UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



☒		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~June 30, 2020



☐		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)



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 and 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 every Interactive Data File required to be submitted 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 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.



Large accelerated filer	x	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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 ☐ No x

Number of shares outstanding of the registrant’s class of common stock as of ~~May 1,~~July 31, 2020:

Class A common stock: ~~214,121,973~~214,252,627 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)


	March 31, 2020			December 31, 2019			June 30, 2020			December 31, 2019
Assets
Investment properties:
Land	$	1,075,577		$	1,021,829		$	1,075,551		$	1,021,829
Building and other improvements	3,548,769			3,544,582			3,563,583			3,544,582
Developments in progress	126,761			113,353			146,502			113,353
	4,751,107			4,679,764			4,785,636			4,679,764
Less: accumulated depreciation	(1,416,981		)	(1,383,274		)	(1,449,947		)	(1,383,274		)
Net investment properties (includes $30,600 and $12,445 from consolidated variable interest entities, respectively)	3,334,126			3,296,490
Net investment properties (includes $41,589 and $12,445 from consolidated variable interest entities, respectively)							3,335,689			3,296,490
Cash and cash equivalents	769,241			9,989			12,563			9,989
Accounts and notes receivable, net	72,003			73,832			87,927			73,832
Acquired lease intangible assets, net	78,439			79,832			74,386			79,832
Right-of-use lease assets	44,157			50,241			43,696			50,241
Other assets, net (includes $344 and $164 from consolidated variable interest entities, respectively)	71,627			75,978			67,151			75,978
Total assets	$	4,369,593		$	3,586,362		$	3,621,412		$	3,586,362

Liabilities and Equity
Liabilities:
Mortgages payable, net	$	93,562		$	94,155		$	92,967		$	94,155
Unsecured notes payable, net	796,420			796,247			796,568			796,247
Unsecured term loans, net	716,792			716,523			716,992			716,523
Unsecured revolving line of credit	849,704			18,000			135,000			18,000
Accounts payable and accrued expenses	50,622			78,902			59,152			78,902
Distributions payable	35,464			35,387			—			35,387
Acquired lease intangible liabilities, net	67,573			63,578			65,248			63,578
Lease liabilities	85,340			91,129			85,602			91,129
Other liabilities (includes $3,233 and $1,707 from consolidated variable interest entities, respectively)	76,815			56,368
Other liabilities (includes $4,752 and $1,707 from consolidated variable interest entities, respectively)							75,798			56,368
Total liabilities	2,772,292			1,950,289			2,027,327			1,950,289

Commitments and contingencies (Note 13)

Equity:
Preferred stock, $0.001 par value, 10,000 shares authorized, none issued or outstanding	—			—			—			—
Class A common stock, $0.001 par value, 475,000 shares authorized, 214,122 and 213,600 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively	214			214
Class A common stock, $0.001 par value, 475,000 shares authorized, 214,253 and 213,600 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively							214			214
Additional paid-in capital	4,512,939			4,510,484			4,515,716			4,510,484
Accumulated distributions in excess of earnings	(2,879,040		)	(2,865,933		)	(2,886,387		)	(2,865,933		)
Accumulated other comprehensive loss	(39,870		)	(12,288		)	(39,176		)	(12,288		)
Total shareholders’ equity	1,594,243			1,632,477			1,590,367			1,632,477
Noncontrolling interests	3,058			3,596			3,718			3,596
Total equity	1,597,301			1,636,073			1,594,085			1,636,073
Total liabilities and equity	$	4,369,593		$	3,586,362		$	3,621,412		$	3,586,362

See accompanying notes to condensed consolidated financial statements

RETAIL PROPERTIES OF AMERICA, INC.

Condensed Consolidated Statements of Operations and Other Comprehensive ~~Loss~~Income (Loss)

(Unaudited)

(in thousands, except per share amounts)


	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019			2020			2019
Revenues:
Lease income	$	118,695		$	122,703		$	96,803		$	118,449		$	215,498		$	241,152

Expenses:
Operating expenses	16,414			17,686			14,843			17,129			31,257			34,815
Real estate taxes	18,533			18,403			17,916			18,534			36,449			36,937
Depreciation and amortization	40,173			43,267			43,755			42,882			83,928			86,149
Provision for impairment of investment properties	346			—			—			—			346			—
General and administrative expenses	9,165			10,499			8,491			9,353			17,656			19,852
Total expenses	84,631			89,855			85,005			87,898			169,636			177,753

Other (expense) income:
Interest expense	(17,046		)	(17,430		)	(19,360		)	(17,363		)	(36,406		)	(34,793		)
Gain on sales of investment properties	—			8,449			—			8,454			—			16,903
Gain on litigation settlement	6,100			—			—			—			6,100			—
Other expense, net	(761		)	(659		)
Net income	22,357			23,208
Other income (expense), net							215			(472		)	(546		)	(1,131		)
Net (loss) income							(7,347		)	21,170			15,010			44,378
Net income attributable to noncontrolling interests	—			—			—			—			—			—
Net income attributable to common shareholders	$	22,357		$	23,208
Net (loss) income attributable to common shareholders							$	(7,347	)	$	21,170		$	15,010		$	44,378

Earnings per common share – basic and diluted:
Net income per common share attributable to common shareholders	$	0.10		$	0.11
(Loss) earnings per common share – basic and diluted:
Net (loss) income per common share attributable to common shareholders							$	(0.04	)	$	0.10		$	0.07		$	0.21

Net income	$	22,357		$	23,208
Other comprehensive loss:
Net unrealized loss on derivative instruments (Note 8)	(27,582		)	(3,514		)
Net (loss) income							$	(7,347	)	$	21,170		$	15,010		$	44,378
Other comprehensive income (loss):
Net unrealized gain (loss) on derivative instruments (Note 8)							694			(6,307		)	(26,888		)	(9,821		)
Comprehensive (loss) income attributable to the Company	$	(5,225	)	$	19,694		$	(6,653	)	$	14,863		$	(11,878	)	$	34,557

Weighted average number of common shares outstanding – basic	213,215			212,850			213,337			212,951			213,276			212,900

Weighted average number of common shares outstanding – diluted	213,215			213,223			213,337			213,090			213,276			213,156

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)


	Class A Common Stock				Additional Paid-in Capital			Accumulated Distributions in Excess of Earnings			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity			Noncontrolling Interests			Total Equity			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					Additional Paid-in Capital			Accumulated Distributions in Excess of Earnings			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity			Noncontrolling Interests			Total Equity			Shares		Amount		Additional Paid-in Capital			Accumulated Distributions in Excess of Earnings			Accumulated Other Comprehensive (Loss) Income			Total Shareholders’ Equity			Noncontrolling Interests			Total Equity
Balance as of April 1, 2019																							213,585		$	214	$	4,505,631		$	(2,768,965	)	$	(5,036	)	$	1,731,844		$	776		$	1,732,620
Net income																							—		—		—			21,170			—			21,170			—			21,170
Other comprehensive loss																							—		—		—			—			(6,307		)	(6,307		)	—			(6,307		)
Contributions from noncontrolling interests																							—		—		—			—			—			—			669			669
Distributions declared to common shareholders ($0.165625 per share)																							—		—		—			(35,388		)	—			(35,388		)	—			(35,388		)
Issuance of restricted shares																							77		—		—			—			—			—			—			—
Stock-based compensation expense																							—		—		1,857			—			—			1,857			—			1,857
Balance as of June 30, 2019																							213,662		$	214	$	4,507,488		$	(2,783,183	)	$	(11,343	)	$	1,713,176		$	1,445		$	1,714,621
Three Months Ended
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
	Shares		Amount		Additional Paid-in Capital			Accumulated Distributions in Excess of Earnings			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity			Noncontrolling Interests			Total Equity
Six Months Ended					Additional Paid-in Capital			Accumulated Distributions in Excess of Earnings			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity			Noncontrolling Interests			Total Equity
Balance as of January 1, 2019	213,176		$	213	$	4,504,702		$	(2,756,802	)	$	(1,522	)	$	1,746,591		$	418		$	1,747,009		213,176		$	213	$	4,504,702		$	(2,756,802	)	$	(1,522	)	$	1,746,591		$	418		$	1,747,009
Net income	—		—		—			23,208			—			23,208			—			23,208			—		—		—			44,378			—			44,378			—			44,378
Other comprehensive loss	—		—		—			—			(3,514		)	(3,514		)	—			(3,514		)	—		—		—			—			(9,821		)	(9,821		)	—			(9,821		)
Contributions from noncontrolling interests	—		—		—			—			—			—			358			358			—		—		—			—			—			—			1,027			1,027
Distributions declared to common shareholders ($0.165625 per share)	—		—		—			(35,371		)	—			(35,371		)	—			(35,371		)
Distributions declared to common shareholders ($0.33125 per share)																							—		—		—			(70,759		)	—			(70,759		)	—			(70,759		)
Issuance of common stock	111		—		—			—			—			—			—			—			111		—		—			—			—			—			—			—
Issuance of restricted shares	392		1		—			—			—			1			—			1			469		1		—			—			—			1			—			1
Stock-based compensation expense, net of forfeitures	(9	)	—		1,966			—			—			1,966			—			1,966			(9	)	—		3,823			—			—			3,823			—			3,823
Shares withheld for employee taxes	(85	)	—		(1,037		)	—			—			(1,037		)	—			(1,037		)	(85	)	—		(1,037		)	—			—			(1,037		)	—			(1,037		)
Balance as of March 31, 2019	213,585		$	214	$	4,505,631		$	(2,768,965	)	$	(5,036	)	$	1,731,844		$	776		$	1,732,620

Balance as of June 30, 2019																							213,662		$	214	$	4,507,488		$	(2,783,183	)	$	(11,343	)	$	1,713,176		$	1,445		$	1,714,621
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		213,600		$	214	$	4,510,484		$	(2,865,933	)	$	(12,288	)	$	1,632,477		$	3,596		$	1,636,073
Net income	—		—		—			22,357			—			22,357			—			22,357			—		—		—			15,010			—			15,010			—			15,010
Other comprehensive loss	—		—		—			—			(27,582		)	(27,582		)	—			(27,582		)	—		—		—			—			(26,888		)	(26,888		)	—			(26,888		)
Contributions from noncontrolling interests	—		—		—			—			—			—			1,123			1,123			—		—		—			—			—			—			2,339			2,339
Termination of consolidated joint venture	—		—		1,661			—			—			1,661			(1,661		)	—
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		)	—		—		—			(35,464		)	—			(35,464		)	—			(35,464		)
Issuance of common stock	148		—		—			—			—			—			—			—			148		—		—			—			—			—			—			—
Issuance of restricted shares	493		—		—			—			—			—			—			—			624		—		—			—			—			—			—			—
Stock-based compensation expense	—		—		2,233			—			—			2,233			—			2,233			—		—		4,454			—			—			4,454			—			4,454
Shares withheld for employee taxes	(119	)	—		(1,439		)	—			—			(1,439		)	—			(1,439		)	(119	)	—		(1,439		)	—			—			(1,439		)	—			(1,439		)
Balance as of March 31, 2020	214,122		$	214	$	4,512,939		$	(2,879,040	)	$	(39,870	)	$	1,594,243		$	3,058		$	1,597,301
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

See accompanying notes to condensed consolidated financial statements

RETAIL PROPERTIES OF AMERICA, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)


	Three Months Ended March 31,						Six Months Ended June 30,
	2020			2019			2020			2019
Cash flows from operating activities:
Net income	$	22,357		$	23,208		$	15,010		$	44,378
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	40,173			43,267			83,928			86,149
Provision for impairment of investment properties	346			—			346			—
Gain on sales of investment properties	—			(8,449		)	—			(16,903		)
Amortization of loan fees and debt premium and discount, net	950			798			1,912			1,597
Amortization of stock-based compensation	2,233			1,966			4,454			3,823
Payment of leasing fees and inducements	(3,676		)	(2,739		)	(4,356		)	(5,120		)
Changes in accounts receivable, net	778			6,312
Reserve for bad debt							13,977			589
Changes in accounts receivable							(31,647		)	1,332
Changes in right-of-use lease assets	467			485			928			961
Changes in accounts payable and accrued expenses, net	(26,319		)	(25,058		)	(21,899		)	(16,999		)
Changes in lease liabilities	(230		)	(150		)	33			(309		)
Changes in other operating assets and liabilities, net	(2,652		)	398			2,696			4,234
Other, net	615			(3,083		)	(957		)	(4,546		)
Net cash provided by operating activities	35,042			36,955			64,425			99,186

Cash flows from investing activities:
Purchase of investment properties	(54,970		)	(25,204		)	(54,970		)	(26,576		)
Capital expenditures and tenant improvements	(14,165		)	(18,746		)	(30,778		)	(39,934		)
Proceeds from sales of investment properties	11,343			21,605			11,369			41,886
Investment in developments in progress	(12,715		)	(5,841		)	(32,499		)	(7,784		)
Net cash used in investing activities	(70,507		)	(28,186		)	(106,878		)	(32,408		)

Cash flows from financing activities:
Principal payments on mortgages payable	(619		)	(764		)	(1,242		)	(1,530		)
Proceeds from unsecured notes payable							—			100,000
Proceeds from unsecured revolving line of credit	937,704			94,000			937,704			143,000
Repayments of unsecured revolving line of credit	(106,000		)	(68,000		)	(820,704		)	(223,000		)
Payment of loan fees and deposits	—			(4		)	(151		)	(754		)
Distributions paid	(35,387		)	(35,383		)	(70,851		)	(70,758		)
Other, net	(316		)	(679		)	900			(10		)
Net cash provided by (used in) financing activities	795,382			(10,830		)	45,656			(53,052		)

Net increase (decrease) in cash, cash equivalents and restricted cash	759,917			(2,061		)
Net increase in cash, cash equivalents and restricted cash							3,203			13,726
Cash, cash equivalents and restricted cash, at beginning of period	14,447			19,601			14,447			19,601
Cash, cash equivalents and restricted cash, at end of period	$	774,364		$	17,540		$	17,650		$	33,327
(continued)	(continued)						(continued)

RETAIL PROPERTIES OF AMERICA, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)


	Three Months Ended March 31,						Six Months Ended June 30,
	2020			2019			2020			2019
Supplemental cash flow disclosure, including non-cash activities:
Cash paid for interest, net of interest capitalized	$	14,263		$	16,216		$	34,234		$	33,276
Cash paid for amounts included in the measurement of operating lease liabilities	$	1,446		$	1,679		$	2,505		$	3,052
Cash received for accounts receivable previously written off							$	54		$	112
Distributions payable	$	35,464		$	35,375		$	—		$	35,388
Accrued capital expenditures and tenant improvements	$	6,246		$	9,407		$	8,938		$	7,403
Accrued leasing fees and inducements	$	683		$	754		$	1,127		$	673
Accrued redevelopment costs	$	2,573		$	395		$	2,531		$	281
Amounts reclassified to developments in progress	$	305		$	—		$	305		$	13,570
Change in noncontrolling interest due to termination of joint venture	$	1,661		$	—
Change in noncontrolling interest due to termination of joint ventures							$	2,217		$	—
Lease liabilities arising from obtaining right-of-use lease assets	$	383		$	103,519		$	383		$	103,519
Straight-line ground rent liabilities reclassified to right-of-use lease asset	$	—		$	31,030		$	—		$	31,030
Straight-line office rent liability reclassified to right-of-use lease asset	$	—		$	507		$	—		$	507
Acquired ground lease intangible liability reclassified to right-of-use lease asset	$	—		$	11,898		$	—		$	11,898

Purchase of investment properties (after credits at closing):
Net investment properties	$	(58,760	)	$	(23,894	)	$	(58,760	)	$	(25,438	)
Right-of-use lease assets	5,999			—			5,999			—
Accounts receivable, acquired lease intangibles and other assets	(1,801		)	(1,694		)	(1,801		)	(1,525		)
Lease liabilities	(5,942		)	—			(5,942		)	—
Accounts payable, acquired lease intangibles and other liabilities	5,534			384			5,534			387
Purchase of investment properties (after credits at closing)	$	(54,970	)	$	(25,204	)	$	(54,970	)	$	(26,576	)

Proceeds from sales of investment properties:
Net investment properties	$	11,281		$	17,456		$	11,307		$	29,318
Right-of-use lease assets	—			8,242			—			8,242
Accounts receivable, acquired lease intangibles and other assets	167			1,417			167			1,591
Lease liabilities	—			(11,326		)	—			(11,326		)
Accounts payable, acquired lease intangibles and other liabilities	(105		)	(2,633		)	(105		)	(2,842		)
Gain on sales of investment properties	—			8,449			—			16,903
Proceeds from sales of investment properties	$	11,343		$	21,605		$	11,369		$	41,886

Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents, at beginning of period	$	9,989		$	14,722		$	9,989		$	14,722
Restricted cash, at beginning of period (included within “Other assets, net”)	4,458			4,879			4,458			4,879
Total cash, cash equivalents and restricted cash, at beginning of period	$	14,447		$	19,601		$	14,447		$	19,601

Cash and cash equivalents, at end of period	$	769,241		$	11,855		$	12,563		$	28,456
Restricted cash, at end of period (included within “Other assets, net”)	5,123			5,685			5,087			4,871
Total cash, cash equivalents and restricted cash, at end of period	$	774,364		$	17,540		$	17,650		$	33,327

See accompanying notes to condensed consolidated financial statements

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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, 2019, which are included in its 2019 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 ~~March 31,~~June 30, 2020, the Company owned 102 retail operating properties in the United States.

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 1 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 capitalization of development costs, provision for impairment, including estimates of holding periods, capitalization rates and discount rates (where applicable), and initial valuations and related amortization periods of deferred costs and intangibles, particularly with respect to property acquisitions and initial recognition of right-of-use lease assets and lease liabilities. Actual results could differ from these estimates.

In accordance with Accounting Standards Codification Topic 205, Presentation of Financial Statements, certain prior year balances have been reclassified in order to conform to the current period presentation. Specifically, for the six months ended June 30, 2019, the reserve for bad debt has been presented in a single line item, “Reserve for bad debt” rather than the previous presentation where it was included as a component of “Other, net” in the accompanying condensed consolidated statements of cash flows 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, 2019 as a result of this reclassification.

All share amounts and dollar 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, per square foot and per unit amounts.

The accompanying condensed consolidated financial statements include the accounts of the Company, as well as all wholly owned subsidiaries and consolidated variable interest entities (VIEs). All intercompany balances and transactions have been eliminated in consolidation. Wholly owned subsidiaries generally consist of limited liability companies, limited partnerships and statutory trusts.

In March 2020, the World Health Organization declared the outbreak of the novel coronavirus (COVID-19) a global pandemic. 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., and has contributed to significant volatility and negative pressure in the financial markets. The global impact of the COVID-19 ~~outbreak~~pandemic has been rapidly evolving and many U.S. states and cities, including where the Company owns properties and/or has development sites, ~~have~~ imposed measures during the first half of the year intended to control its spread, such as instituting “shelter-in-place” rules, limitations on public gatherings and restrictions on ~~the types of businesses that may continue to operate~~certain business operations and/or the types of construction projects that may continue. ~~While~~As a result of the pandemic and the measures noted above to mitigate its impact, a number of the Company’s tenants were required to temporarily close their stores or modify their operations and, as a result,

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

requested lease concessions. Certain other tenants, many of which are considered essential businesses, remain open and continue to operate during this time.

The Company ~~did not incur significant disruptions to its lease income and occupancy~~only closed a small, enclosed portion of one property for a period of time during the ~~three~~six months ended ~~March 31,~~June 30, 2020. As of June 30, 2020, ~~from COVID-19,~~all of the Company’s properties were open for the benefit of the communities and customers that the Company’s tenants serve and approximately 90% of the Company’s tenants, based on gross leasable area, were open as of June 30, 2020. While many U.S. states and cities have eased or lifted such restrictions, some have subsequently reinstated restrictions and others may do so in the future.

The Company continues to closely monitor the impact of the pandemic on all aspects of its business. Due to numerous uncertainties, it is not possible to accurately predict the ultimate impact the pandemic will have on the Company’s financial condition, results of operations and cash flows. ~~To date,~~

During the three months ended June 30, 2020, the Company agreed in principle, and, in certain circumstances, executed agreements, with tenants regarding lease concessions. See a discussion regarding lease concessions signed and agreed in principle as a result of the COVID-19 pandemic and related accounting treatment in Note 2 and Note 6 to the measures noted above to mitigate its impact, a number of the Company’s tenants have announced temporary closures of their stores or modifications of their operations and requested lease concessions. Generally, the Company has not yet reached agreement with tenants regarding concession requests, as discussions are ongoing. Certain other tenants are considered essential businesses which remain open and continue to operate during this time. Except for a small, enclosed portion of one property, the Company has not closed any of its properties and continues to operate them for the benefit of the communities and customers that the Company’s tenants serve.

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~~RETAIL PROPERTIES OF AMERICA, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

condensed consolidated financial statements.

The Company’s property ownership as of ~~March 31,~~June 30, 2020 is summarized below:



	Property Count
Retail operating properties	102
Expansion and redevelopment projects:
Circle East	1
One Loudoun Downtown – Pads G & H (a)	—
Carillon	1
The Shoppes at Quarterfield	1
Total number of properties	105


(a)	The operating portion of this property is included within the property count for retail operating properties.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Refer to the Company’s 2019 Annual Report on Form 10-K for a summary of its significant accounting policies. Except as disclosed below, there have been no changes to the Company’s significant accounting policies in the ~~three~~six months ended ~~March 31,~~June 30, 2020.

Lease Income and Accounts Receivable

The Company commences recognition of lease income on its leases based on a number of factors. In most cases, revenue recognition under a lease begins when the lessee takes possession or controls the physical use of the leased asset. Generally, this occurs on the lease commencement date. At lease commencement, the Company expects that collectibility is probable for all leases due to the creditworthiness analysis performed before entering into a new lease. Lease income, for leases that have fixed and measurable rent escalations, is recognized on a straight-line basis over the term of each lease. The difference between such lease income earned and the cash rent due under the provisions of a lease is recorded as deferred rent receivable and is included as a component of “Accounts and notes receivable, net” in the accompanying condensed consolidated balance sheets.

Throughout the lease term, individual leases are assessed for collectibility and upon the determination that the collection of rents over the remaining lease life is not probable, lease income is adjusted such that it is recognized on the cash basis of accounting. The Company will remove the cash basis designation and resume recording lease income from such tenants during the period earned at such time it believes that the collection of rent over the remaining lease term is probable and, generally, based upon a demonstrated payment history.

As a result of ongoing discussions with tenants regarding lease concession requests as a result of the COVID-19 pandemic, the Company reserves for lease concessions that have been agreed in principle with the tenant for which a reduction in lease income is anticipated under the accounting for lease concessions once executed. In addition, a general portfolio reserve is established based

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

upon an analysis of balances outstanding, historical bad debt levels and current economic trends. An allowance for the uncollectible portion of uncollected receivables is recorded as an adjustment to lease income.

The Company reviews current economic considerations each reporting period, including the effects of tenant bankruptcies. Additionally, with the uncertainties regarding COVID-19 as well as ongoing discussions with tenants regarding lease concession requests, the Company’s assessment also takes into consideration items such as tenant type, local restrictions regarding tenant operations, the current status of lease concession requests, as well as recent rent collection experience. Evaluating and estimating uncollectible lease payments and related receivables requires a significant amount of judgment by management and is based on the best information available to the Company at the time of evaluation.

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses. This new guidance was effective January 1, 2020 and replaced the incurred loss impairment methodology with a methodology that reflects expected credit losses. Financial assets that are measured at amortized cost are 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 forecasted information. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, which clarifies that receivables arising from operating leases are not within the scope of this new guidance. Generally, the pronouncement requires a modified retrospective method of adoption. The adoption of this pronouncement on January 1, 2020 did not have any effect on the Company’s consolidated financial statements as it did not have any financial assets within the scope of this guidance.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement. This new guidance was effective January 1, 2020 and provides new and, in some cases, eliminates or modifies the previously existing disclosure requirements on fair value measurements. Public entities are now required to disclose the following: (i) the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and (ii) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. In addition, public entities are no longer required to disclose the following: (i) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, (ii) the policy for timing of transfers between levels and (iii) the valuation processes for Level 3 fair value measurements. The new pronouncement also clarifies and modifies certain existing provisions to promote the appropriate exercise of discretion by entities when considering fair value measurement disclosures and clarifies that materiality is an appropriate consideration when evaluating disclosure requirements. As permitted by the new pronouncement, the Company removed the discussion of its valuation processes for Level 3 fair value measurements. The Company did not remove any other disclosures as it did not have any transfers between levels of the fair value hierarchy during the current and comparative periods. The adoption of this pronouncement on January 1, 2020 did not have any effect on the Company’s consolidated financial statements. The amended disclosure guidance will be applied prospectively.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform. This temporary guidance is effective as of March 12, 2020 through December 31, 2022 to ease potential burdens related to the accounting for, or recognizing the effects of, reference rate reform on financial reporting. The guidance provides optional expedients for applying existing GAAP to contract modifications and hedging relationships affected by the move of global capital markets away from interbank offered rates, most notably the London Interbank Offered Rate (LIBOR). Specifically, the guidance allows for certain changes in critical terms of a designated hedging instrument or hedged item as a result of reference rate reform to not result in the dedesignation of the hedging relationship. In addition, the optional expedients related to probability and effectiveness assessments allow companies to disregard certain economic mismatches in a hedging relationship arising due to reference rate reform until both the derivative and hedged transactions have completed the transition, where current GAAP requires those mismatches to be modeled into the assessment of effectiveness.

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~~RETAIL PROPERTIES OF AMERICA, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

The Company adopted this guidance as of the effective date and elected to apply the optional expedients related to probability and effectiveness prospectively. The Company has not modified any hedging relationship and has disregarded the potential economic mismatches in hedging relationships due to reference rate reform during the ~~three~~six months ended ~~March 31,~~June 30, 2020.

Recently Issued Accounting Pronouncements

In April 2020, the FASB staff issued a question-and-answer (Q&A) document focusing on the application of the lease guidance in ASC 842, Leases, for lease concessions ~~related to the effects~~provided as a result of the COVID-19 pandemic. ~~The FASB staff noted that due~~Prior to the ~~business disruptions and challenges caused by the COVID-19 pandemic, many lessors are, or will be, providing lease concessions such as payment forgiveness and deferral of payments. Changes~~Q&A, changes to lease

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

payments that are not stipulated in the original lease contract are generally accounted for as lease modifications under ASC 842. Within the Q&A, the FASB staff provides relief for lease concessions offered as a result of the effects of the COVID-19 pandemic and does not require these concessions to be accounted for in accordance with the lease modification guidance in ASC 842.

Under existing lease guidance, ~~the Company would determine,~~a company determines, on a ~~lease by lease~~lease-by-lease basis, if a lease concession ~~was~~is the result of a new arrangement with the tenant or if it ~~was~~is under the enforceable rights and obligations within the lease agreement. Under the relief guidance, a company can account for ~~the~~certain concessions (i) as if no changes to the existing lease contract were made or (ii) as a negative variable lease adjustment to lease income. This optionality is offered in circumstances when the total future payments required by the modified contract are substantially the same as the total payments required by the existing contract. Also, under the relief guidance, a company can account for certain other concessions only as a variable lease adjustment. ~~The Q&A allows~~This singular relief option is offered in circumstances including when the ~~Company, if certain criteria have been met,~~total future payments required by the modified contract are less than the total payments required by the existing contract (i.e., abatement) or when the total payments required are the same, but extend over a longer period of time as compared to ~~bypass~~ the ~~lease by lease analysis and instead elect~~existing contract.

Application of the relief guidance is optional, however it is required to ~~either apply the lease modification accounting framework or not, with such election~~be applied consistently to leases with similar characteristics and similar circumstances. ~~This election is optional and available for~~The Company has elected to apply the relief guidance where lease concessions ~~related~~are (i) granted as relief due to ~~the effects of~~ the COVID-19 pandemic ~~that~~and (ii) result in the ~~total payments required by the modified contract being~~cash flows remaining to be substantially the same as or less than the ~~total payments required by the~~ existing contract. ~~The Company expects to apply the lease modification relief, however, the Q&A has not had a material impact~~

Based on the ~~Company’s condensed consolidated financial statements~~policy elections made under the relief guidance as ~~of and~~well as modifications that do not qualify for the ~~three months ended March 31, 2020 as~~relief guidance, the Company has ~~not yet reached agreement with tenants regarding any concession requests, as discussions are ongoing. The future impact is dependent upon the extent of~~accounted for lease concessions ~~granted~~as follows:



Lease Concession		Accounting Treatment of Concession

(i) Deferral of payment to a future period, with no change in lease term.		Treated as if there are no changes to the existing lease contract; no change to lease income recognized, including straight-line rental income.

(ii) Deferral of payment to a future period, with a modest extension of lease term (iii) Abatement (iv) Combination of abatement and deferral		Treated as a variable lease adjustment; reduction in lease income for the abated and deferred amounts; however, no change in straight-line rental income. Any deferred amounts will be recognized as lease income when payment is received.

(v) Significant lease extension resulting in an increase in cash flows		Existing lease modification guidance under ASC 842 is followed.

See a discussion regarding lease concessions agreed with tenants as a result of the COVID-19 pandemic and related impact in ~~future periods and~~Note 6 to the ~~elections made by the Company at the time of entering such concessions.~~condensed consolidated financial statements.

(3) ACQUISITIONS AND DEVELOPMENTS IN PROGRESS

Acquisitions

The Company closed on the following acquisition during the ~~three~~six months ended ~~March 31,~~June 30, 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)


(a)	The Company acquired the fee interest in an existing multi-tenant retail operating property. In connection with this acquisition, the 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.

~~The Company closed on the following acquisition during the three months ended March 31, 2019:~~

Date Property Name MSA Property Type
Square
Footage

Acquisition
Price

March 7, 2019 North Benson Center Seattle Multi-tenant retail 70,500
$ 25,340

70,500
$ 25,340
(a)


~~(a)~~	~~Acquisition price does not include capitalized closing costs and adjustments totaling $90.~~

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Company closed on the following acquisitions during the six months ended June 30, 2019:

Date

Property Name

MSA

Property Type

Square

Footage

Acquisition

Price

March 7, 2019

North Benson Center

Seattle

Multi-tenant retail

70,500

25,340

June 10, 2019

Paradise Valley Marketplace – Parcel

Phoenix

Land (a)

—

1,343

70,500

26,683

(b)


(a)	The Company acquired a parcel adjacent to its Paradise Valley Marketplace multi-tenant retail operating property. The total number of properties in the Company’s portfolio was not affected by this transaction.


(b)	Acquisition price does not include capitalized closing costs and adjustments totaling $291.

The following table summarizes the acquisition date values, before prorations, the Company recorded in conjunction with the acquisitions discussed above:


	Three Months Ended March 31,						Six Months Ended June 30,
	2020			2019			2020			2019
Land	$	57,137		$	13,275		$	57,137		$	14,819
Building and other improvements, net	1,623			10,619			1,623			10,619
Acquired lease intangible assets (a)	2,014			1,770			2,014			1,770
Acquired lease intangible liabilities (b)	(5,534		)	(234		)	(5,534		)	(234		)
Net assets acquired	$	55,240		$	25,430		$	55,240		$	26,974


(a)	The weighted average amortization period for acquired lease intangible assets is 17 years and five years for acquisitions completed during the ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019, respectively.


(b)	The weighted average amortization period for acquired lease intangible liabilities is 17 years and five years for acquisitions completed during the ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019, respectively.

These acquisitions were 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 acquisitions completed during 2020 and 2019 were considered asset acquisitions and, as such, transaction costs were capitalized upon closing.

In addition, the Company capitalized ~~$626~~$641 and ~~$675~~$1,267 of internal salaries and related benefits of personnel directly involved in capital upgrades and tenant improvements during the three and six months ended ~~March 31,~~June 30, 2020, respectively, and $650 and $1,325 during the three and six months ended June 30, 2019, respectively. The Company also capitalized ~~$60 and $54 of~~ internal leasing incentives of $42 and $102 during the three and six months ended June 30, 2020, respectively, and $82 and $136 during the three and six months ended June 30, 2019, respectively, all of which were incremental to signed ~~leases, during the three months ended March 31, 2020 and 2019, respectively.~~leases.

Developments in Progress

The carrying amount of the Company’s developments in progress are as follows:


Property Name	MSA	March 31, 2020		December 31, 2019		MSA	June 30, 2020		December 31, 2019
Expansion and redevelopment projects:
Expansion and redevelopment projects
Circle East (a)	Baltimore	$	34,665	$	33,628	Baltimore	$	35,298	$	33,628
One Loudoun Downtown	Washington, D.C.	36,346		27,868		Washington, D.C.	51,903		27,868
Carillon	Washington, D.C.	29,517		26,407		Washington, D.C.	32,264		26,407
The Shoppes at Quarterfield	Baltimore	524		—		Baltimore	1,155		—
Pad development projects:
Pad development projects
Southlake Town Square	Dallas	259		—		Dallas	432		—
		101,311		87,903			121,052		87,903
Land held for future development:
Land held for future development
One Loudoun Uptown	Washington, D.C.	25,450		25,450		Washington, D.C.	25,450		25,450
Total developments in progress		$	126,761	$	113,353		$	146,502	$	113,353

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)


(a)	During the year ended December 31, 2018, the Company received net proceeds of $11,820 in connection with the sale of air rights to a third party to develop multi-family rental units at Circle East, which is shown net in the “Developments in progress” balance as of ~~March 31,~~June 30, 2020 and December 31, 2019 in the accompanying condensed consolidated balance sheets.

In response to current macroeconomic conditions related to the COVID-19 pandemic, the Company halted plans for vertical construction at its Carillon redevelopment during the three months ended March 31, 2020 and ~~has~~ materially reduced the planned scope and spend for the project. As of ~~March 31,~~June 30, 2020, the Company ~~was~~is actively completing site work preparation at the property in anticipation of potential future development at the site. The Company expects to ~~complete~~finalize the site work preparation during 2020 for an expected additional capital investment of approximately ~~$4,500.~~

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~~RETAIL PROPERTIES OF AMERICA, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

$1,400.

The Company capitalized ~~$1,316~~$1,347 and ~~$574~~$2,663 of indirect project costs related to redevelopment projects during the three and six months ended ~~March 31,~~June 30, 2020, ~~and 2019, respectively,~~ including, among other costs, ~~$372~~$329 and ~~$365~~$701 of internal salaries and related benefits of personnel directly involved in the redevelopment projects and ~~$785~~$736 and ~~$144~~$1,521 of interest, respectively. The Company capitalized $659 and $1,233 of indirect project costs related to redevelopment projects during the three and six months ended June 30, 2019, including, among other costs, $335 and $700 of internal salaries and related benefits of personnel directly involved in the redevelopment projects and $226 and $370 of interest, respectively.

Variable Interest Entities

As of January 1, 2020, the Company had joint ventures related to the development, ownership and operation of the (i) multi-family rental portion of the expansion project at One Loudoun Downtown – Pads G & H, of which joint venture the Company owned 90%; (ii) multi-family rental portion of the redevelopment project at Carillon, of which joint venture the Company owned 95%, and (iii) medical office building portion of the redevelopment project at Carillon, of which joint venture the Company owned 95%.

The joint ventures are considered VIEs primarily because the Company’s joint venture partners do not have substantive kick-out rights or substantive participating rights. The Company is considered the primary beneficiary as it has a controlling financial interest in each joint venture. As such, the Company has consolidated these joint ventures and presented the joint venture partners’ interests as noncontrolling interests.

As a result of halting the planned vertical construction at Carillon, the Company terminated (i) the joint venture related to the multi-family rental portion of the redevelopment during the three months ended March 31, 2020 and (ii) the joint venture related to the medical office building portion of the redevelopment during the three months ended June 30, 2020. In accordance with the terms of the joint venture ~~agreement,~~agreements, costs incurred prior to the ~~termination~~terminations were funded evenly by the partners and there was no payment between the partners upon termination. Subsequent to the ~~termination,~~terminations, if the Company commences the redevelopment and uses the materials developed, or approvals obtained, by the joint venture partners, the Company is required to reimburse the ~~partner’s~~partners’ costs incurred in connection with such materials and/or approvals. As a result of the ~~termination,~~terminations, the Company reclassified the noncontrolling interest balance of ~~$1,661 related to this multi-family rental joint venture~~$2,217 from noncontrolling interests to additional paid-in capital within equity. There was no gain or loss recognized in connection with the ~~termination. Subsequent to March 31, 2020, the Company terminated the joint venture related to the medical office building portion of the redevelopment at Carillon.~~terminations.

As of ~~March 31,~~June 30, 2020 and December 31, 2019, the Company had recorded the following related to the consolidated joint ventures:


	March 31, 2020								December 31, 2019								June 30, 2020								December 31, 2019
	One Loudoun Downtown – Pads G & H		Carillon – Phase One Multi-family Rental		Carillon – Phase One Medical Office		Total		One Loudoun Downtown – Pads G & H		Carillon – Phase One Multi-family Rental		Carillon – Phase One Medical Office		Total		One Loudoun Downtown – Pads G & H		Carillon – Phase One Multi-family Rental		Carillon – Phase One Medical Office		Total		One Loudoun Downtown – Pads G & H		Carillon – Phase One Multi-family Rental		Carillon – Phase One Medical Office		Total
Net investment properties	$	29,715	$	—	$	885	$	30,600	$	8,830	$	2,940	$	675	$	12,445	$	41,589	$	—	$	—	$	41,589	$	8,830	$	2,940	$	675	$	12,445
Other assets, net	$	344	$	—	$	—	$	344	$	164	$	—	$	—	$	164	$	344	$	—	$	—	$	344	$	164	$	—	$	—	$	164
Other liabilities	$	3,066	$	—	$	167	$	3,233	$	1,546	$	32	$	129	$	1,707	$	4,752	$	—	$	—	$	4,752	$	1,546	$	32	$	129	$	1,707
Noncontrolling interests	$	2,699	$	—	$	359	$	3,058	$	1,869	$	1,454	$	273	$	3,596	$	3,718	$	—	$	—	$	3,718	$	1,869	$	1,454	$	273	$	3,596

Development costs are funded by the partners, including the Company, and/or construction loan financing throughout the construction period. Under terms defined in the joint venture agreements, after construction completion and stabilization of the respective development project, the Company has the ability to call, and the joint venture partner has the ability to put to the Company, subject to certain conditions, the joint venture partner’s interest in the respective joint venture at fair value. The Company has not provided financial support to these VIEs in excess of any amounts that it is contractually required to provide. There was

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

no income from the joint venture projects during the ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019 and, as such, no income was attributed to the noncontrolling interests.

(4) DISPOSITIONS

The Company closed on the following disposition during the ~~three~~six months ended ~~March 31,~~June 30, 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	$	—
			105,900	$	13,900	$	11,343	$	—


(a)	Aggregate proceeds are net of transaction ~~costs.~~costs and exclude $26 of condemnation proceeds, which did not result in recognition of a gain.

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~~RETAIL PROPERTIES OF AMERICA, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

The Company closed on the following ~~disposition~~dispositions during the ~~three~~six months ended ~~March 31,~~June 30, 2019:


Date	Property Name	Property Type	Square Footage	Consideration		Aggregate Proceeds, Net (a)		Gain		Property Name	Property Type	Square Footage	Consideration		Aggregate Proceeds, Net (a)		Gain
March 8, 2019	Edwards Multiplex – Fresno (a)	Single-user retail	94,600	$	25,850	$	21,605	$	8,449	Edwards Multiplex – Fresno (b)	Single-user retail	94,600	$	25,850	$	21,605	$	8,449
June 28, 2019										North Rivers Towne Center	Multi-tenant retail	141,500	18,900		17,989		6,881
			94,600	$	25,850	$	21,605	$	8,449			236,100	$	44,750	$	39,594	$	15,330


(a)	Aggregate proceeds are net of transaction costs.


(b)	Prior to the disposition, the Company was subject to a ground lease whereby it leased the underlying land from a third party. The ground lease was assumed by the purchaser in connection with the disposition.

During the six months ended June 30, 2019, the Company also received net proceeds of $2,292 and recognized a gain of $1,573 in connection with the sale of the second phase of a land parcel, which included rights to develop 10 residential units, at One Loudoun Downtown. The aggregate proceeds from the property dispositions and other transactions during the six months ended June 30, 2019 totaled $41,886, with aggregate gains of $16,903.

None of the dispositions completed during the ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019 qualified for discontinued operations treatment and none are considered individually significant.

As of ~~March 31,~~June 30, 2020 and December 31, 2019, no properties qualified for held for sale accounting treatment.

(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 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.

The following table summarizes the Company’s unvested restricted shares as of and for the ~~three~~six months ended ~~March 31,~~June 30, 2020:


	Unvested Restricted Shares		Weighted Average Grant Date Fair Value per Restricted Share		Unvested Restricted Shares		Weighted Average Grant Date Fair Value per Restricted Share
Balance as of January 1, 2020	535		$	12.46	535		$	12.46
Shares granted (a)	493		$	12.87	624		$	11.66
Shares vested	(213	)	$	13.08	(291	)	$	12.76
Balance as of March 31, 2020 (b)	815		$	12.55
Balance as of June 30, 2020 (b)					868		$	11.78


(a)	Shares granted vest over periods ranging from 0.9 years to three years in accordance with the terms of applicable award agreements.


(b)	As of ~~March 31,~~June 30, 2020, total unrecognized compensation expense related to unvested restricted shares was ~~$4,937,~~$4,617, which is expected to be amortized over a weighted average term of ~~1.5~~1.3 years.

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following table summarizes the Company’s unvested performance restricted stock units (RSUs) as of and for the ~~three~~six months ended ~~March 31,~~June 30, 2020:


	Unvested RSUs		Weighted Average Grant Date Fair Value per RSU		Unvested RSUs		Weighted Average Grant Date Fair Value per RSU
RSUs eligible for future conversion as of January 1, 2020	839		$	13.10	839		$	13.10
RSUs granted (a)	331		$	13.67	331		$	13.67
Conversion of RSUs to common stock and restricted shares (b)	(196	)	$	15.52	(196	)	$	15.52
RSUs eligible for future conversion as of March 31, 2020 (c)	974		$	12.81
RSUs eligible for future conversion as of June 30, 2020 (c)					974		$	12.81

(a)

Assumptions and inputs as of the grant date included a risk-free interest rate of 1.54%, 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 5.07%. Subject to continued employment, in 2023, following the performance period which concludes on December 31, 2022, 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 10, 2020, 196 RSUs converted into 105 shares of common stock and 175 restricted shares that will vest on December 31, 2020, subject to continued employment through such date, after applying a conversion rate of 142.5% 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, 2019. An additional 43 shares of common stock were also issued, representing the dividends that would have been paid on the earned awards during the performance period.

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~~RETAIL PROPERTIES OF AMERICA, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~


(c)	As of ~~March 31,~~June 30, 2020, total unrecognized compensation expense related to unvested RSUs was ~~$7,892,~~$6,916, which is expected to be amortized over a weighted average term of ~~2.4~~2.2 years.

During the three months ended ~~March 31,~~June 30, 2020 and 2019, the Company recorded compensation expense of ~~$2,233~~$2,221 and ~~$1,966,~~$1,857, respectively, related to the amortization of unvested restricted shares and RSUs. During the six months ended June 30, 2020 and 2019, the Company recorded compensation expense of $4,454 and $3,823, respectively, related to the amortization of unvested restricted shares and RSUs. The total fair value of restricted shares that vested during the ~~three~~six months ended ~~March 31,~~June 30, 2020 was ~~$2,513.~~$2,962. In addition, the total fair value of RSUs that converted into common stock during the ~~three~~six months ended ~~March 31,~~June 30, 2020 was $1,321.

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 ~~March 31,~~June 30, 2020, options to purchase 16 shares of common stock remained outstanding and exercisable pursuant to such plan. The Company did not grant any options in 2020 or 2019 and did not record any compensation expense related to stock options during the ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019.

(6) LEASES

Leases as Lessor

Lease income related to the Company’s operating leases is comprised of the following:

Three Months Ended March 31,
2020 2019
Lease income related to fixed lease payments $ 91,147
$ 90,434
Lease income related to variable lease payments 28,495
30,631
Other (a) (947 ) 1,638
Lease income $ 118,695
$ 122,703



	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Lease income related to fixed and variable lease payments
Base rent (a)	$	84,904		$	89,135		$	175,710		$	178,069
Percentage and specialty rent (b)	450			683			1,496			2,002
Tenant recoveries (b) (c)	22,513			25,879			48,333			52,706
Lease termination fee income (b)	252			232			376			1,420
Other lease-related income (b)	1,044			1,589			2,549			2,886
Straight-line rental income, net (d)	(1,284		)	616			(943		)	2,116
Other
Bad debt, net	(12,419		)	(77		)	(13,923		)	(477		)
Amortization of above and below market lease intangibles and lease inducements	1,343			392			1,900			2,430
Lease income	$	96,803		$	118,449		$	215,498		$	241,152

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(a)

~~“Other” is comprised~~Primarily consists of ~~revenue~~fixed lease payments, however, partially offset by adjustments of $(51) for the three and six months ended June 30, 2020 related to executed lease concessions granted as relief due to COVID-19 and treated as a negative variable lease adjustment to base rent in accordance with the Company’s policy elections related to the accounting treatment of such lease concessions. Base rent for the three and six months ended June 30, 2020 is also net of adjustments of $(5,743) driven by uncollected amounts related to cash-basis tenants.


(b)	Represents lease income related to variable lease payments.


(c)	Tenant recoveries for the three and six months ended June 30, 2020 are net of $(1,289) representing uncollected amounts related to cash-basis tenants.

(d)

Represents lease income related to fixed lease payments. Includes changes in ~~collectibility~~allowances for doubtful straight-line receivables of $(1,636) and ~~amortization of above~~$(592) for the three months ended June 30, 2020 and ~~below market lease intangibles~~2019, respectively, and ~~lease inducements.~~$(2,671) and $(814) for the six months ended June 30, 2020 and 2019, respectively.

During the three months ended June 30, 2020, the Company agreed in principle, and, in certain circumstances, executed agreements, with tenants regarding lease concessions. The majority of these concessions are for the deferral of amounts billed, without an extension of the lease term. However, certain of these lease concessions include abatement, a combination of deferral and abatement, or provide a concession that includes the extension of the existing lease term. The majority of the amounts addressed by the lease concessions are base rent, although certain concessions also address tenant recoveries and other charges. As of June 30, 2020, the Company agreed in principle and, in certain circumstances, executed lease concessions to defer, without an extension of the lease term, $6,530 of previously uncollected base rent charges related to the second quarter of 2020, and to address an additional $4,659 of previously uncollected base rent charges related to the second quarter of 2020 through abatement, a combination of deferral and abatement or a concession that includes the extension of the lease term. As of June 30, 2020, the amounts that have been deferred to future periods under executed lease concessions, on a weighted average basis, are expected to begin being received starting in approximately six months from June 30, 2020 and will be received over a period of approximately 11 months once started.

Subsequent to June 30, 2020, the Company agreed in principle and, in certain circumstances, executed agreements, with additional tenants whereby it expects to address an additional $2,493 of previously uncollected base rent charges related to the second quarter of 2020. Furthermore, the Company agreed in principle and, in certain circumstances, executed agreements, with tenants whereby it expects to address through lease concessions approximately $7,100 of base rent charges pertaining to the second half of 2020. The Company 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. Refer to Note 2 to the condensed consolidated financial statements for a discussion of the accounting treatment for lease concessions as a result of the COVID-19 pandemic.

The Company has not yet reached agreements, and in some cases does not anticipate reaching agreements, to defer or abate rent with certain tenants regarding concession requests, as discussions are ongoing. Certain other tenants, many of which are considered essential businesses, remain open and continue to operate during this time.

During the six months ended June 30, 2020, the Company applied $2,753 of security deposits to previously uncollected accounts receivable.

Leases as Lessee

During the ~~three~~six months ended ~~March 31,~~June 30, 2020, the Company extended the term of 1 office lease resulting in an additional lease liability and right-of-use lease asset of $383.

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(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:


	March 31, 2020						December 31, 2019						June 30, 2020						December 31, 2019
	Balance			Weighted Average Interest Rate		Weighted Average Years to Maturity	Balance			Weighted Average Interest Rate		Weighted Average Years to Maturity	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)	$	94,285		4.37	%	4.8	$	94,904		4.37	%	5.1	$	93,662		4.37	%	4.6	$	94,904		4.37	%	5.1
Discount, net of accumulated amortization	(483		)				(493		)				(471		)				(493		)
Capitalized loan fees, net of accumulated amortization	(240		)				(256		)				(224		)				(256		)
Mortgages payable, net	$	93,562					$	94,155					$	92,967					$	94,155


(a)	The fixed rate mortgages had interest rates ranging from 3.75% to 7.48% as of ~~March 31,~~June 30, 2020 and December 31, 2019.

During the ~~three~~six months ended ~~March 31,~~June 30, 2020, the Company made scheduled principal payments of ~~$619~~$1,242 related to amortizing loans.

Unsecured Notes Payable

The following table summarizes the Company’s unsecured notes payable:



		June 30, 2020					December 31, 2019
Unsecured Notes Payable	Maturity Date	Balance			Interest Rate/ Weighted Average Interest Rate		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 (a)	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	%
Senior notes – 4.82% due 2029	June 28, 2029	100,000			4.82	%	100,000			4.82	%
		800,000			4.27	%	800,000			4.27	%
Discount, net of accumulated amortization		(556		)			(616		)
Capitalized loan fees, net of accumulated amortization		(2,876		)			(3,137		)
	Total	$	796,568				$	796,247

(a)

Subsequent to June 30, 2020, the Company completed an offering of $100,000 aggregate principal amount of its 4.00% senior unsecured notes due 2025 (Notes Due 2025), issued at 99.010% of par value plus accrued and unpaid interest from March 15, 2020 through July 20, 2020. This $100,000 offering constitutes a further issuance of, and forms a single series with, the Company’s previously issued Notes Due 2025, of which $250,000 was outstanding as of June 30, 2020, and will mature on March 15, 2025, unless earlier redeemed. The total aggregate principal amount of Notes Due 2025 currently outstanding is $350,000, which enables the Notes Due 2025 to be eligible for index inclusion. The proceeds were used to repay borrowings on the Company’s unsecured revolving line of credit and for general corporate purposes.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~Unsecured Notes Payable~~

~~The following table summarizes the Company’s unsecured notes payable:~~

March 31, 2020 December 31, 2019
Unsecured Notes Payable Maturity Date Balance
Interest Rate/
Weighted Average
Interest Rate
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 %
Senior notes – 4.82% due 2029 June 28, 2029 100,000
4.82 % 100,000
4.82 %
800,000
4.27 % 800,000
4.27 %
Discount, net of accumulated amortization (586 ) (616 )
Capitalized loan fees, net of accumulated amortization (2,994 ) (3,137 )
Total $ 796,420
$ 796,247

Unsecured Term Loans and Revolving Line of Credit

The following table summarizes the Company’s term loans and revolving line of credit:


		March 31, 2020					December 31, 2019						June 30, 2020					December 31, 2019
	Maturity Date	Balance			Interest Rate		Balance			Interest Rate		Maturity Date	Balance			Interest Rate		Balance			Interest Rate
Unsecured credit facility term loan due 2021 – fixed rate (a)	January 5, 2021	$	250,000		3.20	%	$	250,000		3.20	%	January 5, 2021	$	250,000		3.35	%	$	250,000		3.20	%
Unsecured term loan due 2023 – fixed rate (b)	November 22, 2023	200,000			4.05	%	200,000			4.05	%	November 22, 2023	200,000			4.20	%	200,000			4.05	%
Unsecured term loan due 2024 – fixed rate (c)	July 17, 2024	120,000			2.88	%	120,000			2.88	%	July 17, 2024	120,000			2.93	%	120,000			2.88	%
Unsecured term loan due 2026 – fixed rate (d)	July 17, 2026	150,000			3.27	%	150,000			3.27	%	July 17, 2026	150,000			3.42	%	150,000			3.27	%
Subtotal		720,000					720,000						720,000					720,000
Capitalized loan fees, net of accumulated amortization		(3,208		)			(3,477		)				(3,008		)			(3,477		)
Term loans, net		$	716,792				$	716,523					$	716,992				$	716,523

Unsecured credit facility revolving line of credit – variable rate (e)	April 22, 2022	$	849,704		2.04	%	$	18,000		2.85	%	April 22, 2022	$	135,000		1.33	%	$	18,000		2.85	%


(a)	$250,000 of LIBOR-based variable rate debt has been swapped to a fixed rate of 2.00% plus a credit spread based on a leverage grid ranging from 1.20% to 1.70% through January 5, 2021. The applicable credit spread was 1.35% and 1.20% as of ~~March 31,~~June 30, 2020 and December 31, ~~2019.~~2019, respectively.


(b)	$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 November 22, 2023. The applicable credit spread was 1.35% and 1.20% as of ~~March 31,~~June 30, 2020 and December 31, ~~2019.~~2019, respectively.


(c)	$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 ranging from 1.20% to 1.70% through July 17, 2024. The applicable credit spread was 1.25% and 1.20% as of ~~March 31,~~June 30, 2020 and December 31, ~~2019.~~2019, respectively.


(d)	$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 1.65% and 1.50% as of ~~March 31,~~June 30, 2020 and December 31, ~~2019.~~2019, respectively.

(e)

Excludes capitalized loan fees, which are included within “Other assets, net” in the accompanying condensed consolidated balance sheets. The revolving line of credit has 2 six-month extension options that the Company can exercise, at its election, subject to (i) customary representations and warranties, including, but not limited to, the absence of an event of default as defined in the unsecured credit agreement and (ii) payment of an extension fee equal to 0.075% of the revolving line of credit capacity.

Unsecured Credit Facility

The Company has a $1,100,000 unsecured credit facility consisting of an $850,000 unsecured revolving line of credit and a $250,000 unsecured term loan (Unsecured Credit Facility) that is priced on a leverage grid at a rate of LIBOR plus a credit spread. 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 elect~~has the option to make an irrevocable election to convert to an investment grade pricing grid. As of ~~March 31,~~June 30, 2020, making such an election would have resulted in a higher interest rate ~~and, as such,~~for the ~~Company has not made~~

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~~RETAIL PROPERTIES OF AMERICA, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~the election to convert to an investment grade pricing grid. During the three months ended March 31, 2020, the Company elected to increase its borrowings under its~~ unsecured revolving line of credit and would not have changed the interest rate for the $250,000 unsecured term loan due 2021. The Company expects the leverage-based pricing grid to ~~enhance its liquidity and provide maximum financial flexibility as~~be favorable for both the ~~effects of the COVID-19 pandemic continue to evolve and impact the global financial markets. As a result, as of March 31, 2020, the Company’s $850,000~~ unsecured revolving line of credit ~~was nearly fully drawn.~~and the $250,000 unsecured term loan due 2021 when the credit spread set forth in the leverage grid resets next quarter.

The following table summarizes the key terms of the Unsecured Credit Facility:

Leverage-Based Pricing

Investment Grade Pricing

Unsecured Credit Facility

Maturity Date

Extension Option

Extension Fee

Credit Spread

Facility Fee

Credit Spread

Facility Fee

$250,000 unsecured term loan due 2021

1/5/2021

N/A

1.20%–1.70%

N/A

0.90%–1.75%

N/A

$850,000 unsecured revolving line of credit

4/22/2022

~~2-six month~~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 the Company, at its election, to increase the total Unsecured Credit Facility up to $1,600,000, subject to (i) customary fees and conditions including, but not limited to, the absence

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

of an event of default as defined in the unsecured credit agreement and (ii) the Company’s ability to obtain additional lender commitments.

Unsecured Term Loans

As of ~~March 31,~~June 30, 2020, the Company has 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, adjusted based on applicable reserve percentages established by the Federal Reserve, 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 the Company’s leverage, as calculated at the previous quarter end, and the Company ~~may~~has the option to make an irrevocable election to convert to an investment grade pricing grid. Although making such an election during the three months ended June 30, 2020 would have resulted in a lower interest rate as of June 30, 2020 for the Term Loan Due 2023, the Company did not elect to convert to an investment grade pricing ~~grid.~~grid as it expects the leverage-based pricing grid to once again be favorable when the credit spread set forth in the leverage grid resets next quarter. As of ~~March 31,~~June 30, 2020, making ~~such an~~the election to convert to the investment grade pricing grid would not have changed the interest rate for the Term Loan Due 2024 and would have resulted in a higher interest rate for the Term Loan Due 2026. The Company expects the leverage-based pricing grid to be favorable for both the Term Loan Due 2024 and ~~as such,~~Term Loan Due 2026 when the ~~Company has not made~~credit spread set forth in the ~~election to convert to an investment grade pricing grid.~~leverage grid resets next quarter.

The following table summarizes the key terms of the unsecured term loans:



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 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.

The Term Loan Due 2023 has a $100,000 accordion option that allows the Company, at its election, to increase the Term 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 amended term loan agreement and (ii) the Company’s ability to obtain additional lender commitments.

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Debt Maturities

The following table summarizes the scheduled maturities and principal amortization of the Company’s indebtedness as of ~~March 31,~~June 30, 2020 for the remainder of 2020, 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 ~~March 31,~~June 30, 2020., such as the $100,000 public offering of Notes Due 2025, which were issued on July 21, 2020.


	2020			2021			2022			2023			2024			Thereafter			Total			2020			2021			2022			2023			2024			Thereafter			Total
Debt:
Fixed rate debt:
Mortgages payable (a)	$	1,875		$	2,626		$	26,678		$	31,758		$	1,737		$	29,611		$	94,285		$	1,252		$	2,626		$	26,678		$	31,758		$	1,737		$	29,611		$	93,662
Fixed rate term loans (b)	—			250,000			—			200,000			120,000			150,000			720,000			—			250,000			—			200,000			120,000			150,000			720,000
Unsecured notes payable (c)	—			100,000			—			—			150,000			550,000			800,000			—			100,000			—			—			150,000			550,000			800,000
Total fixed rate debt	1,875			352,626			26,678			231,758			271,737			729,611			1,614,285			1,252			352,626			26,678			231,758			271,737			729,611			1,613,662

Variable rate debt:
Variable rate revolving line of credit	—			—			849,704			—			—			—			849,704			—			—			135,000			—			—			—			135,000
Total debt (d)	$	1,875		$	352,626		$	876,382		$	231,758		$	271,737		$	729,611		$	2,463,989		$	1,252		$	352,626		$	161,678		$	231,758		$	271,737		$	729,611		$	1,748,662

Weighted average interest rate on debt:
Fixed rate debt	4.39		%	3.47		%	4.81		%	4.06		%	3.83		%	4.02		%	3.89		%	4.41		%	3.58		%	4.81		%	4.19		%	3.85		%	4.05		%	3.95		%
Variable rate debt (e)	—			—			2.04		%	—			—			—			2.04		%	—			—			1.33		%	—			—			—			1.33		%
Total	4.39		%	3.47		%	2.12		%	4.06		%	3.83		%	4.02		%	3.25		%	4.41		%	3.58		%	1.90		%	4.19		%	3.85		%	4.05		%	3.74		%


(a)	Excludes mortgage discount of ~~$(483)~~$(471) and capitalized loan fees of ~~$(240)~~$(224), net of accumulated amortization, as of ~~March 31,~~June 30, 2020.

(b)

Excludes capitalized loan fees of ~~$(3,208)~~$(3,008), net of accumulated amortization, as of ~~March 31,~~June 30, 2020. The following variable rate term loans have been swapped to fixed rate debt: (i) $250,000 of LIBOR-based variable rate debt has been swapped to a fixed rate of 2.00% plus a credit spread based on a leverage grid through January 5, 2021; (ii) $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; (iii) $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 (iv) $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 ~~March 31,~~June 30, 2020, the applicable credit spread for (i) and (ii) was 1.35%, ~~(ii) and~~for (iii) was ~~1.20%~~1.25% and for (iv) was ~~1.50%~~1.65%.


(c)	Excludes discount of ~~$(586)~~$(556) and capitalized loan fees of ~~$(2,994)~~$(2,876), net of accumulated amortization, as of ~~March 31,~~June 30, 2020.


(d)	The weighted average years to maturity of consolidated indebtedness was ~~3.7~~4.1 years as of ~~March 31,~~June 30, 2020.


(e)	Represents interest rate as of ~~March 31,~~June 30, 2020.

The Company’s unsecured debt agreements, consisting of the (i) unsecured credit agreement, as amended governing the Unsecured Credit Facility, (ii) ~~amended~~ 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 4.12% senior unsecured notes due 2021 and the 4.58% senior unsecured notes due 2024 (Notes Due 2021 and 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), and (vii) note purchase agreement governing the 4.82% senior unsecured notes due 2029 (Notes Due 2029), 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 their calculations are based on the most recent four fiscal quarters of activity. As of ~~March 31,~~June 30, 2020, management believes the Company was in compliance with the financial covenants and default provisions under the unsecured debt agreements.

The Company plans on addressing its debt maturities through a combination of (i) cash flows generated from operations, (ii) working capital, ~~including cash on hand of $769,241 as of March 31, 2020, and~~ (iii) capital markets ~~transactions.~~transactions and (iv) its unsecured revolving line of credit.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

(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 ~~March 31,~~June 30, 2020, the Company has 11 interest rate swaps to hedge the variable cash flows associated with variable rate debt. Changes in fair value of the derivatives that are designated and that qualify as cash flow hedges are recorded in “Accumulated other comprehensive loss” and are reclassified into 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 $~~12,010~~12,013 will be reclassified as an increase to interest expense.

The following table summarizes the Company’s interest rate swaps as of ~~March 31,~~June 30, 2020, 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	December 29, 2017	$	250,000	2.00	%	January 5, 2021
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 following table summarizes the Company’s interest rate swaps that were designated as cash flow hedges of interest rate risk:


	Number of Instruments		Notional				Number of Instruments		Notional
Interest Rate Derivatives	March 31, 2020	December 31, 2019	March 31, 2020		December 31, 2019		June 30, 2020	December 31, 2019	June 30, 2020		December 31, 2019
Interest rate swaps	11	11	$	720,000	$	720,000	11	11	$	720,000	$	720,000

The table below presents the estimated fair value of the Company’s derivative financial instruments, which are presented within “Other liabilities” in the accompanying condensed consolidated balance sheets. The valuation techniques used are described in Note 12 to the condensed consolidated financial statements.


	Fair Value				Fair Value
	March 31, 2020		December 31, 2019		June 30, 2020		December 31, 2019
Derivatives designated as cash flow hedges:
Interest rate swaps	$	39,870	$	12,288	$	39,176	$	12,288

The following table presents the effect of the Company’s derivative financial instruments on the accompanying condensed consolidated statements of operations and other comprehensive ~~loss~~income (loss) for the three and six months ended ~~March 31,~~June 30, 2020 and 2019:


Derivatives in Cash Flow Hedging Relationships	Amount of Loss Recognized in Other Comprehensive Income on Derivative				Location of Loss (Gain) Reclassified from Accumulated Other Comprehensive Income (AOCI) into Income	Amount of Loss (Gain) Reclassified from AOCI into Income					Total Interest Expense Presented in the Statements of Operations in which the Effects of Cash Flow Hedges are Recorded				Amount of Loss Recognized in Other Comprehensive Income on Derivative				Location of Loss (Gain) Reclassified from Accumulated Other Comprehensive Income (AOCI) into Income	Amount of Loss (Gain) Reclassified from AOCI into Income						Total Interest Expense Presented in the Statements of Operations in which the Effects of Cash Flow Hedges are Recorded
	2020		2019			2020		2019			2020		2019		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,
Interest rate swaps	$	28,653	$	3,386	Interest expense	$	1,071	$	(128	)	$	17,046	$	17,430
2020															$	2,301	$	30,954	Interest expense	$	2,995		$	4,066		$	19,360	$	36,406
2019															$	6,215	$	9,601		$	(92	)	$	(220	)	$	17,363	$	34,793

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

(9) EQUITY

The Company has an existing common stock repurchase program under which it may repurchase, from time to time, up to a maximum of $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

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~~RETAIL PROPERTIES OF AMERICA, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

may be suspended or terminated at any time without prior notice. The Company did not repurchase any shares during the ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019. As of ~~March 31,~~June 30, 2020, $189,105 remained available for repurchases of shares of the Company’s common stock under its common stock repurchase program.

(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 March 31,								Three Months Ended June 30,								Six Months Ended June 30,
	2020				2019				2020				2019				2020				2019
Numerator:
Net income attributable to common shareholders	$	22,357			$	23,208
Net (loss) income attributable to common shareholders									$	(7,347	)		$	21,170			$	15,010			$	44,378
Earnings allocated to unvested restricted shares	(109		)		(80		)		(135		)		(110		)		(244		)		(190		)
Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares	$	22,248			$	23,128
Net (loss) income attributable to common shareholders excluding amounts attributable to unvested restricted shares									$	(7,482	)		$	21,060			$	14,766			$	44,188

Denominator:
Denominator for earnings per common share – basic:
Denominator for (loss) earnings per common share – basic:
Weighted average number of common shares outstanding	213,215			(a)	212,850			(b)	213,337			(a)	212,951			(b)	213,276			(a)	212,900			(b)
Effect of dilutive securities:
Stock options	—			(c)	—			(c)	—			(c)	—			(c)	—			(c)	—			(c)
RSUs	—			(d)	373			(e)	—			(d)	139			(e)	—			(d)	256			(e)
Denominator for earnings per common share – diluted:
Denominator for (loss) earnings per common share – diluted:
Weighted average number of common and common equivalent shares outstanding	213,215				213,223				213,337				213,090				213,276				213,156

(a)

Excludes ~~815~~868 shares of unvested restricted common stock as of ~~March 31,~~June 30, 2020, which equate to ~~677~~825 and 751 shares for the three and six months ended June 30, 2020, respectively, on a weighted average ~~basis for the three months ended March 31, 2020.~~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 667 shares of unvested restricted common stock as of ~~March 31,~~June 30, 2019, which equate to ~~602~~660 and 631 shares for the three and six months ended June 30, 2019, respectively, on a weighted average ~~basis for the three months ended March 31, 2019.~~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 16 and 22 shares of common stock as of ~~March 31,~~June 30, 2020 and 2019, respectively, at a weighted average exercise price of $15.87 and $17.34, respectively. Of these totals, outstanding options to purchase 16 and 18 shares of common stock as of ~~March 31,~~June 30, 2020 and 2019, respectively, at a weighted average exercise price of $15.87 and $18.58, respectively, have been excluded from the common shares used in calculating diluted EPS as including them would be anti-dilutive.

(d)

As of ~~March 31,~~June 30, 2020, there were 974 RSUs eligible for future conversion upon completion of the performance periods (see Note 5 to the condensed consolidated financial statements), which equate to ~~969~~974 and 971 RSUs, respectively, on a weighted average basis for the three and six months ended ~~March 31,~~June 30, 2020. These contingently issuable shares have been excluded from the common shares used in calculating diluted EPS as including them would be anti-dilutive.


(e)	As of ~~March 31,~~June 30, 2019, there were 839 RSUs eligible for future conversion upon completion of the performance periods, which equate to ~~832~~839 and 835 RSUs, respectively, on a weighted average basis for the three and six months ended ~~March 31,~~June 30, 2019. These contingently issuable shares are a component of calculating diluted EPS.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

(11) PROVISION FOR IMPAIRMENT OF INVESTMENT PROPERTIES

As of ~~March 31,~~June 30, 2020, the Company identified indicators of impairment at certain of its properties. Such indicators included a low occupancy rate, difficulty in leasing space and related cost of re-leasing, or significant change in the scope, cost or timing of planned redevelopment. As of ~~March 31,~~June 30, 2019, the Company did not identify indicators of impairment at any of its properties. The following table summarizes the results of these analyses as of ~~March 31, 2020.~~June 30, 2020:



	~~March 31,~~June 30, 2020
Number of properties for which indicators of impairment were identified	2
Less: number of properties for which an impairment charge was recorded	—
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	—
Remaining properties for which indicators of impairment were identified but no impairment charge was considered necessary	2

Weighted average percentage by which the projected undiscounted cash flows exceeded its respective carrying value for each of the remaining properties (a)	58166	%


(a)	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 charge during the ~~three~~six months ended ~~March 31,~~June 30, 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


(a)	The Company recorded an impairment charge on December 31, 2019 based upon the terms 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 Company did not record any investment property impairment charges during the ~~three~~six months ended ~~March 31,~~June 30, 2019.

The extent to which COVID-19 impacts the Company and its tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence. If the effects of COVID-19 cause economic and market conditions to continue to deteriorate or if the Company’s expected holding period for assets change, subsequent tests for impairment could result in impairment charges in the future. As of ~~March 31,~~June 30, 2020, the Company does not consider the impacts of COVID-19, including tenant requests for lease concessions, to be impairment indicators. However, indications of a tenant’s inability to continue as a going concern, changes in the Company’s view or strategy relative to a tenant’s business or industry as a result of COVID-19, or changes in the Company’s long-term hold strategies could change in future periods. The Company will 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.

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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:


	March 31, 2020				December 31, 2019				June 30, 2020				December 31, 2019
	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
Financial liabilities:
Mortgages payable, net	$	93,562	$	95,831	$	94,155	$	98,082	$	92,967	$	94,982	$	94,155	$	98,082
Unsecured notes payable, net	$	796,420	$	788,109	$	796,247	$	822,883	$	796,568	$	786,719	$	796,247	$	822,883
Unsecured term loans, net	$	716,792	$	711,013	$	716,523	$	720,000	$	716,992	$	704,148	$	716,523	$	720,000
Unsecured revolving line of credit	$	849,704	$	841,529	$	18,000	$	18,000	$	135,000	$	133,299	$	18,000	$	18,000
Derivative liability	$	39,870	$	39,870	$	12,288	$	12,288	$	39,176	$	39,176	$	12,288	$	12,288

The carrying value of the derivative liability is included within “Other 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								Fair Value
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
March 31, 2020
June 30, 2020
Derivative liability	$	—	$	39,870	$	—	$	39,870	$	—	$	39,176	$	—	$	39,176

December 31, 2019
Derivative liability	$	—	$	12,288	$	—	$	12,288	$	—	$	12,288	$	—	$	12,288

Derivatives: The fair value of the derivative liability is determined using a discounted cash flow analysis on the expected future cash flows of each derivative. This analysis uses 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 use Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of ~~March 31,~~June 30, 2020 and December 31, 2019, 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. 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 8 to the condensed consolidated financial statements.

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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 ~~March 31,~~June 30, 2020. The following table presents the Company’s assets measured at fair value on a nonrecurring basis as of December 31, 2019, aggregated by the level within the fair value hierarchy in which those measurements fall. The table includes information related to properties remeasured to fair value as a result of impairment charges recorded during the year ended December 31, 2019, except for those properties sold prior to December 31, 2019. Methods and assumptions used to estimate the fair value of these assets as of December 31, 2019 are described after the table.



	Fair Value
	Level 1		Level 2			Level 3			Total		Provision for Impairment
December 31, 2019
Investment properties	$	—	$	11,644	(a)	$	5,300	(b)	$	16,944	$	12,298


(a)	Represents the fair value of the Company’s King Philip’s Crossing investment property as of December 31, 2019, the date the asset was measured at fair value. The estimated fair value of King Philip’s Crossing was based upon the expected sales price from an executed sales contract and determined to be a Level 2 input.

(b)

Represents the fair value of the Company’s Streets of Yorktown investment property as of September 30, 2019, the date the asset was measured at fair value. The estimated fair value of Streets of Yorktown was 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. The discount rates and third-party comparable sales prices used in this approach are derived from property-specific information, market transactions and other industry data and are considered significant inputs to this valuation. The reversion value of the property was based upon third-party comparable sales prices, which contain unobservable inputs used by these third parties. A weighted average discount rate of 6.89% was used to (i) present value the estimated income stream over the estimated holding period and (ii) present value the reversion value.

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.


	Fair Value								Fair Value
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
March 31, 2020
June 30, 2020
Mortgages payable, net	$	—	$	—	$	95,831	$	95,831	$	—	$	—	$	94,982	$	94,982
Unsecured notes payable, net	$	242,485	$	—	$	545,624	$	788,109	$	243,380	$	—	$	543,339	$	786,719
Unsecured term loans, net	$	—	$	—	$	711,013	$	711,013	$	—	$	—	$	704,148	$	704,148
Unsecured revolving line of credit	$	—	$	—	$	841,529	$	841,529	$	—	$	—	$	133,299	$	133,299

December 31, 2019
Mortgages payable, net	$	—	$	—	$	98,082	$	98,082	$	—	$	—	$	98,082	$	98,082
Unsecured notes payable, net	$	255,965	$	—	$	566,918	$	822,883	$	255,965	$	—	$	566,918	$	822,883
Unsecured term loans, net	$	—	$	—	$	720,000	$	720,000	$	—	$	—	$	720,000	$	720,000
Unsecured revolving line of credit	$	—	$	—	$	18,000	$	18,000	$	—	$	—	$	18,000	$	18,000

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Company estimates the fair value of 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 Company estimates the fair value of its unsecured term loans, net and unsecured revolving line of credit by discounting the anticipated future cash flows at a reference rate, currently one-month LIBOR, plus an applicable credit spread currently offered to the Company by its lenders for similar instruments of comparable maturities. The following rates were used in the discounted cash flow model to calculate the fair value of the Company’s Level 3 financial liabilities:


	March 31, 2020	December 31, 2019	June 30, 2020	December 31, 2019
Mortgages payable, net – range of discount rates used	3.6% to 4.1%	3.2% to 3.6%	3.6% to 4.2%	3.2% to 3.6%
Unsecured notes payable, net – weighted average discount rate used	4.72%	3.79%	4.69%	3.79%
Unsecured term loans, net – weighted average credit spread portion of discount rate used	1.75%	1.26%	1.95%	1.26%
Unsecured revolving line of credit – credit spread portion of discount rate used	1.63%	1.05%	1.75%	1.05%

There were no transfers between the levels of the fair value hierarchy during the ~~three~~six months ended ~~March 31,~~June 30, 2020 and the year ended December 31, 2019.

(13) COMMITMENTS AND CONTINGENCIES

As of ~~March 31,~~June 30, 2020, 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 ~~March 31,~~June 30, 2020:


		Estimated Net Investment				Net Investment as of March 31, 2020			Estimated Net Investment				Net Investment as of June 30, 2020
Project Name	MSA	Low		High		Net Investment as of March 31, 2020		MSA	Low		High		Net Investment as of June 30, 2020
Circle East (a)	Baltimore	$	42,000	$	44,000	$	22,804	Baltimore	$	42,000	$	44,000	$	23,438
One Loudoun Downtown – Pads G & H (b)	Washington, D.C.	$	125,000	$	135,000	$	21,542	Washington, D.C.	$	125,000	$	135,000	$	35,612
The Shoppes at Quarterfield	Baltimore	$	9,000	$	10,000	$	524	Baltimore	$	9,000	$	10,000	$	1,155
Southlake Town Square – Pad	Dallas	$	2,000	$	2,500	$	259	Dallas	$	2,000	$	2,500	$	432


(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 partners.

In response to current macroeconomic conditions, the Company halted plans for vertical construction at its Carillon redevelopment during the three months ended March 31, 2020 and ~~has~~ materially reduced the planned scope and spend for the project. As of ~~March 31,~~June 30, 2020, the Company ~~was~~is actively completing site work preparation at the property in anticipation of potential future development at the site. The Company expects to ~~complete~~finalize the site work preparation during 2020 for an expected additional capital investment of approximately ~~$4,500.~~$1,400. In addition, during the six months ended June 30, 2020, the Company terminated the joint ~~venture~~ventures related to the multi-family rental portion ~~of the redevelopment~~ and ~~subsequent to March 31, 2020, the Company terminated the joint venture related to~~ the medical office building portion of the redevelopment at Carillon.

(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 three months ended March 31, 2020, the Company entered into a settlement agreement related to litigation with a former tenant and received $6,100 in proceeds.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

(15) SUBSEQUENT EVENTS

Subsequent to ~~March 31,~~June 30, 2020, the ~~Company:~~

~~terminated~~Company completed an offering of $100,000 aggregate principal amount of its 4.00% senior unsecured notes due 2025 (Notes Due 2025), issued at 99.010% of par value plus accrued and unpaid interest from March 15, 2020 through July 20, 2020. This $100,000 offering constitutes a further issuance of, and forms a single series with, the ~~joint venture related~~Company’s previously issued Notes Due 2025, of which $250,000 was outstanding as of June 30, 2020, and will mature on March 15, 2025, unless earlier redeemed. The total aggregate principal amount of Notes Due 2025 currently outstanding is $350,000, which enables the Notes Due 2025 to ~~the medical office building portion of the redevelopment at Carillon; and~~

~~executed amendments~~be eligible for index inclusion. The proceeds were used to its unsecured debt agreements for its Unsecured Credit Facility, Term Loan Due 2023, Term Loan Due 2024 and Term Loan Due 2026 that changed the covenant calculation for the unencumbered interest coverage ratio to include operating results from the most recent four fiscal quarters. Prior to these amendments, the calculation only included operating results from the most recent fiscal quarter. As a result, the updated calculation applies to all unsecured debt instruments to which this covenant relates, includingrepay borrowings on the Company’s unsecured revolving line of credit ~~all unsecured term loans~~ and ~~all unsecured private placement notes payable.~~

On May 1, 2020, the Company’s board of directors temporarily suspended future quarterly dividend payments on the Company’s outstanding Class A common stock in order to preserve and enhance liquidity and capital positioning. The Company’s board of directors will evaluate dividend declaration decisions quarterly and consider REIT taxable income distribution requirements in these deliberations. The timing and amount of dividend resumption depends largely on the Company’s operating cash flow performance as well as other factors.for general corporate purposes.

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 or that they will happen at all. You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “should,” “intends,” “plans,” “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 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 general 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 and our ability to ~~pay~~resume the payment of dividends at ~~current~~past levels;

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) ~~outbreak,~~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;

insurance coverage; and

the likelihood or actual occurrence of terrorist attacks in the U.S.

The extent to which COVID-19 impacts us and our tenants will depend 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, 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 Part II, “Item 1A. Risk Factors” in this document, ~~and~~ in our Annual Report on Form 10-K for the year ended December 31, 2019, and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, which you should interpret as being heightened as a result of the numerous and 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.

Impact of the COVID-19 Pandemic

In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic. 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., and has contributed to significant volatility and negative pressure in the financial markets. Additionally, the pandemic has, and could continue to have, a significant adverse impact on the underlying industries of many of our tenants. Accordingly, our tenants and their operations, and their ability to pay rent, have been adversely impacted and may continue to be adversely impacted. The global impact of the COVID-19 ~~outbreak~~pandemic has been rapidly evolving and many U.S. states and cities, including where we own properties and/or have development sites, ~~have~~ imposed measures during the first half of the year intended to control its spread, such as instituting “shelter-in-place” rules, limitations on public gatherings and restrictions on ~~the types of businesses that may continue to operate~~certain business operations and/or the types of construction projects that may continue. As a result of the pandemic and the measures noted above to mitigate its impact, a number of our tenants were required to temporarily close their stores or modify their operations, which has impacted, and could continue to impact, their ability to pay rent in full, on time, or at all, and more of our tenants could be similarly impacted in the future. While ~~we did not incur~~many U.S. states and cities have eased or lifted such restrictions, some have subsequently reinstated restrictions and others may do so in the future. Continued mitigation efforts or the effect of any relaxation or revocation of current restrictions, including the impact on and of consumer behavior, all of which vary by geography, will continue to impact our business and such impacts may be significant ~~disruptions~~and materially adverse to ~~our lease income and occupancy during the three months ended March 31, 2020 from COVID-19, we~~us. We continue to closely monitor the impact of the pandemic on all aspects of our business. 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. To date, as a result of the pandemic and the measures noted above to mitigate its impact, a number of our tenants have announced temporary closures of their stores or modifications of their operations. Certain other tenants, many of which are considered essential businesses, ~~which~~ remain open and continue to operate during this time. ~~Essential~~Based on annualized base rent (ABR) of leases in effect as of June 30, 2020, essential businesses and office represent approximately 37% of our ~~annualized base rent (ABR),~~ABR, including 8% from grocery/warehouse clubs and 6%7% from office tenants.

During the three months ended June 30, 2020, we agreed in principle, and, in certain circumstances, executed agreements, with tenants regarding lease concessions. The majority of these concessions are for the deferral of amounts billed, without an extension of the lease term. However, certain of these lease concessions include abatement, a combination of deferral and abatement, or provide a concession that includes the extension of the existing lease term. The majority of the amounts addressed by the lease

concessions are base rent, although certain concessions also address tenant recoveries and other charges. As of June 30, 2020, we agreed in principle and, in certain circumstances, executed lease concessions to defer, without an extension of the lease term, $6,530 of previously uncollected base rent charges related to the second quarter of 2020, and to address an additional $4,659 of previously uncollected base rent charges related to the second quarter of 2020 through abatement, a combination of deferral and abatement or a concession that includes the extension of the lease term. As of June 30, 2020, the amounts that have been deferred to future periods under executed lease concessions, on a weighted average basis, are expected to begin being received starting in approximately six months from June 30, 2020 and will be received over a period of approximately 11 months once started.

Subsequent to June 30, 2020, we agreed in principle and, in certain circumstances, executed agreements, with additional tenants whereby we expect to address an additional $2,493 of previously uncollected base rent charges related to the second quarter of 2020. Furthermore, we agreed in principle and, in certain circumstances, executed agreements, with tenants whereby we expect to address through lease concessions approximately $7,100 of base rent charges pertaining to the second half of 2020. 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.

As of July 27, 2020, we have collected 68.4% of base rent charges related to the three months ended June 30, 2020 and 71.4% of July 2020 base rent charges. In addition, as of July 27, 2020, we have applied security deposits, signed lease concession agreements and have agreed in principle to lease amendments for an additional 17.5% and 13.1% of base rent related to the three months ended June 30, 2020 and one month ended July 31, 2020, respectively. Uncollected billed base rent related to tenants who have declared bankruptcy represents an additional 2.0% and 1.4% for the three months ended June 30, 2020 and one month ended July 31, 2020, respectively. We have ~~collected more than 52%~~not yet reached agreements, and in some cases do not anticipate reaching agreements, to defer or abate rent with certain tenants regarding concession requests, as discussions are ongoing. While seeking to work toward a mutually agreeable outcome with tenants directly impacted by COVID-19, we believe that certain tenants, which remain open and have the ability to pay, have elected to withhold rent unnecessarily. We are not forgoing our contractual rights under our lease agreements, and our tenants do not have a clear contractual right to cease paying rent due to government closures and as a result, non-payment of ~~April~~ rent ~~charges~~generally constitutes a default. However, COVID-19 and the related governmental orders present fairly novel situations and it is possible government action could impact our rights. As of June 30, 2020, all of our properties were open for the benefit of the communities and customers that our tenants serve and approximately 90% of our tenants, based on gross leasable area (GLA), were open as of ~~April~~June 30, 2020.

The following ~~table,~~information is based on ABR of leases in our retail operating portfolio that were in effect as of ~~March 31,~~June 30, 2020 ~~sets forth information regarding the percent of April rent collected by tenant type as of April 30, 2020. This information~~and is being provided to assist with analysis of the potential impact of COVID-19. ~~April rental receipts~~The information may not be indicative of ~~collections~~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 operations and may not be comparative to similarly titled classifications by other companies.


											% of Rent Collected
Resiliency Category/Tenant Type	ABR		% of Total ABR		% of April Rent Collected		ABR		% of Total ABR		April 2020		May 2020		June 2020		Q2 2020		July 2020
Essential
Grocery/Warehouse Clubs	$	30,333	8.3	%	99.9	%	$	30,333	8.3	%	99.9	%	99.9	%	99.9	%	99.9	%	99.9	%
Financial Services/Banks	13,673		3.7	%	99.6	%	13,343		3.7	%	100.0	%	99.9	%	98.5	%	99.5	%	98.5	%
Medical	12,211		3.3	%	67.2	%	12,318		3.4	%	86.8	%	88.8	%	86.0	%	87.2	%	84.8	%
Hardware							10,136		2.8	%	96.4	%	95.9	%	79.5	%	90.6	%	91.0	%
Auto and other Essentials							9,977		2.7	%	97.5	%	94.9	%	95.8	%	96.1	%	94.7	%
Electronics	10,241		2.8	%	72.7	%	9,957		2.7	%	96.0	%	98.8	%	99.2	%	98.0	%	99.3	%
Hardware	10,136		2.8	%	95.6	%
Auto and Other Essentials	9,936		2.7	%	96.2	%
Pet/Animal Supplies	9,832		2.7	%	71.9	%	9,734		2.7	%	98.7	%	98.4	%	99.7	%	98.9	%	66.9	%
Office Supplies	6,396		1.7	%	100.0	%	6,396		1.8	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Wireless Communications	6,308		1.7	%	87.6	%	6,339		1.7	%	92.6	%	91.5	%	91.0	%	91.7	%	91.5	%
Drug Stores	3,190		0.9	%	99.0	%	3,190		0.9	%	99.0	%	99.5	%	99.2	%	99.2	%	98.3	%
Total Essential	112,256		30.6	%	90.1	%	111,723		30.7	%	97.1	%	97.2	%	95.4	%	96.5	%	93.4	%

Non-Essential
Apparel	36,856		10.1	%	9.8	%	36,063		9.9	%	27.7	%	28.1	%	40.0	%	31.9	%	54.8	%
Housewares	28,172		7.7	%	31.2	%	28,169		7.7	%	59.8	%	58.5	%	67.9	%	62.1	%	77.9	%
Soft Goods/Discount Stores	25,619		7.0	%	57.8	%	25,650		7.1	%	81.8	%	56.4	%	38.3	%	58.8	%	36.3	%
Services	22,600		6.2	%	32.3	%	22,101		6.1	%	58.1	%	58.9	%	63.3	%	60.1	%	63.0	%
Sporting Goods/Hobby	14,218		3.9	%	41.6	%	14,057		3.9	%	66.0	%	67.1	%	64.7	%	65.9	%	85.1	%
Specialty							10,408		2.9	%	73.9	%	74.6	%	76.8	%	75.1	%	84.8	%
Movie Theaters	10,294		2.8	%	0.0	%	10,294		2.8	%	9.0	%	9.0	%	9.0	%	9.0	%	9.0	%
Specialty	10,205		2.8	%	39.6	%
Health Clubs	10,035		2.7	%	27.9	%	9,262		2.5	%	30.5	%	24.8	%	28.0	%	27.7	%	41.6	%
Other	7,763		2.1	%	13.9	%	7,759		2.1	%	44.6	%	40.1	%	44.7	%	43.1	%	54.5	%
Book Stores	4,621		1.2	%	8.1	%	3,945		1.1	%	53.3	%	56.4	%	61.1	%	56.8	%	81.1	%
Amusement/Play Centers	2,116		0.6	%	18.8	%	2,116		0.6	%	18.8	%	13.1	%	0.0	%	10.6	%	5.9	%
Total Non-Essential	172,499		47.1	%	28.5	%	169,824		46.7	%	51.4	%	47.1	%	49.4	%	49.3	%	57.4	%

Restaurants
Restaurants – Full Service	31,908		8.8	%	31.4	%	31,471		8.7	%	53.6	%	55.3	%	55.6	%	54.9	%	59.2	%
Restaurants – Quick Service	26,543		7.2	%	50.8	%	26,862		7.4	%	65.0	%	68.4	%	70.7	%	68.1	%	69.7	%
Total Restaurants	58,451		16.0	%	40.6	%	58,333		16.1	%	59.0	%	61.3	%	62.7	%	61.0	%	64.2	%

Office	23,079		6.3	%	75.7	%	23,592		6.5	%	89.8	%	91.9	%	91.0	%	90.9	%	84.2	%

Total Retail Operating Portfolio	$	366,285	100.0	%	52.4	%	$	363,472	100.0	%	69.2	%	67.7	%	68.3	%	68.4	%	71.4	%

While working to preserve our profitability and cash flow, we are also working with our tenants regarding requests for lease concessions and other forms of assistance available to them, including small business loans under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law on March 27, 2020 and provides small businesses access to loan programs to cover monthly expenses such as payroll, rent and utilities. Generally, we have not yet reached agreement with tenants regarding concession requests, as discussions are ongoing. While seeking to work toward a mutually agreeable outcome with tenants directly impacted by COVID-19, we believe that certain tenants, which remain open and hold an ability to pay, have elected to withhold April rent unnecessarily. We are not forgoing our contractual rights under our lease agreements and our tenants do not have a clear contractual right to cease paying rent due to government closures. However, COVID-19 and the related governmental orders present fairly novel situations and it is possible government action could impact our rights. Except for a small, enclosed portion of one property, we have not closed any of our properties and continue to operate them for the benefit of the communities and the customers that our tenants serve.



Billed Base Rent Addressed as of July 27, 2020	Q2 2020		July 2020
Billed base rent collected	68.4	%	71.4	%
Security deposits applied	2.5	%	0.0	%
Signed lease amendments (a)	4.4	%	5.0	%
In-process lease amendments (b)	10.6	%	8.1	%
Total billed base rent addressed	85.9	%	84.5	%



					% of Rent Collected
	ABR		% of Total ABR		April 2020		May 2020		June 2020		Q2 2020		July 2020
Anchor (10,000+ sq ft)	$	186,091	51.2	%	75.7	%	70.6	%	68.3	%	71.5	%	71.2	%
Mid-Tier (5,000-9,999 sq ft)	63,146		17.4	%	52.5	%	54.6	%	60.9	%	56.1	%	66.9	%
Small Shop (0-4,000 sq ft)
National/Regional	64,203		17.7	%	66.3	%	68.1	%	70.0	%	68.1	%	74.7	%
Local	50,032		13.7	%	69.1	%	72.8	%	75.6	%	72.5	%	73.8	%
Total Retail Operating Portfolio	$	363,472	100.0	%	69.2	%	67.7	%	68.3	%	68.4	%	71.4	%


(a)	As of July 27, 2020, the majority of signed lease amendments involve rent deferrals, as opposed to rent abatements.


(b)	As of July 27, 2020, the in-process lease amendments are agreed in principle with tenants and the majority involve rent deferrals, as opposed to rent abatements. 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.

In response to current macroeconomic conditions related to the COVID-19 pandemic, we halted plans for vertical construction at our Carillon redevelopment during the three months ended March 31, 2020 and ~~have~~ materially reduced the planned scope and spend for the project, driving a reduction in our expected 2020 redevelopment spend of approximately $75,000 to $100,000. As of ~~March 31,~~June 30, 2020, we ~~were~~are actively completing site work preparation at Carillon in anticipation of potential future development at the site. We expect to ~~complete~~finalize the site work preparation during 2020 for an expected additional capital investment of approximately ~~$4,500.~~$1,400. In addition, during the six months ended June 30, 2020, we terminated the joint ~~venture~~ventures related to the multi-family rental portion ~~of the redevelopment. Subsequent to March 31, 2020, we terminated the joint venture related to~~and the medical office building portion of the redevelopment at Carillon.

During the three months ended March 31, 2020, we elected to increase our borrowings under our unsecured revolving line of credit to enhance our liquidity and provide maximum financial flexibility as the effects of the COVID-19 pandemic continue to evolve and impact the global financial markets. As a result, as of March 31, 2020, our $850,000 unsecured revolving line of credit was nearly fully drawn and the proceeds were deposited into accounts at FDIC-insured institutions. As of March 31, 2020, we have $769,241 of cash on hand and the ability to repay the vast majority of the amount drawn on our unsecured revolving line of credit; however, we may elect to not repay it for some time, which will increase our interest expense.

In order to preserve and enhance liquidity and capital positioning, our board of directors ~~has~~ temporarily suspended future quarterly dividend payments on our outstanding Class A common stock. Our board of directors will continue to evaluate dividend declaration decisions quarterly and consider REIT taxable income distribution requirements in these deliberations. The timing and amount of dividend resumption depends largely on our operating cash flow performance as well as other factors.

~~During this~~Through the period ended June 30, 2020, our employees, except for a small number that are considered essential to be on-site for the safe operation of our properties, ~~have~~ successfully transitioned to working remotely, and we ~~have~~did not ~~furloughed~~furlough any employees nor significantly ~~modified~~modify our key processes or internal controls over financial reporting. In addition, we expect to continue to reduce our 2020 capital expenditures, including tenant improvements, and certain expenses, including overhead, from the original budget.

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 ~~March 31,~~June 30, 2020, we owned 102 retail operating properties in the United States representing ~~19,961,000~~19,962,000 square feet of ~~gross leasable area (GLA)~~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 portfolio as of ~~March 31,~~June 30, 2020:


Property Type	Number of Properties	GLA (in thousands)	Occupancy		Percent Leased Including Leases Signed (a)		Number of Properties	GLA (in thousands)	Occupancy		Percent Leased Including Leases Signed (a)
Retail operating portfolio:
Retail operating portfolio
Multi-tenant retail:
Neighborhood and community centers	62	10,337	94.7	%	96.0	%	62	10,337	94.1	%	95.4	%
Power centers	22	4,816	95.2	%	96.4	%	22	4,816	94.9	%	95.9	%
Lifestyle centers and mixed-use properties (b)	16	4,547	91.4	%	92.4	%	16	4,548	90.9	%	92.2	%
Total multi-tenant retail	100	19,700	94.0	%	95.3	%	100	19,701	93.6	%	94.8	%
Single-user retail	2	261	100.0	%	100.0	%	2	261	100.0	%	100.0	%
Total retail operating properties	102	19,961	94.1	%	95.3	%	102	19,962	93.6	%	94.9	%
Expansion and redevelopment projects:
Circle East	1						1
One Loudoun Downtown – Pads G & H (c)	—						—
Carillon	1						1
The Shoppes at Quarterfield	1						1
Total number of properties	105						105


(a)	Includes leases signed but not commenced.


(b)	Excludes the 18 multi-family rental units at Plaza del Lago. As of ~~March 31,~~June 30, 2020, 1617 multi-family rental units were leased at an average monthly rental rate per unit of ~~$1,339.~~$1,337.


(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.

In 2018, we completed our portfolio transformation and are now a prominent owner of multi-tenant retail properties, many with a mixed-use component, primarily located in the following markets: Dallas, Washington, D.C./Baltimore, New York, Chicago, Seattle, Atlanta, Houston, San Antonio, Phoenix and Austin. As a result, our portfolio is better focused and since our inaugural investor day in 2013, we have (i) improved our retail ABR by 35% to ~~$19.50~~$19.45 per square foot as of ~~March 31,~~June 30, 2020 from $14.46 per square foot as of March 31, 2013, (ii) increased our concentration in lifestyle and mixed-use properties based on multi-tenant retail ABR by ~~1,900~~1,800 basis points to ~~35%~~34% as of ~~March 31,~~June 30, 2020 from 16% as of March 31, 2013, (iii) reduced our top 20 retail tenant concentration of total ABR by ~~1,130~~1,140 basis points to ~~26.6%~~26.5% as of ~~March 31,~~June 30, 2020 from 37.9% as of March 31, 2013, and (iv) reduced our indebtedness by 5%33% to ~~$2,463,989~~$1,748,662 as of ~~March 31,~~June 30, 2020 ~~which includes our nearly fully drawn $850,000 unsecured revolving line of credit,~~ from $2,601,912 as of March 31, 2013. Additionally, as of ~~March 31,~~June 30, 2020, approximately ~~88.1%~~88.3% of our multi-tenant retail ABR was generated in the top 25 metropolitan statistical areas (MSAs), as determined by the United States Census Bureau and ranked based on the most recently available population estimates.

In addition to addressing ~~tenant~~ lease concession requests stemming from COVID-19 in the near term, we are focused on optimizing our tenancy, asset level configurations and merchandising through (i) accretive leasing activity and (ii) mixed-use expansion and redevelopment projects. For the ~~three~~six months ended ~~March 31,~~June 30, 2020, we achieved ~~positive~~a blended re-leasing spread of 2.6% consisting of negative comparable cash leasing spreads of ~~4.8%~~(9.2)% on signed new leases and ~~4.9%~~5.3% on signed renewal ~~leases for a blended re-leasing spread of 4.9%.~~leases. During this period, we achieved average annual contractual rent increases on signed new leases of approximately ~~170~~165 basis points. As of ~~March 31,~~June 30, 2020, we have ~~$16,272~~$10,512 of ABR related to ~~647,000~~450,000 square feet of GLA pertaining to 2020 lease expirations and ~~$4,545~~$5,249 of ABR related to ~~245,000~~249,000 square feet of GLA pertaining to leases signed but not yet commenced. In light of the COVID-19 pandemic, we are unable to project the impact on our leasing volume or other leasing trends. However, while existing tenants are continuing to pursue renewals, we have, to a certain extent, experienced, and may continue to experience, a slowdown in (i) rent commencing on signed leases, (ii) the volume of new and renewal leases and (iii) our ability to finalize the execution of new and renewal leases given current uncertainty.

Our active and near-term expansion and redevelopment projects consist of approximately $178,000 to $192,000 of expected investment through 2022, equivalent to approximately 6% of the net book value of our investment properties as of ~~March 31,~~June 30, 2020. 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. In response to current macroeconomic conditions due to the impact of the COVID-19 pandemic, we halted plans for vertical construction at our Carillon redevelopment during the three months ended March 31, 2020 and ~~have~~ materially reduced the planned scope and spend for the project, driving a reduction in our expected 2020 redevelopment spend of approximately $75,000 to $100,000. As of ~~March 31,~~June 30, 2020, we ~~were~~are actively completing site work preparation at Carillon in anticipation of potential future development at the site. We expect to ~~complete~~finalize the site work preparation during 2020 for an expected

additional capital investment of approximately ~~$4,500.~~$1,400. In addition, during the six months ended June 30, 2020, we terminated the joint ~~venture~~ventures related to the multi-family rental portion ~~of the redevelopment. Subsequent to March 31, 2020, we terminated the joint venture related to~~and the medical office building portion of the redevelopment at Carillon. 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 — ~~Three~~Six Months Ended ~~March 31,~~June 30, 2020

Developments in Progress

During the ~~three~~six months ended ~~March 31,~~June 30, 2020, we invested ~~$12,715~~$32,499 in our expansion and redevelopment projects at Circle East, One Loudoun Downtown, Carillon, The Shoppes at Quarterfield and Southlake Town Square. We expect that the majority of our additional 2020 project spend will be for the One Loudoun Downtown project.

The following table summarizes the carrying amount of developments in progress as of ~~March 31,~~June 30, 2020:


Property Name	MSA	March 31, 2020		MSA	June 30, 2020
Expansion and redevelopment projects:
Expansion and redevelopment projects
Circle East	Baltimore	$	34,665	Baltimore	$	35,298
One Loudoun Downtown	Washington, D.C.	36,346		Washington, D.C.	51,903
Carillon	Washington, D.C.	29,517		Washington, D.C.	32,264
The Shoppes at Quarterfield	Baltimore	524		Baltimore	1,155
Pad development projects:
Pad development projects
Southlake Town Square	Dallas	259		Dallas	432
		101,311			121,052
Land held for future development:
Land held for future development
One Loudoun Uptown	Washington, D.C.	25,450		Washington, D.C.	25,450
Total developments in progress		$	126,761		$	146,502

Acquisitions

The following table summarizes our acquisition activity during the ~~three~~six months ended ~~March 31,~~June 30, 2020:

Date

Property Name

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


(a)	We acquired the fee interest in an existing 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.

Dispositions

The following table summarizes our disposition activity during the ~~three~~six months ended ~~March 31,~~June 30, 2020:



Date	Property Name	Property Type	Square Footage	Consideration
February 13, 2020	King Philip’s Crossing	Multi-tenant retail	105,900	$	13,900
			105,900	$	13,900

Market Summary

The following table summarizes our retail operating portfolio by market as of ~~March 31,~~June 30, 2020:


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		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:
Top 25 MSAs (b)
Dallas	19	$	83,234	23.1	%	$	22.88	3,943	20.0	%	92.2	%	92.9	%	19	$	83,226	23.3	%	$	22.93	3,943	20.0	%	92.1	%	92.4	%
Washington, D.C.	8	39,300		10.9	%	29.32		1,388	7.0	%	96.5	%	96.8	%	8	38,121		10.7	%	28.75		1,388	7.0	%	95.5	%	95.8	%
New York	9	36,638		10.1	%	29.77		1,292	6.6	%	95.2	%	95.2	%	9	36,421		10.2	%	29.59		1,294	6.6	%	95.1	%	97.7	%
Chicago	8	29,603		8.2	%	24.08		1,358	6.9	%	90.5	%	90.5	%	8	29,076		8.1	%	24.02		1,358	6.9	%	89.1	%	89.4	%
Seattle	9	24,450		6.8	%	16.69		1,548	7.9	%	94.6	%	97.6	%	9	24,143		6.7	%	16.73		1,548	7.9	%	93.2	%	96.2	%
Baltimore	4	21,963		6.1	%	16.02		1,543	7.8	%	88.9	%	93.8	%	4	21,995		6.1	%	16.06		1,543	7.8	%	88.8	%	94.1	%
Atlanta	9	20,874		5.8	%	14.00		1,513	7.7	%	98.6	%	98.6	%	9	21,018		5.9	%	14.06		1,513	7.7	%	98.8	%	98.8	%
Houston	9	16,199		4.5	%	14.97		1,141	5.8	%	94.9	%	96.1	%	9	16,477		4.6	%	15.04		1,141	5.8	%	96.1	%	96.3	%
San Antonio	3	12,729		3.5	%	17.95		721	3.7	%	98.3	%	98.4	%	3	12,786		3.6	%	18.00		721	3.7	%	98.4	%	98.4	%
Phoenix	3	11,019		3.0	%	18.02		632	3.2	%	96.8	%	98.1	%	3	11,025		3.1	%	17.93		632	3.2	%	97.4	%	97.5	%
Los Angeles	1	6,742		1.9	%	18.06		396	2.0	%	94.3	%	96.2	%	1	6,858		1.9	%	18.17		396	2.0	%	95.3	%	97.7	%
Riverside	1	4,584		1.3	%	15.99		292	1.5	%	98.1	%	98.1	%	1	4,586		1.3	%	15.99		292	1.5	%	98.1	%	98.1	%
St. Louis	1	4,275		1.2	%	9.60		453	2.3	%	98.3	%	98.3	%	1	3,901		1.1	%	9.50		453	2.3	%	90.6	%	90.6	%
Charlotte	1	3,691		1.0	%	14.06		320	1.6	%	82.1	%	96.2	%	1	3,691		1.0	%	14.06		320	1.6	%	82.1	%	96.2	%
Tampa	1	2,401		0.7	%	19.69		126	0.6	%	97.0	%	97.0	%	1	2,401		0.7	%	19.69		126	0.6	%	97.0	%	97.0	%
Subtotal	86	317,702		88.1	%	20.29		16,666	84.6	%	93.9	%	95.3	%	86	315,725		88.3	%	20.26		16,668	84.6	%	93.5	%	94.9	%

Non-Top 25 MSAs (b)	14	42,719		11.9	%	14.90		3,034	15.4	%	94.5	%	95.0	%	14	41,883		11.7	%	14.71		3,033	15.4	%	93.8	%	94.1	%

Total Multi-Tenant Retail	100	360,421		100.0	%	19.46		19,700	100.0	%	94.0	%	95.3	%	100	357,608		100.0	%	19.40		19,701	100.0	%	93.6	%	94.8	%

Single-User Retail	2	5,864				22.49		261			100.0	%	100.0	%	2	5,864				22.49		261			100.0	%	100.0	%

Total Retail Operating Portfolio (c)	102	$	366,285			$	19.50	19,961			94.1	%	95.3	%	102	$	363,472			$	19.45	19,962			93.6	%	94.9	%

(a)

Excludes ~~$2,025~~$2,027 of multi-tenant retail ABR and 167 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, ~~88.2%~~88.4% of our multi-tenant retail ABR and 84.7% 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 the 18 multi-family rental units at Plaza del Lago. As of ~~March 31,~~June 30, 2020, 1617 multi-family rental units were leased at an average monthly rental rate per unit of ~~$1,339.~~$1,337.

Leasing Activity

The following table summarizes the leasing activity in our retail operating portfolio and our active and near-term expansion and redevelopment projects during the ~~three~~six months ended ~~March 31,~~June 30, 2020. Leases with terms of 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)		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	62	195	$	22.29	$	21.25	4.9	%	4.8	$	8.73	107	389	$	23.25	$	22.08	5.3	%	4.9	$	4.57
Comparable New Leases	5	33	$	23.01	$	21.95	4.8	%	9.4	$	41.30	13	85	$	20.34	$	22.41	(9.2	)%	9.6	$	34.77
Non-Comparable New and Renewal Leases (c)	15	57	$	26.62	N/A		N/A		8.7	$	47.57	28	134	$	29.96	N/A		N/A		10.5	$	26.81
Total	82	285	$	22.39	$	21.35	4.9	%	6.2	$	18.51	148	608	$	22.72	$	22.14	2.6	%	7.0	$	13.03


(a)	Total excludes the impact of Non-Comparable New and Renewal Leases.


(b)	Excludes tenant allowances and related square foot amounts at our active and near-term 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 without fixed rental payments and (iii) leases signed where the previous and current lease do not have a consistent lease structure.

Our near-term efforts are primarily focused on reaching resolution of ~~tenant~~ lease concession requests. During the three months ended June 30, 2020, we executed agreements with certain tenants regarding lease concessions; however, we have not yet reached agreements, and in some cases do not anticipate reaching agreements, to defer or abate rent with certain tenants regarding concession requests, as discussions are ongoing. In addition, our leasing efforts are focused on (i) vacant anchor and small shop space, (ii) upcoming lease expirations and (iii) spaces within our expansion and redevelopment projects. Through these collective efforts, we look to situationally focus on stability, tenancy and to optimize the mix of operators and unique retailers at our properties. As of ~~March 31,~~June 30, 2020, we have ~~$16,272~~$10,512 of ABR related to ~~647,000~~450,000 square feet of GLA pertaining to 2020 lease expirations and ~~$4,545~~$5,249 of ABR related to ~~245,000~~249,000 square feet of GLA pertaining to leases signed but not commenced. In light of the COVID-19 pandemic, we are unable to project the impact on our leasing volume or other leasing trends. However, while existing tenants are continuing to pursue renewals, we have, to a certain extent, experienced, and may continue to experience, a slowdown in (i) rent commencing on signed leases, (ii) the volume of new and renewal leases and (iii) our ability to finalize the execution of new and renewal leases given current uncertainty.

Capital Markets

During the ~~three~~six months ended ~~March 31,~~June 30, 2020, we:

borrowed ~~$831,704,~~$117,000, net of repayments, on our unsecured revolving line of ~~credit to enhance our liquidity and provide maximum financial flexibility as the effects of the COVID-19 pandemic continue to evolve and impact the global financial markets;~~credit; and

made scheduled principal payments of ~~$619~~$1,242 related to amortizing loans.

Subsequent to June 30, 2020, we completed an offering of $100,000 aggregate principal amount of our 4.00% senior unsecured notes due 2025 (Notes Due 2025), issued at 99.010% of par value plus accrued and unpaid interest from March 15, 2020 through July 20, 2020. This $100,000 offering constitutes a further issuance of, and forms a single series with, our previously issued Notes Due 2025, of which $250,000 was outstanding as of June 30, 2020, and will mature on March 15, 2025, unless earlier redeemed. The total aggregate principal amount of Notes Due 2025 currently outstanding is $350,000, which enables the Notes Due 2025 to be eligible for index inclusion. The proceeds were used to repay borrowings on our unsecured revolving line of credit and for general corporate purposes.

Distributions

We declared a quarterly distribution of $0.165625 per share of common stock during the three months ended March 31, 2020. On May 1, 2020,. our board of directors temporarily suspended future quarterly dividend payments on our outstanding Class A common stock; as such, a quarterly distribution was not declared during the three months ended June 30, 2020 and there was no distribution payable as of June 30, 2020. However, during the six months ended June 30, 2020, we paid (i) the fourth quarter 2019 distribution in January 2020 and (ii) the first quarter 2020 distribution in April 2020.

Results of Operations

Comparison of Results for the Three Months Ended ~~March 31,~~June 30, 2020 and 2019


	Three Months Ended March 31,									Three Months Ended June 30,
	2020			2019			Change			2020			2019			Change
Revenues:
Lease income	$	118,695		$	122,703		$	(4,008	)	$	96,803		$	118,449		$	(21,646	)

Expenses:
Operating expenses	16,414			17,686			(1,272		)	14,843			17,129			(2,286		)
Real estate taxes	18,533			18,403			130			17,916			18,534			(618		)
Depreciation and amortization	40,173			43,267			(3,094		)	43,755			42,882			873
Provision for impairment of investment properties	346			—			346
General and administrative expenses	9,165			10,499			(1,334		)	8,491			9,353			(862		)
Total expenses	84,631			89,855			(5,224		)	85,005			87,898			(2,893		)

Other (expense) income:
Interest expense	(17,046		)	(17,430		)	384			(19,360		)	(17,363		)	(1,997		)
Gain on sales of investment properties	—			8,449			(8,449		)	—			8,454			(8,454		)
Gain on litigation settlement	6,100			—			6,100
Other expense, net	(761		)	(659		)	(102		)
Net income	22,357			23,208			(851		)
Other income (expense), net										215			(472		)	687
Net (loss) income										(7,347		)	21,170			(28,517		)
Net income attributable to noncontrolling interests	—			—			—			—			—			—
Net income attributable to common shareholders	$	22,357		$	23,208		$	(851	)
Net (loss) income attributable to common shareholders										$	(7,347	)	$	21,170		$	(28,517	)

Net (loss) income attributable to common shareholders was ~~$22,357~~$(7,347) for the three months ended ~~March 31,~~June 30, 2020 compared to ~~$23,208~~$21,170 for the three months ended ~~March 31,~~June 30, 2019. The ~~$851~~$28,517 decrease was primarily due to the following:

a $21,646 decrease in lease income primarily due to the impact of COVID-19 and related accounting for lease concession agreements and primarily consisting of:

a $12,342 increase in bad debt, net primarily due to higher accounts receivable balances as we have received approximately 68.4% (as of July 27, 2020) of base rent that was billed during the three months ended June 30, 2020 and have agreed in principle to lease concessions which would at least partially abate tenant rent, however have not executed such agreements as of June 30, 2020; as a result, these anticipated abatements are classified as bad debt until executed;

a $4,231 decrease in base rent primarily due to $5,794 from adjustments to base rent driven by tenants being accounted for on the cash basis of accounting, partially offset by increases from occupancy gains and contractual rent changes from our same store portfolio;

a $3,366 decrease in tenant recovery income primarily from lower operating expenses and changes as a result of moving tenants to the cash basis of accounting; and

a $1,900 decrease in straight-line rent primarily as a result of changes in collectibility of straight-line receivables, which results in cash-basis accounting for the impacted tenants;

an ~~$8,449~~$8,454 decrease in gain on sales of investment properties related to the sale of one investment property consisting of approximately ~~105,900~~141,500 square feet of GLA ~~that was impaired~~and a land parcel during the three months ended ~~March 31, 2020 compared~~

~~to the sale of one investment property consisting of approximately 94,600 square feet of GLA that was~~June 30, 2019. No properties were sold ~~for a gain~~ during the three months ended ~~March 31, 2019;~~June 30, 2020; and

a ~~$4,008 decrease~~$1,997 increase in ~~lease income~~interest expense primarily consisting of:

a $1,358 decrease in amortization from acquired below market lease intangibles primarily as a result of the write-off of an acquired lease intangible liability associated with a lease that was not renewed at one of our operating properties during the three months ended March 31, 2019;

~~a $1,159 decrease in straight-line rent;~~

~~a $1,104~~$2,154 increase in ~~bad debt;~~

~~a $1,064 decrease~~interest on our five-year $120,000 unsecured term loan (Term Loan Due 2024) and seven-year $150,000 unsecured term loan (Term Loan Due 2026), which were entered into in ~~lease termination fee income;~~July 2019; and

a ~~$1,007 decrease in tenant recovery income;~~

~~partially offset by~~

~~an $1,872~~$1,165 increase in ~~base rent primarily~~interest on our 4.82% senior unsecured notes due ~~to the growth from our same store portfolio and the operating properties acquired during 2019 and 2020, partially offset by the operating properties sold during 2019 and 2020.~~2029 (Notes Due 2029), which were issued in June 2019;

partially offset by

a ~~$6,100 gain~~$1,360 decrease in interest on ~~litigation settlement recognized during the three months ended March 31, 2020 related~~mortgages payable due to ~~litigation with~~ a ~~former tenant. No such gain was recognized during the three months ended March 31, 2019;~~reduction in mortgage debt;

partially offset by

a ~~$3,094~~$2,286 decrease in ~~depreciation and amortization~~operating expenses primarily due to ~~site improvement~~lower recoverable property operating expenses; and ~~in-place lease intangible assets becoming fully depreciated or amortized upon reaching the end of the asset’s estimated useful life during the three months ended March 31, 2020;~~

~~a $1,334~~an $862 decrease in general and administrative expenses primarily due to a decrease in comparative cash bonus expense resulting from a significant reduction in cash bonus expectations for ~~2020; and~~

~~a $1,272 decrease in operating expenses primarily due to lower snow-related expenses in~~ 2020.

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 lease termination fee expense and non-cash ground rent expense, which is comprised of amortization of right-of-use lease assets and amortization of lease 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 “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 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 six months ended ~~March 31,~~June 30, 2020, our same store portfolio consisted of 101 retail operating properties acquired or placed in service and stabilized prior to January 1, 2019. The number of properties in our same store portfolio ~~decreased to~~did not change as of June 30, 2020 from 101 as of March 31, ~~2020 from 102 as of December 31, 2019 as a result of the following:~~


•	~~the removal of King Philip’s Crossing, a same store investment property that was sold during the three months ended~~ ~~March 31, 2020; and~~

~~the removal of The Shoppes at Quarterfield, which was reclassified to active redevelopment during the three months ended March 31, 2020;~~

~~partially offset by~~

~~the addition of Reisterstown Road Plaza, a redevelopment project that was reclassified into our retail operating portfolio during 2018.~~2020.

The properties and financial results reported in “Other investment properties” primarily include the following:

properties acquired during 2019 and 2020;

the multi-family rental units at Plaza del Lago, a redevelopment project that was placed in service during 2019;

Circle East, which is in active redevelopment;


•	One Loudoun Downtown – Pads G & H, which are in active development;

Carillon, a redevelopment project where we halted plans for vertical construction during the three months ended March 31, 2020 in response to current macroeconomic conditions due to the impact of the COVID-19 pandemic; however, as of June 30, 2020, we are actively completing site work preparation at the property in anticipation of potential future development at the site;

The Shoppes at Quarterfield, which is in active redevelopment;

investment properties that were sold or classified as held for sale during 2019 and 2020; and

the net income from our wholly owned captive insurance company.

The following tables present a reconciliation of net (loss) income attributable to common shareholders to Same Store NOI and details of the components of Same Store NOI for the three months ended June 30, 2020 and 2019:



	Three Months Ended June 30,
	2020			2019			Change
Net (loss) income attributable to common shareholders	$	(7,347	)	$	21,170		$	(28,517	)
Adjustments to reconcile to Same Store NOI:
Gain on sales of investment properties	—			(8,454		)	8,454
Depreciation and amortization	43,755			42,882			873
General and administrative expenses	8,491			9,353			(862		)
Interest expense	19,360			17,363			1,997
Straight-line rental income, net	1,284			(616		)	1,900
Amortization of acquired above and below market lease intangibles, net	(1,796		)	(711		)	(1,085		)
Amortization of lease inducements	453			319			134
Lease termination fees, net	(252		)	(232		)	(20		)
Non-cash ground rent expense, net	212			332			(120		)
Other (income) expense, net	(215		)	472			(687		)
NOI	63,945			81,878			(17,933		)
NOI from Other Investment Properties	(1,241		)	(1,280		)	39
Same Store NOI	$	62,704		$	80,598		$	(17,894	)



	Three Months Ended June 30,
	2020			2019			Change
Same Store NOI:
Base rent	$	83,609		$	87,082		$	(3,473	)
Percentage and specialty rent	448			691			(243		)
Tenant recoveries	22,305			25,310			(3,005		)
Other lease-related income	1,049			1,475			(426		)
Bad debt, net	(12,373		)	(60		)	(12,313		)
Property operating expenses	(14,631		)	(15,867		)	1,236
Real estate taxes	(17,703		)	(18,033		)	330
Same Store NOI	$	62,704		$	80,598		$	(17,894	)

Same Store NOI decreased $17,894, or 22.2%, primarily due to the following:

a $12,313 increase in bad debt, net primarily due to higher accounts receivable balances as we have received approximately 68.4% (as of July 27, 2020) of same store base rent that was billed during the three months ended June 30, 2020 and have agreed in principle to lease concessions which would at least partially abate tenant rent, however have not executed such agreements as of June 30, 2020; as a result, these anticipated abatements are classified as bad debt until executed;

a $3,473 decrease in base rent primarily due to $5,677 from adjustments to base rent driven by tenants being accounted for on the cash basis of accounting, partially offset by increases of $1,274 from occupancy gains and $921 from contractual rent changes; and

a $1,439 increase in property operating expenses and real estate taxes, net of tenant recoveries, primarily due to (i) lower tenant recoveries resulting from moving tenants to the cash basis of accounting, (ii) an increase in real estate tax expense resulting from higher real estate tax assessments, and (iii) an increase in certain non-recoverable property operating expenses, partially offset by (iv) higher net real estate tax refunds in 2020.

Comparison of Results for the Six Months Ended June 30, 2020 and 2019



	Six Months Ended June 30,
	2020			2019			Change
Revenues:
Lease income	$	215,498		$	241,152		$	(25,654	)

Expenses:
Operating expenses	31,257			34,815			(3,558		)
Real estate taxes	36,449			36,937			(488		)
Depreciation and amortization	83,928			86,149			(2,221		)
Provision for impairment of investment properties	346			—			346
General and administrative expenses	17,656			19,852			(2,196		)
Total expenses	169,636			177,753			(8,117		)

Other (expense) income:
Interest expense	(36,406		)	(34,793		)	(1,613		)
Gain on sales of investment properties	—			16,903			(16,903		)
Gain on litigation settlement	6,100			—			6,100
Other expense, net	(546		)	(1,131		)	585
Net income	15,010			44,378			(29,368		)
Net income attributable to noncontrolling interests	—			—			—
Net income attributable to common shareholders	$	15,010		$	44,378		$	(29,368	)

Net income attributable to common shareholders was $15,010 for the six months ended June 30, 2020 compared to $44,378 for the six months ended June 30, 2019. The $29,368 decrease was primarily due to the following:

a $25,654 decrease in lease income primarily due to the impact of COVID-19 and related accounting for lease concession agreements and primarily consisting of:

a $13,446 increase in bad debt, net primarily due to higher accounts receivable balances as we have received approximately 68.4% (as of July 27, 2020) of base rent that was billed during the three months ended June 30, 2020 and have agreed in principle to lease concessions which would at least partially abate tenant rent, however have not executed such agreements as of June 30, 2020; as a result, these anticipated abatements are classified as bad debt until executed;

a $4,373 decrease in tenant recovery income primarily from lower operating expenses and changes as a result of moving tenants to the cash basis of accounting;

a $3,059 decrease in straight-line rent primarily as a result of changes in collectibility of straight-line receivables, which results in cash-basis accounting for the impacted tenants;

a $2,359 decrease in base rent primarily due to $5,794 from adjustments to base rent driven by tenants being accounted for on the cash basis of accounting, as well as the operating properties sold during 2019 and 2020, partially offset by increases from occupancy gains, contractual rent changes and re-leasing spreads from our same store portfolio and increases from the operating properties acquired during 2019 and 2020; and

a $1,044 decrease in termination fee income;

a $16,903 decrease in gain on sales of investment properties related to the sale of one investment property consisting of approximately 105,900 square feet of GLA that was impaired during the six months ended June 30, 2020 compared to the sale of two investment properties, representing approximately 236,100 square feet of GLA, and a land parcel that were sold for gains during the six months ended June 30, 2019; and

a $1,613 increase in interest expense primarily consisting of:

a $4,273 increase in interest on our Term Loan Due 2024 and Term Loan Due 2026, which were entered into in July 2019; and

a $2,370 increase in interest on our Notes Due 2029, which were issued in June 2019;

partially offset by

a $2,705 decrease in interest on mortgages payable due to a reduction in mortgage debt; and

a $1,617 decrease in interest on our revolving line of credit primarily due to lower average LIBOR rates;

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, 2019;

a $3,558 decrease in operating expenses primarily due to lower snow-related expenses in 2020;

a $2,221 decrease in depreciation and amortization primarily due to the impact of assets taken out of service due to the demolition of existing structures at our Carillon redevelopment in 2019 and the investment properties sold during 2019 and 2020; and

a $2,196 decrease in general and administrative expenses primarily due to a decrease in comparative cash bonus expense resulting from a significant reduction in cash bonus expectations for 2020.

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 ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019:


	Three Months Ended March 31,									Six Months Ended June 30,
	2020			2019			Change			2020			2019			Change
Net income attributable to common shareholders	$	22,357		$	23,208		$	(851	)	$	15,010		$	44,378		$	(29,368	)
Adjustments to reconcile to Same Store NOI:
Gain on sales of investment properties	—			(8,449		)	8,449			—			(16,903		)	16,903
Gain on litigation settlement	(6,100		)	—			(6,100		)	(6,100		)	—			(6,100		)
Depreciation and amortization	40,173			43,267			(3,094		)	83,928			86,149			(2,221		)
Provision for impairment of investment properties	346			—			346			346			—			346
General and administrative expenses	9,165			10,499			(1,334		)	17,656			19,852			(2,196		)
Interest expense	17,046			17,430			(384		)	36,406			34,793			1,613
Straight-line rental income, net	(341		)	(1,500		)	1,159			943			(2,116		)	3,059
Amortization of acquired above and below market lease intangibles, net	(976		)	(2,334		)	1,358			(2,772		)	(3,045		)	273
Amortization of lease inducements	419			296			123			872			615			257
Lease termination fees, net	(124		)	(1,188		)	1,064			(376		)	(1,420		)	1,044
Non-cash ground rent expense, net	333			358			(25		)	545			690			(145		)
Other expense, net	761			659			102			546			1,131			(585		)
NOI	83,059			82,246			813			147,004			164,124			(17,120		)
NOI from Other Investment Properties	(1,318		)	(1,484		)	166			(2,559		)	(2,764		)	205
Same Store NOI	$	81,741		$	80,762		$	979		$	144,445		$	161,360		$	(16,915	)


	Three Months Ended March 31,									Six Months Ended June 30,
	2020			2019			Change			2020			2019			Change
Same Store NOI:
Base rent	$	89,323		$	86,591		$	2,732		$	172,932		$	173,673		$	(741	)
Percentage and specialty rent	1,035			1,280			(245		)	1,483			1,971			(488		)
Tenant recoveries	25,445			26,818			(1,373		)	47,750			52,128			(4,378		)
Other lease-related income	1,466			1,289			177			2,515			2,764			(249		)
Bad debt, net	(1,505		)	(428		)	(1,077		)	(13,878		)	(488		)	(13,390		)
Property operating expenses	(15,718		)	(16,365		)	647			(30,349		)	(32,232		)	1,883
Real estate taxes	(18,305		)	(18,423		)	118			(36,008		)	(36,456		)	448
Same Store NOI	$	81,741		$	80,762		$	979		$	144,445		$	161,360		$	(16,915	)

Same Store NOI ~~increased $979,~~decreased $16,915, or ~~1.2%~~10.5%, primarily due to the following:

a ~~$2,732 increase in base rent primarily driven by increases of (i) $1,093 from occupancy growth, (ii) $996 from contractual rent changes and (iii) $552 from re-leasing spreads;~~

~~partially offset by~~

~~a $1,077~~$13,390 increase in bad debt, ~~net;~~net primarily due to higher accounts receivable balances as we have received approximately 68.4% (as of July 27, 2020) of same store base rent that was billed during the three months ended June 30, 2020 and have agreed in principle to lease concessions which would at least partially abate tenant rent, however have not executed such agreements as of June 30, 2020; as a result, these anticipated abatements are classified as bad debt until executed; and

a ~~$608~~$2,047 increase in property operating expenses and real estate taxes, net of tenant recoveries, primarily due to ~~a positive impact~~(i) lower tenant recoveries resulting from moving tenants to the ~~common area maintenance and real estate tax reconciliation process in 2019, increases~~cash basis of accounting, (ii) an increase in certain non-recoverable property operating expenses, and ~~higher net~~(iii) an increase in real estate ~~taxes, partially offset by decreases in net recoverable property operating expenses primarily driven by lower snow-related expenses.~~tax expense resulting from higher real estate tax assessments.

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 computed in accordance with GAAP, excluding (i) depreciation and amortization related to real estate, (ii) gains from sales of real estate assets, (iii) gains and losses from change in control and (iv) impairment write-downs of real 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 which 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, the impact on earnings from gains or losses associated with the early extinguishment of debt or other liabilities, litigation involving the Company, including gains recognized as a result of settlement and costs to engage outside counsel related to litigation with former tenants, the impact on earnings from executive separation and 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 (loss) income attributable to common shareholders to FFO attributable to common shareholders and Operating FFO attributable to common shareholders:


	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019			2020			2019
Net income attributable to common shareholders	$	22,357		$	23,208
Net (loss) income attributable to common shareholders							$	(7,347	)	$	21,170		$	15,010		$	44,378
Depreciation and amortization of real estate	39,838			42,913			43,422			42,531			83,260			85,444
Provision for impairment of investment properties	346			—			—			—			346			—
Gain on sales of investment properties	—			(8,449		)	—			(8,454		)	—			(16,903		)
FFO attributable to common shareholders	$	62,541		$	57,672		$	36,075		$	55,247		$	98,616		$	112,919

FFO attributable to common shareholders per common share outstanding – diluted	$	0.29		$	0.27		$	0.17		$	0.26		$	0.46		$	0.53

FFO attributable to common shareholders	$	62,541		$	57,672		$	36,075		$	55,247		$	98,616		$	112,919
Gain on litigation settlement	(6,100		)	—			—			—			(6,100		)	—
Other (a)	1,011			711			—			569			1,011			1,280
Operating FFO attributable to common shareholders	$	57,452		$	58,383		$	36,075		$	55,816		$	93,527		$	114,199

Operating FFO attributable to common shareholders per common share outstanding – diluted	$	0.27		$	0.27		$	0.17		$	0.26		$	0.44		$	0.54


(a)	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 are included within “Other ~~expense,~~income (expense), net” in the accompanying condensed consolidated statements of operations and other comprehensive ~~loss.~~income (loss).

Liquidity and Capital Resources

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
▪	~~Proceeds from capital markets transactions~~Available borrowings under our unsecured revolving		recoverable through common area maintenance charges to tenants
	line of credit	▪	Debt repayments
▪	Proceeds from capital markets transactions	▪	Distribution payments
▪	Proceeds from asset dispositions	▪	~~Debt repayments~~Redevelopment, expansion and pad development activities
▪	Proceeds from the sales of air rights	▪	~~Distribution payments~~
		▪	~~Redevelopment, expansion and pad development activities~~
		▪	Acquisitions
		▪	New development
		▪	Repurchases of our common stock

During the three months ended March 31, 2020, we elected to nearly fully draw on our $850,000 unsecured revolving line of credit to enhance our liquidity and provide maximum financial flexibility as the effects of the COVID-19 pandemic continue to evolve and impact the global financial markets. As of March 31, 2020, we have $769,241 of cash on hand and the ability to repay the vast majority of the amount drawn on our unsecured revolving line of credit; however, we may elect to not repay it for some time, which will increase our interest expense. Over the last several years, we have made substantial progress in strengthening our balance sheet, as demonstrated by our reduced leverage, improved financial flexibility and higher unencumbered asset ratio. 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. Additionally, ~~through April 30,~~as of July 27, 2020, we have collected ~~more than 52%~~68.4% and 71.4% of ~~billed~~base rent charges from our ~~tenants.~~tenants related to the three months ended June 30, 2020 and one month ended July 31, 2020, respectively, and have applied security deposits, signed lease concession agreements and are actively negotiating lease amendments for an additional 17.5% and 13.1% of the three months ended June 30, 2020 and one month ended July 31, 2020, respectively. Uncollected billed base rent related to tenants who have declared bankruptcy represents an additional 2.0% and 1.4% of the three months ended June 30, 2020 and one month ended July 31, 2020, respectively. If such a trend in cash collection activity continues, or possibly deteriorates, and if we ~~agree~~reach additional agreements with ~~certain~~ tenants ~~that~~to defer or abate rent, ~~may be deferred until a later date,~~ our operating cash flows and liquidity will be negatively impacted. AsFurthermore, as of July 27, 2020, we have signed, or agreed in principle, with tenants whereby we expect to address through lease concessions approximately $7,100 of base rent charges pertaining to the second half of 2020. 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 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 ~~March 31,~~June 30, 2020, we have no scheduled debt maturities and ~~$1,875~~

$1,252 of principal amortization due through the end of 2020, which we plan on satisfying through a combination of cash flows from operations, ~~and~~ working capital ~~including cash on hand~~and our unsecured revolving line of ~~$769,241 as of March 31, 2020.~~credit.

The table below summarizes our consolidated indebtedness as of ~~March 31,~~June 30, 2020:


Debt	Aggregate Principal Amount		Weighted Average Interest Rate		Maturity Date	Weighted Average Years to Maturity	Aggregate Principal Amount		Weighted Average Interest Rate		Maturity Date	Weighted Average Years to Maturity
Fixed rate mortgages payable (a)	$	94,285	4.37	%	Various	4.8 years	$	93,662	4.37	%	Various	4.6 years

Unsecured notes payable:
Senior notes – 4.12% due 2021	100,000		4.12	%	June 30, 2021	1.2 years	100,000		4.12	%	June 30, 2021	1.0 year
Senior notes – 4.58% due 2024	150,000		4.58	%	June 30, 2024	4.3 years	150,000		4.58	%	June 30, 2024	4.0 years
Senior notes – 4.00% due 2025(b)	250,000		4.00	%	March 15, 2025	5.0 years	250,000		4.00	%	March 15, 2025	4.7 years
Senior notes – 4.08% due 2026	100,000		4.08	%	September 30, 2026	6.5 years	100,000		4.08	%	September 30, 2026	6.3 years
Senior notes – 4.24% due 2028	100,000		4.24	%	December 28, 2028	8.8 years	100,000		4.24	%	December 28, 2028	8.5 years
Senior notes – 4.82% due 2029	100,000		4.82	%	June 28, 2029	9.2 years	100,000		4.82	%	June 28, 2029	9.0 years
Total unsecured notes payable (a)	800,000		4.27	%		5.6 years	800,000		4.27	%		5.3 years

Unsecured credit facility:
Term loan due 2021 – fixed rate ~~(b)~~(c)	250,000		3.20	%	January 5, 2021	0.8 years	250,000		3.35	%	January 5, 2021	0.5 years
Revolving line of credit – variable rate(b)	849,704		2.04	%	April 22, 2022 (c)	2.1 years	135,000		1.33	%	April 22, 2022 (d)	1.8 years
Total unsecured credit facility (a)	1,099,704		2.30	%		1.8 years	385,000		2.64	%		1.0 year

Unsecured term loans:
Term Loan Due 2023 – fixed rate ~~(d)~~(e)	200,000		4.05	%	November 22, 2023	3.6 years	200,000		4.20	%	November 22, 2023	3.4 years
Term Loan Due 2024 – fixed rate ~~(e)~~(f)	120,000		2.88	%	July 17, 2024	4.3 years	120,000		2.93	%	July 17, 2024	4.0 years
Term Loan Due 2026 – fixed rate ~~(f)~~(g)	150,000		3.27	%	July 17, 2026	6.3 years	150,000		3.42	%	July 17, 2026	6.0 years
Total unsecured term loans (a)	470,000		3.50	%		4.7 years	470,000		3.63	%		4.4 years

Total consolidated indebtedness	$	2,463,989	3.25	%		3.7 years	$	1,748,662	3.74	%		4.1 years

(a)

Fixed rate mortgages payable excludes mortgage discount of ~~$(483)~~$(471) and capitalized loan fees of ~~$(240)~~$(224), net of accumulated amortization, as of ~~March 31,~~June 30, 2020. Unsecured notes payable excludes discount of ~~$(586)~~$(556) and capitalized loan fees of ~~$(2,994)~~$(2,876), net of accumulated amortization, as of ~~March 31,~~June 30, 2020. Unsecured term loans exclude capitalized loan fees of ~~$(3,208)~~$(3,008), net of accumulated amortization, as of ~~March 31,~~June 30, 2020. 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, 2020, we completed an offering of $100,000 aggregate principal amount of our Notes Due 2025, issued at 99.010% of par value plus accrued and unpaid interest from March 15, 2020 through July 20, 2020. This $100,000 offering constitutes a further issuance of, and forms a single series with, our previously issued Notes Due 2025, of which $250,000 was outstanding as of June 30, 2020, and will mature on March 15, 2025, unless earlier redeemed. The total aggregate principal amount of Notes Due 2025 currently outstanding is $350,000, which enables the Notes Due 2025 to be eligible for index inclusion. The proceeds were used to repay borrowings on our unsecured revolving line of credit and for general corporate purposes.


(c)	Reflects $250,000 of LIBOR-based variable rate debt that has been swapped to a fixed rate of 2.00% plus a credit spread based on a leverage grid ranging from 1.20% to 1.70% through January 5, 2021. The applicable credit spread was ~~1.20%~~1.35% as of ~~March 31,~~June 30, 2020.


~~(c)~~(d)	We have 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 0.075% of the commitment amount being extended.


~~(d)~~(e)	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 ~~1.20%~~1.35% as of ~~March 31,~~June 30, 2020.


~~(e)~~(f)	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%~~1.25% as of ~~March 31,~~June 30, 2020.


~~(f)~~(g)	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 ~~1.50%~~1.65% as of ~~March 31,~~June 30, 2020.

Mortgages Payable

During the ~~three~~six months ended ~~March 31,~~June 30, 2020, we made scheduled principal payments of ~~$619~~$1,242 related to amortizing loans.

Unsecured Term Loans and Revolving Line of Credit

Unsecured Credit Facility

We have a $1,100,000 unsecured credit facility consisting of an $850,000 unsecured revolving line of credit and a $250,000 unsecured term loan (Unsecured Credit Facility) that is priced on a leverage grid at a rate of LIBOR plus a credit spread. In accordance with the unsecured credit 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 elect~~have the option to make an irrevocable election to convert to an investment grade pricing grid. As of ~~March 31,~~

June 30, 2020, making such an election would have resulted in a higher interest rate for the unsecured revolving line of credit and ~~as such, we~~would not have ~~not made~~changed the ~~election~~interest rate for the $250,000 unsecured term loan due 2021. We expect the leverage-based pricing grid to ~~convert to an investment grade pricing grid.~~be favorable for both the unsecured revolving line of credit and the $250,000 unsecured term loan due 2021 when the credit spread set forth in the leverage grid resets next quarter.

The following table summarizes the key terms of the Unsecured Credit Facility:

Leverage-Based Pricing

Investment Grade Pricing

Unsecured Credit Facility

Maturity Date

Extension Option

Extension Fee

Credit Spread

Facility Fee

Credit Spread

Facility Fee

$250,000 unsecured term loan due 2021

1/5/2021

N/A

1.20%–1.70%

N/A

0.90%–1.75%

N/A

$850,000 unsecured revolving line of credit

4/22/2022

~~2-six month~~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 $1,600,000, 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 agreement and (ii) our ability to obtain additional lender commitments.

As of ~~March 31,~~June 30, 2020, 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 ~~March 31,~~June 30, 2020, 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, adjusted based on applicable reserve percentages established by the Federal Reserve, 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 ~~may~~have the option to make an irrevocable election to convert to an investment grade pricing grid. Although making such an election during the three months ended June 30, 2020 would have resulted in a lower interest rate as of June 30, 2020 for the Term Loan Due 2023, we did not elect to convert to an investment grade pricing ~~grid.~~grid as we expect the leverage-based pricing grid to once again be favorable when the credit spread set forth in the leverage grid resets next quarter. As of ~~March 31,~~June 30, 2020, making ~~such an~~the election to convert to the investment grade pricing grid would not have changed the interest rate for the Term Loan Due 2024 and would have resulted in a higher interest rate for the Term Loan Due 2026. We expect the leverage-based pricing grid to be favorable for both the Term Loan Due 2024 and ~~as such, we have not made~~Term Loan Due 2026 when the ~~election to convert to an investment grade pricing grid.~~credit spread set forth in the leverage grid resets next quarter.

The following table summarizes the key terms of the unsecured term loans:



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 2024 has a $130,000 accordion option and the Term Loan 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.

The Term Loan Due 2023 has a $100,000 accordion option that allows us, at our election, to increase the Term 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 amended term loan agreement and (ii) our ability to obtain additional lender commitments.

Our unsecured revolving line of credit and unsecured term loans each bear interest at a rate of LIBOR plus a credit spread, which is based on leverage grids. To the extent that our leverage ratio increases, the applicable credit spread will increase according to the tiers of each respective leverage grid. Based on our unsecured revolving line of credit and unsecured term loans balance of $1,569,704 as of March 31, 2020, the resulting increase in our leverage ratio and related movement to a higher tier on each respective leverage grid is expected to increase the weighted average credit spread portion of the interest rate by 0.11% applicable to the $1,569,704 balance for, at a minimum, the next quarterly compliance period under our debt agreements. Additionally, the facility fee on our unsecured revolving line of credit is expected to increase by 0.05% due to the increase in our leverage ratio and related movement to a higher tier on the leverage grid.

Debt Maturities

The following table summarizes the scheduled maturities and principal amortization of our indebtedness as of ~~March 31,~~June 30, 2020 for the remainder of 2020, 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 ~~March 31,~~June 30, 2020. The table does not reflect the impact of any debt activity that occurred after ~~March 31,~~June 30, 2020., such as the $100,000 public offering of Notes Due 2025, which were issued on July 21, 2020.


	2020			2021			2022			2023			2024			Thereafter			Total			Fair Value		2020			2021			2022			2023			2024			Thereafter			Total			Fair Value
Debt:
Fixed rate debt:
Mortgages payable (a)	$	1,875		$	2,626		$	26,678		$	31,758		$	1,737		$	29,611		$	94,285		$	95,831	$	1,252		$	2,626		$	26,678		$	31,758		$	1,737		$	29,611		$	93,662		$	94,982
Fixed rate term loans (b)	—			250,000			—			200,000			120,000			150,000			720,000			711,013		—			250,000			—			200,000			120,000			150,000			720,000			704,148
Unsecured notes payable (c)	—			100,000			—			—			150,000			550,000			800,000			788,109		—			100,000			—			—			150,000			550,000			800,000			786,719
Total fixed rate debt	1,875			352,626			26,678			231,758			271,737			729,611			1,614,285			1,594,953		1,252			352,626			26,678			231,758			271,737			729,611			1,613,662			1,585,849

Variable rate debt:
Variable rate revolving line of credit	—			—			849,704			—			—			—			849,704			841,529		—			—			135,000			—			—			—			135,000			133,299
Total debt (d)	$	1,875		$	352,626		$	876,382		$	231,758		$	271,737		$	729,611		$	2,463,989		$	2,436,482	$	1,252		$	352,626		$	161,678		$	231,758		$	271,737		$	729,611		$	1,748,662		$	1,719,148

Weighted average interest rate on debt:
Fixed rate debt	4.39		%	3.47		%	4.81		%	4.06		%	3.83		%	4.02		%	3.89		%			4.41		%	3.58		%	4.81		%	4.19		%	3.85		%	4.05		%	3.95		%
Variable rate debt (e)	—			—			2.04		%	—			—			—			2.04		%			—			—			1.33		%	—			—			—			1.33		%
Total	4.39		%	3.47		%	2.12		%	4.06		%	3.83		%	4.02		%	3.25		%			4.41		%	3.58		%	1.90		%	4.19		%	3.85		%	4.05		%	3.74		%


(a)	Excludes mortgage discount of ~~$(483)~~$(471) and capitalized loan fees of ~~$(240)~~$(224), net of accumulated amortization, as of ~~March 31,~~June 30, 2020.

(b)


(c)	Excludes discount of ~~$(586)~~$(556) and capitalized loan fees of ~~$(2,994)~~$(2,876), net of accumulated amortization, as of ~~March 31,~~June 30, 2020.


(d)	The weighted average years to maturity of consolidated indebtedness was ~~3.7~~4.1 years as of ~~March 31,~~June 30, 2020.


(e)	Represents interest rate as of ~~March 31,~~June 30, 2020.

Our unsecured debt agreements, consisting of the (i) unsecured credit agreement, as amended governing the Unsecured Credit Facility, (ii) ~~amended~~ 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 4.12% senior unsecured notes due 2021 and the 4.58% senior unsecured notes due 2024 (Notes Due 2021 and 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), and (vii) note purchase agreement governing the 4.82% senior unsecured notes due 2029 (Notes Due 2029), 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 ~~March 31,~~June 30, 2020, management believes we were in compliance with the financial covenants and default provisions under the unsecured debt agreements.

During the three months ended June 30, 2020, we executed amendments to our unsecured debt agreements for our Unsecured Credit Facility, Term Loan Due 2023, Term Loan Due 2024 and Term Loan Due 2026 that changed the covenant calculation for the unencumbered interest coverage ratio to include operating results from the most recent four fiscal quarters. Prior to these amendments, the calculation only included operating results from the most recent fiscal quarter. As a result, the updated calculation applies to all unsecured debt instruments to which this covenant relates, including our unsecured revolving line of credit, all unsecured term loans and all unsecured private placement notes payable.

We plan on addressing our debt maturities through a combination of (i) cash flows from operations, (ii) working capital, ~~including cash on hand of $769,241 as of March 31, 2020, and~~ (iii) capital markets ~~transactions.~~transactions and (iv) our unsecured revolving line of credit.

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 distributions of all, or substantially all, of our taxable income to shareholders. Our future distributions will be at the discretion of our board of directors and are required to be declared 10 days prior to the record date. 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, expansion 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, and (vii) the amount required to be distributed to maintain our status as a REIT, which is a requirement of our unsecured credit agreement, and to avoid or minimize any income and excise taxes that we otherwise would be required to 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.

We have an existing common stock repurchase program under which we may repurchase, from time to time, up to a maximum of $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. We did not repurchase any shares during the ~~three~~six months ended ~~March 31,~~June 30, 2020. As of ~~March 31,~~June 30, 2020, $189,105 remained available for repurchases of shares of our common stock under our common stock repurchase program.

Capital Expenditures and Redevelopment Activity

We anticipate that obligations related to capital improvements and redevelopments, including expansions and pad developments, can be met with (i) cash flows from operations, (ii) working capital, ~~including cash on hand of $769,241 as of March 31, 2020, and~~ (iii) capital markets ~~transactions.~~transactions and (iv) our unsecured revolving line of credit.

As of ~~March 31,~~June 30, 2020, we have active expansion and redevelopment projects at Circle East, One Loudoun Downtown, The Shoppes at Quarterfield and a vacant pad development at Southlake Town Square. To date, we have invested a total of approximately ~~$45,000~~$61,000 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 ~~$133,000~~$117,000 to ~~$147,000~~$131,000 of additional investment from us to complete these projects. During the three months ended March 31, 2020, we halted plans for vertical construction at our Carillon redevelopment in response to current macroeconomic conditions due to the impact of the COVID-19 pandemic and ~~have~~ materially reduced the planned scope and spend for the project, driving a reduction in our expected 2020 redevelopment spend of approximately $75,000 to $100,000. As of ~~March 31,~~June 30, 2020, we ~~were~~are actively completing site work preparation at Carillon in anticipation of potential future development at the site. We expect to complete the site work preparation during 2020 for an expected additional capital investment of approximately ~~$4,500.~~$1,400.

We capitalized ~~$626~~$641 and ~~$675~~$1,267 of internal salaries and related benefits of personnel directly involved in capital upgrades and tenant improvements during the three and six months ended ~~March 31,~~June 30, 2020, respectively, and $650 and $1,325 during the three and six months ended June 30, 2019, respectively. We also capitalized ~~$60 and $54 of~~ internal leasing incentives of $42 and $102 during the three and six months ended June 30, 2020, respectively, and $82 and $136 during the three and six months ended June 30, 2019, respectively, all of which were incremental to signed ~~leases, during the three months ended March 31, 2020 and 2019, respectively.~~

leases.

In addition, we capitalized ~~$1,316~~$1,347 and ~~$574~~$2,663 of indirect project costs ~~which includes,~~related to redevelopment projects during the three and six months ended June 30, 2020, including, among other costs, ~~$372~~$329 and ~~$365~~$701 of internal salaries and related benefits of personnel directly involved in the redevelopment projects and ~~$785~~$736 and ~~$144~~$1,521 of interest, respectively. We capitalized $659 and $1,233 of indirect project costs related to ~~expansion and~~ redevelopment projects during the three and six months ended ~~March 31, 2020~~June 30, 2019, including, among other costs, $335 and ~~2019,~~$700 of internal salaries and related benefits of personnel directly involved in the redevelopment projects and $226 and $370 of interest, respectively.

Dispositions

The following table highlights our property dispositions during 2019 and the ~~three~~six months ended ~~March 31,~~June 30, 2020:


	Number of Properties Sold	Square Footage	Consideration		Aggregate Proceeds, Net (a)		Debt Extinguished		Number of Properties Sold	Square Footage	Consideration		Aggregate Proceeds, Net (a)		Debt Extinguished
2020 Disposition (through March 31, 2020)	1	105,900	$	13,900	$	11,343	$	—
2020 Disposition (through June 30, 2020)									1	105,900	$	13,900	$	11,343	$	—
2019 Dispositions	2	236,100	$	44,750	$	39,594	$	—	2	236,100	$	44,750	$	39,594	$	—


(a)	Represents total consideration net of transaction costs, as well as capital and tenant-related costs credited to the buyer at close, as applicable.

In addition to the transactions presented in the preceding table, during the six months ended June 30, 2020, we received proceeds of $26 from a condemnation award. During the year ended December 31, 2019, we received net proceeds of $5,062 in connection with the second and third phases of the sale of a land parcel, which included rights to develop 22 residential units, at One Loudoun Downtown.

Acquisitions

The following table highlights our asset acquisitions during 2019 and the ~~three~~six months ended ~~March 31,~~June 30, 2020:


	Number of Assets Acquired	Square Footage	Acquisition Price		Mortgage Debt		Number of Assets Acquired	Square Footage	Acquisition Price		Mortgage Debt
2020 Acquisition (through March 31, 2020) (a)	1	154,700	$	55,000	$	—
2020 Acquisition (through June 30, 2020) (a)							1	154,700	$	55,000	$	—
2019 Acquisitions (b)	3	73,600	$	29,976	$	—	3	73,600	$	29,976	$	—


(a)	2020 acquisition is the 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.


(b)	In addition to the acquisition of one multi-tenant retail operating property, 2019 acquisitions include the purchase of the following that did not affect our property count: (i) a parcel adjacent to our Paradise Valley Marketplace multi-tenant retail operating property and (ii) a single-user parcel at our Southlake Town Square multi-tenant retail operating property.

Summary of Cash Flows


	Three Months Ended March 31,									Six Months Ended June 30,
	2020			2019			Change			2020			2019			Change
Net cash provided by operating activities	$	35,042		$	36,955		$	(1,913	)	$	64,425		$	99,186		$	(34,761	)
Net cash used in investing activities	(70,507		)	(28,186		)	(42,321		)	(106,878		)	(32,408		)	(74,470		)
Net cash provided by (used in) financing activities	795,382			(10,830		)	806,212			45,656			(53,052		)	98,708
Increase (decrease) in cash, cash equivalents and restricted cash	759,917			(2,061		)	761,978
Increase in cash, cash equivalents and restricted cash										3,203			13,726			(10,523		)
Cash, cash equivalents and restricted cash, at beginning of period	14,447			19,601						14,447			19,601
Cash, cash equivalents and restricted cash, at end of period	$	774,364		$	17,540					$	17,650		$	33,327

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 and (iii) gain on sales of investment properties. Net cash provided by operating activities during the ~~three~~six months ended ~~March 31,~~June 30, 2020 decreased ~~$1,913~~$34,761 primarily due to the following:

a ~~$937~~$32,979 decrease in comparative changes in accounts receivable due to a decrease in the rate and aggregate amount of cash collections of charges billed to tenants as a result of the COVID-19 pandemic during the three months ended June 30, 2020 as compared to historical levels;

a $3,674 decrease in NOI, net of bad debt, consisting of a decrease in Same Store NOI and NOI from properties that were sold or held for sale in 2019 and 2020 and other properties not included in our same store portfolio;

a $958 increase in cash paid for ~~leasing fees and inducements;~~interest;

a $337 increase in cash bonuses paid related to the results of 2019; and

ordinary course fluctuations in working capital accounts;

partially offset by

a ~~$1,953~~$764 decrease in cash paid for ~~interest;~~leasing fees and

an $813 increase in NOI, consisting of an increase in Same Store NOI of $979, partially offset by a decrease in NOI from properties that were sold or held for sale in 2019 and 2020 and other properties not included in our same store portfolio of $166. inducements.

During the ~~three~~six months ended ~~March 31,~~June 30, 2020, we distributed ~~$35,387~~$70,851 to common shareholders, which is ~~$345~~$6,426 in excess of net cash provided by operating activities during the period. This is primarily driven by a significant decrease in cash collections from tenants as a result of the ~~timing of ordinary course annual real estate tax payments.~~COVID-19 pandemic. We used existing cash and cash equivalents and our unsecured revolving line of credit in addition to net cash flows provided by operating activities to fund such distributions. In addition, our board of directors temporarily suspended future quarterly dividend payments on our outstanding Class A common stock; as such, a quarterly distribution was not declared during the three months ended June 30, 2020 and a distribution payment is not expected to be made during the three months ended September 30, 2020.

As a result of COVID-19, a number of our tenants ~~have announced temporary closures of~~were required to temporarily close their stores or ~~modifications~~modify their operations and, as a result, requested lease concessions. As of ~~their operations.~~June 30, 2020, approximately 10% of our tenants (based on GLA) were closed. While working to preserve our cash flow, we are also working with our tenants regarding requests for lease concessions. ~~While~~During the three months ended June 30, 2020, we agreed in principle, and, in certain circumstances, executed agreements, with tenants regarding lease concessions. The majority of these concessions are for the deferral of amounts billed, without an extension of the lease term. However, certain of these lease concessions include abatement, a combination of deferral and abatement, or provide a concession that includes the extension of the existing lease term. The majority of the amounts addressed by the lease concessions are base rent, although certain concessions also address tenant recoveries and other charges. As of June 30, 2020, we agreed in principle and, in certain circumstances, executed lease concessions to defer, without an extension of the lease term, $6,530 of previously uncollected base rent charges related to the second quarter of 2020, and to address an additional $4,659 of previously uncollected base rent charges related to the second quarter of 2020 through abatement, a combination of deferral and abatement or a concession that includes the extension of the lease term. As of June 30, 2020, the amounts that have been deferred to future periods under executed lease concessions, on a weighted average basis, are expected to begin being received starting in approximately six months from June 30, 2020 and will be received over a period of approximately 11 months once started.

We have not yet reached ~~agreement~~agreements, and in some cases do not anticipate reaching agreements, to defer or abate rent with certain tenants regarding concession requests, as discussions are ongoing, and certain tenants have not paid or only partially paid their ~~April~~ rent and other charges. As of ~~April 30,~~July 27, 2020, we have collected ~~more than 52%~~68.4% and 71.4% of ~~April~~base rent ~~charges.~~charges related to the three months ended June 30, 2020 and one month ended July 31, 2020, respectively. If such a trend in cash collection activity continues, or possibly deteriorates, and if we reach additional agreements with tenants to defer or abate rent, our operating cash flows will be

negatively impacted. We will continue to work with tenants regarding lease concession requests, which may or may not include some element of rent deferral and, in some cases, partial rent abatement. While seeking to work toward a mutually agreeable outcome with tenants directly impacted by COVID-19, we believe that certain tenants, which remain open and ~~hold an~~have the ability to pay, have elected to withhold ~~April~~base rent unnecessarily. We are not forgoing our contractual rights under our lease agreements and our tenants do not have a clear contractual right to cease paying rent due to government ~~closures.~~closures, and, as a result, non-payment of rent generally constitutes a default. However, COVID-19 and the related governmental orders present fairly novel situations and it is possible government action could impact our rights.

Management believes that cash flows from operations, working capital and ~~existing cash and cash equivalents~~our unsecured revolving line of credit will provide sufficient liquidity to sustain future operations; however, we cannot provide any such assurances.

Cash Flows from Investing Activities

Cash flows from investing activities consist primarily of cash paid to purchase investment properties and fund capital expenditures, tenant improvements and developments in progress, net of proceeds from the sales of investment properties. Net cash flows from investing activities during the ~~three~~six months ended ~~March 31,~~June 30, 2020 decreased ~~$42,321~~$74,470 due to the following:

a ~~$29,766 increase in cash paid to purchase investment properties;~~

~~a $10,262~~$30,517 decrease in proceeds from the sales of investment properties;

a $28,394 increase in cash paid to purchase investment properties; and

a ~~$6,874~~$24,715 increase in investment in developments in progress;

partially offset by

a ~~$4,581~~$9,156 decrease in capital expenditures and tenant improvements.

For 2020, we expect to fund redevelopment, expansion and pad development activities, capital expenditures and tenant improvements through (i) cash flows generated from operations, (ii) working capital, ~~including cash on hand of $769,241 as of March 31, 2020, and~~ (iii) capital markets ~~transactions.~~transactions and (iv) our 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, partially offset by (i) repayments of our unsecured revolving line of credit, (ii) distribution payments, (iii) principal payments on mortgages payable and (iv) payment of loan fees and deposits. Net cash flows from financing activities during the ~~three~~six months ended ~~March 31,~~June 30, 2020 increased ~~$806,212~~$98,708 primarily due to the following:

~~an $805,704~~a $197,000 change in the activity on our unsecured revolving line of credit from net ~~proceeds~~repayments of ~~$26,000~~$80,000 during the ~~three~~six months ended ~~March 31,~~June 30, 2019 compared to net proceeds of ~~$831,704~~$117,000 during the ~~three~~six months ended ~~March 31,~~June 30, 2020;

a $603 decrease in the payment of loan fees and deposits; and

a ~~$145~~$288 decrease in principal payments on mortgages ~~payable.~~payable;

partially offset by

a $100,000 decrease in proceeds from the issuance of unsecured notes payable to institutional investors in a private placement transaction during the six months ended June 30, 2019. No such proceeds were received in 2020.

We plan to continue to address our debt maturities through a combination of (i) cash flows from operations, (ii) working capital, ~~including cash on hand of $769,241 as of March 31, 2020, and~~ (iii) capital markets ~~transactions.~~transactions and (iv) our unsecured revolving line of credit.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Contractual Obligations

During the ~~three~~six months ended ~~March 31,~~June 30, 2020, 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, 2019.

Critical Accounting Policies and Estimates

Our 2019 Annual Report on Form 10-K contains a description of our critical accounting policies, including those relating to the acquisition of investment properties, impairment of long-lived assets and lease income. ~~For~~We consider accounting policies and estimates “critical” to the ~~three months~~portrayal of our financial condition and results of operations as they require our most difficult, subjective or complex judgments. These judgments often result from the need to make estimates about the effect of matters that are inherently uncertain.

We evaluate our assumptions and estimates on an ongoing basis using available information. We base our estimates on current economic conditions, historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets, liabilities and results of operations that are not readily apparent from other sources. Estimates may differ materially upon taking into consideration different conditions or assumptions and actual results may differ materially from these estimates.

Uncertainty in the current economic environment due to the COVID-19 pandemic has, and may continue to, significantly impact the judgments regarding estimates and assumptions utilized by management. In addition to the disclosure of our critical accounting estimates included in our Annual Report on Form 10-K for the year ended ~~March~~December 31, ~~2020, there were no~~2019 in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we are adding the following due to significant changes in judgments related to ~~these policies.~~COVID-19.

Lease Income and Accounts Receivable

We commence recognition of lease income on our leases based on a number of factors. In most cases, revenue recognition under a lease begins when the lessee takes possession or controls the physical use of the leased asset. Generally, this occurs on the lease commencement date. At lease commencement, we expect that collectibility is probable for all of our leases due to the creditworthiness analysis performed by us before entering into a new lease. Lease income, for leases that have fixed and measurable rent escalations, is recognized on a straight-line basis over the term of each lease. The difference between such lease income earned and the cash rent due under the provisions of a lease is recorded as deferred rent receivable and is included as a component of “Accounts and notes receivable, net” in the accompanying condensed consolidated balance sheets.

Throughout the lease term, individual leases are assessed for collectibility and upon the determination that the collection of rents over the remaining lease life is not probable, lease income is adjusted such that it is recognized on the cash basis of accounting. We will remove the cash basis designation and resume recording lease income from such tenants during the period earned at such time we believe that the collection of rent over the remaining lease term is probable and, generally, based upon a demonstrated payment history.

As a result of ongoing discussions with tenants regarding lease concession requests, we reserve for lease concessions that have been agreed in principle with the tenant for which a reduction in lease income is anticipated under the accounting for lease concessions once executed. In addition, a general portfolio reserve is established based upon an analysis of balances outstanding, historical bad debt levels and current economic trends. An allowance for the uncollectible portion of uncollected receivables is recorded as an adjustment to lease income.

We review current economic considerations each reporting period, including the effects of tenant bankruptcies. Additionally, with the uncertainties regarding COVID-19 as well as ongoing discussions with tenants regarding lease concession requests, our assessment also took into consideration items such as tenant type, local restrictions regarding tenant operations, the current status of lease concession requests, as well as recent rent collection experience. Evaluating and estimating uncollectible lease payments and related receivables requires a significant amount of judgment by management and is based on the best information available to management at the time of evaluation.

See further discussion within Part 1, Item 1, Note 2, “Summary of Significant Accounting Policies” regarding the accounting treatment for lease concessions as well as Part II, Item 1A. “Risk Factors.”

Impact of Recently Issued Accounting Pronouncements

See Note 2 – Summary of Significant Accounting Policies in the accompanying condensed consolidated financial statements regarding recently issued accounting pronouncements.

Subsequent Events

~~terminated~~through July 20, 2020. This $100,000 offering constitutes a further issuance of, and forms a single series with, our previously issued Notes Due 2025, of which $250,000 was outstanding as of June 30, 2020, and will mature on March 15, 2025, unless earlier redeemed. The total aggregate principal amount of Notes Due 2025 currently outstanding is $350,000, which enables the ~~joint venture related~~Notes Due 2025 to ~~the medical office building portion of the redevelopment at Carillon; and~~

~~executed amendments~~be eligible for index inclusion. The proceeds were used to our unsecured debt agreements for our Unsecured Credit Facility, Term Loan Due 2023, Term Loan Due 2024 and Term Loan Due 2026 that changed the covenant calculation for the unencumbered interest coverage ratio to include operating results from the most recent four fiscal quarters. Prior to these amendments, the calculation only included operating results from the most recent fiscal quarter. As a result, the updated calculation applies to all unsecured debt instruments to which this covenant relates, includingrepay borrowings on our unsecured revolving line of credit ~~all unsecured term loans~~ and ~~all unsecured private placement notes payable.~~

On May 1, 2020, our board of directors temporarily suspended future quarterly dividend payments on our outstanding Class A common stock in order to preserve and enhance liquidity and capital positioning. Our board of directors will evaluate dividend declaration decisions quarterly and consider REIT taxable income distribution requirements in these deliberations. The timing and amount of dividend resumption depends largely on our operating cash flow performance as well as other factors.for general corporate purposes.

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 ~~March 31,~~June 30, 2020, we had $720,000 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 ~~March 31,~~June 30, 2020 are summarized in the following table:


	Notional Amount		Maturity Date	Fair Value of Derivative Liability		Notional Amount		Maturity Date	Fair Value of Derivative Liability
Unsecured credit facility term loan due 2021	$	250,000	January 5, 2021	$	3,158	$	250,000	January 5, 2021	$	2,373
Term Loan Due 2023	200,000		November 22, 2023	18,124		200,000		November 22, 2023	17,573
Term Loan Due 2024	120,000		July 17, 2024	6,672		120,000		July 17, 2024	6,940
Term Loan Due 2026	150,000		July 17, 2026	11,916		150,000		July 17, 2026	12,290
	$	720,000		$	39,870	$	720,000		$	39,176

For a discussion concerning the scheduled debt maturities and principal amortization of our indebtedness as of ~~March 31,~~June 30, 2020 for the remainder of 2020, 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 7 – 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” contained herein.

A decrease of 1% in market interest rates would result in a hypothetical increase in our derivative liability of approximately ~~$25,013.~~$23,241.

The combined carrying amount of our debt is approximately ~~$19,996~~$22,379 higher than the fair value as of ~~March 31,~~June 30, 2020.

We had ~~$849,704~~$135,000 of variable rate debt, excluding $720,000 of variable rate debt that has been swapped to fixed rate debt, with an interest rate of ~~2.04%~~1.33% based upon LIBOR as of ~~March 31,~~June 30, 2020. An increase in the variable interest rate on this debt constitutes a market risk. If interest rates increase by 1% based on debt outstanding as of ~~March 31,~~June 30, 2020, interest expense would increase by approximately ~~$8,497~~$1,350 on an annualized basis.

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 ~~term loan due 2021, 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 the end of 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 ~~March 31,~~June 30, 2020, our Chief Executive Officer and our Executive Vice President, Chief Financial Officer and 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, 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 Chief Executive Officer and our Executive Vice President, Chief Financial Officer and 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 ~~March 31,~~June 30, 2020 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. “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations”), there have been no material changes to our risk factors during the three months ended ~~March 31,~~June 30, 2020 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, ~~2019:~~2019 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

The current novel coronavirus (COVID-19) pandemic and measures intended to prevent its spread has caused, and could continue to cause, severe disruptions in the U.S., regional and global economies, and could materially and adversely impact our cash flow, financial condition and results of operations.

In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic. COVID-19 has caused, and could continue to cause, significant disruptions to the U.S. and global economy and has contributed to significant volatility and negative pressure in the financial markets. The global impact of the COVID-19 ~~outbreak~~pandemic has been rapidly evolving and many U.S. states and cities, including where we own properties and/or have development sites, have imposed measures intended to control its spread, such as instituting “shelter-in-place” rules and restrictions on the types of businesses that may continue to operate and/or the types of construction projects that may continue. As a result of these measures, a number of our tenants have announced temporary closures of their stores or modifications of their operations and requested lease concessions. In addition, in response to macroeconomic conditions, we halted plans for vertical construction at our Carillon redevelopment and temporarily suspended future quarterly dividend payments. Furthermore, we withdrew guidance for 2020 and nearly fully drew on our $850,000 unsecured revolving line of credit to enhance our liquidity and provide maximum financial flexibility as the effects of the COVID-19 pandemic continue to evolve and impact the global financial markets.

The extent to which COVID-19 impacts our business, operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of such pandemic, actions taken to contain the pandemic or mitigate its impact, all of which could vary by geographic region in which our properties are located. For example, it is possible that public health officials and governmental authorities in the markets in which we operate may impose additional restrictions in an effort to slow the spread of COVID-19 or may relax or revoke existing restrictions too quickly, which could, in either case, exacerbate the severity of the adverse impacts on the economy. The rapid development and fluidity of this situation precludes any prediction as to the full adverse impact of COVID-19. Nevertheless, COVID-19 may materially adversely affect our cash flow, financial condition and results of operations, and it may also have the effect of heightening many of the risks described herein and in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2019 and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, including:

a complete or partial closure of, or a decrease in customer traffic at, one or more of our properties, which has and could continue to adversely affect our operations and those of our tenants;

reduced economic activity impacting the businesses, financial condition and liquidity of our tenants, which has caused and could continue to cause one or more of our tenants, including certain significant tenants, to be unable to meet their rent payment or other obligations to us in full, or at all, or to otherwise seek modifications of such obligations or declare bankruptcy;

decreases in consumer discretionary spending and consumer confidence during the pandemic, as well as a decrease in individuals’ willingness to frequent our properties once reopened as a result of the public health risks and social impacts of such outbreak, which could affect the ability of our properties to generate sufficient revenues to meet operating and other expenses in the short and long term;

inability to renew leases, lease vacant space or re-let space as leases expire on favorable terms, or at all, which could cause interruptions or delays in the receipt of rental payments or the non-receipt of rental payments;

state, local or industry-initiated efforts, such as a rent freeze for tenants or a suspension of a landlord’s ability to enforce evictions, which may affect our ability to collect rent or enforce remedies for the failure to pay rent;

severe disruption and instability in the U.S. and global financial markets or deteriorations in credit and financing conditions, which may affect our ability to access capital on attractive terms or at all;

a reduction in cash flows, which could impact our ability to resume the payment of, or pay in the future, dividends to our stockholders;

our ability to remain in compliance with the financial covenants set forth in our unsecured credit agreement and other debt agreements, which non-compliance could result in a default and, potentially, an acceleration of such indebtedness;

a general decline in business activity and demand for real estate transactions, which could adversely affect the value of our portfolio and our ability or desire to make strategic acquisitions or dispositions;

disruptions in the supply of materials or products or the inability of contractors to perform on a timely basis or at all, including as a result of restrictions on construction activity due to containment measures, which could cause delays in completing ongoing or future construction, expansion or redevelopment projects;

the potential negative impact on the health of our employees or the employees of our tenants, particularly if a significant number of our or their executive management team or key employees are impacted, which could result in a deterioration in our and our tenants’ ability to ensure business continuity during a disruption;

any inability to effectively manage our portfolio and operations while working remotely during the COVID-19 pandemic and for a time after such pandemic, which could adversely impact our business; and

the limited access to our facilities, management, tenants, support staff and professional advisors, which could decrease the effectiveness of our disclosure controls and procedures and internal controls over financial reporting, increase our susceptibility to security breaches, or hamper our ability to comply with regulatory obligations leading to reputational harm and regulatory issues or fines.

There have been no other material changes to our risk factors during the three months ended ~~March 31,~~June 30, 2020 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, ~~2019.~~2019 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


(a)	Not applicable.


(b)	Not applicable.


(c)	Issuer Purchases of Equity Securities

~~The following table summarizes the number of~~From time to time, employees surrender shares of Class A 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 of Class A common stock surrendered or repurchased during the three months ended June 30, 2020.

As of June 30, 2020, $189,105 remained available for ~~the specified periods and amounts outstanding~~repurchases under our $500,000 common stock repurchase ~~program:~~program, which has no scheduled expiration date.

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)
January 1, 2020 to January 31, 2020 34
$ 13.07
N/A $ 189,105
February 1, 2020 to February 29, 2020 55
$ 12.53
N/A $ 189,105
March 1, 2020 to March 31, 2020 30
$ 10.47
N/A $ 189,105
Total 119
$ 12.16
N/A $ 189,105


~~(a)~~	As disclosed on the Current Reports on Form 8-K dated December 15, 2015 and December 14, 2017, this value represents the amount outstanding under our $500,000 common stock repurchase program, which has no scheduled expiration date.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

On May 4, 2020, following a review of the covenants included in our unsecured debt agreements, we entered into (i) the First Amendment to our unsecured credit agreement, with KeyBank National Association, a national banking association, as administrative agent and certain lenders from time to time party thereto, as lenders, (ii) the Third Amendment to our term loan agreement governing the Term Loan Due 2023, with Capital One, National Association, a national banking association, as administrative agent and certain lenders from time to time party thereto, as lenders, and (iii) the First Amendment to our term loan agreement governing the Term Loan Due 2024 and Term Loan Due 2026, with KeyBank National Association, a national banking association, as administrative agent and certain lenders from time to time party thereto, as lenders.None.

Each of the amendments changed the covenant calculation for the unencumbered interest coverage ratio to include operating results from the most recent four fiscal quarters. Prior to these amendments, the calculation only included operating results from the most recent fiscal quarter.

The foregoing summary is qualified in its entirety by reference to the copies of the amendments, which are filed with this report as Exhibits 10.1, 10.2 and 10.3 and are incorporated herein by reference.

ITEM 6. EXHIBITS



Exhibit No.		Description

4.1		Second Supplemental Indenture, dated July 21, 2020, by and between Retail Properties of America, Inc., as issuer, and U.S. Bank National Association, as trustee (incorporated herein by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on July 21, 2020).
4.2		Form of 4.00% Senior Notes due 2025 (incorporated herein by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on July 21, 2020).
10.1		First Amendment to Fifth Amended and Restated Agreement, dated as of May 4, 2020, by and among the Registrant as Borrower and KeyBank National Association as Administrative Agent and certain lenders from time to time parties hereto, as Lenders ~~(filed herewith)~~(incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 filed on May 6, 2020).
10.2		Third Amendment to Term Loan Agreement, dated as of May 4, 2020, by and among the Registrant as Borrower and Capital One, National Association as Administrative Agent and certain lenders from time to time parties hereto, as Lenders ~~(filed herewith)~~(incorporated herein by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 filed on May 6, 2020).
10.3		First Amendment to Term Loan Agreement, dated as of May 4, 2020, by and among the Registrant as Borrower and KeyBank National Association as Administrative Agent and certain lenders from time to time parties hereto, as Lenders ~~(filed herewith)~~(incorporated herein by reference to Exhibit 10.3 to the Registrants’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 filed on May 6, 2020).
31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 (filed herewith).
31.2		Certification of Executive Vice President, Chief Financial Officer and Treasurer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 (filed herewith).
32.1		Certification of Chief Executive Officer and Executive Vice President, Chief Financial Officer and Treasurer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 (furnished herewith).
101.SCH		Inline 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 inline XBRL with applicable taxonomy extension information contained in 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.



By:	/s/ STEVEN P. GRIMES

	Steven P. Grimes
	Chief Executive Officer
	(Principal Executive Officer)
Date:	~~May 6,~~August 5, 2020

By:	/s/ JULIE M. SWINEHART

	Julie M. Swinehart
	Executive Vice President,
	Chief Financial Officer and Treasurer
	(Principal Financial Officer and
	Principal Accounting Officer)
Date:	~~May 6,~~August 5, 2020

4756



PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2326

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4251

Item 4.	Controls and Procedures	4352

PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	4453

Item 1A.	Risk Factors	4453

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4554

Item 3.	Defaults Upon Senior Securities	4554

Item 4.	Mine Safety Disclosures	4554

Item 5.	Other Information	4654

Item 6.	Exhibits	4655

SIGNATURES		4756



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)
January 1, 2020 to January 31, 2020	34	$	13.07	N/A	$	189,105
February 1, 2020 to February 29, 2020	55	$	12.53	N/A	$	189,105
March 1, 2020 to March 31, 2020	30	$	10.47	N/A	$	189,105
Total	119	$	12.16	N/A	$	189,105