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 June 30, 2019March 31, 2020
OR
☐ 
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: 001-36523 (Urban Edge Properties)
Commission File Number: 333-212951-01 (Urban Edge Properties LP)
URBAN EDGE PROPERTIES
URBAN EDGE PROPERTIES LP
(Exact name of Registrant as specified in its charter)
Maryland(Urban Edge Properties) 47-6311266
Delaware(Urban Edge Properties LP) 36-4791544
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
     
888 Seventh AvenueNew YorkNew York 10019
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number including area code:(212)956‑2556
    
Securities registered pursuant to Section 12(b) of the Act:   
Title of class of registered securitiesTrading symbolName of exchange on which registered
Common shares of beneficial interest, par value $0.01 per share
UEThe 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.
Urban Edge Properties    Yes x   NO o         Urban Edge Properties LP     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).  
Urban Edge Properties    Yes  x   NO o         Urban Edge Properties LP     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.
Urban Edge Properties:
Large Accelerated Filerx
Accelerated Filer o        
Non-Accelerated Filer o                             
Smaller Reporting Company☐Emerging Growth Company☐
Urban Edge Properties LP:
Large Accelerated Filer o                              
Accelerated Filer o                              
Non-Accelerated FilerxSmaller 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 pursuant to Section 13(a) of the Exchange Act.
Urban Edge Properties o                   Urban Edge Properties LP o   
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Urban Edge Properties    YES ☐ NO x         Urban Edge Properties LP     YES ☐  NO x
As of July 26, 2019,April 24, 2020, Urban Edge Properties had 121,171,003116,534,331 common shares outstanding.



URBAN EDGE PROPERTIES AND URBAN EDGE PROPERTIES LP
QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED JUNE 30, 2019MARCH 31, 2020

TABLE OF CONTENTS

  
PART I
  
     
Item 1.
 Financial Statements  
  Consolidated Financial Statements of Urban Edge Properties:  
  Consolidated Balance Sheets as of June 30, 2019March 31, 2020 and December 31, 20182019 (unaudited) 
1
  Consolidated Statements of Income for the Three and Six Months Ended June 30,March 31, 2020 and 2019 and 2018 (unaudited) 
2
  Consolidated Statements of Changes in Equity for the Three and Six Months Ended June 30,March 31, 2020 and 2019 and 2018 (unaudited) 
3
  Consolidated Statements of Cash Flows for the SixThree Months Ended June 30,March 31, 2020 and 2019 and 2018 (unaudited) 
54
  Consolidated Financial Statements of Urban Edge Properties LP:  
  Consolidated Balance Sheets as of June 30, 2019March 31, 2020 and December 31, 20182019 (unaudited) 
76
  Consolidated Statements of Income for the Three and Six Months Ended June 30,March 31, 2020 and 2019 and 2018 (unaudited) 
87
  Consolidated Statements of Changes in Equity for the Three and Six Months Ended June 30,March 31, 2020 and 2019 and 2018 (unaudited) 
98
  Consolidated Statements of Cash Flows for the SixThree Months Ended June 30,March 31, 2020 and 2019 and 2018 (unaudited) 
119
  Urban Edge Properties and Urban Edge Properties LP  
  Notes to Consolidated Financial Statements (unaudited) 
1311
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 
3025
Item 3. Quantitative and Qualitative Disclosures about Market Risk 
4337
Item 4. Controls and Procedures 
4438
     
  PART II  
     
Item 1. Legal Proceedings 
4438
Item 1A. Risk Factors 
4439
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 
4541
Item 3. Defaults Upon Senior Securities 
4541
Item 4. Mine Safety Disclosures 
4541
Item 5. Other Information 
4642
Item 6. Exhibits 
4642
  Signatures 
4743
     






EXPLANATORY NOTE
This report combines the quarterly reports on Form 10-Q for the period ended June 30, 2019March 31, 2020 of Urban Edge Properties and Urban Edge Properties LP. Unless stated otherwise or the context otherwise requires, references to “UE” and “Urban Edge” mean Urban Edge Properties, a Maryland real estate investment trust (“REIT”), and references to “UELP” and the “Operating Partnership” mean Urban Edge Properties LP, a Delaware limited partnership. References to the “Company,” “we,” “us” and “our” mean collectively UE, UELP and those entities/subsidiaries consolidated by UE.
UELP is the entity through which we conduct substantially all of our business and own, either directly or through subsidiaries, substantially all of our assets. UE is the sole general partner and also a limited partner of UELP. As the sole general partner of UELP, UE has exclusive control of UELP’s day-to-day management.
As of June 30, 2019,March 31, 2020, UE owned an approximate 95.1%96.0% ownership interest in UELP. The remaining approximate 4.9%4.0% interest is owned by limited partners. The other limited partners of UELP are members of management, our Board of Trustees and contributors of property interests acquired. Under the limited partnership agreement of UELP, unitholders may present their common units of UELP for redemption at any time (subject to restrictions agreed upon at the time of issuance of the units that may restrict such right for a period of time). Upon presentation of a common unit for redemption, UELP must redeem the unit for cash equal to the then value of a share of UE’s common shares, as defined by the limited partnership agreement. In lieu of cash redemption by UELP, however, UE may elect to acquire any common units so tendered by issuing common shares of UE in exchange for the common units. If UE so elects, its common shares will be exchanged for common units on a one-for-one basis. This one-for-one exchange ratio is subject to specified adjustments to prevent dilution. UE generally expects that it will elect to issue its common shares in connection with each such presentation for redemption rather than having UELP pay cash. With each such exchange or redemption, UE’s percentage ownership in UELP will increase. In addition, whenever UE issues common shares other than to acquire common units of UELP, UE must contribute any net proceeds it receives to UELP and UELP must issue to UE an equivalent number of common units of UELP. This structure is commonly referred to as an umbrella partnership REIT, or UPREIT.
The Company believes that combining the quarterly reports on Form 10-Q of UE and UELP into this single report provides the following benefits:
enhances investors’ understanding of UE and UELP by enabling investors to view the business as a whole in the same manner as management views and operates the business;
eliminates duplicative disclosure and provides a more streamlined and readable presentation because a substantial portion of the disclosure applies to both UE and UELP; and
creates time and cost efficiencies throughout the preparation of one combined report instead of two separate reports.
The Company believes it is important to understand the few differences between UE and UELP in the context of how UE and UELP operate as a consolidated company. The financial results of UELP are consolidated into the financial statements of UE. UE does not have any other significant assets, liabilities or operations, other than its investment in UELP, nor does it have employees of its own. UELP, not UE, generally executes all significant business relationships other than transactions involving the securities of UE. UELP holds substantially all of the assets of UE. UELP conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for the net proceeds from equity offerings by UE, which are contributed to the capital of UELP in exchange for units of limited partnership in UELP, as applicable, UELP generates all remaining capital required by the Company’s business. These sources may include working capital, net cash provided by operating activities, borrowings under the revolving credit agreement, the issuance of secured and unsecured debt and equity securities and proceeds received from the disposition of certain properties.
Shareholders’ equity, partners’ capital and noncontrolling interests are the main areas of difference between the consolidated financial statements of UE and UELP. The limited partners of UELP are accounted for as partners’ capital in UELP’s financial statements and as noncontrolling interests in UE’s financial statements. The noncontrolling interests in UELP’s financial statements include the interests of unaffiliated partners in consolidated entities. The noncontrolling interests in UE’s financial statements include the same noncontrolling interests at UELP’s level and limited partners of UELP. The differences between shareholders’ equity and partners’ capital result from differences in the equity issued at UE and UELP levels.
To help investors better understand the key differences between UE and UELP, certain information for UE and UELP in this report has been separated, as set forth below: Item 1. Financial Statements (unaudited), which includes specific disclosures for UE and UELP, Note 14, Equity and Noncontrolling Interest and Note 16, Earnings Per Share and Unit.
This report also includes separate Part I, Item 4. Controls and Procedures sections and separate Exhibits 31 and 32 certifications for each of UE and UELP in order to establish that the requisite certifications have been made and that UE and UELP are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 and 18 U.S.C. §1350.



PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
URBAN EDGE PROPERTIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share amounts)
June 30, December 31,March 31, December 31,
2019 20182020 2019
ASSETS
  

  
Real estate, at cost: 
  
 
  
Land$516,177
 $525,819
$529,809
 $515,621
Buildings and improvements2,155,036
 2,156,113
2,336,405
 2,197,076
Construction in progress78,320
 80,385
28,629
 28,522
Furniture, fixtures and equipment7,066
 6,675
7,016
 7,566
Total2,756,599
 2,768,992
2,901,859
 2,748,785
Accumulated depreciation and amortization(661,909) (645,872)(686,139) (671,946)
Real estate, net2,094,690
 2,123,120
2,215,720
 2,076,839
Right-of-use assets85,404
 —
79,962
 81,768
Cash and cash equivalents412,126
 440,430
622,667
 432,954
Restricted cash51,473
 17,092
19,976
 52,182
Tenant and other receivables, net of allowance for doubtful accounts of $6,486 as of December 31, 201832,643
 28,563
Receivable arising from the straight-lining of rents, net of $134 as of December 31, 201877,189
 84,903
Identified intangible assets, net of accumulated amortization of $29,479 and $39,526, respectively51,618
 68,422
Deferred leasing costs, net of accumulated amortization of $16,615 and $16,826, respectively20,667
 21,277
Deferred financing costs, net of accumulated amortization of $3,276 and $2,764, respectively1,723
 2,219
Tenant and other receivables19,006
 21,565
Receivable arising from the straight-lining of rents74,348
 73,878
Identified intangible assets, net of accumulated amortization of $32,359 and $30,942, respectively59,810
 48,121
Deferred leasing costs, net of accumulated amortization of $16,291 and $16,560, respectively21,105
 21,474
Deferred financing costs, net of accumulated amortization of $4,008 and $3,765, respectively3,634
 3,877
Prepaid expenses and other assets30,886
 12,968
27,372
 33,700
Total assets$2,858,419
 $2,798,994
$3,143,600
 $2,846,358
      
LIABILITIES AND EQUITY 
  
 
  
Liabilities:      
Mortgages payable, net$1,548,944
 $1,550,242
$1,616,853
 $1,546,195
Unsecured credit facility borrowings250,000
 —
Lease liabilities83,050
 —
78,334
 79,913
Accounts payable, accrued expenses and other liabilities85,034
 98,517
69,350
 76,644
Identified intangible liabilities, net of accumulated amortization of $66,613 and $65,058, respectively131,705
 144,258
Identified intangible liabilities, net of accumulated amortization of $65,074 and $62,610, respectively130,840
 128,830
Total liabilities1,848,733
 1,793,017
2,145,377
 1,831,582
Commitments and contingencies


 




 


Shareholders’ equity:      
Common shares: $0.01 par value; 500,000,000 shares authorized and 121,171,003 and 114,345,565 shares issued and outstanding, respectively1,212
 1,143
Common shares: $0.01 par value; 500,000,000 shares authorized and 117,956,031 and 121,370,125 shares issued and outstanding, respectively1,179
 1,213
Additional paid-in capital1,015,470
 956,420
986,489
 1,019,149
Accumulated deficit(56,580) (52,857)(30,243) (52,546)
Noncontrolling interests:      
Operating partnership49,157
 100,822
40,374
 46,536
Consolidated subsidiaries427
 449
424
 424
Total equity1,009,686
 1,005,977
998,223
 1,014,776
Total liabilities and equity$2,858,419
 $2,798,994
$3,143,600
 $2,846,358
 

See notes to consolidated financial statements (unaudited).


URBAN EDGE PROPERTIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except share and per share amounts)
 
Three Months Ended June 30, Six Months Ended June 30,Three Months Ended March 31,
2019 2018 2019 20182020 2019
REVENUE          
Rental revenue$101,488
 $100,768
 $198,796
 $199,162
$93,000
 $97,308
Management and development fees308
 347
 660
 689
314
 352
Other income951
 855
 1,023
 1,172
46
 72
Total revenue102,747
 101,970
 200,479
 201,023
93,360
 97,732
EXPENSES          
Depreciation and amortization22,567
 30,441
 44,397
 51,711
23,471
 21,830
Real estate taxes15,221
 15,587
 30,698
 31,362
14,966
 15,477
Property operating14,416
 21,765
 31,477
 39,668
14,537
 17,061
General and administrative10,010
 8,236
 20,590
 15,877
9,847
 10,580
Casualty and impairment loss (gain), net(1)
5,112
 35
 9,070
 (1,306)
Casualty and impairment loss—
 3,958
Lease expense3,896
 2,752
 7,551
 5,488
3,434
 3,655
Total expenses71,222
 78,816
 143,783
 142,800
66,255
 72,561
Gain on sale of real estate11,550
 50,440
 28,503
 50,440
39,775
 16,953
Interest income2,458
 2,031
 4,964
 3,555
1,683
 2,506
Interest and debt expense(16,472) (15,659) (33,008) (31,303)(17,175) (16,536)
Gain on extinguishment of debt—
 —
 —
 2,524
Income before income taxes29,061
 59,966
 57,155
 83,439
51,388
 28,094
Income tax expense(994) (192) (1,196) (626)(100) (202)
Net income28,067
 59,774
 55,959
 82,813
51,288
 27,892
Less net (income) loss attributable to noncontrolling interests in:       
Less net income attributable to noncontrolling interests in:   
Operating partnership(1,518) (6,025) (3,873) (8,353)(2,308) (2,355)
Consolidated subsidiaries22
 (12) 22
 (23)—
 —
Net income attributable to common shareholders$26,571
 $53,737
 $52,108
 $74,437
$48,980
 $25,537
          
Earnings per common share - Basic:$0.22
 $0.47
 $0.44
 $0.65
$0.40
 $0.22
Earnings per common share - Diluted:$0.22
 $0.47
 $0.44
 $0.65
$0.40
 $0.22
Weighted average shares outstanding - Basic120,364
 113,739
 118,330
 113,708
120,966
 116,274
Weighted average shares outstanding - Diluted120,461
 113,942
 118,436
 114,151
121,051
 126,504
(1) Refer to Note 2 to the unaudited consolidated financial statements in Part I, Item I of this Quarterly Report on Form 10-Q.

See notes to consolidated financial statements (unaudited).



URBAN EDGE PROPERTIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Unaudited)
(In thousands, except share and per share amounts)
Common Shares     Noncontrolling Interests (“NCI”)  Common Shares     Noncontrolling Interests (“NCI”)  
Shares Amount
 Additional
Paid-In Capital		 Accumulated Earnings
(Deficit)		 Operating Partnership Consolidated Subsidiaries Total EquityShares Amount
 Additional
Paid-In Capital		 Accumulated Earnings
(Deficit)		 Operating Partnership Consolidated Subsidiaries Total Equity
Balance, March 31, 2018113,923,724
 $1,139
 $947,815
 $(61,975) $100,036
 $415
 $987,430
Balance, December 31, 2018114,345,565
 $1,143
 $956,420
 $(52,857) $100,822
 $449
 $1,005,977
Net income attributable to common shareholders
—
 —
 —
 53,737
 —
 —
 53,737
—
 —
 —
 25,537
 —
 —
 25,537
Net income attributable to noncontrolling interests
—
 —
 —
 —
 6,025
 12
 6,037
—
 —
 —
 —
 2,355
 —
 2,355
Impact of ASC 842 adoption—
 —
 —
 (2,918) —
 —
 (2,918)
Limited partnership interests:                          
Units redeemed for common shares60,000
 1
 491
 —
 —
 —
 492
5,762,184
 57
 46,090
 —
 —
 —
 46,147
Reallocation of noncontrolling interests—
 —
 1,136
 —
 (1,628) —
 (492)—
 —
 1,250
 —
 (47,397) —
 (46,147)
Common shares issued
21,584
 1
 383
 (36) —
 —
 348
20,657
 1
 69
 (35) —
 —
 35
Dividends on common shares ($0.22 per share)—
 —
 —
 (25,040) —
 —
 (25,040)
Dividends to common shareholders ($0.22 per share)—
 —
 —
 (26,390) —
 —
 (26,390)
Distributions to redeemable NCI ($0.22 per unit)—
 —
 —
 —
 (2,780) —
 (2,780)—
 —
 —
 —
 (1,576) —
 (1,576)
Share-based compensation expense—
 —
 1,154
 7
 1,061
 —
 2,222
—
 —
 1,892
 —
 1,772
 —
 3,664
Share-based awards retained for taxes(1,032) (1) (21) —
 —
 —
 (22)(29,112) —
 (592) —
 —
 —
 (592)
Balance, June 30, 2018114,004,276
 $1,140
 $950,958
 $(33,307) $102,714
 $427
 $1,021,932
Balance, March 31, 2019120,099,294
 $1,201
 $1,005,129
 $(56,663) $55,976
 $449
 $1,006,092

 Common Shares     Noncontrolling Interests (“NCI”)  
 Shares Amount
 
Additional
Paid-In Capital
 
Accumulated Earnings
(Deficit)
 Operating Partnership Consolidated Subsidiaries Total Equity
Balance, March 31, 2019120,099,294
 $1,201
 $1,005,129
 $(56,663) $55,976
 $449
 $1,006,092
Net income attributable to common shareholders—
 —
 —
 26,571
 —
 —
 26,571
Net income (loss) attributable to noncontrolling interests—
 —
 —
 —
 1,518
 (22) 1,496
Limited partnership interests:             
Units redeemed for common shares1,049,508
 11
 8,155
 —
 —
 —
 8,166
Reallocation of noncontrolling interests—
 —
 536
 —
 (8,702) —
 (8,166)
Common shares issued24,365
 —
 314
 (35) —
 —
 279
Dividends to common shareholders ($0.22 per share)—
 —
 —
 (26,453) —
 —
 (26,453)
Distributions to redeemable NCI ($0.22 per unit)—
 —
 —
 —
 (1,553) —
 (1,553)
Share-based compensation expense—
 —
 1,377
 —
 1,918
 —
 3,295
Share-based awards retained for taxes(2,164) —
 (41) —
 —
 —
 (41)
Balance, June 30, 2019121,171,003
 $1,212
 $1,015,470
 $(56,580) $49,157
 $427
 $1,009,686

See notes to consolidated financial statements (unaudited).



 Common Shares     Noncontrolling Interests (“NCI”)  
 Shares Amount
 Additional
Paid-In Capital		 Accumulated Earnings
(Deficit)		 Operating Partnership Consolidated Subsidiaries Total Equity
Balance, December 31, 2017113,827,529
 $1,138
 $946,402
 $(57,621) $100,218
 $404
 $990,541
Net income attributable to common shareholders
—
 —
 —
 74,437
 —
 —
 74,437
Net income attributable to noncontrolling interests
—
 —
 —
 —
 8,353
 23
 8,376
Limited partnership interests:             
Units redeemed for common shares70,000
 1
 570
 —
 —
 —
 571
Reallocation of noncontrolling interests—
 —
 1,620
 —
 (2,191) —
 (571)
Common shares issued
123,937
 2
 423
 (101) —
 —
 324
Dividends to common shareholders ($0.44 per share)—
 —
 —
 (50,037) —
 —
 (50,037)
Distributions to redeemable NCI ($0.44 per unit)—
 —
 —
 —
 (5,566) —
 (5,566)
Share-based compensation expense—
 —
 2,327
 15
 1,900
 —
 4,242
Share-based awards retained for taxes(17,190) (1) (384) —
 —
 —
 (385)
Balance, June 30, 2018114,004,276
 $1,140
 $950,958
 $(33,307) $102,714
 $427
 $1,021,932

Common Shares     Noncontrolling Interests (“NCI”)  Common Shares     Noncontrolling Interests (“NCI”)  
Shares Amount
 
Additional
Paid-In Capital
 
Accumulated Earnings
(Deficit)
 Operating Partnership Consolidated Subsidiaries Total EquityShares Amount
 
Additional
Paid-In Capital
 
Accumulated Earnings
(Deficit)
 Operating Partnership Consolidated Subsidiaries Total Equity
Balance, December 31, 2018114,345,565
 $1,143
 $956,420
 $(52,857) $100,822
 $449
 $1,005,977
Balance, December 31, 2019121,370,125
 $1,213
 $1,019,149
 $(52,546) $46,536
 $424
 $1,014,776
Net income attributable to common shareholders—
 —
 —
 52,108
 —
 —
 52,108
—
 —
 —
 48,980
 —
 —
 48,980
Net income (loss) attributable to noncontrolling interests—
 —
 —
 —
 3,873
 (22) 3,851
Impact of ASC 842 adoption—
 —
 —
 (2,918) —
 —
 (2,918)
Net income attributable to noncontrolling interests—
 —
 —
 —
 2,308
 —
 2,308
Limited partnership interests:                          
Units redeemed for common shares6,811,692
 68
 54,245
 —
 —
 —
 54,313
1,025,836
 10
 8,336
 —
 —
 —
 8,346
Reallocation of noncontrolling interests—
 —
 1,786
 —
 (56,099) —
 (54,313)—
 —
 907
 —
 (9,253) —
 (8,346)
Common shares issued45,022
 1
 383
 (70) —
 —
 314
30,292
 1
 30
 (30) —
 —
 1
Dividends to common shareholders ($0.44 per share)—
 —
 —
 (52,843) —
 —
 (52,843)
Distributions to redeemable NCI ($0.44 per unit)—
 —
 —
 —
 (3,129) —
 (3,129)
Repurchase of common shares(4,452,223) (45) (42,756) —
 —
 —
 (42,801)
Dividends to common shareholders ($0.22 per share)—
 —
 —
 (26,647) —
 —
 (26,647)
Distributions to redeemable NCI ($0.22 per unit)—
 —
 —
 —
 (1,314) —
 (1,314)
Share-based compensation expense—
 —
 3,269
 —
 3,690
 —
 6,959
—
 —
 1,151
 —
 2,097
 —
 3,248
Share-based awards retained for taxes(31,276) —
 (633) —
 —
 —
 (633)(17,999) —
 (328) —
 —
 —
 (328)
Balance, June 30, 2019121,171,003
 $1,212
 $1,015,470
 $(56,580) $49,157
 $427
 $1,009,686
Balance, March 31, 2020117,956,031
 $1,179
 $986,489
 $(30,243) $40,374
 $424
 $998,223


See notes to consolidated financial statements (unaudited).


URBAN EDGE PROPERTIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 
Six Months Ended June 30,Three Months Ended March 31,
2019 20182020 2019
CASH FLOWS FROM OPERATING ACTIVITIES 
  
 
  
Net income$55,959
 $82,813
$51,288
 $27,892
Adjustments to reconcile net income to net cash provided by operating activities: 
  
 
  
Depreciation and amortization44,231
 52,045
23,271
 21,747
Real estate impairment loss22,653
 —
Casualty and impairment loss—
 3,958
Gain on sale of real estate(28,503) (50,440)(39,775) (16,953)
Gain on extinguishment of debt—
 (2,524)
Amortization of deferred financing costs1,439
 1,440
706
 720
Amortization of below market leases, net(11,802) (10,455)(2,249) (2,360)
Amortization of right-of-use assets4,448
 —
Noncash lease expense1,806
 2,014
Straight-lining of rent37
 182
(674) (22)
Share-based compensation expense6,959
 4,242
3,248
 3,664
Provision for doubtful accounts—
 2,509
Credit losses related to operating lease receivables1,424
 485
Change in operating assets and liabilities: 
  
 
  
Tenant and other receivables(3,927) (7,083)1,134
 (10,864)
Deferred leasing costs(1,874) (1,823)(636) (1,201)
Prepaid and other assets(95) 2,907
Prepaid expenses and other assets(9,786) 93
Lease liabilities(1,578) (1,708)
Accounts payable, accrued expenses and other liabilities(12,688) 2,883
(7,383) 1,962
Net cash provided by operating activities76,837
 76,696
20,796
 29,427
CASH FLOWS FROM INVESTING ACTIVITIES 
  
 
  
Real estate development and capital improvements(50,631) (56,279)(6,538) (26,696)
Acquisition of real estate—
 (4,931)
Acquisitions of real estate(92,132) —
Proceeds from sale of operating properties33,821
 54,303
54,402
 18,202
Insurance proceeds4,400
 1,000
Net cash used in investing activities(12,410) (5,907)(44,268) (8,494)
CASH FLOWS FROM FINANCING ACTIVITIES 
  
 
  
Debt repayments(2,059) (1,979)(2,076) (1,144)
Dividends to common shareholders(52,843) (50,037)(26,647) (26,390)
Distributions to redeemable noncontrolling interests(3,129) (5,566)(1,314) (1,576)
Taxes withheld for vested restricted shares(633) (385)(328) (592)
Borrowings under unsecured credit facility250,000
 —
Repurchase of common shares(38,656) —
Proceeds related to the issuance of common shares314
 324
—
 35
Net cash used in financing activities(58,350) (57,643)
Net increase in cash and cash equivalents and restricted cash6,077
 13,146
Net cash provided by (used in) financing activities180,979
 (29,667)
Net increase (decrease) in cash and cash equivalents and restricted cash157,507
 (8,734)
Cash and cash equivalents and restricted cash at beginning of period457,522
 500,841
485,136
 457,522
Cash and cash equivalents and restricted cash at end of period$463,599
 $513,987
$642,643
 $448,788

See notes to consolidated financial statements (unaudited).




Six Months Ended June 30,Three Months Ended March 31,
2019 20182020 2019
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION      
Cash payments for interest net of amounts capitalized of $989 and $2,423, respectively$32,478
 $33,340
Cash payments for interest, net of amounts capitalized of $125 and $565, respectively$16,291
 $16,122
Cash payments for income taxes1,571
 637
6
 7
Cash payments for lease liabilities4,971
 —
NON-CASH INVESTING AND FINANCING ACTIVITIES      
Accrued capital expenditures included in accounts payable and accrued expenses15,463
 27,574
2,013
 15,559
Write-off of fully depreciated and impaired assets38,101
 9,918
5,225
 7,106
Operating lease liabilities arising from obtaining right-of-use assets98,980
 —
Mortgage debt forgiven in foreclosure—
 11,537
Acquisition of real estate through the assumption of debt72,473
 —
Accrued common share repurchase4,145
 —
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents at beginning of period$440,430
 $490,279
$432,954
 $440,430
Restricted cash at beginning of period17,092
 10,562
52,182
 17,092
Cash and cash equivalents and restricted cash at beginning of period$457,522
 $500,841
$485,136
 $457,522
      
Cash and cash equivalents at end of period$412,126
 $500,930
$622,667
 $416,668
Restricted cash at end of period51,473
 13,057
19,976
 32,120
Cash and cash equivalents and restricted cash at end of period$463,599
 $513,987
$642,643
 $448,788

 See notes to consolidated financial statements (unaudited).


URBAN EDGE PROPERTIES LP
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except unit and per unit amounts)
June 30, December 31,March 31, December 31,
2019 20182020 2019
ASSETS
  

  
Real estate, at cost: 
  
 
  
Land$516,177
 $525,819
$529,809
 $515,621
Buildings and improvements2,155,036
 2,156,113
2,336,405
 2,197,076
Construction in progress78,320
 80,385
28,629
 28,522
Furniture, fixtures and equipment7,066
 6,675
7,016
 7,566
Total2,756,599
 2,768,992
2,901,859
 2,748,785
Accumulated depreciation and amortization(661,909) (645,872)(686,139) (671,946)
Real estate, net2,094,690
 2,123,120
2,215,720
 2,076,839
Right-of-use assets85,404
 —
79,962
 81,768
Cash and cash equivalents412,126
 440,430
622,667
 432,954
Restricted cash51,473
 17,092
19,976
 52,182
Tenant and other receivables, net of allowance for doubtful accounts of $6,486 as of December 31, 201832,643
 28,563
Receivable arising from the straight-lining of rents, net of $134 as of December 31, 201877,189
 84,903
Identified intangible assets, net of accumulated amortization of $29,479 and $39,526, respectively51,618
 68,422
Deferred leasing costs, net of accumulated amortization of $16,615 and $16,826, respectively20,667
 21,277
Deferred financing costs, net of accumulated amortization of $3,276 and $2,764, respectively1,723
 2,219
Tenant and other receivables19,006
 21,565
Receivable arising from the straight-lining of rents74,348
 73,878
Identified intangible assets, net of accumulated amortization of $32,359 and $30,942, respectively59,810
 48,121
Deferred leasing costs, net of accumulated amortization of $16,291 and $16,560, respectively21,105
 21,474
Deferred financing costs, net of accumulated amortization of $4,008 and $3,765, respectively3,634
 3,877
Prepaid expenses and other assets30,886
 12,968
27,372
 33,700
Total assets$2,858,419
 $2,798,994
$3,143,600
 $2,846,358
      
LIABILITIES AND EQUITY 
  
 
  
Liabilities:      
Mortgages payable, net$1,548,944
 $1,550,242
$1,616,853
 $1,546,195
Unsecured credit facility borrowings250,000
 —
Lease liabilities83,050
 —
78,334
 79,913
Accounts payable, accrued expenses and other liabilities85,034
 98,517
69,350
 76,644
Identified intangible liabilities, net of accumulated amortization of $66,613 and $65,058, respectively131,705
 144,258
Identified intangible liabilities, net of accumulated amortization of $65,074 and $62,610, respectively130,840
 128,830
Total liabilities1,848,733
 1,793,017
2,145,377
 1,831,582
Commitments and contingencies


 




 


Equity:      
Partners’ capital:      
General partner: 121,171,003 and 114,345,565 units outstanding, respectively1,016,682
 957,563
Limited partners: 6,201,228 and 12,736,633 units outstanding, respectively53,038
 105,447
General partner: 117,956,031 and 121,370,125 units outstanding, respectively987,668
 1,020,362
Limited partners: 4,971,944 and 5,833,318 units outstanding, respectively43,000
 50,156
Accumulated deficit(60,461) (57,482)(32,869) (56,166)
Total partners’ capital1,009,259
 1,005,528
997,799
 1,014,352
Noncontrolling interest in consolidated subsidiaries427
 449
424
 424
Total equity1,009,686
 1,005,977
998,223
 1,014,776
Total liabilities and equity$2,858,419
 $2,798,994
$3,143,600
 $2,846,358
 

See notes to consolidated financial statements (unaudited).



URBAN EDGE PROPERTIES LP
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except unit and per unit amounts)
 
Three Months Ended June 30, Six Months Ended June 30,Three Months Ended March 31,
2019 2018 2019 20182020 2019
REVENUE          
Rental revenue$101,488
 $100,768
 $198,796
 $199,162
$93,000
 $97,308
Management and development fees308
 347
 660
 689
314
 352
Other income951
 855
 1,023
 1,172
46
 72
Total revenue102,747
 101,970
 200,479
 201,023
93,360
 97,732
EXPENSES          
Depreciation and amortization22,567
 30,441
 44,397
 51,711
23,471
 21,830
Real estate taxes15,221
 15,587
 30,698
 31,362
14,966
 15,477
Property operating14,416
 21,765
 31,477
 39,668
14,537
 17,061
General and administrative10,010
 8,236
 20,590
 15,877
9,847
 10,580
Casualty and impairment loss (gain), net(1)
5,112
 35
 9,070
 (1,306)
Casualty and impairment loss—
 3,958
Lease expense3,896
 2,752
 7,551
 5,488
3,434
 3,655
Total expenses71,222
 78,816
 143,783
 142,800
66,255
 72,561
Gain on sale of real estate11,550
 50,440
 28,503
 50,440
39,775
 16,953
Interest income2,458
 2,031
 4,964
 3,555
1,683
 2,506
Interest and debt expense(16,472) (15,659) (33,008) (31,303)(17,175) (16,536)
Gain on extinguishment of debt—
 —
 —
 2,524
Income before income taxes29,061
 59,966
 57,155
 83,439
51,388
 28,094
Income tax expense(994) (192) (1,196) (626)(100) (202)
Net income28,067
 59,774
 55,959
 82,813
51,288
 27,892
Less: net (income) loss attributable to NCI in consolidated subsidiaries22
 (12) 22
 (23)
Less net income attributable to NCI in consolidated subsidiaries—
 —
Net income attributable to unitholders$28,089
 $59,762

$55,981

$82,790
$51,288
 $27,892
          
Earnings per unit - Basic:$0.22
 $0.47
 $0.44
 $0.65
$0.41
 $0.22
Earnings per unit - Diluted:$0.22
 $0.47
 $0.44
 $0.65
$0.40
 $0.22
Weighted average units outstanding - Basic126,478
 126,178
 126,442
 126,178
125,844
 126,391
Weighted average units outstanding - Diluted126,580
 126,602
 126,554
 126,621
126,755
 126,505
(1) Refer to Note 2 to the unaudited consolidated financial statements in Part I, Item I of this Quarterly Report on Form 10-Q.

See notes to consolidated financial statements (unaudited).




URBAN EDGE PROPERTIES LP
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Unaudited)
(In thousands, except unit and per unit amounts)


Total Shares General Partner  Total Units 
Limited Partners(1)
 Accumulated Earnings
(Deficit)		 NCI in Consolidated Subsidiaries Total EquityTotal Shares General Partner  Total Units 
Limited Partners(1)
 Accumulated Earnings
(Deficit)		 NCI in Consolidated Subsidiaries Total Equity
Balance, March 31, 2018113,923,724
 948,954
 12,840,764
 105,771
 (67,710) 415
 987,430
Balance, December 31, 2018114,345,565
 $957,563
 12,736,633
 $105,447
 $(57,482) $449
 $1,005,977
Net income attributable to unitholders—
 —
 —
 —
 59,762
 —
 59,762
—
 —
 —
 —
 27,892
 —
 27,892
Net income attributable to noncontrolling interests—
 —
 —
 —
 —
 12
 12
Impact of ASC 842 adoption—
 —
 —
 —
 (2,918) —
 (2,918)
Common units issued as a result of common shares issued by Urban Edge21,584
 384
 —
 —
 (36) —
 348
20,657
 70
 —
 —
 (35) —
 35
Equity redemption of OP units70,000
 571
 (70,000) —
 —
 —
 571
5,762,184
 46,147
 (5,762,184) —
 —
 —
 46,147
Limited partnership units issued, net(10,000) (563) (31,857) 563
 —
 —
 —
—
 —
 135,337
 —
 —
 —
 —
Reallocation of noncontrolling interests—
 1,620
 —
 (2,191) —
 —
 (571)—
 1,250
 —
 (47,397) —
 —
 (46,147)
Distributions to Partners ($0.22 per unit)—
 —
 —
 —
 (27,820) —
 (27,820)—
 —
 —
 —
 (27,966) —
 (27,966)
Share-based compensation expense—
 1,154
 —
 1,061
 7
 —
 2,222
—
 1,892
 —
 1,772
 —
 —
 3,664
Share-based awards retained for taxes(1,032) (22) —
 —
 —
 —
 (22)(29,112) (592) —
 —
 —
 —
 (592)
Balance, June 30, 2018114,004,276
 $952,098
 12,738,907
 $105,204
 $(35,797) $427
 $1,021,932
Balance, March 31, 2019120,099,294
 $1,006,330
 7,109,786
 $59,822
 $(60,509) $449
 $1,006,092
(1) Limited partners have a 10.1%5.6% common limited partnership interest in the Operating Partnership as of June 30, 2018March 31, 2019 in the form of units of interest in the Operating Partnership (“OP Units”)Units and Long-Term Incentive Plan (“LTIP”)LTIP units.

Total Shares General Partner  Total Units 
Limited Partners(2)
 
Accumulated Earnings
(Deficit)
 NCI in Consolidated Subsidiaries Total EquityTotal Shares General Partner  Total Units 
Limited Partners(2)
 
Accumulated Earnings
(Deficit)
 NCI in Consolidated Subsidiaries Total Equity
Balance, March 31, 2019120,099,294
 $1,006,330
 7,109,786
 $59,822
 $(60,509) $449
 $1,006,092
Balance, December 31, 2019121,370,125
 $1,020,362
 5,833,318
 $50,156
 $(56,166) $424
 $1,014,776
Net income attributable to unitholders—
 —
 —
 —
 28,089
 —
 28,089
—
 —
 —
 —
 51,288
 —
 51,288
Net loss attributable to noncontrolling interests—
 —
 —
 —
 —
 (22) (22)
Common units issued as a result of common shares issued by Urban Edge24,365
 314
 —
 —
 (35) —
 279
30,292
 31
 164,462
 —
 (30) —
 1
Equity redemption of OP units1,049,508
 8,166
 (1,049,508) —
 —
 —
 8,166
1,025,836
 8,346
 (1,025,836) —
 —
 —
 8,346
Repurchase of common shares(4,452,223) (42,801) —
 —
 —
 —
 (42,801)
Limited partnership units issued, net—
 —
 140,950
 —
 —
 —
 —
—
 —
 —
 —
 —
 —
 —
Reallocation of noncontrolling interests—
 536
 —
 (8,702) —
 —
 (8,166)—
 907
 —
 (9,253) —
 —
 (8,346)
Distributions to Partners ($0.22 per unit)—
 —
 —
 —
 (28,006) —
 (28,006)—
 —
 —
 —
 (27,961) —
 (27,961)
Share-based compensation expense—
 1,377
 —
 1,918
 —
 —
 3,295
—
 1,151
 —
 2,097
 —
 —
 3,248
Share-based awards retained for taxes(2,164) (41) —
 —
 —
 —
 (41)(17,999) (328) —
 —
 —
 —
 (328)
Balance, June 30, 2019121,171,003
 $1,016,682
 6,201,228
 $53,038
 $(60,461) $427
 $1,009,686
Balance, March 31, 2020117,956,031
 $987,668
 4,971,944
 $43,000
 $(32,869) $424
 $998,223
(2) Limited partners have a 4.9%4.0% common limited partnership interest in the Operating Partnership as of June 30, 2019March 31, 2020 in the form of units of interest in the OP Units and LTIP units.

See notes to consolidated financial statements (unaudited).


 Total Shares General Partner  Total Units 
Limited Partners(1)
 Accumulated Earnings
(Deficit)		 NCI in Consolidated Subsidiaries Total Equity
Balance, December 31, 2017113,827,529
 $947,540
 12,812,954
 $105,495
 $(62,898) $404
 $990,541
Net income attributable to unitholders—
 —
 —
 —
 82,790
 —
 82,790
Net income attributable to noncontrolling interests—
 —
 —
 —
 —
 23
 23
Common units issued as a result of common shares issued by Urban Edge123,937
 425
 —
 —
 (101) —
 324
Equity redemption of OP units70,000
 571
 (70,000) —
 —
 —
 571
Limited partnership units issued, net—
 —
 (4,047) —
 —
 —
 —
Reallocation of noncontrolling interests—
 1,620
 —
 (2,191) —
 —
 (571)
Distributions to Partners ($0.44 per unit)—
 —
 —
 —
 (55,603) —
 (55,603)
Share-based compensation expense—
 2,327
 —
 1,900
 15
 —
 4,242
Share-based awards retained for taxes(17,190) (385) —
 —
 —
 —
 (385)
Balance, June 30, 2018114,004,276
 $952,098
 12,738,907
 $105,204
 $(35,797) $427
 $1,021,932
(1) Limited partners have a 10.1% common limited partnership interest in the Operating Partnership as of June 30, 2018 in the form of units of interest in the OP Units and LTIP units.
 Total Shares General Partner  Total Units 
Limited Partners(2)
 
Accumulated Earnings
(Deficit)
 NCI in Consolidated Subsidiaries Total Equity
Balance, December 31, 2018114,345,565
 $957,563
 12,736,633
 $105,447
 $(57,482) $449
 $1,005,977
Net income attributable to unitholders—
 —
 —
 —
 55,981
 —
 55,981
Net loss attributable to noncontrolling interests—
 —
 —
 —
 —
 (22) (22)
Impact of ASC 842 adoption—
 —
 —
 —
 (2,918) —
 (2,918)
Common units issued as a result of common shares issued by Urban Edge45,022
 384
 —
 —
 (70) —
 314
Equity redemption of OP units6,811,692
 54,313
 (6,811,692) —
 —
 —
 54,313
Limited partnership units issued, net—
 —
 276,287
 —
 —
 —
 —
Reallocation of noncontrolling interests—
 1,786
 —
 (56,099) —
 —
 (54,313)
Distributions to Partners ($0.44 per unit)—
 —
 —
 —
 (55,972) —
 (55,972)
Share-based compensation expense—
 3,269
 —
 3,690
 —
 —
 6,959
Share-based awards retained for taxes(31,276) (633) —
 —
 —
 —
 (633)
Balance, June 30, 2019121,171,003
 $1,016,682
 6,201,228
 $53,038
 $(60,461) $427
 $1,009,686
(2) Limited partners have a 4.9% common limited partnership interest in the Operating Partnership as of June 30, 2019 in the form of units of interest in the OP Units and LTIP units.

See notes to consolidated financial statements (unaudited).



URBAN EDGE PROPERTIES LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 
Six Months Ended June 30,Three Months Ended March 31,
2019 20182020 2019
CASH FLOWS FROM OPERATING ACTIVITIES 
  
 
  
Net income$55,959
 $82,813
$51,288
 $27,892
Adjustments to reconcile net income to net cash provided by operating activities: 
  
 
  
Depreciation and amortization44,231
 52,045
23,271
 21,747
Real estate impairment loss22,653
 —
Casualty and impairment loss—
 3,958
Gain on sale of real estate(28,503) (50,440)(39,775) (16,953)
Gain on extinguishment of debt—
 (2,524)
Amortization of deferred financing costs1,439
 1,440
706
 720
Amortization of below market leases, net(11,802) (10,455)(2,249) (2,360)
Amortization of right-of-use assets4,448
 —
Noncash lease expense1,806
 2,014
Straight-lining of rent37
 182
(674) (22)
Share-based compensation expense6,959
 4,242
3,248
 3,664
Provision for doubtful accounts—
 2,509
Credit losses related to operating lease receivables1,424
 485
Change in operating assets and liabilities: 
  
 
  
Tenant and other receivables(3,927) (7,083)1,134
 (10,864)
Deferred leasing costs(1,874) (1,823)(636) (1,201)
Prepaid and other assets(95) 2,907
Prepaid expenses and other assets(9,786) 93
Lease liabilities(1,578) (1,708)
Accounts payable, accrued expenses and other liabilities(12,688) 2,883
(7,383) 1,962
Net cash provided by operating activities76,837
 76,696
20,796
 29,427
CASH FLOWS FROM INVESTING ACTIVITIES 
  
 
  
Real estate development and capital improvements(50,631) (56,279)(6,538) (26,696)
Acquisition of real estate—
 (4,931)
Acquisitions of real estate(92,132) —
Proceeds from sale of operating properties33,821
 54,303
54,402
 18,202
Insurance proceeds4,400
 1,000
Net cash used in investing activities(12,410) (5,907)(44,268) (8,494)
CASH FLOWS FROM FINANCING ACTIVITIES 
  
 
  
Debt repayments(2,059) (1,979)(2,076) (1,144)
Distributions to partners(55,972) (55,603)(27,961) (27,966)
Taxes withheld for vested restricted units(633) (385)(328) (592)
Borrowings under unsecured credit facility250,000
 —
Repurchase of common shares(38,656) —
Proceeds related to the issuance of common shares314
 324
—
 35
Net cash used in financing activities(58,350) (57,643)
Net increase in cash and cash equivalents and restricted cash6,077
 13,146
Net cash provided by (used in) financing activities180,979
 (29,667)
Net increase (decrease) in cash and cash equivalents and restricted cash157,507
 (8,734)
Cash and cash equivalents and restricted cash at beginning of period457,522
 500,841
485,136
 457,522
Cash and cash equivalents and restricted cash at end of period$463,599
 $513,987
$642,643
 $448,788

See notes to consolidated financial statements (unaudited).




Six Months Ended June 30,Three Months Ended March 31,
2019 20182020 2019
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION      
Cash payments for interest net of amounts capitalized of $989 and $2,423, respectively$32,478
 $33,340
Cash payments for interest, net of amounts capitalized of $125 and $565, respectively$16,291
 $16,122
Cash payments for income taxes1,571
 637
6
 7
Cash payments for lease liabilities4,971
 —
NON-CASH INVESTING AND FINANCING ACTIVITIES      
Accrued capital expenditures included in accounts payable and accrued expenses15,463
 27,574
2,013
 15,559
Write-off of fully depreciated and impaired assets38,101
 9,918
5,225
 7,106
Operating lease liabilities arising from obtaining right-of-use assets98,980
 —
Mortgage debt forgiven in foreclosure—
 11,537
Acquisition of real estate through the assumption of debt72,473
 —
Accrued common share repurchase4,145
 —
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents at beginning of period$440,430
 $490,279
$432,954
 $440,430
Restricted cash at beginning of period17,092
 10,562
52,182
 17,092
Cash and cash equivalents and restricted cash at beginning of period$457,522
 $500,841
$485,136
 $457,522
      
Cash and cash equivalents at end of period$412,126
 $500,930
$622,667
 $416,668
Restricted cash at end of period51,473
 13,057
19,976
 32,120
Cash and cash equivalents and restricted cash at end of period$463,599
 $513,987
$642,643
 $448,788

 See notes to consolidated financial statements (unaudited).



URBAN EDGE PROPERTIES AND URBAN EDGE PROPERTIES LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.ORGANIZATION

Urban Edge Properties (“UE”, “Urban Edge” or the “Company”) (NYSE: UE) is a Maryland real estate investment trust focused on managing, developing, redeveloping, and acquiring retail real estate in urban communities, primarily in the New York metropolitan area. Urban Edge Properties LP (“UELP” or the “Operating Partnership”) is a Delaware limited partnership formed to serve as UE’s majority-owned partnership subsidiary and to own, through affiliates, all of ourthe Company’s real estate properties and other assets. Unless the context otherwise requires, references to “we”, “us” and “our” refer to Urban Edge Properties and UELP and their consolidated entities/subsidiaries.
The Operating Partnership’s capital includes general and common limited partnership interests in the operating partnership (“OP Units”). As of June 30, 2019,March 31, 2020, Urban Edge owned approximately 95.1%96.0% of the outstanding common OP Units with the remaining limited OP Units held by members of management, ourUrban Edge’s Board of Trustees and contributors of property interests acquired. Urban Edge serves as the sole general partner of the Operating Partnership. The third-party unitholders have limited rights over the Operating Partnership such that they do not have characteristics of a controlling financial interest. As such, the Operating Partnership is considered a variable interest entity (“VIE”), and the Company is the primary beneficiary which consolidates it. The Company’s only investment is the Operating Partnership. The VIE’s assets can be used for purposes other than the settlement of the VIE’s obligations and the Company’s partnership interest is considered a majority voting interest.

As of June 30, 2019,March 31, 2020, our portfolio consisted of 8173 shopping centers, four4 malls and a warehouse park, totaling approximately 15.915.1 million square feet (sf)(“sf”).
2.BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
 
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions of Form 10-Q. Certain information and footnote disclosures included in our annual financial statements have been condensed or omitted. In the opinion of management, the consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position of the Company and the Operating Partnership and the results of operations and cash flows for the interim periods presented. Operating results for the three and six months ended June 30, 2019March 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2019.2020. Accordingly, these consolidated financial statements should be read in conjunction with our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018,2019, as filed with the Securities Exchange Commission (“SEC”).

The consolidated balance sheets as of June 30, 2019March 31, 2020 and December 31, 20182019 reflect the consolidation of wholly-owned subsidiaries and those entities in which we have a controlling financial interest. The consolidated statements of income for the three and six months ended June 30,March 31, 2020 and 2019 and 2018 include the consolidated accounts of the Company and the Operating Partnership. All intercompany transactions have been eliminated in consolidation.

In accordance with ASC 205 Presentation of Financial Statements, the Companycertain prior year balances have been reclassified Property rentals and Tenant reimbursement incomein order to Rental revenue on its consolidated statements of income for the three and six months ended June 30, 2019 and 2018, respectively, as reflected beginning on Form 10-K for the year ended December 31, 2018. Additionally, the Company includes credit losses related to operating lease receivables as a reduction to rental revenue in "Rental revenue" in the consolidated statements of income for the three and six months ended June 30, 2019 dueconform to the adoption of (“ASU 2016-02”) ASC 842 current period presentation.Leases. Provision for doubtful accounts are included in "Property operating expenses" for the three and six months ended June 30, 2018.

The Company includes real estate impairment charges, and casualty losses (gains) resulting from natural disasters in Casualty and impairment loss (gain), net on its consolidated statements of income for the three and six months ended June 30, 2019 and 2018, respectively, as reflected in this Quarterly Report on Form 10-Q. Refer to Note 9 and Note 10 to the unaudited consolidated financial statements in Part I, Item I of this Quarterly Report on Form 10-Q for information regarding real estate impairment charges and casualty losses (gains), respectively.

Our primary business is the ownership, management, redevelopment, development and operation of retail shopping centers and malls. We do not distinguish our primary business or group our operations on a geographical basis for purposes of measuring performance. The Company’s chief operating decision maker reviews operating and financial information for each property on


an individual basis and therefore, each property represents an individual operating segment. None of our tenants accounted for more than 10% of our revenue or property operating income. We aggregate all of our properties into one1 reportable segment due to their similarities with regard to the nature and economics of the properties, tenants and operations, as well as long-term average financial performance.
3.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Real Estate —Real estate is carried at cost, net of accumulated depreciation and amortization. Expenditures for ordinary maintenance and repairs are expensed to operations as they are incurred. Significant renovations that improve or extend the useful lives of assets are capitalized. As real estate is undergoing redevelopment activities, all property operating expenses directly associated with and attributable to the redevelopment, including interest, are capitalized to the extent the capitalized costs of the


property do not exceed the estimated fair value of the property when completed. If the cost of the redeveloped property, including the net book value of the existing property, exceeds the estimated fair value of redeveloped property, the excess is charged to impairment expense. The capitalization period begins when redevelopment activities are underway and ends when the project is substantially complete. Depreciation is recognized on a straight-line basis over estimated useful lives which range from one to 40 years.

Upon the acquisition of real estate, we assess the fair value of acquired assets (including land, buildings and improvements, identified intangibles, such as acquired above and below-market leases, acquired in-place leases and tenant relationships) and acquired liabilities and we allocate the purchase price based on these assessments on a relative fair value basis. We assess fair value based on estimated cash flow projections utilizing appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known trends, and market/economic conditions. We record acquired intangible assets (including acquired above-market leases, acquired in-place leases and tenant relationships) and acquired intangible liabilities (including below-market leases) at their estimated fair value. We amortize identified intangibles that have finite lives over the period they are expected to contribute directly or indirectly to the future cash flows of the property or business acquired.

Our properties are individually reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Such events and changes include macroeconomic conditions, including those caused by global pandemics, like the recent coronavirus disease pandemic (“COVID-19” or the “COVID-19 pandemic”), which may result in property operational disruption and indicate that the carrying amount may not be recoverable. An impairment exists when the carrying amount of an asset exceeds the aggregate projected future cash flows over the anticipated holding period on an undiscounted basis taking into account the appropriate capitalization rate in determining a future terminal value. An impairment loss is measured based on the excess of the property’s carrying amount over its estimated fair value. Estimated fair value may be based on discounted future cash flows utilizing appropriate discount and capitalization rates and in addition to available market information, third-party appraisals, broker selling estimates or sale agreements under negotiation. Impairment analyses are based on our current plans, intended holding periods and available market information at the time the analyses are prepared. If our estimates of the projected future cash flows change based on uncertain market conditions, our evaluation of impairment losses may be different and such differences could be material to our consolidated financial statements.

Recently Issued Accounting Literature — Effective for the fiscal period beginning January 1, 2019,2020, we adopted (“ASU 2016-02”) ASC 842 Leases, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). In connection with the adoption of ASU 2016-02, we also adopted (i) ASU 2019-01 Leases (ASC 842): Codification Improvements, (ii)ASU 2018-20 Leases (ASC 842): Narrow-Scope Improvements for Lessors,(iii) ASU 2018-11 Leases (ASC 842): Targeted Improvements,(iv) ASU 2018-10 Codification Improvements to ASC 842, Leases and (v)ASU 2018-01 Leases (ASC 842): Land Easement Practical Expedient for Transition to Topic 842.

We initially applied the standard at the beginning of the period of adoption through the transition method issued by ASU 2018-11 and have presented comparative periods under ASC 840 Leases. Due to the effects of applying ASC 842, the Company recognized a $2.9 million cumulative-effect adjustment to its accumulated deficit to adjust reserves on receivables from straight-line rents. The new standard requires lessees to apply a two-model approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification determines whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use ("ROU") asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. The Company has elected the short-term lease recognition exemption, and therefore, leases with a term of 12 months or less are not recognized on the balance sheet. The new standard requires lessors to account for leases using an approach that is substantially equivalent to guidance for sales-type leases, direct financing leases and operating leases under ASC 840. For purposes of transition, we did not elect the hindsight practical expedient but did elect the land easement practical expedient to not reassess whether existing land easements contain leases and the practical expedient package, which has been applied consistently to all of our leases. As a result of electing the practical expedient package, we did not (i) reassess whether any expired or existing contracts are or contain leases, (ii) reassess the lease classification for any expired or existing leases or (iii) reassess initial direct costs for any existing leases.

From a lessee perspective, the initial adoption on January 1, 2019 resulted in the recognition of operating lease ROU assets and lease liabilities for 24 operating leases with an aggregate balance of $98.5 million and $93.6 million, respectively. On January 1, 2019, we also reclassified $11.9 million of acquired below-market lease intangibles and $7.1 million of accrued rent and adjusted the carrying values of our ROU assets by the corresponding amounts. If a finance lease is commenced in the future, a finance lease ROU asset and finance lease liability will be recognized on the balance sheet. The Company will recognize amortization of the finance lease ROU asset and interest expense on the lease liability. As of June 30, 2019, our operating lease ROU assets and lease liabilities were $85.4 million and $83.1 million, respectively, as presented on our consolidated balance sheet. The standard's adoption has also impacted the presentation of our consolidated income statement due to accounting for the lease and non-lease components as a single lease component for all classes of underlying assets, presented as lease expense on the consolidated statement of income. Prior to the adoption of ASC 842, related lease and non-lease expense amounts were recognized within lease expense, real estate taxes, property operating expenses and general administrative expenses on the consolidated statement of income.

From a lessor perspective, the adoption resulted in additional general and administrative expenses, attributable to internal leasing department costs not meeting the definition of initial direct costs under ASC 842. Capitalized internal leasing costs were $0.3 million for the six months ended June 30, 2018. The standard's adoption has also impacted the presentation of our consolidated income statement due to accounting for lease and non-lease components as a single lease component, presented as rental revenue on the consolidated statement of income, however there has been no change in the timing of revenue recognition since adoption. Additionally, under the amendments issued in ASU 2018-20, the Company has accounted for common area maintenance expenses paid directly by tenants to third-parties as variable rental revenue and has reported the corresponding expense within property operating expenses, however real estate taxes and insurance expenses paid directly by tenants have not been accounted for by the Company.

The adoption of this standard has also resulted in additional quantitative and qualitative footnote disclosures (refer to Note 8 Leases).

ASU 2016-13, Financial Instruments - Credit Losses (ASC 326): Measurement of Credit Losses will become effective for. In connection with the fiscal period beginning January 1, 2020.adoption of ASU 2016-03, we also adopted (i) ASU 2018-19 Codification Improvements to ASC 326, Financial Instruments - Credit Losses, (ii)ASU 2019-04, Codification Improvements to ASC 326, Financial Statements - Credit Losses, Topic 815, Derivatives and Hedging and Topic 825, Financial Instruments, (iii) ASU 2019-05 Financial Instruments - Credit Losses (ASC 326): Targeted Transition Relief and (iv)ASU 2019-11 Codification Improvements to ASC 326, Financial Instruments - Credit Losses. ASU 2016-13 introduces a new model for estimating credit losses for certain types of financial instruments and also modifies the impairment model with new methodology for estimating credits losses. In November


2018, the FASB issued ASU 2018-19 Codification Improvements to Topic 326, Financial Instruments—Credit Losses, which included amendments to clarify receivables arising from operating leases are within the scope ASC 842.842 Leases. Due to the adoption of ASC 842 on January 1, 2019, the Company includes credit losses related to operating lease receivables as a reduction to rental revenue in "Rental revenue" in the consolidated statements of income.As of March 31, 2020, the Company did not have any outstanding financial instruments. The Company does not expect the adoption of ASU 2016-13 to have a materialhas had no impact onto our consolidated financial statements.statements and disclosures.

In August 2018,December 2019, the FASB issued ASU 2018-132019-12 Disclosure Framework-Changes toIncome Taxes (ASC 740): Simplifying the Disclosure RequirementsAccounting for Fair Value MeasurementIncome Taxes to ASC 820, Fair Value Measurement., which enhances and simplifies various aspects of the income tax accounting. ASU 2018-13 modifies the disclosure requirements for fair value measurements by removing, modifying, and/or adding certain disclosures. ASU 2018-132019-12 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2019.2020. Early adoption is permitted. We electedare currently evaluating the impact ASU 2019-12 may have to early adopt ASU 2018-13 effective January 1, 2019. The adoption of this update did not have a material impact on our consolidated financial statements and disclosures.

In March 2020, the FASB issued ASU 2020-04 Reference Rate Reform (ASC 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. We are currently evaluating the impact ASU 2020-04 may have to our consolidated financial statements and disclosures.

In April 2020, the FASB issued a question-and-answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of COVID-19. Under existing lease guidance, the Company would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated with the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A clarifies that entities may elect to not evaluate whether lease-related relief that lessors provide to mitigate


the economic effects of COVID-19 on lessees is a lease modification under ASC 842. Instead, an entity that elects not to evaluate whether a concession directly related to COVID-19 is a modification can then elect whether to apply the modification guidance (i.e. assume the relief was always contemplated by the contract or assume the relief was not contemplated by the contract). Both lessees and lessors may make this election. The Company is evaluating its election on a disaggregated basis, with such election applied consistently to leases with similar characteristics and similar circumstances. There were no lease concessions granted as a result of COVID-19 during the first quarter. The future impact of the Lease Modification Q&A is dependent upon the extent of lease concessions granted to tenants as a result of COVID-19 in future periods and the elections made by the Company at the time of entering into such concessions.
Any other recently issued accounting standards or pronouncements not disclosed above have been excluded as they are not relevant to the Company or the Operating Partnership, or they are not expected to have a material impact on our consolidated financial statements.

4.ACQUISITIONS AND DISPOSITIONS

Acquisitions
During the sixthree months ended June 30,March 31, 2019, no0 acquisitions were completed by the Company. During the three months ended March 31, 2020, we closed on the following acquisitions:
As
Date Purchased Property Name City State Square Feet Purchase Price 
          (in thousands) 
February 12, 2020 Kingswood Center Brooklyn NY 130,000
 $90,212
 
February 12, 2020 Kingswood Crossing Brooklyn NY 110,000
 77,077
 
        2020 Total$167,289
(1) 

(1) The total purchase price for the properties acquired during the three months ended March 31, 2020 includes $2.5 million of June 30, 2019,transaction costs incurred related to the transactions.

During the quarter, the Company acquired Kingswood Center and Kingswood Crossing for $167.3 million, including transaction costs. The properties are located along Kings Highway in the Midwood neighborhood of Brooklyn, NY and were funded via 1031 exchanges using cash proceeds from dispositions. Additionally, as part of the acquisition of Kingswood Center, the Company assumed a $65.5 million mortgage, which matures in 2028.

A portion of the acquisition of Kingswood Crossing was completed as a reverse Section 1031 like-kind exchange. We entered into a reverse Section 1031 like-kind exchange agreement with third-party intermediaries, which, for a maximum of 180 days, allowed us to defer for tax purposes, gains on the sale of other properties identified and sold within the period. Until the earlier of the termination of the exchange agreements or 180 days after the respective acquisition dates, the third-party intermediaries are the legal owner of the properties; however, we controlled the activities that most significantly impact each property and retained all of the economic benefits and risks associated with each property. Therefore, at the date of acquisition, we determined that we were under contract to purchase an office building in Maywood, NJ, adjacent to our existing property, Bergen Town Center. the primary beneficiary of these variable interest entities and consolidated the properties and their operations as of the acquisition date.

The building is subject to a ground lease, which the Company will acquire the lessee position of for aaggregate purchase price of $7.1 million.the above property acquisitions has been allocated as follows:
Property Name Land Buildings and improvements 
Identified intangible assets(1)
 
Identified intangible liabilities(1)
 Debt premium Total Purchase Price
(in thousands)            
Kingswood Center $15,690
 $76,766
 $9,263
 $(4,534) $(6,973) $90,212
Kingswood Crossing 8,150
 64,159
 4,768
 —
 —
 77,077
2020 Total $23,840
 $140,925
 $14,031
 $(4,534) $(6,973) $167,289
(1) As of March 31, 2020, the remaining weighted average amortization periods of the identified intangible assets and identified intangible liabilities acquired were 8.9 years and 11.3 years, respectively.





Dispositions
During the three months ended March 31, 2020, we disposed of 3 properties and received proceeds of $58.1 million, net of selling costs, resulting in a $39.8 million net gain on sale of real estate. The transaction is scheduled to close bysale of all 3 dispositions were completed as 1031 exchanges with Kingswood Crossing as a result of the endsales occurring within 180 days of 2019. We are also under contract to purchase a retail outparcel in Paramus, NJ, adjacent to our existing property, Bergen Town Center, for a gross purchase price of $6.6 million. The transaction is scheduled to close by the end of 2019.
DispositionsCompany’s acquisition.
On March 15, 2019, we completed the sale of our property in Chicopee, MA for $18.2 million, net of selling costs, resulting in a $17.0 million gain on sale of real estate recognized during the sixthree months ended June 30,March 31, 2019.
On May 14, 2019, we completed the sale of our property in Glen Burnie, MD for $15.6 million, net of selling costs, resulting in a $11.6 million gain on sale of real estate recognized during the three and six months ended June 30, 2019.
Real Estate Held for Sale
As of June 30, 2019, our properties in Tysons Corner, VA and Springfield, MA were classified as held for sale based on executed contracts of sale with third-party buyers. The Company classifies properties as held for sale when executed contract contingencies have been satisfied, which signify that the sale is legally binding. The aggregate asset and liability amounts of these properties were $22.3 million and $12.1 million, respectively, and were included in prepaid expenses and other assets and accounts payable, accrued expenses and other liabilities, respectively, in our consolidated balance sheets as of June 30, 2019. On July 9, 2019, we completed the sale of our property in Springfield, MA for $9.7 million, net of selling costs. The sale of our property in Tysons Corner, VA is scheduled to close by the end of 2019.


5.     IDENTIFIED INTANGIBLE ASSETS AND LIABILITIES
 
Our identified intangible assets (acquired in-place and above-market leases) and liabilities (acquired below-market leases), net of accumulated amortization were $51.6$59.8 million and $131.7$130.8 million, respectively, as of June 30, 2019, respectively,March 31, 2020 and $68.4$48.1 million and $144.3$128.8 million, respectively, as of December 31, 2018, respectively.2019.

Amortization of acquired below-market leases, net of acquired above-market leases resulted in additional rental income of $9.4 million and $11.8$2.2 million for the three and six months ended June 30, 2019, respectively,March 31, 2020 and $7.8 million and $10.5$2.4 million for the same periodsperiod in 2018.2019.
 
Amortization of acquired in-place leases andinclusive of customer relationships resulted in additional depreciation and amortization expense of $1.9 million and $4.0$2.0 million for the three and six months ended June 30, 2019, respectively,March 31, 2020, and $5.8 million and $8.6$2.1 million for the same periodsperiod in 2018.2019.

The following table sets forth the estimated annual amortization income and expense related to intangible assets and liabilities for the remainder of 20192020 and the five succeeding years:
(Amounts in thousands) Below-Market Above-Market   Below-Market Above-Market  
Year Operating Lease Amortization Operating Lease Amortization In-Place Leases Operating Lease Amortization Operating Lease Amortization In-Place Leases
2019(1)
 $4,827
 $(567) $(3,506)
2020 9,570
 (996) (6,124)
2020(1)
 $7,367
 $(778) $(6,565)
2021 9,432
 (797) (4,934) 9,703
 (860) (7,612)
2022 9,355
 (433) (4,032) 9,627
 (495) (6,005)
2023 9,308
 (327) (3,702) 9,575
 (386) (4,859)
2024 9,061
 (266) (3,264) 9,339
 (321) (4,366)
2025 9,167
 (142) (3,732)
(1) Remainder of 2019.2020.



6.     MORTGAGES PAYABLE AND UNSECURED DEBT
 
The following is a summary of mortgages payable as of June 30, 2019March 31, 2020 and December 31, 2018.2019.
   Interest Rate at June 30, December 31,   Interest Rate at March 31, December 31,
(Amounts in thousands) Maturity June 30, 2019 2019 2018 Maturity March 31, 2020 2020 2019
First mortgages secured by:        
        
Variable rate        
Cherry Hill (Plaza at Cherry Hill)(1)
 5/24/2022 4.04% $28,930
 $28,930
 5/24/2022 3.18% $28,930
 $28,930
Westfield (One Lincoln Plaza)(1)
 5/24/2022 4.04% 4,730
 4,730
 5/24/2022 3.18% 4,730
 4,730
Woodbridge (Plaza at Woodbridge)(1)
 5/25/2022 4.04% 55,340
 55,340
 5/25/2022 3.18% 55,340
 55,340
Jersey City (Hudson Commons)(2)
 11/15/2024 4.34% 29,000
 29,000
 11/15/2024 3.48% 28,862
 29,000
Watchung(2)
 11/15/2024 4.34% 27,000
 27,000
 11/15/2024 3.48% 26,871
 27,000
Bronx (1750-1780 Gun Hill Road)(2)
 12/1/2024 4.34% 24,500
 24,500
 12/1/2024 3.48% 24,418
 24,500
Total variable rate debt 169,500
 169,500
 169,151
 169,500
Fixed rate        
Montehiedra (senior loan) 7/6/2021 5.33% 84,314
 84,860
 7/6/2021 5.33% 82,876
 83,202
Montehiedra (junior loan) 7/6/2021 3.00% 30,000
 30,000
 7/6/2021 3.00% 30,000
 30,000
Bergen Town Center - West, Paramus 4/8/2023 3.56% 300,000
 300,000
 4/8/2023 3.56% 300,000
 300,000
Bronx (Shops at Bruckner) 5/1/2023 3.90% 11,283
 11,582
 5/1/2023 3.90% 10,823
 10,978
Jersey City (Hudson Mall)(4)
 12/1/2023 5.07% 23,977
 24,326
 12/1/2023 5.07% 23,445
 23,625
Yonkers Gateway Center(5)
 4/6/2024 4.16% 30,919
 31,704
 4/6/2024 4.16% 29,717
 30,122
Las Catalinas 8/6/2024 4.43% 130,000
 130,000
 8/6/2024 4.43% 128,822
 129,335
Brick 12/10/2024 3.87% 50,000
 50,000
 12/10/2024 3.87% 50,000
 50,000
North Plainfield 12/10/2025 3.99% 25,100
 25,100
 12/10/2025 3.99% 25,100
 25,100
Middletown 12/1/2026 3.78% 31,400
 31,400
 12/1/2026 3.78% 31,400
 31,400
Rockaway 12/1/2026 3.78% 27,800
 27,800
 12/1/2026 3.78% 27,800
 27,800
East Hanover (200 - 240 Route 10 West) 12/10/2026 4.03% 63,000
 63,000
 12/10/2026 4.03% 63,000
 63,000
North Bergen (Tonnelle Ave) 4/1/2027 4.18% 100,000
 100,000
 4/1/2027 4.18% 100,000
 100,000
Manchester 6/1/2027 4.32% 12,500
 12,500
 6/1/2027 4.32% 12,500
 12,500
Millburn 6/1/2027 3.97% 24,000
 24,000
 6/1/2027 3.97% 23,694
 23,798
Totowa 12/1/2027 4.33% 50,800
 50,800
 12/1/2027 4.33% 50,800
 50,800
Woodbridge (Woodbridge Commons) 12/1/2027 4.36% 22,100
 22,100
 12/1/2027 4.36% 22,100
 22,100
East Brunswick 12/6/2027 4.38% 63,000
 63,000
 12/6/2027 4.38% 63,000
 63,000
East Rutherford 1/6/2028 4.49% 23,000
 23,000
 1/6/2028 4.49% 23,000
 23,000
Brooklyn (Kingswood Center)(6)
 2/6/2028 5.07% 72,356
 —
Hackensack 3/1/2028 4.36% 66,400
 66,400
 3/1/2028 4.36% 66,400
 66,400
Marlton 12/1/2028 3.86% 37,400
 37,400
 12/1/2028 3.86% 37,400
 37,400
East Hanover Warehouses 12/1/2028 4.09% 40,700
 40,700
 12/1/2028 4.09% 40,700
 40,700
Union (2445 Springfield Ave) 12/10/2028 4.01% 45,600
 45,600
 12/10/2028 4.01% 45,600
 45,600
Freeport (Freeport Commons) 12/10/2029 4.07% 43,100
 43,100
 12/10/2029 4.07% 43,100
 43,100
Garfield 12/1/2030 4.14% 40,300
 40,300
 12/1/2030 4.14% 40,300
 40,300
Mt Kisco(3)
 11/15/2034 6.40% 13,741
 13,987
 11/15/2034 6.40% 13,359
 13,488
Total fixed rate debt 1,390,434
 1,392,659
 1,457,292
 1,386,748
 Total mortgages payable 1,559,934
 1,562,159
 Total mortgages payable 1,626,443
 1,556,248
 Unamortized debt issuance costs (10,990) (11,917) Unamortized debt issuance costs (9,590) (10,053)
Total mortgages payable, net of unamortized debt issuance costs

Total mortgages payable, net of unamortized debt issuance costs

 $1,548,944
 $1,550,242
Total mortgages payable, net of unamortized debt issuance costs

 1,616,853
 1,546,195
Unsecured credit facilities:    
Revolving credit agreement(7)
 1/29/2024 2.00% 250,000
 —
 Total unsecured credit facilities 250,000

—
Total debt outstanding

Total debt outstanding

 $1,866,853

$1,546,195
(1) 
Bears interest at one month LIBOR plus 160 bps.
(2) 
Bears interest at one month LIBOR plus 190 bps.
(3) 
The mortgage payable balance on the loan secured by Mt Kisco includes $0.9 million and $1.0 million of unamortized debt discount as of June 30, 2019both March 31, 2020 and December 31, 2018, respectively.2019. The effective interest rate including amortization of the debt discount is 7.29%7.30% as of June 30, 2019.March 31, 2020.



(4) 
The mortgage payable balance on the loan secured by Hudson Mall includes $1.1$0.9 million and $1.2$1.0 million of unamortized debt premium as of June 30, 2019March 31, 2020 and December 31, 2018,2019, respectively. The effective interest rate including amortization of the debt premium is 3.82%3.85% as of June 30, 2019.March 31, 2020.
(5) 
The mortgage payable balance on the loan secured by Yonkers Gateway Center includes $0.6$0.5 million and $0.7$0.6 million of unamortized debt premium as of June 30, 2019March 31, 2020 and December 31, 2018,2019, respectively. The effective interest rate including amortization of the debt premium is 3.73%3.70% as of June 30, 2019.March 31, 2020.
(6)
The mortgage payable balance on the loan secured by Kingswood Center includes $6.9 million of unamortized debt premium as of March 31, 2020. The effective interest rate including amortization of the debt premium is 3.44% as of March 31, 2020.
(7)
Bears interest at one month LIBOR plus 1.05% as of March 31, 2020.

The net carrying amount of real estate collateralizing the above indebtedness amounted to approximately $1.3 billion as of June 30, 2019.March 31, 2020. Our mortgage loans contain covenants that limit our ability to incur additional indebtedness on these properties and in certain circumstances require lender approval of tenant leases and/or yield maintenance upon repayment prior to maturity. As of June 30, 2019,March 31, 2020, we were in compliance with all debt covenants.

During 2017, our property in Englewood, NJ was transferred to a receiver. On JanuaryAs of March 31, 2018, our property in Englewood, NJ was sold at a foreclosure sale and on February 23, 2018,2020, the court order was received approving the sale and discharging the receiver of all assets and liabilities related to the property. We recognized a gain on extinguishment of debt of $2.5 million as a resultprincipal repayments of the forgiveness ofCompany’s total outstanding mortgage debt of $11.5 million, which is included in gain on extinguishment of debt in the consolidated statement of income for the six months ended June 30, 2018.

As of June 30, 2019, the principal repayments for the next five years and thereafter are as follows:
(Amounts in thousands)    
Year Ending December 31,    
2019(1)
 $2,573
2020 7,515
2020(1)
 $6,335
2021 123,475
 123,177
2022 99,976
 100,586
2023 344,368
 345,242
2024 274,316
 525,191
2025 33,181
Thereafter 707,711
 742,731
(1) Remainder of 2019.2020.

Revolving Credit Agreement
On January 15, 2015, we entered into a $500 million Revolving Credit Agreement (the “Agreement”) with certain financial institutions. On March 7, 2017, we amended and extended the Agreement. The amendment increased the credit facility size by $100 million to $600 million and extended the maturity date to March 7, 2021 with two2 six-month extension options. On July 29, 2019, we entered into a second amendment to the Agreement to extend the maturity date to January 29, 2024 with two2 six-month extension options. Company borrowings under the Agreement are subject to interest at LIBOR plus 1.05% to 1.50% and an annual facility fee of 15 to 30 basis points. Both the spread over LIBOR and the facility fee are based on our current leverage ratio and are subject to increase if our leverage ratio increases above predefined thresholds. The Agreement contains customary financial covenants including a maximum leverage ratio of 60% and a minimum fixed charge coverage ratio of 1.5x. No amounts have been drawn to date

In March 2020, the Company borrowed $250 million under the Agreement. As of March 31, 2020, $350 million of credit remained available for withdrawal. Financing feescosts associated with executing the existing Agreement of $1.7$3.6 million and $2.2$3.9 million as of June 30, 2019March 31, 2020 and December 31, 2018,2019, respectively, are included in deferred financing fees,costs, net in the consolidated balance sheets. Subsequent to June 30, 2019, additional deferred financing fees of $2.7 million were incurred as a result

Mortgage on Las Catalinas Mall
In April 2020, we notified the servicer of the second amendment$129 million non-recourse mortgage loan on Las Catalinas Mall in Puerto Rico that cash flow would be insufficient to make the April debt service payment and that we were unwilling to fund the shortfalls. Pursuant to the Agreement.loan agreement, the loan is in default, is subject to incremental default interest while the outstanding balance remains unpaid, and the lender has the ability to accelerate the full loan balance. We currently remain in active negotiations with the special servicer and no determination has been made as to the timing or ultimate resolution of this matter.




7.INCOME TAXES

The Company elected to be taxed as a REIT under sections 856-860 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with the filing of its 2015 tax return for its tax year ended December 31, 2015. With exception to the Company’s taxable REIT subsidiary (“TRS”), toTo the extent the Company meets certain requirements under the Code, the Company will not be taxed on its federal taxable income. If we fail to qualify as a REIT for any taxable year, we will be subject to federal income taxes at regular corporate rates, (includingincluding any alternative minimum tax, which, for corporations, was repealed under the Tax Cuts and Jobs Act (“TCJA”) for tax years beginning after December 31, 2017) and may not be able to qualify as a REIT for the four subsequent taxable years. In addition to its TRS, theThe Company is subject to certain foreign and state and local income taxes, including a 29% non-resident withholding tax on its two2 Puerto Rico malls, which are included in income tax expense in the consolidated statements of income. The Company is also subject to certain other taxes, including state and local franchise taxes which are included in general and administrative expenses in the consolidated statements of income.

On December 22, 2017, the TCJA was signed into law. The TCJA amends the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses. Effective January 1, 2018, for businesses, the TCJA reduces the corporate tax rate from a maximum of 35% to a flat 21% rate. Since UE has elected to qualify as a REIT under sections 856-860 of the Internal Revenue Code with intent to distribute 100% of its taxable income and did not have any activities in a Taxable REIT Subsidiary (“TRS”) prior to January 1, 2018, there was no impact to the Company’s financial statements.

On December 31, 2017, the Company elected, for tax purposes, to treat the wholly-owned limited partnership that held its Allentown property as a TRS. A TRS is a corporation, other than a REIT, in which we directly or indirectly hold stock, which has made a joint election with us to be treated as a TRS under Section 856(l) of the Code. A TRS is required to pay regular U.S. federal income tax, and state and local income tax where applicable, as a non-REIT “C” corporation. The Allentown legal entity restructuring resulted in a capital gain recognized for tax purposes in 2017 and a step up in tax basis to the Allentown property resulting in no capital gains recognized for tax purposes in 2018 upon the property’s sale on April 26, 2018. The Company’s consolidated financial statements for the three and six months ended June 30, 2018 reflect the TRS’ federal and state corporate income taxes associated with the operating activities at the TRS. The tax expense recorded in association with the operating activities of the TRS was $0.2 million for the six months ended June 30, 2018. As of December 31, 2018, the Allentown TRS had been dissolved and as such, the Company’s consolidated financial statements for the three and six months ended June 30, 2019 do not reflect any corporate income taxes associated with such TRS.
During the three months ended June 30, 2019,March 31, 2020, certain non-real estate operating activities non-qualifying forthat could not be performed by the REIT purposes, commenceddirectly, occurred through the Company’s operatingtaxable REIT subsidiary (“TRS”), and the Company’s TRS and areis subject to federal, state and local income taxes. These income taxes are included in the income tax expense in the consolidated statements of income.
Our two Puerto Rico malls are subject to a 29% non-resident withholding tax which is included in income tax expense in the consolidated statements of income. The Puerto Rico tax expense recorded was $0.9$0.1 million and $0.2 million for the three months ended June 30,March 31, 2020 and 2019, and 2018, respectively, and $1.1 million and $0.4 million for the six months ended June 30, 2019 and 2018, respectively. Both properties are held in a special partnership for Puerto Rico tax reportingpurposes (the general partner being a qualified REIT subsidiary or “QRS”).

The REIT and the other minority members are partners in the Operating Partnership. As such, the partners are required to report their share of taxable income on their tax returns.

8.LEASES

Leases — We have approximately 1,200All rental revenue was generated from operating leases at our retail shopping centers and malls, which generate rental income from tenants and operating cash flows for the Company. Our tenant leases are dependent on the Company, as lessor, agreeing to provide our tenants with the right to control the use of our real estate assets, as lessees. Our real estate assets are comprised of retail shopping centers and malls. Tenants agree to use and control their agreed upon space for their business purposes. Thus, our tenants obtain substantially all of the economic benefits from the use of our shopping center space and have the right to direct how and for what purpose the real estate space is used throughout the period of use. Given these contractual terms, the Company has determined that all tenant contracts of this nature contain a lease. The Company assesses lease classification for each new and modified lease. All new and modified leases commenced in the sixthree months ended June 30,March 31, 2020 and March 31, 2019, have been assessed and classified as operating leases.

Contractual rent increases of renewal options are often fixed at the time of the initial lease agreement which may result in tenants being able to exercise their renewal options at amounts that are less than the fair value of the rent at the date of renewal. In addition to fixed base rents, certain rental income derived from our tenant leases is variable and may be dependent on percentage rent or


the Consumer Price Index ("CPI"). Variable lease payments from percentage rents are earned by the Company in the event the tenant's gross sales exceed certain amounts. Terms of percentage rent are agreed upon in the tenant's lease and will vary based on the tenant's sales. Variable lease payments dependent on the CPI, will change in accordance with the corresponding increase or decrease in CPI if negotiated and agreed upon in the tenant's lease. Variable lease payments dependent on percentage rent and the CPI were $0.7 million for the six months ended June 30, 2019. Variable lease payments also arise from tenant expense reimbursements, which provide for the recovery of all or a portion of the operating expenses, common area maintenance expenses, real estate taxes, insurance and capital improvements of the respective property and amounted to $54.4 million in the six months ended June 30, 2019. The Company accounts for variable lease payments as "Rental revenue" on the consolidated statement of income in the period in which the changes in facts and circumstances on which the variable lease payments are based occur.

The Company also has 21 properties in its portfolio either completely or partially on land or a building that are owned by third parties. These properties are leased or subleased to us pursuant to ground or building leases, with remaining terms ranging from less than one year to over 80 years and provide us the right to operate each such property. We also lease or sublease real estate for our three corporate offices with remaining terms ranging from one to two years. ROU assets are recorded for these leases, which represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from these leases. ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The initial measurement of a ROU asset may differ from the initial measurement of the lease liability due to initial direct costs, prepaid lease payments and lease incentives. As of June 30, 2019, no other contracts have been identified as leases. Our leases often offer renewal options, which we assess against relevant economic factors to determine whether the Company is reasonably certain of exercising or not exercising the option. Lease payments associated with renewal periods, for which the Company has determined are reasonably certain of being exercised, are included in the measurement of the corresponding lease liability and ROU asset. During the second quarter, the Company reassessed the lease term of one of its ground leases due to a change in circumstances in our election to renew the ground lease. As a result of this reassessment, the Company remeasured the lease liability by using revised inputs as of the reassessment date and recorded an additional ROU asset and lease liability of $5.0 million, respectively.

The discount rate applied to measure each ROU asset and lease liability is based on the incremental borrowing rate of the lease due to the rate implicit in the lease not being readily determinable. The Company initially considers the general economic environment and factors in various financing and asset specific secured borrowings so that the overall incremental borrowing rate is appropriate to the intended use of the lease. Certain expenses derived from these leases are variable and are not included in the measurement of the corresponding lease liability and ROU asset, but are recognized in the period in which the obligation for those payments is incurred. These variable lease payments consist of payments for real estate taxes and common area maintenance, which is dependent on projects and activities at each individual property under ground or building lease.

Accounts Receivable and Changes in Collectibility Assessment — Accounts receivable includes unpaid amounts billed to tenants, disputed enforceable charges and accrued revenues for future billings to tenants for property expenses. We periodically evaluate the collectibility of amounts due from tenants and disputed enforceable charges, resulting from the inability of tenants to make required payments under their lease agreements. We recognize changes in the collectibility assessment of these operating leases as adjustments to rental revenue. Management exercises judgment in assessing collectibility and considers payment history and current credit status. Accounts receivable are written-off directly when they are deemed to be uncollectible.

Leases as lessor

We have approximately 1,200 operating leases at our retail shopping centers and malls, which generate rental income from tenants and operating cash flows for the Company. Our tenant base comprises a diverse group of merchants including department stores, supermarkets, discounters, entertainment offerings, health clubs, DIY stores, in-line specialty shops, restaurants and other food and beverage vendors and service providers. Tenant leases for under 10,000 sf generally have lease terms of five years or less. Tenant leases for 10,000 sf or more are considered anchor leases and generally have lease terms of 10 to 25 years, with one or more renewal options available upon expiration of the initial lease term. Contractual rent increases for the renewal options are often fixed at the time of the initial lease agreement which may result in tenants being able to exercise their renewal options at amounts that are less than the fair value of the rent at the date of renewal.










The components of rental revenue for the three and six months ended June 30,March 31, 2020 and March 31, 2019 were as follows:
Three Months Ended March 31,
(Amounts in thousands)
Three Months Ended June 30, 2019 Six Months Ended June 30, 20192020 2019
Rental Revenue      
Fixed lease revenue$74,896
 $143,380
$69,097
 $68,484
Variable lease revenue26,592
 55,416
23,903
 28,824
Total rental revenue$101,488
 $198,796
$93,000
 $97,308


Maturity analysis of lease payments as lessor

The Company’s operating leases are disclosed in the aggregate due to their consistent nature as real estate leases. As of June 30, 2019, the undiscounted cash flows to be received from lease payments of our operating leases on an annual basis for the next five years and thereafter are as follows:
(Amounts in thousands)  
Year Ending December 31,  
2019(1)
 $132,367
2020 253,816
2021 234,377
2022 215,545
2023 192,209
2024 158,997
Thereafter 872,575
Total undiscounted cash flows
 $2,059,886
(1)Remainder of 2019.

As of December 31, 2018, future base rental revenue under non-cancelable operating leases, under ASC 840 as lessor, was as follows:
(Amounts in thousands)  
Year Ending December 31,  
2019 $256,598
2020 235,652
2021 216,247
2022 198,449
2023 176,282
Thereafter 986,865
These future minimum amounts do not include additional rents based on a percentage of tenants’ sales and tenant expense reimbursements. For the year ended December 31, 2018, rental revenue from percentage rent was $2.0 million. For the year ended December 31, 2018, rental revenue from tenant expense reimbursements was $108.7 million.

Property, plant and equipment under operating leases as lessor
As of June 30, 2019, substantially all of the Company’s real estate assets are subject to operating leases.

Leases as lessee
As of June 30, 2019, the Company had 21 properties in its portfolio either completely or partially on land or a building that was owned by third parties. These properties are leased or subleased to us pursuant to ground or building leases, with remaining terms ranging from less than one year to over 80 years and provide us the right to operate the property. We also lease or sublease real estate for our three corporate offices with remaining terms ranging from one to two years.






The components of lease expense for the three and six months ended June 30, 2019 were as follows:
 (Amounts in thousands)
Three Months Ended June 30, 2019 Six Months Ended June 30, 2019
Lease expense   
Operating lease cost(1)
$3,127
 $6,108
Variable lease cost769
 1,443
Total lease expense$3,896
 $7,551
(1) During the three and six months ended June 30, 2019, the Company recognized sublease income of $5.2 million and $10.2 million, respectively, included in rental revenue on the consolidated statement of income in relation to certain ground and building lease arrangements. Operating lease cost includes amortization of below-market ground lease intangibles and straight-line lease expense.



Supplemental balance sheet information related to leases was as follows:
June 30, 2019
Supplemental noncash information
Weighted-average remaining lease term - operating leases16.2 years
Weighted-average discount rates - operating leases3.97%


Maturity analysis of lease payments as lessee

The undiscounted cash flows to be paid on an annual basis for the next five years and thereafter are presented in the table below. The total amount of lease payments, on an undiscounted basis, are reconciled to the lease liability on the consolidated balance sheet by considering the present value discount.
(Amounts in thousands)  
Year Ending December 31,  
2019(1)
 $4,887
2020 9,228
2021 8,639
2022 8,658
2023 8,456
2024 8,463
Thereafter 68,956
Total undiscounted cash flows 117,287
Present value discount (34,237)
Discounted cash flows $83,050
(1)Remainder of 2019.

As of December 31, 2018, future lease payments under operating lease agreements, including extension options if reasonably assured of being exercised, under ASC 840 as lessee, were as follows:
(Amounts in thousands)  
Year Ending December 31,  
2019 $10,640
2020 9,614
2021 8,957
2022 8,982
2023 8,850
Thereafter 85,535



9.     FAIR VALUE MEASUREMENTS
 
ASC 820, Fair Value Measurement and Disclosures defines fair value and establishes a framework for measuring fair value. The objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels: Level 1 - quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities; Level 2 - observable prices based on inputs not quoted in active markets, but corroborated by market data; and Level 3 - unobservable inputs used when little or no market data is available. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty credit risk in our assessment of fair value.
 
Financial Assets and Liabilities Measured at Fair Value on a Recurring or Non-Recurring Basis

There were no financial assets or liabilities measured at fair value on a recurring or non-recurring basis as of June 30, 2019March 31, 2020 and December 31, 2018.2019.

Financial Assets and Liabilities not Measured at Fair Value
Financial assets and liabilities that are not measured at fair value on the consolidated balance sheets include cash and cash equivalents, mortgages payable and mortgages payable.unsecured credit facility borrowings. Cash and cash equivalents are carried at cost, which approximates fair value. The fair valuevalues of our mortgages payable isand unsecured credit facility borrowings are calculated by


discounting the future contractual cash flows of these instruments using current risk-adjusted rates available to borrowers with similar credit ratings, which are provided by a third-party specialist. The fair value of cash and cash equivalents is classified as Level 1 and the fair valuevalues of mortgages payable isand unsecured credit facility borrowings are classified as Level 2. The table below summarizes the carrying amounts and fair value of these financial instruments as of June 30, 2019March 31, 2020 and December 31, 2018.2019.
 
 As of June 30, 2019 As of December 31, 2018 As of March 31, 2020 As of December 31, 2019
(Amounts in thousands) Carrying Amount Fair Value Carrying Amount Fair Value Carrying Amount Fair Value Carrying Amount Fair Value
Assets:  
  
  
  
  
  
  
  
Cash and cash equivalents $412,126
 $412,126
 $440,430
 $440,430
 $622,667
 $622,667
 $432,954
 $432,954
Liabilities:  
  
  
  
  
  
  
  
Mortgages payable(1)
 $1,559,934
 $1,592,828
 $1,562,159
 $1,543,963
 $1,626,443
 $1,627,178
 $1,556,248
 $1,590,503
Unsecured credit facility 250,000
 250,000
 —
 —

(1) Carrying amounts exclude unamortized debt issuance costs of $11.0$9.6 million and $11.9$10.1 million as of June 30, 2019March 31, 2020 and December 31, 2018,2019, respectively.

Nonfinancial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
We assess the carrying value of our properties for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. Such events and changes include macroeconomic conditions, including those caused by global pandemics, such as COVID-19, which may result in property operational disruption and indicate that the carrying amount may not be recoverable.
No impairment charges were recognized during the three months ended March 31, 2020.
During the three months ended June 30,March 31, 2019, the Company recognized impairment charges of $18.7 million on two retail properties that the Company intends to market and sell within the next two years. The impairment loss was calculated as the difference between the assets’ individual carrying values and the estimated aggregated fair values of $28.5 million, less estimated selling costs. We alsowe recognized a $4.0 million impairment charge on an additionalour property during the three months ended March 31, 2019in Westfield, NJ as a result of the loss of a significant tenant at the property. The valuation of these properties wereour property in Westfield, NJ was based on comparable saleproperty transactions in the properties’property’s surrounding areas.area. The Company believes the inputs utilized to measure the fair values werevalue was reasonable in the context of applicable market conditions, however due to the significance of the unobservable inputs in the overall fair value measures, including market conditions and expectations for growth, the Company determined that such fair value measurements aremeasurement is classified as Level 3. The impairment charges arecharge is included as an expense withinunder casualty and impairment loss (gain), net on our consolidated statementsstatement of income for the three and six months ended June 30,March 31, 2019.



10.     COMMITMENTS AND CONTINGENCIES
 
There are various legal actions against us in the ordinary course of business. After consultation with legal counsel, the outcome of such matters will not have a material adverse effect on our financial condition, results of operations or cash flows.
Redevelopment
As of June 30, 2019,March 31, 2020, we had approximately $120.8$52.8 million of active development, redevelopment and anchor repositioning projects underway,under way, of which $20.7$16.0 million remains to be funded. BasedFurther, while we have approximately $300 million of projects in our development pipeline, we are under no obligation to execute and fund any of these projects and each of these projects is being reevaluated considering market conditions. The Company has updated many of its active project stabilization dates to reflect the impact of the COVID-19 outbreak on current plansits contractors, tenants and estimates, we anticipate the remaining amounts will be expended over the next two years.vendors.
Insurance 
The Company maintains (i) general liability insurance with limits of $200 million for properties in the U.S. and Puerto Rico, and (ii) all-risk property insurance with limits of $500 million per occurrence and in the aggregate for properties in the U.S. and $139$147 million for properties in Puerto Rico, subject to the terms, conditions, exclusions, deductibles and sub-limits when applicable for certain perils such as floods and earthquakes, (iii) pollution insurance with limits of $50 million for properties in the U.S. and (iii)Puerto Rico and (iv) numerous other insurance policies including trustees’ and officers’ insurance, cyber, workers’ compensation and automobile-related liabilities insurance. The Company’s insurance includes coverage for acts of terrorism but excludes coverage for nuclear, biological, chemical or radiological terrorism events as defined by the Terrorism Risk Insurance Program Reauthorization Act, which expires in December 2020. In addition, the Company maintainsThe Company’s coverage for certain cybersecurity losses with limits of $5 million per occurrence and in the aggregate providingprovides first and third-party coverage including network interruption, event management, cyber extortion and claims for media content, security and privacy liability.


The Company’s coverage for pollution related losses provides certain remediation and business interruption coverage for specified pollution incidents, which includes the presence of viruses. The Company has filed insurance claims related to COVID-19 and is pursuing available coverage.
Insurance premiums are typically charged directly to each of the retail properties and warehouses but not all of the cost of such premiums are recovered. The Company is responsible for deductibles, losses in excess of insurance coverage, and the portion of premiums not reimbursable by tenants at our properties, which could be material.
We continue to monitor the state of the insurance market and the scope and costs of coverage for acts of terrorism. However, weavailable coverage. We cannot anticipate what coverage will be available on commercially reasonable terms in the future and expect premiums across most property coverage lines to increase in light of recent events. The incurrence of uninsured losses, costs or uncovered premiums could materially and adversely affect our business, results of operations and financial condition.
Certain of our loans and other agreements contain customary covenants requiring the maintenance of insurance coverage. Although we believe that we currently have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future. If lenders or other counterparties insist on greater coverage than we are able to obtain, such requirement could materially and adversely affect our ability to finance our properties and expand our portfolio.

Tornado-Related Charges
On June 13, 2018, a tornado hit our shopping center in Wilkes-Barre, PA, damaging approximately 13% of the property’s gross leasable area. During the three months ended June 30, 2019, the Company settled the related insurance claim with its carrier for $5.5 million. Of this amount, the Company recognized $4.8 million as a casualty gain in the three months ended June 30, 2019. As part of the settlement, the Company recognized $0.2 million and $0.3 million as business interruption proceeds within rental revenue for the three and six months ended June 30, 2019, respectively.

Hurricane-Related Charges
On September 20, 2017, Hurricane Maria made landfall, damaging our two properties in Puerto Rico. During the six months ended June 30, 2018, the Company received $1.5 million in casualty insurance proceeds, which were partially offset by $0.2 million of hurricane related costs, resulting in net casualty gains of $1.3 million included in casualty and impairment loss (gain), net on the accompanying consolidated statements of income.

During the three and six months ended June 30, 2018, the Company recognized a $0.2 million net casualty gain and $0.5 million of business interruption losses, respectively. For the six months ended June 30, 2018, losses of $0.7 million pertained to rent abatements due to tenants that had not reopened since the hurricane, recorded as a reduction of rental revenue, offset by a $0.2 million reversal within property operating expenses to provision for doubtful accounts for payments received from tenants on rents previously reserved.

During the three months ended June 30, 2019, the Company reached a settlement agreement with its carrier regarding its final insurance recovery related to Hurricane Maria for $14.3 million, of which $3.3 million was previously received, subject to deductibles of $2.3 million. We recognized an $8.7 million casualty gain in the second quarter of 2019 as a result of the remaining insurance proceeds from the settlement agreement for our two malls in Puerto Rico.



Environmental Matters
Each of our properties has been subjected to varying degrees of environmental assessment at various times. Based on these assessments, we have accrued costs of $1.7$1.0 million and $2.7 million on our consolidated balance sheets as of June 30, 2019March 31, 2020 and December 31, 2018,2019, respectively, for remediation costs for environmental contamination at certain properties. While this accrual reflects our best estimates of the potential costs of remediation at these properties, there can be no assurance that the actual costs will not exceed these amounts. During the three and six months ended June 30, 2018, the Company recognized $0.3 million and $0.6 million, respectively, of environmental remediation costs within property operating expenses on the consolidated statements of income. Although we are not aware of any other material environmental contamination, there can be no assurance that the identification of new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites, or changes in cleanup requirements would not result in significant costs to us.

Bankruptcies
Although our rental revenue is supported by long-term leases, leases may be rejected in a bankruptcy proceeding and the related tenant stores may permanently vacate prior to lease expiration. In the event a tenant with a significant number of leases or square footage in our shopping centers files for bankruptcy and rejects its leases with us, we could experience a reduction in our revenues. We monitor the operating performance and rent collections of all tenants in our shopping centers, especially those tenants in arrears or operating retail formats that are experiencing significant changes in competition, business practice, or store closings in other locations.

Sears Holdings Corporation (“Sears”),Pandemic-Related Contingencies
On January 30, 2020, the parent companyspread of Kmart, filed for Chapterthe COVID-19 outbreak was declared a Public Health Emergency of International Concern by the World Health Organization ("WHO"). On March 11, bankruptcy protection on October 15, 2018.2020, WHO characterized the COVID-19 outbreak as a pandemic. During and subsequent to the first quarter, the continually evolving COVID-19 pandemic impacted our tenants and business operations. The Company had four Kmart leases comprising approximately 547,000 sf, which generated $8.5 million in annual rental revenue. In January 2019, Sears announcedhas taken precautions to protect the acquisitionsafety, health and well-being of its assets by ESL Investments (“ESL”) for approximately $5.2 billion. Property rents were paid on all four Kmart locations through April 2019. During the second quarter of 2019, our Kmart leases at Las Catalinasemployees and Huntington, NY were rejected and we recognizedtenants.
As a $7.4 million write-offresult of the below-market intangible liability connectedCompany’s concentrated operations in the New York metropolitan area, the extent and magnitude of the pandemic’s impact to our operations is heightened. As of April 27, 2020, 55% of our portfolio's gross leasable area remains open for business and the Company received approximately 56% of April rental revenue billed, totaling $15.8 million. The Company currently remains in active discussions and negotiations with its impacted tenants and anticipates the need to grant rent concessions or other lease-related relief, such as the deferral of lease payments for a period of time to be paid over the remaining term of the lease. The nature and financial impact of such rent relief is currently unknown as negotiations are in Huntington, NY (classified within rental revenues). ESL assumed the Company’s remaining two Kmart leases at Montehiedra and at Bruckner Commons during the second quarter of 2019. progress.
The Company is monitoring the proceedings and considering its alternatives.

During the second quarter, the Company received $1.1 millionnot currently aware of bankruptcy settlement income in connection with the bankruptcy proceedings of Toys "R" Us Inc. (“Toys “R” Us”). The settlement proceeds were usedany loss contingencies related to offset outstanding credit losses and the remaining proceeds were recorded to other income. Prior to liquidation in 2018, the Company had leases with Toys “R” Usthis matter that would require recognition at nine locations with annual gross rents of $7.6 million. No determination has been made as to the amount or timing of additional bankruptcy settlement proceeds, if any, that may be received.

this time.


11.     PREPAID EXPENSES AND OTHER ASSETS

The following is a summary of the composition of the prepaid expenses and other assets in the consolidated balance sheets:
Balance atBalance at
(Amounts in thousands)June 30, 2019 December 31, 2018March 31, 2020 December 31, 2019
Assets held for sale$22,289
 $—
Other assets3,231
 2,765
$7,179
 $7,460
Real estate held for sale—
 6,574
Deposits for acquisitions—
 10,000
Prepaid expenses:      
Real estate taxes1,772
 6,911
12,986
 6,491
Insurance1,913
 2,509
5,401
 1,520
Licenses/fees1,681
 783
1,806
 1,655
Total Prepaid expenses and other assets$30,886
 $12,968
$27,372
 $33,700
 



12.     ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES

The following is a summary of the composition of accounts payable, accrued expenses other liabilities in the consolidated balance sheets:
 Balance at
(Amounts in thousands)March 31, 2020 December 31, 2019
Deferred tenant revenue$20,571
 $26,224
Accrued interest payable10,202
 9,729
Accrued capital expenditures and leasing costs7,470
 7,893
Security deposits6,192
 5,814
Deferred tax liability, net5,183
 5,137
Accrued payroll expenses2,996
 5,851
Other liabilities and accrued expenses16,736
 15,996
Total accounts payable, accrued expenses and other liabilities$69,350
 $76,644
 Balance at
(Amounts in thousands)June 30, 2019 December 31, 2018
Accrued capital expenditures and leasing costs$21,201
 $29,754
Deferred tenant revenue19,152
 28,697
Liabilities held for sale12,081
 —
Accrued interest payable9,196
 8,950
Deferred tax liability, net5,363
 5,532
Security deposits5,671
 5,396
Accrued payroll expenses3,326
 5,747
Other liabilities and accrued expenses9,044
 7,371
Accrued rent(1)
—
 7,070
Total accounts payable, accrued expenses and other liabilities$85,034
 $98,517
(1) In connection with the adoption of ASC 842 on January 1, 2019, we reclassified $7.1 million of accrued rent and adjusted the carrying values of our ROU assets by the corresponding amount.

13.     INTEREST AND DEBT EXPENSE
 
The following table sets forth the details of interest and debt expense in the consolidated statements of income:
Three Months Ended June 30, Six Months Ended June 30,Three Months Ended March 31,
(Amounts in thousands)2019 2018 2019 20182020 2019
Interest expense$15,752
 $14,942
 $31,568
 $29,864
$16,469
 $15,816
Amortization of deferred financing costs720
 717
 1,440
 1,439
706
 720
Total Interest and debt expense$16,472
 $15,659
 $33,008

$31,303
$17,175
 $16,536


14.     EQUITY AND NONCONTROLLING INTEREST

At-The-MarketShare Repurchase Program
In 2016,March 2020, the Company established an at-the-market (“ATM”) equityCompany’s Board of Trustees authorized a share repurchase program pursuantfor up to which$200 million of the Company’s common shares. Under the program, the Company may offer and sellrepurchase its shares from time to time its common shares, par value $0.01 per share,in the open market or in privately negotiated transactions in compliance with an aggregate gross sales priceSecurities and Exchange Commission Rule 10b-18. The amount and timing of up to $250.0 million through a consortium of broker dealers acting as sales agents. As of June 30, 2019, $241.3 million of common shares remained available for issuance under this ATM equity program and there were no common shares issued under the ATM equity program during the three and six months ended June 30, 2019 and 2018, respectively. Actual future salespurchases will depend on a varietynumber of factors including butthe price and availability of the Company’s shares, trading volume and general market conditions. The share repurchase program does not limitedobligate the Company to market conditions, the trading priceacquire any particular amount of our common shares and our capital needs. We have no obligation to sellmay be suspended or discontinued at any time at the remaining shares available under the active ATM equity program.Company’s discretion.
Dividends and Distributions


During the three months ended June 30,March 31, 2020, the Company repurchased 4.5 million common shares at a weighted average share price of $9.61 under this program, for a total of $42.8 million. Subsequent to March 31, 2020, the Company repurchased an additional 1.4 million common shares at a weighted average share price of $7.98 for a total of $11.3 million. Cumulative total purchases since inception are 5.9 million shares at a weighted average share price of $9.22 amounting to an investment of $54.1 million.

Dividends and Distributions
During the three months ended March 31, 2020 and 2019, and 2018, respectively, the Company declared dividends on our common shares and OP unit distributions of $0.22 per share/unit. During the six months ended June 30, 2019 and 2018, respectively, the Company declared dividends on our common shares and OP unit distributions of $0.44 per share/unit in the aggregate.
Noncontrolling Interests in Operating Partnership
Redeemable noncontrollingNoncontrolling interests in the Operating Partnership reflected on the consolidated balance sheets of the Company are comprised of OP units and limited partnership interests in the Operating Partnership in the form of LTIP unit awards. LTIP unit awards were granted to certain executives pursuant to our 2015 Omnibus Share Plan (the “Omnibus Share Plan”) and our 2018 Inducement Equity Plan (the “Inducement Plan”). OP units were issued to contributors in exchange for their property interests in connection with the Company’s property acquisitions in 2017.


The total of the OP units and LTIP units represent a 5.4% and 6.9%4.5% weighted-average interest in the Operating Partnership for the three and six months ended June 30, 2019,March 31, 2020, respectively. Holders of outstanding vested LTIP units may, from and after two years from the date of issuance, redeem their LTIP units for cash, or for the Company’s common shares on a one-for-one1-for-one basis, solely at our election. Holders of outstanding OP units may redeem their units for cash or the Company’s common shares on a one-for-one1-for-one basis, solely at our election.
In connection with the separation from Vornado Realty L.P. (“VRLP”), the Company issued 5.7 million OP units, which represented a 5.4% interest in the Operating Partnership, to VRLP in exchange for interests in VRLP properties contributed by VRLP. On February 28, 2019, the Company issued 5.7 million common shares to VRLP, in exchange for an equal number of OP units after receiving a notice of redemption from VRLP. The issuance is exempt from registration in reliance upon Section 4(a)(2) of the Securities Act of 1933, as amended, on the basis that no public offering was made.
Noncontrolling Interest in Consolidated Subsidiaries
The noncontrolling interest relates to the 5% interest held by others in our property in Walnut Creek, CA (Mount Diablo). The net income attributable to noncontrolling interest is presented separately in our consolidated statements of income.

15.     SHARE-BASED COMPENSATION

Share-Based Compensation Expense
Share-based compensation expense, which is included in general and administrative expenses in our consolidated statements of income, is summarized as follows:
Three Months Ended June 30, Six Months Ended June 30,Three Months Ended March 31,
(Amounts in thousands)2019 2018 2019 20182020 2019
Share-based compensation expense components:Share-based compensation expense components:      Share-based compensation expense components:  
Restricted share expense$336
 $614
 $1,087
 $1,201
$260
 $751
Stock option expense999
 519
 2,070
 1,104
868
 1,071
LTIP expense(1)995
 208
 2,203
 374
1,183
 1,208
Outperformance Plan (“OPP”) expense923
 858
 1,487
 1,540
Performance-based LTI expense(2)
915
 564
Deferred share unit (“DSU”) expense42
 23
 112
 23
22
 70
Total Share-based compensation expense$3,295
 $2,222
 $6,959
 $4,242
$3,248
 $3,664

(1) LTIP expense includes the time-based portion of the 2018, 2019 and 2020 LTI Plans.
(2) Performance-based LTI expense includes the 2015 and 2017 OPP plans and the performance-based portion of the 2018, 2019 and 2020 LTI Plans.

Equity award activity during the sixthree months ended June 30, 2019March 31, 2020 included: (i) 276,4821,208,304 stock options vested, (ii) 210,078 LTIP units granted, (ii) 180,213 stock options granted, (iii) 31,578 restricted shares granted,128,817 LTIP units vested, (iv) 693,441 stock options vested, (v) 96,37850,285 restricted shares vested and (vi) 80,681 LTIP units vested.(v) 25,937 restricted shares granted.

2019



2020 Long-Term Incentive Plan

On April 4, 2019,February 20, 2020, the Compensation Committee of the Board of Trustees of the Company approved the Company’s 20192020 Long-Term Incentive Plan (“20192020 LTI Plan”). The Plan is a multi-year, equity compensation program under which participants, including our Chairman and Chief Executive Officer, have the opportunity to earn awards in the form of LTIP units that vest based on (i) the passage of time (one-third of the fair value of the program) and (ii) performance goals tied to our relative and absolute total shareholder return (“TSR”) during the three-year performance period following their grant (two-thirds of the fair value of the program). The total grant date fair value under the 2020 LTI Plan was $8.8 million comprising performance-based and time-based awards as described further below:

Performance-based awards
For the performance-based awards under the 20192020 LTI Plan, participants, have the opportunity to earn awards in the form of LTIP Units if and only if, Urban Edge’s absolute andand/or relative TSR meets certain criteria over the three-year performance measurement period (the “Performance Period”) beginning on February 27, 201920, 2020 and ending on February 26, 2022.19, 2023. The Company issued 489,319 LTIP Unitsgranted performance-based awards under the 20192020 LTI Plan.

Plan that represent 630,774 LTIP Units. The fair value of the performance-based award portion of the 2020 LTI Plan on the date of grant was $5.9 million using a Monte Carlo simulation to estimate the fair value through a risk-neutral premise.
Under the Absolute TSR component, 40% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to 18%, 100% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to 27%, and 165% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to or greater than 36%. The Relative TSR component is based on the Company’s performance compared to a peer group comprised of 14 companies. Under the Relative TSR Component, 40% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to the 35th percentile of the peer group, 100% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to the 55th percentile of the peer group, and 165% of the LTIP Units will be earned if the Company’s TSR over the


Performance Period is equal to or above the 75th percentile of the peer group, with earning determined using linear interpolation if in between such relative and absolute TSR thresholds. The fair value of the performance-based award portion of the 2019 LTI Plan on the date of grant was $4.3 million using a Monte Carlo simulation to estimate the fair value through a risk-neutral premise.

Time-based awards
The time-based awards granted under the 20192020 LTI Plan, also granted in the form of LTIP Units, vest ratably over three years except in the case of our Chairman and Chief Executive Officer, where the vesting is ratably over four years. As of June 30, 2019,March 31, 2020, the Company granted time-based awards under the 20192020 LTI Plan that represent 112,910169,004 LTIP units with a grant date fair value of $2.0$2.9 million.

Units Granted to Trustees


On May 9, 2019, certain trustees elected to receive a portion of their compensation in deferred share units and an aggregate of 5,608 shares were granted to those trustees based on the weighted average grant date fair value of $15.60. In addition, certain trustees elected to receive a portion of their compensation in LTIP units and an aggregate of 28,040 LTIP units, were granted to those trustees based on the weighted average grant date fair value of $14.98.

16.     EARNINGS PER SHARE AND UNIT

Urban Edge Earnings per Share
We have calculated earnings per share (“EPS”) under the two-class method. The two-class method is an earnings allocation methodology whereby EPS for each class of Urban Edge common shares and participating securities is calculated according to dividends declared and participating rights in undistributed earnings. Restricted shares issued pursuant to our share-based compensation program are considered participating securities, and as such have non-forfeitable rights to receive dividends.
The following table sets forth the computation of our basic and diluted earnings per share:
Three Months Ended June 30, Six Months Ended June 30,Three Months Ended March 31,
(Amounts in thousands, except per share amounts)2019 2018 2019 20182020 2019
Numerator:          
Net income attributable to common shareholders$26,571
 $53,737
 $52,108
 $74,437
$48,980
 $25,537
Less: Earnings allocated to unvested participating securities(22) (97) (45) (135)(34) (23)
Net income available for common shareholders - basic$26,549
 $53,640

$52,063

$74,302
$48,946
 $25,514
Impact of assumed conversions:          
OP and LTIP units—
 —
 —
 153
—
 2,245
Net income available for common shareholders - dilutive$26,549
 $53,640

$52,063

$74,455
$48,946
 $27,759
          
Denominator:          
Weighted average common shares outstanding - basic120,364
 113,739
 118,330
 113,708
120,966
 116,274
Effect of dilutive securities(1):
          
Stock options using the treasury stock method—
 —
 —
 2
Restricted share awards97
 203
 106
 195
85
 114
Assumed conversion of OP and LTIP units—
 —
 —
 246
—
 10,116
Weighted average common shares outstanding - diluted120,461
 113,942
 118,436
 114,151
121,051
 126,504
          
Earnings per share available to common shareholders:          
Earnings per common share - Basic$0.22
 $0.47
 $0.44
 $0.65
$0.40
 $0.22
Earnings per common share - Diluted$0.22
 $0.47
 $0.44
 $0.65
$0.40
 $0.22
(1) For the three and six months ended June 30, 2019 and the three months ended June 30, 2018,March 31, 2020, the effect of the redemption of OP and LTIP units for Urban Edge common shares would have an anti-dilutive effect on the calculation of diluted EPS. Accordingly, the impact of such redemption has not been included in the determination of diluted EPS for this period.


















Operating Partnership Earnings per Unit
The following table sets forth the computation of basic and diluted earnings per unit:
Three Months Ended June 30, Six Months Ended June 30,Three Months Ended March 31,
(Amounts in thousands, except per unit amounts)2019 2018 2019 20182020 2019
Numerator:          
Net income attributable to unitholders$28,089
 $59,762
 $55,981
 $82,790
$51,288
 $27,892
Less: net income attributable to participating securities(23) (102) (47) (144)(34) (25)
Net income available for unitholders$28,066

$59,660

$55,934

$82,646
$51,254

$27,867
          
Denominator:          
Weighted average units outstanding - basic126,478
 126,178
 126,442
 126,178
125,844
 126,391
Effect of dilutive securities issued by Urban Edge97
 203
 106
 197
85
 114
Unvested LTIP units5
 221
 6
 246
826
 —
Weighted average units outstanding - diluted126,580
 126,602
 126,554
 126,621
126,755
 126,505
          
Earnings per unit available to unitholders:          
Earnings per unit - Basic$0.22
 $0.47
 $0.44
 $0.65
$0.41
 $0.22
Earnings per unit - Diluted$0.22
 $0.47
 $0.44
 $0.65
$0.40
 $0.22




ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain statements contained herein constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of future performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as “approximates,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “would,” “may” or other similar expressions in this Quarterly Report on Form 10-Q. Many of the factors that will determine the outcome of these and our other forward-looking statements are beyond our ability to control or predict; these factorspredict and include, among others,others: (i) the estimated remediationeconomic, political and repair costs relatedsocial impact of, and uncertainty relating to, natural disasters at the affected propertiesCOVID-19 pandemic, including (a) the effectiveness or lack of effectiveness of governmental relief in providing assistance to large and small businesses, particularly our retail tenants, that have suffered significant declines in revenues as a result of mandatory business shut-downs, “shelter-in-place” or “stay-at-home” orders and social distancing practices, as well as to individuals adversely impacted by the COVID-19 pandemic, (b) the duration of any such orders or other formal recommendations for social distancing and the lossspeed and extent to which revenues of our retail tenants recover following the lifting of any such orders or bankruptcy of a major tenant andrecommendations, (c) the potential impact of any such event.events on the obligations of the Company’s tenants to make rent and other payments or honor other commitments under existing leases, (d) the potential adverse impact on returns from redevelopment projects, and (e) the broader impact of the severe economic contraction and increase in unemployment that has occurred in the short term and negative consequences that will occur if these trends are not quickly reversed; (ii) the loss or bankruptcy of major tenants, particularly in light of the adverse impact to the financial health of many retailers that has occurred and continues to occur as a result of the COVID-19 pandemic; (iii) the ability and willingness of the Company’s tenants to renew their leases with the Company upon expiration, the Company’s ability to re-lease its properties on the same or better terms, or at all, in the event of non-renewal or in the event the Company exercises its right to replace an existing tenant, particularly, in light of the adverse impact to the financial health of many retailers that has occurred and continues to occur as a result of the COVID-19 pandemic and the significant uncertainty as to when and the conditions under which potential tenants will be able to operate physical retail locations in future; (iv) the impact of e-commerce on our tenants’ business; (v) macroeconomic conditions, such as a disruption of, or lack of access to the capital markets, as well as the recent significant decline in the Company’s share price from prices prior to the spread of the COVID-19 pandemic; (vi) the Company’s success in implementing its business strategy and its ability to identify, underwrite, finance, consummate and integrate diversifying acquisitions and investments; (vii) changes in general economic conditions or economic conditions in the markets in which the Company competes, and their effect on the Company’s revenues, earnings and funding sources, and on those of its tenants; (viii) increases in the Company’s borrowing costs as a result of changes in interest rates and other factors, including the potential phasing out of LIBOR after 2021; (ix) the Company’s ability to pay down, refinance, restructure or extend its indebtedness as it becomes due and potential limitations on the Company’s ability to borrow funds under its existing credit facility as a result of covenants relating to the Company’s financial results in the second quarter of 2020 or future quarters; (x) potentially higher costs associated with the Company’s development, redevelopment and anchor repositioning projects, and the Company’s ability to lease the properties at projected rates; (xi) the Company’s liability for environmental matters; (xii) damage to the Company’s properties from catastrophic weather and other natural events, and the physical effects of climate change; (xiii) the Company’s ability and willingness to maintain its qualification as a REIT in light of economic, market, legal, tax and other considerations; (xiv) information technology security breaches; and (xv) the loss of key executives. For further discussion of factors that could materially affect the outcome of our forward-looking statements, see “Risk Factors” in Part I, Item 1A, of the Company’s Annual Report on Form 10-K for the year ended December 31, 20182019 and the other documents filed by the Company with the SEC, including the information contained in this Quarterly Report on Form 10-Q.
For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q.
The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in Part I of this Quarterly Report on Form 10-Q.

Overview

Urban Edge Properties (“UE”, “Urban Edge” or the “Company”) (NYSE: UE) is a Maryland real estate investment trust that manages, develops, redevelops, and acquires retail real estate, primarily in the New York metropolitan area. Urban Edge Properties LP (“UELP” or the “Operating Partnership”) is a Delaware limited partnership formed to serve as UE’s majority-owned partnership


subsidiary and to own, through affiliates, all of ourthe Company’s real estate properties and other assets. Unless the context otherwise requires, references to “we”, “us” and “our” refer to Urban Edge Properties and UELP and their consolidated entities/subsidiaries.
The Operating Partnership’s capital includes general and common limited partnership interests in the operating partnership (“OP Units”). As of June 30, 2019,March 31, 2020, Urban Edge owned approximately 95.1%96.0% of the outstanding common OP Units with the remaining limited OP Units held by members of management, ourUrban Edge’s Board of Trustees and contributors of property interests acquired. Urban Edge serves as the sole general partner of the Operating Partnership.

As of June 30, 2019,March 31, 2020, our portfolio consisted of 8173 shopping centers, four malls and a warehouse park, totaling approximately 15.915.1 million square feet.

Critical Accounting Policies and Estimates

The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 20182019 contains a description of our critical accounting policies, including accounting for real estate, leases and revenue recognition. For the sixthree months ended June 30, 2019,March 31, 2020, there were no material changes to these policies other thanwith the adoptionexception of ASU 2016-02 and updates to the Company’s policies on leases, accounts receivable and changes in collectibility assessment describedour real estate policy, which has been included in Note 3 and Note 8 to the unaudited consolidated financial statements in Part 1,I, Item 1I of this Quarterly Report on Form 10-Q.

Recent Accounting Pronouncements

Refer to Note 3 to the unaudited consolidated financial statements in Part I, Item I of this Quarterly Report on Form 10-Q for information regarding recent accounting pronouncements that may affect us.
 





Results of Operations
We derive substantially all of our revenue from rents received from tenants under existing leases on each of our properties. This revenue includes fixed base rents, recoveries of expenses that we have incurred and that we pass through to the individual tenants and percentage rents that are based on specified percentages of tenants’ revenue, in each case as provided in the respective leases.
Our primary cash expenditures consist of our property operating and capital costs, general and administrative expenses, and interest and debt expense. Property operating expenses include: real estate taxes, repairs and maintenance, management expenses, insurance and utilities; general and administrative expenses include payroll, professional fees, information technology, office expenses and other administrative expenses; and interest and debt expense primarily consist of interest on our mortgage debt. In addition, we incur substantial non-cash charges for depreciation and amortization on our properties. We also capitalize certain expenses, such as taxes, interest and salaries related to properties under development or redevelopment until the property is ready for its intended use.
Our consolidated results of operations often are not comparable from period to period due to the impact of property acquisitions, dispositions, developments, redevelopments and changes in accounting policies. The results of operations of any acquired properties are included in our financial statements as of the date of acquisition. Our results of operations are affected by national, regional and local economic conditions, as well as macroeconomic conditions, which are at times subject to volatility and uncertainty. There continues to be volatility and economic uncertainty in many markets. The current COVID-19 pandemic has increased volatility and uncertainty and has created significant economic disruption. The duration of measures taken to contain the pandemic, including mandatory business shut-downs and social distancing is unknown as is the long-term consequence of such measures on consumer behavior. Specifically, the revenue and sales volume for our tenants identified as nonessential may decline significantly as demand for their services and products changes in the near term and potentially longer term. We are actively managing our business to respond to the ongoing economic and social impact and uncertainty relating to COVID-19 pandemic; however, our future near term and potentially longer term results of operations may be significantly adversely affected. See “Pandemic-Related Contingencies” under Liquidity and Capital Resources and “Item 1A. Risk Factors” for more information.
The following provides an overview of our key financial metrics based on our consolidated results of operations (refer to cash Net Operating Income (“NOI”), same-property cash NOI and Funds From Operations applicable to diluted common shareholders (“FFO”) described later in this section):
Three Months Ended June 30, Six Months Ended June 30,Three Months Ended March 31,
(Amounts in thousands)2019 2018 2019 20182020 2019
Net income$28,067
 $59,774
 $55,959
 $82,813
$51,288
 $27,892
FFO applicable to diluted common shareholders(1)
57,582
 39,580
 94,102
 83,680
34,794
 36,520
Cash NOI(2)
60,135
 54,731
 119,478
 114,662
57,669
 59,343
Same-property cash NOI(2)
53,375
 54,344
 106,370
 108,388
54,553
 55,133
(1) Refer to page 3831 for a reconciliation to the nearest generally accepted accounting principles (“GAAP”) measure.
(2) Refer to page 3730 for a reconciliation to the nearest GAAP measure.


Development/Redevelopment Activity

The Company has 12nine active development, redevelopment or anchor repositioning projects with total estimated costs of $120.8$52.8 million, of which $100.1$36.8 million (or 83%70%) has been incurred as of June 30, 2019. DuringMarch 31, 2020. We have delayed and continue to monitor the second quarter,stabilization dates of these projects as a result of the Company invested $18.1impact of the COVID-19 pandemic on our tenants and vendors. As of March 31, 2020, we have $16 million remaining to be funded on our active projects. Further, while we have approximately $300 million of projects in redevelopmentour development pipeline, we are under no obligation to execute and fund any of these projects and completed the anchor retenanting at Woodbridge Commons in Woodbridge, NJ and the ShopRite expansion at Rockaway River Commons in Rockaway, NJ.each of these projects is being reevaluated considering market conditions.

Acquisition/Disposition Activity

During the quarter, the Company acquired Kingswood Center and Kingswood Crossing for $167.3 million, including transaction costs. The properties are located along Kings Highway in the Midwood neighborhood of Brooklyn, NY. The Company plans to increase the value of these assets via lease up of existing vacancy, remerchandising where appropriate and maximizing the value of unused development rights. As part of the acquisition of Kingswood Center, we assumed a $65.5 million mortgage, which matures in 2028.
OnDuring the three months ended March 15, 2019,31, 2020, we completed the saledisposed of our property in Chicopee, MA for $18.2three properties and received proceeds of $58.1 million, net of selling costs, resulting in a $17.0$39.8 million net gain on sale of real estate recognizedestate. Proceeds from the dispositions, in addition to proceeds generated from some of the Company’s non-core asset sales in 2019, were used to acquire Kingswood Center and Kingswood Crossing via 1031 exchanges and allowed for the deferral of capital gains resulting from these sales.
Given the impact of the COVID-19 pandemic on the markets where our properties are located, we anticipate a reduction in our disposition and acquisition activity during the six months ended June 30, 2019.
On May 14, 2019, we completedsecond quarter and potentially for the saleremainder of our property in Glen Burnie, MD for $15.6 million, net of selling costs, resulting in a $11.6 million gain on sale of real estate recognized during the three and six months ended June 30, 2019.
On July 9, 2019, we completed the sale of our property in Springfield, MA for $9.7 million, net of selling costs. The Company will recognize a gain on sale of real estate in the third quarter of 2019 in connection with this transaction.
As of June 30, 2019, we were under contract to purchase an office building in Maywood, NJ, adjacent to our existing property, Bergen Town Center. The building is subject to a ground lease, which the Company will acquire the lessee position of for a purchase price of $7.1 million. The transaction is scheduled to close by the end of 2019. We are also under contract to purchase a retail outparcel in Paramus, NJ, adjacent to our existing property, Bergen Town Center, for a gross purchase price of $6.6 million. The transaction is scheduled to close by the end of 2019.




2020.

Equity Activity

Equity award activity during the sixthree months ended June 30, 2019March 31, 2020 included: (i) 276,4821,208,304 stock options vested, (ii) 210,078 LTIP units granted, (ii) 180,213 stock options granted, (iii) 31,578 restricted shares granted,128,817 LTIP units vested, (iv) 693,441 stock options vested, (v) 96,37850,285 restricted shares vested and (vi) 80,681 LTIP units vested.(v) 25,937 restricted shares granted. Refer to Note 15 to the unaudited consolidated financial statements in Part I, Item I of this Quarterly Report on Form 10-Q for more information regarding the Company’s equity award activity.

On April 4, 2019,February 20, 2020, the Compensation Committee of the Board of Trustees of the Company approved the Company’s 2019 Long-Term Incentive Plan (“20192020 LTI Plan”).Plan. The 2020 LTI Plan is a multi-year, equity compensation program under which participants, including our Chairman and Chief Executive Officer, have the opportunity to earn awards in the form of LTIP units that vest based on the passage of time (one-third of the program) and performance goals tied to our relative and absolute total shareholder return (“TSR”) during the three-year performance period following their grant (two-thirds of the program). During the three months ended June 30, 2019,March 31, 2020, the Company issued 489,319630,774 performance-based LTIP units and 112,910169,004 time-based LTIP units, respectively, in connection with the 20192020 LTI Plan. Refer to Note 15 to the unaudited consolidated financial statements in Part I, Item I of this Quarterly Report on Form 10-Q for more information regarding the 20192020 LTI Plan.
In March 2020, the Company’s Board of Trustees authorized a share repurchase program for up to $200 million of the Company’s common shares. During the three months ended March 31, 2020, the Company repurchased 4.5 million common shares at a weighted average share price of $9.61 under this program, for a total of $42.8 million. Subsequent to March 31, 2020, the Company repurchased an additional 1.4 million common shares at a weighted average share price of $7.98 for a total of $11.3 million. Cumulative total purchases since inception are 5.9 million shares at a weighted average share price of $9.22 amounting to an investment of $54.1 million. Refer to Note 14 to the unaudited consolidated financial statements in Part I, Item I of this Quarterly Report on Form 10-Q for more information regarding the Company’s share repurchase program.































Comparison of the Three Months Ended June 30,March 31, 2020 to March 31, 2019 to June 30, 2018
Net income for the three months ended June 30, 2019March 31, 2020 was $28.1$51.3 million, compared to net income of $59.8$27.9 million for the three months ended June 30, 2018.March 31, 2019. The following table summarizes certain line items from our consolidated statements of income that we believe are important in understanding our operations and/or those items which significantly changed in the three months ended June 30, 2019March 31, 2020 as compared to the same period of 2018:2019:
Three Months Ended June 30, 2019  Three Months Ended March 31,  
(Amounts in thousands)2019 2018 $ Change2020 2019 Change
Total revenue$102,747
 $101,970
 $777
$93,360
 $97,732
 $(4,372)
Depreciation and amortization22,567
 30,441
 (7,874)23,471
 21,830
 1,641
Real estate taxes14,966
 15,477
 (511)
Property operating expenses14,416
 21,765
 (7,349)14,537
 17,061
 (2,524)
General and administrative10,010
 8,236
 1,774
9,847
 10,580
 (733)
Casualty and impairment loss, net5,112
 35
 5,077
Lease expense3,896
 2,752
 1,144
Casualty and impairment loss—
 3,958
 (3,958)
Gain on sale of real estate11,550
 50,440
 (38,890)39,775
 16,953
 22,822
Interest income2,458
 2,031
 427
1,683
 2,506
 (823)
Interest and debt expense16,472
 15,659
 813
17,175
 16,536
 639
Income tax expense994
 192
 802
Total revenue increaseddecreased by $0.8$4.4 million to $102.7$93.4 million in the secondfirst quarter of 20192020 from $102.0$97.7 million in the secondfirst quarter of 2018.2019. The decrease is primarily attributable to:
$2.7 million as a result of property dispositions net of acquisitions since the first quarter of 2019;
$1.8 million decrease in tenant reimbursement income due to lower common area maintenance expenses; and
$1.0 million increase in credit losses related to operating lease receivables, partially offset by
$1.1 million increase in property rentals due to rent commencements and contractual rent increases.
Depreciation and amortization increased by $1.6 million to $23.5 million in the first quarter of 2020 from $21.8 million in the first quarter of 2019. The increase is primarily attributable to:
$2.31.0 million increase in write-offs of below-market lease intangible liabilities related to recaptured leases;
$0.5 million net increase in other income due to an increase in tenant bankruptcy settlement income, offset by a decrease in lease termination income; and
$0.2 million increase due to rent abatements reflected as a reduction of rental revenue in the second quarter of 2018 at our two malls in Puerto Rico and at our property in Wilkes-Barre, PA as a result of natural disasters,acquisitions net of dispositions since the first quarter of 2019; and
$0.6 million increase from completed development projects and tenant improvements.
Real estate taxes decreased by $0.5 million to $15.0 million in the first quarter of 2020 from $15.5 million in the first quarter of 2019. The decrease is primarily attributable to:
$0.8 million as a result of dispositions net of acquisitions since the first quarter of 2019, partially offset by
$1.30.3 million due to higher assessed values and a decrease in capitalized taxes.
Property operating expenses decreased by $2.5 million to $14.5 million in the first quarter of 2020 from $17.1 million in the first quarter of 2019. The decrease is primarily attributable to:
$2.2 million decrease in common area maintenance expenses primarily related to snow; and
$0.6 million decrease as a result of property dispositions since the second quarternet of 2018;
$0.6 million decrease in property rentals due to lease terminations and modifications,acquisitions, partially offset by rent commencements and contractual rent increases since the second quarter of 2018; and
$0.3 million decrease due to credit losses related to operating lease receivables recognized against rental incomeincrease in the second quarter of 2019 in accordance with the new lease accounting standard, ASC 842, as compared to being included in property operating expenses in the second quarter of 2018.environmental compliance expenses.
DepreciationGeneral and amortizationadministrative expenses decreased by $7.9$0.7 million to $22.6$9.8 million in the secondfirst quarter of 20192020 from $30.4$10.6 million in the secondfirst quarter of 2018.2019. The decrease is primarily attributable to:
$8.4 million decrease in depreciation and amortization as a result of write-offs of existing tenant improvements and intangible assets related to recaptured leases in the second quarter of 2018, partially offset by
$0.5 million increase from development projects and tenant improvements placed into service.
Property operating expenses decreased by $7.3 million to $14.4 million in the second quarter of 2019 from $21.8 million in the second quarter of 2018. The decrease is primarily attributable to:
$6.0 million lease termination payment to acquire the Toys “R” Us lease at Hudson Mall in Jersey City, NJ in the second quarter of 2018;
$1.3 million due to the provision for doubtful accounts recognized in property operating expenses in the second quarter of 2018 compared to being recorded as credit losses against rental revenue in the second quarter of 2019; and
$0.8 million decrease in common area maintenance projects, partially offset by
$0.8 million of common area maintenance expenses recognized on a gross basis at tenant-maintained centers in accordance with the new lease accounting standard, ASC 842.
General and administrative expenses increased by $1.8 million to $10.0 million in the second quarter of 2019 from $8.2 million in the second quarter of 2018. The increase is primarily attributable to:
$1.1 million increase in share-based compensation expense due to additional equity awards granted since the second quarter of 2018;
$0.4 million of severance expenses incurred in the second quarter of 2019; and
$0.3 million increase inlower professional fees for consulting recruitment and legal services.


We recognized a $5.1 million casualtyCasualty and impairment loss of $4.0 million in the secondin the first quarter of 2019 attributable to:
$18.7 millionwas made up of a real estate impairment chargescharge recognized against the carrying values of two properties, partially offset by
$13.6 million from insurance settlements for Hurricane Maria aton our two mallsproperty in Puerto Rico and for tornado damage at our shopping center in Wilkes-Barre, PA.
Lease expense increased by $1.1 million to $3.9 million in the second quarter of 2019 from $2.8 million in the second quarter of 2018. The increase is primarilyWestfield, NJ attributable to the recognitionvacancy of common area maintenance and real estate taxes associated with ground or building leases within lease expense in accordance with the new lease accounting standard, ASC 842, effective January 1, 2019.a significant tenant.
We recognized a gain on sale of real estate of $11.6$39.8 million in the secondfirst quarter of 2020 due to the sale of three operating properties and a gain on sale of real estate of $17.0 million in the first quarter of 2019 due to the sale of our property in Glen Burnie, MD on May 14, 2019. A gain on sale of real estate of $50.4 million was recognized in the second quarter of 2018 as a result of the sale of our property in Allentown, PA on April 26, 2018.Chicopee, MA.
Interest income increaseddecreased by $0.4$0.8 million to $1.7 million in the first quarter of 2020 from $2.5 million in the secondfirst quarter of 2019 from $2.0 million in the second quarter of 2018.2019. The increasedecrease is primarily attributable to an increasea decrease in interest rates.
Interest and debt expense increased by $0.8$0.6 million to $17.2 million in the first quarter of 2020 from $16.5 million in the secondfirst quarter of 2019 from $15.7 million in the second quarter of 2018. The increase is primarily attributable to a decrease in interest capitalized due to the completion of development projects and higher interest rates on variable rate date.
Income tax expense increased by $0.8 million to $1.0 million in the second quarter of 2019 from $0.2 million in the second quarter of 2018 due to the tax impact of the insurance settlement related to Hurricane Maria.

Comparison of the Six Months Ended June 30, 2019 to June 30, 2018
Net income for the six months ended June 30, 2019 was $56.0 million, compared to net income of $82.8 million for the six months ended June 30, 2018. The following table summarizes certain line items from our consolidated statements of income that we believe are important in understanding our operations and/or those items which significantly changed in the six months ended June 30, 2019 as compared to the same period of 2018:
 Six Months Ended June 30,  
(Amounts in thousands)2019 2018 $ Change
Total revenue$200,479
 $201,023
 $(544)
Depreciation and amortization44,397
 51,711
 (7,314)
Property operating expenses31,477
 39,668
 (8,191)
General and administrative20,590
 15,877
 4,713
Casualty and impairment (loss) gain, net(9,070) 1,306
 (10,376)
Lease expense7,551
 5,488
 2,063
Gain on sale of real estate28,503
 50,440
 (21,937)
Interest income4,964
 3,555
 1,409
Interest and debt expense33,008
 31,303
 1,705
Gain on extinguishment of debt—
 2,524
 (2,524)
Income tax expense1,196
 626
 570
Total revenue decreased by $0.5 million to $200.5 million in the six months ended June 30, 2019 from $201.0 million in the six months ended June 30, 2018. The decrease is primarily attributable to:
$3.0 million decrease as a result of property dispositions;
$0.8 million due to credit losses related to operating lease receivables recognized against rental income in 2019 in accordance with the new lease accounting standard, ASC 842, effective January 1, 2019, as compared to being included in property operating expenses in 2018;
$0.1 million decrease in property rentals due to lease terminations and modifications, offset by rent commencements and contractual rent increases, partially offset by
$2.3 million increase in write-offs of below-market lease intangible liabilities related to recaptured leases;
$0.8 million increase due to rent abatements, reflected as a reduction of rental revenue in the six months ended June 30, 2018, recognized at our two malls in Puerto Rico and at our property in Wilkes-Barre, PA as a result of natural disasters; and


$0.3 million net increase in other income due to an increase in tenant bankruptcy settlement income, offset by a decrease in lease termination income.
Depreciation and amortization expenses decreased by $7.3 million to $44.4 million in the six months ended June 30, 2019 from $51.7 million in the six months ended June 30, 2018. The decrease is primarily attributable to:
$8.4 million decrease in depreciation and amortization as a result of write-offs of existing tenant improvements and intangible assets related to recaptured leases in the second quarter of 2018, partially offset by
$1.1 million increase from development projects and tenant improvements placed into service.
Property operating expenses decreased by $8.2 million to $31.5 million in the six months ended June 30, 2019 from $39.7 million in the six months ended June 30, 2018. The decrease is primarily attributable to:
$6.0 million lease termination payment to acquire the Toys “R” Us lease at Hudson Mall in Jersey City, NJ in the second quarter of 2018;
$2.5 million due to provision for doubtful accounts recognized in property operating expenses in the six months ended June 30, 2018 and rental revenue in the six months ended June 30, 2019;
$1.1 million decrease due to higher common area maintenance expenses incurred for snow removal in 2018; and
$0.6 million of environmental remediation costs accrued in the six months ended June 30, 2018, partially offset by
$1.5 million of common area maintenance expenses recognized on a gross basis at tenant-maintained centers in accordance with the new lease accounting standard, ASC 842; and
$0.5 million increase in repair costs for vacant spaces.
General and administrative expenses increased by $4.7 million to $20.6 million in the six months ended June 30, 2019 from $15.9 million in the six months ended June 30, 2018.2019. The increase is primarily attributable to:
$2.4 million increase in share-based compensation expense due to additional equity awards granted;
$1.2 million increase in professional fees for consulting, recruitment and legal services;
$0.4 million of severance expenses;
$0.4 million of accelerated amortization of unvested equity awards associated with the retirement of the Company’s Chief Operating Officer; and
$0.3 million increasedecrease in transaction costs.
A casualty and impairment loss, net of $9.1 million was recognized in the in the six months ended June 30, 2019 attributable to:
$22.7 million of real estate impairment charges recognized against the carrying values of three properties, partially offset by
$13.6 million from insurance settlements for Hurricane Maria at our two malls in Puerto Rico and for tornado damage at our shopping center in Wilkes-Barre, PA.
We recognized a $1.3 million casualty and impairment gain in the six months ended June 30, 2018 comprised of $1.5 million of insurance proceeds offset by $0.2 million of expenses incurred as a result of Hurricane Maria in Puerto Rico.
Lease expense increased by $2.1 million to $7.6 million in the six months ended June 30, 2019 from $5.5 million in the six months ended June 30, 2018. The increase is primarily attributable to the recognition of common area maintenance and real estate taxes associated with ground or building leases within lease expense in accordance with the new lease accounting standard, ASC 842, effective January 1, 2019.
We recognized a gain on sale of real estate of $28.5 million in the six months ended June 30, 2019 due to the sale of our property in Chicopee, MA on March 15, 2019 and the sale of our property in Glen Burnie, MD on May 14, 2019. A gain on sale of real estate of $50.4 million was recognized in the second quarter of 2018interest capitalized as a result of the salecompletion of our property in Allentown, PA on April 26, 2018.
Interest income increased by $1.4 million to $5.0 million in the six months ended June 30, 2019 from $3.6 million in the six months ended June 30, 2018. The increase is primarily attributable to an increase in interest rates.
Interest and debt expense increased by $1.7 million to $33.0 million in the six months ended June 30, 2019 from $31.3 million in the six months ended June 30, 2018. The increase is primarily attributable to:development projects;
$1.20.3 million decrease in interest capitalized due to the completionassumption of development projects;mortgage debt in connection with the acquisition of Kingswood Center in Brooklyn, NY; and
$0.50.2 million increase resulting from higherdue to interest on the $250 million drawn on the Company’s revolving credit agreement in the first quarter of 2020, partially offset by
$0.3 million decrease due to lower interest rates on variable ratevariable-rate debt.
We recognized a $2.5 million gain on extinguishment of debt


To the extent we continue to maintain an outstanding balance under our revolving credit agreement, our interest expense will be higher in the six months ended June 30, 2018 as a result of the foreclosure sale and forgiveness of the $11.5 million mortgage debt secured by our property in Englewood, NJ.
Income tax expense increased by $0.6 million to $1.2 million in the six months ended June 30, 2019 from $0.6 million in the six months ended June 30, 2018 primarily attributable to the tax impact from the insurance settlement for our two malls in Puerto Rico related to Hurricane Maria.

future quarters.

Non-GAAP Financial Measures

Throughout this section, we have provided certain information on a “same-property” cash basis which includes the results of operations that were owned and operated for the entirety of the reporting periods being compared totaltotaling 82 propertiesing 73 properties for thethree and six months ended June 30, 2019 March 31, 2020 and 2018, respectively.2019. Information provided on a same-property basis excludes properties that were under development, redevelopment or that involve anchor repositioning where a substantial portion of the gross leasable area is taken out of service and also excludes properties acquired or sold during the periods being compared. While there is judgment surrounding changes in designations, a property is removed from the same-property pool when a property is considered to be a redevelopment property because it is undergoing significant renovation or retenanting pursuant to a formal plan and is expected to have a significant impact on property operating income based on the retenanting that is occurring. A development or redevelopment property is moved back to the same-property pool once a substantial portion of the NOI growth expected from the development or redevelopment is reflected in both the current and comparable prior year period, generally one year after at least 80% of the expected NOI from the project is realized on a cash basis. Acquisitions are moved into the same-property pool once we have owned the property for the entirety of the comparable periods and the property is not under significant development or redevelopment.

We calculate same-property cash NOI using net income as defined by GAAP reflecting only those income and expense items that are reflected in cash NOI, adjusted for the following items: lease termination fees, bankruptcy settlement income, and income and expenses that we do not believe are representative of ongoing operating results, if any.

The most directly comparable GAAP financial measure to cash NOI is net income. Cash NOI excludes certain components from net income in order to provide results that are more closely related to a property’s results of operations. We calculate cash NOI by adjusting net income to add back depreciation and amortization expense, general and administrative expenses, casualty and real estate impairment losses and non-cash lease expense, and deduct non-cash rental income resulting from the straight-lining of rents and amortization of acquired below market leases net of above market leases.

We use cash NOI internally to make investment and capital allocation decisions and to compare the unlevered performance of our properties to our peers. Further, we believe cash NOI is useful to investors as a performance measure because, when compared across periods, cash NOI reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and disposition activity on an unleveraged basis, providing perspective not immediately apparent from net income. As such, cash NOI assists in eliminating disparities in net income due to the development, redevelopment, acquisition or disposition of properties during the periods presented, and thus provides a more consistent performance measure for the comparison of the operating performance of the Company’s properties. Cash NOI and same-property cash NOI should not be considered substitutes for net income and may not be comparable to similarly titled measures employed by others.
Same-property cash NOI decreased by $1.0$0.6 million, or (1.8)(1.1)%, for the three months ended June 30, 2019March 31, 2020 as compared to the three months ended June 30, 2018 and decreased by $2.0 million, or (1.9)%, for the six months ended June 30, 2019 as compared to the six months ended June 30, 2018.March 31, 2019.






















The following table reconciles net income to cash NOI and same-property cash NOI for the three and six months ended June 30,March 31, 2020 and 2019, and 2018, respectively.
Three Months Ended June 30, Six Months Ended June 30,Three Months Ended March 31,
(Amounts in thousands)2019 2018 2019 20182020 2019
Net income$28,067
 $59,774
 $55,959
 $82,813
$51,288
 $27,892
Management and development fee income from non-owned properties(308) (347) (660) (689)(314) (352)
Other expense (income)318
 4
 548
 (73)
Other expense255
 230
Depreciation and amortization22,567
 30,441
 44,397
 51,711
23,471
 21,830
General and administrative expense10,010
 8,236
 20,590
 15,877
9,847
 10,580
Casualty and impairment loss (gain), net(1)
5,112
 35
 9,070
 (1,306)
Casualty and impairment loss(1)
—
 3,958
Gain on sale of real estate(11,550) (50,440) (28,503) (50,440)(39,775) (16,953)
Interest income(2,458) (2,031) (4,964) (3,555)(1,683) (2,506)
Interest and debt expense16,472
 15,659
 33,008
 31,303
17,175
 16,536
Gain on extinguishment of debt—
 —
 —
 (2,524)
Income tax expense994
 192
 1,196
 626
100
 202
Non-cash revenue and expenses(9,089) (6,792) (11,163) (9,081)(2,695) (2,074)
Cash NOI60,135
 54,731
 119,478
 114,662
57,669
 59,343
Adjustments:          
Non-same property cash NOI(2)
(5,608) (5,780) (11,929) (12,059)(3,113) (4,183)
Tenant bankruptcy settlement income and lease termination income(1,152) (813) (1,179) (977)(3) (27)
Lease termination payment—
 6,000
 —
 6,000
Natural disaster related operating loss—
 (128) —
 178
Environmental remediation costs—
 334
 —
 584
Same-property cash NOI$53,375

$54,344

$106,370

$108,388
$54,553
 $55,133
Cash NOI related to properties being redeveloped5,640
 4,830
 11,497
 9,721
696
 524
Same-property cash NOI including properties in redevelopment$59,015
 $59,174

$117,867

$118,109
$55,249
 $55,657
(1) The three and six months ended June 30,March 31, 2019 reflect a real estate impairment losses, offset by insurance proceeds for Hurricane Maria atcharge recognized on our two mallsproperty in Puerto Rico and for tornado damage at our shopping center in Wilkes-Barre, PA. The six months ended June 30, 2018 reflect hurricane-related insurance proceeds net of expenses.Westfield, NJ.
(2) Non-same property cash NOI includes cash NOI related to properties being redeveloped and properties acquired or disposed.


 









 


















Funds From Operations
FFO for the three months ended June 30, 2019March 31, 2020 was $57.6$34.8 million compared to $39.6$36.5 million for the three months ended June 30, 2018 and $94.1 million for the six months ended June 30, 2019 compared to $83.7 million for the six months ended June 30, 2018.March 31, 2019.
We calculate FFO in accordance with the National Association of Real Estate Investment Trusts’ (‘‘Nareit’’) definition. Nareit defines FFO as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable real estate and land when connected to the main business of a REIT, impairments on depreciable real estate or land related to a REIT's main business, and rental property depreciation and amortization expense. We believe FFO is a meaningful non-GAAP financial measure useful in comparing our levered operating performance from period to period both internally and among our peers because this non-GAAP measure excludes net gains on sales of depreciable real estate, real estate impairment losses, rental property depreciation and amortization expense which implicitly assumes that the value of real estate diminishes predictably over time rather than fluctuating based on market conditions. FFO does not represent cash flows from operating activities in accordance with GAAP, should not be considered an alternative to net income as an indication of our performance, and is not indicative of cash flow as a measure of liquidity or our ability to make cash distributions. FFO may not be comparable to similarly titled measures employed by others.
Three Months Ended June 30, Six Months Ended June 30,Three Months Ended March 31,
(Amounts in thousands)2019 2018 2019 20182020 2019
Net income$28,067
 $59,774
 $55,959
 $82,813
$51,288
 $27,892
Less net (income) loss attributable to noncontrolling interests in:       
Less net income attributable to noncontrolling interests in:   
Operating partnership(1,518) (6,025) (3,873) (8,353)(2,308) (2,355)
Consolidated subsidiaries22
 (12) 22
 (23)—
 —
Net income attributable to common shareholders26,571
 53,737
 52,108
 74,437
48,980
 25,537
Adjustments:          
Rental property depreciation and amortization22,348
 30,258
 43,971
 51,330
23,281
 21,623
Gain on sale of real estate(11,550) (50,440) (28,503) (50,440)(39,775) (16,953)
Real estate impairment loss18,695
 —
 22,653
 —
—
 3,958
Limited partnership interests in operating partnership(1)
1,518
 6,025
 3,873
 8,353
2,308
 2,355
FFO applicable to diluted common shareholders$57,582
 $39,580

$94,102

$83,680
$34,794
 $36,520
(1) Represents earnings allocated to LTIP and OP unitholders for unissued common shares which have been excluded for purposes of calculating earnings per diluted share for the periods presented.






Liquidity and Capital Resources

Due to the nature of our business, the cash generated from operations is primarily paid to our shareholders and unitholders of the Operating Partnership in the form of distributions. Our status as a REIT requires that we generally distribute at least 90% of our REITREIT’s ordinary taxable income each year. Our Board of Trustees declared a quarterly dividend of $0.22 per common share and OP unit for each of the first two quartersquarter of 2019,2020, or an annual rate of $0.88. We expect to payHistorically, we have paid regular cash dividends; however, the timing, declaration, amount and payment of distributions to shareholders and unitholders of the Operating Partnership fall within the discretion of our Board of Trustees. Our Board of Trustees’ decisions regarding the payment of dividends depends on many factors, such as maintaining our REIT tax status, our financial condition, earnings, capital requirements, debt service obligations, limitations under our financing arrangements, industry practice, legal requirements, regulatory constraints, and other factors.As a result of COVID-19 and the future uncertainties it has generated, the Company has temporarily suspended quarterly dividend distributions. The Company’s Board of Trustees will continue to monitor the Company’s financial performance and economic outlook and, at a later date, intends to reinstate a regular quarterly dividend of at least the amount required to continue qualifying as a REIT for US federal income tax purposes.

Property rental income is our primary source of cash flow and is dependent on a number of factors, including our occupancy level and rental rates, as well as our tenants’ ability to pay rent. Our properties providehave historically provided us with a relatively consistent stream of cash flow that enables us to pay operating expenses, debt service and recurring capital expenditures. As discussed in more detail below, the effects of COVID-19 and the actions taken to minimize its spread have had an adverse impact on our short-term cash flow as a significant number of our tenants have not paid rent that was due in April and could have a significant longer term adverse impact on our cash flow and financial condition. Other sources of liquidity to fund cash requirements include proceeds from financings, equity offerings and asset sales.

Our short-term liquidity requirements consist of normal recurring operating expenses, lease obligations, regular debt service requirements, recurring expenditures (general & administrative expenses), expenditures related to leasing activity and distributions to shareholders and unitholders of the Operating Partnership. Our long-term capital requirements consist primarily of maturities under our long-term debt agreements, development and redevelopment costs and potential acquisitions.

At June 30, 2019,March 31, 2020, we had cash and cash equivalents, including restricted cash, of $463.6$642.6 million and no amounts drawn on$350 million available under our line of credit. There were no common shares issued under the ATM equity program during the three and six months ended June 30, 2019 and 2018, respectively. In addition, we had the following sources of capital available:credit:
(Amounts in thousands)June 30, 2019March 31, 2020
ATM equity program(1)
 
Original offering amount$250,000
Available capacity$241,300
 
Revolving credit agreement(2)
 
Revolving credit agreement(1)
 
Total commitment amount$600,000
$600,000
Available capacity$600,000
$350,000
Maturity(3)
March 7, 2021
MaturityJanuary 29, 2024
(1) Refer to Note 14 to the unaudited consolidated financial statements in Part I, Item I of this Quarterly Report on Form 10-Q.
(2) Refer to Note 6 to the unaudited consolidated financial statements in Part I, Item I of this Quarterly Report on Form 10-Q.
(3)On July 29, 2019, we entered into an amendment to extend the maturity date to January 29, 2024 with two six-month extension options.

The Company continues to monitor the outbreak of COVID-19 and its impact on our overall liquidity position and outlook. The ultimate impact COVID-19 may have on our operational and financial performance over the next 12 months is currently uncertain and will depend on certain developments, including, among others, the impact of COVID-19 on our tenants and the magnitude and duration of the pandemic, including its impact on store closing and social distancing rules which may impact a tenant’s ability to generate sales at sufficient levels to cover operating costs. In light of the various uncertainties resulting from COVID-19, the Company borrowed $250 million under its existing $600 million revolving credit agreement in March 2020 as a precautionary measure to increase the Company's cash position and facilitate financial flexibility. We currently have $350 million remaining under our revolving credit agreement. Our ability to retain our outstanding borrowings and utilize remaining amounts available under our revolving credit facility will depend on our continued compliance with the applicable financial covenants and other terms of our revolving credit agreement, which may be impacted by tenant store closures and failure of tenants to pay rent. The proceeds are available to use for working capital and other corporate purposes if the Company experiences a material decrease in cash flow from property rental income as operational disruptions may persist into the future. We have no debt scheduled to mature in 2019.2020 or over the next 12 months. We currently believe that cash flows from operations over the next 12 months, together with our cash on hand, our ATM equity program, our revolving credit agreement and our general ability to access the capital markets, these resources will be sufficient to finance our operations and fund our debt service requirements and capital expenditures.expenditures over the next 12 months.

On March 27, 2020, the President of the United States signed the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), a substantial tax-and-spending package intended to provide additional economic stimulus to address the impact of the COVID-19 pandemic. The Company currently has not applied for or received any loans authorized under the CARES Act; however, the Company may avail itself of certain tax provisions in the CARES Act as we seek to manage our dividend.



Summary of Cash Flows
Cash and cash equivalents including restricted cash was $463.6$642.6 million at June 30, 2019,March 31, 2020, compared to $457.5$485.1 million as of December 31, 20182019 and $514.0$448.8 million as of June 30, 2018,March 31, 2019, an increase of $6.1$157.5 million and a decrease of $50.4$193.9 million, respectively. Our cash flow activities are summarized as follows:
 Six Months Ended June 30,  
(Amounts in thousands)2019 2018 Increase (Decrease)
Net cash provided by operating activities$76,837
 $76,696
 $141
Net cash used in investing activities(12,410) (5,907) (6,503)
Net cash used in financing activities(58,350) (57,643) (707)




 Three Months Ended March 31,  
(Amounts in thousands)2020 2019 Increase (Decrease)
Net cash provided by operating activities$20,796
 $29,427
 $(8,631)
Net cash used in investing activities(44,268) (8,494) (35,774)
Net cash provided by (used in) financing activities180,979
 (29,667) 210,646
Operating Activities
Net cash flow provided by operating activities primarily consists of cash inflows from rental revenue and cash outflows for property operating expenses, general and administrative expenses and interest and debt expense.
Net cash provided by operating activities of $76.8$20.8 million for the sixthree months ended June 30, 2019 increasedMarch 31, 2020 decreased by $0.1$8.6 million from $76.7$29.4 million as of June 30, 2018March 31, 2019, due to timing of cash receipts and payments related to tenant collections including the impact of recovery income.
Investing Activities
Net cash flow provided by or used in investing activities is impacted by the timing and extent of our real estate development, capital improvements, and acquisition and disposition activities during the period.
Net cash used in investing activities of $12.4$44.3 million for the sixthree months ended June 30, 2019,March 31, 2020, increased by $6.5$35.8 million from $5.9compared to net cash used in investing activities of $8.5 million for the sixthree months ended June 30, 2018March 31, 2019 due to (i) $20.5$92.1 million decreaseincrease in cash used in the acquisition of real estate, partially offset by (ii) $36.2 million increase in cash provided fromby the sale of properties partially offset by (ii) $5.6and (iii) $20.2 million decrease in cash used for real estate development and capital improvements at existing properties, (iii) $4.9 million decrease in cash used for acquisitions and (iv) $3.4 million increase in insurance proceeds for physical property damages received in the six months ended June 30, 2019.properties.
Financing Activities
Net cash flow provided by or used in financing activities is impacted by the timing and extent of issuances of debt and equity securities, distributions paid to common shareholders and unitholders of the Operating Partnership as well as principal and other payments associated with our outstanding indebtedness.
Net cash provided by financing activities of $181.0 million for the three months ended March 31, 2020, increased by $210.6 million from cash used in financing activities of $58.4$29.7 million for the sixthree months ended June 30,March 31, 2019 increased by $0.7 million from $57.6 million for the six months ended June 30, 2018 due to (i) $0.4$250.0 million increase in distributions to shareholdersof cash borrowings provided under the Company’s revolving credit agreement and unitholders, (ii) $0.2$0.3 million increasedecrease in tax withholdings on vested restricted stock, partially offset by (iii) $38.7 million of cash paid to repurchase common shares and (iii) $0.1(iv) $0.9 million increase in debt repayments.
Financing Activities and Contractual Obligations
Below is a summary of our outstanding debt and weighted average interest raterates as of June 30, 2019.March 31, 2020.
(Amounts in thousands) Principal balance at June 30, 2019 Weighted Average Interest Rate at June 30, 2019 Principal balance at March 31, 2020 Weighted Average Interest Rate at March 31, 2020
Mortgages payable:      
Fixed rate debt $1,390,434
 4.12% $1,457,292
 4.16%
Variable rate debt(1)
 169,500
 4.18% 169,151
 3.32%
Total mortgages payable 1,559,934
 4.13% 1,626,443
 4.07%
Unamortized debt issuance costs (10,990)  (9,590) 
Total mortgages payable, net of unamortized debt issuance costs $1,548,944
  1,616,853
 
Unsecured credit facilities:   
Revolving credit agreement(2)
 250,000
 2.00%
Total unsecured credit facilities 250,000
 2.00%
Total debt outstanding

 $1,866,853
 3.80%
(1) As of June 30, 2019, $80.5March 31, 2020, $80.2 million of our variable rate debt bears interest at one month LIBOR plus 190 bps and $89 million of our variable rate debt bears interest at one month LIBOR plus 160 bps.
(2) As of March 31, 2020, the borrowings on our revolving credit agreement were subject to one month LIBOR plus 1.05%.


The net carrying amount of real estate collateralizing the above indebtedness amounted to approximately $1.3 billion as of June 30, 2019.March 31, 2020. Our mortgage loans contain covenants that limit our ability to incur additional indebtedness on these properties and in certain circumstances, require lender approval of tenant leases and/or yield maintenance upon repayment prior to maturity. As of June 30, 2019,March 31, 2020, we were in compliance with all debt covenants.

On January 15, 2015, we entered into a $500 million Revolving Credit Agreement (the “Agreement”) with certain financial institutions. On March 7, 2017, we amended and extended the Agreement. The amendment increased the credit facility size by $100 million to $600 million and extended the maturity date to March 7, 2021 with two six-month extension options. On July 29, 2019, we entered into a second amendment to the Agreement to extend the maturity date to January 29, 2024 with two six-month extension options. Company borrowings under the Agreement are subject to interest at LIBOR plus an applicable margin of 1.05% to 1.50% and an annual facility fee of 15 to 30 basis points. Both the spread over LIBOR and the facility fee are based on our current leverage ratio and are subject to increase if our leverage ratio increases above predefined thresholds. The Agreement contains customary financial covenants, including a maximum leverage ratio of 60% and a minimum fixed charge coverage ratio of 1.5x. No

Under the Agreement, our financial covenants are generally measured using annualized operating results from the prior quarter, including the maximum leverage ratio, which measures our asset value based on net operating income, as defined in the Agreement. Net operating income is defined, in part, based on rents and other revenues received in the ordinary course of business from our properties. As a result, if cash revenue recognized during a quarter declines significantly from historical amounts, we may be required to repay all outstanding amounts and lose access to our revolving credit facility unless we obtain a waiver. We currently believe that with our cash on hand, we will have been drawnsufficient resources to datefinance our operations and fund our debt service requirements and capital expenditures for at least the next 12 months even if we are required to repay all outstanding borrowings under the Agreement.


In March 2020, the Company borrowed $250 million under the Agreement and $350 million remained available for withdrawal.

In the event that LIBOR is discontinued, the interest rates for our debt following such event will be based on either alternate base rates or agreed upon replacement rates. Such an event would not affect our ability to borrow or maintain already outstanding borrowings, although it could result in higher interest rates.

Capital Expenditures
The following summarizes capital expenditures presented on a cash basis for the sixthree months ended June 30, 2019March 31, 2020 and 2018:2019:
 Six Months Ended June 30, Three Months Ended March 31,
(Amounts in thousands) 2019 2018 2020 2019
Capital expenditures:   
   
Development and redevelopment costs(1) $45,488
 $52,372
 $4,188
 $21,068
Capital improvements(1) 1,633
 1,510
 1,469
 3,137
Tenant improvements and allowances 3,399
 1,097
 881
 2,413
Total capital expenditures $50,520

$54,979
 $6,538
 $26,618
(1)Amount for the three months ended March 31, 2019 have been reclassified to conform with current period presentation.

As of June 30, 2019,March 31, 2020, we had approximately $120.8$52.8 million of active redevelopment, development and anchor repositioning projects at various stages of completion, and $113.0 million of completed projects, a decrease of $16.8$12.8 million from $250.6$65.6 million of projects as of December 31, 2018.2019. We have advanced these projects $10.8and incurred $1.1 million of additional spend since December 31, 2018 and2019. We anticipate that these projects will require an additional $23.9$16 million,which we expect to occur over the next two yearssix to complete.eighteen months depending on any restrictions on construction activity. We expect to fund these projects using cash on hand, proceeds from dispositions, secured debt, or proceeds from issuing equity.

Commitments and Contingencies
Insurance
The Company maintains (i) general liability insurance with limits of $200 million for properties in the U.S. and Puerto Rico, and (ii) all-risk property insurance with limits of $500 million per occurrence and in the aggregate for properties in the U.S. and $139$147 million for properties in Puerto Rico, subject to the terms, conditions, exclusions, deductibles and sub-limits when applicable for certain perils such as floods and earthquakes, (iii) pollution insurance with limits of $50 million for properties in the U.S. and (iii)Puerto Rico and (iv) numerous other insurance policies including trustees’ and officers’ insurance, cyber, workers’ compensation


and automobile-related liabilities insurance. The Company’s insurance includes coverage for acts of terrorism but excludes coverage for nuclear, biological, chemical or radiological terrorism events as defined by the Terrorism Risk Insurance Program Reauthorization Act, which expires in December 2020. In addition, the Company maintainsThe Company’s coverage for certain cybersecurity losses with limits of $5 million per occurrence and in the aggregate providingprovides first and third-party coverage including network interruption, event management, cyber extortion and claims for media content, security and privacy liability.
The Company’s coverage for pollution related losses provides certain remediation and business interruption coverage for specified pollution incidents, which includes the presence of viruses. The Company has filed insurance claims related to COVID-19 and is pursuing available coverage.
Insurance premiums are typically charged directly to each of the retail properties and warehouses but not all of the cost of such premiums are recovered. The Company is responsible for deductibles, losses in excess of insurance coverage, and the portion of premiums not reimbursable by tenants at our properties, which could be material.
We continue to monitor the state of the insurance market and the scope and costs of coverage for acts of terrorism. However, weavailable coverage. We cannot anticipate what coverage will be available on commercially reasonable terms in the future and expect premiums across most property coverage lines to increase in light of recent events. The incurrence of uninsured losses, costs or uncovered premiums could materially and adversely affect our business, results of operations and financial condition.
Certain of our loans and other agreements contain customary covenants requiring the maintenance of insurance coverage. Although we believe that we currently have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future. If lenders or other counterparties insist on greater coverage than we are able to obtain, such requirement could materially and adversely affect our ability to finance our properties and expand our portfolio.

Tornado-Related Charges
On June 13, 2018, a tornado hit our shopping center in Wilkes-Barre, PA, damaging approximately 13% of the property’s gross leasable area. During the three months ended June 30, 2019, the Company settled the related insurance claim with its carrier for $5.5 million. Of this amount, the Company recognized $4.8 million as a casualty gain in the three months ended June 30, 2019. As part of the settlement, the Company recognized $0.2 million and $0.3 million as business interruption proceeds within rental revenue for the three and six months ended June 30, 2019, respectively.





Hurricane-Related Charges
On September 20, 2017, Hurricane Maria made landfall, damaging our two properties in Puerto Rico. During the six months ended June 30, 2018, the Company received $1.5 million in casualty insurance proceeds, which were partially offset by $0.2 million of hurricane related costs, resulting in net casualty gains of $1.3 million included in casualty and impairment loss (gain), net on the accompanying consolidated statements of income.

During the three and six months ended June 30, 2018, the Company recognized a $0.2 million net casualty gain and $0.5 million of business interruption losses, respectively. For the six months ended June 30, 2018, losses of $0.7 million pertained to rent abatements due to tenants that had not reopened since the hurricane, recorded as a reduction of rental revenue, offset by a $0.2 million reversal within property operating expenses to provision for doubtful accounts for payments received from tenants on rents previously reserved.

During the three months ended June 30, 2019, the Company reached a settlement agreement with its carrier regarding its final insurance recovery related to Hurricane Maria for $14.3 million, of which $3.3 million was previously received, subject to deductibles of $2.3 million. We recognized an $8.7 million casualty gain in the second quarter of 2019 as a result of the remaining insurance proceeds from the settlement agreement for our two malls in Puerto Rico.

Environmental Matters
Each of our properties has been subjected to varying degrees of environmental assessment at various times. Based on these assessments, we have accrued costs of $1.7$1.0 million and $2.7 million on our consolidated balance sheets as of June 30, 2019March 31, 2020 and December 31, 2018,2019, respectively, for remediation costs for environmental contamination at certain properties. While this accrual reflects our best estimates of the potential costs of remediation at these properties, there can be no assurance that the actual costs will not exceed these amounts. During the three and six months ended June 30, 2018, the Company recognized $0.3 million and $0.6 million, respectively, of environmental remediation costs within property operating expenses on the consolidated statements of income. Although we are not aware of any other material environmental contamination, there can be no assurance that the identification of new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites, or changes in cleanup requirements would not result in significant costs to us.

Bankruptcies
Although our rental revenue is supported by long-term leases, leases may be rejected in a bankruptcy proceeding and the related tenant stores may permanently vacate prior to lease expiration. In the event a tenant with a significant number of leases or square footage in our shopping centers files for bankruptcy and rejects its leases with us, we could experience a reduction in our revenues. We monitor the operating performance and rent collections of all tenants in our shopping centers, especially those tenants in arrears or operating retail formats that are experiencing significant changes in competition, business practice, or store closings in other locations.

Sears,Pandemic-Related Contingencies
During and subsequent to the parent companyfirst quarter, the continually evolving COVID-19 pandemic impacted our tenants and business operations. As a result of Kmart, filedthe Company’s concentrated operations in the New York metropolitan area, the extent and magnitude of the pandemic’s impact to our operations is heightened. As of April 27, 2020, 55% of our portfolio's gross leasable area (46% as measured by annualized base rent) remains open for Chapter 11 bankruptcy protection on October 15, 2018.business and the Company received approximately 56% of April rental revenue billed, totaling $15.8 million. The Company had four Kmart leases comprising approximately 547,000 sf, which generated $8.5 millioncurrently remains in annual rental revenue. In January 2019, Sears announcedactive discussions and negotiations with its impacted tenants and anticipates the acquisitionneed to grant rent concessions or other lease-related relief, such as the deferral of its assets by ESLlease payments for approximately $5.2 billion. Property rents werea period of time to be paid on all four Kmart locations through April 2019. Duringover the second quarter of 2019, our Kmart leases at Las Catalinas and Huntington, NY were rejected and we recognized a $7.4 million write-offremaining term of the below-market intangible liability connected withlease. The nature and financial impact of such rent relief is currently unknown as negotiations are in progress.
Of the leasetotal annualized base rent, or ABR, owed to us under leases that had commenced as of March 31, 2020, (i) approximately 42% related to businesses, other than restaurants, that we believe provide essential goods and services, (ii) approximately 9% related to restaurants and (iii) approximately 49% related to other businesses. As of April 27, 2020, we had collected approximately 88% of all April base rents and monthly tenant reimbursements owed from businesses, other than restaurants, that we believe provide essential goods and services, as compared to 26% of these amounts owed by restaurants and 36% of these amounts owed by other businesses. We anticipate that the significant reduction in Huntington, NY (classified withincollections of base rents and tenant reimbursements from tenants may continue while governmental orders preventing or limiting non-essential business from opening remain in place and potentially


beyond if recommended social distancing practices continue to have a significant adverse impact on in-person visits to shopping centers, restaurants and entertainment venues.
We anticipate a decline in our percentage rent earned throughout 2020 as a result of reduced sales volumes from temporary store closures and changes in consumer behavior. Percentage rent accounted for less than 1% of rental revenues). ESL assumedrevenue for the Company’s remaining two Kmart leases at Montehiedrathree months ended March 31, 2020 and at Bruckner Commons during2019, respectively and totaled $4.0 million for the second quarter ofyear ended December 31, 2019.
The Company is monitoring the proceedings and considering its alternatives.

During the second quarter, the Company received $1.1 millionnot currently aware of bankruptcy settlement income in connection with the bankruptcy proceedings of Toys “R” Us. The settlement proceeds were usedany loss contingencies related to offset outstanding credit losses and the remaining proceeds were recorded to other income. Prior to liquidation in 2018, the Company had leases with Toys “R” Usthis matter that would require recognition at nine locations with annual gross rents of $7.6 million. No determination has been made as to the amount or timing of additional bankruptcy settlement proceeds, if any, that may be received.this time.

Inflation and Economic Condition Considerations
Most of our leases contain provisions designed to partially mitigate the impact of inflation. Although inflation has been low in recent periods and has had a minimal impact on the performance of our shopping centers, it is very possible that inflation will increase in future years. Most of our leases require tenants to pay their share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing our exposure to increases in costs and operating expenses resulting from inflation, although some larger tenants have capped the amount of these operating expenses they are responsible for under the lease. A small number of our leases also include percentage rent clauses enabling us to receive additional rent based on tenant


sales above a predetermined level, which sales generally increase as prices rise and are typically related to increases in the Consumer Price Index or similar inflation indices.

Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as of June 30, 2019March 31, 2020 or December 31, 2018.2019.



ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We have exposure to fluctuations in interest rates, which are sensitive to many factors that are beyond our control. The following table discusses our exposure to hypothetical changes in market rates of interest on interest expense for our variable rate debt and fixed-rate debt. Interest rate risk amounts were determined by considering the impact of hypothetical interest rates on our debt. This analysis does not take into account all of the factors that may affect our debt, such as the effect that a changing interest rate environment could have on the overall level of economic activity or the action that our management might take to reduce our exposure to the change. This analysis assumes no change in our financial structure. Our exposure to a change in interest rates is summarized in the table below.
 2019 2018
(Amounts in thousands)June 30, Balance Weighted Average Interest Rate Effect of 1% Change in Base Rates December 31, Balance Weighted Average Interest Rate
  
Variable Rate$169,500
 4.18% $1,695
 $169,500
 4.09%
Fixed Rate1,390,434
 4.12% —
(2) 
1,392,659
 4.12%
 $1,559,934
(1) 
  $1,695
 $1,562,159
(1) 
 
 2020 2019
(Amounts in thousands)March 31, Balance Weighted Average Interest Rate Effect of 1% Change in Base Rates December 31, Balance Weighted Average Interest Rate
          
Variable rate unsecured debt$250,000
 2.00% $2,500
 $—
 —%
Variable rate mortgages169,151
 3.32% 1,692
 169,500
 3.45%
Fixed rate mortgages1,457,292
 4.16% —
(2) 
1,386,748
 4.12%
 $1,876,443
(1) 
  $4,192
 $1,556,248
(1) 
 
(1) Excludes unamortized debt issuance costs of $11.0$9.6 million and $11.9$10.1 million as of June 30, 2019March 31, 2020 and December 31, 2018,2019, respectively.
(2) If the weighted average interest rate of our fixed rate debt increased by 1% (i.e. due to refinancing at higher rates), annualized interest expense would have increased by approximately $13.9$14.6 million based on outstanding balances as of June 30, 2019.March 31, 2020.

We may utilize various financial instruments to mitigate the impact of interest rate fluctuations on our cash flows and earnings, including hedging strategies, depending on our analysis of the interest rate environment and the costs and risks of such strategies. As of June 30, 2019,March 31, 2020, we did not have any hedging instruments in place.

Fair Value of Debt

The estimated fair value of our consolidated debt is calculated based on current market prices and discounted cash flows at the current rate at which similar loans would be made to borrowers with similar credit ratings for the remaining term of such debt. As of June 30, 2019,March 31, 2020, the estimated fair value of our consolidated debt was $1.6$1.9 billion.

Other Market Risks

As of June 30, 2019,March 31, 2020, we had no material exposure to any other market risks (including foreign currency exchange risk or commodity price risk).

In making this determination and for purposes of the SEC’s market risk disclosure requirements, we have estimated the fair value of our financial instruments at June 30, 2019March 31, 2020 based on pertinent information available to management as of that date. Although management is not aware of any factors that would significantly affect the estimated amounts as of June 30, 2019,March 31, 2020, future estimates of fair value and the amounts which may be paid or realized in the future may differ significantly from amounts presented.



ITEM 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures (Urban Edge Properties)
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) that are designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. Because of inherent limitations, disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of disclosure controls and procedures are met.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective.
There have not been any changes in our internal control over financial reporting (as defined in Rule 13a-15(f)) that occurred during the three months ended June 30, 2019March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Evaluation of Disclosure Controls and Procedures (Urban Edge Properties LP)
The Operating Partnership’s management maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) that are designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer of our general partner, as appropriate to allow timely decisions regarding required disclosures. Because of inherent limitations, disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of disclosure controls and procedures are met.
The Operating Partnership’s management, with the participation of the Chief Executive Officer and Chief Financial Officer of our general partner, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer of our general partner concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective.
There have not been any changes in our internal control over financial reporting (as defined in Rule 13a-15(f)) that occurred during the three months ended June 30, 2019March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS
We are party to various legal actions that arise in the ordinary course of business. In our opinion, after consultation with legal counsel, the outcome of such matters is not expected to have a material adverse effect on our financial position, results of operations or cash flows.


ITEM 1A.RISK FACTORS
Except to the extent additional factual information disclosed elsewhere in this Quarterly Report on Form 10-Q relates to such risk 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 were no material changes to the risk factors disclosed in Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 20182019 filed with the SEC on February 13,12, 2020, other than those disclosed below.
Actual or perceived threats associated with epidemics, pandemics or other public health crises, including the COVID-19 pandemic, could have a material adverse effect on our and our tenants’ business, financial condition, results of operations, cash flow, liquidity, and ability to access the capital markets and satisfy debt service obligations.
Epidemics, pandemics or other public health crises, including the recent COVID-19 pandemic, that impact economic and market conditions, particularly in the markets where our properties are located, and preventative measures taken to alleviate their impact, including mandatory business shutdowns, “shelter-in-place” or “stay-at-home” orders issued by local, state or federal authorities, may have a material adverse effect on our and our tenants’ business, financial condition, results of operations, liquidity, and ability to access capital markets and satisfy debt service obligations.
Our retail tenants depend on in-person interactions with their customers, and an epidemic, pandemic or other public health crisis may decrease customer willingness to visit, and mandated “shelter-in-place” or “stay-at-home” orders may prevent customers from visiting, our tenants’ businesses, which may negatively impact their profitability or cash flow and ability make timely rental payments to us. As a result of our concentrated operations in the New York metropolitan area, the extent and magnitude, or perception, of the impact of the current COVID-19 pandemic on our and our tenants’ business is heightened. As of April 27, 2020, 55% of our portfolio's gross leasable area remains open for business. We are in active discussions and negotiations with our impacted tenants and anticipate granting rent concessions or other lease-related relief. The nature and financial impact of such rent relief is currently unknown. In April 2020, the Company received approximately 56% of rent collections, totaling $15.8 million. We anticipate a decline in our percentage rent throughout 2020 as a result of reduced sales volume from temporary store closures and changes in consumer behavior.
Moreover, the ongoing COVID-19 pandemic and restrictions intended to prevent and mitigate its spread could have additional adverse effects on our business, including with regards to:
the ability and willingness of our tenants to renew their leases upon expiration, our ability to re-lease the properties on the same or better terms in the event of nonrenewal or in the event we exercise our right to replace an existing tenant, and obligations we may incur in connection with the replacement of an existing tenant, particularly in light of the adverse impact to the financial health of many retailers that has occurred and continues to occur as a result of the COVID-19 pandemic and the significant uncertainty as to when and the conditions under which potential tenants will be able to operate physical retail locations in the future;
anticipated returns from development and redevelopment projects, which have been temporarily delayed and may, in some cases, be abandoned;
the broader impact of the severe economic contraction due to the COVID-19 pandemic, the resulting increase in unemployment that has occurred and its effect on consumer behavior, and the negative consequences that will occur if these trends are not timely reversed;
macroeconomic conditions, such as a disruption of, or lack of access to, the capital markets as well as the significant decline in our share price from prices prior to the spread of the COVID-19 pandemic;
our decision to pay dividends at all, or pay them in stock, which in the case of the latter may result in our shareholders having a tax liability with respect to such dividends that exceeds the amount of cash received, if any;
our ability to pay down, refinance, restructure or extend our indebtedness as it becomes due and potential limitations on our ability to borrow funds under our existing credit facility as a result of covenants relating to our financial results in the second quarter of 2020 or future quarters; and
potential reduction in our operating effectiveness as employees work remotely or if key personnel become unavailable due to illness or other personal circumstances related to COVID-19.
The COVID-19 pandemic and restrictions intended to prevent and mitigate its spread have already had a significant adverse impact on economic and market conditions around the world, including the United States and markets where our properties are located and could further trigger a period of sustained global and U.S. economic downturn or recession. While the rapid developments regarding the COVID-19 pandemic preclude any prediction as to its ultimate adverse impact, the current economic, political and social environment presents material risks and uncertainties with respect to our and our tenants’ business, financial condition, results of operations, cash flows, liquidity and ability to access the capital markets and satisfy debt service obligations.


To the extent any of these risks and uncertainties adversely impact us in the ways described above or otherwise, they may also have the effect of heightening many of the other risks described under the section entitled “Item 1A. Risk Factors” in our most recent annual report on Form 10-K for the year ended December 31, 2019.


ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Urban Edge Properties
(a) During the three months ended June 30, 2019, we issued 1,049,508 sharesRecent Sales of common shares in exchange for 1,049,508 OP Units that were held by certain limited partnersUnregistered Securities: Not applicable.
(b) Use of our Operating Partnership in connection with certainProceeds from Sales of our prior acquisitions. OP Units are generally redeemable for cash or, at our discretion, exchangeable into shares of our common stock on a one-for-one basis. The cash redemption amount per OP Unit is based on the market price of a shares of our common stock at the time of redemption. These shares of common stock were issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. We relied on the exemption under Section 4(a)(2) based upon factual representations received from the limited partners who received the shares of common stock.
(b)Registered Securities: Not applicable.
(c) Issuer Purchases of Equity Securities.Securities:
Period 
(a)
Total Number of Shares Purchased
 
(b)
Average Price Paid per Share
 
(c)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
 
(d)
Maximum Number (or Approximate Dollar Value) of Shares that May Yet to be Purchased Under the Plan or Program
April 1, 2019 - April 30, 2019 —
 $—
 N/A N/A
May 1, 2019 - May 31, 2019 —
 —
 N/A N/A
June 1, 2019 - June 30, 2019 2,164
(1) 
19.05
 N/A N/A
  2,164
 $19.05
 N/A N/A
Period 
(a)
Total Number of Shares Purchased
 
(b)
Average Price Paid per Share
 
(c)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2)
 
(d)
Maximum Number (or Approximate Dollar Value) of Shares that May Yet to be Purchased Under the Plan or Program(2)
January 1, 2020 - January 31, 2020 538
(1) 
$21.98
 —
 $—
February 1, 2020 - February 29, 2020 —
 —
 —
 —
March 1, 2020 - March 31, 2020 4,452,223
(2) 
9.61
 4,452,223
 157,200,000
  4,452,761
 $9.61
 4,452,223
 $157,200,000
(1) Represents common shares surrendered by employees to us to satisfy such employees’ tax withholding obligations in connection with the vesting of restricted common shares.
(2) In March 2020, the Company’s Board of Trustees authorized a share repurchase program for up to $200 million of the Company’s shares. Under the program, the Company may repurchase its shares from time to time in the open market or in privately negotiated transactions in compliance with Securities and Exchange Commission Rule 10b-18. The share repurchase program does not obligate the Company to acquire any particular amount of common shares and may be suspended or discontinued at any time at the Company’s discretion.

Urban Edge Properties LP
(a) Recent Sales of Unregistered Securities: Not applicable.
(b) Use of Proceeds from Sales of Registered Securities: Not applicable.
(c) Issuer Purchases of Equity Securities.
Period 
(a)
Total Number of Units Purchased
 
(b)
Average Price Paid per Unit
 
(c)
Total Number of Units Purchased as Part of Publicly Announced Plans or Programs
 
(d)
Maximum Number (or Approximate Dollar Value) of Units that May Yet to be Purchased Under the Plan or Program
April 1, 2019 - April 30, 2019 —
 $—
 N/A N/A
May 1, 2019 - May 31, 2019 —
 —
 N/A N/A
June 1, 2019 - June 30, 2019 2,164
(1) 
19.05
 N/A N/A
  2,164
 $19.05
 N/A N/A
(1) Represents common units of the Operating Partnership previously held by Urban Edge Properties that were redeemed in connection with the surrender of restricted common shares of Urban Edge Properties by employees to Urban Edge Properties to satisfy such employees’ tax withholding obligations in connection with the vesting of restricted common shares.Securities: Not applicable.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.MINE SAFETY DISCLOSURES
Not applicable.


ITEM 5.OTHER INFORMATION
On July 29, 2019, we entered into the second amendment to our Revolving Credit Agreement with certain financial institutions. The second amendment extends the maturity date of our Revolving Credit Agreement until January 29, 2024, adjusts the applicable interest rates and annual facility fee, in each case as set forth in Note 6 to the unaudited consolidated financial statements in Part I, Item I of this Quarterly Report on Form 10-Q, provides for the possible application of an alternate interest rate in the event of the discontinuation of LIBOR or certain other enumerated events, and makes additional non-material modifications to our Revolving Credit Agreement. The foregoing summary is qualified in its entirety by reference to the second amendment to our Revolving Credit Agreement, a copy of which is filed with this Quarterly Report on Form 10-Q as Exhibit 10.1.None.

ITEM 6.EXHIBITS

The exhibits listed below are included in, or incorporated by reference into, this Quarterly Report on Form 10-Q.

INDEX TO EXHIBITS

The following exhibits are included as part of this Quarterly Report on Form 10-Q:
Exhibit Number Exhibit Description
10.1*3.1
 
Second Amendment, dated asAmended and Restated Bylaws of July 29, 2019, to Revolving Credit Agreement by and among Urban Edge Properties LP, as Borrower, each of the Banks party thereto, and Wells Fargo Bank, National Association, as Administrative Agent(incorporated by reference to Exhibit 3.1 to Form 8-K filed March 24, 2020)
31.1*
 
Certification by the Chief Executive Officer for Urban Edge Properties pursuant to rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
 
Certification by the Chief Financial Officer for Urban Edge Properties pursuant to rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.3*
 
Certification by the Chief Executive Officer for Urban Edge Properties LP pursuant to rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.4*
 
Certification by the Chief Financial Officer for Urban Edge Properties LP pursuant to rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**
 
Certification by the Chief Executive Officer and Chief Financial Officer for Urban Edge Properties pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**
 
Certification by the Chief Executive Officer and Chief Financial Officer for Urban Edge Properties LP pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.SCH Inline XBRL Taxonomy Extension Schema
101.CAL Inline XBRL Extension Calculation Linkbase
101.LAB Inline XBRL Extension Labels Linkbase
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase
104 
Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*)

* Filed herewith
** In accordance with Item 601 (b)601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.


PART IV

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act, of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.

 URBAN EDGE PROPERTIES
 (Registrant)
  
 /s/ Mark Langer
 Mark Langer, Chief Financial Officer
  
 Date: July 31, 2019April 29, 2020
  
 URBAN EDGE PROPERTIES LP
 By: Urban Edge Properties, General Partner
  
 /s/ Mark Langer
 Mark Langer, Chief Financial Officer
  
 Date: July 31, 2019April 29, 2020
  





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