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RVI Retail Value

Filed: 4 May 21, 4:24pm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

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

For the quarterly period ended March 31, 2021 

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 1-38517

 

RETAIL VALUE INC.

(Exact name of registrant as specified in its charter)

 

 

Ohio

 

82-4182996

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

3300 Enterprise Parkway

Beachwood, OH

 

44122

(Address of principal executive offices)

 

(Zip Code.)

 

Registrant’s telephone number, including area code:  (216) 755-5500

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Shares, Par Value $0.10 Per Share

RVI

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

☐  

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of April 30, 2021, the registrant had 21,083,252 shares of common stock, $0.10 par value per share, outstanding.

 


 

 

Retail Value Inc.

QUARTERLY REPORT ON FORM 10-Q

QUARTER ENDED March 31, 2021

 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

Item 1.

Financial Statements – Unaudited

 

 

Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020

2

 

Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three Months Ended March 31, 2021 and 2020

3

 

Consolidated Statements of Equity for the Three Months Ended March 31, 2021 and 2020

4

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020

5

 

Notes to Condensed Consolidated Financial Statements

6

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

13

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

27

Item 4.

Controls and Procedures

28

 

 

 

PART II. OTHER INFORMATION

 

Item 1.

Legal Proceedings

29

Item 1A.

Risk Factors

29

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

29

Item 3.

Defaults Upon Senior Securities

29

Item 4.

Mine Safety Disclosures

29

Item 5.

Other Information

29

Item 6.

Exhibits

30

 

 

 

SIGNATURES

31

 

 

 

1

 

 


 

 

Retail Value Inc.

CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except share amounts)  

 

 

March 31, 2021

 

 

December 31, 2020

 

Assets

 

 

 

 

 

 

 

Land

$

397,024

 

 

$

397,699

 

Buildings

 

1,030,973

 

 

 

1,031,886

 

Fixtures and tenant improvements

 

131,780

 

 

 

134,335

 

 

 

1,559,777

 

 

 

1,563,920

 

Less: Accumulated depreciation

 

(602,879

)

 

 

(593,691

)

 

 

956,898

 

 

 

970,229

 

Construction in progress

 

1,887

 

 

 

1,515

 

Total real estate assets, net

 

958,785

 

 

 

971,744

 

Cash and cash equivalents

 

72,741

 

 

 

56,849

 

Restricted cash

 

63,557

 

 

 

115,939

 

Accounts receivable

 

22,053

 

 

 

25,302

 

Other assets, net

 

23,188

 

 

 

26,042

 

 

$

1,140,324

 

 

$

1,195,876

 

Liabilities and Equity

 

 

 

 

 

 

 

Mortgage indebtedness, net

$

294,069

 

 

$

344,485

 

Accounts payable and other liabilities

 

34,239

 

 

 

38,603

 

Dividends payable

 

0

 

 

 

23,002

 

Total liabilities

 

328,308

 

 

 

406,090

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

 

Redeemable preferred equity

 

190,000

 

 

 

190,000

 

Retail Value Inc. shareholders' equity

 

 

 

 

 

 

 

Common shares, with par value, $0.10 stated value; 200,000,000 shares authorized;

   21,083,486 and 19,829,498 shares issued at March 31, 2021 and December 31, 2020,

   respectively

 

2,108

 

 

 

1,983

 

Additional paid-in capital

 

740,130

 

 

 

721,234

 

Accumulated distributions in excess of net loss

 

(120,219

)

 

 

(123,428

)

Less: Common shares in treasury at cost: 234 shares at March 31, 2021 and

   December 31, 2020

 

(3

)

 

 

(3

)

Total equity

 

622,016

 

 

 

599,786

 

 

$

1,140,324

 

 

$

1,195,876

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

2

 


 

 

Retail Value Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(unaudited, in thousands, except per share amounts)

 

 

Three Months

 

 

Ended March 31,

 

 

2021

 

 

2020

 

Revenues from operations:

 

 

 

 

 

 

 

Rental income

$

41,422

 

 

$

50,330

 

Other income

 

37

 

 

 

39

 

 

 

41,459

 

 

 

50,369

 

Rental operation expenses:

 

 

 

 

 

 

 

Operating and maintenance

 

9,607

 

 

 

11,062

 

Real estate taxes

 

4,266

 

 

 

5,719

 

Property and asset management fees

 

4,035

 

 

 

4,876

 

Impairment charges

 

2,010

 

 

 

15,910

 

General and administrative

 

865

 

 

 

1,077

 

Depreciation and amortization

 

13,358

 

 

 

16,470

 

 

 

34,141

 

 

 

55,114

 

Other income (expense):

 

 

 

 

 

 

 

Interest expense, net

 

(3,991

)

 

 

(7,292

)

Debt extinguishment costs

 

(130

)

 

 

(3,965

)

Other income, net

 

0

 

 

 

334

 

Gain on disposition of real estate, net

 

121

 

 

 

2,674

 

 

 

(4,000

)

 

 

(8,249

)

Income (loss) before tax expense

 

3,318

 

 

 

(12,994

)

Tax expense

 

(109

)

 

 

(73

)

Net income (loss)

$

3,209

 

 

$

(13,067

)

Comprehensive income (loss)

$

3,209

 

 

$

(13,067

)

 

 

 

 

 

 

 

 

Per share data:

 

 

 

 

 

 

 

Basic and diluted

$

0.15

 

 

$

(0.66

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

 


 

Retail Value Inc.

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited, in thousands)

 

 

 

Common

Shares

 

 

Additional

Paid-in

Capital

 

 

Accumulated Distributions

in Excess of

Net Loss

 

 

Treasury

Stock at

Cost

 

 

Total

 

Balance as of December 31, 2020

 

$

1,983

 

 

$

721,234

 

 

$

(123,428

)

 

$

(3

)

 

$

599,786

 

Issuance of common shares related to

   stock dividend and stock plan

 

 

125

 

 

 

18,896

 

 

 

 

 

 

 

 

 

19,021

 

Net income

 

 

 

 

 

 

 

 

3,209

 

 

 

 

 

 

3,209

 

Balance, March 31, 2021

 

$

2,108

 

 

$

740,130

 

 

$

(120,219

)

 

$

(3

)

 

$

622,016

 

 

 

 

Common

Shares

 

 

Additional

Paid-in

Capital

 

 

Accumulated Distributions

in Excess of

Net Loss

 

 

Treasury

Stock at

Cost

 

 

Total

 

Balance as of December 31, 2019

 

$

1,905

 

 

$

692,871

 

 

$

(6,857

)

 

$

(16

)

 

$

687,903

 

Issuance of common shares related to

   stock dividend

 

 

77

 

 

 

28,022

 

 

 

 

 

 

 

 

 

28,099

 

Net loss

 

 

 

 

 

 

 

 

(13,067

)

 

 

 

 

 

(13,067

)

Balance, March 31, 2020

 

$

1,982

 

 

$

720,893

 

 

$

(19,924

)

 

$

(16

)

 

$

702,935

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4

 


 

 

Retail Value Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

 

 

Three Months

 

 

Ended March 31,

 

 

2021

 

 

2020

 

Cash flow from operating activities:

 

 

 

 

 

 

 

Net income (loss)

$

3,209

 

 

$

(13,067

)

Adjustments to reconcile net income (loss) to net cash flow

     provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

13,358

 

 

 

16,470

 

Amortization and write-off of above- and

   below-market leases, net

 

(236

)

 

 

(306

)

Amortization and write-off of debt issuance costs and

   fair market value of debt adjustments

 

781

 

 

 

4,586

 

Gain on disposition of real estate, net

 

(121

)

 

 

(2,674

)

Impairment charges

 

2,010

 

 

 

15,910

 

Net change in accounts receivable

 

3,298

 

 

 

2,014

 

Net change in accounts payable and other liabilities

 

(1,883

)

 

 

(7,118

)

Net change in other operating assets

 

2,035

 

 

 

(592

)

Total adjustments

 

19,242

 

 

 

28,290

 

Net cash flow provided by operating activities

 

22,451

 

 

 

15,223

 

Cash flow from investing activities:

 

 

 

 

 

 

 

Real estate improvements to operating real estate

 

(3,378

)

 

 

(6,152

)

Proceeds from disposition of real estate

 

61

 

 

 

146,824

 

Net cash flow (used for) provided by investing activities

 

(3,317

)

 

 

140,672

 

Cash flow from financing activities:

 

 

 

 

 

 

 

Repayment of mortgage debt, including repayment costs

 

(51,168

)

 

 

(154,596

)

Payment of debt issuance costs

 

(75

)

 

 

0

 

Dividends paid

 

(4,381

)

 

 

(10,958

)

Net cash flow used for financing activities

 

(55,624

)

 

 

(165,554

)

 

 

 

 

 

 

 

 

Net decrease in cash, cash equivalents and restricted cash

 

(36,490

)

 

 

(9,659

)

Cash, cash equivalents and restricted cash, beginning of period

 

172,788

 

 

 

183,293

 

Cash, cash equivalents and restricted cash, end of period

$

136,298

 

 

$

173,634

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5

 


 

 

Notes to Condensed Consolidated Financial Statements

1.

Nature of Business and Financial Statement Presentation

Nature of Business

Retail Value Inc. and its related consolidated real estate subsidiaries (collectively, the “Company” or “RVI”) were formed in December 2017 and owned and operated a portfolio of 48 retail shopping centers, comprised of 36 continental U.S. assets and 12 Puerto Rico assets, at the time of their separation from SITE Centers Corp. (“SITE Centers”) on July 1, 2018.  The Company focuses on realizing value in its business through operations and sales of its assets.  At March 31, 2021, RVI owned 22 retail shopping centers that included 11 continental U.S. assets and 11 Puerto Rico assets (including 5 enclosed malls) comprising 8.5 million square feet of gross leasable area (“GLA”) located in 9 states and Puerto Rico.  These properties serve as direct or indirect collateral for a mortgage loan which, as of March 31, 2021, had an aggregate principal balance of $303.0 million. In April 2021, a $23.6 million repayment on the mortgage loan was made from net sale proceeds from an asset sold in early April 2021 along with unrestricted cash on hand (Note 11).

In connection with the separation from SITE Centers, SITE Centers retained 1,000 shares of RVI’s series A preferred stock having an aggregate dividend preference equal to $190 million, which amount may increase by up to an additional $10 million depending on the amount of aggregate gross proceeds generated by RVI asset sales.

On July 1, 2018, the Company and SITE Centers also entered into an external management agreement (the “External Management Agreement”) which, together with various property management agreements, governs the fees, terms and conditions pursuant to which SITE Centers manages RVI and its properties.  SITE Centers provides RVI with day-to-day management, subject to supervision and certain discretionary limits and authorities granted by the RVI Board of Directors.  The Company does not have any employees.  In general, either SITE Centers or RVI may terminate the management agreements on June 30, 2021, or at the end of any six-month renewal period thereafter.  SITE Centers and RVI also entered into a tax matters agreement that governs the rights and responsibilities of the parties following RVI’s separation from SITE Centers with respect to various tax matters and provides for the allocation of tax-related assets, liabilities and obligations.

Use of Estimates in Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the year.  The Company considered impacts to its estimates related to the COVID-19 pandemic, as appropriate, within its unaudited condensed consolidated financial statements and there may be changes to those estimates in future periods.  The Company believes that its accounting estimates are appropriate after giving consideration to the uncertainties surrounding the severity and duration of the COVID‑19 pandemic.  Actual results could differ from those estimates.

Unaudited Interim Financial Statements

 

These financial statements have been prepared by the Company in accordance with U.S. GAAP for interim financial information and the applicable rules and regulations of the Securities and Exchange Commission.  Accordingly, they do not include all information and footnotes required by U.S. GAAP for complete financial statements.  However, in the opinion of management, the interim financial statements include all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the results of the periods presented.  The results of operations for the three months ended March 31, 2021 and 2020, are not necessarily indicative of the results that may be expected for the full year.  These condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Statements of Cash Flows and Supplemental Disclosure of Non-Cash Investing and Financing Information

Non-cash investing and financing activities are summarized as follows (in millions):

 

Three Months

 

 

Ended March 31,

 

 

2021

 

 

2020

 

Accounts payable related to construction in progress

$

1.2

 

 

$

4.7

 

Stock dividends

 

18.6

 

 

 

28.1

 

6

 


 

 

 

Impact of COVID-19 Pandemic on Revenue and Receivables

Beginning in March 2020, the retail sector within the continental U.S. and Puerto Rico have been significantly impacted by the COVID-19 pandemic.  Though the impact of the COVID-19 pandemic on tenant operations has varied by tenant category, local conditions and applicable government mandates, a significant number of the Company’s tenants have experienced a reduction in sales and foot traffic, and many tenants were forced to limit their operations or close their businesses for a period of time.  The COVID-19 pandemic had no impact on the Company’s collection of rents for the first quarter of 2020, but it had a significant impact on the collection of rents for April 2020 through March 31, 2021.

The Company has engaged in discussions with most of its larger tenants that failed to satisfy all or a portion of their rent obligations during the 12 months ended March 31, 2021 and has agreed to terms on rent-deferral arrangements (and, in a small number of cases, rent abatements) and other lease modifications with a significant number of such tenants.  The Company continues to evaluate its options with respect to tenants with which the Company has not reached satisfactory resolution of unpaid rents and has commenced collections actions against several tenants.  

For those tenants where the Company is unable to assert that collection of amounts due over the lease term is probable, regardless of whether the Company has entered into a deferral agreement to extend the payment terms, the Company has categorized these tenants on the cash basis of accounting.  As a result, no rental income is recognized from such tenants once they have been placed on the cash basis of accounting until payments are received and all existing accounts receivable relating to these tenants have been reserved in full, including straight-line rental income.  The Company will remove the cash basis designation and resume recording rental income from such tenants on a straight-line basis at such time it believes collection from the tenants is probable based upon a demonstrated payment history or a recapitalization event.

The Company had net billed contractual tenant accounts receivable of $5.8 million at March 31, 2021.  During the three months ended March 31, 2021, the Company recorded net uncollectible revenue that resulted in rental income of $0.2 million primarily due to rental income paid in 2021 related to outstanding receivables in 2020 from tenants on the cash basis of accounting. The aggregate amount of uncollectible revenue reported during the quarter primarily was due to the impact of the COVID-19 pandemic.  

2.

Other Assets and Intangibles, net

Other Assets and Intangibles, net consists of the following (in thousands):

 

 

March 31, 2021

 

 

December 31, 2020

 

Intangible assets:

 

 

 

 

 

 

 

In-place leases, net

$

2,965

 

 

$

3,244

 

Above-market leases, net

 

346

 

 

 

410

 

Lease origination costs, net

 

454

 

 

 

487

 

Tenant relationships, net

 

3,308

 

 

 

3,802

 

Total intangible assets, net(A)

 

7,073

 

 

 

7,943

 

Operating lease ROU assets

 

1,456

 

 

 

1,509

 

Notes receivable(B)

 

3,000

 

 

 

3,000

 

Other assets:

 

 

 

 

 

 

 

Prepaid expenses

 

11,317

 

 

 

13,314

 

Other assets

 

342

 

 

 

276

 

Total other assets, net

$

23,188

 

 

$

26,042

 

 

 

 

 

 

 

 

 

Below-market leases, net (other liabilities)

$

13,529

 

 

$

13,829

 

 

 

(A)

The Company recorded amortization expense related to its intangibles, excluding above- and below-market leases, of $0.4 million and $0.9 million for the three months ended March 31, 2021 and 2020, respectively.

 

(B)

Maturity date is the earlier of September 2022 (subject to buyer’s option to exercise a six-month extension in certain circumstances) and the satisfaction of certain property leasing conditions.

7

 


 

 

3.

Assets Held for Sale

As of March 31, 2021, the Company had one asset, Marketplace of Brown Deer, classified as held for sale.  There were 0 assets considered as held for sale at March 31, 2020 or December 31, 2020.  The Company classifies properties as held for sale when executed contract contingencies have been satisfied, which signify that the sale is legally binding.  This asset was sold in April 2021, for a gross sales price of $10.3 million, which was in excess of its book basis.  The net sale proceeds were used along with unrestricted cash on hand to repay the mortgage loan by $23.6 million (Note 11).  The following table presents the assets and liabilities associated with this asset (in thousands):

 

 

March 31, 2021

 

Assets

 

 

 

Land

$

1,967

 

Buildings

 

14,665

 

Fixtures and tenant improvements

 

5,442

 

 

 

22,074

 

Less: Accumulated depreciation

 

(14,065

)

Total real estate assets, net

 

8,009

 

Intangible assets, net

 

484

 

Other assets

 

342

 

Assets associated with real estate assets held for sale

$

8,835

 

 

 

 

 

Liabilities

 

 

 

Below-market leases, net

$

961

 

Other liabilities

 

524

 

Liabilities associated with real estate assets held for sale

$

1,485

 

 

There were 0 discontinued operations for the three months ended March 31, 2021, as this disposition does not represent a strategic shift in the Company’s business that would qualify as discontinued operations.  

4.

Indebtedness

Mortgage Indebtedness

The Company has a mortgage loan, which had an outstanding aggregate principal amount of $303.0 million at March 31, 2021, and is secured, directly and indirectly, by all of its properties.  In April 2021, a $23.6 million repayment on the mortgage loan was made from net proceeds from an asset sale consummated in early April 2021 along with unrestricted cash on hand (Note 11).  

On March 9, 2021, the Company exercised its first one-year extension option under the loan agreement to extend the maturity date to March 9, 2022, subject to 2 remaining one-year extensions at the borrowers’ option conditioned upon, among other items, (i) an event of default shall not be continuing, (ii) in the case of the second one-year extension option (exercisable March 2022), in addition to (i) above, evidence that the Debt Yield (as defined and calculated in accordance with the loan agreement) equals or exceeds 13% and (iii) in the case of the third one-year extension option (exercisable March 2023), in addition to (i) above, evidence that the Debt Yield equals or exceeds 14% on the extension date.  

As of March 31, 2021, the Company was in compliance with all provisions of the loan agreements. The Company expects to continue to use cash flow from operations and asset sales to repay the mortgage loan.  As of May 4, 2021, the Company plans to exercise the second one-year extension option effective March 9, 2022 to the extent the mortgage loan remains outstanding.  The Debt Yield as of March 31, 2021 was 18.29%, which is in excess of the required threshold of 13% in order to exercise the second one-year extension option.  If the Debt Yield requirement is not met at the time of the extension exercise, the Company can utilize unrestricted cash to pay down principal to satisfy the Debt Yield requirement.  If the Company does not have sufficient cash to pay down the principal to satisfy the required Debt Yield, the Company would need to obtain alternative sources of capital, which could include a refinancing of the current mortgage loan or other financing options.

As of March 31, 2021, the interest rate of the Company’s mortgage loan was 4.2% per annum.  The interest rate on the mortgage loan is equal to the one-month LIBOR plus a weighted-average spread of 4.1% per annum as of March 31, 2021, provided that such spread is subject to an increase of 0.25% per annum in connection with any exercise of the third extension option.  Application of voluntary prepayments will cause the weighted-average interest rate spread to increase over time as senior tranches of the mortgage debt are repaid first.

8

 


 

Credit Agreement

The Company maintains a Credit Agreement (the “Revolving Credit Agreement”) with PNC Bank, National Association, as lender and administrative agent (“PNC”) that was amended and extended in February 2021.  The Revolving Credit Agreement provides for borrowings of up to $30.0 million.  Borrowings under the Revolving Credit Agreement may be used by the Company for general corporate purposes and working capital.  The Company’s borrowings under the Revolving Credit Agreement bear interest at variable rates at the Company’s election, based on either (i) LIBOR plus a specified spread ranging from 1.30% to 1.75% per annum depending on the Company’s Leverage Ratio (as defined in the Revolving Credit Agreement) or (ii) the Alternate Base Rate (as defined in the Revolving Credit Agreement) plus a specified spread ranging from 0.30% to 0.75% per annum depending on the Company’s Leverage Ratio.  The Company is also required to pay a facility fee on the aggregate revolving commitments at a rate per annum that ranges from 0.15% to 0.30% depending on the Company’s Leverage Ratio.

The Revolving Credit Agreement matures on the earliest of (i) February 9, 2022, (ii) the date on which the External Management Agreement is terminated, (iii) the date on which DDR Asset Management, LLC or another wholly-owned subsidiary of SITE Centers ceases to be the “Service Provider” under the External Management Agreement as a result of assignment or operation of law or otherwise and (iv) the date on which the principal amount outstanding under the Company’s mortgage loan is repaid or refinanced.

At March 31, 2021, there were 0 amounts outstanding under the Revolving Credit Agreement.

5.

Financial Instruments and Fair Value Measurements

The following methods and assumptions were used by the Company in estimating fair value disclosures of financial instruments:

Cash and Cash Equivalents, Restricted Cash, Accounts Receivable and Accounts Payable and Other Liabilities

The carrying amounts reported in the Company’s consolidated balance sheets for these financial instruments approximated fair value because of their short-term maturities.

Debt

The fair market value of debt is estimated using a discounted cash flow technique that incorporates future contractual interest and principal payments and a market interest yield curve with adjustments for duration, optionality and risk profile, including the Company’s non-performance risk and loan to value and is classified as Level 3 in the fair value hierarchy.

Considerable judgment is necessary to develop estimated fair values of financial instruments.  Accordingly, the estimates presented are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments. The carrying amount of debt, including deferred financing costs, was $294.1 million and $344.5 million at March 31, 2021 and December 31, 2020, respectively.  The fair value of debt was $312.2 million and $362.7 million at March 31, 2021 and December 31, 2020, respectively.  

6.

Commitments and Contingencies

Hurricane Loss

In 2017, Hurricane Maria made landfall in Puerto Rico.  At the time of the hurricane, the Company owned 12 assets in Puerto Rico, aggregating 4.4 million square feet of Company-owned GLA, which sustained varying degrees of damage.  In August 2019, the Company reached a settlement with its insurer with respect to the Company’s claims relating to the hurricane damage.  The Company continued to own 11 of these Puerto Rico assets at March 31, 2021.

The remaining unutilized property damage settlement proceeds of $30.7 million along with other related reserves required by the mortgage lender of $6.5 million are reflected in the Company’s consolidated balance sheets as Restricted Cash and will be disbursed to the Company in accordance with the terms of the Company’s mortgage financing upon the lender’s satisfaction that all necessary restoration work has been completed.

9

 


 

Legal Matters

The Company and its subsidiaries are subject to various legal proceedings, which, taken together, are not expected to have a material adverse effect on the Company.  The Company is also subject to a variety of legal actions for personal injury or property damage arising in the ordinary course of its business, most of which are covered by insurance.  While the resolution of all matters cannot be predicted with certainty, management believes that the final outcome of such legal proceedings and claims will not have a material adverse effect on the Company’s liquidity, financial position or results of operations.  

7.

Impairment Charges

The Company recorded impairment charges of $2.0 million and $15.9 million for the three months ended March 31, 2021 and 2020, respectively.  Impairment charges were recorded on assets based on the difference between the carrying value of the assets and the estimated fair market value after the assets failed a step one analysis that compared the sum of estimated future undiscounted cash flows to the assets carrying value.  These impairments primarily were triggered by indicative bids received and changes in market assumptions due to the disposition process, as well as changes in projected cash flows.  

Items Measured at Fair Value  

The valuation of impaired real estate assets is determined using widely accepted valuation techniques including actual sales negotiations and bona fide purchase offers received from third parties, an income capitalization approach considering prevailing market capitalization rates and analysis of recent comparable sales transactions, as well as discounted cash flow analysis on the expected cash flows of each asset.  In general, the Company considers multiple valuation techniques when measuring fair value of real estate.  However, in certain circumstances, a single valuation technique may be appropriate.

For operational real estate assets, the significant assumptions included the capitalization rate used in the income capitalization valuation, as well as the projected property net operating income.  These valuation adjustments were calculated based on market conditions and assumptions made by SITE Centers or the Company at the time the valuation adjustments and impairments were recorded, which may differ materially from actual results if market conditions or the underlying assumptions change.

The following table presents information about the fair value of real estate that was impaired, and therefore, measured on a fair value basis, along with the related impairment charge, for the three months ended March 31, 2021.  The table also indicates the fair value hierarchy of the valuation techniques used by the Company to determine such fair value (in millions).

 

 

Fair Value Measurements

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Total Impairment Charges

 

March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-lived assets held and used

 

$

0

 

 

$

0

 

 

$

24.9

 

 

$

24.9

 

 

$

2.0

 

 

 

The following table presents quantitative information about the significant unobservable inputs used by the Company to determine the fair value for the three-months ended March 31, 2021 (in millions):

 

 

Quantitative Information about Level 3 Fair Value Measurements

Description

 

Fair Value at

March 31, 2021

 

 

Valuation

Technique

 

Unobservable Inputs

 

Range

 

Weighted

Average

Long-lived assets held and used

 

$

24.9

 

 

Indicative Bid (A)

 

Indicative Bid(A)

 

N/A

 

N/A

(A)

Fair value measurements based upon indicative bids were developed by third-party sources (including offers and comparable sales values), subject to SITE Centers’ corroboration for reasonableness.  The Company does not have access to certain unobservable inputs used by these third parties to determine these estimated values.

10

 


 

8.

Transactions with SITE Centers

The following table presents fees and other amounts charged by SITE Centers (in thousands):

 

Three Months

 

 

Ended March 31,

 

 

2021

 

 

2020

 

Property management fees(A)

$

2,265

 

 

$

2,552

 

Asset management fees(B)

 

1,770

 

 

 

2,324

 

Leasing commissions(C)

 

778

 

 

 

1,231

 

Maintenance services and other(D)

 

344

 

 

 

341

 

Disposition fees(E)

 

0

 

 

 

1,556

 

Legal fees(F)

 

104

 

 

 

93

 

 

$

5,261

 

 

$

8,097

 

(A)

Property management fees are generally calculated based on a percentage of tenant cash receipts collected during the three months immediately preceding the most recent June 30 or December 31.  For the three months ended March 31, 2021, includes the monthly supplemental fees discussed below.  

(B)

Asset management fees are generally calculated at 0.5% per annum of the gross asset value as determined on the immediately preceding June 30 or December 31.

(C)

Leasing commissions represent fees charged for the execution of the leasing of retail space.  Leasing commissions are included within Real Estate Assets on the consolidated balance sheets.

(D)

Maintenance services represent amounts charged to the properties for the allocation of compensation and other benefits of personnel directly attributable to the management of the properties.  Amounts are recorded in Operating and Maintenance Expense on the consolidated statements of operations.

(E)

Disposition fees equal 1% of the gross sales price of each asset sold.  Disposition fees are included within Gain on Disposition of Real Estate on the consolidated statements of operations.

(F)

Legal fees charged for collection activity, negotiating and reviewing tenant leases and contracts for asset dispositions.

 

In October 2020, the Company entered into an Amended and Restated Agreement (the “Agreement”) with an affiliate of SITE Centers in order to address the impact of the COVID-19 pandemic on the level of effort required to manage the portfolio and the property management fees for the six-month period ending June 30, 2021.  Pursuant to the terms of the Company’s existing property management agreements with SITE Centers, property management fees are determined on each July 1 and January 1 based on gross property revenues received during the three-month period immediately preceding such determination date.  In order to offset the impact of reduced property collections during the three-month period preceding January 1, 2021 on the property management fee applicable to the first six months of 2021, the Agreement provides that beginning on January 1, 2021, the Company will pay JDN Development Company (an affiliate of SITE Centers) a monthly supplemental fee in an amount equal to (i) the average monthly property management fee paid during 2019 with respect to the properties owned by the Company and its subsidiaries as of October 1, 2020 (which amount is $737,377) minus (ii) the monthly property management fee determined on January 1, 2021 for the first six months of 2021 in accordance with the existing property management agreements (which amount is $634,848).  This arrangement is similar to the prior arrangement between the parties governing the payment of a monthly supplemental fee with respect to the last six months of 2020.

 

9.

Earnings Per Share

The following table provides the net income (loss) and the number of common shares used in the computations of “basic” earnings per share (“EPS”), which utilizes the weighted-average number of common shares outstanding, and “diluted” EPS (in thousands, except per share amounts):  

 

Three Months

 

 

Ended March 31,

 

 

2021

 

 

2020

 

Numerators Basic and Diluted

 

 

 

 

 

 

 

Net income (loss) attributable to common shareholders

   after allocation to participating securities

$

3,209

 

 

$

(13,067

)

Denominators Number of Shares

 

 

 

 

 

 

 

Basic and DilutedAverage shares outstanding

 

20,916

 

 

 

19,749

 

Income (loss) Per Share:

 

 

 

 

 

 

 

Basic and Diluted

$

0.15

 

 

$

(0.66

)

11

 


 

 

 

Dividends

In November 2020, the Company declared a dividend on its common shares of $1.16 per share that was paid in January 2021 in a combination of cash and the Company’s common shares, subject to a Puerto Rico withholding tax of 10%.  The aggregate amount of cash paid to shareholders was limited to 10% of the total dividend paid.  In connection with the 2020 dividend, in January 2021, the Company issued 1,253,988 common shares, based on the volume-weighted average trading price of $14.8492 per share, and paid $4.4 million in cash, which included the Puerto Rico withholding tax.

10.

Segment Information

The Company has 2 reportable operating segments: continental U.S. and Puerto Rico.  The table below presents information about the Company’s reportable operating segments (in thousands):

 

 

Three Months Ended March 31, 2021

 

 

Continental U.S.

 

 

Puerto Rico

 

 

Other

 

 

Total

 

Lease revenue and other property revenue

$

18,170

 

 

$

23,289

 

 

 

 

 

 

$

41,459

 

Rental operation expenses

 

(5,518

)

 

 

(8,355

)

 

 

 

 

 

 

(13,873

)

Net operating income

 

12,652

 

 

 

14,934

 

 

 

 

 

 

 

27,586

 

Property and asset management fees

 

(1,548

)

 

 

(2,487

)

 

 

 

 

 

 

(4,035

)

Impairment charges

 

0

 

 

 

(2,010

)

 

 

 

 

 

 

(2,010

)

Depreciation and amortization

 

(6,988

)

 

 

(6,370

)

 

 

 

 

 

 

(13,358

)

Unallocated expenses(A)

 

 

 

 

 

 

 

 

$

(4,986

)

 

 

(4,986

)

Gain (loss) on disposition of real estate, net

 

148

 

 

 

(27

)

 

 

 

 

 

 

121

 

Income before tax expense

 

 

 

 

 

 

 

 

 

 

 

 

$

3,318

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2021:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total gross real estate assets

$

594,678

 

 

$

966,986

 

 

 

 

 

 

$

1,561,664

 

 

 

Three Months Ended March 31, 2020

 

 

Continental U.S.

 

 

Puerto Rico

 

 

Other

 

 

Total

 

Lease revenue and other property revenue

$

24,955

 

 

$

25,414

 

 

 

 

 

 

$

50,369

 

Rental operation expenses

 

(8,277

)

 

 

(8,504

)

 

 

 

 

 

 

(16,781

)

Net operating income

 

16,678

 

 

 

16,910

 

 

 

 

 

 

 

33,588

 

Property and asset management fees

 

(2,418

)

 

 

(2,458

)

 

 

 

 

 

 

(4,876

)

Impairment charges

 

(15,910

)

 

 

 

 

 

 

 

 

 

 

(15,910

)

Depreciation and amortization

 

(9,230

)

 

 

(7,240

)

 

 

 

 

 

 

(16,470

)

Unallocated expenses(A)

 

 

 

 

 

 

 

 

$

(12,000

)

 

 

(12,000

)

Gain on disposition of real estate, net

 

2,674

 

 

 

 

 

 

 

 

 

 

 

2,674

 

Loss before tax expense

 

 

 

 

 

 

 

 

 

 

 

 

$

(12,994

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total gross real estate assets

$

760,385

 

 

$

1,082,915

 

 

 

 

 

 

$

1,843,300

 

 

(A)

Unallocated expenses consist of General and Administrative Expenses, Interest Expense and Other Expenses as listed in the Company’s consolidated statements of operations.  

11.

Subsequent Events

Assets Sales

In April 2021, the Company sold 4 assets, in separate transactions, (Marketplace of Brown Deer, Noble Town Center, Plaza Vega Baja and Uptown Solon) for a gross sales price of $38.9 million.  In April 2021, the Company utilized net sale proceeds from the asset sold on April 9, 2021, Marketplace of Brown Deer, along with unrestricted cash on hand to repay the mortgage loan by $23.6 million.  A majority of the net sale proceeds from the three additional asset sales in April will be used to repay mortgage debt in May 2021.

12

 


 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides readers with a perspective from management on the financial condition, results of operations and liquidity of Retail Value Inc. and its related consolidated real estate subsidiaries (collectively, the “Company” or “RVI”) (NYSE: RVI) and other factors that may affect the Company’s future results.  The Company believes it is important to read the MD&A in conjunction with its Annual Report on Form 10-K for the year ended December 31, 2020, as well as other publicly available information.  

RVI is an Ohio company formed in December 2017 that, as of March 31, 2021, owned and operated a portfolio of 22 assets, composed of 11 continental U.S. assets and 11 assets in Puerto Rico.  These properties consisted of retail shopping centers (including five enclosed malls) composed of 8.5 million square feet of Company-owned gross leasable area (“GLA”) and were located in nine states and Puerto Rico.  The Company’s continental U.S. properties and Puerto Rico properties comprised approximately 44% and 56%, respectively, of its total consolidated revenue for the three months ended March 31, 2021.  At March 31, 2021, the aggregate occupancy of the Company’s shopping center portfolio was 86.8%, and the average annualized base rent per occupied square foot was $16.03.  

EXECUTIVE SUMMARY

The Company expects to focus on realizing value in its portfolio through operations and sales of its assets.  The Company primarily intends to use net asset sale proceeds first to repay mortgage debt, second to make distributions on account of the RVI Preferred Shares, up to the preference amount, and third to make distributions to holders of the Company’s common shares.  

From January 1, 2021 through April 30, 2021, the Company sold the following assets (in thousands):

Date Sold

 

Property Name

 

City, State

 

Total Owned GLA

 

 

Gross

Sales Price

 

4/9/21

 

Marketplace of Brown Deer

 

Brown Deer, WI

 

 

405

 

 

$

10,250

 

4/13/21

 

Noble Town Center

 

Jenkintown, PA

 

 

168

 

 

 

14,000

 

4/14/21

 

Plaza Vega Baja

 

Vega Baja, PR

 

 

185

 

 

 

4,500

 

4/21/21

 

Uptown Solon

 

Solon, OH

 

 

182

 

 

 

10,100

 

 

 

 

 

 

 

 

940

 

 

$

38,850

 

In March 2020, the World Health Organization categorized COVID-19 as a pandemic, and it continues to spread throughout the United States and other countries across the world.  Beginning in mid-March 2020, federal, state and local governments took various actions to limit the spread of COVID-19, including ordering the temporary closure of non-essential businesses (which included many of the Company’s tenants) and imposing significant social distancing guidelines and restrictions on the continued operations of essential businesses and the reopening of non-essential businesses.  As of April 23, 2021, approximately 99% of the Company’s tenants, based on average base rents, were open for business, up from a low of approximately 34% in early April 2020. Although rent collection levels continued to improve during the first quarter of 2021, collection levels remain below historical averages and operating restrictions on tenant businesses remain in place in certain locations (including Puerto Rico).  Future rent collections may be negatively impacted by any surges in COVID-19 contagion, the discovery of new COVID-19 variants or delays in the acceptance, administration or effectiveness of COVID-19 vaccines. The ultimate impact of the pandemic and secondary social and economic effects on the Company's results of operations, financial position, liquidity and capital resources remains unclear and cannot be reasonably forecasted at this time.  For a further discussion on the impact of the COVID-19 pandemic on the Company’s business, see “Liquidity, Capital Resources and Financing Activities” and “Economic Conditions” included in this section and Item 1A. Risk Factors in Part II of this Quarterly Report.

Manager

The Company is party to an external management agreement (the “External Management Agreement”) with SITE Centers Corp. (“SITE Centers”) which, together with various property management agreements, governs the fees, terms and conditions pursuant to which SITE Centers serves as the Company’s manager.  The Company does not have any employees.  In general, either the Company or SITE Centers may terminate these management agreements on June 30, 2021 or at the end of any six-month renewal period thereafter.  

Pursuant to the External Management Agreement, the Company pays SITE Centers and certain of its subsidiaries a monthly asset management fee in an aggregate amount of 0.5% per annum of the gross asset value of the Company’s properties (determined on

13

 


 

the immediately preceding June 30 or December 31 and calculated in accordance with the terms of the External Management Agreement).  The External Management Agreement also provides for the reimbursement of certain expenses incurred by SITE Centers in connection with the services it provides to the Company along with the payment of transaction-based fees to SITE Centers in the event of any debt financings or change of control transactions.

Pursuant to the property management agreements, the Company pays SITE Centers and certain of its subsidiaries a monthly property management fee in an aggregate amount of 3.5% and 5.5% of the average gross monthly property revenue collected during the most recent second or fourth quarter in respect to the Company’s continental U.S. properties and the Puerto Rico properties, respectively.  In order to address the impact of the pandemic on the level of effort required to manage the portfolio and property management fees paid in the first half of 2021, the Company has agreed to pay an affiliate of SITE Centers a supplemental monthly fee during the six-month period ending June 30, 2021 (see Note 8 “Transactions with SITE Centers” of the Company’s consolidated financial statements included herein).  The property management agreements also provide for the payment to SITE Centers of certain leasing commissions and a disposition fee of 1% of the gross sales price of each asset sold by the Company.

2021 RESULTS OF OPERATIONS

Where used, references to “Comparable Portfolio Properties” reflect shopping center properties owned as of March 31, 2021.  

Revenues from Operations (in thousands)

 

Three Months

 

 

 

 

 

 

Ended March 31,

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

Rental income(A)

$

41,422

 

 

$

50,330

 

 

$

(8,908

)

Other income

 

37

 

 

 

39

 

 

 

(2

)

Total revenues (B)

$

41,459

 

 

$

50,369

 

 

$

(8,910

)

(A)

The following table summarizes the key components of the 2021 rental income as compared to 2020 (in thousands):

 

 

Three Months

 

 

 

 

 

 

 

Ended March 31,

 

 

 

 

 

Contractual Lease Payments

 

2021

 

 

2020

 

 

$ Change

 

Base and percentage rental income(1)

 

$

28,996

 

 

$

35,614

 

 

$

(6,618

)

Recoveries from tenants(2)

 

 

10,295

 

 

 

12,896

 

 

 

(2,601

)

Uncollectible revenue(3)

 

 

238

 

 

 

(858

)

 

 

1,096

 

Ancillary rental income

 

 

1,808

 

 

 

2,178

 

 

 

(370

)

Lease termination fees

 

 

85

 

 

 

500

 

 

 

(415

)

Total contractual lease payments

 

$

41,422

 

 

$

50,330

 

 

$

(8,908

)

 

(1)

The following tables present the statistics for the Company’s portfolio affecting base and percentage rental revenues:

 

Shopping Center Portfolio

March 31,

 

 

2021

 

 

2020

 

Centers owned

22

 

 

26

 

Aggregate occupancy rate

 

86.8

%

 

 

87.2

%

Average annualized base rent per occupied square foot

$

16.03

 

 

$

15.65

 

 

 

Continental U.S.

March 31,

 

 

Puerto Rico

March 31,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Centers owned

11

 

 

14

 

 

11

 

 

12

 

Aggregate occupancy rate

 

86.1

%

 

 

89.3

%

 

 

87.6

%

 

 

84.5

%

Average annualized base rent per occupied square

   foot

$

13.17

 

 

$

13.00

 

 

$

19.60

 

 

$

19.85

 

For the three months ended March 31, 2021, the decrease in base and percentage rental income primarily was due to property dispositions.  The decrease in the continental U.S. occupancy rate primarily was due to the disposition of higher

14

 


 

occupancy properties and a combination of tenant expirations and bankruptcies.  The increase in the occupancy rate for the Puerto Rico portfolio primarily was due to the disposition of a property with a lower occupancy, as well as new leasing activity in excess of lease expirations.  

 

(2)

Recoveries from Comparable Portfolio Properties were approximately 66.0% and 71.8% of reimbursable operating expenses and real estate taxes for the three months ended March 31, 2021 and 2020, respectively.  The overall decrease in the amount of recoveries from tenants related primarily to anchor renewal conversions to gross leases in Puerto Rico and the impact of the COVID-19 pandemic including both tenant expirations and bankruptcies in the continental U.S.  

 

(3)

Primarily relates to the impact of the COVID-19 pandemic on rent collections, including the impact of lease modification accounting and tenants on the cash basis of accounting due to collectability concerns.  For the three months ended March 31, 2021, the net amount reported was income primarily due to rental income paid in 2021 related to outstanding receivables in 2020 by tenants on the cash basis of accounting.

(B)

The changes in Total Revenues are composed of the following (in millions):

 

 

Continental U.S.

 

 

Puerto Rico

 

 

Total

 

Comparable Portfolio Properties

 

$

0.7

 

 

$

(0.8

)

 

$

(0.1

)

Disposition of shopping centers

 

 

(7.5

)

 

 

(1.3

)

 

 

(8.8

)

 

 

$

(6.8

)

 

$

(2.1

)

 

$

(8.9

)

Expenses from Operations (in thousands)

 

Three Months

 

 

 

 

 

 

Ended March 31,

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

Operating and maintenance(A)

$

9,607

 

 

$

11,062

 

 

$

(1,455

)

Real estate taxes(B)

 

4,266

 

 

 

5,719

 

 

 

(1,453

)

Property and asset management fees

 

4,035

 

 

 

4,876

 

 

 

(841

)

Impairment charges(C)

 

2,010

 

 

 

15,910

 

 

 

(13,900

)

General and administrative(D)

 

865

 

 

 

1,077

 

 

 

(212

)

Depreciation and amortization(E)

 

13,358

 

 

 

16,470

 

 

 

(3,112

)

 

$

34,141

 

 

$

55,114

 

 

$

(20,973

)

(A)

The changes in Operating and Maintenance are composed of the following (in millions):

 

 

Continental U.S.

 

 

Puerto Rico

 

 

Total

 

Comparable Portfolio Properties

 

$

(0.2

)

 

$

0.4

 

 

$

0.2

 

Disposition of shopping centers

 

 

(1.2

)

 

 

(0.5

)

 

 

(1.7

)

 

 

$

(1.4

)

 

$

(0.1

)

 

$

(1.5

)

(B)

The changes in Real Estate Taxes are composed of the following (in millions):

 

 

Continental U.S.

 

 

Puerto Rico

 

 

Total

 

Comparable Portfolio Properties

 

$

0.2

 

 

$

 

 

$

0.2

 

Disposition of shopping centers

 

 

(1.6

)

 

 

(0.1

)

 

 

(1.7

)

 

 

$

(1.4

)

 

$

(0.1

)

 

$

(1.5

)

(C)

The Company recorded impairment charges in 2021 and 2020 primarily related to shopping centers marketed for sale.  These impairments primarily were triggered by indicative bids received and changes in market assumptions due to the disposition process.  Changes in holding periods or an asset’s expected future undiscounted cash flows due to changes in market or leasing conditions (including as result of the COVID-19 pandemic) each could result in the recognition of additional impairment charges.  Impairment charges are presented in Note 7, “Impairment Charges,” to the Company’s consolidated financial statements included herein.

(D)

Primarily represents legal, audit, tax and compliance services and director compensation.  

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(E)

The disposition of shopping centers accounted for $3.1 million of the reduction in depreciation expense.

Other Income and Expenses (in thousands)

 

Three Months

 

 

 

 

 

 

Ended March 31,

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

Interest expense, net(A)

$

(3,991

)

 

$

(7,292

)

 

$

3,301

 

Debt extinguishment costs(B)

 

(130

)

 

 

(3,965

)

 

 

3,835

 

Other income, net

 

 

 

 

334

 

 

 

(334

)

Gain on disposition of real estate, net(C)

 

121

 

 

 

2,674

 

 

 

(2,553

)

Tax expense

 

(109

)

 

 

(73

)

 

 

(36

)

 

$

(4,109

)

 

$

(8,322

)

 

$

4,213

 

(A)

At March 31, 2021 and 2020, the interest rate of the Company’s mortgage loan was 4.2% and 3.8% per annum, respectively.  The decrease in interest expense was primarily due to reductions in the amount of debt outstanding.

(B)

Debt extinguishment costs were incurred in both years in connection with the prepayment of the mortgage loan with asset sale proceeds primarily related to the write-off of unamortized deferred financing costs.  

(C)

Related to the sale of three assets for the three months ended March 31, 2020.  

Net Income (Loss) (in thousands)

 

Three Months

 

 

 

 

 

 

Ended March 31,

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

Net income (loss)

$

3,209

 

 

$

(13,067

)

 

$

16,276

 

The increase in net income primarily was attributable to a reduction in interest expense and debt extinguishment costs, lower impairment charges and payments of 2020 rental income by cash basis tenants partially offset by the impact of 2020 asset sales.

NON-GAAP FINANCIAL MEASURES

Funds from Operations and Operating Funds from Operations

Definition and Basis of Presentation

The Company believes that Funds from Operations, or FFO, and Operating FFO, both non-GAAP financial measures, provide additional and useful means to assess the financial performance of REITs.  FFO and Operating FFO are frequently used by the real estate industry, as well as securities analysts, investors and other interested parties, to evaluate the performance of REITs.  The Company also believes that FFO and Operating FFO more appropriately measure the core operations of the Company and provide benchmarks to its peer group.

FFO excludes GAAP historical cost depreciation and amortization of real estate and real estate investments, which assume that the value of real estate assets diminishes ratably over time.  Historically, however, real estate values have risen or fallen with market conditions, and many companies use different depreciable lives and methods.  Because FFO excludes depreciation and amortization unique to real estate and gains and losses from property dispositions, it can provide a performance measure that, when compared year over year, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, interest costs and acquisition, disposition and development activities.  This provides a perspective of the Company’s financial performance not immediately apparent from net income determined in accordance with GAAP.

FFO is generally defined and calculated by the Company as net income (loss) (computed in accordance with GAAP), adjusted to exclude (i) gains and losses from disposition of real estate property and related investments, which are presented net of taxes, if any, (ii) impairment charges on real estate property and related investments and (iii) certain non-cash items.  These non-cash items principally include real property depreciation and amortization of intangibles.  The Company’s calculation of FFO is consistent with the definition of FFO provided by NAREIT.

16

 


 

The Company believes that certain charges and income recorded in its operating results are not comparable or reflective of its core operating performance.  Operating FFO is useful to investors as the Company removes non-comparable charges and income to analyze the results of its operations and assess performance of the core operating real estate portfolio.  As a result, the Company also computes Operating FFO and discusses it with the users of its financial statements, in addition to other measures such as net income (loss) determined in accordance with GAAP and FFO.  Operating FFO is generally defined and calculated by the Company as FFO excluding certain charges and gains that management believes are not comparable and indicative of the results of the Company’s operating real estate portfolio.  Such adjustments include gains/losses on the early extinguishment of debt, net hurricane-related activity, transaction costs and other restructuring type costs.  The disclosure of these charges and income is generally requested by users of the Company’s financial statements.  

The adjustment for these charges and income may not be comparable to how other REITs or real estate companies calculate their results of operations, and the Company’s calculation of Operating FFO differs from NAREIT’s definition of FFO.  Additionally, the Company provides no assurances that these charges and income are non-recurring.  These charges and income could be reasonably expected to recur in future results of operations.

These measures of performance are used by the Company for several business purposes and by other REITs.  The Company uses FFO and/or Operating FFO in part (i) as a disclosure to improve the understanding of the Company’s operating results among the investing public, (ii) as a measure of a real estate asset’s performance and (iii) to compare the Company’s performance to that of other publicly traded shopping center REITs.

For the reasons described above, management believes that FFO and Operating FFO provide the Company and investors with an important indicator of the Company’s operating performance.  They provide recognized measures of performance other than GAAP net income, which may include non-cash items (often significant).  Other real estate companies may calculate FFO and Operating FFO in a different manner.

The Company’s management recognizes the limitations of FFO and Operating FFO when compared to GAAP’s net income.  FFO and Operating FFO do not represent amounts available for dividends, capital replacement or expansion, debt service obligations or other commitments and uncertainties.  The Company’s management does not use FFO or Operating FFO as an indicator of the Company’s cash obligations and funding requirements for future commitments or redevelopment activities.  Neither FFO nor Operating FFO represents cash generated from operating activities in accordance with GAAP, and neither is necessarily indicative of cash available to fund cash needs.  Neither FFO nor Operating FFO should be considered an alternative to net income (computed in accordance with GAAP) or as an alternative to cash flow as a measure of liquidity.  FFO and Operating FFO are simply used as additional indicators of the Company’s operating performance.  The Company believes that to further understand its performance, FFO and Operating FFO should be compared with the Company’s reported net income (loss) and considered in addition to cash flows determined in accordance with GAAP, as presented in its consolidated financial statements.  Reconciliations of these measures to their most directly comparable GAAP measure of net income (loss) have been provided below.

Reconciliation Presentation

FFO and Operating FFO were as follows (in thousands):

 

Three Months

 

 

 

 

 

 

Ended March 31,

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

FFO

$

18,439

 

 

$

16,622

 

 

$

1,817

 

Operating FFO

 

18,569

 

 

 

20,253

 

 

 

(1,684

)

The increase in FFO primarily was due to the decrease in interest expense and debt extinguishment costs partially offset by the impact from the disposition of assets, as well as payments of 2020 rental income by cash basis tenants.  The change in Operating FFO primarily was due to the same factors impacting FFO, except that the exclusion of debt extinguishments costs in 2020 resulted in an overall decrease of Operating FFO.

17

 


 

The Company’s reconciliation of net income (loss) to FFO and Operating FFO is as follows (in thousands).  The Company provides no assurances that these charges and income adjusted in the calculation of Operating FFO are non-recurring.  These charges and income could reasonably be expected to recur in future results of operations.

 

Three Months

 

 

Ended March 31,

 

 

2021

 

 

2020

 

Net income (loss)

$

3,209

 

 

$

(13,067

)

Depreciation and amortization of real estate investments

 

13,341

 

 

 

16,453

 

Impairment of real estate assets

 

2,010

 

 

 

15,910

 

Gain on disposition of real estate

 

(121

)

 

 

(2,674

)

FFO

 

18,439

 

 

 

16,622

 

Debt extinguishment and other expenses

 

130

 

 

 

3,631

 

Non-operating items, net

 

130

 

 

 

3,631

 

Operating FFO

$

18,569

 

 

$

20,253

 

 

LIQUIDITY, CAPITAL RESOURCES AND FINANCING ACTIVITIES

The Company requires capital to fund its operating expenses, capital expenditures and investment activities.  Absent the occurrence of an Amortization Period (as described below), the Company’s capital sources may include cash flow from operations, as well as availability under its Revolving Credit Agreement (as defined below).

Although the Company has experienced a reduction in timely collections of rent and delays in the execution of its disposition strategy as a result of the impacts of the COVID-19 pandemic, the Company witnessed continued improvement in rent collections and transaction markets during the first quarter of 2021 and believes that it has sufficient liquidity and capital resources to operate its business for at least the next twelve months.  At March 31, 2021, the Company had an unrestricted cash balance of $72.7 million, restricted cash on deposit with its mortgage lender of $63.6 million and $30.0 million of availability under its Revolving Credit Agreement (subject to satisfaction of applicable borrowing conditions). Debt outstanding was $303.0 million at March 31, 2021. In April 2021, a $23.6 million repayment on the mortgage loan was made from the use of net proceeds from an asset sale consummated in early April 2021 along with unrestricted cash on hand (Note 11). The Company’s mortgage loan generally requires interest-only payments subject to maintenance of a minimum debt yield and has a maturity date of March 9, 2022 with two remaining one-year extensions at the Company’s option based on the satisfaction of certain conditions.  Subject to the uncertain impact of the COVID-19 pandemic on capital and transactions markets, the Company expects to utilize net asset sale proceeds to repay the principal of the mortgage loan and may utilize one or both of the loan’s remaining extension options. No assurance can be provided that obligations, including the mortgage loan, will be repaid, extended or refinanced as currently anticipated. Apart from capital expenditures deemed advisable in connection with the maintenance and leasing of its properties, and the completion of restoration work in Puerto Rico, the Company does not anticipate any material capital projects or development spending during the remainder of 2021.

Mortgage Indebtedness

As of March 31, 2021, the aggregate principal amount of the mortgage loan was $303.0 million.  In April 2021, a $23.6 million repayment on the mortgage loan was made from the use of net proceeds from an asset sale consummated in early April 2021 along with unrestricted cash on hand (Note 11). A majority of the net sale proceeds of approximately $24.9 million from three additional asset sales consummated in April 2021 will be used to repay the mortgage loan in May 2021.  On March 9, 2021, the Company exercised its first one-year extension option under the loan agreement to extend the maturity date to March 9, 2022, subject to two remaining one-year extensions at the borrowers’ option conditioned upon, among other items, (i) an event of default shall not be continuing, (ii) in the case of the second one-year extension option (exercisable March 2022), in addition to (i) above, evidence that the Debt Yield (as defined and calculated in accordance with the loan agreement) equals or exceeds 13% and (iii) in the case of the third one-year extension option (exercisable March 2023), in addition to (i) above, evidence that the Debt Yield equals or exceeds 14% on the extension date.  The Debt Yield as of March 31, 2021, was 18.29%.  

As of March 31, 2021, the interest rate applicable to the notes was equal to one-month LIBOR plus a weighted-average spread of 4.1% per annum, provided that such spread is subject to an increase of 0.25% per annum in connection with any exercise of the third extension option.  The borrowers are required to maintain an interest rate cap with respect to the principal amount of the notes having (i) during the initial two-year term of the loan, a LIBOR strike rate equal to 4.5%, (ii) during the initial one-year extension period, a LIBOR strike rate equal to 9.27% and (iii) with respect to any subsequent extension period, a LIBOR strike rate that would result in a debt service coverage ratio of 1.20x based on the Mortgaged Properties (as defined below).  Application of voluntary

18

 


 

prepayments as described below will cause the weighted-average interest rate spread to increase over time as senior tranches of the mortgage debt are repaid first.  At March 31, 2021, the interest rate applicable to the mortgage loan was 4.2%.  

The borrowers’ obligations to pay principal, interest and other amounts under the mortgage loan are evidenced by certain promissory notes executed by the borrowers, referred to collectively as the notes, which are secured by, among other things: (i) mortgages encumbering the borrowers’ properties located in the continental U.S. (which comprise substantially all of the Company’s properties located in the continental U.S.) and Plaza del Sol located in Bayamon, Puerto Rico (collectively, the “Mortgaged Properties”); (ii) a pledge of the equity of the Company’s subsidiaries that own each of the Company’s properties located in Puerto Rico (collectively, the “Pledged Properties”) and a pledge of related rents and other cash flows, insurance proceeds and condemnation awards and (iii) a pledge of any reserves and accounts of any borrower.  The originating lenders placed the notes into a securitization trust that issued and sold mortgage-backed securities to investors.

The loan facility is structured as an interest only loan throughout the initial two-year term and any exercised extension options.  As a result, so long as no Amortization Period (as described below) or event of default exists, any property cash flows available following payment of debt service and funding of certain required reserve accounts (including reserves for payment of real estate taxes, insurance premiums, ground rents, tenant improvements and capital expenditures) will be available to the borrowers to pay operating expenses and for other general corporate purposes.  An Amortization Period will be deemed to commence in the event the borrowers fail to achieve a Debt Yield of 10.0% at the end of any fiscal quarter.  The Debt Yield as of March 31, 2021, was 18.29%.  During the pendency of an Amortization Period, any property cash flows available following payment of debt service and the funding of certain reserve accounts (including the reserve accounts referenced above and additional reserves established for payment of approved operating expenses, SITE Centers management fees, certain public company costs, certain taxes and the minimum cash portion of required REIT distributions) shall be applied to the repayment of the notes.  During an Amortization Period, cash flow from the borrowers’ operations will be made available to the Company only to pay required REIT distributions in an amount equal to the minimum portion of required REIT distributions allowed by law to be paid in cash (currently 10% for distributions declared in 2020, otherwise limited to 20%), with the remainder of required REIT distributions during an Amortization Period likely to be paid in common shares of the Company.

Subject to certain conditions described in the mortgage loan agreement, the borrowers may prepay principal amounts outstanding under the loan facility in whole or in part, without premium or penalty, by providing advance notice of prepayment to the lenders. The borrowers are required to use certain proceeds from permitted asset sales to prepay principal amounts outstanding under the loan facility.  Each Mortgaged Property has a portion of the original principal amount of the mortgage loan allocated to it.  The amount of proceeds from the sale of an individual Mortgaged Property required to be applied toward prepayment of the notes (i.e., the property’s “release price”) will depend upon the principal amount of the mortgage loan allocated to it and the Debt Yield at the time of the sale as follows:

 

if the Debt Yield is less than or equal to 14.0%, the release price is the greater of (i) 100% of the property’s net sale proceeds and (ii) 110% of its allocated loan amount and

 

 

if the Debt Yield is greater than 14.0%, the release price is the greater of (i) 90% of the property’s net sale proceeds and (ii) 105% of its allocated loan amount.

To the extent the net cash proceeds from the sale of a Mortgaged Property that are applied to repay the mortgage loan exceed the amount specified in applicable clause (ii) above with respect to such property, the excess may be applied by the Company as a credit against the release price applicable to future sales of Mortgaged Properties.  To the extent that net cash proceeds from the sale of a Mortgaged Property are less than the amount specified in the applicable clause (ii) above, the Company would be required to utilize credits from previous sales or cash on hand to satisfy the release price applicable to that property. Pledged Properties other than Plaza del Sol do not have allocated loan amounts or, in general, minimum release prices; all proceeds from sales of Pledged Properties are required to be used to prepay the notes.  

Voluntary prepayments made by the borrowers (including prepayments made with proceeds from asset sales and prepayments made with property cash flows following commencement of any Amortization Period) will be applied to tranches of notes (i) absent an event of default, in descending order of seniority (i.e., such prepayments will first be applied to the most senior tranches of notes) and (ii) following any event of default, in such order as the loan servicer determines in its sole discretion.  As a result, the Company expects that the weighted-average interest rate spread applicable to the notes will increase during the term of the loan facility.

In the event of a default, the contract rate of interest on the notes will increase to the lesser of (i) the maximum rate allowed by law or (ii) the greater of (A) 4% above the interest rate otherwise applicable and (B) the Prime Rate (as defined in the mortgage loan) plus 1.0%.  The notes contain other terms and provisions that are customary for instruments of this nature.  In addition, the Company

19

 


 

executed a certain environmental indemnity agreement and a certain guaranty agreement in favor of the lenders under which the Company agreed to indemnify the lenders for certain environmental risks and guarantee the borrowers’ obligations under the exceptions to the non-recourse provisions in the mortgage loan agreement.  The mortgage loan agreement includes representations, warranties, affirmative and restrictive covenants and other provisions customary for agreements of this nature.  The mortgage loan agreement also includes customary events of default, including, among others, principal and interest payment defaults and breaches of affirmative or negative covenants; the mortgage loan agreement does not contain any financial maintenance covenants.  Upon the occurrence of an event of default, the lenders may avail themselves of various customary remedies under the loan agreement and other agreements executed in connection therewith or applicable law, including accelerating the loan facility and realizing on the real property collateral or pledged collateral.

Credit Agreement

In July 2018, the Company entered into a Credit Agreement (the “Revolving Credit Agreement”) with PNC Bank, National Association (“PNC”) that was amended and extended in February 2021.  The Revolving Credit Agreement provides for borrowings of up to $30.0 million.  The Company’s borrowings under the Revolving Credit Agreement bear interest at variable rates at the Company’s election, based on either (i) LIBOR plus a specified spread ranging from 1.30% to 1.75% depending on the Company’s Leverage Ratio (as defined in the Revolving Credit Agreement) or (ii) the Alternate Base Rate (as defined in the Revolving Credit Agreement) plus a specified spread ranging from 0.30% to 0.75% depending on the Company’s Leverage Ratio.  The Company is also required to pay a facility fee on the aggregate revolving commitments at a rate per annum that ranges from 0.15% to 0.30% depending on the Company’s Leverage Ratio.

The Revolving Credit Agreement matures on the earliest to occur of (i) February 9, 2022, (ii) the date on which the External Management Agreement is terminated, (iii) the date on which DDR Asset Management, LLC or another wholly-owned subsidiary of SITE Centers ceases to be the “Service Provider” under the External Management Agreement as a result of assignment or operation of law or otherwise and (iv) the date on which the principal amount outstanding under the Company’s $900 million mortgage loan is repaid or refinanced.

The Revolving Credit Agreement contains customary affirmative and negative covenants, including a requirement to maintain tangible net worth of $400 million.  Upon the occurrence of certain customary events of default, the Company’s obligations under the Revolving Credit Agreement may be accelerated and the lending commitments thereunder terminated.  The Company may not borrow under the Revolving Credit Agreement, and a Default (as defined therein) occurs under the Revolving Credit Agreement, if there is a “Default” under SITE Centers’ corporate credit facility with JPMorgan Chase Bank, N.A., SITE Centers’ corporate credit facility with Wells Fargo Bank, National Association or SITE Centers’ corporate credit facility with PNC.  Additionally, the Company may not borrow under the Revolving Credit Agreement if there is a “Default” under the Revolving Credit Agreement or an “Event of Default” under the Company’s mortgage loan, if the External Management Agreement is no longer in full force and effect or if the Company has delivered or received a notice of termination or a notice of default under the External Management Agreement.

The Company’s obligations under the Revolving Credit Agreement are guaranteed by SITE Centers in favor of PNC.  In consideration thereof, the Company has agreed to pay to SITE Centers the following amounts: (i) an annual guaranty commitment fee of 0.20% of the aggregate commitments under the Revolving Credit Agreement, (ii) for all times other than those referenced in clause (iii) below, when any amounts are outstanding under the Revolving Credit Agreement, an amount equal to 5.00% per annum times the average aggregate outstanding daily principal amount of such loans plus the aggregate stated average daily amount of outstanding letters of credit and (iii) in the event SITE Centers pays any amounts to PNC pursuant to SITE Centers’ guaranty and the Company fails to reimburse SITE Centers for such amount within three business days, an amount in cash equal to the amount of such paid obligations plus default interest, which will accrue from the date of such payment by SITE Centers until repaid by the Company at a rate per annum generally equal to the sum of the LIBOR rate (or other applicable benchmark rate) plus 8.75%.  

Series A Preferred Stock

In connection with the Company’s separation from SITE Centers, the Company issued the RVI Preferred Shares to SITE Centers that are noncumulative and have no mandatory dividend rate.  The RVI Preferred Shares rank, with respect to dividend rights and rights upon liquidation, dissolution or winding up of the Company, senior in preference and priority to the Company’s common shares and any other class or series of the Company’s capital stock.  Subject to the requirement that the Company distribute to its common shareholders the minimum amount required to be distributed with respect to any taxable year in order for the Company to maintain its status as a REIT and to avoid U.S. federal income taxes, the RVI Preferred Shares will be entitled to a dividend preference for all dividends declared on the Company’s capital stock at any time up to a “preference amount” equal to $190 million in the aggregate, which amount may increase by up to an additional $10 million if the aggregate gross proceeds of the Company’s asset sales subsequent to July 1, 2018 exceed $2.0 billion.  Notwithstanding the foregoing, the RVI Preferred Shares are entitled to receive dividends only when, as and if declared by the Company’s Board of Directors, and the Company’s ability to pay dividends is subject

20

 


 

to any restrictions set forth in the terms of its indebtedness.  Upon payment to SITE Centers of aggregate dividends on the RVI Preferred Shares equaling the maximum preference amount of $200 million, the RVI Preferred Shares are required to be redeemed by the Company for $1.00 per share.

Subject to the terms of any of the Company’s indebtedness and unless prohibited by Ohio law governing distributions to stockholders, the RVI Preferred Shares must be redeemed upon (i) the Company’s failure to maintain its status as a REIT, (ii) any failure by the Company to comply with the terms of the RVI Preferred Shares or (iii) the consummation of any transaction (including, without limitation, any merger or consolidation), the result of which is that the Company sells, assigns, transfers, conveys or otherwise disposes of all or substantially all of its properties or assets, in one or more related transactions, to any person or entity, or any person or entity, directly or indirectly, becomes the beneficial owner of 40% or more of the Company’s common shares, measured by voting power.  The RVI Preferred Shares also contain restrictions on the Company’s ability to invest in joint ventures, acquire assets or properties, develop or redevelop real estate or make loans or advances to third parties.

The Company may redeem the RVI Preferred Shares, or any part thereof, at any time at a price payable per share calculated by dividing the number of RVI Preferred Shares outstanding on the redemption date into the difference of (x) $200 million minus (y) the aggregate amount of dividends previously distributed on the RVI Preferred Shares to be redeemed.  As of April 30, 2021, no dividends have been paid on the RVI Preferred Shares.

Common Share Dividends

The Company’s 2020 dividend was paid on January 12, 2021, in a combination of cash and the Company’s common shares.  See Note 9, “Earnings Per Share,” of the Company’s consolidated financial statements included herein.  

Distributions of Puerto Rico sourced net taxable income to Company shareholders are subject to a 10% Puerto Rico withholding tax.  In 2018, the Company entered into a closing agreement with the Puerto Rico Department of Treasury which provides that the Company will be exempt from Puerto Rico income taxes so long as it qualifies as a REIT in the U.S. and distributes at least 90% of its Puerto Rico net taxable income to its shareholders every year.  As such, in 2020, the Company’s Board of Directors declared common share dividends, subject to a 10% withholding tax, on account of taxable income generated in Puerto Rico in those years.  The amount of the 2020 dividend is expected to exceed the amount of REIT taxable income generated by the Company in 2020.  Accordingly, federal income taxes were not incurred by the Company in 2020.

Dividend Distributions

The Company anticipates making distributions to holders of its common shares to satisfy the requirements to qualify as a REIT and generally not be subject to U.S. federal income and excise tax (other than with respect to operations conducted through the Company’s taxable REIT subsidiary).  U.S. federal income tax law generally requires that a REIT distribute annually to holders of its capital stock at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its REIT taxable income.  The Company generally intends to make distributions with respect to each taxable year in an amount at least equal to its REIT taxable income for such taxable year.  The Company also anticipates making future distributions to holders of its common shares in order to satisfy the requirements of its closing agreement with the Puerto Rico Department of Treasury in order to be exempt from Puerto Rico income taxes.  Although the Company expects to declare and pay distributions on or around the end of each calendar year, the Company’s Board of Directors will evaluate its dividend policy regularly, particularly in light of the current and potential impacts of the COVID-19 pandemic.

To the extent that cash available for future distributions is less than the Company’s REIT taxable income or its taxable income generated in Puerto Rico, or if amortization requirements commence with respect to the terms of the mortgage loan, or if the Company determines it is advisable for other reasons, the Company may make a portion of its distributions in the form of common shares, and any such distribution of common shares may be taxable as a dividend to shareholders.  The Company may also distribute debt or other securities in the future, which also may be taxable as a dividend to shareholders.

Any distributions the Company makes to its shareholders will be at the discretion of the Company’s Board of Directors and will depend upon, among other things, the Company’s actual and anticipated results of operations and liquidity, which will be affected by various factors, including the income from its portfolio, its operating expenses (including management fees and other obligations owing to SITE Centers), as well as gains and losses relating to the sale of assets, and the terms of the mortgage financing and the limitations set forth in the mortgage loan agreements.  Distributions will also be impacted by the pace and success of the Company’s property disposition strategy.  As a result of the terms of the mortgage financing, the Company anticipates that the majority of distributions of sales proceeds to be made to shareholders will not occur until after the mortgage loan has been repaid or refinanced.  Furthermore, subject to the Company’s ability to make distributions to the holders of the Company’s common shares in amounts necessary to maintain its status as a REIT and to avoid payment of U.S. federal income taxes, the RVI Preferred Shares will be entitled

21

 


 

to a dividend preference for all dividends declared on the Company’s capital stock, at any time up to the preference amount.  Subsequent to the payment of dividends on the RVI Preferred Shares equaling the maximum preference amount of $200 million, the RVI Preferred Shares are required to be redeemed by the Company for an aggregate amount of $1.00 per share.  Due to the dividend preference of the RVI Preferred Shares, distributions of sales proceeds to holders of common shares are unlikely to occur until after aggregate dividends have been paid on the RVI Preferred Shares in an amount equal to the preference amount.  At this time, the Company cannot predict when or if it will declare dividends to the holders of RVI Preferred Shares and when or if such dividends, if paid, will equal the preference amount or the maximum preference amount.  

Dispositions

In April 2021, the Company sold four shopping centers, in separate transactions, aggregating 0.9 million square feet, for an aggregate gross sales price of $38.9 million.

Cash Flow Activity

The Company’s cash flow activities are summarized as follows (in thousands):  

 

Three Months

 

 

Ended March 31,

 

 

2021

 

 

2020

 

Cash flow provided by operating activities

$

22,451

 

 

$

15,223

 

Cash flow (used for) provided by investing activities

 

(3,317

)

 

 

140,672

 

Cash flow used for financing activities

 

(55,624

)

 

 

(165,554

)

Changes in cash flow compared to the prior comparable period are described as follows:

Operating Activities: Cash provided by operating activities increased $7.2 million primarily due to the following:

 

Timing and increase in cash collected from tenants;

 

Reduction of interest payments and

 

Decrease in operating income due to asset sales.

Investing Activities:  Cash provided by investing activities decreased $144.0 million primarily due to the following:

 

Decrease in proceeds from dispositions of real estate of $146.8 million and

 

Decrease in payments for real estate improvements of $2.8 million.

Financing Activities:  Cash used for financing activities decreased by $109.9 million primarily due to the following:

 

Decrease in debt repayments of $103.4 million and

 

Decrease in dividends paid of $6.6 million.

CAPITALIZATION

At March 31, 2021, the Company’s capitalization consisted of $303.0 million of mortgage debt, $190.0 million of RVI Preferred Shares and $394.5 million of market equity (market equity is defined as common shares outstanding multiplied by $18.71, the closing price of the Company’s common shares on the New York Stock Exchange at March 31, 2021), resulting in a debt to total market capitalization ratio of 0.34 to 1.0, as compared to the ratio of 0.55 to 1.0 at March 31, 2020.  The closing price of the Company’s shares on the New York Stock Exchange was $12.25 at March 31, 2020.

CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS

The Company had aggregate outstanding mortgage indebtedness of $303.0 million at March 31, 2021 with a maturity of March 2022, subject to two one-year extension options.  In April 2021, a $23.6 million repayment on the mortgage loan was made from the use of net proceeds from an asset sale consummated in early April 2021 along with unrestricted cash on hand.  In addition, the Company has two long-term ground leases in which it is the lessee.  

SITE Centers Guaranty

On July 2, 2018, SITE Centers provided an unconditional guaranty to PNC with respect to any obligations outstanding from time to time under the Company’s Revolving Credit Agreement.  In connection with this arrangement, the Company has agreed to pay to SITE Centers a guaranty commitment fee of 0.20% per annum on the committed amount of the Revolving Credit Agreement and a

22

 


 

fee equal to 5.00% per annum on any amounts drawn by the Company under the Revolving Credit Agreement.  In the event SITE Centers pays any of the Company’s obligations on the Revolving Credit Agreement and the Company fails to reimburse such amount within three business days, the guaranty provides for default interest that accrues at a rate generally equal to the sum of the LIBOR rate (or other applicable benchmark rate) plus 8.75% per annum. SITE Centers continued to provide the guaranty in connection with the February 2021 extension of the Revolving Credit Agreement’s maturity date to February 9, 2022.

Other Commitments

The Company has entered into agreements with general contractors related to its shopping centers having aggregate commitments of approximately $1.5 million at March 31, 2021.  These obligations, composed principally of construction contracts for the repair of the Puerto Rico properties, are generally due within 12 to 24 months, as the related construction costs are incurred, and are expected to be financed through operating cash flow.  These contracts typically can be changed or terminated without penalty.  

The Company routinely enters into contracts for the maintenance of its properties.  These contracts typically can be canceled upon 30 to 60 days’ notice without penalty.  At March 31, 2021, the Company had purchase order obligations, typically payable within one year, aggregating approximately $0.7 million related to the maintenance of its properties and general and administrative expenses.

Hurricane Loss

In 2017, Hurricane Maria made landfall in Puerto Rico and the Company’s 12 assets in Puerto Rico, aggregating 4.4 million square feet of Company-owned GLA, were significantly impacted.  As of March 31, 2021, the Company had expended approximately $126 million in connection with repairing property damage caused by the hurricane.  Included in restricted cash at March 31, 2021 are the remaining property damage settlement proceeds of $30.7 million along with other related hurricane reserves required by the mortgage lender of $6.5 million aggregating $37.2 million. The Company estimates that it will incur between $5 million and $7 million to complete its restoration efforts subject to the mortgage lender’s satisfaction that all necessary restoration work has been completed.  The Company anticipates that the repair and restoration work will be substantially complete in mid-2021, the timing of which has been delayed by the impact of the COVID-19 pandemic.  The timing and schedule of additional repair work to be completed are highly dependent upon any changes in the scope of work, the availability of building materials, supplies and skilled labor. In addition, the timing of completing the remaining repair work could be delayed by any additional stay-at-home directives or temporary closures of non-essential businesses as a result of the impacts of the COVID-19 pandemic.

ECONOMIC CONDITIONS

Portfolio Composition and Retail Environment. Though leasing prospects are heavily dependent on local conditions, in general, the Company saw continued demand from tenants for its continental U.S. space during January and February of 2020 before uncertainty and tenant concern around the COVID-19 pandemic caused a slow-down in lease activity from March 2020 through March 31, 2021.  The Company’s portfolio has a diversified tenant base, with only two tenants whose annualized rental revenue equals or exceeds 3% of the Company’s annualized revenues at March 31, 2021 (Walmart/Sam’s Club at 5.4% and PetSmart at 3.5%).  Other significant tenants include TJX Companies (T.J. Maxx, Marshalls and HomeGoods), Bed Bath & Beyond and Best Buy.  All of these tenants have relatively strong financial positions, having outperformed other retail categories on a relative basis over time, and the Company believes they remain well capitalized. Historically, these tenants have provided a stable revenue base, and the Company believes that they will continue doing so going forward, given the long-term nature of these leases. Moreover, the majority of the tenants in the Company’s continental U.S. shopping centers provide day-to-day consumer necessities with a focus on value, convenience and service, which the Company believes will enable many of its tenants to succeed under a variety of economic conditions.  The Company recognizes the risks posed by current economic conditions but believes that the diversity of its properties and the credit quality of its tenant base should enable it to navigate through a potentially challenging economic environment.

The shopping center portfolio’s occupancy was 86.8% and 87.2% at March 31, 2021 and 2020, respectively.  The net decrease in the rate primarily was attributed to the sale of assets having higher occupancy rates and a combination of tenant expirations and bankruptcies.  The total portfolio average annualized base rent per occupied square foot was $16.03 at March 31, 2021, as compared to $15.65 at March 31, 2020.  

At March 31, 2021, the Company owned 11 assets on the island of Puerto Rico (including five enclosed malls) aggregating 3.9 million square feet, representing 46% of Company-owned GLA and approximately 56% of the Company’s total consolidated revenue and approximately 54% of the Company’s total consolidated revenue less operating expenses (i.e., net operating income) for the three months ended March 31, 2021.  The Company believes that the tenants at its Puerto Rico properties (many of which are high-quality continental U.S. retailers, such as Walmart/Sam’s Club and the TJX Companies (T.J. Maxx and Marshalls)) typically cater to the local consumer’s desire for value, convenience and day-to-day necessities.  However, new demand for space at the Puerto Rico properties has been more limited, especially with respect to big-box and national tenants as many of those tenants continue to evaluate their

23

 


 

presence and operating plans on the Island.  Limited leasing demand may continue to put pressure on leasing spreads on both new leases and renewals as the Company seeks to prioritize occupancy over rental rate growth.  There is continued concern about the strength of the Puerto Rican economy, the ability of the government of Puerto Rico to meet its financial obligations and the impact of the territory’s ongoing bankruptcy and debt restructuring process on the economy of Puerto Rico, which may further adversely impact retail tenants’ interest in maintaining or expanding their operations in Puerto Rico.  The impact of Hurricane Maria in Puerto Rico further exacerbated these concerns.  

The retail sector continues to be affected by increasing competition, including the impact of e-commerce.  These dynamics are expected to continue to lead to tenant bankruptcies, closures and store downsizing.  Some conventional department stores and national chains have announced bankruptcies, store closures and/or reduced expansion plans in recent years leading to a smaller overall number of tenants requiring large store formats. The loss of a tenant or downsizing of space can adversely affect the Company.  In addition to the impacts of increased competition, e-commerce and adverse conditions in Puerto Rico, beginning in March 2020, the retail sector in both the continental U.S. and Puerto Rico has been significantly impacted by the COVID-19 pandemic. Though the impact of the COVID-19 pandemic on tenant operations has varied by tenant category, local conditions and applicable government mandates, a significant number of the Company’s tenants have experienced a reduction in sales and foot traffic, and many tenants were forced to limit their operations or close their businesses for a period of time.  As of April 23, 2021, approximately 99% of the Company’s tenants (based on average base rents) were open for business, up from a low of approximately 34% in early April 2020.  Tenant operations in Puerto Rico have been particularly impacted by local government mandates and operating restrictions.  Malls and nonessential businesses at outdoor shopping centers were forced to close from mid-March until early June of 2020 and gyms and movie theatres remained subject to mandatory closure orders until mid-September 2020. Malls and shopping centers in Puerto Rico remained subject to significant operating restrictions during the first quarter of 2021 and concerns regarding increases in local COVID-19 infection levels caused the Puerto Rico government to re-tighten store capacity restrictions and curfews in mid-April 2021. These restrictions are expected to continue to challenge tenant revenues, rent collections and the overall leasing environment in Puerto Rico.

The COVID-19 pandemic had no impact on the Company’s collection of rents for the first quarter of 2020, but it had a significant impact on collection of rents for April 2020 through March 31, 2021.  The Company’s collection rates showed improvement in the second half of 2020 and continuing into the first quarter of 2021.  A majority of tenants, including tenants previously on the cash basis of accounting, have resumed repaying their monthly rent and are repaying deferred rents from prior periods.  As of April 23, 2021, the Company’s quarterly rent payment rates for assets owned as of March 31, 2021, are as follows:

 

 

Second Quarter

2020

 

 

Third Quarter

2020

 

 

Fourth Quarter

2020

 

 

First Quarter

2021

 

Continental U.S.

 

87%

 

 

92%

 

 

96%

 

 

98%

 

Puerto Rico

 

80%

 

 

90%

 

 

92%

 

 

94%

 

The Company calculates the aggregate percentage of rents paid for assets owned as of March 31, 2021, by comparing the amount of tenant payments received as of the date presented to the amount billed to tenants during the period, which billed amount includes abated rents, rents subject to deferral arrangements and rents owing from bankrupt tenants that were in possession of the space and billed.  For purposes of reporting the percentage of aggregate base rents collected for a given period, when rents subject to deferral arrangements are later paid, those payments are allocated to the period in which the rent was originally owed.  

The Company continues to evaluate its options with respect to tenants with whom the Company has not reached satisfactory resolution of unpaid rents and has commenced collection actions against several tenants.  In addition, the Company has engaged in discussions with most of its larger tenants that failed to satisfy all or a portion of their rent obligations during 2020 and the first quarter of 2021 and has agreed to terms with a significant number of such tenants. These arrangements have generally taken the form of rent deferrals and, in circumstances where tenants have agreed to extend lease terms or make other material concessions, rent abatements (especially in Puerto Rico).  As of April 23, 2021, agreed-upon rent-deferral and abatement arrangements relating to 2020 and 2021 base rents that remain unpaid for assets owned as of March 31, 2021, represented the following percentages:

 

 

Second Quarter

2020

 

 

Third Quarter

2020

 

 

Fourth Quarter

2020

 

 

First Quarter

2021

 

Continental U.S.

 

5%

 

 

3%

 

 

1%

 

 

0%

 

Puerto Rico

 

6%

 

 

2%

 

 

2%

 

 

0%

 

A majority of rent deferral arrangements are obligated to be repaid by year-end 2021.

While the Company is unable to forecast the resolution of unpaid rents, the level of rent collections in subsequent periods or the duration of the disruption to tenant and Company operations caused by the COVID-19 pandemic, the Company witnessed an improvement in the level and pace of tenant collections in late 2020, which continued during the first quarter of 2021. However, any

24

 


 

increases in infection levels, the discovery of new COVID-19 variants or delays in the acceptance, administration or effectiveness of vaccines could lead to new restrictions on tenant operations, nonpayment of contractual and previously deferred rents, additional tenant requests for rent relief and additional tenant closures and bankruptcies, all of which could adversely impact the Company’s results of operations in the future. Certain tenant categories remain especially vulnerable to the impacts of the COVID-19 pandemic, including movie theaters, restaurants and entertainment.

Disposition Outlook. In addition to its goal of maximizing cash flow from property operations, the Company seeks to realize value through the regular sale of assets to a variety of buyers.  In recent years, the market upon which this aspect of the business plan relies has been characterized as liquid but fragmented, with a wide range of generally small, non-institutional investors.  While some investors do not require debt financing, many seek to capitalize on leveraged returns using mortgage financing at interest rates well below the initial asset-level returns implied by disposition prices.  In addition to small, often local buyers, the Company also plans to transact with mid-sized institutional investors, some of which are domestic and foreign publicly traded companies.  Many larger domestic institutions, such as pension funds and insurance companies that were traditionally large buyers of retail real estate assets, have generally become less active participants in retail transaction markets over the last several years.  Lower participation of institutions and a generally smaller overall buyer pool has resulted in some level of pressure on asset prices, particularly for larger properties, though this impact remains highly heterogeneous and varies widely by market and specific assets.  Prices for retail real estate in Puerto Rico (especially enclosed malls) remain highly uncertain due to local economic conditions and extremely limited transaction activity since Hurricane Maria.

The COVID-19 pandemic created uncertainty and delays with respect to the Company’s execution of the disposition portion of its business plan as many prospective purchasers suspended their acquisition activities during much of 2020 due to, among other factors, the uncertainty of tenant operations and the availability and terms of financing. While financing markets and levels of investor interest in shopping center assets have improved considerably since late 2020, financing underwriting standards remain tighter than pre-pandemic levels and it remains unclear whether purchasers’ expectations with respect to economic returns from investments in retail real estate have been altered by the pandemic and resulting changes in consumer behavior. The Company is currently unable to quantify or predict the magnitude of the impact of the COVID-19 pandemic on the timing and pricing of disposition activity.

 

For additional information regarding risks relating to the Puerto Rico economy, the COVID-19 pandemic, the impact of e‑commerce and other relevant business uncertainties see Item 1A. Risk Factors in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

FORWARD-LOOKING STATEMENTS

MD&A should be read in conjunction with the Company’s consolidated financial statements and the notes thereto appearing elsewhere in this report.  Historical results and percentage relationships set forth in the Company’s consolidated financial statements, including trends that might appear, should not be taken as indicative of future operations.  The Company considers portions of this information to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), both as amended, with respect to the Company’s expectations for future periods.  Forward-looking statements include, without limitation, statements related to acquisitions (including any related pro forma financial information) and other business development activities, future capital expenditures, financing sources and availability and the effects of environmental and other regulations.  Although the Company believes that the expectations reflected in these forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved.  For this purpose, any statements contained herein that are not statements of historical fact should be deemed to be forward-looking statements.  Without limiting the foregoing, the words “will,” “believes,” “anticipates,” “plans,” “expects,” “seeks,” “estimates” and similar expressions are intended to identify forward-looking statements.  Readers should exercise caution in interpreting and relying on forward-looking statements because such statements involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond the Company’s control and that could cause actual results to differ materially from those expressed or implied in the forward-looking statements and that could materially affect the Company’s actual results, performance or achievements.  For additional factors that could cause the results of the Company to differ materially from those indicated in the forward-looking statements.  See Item 1A. Risk Factors in the Company’s Annual Report on 10-K for the year ended December 31, 2020.  The impact of the COVID-19 pandemic may also exacerbate the risks discussed therein and herein, any of which could have a material effect of the Company.

Factors that could cause actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, but are not limited to, the following:

 

The Company may be unable to dispose of properties on favorable terms or at all, especially (i) in markets or regions experiencing deteriorating economic conditions, (ii) with respect to properties anchored by tenants experiencing financial

25

 


 

 

challenges and (iii) during periods of diminished demand for commercial real estate assets, whether caused by public health crises, other social disruptions or otherwise.  In addition, real estate investments can be illiquid, particularly as prospective buyers may experience increased costs of financing or difficulties obtaining financing due to local, national or global conditions;

 

The Company is subject to general risks affecting the real estate industry, including the need to enter into new leases or renew leases on favorable terms to generate rental revenues, and any economic downturn may adversely affect the ability of the Company’s tenants, or new tenants, to enter into new leases or the ability of the Company’s existing tenants to renew their leases at rates at least as favorable as their current rates;

 

The Company could be adversely affected by changes in the local markets where its properties are located, as well as by adverse changes in regional or national economic and market conditions;

 

The Company may fail to anticipate the effects on its properties of changes in consumer buying practices, including sales over the internet and the resulting retailing practices and space needs of its tenants, or a general downturn in its tenants’ businesses, which may cause tenants to close stores or default in payment of rent;

 

The Company is subject to competition for tenants from other owners of retail properties, and its tenants are subject to competition from other retailers and methods of distribution.  The Company is dependent upon the successful operations and financial condition of its tenants, in particular its major tenants.  The bankruptcy of major tenants could result in a loss of significant rental income and could give rise to termination or rent abatement by other tenants under the co-tenancy clauses of their leases;

 

The Company relies on major tenants, which makes it vulnerable to changes in the business and financial condition of, or demand for its space by, such tenants;

 

The Company’s financial condition may be affected by required debt service payments, the risk of default and restrictions on its ability to incur additional debt or to enter into certain transactions under documents governing its debt obligations.  In addition, it may encounter difficulties in refinancing existing debt.  Borrowings under the mortgage loan or the Revolving Credit Agreement are subject to certain representations and warranties and customary events of default, including any event that has had or could reasonably be expected to have a material adverse effect on the Company’s business or financial condition;

 

Changes in interest rates could adversely affect the market price of the Company’s common shares, its performance and cash flow and its ability to sell assets and the sales prices applicable thereto;

 

Debt and/or equity financing necessary for the Company to continue to operate its business or to refinance existing indebtedness may not be available or may not be available on favorable terms;

 

Disruptions in the financial markets could affect the Company’s ability to obtain financing or to refinance existing indebtedness on reasonable terms and have other adverse effects on the Company and the market price of the Company’s common shares;

 

The ability of the Company to pay dividends on its common shares in excess of its REIT taxable income is generally subject to its ability to first declare and pay aggregate dividends on the RVI Preferred Shares in an amount equal to the preference amount;

 

The Company is subject to complex regulations related to its status as a REIT and would be adversely affected if it failed to qualify as a REIT;

 

The Company must make distributions to shareholders to continue to qualify as a REIT, and if the Company must borrow funds to make distributions, those borrowings may not be available on favorable terms or at all;

 

The outcome of litigation, including litigation with tenants, may adversely affect the Company’s results of operations and financial condition;

 

The Company may not realize anticipated returns from its 10 real estate assets located in Puerto Rico, which carry risks in addition to those it faces with its continental U.S. properties and operations;

26

 


 

 

Property damage, expenses related thereto, and other business and economic consequences (including the potential loss of revenue) resulting from natural disasters and extreme weather conditions in locations where the Company owns properties;

 

Sufficiency and timing of any insurance recovery payments related to damages from extreme weather conditions;

 

The Company and its tenants could be negatively affected by the impacts of pandemics and other public health crises, including the COVID-19 pandemic;

 

The Company is subject to potential environmental liabilities;

 

The Company may incur losses that are uninsured or exceed policy coverage due to its liability for certain injuries to persons, property or the environment occurring on its properties;

 

The Company could incur additional expenses to comply with or respond to claims under the Americans with Disabilities Act or otherwise be adversely affected by changes in government regulations, including changes in environmental, zoning, tax and other regulations;

 

Changes in accounting or other standards may adversely affect the Company’s business;

 

The Company’s Board of Directors, which regularly reviews the Company’s business strategy and objectives, may change its strategic plan, including to adopt a plan of dissolution and/or delay distributions;

 

A change in the Company’s relationship with SITE Centers and SITE Centers’ ability to retain qualified personnel and adequately manage the Company;

 

Potential conflicts of interest with SITE Centers and the Company’s ability to replace SITE Centers as manager (and the fees to be paid to any replacement manager) in the event the management agreements are terminated and

 

The Company and its vendors, including SITE Centers, could sustain a disruption, failure or breach of their respective networks and systems, including as a result of cyber-attacks, which could disrupt the Company’s business operations, compromise the confidentiality of sensitive information and result in fines and penalties.

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s primary market risk exposure is interest rate risk.  At March 31, 2021 and December 31, 2020, the Company’s outstanding indebtedness was composed of all variable-rate debt.  At March 31, 2021, the Company’s carrying value of the variable-rate debt was $294.1 million and its fair value was $312.2 million.  At December 31, 2020, the Company’s carrying value of the variable-rate debt was $344.5 million and its fair value was $362.7 million.  If interest rates were to increase by 1.00%, or 100 basis-points, the fair value of the debt would be $312.0 million and $362.5 million at March 31, 2021 and December 31, 2020, respectively. The sensitivity to changes in interest rates of the Company’s variable-rate debt was determined using a valuation model based upon factors that measure the net present value of such obligations that arise from the hypothetical estimate as discussed above.  A 100 basis-point increase in short-term market interest rates on variable-rate debt at March 31, 2021, would result in an increase in interest expense of approximately $0.8 million for the three-month period ended March 31, 2021.  

The Company intends to use proceeds from asset sales to repay its indebtedness and, following the repayment of its mortgage loan, for general corporate purposes including distributions to the Company’s preferred and common shareholders.  To the extent the Company was to incur variable-rate indebtedness, its exposure to increases in interest rates in an inflationary period could increase.  The Company does not believe, however, that increases in interest expense as a result of inflation will significantly impact the Company’s distributable cash flow.

The Company intends to continually monitor and actively manage interest costs on any variable-rate debt portfolio and may enter into swap positions or interest rate caps.  Accordingly, the cost of obtaining such protection agreements in relation to the Company’s access to capital markets will continue to be evaluated.  The Company has not entered, and does not plan to enter, into any derivative financial instruments for trading or speculative purposes.  As of March 31, 2021, the Company had no other material exposure to market risk.

27

 


 

Item 4.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company’s management, with the participation of the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), conducted an evaluation, pursuant to Exchange Act Rules 13a-15(b) and 15d-15(b), of the effectiveness of the Company’s disclosure controls and procedures.  Based on their evaluation as required, the CEO and CFO have concluded that the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) were effective as of March 31, 2021, to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and were effective as of March 31, 2021, to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its CEO and CFO, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

For the three months ended March 31, 2021, there were no changes in the Company’s internal control over financial reporting that materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1.

The Company and its subsidiaries are subject to various legal proceedings, which, taken together, are not expected to have a material adverse effect on the Company.  The Company is also subject to a variety of legal actions for personal injury or property damage arising in the ordinary course of its business, most of which are covered by insurance.  While the resolution of all matters cannot be predicted with certainty, management believes that the final outcome of such legal proceedings and claims will not have a material adverse effect on the Company’s liquidity, financial position or results of operations.

Item 1A.

RISK FACTORS

None.

Item 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

Item 3.

DEFAULTS UPON SENIOR SECURITIES

None.

Item 4.

MINE SAFETY DISCLOSURES

Not applicable.

Item 5.

OTHER INFORMATION

None.

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Item 6.EXHIBITS

10.1

 

Second Amendment to the Credit Agreement, dated February 26, 2021, among the Company, the lenders named therein and PNC Bank, National Association, as administrative agent1

 

 

 

10.2

 

Amended and Restated Guaranty Fee and Reimbursement Letter Agreement, dated February 26, 2021, by and between the Company and SITE Centers Corp. (f/k/a DDR Corp.)1

 

 

 

31.1

 

Certification of principal executive officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 19341

 

 

 

31.2

 

Certification of principal financial officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 19341

 

 

 

32.1

 

Certification of chief executive officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of this report pursuant to the Sarbanes-Oxley Act of 20021, 2

 

 

 

32.2

 

Certification of chief financial officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of this report pursuant to the Sarbanes-Oxley Act of 20021, 2

 

 

 

101.INS

 

Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document1

 

 

 

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document 1

 

 

 

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document 1

 

 

 

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document 1

 

 

 

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document 1

 

 

 

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document 1

 

 

 

104

 

The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 has been formatted in Inline XBRL and included in Exhibit 101.

1

Submitted electronically herewith.

2

Pursuant to SEC Release No. 34-4751, these exhibits are deemed to accompany this report and are not “filed” as part of this report.

Attached as Exhibit 101 to this report are the following formatted in iXBRL (Inline Extensible Business Reporting Language): (i)  Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020, (ii)  Consolidated Statements of Operations and Other Comprehensive Income (Loss) for the Three Months Ended March 31, 2021 and 2020, (iii) Consolidated Statements of Equity for the Three Months Ended March 31, 2021 and 2020, (iv)  Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020 and (v) Notes to Condensed Consolidated Financial Statements.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

Retail Value Inc.

 

 

 

 

 

 

By:

 

/s/ Christa A. Vesy

 

 

 

 

Name:

 

Christa A. Vesy

 

 

 

 

Title:

 

Executive Vice President, Chief Financial Officer, Chief Accounting Officer and Treasurer

(Authorized Officer)

Date:  May 4, 2021

 

 

 

 

 

 

 

 

31