Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executing on our Strategy

We reported Net income attributable to common stockholders of $249.1 million during the year ended December 31, 2018, as compared to $159.9 million, net of $80.7 million of merger costs, during the same period in 2017.

We sustained superior same property NOI growth:

•	We achieved pro-rata same property NOI growth, as adjusted, excluding termination fees, of 3.4%.

•	We executed 1,802 leasing transactions representing 6.2 million pro-rata SF of new and renewal leasing, with trailing twelve month rent spreads of 8.3% on comparable retail operating property spaces.

•	At December 31, 2018, our total property portfolio was 95.6% leased, while our same property portfolio was 96.1% leased.

We developed and redeveloped high quality shopping centers at attractive returns on investment:

•	We started three new developments representing a total pro-rata project investment of $80.5 million upon completion, with a weighted average projected return on investment of 7.1%.

•	We started eight new redevelopments representing a total pro-rata project investment of $112.2 million upon completion, with a weighted average projected return on investment of 8.3%.

•	Including these new projects, a total of 19 properties were in the process of development or redevelopment, representing a pro-rata investment upon completion of $389.9 million.

•	We completed four new developments representing a total pro-rata project investment of $167.7 million, with a weighted average return on investment of 7.4%.

•	We completed twelve new redevelopments representing a total pro-rata project investment of $184.4 million, with a weighted average return on investment of 6.9%.

We maintained a conservative balance sheet providing financial flexibility to cost effectively fund investment opportunities and debt maturities:

•

On March 9, 2018, the Company received proceeds from the sale of $300.0 million of 4.125% senior unsecured public notes, which priced at 99.837% and mature in March 2028. $60 million of the proceeds was used to repay our unsecured revolving credit facility (the “Line”) and $163.2 million was used, in April, to early redeem our $150.0 million 6.0% senior unsecured public notes originally due June 2020, including accrued and unpaid interest through the redemption date and a make-whole amount. We used the remainder of the proceeds to repay 2018 mortgage maturities and for general corporate purposes.

•

On March 26, 2018, we amended and restated our Line. The amendment and restatement increases the size of the Line to $1.25 billion from $1.0 billion and extends the maturity date to March 23, 2022, with options to extend maturity for two additional six-month periods. Borrowings will bear interest at an annual rate of LIBOR plus 87.5 basis points, subject to our credit ratings, compared to a rate of 92.5 basis points under the previous facility. An annual facility fee of 15 basis points, subject to our credit ratings, applies to the Line.

•	During 2018, we repurchased $246.5 million of our common stock at a weighted average price per share of $57.97.

•	At December 31, 2018, our annualized net debt-to-operating EBITDAre ratio on a pro-rata basis was 5.3x.

Leasing Activity and Significant Tenants

We believe our high-quality, grocery anchored shopping centers located in densely populated, desirable infill trade areas create attractive spaces for retail tenants.

Pro-rata Occupancy

The following table summarizes pro-rata occupancy rates of our combined Consolidated and Unconsolidated shopping center portfolio:

		December 31, 2018		December 31, 2017
% Leased – All properties		95.6%		95.5%
Anchor space		98.4%		98.1%
Shop space		90.9%		91.1%

The decline in shop space percent leased is driven by strategic vacancies in preparation for redevelopments.

Pro-rata Leasing Activity

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

Year ended December 31, 2018
		Leasing Transactions (1)		SF (in thousands)		Base Rent PSF				Tenant Allowance and Landlord Work PSF				Leasing Commissions PSF
Anchor Leases
New		38		625		$	18.75			$	29.78			$	6.96
Renewal		99		2,886		15.18				0.60				0.35
Total Anchor Leases (1)		137		3,511		$	15.82			$	5.79			$	1.52
Shop Space
New		519		890		$	33.05			$	28.17			$	13.86
Renewal		1,146		1,838		33.65				0.83				2.13
Total Shop Space Leases (1)		1,665		2,728		$	33.45			$	9.75			$	5.96
Total Leases		1,802		6,239		$	23.53			$	7.52			$	3.46
(1) Number of leasing transactions reported at 100%; all other statistics reported at pro-rata share.

Year ended December 31, 2017
		Leasing Transactions (1)(2)		SF (in thousands)		Base Rent PSF				Tenant Allowance and Landlord Work PSF				Leasing Commissions PSF
Anchor Leases
New		39		895		$	17.34			$	29.56			$	4.92
Renewal		87		2,465		14.47				0.02				0.46
Total Anchor Leases (1)		126		3,360		$	15.24			$	7.89			$	1.65
Shop Space
New		548		952		$	32.45			$	26.81			$	13.17
Renewal		1,175		2,005		31.31				1.47				2.40
Total Shop Space Leases (1)		1,723		2,957		$	31.68			$	9.63			$	5.87
Total Leases		1,849		6,317		$	22.93			$	8.70			$	3.62
(1) Number of leasing transactions reported at 100%; all other statistics reported at pro-rata share.
(2) For the year ending December 31, 2017, amounts include leasing activity of properties acquired from Equity One beginning March 1, 2017.

Total weighted average base rent on signed shop space leases during 2018 was $33.45 PSF and exceeds the average annual base rent of all shop space leases due to expire during the next 12 months of $30.62 PSF.

Significant Tenants and Concentrations of Risk

We seek to reduce our operating and leasing risks through geographic diversification and by avoiding dependence on any single property, market, or tenant. The following table summarizes our most significant tenants, based on their percentage of annualized base rent:

		December 31, 2018
Anchor		Number of Stores		Percentage of Company- owned GLA (1)		Percentage of Annualized Base Rent (1)
Publix		70		6.5%		3.2%
Kroger Co.		56		6.6%		3.0%
Albertsons Companies, Inc.		47		4.2%		2.8%
Whole Foods		32		2.4%		2.4%
TJX Companies		59		3.0%		2.3%
(1) Includes Regency's pro-rata share of Unconsolidated Properties and excludes those owned by anchors.

Bankruptcies and Credit Concerns

Our management team devotes significant time to researching and monitoring retail trends, consumer preferences, customer shopping behaviors, changes in retail delivery methods, and changing demographics in order to anticipate the challenges and opportunities impacting the retail industry. A greater shift to e-commerce, large-scale retail business failures, unemployment, and tight credit markets could negatively impact consumer spending and have an adverse effect on our results of operations. We seek to mitigate these potential impacts through tenant diversification, re-tenanting weaker tenants with stronger operators, anchoring our centers with market leading grocery stores that drive foot traffic, and maintaining a presence in affluent suburbs and dense infill trade areas. As a result of our research and findings, we may reduce new leasing, suspend leasing, or curtail allowances for construction of leasehold improvements within a certain retail category or to a specific retailer in order to reduce our risk from bankruptcies and store closings.

We closely monitor the operating performance and rent collections of tenants in our shopping centers as well as those retailers experiencing significant changes to their business models as a result of reduced customer traffic in their stores and increased competition from e-commerce sales. Retailers who are unable to withstand these and other business pressures may file for bankruptcy. 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 recover 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. Tenants who have filed for bankruptcy and continue to occupy space at December 31, 2018 in our shopping centers represent an aggregate of 0.4% of our annual base rent on a pro-rata basis.

Results from Operations

Comparison of the years ended December 31, 2018 and 2017:

Results from operations for the year ended December 31, 2017 reflect the results of our merger with Equity One on March 1, 2017, and therefore only includes ten months of operating results for the Equity One portfolio in 2017.

Our total revenues increased as summarized in the following table:

(in thousands)		2018				2017			Change
Minimum rent		$	818,483			728,078			90,405
Percentage rent		7,486				6,635			851
Recoveries from tenants		245,196				206,675			38,521
Other income		21,316				16,780			4,536
Management, transaction, and other fees		28,494				26,158			2,336
Total revenues		$	1,120,975			984,326			136,649

Minimum rent changed as follows:

•	$14.1 million increase from rent commencing at development properties;

•	$12.6 million increase from acquisitions of operating properties; and

•	$77.4 million increase at same properties, including $64.1 million from properties acquired through our merger with Equity One which only includes ten months of 2017 operating results. The remaining increase is driven by redevelopments, rental rate growth on new and renewal leases, and rent commencements;

•	reduced by $13.7 million from the sale of operating properties.

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

•	$4.4 million increase from rent commencing at development properties;

•	$2.9 million increase from acquisitions of operating properties; and

•	$34.4 million increase from same properties, including $26.7 million from properties acquired through our merger with Equity One which only includes ten months of 2017 operating results. The remaining increase is associated with higher recoverable costs;

•	reduced by $3.2 million from the sale of operating properties.

Other income, which consists of incidental income earned at our centers, increased $4.5 million from same properties, including $2.7 million from properties acquired through our merger with Equity One, primarily from termination and assignment fees.

Management, transaction and other fees increased $2.3 million due partially to an increase in development fees from active developments within unconsolidated partnerships, along with an increase in leasing and property management fees earned from unconsolidated partnerships.

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

(in thousands)		2018				2017			Change
Depreciation and amortization		$	359,688			334,201			25,487
Operating and maintenance		168,034				143,990			24,044
General and administrative		65,491				67,624			(2,133	)
Real estate taxes		137,856				109,723			28,133
Other operating expenses		9,737				89,225			(79,488	)
Total operating expenses		$	740,806			744,763			(3,957	)

Depreciation and amortization costs changed as follows:

•	$6.4 million increase as we began depreciating costs at development properties where tenant spaces were completed and became available for occupancy;

•	$6.0 million net increase from acquisitions of operating properties; and

•	$20.4 million net increase at same properties, including $15.9 million from properties acquired through our merger with Equity One which only includes ten months of 2017 operating results. The remaining increase is primarily attributable to redevelopment assets being placed in service;

•	reduced by $7.3 million from the sale of operating properties.

Operating and maintenance costs changed as follows:

•	$6.3 million increase from operations commencing at development properties;

•	$2.1 million increase from acquisitions of operating properties; and

•	$18.2 million increase at same properties, including $15.1 million from properties acquired through our merger with Equity One which only includes ten months of 2017 operating results. The remaining increase is primarily attributable to increases in recoverable costs;

•	reduced by $2.6 million from the sale of operating properties.

General and administrative changed as follows:

•	$4.9 million decrease in the value of participant obligations within the deferred compensation plan; and

•	$1.6 million net decrease in compensation and management consulting costs; offset by

•	$3.8 million increase from decreased leasing overhead capitalization due to the different mix of leasing transactions; and

•	$500,000 increase from lower development overhead capitalization based on the timing and size of current development and redevelopment projects.

Real estate taxes changed as follows:

•	$2.8 million increase from development properties where capitalization ceased as tenant spaces became available for occupancy;

•	$2.3 million increase from acquisitions of operating properties; and

•	$24.4 million increase at same properties, including $19.9 million from properties acquired through the Equity One merger which only includes ten months of 2017 operating results. The remaining increase is from increased tax assessments;

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

Other operating expenses decreased $79.5 million, primarily attributable to transaction costs related to the Equity One merger in 2017.

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

(in thousands)		2018				2017			Change
Interest expense, net
Interest on notes payable		$	129,299			119,301			9,998
Interest on unsecured credit facilities		18,999				14,677			4,322
Capitalized interest		(7,020		)		(7,946	)		926
Hedge expense		8,408				8,408			—
Interest income		(1,230		)		(1,811	)		581
Interest expense, net		148,456				132,629			15,827
Provision for impairment		38,437				—			38,437
Gain on sale of real estate, net of tax		(28,343		)		(27,432	)		(911	)
Early extinguishment of debt		11,172				12,449			(1,277	)
Net investment income		1,096				(3,985	)		5,081
Total other expense (income)		$	170,818			113,661			57,157

The $15.8 million net increase in total interest expense is due to:

•	$10.0 million net increase in interest on notes payable primarily due to:

◦	$7.6 million increase from the issuances of $950 million of new unsecured debt during 2017. The debt proceeds were used as follows:

▪	$325 million used to redeem all of our preferred stock,

▪	$415 million used to fund consideration paid to Equity One to repay its credit facilities not assumed by the Company in the merger, and

▪	$210 million used to retire mortgage loans and to reduce the outstanding balance on the Line;

◦	$3.4 million net increase from the issuance of $300 million of new unsecured debt in March 2018 to redeem $150 million of unsecured debt in April 2018, and to repurchase common stock;

◦	$3.2 million of additional interest on notes payable assumed with the Equity One merger; and

◦	$725,000 increase from amortization of additional debt premiums and loan costs from above debt issuances; offset by

◦	$4.9 million net decrease in mortgage interest expense primarily due to mortgage payoffs during 2018 and 2017.

•	further increased by $4.3 million in interest on unsecured credit facilities related to higher average balances primarily related to the Equity One merger and higher interest rates.

During 2018, we recognized $38.4 million of impairment losses, including $12.6 million of goodwill impairment, on ten operating properties and two land parcels, eight of which have been sold. Of the four remaining properties, three are included in Properties held for sale as of December 31, 2018. We did not recognize any impairments during 2017.

During 2018, we early redeemed $150 million of 6% senior unsecured notes resulting in $11.0 million of debt extinguishment costs. During 2017, we repaid nine mortgages with a portion of the proceeds from our unsecured public debt offering, and recognized $12.4 million of debt extinguishment costs.

Net investment income decreased $5.1 million, driven by valuation changes in the stock market, primarily attributable to investments held within the non-qualified deferred compensation plan.

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

(in thousands)		Regency's Ownership		2018				2017			Change
GRI - Regency, LLC (GRIR)		40.00%		$	29,614			27,440			2,174
Equity One JV Portfolio LLC (NYC)		30.00%		490				686			(196	)
Columbia Regency Retail Partners, LLC (Columbia I)		20.00%		1,311				3,620			(2,309	)
Columbia Regency Partners II, LLC (Columbia II)		20.00%		4,673				1,530			3,143
Cameron Village, LLC (Cameron)		30.00%		943				850			93
RegCal, LLC (RegCal)		25.00%		1,542				1,403			139
US Regency Retail I, LLC (USAA)		20.01%		937				4,456			(3,519	)
Other investments in real estate partnerships		9.375% - 50.00%		3,464				3,356			108
Total equity in income of investments in real estate partnerships				$	42,974			43,341			(367	)

The $367,000 decrease in total Equity in income in investments in real estate partnerships is attributed to:

•	$2.2 million increase within GRIR primarily due to an increase in minimum rent across the portfolio of properties and reduced depreciation;

•	$2.3 million decrease within Columbia I due to our $2.4 million share of gains on the sale of real estate recognized in 2017;

•	$3.1 million increase within Columbia II due to our $3.1 million share of gains on the sale of real estate recognized in 2018; and

•	$3.5 million decrease within USAA due to our $3.3 million share of gains on the sale of real estate recognized in 2017.

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

(in thousands)		2018				2017			Change
Income from operations		$	252,325			169,243			83,082
Deferred income tax benefit		—				9,737			(9,737	)
Income attributable to noncontrolling interests		(3,198		)		(2,903	)		(295	)
Preferred stock dividends and issuance costs		—				(16,128	)		16,128
Net income attributable to common stockholders		$	249,127			159,949			89,178
Net income attributable to exchangeable operating partnership units		525				388			137
Net income attributable to common unit holders		$	249,652			160,337			89,315

The $9.7 million income tax benefit during 2017 was due to revaluing the net deferred tax liability at a TRS entity acquired through the Equity One merger, as a result of the change in corporate tax rates from the 2017 Tax Cuts and Jobs Act.

During 2017, we redeemed all of our outstanding preferred stock.

Comparison of the years ended December 31, 2017 and 2016:

Results from operations for the year ended December 31, 2017 reflect the results of our merger with Equity One on March 1, 2017, and therefore only includes ten months of operating results for the Equity One portfolio in 2017.

Our total revenues increased as summarized in the following table:

(in thousands)		2017				2016			Change
Minimum rent		$	728,078			444,305			283,773
Percentage rent		6,635				4,128			2,507
Recoveries from tenants		206,675				127,677			78,998
Other income		16,780				12,934			3,846
Management, transaction, and other fees		26,158				25,327			831
Total revenues		$	984,326			614,371			369,955

Minimum rent changed as follows:

•	$7.2 million increase from development properties;

•	$5.2 million increase from acquisitions of operating properties;

•	$15.1 million increase at same properties reflecting an increase from rental rate growth on new and renewal leases, contractual rent steps, and our redevelopment properties; and

•	$261.4 million increase from properties acquired through the Equity One merger;

•	reduced by $5.2 million from the sale of operating properties.

Percentage rent increased $2.5 million primarily as a result of properties acquired through the Equity One merger.

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

•	$1.7 million increase from rent commencing at development properties;

•	$1.9 million increase from acquisitions of operating properties;

•	$8.4 million increase from same properties associated with higher recoverable costs and an improvement in recovery rates; and

•	$68.6 million increase from properties acquired through the Equity One merger;

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

Other income, which consists of incidental income earned at our centers, increased $3.8 million as follows:

•	$354,000 increase from development properties;

•	$1.0 million from acquisitions of operating properties; and

•	$3.9 million from properties acquired through the Equity One merger;

•	reduced by $1.4 million in same properties primarily due to other fee income in 2016.

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

(in thousands)		2017				2016			Change
Depreciation and amortization		$	334,201			162,327			171,874
Operating and maintenance		143,990				95,022			48,968
General and administrative		67,624				65,327			2,297
Real estate taxes		109,723				66,395			43,328
Other operating expenses		89,225				14,081			75,144
Total operating expenses		$	744,763			403,152			341,611

Depreciation and amortization costs changed as follows:

•	$2.8 million increase as we began depreciating costs at development properties where tenant spaces were completed and became available for occupancy;

•	$2.7 million increase from acquisitions of operating properties and corporate assets;

•	$2.2 million increase at same properties, attributable primarily to redevelopments; and

•	$165.9 million increase from properties acquired through the Equity One merger;

•	reduced by $1.8 million from the sale of operating properties.

Operating and maintenance costs changed as follows:

•	$1.4 million increase from operations commencing at development properties;

•	$1.5 million increase from acquisitions of operating properties;

•	$1.0 million net increase from claims losses within the company's wholly-owned captive insurance program;

•	$1.0 million increase at same properties primarily attributable to recoverable costs; and

•	$45.3 million increase from properties acquired through the Equity One merger;

•	reduced by $1.2 million from the sale of operating properties.

General and administrative changed as follows:

•	$2.2 million increase in the value of participant obligations within the deferred compensation plan; and

•	$4.6 million increase in compensation costs related to additional staffing and incentive compensation as a result of the Equity One merger;

•	reduced by $4.5 million primarily from greater development overhead capitalization based on the progress and size of current development and redevelopment projects.

Real estate taxes changed as follows:

•	$782,000 increase from development properties where capitalization ceased as tenant spaces became available for occupancy;

•	$1.3 million increase from acquisitions of operating properties;

•	$3.6 million increase at same properties from increased tax assessments; and

•	$38.6 million increase from properties acquired through the Equity One merger;

•	reduced by $1.0 million from sold properties.

Other operating expenses increased as follows:

•	$1.8 million increase in corporate expenses due to an increase in franchise taxes; and

•	$73.3 million increase primarily attributable to transaction costs related to the Equity One merger in March 2017.

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

(in thousands)		2017				2016			Change
Interest expense, net
Interest on notes payable		$	119,301			81,330			37,971
Interest on unsecured credit facilities		14,677				5,635			9,042
Capitalized interest		(7,946		)		(3,481	)		(4,465	)
Hedge expense		8,408				8,408			—
Interest income		(1,811		)		(1,180	)		(631	)
Interest expense, net		$	132,629			90,712			41,917
Provision for impairment		—				4,200			(4,200	)
Gain on sale of real estate, net of tax		(27,432		)		(47,321	)		19,889
Early extinguishment of debt		12,449				14,240			(1,791	)
Net investment income		(3,985		)		(1,672	)		(2,313	)
Loss on derivative instruments		—				40,586			(40,586	)
Total other expense (income)		$	113,661			100,745			12,916

The $41.9 million net increase in total interest expense is due to:

•	$38.0 million increase in interest on notes payable due to:

◦	$26.0 million of additional interest on notes payable assumed with the Equity One merger; and

◦	$29.7 million increase in interest attributable to the issuance of $950 million of new unsecured debt in 2017. The debt proceeds were used as follows:

▪	$325 million used to redeem all of our preferred stock,

▪	$415 million used to fund consideration paid to Equity One to repay its credit facilities not assumed by the Company in the merger, and

▪	$210 million used to retire mortgage loans and to reduce the outstanding balance on the Line;

◦	offset by $6.9 million decrease in mortgage interest expense primarily due to the payoff of nine mortgages loans; and

◦	$10.8 million decrease due to the early redemption of our $300 million notes during 2016;

•	$9.0 million increase in interest on unsecured credit facilities related to higher average balances primarily related to the Equity One merger;

•	offset by $4.5 million decrease from higher capitalization of interest based on the size and progress of development and redevelopment projects in process.

We did not recognize any impairments during 2017. During 2016, we recognized $4.2 million of impairment losses on two operating properties and two land parcels, all of which have since been sold.

During 2017, we sold six operating properties and nine land parcels resulting in gains of $27.4 million, compared to gains of $47.3 million from the sale of eleven operating properties and sixteen land parcels during 2016.

During 2017, we repaid nine mortgages with a portion of the proceeds from our unsecured public debt offering in June 2017, and recognized $12.4 million of debt extinguishment costs. In 2016, we recognized a $14.2 million charge in connection with the early redemption of the $300 million unsecured notes.

Net investment income increased $2.3 million, attributable primarily to realized and unrealized gains on investments held within the non-qualified deferred compensation plan.

During 2016, we recognized a $40.6 million charge to settle $220 million of forward starting interest rate swaps related to new debt previously expected to be issued in 2017.

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

(in thousands)		Regency's Ownership		2017				2016			Change
GRI - Regency, LLC (GRIR)		40.00%		$	27,440			29,791			(2,351	)
Equity One JV Portfolio LLC (NYC)		30.00%		686				—			686
Columbia Regency Retail Partners, LLC (Columbia I)		20.00%		3,620				4,180			(560	)
Columbia Regency Partners II, LLC (Columbia II)		20.00%		1,530				3,240			(1,710	)
Cameron Village, LLC (Cameron)		30.00%		850				695			155
RegCal, LLC (RegCal)		25.00%		1,403				1,080			323
US Regency Retail I, LLC (USAA)		20.01%		4,456				1,180			3,276
Other investments in real estate partnerships		50.00%		3,356				16,352			(12,996	)
Total equity in income of investments in real estate partnerships				$	43,341			56,518			(13,177	)

The $13.2 million decrease in our total Equity in income in investments in real estate partnerships is largely attributed to:

•	$2.4 million decrease within GRIR driven by gains on sale of real estate that were recognized in 2016, offset by lower depreciation expense in 2017 related to assets that became fully depreciated in 2016;

•	$1.7 million decrease within Columbia II due to gains on sale of real estate that were recognized in 2016;

•	$3.3 million increase within USAA due to gains on sale of real estate recognized in 2017; and

•	$13.0 million decrease within Other investments in real estate partnerships due to our pro-rata share of gains on sale of real estate recognized in these partnerships in 2016.

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

(in thousands)		2017				2016			Change
Income from operations		$	169,243			166,992			2,251
Deferred income tax benefit		(9,737		)		—			(9,737	)
Income attributable to noncontrolling interests		(2,903		)		(2,070	)		(833	)
Preferred stock dividends and issuance costs		(16,128		)		(21,062	)		4,934
Net income attributable to common stockholders		$	159,949			143,860			16,089
Net income attributable to exchangeable operating partnership units		388				257			131
Net income attributable to common unit holders		$	160,337			144,117			16,220

The $9.7 million income tax benefit during 2017 was due to revaluing the net deferred tax liability at a taxable REIT subsidiary acquired through the Equity One merger, as a result of the change in corporate tax rates from the 2017 Tax Cuts and Jobs Act.

During 2017, we redeemed both our Series 6 and Series 7 preferred stock, resulting in a decrease to preferred stock dividends, offset by a charge upon writing off issuance costs.

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 manage our entire real estate portfolio without regard to ownership structure, although certain decisions impacting properties owned through partnerships require partner approval. Therefore, we believe presenting our pro-rata share of operating results regardless of ownership structure, along with other non-GAAP measures, may assist in comparing the 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 "Defined Terms" in Part I, Item 1.

Pro-Rata Same Property NOI:

For purposes of evaluating same property NOI on a comparative basis, and in light of the merger with Equity One on March 1, 2017, we are presenting our same property NOI on a pro forma basis for the year ended December 31, 2017, as if the merger had occurred January 1, 2017. This perspective allows us to evaluate same property NOI growth over a comparable period. The pro forma same property NOI as adjusted is not necessarily indicative of what the actual same property NOI and growth would have been if the merger had occurred on January 1, 2017, nor does it purport to represent the same property NOI and growth for future periods.

Our pro-rata same property NOI as adjusted, excluding termination fees, changed as follows:

(in thousands)		2018				2017 (1)			Change
Base rent		$	824,238			795,836			28,402
Percentage rent		8,574				9,065			(491	)
Recoveries from tenants		266,274				244,082			22,192
Other income		20,826				16,994			3,832
Operating expenses		327,563				299,507			28,056
Pro-rata same property NOI, as adjusted		$	792,349			766,470			25,879
Less: Termination fees		1,222				990			232
Pro-rata same property NOI, as adjusted, excluding termination fees		$	791,127			765,480			25,647
Pro-rata same property NOI growth, as adjusted, excluding termination fees									3.4	%
(1) Adjusted for Equity One operating results prior to the merger for this period. For additional information and details about the Equity One operating results included herein, refer to the Same Property NOI reconciliation at the end of the Supplemental Earnings section.

Base rent increased $28.4 million, driven by increases in rental rate growth on new and renewal leases, contractual rent steps in existing leases, and rent commencements.

Recoveries from tenants increased $22.2 million, as a result of increases in recoverable costs, as noted below.

Other income increased $3.8 million, due to an increase in parking income, land rental, temporary tenants.

Operating expenses increased $28.1 million, primarily due to a $17.6 million increase in real estate tax assessments and $8.8 million increase in common area maintenance costs.

Same Property Rollforward:

Our same property pool includes the following property count, pro-rata GLA, and changes therein:

	2018					2017
(GLA in thousands)	Property Count		GLA			Property Count		GLA
Beginning same property count	395		40,601			289		26,392
Acquired properties owned for entirety of comparable periods	7		917			1		180
Developments that reached completion by beginning of earliest comparable period presented	8		512			2		331
Disposed properties	(11	)	(1,178	)		(7	)	(546	)
Properties acquired through Equity One merger	—		—			110		14,181
SF adjustments (1)	—		14			—		63
Ending same property count	399		40,866			395		40,601
(1) SF adjustments arise from remeasurements or redevelopments.

NAREIT FFO:

Our reconciliation of net income attributable to common stock and unit holders to NAREIT FFO is as follows:

(in thousands, except share information)		2018				2017
Reconciliation of Net income to NAREIT FFO
Net income attributable to common stockholders		$	249,127			159,949
Adjustments to reconcile to NAREIT FFO: (1)
Depreciation and amortization (excluding FF&E)		390,603				364,908
Provision for impairment to operating properties		37,895				—
Gain on sale of operating properties, net of tax		(25,293		)		(30,402	)
Exchangeable operating partnership units		525				388
NAREIT FFO attributable to common stock and unit holders		$	652,857			494,843
(1) Includes Regency's pro-rata share of unconsolidated investment partnerships, net of pro-rata share attributable to noncontrolling interests.

Reconciliation of Same Property NOI to Nearest GAAP Measure:

Our reconciliation of Net income attributable to common stockholders to Same Property NOI, on a pro-rata basis, is as follows:

		2018										2017
(in thousands)		Same Property				Other (1)			Total			Same Property			Other (1)			Total
Net income (loss) attributable to common stockholders		$	416,657			(167,530	)		249,127			344,386			(184,437	)		159,949
Less:
Management, transaction, and other fees		—				28,494			28,494			—			26,158			26,158
Gain on sale of real estate, net of tax		—				28,343			28,343			—			27,432			27,432
Other (2)		45,377				11,529			56,906			37,812			9,545			47,357
Plus:
Depreciation and amortization		333,001				26,687			359,688			320,090			14,111			334,201
General and administrative		—				65,491			65,491			—			67,624			67,624
Other operating expense, excluding provision for doubtful accounts		727				4,017			4,744			1,066			74,430			75,496
Other expense (income)		33,701				165,460			199,161			44,627			96,466			141,093
Equity in income of investments in real estate excluded from NOI (3)		53,640				3,040			56,680			51,351			1,939			53,290
Net income attributable to noncontrolling interests		—				3,198			3,198			—			2,903			2,903
Preferred stock dividends and issuance costs		—				—			—			—			16,128			16,128
Same Property NOI for non-ownership periods of Equity One (4)		—				—			—			42,762			—			42,762
Pro-rata NOI, as adjusted		$	792,349			31,997			824,346			766,470			26,029			792,499
(1) Includes revenues and expenses attributable to non-same property, sold property, development properties, corporate activities, and noncontrolling interests.
(2) Includes straight-line rental income and expense, net of reserves, above and below market rent amortization, other fees, and noncontrolling interest.
(3) Includes non-NOI expenses incurred at our unconsolidated real estate partnerships, including those separated out above for our consolidated properties.
(4) NOI from Equity One prior to the merger was derived from the accounting records of Equity One without adjustment. Equity One's financial information for the two month period ended February 28, 2017 was subject to a limited internal review by Regency. The table below provides Same Property NOI detail for the non-ownership period of Equity One.

(in thousands)		Two Months Ended February 2017
Base rent		$	44,390
Percentage rent		1,265
Recoveries from tenants		13,863
Other income		611
Operating expenses		17,367
Pro-rata same property NOI, as adjusted		42,762
Less: Termination fees		30
Pro-rata same property NOI, as adjusted, excluding termination fees		$	42,732

Liquidity and Capital Resources

General

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

Except for $500 million of unsecured public and private placement debt, our Parent Company has no capital commitments other than its guarantees of the commitments of our Operating Partnership. The Operating Partnership is a co-issuer and a guarantor on the $500 million of outstanding debt of our Parent Company. All remaining debt is held by our Operating Partnership or by our co-investment partnerships. The Parent Company will from time to time access the capital markets for the purpose of issuing new equity and will simultaneously contribute all of the offering proceeds to the Operating Partnership in exchange for additional partnership units. Based upon our available sources of capital, our current credit ratings, and the number of high quality, unencumbered properties we own, we believe our available capital resources are sufficient to meet our expected capital needs.

In addition to our $42.5 million of unrestricted cash at December 31, 2018, the Company has the following additional sources of capital available:

(in thousands)		December 31, 2018
ATM equity program (see note 11 to our Consolidated Financial Statements)
Original offering amount		$	500,000
Available capacity		$	500,000
Line of Credit (the "Line") (see note 8 to our Consolidated Financial Statements)
Total commitment amount		$	1,250,000
Available capacity (1)		$	1,095,612
Maturity (2)		March 23, 2022
(1) Net of letters of credit.
(2) The Company has the option to extend the maturity for two additional six-month periods.

Our dividend distribution policy is set by our Board of Directors, who monitors our financial position. Our Board of Directors recently declared a common stock dividend of $0.585 per share, payable on March 7, 2019, to shareholders of record as of February 25, 2019. Future dividends will be declared at the discretion of our Board of Directors and will be subject to capital requirements and availability. We plan to continue paying an aggregate amount of distributions to our stock and unit holders that, at a minimum, meet the requirements to continue qualifying as a REIT for federal income tax purposes.

We expect to generate sufficient cash flow from operations to fund our dividend distributions. We generated cash flow from operations of approximately $610.3 million and $469.8 million for the years ended December 31, 2018 and 2017, respectively. We paid $376.8 million and $328.3 million to our common and preferred stock and unit holders for the years ended December 31, 2018 and 2017, respectively. We currently do not have any preferred shares or units issued and outstanding.

To meet our additional cash requirements beyond our dividend, we will utilize the following:

•	remaining cash generated from operations after dividends paid,

•	proceeds from the sale of real estate,

•	available borrowings from our Line, and

•	when the capital markets are favorable, proceeds from the sale of equity or the issuance of new long-term debt.

During the next twelve months, we estimate that we will require approximately $171.8 million of cash to fund the following:

•	$143.7 million to complete in-process developments and redevelopments,

•	$13.2 million to repay maturing debt, and

•	$14.9 million to fund our pro-rata share of estimated capital contributions to our co-investment partnerships for repayment of maturing debt.

If we start new developments, redevelop additional shopping centers, commit to new acquisitions, prepay debt prior to maturity, or repurchase shares of our common stock, our cash requirements will increase. If we refinance maturing debt, our cash requirements will decrease. In addition, we have a contractual commitment to purchase, through December 2019, up to an additional 90.6% ownership interest in an operating shopping center. We currently expect the seller to require us to purchase an additional 25.6% ownership interest in the property by December 2019 for approximately $27.5 million.

We endeavor to maintain a high percentage of unencumbered assets. As of December 31, 2018, 87.8% of our wholly-owned real estate assets were unencumbered. Such assets allow us to access the secured and unsecured debt markets and to maintain availability on the Line. Our annualized Fixed charge coverage ratio, including our pro-rata share of our partnerships, was 4.2 and 4.1 times for the periods ended December 31, 2018 and 2017, respectively.

Our Line, Term Loans, and unsecured loans require that we remain in compliance with various covenants, which are described in note 8 to the Consolidated Financial Statements. We are in compliance with these covenants at December 31, 2018 and expect to remain in compliance.

Summary of Cash Flow Activity

The following table summarizes net cash flows related to operating, investing, and financing activities of the Company:

(in thousands)		2018				2017			Change
Net cash provided by operating activities		$	610,327			469,784			140,543
Net cash used in investing activities		(106,024		)		(1,007,230	)		901,206
Net cash (used in) provided by financing activities		(508,494		)		568,948			(1,077,442	)
Net (decrease) increase in cash and cash equivalents and restricted cash		(4,191		)		31,502			(35,693	)
Total cash and cash equivalents and restricted cash		$	45,190			49,381			(4,191	)

Net cash provided by operating activities:

Net cash provided by operating activities increased by $140.5 million due to:

•	$119.3 million increase in cash from operating income, including the additional cash flows from properties acquired through the Equity One merger in March 2017, net of merger costs;

•	$764,000 increase in operating cash flow distributions from our unconsolidated real estate partnerships; and,

•	$20.5 million net increase in cash due to timing of cash receipts and payments related to operating activities.

Net cash used in investing activities:

Net cash used in investing activities changed by $901.2 million as follows:

(in thousands)		2018				2017			Change
Cash flows from investing activities:
Acquisition of operating real estate		$	(85,289	)		(124,727	)		39,438
Advance deposits paid on acquisition of operating real estate		—				(4,917	)		4,917
Acquisition of Equity One, net of cash and restricted cash acquired of $74,507		—				(646,790	)		646,790
Real estate development and capital improvements		(226,191		)		(346,857	)		120,666
Proceeds from sale of real estate investments		250,445				110,015			140,430
Proceeds from (issuance of) notes receivable		15,648				(5,236	)		20,884
Investments in real estate partnerships		(74,238		)		(23,529	)		(50,709	)
Distributions received from investments in real estate partnerships		14,647				36,603			(21,956	)
Dividends on investment securities		531				365			166
Acquisition of investment securities		(23,164		)		(23,535	)		371
Proceeds from sale of investment securities		21,587				21,378			209
Net cash used in investing activities		$	(106,024	)		(1,007,230	)		901,206

Significant investing and divesting activities included:

•	We invested $85.3 million in 2018 to acquire three operating properties. Other than those included with the Equity One merger, we invested $124.7 million in 2017 to acquire two operating properties and two real estate parcels at existing operating properties.

•	We issued 65.5 million shares of common stock to the shareholders of Equity One valued at $4.5 billion in a stock for stock exchange and merged Equity One into the Company on March 1, 2017. As part of the merger, we paid $646.8 million, net of cash and restricted cash acquired, to repay credit facilities not assumed with the merger at the closing date.

•	We invested $120.7 million less in 2018 than 2017 on real estate development, redevelopment, and capital improvements, as further detailed in a table below.

•	We received proceeds of $250.4 million from the sale of ten shopping centers and nine land parcels in 2018, compared to $110.0 million for six shopping centers and nine land parcels in 2017.

•	We invested $74.2 million in our real estate partnerships during 2018, including:

◦	$48.8 million to fund our share of acquiring four operating properties,

◦	$1.3 million to acquire an interest in one land parcel for development,

◦	$21.9 million to fund our share of development and redevelopment activities, and

◦	$2.2 million to fund our share of maturing debt.

During the same period in 2017, we invested $23.5 million in our real estate partnerships, including:

◦	$8.8 million to acquire an interest in one land parcel for development,

◦	$7.8 million to fund our share of development and redevelopment activities, and

◦	$6.9 million to fund our share of maturing debt.

•

Distributions from our unconsolidated real estate partnerships include return of capital from sales or financing proceeds. The $14.6 million received in 2018 is driven by the sale of one land parcel and one operating property plus our share of proceeds from financing activities at two operating properties. During the same period in 2017, we received $36.6 million from the sale of three operating properties and one land parcel plus our share of proceeds from refinancing certain operating properties within the partnerships.

•	Acquisition of securities and proceeds from sale of securities pertain to investments held in our captive insurance company and our deferred compensation plan.

We plan to continue developing and redeveloping shopping centers for long-term investment purposes. During 2018, we deployed capital of $226.2 million for the development, redevelopment, and improvement of our real estate properties as comprised of the following:

(in thousands)		2018				2017			Change
Capital expenditures:
Land acquisitions for development / redevelopment		$	2,787			24,775			(21,988	)
Building and tenant improvements		68,463				54,200			14,263
Redevelopment costs		51,351				133,597			(82,246	)
Development costs		86,800				109,601			(22,801	)
Capitalized interest		6,303				7,946			(1,643	)
Capitalized direct compensation		10,487				16,738			(6,251	)
Real estate development and capital improvements		$	226,191			346,857			(120,666	)

•	During 2018 we acquired three land parcels for new development and redevelopment projects as compared to four land parcels acquired during 2017.

•	Building and tenant improvements increased $14.3 million during the year ended December 31, 2018 primarily related to the overall increase in the size of our portfolio from the merger with Equity One in March 2017.

•

Redevelopment expenditures were lower during 2018 due to the timing, magnitude, and number of projects currently in process. We intend to continuously improve our portfolio of shopping centers through redevelopment which can include adjacent land acquisition, existing building expansion, facade renovations, new out-parcel building construction, and redevelopment related tenant improvement costs. The size and magnitude of each redevelopment project varies with each redevelopment plan.

•	Development expenditures were lower in 2018 due to the progress towards completion of our development projects currently in process. At December 31, 2018 and 2017, we had six and eight consolidated development projects, respectively, that were either under construction or in lease up. See the tables below for more details about our development projects.

•	Interest is capitalized on our development and redevelopment projects and is based on cumulative actual costs expended. We cease interest capitalization when the property is no longer being developed or is available for occupancy upon substantial completion of tenant improvements, but in no event would we capitalize interest on the project beyond 12 months after the anchor opens for business.

•

We have a staff of employees who directly support our development program, which includes redevelopment of our existing properties. We currently expect that our development activity will approximate our recent historical averages, although the amount of activity by type will vary and likely shift towards more redevelopment in the near future. Internal compensation costs directly attributable to these activities are capitalized as part of each project. Changes in the level of future development activity could adversely impact results of operations by reducing the amount of internal costs for development projects that may be capitalized. A 10% reduction in development activity without a corresponding reduction in development related compensation costs could result in an additional charge to net income of $1.5 million per year.

The following table summarizes our in-process consolidated development projects:

(in thousands, except cost PSF)								December 31, 2018
Property Name		Market		Start Date		Estimated/Actual Anchor Opens		Estimated Net Development Costs (1)				% of Costs Incurred (1)			GLA			Cost PSF GLA (1)
The Village at Riverstone		Houston, TX		Q4-16		Sept-18		$	30,658			86	%		167			184
Pinecrest Place (2)		Miami, FL		Q1-17		Jan-18		16,373				88	%		70			234
Mellody Farm		Chicago, IL		Q2-17		Sept-18		103,939				80	%		259			401
Indigo Square		Charleston, SC		Q4-17		Mar-19		16,808				81	%		51			330
Carytown Exchange (3)		Richmond, VA		Q4-18		Nov-20		26,360				3	%		107			246
The Village at Hunter's Lake		Tampa, FL		Q4-18		Apr-20		21,999				7	%		72			306
Total								$	216,137			67	%		726			$	298
(1) Includes leasing costs and is net of tenant reimbursements.
(2) Estimated Net Development Costs for Pinecrest Place excludes the cost of land, which the Company has leased long term.
(3) Estimated Net Development Costs for Carytown Exchange excludes the cost of land, which was contributed by a partner.

The following table summarizes our pro-rata share of in-process unconsolidated development projects:

(in thousands, except cost PSF)								December 31, 2018
Property Name		Market		Start Date		Estimated/Actual Anchor Opens		Estimated Net Development Costs (1)				% of Costs Incurred (1)			GLA			Cost PSF GLA (1)
Midtown East		Raleigh, NC		Q4-17		Sept-19		$	22,639			67	%		87			$	260
Ballard Blocks II		Seattle, WA		Q1-18		Oct-19		32,161				43	%		57			$	564
Total								$	54,800			54	%		144			381
(1) Includes leasing costs and is net of tenant reimbursements.

The following table summarizes our completed consolidated development projects:

(in thousands, except cost PSF)						December 31, 2018
Property Name		Market		Completion Date		Net Development Costs (1)				GLA			Cost PSF GLA (1)
Chimney Rock Crossing		New York, NY		Q2-18		$	70,105			218			$	322
Northgate Marketplace Ph II		Medford, OR		Q2-18		40,791				177			230
Market at Springwoods Village (2)		Houston, TX		Q4-18		25,373				167			152
The Field at Commonwealth		Metro DC		Q4-18		43,378				167			260
Total						$	179,647			729			$	246
(1) Includes leasing costs and is net of tenant reimbursements.
(2) Estimated Net Development Costs are reported at full project cost. Our ownership interest in this consolidated property is 53%.

Net cash (used in) provided by financing activities:

Net cash flows generated from financing activities changed during 2018, as follows:

(in thousands)		2018				2017			Change
Cash flows from financing activities:
Equity issuances		$	—			88,458			(88,458	)
Repurchase of common shares in conjunction with equity award plans		(6,772		)		(18,649	)		11,877
Common shares repurchased through share repurchase program		(213,851		)		—			(213,851	)
Preferred stock redemption		—				(325,000	)		325,000
Distributions to limited partners in consolidated partnerships, net		(4,526		)		(8,139	)		3,613
Dividend payments and operating partnership distributions		(376,755		)		(328,314	)		(48,441	)
Borrowings on unsecured credit facilities, net		85,000				345,000			(260,000	)
Proceeds from debt issuance		301,251				1,084,184			(782,933	)
Debt repayments, including early redemption costs		(283,492		)		(255,421	)		(28,071	)
Payment of loan costs		(9,448		)		(13,271	)		3,823
Proceeds from sale of treasury stock, net		99				100			(1	)
Net cash (used in) provided by financing activities		$	(508,494	)		568,948			(1,077,442	)

Significant financing activities during the years ended December 31, 2018 and 2017 include the following:

•	We had no equity issuances during 2018. During December 2017, we raised $88.5 million upon settling the remaining 1,250,000 shares under the forward equity offering.

•	We repurchased for cash a portion of the common stock related to vested stock based compensation awards to satisfy employee federal and state tax withholding requirements. The 2017 repurchases were higher due to the vesting of Equity One's stock-based compensation program as a result of the merger.

•	We paid $213.9 million to repurchase 3,689,104 common shares in 2018 through our repurchase program. Additionally, we repurchased 563,229 shares in December 2018 that settled for $32.8 million in January 2019.

•	We paid $325.0 million in 2017 to redeem all of our preferred stock.

•	Net distributions to Limited partners in consolidated partnerships decreased $3.6 million primarily due to proceeds from property refinancings distributed during 2017.

•	We paid $48.4 million more in dividends during 2018 as a result of issuing common shares as merger consideration to acquire Equity One in 2017, combined with an increase in our dividend rate from $2.10 per share during 2017 to $2.22 per share during 2018.

•	We had the following debt related activity during 2018:

▪	We borrowed, net of payments, an additional $85.0 million on our Line.

▪	We received proceeds of $299.5 million upon issuance, in March, of $300.0 million of senior unsecured public notes and drew $1.7 million on a construction loan to fund an in-process development project.

▪	We paid $160.5 million, including a make-whole premium, to early redeem our senior unsecured public notes originally due June 2020 and $123.0 million to pay scheduled principal mortgage payments and mortgages maturities.

▪	We paid $9.4 million of loan costs in connection with our public note offering above and expanding our Line commitment.

•	We had the following debt related activity during 2017:

▪	We borrowed, net of payments, an additional $45.0 million on our Line.

▪	We received proceeds of $300.0 million upon closing a new term loan related to the merger with Equity One.

▪	We received proceeds of $1.1 billion from debt issuances including

*	$953.1 million, including debt premiums, from our $950.0 million senior unsecured public note issuances in 2017. The debt proceeds were used as follows:

*	$325 million used to redeem all of our preferred stock,

*	$415 million used to fund consideration paid to Equity One to repay its credit facilities not assumed by the Company in the merger, and

*	$213.1 million used to retire mortgage loans and to reduce the outstanding balance on the Line;

*	$122.5 million from mortgage loans, and

*	$8.6 million in construction loan proceeds.

▪	We paid $255.4 million to repay or refinance mortgage loans and to pay scheduled principal payments.

▪	We paid $13.3 million of loan costs in connection with the new debt issued above, including expanding our Line commitment.

Contractual Obligations

We have debt obligations related to our mortgage loans, unsecured notes, unsecured credit facilities and interest rate swap obligations as described further below and in note 8, note 9, and note 16 to the Consolidated Financial Statements. We have shopping centers that are subject to non-cancelable long-term ground leases where a third party owns and has leased the underlying land to us to construct and/or operate a shopping center. We also have non-cancelable operating leases pertaining to office space from which we conduct our business. In addition, at December 31, 2018, we have a contractual commitment to purchase, through December 2019, up to an additional 90.6% ownership interest in an operating shopping center. We currently expect the seller to require us to purchase an additional 25.6% ownership interest in the property by December 2019 for approximately $27.5 million.

The following table of Contractual Obligations summarizes our debt maturities, including our pro-rata share of obligations within co-investment partnerships as of December 31, 2018, and excludes the following:

•	Recorded debt premiums or discounts and issuance costs that are not obligations;

•	Obligations related to construction or development contracts, since payments are only due upon satisfactory performance under the contracts;

•	Letters of credit of $9.4 million issued to cover our captive insurance program and performance obligations on certain development projects, which the latter will be satisfied upon completion of the development projects; and

•	Obligations for retirement savings plans due to uncertainty around timing of participant withdrawals, which are solely within the control of the participant, and are further discussed in note 13 to the Consolidated Financial Statements.

		Payments Due by Period
(in thousands)		2019				2020			2021			2022			2023			Beyond 5 Years			Total
Notes payable:
Regency (1)		$	163,223			523,669			457,680			827,419			156,771			2,806,715			$	4,935,477
Regency's share of joint ventures (1) (2)		46,303				122,512			119,233			80,113			73,424			196,027			637,612
Operating leases:
Regency - office leases		4,982				4,908			3,858			2,893			2,189			5,944			24,774
Subleases:
Regency - office leases		(577		)		(614	)		(309	)		—			—			—			(1,500		)
Ground leases:
Regency		10,672				10,439			10,344			10,258			10,369			461,762			513,844
Regency's share of joint ventures		393				394			394			394			394			18,073			20,042
Purchase commitment		27,547				—			—			—			—			—			27,547
U.S. Treasury rate lock		5,491				—			—			—			—			—			5,491
Total		$	258,034			661,308			591,200			921,077			243,147			3,488,521			$	6,163,287
(1) Includes interest payments.
(2) We are obligated to contribute our pro-rata share to fund maturities if they are not refinanced. We believe that our partners are financially sound and have sufficient capital or access thereto to fund future capital requirements. In the event that a co-investment partner was unable to fund its share of the capital requirements of the co-investment partnership, we would have the right, but not the obligation, to loan the defaulting partner the amount of its capital call.

Critical Accounting Estimates

Knowledge about our accounting policies is necessary for a complete understanding of our financial statements. The preparation of our financial statements requires that we make certain estimates that impact the balance of assets and liabilities as of a financial statement date and the reported amount of income and expenses during a financial reporting period. These accounting estimates are based upon, but not limited to, our judgments about historical and expected future results, current market conditions, and interpretation of industry accounting standards. They are considered to be critical because of their significance to the financial statements and the possibility that future events may differ from those judgments, or that the use of different assumptions could result in materially different estimates. We review these estimates on a periodic basis to ensure reasonableness; however, the amounts we may ultimately realize could differ from such estimates.

Accounts Receivable and Straight Line Rent

Minimum rent, percentage rent, and expense recoveries from tenants for common area maintenance costs, insurance and real estate taxes are the Company's principal source of revenue. As a result of generating this revenue, we will routinely have accounts receivable due from tenants. We are subject to tenant defaults and bankruptcies that may affect the collection of outstanding receivables. To address the collectability of these receivables, we analyze historical tenant collection rates, write-off experience, tenant credit-worthiness and current economic trends when evaluating the adequacy of our allowance for doubtful accounts and straight line rent reserve. Although we estimate uncollectible receivables and provide for them through charges against income, actual experience may differ from those estimates.

Real Estate Investments

Acquisition of Real Estate Investments

Upon acquisition of real estate operating properties, the Company estimates the fair value of acquired tangible assets (consisting of land, building, building improvements and tenant improvements) and identified intangible assets and liabilities (consisting of above and below-market leases and in-place leases), assumed debt, and any noncontrolling interest in the acquiree at the date of acquisition, based on evaluation of information and estimates available at that date. Based on these estimates, the Company allocates the estimated fair value to the applicable assets and liabilities. If the acquisition is determined to be a business combination, any excess consideration above the fair value allocated to the applicable assets and liabilities results in goodwill. Fair value is determined based on an exit price approach, which contemplates the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Transaction costs associated with asset acquisitions are capitalized, while such costs are expensed for business combinations in the period incurred.

We strategically co-invest with partners to own, manage, acquire, develop and redevelop operating properties. We analyze our investments in real estate partnerships in order to determine whether the entity should be consolidated. The Company consolidates partnerships in which it owns less than 100%, but which it controls. Control is determined using an evaluation based on accounting standards related to the consolidation of variable interest entities ("VIEs") and voting interest entities. For joint ventures that are determined to be a VIE, the Company consolidates the entity where it is deemed to be the primary beneficiary. Determination of the primary beneficiary is based on whether an entity has (1) the power to direct the activities of the VIE that most significantly impact the entity's economic performance, and (2) the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE. Management uses its judgment when making these determinations. We use the equity method of accounting for investments in real estate partnerships when we have significant influence but do not have a controlling financial interest. Under the equity method, we record our investments in and advances to these entities as Investments in real estate partnerships in our Consolidated Balance Sheets, and our proportionate share of earnings or losses earned by the partnership is recognized in Equity in income (loss) of investments in real estate partnerships in our Consolidated Statements of Operations.

Development and Redevelopment of Real Estate Assets and Cost Capitalization

We have a development program, which includes redevelopment of our existing properties. We capitalize the acquisition of land, the construction of buildings, and other specifically identifiable development costs incurred by recording them in Real estate assets, at cost, in our accompanying Consolidated Balance Sheets. Other specifically identifiable development costs include pre-development costs essential to the development process, as well as, interest, real estate taxes, and direct employee costs incurred during the development period. Once a development property is substantially complete and held available for occupancy, these indirect costs are no longer capitalized.

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Pre-development costs are incurred prior to land acquisition during the due diligence phase and include contract deposits, legal, engineering, and other professional fees related to evaluating the feasibility of developing a shopping center. If we determine it is probable that a specific project undergoing due diligence will not be developed, we immediately expense all related capitalized pre-development costs not considered recoverable.

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Interest costs are capitalized to each development project based on applying our weighted average borrowing rate to that portion of the actual development costs expended. We cease interest cost capitalization when the property is no longer being developed or is available for occupancy upon substantial completion of tenant improvements, but in no event would we capitalize interest on the project beyond 12 months after the anchor opens for business. During the years ended December 31, 2018, 2017, and 2016, we capitalized interest of $7.0 million, $7.9 million, and $3.5 million, respectively, on our development projects.

•	Real estate taxes are capitalized to each development project over the same period as we capitalize interest.

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We have a staff of employees who directly support our development program. All direct internal costs attributable to these development activities are capitalized as part of each development project. The capitalization of costs is directly related to the actual level of development activity occurring. During the years ended December 31, 2018, 2017, and 2016, we capitalized $17.1 million, $17.6 million, and $13.0 million, respectively, of direct internal costs incurred to support our development program.

Valuation of Real Estate Investments

In accordance with GAAP, we evaluate our real estate for impairment whenever there are indicators, including property operating performance and general market conditions, that the carrying value of our real estate properties (including any related amortizable intangible assets or liabilities) may not be recoverable. If such indicators occur, we compare the current carrying value of the asset to the estimated undiscounted cash flows that are directly associated with the use and ultimate disposition of the asset. Our estimated cash flows are based on several key assumptions, including rental rates, costs of tenant improvements, leasing commissions, anticipated hold period, comparable sales information, and assumptions regarding the residual value upon disposition, including the exit capitalization rate. These key assumptions are subjective in nature and the resulting impairment, if any, could differ from the actual gain or loss recognized upon ultimate sale in an arm's length transaction. If the carrying value of the asset exceeds the estimated undiscounted cash flows, an impairment loss is recognized equal to the excess of carrying value over fair value. Changes in our disposition strategy or changes in the marketplace may alter the hold period of an asset or asset group, which may result in an impairment loss and such loss could be material to the Company's financial condition or operating performance. In estimating the fair value of undeveloped land, we generally use market data and comparable sales information.

We evaluate our investments in real estate partnerships for impairment whenever there are indicators, including underlying property operating performance and general market conditions, that the value of our investments in real estate partnerships may be impaired. An investment in a real estate partnerships is considered impaired only if we determine that its fair value is less than the net carrying value of the investment in that real estate partnerships on an other-than-temporary basis. Cash flow projections for the investments consider property level factors, such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors. We consider various qualitative factors to determine if a decrease in the value of our investment is other-than-temporary. These factors include the age of the real estate partnerships, our intent and ability to retain our investment in the entity, and the financial condition and long-term prospects of the entity. If we believe that the decline in the fair value of the investment is temporary, no impairment charge is recorded. If our analysis indicates that there is an other-than-temporary impairment related to the investment in a particular real estate partnership, the carrying value of the investment will be adjusted to an amount that reflects the estimated fair value of the investment.

Recent Accounting Pronouncements

See Note 1 to Consolidated Financial Statements.

Environmental Matters

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

As of December 31, 2018 we and our Investments in real estate partnerships had accrued liabilities of $8.7 million for our pro-rata share of environmental remediation. We believe that the ultimate disposition of currently known environmental matters will not have a material effect on our financial position, liquidity, or results of operations; however, we can give no assurance that existing environmental studies on our shopping centers have revealed all potential environmental liabilities; that any previous owner, occupant or tenant did not create any material environmental condition not known to us; that the current environmental condition of the shopping centers will not be affected by tenants and occupants, by the condition of nearby properties, or by unrelated third parties; or that changes in applicable environmental laws and regulations or their interpretation will not result in additional environmental liability to us.

Off-Balance Sheet Arrangements

We do not have off-balance sheet arrangements, financings, or other relationships with other unconsolidated entities (other than our unconsolidated investment partnerships) or other persons, also known as variable interest entities, not previously discussed. Our unconsolidated investment partnership properties have been financed with non-recourse loans. We have no guarantees related to these loans.

Inflation/Deflation

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