The following table sets forth the occupancy rate, square footage and weighted average annual base rent per square foot of our warehousesindustrial properties as of December 31 for the last five years:
Lease Expirations
The following table sets forth the anticipated expirations of tenant leases in our consolidated retail portfolio for each year from 20182022 through 20282032 and thereafter, assuming no exercise of renewal options or early termination rights:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Percentage of | | Weighted Average Annual |
| | Number of | | Square Feet of | | Retail Properties | | Base Rent of Expiring Leases |
Year | | Expiring Leases | | Expiring Leases | | Square Feet | | Total | | Per Square Foot |
| | | | | | | | | | | |
Month-To-Month | | 29 | | 113,000 | | | 0.8% | | $ | 2,853,250 | | | $25.25 | |
2022 | | 83 | | 486,000 | | | 3.4% | | 13,379,580 | | | 27.53 | |
2023 | | 106 | | 1,145,000 | | | 7.9% | | 25,361,750 | | | 22.15 | |
2024 | | 104 | | 1,551,000 | | | 10.7% | | 31,314,690 | | | 20.19 | |
2025 | | 80 | | 1,234,000 | | | 8.5% | | 23,248,560 | | | 18.84 | |
2026 | | 97 | | 891,000 | | | 6.2% | | 20,635,560 | | | 23.16 | |
2027 | | 84 | | 1,065,000 | | | 7.4% | | 17,540,550 | | | 16.47 | |
2028 | | 47 | | 653,000 | | | 4.5% | | 18,395,010 | | | 28.17 | |
2029 | | 70 | | 1,526,000 | | | 10.5% | | 33,358,360 | | | 21.86 | |
2030 | | 43 | | 1,191,000 | | | 8.2% | | 18,543,870 | | | 15.57 | |
2031 | | 32 | | 909,000 | | | 6.3% | | 15,053,040 | | | 16.56 | |
2032 | | 35 | | 347,000 | | | 2.4% | | 7,318,230 | | | 21.09 | |
Thereafter | | 48 | | 2,064,000 | | | 14.3% | | 31,909,440 | | | 15.46 | |
Subtotal/Average | | 858 | | 13,175,000 | | | 91.1% | | $ | 259,547,500 | | | $19.70 | |
Vacant | | 185 | | 1,294,000 | | | 8.9% | | N/A | | N/A | |
Total(1) | | 1,043 | | 14,469,000 | | | 100.0% | | $ | 259,547,500 | | | N/A | |
(1) Total lease count excludes industrial tenant leases, temporary tenant leases, cart and kiosk leases and Sunrise Mall.
|
| | | | | | | | | | | | | | |
| | | | | | Percentage of | | Weighted Average Annual |
| | Number of | | Square Feet of | | Retail Properties | | Base Rent of Expiring Leases |
Year | | Expiring Leases | | Expiring Leases | | Square Feet | | Total | | Per Square Foot |
| | | | | | | | | | | |
Month-To-Month | | 27 | | 69,000 |
| | 0.4% | | $ | 2,398,440 |
| | $34.76 | |
2018 | | 83 | | 601,000 |
| | 3.8% | | 10,487,450 |
| | 17.45 | (1) |
2019 | | 133 | | 1,416,000 |
| | 9.0% | | 29,042,160 |
| | 20.51 | (1) |
2020 | | 100 | | 1,394,000 |
| | 8.8% | | 26,081,740 |
| | 18.71 | |
2021 | | 94 | | 1,080,000 |
| | 6.9% | | 23,932,800 |
| | 22.16 | |
2022 | | 98 | | 1,442,000 |
| | 9.2% | | 20,966,680 |
| | 14.54 | |
2023 | | 72 | | 1,644,000 |
| | 10.4% | | 29,345,400 |
| | 17.85 | |
2024 | | 62 | | 1,491,000 |
| | 9.5% | | 20,829,270 |
| | 13.97 | |
2025 | | 42 | | 598,000 |
| | 3.8% | | 10,405,200 |
| | 17.40 | |
2026 | | 56 | | 655,000 |
| | 4.2% | | 8,829,400 |
| | 13.48 | |
2027 | | 54 | | 819,000 |
| | 5.2% | | 16,543,800 |
| | 20.20 | |
2028 | | 33 | | 487,000 |
| | 3.1% | | 12,106,820 |
| | 24.86 | |
Thereafter | | 59 | | 3,423,000 |
| | 21.7% | | 50,283,870 |
| | 14.69 | |
Sub-total/Average | | 913 | | 15,119,000 |
| | 96.0% | | $ | 261,407,510 |
| | $17.29 | |
Vacant | | 71 | | 624,000 |
| | 4.0% | | N/A |
| | N/A | |
Total | | 984 | | 15,743,000 |
| | 100.0% | | $ | 261,407,510 |
| | N/A | |
(1) We expect to achieve moderate increases in average rents as we renew or re-lease these spaces.
ITEM 3. LEGAL PROCEEDINGS
We are party to various legal actions that arise in the ordinary course of business. In our opinion, after consultation with legal counsel, the outcome of such matters is not expected to have a material adverse effect on our financial position, results of operations or cash flows.
| |
ITEM 4. | MINE SAFETY DISCLOSURES |
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
| |
ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Urban Edge Properties
Market Information and Dividends
Our common shares are listed on the NYSE under the symbol “UE”. Our common shares began “regular way” trading on January 15, 2015. As of February 13, 2018,9, 2022, there were approximately 1,3771,134 holders of record of our common shares. The following table sets forth the high and low sales prices and the cash dividends declared on our common shares by quarter for 2017 and 2016:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| 2017 | | 2016 |
| High Price | | Low Price | | Cash Dividends Declared Per Share | | High Price | | Low Price | | Cash Dividends Declared Per Share |
| | | | | |
Quarter Ended | | | | | | | | | | | |
Fourth quarter | $ | 26.19 |
| | $ | 23.18 |
| | $ | 0.22 |
| | $ | 28.36 |
| | $ | 24.10 |
| | $ | 0.22 |
|
Third quarter | 25.92 |
| | 23.46 |
| | 0.22 |
| | 30.29 |
| | 26.69 |
| | 0.20 |
|
Second quarter | 27.70 |
| | 23.13 |
| | 0.22 |
| | 29.87 |
| | 24.36 |
| | 0.20 |
|
First quarter | 28.90 |
| | 24.50 |
| | 0.22 |
| | 26.18 |
| | 21.77 |
| | 0.20 |
|
The Company elected to be taxed as a REIT under sections 856-860 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with the filing of its 2015 tax return for its tax year ended December 31, 2015. Under those sections, aWith the exception of the Company’s taxable REIT which distributes at least 90% of its REIT taxable income as a dividendsubsidiary (“TRS”), to its shareholders each year and whichthe extent the Company meets certain other conditionsrequirements under the Code, the Company will not be taxed on that portion of its federal taxable income which is distributed to its shareholders.income. If we fail to qualify as a REIT for any taxable year, we will be subject to federal income taxes at regular corporate rates (including any alternative minimum tax, which, for corporations, was repealed under the TCJA (defined above) for tax years beginning after December 31, 2017 under the TCJA)2017) and may not be able to qualify as a REIT for the four subsequent taxable years.
Future distributions will be declared and paid at the discretion of the Board of Trustees and will depend upon cash generated by operating activities, our financial condition, capital requirements, annual dividend requirements under the REIT provisions of the Internal Revenue Code of 1986, as amended, and such other factors as our Board of Trustees deems relevant.
Our Board of Trustees declared a quarterly dividend of $0.15 per share for each of the four quarters in 2021, which resulted in a total annual dividendsdividend per common share and OP unit of $0.60 for 20172021. Our Board of Trustees declared a quarterly dividend of $0.22 per common share and OP unit for the first quarter of 2020 and temporarily suspended quarterly dividend distributions for the second and third quarters as a result of COVID-19 and the uncertainties it generated. A special cash dividend of $0.46 per common share and OP unit was $0.88declared in December 2020, which resulted in a total annual dividend per share.common share and OP unit of $0.68 for 2020. The annual dividend amount may differ from dividends as calculated for federal income tax purposes. Distributions to the extent of our current and accumulated earnings and profits for federal income tax purposes generally will be taxable to a shareholder as ordinary dividend income. However, the TCJA provides a deduction of up to 20% of a non-corporate taxpayer’s ordinary REIT dividends with such deduction scheduled to expire for taxable years beginning after December 31, 2025. Distributions in excess of current and accumulated earnings and profits will be treated as a nontaxable reduction of the shareholder’s basis in such shareholder’s shares, to the extent thereof, and thereafter as taxable capital gains. Distributions that are treated as a reduction of the shareholder’s basis in its shares will have the effect of increasing the amount of gain, or reducing the amount of loss, recognized upon the sale of the shareholder’s shares. No assurances can be given regarding what portion, if any, of distributions in 20172021 or subsequent years will constitute a return of capital for federal income tax purposes. During a year in which a REIT earns a net long-term capital gain, the REIT can elect under Section 857(b)(3) of the Code to designate a portion of dividends paid to shareholders as capital gain dividends. If this election is made, the capital gain dividends are generally taxable to the shareholder as long-term capital gains.
As of December 31, 2017, the Company elected, for tax purposes, to treat the wholly-owned limited partnership that holds its Allentown property as a taxable REIT subsidiary (“TRS”). A TRS is a corporation, other than a REIT, in which we directly or indirectly hold stock, which has made a joint election with us to be treated as a TRS under Section 856(l) of the Code. A TRS is required to pay regular U.S. federal income tax, and state and local income tax where applicable, as a non-REIT “C” corporation. As a result, all future taxable income recognized by the TRS, including capital gains on the sale of the property held in the TRS, will be subject to a corporate level tax.
The Allentown legal entity restructuring resulted in a capital gain recognized for tax purposes in 2017. Consequently, the Company has determined that $0.37 of the $0.88 dividends distributed to shareholders in 2017 represented long-term capital gains. The Company’s 2018 consolidated financial statements will reflect the TRS’ federal and state corporate income taxes associated with the operating activities at its Allentown property until the expected sale date in the first quarter.
We have determined the dividends paid on our common shares during 20172021 and 20162020 qualify for the following tax treatment:
| | | | | | | | | | | | | | | | | | | | | | | |
| Total Distribution per Share | | Ordinary Dividends | | Long Term Capital Gains | | Return of Capital |
2021 | $ | 0.60 | | | $ | 0.60 | | | $ | — | | | $ | — | |
2020 | 0.68 | | | 0.68 | | | — | | | — | |
|
| | | | | | | | | | | | | | | |
| Total Distribution per Share | | Ordinary Dividends | | Long Term Capital Gains | | Return of Capital |
2017 | $ | 0.88 |
| | $ | 0.51 |
| | $ | 0.37 |
| | $ | — |
|
2016 | 0.82 |
| | 0.82 |
| | — |
| | — |
|
Total Shareholder Return Performance
The following performance graph compares the cumulative total shareholder return of our common shares with the Russell 2000 Index, the S&P 500 Index, Dow Jones Equity All REIT (previously SNL U.S. REIT Equity IndexIndex) and the Dow Jones US Real Estate Strip Centers (previously SNL REIT Retail Shopping Center IndexIndex) as provided by SNL Financial LC, from January 15, 2015 tofor the six fiscal years commencing December 31, 2017,2015 and ending December 31, 2021, assuming an investment of $100 and the reinvestment of all dividends into additional common shares during the holding period. Historical stock performance is not necessarily indicative of future results.
The performance graph shall not be deemed incorporated by reference by any general statement incorporating by reference this annual report into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such acts.
COMPARISON OF CUMULATIVE TOTAL RETURN(1)
(1) $100 invested on January 15,December 31, 2015 in stock or index, including reinvestment of dividends.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Cumulative(1) Total Return % | | Total Return $ as of |
Stock/Index | | | 12/31/2015 | | 12/31/2016 | | 12/31/2017 | | 12/31/2018 | | 12/31/2019 | | 12/31/2020 | | 12/31/2021 |
UE | | 2.7 | | 100 | | | 120.9 | | | 116.0 | | | 78.9 | | | 95.4 | | | 67.7 | | | 102.7 | |
S&P 500 | | 161.3 | | 100 | | | 112.0 | | | 136.4 | | | 130.4 | | | 171.5 | | | 203.0 | | | 261.3 | |
Russell 2000 | | 114.0 | | 100 | | | 121.3 | | | 139.1 | | | 123.8 | | | 155.4 | | | 186.4 | | | 214.0 | |
Dow Jones Equity All REIT | | 96.4 | | 100 | | | 108.9 | | | 118.3 | | | 113.5 | | | 146.1 | | | 139.1 | | | 196.4 | |
Dow Jones US Real Estate Strip Centers | | (1.0) | | 100 | | | 103.3 | | | 92.4 | | | 78.9 | | | 100.2 | | | 68.8 | | | 99.0 | |
|
| | | | | | | | | | | | | | | |
| | Cumulative(1) Total Return % | | Total Return $ as of |
Stock/Index | | | 1/15/2015 | | 12/31/2015 | | 12/31/2016 | | 12/31/2017 |
UE | | 18.7 |
| | 100 |
| | 101.4 |
| | 122.6 |
| | 118.7 |
|
S&P 500 | | 42.8 |
| | 100 |
| | 104.7 |
| | 117.2 |
| | 142.8 |
|
Russell 2000 | | 38.7 |
| | 100 |
| | 99.7 |
| | 120.9 |
| | 138.7 |
|
SNL U.S. REIT Equity | | 14.5 |
| | 100 |
| | 97.1 |
| | 105.7 |
| | 114.5 |
|
SNL U.S. REIT Retail Shopping Center | | (8.9 | ) | | 100 |
| | 98.9 |
| | 102.4 |
| | 91.1 |
|
(1) Cumulative total return is for the period from the separation date on January 15, 2015 tosix fiscal years commencing December 31, 2017.2015 and ending December 31, 2021.
Operating Partnership
Market Information and Distributions
There is no established public market for our general and common limited partnership interests in the operating partnership (“OP Units”). As of February 13, 2018,9, 2022, there were 12,812,954 OP Units117,398,896 general partnership units outstanding and 4,412,654 common limited partnership units outstanding, held by approximately 311,134 and 40 holders of record. The following table sets forth the cash distributions declared on our OP Units by quarter for 2017 and 2016:record, respectively.
|
| | | | | | | | |
| | 2017 | | 2016 |
| | Cash Distributions Declared Per Unit | | Cash Distributions Declared Per Unit |
| | |
Quarter Ended | | | | |
Fourth quarter | | $ | 0.22 |
| | $ | 0.22 |
|
Third quarter | | 0.22 |
| | 0.20 |
|
Second quarter | | 0.22 |
| | 0.20 |
|
First quarter | | 0.22 |
| | 0.20 |
|
Under the limited partnership agreement of UELP, unitholders may present their common units of UELP for redemption at any time (subject to restrictions agreed upon at the time of issuance of the units that may restrict such right for a period of time). Upon presentation of a common unit for redemption, UELP must redeem the unit for cash equal to the then value of a share of UE’s common shares, as defined by the limited partnership agreement. In lieu of cash redemption by UELP, however, UE may elect to acquire any common units so tendered by issuing common shares of UE in exchange for the common units. If UE so elects, its common shares will be exchanged for common units on a one-for-one basis. No units were redeemed duringDuring the year ended December 31, 2017.2021, 100,000 units were redeemed for common shares and no units were redeemed for cash.
Recent Sales of Unregistered Shares
UnderDuring the termsyear ended December 31, 2021, the Company issued an aggregate of UELP’s limited partnership agreement, the100,000 common shares in exchange for 100,000 common limited partnership units held by certain limited partners of the Operating Partnership. All common shares were issued in ourreliance on an exemption from registration under Section 4(a)(2) of the Securities Act. We relied on the exemption under Section 4(a)(2) based upon factual representations received from the limited partner who received the common shares.
Each time the Company issues common shares (other than in exchange for common limited partnership may be redeemed, subjectunits when such units are presented for redemption), it contributes the proceeds of such issuance to certain conditions,the Operating Partnership in return for cash or an equivalent number of our commonpartnership units with rights and preferences analogous to the shares at our option.issued. During the three monthsyear ended, December 31, 2017, there2021, in connection with issuances of common shares by the Company pursuant to the Urban Edge Properties 2015 Employee Share Purchase Plan, the Operating Partnership issued an aggregate of 24,544 common limited partnership units to the Company in exchange for approximately $0.3 million, the aggregate proceeds of such common share issuances to the Company. Such units were no redemptionsissued in reliance on an exemption from registration under Section 4(a)(2) of operating partnership units.the Securities Act.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
During 2017, 5,427the year ended December 31, 2021, 5,305 restricted common shares were forfeited by former employees.employees in connection with their departure from the Company. We did not repurchase any of our equity securities during the three monthsyear ended December 31, 2017.2021. Our employees will at times surrender common shares owned by them to satisfy statutory minimum federal, state and local tax obligations associated with the vesting of their restricted common shares. During the year ended December 31, 2021, 13,062 restricted common shares were surrendered.
In March 2020, our Board of Trustees authorized a share repurchase program for up to $200 million of the Company’s common shares. During the year ended December 31, 2020, we repurchased 5,873,923 shares at a weighted average share price of $9.22 amounting to $54.1 million. During the year ended December 31, 2021, no shares were repurchased.
Equity Compensation Plan Information
Information regarding equity compensation plans is presented in Part III, Item 12 of this Annual Report on Form 10-K and incorporated herein by reference.
| |
ITEM 6. | SELECTED FINANCIAL DATA |
The following table includes selected consolidated and combined financial data set forth for the Company and the Operating Partnership as of and for each of the five years in the period ended December 31, 2017. The consolidated balance sheets as of December 31, 2017 and December 31, 2016 reflects the consolidation of properties that are wholly-owned and properties in which we own less than 100% interest, but in which we have a controlling interest. The consolidated statement of income for the year ended December 31, 2017 and December 31, 2016 includes the consolidated accounts of the Company. The consolidated and combined statement of income for the year ended December 31, 2015 includes the consolidated accounts of the Company and the combined accounts of the UE Business. Accordingly, the results presented for the year ended December 31, 2015 reflect the aggregate operations, changes in cash flows and equity on a carved-out and combined basis for the period from January 1, 2015 through the date of separation and on a consolidated basis subsequent to the date of separation. The financial data for the periods prior to the separation date are prepared on a carved-out and combined basis from the consolidated financial statements of Vornado as the UE Business was under common control of Vornado prior to January 15, 2015. This selected financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and our audited consolidated and combined financial statements and related notes included in Part II, Items 7 and 8, respectively, of this Annual Report on Form 10-K.ITEM 6. [RESERVED]
Urban Edge PropertiesNot applicable.
|
| | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
(Amounts in thousands, except per share amounts) | 2017 | | 2016 | | 2015 | | 2014 | | 2013 |
Operating Data: | | | | | | | | | |
Property rentals | $ | 265,984 |
| | $ | 236,798 |
| | $ | 231,867 |
| | $ | 232,592 |
| | $ | 228,282 |
|
Tenant expense reimbursements | 99,098 |
| | 84,921 |
| | 84,617 |
| | 81,887 |
| | 73,170 |
|
Income from Stop & Shop settlement | — |
| | — |
| | — |
| | — |
| | 59,599 |
|
Management and development fees | 1,535 |
| | 1,759 |
| | 2,261 |
| | 535 |
| | 606 |
|
Income from acquired leasehold interest | 39,215 |
| | — |
| | — |
| | — |
| | — |
|
Other income | 1,210 |
| | 2,498 |
| | 4,200 |
| | 662 |
| | 1,338 |
|
Total revenue | 407,042 |
| | 325,976 |
| | 322,945 |
| | 315,676 |
| | 362,995 |
|
Total expenses | 245,278 |
| | 192,958 |
| | 224,869 |
| | 193,236 |
| | 195,782 |
|
Operating income | 161,764 |
| | 133,018 |
| | 98,076 |
| | 122,440 |
| | 167,213 |
|
Net income | 72,938 |
| | 96,630 |
| | 41,348 |
| | 65,794 |
| | 109,335 |
|
Net income attributable to operating partnership | (5,824 | ) | | (5,812 | ) | | (2,547 | ) | | — |
| | — |
|
Net income attributable to consolidated subsidiaries | (44 | ) | | (3 | ) | | (16 | ) | | (22 | ) | | (21 | ) |
Net income attributable to common shareholders(1) | $ | 67,070 |
| | $ | 90,815 |
| | $ | 38,785 |
| | $ | 65,772 |
| | $ | 109,314 |
|
| | | | | | | | | |
Earnings per common share - Basic(2): | 0.62 |
| | 0.91 |
| | 0.39 |
| | 0.66 |
| | 1.10 |
|
Earnings per common share - Diluted(2): | 0.61 |
| | 0.91 |
| | 0.39 |
| | 0.66 |
| | 1.10 |
|
Weighted average shares outstanding - Basic(2) | 107,132 |
| | 99,364 |
| | 99,252 |
| | 99,248 |
| | 99,248 |
|
Weighted average shares outstanding - Diluted(2) | 118,390 |
| | 99,794 |
| | 99,278 |
| | 99,248 |
| | 99,248 |
|
Dividends declared per common share | 0.88 |
| | 0.82 |
| | 0.80 |
| | — |
| | — |
|
(1) Net income earned prior to January 15, 2015 is attributable to Vornado as it was the sole shareholder prior to January 15, 2015. Refer to Note 1 to the consolidated and combined financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
(2) The common shares outstanding at the date of separation are reflected as outstanding for all periods prior to the separation. Refer to Note 2 to the consolidated and combined financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
|
| | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
(Amounts in thousands) | 2017 | | 2016 | | 2015 | | 2014 | | 2013 |
Balance Sheet Data as of period end: | | | | | | | | | |
Real estate, net of accumulated depreciation | $ | 2,084,727 |
| | $ | 1,597,423 |
| | $ | 1,575,530 |
| | $ | 1,555,301 |
| | $ | 1,562,416 |
|
Total assets | 2,820,808 |
| | 1,904,138 |
| | 1,918,931 |
| | 1,731,176 |
| | 1,749,965 |
|
Mortgages payable, net | 1,564,542 |
| | 1,197,513 |
| | 1,233,983 |
| | 1,278,182 |
| | 1,200,762 |
|
Total liabilities | 1,830,267 |
| | 1,408,021 |
| | 1,447,477 |
| | 1,472,313 |
| | 1,408,381 |
|
Noncontrolling interests in operating partnership | 100,218 |
| | 35,451 |
| | 33,177 |
| | — |
| | — |
|
Total equity | 990,541 |
| | 496,117 |
| | 471,454 |
| | 258,863 |
| | 341,584 |
|
| | | | | | | | | |
Other Data: | | | | | | | | | |
Cash flow Statement Data: | | | | | | | | | |
Provided by operating activities | 157,898 |
| | 137,249 |
| | 138,078 |
| | 105,688 |
| | 240,527 |
|
Used in investing activities | (295,732 | ) | | (59,230 | ) | | (66,415 | ) | | (45,586 | ) | | (24,926 | ) |
Provided by (used in) financing activities | 498,489 |
| | (115,858 | ) | | 93,795 |
| | (63,807 | ) | | (212,636 | ) |
Urban Edge Properties LP
|
| | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
(Amounts in thousands, except per unit amounts) | 2017 | | 2016 | | 2015 | | 2014 | | 2013 |
Operating Data: | | | | | | | | | |
Property rentals | $ | 265,984 |
| | $ | 236,798 |
| | $ | 231,867 |
| | $ | 232,592 |
| | $ | 228,282 |
|
Tenant expense reimbursements | 99,098 |
| | 84,921 |
| | 84,617 |
| | 81,887 |
| | 73,170 |
|
Income from Stop & Shop settlement | — |
| | — |
| | — |
| | — |
| | 59,599 |
|
Management and development fees | 1,535 |
| | 1,759 |
| | 2,261 |
| | 535 |
| | 606 |
|
Income from acquired leasehold interest | 39,215 |
| | | | | | | | |
Other income | 1,210 |
| | 2,498 |
| | 4,200 |
| | 662 |
| | 1,338 |
|
Total revenue | 407,042 |
| | 325,976 |
| | 322,945 |
| | 315,676 |
| | 362,995 |
|
Total expenses | 245,278 |
| | 192,958 |
| | 224,869 |
| | 193,236 |
| | 195,782 |
|
Operating income | 161,764 |
| | 133,018 |
| | 98,076 |
| | 122,440 |
| | 167,213 |
|
Net income | 72,938 |
| | 96,630 |
| | 41,348 |
| | 65,794 |
| | 109,335 |
|
Net income attributable to consolidated subsidiaries | (44 | ) | | (3 | ) | | (16 | ) | | (22 | ) | | (21 | ) |
Net income attributable to unitholders(1) | $ | 72,894 |
| | $ | 96,627 |
| | $ | 41,332 |
| | $ | 65,772 |
| | $ | 109,314 |
|
| | | | | | | | | |
Earnings per unit - Basic(2): | 0.62 |
| | 0.91 |
| | 0.39 |
| | 0.63 |
| | 1.04 |
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Earnings per unit - Diluted(2): | 0.61 |
| | 0.91 |
| | 0.39 |
| | 0.63 |
| | 1.04 |
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Weighted average units outstanding - Basic(2) | 117,779 |
| | 105,455 |
| | 105,276 |
| | 104,965 |
| | 104,965 |
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Weighted average units outstanding - Diluted(2) | 118,390 |
| | 106,099 |
| | 105,374 |
| | 104,965 |
| | 104,965 |
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Distributions declared per unit | 0.88 |
| | 0.82 |
| | 0.80 |
| | — |
| | — |
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(1) Net income earned prior to January 15, 2015 is attributable to Vornado as it was the sole unitholder prior to January 15, 2015. Refer to Note 1 to the consolidated and combined financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
(2) The units outstanding at the date of separation are reflected as outstanding for all periods prior to the separation. Refer to Note 2 to the consolidated and combined financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
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| Year Ended December 31, |
(Amounts in thousands) | 2017 | | 2016 | | 2015 | | 2014 | | 2013 |
Balance Sheet Data as of period end: | | | | | | | | | |
Real estate, net of accumulated depreciation | $ | 2,084,727 |
| | $ | 1,597,423 |
| | $ | 1,575,530 |
| | $ | 1,555,301 |
| | $ | 1,562,416 |
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Total assets | 2,820,808 |
| | 1,904,138 |
| | 1,918,931 |
| | 1,731,176 |
| | 1,749,965 |
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Mortgages payable, net | 1,564,542 |
| | 1,197,513 |
| | 1,233,983 |
| | 1,278,182 |
| | 1,200,762 |
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Total liabilities | 1,830,267 |
| | 1,408,021 |
| | 1,447,477 |
| | 1,472,313 |
| | 1,408,381 |
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Total equity | 990,541 |
| | 496,117 |
| | 471,454 |
| | 258,863 |
| | 341,584 |
|
| | | | | | | | | |
Other Data: | | | | | | | | | |
Cash flow Statement Data: | | | | | | | | | |
Provided by operating activities | 157,898 |
| | 137,249 |
| | 138,078 |
| | 105,688 |
| | 240,527 |
|
Used in investing activities | (295,732 | ) | | (59,230 | ) | | (66,415 | ) | | (45,586 | ) | | (24,926 | ) |
Provided by (used in) financing activities | 498,489 |
| | (115,858 | ) | | 93,795 |
| | (63,807 | ) | | (212,636 | ) |
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ITEM 7. | ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Certain statements contained herein constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of future performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “would,” “may” or other similar expressions in this Annual Report on Form 10-K. Many of the factors that will determine the outcome of these and our other forward-looking statements are beyond our ability to control or predict; these factors include, among others, the estimated remediation and repair costs related to Hurricane Maria and the timing of re-opening and resumption of full operations at the affected properties. For further discussion of factors that could materially affect the outcome of our forward-looking statements, see “Risk Factors” in Part I, Item 1A, of this Annual Report on Form 10-K for the year ended December 31, 2017.
For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances occurring after the date of this Annual Report on Form 10-K.
The following discussion should be read in conjunction with the consolidated and combined financial statements and notes thereto included in Part II, Item 8 of this Annual Report on Form 10-K.
This section of this Annual Report on Form 10-K generally discusses 2021 and 2020 items and provides a year-to-year comparison between 2021 and 2020. A discussion of 2019 items and year-to-year comparisons between 2020 and 2019 are not included in this Annual Report on Form 10-K but can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
Executive Overview
Our Company
Urban Edge Properties (“UE”, “Urban Edge”, or the “Company”) (NYSE: UE) is a Maryland real estate investment trust that manages, develops, redevelops, and acquires retail real estate, primarily in the Washington, D.C. to Boston corridor with a concentration on the New York metropolitan area. Urban Edge Properties LP (“UELP” or the “Operating Partnership”) is a Delaware limited partnership formed to serve as UE’s majority-owned partnership subsidiary and to own, through affiliates, all of our real estate properties and other assets. Unless the context otherwise requires, references to “we”, “us” and “our” refer to Urban Edge Properties and UELP and their consolidated entities/subsidiaries.
The Operating Partnership’s capital includes general and common limited partnership interests in the operating partnership (“OP Units”). As of December 31, 2017,2021, Urban Edge owned approximately 89.9%96.2% of the outstanding common OP Units with the remaining limited OP Units held by Vornado Realty L.P., members of management, ourUrban Edge’s Board of Trustees and contributors of property interests acquired. Urban Edge serves as the sole general partner of the Operating Partnership. The third party unitholders have limited rights over the Operating Partnership such that they do not have characteristics of a controlling financial interest. As such, the Operating Partnership is considered a variable interest entity (“VIE”), and the Company is the primary beneficiary that consolidates it. The Company’s only investment is the Operating Partnership. The VIE’s assets can be used for purposes other than the settlement of the VIE’s obligations and the Company’s partnership interest is considered a majority voting interest.
As of December 31, 2017,2021, our portfolio was comprised 85of 68 shopping centers, fourfive malls and a warehouse parktwo industrial parks totaling approximately 16.717.0 million square feet.
Operating Strategy. Our operating strategy is to maximize
COVID-19 Pandemic
On January 30, 2020, the valuespread of the COVID-19 outbreak was declared a Public Health Emergency of International Concern by the World Health Organization ("WHO"). On March 11, 2020, the WHO characterized the COVID-19 outbreak as a global pandemic. Early in the pandemic, the tri-state area of Connecticut, New York and New Jersey enforced preventive measures including mandatory business closures for non-essential businesses and quarantines or “shelter-in-place” requirements. Given our geographic concentration in the Northeast, many of our existing assets through proactive management encompassing: continuous asset evaluationtenants faced adverse financial consequences from reduced business operations and social distancing requirements as a result of the COVID-19 pandemic. The Company’s results for highest-and-best-use; efficient2020 were negatively impacted by tenant fallout from COVID-driven bankruptcies, uncollected or disputed rents from impacted tenants, and cost-conscious operations that minimize retailer operating expense and enhance property quality; and targeted leasingfrom abatements granted to tenants facing financial hardships due to the most desirable tenants. During 2017 we:pandemic.
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• | increased same-property cash Net Operating Income (“NOI”)(1) by 4.7% over the year ended December 31, 2016;
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• | increased same-property retail portfolio occupancy(2) to 98.3% from 98.2% as of December 31, 2016;
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• | saw consolidated retail portfolio occupancy(3) decline to 96.0% from 97.2% as of December 31, 2016 owing to our acquisition of shopping centers with lower occupancies than ours;
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• | signed 37Throughout 2021, the widespread distribution of vaccines and reduction of restrictions boosted economic confidence and increased consumer spending, resulting in a strengthened existing retail tenant base and increase in demand for space. The Company reached record leasing volumes with 161 total new leases, renewals and options, totaling approximately 2 million square feet. Foot traffic at our properties returned to near pre-pandemic levels, which has increased sales volume for our tenants and we have collected 98% of base rents billed during the year, inclusive of rent deferrals granted as part of our COVID-19 tenant relief efforts.
2021 Highlights Set forth below are highlights of our development and redevelopment projects, property acquisitions and dispositions, and leasing activities: •Acquired Woodmore Towne Centre in December 2021 for a purchase price of $198.1 million, including transaction costs. The property, located in Glenarden, MD, sits on 83 acres including an adjacent 22-acre vacant land parcel and is anchored by top-tier national and regional tenants including grocers Wegmans and Costco; •Acquired two industrial warehouses aggregating 275,000 sf, for a total purchase price of $56.1 million, including transaction costs. The two properties, located at 601 Murray Road and 151 Ridgedale Avenue, are adjacent to our existing 943,000 sf warehouse park in East Hanover, NJ;
•Completed the sale of three properties, one property parcel and one ground lease and received proceeds of $37.3 million, net of selling costs, resulting in a $18.6 million net gain on sale of real estate; •Terminated our remaining leases with Kmart and Sears at Bruckner Commons, The Outlets at Montehiedra, and Sunrise Mall for $20 million, effective October 15, 2021. Controlling these anchor spaces is a critical aspect of the plans we have under way to reposition and redevelop these spaces; •Stabilized five redevelopment projects aggregating $29.3 million, two of which stabilized during the fourth quarter. The 102,000 sf CubeSmart self-storage facility developed on excess land at Tonnelle Commons reached 87% occupancy. Additionally, the build-out of Fun City was completed at our property in Salem, NH, which opened in November 2021; •Activated six new redevelopment projects related to anchor leases executed during the year. These projects have an estimated cost of $102.2 million, of which $95.2 million remains to be funded as of December 31, 2021 and are expected to generate an approximate 8% unleveraged yield; •Signed 57 new leases totaling 346,877 square feet, including 19 new leases on a same-space(4) basis totaling 108,604 square feet at an average rental rate of $21.52 per square foot on a GAAP basis and $19.93 per square foot on a cash basis, and generating average rent spreads of 13.8% on a GAAP basis and 3.2% on a cash basis; and |
renewed or extended 70 leases totaling 1,041,389677,817 square feet, including 7046 new leases on a same-space(1) basis totaling 1,041,389431,386 square feet at an average rental rate of $15.93$21.15 per square foot on a GAAP basis and $15.63$19.43 per square foot on a cash basis, resulting in average rent spreads of 23.0% on a GAAP basis and 9.5% on a cash basis; and
•Renewed or extended 104 leases totaling 1,259,467 square feet, including 97 leases on a same-space(1) basis totaling 1,247,758 square feet at an average rental rate of $20.69 per square foot on a GAAP basis and $20.52 per square foot on a cash basis, generating average rent spreads of 9.3%10.9% on a GAAP basis and 5.8%3.5% on a cash basis.
2022 Outlook
Investment Strategy. Our investment strategy isWe intend to selectively deploy capital through redevelopmentcreate value and development of our existing assets and through acquisitions in our target markets that are expected to generate attractive risk-adjusted returns. At the same time, we plan to sell assets that no longer meet our investment criteria. During 2017, we:
increased the number of active development and redevelopment projects; active projects have a total expected investment of $195.5 million of which $104.9 million remains to be funded;
completed projects at East Hanover, East Hanover warehouses, Garfield, Hackensack, Rockaway, Turnersville, Walnut Creek (Mt. Diablo), and Freeport;
identified approximately $115.5 million of additional development and redevelopment projects expected to be completed over the next several years;
acquired nine retail assets, predominantly in the New York metropolitan area, totaling $464 million, including transaction costs, with gross leasable area of 2.0 million sf; and
completed the sale of a 32,000 sf, vacant building in Eatontown, NJ for $4.8 million, and completed the sale of excess land in Kearny, NJ for $0.3 million, both net of selling costs.
Capital Strategy. Our capital strategy is to keep our balance sheet strong, flexible and capable of supporting growth by using cash flow from operations, refinancing debt when opportunities are favorable, and reinvesting funds from selective asset sales. During 2017, we:
refinanced our $544 million cross-collateralized mortgage with 18 individual, non-recourse mortgage financings totaling $710 million;
refinanced our $74 million, 4.59% mortgage loan secured by our Tonnelle Commons property in North Bergen, NJ, increasing the principal balance to $100 million with a 10-year fixed rate mortgage, at 4.18%;
amended and extended our $500 million unsecured revolving credit agreement. The amendment increased its size to $600 million and extended the maturity date to March 7, 2021 with two six-month extension options;
issued 1.8 million OP units in connection with the acquisition of a ground lease under Yonkers Gateway Center at $27.09 per unit. Additionally, we issued 2.6 million OP units and 1.9 million OP units in connection with the portfolio acquisition of seven retail assets (the "Portfolio”) at a value of $27.02 per unit;
issued 7.7 million common shares of beneficial interest in an underwritten public offering in May 2017. This offering generated cash proceeds of $193.5 million, net of $1.3 million of issuance costs;
issued 6.25 million common shares of beneficial interest in August 2017 to a large institutional investor at a net price of $24.80 per share. There was no underwriter or placement agent and net cash proceeds to the Company were $155 million; and
ended the year with cash and cash equivalents, including restricted cash, of $501 million and debt, net of cash, to total market capitalization of 22.4%.
2018 Outlook. We seek growth ingrow earnings, funds from operations, and cash flows primarily by:
leasing•Adding essential tenants to our properties and positioning our retail environments with quality grocers, premium healthcare operators and elevated food offerings;
•Leasing vacant spaces, proactively extending expiring leases, at higher rents, processingmanaging the exercise of tenant options and, when possible, replacing underperforming tenants with tenantsoperators that can pay higher rents;rents and positively impact our properties;
expediting•Expediting the delivery of space to tenants and the collection of rents from tenants with executed leases that have not yet commenced;
creating•Generating additional valueincome from our existing assets by redevelopment ofredeveloping underutilized existing space, development ofdeveloping new space and pad sites, repositioning anchors, and by anchor repositioning;incorporating non-retail uses such as industrial, self-storage, office and other uses;
disposing of non-core•Acquiring assets and, when possible, reinvesting the proceeds in existing properties and in acquiring additional properties meetingthat meet our investment criteria.
There can be no assurance that we will be able to execute on our growth strategy, especially given the ongoing economic uncertainty. See Forward-Looking Statements in this Annual Report on Form 10-K. | | | | | | | | | | | |
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(1)Refer to page 38Same-space leases represent those leases signed on spaces for which there was a reconciliation to the nearest GAAP measure. |
(2)Information provided on a same-property basis includes the results of properties that were owned and operated for the entirety of the reporting periods being compared and excludes properties that were under development, redevelopment, acquired, sold, or in the foreclosure process during the periods being compared and totals 74 properties for the years ended December 31, 2017 and December 31, 2016.
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(3)Our retail portfolio includes shopping centers and malls and excludes warehouses.
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(4)The “same-space” designation is used to compare leasing terms (cash leasing spreads) from the prior tenant to the new/current tenant. In some cases, leases are excluded from "same-space" because the gross leasable area of the prior lease is combined/divided to form a larger/smaller, non-comparable space.previous lease.
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Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, referred to as “GAAP”, requires management to make estimates and assumptions that in certain circumstances affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and revenue and expenses. These estimates are prepared using management’s best judgment, after considering past and current events and economic conditions. In addition, certain information relied upon by management in preparing such estimates includes internally generated financial and operating information, external market information, when available, and when necessary, information obtained from consultations with third party experts. Actual results could differ from these estimates. A discussion of possible risks which may affect these estimates is included in “Item 1A. Risk Factors” of this Annual Report on Form 10-K. Management considers an accounting estimate to be critical if changes in the estimate could have a material impact on our consolidated and combined results of operations or financial condition.
Our significant accounting policies are more fully described in Note 3 to the consolidated and combined financial statements included in Part II, Item 8 of this Annual Report on Form 10-K; however, the most critical10-K. The following accounting policies, which involve the use of estimates and assumptions as to future uncertainties and, therefore, may result in actual amounts that differ from estimates are considered critical because they are particularly dependent on management’s judgment about matters that have a significant level of uncertainty at the time the accounting estimates are made, and changes to those estimates could have a material impact on our financial condition or operating results.
Revenue Recognition and Receivables - Estimating Collectibility
Rental revenue comprises revenue from fixed and variable lease payments, as follows:
Real Estate —The naturedesignated within tenant operating leases. Components of our businessthis include contractual rents arising from tenant operating lease agreements, tenant expense reimbursements, and straight-line rental income. We evaluate the collectibility of amounts due from tenants and disputed enforceable charges on both a lease-by-lease and a portfolio-level basis, which result from the inability of tenants to make required payments under their operating lease agreements. We recognize changes in the collectibility assessment of these operating leases as an owner, redeveloper and operator of retail shopping centers means that we invest significant amounts of capital into our properties. Depreciation, amortization and maintenance costs relatingadjustments to our properties constitute substantial costs for us as well as the industry as a whole. Real estate is capitalized and depreciated on a straight-line basisrental revenue in accordance with GAAPASC 842 Leases which are recorded as rental revenue deemed uncollectible and consistent with industry standardsare included within the line items Rental revenue on our consolidated statements of income.
Management exercises judgement when evaluating the collectibility of these receivables and will look to both quantitative and qualitative factors. Such factors include tenants’ current credit status, either from third parties or using an internal risk assessment, payment history, amount of outstanding receivables, tenant sales performance, potential liquidity and current economic and sector specific trends. Tenant receivables, and receivables arising from the straight-lining of rents, are written-off directly when management deems the collectibility of substantially all future lease payments from a specific lease is not probable, at which point, the Company will begin recognizing revenue from such leases prospectively, based on our best estimatesactual cash received. This write-off effectively reduces cumulative non-cash rental income recognized from the straight-lining of rents since lease commencement. If the Company subsequently determines that it is probable it will collect substantially all of the assets’ physicallessee’s remaining lease payments under the lease term, the Company will reinstate the receivable balance, including those arising from the straight-lining of rents. Changes in our assessments of collectibility are recognized as adjustments to rental revenue in accordance with ASC 842.
These assessments are inherently sensitive as they are based on the judgement of management and economic useful lives which range from 3information available at the time of evaluation. We routinely reassess the quantitative and qualitative factors used to 40 years.derive these estimates and believe the methods and assumptions noted above to be reasonable in evaluating collectibility. We periodically reviewhave not had any changes to the estimated lives of our assetsmethods or assumptions used to evaluate collectibility. Although we routinely reassess these estimates, taking into consideration all information available and implement changes, as necessary,future projections, they are subject to these estimates. These assessmentsuncertainty and have a direct impact on our net income. Real estate is carried at cost, net of accumulated depreciationActual results may differ from these estimates and amortization. Expenditures for ordinary maintenance and repairs are expensed to operations as they are incurred. Significant renovations that improve or extend the useful lives of assets are capitalized.can have a material impact on our operating results.
Real estate undergoing redevelopment activities is also carried at cost but no depreciation is recognized. All property operating expenses directly associated withEstate - Estimates Related to Valuing Acquired Assets and attributable to the redevelopment, including interest, are capitalized to the extent the capitalized costs of the property do not exceed the estimated fair value of the property when completed. If the cost of the redeveloped property, including the net book value of the existing property, exceeds the estimated fair value of redeveloped property, the excess is charged to impairment expense. The capitalization period begins when redevelopment activities are underway and ends when the project is substantially complete. Generally, a redevelopment is considered substantially completed and ready for its intended use upon completion of tenant improvements, but no later than one year from completion of major construction activity. We make judgments as to the time period over which to capitalize such costs and these assumptions have a direct impact on net income because capitalized costs are not subtracted in calculating net income.
Liabilities
Upon the acquisition of real estate, we assess the fair value of acquired assets (including land, buildings and improvements, identified intangibles, such as acquired above and below-market leases, acquired in-place leases and tenant relationships) and acquired liabilities. We assess fair value based on estimated cash flow projections utilizing appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known trends, and market/economic conditions. Based on these estimates, we allocate the purchase price to the applicable assets and liabilities based on their relative fair values at date of acquisition.
In allocating the purchase price to identified intangible assets and liabilities of an acquired property, the value of above-market and below-market leases is estimated based on the present value of the difference between the contractual amounts, including fixed rate below-market renewal options, to be paid pursuant to the in-place leases and our estimate of the market lease rates and other lease provisions for comparable leases measured over a period equal to the estimated remaining term of the lease. Tenant related intangibles and improvements are amortized on a straight-line basis over the related lease term, including any
bargain renewal options. We amortize identified intangibles that have finite lives over the period they are expected to contribute directly or indirectly to the future cash flows of the property or business acquired. We consider qualitative and quantitative factors in evaluating the likelihood of a tenant exercising a below market renewal option and include such renewal options in the calculation of in-place leases. If the value of below-market lease intangibles includes renewal option periods, we include such renewal periods in the amortization period utilized. If a lease terminates prior to its stated expiration, all unamortized amounts relating to that lease are written off.
Since the assessment of fair value and allocation of these amounts is made at the time of acquisition, they are subject to future changes in market conditions and tenants’ ability to continue operations and their exercise of options and renewals. In the case that these assumptions change materially, they could have a material impact on our results and financial statements. During 2021, we acquired three properties and utilized the above factors, including the use of a third-party, to allocate the purchase price of these properties among various assets and liabilities. Further information on these allocations can be found in Part II, Item 8, Note 4 of this Annual Report on Form 10-K. We have had no changes to our methods of fair value assessment and allocations during the year ended December 31, 2021.
Real Estate - Estimates Related to Impairments
Our properties are individually reviewedevaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment exists when the carrying amount of an asset exceeds the aggregate projected future cash flows over the anticipated holding period on an undiscounted basis.basis taking into account the appropriate capitalization rate in determining a future terminal value. An impairment loss is measured based on the excess of
the property’s carrying amount over its estimated fair value. Estimated fair value may be based on discounted future cash flows utilizing appropriate discount and capitalization rates and, in addition to available market information, third-party appraisals, broker selling estimates or sale agreements under negotiation. Impairment analyses are based on our current plans, intended holding periods and available market information at the time the analyses are prepared. If our estimates of the projected future cash flows anticipated holding periods, orchange based on uncertain market conditions, change, our evaluation of impairment losses may be different and such differences could be material to our consolidated and combined financial statements. Plans to hold properties over longer periods decrease the likelihood of recording impairment losses. The carrying value of a property may also be individually reassessed in the event a casualty occurs at that property. Casualty events may include property damage from a natural disaster or fire. When such an event occurs, management estimates the net book value of assets damaged over the property’s total gross leasable area and adjusts the property’s carrying value to reflect the damages. Estimates are subjective and may change if additional damage is later assessed.assessed or if future cash flows are revised.
Real Estate Held For Sale — When a real estate asset is identified by management as held for sale,During the year ended December 31, 2021, we cease depreciation of the asset and estimate its fair value, net of estimated costs to sell. If the estimated fair value, net of estimated costs to sell, of an asset is less than its net carrying value, an adjustment is recorded to reflect the estimated fair value. Properties classified as real estate held for sale generally represent properties that are under contract for sale and are expected to close within a year.
In evaluating whether a property meets the held for sale criteria, we make a determination ashave had no changes to the pointmethods or assumptions used in time that it is probable that a sale will be consummated. Given the natureour analyses of all real estate sales contracts, it is not unusual for such contracts to allow potential buyers a period of time to evaluate the property prior to formal acceptance of the contract. In addition, certain other matters critical to the final sale, such as financing arrangements, often remain pending even upon contract acceptance. As a result, properties under contract may not close within the expected time period or may not close.
Allowance for Doubtful Accounts —We make estimates of the collectibility of our current accounts receivable and straight-line rents receivable which require significant judgment by management. The collectibility of receivables is affected by numerous factors including current economic conditions, bankruptcies, and the ability of the tenant to perform under the terms of their lease agreement. While we make estimates of potentially uncollectible amounts and provide an allowance for them through bad debt expense, actual collectibility could differ from those estimates which could affect our net income.
With respect to the allowance for current uncollectible tenant receivables, we assess the collectibility of outstanding receivables by evaluating such factors as nature and age of the receivable, credit history and current financial condition of the specific tenant including our assessment of the tenant’s ability to meet its contractual lease obligations, and the status of any pending disputes or lease negotiations with the tenant.
The straight-line receivable arises from earnings recognized in excess of amounts currently due under the lease agreements. Due to the nature of the straight-line receivable, the collection period of these amounts typically extends beyond one year. The extended collection period for straight-line rents along with our evaluation of tenant credit risk may result in the deferral of a portion of straight-line rental income until the collection of such income is reasonably assured. These estimates have a direct impact on our earnings.
Revenue Recognition —We have the following revenue sources and revenue recognition policies:
Base Rent - income arising from minimum lease payments from tenant leases. These rents are recognized over the non-cancelable term of the related leases on a straight-line basis which includes the effects of rent steps and rent abatements under the leases. We commence revenue recognition when the tenant takes possession of the leased space and the leased space is substantially ready for its intended use. In addition, in circumstances where we provide a lease incentive to tenants, we recognize the incentive as a reduction of rental revenue on a straight-line basis over the term of the lease. We have a limited number of operating leases that contain contingent rental provisions under which fixed rent shall abate, contingent upon timing and completion of property redevelopment. The Company’s policy is to defer recognition of contingent rent abatements until the specified target (i.e. completion of redevelopment) that triggers the contingent rent abatement is achieved.
Percentage Rent - income arising from retail tenant leases that is contingent upon tenant sales exceeding defined thresholds. These rents are recognized only after the contingency has been removed (i.e., when tenant sales thresholds have been achieved).
Tenant Expense Reimbursements - revenue arising from tenant leases which provide for the recovery of all or a portion of the operating expenses, real estate taxes and capital improvements of the respective property. This revenue is accrued in the same periods as the expenses are incurred.
Management, Leasing and Other Fees - income arising from contractual agreements with third parties. This revenue is recognized as the related services are performed under the respective agreements.
Share-Based Compensation — We grant stock options, LTIP units, OP units, restricted share awards and performance-based units to our officers, trustees and employees. Fair value is determined, depending on the type of award, using either the Black-Scholes option-pricing model or the Monte Carlo method, both of which are intended to estimate the fair value of the awards at the grant date. In using the Black-Scholes option pricing model, expected volatilitiesour real estate assets and dividend yieldshave not incurred any material impairment losses. We operate in a business that has significant investments in real estate and our estimates of valuation are primarily based on available implied datasubject to current market conditions and peer group companies’ historical data. The risk-free interest ratetenant operations, which drive future cash flows, and are beyond our control. As these factors can result in changes to our estimates and result in material impairment losses, this is based on the U.S. Treasury yield curve in effect at the time of grant. Share-based compensation expense is included in general and administrative expenses on the consolidated and combined statements of income.deemed a critical accounting estimate.
Recent Accounting Pronouncements
On January 11, 2021, the SEC issued Final Rule Release No. 33-10890, Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information. This rule, which became effective on February 10, 2021, adopts amendments to modernize, simplify and enhance certain financial disclosure requirements in Regulation S-K. Specifically, the amendments eliminate the requirement for Selected Financial Data, streamline the requirement to disclose Supplementary Financial Information, and amend Management’s Discussion & Analysis of Financial Condition and Results of Operations (‘‘MD&A’’). We early adopted the amendments to two items resulting in the elimination of Item 301, Selected Financial Data, and the omission of Item 302(a), Supplementary Financial Information. The amendments to Item 303(a)(b) MD&A were adopted in our current Form 10-K for the year ended December 31, 2021.
See Note 3 to the audited consolidated and combined financial statements in Part II, Item 8 of this Annual Report on Form 10-K for information regarding recent accounting pronouncements that may affect us. Additionally, see Note 87 to the audited consolidated and combined financial statements in Part II, Item 8 of this Annual Report on Form 10-K for information regarding recent amendments to the Internal Revenue Code.
Results of Operations
We derive substantially all of our revenue from rents received from tenants under existing leases on each of our properties. This revenue includes fixed base rents, recoveries of expenses that we have incurred and that we pass through to the individual tenants and percentage rents that are based on specified percentages of tenants’ revenue, in each case as provided in the respective leases.
Our primary cash expensesexpenditures consist of our property operating and capital expenses,costs, general and administrative expenses, and interest and debt expense. Property operating expenses include: real estate taxes, repairs and maintenance, management expenses, insurance and utilities; general and administrative expenses, which include payroll, professional fees, information technology, office expenses and other administrative expenses; and interest and debt expense is primarily consists of interest on our mortgage debt and amortization of deferred financing costs on our revolving credit agreement.debt. In addition, we incur substantial non-cash charges for depreciation and amortization on our properties. We also capitalize certain expenses, such as taxes, interest and salaries related to properties under development or redevelopment until the property is ready for its intended use.
Our consolidated and combined results of operations often are not comparable from period to period due to the impact of property acquisitions, dispositions, developments, redevelopments and redevelopments.changes in accounting policies. The results of operations of any acquired properties are included in our financial statements as of the date of acquisition. Our results of operations are affected by national, regional and local economic conditions, as well as macroeconomic conditions, which are at times subject to volatility and uncertainty. The current COVID-19 pandemic has increased volatility and uncertainty and has created significant economic disruption in many markets. Vaccinations for the COVID-19 virus have been widely distributed among the general U.S. population, which has facilitated the loosening of restrictions previously mandated on our tenants identified as nonessential; however the potential emergence of vaccine-resistant variants of COVID-19 may trigger restrictions to be put back in place. Such restrictions may include mandatory business shut-downs, reduced business operations and social distancing requirements. The long-term consequences of the various restrictions taken during the pandemic on consumer behavior is currently unknown. Specifically, the revenue and sales volume for certain tenants identified as nonessential may decline significantly as demand for their services and products declines potentially longer term. We are actively managing our business to respond to the ongoing economic and social impact and uncertainty relating to the COVID-19 pandemic; however, our future near term and potentially longer term results of operations may be significantly adversely affected. See “Pandemic-Related Contingencies” under Liquidity and Capital Resources and “Item 1A. Risk Factors” for more information.
The following provides an overview of our key non-GAAP measures based on our consolidated results of operations (refer to cash NOI, same-property cash NOI and Funds From Operations applicable to diluted common shareholders (“FFO”) described later in this section):
| | | | | | | | | | | |
| Year Ended December 31, |
(Amounts in thousands) | 2021 | | 2020 |
Net income | $ | 107,815 | | | $ | 97,750 | |
FFO applicable to diluted common shareholders(1) | 180,270 | | | 156,326 | |
NOI(2) | 223,811 | | | 200,383 | |
Same-property NOI(2) | 196,005 | | | 171,453 | |
|
| | | | | | | |
| Year Ended December 31, |
(Amounts in thousands) | 2017 | | 2016 |
Net income | $ | 72,938 |
| | $ | 96,630 |
|
FFO applicable to diluted common shareholders(1) | 157,762 |
| | 136,493 |
|
Cash NOI(2) | 233,187 |
| | 209,661 |
|
Same-property cash NOI(2) | 187,615 |
| | 179,119 |
|
(1) Refer to page 3933 for a reconciliation to the nearest generally accepted accounting principles (“GAAP”) measure.
(2) Refer to page 3832 for a reconciliation to the nearest GAAP measure.
Comparison of the Year Ended December 31, 20172021 to December 31, 20162020
Net income for the year ended December 31, 20172021 was $72.9$107.8 million, compared to net income of $96.6$97.8 million for the year ended December 31, 2016.2020. The following table summarizes certain line items from our consolidated statements of income that we believe are important in understanding our operations and/or those items which significantly changed in the year ended December 31, 20172021 as compared to the same period of 2016:2020:
| | | For the year ended December 31, | | For the year Ended December 31, | |
(Amounts in thousands) | 2017 | | 2016 | | $ Change | (Amounts in thousands) | 2021 | | 2020 | | $ Change | |
Total revenue | $ | 407,042 |
| | $ | 325,976 |
| | $ | 81,066 |
| Total revenue | $ | 425,082 | | | $ | 330,095 | | | $ | 94,987 | | |
Real estate taxes | | Real estate taxes | 63,844 | | | 60,049 | | | $ | 3,795 | | |
Property operating expenses | 50,894 |
| | 45,280 |
| | 5,614 |
| Property operating expenses | 68,531 | | | 56,126 | | | 12,405 | | |
General and administrative expenses | 30,413 |
| | 27,438 |
| | 2,975 |
| |
Depreciation and amortization | 82,281 |
| | 56,145 |
| | 26,136 |
| |
Real estate taxes | 59,737 |
| | 51,429 |
| | 8,308 |
| |
Casualty and impairment loss | 7,382 |
| | — |
| | 7,382 |
| |
Provision for doubtful accounts | 3,445 |
| | 1,214 |
| | 2,231 |
| |
General and administrative | | General and administrative | 39,152 | | | 48,682 | | | (9,530) | | |
Casualty and impairment loss, net | | Casualty and impairment loss, net | 468 | | | 3,055 | | | (2,587) | | |
Gain on sale of real estate | 202 |
| | 15,618 |
| | (15,416 | ) | Gain on sale of real estate | 18,648 | | | 39,775 | | | (21,127) | | |
Interest income | | Interest income | 360 | | | 2,599 | | | (2,239) | | |
Interest and debt expense | 56,218 |
| | 51,881 |
| | 4,337 |
| Interest and debt expense | 57,938 | | | 71,015 | | | (13,077) | | |
Loss on extinguishment of debt | 35,336 |
| | — |
| | 35,336 |
| |
Income tax benefit (expense) | 278 |
| | (804 | ) | | 1,082 |
| |
Gain on extinguishment of debt | | Gain on extinguishment of debt | — | | | 34,908 | | | (34,908) | | |
Income tax (benefit) expense | | Income tax (benefit) expense | 1,139 | | | (38,996) | | | 40,135 | | |
Total revenue increased by $81.1$95.0 million to $407.0$425.1 million in the year ended December 31, 20172021 from $326.0$330.1 million in the year ended December 31, 2016.2020. The increase is primarily attributable to:
•$39.244.7 million in income from acquired leasehold interest due to the write-offaccelerated amortization of the unamortizedbelow-market intangible liability related to the below-market ground lease acquiredliabilities in connection with the acquisitiontermination of our Kmart and Sears leases, effective October 15, 2021;
•$30.0 million decrease in rental revenue deemed uncollectible;
•$11.3 million increase in straight-line rent driven by write-offs of receivables arising from the ground lease at Shops at Bruckner;straight-lining of rents for tenants put on cash basis during 2020 compared to a reinstatement of straight-line balances, net of write-offs, during 2021;
•$32.610.6 million increase as a result of property acquisitions net of dispositions; and
$6.3million increase in tenant expense reimbursements due to an increase in recoverable expenses and revenue from recoverable capital projects; and
$4.5 million increase in property rentals due to rent commencements, contractual rent increases and an increase in percentage rental income, net of tenant vacancies primarily at properties undergoing development, partially offset by
$1.3 million decrease in other income due to a decrease in tenant bankruptcy settlement income received during 2017; and
•$0.2 million decreaseincrease in management and development fee income.income and tenant bankruptcy settlement income; offset by
Property operating expenses•$1.8 million net decrease in property rentals and tenant reimbursements due to lease terminations and modifications, partially offset by rent commencements and contractual rent increases.
Real estate tax expense increased by $5.6$3.8 million to $50.9$63.8 million in the year ended December 31, 20172021 from $45.3$60.0 million in the year ended December 31, 2016.2020. The increase is primarily attributable to anto:
•$7.0 million increase in common area maintenance expenses as a result of property acquisitions that closednet of dispositions; offset by
•$2.2 million decrease as a result of successful tax appeals and lowered assessments; and
•$1.0 million of real estate taxes capitalized in 2017.connection with redevelopment projects.
General and administrativeProperty operating expenses increased by $3.0$12.4 million to $30.4$68.5 million in the year ended December 31, 2017 from $27.4 million in the year ended December 31, 2016. The increase is primarily attributable to:
$2.4 million net increase in employment costs including $1.7 million increase in share based compensation expense and $0.5 million severance expense; and
$0.6 million net increase in legal, other professional fees and costs related to information technology.
Depreciation and amortization increased by $26.1 million to $82.3 million in the year ended December 31, 20172021 from $56.1 million in the year ended December 31, 2016.2020. The increase is primarily attributable to:
•$23.16.7 million increase in common area maintenance expenses across the portfolio as a result of spend reductions and limited center hours due to COVID-19 interruptions during 2020; and
•$5.7 million increase as a result of property acquisitions net of dispositions that closed in 2017dispositions.
General and 2016; and
$3.4 million increase from development projects and tenant improvements placed into service in 2017 and 2016, partially offsetadministrative expenses decreased by
$0.4 million decrease in tenant intangibles due to write-offs from tenants vacating in 2016.
Real estate taxes increased by $8.3 $9.5 million to $59.7$39.2 million in the year ended December 31, 20172021 from $51.4$48.7 million in the year ended December 31, 2016.2020. The increasedecrease is primarily attributable to:
•$5.07.2 million of executive transition costs including accelerated amortization of unvested equity awards recognized during 2020; and
•$5.4 million decrease in transaction costs related to the Puerto Rico legal entity restructuring and debt refinancing in 2020, offset by;
•$3.1 million increase in payroll, transaction, severance, and other expenses.
We recognized a casualty and impairment loss, net of $0.5 million, in the year ended December 31, 2021 attributable to real estate impairment charges recognized against the carrying value of one property and one ground lease, each of which were disposed of during the year. We recognized a casualty and impairment loss, net of $3.1 million, in the year ended December 31, 2020 attributable to a real estate impairment charge recognized against the carrying value of one property.
We recognized a gain on sale of real estate of $18.6 million in the year ended December 31, 2021 due to the sale of three operating properties and one property parcel. We recognized a gain on sale of real estate of $39.8 million in the year ended December 31, 2020 due to the sale of three operating properties.
Interest income decreased by $2.2 million to $0.4 million in the year ended December 31, 2021 from $2.6 million in the year ended December 31, 2020. The decrease is primarily attributable to a lower cash balance and a decrease in interest rates.
Interest and debt expense decreased by $13.1 million to $57.9 million in the year ended December 31, 2021 from $71.0 million in the year ended December 31, 2020. The decrease is primarily attributable to:
•$8.1 million decrease due to the troubled debt restructuring on our mortgage at Las Catalinas Mall in Puerto Rico in December 2020, subsequent to which we recognized interest payments as a reduction of the carrying value of the loan and not as interest expense;
•$2.0 million decrease due to the $250 million draw on the Company’s revolving credit agreement in March 2020, with the borrowings fully repaid in November 2020;
•$1.3 million increase in capitalized interest due to the activation of redevelopment projects during 2021;
•$0.9 million decrease in interest on variable-rate debt due to lower interest rates; and
•$0.8 million decrease as a result of acquisitions netthe refinancing of dispositions that closedthe mortgage secured by The Outlets at Montehiedra in 2017June 2020.
We recognized a gain on extinguishment of debt of $34.9 million in the year ended December 31, 2020 as a result of the refinancing of the mortgage secured by The Outlets at Montehiedra, consisting of the forgiveness of the $30 million junior loan plus accrued interest of $5.4 million, offset by the write-off of $0.4 million of unamortized deferred financing fees and 2016; and$0.1 million of transaction costs.
$3.3Income tax expense of $1.1 million increase due to higher assessed values and tax refunds received in 2016.
Casualty and impairment losses of $7.4 million werewas recognized in the year ended December 31, 2017 as2021 compared to a result of the following events:
$3.5$39.0 million real estate impairment loss on our property in Eatontown, NJ, prior to sale on June 30, 2017; and
$3.9 million casualty loss incurred as a result of Hurricane Maria, consisting of a $2.2 million write-off of the estimated net book value of the fixed assets damaged by the hurricane, and $1.7 million of hurricane related expenses.
Provision for doubtful accounts increased by $2.2 million to $3.4 milliontax benefit in the year ended December 31, 2017 from $1.2 million in the year ended December 31, 2016 primarily due to $1.3 million provision for doubtful accounts recorded for tenants impacted by Hurricane Maria.
We recognized a gain on the sale of real estate in 2017 of $0.2 million as a result of the sale of excess land at our property in Kearny, NJ on September 8, 2017. We recognized a gain on the sale of real estate of $15.6 million as a result of the sale of our property in Waterbury, CT on June 9, 2016.
Interest and debt expense increased by $4.3 million to $56.2 million in the year ended December 31, 2017 from $51.9 million in the year ended December 31, 2016.2020. The increase is primarily attributable to:
$4.5 million increase in interest from loans issued and assumed on acquisitions closed since December 2016;
$3.6 million increase in interest due to 18 new individual, non-recourse mortgage financings totaling $710 million closed during the fourth quarter of 2017; and
$0.5 million increase in interest due to the tax impact of the mortgage loan refinancing secured byand legal entity restructuring transactions related to our Tonnelle Commons propertymalls in North Bergen, NJ,Puerto Rico in 2020, partially offset by
$4.1 million net decrease in interest due state and local income tax expense resulting from tax strategies implemented to principal paydowns and refinancing oflimit the $544 million cross-collateralized mortgage loan; and
$0.2 million increase of interest capitalized related to additional development projects.
Loss on extinguishmentimpact from the cancellation of debt of $35.3 million in the year ended December 31, 2017 was recognized as a result of the following events:
$34.1 million charge related to the early debt extinguishment in connection with the refinancing of our $544 million cross-collateralized mortgage consisting of a $31.1 million defeasance expense and $3.0 million write-off of unamortized deferred financing fees; and
$1.3 million charge from the refinancing our mortgage loan secured by our Tonnelle Commons property in North Bergen, NJ, consisting of a $1.1 million prepayment penalty and $0.2 million of unamortized deferred financing feesat The Outlets at Montehiedra on the original loan.Company’s U.S. federal taxable income.
Income tax expense decreased by $1.1 million resulting in an income tax benefit of $0.3 million in the year ended December 31, 2017 from $0.8 million of expense in the year ended December 31, 2016 primarily due to the impact of the losses from Hurricane Maria in 2017.
Comparison of the Year Ended December 31, 20162020 to 2015December 31, 2019
Net income forDiscussions of 2019 items and comparisons between the year ended December 31, 2016 was $96.6 million, compared to net income2020 and 2019, respectively, that are not included in this Report can be found in “Management’s Discussion and Analysis of $41.3 millionFinancial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015. The following table summarizes certain line items from2020.
Non-GAAP Financial Measures
We use NOI internally to make investment and capital allocation decisions and to compare the unlevered performance of our consolidated and combined statements of income thatproperties to our peers. Further, we believe NOI is useful to investors as a performance measure because, when compared across periods, NOI reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and disposition activity on an unleveraged basis, providing perspective not immediately apparent from net income. The most directly comparable GAAP financial measure to NOI is net income. NOI excludes certain components from net income in order to provide results that are important in understanding our operations and/or those items which significantly changed in the year ended December 31, 2016 as comparedmore closely related to the same perioda property’s results of 2015:
|
| | | | | | | | | | | |
| For the year ended December 31, |
(Amounts in thousands) | 2016 | | 2015 | | $ Change |
Total revenue | $ | 325,976 |
| | $ | 322,945 |
| | $ | 3,031 |
|
Real estate tax expenses | 51,429 |
| | 49,311 |
| | 2,118 |
|
Property operating expenses | 45,280 |
| | 50,595 |
| | (5,315 | ) |
General and administrative expenses | 27,438 |
| | 32,044 |
| | (4,606 | ) |
Transaction costs | 1,405 |
| | 24,011 |
| | (22,606 | ) |
Gain on sale of real estate | 15,618 |
| | — |
| | 15,618 |
|
Interest and debt expense | 51,881 |
| | 55,584 |
| | (3,703 | ) |
Income tax expense | 804 |
| | 1,294 |
| | (490 | ) |
Total revenue of $326.0 million in the year ended December 31, 2016 increased $3.0 million from $322.9 million in the year ended December 31, 2015. The increase is primarily attributable to:
$4.4 millionoperations. We calculate NOI by adjusting net increase in property rentals dueincome to rent commencements from higher occupancy, contractual rent increasesadd back depreciation and increase in specialty leasingamortization expense, general and administrative expenses, casualty and real estate impairment losses, interest and debt expense, income offset by tenant vacancies at development projects;
$0.5 million net increase associated with properties acquiredtax expense and sold in 2016non-cash lease expense, and 2015;
$0.3 million increase in tenant expense reimbursements due to recoveries derived from the growth in capital improvements partially offset by a decrease in recoverable expenses;
partially offset by $1.7 million lower tenant bankruptcy settlement income; and
$0.5 million decrease indeduct management and development fee income due tofrom non-owned properties, under management sold during 2015.
Real estate tax expenses increased by $2.1 million to $51.4 million in the year ended December 31, 2016 from $49.3 million in the year ended December 31, 2015. The increase is primarily attributable to:
$2.3 million increase due to higher assessed values and tax refunds received in 2015;
$0.5 million increase due to the acquisition of Cross Bay Commons in December 2015; and
partially offset by $0.7 million of additional real estate taxes capitalized related to space taken out of service for development and redevelopment projects.
Property operating expenses decreased by $5.3 million to $45.3 million in the year ended December 31, 2016 from $50.6 million in the year ended December 31, 2015. The decrease is primarily attributable to:
$3.2 million lower common area maintenance expenses;
$1.4 million of environmental remediation costs accrued in 2015; and
$0.7 million decrease in non-recoverable operating expenses including property level litigation costs.
General and administrative expenses decreased by $4.6 million to $27.4 million in the year ended December 31, 2016 from $32.0 million in the year ended December 31, 2015. The decrease is primarily attributable to:
$7.1 million of share-based compensation expense incurred in 2015 in connection with the one-time issuance of LTIP units to certain executives in connection with our separation transaction; and
partially offset by $2.5 million of share-based compensation expense incurred in 2016 due to equity awards granted and the vesting of existing equity awards.
Transaction costs decreased $22.6 million to $1.4 million in the year ended December 31, 2016 from $24.0 million in the year ended December 31, 2015. The decrease is primarily due to costs incurred in connection with the separation transaction in 2015.
Gaingains on sale of real estate, assetsinterest income, non-cash rental income resulting from the straight-lining of $15.6 millionrents and amortization of acquired below market leases net of above market leases. NOI should not be considered a substitute for net income and may not be comparable to similarly titled measures employed by others.
We calculate same-property NOI using net income as defined by GAAP reflecting only those income and expense items that are reflected in the year ended December 31, 2016 was recognized asNOI (as described above) and excluding properties that were under development, redevelopment or that involve anchor repositioning where a resultsubstantial portion of the salegross leasable area is taken out of our propertyservice, and also excluding properties acquired or sold during the periods being compared. We also exclude for the following items in Waterbury, CT on June 9, 2016. The sale completedcalculating same-property NOI: lease termination fees, bankruptcy settlement income, and income and expenses that we do not believe are representative of ongoing operating results, if any. As such, same-property NOI assists in eliminating disparities in net income due to the reverse Section 1031 tax deferred exchange transaction withdevelopment, redevelopment, acquisition or disposition of properties during the acquisition of Cross Bay Commons.
Interestperiods presented, and debt expense decreased $3.7 million to $51.9 million inthus provides a more consistent performance measure for the year ended December 31, 2016 from $55.6 million in the year ended December 31, 2015. The decrease is primarily attributable to:
$1.9 million of additional interest capitalized related to increased levels of development and redevelopment;
$1.1 million of costs expensed in connection with the refinancingcomparison of the loan securedoperating performance of the Company’s properties, which the Company believes to be useful to investors. Same-property NOI should not be considered a substitute for net income and may not be comparable to similarly titled measures employed by Montehiedra in January 2015; andothers.
$0.7 million due to a lower mortgage payable balance as a result of scheduled principal payments and debt prepayment in connection with the sale of our property in Waterbury, CT during the second quarter of 2016.
Income tax expense decreased $0.5 million resulting in income tax expense of $0.8 million in the year ended December 31, 2016 from $1.3 million of expense in the year ended December 31, 2015 as a result of a $0.6 million reduction to the accrued income tax liability recorded during 2016, partially offset by the current period income tax expense accrual.
Non-GAAP Financial Measures
Throughout this section, we have provided certain information on a “same-property” cash basis which includes the results of operations that were owned and operated for the entirety of the reporting periods being compared, totaling 74which total 66 properties for the twelve monthsyears ended December 31, 20172021 and 2016.2020. Information provided on a same-property basis excludes properties that were under development, redevelopment or that involve anchor repositioning where a substantial portion of the gross leasable area is taken out of service and also excludes properties acquired sold, under contract to be sold, or that are in the foreclosure processsold during the periods being compared. While there is judgment surrounding changes in designations, a property is removed from the same-property pool when a property is considered to be a redevelopment property because it is undergoing significant renovation or retenanting pursuant to a formal plan and is expected to have a significant impact on property operating income based on the retenanting that is occurring. A development or redevelopment property is moved back to the same-property pool once a substantial portion of the NOI growth expected from the development or redevelopment is reflected in both the current and comparable prior year period, generally one year after at least 80% of the expected cash NOI from the project is realized.realized on a cash basis. Acquisitions are moved into the same-property pool once we have owned the property for the entirety of the comparable periods and the property is not under significant development or redevelopment.
We calculate same-property cash NOI using net income as defined by GAAP reflecting only those income and expense items that are incurred at the property level, adjusted for the following items: lease termination fees, bankruptcy settlement income, non-cash rental income and ground rent expense and income or expenses that we do not believe are representative of ongoing operating results, if any.
The most directly comparable GAAP financial measure to cash NOI is net income. Cash NOI excludes certain components from net income in order to provide results that are more closely related to a property’s results of operations. We calculate cash NOI by adjusting GAAP operating income to add back depreciation and amortization expense, general and administrative expenses, casualty and real estate impairment losses and non-cash ground rent expense, and deduct non-cash rental income resulting from the straight-lining of rents and amortization of acquired below market leases net of above market leases.
We use cash NOI internally to make investment and capital allocation decisions and to compare the unlevered performance of our properties to our peers. Further, we believe cash NOI is useful to investors as a performance measure because, when compared across periods, cash NOI reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and disposition activity on an unleveraged basis, providing perspective not immediately apparent from operating income or net income. As such, cash NOI assists in eliminating disparities in net income due to the development, redevelopment, acquisition or disposition of properties during the periods presented, and thus provides a consistent performance measure for the comparison of the operating performance of the Company’s properties. Cash NOI and same-property cash NOI should not be considered substitutes for operating income or net income and may not be comparable to similarly titled measures employed by others.
Same-property cash NOI increased by $8.5$24.6 million, or 4.7%14.3%, for the twelve monthsyear ended December 31, 20172021 as compared to the twelve monthsyear ended December 31, 2016.2020. Same-property NOI results for the year ended December 31, 2020 were negatively impacted by rental revenue deemed uncollectible primarily due to the COVID-19 pandemic.
The following table reconciles net income to cash NOI and same-property cash NOI for the years ended December 31, 20172021 and 2016.2020.
| | | | | | | | | | | |
| For the year ended December 31, |
(Amounts in thousands) | 2021 | | 2020 |
Net income | $ | 107,815 | | | $ | 97,750 | |
Management and development fee income from non-owned properties | (1,169) | | | (1,283) | |
Other expense | 608 | | | 672 | |
Depreciation and amortization | 92,331 | | | 96,029 | |
General and administrative expense | 39,152 | | | 48,682 | |
Real estate impairment loss | 468 | | | 3,055 | |
Gain on sale of real estate | (18,648) | | | (39,775) | |
| | | |
Interest income | (360) | | | (2,599) | |
Interest and debt expense | 57,938 | | | 71,015 | |
Gain on extinguishment of debt | — | | | (34,908) | |
Income tax (benefit) expense | 1,139 | | | (38,996) | |
Non-cash revenue and expenses | (55,463) | | | 741 | |
NOI | 223,811 | | | 200,383 | |
Adjustments: | | | |
Non-same property NOI and other(1) | (26,493) | | | (27,836) | |
Tenant bankruptcy settlement income and lease termination income | (1,313) | | | (1,094) | |
| | | |
| | | |
Same-property NOI | $ | 196,005 | | | $ | 171,453 | |
Adjustments: | | | |
NOI related to properties being redeveloped | 20,915 | | | 18,621 | |
Same-property NOI including properties in redevelopment | $ | 216,920 | | | $ | 190,074 | |
|
| | | | | | | |
| For the year ended December 31, |
(Amounts in thousands) | 2017 | | 2016 |
Net income | $ | 72,938 |
| | $ | 96,630 |
|
Add: income tax (benefit) expense | (278 | ) | | 804 |
|
Interest income | (2,248 | ) | | (679 | ) |
Gain on sale of real estate | (202 | ) | | (15,618 | ) |
Interest and debt expense | 56,218 |
| | 51,881 |
|
Loss on extinguishment of debt | 35,336 |
| | — |
|
Management and development fee income from non-owned properties | (1,535 | ) | | (1,759 | ) |
Other income | (235 | ) | | (121 | ) |
Depreciation and amortization | 82,281 |
| | 56,145 |
|
Casualty and impairment loss(6) | 7,382 |
| | — |
|
General and administrative expense | 30,413 |
| | 27,438 |
|
Transaction costs | 278 |
| | 1,405 |
|
Less: non-cash revenue and expenses | (47,161 | ) | | (6,465 | ) |
Cash NOI(1) | 233,187 |
|
| 209,661 |
|
Adjustments: | | | |
Non-same property cash NOI(1)(2) | (46,766 | ) | | (28,164 | ) |
Hurricane related operating loss(4)
| 1,267 |
| | — |
|
Construction settlement due to tenant | 902 |
| | — |
|
Tenant bankruptcy settlement income(3) | (975 | ) | | (2,378 | ) |
Same-property cash NOI | $ | 187,615 |
| | $ | 179,119 |
|
Adjustments: | | | |
Cash NOI related to properties being redeveloped(5) | 25,304 |
| | 22,846 |
|
Same-property cash NOI including properties in redevelopment | $ | 212,919 |
|
| $ | 201,965 |
|
(1) Cash NOI is calculated as total property revenues less property operating expenses, excluding the net effects of non-cash rental income and non-cash ground rent expense.
(2) Non-same property cash NOI for the year ended December 31, 2017 includes cash NOI related to properties being redeveloped and properties acquired or disposed or in foreclosure. Includes $0.9the period. Amounts for 2021 include Sunrise Mall which generated a net loss of $3.0 million of hurricane operating losses at Montehiedra that are subject to reimbursement from the insurance company.
(3) Tenant bankruptcy settlement income includes lease termination income.
(4) Amounts reflect rental and tenant reimbursement losses as well as provisions against outstanding amounts due from tenants at Las Catalinas that are subject to reimbursement from the insurance company.
(5) Excludes $0.9 million of rental and tenant reimbursement losses as well as provisions against outstanding amounts due from tenants at Montehiedra that are subject to reimbursement from the insurance company for the year ended December 31, 2017.2021. These amounts reflect the total loss on the property and include the portion pertaining to the noncontrolling interest in Sunrise Mall.
(6) Casualty and impairment lossfor the year ended December 31, 2017 include $1.7 million hurricane related expenses, $2.2 million write-off of net book value of assets damaged and $3.5 million real estate impairment loss incurred in connection with the sale of the Company's Eatontown property.
Funds From Operations
FFO applicable to diluted common shareholders for the year ended December 31, 20172021 was $157.8$180.3 million compared to $136.5$156.3 million for the year ended December 31, 2016.2020.
We calculate FFO in accordance with the National Association of Real Estate Investment Trusts’ (‘‘NAREIT’Nareit’’) definition. NAREITNareit defines FFO as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciateddepreciable real estate assets,and land when connected to the main business of a REIT, impairments on depreciable real estate impairment losses,or land related to a REIT's main business, and rental property depreciation and amortization expense. We believe FFO is a meaningful non-GAAP financial measure useful in comparing our levered operating performance from period to period both internally and among our peers because this non-GAAP measure excludes net gains on sales of depreciable real estate, real estate impairment losses, rental property depreciation and amortization expense which implicitly assumes that the value of real estate diminishes predictably over time rather than fluctuating based on market conditions. We believe the presentation of comparable period operating results generated from FFO provides useful information to investors because the definition excludes items included in net income that do not relate to, or are not, indicative of our operating and financial performance, such as depreciation and amortization related to real estate, and items which can make periodic and peer analyses of operating and financial performance more difficult, such as gains (or losses) from sales of depreciable real estate and land when connected to the main business of a REIT and impairments on depreciable real estate or land related to a REIT's main business. FFO does not represent cash flows from operating activities in accordance with GAAP, should not be considered an alternative to net income as an indication of our performance, and is not indicative of cash flow as a measure of liquidity or our ability to make cash distributions. FFO may not be comparable to similarly titled measures employed by others.
The following table reflects the reconciliation of net income to FFO for the years ended December 31, 2021 and 2020. | | | For the year ended December 31, | | For the year ended December 31, |
(Amounts in thousands) | 2017 | | 2016 | (Amounts in thousands) | 2021 | | 2020 |
Net income | $ | 72,938 |
| | $ | 96,630 |
| Net income | $ | 107,815 | | | $ | 97,750 | |
Less (net income) attributable to noncontrolling interests in: | | | | |
Less net (income) loss attributable to noncontrolling interests in: | | Less net (income) loss attributable to noncontrolling interests in: | |
Operating partnership | (5,824 | ) | | (5,812 | ) | Operating partnership | (4,296) | | | (4,160) | |
Consolidated subsidiaries | (44 | ) | | (3 | ) | Consolidated subsidiaries | (833) | | | (1) | |
Net income attributable to common shareholders | 67,070 |
| | 90,815 |
| Net income attributable to common shareholders | 102,686 | | | 93,589 | |
Adjustments: | | | | Adjustments: | |
Rental property depreciation and amortization | 81,401 |
| | 55,484 |
| Rental property depreciation and amortization | 91,468 | | | 95,297 | |
Gain on sale of real estate | | Gain on sale of real estate | (18,648) | | | (39,775) | |
Real estate impairment loss | 3,467 |
| | — |
| Real estate impairment loss | 468 | | | 3,055 | |
Gain on sale of real estate | — |
| | (15,618 | ) | |
Limited partnership interests in operating partnership(1) | 5,824 |
| | 5,812 |
| Limited partnership interests in operating partnership(1) | 4,296 | | | 4,160 | |
FFO applicable to diluted common shareholders | $ | 157,762 |
| | $ | 136,493 |
| FFO applicable to diluted common shareholders | $ | 180,270 | | | $ | 156,326 | |
(1) Represents earnings allocated to LTIPLong-Term Incentive Plan (“LTIP”) and OP unit holdersOperating Partnership (“OP”) unitholders for unissued common shares, which have been excluded for purposes of calculating earnings per diluted share for the periods presented. FFO applicable to diluted common shareholders calculations includes earnings allocated to LTIP and OP unit holders. For the year ended December 31, 2017 calculation, the weighted average share total includes the redeemable shares outstanding as their inclusion is dilutive. For the year ended December 31, 2016, the respective weighted average share totalspresented because they are excluded because their inclusion is anti-dilutive.
Liquidity and Capital Resources
Due to the nature of our business, we typically generate significant amounts of cash from operations; however, the cash generated from operations is primarily paid to our shareholders and unitholders of the Operating Partnership in the form of distributions. Our status as a REIT requires that we generally distribute at least 90% of our REITREIT’s ordinary taxable income each year. OurOur Board of Trustees declared a quarterly dividend of $0.22$0.15 per common share and OP Unitunit for each of the four quarters in 2017,2021, or an annual rate of $0.88. We expect to pay$0.60. Historically, we have paid regular cash dividends,dividends; however, the timing, declaration, amount and payment of distributions to shareholders and unitholders of the Operating Partnership fallsfall within the discretion of our Board of Trustees. Our Board of Trustees’ decisions regarding the payment of dividends dependsdepend on many factors, such as maintaining our REIT tax status, our financial condition, earnings, capital requirements, debt service obligations, limitations under our financing arrangements, industry practice, legal requirements, regulatory constraints, and other factors.
Property rental income is our primary source of cash flow and is dependent on a number of factors, including our occupancy level and rental rates, as well as our tenants’ ability to pay rent. Our properties providehave historically provided us with a relatively consistent stream of cash flow that enables us to pay operating expenses, debt service and recurring capital expenditures. During the year ended December 31, 2020, the COVID-19 pandemic had an adverse impact on our short-term cash flow by affecting our tenants’ ability to pay rent, however, our collection rates have returned to pre-pandemic levels and we have collected 98% of base rents billed during the year ended December 31, 2021. Other sources of liquidity to fund cash requirements include proceeds from financings, equity offerings and asset sales. Additionally, we have a $600 million revolving credit agreement with certain financial institutions which has a maturity date of January 29, 2024 and includes two six-month extension options. See Note 6 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Our short-term liquiditycash requirements consist of normal recurring operating expenses, lease obligations, regular debt service requirements, recurring expenditures (generalgeneral & administrative expenses),expenses, expenditures related to leasing activity and distributions to shareholders and unitholders of the Operating Partnership. Our long-term capital requirements consist primarily of maturities under our long-term debt agreements, development and redevelopment costs and potential acquisitions.
At December 31, 2017,2021, we had cash and cash equivalents, including restricted cash, of $501$219.8 million and no amounts drawn on our $600 millionrevolving credit agreement. In addition, the Company has the following sources of capital available:
|
| | | |
| Year Ended December 31, |
(Amounts in thousands) | 2017 |
ATM equity program(1) | |
Original offering amount | $ | 250,000 |
|
Available capacity | $ | 241,300 |
|
| |
Revolving credit agreement(2) | |
Total commitment amount | $ | 600,000 |
|
Available capacity | $ | 600,000 |
|
Maturity(3) | March 7, 2021 |
|
(1) Refer to Note 15 to the consolidated and combined financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
(2) Refer to Note 7 to the consolidated and combined financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
(3)On March 7, 2017, we amended and extended our revolving credit agreement. The amendment increased the credit facility size by $100 million to $600 million and extended the maturity date to March 7, 2021 with two six-month extension options.
On May 10, 2017, the Company issued 7.7 million common shares of beneficial interest in an underwritten public offering pursuant to the Company’s effective shelf registration statement previously filed on Form S-3 (File No. 333-212951) with the SEC on August 5, 2016. This offering generated cash proceeds of $193.5 million, net of $1.3 million of issuance costs.
On August 4, 2017, the Company issued 6.25 million common shares of beneficial interest to a large institutional investor at a net price of $24.80 per share, pursuant to the Company’s effective shelf registration statement previously filed on Form S-3 (File No. 333-212951) with the SEC on August 5, 2016. The issuance was a direct sale with no underwriter or placement agent such that net cash proceeds to the Company were $155 million.
On January 4, 2017, we issued 1.8 million OP units in connection with the acquisition of Yonkers Gateway Center at a value of $27.09 per unit. On May 24 and 25, 2017 we issued 2.6 million OP units and 1.9 million OP units, respectively, in connection with the Portfolio acquisition at a value of $27.02 per unit.
We have one mortgage loan, secured by our property in Englewood, NJ, scheduled to mature in 2018. As of December 31, 2017, the outstanding principal balance of this mortgage loan totaled $11.5 million. During 2017, our property in Englewood, NJ was transferred to a receiver. Subsequent to December 31, 2017, the property was sold at a foreclosure sale. Upon issuance of the court’s order approving the sale and discharging the receiver, all assets and liabilities related to the property will be removed. We
have no other debt scheduled to mature until 2021. We currently believe that cash flows from operations over the next 12 months, together with cash on hand, our ATM equity program, our revolving credit agreement and our general ability to access the capital markets will be sufficient to finance our operations and fund our debt service requirements and capital expenditures.
Summary of Cash Flows
Cash and cash equivalents, including restricted cash, was $500.8$219.8 million at December 31, 2017,2021, compared to $140.2$419.3 million as of December 31, 2016, an increase2020, a decrease of $360.6$199.4 million.
Our cash flow activities are summarized as follows:
| | | | | | | | | | | | | |
| Year Ended December 31, | | |
(Amounts in thousands) | 2021 | | 2020 | | |
Net cash provided by operating activities | $ | 135,273 | | | $ | 112,822 | | | |
Net cash used in investing activities | (311,160) | | | (98,460) | | | |
Net cash used in financing activities | (23,530) | | | (80,245) | | | |
|
| | | | | | | | | | | |
| Year Ended December 31, |
(Amounts in thousands) | 2017 | | 2016 | | 2015 |
Net cash provided by operating activities | $ | 157,898 |
| | $ | 137,249 |
| | $ | 138,078 |
|
Net cash used in investing activities | (295,732 | ) | | (59,230 | ) | | (66,415 | ) |
Net cash provided by (used in) financing activities | 498,489 |
| | (115,858 | ) | | 93,795 |
|
Operating Activities
Net cash provided by operating activities primarily consists of cash inflows from tenant rent and tenant expense reimbursementsrental revenue and cash outflows for property operating expenses, general and administrative expenses and interest and debt expense.
ForNet cash provided by operating activities for the year ended December 31, 2017, net cash provided2021 increased by operating activities of $157.9$22.5 million was comprised of $161.3 million of cash from operating income and a net decrease of $3.4 million in cashas compared to December 31, 2020, due to timingthe improved collection rates on property rentals and tenant expense reimbursements in 2021 and collection of cash receiptspreviously billed and payments related to changes in operating assets and liabilities.deferred amounts from 2020.
For the year ended December 31, 2016, net cash provided by operating activities of $137.2 million was comprised of $140.1 million of cash from operating income and $2.9 million net decrease in cash due to timing of cash receipts and payments related to changes in operating assets and liabilities.
Investing Activities
Net cash flow used in investing activities is impacted by the timing and extent of our real estate development, capital improvements, and acquisition and disposition activities during the period.
Net cash used in investing activities of $295.7 million for the year ended December 31, 2017,2021, increased by $236.5$212.7 million from $59.2 million for the year endedcompared to December 31, 2016. The activity was comprised of2020 due to a (i) $211.4$128.3 million netincrease in cash used in acquiring nine real estate assets during the year, with total gross leasable area of 2.0for acquisitions, (ii) $66.9 million sf, and (ii) $89.3 million netincrease in cash used infor real estate development and capital improvements, at existing properties, partially offsetand (iii) $17.5 million decrease in cash provided by (iii) $5.0 million of proceeds from the sale of our property in Eatontown, NJproperties and the saleoperating leases.
The Company has 21 active development, redevelopment or anchor repositioning projects with total estimated costs of excess land in Kearny, NJ.$218.7 million, of which $72.1 million has been incurred and $146.6 million remains to be funded as of December 31, 2021.
NetThe following summarizes capital expenditures presented on a cash used in investing activities of $59.2 millionbasis for the yearyears ended December 31, 2016 was comprised2021 and 2020:
| | | | | | | | | | | | | | |
| | Year Ended December 31, |
(Amounts in thousands) | | 2021 | | 2020 |
Capital expenditures: | | | | |
Development and redevelopment costs | | $ | 76,750 | | | $ | 15,468 | |
Capital improvements | | 14,944 | | | 10,704 | |
Tenant improvements and allowances | | 3,683 | | | 2,350 | |
Total capital expenditures | | $ | 95,377 | | | $ | 28,522 | |
Development and redevelopment costs includes $20 million incurred by the Company to terminate its three remaining leases with Kmart and Sears at Bruckner Commons, The Outlets at Montehiedra, and Sunrise Mall, effective October 15, 2021. Controlling these anchor spaces is a critical aspect of (i) $69.9 million of real estate additionsthe plans the Company has under way to reposition and (ii) $9.3 million fromredevelop these spaces with uses that appeal to the acquisition of real estate, partially offset by (iii) $19.9 million of proceeds fromrespective communities where the sale of operating properties.properties are located.
Financing Activities
Net cash flow provided byused in financing activities is impacted by the timing and extent of issuances of debt and equity securities, distributions paid to common shareholders and unitholders of the Operating Partnership as well as principal and other payments associated with our outstanding indebtedness.
Net cash provided byused in financing activities of $498.5 million for the year ended December 31, 2017 increased2021, decreased by $614.3$56.7 million from net cash used in financing activities of $115.9 million for the year ended December 31, 2016. The activity was comprised2020 due to (i) $71.1 million decrease in debt repayments primarily related to the mortgage refinancing on our Puerto Rico property in 2020, (ii) $54.1 million of (i) $935.7cash paid to repurchase common shares in 2020, (iii) $27.0 million ofincrease in proceeds from borrowings attributableunder mortgage loans, (iv) $3.5 million decrease in cash used to the issuance of 18 non-recourse secured mortgages, refinancing of our Tonnelle Commons mortgage loanissue debt, (v) $1.2 million decrease in tax withholdings on vested restricted stock, and mortgages assumed and issued to fund acquisitions, (ii) $348.4(vi) $0.8 million of proceeds from the issuance of common shares attributable to an underwritten public offering, and a direct sale of common shares with a large institutional investor, partiallyincrease in cash contributed by noncontrolling interests, offset by (iii) $536.5(vii) $101.0 million used to purchase marketable securitiesincrease in connection with debt defeasance, (iv) $129.6 million for debt repayments, (v) $104.9 million of distributions paid to common shareholders and unitholders of the Operating Partnership, (vi) $13.2 million of debt issuance costs, (vii) $1.1 million payment on extinguishment of debt attributablepartners due to the refinancingtemporary suspension of our Tonnelle Commons mortgage loan,dividends during 2020 and (viii) $0.3 millionthe declaration of taxes withheld on vested restricted units.a special dividend in the fourth quarter of 2020, paid in January 2021.
Net cash used in financing activities of $115.9 million for the year ended December 31, 2016, was comprised of (i) $86.3 million of distributions paidOn May 5, 2021 we established an at-the-market equity program (the “ATM Program”), pursuant to common shareholderswhich we may offer and unitholders of the Operating Partnership and (ii) $38.5 million for debt repayments, partially offset by (iii) $8.9 million of proceeds from the issuance ofsell common shares, including shares issued under our ATM equity program.
Financing Activities and Contractual Obligations
Below is a summarypar value $0.01 per share, with an aggregate gross sales price of our outstanding debt and weighted average interest rate as of December 31, 2017.
|
| | | | | | |
(Amounts in thousands) | | Principal balance at December 31, 2017 | | Weighted Average Interest Rate at December 31, 2017 |
Mortgages payable: | | | | |
Fixed rate debt | | $ | 1,408,817 |
| | 4.14% |
Variable rate debt(1) | | 169,500 |
| | 3.10% |
Total mortgages payable | | 1,578,317 |
| | 4.03% |
Unamortized debt issuance costs | | (13,775 | ) | | |
Total mortgages payable, net of unamortized debt issuance costs | | $ | 1,564,542 |
| | |
(1)up to $250 million. As of December 31, 2017, $80.5 million of our variable rate debt bears interest at one month LIBOR plus 190 bps and $89 million of our variable rate debt bears interest at one month LIBOR plus 160 bps.
The net carrying amount of real estate collateralizing the above indebtedness amounted to approximately $1.3 billion as of December 31, 2017. Our mortgage loans contain covenants that limit our ability to incur additional indebtedness on these properties and in certain circumstances, require lender approval of tenant leases and/or yield maintenance upon repayment prior to maturity. As of December 31, 2017,2021, we were in compliance with all debt covenants.
On January 15, 2015, we entered into a $500 million Revolving Credit Agreement (the “Agreement”) with certain financial institutions. On March 7, 2017, we amended and extended the Agreement. The amendment increased the credit facility size by $100 million to $600 million and extended the maturity date to March 7, 2021 with two six-month extension options. Borrowingshave not issued any common shares under the Agreement are subjectATM Program. Refer to interest at LIBOR plus an applicable margin of 1.10% to 1.55%Part II, Item 8 Equity and an annual facility fee of 15 to 35 basis points. Both the spread over LIBOR and the facility fee are based on our current leverage ratio and are subject to increase if our leverage ratio increases above predefined thresholds. The Agreement contains customary financial covenants, including a maximum leverage ratio of 60% and a minimum fixed charge coverage ratio of 1.5x. No amounts have been drawn to date under the Agreement.
On March 29, 2017, we refinanced the $74 million, 4.59% mortgage loan secured by our Tonnelle Commons property in North Bergen, NJ, increasing the principal balance to $100 million with a 10-year fixed rate mortgage, at 4.18%. As a result, we recognized a loss on extinguishment of debt of $1.3 million during the twelve months ended December 31, 2017 comprised of a $1.1 million prepayment penalty and write-off of $0.2 million of unamortized deferred financing fees on the original loan.
In connection with retail assets acquired during the year ended December 31, 2017, we assumed $69.4 million of existing mortgages, secured by the acquired properties, including $12.6 million with the acquisition of Shops at Bruckner on January 17, 2017, $23.8 million with the acquisition of Hudson Mall on February 2, 2017, and $33 million with the acquisition of Yonkers Gateway Center on May 24, 2017. In addition, we obtained $126 million of non-recourse, secured mortgage debt on May 24 and 25, 2017, in connection with the acquisition of a portfolio of seven retail assets comprising 1.5 million sf of gross leasable area.
During the fourth quarter of 2017, we completed 18 individual, non-recourse mortgage financings totaling $710 million. The new mortgages have a weighted average interest rate of 4.0% with a weighted average term to maturity of 10 years. The proceeds received were used to legally defease and prepay the Company’s $544 million mortgage, cross-collateralized by 39 assets and scheduled to mature in 2020. The cross-collateralized mortgage loan had a weighted average interest rate of 4.2%. As a result of the refinancing, the Company generated $120 million of additional cash proceeds net of refinancing costs, and recognized a $34.1 million loss on extinguishment of debt in the year ended December 31, 2017.
During 2017, our property in Englewood, NJ was transferred to a receiver. Subsequent to December 31, 2017, the property was sold at a foreclosure sale. Upon issuance of the court’s order approving the sale and discharging the receiver, all assets and liabilitiesNoncontrolling Interest for more information related to the property will be removed.this program.
Contractual Obligations
We have contractual obligations related to our mortgage loans described further in Note 76 to the consolidated and combined financial statements included in Part II, Item 8 of this Annual Report on Form 10-K. In addition, we have contractual obligations for certain properties that are subject to long-term ground and building leases where a third party owns and has leased the underlying land to us. We also have non-cancelable operating leases pertaining to office space from which we conduct our business. Below is a summary of our contractual obligations as of December 31, 2017:2021: | | | | Commitments Due by Period | | Commitments Due by Period |
(Amounts in thousands) | | Total | | Less than 1 year | | 1 to 3 years | | 3 to 5 years | | More than 5 years | (Amounts in thousands) | | Total | | Less than 1 year | | 1 to 3 years | | 3 to 5 years | | More than 5 years |
Contractual cash obligations | | | | | | | | | | | Contractual cash obligations | | | | | | | | | | |
Long-term debt obligations(1) | | $ | 2,063,703 |
| | $ | 80,585 |
| | $ | 138,245 |
| | $ | 341,967 |
| | $ | 1,502,906 |
| Long-term debt obligations(1) | | $ | 1,981,997 | | | $ | 155,249 | | | $ | 602,943 | | | $ | 345,191 | | | $ | 878,614 | |
Operating lease obligations | | 66,789 |
| | 9,091 |
| | 15,558 |
| | 11,521 |
| | 30,619 |
| |
Operating lease obligations(2) | | Operating lease obligations(2) | | 89,351 | | | 9,089 | | | 16,437 | | | 12,416 | | | 51,409 | |
Finance lease obligations(2) | | Finance lease obligations(2) | | 6,859 | | | 109 | | | 218 | | | 233 | | | 6,299 | |
| | $ | 2,130,492 |
|
| $ | 89,676 |
|
| $ | 153,803 |
|
| $ | 353,488 |
|
| $ | 1,533,525 |
| | $ | 2,078,207 | | | $ | 164,447 | | | $ | 619,598 | | | $ | 357,840 | | | $ | 936,322 | |
(1) Includes interest and principal payments. Interest on variable rate debt is computed using rates in effect as of December 31, 2017.2021. See Note 6 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information.
(2) See Note 8 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information.
Additional contractual obligations that have been excluded from this table are as follows:
•Obligations related to construction and development contracts, since amounts are not fixed or determinable. Such contracts will generally be due over the next two years;
•Obligations related to maintenance contracts, since these contracts typically can be canceled upon 30 to 60 days’ notice without penalty;
•Obligations related to employment contracts with certain executive officers, since all agreements are subject to cancellation by either the Company or the executive without cause upon notice; and
•Recorded debt premiums or discounts that are not obligations.
Capital Expenditures
The following summarizes capital expenditures presented on aWe believe that cash basis for the years ended December 31, 2017 and 2016:
|
| | | | | | | | |
| | Year Ended December 31, |
(Amounts in thousands) | | 2017 | | 2016 |
Capital expenditures: | | | |
|
Development and redevelopment costs | | $ | 60,477 |
| | $ | 51,585 |
|
Capital improvements | | 13,181 |
| | 15,180 |
|
Tenant improvements and allowances | | 7,568 |
| | 3,136 |
|
Total capital expenditures | | $ | 81,226 |
| | $ | 69,901 |
|
As of December 31, 2017, we had approximately $195.5 million of active redevelopment, development and anchor repositioning projects at various stages of completion and $53.6 million of completed projects, an increase of $57.4 millionflows from $191.7 million of active and completed projects as of December 31, 2016. We have advanced these projects $56.5 million since December 31, 2016 and anticipate that these projects will require an additional $111.4 million over the next two years to complete. We expect to fund these projects usingour current operations, cash on hand, proceeds from dispositions, borrowingsour line of credit under our revolving credit agreement, and/or using secured debt, or issuing equity.
Commitmentsthe potential to refinance our loans and Contingencies
Loan Commitments
In January 2015, we completed a modification ofour general ability to access the $120.0 million, 6.04% mortgage loan secured by Montehiedra. As part of the planned redevelopment of the property, we committed to fund $20.0 million for leasing and other capital expenditures which has been fully funded as of December 31, 2017.
Insurance
The Company maintains (i) general liability insurance with limits of $200 million for properties in the U.S. and Puerto Rico and (ii) all-risk property insurance with limits of $500 million per occurrence and in the aggregate for properties in the U.S. and $139 million for properties in Puerto Rico, subject to the terms, conditions, exclusions, deductibles and sub-limits when applicable for certain perils such as floods and earthquakes and (iii) numerous other insurance policies including trustees’ and officers’ insurance, workers’ compensation and automobile-related liabilities insurance. The Company’s insurance includes coverage for certified acts of terrorism acts but excludes coverage for nuclear, biological, chemical or radiological terrorism events as defined by the Terrorism
Risk Insurance Program Reauthorization Act, which expires in December 2020. In addition, the Company maintains coverage for certain cybersecurity losses with limits of $5 million per occurrence and in the aggregate providing first and third party coverage including network interruption, event management, cyber extortion and claims for media content, security and privacy liability. Insurance premiums are typically charged directly to each of the retail properties and warehouses but not all of the cost of such premiums are recovered. The Company is responsible for deductibles, losses in excess of insurance coverage, and the portion of premiums not covered from retail properties, which could be material.
We continue to monitor the state of the insurance market and the scope and costs of coverage for acts of terrorism. However, we cannot anticipate what coveragemarkets will be available on commercially reasonable terms in the future and expect premiums across most property coverage linessufficient to increase in light of recent events. The incurrence of uninsured losses, costs or uncovered premiums could materially and adversely affectfinance our business, results of operations and financial condition.fund our obligations in both the short-term and long-term.
Hurricane-Related Charges
On September 20, 2017, Hurricane Maria made landfall, damaging our two properties in Puerto Rico. All anchor tenants were open for business within weeks after the hurricane other than Marshalls at Montehiedra, which is being reconstructed. At year-end, approximately 86% of all stores previously occupied prior to the hurricane (as measured by GLA) are open.
As of December 31, 2017, the Company has incurred approximately $5.1 million of costs remediating property damages caused by the hurricane, $3.4 million capitalized within Construction in progress on the consolidated balance sheet and $1.7 million of costs expensed within Casualty and impairment loss on the consolidated statement of income. The Company expects insurance proceeds to cover substantially all of these losses subject to applicable deductibles of approximately $2.3 million.
The Company recognized $2.2 million of business interruption losses, net of $1.8 million in cash advances received from its insurance carrier. Losses of $0.9 million pertained to rent abatements when the malls were closed or inoperable as a result of the hurricane, recorded as a reduction of property rentals and tenant expense reimbursements, and $1.3 million was recorded as a provision for doubtful accounts for unpaid rents. The Company expects to recover a significant portion of these losses from insurance in 2018.
In the third quarter of 2017, the Company also recognized a $2.2 million charge reflecting the net book value of assets damaged as a result of the hurricane included within Casualty and impairment loss on the consolidated statement of income.
The Company has comprehensive, all-risk property insurance coverage on its properties in Puerto Rico, including for business interruption, with a $139 million limit of liability, subject to certain conditions, exclusions, deductibles and sub-limits.
To the extent insurance proceeds ultimately exceed the difference between replacement cost and net book value of the damaged assets, the hurricane related expenses incurred, and/or business interruption losses recognized, the excess will be reflected as income in the period those amounts are received or when receipt is deemed probable.
No determination has been made as to the total amount or timing of insurance payments that may be received as a result of the hurricane.
Environmental Matters
Each of our properties has been subjected to varying degrees of environmental assessment at various times. Based on these assessments and the projected remediation costs, we have accrued costs of $1.2 million and $1.3 million on our consolidated balance sheets as of December 31, 2017 and December 31, 2016, respectively, for potential remediation costs for environmental contamination at two properties. While this accrual reflects our best estimates of the potential costs of remediation at these properties, $0.1 million has currently been expended during the year ended December 31, 2017 and there can be no assurance that the actual costs will not exceed this amount. With respect to our other properties, the environmental assessments did not reveal any material environmental contamination. However, there can be no assurance that the identification of new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites, or changes in cleanup requirements would not result in significant costs to us.
Bankruptcies
Although our base rent is supported by long-term leases, leases may be rejected in a bankruptcy proceeding and the impacted stores may close prior to lease expiration. In the event that a tenant with a significant number of leases in our shopping centers files for bankruptcy and rejects its leases with us, we could experience a reduction in our revenues. We monitor the operating performance and rent collections of all tenants in our shopping centers, especially those tenants in arrears or operating retail formats that are experiencing significant changes in competition, business practice, or store closings in other locations, such as Toys “R” Us, Sears Holding Corporation (“Sears”) and Staples, Inc. (“Staples”). Sears and Staples represent 2.0% and 1.5%, respectively, of our annualized base rent and each continued to close stores in 2017. During September 2017, Toys “R” Us filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code. As of December 31, 2017, the Company had leases with Toys
“R” Us at nine locations with annualized base rent of $5.0 million. We are unable to estimate the outcome of the bankruptcy proceedings at this time. We are not aware of any additional bankruptcies or announced store closings by any tenants in our shopping centers that would individually cause a material reduction in our revenues.
Inflation and Economic Condition Considerations
Most of our leases contain provisions designed to partially mitigate the impact of inflation. Although inflation has been low in recent periods and has had a minimal impact on the performance of our shopping centers, there are more recent data suggesting that inflation may be a greater concern in the future given economic conditions and governmental fiscal policy. Most of our leases require tenants to pay their share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing our exposure to increases in costs and operating expenses resulting from inflation, although some larger tenants have capped the amount of these operating expenses they are responsible for under the lease. A small number of our leases also include percentage rent clauses enabling us to receive additional rent based on tenant sales above a predetermined level, which sales generally increase as prices rise and are typically related to increases in the Consumer Price Index or similar inflation indices.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as defined in Item 303 of Regulation S-K as of December 31, 2017 or December 31, 2016.
| |
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
We have exposure to fluctuations in interest rates, which are sensitive to many factors that are beyond our control. The following table discusses our exposure to hypothetical changes in market rates of interest on interest expense for our variable rate debt and fixed-rate debt. Interest rate risk amounts were determined by considering the impact of hypothetical interest rates on our debt. This analysis does not take into account all of the factors that may affect our debt, such as the effect that a changing interest rate environment could have on the overall level of economic activity or the action that our management might take to reduce our exposure to the change. This analysis assumes no change in our financial structure. Our exposure to a change in interest rates is summarized in the table below. As of December 31, 2017,2021, all of our variable rate debt outstanding had rates indexed to LIBOR.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2021 | | 2020 |
(Amounts in thousands) | December 31, Balance | | Weighted Average Interest Rate | | Effect of 1% Change in Base Rates | | December 31, Balance | | Weighted Average Interest Rate |
| |
Variable Rate | $ | 161,084 | | | 1.85% | | $ | 1,611 | | | $ | 169,371 | | | 1.90% |
Fixed Rate | 1,534,324 | | | 4.10% | | — | | (2) | 1,428,026 | | | 4.16% |
| $ | 1,695,408 | | (1) | | | $ | 1,611 | | | $ | 1,597,397 | | (1) | |
|
| | | | | | | | | | | | | | | |
| 2017 | | 2016 |
(Amounts in thousands) | December 31, Balance | | Weighted Average Interest Rate | | Effect of 1% Change in Base Rates | | December 31, Balance | | Weighted Average Interest Rate |
| |
Variable Rate | $ | 169,500 |
| | 3.10% | | $ | 1,695 |
| | $ | 38,756 |
| | 2.36% |
Fixed Rate | 1,408,817 |
| | 4.14% | | — |
| (2) | 1,166,804 |
| | 4.26% |
| $ | 1,578,317 |
| (1) | | | $ | 1,695 |
| | $ | 1,205,560 |
| (1) | |
(1) Excludes unamortized debt issuance costs of $13.8$8.2 million and $8.0$9.9 million as of December 31, 20172021 and December 31, 2016,2020, respectively.
(2)If the weighted average interest rate of our fixed rate debt increased by 1% (i.e. due to refinancing at higher rates), annualized interest expense would have increasedincrease by approximately $14.1$15.3 million based on outstanding balances as of December 31, 2017.2021.
We may utilize various financial instruments to mitigate the impact of interest rate fluctuations on our cash flows and earnings, including hedging strategies, depending on our analysis of the interest rate environment and the costs and risks of such strategies. As of December 31, 2017,2021, we did not have any material hedging instruments in place.
Fair Value of Debt
The estimated fair value of our consolidated debt is calculated based on current market prices and discounted cash flows at the current rate at which similar loans would be made to borrowers with similar credit ratings for the remaining term of such debt. As of December 31, 2017,2021, the estimated fair value of our consolidated debt was $1.6$1.7 billion.
Other Market Risks
As of December 31, 2021, we had no material exposure to any other market risks (including foreign currency exchange risk or commodity price risk).
In making this determination and for purposes of the SEC’s market risk disclosure requirements, we have estimated the fair value of our financial instruments at December 31, 2021 based on pertinent information available to management as of that date. Although management is not aware of any factors that would significantly affect the estimated amounts as of December 31, 2021, future estimates of fair value and the amounts which may be paid or realized in the future may differ significantly from amounts presented.
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ITEM 8. | ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
INDEX TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
| | | | | | | | |
| | Page |
CONSOLIDATED FINANCIAL STATEMENTS | | Page |
Report of Independent Registered Public Accounting Firm for Urban Edge Properties (PCAOB ID No. 34) | | |
Report of Independent Registered Public Accounting Firm for Urban Edge Properties LP (PCAOB ID No. 34) | | |
Urban Edge Properties Consolidated Balance Sheets as of December 31, 20172021 and 20162020 | | |
Urban Edge Properties Consolidated and Combined Statements of Income for the years ended December 31, 2017, 20162021, 2020 and 20152019 | | |
Urban Edge Properties Consolidated and Combined StatementStatements of Changes in Equity for the years ended December 31, 2017, 20162021, 2020 and 20152019 | | |
Urban Edge Properties Consolidated and Combined Statements of Cash Flows for the years ended December 31, 2017, 20162021, 2020 and 20152019 | | |
Urban Edge Properties LP Consolidated Balance Sheets as of December 31, 20172021 and 20162020 | | |
Urban Edge Properties LP Consolidated and Combined Statements of Income for the years ended December 31, 2017, 20162021, 2020 and 20152019 | | |
Urban Edge Properties LP Consolidated and Combined StatementStatements of Changes in Equity for the years ended December 31, 2017, 20162021, 2020 and 20152019 | | |
Urban Edge Properties LP Consolidated and Combined Statements of Cash Flows for the years ended December 31, 2017, 20162021, 2020 and 20152019 | | |
Notes to Consolidated and Combined Financial Statements | | |
| | |
CONSOLIDATED FINANCIAL STATEMENT SCHEDULES | | |
Schedule III – Real Estate and Accumulated Depreciation | | |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees
of Urban Edge Properties
New York, New York
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Urban Edge Properties and subsidiaries (the "Company") as of December 31, 20172021 and 2016,2020, the related consolidated and combined statements of income, changes in equity, and cash flows for each of the three years in the period ended December 31, 20172021, and the related notes and schedules listed in the Index at Item 15 (collectively referred to as the “financial statements”"financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172021 and 2016,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017,2021, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2017,2021, based on the criteria established in Internal Control -— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 14, 2018,16, 2022, expressed an unqualified opinion on the Company'sCompany’s internal control over financial reporting.
Basis for Opinion
These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’sCompany's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Real Estate Impairment —Refer to Notes 2, 3 and 9 to the financial statements
Critical Audit Matter Description
The Company’s real estate assets are individually evaluated for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company’s evaluation of the recoverability of real estate assets involves the comparison of the projected undiscounted future cash flows expected to be generated by each real estate asset over the Company’s estimated holding period to the respective carrying amount. The Company’s undiscounted future cash flow analyses require management to make significant estimates, including estimated terminal values determined using appropriate capitalization rates. Total real estate assets as of December 31, 2021 had a net book value of $2.4 billion.
Given that the Company’s estimated capitalization rates used in the evaluation of impairment of real estate assets is a significant assumption made by management, performing audit procedures to evaluate the reasonableness of management’s undiscounted future cash flow analyses required a high degree of auditor judgment and an increased level of effort, including the need to involve our fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the Company’s estimated capitalization rates used in the evaluation of impairment of real estate assets included the following, among others:
•We tested the effectiveness of the Company’s internal controls over management’s evaluation of the recoverability of real estate, including internal controls over management’s determination of the reasonableness of the applicable capitalization rates.
•Inquired with management regarding the appropriateness of the capitalization rates, including considerations related to the impact of COVID-19 and evaluating the consistency of the capitalization rates used with evidence obtained in other areas of our audit.
•With the assistance of our fair value specialists, we evaluated the reasonableness of the Company’s estimated capitalization rates by:
◦Testing the source information underlying the determination of the capitalization rates by evaluating the reasonableness of the capitalization rates used by management with independent market data, focusing on key factors, including the impact of the COVID-19 pandemic, geographical location, tenant composition, and property type.
◦Developing a range of independent estimates of capitalization rates and comparing those to the capitalization rates selected by management.
/s/ DELOITTE & TOUCHE LLP
New York, New York
February 14, 201816, 2022
We have served as the Company'sCompany’s auditor since 2014.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of
Urban Edge Properties LP
New York, New York
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Urban Edge Properties LP (the "Operating Partnership") as of December 31, 20172021 and 2016,2020, and the related consolidated and combined statements of income, changes in equity, and cash flows for each of the three years in the period ended December 31, 20172021, and the related notes and schedules listed in the Index at Item 15 (collectively referred to as the “financial statements”"financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Operating Partnership as of December 31, 20172021 and 2016,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017,2021, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Operating Partnership's internal control over financial reporting as of December 31, 2017,2021, based on the criteria established in Internal Control -— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 14, 2018,16, 2022, expressed an unqualified opinion on the Operating Partnership 'sPartnership’s internal control over financial reporting.
Basis for Opinion
These financial statements and financial statement schedules are the responsibility of the Operating Partnership 'sPartnership's management. Our responsibility is to express an opinion on the Operating Partnership’sPartnership's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Operating Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Real Estate Impairment —Refer to Notes 2, 3 and 9 to the financial statements
Critical Audit Matter Description
The Operating Partnership's real estate assets are individually evaluated for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. The Operating Partnership's evaluation of the recoverability of real estate assets involves the comparison of the projected undiscounted future cash flows expected to be generated by each real estate asset over the Operating Partnership's estimated holding period to the respective carrying amount. The Operating Partnership's undiscounted future cash flow analyses require management to make significant estimates, including estimated terminal values determined using appropriate capitalization rates. Total real estate assets as of December 31, 2021 had a net book value of $2.4 billion.
Given that the Operating Partnership's estimated capitalization rates used in the evaluation of impairment of real estate assets is a significant assumption made by management, performing audit procedures to evaluate the reasonableness of management’s undiscounted future cash flow analyses required a high degree of auditor judgment and an increased level of effort, including the need to involve our fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the Operating Partnership's estimated capitalization rates used in the evaluation of impairment of real estate assets included the following, among others:
•We tested the effectiveness of the Operating Partnership's internal controls over management’s evaluation of the recoverability of real estate, including internal controls over management’s determination of the reasonableness of the applicable capitalization rates.
•Inquired with management regarding the appropriateness of the capitalization rates, including considerations related to the impact of COVID-19 and evaluating the consistency of the capitalization rates used with evidence obtained in other areas of our audit.
•With the assistance of our fair value specialists, we evaluated the reasonableness of the Operating Partnership's estimated capitalization rates by:
◦Testing the source information underlying the determination of the capitalization rates by evaluating the reasonableness of the capitalization rates used by management with independent market data, focusing on key factors, including the impact of the COVID-19 pandemic, geographical location, tenant composition, and property type.
◦Developing a range of independent estimates of capitalization rates and comparing those to the capitalization rates selected by management.
/s/ DELOITTE & TOUCHE LLP
New York, New York
February 14, 201816, 2022
We have served as the Operating Partnership'sPartnership’s auditor since 2016.
URBAN EDGE PROPERTIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
| | | | | | | | | | | |
| December 31, | | December 31, |
| 2021 | | 2020 |
ASSETS | | | |
Real estate, at cost: | | | |
Land | $ | 543,827 | | | $ | 568,662 | |
Buildings and improvements | 2,441,797 | | | 2,326,450 | |
Construction in progress | 212,296 | | | 44,689 | |
Furniture, fixtures and equipment | 7,530 | | | 7,016 | |
Total | 3,205,450 | | | 2,946,817 | |
Accumulated depreciation and amortization | (753,947) | | | (730,366) | |
Real estate, net | 2,451,503 | | | 2,216,451 | |
Operating lease right-of-use assets | 69,361 | | | 80,997 | |
Cash and cash equivalents | 164,478 | | | 384,572 | |
Restricted cash | 55,358 | | | 34,681 | |
Tenant and other receivables | 15,812 | | | 15,673 | |
Receivables arising from the straight-lining of rents | 62,692 | | | 62,106 | |
Identified intangible assets, net of accumulated amortization of $37,361 and $37,009, respectively | 71,107 | | | 56,184 | |
Deferred leasing costs, net of accumulated amortization of $17,641 and $16,419, respectively | 20,694 | | | 18,585 | |
Prepaid expenses and other assets | 74,111 | | | 70,311 | |
Total assets | $ | 2,985,116 | | | $ | 2,939,560 | |
| | | |
LIABILITIES AND EQUITY | | | |
Liabilities: | | | |
Mortgages payable, net | $ | 1,687,190 | | | $ | 1,587,532 | |
Operating lease liabilities | 64,578 | | | 74,972 | |
Accounts payable, accrued expenses and other liabilities | 84,829 | | | 132,980 | |
Identified intangible liabilities, net of accumulated amortization of $35,029 and $71,375, respectively | 100,625 | | | 148,183 | |
Total liabilities | 1,937,222 | | | 1,943,667 | |
Commitments and contingencies (Note 10) | 0 | | 0 |
Shareholders’ equity: | | | |
Common shares: $0.01 par value; 500,000,000 shares authorized and 117,147,986 and 117,014,317 shares issued and outstanding, respectively | 1,170 | | | 1,169 | |
Additional paid-in capital | 1,001,253 | | | 989,863 | |
Accumulated deficit | (7,091) | | | (39,467) | |
Noncontrolling interests: | | | |
Operating partnership | 39,616 | | | 38,456 | |
Consolidated subsidiaries | 12,946 | | | 5,872 | |
Total equity | 1,047,894 | | | 995,893 | |
Total liabilities and equity | $ | 2,985,116 | | | $ | 2,939,560 | |
|
| | | | | | | |
| December 31, | | December 31, |
| 2017 | | 2016 |
ASSETS |
| | |
|
Real estate, at cost: | |
| | |
|
Land | $ | 521,669 |
| | $ | 384,217 |
|
Buildings and improvements | 2,010,527 |
| | 1,650,054 |
|
Construction in progress | 133,761 |
| | 99,236 |
|
Furniture, fixtures and equipment | 5,897 |
| | 4,993 |
|
Total | 2,671,854 |
| | 2,138,500 |
|
Accumulated depreciation and amortization | (587,127 | ) | | (541,077 | ) |
Real estate, net | 2,084,727 |
| | 1,597,423 |
|
Cash and cash equivalents | 490,279 |
| | 131,654 |
|
Restricted cash | 10,562 |
| | 8,532 |
|
Tenant and other receivables, net of allowance for doubtful accounts of $4,937 and $2,332, respectively | 20,078 |
| | 9,340 |
|
Receivable arising from the straight-lining of rents, net of allowance for doubtful accounts of $494 and $261, respectively | 85,843 |
| | 87,695 |
|
Identified intangible assets, net of accumulated amortization of $33,827 and $22,361, respectively | 87,249 |
| | 30,875 |
|
Deferred leasing costs, net of accumulated amortization of $14,796 and $13,909, respectively | 20,268 |
| | 19,241 |
|
Deferred financing costs, net of accumulated amortization of $1,740 and $726, respectively | 3,243 |
| | 1,936 |
|
Prepaid expenses and other assets | 18,559 |
| | 17,442 |
|
Total assets | $ | 2,820,808 |
| | $ | 1,904,138 |
|
| | | |
LIABILITIES AND EQUITY | |
| | |
|
Liabilities: | | | |
Mortgages payable, net | $ | 1,564,542 |
| | $ | 1,197,513 |
|
Identified intangible liabilities, net of accumulated amortization of $65,832 and $72,528, respectively | 180,959 |
| | 146,991 |
|
Accounts payable and accrued expenses | 69,595 |
| | 48,842 |
|
Other liabilities | 15,171 |
| | 14,675 |
|
Total liabilities | 1,830,267 |
| | 1,408,021 |
|
Commitments and contingencies |
|
| |
|
|
Shareholders’ equity: | | | |
Common shares: $0.01 par value; 500,000,000 shares authorized and 113,827,529 and 99,754,900 shares issued and outstanding, respectively | 1,138 |
| | 997 |
|
Additional paid-in capital | 946,402 |
| | 488,375 |
|
Accumulated deficit | (57,621 | ) | | (29,066 | ) |
Noncontrolling interests: | | | |
Operating partnership | 100,218 |
| | 35,451 |
|
Consolidated subsidiaries | 404 |
| | 360 |
|
Total equity | 990,541 |
| | 496,117 |
|
Total liabilities and equity | $ | 2,820,808 |
| | $ | 1,904,138 |
|
See notes to consolidated and combined financial statements.
URBAN EDGE PROPERTIES
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
(In thousands, except share and per share amounts)
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2021 | | 2020 | | 2019 |
REVENUE | | | | | |
Rental revenue | $ | 422,467 | | | $ | 328,280 | | | $ | 384,405 | |
Management and development fees | 1,169 | | | 1,283 | | | 1,900 | |
Other income | 1,446 | | | 532 | | | 1,344 | |
Total revenue | 425,082 | | | 330,095 | | | 387,649 | |
EXPENSES | | | | | |
Depreciation and amortization | 92,331 | | | 96,029 | | | 94,116 | |
Real estate taxes | 63,844 | | | 60,049 | | | 60,179 | |
Property operating | 68,531 | | | 56,126 | | | 64,062 | |
General and administrative | 39,152 | | | 48,682 | | | 38,220 | |
Casualty and impairment loss, net(1) | 468 | | | 3,055 | | | 12,738 | |
Lease expense | 12,872 | | | 13,667 | | | 14,466 | |
Total expenses | 277,198 | | | 277,608 | | | 283,781 | |
Gain on sale of real estate | 18,648 | | | 39,775 | | | 68,632 | |
Gain on sale of lease | — | | | — | | | 1,849 | |
Interest income | 360 | | | 2,599 | | | 9,774 | |
Interest and debt expense | (57,938) | | | (71,015) | | | (66,639) | |
Gain on extinguishment of debt | — | | | 34,908 | | | — | |
Income before income taxes | 108,954 | | | 58,754 | | | 117,484 | |
Income tax (expense) benefit | (1,139) | | | 38,996 | | | (1,287) | |
Net income | 107,815 | | | 97,750 | | | 116,197 | |
Less net (income) loss attributable to noncontrolling interests in: | | | | | |
Operating partnership | (4,296) | | | (4,160) | | | (6,699) | |
Consolidated subsidiaries | (833) | | | (1) | | | 25 | |
Net income attributable to common shareholders | $ | 102,686 | | | $ | 93,589 | | | $ | 109,523 | |
| | | | | |
Earnings per common share - Basic: | $ | 0.88 | | | $ | 0.79 | | | $ | 0.91 | |
Earnings per common share - Diluted: | $ | 0.88 | | | $ | 0.79 | | | $ | 0.91 | |
Weighted average shares outstanding - Basic | 117,029 | | | 117,722 | | | 119,751 | |
Weighted average shares outstanding - Diluted | 121,447 | | | 117,902 | | | 119,896 | |
|
| | | | | | | | | | | |
| Year Ended December 31, |
| 2017 | | 2016 | | 2015 |
REVENUE | | | | | |
Property rentals | $ | 265,984 |
| | $ | 236,798 |
| | $ | 231,867 |
|
Tenant expense reimbursements | 99,098 |
| | 84,921 |
| | 84,617 |
|
Management and development fees | 1,535 |
| | 1,759 |
| | 2,261 |
|
Income from acquired leasehold interest | 39,215 |
| | — |
| | — |
|
Other income | 1,210 |
| | 2,498 |
| | 4,200 |
|
Total revenue | 407,042 |
| | 325,976 |
| | 322,945 |
|
EXPENSES | | | | | |
Depreciation and amortization | 82,281 |
| | 56,145 |
| | 57,253 |
|
Real estate taxes | 59,737 |
| | 51,429 |
| | 49,311 |
|
Property operating | 50,894 |
| | 45,280 |
| | 50,595 |
|
General and administrative | 30,413 |
| | 27,438 |
| | 32,044 |
|
Casualty and impairment loss | 7,382 |
| | — |
| | — |
|
Ground rent | 10,848 |
| | 10,047 |
| | 10,129 |
|
Transaction costs | 278 |
| | 1,405 |
| | 24,011 |
|
Provision for doubtful accounts | 3,445 |
| | 1,214 |
| | 1,526 |
|
Total expenses | 245,278 |
| | 192,958 |
| | 224,869 |
|
Operating income | 161,764 |
| | 133,018 |
| | 98,076 |
|
Gain on sale of real estate | 202 |
| | 15,618 |
| | — |
|
Interest income | 2,248 |
| | 679 |
| | 150 |
|
Interest and debt expense | (56,218 | ) | | (51,881 | ) | | (55,584 | ) |
Loss on extinguishment of debt | (35,336 | ) | | — |
| | — |
|
Income before income taxes | 72,660 |
| | 97,434 |
| | 42,642 |
|
Income tax benefit (expense) | 278 |
| | (804 | ) | | (1,294 | ) |
Net income | 72,938 |
| | 96,630 |
| | 41,348 |
|
Less (net income) loss attributable to noncontrolling interests in: | | | | | |
Operating partnership | (5,824 | ) | | (5,812 | ) | | (2,547 | ) |
Consolidated subsidiaries | (44 | ) | | (3 | ) | | (16 | ) |
Net income attributable to common shareholders | $ | 67,070 |
| | $ | 90,815 |
| | $ | 38,785 |
|
| | | | | |
Earnings per common share - Basic: | $ | 0.62 |
| | $ | 0.91 |
| | $ | 0.39 |
|
Earnings per common share - Diluted: | $ | 0.61 |
| | $ | 0.91 |
| | $ | 0.39 |
|
Weighted average shares outstanding - Basic | 107,132 |
| | 99,364 |
| | 99,252 |
|
Weighted average shares outstanding - Diluted | 118,390 |
| | 99,794 |
| | 99,278 |
|
(1) Refer to Note 2 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
See notes to consolidated and combined financial statements.
URBAN EDGE PROPERTIES
CONSOLIDATED AND COMBINED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except share and per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Shares | | | | | | Noncontrolling Interests (“NCI”) | | |
| Shares | | Amount | | Additional Paid-In Capital | | Accumulated Earnings (Deficit) | | Operating Partnership | | Consolidated Subsidiaries | | Total Equity |
Balance, January 1, 2019 | 114,345,565 | | $ | 1,143 | | | $ | 956,420 | | | $ | (52,857) | | | $ | 100,822 | | | $ | 449 | | | $ | 1,005,977 | |
Net income attributable to common shareholders | — | | | — | | | — | | | 109,523 | | | — | | | — | | | 109,523 | |
Net income (loss) attributable to noncontrolling interests | — | | | — | | | — | | | — | | | 6,699 | | | (25) | | | 6,674 | |
Impact of ASC 842 adoption | — | | | — | | | — | | | (2,918) | | | — | | | — | | | (2,918) | |
Limited partnership interests: | | | | | | | | | | | | | |
Units redeemed for common shares | 6,995,941 | | | 69 | | | 55,788 | | | — | | | (4,279) | | | — | | | 51,578 | |
Units redeemed for cash | — | | | — | | | (3,422) | | | — | | | (2,556) | | | — | | | (5,978) | |
Reallocation of noncontrolling interests | — | | | — | | | 4,521 | | | — | | | (56,099) | | | — | | | (51,578) | |
Common shares issued | 59,895 | | | 1 | | | 569 | | | (131) | | | — | | | — | | | 439 | |
Dividends to common shareholders ($0.88 per share) | — | | | — | | | — | | | (106,163) | | | — | | | — | | | (106,163) | |
Distributions to redeemable NCI ($0.88 per unit) | — | | | — | | | — | | | — | | | (5,694) | | | — | | | (5,694) | |
Share-based compensation expense | — | | | — | | | 5,906 | | | — | | | 7,643 | | | — | | | 13,549 | |
Share-based awards retained for taxes | (31,276) | | | — | | | (633) | | | — | | | — | | | — | | | (633) | |
Balance, December 31, 2019 | 121,370,125 | | 1,213 | | | 1,019,149 | | | (52,546) | | | 46,536 | | | 424 | | | 1,014,776 | |
Net income attributable to common shareholders | — | | | — | | | — | | | 93,589 | | | — | | | — | | | 93,589 | |
Net income attributable to noncontrolling interests | — | | | — | | | — | | | — | | | 4,160 | | | 1 | | | 4,161 | |
| | | | | | | | | | | | | |
Limited partnership interests: | | | | | | | | | | | | | |
Units redeemed for common shares | 1,579,389 | | | 15 | | | 11,129 | | | — | | | — | | | — | | | 11,144 | |
| | | | | | | | | | | | | |
Reallocation of noncontrolling interests | — | | | — | | | 8,833 | | | — | | | (19,977) | | | — | | | (11,144) | |
Common shares issued | 66,588 | | | 1 | | | 427 | | | (30) | | | — | | | — | | | 398 | |
Repurchase of common shares | (5,873,923) | | | (59) | | | (54,082) | | | — | | | — | | | — | | | (54,141) | |
Dividends to common shareholders ($0.68 per share) | — | | | — | | | — | | | (80,480) | | | — | | | — | | | (80,480) | |
Distributions to redeemable NCI ($0.68 per unit) | — | | | — | | | — | | | — | | | (3,386) | | | — | | | (3,386) | |
Contributions from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | 5,447 | | | 5,447 | |
Share-based compensation expense | — | | | — | | | 5,871 | | | — | | | 11,123 | | | — | | | 16,994 | |
Share-based awards retained for taxes | (127,862) | | | (1) | | | (1,464) | | | — | | | — | | | — | | | (1,465) | |
Balance, December 31, 2020 | 117,014,317 | | $ | 1,169 | | | $ | 989,863 | | | $ | (39,467) | | | $ | 38,456 | | | $ | 5,872 | | | $ | 995,893 | |
Net income attributable to common shareholders | — | | | — | | | — | | | 102,686 | | | — | | | — | | | 102,686 | |
Net income attributable to noncontrolling interests | — | | | — | | | — | | | — | | | 4,296 | | | 833 | | | 5,129 | |
Limited partnership interests: | | | | | | | | | | | | | |
Units redeemed for common shares | 100,000 | | | — | | | 840 | | | — | | | (6,302) | | | — | | | (5,462) | |
Reallocation of noncontrolling interests | — | | | — | | | 8,206 | | | — | | | (2,744) | | | — | | | 5,462 | |
Common shares issued | 46,731 | | | 1 | | | 509 | | | (144) | | | — | | | — | | | 366 | |
| | | | | | | | | | | | | |
Dividends to common shareholders ($0.60 per share) | — | | | — | | | — | | | (70,166) | | | — | | | — | | | (70,166) | |
Distributions to redeemable NCI ($0.60 per unit) | — | | | — | | | — | | | — | | | (2,864) | | | — | | | (2,864) | |
Contributions from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | 6,241 | | | 6,241 | |
Share-based compensation expense | — | | | — | | | 2,045 | | | — | | | 8,774 | | | — | | | 10,819 | |
Share-based awards retained for taxes | (13,062) | | | — | | | (210) | | | — | | | — | | | — | | | (210) | |
Balance, December 31, 2021 | 117,147,986 | | $ | 1,170 | | | $ | 1,001,253 | | | $ | (7,091) | | | $ | 39,616 | | | $ | 12,946 | | | $ | 1,047,894 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Shares | | | | | | | | Noncontrolling Interests (“NCI”) | | |
| Shares | | Amount |
| | Additional Paid-In Capital | | Vornado Equity | | Accumulated Earnings (Deficit) | | Operating Partnership | | Consolidated Subsidiaries | | Total Equity |
Balance, January 1, 2015 | — |
| | $ | — |
| | $ | — |
| | $ | 258,522 |
| | $ | — |
| | $ | — |
| | $ | 341 |
| | $ | 258,863 |
|
Net income (loss) attributable to common shareholders(1) | — |
| | — |
| | — |
| | (2,022 | ) | | 40,807 |
| | — |
| | — |
| | 38,785 |
|
Net income attributable to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | 2,547 |
| | 16 |
| | 2,563 |
|
Limited partnership units issued to Vornado at separation | — |
| | — |
| | — |
| | (27,649 | ) | | — |
| | 27,649 |
| | — |
| | — |
|
Contributions from Vornado | — |
| | — |
| | — |
| | 245,067 |
| | — |
| | — |
| | — |
| | 245,067 |
|
Issuance of shares in connection with separation | 99,247,806 |
| | 993 |
| | 472,925 |
| | (473,918 | ) | | — |
| | — |
| | — |
| | — |
|
Common shares issued | 43,146 |
| | — |
| | 258 |
| | — |
| | (258 | ) | | — |
| | — |
| | — |
|
Dividends on common shares ($0.80 per share) | — |
| | — |
| | — |
| | — |
| | (79,167 | ) | | — |
| | — |
| | (79,167 | ) |
Share-based compensation expense | — |
| | — |
| | 2,186 |
| | — |
| | 176 |
| | 7,899 |
| | — |
| | 10,261 |
|
Distributions to operating partnership ($0.80 per unit) | — |
| | — |
| | — |
| | — |
| | — |
| | (4,918 | ) | | — |
| | (4,918 | ) |
Balance, December 31, 2015 | 99,290,952 |
| | 993 |
| | 475,369 |
| | — |
| | (38,442 | ) | | 33,177 |
| | 357 |
| | 471,454 |
|
Net income attributable to common shareholders | — |
| | — |
| | — |
| | — |
| | 90,815 |
| | — |
| | — |
| | 90,815 |
|
Net income attributable to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | 5,812 |
| | 3 |
| | 5,815 |
|
Common shares issued | 465,534 |
| | 4 |
| | 9,293 |
| | — |
| | (348 | ) | | — |
| | — |
| | 8,949 |
|
Share-based awards retained for taxes | (1,586 | ) | | — |
| | (38 | ) | | — |
| | — |
| | — |
| | — |
| | (38 | ) |
Dividends on common shares ($0.82 per share) | — |
| | — |
| | — |
| | — |
| | (81,240 | ) | | — |
| | — |
| | (81,240 | ) |
Share-based compensation expense | — |
| | — |
| | 3,751 |
| | — |
| | 149 |
| | 1,533 |
| | — |
| | 5,433 |
|
Distributions to operating partnership ($0.82 per unit) | — |
| | — |
| | — |
| | — |
| | — |
| | (5,071 | ) | | — |
| | (5,071 | ) |
Balance, December 31, 2016 | 99,754,900 |
| | 997 |
| | 488,375 |
| | — |
| | (29,066 | ) | | 35,451 |
| | 360 |
| | 496,117 |
|
Net income attributable to common shareholders
| — |
| |
|
| | — |
| | — |
| | 67,070 |
| | — |
| | — |
| | 67,070 |
|
Net income attributable to noncontrolling interests
| — |
| |
|
| | — |
| | — |
| | — |
| | 5,824 |
| | 44 |
| | 5,868 |
|
Limited partnership units issued | — |
| | — |
| | 105,200 |
| | — |
| | — |
| | 65,884 |
| | — |
| | 171,084 |
|
Common shares issued
| 14,083,137 |
| | 141 |
| | 348,582 |
| | — |
| | (319 | ) | | — |
| | — |
| | 348,404 |
|
Share-based awards withheld for taxes
| (10,508 | ) | | — |
| | (287 | ) | | — |
| | — |
| | — |
| | — |
| | (287 | ) |
Dividends on common shares ($0.88 per share) | — |
| |
|
| | — |
| | — |
| | (95,381 | ) | | — |
| | — |
| | (95,381 | ) |
Share-based compensation expense
| — |
| |
|
| | 4,532 |
| | — |
| | 75 |
| | 2,530 |
| | — |
| | 7,137 |
|
Distributions to operating partnership ($0.88 per unit) | — |
| |
|
| | — |
| | — |
| | — |
| | (9,471 | ) | | — |
| | (9,471 | ) |
Balance, December 31, 2017 | 113,827,529 |
| | $ | 1,138 |
| | $ | 946,402 |
| | $ | — |
| | $ | (57,621 | ) | | $ | 100,218 |
| | $ | 404 |
| | $ | 990,541 |
|
See notes to consolidated and combined financial statements.
URBAN EDGE PROPERTIES
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(In thousands)
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2021 | | 2020 | | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | |
Net income | $ | 107,815 | | | $ | 97,750 | | | $ | 116,197 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation and amortization | 94,135 | | | 97,751 | | | 96,641 | |
Casualty and impairment loss, net | 468 | | | 3,055 | | | 12,738 | |
Gain on sale of real estate | (18,648) | | | (39,775) | | | (68,632) | |
Gain on sale of lease | — | | | — | | | (1,849) | |
Gain on extinguishment of debt | — | | | (34,908) | | | — | |
Amortization of below market leases, net | (55,173) | | | (10,624) | | | (15,940) | |
| | | | | |
Noncash lease expense | 6,802 | | | 7,522 | | | 8,205 | |
Straight-lining of rent | (878) | | | 10,523 | | | 1,021 | |
Share-based compensation expense | 10,819 | | | 16,994 | | | 13,549 | |
| | | | | |
Change in operating assets and liabilities: | | | | | |
Tenant and other receivables | (139) | | | 5,892 | | | 8,119 | |
Deferred leasing costs | (5,818) | | | (1,218) | | | (4,303) | |
Prepaid and other assets | 5,661 | | | (41,982) | | | (3,331) | |
Lease liabilities | (6,227) | | | (6,680) | | | (7,107) | |
Accounts payable, accrued expenses and other liabilities | (3,544) | | | 8,522 | | | 1,092 | |
Net cash provided by operating activities | 135,273 | | | 112,822 | | | 156,400 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | |
Real estate development and capital improvements | (95,377) | | | (28,522) | | | (91,301) | |
Acquisitions of real estate | (252,632) | | | (124,340) | | | (47,356) | |
Proceeds from sale of operating properties | 34,482 | | | 54,402 | | | 116,510 | |
Proceeds from sale of operating lease | 2,367 | | | — | | | 6,949 | |
Insurance proceeds | — | | | — | | | 12,677 | |
Net cash used in investing activities | (311,160) | | | (98,460) | | | (2,521) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | |
Debt repayments | (18,192) | | | (89,302) | | | (5,587) | |
Dividends paid to common shareholders | (123,998) | | | (26,647) | | | (106,163) | |
Distributions paid to redeemable noncontrolling interests | (4,937) | | | (1,314) | | | (5,694) | |
Taxes withheld for vested restricted shares | (210) | | | (1,465) | | | (633) | |
Debt issuance costs | — | | | (3,471) | | | (2,649) | |
Payment for redemption of units | — | | | — | | | (5,978) | |
Proceeds related to the issuance of common shares | 366 | | | 398 | | | 439 | |
Cash paid to repurchase shares | — | | | (54,141) | | | — | |
Contributions from noncontrolling interests | 6,241 | | | 5,447 | | | — | |
Proceeds from borrowings | 117,200 | | | 90,250 | | | — | |
Net cash used in financing activities | (23,530) | | | (80,245) | | | (126,265) | |
Net (decrease) increase in cash and cash equivalents and restricted cash | (199,417) | | | (65,883) | | | 27,614 | |
Cash and cash equivalents and restricted cash at beginning of year | 419,253 | | | 485,136 | | | 457,522 | |
Cash and cash equivalents and restricted cash at end of year | $ | 219,836 | | | $ | 419,253 | | | $ | 485,136 | |
|
| | | | | | | | | | | |
| Year Ended December 31, |
| 2017 | | 2016 | | 2015 |
CASH FLOWS FROM OPERATING ACTIVITIES | |
| | |
| | |
Net income | $ | 72,938 |
| | $ | 96,630 |
| | $ | 41,348 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | |
| | |
| | |
Depreciation and amortization | 82,511 |
| | 57,178 |
| | 58,299 |
|
Income from acquired leasehold interest | (39,215 | ) | | — |
| | — |
|
Casualty and impairment loss | 5,637 |
| | — |
| | — |
|
Loss on extinguishment of debt | 35,336 |
| | — |
| | — |
|
Amortization of deferred financing costs | 2,876 |
| | 2,830 |
| | 2,738 |
|
Amortization of above and below market leases, net | (9,502 | ) | | (7,776 | ) | | (7,907 | ) |
Straight-lining of rent | 352 |
| | 227 |
| | 333 |
|
Share-based compensation expense | 7,137 |
| | 5,433 |
| | 10,261 |
|
Gain on sale of real estate | (202 | ) | | (15,618 | ) | | — |
|
Non-cash separation costs paid by Vornado | — |
| | — |
| | 17,403 |
|
Provision for doubtful accounts | 3,445 |
| | 1,214 |
| | 1,526 |
|
Change in operating assets and liabilities: | |
| | |
| | |
Tenant and other receivables | (13,749 | ) | | (78 | ) | | (4 | ) |
Deferred leasing costs | (4,110 | ) | | (3,815 | ) | | (2,940 | ) |
Prepaid and other assets | (4,432 | ) | | 141 |
| | (671 | ) |
Accounts payable and accrued expenses | 18,594 |
| | (237 | ) | | 11,300 |
|
Other liabilities | 282 |
| | 1,120 |
| | 6,392 |
|
Net cash provided by operating activities | 157,898 |
| | 137,249 |
| | 138,078 |
|
CASH FLOWS FROM INVESTING ACTIVITIES | |
| | |
| | |
Real estate development and capital improvements | (89,344 | ) | | (69,901 | ) | | (36,290 | ) |
Acquisition of real estate | (211,393 | ) | | (9,267 | ) | | (30,125 | ) |
Proceeds from sale of real estate | 5,005 |
| | 19,938 |
| | — |
|
Net cash used in investing activities | (295,732 | ) | | (59,230 | ) |
| (66,415 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES | |
| | |
| | |
Debt repayments | (129,640 | ) | | (38,458 | ) | | (44,654 | ) |
Contributions from Vornado | — |
| | — |
| | 227,732 |
|
Dividends paid to shareholders | (95,381 | ) | | (81,240 | ) | | (79,167 | ) |
Distributions to noncontrolling interests in operating partnership | (9,471 | ) | | (5,071 | ) | | (4,918 | ) |
Debt issuance costs | (13,193 | ) | | — |
| | (5,198 | ) |
Taxes withheld for vested restricted shares | (287 | ) | | (38 | ) | | — |
|
Payment on extinguishment of debt | (1,138 | ) | | — |
| | — |
|
Proceeds from issuance of common shares, net | 348,404 |
| | 8,949 |
| | — |
|
Purchase of marketable securities in connection with debt defeasance | (536,505 | ) | | — |
| | — |
|
Proceeds from borrowings | 935,700 |
| | — |
| | — |
|
Net cash provided by (used in) financing activities | 498,489 |
| | (115,858 | ) | | 93,795 |
|
Net increase (decrease) in cash and cash equivalents and restricted cash | 360,655 |
| | (37,839 | ) | | 165,458 |
|
Cash and cash equivalents and restricted cash at beginning of year | 140,186 |
| | 178,025 |
| | 12,567 |
|
Cash and cash equivalents and restricted cash at end of year | $ | 500,841 |
| | $ | 140,186 |
| | $ | 178,025 |
|
See notes to consolidated and combined financial statements.
statements
| | | Year Ended December 31, | | Year Ended December 31, |
| 2017 | | 2016 | | 2015 | | 2021 | | 2020 | | 2019 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | | | | | | SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | | | | |
Cash payment for interest, includes amounts capitalized of $3,926, $3,763 and $1,856, respectively | $ | 55,140 |
| | $ | 51,137 |
| | $ | 52,814 |
| |
Cash payments for interest net of amounts capitalized of $2,023, $715 and $1,425, respectively | | Cash payments for interest net of amounts capitalized of $2,023, $715 and $1,425, respectively | $ | 58,621 | | | $ | 68,113 | | | $ | 64,751 | |
Cash payments for income taxes | 1,237 |
| | 1,277 |
| | 1,907 |
| Cash payments for income taxes | 4,663 | | | 499 | | | 1,601 | |
NON-CASH INVESTING AND FINANCING ACTIVITIES | | | | | | NON-CASH INVESTING AND FINANCING ACTIVITIES | |
Acquisition of real estate through issuance of OP units | 171,084 |
| | — |
| | — |
| |
Acquisition of real estate through assumption of debt | 69,659 |
| | — |
| | — |
| |
Accrued capital expenditures included in accounts payable and accrued expenses | 14,651 |
| | 12,492 |
| | 8,699 |
| Accrued capital expenditures included in accounts payable and accrued expenses | 18,702 | | | 5,808 | | | 5,056 | |
Write-off of fully depreciated assets | 3,286 |
| | 4,585 |
| | 10,588 |
| |
Marketable securities transferred in connection with debt defeasance | 536,590 |
| | — |
| | — |
| |
Defeasance of mortgages payable | (505,473 | ) | | — |
| | — |
| |
Write-off of fully depreciated and impaired assets | | Write-off of fully depreciated and impaired assets | 10,706 | | | 21,447 | | | 56,199 | |
Forgiveness of mortgage debt | | Forgiveness of mortgage debt | — | | | 30,000 | | | — | |
Assumption of debt from the acquisition of real estate | | Assumption of debt from the acquisition of real estate | — | | | 72,473 | | | — | |
Dividend/distribution declared and paid in subsequent period | | Dividend/distribution declared and paid in subsequent period | — | | | 55,905 | | | — | |
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH | | | | | | RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH | |
Cash and cash equivalents at beginning of year | $ | 131,654 |
| | $ | 168,983 |
| | $ | 2,600 |
| Cash and cash equivalents at beginning of year | $ | 384,572 | | | $ | 432,954 | | | $ | 440,430 | |
Restricted cash at beginning of year | 8,532 |
| | 9,042 |
| | 9,967 |
| Restricted cash at beginning of year | 34,681 | | | 52,182 | | | 17,092 | |
Cash and cash equivalents and restricted cash at beginning of year | $ | 140,186 |
| | $ | 178,025 |
| | $ | 12,567 |
| Cash and cash equivalents and restricted cash at beginning of year | $ | 419,253 | | | $ | 485,136 | | | $ | 457,522 | |
| | | | | | | | | | | |
Cash and cash equivalents at end of year | $ | 490,279 |
| | $ | 131,654 |
| | $ | 168,983 |
| Cash and cash equivalents at end of year | $ | 164,478 | | | $ | 384,572 | | | $ | 432,954 | |
Restricted cash at end of year | 10,562 |
| | 8,532 |
| | 9,042 |
| Restricted cash at end of year | 55,358 | | | 34,681 | | | 52,182 | |
Cash and cash equivalents and restricted cash at end of year | $ | 500,841 |
| | $ | 140,186 |
| | $ | 178,025 |
| Cash and cash equivalents and restricted cash at end of year | $ | 219,836 | | | $ | 419,253 | | | $ | 485,136 | |
See notes to consolidated and combined financial statements.
URBAN EDGE PROPERTIES LP
CONSOLIDATED BALANCE SHEETS
(In thousands, except unit and per unit amounts)
| | | December 31, | | December 31, | | December 31, | | December 31, |
| 2017 | | 2016 | | 2021 | | 2020 |
ASSETS | | | |
| ASSETS | | | |
Real estate, at cost: | |
| | |
| Real estate, at cost: | | | |
Land | $ | 521,669 |
| | $ | 384,217 |
| Land | $ | 543,827 | | | $ | 568,662 | |
Buildings and improvements | 2,010,527 |
| | 1,650,054 |
| Buildings and improvements | 2,441,797 | | | 2,326,450 | |
Construction in progress | 133,761 |
| | 99,236 |
| Construction in progress | 212,296 | | | 44,689 | |
Furniture, fixtures and equipment | 5,897 |
| | 4,993 |
| Furniture, fixtures and equipment | 7,530 | | | 7,016 | |
Total | 2,671,854 |
| | 2,138,500 |
| Total | 3,205,450 | | | 2,946,817 | |
Accumulated depreciation and amortization | (587,127 | ) | | (541,077 | ) | Accumulated depreciation and amortization | (753,947) | | | (730,366) | |
Real estate, net | 2,084,727 |
| | 1,597,423 |
| Real estate, net | 2,451,503 | | | 2,216,451 | |
Operating lease right-of-use assets | | Operating lease right-of-use assets | 69,361 | | | 80,997 | |
Cash and cash equivalents | 490,279 |
| | 131,654 |
| Cash and cash equivalents | 164,478 | | | 384,572 | |
Restricted cash | 10,562 |
| | 8,532 |
| Restricted cash | 55,358 | | | 34,681 | |
Tenant and other receivables, net of allowance for doubtful accounts of $4,937 and $2,332, respectively | 20,078 |
| | 9,340 |
| |
Receivable arising from the straight-lining of rents, net of allowance for doubtful accounts of $494 and $261, respectively | 85,843 |
| | 87,695 |
| |
Identified intangible assets, net of accumulated amortization of $33,827 and $22,361, respectively | 87,249 |
| | 30,875 |
| |
Deferred leasing costs, net of accumulated amortization of $14,796 and $13,909, respectively | 20,268 |
| | 19,241 |
| |
Deferred financing costs, net of accumulated amortization of $1,740 and $726, respectively | 3,243 |
| | 1,936 |
| |
Tenant and other receivables | | Tenant and other receivables | 15,812 | | | 15,673 | |
Receivables arising from the straight-lining of rents | | Receivables arising from the straight-lining of rents | 62,692 | | | 62,106 | |
Identified intangible assets, net of accumulated amortization of $37,361 and $37,009, respectively | | Identified intangible assets, net of accumulated amortization of $37,361 and $37,009, respectively | 71,107 | | | 56,184 | |
Deferred leasing costs, net of accumulated amortization of $17,641 and $16,419, respectively | | Deferred leasing costs, net of accumulated amortization of $17,641 and $16,419, respectively | 20,694 | | | 18,585 | |
Prepaid expenses and other assets | 18,559 |
| | 17,442 |
| Prepaid expenses and other assets | 74,111 | | | 70,311 | |
Total assets | $ | 2,820,808 |
| | $ | 1,904,138 |
| Total assets | $ | 2,985,116 | | | $ | 2,939,560 | |
| | | | | | | |
LIABILITIES AND EQUITY | |
| | |
| LIABILITIES AND EQUITY | | | |
Liabilities: | | | | Liabilities: | |
Mortgages payable, net | $ | 1,564,542 |
| | $ | 1,197,513 |
| Mortgages payable, net | $ | 1,687,190 | | | $ | 1,587,532 | |
Identified intangible liabilities, net of accumulated amortization of $65,832 and $72,528, respectively | 180,959 |
| | 146,991 |
| |
Accounts payable and accrued expenses | 69,595 |
| | 48,842 |
| |
Other liabilities | 15,171 |
| | 14,675 |
| |
Operating lease liabilities | | Operating lease liabilities | 64,578 | | | 74,972 | |
Accounts payable, accrued expenses and other liabilities | | Accounts payable, accrued expenses and other liabilities | 84,829 | | | 132,980 | |
Identified intangible liabilities, net of accumulated amortization of $35,029 and $71,375, respectively | | Identified intangible liabilities, net of accumulated amortization of $35,029 and $71,375, respectively | 100,625 | | | 148,183 | |
Total liabilities | 1,830,267 |
| | 1,408,021 |
| Total liabilities | 1,937,222 | | | 1,943,667 | |
Commitments and contingencies |
|
| |
|
| |
Commitments and contingencies (Note 10) | | Commitments and contingencies (Note 10) | 0 | | 0 |
Equity: | | | | Equity: | |
Partners’ capital: | | | | Partners’ capital: | |
General partner:113,827,529 and 99,754,900 units outstanding, respectively | 947,540 |
| | 489,372 |
| |
Limited partners:12,812,954 and 6,378,704 units outstanding, respectively | 105,495 |
| | 37,081 |
| |
General partner: 117,147,986 and 117,014,317 units outstanding, respectively | | General partner: 117,147,986 and 117,014,317 units outstanding, respectively | 1,002,423 | | | 991,032 | |
Limited partners: 4,662,654 and 4,729,010 units outstanding, respectively | | Limited partners: 4,662,654 and 4,729,010 units outstanding, respectively | 41,030 | | | 41,302 | |
Accumulated deficit | (62,898 | ) | | (30,696 | ) | Accumulated deficit | (8,505) | | | (42,313) | |
Total partners’ capital | 990,137 |
| | 495,757 |
| Total partners’ capital | 1,034,948 | | | 990,021 | |
Noncontrolling interest in consolidated subsidiaries | 404 |
| | 360 |
| Noncontrolling interest in consolidated subsidiaries | 12,946 | | | 5,872 | |
Total equity | 990,541 |
| | 496,117 |
| Total equity | 1,047,894 | | | 995,893 | |
Total liabilities and equity | $ | 2,820,808 |
| | $ | 1,904,138 |
| Total liabilities and equity | $ | 2,985,116 | | | $ | 2,939,560 | |
See notes to consolidated and combined financial statements.
URBAN EDGE PROPERTIES LP
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
(In thousands, except unit and per unit amounts)
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2021 | | 2020 | | 2019 |
REVENUE | | | | | |
Rental revenue | $ | 422,467 | | | $ | 328,280 | | | $ | 384,405 | |
Management and development fees | 1,169 | | | 1,283 | | | 1,900 | |
Other income | 1,446 | | | 532 | | | 1,344 | |
Total revenue | 425,082 | | | 330,095 | | | 387,649 | |
EXPENSES | | | | | |
Depreciation and amortization | 92,331 | | | 96,029 | | | 94,116 | |
Real estate taxes | 63,844 | | | 60,049 | | | 60,179 | |
Property operating | 68,531 | | | 56,126 | | | 64,062 | |
General and administrative | 39,152 | | | 48,682 | | | 38,220 | |
Casualty and impairment loss, net(1) | 468 | | | 3,055 | | | 12,738 | |
Lease expense | 12,872 | | | 13,667 | | | 14,466 | |
Total expenses | 277,198 | | | 277,608 | | | 283,781 | |
Gain on sale of real estate | 18,648 | | | 39,775 | | | 68,632 | |
Gain on sale of lease | — | | | — | | | 1,849 | |
Interest income | 360 | | | 2,599 | | | 9,774 | |
Interest and debt expense | (57,938) | | | (71,015) | | | (66,639) | |
Gain on extinguishment of debt | — | | | 34,908 | | | — | |
Income before income taxes | 108,954 | | | 58,754 | | | 117,484 | |
Income tax (expense) benefit | (1,139) | | | 38,996 | | | (1,287) | |
Net income | 107,815 | | | 97,750 | | | 116,197 | |
Less: net (income) loss attributable to NCI in consolidated subsidiaries | (833) | | | (1) | | | 25 | |
Net income attributable to unitholders | $ | 106,982 | | | $ | 97,749 | | | $ | 116,222 | |
| | | | | |
Earnings per unit - Basic: | $ | 0.88 | | | $ | 0.80 | | | $ | 0.92 | |
Earnings per unit - Diluted: | $ | 0.88 | | | $ | 0.80 | | | $ | 0.92 | |
Weighted average units outstanding - Basic | 120,966 | | | 121,957 | | | 126,333 | |
Weighted average units outstanding - Diluted | 122,107 | | | 122,811 | | | 126,478 | |
(1) Refer to Note 2 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K. |
| | | | | | | | | | | |
| Year Ended December 31, |
| 2017 | | 2016 | | 2015 |
REVENUE | | | | | |
Property rentals | $ | 265,984 |
| | $ | 236,798 |
| | $ | 231,867 |
|
Tenant expense reimbursements | 99,098 |
| | 84,921 |
| | 84,617 |
|
Management and development fees | 1,535 |
| | 1,759 |
| | 2,261 |
|
Income from acquired leasehold interest | 39,215 |
| | — |
| | — |
|
Other income | 1,210 |
| | 2,498 |
| | 4,200 |
|
Total revenue | 407,042 |
| | 325,976 |
| | 322,945 |
|
EXPENSES | | | | | |
Depreciation and amortization | 82,281 |
| | 56,145 |
| | 57,253 |
|
Real estate taxes | 59,737 |
| | 51,429 |
| | 49,311 |
|
Property operating | 50,894 |
| | 45,280 |
| | 50,595 |
|
General and administrative | 30,413 |
| | 27,438 |
| | 32,044 |
|
Casualty and impairment loss | 7,382 |
| | — |
| | — |
|
Ground rent | 10,848 |
| | 10,047 |
| | 10,129 |
|
Transaction costs | 278 |
| | 1,405 |
| | 24,011 |
|
Provision for doubtful accounts | 3,445 |
| | 1,214 |
| | 1,526 |
|
Total expenses | 245,278 |
| | 192,958 |
| | 224,869 |
|
Operating income | 161,764 |
| | 133,018 |
| | 98,076 |
|
Gain on sale of real estate | 202 |
| | 15,618 |
| | — |
|
Interest income | 2,248 |
| | 679 |
| | 150 |
|
Interest and debt expense | (56,218 | ) | | (51,881 | ) | | (55,584 | ) |
Loss on extinguishment of debt | (35,336 | ) | | — |
| | — |
|
Income before income taxes | 72,660 |
| | 97,434 |
| | 42,642 |
|
Income tax benefit (expense) | 278 |
| | (804 | ) | | (1,294 | ) |
Net income | 72,938 |
| | 96,630 |
| | 41,348 |
|
Less: (net income) loss attributable to NCI in consolidated subsidiaries | (44 | ) | | (3 | ) | | (16 | ) |
Net income attributable to unitholders | $ | 72,894 |
| | $ | 96,627 |
| | $ | 41,332 |
|
| | | | | |
Earnings per unit - Basic: | $ | 0.62 |
| | $ | 0.91 |
| | $ | 0.39 |
|
Earnings per unit - Diluted: | $ | 0.61 |
| | $ | 0.91 |
| | $ | 0.39 |
|
Weighted average units outstanding - Basic | 117,779 |
| | 105,455 |
| | 105,276 |
|
Weighted average units outstanding - Diluted | 118,390 |
| | 106,099 |
| | 105,374 |
|
See notes to consolidated and combined financial statements.
URBAN EDGE PROPERTIES LP
CONSOLIDATED AND COMBINED STATEMENTSTATEMENTS OF CHANGES IN EQUITY
(In thousands, except unit and per unit amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Shares | | General Partner | | Total Units | | Limited Partners(1) | | Accumulated Earnings (Deficit) | | NCI in Consolidated Subsidiaries | | Total Equity |
Balance, January 1, 2019 | 114,345,565 | | | $ | 957,563 | | | 12,736,633 | | | $ | 105,447 | | | $ | (57,482) | | | $ | 449 | | | $ | 1,005,977 | |
Net income attributable to unitholders | — | | | — | | | — | | | — | | | 116,222 | | | — | | | 116,222 | |
Net loss attributable to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | (25) | | | (25) | |
Impact of ASC 842 adoption | — | | | — | | | — | | | — | | | (2,918) | | | — | | | (2,918) | |
Common units issued as a result of common shares issued by Urban Edge | 59,895 | | | 570 | | | — | | | — | | | (131) | | | — | | | 439 | |
Equity redemption of OP Units | 6,995,941 | | | 55,857 | | | (6,995,941) | | | (4,279) | | | — | | | — | | | 51,578 | |
Equity redemption for cash | — | | | (3,422) | | | (357,998) | | | (2,556) | | | — | | | — | | | (5,978) | |
Limited partnership units issued, net | — | | | — | | | 450,624 | | | — | | | — | | | — | | | — | |
Reallocation of noncontrolling interests | — | | | 4,521 | | | — | | | (56,099) | | | — | | | — | | | (51,578) | |
Distributions to Partners ($0.88 per unit) | — | | | — | | | — | | | — | | | (111,857) | | | — | | | (111,857) | |
Share-based compensation expense | — | | | 5,906 | | | — | | | 7,643 | | | — | | | — | | | 13,549 | |
Share-based awards retained for taxes | (31,276) | | | (633) | | | — | | | — | | | — | | | — | | | (633) | |
Balance, December 31, 2019 | 121,370,125 | | | 1,020,362 | | | 5,833,318 | | | 50,156 | | | (56,166) | | | 424 | | | 1,014,776 | |
Net income attributable to unitholders | — | | | — | | | — | | | — | | | 97,749 | | | — | | | 97,749 | |
Net income attributable to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | 1 | | | 1 | |
| | | | | | | | | | | | | |
Common units issued as a result of common shares issued by Urban Edge | 66,588 | | | 428 | | | 475,081 | | | — | | | (30) | | | — | | | 398 | |
Equity redemption of OP Units | 1,579,389 | | | 11,144 | | | (1,579,389) | | | — | | | — | | | — | | | 11,144 | |
Repurchase of common shares | (5,873,923) | | | (54,141) | | | — | | | — | | | — | | | — | | | (54,141) | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Reallocation of noncontrolling interests | — | | | 8,833 | | | — | | | (19,977) | | | — | | | — | | | (11,144) | |
Distributions to Partners ($0.68 per unit) | — | | | — | | | — | | | — | | | (83,866) | | | — | | | (83,866) | |
Contributions from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | 5,447 | | | 5,447 | |
Share-based compensation expense | — | | | 5,871 | | | — | | | 11,123 | | | — | | | — | | | 16,994 | |
Share-based awards retained for taxes | (127,862) | | | (1,465) | | | — | | | — | | | — | | | — | | | (1,465) | |
Balance, December 31, 2020 | 117,014,317 | | | $ | 991,032 | | | 4,729,010 | | | $ | 41,302 | | | $ | (42,313) | | | $ | 5,872 | | | $ | 995,893 | |
Net income attributable to unitholders | — | | | — | | | — | | | — | | | 106,982 | | | — | | | 106,982 | |
Net income attributable to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | 833 | | | 833 | |
Common units issued as a result of common shares issued by Urban Edge | 46,731 | | | 510 | | | 33,644 | | | — | | | (144) | | | — | | | 366 | |
Equity redemption of OP units | 100,000 | | | 840 | | | (100,000) | | | (6,302) | | | — | | | — | | | (5,462) | |
| | | | | | | | | | | | | |
Reallocation of noncontrolling interests | — | | | 8,206 | | | — | | | (2,744) | | | — | | | — | | | 5,462 | |
Distributions to Partners ($0.60 per unit) | — | | | — | | | — | | | — | | | (73,030) | | | — | | | (73,030) | |
Contributions from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | 6,241 | | | 6,241 | |
Share-based compensation expense | — | | | 2,045 | | | — | | | 8,774 | | | — | | | — | | | 10,819 | |
Share-based awards retained for taxes | (13,062) | | | (210) | | | — | | | — | | | — | | | — | | | (210) | |
Balance, December 31, 2021 | 117,147,986 | | | $ | 1,002,423 | | | 4,662,654 | | | $ | 41,030 | | | $ | (8,505) | | | $ | 12,946 | | | $ | 1,047,894 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| General Partner | | Limited Partners(1) | | Vornado Equity | | Accumulated Earnings (Deficit) | | NCI in Consolidated Subsidiaries | | Total Equity |
Balance, January 1, 2015 | $ | — |
| | $ | — |
| | $ | 258,522 |
| | $ | — |
| | $ | 341 |
| | $ | 258,863 |
|
Net income (loss) attributable to unitholders(2) | — |
| | — |
| | (2,022 | ) | | 43,354 |
| | — |
| | 41,332 |
|
Net income attributable to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | 16 |
| | 16 |
|
Contributions from Vornado | — |
| | — |
| | 245,067 |
| | — |
| | — |
| | 245,067 |
|
Issuance of units in connection with separation | 473,918 |
| | 27,649 |
| | (501,567 | ) | | — |
| | — |
| | — |
|
Common units issued as a result of common shares issued by Urban Edge | 258 |
| | — |
| | — |
| | (258 | ) | | — |
| | — |
|
Distributions to partners ($0.80 per unit) | — |
| | — |
| | — |
| | (84,085 | ) | | — |
| | (84,085 | ) |
Share-based compensation expense | 2,186 |
| | 7,899 |
| | — |
| | 176 |
| | — |
| | 10,261 |
|
Balance, December 31, 2015 | 476,362 |
| | 35,548 |
| | — |
| | (40,813 | ) | | 357 |
| | 471,454 |
|
Net income attributable to unitholders | — |
| | — |
| | — |
| | 96,627 |
| | — |
| | 96,627 |
|
Net income attributable to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | 3 |
| | 3 |
|
Common units issued as a result of common shares issued by Urban Edge | 9,297 |
| | — |
| | — |
| | (348 | ) | | — |
| | 8,949 |
|
Distributions to partners ($0.82 per unit) | — |
| | — |
| | — |
| | (86,311 | ) | | — |
| | (86,311 | ) |
Share-based compensation expense | 3,751 |
| | 1,533 |
| | — |
| | 149 |
| | — |
| | 5,433 |
|
Share-based awards retained for taxes | (38 | ) | | — |
| | — |
| | — |
| | — |
| | (38 | ) |
Balance, December 31, 2016 | 489,372 |
| | 37,081 |
| | — |
| | (30,696 | ) | | 360 |
| | 496,117 |
|
Net income attributable to unitholders | — |
| | — |
| | — |
| | 72,894 |
| | — |
| | 72,894 |
|
Net income attributable to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | 44 |
| | 44 |
|
Common units issued as a result of common shares issued by Urban Edge | 348,723 |
| | — |
| | — |
| | (319 | ) | | — |
| | 348,404 |
|
Limited partnership units issued | 105,200 |
| | 65,884 |
| | — |
| | — |
| | — |
| | 171,084 |
|
Distributions to partners ($0.88 per unit) | — |
| | — |
| | — |
| | (104,852 | ) | | — |
| | (104,852 | ) |
Share-based compensation expense | 4,532 |
| | 2,530 |
| | — |
| | 75 |
| | — |
| | 7,137 |
|
Share-based awards withheld for taxes | (287 | ) | | — |
| | — |
| | — |
| | — |
| | (287 | ) |
Balance, December 31, 2017 | $ | 947,540 |
| | $ | 105,495 |
| | $ | — |
| | $ | (62,898 | ) | | $ | 404 |
| | $ | 990,541 |
|
(1) Limited partners have a 10.1%3.8% common limited partnership interest in the Operating Partnership as of December 31, 20172021 in the form of units of interest in the Operating Partnership (“OP Units”) and Long-Term Incentive Plan (“LTIP”) units.
(2) Net loss earned from January 1, 2015 through January 15, 2015 is attributable to Vornado as it was the sole unitholder prior to January 15, 2015. Refer to Note 1 - Organization.
See notes to consolidated and combined financial statements.
URBAN EDGE PROPERTIES LP
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(In thousands)
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2021 | | 2020 | | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | |
Net income | $ | 107,815 | | | $ | 97,750 | | | $ | 116,197 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation and amortization | 94,135 | | | 97,751 | | | 96,641 | |
Casualty and impairment loss, net | 468 | | | 3,055 | | | 12,738 | |
Gain on sale of real estate | (18,648) | | | (39,775) | | | (68,632) | |
Gain on sale of lease | — | | | — | | | (1,849) | |
Gain on extinguishment of debt | — | | | (34,908) | | | — | |
Amortization of below market leases, net | (55,173) | | | (10,624) | | | (15,940) | |
| | | | | |
Noncash lease expense | 6,802 | | | 7,522 | | | 8,205 | |
Straight-lining of rent | (878) | | | 10,523 | | | 1,021 | |
Share-based compensation expense | 10,819 | | | 16,994 | | | 13,549 | |
Change in operating assets and liabilities: | | | | | |
Tenant and other receivables | (139) | | | 5,892 | | | 8,119 | |
Deferred leasing costs | (5,818) | | | (1,218) | | | (4,303) | |
Prepaid and other assets | 5,661 | | | (41,982) | | | (3,331) | |
Lease liabilities | (6,227) | | | (6,680) | | | (7,107) | |
Accounts payable, accrued expenses and other liabilities | (3,544) | | | 8,522 | | | 1,092 | |
Net cash provided by operating activities | 135,273 | | | 112,822 | | | 156,400 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | |
Real estate development and capital improvements | (95,377) | | | (28,522) | | | (91,301) | |
Acquisitions of real estate | (252,632) | | | (124,340) | | | (47,356) | |
Proceeds from sale of operating properties | 34,482 | | | 54,402 | | | 116,510 | |
Proceeds from sale of operating lease | 2,367 | | | — | | | 6,949 | |
Insurance proceeds | — | | | — | | | 12,677 | |
Net cash used in investing activities | (311,160) | | | (98,460) | | | (2,521) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | |
Debt repayments | (18,192) | | | (89,302) | | | (5,587) | |
Distributions paid to partners | (128,935) | | | (27,961) | | | (111,857) | |
Taxes withheld for vested restricted units | (210) | | | (1,465) | | | (633) | |
Debt issuance costs | — | | | (3,471) | | | (2,649) | |
Payment for redemption of units | — | | | — | | | (5,978) | |
Proceeds related to the issuance of common shares | 366 | | | 398 | | | 439 | |
Cash paid to repurchase shares | — | | | (54,141) | | | — | |
Contributions from noncontrolling interests | 6,241 | | | 5,447 | | | — | |
Proceeds from borrowings | 117,200 | | | 90,250 | | | — | |
Net cash used in financing activities | (23,530) | | | (80,245) | | | (126,265) | |
Net (decrease) increase in cash and cash equivalents and restricted cash | (199,417) | | | (65,883) | | | 27,614 | |
Cash and cash equivalents and restricted cash at beginning of year | 419,253 | | | 485,136 | | | 457,522 | |
Cash and cash equivalents and restricted cash at end of year | $ | 219,836 | | | $ | 419,253 | | | $ | 485,136 | |
|
| | | | | | | | | | | |
| Year Ended December 31, |
| 2017 | | 2016 | | 2015 |
CASH FLOWS FROM OPERATING ACTIVITIES | |
| | |
| | |
Net income | $ | 72,938 |
| | $ | 96,630 |
| | $ | 41,348 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | |
| | |
| | |
Depreciation and amortization | 82,511 |
| | 57,178 |
| | 58,299 |
|
Income from acquired leasehold interest | (39,215 | ) | | — |
| | — |
|
Casualty and impairment loss | 5,637 |
| | — |
| | — |
|
Loss on extinguishment of debt | 35,336 |
| | — |
| | — |
|
Amortization of deferred financing costs | 2,876 |
| | 2,830 |
| | 2,738 |
|
Amortization of above and below market leases, net
| (9,502 | ) | | (7,776 | ) | | (7,907 | ) |
Straight-lining of rent | 352 |
| | 227 |
| | 333 |
|
Share-based compensation expense | 7,137 |
| | 5,433 |
| | 10,261 |
|
Gain on sale of real estate | (202 | ) | | (15,618 | ) | | — |
|
Non-cash separation costs paid by Vornado | — |
| | — |
| | 17,403 |
|
Provision for doubtful accounts | 3,445 |
| | 1,214 |
| | 1,526 |
|
Change in operating assets and liabilities: | |
| | |
| | |
Tenant and other receivables | (13,749 | ) | | (78 | ) | | (4 | ) |
Deferred leasing costs | (4,110 | ) | | (3,815 | ) | | (2,940 | ) |
Prepaid and other assets | (4,432 | ) | | 141 |
| | (671 | ) |
Accounts payable and accrued expenses | 18,594 |
| | (237 | ) | | 11,300 |
|
Other liabilities | 282 |
| | 1,120 |
| | 6,392 |
|
Net cash provided by operating activities | 157,898 |
| | 137,249 |
| | 138,078 |
|
CASH FLOWS FROM INVESTING ACTIVITIES | |
| | |
| | |
Real estate development and capital improvements | (89,344 | ) | | (69,901 | ) | | (36,290 | ) |
Acquisition of real estate | (211,393 | ) | | (9,267 | ) | | (30,125 | ) |
Proceeds from sale of real estate | 5,005 |
| | 19,938 |
| | — |
|
Net cash used in investing activities | (295,732 | ) | | (59,230 | ) | | (66,415 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES | |
| | |
| | |
Debt repayments | (129,640 | ) | | (38,458 | ) | | (44,654 | ) |
Contributions from Vornado | — |
| | — |
| | 227,732 |
|
Distributions to partners | (104,852 | ) | | (86,311 | ) | | (84,085 | ) |
Debt issuance costs | (13,193 | ) | | — |
| | (5,198 | ) |
Taxes withheld for vested restricted units | (287 | ) | | (38 | ) | | — |
|
Payment on extinguishment of debt | (1,138 | ) | | — |
| | — |
|
Proceeds from issuance of units, net | 348,404 |
| | 8,949 |
| | — |
|
Purchase of marketable securities in connection with debt defeasance | (536,505 | ) | | — |
| | — |
|
Proceeds from borrowings | 935,700 |
| | — |
| | — |
|
Net cash provided by (used in) financing activities | 498,489 |
| | (115,858 | ) |
| 93,795 |
|
Net increase (decrease) in cash and cash equivalents and restricted cash | 360,655 |
| | (37,839 | ) | | 165,458 |
|
Cash and cash equivalents and restricted cash at beginning of year | 140,186 |
| | 178,025 |
| | 12,567 |
|
Cash and cash equivalents and restricted cash at end of year | $ | 500,841 |
| | $ | 140,186 |
| | $ | 178,025 |
|
See notes to consolidated and combined financial statements.
| | | Year Ended December 31, | | Year Ended December 31, |
| 2017 | | 2016 | | 2015 | | 2021 | | 2020 | | 2019 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | | | | | | SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | | | | |
Cash payment for interest, includes amounts capitalized of $3,926, $3,763 and $1,856, respectively | $ | 55,140 |
| | $ | 51,137 |
| | $ | 52,814 |
| |
Cash payments for interest net of amounts capitalized of $2,023, $715 and $1,425, respectively | | Cash payments for interest net of amounts capitalized of $2,023, $715 and $1,425, respectively | $ | 58,621 | | | $ | 68,113 | | | $ | 64,751 | |
Cash payments for income taxes | 1,237 |
| | 1,277 |
| | 1,907 |
| Cash payments for income taxes | 4,663 | | | 499 | | | 1,601 | |
NON-CASH INVESTING AND FINANCING ACTIVITIES | | | | | | NON-CASH INVESTING AND FINANCING ACTIVITIES | |
Acquisition of real estate through issuance of OP units | 171,084 |
| | — |
| | — |
| |
Acquisition of real estate through assumption of debt | 69,659 |
| | — |
| | — |
| |
Accrued capital expenditures included in accounts payable and accrued expenses | 14,651 |
| | 12,492 |
| | 8,699 |
| Accrued capital expenditures included in accounts payable and accrued expenses | 18,702 | | | 5,808 | | | 5,056 | |
Write-off of fully depreciated assets | 3,286 |
| | 4,585 |
| | 10,588 |
| |
Marketable securities transferred in connection with debt defeasance | 536,590 |
| | — |
| | — |
| |
Defeasance of mortgages payable | (505,473 | ) | | — |
| | — |
| |
Write-off of fully depreciated and impaired assets | | Write-off of fully depreciated and impaired assets | 10,706 | | | 21,447 | | | 56,199 | |
Forgiveness of mortgage debt | | Forgiveness of mortgage debt | — | | | 30,000 | | | — | |
Assumption of debt from the acquisition of real estate | | Assumption of debt from the acquisition of real estate | — | | | 72,473 | | | — | |
Dividend/distribution declared and paid in subsequent period | | Dividend/distribution declared and paid in subsequent period | — | | | 55,905 | | | — | |
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH | | | | | | RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH | |
Cash and cash equivalents at beginning of year | $ | 131,654 |
| | $ | 168,983 |
| | $ | 2,600 |
| Cash and cash equivalents at beginning of year | $ | 384,572 | | | $ | 432,954 | | | $ | 440,430 | |
Restricted cash at beginning of year | 8,532 |
| | 9,042 |
| | 9,967 |
| Restricted cash at beginning of year | 34,681 | | | 52,182 | | | 17,092 | |
Cash and cash equivalents and restricted cash at beginning of year | $ | 140,186 |
| | $ | 178,025 |
| | $ | 12,567 |
| Cash and cash equivalents and restricted cash at beginning of year | $ | 419,253 | | | $ | 485,136 | | | $ | 457,522 | |
| | | | | | | | | | | |
Cash and cash equivalents at end of year | $ | 490,279 |
| | $ | 131,654 |
| | $ | 168,983 |
| Cash and cash equivalents at end of year | $ | 164,478 | | | $ | 384,572 | | | $ | 432,954 | |
Restricted cash at end of year | 10,562 |
| | 8,532 |
| | 9,042 |
| Restricted cash at end of year | 55,358 | | | 34,681 | | | 52,182 | |
Cash and cash equivalents and restricted cash at end of year | $ | 500,841 |
| | $ | 140,186 |
| | $ | 178,025 |
| Cash and cash equivalents and restricted cash at end of year | $ | 219,836 | | | $ | 419,253 | | | $ | 485,136 | |
See notes to consolidated and combined financial statements.
URBAN EDGE PROPERTIES AND URBAN EDGE PROPERTIES LP
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
Urban Edge Properties (“UE”, “Urban Edge”, or the “Company”) (NYSE: UE) is a Maryland real estate investment trust focused on managing, developing, redeveloping, and acquiring retail real estate in urban communities, primarily in the New York metropolitan area. Urban Edge Properties LP (“UELP” or the “Operating Partnership”) is a Delaware limited partnership formed to serve as UE’s majority-owned partnership subsidiary and to own, through affiliates, all of ourthe Company’s real estate properties and other assets. UE and UELP were created in 2014 to own the majority of Vornado Realty Trust’s (“Vornado”) (NYSE: VNO) former shopping center business (the “UE Business”), and separated from Vornado in January 2015. Unless the context otherwise requires, references to “we”, “us” and “our” refer to UE after giving effect to the transfer of the UE Business from Vornado,Urban Edge Properties and for periods prior to such transfer, refer to the UE Business while owned by Vornado.UELP and their consolidated entities/subsidiaries.
The Operating Partnership’s capital includes general and common limited partnership interests in the operating partnership (“OP Units”). As of December 31, 2017,2021, Urban Edge owned approximately 89.9%96.2% of the outstanding common OP Units with the remaining limited OP Units held by Vornado Realty L.P., members of management, ourUrban Edge’s Board of Trustees and contributors of property interests acquired. Urban Edge serves as the sole general partner of the Operating Partnership. The third partythird-party unitholders have limited rights over the Operating Partnership such that they do not have characteristics of a controlling financial interest. As such, the Operating Partnership is considered a variable interest entity (“VIE”), and the Company is the primary beneficiary which consolidates it. The Company’s only investment is the Operating Partnership. The VIE’s assets can be used for purposes other than the settlement of the VIE’s obligations and the Company’s partnership interest is considered a majority voting interest.
As of December 31, 2017,2021, our portfolio comprised 85consisted of 68 shopping centers, four5 malls and a warehouse park2 industrial parks totaling approximately 16.717.0 million square feet.sf, which is inclusive of a 95% controlling interest in Walnut Creek, CA (Mt. Diablo), and an 82.5% controlling interest in Sunrise Mall, in Massapequa, NY.
| |
2. | BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION |
2.BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The accompanying consolidated and combined financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for annual financial information and with the instructions of Form 10-K. The consolidated financial statements as of and for the yearyears ended December 31, 20172021, 2020 and 2019 reflect the consolidation of the Company, the Operating Partnership, wholly-owned subsidiaries and those entities in which we have a controlling financial interest. All intercompany transactions have been eliminated in consolidation.
In accordance with the adoption of ASC 842 Leases (“ASU 2016-02”), the Company includes rental revenue deemed uncollectible as a reduction to rental revenue in the consolidated statements of income for the year ended December 31, 2019, as reflected beginning on Form 10-K for the year ended December 31, 2019.
The Company includes real estate impairment charges, and casualty losses (gains) resulting from natural disasters in Casualty and impairment loss, net on its consolidated statements of income for the years ended December 31, 20172021, 2020 and 2016 include the consolidated accounts of the Company2019 as reflected in this Form 10-K. Refer to Note 9, Fair Value Measurements and the Operating Partnership. The results presentedNote 10, Commitments and Contingencies in Part II, Item 8 in this Annual Report on Form 10-K for the year ended December 31, 2015 reflect the operationsinformation regarding real estate impairment charges and changes in cash flows on a carved-out and combined basis for the period from January 1, 2015 through the date of separation and on a consolidated basis subsequent to the date of separation. The financial statements reflect the common shares as of the date of the separation as outstanding for all periods prior to the separation. All intercompany transactions have been eliminated in consolidation and combination.casualty losses (gains), respectively.
Our primary business is the ownership, management, redevelopment, development and operation of retail shopping centers and malls. We do not distinguish our primary business or group our operations on a geographical basis for purposes of measuring performance. The Company’s chief operating decision maker reviews operating and financial information for each property on an individual basis and therefore, each property represents an individual operating segment. None of our tenants accounted for more than 10% of our revenue or property operating income.income as of December 31, 2021. We aggregate all of our properties into one1 reportable segment due to their similarities with regard to the nature and economics of the properties, tenants and operations, as well as long-term average financial performance.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates —The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates. The most critical accounting policies, which involve the use of estimates and assumptions as to future uncertainties and, therefore, may result in actual amounts that differ from estimates include revenue recognition and collectibility of receivables, acquisitions of real estate and valuation of real estate. For more information on these estimates and policies refer to Part II, Item 7 Critical Accounting Policies and Estimates of this Annual Report on Form 10-K.
Real Estate —Real estate is carried at cost, net of accumulated depreciation and amortization. Expenditures for ordinary maintenance and repairs are expensed to operations as they are incurred. Significant renovations that improve or extend the useful lives of assets are capitalized. As real estate is undergoing redevelopment activities, all property operating expenses directly associated with and attributable to the redevelopment, including interest, are capitalized to the extent the capitalized costs of the
property do not exceed the estimated fair value of the property when completed. If the cost of the redeveloped property, including the net book value of the existing property, exceeds the estimated fair value of redeveloped property, the excess is charged to impairment expense. The capitalization period begins when redevelopment activities are underwayunder way and ends when the project is substantially complete. Depreciation is recognized on a straight-line basis over estimated useful lives which range from 3one to 40 years.
Upon the acquisition of real estate, we assess the fair value of acquired assets (including land, buildings and improvements, identified intangibles, such as acquired above and below-market leases, acquired in-place leases and tenant relationships) and acquiredassumption of liabilities and we allocate the purchase price based on these assessments on a relative fair value basis. We assess fair value based on estimated cash flow projections utilizing appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known trends, and market/economic conditions. We record acquired intangible assets (including acquired above-market leases, acquired in-place leases and tenant relationships) and acquired intangible liabilities (including below-market leases) at their estimated fair value. We amortize identified intangibles that have finite lives over the period they are expected to contribute directly or indirectly to the future cash flows of the property or business acquired.
Our properties are individually reviewedevaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Such events and changes include macroeconomic conditions, including those caused by global pandemics, like the recent COVID-19 pandemic, which resulted in property operational disruption and could indicate that the carrying amount may not be recoverable. An impairment exists when the carrying amount of an asset exceeds the aggregate projected future cash flows over the anticipated holding period on an undiscounted basis.basis taking into account the appropriate capitalization rate in determining a future terminal value. An impairment loss is measured based on the excess of the property’s carrying amount over its estimated fair value. Estimated fair value may be based on discounted future cash flows utilizing appropriate discount and capitalization rates and, in addition to available market information, third-party appraisals, broker selling estimates or sale agreements under negotiation. Impairment analyses are based on our current plans, intended holding periods and available market information at the time the analyses are prepared. If our estimates of the projected future cash flows anticipated holding periods, orchange based on uncertain market conditions, change, our evaluation of impairment losses may be different and such differences could be material to our consolidated and combined financial statements. Plans to hold properties over longer periods decrease the likelihood of recording impairment losses.
Real Estate Held For Sale — When a real estate asset is identified by management as held for sale, we cease depreciation of the asset and estimate its fair value, net of estimated costs to sell. If the estimated fair value, net of estimated costs to sell, of an asset is less than its net carrying value, an adjustmentimpairment charge is recorded to reflect the estimated fair value. Properties classifiedThe Company classifies properties as real estate held for sale generally represent propertieswhen executed contract contingencies have been satisfied, which signify that are under contract forthe sale is legally binding. Refer to Note 4, Acquisitions and are expected to close within a year.dispositions in Part II, Item 8. in this Annual Report on Form 10-K.
Cash and Cash Equivalents —Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less and are carried at cost, which approximates fair value due to their short-term maturities. The majority of our cash and cash equivalents consists of (i) deposits at major commercial banks, including money market accounts, which may at times exceed the Federal Deposit Insurance Corporation limit, (ii) United States Treasury Bills, and (iii) Certificate of Deposits placed through an Account Registry Service (“CDARS”). To date we have not experienced any losses on our invested cash.
Restricted Cash —Restricted cash consists of security deposits and cash escrowed under loan agreements for debt service, real estate taxes, property insurance, tenant improvements, leasing commissions, capital expenditures and capital expenditures.cash held for potential Internal Revenue Code Section 1031 tax deferred exchange transactions.
Accounts ReceivableTenant and Allowance for Doubtful Accounts Other Receivables and Changes in Collectibility Assessment —Accounts receivable includes Tenant receivables include unpaid amounts billed to tenants, disputed enforceable charges and accrued revenues for future billings to tenants for property expenses. We periodically evaluate the collectibility of amounts due from tenants and maintain an allowance for doubtful accounts for estimated losses resultingdisputed enforceable charges on both a lease-by-lease and a portfolio-level, which result from the inability of tenants to make required payments under thetheir operating lease agreements. We also maintain an allowance forrecognize changes in the collectibility assessment of these operating leases as adjustments to rental revenue in accordance with ASC 842
Leases. Management exercises judgment in assessing collectibility and considers payment history, current credit status and publicly available information about the financial condition of the tenant, among other factors. Tenant receivables, and receivables arising from the straight-lining of rents. These receivables ariserents, are written-off directly when management deems the collectibility of substantially all future lease payments from earningsa specific lease is not probable, at which point, the Company will begin recognizing revenue from such leases prospectively, based on actual amounts received. This write-off effectively reduces cumulative non-cash rental income recognized in excessfrom the straight-lining of amounts currently duerents since lease commencement. If the Company subsequently determines that it is probable it will collect substantially all of the lessee’s remaining lease payments under the lease agreements. Management exercises judgment in establishing these allowances and considers payment history and current credit status in developing these estimates. Accounts receivable are written-off when they are deemed to be uncollectible and we are no longer actively pursuing collection.term, the Company will reinstate the receivables balance, including those arising from the straight-lining of rents.
Deferred Leasing Costs — Deferred leasing costs include direct salaries, third-party feesincremental costs of a lease that would have not been incurred if the lease had not been executed, including broker and other costs incurred by us to originate a lease.sale commissions, and contingent legal fees. Such costs are capitalized and amortized on a straight-line basis over the term of the related leases.leases as depreciation and amortization expense on the consolidated statements of income. Deferred leasing costs also includes lease incentives that can be used at the discretion of the tenant. Lease incentives are capitalized and amortized over the term of the related leases as a reduction to rental revenue on the consolidated statements of income.
Deferred Financing Costs — Deferred financing costs include fees associated with our revolving credit agreement. Such fees are amortized on a straight-line basis over the terms of the related revolving credit agreement as a component of interest expense, which approximates the effective interest rate method, in accordance with the terms of the agreement. No amounts have beenwere drawn to dateor outstanding under the revolving credit agreement.agreement as of December 31, 2021. Deferred financing costs are included in prepaid expenses and other assets on the consolidated balance sheets.
Revenue Recognition —We have the following revenue sources and revenue recognition policies:
Base Rent -
•Rental revenue: Rental revenue comprises revenue from fixed and variable lease payments, as designated within tenant operating leases in accordance with ASC 842 Leases, as described further in ourLeases accounting policy in Note 3 to the audited consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.
•Rental revenue deemed uncollectible: We evaluate the collectibility of amounts due from tenants and disputed enforceable charges on both a lease-by-lease and a portfolio-level, which result from the inability of tenants to make required payments under their operating lease agreements. We recognize changes in the collectibility assessment of these operating leases as adjustments to rental revenue in accordance with ASC 842.
•Other Income: Other income arisingis generated in connection with certain services provided to tenants for which we earn a fee. This revenue is recognized as the services are transferred in accordance with ASC 606 Revenue from minimumContracts with Customers.
•Management and development fees: We generate management and development fee income from contractual property management agreements with third parties. This revenue is recognized as the services are transferred in accordance with ASC 606.
Leases — We have approximately 900 operating leases at our properties, which generate rental income from tenants and operating cash flows for the Company. Our tenant leases are dependent on the Company, as lessor, agreeing to provide our tenants with the right to control the use of our real estate assets, as lessees. Our real estate assets are comprised of retail shopping centers, malls and industrial parks. Tenants agree to use and control their agreed upon space for their business purposes. Thus, our tenants obtain substantially all of the economic benefits from the use of our shopping center space and have the right to direct how and for what purpose the real estate space is used throughout the period of use. Given these contractual terms, the Company has determined that all tenant contracts of this nature contain a lease. The Company assesses lease classification for each new and modified lease. All new and modified leases which commenced in the year ended December 31, 2021 have been assessed and classified as operating leases.
Contractual rent increases of renewal options are often fixed at the time of the initial lease agreement which may result in tenants being able to exercise their renewal options at amounts that are less than the fair value of the rent at the date of renewal. In addition to fixed base rents, certain rental income derived from our tenant leases is variable and may be dependent on percentage rent or the Consumer Price Index ("CPI"). Variable lease payments from tenant leases. Thesepercentage rents are recognized overearned by the non-cancelable termCompany in the event the tenant's gross sales exceed certain amounts. Terms of percentage rent are agreed upon in the related leasestenant's lease and will vary based on a straight-line basis which includes the effects oftenant's sales. Variable lease payments dependent on the CPI, will change in accordance with the corresponding increase or decrease in CPI if negotiated and agreed upon in the tenant's lease. Variable lease payments dependent on percentage rent steps and rent abatements under the leases. We commence revenue recognition when the tenant takes possession of the leased space and the leased space is substantially readyCPI were $9.8 million and $2.4 million for its intended use. In addition, in circumstances where we provide athe years ended December 31, 2021 and 2020, respectively. Variable lease incentive to tenants, we recognize the incentive as a reduction of rental revenue on a straight-line basis over the term of the lease.
Percentage Rent - income arising from retail tenant leases that is contingent upon tenant sales exceeding defined thresholds. These rents are recognized only after the contingency has been removed (i.e., when tenant sales thresholds have been achieved).
Tenant Expense Reimbursements - revenue arisingpayments also arise from tenant leasesexpense reimbursements, which provide for the recovery of all or a portion of the operating expenses, common area maintenance expenses, real estate taxes, insurance and capital improvements of
the respective property and amounted to $101.3 million and $96.7 million for the years ended December 31, 2021 and 2020, respectively. The Company accounts for variable lease payments as Rental revenue on the consolidated statements of income in the period in which the changes in facts and circumstances on which the variable lease payments are based occur.
The Company also has 20 properties in its portfolio either completely or partially on land or in a building that are owned by third parties. These properties are leased or subleased to us pursuant to ground leases, building leases or easements, with remaining terms ranging from one to 78 years and provide us the right to operate each such property. We also lease or sublease real estate for our 3 corporate offices with remaining terms of less than one year. Right-of-use ("ROU") assets are recorded for these leases, which represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from these leases. ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The initial measurement of a ROU asset may differ from the initial measurement of the lease liability due to initial direct costs, prepaid lease payments and lease incentives. As of December 31, 2021, no other contracts have been identified as leases. Our leases often offer renewal options, which we assess against relevant economic factors to determine whether the Company is reasonably certain of exercising or not exercising the option. Lease payments associated with renewal periods, for which the Company has determined are reasonably certain of being exercised, are included in the measurement of the corresponding lease liability and ROU asset.
For finance leases and operating leases, the discount rate applied to measure each ROU asset and lease liability is based on the incremental borrowing rate of the lease due to the rate implicit in the lease not being readily determinable. The Company initially considers the general economic environment and factors in various financing and asset specific secured borrowings so that the overall incremental borrowing rate is appropriate to the intended use of the lease. Certain expenses derived from these leases are variable and are not included in the measurement of the corresponding lease liability and ROU asset, but are recognized in the period in which the obligation for those payments is incurred. These variable lease payments consist of payments for real estate taxes and capital improvements of the respective property. This revenuecommon area maintenance, which is accrued in the same periods as the expenses are incurred.dependent on projects and activities at each individual property under ground or building lease.
Management, Leasing and Other Fees - income arising from contractual agreements with third parties. This revenue is recognized as the related services are performed under the respective agreements.
Noncontrolling Interests — Noncontrolling interests in consolidated subsidiaries represent the portion of equity that we do not own in those entities that we consolidate. We identify our noncontrolling interests separately within the equity section on the consolidated balance sheets. Noncontrolling interests in the Operating Partnership include OP units and limited partnership interests in the Operating Partnership in the form of long-term incentive plan (“LTIP”) unit awards.awards classified as equity.
Variable Interest Entities - — Certain entities that do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties, or infor which the equity investors do not haveowners as a group lack any one of the characteristicsfollowing characteristics: (i) the power, through voting rights or similar rights, to direct the activities of a controlling financial interestlegal entity that most significantly impact the entity’s economic performance, (ii) the obligation to absorb the expected losses of the legal entity, or (iii) the right to receive the expected residual returns of the legal entity, qualify as VIEs. VIEs are required to be consolidated by their primary beneficiary. The primary beneficiary of a VIE has both the power to direct the activities that most significantly impact economic performance of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The consolidated and combined financial statements reflect the consolidation of VIEs in which the Company is the primary beneficiary.
Management uses its judgment when determining if we are the primary beneficiary of, or have a controlling financial interest in, an entity in which we have a variable interest. Factors considered in determining whether we have the power to direct the activities that most significantly impact the entity’s economic performance include voting rights, involvement in day-to-day capital and operating decisions and the extent of our involvement in the entity.
Excluding the Operating Partnership, the Company had 2 entities that met the criteria of a VIE in which we held variable interests as of December 31, 2021 and 2020. These entities are VIEs primarily because the noncontrolling interests do not have substantive kick-out or participating rights and we control the significant operating decisions and consequently have the power to direct the activities that most significantly impact the economic performance of these entities. As we also have the obligation to absorb the majority of the losses and/or the right to receive a majority of the benefits for these entities, they were consolidated in our financial statements as of December 31, 2021 and 2020. The majority of the operations of these VIEs are funded with cash flows generated by the properties and periodic cash contributions.
As of December 31, 2021 and 2020, excluding the Operating Partnership, the 2 consolidated VIEs had total assets of $48.5 million and $43.6 million, respectively and total liabilities of $24.7 million and $31.5 million, respectively.
Earnings Per Share and Unit —Basic earnings per common share and unit is computed by dividing net income attributable to common shareholders and unitholders by the weighted average common shares and units outstanding during the period. Unvested share-based payment awards that entitle holders to receive non-forfeitable dividends, such as our restricted stock awards, are classified as “participating securities.” Because the awards are considered participating securities, the Company and the Operating Partnership are required to apply the two-class method of computing basic and diluted earnings that would otherwise have been available to common shareholders and unitholders. Under the two-class method, earnings for the period are allocated between common shareholders and unitholders and other shareholders and unitholders, based on their respective rights to receive dividends. During periods of net loss, losses are allocated only to the extent the participating securities are required to absorb their share of such losses. Diluted earnings per common share and unit reflects the potential dilution of the assumed exercises of shares including stock options and unvested restricted shares to the extent they are dilutive.
Share-Based Compensation —We grant stock options, LTIP units, OP units, deferred share units, restricted share awards and performance-based units to our officers, trustees and employees. The term of each award is determined by the compensation committee of our Board of Trustees (the “Compensation Committee”), but in no event can such term be longer than ten years from the date of grant. The vesting schedule of each award is determined by the Compensation Committee, in its sole and absolute discretion, at the date of grant of the award. Dividends are paid on certain shares of unvested restricted stock, which makes the restricted stock a participating security.
Fair value is determined, depending on the type of award, using either the Black-Scholes option-pricing model or the Monte Carlo method, both of which are intended to estimate the fair value of the awards at the grant date. In using the Black-Scholes option-pricing model, expected volatilities and dividend yields are primarily based on available implied data and peer group companies’ historical data. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant.
Compensation expense for restricted share awards is based on the fair value of our common shares at the date of the grant and is recognized ratably over the vesting period. For grants with a graded vesting schedule or a cliff vesting schedule, we have elected to recognize compensation expense on a straight-line basis. Also included in Share-based compensation expense is the unrecognized compensation expense of awards issued under Vornado’s outperformance plan (“OPP”) prior to the separation for the Company’s employees who were previously Vornado employees. The OPP unrecognized compensation expense is recognized on a straight-
linestraight-line basis over the remaining life of the OPP awards issued. Share-based compensation expense is included in general and administrative expenses on the consolidated and combined statements of income.
When the Company issues common shares as compensation, it receives a like number of common units from the Operating Partnership. Accordingly, the Company’s ownership in the Operating Partnership will increase based on the number of common shares awarded under our 2015 Omnibus Share Plan. As a result of the issuance of common units to the Company for share-based compensation, the Operating Partnership accounts for share-based compensation in the same manner as the Company.
Income Taxes — Our twoThe Company elected to be taxed as a REIT under sections 856-860 of the Code, commencing with the filing of its 2015 tax return for its tax year ended December 31, 2015. With the exception of the Company’s TRS, to the extent the Company meets certain requirements under the Code, the Company will not be taxed on its federal taxable income. If we fail to qualify as a REIT for any taxable year, we will be subject to federal income taxes at regular corporate rates (including any alternative minimum tax, which, for corporations, was repealed under the TCJA for tax years beginning after December 31, 2017) and may not be able to qualify as a REIT for the four subsequent taxable years. In addition to its TRS, the Company is subject to certain foreign and state and local income taxes, in particular income taxes arising from its operating activities in Puerto Rico, malls are subject to income taxes which are based on estimated taxable income and are included in income tax expense in the consolidated and combined statements of income.
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.basis and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the enacted tax rates in effect for the year in which thesethose temporary differences are expected to be recovered or settled. Earnings and profits,The Company provides a valuation allowance for deferred tax assets for which determineit does not consider realization of such assets to be more likely than not.
The Company applies the taxability of dividendsFASB’s guidance relating to shareholders, differsuncertainty in income taxes recognized in a Company’s financial statements. Under this guidance the Company may recognize the tax benefit from net income reported for financial reporting purposes primarily because of differences in depreciable lives and cost basesan uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the malls,position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The guidance on accounting for uncertainty in income taxes also provides guidance on derecognition, classification, interest and penalties on income taxes, and accounting in interim periods. The Company records interest and penalties relating to unrecognized tax benefits, if any, as well as other timing differences.income tax expense
Concentration of Credit Risk —A concentration of credit risk arises in our business when a national or regionally-based tenant occupies a substantial amount of space in multiple properties owned by us. In that event, if the tenant suffers a significant downturn in its business, it may become unable to make its contractual rent payments to us, exposing us to potential losses in rental revenue, expense recoveries, and percentage rent. Further, the impact may be magnified if the tenant is renting space in multiple locations. Generally, we do not obtain security from our national or regionally-based tenants in support of their lease obligations to us. We regularly monitor our tenant base to assess potential concentrations of credit risk. None of our tenants accounted for more than 10% of total revenues in the year ended December 31, 2017.2021. As of December 31, 2017,2021, The Home DepotTJX Companies, Inc. was our largest tenant with 7NaN stores which comprised an aggregate of 920,000 square-feet714,731 sf and accounted for approximately $22.3$20.6 million, or 5.5%4.8% of our total revenue for the year ended December 31, 2017.2021.
Recently Issued Accounting Literature
Effective for the fiscal period beginning January 1, 2019, we adopted ASC 842 Leases, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). In May 2017,connection with the FASBadoption of ASU 2016-02, we also adopted (i) ASU 2019-01 Leases (ASC 842): Codification Improvements, (ii)ASU 2018-20 Leases (ASC 842): Narrow-Scope Improvements for Lessors,(iii) ASU 2018-11 Leases (ASC 842): Targeted Improvements,(iv) ASU 2018-10 Codification Improvements to ASC 842, Leases and (v)ASU 2018-01 Leases (ASC 842): Land Easement Practical Expedient for Transition to Topic 842.
We initially applied the standard at the beginning of the period of adoption through the transition method issued an update (“by ASU 2017-09”) Scope of Modification Accounting, which clarifies when to account for a change2018-11 and have presented comparative periods under ASC 840 Leases. Due to the terms or conditionseffects of applying ASC 842, the Company recognized a share-based payment award as a modification. Under the new guidance, modification accounting will not apply if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. ASU 2017-09 is effective for annual periods beginning after December 15, 2017, with early adoption permitted. We adopted the standard on January 1, 2018, which resulted in no impact. If we encounter a change$2.9 million cumulative-effect adjustment to the terms or conditions of any of our share-based payment awards we will evaluate the need to apply modification accounting based on the new guidance. The general treatment for modifications of share-based payment awards is to record the incremental value arising from the change as additional compensation cost.
In February 2017, the FASB issued an updated (“ASU 2017-05”) Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets, to clarify the scope and accounting for derecognition of nonfinancial assets. ASU 2017-05 eliminated the guidance specific to real estate sales and partial sales. ASU 2017-05 defines “in-substance nonfinancial assets” and includes guidance on partial sales of nonfinancial assets. ASU 2017-05 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017, with early adoption permitted. We adopted the standard on January 1, 2018, which resulted in no impact.
In January 2017, the FASB issued an update (“ASU 2017-01”) Clarifying the Definition of a Business, which changes the definition of a business to exclude acquisitions where substantially all of the fair value of the assets acquired are concentrated in a single identifiable asset or a group of similar identifiable assets. While there are various differences between accounting for an asset acquisition and a business combination, the largest impact is that transaction costs are capitalized for asset acquisitions rather than expensed when they are considered business combinations. ASU 2017-01 is effective for annual periods beginning after December 15, 2017, with early adoption permitted. We elected to early adopt ASU 2017-01 effective January 1, 2017. The adoption of this standard has resulted in asset acquisition classification for the real estate acquisitions closedits accumulated deficit in the year ended December 31, 2017, and accordingly, acquisition costs for these acquisitions have been capitalized (refer 2019 to Note 4 Acquisitions and Dispositions)adjust reserves on receivables from straight-line rents.
In February 2016, the FASB issued an update (“ASU 2016-02”) Leases, which revises the accounting related The new standard requires lessees to lease accounting. Under the new guidance, lessees will be required to recognizeapply a lease liability and a right-of-use asset for alltwo-model approach, classifying leases with terms greater than 12 months. Leases will be classified as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification determines whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a ROU asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. The Company has elected the short-term lease recognition exemption, and therefore, leases with a term of 12 months or less are not recognized on the balance sheet. The new standard requires lessors to account for leases using an approach that is substantially equivalent to guidance for sales-type leases, direct financing leases and operating leases under ASC 840. For purposes of transition, we did not elect the hindsight practical expedient but did elect the land easement practical expedient to not reassess whether existing land easements contain leases and the practical expedient package, which has been applied consistently to all of our leases. As a result of electing the practical expedient package, we did not (i) reassess whether any expired or existing contracts are or contain leases, (ii) reassess the lease classification affectingfor any expired or existing leases or (iii) reassess initial direct costs for any existing leases.
From a lessee perspective, the pattern of expense recognitioninitial adoption on January 1, 2019 resulted in the income statement. The provisionsrecognition of ASU 2016-02 are effective for fiscal years beginning afteroperating lease ROU assets and lease liabilities. Additionally, we reclassified certain amounts of acquired below-market lease intangibles and accrued rent and adjusted the carrying values of our ROU assets by the corresponding amounts. As of December 15, 201831, 2021, the Company had 24 operating leases and should be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative periodour operating lease ROU assets and lease liabilities were $69.4 million and $64.6 million, respectively, as presented in the financial statements. Early adoption is permitted. We expect to adopt
the standard beginning January 1, 2019. This standard will impacton our consolidated financial statements bybalance sheet. As of December 31, 2021, our finance lease ROU asset and finance lease liabilities were $2.7 million and $3.0 million, respectively. The finance lease ROU asset is included within prepaid expenses and other assets on our consolidated balance sheets as of December 31, 2021 and 2020 and the recording of right-of-use assetsfinance lease liability is included within accounts payable, accrued expenses and leaseother liabilities on our consolidated balance sheets for operatingas of December 31, 2021 and 2020. The Company recognizes interest expense on its finance leases where we arelease liability. The standard's adoption has also impacted the lessee. We are currently in the processpresentation of evaluating the inputs required to calculate the amount that will be recorded on our consolidated balance sheetsincome statements due to accounting for these leases. In addition, leases where we are the lease and non-lease components as a single lease component for all classes of underlying assets, presented as lease expense on the consolidated statements of income. Prior to the adoption of ASC 842, related lease and non-lease expense amounts were recognized within lease expense, real estate taxes, property operating expenses and general administrative expenses on the consolidated statements of income.
From a lessor that meetperspective, the criteria of a finance lease will be amortized using the effective interest method with corresponding chargesadoption resulted in additional general and administrative expenses, attributable to interest expense and amortization expense. Leases where we are the lessor that meet the criteria of an operating lease will continue to be amortized on a straight-line basis. Further, internal leasing department costs previously capitalized will be expensed within general and administrative expenses. Historical capitalizationnot meeting the definition of internal leasinginitial direct costs was $0.7 million and $0.8 million forunder ASC 842. The standard's adoption has also impacted the years ended December 31, 2017 and December 31, 2016. ASU 2016-02 originally stated that companies would be requiredpresentation of our consolidated income statements due to bifurcate certain lease revenues between lease and non-lease components, however, the FASB issued an exposure draft in January 2018 (2018 Exposure Draft) which, if adopted as written, would allow lessors a practical expedient by class of underlying assets to accountaccounting for lease and non-lease components as a single lease component, presented as rental revenue on the consolidated statements of income, however there has been no change in the timing of revenue recognition since adoption. Additionally, under the amendments issued in ASU 2018-20, the Company has accounted for common area maintenance expenses paid directly by tenants to third-parties as variable rental revenue and has reported the corresponding expense within property operating expenses. Real estate taxes and insurance expenses paid directly by tenants have not been recognized as rental revenue or as expenses on the consolidated statements of income.
In March 2020, the FASB issued ASU 2020-04 Reference Rate Reform (ASC 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. We currently do not anticipate the need to modify our existing debt agreements as a result of reference rate reform in the current year, however if certain criteriaany modification is executed as a result of reference rate reform, the Company will elect the optional expedient available under ASU 2020-04, which allows entities to account for the modification as if the modification was not substantial. We will disclose the nature of and reason for electing the optional expedient in each interim and annual financial statement period if and when applicable through December 31, 2022.
In April 2020, the FASB issued a question-and-answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of COVID-19. Under existing lease guidance, the Company would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated with the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A clarifies that entities may elect to not evaluate whether lease-related relief, that lessors provide to mitigate the economic effects of COVID-19 on lessees, is a lease modification under ASC 842. Instead, when the cash flows resulting from the lease concession granted for COVID-19 rent relief are met. ASU 2016-02 originally requiredsubstantially the same or less than the cash flows of the original contract, an entity may elect to apply the modification guidance (i.e. assume the relief was always contemplated by the contract or assume the relief was not contemplated by the contract).
The FASB stated that there are multiple ways to account for rent concessions, none of which the FASB believes are more preferable than the others. Two of those methods are: (i) account for the concessions as if no changes to the lease contract were made; under that accounting, a modified retrospective method of adoption, however, the 2018 Exposure Draft indicates that companies may be permittedlessor would continue to increase its lease receivable and continue to recognize income, referred to as the “receivable approach”; or (ii) account for the deferred payments or abatements as variable lease payments; under that accounting, a cumulative-effect adjustment tolessor would recognize the opening balance of retained earningspayment as income in profit or loss in the period of adoption. in which the changes in facts and circumstances on which the variable lease payments are based occurred, referred to as the “variable approach”.
The Company will continuemakes the election to evaluateaccount for rent concessions using the impactreceivable approach or variable approach a on a disaggregated basis, with such election applied consistently to leases with similar characteristics and similar circumstances. As of December 31, 2021, the Company has granted rent deferrals accounted under both the receivable approach by electing the Lease Modification Q&A and as modifications due to term extensions of the leases. The Company has also granted abatements accounted for under both the variable approach and as modifications due to the executed agreements including other rental term modifications, such as term extensions and substantial changes in cash flows. Refer to Note 10 to the consolidated financial statements included in Part II, Item 8 of this guidance until it becomes effective.Annual Report on Form 10-K.
In May 2014, the FASB issued an update (“ASU 2014-09”) Revenue from Contracts with Customers to ASC Topic 606, which supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition. ASU 2014-09 requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. During the year ended December 31, 2016, the FASB issued the following updates to ASC Topic 606 to clarify and/or amend the guidance in ASU 2014-09: (i) ASU 2016-08 Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarifies the implementation guidance on principal versus agent considerations, (ii) ASU 2016-10 Identifying Performance Obligations and Licensing, which clarifies guidance related to identifying performance obligations and licensing implementation guidance and (iii) ASU 2016-12 Narrow-Scope Improvements and Practical Expedients, which amends certain aspects of ASU 2014-09. In August 2015, the FASB issued an update (“ASU 2015-09”) Revenue from Contracts with Customers to ASC Topic 606, which defers the effective date of ASU 2014-09 for all entities by one year. ASU 2015-09 is effective beginning after December 15, 2017, including interim reporting periods within that reporting period. We adopted this standard effective January 1, 2018 using the modified retrospective approach which requires applying the new standard to all existing contracts not yet completed as of the effective date. We have completed our evaluation of the standard’s impact on the Company’s revenue streams, specifically management and development fee income. We expect the new standard to primarily impact qualitative disclosures rather than materially affecting our revenue recognition accounting policies and will not have a material impact on our consolidated financial statements.
Any other recently issued accounting standards or pronouncements not disclosed above have been excluded as they are not relevant to the Company or the Operating Partnership, or they are not expected to have a material impact on our consolidated financial statements.
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4. | ACQUISITIONS AND DISPOSITIONS |
4. ACQUISITIONS AND DISPOSITIONS
Acquisitions
During the years ended December 31, 2021 and December 31, 2020, we closed on the following acquisitions:
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Date Purchased | | Property Name | | City | | State | | Square Feet | | Purchase Price | |
| | | | | | | | | | (in thousands) | |
August 10, 2021 | | 601 Murray Road | | East Hanover | | NJ | | 88,000 | | | $ | 18,312 | | |
August 19, 2021 | | 151 Ridgedale Avenue | | East Hanover | | NJ | | 187,000 | | | 37,759 | | |
December 23, 2021 | | Woodmore Towne Centre | | Glenarden | | MD | | 712,000 | | | 198,055 | | |
| | | | | | | | 2021 Total | $ | 254,126 | | (1) |
| | | | | | | | | | | |
February 12, 2020 | | Kingswood Center | | Brooklyn | | NY | | 130,000 | | | $ | 90,212 | | |
February 12, 2020 | | Kingswood Crossing | | Brooklyn | | NY | | 110,000 | | | 77,077 | | |
December 11, 2020 | | 51 East Spring Valley Ave | | Maywood | | NJ | | 3,000 | | | 662 | | |
December 31, 2020 | | Sunrise Mall | | Massapequa | | NY | | 1,211,000 | | | 31,545 | | |
| | | | | | | | 2020 Total | $ | 199,496 | | (1) |
(1) The total purchase price for the properties acquired in the years ended December 31, 2021 and December 31, 2020 include $5.2 million and $3.1 million, respectively, of transaction costs incurred in relation to the transactions.
During the year ended December 31, 20172021, the Company purchased 3 assets, at an aggregate purchase price of $254.1 million and 987,000 sf, comprising two assets located in East Hanover, NJ, and one asset located in Glenarden, MD.
In December 31, 2016, we2021, the Company closed on the following acquisitions:
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Date Purchased | | Property Name | | City | | State | | Square Feet | | Purchase Price(1) |
| | | | | | | | | | (in thousands) |
January 4, 2017 | | Yonkers Gateway Center | | Yonkers | | NY | | — |
| (2) | $ | 51,902 |
|
January 17, 2017 | | Shops at Bruckner | | Bronx | | NY | | 114,000 |
| | 32,269 |
|
February 2, 2017 | | Hudson Mall | | Jersey City | | NJ | | 383,000 |
| | 44,273 |
|
May 24, 2017 | | Yonkers Gateway Center | | Yonkers | | NY | | 437,000 |
| (2) | 101,825 |
|
May 24, 2017 | | The Plaza at Cherry Hill | | Cherry Hill | | NJ | | 413,000 |
| | 53,535 |
|
May 24, 2017 | | Manchester Plaza | | Manchester | | MO | | 131,000 |
| | 20,162 |
|
May 24, 2017 | | Millburn Gateway Center | | Millburn | | NJ | | 102,000 |
| | 45,583 |
|
May 24, 2017 | | 21 E Broad St / One Lincoln Plaza | | Westfield | | NJ | | 22,000 |
| | 10,158 |
|
May 25, 2017 | | The Plaza at Woodbridge | | Woodbridge | | NJ | | 411,000 |
| | 103,962 |
|
| | | | | | | | 2017 Total | $ | 463,669 |
|
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December 22, 2016 | | North Bergen - outparcel | | North Bergen | | NJ | | 0.3 |
| (3) | $ | 2,667 |
|
| | | | | | | | 2016 Total | $ | 2,667 |
|
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(1)
| Includes $11.3 million of transaction costs incurred since January 1, 2017. |
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(2)
| On January 4, 2017, we acquired fee and leasehold interests, including the lessor position under an operating lease for the whole property. On May 24, 2017, we purchased the remaining fee and leasehold interests not previously acquired, including the lessee position under the operating lease for the whole property. |
On January 4, 2017, we acquired fee and leasehold interestsacquisition of Woodmore Towne Centre, a 712,000 sf retail center located in Yonkers Gateway CenterGlenarden, MD, for $51.9 million. Consideration for thisa purchase consistedprice of the issuance of $48.8$198.1 million, in OP units and $2.9 million of cash. The total number of OP units issued was 1.8 million at a value of $27.09 per unit. Transaction costs associated with this acquisition were $0.2 million.
On January 17, 2017, we acquired the leasehold interest in the Shops at Bruckner for $32.3 million, consisting of the assumption of the existing debt of $12.6 million and $19.4 million of cash.including transaction costs. The property is 97% leased and sits on 83 acres and includes an additional 22 acres of land adjacent to the main parcel that may be developed for a 114,000 sf retail centercomplementary commercial use in the Bronx, NY directly across from our 376,000 sf Bruckner Commons shopping center. We own the land under the Shops at Bruckner and had been leasing it to the seller under a ground lease that ran through September 2044. Concurrent withfuture. To partially fund the acquisition, we wrote-off the unamortized intangible liability balance related toCompany entered into a 10-year, $117.2 million non-recourse first mortgage secured by the below-market ground lease as well asproperty. The mortgage has a fixed interest rate of 3.39% and is interest-only for the existing straight-line receivable balance. As a result, we recognized $39.2 million of income fromentire loan term.
The 2 industrial properties, acquired leasehold interest in the year ended December 31, 2017. Transaction costs associated with this acquisition were $0.3 million.
On February 2, 2017, we acquired Hudson Mall, a 383,000 sf retail center in Jersey City, NJAugust 2021, are adjacent to our existing Hudson Commons shopping center. Consideration for this purchase consisted943,000 sf warehouse park in East Hanover, NJ. The acquisition of the assumption151 Ridgedale Avenue was partially funded via a 1031 exchange using cash proceeds from previous dispositions.
The Company purchased 4 assets with a total consideration of the existing debt of $23.8$199.5 million and $19.9 million of cash. Transaction costs associated with this acquisition were $0.6 million.
On May 24 and 25, 2017, we acquired the Portfolio comprising 1.5 million sf of gross leasable area, predominantly in the New York City metropolitan area, for $325 million excluding transaction costs. The Portfolio was privately owned for more than three decades and was 83% leased as of the date of acquisition. Consideration for this purchase consisted of the issuance of $122 million in OP units, the assumption of $33 million of existing mortgage debt, the issuance of $126 million of non-recourse, secured mortgage debt and $44 million of cash. The total number of OP units issued was 4.5 million at a value of $27.02 per unit. Transaction costs associated with this acquisition were $10.2 million.
All acquisitions closed during the year ended December 31, 2017 were accounted2020. 2 of the assets are located in Brooklyn, NY, 1 asset is located in Massapequa, NY and 1 asset is located in Maywood, NJ and is adjacent to our existing property, Bergen Town Center.
The Company acquired Sunrise Mall in Massapequa, NY for as asset acquisitions in accordance with ASU 2017-01, adopted January 1, 2017. Accordingly,$31.5 million, including transaction costs incurred since January 1, 2017 related to these transactionson December 31, 2020. The Company’s acquired ownership interest of the asset is 82.5% with the remaining 17.5% held by strategic partners.
The Company acquired Kingswood Center and Kingswood Crossing for $167.3 million, including transaction costs on February 12, 2020. The properties are located along Kings Highway in the Midwood neighborhood of Brooklyn, NY and were capitalizedfunded via 1031 exchanges using cash proceeds from dispositions. Additionally, as part of the asset’s purchase price. The purchase pricesacquisition of Kingswood Center, the Company assumed a $65.5 million mortgage, which matures in 2028.
A portion of the acquisition of Kingswood Crossing was completed as a reverse Section 1031 exchange. We entered into a reverse Section 1031 exchange agreement with third-party intermediaries, which, for a maximum of 180 days, allowed us to defer for tax purposes, gains on the sale of other properties identified and sold within the period. Until the earlier of the termination of the exchange agreements or 180 days after the respective acquisition dates, the third-party intermediaries are the legal owner of the properties; however, we controlled the activities that most significantly impact each property and retained all acquisitions were allocated toof the acquired assetseconomic benefits and liabilities based on their relative fair valuesrisks associated with each property. Therefore, at the date of acquisition.acquisition, we determined that we were the primary beneficiary of these variable interest entities and consolidated the properties and their operations as of the acquisition date.
The aggregate purchase price of the above property acquisitions havehas been allocated as follows:
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Property Name | | Land | | Buildings and improvements | | Identified intangible assets(1) | | Identified intangible liabilities(1) | | Debt Premium | | ROU assets net of lease liabilities | | Other assets, net | | Total Purchase Price |
(in thousands) | | | | | | | | | | | | | | | | |
601 Murray Road | | $ | 2,075 | | | $ | 14,733 | | | $ | 1,722 | | | $ | (218) | | | $ | — | | | — | | | — | | | 18,312 | |
151 Ridgedale Avenue | | 2,990 | | | 35,509 | | | — | | | (740) | | | — | | | — | | | — | | | 37,759 | |
Woodmore Towne Centre(3) | | 28,398 | | | 144,834 | | | 23,128 | | | (8,035) | | | — | | | — | | | $ | 9,730 | | | 198,055 | |
2021 Total | | $ | 33,463 | | | $ | 195,076 | | | $ | 24,850 | | | $ | (8,993) | | | $ | — | | | $ | — | | | $ | 9,730 | | | $ | 254,126 | |
| | | | | | | | | | | | | | | | |
Kingswood Center | | $ | 15,690 | | | $ | 76,766 | | | $ | 9,263 | | | $ | (4,534) | | | $ | (6,973) | | | $ | — | | | $ | — | | | $ | 90,212 | |
Kingswood Crossing | | 8,150 | | | 64,159 | | | 4,768 | | | — | | | — | | | — | | | — | | | 77,077 | |
51 East Spring Valley Ave | | 662 | | | — | | | — | | | — | | | — | | | — | | | — | | | 662 | |
Sunrise Mall(2) | | 44,035 | | | 3,084 | | | 5,495 | | | (26,495) | | | — | | | 5,012 | | | 414 | | | 31,545 | |
2020 Total | | $ | 68,537 | | | $ | 144,009 | | | $ | 19,526 | | | $ | (31,029) | | | $ | (6,973) | | | $ | 5,012 | | | $ | 414 | | | $ | 199,496 | |
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Property Name | | Land | | Buildings and improvements | | Identified intangible assets(1) | | Identified intangible liabilities(1) | | Debt premium | | Total purchase price |
(in thousands) | | | | | | | | | | | | |
Yonkers Gateway Center | | $ | 40,699 |
| | $ | — |
| | $ | 25,858 |
| | $ | (14,655 | ) | | $ | — |
| | $ | 51,902 |
|
Shops at Bruckner | | — |
| | 32,979 |
| | 12,029 |
| | (12,709 | ) | | (30 | ) | | 32,269 |
|
Hudson Mall | | 15,824 |
| | 37,593 |
| | 9,930 |
| | (17,344 | ) | | (1,730 | ) | | 44,273 |
|
Yonkers Gateway Center | | 22,642 |
| | 110,635 |
| | 38,162 |
| | (68,694 | ) | | (920 | ) | | 101,825 |
|
The Plaza at Cherry Hill | | 14,602 |
| | 33,666 |
| | 7,800 |
| | (2,533 | ) | | — |
| | 53,535 |
|
Manchester Plaza | | 4,409 |
| | 13,756 |
| | 3,256 |
| | (1,259 | ) | | — |
| | 20,162 |
|
Millburn Gateway Center | | 15,783 |
| | 25,387 |
| | 5,360 |
| | (947 | ) | | — |
| | 45,583 |
|
21 E Broad St / One Lincoln Plaza | | 5,728 |
| | 4,305 |
| | 679 |
| | (554 | ) | | — |
| | 10,158 |
|
The Plaza at Woodbridge | | 21,547 |
| | 75,017 |
| | 11,596 |
| | (4,198 | ) | | — |
| | 103,962 |
|
2017 Total | | $ | 141,234 |
| | $ | 333,338 |
| | $ | 114,670 |
| | $ | (122,893 | ) | | $ | (2,680 | ) | | $ | 463,669 |
|
| | | | | | | | | | | | |
North Bergen - outparcel | | $ | 2,667 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 2,667 |
|
2016 Total | | $ | 2,667 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 2,667 |
|
(1) As of December 31, 2017,2021, the remaining weighted average amortization periods of the identified intangible assets and identified intangible liabilities acquired in 20172021 were 17.98.7 years and 16.614.7 years, respectively and the remaining weighted average amortization periods of the identified intangible assets and identified intangible liabilities acquired in 2020 were 10.3 years and 27.2 years, respectively.
(2) In connection with this acquisition, the Company acquired the lessee positions of ground leases and recognized operating lease ROU assets and operating lease liabilities. Refer to Note 8 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information.
(3) The amount allocated to Other assets, net relates to future reimbursements from the county for development work performed by the previous owner and is included in Prepaid expenses and other assets on our consolidated balance sheets.
Dispositions
On June 30, 2017, we completed the sale of our property previously classified as held for sale in Eatontown, NJ, for $4.8 million, net of selling costs. Prior to the sale, the book value of this property exceeded its estimated fair value less costs to sell, and as such, an impairment charge of $3.5 million was recognized inDuring the year ended December 31, 2017. Our determination2021, we disposed of fair value was based3 properties and 1 property parcel and received proceeds of $34.9 million, net of selling costs, resulting in an $18.6 million net gain on sale of real estate. Of these dispositions completed during the executed contract of saleyear ended December 31, 2021, two were completed as a 1031 exchange with the third-party buyer.
On September 8, 2017, we completedacquisition of 151 Ridgedale Avenue, allowing for the deferral of capital gains from the sale for income tax purposes.
During the year ended December 31, 2021, the Company also sold its lessee position in its ground lease at Vallejo, CA and received proceeds of excess land in Kearny, NJ for $0.3$2.4 million, net of selling costs, and derecognized the ROU asset and corresponding lease liability related to the lease.
During the year ended December 31, 2020, we disposed of 3 properties and received proceeds of $58.1 million, net of selling costs, resulting in a $39.8 million net gain of $0.2 million.
On June 9, 2016, we completed theon sale of real estate. The sale of all 3 dispositions were completed as 1031 exchanges with Kingswood Crossing as a shopping center located in Waterbury, CT for $21.6 million, resulting in a gainresult of $15.6 million.the sales occurring within 180 days of the Company’s acquisition.
Real Estate Held for Sale
AtAs of December 31, 2017, we had one2020, a parcel of 1 property in Lodi, NJ was classified as held for sale in Allentown, PA based on thean executed contract of sale with a third-party buyer and our intent to dispose of the property.buyer. The carryingaggregate amount of our property in Allentown, PA is $3.3this parcel was $7.1 million net of accumulated depreciation of $14.3 million, which isand was included in prepaid expenses and other assets in our consolidated balance sheets as of December 31, 2017. We expect to complete the2020. The parcel was sold in January 2021. There was no real estate held for sale of Allentown during 2018.
| |
5. | RELATED PARTY TRANSACTIONS |
In connection with the separation, the Company and Vornado entered into a transition services agreement under which Vornado provided transition services to the Company including human resources, information technology, risk management, tax services and office space and support. The fees charged to us by Vornado for those transition services approximated the actual cost incurred by Vornado in providing such services. On June 28, 2016, the Company executed an amendment to the transition services agreement, extending Vornado’s provision of information technology, risk management services and the portion of the human resources service related to health and benefits through July 31, 2018, unless terminated earlier. Fees for these services remain the same except that they may be adjusted for inflation. As of December 31, 2017 and December 31, 2016, there were no amounts due to Vornado related to such services.
During the years ended December 31, 2017, 2016, and 2015 there were $1.6 million, $1.7 million, and $2.4 million respectively, of costs paid to Vornado included in general and administrative expenses, which consisted of $1.0 million, $0.9 million, and $0.4
million of rent expense for two of our office locations and $0.6 million, $0.8 million, and, $2.0 million of transition services fees, respectively.
Management and Development Fees
In connection with the separation, the Company and Vornado entered into property management agreements under which the Company provides management, development, leasing and other services to certain properties owned by Vornado and its affiliates, including Interstate Properties (“Interstate”) and Alexander’s, Inc. (NYSE:ALX). Interstate is a general partnership that owns retail properties in which Steven Roth, Chairman of Vornado’s Board and Chief Executive Officer of Vornado, and a member of our Board of Trustees, is the managing general partner. Interstate and its partners beneficially owned an aggregate of approximately 7.2% of the common shares of beneficial interest of Vornado as of December 31, 2017. As of December 31, 2017, Vornado owned 32.4% of Alexander’s, Inc. During the years ended December 31, 2017, 2016, and 2015 we recognized management and development fee income of $1.5 million, $1.8 million, and $2.3 million respectively. As of December 31, 2017 and December 31, 2016, there were $0.2 million and $0.3 million, respectively, of fees due from Vornado included in tenant and other receivables in our consolidated balance sheets.2021.
6.
5. IDENTIFIED INTANGIBLE ASSETS AND LIABILITIES
The following table summarizes our identified intangible assets and liabilities:
| | | | | | | | | | | |
(Amounts in thousands) | December 31, 2021 | | December 31, 2020 |
In-place leases | $ | 96,648 | | | $ | 82,303 | |
Accumulated amortization | (33,057) | | | (32,515) | |
Above-market leases | 10,185 | | | 9,255 | |
Accumulated amortization | (3,147) | | | (3,570) | |
Other intangible assets | 1,635 | | | 1,635 | |
Accumulated amortization | (1,157) | | | (924) | |
Identified intangible assets, net of accumulated amortization | 71,107 | | | 56,184 | |
Below-market leases | 135,654 | | | 219,558 | |
Accumulated amortization | (35,029) | | | (71,375) | |
Identified intangible liabilities, net of accumulated amortization | $ | 100,625 | | | $ | 148,183 | |
|
| | | | | | | |
(Amounts in thousands) | December 31, 2017 | | December 31, 2016 |
In-place leases | $ | 88,355 |
| | $ | 29,065 |
|
Accumulated amortization | (21,557 | ) | | (12,244 | ) |
Below-market ground leases(1) | 23,730 |
| | 23,730 |
|
Accumulated amortization | (10,819 | ) | | (9,847 | ) |
Above-market leases | 7,356 |
| | 441 |
|
Accumulated amortization | (1,228 | ) | | (270 | ) |
Other intangible assets | 1,635 |
| | — |
|
Accumulated amortization | (223 | ) | | — |
|
Identified intangible assets, net of accumulated amortization | 87,249 |
| | 30,875 |
|
Below-market leases | 246,791 |
| | 219,519 |
|
Accumulated amortization | (65,832 | ) | | (72,528 | ) |
Identified intangible liabilities, net of accumulated amortization | $ | 180,959 |
| | $ | 146,991 |
|
(1)Intangible assets related to below-market leases where the Company is a lessee under a ground lease.
Amortization of acquired below-market leases, net of acquired above-market leases resulted in additional rental income of $9.5$55.2 million $7.8, $10.6 million, and $7.9$15.9 million for the years ended December 31, 2017, 20162021, 2020 and 2015,2019, respectively. On September 29, 2021, the Company entered into agreements to terminate our three remaining Kmart and Sears leases effective October 15, 2021. The modification of these leases resulted in accelerated amortization of the below-market intangible lease liabilities of $45.9 million which is included in rental revenue for the year ended December 31, 2021. The intangibles related to these leases were fully amortized and subsequently written-off in 2021.
Amortization of acquired in-place leases and customer relationships resulted in additional depreciation and amortization expense of $9.3$8.6 million $2.0, $10.2 million, and $1.5$8.8 million for the years ended December 31, 2017, 20162021, 2020 and 2015,2019, respectively.
Certain shopping centers are subject to ground leases or ground and building leases. Amortization During 2021, we recognized $0.4 million of these acquired below-market leases resulted in additional rent expense of $1.0 million for eachaccelerated amortization of the years ended December 31, 2017, 2016in-place lease intangibles related to the Kmart and 2015, respectively.Sears lease terminations noted above.
The following table sets forth the estimated annual amortization expense(expense) and income related to intangible assets and liabilities for the five succeeding years commencing January 1, 2018:2022:
| | | | | | | | | | | | | | | | | | | | |
(Amounts in thousands) | | Below-Market | | Above-Market | | In-Place Lease |
Year | | Operating Lease Amortization | | Operating Lease Amortization | | Amortization |
2022 | | $ | 7,817 | | | $ | (1,154) | | | $ | (10,103) | |
2023 | | 7,771 | | | (1,092) | | | (8,355) | |
2024 | | 7,536 | | | (996) | | | (7,127) | |
2025 | | 7,354 | | | (803) | | | (6,082) | |
2026 | | 6,976 | | | (683) | | | (5,469) | |
|
| | | | | | | | | | | | | | | | |
(Amounts in thousands) | | Below-Market | | Above-Market | | In-Place Leases | | Below-Market Ground |
Year | | Operating Lease Income | | Operating Lease Expense | | Expense | | Leases Expense |
2018 | | $ | 12,074 |
| | $ | 1,574 |
| | $ | 11,317 |
| | $ | 972 |
|
2019 | | 11,620 |
| | 1,294 |
| | 8,620 |
| | 972 |
|
2020 | | 11,453 |
| | 1,016 |
| | 7,349 |
| | 972 |
|
2021 | | 11,251 |
| | 803 |
| | 6,033 |
| | 622 |
|
2022 | | 10,802 |
| | 426 |
| | 4,240 |
| | 590 |
|
7.6. MORTGAGES PAYABLE
The following is a summary of mortgages payable as of December 31, 20172021 and December 31, 2016.2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Interest Rate at | | December 31, | | December 31, |
(Amounts in thousands) | | Maturity | | December 31, 2021 | | 2021 | | 2020 |
First mortgages secured by: | | | | | | | | |
Variable rate | | | | | | | | |
Cherry Hill (Plaza at Cherry Hill)(1) | | 5/24/2022 | | 1.70% | | $ | 28,244 | | | $ | 28,930 | |
Woodbridge (Plaza at Woodbridge)(1) | | 5/25/2022 | | 1.70% | | 54,029 | | | 55,340 | |
Jersey City (Hudson Commons)(2) | | 11/15/2024 | | 2.00% | | 28,034 | | | 28,586 | |
Watchung(2) | | 11/15/2024 | | 2.00% | | 26,097 | | | 26,613 | |
Bronx (1750-1780 Gun Hill Road)(2) | | 12/1/2024 | | 2.00% | | 24,680 | | | 25,172 | |
Westfield (One Lincoln Plaza)(3) | | — | | —% | | — | | | 4,730 | |
Total variable rate debt | | | | | | 161,084 | | | 169,371 | |
Fixed rate | | | | | | | | |
Paramus (Bergen Town Center - West) | | 4/8/2023 | | 3.56% | | 300,000 | | | 300,000 | |
Bronx (Shops at Bruckner) | | 5/1/2023 | | 3.90% | | 9,698 | | | 10,351 | |
Jersey City (Hudson Mall) | | 12/1/2023 | | 5.07% | | 22,154 | | | 22,904 | |
Yonkers Gateway Center | | 4/6/2024 | | 4.16% | | 26,774 | | | 28,482 | |
Brick | | 12/10/2024 | | 3.87% | | 49,554 | | | 50,000 | |
North Plainfield | | 12/10/2025 | | 3.99% | | 25,100 | | | 25,100 | |
Las Catalinas | | 2/1/2026 | | 4.43% | | 123,977 | | | 127,669 | |
Middletown | | 12/1/2026 | | 3.78% | | 31,400 | | | 31,400 | |
Rockaway | | 12/1/2026 | | 3.78% | | 27,800 | | | 27,800 | |
East Hanover (200 - 240 Route 10 West) | | 12/10/2026 | | 4.03% | | 63,000 | | | 63,000 | |
North Bergen (Tonnelle Ave) | | 4/1/2027 | | 4.18% | | 100,000 | | | 100,000 | |
Manchester | | 6/1/2027 | | 4.32% | | 12,500 | | | 12,500 | |
Millburn | | 6/1/2027 | | 3.97% | | 22,944 | | | 23,381 | |
Totowa | | 12/1/2027 | | 4.33% | | 50,800 | | | 50,800 | |
Woodbridge (Woodbridge Commons) | | 12/1/2027 | | 4.36% | | 22,100 | | | 22,100 | |
East Brunswick | | 12/6/2027 | | 4.38% | | 63,000 | | | 63,000 | |
East Rutherford | | 1/6/2028 | | 4.49% | | 23,000 | | | 23,000 | |
Brooklyn (Kingswood Center) | | 2/6/2028 | | 5.07% | | 70,815 | | | 71,696 | |
Hackensack | | 3/1/2028 | | 4.36% | | 66,400 | | | 66,400 | |
Marlton | | 12/1/2028 | | 3.86% | | 37,400 | | | 37,400 | |
East Hanover Warehouses | | 12/1/2028 | | 4.09% | | 40,700 | | | 40,700 | |
Union (2445 Springfield Ave) | | 12/10/2028 | | 4.01% | | 45,600 | | | 45,600 | |
Freeport (Freeport Commons) | | 12/10/2029 | | 4.07% | | 43,100 | | | 43,100 | |
Montehiedra | | 6/1/2030 | | 5.00% | | 79,381 | | | 81,141 | |
Montclair | | 8/15/2030 | | 3.15% | | 7,250 | | | 7,250 | |
Garfield | | 12/1/2030 | | 4.14% | | 40,300 | | | 40,300 | |
Woodmore Towne Centre | | 1/6/2032 | | 3.39% | | 117,200 | | | — | |
Mt Kisco | | 11/15/2034 | | 6.40% | | 12,377 | | | 12,952 | |
| | | | | | | | |
Total fixed rate debt | | | | | | 1,534,324 | | | 1,428,026 | |
| | Total mortgages payable | | 1,695,408 | | | 1,597,397 | |
| | Unamortized debt issuance costs | | (8,218) | | | (9,865) | |
Total mortgages payable, net of unamortized debt issuance costs | | $ | 1,687,190 | | | $ | 1,587,532 | |
(1)Bears interest at one month LIBOR plus 160 bps.
(2)Bears interest at one month LIBOR plus 190 bps.
(3)Loan repaid in July 2021 in connection with the disposition of the property.
|
| | | | | | | | | | | | |
| | | | Interest Rate at | | December 31, | | December 31, |
(Amounts in thousands) | | Maturity | | December 31, 2017 | | 2017 | | 2016 |
First mortgages secured by: | | | | | | | | |
Variable rate | | | | | | | | |
Plaza at Cherry Hill(8) | | 5/24/2022 | | 2.96% | | $ | 28,930 |
| | $ | — |
|
Westfield - One Lincoln Plaza(8) | | 5/24/2022 | | 2.96% | | 4,730 |
| | — |
|
Plaza at Woodbridge(8) | | 5/25/2022 | | 2.96% | | 55,340 |
| | — |
|
Hudson Commons(10) | | 11/15/2024 | | 3.26% | | 29,000 |
| | — |
|
Watchung(10) | | 11/15/2024 | | 3.26% | | 27,000 |
| | — |
|
Bronx (1750-1780 Gun Hill Road)(10) | | 12/1/2024 | | 3.26% | | 24,500 |
| | — |
|
Cross-collateralized loan (variable)(1) | | — | | —% | | — |
| | 38,756 |
|
Total variable rate debt | | | | | | 169,500 |
|
| 38,756 |
|
Fixed rate | | | | | | | | |
Englewood(3) | | 10/1/2018 | | 6.22% | | 11,537 |
| | 11,537 |
|
Montehiedra Town Center, Senior Loan(2) | | 7/6/2021 | | 5.33% | | 86,236 |
| | 87,308 |
|
Montehiedra Town Center, Junior Loan(2) | | 7/6/2021 | | 3.00% | | 30,000 |
| | 30,000 |
|
Bergen Town Center | | 4/8/2023 | | 3.56% | | 300,000 |
| | 300,000 |
|
Shops at Bruckner(6) | | 5/1/2023 | | 3.90% | | 12,162 |
| | — |
|
Hudson Mall(7) | | 12/1/2023 | | 5.07% | | 25,004 |
| | — |
|
Yonkers Gateway Center(9) | | 4/6/2024 | | 4.16% | | 33,227 |
| | — |
|
Las Catalinas | | 8/6/2024 | | 4.43% | | 130,000 |
| | 130,000 |
|
Brick | | 12/10/2024 | | 3.87% | | 50,000 |
| | — |
|
North Plainfield | | 12/10/2025 | | 3.99% | | 25,100 |
| | — |
|
Middletown | | 12/1/2026 | | 3.78% | | 31,400 |
| | — |
|
Rockaway | | 12/1/2026 | | 3.78% | | 27,800 |
| | — |
|
East Hanover (200 - 240 Route 10 West)
| | 12/10/2026 | | 4.03% | | 63,000 |
| | — |
|
North Bergen (Tonnelle Ave)(5) | | 4/1/2027 | | 4.18% | | 100,000 |
| | 73,951 |
|
Manchester Plaza | | 6/1/2027 | | 4.32% | | 12,500 |
| | — |
|
Millburn | | 6/1/2027 | | 3.97% | | 24,000 |
| | — |
|
Totowa | | 12/1/2027 | | 4.33% | | 50,800 |
| | — |
|
Woodbridge Commons
| | 12/1/2027 | | 4.36% | | 22,100 |
| | — |
|
East Brunswick | | 12/6/2027 | | 4.38% | | 63,000 |
| | — |
|
East Rutherford | | 1/6/2028 | | 4.49% | | 23,000 |
| | — |
|
Hackensack | | 3/1/2028 | | 4.36% | | 66,400 |
| | — |
|
East Hanover Warehouses | | 12/1/2028 | | 4.09% | | 40,700 |
| | — |
|
Marlton | | 12/1/2028 | | 3.86% | | 37,400 |
| | — |
|
Union (2445 Springfield Ave) | | 12/10/2028 | | 4.01% | | 45,600 |
| | — |
|
Freeport (437 East Sunrise Highway)
| | 12/10/2029 | | 4.07% | | 43,100 |
| | — |
|
Garfield | | 12/1/2030 | | 4.14% | | 40,300 |
| | — |
|
Mt Kisco -Target(4) | | 11/15/2034 | | 6.40% | | 14,451 |
| | 14,883 |
|
Cross-collateralized loan (fixed)(1) | | — | | —% | | — |
| | 519,125 |
|
Total fixed rate debt | | | | | | 1,408,817 |
|
| 1,166,804 |
|
| | Total mortgages payable | | 1,578,317 |
|
| 1,205,560 |
|
| | Unamortized debt issuance costs | | (13,775 | ) | | (8,047 | ) |
Total mortgages payable, net of unamortized debt issuance costs
| | $ | 1,564,542 |
| | $ | 1,197,513 |
|
| |
(1)
| The cross-collateralized mortgage loan was defeased and prepaid on November 15, 2017. |
| |
(2)
| As part of the planned redevelopment of Montehiedra Town Center, we committed to fund $20.0 million for leasing and capital expenditures which has been fully funded as of December 31, 2017. |
| |
(3)
| During 2017, our property in Englewood, NJ was transferred to a receiver. Subsequent to December 31, 2017, the property was sold at a foreclosure sale. Upon issuance of the court’s order approving the sale and discharging the receiver, all assets and liabilities related to the property will be removed. The consolidated balance sheet included total assets and liabilities of $12.4 millionand $14.8 million, respectively as of December 31, 2017.
|
| |
(4)
| The mortgage payable balance on the loan secured by Mount Kisco (Target) includes $1.0 million and $1.1 million of unamortized debt discount as of December 31, 2017 and December 31, 2016, respectively. The effective interest rate including amortization of the debt discount is 7.37% as of December 31, 2017. |
| |
(5)
| On March 29, 2017, we refinanced the $74 million, 4.59% mortgage loan secured by our Tonnelle Commons property in North Bergen, NJ, increasing the principal balance to $100 million with a 10-year fixed rate mortgage, at 4.18%. As a result, we recognized a loss on extinguishment of debt of $1.3 million during the year ended December 31, 2017 comprised of a $1.1 million prepayment penalty and write-off of $0.2 million of unamortized deferred financing fees on the original loan.
|
| |
(6)
| On January 17, 2017, we assumed the existing mortgage secured by the Shops at Bruckner in connection with our acquisition of the property’s leasehold interest. |
| |
(7)
| On February 2, 2017, we assumed the existing mortgage secured by Hudson Mall in connection with our acquisition of the property. The mortgage payable balance on the loan secured by Hudson Mall includes $1.5 million of unamortized debt premium as of December 31, 2017. The effective interest rate including amortization of the debt premium is 3.51%as of December 31, 2017.
|
| |
(8)
| Bears interest at one month LIBOR plus 160 bps. |
| |
(9)
| Reflects the $33 million existing mortgage assumed in connection with the acquisition of Yonkers Gateway Center on May 24, 2017. The mortgage payable balance on the loan secured by Yonkers Gateway Center includes $0.8 million of unamortized debt premium as of December 31, 2017. The effective interest rate including amortization of the debt premium is 2.28%as of December 31, 2017.
|
| |
(10)
| Bears interest at one month LIBOR plus 190 bps. |
The net carrying amount of real estate collateralizing the above indebtedness amounted to approximately $1.3$1.4 billion as of December 31, 2017.2021. Our mortgage loans contain covenants that limit our ability to incur additional indebtedness on these properties and in certain circumstances require lender approval of tenant leases and/or yield maintenance upon repayment prior to maturity. As of December 31, 2017,2021, we were in compliance with all debt covenants.
As of December 31, 2017,2021, the principal repayments for the next five years and thereafter are as follows:
| | | | | | | | |
(Amounts in thousands) | | |
Year Ending December 31, | | |
2022 | | $ | 98,915 | |
2023 | | 349,814 | |
2024 | | 163,721 | |
2025 | | 40,946 | |
2026 | | 230,694 | |
Thereafter | | 811,318 | |
|
| | | | |
(Amounts in thousands) | | |
Year Ending December 31, | | |
2018 | | $ | 14,787 |
|
2019 | | 4,244 |
|
2020 | | 7,571 |
|
2021 | | 124,590 |
|
2022 | | 100,899 |
|
Thereafter | | 1,326,226 |
|
Revolving Credit Agreement
On January 15, 2015, we entered into a $500 million Revolving Credit Agreement (the “Agreement”) with certain financial institutions. On March 7, 2017, we amended and extended the Agreement. The amendment increased the credit facility size by $100 million to $600 million and extended the maturity date to March 7, 2021 with 2 six-month extension options. On July 29, 2019, we entered into a second amendment to the Agreement to extend the maturity date to January 29, 2024 with two six-month extension options. Borrowings
On June 3, 2020, we entered into a third amendment to the Agreement, which among other things, modifies certain definitions and the measurement period for certain financial covenants to a trailing four-quarter period instead of the most recent quarter period annualized. Company borrowings under the Agreement are subject to interest at LIBOR plus an applicable margin of 1.10%1.05% to 1.55%1.50% and an annual facility fee of 15 to 3530 basis points which is expensed within interest and debt expense as incurred.points. Both the spread over LIBOR and the facility fee are based on our current leverage ratio and are subject to increase if our leverage ratio increases above predefined thresholds.change. The Agreement contains customary financial covenants including a maximum leverage ratio of 60% and a minimum fixed charge coverage ratio of 1.5x.
No amounts have beenwere drawn to dateor outstanding under the Agreement.Agreement as of December 31, 2021 and 2020. Financing feescosts associated with executing the Agreement of $3.2$2.2 million and $1.9$3.3 million as of December 31, 20172021 and December 31, 2016,2020, respectively, are included in deferred financing fees inthe prepaid expenses and other assets line item of the consolidated balance sheets.sheets, as deferred financing costs, net.
DuringMortgage on Las Catalinas Mall
In April 2020, we notified the fourth quarterservicer of 2017, we completed 18 individual,the $129 million non-recourse mortgage financings totaling $710 million.loan on Las Catalinas Mall in Puerto Rico that cash flow would be insufficient to service the debt and that we were unwilling to fund the shortfalls. In December 2020, the non-recourse mortgage loan on Las Catalinas Mall was modified to convert the mortgage from an amortizing 4.43% loan to interest only payments, starting at 3.00% in 2021 and increasing 50 basis points annually until returning to 4.43% in 2024 and thereafter, and enables the Company, at its option, to repay the loan at a discounted value of $72.5 million, beginning in August 2023 through the extended maturity date of February 2026.
While it is possible we will be able to repay the loan at the discounted value in the future, it is contingent upon certain factors including the future operating performance of the property as well as the ability to meet all required payments on the loan. Therefore, in accordance with ASC 470-60 Troubled Debt Restructurings, the Company did not recognize a gain at the time of the restructuring, as the future cash payments, including contingent payments, are greater than the carrying value of the mortgage payable.
We have accrued interest of $5.4 million related to this mortgage, which is included in accounts payable, accrued expenses and other liabilities on the consolidated balance sheets as of December 31, 2021. We incurred $1.2 million of lender fees in connection with the loan modification which are treated as a reduction of the mortgage payable balance and amortized over the term of the loan in accordance with the provisions under ASC 470-60.
Mortgage on Woodmore Towne Centre
On December 23, 2021, the Company entered into a 10-year, $117.2 million non-recourse first mortgage to partially fund the acquisition of its property in Glenarden, MD. The new mortgages havemortgage is secured by the property with a weighted averagefixed interest rate of 4.0% with a weighted average term to maturity of 10 years. The proceeds received were used to legally defease3.39% and prepay the Company’s $544 million mortgage, cross-collateralized by 39 assets and scheduled to mature in 2020. The cross-collateralized mortgage loan had a weighted average interest rate of 4.2%. The cash outlay requiredis interest-only for the defeasance of approximately $536.5 million was basedentire loan term.
Mortgage on the purchase price of U.S. government securities that will generate sufficient cash flows to fund the remaining payment obligations under the loan from the effective date of the defeasance through the maturity date in 2020. The Outlets at Montehiedra
In connection with the defeasance, the mortgage and other liens on the property were extinguished, and all existing collateral was released. As a resultrefinancing of the refinancing,loan secured by The Outlets at Montehiedra (“Montehiedra”) in the second quarter of 2020, the Company generated $120provided a $12.5 million of additional cash proceeds net of refinancing costs, and recognized a $34.1 million loss on extinguishment of debt in the year ended December 31, 2017. Financing fees associatedlimited corporate guarantee. The guarantee is reduced commensurate with the new loans of $9.3 million are includedloan amortization schedule and will reduce to zero in deferred financing fees in the consolidated
balance sheet asapproximately five years. As of December 31, 2017. The2021, the remaining weighted average amortization period of these deferred financing feesexposure under the guarantee is 9.4 years as of December 31, 2017.$9.9 million. There was no separate liability recorded related to this guarantee.
8.7. INCOME TAXES
The Company has elected to qualifybe taxed as a REIT under sections 856-860 of the Internal Revenue Code, of 1986, as amended, commencing with the filing of ourits 2015 tax return for the 2015 fiscal year for theits tax year ended December 31, 2015. Under those sections, a REIT that distributes at least 90%With the exception of its REIT taxable income as a dividendthe Company’s TRS, to its shareholders each year and whichthe extent the Company meets certain other conditionsrequirements under the Code, the Company will not be taxed on that portion of its taxable income which is distributed to its shareholders. As a REIT, we generally will not be subject to federal income taxes, provided that we distribute 100% of taxable income. It is our intention to adhere to the organizational and operational requirements to maintain our REIT status. If we fail to qualify as a REIT for any taxable year, we will be subject to federal income taxes at regular corporate rates (including any alternative minimum tax, which, for corporations, was repealed under the TCJA for tax years beginning after December 31, 2017 by the TCJA)2017) and may not be able to qualify as a REIT for the four subsequent taxable years.
On December 22, 2017, the Tax Cuts and Jobs Act (the "Act") was signed into law. The Act amends the Internal Revenue Code In addition to reduce tax rates and modify policies, credits, and deductions for individuals and businesses. Effective January 1, 2018, for businesses, the Act reduces the corporate tax rate from a maximum of 35% to a flat 21% rate. Since UE has elected to qualify as a REIT under sections 856-860 of the Internal Revenue Code with intent to distribute 100% of its taxable income and did not have any activities in a Taxable REIT Subsidiary (“TRS”) prior to January 1, 2018, there is no impact to the Company’s financial statements.
As of December 31, 2017,TRS, the Company elected, for tax purposes,is subject to treat the wholly-owned limited partnership that holds its Allentown property as a taxable REIT subsidiary (“TRS”). A TRS is a corporation, other than a REIT, in which we directly or indirectly hold stock, which has made a joint election with us to be treated as a TRS under Section 856(l) of the Code. A TRS is required to pay regular U.S. federal income tax,certain foreign, and state and local income taxes, in particular income taxes arising from its operating activities in Puerto Rico, which are included in income tax where applicable, as a non-REIT “C” corporation. As a result, all future taxable income recognized by the TRS, including capital gains on the sale of the property heldexpense in the TRS, will be subject toconsolidated statements of income.
The Company satisfied its REIT distribution requirement by distributing $0.60 per common share in 2021, which comprised a corporate level tax.
The Allentown legal entity restructuring resulted in a capital gain recognizedregular quarterly cash dividend of $0.15 per common share declared for tax purposes in 2017. Consequently,each quarter of 2021. During the year ended December 31, 2020, the Company has determined that $0.37declared a regular cash dividend of the $0.88 dividends distributed to shareholders in 2017 represented long-term capital gains. The Company’s 2018 consolidated financial statements will reflect the TRS’ federal and state corporate income taxes associated with the operating activities at its Allentown property until the expected sale date in$0.22 per common share for the first quarter.
quarter of 2020 and a special cash dividend of $0.46 per common share in December 2020. During the year ended December 31, 2019, the Company declared cash distributions on our common shares of $0.88 per share. The following summarizes the tax statustaxability of such dividends paid for the years ended December 31, 2017, 20162021, 2020 and 2015:2019 are as follows:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2021 | | 2020 | | 2019 |
Dividend paid per share(1) | $ | 0.60 | | | $ | 0.68 | | | $ | 0.88 | |
Ordinary income | 100 | % | | 100 | % | | 83 | % |
Return of capital | — | % | | — | % | | — | % |
Capital gains | — | % | | — | % | | 17 | % |
|
| | | | | | | | | | | |
| Year Ended December 31, |
| 2017 | | 2016 | | 2015 |
Dividend paid per share | $ | 0.88 |
| | $ | 0.82 |
| | $ | 0.80 |
|
Ordinary income | 58 | % | | 100 | % | | 100 | % |
Return of capital | — | % | | — | % | | — | % |
Capital gains | 42 | % | | — | % | | — | % |
(1) The special cash dividend of $0.46 per common share declared in December 2020, and paid in January 2021, was fully allocable to the 2020 tax year.
TheFor U.S. federal income tax purposes, the REIT and the other minority members are partners in the Operating Partnership. As such, the partners are required to report their share of taxable income on their respective tax returns. We are alsoHowever, the Company maintains certain non-real estate operating activities that could not be performed by the REIT, and occur through the Company’s TRS, which is subject to certain other taxes, includingfederal, state and local income taxes. These income taxes and franchise taxes which are included in general and administrative expensesthe income tax expense in the consolidated and combined statements of income.
Our twoDuring the year ended December 31, 2021, the REIT was subject to Puerto Rico malls arecorporate income taxes on its allocable share of the Company’s Puerto Rico operating activities. The Puerto Rico corporate income tax consists of a flat 18.5% tax rate plus a graduated income surcharge tax for a maximum corporate income tax rate of 37.5%. In addition, the REIT is subject to a 29% non-resident withholding10% branch profits tax whichon the earnings and profits generated from its allocable share of the Company’s Puerto Rico operating activities and such tax is included in income tax benefit (expense)expense in the consolidated and combined statements of income. During the year ended December 31, 2020 the Company also had activities occurring in special partnerships subject to a Puerto Rico 29% non-resident withholding tax on the net income from operating activities allocated to the Operating Partnership.
On June 1, 2020, the Company completed a mortgage refinancing of its mall in Puerto Rico, The Outlets at Montehiedra. The debt forgiven as a part of this refinancing resulted in a write-down to our Puerto Rico tax basis in the mall equal to such amount of debt forgiven and the recognition of a deferred tax liability on the Company’s consolidated balance sheet, which amounted to $10.3 million.
On June 5, 2020 and December 11, 2020, the Company completed a legal entity restructuring of Montehiedra and Las Catalinas Mall, respectively. The legal entity restructurings resulted in a step up in our Puerto Rico tax basis in each mall and the recognition of a deferred tax asset on the Company’s consolidated balance sheet, which amounted to $23.7 million for Montehiedra and $29.5 million for Las Catalinas Mall.
Together, the refinancing and legal entity restructuring transactions resulted in a net deferred tax asset of $42.9 million, which is included in prepaid expenses and other assets on the consolidated balance sheets as of December 31, 2020, and the Company recognized an accompanying Puerto Rico income tax benefit on the consolidated statements of income during the year ended December 31, 2020.
As a result of the Montehiedra refinancing and the Las Catalinas Mall troubled debt restructuring, the Company recognized a gain on extinguishment of debt for U.S. federal income tax purposes and implemented various tax planning strategies to limit its impact on the Company’s overall U.S. federal taxable income. The strategies implemented resulted in the recognition of a state and local income tax liability and corresponding deferred tax asset for the REIT of $4.5 million during the year ended December 31, 2020. During the year ended December 31, 2021, based on the filing of the 2020 state and local income tax returns, this amount was reduced by $1.2 million due to the final taxable amount being lower than what was originally estimated.
Refer to Note 6 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information on the Montehiedra refinancing and the Las Catalinas Mall troubled debt restructuring.
A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required if, based on the evidence available, it is more likely than not (a likelihood of more than 50 percent) that some portion or all of the deferred tax assets will not be realized. Management’s determination of the ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the underlying temporary differences become deductible. As of December 31, 2021, no valuation allowance has been recorded against the deferred tax assets that resulted from the legal entity restructurings of the Puerto Rico malls. In assessing the realizability of deferred tax assets, management determined it is more likely than not that these deferred tax assets will be realized.
During the year ended December 31, 2020, the Company recorded a $4.5 million valuation allowance against the REIT’s state and local deferred tax asset described above because management determined that it is not more likely than not that these deferred tax assets will be realized. As of December 31, 2021, the Company’s total deferred tax asset and valuation allowance attributable to the REIT’s state and local income tax liability decreased by $1.5 million to $3.0 million. The $1.5 million decrease is attributed to the $1.2 million reduction based on the final taxable amount being lower than what was $0.3originally estimated as discussed above and the current year movement in the temporary difference.
We account for uncertain tax positions in accordance with ASC 740 Income Taxes on the basis of a two-step process whereby (i) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
Income before income taxes from the Company’s operating activities in Puerto Rico during the years ended December 31, 2021 and 2020 was $8.5 million and $26.4 million, respectively. For the year ended December 31, 2021, the Puerto Rico income tax expense was $2.4 million and the REIT’s state and local income tax benefit was $1.2 million as compared to a Puerto Rico income tax benefit of $43.5 million and a REIT state and local income tax expense of $4.5 million for the year ended December 31, 2020. Puerto Rico income tax expense of $1.2 million was recorded for the year ended December 31, 2019. Income taxes are accounted for under the asset and liability method. Deferred income taxes are recognized for the tax effect of temporary differences between the financial reporting basis and the tax basis of taxable assets and liabilities and for the tax effect of carried forward tax attributes such as net operating losses and tax credits.
Income tax expense (benefit) for the years ended December 31, 2017. During2021, 2020 and 2019 consists of the following:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
(Amounts in thousands) | 2021 | | 2020 | | 2019 |
Income tax expense (benefit): | | | | | |
Current: | | | | | |
| | | | | |
U.S. state and local income tax | (1,228) | | | 4,525 | | | 66 | |
Puerto Rico income tax | 110 | | | 1,293 | | | 851 | |
Total current | (1,118) | | | 5,818 | | | 917 | |
Deferred: | | | | | |
U.S. federal income tax | 5 | | | (6) | | | — | |
| | | | | |
Puerto Rico income tax(1) | 2,252 | | | (44,808) | | | 370 | |
Total deferred | 2,257 | | | (44,814) | | | 370 | |
Total income tax expense (benefit) | $ | 1,139 | | | $ | (38,996) | | | $ | 1,287 | |
(1) Due to the effects of applying ASC 842 on January 1, 2019, a deferred tax benefit of $0.8 million was recognized within a cumulative-effect adjustment to accumulated deficit to adjust reserves on receivables from straight-line rents during the year ended December 31, 2019. Refer to Note 3 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information.
Provision for income taxes differs from the amounts computed by applying the statutory federal income tax rate to consolidated net income before income taxes as follows:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
(Amounts in thousands) | 2021 | | 2020 | | 2019 |
| | | | | |
| | | | | |
Federal provision at statutory tax rate(1) | $ | 22,880 | | | $ | 12,338 | | | $ | 24,672 | |
REIT income before income taxes not subject to federal tax provision | (22,875) | | | (12,339) | | | (24,677) | |
| | | | | |
State and local income tax provision, net of federal benefit | 225 | | | 11 | | | 66 | |
Puerto Rico income tax provision | 2,362 | | | (43,515) | | | 1,221 | |
Change in valuation allowance | (1,453) | | | 4,509 | | | 5 | |
Total income tax expense (benefit) | $ | 1,139 | | | $ | (38,996) | | | $ | 1,287 | |
(1) Federal statutory tax rate of 21% for the years ended December 31, 20162021, 2020 and 2015, $0.8 million and $1.3 million of Puerto Rico tax expense was recognized, respectively. Both properties are held in a special partnership for Puerto Rico tax reporting (the general partner being a qualified REIT subsidiary or “QRS”).2019.
Income tax (benefit) expense consists of the following:
|
| | | | | | | | | | | |
| Year Ended December 31, |
(Amounts in thousands) | 2017 | | 2016 | | 2015 |
Income tax expense: | | | | | |
Current(1) | $ | 696 |
| | $ | 609 |
| | $ | 1,417 |
|
Deferred | (974 | ) | | 195 |
| | (123 | ) |
Total income tax (benefit) expense | $ | (278 | ) | | $ | 804 |
| | $ | 1,294 |
|
(1)Current income tax expense for the year ended December 31, 2016 is net of a $0.6 million reduction to the accrued income tax liability recorded in the second quarter of 2016.
A net deferred tax liability of $2.8 million is included in our consolidated balance sheet within Other liabilities as of December 31, 2017, comprised of temporary differences related to our two Puerto Rico properties, a deferred tax liability of $4.2 million offset by a deferred tax asset of $1.4 million. The deferred tax liability of $4.2 million is comprised of $2.2 million of tax depreciation in excess of GAAP depreciation, $1.7 million straight-line rents and $0.3 million of amortization of acquired leases not recorded for tax purposes. The deferred tax asset of $1.4 million is comprised of $0.5 million of insurance receivables recorded for tax purposes, $0.2 million of amortization of deferred financing fees not recorded for tax purposes and $0.7 million excess of bad debt expense for tax purposes.
The temporary differences resulting from activity during the years ended December 31, 2017, 2016, and 2015 is recorded within Income tax expense on the consolidated and combined statements of income.
Below is a table summarizing the netCompany’s deferred income tax liability balanceassets and liabilities as of December 31, 20172021 and 2016:2020:
| | | | | | | | | | | |
| Balance at |
(Amounts in thousands) | December 31, 2021 | | December 31, 2020 |
Deferred tax assets: | | | |
Depreciation | $ | 40,793 | | | $ | 41,942 | |
Amortization of deferred financing costs | 860 | | | 1,105 | |
Rental revenue deemed uncollectible | 735 | | | 2,109 | |
Charitable contribution | 7 | | | 7 | |
Net operating loss | 1,425 | | | 107 | |
Valuation allowance | (3,061) | | | (4,514) | |
Total deferred tax assets | 40,759 | | | 40,756 | |
| | | |
Deferred tax liabilities: | | | |
| | | |
Mortgage liability | (1,394) | | | — | |
Straight line rent | (961) | | | (738) | |
Amortization of acquired leases | (205) | | | (228) | |
Accrued interest expense | (779) | | | (113) | |
Total deferred tax liabilities | (3,339) | | | (1,079) | |
| | | |
Net deferred tax assets | $ | 37,420 | | | $ | 39,677 | |
|
| | | |
(Amounts in thousands) | |
Balance at January 1, 2016 | $ | (3,607 | ) |
Change in deferred tax assets: | |
Depreciation | (94 | ) |
Amortization of deferred financing costs | (46 | ) |
Provision for doubtful accounts | (14 | ) |
Change in deferred tax liabilities: | |
Depreciation | (88 | ) |
Straight-line rent | 39 |
|
Amortization of acquired leases | 8 |
|
Balance at December 31, 2016 | (3,802 | ) |
Change in deferred tax assets: | |
Depreciation | (312 | ) |
Amortization of deferred financing costs | (46 | ) |
Provision for doubtful accounts | 514 |
|
Insurance claims receivable | 501 |
|
Change in deferred tax liabilities: | |
Depreciation | 102 |
|
Straight-line rent | 207 |
|
Amortization of acquired leases | 8 |
|
Balance at December 31, 2017 | $ | (2,828 | ) |
8. LEASES
Leases as lessor
We have approximately 900 operating leases at our retail shopping centers, malls and industrial properties which generate rental income from tenants and operating cash flows for the Company. Our tenant base comprises a diverse group of merchants including department stores, supermarkets, discounters, entertainment offerings, health clubs, DIY stores, in-line specialty shops, restaurants and other food and beverage vendors and service providers. Tenant leases under 10,000 sf generally have lease terms of 5 years or less. Tenant leases 10,000 sf or more are considered anchor leases and generally have lease terms of 10 to 25 years, with one or more renewal options available upon expiration of the initial lease term. Contractual rent increases for the renewal options are often fixed at the time of the initial lease agreement which may result in tenants being able to exercise their renewal options at amounts that are less than the fair value of the rent at the date of renewal.
The Operating Partnership is organizedcomponents of rental revenue for the years ended December 31, 2021 and 2020 were as limited partnershipfollows:
| | | | | | | | | | | |
| Year Ended December 31, |
(Amounts in thousands) | 2021 | | 2020 |
Rental Revenue | | | |
Fixed lease revenue | $ | 318,585 | | | $ | 235,488 | |
Variable lease revenue | 103,882 | | | 92,792 | |
Total rental revenue | $ | 422,467 | | | $ | 328,280 | |
Property, plant and is generally notequipment under operating leases as lessor
As of December 31, 2021 and 2020, substantially all of the Company’s real estate assets are subject to federal income tax. Accordingly, no provision for federal income taxes has been reflectedoperating leases.
Maturity analysis of lease payments as lessor
The Company’s operating leases, including those with revenue recognized on a cash basis, are disclosed in the accompanyingaggregate due to their consistent nature as real estate leases. As of December 31, 2021, the undiscounted cash flows to be received from lease payments of our operating leases on an annual basis for the next five years and thereafter are as follows:
| | | | | | | | |
(Amounts in thousands) | | |
Year Ending December 31, | | |
2022 | | $ | 258,992 | |
2023 | | 247,248 | |
2024 | | 216,275 | |
2025 | | 192,115 | |
2026 | | 171,170 | |
Thereafter | | 748,432 | |
Total undiscounted cash flows | | $ | 1,834,232 | |
Leases as lessee
As of December 31, 2021, the Company had 20 properties in its portfolio either completely or partially on land or in a building owned by third parties. These properties are leased or subleased to us pursuant to ground leases, building leases or easements, with remaining terms ranging from one to 78 years and provide us the right to operate the property. We also lease or sublease real estate for our 3 corporate offices with remaining terms of less than one year.
On December 31, 2020, the Company recognized $5.7 million of operating lease ROU assets and $0.7 million of corresponding operating lease liabilities in connection with the Company’s acquisition of Sunrise Mall, which included the acquisition of the lessee positions of ground leases.
The components of lease expense for the years ended December 31, 2021 and 2020 were as follows:
| | | | | | | | | | | |
| Year Ended December 31, |
(Amounts in thousands) | 2021 | | 2020 |
Lease expense | | | |
Operating lease cost(1) | $ | 10,162 | | | $ | 10,875 | |
Variable lease cost | 2,710 | | | 2,792 | |
Total lease expense | $ | 12,872 | | | $ | 13,667 | |
(1) During the years ended December 31, 2021 and 2020, the Company recognized sublease income of $19.1 million and $17.7 million, respectively, included in rental revenue on the consolidated statements of income in relation to certain ground and combined financial statements. building lease arrangements. Operating lease cost includes amortization of below-market ground lease intangibles and straight-line lease expense.
Supplemental balance sheet information related to leases as of December 31, 2021 and December 31, 2020 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
Supplemental noncash information | Operating leases | | Finance lease | | Operating leases | | Finance lease |
Weighted-average remaining lease term | 14.8 years | | 34.2 years | | 15.7 years | | 35.2 years |
Weighted-average discount rates | 3.98 | % | | 4.01 | % | | 3.99 | % | | 4.01 | % |
Supplemental cash information related to leases for the years ended December 31, 2021 and 2020 was as follows:
| | | | | | | | | | | |
(Amounts in thousands) | Year Ended December 31, |
Cash paid for amounts included in the measurement of lease liabilities: | 2021 | | 2020 |
Operating cash flows from operating leases | $ | 9,584 | | | $ | 10,033 | |
Operating cash flows from finance lease | 120 | | | 120 | |
Financing cash flows from finance lease | 11 | | | 11 | |
| | | |
Right-of-use assets obtained in exchange for lease liabilities: | | | |
Operating leases | $ | 772 | | | $ | 1,740 | |
| | | |
Maturity analysis of lease payments as lessee
The Operating Partnership, however, is subjectundiscounted cash flows to be paid on an annual basis for the next five years and thereafter are presented in the table below. The total amount of lease payments, on an undiscounted basis, are reconciled to the non-resident withholding tax at our two Puerto Rico malls.lease liability on the consolidated balance sheet by considering the present value discount.
| | | | | | | | | | | | | | |
(Amounts in thousands) | | Operating | | Finance |
Year Ending December 31, | | leases | | lease |
2022 | | $ | 9,089 | | | $ | 109 | |
2023 | | 8,212 | | | 109 | |
2024 | | 8,225 | | | 109 | |
2025 | | 6,324 | | | 109 | |
2026 | | 6,092 | | | 124 | |
Thereafter | | 51,409 | | | 6,299 | |
Total undiscounted cash flows | | 89,351 | | | 6,859 | |
Present value discount | | (24,773) | | | (3,855) | |
Discounted cash flows | | $ | 64,578 | | | $ | 3,004 | |
9. FAIR VALUE MEASUREMENTS
ASC 820, Fair Value Measurement and Disclosures defines fair value and establishes a framework for measuring fair value. The objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels: Level 1 - quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities; Level 2 - observable prices based on inputs not quoted in active markets, but corroborated by market data; and Level 3 - unobservable inputs used when little or no market data is available. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty credit risk in our assessment of fair value.
Financial Assets and Liabilities Measured at Fair Value on a Recurring or Non-Recurring Basis
There were no financial assets or liabilities measured at fair value on a recurring or non-recurring basis as of December 31, 20172021 and December 31, 2016.2020.
Financial Assets and Liabilities not Measured at Fair Value
Financial assets and liabilities that are not measured at fair value on the consolidated balance sheets include cash and cash equivalents and mortgages payable. Cash and cash equivalents are carried at cost, which approximates fair value. The fair value of mortgages payable is calculated by discounting the future contractualbased on current market prices and discounted cash flows of these instruments usingat the current risk-adjusted rates availablerate at which similar loans would be made to borrowers with similar credit ratings for the remaining term of such debt, which areis provided by a third-party specialist. The fair value of cash and cash equivalents isare classified as Level 1 and the fair value of mortgages payable is classified as Level 2. The table below summarizes the carrying amounts and fair value of these financial instruments as of December 31, 20172021 and December 31, 2016.2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of December 31, 2021 | | As of As of December 31, 2020 |
(Amounts in thousands) | | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value |
Liabilities: | | | | | | | | |
Mortgages payable(1) | | $ | 1,695,408 | | | $ | 1,692,674 | | | $ | 1,597,397 | | | $ | 1,611,868 | |
|
| | | | | | | | | | | | | | | | |
| | As of December 31, 2017 | | As of December 31, 2016 |
(Amounts in thousands) | | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value |
Assets: | | |
| | |
| | |
| | |
|
Cash and cash equivalents | | $ | 490,279 |
| | $ | 490,279 |
| | $ | 131,654 |
| | $ | 131,654 |
|
Liabilities: | | |
| | |
| | |
| | |
|
Mortgages payable(1) | | $ | 1,578,317 |
| | $ | 1,579,839 |
| | $ | 1,205,560 |
| | $ | 1,216,989 |
|
(1)Carrying amounts exclude unamortized debt issuance costs of $13.8$8.2 million and $8.0$9.9 million as of December 31, 20172021 and December 31, 2016,2020, respectively.
The following market spreads were usedNonfinancial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
We assess the carrying value of our properties for impairment, when events or changes in circumstances indicate that the carrying value may not be recoverable. Such events and changes include macroeconomic conditions, including those caused by global pandemics, such as COVID-19, which may result in property operational disruption and indicate that the carrying amount may not be recoverable.
During the year ended December 31, 2021, the Company recognized impairment charges on 2 retail properties that the Company was actively marketing. The Company recognized an impairment charge of $0.4 million on its property in Westfield, NJ which was sold on July 22, 2021. Additionally, the Company recognized an impairment charge of $0.1 million on its ground lease in Vallejo, CA which was sold on December 21, 2021. Prior to estimatethese dispositions, the carrying value of these assets exceeded the estimated fair value less costs to sell. The aggregated fair values of $7.9 million were based on sale agreements under negotiation with third-party buyers.
During the year ended December 31, 2020, the Company recognized an impairment charge of $3.1 million on a parcel of our property in Lodi, NJ, which was sold on January 8, 2021. Prior to the sale of the parcel, the carrying value of this property exceeded its estimated fair value less costs to sell of $7.2 million. The fair value of mortgages payable:
|
| | | | | | | |
| December 31, 2017 | | December 31, 2016 |
| Low | | High | | Low | | High |
Mortgages payable | 1.7% | | 2.1% | | 2.0% | | 2.3% |
10. LEASES
As Lessor
We lease space to tenants under operating leases which expire from 2018 to 2072. The leases provide for the payment of fixed base rents payable monthly in advance as well as reimbursements of real estate taxes, insurance and maintenance costs. Retail leases may also provide for the payment by the lessee of additional rentsparcel was based on a percentagesale agreement under negotiation with a third-party buyer.
During the year ended December 31, 2019, the Company recognized impairment charges of their sales.
Future base rental revenue under$26.3 million on 4 retail properties that the Company was actively marketing. The impairment loss was calculated as the difference between the assets’ individual carrying values and the estimated aggregated fair values of $38.5 million, less estimated selling costs. The valuation of these non-cancelable operating leases excluding extension options is as follows:
|
| | | | |
(Amounts in thousands) | | |
Year Ending December 31, | | |
2018 | | $ | 262,499 |
|
2019 | | 245,240 |
|
2020 | | 216,284 |
|
2021 | | 195,905 |
|
2022 | | 173,528 |
|
Thereafter | | 1,015,389 |
|
These future minimum amounts do not include additional rentsproperties were based on capitalization rates, discounted future cash flows, third-party appraisals, broker selling estimates and sale agreements under negotiations. The capitalization rates (ranging from 9.9% to 12.1%) and discounts rates (ranging from 9.3% to 10.8%) utilized in the analyses were based upon unobservable rates that the Company believes to be in a percentagereasonable range of tenants’ sales or reimbursements. Forcurrent market rates.
The Company believes the inputs utilized to measure these fair values were reasonable in the context of applicable market conditions, however due to the significance of the unobservable inputs in the overall fair value measures, including market conditions and expectations for growth, the Company determined that such fair value measurements are classified as Level 3.
Aggregate impairment charges of $0.5 million, $3.1 million and $26.3 million, respectively, are included as an expense within casualty and impairment loss, net on our consolidated statements of income for the years ended December 31, 2017, 20162021, 2020 and 2015, these additional rents were $1.2 million, $0.8 million, and $1.2 million, respectively.2019.
As Lessee
We are a tenant under long-term ground leases or ground and building leases for certain of our properties. Lease expirations range from 2018 to 2102. Future lease payments under these agreements, excluding extension options, are as follows: |
| | | | |
(Amounts in thousands) | | |
Year Ending December 31, | | |
2018 | | $ | 9,091 |
|
2019 | | 8,901 |
|
2020 | | 6,657 |
|
2021 | | 6,092 |
|
2022 | | 5,429 |
|
Thereafter | | 30,619 |
|
11.10. COMMITMENTS AND CONTINGENCIES
Legal Matters
There are various legal actions against us in the ordinary course of business. In our opinion, after consultation with legal counsel, the outcome of such matters will not have a material adverse effect on our financial condition, results of operations or cash flows.
Loan Commitments: In January 2015, we completed the modification
Redevelopment and Anchor Repositioning
The Company has 21 active development, redevelopment or anchor repositioning projects with total estimated costs of the $120.0$218.7 million, 6.04% mortgage loan secured by Montehiedra Town Center. As part of the planned redevelopment of the property, we committed to fund $20.0which $72.1 million for leasing and building capital expenditures which has been fullyincurred and $146.6 million remains to be funded as of December 31, 2017.2021. We continue to monitor the stabilization dates of these projects as a result of the impact of the COVID-19 pandemic on our tenants, vendors and supply chains. We have identified future projects in our development pipeline, but we are under no obligation to execute and fund any of these projects and each of these projects is being further evaluated based on market conditions.
Redevelopment: As of December 31, 2017, we had approximately $195.5 million of active development, redevelopment and anchor repositioning projects underway of which $104.9 million remains to be funded. Based on current plans and estimates we anticipate the remaining amounts will be expended over the next two years.
Insurance
The Company maintains (i)numerous insurance policies including for general liability, insurance with limitsproperty, pollution, acts of $200 million for properties in the U.S.terrorism, trustees’ and Puerto Ricoofficers’, cyber, workers’ compensation and (ii) all-risk property insurance with limits of $500 million per occurrence and in the aggregate for properties in the U.S. and $139 million for properties in Puerto Rico,automobile-related liabilities. However, all such policies are subject to the terms, conditions, exclusions, deductibles and sub-limits, when applicable for certain perils such as floods and earthquakes and (iii) numerousamount other insurance policies including trustees’ and officers’ insurance, workers’ compensation and automobile-related liabilities insurance. Thelimiting factors. For example, the Company’s insurance includes coverage for certified acts of terrorism acts butinsurance excludes coverage for nuclear, biological, chemical or radiological terrorism events as defined by the Terrorism
Risk Insurance Program Reauthorization Act,Act.
The Company’s primary and excess insurance policies providing coverage for pollution related losses have an aggregate limit of $75 million and provide remediation and business interruption coverage for pollution incidents, which expires inpursuant to our policies expressly include the presence and dispersal of viruses. On December 2020. In addition,23, 2020, the Company maintains coverage for certain cybersecurity losses with limits of $5 million per occurrenceinitiated litigation in New Jersey state court, Bergen County, under these policies to recover uncollected rents and inother amounts resulting from the aggregate providing first and third party coverage including network interruption, event management, cyber extortion and claims for media content, security and privacy liability. COVID-19 virus.
Insurance premiums are typically charged directly to each of the retail properties and warehouses but not all of the cost of such premiums are recovered. The Company is responsible for deductibles, losses in excess of insurance coverage, and the portion of premiums not covered from retailreimbursable by tenants at our properties, which could be material.
We continue to monitor the state of the insurance market and the scope and costs of coverage for acts of terrorism. However, weavailable coverage. We cannot anticipate what coverage will be available on commercially reasonable terms in the future and expect premiums across most property coverage lines to increase in light of recent events. The incurrence of uninsured losses, costs or uncovered premiums could materially and adversely affect our business, results of operations and financial condition.
Certain of our loans and other agreements contain customary covenants requiring the maintenance of insurance coverage. Although we believe that we currently have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future. If lenders or other counterparties insist on greater coverage than we are able to obtain, such requirement could materially and adversely affect our ability to finance our properties and expand our portfolio.
Tornado-Related Charges
On June 13, 2018, a tornado hit our shopping center in Wilkes-Barre, PA, damaging approximately 13% of the property’s gross leasable area. During the year ended December 31, 2019, the Company settled the related insurance claim with its carrier for $5.5 million. Of this amount, the Company recognized $4.8 million as a casualty gain during the year ended December 31, 2019 included in casualty and impairment loss, net on the accompanying consolidated statements of income. As part of the settlement, the Company recognized $0.3 million as business interruption proceeds within rental revenue during the year ended December 31, 2019.
Hurricane-Related Charges
On September 20, 2017,In June 2019, the Company finalized its insurance recovery related to Hurricane Maria made landfall, damaging our two propertieswith its carrier in Puerto Rico. All anchor tenants were open for business within weeks after the hurricane other than Marshalls at Montehiedra,amount of $14.3 million, of which is being reconstructed. At year-end, approximately 86%$3.3 million was previously received, subject to deductibles of all stores previously occupied prior to$2.3 million. We recognized an $8.7 million casualty gain during the hurricane (as measured by GLA) are open.
As ofyear ended December 31, 2017, the Company has incurred approximately $5.1 million of costs remediating property damages caused by the hurricane, $3.4 million capitalized within Construction in progress on the consolidated balance sheet and $1.7 million of costs expensed within Casualty and impairment loss on the consolidated statement of income. The Company expects insurance proceeds to cover substantially all of these losses subject to applicable deductibles of approximately $2.3 million.
The Company recognized $2.2 million of business interruption losses, net of $1.8 million in cash advances received from its insurance carrier. Losses of $0.9 million pertained to rent abatements when the malls were closed or inoperable2019 as a result of the hurricane, recorded as a reduction of property rentals and tenant expense reimbursements, and $1.3 million was recorded as a provisionremaining insurance proceeds from the settlement agreement for doubtful accounts for unpaid rents. The Company expects to recover a significant portion of these losses from insurance in 2018.
In the third quarter of 2017, the Company also recognized a $2.2 million charge reflecting the net book value of assets damaged as a result of the hurricane included within Casualty and impairment loss on the consolidated statement of income.
The Company has comprehensive, all-risk property insurance coverage on its propertiesour 2 malls in Puerto Rico, including for business interruption, with a $139 million limit of liability, subject to certain conditions, exclusions, deductibles and sub-limits.Rico.
To the extent insurance proceeds ultimately exceed the difference between replacement cost and net book value of the damaged assets, the hurricane related expenses incurred, and/or business interruption losses recognized, the excess will be reflected as income in the period those amounts are received or when receipt is deemed probable.
No determination has been made as to the total amount or timing of insurance payments that may be received as a result of the hurricane.
Environmental Matters
Each of our properties has been subjected to varying degrees of environmental assessment at various times. Based on these assessments, and the projected remediation costs, we have accrued costs of $1.2$1.7 million and $1.3$1.8 million on our consolidated balance sheets as of December 31, 20172021 and December 31, 2016,2020, respectively, for potential remediation costs for environmental contamination at twocertain properties. While this accrual reflects our best estimates of the potential costs of remediation at these properties, $0.1 million has currently been expended during the year ended December 31, 2017 and there can be no assurance that the actual costs will not exceed this amount. With respect to ourthese amounts. During the year ended December 31, 2019, the Company recognized $1.4 million of environmental remediation costs included in property operating expenses on the consolidated statements of income. Although we are not aware of any other properties, the environmental assessments did not reveal any material environmental contamination. However,contamination, there can be no assurance that the identification of new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites, or changes in cleanup requirements would not result in significant costs to us.
Bankruptcies
12.Although our rental revenue is supported by long-term leases, leases may be rejected in a bankruptcy proceeding and the related tenant stores may permanently vacate prior to lease expiration. In the event a tenant with a significant number of leases or square footage in our shopping centers files for bankruptcy and rejects its leases with us, we could experience a reduction in our revenues. We monitor the operating performance and rent collections of all tenants in our shopping centers, especially those tenants in arrears or operating retail formats that are experiencing significant changes in competition, business practice, or store closings in other locations. Given the economic environment brought upon by COVID-19, certain tenants experienced liquidity or financial hardships and filed for Chapter 11 bankruptcy protection since the pandemic was declared. Although some of these tenants intend to exit the Chapter 11 bankruptcy process and resume operations, the outcomes of such proceedings are unknown and the Company is currently exploring leasing alternatives for these spaces.
11. PREPAID EXPENSES AND OTHER ASSETS
The following is a summary of the composition of the prepaid expenses and other assets in the consolidated balance sheets:
| | | Balance at | | Balance at |
(Amounts in thousands) | December 31, 2017 | | December 31, 2016 | (Amounts in thousands) | December 31, 2021 | | December 31, 2020 |
Other assets | | Other assets | $ | 19,712 | | | $ | 5,953 | |
Deferred tax asset, net | | Deferred tax asset, net | 37,420 | | | 39,677 | |
Real estate held for sale | $ | 3,285 |
| | $ | — |
| Real estate held for sale | — | | | 7,056 | |
Other assets | 3,771 |
| | 2,161 |
| |
Deposits for acquisitions | 406 |
| | 6,600 |
| |
Finance lease right-of-use asset | | Finance lease right-of-use asset | 2,724 | | | 2,724 | |
Deferred financing costs, net of accumulated amortization of $5,932 and $4,819, respectively | | Deferred financing costs, net of accumulated amortization of $5,932 and $4,819, respectively | 2,234 | | | 3,347 | |
| Prepaid expenses: | | | | Prepaid expenses: | |
Real estate taxes | 7,094 |
| | 5,198 |
| Real estate taxes | 9,982 | | | 8,093 | |
Insurance | 2,793 |
| | 2,545 |
| Insurance | 1,088 | | | 1,583 | |
Rent, licenses/fees | 1,210 |
| | 938 |
| Rent, licenses/fees | 951 | | | 1,878 | |
Total Prepaid expenses and other assets | $ | 18,559 |
| | $ | 17,442 |
| Total Prepaid expenses and other assets | $ | 74,111 | | | $ | 70,311 | |
13.
12. ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES
The following is a summary of the composition of accounts payable, accrued expenses and other liabilities in the consolidated balance sheets:
| | | | | | | | | | | |
| Balance at |
(Amounts in thousands) | December 31, 2021 | | December 31, 2020 |
Dividend payable | $ | — | | | $ | 55,905 | |
Deferred tenant revenue | 28,898 | | | 26,594 | |
Accrued capital expenditures and leasing costs | 19,164 | | | 7,797 | |
Finance lease liability | 3,004 | | | 2,993 | |
Accrued interest payable | 9,879 | | | 11,095 | |
Security deposits | 6,693 | | | 5,884 | |
| | | |
Accrued payroll expenses | 9,134 | | | 5,797 | |
Other liabilities and accrued expenses | 8,057 | | | 16,915 | |
Total accounts payable, accrued expenses and other liabilities | $ | 84,829 | | | $ | 132,980 | |
|
| | | | | | | |
| Balance at |
(Amounts in thousands) | December 31, 2017 | | December 31, 2016 |
Deferred ground rent expense | $ | 6,499 |
| | $ | 6,284 |
|
Deferred tax liability, net | 2,828 |
| | 3,802 |
|
Deferred tenant revenue | 4,183 |
| | 3,280 |
|
Environmental remediation costs | 1,232 |
| | 1,309 |
|
Other liabilities | 429 |
| | — |
|
Total Other liabilities | $ | 15,171 |
| | $ | 14,675 |
|
14.13. INTEREST AND DEBT EXPENSE
The following table sets forth the details of interest and debt expense:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
(Amounts in thousands) | 2021 | | 2020 | | 2019 |
Interest expense | $ | 54,946 | | | $ | 68,184 | | | $ | 63,783 | |
Amortization of deferred financing costs | 2,992 | | | 2,831 | | | 2,856 | |
Total Interest and debt expense | $ | 57,938 | | | $ | 71,015 | | | $ | 66,639 | |
|
| | | | | | | | | | | | |
| | Year Ended December 31, |
(Amounts in thousands) | | 2017 | | 2016 | | 2015 |
Interest expense | | $ | 53,342 |
| | $ | 49,051 |
| | $ | 52,846 |
|
Amortization of deferred financing costs | | 2,876 |
| | 2,830 |
| | 2,738 |
|
Total Interest and debt expense | | $ | 56,218 |
| | $ | 51,881 |
| | $ | 55,584 |
|
15.14. EQUITY AND NONCONTROLLING INTEREST
At-The-Market Program
In 2016,On May 5, 2021 the Company established an at-the-market (“ATM”) equity program (the “ATM Program”), pursuant to which the Company may offer and sell from time to time its common shares, par value $0.01 per share, with an aggregate gross sales price of up to $250.0 million through a consortium$250 million. Sales under the ATM Program may be made from time to time, as needed, by means of broker dealers actingordinary brokers’ transactions or other transactions that are deemed to be “at the market” offerings, in privately negotiated transactions, which may include block trades, or as otherwise agreed with the sales agents.
As of December 31, 2017, $241.3 million of2021, the Company has not issued any common shares remained available for issuance under this ATM equity program and there were no common shares issued under the ATM equity program during the year ended December 31, 2017. From September 2016 to December 31, 2016, the Company issued 307,342 common shares at a weighted average price of $28.45 under its ATM equity program, generating cash proceeds of $8.7 million. We paid $0.1 million of commissions to distribution agents and $0.4 million in additional offering expenses related to the issuance of these common shares. Actual futureProgram. Future sales will depend on a variety of factors including, but not limited to, market conditions, the trading price of our common shares, and our capital needs. We haveThe Company has no obligation to sell the remainingany shares available under the active ATM equity program.Program.
Underwritten Public Offering
On May 10, 2017,Share Repurchase Program
In March 2020, the Company’s Board of Trustees authorized a share repurchase program for up to $200 million of the Company’s common shares. Under the program, the Company issued 7.7 millionmay repurchase its shares from time to time in the open market or in privately negotiated transactions in compliance with Securities and Exchange Commission Rule 10b-18. The amount and timing of the purchases will depend on a number of factors including the price and availability of the Company’s shares, trading volume and general market conditions. The share repurchase program does not obligate the Company to acquire any particular amount of common shares of beneficial interest in an underwritten public offering pursuant toand may be suspended or discontinued at any time at the Company’s effective shelf registration statement previously filed on Form S-3 (File No. 333-212951) withdiscretion.
During the SEC on August 5, 2016. This offering generated cash proceeds of $193.5 million, net of $1.3 million of issuance costs.
Stock Purchase Agreement
On August 4, 2017,year ended December 31, 2021, no shares were repurchased by the Company. During the year ended December 31, 2020, the Company issued 6.25repurchased 5.9 million common shares of beneficial interest to a large institutional investor at a netweighted average share price of $24.80 per share, pursuant$9.22 amounting to the Company’s effective shelf registration statement previously filed on Form S-3 (File No. 333-212951) with the SEC on August 5, 2016. The issuance was a direct sale with no underwriter or placement agent such that net cash proceeds to the Company were $155$54.1 million.
Units of the Operating Partnership
An equivalent number of common units were issued by the Operating Partnership to the Company in connection with the Company’s issuance of common shares of beneficial interest, as discussed above.
The Operating Partnership’s capital includes general and common limited partnership interests in the operating partnership (“OP Units”). As of December 31, 2017,2021, Urban Edge owned approximately 89.9%96.2% of the outstanding common OP Units with the remaining limited OP Units held by Vornado Realty L.P., members of management, ourUrban Edge’s Board of Trustees and contributors of property interests acquired. Urban Edge serves as the sole general partner of the Operating Partnership. The third partythird-party unitholders have limited rights over the Operating Partnership such that they do not have characteristics of a controlling financial interest. As such, the Operating Partnership is considered a variable interest entity (“VIE”),VIE, and the Company is the primary beneficiary which consolidates it. The Company’s only investment is the Operating Partnership. The VIE’s assets can be used for purposes other than the settlement of the VIE’s obligations and the Company’s partnership interest is considered a majority voting interest.
The Operating Partnership issued 1.8 million OP units in connection with the acquisition of Yonkers Gateway Center on January 4, 2017, at a value of $27.09 per unit. On May 24 and 25, 2017, the Operating Partnership issued 2.6 million OP units and 1.9 million OP units, respectively, in connection with the Portfolio acquisition at a value of $27.02 per unit (refer to Note 4 Acquisitions and Dispositions).
Dividends and Distributions
During the yearsyear ended December 31, 2017 and 2016, 2021 the Company declared distributions on our common stock dividendsshares and OP units of $0.60 per share/unit which comprised a regular quarterly dividend of $0.15 per common share and OP unit declared for each quarter of 2021.
During the year ended December 31, 2020 the Company declared distributions on our common shares and OP units of $0.68 per share/unit in the aggregate, which comprised a regular quarterly dividend of $0.22 per common share and OP unit declared for the first quarter of 2020 and a special cash dividend of $0.46 per common share and OP unit declared in December 2020 and paid on January 19, 2021. As a result of COVID-19 and the uncertainties it generated, the Company temporarily suspended quarterly dividend distributions for the second and third quarters of 2020.
During the year ended December 31, 2019, the Company declared distributions on our common shares and OP units of $0.88 and $0.82 per share/unit respectively. in the aggregate.
We have a Dividend Reinvestment Plan (the “DRIP”), whereby shareholders may use their dividends to purchase shares. During the years ended December 31, 2017, 20162021, 2020 and 2015, 12,788, 12,5642019, 4,442, 3,445 and 11,4076,920 shares were issued under the DRIP, respectively.
Noncontrolling Interests in Operating Partnership
Noncontrolling interests in the operating partnershipOperating Partnership reflected on the consolidated balance sheets of the Company are comprised of OP units and limited partnership interests in the Operating Partnership in the form of LTIP unit awards. In connection with the separation, the Company issued 5.7 million OP units, representing a 5.4% interest in the Operating Partnership to VRLP in exchange for interests in VRLP properties contributed by VRLP. LTIP unit awards were granted to certain executives pursuant to our 2015 Omnibus Share Plan (the “Omnibus Share Plan”) and our 2018 Inducement Equity Plan (the “Inducement Plan”). OP units were issued to contributors in exchange for their property interests in connection with the Company’s acquisition of Yonkers Gateway Center and the Portfolio acquisition. property acquisitions in 2017.
The total of the OP units and LTIP units represent a 9.3%4.1% weighted-average interest in the Operating Partnership for the year ended December 31, 2017.2021. Holders of outstanding vested LTIP units may, from and after two years from the date of issuance, redeem their LTIP units for
cash, or for the Company’s common shares on a one-for-one1-for-one basis, solely at our election. Holders of outstanding OP units may at a determinable date, redeem their units for cash or the Company’s common shares on a one-for-one1-for-one basis, solely at our election. On August 5, 2019, the Company received requests from certain holders of OP units to redeem 357,998 units. The Company elected to satisfy the redemption requests by repurchasing the units at a price of $16.70 per unit, for total cash consideration of $6.0 million. During the years ended December 31, 2021, 2020 and 2019, 100,000, 1,355,836 and 6,995,941 units, respectively, were redeemed for an equivalent amount of common shares of the Company.
In connection with the separation from Vornado Realty L.P. (“VRLP”), the Company issued 5.7 million OP units, which represented a 5.4% interest in the Operating Partnership, to VRLP in exchange for interests in VRLP properties contributed by VRLP. On February 28, 2019, the Company issued 5.7 million common shares to VRLP, in exchange for an equal number of OP units after receiving a notice of redemption from VRLP. The issuance is exempt from registration in reliance upon Section 4(a)(2) of the Securities Act of 1933, as amended, on the basis that no public offering was made.
Noncontrolling InterestInterests in Consolidated Subsidiaries
The Company’s noncontrolling interest relatesinterests relate to the 5% interest held by others in our property in Walnut Creek, CA (Mount Diablo). The and 17.5% held by others in our property in Massapequa, NY. The net income attributable to noncontrolling interestinterests is presented separately in our consolidated and combined statements of income.
16.
15. SHARE-BASED COMPENSATION
Omnibus Share Plan
On January 7, 2015 our board and initial shareholder approved the Urban Edge Properties Omnibus Share Plan, under which awards may be granted up to a maximum of 15,000,000 of our common shares or share equivalents. Pursuant to the Omnibus Share Plan, stock options, LTIP units, operating partnership units and restricted shares were granted.
Outperformance and Long-Term Incentive Plans
The Compensation Committee of the Board of Trustees of the Company approved the Company’s 2015 Outperformance Plan (“2015 OPP”) on November 3, 2015 and the Company’s 2017 Outperformance Plan (“2017 OPP”) on February 24, 2017. Both Outperformance Plans are multi-year, performance-based equity compensation plans under which participants, including our Chairman and Chief Executive Officer, have the opportunity to earn awards in the form of LTIP units if, and only if, we outperform a predetermined total shareholder return (“TSR”) and/or outperform the market with respect to a relative TSR in any year duringover the requisite performance periods as described below.three-year period beginning on the date the respective plan was approved. The aggregate notional amounts of the 2015 OPP grant and the 2017 OPP grant are $10.2 million and $12.0 million, respectively.
Awards under the 2015 OPP and the 2017 OPP may be earned if we (i) achieve a TSR level greater than 7% per annum, or 21% over the three-year performance measurement period (the “Performance Period”), and/or (ii) achieve a TSR equal to or above, that of the 50th percentile of a retail REIT peer group (“Peer Group”) comprised of our peer companies, over a three-year performance measurement period.Performance Period. Distributions on awards accrue during the measurement period, except that 10% of such distributions are paid in cash. If the designated performance objectives are achieved, LTIP units are also subject to time-based vesting requirements. Awards earned under the 2015 OPP and the 2017 OPP vest 50% in year three, 25% in year four and 25% in year five.
On February 22, 2018, the Compensation Committee of the Board of Trustees approved the Company’s 2018 Long-Term Incentive Plan (“2018 LTI Plan”) under the Omnibus Share Plan, a multi-year equity compensation program, comprised of both performance-based and time-based vesting awards. Equity awards granted under the 2018 LTI Plan are weighted, in terms of grant date and fair value, 80% performance-based and 20% time-based.
The fair values of the 2015 OPP, and the 2017 OPP and the 2018 LTI Plan on the dates of grant were $3.9 million, $4.1 million and $4.1$3.6 million, respectively. A Monte Carlo simulation was used to estimate the fair values based on the probability of satisfying the market conditions and the projected share prices at the time of payments, discounted to the valuation dates over the three-year performance periods. For the 2015 OPP, assumptions include historical volatility (25.0%), risk-free interest rates (1.2%), and historical daily return as compared to our Peer Group (which ranged from 19.0% to 27.0%). For the 2017 OPP, assumptions include historical volatility (19.7%), risk-free interest rates (1.5%), and historical daily return as compared to our Peer Group. For boththe 2018 LTI Plan, assumptions include historical volatility, risk-free interest rates, and historical daily return as compared to our Peer Group. For the 2015 OPP and 2017 OPP, and the performance-based portion of the 2018 LTI Plan plans, such amounts are being amortized into share-based compensation expense over a five-year period from the dates of grant, using graded vesting attribution models.
The 2015 OPP was fully vested as of November 5, 2020 and there is no compensation cost remaining as of December 31, 2021. In the years ending December 31, 2017, 2016,2021, 2020, and 20152019 we recognized $2.0$0.7 million, $1.1$1.6 million and $0.2$2.3 million of compensation expense related to the 2015 OPP, 2017 OPP and 2017 OPPs’ LTIP Units,2018 LTI Plan, respectively. As of December 31, 2017,2021, there was $4.6$0.2 million of total unrecognized compensation cost related to the 20152017 OPP and 2017 OPPs’ LTIP Units,2018 LTI Plan, which will be recognized over a weighted-average period of 3.7less than one year.
2018 Inducement Equity Plan
The Inducement Plan was approved by the Compensation Committee of the Board of Trustees of the Company on September 26, 2018. Under the Inducement Plan, the Compensation Committee of the Board of Trustees may grant, subject to any Company performance conditions as specified by the Compensation Committee, awards to individuals who were not previously employees as an inducement material to the individual’s entry into employment with the Company. The terms and conditions of the Inducement Plan and any awards thereunder granted are substantially similar to those under the 2015 Omnibus Share Plan. The Company has granted an aggregate of 352,890 restricted LTIP Units and 2,000,000 stock options under the Inducement Plan with grant date fair values of $7.2 million and $9.3 million, respectively.
2019 Long-Term Incentive Plan
On April 4, 2019, the Compensation Committee of the Board of Trustees of the Company approved the Company’s 2019 Long-Term Incentive Plan (“2019 LTI Plan”). The Plan is a multi-year, equity compensation program under which participants, including our Chairman and Chief Executive Officer, have the opportunity to earn awards in the form of LTIP units that vest based on the passage of time (one-third of the program) and performance goals tied to our relative and absolute TSR during the three-year performance period following their grant (two-thirds of the program).
Performance-based awards
For the performance-based awards under the 2019 LTI Plan, participants have the opportunity to earn awards in the form of LTIP Units if, and only if, Urban Edge’s absolute and/or relative TSR meets certain criteria over the three-year Performance Period beginning on February 27, 2019 and ending on February 26, 2022. The Company issued 489,319 LTIP Units under the 2019 LTI Plan.
Under the Absolute TSR component, 40% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to 18%, 100% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to 27%, and 165% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to or greater than 36%. The Relative TSR component is based on the Company’s performance compared to a peer group comprised of 12 companies. Under the Relative TSR Component, 40% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to the 35th percentile of the peer group, 100% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to the 55th percentile of the peer group, and 165% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to or above the 75th percentile of the peer group, with earning determined using linear interpolation if between such relative and absolute TSR thresholds. The fair value of the performance-based award portion of the 2019 LTI Plan on the date of grant was $4.3 million using a Monte Carlo simulation to estimate the fair value through a risk-neutral premise.
Time-based awards
The time-based awards under the 2019 LTI Plan, also granted in the form of LTIP Units, vest ratably over three years except in the case of our Chairman and Chief Executive Officer, where the vesting is ratably over four years. The Company granted time-based awards under the 2019 LTI Plan that represent 112,910 LTIP units with a grant date fair value of $2.0 million. During the years ended December 31, 2021, 2020 and 2019, respectively, we recognized $1.4 million, $1.9 million and $1.4 million of compensation expense related to the 2019 LTI Plan.
2020 Long-Term Incentive Plan
On February 20, 2020, the Compensation Committee of the Board of Trustees of the Company approved the Company’s 2020 Long-Term Incentive Plan (“2020 LTI Plan”). The Plan is a multi-year, equity compensation program under which participants, including our Chairman and Chief Executive Officer, have the opportunity to earn awards in the form of LTIP units that vest based on (i) the passage of time (one-third of the fair value of the program) and (ii) performance goals tied to our relative and absolute TSR during the three-year performance period following their grant (two-thirds of the fair value of the program). The total grant date fair value under the 2020 LTI Plan was $8.8 million comprising performance-based and time-based awards as described further below:
Performance-based awards
For the performance-based awards under the 2020 LTI Plan, participants, have the opportunity to earn awards in the form of LTIP Units if Urban Edge’s absolute and/or relative TSR meets certain criteria over the three-year Performance Period beginning on February 20, 2020 and ending on February 19, 2023. The Company granted performance-based awards under the 2020 LTI Plan that represent 630,774 LTIP Units. The fair value of the performance-based award portion of the 2020 LTI Plan on the date of grant was $5.9 million using a Monte Carlo simulation to estimate the fair value through a risk-neutral premise.
Under the Absolute TSR component, 40% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to 18%, 100% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to 27%, and 165% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to or greater than 36%. The Relative TSR component is based on the Company’s performance compared to a peer group comprised of 12 companies. Under the Relative TSR Component, 40% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to the 35th percentile of the peer group, 100% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to the 55th percentile of the peer group, and 165% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to or above the 75th percentile of the peer group, with earning determined using linear interpolation if in between such relative and absolute TSR thresholds. During the years ended December 31, 2021
and 2020 we recognized $1.3 million and $1.1 million, respectively, of compensation expense related to the performance-based awards under the 2020 LTI Plan.
Time-based awards
The time-based awards granted under the 2020 LTI Plan, also granted in the form of LTIP Units, vest ratably over three years except in the case of our Chairman and Chief Executive Officer, where the vesting is ratably over four years. The Company granted time-based awards under the 2020 LTI Plan that represent 169,004 LTIP units with a grant date fair value of $2.9 million. During the years ended December 31, 2021 and 2020 we recognized $0.7 million and $1.1 million, respectively, of compensation expense related to the time-based awards under the 2020 LTI Plan.
2021 Long-Term Incentive Plan
On February 10, 2021, the Compensation Committee of the Board of Trustees of the Company approved the Company’s 2021 Long-Term Incentive Plan (“2021 LTI Plan”). The Plan is a multi-year, equity compensation program under which participants, including our Chairman and Chief Executive Officer, have the opportunity to earn awards in the form of LTIP units that vest based on the passage of time (one-half of the program) and performance goals tied to our relative and absolute TSR during the three-year Performance Period following their grant (one-half of the program). The total grant date fair value under the 2021 LTI Plan was $7.8 million, comprising both performance-based and time-based awards.
Performance-based awards
For the performance-based awards under the 2021 LTI Plan, participants have the opportunity to earn awards in the form of LTIP Units if Urban Edge’s absolute and/or relative TSR meets certain criteria over the three-year Performance Period beginning on February 10, 2021 and ending on February 9, 2024. The Company granted performance-based awards under the 2021 LTI Plan that represent 398,977 LTIP Units. The fair value of the performance-based award portion of the 2021 LTI Plan on the date of grant was $3.9 million using a Monte Carlo simulation to estimate the fair value through a risk-neutral premise.
Under the Absolute TSR component, 40% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to 18%, 100% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to 27%, and 165% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to or greater than 36%. The Relative TSR component is based on the Company’s performance compared to a peer group comprised of 15 companies. Under the Relative TSR Component, 40% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to the 35th percentile of the peer group, 100% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to the 55th percentile of the peer group, and 165% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to or above the 75th percentile of the peer group, with earning determined using linear interpolation if in between such relative and absolute TSR thresholds. During the year ended December 31, 2021, we recognized $1.0 million of compensation expense related to the performance-based awards under the 2021 LTI Plan.
Time-based awards
The time-based awards granted under the 2021 LTI Plan, also granted in the form of LTIP Units, vest ratably over three years except in the case of our Chairman and Chief Executive Officer, where the vesting is ratably over four years. As of December 31, 2021, the Company granted time-based awards under the 2021 LTI Plan that represent 273,615 LTIP units with a grant date fair value of $3.9 million. During the year ended December 31, 2021, we recognized $1.0 million of compensation expense related to the time-based awards under the 2021 LTI Plan.
Units and Deferred Share Units Granted to Trustees
On May 6, 2020, certain trustees elected to receive a portion of their compensation in deferred share units and an aggregate of 12,121 shares were granted to those trustees based on the weighted average grant date fair value of $8.25. In addition, certain trustees elected to receive a portion of their compensation in LTIP units and an aggregate of 87,117 LTIP units, were granted to those trustees based on the weighted average grant date fair value of $8.03.
On May 5, 2021, a certain trustee elected to receive a portion of their compensation in deferred share units and an aggregate of 6,476 shares were granted to this trustee based on the weighted average grant date fair value of $15.44. In addition, certain trustees elected to receive a portion of their compensation in LTIP units and an aggregate of 39,756 LTIP units were granted to those trustees based on the weighted average grant date fair value of $15.09.
On July 1, 2021 a certain trustee elected to receive a portion of their compensation in LTIP units and an aggregate of 12,254 LTIP units were granted to this trustee based on the weighted average grant date fair value of $15.02.
On November 22, 2021, a certain trustee elected to receive a portion of their compensation in LTIP units and an aggregate of 10,208 LTIP units were granted to this trustee based on the weighted average grant date fair value of $14.17.
2022 Long-Term Incentive Plan
On February 11, 2022, the Compensation Committee of the Board of Trustees of the Company (the “Compensation Committee”) approved the Company’s 2022 Long-Term Incentive Plan (“2022 LTI Plan”). The Plan is a multi-year, equity compensation program under which participants, including our Chairman and Chief Executive Officer, have the opportunity to earn awards in the form of LTIP units that vest based on (i) the passage of time (one-half of the program) and (ii) performance goals tied to our relative total shareholder return (“TSR”), absolute TSR and FFO as Adjusted growth over a three year performance period (one-half of the program). The total grant date fair value under the 2022 LTI Plan was $8.6 million, comprising both performance-based and time-based awards.
Shares Under Option
All stock options granted have ten-year contractual lives, containing vesting terms of three to five years. As of December 31, 2017, the weighted average contractual term of shares under option outstanding at the end of the period is 7.3 years. The following table presents stock option activity for the twelve monthsyear ended December 31, 2017, 2016, and 2015:2021:
| | | | | | | | | | | | | | | | | |
| Shares Under Options | | Weighted Average Exercise Price per Share | | Weighted Average Remaining Contractual Term |
| | | | | (in years) |
Outstanding at January 1, 2021 | 4,930,762 | | $22.89 | | — |
Granted | — | | — | | — |
Exercised | — | | — | | — |
Forfeited or expired | (1,000,000) | | 21.72 | | — |
Outstanding at December 31, 2021 | 3,930,762 | | $23.19 | | 3.56 |
Exercisable at December 31, 2021 | 3,156,449 | | $23.61 | | — |
|
| | | | | | | | | |
| Shares Under Options | | Weighted Average Exercise Price per Share | | Weighted Average Remaining Expected Term |
| | | | | (In years) |
Outstanding at January 1, 2015 | — |
| | $ | — |
| | — |
|
Granted | 2,302,762 |
| | 23.89 |
| | 6.15 |
|
Exercised | — |
| | — |
| | — |
|
Forfeited or expired | (13,623 | ) | | 24.46 |
| | — |
|
Outstanding at December 31, 2015 | 2,289,139 |
| | 23.89 |
| | 6.15 |
|
Granted | 196,713 |
| | 23.52 |
| | 6.00 |
|
Exercised | (8,501 | ) | | 24.46 |
| | — |
|
Forfeited or expired | (5,067 | ) | | 24.46 |
| | — |
|
Outstanding at December 31, 2016 | 2,472,284 |
| | 23.86 |
| | 5.33 |
|
Granted | 137,259 |
| | 28.36 |
| | 6.01 |
|
Exercised | — |
| | — |
| | — |
|
Forfeited or expired | (5,879 | ) | | 23.17 |
| | — |
|
Outstanding at December 31, 2017 | 2,603,664 |
| | $ | 24.09 |
| | 4.40 |
|
Exercisable at December 31, 2017 | 143,060 |
| | $ | 23.67 |
| | — |
|
DuringNo options were granted or exercised during the twelve monthsyear ended December 31, 2017, 20162021. As of December 31, 2021, there was no intrinsic value for the outstanding and 2015, the fair value of the options granted was estimated on the grant date using the Black-Scholes pricing model with the following assumptions:exercisable shares under option.
|
| | | | | | | | | | | |
| February 17, 2015 | | March 12, 2015 | | April 20, 2015 | | August 17, 2015 | | February 8, 2016 | | February 24, 2017 |
Risk-free interest rate | 1.76% | | 1.91% | | 1.60% | | 1.95% | | 1.31% | | 1.93% |
Expected option life | 6.00 | | 6.50 | | 6.25 | | 6.25 | | 6.25 | | 6.25 |
Expected volatility | 24.00% | | 25.00% | | 26.00% | | 27.00% | | 23.94% | | 25.06% |
The options were granted with an exercise price equivalent to the average of the high and low share price on the grant date.
Restricted0Restricted Shares
The following table presents information regarding restricted share activity during the twelve months ended December 31, 2017, 2016, and 2015: |
| | | | | | |
| Shares | | Weighted Average Grant Date Fair Value per Share |
Unvested at January 1, 2015 | — |
| | $ | — |
|
Granted | 35,460 |
| | 22.84 |
|
Vested | (1,022 | ) | | 24.46 |
|
Forfeited | (3,721 | ) | | 24.18 |
|
Unvested at December 31, 2015 | 30,717 |
| | 22.62 |
|
Granted | 117,399 |
| | 24.55 |
|
Vested | (15,977 | ) | | 23.17 |
|
Forfeited | (2,744 | ) | | 23.55 |
|
Unvested at December 31, 2016 | 129,395 |
| | 24.29 |
|
Granted | 104,698 |
| | 27.69 |
|
Vested | (53,236 | ) | | 25.13 |
|
Forfeited | (5,427 | ) | | 24.64 |
|
Unvested at December 31, 2017 | 175,430 |
| | $ | 26.05 |
|
During the years ended December 31, 2017, 20162021, 2020, and 2015,2019:
| | | | | | | | | | | |
| Shares | | Weighted Average Grant Date Fair Value per Share |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Unvested at January 1, 2021 | 72,393 | | | 19.03 | |
Granted | 17,933 | | | 15.58 | |
Vested | (35,674) | | | 20.06 | |
Forfeited | (5,305) | | | 18.03 | |
Unvested at December 31, 2021 | 49,347 | | | $ | 17.23 | |
During the year ended December 31, 2021, we granted 104,698, 117,399, and 35,46017,933 restricted shares respectively, that are subject to forfeiture and vest over periods ranging from one to fourthree years. The total grant date value of the 53,236, 15,977, and 1,02235,674 restricted shares vested during the years ended December 31, 2017, 2016 and 2015 was $1.3 million, $0.4 million and $25 thousand, respectively.
In connection with the separation transaction, there were 433,040 LTIP units issued to executives during the year ended December 31, 2015 of which 343,2322021 was $0.7 million.
Restricted Units
During the years ended December 31, 2021, 2020 and 2019, respectively, there were immediately vested.335,833, 297,195 and 276,482 additional LTIP units issued. During the years ended December 31, 2021, 2020 and 2019, 271,635, 433,016, and 131,884 units vested, respectively. There were no restricted units converted to common shares during the year ended December 31, 2021. During the year ended December 31, 2017, there2020, 223,553 restricted units were 31,734 additional LTIP units issuedconverted to executives. During the years endedcommon shares. As of December 31, 2017 and 2016, 16,789, and 39,439 units vested, respectively. The2021 the remaining 65,314629,931 units vest over a weighted average period of 2.4approximately two years.
Share-Based Compensation Expense
Share-based compensation expense, which is included in general and administrative expenses in our consolidated and combined statements of income, is summarized as follows:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
(Amounts in thousands) | 2021 | | 2020 | | 2019 |
Share-based compensation expense components: | | | | | |
Restricted share expense | $ | 461 | | | $ | 832 | | | $ | 1,697 | |
Stock option expense | 1,435 | | | 4,991 | | | 4,055 | |
LTIP expense(1) | 4,909 | | | 7,331 | | | 4,477 | |
Performance-based LTI expense(2) | 3,865 | | | 3,792 | | | 3,164 | |
DSU expense | 149 | | | 48 | | | 156 | |
Total Share-based compensation expense | $ | 10,819 | | | $ | 16,994 | | | $ | 13,549 | |
|
| | | | | | | | | | | |
| Year Ended December 31, |
(Amounts in thousands) | 2017 | | 2016 | | 2015 |
Share-based compensation expense components: | | | | | |
Restricted share expense | $ | 1,961 |
| | $ | 1,314 |
| | $ | 282 |
|
Stock option expense | 2,569 |
| | 2,437 |
| | 1,901 |
|
LTIP expense(2) | 557 |
| | 473 |
| | 7,748 |
|
Outperformance Plan (“OPP”) expense(1) | 2,050 |
| | 1,209 |
| | 330 |
|
Total Share-based compensation expense | $ | 7,137 |
| | $ | 5,433 |
| | $ | 10,261 |
|
(1) OPP Expense forLTIP expense includes the years ended December 31, 2017, 2016, and 2015 includes $30 thousand, $0.1 million, and $0.2 million, respectively, of unrecognized compensation expense of awards issued under Vornado’s OPP for UE employees who were previously Vornado employees. The remaining OPP unrecognized compensation expense was transferred from Vornado to UE astime-based portion of the separation date2021, 2020, 2019 and is amortized on a straight-line basis over2018 LTI Plans.
(2) Performance-based LTI expense includes the remaining life2017 OPP plan and the performance-based portion of the OPP awards issued.2021, 2020, 2019 and 2018 LTI Plans.
(2) LTIP expense excludes the expense associated with LTIP units under the 2015 OPP and the 2017 OPP.
As of December 31, 2017,2021, we had a total of $12.0$13.2 million of unrecognized compensation expense related to unvested and restricted share-based payment arrangements including unvested stock options, LTIP units, deferred share units, and restricted share awards which were granted under our Omnibus Share Plan as well as OPP awards issued by Vornado.awards. This expense is expected to be recognized over a weighted average period of 2.6two years.
17.16. EARNINGS PER SHARE AND UNIT
Urban Edge Earnings per Share
We have calculated earnings per share (“EPS”) under the two-class method. The two-class method is an earnings allocation methodology whereby EPS for each class of Urban Edge common shares and participating securities is calculated according to dividends declared and participating rights in undistributed earnings. Restricted shares issued pursuant to our share-based compensation program are considered participating securities, and as such have non-forfeitable rights to receive dividends.
The computation of diluted EPS reflects potential dilution of securities by adding potential common shares, including stock options and unvested restricted shares, to the weighted average number of common shares outstanding for the period. For the yearyears ended December 31, 2017, 20162021, 2020 and 2015,2019 there were options outstanding for 2,603,664, 2,472,284, and 2,289,1393,930,762 shares respectively, that potentially could be exercised for common shares. During 2017the years ended December 31, 2021, 2020 and 2016, respectively, 167,933 and 256,9172019, no options with exercise prices ranging from $22.83 to $28.36, were included in the diluted EPS calculation as their optionexercise prices were lowerhigher than the average market prices of our common shares. In addition, as of December 31, 20172021 there were 175,43049,347 unvested restricted shares outstanding that potentially could become unrestricted common shares. The computation of diluted EPS for the years ended December 31, 2017, 20162021, 2020 and 20152019 included the 167,100, 114,354,54,988, 77,289, and 25,829100,406 weighted average unvested restricted shares outstanding, respectively, as their effect is dilutive.
The effect of the redemption of OP and vested LTIP units is not reflected in the computation of basic and diluted earnings per share, as they are redeemable for common shares on a one-for-one basis. The income allocable to such units is allocated on this same basis and reflected as noncontrolling interests in the accompanying consolidated and combined financial statements. As such, the assumed redemption of these units would have no net impact on the determination of diluted earnings per share since they would be anti-dilutive.
As described in Note 2, the common shares outstanding at the date of the separation are reflected as outstanding for all periods prior to the separation. The following table sets forth the computation of our basic and diluted earnings per share:
The following table sets forth the computation of our basic and diluted earnings per share:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
(Amounts in thousands, except per share amounts) | 2021 | | 2020 | | 2019 |
Numerator: | | | | | |
Net income attributable to common shareholders | $ | 102,686 | | | $ | 93,589 | | | $ | 109,523 | |
Less: Earnings allocated to unvested participating securities | (47) | | | (62) | | | (92) | |
Net income available for common shareholders - basic | $ | 102,639 | | | $ | 93,527 | | | $ | 109,431 | |
Impact of assumed conversions: | | | | | |
OP and LTIP units | 3,675 | | | 81 | | | 5 | |
Net income available for common shareholders - dilutive | $ | 106,314 | | | $ | 93,608 | | | $ | 109,436 | |
| | | | | |
Denominator: | | | | | |
Weighted average common shares outstanding - basic | 117,029 | | | 117,722 | | | 119,751 | |
Effect of dilutive securities: | | | | | |
| | | | | |
Restricted share awards | 55 | | | 77 | | | 100 | |
Assumed conversion of OP and LTIP units | 4,363 | | | 103 | | | 45 | |
Weighted average common shares outstanding - diluted | 121,447 | | | 117,902 | | | 119,896 | |
| | | | | |
Earnings per share available to common shareholders: | | | | | |
Earnings per common share - Basic | $ | 0.88 | | | $ | 0.79 | | | $ | 0.91 | |
Earnings per common share - Diluted | $ | 0.88 | | | $ | 0.79 | | | $ | 0.91 | |
|
| | | | | | | | | | | |
| Year Ended December 31, |
(Amounts in thousands, except per share amounts) | 2017 | | 2016 | | 2015 |
Numerator: | | | | | |
Net income attributable to common shareholders | $ | 67,070 |
| | $ | 90,815 |
| | $ | 38,785 |
|
Less: Earnings allocated to unvested participating securities | (155 | ) | | (114 | ) | | (23 | ) |
Net income available for common shareholders - basic | $ | 66,915 |
| | $ | 90,701 |
|
| $ | 38,762 |
|
Impact of assumed conversions: | | | | | |
OP and LTIP units | 5,782 |
| | 53 |
| | — |
|
Net income available for common shareholders - dilutive | $ | 72,697 |
| | $ | 90,754 |
|
| $ | 38,762 |
|
| | | | | |
Denominator: | | | | | |
Weighted average common shares outstanding - basic | 107,132 |
| | 99,364 |
| | 99,252 |
|
Effect of dilutive securities: | | | | | |
Stock options using the treasury stock method | 168 |
| | 257 |
| | — |
|
Restricted share awards | 167 |
| | 114 |
| | 26 |
|
Assumed conversion of OP and LTIP units | 10,923 |
| | 59 |
| | — |
|
Weighted average common shares outstanding - diluted | 118,390 |
| | 99,794 |
| | 99,278 |
|
| | | | | |
Earnings per share available to common shareholders: | | | | | |
Earnings per common share - Basic | $ | 0.62 |
| | $ | 0.91 |
| | $ | 0.39 |
|
Earnings per common share - Diluted | $ | 0.61 |
| | $ | 0.91 |
| | $ | 0.39 |
|
Operating Partnership Earnings per Unit
The following table sets forth the computation of basic and diluted earnings per unit:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
(Amounts in thousands, except per unit amounts) | 2021 | | 2020 | | 2019 |
Numerator: | | | | | |
Net income attributable to unitholders | $ | 106,982 | | | $ | 97,749 | | | $ | 116,222 | |
Less: net income attributable to participating securities | (47) | | | (62) | | | (92) | |
Net income available for unitholders | $ | 106,935 | | | $ | 97,687 | | | $ | 116,130 | |
| | | | | |
Denominator: | | | | | |
Weighted average units outstanding - basic | 120,966 | | | 121,957 | | | 126,333 | |
Effect of dilutive securities issued by Urban Edge | 55 | | | 77 | | | 100 | |
Unvested LTIP units | 1,086 | | | 777 | | | 45 | |
Weighted average units outstanding - diluted | 122,107 | | | 122,811 | | | 126,478 | |
| | | | | |
Earnings per unit available to unitholders: | | | | | |
Earnings per unit - Basic | $ | 0.88 | | | $ | 0.80 | | | $ | 0.92 | |
Earnings per unit - Diluted | $ | 0.88 | | | $ | 0.80 | | | $ | 0.92 | |
|
| | | | | | | | | | | |
| Year Ended December 31, |
(Amounts in thousands, except per unit amounts) | 2017 | | 2016 | | 2015 |
Numerator: | | | | | |
Net income attributable to unitholders | $ | 72,894 |
| | $ | 96,627 |
| | $ | 41,332 |
|
Less: net income attributable to participating securities | (155 | ) | | (211 | ) | | (22 | ) |
Net income available for unitholders | $ | 72,739 |
|
| $ | 96,416 |
|
| $ | 41,310 |
|
| | | | | |
Denominator: | | | | | |
Weighted average units outstanding - basic | 117,779 |
| | 105,455 |
| | 105,276 |
|
Effect of dilutive securities issued by Urban Edge | 335 |
| | 371 |
| | 26 |
|
Unvested LTIP units | 276 |
| | 273 |
| | 72 |
|
Weighted average units outstanding - diluted | 118,390 |
| | 106,099 |
| | 105,374 |
|
| | | | | |
Earnings per unit available to unitholders: | | | | | |
Earnings per unit - Basic | $ | 0.62 |
| | $ | 0.91 |
| | $ | 0.39 |
|
Earnings per unit - Diluted | $ | 0.61 |
| | $ | 0.91 |
| | $ | 0.39 |
|
18. QUARTERLY FINANCIAL DATA (unaudited)
The following tables summarize the quarterly results of operations of Urban Edge Properties and Urban Edge Properties LP for the years ended December 31, 2017 and 2016:
|
| | | | | | | | | | | | | | | |
| Three Months Ended, |
(Amounts in thousands, except per share/unit amounts) | December 31, 2017 | | September 30, 2017 | | June 30, 2017 | | March 31, 2017 |
Total revenue | $ | 97,376 |
| | $ | 94,101 |
| | $ | 89,501 |
| | $ | 126,064 |
|
Operating income | 30,742 |
| | 33,190 |
| | 28,515 |
| | 69,317 |
|
Net (loss) income | (15,873 | ) | | 19,156 |
| | 14,920 |
| | 54,735 |
|
Net loss (income) attributable to noncontrolling interests in operating partnership | 1,607 |
| | (1,967 | ) | | (1,326 | ) | | (4,138 | ) |
Net income attributable to noncontrolling interests in consolidated subsidiaries | (11 | ) | | (11 | ) | | (11 | ) | | (11 | ) |
Net (loss) income attributable to common shareholders | (14,277 | ) | | 17,178 |
| | 13,583 |
| | 50,586 |
|
Net (loss) income attributable to unitholders | (15,884 | ) |
| 19,145 |
|
| 14,909 |
|
| 54,724 |
|
Earnings (loss) per common share - Basic | (0.13 | ) | | 0.15 |
| | 0.13 |
| | 0.51 |
|
Earnings (loss) per common share - Diluted | (0.13 | ) | | 0.15 |
| | 0.13 |
| | 0.50 |
|
Earnings (loss) per common unit - Basic | (0.13 | ) | | 0.15 |
| | 0.13 |
| | 0.51 |
|
Earnings (loss) per common unit - Diluted | (0.13 | ) | | 0.15 |
| | 0.13 |
| | 0.50 |
|
|
| | | | | | | | | | | | | | | |
| Three Months Ended, |
(Amounts in thousands, except per share/unit amounts) | December 31, 2016 | | September 30, 2016 | | June 30, 2016 | | March 31, 2016 |
Total revenue | $ | 83,478 |
| | $ | 79,973 |
| | $ | 79,457 |
| | $ | 83,068 |
|
Operating income | 33,428 |
| | 33,414 |
| | 32,790 |
| | 33,386 |
|
Net income | 20,266 |
| | 20,505 |
| | 36,071 |
| | 19,788 |
|
Net income attributable to noncontrolling interests in operating partnership | (1,218 | ) | | (1,239 | ) | | (2,201 | ) | | (1,154 | ) |
Net (income)/loss attributable to noncontrolling interests in consolidated subsidiaries | (4 | ) | | (1 | ) | | (2 | ) | | 4 |
|
Net income attributable to common shareholders | 19,044 |
| | 19,265 |
| | 33,868 |
| | 18,638 |
|
Net income attributable to unitholders | 20,262 |
| | 20,504 |
| | 36,069 |
| | 19,792 |
|
Earnings per common share - Basic | 0.19 |
| | 0.19 |
| | 0.34 |
| | 0.19 |
|
Earnings per common share - Diluted | 0.19 |
| | 0.19 |
| | 0.34 |
| | 0.19 |
|
Earnings per common unit - Basic | 0.19 |
| | 0.19 |
| | 0.34 |
| | 0.19 |
|
Earnings per common unit - Diluted | 0.19 |
| | 0.19 |
| | 0.34 |
| | 0.19 |
|
19. SUBSEQUENT EVENTS
Pursuant to the Subsequent Events Topic of the FASB ASC, we have evaluated subsequent events and transactions that occurred after our December 31, 2017 consolidated balance sheet date for potential recognition or disclosure in our consolidated and combined financial statements.
During 2017, our property in Englewood, NJ was transferred to a receiver. On January 31, 2018, the property was sold at a foreclosure sale. Upon issuance of the court’s order approving the sale and discharging the receiver, all assets and liabilities related to the property will be removed.
| |
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES |
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
| |
ITEM 9A. | CONTROLS AND PROCEDURES |
ITEM 9A. CONTROLS AND PROCEDURES
Controls and Procedures (Urban Edge Properties)
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) that are designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. Because of inherent limitations, disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of disclosure controls and procedures are met.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in reports filed or submitted under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms.
Management’s Annual Report on Internal Control over Financial Reporting
The management of Urban Edge Properties and subsidiaries (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting for the Company, defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the Company’s boardBoard of trustees,Trustees, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting, which requires the use of certain estimates and judgments, and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
•Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
•Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and trustees of the Company; and
•Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or internal control over financial reporting will prevent all errors and fraud. In designing and evaluating our control system, management recognized that any control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. Further, the design of a control system must reflect the fact that there are resource constraints, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, that may affect our operation have been or will be detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management’s override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions that cannot be anticipated at the present time, or the degree of
compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017.2021. In making this assessment, the Company’s management used the criteria set forth by the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). Based on this assessment, management has concluded that, as of December 31, 2017,2021, the Company’s internal control over financial reporting was effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 20172021 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm as stated in their attestation report which is included herein.
Changes in Internal Control Over Financial Reporting
There have not been any changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)) that occurred during the three months ended December 31, 20172021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Controls and Procedures (Urban Edge Properties LP)
Evaluation of Disclosure Controls and Procedures
The Operating Partnership’s management maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) that are designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer of our general partner, as appropriate to allow timely decisions regarding required disclosures. Because of inherent limitations, disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of disclosure controls and procedures are met.
The Operating Partnership’s management, with the participation of the Chief Executive Officer and Chief Financial Officer of our general partner, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer of our general partner concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in reports filed or submitted under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms.
Management’s Annual Report on Internal Control over Financial Reporting
The Operating Partnership’s management is responsible for establishing and maintaining adequate internal control over financial reporting for the Operating Partnership, defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, the Operating Partnership’s principal executive and principal financial officers, or persons performing similar functions, and effected by the boardBoard of trustees,Trustees, management and other personnel of the Operating Partnership’s general partner, to provide reasonable assurance regarding the reliability of financial reporting, which requires the use of certain estimates and judgments, and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
•Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
•Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and trustees of the Operating Partnership’s general partner; and
•Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
The Operating Partnership’s management, including the Chief Executive Officer and Chief Financial Officer of our general partner, does not expect that our disclosure controls and procedures or internal control over financial reporting will prevent all errors and fraud. In designing and evaluating our control system, management recognized that any control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. Further, the design of a control system must reflect the fact that there are resource constraints, and management necessarily was required
to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, that may affect our operation have been or will be detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management’s override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions that cannot be anticipated at the present time, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.
The Operating Partnership’s management assessed the effectiveness of the Operating Partnership’s internal control over financial reporting as of December 31, 2017.2021. In making this assessment, the Operating Partnership’s management used the criteria set forth by the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). Based on this assessment, management has concluded that, as of December 31, 2017,2021, the Operating Partnership’s internal control over financial reporting was effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
The effectiveness of the Operating Partnership’s internal control over financial reporting as of December 31, 20172021 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm as stated in their attestation report which is included herein.
Changes in Internal Control Over Financial Reporting
There have not been any changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)) that occurred during the three months ended December 31, 20172021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees
of Urban Edge Properties
New York, New York
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Urban Edge Properties and subsidiaries (the "Company"“Company”) as of December 31, 2017,2021, based on criteria established in Internal Control -— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2021, based on the criteria established in Internal Control -— Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements and financial statement schedules as of and for the year ended December 31, 2017,2021, of the Company and our report dated February 14, 201816, 2022, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company'sCompany’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company'sCompany’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America.PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company'scompany’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company'scompany’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company'scompany’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
New York, New York
February 14, 201816, 2022
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of
Urban Edge Properties LP
New York, New York
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Urban Edge Properties LP (the "Operating Partnership"“Operating Partnership”) as of December 31, 2017,2021, based on criteria established in Internal Control -— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Operating Partnership maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2021, based on the criteria established in Internal Control -— Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements and financial statement schedules as of and for the year ended December 31, 20172021, of the Operating Partnership and our report dated February 14, 201816, 2022, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Operating Partnership's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Operating Partnership's internal control over financial reporting based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)PCAOB and are required to be independent with respect to the Operating Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America.PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company'scompany’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company'scompany’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company'scompany’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
New York, New York
February 14, 201816, 2022
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ITEM 9B. | ITEM 9B. OTHER INFORMATION |
None.
On February 11, 2022, the Compensation Committee approved and adopted an Executive Severance and Change in Control Plan (the “Plan”) for the benefit of certain of the Company’s executive officers and other eligible employees that the Compensation Committee may designate from time to time (the “Participants”). Each of the Company’s named executive officers identified in the Company’s proxy statement filed in connection with its 2021 annual meeting of shareholders has been named as Participants in the Plan (other than those executives whose severance benefits are governed by the terms of their existing agreements with the Company).
Under the Plan, in the event that a Participant’s employment is terminated by the Company for any reason other than for cause or death or disability, such Participant shall be entitled to (i) a lump sum payment equal to the product of (A) a severance multiple of either 1.0 (or such lesser multiple as may be agreed for non-executive officers), as specified in the letter agreement provided to each Participant upon qualification for the Plan, and (B) the sum of the Participant’s annual base salary and most recent target annual cash performance bonus, (ii) continuing coverage under the Company’s group medical, dental and vision plans as would have applied if the Participant remained employed for a number of years equal to the applicable severance multiple (at such cost to the Participant as would have applied in the absence of such termination), and (iii) full acceleration of time-base based equity awards held by the Participant and any accelerated vesting of equity awards with performance-based vesting to occur in accordance with the terms of the applicable award agreement. In addition, if such termination occurs within three months prior to, or within 12 months following, a Change in Control (as defined in the Plan), the relevant severance multiple will be 1.5 (or such lesser multiple as may be agreed for non-executive officers), as specified in the letter agreement provided to each Participant upon qualification for the Plan.
In the event that a Participant’s employment is terminated on account of his or her death or disability, such Participant (or the Participant’s estate or beneficiaries) shall be entitled to, among other things, full acceleration of time-base based equity awards held by the Participant and any equity awards with performance-based vesting to remain outstanding and earned in accordance with the their terms based on performance but without further vesting based on service. Additionally, in the event that a Participant’s employment is terminated on account of his or her disability, such Participant shall be entitled to receive any compensation and/or benefits as may be due or payable to such Participant in accordance with the terms and provisions of any employee benefit plans or programs of Urban Edge.
As a condition to participation in the Plan, each Participant must enter into a letter agreement with the Company in the form attached as an exhibit to the Plan, which, among other things, contains restrictive covenants in favor of the Company, including confidentiality, intellectual property, non-disparagement, non-competition and non-solicitation covenants. Participants must generally also execute, deliver and not revoke a general release of claims in favor of the Company in order to receive benefits.
The foregoing is a summary of the Plan and should be read in conjunction with the full text of the Plan, which is attached hereto as Exhibit 10.17 and is incorporated herein by reference.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
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ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by Item 10 will be included in the Proxy Statement to be filed relating to Urban Edge Properties’ 20182022 Annual Meeting of Shareholders and is incorporated herein by reference.
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ITEM 11. | EXECUTIVE COMPENSATION |
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 will be included in the Proxy Statement to be filed relating to Urban Edge Properties’ 20182022 Annual Meeting of Shareholders and is incorporated herein by reference.
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ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Equity Compensation Plan Information
The following table summarizes information, as of December 31, 2017,2021, relating to our equity compensation plans pursuant to which our common shares or other equity securities may be granted from time to time.
| | | | | | | | | | | | | | | | | | | | | | | |
| | (a) | | (b) | | (c) | |
Plan Category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | Weighted-average exercise price of outstanding options, warrants and rights (2) | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column a) | |
| | | | | | | |
Equity compensation plans approved by security holders | | 2,821,917 | | (1) | $ | 20.04 | | | 4,151,073 | | (3) |
Equity compensation plans not approved by security holders | | 1,019,557 | | (4) | 21.72 | | | N/A | |
Total | | 3,841,474 | | | $ | 20.49 | | | 4,151,073 | | |
|
| | | | | | | | | | |
| | (a) | | (b) | | (c) |
Plan Category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) | | Weighted-average exercise price of outstanding options, warrants and rights (2) | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column a)(3) |
| | | | | | |
Equity compensation plans approved by security holders including the employee share purchase plan | | 3,701,398 |
| | $ | 21.79 |
| | 6,506,015 |
|
Equity compensation plans not approved by security holders | | N/A |
| | N/A |
| | N/A |
|
Total | | 3,701,398 |
|
| $ | 21.79 |
|
| 6,506,015 |
|
(1) Includes an aggregate of (i) 2,603,664107,646 common shares issuable upon exercise of outstanding unvested options (excluding 2,831,617 common shares issuable upon exercise of outstanding vested options) and (ii) 1,097,7342,714,271 common shares issuable in exchange for common units which may, upon satisfaction of certain conditions, be issuable pursuant to outstanding LTIP Units in our Operating Partnership (“LTIP Units”). The LTIP Units outstanding as of December 31, 20172021 include 632,9601,397,695 LTIP Units issued pursuant to our 2015 OPP2019 LTI Plan, 2020 LTI Plan, and 2017 OPP,2021 LTI Plan which remain subject to performance-based vesting criteria.
(2)The LTIP Units do not have an exercise price. Accordingly, these awards are not included in the weighted-average exercise price calculation.
(3) Includes (i) 4,850,5192,137,585 common shares remaining available for issuance under the Urban Edge Properties 2015 Omnibus Incentive Plan (the “Plan”) and (ii) 1,655,4962,013,488 common share remaining available under the Urban Edge Properties 2015 Employee Share Purchase Plan (“ESPP”). The number of common shares remaining available for issuance under the Plan is based on awards being granted as "Full Value Awards," as defined in the Plan, including awards such as restricted stock, LTIP units or performance units that do not require the payment of an exercise price. If we were to grant awards other than “Full Value Awards," as defined in the Plan, including stock options or stock appreciation rights, the number of securities remaining available for future issuance under the Plan would be 9,701,038.4,275,169. Pursuant to the terms of the ESPP, on each January 1 prior to the tenth anniversary of the ESPP’s effective date, an additional number of common shares will be added to the maximum number of shares authorized for issuance under the ESPP equal to the lesser of (a) 0.1% of the total number of common shares outstanding on December 31 of the preceding calendar year and (b) 150,000 common shares; provided that the Compensation Committee of our Board of Trustees may act prior to January 1 of any calendar year to provide that there will be no increase in the share reserve for that calendar year, or that the increase in the share reserve for that calendar year shall be less than the increase that would otherwise occur.
(4) Relates to the Urban Edge Properties 2018 Inducement Equity Plan, which is an omnibus equity plan pursuant to which we may grant a variety of equity awards pursuant to the employment inducement award exemption provided by Section 303A.08 of the New York Stock Exchange Listed Company Manual, including options, share appreciation rights, performance shares, restricted shares and other share-based awards including LTIP Units. A total of 1,170,628 common shares are authorized to be issued under the 2018 Inducement Equity Plan. The 2018 Inducement Equity Plan has a ten-year term expiring on September 20, 2028 and generally may be amended at any time by our Board of Trustees. Included in the 1,170,628 common shares authorized to be issued under the 2018 Inducement Equity Plan are an aggregate of (i) 666,667 common shares issuable upon exercise of outstanding unvested options (excluding 333,333 common shares issuable upon exercise of outstanding vested options) and (ii) 170,628 common shares issuable in exchange for common units which may, upon satisfaction of certain conditions, be issuable pursuant to outstanding LTIP Units in our Operating Partnership (“LTIP Units”).
Additional information concerning security ownership of certain beneficial owners and management required by Item 12 will be included in the Proxy Statement to be filed relating to Urban Edge Properties’ 20182022 Annual Meeting of Shareholders and is incorporated herein by reference.
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ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by Item 13 will be included in the Proxy Statement to be filed relating to Urban Edge Properties’ 20182022 Annual Meeting of Shareholders and is incorporated herein by reference.
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ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES |
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by Item 14 will be included in the Proxy Statement to be filed relating to Urban Edge Properties’ 20182022 Annual Meeting of Shareholders and is incorporated herein by reference.
PART IV
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ITEM 15. | ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
(a)(1)Financial Statements
Our consolidated and combined financial statements and notes thereto, together with the Reports of Independent Registered Public Accounting Firm are included as a separate sectionin Item 8 of this Annual Report on Form 10-K commencing on page 4737.
(2) Financial Statement Schedules
Our financial statement schedules are included in a separate sectionItem 8 of this Annual Report on Form 10-K commencing on page 9492.
(3) Exhibits
A list of exhibits to this Annual Report on Form 10-K is set forth on the Exhibit Index immediately preceding such exhibitsto Exhibits commencing on page 88 and is incorporated herein by reference.
(b) See Exhibit Index to Exhibits
(c) Schedules other than those listed above are omitted because they are not applicable or the information required is included in the consolidated and combined financial statements or the notes thereto.
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ITEM 16. | FORM 10-K SUMMARY |
ITEM 16. FORM 10-K SUMMARY
Not applicable.
INDEX TO EXHIBITS
The following exhibits are filedincluded as part of this Annual Report on Form 10-K:
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Exhibit Number | | Exhibit Description |
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| | Second Amendment, dated as of July 29, 2019, to Revolving Credit Agreement by and among Urban Edge Properties LP, as Borrower, each of the Banks party thereto, and Wells Fargo Bank, National Association, as Administrative Agent dated as of January 15, 2015 (incorporated by reference to Exhibit 10.1010.5 to Form 10-K filed on February 12, 2020) |
| | Third Amendment, dated as of June 3, 2020, to Revolving Credit Agreement by and among Urban Edge Properties LP, as Borrower, each of the Banks party thereto, and Wells Fargo Bank, National Association, as Administrative Agent (incorporated by reference to Exhibit 10.1 to Form 8-K filed January 21, 2015)June 5, 2020) |
| | Tax Protection Agreement dated as of May 24, 2017, by and among Urban Edge Properties LP; Urban Edge Properties; and Acklinis Yonkers Realty, L.L.C., Acklinis Realty Holding, LLC, Acklinis Original Building, L.L.C., A & R Woodbridge Shopping Center, L.L.C., A & R Millburn Associates, L.P., Ackrik Associates, L.P., A & R Manchester, LLC, A & R Westfield Lincoln Plaza, LLC and A & R Westfield Broad Street, LLC. (incorporated by reference to Exhibit 10.1 to Form 10-Q filed on August 2, 2017) |
| | Contribution Agreement dated as of April 7, 2017, by and among Urban Edge Properties LP; Urban Edge Properties; and Acklinis Yonkers Realty, L.L.C., Acklinis Realty Holding, LLC, Acklinis Original Building, L.L.C., A & R Woodbridge Shopping Center, L.L.C., A & R Millburn Associates, L.P., Ackrik Associates, L.P., A & R Manchester, LLC, A & R Westfield Lincoln Plaza, LLC and A & R Westfield Broad Street, LLC. (incorporated by reference to Exhibit 10.2 to Form 10-Q filed on August 2, 2017) |
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101.INS101.SCH* | | XBRL Instance Document |
101.SCH | | Inline XBRL Taxonomy Extension Schema |
101.CAL101.CAL* | | Inline XBRL Extension Calculation Linkbase |
101.LAB101.LAB* | | Inline XBRL Extension Labels Linkbase |
101.PRE101.PRE* | | Inline XBRL Taxonomy Extension Presentation Linkbase |
101.DEF101.DEF* | | Inline XBRL Taxonomy Extension Definition Linkbase |
104* | | Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*) |
* Filed herewith
** In accordance with Item 601 (b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
† Management contracts and compensatory plans or arrangements required to be filed pursuant to Item 15(b) of Form 10-K.
† Filed electronically herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.
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| | URBAN EDGE PROPERTIES |
| | (Registrant) |
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Date: February 14, 2018 | By: | /s/ Mark Langer |
| | Mark Langer, Chief Financial Officer |
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| Date: February 16, 2022 |
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| | URBAN EDGE PROPERTIES LP |
| | By: Urban Edge Properties, General Partner |
| | |
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Date: February 14, 2018 | By: | /s/ Mark Langer |
| | Mark Langer, Chief Financial Officer |
| |
| Date: February 16, 2022 |
| |
KNOWN BY ALL PERSONS BY THESE PRESENTS, that the individuals whose signatures appear below hereby constitute and appoint Jeffrey S. Olson and Mark Langer, and each of them severally, as his or her true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution for him or her and in his or her name, place and stead in any and all capacities to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do or perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or of his substitute or substitutes, may lawfully do to cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Urban Edge Properties in its own capacity and in its capacity as the Registrantsole general partner of Urban Edge Properties LP, and in the capacities and on the dates indicated:
| | | | | | | | | | | | | | | | | |
| Signature | | Title | | Date |
| | | | | |
By: | /s/ Jeffrey S. Olson | | Chairman of the Board of Trustees | | February 16, 2022 |
| Jeffrey S. Olson | | and Chief Executive Officer | | |
| | | (Principal Executive Officer) | | |
| | | | | |
By: | Signature | | Title | | Date |
| | | | | |
By: | /s/ Jeffrey S. Olson | | Chairman of the Board of Trustees | | February 14, 2018 |
| Jeffrey S. Olson | | and Chief Executive Officer | | |
| | | (Principal Executive Officer) | | |
| | | | | |
By: | /s/ Mark Langer | | Chief Financial Officer | | February 14, 201816, 2022 |
| Mark Langer | | (Principal Financial Officer) | | |
| | | | | |
By: | /s/ Jennifer Holmes | | Chief Accounting Officer | | February 14, 201816, 2022 |
| Jennifer Holmes | | (Principal Accounting Officer) | | |
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By: | /s/ Susan Givens | | Trustee | | February 16, 2022 |
| Susan Givens | | | | |
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By: | /s/ Michael A. Gould | | Trustee | | February 14, 201816, 2022 |
| Michael A. Gould | | | | |
| | | | | |
By: | /s/ Steven H. Grapstein | | Trustee | | February 14, 201816, 2022 |
| Steven H. Grapstein | | | | |
| | | | | |
By: | /s/ Steven J. Guttman | | Trustee | | February 14, 201816, 2022 |
| Steven J. Guttman | | | | |
| | | | | |
By: | /s/ Norman K. Jenkins | | Trustee | | February 16, 2022 |
| Norman K. Jenkins | | | | |
| | | | | |
By: | /s/ Amy B. Lane | | Trustee | | February 14, 201816, 2022 |
| Amy B. Lane | | | | |
| | | | | |
By: | /s/ Kevin P. O’Shea | | Trustee | | February 14, 201816, 2022 |
| Kevin P. O’Shea | | | | |
| | | | | |
By: | /s/ Steven Roth | | Trustee | | February 14, 201816, 2022 |
| Steven Roth | | | | |
| | | | | |
By: | /s/ Douglas W. Sesler | | Trustee | | February 16, 2022 |
| Douglas W. Sesler | | | | |
URBAN EDGE PROPERTIES AND URBAN EDGE PROPERTIES LP
SCHEDULE II- VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
|
| | | | | | | | | | | | | | | | |
Column A | | Column B | | Column C | �� | Column D | | Column E |
Description | | Balance at Beginning of Year | | Additions (Reversals) Expensed | | Uncollectible Accounts Written-Off | | Balance at End of Year |
Year Ended December 31, 2017: | | | | | | | | |
Allowance for doubtful accounts | | $ | 2,593 |
| | $ | 3,445 |
| | $ | (607 | ) | | $ | 5,431 |
|
Year Ended December 31, 2016: | | | | | | | | |
Allowance for doubtful accounts | | 1,926 |
| | 1,214 |
| | (547 | ) | | 2,593 |
|
Year Ended December 31, 2015: | | |
| | |
| | |
| | |
|
Allowance for doubtful accounts | | 2,432 |
| | 1,526 |
| | (2,032 | ) | | 1,926 |
|
URBAN EDGE PROPERTIES AND URBAN EDGE PROPERTIES LP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
(in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Initial cost to company | | | | Gross amount at which carried at close of period | | | | | | |
Description | | Encumbrances | | Land | | Building and improvements | | Costs capitalized subsequent to acquisition | | Land | | Building and improvements | | Total(2) | | Accumulated depreciation and amortization(1) | | Date of construction | | Date acquired |
| | | | | | | | | | | | | | | | | | | | |
SHOPPING CENTERS AND MALLS: | | | | | | | | | | | | |
Baltimore (Towson), MD | | — | | | 581 | | | 3,227 | | | 19,637 | | | 581 | | | 22,864 | | | 23,445 | | | (9,516) | | | 1968 | | 1968 |
Bensalem, PA | | — | | | 2,727 | | | 6,698 | | | 1,610 | | | 2,727 | | | 8,308 | | | 11,035 | | | (4,656) | | | 1972/ 1999 | | 1972 |
Bergen Town Center - East, Paramus, NJ | | — | | | 6,305 | | | 6,824 | | | 41,465 | | | 6,305 | | | 48,289 | | | 54,594 | | | (12,174) | | | 1957/ 2009 | | 2003/ 2019 |
Bergen Town Center - West, Paramus, NJ | | 300,000 | | | 22,930 | | | 89,358 | | | 384,257 | | | 32,371 | | | 464,174 | | | 496,545 | | | (137,991) | | | 1957/ 2009 | | 2003/ 2020 |
Brick, NJ | | 49,554 | | | 1,391 | | | 11,179 | | | 14,579 | | | 1,391 | | | 25,758 | | | 27,149 | | | (17,867) | | | 1968 | | 1968 |
Bronx (Bruckner Boulevard), NY | | — | | | 66,100 | | | 259,503 | | | 3,730 | | | 55,295 | | | 274,038 | | | 329,333 | | | (50,679) | | | N/A | | 2007 |
Bronx (Shops at Bruckner), NY | | 9,698 | | | — | | | 32,979 | | | 5,112 | | | — | | | 38,091 | | | 38,091 | | | (2,895) | | | N/A | | 2017 |
Bronx (1750-1780 Gun Hill Road), NY | | 24,680 | | | 6,427 | | | 11,885 | | | 23,702 | | | 6,428 | | | 35,586 | | | 42,014 | | | (12,985) | | | 2009 | | 2005 |
Brooklyn (Kingswood Center), NY | | 70,815 | | | 15,690 | | | 76,766 | | | (2,096) | | | 15,690 | | | 74,670 | | | 90,360 | | | (4,660) | | | N/A | | 2020 |
Brooklyn (Kingswood Crossing), NY | | — | | | 8,150 | | | 64,159 | | | 1,509 | | | 8,150 | | | 65,668 | | | 73,818 | | | (3,741) | | | N/A | | 2020 |
Broomall, PA | | — | | | 850 | | | 2,171 | | | 8,042 | | | 321 | | | 10,742 | | | 11,063 | | | (1,849) | | | 1966 | | 1966 |
Buffalo (Amherst), NY | | — | | | 5,743 | | | 4,056 | | | 16,578 | | | 5,107 | | | 21,270 | | | 26,377 | | | (11,016) | | | 1968 | | 1968 |
Cambridge (leased through 2033)(3), MA | | — | | | — | | | — | | | 97 | | | — | | | 97 | | | 97 | | | (24) | | | N/A | | 2007 |
Carlstadt (leased through 2050)(3), NJ | | — | | | — | | | 16,458 | | | 137 | | | — | | | 16,595 | | | 16,595 | | | (5,905) | | | N/A | | 2007 |
Charleston (leased through 2063)(3), SC | | — | | | — | | | 3,634 | | | 308 | | | — | | | 3,942 | | | 3,942 | | | (1,442) | | | N/A | | 2006 |
Cherry Hill (Plaza at Cherry Hill), NJ | | 28,244 | | | 14,602 | | | 33,666 | | | (2,679) | | | 14,602 | | | 30,987 | | | 45,589 | | | (6,140) | | | N/A | | 2017 |
Dewitt (leased through 2041)(3), NY | | — | | | — | | | 7,116 | | | — | | | — | | | 7,116 | | | 7,116 | | | (2,787) | | | N/A | | 2006 |
Rockaway, NJ | | 27,800 | | | 559 | | | 6,363 | | | 4,868 | | | 559 | | | 11,231 | | | 11,790 | | | (7,315) | | | 1964 | | 1964 |
East Brunswick, NJ | | 63,000 | | | 2,417 | | | 17,169 | | | 7,524 | | | 2,417 | | | 24,693 | | | 27,110 | | | (19,717) | | | 1957/ 1972 | | 1957/ 1972 |
East Hanover (200 - 240 Route 10 West), NJ | | 63,000 | | | 2,232 | | | 18,241 | | | 16,690 | | | 2,671 | | | 34,492 | | | 37,163 | | | (20,946) | | | 1962 | | 1962/ 1998 |
East Rutherford, NJ | | 23,000 | | | — | | | 36,727 | | | 1,303 | | | — | | | 38,030 | | | 38,030 | | | (10,431) | | | 2007 | | 2007 |
Freeport (Meadowbrook Commons) (leased through 2040)(3), NY | | — | | | — | | | — | | | 927 | | | — | | | 927 | | | 927 | | | (22) | | | N/A | | 2005 |
Freeport (Freeport Commons), NY | | 43,100 | | | 1,231 | | | 4,747 | | | 4,631 | | | 1,593 | | | 9,016 | | | 10,609 | | | (6,839) | | | 1981 | | 1981 |
Garfield, NJ | | 40,300 | | | 45 | | | 8,068 | | | 46,545 | | | 44 | | | 54,614 | | | 54,658 | | | (21,052) | | | 2009 | | 1998 |
Glenarden, MD (Woodmore Towne Centre) | | 117,200 | | | 28,397 | | | 144,834 | | | — | | | 28,397 | | | 144,834 | | | 173,231 | | | (131) | | | N/A | | 2021 |
Glenolden, PA | | — | | | 850 | | | 1,820 | | | 824 | | | 850 | | | 2,644 | | | 3,494 | | | (2,373) | | | 1975 | | 1975 |
Hackensack, NJ | | 66,400 | | | 692 | | | 10,219 | | | 7,601 | | | 692 | | | 17,820 | | | 18,512 | | | (12,415) | | | 1963 | | 1963 |
Hazlet, NJ | | — | | | 7,400 | | | 9,413 | | | (8,028) | | | 5,211 | | | 3,574 | | | 8,785 | | | (79) | | | N/A | | 2007 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Initial cost to company | | | | Gross amount at which carried at close of period | | | | | | |
Description | | Encumbrances | | Land | | Building and improvements | | Costs capitalized subsequent to acquisition | | Land | | Building and improvements | | Total(2) | | Accumulated depreciation and amortization(1) | | Date of construction | | Date acquired |
| | | | | | | | | | | | | | | | | | | | |
SHOPPING CENTERS AND MALLS: | | | | | | | | | | | | |
Allentown, PA | | $ | — |
| | $ | 187 |
| | $ | 15,580 |
| | $(15,767) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | 1957 | | 1957 |
Baltimore (Towson), MD | | — |
| | 581 |
| | 3,227 |
| | 16,616 | | 581 |
| | 19,843 |
| | 20,424 |
| | (6,269 | ) | | 1968 | | 1968 |
Bensalem, PA | | — |
| | 2,727 |
| | 6,698 |
| | 2,042 | | 2,727 |
| | 8,740 |
| | 11,467 |
| | (4,290 | ) | | 1972/ 1999 | | 1972 |
Bergen Town Center - East, Paramus, NJ | | — |
| | 6,305 |
| | — |
| | 38,249 | | 6,305 |
| | 38,249 |
| | 44,554 |
| | (7,456 | ) | | 1957/ 2009 | | 2003 |
Bergen Town Center - West, Paramus, NJ | | 300,000 |
| | 15,812 |
| | 82,240 |
| | 342,842 | | 33,563 |
| | 407,331 |
| | 440,894 |
| | (109,505 | ) | | 1957/ 2009 | | 2003/ 2015 |
Bethlehem, PA | | — |
| | 827 |
| | 5,200 |
| | 1,603 | | 839 |
| | 6,791 |
| | 7,630 |
| | (5,793 | ) | | 1966 | | 1966 |
Brick, NJ | | 50,000 |
| | 1,391 |
| | 11,179 |
| | 9,268 | | 1,391 |
| | 20,447 |
| | 21,838 |
| | (14,550 | ) | | 1968 | | 1968 |
Bronx (Bruckner Boulevard), NY | | — |
| | 66,100 |
| | 259,503 |
| | (29,809) | | 48,889 |
| | 246,904 |
| | 295,793 |
| | (18,281 | ) | | N/A | | 2007 |
Bronx (Shops at Bruckner), NY | | 12,162 |
| | — |
| | 32,979 |
| | — | | — |
| | 32,979 |
| | 32,979 |
| | (1,077 | ) | | N/A | | 2017 |
Bronx (1750-1780 Gun Hill Road), NY | | 24,500 |
| | 6,427 |
| | 11,885 |
| | 22,087 | | 6,428 |
| | 33,972 |
| | 40,400 |
| | (8,325 | ) | | 2009 | | 2005 |
Broomall, PA | | — |
| | 850 |
| | 2,171 |
| | 1,399 | | 850 |
| | 3,570 |
| | 4,420 |
| | (2,842 | ) | | 1966 | | 1966 |
Buffalo (Amherst), NY | | — |
| | 5,743 |
| | 4,056 |
| | 14,068 | | 5,107 |
| | 18,760 |
| | 23,867 |
| | (8,777 | ) | | 1968 | | 1968 |
Cambridge (leased through 2033)(3), MA | | — |
| | — |
| | — |
| | 147 | | — |
| | 147 |
| | 147 |
| | (146 | ) | | N/A | | |
Carlstadt (leased through 2050)(3), NJ | | — |
| | — |
| | 16,458 |
| | 137 | | — |
| | 16,595 |
| | 16,595 |
| | (4,201 | ) | | N/A | | 2007 |
Charleston (leased through 2063)(3), SC | | — |
| | — |
| | 3,634 |
| | — | | — |
| | 3,634 |
| | 3,634 |
| | (1,022 | ) | | N/A | | 2006 |
Cherry Hill (Cherry Hill Commons), NJ | | — |
| | 5,864 |
| | 2,694 |
| | 5,408 | | 4,864 |
| | 9,102 |
| | 13,966 |
| | (4,694 | ) | | 1964 | | 1964 |
Cherry Hill (Plaza at Cherry Hill), NJ | | 28,930 |
| | 14,602 |
| | 33,666 |
| | (465) | | 14,602 |
| | 33,201 |
| | 47,803 |
| | (1,409 | ) | | N/A | | 2017 |
Chicopee, MA | | — |
| | 895 |
| | — |
| | — | | 895 |
| | — |
| | 895 |
| | — |
| | 1969 | | 1969 |
Commack (leased through 2021)(3), NY | | — |
| | — |
| | 43 |
| | 184 | | — |
| | 227 |
| | 227 |
| | (215 | ) | | N/A | | 2006 |
Dewitt (leased through 2041)(3), NY | | — |
| | — |
| | 7,116 |
| | — | | — |
| | 7,116 |
| | 7,116 |
| | (1,981 | ) | | N/A | | 2006 |
Rockaway, NJ | | 27,800 |
| | 559 |
| | 6,363 |
| | 4,515 | | 559 |
| | 10,879 |
| | 11,438 |
| | (6,117 | ) | | 1964 | | 1964 |
East Brunswick, NJ | | 63,000 |
| | 2,417 |
| | 17,169 |
| | 7,475 | | 2,417 |
| | 24,644 |
| | 27,061 |
| | (17,559 | ) | | 1957/ 1972 | | 1957/ 1972 |
East Hanover (200 - 240 Route 10 West), NJ | | 63,000 |
| | 2,232 |
| | 18,241 |
| | 19,027 | | 2,671 |
| | 36,829 |
| | 39,500 |
| | (16,928 | ) | | 1962 | | 1962/ 1998 |
East Hanover (280 Route 10 West), NJ | | — |
| | — |
| | — |
| | 7,075 | | — |
| | 7,075 |
| | 7,075 |
| | (2,251 | ) | | N/A | | |
East Rutherford, NJ | | 23,000 |
| | — |
| | 36,727 |
| | 274 | | — |
| | 37,001 |
| | 37,001 |
| | (7,392 | ) | | 2007 | | 2007 |
Englewood, NJ | | 11,537 |
| | 2,300 |
| | 17,245 |
| | (8,390) | | 1,495 |
| | 9,660 |
| | 11,155 |
| | (1,410 | ) | | N/A | | 2007 |
Freeport (240 West Sunrise Highway) (leased through 2040)(3), NY | | — |
| | — |
| | — |
| | 260 | | — |
| | 260 |
| | 260 |
| | (217 | ) | | N/A | | 2005 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Initial cost to company | | | | Gross amount at which carried at close of period | | | | | | |
Description | | Encumbrances | | Land | | Building and improvements | | Costs capitalized subsequent to acquisition | | Land | | Building and improvements | | Total(2) | | Accumulated depreciation and amortization(1) | | Date of construction | | Date acquired |
| | | | | | | | | | | | | | | | | | | | |
Huntington, NY | | — | | | 21,200 | | | 33,667 | | | 17,005 | | | 11,332 | | | 60,540 | | | 71,872 | | | (8,239) | | | N/A | | 2007 |
Inwood, NY | | — | | | 12,419 | | | 19,097 | | | 2,829 | | | 12,419 | | | 21,926 | | | 34,345 | | | (9,786) | | | N/A | | 2004 |
Jersey City (Hudson Commons), NJ | | 28,034 | | | 652 | | | 7,495 | | | 1,130 | | | 652 | | | 8,625 | | | 9,277 | | | (4,231) | | | 1965 | | 1965 |
Jersey City (Hudson Mall), NJ | | 22,154 | | | 15,824 | | | 37,593 | | | (3,267) | | | 14,289 | | | 35,861 | | | 50,150 | | | (6,951) | | | N/A | | 2017 |
Kearny, NJ | | — | | | 309 | | | 3,376 | | | 18,287 | | | 296 | | | 21,676 | | | 21,972 | | | (7,232) | | | 1938 | | 1959 |
Lancaster, PA | | — | | | 3,140 | | | 63 | | | 2,059 | | | 3,140 | | | 2,122 | | | 5,262 | | | (1,135) | | | 1966 | | 1966 |
Las Catalinas, Puerto Rico | | 123,977 | | | 15,280 | | | 64,370 | | | 5,740 | | | 11,490 | | | 73,900 | | | 85,390 | | | (34,602) | | | 1996 | | 2002 |
Lodi (Washington Street), NJ | | — | | | 7,606 | | | 13,125 | | | (8,813) | | | 3,823 | | | 8,095 | | | 11,918 | | | (3,217) | | | N/A | | 2004 |
Manalapan, NJ | | — | | | 725 | | | 7,189 | | | 7,240 | | | 1,046 | | | 14,108 | | | 15,154 | | | (10,605) | | | 1971 | | 1971 |
Manchester, MO | | 12,500 | | | 4,409 | | | 13,756 | | | (6,799) | | | 2,858 | | | 8,508 | | | 11,366 | | | (708) | | | N/A | | 2017 |
Marlton, NJ | | 37,400 | | | 1,611 | | | 3,464 | | | 14,759 | | | 1,454 | | | 18,380 | | | 19,834 | | | (13,006) | | | 1973 | | 1973 |
Massapequa, (portion leased through 2069)(3), NY | | — | | | 44,035 | | | 3,084 | | | 29,423 | | | 30,077 | | | 46,465 | | | 76,542 | | | (56) | | | N/A | | 2020 |
Middletown, NJ | | 31,400 | | | 283 | | | 5,248 | | | 2,869 | | | 283 | | | 8,117 | | | 8,400 | | | (6,902) | | | 1963 | | 1963 |
Millburn, NJ | | 22,944 | | | 15,783 | | | 25,837 | | | (578) | | | 15,783 | | | 25,259 | | | 41,042 | | | (4,414) | | | N/A | | 2017 |
Montclair, NJ | | 7,250 | | | 66 | | | 419 | | | 472 | | | 66 | | | 891 | | | 957 | | | (776) | | | 1972 | | 1972 |
Montehiedra, Puerto Rico | | 79,381 | | | 9,182 | | | 66,751 | | | 30,012 | | | 7,951 | | | 97,994 | | | 105,945 | | | (52,018) | | | 1996/ 2015 | | 1997 |
Morris Plains, NJ | | — | | | 1,104 | | | 6,411 | | | 18,339 | | | 1,082 | | | 24,772 | | | 25,854 | | | (8,426) | | | 1961 | | 1985 |
Mount Kisco, NY | | 12,377 | | | 22,700 | | | 26,700 | | | 4,403 | | | 23,297 | | | 30,506 | | | 53,803 | | | (9,877) | | | N/A | | 2007 |
New Hyde Park (leased through 2029)(3), NY | | — | | | — | | | 4 | | | — | | | — | | | 4 | | | 4 | | | (4) | | | 1970 | | 1976 |
Newington, CT | | — | | | 2,421 | | | 1,200 | | | 1,658 | | | 2,421 | | | 2,858 | | | 5,279 | | | (1,460) | | | 1965 | | 1965 |
Norfolk (leased through 2069)(3), VA | | — | | | — | | | 3,927 | | | 15 | | | — | | | 3,942 | | | 3,942 | | | (3,937) | | | N/A | | 2005 |
North Bergen (Kennedy Boulevard), NJ | | — | | | 2,308 | | | 636 | | | 261 | | | 2,308 | | | 897 | | | 3,205 | | | (699) | | | 1993 | | 1959 |
North Bergen (Tonnelle Avenue), NJ | | 100,000 | | | 24,978 | | | 10,462 | | | 67,385 | | | 33,211 | | | 69,614 | | | 102,825 | | | (21,231) | | | 2009 | | 2006 |
North Plainfield, NJ | | 25,100 | | | 6,577 | | | 13,983 | | | 795 | | | 6,577 | | | 14,778 | | | 21,355 | | | (5,518) | | | 1955 | | 1989 |
Paramus (leased through 2033)(3), NJ | | — | | | — | | | — | | | 12,569 | | | — | | | 12,569 | | | 12,569 | | | (6,151) | | | 1957/ 2009 | | 2003 |
Queens, NY | | — | | | 14,537 | | | 12,304 | | | 4,284 | | | 14,537 | | | 16,588 | | | 31,125 | | | (2,832) | | | N/A | | 2015 |
Rochester (Henrietta) (leased through 2056)(3), NY | | — | | | — | | | 2,647 | | | 1,181 | | | — | | | 3,828 | | | 3,828 | | | (3,634) | | | 1971 | | 1971 |
Rockville, MD | | — | | | 3,470 | | | 20,599 | | | 3,262 | | | 3,470 | | | 23,861 | | | 27,331 | | | (10,523) | | | N/A | | 2005 |
Revere (Wonderland), MA | | — | | | 6,323 | | | 17,130 | | | 28 | | | 6,323 | | | 17,158 | | | 23,481 | | | (2,396) | | | N/A | | 2019 |
Salem (leased through 2102)(3), NH | | — | | | 6,083 | | | — | | | (1,823) | | | 2,994 | | | 1,266 | | | 4,260 | | | (24) | | | N/A | | 2006 |
South Plainfield (leased through 2039)(3), NJ | | — | | | — | | | 10,044 | | | 1,926 | | | — | | | 11,970 | | | 11,970 | | | (4,409) | | | N/A | | 2007 |
Springfield (leased through 2025)(3), PA | | — | | | — | | | — | | | 80 | | | — | | | 80 | | | 80 | | | (80) | | | N/A | | 2005 |
Staten Island, NY | | — | | | 11,446 | | | 21,262 | | | 5,072 | | | 11,446 | | | 26,334 | | | 37,780 | | | (11,973) | | | N/A | | 2004 |
Totowa, NJ | | 50,800 | | | 120 | | | 11,994 | | | 5,024 | | | 92 | | | 17,046 | | | 17,138 | | | (15,322) | | | 1957/ 1999 | | 1957 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Initial cost to company | | | | Gross amount at which carried at close of period | | | | | | |
Description | | Encumbrances | | Land | | Building and improvements | | Costs capitalized subsequent to acquisition | | Land | | Building and improvements | | Total(2) | | Accumulated depreciation and amortization(1) | | Date of construction | | Date acquired |
| | | | | | | | | | | | | | | | | | | | |
Freeport (437 East Sunrise Highway), NY | | 43,100 |
| | 1,231 |
| | 4,747 |
| | 4,311 | | 1,231 |
| | 9,058 |
| | 10,289 |
| | (6,222 | ) | | 1981 | | 1981 |
Garfield, NJ | | 40,300 |
| | 45 |
| | 8,068 |
| | 41,981 | | 45 |
| | 50,050 |
| | 50,095 |
| | (12,189 | ) | | 2009 | | 1998 |
Glen Burnie, MD | | — |
| | 462 |
| | 2,571 |
| | 2,481 | | 462 |
| | 5,052 |
| | 5,514 |
| | (3,462 | ) | | 1958 | | 1958 |
Glenolden, PA | | — |
| | 850 |
| | 1,820 |
| | 728 | | 850 |
| | 2,548 |
| | 3,398 |
| | (2,256 | ) | | 1975 | | 1975 |
Hackensack, NJ | | 66,400 |
| | 692 |
| | 10,219 |
| | 5,607 | | 542 |
| | 15,976 |
| | 16,518 |
| | (9,939 | ) | | 1963 | | 1963 |
Hazlet, NJ | | — |
| | 7,400 |
| | 9,413 |
| | (2,145) | | 7,400 |
| | 7,268 |
| | 14,668 |
| | (1,917 | ) | | N/A | | 2007 |
Huntington, NY | | — |
| | 21,200 |
| | 33,667 |
| | 4,072 | | 21,200 |
| | 37,739 |
| | 58,939 |
| | (9,196 | ) | | N/A | | 2007 |
Inwood, NY | | — |
| | 12,419 |
| | 19,097 |
| | 2,856 | | 12,419 |
| | 21,953 |
| | 34,372 |
| | (6,974 | ) | | N/A | | 2004 |
Jersey City (Hudson Commons), NJ | | 29,000 |
| | 652 |
| | 7,495 |
| | 950 | | 652 |
| | 8,445 |
| | 9,097 |
| | (3,376 | ) | | 1965 | | 1965 |
Jersey City (Hudson Mall), NJ | | 25,004 |
| | 15,824 |
| | 37,593 |
| | 184 | | 15,824 |
| | 37,777 |
| | 53,601 |
| | (1,878 | ) | | N/A | | 2017 |
Kearny, NJ | | — |
| | 309 |
| | 3,376 |
| | 7,997 | | 296 |
| | 11,386 |
| | 11,682 |
| | (4,254 | ) | | 1938 | | 1959 |
Lancaster, PA | | — |
| | 3,140 |
| | 63 |
| | 2,129 | | 3,140 |
| | 2,192 |
| | 5,332 |
| | (779 | ) | | 1966 | | 1966 |
Las Catalinas, Puerto Rico | | 130,000 |
| | 15,280 |
| | 64,370 |
| | 14,414 | | 15,280 |
| | 78,784 |
| | 94,064 |
| | (36,399 | ) | | 1996 | | 2002 |
Lawnside, NJ | | — |
| | 1,226 |
| | 3,164 |
| | 1,417 | | 851 |
| | 4,956 |
| | 5,807 |
| | (3,789 | ) | | 1969 | | 1969/ 2015 |
Lodi (Route 17 North), NJ | | — |
| | 238 |
| | 9,446 |
| | 36 | | 238 |
| | 9,483 |
| | 9,721 |
| | (4,308 | ) | | 1999 | | 1975 |
Lodi (Washington Street), NJ | | — |
| | 7,606 |
| | 13,125 |
| | 2,678 | | 7,606 |
| | 15,804 |
| | 23,410 |
| | (4,839 | ) | | N/A | | 2004 |
Manalapan, NJ | | — |
| | 725 |
| | 7,189 |
| | 6,857 | | 1,046 |
| | 13,725 |
| | 14,771 |
| | (9,430 | ) | | 1971 | | 1971 |
Manchester, MO | | 12,500 |
| | 4,409 |
| | 13,756 |
| | 704 | | 4,409 |
| | 14,460 |
| | 18,869 |
| | (322 | ) | | N/A | | 2017 |
Marlton, NJ | | 37,400 |
| | 1,611 |
| | 3,464 |
| | 13,557 | | 1,454 |
| | 17,178 |
| | 18,632 |
| | (10,408 | ) | | 1973 | | 1973 |
Middletown, NJ | | 31,400 |
| | 283 |
| | 5,248 |
| | 3,127 | | 283 |
| | 8,375 |
| | 8,658 |
| | (6,414 | ) | | 1963 | | 1963 |
Milford (leased through 2019)(3), MA | | — |
| | — |
| | — |
| | — | | — |
| | — |
| | — |
| | — |
| | N/A | | 1976 |
Millburn, NJ | | 24,000 |
| | 15,783 |
| | 25,837 |
| | (928) | | 15,783 |
| | 24,909 |
| | 40,692 |
| | (840 | ) | | N/A | | 2017 |
Montclair, NJ | | — |
| | 66 |
| | 419 |
| | 434 | | 66 |
| | 853 |
| | 919 |
| | (724 | ) | | 1972 | | 1972 |
Montehiedra, Puerto Rico | | 116,236 |
| | 9,182 |
| | 66,751 |
| | 24,170 | | 9,267 |
| | 90,837 |
| | 100,104 |
| | (39,203 | ) | | 1996/ 2015 | | 1997 |
Morris Plains, NJ | | — |
| | 1,104 |
| | 6,411 |
| | 2,189 | | 1,104 |
| | 8,601 |
| | 9,705 |
| | (7,165 | ) | | 1961 | | 1985 |
Mount Kisco, NY | | 14,451 |
| | 22,700 |
| | 26,700 |
| | 1,960 | | 23,297 |
| | 28,063 |
| | 51,360 |
| | (6,960 | ) | | N/A | | 2007 |
New Hyde Park (leased through 2029)(3), NY | | — |
| | — |
| | 4 |
| | — | | — |
| | 4 |
| | 4 |
| | (4 | ) | | 1970 | | 1976 |
Newington, CT | | — |
| | 2,421 |
| | 1,200 |
| | 2,049 | | 2,421 |
| | 3,249 |
| | 5,670 |
| | (1,224 | ) | | 1965 | | 1965 |
Norfolk (leased through 2069)(3), VA | | — |
| | — |
| | 3,927 |
| | 15 | | — |
| | 3,942 |
| | 3,942 |
| | (3,486 | ) | | N/A | | 2005 |
North Bergen (Kennedy Boulevard), NJ | | — |
| | 2,308 |
| | 636 |
| | 175 | | 2,308 |
| | 810 |
| | 3,118 |
| | (534 | ) | | 1993 | | 1959 |
North Bergen (Tonnelle Avenue), NJ | | 100,000 |
| | 24,493 |
| | — |
| | 66,789 | | 34,473 |
| | 56,809 |
| | 91,282 |
| | (14,577 | ) | | 2009 | | 2006 |
North Plainfield, NJ | | 25,100 |
| | 6,577 |
| | 13,983 |
| | 588 | | 6,577 |
| | 14,571 |
| | 21,148 |
| | (3,527 | ) | | 1955 | | 1989 |
Oceanside, NY | | — |
| | 2,710 |
| | 2,306 |
| | — | | 2,710 |
| | 2,306 |
| | 5,016 |
| | (610 | ) | | N/A | | 2007 |
Paramus (leased through 2033)(3), NJ | | — |
| | — |
| | — |
| | 12,569 | | — |
| | 12,569 |
| | 12,569 |
| | (3,696 | ) | | 1957/ 2009 | | 2003 |
Queens, NY | | — |
| | 14,537 |
| | 12,304 |
| | 1,589 | | 14,537 |
| | 13,892 |
| | 28,429 |
| | (790 | ) | | N/A | | 2015 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Initial cost to company | | | | Gross amount at which carried at close of period | | | | | | |
Description | | Encumbrances | | Land | | Building and improvements | | Costs capitalized subsequent to acquisition | | Land | | Building and improvements | | Total(2) | | Accumulated depreciation and amortization(1) | | Date of construction | | Date acquired |
| | | | | | | | | | | | | | | | | | | | |
Union (2445 Springfield Avenue), NJ | | 45,600 | | | 19,700 | | | 45,090 | | | — | | | 19,700 | | | 45,090 | | | 64,790 | | | (16,439) | | | N/A | | 2007 |
Union (Route 22 and Morris Avenue), NJ | | — | | | 3,025 | | | 7,470 | | | 7,192 | | | 3,025 | | | 14,662 | | | 17,687 | | | (6,561) | | | 1962 | | 1962 |
Walnut Creek (1149 South Main Street), CA | | — | | | 2,699 | | | 19,930 | | | (1,003) | | | 2,699 | | | 18,927 | | | 21,626 | | | (3,559) | | | N/A | | 2006 |
Walnut Creek (Mt. Diablo), CA | | — | | | 5,909 | | | — | | | 1,784 | | | — | | | 7,693 | | | 7,693 | | | — | | | N/A | | 2007 |
Watchung, NJ | | 26,097 | | | 4,178 | | | 5,463 | | | 2,929 | | | 4,441 | | | 8,129 | | | 12,570 | | | (6,638) | | | 1994 | | 1959 |
Wheaton (leased through 2060)(3), MD | | — | | | — | | | 5,367 | | | — | | | — | | | 5,367 | | | 5,367 | | | (2,046) | | | N/A | | 2006 |
Wilkes-Barre (461 - 499 Mundy Street), PA | | — | | | 6,053 | | | 26,646 | | | (15,463) | | | 2,823 | | | 14,413 | | | 17,236 | | | (264) | | | N/A | | 2007 |
Woodbridge (Woodbridge Commons), NJ | | 22,100 | | | 1,509 | | | 2,675 | | | 5,637 | | | 1,539 | | | 8,282 | | | 9,821 | | | (4,013) | | | 1959 | | 1959 |
Woodbridge (Plaza at Woodbridge), NJ | | 54,029 | | | 21,547 | | | 75,017 | | | 8,498 | | | 21,547 | | | 83,515 | | | 105,062 | | | (10,870) | | | N/A | | 2017 |
Wyomissing (leased through 2065)(3), PA | | — | | | — | | | 2,646 | | | 403 | | | — | | | 3,049 | | | 3,049 | | | (2,655) | | | N/A | | 2005 |
Yonkers, NY | | 26,774 | | | 63,341 | | | 110,635 | | | 14,596 | | | 65,940 | | | 122,632 | | | 188,572 | | | (16,782) | | | N/A | | 2017 |
| | | | | | | | | | | | | | | | | | | | |
INDUSTRIAL: | | | | | | | | | | | | | | | | | | | | |
East Hanover, NJ(4) | | 40,700 | | | 5,589 | | | 57,485 | | | 30,750 | | | 5,756 | | | 88,068 | | | 93,824 | | | (22,177) | | | 1972 | | 1972 / 2021 |
Lodi (Route 17 North), NJ | | — | | | 238 | | | 9,446 | | | 4,212 | | | 238 | | | 13,658 | | | 13,896 | | | (127) | | | 1999 | | 1975 |
| | | | | | | | | | | | | | | | | | | | |
TOTAL UE PROPERTIES | | 1,695,408 | | | 583,698 | | | 1,718,987 | | | 895,235 | | | 543,827 | | | 2,654,093 | | | 3,197,920 | | | (752,152) | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Leasehold Improvements, Equipment and Other | | — | | | — | | | — | | | 7,530 | | | — | | | 7,530 | | | 7,530 | | | (1,795) | | | | | |
| | | | | | | | | | | | | | | | | | | | |
TOTAL | | $ | 1,695,408 | | | $ | 583,698 | | | $ | 1,718,987 | | | $ | 902,765 | | | $ | 543,827 | | | $ | 2,661,623 | | | $ | 3,205,450 | | | $ | (753,947) | | | | | |
(1)Depreciation of the buildings and improvements are calculated over lives ranging from one to forty years.
(2)Adjusted tax basis for federal income tax purposes was $1.8 billion as of December 31, 2021.
(3)The Company is a lessee under a ground or building lease. The building will revert to the lessor upon lease expiration.
(4)The increase in initial cost to the Company is due to the acquisitions of 151 Ridgedale Avenue and 601 Murray Road.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Initial cost to company | | | | Gross amount at which carried at close of period | | | | | | |
Description | | Encumbrances | | Land | | Building and improvements | | Costs capitalized subsequent to acquisition | | Land | | Building and improvements | | Total(2) | | Accumulated depreciation and amortization(1) | | Date of construction | | Date acquired |
| | | | | | | | | | | | | | | | | | | | |
Rochester (Henrietta) (leased through 2056)(3), NY | | — |
| | — |
| | 2,647 |
| | 1,259 | | — |
| | 3,906 |
| | 3,906 |
| | (3,544 | ) | | 1971 | | 1971 |
Rochester, NY | | — |
| | 2,172 |
| | — |
| | — | | 2,172 |
| | — |
| | 2,172 |
| | — |
| | 1966 | | 1966 |
Rockville, MD | | — |
| | 3,470 |
| | 20,599 |
| | 2,575 | | 3,470 |
| | 23,175 |
| | 26,645 |
| | (7,296 | ) | | N/A | | 2005 |
Salem (leased through 2102)(3), NH | | — |
| | 6,083 |
| | — |
| | — | | 6,083 |
| | — |
| | 6,083 |
| | — |
| | N/A | | 2006 |
Signal Hill, CA | | — |
| | 9,652 |
| | 2,940 |
| | 1 | | 9,652 |
| | 2,941 |
| | 12,593 |
| | (827 | ) | | N/A | | 2006 |
South Plainfield (leased through 2039)(3), NJ | | — |
| | — |
| | 10,044 |
| | 2,286 | | — |
| | 12,330 |
| | 12,330 |
| | (3,347 | ) | | N/A | | 2007 |
Springfield, MA | | — |
| | — |
| | — |
| | 80 | | — |
| | 80 |
| | 80 |
| | (80 | ) | | N/A | | 2005 |
Springfield (leased through 2025)(3), PA | | — |
| | 2,797 |
| | 2,471 |
| | 494 | | 2,797 |
| | 2,965 |
| | 5,762 |
| | (1,226 | ) | | 1993 | | 1966 |
Staten Island, NY | | — |
| | 11,446 |
| | 21,262 |
| | 4,216 | | 11,446 |
| | 25,478 |
| | 36,924 |
| | (8,543 | ) | | N/A | | 2004 |
Totowa, NJ | | 50,800 |
| | 120 |
| | 11,994 |
| | 5,541 | | 92 |
| | 17,563 |
| | 17,655 |
| | (14,197 | ) | | 1957/ 1999 | | 1957 |
Turnersville, NJ | | — |
| | 900 |
| | 1,342 |
| | 3,048 | | 900 |
| | 4,389 |
| | 5,289 |
| | (2,274 | ) | | 1974 | | 1974 |
Tyson’s Corner (leased through 2035)(3), VA | | — |
| | — |
| | — |
| | — | | — |
| | — |
| | — |
| | — |
| | N/A | | 2006 |
Union (2445 Springfield Avenue), NJ | | 45,600 |
| | 19,700 |
| | 45,090 |
| | — | | 19,700 |
| | 45,090 |
| | 64,790 |
| | (11,930 | ) | | N/A | | 2007 |
Union (Route 22 and Morris Avenue), NJ | | — |
| | 3,025 |
| | 7,470 |
| | 3,758 | | 3,025 |
| | 11,228 |
| | 14,253 |
| | (6,337 | ) | | 1962 | | 1962 |
Vallejo (leased through 2043)(3), CA | | — |
| | — |
| | 2,945 |
| | 221 | | — |
| | 3,166 |
| | 3,166 |
| | (968 | ) | | N/A | | 2006 |
Walnut Creek (1149 South Main Street), CA | | — |
| | 2,699 |
| | 19,930 |
| | (1,043) | | 2,699 |
| | 18,887 |
| | 21,586 |
| | (887 | ) | | N/A | | 2006 |
Walnut Creek (Mt. Diablo), CA | | — |
| | 5,909 |
| | — |
| | 1,539 | | 5,908 |
| | 1,540 |
| | 7,448 |
| | (207 | ) | | N/A | | 2007 |
Watchung, NJ | | 27,000 |
| | 4,178 |
| | 5,463 |
| | 2,945 | | 4,441 |
| | 8,145 |
| | 12,586 |
| | (5,308 | ) | | 1994 | | 1959 |
West Babylon, NY | | — |
| | 6,720 |
| | 13,786 |
| | 2,105 | | 6,720 |
| | 15,891 |
| | 22,611 |
| | (3,537 | ) | | N/A | | 2007 |
Westfield, NJ | | 4,730 |
| | 5,728 |
| | 4,305 |
| | (97) | | 5,728 |
| | 4,208 |
| | 9,936 |
| | (109 | ) | | N/A | | 2017 |
Wheaton (leased through 2060)(3), MD | | — |
| | — |
| | 5,367 |
| | — | | — |
| | 5,367 |
| | 5,367 |
| | (1,509 | ) | | N/A | | 2006 |
Wilkes-Barre (461 - 499 Mundy Street), PA | | — |
| | 6,053 |
| | 26,646 |
| | 1,614 | | 6,053 |
| | 28,260 |
| | 34,313 |
| | (7,283 | ) | | N/A | | 2007 |
Woodbridge (Woodbridge Commons), NJ | | 22,100 |
| | 1,509 |
| | 2,675 |
| | 2,908 | | 1,539 |
| | 5,553 |
| | 7,092 |
| | (2,919 | ) | | 1959 | | 1959 |
Woodbridge (Plaza at Woodbridge), NJ | | 55,340 |
| | 21,547 |
| | 75,017 |
| | (829) | | 21,547 |
| | 74,188 |
| | 95,735 |
| | (2,327 | ) | | N/A | | 2017 |
Wyomissing (leased through 2065)(3), PA | | — |
| | — |
| | 2,646 |
| | 1,869 | | — |
| | 4,515 |
| | 4,515 |
| | (3,612 | ) | | N/A | | 2005 |
Yonkers, NY | | 33,227 |
| | 63,341 |
| | 110,635 |
| | 6,175 | | 64,643 |
| | 115,508 |
| | 180,151 |
| | — |
| | N/A | | 2017 |
York, PA | | — |
| | 409 |
| | 2,568 |
| | 2,097 | | 409 |
| | 4,665 |
| | 5,074 |
| | (6,154 | ) | | 1970 | | 1970 |
| | | | | | | | | | | | | |
|
| | | | | | |
WAREHOUSES: | | | | | | | | | | | | | |
|
| | | | | | |
East Hanover - Five Buildings, NJ | | 40,700 |
| | 576 |
| | 7,752 |
| | 30,033 | | 691 |
| | 37,670 |
| | 38,361 |
| | (17,243 | ) | | 1972 | | 1972 |
| | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Initial cost to company | | | | Gross amount at which carried at close of period | | | | | | |
Description | | Encumbrances | | Land | | Building and improvements | | Costs capitalized subsequent to acquisition | | Land | | Building and improvements | | Total(2) | | Accumulated depreciation and amortization(1) | | Date of construction | | Date acquired |
| | | | | | | | | | | | | | | | | | | | |
TOTAL UE PROPERTIES | | 1,578,317 |
|
| 511,336 |
|
| 1,418,037 |
|
| 736,580 |
|
| 521,669 |
|
| 2,144,288 |
| | 2,665,957 |
| | (586,062 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | |
Leasehold Improvements, Equipment and Other | | — |
| | — |
| | — |
| | 5,897 |
| | — |
| | 5,897 |
| | 5,897 |
| | (1,065 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | |
TOTAL | | $ | 1,578,317 |
|
| $ | 511,336 |
|
| $ | 1,418,037 |
|
| $ | 742,477 |
|
| $ | 521,669 |
|
| $ | 2,150,185 |
| | $ | 2,671,854 |
| | $ | (587,127 | ) | | | | |
| |
(1)
| Depreciation of the buildings and improvements are calculated over lives ranging from the life of the lease to forty years. |
| |
(2)
| Adjusted tax basis for federal income tax purposes was $1.5 billion as of December 31, 2017. |
| |
(3)
| The Company is a lessee under a ground or building lease. The building will revert to the lessor upon lease expiration. |
URBAN EDGE PROPERTIES AND URBAN EDGE PROPERTIES LP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
(Amounts in thousands)
The following is a reconciliation of real estate assets and accumulated depreciation:
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
Real Estate | | | | | | |
Balance at beginning of period | | $ | 2,946,817 | | | $ | 2,748,785 | | | $ | 2,768,992 | |
Additions during the period: | | | | | | |
Land | | 33,473 | | | 68,536 | | | 13,441 | |
Buildings & improvements | | 200,289 | | | 145,800 | | | 31,806 | |
Construction in progress | | 97,401 | | | 27,550 | | | 61,641 | |
| | 3,277,980 | | | 2,990,671 | | | 2,875,880 | |
Less: Impairments, assets sold, written-off or reclassified as held for sale | | (72,530) | | | (43,854) | | | (127,095) | |
Balance at end of period | | $ | 3,205,450 | | | $ | 2,946,817 | | | $ | 2,748,785 | |
Accumulated Depreciation | | | | | | |
Balance at beginning of period | | $ | 730,366 | | | $ | 671,946 | | | $ | 645,872 | |
Additions charged to operating expenses | | 80,288 | | | 81,691 | | | 80,774 | |
| | 810,654 | | | 753,637 | | | 726,646 | |
Less: Accumulated depreciation on assets sold, written-off or reclassified as held for sale | | (56,707) | | | (23,271) | | | (54,700) | |
Balance at end of period | | $ | 753,947 | | | $ | 730,366 | | | $ | 671,946 | |
|
| | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2017 | | 2016 | | 2015 |
Real Estate | | | | | | |
|
Balance at beginning of period | | $ | 2,138,500 |
| | $ | 2,084,642 |
| | $ | 2,022,804 |
|
Additions during the period: | | | | | | |
|
Land | | 142,305 |
| | 2,667 |
| | 10,984 |
|
Buildings & improvements | | 389,338 |
| | 18,316 |
| | 8,840 |
|
Construction in progress | | 34,525 |
| | 47,234 |
| | 52,602 |
|
| | 2,704,668 |
| | 2,152,859 |
| | 2,095,230 |
|
Less: Impairments and assets sold or written-off | | (32,814 | ) | | (14,359 | ) | | (10,588 | ) |
Balance at end of period | | $ | 2,671,854 |
| | $ | 2,138,500 |
| | $ | 2,084,642 |
|
Accumulated Depreciation | | | | | | |
|
Balance at beginning of period | | $ | 541,077 |
| | $ | 509,112 |
| | $ | 467,503 |
|
Additions charged to operating expenses | | 65,140 |
| | 42,989 |
| | 52,197 |
|
| | 606,217 |
| | 552,101 |
| | 519,700 |
|
Less: Accumulated depreciation on assets written-off | | (19,090 | ) | | (11,024 | ) | | (10,588 | ) |
Balance at end of period | | $ | 587,127 |
| | $ | 541,077 |
| | $ | 509,112 |
|