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Cover and table of contents
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 March 31, 2022
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 172,362,333 as of May 4, 2022.
EXPLANATORY NOTE
This report combines the quarterly reports on Form 10-Q for the quarter ended March 31, 2022, 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 March 31, 2022, the Parent Company owned approximately 99.6% of the Units in the Operating Partnership. The remaining limited Units are owned by third party 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
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
REGENCY CENTERS CORPORATION
Consolidated Balance Sheets
March 31, 2022 and December 31, 2021
(in thousands, except share data)
| 2022 | 2021 | |||||||
| Assets | (unaudited) | |||||||
| Real estate assets, at cost | $ | 11,567,492 | 11,495,581 | |||||
| Less: accumulated depreciation | 2,235,869 | 2,174,963 | ||||||
| Real estate assets, net | 9,331,623 | 9,320,618 | ||||||
| Investments in real estate partnerships | 357,998 | 372,591 | ||||||
| Properties held for sale | 2,354 | 25,574 | ||||||
| Cash, cash equivalents, and restricted cash, including $2,749 and $1,930 of restricted cash at March 31, 2022 and December 31, 2021, respectively | 178,730 | 95,027 | ||||||
| Tenant and other receivables | 151,852 | 153,091 | ||||||
| Deferred leasing costs, less accumulated amortization of $118,572 and $117,878 at March 31, 2022 and December 31, 2021, respectively | 64,954 | 65,741 | ||||||
| Acquired lease intangible assets, less accumulated amortization of $316,632 and $312,186 at March 31, 2022 and December 31, 2021, respectively | 205,333 | 212,707 | ||||||
| Right of use assets, net | 279,892 | 280,783 | ||||||
| Other assets | 267,428 | 266,431 | ||||||
| Total assets | $ | 10,840,164 | 10,792,563 | |||||
| Liabilities and Equity | ||||||||
| Liabilities: | ||||||||
| Notes payable | $ | 3,716,717 | 3,718,944 | |||||
| Accounts payable and other liabilities | 278,265 | 322,271 | ||||||
| Acquired lease intangible liabilities, less accumulated amortization of $173,281 and $172,293 at March 31, 2022 and December 31, 2021, respectively | 362,890 | 363,276 | ||||||
| Lease liabilities | 215,705 | 215,788 | ||||||
| Tenants’ security, escrow deposits and prepaid rent | 60,895 | 62,352 | ||||||
| Total liabilities | 4,634,472 | 4,682,631 | ||||||
| Commitments and contingencies | — | — | ||||||
| Equity: | ||||||||
| Stockholders’ equity: | ||||||||
| Common stock, $0.01 par value per share, 220,000,000 shares authorized; 171,372,557 and 171,213,008 shares issued at March 31, 2022 and December 31, 2021, respectively | 1,714 | 1,712 | ||||||
| Treasury stock at cost, 436,924 and 427,901 shares held at March 31, 2022 and December 31, 2021, respectively | (23,831 | ) | (22,758 | ) | ||||
| Additional paid-in-capital | 7,882,764 | 7,883,458 | ||||||
| Accumulated other comprehensive loss | (1,764 | ) | (10,227 | ) | ||||
| Distributions in excess of net income | (1,726,556 | ) | (1,814,814 | ) | ||||
| Total stockholders’ equity | 6,132,327 | 6,037,371 | ||||||
| Noncontrolling interests: | ||||||||
| Exchangeable operating partnership units, aggregate redemption value of $54,222 and $56,844 at March 31, 2022 and December 31, 2021, respectively | 35,876 | 35,447 | ||||||
| Limited partners’ interests in consolidated partnerships | 37,489 | 37,114 | ||||||
| Total noncontrolling interests | 73,365 | 72,561 | ||||||
| Total equity | 6,205,692 | 6,109,932 | ||||||
| Total liabilities and equity | $ | 10,840,164 | 10,792,563 |
See accompanying notes to consolidated financial statements.
REGENCY CENTERS CORPORATION
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
| Three months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Revenues: | ||||||||
| Lease income | $ | 293,645 | 266,357 | |||||
| Other property income | 3,104 | 1,953 | ||||||
| Management, transaction, and other fees | 6,684 | 6,393 | ||||||
| Total revenues | 303,433 | 274,703 | ||||||
| Operating expenses: | ||||||||
| Depreciation and amortization | 77,842 | 77,259 | ||||||
| Operating and maintenance | 46,461 | 45,582 | ||||||
| General and administrative | 18,792 | 21,287 | ||||||
| Real estate taxes | 36,869 | 36,166 | ||||||
| Other operating expenses | 2,173 | 698 | ||||||
| Total operating expenses | 182,137 | 180,992 | ||||||
| Other expense (income): | ||||||||
| Interest expense, net | 36,738 | 36,936 | ||||||
| Gain on sale of real estate, net of tax | (101,948 | ) | (11,698 | ) | ||||
| Net investment loss (income) | 2,494 | (1,486 | ) | |||||
| Total other (income) expense | (62,716 | ) | 23,752 | |||||
| Income from operations before equity in income of investments in real estate partnerships | 184,012 | 69,959 | ||||||
| Equity in income of investments in real estate partnerships | 12,804 | 11,666 | ||||||
| Net income | 196,816 | 81,625 | ||||||
| Noncontrolling interests: | ||||||||
| Exchangeable operating partnership units | (863 | ) | (364 | ) | ||||
| Limited partners’ interests in consolidated partnerships | (725 | ) | (605 | ) | ||||
| Income attributable to noncontrolling interests | (1,588 | ) | (969 | ) | ||||
| Net income attributable to common stockholders | $ | 195,228 | 80,656 | |||||
| Income per common share - basic | $ | 1.14 | 0.48 | |||||
| Income per common share - diluted | $ | 1.14 | 0.47 |
See accompanying notes to consolidated financial statements.
REGENCY CENTERS CORPORATION
Consolidated Statements of Comprehensive Income
(in thousands)
(unaudited)
| Three months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Net income | $ | 196,816 | 81,625 | |||||
| Other comprehensive income (loss): | ||||||||
| Effective portion of change in fair value of derivative instruments: | ||||||||
| Effective portion of change in fair value of derivative instruments | 8,968 | 5,810 | ||||||
| Reclassification adjustment of derivative instruments included in net income | 1,010 | 1,035 | ||||||
| Unrealized loss on available-for-sale debt securities | (754 | ) | (285 | ) | ||||
| Other comprehensive income | 9,224 | 6,560 | ||||||
| Comprehensive income | 206,040 | 88,185 | ||||||
| Less: comprehensive income attributable to noncontrolling interests: | ||||||||
| Net income attributable to noncontrolling interests | 1,588 | 969 | ||||||
| Other comprehensive income attributable to noncontrolling interests | 761 | 447 | ||||||
| Comprehensive income attributable to noncontrolling interests | 2,349 | 1,416 | ||||||
| Comprehensive income attributable to the Company | $ | 203,691 | 86,769 |
See accompanying notes to consolidated financial statements.
REGENCY CENTERS CORPORATION
C****onsolidated Statements of Equity
For the three months ended March 31, 2022 and 2021
(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, 2020 | $ | 1,697 | (24,436 | ) | 7,792,082 | (18,625 | ) | (1,765,806 | ) | 5,984,912 | 35,727 | 37,508 | 73,235 | 6,058,147 | ||||||||||||||||||||||||||
| Net income | — | — | — | — | 80,656 | 80,656 | 364 | 605 | 969 | 81,625 | ||||||||||||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income before reclassification | — | — | — | 5,162 | — | 5,162 | 25 | 338 | 363 | 5,525 | ||||||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | — | — | — | 951 | — | 951 | 4 | 80 | 84 | 1,035 | ||||||||||||||||||||||||||||||
| Deferred compensation plan, net | — | (339 | ) | 339 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Restricted stock issued, net of amortization | 1 | — | 2,478 | — | — | 2,479 | — | — | — | 2,479 | ||||||||||||||||||||||||||||||
| Common stock repurchased for taxes withheld for stock based compensation, net | — | — | (3,859 | ) | — | — | (3,859 | ) | — | — | — | (3,859 | ) | |||||||||||||||||||||||||||
| Common stock issued under dividend reinvestment plan | — | — | 376 | — | — | 376 | — | — | — | 376 | ||||||||||||||||||||||||||||||
| Distributions to partners | — | — | — | — | — | — | — | (785 | ) | (785 | ) | (785 | ) | |||||||||||||||||||||||||||
| Cash dividends declared: | ||||||||||||||||||||||||||||||||||||||||
| Common stock/unit ($0.595 per share) | — | — | — | — | (101,046 | ) | (101,046 | ) | (453 | ) | — | (453 | ) | (101,499 | ) | |||||||||||||||||||||||||
| Balance at March 31, 2021 | $ | 1,698 | (24,775 | ) | 7,791,416 | (12,512 | ) | (1,786,196 | ) | 5,969,631 | 35,667 | 37,746 | 73,413 | 6,043,044 | ||||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | 1,712 | (22,758 | ) | 7,883,458 | (10,227 | ) | (1,814,814 | ) | 6,037,371 | 35,447 | 37,114 | 72,561 | 6,109,932 | ||||||||||||||||||||||||||
| Net income | — | — | — | — | 195,228 | 195,228 | 863 | 725 | 1,588 | 196,816 | ||||||||||||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income before reclassification | — | — | — | 7,537 | — | 7,537 | 37 | 640 | 677 | 8,214 | ||||||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | — | — | — | 926 | — | 926 | 4 | 80 | 84 | 1,010 | ||||||||||||||||||||||||||||||
| Deferred compensation plan, net | — | (1,073 | ) | 1,073 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Restricted stock issued, net of amortization | 2 | — | 4,206 | — | — | 4,208 | — | — | — | 4,208 | ||||||||||||||||||||||||||||||
| Common stock repurchased for taxes withheld for stock based compensation, net | — | — | (6,091 | ) | — | — | (6,091 | ) | — | — | — | (6,091 | ) | |||||||||||||||||||||||||||
| Common stock issued under dividend reinvestment plan | — | — | 118 | — | — | 118 | — | — | — | 118 | ||||||||||||||||||||||||||||||
| Distributions to partners | — | — | — | — | — | — | — | (1,070 | ) | (1,070 | ) | (1,070 | ) | |||||||||||||||||||||||||||
| Cash dividends declared: | ||||||||||||||||||||||||||||||||||||||||
| Common stock/unit ($0.625 per share) | — | — | — | — | (106,970 | ) | (106,970 | ) | (475 | ) | — | (475 | ) | (107,445 | ) | |||||||||||||||||||||||||
| Balance at March 31, 2022 | $ | 1,714 | (23,831 | ) | 7,882,764 | (1,764 | ) | (1,726,556 | ) | 6,132,327 | 35,876 | 37,489 | 73,365 | 6,205,692 |
See accompanying notes to consolidated financial statements.
REGENCY CENTERS CORPORATION
Consolidated Statements of Cash Flows
For the three months ended March 31, 2022 and 2021
(in thousands)
(unaudited)
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 196,816 | 81,625 | |||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 77,842 | 77,259 | ||||||
| Amortization of deferred loan costs and debt premiums | 1,379 | 2,167 | ||||||
| (Accretion) and amortization of above and below market lease intangibles, net | (5,302 | ) | (5,576 | ) | ||||
| Stock-based compensation, net of capitalization | 4,164 | 2,420 | ||||||
| Equity in income of investments in real estate partnerships | (12,804 | ) | (11,666 | ) | ||||
| Gain on sale of real estate, net of tax | (101,948 | ) | (11,698 | ) | ||||
| Distribution of earnings from investments in real estate partnerships | 16,736 | 16,491 | ||||||
| Settlement of derivative instruments | — | (2,472 | ) | |||||
| Deferred compensation expense | (2,256 | ) | 1,139 | |||||
| Realized and unrealized loss (gain) on investments | 2,533 | (1,354 | ) | |||||
| Changes in assets and liabilities: | ||||||||
| Tenant and other receivables | 3,396 | 15,760 | ||||||
| Deferred leasing costs | (2,014 | ) | (1,907 | ) | ||||
| Other assets | (4,724 | ) | (9,801 | ) | ||||
| Accounts payable and other liabilities | (29,387 | ) | (14,716 | ) | ||||
| Tenants’ security, escrow deposits and prepaid rent | (1,539 | ) | 1,691 | |||||
| Net cash provided by operating activities | 142,892 | 139,362 | ||||||
| Cash flows from investing activities: | ||||||||
| Acquisition of operating real estate | (30,166 | ) | 500 | |||||
| Real estate development and capital improvements | (53,605 | ) | (31,378 | ) | ||||
| Proceeds from sale of real estate | 124,924 | 53,859 | ||||||
| Issuance of notes receivable | — | (20 | ) | |||||
| Investments in real estate partnerships | (7,173 | ) | (20,223 | ) | ||||
| Return of capital from investments in real estate partnerships | 23,892 | 3,283 | ||||||
| Dividends on investment securities | 109 | 51 | ||||||
| Acquisition of investment securities | (5,554 | ) | (8,136 | ) | ||||
| Proceeds from sale of investment securities | 5,927 | 8,834 | ||||||
| Net provided by investing activities | 58,354 | 6,770 | ||||||
| Cash flows from financing activities: | ||||||||
| Repurchase of common shares in conjunction with equity award plans | (6,246 | ) | (3,996 | ) | ||||
| Proceeds from sale of treasury stock | 63 | 96 | ||||||
| Distributions to limited partners in consolidated partnerships, net | (1,070 | ) | (785 | ) | ||||
| Distributions to exchangeable operating partnership unit holders | (475 | ) | (453 | ) | ||||
| Dividends paid to common stockholders | (106,887 | ) | (100,580 | ) | ||||
| Proceeds from unsecured credit facilities | 40,000 | — | ||||||
| Repayment of unsecured credit facilities | (40,000 | ) | (265,000 | ) | ||||
| Repayment of notes payable | — | (3,962 | ) | |||||
| Scheduled principal payments | (2,846 | ) | (3,114 | ) | ||||
| Payment of loan costs | (82 | ) | (7,468 | ) | ||||
| Net cash used in financing activities | (117,543 | ) | (385,262 | ) | ||||
| Net increase (decrease) in cash and cash equivalents and restricted cash | 83,703 | (239,130 | ) | |||||
| Cash and cash equivalents and restricted cash at beginning of the period | 95,027 | 378,450 | ||||||
| Cash and cash equivalents and restricted cash at end of the period | $ | 178,730 | 139,320 |
See accompanying notes to consolidated financial statements.
REGENCY CENTERS CORPORATION
Consolidated Statements of Cash Flows
For the three months ended March 31, 2022 and 2021
(in thousands)
(unaudited)
| 2022 | 2021 | |||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest (net of capitalized interest of $796 and $849 in 2022 and 2021, respectively) | $ | 44,317 | 44,276 | |||||
| Cash paid (refunded) for income taxes | $ | 165 | (101 | ) | ||||
| Supplemental disclosure of non-cash transactions: | ||||||||
| Common stock and exchangeable operating partnership dividends declared but not paid | $ | 107,445 | 101,500 | |||||
| Change in accrued capital expenditures | $ | 11,603 | 874 | |||||
| Common stock issued under dividend reinvestment plan | $ | 118 | 376 | |||||
| Stock-based compensation capitalized | $ | 199 | 196 | |||||
| Common stock issued for dividend reinvestment in trust | $ | 267 | 274 | |||||
| Contribution of stock awards into trust | $ | 1,177 | 571 | |||||
| Distribution of stock held in trust | $ | 329 | 415 | |||||
| Change in fair value of securities | $ | 754 | 361 |
See accompanying notes to consolidated financial statements.
REGENCY CENTERS, L.P.
Consolidated Balance Sheets
March 31, 2022 and December 31, 2021
(in thousands, except unit data)
| 2022 | 2021 | |||||||
| Assets | (unaudited) | |||||||
| Real estate assets, at cost | $ | 11,567,492 | 11,495,581 | |||||
| Less: accumulated depreciation | 2,235,869 | 2,174,963 | ||||||
| Real estate assets, net | 9,331,623 | 9,320,618 | ||||||
| Investments in real estate partnerships | 357,998 | 372,591 | ||||||
| Properties held for sale | 2,354 | 25,574 | ||||||
| Cash, cash equivalents, and restricted cash, including $2,749 and $1,930 of restricted cash at March 31, 2022 and December 31, 2021, respectively | 178,730 | 95,027 | ||||||
| Tenant and other receivables | 151,852 | 153,091 | ||||||
| Deferred leasing costs, less accumulated amortization of $118,572 and $117,878 at March 31, 2022 and December 31, 2021, respectively | 64,954 | 65,741 | ||||||
| Acquired lease intangible assets, less accumulated amortization of $316,632 and $312,186 at March 31, 2022 and December 31, 2021, respectively | 205,333 | 212,707 | ||||||
| Right of use assets, net | 279,892 | 280,783 | ||||||
| Other assets | 267,428 | 266,431 | ||||||
| Total assets | $ | 10,840,164 | 10,792,563 | |||||
| Liabilities and Capital | ||||||||
| Liabilities: | ||||||||
| Notes payable | $ | 3,716,717 | 3,718,944 | |||||
| Accounts payable and other liabilities | 278,265 | 322,271 | ||||||
| Acquired lease intangible liabilities, less accumulated amortization of $173,281 and $172,293 at March 31, 2022 and December 31, 2021, respectively | 362,890 | 363,276 | ||||||
| Lease liabilities | 215,705 | 215,788 | ||||||
| Tenants’ security, escrow deposits and prepaid rent | 60,895 | 62,352 | ||||||
| Total liabilities | 4,634,472 | 4,682,631 | ||||||
| Commitments and contingencies | — | — | ||||||
| Capital: | ||||||||
| Partners’ capital: | ||||||||
| General partner; 171,372,557 and 171,213,008 units outstanding at March 31, 2022 and December 31, 2021, respectively | 6,134,091 | 6,047,598 | ||||||
| Limited partners; 760,046 units outstanding at March 31, 2022 and December 31, 2021 | 35,876 | 35,447 | ||||||
| Accumulated other comprehensive (loss) | (1,764 | ) | (10,227 | ) | ||||
| Total partners’ capital | 6,168,203 | 6,072,818 | ||||||
| Noncontrolling interest: Limited partners’ interests in consolidated partnerships | 37,489 | 37,114 | ||||||
| Total capital | 6,205,692 | 6,109,932 | ||||||
| Total liabilities and capital | $ | 10,840,164 | 10,792,563 |
See accompanying notes to consolidated financial statements.
REGENCY CENTERS, L.P.
Consolidated Statements of Operations
(in thousands, except per unit data)
(unaudited)
| Three months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Revenues: | ||||||||
| Lease income | $ | 293,645 | 266,357 | |||||
| Other property income | 3,104 | 1,953 | ||||||
| Management, transaction, and other fees | 6,684 | 6,393 | ||||||
| Total revenues | 303,433 | 274,703 | ||||||
| Operating expenses: | ||||||||
| Depreciation and amortization | 77,842 | 77,259 | ||||||
| Operating and maintenance | 46,461 | 45,582 | ||||||
| General and administrative | 18,792 | 21,287 | ||||||
| Real estate taxes | 36,869 | 36,166 | ||||||
| Other operating expenses | 2,173 | 698 | ||||||
| Total operating expenses | 182,137 | 180,992 | ||||||
| Other expense (income): | ||||||||
| Interest expense, net | 36,738 | 36,936 | ||||||
| Gain on sale of real estate, net of tax | (101,948 | ) | (11,698 | ) | ||||
| Net investment loss (income) | 2,494 | (1,486 | ) | |||||
| Total other (income) expense | (62,716 | ) | 23,752 | |||||
| Income from operations before equity in income of investments in real estate partnerships | 184,012 | 69,959 | ||||||
| Equity in income of investments in real estate partnerships | 12,804 | 11,666 | ||||||
| Net income | 196,816 | 81,625 | ||||||
| Limited partners’ interests in consolidated partnerships | (725 | ) | (605 | ) | ||||
| Net income attributable to common unit holders | $ | 196,091 | 81,020 | |||||
| Income per common share - basic | $ | 1.14 | 0.48 | |||||
| Income per common share - diluted | $ | 1.14 | 0.47 |
See accompanying notes to consolidated financial statements.
REGENCY CENTERS, L.P.
Consolidated Statements of Comprehensive Income
(in thousands)
(unaudited)
| Three months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Net income | $ | 196,816 | 81,625 | |||||
| Other comprehensive income (loss): | ||||||||
| Effective portion of change in fair value of derivative instruments: | ||||||||
| Effective portion of change in fair value of derivative instruments | 8,968 | 5,810 | ||||||
| Reclassification adjustment of derivative instruments included in net income | 1,010 | 1,035 | ||||||
| Unrealized loss on available-for-sale debt securities | (754 | ) | (285 | ) | ||||
| Other comprehensive income | 9,224 | 6,560 | ||||||
| Comprehensive income | 206,040 | 88,185 | ||||||
| Less: comprehensive income attributable to noncontrolling interests: | ||||||||
| Net income attributable to noncontrolling interests | 725 | 605 | ||||||
| Other comprehensive income attributable to noncontrolling interests | 720 | 418 | ||||||
| Comprehensive income attributable to noncontrolling interests | 1,445 | 1,023 | ||||||
| Comprehensive income attributable to the Partnership | $ | 204,595 | 87,162 |
See accompanying notes to consolidated financial statements.
REGENCY CENTERS, L.P.
C****onsolidated Statements of Capital
For the three months ended March 31, 2022 and 2021
(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, 2020 | $ | 6,003,537 | 35,727 | (18,625 | ) | 6,020,639 | 37,508 | 6,058,147 | ||||||||||||||||
| Net income | 80,656 | 364 | — | 81,020 | 605 | 81,625 | ||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||||||
| Other comprehensive income before reclassification | — | 25 | 5,162 | 5,187 | 338 | 5,525 | ||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | — | 4 | 951 | 955 | 80 | 1,035 | ||||||||||||||||||
| Distributions to partners | (101,046 | ) | (453 | ) | — | (101,499 | ) | (785 | ) | (102,284 | ) | |||||||||||||
| Restricted units issued as a result of restricted stock issued by Parent Company, net of amortization | 2,479 | — | — | 2,479 | — | 2,479 | ||||||||||||||||||
| Common units repurchased as a result of common stock repurchased by Parent Company, net of issuances | (3,483 | ) | — | — | (3,483 | ) | — | (3,483 | ) | |||||||||||||||
| Balance at March 31, 2021 | $ | 5,982,143 | 35,667 | (12,512 | ) | 6,005,298 | 37,746 | 6,043,044 | ||||||||||||||||
| Balance at December 31, 2021 | $ | 6,047,598 | 35,447 | (10,227 | ) | 6,072,818 | 37,114 | 6,109,932 | ||||||||||||||||
| Net income | 195,228 | 863 | — | 196,091 | 725 | 196,816 | ||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||||||
| Other comprehensive income before reclassification | — | 37 | 7,537 | 7,574 | 640 | 8,214 | ||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | — | 4 | 926 | 930 | 80 | 1,010 | ||||||||||||||||||
| Distributions to partners | (106,970 | ) | (475 | ) | — | (107,445 | ) | (1,070 | ) | (108,515 | ) | |||||||||||||
| Restricted units issued as a result of restricted stock issued by Parent Company, net of amortization | 4,208 | — | — | 4,208 | — | 4,208 | ||||||||||||||||||
| Common units repurchased as a result of common stock repurchased by Parent Company, net of issuances | (5,973 | ) | — | — | (5,973 | ) | — | (5,973 | ) | |||||||||||||||
| Balance at March 31, 2022 | $ | 6,134,091 | 35,876 | (1,764 | ) | 6,168,203 | 37,489 | 6,205,692 |
See accompanying notes to consolidated financial statements.
REGENCY CENTERS, L.P.
Consolidated Statem****ents of Cash Flows
For the three months ended March 31, 2022 and 2021
(in thousands)
(unaudited)
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 196,816 | 81,625 | |||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 77,842 | 77,259 | ||||||
| Amortization of deferred loan costs and debt premiums | 1,379 | 2,167 | ||||||
| (Accretion) and amortization of above and below market lease intangibles, net | (5,302 | ) | (5,576 | ) | ||||
| Stock-based compensation, net of capitalization | 4,164 | 2,420 | ||||||
| Equity in income of investments in real estate partnerships | (12,804 | ) | (11,666 | ) | ||||
| Gain on sale of real estate, net of tax | (101,948 | ) | (11,698 | ) | ||||
| Distribution of earnings from investments in real estate partnerships | 16,736 | 16,491 | ||||||
| Settlement of derivative instruments | — | (2,472 | ) | |||||
| Deferred compensation expense | (2,256 | ) | 1,139 | |||||
| Realized and unrealized loss (gain) on investments | 2,533 | (1,354 | ) | |||||
| Changes in assets and liabilities: | ||||||||
| Tenant and other receivables | 3,396 | 15,760 | ||||||
| Deferred leasing costs | (2,014 | ) | (1,907 | ) | ||||
| Other assets | (4,724 | ) | (9,801 | ) | ||||
| Accounts payable and other liabilities | (29,387 | ) | (14,716 | ) | ||||
| Tenants’ security, escrow deposits and prepaid rent | (1,539 | ) | 1,691 | |||||
| Net cash provided by operating activities | 142,892 | 139,362 | ||||||
| Cash flows from investing activities: | ||||||||
| Acquisition of operating real estate | (30,166 | ) | 500 | |||||
| Real estate development and capital improvements | (53,605 | ) | (31,378 | ) | ||||
| Proceeds from sale of real estate | 124,924 | 53,859 | ||||||
| Issuance of notes receivable | — | (20 | ) | |||||
| Investments in real estate partnerships | (7,173 | ) | (20,223 | ) | ||||
| Return of capital from investments in real estate partnerships | 23,892 | 3,283 | ||||||
| Dividends on investment securities | 109 | 51 | ||||||
| Acquisition of investment securities | (5,554 | ) | (8,136 | ) | ||||
| Proceeds from sale of investment securities | 5,927 | 8,834 | ||||||
| Net provided by investing activities | 58,354 | 6,770 | ||||||
| Cash flows from financing activities: | ||||||||
| Repurchase of common shares in conjunction with equity award plans | (6,246 | ) | (3,996 | ) | ||||
| Proceeds from sale of treasury stock | 63 | 96 | ||||||
| Distributions to limited partners in consolidated partnerships, net | (1,070 | ) | (785 | ) | ||||
| Distributions to partners | (107,362 | ) | (101,033 | ) | ||||
| Proceeds from unsecured credit facilities | 40,000 | — | ||||||
| Repayment of unsecured credit facilities | (40,000 | ) | (265,000 | ) | ||||
| Repayment of notes payable | — | (3,962 | ) | |||||
| Scheduled principal payments | (2,846 | ) | (3,114 | ) | ||||
| Payment of loan costs | (82 | ) | (7,468 | ) | ||||
| Net cash used in financing activities | (117,543 | ) | (385,262 | ) | ||||
| Net increase (decrease) in cash and cash equivalents and restricted cash | 83,703 | (239,130 | ) | |||||
| Cash and cash equivalents and restricted cash at beginning of the period | 95,027 | 378,450 | ||||||
| Cash and cash equivalents and restricted cash at end of the period | $ | 178,730 | 139,320 |
See accompanying notes to consolidated financial statements.
REGENCY CENTERS, L.P.
Consolidated Statements of Cash Flows
For the three months ended March 31, 2022 and 2021
(in thousands)
(unaudited)
| 2022 | 2021 | |||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest (net of capitalized interest of $796 and $849 in 2022 and 2021, respectively) | $ | 44,317 | 44,276 | |||||
| Cash paid (refunded) for income taxes | $ | 165 | (101 | ) | ||||
| Supplemental disclosure of non-cash transactions: | ||||||||
| Common stock and exchangeable operating partnership dividends declared but not paid | $ | 107,445 | 101,500 | |||||
| Change in accrued capital expenditures | $ | 11,603 | 874 | |||||
| Common stock issued by Parent Company for dividend reinvestment plan | $ | 118 | 376 | |||||
| Stock-based compensation capitalized | $ | 199 | 196 | |||||
| Common stock issued for dividend reinvestment in trust | $ | 267 | 274 | |||||
| Contribution of stock awards into trust | $ | 1,177 | 571 | |||||
| Distribution of stock held in trust | $ | 329 | 415 | |||||
| Change in fair value of securities | $ | 754 | 361 |
See accompanying notes to consolidated financial statements.
REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Unaudited Consolidated Financial Statements
March 31, 2022
| 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 March 31, 2022, the Parent Company, the Operating Partnership, and their controlled subsidiaries on a consolidated basis owned 303 properties and held partial interests in an additional 103 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.
Risks and Uncertainties
The success of the Company's tenants in operating their businesses and their ability to pay rent continue to be significantly influenced by many challenges including the impact of inflation, labor shortages, and supply chain constraints on their cost of doing business. Additionally, macroeconomic and geopolitical risks create challenges that may exacerbate current market conditions in the United States. The policies utilized to address these issues, including raising interest rates, could result in adverse impacts on the U.S. economy, including a slowing of growth or potentially a recession, thereby impacting tenants' businesses and/or decreasing future demand for space in shopping centers. The potential impact of current economic challenges on the Company’s financial condition, results of operations, and cash flows is subject to change and continues to depend on the extent and duration of these risks and uncertainties.
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 March 31, 2022, 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 shares of 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.
REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Unaudited Consolidated Financial Statements
March 31, 2022
Real Estate Partnerships
As of March 31, 2022, Regency had a partial ownership interest in 113 properties through partnerships, of which 10 are consolidated into the Company's financial statements. 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 into its financial statements 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.
The assets of these partnerships are restricted to the use of the partnerships and cannot be used by general creditors of the Company. 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) | March 31, 2022 | December 31, 2021 | ||||||
| Assets | ||||||||
| Net real estate investments | $ | 216,131 | 379,075 | |||||
| Cash, cash equivalents and restricted cash | 2,868 | 5,202 | ||||||
| Liabilities | ||||||||
| Notes payable | 4,918 | 5,000 | ||||||
| Equity | ||||||||
| Limited partners’ interests in consolidated partnerships | 27,714 | 27,950 |
Revenues and Other Receivables
Other property income includes parking fees and other 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 are as follows:
| Three months ended March 31, | ||||||||||
| (in thousands) | Timing of satisfaction of performance obligations | 2022 | 2021 | |||||||
| Management, transaction and other fees: | ||||||||||
| Property management services | Over time | $ | 3,618 | 3,771 | ||||||
| Asset management services | Over time | 1,755 | 1,715 | |||||||
| Leasing services | Point in time | 996 | 851 | |||||||
| Other transaction fees | Point in time | 315 | 56 | |||||||
| Total management, transaction, and other fees | $ | 6,684 | 6,393 |
The accounts receivable for management services, which are included within Tenant and other receivables in the accompanying Consolidated Balance Sheets, are $13.8 million and $13.2 million, as of March 31, 2022 and December 31, 2021, respectively.
REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Unaudited Consolidated Financial Statements
March 31, 2022
Recent Accounting Pronouncements
The following table provides a brief description of recently adopted accounting pronouncements and impact on our financial statements:
| Standard | Description | Date of adoption | Effect on the financial statements or other significant matters | |||
| Recently adopted**:** | ||||||
| ASU 2021-05, Leases (Topic 842): Lessors - Certain Leases with Variable Lease Payments | The amendments in this update affect lessor lease classification. Lessors should classify and account for a lease as an operating lease if both of the following criteria are met: (1) have variable lease payments that do not depend on a reference index or a rate and (2) would have resulted in the recognition of a selling loss at lease commencement if classified as sales-type or direct financing. This update results in similar treatment under the current Topic 842 as under the previous Topic 840. | January 2022 | The adoption of this standard did not have a material impact to the Company’s financial condition, results of operations, cash flows or related footnote disclosures as the Company’s customary lease terms do not result in sales-type or direct financing classification, although future leases may. | |||
REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Unaudited Consolidated Financial Statements
March 31, 2022
| 2. | Real Estate Investments |
The following table details the shopping centers acquired or land acquired for development during the three months ended March 31, 2022. There were no such purchases during the three months ended March 31, 2021.
| (in thousands) | Three months ended March 31, 2022 | |||||||||||||||||||||||
| Date Purchased | Property Name | City/State | Property Type | Ownership | Purchase Price | Debt Assumed, Net of Discounts | Intangible Assets | Intangible Liabilities | ||||||||||||||||
| 3/1/2022 | Glenwood Green | Old Bridge, NJ | Development | 100% | $ | 11,000 | — | — | — | |||||||||||||||
| 3/25/2022 | Naperville Plaza (1) | Naperville, IL | Operating | 20% | 52,380 | 22,074 | 4,336 | 814 | ||||||||||||||||
| 3/31/2022 | Island Village | Bainbridge Island, WA | Operating | 100% | 30,650 | — | 2,900 | 6,839 | ||||||||||||||||
| Total property acquisitions | $ | 94,030 | 22,074 | 7,236 | 7,653 |
(1)
This operating property was purchased through Columbia Regency Partners II, LLC, an unconsolidated Investment in real estate partnership, in which the Company owns 20%.
Subsequent to March 31, 2022, the Company completed the acquisition of the partner's 75% interest in four properties held in the RegCal partnership for $88.5 million, increasing the Company's ownership in such properties to 100%. Prior to the completion of the acquisition, the Company owned a 25% equity interest in the properties through an unconsolidated Investment in real estate partnership.
| 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 March 31, | |||||||||
| (in thousands, except number sold data) | 2022 | 2021 | |||||||
| Net proceeds from sale of real estate investments | $ | 124,924 | 53,859 | ||||||
| Gain on sale of real estate, net of tax | 101,948 | 11,698 | |||||||
| Number of operating properties sold | 1 | 4 | |||||||
| Number of land parcels sold | 1 | 1 | |||||||
| Percent interest sold | 100% | 100% |
At March 31, 2022, the Company also had one land parcel classified within Properties held for sale on the Consolidated Balance Sheets.
| 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) | March 31, 2022 | December 31, 2021 | ||||||
| Goodwill, net | $ | 167,095 | 167,095 | |||||
| Investments | 61,332 | 65,112 | ||||||
| Prepaid and other | 25,636 | 21,332 | ||||||
| Deferred financing costs, net | 6,875 | 7,448 | ||||||
| Furniture, fixtures, and equipment, net | 5,248 | 5,444 | ||||||
| Derivative assets | 1,242 | — | ||||||
| Total other assets | $ | 267,428 | 266,431 |
REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Unaudited Consolidated Financial Statements
March 31, 2022
The following table presents the goodwill balances and activity during the year to date periods ended:
| March 31, 2022 | December 31, 2021 | |||||||||||||||||||||||
| (in thousands) | Goodwill | Accumulated Impairment Losses | Total | Goodwill | Accumulated Impairment Losses | Total | ||||||||||||||||||
| Beginning of year balance | $ | 300,529 | (133,434 | ) | 167,095 | 307,413 | (133,545 | ) | 173,868 | |||||||||||||||
| Goodwill allocated to Properties held for sale | — | — | — | (2,465 | ) | — | (2,465 | ) | ||||||||||||||||
| Goodwill associated with disposed reporting units: | ||||||||||||||||||||||||
| Goodwill allocated to Provision for impairment | — | — | — | (111 | ) | 111 | — | |||||||||||||||||
| Goodwill allocated to Gain on sale of real estate | — | — | — | (4,308 | ) | — | (4,308 | ) | ||||||||||||||||
| End of period balance | $ | 300,529 | (133,434 | ) | 167,095 | 300,529 | (133,434 | ) | 167,095 |
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.
| 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 as of the dates set forth below:
| (in thousands) | Weighted Average Contractual Rate | Weighted Average Effective Rate | March 31, 2022 | December 31, 2021 | ||||||||
| Notes payable: | ||||||||||||
| Fixed rate mortgage loans | 4.0% | 3.5% | $ | 356,541 | 359,414 | |||||||
| Variable rate mortgage loans (1) | 3.2% | 3.3% | 115,089 | 115,539 | ||||||||
| Fixed rate unsecured debt | 3.8% | 4.0% | 3,245,087 | 3,243,991 | ||||||||
| Total notes payable | 3,716,717 | 3,718,944 | ||||||||||
| Unsecured credit facilities: | ||||||||||||
| Line of Credit (the "Line") (2) | 1.1% | 1.4% | — | — | ||||||||
| Total debt outstanding | $ | 3,716,717 | 3,718,944 |
(1)
Four of these variable rate loans have interest rate swaps in place to mitigate the interest rate fluctuation risk. Based on these swap agreements, the effective fixed rates of the four 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.
Scheduled principal payments and maturities on notes payable and unsecured credit facilities were as follows:
| (in thousands) | March 31, 2022 | |||||||||||||||
| Scheduled Principal Payments and Maturities by Year: | Scheduled Principal Payments | Mortgage Loan Maturities | Unsecured Maturities (1) | Total | ||||||||||||
| 2022 (2) | $ | 8,542 | 5,848 | — | 14,390 | |||||||||||
| 2023 | 9,695 | 59,376 | — | 69,071 | ||||||||||||
| 2024 | 4,849 | 90,742 | 250,000 | 345,591 | ||||||||||||
| 2025 | 3,732 | 45,000 | 250,000 | 298,732 | ||||||||||||
| 2026 | 3,922 | 88,000 | 200,000 | 291,922 | ||||||||||||
| Beyond 5 Years | 6,661 | 138,234 | 2,575,000 | 2,719,895 | ||||||||||||
| Unamortized debt premium/(discount) and issuance costs | — | 7,029 | (29,913 | ) | (22,884 | ) | ||||||||||
| Total | $ | 37,401 | 434,229 | 3,245,087 | 3,716,717 |
(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 March 31, 2022, with all financial and other covenants under its unsecured public and private placement debt and unsecured credit facilities, and expects to remain in compliance thereafter.
REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Unaudited Consolidated Financial Statements
March 31, 2022
| 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 transactions or 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 | March 31, 2022 | December 31, 2021 | ||||||||||||
| 4/7/16 | 4/1/23 | $ | 18,932 | 1 Month LIBOR | 1.303% | $ | 90 | (175 | ) | |||||||||
| 12/1/16 | 11/1/23 | 31,607 | 1 Month LIBOR | 1.490% | 357 | (412 | ) | |||||||||||
| 9/17/19 | 3/17/25 | 24,000 | 1 Month LIBOR | 1.542% | 633 | (364 | ) | |||||||||||
| 6/2/17 | 6/2/27 | 35,876 | 1 Month LIBOR with Floor | 2.366% | 162 | (1,907 | ) | |||||||||||
| $ | 1,242 | (2,858 | ) |
(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 March 31, 2022, 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 Income (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 March 31, | Three months ended March 31, | Three months ended March 31, | ||||||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Interest rate swaps | $ | 8,968 | 5,810 | Interest expense | $ | 1,010 | 1,035 | Interest expense, net | $ | 36,738 | 36,936 |
As of March 31, 2022, the Company expects approximately $456,000 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.
REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Unaudited Consolidated Financial Statements
March 31, 2022
| 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 (“Recoverable Costs”). 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 the tenants’ contractual obligations to reimburse the Company for their portion of 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 March 31, | |||||||
| 2022 | 2021 | |||||||
| Operating lease income | ||||||||
| Fixed and in-substance fixed lease income | $ | 207,502 | 196,054 | |||||
| Variable lease income | 72,026 | 64,067 | ||||||
| Other lease related income, net: | ||||||||
| Above/below market rent and tenant rent inducement amortization, net | 5,689 | 5,996 | ||||||
| Uncollectible straight-line rent | 2,282 | (2,035 | ) | |||||
| Uncollectible amounts billable in lease income | 6,146 | 2,275 | ||||||
| Total lease income | $ | 293,645 | 266,357 |
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 in which collectibility is considered probable. At lease commencement, the Company generally expects that collectibility of substantially all payments due under the lease is probable due to the Company’s credit checks on tenants and other credit 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 no longer to be probable of collection. Should collectibility of Lease income become probable again, through evaluation of qualitative and quantitative measures on a tenant by tenant basis, accrual basis accounting resumes and all commencement-to-date straight-line rent is recognized in that period. In addition to the lease-specific collectibility assessment performed under Topic 842, the Company may also recognize 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.
The following table represents the components of Tenant and other receivables in the accompanying Consolidated Balance Sheets:
| (in thousands) | March 31, 2022 | December 31, 2021 | ||||||
| Tenant receivables | $ | 17,756 | $ | 27,354 | ||||
| Straight-line rent receivables | 109,953 | 103,942 | ||||||
| Other receivables (1) | 24,143 | 21,795 | ||||||
| Total tenant and other receivables | $ | 151,852 | $ | 153,091 |
(1)
Other receivables include construction receivables, insurance receivables, and amounts due from real estate partnerships for Management, transaction and other fee income.
REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Unaudited Consolidated Financial Statements
March 31, 2022
| 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:
| March 31, 2022 | December 31, 2021 | |||||||||||||||
| (in thousands) | Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||
| Financial liabilities: | ||||||||||||||||
| Notes payable | $ | 3,716,717 | 3,782,877 | 3,718,944 | 4,103,533 |
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 March 31, 2022, and December 31, 2021, respectively. These fair value measurements maximize the use of observable inputs which are classified within Level 2 of the fair value hierarchy. 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 loss (income) in the accompanying Consolidated Statements of Operations, and include unrealized losses of $3.0 million and unrealized gains of $417,462 during the three months ended March 31, 2022 and 2021, respectively.
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.
REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Unaudited Consolidated Financial Statements
March 31, 2022
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 March 31, 2022 | |||||||||||||||
| 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 | $ | 46,358 | 46,358 | — | — | ||||||||||
| Available-for-sale debt securities | 14,974 | — | 14,974 | — | |||||||||||
| Interest rate derivatives | 1,242 | — | 1,242 | — | |||||||||||
| Total | $ | 62,574 | 46,358 | 16,216 | — |
| Fair Value Measurements as of December 31, 2021 | |||||||||||||||
| 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 | $ | 49,513 | 49,513 | — | — | ||||||||||
| Available-for-sale debt securities | 15,599 | — | 15,599 | — | |||||||||||
| Interest rate derivatives | — | — | - | — | |||||||||||
| Total | $ | 65,112 | 49,513 | 15,599 | — | ||||||||||
| Liabilities: | |||||||||||||||
| Interest rate derivatives | $ | (2,858 | ) | — | (2,858 | ) | — |
The following table presents the placement in the fair value hierarchy of assets and liabilities that are measured at fair value on a nonrecurring basis:
| Fair Value Measurements as of December 31, 2021 | |||||||||||||||||||
| 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 | $ | 140,500 | — | — | 140,500 | (84,277 | ) |
During the year ended December 31, 2021, the Company revalued two shopping centers to estimated fair value due to a change in expected hold period using a discounted cash flow model with a discount rate of 7.2% and a terminal capitalization rate of 5.25%.
| 9. | Equity and Capital |
Common Stock of the Parent Company
Dividends Declared
On April 29, 2022, our Board of Directors declared a common stock dividend of $0.625 per share, payable on July 6, 2022, to shareholders of record as of June 15, 2022.
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.
REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Unaudited Consolidated Financial Statements
March 31, 2022
During 2021, the Company entered into forward sale agreements under its ATM program to issue shares of its common stock at a weighted average offering price of $64.59 before any underwriting discount and offering expenses. Subsequent to March 31, 2022, the Company settled 984,618 shares subject to forward sales agreements and received proceeds of approximately $61.3 million, after approximately $3.3 million in underwriting discounts and offering expenses. The proceeds were used to fund acquisitions. All shares are now settled under the forward sales agreements.
As of March 31, 2022, $350.4 million of common stock remained available for issuance under this ATM equity program.
Share Repurchase Program
On February 3, 2021, 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 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. Under the current authorization, the program is set to expire on February 3, 2023, but may be modified or terminated at any time 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 March 31, 2022, no 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. During the three months ended March 31, 2022, no Partnership Units were converted to Parent Company common stock.
| 10. | Stock-Based Compensation |
During the three months ended March 31, 2022, the Company granted 255,505 shares of restricted stock with a weighted-average grant-date fair value of $73.14 per share. The Company records stock-based compensation expense within General and administrative expenses in the accompanying Consolidated Statements of Operations, and records forfeitures as they occur.
| 11. | 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 March 31, | ||||||||
| (in thousands, except per share data) | 2022 | 2021 | ||||||
| Numerator: | ||||||||
| Income attributable to common stockholders - basic | $ | 195,228 | 80,656 | |||||
| Income attributable to common stockholders - diluted | $ | 195,228 | 80,656 | |||||
| Denominator: | ||||||||
| Weighted average common shares outstanding for basic EPS | 171,312 | 169,768 | ||||||
| Weighted average common shares outstanding for diluted EPS | 171,671 | 170,006 | ||||||
| Income per common share – basic | $ | 1.14 | 0.48 | |||||
| Income per common share – diluted | $ | 1.14 | 0.47 |
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 March 31, 2022 and 2021, were 760,046 and 765,046, respectively.
REGENCY CENTERS CORPORATION AND REGENCY CENTERS, L.P.
Notes to Unaudited Consolidated Financial Statements
March 31, 2022
Operating Partnership Earnings per Unit
The following summarizes the calculation of basic and diluted earnings per unit:
| Three months ended March 31, | ||||||||
| (in thousands, except per share data) | 2022 | 2021 | ||||||
| Numerator: | ||||||||
| Income attributable to common unit holders - basic | $ | 196,091 | 81,020 | |||||
| Income attributable to common unit holders - diluted | $ | 196,091 | 81,020 | |||||
| Denominator: | ||||||||
| Weighted average common units outstanding for basic EPU | 172,072 | 170,533 | ||||||
| Weighted average common units outstanding for diluted EPU | 172,431 | 170,771 | ||||||
| Income per common unit – basic | $ | 1.14 | 0.48 | |||||
| Income per common unit – diluted | $ | 1.14 | 0.47 |
| 12. | Commitments and Contingencies |
Litigation
The Company is involved in litigation on a number of matters, and is subject to other disputes that arise in the ordinary course of business. While the outcome of any particular lawsuit or dispute cannot be predicted with certainty, in the opinion of management, the Company's currently pending litigation and disputes are not expected to have a material adverse effect on the Company's consolidated financial position, results of operations, or liquidity. Legal fees are expensed as incurred.
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, older underground petroleum storage tanks and other historic land use. 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 March 31, 2022 and December 31, 2021, the Company had $9.4 million in letters of credit outstanding.
Next: Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations