ROSPECTUS
[Graphic omitted]
$400,000,000
REGENCY CENTERS CORPORATION
Common Stock, Preferred Stock, Depositary Shares, Warrants
By this prospectus, Regency Centers Corporation may offer from time to
time:
o common stock
o preferred stock
o depositary shares
o warrants exercisable for common stock
When Regency Centers Corporation offers securities, we will provide you
with a prospectus supplement describing the terms of the specific issue of
securities, including the price of the securities.
You should read this prospectus and any prospectus supplement carefully
before you decide to invest. This prospectus may not be used to sell securities
unless it is accompanied by a prospectus supplement that further describes the
securities being delivered to you.
Regency's common stock is listed on the New York Stock Exchange under
the symbol "REG." The last reported sale price of our common shares on the New
York Stock Exchange on September 23, 2004 was $45 per share. Our Series 3
cumulative redeemable preferred stock and Series 4 cumulative redeemable
preferred stock are listed on the New York Stock Exchange under the symbols
"REGPRC" and "REGPRD," respectively.
We may sell these securities to or through underwriters, to other
purchasers and/or through agents. The accompanying prospectus supplement will
specify the names of any underwriters or agents.
See " Risk Factors" beginning on page 3 for a discussion on risk
factors you should consider before you make your investment decision.
-------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission or other regulatory body has approved or disapproved of these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The date of this prospectus is September 24, 2004.
TABLE OF CONTENTS
Page
WHERE YOU CAN FIND MORE INFORMATION..........................................1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..............................1
FORWARD-LOOKING INFORMATION..................................................2
RISK FACTORS.................................................................3
THE COMPANY.................................................................12
USE OF PROCEEDS.............................................................12
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS................................................12
CAPITAL STOCK...............................................................13
DESCRIPTION OF COMMON STOCK.................................................19
DESCRIPTION OF PREFERRED STOCK..............................................22
DESCRIPTION OF DEPOSITARY SHARES............................................32
description of warrants.....................................................36
PLAN OF DISTRIBUTION........................................................38
Certain Federal Income Tax Considerations...................................41
ERISA CONSIDERATIONS........................................................57
LEGAL MATTERS...............................................................60
EXPERTS.....................................................................60
i
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission or "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 www.sec.gov.
We also maintain a web site at www.regencycenters.com. Information on our
website is not incorporated by reference in this prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This prospectus is part of a registration statement we filed with the
SEC. 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. 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 future filings made
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 (Commission File No. 1-12298) after the initial filing of
the registration statement that contains this prospectus and prior to the time
that we sell all the securities covered by this prospectus (other than
information in documents that is deemed not to be filed):
o Our annual report on Form 10-K for the year ended December 31,
2003;
o Our quarterly reports on Form 10-Q for the quarters ended
March 31, 2004 and June 30, 2004;
o Our current reports on Form 8-K dated August 4, 2004 and
August 24, 2004; and
o The description of our common stock which is contained in our
registration statement on Form 8-A filed on August 30, 1993,
and declared effective on October 29, 1993, including
amendments or reports filed for the purpose of updating that
description.
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) 598-7727
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
1
information in this prospectus or any supplement is accurate as 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.
FORWARD-LOOKING INFORMATION
This prospectus includes and incorporates by reference forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. We intend such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995. Forward-looking statements are generally identifiable by use of the
words "believe," "expect," "intend," "anticipate," "estimate," "project" or
similar expressions. Forward-looking statements are not guarantees of future
performance and involve known and unknown risks and uncertainties that could
cause actual results to differ materially from those expressed or implied by
such statements. Such risks and uncertainties include, but are not limited to,
those described under the caption "Risk Factors" in the accompanying prospectus
as well as:
o changes in national and local economic conditions;
o financial difficulties of tenants;
o competitive market conditions, including pricing of acquisitions
and sales of properties and out-parcels;
o changes in expected leasing activity and market rents;
o timing of acquisitions, development starts and sales of
properties and out-parcels;
o our inability to exercise voting control over the joint ventures
through which we own or develop some of our properties;
o weather;
o consequences of any armed conflict or terrorist attack against
the United States;
o the ability to obtain governmental approvals; and
o meeting development schedules.
We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
2
RISK FACTORS
The following contains a description of the material risks involved in
an investment in our securities.
Risk Factors Related to Our Industry and Real Estate Investments
----------------------------------------------------------------
Our revenues and cash flow could be adversely affected by poor market conditions
where properties are geographically concentrated.
Regency's performance depends on the economic conditions in markets in
which our properties are concentrated, including Florida, California, Texas,
Georgia and Ohio. Our revenues and cash available for distribution to
shareholders could be adversely affected by this geographic concentration 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.
Loss of revenues from major tenants could reduce distributions to shareholders.
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.
Downturns in the retailing industry likely will have a direct impact on our
revenues and cash flow.
Our properties consist of grocery-anchored shopping centers. Our
performance 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;
3
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 growth of super-centers, such as those operated by
Walmart;
o the excess amount of retail space in a number of
markets;
o increasing consumer purchases through catalogues or the
Internet;
o reduction in the demand for tenants to occupy our
shopping centers as a result of the Internet and
e-commerce;
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 and our cash available for distribution to
shareholders.
Unsuccessful development activities could reduce distributions to shareholders.
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.
4
Uninsured loss may adversely affect distributions to shareholders.
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.
We face competition from numerous sources.
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.
Costs of environmental remediation could reduce our cash flow.
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.
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.
5
Risk Factors Related to Our Acquisition Structure
-------------------------------------------------
Our partnership structure may limit our flexibility to manage our assets.
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.
We do not have voting control over our joint venture investments, so we are
unable to ensure that our objectives will be pursued.
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.
Risk Factors Related to Our Capital Structure
---------------------------------------------
Our debt financing may reduce distributions to shareholders.
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
6
an annual basis. Our board of directors may amend this policy at any time
without the approval of our shareholders.
Our line of credit imposes 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.
We are dependent on external sources of capital, which may not be available.
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 our degree of leverage.
Risk Factors Related to Interest Rates and the Market for Our Stock
-------------------------------------------------------------------
Increased interest rates may reduce distributions to shareholders.
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.
7
Increased market interest rates could reduce our stock prices.
The annual dividend rate on our common and preferred 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.
Outstanding SynDECs could adversely influence the market price for our common
stock.
In June 2003, an affiliate of Security Capital Group Incorporated sold
23,203,712 shares of our common stock, including 4,606,880 shares purchased by
us directly from Security Capital, and Citigroup Global Markets Holdings Inc.,
or CGMHI, sold an aggregate of 8,280,000 SynDECS (Debt Exchangeable for Common
Stock). The SynDECS are a series of debt securities of CGMHI that will each be
mandatorily exchanged upon maturity, on July 1, 2006, into between 5/6th of a
share and one share of Regency's common stock or its value in cash based on a
formula linked to the market price of Regency's common stock. Any market for the
SynDECS is likely to influence the market for Regency's common stock. For
example, the price of Regency's common stock could become more volatile and
could be depressed by investors' anticipation of the potential distribution into
the market of substantial additional amounts of Regency's common stock at the
maturity of the SynDECS, by possible sales of Regency's common stock by
investors who view the SynDECS as a more attractive means of equity
participation in Regency and by hedging or arbitrage trading activity that may
develop involving the SynDECS and Regency's common stock.
Risk Factors Related to Federal Income Tax Laws
-----------------------------------------------
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.
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.
8
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 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., which has elected to be a
taxable REIT subsidiary.
Our former foreign controlled status could cause foreign shareholders to be
subject to tax upon a sale of shares.
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
9
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 series of shares
sold is considered regularly traded under applicable treasury regulations on an
established securities market, such as the New York Stock Exchange; 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.
Risk Factors Related to Our Ownership Limitations, the Florida Business
-----------------------------------------------------------------------
Corporation Act and Certain Other Matters
-----------------------------------------
Restrictions on the ownership of our capital stock to preserve our REIT status
could delay or prevent a change in control.
Ownership of more than 7% by value of our outstanding capital stock by
certain persons is restricted for the purpose of maintaining our qualification
as a REIT, with certain exceptions. This 7% limitation may discourage a change
in control and may also (i) deter tender offers for our capital stock, which
offers may be attractive to our shareholders, or (ii) limit the opportunity for
our shareholders to receive a premium for their capital stock that might
otherwise exist if an investor attempted to assemble a block in excess of 7% of
our outstanding capital stock or to effect a change in control.
The issuance of our capital stock could delay or prevent a change in control.
Our articles of incorporation authorize our board of directors to issue
up to 10,000,000 shares of preferred stock and 10,000,000 shares of special
common stock and to establish the preferences and rights of any shares issued.
The issuance of preferred stock or special common stock could have the effect of
delaying or preventing a change in control even if a change in control were in
our shareholders' interest. The provisions of the Florida Business Corporation
Act regarding control share acquisitions and affiliated transactions could also
deter potential acquisitions by preventing the acquiring party from voting the
common stock it acquires or consummating a merger or other extraordinary
corporate transaction without the approval of our disinterested shareholders.
See "Capital Stock" for additional information.
10
Our board of directors may change our policies without a vote of our
shareholders.
Our board of directors establishes the policies that govern our
investment and operating strategies including, among others, development and
acquisition of shopping centers, tenant and market focus, debt and equity
financing policies, quarterly distributions to shareholders and REIT tax status.
Our board of directors may amend these policies at any time without a vote of
our shareholders.
11
THE COMPANY
Regency is a real estate investment trust or "REIT". We invest in
retail shopping centers through Regency Centers, L.P., the operating partnership
in which we are the sole general partner and 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 generally executed by our operating partnership, its
wholly-owned subsidiaries and 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.
USE OF PROCEEDS
Unless otherwise set forth in the applicable prospectus supplement, the
net proceeds from the sale of our securities will be used for general corporate
purposes, which may include the repayment of outstanding indebtedness, the
redemption of preferred units issued by our operating partnership, the
acquisition of shopping centers as suitable opportunities arise, the expansion
and improvement of properties in our portfolio and payment of development costs
for new centers.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table shows our ratio of earnings to fixed charges for
the periods indicated:
For the six
months ended
June 30, For the year ended December 31,
---------------- ----------------------------------------------------------
2004 2003 2003 2002 2001 2000 1999
---- ---- ---- ---- ---- ---- ----
Ratio of earnings to fixed charges (1) 2.0 1.7 1.9 1.6 1.5 1.5 1.7
----------------
(1) Net earnings from discontinued operations have been restated for all
periods presented.
The ratios of earnings to combined fixed charges and preferred stock
dividends is computed by dividing earnings by the sum of fixed charges and
preferred stock dividends. The term "fixed charges" for our company includes the
sum of the following: (a) interest expensed and capitalized, (b) amortized
premiums, discounts and capitalized expenses related to indebtedness and (c)
dividends paid on preferred stock and preferred units. The term "earnings" for
our company is the amount resulting from adding (a) income from continuing
operations before adjustment for minority interests in consolidated
subsidiaries, (b) fixed charges and (c) cash distributed by equity investees;
then subtracting from the total of added items (a) capitalized interest, (b)
dividends paid on preferred stock and preferred units and (c) equity in income
of investments in real estate partnerships.
12
CAPITAL STOCK
General
We are authorized to issue up to:
o 150,000,000 shares of common stock, $.01 par value per share,
o 10,000,000 shares of special common stock, $.01 par value, and
o 30,000,000 shares of preferred stock, $.01 par value per share.
As of September 23, 2004, we had 62,538,266 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 and
depositary shares representing an aggregate of 500,000 shares of 7.25% Series 4
cumulative redeemable preferred stock issued and outstanding on that date. In
addition, we have reserved for issuance, upon exchange of three corresponding
series of preferred limited partnership interests of our operating partnership,
an aggregate of 1,040,000 shares of cumulative redeemable preferred stock.
All of the outstanding capital stock is, and all of the shares offered
by means of this prospectus will be, fully paid and non-assessable. This means
that the shares we offer will be paid for in full at the time they are issued,
and, once they are paid for in full, there will be no further liability for
further assessments.
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. In order for us to qualify
as a REIT under the Internal Revenue Code, 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 Code to include certain entities) during the last
half of a taxable year, 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 taxable
year, and certain other requirements must be satisfied (see "Certain Federal
Income Tax Considerations-Requirements for Qualification").
To assure that five or fewer individuals do not Beneficially Own (as
defined in the our articles of incorporation 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 of incorporation 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 of incorporation and those to whom Beneficial
13
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 by value 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 us or acquisitions from other Existing Holders, but may not
acquire additional shares from these sources such that the five largest
Beneficial Owners of capital stock hold more than 49.5% by value of our
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, 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 "Certain Federal
Income Tax Considerations-Requirements for Qualification-Income Tests"), our
articles of incorporation provide that no constructive owner of our stock who
owns, directly or indirectly, a 10% interest in any tenant of ours (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 and the Related Tenant Limit if evidence satisfactory to the board
of directors is presented that such ownership will not then or in the future
jeopardize our status as a REIT. As a condition of such waiver, our board of
directors may require opinions of counsel satisfactory to it and/or an
undertaking from the applicant with respect to preserving our REIT status.
Remedies. If shares of capital stock:
o in excess of the applicable Ownership Limit, Existing Holder
Limit, or Related Tenant Limit, or
o which (1) would cause the REIT to be beneficially owned by
fewer than 100 persons (without application of the attribution
rules), or (2) would result in Regency 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 will 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, or the Related Tenant
Limit or which would otherwise jeopardize our status as a REIT ("excess shares")
will be deemed held in trust on behalf of us and for our benefit. Our board of
directors will, within six months after receiving notice of such actual or
proposed transfer, either:
o direct the holder of such shares to sell all shares held in
trust for Regency for cash in such manner as our board of
directors directs, or
o redeem such shares for a price equal to the lesser of:
14
o the price paid by the holder from whom shares are being
redeemed, and
o the average of the last reported sales prices on the New York
Stock Exchange of the relevant class of capital stock on the 10
trading days immediately preceding the date fixed for redemption
by our board of directors, or if such class of capital stock is
not then traded on the New York Stock Exchange, 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 our board of directors as the fair market value
of such class of capital stock on the relevant date.
If our board of directors directs the intended holder to sell the
shares, the holder must receive the proceeds from the sale as trustee for us and
pay us out of the proceeds of the sale all expenses incurred by us in connection
with the sale, plus any remaining amount of the proceeds that exceeds the amount
originally paid by the intended holder for such shares. The intended holder will
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 must be repaid to us
upon demand.
Miscellaneous. All certificates representing capital stock will bear a
legend referring to the restrictions described above. The transfer restrictions
described above will not preclude the settlement of any transaction entered
through the facilities of the New York Stock Exchange.
Our articles of incorporation provide that every shareholder of record
of more than 5% of our outstanding capital stock and every Actual Owner (as
defined in our articles of incorporation) of more than 5% of our outstanding
capital stock held by a nominee must give written notice to us of information
specified in our articles of incorporation 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 to us such
information as we may request, in good faith, in order to determine our status
as a REIT.
The ownership limitations described above may have the effect of
precluding acquisition of control of Regency by a third party even if our board
of directors determines that maintenance of REIT status is no longer in our best
interests. Our board of directors has the right under our articles of
incorporation (subject to contractual restrictions, including covenants made to
the lenders under our line of credit) to revoke our REIT status if our 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 of incorporation will remain in
effect. Any change in the ownership limitations would require an amendment to
our articles.
15
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 us
no later than the deadline for submitting 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.
16
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:
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 or she 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
17
party by reason of the fact that he or she 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 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 that 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, executive officers and former executive 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 or executive officer
against liability asserted against the director or executive officer 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.
18
DESCRIPTION OF COMMON STOCK
We are authorized to issue up to 150,000,000 shares of common stock,
$.01 par value per share. As of September 23, 2004, we had 62,538,266 shares of
common stock issued and outstanding. Holders of our 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 the 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 have designated or may designate in the
future. 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. As of September 4, 2004, no shares of special common stock
were outstanding.
The following is a description of the general terms and provisions of
our special common stock. We will describe the particular terms of any class or
series of special common stock we offer in the applicable prospectus supplement.
The summary of our special common stock contained in this prospectus is not
complete and does not contain all of the information that you may find useful or
that may be important to you. You should refer to the provisions of our articles
of incorporation and the applicable amendment to our articles creating any
special common stock offered hereby, which we will file with the SEC at or
before the time of issuance of the class or series. These documents are or will
be available as described under the heading "Where You Can Find More
Information" above.
The special common stock will bear dividends in such amounts as our
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. This means that we cannot pay dividends on the special common
stock without also paying dividends on an equal basis on our common stock. Upon
the liquidation, dissolution or winding up of the company, the special common
19
stock will participate on an equal basis 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.
Because we expect special common stock to be closely held as a general
rule, we anticipate that most classes or series would be convertible into common
stock for liquidity purposes.
The special common stock offered hereby will be issued in one or more
classes or series. The applicable prospectus supplement will describe the
following terms of the class or series of special stock offered thereby:
(1) the designation of the class or series and the number of
shares offered;
(2) the initial public offering price at which the class or series
will be issued;
(3) the dividend rate (or method of calculation);
(4) any redemption or sinking fund provisions;
(5) any conversion or exchange rights;
(6) any voting rights;
(7) any listing of the special common stock on any securities
exchange;
(8) a discussion of federal income tax considerations applicable
to the class or series;
(9) any limitations on issuance of any class or series of stock
ranking senior to or on a parity with the class or series as
to dividend rights and rights upon liquidation, dissolution or
winding up of our affairs;
(10) any limitations on direct or beneficial ownership and
restrictions on transfer, in each case as may be appropriate
to preserve our status as a REIT for federal tax purposes; and
(11) any other specific terms, preferences, rights, limitations or
restrictions of the class or series.
20
Transfer Agent
The transfer agent for our common stock is Wachovia Bank, National
Association, Charlotte, North Carolina.
21
DESCRIPTION OF PREFERRED STOCK
General
The following is a description of the general terms and provisions of
our preferred stock. We will describe the particular terms of any class or
series of preferred stock we offer in the applicable prospectus supplement. The
summary of our preferred stock contained in this prospectus is not complete and
does not contain all of the information that you may find useful or that may be
important to you. You should refer to the provisions of our articles of
incorporation and the applicable amendment to our articles creating any
preferred stock offered hereby, which we will file with the SEC at or before the
time of issuance of the class or series. These documents, along with existing
amendments creating series of preferred stock that our board of directors has
previously authorized, are or will be available as described under the heading
"Where You Can Find More Information" above.
Our board of directors has the ability to issue from time to time up to
30,000,000 shares of preferred stock in one or more classes or series, without
shareholder approval. The board of directors may, by adopting an amendment to
our articles of incorporation, designate for the class or series:
o the number of shares and name of the class or series;
o the dividend rights and preferences, if any;
o liquidation preferences and the amounts payable on liquidation
or dissolution;
o redemption terms, if any;
o the voting powers of the series, including the right to elect
directors, if any;
o the terms upon which the class or series may be converted into
any other class or series of our stock, including our common
stock; and
o any other terms that are not prohibited by law.
It is impossible for us to state the actual effect on existing
shareholders if the board of directors designates any class or new series of
preferred stock. The effects of such a designation will not be determinable
until the rights accompanying the class or series have been designated. The
issuance of preferred stock could adversely affect the voting power, cash
available for dividends, 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.
22
Preferred Stock Outstanding or Reserved for Issuance
As of September 23, 2004, we have two series of preferred stock
outstanding, both represented by depositary shares:
o 300,000 shares of 7.45% Series 3 cumulative redeemable preferred
stock, represented in turn by 3,000,000 depositary shares; and
o 500,000 shares of 7.25% Series 4 cumulative redeemable preferred
stock, represented in turn by 5,000,000 depositary shares.
We have an additional three series of preferred stock, totaling 1,040,000
shares, reserved for issuance upon exchange of three corresponding series of
preferred limited partnership interests in our operating partnership, Regency
Centers, L.P. The terms of these three series of preferred stock are summarized
below.
All five series of our preferred stock outstanding or authorized for
issuance are entitled to dividends on an equal basis before the holders of our
common stock receive dividends, and all five series are entitled to a
liquidation preference on an equal basis before holders of our common stock
receive any liquidating distributions.
Series 3 and Series 4 Preferred Stock
Our Series 3 and Series 4 preferred shares are represented by
depositary shares. Each depositary share represents 1/10th of a share of
preferred stock. The Series 3 and Series 4 preferred shares have a liquidation
preference of $250 per share ($25 per depositary share). The Series 3 preferred
shares 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). The
Series 4 preferred shares are entitled to a cumulative dividend at the rate of
7.25% of the liquidation preference per year ($1.8125 per year per depositary
share).
As to the limited matters on which the holders of Series 3 and Series 4
preferred shares are entitled to vote, they generally will vote as a class with
other preferred shares upon which like voting rights have been granted (together
with the Series 3 and Series 4 preferred stock, the "parity voting stock"), and
each share will be entitled to one vote per $25 of liquidation preference
(equivalent to one vote per depositary share). If we fail to declare or pay
dividends on the Series 3 or Series 4 preferred stock for at least six dividend
periods, whether or not consecutive, the holders of the Series 3 and Series 4
preferred stock, along with the holders of other parity voting stock also having
voting rights because of dividend arrearages on their shares, voting together as
a single class without regard to class or series, will be entitled to elect two
members of our board of directors by a plurality of votes (assuming the presence
of a quorum). This voting right will vest and the additional directors so
elected to our board will serve until all accrued and unpaid dividends on the
parity voting securities have been paid or a sufficient sum has been set aside
for their payment.
23
The affirmative vote of the holders of at least a majority of the
voting power entitled to be cast by the holders of Series 3 and Series 4
preferred stock and other parity voting stock, voting together as a single
class, is also required to amend our articles of incorporation to increase the
authorized amount of our preferred stock (unless junior to the parity voting
stock). The Series 3 and Series 4 preferred stock, along with other parity
voting stock, also have the right to approve (by at least two-thirds of the
voting power they are entitled to cast) certain other amendments to our articles
of incorporation that are specifically deemed to materially and adversely affect
these holders.
At any time beginning April 3, 2008 in the case of the Series 3
preferred stock and at any time beginning August 31, 2009 in the case of the
Series 4 preferred stock, we have the right, but not the obligation, to redeem
the preferred stock for cash at a redemption price of $250 per share (equivalent
to $25 per depositary share), plus all accrued but unpaid dividends.
Series D, Series E and Series F Preferred Stock Reserved for Issuance
We have reserved three series of cumulative redeemable preferred stock
for issuance upon exchange, on a one-share-for-one-unit basis, of three
corresponding series of preferred limited partnership units in Regency Centers,
L.P., our operating partnership. The limited partnership units 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
o will be callable 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
preferred stock will be exchangeable for the preferred units earlier under
certain circumstances, including if our operating partnership fails to make
timely distributions on its preferred units for six quarters, or if the
partnership is or is likely to become in the immediate future a "publicly traded
partnership" within the meaning of Section 7704 of the Internal Revenue Code.
When issued, the preferred stock will not have voting rights except in
limited circumstances generally similar to those of our Series 3 and Series 4
preferred stock.
The following table describes the preferred units outstanding as of
September 23, 2004 and the related series of authorized but unissued preferred
stock:
24
Units
Issued/ Aggregate Date Exchangeable
Shares Liquidation Distribution Callable by
Series Issuable Preference Rate by Regency Unitholder
-------------------- ------------------ --- ---------------- ------------------- ------------------ -------------------
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
------------------ ----------------
1,040,000 $ 104,000,000
================== ================
Preferred Stock Offered Hereby
The preferred stock offered hereby will be issued in one or more
classes or series. The preferred stock will have the dividend, liquidation,
redemption, voting and other rights described below. The applicable prospectus
supplement will describe the following terms of the class or series of preferred
stock offered thereby:
(1) the designation of the class or series and the number of
shares offered;
(2) the liquidation preference of the class or series;
(3) the initial public offering price at which the class or series
will be issued;
(4) the dividend rate (or method of calculation), the dates on
which dividends will be payable and the dates from which
dividends will begin to accumulate, if any;
(5) any redemption or sinking fund provisions;
(6) any conversion or exchange rights;
(7) any voting rights;
(8) any listing of the preferred stock on any securities exchange;
(9) a discussion of federal income tax considerations applicable
to the class or series;
(10) the relative ranking and preferences of the class or series as
to dividend rights and rights upon liquidation, dissolution or
winding up of our affairs;
(11) any limitations on issuance of any class or series of
preferred stock ranking senior to or on a parity with the
class or series as to dividend rights and rights upon
liquidation, dissolution or winding up of our affairs; and
(12) any limitations on direct or beneficial ownership and
restrictions on transfer, in each case as may be appropriate
to preserve our status as a REIT for federal tax purposes.
25
Rank
The preferred stock will, with respect to dividend rights and rights
upon our liquidation, dissolution and winding up, rank prior to the common stock
(including any special common stock) and all other classes and series of our
equity securities hereafter authorized, issued or outstanding, other than any
classes or series of our equity securities which by their terms specifically
provide for a ranking on a parity with (the "parity stock") or senior to (the
"senior stock") the preferred stock as to dividend rights and rights upon our
liquidation, dissolution or winding up. We sometimes refer collectively to the
common stock and the other classes and series of equity securities that are not
senior stock or parity stock as the "junior stock." The preferred stock will be
on a parity with our Series 3, Series 4, Series B, Series C and Series D
preferred stock if our board of directors specifically makes it on a parity with
these series of preferred stock. Otherwise, the preferred stock will be junior
to these series of preferred stock. The preferred stock will be junior to all
our outstanding debt. The preferred stock will be subject to future creation of
senior stock, parity stock and junior stock to the extent not expressly
prohibited by the amendment to our articles of incorporation that designates the
class or series of preferred stock.
Dividends
Holders of preferred stock will be entitled to receive, when, as and if
declared by our board of directors, out of our assets legally available
therefor, dividends or distributions in cash, property or other assets of
Regency or in securities of Regency or from any other source as our board of
directors determines, in its discretion, and at such dates and at such rates per
share per year as described in the applicable prospectus supplement. The
dividend rate may be fixed or variable, or both. Each declared dividend will be
payable to holders of record as they appear at the close of business on our
books on record dates determined by our board of directors.
Dividends on a class or series of preferred stock may be cumulative or
non-cumulative. If dividends on a class or series of preferred stock are
non-cumulative and if our board of directors fails to declare a dividend for a
dividend period with respect to the class or series, then holders of the class
or series will have no right to receive a dividend for that dividend period, and
we will have no obligation to pay the dividend for that period, whether or not
dividends are declared payable on any future dividend payment dates. If
dividends on a class or series of preferred stock are cumulative, the dividends
on the shares will accrue from and after the date set forth in the applicable
prospectus supplement.
No full dividends will be declared or paid or set apart for payment on
any class or series of preferred stock ranking, as to dividends, on a parity
with or junior to the class or series of preferred stock offered by the
applicable prospectus supplement for any period unless full dividends for the
immediately preceding dividend period on such preferred stock (including any
accumulation of unpaid dividends for prior dividend periods, if dividends on
such preferred stock are cumulative) have been or are contemporaneously declared
and paid or are declared and a sum sufficient for the payment thereof is set
apart for such payment. When dividends are not so paid in full (or a sum
sufficient for such full payment is not so set apart) on such preferred stock
and any of our parity stock ranking on a parity as to dividends with such
preferred stock, dividends on such preferred stock and dividends on such parity
stock will be declared pro rata so that the amount of dividends declared per
26
share on such preferred stock and such parity stock will in all cases bear to
each other the same ratio that accrued dividends for the then-current dividend
period per share on such preferred stock (including any accumulation of unpaid
dividends for prior dividend periods, if dividends on such preferred stock are
cumulative) and accrued dividends, including required or permitted
accumulations, if any, on shares of such parity stock, bear to each other. No
interest, or sum of money in lieu of interest, will be payable with respect to
any dividend payment(s) on preferred stock that may be in arrears.
Unless full dividends on the class or series of preferred stock offered
by the applicable prospectus supplement have been declared and paid or set apart
for payment for the immediately preceding dividend period (including any
accumulation of unpaid dividends for prior dividend periods, if dividends on
such preferred stock are cumulative):
o we may not declare, set aside or pay any cash dividend or
distribution (other than in shares of junior stock) on the
junior stock;
o we may not, directly or indirectly, repurchase, redeem or
otherwise acquire any shares of our junior stock (or pay any
amounts into a sinking fund for the redemption of any shares
of our junior stock) except by conversion into or exchange for
junior stock; and
o we may not, directly or indirectly, repurchase, redeem or
otherwise acquire any such preferred stock or any stock
ranking on parity with such preferred stock (or pay any
amounts into a sinking fund for the redemption of any shares
of any such stock) otherwise than pursuant to pro rata offers
to purchase or a concurrent redemption of all, or a pro rata
portion, of such preferred stock and such parity stock (except
by conversion into or exchange for junior stock).
The limitations described above will not apply to:
o payments in lieu of fractional shares in connection with a
merger, stock dividend or similar event; or
o any redemption necessary in order to preserve our status as a
REIT.
Any dividend payment made on a class or series of preferred stock will
first be credited against the earliest accrued but unpaid dividend due with
respect to shares of the class or series.
Liquidation
In the event of a voluntary or involuntary liquidation, dissolution or
winding up of the affairs of Regency, the holders of a class or series of
preferred stock will be entitled, subject to the rights of creditors, but before
any distribution or payment to the holders of
o any preferred stock junior on our liquidation, dissolution or
winding up, or
o our common stock (including any special common stock),
27
to receive a liquidating distribution in the amount of the liquidation
preference per share as set forth in the applicable prospectus supplement, plus
accrued and unpaid dividends for the then-current dividend period (including any
accumulation of unpaid dividends for prior dividend periods, if dividends on the
class or series of preferred stock are cumulative). The liquidation preference
is not indicative of the price at which the preferred stock will actually trade
on or after the date of issuance.
If the amounts available for distribution with respect to a class or
series of preferred stock and all other outstanding parity stock are not
sufficient to satisfy the full liquidation rights of all such parity stock
outstanding, then the holders of each class or series will share ratably in any
such distribution of assets in proportion to the full respective preferential
amounts (which may include accumulated dividends) to which they are entitled.
Unless otherwise provided in the applicable prospectus supplement, after payment
of the full amount of the liquidating distribution, the holders of preferred
stock will not be entitled to any further participation in any distribution of
our assets.
Redemption
The terms, if any, on which preferred stock of any class or series may
be redeemed will be set forth in the applicable prospectus supplement. These
terms will include:
o whether the shares are redeemable at our election or the
election of the holder or are mandatorily redeemable on a
specified date or the occurrence of a specified event;
o the redemption price (or the manner of calculating the
redemption price), including any premium over the liquidation
preference per share;
o whether the redemption price will be payable in cash or other
consideration;
o the redemption date or dates;
o redemption notice requirements;
o other procedures for redemption, including the manner for
selecting shares to be redeemed if fewer than all shares of the
class or series are to be redeemed; and
o when, where and how we must make a deposit of the redemption
price in order for the shares called for redemption to be
deemed no longer outstanding and the date as of which they
will cease to be deemed outstanding if we comply with these
provisions.
Conversion Rights
The terms and conditions, if any, upon which shares of any class or
series of preferred stock will be convertible into our common stock will be set
forth in the applicable prospectus supplement. Such terms will include:
28
o the number of shares of common stock into which the preferred
stock is convertible;
o the conversion price (or manner of calculating the conversion
price);
o the conversion period;
o provisions as to whether conversion will be at the option of the
holders of the preferred stock or at our option;
o the events requiring an adjustment of the conversion price; and
o provisions affecting conversion in the event of the redemption
of such preferred stock.
Voting
The preferred stock of a class or series will not be entitled to vote,
except (1) as described in the applicable prospectus supplement or (2) as
required by Florida law.
If we apply to list a class or series of preferred stock on the New
York Stock Exchange, the class or series will have the voting rights then
required as a condition of listing. Voting rights required by the New York Stock
Exchange as of the date of this prospectus include the following rights:
o The affirmative vote of the holders of at least two-thirds of
the voting power entitled to be cast by the holders of the
listed class or series of preferred stock and all other
preferred shares upon which like voting rights have been
conferred and are exercisable, voting together as a single
class, will be necessary to effect either of the following:
(1) designate, create or increase the authorized amount
of any class or series of shares ranking senior to
the listed class or series; but no such vote will be
required if:
o at or prior to the time of the action with
respect to which such vote would be
required, provision is made for the
redemption of all outstanding shares of the
listed class or series and no portion of the
redemption price will be paid from the
proceeds of such senior stock; or
o the holders of the listed class or series
have previously voted to grant authority to
the board of directors to create such senior
shares in accordance with Florida law; or
(2) amend, alter or repeal the articles of incorporation,
whether in connection with a merger, consolidation,
transfer or lease of assets substantially as an
entirety, or otherwise (an "Event"), that materially
and adversely affects the powers, rights or
29
preferences of the holders of the listed class or
series; provided, however, that:
o the amendment of articles of incorporation
to authorize or create or increase the
authorized amount of any shares ranking
junior to or on a parity with the listed
class or series; or
o with respect to the occurrence of any Event,
so long as the issuer is the surviving
entity and the listed class or series of
preferred stock remains outstanding or the
surviving entity is a domestic corporation
which substitutes for the listed class or
series other preferred stock having
substantially the same rights and terms as
the listed class or series,
will not in either case be deemed to materially and
adversely affect the powers, rights or preferences of
the holders of the listed class or series.
o The affirmative vote of the holders of at least a majority of
the voting power entitled to be cast by the holders of the
listed class or series preferred stock and the parity voting
securities, voting together as a single class, will be
required to amend the articles of incorporation to increase
the authorized amount of preferred stock (unless junior to the
listed class or series).
o If and when dividends on the listed class or series of preferred
stock have not been declared or paid for at least six dividend
payment periods, whether or not consecutive, all holders of the
class or series, together with all holders of the other parity
voting securities, voting together as a single class without
regard to class or series, must be entitled to elect a total of
two members of the board of directors. This voting right must
vest and any directors so elected must have the right to serve
until all accumulated and unpaid dividends on the outstanding
shares of the listed class or series and other parity voting
securities have been paid or a sufficient sum set aside for
payment thereof.
Under Florida law in effect on this date of this prospectus, holders of
our preferred stock will be entitled to vote as a single class on any amendment
to our articles of incorporation, whether or not our articles expressly give
them voting rights, if the amendment would:
o effect an exchange or reclassification of all or part of the
shares of the class into shares of another class;
o effect an exchange or reclassification, or create a right of
exchange, of all or part of the shares of another class into
shares of the class;
o change the designation, rights, preferences or limitations of
all or part of the shares of the class;
o change the shares of all or part of the class into a different
number of shares of the same class;
30
o create a new class of shares having rights or preferences with
respect to distributions or to dissolution that are prior or
superior to the shares of the class;
o increase the rights, preferences, or number of authorized
shares of any class that, after giving effect to the
amendment, have rights or preferences with respect to
distributions or to dissolution that are prior or superior to
the shares of the class;
o limit or deny an existing preemptive right of all or part of the
shares of the class; or
o cancel or otherwise affect rights to distributions or
dividends that have accumulated but not yet been declared on
all or part of the shares of the class.
Any such amendment would require the affirmative vote of a majority of
the votes cast by the holders of preferred stock with respect to the amendment.
However, if the amendment would create dissenters' rights of appraisal, adoption
of the amendment would require the affirmative vote of a majority of the votes
entitled to be cast by the holders of preferred stock. If the amendment would
affect a series of preferred stock in one or more of the ways described above in
a substantially different way than any other series, the series so affected will
be entitled to vote as a separate class on the amendment.
No Other Rights
The shares of a class or series of preferred stock will not have any
preferences, voting powers or relative, participating, optional or other special
rights except as set forth above or described in the applicable prospectus
supplement, set forth in the applicable amendment to our articles designating
the class or series or as otherwise required by law.
Transfer Agent
The transfer agent for each class or series of preferred stock will be
described in the applicable prospectus supplement.
31
DESCRIPTION OF DEPOSITARY SHARES
We may, at our option, elect to offer fractional interests in shares of
preferred stock, rather than a full share of preferred stock. In that event,
receipts ("depositary receipts") will be issued for depositary shares, each of
which will represent a fraction of a share of a particular class or series of
preferred stock, as described in the applicable prospectus supplement.
As of September 23, 2004, we have outstanding the following depositary
shares:
o 3,000,000 depositary shares issued under a deposit agreement
with Wachovia Bank, National Association, as depositary, each
representing a 1/10th fractional interest in a share of our
7.45% Series 3 cumulative redeemable preferred stock; and
o 5,000,000 depositary shares issued under a deposit agreement
with Wachovia Bank, National Association, as depositary, each
representing a 1/10th fractional interest in a share of our
7.25% Series 3 cumulative redeemable preferred stock.
The depositary shares underlying our Series 3 and Series 4 preferred
stock are listed on the New York Stock Exchange under the symbol "REGPRC" and
"REGPRD," respectively. For additional information about these depositary shares
and the Series 3 and Series 4 preferred stock they represent, See "Description
of Preferred Stock - Preferred Stock Outstanding or Reserved for Issuance."
Any class or series of preferred stock represented by depositary shares
will be deposited under a deposit agreement between Regency and the depositary.
The prospectus supplement relating to a series of depositary shares will set
forth the name and address of the depositary for the depositary shares. Subject
to the terms of the deposit agreement, each owner of a depositary share will be
entitled, in proportion to the applicable fraction of a share of preferred stock
represented by such depositary share, to all the rights and preferences of the
preferred stock represented thereby, including dividend and liquidation rights
and any right to convert the preferred stock into shares of our capital stock of
a different class or series.
The following is a description of the general terms and provisions of
the depositary shares. We will describe the particular terms of any depositary
shares we offer in the applicable prospectus supplement. The summary of the
depositary shares contained in this prospectus is not complete and does not
contain all of the information that you may find useful or that may be important
to you. You should refer to the provisions of the deposit agreement, the
depositary receipts, our articles of incorporation and the applicable amendment
to our articles creating the preferred stock underlying any depositary shares
offered hereby, which we will file with the SEC at or before the time of
issuance of the depositary shares. These documents, along with existing
amendments creating series of preferred stock that our board of directors has
previously authorized, are or will be available as described under the heading
"Where You Can Find More Information" above.
32
Dividends and Other Distributions
The depositary will distribute all cash dividends or other cash
distributions received with respect to the preferred stock to the record holders
of depositary shares relating to the preferred stock in proportion to the number
of depositary shares owned by the holders on the relevant record date. The
depositary will distribute only such amount, however, as can be distributed
without attributing to any holder of depositary shares a fraction of one cent,
and the balance not so distributed will be added to and treated as part of the
next sum received by the depositary for distribution to record holders of
depositary shares.
In the event of a distribution other than in cash, the depositary will
distribute property received by it to the record holders of depositary shares in
an equitable manner, unless the depositary determines that it is not feasible to
make the distribution, in which case the depositary may sell the property and
distribute the net proceeds from the sale to the holders.
The deposit agreement will also contain provisions relating to the
manner in which any subscription or similar rights offered by us to our holders
of preferred stock will be made available to the holders of depositary shares.
Redemption of Depositary Shares
If a class or series of preferred stock represented by depositary
shares is subject to redemption, the depositary shares will be redeemed from the
proceeds received by the depositary from the redemption, in whole or in part, of
the class or series of preferred stock held by the depositary. The depositary
will mail notice of redemption not less than 30 and not more than 60 days before
the date fixed for redemption to the record holders of the depositary shares to
be so redeemed at their respective addresses appearing on the depositary's
books. The redemption price per depositary share will equal the applicable
fraction of the redemption price per share payable with respect to such class or
series of preferred stock. Whenever we redeem preferred stock held by the
depositary, the depositary will redeem as of the same redemption date the number
of depositary shares representing the preferred stock so redeemed. If fewer than
all the depositary shares are to be redeemed, the depositary shares to be
redeemed will be selected by lot or pro rata as may be determined to be
equitable by the depositary.
After the date fixed for redemption, the depositary shares called for
redemption will no longer be outstanding, and all rights of the holders of the
depositary shares will cease, except the right to receive the money, securities,
or other property to which the holders of the depositary shares were entitled to
receive upon such redemption, upon surrender to the depositary of the depositary
receipts evidencing their depositary shares.
Voting the Preferred Stock
Upon receipt of notice of any meeting at which the holders of the
preferred stock are entitled to vote, the depositary will mail the information
contained in the notices of meeting to the record holders of the depositary
shares relating to such preferred stock. Each record holder of the depositary
shares on the record date (which will be the same date as the record date for
the preferred stock) will be entitled to instruct the depositary as to the
exercise of the voting rights pertaining to the amount of the preferred stock
represented by the holder's depositary shares. The depositary will endeavor,
33
insofar as practicable, to vote the number of shares of preferred stock
represented by the depositary shares in accordance with these instructions, and
we will agree to take all reasonable action which the depositary may deem
necessary in order to enable the depositary to do so. The depositary will
abstain from voting the preferred stock to the extent it does not receive
specific instructions from the holder of depositary shares representing such
shares of preferred stock.
Amendment and Termination of the Deposit Agreement
The form of depositary receipt evidencing the depositary shares and any
provision of the deposit agreement may be amended at any time by agreement
between us and the depositary. However, any amendment which materially and
adversely alters the rights of the holders of depositary shares will not be
effective unless the holders of at least a majority of the depositary shares
then outstanding approve the amendment. The deposit agreement will only
terminate if (1) all outstanding depositary shares related thereto have been
redeemed, (2) there has been a final distribution in respect of the preferred
stock in connection with any liquidation, dissolution or winding up of Regency
and the distribution has been distributed to the holders of the related
depositary shares, (3) termination is necessary to preserve our status as a
REIT, (4) each share of the related preferred stock has been converted into
Regency securities not so represented by depositary shares or has been
distributed to the holders of depositary receipts, pro rata in accordance with
their respective interests, or (5) a majority of any series of preferred stock
adversely affected by such termination consents to such termination, whereupon
the depositary will deliver or make available to each holder of depositary
receipts, upon surrender of the depositary receipts held by the holder, the
number of whole or fractional shares of preferred stock as are represented by
the depositary shares evidenced by the depositary receipts, together with any
other property held by the depositary with respect to the depositary receipts.
Charges of Depositary
We will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. We will pay
charges of the depositary in connection with the initial deposit of the
preferred stock and issuance of depositary receipts, all withdrawals of
preferred stock by owners of depositary shares and any redemption of the
preferred stock. Holders of depositary receipts will pay all other transfer and
other taxes and governmental charges and such other charges as are expressly
provided in the deposit agreement to be paid by the holders.
Resignation and Removal of Depositary
The depositary may resign at any time by delivering a notice to us of
its election to do so, and we may at any time remove the depositary. Any
resignation or removal will take effect upon the appointment of a successor
depositary and the successor depositary's acceptance of the appointment. A
successor depositary must be appointed within 60 days after delivery of the
notice of resignation or removal and must be a bank or trust company having its
principal office in the United States and having a combined capital and surplus
of at least $500,000,000.
34
Restrictions on Ownership
In order to safeguard us against loss of our status as a REIT, the
deposit agreement will contain provisions restricting the ownership and transfer
of depositary shares. These restrictions will be described in the applicable
prospectus supplement and will be referenced on the applicable depositary
receipts.
Miscellaneous
The depositary will forward all reports and communications from us
which we deliver to the depositary and which we are required or otherwise
determine to furnish to the holders of the preferred stock.
Neither the depositary nor we will be liable if either of us is
prevented or delayed by law or any circumstance beyond our control in performing
our respective obligations under the deposit agreement. The obligations of
Regency and the depositary under the deposit agreement will be limited to
performance in good faith of our respective duties thereunder. We and the
depositary may rely upon written advice of counsel or accountants, or
information provided by persons presenting preferred stock for deposit, holders
of depositary shares or other persons believed to have authority to act on their
behalf and on documents believed to be genuine.
35
DESCRIPTION OF WARRANTS
General
We may issue warrants to purchase our common stock, independently or
together with common stock. We will issue warrants under warrant agreements to
be entered into between us and a bank or trust company, as warrant agent, as
more fully described in the applicable prospectus supplement. The warrant agent
will act solely as our agent in connection with the warrants and will not assume
any obligation or relationship of agency or trust for or with any holders or
beneficial owners of warrants.
The applicable prospectus supplement will contain a description of the
following terms:
(1) the title of the warrants;
(2) the number of shares of our common stock for which the
warrants are exercisable;
(3) the price or prices at which the warrants will be issued;
(4) the aggregate number of warrants;
(5) the designation and terms of any other securities with which
the warrants are issued, the number of warrants issued with
each such security and the date, if any, on which the warrants
will become separately transferable;
(6) any provisions for adjustment of the number of shares of
common stock receivable upon exercise of the warrants or the
exercise price of the warrants;
(7) the price or prices at which the underlying common stock
purchasable upon exercise of the warrants may be purchased;
(8) if applicable, a discussion of the material U.S. federal
income tax considerations applicable to the exercise of the
warrants;
(9) the date on which the right to exercise the warrants will begin,
and the date on which the right will expire;
(10) the maximum or minimum number of warrants which may be
exercised at any time;
(11) information with respect to book-entry procedures, if any; and
(12) any other terms, procedures and limitations relating to the
exercise and exchange of the warrants.
Exercise of Warrants
Each warrant will entitle its holder to purchase, for cash and/or
securities (as will be specified in the applicable prospectus supplement),
shares of our common stock, at the exercise price set forth in, or determinable
36
as set forth in, the applicable prospectus supplement. Holders may exercise
warrants at any time up to the close of business on the expiration date set
forth in the prospectus supplement relating to the warrants. After the close of
business on the expiration date, unexercised warrants will become void.
Upon receipt of payment and the properly completed and duly executed
warrant certificate at the corporate trust office of the warrant agent or any
other office indicated in the prospectus supplement, we will, as soon as
practicable, forward the common stock purchasable upon exercise of the warrants.
If a holder exercises less than all of the warrants represented by the warrant
certificate, the warrant agent will issue a new warrant certificate for the
remaining warrants.
Before the exercise of any warrants, holders of the warrants will not
have any of the rights of holders of the shares subject to the warrants,
including the right to vote or to receive any payments of dividends on our
common stock.
Anti-dilution and Other Provisions
The exercise price payable, the number of shares of common stock
purchasable upon the exercise of each applicable warrant and the number of
applicable warrants outstanding are subject to adjustment if specified events
occur. These events include:
o the issuance of a stock dividend to holders of our common stock;
and
o a combination, subdivision or reclassification of shares of our
common stock.
In lieu of adjusting the number of shares of common stock purchasable
upon exercise of each applicable warrant, we may elect to adjust the number of
warrants. No adjustment in the number of shares purchasable upon exercise of the
warrants will be required until cumulative adjustments require an adjustment of
at least 1% in the number of shares purchasable. We may also, at our option,
reduce the exercise price at any time. No fractional shares will be issued upon
exercise of warrants, but we will pay the cash value of fractional shares
otherwise issuable. Notwithstanding the preceding sentences, in case of any
consolidation, merger, or sale or conveyance of our property as an entirety or
substantially as an entirety, each warrant holder will have the right to the
kind and amount of shares of stock and other securities and property, including
cash, receivable by a holder of the number of shares of common stock into which
the warrants were exercisable immediately prior to this event.
The descriptions of the warrant agreements in this prospectus and in
any prospectus supplement are summaries of material provisions of the applicable
warrant agreements. These descriptions do not restate those agreements in their
entirety and do not contain all of the information that you may find useful or
that may be important to you. You should refer to the provisions of the
applicable warrant agreement and warrant certificate relating to the warrants
because they, and not the summaries, define your rights as holders of the
warrants or any warrant units. For more information, please review the forms of
these documents, which will be filed with the SEC promptly after the offering of
warrants and will be available as described under the heading "Where You Can
Find More Information" above.
37
PLAN OF DISTRIBUTION
We may sell the offered securities:
o directly to purchasers;
o through agents;
o through dealers;
o through underwriters;
o directly to our stockholders; or
o through a combination of any of these methods of sale.
The prospectus supplement relating to the offered securities will set
forth the offering terms, including the name or names of any underwriters,
dealers or agents, the purchase price of the securities and the proceeds to us
from the sale, any underwriting discounts, commissions and other items
constituting underwriters' compensation, any initial public offering price and
any underwriting discounts, commissions and other items allowed or reallowed or
paid to dealers or agents, and any securities exchanges on which the securities
may be listed.
We may use one or more underwriters in the sale of the securities, in
which case the offered securities will be acquired by the underwriter or
underwriters for their own account and may be resold from time to time in one or
more transactions either:
o at a fixed price or prices, which may be changed;
o at market prices prevailing at the time of sale;
o at prices related to the prevailing market prices; or
o at negotiated prices.
We may directly solicit offers to purchase the securities. Agents
designated by us from time to time may also solicit offers to purchase
securities. Any agent designated by us, who may be deemed to be an "underwriter"
as that term is defined in the Securities Act of 1933, involved in the offer or
sale of the securities will be named, and any commissions payable by us to the
agent will be set forth in the prospectus supplement.
If we use a dealer in the sale of the offered securities, we will sell
the securities to the dealer, as principal. The dealer, who may be deemed to be
an "underwriter" as that term is defined in the Securities Act of 1933, may then
resell the offered securities to the public at varying prices to be determined
by the dealer at the time of resale.
If we use one or more underwriters in the sale, we will sign an
underwriting agreement with the underwriters at the time of sale to the
underwriters. The names of the underwriters will be set forth in the prospectus
supplement, which will be used by the underwriters to make resales of the
38
offered securities to the public. In connection with the sale of securities, the
underwriters may be deemed to have received compensation from us in the form of
underwriting discounts or commissions and may also receive commissions from
purchasers of the securities for whom they may act as agents. Underwriters may
also sell offered securities to or through dealers, and the dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions from the purchasers for whom they may act as
agents.
We may enter into derivative transactions with third parties, or sell
securities not covered by this prospectus to third parties in privately
negotiated transactions. If the applicable prospectus supplement indicates, in
connection with those derivatives, the third parties may sell securities covered
by this prospectus and the applicable prospectus supplement, including short
sale transactions. If so, the third party may use securities pledged by us or
borrowed from us or others to settle those sales or to close out any related
open borrowings of our securities, and may use securities received from us in
settlement of those derivatives to close out any related open borrowings of our
securities. The third party in such sale transactions will be an underwriter
and, if not identified in this prospectus, will be identified in the applicable
prospectus supplement or a post-effective amendment to this registration
statement.
If so indicated in the applicable prospectus supplement, we will
authorize underwriters, dealers or other persons to solicit offers by certain
institutions to purchase offered securities from us at the public offering price
set forth in the applicable prospectus supplement pursuant to delayed delivery
contracts providing for payment and delivery on a future date or dates.
Institutions with which these contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others. The obligations of any
purchasers under any delayed delivery contract will not be subject to any
conditions except:
o the purchase of the offered securities must not at the time of
delivery be prohibited under the laws of the jurisdiction to
which the purchaser is subject; and
o if the offered securities are also being sold to underwriters,
we will have sold to the underwriters the offered securities
not sold for delayed delivery.
The underwriters, dealers and other persons will not have any
responsibility for the validity or performance of these contracts. The
prospectus supplement relating to the contracts will set forth the price to be
paid for securities under the contracts, the commission payable for solicitation
of the contracts and the date or dates in the future for delivery of offered
securities under the contracts.
Unless otherwise set forth in the applicable prospectus supplement, the
obligations of underwriters to purchase the offered securities will be subject
to certain conditions precedent, and the underwriters will be obligated to
purchase all such securities, if any are purchased. In connection with the
offering of securities, we may grant to the underwriters an option to purchase
additional securities to cover over-allotments at the initial public offering
price, with an additional underwriting commission, as may be set forth in the
accompanying prospectus supplement. If we grant any over-allotment option, the
terms of the over-allotment option will be set forth in the prospectus
supplement for the securities.
39
Underwriters, dealers and agents may be entitled, under their
agreements with us, to indemnification by us against certain civil liabilities,
including liabilities under the Securities Act of 1933, or to contribution with
respect to payments which they may be required to make.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, us in the ordinary course of business.
Any underwriter may engage in over-allotment, stabilizing transactions,
short-covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934. Over-allotment involves sales in
excess of the offering size, which create a short position. Stabilizing
transactions permit bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. Short-covering transactions
involve purchases of the securities in the open market after the distribution is
completed to cover short positions. Penalty bids permit the underwriters to
reclaim a selling concession from a dealer when the securities originally sold
by the dealer are purchased in a covering transaction to cover short positions.
Those activities may cause the price of the securities to be higher than it
would otherwise be. If commenced, the underwriters may discontinue any of the
activities at any time.
The anticipated date of delivery of offered securities will be set
forth in the applicable prospectus supplement relating to each offer.
Trading Markets and Listing of Securities
Our common stock is traded on the New York Stock Exchange. We may elect
to list any other class or series of securities on any exchange but are not
obligated to do so. It is possible that one or more underwriters may make a
market in a class or series of securities, but the underwriters will not be
obligated to do so and may discontinue any market making at any time without
notice. We cannot give any assurance as to the liquidity of the trading market
for any of the securities.
40
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain of the material federal income
tax considerations regarding Regency 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, and 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) subject to special treatment under the federal
income tax laws. This summary deals only with shareholders of Regency 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 qualified in its entirety by 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).
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).
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.
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 ended 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.
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 LLP that the Company has been
organized 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
41
enable it to continue to be taxed as a REIT. It must be emphasized that this
opinion is based on various assumptions and is 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 "Certain Federal Income
Tax Considerations," those concerning its business and properties, and certain
matters relating to the Company's manner of operation. Foley & Lardner LLP is
not aware of any facts or circumstances that are inconsistent with these
representations and assumptions. The qualification and taxation as a REIT
depends upon the Company's ability to meet, through actual annual (and in some
cases quarterly) 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 LLP. 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 profitability.
42
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, if the Company acquires any asset from a C corporation (that
is, a corporation generally subject to full corporate level tax) in a
transaction in which the basis of the asset in the Company's hands is determined
by reference to the basis of the asset (or any other property) in the hands of
the C corporation, and the Company recognizes gain on the disposition of such
asset during the 10-year period beginning on the date on which such asset was
acquired by the Company, then, to the extent of such property's "built-in gain"
(the excess of the fair market value of such property at the time of acquisition
by the Company over the adjusted basis in the property at such time), such gain
will be subject to tax at the highest regular corporate rate applicable. The
rule described above with respect to the recognition of "built-in gain" will
apply assuming that an election is not made pursuant to Section 1.337(d)-7 of
the Treasury Regulations to treat the asset as having been sold by the C
corporation for fair market value immediately before the acquisition by the
Company.
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);
43
(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 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.
The Company owns, and intends to continue to own, 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 Partnership
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 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
44
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 the 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.
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
45
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, dividends, and from
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 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
46
"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. 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.
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
47
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 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 Company's
total value 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
48
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 LLP, 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 stock 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.
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 (or is not treated as having distributed) all of its net capital gain
or distributes (or is treated as having distributed) 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
49
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 (other than capital gain income that the
Company elects to retain and pay tax on) and (iii) any undistributed taxable
income from prior periods (other than capital gains from such years which the
Company elected to retain and pay tax on), 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.
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 to individual shareholders generally at
preferential capital gain rates applicable to dividends through December 31,
2008, and otherwise, including to corporate distributees, as ordinary income.
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.
50
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 generally will be taxable as
ordinary income and will not be eligible for the dividends received deduction
generally available for corporations. However, dividends, other than capital
gain dividends, that are (i) attributable to income on which the Company was
subject to tax in the previous taxable year at the corporate level, either
because it did not distribute such income or such income consists of gains from
certain assets acquired from C corporations, including as a result of the
conversion of a C corporation to a REIT, or (ii) attributable to dividends
received by the Company from non-REIT corporations, such as taxable REIT
subsidiaries, during the current taxable year will be taxable, to the extent
designated by the Company, to individual stockholders as net capital gain at the
maximum rate of 15%. 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. 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. Shareholders may not include
in their own income tax returns any of our net operating losses or capital
losses.
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. 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; (2) will be
deemed to have paid its proportionate share of the tax paid by the Company on
51
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 15% rate gain
distribution, which would be taxable to non-corporate U.S. shareholders at a
maximum rate of 15%; or (2) an "unrecaptured Section 1250 gain" distribution,
which would be taxable to non-corporate U.S. shareholders at a maximum rate of
25%.
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 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
52
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, 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 and
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 10%, by value, of the 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 UBTI earned by the REIT, 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. 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.
53
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.
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
54
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 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,
55
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 May 14, 2002, when beneficial
ownership of those shares was acquired by General Electric Company. 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 New York Stock Exchange; 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.
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 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
56
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 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 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.
ERISA CONSIDERATIONS
The following is a summary of material considerations arising under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the
prohibited transactions provisions of Section 4975 of the Code that may be
relevant to a prospective purchaser of our securities. This discussion does not
purport to deal with all aspects of ERISA or Section 4975 of the Code that may
be relevant to particular shareholders (including plans subject to Title I of
ERISA, other retirement plans and Individual Retirement Accounts ("IRA's")
subject to the prohibited transaction provisions of Section 4975 of the Code,
and governmental plans or church plans that are exempt from ERISA and Section
4975 of the Code but that may be subject to the prohibited transaction
provisions of Section 503 of the Code and to state law requirements) in light of
their particular circumstances.
IF YOU ARE A FIDUCIARY MAKING THE DECISION TO INVEST IN SECURITIES ON
BEHALF OF A PROSPECTIVE PURCHASER THAT IS AN EMPLOYEE BENEFIT PLAN, A TAX
QUALIFIED RETIREMENT PLAN, OR AN IRA YOU SHOULD CONSULT YOUR OWN LEGAL ADVISOR
REGARDING THE SPECIFIC CONSIDERATIONS ARISING UNDER ERISA, SECTIONS 4975 AND 503
57
OF THE CODE, AND STATE LAW WITH RESPECT TO THE PURCHASE, OWNERSHIP, OR SALE OF
OUR SECURITIES BY SUCH PLAN OR IRA.
Employee Benefit Plans, Tax Qualified Retirement Plans and IRAs
Each fiduciary of a pension, profit sharing, or other employee benefit
plan subject to Title I of ERISA (an "ERISA plan") should carefully consider
whether an investment in our securities is consistent with its fiduciary
responsibilities under ERISA. The fiduciary must make its own determination as
to whether an investment in the securities:
o is permissible under the documents governing the ERISA plan;
o is appropriate for the ERISA plan under the general fiduciary
standards of investment prudence and diversification, taking
into account the overall investment policy of the ERISA plan
and the composition of the ERISA plan's investment portfolio;
and
o would result in a nonexempt prohibited transaction under ERISA
and the Code.
The fiduciary of an IRA or of a qualified retirement plan not subject
to Title I of ERISA because it is a governmental or church plan or because it
does not cover common law employees (a "non-ERISA plan") should consider that
such an IRA or non-ERISA plan may only make investments that are authorized by
the appropriate governing documents and under applicable state law. The
fiduciary should also consider the applicable prohibited transaction rules of
Sections 4975 and 503 of the Code.
Status of the REIT
The following section discusses certain principles that apply in
determining whether the fiduciary requirements of ERISA and the prohibited
transaction provisions of ERISA and the Code apply to an entity because one or
more investors in the entity's equity interests is an ERISA plan or is a
non-ERISA plan or an IRA subject to Section 4975 of the Code. An ERISA plan
fiduciary should also consider the relevance of these principles to ERISA's
prohibition on improper delegation of control over or responsibility for "plan
assets" and ERISA's imposition of co-fiduciary liability on a fiduciary who
participates in, permits (by action or inaction) the occurrence of, or fails to
remedy a known breach by another fiduciary.
Under the Department of Labor regulations as to what constitutes assets
of an employee benefit plan (the "DOL regulations"), if an ERISA plan acquires
an equity interest in an entity, which interest is neither a "publicly offered
security" nor a security issued by an investment company registered under the
Investment Company Act of 1940, the ERISA plan assets would include, for
purposes of the fiduciary responsibility provisions of ERISA, both the equity
interest and an undivided interest in each of the entity's underlying assets
unless certain specified exceptions apply. The DOL regulations define a publicly
offered security as a security that is "widely held," "freely transferable," and
either part of a class of securities registered under the Securities Exchange
Act of 1934, or sold pursuant to an effective registration statement under the
Securities Act of 1933 (provided the securities are registered under the
Securities Exchange Act of 1934 within 120 days after the end of the fiscal year
of the issuer during which the offering occurred). The equity securities offered
58
hereby will be sold in an offering registered under the Securities Act of 1933
and are or are expected to be registered under the Securities Exchange Act of
1934.
The DOL regulations provide that a security is "widely held" only if it
is part of a class of securities that is owned by 100 or more investors
independent of the issuer and of one another. A security will not fail to be
"widely held" because the number of independent investors falls below 100 as a
result of events beyond the issuer's control. Our common stock is "widely held."
The DOL regulations provide that whether a security is "freely
transferable" is a factual question to be determined on the basis of all
relevant facts and circumstances. The DOL regulations further provide that when
a security is part of an offering in which the minimum investment is $10,000 or
less, as is expected to be the case with this offering, certain restrictions
ordinarily will not, alone or in combination, affect the finding that such
securities are freely transferable. We believe that restrictions imposed under
our articles of incorporation on the transfer of our capital stock are limited
to the restrictions on transfers generally permitted under the DOL regulations
and are not likely to result in the failure of our capital stock to be "freely
transferable." The DOL regulations only establish a presumption in favor of the
finding of free transferability, and, therefore, no assurance can be given that
the Department of Labor and the U.S. Treasury Department will not reach a
contrary conclusion.
59
LEGAL MATTERS
The validity of the securities to which this prospectus relates and
certain tax matters described under "Certain Federal Income Tax Considerations"
and "ERISA Considerations" will be passed upon for Regency by Foley & Lardner
LLP, Jacksonville, Florida. Attorneys with Foley & Lardner LLP representing
Regency with respect to this offering beneficially owned approximately 6,850
shares of Regency's common stock as of the date of this prospectus.
EXPERTS
The consolidated financial statements and schedules of Regency Centers
Corporation as of December 31, 2003 and 2002, and for each of the years in the
three-year period ended December 31, 2003, have been incorporated by reference
herein and in the registration statement in reliance upon the reports of KPMG
LLP, independent accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
60