UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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| | | | | | | |
x☒ | | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended SeptemberJune 30, 20172021
or
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o☐ | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-35481
RETAIL PROPERTIES OF AMERICA, INC.
(Exact name of registrant as specified in its charter)
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| | | | | | | | | | | | | | | | |
Maryland | | 42-1579325 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
| | |
2021 Spring Road, Suite 200, Oak Brook, Illinois | | 60523 |
(Address of principal executive offices) | | (Zip Code) |
2021 Spring Road, Suite 200, Oak Brook, Illinois 60523
(630)Address of principal executive offices) (Zip Code)
(630) 634-4200
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Class A Common Stock, $0.001 par value | | RPAI | | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | x | | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | | Smaller reporting company | ☐ |
| | |
Large accelerated filer x
| | Accelerated filer o
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| | |
Non-accelerated filer o
| | Smaller reporting company o
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(Do not check if a smaller reporting company) | | Emerging growth companyo | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No x
Number of shares outstanding of the registrant’s classesclass of common stock as of October 27, 2017:July 30, 2021:
Class A common stock: 227,100,049214,797,869 shares
RETAIL PROPERTIES OF AMERICA, INC.
TABLE OF CONTENTS
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RETAIL PROPERTIES OF AMERICA, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except par value amounts)
| | | | September 30, 2017 | | December 31, 2016 | | June 30, 2021 | | December 31, 2020 |
Assets | | | | | Assets | | | |
Investment properties: | | | | | Investment properties: | | | |
Land | | $ | 1,090,790 |
| | $ | 1,191,403 |
| Land | $ | 1,073,449 | | | $ | 1,075,037 | |
Building and other improvements | | 3,773,266 |
| | 4,284,664 |
| Building and other improvements | 3,610,901 | | | 3,590,495 | |
Developments in progress | | 31,083 |
| | 23,439 |
| Developments in progress | 182,979 | | | 188,556 | |
| | 4,895,139 |
| | 5,499,506 |
| | 4,867,329 | | | 4,854,088 | |
Less accumulated depreciation | | (1,250,619 | ) | | (1,443,333 | ) | |
Net investment properties | | 3,644,520 |
| | 4,056,173 |
| |
Less: accumulated depreciation | | Less: accumulated depreciation | (1,572,604) | | | (1,514,440) | |
Net investment properties (includes $93,186 and $74,314 from consolidated variable interest entities, respectively) | | Net investment properties (includes $93,186 and $74,314 from consolidated variable interest entities, respectively) | 3,294,725 | | | 3,339,648 | |
Cash and cash equivalents | | 29,652 |
| | 53,119 |
| Cash and cash equivalents | 67,245 | | | 41,785 | |
Accounts and notes receivable (net of allowances of $6,421 and $6,886, respectively) | | 72,496 |
| | 78,941 |
| |
Accounts receivable, net | | Accounts receivable, net | 69,494 | | | 73,983 | |
Acquired lease intangible assets, net | | 126,487 |
| | 142,015 |
| Acquired lease intangible assets, net | 60,666 | | | 66,799 | |
Right-of-use lease assets | | Right-of-use lease assets | 41,855 | | | 42,768 | |
Assets associated with investment properties held for sale | | 64,673 |
| | 30,827 |
| Assets associated with investment properties held for sale | 13,800 | | | 0 | |
Other assets, net | | 131,265 |
| | 91,898 |
| |
Other assets, net (includes $647 and $354 from consolidated variable interest entities, respectively) | | Other assets, net (includes $647 and $354 from consolidated variable interest entities, respectively) | 67,973 | | | 72,220 | |
Total assets | | $ | 4,069,093 |
| | $ | 4,452,973 |
| Total assets | $ | 3,615,758 | | | $ | 3,637,203 | |
| | | | | | | | |
Liabilities and Equity | | | | | Liabilities and Equity | | | |
Liabilities: | | | | | Liabilities: | | | |
Mortgages payable, net | | $ | 288,100 |
| | $ | 769,184 |
| Mortgages payable, net | $ | 90,374 | | | $ | 91,514 | |
Unsecured notes payable, net | | 695,595 |
| | 695,143 |
| Unsecured notes payable, net | 1,187,044 | | | 1,186,000 | |
Unsecured term loans, net | | 546,914 |
| | 447,598 |
| Unsecured term loans, net | 467,895 | | | 467,559 | |
Unsecured revolving line of credit | | 187,000 |
| | 86,000 |
| Unsecured revolving line of credit | 0 | | | 0 | |
Accounts payable and accrued expenses | | 74,105 |
| | 83,085 |
| Accounts payable and accrued expenses | 64,912 | | | 78,692 | |
Distributions payable | | 40,145 |
| | 39,222 |
| Distributions payable | 16,110 | | | 12,855 | |
Acquired lease intangible liabilities, net | | 101,045 |
| | 105,290 |
| Acquired lease intangible liabilities, net | 58,687 | | | 61,698 | |
Liabilities associated with investment properties held for sale, net | | 9,056 |
| | 864 |
| |
Other liabilities | | 78,195 |
| | 74,501 |
| |
Lease liabilities | | Lease liabilities | 84,095 | | | 84,628 | |
Liabilities associated with investment properties held for sale | | Liabilities associated with investment properties held for sale | 526 | | | 0 | |
Other liabilities (includes $3,103 and $3,890 from consolidated variable interest entities, respectively) | | Other liabilities (includes $3,103 and $3,890 from consolidated variable interest entities, respectively) | 62,854 | | | 72,127 | |
Total liabilities | | 2,020,155 |
| | 2,300,887 |
| Total liabilities | 2,032,497 | | | 2,055,073 | |
| | | | | | | | |
Commitments and contingencies (Note 14) | |
| |
| |
Commitments and contingencies (Note 13) | | Commitments and contingencies (Note 13) | 0 | | 0 |
| | | | | |
Equity: | | | | | Equity: | | | |
Preferred stock, $0.001 par value, 10,000 shares authorized, 7.00% Series A cumulative redeemable preferred stock, 5,400 shares issued and outstanding as of September 30, 2017 and December 31, 2016; liquidation preference $135,000 | | 5 |
| | 5 |
| |
Class A common stock, $0.001 par value, 475,000 shares authorized, 227,496 and 236,770 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively | | 227 |
| | 237 |
| |
Preferred stock, $0.001 par value, 10,000 shares authorized, NaN issued or outstanding | | Preferred stock, $0.001 par value, 10,000 shares authorized, NaN issued or outstanding | 0 | | | 0 | |
Class A common stock, $0.001 par value, 475,000 shares authorized, 214,798 and 214,168 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively | | Class A common stock, $0.001 par value, 475,000 shares authorized, 214,798 and 214,168 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively | 215 | | | 214 | |
Additional paid-in capital | | 4,804,679 |
| | 4,927,155 |
| Additional paid-in capital | 4,522,790 | | | 4,519,522 | |
Accumulated distributions in excess of earnings | | (2,756,859 | ) | | (2,776,033 | ) | Accumulated distributions in excess of earnings | (2,921,415) | | | (2,910,383) | |
Accumulated other comprehensive income | | 886 |
| | 722 |
| |
Accumulated other comprehensive loss | | Accumulated other comprehensive loss | (22,827) | | | (31,730) | |
Total shareholders’ equity | | Total shareholders’ equity | 1,578,763 | | | 1,577,623 | |
Noncontrolling interests | | Noncontrolling interests | 4,498 | | | 4,507 | |
Total equity | | 2,048,938 |
| | 2,152,086 |
| Total equity | 1,583,261 | | | 1,582,130 | |
Total liabilities and equity | | $ | 4,069,093 |
| | $ | 4,452,973 |
| Total liabilities and equity | $ | 3,615,758 | | | $ | 3,637,203 | |
See accompanying notes to condensed consolidated financial statements
RETAIL PROPERTIES OF AMERICA, INC.
Condensed Consolidated Statements of Operations and Other Comprehensive Income (Loss) Income
(Unaudited)
(in thousands, except per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Revenues: | | | | | | | |
Lease income | $ | 121,239 | | | $ | 96,803 | | | $ | 240,619 | | | $ | 215,498 | |
| | | | | | | |
Expenses: | | | | | | | |
Operating expenses | 17,180 | | | 14,843 | | | 35,245 | | | 31,257 | |
Real estate taxes | 17,799 | | | 17,916 | | | 36,733 | | | 36,449 | |
Depreciation and amortization | 41,815 | | | 43,755 | | | 89,682 | | | 83,928 | |
Provision for impairment of investment properties | 0 | | | 0 | | | 0 | | | 346 | |
General and administrative expenses | 10,374 | | | 8,491 | | | 21,492 | | | 17,656 | |
Total expenses | 87,168 | | | 85,005 | | | 183,152 | | | 169,636 | |
| | | | | | | |
Other (expense) income: | | | | | | | |
Interest expense | (18,776) | | | (19,360) | | | (37,528) | | | (36,406) | |
| | | | | | | |
Gain on litigation settlement | 0 | | | 0 | | | 0 | | | 6,100 | |
Other income (expense), net | 92 | | | 215 | | | 161 | | | (546) | |
Net income (loss) | 15,387 | | | (7,347) | | | 20,100 | | | 15,010 | |
Net loss attributable to noncontrolling interests | 9 | | | 0 | | | 9 | | | 0 | |
Net income (loss) attributable to common shareholders | $ | 15,396 | | | $ | (7,347) | | | $ | 20,109 | | | $ | 15,010 | |
| | | | | | | |
Earnings (loss) per common share – basic and diluted: | | | | | | | |
Net income (loss) per common share attributable to common shareholders | $ | 0.07 | | | $ | (0.04) | | | $ | 0.09 | | | $ | 0.07 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Net income (loss) | $ | 15,387 | | | $ | (7,347) | | | $ | 20,100 | | | $ | 15,010 | |
Other comprehensive income (loss): | | | | | | | |
Net unrealized gain (loss) on derivative instruments (Note 8) | 784 | | | 694 | | | 8,903 | | | (26,888) | |
Comprehensive income (loss) | 16,171 | | | (6,653) | | | 29,003 | | | (11,878) | |
Comprehensive loss attributable to noncontrolling interests | 9 | | | 0 | | | 9 | | | 0 | |
Comprehensive income (loss) attributable to the Company | $ | 16,180 | | | $ | (6,653) | | | $ | 29,012 | | | $ | (11,878) | |
| | | | | | | |
Weighted average number of common shares outstanding – basic | 213,813 | | | 213,337 | | | 213,732 | | | 213,276 | |
| | | | | | | |
Weighted average number of common shares outstanding – diluted | 214,069 | | | 213,337 | | | 214,209 | | | 213,276 | |
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Revenues | | | | | | | | |
Rental income | | $ | 100,977 |
| | $ | 113,627 |
| | $ | 316,968 |
| | $ | 344,081 |
|
Tenant recovery income | | 28,024 |
| | 29,130 |
| | 88,334 |
| | 89,140 |
|
Other property income | | 1,518 |
| | 1,769 |
| | 6,249 |
| | 7,170 |
|
Total revenues | | 130,519 |
| | 144,526 |
| | 411,551 |
| | 440,391 |
|
| | | | | | | | |
Expenses | | | | | | | | |
Operating expenses | | 19,572 |
| | 20,285 |
| | 62,440 |
| | 63,438 |
|
Real estate taxes | | 21,863 |
| | 19,937 |
| | 65,229 |
| | 60,966 |
|
Depreciation and amortization | | 51,469 |
| | 56,763 |
| | 157,268 |
| | 163,602 |
|
Provision for impairment of investment properties | | 45,822 |
| | 4,742 |
| | 58,856 |
| | 11,048 |
|
General and administrative expenses | | 7,785 |
| | 11,110 |
| | 29,368 |
| | 33,289 |
|
Total expenses | | 146,511 |
| | 112,837 |
| | 373,161 |
| | 332,343 |
|
| | | | | | | | |
Operating (loss) income | | (15,992 | ) | | 31,689 |
| | 38,390 |
| | 108,048 |
|
| | | | | | | | |
Gain on extinguishment of debt | | — |
| | — |
| | — |
| | 13,653 |
|
Gain on extinguishment of other liabilities | | — |
| | — |
| | — |
| | 6,978 |
|
Interest expense | | (21,110 | ) | | (25,602 | ) | | (128,077 | ) | | (78,343 | ) |
Other (expense) income, net | | (76 | ) | | 22 |
| | 380 |
| | 449 |
|
(Loss) income from continuing operations | | (37,178 | ) | | 6,109 |
| | (89,307 | ) | | 50,785 |
|
Gain on sales of investment properties | | 73,082 |
| | 66,385 |
| | 230,874 |
| | 97,737 |
|
Net income | | 35,904 |
| | 72,494 |
| | 141,567 |
| | 148,522 |
|
Preferred stock dividends | | (2,362 | ) | | (2,362 | ) | | (7,087 | ) | | (7,087 | ) |
Net income attributable to common shareholders | | $ | 33,542 |
| | $ | 70,132 |
| | $ | 134,480 |
| | $ | 141,435 |
|
| | | | | | | | |
Earnings per common share – basic | | | | | | | | |
Net income per common share attributable to common shareholders | | $ | 0.15 |
| | $ | 0.30 |
| | $ | 0.58 |
| | $ | 0.60 |
|
Earnings per common share – diluted | | | | | | | | |
Net income per common share attributable to common shareholders | | $ | 0.15 |
| | $ | 0.30 |
| | $ | 0.57 |
| | $ | 0.60 |
|
| | | | | | | | |
Net income | | $ | 35,904 |
| | $ | 72,494 |
| | $ | 141,567 |
| | $ | 148,522 |
|
Other comprehensive (loss) income: | | | | | | | | |
Net unrealized (loss) gain on derivative instruments (Note 9) | | (323 | ) | | 666 |
| | 164 |
| | 189 |
|
Comprehensive income attributable to the Company | | $ | 35,581 |
| | $ | 73,160 |
| | $ | 141,731 |
| | $ | 148,711 |
|
| | | | | | | | |
Weighted average number of common shares outstanding – basic | | 229,508 |
| | 236,783 |
| | 233,348 |
| | 236,692 |
|
| | | | | | | | |
Weighted average number of common shares outstanding – diluted | | 230,104 |
| | 237,108 |
| | 233,949 |
| | 236,983 |
|
See accompanying notes to condensed consolidated financial statements
RETAIL PROPERTIES OF AMERICA, INC.
Condensed Consolidated Statements of Equity
(Unaudited)
(in thousands, except per share amounts)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Preferred Stock | | Class A Common Stock | | Additional Paid-in Capital | | Accumulated Distributions in Excess of Earnings | | Accumulated Other Comprehensive (Loss) Income | | Total Shareholders’ Equity |
| Shares | | Amount | | Shares | | Amount | |
Balance as of January 1, 2016 | 5,400 |
| | $ | 5 |
| | 237,267 |
| | $ | 237 |
| | $ | 4,931,395 |
| | $ | (2,776,215 | ) | | $ | (85 | ) | | $ | 2,155,337 |
|
Cumulative effect of accounting change | — |
| | — |
| | — |
| | — |
| | 17 |
| | (17 | ) | | — |
| | — |
|
Net income | — |
| | — |
| | — |
| | — |
| | — |
| | 148,522 |
| | — |
| | 148,522 |
|
Other comprehensive income | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 189 |
| | 189 |
|
Distributions declared to preferred shareholders ($1.3125 per share) | — |
| | — |
| | — |
| | — |
| | — |
| | (7,087 | ) | | — |
| | (7,087 | ) |
Distributions declared to common shareholders ($0.496875 per share) | — |
| | — |
| | — |
| | — |
| | — |
| | (117,946 | ) | | — |
| | (117,946 | ) |
Issuance of common stock, net of offering costs | — |
| | — |
| | — |
| | — |
| | (100 | ) | | — |
| | — |
| | (100 | ) |
Issuance of restricted shares | — |
| | — |
| | 269 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Exercise of stock options | — |
| | — |
| | 2 |
| | — |
| | 23 |
| | — |
| | — |
| | 23 |
|
Stock-based compensation expense, net of forfeitures | — |
| | — |
| | (10 | ) | | — |
| | 5,296 |
| | — |
| | — |
| | 5,296 |
|
Shares withheld for employee taxes | — |
| | — |
| | (152 | ) | | — |
| | (2,250 | ) | | — |
| | — |
| | (2,250 | ) |
Balance as of September 30, 2016 | 5,400 |
| | $ | 5 |
| | 237,376 |
| | $ | 237 |
| | $ | 4,934,381 |
| | $ | (2,752,743 | ) | | $ | 104 |
| | $ | 2,181,984 |
|
| | | | | | | | | | | | | | | |
Balance as of January 1, 2017 | 5,400 |
| | $ | 5 |
| | 236,770 |
| | $ | 237 |
| | $ | 4,927,155 |
| | $ | (2,776,033 | ) | | $ | 722 |
| | $ | 2,152,086 |
|
Net income | — |
| | — |
| | — |
| | — |
| | — |
| | 141,567 |
| | — |
| | 141,567 |
|
Other comprehensive income | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 164 |
| | 164 |
|
Distributions declared to preferred shareholders ($1.3125 per share) | — |
| | — |
| | — |
| | — |
| | — |
| | (7,087 | ) | | — |
| | (7,087 | ) |
Distributions declared to common shareholders ($0.496875 per share) | — |
| | — |
| | — |
| | — |
| | — |
| | (115,306 | ) | | — |
| | (115,306 | ) |
Shares repurchased through share repurchase program | — |
| | — |
| | (9,433 | ) | | (10 | ) | | (125,579 | ) | | — |
| | — |
| | (125,589 | ) |
Issuance of restricted shares | — |
| | — |
| | 285 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Stock-based compensation expense, net of forfeitures | — |
| | — |
| | (34 | ) | | — |
| | 4,483 |
| | — |
| | — |
| | 4,483 |
|
Shares withheld for employee taxes | — |
| | — |
| | (92 | ) | | — |
| | (1,380 | ) | | — |
| | — |
| | (1,380 | ) |
Balance as of September 30, 2017 | 5,400 |
| | $ | 5 |
| | 227,496 |
| | $ | 227 |
| | $ | 4,804,679 |
| | $ | (2,756,859 | ) | | $ | 886 |
| | $ | 2,048,938 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class A Common Stock | | Additional Paid-in Capital | | Accumulated Distributions in Excess of Earnings | | Accumulated Other Comprehensive (Loss) Income | | Total Shareholders’ Equity | | Noncontrolling Interests | | Total Equity |
Three Months Ended | Shares | | Amount |
Balance as of April 1, 2020 | 214,122 | | | $ | 214 | | | $ | 4,512,939 | | | $ | (2,879,040) | | | $ | (39,870) | | | $ | 1,594,243 | | | $ | 3,058 | | | $ | 1,597,301 | |
Net loss | — | | | — | | | — | | | (7,347) | | | — | | | (7,347) | | | — | | | (7,347) | |
Other comprehensive income | — | | | — | | | — | | | — | | | 694 | | | 694 | | | — | | | 694 | |
Contributions from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | 1,216 | | | 1,216 | |
Termination of consolidated joint ventures | — | | | — | | | 556 | | | — | | | — | | | 556 | | | (556) | | | — | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Issuance of restricted shares | 131 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Stock-based compensation expense | — | | | — | | | 2,221 | | | — | | | — | | | 2,221 | | | — | | | 2,221 | |
| | | | | | | | | | | | | | | |
Balance as of June 30, 2020 | 214,253 | | | $ | 214 | | | $ | 4,515,716 | | | $ | (2,886,387) | | | $ | (39,176) | | | $ | 1,590,367 | | | $ | 3,718 | | | $ | 1,594,085 | |
Three Months Ended | | | | | | | | | | | | | | | |
Balance as of April 1, 2021 | 214,733 | | | $ | 215 | | | $ | 4,521,067 | | | $ | (2,920,701) | | | $ | (23,611) | | | $ | 1,576,970 | | | $ | 4,507 | | | $ | 1,581,477 | |
Net income (loss) | — | | | — | | | — | | | 15,396 | | | — | | | 15,396 | | | (9) | | | 15,387 | |
Other comprehensive income | — | | | — | | | — | | | — | | | 784 | | | 784 | | | — | | | 784 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Distributions declared to common shareholders ($0.075 per share) | — | | | — | | | — | | | (16,110) | | | — | | | (16,110) | | | — | | | (16,110) | |
Issuance of common stock, net of offering costs | — | | | — | | | (247) | | | — | | | — | | | (247) | | | — | | | (247) | |
Issuance of restricted shares | 65 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Stock-based compensation expense | — | | | — | | | 1,970 | | | — | | | — | | | 1,970 | | | — | | | 1,970 | |
| | | | | | | | | | | | | | | |
Balance as of June 30, 2021 | 214,798 | | | $ | 215 | | | $ | 4,522,790 | | | $ | (2,921,415) | | | $ | (22,827) | | | $ | 1,578,763 | | | $ | 4,498 | | | $ | 1,583,261 | |
| | | | | | | | | | | | | | | |
Six Months Ended | | | | | | | | | | | | | | | |
Balance as of January 1, 2020 | 213,600 | | | $ | 214 | | | $ | 4,510,484 | | | $ | (2,865,933) | | | $ | (12,288) | | | $ | 1,632,477 | | | $ | 3,596 | | | $ | 1,636,073 | |
Net income | — | | | — | | | — | | | 15,010 | | | — | | | 15,010 | | | — | | | 15,010 | |
Other comprehensive loss | — | | | — | | | — | | | — | | | (26,888) | | | (26,888) | | | — | | | (26,888) | |
Contributions from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | 2,339 | | | 2,339 | |
Termination of consolidated joint ventures | — | | | — | | | 2,217 | | | — | | | — | | | 2,217 | | | (2,217) | | | — | |
Distributions declared to common shareholders ($0.165625 per share) | — | | | — | | | — | | | (35,464) | | | — | | | (35,464) | | | — | | | (35,464) | |
Issuance of common stock | 148 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | |
Issuance of restricted shares | 624 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Stock-based compensation expense | — | | | — | | | 4,454 | | | — | | | — | | | 4,454 | | | — | | | 4,454 | |
Shares withheld for employee taxes | (119) | | | — | | | (1,439) | | | — | | | — | | | (1,439) | | | — | | | (1,439) | |
Balance as of June 30, 2020 | 214,253 | | | $ | 214 | | | $ | 4,515,716 | | | $ | (2,886,387) | | | $ | (39,176) | | | $ | 1,590,367 | | | $ | 3,718 | | | $ | 1,594,085 | |
Six Months Ended | | | | | | | | | | | | | | | |
Balance as of January 1, 2021 | 214,168 | | | $ | 214 | | | $ | 4,519,522 | | | $ | (2,910,383) | | | $ | (31,730) | | | $ | 1,577,623 | | | $ | 4,507 | | | $ | 1,582,130 | |
Net income (loss) | — | | | — | | | — | | | 20,109 | | | — | | | 20,109 | | | (9) | | | 20,100 | |
Other comprehensive income | — | | | — | | | — | | | — | | | 8,903 | | | 8,903 | | | — | | | 8,903 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Distributions declared to common shareholders ($0.145 per share) | — | | | — | | | — | | | (31,141) | | | — | | | (31,141) | | | — | | | (31,141) | |
Issuance of common stock, net of offering costs | 151 | | | — | | | (249) | | | — | | | — | | | (249) | | | — | | | (249) | |
| | | | | | | | | | | | | | | |
Issuance of restricted shares | 608 | | | 1 | | | — | | | — | | | — | | | 1 | | | — | | | 1 | |
Stock-based compensation expense | — | | | — | | | 4,776 | | | — | | | — | | | 4,776 | | | — | | | 4,776 | |
Shares withheld for employee taxes | (129) | | | — | | | (1,259) | | | — | | | — | | | (1,259) | | | — | | | (1,259) | |
Balance as of June 30, 2021 | 214,798 | | | $ | 215 | | | $ | 4,522,790 | | | $ | (2,921,415) | | | $ | (22,827) | | | $ | 1,578,763 | | | $ | 4,498 | | | $ | 1,583,261 | |
See accompanying notes to condensed consolidated financial statements
RETAIL PROPERTIES OF AMERICA, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
| | | | | | | | | | | |
| Six Months Ended June 30, |
| 2021 | | 2020 |
Cash flows from operating activities: | | | |
Net income | $ | 20,100 | | | $ | 15,010 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization | 89,682 | | | 83,928 | |
Provision for impairment of investment properties | 0 | | | 346 | |
| | | |
Amortization of loan fees and debt discount, net | 2,409 | | | 1,912 | |
Amortization of stock-based compensation | 4,776 | | | 4,454 | |
| | | |
Payment of leasing fees and inducements | (4,067) | | | (4,356) | |
Changes in accounts receivable, net | 4,334 | | | (17,670) | |
Changes in right-of-use lease assets | 913 | | | 928 | |
Changes in accounts payable and accrued expenses, net | (15,413) | | | (21,899) | |
Changes in lease liabilities | (533) | | | 33 | |
Changes in other operating assets and liabilities, net | 6,616 | | | 2,696 | |
Other, net | (2,471) | | | (957) | |
Net cash provided by operating activities | 106,346 | | | 64,425 | |
| | | |
Cash flows from investing activities: | | | |
Purchase of investment properties | 0 | | | (54,970) | |
Capital expenditures and tenant improvements | (20,070) | | | (30,778) | |
Proceeds from sales of investment properties | 0 | | | 11,369 | |
Investment in developments in progress | (29,943) | | | (32,499) | |
| | | |
Net cash used in investing activities | (50,013) | | | (106,878) | |
| | | |
Cash flows from financing activities: | | | |
Principal payments on mortgages payable | (1,194) | | | (1,242) | |
| | | |
| | | |
| | | |
| | | |
Proceeds from unsecured revolving line of credit | 7,000 | | | 937,704 | |
Repayments of unsecured revolving line of credit | (7,000) | | | (820,704) | |
Payment of loan fees and deposits | (3) | | | (151) | |
| | | |
Distributions paid | (27,886) | | | (70,851) | |
| | | |
Other, net | (1,458) | | | 900 | |
Net cash (used in) provided by financing activities | (30,541) | | | 45,656 | |
| | | |
Net increase in cash, cash equivalents and restricted cash | 25,792 | | | 3,203 | |
Cash, cash equivalents and restricted cash, at beginning of period | 45,329 | | | 14,447 | |
Cash, cash equivalents and restricted cash, at end of period | $ | 71,121 | | | $ | 17,650 | |
(continued) |
|
| | | | | | | |
| Nine Months Ended September 30, |
| 2017 | | 2016 |
Cash flows from operating activities: | | | |
Net income | $ | 141,567 |
| | $ | 148,522 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization | 157,268 |
| | 163,602 |
|
Provision for impairment of investment properties | 58,856 |
| | 11,048 |
|
Gain on sales of investment properties | (230,874 | ) | | (97,737 | ) |
Gain on extinguishment of debt | — |
| | (13,653 | ) |
Gain on extinguishment of other liabilities | — |
| | (6,978 | ) |
Amortization of loan fees and debt premium and discount, net | 6,748 |
| | 4,372 |
|
Amortization of stock-based compensation | 4,483 |
| | 5,296 |
|
Premium paid in connection with defeasance of mortgages payable | 59,968 |
| | — |
|
Payment of leasing fees and inducements | (13,540 | ) | | (7,730 | ) |
Changes in accounts receivable, net | 851 |
| | (1,109 | ) |
Changes in accounts payable and accrued expenses, net | (5,433 | ) | | 803 |
|
Changes in other operating assets and liabilities, net | 3,236 |
| | (637 | ) |
Other, net | (1,452 | ) | | (791 | ) |
Net cash provided by operating activities | 181,678 |
| | 205,008 |
|
| | | |
Cash flows from investing activities: | | | |
Changes in restricted escrows, net | 20,914 |
| | (5,904 | ) |
Purchase of investment properties | (146,710 | ) | | (266,377 | ) |
Capital expenditures and tenant improvements | (52,565 | ) | | (43,207 | ) |
Proceeds from sales of investment properties | 564,069 |
| | 307,355 |
|
Investment in developments in progress | (11,160 | ) | | (315 | ) |
Other, net | — |
| | 194 |
|
Net cash provided by (used in) investing activities | 374,548 |
| | (8,254 | ) |
| | | |
Cash flows from financing activities: | | | |
Principal payments on mortgages payable | (98,028 | ) | | (45,244 | ) |
Proceeds from unsecured notes payable | — |
| | 100,000 |
|
Proceeds from unsecured term loans | 200,000 |
| | — |
|
Repayments of unsecured term loans | (100,000 | ) | | — |
|
Proceeds from unsecured revolving line of credit | 664,000 |
| | 390,000 |
|
Repayments of unsecured revolving line of credit | (563,000 | ) | | (490,000 | ) |
Payment of loan fees and deposits | (10 | ) | | (6,386 | ) |
Purchase of U.S. Treasury securities in connection with defeasance of mortgages payable | (439,403 | ) | | — |
|
Distributions paid | (121,470 | ) | | (125,015 | ) |
Shares repurchased through share repurchase program | (120,402 | ) | | — |
|
Other, net | (1,380 | ) | | (2,462 | ) |
Net cash used in financing activities | (579,693 | ) | | (179,107 | ) |
| | | |
Net (decrease) increase in cash and cash equivalents | (23,467 | ) | | 17,647 |
|
Cash and cash equivalents, at beginning of period | 53,119 |
| | 51,424 |
|
Cash and cash equivalents, at end of period | $ | 29,652 |
| | $ | 69,071 |
|
(continued) | |
RETAIL PROPERTIES OF AMERICA, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
| | | | | | | | | | | |
| Six Months Ended June 30, |
| 2021 | | 2020 |
Supplemental cash flow disclosure, including non-cash activities: | | | |
Cash paid for interest, net of interest capitalized | $ | 36,237 | | | $ | 34,234 | |
Cash paid for amounts included in the measurement of operating lease liabilities | $ | 2,972 | | | $ | 2,505 | |
Distributions payable | $ | 16,110 | | | $ | 0 | |
Accrued capital expenditures and tenant improvements | $ | 4,577 | | | $ | 8,938 | |
Accrued leasing fees and inducements | $ | 2,523 | | | $ | 1,127 | |
Accrued redevelopment costs | $ | 1,937 | | | $ | 2,531 | |
Amounts reclassified to developments in progress | $ | 0 | | | $ | 305 | |
Developments in progress placed in service | $ | 36,053 | | | $ | 0 | |
Change in noncontrolling interest due to termination of joint ventures | $ | 0 | | | $ | 2,217 | |
Lease liabilities arising from obtaining right-of-use lease assets | $ | 0 | | | $ | 383 | |
| | | |
Purchase of investment properties (after credits at closing): | | | |
Net investment properties | $ | 0 | | | $ | (58,760) | |
Right-of-use lease assets | 0 | | | 5,999 | |
Accounts receivable, acquired lease intangibles and other assets | 0 | | | (1,801) | |
Lease liabilities | 0 | | | (5,942) | |
Accounts payable, acquired lease intangibles and other liabilities | 0 | | | 5,534 | |
Purchase of investment properties (after credits at closing) | $ | 0 | | | $ | (54,970) | |
| | | |
Proceeds from sales of investment properties: | | | |
Net investment properties | $ | 0 | | | $ | 11,307 | |
| | | |
Accounts receivable, acquired lease intangibles and other assets | 0 | | | 167 | |
| | | |
Accounts payable, acquired lease intangibles and other liabilities | 0 | | | (105) | |
| | | |
Proceeds from sales of investment properties | $ | 0 | | | $ | 11,369 | |
| | | |
Reconciliation of cash, cash equivalents and restricted cash: | | | |
Cash and cash equivalents, at beginning of period | $ | 41,785 | | | $ | 9,989 | |
Restricted cash, at beginning of period (included within “Other assets, net”) | 3,544 | | | 4,458 | |
Total cash, cash equivalents and restricted cash, at beginning of period | $ | 45,329 | | | $ | 14,447 | |
| | | |
Cash and cash equivalents, at end of period | $ | 67,245 | | | $ | 12,563 | |
Restricted cash, at end of period (included within “Other assets, net”) | 3,876 | | | 5,087 | |
Total cash, cash equivalents and restricted cash, at end of period | $ | 71,121 | | | $ | 17,650 | |
|
| | | | | | | |
| Nine Months Ended September 30, |
| 2017 | | 2016 |
Supplemental cash flow disclosure, including non-cash activities: | | | |
Cash paid for interest, net of interest capitalized | $ | 61,360 |
| | $ | 73,603 |
|
Distributions payable | $ | 40,145 |
| | $ | 39,315 |
|
Accrued share repurchase through share repurchase program | $ | 5,187 |
| | $ | — |
|
Accrued capital expenditures and tenant improvements | $ | 5,601 |
| | $ | 7,740 |
|
Accrued leasing fees and inducements | $ | 493 |
| | $ | 913 |
|
Accrued redevelopment costs | $ | 1,300 |
| | $ | — |
|
Amounts reclassified to developments in progress | $ | — |
| | $ | 2,467 |
|
U.S. Treasury securities transferred in connection with defeasance of mortgages payable | $ | 439,403 |
| | $ | — |
|
Defeasance of mortgages payable | $ | 379,435 |
| | $ | — |
|
| | | |
Purchase of investment properties (after credits at closing): | | | |
Net investment properties | $ | (147,234 | ) | | $ | (261,657 | ) |
Accounts receivable, acquired lease intangibles and other assets | (11,366 | ) | | (25,049 | ) |
Accounts payable, acquired lease intangibles and other liabilities | 9,366 |
| | 5,013 |
|
Deferred gain | 2,524 |
| | — |
|
Mortgages payable assumed, net | — |
| | 15,316 |
|
| $ | (146,710 | ) | | $ | (266,377 | ) |
| | | |
Proceeds from sales of investment properties: | | | |
Net investment properties | $ | 395,282 |
| | $ | 282,661 |
|
Accounts receivable, acquired lease intangibles and other assets | 13,801 |
| | 15,306 |
|
Accounts payable, acquired lease intangibles and other liabilities | (9,316 | ) | | (9,149 | ) |
Deferred gain | (1,486 | ) | | 1,500 |
|
Mortgage debt forgiven or assumed | — |
| | (94,353 | ) |
Gain on extinguishment of debt | — |
| | 13,653 |
|
Gain on sales of investment properties | 230,874 |
| | 97,737 |
|
Proceeds temporarily restricted related to potential Internal Revenue Code Section 1031 tax-deferred exchanges | (65,086 | ) | | — |
|
| $ | 564,069 |
| | $ | 307,355 |
|
See accompanying notes to condensed consolidated financial statements
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Readers of this Quarterly Report should refer to the audited financial statements of Retail Properties of America, Inc. for the year ended December 31, 2016,2020, which are included in its 20162020 Annual Report on Form 10-K, as certain footnote disclosures which would substantially duplicate those contained in the Annual Report have been omitted from this Quarterly Report. In the opinion of management, all adjustments necessary, all of which were of normal recurring nature, for a fair presentation have been included in this Quarterly Report.
(1) ORGANIZATION AND BASIS OF PRESENTATION
Retail Properties of America, Inc. (the Company) was formed on March 5, 2003 and its primary purpose is to own and operate high quality, strategically located open-air shopping centers, including properties with a mixed-use component. As of June 30, 2021, the Company owned 100 retail operating properties in the United States.
On July 18, 2021, the Company entered into a definitive Agreement and Plan of Merger (Merger Agreement) with Kite Realty Group Trust (Kite) and KRG Oak, LLC, a wholly owned subsidiary of Kite (Merger Sub). Upon the terms and subject to the conditions set forth in the Merger Agreement, the Company will merge with and into Merger Sub, with Merger Sub surviving the merger (Merger). At the effective time of the Merger (Effective Time), each share of Class A common stock of the Company issued and outstanding immediately prior to the Effective Time will be converted into the right to receive 0.623 common shares of Kite, plus the right, if any, to receive cash in lieu of fractional common shares of Kite. During the period from the date of the Merger Agreement until the completion of the Merger, the Company is subject to certain restrictions on its ability to engage with third parties regarding alternative acquisition proposals and on the conduct of the Company’s business.
The board of directors of the Company and the board of trustees of Kite each have unanimously approved the transaction. The closing of the Merger is expected to occur in the fourth quarter of 2021, subject to the satisfaction of certain closing conditions, including the approval of both Kite’s and the Company’s shareholders. There can be no assurance that the Merger will be completed on the terms or timeline currently contemplated or at all.
The Company has elected to be taxed as a real estate investment trust (REIT) under the Internal Revenue Code of 1986, as amended (the Code). The Company believes it qualifies for taxation as a REIT and, as such, the Company generally will not be subject to U.S. federal income tax on taxable income that is distributed to its shareholders. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to U.S. federal income tax on its taxable income. Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes on its income, property or net worth and U.S. federal income and excise taxes on its undistributed income. The Company has one wholly-owned1 wholly owned subsidiary that has jointly elected to be treated as a taxable REIT subsidiary (TRS) and is subject to U.S. federal, state and local income taxes at regular corporate tax rates. The income tax expense incurred by the TRS did not have a material impact on the Company’s accompanying condensed consolidated financial statements.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. For example, significant estimates and assumptions have been made with respect to useful lives of assets, capitalization of development costs, fair value measurements,(i) the reserve for uncollectible lease income, (ii) provision for impairment, including estimates of holding periods, capitalization rates and discount rates (where applicable), provision for income taxes, recoverable amounts of receivables, deferred taxes and (iii) initial valuations and related amortization periods of deferred costs and intangibles, particularly with respect to property acquisitions.acquisitions and initial recognition of right-of-use lease assets and lease liabilities. Actual results could differ from these estimates.
In accordance with the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC) 205, Presentation of Financial Statements, certain prior year balances in the accompanying condensed consolidated statements of cash flows have been reclassified in order to conform to the current period presentation. Specifically, for the six months ended June 30, 2020, the reserve for bad debt of $13,977 has been presented as a component of “Changes in accounts receivable, net” rather than the previous presentation where it was included as a single line item, “Reserve for bad debt” within “Cash flows from operating activities.” There has been no change to “Net cash provided by operating activities” for the six months ended June 30, 2020 as a result of this reclassification.
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
All sharedollar amounts and dollarshare amounts in this Quarterly Report on Form 10-Q, including the condensed consolidated financial statements and notes thereto, are stated in thousands with the exception of per share, amountsper square foot and per square footunit amounts.
The accompanying condensed consolidated financial statements include the accounts of the Company, as well as all wholly-ownedwholly owned subsidiaries and any consolidated variable interest entities (VIEs). All intercompany balances and transactions have been eliminated in consolidation. Wholly-ownedWholly owned subsidiaries generally consist of limited liability companies, limited partnerships and statutory trusts.
The Company’s property ownership as of SeptemberJune 30, 20172021 is summarized below:
|
| | | | |
| Wholly-ownedProperty Count |
Retail operating properties (a) | 120 |
|
Office properties | 1 |
|
Total operating properties | 121 |
|
| |
Redevelopment properties | 2 |
|
100 | |
(a)Expansion and redevelopment projects: | Excludes six wholly-owned operating |
Circle East | 1 | |
One Loudoun Downtown – Pads G & H (b) | 0 | |
Carillon | 1 | |
The Shoppes at Quarterfield | 1 | |
Total number of properties classified as held for sale as of September 30, 2017. | 103 | |
(a)Excludes 2 retail operating properties classified as held for sale as of June 30, 2021.
(b)The operating portion of this property is included within the property count for retail operating properties.
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Refer to the Company’s 20162020 Annual Report on Form 10-K for a summary of its significant accounting policies. Except as disclosed below, thereThere have been no changes to the Company’s significant accounting policies in the ninesix months ended September 30, 2017.
Recently Adopted Accounting Pronouncements
The Company elected to early adopt Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2017-09, Compensation – Stock Compensation, on a prospective basis as of June 30, 2017. This new pronouncement amends/clarifies guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. Under the new guidance, an entity should account for the effects of a modification unless all of the following are the same in the modified award as the original award immediately before the original award is modified: 1) the fair value; 2) the vesting conditions; and 3) the classification of the modified award as an equity instrument or a liability instrument. The existing disclosure requirements apply regardless of whether an entity is required to apply modification accounting. The adoption of this pronouncement did not have any effect on the Company’s condensed consolidated financial statements.2021.
In March 2017, the Securities and Exchange Commission issued a final rule, Exhibit Hyperlinks and HTML Format, which is effective September 1, 2017. The final rule requires registrants that file registration statements and reports subject to the exhibit requirements under Item 601 of Regulation S-K, or that file Forms F-10 or 20-F, to include a hyperlink to each exhibit listed in the exhibit index of these filings. To enable the inclusion of such hyperlinks, registrants are required to submit all such filings in HyperText Markup Language (HTML) format. The Company has added hyperlinks to its exhibit index starting with this Form 10-Q for the quarter ended September 30, 2017.
Recently Issued Accounting Pronouncements
In May 2014 with subsequent updates issued in August 2015 and March, April, May and December 2016, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. This new guidance is effective January 1, 2018, with early adoption permitted, and will replace existing revenue recognition standards. The core principle of this standard is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The sale of investment property and any non-lease components, including common area maintenance reimbursements, contained within lease agreements will be required to follow the new guidance; however, lease components of lease contracts will be subject to the Leases guidance described below. This pronouncement allows either a full or a modified retrospective method of adoption. Expanded quantitative and qualitative disclosures regarding revenue recognition will be required for contracts that are subject to this guidance. While the Company anticipates additional disclosure, it does not expect the adoption of this pronouncement on January 1, 2018 will have a material effect on its condensed consolidated financial statements as it believes the majority of its revenue falls outside of the scope of this guidance; however, it will continue to evaluate this assessment until the guidance becomes effective. The Company expects to adopt this guidance on a modified retrospective basis applying the guidance to the sales of investment properties upon adoption and applying it to any non-lease components contained within new and modified lease agreements beginning January 1, 2019 with the adoption of the new Leases guidance.
In February 2017, the FASB issued ASU 2017-05, Other Income–Gains and Losses from the Derecognition of Nonfinancial Assets. This new guidance is required to be adopted concurrently with the amendments in ASU 2014-09, Revenue from Contracts with Customers. The new pronouncement, which adds guidance for partial sales of nonfinancial assets and clarifies the scope of Subtopic 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets, applies to the derecognition of all nonfinancial assets (including real estate) for which the counterparty is not a customer. The pronouncement requires either a retrospective or a modified retrospective method of adoption. The Company does not expect the adoption of this pronouncement will have a material effect on its condensed consolidated financial statements; however, it will continue to evaluate this assessment until the guidance becomes effective. The Company expects to adopt this guidance on a modified retrospective basis.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall. This new guidance is effective January 1, 2018 and will require companies to disclose the fair value of financial assets and financial liabilities measured at amortized cost in accordance with the exit price notion and will no longer require disclosure of the methods and significant assumptions used, including any changes, to estimate fair value. In addition, companies will be required to disclose all financial assets and financial liabilities grouped by 1) measurement category and 2) form of financial instrument. The Company does not expect the adoption
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
of this pronouncement will have a material effect on its condensed consolidated financial statements; however, it will continue to evaluate this assessment until the guidance becomes effective.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows. This new guidance is effective January 1, 2018, with early adoption permitted, and adds or clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows. Of the eight types of cash flows discussed in the new standard, the classification of debt prepayment costs as a financing outflow will impact the Company’s condensed consolidated statements of cash flows as this item is currently reflected as an operating outflow. The pronouncement requires a retrospective transition method of adoption. The Company does not expect the adoption of this pronouncement will have a material effect on its condensed consolidated financial statements; however, it will continue to evaluate this assessment until the guidance becomes effective.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows. This new guidance is effective January 1, 2018, with early adoption permitted, and requires amounts that are generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The pronouncement requires a retrospective transition method of adoption. Upon adoption, the Company will include amounts generally described as restricted cash within the beginning-of-period, change and end-of-period total amounts on the statement of cash flows rather than within an activity on the statement of cash flows.
In February 2016, the FASB issued ASU 2016-02, Leases. This new guidance is effective January 1, 2019, with early adoption permitted, and will require lessees to recognize a liability to make lease payments and a right-of-use (ROU) asset, initially measured at the present value of lease payments, for both operating and financing leases. For leases with a term of 12 months or less, lessees will be permitted to make an accounting policy election by class of underlying asset to not recognize lease liabilities and lease assets. Upon adoption, the Company will recognize a lease liability and an ROU asset for operating leases where it is the lessee, such as ground leases and office leases. The Company is in the process of evaluating the inputs required to calculate the amounts that will be recorded on its balance sheet for each lease. For leases with a term of 12 months or less, the Company expects to make an accounting policy election by class of underlying asset to not recognize lease liabilities and lease assets. Under this new pronouncement, lessor accounting for lease components will be largely unchanged from existing GAAP; however, upon adoption of the Leases guidance, non-lease components of new or modified leases, including common area maintenance reimbursements, will be accounted for under the Revenue from Contracts with Customers guidance described above. The Company anticipates that it will be required to bifurcate certain lease revenues between lease and non-lease components. Additionally, only incremental direct leasing costs may be capitalized under this new guidance, which is consistent with the Company’s existing policies. The pronouncement requires a modified retrospective method of adoption and allows some optional practical expedients. The Company expects to adopt this new guidance on January 1, 2019 and will continue to evaluate the impact of this guidance until it becomes effective.
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging. This new guidance is effective January 1, 2019, with early adoption permitted, and amends the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results in an entity’s financial statements. The new guidance eliminates the requirement to separately measure and report hedge ineffectiveness and entities will be required to present the earnings effect of the hedging instrument in the same income statement line item in which they report the earnings effect of the hedged item. In addition, entities may perform the initial quantitative assessment of hedge effectiveness at any time after hedge designation, but no later than the first quarterly effectiveness testing date, and subsequent assessments of hedge effectiveness may be performed qualitatively unless facts and circumstances change. Disclosure requirements will be modified to include a tabular disclosure related to the effect of hedging instruments on the income statement and eliminate the requirement to disclose the ineffective portion of the change in fair value of such instruments. As of September 30, 2017, the Company had interest rate swaps that were designated as cash flow hedges of interest rate risk that expire prior to the effective date. Based upon its current hedges, the Company does not expect that the adoption of this pronouncement will have a material effect on its condensed consolidated financial statements; however, it will continue to evaluate this assessment until the guidance becomes effective.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses. This new guidance is effective January 1, 2020, with early adoption permitted beginning January 1, 2019, and replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses. Financial assets that are measured at amortized cost will be required to be presented at the net amount expected to be collected with an allowance for credit losses deducted from the amortized cost basis. In addition, an entity must consider broader information in developing its expected credit loss estimate, including the use of
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
forecasted information. Generally, the pronouncement requires a modified retrospective method of adoption. The Company will continue to evaluate the impact of this guidance until it becomes effective.
(3) ACQUISITIONS AND DEVELOPMENTS IN PROGRESS
Acquisitions
The Company did not acquire any properties during the six months ended June 30, 2021.
The Company closed on the following acquisitionsacquisition during the ninesix months ended SeptemberJune 30, 2017:2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Date | | Property Name | | Metropolitan Statistical Area (MSA) | | Property Type | | Square Footage | | Acquisition Price | |
February 6, 2020 | | Fullerton Metrocenter | | Los Angeles | | Fee interest (a) | | 154,700 | | | $ | 55,000 | | |
| | | | | | | | 154,700 | | | $ | 55,000 | | (b) |
|
| | | | | | | | | | | | | | |
Date | | Property Name | | Metropolitan Statistical Area (MSA) | | Property Type | | Square Footage | | Acquisition Price | |
January 13, 2017 | | Main Street Promenade (a) | | Chicago | | Multi-tenant retail | | 181,600 |
| | $ | 88,000 |
| |
January 25, 2017 | | Boulevard at the Capital Centre – Fee Interest | | Washington, D.C. | | Fee interest (b) | | — |
| | 2,000 |
| |
February 24, 2017 | | One Loudoun Downtown – Phase II | | Washington, D.C. | | Additional phase of multi-tenant retail (c) | | 15,900 |
| | 4,128 |
| |
April 5, 2017 | | One Loudoun Downtown – Phase III | | Washington, D.C. | | Additional phase of multi-tenant retail (c) | | 9,800 |
| | 2,193 |
| |
May 16, 2017 | | One Loudoun Downtown – Phase IV | | Washington, D.C. | | Development rights (c) | | — |
| | 3,500 |
| |
July 6, 2017 | | New Hyde Park Shopping Center | | New York | | Multi-tenant retail | | 32,300 |
| | 22,075 |
| |
August 8, 2017 | | One Loudoun Downtown – Phase V | | Washington, D.C. | | Additional phase of multi-tenant retail (c) | | 17,700 |
| | 5,167 |
| |
August 8, 2017 | | One Loudoun Downtown – Phase VI | | Washington, D.C. | | Additional phase of multi-tenant retail (c) | | 74,100 |
| | 20,523 |
| |
| | | | | | | | 331,400 |
| | $ | 147,586 |
| (d) |
| |
(a) | This property was acquired through a consolidated VIE and was used to facilitate an Internal Revenue Code Section 1031 tax-deferred exchange (1031 Exchange). |
| |
(b) | The wholly-owned multi-tenant retail operating property located in Largo, Maryland was previously subject to an approximately 70 acre long-term ground lease with a third party. The Company completed a transaction whereby it received the fee interest in approximately 50 acres of the underlying land in exchange for which (i) the Company paid $1,939 and (ii) the term of the ground lease with respect to the remaining approximately 20 acres was shortened to nine months. The Company derecognized building and improvements of $11,347 related to the remaining ground lease, recognized the fair value of land received of $15,200 and recorded a deferred gain of $2,524. The deferred gain will be recognized upon the expiration of the remaining ground lease. The total number of properties in the Company’s portfolio was not affected by this transaction. |
| |
(c) | The Company acquired the remaining five phases under contract, including the development rights for an additional 123 multi-family units for a total of 408 units, at its One Loudoun Downtown multi-tenant retail operating property, which were accounted for as asset acquisitions. The total number of properties in the Company’s portfolio was not affected by these transactions. |
| |
(d) | Acquisition price does not include capitalized closing costs and adjustments totaling $2,190. |
(a)The Company closed onacquired the following acquisitions duringfee interest in an existing multi-tenant retail operating property. In connection with this acquisition, the nine months ended September 30, 2016:Company also assumed the lessor position in a ground lease with a shadow anchor.
(b)Acquisition price does not include capitalized closing costs and adjustments totaling $240.
|
| | | | | | | | | | | | | |
Date | | Property Name | | MSA | | Property Type | | Square Footage | | Acquisition Price |
January 15, 2016 | | Shoppes at Hagerstown (a) | | Hagerstown | | Multi-tenant retail | | 113,000 |
| | $ | 27,055 |
|
January 15, 2016 | | Merrifield Town Center II (a) | | Washington, D.C. | | Multi-tenant retail | | 76,000 |
| | 45,676 |
|
March 29, 2016 | | Oak Brook Promenade | | Chicago | | Multi-tenant retail | | 183,200 |
| | 65,954 |
|
April 1, 2016 | | The Shoppes at Union Hill (b) | | New York | | Multi-tenant retail | | 91,700 |
| | 63,060 |
|
April 29, 2016 | | Ashland & Roosevelt – Fee Interest | | Chicago | | Ground lease interest (c) | | — |
| | 13,850 |
|
May 5, 2016 | | Tacoma South | | Seattle | | Multi-tenant retail | | 230,700 |
| | 39,400 |
|
June 15, 2016 | | Eastside | | Dallas | | Multi-tenant retail | | 67,100 |
| | 23,842 |
|
August 30, 2016 | | Woodinville Plaza – Anchor Space Improvements | | Seattle | | Anchor space improvements (d) | | — |
| | 4,500 |
|
| | | | | | | | 761,700 |
| | $ | 283,337 |
|
| |
(a) | These properties were acquired as a two-property portfolio. Merrifield Town Center II also contains 62,000 square feet of storage space for a total of 138,000 square feet. |
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| |
(b) | In conjunction with the acquisition, the Company assumed mortgage debt with a principal balance of $15,971 and an interest rate of 3.75% that matures in 2031.
|
| |
(c) | The Company acquired the fee interest in an existing wholly-owned multi-tenant retail operating property located in Chicago, Illinois, which was previously subject to a ground lease with a third party. In conjunction with this transaction, the Company reversed the straight-line ground rent liability of $6,978, which is reflected as “Gain on extinguishment of other liabilities” in the accompanying condensed consolidated statements of operations and other comprehensive (loss) income. |
| |
(d) | The Company acquired the anchor space improvements, which were previously subject to a ground lease with the Company, in an existing wholly-owned multi-tenant retail operating property located in Woodinville, Washington. |
The following table summarizes the acquisition date values, before prorations, the Company recorded in conjunction with the acquisitionsacquisition discussed above:
|
| | | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 |
Land | | $ | 38,833 |
| | $ | 84,720 |
|
Building and other improvements, net | | 108,401 |
| | 176,937 |
|
Acquired lease intangible assets (a) | | 11,139 |
| | 25,016 |
|
Acquired lease intangible liabilities (b) | | (7,521 | ) | | (3,991 | ) |
Other liabilities | | (1,076 | ) | | — |
|
Mortgages payable, net | | — |
| | (15,316 | ) |
Net assets acquired | | $ | 149,776 |
| | $ | 267,366 |
|
| | | | | | | |
(a) | The weighted average amortization period for acquired
| | Six Months Ended |
| | | June 30, 2020 |
Land | | | $ | 57,137 | |
| | | |
Building and other improvements, net | | | 1,623 | |
Acquired lease intangible assets is seven years and six years for acquisitions completed during the nine months ended September 30, 2017 and 2016, respectively.(a) | | | 2,014 | |
Acquired lease intangible liabilities (b) | | | (5,534) | |
| | | |
(b) | The weighted average amortization period for
| | |
Net assets acquired lease intangible liabilities is 13 years and 11 years for acquisitions completed during the nine months ended September 30, 2017 and 2016, respectively. | | | $ | 55,240 | |
(a)The weighted average amortization period for acquired lease intangible assets is 17 years for the acquisition completed during the six months ended June 30, 2020.
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(b)The weighted average amortization period for acquired lease intangible liabilities is 17 years for the acquisition completed during the six months ended June 30, 2020.
The above acquisitions wereacquisition was funded using a combination of available cash on hand, proceeds from dispositions and proceeds from the Company’s unsecured revolving line of credit. All of the acquisitionsThe acquisition completed during 2017 were2020 was considered an asset acquisitionsacquisition and, as such, transaction costs were capitalized upon closing. Transaction costs
In addition, the Company capitalized $771 and $1,487 of internal salaries and related tobenefits of personnel directly involved in capital upgrades and tenant improvements during the 2016 acquisitions that were accounted for as business combinations totaled $913 for the ninethree and six months ended SeptemberJune 30, 20162021, respectively, and are included in “General$641 and administrative expenses” in$1,267 during the accompanying condensed consolidated statements of operationsthree and other comprehensive (loss) income. In addition, total revenues of $36,210 and net income attributable to common shareholders of $7,760 are included in the Company’s condensed consolidated statements of operations and other comprehensive (loss) income for the ninesix months ended SeptemberJune 30, 2016 from the properties acquired2020, respectively. The Company also capitalized internal leasing incentives of $106 and $163 during the ninethree and six months ended SeptemberJune 30, 2016 that were accounted for as business combinations.
Condensed Pro Forma Financial Information
Disclosure of pro forma financial information is required for acquisitions accounted for as business combinations, if such financial information is available. Pro forma financial information is provided for acquisitions accounted for as business combinations completed2021, respectively, and $42 and $102 during the period, or after such period through the financial statement issuance date, as if these acquisitions had been completed as of the beginning of the year prior to the acquisition date. Pro forma financial information is not required for asset acquisitions.
The following unaudited condensed pro forma financial information is presented as if the acquisitions completed during the ninethree and six months ended SeptemberJune 30, 20162020, respectively, all of which were completed as of January 1, 2015. The following 2016 acquisitions have not been adjusted inincremental to signed leases.
Subsequent to June 30, 2021, the pro forma presentation as they were accounted for as asset acquisitions: (i) the acquisition of the anchor space improvements in the Company’s Woodinville PlazaCompany acquired Arcadia Village, a 37,000 square foot multi-tenant retail operating property located in the SeattlePhoenix MSA, which was acquired on August 30, 2016 for $4,500 and (ii) the acquisitiona gross purchase price of $21,000.
Developments in Progress
The carrying amount of the fee interestCompany’s developments in progress are as follows:
| | | | | | | | | | | | | | | | | | | | |
Property Name | | MSA | | June 30, 2021 | | December 31, 2020 |
Expansion and redevelopment projects | | | | | | |
Circle East (a) | | Baltimore | | $ | 34,336 | | | $ | 38,180 | |
One Loudoun Downtown (b) | | Washington, D.C. | | 86,030 | | | 89,103 | |
Carillon | | Washington, D.C. | | 33,660 | | | 33,463 | |
The Shoppes at Quarterfield | | Baltimore | | 1,349 | | | 865 | |
Pad development projects | | | | | | |
Southlake Town Square | | Dallas | | 2,154 | | | 1,495 | |
| | | | 157,529 | | | 163,106 | |
Land held for future development | | | | | | |
One Loudoun Uptown | | Washington, D.C. | | 25,450 | | | 25,450 | |
Total developments in progress | | | | $ | 182,979 | | | $ | 188,556 | |
(a)During the six months ended June 30, 2021, 10,500 square feet of the project’s gross leasable area were placed in service and reclassified into “Land” and “Building and other improvements” in the Company’s Ashland & Roosevelt multi-tenant retail operating property locatedaccompanying condensed consolidated balance sheets.
(b)During the three months ended June 30, 2021, the 99 multi-family rental units at One Loudoun Downtown – Pad G were placed in service and reclassified into “Land” and “Building and other improvements” in the Chicago MSA, which was acquiredaccompanying condensed consolidated balance sheets.
In response to macroeconomic conditions related to the novel coronavirus (COVID-19) pandemic, the Company halted plans for vertical construction at its Carillon redevelopment during 2020 and materially reduced the planned scope and spend for the project. During the three months ended June 30, 2021, the Company announced plans to commence construction on April 29, 2016 for $13,850. Pro forma financial information is not presented for acquisitions completeda medical office building at Carillon in the second half of 2021.
The Company capitalized $2,020 and $3,831 of indirect project costs related to redevelopment projects during 2017 as they have been accounted for as asset acquisitions. These pro forma results are for comparative purposes onlythe three and are not necessarily indicativesix months ended June 30, 2021, including, among other costs, $359 and $768 of whatinternal salaries and related benefits of personnel directly involved in the Company’s actual resultsredevelopment projects and $1,254 and $2,546 of operations would have beeninterest, respectively. The Company capitalized $1,347 and $2,663 of indirect project costs related to redevelopment projects during the three and six months ended June 30, 2020, including, among other costs, $329 and $701 of internal salaries and related benefits of personnel directly involved in the redevelopment projects and $736 and $1,521 of interest, respectively.
Variable Interest Entities
As of June 30, 2021, the Company had 1 joint venture related to the acquisitions occurred at the beginningdevelopment, ownership and operation of the period presented, nor are they necessarily indicativemulti-family rental portion of future operating results.
the expansion project at One Loudoun Downtown – Pads G & H, of which joint venture the Company owns 90%.
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The unaudited condensed pro formajoint venture is considered a VIE primarily because the Company’s joint venture partner does not have substantive kick-out rights or substantive participating rights. The Company is considered the primary beneficiary as it has a controlling financial information is as follows:
|
| | | | | | | | |
| | Three Months Ended September 30, 2016 | | Nine Months Ended September 30, 2016 |
Total revenues | | $ | 144,526 |
| | $ | 444,622 |
|
Net income | | $ | 72,494 |
| | $ | 147,421 |
|
Net income attributable to common shareholders | | $ | 70,132 |
| | $ | 140,334 |
|
Earnings per common share – basic and diluted | | | | |
Net income per common share attributable to common shareholders | | $ | 0.30 |
| | $ | 0.59 |
|
Weighted average number of common shares outstanding – basic | | 236,783 |
| | 236,692 |
|
Variable Interest Entities
Duringinterest in the nine months ended September 30, 2017,joint venture. As such, the Company entered into an agreement with a qualified intermediaryhas consolidated the joint venture and presented the joint venture partner’s interest as noncontrolling interests.
As of June 30, 2021 and December 31, 2020, the Company recorded the following related to a potential 1031 Exchange. Thethe One Loudoun Downtown – Pads G & H consolidated joint venture:
| | | | | | | | | | | |
| One Loudoun Downtown – Pads G & H |
| June 30, 2021 | | December 31, 2020 |
Net investment properties | $ | 93,186 | | | $ | 74,314 | |
Other assets, net | $ | 647 | | | $ | 354 | |
Other liabilities | $ | 3,103 | | | $ | 3,890 | |
Noncontrolling interests | $ | 4,498 | | | $ | 4,507 | |
As of June 30, 2021, the Company loaned $87,452 to the VIEs to acquire Main Street Promenade on January 13, 2017. The 1031 Exchange was completed during the nine months ended September 30, 2017 and, in accordance with applicable provisionshas funded $4,580 of the Code, within 180 days after the acquisition date of the property. At the completion of the 1031 Exchange, the sole membership interests of the VIEs were assignedpartner’s development costs related to the Company in satisfaction of the outstandingOne Loudoun Downtown – Pads G & H through a loan resulting in the entities being wholly ownedprovided by the Company and no longer considered VIEs.
During the nine months ended September 30, 2016, the Company entered into agreements with a qualified intermediary related to three 1031 Exchanges. The Company loaned $65,419, $39,215 and $23,522 to the VIEs to acquire Oak Brook Promenade, Tacoma South and Eastside, respectively. Each 1031 Exchange was completed during the year ended December 31, 2016 and, in accordance with applicable provisions of the Code, within 180 days after the acquisition date of the property. At the completion of the 1031 Exchanges, the sole membership interests of the VIEs were assigned to the Company and the respective outstanding loans were extinguished, resulting in the entities being wholly ownedjoint venture. The loan, secured by the Company and no longer considered VIEs.
Priorjoint venture project, is required to be repaid subsequent to the completion of construction and stabilization of the 1031 Exchanges,project and is eliminated upon consolidation. Under terms defined in the joint venture agreement, after construction completion and stabilization of the development project, the Company was deemed to be the primary beneficiary of each VIE as it hadhas the ability to directcall, and the activities of each VIE that most significantly impact its economic performance and had all ofjoint venture partner has the risks and rewards of ownership. Accordingly,ability to put to the Company, consolidatedsubject to certain conditions, the VIEs. No value or incomejoint venture partner’s interest in the joint venture at fair value. During the six months ended June 30, 2021, a $9 loss was attributed to the noncontrolling interest. The assets ofinterests. There was no income attributed to the VIEs consisted ofnoncontrolling interests during the respective investment property, Main Street Promenade, Oak Brook Promenade, Tacoma South and Eastside, which were operated by the Company.six months ended June 30, 2020.
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(4) DISPOSITIONS
The Company did not sell any properties during the six months ended June 30, 2021.
The Company closed on the following dispositionsdisposition during the ninesix months ended SeptemberJune 30, 2017:2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Date | | Property Name | | Property Type | | Square Footage | | Consideration | | Aggregate Proceeds, Net (a) | | Gain |
February 13, 2020 | | King Philip’s Crossing | | Multi-tenant retail | | 105,900 | | | $ | 13,900 | | | $ | 11,343 | | | $ | 0 | |
| | | | | | 105,900 | | | $ | 13,900 | | | $ | 11,343 | | | $ | 0 | |
|
| | | | | | | | | | | | | | | | | | | |
Date | | Property Name | | Property Type | | Square Footage | | Consideration | | Aggregate Proceeds, Net (a) | | Gain |
January 27, 2017 | | Rite Aid Store (Eckerd), Culver Rd. – Rochester, NY | | Single-user retail | | 10,900 |
| | $ | 500 |
| | $ | 332 |
| | $ | — |
|
February 21, 2017 | | Shoppes at Park West | | Multi-tenant retail | | 63,900 |
| | 15,383 |
| | 15,261 |
| | 7,569 |
|
March 7, 2017 | | CVS Pharmacy – Sylacauga, AL | | Single-user retail | | 10,100 |
| | 3,700 |
| | 3,348 |
| | 1,651 |
|
March 8, 2017 | | Rite Aid Store (Eckerd) – Kill Devil Hills, NC | | Single-user retail | | 13,800 |
| | 4,297 |
| | 4,134 |
| | 1,857 |
|
March 15, 2017 | | Century III Plaza – Home Depot (b) | | Single-user parcel | | 131,900 |
| | 17,519 |
| | 17,344 |
| | 4,487 |
|
March 16, 2017 | | Village Shoppes at Gainesville | | Multi-tenant retail | | 229,500 |
| | 41,750 |
| | 41,380 |
| | 14,107 |
|
March 24, 2017 | | Northwood Crossing | | Multi-tenant retail | | 160,000 |
| | 22,850 |
| | 22,723 |
| | 10,007 |
|
April 4, 2017 | | University Town Center | | Multi-tenant retail | | 57,500 |
| | 14,700 |
| | 14,590 |
| | 9,128 |
|
April 4, 2017 | | Edgemont Town Center | | Multi-tenant retail | | 77,700 |
| | 19,025 |
| | 18,857 |
| | 8,995 |
|
April 4, 2017 | | Phenix Crossing (c) | | Multi-tenant retail | | 56,600 |
| | 12,400 |
| | (28 | ) | | 5,699 |
|
April 27, 2017 | | Brown’s Lane | | Multi-tenant retail | | 74,700 |
| | 10,575 |
| | 10,318 |
| | 3,408 |
|
May 9, 2017 | | Rite Aid Store (Eckerd) – Greer, SC | | Single-user retail | | 13,800 |
| | 3,050 |
| | 2,961 |
| | 830 |
|
May 9, 2017 | | Evans Towne Centre | | Multi-tenant retail | | 75,700 |
| | 11,825 |
| | 11,419 |
| | 5,226 |
|
May 25, 2017 | | Red Bug Village | | Multi-tenant retail | | 26,200 |
| | 8,100 |
| | 7,767 |
| | 2,184 |
|
May 26, 2017 | | Wilton Square | | Multi-tenant retail | | 438,100 |
| | 49,300 |
| | 48,503 |
| | 19,630 |
|
May 30, 2017 | | Town Square Plaza | | Multi-tenant retail | | 215,600 |
| | 28,600 |
| | 26,459 |
| | 3,412 |
|
May 31, 2017 | | Cuyahoga Falls Market Center | | Multi-tenant retail | | 76,400 |
| | 11,500 |
| | 11,101 |
| | 1,300 |
|
June 5, 2017 | | Plaza Santa Fe II | | Multi-tenant retail | | 224,200 |
| | 35,220 |
| | 33,506 |
| | 16,946 |
|
June 6, 2017 | | Rite Aid Store (Eckerd)–Columbia, SC | | Single-user retail | | 13,400 |
| | 3,250 |
| | 3,163 |
| | 1,046 |
|
June 16, 2017 | | Fox Creek Village | | Multi-tenant retail | | 107,500 |
| | 24,825 |
| | 24,415 |
| | 12,470 |
|
June 29, 2017 | | Cottage Plaza | | Multi-tenant retail | | 85,500 |
| | 23,050 |
| | 22,685 |
| | 8,039 |
|
June 29, 2017 | | Magnolia Square | | Multi-tenant retail | | 116,000 |
| | 16,000 |
| | 15,692 |
| | 4,866 |
|
June 29, 2017 | | Cinemark Seven Bridges | | Single-user retail | | 70,200 |
| | 15,271 |
| | 14,948 |
| | 3,973 |
|
June 29, 2017 | | Low Country Village I & II | | Multi-tenant retail | | 139,900 |
| | 22,075 |
| | 21,639 |
| | 10,286 |
|
July 20, 2017 | | Boulevard Plaza | | Multi-tenant retail | | 111,100 |
| | 14,300 |
| | 13,913 |
| | 846 |
|
July 26, 2017 | | Irmo Station (c) | | Multi-tenant retail | | 99,400 |
| | 16,027 |
| | (47 | ) | | 7,236 |
|
July 27, 2017 | | Hickory Ridge | | Multi-tenant retail | | 380,600 |
| | 44,020 |
| | 43,701 |
| | 18,535 |
|
August 4, 2017 | | Lakepointe Towne Center | | Multi-tenant retail | | 196,600 |
| | 10,500 |
| | 10,179 |
| | — |
|
August 14, 2017 | | The Columns | | Multi-tenant retail | | 173,400 |
| | 21,750 |
| | 21,313 |
| | 5,073 |
|
August 25, 2017 | | Holliday Towne Center | | Multi-tenant retail | | 83,100 |
| | 11,750 |
| | 11,413 |
| | 2,633 |
|
August 25, 2017 | | Northwoods Center (c) | | Multi-tenant retail | | 96,000 |
| | 24,250 |
| | (9 | ) | | 10,889 |
|
September 14, 2017 | | The Orchard | | Multi-tenant retail | | 165,800 |
| | 20,000 |
| | 19,663 |
| | 5,022 |
|
September 21, 2017 | | Lake Mary Pointe | | Multi-tenant retail | | 51,100 |
| | 5,100 |
| | 4,838 |
| | 534 |
|
September 22, 2017 | | West Town Market (c) | | Multi-tenant retail | | 67,900 |
| | 14,250 |
| | (59 | ) | | 8,074 |
|
September 29, 2017 | | Dorman Centre I & II | | Multi-tenant retail | | 388,300 |
| | 46,000 |
| | 45,011 |
| | 13,430 |
|
| | | | | | 4,302,400 |
| | $ | 642,712 |
| | $ | 562,433 |
| | $ | 229,388 |
|
| |
(a) | (a)Aggregate proceeds are net of transaction costs and proceeds temporarily restricted related to potential 1031 Exchanges and exclude $150 of condemnation proceeds, which did not result in any additional gain recognition. |
| |
(b) | The Company disposed of the Home Depot parcel at Century III Plaza, an existing 284,100 square foot multi-tenant retail operating property. The remaining portion of Century III Plaza is classified as held for sale as of September 30, 2017. |
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| |
(c) | The following disposition proceeds are temporarily restricted related to potential 1031 Exchanges and are included in “Other assets, net” in the accompanying condensed consolidated balance sheets: |
|
| | | | |
Property Name | | Proceeds Temporarily Restricted |
Phenix Crossing | | $ | 12,324 |
|
Irmo Station | | 15,643 |
|
Northwoods Center | | 23,255 |
|
West Town Market | | 13,864 |
|
| | $ | 65,086 |
|
During the nine months ended September 30, 2017, the Company also received proceeds and recognized a gain of $1,486 as a result of the receipt of the escrow related to the disposition of Maple Tree Place on August 12, 2016. The aggregate proceeds, net of closingtransaction costs and exclude $26 of condemnation proceeds, temporarily restricted related to potential 1031 Exchanges, from property dispositions and other transactions during the nine months ended September 30, 2017 totaled $564,069, with aggregate gainswhich did not result in recognition of $230,874.a gain.
The Company closed on the following dispositions during the nine months ended September 30, 2016:
|
| | | | | | | | | | | | | | | | | | | |
Date | | Property Name | | Property Type | | Square Footage | | Consideration | | Aggregate Proceeds, Net (a) | | Gain |
February 1, 2016 | | The Gateway (b) | | Multi-tenant retail | | 623,200 |
| | $ | 75,000 |
| | $ | (795 | ) | | $ | 3,868 |
|
February 10, 2016 | | Stateline Station | | Multi-tenant retail | | 142,600 |
| | 17,500 |
| | 17,210 |
| | 4,253 |
|
March 30, 2016 | | Six Property Portfolio (c) | | Single-user retail | | 230,400 |
| | 35,413 |
| | 34,986 |
| | 13,618 |
|
April 20, 2016 | | CVS Pharmacy – Oklahoma City, OK | | Single-user retail | | 10,900 |
| | 4,676 |
| | 4,608 |
| | 1,764 |
|
June 2, 2016 | | Rite Aid Store (Eckerd) – Canandaigua, NY & Tim Horton Donut Shop (d) | | Single-user retail | | 16,600 |
| | 5,400 |
| | 5,333 |
| | 1,444 |
|
June 15, 2016 | | Academy Sports – Midland, TX (e) | | Single-user retail | | 61,200 |
| | 5,541 |
| | 5,399 |
| | 2,220 |
|
June 23, 2016 | | Four Rite Aid Portfolio (f) | | Single-user retail | | 45,400 |
| | 15,934 |
| | 14,646 |
| | 2,287 |
|
July 8, 2016 | | Broadway Shopping Center | | Multi-tenant retail | | 190,300 |
| | 20,500 |
| | 20,103 |
| | 7,958 |
|
July 21, 2016 | | Mid-Hudson Center | | Multi-tenant retail | | 235,600 |
| | 27,500 |
| | 25,615 |
| | — |
|
July 27, 2016 | | Rite Aid Store (Eckerd), Main St. – Buffalo, NY | | Single-user retail | | 10,900 |
| | 3,388 |
| | 3,296 |
| | 344 |
|
July 29, 2016 | | Rite Aid Store (Eckerd)–Lancaster, NY | | Single-user retail | | 10,900 |
| | 3,425 |
| | 3,349 |
| | 625 |
|
August 4, 2016 | | Alison's Corner | | Multi-tenant retail | | 55,100 |
| | 7,850 |
| | 7,559 |
| | 3,334 |
|
August 5, 2016 | | Rite Aid Store (Eckerd), Lake Ave. – Rochester, NY | | Single-user retail | | 13,200 |
| | 5,400 |
| | 5,334 |
| | 907 |
|
August 12, 2016 | | Maple Tree Place | | Multi-tenant retail | | 489,000 |
| | 90,000 |
| | 87,047 |
| | 15,566 |
|
August 12, 2016 | | CVS Pharmacy – Burleson, TX | | Single-user retail | | 10,900 |
| | 4,190 |
| | 4,102 |
| | 1,425 |
|
August 18, 2016 | | Mitchell Ranch Plaza | | Multi-tenant retail | | 199,600 |
| | 55,625 |
| | 54,305 |
| | 33,612 |
|
August 22, 2016 | | Rite Aid Store (Eckerd), E. Main St. – Batavia, NY | | Single-user retail | | 13,800 |
| | 5,050 |
| | 4,924 |
| | 1,249 |
|
September 9, 2016 | | Rite Aid Store (Eckerd)–Lockport, NY | | Single-user retail | | 13,800 |
| | 4,690 |
| | 4,415 |
| | 753 |
|
September 9, 2016 | | Rite Aid Store (Eckerd), Ferry St. – Buffalo, NY | | Single-user retail | | 10,900 |
| | 3,600 |
| | 3,370 |
| | 612 |
|
| | | | | | 2,384,300 |
| | $ | 390,682 |
| | $ | 304,806 |
| | $ | 95,839 |
|
| |
(a) | Aggregate proceeds are net of transaction costs. |
| |
(b) | The property was disposed of through a lender-directed sale in full satisfaction of the Company’s $94,353 mortgage obligation. Immediately prior to the disposition the lender reduced the Company’s loan obligation to $75,000 which was assumed by the buyer in connection with the disposition. Along with the loan reduction, the lender received the balance of the restricted escrows that they held and the rights to unpaid accounts receivable and forgave accrued interest, resulting in a net gain on extinguishment of debt of $13,653. |
| |
(c) | Portfolio consists of the following properties: (i) Academy Sports – Houma, LA, (ii) Academy Sports – Port Arthur, TX, (iii) Academy Sports – San Antonio, TX, (iv) CVS Pharmacy – Moore, OK, (v) CVS Pharmacy – Saginaw, TX and (vi) Rite Aid Store (Eckerd) – Olean, NY. At the closing of the disposition, proceeds of $34,973 were temporarily restricted related to 1031 Exchanges. During the three months ended September 30, 2016, the related 1031 Exchanges closed and the proceeds were released to the Company. |
| |
(d) | The terms of the disposition of Rite Aid Store (Eckerd) – Canandaigua, NY and Tim Horton Donut Shop – Canandaigua, NY were negotiated as a single transaction. |
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| |
(e) | At the closing of the disposition, proceeds of $5,383 were temporarily restricted related to a 1031 Exchange. During the three months ended September 30, 2016, the related 1031 Exchange closed and the proceeds were released to the Company. |
| |
(f) | Portfolio consists of the following properties: (i) Rite Aid Store (Eckerd) – Cheektowaga, NY, (ii) Rite Aid Store (Eckerd), W. Main St. – Batavia, NY, (iii) Rite Aid Store (Eckerd), Union Rd. – West Seneca, NY and (iv) Rite Aid Store (Eckerd) – Greece, NY. |
During the nine months ended September 30, 2016, the Company also disposed of an outparcel for consideration of $2,639 and recorded a gain of $1,898 from the transaction. At the closing of the disposition, proceeds of $2,549 were temporarily restricted related to a 1031 Exchange. During the three months ended September 30, 2016, the related 1031 Exchange closed and the proceeds were released to the Company. The aggregate proceeds, net of closing costs, from the property dispositions and this additional transaction totaled $307,355 with aggregate gains of $97,737.
None of the dispositions completed during the ninesix months ended SeptemberJune 30, 2017 and 2016 qualified2020 did not qualify for discontinued operations treatment.treatment and is not considered individually significant.
The followingAs of June 30, 2021, the Company had entered into contracts to sell (i) Streets of Yorktown, an 85,200 square foot multi-tenant retail operating property located in Houston, Texas, and (ii) HQ Shopping Center, a 116,400 square foot multi-tenant retail operating property located in San Antonio, Texas. These properties qualified for held for sale accounting treatment prior to or during the quarter ended September 30, 2017. Uponupon meeting all applicable GAAP criteria for held for sale accounting treatment,during the quarter ended June 30, 2021, at which time depreciation and amortization were ceased. In addition, the assets and liabilities associated with these properties are separately classified as held for sale in the accompanying condensed consolidated balance sheet as of SeptemberJune 30, 2017.
|
| | | | | | | |
Property Name | | Property Location | | Property Type | | Square Footage |
Century III Plaza, excluding the Home Depot parcel | | West Mifflin, Pennsylvania | | Multi-tenant retail | | 152,200 |
|
Forks Town Center | | Easton, Pennsylvania | | Multi-tenant retail | | 100,300 |
|
Placentia Town Center | | Placentia, California | | Multi-tenant retail | | 111,000 |
|
Quakertown | | Quakertown, Pennsylvania | | Multi-tenant retail | | 61,800 |
|
Saucon Valley Square | | Bethlehem, Pennsylvania | | Multi-tenant retail | | 80,700 |
|
Five Forks | | Simpsonville, South Carolina | | Multi-tenant retail | | 70,200 |
|
| | | | | | 576,200 |
|
Subsequent to September 30, 2017, the Company sold Forks Town Center, Placentia Town Center, Five Forks and Saucon Valley Square2021. NaN properties qualified for total consideration of $76,545. Century III Plaza, including the Home Depot parcel, and CVS Pharmacy – Sylacauga were classified as held for sale accounting treatment as of December 31, 2016. The Home Depot parcel at Century III Plaza and CVS Pharmacy – Sylacauga were sold during the nine months ended September 30, 2017.2020.
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The following table presents the assets and liabilities associated with the investment properties classified as held for sale:
| | | | | |
| June 30, 2021 |
Assets | |
Land, building and other improvements | $ | 22,173 | |
Less: accumulated depreciation | (8,778) | |
Net investment properties | 13,395 | |
Other assets | 405 | |
Assets associated with investment properties held for sale | $ | 13,800 | |
| |
Liabilities | |
Other liabilities | $ | 526 | |
Liabilities associated with investment properties held for sale | $ | 526 | |
|
| | | | | | | |
| September 30, 2017 | | December 31, 2016 |
Assets | | | |
Land, building and other improvements | $ | 81,718 |
| | $ | 45,395 |
|
Less accumulated depreciation | (21,189 | ) | | (15,769 | ) |
Net investment properties | 60,529 |
| | 29,626 |
|
Other assets | 4,144 |
| | 1,201 |
|
Assets associated with investment properties held for sale | $ | 64,673 |
| | $ | 30,827 |
|
| | | |
Liabilities | | | |
Mortgage payable, net | $ | 7,655 |
| | $ | — |
|
Other liabilities | $ | 1,401 |
| | $ | 864 |
|
Liabilities associated with investment properties held for sale, net | $ | 9,056 |
| | $ | 864 |
|
(5) EQUITY COMPENSATION PLANS
The Company’s Amended and Restated 2014 Long-Term Equity Compensation Plan, subject to certain conditions, authorizes the issuance of incentive and non-qualified stock options, restricted stock and restricted stock units, stock appreciation rights and other similar awards as well as cash-based awards to the Company’s employees, non-employee directors, consultants and advisors in connection with compensation and incentive arrangements that may be established by the Company’s board of directors or executive management.
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The following table summarizes the Company’s unvested restricted shares as of and for the ninesix months ended SeptemberJune 30, 2017:2021:
| | | | | | | | | | | |
| Unvested Restricted Shares | | Weighted Average Grant Date Fair Value per Restricted Share |
Balance as of January 1, 2021 | 685 | | | $ | 10.81 | |
Shares granted (a) | 608 | | | $ | 11.31 | |
Shares vested | (389) | | | $ | 10.27 | |
| | | |
Balance as of June 30, 2021 (b) | 904 | | | $ | 11.38 | |
|
| | | | | | |
| Unvested Restricted Shares |
| Weighted Average Grant Date Fair Value per Restricted Share |
Balance as of January 1, 2017 | 542 |
|
| $ | 15.28 |
|
Shares granted (a) | 285 |
|
| $ | 14.60 |
|
Shares vested | (282 | ) |
| $ | 15.45 |
|
Shares forfeited | (34 | ) | | $ | 15.12 |
|
Balance as of September 30, 2017 (b) | 511 |
|
| $ | 14.82 |
|
(a)Shares granted vest over periods ranging from 0.9 years to three years in accordance with the terms of applicable award agreements. | |
(a) | Shares granted vest over periods ranging from one year to three years in accordance with the terms of applicable award agreements. |
| |
(b) | As of September 30, 2017, total unrecognized compensation expense related to unvested restricted shares was $3,263, which is expected to be amortized over a weighted average term of 1.3 years. |
(b)As of June 30, 2021, total unrecognized compensation expense related to unvested restricted shares was $3,661, which is expected to be amortized over a weighted average term of 1.3 years.
The following table summarizes the Company’s unvested performance restricted stock units (RSUs) as of and for the ninesix months ended SeptemberJune 30, 2017:2021:
| | | | | | | | | | | |
| Unvested RSUs | | Weighted Average Grant Date Fair Value per RSU |
RSUs eligible for future conversion as of January 1, 2021 | 974 | | | $ | 12.81 | |
RSUs granted (a) | 452 | | | $ | 10.06 | |
Conversion of RSUs to common stock and restricted shares (b) | (260) | | | $ | 14.39 | |
| | | |
RSUs eligible for future conversion as of June 30, 2021 (c) | 1,166 | | | $ | 11.39 | |
(a)Assumptions and inputs as of the grant date included a risk-free interest rate of 0.16%, the Company’s historical common stock performance relative to the peer companies within the National Association of Real Estate Investment Trusts (NAREIT) Shopping Center Index and the Company’s projected common stock dividend yield of 4.08%. Subject to continued employment, in 2024, following the performance period which concludes on December 31, 2023, one-third of the RSUs that are earned will convert into shares of common stock and two-thirds will convert into restricted shares with a one year vesting term.
(b)On February 8, 2021, 260 RSUs converted into 102 shares of common stock and 197 restricted shares that will vest on December 31, 2021, subject to continued employment through such date, after applying a conversion rate of 115% based upon the Company’s Total Shareholder Return (TSR) relative to the TSRs of its peer companies for the performance period that concluded on December 31, 2020. An additional 49 shares of common stock were also issued, representing the dividends that would have been paid on the earned awards during the performance period.
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
|
| | | | | | |
| Unvested RSUs | | Weighted Average Grant Date Fair Value per RSU |
RSUs eligible for future conversion as of January 1, 2017 | 391 |
| | $ | 14.02 |
|
RSUs granted (a) | 253 |
| | $ | 15.52 |
|
RSUs ineligible for conversion | (89 | ) | | $ | 14.68 |
|
RSUs eligible for future conversion as of September 30, 2017 (b) | 555 |
| | $ | 14.60 |
|
(c)As of June 30, 2021, total unrecognized compensation expense related to unvested RSUs was $7,110, which is expected to be amortized over a weighted average term of 2.1 years. | |
(a) | Assumptions and inputs as of the grant date included a risk-free interest rate of 1.50%, the Company’s historical common stock performance relative to the peer companies within the National Association of Real Estate Investment Trusts (NAREIT) Shopping Center Index and the Company’s common stock dividend yield of 4.32%. In 2020, following the performance period which concludes on December 31, 2019, one-third of the RSUs that are earned will convert into shares of common stock and two-thirds will convert into restricted shares with a one year vesting term. |
| |
(b) | As of September 30, 2017, total unrecognized compensation expense related to unvested RSUs was $4,663, which is expected to be amortized over a weighted average term of 2.5 years. |
During the three months ended SeptemberJune 30, 20172021 and 2016,2020, the Company recorded compensation expense of $934$1,970 and $1,594,$2,221, respectively, related to the amortization of unvested restricted shares and RSUs. During the ninesix months ended SeptemberJune 30, 20172021 and 2016,2020, the Company recorded compensation expense of $4,483$4,776 and $5,296,$4,454, respectively, related to the amortization of unvested restricted shares and RSUs. Included within the amortization of stock-based compensation expense recorded during the three and nine months ended September 30, 2017 is the reversal of $830 of previously recognized compensation expense related to the forfeiture of 34 restricted shares and 89 RSUs resulting from the resignation of the Company’s former Chief Financial Officer and Treasurer. In addition, $30 of dividends previously paid on the forfeited restricted shares were reclassified from distributions paid to compensation expense. The total fair value of restricted shares that vested during the ninesix months ended SeptemberJune 30, 20172021 was $4,129.$4,078. In addition, the total fair value of RSUs that converted into common stock during the six months ended June 30, 2021 was $1,002.
Prior to 2013, non-employee directors had been granted options to acquire shares under the Company’s Third Amended and Restated Independent Director Stock Option and Incentive Plan. As of SeptemberJune 30, 2017,2021 and 2020, options to purchase 4110 and 16 shares of common stock, respectively, remained outstanding and exercisable. The Company did not0t grant any options in 20172021 or 20162020 and did not record any0 compensation expense related to stock options was recorded during the ninesix months ended SeptemberJune 30, 20172021 and 2016.2020.
(6) LEASES
Leases as Lessor
Lease income related to the Company’s operating leases is comprised of the following:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Lease income related to fixed and variable lease payments | | | | | | | |
Base rent (a) (b) | $ | 87,944 | | | $ | 90,670 | | | $ | 174,018 | | | $ | 181,103 | |
Percentage and specialty rent (c) | 633 | | | 450 | | | 1,157 | | | 1,325 | |
Tenant recoveries (b) (c) | 24,413 | | | 23,823 | | | 50,441 | | | 49,565 | |
Lease termination fee income (c) | 759 | | | 252 | | | 1,438 | | | 376 | |
Other lease-related income (c) | 1,468 | | | 1,044 | | | 2,777 | | | 2,549 | |
Straight-line rental income, net (d) | 787 | | | (1,284) | | | 1,207 | | | (943) | |
Other | | | | | | | |
Uncollectible lease income, net (e) | 4,773 | | | (19,495) | | | 8,317 | | | (20,377) | |
Amortization of above and below market lease intangibles and lease inducements | 462 | | | 1,343 | | | 1,264 | | | 1,900 | |
Lease income | $ | 121,239 | | | $ | 96,803 | | | $ | 240,619 | | | $ | 215,498 | |
(a)Base rent primarily consists of fixed lease payments; however, it also includes the net impact of variable lease payments related to lease concessions granted as relief due to COVID-19 in accordance with the Company’s policy elections related to the accounting treatment of such lease concessions. The impact of these lease concessions includes an increase of $905 and $0 for the three months ended June 30, 2021 and 2020, respectively, and $2,146 and $0 for the six months ended June 30, 2021 and 2020, respectively, in base rent related to the repayment of amounts previously deferred under lease concessions that did not meet deferral accounting treatment; as a result, lease income was reduced for the deferral in previous periods, however recognized as variable lease income upon receipt of payment, partially offset by a decrease of $700 and $28 for the three months ended June 30, 2021 and 2020, respectively, and more than offset by $3,309 and $28 for the six months ended June 30, 2021 and 2020, respectively, in base rent related to executed lease concession agreements that did not meet deferral accounting treatment and for which payment has not been received. Of the aggregate $700 and $3,309 decrease from lease concession agreements, $310 and $1,585 were associated with billed base rent from prior periods for the three and six months ended June 30, 2021, respectively.
(b)Base rent and tenant recoveries are presented gross of any uncollected amounts related to cash-basis tenants. Such uncollected amounts are reflected within “Uncollectible lease income, net.”
(c)Represents lease income related to variable lease payments.
(d)Represents lease income related to fixed lease payments. Straight-line rental income, net includes changes in the reserve for straight-line receivables related to tenants accounted for on the cash basis of $484 and $(1,636) for the three months ended June 30, 2021 and 2020, respectively, and $(2,127) and $(2,671) for the six months ended June 30, 2021 and 2020, respectively.
(e)Uncollectible lease income, net includes (i) the change in reserve related to receivables associated with tenants accounted for on the cash basis of accounting, (ii) the impact of executed lease concessions that did not meet deferral accounting treatment, however, were agreed in previous periods; as a result, the impact of these anticipated concessions was included within the reserve for uncollectible lease
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
income until executed, (iii) the net change in the general reserve for those receivables that are not considered probable of collection, and (iv) the estimated impact for lease concessions that have been agreed in principle with the tenant that are not expected to meet deferral accounting treatment, however, such agreements were not executed as of period end.
(6) MORTGAGES PAYABLEIn response to COVID-19 and its related impact on many of the Company’s tenants, the Company reached agreements with tenants regarding lease concessions. The majority of the amounts addressed by the lease concessions are base rent, although certain concessions also address tenant recoveries and other charges. The majority of these concessions were agreed to and, in the majority of these circumstances, executed during the year ended December 31, 2020. As of June 30, 2021, the Company has agreed in principle and/or executed additional lease concessions to defer, without an extension of the lease term, $54 of previously uncollected base rent charges and to address an additional $694 of previously uncollected base rent charges through abatement, a combination of deferral and abatement or a concession with the extension of the lease term.
As of June 30, 2021, $3,771 of executed lease concessions to defer rental payment without an extension of the lease term, net of related reserves, remain outstanding within “Accounts receivable, net” in the accompanying condensed consolidated balance sheets. Further, as of June 30, 2021, the amounts that have been deferred to future periods under executed lease concessions, on a weighted average basis, will be received over a period of approximately six months.
(7) DEBT
The Company has the following types of indebtedness: (i) mortgages payable, (ii) unsecured notes payable, (iii) unsecured term loans and (iv) an unsecured revolving line of credit.
Mortgages Payable
The following table summarizes the Company’s mortgages payable:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 |
| Balance | | Weighted Average Interest Rate | | Weighted Average Years to Maturity | | Balance | | Weighted Average Interest Rate | | Weighted Average Years to Maturity |
Fixed rate mortgages payable (a) | $ | 90,962 | | | 4.37 | % | | 3.5 | | $ | 92,156 | | | 4.36 | % | | 4.1 |
Discount, net of accumulated amortization | (428) | | | | | | | (450) | | | | | |
Capitalized loan fees, net of accumulated amortization | (160) | | | | | | | (192) | | | | | |
Mortgages payable, net | $ | 90,374 | | | | | | | $ | 91,514 | | | | | |
|
| | | | | | | | | | | | | | | | | |
| September 30, 2017 | | December 31, 2016 |
| Aggregate Principal Balance |
| Weighted Average Interest Rate | | Weighted Average Years to Maturity | | Aggregate Principal Balance | | Weighted Average Interest Rate | | Weighted Average Years to Maturity |
Fixed rate mortgages payable (a) | $ | 288,252 |
|
| 4.99 | % | | 5.5 | | $ | 773,395 |
| | 6.31 | % | | 4.2 |
Premium, net of accumulated amortization | 1,087 |
| | | | | | 1,437 |
| | | | |
Discount, net of accumulated amortization | (590 | ) |
| | | | | (622 | ) | | | | |
Capitalized loan fees, net of accumulated amortization | (649 | ) | | | | | | (5,026 | ) | | | | |
Mortgages payable, net | $ | 288,100 |
|
| | | | | $ | 769,184 |
| | | | |
(a)The fixed rate mortgages had interest rates ranging from 3.75% to 4.82% as of June 30, 2021 and December 31, 2020. | |
(a) | The fixed rate mortgages had interest rates ranging from 3.75% to 8.00% as of September 30, 2017 and December 31, 2016 and exclude a $7,680 mortgage payable and capitalized loan fees of $(25) associated with one investment property classified as held for sale as of September 30, 2017. |
During the ninesix months ended SeptemberJune 30, 2017,2021, the Company repaid or defeased mortgages payable in the total amount of $473,844, of which $174,702 related to properties that were disposed of during the period, which had a weighted average fixed interest rate of 7.09%, and made scheduled principal payments of $3,619$1,194 related to amortizing loans. Included within the total repayments and defeasances for the nine months ended September 30, 2017 is the defeasance of a portfolio of mortgages payable with a principal balance of $379,435 as of December 31, 2016 that was cross-collateralized by 45 properties and scheduled to mature in 2019 (known as the IW JV portfolio of mortgages payable). The Company incurred a defeasance premium and associated fees totaling $60,198 in connection with this transaction, which are included within “Interest expense” in the accompanying condensed consolidated statements of operations and other comprehensive (loss) income. As a result, the 45 properties that secured the mortgages payable as of December 31, 2016 are no longer encumbered by mortgages.
Debt Maturities
The following table shows the scheduled maturities and principal amortization of the Company’s indebtedness as of September 30, 2017 for the remainder of 2017, each of the next four years and thereafter and the weighted average interest rates by year. The table does not reflect the impact of any debt activity that occurred after September 30, 2017.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2017 | | 2018 | | 2019 | | 2020 | | 2021 | | Thereafter | | Total |
Debt: | | | | | | | | | | | | | |
Fixed rate debt: | | | | | | | | | | | | | |
Mortgages payable (a) | $ | 1,003 |
| | $ | 4,177 |
| | $ | 25,257 |
| | $ | 3,923 |
| | $ | 22,820 |
| | $ | 231,072 |
| | $ | 288,252 |
|
Fixed rate term loans (b) | — |
| | — |
| | — |
| | — |
| | 250,000 |
| | 200,000 |
| | 450,000 |
|
Unsecured notes payable (c) | — |
| | — |
| | — |
| | — |
| | 100,000 |
| | 600,000 |
| | 700,000 |
|
Total fixed rate debt | 1,003 |
| | 4,177 |
| | 25,257 |
| | 3,923 |
| | 372,820 |
| | 1,031,072 |
| | 1,438,252 |
|
| | | | | | | | | | | | | |
Variable rate debt: | | | | | | | | | | | | | |
Variable rate term loan and revolving line of credit | — |
| | 100,000 |
| | — |
| | 187,000 |
| | — |
| | — |
| | 287,000 |
|
Total debt (d) | $ | 1,003 |
| | $ | 104,177 |
| | $ | 25,257 |
| | $ | 190,923 |
| | $ | 372,820 |
| | $ | 1,031,072 |
| | $ | 1,725,252 |
|
| | | | | | | | | | | | | |
Weighted average interest rate on debt: | | | | | | | | | | | | | |
Fixed rate debt | 5.10 | % | | 5.05 | % | | 7.29 | % | | 4.62 | % | | 2.73 | % | | 4.08 | % | | 3.79 | % |
Variable rate debt (e) | — |
| | 2.68 | % | | — |
| | 2.59 | % | | — |
| | — |
| | 2.62 | % |
Total | 5.10 | % | | 2.78 | % | | 7.29 | % | | 2.63 | % | | 2.73 | % | | 4.08 | % | | 3.60 | % |
| |
(a) | Excludes mortgage premium of $1,087 and discount of $(590), net of accumulated amortization, as of September 30, 2017 and a $7,680 mortgage payable associated with one investment property classified as held for sale as of September 30, 2017. |
| |
(b) | $250,000 of London Interbank Offered Rate (LIBOR)-based variable rate debt has been swapped to a fixed rate through two interest rate swaps. The swaps effectively convert one-month floating rate LIBOR to a weighted average fixed rate of 0.67% through December 31, |
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Unsecured Notes Payable
2017. In addition, $200,000The following table summarizes the Company’s unsecured notes payable:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | June 30, 2021 | | December 31, 2020 |
Unsecured Notes Payable | | Maturity Date | | Balance | | Interest Rate/ Weighted Average Interest Rate | | Balance | | Interest Rate/ Weighted Average Interest Rate |
Senior notes – 4.58% due 2024 | | June 30, 2024 | | $ | 150,000 | | | 4.58 | % | | $ | 150,000 | | | 4.58 | % |
Senior notes – 4.00% due 2025 | | March 15, 2025 | | 350,000 | | | 4.00 | % | | 350,000 | | | 4.00 | % |
Senior notes – 4.08% due 2026 | | September 30, 2026 | | 100,000 | | | 4.08 | % | | 100,000 | | | 4.08 | % |
Senior notes – 4.24% due 2028 | | December 28, 2028 | | 100,000 | | | 4.24 | % | | 100,000 | | | 4.24 | % |
Senior notes – 4.82% due 2029 | | June 28, 2029 | | 100,000 | | | 4.82 | % | | 100,000 | | | 4.82 | % |
Senior notes – 4.75% due 2030 | | September 15, 2030 | | 400,000 | | | 4.75 | % | | 400,000 | | | 4.75 | % |
| | | | 1,200,000 | | | 4.42 | % | | 1,200,000 | | | 4.42 | % |
Discount, net of accumulated amortization | | | | (6,044) | | | | | (6,473) | | | |
Capitalized loan fees, net of accumulated amortization | | (6,912) | | | | | (7,527) | | | |
| | Total | | $ | 1,187,044 | | | | | $ | 1,186,000 | | | |
Unsecured Term Loans and Revolving Line of Credit
The following table summarizes the Company’s term loans and revolving line of credit:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | June 30, 2021 | | December 31, 2020 |
| Maturity Date | | Balance | | Interest Rate | | Balance | | Interest Rate |
Unsecured term loan due 2023 – fixed rate (a) | November 22, 2023 | | $ | 200,000 | | | 4.10 | % | | $ | 200,000 | | | 4.10 | % |
Unsecured term loan due 2024 – fixed rate (b) | July 17, 2024 | | 120,000 | | | 2.88 | % | | 120,000 | | | 2.88 | % |
Unsecured term loan due 2026 – fixed rate (c) (d) | July 17, 2026 | | 150,000 | | | 3.37 | % | | 150,000 | | | 3.37 | % |
Subtotal | | | 470,000 | | | | | 470,000 | | | |
Capitalized loan fees, net of accumulated amortization | | | (2,105) | | | | | (2,441) | | | |
Term loans, net | | | $ | 467,895 | | | | | $ | 467,559 | | | |
| | | | | | | | | |
Unsecured credit facility revolving line of credit – variable rate (e) | April 22, 2022 (f) | | $ | 0 | | | 1.20 | % | | $ | 0 | | | 1.25 | % |
(a)$200,000 of LIBOR-based variable rate debt has been swapped to a fixed rate of 2.85% plus a credit spread based on a leverage grid ranging from 1.20% to 1.85% through two interestNovember 22, 2023. The applicable credit spread was 1.25% as of June 30, 2021 and December 31, 2020.
(b)$120,000 of LIBOR-based variable rate swaps. The swaps effectively convert one-month floating rate LIBORdebt has been swapped to a fixed rate of 1.26%1.68% plus a credit spread based on a leverage grid ranging from 1.20% to 1.70% through November 22, 2018.
| |
(c) | Excludes discount of $(882), net of accumulated amortization, as of September 30, 2017. |
| |
(d) | The weighted average years to maturity of consolidated indebtedness was 5.4 years as of September 30, 2017. Total debt excludes capitalized loan fees of $(7,283), net of accumulated amortization, as of September 30, 2017, which are included as a reduction to the respective debt balances. |
| |
(e) | Represents interest rates as of September 30, 2017. |
July 17, 2024. The applicable credit spread was 1.20% as of June 30, 2021 and December 31, 2020.
(c)$150,000 of LIBOR-based variable rate debt has been swapped to a fixed rate of 1.77% plus a credit spread based on a leverage grid ranging from 1.50% to 2.20% through July 17, 2026. The applicable credit spread was 1.60% as of June 30, 2021 and December 31, 2020.
(d)Subsequent to June 30, 2021, the Company plansamended the pricing terms of the unsecured term loan due 2026, which will bear interest at a rate of LIBOR plus a credit spread based on addressinga leverage grid ranging from 1.20% to 1.70%. In accordance with the amended unsecured term loan agreement, the Company may elect to convert to an investment grade pricing grid.
(e)Excludes capitalized loan fees, which are included within “Other assets, net” in the accompanying condensed consolidated balance sheets.
(f)Subsequent to June 30, 2021, the Company entered into its debt maturities through a combinationsixth amended and restated unsecured credit agreement that extended the maturity date of proceeds from asset dispositions, capital markets transactions and itsthe unsecured revolving line of credit.
(7) UNSECURED NOTES PAYABLE
The following table summarizescredit to January 8, 2026 with the option to extend for 2 additional six-month periods at the Company’s unsecured notes payable:
|
| | | | | | | | | | | | | | | | |
| | | | September 30, 2017 | | December 31, 2016 |
Unsecured Notes Payable | | Maturity Date | | Principal Balance | | Interest Rate/ Weighted Average Interest Rate | | Principal Balance | | Interest Rate/ Weighted Average Interest Rate |
Senior notes – 4.12% due 2021 | | June 30, 2021 | | $ | 100,000 |
| | 4.12 | % | | $ | 100,000 |
| | 4.12 | % |
Senior notes – 4.58% due 2024 | | June 30, 2024 | | 150,000 |
| | 4.58 | % | | 150,000 |
| | 4.58 | % |
Senior notes – 4.00% due 2025 | | March 15, 2025 | | 250,000 |
| | 4.00 | % | | 250,000 |
| | 4.00 | % |
Senior notes – 4.08% due 2026 | | September 30, 2026 | | 100,000 |
| | 4.08 | % | | 100,000 |
| | 4.08 | % |
Senior notes – 4.24% due 2028 | | December 28, 2028 | | 100,000 |
| | 4.24 | % | | 100,000 |
| | 4.24 | % |
| | | | 700,000 |
| | 4.19 | % | | 700,000 |
| | 4.19 | % |
Discount, net of accumulated amortization | | | | (882 | ) | | | | (971 | ) | | |
Capitalized loan fees, net of accumulated amortization | | | | (3,523 | ) | | | | (3,886 | ) | | |
| | Total | | $ | 695,595 |
| | | | $ | 695,143 |
| | |
Notes Due 2026election, subject to (i) customary representations and 2028
The note purchase agreement governing the 4.08% senior unsecured notes due 2026 and the 4.24% senior unsecured notes due 2028 (Notes Due 2026 and 2028) contains customary covenants and events of default. Pursuantwarranties, including, but not limited to, the termsabsence of an event of default as defined in the amended unsecured credit agreement and (ii) payment of an extension fee equal to 0.075% of the note purchase agreement, the Company is subject to various financial covenants, including the requirement to maintain the following: (i) maximum unencumbered, secured and consolidated leverage ratios; (ii) a minimum interest coverage ratio; (iii) an unencumbered interest coverage ratio (as set forth in the Company’s unsecuredrevolving line of credit facility and the note purchase agreement governing the Notes Due 2021 and 2024); and (iv) a fixed charge coverage ratio (as set forth in the Company’s unsecured credit facility).
Notes Due 2025
The indenture, as supplemented, governing the 4.00% senior unsecured notes due 2025 (Notes Due 2025) (the Indenture) contains customary covenants and events of default. Pursuant to the terms of the Indenture, the Company is subject to various financial covenants, including the requirement to maintain the following: (i) maximum secured and total leverage ratios; (ii) a debt service coverage ratio; and (iii) maintenance of an unencumbered assets to unsecured debt ratio.
Notes Due 2021 and 2024
The note purchase agreement governing the 4.12% senior unsecured notes due 2021 and the 4.58% senior unsecured notes due 2024 (Notes Due 2021 and 2024) contains customary covenants and events of default. Pursuant to the terms of the note purchase agreement, the Company is subject to various financial covenants, some of which are based upon the financial covenants in effect in the Company’s unsecured credit facility, including the requirement to maintain the following: (i) maximum unencumbered, secured and consolidated leverage ratios; (ii) minimum interest coverage and unencumbered interest coverage ratios; and (iii) a minimum consolidated net worth.
As of September 30, 2017, management believes the Company was in compliance with the financial covenants under the Indenture and the note purchase agreements.
capacity.
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(8) UNSECURED TERM LOANS AND REVOLVING LINE OF CREDIT
The following table summarizes the Company’s term loans and revolving line of credit:
|
| | | | | | | | | | | | | | | | |
| | | | September 30, 2017 | | December 31, 2016 |
| | Maturity Date | | Balance | | Interest Rate | | Balance | | Interest Rate |
Unsecured credit facility term loan due 2021 – fixed rate (a) | | January 5, 2021 | | $ | 250,000 |
| | 1.97 | % | | $ | 250,000 |
| | 1.97 | % |
Unsecured credit facility term loan due 2018 – variable rate | | May 11, 2018 | | 100,000 |
| | 2.68 | % | | 200,000 |
| | 2.22 | % |
Unsecured term loan due 2023 – fixed rate (b) | | November 22, 2023 | | 200,000 |
| | 2.96 | % | | — |
| | — | % |
Subtotal | | | | 550,000 |
| | | | 450,000 |
| | |
Capitalized loan fees, net of accumulated amortization | | | | (3,086 | ) | | | | (2,402 | ) | | |
Term loans, net | | | | $ | 546,914 |
| | | | $ | 447,598 |
| | |
| | | | | | | | | | |
Revolving line of credit – variable rate (c) | | January 5, 2020 | | $ | 187,000 |
| | 2.59 | % | | $ | 86,000 |
| | 2.12 | % |
| |
(a) | $250,000 of LIBOR-based variable rate debt has been swapped to a weighted average fixed rate of 0.67% plus a credit spread based on a leverage grid ranging from 1.30% to 2.20% through December 31, 2017. The applicable credit spread was 1.30% as of September 30, 2017 and December 31, 2016.
|
| |
(b) | $200,000 of LIBOR-based variable rate debt has been swapped to a fixed rate of 1.26% plus a credit spread based on a leverage grid ranging from 1.70% to 2.55% through November 22, 2018. The applicable credit spread was 1.70% as of September 30, 2017.
|
| |
(c) | Excludes capitalized loan fees, which are included in “Other assets, net” in the accompanying condensed consolidated balance sheets. |
Unsecured Credit Facility
On January 6, 2016,April 23, 2018, the Company entered into its fourthfifth amended and restated unsecured credit agreement (Unsecured Credit Agreement) with a syndicate of financial institutions led by KeyBank National Association serving as administrative agent and Wells Fargo Bank, National Association serving as syndication agent to provide for an unsecured credit facility aggregating $1,200,000$1,100,000, consisting of an $850,000 unsecured revolving line of credit that matures on April 22, 2022 and a $250,000 unsecured term loan that was scheduled to mature on January 5, 2021 and was repaid during 2020 (Unsecured Credit Facility). The Unsecured Credit Facility consists of a $750,000 unsecured revolving line of credit a $250,000 unsecured term loan and a second unsecured term loan which had an outstanding balance of $200,000 at inception, of which the Company repaid $100,000 during the nine months ended September 30, 2017, and is priced on a leverage grid at a rate of LIBOR plus a credit spread. The Company received investment grade credit ratings from Moody’s and Standard & Poor’s in 2014. In accordance with the unsecured credit agreement, the credit spread set forth in the leverage grid resets quarterly based on the Company’s leverage, as calculated at the previous quarter end, and the Company may electhas the option to make an irrevocable election to convert to an investment grade pricing grid. As of SeptemberJune 30, 2017,2021, making such an election would have resulted in a higher interest rate and, as such, the Company has not made the election to convert to an investment grade pricing grid.
The following table summarizes the key terms of the Unsecured Credit Facility:
unsecured revolving line of credit as of June 30, 2021: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Leverage-Based Pricing | | Ratings-BasedInvestment Grade Pricing |
Unsecured Credit Facility | | Maturity Date | | Extension Option | | Extension Fee | | Credit Spread | UnusedFacility Fee | | Credit Spread | Facility Fee |
$250,000 unsecured term loan | | 1/5/2021 | | N/A | | N/A | | 1.30% - 2.20% | N/A | | 0.90% - 1.75% | N/A |
$100,000 unsecured term loan | | 5/11/2018 | | 2 one year | | 0.15% | | 1.45% - 2.20% | N/A | | 1.05% - 2.05% | N/A |
$750,000850,000 unsecured revolving line of credit | | 1/5/20204/22/2022 | | 2 six month-month | | 0.075% | | 1.35% - 2.25%1.05%–1.50% | 0.15% - 0.25%–0.30% | | 0.85% - 0.825%–1.55% | 0.125% - –0.30% |
The Unsecured Credit Facility has a $400,000$500,000 accordion option that allows the Company, at its election, to increase the total Unsecured Credit Facility up to $1,350,000, subject to (i) customary fees and conditions including, but not limited to, the absence of an event of default as defined in the unsecured credit facilityagreement and (ii) the Company’s ability to obtain additional lender commitments.
Subsequent to June 30, 2021, the Company entered into its sixth amended and restated unsecured credit agreement with a syndicate of financial institutions to provide for an $850,000 unsecured revolving line of credit that will be priced on a leverage grid at a rate of LIBOR plus a credit spread.
The following table summarizes the key terms of the sixth amended and restated unsecured credit agreement:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Leverage-Based Pricing | | Investment Grade Pricing |
Sixth Amended and Restated Unsecured Credit Agreement | | Maturity Date | | Extension Option | | Extension Fee | | Credit Spread | Facility Fee | | Credit Spread | Facility Fee |
$850,000 unsecured revolving line of credit | | 1/8/2026 | | 2 six-month | | 0.075% | | 1.05%–1.50% | 0.15%–0.30% | | 0.725%–1.40% | 0.125%–0.30% |
The sixth amended and restated unsecured credit agreement has a $750,000 accordion that allows the Company, at its election, to increase the total unsecured revolving line of credit up to $1,600,000, subject to (i) customary fees and conditions including, but not limited to, the absence of an event of default as defined in the Unsecured Credit Agreementamended unsecured credit agreement and (ii) the Company’s ability to obtain additional lender commitments.
The Unsecured Credit Agreement contains customary covenantssixth amended and events of default. Pursuant to the terms of the Unsecured Credit Agreement,restated unsecured credit agreement also includes a sustainability metric based on targeted greenhouse gas emission reductions, which permits the Company is subject to various financial covenants, includingreduce the requirement to maintain the following: (i) maximum unencumbered, secured and consolidated leverage ratios; and (ii) minimum fixed charge and unencumbered interest coverage ratios. applicable grid-based spread by one basis point annually upon attainment.
Unsecured Term Loans
As of SeptemberJune 30, 2017, management believes2021, the Company was in compliance withhas the financial covenants and default provisions under the Unsecured Credit Agreement.
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Term Loan Due 2023
On January 3, 2017, the Company received funding onfollowing unsecured term loans: (i) a seven-yearseven-year $200,000 unsecured term loan with a group of financial institutions, which closed during the year ended December 31, 2016. The Term(Term Loan Due 2023 is priced on2023), (ii) a leverage gridfive-year $120,000 unsecured term loan (Term Loan Due 2024) and (iii) a seven-year $150,000 unsecured term loan (Term Loan Due 2026), each of which bears interest at a rate of LIBOR plus a credit spread.spread based on a leverage grid. In accordance with the respective term loan agreement (Term Loan Agreement),agreements, the credit spread set forth in the leverage grid resets quarterly based on the Company’s leverage, as calculated at the previous quarter end, and the Company may electhas the option to make an irrevocable election to convert to an investment grade pricing grid. As of SeptemberJune 30, 2017,2021, making such an election would not have changed the interest rate for the Term Loan Due 2023 and would have resulted in a higher interest raterates for the Term Loan Due 2024 and Term Loan Due 2026 and, as such, the Company has not made the election to convert to an investment grade pricing grid.
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The following table summarizes the key terms of the Term Loan Due 2023:unsecured term loans as of June 30, 2021:
|
| | | | | | |
Term Loan Due 2023 | | Maturity Date | | Leverage-Based Pricing
Credit Spread
| | Ratings-Based Pricing
Credit Spread
|
$200,000 unsecured term loan | | 11/22/2023 | | 1.70% – 2.55% | | 1.50% – 2.45% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unsecured Term Loans | | Maturity Date | | Leverage-Based Pricing Credit Spread | | Investment Grade Pricing Credit Spread |
$200,000 unsecured term loan due 2023 | | 11/22/2023 | | 1.20 | % | – | 1.85% | | 0.85 | % | – | 1.65% |
$120,000 unsecured term loan due 2024 | | 7/17/2024 | | 1.20 | % | – | 1.70% | | 0.80 | % | – | 1.65% |
$150,000 unsecured term loan due 2026 | | 7/17/2026 | | 1.50 | % | – | 2.20% | | 1.35 | % | – | 2.25% |
The Term Loan Due 2023 has a $100,000 accordion option that allows the Company, at its election, to increase the total unsecured term loanTerm Loan Due 2023 up to $300,000, subject to (i) customary fees and conditions, including the absence of an event of default as defined in the Term Loan Agreement.amended term loan agreement and (ii) the Company’s ability to obtain additional lender commitments.
The Term Loan Agreement containsDue 2024 has a $130,000 accordion option and the Term Loan Due 2026 has a $100,000 accordion option that, collectively, allow the Company, at its election, to increase the total of the Term Loan Due 2024 and Term Loan Due 2026 up to $500,000, subject to (i) customary fees and conditions, including the absence of an event of default as defined in the term loan agreement and (ii) the Company’s ability to obtain additional lender commitments.
Subsequent to June 30, 2021, the Company amended the pricing terms of the Term Loan Due 2026 as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Term Loan Due 2026 | | Maturity Date | | Leverage-Based Pricing Credit Spread | | Investment Grade Pricing Credit Spread |
$150,000 unsecured term loan due 2026 | | 7/17/2026 | | 1.20 | % | – | 1.70% | | 0.75 | % | – | 1.60% |
The amendment to the Term Loan Due 2026 also includes a sustainability metric based on targeted greenhouse gas emission reductions, which permits the Company to reduce the applicable grid-based spread on the Term Loan Due 2026 by one basis point annually upon attainment.
Debt Maturities
The following table summarizes the scheduled maturities and principal amortization of the Company’s indebtedness as of June 30, 2021 for the remainder of 2021, each of the next four years and thereafter, and the weighted average interest rates by year.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | Thereafter | | Total |
Debt: | | | | | | | | | | | | | |
Fixed rate debt: | | | | | | | | | | | | | |
Mortgages payable (a) | $ | 1,215 | | | $ | 26,641 | | | $ | 31,758 | | | $ | 1,737 | | | $ | 1,809 | | | $ | 27,802 | | | $ | 90,962 | |
Fixed rate term loans (b) | 0 | | | 0 | | | 200,000 | | | 120,000 | | | 0 | | | 150,000 | | | 470,000 | |
Unsecured notes payable (c) | 0 | | | 0 | | | 0 | | | 150,000 | | | 350,000 | | | 700,000 | | | 1,200,000 | |
Total fixed rate debt | 1,215 | | | 26,641 | | | 231,758 | | | 271,737 | | | 351,809 | | | 877,802 | | | 1,760,962 | |
| | | | | | | | | | | | | |
Variable rate debt: | | | | | | | | | | | | | |
Variable rate revolving line of credit (d) | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | |
Total debt (e) | $ | 1,215 | | | $ | 26,641 | | | $ | 231,758 | | | $ | 271,737 | | | $ | 351,809 | | | $ | 877,802 | | | $ | 1,760,962 | |
| | | | | | | | | | | | | |
Weighted average interest rate on debt: | | | | | | | | | | | | | |
Fixed rate debt | 4.08 | % | | 4.81 | % | | 4.10 | % | | 3.83 | % | | 4.00 | % | | 4.37 | % | | 4.19 | % |
Variable rate debt (f) | 0 | | | 1.20 | % | | 0 | | | 0 | | | 0 | | | 0 | | | 1.20 | % |
Total | 4.08 | % | | 4.81 | % | | 4.10 | % | | 3.83 | % | | 4.00 | % | | 4.37 | % | | 4.19 | % |
(a)Excludes mortgage discount of $(428) and capitalized loan fees of $(160), net of accumulated amortization, as of June 30, 2021.
(b)Excludes capitalized loan fees of $(2,105), net of accumulated amortization, as of June 30, 2021. The following variable rate term loans have been swapped to fixed rate debt: (i) $200,000 of LIBOR-based variable rate debt has been swapped to a fixed rate of 2.85% plus a credit spread based on a leverage grid through November 22, 2023; (ii) $120,000 of LIBOR-based variable rate debt has been swapped to a fixed rate of 1.68% plus a credit spread based on a leverage grid through July 17, 2024; and (iii) $150,000 of LIBOR-based variable rate debt has been swapped to a fixed rate of 1.77% plus a credit spread based on a leverage grid through July 17, 2026. As of June 30, 2021, the applicable credit spread for (i) 1.25%, for (ii) was 1.20% and for (iii) was 1.60%.
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(c)Excludes discount of $(6,044) and capitalized loan fees of $(6,912), net of accumulated amortization, as of June 30, 2021.
(d)Subsequent to June 30, 2021, the Company entered into its sixth amended and restated unsecured credit agreement that extended the maturity date of the unsecured revolving line of credit to January 8, 2026.
(e)The weighted average years to maturity of consolidated indebtedness was 5.4 years as of June 30, 2021.
(f)Represents interest rate as of June 30, 2021, however, the revolving line of credit was not drawn as of June 30, 2021.
The Company’s unsecured debt agreements, consisting of the (i) unsecured credit agreement, as amended, governing the Unsecured Credit Facility, (ii) term loan agreement, as amended, governing the Term Loan Due 2023, (iii) term loan agreement, as amended, governing the Term Loan Due 2024 and Term Loan Due 2026, (iv) note purchase agreement governing the 4.58% senior unsecured notes due 2024 (Notes Due 2024), (v) indenture, as supplemented, governing the 4.00% senior unsecured notes due 2025 (Notes Due 2025), (vi) note purchase agreement governing the 4.08% senior unsecured notes due 2026 and the 4.24% senior unsecured notes due 2028 (Notes Due 2026 and 2028), (vii) note purchase agreement governing the 4.82% senior unsecured notes due 2029 (Notes Due 2029) and (viii) indenture, as supplemented, governing the 4.75% senior unsecured notes due 2030 (Notes Due 2030), contain customary representations, warranties and covenants, and events of default, includingdefault. These include financial covenants that require the Company to maintain the following:such as (i) maximum unencumbered, secured and consolidated leverage ratios; and (ii) minimum interest coverage ratios; (iii) minimum fixed charge andcoverage ratios; (iv) minimum unencumbered interest coverage ratios.ratios; (v) a minimum debt service coverage ratio; and (vi) a minimum unencumbered assets to unsecured debt ratio. All financial covenants that include operating results, or derivations thereof, in their calculations are based on the most recent four fiscal quarters of activity. As of SeptemberJune 30, 2017, management2021, the Company believes the Companyit was in compliance with the financial covenants and default provisions under the Term Loan Agreement.unsecured debt agreements.
The Company plans on addressing its debt maturities, subject to the restrictions set forth in the Merger Agreement, through a combination of (i) cash flows generated from operations, (ii) working capital, (iii) capital markets transactions and (iv) its unsecured revolving line of credit. (9)
(8) DERIVATIVES
The Company’s objective in using interest rate derivatives is to manage its exposure to interest rate movements and add stability to interest expense. To accomplish this objective, the Company uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable rate amounts from a counterparty in exchange for the Company making fixed rate payments over the life of the agreement without exchange of the underlying notional amount.
As of SeptemberJune 30, 2017,2021, the Company utilized fourhas 8 interest rate swaps to hedge the variable cash flows associated with variable rate debt. The effective portion of changesChanges in the fair value of the derivatives that are designated and that qualify as cash flow hedges isare recorded inwithin “Accumulated other comprehensive income”loss” and isare reclassified tointo interest expense as interest payments are made on the Company’s variable rate debt. Over the next 12 months, the Company estimates that an additional $760$9,789 will be reclassified as a decreasean increase to interest expense. The ineffective portion of the change in fair value of derivatives is recognized directly in earnings.
The following table summarizes the Company’s interest rate swaps as of SeptemberJune 30, 2017,2021, which effectively convert one-month floating rate LIBOR to a fixed rate:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Number of Instruments | | Effective Date | | Aggregate Notional | | Fixed Interest Rate | | Maturity Date |
NaN | | November 23, 2018 | | $ | 200,000 | | | 2.85 | % | | November 22, 2023 |
NaN | | August 15, 2019 | | $ | 120,000 | | | 1.68 | % | | July 17, 2024 |
NaN | | August 15, 2019 | | $ | 150,000 | | | 1.77 | % | | July 17, 2026 |
The Company previously had 3 interest rate swaps with notional amounts totaling $250,000 and a maturity date of January 5, 2021 that were terminated during 2020 in conjunction with the repayment of the Company’s $250,000 unsecured term loan due 2021. At termination, these interest rate swaps were in a liability position and had a fair value of $1,699. The associated other comprehensive income was amortized into expense through the original maturity date. As a result, the Company recognized $64 of interest expense, which is included within “Interest expense” in the accompanying condensed consolidated statements of operations and other comprehensive income (loss), in connection with the termination of these swaps during the six months ended June 30, 2021.
|
| | | | | | | | | |
Effective Date | | Notional | | Fixed Interest Rate | | Termination Date |
March 1, 2016 | | $ | 100,000 |
| | 0.66 | % | | December 31, 2017 |
May 16, 2016 | | $ | 150,000 |
| | 0.67 | % | | December 31, 2017 |
January 3, 2017 | | $ | 100,000 |
| | 1.26 | % | | November 22, 2018 |
January 3, 2017 | | $ | 100,000 |
| | 1.26 | % | | November 22, 2018 |
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The following table summarizes the Company’s interest rate swaps that were designated as cash flow hedges of interest rate risk:
|
| | | | | | | | | | | | | | |
| | Number of Instruments | | Notional |
Interest Rate Derivatives | | September 30, 2017 | | December 31, 2016 | | September 30, 2017 | | December 31, 2016 |
Interest rate swaps | | 4 |
| | 2 |
| | $ | 450,000 |
| | $ | 250,000 |
|
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of Instruments | | Notional |
Interest Rate Derivatives | | June 30, 2021 | | December 31, 2020 | | June 30, 2021 | | December 31, 2020 |
Interest rate swaps | | 8 | | | 8 | | | $ | 470,000 | | | $ | 470,000 | |
The table below presents the estimated fair value of the Company’s derivative financial instruments, which are presented within “Other assets, net”liabilities” in the accompanying condensed consolidated balance sheets. The valuation techniques utilizedused are described in Note 1312 to the condensed consolidated financial statements.
| | | | Fair Value | | Fair Value |
| | September 30, 2017 | | December 31, 2016 | | June 30, 2021 | | December 31, 2020 |
Derivatives designated as cash flow hedges: | | | | | Derivatives designated as cash flow hedges: | | | | |
| Interest rate swaps | | $ | 891 |
| | $ | 743 |
| Interest rate swaps | | $ | 22,827 | | | $ | 31,666 | |
The following table presents the effect of the Company’s derivative financial instruments on the accompanying condensed consolidated statements of operations and other comprehensive income (loss) income:for the three and six months ended June 30, 2021 and 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivatives in Cash Flow Hedging Relationships | | Amount of Loss (Gain) Recognized in Other Comprehensive Income on Derivative | | Location of Loss Reclassified from Accumulated Other Comprehensive Income (AOCI) into Income | | Amount of Loss Reclassified from AOCI into Income | | Total Interest Expense Presented in the Statements of Operations in which the Effects of Cash Flow Hedges are Recorded |
| | Three Months Ended June 30, | | Six Months Ended June 30, | | | | Three Months Ended June 30, | | Six Months Ended June 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
2021 | | $ | 1,717 | | | $ | (3,889) | | | Interest expense | | $ | 2,501 | | | $ | 5,014 | | | $ | 18,776 | | | $ | 37,528 | |
2020 | | $ | 2,301 | | | $ | 30,954 | | | Interest expense | | $ | 2,995 | | | $ | 4,066 | | | $ | 19,360 | | | $ | 36,406 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivatives in Cash Flow Hedging Relationships | | Amount of (Gain) Loss Recognized in Other Comprehensive Income on Derivative (Effective Portion) | | Location of (Gain) Loss Reclassified from Accumulated Other Comprehensive Income (AOCI) into Income (Effective Portion) | | Amount of (Gain) Loss Reclassified from AOCI into Income (Effective Portion) | | Location of Loss (Gain) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) | | Amount of Loss (Gain) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | | Three Months Ended September 30, | | Nine Months Ended September 30, |
2017 | | $ | (9 | ) | | $ | (422 | ) | | Interest expense | | $ | (332 | ) | | $ | (258 | ) | | Other (expense) income, net | | $ | 5 |
| | $ | 16 |
|
2016 | | $ | (534 | ) | | $ | 153 |
| | Interest expense | | $ | 132 |
| | $ | 342 |
| | Other (expense) income, net | | $ | (38 | ) | | $ | (35 | ) |
(10)(9) EQUITY
In December 2015, the Company entered into an at-the-market (ATM) equity program under which it may issue and sell shares of its Class A common stock, having an aggregate offering price of up to $250,000, from time to time. Actual sales may depend on a variety of factors, including, among others, market conditions and the trading price of the Company’s Class A common stock. Any net proceeds are expected to be used for general corporate purposes, which may include the funding of acquisitions and redevelopment activities and the repayment of debt, including the Company’s unsecured revolving line of credit. The Company did not sell any shares under its ATM equity program during the nine months ended September 30, 2017 and 2016. As of September 30, 2017, the Company had Class A common shares havinghas an aggregate offering price of up to $250,000 remaining available for sale under its ATM equity program.
In December 2015, the Company’s board of directors authorized aexisting common stock repurchase program under which the Companyit may repurchase, from time to time, up to a maximum of $250,000$500,000 of shares of its Class A common stock. The shares may be repurchased in the open market or in privately negotiated transactions and are canceled upon repurchase. The timing and actual number of shares repurchased will depend on a variety of factors, including price in absolute terms and in relation to the value of the Company’s assets, corporate and regulatory requirements, market conditions and other corporate liquidity requirements and priorities. The common stock repurchase program may be suspended or terminated at any time without prior notice. The Company did not0t repurchase any shares during the ninesix months ended SeptemberJune 30, 2016.
The following table presents activity under2021 and 2020. As of June 30, 2021, $189,105 remained available for repurchases of shares of the Company’s common stock under its common stock repurchase program. Subsequent to June 30, 2021, in connection with the Merger Agreement, the Company suspended its common stock repurchase program.
On April 1, 2021, the Company established an at-the-market (ATM) equity program under which it may issue and sell shares of its Class A common stock, having an aggregate offering price of up to $250,000, from time to time. Actual sales may depend on a variety of factors, including, among others, market conditions and the trading price of the Company’s Class A common stock. Any net proceeds are expected to be used for general corporate purposes, which may include funding acquisitions and redevelopment activities and repaying debt. The Company did 0t sell any shares under its ATM equity program during the ninesix months ended SeptemberJune 30, 2017:2021. As of June 30, 2021, the Company had Class A common shares having an aggregate offering price of up to $250,000 remaining available for sale under its ATM equity program. Subsequent to June 30, 2021, in connection with the Merger Agreement, the Company suspended its ATM equity program.
|
| | | | | | | | | | | |
| | Number of Common Shares Repurchased | | Average Price per Share | | Total Repurchases |
First quarter 2017 | | — |
| | $ | — |
| | $ | — |
|
Second quarter 2017 | | 6,024 |
| | $ | 12.55 |
| | $ | 75,697 |
|
Third quarter 2017 (a) | | 3,805 |
| | $ | 13.09 |
| | $ | 49,892 |
|
Year to date September 30, 2017 | | 9,829 |
| | $ | 12.76 |
| | $ | 125,589 |
|
| |
(a) | Includes 396 shares repurchased in September 2017 at an average price per share of $13.08 for a total of $5,187, which settled on October 2, 2017. This repurchase has been reflected in the Company’s share count as of such date. |
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
As of September 30, 2017, $115,570 remained available under the repurchase program.
(11)(10) EARNINGS PER SHARE
The following table summarizes the components used in the calculation of basic and diluted earnings per share (EPS):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, | |
| 2021 | | 2020 | | 2021 | | 2020 | |
Numerator: | | | | | | | | |
Net income (loss) | $ | 15,387 | | | $ | (7,347) | | | $ | 20,100 | | | $ | 15,010 | | |
Net loss attributable to noncontrolling interests | 9 | | | 0 | | | 9 | | | 0 | | |
Net income (loss) attributable to common shareholders | 15,396 | | | (7,347) | | | 20,109 | | | 15,010 | | |
Earnings allocated to unvested restricted shares | (69) | | | (135) | | | (119) | | | (244) | | |
Net income (loss) attributable to common shareholders excluding amounts attributable to unvested restricted shares | $ | 15,327 | | | $ | (7,482) | | | $ | 19,990 | | | $ | 14,766 | | |
| | | | | | | | |
Denominator: | | | | | | | | |
Denominator for earnings (loss) per common share – basic: | | | | | | | | |
Weighted average number of common shares outstanding | 213,813 | | (a) | 213,337 | | (b) | 213,732 | | (a) | 213,276 | | (b) |
Effect of dilutive securities: | | | | | | | | |
Stock options | 0 | | (c) | 0 | | (c) | 0 | | (c) | 0 | | (c) |
RSUs | 256 | | (d) | 0 | | (e) | 477 | | (d) | 0 | | (e) |
Denominator for earnings (loss) per common share – diluted: | | | | | | | | |
Weighted average number of common and common equivalent shares outstanding | 214,069 | | | 213,337 | | | 214,209 | | | 213,276 | | |
(a)Excludes 904 shares of unvested restricted common stock as of June 30, 2021, which equate to 939 and 909 shares for the three and six months ended June 30, 2021, respectively, on a weighted average basis. These shares will continue to be excluded from the computation of basic EPS until contingencies are resolved and the shares are released.
(b)Excludes 868 shares of unvested restricted common stock as of June 30, 2020, which equate to 825 and 751 shares for the three and six months ended June 30, 2020, respectively, on a weighted average basis. These shares were excluded from the computation of basic EPS as the contingencies remained and the shares had not been released as of the end of the reporting period.
(c)There were outstanding options to purchase 10 and 16 shares of common stock as of June 30, 2021 and 2020, respectively, at a weighted average exercise price of $15.12 and $15.87, respectively. Of these totals, outstanding options to purchase 10 and 16 shares of common stock as of June 30, 2021 and 2020, respectively, at a weighted average exercise price of $15.12 and $15.87, respectively, have been excluded from the common shares used in calculating diluted EPS as including them would be anti-dilutive.
(d)As of June 30, 2021, there were 1,166 RSUs eligible for future conversion upon completion of the performance periods (see Note 5 to the condensed consolidated financial statements), which equate to 1,166 and 1,162 RSUs for the three and six months ended June 30, 2021, respectively, on a weighted average basis. These contingently issuable shares are a component of calculating diluted EPS.
(e)As of June 30, 2020, there were 974 RSUs eligible for future conversion upon completion of the performance periods, which equate to 974 and 971 RSUs for the three and six months ended June 30, 2020, respectively, on a weighted average basis. These contingently issuable shares have been excluded from the common shares used in calculating diluted EPS as including them would be anti-dilutive.
|
| | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, | |
| 2017 | | 2016 | | 2017 | | 2016 | |
Numerator: | | | | | |
| |
|
(Loss) income from continuing operations | $ | (37,178 | ) | | $ | 6,109 |
| | $ | (89,307 | ) |
| $ | 50,785 |
|
|
Gain on sales of investment properties | 73,082 |
| | 66,385 |
| | 230,874 |
|
| 97,737 |
|
|
Preferred stock dividends | (2,362 | ) | | (2,362 | ) | | (7,087 | ) | | (7,087 | ) | |
Net income attributable to common shareholders | 33,542 |
| | 70,132 |
| | 134,480 |
|
| 141,435 |
|
|
Distributions paid on unvested restricted shares | (62 | ) | | (108 | ) | | (240 | ) | | (348 | ) |
|
Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares | $ | 33,480 |
| | $ | 70,024 |
| | $ | 134,240 |
|
| $ | 141,087 |
|
|
| | | | |
|
|
|
|
Denominator: | | | | | |
| | |
Denominator for earnings per common share – basic: | | | | | | | | |
Weighted average number of common shares outstanding | 229,508 |
| (a) | 236,783 |
| (b) | 233,348 |
| (a) | 236,692 |
| (b) |
Effect of dilutive securities: | | | | | | | | |
Stock options | 1 |
| (c) | 2 |
| (c) | 1 |
| (c) | 2 |
| (c) |
RSUs | 595 |
| (d) | 323 |
| (e) | 600 |
| (d) | 289 |
| (e) |
Denominator for earnings per common share – diluted: | | | | |
|
|
|
|
|
|
Weighted average number of common and common equivalent shares outstanding | 230,104 |
| | 237,108 |
| | 233,949 |
| | 236,983 |
| |
| |
(a) | Excludes 511 shares of unvested restricted common stock as of September 30, 2017, which equate to 546 and 549 shares, respectively, on a weighted average basis for the three and nine months ended September 30, 2017. These shares will continue to be excluded from the computation of basic EPS until contingencies are resolved and the shares are released.
|
| |
(b) | Excludes 587 shares of unvested restricted common stock as of September 30, 2016, which equate to 596 and 657 shares, respectively, on a weighted average basis for the three and nine months ended September 30, 2016. These shares were excluded from the computation of basic EPS as the contingencies remained and the shares had not been released as of the end of the reporting period.
|
| |
(c) | There were outstanding options to purchase 41 shares of common stock as of September 30, 2017 and 2016, at a weighted average exercise price of $19.25 and $19.33, respectively. Of these totals, outstanding options to purchase 35 shares of common stock as of September 30, 2017 and 2016, at a weighted average exercise price of $20.55 and $20.63, respectively, have been excluded from the common shares used in calculating diluted EPS as including them would be anti-dilutive. |
| |
(d) | As of September 30, 2017, there were 555 RSUs eligible for future conversion upon completion of the performance periods (see Note 5 to the condensed consolidated financial statements), which equate to 633 and 638 RSUs on a weighted average basis for the three and nine months ended September 30, 2017, respectively. These contingently issuable shares are included in diluted EPS based on the weighted average number of shares that would be outstanding during the period, if any, assuming September 30, 2017 was the end of the contingency periods.
|
| |
(e) | As of September 30, 2016, there were 391 RSUs eligible for future conversion upon completion of the performance periods, which equate to 391 and 360 RSUs on a weighted average basis for the three and nine months ended September 30, 2016, respectively. These contingently issuable shares are included in diluted EPS based on the weighted average number of shares that would have been outstanding during the period, if any, assuming September 30, 2016 was the end of the contingency periods.
|
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(12)(11) PROVISION FOR IMPAIRMENT OF INVESTMENT PROPERTIES
As of SeptemberJune 30, 20172021 and 2016,2020, the Company identified indicators of impairment at certain of its properties.properties and took into consideration the most current information available and expectations at the time of the assessment. Such indicators included a low occupancy rate, expected sustained difficulty in leasing space and related cost of re-leasing, significant exposure to financially troubled tenants or reduced anticipated holding periods. The following table summarizes the results of these analyses as of SeptemberJune 30, 20172021 and 2016:2020:
| | | | | | | | | | | |
| June 30, 2021 | | June 30, 2020 |
Number of properties for which indicators of impairment were identified | 6 | | | 2 | |
Less: number of properties for which an impairment charge was recorded | 0 | | | 0 | |
Less: number of properties that were held for sale as of the date the analysis was performed for which indicators of impairment were identified but no impairment charge was recorded | 2 | | | 0 | |
Remaining properties for which indicators of impairment were identified but no impairment charge was considered necessary | 4 | | | 2 | |
| | | |
Weighted average percentage by which the projected undiscounted cash flows exceeded its respective carrying value for each of the remaining properties (a) | 172 | % | | 166 | % |
|
| | | | | | | |
| | September 30, 2017 | | September 30, 2016 | |
Number of properties for which indicators of impairment were identified | | 11 |
| (a) | 5 |
| (b) |
Less: number of properties for which an impairment charge was recorded | | 2 |
| | 1 |
| |
Less: number of properties that were held for sale as of the date the analysis was performed for which indicators of impairment were identified but no impairment charge was recorded | | 5 |
| | 1 |
| |
Remaining properties for which indicators of impairment were identified but no impairment charge was considered necessary | | 4 |
| | 3 |
| |
| | | | | |
Weighted average percentage by which the projected undiscounted cash flows exceeded its respective carrying value for each of the remaining properties (c) | | 32 | % | | 14 | % | |
(a)Based upon the estimated holding period for each asset where an undiscounted cash flow analysis was performed. | |
(a) | Includes four properties which were sold subsequent to September 30, 2017. |
| |
(b) | Includes three properties which have subsequently been sold as of September 30, 2017.The Company did 0t record any investment property impairment charges during the six months ended June 30, 2021. |
| |
(c) | Based upon the estimated holding period for each asset where an undiscounted cash flow analysis was performed. |
The Company recorded the following investment property impairment chargescharge during the ninesix months ended SeptemberJune 30, 2017:2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Property Name | | Property Type | | Impairment Date | | Square Footage | | Provision for Impairment of Investment Properties |
King Philip’s Crossing (a) | | Multi-tenant retail | | February 13, 2020 | | 105,900 | | | $ | 346 | |
| | | | | | | | $ | 346 | |
| | Estimated fair value of impaired property as of impairment date | $ | 11,644 | |
|
| | | | | | | | | | | |
Property Name | | Property Type | | Impairment Date | | Square Footage | | Provision for Impairment of Investment Properties |
Century III Plaza, excluding the Home Depot parcel (a) | | Multi-tenant retail | | June 30, 2017 | | 152,200 |
| | $ | 3,076 |
|
Lakepointe Towne Center (b) | | Multi-tenant retail | | June 30, 2017 | | 196,600 |
| | 9,958 |
|
Saucon Valley Square (c) | | Multi-tenant retail | | September 30, 2017 | | 80,700 |
| | 184 |
|
Schaumburg Towers (d) | | Office | | September 30, 2017 | | 895,400 |
| | 45,638 |
|
| | | | | | | | $ | 58,856 |
|
| | Estimated fair value of impaired properties as of impairment date | $ | 86,800 |
|
| |
(a) | The Company recorded an impairment charge based upon the terms and conditions of a bona fide purchase offer. This property was classified as held for sale as of September 30, 2017. The Home Depot parcel of Century III Plaza was sold on March 15, 2017. |
| |
(b) | The Company recorded an impairment charge based upon the terms and conditions of an executed sales contract. This property was classified as held for sale as of June 30, 2017 and was sold on August 4, 2017. |
| |
(c) | The Company recorded an impairment charged based upon the terms and conditions of an executed sales contract. This property was classified as held for sale as of September 30, 2017 and was sold on October 27, 2017. |
| |
(d) | The Company recorded an impairment charge based upon the terms and conditions of a bona fide purchase offer. |
(a)The Company recorded an impairment charge on December 31, 2019 based upon the following investmentterms and conditions of an executed sales contract. This property was sold on February 13, 2020, at which time additional impairment was recognized pursuant to the terms and conditions of an executed sales contract.
The extent to which COVID-19 impacts the Company and its tenants will depend, in part, on future developments, which are highly uncertain. If the effects of COVID-19 cause economic and market conditions to deteriorate, which, consequently, result in deterioration of operating conditions, and/or if the Company’s expected holding period for assets change, subsequent tests for impairment could result in impairment charges duringin the nine months ended September 30, 2016:
|
| | | | | | | | | | | |
Property Name | | Property Type | | Impairment Date | | Square Footage | | Provision for Impairment of Investment Properties |
South Billings Center (a) | | Development | | March 31, 2016 | | — |
| | $ | 2,164 |
|
Mid-Hudson Center (b) | | Multi-tenant retail | | June 30, 2016 | | 235,600 |
| | 4,142 |
|
Saucon Valley Square (c) | | Multi-tenant retail | | September 30, 2016 | | 80,700 |
| | 4,742 |
|
| | | | | | | | $ | 11,048 |
|
| | Estimated fair value of impaired properties as of impairment date | $ | 37,100 |
|
RETAIL PROPERTIES OF AMERICA, INC.
Notesa tenant’s inability to Condensed Consolidated Financial Statements
(Unaudited)
| |
(a) | An impairment charge was recorded on March 31, 2016 based upon the terms and conditions of an executed sales contract, which was subsequently terminated. The property, which was not under active development, was sold on December 16, 2016 and additional impairment was recognized pursuant to the terms and conditions of an executed sales contract. |
| |
(b) | The Company recorded an impairment charge based upon the terms and conditions of an executed sales contract. This property was classified as held for sale as of June 30, 2016 and was sold on July 21, 2016. |
| |
(c) | The Company recorded an impairment charge driven by a change in the estimated holding period for the property. |
continue as a going concern, changes in the Company’s view or strategy relative to a tenant’s business or industry, or changes in the Company’s long-term hold strategies could change in future periods. The Company provideswill continue to monitor circumstances and events in future periods and can provide no assurance that material impairment charges with respect to its investment properties will not occur in future periods.
(13)
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(12) FAIR VALUE MEASUREMENTS
Fair Value of Financial Instruments
The following table presents the carrying value and estimated fair value of the Company’s financial instruments:
| | | | | | | | | | | | | | | | | | June 30, 2021 | | December 31, 2020 |
| September 30, 2017 | | December 31, 2016 | | Carrying Value | | Fair Value | | Carrying Value | | Fair Value |
| Carrying Value | | Fair Value | | Carrying Value | | Fair Value | |
Financial assets: | | | | | | | | |
Derivative asset | $ | 891 |
| | $ | 891 |
| | $ | 743 |
| | $ | 743 |
| |
| Financial liabilities: | | | | | | | | Financial liabilities: | | | | | | | |
Mortgages payable, net | $ | 288,100 |
| | $ | 302,451 |
| | $ | 769,184 |
| | $ | 833,210 |
| Mortgages payable, net | $ | 90,374 | | | $ | 91,982 | | | $ | 91,514 | | | $ | 93,664 | |
Unsecured notes payable, net | $ | 695,595 |
| | $ | 699,725 |
| | $ | 695,143 |
| | $ | 679,212 |
| Unsecured notes payable, net | $ | 1,187,044 | | | $ | 1,295,501 | | | $ | 1,186,000 | | | $ | 1,253,928 | |
Unsecured term loans, net | $ | 546,914 |
| | $ | 551,274 |
| | $ | 447,598 |
| | $ | 450,421 |
| Unsecured term loans, net | $ | 467,895 | | | $ | 470,238 | | | $ | 467,559 | | | $ | 464,072 | |
Unsecured revolving line of credit | $ | 187,000 |
| | $ | 187,215 |
| | $ | 86,000 |
| | $ | 86,130 |
| Unsecured revolving line of credit | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | |
Derivative liability | | Derivative liability | $ | 22,827 | | | $ | 22,827 | | | $ | 31,666 | | | $ | 31,666 | |
The carrying value of the derivative assetliability is included inwithin “Other assets, net”liabilities” in the accompanying condensed consolidated balance sheets.
Recurring Fair Value Measurements
The following table presents the Company’s financial instruments, which are measured at fair value on a recurring basis, by the level in the fair value hierarchy within which those measurements fall. Methods and assumptions used to estimate the fair value of these instruments are described after the table.
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value |
| Level 1 | | Level 2 | | Level 3 | | Total |
June 30, 2021 | | | | | | | |
| | | | | | | |
Derivative liability | $ | — | | | $ | 22,827 | | | $ | — | | | $ | 22,827 | |
| | | | | | | |
December 31, 2020 | | | | | | | |
| | | | | | | |
Derivative liability | $ | — | | | $ | 31,666 | | | $ | — | | | $ | 31,666 | |
|
| | | | | | | | | | | | | | | |
| Fair Value |
| Level 1 | | Level 2 | | Level 3 | | Total |
September 30, 2017 | | | | | | | |
Derivative asset | $ | — |
| | $ | 891 |
| | $ | — |
| | $ | 891 |
|
| | | | | | | |
December 31, 2016 | | | | | | | |
Derivative asset | $ | — |
| | $ | 743 |
| | $ | — |
| | $ | 743 |
|
Derivative asset:Derivatives: The fair value of the derivative assetliability is determined using a discounted cash flow analysis on the expected future cash flows of each derivative. This analysis utilizesuses observable market data including forward yield curves and implied volatilities to determine the market’s expectation of the future cash flows of the variable component. The fixed and variable components of the derivative are then discounted using calculated discount factors developed based on the LIBOR swap rate and are aggregated to arrive at a single valuation for the period. The Company also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilizeuse Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of SeptemberJune 30, 20172021 and December 31, 2016,2020, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation. As a result, the Company has determined that its derivative valuations in their entirety are classified within Level 2 of the fair value hierarchy.
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered any applicable credit enhancements. The Company’s derivative instruments are further described in Note 98 to the condensed consolidated financial statements.
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Nonrecurring Fair Value Measurements
The Company did not remeasure any assets to fair value on a nonrecurring basis as of June 30, 2021. The following table presents the Company’s assets remeasuredmeasured at fair value on a nonrecurring basis as of September 30, 2017 and December 31, 2016,2020, aggregated by the level within the fair value hierarchy in which those measurements fall. The table includes information related to a properties remeasured to fair value as a result of impairment charges recorded during the nine months ended September 30, 2017 and the year ended December 31, 2016,2020, except for those properties sold prior to September 30, 2017 and December 31, 2016, respectively.2020. Methods and assumptions used to estimate the fair value of these assets arethis asset is described after the table.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value | | |
| Level 1 | | Level 2 | | Level 3 | | Total | | Provision for Impairment |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
December 31, 2020 | | | | | | | | | |
Investment property | $ | — | | | $ | — | | | $ | 2,500 | | (a) | $ | 2,500 | | | $ | 2,279 | |
|
| | | | | | | | | | | | | | | | | | | |
| Fair Value | | |
| Level 1 | | Level 2 | | Level 3 | | Total | | Provision for Impairment (a) |
September 30, 2017 | | | | | | | | | |
Investment property | $ | — |
| | $ | 58,000 |
| (b) | $ | — |
| | $ | 58,000 |
| | $ | 45,638 |
|
Investment properties – held for sale | $ | — |
| | $ | 18,300 |
| (c) | $ | — |
| | $ | 18,300 |
| | $ | 3,260 |
|
| | | | | | | | | |
December 31, 2016 | | | | | | | | | |
Investment properties | $ | — |
| | $ | 500 |
| (d) | $ | 10,600 |
| (e) | $ | 11,100 |
| | $ | 13,227 |
|
| |
(a) | Excludes impairment charges recorded on investment properties sold prior to September 30, 2017 and December 31, 2016, respectively. |
| |
(b) | (a)Represents the fair value of the Company’s Schaumburg Towers investment property based on an expected sales price of $87,600 from a bona fide purchase offer, determined to be a Level 2 input, which contemplates historically deferred maintenance and capital requirements. The estimated fair value of $58,000 as of September 30, 2017, the date the asset was measured at fair value, reflects (i) capital expenditures expected to be incurred by the Company prior to sale and (ii) tenant-related costs expected to be credited to the buyer at close. |
| |
(c) | Represents the fair values of the Company’s Century III Plaza, excluding the Home Depot parcel and Saucon Valley Square investment properties. The estimated fair value of Century III Plaza, excluding the Home Depot parcel, of $12,000 as of June 30, 2017, the date the asset was measured at fair value, was based upon the expected sales price from a bona fide purchase offer and determined to be a Level 2 input. The estimated fair value of Saucon Valley Square of $6,300 as of September 30, 2017, the date the asset was measured at fair value, was based upon the expected sales price from an executed sales contract and determined to be a Level 2 input. |
| |
(d) | Represents the fair value of the Company’s Rite Aid Store (Eckerd), Culver Rd. investment property as of December 31, 2016, the date the asset was measured at fair value. The estimated fair value of Rite Aid Store (Eckerd), Culver Rd. was based upon the expected sales price from a bona fide purchase offer and determined to be a Level 2 input. |
| |
(e) | Represents the fair values of the Company’s Crown Theater and Saucon Valley Square investment properties. The estimated fair values of Crown Theater and Saucon Valley Square of $4,000 and $6,600, respectively, were determined using the income approach. The income approach involves discounting the estimated income stream and reversion (presumed sale) value of a property over an estimated holding period to a present value at a risk-adjusted rate. Discount rates, growth assumptions and terminal capitalization rates utilized in this approach are derived from property-specific information, market transactions and other financial and industry data. The terminal capitalization rate and discount rate are significant inputs to this valuation. The following were the key Level 3 inputs used in estimating the fair values of Crown Theater as of December 31, 2016 and Saucon Valley Square as of September 30, 2016, the date the assets were measured at fair value: |
|
| | | | |
| | 2016 |
| | Low | | High |
Rental revenue growth rates | | Varies (i) | | Varies (i) |
Operating expense growth rates | | 3.10% | | 18.02% |
Discount rates | | 9.35% | | 10.00% |
Terminal capitalization rates | | 8.35% | | 9.50% |
| |
(i) | Since cash flow models are established at the tenant level, projected rental revenue growth rates fluctuate over the course of the estimated holding period based upon the timing of lease rollover, amount of available space and other property and space-specific factors. |
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
the Company’s Streets of Yorktown investment property as of September 30, 2020, the date the asset was measured at fair value. The estimated fair value of Streets of Yorktown was based upon third-party comparable sales prices, derived from property-specific information, market transactions and other industry data and are considered significant unobservable inputs.
Fair Value Disclosures
The following table presents the Company’s financial liabilities, which are measured at fair value for disclosure purposes, by the level in the fair value hierarchy within which those measurements fall. Methods and assumptions used to estimate
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value |
| Level 1 | | Level 2 | | Level 3 | | Total |
June 30, 2021 | | | | | | | |
Mortgages payable, net | $ | — | | | $ | — | | | $ | 91,982 | | | $ | 91,982 | |
Unsecured notes payable, net | $ | 817,633 | | | $ | — | | | $ | 477,868 | | | $ | 1,295,501 | |
Unsecured term loans, net | $ | — | | | $ | — | | | $ | 470,238 | | | $ | 470,238 | |
Unsecured revolving line of credit | $ | — | | | $ | — | | | $ | 0 | | | $ | 0 | |
| | | | | | | |
December 31, 2020 | | | | | | | |
Mortgages payable, net | $ | — | | | $ | — | | | $ | 93,664 | | | $ | 93,664 | |
Unsecured notes payable, net | $ | 790,379 | | | $ | — | | | $ | 463,549 | | | $ | 1,253,928 | |
Unsecured term loans, net | $ | — | | | $ | — | | | $ | 464,072 | | | $ | 464,072 | |
Unsecured revolving line of credit | $ | — | | | $ | — | | | $ | 0 | | | $ | 0 | |
The Company estimates the fair value of these instruments are described after the table.
|
| | | | | | | | | | | | | | | |
| Fair Value |
| Level 1 | | Level 2 | | Level 3 | | Total |
September 30, 2017 | | | | | | | |
Mortgages payable, net | $ | — |
| | $ | — |
| | $ | 302,451 |
| | $ | 302,451 |
|
Unsecured notes payable, net | $ | 245,250 |
| | $ | — |
| | $ | 454,475 |
| | $ | 699,725 |
|
Unsecured term loans, net | $ | — |
| | $ | — |
| | $ | 551,274 |
| | $ | 551,274 |
|
Unsecured revolving line of credit | $ | — |
| | $ | — |
| | $ | 187,215 |
| | $ | 187,215 |
|
| | | | | | | |
December 31, 2016 | | | | | | | |
Mortgages payable, net | $ | — |
| | $ | — |
| | $ | 833,210 |
| | $ | 833,210 |
|
Unsecured notes payable, net | $ | 234,700 |
| | $ | — |
| | $ | 444,512 |
| | $ | 679,212 |
|
Unsecured term loans, net | $ | — |
| | $ | — |
| | $ | 450,421 |
| | $ | 450,421 |
|
Unsecured revolving line of credit | $ | — |
| | $ | — |
| | $ | 86,130 |
| | $ | 86,130 |
|
Mortgages payable, net:its Level 3 financial liabilities using a discounted cash flow model that incorporates future contractual principal and interest payments. The Company estimates the fair value of its mortgages payable, net and Level 3 unsecured notes payable, net by discounting the anticipated future cash flows of each instrument at rates currently offered to the Company by its lenders for similar debt instruments of comparable maturities. The rates used are not directly observable in the marketplace and judgment is used in determining the appropriate rate for each of the Company’s individual mortgages payable based upon the specific terms of the agreement, including the term to maturity, the quality and nature of the underlying property and its leverage ratio. The rates used range from 3.2% to 4.2% and 2.9% to 4.6% as of September 30, 2017 and December 31, 2016, respectively.
Unsecured notes payable, net: The quoted market price as of September 30, 2017 was used to value the Notes Due 2025. The Company estimates the fair value of its Notes Due 2021 and 2024 and Notes Due 2026 and 2028 by discounting the future cash flows at rates currently offered to the Company by its lenders for similar debt instruments of comparable maturities. The rates used are not directly observable in the marketplace and judgment is used in determining the appropriate rates. The weighted average rates used were 4.22% and 4.48% as of September 30, 2017 and December 31, 2016, respectively.
Unsecured term loans, net: The Company estimates the fair value of its unsecured term loans, net and unsecured revolving line of credit by discounting the anticipated future cash flows related to theat a reference rate, currently one-month LIBOR, plus an applicable credit spreads at ratesspread currently offered to the Company by its lenders for similar instruments of comparable maturities. The following rates were used are not directly observable in the marketplace and judgment is used in determining the appropriate rates. The weighted average rates useddiscounted cash flow model to discount the credit spreads were 1.41% and 1.30% as of September 30, 2017 and December 31, 2016, respectively.
Unsecured revolving line of credit: The Company estimatescalculate the fair value of its unsecured revolving line of credit by discounting the anticipated future cash flows related to the credit spreads at rates currently offered to the Company by its lenders for similar facilities of comparable maturity. The rates used are not directly observable in the marketplace and judgment is used in determining the appropriate rates. The rate used to discount the credit spreads was 1.30% as of September 30, 2017 and December 31, 2016.Company’s Level 3 financial liabilities:
| | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 |
Mortgages payable, net – range of discount rates used | 3.2% to 4.4% | | 3.5% to 4.2% |
Unsecured notes payable, net – weighted average discount rate used | 3.14% | | 3.84% |
Unsecured term loans, net – weighted average credit spread portion of discount rate used | 1.33% | | 1.71% |
Unsecured revolving line of credit – credit spread portion of discount rate used | 1.10% | | 1.68% |
There were no transfers between the levels of the fair value hierarchy during the ninesix months ended SeptemberJune 30, 2017.
(14) COMMITMENTS AND CONTINGENCIES
As of September 30, 2017,2021 and the Company had letter(s) of credit outstanding totaling $9,645 which serve as collateral for certain capital improvements and performance obligations on certain redevelopment projects, which will be satisfied upon completion of the projects, and reduced the available borrowings on its unsecured revolving line of credit.
As of September 30, 2017, the Company had begun redevelopment activities at Reisterstown Road Plaza located in Baltimore, Maryland and Towson Circle located in Towson, Maryland. The Company estimates that it will incur net costs of approximately $9,500 to $10,500 related to the Reisterstown Road Plaza redevelopment and approximately $33,000 to $35,000 related to the Towson Circle redevelopment, of which $6,539 and $12,102, respectively, has been incurred as of September 30, 2017.
year ended December 31, 2020.
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(13) COMMITMENTS AND CONTINGENCIES
(15)As of June 30, 2021, the Company had letters of credit outstanding totaling $291 that serve as collateral for certain capital improvements at 1 of its properties and reduce the available borrowings on its unsecured revolving line of credit.
The following table summarizes the Company’s active expansion and redevelopment projects as of June 30, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Estimated Net Investment | | Net Investment as of June 30, 2021 |
Project Name | | MSA | | Low | | High | |
Circle East (a) | | Baltimore | | $ | 46,000 | | | $ | 48,000 | | | $ | 28,929 | |
One Loudoun Downtown – Pads G & H (b) | | Washington, D.C. | | $ | 125,000 | | | $ | 135,000 | | | $ | 95,546 | |
The Shoppes at Quarterfield | | Baltimore | | $ | 9,700 | | | $ | 10,700 | | | $ | 4,266 | |
Southlake Town Square – Pad | | Dallas | | $ | 2,000 | | | $ | 2,500 | | | $ | 2,154 | |
(a)Investment amounts are net of proceeds of $11,820 received from the sale of air rights.
(b)Investment amounts are net of expected contributions from the Company’s joint venture partner.
(14) LITIGATION
The Company is subject, from time to time, to various legal proceedings and claims that arise in the ordinary course of business. While the resolution of such matters cannot be predicted with certainty, management believes, based on currently available information, that the final outcome of such matters will not have a material effect on the Company’s condensed consolidated financial statements. During the six months ended June 30, 2020, the Company entered into a settlement agreement related to litigation with a former tenant and received $6,100 in proceeds.
(16)(15) SUBSEQUENT EVENTS
Subsequent to SeptemberJune 30, 2017,2021, the Company:
•entered into its sixth amended and restated unsecured credit agreement with a syndicate of financial institutions to provide for an $850,000 unsecured revolving line of credit and amended the pricing terms of the Term Loan Due 2026. See Note 7 to the condensed consolidated financial statements for further details;
•closed on the dispositionacquisition of Forks Town Center,Arcadia Village, a 100,30037,000 square foot multi-tenant retail operating property located in Easton, Pennsylvania,Phoenix, Arizona, for a gross purchase price of $21,000;
•paid the cash dividend for the second quarter of 2021 of $0.075 per share on its outstanding Class A common stock, which was classified as held for sale aspaid on July 9, 2021 to Class A common shareholders of September 30, 2017, for a sales pricerecord at the close of $23,800 with an anticipated gainbusiness on sale. The mortgage payable, with a principal balance of $7,680 as of September 30, 2017June 25, 2021; and an interest rate of 7.70%, was repaid in conjunction with the disposition;
closed on the disposition of Placentia Town Center, a 111,000 square foot multi-tenant retail operating property located in Placentia, California, which was classified as held for sale as of September 30, 2017, for a sales price of $35,725 with an anticipated gain on sale;
closed on the disposition of Five Forks, a 70,200 square foot multi-tenant retail operating property located in Simpsonville, South Carolina, which was classified as held for sale as of September 30, 2017, for a sales price of $10,720 with an anticipated gain on sale;
closed on the disposition of Saucon Valley Square, a 80,700 square foot multi-tenant retail operating property located in Bethlehem, Pennsylvania, which was classified as held for sale as of September 30, 2017, for a sales price of $6,300 with no anticipated gain on sale or additional impairment due to previously recognized impairment charges;
announced that it will redeem all 5,400 outstanding shares of its 7.00% Series A cumulative redeemable preferred stock on December 20, 2017 for cash at a redemption price of $25.00 per preferred share, plus $0.3840 per preferred share representing all accrued and unpaid dividends up to, but excluding, December 20, 2017; and
•declared the cash dividend for the fourththird quarter of 20172021 of $0.165625$0.075 per share on its outstanding Class A common stock, which will be paid on January 10, 2018October 8, 2021 to Class A common shareholders of record at the close of business on December 27, 2017.
October 1, 2021.
Proposed Merger with Kite Realty Group Trust
On July 18, 2021, the Company entered into a definitive Merger Agreement with Kite and Merger Sub. Upon the terms and subject to the conditions set forth in the Merger Agreement, the Company will merge with and into Merger Sub, with Merger Sub surviving the Merger. At the Effective Time, each share of Class A common stock of the Company issued and outstanding immediately prior to the Effective Time will be converted into the right to receive 0.623 common shares of Kite, plus the right, if any, to receive cash in lieu of fractional common shares of Kite. During the period from the date of the Merger Agreement until the completion of the Merger, the Company is subject to certain restrictions on its ability to engage with third parties regarding alternative acquisition proposals and on the conduct of the Company’s business.
RETAIL PROPERTIES OF AMERICA, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The board of directors of the Company and the board of trustees of Kite each have unanimously approved the transaction. The closing of the Merger is expected to occur in the fourth quarter of 2021, subject to the satisfaction of certain closing conditions, including the approval of both Kite and the Company’s shareholders. There can be no assurance that the Merger will be completed on the terms or timeline currently contemplated or at all.
In connection with the Merger Agreement, the Company suspended its common stock repurchase program and ATM equity program.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q may constitute “forward-looking statements” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act). Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods which may be incorrect or imprecise and we may not be able to realize them. We do not guarantee that the transactions and events described will happen as described (oror that they will happen at all).all. You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “should,” “intends,” “plans,” “estimates,” “continue”“estimates” or “anticipates” and variations of such words or similar expressions or the negative of such words. You can also identify forward-looking statements by discussions of strategies, plans or intentions. Risks, uncertainties and changes in the following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:
•economic, business and financial conditions, and changes in our industry and changes in the real estate markets in particular;
•economic and other developments in our target markets where we have a high concentration of properties;
•our business strategy;
•our projected operating results;
•rental rates and/or vacancy rates;
•frequency and magnitude of defaults on, early terminations of or non-renewal of leases by tenants;
•bankruptcy, insolvency or insolvencygeneral downturn in the business of a major tenant or a significant number of smaller tenants;
•adverse impact of e-commerce developments and shifting consumer retail behavior on our tenants;
•interest rates or operating costs;
•the discontinuation of London Interbank Offered Rate (LIBOR);
•real estate and zoning laws and changes in real property tax rates;
•real estate valuations;
•our leverage;
•our ability to generate sufficient cash flows to service our outstanding indebtedness and make distributions to our shareholders;
•changes in the dividend policy for our Class A common stock;
•our ability to obtain necessary outside financing;
•the availability, terms and deployment of capital;
•general volatility of the capital and credit markets and the market price of our Class A common stock;
•risks generally associated with real estate acquisitions and dispositions, including our ability to identify and pursue acquisition and disposition opportunities;
•risks generally associated with redevelopment, including the impact of construction delays and cost overruns and related impact on our estimated investments in such redevelopment, our ability to lease redeveloped space, and our ability to identify and pursue redevelopment opportunities;opportunities and the risk that it takes longer than expected for development assets to stabilize or that we do not achieve our estimated returns on such investments;
•composition of members of our senior management team;
•our ability to attract and retain qualified personnel;
•our ability to continue to qualify as a real estate investment trust (REIT);
•governmental regulations, tax laws and rates and similar matters;
•our compliance with laws, rules and regulations;
•environmental uncertainties and exposure to natural disasters;
•pandemics or other public health crises, such as the novel coronavirus (COVID-19) pandemic, and the related impact on (i) our ability to manage our properties, finance our operations and perform necessary administrative and reporting functions and (ii) our tenants’ ability to operate their businesses, generate sales and meet their financial obligations, including the obligation to pay rent and other charges as specified in their leases;
other closing conditions to consummate the Merger and the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement (defined below);
•insurance coverage; and
•the likelihood or actual occurrence of terrorist attacks in the U.S.
The extent to which COVID-19 ultimately impacts us and our tenants will depend, in part, on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, including the adoption of available COVID-19 vaccines, and the direct and indirect economic effects of the pandemic and containment measures, among others. For a further discussion of these and other factors that could impact our future results, performance or transactions, see ItemPart II, “Item 1A. “RiskRisk Factors” in this document and in our Annual Report on Form 10-K for the year ended December 31, 20162020, which you should interpret as being heightened as a result of the numerous and in our Quarterly Report on Form 10-Q for the quarters ended March 31, 2017 and June 30, 2017.ongoing adverse impacts of COVID-19. Readers should not place undue reliance on any forward-looking statements, which are based only on information currently available to us (or to third parties making the forward-looking statements). We undertake no obligation to publicly release any revisions to such forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q, except as required by applicable law.
The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the related notes included in this report.
Proposed Merger with Kite Realty Group Trust
On July 18, 2021, we entered into a definitive Agreement and Plan of Merger (Merger Agreement) with Kite Realty Group Trust (Kite) and KRG Oak, LLC, a wholly owned subsidiary of Kite (Merger Sub). Upon the terms and subject to the conditions set forth in the Merger Agreement, we will merge with and into Merger Sub, with Merger Sub surviving the merger (Merger). Immediately following the closing of the Merger, Merger Sub will merge with and into Kite Realty Group, L.P., the operating partnership of Kite with Kite Realty Group, L.P. surviving such merger, so that all of the assets of Kite are owned at or below the operating partnership level. At the effective time of the Merger (Effective Time), each share of our Class A common stock issued and outstanding immediately prior to the Effective Time will be converted into the right to receive 0.623 common shares of Kite, plus the right, if any, to receive cash in lieu of fractional common shares of Kite. During the period from the date of the Merger Agreement until the completion of the Merger, we are subject to certain restrictions on our ability to engage with third parties regarding alternative acquisition proposals and on the conduct of our business.
Our board of directors and the board of trustees of Kite each have unanimously approved the transaction. The closing of the Merger is expected to occur in the fourth quarter of 2021, subject to the satisfaction of certain closing conditions, including the approval of both Kite and our shareholders. There can be no assurance that the Merger will be completed on the terms or timeline currently contemplated or at all.
Impact of the COVID-19 Pandemic
The global outbreak of COVID-19 has caused, and could continue to cause, significant disruptions to the U.S. and global economy, including the retail sector within the U.S. Additionally, the COVID-19 pandemic has had, and could continue to have, a significant adverse impact on the underlying industries of many of our tenants. As a result of the pandemic and the measures implemented to control the spread of COVID-19, our tenants and their operations, and their ability to pay rent in full, on time or at all, have been, and may continue to be, adversely impacted due to restrictions placed on their operations. While many U.S. states and cities have eased or lifted such restrictions, revocation of restrictions, including the impact on and of consumer behavior, all of which vary by geography, could impact our business and such impacts may be significant and materially adverse to us. While we have been negatively impacted by the COVID-19 pandemic, including a decline in our retail portfolio occupancy of 230 basis points from 94.1% as of March 31, 2020 to 91.8% as of June 30, 2021 and a 4.2% decrease in annualized base rent (ABR) within our retail operating portfolio from $366,285 at March 31, 2020 to $350,823 at June 30, 2021, we also note recent positive trends, including continued improvement in base rent collection since the start of the pandemic, positive blended re-leasing spreads throughout the pandemic and increased leasing demand over the previous three quarters. However, due to numerous uncertainties, it is not possible to accurately predict the ultimate impact the pandemic will have on our financial condition, results of operations and cash flows and we continue to closely monitor the impact of the pandemic on all aspects of our business.
In response to COVID-19 and its related impact on many of our tenants, we reached agreements with tenants regarding lease concessions. The majority of the amounts addressed by the lease concessions are base rent, although certain concessions also address tenant recoveries and other charges. The majority of these concessions were agreed to and, in the majority of these circumstances, executed during the year ended December 31, 2020. As of June 30, 2021, we have agreed in principle and/or executed additional lease concessions to defer, without an extension of the lease term, $54 of previously uncollected base rent charges and to address an additional $694 of previously uncollected base rent charges through abatement, a combination of deferral and abatement or a concession with the extension of the lease term.
As of July 26, 2021, we have collected 98% and 97% of base rent charges related to the three months ended June 30, 2021 and March 31, 2021, respectively, and have executed lease concession agreements to address an additional 0.45% and 1.6% of base rent related to the three months ended June 30, 2021 and March 31, 2021, respectively. Uncollected billed base rent related to tenants who have declared bankruptcy represents 0.0% for both the three months ended June 30, 2021 and March 31, 2021. As of July 26, 2021, we have collected 84%, 92%, 96% and 97% of billed base rent charges related to the three months ended June 30, 2020, September 30, 2020, December 31, 2020 and March 31, 2021, respectively, as compared to 81%, 89%, 95% and 96% as of April 26, 2021, respectively.
As of June 30, 2021, we have collected 95% of the base rent charges that had previously been deferred under executed lease concession agreements and were due to be paid during the three months ended June 30, 2021. As of June 30, 2021, the amounts that have been deferred to future periods under executed lease concessions, on a weighted average basis, are expected to be received over a period of approximately six months. While we have reached agreement with the majority of tenants that have requested lease concessions as a result of COVID-19, we can provide no assurances whether certain tenants may request additional concessions in the future. As of June 30, 2021, all of our properties were open for the benefit of the communities and customers that our tenants serve.
The following ABR information is based on ABR of leases in our retail operating portfolio that were in effect as of June 30, 2021, and is being provided to assist with analysis of the actual and potential impact of COVID-19. The information may not be indicative of collection and lease concession activity in future periods. The classification of tenant type, including the classification between essential and non-essential, is based on management’s understanding of the tenant’s operations and may not be comparative to similarly titled classifications by other companies.
| | | | | | | | | | | | | | | | | | | | | | | |
Billed Base Rent Collections as of July 26, 2021 | |
Resiliency Category/Tenant Type | | 6/30/2021 ABR | | % of 6/30/2021 ABR | | Q2 2021 Billed Base Rent Collected | |
Essential | | $ | 113,026 | | | 32 | % | | 100 | % | |
Office | | 23,042 | | | 7 | % | | 98 | % | |
Non-Essential | | 158,182 | | | 45 | % | | 97 | % | |
Restaurants | | | | | | | |
Restaurants – Full Service | | 29,120 | | | 8 | % | | 99 | % | |
Restaurants – Quick Service | | 27,453 | | | 8 | % | | 97 | % | |
Total Restaurants | | 56,573 | | | 16 | % | | 98 | % | |
| | | | | | | |
Total Retail Operating Portfolio – Billed base rent collected | | $ | 350,823 | | | 100 | % | | 98 | % | |
Addressed through executed lease amendments | | | | | | 0 | % | (a) |
Total Retail Operating Portfolio – Billed base rent addressed | | | | | | 98 | % | |
(a)We have executed lease amendments to address an additional 0.45% of billed base rent related to the second quarter of 2021 through deferrals, abatements, combinations and/or modifications.
Executive Summary
Retail Properties of America, Inc. (we, our, us) is a REIT that owns and operates high quality, strategically located open-air shopping centers, including properties with a mixed-use component. As of June 30, 2021, we owned 100 retail operating properties in the United States. As of September 30, 2017, we owned 120 retail operating propertiesStates representing 21,647,00019,726,000 square feet of gross leasable area (GLA). and had four expansion and redevelopment projects. Our retail operating portfolio includes (i) neighborhood and community centers, (ii) power centers, and (iii) lifestyle centers and multi-tenant retail-focused mixed-use properties, as well as single-user retail properties.
The following table summarizes our operating portfolio as of SeptemberJune 30, 2017:2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Property Type | | Number of Properties | | GLA (in thousands) | | Occupancy | | Percent Leased Including Leases Signed (a) |
Retail operating portfolio | | | | | | | | |
Multi-tenant retail: | | | | | | | | |
Neighborhood and community centers | | 62 | | | 10,336 | | | 92.6 | % | | 93.6 | % |
Power centers | | 21 | | | 4,668 | | | 94.5 | % | | 95.3 | % |
Lifestyle centers and mixed-use properties (b) | | 15 | | | 4,461 | | | 86.7 | % | | 90.7 | % |
Total multi-tenant retail | | 98 | | | 19,465 | | | 91.7 | % | | 93.3 | % |
Single-user retail | | 2 | | | 261 | | | 100.0 | % | | 100.0 | % |
Total retail operating properties | | 100 | | | 19,726 | | | 91.8 | % | | 93.4 | % |
Expansion and redevelopment projects: | | | | | | | | |
Circle East | | 1 | | | | | | | |
One Loudoun Downtown – Pads G & H (c) | | — | | | | | | | |
Carillon | | 1 | | | | | | | |
The Shoppes at Quarterfield | | 1 | | | | | | | |
Total number of properties (d) | | 103 | | | | | | | |
(a)Includes leases signed but not commenced.
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| | | | | | | | | | | | |
Property Type | | Number of Properties | | GLA (in thousands) | | Occupancy | | Percent Leased Including Leases Signed (a) |
Operating portfolio: | | | | | | | | |
Multi-tenant retail | | | | | | | | |
Neighborhood and community centers | | 59 |
| | 7,878 |
| | 91.8 | % | | 92.6 | % |
Power centers | | 40 |
| | 9,142 |
| | 93.8 | % | | 95.0 | % |
Lifestyle centers and mixed-use properties | | 15 |
| | 4,172 |
| | 85.6 | % | | 86.9 | % |
Total multi-tenant retail | | 114 |
| | 21,192 |
| | 91.5 | % | | 92.5 | % |
Single-user retail | | 6 |
| | 455 |
| | 100.0 | % | | 100.0 | % |
Total retail operating portfolio | | 120 |
| | 21,647 |
| | 91.7 | % | | 92.7 | % |
Office | | 1 |
| | 895 |
| | 13.8 | % | | 46.1 | % |
Total operating portfolio (b) | | 121 |
| | 22,542 |
| | 88.6 | % | | 90.8 | % |
| |
(a) | Includes leases signed but not commenced. |
| |
(b) | Excludes six multi-tenant retail operating properties classified as held for sale as of September 30, 2017.
|
In addition to our operating portfolio,(b)Excludes the following multi-family rental units as of SeptemberJune 30, 2017, we owned2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Property | | Number of Units | | Average Monthly Rent per Occupied Unit | | Occupancy | | Percent Leased Including Leases Signed |
One Loudoun Downtown – Pad G | | 99 | | $ | 2,341 | | | 38.3 | % | | 63.6 | % |
Plaza del Lago | | 18 | | $ | 1,378 | | | 88.9 | % | | 94.4 | % |
(c)The operating portion of this property is included in the property count of lifestyle centers and mixed-use properties within our retail operating portfolio.
(d)Excludes two multi-tenant retail operating properties where we have begun redevelopment activities.classified as held for sale as of June 30, 2021.
We have undertakenare a portfolio repositioning effort, the core objective of which is to become a dominantprominent owner of multi-tenant retail properties, many with a mixed-use component, primarily located in 10 to 15 target markets, owning 3,000,000 to 5,000,000 square feet in each market. To date, we have identified 10 targetthe following markets: Dallas, Washington, D.C./Baltimore, New York, Chicago, Seattle, Atlanta, Houston, San Antonio, Phoenix and Austin. DependingSince our inaugural investor day in 2013, we have:
•improved our retail ABR by 34% to $19.37 per square foot as of June 30, 2021 from $14.46 per square foot as of March 31, 2013;
•increased our concentration in lifestyle and mixed-use properties based on whether favorable market conditions exist, among other factors, we expectmulti-tenant retail ABR by 1,700 basis points to substantially complete33% as of June 30, 2021 from 16% as of March 31, 2013;
•reduced our portfolio disposition effortstop 20 retail tenant concentration of total ABR by 1,070 basis points to 27.2% as of June 30, 2021 from 37.9% as of March 31, 2013; and
•reduced our indebtedness by 32% to $1,760,962 as of June 30, 2021 from $2,601,912 as of March 31, 2013.
Additionally, as of June 30, 2021, approximately 88.2% of our multi-tenant retail ABR was generated in the top 25 metropolitan statistical areas (MSAs), as determined by the endUnited States Census Bureau and ranked based on the most recently available population estimates.
We are focused on optimizing our tenancy, asset level configurations and merchandising through accretive leasing activity and growth-producing mixed-use expansion and redevelopment projects. For the six months ended June 30, 2021, we achieved a blended re-leasing spread of 2018.positive 5.3%, consisting of comparable cash leasing spreads of 15.2% on new leases and 2.9% on renewal leases. During this period, we achieved average annual contractual rent increases on comparable signed new leases of approximately 170 basis points. As of June 30, 2021, we have $12,754 of ABR related to 616 square feet of GLA pertaining to 2021 lease expirations and $8,342 of ABR related to 317 square feet of GLA pertaining to leases signed but not yet commenced.
Our active expansion and redevelopment projects consist of approximately $183,000 to $196,000 of expected investment through 2022, equivalent to approximately 6% of the net book value of our investment properties as of June 30, 2021. These predominantly mixed-use-focused projects include the redevelopment at Circle East, the expansion projects of Pads G & H at One Loudoun Downtown and site and building reconfiguration at The Shoppes at Quarterfield as well as the vacant pad development at Southlake Town Square. Our current portfolio of assets contains numerous additional projects in the longer-term pipeline, including, among others, redevelopment at Carillon, additional pad developments at One Loudoun Downtown, pad developments and expansions at Main Street Promenade and Downtown Crown, and future projects at Merrifield Town Center, Tysons Corner, Southlake Town Square, Lakewood Towne Center and One Loudoun Uptown.
Company Highlights — Six Months Ended June 30, 2021
Developments in Progress
During the six months ended June 30, 2021, we:
•invested $29,943 in our expansion and redevelopment projects at Circle East, One Loudoun Downtown, The Shoppes at Quarterfield and Southlake Town Square. We expect the majority of our additional 2021 project spend will be for the One Loudoun Downtown project;
•placed portions of Circle East and The Shoppes at Quarterfield in service and reclassified the related costs from “Developments in progress” into “Land” and “Building and other improvements” in the accompanying condensed consolidated balance sheets; and
Company Highlights — Nine Months Ended September•placed the 99 multi-family rental units at One Loudoun Downtown – Pad G in service and reclassified the related costs from “Developments in progress” into “Land” and “Building and other improvements” in the accompanying condensed consolidated balance sheets.
The following table summarizes the carrying amount of our developments in progress as of June 30, 20172021 and December 31, 2020:
| | | | | | | | | | | | | | | | | | | | |
Property Name | | MSA | | June 30, 2021 | | December 31, 2020 |
Expansion and redevelopment projects | | | | | | |
Circle East | | Baltimore | | $ | 34,336 | | | $ | 38,180 | |
One Loudoun Downtown | | Washington, D.C. | | 86,030 | | | 89,103 | |
Carillon (a) | | Washington, D.C. | | 33,660 | | | 33,463 | |
The Shoppes at Quarterfield | | Baltimore | | 1,349 | | | 865 | |
Pad development projects | | | | | | |
Southlake Town Square | | Dallas | | 2,154 | | | 1,495 | |
| | | | 157,529 | | | 163,106 | |
Land held for future development | | | | | | |
One Loudoun Uptown | | Washington, D.C. | | 25,450 | | | 25,450 | |
Total developments in progress | | | | $ | 182,979 | | | $ | 188,556 | |
(a)In response to macroeconomic conditions due to the COVID-19 pandemic, we halted plans for vertical construction at the redevelopment during 2020. During the three months ended June 30, 2021, we announced plans to commence construction on a medical office building at Carillon in the second half of 2021.
Acquisitions
DuringWe did not acquire any properties during the ninesix months ended SeptemberJune 30, 2017,2021.
Subsequent to June 30, 2021, we continued to execute our investment strategy by acquiring two multi-tenant retail operating properties, five additional phases, including the development rights for additional multi-family units, at an existing wholly-ownedacquired Arcadia Village, a 37,000 square foot multi-tenant retail operating property andlocated in the fee interest in an existing wholly-owned multi-tenant retail operating propertyPhoenix MSA, for a totalgross purchase price of $147,586.$21,000.
Dispositions
We did not sell any properties during the six months ended June 30, 2021.
Market Summary
The following table summarizes our acquisitions during the nine months ended September 30, 2017:
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| | | | | | | | | | | | | |
Date | | Property Name | | Metropolitan Statistical Area (MSA) | | Property Type | | Square Footage | | Acquisition Price |
January 13, 2017 | | Main Street Promenade | | Chicago | | Multi-tenant retail | | 181,600 |
| | $ | 88,000 |
|
January 25, 2017 | | Boulevard at the Capital Centre – Fee Interest | | Washington, D.C. | | Fee interest (a) | | — |
| | 2,000 |
|
February 24, 2017 | | One Loudoun Downtown – Phase II | | Washington, D.C. | | Additional phase of multi-tenant retail (b) | | 15,900 |
| | 4,128 |
|
April 5, 2017 | | One Loudoun Downtown – Phase III | | Washington, D.C. | | Additional phase of multi-tenant retail (b) | | 9,800 |
| | 2,193 |
|
May 16, 2017 | | One Loudoun Downtown – Phase IV | | Washington, D.C. | | Development rights (b) | | — |
| | 3,500 |
|
July 6, 2017 | | New Hyde Park Shopping Center | | New York | | Multi-tenant retail | | 32,300 |
| | 22,075 |
|
August 8, 2017 | | One Loudoun Downtown – Phase V | | Washington, D.C. | | Additional phase of multi-tenant retail (b) | | 17,700 |
| | 5,167 |
|
August 8, 2017 | | One Loudoun Downtown – Phase VI | | Washington, D.C. | | Additional phase of multi-tenant retail (b) | | 74,100 |
| | 20,523 |
|
| | | | | | | | 331,400 |
| | $ | 147,586 |
|
| |
(a) | The wholly-owned multi-tenant retail operating property located in Largo, Maryland was previously subject to an approximately 70 acre long-term ground lease with a third party. We completed a transaction whereby we received the fee interest in approximately 50 acres of the underlying land in exchange for which (i) we paid $1,939 and (ii) the term of the ground lease with respect to the remaining approximately 20 acres was shortened to nine months. We derecognized building and improvements of $11,347 related to the remaining ground lease, recognized the fair value of land received of $15,200 and recorded a deferred gain of $2,524. The deferred gain will be recognized upon the expiration of the remaining ground lease. The total number of properties in our portfolio was not affected by this transaction. |
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(b) | We acquired the remaining five phases under contract, including the development rights for an additional 123 multi-family units for a total of 408 units, at our One Loudoun Downtown multi-tenant retail operating property. The total number of properties in our portfolio was not affected by these transactions. |
In total for 2017, we expect to invest approximately $375,000 to $475,000 on strategic acquisitions in our target markets and repurchases of our common stock. Some of these acquisitions may be structured as Internal Revenue Code Section 1031 tax-deferred exchanges (1031 Exchanges).
Dispositions
During the nine months ended September 30, 2017, we continued to pursue dispositions of select non-target and single-user properties. Consideration from dispositions totaled $642,712 and included the sales of 28 multi-tenant retail operating properties aggregating 4,038,300 square feet for total consideration of $595,125, a 131,900 square foot single-user parcel located at an existing multi-tenant retail operating property for consideration of $17,519 and six single-user retail properties aggregating 132,200 square feet for total consideration of $30,068.
The following table summarizes our dispositions during the nine months ended September 30, 2017:
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| | | | | | | | | | | |
Date | | Property Name | | Property Type | | Square Footage | | Consideration |
January 27, 2017 | | Rite Aid Store (Eckerd), Culver Rd. – Rochester, NY | | Single-user retail | | 10,900 |
| | $ | 500 |
|
February 21, 2017 | | Shoppes at Park West | | Multi-tenant retail | | 63,900 |
| | 15,383 |
|
March 7, 2017 | | CVS Pharmacy – Sylacauga, AL | | Single-user retail | | 10,100 |
| | 3,700 |
|
March 8, 2017 | | Rite Aid Store (Eckerd) – Kill Devil Hills, NC | | Single-user retail | | 13,800 |
| | 4,297 |
|
March 15, 2017 | | Century III Plaza – Home Depot (a) | | Single-user parcel | | 131,900 |
| | 17,519 |
|
March 16, 2017 | | Village Shoppes at Gainesville | | Multi-tenant retail | | 229,500 |
| | 41,750 |
|
March 24, 2017 | | Northwood Crossing | | Multi-tenant retail | | 160,000 |
| | 22,850 |
|
April 4, 2017 | | University Town Center | | Multi-tenant retail | | 57,500 |
| | 14,700 |
|
April 4, 2017 | | Edgemont Town Center | | Multi-tenant retail | | 77,700 |
| | 19,025 |
|
April 4, 2017 | | Phenix Crossing | | Multi-tenant retail | | 56,600 |
| | 12,400 |
|
April 27, 2017 | | Brown’s Lane | | Multi-tenant retail | | 74,700 |
| | 10,575 |
|
May 9, 2017 | | Rite Aid Store (Eckerd) – Greer, SC | | Single-user retail | | 13,800 |
| | 3,050 |
|
May 9, 2017 | | Evans Town Centre | | Multi-tenant retail | | 75,700 |
| | 11,825 |
|
May 25, 2017 | | Red Bug Village | | Multi-tenant retail | | 26,200 |
| | 8,100 |
|
May 26, 2017 | | Wilton Square | | Multi-tenant retail | | 438,100 |
| | 49,300 |
|
May 30, 2017 | | Town Square Plaza | | Multi-tenant retail | | 215,600 |
| | 28,600 |
|
May 31, 2017 | | Cuyahoga Falls Market Center | | Multi-tenant retail | | 76,400 |
| | 11,500 |
|
June 5, 2017 | | Plaza Santa Fe II | | Multi-tenant retail | | 224,200 |
| | 35,220 |
|
June 6, 2017 | | Rite Aid Store (Eckerd) – Columbia, SC | | Single-user retail | | 13,400 |
| | 3,250 |
|
June 16, 2017 | | Fox Creek Village | | Multi-tenant retail | | 107,500 |
| | 24,825 |
|
June 29, 2017 | | Cottage Plaza | | Multi-tenant retail | | 85,500 |
| | 23,050 |
|
June 29, 2017 | | Magnolia Square | | Multi-tenant retail | | 116,000 |
| | 16,000 |
|
June 29, 2017 | | Cinemark Seven Bridges | | Single-user retail | | 70,200 |
| | 15,271 |
|
June 29, 2017 | | Low Country Village I & II | | Multi-tenant retail | | 139,900 |
| | 22,075 |
|
July 20, 2017 | | Boulevard Plaza | | Multi-tenant retail | | 111,100 |
| | 14,300 |
|
July 26, 2017 | | Irmo Station (b) | | Multi-tenant retail | | 99,400 |
| | 16,027 |
|
July 27, 2017 | | Hickory Ridge | | Multi-tenant retail | | 380,600 |
| | 44,020 |
|
August 4, 2017 | | Lakepointe Towne Center | | Multi-tenant retail | | 196,600 |
| | 10,500 |
|
August 14, 2017 | | The Columns | | Multi-tenant retail | | 173,400 |
| | 21,750 |
|
August 25, 2017 | | Holliday Towne Center | | Multi-tenant retail | | 83,100 |
| | 11,750 |
|
August 25, 2017 | | Northwoods Center (b) | | Multi-tenant retail | | 96,000 |
| | 24,250 |
|
September 14, 2017 | | The Orchard | | Multi-tenant retail | | 165,800 |
| | 20,000 |
|
September 21, 2017 | | Lake Mary Pointe | | Multi-tenant retail | | 51,100 |
| | 5,100 |
|
September 22, 2017 | | West Town Market (b) | | Multi-tenant retail | | 67,900 |
| | 14,250 |
|
September 29, 2017 | | Dorman Centre I & II | | Multi-tenant retail | | 388,300 |
| | 46,000 |
|
| | | | | | 4,302,400 |
| | $ | 642,712 |
|
| |
(a) | We disposed of the Home Depot parcel at Century III Plaza, an existing 284,100 square foot multi-tenant retail operating property. The remaining portion of Century III Plaza is classified as held for sale as of September 30, 2017. |
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(b) | Disposition proceeds related to this property are temporarily restricted related to a potential 1031 Exchange. As of September 30, 2017, disposition proceeds totaling $65,086 are temporarily restricted and are included in “Other assets, net” in the accompanying condensed consolidated balance sheets. |
During the nine months ended September 30, 2017, we also received net proceeds of $1,636 from other transactions, including condemnation awards and receipt of the escrow related to the disposition of Maple Tree Place on August 12, 2016. The aggregate proceeds, net of closing costs and proceeds temporarily restricted related to potential 1031 Exchanges, from property dispositions and other transactions during the nine months ended September 30, 2017 totaled $564,069.
Subsequent to September 30, 2017, we sold four multi-tenant retail operating properties aggregating 362,200 square feet for total consideration of $76,545. In total for 2017, we expect targeted dispositions to total approximately $850,000 to $1,000,000, some of which may be structured as 1031 Exchanges.
Market Summary
As a result of our capital recycling efforts over the past several years, we increased the amount of annualized base rent (ABR) in our target markets to 76.4% of our total multi-tenant retail ABR, or 76.9% including amounts attributable to our active redevelopments. The following table summarizes our operating portfolio by market as of SeptemberJune 30, 2017:2021. Square feet of GLA is presented in thousands.
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Property Type/Market | | Number of Properties | | ABR (a) | | % of Total Multi-Tenant Retail ABR (a) | | ABR per Occupied Sq. Ft. | | GLA (a) | | % of Total Multi-Tenant Retail GLA (a) | | Occupancy | | % Leased Including Signed |
Multi-Tenant Retail: | | | | | | | | | | | | | | | | |
Top 25 MSAs (b) | | | | | | | | | | | | | | | | |
Dallas | | 19 | | | $ | 79,019 | | | 22.9 | % | | $ | 23.05 | | | 3,943 | | | 20.3 | % | | 86.9 | % | | 89.8 | % |
New York | | 9 | | | 36,515 | | | 10.6 | % | | 30.10 | | | 1,292 | | | 6.6 | % | | 93.9 | % | | 96.4 | % |
Washington, D.C. | | 8 | | | 36,378 | | | 10.5 | % | | 28.86 | | | 1,388 | | | 7.1 | % | | 90.8 | % | | 92.6 | % |
Chicago | | 8 | | | 27,468 | | | 8.0 | % | | 23.61 | | | 1,358 | | | 7.0 | % | | 85.7 | % | | 87.2 | % |
Seattle | | 9 | | | 23,767 | | | 6.9 | % | | 16.53 | | | 1,516 | | | 7.8 | % | | 94.8 | % | | 95.9 | % |
Baltimore | | 4 | | | 23,122 | | | 6.7 | % | | 16.09 | | | 1,543 | | | 7.9 | % | | 93.2 | % | | 93.6 | % |
Atlanta | | 9 | | | 20,914 | | | 6.1 | % | | 14.15 | | | 1,513 | | | 7.8 | % | | 97.7 | % | | 98.8 | % |
Houston | | 8 | | | 13,488 | | | 3.9 | % | | 13.58 | | | 1,056 | | | 5.4 | % | | 94.1 | % | | 94.6 | % |
San Antonio | | 2 | | | 10,965 | | | 3.2 | % | | 18.75 | | | 605 | | | 3.1 | % | | 96.7 | % | | 96.7 | % |
Phoenix | | 3 | | | 10,404 | | | 3.0 | % | | 17.75 | | | 632 | | | 3.3 | % | | 92.8 | % | | 95.5 | % |
Los Angeles | | 1 | | | 6,715 | | | 1.9 | % | | 17.70 | | | 395 | | | 2.0 | % | | 96.1 | % | | 98.8 | % |
Riverside | | 1 | | | 4,796 | | | 1.4 | % | | 16.40 | | | 292 | | | 1.5 | % | | 100.0 | % | | 100.0 | % |
Charlotte | | 1 | | | 4,181 | | | 1.2 | % | | 13.97 | | | 319 | | | 1.6 | % | | 93.7 | % | | 97.5 | % |
St. Louis | | 1 | | | 4,073 | | | 1.2 | % | | 9.74 | | | 453 | | | 2.3 | % | | 92.3 | % | | 92.3 | % |
Tampa | | 1 | | | 2,339 | | | 0.7 | % | | 19.19 | | | 126 | | | 0.7 | % | | 97.0 | % | | 97.0 | % |
Subtotal | | 84 | | | 304,144 | | | 88.2 | % | | 20.15 | | | 16,431 | | | 84.4 | % | | 91.9 | % | | 93.5 | % |
| | | | | | | | | | | | | | | | |
Non-Top 25 MSAs (b) | | 14 | | | 40,815 | | | 11.8 | % | | 14.80 | | | 3,034 | | | 15.6 | % | | 90.9 | % | | 92.3 | % |
| | | | | | | | | | | | | | | | |
Total Multi-Tenant Retail | | 98 | | | 344,959 | | | 100.0 | % | | 19.32 | | | 19,465 | | | 100.0 | % | | 91.7 | % | | 93.3 | % |
| | | | | | | | | | | | | | | | |
Single-User Retail | | 2 | | | 5,864 | | | | | 22.49 | | | 261 | | | | | 100.0 | % | | 100.0 | % |
| | | | | | | | | | | | | | | | |
Total Retail Operating Portfolio (c) | | 100 | | | $ | 350,823 | | | | | $ | 19.37 | | | 19,726 | | | | | 91.8 | % | | 93.4 | % |
(a)Excludes $2,791 of multi-tenant retail ABR and 178 square feet of multi-tenant retail GLA attributable to Circle East and The Shoppes at Quarterfield, located in the Baltimore MSA, and Carillon, located in the Washington, D.C. MSA, all three of which are in redevelopment. Including these amounts, 88.3% of our multi-tenant retail ABR and 84.6% of our multi-tenant retail GLA is located in the top 25 MSAs.
(b)Top 25 MSAs are determined by the United States Census Bureau and ranked based on the most recently available population estimates.
(c)Excludes two multi-tenant retail operating properties classified as held for sale as of June 30, 2021 and the following multi-family rental units as of June 30, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Market | | Number of Units | | Average Monthly Rent per Occupied Unit | | Occupancy | | % Leased Including Signed |
Washington, D.C. | | 99 | | $ | 2.341 | | | 38.3 | % | | 63.6 | % |
Chicago | | 18 | | $ | 1.378 | | | 88.9 | % | | 94.4 | % |
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Property Type/Market | | Number of Properties | | ABR (a) | | % of Total Multi-Tenant Retail ABR (a) | | ABR per Occupied Sq. Ft. | | GLA (in thousands) (a) | | % of Total Multi-Tenant Retail GLA (a) | | Occupancy | | % Leased Including Signed |
Multi-Tenant Retail: | | | | | | | | | | | | | | | | |
Target Markets | | | | | | | | | | | | | | | | |
Dallas, Texas | | 19 |
| | $ | 80,592 |
| | 22.6 | % | | $ | 21.98 |
| | 3,926 |
| | 18.5 | % | | 93.4 | % | | 94.7 | % |
Washington, D.C. / Baltimore, Maryland | | 13 |
| | 50,209 |
| | 14.1 | % | | 22.39 |
| | 2,735 |
| | 12.9 | % | | 82.0 | % | | 82.8 | % |
New York, New York | | 9 |
| | 34,661 |
| | 9.7 | % | | 28.06 |
| | 1,292 |
| | 6.1 | % | | 95.6 | % | | 96.7 | % |
Chicago, Illinois | | 7 |
| | 25,688 |
| | 7.2 | % | | 23.02 |
| | 1,258 |
| | 5.9 | % | | 88.7 | % | | 91.7 | % |
Seattle, Washington | | 8 |
| | 20,424 |
| | 5.7 | % | | 15.18 |
| | 1,477 |
| | 7.0 | % | | 91.1 | % | | 91.7 | % |
Atlanta, Georgia | | 9 |
| | 18,401 |
| | 5.2 | % | | 13.28 |
| | 1,513 |
| | 7.1 | % | | 91.6 | % | | 91.7 | % |
Houston, Texas | | 9 |
| | 15,173 |
| | 4.3 | % | | 14.13 |
| | 1,141 |
| | 5.4 | % | | 94.1 | % | | 94.5 | % |
San Antonio, Texas | | 3 |
| | 12,138 |
| | 3.4 | % | | 17.17 |
| | 723 |
| | 3.4 | % | | 97.8 | % | | 98.9 | % |
Phoenix, Arizona | | 3 |
| | 9,886 |
| | 2.8 | % | | 17.36 |
| | 632 |
| | 3.0 | % | | 90.1 | % | | 91.4 | % |
Austin, Texas | | 4 |
| | 5,170 |
| | 1.4 | % | | 15.99 |
| | 350 |
| | 1.7 | % | | 92.4 | % | | 93.7 | % |
Subtotal | | 84 |
| | 272,342 |
| | 76.4 | % | | 19.93 |
| | 15,047 |
| | 71.0 | % | | 90.8 | % | | 91.9 | % |
| | | | | | | | | | | | | | | | |
Non-Target – Top 50 MSAs | | 14 |
| | 37,903 |
| | 10.6 | % | | 15.50 |
| | 2,641 |
| | 12.5 | % | | 92.6 | % | | 94.1 | % |
| | | | | | | | | | | | | | | | |
Subtotal Target Markets and Top 50 MSAs | | 98 |
| | 310,245 |
| | 87.0 | % | | 19.25 |
| | 17,688 |
| | 83.5 | % | | 91.1 | % | | 92.2 | % |
| | | | | | | | | | | | | | | | |
Non-Target – Other | | 16 |
| | 46,199 |
| | 13.0 | % | | 14.09 |
| | 3,504 |
| | 16.5 | % | | 93.6 | % | | 93.9 | % |
| | | | | | | | | | | | | | | | |
Total Multi-Tenant Retail | | 114 |
| | 356,444 |
| | 100.0 | % | | 18.38 |
| | 21,192 |
| | 100.0 | % | | 91.5 | % | | 92.5 | % |
| | | | | | | | | | | | | | | | |
Single-User Retail | | 6 |
| | 10,669 |
| | | | 23.45 |
| | 455 |
| | | | 100.0 | % | | 100.0 | % |
| | | | | | | | | | | | | | | | |
Total Retail | | 120 |
| | 367,113 |
| | | | 18.50 |
| | 21,647 |
| | | | 91.7 | % | | 92.7 | % |
| | | | | | | | | | | | | | | | |
Office | | 1 |
| | 1,921 |
| | | | 15.55 |
| | 895 |
| | | | 13.8 | % | | 46.1 | % |
| | | | | | | | | | | | | | | | |
Total Operating Portfolio (b) | | 121 |
| | $ | 369,034 |
| | | | $ | 18.48 |
| | 22,542 |
| | | | 88.6 | % | | 90.8 | % |
| |
(a) | Excludes $7,548 of multi-tenant retail ABR and 816 square feet of multi-tenant retail GLA attributable to our two active redevelopments, which are located in the Washington, D.C./Baltimore MSA. Including these amounts, 76.9% of our multi-tenant retail ABR and 72.1% of our multi-tenant retail GLA is located in our target markets. |
| |
(b) | Excludes six multi-tenant retail operating properties classified as held for sale as of September 30, 2017. |
Leasing Activity
The following table summarizes the leasing activity in our retail operating portfolio and our active expansion and redevelopment projects during the ninesix months ended SeptemberJune 30, 2017. Leases2021. New leases with terms of less than 12 months and renewal leases that extend the lease term by less than 12 months have been excluded from the table.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of Leases Signed | | GLA Signed (in thousands) | | New Contractual Rent per Square Foot (PSF) (a) | | Prior Contractual Rent PSF (a) | | % Change over Prior ABR (a) | | Weighted Average Lease Term | | Tenant Allowances PSF (b) |
Comparable Renewal Leases | | 119 | | | 898 | | | $ | 19.44 | | | $ | 18.90 | | | 2.9 | % | | 5.1 | | | $ | 2.34 | |
Comparable New Leases | | 33 | | | 184 | | | $ | 26.01 | | | $ | 22.57 | | | 15.2 | % | | 9.6 | | | $ | 43.54 | |
Non-Comparable New and Renewal Leases (c) | | 74 | | | 509 | | | $ | 18.39 | | | N/A | | N/A | | 6.7 | | | $ | 15.05 | |
Total | | 226 | | | 1,591 | | | $ | 20.56 | | | $ | 19.52 | | | 5.3 | % | | 6.2 | | | $ | 11.11 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of Leases Signed | | GLA Signed (in thousands) | | New Contractual Rent per Square Foot (PSF) (a) | | Prior Contractual Rent PSF (a) | | % Change over Prior ABR (a) | | Weighted Average Lease Term | | Tenant Allowances PSF |
Comparable Renewal Leases | | 279 |
| | 1,568 |
| | $ | 19.10 |
| | $ | 17.90 |
| | 6.7 | % | | 4.9 |
| | $ | 1.56 |
|
Comparable New Leases | | 32 |
| | 177 |
| | $ | 23.16 |
| | $ | 19.37 |
| | 19.6 | % | | 8.4 |
| | $ | 45.73 |
|
Non-Comparable New and Renewal Leases (b) | | 73 |
| | 305 |
| | $ | 18.90 |
| | N/A |
| | N/A |
| | 6.9 |
| | $ | 27.84 |
|
Total | | 384 |
| | 2,050 |
| | $ | 19.51 |
| | $ | 18.05 |
| | 8.1 | % | | 5.5 |
| | $ | 9.29 |
|
| |
(a) | Total excludes the impact of Non-Comparable New and Renewal Leases. |
| |
(b) | Includes (i) leases signed on units that were vacant for over 12 months, (ii) leases signed without fixed rental payments and (iii) leases signed where the previous and the current lease do not have a consistent lease structure. |
(a)Total excludes the impact of Non-Comparable New and Renewal Leases.
(b)Excludes tenant allowances and related square foot amounts at our active expansion and redevelopment projects. These tenant allowances, if any, are included in the expected investment for each project.
(c)Includes (i) leases signed on units that were vacant for over 12 months, (ii) leases signed with variable lease payment terms and (iii) leases signed where the previous and current lease do not have a consistent lease structure.
OurSubject to the applicable restrictions contained in the Merger Agreement, our near-term leasing efforts continue to beare primarily focused on (i) natural lease expirations, (ii) spaces previously occupied by bankrupt tenants, (iii) vacant anchor and small shop space, (ii) upcoming lease expirations and (iv) space(iii) spaces within our expansion and redevelopment projects. As we lease vacant space,Through these collective efforts, we look to capitalizesituationally focus on the opportunity to mark rents to market, upgrade ourstability and tenancy, and to optimize the mix of operators and unique retailers at our properties.
We continue As of June 30, 2021, we have $12,754 of ABR related to focus on leasing the vacant space at our one remaining office property and have leased 413,000616 square feet of the available 895,000GLA pertaining to 2021 lease expirations and $8,342 of ABR related to 317 square feet as of September 30, 2017.GLA pertaining to leases signed but not commenced.
Capital Markets
During the ninesix months ended SeptemberJune 30, 2017, we:
defeased the IW JV portfolio of mortgages payable, which had an outstanding principal balance of $379,435 and an interest rate of 7.50%, and incurred a defeasance premium and associated fees totaling $60,198;
repaid $100,000 of our unsecured term loan due 2018;
received funding in the amount of $200,000 on a seven-year unsecured term loan;
entered into two agreements to swap a total of $200,000 of London Interbank Offered Rate (LIBOR)-based variable rate debt to a fixed interest rate of 1.26% through November 22, 2018;
borrowed $101,000, net of repayments, on our unsecured revolving line of credit;
repaid $94,409 of mortgages payable and2021, we made scheduled principal payments of $3,619$1,194 related to amortizing loans;loans.
Subsequent to June 30, 2021, we entered into our sixth amended and
repurchased 9,829 shares restated unsecured credit agreement with a syndicate of our common stock atfinancial institutions to provide for an average price per share$850,000 unsecured revolving line of $12.76 for a totalcredit and amended the pricing terms of $125,589, which includes 396 shares repurchased in September 2017 at an average price per share of $13.08 for a total of $5,187, which settled on October 2, 2017, resulting in $115,570 remaining available under our $250,000 common stock repurchase program.the seven-year $150,000 unsecured term loan (Term Loan Due 2026).
Distributions
We declared quarterly distributions totaling $1.3125 per share of preferred stock and quarterly distributions totaling $0.496875$0.145 per share of common stock during the ninesix months ended SeptemberJune 30, 2017.
2021 comprised of the first quarter 2021 distribution of $0.07 per share and the second quarter 2021 distribution of $0.075 per share. During the six months ended June 30, 2021, we paid the fourth quarter 2020 distribution of $0.06 per share in January 2021 and the first quarter 2021 distribution $0.07 per share in April 2021.
Results of Operations
Comparison of Results for the Three Months Ended SeptemberJune 30, 20172021 and 20162020
|
| | | | | | | | | | | |
| Three Months Ended September 30, | | |
| 2017 | | 2016 | | Change |
Revenues | | | | | |
Rental income | $ | 100,977 |
| | $ | 113,627 |
| | $ | (12,650 | ) |
Tenant recovery income | 28,024 |
| | 29,130 |
| | (1,106 | ) |
Other property income | 1,518 |
| | 1,769 |
| | (251 | ) |
Total revenues | 130,519 |
| | 144,526 |
| | (14,007 | ) |
| | | | | |
Expenses | | | | | |
Operating expenses | 19,572 |
| | 20,285 |
| | (713 | ) |
Real estate taxes | 21,863 |
| | 19,937 |
| | 1,926 |
|
Depreciation and amortization | 51,469 |
| | 56,763 |
| | (5,294 | ) |
Provision for impairment of investment properties | 45,822 |
| | 4,742 |
| | 41,080 |
|
General and administrative expenses | 7,785 |
| | 11,110 |
| | (3,325 | ) |
Total expenses | 146,511 |
| | 112,837 |
| | 33,674 |
|
| | | | | |
Operating (loss) income | (15,992 | ) | | 31,689 |
| | (47,681 | ) |
| | | | | |
Interest expense | (21,110 | ) | | (25,602 | ) | | 4,492 |
|
Other (expense) income, net | (76 | ) | | 22 |
| | (98 | ) |
(Loss) income from continuing operations | (37,178 | ) | | 6,109 |
| | (43,287 | ) |
Gain on sales of investment properties | 73,082 |
| | 66,385 |
| | 6,697 |
|
Net income | 35,904 |
| | 72,494 |
| | (36,590 | ) |
Preferred stock dividends | (2,362 | ) | | (2,362 | ) | | — |
|
Net income attributable to common shareholders | $ | 33,542 |
| | $ | 70,132 |
| | $ | (36,590 | ) |
| | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | |
| 2021 | | 2020 | | Change |
Revenues: | | | | | |
Lease income | $ | 121,239 | | | $ | 96,803 | | | $ | 24,436 | |
| | | | | |
Expenses: | | | | | |
Operating expenses | 17,180 | | | 14,843 | | | 2,337 | |
Real estate taxes | 17,799 | | | 17,916 | | | (117) | |
Depreciation and amortization | 41,815 | | | 43,755 | | | (1,940) | |
| | | | | |
General and administrative expenses | 10,374 | | | 8,491 | | | 1,883 | |
Total expenses | 87,168 | | | 85,005 | | | 2,163 | |
| | | | | |
Other (expense) income: | | | | | |
Interest expense | (18,776) | | | (19,360) | | | 584 | |
| | | | | |
Other income, net | 92 | | | 215 | | | (123) | |
Net income (loss) | 15,387 | | | (7,347) | | | 22,734 | |
Net loss attributable to noncontrolling interests | 9 | | | — | | | 9 | |
Net income (loss) attributable to common shareholders | $ | 15,396 | | | $ | (7,347) | | | $ | 22,743 | |
Net income (loss) attributable to common shareholders decreased $36,590 from $70,132was $15,396 for the three months ended SeptemberJune 30, 20162021 compared to $33,542$(7,347) for the three months ended SeptemberJune 30, 20172020. The $22,743 increase was primarily due to the following:
•a $24,436 increase in lease income largely due to the impact of COVID-19 and related accounting for lease concession agreements and primarily consisting of:
•a $24,268 decrease in reserve for uncollectible lease income primarily due to the significant impact from the COVID-19 pandemic in the comparison period whereby uncollectible lease income, net was $(19,495), and due to the current period impacts from the following: (i) collection of amounts related to previous periods from tenants accounted for on the cash basis of accounting, (ii) the execution of lease concessions that did not meet deferral accounting treatment, however, were agreed in previous periods; as a result, the impact of these concessions was included within the following:reserve for uncollectible lease income until executed, and (iii) a decrease in the general reserve due to collections from accrual-basis tenants, partially offset by (iv) the uncollected portion of current period charges related to cash-basis tenants and (v) the impact of lease concessions we have agreed in principle as of June 30, 2021 that are not expected to meet deferral accounting treatment, however, such agreements have not been executed as of June 30, 2021; as a result, the impact of these anticipated concessions are included within the reserve for uncollectible lease income until executed; and
•a $41,080$2,071 increase in provision for impairment of investment properties. Based on the results of our evaluations for impairment (see Notes 12 and 13 to the accompanying condensed consolidated financial statements), we recognized impairment charges of $45,822 and $4,742 for the three months ended September 30, 2017 and 2016, respectively; and
a $12,650 decrease instraight-line rental income primarily consistingdue to a net reduction in the number of tenants accounted for on the cash basis of accounting. The impact of COVID-19 in the comparison period resulted in the negative straight-line rental income of $(1,284) in 2020 from moving tenants to the cash basis of accounting compared to an increase in straight-line rental income of $787 in 2021 driven by the reduction in tenants accounted for on the cash basis of accounting;
partially offset by
•a $12,601$2,726 decrease in base rent which resulted from the operating properties sold during 2016 and 2017 or classified as held for sale as of September 30, 2017, along with our one remaining office property and our redevelopment properties, partially offset by an increase from the operating properties acquired during 2016 and 2017 and growthprimarily from our same store portfolio; and
partially offset by
•a $6,697 increase in gain on sales of investment properties related to the sales of 11 investment properties, representing approximately 1,813,300 square feet of GLA, during the three months ended September 30, 2017 compared to the sales of 12 investment properties, representing approximately 1,254,000 square feet of GLA, during the three months ended September 30, 2016;
a $5,294$1,940 decrease in depreciation and amortization primarily due to the write-offa decrease in asset write-offs as a result of assets taken out of service at a redevelopment propertytenant move-outs during the three months ended SeptemberJune 30, 2016, along with a decrease from the investment properties sold or classified as held for sale as of September 30, 2017, partially offset by an increase from the acquisition of investment properties during2021 compared to the three months ended SeptemberJune 30, 2017; and2020;
a $4,492 decrease in interest expense primarily consisting of:
an $11,032 decrease in interest on mortgages payable due to a reduction in mortgage debt;partially offset by
•a $2,998$2,337 increase in prepayment penalties;
a $2,080operating expenses primarily due to lower recoverable property operating expenses in 2020 resulting from the impact of COVID-19 as well as an increase in interest from our 4.08% senior unsecured notes due 2026 and our 4.24% senior unsecured notes due 2028 (Notes Due 2026 and 2028), which were issuedexpenses incurred in September and December 2016, respectively; and
a $1,514 increase in interest on our Term Loan Due 2023, which funded in January 2017.2021 related to the Texas winter storm.
Net operating income (NOI)
We define NOI as all revenues other than (i) straight-line rental income (non-cash), (ii) amortization of lease inducements, (iii) amortization of acquired above and below market lease intangibles and (iv) lease termination fee income, less real estate taxes and all operating expenses other than straight-linelease termination fee expense and non-cash ground rent expense, (non-cash)which is comprised of amortization of right-of-use lease assets and amortization of acquired ground lease intangibles (non-cash).liabilities. NOI consists of same store NOI (Same Store NOI) and NOI from other investment properties (NOI from Other Investment Properties). We believe that NOI, Same Store NOI and NOI from Other Investment Properties, which are supplemental non-GAAP financial measures, provide an additional and useful operating perspective not immediately apparent from “Operating“Net income” or “Net income attributable to common shareholders” in accordance with accounting principles generally accepted in the United States (GAAP). We use these measures to evaluate our performance on a property-by-property basis because they allow management to evaluate the impact that factors such as lease structure, lease rates and tenant base have on our operating results. NOI, Same Store NOI and NOI from Other Investment Properties do not represent alternatives to “Net income” or “Net income attributable to common shareholders” in accordance with GAAP as indicators of our financial performance. Comparison of our presentation of NOI, Same Store NOI and NOI from Other Investment Properties to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in definition and application by such REITs. For reference and as an aid in understanding our computation of NOI, a reconciliation of net (loss) income attributable to common shareholders as computed in accordance with GAAP to Same Store NOI has been presented for each comparable period presented.
Same store portfolio
For the three and ninesix months ended SeptemberJune 30, 2017,2021, our same store portfolio consisted of 110100 retail operating properties acquired or placed in service and stabilized prior to January 1, 2016.2020. The number of properties in our same store portfolio decreased to 110 as of September 30, 2017 from 123100 as of June 30, 20172021 from 102 as of March 31, 2021 as a result of the following:
the removal of eight same store investment properties sold during the three months ended September 30, 2017; and
the removal of fivetwo same store investment properties classified as held for sale as of September 30, 2017. Century III Plaza, which is also classified as held for sale as of September 30, 2017, did not impact the number of same store properties as it was classified as held for sale as of June 30, 2017.
The sales of Boulevard Plaza on July 20, 2017, Irmo Station on July 26, 2017 and Lakepointe Towne Center on August 4, 2017 did not impact the number of same store properties as they were classified as held for sale as of June 30, 2017.2021.
The properties and financial results reported in “Other investment properties” primarily include the following:
•properties acquired after December 31, 2015;or placed in service and stabilized during 2020 and 2021;
our one remaining office property;•the multi-family rental units at Plaza del Lago and One Loudoun Downtown – Pad G;
three properties•Circle East, which is in active redevelopment;
•One Loudoun Downtown – Pads G & H, which are in active development;
•Carillon, a redevelopment project where we have begun redevelopment and/or activitieshalted plans for vertical construction during 2020 in anticipationresponse to macroeconomic conditions due to the impact of the COVID-19 pandemic. During the three months ended June 30, 2021, we announced plans to commence construction on a medical office building at Carillon in the second half of 2021;
•The Shoppes at Quarterfield, which is in active redevelopment;
•land held for future redevelopment;development;
•investment properties that were sold or classified as held for sale in 2016during 2020 and 2017;2021;
•the net income from our wholly-ownedwholly owned captive insurance company; and
the historical ground rent expense related to an existing same store investment property that was subject to a ground lease with a third party prior to our acquisition of the fee interest on April 29, 2016.
•noncontrolling interests.
The following tables present a reconciliation of net income (loss) attributable to common shareholders to Same Store NOI and details of the components of Same Store NOI for the three months ended June 30, 2021 and 2020:
| | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | |
| 2021 | | 2020 | | Change |
Net income (loss) attributable to common shareholders | $ | 15,396 | | | $ | (7,347) | | | $ | 22,743 | |
Adjustments to reconcile to Same Store NOI: | | | | | |
Net loss attributable to noncontrolling interests | (9) | | | — | | | (9) | |
Depreciation and amortization | 41,815 | | | 43,755 | | | (1,940) | |
| | | | | |
General and administrative expenses | 10,374 | | | 8,491 | | | 1,883 | |
Interest expense | 18,776 | | | 19,360 | | | (584) | |
Straight-line rental income, net | (787) | | | 1,284 | | | (2,071) | |
Amortization of acquired above and below market lease intangibles, net | (1,009) | | | (1,796) | | | 787 | |
Amortization of lease inducements | 547 | | | 453 | | | 94 | |
Lease termination fees, net | (759) | | | (252) | | | (507) | |
Non-cash ground rent expense, net | 212 | | | 212 | | | — | |
Other income, net | (92) | | | (215) | | | 123 | |
NOI | 84,464 | | | 63,945 | | | 20,519 | |
NOI from Other Investment Properties | (1,927) | | | (1,742) | | | (185) | |
Same Store NOI | $ | 82,537 | | | $ | 62,203 | | | $ | 20,334 | |
| | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | |
| 2021 | | 2020 | | Change |
Same Store NOI: | | | | | |
Base rent | $ | 86,107 | | | $ | 88,755 | | | $ | (2,648) | |
Percentage and specialty rent | 644 | | | 448 | | | 196 | |
Tenant recoveries | 23,713 | | | 23,558 | | | 155 | |
Other lease-related income | 1,319 | | | 1,050 | | | 269 | |
Uncollectible lease income, net | 4,269 | | | (19,344) | | | 23,613 | |
Property operating expenses | (16,361) | | | (14,639) | | | (1,722) | |
Real estate taxes | (17,154) | | | (17,625) | | | 471 | |
Same Store NOI | $ | 82,537 | | | $ | 62,203 | | | $ | 20,334 | |
Same Store NOI increased $20,334, or 32.7%, primarily due to the following:
•a $23,613 decrease in reserve for uncollectible lease income primarily due to the significant impact from the COVID-19 pandemic in the comparison period whereby uncollectible lease income, net was $(19,344), and due to the current period impacts from the following: (i) collection of amounts related to previous periods from tenants accounted for on the cash basis of accounting, (ii) the execution of lease concessions that did not meet deferral accounting treatment, however, were agreed in previous periods; as a result, the impact of these concessions was included within the reserve for uncollectible lease income until executed, and (iii) a decrease in the general reserve due to collections from accrual-basis tenants, partially offset by (iv) the uncollected portion of current period charges related to cash-basis tenants and (v) the impact of lease concessions we have agreed in principle as of June 30, 2021 that are not expected to meet deferral accounting treatment, however, such agreements have not been executed as of June 30, 2021; as a result, the impact of these anticipated concessions are included within the reserve for uncollectible lease income until executed;
partially offset by
•a $2,648 decrease in base rent primarily as a result of (i) a $3,013 decrease from occupancy declines, (ii) a $672 decrease from lease concession agreements that do not meet deferral accounting treatment, partially offset by (iii) $787 related to the recognition of amounts previously deferred under lease concessions that did not meet deferral accounting treatment, and (iv) an increase of $461 from contractual rent changes. Of the aggregate $672 decrease from lease concession agreements, $310 was associated with billed base rent from prior periods; and
•a $1,096 increase in property operating expenses and real estate taxes, net of tenant recoveries, primarily due to (i) decreases in tenant recoveries as a result of a decline in occupancy, (ii) an increase in certain recoverable property
operating expenses and (iii) an increase in certain non-recoverable property operating expenses, partially offset by (iv) the positive impact from the common area maintenance reconciliation process in 2021.
Comparison of Results for the Six Months Ended June 30, 2021 and 2020
| | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | |
| 2021 | | 2020 | | Change |
Revenues: | | | | | |
Lease income | $ | 240,619 | | | $ | 215,498 | | | $ | 25,121 | |
| | | | | |
Expenses: | | | | | |
Operating expenses | 35,245 | | | 31,257 | | | 3,988 | |
Real estate taxes | 36,733 | | | 36,449 | | | 284 | |
Depreciation and amortization | 89,682 | | | 83,928 | | | 5,754 | |
Provision for impairment of investment properties | — | | | 346 | | | (346) | |
General and administrative expenses | 21,492 | | | 17,656 | | | 3,836 | |
Total expenses | 183,152 | | | 169,636 | | | 13,516 | |
| | | | | |
Other (expense) income: | | | | | |
Interest expense | (37,528) | | | (36,406) | | | (1,122) | |
| | | | | |
Gain on litigation settlement | — | | | 6,100 | | | (6,100) | |
Other income (expense), net | 161 | | | (546) | | | 707 | |
Net income | 20,100 | | | 15,010 | | | 5,090 | |
Net loss attributable to noncontrolling interests | 9 | | | — | | | 9 | |
Net income attributable to common shareholders | $ | 20,109 | | | $ | 15,010 | | | $ | 5,099 | |
Net income attributable to common shareholders was $20,109 for the six months ended June 30, 2021 compared to $15,010 for the six months ended June 30, 2020. The $5,099 increase was primarily due to the following:
•a $25,121 increase in lease income primarily due to the impact of COVID-19 and related accounting for lease concession agreements and primarily consisting of:
•a $28,694 decrease in reserve for uncollectible lease income primarily due to the significant impact from the COVID-19 pandemic in 2020 whereby uncollectible lease income, net was $(20,377), and due to the current year impacts from the following: (i) collection of amounts related to previous periods from tenants accounted for on the cash basis of accounting, (ii) the execution of lease concessions that did not meet deferral accounting treatment, however, were agreed in previous periods; as a result, the impact of these concessions was included within the reserve for uncollectible lease income until executed, and (iii) a decrease in the general reserve due to collections from accrual-basis tenants, partially offset by (iv) the uncollected portion of current period charges related to cash-basis tenants and (v) the impact of lease concessions we have agreed in principle as of June 30, 2021 that are not expected to meet deferral accounting treatment, however, such agreements have not been executed as of June 30, 2021; as a result, the impact of these anticipated concessions are included within the reserve for uncollectible lease income until executed; and
•a $2,150 increase in straight-line rental income primarily due to a net reduction in the number of tenants accounted for on the cash basis of accounting. The impact of COVID-19 in the comparison period resulted in the negative straight-line rental income of $(943) in 2020 from moving tenants to the cash basis of accounting compared to an increase in straight-line rental income of $1,207 in 2021 driven by the reduction in tenants accounted for on the cash basis of accounting;
partially offset by
•a $7,085 decrease in base rent primarily from our same store portfolio;
partially offset by
•a $6,100 gain on litigation settlement recognized during the six months ended June 30, 2020 related to litigation with a former tenant. No such gain was recognized during the six months ended June 30, 2021;
•a $5,754 increase in depreciation and amortization primarily due to the write-off of assets taken out of service due to the demolition of a retail outparcel at our Tacoma South investment property during the six months ended June 30, 2021. No such write-off occurred during the six months ended June 30, 2020; and
•a $3,988 increase in operating expenses primarily due to lower recoverable property operating expenses in 2020 resulting from the impact of COVID-19 as well as an increase in expenses incurred in 2021 related to the Texas winter storm.
The following tables present a reconciliation of net income attributable to common shareholders to Same Store NOI and details of the components of Same Store NOI for the threesix months ended SeptemberJune 30, 20172021 and 2016:2020:
| | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | |
| 2021 | | 2020 | | Change |
Net income attributable to common shareholders | $ | 20,109 | | | $ | 15,010 | | | $ | 5,099 | |
Adjustments to reconcile to Same Store NOI: | | | | | |
Net loss attributable to noncontrolling interests | (9) | | | — | | | (9) | |
Gain on litigation settlement | — | | | (6,100) | | | 6,100 | |
Depreciation and amortization | 89,682 | | | 83,928 | | | 5,754 | |
Provision for impairment of investment properties | — | | | 346 | | | (346) | |
General and administrative expenses | 21,492 | | | 17,656 | | | 3,836 | |
Interest expense | 37,528 | | | 36,406 | | | 1,122 | |
Straight-line rental income, net | (1,207) | | | 943 | | | (2,150) | |
Amortization of acquired above and below market lease intangibles, net | (2,234) | | | (2,772) | | | 538 | |
Amortization of lease inducements | 970 | | | 872 | | | 98 | |
Lease termination fees, net | (1,438) | | | (376) | | | (1,062) | |
Non-cash ground rent expense, net | 424 | | | 545 | | | (121) | |
Other (income) expense, net | (161) | | | 546 | | | (707) | |
NOI | 165,156 | | | 147,004 | | | 18,152 | |
NOI from Other Investment Properties | (3,121) | | | (3,559) | | | 438 | |
Same Store NOI | $ | 162,035 | | | $ | 143,445 | | | $ | 18,590 | |
|
| | | | | | | | | | | |
| Three Months Ended September 30, | | |
| 2017 | | 2016 | | Change |
Net income attributable to common shareholders | $ | 33,542 |
| | $ | 70,132 |
| | $ | (36,590 | ) |
Adjustments to reconcile to Same Store NOI: | | | | | |
Preferred stock dividends | 2,362 |
| | 2,362 |
| | — |
|
Gain on sales of investment properties | (73,082 | ) | | (66,385 | ) | | (6,697 | ) |
Depreciation and amortization | 51,469 |
| | 56,763 |
| | (5,294 | ) |
Provision for impairment of investment properties | 45,822 |
| | 4,742 |
| | 41,080 |
|
General and administrative expenses | 7,785 |
| | 11,110 |
| | (3,325 | ) |
Interest expense | 21,110 |
| | 25,602 |
| | (4,492 | ) |
Straight-line rental income, net | (1,849 | ) | | (1,226 | ) | | (623 | ) |
Amortization of acquired above and below market lease intangibles, net | (482 | ) | | (1,441 | ) | | 959 |
|
Amortization of lease inducements | 242 |
| | 265 |
| | (23 | ) |
Lease termination fees | (188 | ) | | (385 | ) | | 197 |
|
Straight-line ground rent expense | 674 |
| | 692 |
| | (18 | ) |
Amortization of acquired ground lease intangibles | (140 | ) | | (140 | ) | | — |
|
Other expense (income), net | 76 |
| | (22 | ) | | 98 |
|
NOI | 87,341 |
| | 102,069 |
| | (14,728 | ) |
NOI from Other Investment Properties | (12,054 | ) | | (27,548 | ) | | 15,494 |
|
Same Store NOI | $ | 75,287 |
| | $ | 74,521 |
| | $ | 766 |
|
| | | Three Months Ended September 30, | | | | Six Months Ended June 30, | |
| 2017 | | 2016 | | Change | | 2021 | | 2020 | | Change |
Same Store NOI: | | | | | | Same Store NOI: | | | | | |
Base rent | $ | 82,163 |
| | $ | 80,918 |
| | $ | 1,245 |
| Base rent | $ | 170,174 | | | $ | 177,122 | | | $ | (6,948) | |
Percentage and specialty rent | 603 |
| | 531 |
| | 72 |
| Percentage and specialty rent | 1,164 | | | 1,311 | | | (147) | |
Tenant recovery income | 24,499 |
| | 22,838 |
| | 1,661 |
| |
Other property operating income | 832 |
| | 881 |
| | (49 | ) | |
| 108,097 |
| | 105,168 |
| | 2,929 |
| |
| | | | | | |
Tenant recoveries | | Tenant recoveries | 49,636 | | | 48,880 | | | 756 | |
Other lease-related income | | Other lease-related income | 2,604 | | | 2,518 | | | 86 | |
Uncollectible lease income, net | | Uncollectible lease income, net | 8,026 | | | (20,179) | | | 28,205 | |
Property operating expenses | 14,814 |
| | 15,084 |
| | (270 | ) | Property operating expenses | (33,458) | | | (30,359) | | | (3,099) | |
Bad debt expense | 148 |
| | (74 | ) | | 222 |
| |
Real estate taxes | 17,848 |
| | 15,637 |
| | 2,211 |
| Real estate taxes | (36,111) | | | (35,848) | | | (263) | |
| 32,810 |
| | 30,647 |
| | 2,163 |
| |
| | | | | | |
Same Store NOI | $ | 75,287 |
| | $ | 74,521 |
| | $ | 766 |
| Same Store NOI | $ | 162,035 | | | $ | 143,445 | | | $ | 18,590 | |
Same Store NOI increased $766,$18,590, or 1.0%13.0%, primarily due to the following:
base rent increased $1,245•a $28,205 decrease in reserve for uncollectible lease income primarily due to the significant impact from the COVID-19 pandemic in 2020 whereby uncollectible lease income, net was $(20,179), and due to the current year impacts from the following: (i) collection of amounts related to previous periods from tenants accounted for on the cash basis of accounting, (ii) the execution of lease concessions that did not meet deferral accounting treatment, however, were agreed in previous periods; as a result, the impact of these concessions was included within the reserve for uncollectible lease income until executed, and (iii) a decrease in the general reserve due to collections from accrual-basis tenants, partially offset by (iv) the uncollected portion of current period charges related to cash-basis tenants and (v) the impact of lease concessions we have agreed in principle as of June 30, 2021 that are not expected to meet deferral accounting treatment, however, such agreements have not been executed as of June 30, 2021; as a result, the impact of these anticipated concessions are included within the reserve for uncollectible lease income until executed;
partially offset by
•a $6,948 decrease in base rent primarily as a result of (i) a $6,582 decrease from occupancy declines, (ii) a $3,281 decrease from lease concession agreements that do not meet deferral accounting treatment, partially offset by (iii) $1,791 related to the recognition of amounts previously deferred under lease concessions that did not meet deferral accounting treatment, (iv) an increase of $622$1,002 from contractual rent changes $511and (v) $323 from re-leasing spreadslower rent abatements. Of the aggregate $3,281 increase from lease concession agreements, $1,585 was associated with billed base rent from prior periods; and $193 from rent abatements, partially offset by
•a decrease of $106 from occupancy changes;
partially offset by
$2,606 increase in property operating expenses and real estate taxes, net of tenant recovery income, increased $280recoveries, primarily due to higher net real estate tax refunds during the three months ended September 30, 2016; and
bad debt expense increased $222.
Comparison of Results for the Nine Months Ended September 30, 2017 and 2016
|
| | | | | | | | | | | |
| Nine Months Ended September 30, | | |
| 2017 | | 2016 | | Change |
Revenues | | | | | |
Rental income | $ | 316,968 |
| | $ | 344,081 |
| | $ | (27,113 | ) |
Tenant recovery income | 88,334 |
| | 89,140 |
| | (806 | ) |
Other property income | 6,249 |
| | 7,170 |
| | (921 | ) |
Total revenues | 411,551 |
| | 440,391 |
| | (28,840 | ) |
| | | | | |
Expenses | | | | | |
Operating expenses | 62,440 |
| | 63,438 |
| | (998 | ) |
Real estate taxes | 65,229 |
| | 60,966 |
| | 4,263 |
|
Depreciation and amortization | 157,268 |
| | 163,602 |
| | (6,334 | ) |
Provision for impairment of investment properties | 58,856 |
| | 11,048 |
| | 47,808 |
|
General and administrative expenses | 29,368 |
| | 33,289 |
| | (3,921 | ) |
Total expenses | 373,161 |
| | 332,343 |
| | 40,818 |
|
| | | | | |
Operating income | 38,390 |
| | 108,048 |
| | (69,658 | ) |
| | | | | |
Gain on extinguishment of debt | — |
| | 13,653 |
| | (13,653 | ) |
Gain on extinguishment of other liabilities | — |
| | 6,978 |
| | (6,978 | ) |
Interest expense | (128,077 | ) | | (78,343 | ) | | (49,734 | ) |
Other income, net | 380 |
| | 449 |
| | (69 | ) |
(Loss) income from continuing operations | (89,307 | ) | | 50,785 |
| | (140,092 | ) |
Gain on sales of investment properties | 230,874 |
| | 97,737 |
| | 133,137 |
|
Net income | 141,567 |
| | 148,522 |
| | (6,955 | ) |
Preferred stock dividends | (7,087 | ) | | (7,087 | ) | | — |
|
Net income attributable to common shareholders | $ | 134,480 |
| | $ | 141,435 |
| | $ | (6,955 | ) |
Net income attributable to common shareholders decreased $6,955 from $141,435 for the nine months ended September 30, 2016 to $134,480 for the nine months ended September 30, 2017 primarily(i) decreases in tenant recoveries as a result of the following:
a $49,734decline in occupancy, (ii) an increase in interest expense primarily consisting of:
a $67,513certain net recoverable property operating expenses and (iii) an increase in prepayment penalties and defeasance premiums and a $3,395 increase in capitalized loan fee write-offs primarily related to the defeasance of the IW JV portfolio of mortgages payable during the nine months ended September 30, 2017, which resulted in a defeasance premium and associated fees totaling $60,198 and the write-off of $4,003 of capitalized loan fees;
a $6,240 increase in interest from our 4.08% senior unsecured notes due 2026 and our 4.24% senior unsecured notes due 2028 (Notes Due 2026 and 2028), which were issued in September and December 2016, respectively; and
a $4,460 increase in interest on our Term Loan Due 2023, which funded in January 2017;
partially offset by
a $33,065 decrease in interest on mortgages payable due to a reduction in mortgage debt;
a $47,808 increase in provision for impairment of investment properties. Based on the results of our evaluations for impairment (see Notes 12 and 13 to the accompanying condensed consolidated financial statements), we recognized impairment charges of $58,856 and $11,048 for the nine months ended September 30, 2017 and 2016, respectively;
a $27,113 decrease in rental income primarily consisting of a $26,936 decrease in base rent, which resulted from thecertain non-recoverable property operating properties sold during 2016 and 2017 or classified as held for sale as of September 30, 2017, along with our one remaining office property and our redevelopment properties,expenses, partially offset by an increase(iv) the positive impact from the operating properties acquired during 2016 and 2017 and growth from our same store portfolio;common area maintenance reconciliation process in 2021.
a $13,653 gain on extinguishment of debt recognized during the nine months ended September 30, 2016 associated with the disposition of The Gateway through a lender-directed sale in full satisfaction of our mortgage obligation. No such gain was recorded during the nine months ended September 30, 2017; and
a $6,978 gain on extinguishment of other liabilities recognized during the nine months ended September 30, 2016 related to the acquisition of the fee interest in Ashland & Roosevelt, one of our existing investment properties that was previously subject to a ground lease with a third party. The amount recognized represents the reversal of the straight-line ground rent liability associated with the ground lease. No such gain was recorded during the nine months ended September 30, 2017;
partially offset by
a $133,137 increase in gain on sales of investment properties related to the sales of 34 investment properties and a single-user parcel located at an existing multi-tenant retail operating property, representing approximately 4,302,400 square feet of GLA, during the nine months ended September 30, 2017 compared to the sales of 28 investment properties and one outparcel, representing approximately 2,387,700 square feet of GLA, during the nine months ended September 30, 2016; and
a $6,334 decrease in depreciation and amortization primarily due to the write-off of assets taken out of service at a redevelopment property during the nine months ended September 30, 2016, along with a decrease from the investment properties sold or classified as held for sale as of September 30, 2017, partially offset by an increase from the acquisition of investment properties during the nine months ended September 30, 2017.
The following tables present a reconciliation of net income attributable to common shareholders to Same Store NOI and details of the components of Same Store NOI for the nine months ended September 30, 2017 and 2016:
|
| | | | | | | | | | | |
| Nine Months Ended September 30, | | |
| 2017 | | 2016 | | Change |
Net income attributable to common shareholders | $ | 134,480 |
| | $ | 141,435 |
| | $ | (6,955 | ) |
Adjustments to reconcile to Same Store NOI: | | | | | |
Preferred stock dividends | 7,087 |
| | 7,087 |
| | — |
|
Gain on sales of investment properties | (230,874 | ) | | (97,737 | ) | | (133,137 | ) |
Depreciation and amortization | 157,268 |
| | 163,602 |
| | (6,334 | ) |
Provision for impairment of investment properties | 58,856 |
| | 11,048 |
| | 47,808 |
|
General and administrative expenses | 29,368 |
| | 33,289 |
| | (3,921 | ) |
Gain on extinguishment of debt | — |
| | (13,653 | ) | | 13,653 |
|
Gain on extinguishment of other liabilities | — |
| | (6,978 | ) | | 6,978 |
|
Interest expense | 128,077 |
| | 78,343 |
| | 49,734 |
|
Straight-line rental income, net | (3,109 | ) | | (3,054 | ) | | (55 | ) |
Amortization of acquired above and below market lease intangibles, net | (1,762 | ) | | (2,412 | ) | | 650 |
|
Amortization of lease inducements | 824 |
| | 817 |
| | 7 |
|
Lease termination fees | (2,310 | ) | | (3,070 | ) | | 760 |
|
Straight-line ground rent expense | 2,037 |
| | 2,372 |
| | (335 | ) |
Amortization of acquired ground lease intangibles | (420 | ) | | (420 | ) | | — |
|
Other income, net | (380 | ) | | (449 | ) | | 69 |
|
NOI | 279,142 |
| | 310,220 |
| | (31,078 | ) |
NOI from Other Investment Properties | (52,111 | ) | | (87,028 | ) | | 34,917 |
|
Same Store NOI | $ | 227,031 |
| | $ | 223,192 |
| | $ | 3,839 |
|
|
| | | | | | | | | | | |
| Nine Months Ended September 30, | | |
| 2017 | | 2016 | | Change |
Same Store NOI: | | | | | |
Base rent | $ | 246,496 |
| | $ | 242,589 |
| | $ | 3,907 |
|
Percentage and specialty rent | 2,433 |
| | 2,621 |
| | (188 | ) |
Tenant recovery income | 71,777 |
| | 68,961 |
| | 2,816 |
|
Other property operating income | 2,474 |
| | 2,386 |
| | 88 |
|
| 323,180 |
| | 316,557 |
| | 6,623 |
|
| | | | | |
Property operating expenses | 44,224 |
| | 45,435 |
| | (1,211 | ) |
Bad debt expense | 668 |
| | 355 |
| | 313 |
|
Real estate taxes | 51,257 |
| | 47,575 |
| | 3,682 |
|
| 96,149 |
| | 93,365 |
| | 2,784 |
|
| | | | | |
Same Store NOI | $ | 227,031 |
| | $ | 223,192 |
| | $ | 3,839 |
|
Same Store NOI increased $3,839, or 1.7%, primarily due to an increase of $3,907 in base rent primarily as a result of increases in the following: $1,905 from contractual rent changes, $1,647 from re-leasing spreads and $300 from rent abatements.
Funds From Operations Attributable to Common Shareholders
The National Association of Real Estate Investment Trusts, or NAREIT, an industry trade group, has promulgated a financial measure known as funds from operations (FFO). As defined by NAREIT, FFO means net income (loss)attributable to common shareholders computed in accordance with GAAP, excluding the Company’s share of (i) depreciation and amortization related to real estate, (ii) gains (or losses) from sales of depreciable real estate plus depreciationassets, (iii) gains and amortizationlosses from change in control and (iv) impairment charges on depreciablewrite-downs of real estate.estate assets and investments in entities directly attributable to decreases in the value of real estate held by the entity. We have adopted the NAREIT definition in our computation of FFO attributable to common shareholders. Management believes that, subject to the following limitations, FFO attributable to common shareholders provides a basis for comparing our performance and operations to those of other REITs.
We define Operating FFO attributable to common shareholders as FFO attributable to common shareholders excluding the impact of discrete non-operating transactions and other events whichthat we do not consider representative of the comparable operating results of our real estate operating portfolio, which is our core business platform. Specific examples of discrete non-operating transactions and other events include, but are not limited to, (i) the impact on earnings from gains or losses associated with the early extinguishment of debt or other liabilities, impairment charges to write down the carrying value of assets other than depreciable real estate,(ii) litigation involving the Company, including actual or anticipatedgains recognized as a result of settlement and associated legal costs andto engage outside counsel related to litigation with former tenants, (iii) the impact on earnings from executive separation, and (iv) the excess of redemption value over carrying value of preferred stock redemption, which are not otherwise adjusted in our calculation of FFO attributable to common shareholders.
We believe that FFO attributable to common shareholders and Operating FFO attributable to common shareholders, which are supplemental non-GAAP financial measures, provide an additional and useful means to assess the operating performance of REITs. FFO attributable to common shareholders and Operating FFO attributable to common shareholders do not represent alternatives to (i) “Net Income” or “Net income attributable to common shareholders” as indicators of our financial performance, or (ii) “Cash flows from operating activities” in accordance with GAAP as measures of our capacity to fund cash needs, including the payment of dividends. Comparison of our presentation of Operating FFO attributable to common shareholders to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in definition and application by such REITs.
The following table presents a reconciliation of net income (loss) attributable to common shareholders to FFO attributable to common shareholders and Operating FFO attributable to common shareholders:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Net income (loss) attributable to common shareholders | $ | 15,396 | | | $ | (7,347) | | | $ | 20,109 | | | $ | 15,010 | |
Depreciation and amortization of real estate (a) | 41,508 | | | 43,422 | | | 89,048 | | | 83,260 | |
Provision for impairment of investment properties | — | | | — | | | — | | | 346 | |
| | | | | | | |
FFO attributable to common shareholders | $ | 56,904 | | | $ | 36,075 | | | $ | 109,157 | | | $ | 98,616 | |
FFO attributable to common shareholders per common share outstanding – diluted | $ | 0.27 | | | $ | 0.17 | | | $ | 0.51 | | | $ | 0.46 | |
| | | | | | | |
FFO attributable to common shareholders | $ | 56,904 | | | $ | 36,075 | | | $ | 109,157 | | | $ | 98,616 | |
Impact on earnings from the early extinguishment of debt, net (b) | — | | | — | | | 64 | | | — | |
Gain on litigation settlement | — | | | — | | | — | | | (6,100) | |
Other (c) | 5 | | | — | | | 33 | | | 1,011 | |
Operating FFO attributable to common shareholders | $ | 56,909 | | | $ | 36,075 | | | $ | 109,254 | | | $ | 93,527 | |
Operating FFO attributable to common shareholders per common share outstanding – diluted | $ | 0.27 | | | $ | 0.17 | | | $ | 0.51 | | | $ | 0.44 | |
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Net income attributable to common shareholders | $ | 33,542 |
| | $ | 70,132 |
| | $ | 134,480 |
| | $ | 141,435 |
|
Depreciation and amortization of depreciable real estate | 50,867 |
| | 56,384 |
| | 155,857 |
| | 162,577 |
|
Provision for impairment of investment properties | 45,822 |
| | 4,742 |
| | 58,856 |
| | 8,884 |
|
Gain on sales of depreciable investment properties | (73,082 | ) | | (66,385 | ) | | (230,874 | ) | | (97,737 | ) |
FFO attributable to common shareholders | $ | 57,149 |
| | $ | 64,873 |
| | $ | 118,319 |
| | $ | 215,159 |
|
| | | | | | | |
FFO attributable to common shareholders per common share outstanding | $ | 0.25 |
| | $ | 0.27 |
| | $ | 0.51 |
| | $ | 0.91 |
|
| | | | | | | |
FFO attributable to common shareholders | $ | 57,149 |
| | $ | 64,873 |
| | $ | 118,319 |
| | $ | 215,159 |
|
Impact on earnings from the early extinguishment of debt, net | 3,006 |
| | — |
| | 71,675 |
| | (12,842 | ) |
Provision for hedge ineffectiveness | 5 |
| | (38 | ) | | 16 |
| | (35 | ) |
Provision for impairment of non-depreciable investment property | — |
| | — |
| | — |
| | 2,164 |
|
Gain on extinguishment of other liabilities | — |
| | — |
| | — |
| | (6,978 | ) |
Impact on earnings from executive separation, net (a) | (1,086 | ) | | — |
| | (1,086 | ) | | — |
|
Other (b) | 207 |
| | (5 | ) | | 188 |
| | (189 | ) |
Operating FFO attributable to common shareholders | $ | 59,281 |
| | $ | 64,830 |
| | $ | 189,112 |
| | $ | 197,279 |
|
| | | | | | | |
Operating FFO attributable to common shareholders per common share outstanding | $ | 0.26 |
| | $ | 0.27 |
| | $ | 0.81 |
| | $ | 0.83 |
|
(a)Includes $7,527 of accelerated depreciation recorded in connection with the write-off of assets taken out of service due to the demolition of a retail outparcel at our Tacoma South investment property during the six months ended June 30, 2021. | |
(a) | Reflected as a reduction to “General and administrative expenses” in the accompanying condensed consolidated statements of operations and other comprehensive (loss) income. |
| |
(b) | Primarily consists of the impact on earnings from litigation involving the Company, including actual or anticipated settlement and associated legal costs, which are included in “Other (expense) income, net” in the accompanying condensed consolidated statements of operations and other comprehensive (loss) income. |
(b)Included within “Interest expense” in the accompanying condensed consolidated statements of operations and other comprehensive income (loss). (c)Primarily consists of the impact on earnings from litigation involving the Company, including costs to engage outside counsel related to litigation with former tenants, which is included within “Other income (expense), net” in the accompanying condensed consolidated statements of operations and other comprehensive income (loss).
Liquidity and Capital Resources
WeSubject to the applicable restrictions contained in the Merger Agreement, we anticipate that cash flows from the below-listed sources will provide adequate capital for the next 12 months and beyond for all scheduled principal and interest payments on our outstanding indebtedness, including maturing debt, current and anticipated tenant allowances or other capital obligations, the shareholder distributions required to maintain our REIT status and compliance with the financial covenants of our unsecured debt agreements.
Our primary expected sources and uses of liquidity are as follows:
|
| | | |
| SOURCES | | USES |
▪ | Operating cash flow | ▪ | Tenant allowances and leasing costs |
▪ | Cash and cash equivalents | ▪ | Improvements made to individual properties, certain of which are not |
▪ | Available borrowings under our unsecured revolving | | recoverable through common area maintenance charges to tenants |
| line of credit | ▪ | Acquisitions |
▪ | Proceeds from capital markets transactions | ▪ | Debt repayments and defeasances |
▪ | Proceeds from asset dispositions | ▪ | Distribution payments |
| | ▪ | Redevelopment, renovation or expansion activities |
| | ▪ | New development |
| | ▪ | Repurchases of our common stock |
| | ▪ | Redemption of our preferred stock |
We have made substantial progress over the last several years in strengthening our balance sheet, as demonstrated by our reduced leverage, increased liquidity and higher unencumbered asset ratio. We funded debt maturities primarily through asset dispositions and capital markets transactions, including the public offering of our common stock and private and public offerings of senior unsecured notes. As of September 30, 2017, we had $1,003 of principal amortization due through the end of 2017, which we plan
on satisfying through a combination of proceeds from asset dispositions, capital markets transactions and our unsecured revolving line of credit.
The table below summarizes our consolidated indebtedness as of September 30, 2017:
|
| | | | | | | | | | | |
Debt | | Aggregate Principal Amount | | Weighted Average Interest Rate | | Maturity Date | | Weighted Average Years to Maturity |
Fixed rate mortgages payable (a) | | $ | 288,252 |
| | 4.99 | % | | Various | | 5.5 years |
| | | | | | | | |
Unsecured notes payable: | | | | | | | | |
Senior notes – 4.12% due 2021 | | 100,000 |
| | 4.12 | % | | June 30, 2021 | | 3.8 years |
Senior notes – 4.58% due 2024 | | 150,000 |
| | 4.58 | % | | June 30, 2024 | | 6.8 years |
Senior notes – 4.00% due 2025 | | 250,000 |
| | 4.00 | % | | March 15, 2025 | | 7.5 years |
Senior notes – 4.08% due 2026 | | 100,000 |
| | 4.08 | % | | September 30, 2026 | | 9.0 years |
Senior notes – 4.24% due 2028 | | 100,000 |
| | 4.24 | % | | December 28, 2028 | | 11.3 years |
Total unsecured notes payable (a) | | 700,000 |
| | 4.19 | % | | | | 7.5 years |
| | | | | | | | |
Unsecured credit facility: | | | | | | | | |
Term loan due 2021 – fixed rate (b) | | 250,000 |
| | 1.97 | % | | January 5, 2021 | | 3.3 years |
Term loan due 2018 – variable rate (c) | | 100,000 |
| | 2.68 | % | | May 11, 2018 (c) | | 0.6 years |
Revolving line of credit – variable rate (c) | | 187,000 |
| | 2.59 | % | | January 5, 2020 (c) | | 2.3 years |
Total unsecured credit facility (a) | | 537,000 |
| | 2.32 | % | | | | 2.4 years |
| | | | | | | | |
Term Loan Due 2023 – fixed rate (a) (d) | | 200,000 |
| | 2.96 | % | | November 22, 2023 | | 6.1 years |
| | | | | | | | |
Total consolidated indebtedness | | $ | 1,725,252 |
| | 3.60 | % | | | | 5.4 years |
| |
(a) | Fixed rate mortgages payable excludes mortgage premium of $1,087, discount of $(590) and capitalized loan fees of $(649), net of accumulated amortization, as of September 30, 2017 and a $7,680 mortgage payable and capitalized loan fees of $(25), net of accumulated amortization, associated with one investment property classified as held for sale as of September 30, 2017. Unsecured notes payable excludes discount of $(882) and capitalized loan fees of $(3,523), net of accumulated amortization, as of September 30, 2017. Term loans exclude capitalized loan fees of $(3,086), net of accumulated amortization, as of September 30, 2017. Capitalized loan fees related to the revolving line of credit are included in “Other assets, net” in the accompanying condensed consolidated balance sheets. |
| |
(b) | Reflects $250,000 of LIBOR-based variable rate debt that has been swapped to a weighted average fixed rate of 0.67% plus a credit spread based on a leverage grid ranging from 1.30% to 2.20% through December 31, 2017. The applicable credit spread was 1.30% as of September 30, 2017. |
| |
(c) | We have two one year extension options on the term loan due 2018 and two six-month extension options on the revolving line of credit, which we may exercise as long as we are in compliance with the terms of the unsecured credit agreement and we pay an extension fee equal to 0.15% for the term loan and 0.075% of the commitment amount being extended for the revolving line of credit. |
| |
(d) | Reflects $200,000 of LIBOR-based variable rate debt that has been swapped to a fixed rate of 1.26% plus a credit spread based on a leverage grid ranging from 1.70% to 2.55% through November 22, 2018. The applicable credit spread was 1.70% as of September 30, 2017. |
Mortgages Payable
During the nine months ended September 30, 2017, we repaid or defeased mortgages payable in the total amount of $473,844, which had a weighted average fixed interest rate of 7.09%, and made scheduled principal payments of $3,619 related to amortizing loans. Included within the total repayments and defeasances for the nine months ended September 30, 2017 is the defeasance of a portfolio of mortgages payable with a principal balance of $379,435 as of December 31, 2016 and an interest rate of 7.50% that was cross-collateralized by 45 properties and scheduled to mature in 2019 (known as the IW JV portfolio of mortgages payable). We incurred a defeasance premium and associated fees totaling $60,198 in connection with this transaction, which are included within “Interest expense” in the accompanying condensed consolidated statements of operations and other comprehensive (loss) income. As a result, the 45 properties that secured the mortgages payable as of December 31, 2016 are no longer encumbered by mortgages.
Unsecured Notes Payable
Notes Due 2026 and 2028
On September 30, 2016, we issued $100,000 of 4.08% senior unsecured notes due 2026 in a private placement transaction pursuant to a note purchase agreement we entered into with certain institutional investors on September 30, 2016. Pursuant to the same note purchase agreement, on December 28, 2016, we also issued $100,000 of 4.24% senior unsecured notes due 2028 (Notes Due 2026 and 2028). The proceeds were used to pay down our unsecured revolving line of credit, early repay certain longer-dated mortgages payable and for general corporate purposes.
The note purchase agreement governing the Notes Due 2026 and 2028 contains customary covenants and events of default. Pursuant to the terms of the note purchase agreement, we are subject to various financial covenants, including the requirement to maintain the following: (i) maximum unencumbered, secured and consolidated leverage ratios; (ii) a minimum interest coverage ratio; (iii) an unencumbered interest coverage ratio (as set forth in our unsecured credit facility and the note purchase agreement governing the Notes Due 2021 and 2024); and (iv) a fixed charge coverage ratio (as set forth in our unsecured credit facility).
Notes Due 2025
On March 12, 2015, we completed a public offering of $250,000 in aggregate principal amount of 4.00% senior unsecured notes due 2025 (Notes Due 2025). The Notes Due 2025 were priced at 99.526% of the principal amount to yield 4.058% to maturity. The proceeds were used to repay a portion of our unsecured revolving line of credit.
The indenture, as supplemented, governing the Notes Due 2025 (the Indenture) contains customary covenants and events of default. Pursuant to the terms of the Indenture, we are subject to various financial covenants, including the requirement to maintain the following: (i) maximum secured and total leverage ratios; (ii) a debt service coverage ratio; and (iii) maintenance of an unencumbered assets to unsecured debt ratio.
Notes Due 2021 and 2024
On June 30, 2014, we completed a private placement of $250,000 of unsecured notes, consisting of $100,000 of 4.12% senior unsecured notes due 2021 and $150,000 of 4.58% senior unsecured notes due 2024 (Notes Due 2021 and 2024). The proceeds were used to repay a portion of our unsecured revolving line of credit.
The note purchase agreement governing the Notes Due 2021 and 2024 contains customary covenants and events of default. Pursuant to the terms of the note purchase agreement, we are subject to various financial covenants, some of which are based upon the financial covenants in effect in our unsecured credit facility, including the requirement to maintain the following: (i) maximum unencumbered, secured and consolidated leverage ratios; (ii) minimum interest coverage and unencumbered interest coverage ratios; and (iii) a minimum consolidated net worth.
As of September 30, 2017, management believes we were in compliance with the financial covenants under the Indenture and the note purchase agreements.
Unsecured Term Loans and Revolving Line of Credit
Unsecured Credit Facility
On January 6, 2016, we entered into our fourth amended and restated unsecured credit agreement (Unsecured Credit Agreement) with a syndicate of financial institutions led by KeyBank National Association serving as administrative agent and Wells Fargo Bank, National Association serving as syndication agent to provide for an unsecured credit facility aggregating $1,200,000 (Unsecured Credit Facility). The Unsecured Credit Facility consists of a $750,000 unsecured revolving line of credit, a $250,000 unsecured term loan and a second unsecured term loan which had an outstanding balance of $200,000 at inception, of which we repaid $100,000 during the nine months ended September 30, 2017, and is priced on a leverage grid at a rate of LIBOR plus a credit spread. We received investment grade credit ratings from Moody’s and Standard & Poor’s in 2014. In accordance with the unsecured credit agreement, we may elect to convert to an investment grade pricing grid. As of September 30, 2017, making such an election would have resulted in a higher interest rate and, as such, we have not made the election to convert to an investment grade pricing grid.
The following table summarizes the key terms of the Unsecured Credit Facility:
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| SOURCES | | | | | | | Leverage-Based Pricing | | Ratings-Based PricingUSES |
Unsecured Credit Facility▪ | Operating cash flow | Maturity Date▪ | | Extension Option | | Extension Fee | | Credit Spread | Unused Fee | | Credit Spread | Facility FeeTenant allowances and leasing costs |
$250,000 unsecured term loan▪ | Cash and cash equivalents | 1/5/2021▪ | | N/A | | N/A | | 1.30% - 2.20% | N/A | | 0.90% - 1.75% | N/AImprovements made to individual properties, certain of which are not |
$100,000▪ | Available borrowings under our unsecured term loanrevolving | | 5/11/2018 | | 2 one year | | 0.15% | | 1.45% - 2.20% | N/A | | 1.05% - 2.05% | N/Arecoverable through common area maintenance charges to tenants |
$750,000 unsecured revolving | line of credit | ▪ | 1/5/2020Debt repayments |
▪ | Proceeds from capital markets transactions | 2 six month▪ | Distribution payments |
▪ | 0.075%Proceeds from asset dispositions | ▪ | 1.35% - 2.25%Redevelopment, expansion and pad development activities |
▪ | 0.15% - 0.25%Proceeds from the sales of air rights | ▪ | 0.85% - 1.55%Acquisitions |
| 0.125% - 0.30% | ▪ | New development |
Over the last several years, we have made substantial progress in reinforcing the strength of our balance sheet, as demonstrated by our financial flexibility and abundant liquidity. We believe this progress places us in a position to be able to better withstand the current unprecedented macroeconomic environment. However, there can be no assurances in this regard or that additional financing or capital will be available to us going forward on favorable terms, or at all, including with respect to the restrictions set forth in the Merger Agreement. Additionally, as of July 26, 2021, we have collected 98% and 97% of base rent charges related to the three months ended June 30, 2021 and March 31, 2021, respectively, and have executed lease concession agreements to address an additional 0.45% and 1.6% of base rent related to the three months ended June 30, 2021 and March 31, 2021, respectively. Uncollected billed base rent related to tenants who have declared bankruptcy represents 0.0% for both the three months ended June 30, 2021 and March 31, 2021. As of July 26, 2021, we have collected 84%, 92%, 96% and 97% of billed base rent charges related to the three months ended June 30, 2020, September 30, 2020, December 31, 2020 and
March 31, 2021, respectively, as compared to 81%, 89%, 95% and 96% as of April 26, 2021, respectively. If our cash collection activity deteriorates, and if we reach additional agreements with tenants to defer or abate rent, our operating cash flows and liquidity will be negatively impacted. We can make no assurances that the in-process lease amendments will ultimately be executed in the lease concession type being actively negotiated, or at all. Over the last several years as we worked to fortify our balance sheet, we funded debt maturities primarily through capital markets transactions, including public and private offerings of senior unsecured notes, as well as asset dispositions. As of June 30, 2021, we have no scheduled debt maturities and $1,215 of principal amortization due through the end of 2021, which we plan on satisfying through a combination of cash flows from operations, working capital and our unsecured revolving line of credit, subject to the restrictions set forth in the Merger Agreement.
The table below summarizes our consolidated indebtedness as of June 30, 2021:
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Debt | | Aggregate Principal Amount | | Weighted Average Interest Rate | | Maturity Date | | Weighted Average Years to Maturity |
Fixed rate mortgages payable (a) | | $ | 90,962 | | | 4.37 | % | | Various | | 3.5 years |
| | | | | | | | |
Unsecured notes payable: | | | | | | | | |
Senior notes – 4.58% due 2024 | | 150,000 | | | 4.58 | % | | June 30, 2024 | | 3.0 years |
Senior notes – 4.00% due 2025 | | 350,000 | | | 4.00 | % | | March 15, 2025 | | 3.7 years |
Senior notes – 4.08% due 2026 | | 100,000 | | | 4.08 | % | | September 30, 2026 | | 5.3 years |
Senior notes – 4.24% due 2028 | | 100,000 | | | 4.24 | % | | December 28, 2028 | | 7.5 years |
Senior notes – 4.82% due 2029 | | 100,000 | | | 4.82 | % | | June 28, 2029 | | 8.0 years |
Senior notes – 4.75% due 2030 | | 400,000 | | | 4.75 | % | | September 15, 2030 | | 9.2 years |
Total unsecured notes payable (a) | | 1,200,000 | | | 4.42 | % | | | | 6.3 years |
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Unsecured credit facility: | | | | | | | | |
Revolving line of credit – variable rate | | — | | | 1.20 | % | | April 22, 2022 (b) | | 0.8 years |
| | | | | | | | |
Unsecured term loans: | | | | | | | | |
Term Loan Due 2023 – fixed rate (c) | | 200,000 | | | 4.10 | % | | November 22, 2023 | | 2.4 years |
Term Loan Due 2024 – fixed rate (d) | | 120,000 | | | 2.88 | % | | July 17, 2024 | | 3.0 years |
Term Loan Due 2026 – fixed rate (e) (f) | | 150,000 | | | 3.37 | % | | July 17, 2026 | | 5.0 years |
Total unsecured term loans (a) | | 470,000 | | | 3.56 | % | | | | 3.4 years |
| | | | | | | | |
Total consolidated indebtedness | | $ | 1,760,962 | | | 4.19 | % | | | | 5.4 years |
(a)Fixed rate mortgages payable excludes mortgage discount of $(428) and capitalized loan fees of $(160), net of accumulated amortization, as of June 30, 2021. Unsecured Credit Facility has a $400,000 accordionnotes payable excludes discount of $(6,044) and capitalized loan fees of $(6,912), net of accumulated amortization, as of June 30, 2021. Unsecured term loans exclude capitalized loan fees of $(2,105), net of accumulated amortization, as of June 30, 2021. Capitalized loan fees related to the revolving line of credit are included within “Other assets, net” in the accompanying condensed consolidated balance sheets.
(b)Subsequent to June 30, 2021, we entered into our sixth amended and restated unsecured credit agreement that extended the maturity date of the unsecured revolving line of credit to January 8, 2026 with the option that allows us,to extend for two additional six-month periods at our election, to increase the total credit facility up to $1,600,000, subject to (i) customary feesrepresentations and conditionswarranties, including, but not limited to, the absence of an event of default as defined in the amended unsecured credit agreement and (ii) our abilitypayment of an extension fee equal to obtain additional lender commitments.
The Unsecured Credit Agreement contains customary covenants and events0.075% of default. Pursuantthe revolving line of credit capacity. See Note 7 to the accompanying condensed consolidated financial statements for further details.
(c)Reflects $200,000 of LIBOR-based variable rate debt that has been swapped to a fixed rate of 2.85% plus a credit spread based on a leverage grid ranging from 1.20% to 1.85% through November 22, 2023. The applicable credit spread was 1.25% as of June 30, 2021.
(d)Reflects $120,000 of LIBOR-based variable rate debt that has been swapped to a fixed rate of 1.68% plus a credit spread based on a leverage grid ranging from 1.20% to 1.70% through July 17, 2024. The applicable credit spread was 1.20% as of June 30, 2021.
(e)Reflects $150,000 of LIBOR-based variable rate debt that has been swapped to a fixed rate of 1.77% plus a credit spread based on a leverage grid ranging from 1.50% to 2.20% through July 17, 2026. The applicable credit spread was 1.60% as of June 30, 2021.
(f)Subsequent to June 30, 2021, we amended the pricing terms of the Term Loan Due 2026, which will bear interest at a rate of LIBOR plus a credit spread based on a leverage grid ranging from 1.20% to 1.70%. In accordance with the amended unsecured term loan agreement, we may elect to convert to an investment grade pricing grid.
Mortgages Payable
During the six months ended June 30, 2021, we made scheduled principal payments of $1,194 related to amortizing loans.
Unsecured Term Loans and Revolving Line of Credit
Unsecured Credit Agreement,Facility
On April 23, 2018, we are subjectentered into our fifth amended and restated unsecured credit agreement with a syndicate of financial institutions to various financial covenants, including the requirement to maintain the following: (i) maximum unencumbered, secured and consolidated leverage ratios; and (ii) minimum fixed charge and unencumbered interest coverage ratios. Asprovide for an unsecured credit facility aggregating $1,100,000, consisting of September 30, 2017, management believes we were in compliance with the financial covenants and default provisions under the Unsecured Credit Agreement.
As of September 30, 2017, we had letter(s) of credit outstanding totaling $9,645 which serve as collateral for certain capital improvements and performance obligations on certain redevelopment projects, which will be satisfied upon completion of the projects, and reduced the available borrowings on ouran $850,000 unsecured revolving line of credit.
Term Loan Due 2023
On January 3, 2017, we received fundingcredit that matures on April 22, 2022 and a seven-year $200,000$250,000 unsecured term loan with a groupthat was scheduled to mature on January 5, 2021 and was repaid during 2020 (Unsecured Credit Facility). The unsecured revolving line of financial institutions, which closed during the year ended December 31, 2016. The Term Loan Due 2023credit is priced on a leverage grid at a rate of LIBOR plus a credit spread. In accordance with the term loanunsecured credit agreement, (Term Loan Agreement),the credit spread set forth in the leverage grid resets quarterly based on our leverage, as calculated at the previous quarter end, and we may electhave the option to make an irrevocable election to convert to an investment grade pricing grid. As of SeptemberJune 30, 2017,2021, making such an election would have resulted in a higher interest rate and, as such, we have not made the election to convert to an investment grade pricing grid.
The following table summarizes the key terms of the Term Loan Due 2023:
unsecured revolving line of credit as of June 30, 2021: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Term Loan Due 2023 | | Maturity Date | | Leverage-Based Pricing Credit Spread
| | Ratings-BasedInvestment Grade Pricing
Credit Spread
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Unsecured Credit Facility | | Maturity Date | | Extension Option | | Extension Fee | | Credit Spread | Facility Fee | | Credit Spread | Facility Fee |
$850,000 unsecured revolving line of credit | | 4/22/2022 | | 2 six-month | | 0.075% | | 1.05%–1.50% | 0.15%–0.30% | | 0.825%–1.55% | 0.125%–0.30% |
The Unsecured Credit Facility has a $500,000 accordion option that allows us, at our election, to increase the total Unsecured Credit Facility up to $1,350,000, subject to (i) customary fees and conditions including, but not limited to, the absence of an event of default as defined in the unsecured credit agreement and (ii) our ability to obtain additional lender commitments.
Subsequent to June 30, 2021, we entered into our sixth amended and restated unsecured credit agreement with a syndicate of financial institutions to provide for an $850,000 unsecured revolving line of credit that will be priced on a leverage grid at a rate of LIBOR plus a credit spread.
The following table summarizes the key terms of the sixth amended and restated unsecured credit agreement:
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| | | | | | | | Leverage-Based Pricing | | Investment Grade Pricing |
Sixth Amended and Restated Unsecured Credit Agreement | | Maturity Date | | Extension Option | | Extension Fee | | Credit Spread | Facility Fee | | Credit Spread | Facility Fee |
$850,000 unsecured revolving line of credit | | 1/8/2026 | | 2 six-month | | 0.075% | | 1.05%–1.50% | 0.15%–0.30% | | 0.725%–1.40% | 0.125%–0.30% |
The sixth amended and restated unsecured credit agreement has a $750,000 accordion that allows us, at our election, to increase the total unsecured revolving line of credit up to $1,600,000, subject to (i) customary fees and conditions including, but not limited to, the absence of an event of default as defined in the amended unsecured credit agreement and (ii) our ability to obtain additional lender commitments. The sixth amended and restated unsecured credit agreement also includes a sustainability metric based on targeted greenhouse gas emission reductions, which permits us to reduce the applicable grid-based spread by one basis point annually upon attainment.
As of June 30, 2021, we had letters of credit outstanding totaling $291 that serve as collateral for certain capital improvements at one of our properties and reduce the available borrowings on our unsecured revolving line of credit.
Unsecured Term Loans
As of June 30, 2021, we have the following unsecured term loans: (i) a seven-year $200,000 unsecured term loan (Term Loan Due 2023), (ii) a five-year $120,000 unsecured term loan (Term Loan Due 2024) and (iii) a seven-year $150,000 unsecured term loan (Term Loan Due 2026), each of which bears interest at a rate of LIBOR plus a credit spread based on a leverage grid. In accordance with the respective term loan agreements, the credit spread set forth in the leverage grid resets quarterly based on our leverage, as calculated at the previous quarter end, and we have the option to make an irrevocable election to convert to an investment grade pricing grid. As of June 30, 2021, making such an election would not have changed the interest rate for the Term Loan Due 2023 and would have resulted in higher interest rates for the Term Loan Due 2024 and Term Loan Due 2026 and, as such, we have not made the election to convert to an investment grade pricing grid.
The following table summarizes the key terms of the unsecured term loans as of June 30, 2021:
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Unsecured Term Loans | | Maturity Date | | Leverage-Based Pricing Credit Spread | | Investment Grade Pricing Credit Spread |
$200,000 unsecured term loan due 2023 | | 11/22/2023 | | 1.70%1.20% – 2.55%1.85% | | 0.85% – 1.65% |
$120,000 unsecured term loan due 2024 | | 7/17/2024 | | 1.20% – 1.70% | | 0.80% – 1.65% |
$150,000 unsecured term loan due 2026 | | 7/17/2026 | | 1.50% – 2.45%2.20% | | 1.35% – 2.25% |
The Term Loan Due 2023 has a $100,000 accordion option that allows us, at our election, to increase the total unsecured term loanTerm Loan Due 2023 up to $300,000, subject to (i) customary fees and conditions, including the absence of an event of default as defined in the Term Loan Agreement.amended term loan agreement and (ii) our ability to obtain additional lender commitments.
The Term Loan Agreement contains customary covenantsDue 2024 has a $130,000 accordion option and events of default, including financial covenants that require us to maintain the following: (i) maximum unencumbered, secured and consolidated leverage ratios; and (ii) minimum fixed charge and unencumbered interest coverage ratios. As of September 30, 2017, management believes we were in compliance with the financial covenants and default provisions under the Term Loan Agreement.Due 2026 has a $100,000 accordion option that, collectively, allow us, at our election, to increase the total of the Term Loan Due 2024 and Term Loan Due 2026 up to $500,000, subject to (i) customary fees and conditions, including the absence of an event of default as defined in the term loan agreement and (ii) our ability to obtain additional lender commitments.
Subsequent to June 30, 2021, we amended the pricing terms of the Term Loan Due 2026 as follows:
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Term Loan Due 2026 | | Maturity Date | | Leverage-Based Pricing Credit Spread | | Investment Grade Pricing Credit Spread |
$150,000 unsecured term loan due 2026 | | 7/17/2026 | | 1.20 | % | – | 1.70% | | 0.75 | % | – | 1.60% |
The amendment to the Term Loan Due 2026 also includes a sustainability metric based on targeted greenhouse gas emission reductions, which permits us to reduce the applicable grid-based spread on the Term Loan Due 2026 by one basis point annually upon attainment.
Debt Maturities
The following table showssummarizes the scheduled maturities and principal amortization of our indebtedness as of SeptemberJune 30, 20172021 for the remainder of 2017,2021, each of the next four years and thereafter, and the weighted average interest rates by year, as well as the fair value of our indebtedness as of SeptemberJune 30, 2017.2021.
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| 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | Thereafter | | Total | | Fair Value |
Debt: | | | | | | | | | | | | | | | |
Fixed rate debt: | | | | | | | | | | | | | | | |
Mortgages payable (a) | $ | 1,215 | | | $ | 26,641 | | | $ | 31,758 | | | $ | 1,737 | | | $ | 1,809 | | | $ | 27,802 | | | $ | 90,962 | | | $ | 91,982 | |
Fixed rate term loans (b) | — | | | — | | | 200,000 | | | 120,000 | | | — | | | 150,000 | | | 470,000 | | | 470,238 | |
Unsecured notes payable (c) | — | | | — | | | — | | | 150,000 | | | 350,000 | | | 700,000 | | | 1,200,000 | | | 1,295,501 | |
Total fixed rate debt | 1,215 | | | 26,641 | | | 231,758 | | | 271,737 | | | 351,809 | | | 877,802 | | | 1,760,962 | | | 1,857,721 | |
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Variable rate debt: | | | | | | | | | | | | | | | |
Variable rate revolving line of credit (d) | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total debt (e) | $ | 1,215 | | | $ | 26,641 | | | $ | 231,758 | | | $ | 271,737 | | | $ | 351,809 | | | $ | 877,802 | | | $ | 1,760,962 | | | $ | 1,857,721 | |
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Weighted average interest rate on debt: | | | | | | | | | | | | | | | |
Fixed rate debt | 4.08 | % | | 4.81 | % | | 4.10 | % | | 3.83 | % | | 4.00 | % | | 4.37 | % | | 4.19 | % | | |
Variable rate debt (f) | — | | | 1.20 | % | | — | | | — | | | — | | | — | | | 1.20 | % | | |
Total | 4.08 | % | | 4.81 | % | | 4.10 | % | | 3.83 | % | | 4.00 | % | | 4.37 | % | | 4.19 | % | | |
(a)Excludes mortgage discount of $(428) and capitalized loan fees of $(160), net of accumulated amortization, as of June 30, 2021.
(b)Excludes capitalized loan fees of $(2,105), net of accumulated amortization, as of June 30, 2021. The table doesfollowing variable rate term loans have been swapped to fixed rate debt: (i) $200,000 of LIBOR-based variable rate debt has been swapped to a fixed rate of 2.85% plus a credit spread based on a leverage grid through November 22, 2023; (ii) $120,000 of LIBOR-based variable rate debt has been swapped to a fixed rate of 1.68% plus a credit spread based on a leverage grid through July 17, 2024; and (iii) $150,000 of LIBOR-based variable rate debt has been swapped to a fixed rate of 1.77% plus a credit spread based on a leverage grid through July 17, 2026. As of June 30, 2021, the applicable credit spread for (i) was 1.25%, for (ii) was 1.20% and for (iii) was 1.60%.
(c)Excludes discount of $(6,044) and capitalized loan fees of $(6,912), net of accumulated amortization, as of June 30, 2021.
(d)Subsequent to June 30, 2021, we entered into our sixth amended and restated unsecured credit agreement that extended the maturity date of the unsecured revolving line of credit to January 8, 2026.
(e)The weighted average years to maturity of consolidated indebtedness was 5.4 years as of June 30, 2021.
(f)Represents interest rate as of June 30, 2021, however, the revolving line of credit was not reflectdrawn as of June 30, 2021.
Our unsecured debt agreements, consisting of the (i) unsecured credit agreement, as amended, governing the Unsecured Credit Facility, (ii) term loan agreement, as amended, governing the Term Loan Due 2023, (iii) term loan agreement, as amended, governing the Term Loan Due 2024 and Term Loan Due 2026, (iv) note purchase agreement governing the 4.58% senior unsecured notes due 2024 (Notes Due 2024), (v) indenture, as supplemented, governing the Notes Due 2025, (vi) note purchase agreement governing the 4.08% senior unsecured notes due 2026 and the 4.24% senior unsecured notes due 2028 (Notes Due 2026 and 2028), (vii) note purchase agreement governing the 4.82% senior unsecured notes due 2029 (Notes Due 2029) and (viii) indenture, as supplemented, governing the Notes Due 2030, contain customary representations, warranties and covenants, and events of default. These include financial covenants such as (i) maximum unencumbered, secured and consolidated leverage ratios; (ii) minimum interest coverage ratios; (iii) minimum fixed charge coverage ratios; (iv) minimum unencumbered interest coverage ratios; (v) a minimum debt service coverage ratio; and (vi) a minimum unencumbered assets to unsecured debt ratio. All financial covenants that include operating results, or derivations thereof, in the covenant calculations are based on the most recent four fiscal quarters of activity. As such, the impact of short-term relative adverse operating results, if any, on our financial covenants is partially mitigated by previous and/or subsequent operating results. As of June 30, 2021, we believe we were in compliance with the financial covenants and default provisions under the unsecured debt activity that occurred after September 30, 2017.agreements.
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| 2017 | | 2018 | | 2019 | | 2020 | | 2021 | | Thereafter | | Total | | Fair Value |
Debt: | | | | | | | | | | | | | | | |
Fixed rate debt: | | | | | | | | | | | | | | | |
Mortgages payable (a) | $ | 1,003 |
| | $ | 4,177 |
| | $ | 25,257 |
| | $ | 3,923 |
| | $ | 22,820 |
| | $ | 231,072 |
| | $ | 288,252 |
| | $ | 302,451 |
|
Fixed rate term loans (b) | — |
| | — |
| | — |
| | — |
| | 250,000 |
| | 200,000 |
| | 450,000 |
| | 451,174 |
|
Unsecured notes payable (c) | — |
| | — |
| | — |
| | — |
| | 100,000 |
| | 600,000 |
| | 700,000 |
| | 699,725 |
|
Total fixed rate debt | 1,003 |
| | 4,177 |
| | 25,257 |
| | 3,923 |
| | 372,820 |
| | 1,031,072 |
| | 1,438,252 |
| | 1,453,350 |
|
| | | | | | | | | | | | | | | |
Variable rate debt: | | | | | | | | | | | | | | | |
Variable rate term loan and revolving line of credit | — |
| | 100,000 |
| | — |
| | 187,000 |
| | — |
| | — |
| | 287,000 |
| | 287,315 |
|
Total debt (d) | $ | 1,003 |
| | $ | 104,177 |
| | $ | 25,257 |
| | $ | 190,923 |
| | $ | 372,820 |
| | $ | 1,031,072 |
| | $ | 1,725,252 |
| | $ | 1,740,665 |
|
| | | | | | | | | | | | | | | |
Weighted average interest rate on debt: | | | | | | | | | | | | | | | |
Fixed rate debt | 5.10 | % | | 5.05 | % | | 7.29 | % | | 4.62 | % | | 2.73 | % | | 4.08 | % | | 3.79 | % | | |
Variable rate debt (e) | — |
| | 2.68 | % | | — |
| | 2.59 | % | | — |
| | — |
| | 2.62 | % | | |
Total | 5.10 | % | | 2.78 | % | | 7.29 | % | | 2.63 | % | | 2.73 | % | | 4.08 | % | | 3.60 | % | | |
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(a) | Excludes mortgage premium of $1,087 and discount of $(590), net of accumulated amortization, as of September 30, 2017 and a $7,680 mortgage payable associated with one investment property classified as held for sale as of September 30, 2017. |
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(b) | $250,000 of LIBOR-based variable rate debt has been swapped to a fixed rate through two interest rate swaps. The swaps effectively convert one-month floating rate LIBOR to a weighted average fixed rate of 0.67% through December 31, 2017. In addition, $200,000 of LIBOR-based variable rate debt has been swapped to a fixed rate through two interest rate swaps. The swaps effectively convert one-month floating rate LIBOR to a fixed rate of 1.26% through November 22, 2018. |
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(c) | Excludes discount of $(882), net of accumulated amortization, as of September 30, 2017. |
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(d) | The weighted average years to maturity of consolidated indebtedness was 5.4 years as of September 30, 2017. Total debt excludes capitalized loan fees of $(7,283), net of accumulated amortization, as of September 30, 2017, which are included as a reduction to the respective debt balances. |
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(e) | Represents interest rates as of September 30, 2017. |
We plan on addressing our debt maturities through a combination of proceeds(i) cash flows generated from asset dispositions,operations, (ii) working capital, (iii) capital markets transactions and (iv) our unsecured revolving line of credit.credit, subject to the restrictions set forth in the Merger Agreement.
Distributions and Equity Transactions
Our distributions of current and accumulated earnings and profits for U.S. federal income tax purposes are taxable to shareholders, generally, as ordinary income. Distributions in excess of these earnings and profits generally are treated as a non-taxable reduction of the shareholders’ basis in the shares to the extent thereof (non-dividend distributions) and thereafter as taxable gain. We intend to continue to qualify as a REIT for U.S. federal income tax purposes. The Internal Revenue Code of 1986, as amended (the Code) generally requires that a REIT annually distributes to its shareholders at least 90% of its REIT taxable income, determined without regard to the dividends paid deduction and excluding net capital gains. The Code imposes tax on any undistributed REIT taxable income.
To satisfy the requirements for qualification as a REIT and generally not be subject to U.S. federal income and excise tax, we intend to make regular quarterly distributions of all, or substantially all, of our taxable income to shareholders. Our future distributions are subject to the restrictions set forth in the Merger Agreement, including (1) that the declaration and payment by us of regular quarterly dividends, aggregated and paid quarterly in accordance with past practice, will be at a quarterly rate not to exceed $0.075 per share, and (2) that we will coordinate the discretionrecord and payment date of our board of directors.any such dividend with Kite, which will be consistent with Kite’s historical record and payment dates. When determining the amount of future distributions, we expect to consider, among other factors, (i) the amount of cash generated from our operating activities, (ii) our expectations of future cash flow, (iii) our determination of near-term cash needs for debt repayments and potential future share repurchases, (iv) the market of available acquisitions of new properties and redevelopment, expansionsexpansion and pad development opportunities, (v) the timing of significant re-leasing activities and the establishment of additional cash reserves for anticipated tenant allowances and general property capital improvements, (vi) our ability to continue to access additional sources of capital, (vii) the restrictions set forth in the Merger Agreement, including those noted above, and (viii) the amount required to be
distributed to maintain our status as a REIT, which is a requirement of our Unsecured Credit Agreement,unsecured credit agreement, and to avoid or minimize any income and excise taxes that we otherwise would be required to pay, and (viii) the amount required to declare and pay in cash, or set aside for the payment of, the dividends on our Series A preferred stock for all past dividend periods.pay. Under certain circumstances, we may be required to make distributions in excess of cash available for distribution in order to meet the REIT distribution requirements.
In December 2015, we entered into an at-the-market (ATM) equity program under which we may issue and sell sharesWe declared quarterly distributions totaling $0.145 per share of our Class A common stock having an aggregate offering priceduring the six months ended June 30, 2021, comprised of up to $250,000, from time to time. Actual sales may depend on a varietythe first quarter 2021 distribution of factors, including, among others, market conditions$0.07 per share and the trading pricesecond quarter 2021 distribution of our Class A common stock. Any net proceeds are expected to be used for general corporate purposes, which may include the funding of acquisitions and redevelopment activities and the repayment of debt, including our unsecured revolving line of credit. $0.075 per share.
We did not sell any shares under our ATM equity program during the nine months ended September 30, 2017. As of September 30, 2017, we had Class A common shares havinghave an aggregate offering price of up to $250,000 remaining available for sale under our ATM equity program.
In December 2015, our board of directors authorized aexisting common stock repurchase program under which we may repurchase, from time to time, up to a maximum of $250,000$500,000 of shares of our Class A common stock. The shares may be repurchased in the open market or in privately negotiated transactions and are canceled upon repurchase. The timing and actual number of shares repurchased will depend on a variety of factors, including price in absolute terms and in relation to the value of our assets, corporate and regulatory requirements, market conditions and other corporate liquidity requirements and priorities. The common stock repurchase
program may be suspended or terminated at any time without prior notice.
The following table presents activity We did not repurchase any shares during the six months ended June 30, 2021. As of June 30, 2021, $189,105 remained available for repurchases of shares of our common stock under our common stock repurchase program. Subsequent to June 30, 2021, in connection with the Merger Agreement, we suspended the common stock repurchase program.
On April 1, 2021, we established an at-the-market (ATM) equity program under which we may issue and sell shares of our Class A common stock, having an aggregate offering price of up to $250,000, from time to time. Actual sales may depend on a variety of factors, including, among others, market conditions and the trading price of our Class A common stock. Any net proceeds are expected to be used for general corporate purposes, which may include funding acquisitions and redevelopment activities and repaying debt. We did not sell any shares under our ATM equity program during the ninesix months ended SeptemberJune 30, 2017:
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| | | | | | | | | | | |
| | Number of Common Shares Repurchased | | Average Price per Share | | Total Repurchases |
First quarter 2017 | | — |
| | $ | — |
| | $ | — |
|
Second quarter 2017 | | 6,024 |
| | $ | 12.55 |
| | $ | 75,697 |
|
Third quarter 2017 (a) | | 3,805 |
| | $ | 13.09 |
| | $ | 49,892 |
|
Year to date September 30, 2017 | | 9,829 |
| | $ | 12.76 |
| | $ | 125,589 |
|
| |
(a) | Includes 396 shares repurchased in September 2017 at an average price per share of $13.08 for a total of $5,187, which settled on October 2, 2017. |
2021. As of SeptemberJune 30, 2017, $115,570 remained2021, we had Class A common shares having an aggregate offering price of up to $250,000 remaining available for sale under our common stock repurchaseATM equity program. Subsequent to June 30, 2021, in connection with the Merger Agreement, we suspended the ATM equity program.
Capital Expenditures and Redevelopment Activity
We anticipate that obligations related to capital improvements and redevelopments, including expansions and pad developments, at our operating properties and our one remaining office property in 20172021, subject to the restrictions contained in the Merger Agreement, can be met with (i) cash flows generated from operations, asset dispositions(ii) working capital, (iii) capital markets transactions and working capital.(iv) our unsecured revolving line of credit.
We beganAs of June 30, 2021, we have active expansion and redevelopment activitiesprojects at Reisterstown Road PlazaCircle East, One Loudoun Downtown, The Shoppes at Quarterfield and Towson Circle in 2016. Wea vacant pad development at Southlake Town Square and we have invested a total of approximately $18,600$131,000 in these projects, which is net of proceeds of $11,820 from the sale of air rights at Circle East and net of contributions from our joint venture partner at One Loudoun Downtown. These projects are at various stages of completion, and based on our current plans and estimates, we anticipate that it will require approximately $52,000 to $65,000 of additional investment from us to complete these projects.
We capitalized $771 and $1,487 of internal salaries and related benefits of personnel directly involved in capital upgrades and tenant improvements during the three and six months ended June 30, 2021, respectively, and $641 and $1,267 during the three and six months ended June 30, 2020, respectively. We also capitalized internal leasing incentives of $106 and $163 during the three and six months ended June 30, 2021, respectively, and $42 and $102 during the three and six months ended June 30, 2020, respectively, all of which were incremental to signed leases.
In addition, we capitalized $2,020 and $3,831 of indirect project costs related to redevelopment projects it will require an additional $23,900during the three and six months ended June 30, 2021, including, among other costs, $359 and $768 of internal salaries and related benefits of personnel directly involved in the redevelopment projects and $1,254 and $2,546 of interest, respectively. We capitalized $1,347 and $2,663 of indirect project costs related to $26,900, netredevelopment projects during the three and six months ended June 30, 2020, including, among other costs, $329 and $701 of proceeds from land sales, reimbursement from third partiesinternal salaries and contributions from a project partner, as applicable. We anticipate fundingrelated benefits of personnel directly involved in the redevelopments with cash flows from operations, asset dispositions, working capitalredevelopment projects and proceeds from our unsecured revolving line$736 and $1,521 of credit.interest, respectively.
Dispositions
We continue to execute our portfolio repositioning strategy of disposing of select non-target and single-user properties.did not sell any properties during the six months ended June 30, 2021. The following table highlights our property dispositionsdisposition during 2016 and the nine months ended September 30, 2017:2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of Properties Sold | | Square Footage | | Consideration | | Aggregate Proceeds, Net (a) | | Debt Extinguished |
2020 Disposition | | 1 | | | 105,900 | | | $ | 13,900 | | | $ | 12,695 | | | $ | — | |
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| | | | | | | | | | | | | | | | | | | |
| | Number of Properties Sold (a) | | Square Footage | | Consideration | | Aggregate Proceeds, Net (b) | | Debt Extinguished | |
2017 Dispositions (through September 30, 2017) | | 35 |
| | 4,302,400 |
| | $ | 642,712 |
| | $ | 562,433 |
| | $ | 19,691 |
| (c) |
2016 Dispositions | | 46 |
| | 3,013,900 |
| | $ | 540,362 |
| | $ | 448,216 |
| | $ | 94,353 |
| (c) (d) |
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(a) | 2017 dispositions include the disposition of CVS Pharmacy – Sylacauga and the Home Depot parcel at Century III Plaza, both of which were classified as held for sale as of December 31, 2016. 2016 dispositions include the disposition of one development property, which was not under active development. |
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(b) | Represents total consideration net of transaction costs and proceeds temporarily restricted related to potential 1031 Exchanges. 2017 dispositions exclude proceeds of $65,086 which are temporarily restricted related to potential 1031 Exchanges. |
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(c) | Excludes $155,011 and $10,695 of mortgages payable repayments or defeasances completed prior to disposition of the respective property for the nine months ended September 30, 2017 and year ended December 31, 2016, respectively.
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(d) | Represents The Gateway’s outstanding mortgage payable prior to the lender-directed sale of the property. Immediately prior to the disposition, the lender reduced our loan obligation to $75,000 which was assumed by the buyer in connection with the disposition. Along with the loan reduction, the lender received the balance of the restricted escrows that they held and the rights to unpaid accounts receivable and forgave accrued interest, resulting in a net gain on extinguishment of debt of $13,653. |
In addition to the transactionstransaction presented in the preceding table, during the nine months ended September 30, 2017, we received escrow funds related to a 2016 property disposition and a condemnation award, which resulted in net proceeds totaling $1,636. During the year ended December 31, 2016,2020, we also received proceeds of $2,549$26 from the salea condemnation award.
Acquisitions
We continue to execute our investment strategy of acquiring high quality, multi-tenant retail assets within our target markets.did not acquire any properties during the six months ended June 30, 2021. The following table highlights our asset acquisitionsacquisition during 2016 and2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of Assets Acquired | | Square Footage | | Acquisition Price | | Mortgage Debt |
2020 Acquisition (a) | | 1 | | | 154,700 | | | $ | 55,000 | | | $ | — | |
(a)2020 acquisition is the nine months ended September 30, 2017:fee interest in our Fullerton Metrocenter multi-tenant retail operating property. In connection with this acquisition, we also assumed the lessor position in a ground lease with a shadow anchor. The total number of properties in our portfolio was not affected by this transaction.
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| | | | | | | | | | | | | | |
| | Number of Assets Acquired | | Square Footage | | Acquisition Price | | Mortgage Debt |
2017 Acquisitions (through September 30, 2017) (a) | | 8 |
| | 331,400 |
| | $ | 147,586 |
| | $ | — |
|
2016 Acquisitions (b) | | 9 |
| | 1,102,300 |
| | $ | 408,308 |
| | $ | 15,971 |
|
| |
(a) | 2017 acquisitions include the purchase of the following: 1) the fee interest in our Boulevard at the Capital Centre multi-tenant retail operating property that was previously subject to a ground lease with a third party and 2) the remaining five phases under contract, including the development rights for additional multi-family units, at our One Loudoun Downtown multi-tenant retail operating property that was acquired in phases as the seller completed construction on stand-alone buildings at the property. The total number of properties in our portfolio was not affected by these transactions. |
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(b) | 2016 acquisitions include the purchase of the following: 1) the fee interest in our Ashland & Roosevelt multi-tenant retail operating property that was previously subject to a ground lease with a third party and 2) the anchor space improvements at our Woodinville Plaza multi-tenant retail operating property that was previously subject to a ground lease with us. The total number of properties in our portfolio was not affected by these transactions. |
Summary of Cash Flows
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| | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 | | Change |
Net cash provided by operating activities | | $ | 181,678 |
| | $ | 205,008 |
| | $ | (23,330 | ) |
Net cash provided by (used in) investing activities | | 374,548 |
| | (8,254 | ) | | 382,802 |
|
Net cash used in financing activities | | (579,693 | ) | | (179,107 | ) | | (400,586 | ) |
(Decrease) increase in cash and cash equivalents | | (23,467 | ) | | 17,647 |
| | (41,114 | ) |
Cash and cash equivalents, at beginning of period | | 53,119 |
| | 51,424 |
| | |
Cash and cash equivalents, at end of period | | $ | 29,652 |
| | $ | 69,071 |
| | |
| | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, |
| 2021 | | 2020 | | Change |
Net cash provided by operating activities | $ | 106,346 | | | $ | 64,425 | | | $ | 41,921 | |
Net cash used in investing activities | (50,013) | | | (106,878) | | | 56,865 | |
Net cash (used in) provided by financing activities | (30,541) | | | 45,656 | | | (76,197) | |
Increase in cash, cash equivalents and restricted cash | 25,792 | | | 3,203 | | | 22,589 | |
Cash, cash equivalents and restricted cash, at beginning of period | 45,329 | | | 14,447 | | | |
Cash, cash equivalents and restricted cash, at end of period | $ | 71,121 | | | $ | 17,650 | | | |
Cash Flows from Operating Activities
Cash flows from operating activities consist primarily of net income from property operations, adjusted for the following, among others: (i) depreciation and amortization, (ii) provision for impairment of investment properties, (iii) gain on sales of investment properties, and (iv) gains on extinguishmentamortization of stock-based compensation, loan fees and debt and other liabilities.discount, net. Net cash provided by operating activities during the ninesix months ended SeptemberJune 30, 2017 decreased $23,3302021 increased $41,921 primarily due to the following:
•a $31,078 decrease$22,004 increase in comparative changes in accounts receivable, net due to an increase in cash collections of charges billed to tenants, including collection of charges from prior periods, and the collection of amounts previously deferred under lease concession agreements as a result of COVID-19;
•an $18,152 increase in NOI, consisting of an increase in Same Store NOI of $18,590, partially offset by a decrease in NOI from properties that were sold or held for sale in 20162020 and 20172021 and other properties not included in our same store portfolio of $34,917, partially offset by $438;
•an increase$1,862 decrease in Same Store NOI of $3,839; andcash bonuses paid;
•a $5,810 increase$289 decrease in cash paid for leasing fees and inducements;
and
partially offset by
•a $12,243 decrease$2,003 increase in cash paid for interest; and
a $758 decrease in cash bonuses paid; and
•ordinary course fluctuations in working capital accounts.
We believe that cash flows from operations, working capital and our unsecured revolving line of credit will provide sufficient liquidity to sustain future operations, subject to the restrictions contained in the Merger Agreement; however, we cannot provide any such assurances.
Cash Flows from Investing Activities
Cash flows from investing activities consist primarily of proceeds from the sales of investment properties, net of cash paid to purchase investment properties and fund capital expenditures, tenant improvements and developments in progress, in addition to changes in restricted escrows.net of proceeds from the sales of investment properties. Net cash flows from investing activities during the ninesix months ended SeptemberJune 30, 20172021 increased $382,802 primarily$56,865 due to the following:
•a $256,714 increase$54,970 decrease in cash paid to purchase investment properties;
•a $10,708 decrease capital expenditures and tenant improvements; and
•a $2,556 decrease in investment in developments in progress;
partially offset by
•an $11,369 decrease in proceeds from the sales of investment properties;properties.
a $119,667 decreaseIn 2021, subject to the restrictions contained in cash paidthe Merger Agreement, we expect to purchase investment properties; and
a $26,818 net change in restricted escrow activity;
partially offset by
a $10,845 increase in investment in developments in progress; and
a $9,358 increase in capital expenditures and tenant improvements.
We will continue to execute our investment strategy by pursuing targeted dispositions. The majority of the proceeds from disposition activity for the remainder of 2017 is expected to be used to acquire high quality, multi-tenant retail assets within our target markets, fund redevelopment, expansion and pad development activities, repay debt, repurchaseacquisitions, capital expenditures and tenant improvements through cash flows generated from operations, working capital, capital markets transactions and our common stock and redeem our preferred stock. In addition, tenant improvement costs associated with re-leasing vacant space may continue to be significant.unsecured revolving line of credit.
Cash Flows from Financing Activities
Cash flows from financing activities primarily consist of proceeds from our unsecured revolving line of credit and the issuance of debt instruments, partially offset by distribution payments,(i) repayments of our unsecured revolving line of credit, and otherunsecured debt instruments and mortgages payable, (ii) distribution payments, (iii) payment of loan fees and deposits, (iv) debt prepayment costs, (v) principal payments on mortgages payable, the purchase of U.S. Treasury securities in connection with defeasance of mortgages payable and repurchases of(vi) shares repurchased through our common stock.stock repurchase program. Net cash flows from financing activities during the ninesix months ended SeptemberJune 30, 20172021 decreased $400,586$76,197 primarily due to the following:
•a $117,000 change in the $439,403 purchase of U.S. Treasury securities in connection with defeasance of the IW JV portfolio of mortgages payable during the nine months ended September 30, 2017;
$120,402 paid in 2017 to repurchase common shares through our share repurchase program;
the repayment of $100,000activity on our unsecured term loan due 2018 during the nine months ended September 30, 2017;
a $100,000 decrease in proceeds from the issuance of unsecured notes related to a $100,000 private placement transaction during the nine months ended September 30, 2016; and
a $52,784 increase in principal payments on mortgages payable;
partially offset by
a $201,000 increase in net proceeds from our unsecured revolving line of credit;credit from net proceeds of $117,000 during the six months ended June 30, 2020 compared to net proceeds of $0 during the six months ended June 30, 2021;
$200,000 of proceeds from the Term Loan Due 2023, which funded in January 2017;partially offset by
•a $6,376 decrease in the payment of loan fees and deposits; and
a $3,545$42,965 decrease in distributions paid as a result of the timing of the third quarter preferred distribution payment and a decrease in common shares outstanding due to the repurchase of common shares through our share repurchase program.paid.
We plan to continue to address our debt maturities through a combination of proceeds(i) cash flows from asset dispositions,operations, (ii) working capital, (iii) capital markets transactions and (iv) our unsecured revolving line of credit.credit, subject to the restrictions contained in the Merger Agreement.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Contractual Obligations
During the ninesix months ended SeptemberJune 30, 2017,2021, except as otherwise disclosed herein, there were no material changes outside the normal course of business to the contractual obligations identified in our Annual Report on Form 10-K for the year ended December 31, 2016.2020.
Critical Accounting Policies and Estimates
Our 20162020 Annual Report on Form 10-K contains a description of our critical accounting policies, including those relating to the acquisitioncollectibility of investment properties,lease income and accounts receivable and impairment of long-lived assets and unconsolidated joint ventures, cost capitalization, depreciation and amortization, development and redevelopment, investment properties held for sale, partially-owned entities, revenue recognition, accounts and notes receivable and allowance for doubtful accounts and income taxes.assets. For the ninesix months ended SeptemberJune 30, 2017,2021, there were no significant changes to these policies.
Impact of Recently Issued Accounting Pronouncements
See Note 2 – Summary of Significant Accounting Policies to ourin the accompanying condensed consolidated financial statements contained herein regarding recently issued accounting pronouncements.
Subsequent Events
Subsequent to SeptemberJune 30, 2017, we:2021, we
•entered into our sixth amended and restated unsecured credit agreement with a syndicate of financial institutions to provide for an $850,000 unsecured revolving line of credit and amended the pricing terms of the Term Loan Due 2026. See Note 7 to the accompanying condensed consolidated financial statements for further details;
•closed on the dispositionacquisition of Forks Town Center,Arcadia Village, a 100,30037,000 square foot multi-tenant retail operating property located in Easton, Pennsylvania,Phoenix, Arizona, for a gross purchase price of $21,000;
•paid the cash dividend for the second quarter of 2021 of $0.075 per share on our outstanding Class A common stock, which was classified as held for sale aspaid on July 9, 2021 to Class A common shareholders of September 30, 2017, for a sales pricerecord at the close of $23,800 with an anticipated gainbusiness on sale. The mortgage payable, with a principal balance of $7,680 as of September 30, 2017June 25, 2021; and an interest rate of 7.70%, was repaid in conjunction with the disposition;
closed on the disposition of Placentia Town Center, a 111,000 square foot multi-tenant retail operating property located in Placentia, California, which was classified as held for sale as of September 30, 2017, for a sales price of $35,725 with an anticipated gain on sale;
closed on the disposition of Five Forks, a 70,200 square foot multi-tenant retail operating property located in Simpsonville, South Carolina, which was classified as held for sale as of September 30, 2017, for a sales price of $10,720 with an anticipated gain on sale;
closed on the disposition of Saucon Valley Square, a 80,700 square foot multi-tenant retail operating property located in Bethlehem, Pennsylvania, which was classified as held for sale as of September 30, 2017, for a sales price of $6,300 with no anticipated gain on sale or additional impairment due to previously recognized impairment charges;
announced that we will redeem all 5,400 outstanding shares of our 7.00% Series A cumulative redeemable preferred stock on December 20, 2017 for cash at a redemption price of $25.00 per preferred share, plus $0.3840 per preferred share representing all accrued and unpaid dividends up to, but excluding, December 20, 2017; and
•declared the cash dividend for the fourththird quarter of 20172021 of $0.165625$0.075 per share on our outstanding Class A common stock, which will be paid on January 10, 2018October 8, 2021 to Class A common shareholders of record at the close of business on December 27, 2017.October 1, 2021.
Proposed Merger with Kite Realty Group Trust
On July 18, 2021, we entered into a definitive Merger Agreement with Kite and Merger Sub. Upon the terms and subject to the conditions set forth in the Merger Agreement, we will merge with and into Merger Sub, with Merger Sub surviving the Merger. At the Effective Time, each share of our Class A common stock issued and outstanding immediately prior to the Effective Time will be converted into the right to receive 0.623 common shares of Kite, plus the right, if any, to receive cash in lieu of fractional common shares of Kite. During the period from the date of the Merger Agreement until the completion of the Merger, we are subject to certain restrictions on our ability to engage with third parties regarding alternative acquisition proposals and on the conduct of our business.
Our board of directors and the board of trustees of Kite each have unanimously approved the transaction. The closing of the Merger is expected to occur in the fourth quarter of 2021, subject to the satisfaction of certain closing conditions, including the approval of both Kite and our shareholders. There can be no assurance that the Merger will be completed on the terms or timeline currently contemplated or at all.
In connection with the Merger Agreement, we suspended our common stock repurchase program and ATM equity program.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We may be exposed to interest rate changes primarily as a result of our long-term debt that is used to maintain liquidity and fund our operations. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve our objectives, we borrow primarily at fixed rates, and in some cases variable rates with the ability to convert to fixed rates.
With regard to variable rate financing, we assess interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities. We maintain risk management control systems to monitor interest rate cash flow risk attributable to both our outstanding or forecasted debt obligations as well as our potential offsetting hedge positions. The risk management control systems involve the use of analytical techniques, including cash flow sensitivity analysis, to estimate the expected impact of changes in interest rates on our future cash flows.
As of SeptemberJune 30, 2017,2021, we had $450,000$470,000 of variable rate debt based on LIBOR that has been swapped to fixed rate debt through interest rate swaps. Our interest rate swaps as of SeptemberJune 30, 20172021 are summarized in the following table:
| | | | | | | | | | | | | | | | | |
| Notional Amount | | Maturity Date | | Fair Value of Derivative Liability |
Term Loan Due 2023 | $ | 200,000 | | | November 22, 2023 | | $ | 11,825 | |
Term Loan Due 2024 | 120,000 | | | July 17, 2024 | | 4,262 | |
Term Loan Due 2026 | 150,000 | | | July 17, 2026 | | 6,740 | |
| $ | 470,000 | | | | | $ | 22,827 | |
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| | | | | | | | | | |
| | Notional Amount | | Termination Date | | Fair Value of Derivative Asset |
Fixed rate portion of Unsecured Credit Facility | | $ | 250,000 |
| | December 31, 2017 | | $ | 367 |
|
Term Loan Due 2023 | | 200,000 |
| | November 22, 2018 | | 524 |
|
| | $ | 450,000 |
| | | | $ | 891 |
|
For a discussion concerning the scheduled debt maturities and principal amortization of our indebtedness as of SeptemberJune 30, 20172021 for the remainder of 2017,2021, each of the next four years and thereafter and the weighted average interest rates by year to evaluate the expected cash flows and sensitivity to interest rate changes, refer to Note 6 to7 – Debt in the accompanying condensed consolidated financial statements and Part I, “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Debt Maturities.”Maturities” contained herein.
A decrease of 1% in market interest rates would result in a hypothetical decreaseincrease in our derivative assetliability of approximately $2,559.$16,443.
The combined carrying amount of our mortgages payable, unsecured notes payable, Term Loan Due 2023 and Unsecured Credit Facilitydebt is approximately $23,056$112,408 lower than the fair value as of SeptemberJune 30, 2017.2021.
WeAs of June 30, 2021, we had $287,000 of variable rate debt, excluding $450,000$470,000 of variable rate debt that has been swapped to fixed rate debt and access to a variable rate revolving line of credit with interest rates varying based upon LIBOR, with a weighted averagean interest rate of 2.62%1.20% based on LIBOR; however, the revolving line of credit was not drawn as of SeptemberJune 30, 2017.2021. An increase in the variable interest rate on this debtthe revolving line of credit constitutes a market risk. If interest rates increase by 1% based on debt outstanding, there would be no change to interest expense as the revolving line of credit is undrawn as of SeptemberJune 30, 2017, interest expense would increase by approximately $2,870 on an annualized basis.2021.
WeSubject to the restrictions contained in the Merger Agreement, we may use additional derivative financial instruments to hedge exposures to changes in interest rates. To the extent we do, we are exposed to market and credit risk. Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates. The market risk associated with interest rate contracts is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. When the fair value of a derivative contract is negative, we owe the counterparty and, therefore, we generally are not exposed to the credit risk of the counterparty. We minimize credit risk in derivative instruments by entering into transactions with highly rated counterparties or with the same party providing the financing, with the right of offset.
When LIBOR is discontinued, the interest rate for certain of our debt instruments, including our unsecured credit facility revolving line of credit, Term Loan Due 2023, Term Loan Due 2024 and Term Loan Due 2026, and interest rate swap agreements that are indexed to LIBOR will be based on a replacement rate or an alternate base rate as specified in the applicable documentation governing such debt or swaps or as otherwise agreed upon. Such an event would not affect our ability to borrow or maintain already outstanding borrowings or swaps, but the replacement rate or alternate base rate could be higher or more volatile than LIBOR prior to its discontinuance. We understand that LIBOR is expected to remain available through June 30, 2023 and that banking regulators are encouraging banks to discontinue new LIBOR debt issuances by December 31, 2021.
ITEM 4. CONTROLS AND PROCEDURES
We have established disclosure controls and procedures to ensure that material information relating to us, including our consolidated subsidiaries, is made known to the officers who certify our financial reports and to the members of senior management and the board of directors.
Based on management’s evaluation as of SeptemberJune 30, 2017,2021, our President, Chief Executive Officer and Treasurer and Interim Principalour Executive Vice President, Chief Financial Officer hasand Treasurer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934)1934, as amended) are effective to ensure that the information required to be disclosed by us in our reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our President, Chief Executive Officer and Treasurerour Executive Vice President, Chief Financial Officer and Interim Principal Financial Officer,Treasurer, to allow timely decisions regarding required disclosure.
There were no changes to our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) during the fiscal quarter ended SeptemberJune 30, 20172021 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are subject, from time to time, to various legal proceedings and claims that arise in the ordinary course of business. While the resolution of such matters cannot be predicted with certainty, we believe, based on currently available information, that the final outcome of such matters will not have a material effect on our condensed consolidated financial statements.
ITEM 1A. RISK FACTORS
Except to the extent updated below or to the extent additional factual information disclosed elsewhere in this Quarterly Report on Form 10-Q relates to such factors (including, without limitation, the matters discussed in Part I,I. “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations”), and other than risks related to the Merger Agreement set forth below, there have been no material changes to our risk factors during the three months ended SeptemberJune 30, 20172021 compared to those risk factors presented in Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2016.2020.
RISKS RELATED TO THE MERGER
The exchange ratio is fixed and the value of Kite common shares that our stockholders will receive in the Merger will fluctuate based on the market price of Kite common shares.
At the Effective Time, each outstanding share of our Class A common stock (other than shares held by Kite or any Kite subsidiary) will be converted into the right to receive 0.623 common shares of Kite, plus the right, if any, to receive cash in lieu of fractional Kite common shares into which such shares of our Class A common stock would have been converted pursuant to the terms and subject to the conditions set forth in the Merger Agreement.
Because the exchange ratio of 0.623 is fixed, other than customary adjustments in the event of certain changes in Kite’s or our capitalization or the payment of certain dividends by Kite or us reasonably necessary to maintain its REIT qualification and/or to avoid the imposition of U.S. federal income or excise tax, the value of the consideration to be received by our stockholders in the Merger will depend on the market price of Kite common shares at the time of the Merger. Changes in the market price of common shares of Kite prior to the Merger will affect the market value of the merger consideration that our stockholders will be entitled to receive on the closing date of the Merger. Market price changes may result from a variety of factors (many of which are beyond the control of us and Kite), including the following factors:
•market reaction to the announcement of the Merger and the prospects of the combined company;
•changes in the respective businesses, operations, assets, liabilities and prospects of us and Kite;
•changes in market assessments of the business, operations, financial position and prospects of either company;
•market assessments of the likelihood that the Merger will be completed;
•interest rates, general market and economic conditions and other factors generally affecting the market prices of our Class A common stock and the common shares of Kite;
•federal, state and local legislation, governmental regulation and legal developments in the businesses in which we and Kite operate; and
•other factors beyond the control of us and Kite, including those described or referred to elsewhere in this “Risk Factors” section.
The market price of common shares of Kite at the closing of the Merger may vary from its price on the date the Merger Agreement was executed, on the date of the proxy statement/prospectus and on the dates of our special meeting and Kite’s special meeting. As a result, the market value of the merger consideration represented by the exchange ratio will also vary. For example, based on the range of closing prices of Kite common shares during the period from July 16, 2021, the last trading day before public announcement of the Merger, through August 3, 2021, the exchange ratio of 0.623 represented a market value per share of our Class A common stock ranging from a low of $11.68 to a high of $12.98.
Because the Merger will be completed after the date of our and Kite’s special meetings, at the time of the special meetings you will not know the exact market value of the Kite common shares that you will receive upon completion of the Merger. You should consider, among other things:
•if the market price of the Kite common shares increases between the date the Merger Agreement was signed, the date of the proxy statement/prospectus or the date of our special meeting and the closing of the Merger, our stockholders will receive Kite common shares that have a market value upon completion of the Merger that is greater than the market value of such shares calculated pursuant to the exchange ratio on the date the Merger Agreement was signed, the date of the proxy statement/prospectus or the dates of the special meetings, respectively; and
•if the market price of the Kite common shares declines between the date the Merger Agreement was signed, the date of the proxy statement/prospectus or on the dates of the special meetings and the closing of the Merger, our stockholders will receive Kite common shares that have a market value upon completion of the Merger that is less than the market value of such shares calculated pursuant to the exchange ratio on the date the Merger Agreement was signed, the date of the proxy statement/prospectus or on the dates of the special meetings, respectively.
Therefore, while the number of common shares of Kite to be issued per share of our Class A common stock is fixed, our stockholders cannot be sure of the market value of the merger consideration they will receive upon completion of the Merger.
The proposed Merger with Kite may not be completed on the terms or timeline contemplated, or at all, and other events may intervene to delay or result in the termination of the proposed Merger.
We expect that the Merger will be completed in the fourth quarter of 2021, assuming all the conditions to closing in the Merger Agreement are satisfied or waived. Certain events may delay the completion of the Merger or result in a termination of the Merger Agreement. Some of these events are outside of our control. The completion of the Merger is subject to certain conditions, including:
•receipt of requisite approvals from Kite’s common shareholders and our stockholders;
•on the SEC having declared effective the registration statement on Form S-4 that will be filed by Kite in connection with the Merger and the absence of any stop order or proceedings seeking a stop order;
•the absence of any temporary restraining order, preliminary or permanent injunction or other judgement, order or decree issued by any governmental authority of competent jurisdiction prohibiting consummation of the Merger or any other transaction contemplated by the Merger Agreement, and the absence of any law enacted, entered, promulgated or enforced by any governmental entity after the date of the Merger Agreement that, in any case, makes illegal the consummation of the Merger;
•the approval for listing on the New York Stock Exchange of the common shares of Kite to be issued in connection with the Merger, subject to official notice of issuance;
•the absence of a material adverse effect on either the Company or Kite;
•accuracy of each party’s representations and warranties in the Merger Agreement, subject in most cases to materiality or material adverse effect qualifications, and performance in all material respects of each party’s covenants and agreements in the Merger Agreement;
•the receipt of tax opinions relating to the status as a real estate investment trust of each company and the tax-free nature of the transaction; and
•other customary conditions specified in the Merger Agreement.
In addition, the Merger Agreement may be terminated under certain circumstances, including by either the Company or Kite if (1) the Merger has not been consummated on or before March 31, 2022; (2) a governmental authority of competent jurisdiction shall have issued an order or taken any other action permanently restraining or otherwise prohibiting the Merger, and such order or other action shall have become final and non-appealable; (3) upon a failure of either party to obtain approval of its shareholders or stockholders; (4) upon a material, uncured breach by the other party that would cause the closing conditions not to be satisfied, subject to a 45-day cure period; (5) if the other party’s board makes an adverse recommendation change with respect to the transaction; or (6) prior to obtaining approval of its shareholders or stockholders, and upon payment of the
applicable termination fee, in order to enter into a definitive agreement with a third party with respect to a superior acquisition proposal.
There can be no assurance that the conditions to closing will be satisfied or waived on the terms or timeline currently contemplated, or at all or that other events will not intervene to delay or result in the termination of the proposed Merger.
Failure to complete the Merger could negatively affect the value of our Class A common stock and our future business and financial results.
If the Merger is not completed, our ongoing business could be adversely affected and we will be subject to a variety of risks associated with the failure to complete the Merger, including the following:
•the requirement in the Merger Agreement that, under certain circumstances, we pay Kite a termination fee of $107 million and may also be required, under certain circumstances, to pay Kite an expense reimbursement of up to $15 million, with the actual amount of such termination fee and expense reimbursement payment subject to an escrow and adjustment mechanism for REIT compliance purposes to provide for a lesser amount if necessary to be paid to Kite without causing Kite to fail to meet its REIT requirements for such year;
•having to pay substantial costs relating to the Merger in connection with the proposed Merger, such as legal, accounting, financial advisor, filing, printing and mailing fees and integration costs that have already been incurred or will continue to be incurred until the closing of the Merger;
•having our management focusing on the Merger instead of pursuing other opportunities that could be beneficial to the companies, in each case, without realizing any benefits of having the Merger completed; and
•reputational harm due to the adverse perception of any failure to successfully complete the Merger.
If the Merger is not completed, we cannot assure our stockholders that these risks will not materialize and will not materially affect our business, financial results and stock price.
The pendency of the Merger could adversely affect our business and operations.
In connection with the pending Merger, some of our tenants, prospective tenants or vendors may delay or defer decisions, which could adversely affect our revenues, earnings, funds from operations, cash flows and expenses, regardless of whether the Merger is completed. Similarly, our current and prospective employees may experience uncertainty about their future roles with the combined company following the Merger, which may materially adversely affect our ability to attract and retain key personnel during the pendency of the Merger. In addition, due to interim operating covenants in the Merger Agreement, we may be unable (without Kite’s prior written consent), during the pendency of the Merger, to pursue strategic transactions, undertake significant capital projects, undertake certain significant financing transactions and otherwise pursue other actions, even if such actions would prove beneficial.
Shareholder litigation could prevent or delay the closing of the Merger or otherwise negatively affect our business and operations.
Securities class action lawsuits and derivative lawsuits are often brought against companies that have entered into merger agreements. We cannot assure you as to the outcome of any lawsuit that may be filed, including the amount of costs associated with defending claims or any other liabilities that may be incurred in connection with such litigation. If plaintiffs are successful in obtaining an injunction prohibiting the parties from completing the Merger on the agreed-upon terms, such an injunction may delay the consummation of the Merger in the expected timeframe or may prevent the Merger from being consummated altogether. Whether or not any plaintiff’s claim is successful, this type of litigation may result in significant costs and divert management’s attention and resources, which could adversely affect the operation of our business.
The Merger Agreement contains provisions that could make it difficult for a third party to acquire us prior to the Merger.
The Merger Agreement provides that, until the Effective Time, subject to customary exceptions, each of the Company and Kite are subject to certain restrictions on (1) soliciting proposals relating to certain alternative transactions, (2) entering into discussions or negotiating or providing non-public information in connection with any proposal for an alternative transaction from a third party, (3) approving or entering into any agreements providing for any such alternative transaction, or (4) agreeing to or proposing publicly to do any of the foregoing. Notwithstanding these “no-shop” restrictions, prior to obtaining the
approval of Company stockholders and the approval of Kite shareholders, under specified circumstances the board of directors of the Company and the board of trustees of Kite, respectively, may change their recommendations of the transaction, and the Company and Kite may each also terminate the Merger Agreement to accept a superior proposal upon payment of the termination fees described below.
If the Merger Agreement is terminated because (1) the Company’s board changes its recommendation in favor of the transactions contemplated by the Merger Agreement, (2) the Company terminates the Merger Agreement to enter into a definitive agreement with a third party with respect to a superior acquisition proposal, or (3) the Company consummates or enters into an agreement for an alternative transaction within 12 months following termination under certain circumstances, the termination fee payable by the Company to Kite in such circumstances is $107 million. The Merger Agreement also provides that the Company must pay Kite an expense reimbursement of up to $15 million if the Merger Agreement is terminated for breach or because such its stockholders vote against the transactions contemplated by the Merger Agreement. The actual amount of the termination fee and expense reimbursement payment is subject to an escrow and adjustment mechanism for REIT compliance purposes to provide for a lesser amount if necessary to be paid to Kite without causing Kite to fail to meet its REIT requirements for such year.
These provisions could discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of us from considering or proposing such an acquisition, even if the potential acquirer were prepared to pay consideration with a higher per share cash or market value than that market value proposed to be received or realized in the Merger, or might result in a potential competing acquirer proposing to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances under the Merger Agreement.
RISKS RELATED TO THE COMBINED COMPANY FOLLOWING THE MERGER
The combined company may incur substantial expenses related to the Merger.
The combined company may incur substantial expenses in connection with completing the Merger and integrating our business, operations, networks, systems, technologies, policies and procedures with those of Kite. There are several systems that must be integrated, including accounting and finance and asset management. While Kite has assumed that a certain level of transaction and integration expenses would be incurred, there are a number of factors beyond its control that could affect the total amount or the timing of the combined company’s integration expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. As a result, the transaction and integration expenses associated with the Merger could, particularly in the near term, exceed the savings that the combined company expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings related to the integration of the businesses following the completion of the Merger.
Following the Merger, the combined company may be unable to integrate our business and Kite’s business successfully and realize the anticipated synergies and other benefits of the Merger or do so within the anticipated time frame.
The Merger involves the combination of two companies that currently operate as independent public companies. The combined company will be required to devote significant management attention and resources to integrating the business practices and operations of us and Kite. Potential difficulties the combined company may encounter in the integration process include the following:
•the inability to successfully combine the businesses of us and Kite in a manner that permits the combined company to achieve the cost savings anticipated to result from the Merger, which would result in the anticipated benefits of the Merger not being realized in the timeframe currently anticipated or at all;
•the risk of not realizing all of the anticipated operational efficiencies or other anticipated strategic and financial benefits of the Merger within the expected timeframe or at all;
•lost sales and tenants as a result of certain tenants of us or Kite deciding not to continue to do business with the combined company;
•the complexities associated with integrating personnel from the two companies;
•the additional complexities of combining two companies with different histories, cultures, regulatory restrictions, strategies, markets and tenant bases;
•the failure to retain key employees, including potential departures of employees of either company before the Merger or of the combined company after the Merger because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the combined company following the Merger;
•potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the Merger; and
•performance shortfalls at one or both of the two companies as a result of the diversion of management’s attention caused by completing the Merger and integrating the companies’ operations.
For all these reasons, you should be aware that it is possible that the integration process could result in the distraction of the combined company’s management, the disruption of the combined company’s ongoing business or inconsistencies in the combined company’s operations, services, standards, controls, procedures and policies, any of which could adversely affect the ability of the combined company to maintain relationships with tenants, vendors and employees or to achieve the anticipated benefits of the Merger, or could otherwise adversely affect the business and financial results of the combined company.
The market price of the combined company’s common stock after the Merger may be volatile or may decline as a result of the Merger.
The United States stock markets, including the New York Stock Exchange on which the combined company’s common shares will continue to be listed under the symbol “KRG” after the Merger, have experienced significant price and volume fluctuations. As a result, the market price of the combined company’s common shares is likely to be similarly volatile, and investors in the combined company’s common shares may experience a decrease in the value of their shares, including decreases unrelated to the combined company’s operating performance or prospects. We cannot assure you that the market price of the combined company’s common shares will not fluctuate or decline significantly in the future. For example, the market price of the combined company’s common shares may decline as a result of the Merger if the combined company does not achieve the perceived benefits of the Merger or the effect of the Merger on the combined company’s financial results is not consistent with the expectations of financial or industry analysts.
In addition, upon consummation of the Merger, our stockholders will own interests in a combined company, which will operate an expanded business with a different mix of properties, risks and liabilities. Our current stockholders may not wish to continue to invest in the combined company, or for other reasons may wish to dispose of some or all of their shares of the combined company. If, following the Effective Time of the Merger, significant amounts of the combined company’s common shares are sold, the price of the combined company’s common shares could decline.
The combined company may incur adverse tax consequences if either us or Kite has failed or fails to qualify as a REIT for U.S. federal income tax purposes.
Each of the Company and Kite has operated in a manner that it believes has allowed it to qualify as a REIT for U.S. federal income tax purposes under the Code and intends to continue to do so through the time of the Merger. Each of the Company and Kite intend for the combined company to continue operating in such a manner following the Merger. The closing of the Merger is conditioned on the receipt by us of an opinion of Kite’s counsel to the effect that Kite has been organized and operated in conformity with the requirements for qualification and taxation as a REIT under the Code, and Kite’s actual and proposed method of operation has enabled it and will continue to enable it to satisfy the requirements for qualification and taxation as a REIT. The foregoing REIT opinion, however, is limited to the factual representations provided by Kite to its counsel and the assumptions set forth therein, and is not a guarantee that Kite, in fact, has qualified or will continue to qualify as a REIT. Moreover, Kite has not requested nor plans to request a ruling from the IRS that it qualifies as a REIT. Qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations. The complexity of these provisions and of the applicable Treasury Regulations is greater in the case of a REIT, like Kite, that holds assets through a partnership. The determination of various factual matters and circumstances not entirely within Kite’s control may affect its ability to qualify as a REIT.
If the Company or Kite (or, following the Merger, the combined company) loses its REIT status, or is determined to have lost its REIT status in a prior year, it will face serious tax consequences that would substantially reduce its cash available for distribution, including cash available to pay dividends to its stockholders, because:
•it would be subject to U.S. federal income tax on its net income at regular corporate rates for the years it did not qualify for taxation as a REIT (and, for such years, would not be allowed a deduction for dividends paid to stockholders in computing its taxable income);
•it could be subject to increased state and local taxes for such periods;
•unless it is entitled to relief under applicable statutory provisions, neither it nor any “successor” company could elect to be taxed as a REIT until the fifth taxable year following the year during which it was disqualified; and
•for five years following re-election of REIT status, upon a taxable disposition of an asset owned as of such re-election, it could be subject to corporate level tax with respect to any built-in gain inherent in such asset at the time of re-election.
As a result of all these factors, the Company’s or Kite’s (or following the Merger, the combined company’s) failure to qualify as a REIT could impair the combined company’s ability to expand its business and raise capital and would materially adversely affect the value of its stock.
If the Merger does not qualify as a tax-free reorganization, there may be adverse tax consequences.
The Merger is intended to qualify as a tax-free reorganization within the meaning of Section 368(a) of the Code. The closing of the Merger is conditioned on the receipt by each of Kite and us of an opinion of its respective counsel to the effect that the Merger will qualify as a tax-free reorganization within the meaning of Section 368(a) of the Code. The foregoing opinions, however, are limited to the factual representations provided by Kite and us to counsel and the assumptions set forth therein, and are not a guarantee that the Merger, in fact, will qualify as a tax-free reorganization. Moreover, neither we nor Kite has requested or plans to request a ruling from the IRS that the Merger qualifies as a tax-free reorganization. If the Merger were to fail to qualify as a tax-free reorganization, then each of our stockholders generally would recognize gain or loss, as applicable, equal to the difference between (i) the sum of the fair market value of the common shares of Kite and cash in lieu of any fractional common share of Kite received by our stockholders in the Merger; and (ii) our stockholders’ adjusted tax basis in our common stock.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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(c) | Issuer Purchases of Equity Securities |
The following table summarizes our(a)Not applicable.
(b)Not applicable.
(c)Issuer Purchases of Equity Securities
From time to time, employees surrender shares of Class A common stock repurchases during the quarter ended September 30, 2017, including, where applicable, shares of common stock surrendered to the Company by employees to satisfy their tax withholding obligations in connection with the vesting of common stock and restricted shares. There were no shares and amounts outstandingof Class A common stock surrendered or repurchased during the three months ended June 30, 2021.
As of June 30, 2021, $189,105 remained available for repurchases under our $500,000 common stock repurchase program, which has no scheduled expiration date. Subsequent to June 30, 2021, our common stock repurchase program.program was suspended in connection with the proposed Merger and the applicable restrictions set forth in the Merger Agreement.
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| | | | | | | | | | | | | | |
Period | | Total number of shares of Class A common stock purchased | | Average price paid per share of Class A common stock | | Total number of shares purchased as part of publicly announced plans or programs | | Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs (a) |
July 1, 2017 to July 31, 2017 | | — |
| | $ | — |
| | — |
| | $ | 165,462 |
|
August 1, 2017 to August 31, 2017 | | 1,466 |
| | $ | 13.15 |
| | 1,462 |
| | $ | 146,207 |
|
September 1, 2017 to September 30, 2017 (b) | | 2,343 |
| | $ | 13.06 |
| | 2,343 |
| | $ | 115,570 |
|
Total | | 3,809 |
| | $ | 13.09 |
| | 3,805 |
| | $ | 115,570 |
|
| |
(a) | As disclosed on the Form 8-K dated December 15, 2015, represents the amount outstanding under our $250,000 common stock repurchase program, which has no scheduled expiration date. |
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(b) | Includes 396 shares repurchased in September 2017 at an average price per share of $13.08 for a total of $5,187, which settled on October 2, 2017. |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
| | | | | | | | |
Exhibit No. | | Description |
| | |
2.1 | | | | Description2.1 to the Registrant’s Current Report on Form 8-K dated July 19, 2021 and incorporated herein by reference). |
3.1 | | |
31.110.1 | | Sixth Amended and Restated Credit Agreement, dated as of July 8, 2021, by and among the Registrant as Borrower and KeyBank National Association as Administrative Agent, Wells Fargo Securities, LLC and KeyBanc Capital Markets Inc. as Joint Book Managers, Wells Fargo Bank, National Association as Syndication Agent, Capital One, National Association, PNC Capital Markets LLC, Regions Capital Markets, and TD Bank, N.A. as Joint Lead Arrangers, each of Capital One, National Association, PNC Bank, National Association, Regions Bank, TD Bank, N.A., U.S. Bank National Association, Bank of America, N.A., Citibank, N.A., and The Bank of Nova Scotia as Documentation Agents, and certain lenders from time to time parties hereto, as Lenders (filed herewith). |
10.2 | | |
10.3 | | |
10.4 | | |
10.5 | | |
31.1 | | |
32.131.2 | | |
32.1 | | |
101101.SCH | | AttachedInline XBRL Taxonomy Extension Schema Document (filed herewith). |
101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith). |
101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith). |
101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith). |
101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith). |
104 | | Cover Page Interactive Data File (formatted as Exhibit 101 to this report are the following formattedinline XBRL with applicable taxonomy extension information contained in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016, (ii) Condensed Consolidated Statements of Operations and Other Comprehensive (Loss) Income for the Three-Month Periods and Nine-Month Periods Ended September 30, 2017 and 2016, (iii) Condensed Consolidated Statements of Equity for the Nine-Month Periods Ended September 30, 2017 and 2016, (iv) Condensed Consolidated Statements of Cash Flows for the Nine-Month Periods Ended September 30, 2017 and 2016, and (v) Notes to Condensed Consolidated Financial Statements.Exhibits 101.*) (filed herewith). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
RETAIL PROPERTIES OF AMERICA, INC.
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| | | | |
By: | /s/ STEVEN P. GRIMES | |
| | |
| Steven P. Grimes | |
| President, Chief Executive Officer and Treasurer |
| (Principal Executive Officer and Interim Principal Financial Officer) |
Date: | November 1, 2017 | August 4, 2021 |
| | |
By: | /s/ JULIE M. SWINEHART | |
| | |
| Julie M. Swinehart | |
| SeniorExecutive Vice President, and Chief Accounting Officer |
| Chief Financial Officer and Treasurer |
| (Principal Financial Officer and |
| Principal Accounting Officer) | |
Date: | November 1, 2017 | August 4, 2021 |