What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-04 compared with 2020-08-03 · 160 added, 176 removed, 277 unchanged (55% of the section changed)

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We believe we own and operate one of the largest open-air retail portfolios by gross leasable area (“GLA”) in the United States (“U.S.”), comprised primarily of community and neighborhood shopping centers.

As of June 30, 2020, our portfolio was comprised of 398 shopping centers (the “Portfolio”) totaling approximately 70 million square feet of GLA.

As of September 30, 2020, our portfolio was comprised of 395 shopping centers (the “Portfolio”) totaling approximately 69 million square feet of GLA.

Our high-quality national Portfolio is primarily located within established trade areas in the top 50 Metropolitan Statistical Areas (“MSAs”) in the U.S., and our shopping centers are primarily anchored by non-discretionary and value-oriented retailers, as well as consumer-oriented service providers.

As of June 30, 2020, our three largest tenants by annualized base rent (“ABR”) were The TJX Companies, Inc.

As of September 30, 2020, our three largest tenants by annualized base rent (“ABR”) were The TJX Companies, Inc.

(“TJX”), The Kroger Co.

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Expense reimbursements primarily consist of payments made by tenants to us for their proportionate share of property operating expenses, including common area expenses, utilities, insurance and real estate taxes, and certain capital expenditures related to the maintenance of our properties.

Our ability to maintain or increase rental income is primarily dependent on our ability to maintain or increase rental rates, renew expiring leases at equal or higher rents and/or lease available space.

Our ability to maintain or increase rental income is primarily dependent on our ability to maintain or increase rental rates, renew expiring leases and/or lease available space.

Increases in our property operating expenses, including repairs and maintenance, landscaping, snow removal, security, ground rent related to properties for which we are the lessee, utilities, insurance, real estate taxes and various other costs, to the extent they are not reimbursed by tenants or offset by increases in rental income, will adversely impact our overall performance.

Factors that could affect our rental income and/or property operating expenses include:

(1) changes in national, regional and local economies, due to global events such as international trade disputes, a foreign debt crisis, foreign currency volatility, as well as from domestic issues, such as government policies and regulations, tariffs, energy prices, market dynamics, rising interest rates and unemployment or limited growth in consumer income;

(2) local market conditions, including an oversupply of space in, or a reduction in demand for, properties similar to those in our Portfolio;

(3) competition from other available properties and e-commerce, and the attractiveness of properties in our Portfolio to our tenants;

(4) ongoing disruption and/or consolidation in the retail sector, the financial stability of our tenants and the overall financial condition of large retailing companies, including their ability to pay rent and expense reimbursements;

(5) in the case of percentage rents, the sales volume of our tenants;

(6) increases in property operating expenses, including common area expenses, utilities, insurance and real estate taxes, which are relatively inflexible and generally do not decrease if revenue or occupancy decrease;

(7) increases in the costs to repair, renovate and re-lease space;

(8) earthquakes, tornadoes, hurricanes, damage from rising sea levels due to climate change, other natural disasters, epidemics and/or pandemics, including COVID-19, civil unrest, terrorist acts or acts of war, which may result in uninsured or underinsured losses;

and (9) changes in laws and governmental regulations, including those governing usage, zoning, the environment and taxes.

See “Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q for the factors that could affect our rental income and/or property operating expenses.

As discussed below and in “Part II - Item 1A.

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Impacts on Business from COVID-19

The global outbreak of a novel strain of coronavirus (“COVID-19”) and the public health measures that have been undertaken in response have had a significant adverse impact on the global economy, on our tenants, and on our business.

The effects of COVID-19, including related government restrictions, border closings, quarantines, “shelter-in-place” orders and “social distancing” guidelines, have forced many of our tenants to close stores, reduce hours or significantly limit service, and have resulted in a dramatic increase in national unemployment and an economic recession.

The global outbreak of a novel strain of coronavirus (“COVID-19”) and the public health measures that have been undertaken in response have had a significant adverse impact on our business, our tenants and the global economy.

Since we cannot estimate when the COVID-19 pandemic and the responsive measures to combat it will end, we cannot estimate the ultimate operational and financial impact of COVID-19 on our business.

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Grocery stores and other essential tenants have remained open throughout this time and many have experienced stable or increased sales, which we believe will help to partially mitigate the adverse impact of COVID-19 on our business.

COVID-19 has significantly impacted our operations during the second quarter of 2020, and the following operating trends, combined with macroeconomic trends such as the current economic recession, reduced consumer spending and significantly increased unemployment, lead us to believe that our operating results for at least the remainder of 2020 will continue to be adversely affected by COVID-19.

• Rent collection:

As of July 29, 2020, we had collected approximately 98%, 78% and 58% of second quarter 2020 billed base rent from essential retailers, hybrid retailers and other retailers or services, respectively.

As of July 29, 2020, approximately 33%, 24% and 43% of our portfolio by ABR consisted of essential retailers, hybrid retailers and other retailers or services, respectively.

• Store closures:

As of July 29, 2020, approximately 6% of our ABR is represented by tenants that are currently closed, including approximately 1%, 5% and 11% of the ABR of essential retailers, hybrid retailers and other retailers or services, respectively.

Store closures, particularly if for an extended period, or if forced to occur multiple times, increase the risk of business failures and lease defaults.

COVID-19 has significantly impacted our operations during the second and third quarters of 2020, and the following operating trends, combined with macroeconomic trends such as significantly increased unemployment and changes in consumer spending, lead us to believe that our operating results for 2020 and 2021 will continue to be adversely affected by COVID-19.

The following table presents information related to rent collection and store closures:

As of October 30, 2020

Second Quarter 2020

Rent Collected Third Quarter 2020

Rent Collected Portfolio Composition By ABR Percent of ABR

Currently Closed

Essential retailers (1)

99 % 99 % 34 % 0 %

Hybrid retailers (2)

82 % 88 % 25 % 4 %

Other retailers or services (3)

65 % 80 % 41 % 5 %

Weighted average 81 % 88 % 3 %

(1) Businesses deemed necessary for day-to-day living.

(2) Businesses deemed necessary for day-to-day living, but operating in a moderated capacity, and businesses deemed necessary for day-to-day living in many, but not all jurisdictions.

(3) Businesses deemed non-essential for day-to-day living.

• Timing of rental payments:

Certain tenants experiencing economic difficulties during this pandemic have sought rent relief, which has been provided on a case-by-case basis primarily in the form of rent deferrals, and in limited cases in the form of rent abatements.

Rent deferrals have significantly increased our Receivables, net.

We are in ongoing discussions with our tenants regarding rent that has not yet been collected.

We are in ongoing discussions with our tenants regarding rent that has not yet been collected or addressed through executed deferral or abatement agreements.

• Leasing activity:

While the size of our new and renewal leasing pipeline remains generally consistent with prior periods, the velocity of lease execution has notably slowed since March 2020.

We have taken various steps to mitigate the impact of COVID-19 on our liquidity, including deferrals of approximately $100.0 million of capital expenditures originally anticipated in 2020 and the temporary suspension of our quarterly cash dividend.

In June 2020, we issued $500.0 million aggregate principal amount of 4.050% Senior Notes due 2030, the net proceeds of which were used to repurchase of a portion of our 3.875%, Senior Notes due 2022 and repay outstanding indebtedness under our $1.25 billion revolving credit facility (the “Revolving Facility”), extending the duration of our debt.

As of July 29, 2020, we have approximately $350.0 million in cash, approximately $1.1 billion of remaining availability under the Revolving Facility, and no debt maturities until 2022.

While lease execution velocity notably slowed in the second quarter of 2020, it has since recovered to levels similar to those experienced in prior periods.

We have taken various steps to mitigate the impact of COVID-19 on our liquidity, including the deferral of approximately $100.0 million of capital expenditures originally anticipated in 2020 and the temporary suspension of our quarterly cash dividend for the second and third quarters of 2020.

In June 2020 and August 2020, we issued an aggregate of $800.0 million principal amount of 4.050% Senior Notes due 2030, the net proceeds of which were used to repurchase a portion of our 3.875% Senior Notes due 2022, repay outstanding indebtedness under our $1.25 billion revolving credit facility (the “Revolving Facility”), and for general corporate purposes.

As of October 30, 2020, we have approximately $660.0 million in cash, approximately $1.2 billion of remaining availability under the Revolving Facility, and no debt maturities until 2022.

In addition, we have encouraged our tenants whose businesses have been impacted by COVID-19 to explore their eligibility for benefits under government assistance programs intended to provide financial support to affected businesses;

the ultimate impact of such assistance on our tenants, however, is not yet clear.

The effects of COVID-19 have triggered an economic recession, and we expect that the longer it continues, the number of our tenants facing financial distress will increase.

Historically, economic indicators such as GDP growth, consumer confidence and employment are correlated with demand for certain of our tenants’ products and services.

In addition, some of our tenants have been required to close their stores for the second time due to the re-instatement of government restrictions, and other tenants who are currently operating may also be required to do so in the future.

These conditions could increase the number of our tenants that are unable to meet their lease obligations to us and could limit the demand for space from new tenants.

We expect the significance of the COVID-19 crisis and the resulting economic slowdown on our financial and operational results to be dictated by, among other things, the scope, severity and duration of the pandemic, the direct and indirect economic effects of the pandemic and containment measures, and potential changes in consumer behavior.

These uncertainties make it difficult to predict operating results for our Portfolio for the remainder of 2020.

We expect the significance of the COVID-19 crisis and the resulting economic slowdown on our financial and operational results to be dictated by, among other things, the scope, severity and duration of the pandemic, the speed and effectiveness of vaccine and treatment developments, the direct and indirect economic effects of the pandemic and containment measures, and potential changes in consumer behavior.

Adverse developments related to these conditions could increase the number of tenants that close their stores, that are unable to meet their lease obligations to us, and/or that file for bankruptcy protection, and could limit the demand for space from new tenants.

These uncertainties make it difficult to predict operating results for our Portfolio for the remainder of 2020 and 2021.

Therefore, there can be no assurances that we will not experience declines in revenues, net income or funds from operations, which could be material.

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Leasing Highlights

As of June 30, 2020, billed and leased occupancy were 88.9% and 92.1%, respectively, as compared to 87.5% and 91.5%, respectively, as of June 30, 2019.

The following table summarizes our executed leasing activity for the three months ended June 30, 2020 and 2019 (dollars in thousands, except for per square foot (“PSF”) amounts):

For the Three Months Ended June 30, 2020

As of September 30, 2020, billed and leased occupancy were 88.0% and 91.2%, respectively, as compared to 88.6% and 91.9%, respectively, as of September 30, 2019.

The following table summarizes our executed leasing activity for the three months ended September 30, 2020 and 2019 (dollars in thousands, except for per square foot (“PSF”) amounts):

For the Three Months Ended September 30, 2020

Leases GLA New ABR PSF Tenant Improvements and Allowances PSF Third Party Leasing Commissions PSF Rent Spread (1)

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Option leases 50 1,002,561 11.35 0.07 — 7.1 %

For the Three Months Ended June 30, 2019

For the Three Months Ended September 30, 2019

Leases GLA New ABR PSF Tenant Improvements and Allowances PSF Third Party Leasing Commissions PSF Rent Spread (1)

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ABR PSF includes the GLA of lessee-owned leasehold improvements.

The following table summarizes our executed leasing activity for the six months ended June 30, 2020 and 2019 (dollars in thousands, except for per square foot (“PSF”) amounts):

For the Six Months Ended June 30, 2020

The following table summarizes our executed leasing activity for the nine months ended September 30, 2020 and 2019 (dollars in thousands, except for per square foot (“PSF”) amounts):

For the Nine Months Ended September 30, 2020

Leases GLA New ABR PSF Tenant Improvements and Allowances PSF Third Party Leasing Commissions PSF Rent Spread (1)

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Option leases 149 2,504,910 11.41 0.07 — 7.4 %

For the Six Months Ended June 30, 2019

For the Nine Months Ended September 30, 2019

Leases GLA New ABR PSF Tenant Improvements and Allowances PSF Third Party Leasing Commissions PSF Rent Spread (1)

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Acquisition Activity

• During the six months ended June 30, 2020, we acquired one land parcel for $2.0 million, including transaction costs.

• During the six months ended June 30, 2019, we acquired two shopping centers, two leases at an existing shopping center and one land parcel for an aggregate purchase price of $79.6 million, including transaction costs.

• During the nine months ended September 30, 2020, we acquired two land parcels for $3.4 million, including transaction costs.

• During the nine months ended September 30, 2019, we acquired two shopping centers, two leases at an existing shopping center and one land parcel for an aggregate purchase price of $79.6 million, including transaction costs.

Disposition Activity

• During the six months ended June 30, 2020, we disposed of five shopping centers and two partial shopping centers for aggregate net proceeds of $45.7 million resulting in aggregate gain of $8.2 million and aggregate impairment of less than $0.1 million.

In addition, during the six months ended June 30, 2020, we received aggregate net proceeds of $0.9 million and resolved a $0.5 million contingency from previously disposed assets resulting in aggregate gain of $1.4 million.

• During the six months ended June 30, 2019, we disposed of six shopping centers and three partial shopping centers for aggregate net proceeds of $94.8 million resulting in aggregate gain of $20.5 million.

In addition, during the six months ended June 30, 2019, we received aggregate net proceeds of $0.3 million from previously disposed assets resulting in aggregate gain of $0.1 million.

• During the nine months ended September 30, 2020, we disposed of eight shopping centers, three partial shopping centers and one land parcel for aggregate net proceeds of $81.9 million resulting in aggregate gain of $21.3 million and aggregate impairment of $6.0 million.

• During the nine months ended September 30, 2019, we disposed of 18 shopping centers and four partial shopping centers for aggregate net proceeds of $239.4 million resulting in aggregate gain of $46.0 million and aggregate impairment of $14.4 million.

In addition, during the nine months ended September 30, 2019, we received aggregate net proceeds of $0.4 million from previously disposed assets resulting in aggregate gain of $0.3 million.

Results of Operations

The results of operations discussion is combined for BPG and the Operating Partnership because there are no material differences in the results of operations between the two reporting entities.

Comparison of the Three Months Ended June 30, 2020 to the Three Months Ended June 30, 2019

Comparison of the Three Months Ended September 30, 2020 to the Three Months Ended September 30, 2019

Revenues (in thousands)

Three Months Ended June 30,

Three Months Ended September 30,

2020 2019 $ Change

Rental income $ 253,799 $ 292,732 $ (38,933)

$ 247,434 $ 290,737 $ (43,303)

Other revenues 136 233 (97)

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Rental income

The decrease in rental income for the three months ended June 30, 2020 of $43.3 million, as compared to the corresponding period in 2019, was due to an $8.2 million decrease in rental income due to net disposition activity and a $35.1 million decrease for the remaining portfolio.

The decrease in rental income for the three months ended September 30, 2020 of $38.9 million, as compared to the corresponding period in 2019, was due to a $7.3 million decrease in rental income due to net disposition activity and a $31.6 million decrease for the remaining portfolio.

The decrease for the remaining portfolio was due to (i) a $19.3 million increase in revenues deemed uncollectible;

(ii) a $9.8 million decrease in straight-line rental income, net;

(iii) a $0.9 million decrease in percentage rents;

(iv) a $0.7 million decrease in expense reimbursements;

(v) a $0.6 million decrease in ancillary and other rental income;

and (vi) a $0.3 million decrease in accretion of above- and below-market leases and tenant inducements, net;

partially offset by (vii) a $4.8 million increase in base rent;

and (viii) a $0.3 million increase in lease termination fees.

(iii) a $1.5 million decrease in expense reimbursements;

(iv) a $1.2 million decrease in base rent;

(v) a $0.4 million decrease in percentage rents;

(vi) a $0.2 million decrease in ancillary and other rental income;

and (vii) a $0.2 million decrease in accretion of above- and below-market leases and tenant inducements, net;

partially offset by (viii) a $1.0 million increase in lease termination fees.

The increase in revenues deemed uncollectible and decrease in straight-line rental income, net were primarily attributable to COVID-19.

The $4.8 million increase in base rent for the remaining portfolio was primarily due to contractual rent increases, an increase in billed occupancy, and positive rent spreads for new and renewal leases and option exercises of 8.1% during the six months ended June 30, 2020 and 10.9% during the year ended December 31, 2019.

The $1.2 million decrease in base rent for the remaining portfolio was primarily due to COVID-19 rent deferrals accounted for as lease modifications and rent abatements, partially offset by contractual rent increases, an increase in weighted average billed occupancy, and positive rent spreads for new and renewal leases and option exercises of 7.2% during the nine months ended September 30, 2020 and 10.9% during the year ended December 31, 2019.

Other revenues

Other revenues remained generally consistent for the three months ended June 30, 2020 as compared to the corresponding period in 2019.

Other revenues remained generally consistent for the three months ended September 30, 2020 as compared to the corresponding period in 2019.

Operating Expenses (in thousands)

Three Months Ended June 30,

Three Months Ended September 30,

2020 2019 $ Change

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Operating costs $ 24,794 $ 29,573 $ (4,779)

$ 25,136 $ 29,307 $ (4,171)

Real estate taxes 42,124 43,688 (1,564)

41,808 43,189 (1,381)

Depreciation and amortization 87,488 82,837 4,651

80,829 81,593 (764)

Impairment of real estate assets 5,746 8,170 (2,424)

5,962 6,186 (224)

General and administrative 27,748 24,550 3,198

24,436 25,175 (739)

Total operating expenses $ 187,900 $ 188,818 $ (918)

Operating costs

The decrease in operating costs for the three months ended June 30, 2020 of $4.2 million, as compared to the corresponding period in 2019, was primarily due to a $0.9 million decrease in operating costs due to net disposition activity and a $3.3 million decrease for the remaining portfolio primarily due to proactive cost reductions taken in response to COVID-19.

The decrease in operating costs for the three months ended September 30, 2020 of $4.8 million, as compared to the corresponding period in 2019, was primarily due to a $1.0 million decrease in operating costs due to net disposition activity and a $3.8 million decrease for the remaining portfolio primarily due to proactive cost reductions taken in response to COVID-19 and favorable insurance captive adjustments.

Real estate taxes

The decrease in real estate taxes for the three months ended June 30, 2020 of $1.4 million, as compared to the corresponding period in 2019, was primarily due to a $0.9 million decrease in real estate taxes due to net disposition activity and a $0.5 million decrease for the remaining portfolio primarily due to favorable adjustments of prior year assessments.

The decrease in real estate taxes for the three months ended September 30, 2020 of $1.6 million, as compared to the corresponding period in 2019, was primarily due to a $1.0 million decrease in real estate taxes due to net disposition activity and a $0.6 million decrease for the remaining portfolio primarily due to decreases in assessments from several jurisdictions.

Depreciation and amortization

The decrease in depreciation and amortization for the three months ended June 30, 2020 of $0.8 million, as compared to the corresponding period in 2019, was primarily due to a $2.2 million decrease in depreciation and amortization due to net disposition activity, partially offset by a $1.4 million increase for the remaining portfolio primarily related to tenant write-offs and value-enhancing reinvestment capital expenditures, partially offset by a decrease in depreciation and amortization related to acquired in-place lease intangibles.

The increase in depreciation and amortization for the three months ended September 30, 2020 of $4.7 million, as compared to the corresponding period in 2019, was primarily due to a $2.2 million decrease in depreciation and amortization due to net disposition activity, offset by a $6.9 million increase for the remaining portfolio primarily

related to tenant write-offs and value-enhancing reinvestment capital expenditures, partially offset by a decrease in depreciation and amortization for the remaining portfolio related to acquired in-place lease intangibles.

Impairment of real estate assets

During the three months ended June 30, 2020, aggregate impairment of $6.0 million was recognized on two operating properties.

During the three months ended June 30, 2019, aggregate impairment of $6.2 million was recognized on one operating property.

During the three months ended September 30, 2020, aggregate impairment of $5.7 million was recognized on one shopping center as a result of disposition activity and one operating property.

During the three months ended September 30, 2019, aggregate impairment of $8.2 million was recognized on three shopping centers and one partial shopping center as a result of disposition activity.

Impairments recognized were due to changes in anticipated hold periods in connection with our capital recycling program.

General and administrative

The decrease in general and administrative costs for the three months ended June 30, 2020 of $0.7 million, as compared to the corresponding period in 2019, was primarily due to a decrease in marketing and travel costs due to COVID-19 and a decrease in net compensation costs, partially offset by an increase in non-recurring costs.

During the three months ended June 30, 2020 and 2019, construction compensation costs of $3.6 million and $3.6 million, respectively, were capitalized to building and improvements and leasing legal costs of $0.1 million and $0.0 million, respectively and leasing commission costs of $1.2 million and $1.8 million, respectively, were capitalized to deferred charges and prepaid expenses, net.

The increase in general and administrative costs for the three months ended September 30, 2020 of $3.2 million, as compared to the corresponding period in 2019, was primarily due to an increase in litigation and other non-routine legal expenses, partially offset by a decrease in professional and travel costs due to COVID-19.

During the three months ended September 30, 2020 and 2019, construction compensation costs of $3.8 million and $3.8 million, respectively, were capitalized to building and improvements and leasing legal costs of $0.1 million and $0.0 million, respectively and leasing commission costs of $1.4 million and $1.6 million, respectively, were capitalized to deferred charges and prepaid expenses, net.

Other Income and Expenses (in thousands)

Three Months Ended June 30,

Three Months Ended September 30,

2020 2019 $ Change

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Dividends and interest $ 109 $ 128 $ (19)

$ 102 $ 300 $ (198)

Interest expense (50,991) (47,698) (3,293)

(49,852) (48,475) (1,377)

Gain on sale of real estate assets 13,621 25,621 (12,000)

Loss on extinguishment of debt, net (50) (943) 893

(10,386) (707) (9,679)

(961) (756) (205)

Other (780) (401) (379)

Total other expense $ (38,091) $ (23,293) $ (14,798)

Dividends and interest

The decrease in dividends and interest for the three months ended June 30, 2020 of $0.2 million, as compared to the corresponding period in 2019, was primarily due to a $0.2 million decrease in investment income from marketable securities.

Dividends and interest remained generally consistent for the three months ended September 30, 2020 as compared to the corresponding period in 2019.

Interest expense

The increase in interest expense for the three months ended June 30, 2020 of $1.4 million, as compared to the corresponding period in 2019, was primarily due to higher overall debt obligations.

The increase in interest expense for the three months ended September 30, 2020 of $3.3 million, as compared to the corresponding period in 2019, was primarily due to higher overall debt obligations as we bolstered liquidity in response to COVID-19.

Gain on sale of real estate assets

During the three months ended June 30, 2020, two shopping centers were disposed resulting in aggregate gain of $0.7 million.

During the three months ended June 30, 2019, three shopping centers and three partial shopping centers were disposed resulting in aggregate gain of $13.2 million.

During the three months ended September 30, 2020, two shopping centers, one partial shopping center and one land parcel were disposed resulting in aggregate gain of $13.1 million.

In addition, during the three months ended September 30, 2020, we received aggregate net proceeds of less than $0.1 million and resolved contingencies of $0.1 million from previously disposed assets resulting in aggregate gain of $0.1 million, and we received final insurance proceeds related to two shopping centers that were damaged by Hurricane Michael resulting in aggregate gain of $0.4 million.

During the three months ended September 30, 2019, nine shopping centers were disposed resulting in aggregate gain of $25.5 million.

In addition, during the three months ended September 30, 2019, we received aggregate net proceeds of $0.1 million from previously disposed assets resulting in aggregate gain of $0.1 million.

Loss on extinguishment of debt, net

During the three months ended June 30, 2020, we repurchased $182.5 million of our 3.875% Senior Notes due 2022 through a tender offer, resulting in a $10.4 million loss on extinguishment of debt, net.

Loss on extinguishment of debt, net includes $9.5 million of prepayment fees and $0.9 million of accelerated unamortized debt issuance costs and debt discounts.

During the three months ended June 30, 2019, we repaid $200.0 million of an unsecured term loan under the Operating Partnership’s senior unsecured credit facility agreement, as amended April 29, 2020 (the “Unsecured Credit Facility”), resulting in a $0.7 million loss on extinguishment of debt due to the acceleration of unamortized debt issuance costs.

Other expense remained generally consistent for the three months ended June 30, 2020 as compared to the corresponding period in 2019.

Comparison of the Six Months Ended June 30, 2020 to the Six Months Ended June 30, 2019

During the three months ended September 30, 2020, we repurchased $0.7 million of our 3.875% Senior Notes due 2022 through a tender offer, resulting in a $0.1 million loss on extinguishment of debt, net.

Loss on extinguishment of debt, net includes less than $0.1 million of prepayment fees and less than $0.1 million of accelerated unamortized

debt issuance costs and debt discounts.

During the three months ended September 30, 2019, we repaid $300.0 million of an unsecured term loan under our senior unsecured credit facility agreement, as amended April 29, 2020 (the “Unsecured Credit Facility”), resulting in a $0.9 million loss on extinguishment of debt due to the acceleration of unamortized debt issuance costs.

The increase in other expense for the three months ended September 30, 2020 of $0.4 million, as compared to the corresponding period in 2019, was primarily due to favorable tax adjustments in the prior year.

Comparison of the Nine Months Ended September 30, 2020 to the Nine Months Ended September 30, 2019

Revenues (in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

2020 2019 $ Change

Rental income $ 781,635 $ 873,424 $ (91,789)

$ 527,836 $ 580,692 $ (52,856)

Other revenues 2,221 1,685 536

2,085 1,452 633

Total revenues $ 783,856 $ 875,109 $ (91,253)

Rental income

The decrease in rental income for the six months ended June 30, 2020 of $52.9 million, as compared to the corresponding period in 2019, was due to a $16.0 million decrease in rental income due to net disposition activity and a $36.9 million decrease for the remaining portfolio.

The decrease in rental income for the nine months ended September 30, 2020 of $91.8 million, as compared to the corresponding period in 2019, was due to a $23.7 million decrease in rental income due to net disposition activity and a $68.1 million decrease for the remaining portfolio.

The decrease for the remaining portfolio was due to (i) a $47.7 million increase in revenues deemed uncollectible;

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(iv) a $1.3 million decrease in accretion of above- and below-market leases and tenant inducements, net;

and (v) a $0.3 million decrease in ancillary and other rental income;

partially offset by (vi) a $12.3 million increase in base rent;

(vii) a $1.2 million increase in expense reimbursements;

(v) a $0.5 million decrease in ancillary and other rental income;

and (vi) a $0.1 million decrease in expense reimbursements;

partially offset by (vii) an $11.2 million increase in base rent;

and (viii) a $2.1 million increase in lease termination fees.

The increase in revenues deemed uncollectible and decrease in straight-line rental income, net were primarily attributable to COVID-19.

The $12.3 million increase in base rent for the remaining portfolio was primarily due to contractual rent increases, an increase in billed occupancy, and positive rent spreads for new and renewal leases and option exercises of 8.1% during the six months ended June 30, 2020 and 10.9% during the year ended December 31, 2019.

The $11.2 million increase in base rent for the remaining portfolio was primarily due to contractual rent increases, an increase in weighted average billed occupancy, and positive rent spreads for new and renewal leases and option exercises of 7.2% during the nine months ended September 30, 2020 and 10.9% during the year ended December 31, 2019, partially offset by COVID-19 rent deferrals accounted for as lease modifications and rent abatements.

Other revenues

The increase in other revenues for the six months ended June 30, 2020 of $0.6 million, as compared to the corresponding period in 2019, was primarily due to an increase in tax increment financing income.

The increase in other revenues for the nine months ended September 30, 2020 of $0.5 million, as compared to the corresponding period in 2019, was primarily due to an increase in tax increment financing income.

Operating Expenses (in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

2020 2019 $ Change

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Operating costs $ 80,286 $ 90,138 $ (9,852)

$ 55,492 $ 60,565 $ (5,073)

Real estate taxes 126,796 130,203 (3,407)

84,672 86,515 (1,843)

Depreciation and amortization 251,334 249,825 1,509

163,846 166,988 (3,142)

Impairment of real estate assets 16,306 17,468 (1,162)

10,560 9,298 1,262

General and administrative 74,781 75,168 (387)

47,033 50,618 (3,585)

Total operating expenses $ 549,503 $ 562,802 $ (13,299)

Operating costs

The decrease in operating costs for the six months ended June 30, 2020 of $5.1 million, as compared to the corresponding period in 2019, was primarily due to a $2.0 million decrease in operating costs due to net disposition activity and a $3.1 million decrease for the remaining portfolio primarily due to proactive cost reductions taken in response to COVID-19.

The decrease in operating costs for the nine months ended September 30, 2020 of $9.9 million, as compared to the corresponding period in 2019, was primarily due to a $3.0 million decrease in operating costs due to net disposition activity and a $6.9 million decrease for the remaining portfolio primarily due to proactive cost reductions taken in response to COVID-19 and favorable insurance captive adjustments.

Real estate taxes

The decrease in real estate taxes for the six months ended June 30, 2020 of $1.8 million, as compared to the corresponding period in 2019, was primarily due to a $2.2 million decrease in real estate taxes due to net disposition activity, partially offset by a $0.4 million increase for the remaining portfolio primarily due to increases in tax rates and assessments from several jurisdictions.

The decrease in real estate taxes for the nine months ended September 30, 2020 of $3.4 million, as compared to the corresponding period in 2019, was primarily due to a $3.2 million decrease in real estate taxes due to net disposition activity and a $0.2 million decrease for the remaining portfolio primarily due to an increase in capitalized real estate taxes.

Depreciation and amortization

The decrease in depreciation and amortization for the six months ended June 30, 2020 of $3.1 million, as compared to the corresponding period in 2019, was primarily due to a $4.1 million decrease in depreciation and amortization due to net disposition activity, partially offset by a $1.0 million increase for the remaining portfolio primarily related to tenant write-offs, partially offset by a decrease in depreciation and amortization related to acquired in-place lease intangibles.

The increase in depreciation and amortization for the nine months ended September 30, 2020 of $1.5 million, as compared to the corresponding period in 2019, was primarily due to a $6.5 million decrease in depreciation and amortization due to net disposition activity, offset by an $8.0 million increase for the remaining portfolio primarily related to tenant write-offs and value-enhancing reinvestment capital expenditures, partially offset by a decrease in depreciation and amortization for the remaining portfolio related to acquired in-place lease intangibles.

Impairment of real estate assets

During the six months ended June 30, 2020, aggregate impairment of $10.6 million was recognized on one partial shopping center as a result of disposition activity and three operating properties.

During the six months ended June 30, 2019, aggregate impairment of $9.3 million was recognized on two operating properties.

During the nine months ended September 30, 2020, aggregate impairment of $16.3 million was recognized on two shopping centers and one partial shopping center as a result of disposition activity and two operating properties.

During the nine months ended September 30, 2019, aggregate impairment of $17.5 million was recognized on three shopping centers and one partial shopping center as a result of disposition activity and one operating property.

Impairments recognized were due to changes in anticipated hold periods primarily in connection with our capital recycling program.

General and administrative

The decrease in general and administrative costs for the six months ended June 30, 2020 of $3.6 million, as compared to the corresponding period in 2019, was primarily due to a decrease in marketing, professional and travel costs due to COVID-19 and a decrease in net compensation costs, partially offset by an increase in non-recurring costs.

During the six months ended June 30, 2020 and 2019, construction compensation costs of $7.1 million and $6.9 million, respectively, were capitalized to building and improvements and leasing legal costs of $0.1 million and $0.0

million, respectively and leasing commission costs of $2.6 million and $3.0 million, respectively, were capitalized to deferred charges and prepaid expenses, net.

The decrease in general and administrative costs for the nine months ended September 30, 2020 of $0.4 million, as compared to the corresponding period in 2019, was primarily due to a decrease in marketing, professional and travel costs due to COVID-19 and a decrease in net compensation costs, partially offset by an increase in litigation and other non-routine legal expenses.

During the nine months ended September 30, 2020 and 2019, construction compensation costs of $10.9 million and $10.7 million, respectively, were capitalized to building and improvements and leasing legal costs of $0.2 million and $0.0 million, respectively and leasing commission costs of $4.0 million and $4.5 million, respectively, were capitalized to deferred charges and prepaid expenses, net.

Other Income and Expenses (in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

2020 2019 $ Change

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Dividends and interest $ 335 $ 575 $ (240)

$ 226 $ 447 $ (221)

Interest expense (148,197) (142,839) (5,358)

(97,206) (95,141) (2,065)

Gain on sale of real estate assets 23,218 46,266 (23,048)

Loss on extinguishment of debt, net (10,441) (1,620) (8,821)

(10,391) (677) (9,714)

(1,719) (1,574) (145)

Other (2,499) (1,975) (524)

Total other expense $ (137,584) $ (99,593) $ (37,991)

Dividends and interest

The decrease in dividends and interest for the six months ended June 30, 2020 of $0.2 million, as compared to the corresponding period in 2019, was primarily due to a $0.2 million decrease in investment income from marketable securities.

The decrease in dividends and interest for the nine months ended September 30, 2020 of $0.2 million, as compared to the corresponding period in 2019, was primarily due to a $0.2 million decrease in investment income from marketable securities.

Interest expense

The increase in interest expense for the six months ended June 30, 2020 of $2.1 million, as compared to the corresponding period in 2019, was primarily due to higher overall debt obligations.

The increase in interest expense for the nine months ended September 30, 2020 of $5.4 million, as compared to the corresponding period in 2019, was primarily due to higher overall debt obligations as we bolstered liquidity in response to COVID-19.

Gain on sale of real estate assets

During the six months ended June 30, 2020, five shopping centers and one partial shopping center were disposed resulting in aggregate gain of $8.2 million.

During the six months ended June 30, 2019, six shopping centers and three partial shopping centers were disposed resulting in aggregate gain of $20.5 million.

In addition, during the six months ended June 30, 2019, we received aggregate net proceeds of $0.3 million from previously disposed assets resulting in aggregate gain of $0.1 million.

During the nine months ended September 30, 2020, six shopping centers, two partial shopping centers and one land parcel were disposed resulting in aggregate gain of $21.3 million.

In addition, during the nine months ended September 30, 2020, we received aggregate net proceeds of $1.0 million and resolved contingencies of $0.5 million from previously disposed assets resulting in aggregate gain of $1.5 million, and we received final insurance proceeds related to two shopping centers that were damaged by Hurricane Michael resulting in aggregate gain of $0.4 million.

During the nine months ended September 30, 2019, 15 shopping centers and three partial shopping centers were disposed resulting in aggregate gain of $46.0 million.

In addition, during the nine months ended September 30, 2019, we received aggregate net proceeds of $0.4 million from previously disposed assets resulting in aggregate gain of $0.3 million.

Loss on extinguishment of debt, net

During the six months ended June 30, 2020, we repurchased $182.5 million of our 3.875% Senior Notes due 2022 through a tender offer and repaid our $7.0 million secured loan, resulting in a $10.4 million loss on extinguishment of debt, net.

During the nine months ended September 30, 2020, we repurchased $183.2 million of our 3.875% Senior Notes due 2022 through a tender offer and repaid our $7.0 million secured loan, resulting in a $10.4 million loss on extinguishment of debt, net.

Loss on extinguishment of debt, net includes $9.7 million of prepayment fees and $0.7 million of accelerated unamortized debt issuance costs and debt discounts, net of premiums.

During the six months ended June 30, 2019, we repaid $200.0 million of an unsecured term loan under the Unsecured Credit Facility, resulting in a $0.7 million loss on extinguishment of debt due to the acceleration of unamortized debt issuance costs.

Other expense remained generally consistent for the six months ended June 30, 2020 as compared to the corresponding period in 2019.

During the nine months ended September 30, 2019, we repaid $500.0 million of an unsecured term loan under the Unsecured Credit Facility, resulting in a $1.6 million loss on extinguishment of debt due to the acceleration of unamortized debt issuance costs.

The increase in other expense for the nine months ended September 30, 2020 of $0.5 million, as compared to the corresponding period in 2019, was primarily due to an increase in transaction expenses and favorable tax adjustments in the prior year.

Liquidity and Capital Resources

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We believe our current capital structure provides us with the financial flexibility and capacity to fund our current capital needs as well as future growth opportunities.

We have access to multiple forms of capital, including secured property level debt, unsecured corporate level debt, preferred equity, and common equity, which will allow us to efficiently execute on our strategic and operational objectives.

We have access to multiple forms of capital, including secured

property level debt, unsecured corporate level debt, preferred equity, and common equity, which will allow us to efficiently execute on our strategic and operational objectives.

We currently have investment grade credit ratings from all three major credit rating agencies.

As of June 30, 2020, we had $1.1 billion of available liquidity under our $1.25 billion revolving credit facility (the “Revolving Facility”) and $318.5 million in cash and cash equivalents.

As of September 30, 2020, we had $1.2 billion of available liquidity under the Revolving Facility and $609.8 million in cash and cash equivalents.

We intend to continue to enhance our financial and operational flexibility through the additional extension of the duration of our debt.

As previously discussed under the header “Impacts on Business from COVID-19”, the COVID-19 pandemic has had, and we expect will continue to have, an adverse impact on our liquidity and capital resources.

Future decreases in cash flow from operations resulting from tenant defaults, rent deferrals, or decreases in our rents or occupancy, would decrease the cash available for the capital uses described above, including payment of dividends.

Future decreases in cash flow from operations resulting from rent deferrals, tenant defaults, or decreases in rental rates or occupancy, would decrease the cash available for the capital uses described above, including payment of dividends.

The decline in our stock price since the onset of the pandemic has significantly decreased the likelihood of utilizing our at-the-market equity offering program in the near future.

In June 2020, we issued $500.0 million aggregate principal amount of 4.050% Senior Notes due 2030, the net proceeds of which were used to repurchase a portion of our 3.875%, Senior Notes due 2022 and repay outstanding indebtedness under the Revolving Facility, extending the duration of our debt.

In June 2020 and August 2020, we issued an aggregate of $800.0 million principal amount of 4.050% Senior Notes due 2030, the net proceeds of which were used to repurchase a portion of our 3.875% Senior Notes due 2022, repay outstanding indebtedness under the Revolving Facility, and for general corporate purposes.

However, the impacts of COVID-19 may increase risks related to the pricing and availability of future debt financing.

In addition, a significant decline in our operating performance in the future could result in us not satisfying the financial covenants applicable to our debt and/or defaulting on our debt, which could impact our ability to incur additional debt, including the remaining capacity on our Revolving Facility.

In addition, we have no debt maturities until 2022.

However, since we do not know the ultimate severity and length of the COVID-19 pandemic, and thus cannot predict the impact it will ultimately have on our tenants and on the debt and equity capital markets, we cannot estimate the impact it will have on our liquidity and capital resources.

However, since we do not know the ultimate severity, scope or duration of the pandemic, and thus cannot predict the impact it will ultimately have on our tenants and on the debt and equity capital markets, we cannot estimate the impact it will have on our liquidity and capital resources.

In order to continue to qualify as a REIT for federal income tax purposes, we must distribute to our stockholders at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains.

We intend to continue to satisfy this requirement and maintain our REIT status.

Cash dividends paid to common stockholders for the six months ended June 30, 2020 and 2019 were $170.3 million and $167.8 million, respectively.

In response to uncertainties stemming from the COVID-19 pandemic, our Board of Directors has temporarily suspended the quarterly cash dividend.

Cash dividends paid to common stockholders for the nine months ended September 30, 2020 and 2019 were $170.4 million and $251.3 million, respectively.

In response to COVID-19, our Board of Directors temporarily suspended the dividend for the second and third quarters of 2020.

In October 2020, our Board of Directors declared a quarterly cash dividend of $0.215 per common share for the fourth quarter of 2020.

The dividend is payable on January 15, 2021 to shareholders of record on January 6, 2021.

Our Board of Directors will reevaluate the dividend on a quarterly basis, taking into account a variety of relevant factors including REIT taxable income.

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Brixmor Property Group Inc .

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows provided by operating activities $ 323,632 $ 399,933

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Brixmor Operating Partnership LP

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows provided by operating activities $ 323,632 $ 399,933

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Cash flows provided by (used in) financing activities 396,321 (308,569)

Cash and cash equivalents and restricted cash for BPG were $320.0 million and $13.3 million as of June 30, 2020 and 2019, respectively.

Cash and cash equivalents and restricted cash for the Operating Partnership were $310.0 million and $13.2 million as of June 30, 2020 and 2019, respectively.

Cash and cash equivalents and restricted cash for BPG were $611.2 million and $31.5 million as of September 30, 2020 and 2019, respectively.

Cash and cash equivalents and restricted cash for the Operating Partnership were $601.2 million and $31.5 million as of September 30, 2020 and 2019, respectively.

Operating Activities

Net cash provided by operating activities primarily consists of cash inflows from tenant rental payments and expense reimbursements and cash outflows for property operating expenses, general and administrative expenses and interest expense.

During the six months ended June 30, 2020, our net cash provided by operating activities decreased $71.4 million as compared to the corresponding period in 2019.

The decrease is primarily due to (i) a decrease from net working capital;

During the nine months ended September 30, 2020, our net cash provided by operating activities decreased $76.3 million as compared to the corresponding period in 2019.

The decrease is primarily due to (i) a decrease from net working capital primarily due to decreased cash collection levels as a result of COVID-19;

(ii) a decrease in net operating income due to net disposition activity;

(iii) a decrease in same property net operating income primarily due to COVID-19;

and (iv) an increase in cash outflows for interest expense;

partially offset by (v) a decrease in cash outflows for general and administrative expense;

and (vi) an increase in lease termination fees.

(iii) an increase in cash outflows for interest expense;

and (iv) an increase in cash outflows for general and administrative expense;

partially offset by (v) an increase in lease termination fees.

Investing Activities

Net cash used in investing activities is impacted by the nature, timing and magnitude of acquisition and disposition activity and improvements to and investments in our shopping centers, including capital expenditures associated with our value-enhancing reinvestment efforts.

During the six months ended June 30, 2020, our net cash used in investing activities decreased $23.3 million as compared to the corresponding period in 2019.

The decrease was primarily due to (i) a decrease of $77.6 million in acquisitions of real estate assets;

and (ii) a decrease of $11.4 million in improvements to and investments in real estate assets;

partially offset by (iii) a decrease of $48.5 million in net proceeds from sales of real estate assets;

and (iv) a $17.3 million decrease in net proceeds from sales of marketable securities, net of purchases.

During the nine months ended September 30, 2020, our net cash used in investing activities increased $29.7 million as compared to the corresponding period in 2019.

The increase was primarily due to (i) a decrease of $156.9 million in net proceeds from sales of real estate assets;

and (ii) a $13.3 million decrease in net proceeds from sales of marketable securities, net of purchases;

partially offset by (iii) a decrease of $76.2 million in acquisitions of real estate assets;

and (iv) a decrease of $64.3 million in improvements to and investments in real estate assets.

Improvements to and investments in real estate assets

During the six months ended June 30, 2020 and 2019, we expended $158.1 million and $169.5 million, respectively, on improvements to and investments in real estate assets.

In addition, during the six months ended June 30, 2020 and 2019, insurance proceeds of $3.6 million and $1.4 million, respectively, were received and included in improvements to and investments in real estate assets.

During the nine months ended September 30, 2020 and 2019, we expended $217.9 million and $282.2 million, respectively, on improvements to and investments in real estate assets.

In addition, during the nine months ended September 30, 2020 and 2019, insurance proceeds of $7.3 million and $5.0 million, respectively, were received and included in improvements to and investments in real estate assets.

Maintenance capital expenditures represent costs to fund major replacements and betterments to our properties.

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Such initiatives are tenant driven and focus on upgrading our centers with strong, best-in-class retailers and enhancing the overall merchandise mix and tenant quality of our Portfolio.

June 30, 2020, we had 52 in-process anchor space repositioning, redevelopment and outparcel development projects with an aggregate anticipated cost of $392.9 million, of which $215.6 million had been incurred as of June 30, 2020.

As of September 30, 2020, we had 54 in-process anchor space repositioning, redevelopment and outparcel development projects with an aggregate anticipated cost of $373.0 million, of which $198.1 million had been incurred as of September 30, 2020.

Acquisitions of and proceeds from sales of real estate assets

We continue to evaluate the market for acquisition opportunities and we may acquire shopping centers when we believe strategic opportunities exist, particularly where we can further concentrate our Portfolio in attractive retail submarkets and optimize the quality and long-term growth rate of our asset base.

During the six months ended June 30, 2020, we acquired one land parcel for $2.0 million, including transaction costs.

During the six months ended June 30, 2019, we acquired two shopping centers, two leases at an existing shopping center and one land parcel for an aggregate purchase price of $79.6 million, including transaction costs.

During the nine months ended September 30, 2020, we acquired two land parcels for $3.4 million, including transaction costs.

During the nine months ended September 30, 2019, we acquired two shopping centers, two leases at an existing shopping center and one land parcel for an aggregate purchase price of $79.6 million, including transaction costs.

We may also dispose of properties when we believe value has been maximized, where there is downside risk, or where we have limited ability or desire to build critical mass in a particular submarket.

During the six months ended June 30, 2020, we disposed of five shopping centers and two partial shopping centers for aggregate net proceeds of $45.7 million.

In addition, during the six months ended June 30, 2020, we received aggregate net proceeds of $0.9 million from previously disposed assets.

During the six months ended June 30, 2019, we disposed of six shopping centers and three partial shopping centers for aggregate net proceeds of $94.8 million.

In addition, during the six months ended June 30, 2019, we received aggregate net proceeds of $0.3 million from previously disposed assets.

During the nine months ended September 30, 2020, we disposed of eight shopping centers, three partial shopping centers and one land parcel for aggregate net proceeds of $81.9 million.

In addition, during the nine months ended September 30, 2020, we received aggregate net proceeds of $1.0 million from previously disposed assets.

During the nine months ended September 30, 2019, we disposed of 18 shopping centers and four partial shopping centers for aggregate net proceeds of $239.4 million.

In addition, during the nine months ended September 30, 2019, we received aggregate net proceeds of $0.4 million from previously disposed assets.

Financing Activities

Net cash provided by (used in) financing activities is impacted by the nature, timing and magnitude of issuances and repurchases of debt and equity securities, as well as principal payments associated with our outstanding indebtedness and distributions made to our common stockholders.

During the six months ended June 30, 2020, our net cash provided by financing activities increased $384.2 million as compared to the corresponding period in 2019.

The increase was primarily due to (i) a $409.7 million increase in debt borrowings, net of repayments, partially offset by (ii) an increase of $12.3 million in repurchases of common stock;

(iii) an increase of $10.6 million in deferred financing and debt extinguishment costs;

and (iv) an increase of $2.6 million in distributions to common stockholders.

The increase in debt borrowings is primarily related to amounts drawn on our Revolving Facility in order to bolster liquidity in response to COVID-19 and net proceeds from the issuance of our 4.050%, Senior Notes due 2030, net of amounts repaid under the Revolving Facility and the repurchase of a portion of our 3.875%, Senior Notes due 2022.

During the nine months ended September 30, 2020, our net cash provided by financing activities increased $715.0 million as compared to the corresponding period in 2019.

The increase was primarily due to (i) a $657.7 million increase in debt borrowings, net of repayments;

and (ii) an $80.9 million decrease in distributions to common stockholders;

partially offset by (iii) a $12.3 million increase in repurchases of common stock;

and (iv) an $11.3 million increase in deferred financing and debt extinguishment costs.

The increase in debt borrowings is primarily related to net proceeds from the issuances of our 4.050% Senior Notes due 2030, net of the repurchases of a portion of our 3.875% Senior Notes due 2022.

Contractual Obligations

Our contractual obligations relate to our debt, including unsecured notes payable and unsecured credit facilities, with maturities ranging from two years to 10 years, in addition to non-cancelable operating leases pertaining to our ground leases and administrative office leases.

The following table summarizes our debt maturities (excluding extension options), interest payment obligations (excluding debt premiums and discounts and deferred financing costs) and obligations under non-cancelable operating leases (excluding renewal options) as of June 30, 2020:

Our contractual obligations relate to our debt, including unsecured notes payable and unsecured credit facilities, with maturities ranging from one year to 10 years, in addition to non-cancelable operating leases pertaining to our ground leases and administrative office leases.

Contractual Obligations

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(1) Debt includes scheduled maturities for unsecured notes payable and unsecured credit facilities.

(2) As of June 30, 2020, we incur variable rate interest on (i) $145.5 million outstanding under our Revolving Facility;

(ii) a $350.0 million term loan;

(2) As of September 30, 2020, we incur variable rate interest on (i) a $350.0 million term loan;

(iii) a $300.0 million term loan;

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“Quantitative and Qualitative Disclosures” in our annual report on Form 10-K for the year ended December 31, 2019 for a further discussion of these and other factors that could impact interest payments.

Interest payments for these variable rate loans are presented using rates (including the impact of interest rate swaps) as of June 30, 2020.

Interest payments for these variable rate loans are presented using rates (including the impact of interest rate swaps) as of September 30, 2020.

Non-GAAP Performance Measures

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NAREIT FFO (defined hereafter) is a supplemental, non-GAAP performance measure utilized to evaluate the operating and financial performance of real estate companies.

The National Association of Real Estate Investment Trusts (“NAREIT”) defines funds from operations (“FFO”) as net income (loss), calculated in accordance with GAAP, excluding (i) depreciation and amortization related to real estate, (ii) gains and losses from the sale of certain real estate assets, (iii) gains and losses from change in control, (iv) impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity and (v) after adjustments for unconsolidated joint ventures calculated to reflect FFO on the same basis.

Considering the nature of our business as a real estate owner and operator, we believe that NAREIT FFO is useful to investors in measuring our operating and financial performance because the definition excludes items included in net income that do not relate to or are not indicative of our operating and financial performance, such as depreciation and amortization related to real estate, and items which can make periodic and peer analyses of operating and financial performance more difficult, such as gains and losses from the sale of certain real estate assets and impairment write-downs.

Our reconciliation of net income to NAREIT FFO for the three and six months ended June 30, 2020 and 2019 is as follows (in thousands, except per share amounts):

Three Months Ended June 30, Six Months Ended June 30,

depreciable real estate held by the entity and (v) after adjustments for unconsolidated joint ventures calculated to reflect FFO on the same basis.

Our reconciliation of net income to NAREIT FFO for the three and nine months ended September 30, 2020 and 2019 is as follows (in thousands, except per share amounts):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

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Same property NOI excludes (i) corporate level expenses (including general and administrative), (ii) lease termination fees, (iii) straight-line rental income, net, (iv) accretion of above- and below-market leases and tenant inducements, net, (v) straight-line ground rent expense, and (vi) income (expense) associated with our captive insurance company.

properties, such as depreciation and amortization and corporate level expenses (including general and administrative), and because it eliminates disparities in NOI due to the acquisition or disposition of properties or the stabilization of completed new development properties during the period presented and therefore provides a more consistent metric for comparing the operating performance of our real estate between periods.

Comparison of the Three and Six Months Ended June 30, 2020 to the Three and Six Months Ended June 30, 2019

Three Months Ended June 30, Six Months Ended June 30,

Considering the nature of our business as a real estate owner and operator, we believe that same property NOI is useful to investors in measuring the operating performance of our property portfolio because the definition excludes various items included in net income that do not relate to, or are not indicative of, the operating performance of our properties, such as depreciation and amortization and corporate level expenses (including general and administrative), and because it eliminates disparities in NOI due to the acquisition or disposition of properties or the stabilization of completed new development properties during the period presented and therefore provides a more consistent metric for comparing the operating performance of our real estate between periods.

Comparison of the Three and Nine Months Ended September 30, 2020 to the Three and Nine Months Ended September 30, 2019

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 Change 2020 2019 Change

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The following table provides a reconciliation of net income to same property NOI for the periods presented (in thousands):

Ended June 30, Six Months

Ended June 30,

Ended September 30, Nine Months

Ended September 30,

2020 2019 2020 2019

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Off-Balance Sheet Arrangements

We had no material off-balance sheet arrangements as of June 30, 2020.

We had no material off-balance sheet arrangements as of September 30, 2020.

Quantitative and Qualitative Disclosures about Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis