REG

Regency Centers Corp. 10-Q Summary: Period Ended June 30, 2007

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended June 30, 2007, and the six-month period ended on the same date. Regency Centers Corporation is a Real Estate Investment Trust (REIT) engaged in the ownership, management, leasing, acquisition, and development of retail shopping centers. As of June 30, 2007, the Company directly owned 223 shopping centers (Consolidated Properties) and held partial interests in 190 additional centers through joint ventures (Unconsolidated Properties), totaling 413 centers with approximately 48.0 million square feet of Gross Leasable Area (GLA).

Key Financial Metrics

Revenue and Profitability (Six Months Ended June 30, 2007):

• Total Revenues: $215.2 million (up 4.9% from $205.2 million in 2006).
• Net Income: $106.3 million (down 1.4% from $107.8 million in 2006).
• Net Income for Common Stockholders: $96.4 million (down 1.6% from $98.0 million in 2006).
• Diluted Earnings Per Share (EPS): $1.39 (down from $1.43 in 2006).
• Income from Continuing Operations: $86.3 million (up 21.1% from $71.3 million in 2006).
• Income from Discontinued Operations: $19.9 million (down 45.4% from $36.5 million in 2006).

Cash Flow (Six Months Ended June 30, 2007):

• Net Cash Provided by Operating Activities: $121.1 million (up from $108.8 million in 2006).
• Net Cash Used in Investing Activities: $(253.0) million (compared to $53.0 million provided in 2006), driven by $385.9 million in development costs and $34.0 million in acquisitions, partially offset by $173.3 million in proceeds from property sales.
• Net Cash Provided by Financing Activities: $152.9 million (compared to $(167.7) million used in 2006), primarily due to $398.1 million in proceeds from new unsecured notes.
• Cash and Cash Equivalents: $55.1 million at period end (up from $34.0 million at Dec 31, 2006).

Balance Sheet Highlights (June 30, 2007):

• Total Assets: $3.99 billion.
• Total Liabilities: $2.03 billion.
• Total Debt: $1.84 billion (Notes Payable of $1.81 billion and Unsecured Line of Credit of $30.0 million).
• Stockholders' Equity: $1.88 billion.

Material Changes vs. Prior Period

• Revenue Growth: Driven by higher minimum rents from lease renewals and new developments, as well as increased tenant recoveries. Management fees decreased due to the absence of a large one-time contingent acquisition fee recognized in 2006.
• Discontinued Operations: Significant decline in income from discontinued operations ($19.9M vs $36.5M) due to fewer property sales to unrelated third parties in the current period compared to the prior year. The Company sold three properties for net proceeds of $81.4 million in the first half of 2007.
• Debt Structure: On June 5, 2007, the Company issued $400 million of 10-year senior unsecured notes at 5.875% to reduce its unsecured line of credit. Total debt increased by approximately $265 million year-over-year.
• Development Activity: Properties in development increased to $929.4 million (from $615.5 million), reflecting a robust pipeline of 48 properties under construction or renovation.

Guidance, Outlook, and Risks

Management Commentary: Management maintains a "self-funding" business model utilizing center "recycling" (selling lower-performing assets to fund higher-quality developments). The Company anticipates sustaining its development program at historical levels for the next three years, with estimated returns on current projects ranging from 8% to 8.5%.

Liquidity: The Company has a $600 million unsecured line of credit with $570 million available as of June 30, 2007. It expects to fund capital requirements through operating cash flow, property sales, joint venturing, and capital markets.

Risks and Contingencies:

• Interest Rate Risk: While 96.5% of debt is fixed, the Company has variable rate exposure. A 1% increase in variable rates would increase annual interest expense by approximately $636,000.
• Tenant Concentration: No single tenant accounts for more than 7% of annual base rental revenues. The Company monitors the video rental industry and potential tenant bankruptcies.
• Environmental Liabilities: The Company has accrued approximately $4.2 million for known environmental remediation obligations.
• Joint Venture Risks: The Company relies on joint ventures for capital and growth; it does not have voting control over all ventures, and major decisions require partner approval.

Investor Verification Checklist

• Verify the sustainability of the 8% to 8.5% projected returns on the $1.2 billion development pipeline given rising land and construction costs.
• Confirm the status of the $362 million acquisition of 33 Schnucks-anchored centers with MCW and Desco Group, expected to close later in 2007.
• Monitor the occupancy rate of Consolidated Properties, which stood at 86.7% (lower than the 95.0% occupancy of Unconsolidated joint ventures).
• Review the impact of the $400 million new debt issuance on future interest coverage ratios and fixed charge coverage covenants.
• Assess the potential for future gains from sales to joint ventures, which are recognized only on the non-owned portion of the sale.