As filed with the Securities and Exchange Commission on May 20, 2003
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
REGENCY CENTERS CORPORATION
(Exact name of registrant as specified in its charter)
Florida 59-3191743
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation)
121 West Forsyth Street, Suite 200
Jacksonville, Florida 32202
(904) 356-7000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Martin E. Stein, Jr.,
Chairman and Chief Executive Officer
121 West Forsyth Street, Suite 200
Jacksonville, Florida 32202
(904) 356-7000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
Linda Y. Kelso
Miriam K. Greenhut
Foley & Lardner
200 Laura Street
Jacksonville, Florida 32202
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. |_|
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. |X|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act of 1933, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act of 1933, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434 under
the Securities Act of 1933, please check the following box. |_|
Calculation of Registration Fee
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Title of each Proposed Proposed
class of maximum Maximum
securities to be Amount to be offering price Aggregate Amount of registration
registered Registered per share(1) Offering Price(1) fee(1)
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Common Stock, 34,273,236 shares $33.465 $1,146,953,843 $92,788.57
$0.01 par value
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(1) Pursuant to Rule 457(c) under the Securities Act of 1933, the
registration fee has been calculated based on the average of the high
and low prices reported on the New York Stock Exchange on May 15, 2003.
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
Subject to Completion Dated May 20, 2003
PROSPECTUS
34,273,236 Shares
Regency Centers Corporation
121 W. Forsyth Street, Suite 200
Jacksonville, Florida 32202
(904) 598-7000
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The information in this prospectus is not complete and may be changed. The
selling shareholder may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and the selling shareholder
is not soliciting offers to buy these securities in any state where the offer or
sale is not permitted.
This prospectus relates to the public offering from time to time of up to
34,273,236 shares of common stock by Security Capital Group Incorporated and its
affiliates or their permitted transferees. We are registering these shares for
offer and sale as required under the terms of a registration rights agreement
between Security Capital and us. Our registration of the offered shares does not
mean that Security Capital will offer or sell any of the shares. We will not
receive any proceeds from the sale of the shares.
Security Capital may sell shares to or through underwriters, and also to other
purchasers or through agents. The names of the underwriters will be set forth in
a prospectus supplement.
Our common stock is listed on the New York Stock Exchange under the symbol
"REG." The last reported sales price for our common stock on the New York Stock
Exchange on May 19, 2003 was $33.65 per share.
Investing in our common stock involves risks. See "Risk Factors" beginning on
page 3.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the common stock or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
___________, 2003
PROSPECTUS SUMMARY
THE ISSUER
We are a real estate investment trust which acquires, owns, develops and manages
grocery-anchored shopping centers in target markets in the United States. Our
common stock is traded on the New York Stock Exchange.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from the SEC's web site at http//www.sec.gov. We also maintain a web site at
www.regencycenters.com.
This prospectus is part of a registration statement we filed with the SEC,
covering the securities offered hereby. The SEC allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents. We refer you
to the registration statement, the exhibits, financial statements and schedules
thereto for further information. This prospectus is qualified in its entirety by
such other information. The information incorporated by reference is considered
to be part of this prospectus, and later information that we file with the SEC
will automatically update and supersede this information. We incorporate by
reference the documents listed below and any documents we file in the future
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 until the selling shareholder sells all of the shares
covered by this prospectus (but we do not incorporate by reference any documents
that we furnish to but that are not deemed filed with the SEC):
o Our annual report on Form 10-K for the fiscal year ended December 31, 2002;
o Our quarterly report on Form 10-Q for the quarter ended March 31, 2003; and
o Our current report on Form 8-K dated April 10, 2003.
The Securities and Exchange Commission has assigned file number 1-12298 to
reports and other information that we file with the Securities and Exchange
Commission.
You may request a copy of these filings, at no cost, by writing or telephoning
us at the following address:
Ms. Diane Ortolano
Shareholder Communications
Regency Centers Corporation
121 W. Forsyth Street
Suite 200
Jacksonville, FL 32202
(904) 598-7675
You should rely only on the information incorporated by reference or provided in
this prospectus or any supplement. We have not authorized anyone else to provide
you with different information. You should not assume that the information in
this prospectus or any supplement is accurate as
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of any date other than the date on the front of those documents.
When we say "we," "our," "us" or "Regency," we mean Regency Centers Corporation
and its consolidated subsidiaries, except where we make it clear that we mean
only the parent company. When we say "you," without any further specification,
we mean any party to whom this prospectus is delivered, including a holder in
street name.
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FORWARD-LOOKING INFORMATION
Some of the matters discussed in this prospectus include forward-looking
statements based on current expectations, estimates, forecasts and projections,
beliefs and assumptions made by our management. You can identify these
forward-looking statements by the use of words like "strategy," "expects,"
"plans," "believes," "will," "estimates," "intends," "projects," "goals,"
"targets," "anticipating," "hope" and other words of similar meaning. You can
also identify them by the fact that they do not relate strictly to historical or
current facts. Even though we believe our expectations regarding future events
are based on reasonable assumptions, forward-looking statements are not
guarantees of future performance. In evaluating these statements, you should
specifically consider various risks, uncertainties and other factors that may
cause our actual results, performance or achievements to be materially different
from any future results, performance or achievements expressed or implied by the
forward-looking statements. Certain of such risks and uncertainties include
those listed under the caption "Risk Factors" and those indicated from time to
time in our filings with the Securities and Exchange Commission, many of which
are beyond our ability to control or predict. You are cautioned not to unduly
rely on these forward-looking statements when evaluating the information
included or incorporated by reference into this prospectus.
These forward-looking statements speak only as of the date of this prospectus.
We undertake no obligation to review or revise any particular forward-looking
statements included or incorporated by reference in this prospectus to reflect
events, conditions or circumstances occurring after the date of this prospectus
or to reflect the occurrence of unanticipated events.
RISK FACTORS
The following contains a description of the material risks involved in an
investment in our common stock.
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Our debt financing may reduce distributions to
shareholders.
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We do not expect to generate sufficient funds from operations to make balloon
principal payments when due on our debt. If we are unable to refinance our debt
on acceptable terms, we might be forced to dispose of properties, which might
result in losses, or to obtain financing at unfavorable terms. Either could
reduce the cash flow available for distributions to shareholders. In addition,
if we cannot make required mortgage payments, the mortgagee could foreclose on
the property securing the mortgage, causing the loss of cash flow from that
property to meet obligations. Substantially all of our debt is cross-defaulted,
but not cross-collateralized.
Our organizational documents do not limit the amount of debt that may be
incurred. We have established a policy limiting total debt to 50% of total
assets at cost and maintaining a minimum debt service coverage ratio of 2:1 on
an annual
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basis. Our board of directors may amend this policy at any time without the
approval of our shareholders.
Our line of credit imposes certain covenants which limit our flexibility in
obtaining other financing, such as a prohibition on negative pledge agreements.
The degree to which we are leveraged could have important consequences to you,
including the following:
o leverage could affect our ability to obtain additional financing in the
future to repay indebtedness or for working capital, capital expenditures,
acquisitions, development or other general corporate purposes;
o leverage could make us more vulnerable to a downturn in our business or the
economy generally; and
o as a result, our leverage could lead to reduced distributions to
shareholders.
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Loss of revenues from major tenants could reduce
distributions to shareholders.
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We derive significant revenues from anchor tenants such as Kroger, Publix,
Safeway, and Albertsons that occupy more than one center. Distributions to
shareholders could be adversely affected by the loss of revenues in the event a
major tenant:
o files for bankruptcy or insolvency;
o experiences a downturn in its business;
o materially defaults on its lease;
o does not renew its leases as they expire; or
o renews at lower rental rates.
Vacated anchor space, including space owned by the anchor, can reduce rental
revenues generated by the shopping center because of the loss of the departed
anchor tenant's customer drawing power. Most anchors have the right to vacate
and prevent retenanting by paying rent for the balance of the lease term. If
major tenants vacate a property, then other tenants may be entitled to terminate
their leases at the property.
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We do not have voting control over our joint venture
investments, so we are unable to ensure that our
objectives will be pursued.
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We have invested in some cases as a co-venturer or partner in the acquisition or
development of properties. These investments involve risks not present in a
wholly owned project. We do not have voting control over the ventures or
partnerships. The co-venturer or partner might (1) have interests or goals that
are inconsistent with our interests or goals or (2) otherwise impede our
objectives. The co-venturer or partner also might become insolvent or bankrupt.
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Downturns in the retailing industry likely will have a
direct impact on our performance.
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Our properties consist of grocery-anchored shopping centers. Our performance
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therefore is linked to economic conditions in the market for retail space
generally. The market for retail space has been or could be adversely affected
by any of the following:
o weakness in the national, regional and local economies;
o consequences of any armed conflict involving, or terrorist attack against,
the United States;
o the adverse financial condition of some large retailing companies;
o the ongoing consolidation in the retail sector;
o the excess amount of retail space in a number of markets;
o increasing consumer purchases through catalogues or the Internet;
o the timing and costs associated with property improvements and rentals;
o changes in taxation and zoning laws; and
o adverse government regulation.
To the extent that any of these conditions occur, they are likely to impact
market rents for retail space.
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We are dependent on external sources of capital, which
may not be available.
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To qualify as a REIT, we must, among other things, distribute to our
stockholders each year at least 90% of our REIT taxable income (excluding any
net capital gains). Because of these distribution requirements, we likely will
not be able to fund all future capital needs, including capital for
acquisitions, with income from operations. We therefore will have to rely on
third-party sources of capital, which may or may not be available on favorable
terms or at all. Our access to third-party sources of capital depends on a
number of things, including the market's perception of our growth potential and
our current and potential future earnings. Moreover, additional equity offerings
may result in substantial dilution of stockholders' interests, and additional
debt financing may substantially increase leverage.
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We could be adversely affected by poor market conditions
where properties are geographically concentrated.
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Our performance depends on the economic conditions in markets in which our
properties are concentrated, including Florida, California, Texas, Georgia and
Ohio. Our operating results could be adversely affected if market conditions,
such as an oversupply of space or a reduction in demand for real estate, in
these areas become more competitive relative to other geographic areas.
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Security Capital controls shareholder vote. Sale of
shares may adversely affect stock price.
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Security Capital and its affiliates, which are offering shares pursuant to this
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prospectus, own 34,273,236 shares of our common stock as of the date of this
prospectus, constituting 56.7% of our outstanding common stock. As a result of
its stock ownership, Security Capital currently can control the outcome of any
corporate transaction or other matter submitted to the shareholders for
approval.
Sales of a substantial number of shares of our common stock, or the perception
that such sales could occur, also could adversely affect prevailing market
prices for our common stock. The shares offered pursuant to this prospectus
constitute 56.7% of our outstanding common stock, and are available for sale in
the public markets from time to time.
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Unsuccessful development activities could reduce
distributions to shareholders.
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We actively pursue development activities as opportunities arise. Development
activities require various government and other approvals. We may not recover
our investment in development projects for which approvals are not received. We
incur risks associated with development activities, including:
o the risk that we may abandon development opportunities and lose our
investment in these developments;
o the risk that construction costs of a project may exceed original
estimates, possibly making the project unprofitable;
o lack of cash flow during the construction period; and
o the risk that occupancy rates and rents at a completed project will not be
sufficient to make the project profitable.
If we sustain material losses due to an unsuccessful development project, our
cash flow will be reduced.
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Increased interest rates may reduce distributions to
shareholders.
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We are obligated on floating rate debt. If we do not eliminate our exposure to
increases in interest rates through interest rate protection or cap agreements,
these increases may reduce cash flow and our ability to make distributions to
shareholders.
Although swap agreements enable us to convert floating rate debt to fixed rate
debt and cap agreements enable us to cap our maximum interest rate, they expose
us to the risk that the counterparties to these hedge agreements may not
perform, which could increase our exposure to rising interest rates. Generally,
however, the counterparties to our hedge agreements are major financial
institutions. If we enter into swap agreements, decreases in interest rates will
increase our interest expense as compared to the underlying floating rate debt.
This could result in our making payments to unwind these agreements, such as in
connection with a prepayment of the floating rate debt. Cap agreements do not
protect us from increases up to the capped rate.
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Increased market interest rates could reduce our stock
prices.
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The annual dividend rate on our common stock as a percentage of its market price
may influence the trading price of our stock. An increase in market interest
rates may lead purchasers to demand a higher annual dividend rate, which could
adversely affect the market price of our stock. A decrease in the market price
of our common stock could reduce our ability to raise additional equity in the
public markets.
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Partnership structure may limit flexibility to manage
assets.
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We invest in retail shopping centers through Regency Centers, L.P., the
operating partnership in which we currently own 98% of the outstanding common
partnership units. From time to time, we acquire properties through our
operating partnership in exchange for limited partnership interests. This
acquisition structure may permit limited partners who contribute properties to
us to defer some, if not all, of the income tax liability that they would incur
if they sold the property.
Properties contributed to our operating partnership may have unrealized gain
attributable to the difference between the fair market value and adjusted tax
basis in the properties prior to contribution. As a result, the sale of these
properties could cause adverse tax consequences to the limited partners who
contributed them.
Generally, our operating partnership has no obligation to consider the tax
consequences of its actions to any limited partner. However, our operating
partnership may acquire properties in the future subject to material
restrictions on refinancing or resale designed to minimize the adverse tax
consequences to the limited partners who contribute those properties. These
restrictions could significantly reduce our flexibility to manage our assets by
preventing us from reducing mortgage debt or selling a property when such a
transaction might be in our best interest in order to reduce interest costs or
dispose of an under-performing property.
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Uninsured loss may adversely affect distributions to
shareholders.
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We carry comprehensive liability, fire, flood, extended coverage and rental loss
insurance for our properties with policy specifications and insured limits
customarily carried for similar properties. We believe that the insurance
carried on our properties is adequate in accordance with industry standards.
There are, however, some types of losses, such as from hurricanes, terrorism,
wars or earthquakes, which may be uninsurable, or the cost of insuring against
such losses may not be economically justifiable. If an uninsured loss occurs, we
could lose both the invested capital in and anticipated revenues from the
property, and would still be obligated to repay any recourse mortgage debt on
the property. In that event, our distributions to shareholders could be reduced.
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We face competition from numerous sources.
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The ownership of shopping centers is highly fragmented, with less than 10% owned
by real estate investment trusts. We face competition from other real estate
investment trusts as well as from numerous small owners in the acquisition,
ownership and leasing of shopping centers. We compete to develop shopping
centers with other real estate investment trusts engaged in development
activities as well as with local, regional and national real estate developers.
We compete in the acquisition of properties through proprietary research that
identifies opportunities in markets with high barriers to entry and
higher-than-average population growth and household income. We seek to maximize
rents per square foot by establishing relationships with supermarket chains that
are first or second in their markets and leasing non-anchor space in multiple
centers to national or regional tenants. We compete to develop properties by
applying our proprietary research methods to identify development and leasing
opportunities and by pre-leasing a significant portion of a center before
beginning construction.
There can be no assurance, however, that other real estate owners or developers
will not utilize similar research methods and target the same markets and anchor
tenants that we target. These entities may successfully control these markets
and tenants to our exclusion. If we cannot successfully compete in our targeted
markets, our cash flow, and therefore distributions to shareholders, may be
adversely affected.
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Costs of environmental remediation could reduce our cash
flow.
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Under various federal, state and local laws, an owner or manager of real
property may be liable for the costs of removal or remediation of hazardous or
toxic substances on the property. These laws often impose liability without
regard to whether the owner knew of, or was responsible for, the presence of
hazardous or toxic substances. The cost of any required remediation could exceed
the value of the property and/or the aggregate assets of the owner.
We have properties that will require or are currently undergoing varying levels
of environmental remediation for contamination caused by dry cleaner tenants.
These remediations are not expected to have a material financial effect on us
due to financial statement reserves and state-regulated programs that shift the
responsibility and cost for remediation to the state.
The presence of, or the failure to properly remediate, hazardous or toxic
substances may adversely affect our ability to sell or rent a contaminated
property or to borrow using the property as collateral. Any of these
developments could reduce cash flow and distributions to shareholders.
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If we fail to qualify as a REIT for federal income tax
purposes, we would be subject to federal income tax at
regular corporate rates.
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We believe that we qualify for taxation as a REIT for federal income tax
purposes, and we plan to operate so that we can continue to meet the
requirements for taxation as a REIT. If we qualify as a REIT, we generally will
not be subject to federal income tax on our income that we distribute currently
to our stockholders. Many of the REIT requirements, however, are highly
technical and complex. The determination that we are a REIT requires an analysis
of various factual matters and circumstances, some of which may not be totally
within our control and some of which involve questions of interpretation. For
example, to qualify as a REIT, at least 95% of our gross income must come from
specific passive sources, like rent, that are itemized in the REIT tax laws.
There can be no assurance that the IRS or a court would agree with the positions
we have taken in interpreting the REIT requirements. We also are required to
distribute to our stockholders at least 90% of our REIT taxable income
(excluding capital gains). The fact that we hold some of our assets through
partnerships and their subsidiaries further complicates the application of the
REIT requirements. Even a technical or inadvertent mistake could jeopardize our
REIT status. Furthermore, Congress and the IRS might make changes to the tax
laws and regulations, and the courts might issue new rulings, that make it more
difficult, or impossible, for us to remain qualified as a REIT.
Also, unless the IRS granted us relief under certain statutory provisions, we
would remain disqualified as a REIT for four years following the year we first
failed to qualify. If we failed to qualify as a REIT, we would have to pay
significant income taxes. This likely would have a significant adverse affect on
the value of our securities. In addition, we would no longer be required to pay
any dividends to stockholders.
Even if we qualify as a REIT for federal income tax purposes, we are required to
pay certain federal, state and local taxes on our income and property. For
example, if we have net income from "prohibited transactions," that income will
be subject to a 100% tax. In general, prohibited transactions are sales or other
dispositions of property held primarily for sale to customers in the ordinary
course of business. The determination as to whether a particular sale is a
prohibited transaction depends on the facts and circumstances related to that
sale. While we have undertaken a significant number of asset sales in recent
years, we do not believe that those sales should be considered prohibited
transactions, but there can be no assurance that the IRS would not contend
otherwise. In addition, any net taxable income earned directly by our taxable
affiliates, including Regency Realty Group, Inc., is subject to federal and
state corporate income tax. In this regard, several provisions of the laws
applicable to REITs and their subsidiaries ensure that a taxable REIT subsidiary
will be subject to an appropriate level of federal income taxation. For example,
a
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taxable REIT subsidiary is limited in its ability to deduct interest payments
made to an affiliated REIT. In addition, a REIT has to pay a 100% penalty tax on
some payments that it receives if the economic arrangements between the REIT,
the REIT's tenants, and the taxable REIT subsidiary are not comparable to
similar arrangements between unrelated parties. Finally, some state and local
jurisdictions may tax some of our income even though as a REIT we are not
subject to federal income tax on that income. To the extent that we and our
affiliates are required to pay federal, state and local taxes, we will have less
cash available for distributions to our stockholders.
Prior to December 31, 2000, a REIT could not own securities in any one issuer if
the value of those securities exceeded 5% of the value of the REIT's total
assets or the securities owned by the REIT represented more than 10% of the
issuer's outstanding voting securities. As a result of the REIT Modernization
Act, after December 31, 2000, the 5% value test and the 10% voting security test
were modified in two respects. First, the 10% voting securities test was
expanded so that REITs also are prohibited from owning more than 10% of the
value of the outstanding securities of any one issuer. Second, an exception to
these tests allows a REIT to own securities of a subsidiary that exceed the 5%
value test and the new 10% vote or value test if the subsidiary elects to be a
"taxable REIT subsidiary." Under a new asset test, for taxable years beginning
after December 31, 2000, we are not able to own securities of taxable REIT
subsidiaries that represent in the aggregate more than 20% of the value of our
total assets. We currently own more than 10% of the total value of the
outstanding securities of Regency Realty Group, Inc. Regency Realty Group, Inc.
has elected to be a taxable REIT subsidiary.
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Our former foreign controlled status could cause foreign shareholders to be
subject to tax upon a sale of shares.
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Gain recognized by a non-U.S. shareholder upon the sale or exchange of our
shares generally would not be subject to United States taxation unless, among
other exceptions, our shares constitute a U.S. real property interest within the
meaning of the Foreign Investment in Real Property Tax Act, which is referred to
as "FIRPTA," as described below.
Our shares will not constitute a U.S. real property interest if we are a
domestically controlled REIT, which requires that, at all times during the
five-year period preceding a sale or exchange of our stock, less than 50% in
value of our stock is held directly or indirectly by non-U.S. shareholders.
Because a foreign company beneficially owned in excess of 50% in value of our
shares until January 16, 2001, when a domestic corporation acquired those
shares, we believe that we currently are not a domestically controlled REIT, but
that we may become domestically-controlled in the future. Because our shares are
publicly traded, however, we cannot guarantee that we will become a domestically
controlled REIT. Even if we do not qualify as a domestically controlled REIT at
the time a non-U.S. shareholder sells our shares, gain arising from the sale
still would not be subject to FIRPTA tax if: (1) the class or
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series of shares sold is considered regularly traded under applicable treasury
regulations on an established securities market, such as the NYSE; and (2) the
selling non-U.S. shareholder owned, actually or constructively, 5% or less in
value of the outstanding class or series of shares being sold throughout the
five-year period ending on the date of the sale or exchange. See "Federal Income
Tax Considerations - U.S. Taxation of Non-U.S. Shareholders" below for a more
detailed discussion of the U.S. tax consequences applicable to foreign investors
in our stock.
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Pending tax legislation could adversely affect the price
of our stock.
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Both the United States Senate and the United States House of Representatives
have passed tax bills that would, among other things, substantially reduce or
eliminate at the shareholder level the taxation of dividends paid by
corporations other than REITs. REITs currently enjoy tax advantages relative to
regular C corporations because they are not subject to corporate-level income
tax on income they distribute to shareholders, but shareholders do include REIT
dividends in taxable income. If the double taxation of corporate dividends were
to be eliminated or reduced, individual investors could view stocks of regular C
corporations as more attractive relative to stocks of REITs than is currently
the case, because part or all of the dividends paid on the stocks of the regular
C corporations will be exempt from tax for the individual. This may have an
adverse effect on the price of our stock. This adverse effect may take place
prior to the adoption of any tax cut based upon the market's perception of the
likelihood of implementation of such a provision. However, under the proposed
legislation, if a REIT receives excludible dividend income from an investment in
another corporation (such as a taxable REIT subsidiary), the REIT may retain or
distribute that dividend income to the REIT's shareholders, with the REIT and
the shareholders able to benefit from the dividend exclusion from, or reduction
in, taxation. We cannot predict the form in which this pending legislation
ultimately will be enacted, whether it will in fact be enacted, or what effect,
if any, its enactment may have on the value of our common stock.
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USE OF PROCEEDS
We will not receive any proceeds from the resale of the shares covered by this
prospectus, all of which are being offered by the selling shareholder. For
additional information see "The Selling Shareholder" and "Plan of Distribution"
elsewhere in this prospectus.
REGENCY CENTERS CORPORATION
Regency Centers Corporation ("Regency Centers") completed its initial public
offering in 1993 (NYSE: REG) and became a qualified self-administered,
self-managed real estate investment trust ("REIT"). Through a series of
strategic acquisitions in 1997, 1998 and 1999, we expanded the scope of our
operations and became a nationally based owner, operator, and developer of
grocery-anchored retail shopping centers.
At March 31, 2003, our assets totaled approximately $3.1 billion with 261
shopping centers in 21 states. At March 31, 2003, our gross leasable area
("GLA") totaled 29.6 million square feet and was 94.9% leased. Geographically,
20.6% of our GLA is located in Florida, 18.1% in California, 17.3% in Texas,
8.2% in Georgia, 6.4% in Ohio, and 29.3% spread throughout 16 other states.
We invest in retail shopping centers through Regency Centers, L.P., the
operating partnership in which we currently own approximately 98% of the
outstanding common partnership units. Our acquisition, development, operations
and financing activity, including the issuance of common or preferred
partnership units, is executed by our operating partnership, its wholly-owned
subsidiaries and its joint ventures with third parties.
Our executive offices are located at 121 West Forsyth Street, Suite 200,
Jacksonville, Florida 32202 and our telephone number is (904) 598-7000.
THE SELLING SHAREHOLDER
General
Security Capital, including its affiliates, permitted pledgees, transferees or
other successors in interest, may from time to time offer and sell any or all of
the shares of common stock offered by this prospectus. Security Capital
currently intends, subject to market conditions, the market price of our common
stock and other considerations it deems relevant, to sell approximately
4,700,000 shares in the 30 to 60 days following the date of this prospectus.
However, the registration of the shares offered hereby does not necessarily mean
that Security Capital will sell any or all of the shares.
As of May 13, 2003, there were 60,482,796 shares of our common stock outstanding
and Security Capital beneficially owned 34,273,236 shares, representing
approximately 56.7% of our common stock. All of these shares are available for
resale under this prospectus. Because Security Capital and its affiliates may
sell all, some or none of the shares, we cannot estimate
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the number of offered shares that Security Capital will sell or the number of
shares that Security Capital will beneficially own after the offering.
In May 2002, Security Capital became an indirect wholly-owned subsidiary of
General Electric Capital Corporation, which in turn is an indirect subsidiary of
the General Electric Company. Both General Electric Capital Services, Inc., the
parent of General Electric Capital Corporation, and its parent, the General
Electric Company, disclaim any beneficial ownership over the shares of Regency
common stock owned by Security Capital.
Material Relationships with Security Capital
During the past three years, we have had material relationships with Security
Capital as described below.
Stockholders Agreement
Security Capital is a party to a Stockholders Agreement with us. The
Stockholders Agreement contained a standstill provision that expired on April
10, 2003. The following are material provisions of the Stockholders Agreement
that remain in effect following the end of the standstill and until Security
Capital ceases to own 10% or 15% of our common stock on a fully diluted basis
for 180 consecutive days:
Board of Directors Representation
So long as Security Capital continues to own at least 15% of our common stock on
a fully diluted basis, Security Capital has the right to name the lesser of
three directors, or its pro rata share based on stock ownership, and to have one
of its designees serve on most committees of our board. Currently, C. Ronald
Blankenship, Vice Chairman of Security Capital, and Joseph E. Parsons,
President-North America Equity Holdings of GE Real Estate and Chairman and Chief
Executive Officer of Security Capital, serve on our board of directors as
Security Capital's designees, and Mr. Blankenship serves on our board's
investment committee. A third director, Thomas G. Wattles, also was designated
by Security Capital and also serves on the investment committee, but, as of
November 30, 2002, he was no longer employed by or otherwise affiliated with
Security Capital.
Participation Rights
So long as Security Capital owns at least 15% of our common stock on a fully
diluted basis, it has the right to acquire its pro rata share, based on its then
stock ownership, or 49%, if less, of most capital stock we issue or sell.
Approval of Partnerships and Joint Ventures
So long as Security Capital continues to own 15% of our common stock on a fully
diluted basis, we may not enter into any partnerships or joint ventures without
Security Capital's prior written consent, in its sole discretion.
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Information Rights
So long as Security Capital continues to own 15% of our common stock on a fully
diluted basis, we are required to give Security Capital monthly reports,
financial statements and other information and consult with Security Capital
before seeking the approval of our board of directors for actions such as:
o acquisitions of more than $10 million;
o dispositions of more than $20 million;
o debt or other financing arrangements of more than $20 million;
o our annual operating budget;
o material changes in our executive management;
o new material agreements with any members of our executive
management; and
o most issuances of equity by us or any of our subsidiaries.
We are not obligated to accept or comply with any advice offered by Security
Capital on these matters.
Tax-Deferred Exchanges
So long as Security Capital continues to own 10% of our common stock on a fully
diluted basis, when we dispose of properties, we must use reasonable efforts,
consistent with prudent management of our assets in the interest of our
shareholders, to dispose of them in transactions than qualify as tax deferred
exchanges for federal income tax purposes.
Negotiated Sales of Our Stock by Security Capital
So long as Security Capital continues to own 15% of our common stock on a fully
diluted basis, it may not transfer shares of our common stock in a negotiated
transaction that would result in any transferee beneficially owning more than
9.8% of our capital stock unless we approve the transfer, in our sole
discretion.
Non-Compete
So long as Security Capital continues to own 15% of our common stock on a fully
diluted basis, Security Capital is prohibited from directly or indirectly
owning, developing or acquiring shopping centers in the U.S. that (1) have less
than 250,000 square feet and (2) are anchored by a grocery store, drugstore or
general merchandise discount store such as Wal-Mart.
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Registration Rights Agreement
We are parties to a registration rights agreement with Security Capital granting
Security Capital the right to require us, upon notice, to register its shares of
our common stock for resale under the Securities Act of 1933. Security Capital
has requested this registration under that agreement by notice to us dated May
14, 2003. The agreement contains terms customary for registration rights
agreements of its type, including indemnification provisions.
Related Party Transactions
Until May 13, 2002, Macquarie Capital Partners LLC was 40% owned by Security
Capital. Under an agreement with us, Macquarie Capital Partners LLC acts as our
financial advisor in connection with identifying alternative sources of capital,
including arranging and structuring joint ventures or funds that own
grocery-anchored shopping centers. Fees paid to Macquarie Capital Partners LLC
are based upon a percentage (a range of 2% - 3%) of capital raised. During 2002,
2001 and 2000, respectively, we paid approximately $1.7 million, $1.2 million
and $1.5 million for these services.
During 2002, 2001 and 2000, respectively, we paid Security Capital approximately
$376,000, $35,000 and $460,000 for insurance administrative, property tax, and
income tax consulting services under an administrative services agreement.
Security Capital continues to provide insurance administrative services under
that agreement.
Material Relationships with General Electric
On November 21, 1996 we entered into a $11.5 million mortgage loan with General
Electric Capital Corporation. The loan is secured by one of our centers, Pike
Creek, bears interest at the rate of 9.04% per year and matures on November 21,
2003. The mortgage loan was subsequently assigned to Fair Oak LLC for which
General Electric Capital Corporation acts as manager and servicer.
PLAN OF DISTRIBUTION
We are registering the shares on behalf of the selling shareholder. All costs,
expenses and fees in connection with the registration of the shares offered
hereby, other than our legal and accounting fees in excess of $25,000, and all
brokerage commissions and similar selling expenses, if any, attributable to the
sale of shares will be borne by the selling shareholder.
Common stock may be sold from time to time by Security Capital or by its
permitted pledgees, transferees or other successors in interest to Security
Capital. The distribution of the common stock may be effected in one or more
transactions that may take place through the New York Stock Exchange, including
block trades or ordinary broker's transactions, or through broker-dealers acting
either as principal or agent, or through privately negotiated transactions, or
through an underwritten public offering, or through a combination of any such
methods of sale, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices for cash or
other consideration. Usual and customary or
15
specifically negotiated brokerage fees or commissions may be paid by Security
Capital in connection with such sales. Additionally, Security Capital may sell
common stock upon conversion or exchange of convertible or exchangeable
securities issued by Security Capital or in satisfaction of options or short
sales of shares.
The aggregate proceeds to Security Capital from the sale of common stock will be
the purchase price of the common stock sold less the aggregate agents'
commissions and underwriters' discounts, if any, and other expenses of issuance
and distribution not borne by us. Security Capital and any dealers or agents
that participate in the distribution of the common stock may be deemed to be
"underwriters" within the meaning of the Securities Act, and any profit on the
sale of the common stock by them and any commissions received by any such
dealers or agents might be deemed to be underwriting discounts and commissions
under the Securities Act.
To the extent required, the specific number of shares of common stock to be
sold, the names of the selling shareholders, if other than Security Capital,
purchase price, public offering price, the terms upon which such securities may
be issued, the names of any agent, dealer or underwriter, and any applicable
commission or discount with respect to a particular offering will be set forth
in any accompanying prospectus supplement.
We have also agreed to indemnify Security Capital against specified liabilities,
including certain potential liabilities arising under the Securities Act, or to
contribute to the payments Security Capital may be required to make in respect
thereof.
Because the selling shareholder may be deemed to be an "underwriter" within the
meaning of Section 2(11) of the Securities Act, the selling shareholder will be
subject to the prospectus delivery requirements of the Securities Act, which may
include delivery through the facilities of the NYSE pursuant to Rule 153 under
the Securities Act. We have informed the selling shareholder that the
anti-manipulative provisions of Regulation M promulgated under the Exchange Act
may apply to its sales in the market.
The selling shareholder also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act, provided
they meet the criteria and conform to the requirements of such rule.
DESCRIPTION OF CAPITAL STOCK
General
We are authorized to issue up to 150,000,000 shares of common stock, $.01 par
value per share, 10,000,000 shares of special common stock, $.01 par value, and
10,000,000 shares of preferred stock, $.01 par value per share. As of May 13,
2003, we had 60,482,796 shares of common stock issued and outstanding. We also
had depositary shares representing an aggregate of 300,000 shares of 7.45%
Series 3 cumulative redeemable preferred stock issued and outstanding on that
date. In addition, we have reserved for issuance, upon exchange of six
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corresponding series of preferred limited partnership interests of our operating
partnership, an aggregate of 3,890,000 million shares of cumulative redeemable
preferred stock.
All of the outstanding capital stock is fully paid and non-assessable.
Common Stock
Holders of common stock are entitled to one vote per share. All actions
submitted to a vote of shareholders are voted on by holders of common stock
voting together as a single class. Holders of common stock are not entitled to
cumulative voting in the election of directors.
Holders of common stock are entitled to receive dividends in cash or in property
on an equal basis, if and when dividends are declared on the common stock by our
board of directors, subject to any preference in favor of outstanding shares of
preferred stock.
In the event of liquidation of our company, all holders of common stock will
participate on an equal basis with each other in our net assets available for
distribution after payment of our liabilities and payment of any liquidation
preferences in favor of outstanding shares of preferred stock.
Holders of common stock are not entitled to preemptive rights, and the common
stock is not subject to redemption.
The rights of holders of common stock are subject to the rights of holders of
any preferred stock that we designate or have designated. The rights of
preferred shareholders may adversely affect the rights of the common
shareholders.
Special Common Stock
Under our articles of incorporation, our board of directors is authorized,
without further shareholder action, to provide for the issuance of up to
10,000,000 shares of special common stock from time to time in one or more
classes or series. The special common stock will bear dividends in such amounts
as the board may determine with respect to each class or series. Dividends on
any class or series of special common stock must be pari passu with dividends on
our common stock. Upon the liquidation, dissolution or winding up of the
company, the special common stock will participate pari passu with the common
stock in liquidating distributions. Shares of special common stock will have one
vote per share and vote together with the holders of common stock (and not
separately as a class except where otherwise required by law), unless the board
of directors creates classes or series with more limited voting rights or
without voting rights. The board will have the right to determine whether shares
of special common stock may be converted into shares of any other class or
series or be redeemed, and, if so, the redemption price and the other terms and
conditions of redemption, and to determine such other rights as may be allowed
by law. Holders of special common stock will not be entitled, as a matter of
right, to preemptive rights. As all special common
17
stock is expected to be closely held, it is anticipated that most classes or
series would be convertible into common stock for liquidity purposes.
Preferred Stock
Our board of directors has the ability to issue up to 10,000,000 shares of
preferred stock in one or more series, without shareholder approval. The board
of directors may designate for the series:
o the number of shares and name of the series,
o the voting powers of the series, including the right to elect
directors, if any,
o the dividend rights and preferences, if any,
o redemption terms, if any,
o liquidation preferences and the amounts payable on liquidation
or dissolution,
o the terms upon which the series may be converted into any other
series or class of our stock, including the common stock and
o any other terms that are not prohibited by law.
7.45% Series 3 Cumulative Redeemable Preferred Stock
The Series 3 preferred shares are represented by depositary shares. Each
depositary share represents 1/10th of a share of Series 3 preferred stock. The
Series 3 preferred shares have a liquidation preference of $250 per share ($25
per depositary share) and are entitled to a cumulative dividend at the rate of
7.45% of the liquidation preference per year ($1.8625 per year per depositary
share). As to the limited matters on which the Series 3 preferred stock is
entitled to vote, generally voting as a class with other preferred shares upon
which like voting rights have been granted, each share of Series 3 preferred
stock is entitled to one vote per $25 of liquidation preference. At any time
after April 3, 2008, we have the right, but not the obligation, to redeem the
Series 3 preferred stock for cash at a redemption price of $250 per share
(equivalent to $25 per depositary share), plus all accrued but unpaid dividends.
Cumulative Redeemable Preferred Stock Reserved for Issuance
We have reserved six series of cumulative redeemable preferred stock for
issuance upon exchange, on a one-share-for-one-unit basis, of six corresponding
series of preferred limited partnership interests in Regency Centers, L.P., our
operating partnership. The limited partnership interests were issued in private
placements to institutional investors. Each corresponding series of cumulative
redeemable preferred stock:
o will be entitled to a liquidation preference;
o will bear cumulative preferential quarterly dividends based on
a specified percentage of the liquidation preference;
o will not be convertible into our common stock;
o will have no stated maturity or mandatory redemption; and
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o will be redeemable from time to time at our election.
The preferred stock generally will be issuable beginning 10 years after the date
of issuance of the corresponding series of preferred units. The following table
sets forth additional information about each series of the cumulative redeemable
preferred stock.
Units
Issued/ Aggregate Exchangeable
Shares Liquidation Distribution Callable by
Series Issuable Preference Rate by Regency Unitholder
--------------------------------------------------------------------------------------------------------------------
Series A 1,600,000 $ 80,000,000 8.125% 06/25/03 06/25/08
Series B 850,000 85,000,000 8.750% 09/03/04 09/03/09
Series C 400,000 40,000,000 9.000% 09/03/04 09/03/09
Series D 500,000 50,000,000 9.125% 09/29/04 09/29/09
Series E 300,000 30,000,000 8.750% 05/25/05 05/25/10
Series F 240,000 24,000,000 8.750% 09/08/05 09/08/10
----------------
------------------
3,890,000 $ 309,000,000
================== ================
It is impossible for us to state the actual effect it will have on common stock
holders if the board of directors designates any new series of preferred stock.
The effects of such a designation will not be determinable until the rights
accompanying the series have been designated. The issuance of preferred stock
could adversely affect the voting power, liquidation rights or other rights held
by owners of common stock or other series of preferred stock. The board of
directors' authority to issue preferred stock without shareholder approval could
make it more difficult for a third party to acquire control of our company, and
could discourage any such attempt.
Statutory Provisions And Provisions Of Our Articles Of Incorporation And Bylaws
The following provisions of the Florida Business Corporation Act and our
articles of incorporation and bylaws could have the effect of preventing or
delaying a person from acquiring or seeking to acquire a substantial equity
interest in, or control of, our company.
Restrictions on Ownership
Restrictions Relating to REIT Qualification
For Regency Centers to qualify as a REIT, not more than 50% in value of our
outstanding capital stock may be owned, directly or indirectly, by five or fewer
individuals (as defined in the Internal Revenue Code of 1986, as amended (the
"Code"), to include certain entities such as qualified pension plans) during the
last half of a taxable year. Also, our stock must be beneficially owned (without
reference to attribution rules) by 100 or more persons during at least 335 days
in a taxable year of 12 months or during a proportionate part of a shorter
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taxable year, and certain other requirements must be satisfied (see "Federal
Income Tax Considerations-Requirements for Qualification").
To assure that five or fewer individuals do not Beneficially Own (as defined in
our articles to include ownership through the application of certain stock
attribution provisions of the Code) more than 50% in value of our outstanding
capital stock, our articles provide that, subject to certain exceptions, no
holder may own, or be deemed to own (by virtue of certain of the attribution
provisions of the Code), more than 7% by value (the "Ownership Limit") of our
outstanding capital stock.
Certain existing holders specified in our articles and those to whom Beneficial
Ownership of their capital stock is attributed, whose Beneficial Ownership of
capital stock exceeds the Ownership Limit ("Existing Holders"), may continue to
own such percentage of outstanding capital stock (the "Existing Holder Limit")
and may increase their respective Existing Holder Limits through our benefit
plans, dividend reinvestment plans, additional asset sales or capital
contributions to Regency Centers or acquisitions from other Existing Holders,
but may not acquire additional shares from such sources such that the five
largest Beneficial Owners of capital stock hold more than 49.5% by value of the
outstanding capital stock, and in any event may not increase their respective
Existing Holder Limits through acquisition of capital stock from any other
sources.
In addition, Security Capital and its affiliates may not own more than 60% of
our outstanding common stock on a fully diluted basis ("Special Shareholder
Limit"). The Special Shareholder Limit will be reduced to 49% of our common
stock on a fully diluted basis if the ownership by Security Capital and its
affiliates drops below 45% for 180 consecutive days. The Special Shareholder
Limit also will be increased or reduced in certain other events specified in our
articles.
Because rent from a related tenant (any tenant 10% of which is owned, directly
or constructively, by the REIT) is not qualifying rent for purposes of the gross
income tests under the Code (see "Federal Income Tax Considerations-Requirements
for Qualification-Income Tests"), our articles also provide that no constructive
owner of our stock who owns, directly or indirectly, a 10% interest in any of
our tenants (a "Related Tenant Owner") may own, or constructively own by virtue
of certain of the attribution provisions of the Code (which differ from the
attribution provisions applied to determine Beneficial Ownership), more than
9.8% by value of our outstanding capital stock (the "Related Tenant Limit").
Our board of directors may waive the Ownership Limit, the Existing Holder Limit,
the Special Shareholder Limit and the Related Tenant Limit if evidence
satisfactory to the board is presented that such ownership will not then or in
the future jeopardize our status as a REIT. As a condition of such waiver, the
board may require opinions of counsel satisfactory to it and/or an undertaking
from the applicant with respect to preserving our REIT status.
Any shares issued or transferred in violation of the foregoing restriction will
be void, or if such remedy is invalid, will be subject to the provisions for
"excess shares" described below.
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Our articles previously restricted the ownership of our capital stock by
non-U.S. persons, but these restrictions have been repealed.
Remedies
If:
(1) shares of capital stock in excess of the applicable Ownership
Limit, Existing Holder Limit, Special Shareholder Limit, or Related Tenant
Limit, or
(2) shares which (a) would cause Regency Centers to be beneficially
owned by fewer than 100 persons (without application of the attribution rules)
or (b) would result in Regency Centers being "closely held" within the meaning
of Section 856(h) of the Code,
are issued or transferred to any person or retained by any person after becoming
a Related Tenant Owner, such issuance, transfer, or retention shall be null and
void to the intended holder, and the intended holder will have no rights to the
stock. Capital stock transferred, proposed to be transferred, or retained in
excess of the Ownership Limit, the Existing Holder Limit, the Special
Shareholder Limit or the Related Tenant Limit or which would otherwise
jeopardize our REIT status ("excess shares") will be deemed held in trust on
behalf of and for our benefit. Our board of directors will, within six months
after receiving notice of such actual or proposed transfer, either (i) direct
the holder of such shares to sell all shares held in trust for us for cash in
such manner as the board directs, or (ii) redeem such shares for a price equal
to the lesser of (a) the price paid by the holder from whom shares are being
redeemed and (b) the average of the last reported sales prices on the NYSE of
the relevant class of capital stock on the 10 trading days immediately preceding
the date fixed for redemption by the board, or if such class of capital stock is
not then traded on the NYSE, the average of the last reported sales prices of
such class of capital stock (or, if sales prices are not reported, the average
of the closing bid and asked prices) on the 10 trading days immediately
preceding the relevant date as reported on any exchange or quotation system over
which such class of capital stock may be traded, or if such class of capital
stock is not then traded over any exchange or quotation system, then the price
determined in good faith by the board as the fair market value of such class of
capital stock on the relevant date. If the board directs the intended holder to
sell the shares, the holder shall receive such proceeds as our trustee and pay
us out of the proceeds of such sale all expenses incurred by us in connection
with such sale, plus any remaining amount of such proceeds that exceeds the
amount originally paid by the intended holder for such shares. The intended
holder shall not be entitled to distributions, voting rights or any other
benefits with respect to such excess shares except the amounts described above.
Any dividend or distribution paid to an intended holder on excess shares
pursuant to our articles must be repaid to us upon demand.
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Miscellaneous
All certificates representing capital stock will bear a legend referring to the
restrictions described above. The transfer restrictions described above shall
not preclude the settlement of any transaction entered through the facilities of
the New York Stock Exchange.
Our articles provide that every shareholder of record of more than 5% of the
outstanding capital stock and every actual owner (as defined in our articles) of
more than 5% of the outstanding capital stock held by a nominee must give us
written notice of information specified in our articles within 30 days after
December 31 of each year. In addition, each beneficial owner of capital stock
and each person who holds capital stock for a beneficial owner must provide us
such information as we may request, in good faith, in order to determine our
status as a REIT and to comply with the requirements of any taxing authority or
governmental authority or to determine such compliance.
The ownership limitations described above may have the effect of precluding a
third party from acquiring control of Regency Centers even if our board of
directors determines that maintenance of REIT status is no longer in our best
interests. The board of directors has the right under our articles (subject to
contractual restrictions) to revoke our REIT status if the board of directors
determines that it is no longer in our best interest to attempt to qualify, or
to continue to qualify, as a REIT. In the event of such revocation, the
ownership limitations in our articles will remain in effect. Any change in the
ownership limitations would require an amendment to our articles.
Staggered Board of Directors
Our articles and bylaws divide the board into three classes of directors, with
each class constituting approximately one-third of the total number of directors
and with classes serving staggered three-year terms. The classification of
directors will have the effect of making it more difficult for shareholders to
change the composition of our board. We believe, however, that the longer time
required to elect a majority of a classified board of directors helps to insure
continuity and stability of our management and policies.
The classification provisions could also have the effect of discouraging a third
party from accumulating large blocks of our stock or attempting to obtain
control of Regency Centers, even though such an attempt might be beneficial to
Regency Centers and its shareholders. Accordingly, shareholders could be
deprived of opportunities to sell their shares of capital stock at a higher
market price than might otherwise be the case.
Advance Notice Provisions for Shareholder Nominations and Shareholder Proposals
Our bylaws establish an advance notice procedure for shareholders to make
nominations of candidates for election as directors or to bring other business
before any meeting of our shareholders. Any shareholder nomination or proposal
for action at an upcoming shareholder meeting must be delivered to Regency
Centers no later than the deadline for submitting
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shareholder proposals pursuant to Rule 14a-8 under the Exchange Act. The
presiding officer at any shareholder meeting is not required to recognize any
proposal or nomination which did not comply with this deadline.
The purpose of requiring shareholders to give advance notice of nominations and
other business is to afford our board a meaningful opportunity to consider the
qualifications of the proposed nominees or the advisability of the other
proposed business and, to the extent deemed necessary or desirable by our board,
to inform shareholders and make recommendations about such qualifications or
business, as well as to provide a more orderly procedure for conducting meetings
of shareholders. Although our bylaws do not give the board any power to
disapprove timely shareholder nominations for the election of directors or
proposals for action, they may have the effect of precluding a contest for the
election of directors or the consideration of shareholder proposals if the
proper procedures are not followed, and of discouraging or deterring the third
party from conducting a solicitation of proxies to elect its own slate of
directors or to approve its own proposal.
Certain Provisions of Florida Law
We are subject to anti-takeover provisions that apply to public corporations
organized under Florida law unless the corporation has elected to opt out of
those provisions in its articles of incorporation or its bylaws. We have not
elected to opt out of these provisions.
Subject to certain exceptions, the Florida Business Corporation Act prohibits
the voting of shares in a publicly held Florida corporation that are acquired in
a "control share acquisition" unless:
o the board of directors approves the control share acquisition
or
o the holders of a majority of the corporation's voting shares
approve the granting of voting rights to the acquiring party.
A "control share acquisition" is defined as an acquisition that immediately
thereafter entitles the acquiring party, directly or indirectly, to vote in the
election of directors within any of the following ranges of voting power:
o 1/5 or more but less than 1/3;
o 1/3 or more but less than a majority; and
o a majority or more.
The Florida Business Corporation Act also contains an "affiliated transaction"
provision that prohibits a publicly held Florida corporation from engaging in a
broad range of business combinations or other extraordinary corporate
transactions with an "interested shareholder" unless:
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o the transaction is approved by a majority of disinterested
directors before the person becomes an interested shareholder;
o the corporation has not had more than 300 shareholders of
record during the three years preceding the "affiliated
transaction";
o the interested shareholder has owned at least 80% of the
corporation's outstanding voting shares for at least five
years;
o the interested shareholder is the beneficial owner of at least
90% of the voting shares (excluding shares acquired directly
from the corporation in a transaction not approved by a
majority of the disinterested directors);
o consideration is paid to the holders of the corporation's
shares equal to the highest amount per share paid by the
interested shareholder for the acquisition of the corporation's
shares in the last two years or fair market value, and other
specified conditions are met; or
o the transaction is approved by the holders of two-thirds of the
corporation's voting shares other than those owned by the
interested shareholder.
An "interested shareholder" is defined as a person who, together with affiliates
and associates, beneficially owns more than 10% of a company's outstanding
voting shares.
Indemnification and Limitation of Liability
The Florida Business Corporation Act authorizes Florida corporations to
indemnify any person who was or is a party to any proceeding other than an
action by, or in the right of, the corporation, by reason of the fact that he or
she is or was a director, officer, employee, or agent of the corporation. The
indemnity also applies to any person who is or was serving at the request of the
corporation as a director, officer, employee, or agent of another corporation or
other entity. The indemnification applies against liability incurred in
connection with such a proceeding, including any appeal thereof, if the person
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the corporation. To be eligible for indemnity
with respect to any criminal action or proceeding, the person must have had no
reasonable cause to believe his or her conduct was unlawful.
In the case of an action by or on behalf of a corporation, indemnification may
not be made if the person seeking indemnification is found liable, unless the
court in which the action was brought determines such person is fairly and
reasonably entitled to indemnification.
The indemnification provisions of the Florida Business Corporation Act require
indemnification if a director, officer, employee or agent has been successful in
defending any action, suit or proceeding to which he or she was a party by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation. The indemnity covers expenses actually and reasonably incurred
in defending the action.
The indemnification authorized under Florida law is not exclusive and is in
addition to any other rights granted to officers and directors under the
articles of incorporation or bylaws of
24
the corporation or any agreement between officers and directors and the
corporation. Each of our directors and executive officers has signed an
indemnification agreement. The indemnification agreements provide for full
indemnification of our directors and executive officers under Florida law. The
indemnification agreements also provide that we will indemnify the officer or
director against liabilities and expenses incurred in a proceeding to which the
officer or director is a party or is threatened to be made a party, or in which
the officer or director is called upon to testify as a witness or deponent, in
each case arising out of actions of the officer or director in his or her
official capacity. The officer or director must repay such expenses if it is
subsequently found the officer or director is not entitled to indemnification.
Exceptions to this additional indemnification include criminal violations by the
officer or director, transactions involving an improper personal benefit to the
officer or director, unlawful distributions of our assets under Florida law and
willful misconduct or conscious disregard for our best interests.
Our bylaws provide for the indemnification of directors, former directors and
officers to the maximum extent permitted by Florida law and for the advancement
of expenses incurred in connection with the defense of any action, suit or
proceeding that the director or officer was a party to by reason of the fact
that he or she is or was a director or officer of our corporation, or at our
request, a director, officer, employee or agent of another corporation. Our
bylaws also provide that we may purchase and maintain insurance on behalf of any
director against liability asserted against the director in such capacity.
Under the Florida Business Corporation Act, a director is not personally liable
for monetary damages to us or to any other person for acts or omissions in his
or her capacity as a director except in certain limited circumstances. Those
circumstances include violations of criminal law (unless the director had
reasonable cause to believe that such conduct was lawful or had no reasonable
cause to believe such conduct was unlawful), transactions in which the director
derived an improper personal benefit, transactions involving unlawful
distributions, and conscious disregard for the best interest of the corporation
or willful misconduct (only if the proceeding is by or in the right of the
corporation). As a result, shareholders may be unable to recover monetary
damages against directors for actions taken by them which constitute negligence
or gross negligence or which are in violation of their fiduciary duties,
although injunctive or other equitable relief may be available.
Transfer Agent and Registrar
The transfer agent for our common stock is Wachovia Bank, National Association,
Charlotte, North Carolina.
25
FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain of the material federal income tax
considerations regarding Regency Centers and is based on current law, is for
general information only and is not tax advice. This discussion does not purport
to deal with all aspects of taxation that may be relevant to particular
investors in light of their personal investment or tax circumstances, or to
certain types of holders (including insurance companies, tax-exempt
organizations, financial institutions or broker-dealers, foreign corporations,
persons who are not citizens or residents of the United States, persons who own
shares as part of a conversion transaction, as part of a hedging transaction or
as a position in a straddle for tax purposes, persons whose functional currency
is not the U.S. dollar and traders in securities that elect mark-to-market
accounting) subject to special treatment under the federal income tax laws. This
summary deals only with shareholders of Regency Centers that hold shares as
"capital assets," within the meaning of Section 1221 of the Code. This summary
does not discuss any state, local, or foreign tax considerations. This summary
is based in its entirety on the applicable Code provisions, rules and
regulations promulgated thereunder, and administrative and judicial
interpretations thereof, all as of the date hereof and all of which are subject
to change (which change may apply retroactively).
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT HIS OR HER OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE PURCHASE, OWNERSHIP
AND SALE OF SECURITIES IN AN ENTITY ELECTING TO BE TAXED AS A REAL ESTATE
INVESTMENT TRUST, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX
CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND ELECTION AND OF POTENTIAL
CHANGES IN APPLICABLE TAX LAWS.
As used in this section, the term "Company" refers to Regency Centers
Corporation and all qualified REIT subsidiaries (a wholly-owned subsidiary which
is not treated as a separate entity for federal income tax purposes) but
excludes Regency Realty Group, Inc. and its subsidiaries (collectively, the
"Management Company") (which is treated as a separate entity for federal income
tax purposes, although its results are consolidated with those of the Company
for financial reporting purposes).
General
The Company made an election to be taxed as a REIT under Sections 856 through
860 of the Code commencing with its taxable year ending December 31, 1993. The
Company believes that it has been organized and operated in such a manner as to
qualify for taxation as a REIT under the Code for such taxable year and all
subsequent taxable years to date, and the Company intends to continue to operate
in such a manner in the future. However, no assurance can be given that the
Company will operate in a manner so as to qualify or remain qualified as a REIT.
26
The following sets forth only a summary of the material aspects of the Code
sections that govern the federal income tax treatment of a REIT and its
shareholders.
It is the opinion of Foley & Lardner that the Company has been organized and
operated in conformity with the requirements for qualification and taxation as a
REIT commencing with the Company's taxable year that ended December 31, 1993 and
for all subsequent taxable years to date, and its method of operation will
enable it to continue to be taxed as a REIT. It must be emphasized that this
opinion is based and conditioned upon certain representations made by the
Company as to factual matters including, but not limited to, those set forth
below in this discussion of "Federal Income Tax Considerations," those
concerning its business and properties, and certain matters relating to the
Company's manner of operation. Foley & Lardner is not aware of any facts or
circumstances that are inconsistent with these representations. The
qualification and taxation as a REIT depends upon the Company's ability to meet,
through actual annual operating results, the various income, asset,
distribution, stock ownership and other tests discussed below, the results of
which will not be reviewed by nor be under the control of Foley & Lardner.
Accordingly, no assurance can be given that the actual results of the Company's
operation for any particular taxable year will satisfy such requirements. For a
discussion of the tax consequences of failure to qualify as a real estate
investment trust, see "-- Failure to Qualify."
Taxation of the Company
As a REIT, the Company generally is not subject to federal corporate income tax
on its net income that is currently distributed to shareholders. This treatment
substantially eliminates the "double taxation" (at the corporate and shareholder
levels) that generally results from an investment in a corporation. However, the
Company will be subject to federal income tax in the following circumstances.
First, the Company will be taxed at regular corporate rates on any undistributed
REIT taxable income, including undistributed net capital gains. Second, under
certain circumstances, the Company may be subject to the "corporate alternative
minimum tax" on its items of tax preference. Third, if the Company has (i) net
income from the sale or other disposition of "foreclosure property" (which is,
in general, property acquired by the Company by foreclosure or otherwise on
default of a loan secured by the property) which is held primarily for sale to
customers in the ordinary course of business or (ii) other non-qualifying net
income from foreclosure property, it will be subject to tax on such income at
the highest corporate rate. Fourth, if the Company has net income from
"prohibited transactions" (which are, in general, certain sales or other
dispositions of property held primarily for sale to customers in the ordinary
course of business other than foreclosure property), such income will be subject
to a 100% tax. Fifth, if the Company fails to satisfy either the 75% gross
income test or the 95% gross income test discussed below, but still maintains
its qualification as a REIT because other requirements are met, the Company will
be subject to a tax equal to the gross income attributable to the greater of
either (1) the amount by which 75% of the Company's gross income exceeds the
amount of the Company's income qualifying under the 75% test for the taxable
year or (2) the amount by which 90% of the Company's gross income exceeds the
amount of the Company's income qualifying for the 95% income test for the
taxable year, multiplied by a fraction intended to reflect the Company's
27
profitability. Sixth, if the Company should fail to distribute during each
calendar year at least the sum of (i) 85% of its REIT ordinary income for such
year, (ii) 95% of its REIT capital gain net income for such year, and (iii) any
undistributed taxable income from prior years, it will be subject to a 4% excise
tax on the excess of such required distribution over the amounts actually
distributed. Seventh, the Company will be subject to a 100% penalty tax on some
payments it receives (or on certain expenses deducted by a taxable REIT
subsidiary) if arrangements among the Company, its tenants, and the Company's
taxable REIT subsidiaries are not comparable to similar arrangements among
unrelated parties. Eighth, when assets are acquired from a "C" corporation in a
carryover basis transaction, the "C" corporation is generally required to
recognize gain with respect to the assets' "built-in gain." Built-in gain is the
amount by which an asset's fair market value exceeds its adjusted basis. If the
Company was the successor to these acquired entities, the Company would be
liable for any tax owed by them as a result of the recognition of built-in gain.
Applicable treasury regulations, however, allow an acquiring REIT, such as the
Company, to avoid the recognition of gain and the imposition of corporate level
tax on a built-in gain asset acquired in a carryover basis transaction from a
"C" corporation on or after January 2, 2002 unless and until the acquiring REIT
disposes of that built-in gain asset in a taxable transaction during the 10-year
period following the asset's acquisition (the "Recognition Period"), at which
time the acquiring REIT would recognize, and would be subject to the highest
regular corporate rate of tax on, the built-in gain.
In addition, the Management Company is taxed on its income at regular corporate
rates.
Requirements for Qualification
A REIT is defined in the Code as a corporation, trust or association: (1) which
is managed by one or more trustees or directors; (2) the beneficial ownership of
which is evidenced by transferable shares or by transferable certificates of
beneficial interest; (3) which would be taxable as a domestic corporation, but
for Sections 856 through 859 of the Code; (4) which is neither a financial
institution nor an insurance company subject to certain provisions of the Code;
(5) the beneficial ownership of which is held by 100 or more persons (determined
without reference to any rules of attribution); (6) not more than 50% in value
of the outstanding stock of which is owned during the last half of each taxable
year, directly or indirectly, by or for "five or fewer" individuals (as defined
in the Code to include certain entities); (7) which meets certain income and
asset tests described below and (8) which makes an election to be a REIT for the
current taxable year or has made such an election for a previous taxable year
which has not been terminated or revoked. Conditions (1) to (4), inclusive, must
be met during the entire taxable year and condition (5) must be met during at
least 335 days of a taxable year of 12 months, or during a proportionate part of
a taxable year of less than 12 months. The Company has previously issued
sufficient shares to allow it to satisfy conditions (5) and (6). The Company's
articles of incorporation provide restrictions regarding the transfer of its
shares which are intended to assist the Company in continuing to satisfy the
stock ownership requirements described in (5) and (6) above. Moreover, for the
Company's taxable years commencing on or after January 1, 1998, if the Company
complies with regulatory rules pursuant to which it is required to send annual
letters to certain of its
28
shareholders requesting information regarding the actual ownership of its stock,
but does not know, or exercising reasonable diligence would not have known,
whether it failed to meet the requirement that it not be closely held, the
Company will be treated as having met the "five or fewer" requirement. If the
Company were to fail to comply with these regulatory rules for any year, it
would be subject to a $25,000 penalty. If the Company's failure to comply was
due to intentional disregard of the requirements, the penalty would be increased
to $50,000. However, if the Company's failure to comply was due to reasonable
cause and not willful neglect, no penalty would be imposed.
In addition, the Company must satisfy all relevant filing and other
administrative requirements established by the IRS that must be met to elect and
maintain REIT status, use a calendar year for federal income tax purposes, and
comply with the recordkeeping requirements of the Code and regulations
promulgated thereunder.
On several occasions, Congress has proposed legislation adding an additional
requirement for REIT qualification. This proposed legislation would require that
an entity seeking to qualify as a REIT not be a "controlled entity." This
legislation was proposed most recently in the Jobs and Growth Tax Relief
Reconciliation Act of 2003, which the Senate passed on May 15, 2003. Under this
legislation, an entity is a controlled entity if, at any time during the taxable
year, one person (excluding other REITs), in the case of a corporation, owns
stock possessing at least 50% of the total voting power of the stock of such
corporation, or having a value equal to at least 50% of the total value of the
stock of such corporation, or in the case of a trust, owns beneficial interests
in the trust which would meet the 50% vote or value tests applicable for
corporations if such interests were stock. This legislation is proposed to be
effective for taxable years ending after May 8, 2003; however, under a
grandfathering provision, the additional requirement would not apply to any
entity which was a controlled entity as of May 8, 2003, which is a REIT for the
taxable year which includes such date, and which has significant assets or
activities as of such date. As of May 15, 2003, Security Capital owned
approximately 56.7% of the voting power of the Company and hence, the Company is
a controlled entity within the meaning of this proposed legislation. However,
the Company believes that it would satisfy the provisions of the grandfathering
exception as presently proposed, and would not be disqualified from maintaining
its REIT status by virtue of Security Capital's ownership. No assurances can be
given, however, about what form any final legislation might take and whether a
similar grandfathering provision would be included.
The Company owns its properties through its operating partnership, Regency
Centers, L.P. (the "Partnership"), of which the Company is the general partner
and a Company subsidiary is the principal limited partner. The former owners of
certain Partnership properties and certain investment funds also are limited
partners. The Company presently owns certain of its properties indirectly
through other partnerships and limited liability companies (collectively with
the Partnership, the "Property Partnerships"), of which the partners are the
Partnership and certain third parties. In the case of a REIT which is a partner
in a partnership either directly or indirectly through a qualified REIT
subsidiary, Treasury Regulations provide that the REIT will be deemed to own its
proportionate share of the assets of the partnership and will be deemed to be
entitled to the income of the partnership attributable to such share. In
29
addition, the character of the assets and gross income of the partnership will
retain the same character in the hands of the REIT for purposes of Section 856
of the Code, including satisfying the gross income tests and asset tests. Thus,
the Company's proportionate share of the assets, liabilities and items of income
of the Property Partnerships (other than certain properties held by the
Management Company), is treated as assets, liabilities and items of income of
the Company for purposes of applying the requirements described below.
The Company believes that each of the Property Partnerships in which it owns an
interest, directly or through another partnership or limited liability company,
will be treated as partnerships or disregarded for federal income tax purposes
and will not be taxable as corporations. If any of these entities were treated
as a corporation, it would be subject to an entity level tax on its income and
the Company could fail to meet the REIT income and asset tests. For a discussion
of the tax consequences of failure to qualify as a real estate investment trust,
see "-- Failure to Qualify."
If a REIT owns a corporate subsidiary that is a "qualified REIT subsidiary," the
separate existence of that subsidiary will be disregarded for federal income tax
purposes. Generally, a qualified REIT subsidiary is a corporation, other than a
taxable REIT subsidiary (discussed below), all of the capital stock of which is
owned by the REIT. All assets, liabilities and items of income, deduction and
credit of the qualified REIT subsidiary will be treated as assets, liabilities
and items of income, deduction and credit of the REIT itself. A qualified REIT
subsidiary of Company will not be subject to federal corporate income taxation,
although it may be subject to state and local taxation in some states. Although
in the past the Company owned some of its properties indirectly through
qualified REIT subsidiaries, at the present time, the Company does not utilize
any qualified REIT subsidiaries.
A "taxable REIT subsidiary" of the Company is a corporation in which the Company
directly or indirectly owns stock and that elects, together with the Company, to
be treated as a taxable REIT subsidiary under Section 856(l) of the Code. In
addition, if a taxable REIT subsidiary of the Company owns, directly or
indirectly, securities representing 35% or more of the vote or value of a
subsidiary corporation, that subsidiary will also be treated as a taxable REIT
subsidiary of the Company. A taxable REIT subsidiary is a corporation subject to
federal income tax, and state and local income tax where applicable, as a
regular "C" corporation.
Generally, a taxable REIT subsidiary can perform some impermissible tenant
services without causing the Company to receive impermissible tenant services
income under the REIT income tests. However, several provisions regarding the
arrangements between a REIT and its taxable REIT subsidiaries are intended to
ensure that a taxable REIT subsidiary will be subject to an appropriate level of
federal income taxation. For example, a taxable REIT subsidiary is limited in
its ability to deduct interest payments made to the Company. In addition, a REIT
will be obligated to pay a 100% penalty tax on some payments that it receives or
on certain expenses deducted by the taxable REIT subsidiary if the economic
arrangements between the REIT, the REIT's tenants and the taxable REIT
subsidiary are not comparable to similar arrangements among unrelated parties.
30
The Management Company has made an election to be treated as a taxable REIT
subsidiary of the Company.
Income Tests
In order for the Company to maintain its qualification as a REIT, it must
satisfy two gross income requirements annually. First, at least 75% of the
Company's gross income (excluding gross income from prohibited transactions) for
each taxable year must be derived directly or indirectly from investments
relating to real property or mortgages on real property, including "rents from
real property", gains on the disposition of real estate, dividends paid by
another REIT and interest on obligations secured by mortgages on real property
or on interests in real property or from certain types of temporary investments.
Second, at least 95% of the Company's gross income (excluding gross income from
prohibited transactions) for each taxable year must be derived from any
combination of income qualifying under the 75% test and from dividends,
interest, some payments under hedging instruments, gain from the sale or
disposition of stock or securities and some hedging instruments.
Rents received by the Company qualify as "rents from real property" in
satisfying the gross income requirements for a REIT described above only if the
following conditions are met. First, the amount of rent must not be based in
whole or in part on the income or profits derived by any person from such
property, although an amount received or accrued generally will not be excluded
from the term "rents from real property" solely by reason of being based on a
fixed percentage or percentages of receipts or sales. The Company does not
anticipate charging rent for any portion of any property that is based in whole
or in part on the income or profits of any person (except by reason of being
based on a percentage of receipts for sales, which is permitted by the Code).
Second, rents received from a "related party tenant" will not qualify as rents
from real property in satisfying the gross income tests unless the tenant is a
taxable REIT subsidiary and at least 90% of the property is leased to unrelated
tenants and the rent paid by the taxable REIT subsidiary is substantially
comparable to the rent paid by the unrelated tenants for comparable space. A
tenant is a related party tenant if the REIT, or an actual or constructive owner
of 10% or more of the REIT, actually or constructively owns 10% or more of the
tenant. The Company does not anticipate receiving rents from such a tenant.
Additionally, pursuant to the articles of incorporation, Related Tenant Owners
are prohibited from acquiring constructive ownership of more than 9.8% by value
of the Company. Third, rent attributable to personal property leased in
connection with a lease of real property will not qualify if it is greater than
15% of the total rent received under the lease. Fourth, for rents to qualify as
rents from real property for the purpose of satisfying the gross income tests,
the Company is generally only allowed directly to provide services that are
"usually or customarily rendered" in connection with the rental of real property
and not otherwise considered "rendered to the occupant." Accordingly, the
Company may not provide "impermissible services" to tenants (except through a
taxable REIT subsidiary, or through an independent contractor that bears the
expenses of providing the services and from whom the Company derives no revenue)
without giving rise to "impermissible tenant service income," which is
nonqualifying income for purposes of the income tests. For this purpose, the
amount
31
that the Company would be deemed to have received for performing any
"impermissible services" will be the greater of the actual amount so received or
150% of the direct cost to the Company of providing those services. If
impermissible tenant service income exceeds 1% of the Company's total income
from a property, all of the income from that property will fail to qualify as
rents from real property. If the total amount of impermissible tenant service
income from a property does not exceed 1% of the Company's total income from the
property, the services will not "taint" the other income from the property (that
is, they will not cause the rent paid by tenants of that property to fail to
qualify itself as rents from real property), but the impermissible tenant
service income will not qualify as rents from real property. The Company
provides certain services with respect to the properties that the Company
believes complies with the "usually or customarily rendered" requirement. The
Company will hire independent contractors from whom the Company derives no
income to perform such services or utilize the Management Company to perform
such services, to the extent that the performance of such services by the
Company would cause amounts received from its tenants to be excluded from rents
from real property.
The term "interest" generally does not include any amount received or accrued
(directly or indirectly) if the determination of such amount depends in whole or
in part on the income or profits of any person. However, an amount received or
accrued generally will not be excluded from the term "interest" solely by reason
of being based on a fixed percentage or percentages of receipts or sales. The
Company does not expect to derive significant amounts of interest that would
fail to qualify under the 75% and 95% gross income tests.
The Company's share of any dividends received from corporate subsidiaries (and
from other corporations in which the Company owns an interest) will qualify for
purposes of the 95% gross income test but not for purposes of the 75% gross
income test. The Company does not anticipate that it will receive sufficient
dividends to cause the Company to exceed the limit on nonqualifying income under
the 75% gross income test.
It is possible that, from time to time, the Company or the Partnership will
enter into hedging transactions with respect to one or more of its assets or
liabilities. Any such hedging transactions could take a variety of forms. If the
Company or the Partnership enters into an interest rate swap or cap contract to
hedge any variable rate indebtedness incurred to acquire or carry real estate
assets, any periodic income or gain from the disposition of such contract should
be qualifying income for purposes of the 95% gross income test but not for the
75% gross income test. For the Company's taxable year which begins on January 1,
1998, and for all taxable years thereafter, income from hedging transactions
which is qualifying income for the 95% gross income test also includes payments
to the Company under an option, futures contract, forward rate agreement, or any
similar financial instrument. To the extent that the Company or the Partnership
hedges with other types of financial instruments or in other situations, it may
not be entirely clear how the income from those transactions will be treated for
purposes of the various income tests that apply to REITs under the Code. The
Company intends to structure any hedging transactions in a manner that does not
jeopardize its status as a REIT.
32
The Management Company receives fees in consideration of the performance of
management and administrative services with respect to properties that are not
owned by the Company and earns income from the acquisition, development and
resale of real estate. Distributions received by the Company from the Management
Company of its earnings do not qualify under the 75% gross income test. The
Company believes that the aggregate amount of the distributions from the
Management Company together with all other non-qualifying income in any taxable
year will not cause the Company to exceed the limits on non-qualifying income
under the 75% and 95% gross income tests.
The Company believes that it has satisfied the 75% and 95% gross income tests
for taxable years ended prior to the date of this prospectus and intends to
operate in such a manner so as to satisfy such tests in the future. If the
Company fails to satisfy one or both of the 75% or 95% gross income tests for
any taxable year, it may nevertheless qualify as a REIT for such year if it is
entitled to relief under certain provisions of the Code. These relief provisions
generally will be available if the Company's failure to meet such tests was due
to reasonable cause and not due to willful neglect, the Company attaches a
schedule of the sources of its income to its federal income tax return, and any
incorrect information on the schedule was not due to fraud with intent to evade
tax. It is not possible to state whether in all circumstances the Company would
be entitled to the benefit of those relief provisions. As discussed above, even
if those relief provisions apply, a tax would be imposed with respect to the
excess net income.
If the Company has net income from "prohibited transactions," that income will
be subject to a 100% tax. In general, prohibited transactions are sales or other
dispositions of property held primarily for sale to customers in the ordinary
course of business. The determination as to whether a particular sale is a
prohibited transaction depends on the facts and circumstances related to that
sale. While the Company has undertaken a significant number of asset sales in
recent years, the Company does not believe that those sales should be considered
prohibited transactions, but there can be no assurance that the IRS would not
contend otherwise.
Asset Tests
The Company, at the close of each quarter of its taxable year, must also satisfy
four tests relating to the nature of its assets. First, at least 75% of the
value of the Company's total assets must be represented by real estate assets
(including (i) its allocable share of real estate assets which are held by the
Partnership or other Property Partnerships or which are held by "qualified REIT
subsidiaries" of the Company and (ii) stock or debt instruments held for not
more than one year purchased with the proceeds of a stock offering or long-term
(at least five years) debt offering of the Company), cash, cash items and
government securities. Second, not more than 25% of the value of the Company's
total assets may be represented by securities other than those in the 75% asset
class. Third, except for equity investments in REITs, qualified REIT
subsidiaries, or taxable REIT subsidiaries or other securities that qualify as
"real estate assets" for purposes of the 75% test described above, (a) the value
of any one issuer's securities that the Company owns may not exceed 5% of the
value of the Company's total assets; (b) the Company may not own more than 10%
of any one issuer's outstanding voting securities; and (c) the Company may not
own more than 10% of the value of the
33
outstanding securities of any one issuer.For purposes of the 10% value test,
securities which qualify as "straight debt" are not taken into account if
(a) the issuer is an individual, (b) the only securities of such issuer which
are held by the REIT or a taxable REIT subsidiary are straight debt or (c) the
issuer is a partnership and the REIT owns at least a 20% profits interest in the
partnership. Straight debt means any written unconditional promise to pay on
demand or on a specified date a sum certain in money if (a) the interest rate
(and the interest payment dates) are not contingent on profits, the borrower's
discretion or similar factors and (b) the instrument is not convertible. Fourth,
no more than 20% of the value of the Company's total assets may be comprised of
securities of one or more taxable REIT subsidiaries.
The Partnership owns 100% of the outstanding capital stock of the Management
Company. The Company believes that the aggregate value of the Management Company
does not exceed 20% of the aggregate value of the Company's gross assets. As of
each relevant testing date prior to the election to treat the Management Company
as a taxable REIT subsidiary, which election first became available as of
January 1, 2001, the Company believes it did not own more than 10% of the voting
securities of the Management Company. In addition, the Company believes that as
of each relevant testing date prior to the election to treat the Management
Company as a taxable REIT subsidiary of the Company, the Company's pro rata
share of the value of the securities, including debt, of the Management Company
did not exceed 5% of the total value of the Company's assets. No independent
appraisals have been obtained to support the Company's estimate of value,
however, and Foley & Lardner, in issuing its opinion on the Company's
qualification as a REIT, is relying on the Company's representation as to the
limited value of the interests in the Management Company.
After initially meeting the asset tests at the close of any quarter, the Company
will not lose its status as a REIT if it fails to satisfy the 25%, 20%, and 5%
asset tests and the 10% value limitation at the end of a later quarter solely by
reason of changes in the relative values of the Company's assets. If the failure
to satisfy the 25%, 20%, or 5% asset tests or the 10% value limitation results
from an acquisition of securities or other property during a quarter, the
failure can be cured by disposition of sufficient nonqualifying assets within 30
days after the close of that quarter. The Company intends to maintain adequate
records of the value of its assets to maintain compliance with the asset tests
and would attempt to take any available actions within 30 days after the close
of any quarter in an effort to cure any noncompliance with the 25%, 20%, or 5%
asset tests or 10% value limitation of which it becomes aware within that
period. If the Company failed to cure noncompliance with the asset tests within
this time period, it would cease to qualify as a REIT. See "-- Failure to
Qualify."
Annual Distribution Requirements
The Company, in order to qualify as a REIT, is required to distribute dividends
(other than capital gains dividends) to its shareholders in an amount at least
equal to: (a) the sum of (i) 90% of the Company's "REIT taxable income"
(computed without regard to the dividends paid deduction and the Company's net
capital gain) and (ii) 90% of the net income (after tax), if any, from
foreclosure property; minus (b) the sum of certain items of non-cash income. In
addition, if during the applicable Recognition Period, the Company disposes of
any asset with
34
built-in-gain, the Company will be required to distribute at least 90% of the
built-in-gain (after tax), if any, recognized on the disposition of such asset.
Such distribution must be paid in the taxable year to which it relates, or in
the following taxable year if declared before the Company timely files its tax
return for such prior year and if paid on or before the first regular dividend
payment date after such declaration. To the extent that the Company does not
distribute all of its net capital gain or distributes at least 90%, but less
than 100%, of its "REIT taxable income," as adjusted, it will be subject to tax
thereon at regular ordinary and capital gains corporate tax rates. The Company
may elect to retain, rather than distribute as a capital gain dividend, its net
long-term capital gains. If the Company makes this election, a "Capital Gains
Designation," the Company would pay tax on its retained net long-term capital
gains. In addition, to the extent the Company makes a Capital Gains Designation,
a U.S. Shareholder generally would: (i) include its proportionate share of the
Company's undistributed long-term capital gains in computing its long-term
capital gains in its return for its taxable year in which the last day of the
Company's taxable year falls (subject to certain limitations as to the amount
that is includable); (ii) be deemed to have paid the capital gains tax imposed
on the Company on the designated amounts included in the U.S. Shareholder's
long-term capital gains; (iii) receive a credit or refund for the amount of tax
deemed paid by it; (iv) increase the adjusted basis of its shares by the
difference between the amount of includable gains and the tax deemed to have
been paid by it; and (v) in the case of a U.S. Shareholder that is a
corporation, appropriately adjust its earnings and profits for the retained
capital gains in accordance with Treasury Regulations to be prescribed by the
IRS. If the Company should fail to distribute during each calendar year at least
the sum of (i) 85% of its REIT ordinary income for such year, (ii) 95% of its
REIT capital gain income for such year and (iii) any undistributed taxable
income from prior periods, the Company will be subject to a 4% excise tax on the
excess of such required distribution over the amounts actually distributed.
The Company intends to make timely distributions sufficient to satisfy this
annual distribution requirement in the future. It is possible that the Company,
from time to time, may not have sufficient cash or other liquid assets to meet
the 90% distribution requirement due to timing differences between the actual
receipt of income and the actual payment of deductible expenses and the
inclusion of such income and deduction of such expenses in arriving at the
taxable income of the Company, or if the amount of nondeductible expenses such
as principal amortization or capital expenditures exceeds the amount of noncash
deductions. In the event that such timing differences occur, in order to meet
the 90% distribution requirement, the Company may find it necessary to arrange
for short-term, or possibly long-term, borrowings to permit the payment of
required dividends or to pay dividends in the form of taxable stock dividends.
Under certain circumstances, the Company may be able to rectify a failure to
meet the distribution requirement for a certain year by paying "deficiency
dividends" to shareholders in a later year, which may be included in the
Company's deduction for dividends paid for the earlier year. Thus, the Company
may be able to avoid being taxed on amounts distributed as deficiency dividends;
however, the Company will be required to pay to the IRS interest based upon the
amount of any deduction taken for deficiency dividends.
35
Failure to Qualify
If the Company fails to qualify for taxation as a REIT in any taxable year, and
the relief provisions do not apply, the Company will be subject to tax
(including any applicable corporate alternative minimum tax) on its taxable
income at regular corporate rates. Such a failure could have an adverse effect
on the market value and marketability of the common stock. Distributions to
shareholders in any year in which the Company fails to qualify will not be
deductible by the Company nor will they be required to be made. In such event,
to the extent of current and accumulated earnings and profits, all distributions
to shareholders will be taxable as ordinary income, and, subject to certain
limitations of the Code, corporate distributees may be eligible for the
dividends received deduction. Unless entitled to relief under specific statutory
provisions, the Company will also be disqualified from taxation as a REIT for
the four taxable years following the year during which qualification was lost.
It is not possible to state whether the Company would be entitled to such
statutory relief.
Taxation of Taxable Domestic Shareholders
As used in this section, the term U.S. shareholder means a holder of shares who
is (i) a citizen or resident of the United States, (ii) a domestic corporation,
partnership, limited liability company or other entity treated as a corporation
or partnership for federal income tax purposes, (iii) an estate whose income is
subject to U.S. federal income tax regardless of its source; or (iv) a trust if
a U.S. court can exercise primary supervision over the trust's administration
and one or more U.S. persons have authority to control all substantial decisions
of the trust.
So long as the Company qualifies as a REIT, distributions to U.S. shareholders
out of the Company's current or accumulated earnings and profits that are not
designated as capital gain dividends will be taxable as ordinary income and will
not be eligible for the dividends received deduction generally available for
corporations. Distributions in excess of the Company's current and accumulated
earnings and profits will not be taxable to a U.S. shareholder to the extent
that the distributions do not exceed the adjusted tax basis of the shareholder's
shares. Rather, the distributions will reduce the adjusted tax basis of the
shares. Distributions that exceed the U.S. shareholder's adjusted tax basis in
the Company's shares will be taxable as capital gains. For purposes of
determining the portion of distributions on separate classes of shares that will
be treated as dividends for U.S. federal income tax purposes, current or
accumulated earnings and profits will be allocated to distributions resulting
from priority rights of preferred shares before being allocated to other
distributions. If the Company declares a dividend in October, November, or
December of any year with a record date in one of these months and pays the
dividend on or before January 31 of the following year, the Company will be
treated as having paid the dividend, and the shareholder will be treated as
having received the dividend, on December 31 of the year in which the dividend
was declared.
The Company may elect to designate distributions of the Company's net capital
gain as "capital gain dividends." Capital gain dividends are taxed to
shareholders as gain from the sale or exchange of a capital asset held for more
than one year, without regard to how long the U.S.
36
shareholder has held the Company's shares. Designations that the Company makes
only will be effective to the extent that they comply with Revenue Ruling 89-81,
which requires that distributions made to different classes of shares be
composed proportionately of dividends of a particular type. If the Company
designates any portion of a dividend as a capital gain dividend, a U.S.
shareholder will receive an Internal Revenue Service Form 1099-DIV indicating
the amount that will be taxable to the shareholder as capital gain. Corporate
shareholders, however, may be required to treat up to 20% of capital gain
dividends as ordinary income.
Instead of paying capital gain dividends, the Company may designate all or part
of its net capital gain as "undistributed capital gain." The Company will be
subject to tax at regular corporate rates on any undistributed capital gain. A
U.S. shareholder (1) will include in its income as long-term capital gains its
proportionate share of such undistributed capital gains and (2) will be deemed
to have paid its proportionate share of the tax paid by the Company on such
undistributed capital gains and receive a credit or refund to the extent that
the tax the Company paid exceeds the U.S. shareholder's tax liability on the
undistributed capital gain and (3) in the case of a U.S. shareholder that is a
corporation, appropriately adjust its earnings and profits for the retained
capital gains in accordance with Treasury Regulations to be prescribed by the
IRS. A U.S. shareholder will increase the basis in its common shares by the
difference between the amount of capital gain included in its income and the
amount of tax it is deemed to have paid. The Company's earnings and profits will
be adjusted appropriately.
The Company will classify portions of any designated capital gain dividend or
undistributed capital gain as either: (1) a 20% rate gain distribution, which
would be taxable to non-corporate U.S. shareholders at a maximum rate of 20%; or
(2) an "unrecaptured Section 1250 gain" distribution, which would be taxable to
non-corporate U.S. shareholders at a maximum rate of 25%. The Company must
determine the maximum amounts that it may designate as 20% and 25% rate capital
gain dividends by performing the computation required by the Code as if the
Company were an individual whose ordinary income were subject to a marginal tax
rate of at least 28%.
Distributions that the Company makes and gain arising from the sale or exchange
by a U.S. shareholder of the Company's shares will not be treated as passive
activity income, and as a result, U.S. shareholders generally will not be able
to apply any "passive losses" against this income or gain. In addition, taxable
distributions from the Company generally will be treated as investment income
for purposes of the investment interest limitations. A U.S. shareholder may
elect to treat capital gain dividends and capital gains from the disposition of
shares as investment income for purposes of the investment interest limitation,
in which case the applicable capital gains will be taxed at ordinary income
rates. The Company will notify shareholders regarding the portions of
distributions for each year that constitute ordinary income, return of capital,
capital gain or represent tax preference items to be taken into account for
purposes of computing the alternative minimum tax liability of the shareholders.
U.S. shareholders may not include in their individual income tax returns any of
the Company's net operating losses or capital losses. The Company's operating or
capital losses would be
37
carried over by the Company for potential offset against future income, subject
to applicable limitations.
Upon any taxable sale or other disposition of shares, a U.S. shareholder will
recognize gain or loss for federal income tax purposes in an amount equal to the
difference between: (1) the amount of cash and the fair market value of any
property received on the sale or other disposition and (2) the holder's adjusted
tax basis in the shares for tax purposes.
This gain or loss will be a capital gain or loss. The applicable tax rate will
depend on the shareholder's holding period for the asset (generally, if an asset
has been held for more than one year it will produce long-term capital gain) and
the shareholder's tax bracket. The Internal Revenue Service has the authority to
prescribe, but has not yet prescribed, regulations that would apply a capital
gain tax rate of 25% (which is generally higher than the long-term capital gain
tax rates for noncorporate shareholders) to a portion of capital gain realized
by a noncorporate shareholder on the sale of REIT shares that would correspond
to the REIT's "unrecaptured Section 1250 gain." Shareholders are urged to
consult with their tax advisors with respect to their capital gain tax
liability. A corporate U.S. shareholder will be subject to tax at a maximum rate
of 35% on capital gain from the sale of the Company's shares. In general, any
loss recognized by a U.S. shareholder upon the sale or other disposition of
shares that have been held for six months or less, after applying the holding
period rules, will be treated as a long-term capital loss, to the extent of
distributions received by the U.S. shareholder from the Company that were
required to be treated as long-term capital gains.
Taxation of Tax-Exempt Shareholders
Provided that a tax-exempt shareholder has not held its common shares as "debt
financed property" within the meaning of the Code and the shares are not
otherwise used in a trade or business, distributions from the Company will not
be unrelated business taxable income, referred to as UBTI, to a tax-exempt
shareholder. Similarly, income from the sale of shares will not constitute UBTI
unless the tax-exempt shareholder has held its shares as debt financed property
within the meaning of the Code or has used the shares in a trade or business.
However, for tax-exempt shareholders that are social clubs, voluntary employee
benefit associations, supplemental unemployment benefit trusts or qualified
group legal services plans exempt from federal income taxation under Sections
501(c)(7), (c)(9), (c)(17) and (c)(20) of the Code, respectively, or a single
parent title-holding corporation exempt under Section 501(c)(2) the income of
which is payable to any of the aforementioned tax-exempt organizations, income
from an investment in the Company will constitute UBTI unless the organization
properly sets aside or reserves such amounts for purposes specified in the Code.
These tax-exempt shareholders should consult their tax advisors concerning these
"set aside" and reserve requirements.
Notwithstanding the above, however, a portion of the dividends paid by a
"pension held REIT" are treated as UBTI if received by any trust which is
described in Section 401(a) of the Code, is tax-exempt under Section 501(a) of
the Internal Revenue Code, and holds more than
38
10%, by value, of the equity interests in the REIT. Tax-exempt pension funds
that are described in Section 401(a) of the Internal Revenue Code are referred
to below as "pension trusts."
A REIT is a pension held REIT if it meets the following two tests: (1) it
qualified as a REIT only by reason of Section 856(h)(3) of the Code, which
provides that stock owned by pension trusts will be treated, for purposes of
determining if the REIT is closely held, as owned by the beneficiaries of the
trust rather than by the trust itself; and (2) either (a) at least one pension
trust holds more than 25% of the value of the REIT's stock, or (b) a group of
pension trusts each individually holding more than 10% of the value of the
REIT's shares, collectively owns more than 50% of the value of the REIT's
shares.
The percentage of any REIT dividend from a "pension held REIT" treated as UBTI
is equal to the ratio of the gross income of the REIT from unrelated trades or
businesses less direct expenses related to this gross income, treating the REIT
as if it were a pension trust and therefore subject to tax on UBTI, to the total
gross income of the REIT less direct expenses related to the total gross income.
An exception applies where the percentage is less than 5% for any year. The
provisions requiring pension trusts to treat a portion of REIT distributions as
UBTI will not apply if the REIT is able to satisfy the "not closely held
requirement" without relying upon the "look-through" exception for pension
trusts. Based on both the Company's current share ownership and the limitations
on transfer and ownership of shares contained in the Company's organizational
documents, we do not expect to be classified as a pension held REIT.
U.S. Taxation of Non-U.S. Shareholders
As used in this section, the terms "non-U.S. shareholder" means a holder of
shares that is not a U.S. person for U.S. federal income tax purposes. The
Company's distributions to a non-U.S. shareholder that are neither attributable
to gain from sales or exchanges by the Company of "U.S. real property interests"
nor designated by the Company as capital gains dividends will be treated as
dividends of ordinary income to the extent that they are made out of the
Company's current or accumulated earnings and profits. These distributions
ordinarily will be subject to withholding of U.S. federal income tax on a gross
basis at a rate of 30%, or a lower rate as permitted under an applicable income
tax treaty, unless the dividends are treated as effectively connected with the
conduct by the non-U.S. shareholder of a U.S. trade or business. Under some
treaties, however, lower withholding rates generally applicable to dividends do
not apply to dividends from REITs. Applicable certification and disclosure
requirements must be satisfied to be exempt from withholding under the
effectively connected income exemption. Dividends that are effectively connected
with a trade or business will be subject to tax on a net basis, that is, after
allowance for deductions, at graduated rates, in the same manner as U.S.
shareholders are taxed with respect to these dividends, and are generally not
subject to withholding. Any dividends received by a corporate non-U.S.
shareholder that is engaged in a U.S. trade or business also may be subject to
an additional branch profits tax at a 30% rate, or lower applicable treaty rate.
39
Distributions in excess of current and accumulated earnings and profits that
exceed the non-U.S. shareholder's basis in the Company's shares will be taxable
to a non-U.S. shareholder as gain from the sale of shares, which is discussed
below. Distributions in excess of current or accumulated earnings and profits of
the Company that do not exceed the adjusted tax basis of the non-U.S.
shareholder in the Company's shares will reduce the non-U.S. shareholder's
adjusted tax basis in the shares and will not be subject to U.S. federal income
tax, but will be subject to U.S. withholding tax as described below.
The Company expects to withhold U.S. income tax at the rate of 30% on any
dividend distributions (including distributions that later may be determined to
have been in excess of current and accumulated earnings and profits) made to a
non-U.S. shareholder unless: (1) a lower treaty rate applies and the non-U.S.
shareholder files an Internal Revenue Service Form W-8BEN evidencing eligibility
for that reduced treaty rate with the Company; or (2) the non-U.S. shareholder
files an Internal Revenue Service Form W-8ECI with the Company claiming that the
distribution is effectively connected income.
The Company may be required to withhold at least 10% of any distribution in
excess of the Company's current and accumulated earnings and profits, even if a
lower treaty rate applies and the non-U.S. shareholder is not liable for tax on
the receipt of that distribution. However, a non-U.S. shareholder may seek a
refund of these amounts from the Internal Revenue Service if the non-U.S.
shareholder's U.S. tax liability with respect to the distribution is less than
the amount withheld.
Distributions to a non-U.S. shareholder that the Company designates at the time
of the distribution as capital gain dividends, other than those arising from the
disposition of a U.S. real property interest, generally should not be subject to
U.S. federal income taxation unless: (1) the investment in the shares is
effectively connected with the conduct of the non-U.S. shareholder's U.S. trade
or business, in which case the non-U.S. shareholder will be subject to the same
treatment as U.S. shareholders on any gain, except that a shareholder that is a
foreign corporation also may be subject to the 30% branch profits tax, as
discussed above, or (2) the non-U.S. shareholder is a nonresident alien
individual who is present in the U.S. for 183 days or more during the taxable
year and has a "tax home" in the U.S., in which case the nonresident alien
individual will be subject to a 30% tax on the individual's capital gains.
Under the Foreign Investment in Real Property Tax Act, which is referred to as
"FIRPTA," distributions to a non-U.S. shareholder that are attributable to gain
from sales or exchanges by the Company of U.S. real property interests, whether
or not designated as a capital gain dividend, will cause the non-U.S.
shareholder to be treated as recognizing gain that is income effectively
connected with a U.S. trade or business. Non-U.S. shareholders will be taxed on
this gain at the same rates applicable to U.S. shareholders, subject to a
special alternative minimum tax in the case of nonresident alien individuals.
Also, this gain may be subject to a 30% branch profits tax in the hands of a
non-U.S. shareholder that is a corporation.
The Company will be required to withhold and remit to the Internal Revenue
Service 35% of any distributions to foreign shareholders that are designated as
capital gain dividends, or, if
40
greater, 35% of a distribution that could have been designated as a capital gain
dividend. Distributions can be designated as capital gains to the extent of the
Company's net capital gain for the taxable year of the distribution. The amount
withheld is creditable against the non-U.S. shareholder's United States federal
income tax liability.
Although the law is not clear on the matter, it appears that amounts the Company
designates as undistributed capital gains in respect of the common shares held
by U.S. shareholders generally should be treated for non-U.S. shareholders in
the same manner as actual distributions by the Company of capital gain
dividends. Under that approach, the non-U.S. shareholders would be able to
offset as a credit against their United States federal income tax liability
resulting from reporting the capital gain their proportionate share of the tax
paid by the Company on the undistributed capital gains, and to receive from the
Internal Revenue Service a refund to the extent their proportionate share of
this tax paid by the Company were to exceed their actual United States federal
income tax liability.
Gain recognized by a non-U.S. shareholder upon the sale or exchange of the
Company's shares generally would not be subject to United States taxation
unless: (1) the investment in the Company's shares is effectively connected with
the conduct of the non-U.S. shareholder's U.S. trade or business, in which case
the non-U.S. shareholder will be subject to the same treatment as domestic
shareholders as to any gain; (2) the non-U.S. shareholder is a nonresident alien
individual who is present in the United States for 183 days or more during the
taxable year and has a tax home in the United States, in which case the
nonresident alien individual will be subject to a 30% tax on the individual's
net capital gains for the taxable year; or (3) the Company's shares constitute a
U.S. real property interest within the meaning of FIRPTA, as described below.
The Company's shares will not constitute a U.S. real property interest if the
Company is a domestically controlled REIT. The Company will be a
domestically-controlled REIT if, at all times during the 5 year period,
preceding a sale or exchange of stock, less than 50% in value of the Company's
stock is held directly or indirectly by non-U.S. shareholders. The Company
believes that it currently is not a domestically controlled REIT because
Security Capital U.S. Realty, a foreign company, beneficially owned in excess of
50% in value of the Company's shares until January 16, 2001, when beneficial
ownership of those shares was acquired by Security Capital, a Maryland
corporation. Therefore, the sale of the Company's shares may currently be
subject to taxation under FIRPTA. The Company believes, however, that at the
present time less than 50% in value of the Company's stock is held directly or
indirectly by non-U.S. shareholders and hence, the Company may become
domestically-controlled in the future. Because the Company's shares are publicly
traded, however, the Company cannot guarantee that the Company will become a
domestically controlled REIT. Even if the Company does not qualify as a
domestically controlled REIT at the time a non-U.S. shareholder sells the
Company's shares, gain arising from the sale still would not be subject to
FIRPTA tax if: (1) the class or series of shares sold is considered regularly
traded under applicable treasury regulations on an established securities
market, such as the NYSE; and (2) the selling non-U.S. shareholder owned,
actually or constructively, 5% or less in value of the
41
outstanding class or series of shares being sold throughout the five-year period
ending on the date of the sale or exchange.
If gain on the sale or exchange of the Company's shares were subject to taxation
under FIRPTA, the non-U.S. shareholder would be subject to regular U.S. income
tax as to any gain in the same manner as a taxable U.S. shareholder, subject to
any applicable alternative minimum tax and special alternative minimum tax in
the case of nonresident alien individuals.
Other Tax Consequences
The Company and its security holders may be subject to state or local taxation
in various state or local jurisdictions, including those in which it or they
transact business or reside. The state and local tax treatment of the Company
and its security holders may not conform to the federal income tax consequences
discussed above. Consequently, prospective security holders should consult their
own tax advisors regarding the effect of state and local tax laws on an
investment in the Company.
Backup Withholding
U.S. Shareholders
The Company will report to its domestic shareholders and to the IRS the amount
of dividends paid during each calendar year, and the amount of tax withheld, if
any. Under the backup withholding rules, a shareholder may be subject to backup
withholding at the rate of 30% (29% for 2004-2005) with respect to dividends
paid unless such shareholder (a) is a corporation or another form of entity
exempt from backup withholding and, when required, demonstrates this fact, or
(b) provides a taxpayer identification number, certifies to no loss of exemption
from backup withholding, and otherwise complies with applicable requirements of
the backup withholding rules. A shareholder that does not provide the Company
with a correct taxpayer identification number may also be subject to penalties
imposed by the IRS. Any amount paid as backup withholding will be creditable
against the shareholder's income tax liability. In addition, the Company may be
required to withhold a portion of capital gain distributions to any shareholders
who fail to certify their non-foreign status to the Company.
Non-U.S. Shareholders
Generally, information reporting will apply to payments of distributions on the
Company's shares, and backup withholding at a rate of 30% (29% for 2004-2005)
may apply, unless the payee certifies that it is not a U.S. person or otherwise
establishes an exemption.
The payment of the proceeds from the disposition of Company shares to or through
the U.S. office of a U.S. or foreign broker will be subject to information
reporting and, possibly, backup withholding unless the non-U.S. shareholder
certifies as to its non-U.S. status or otherwise establishes an exemption,
provided that the broker does not have actual knowledge that the shareholder is
a U.S. person or that the conditions of any other exemption are not, in fact,
satisfied. The proceeds of the disposition by a non-U.S. shareholder of Company
shares
42
to or through a foreign office of a broker generally will not be subject
to information reporting or backup withholding. However, if the broker is a U.S.
person, a controlled foreign corporation for U.S. tax purposes, or a foreign
person 50% or more of whose gross income from all sources for specified periods
is from activities that are effectively connected with a U.S. trade or business,
information reporting generally will apply unless the broker has documentary
evidence as to the non-U.S. shareholder's foreign status and has no actual
knowledge to the contrary.
Applicable treasury regulations provide presumptions regarding the status of
shareholders when payments to the shareholders cannot be reliably associated
with appropriate documentation provided to the payer. Because the application of
these treasury regulations varies depending on the shareholder's particular
circumstances, you are urged to consult your tax advisor regarding the
information reporting requirements applicable to you.
43
LEGAL MATTERS
The validity of the common stock and certain tax matters described under
"Federal Income Tax Considerations" will be passed upon for Regency by Foley &
Lardner, Jacksonville, Florida. Attorneys with Foley & Lardner representing
Regency with respect to this offering beneficially owned approximately 7,800
shares of our common stock as of the date of this prospectus.
EXPERTS
The consolidated financial statements and schedule of Regency Centers
Corporation as of December 31, 2002 and 2001, and for each of the years in the
three-year period ended December 31, 2002, have been incorporated by reference
herein and in the registration statement in reliance upon the reports of KPMG
LLP, independent accountants, also incorporated by reference herein and upon the
authority of said firm as experts in accounting and auditing. The audit report
covering the December 31, 2002 financial statements refers to the Company's
adoption of Statement of Financial Accounting Standards No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets." To the extent that KPMG LLP
audits and reports on consolidated financial statements of Regency Centers
Corporation issued at future dates, and consents to the use of its report
thereon, such consolidated financial statements also will be incorporated by
reference in the registration statement in reliance upon its reports and said
authority.
44
================================================================================
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY...........................1
FORWARD-LOOKING INFORMATION..................3
RISK FACTORS.................................3
USE OF PROCEEDS.............................12
REGENCY CENTERS CORPORATION.................12
THE SELLING SHAREHOLDER.....................12
PLAN OF DISTRIBUTION........................15 Regency Centers Corporation
DESCRIPTION OF CAPITAL STOCK................16
FEDERAL INCOME TAX CONSIDERATIONS...........26
LEGAL MATTERS...............................44
EXPERTS.....................................44
-------------
PROSPECTUS
-------------
34,273,236 Shares
Common Stock
__________, 2003
================================================================================
PART II
Information Not Required in Prospectus
--------------------------------------
Item 14. Other Expenses of Issuance and Distribution.
Set forth below is an estimate of the approximate amount of fees and expenses,
other than underwriting discounts and commissions, in connection with the
distribution of the securities registered hereby, all of which will be payable
by the selling shareholder except as noted in the prospectus.
Securities and Exchange Commission
Registration Fee $ 92,789
Printing* $ 15,000
Legal Fees and Expenses* $ 50,000
Accounting Fees and Expenses* $ 25,000
Miscellaneous* $ 5,211
-----------
Total* $ 188,000
===========
* Estimated
Item 15. Indemnification of Directors and Officers.
Regency Centers Corporation's officers and directors are and will be indemnified
under Florida law and, the charter and by-laws of Regency Centers Corporation.
The Florida Business Corporation Act (the "Florida Act"), under which Regency is
organized, permits a Florida corporation to indemnify a present or former
director or officer of the corporation (and certain other persons serving at the
request of the corporation in related capacities) for liabilities, including
legal expenses, arising by reason of service in such capacity if such person
shall have acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation, and in any criminal
proceeding if such person had no reasonable cause to believe his conduct was
unlawful. However, in the case of actions brought by or in the right of the
corporation, no indemnification may be made with respect to any matter as to
which such director or officer shall have been adjudged liable, except in
certain limited circumstances.
Article X of Regency's bylaws provides that Regency shall indemnify directors
and executive officers to the fullest extent now or hereafter permitted by the
Florida Act. In addition, Regency has entered into indemnification agreements
with its directors and executive officers in which it has agreed to indemnify
such persons to the fullest extent now or hereafter permitted by the Florida
Act.
Item 16. Exhibits
The exhibits to this Registration Statement are listed in the Exhibit Index,
which appears immediately after the signature page and is incorporated herein by
this reference.
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement
(i) to include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement
or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would
not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) under
the Securities Act of 1933, if, in the aggregate, the
changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) to include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above do not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Jacksonville, State of Florida, on May 19, 2003.
By: REGENCY CENTERS CORPORATION
By: /s/ Martin E. Stein, Jr.
-------------------------------------
Martin E. Stein, Jr., Chairman of the
Board and Chief Executive Officer
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears on the
Signature Page to this Registration Statement constitutes and appoints Martin E.
Stein, Jr., Mary Lou Fiala, Bruce M. Johnson and J. Christian Leavitt, and each
or any of them, his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, including
any amendment or registration statement filed pursuant to Rule 462, and to file
the same, with all exhibits hereto, and other documents in connection therewith,
with the Securities and Exchange Commission, and grants unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or his or her substitute or substitutes may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
Date: May 19, 2003 /s/ Martin E. Stein, Jr.
-----------------------------------------
Martin E. Stein, Jr., Chairman of the
Board and Chief Executive Officer
Date: May 16, 2003 /s/ Mary Lou Fiala
-----------------------------------------
Mary Lou Fiala, President, Chief
Operating Officer and Director
Date: May 19, 2003 /s/ Bruce M. Johnson
-----------------------------------------
Bruce M. Johnson, Managing Director and
Principal Financial Officer
Date: May 19, 2003 /s/ J. Christian Leavitt
-----------------------------------------
J. Christian Leavitt, Senior Vice
President, Secretary, Treasurer and
Principal Accounting Officer
Date: May 19, 2003 /s/ Raymond L. Bank
-----------------------------------------
Raymond L. Bank, Director
Date: May __, 2003
-----------------------------------------
C. Ronald Blankenship, Director
Date: May 19, 2003 /s/ A.R. Carpenter
-----------------------------------------
A.R. Carpenter, Director
Date: May 19, 2003 /s/ J. Dix Druce, Jr.
-----------------------------------------
J. Dix Druce, Jr., Director
Date: May 19, 2003 /s/ Douglas S. Luke
-----------------------------------------
Douglas S. Luke, Director
Date: May 19, 2003 /s/ Joseph E. Parsons
-----------------------------------------
Joseph E. Parsons, Director
Date: May __, 2003
-----------------------------------------
John C. Schweitzer, Director
Date: May 19, 2003 /s/ Thomas G. Wattles
-----------------------------------------
Thomas G. Wattles, Director
Date: May 15, 2003 /s/ Terry N. Worrell
-----------------------------------------
Terry N. Worrell, Director
EXHIBIT INDEX
Sequential
Page No.
5.1 Opinion of Foley & Lardner as to the legality
of the securities to be issued
8.1 Opinion of Foley & Lardner as to Tax Matters and REIT
Qualification
23.1 Consent of Foley & Lardner (included in Opinions filed as
Exhibit 5.1 and 8.1)
23.2 Consent of KPMG LLP
24.1 Powers of Attorney (included on signature page)