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Item 7. Management’s Discussion and Analysis

2023-02-08 compared with 2022-02-10 · 204 added, 265 removed, 350 unchanged (57% of the section changed)

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Financial Statements and Supplementary Data” of this report.

We are an equity real estate investment trust ("REIT") specializing in the ownership, management, and redevelopment of high quality retail and mixed-use properties located primarily in densely populated and affluent communities in strategically selected metropolitan markets in the Northeast and Mid-Atlantic regions of the United States, California, and South Florida.

Federal Realty Investment Trust (the "Parent Company" or the "Trust") is an equity real estate investment trust ("REIT").

Federal Realty OP LP (the "Operating Partnership") is the entity through which the Trust conducts substantially all of its operations and owns substantially all of its assets.

The Trust owns 100% of the limited liability company interest of, is sole member of, and exercises exclusive control over Federal Realty GP LLC (the "General Partner"), which in turn, is the sole general partner of the Operating Partnership.

Unless stated otherwise or the context otherwise requires, "we," "our," and "us" means the Trust and its business and operations conducted through its directly and indirectly owned subsidiaries, including the Operating Partnership.

The Parent Company specializes in the ownership, management, and redevelopment of high quality retail and mixed-use properties located primarily in communities where we believe demand exceeds supply, in strategically selected metropolitan markets in the Northeast and Mid-Atlantic regions of the United States, California, and South Florida.

As of December 31, 2022, we owned or had a majority interest in community and neighborhood shopping centers and mixed-use properties which are operated as 103 predominantly retail real estate projects comprising approximately 25.8 million square feet.

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We have paid quarterly dividends to our shareholders continuously since our founding in 1962 and have increased our dividends per common share for 55 consecutive years.

Summary Financial Information

The following table includes select financial information that is helpful in understanding the trends in financial condition and the results of operations discussed throughout this Item 7.

Financial Statements and Supplementary Data.”

Year Ended December 31,

2021 2020 2019

(In thousands, except per share data and ratios)

Operating Data:

Rental income $ 948,842 $ 832,171 $ 932,738

Property operating income (1) $ 634,607 $ 545,332 $ 637,030

Gain on sale of real estate and change in control of interest, net of tax $ 89,950 $ 98,117 $ 116,393

Operating income $ 394,725 $ 289,524 $ 470,911

Net income available for common shareholders $ 253,456 $ 123,664 $ 345,824

Net cash provided by operating activities $ 471,352 $ 369,929 $ 461,919

Net cash used in investing activities $ (660,118) $ (368,383) $ (316,532)

Net cash (used in) provided by financing activities $ (452,967) $ 661,736 $ (100,105)

Earnings per common share, diluted:

Net income available to common shareholders $ 3.26 $ 1.62 $ 4.61

Dividends declared per common share $ 4.26 $ 4.22 $ 4.14

Funds from operations available to common shareholders (2) $ 434,743 $ 333,849 $ 465,819

Funds from operations available for common shareholders, per diluted share (2) $ 5.57 $ 4.38 $ 6.17

EBITDAre (3) $ 589,792 $ 501,813 $ 599,567

Ratio of EBITDAre to combined fixed charges and preferred share dividends (3)(4) 3.6x 2.7x 4.2x

As of December 31,

2021 2020 2019

(In thousands)

Balance Sheet Data:

Real estate, at cost $ 9,422,062 $ 8,582,870 $ 8,298,132

Total assets $ 7,622,320 $ 7,607,624 $ 6,794,992

Total debt $ 4,047,547 $ 4,291,375 $ 3,356,594

Total shareholders’ equity $ 2,663,148 $ 2,548,747 $ 2,636,132

Number of common shares outstanding 78,603 76,727 75,541

(1) Property operating income is a non-GAAP measure that consists of rental income and mortgage interest income, less rental expenses and real estate taxes.

This measure is used internally to evaluate the performance of property operations and we consider it to be a significant measure.

Property operating income should not be considered an alternative measure of operating results or cash flow from operations as determined in accordance with GAAP.

The reconciliation of operating income to property operating income for 2021, 2020, and 2019 is as follows:

2021 2020 2019

(in thousands)

Operating income $ 394,725 $ 289,524 $ 470,911

General and administrative 49,856 41,680 42,754

Depreciation and amortization 279,976 255,027 239,758

Impairment charge — 57,218 —

Gain on sale of real estate and change in control of interest, net of tax (89,950) (98,117) (116,393)

Property operating income $ 634,607 $ 545,332 $ 637,030

(2) Funds from operations "FFO" is a supplemental non-GAAP measure.

See "Liquidity and Capital Resources" in this Item 7.

for further discussion.

(3) EBITDA for Real Estate ("EBITDAre") is a non-GAAP measure that NAREIT defines as:

net income computed in accordance with GAAP plus net interest expense, income tax expense, depreciation and amortization, gain or loss on sale of real estate, impairments of real estate, and adjustments to reflect the entity's share of EBITDAre of unconsolidated

We calculate EBITDAre consistent with the NAREIT definition.

As EBITDA is a widely known and understood measure of performance, management believes EBITDAre represents an additional non-GAAP performance measure, independent of a company's capital structure that will provide investors with a uniform basis to measure the enterprise value of a company.

EBITDAre also approximates a key performance measure in our debt covenants, but it should not be considered an alternative measure of operating results or cash flow from operations as determined in accordance with GAAP.

The reconciliation of net income to EBITDAre for the periods presented is as follows:

2021 2020 2019

(In thousands)

Net income $ 269,081 $ 135,888 $ 360,542

Interest expense 127,698 136,289 109,623

Other interest income (809) (1,894) (1,266)

Early extinguishment of debt — 11,179 —

Provision (benefit) for income tax 118 (194) 772

Depreciation and amortization 279,976 255,027 239,758

Gain on sale of real estate and change in control of interest (89,950) (98,117) (116,779)

Impairment charge — 57,218 —

Adjustments of EBITDAre of unconsolidated affiliates 3,678 6,417 6,917

EBITDAre $ 589,792 $ 501,813 $ 599,567

(4) Fixed charges consist of interest on borrowed funds (including capitalized interest), amortization of debt discount/ premiums and debt costs, costs related to the early extinguishment of debt, and the portion of rent expense representing an interest factor.

Excluding the $11.2 million early extinguishment of debt charge from fixed charges in 2020, the ratio of EBITDAre to combined fixed charges and preferred share dividends is 2.9x.

Excluding the $11.9 million charge related to the buyout of the Kmart lease at Assembly Square Marketplace in 2019, our ratio of EBITDAre to combined fixed charges and preferred share dividends remained 4.2x.

Impacts of COVID-19 Pandemic

We continue to monitor and address risks related to the COVID-19 pandemic.

Since March 2020 when the World Health Organization characterized COVID-19 as a global pandemic, we have been and continue to be impacted by COVID-19 and the actions taken by federal, state, and local government to prevent its spread.

These actions included the closure of nonessential businesses and ordering residents to generally stay at home at the onset of the pandemic, phased reopenings and capacity limitations, and now generally lifted restrictions.

While the overall economy is showing signs of recovery from the initial impacts of COVID-19, workforce shortages, global supply chain bottlenecks and shortages, inflation, as well as COVID-19 variants are impacting the pace of recovery.

Closures and restrictions, along with general concern over the spread of COVID-19, required a significant number of tenants to close their operations or to significantly limit the amount of business they are able to conduct, which impacted their ability to timely pay rent as required under our leases and also caused many tenants to close their business permanently.

While improving, our cash flow and results of operations in the year ended December 31, 2021 continued to be materially adversely impacted, with vacancy levels remaining above historical levels.

Impacts of COVID-19 Pandemic and General Economic Conditions

Given the ongoing workforce shortages, global supply chain bottlenecks and shortages, and high inflation, we continue to monitor and address risks related to the COVID-19 pandemic and the general state of the economy.

While improving, our cash flow and results of operations in the year ended December 31, 2022 continued to be negatively impacted largely due to vacancy levels remaining above historical levels.

Although virtually all of our leases required the tenants to pay rent even while they were not operating, we entered into numerous agreements to abate, defer, and/or restructure tenant rent payments for varying periods of time, all with the objective of collecting as much cash as reasonably possible and maintaining occupancy to the maximum extent.

We believe those actions will position many of our tenants to be able to return to payment of contractual rent as soon as possible after the impacts from the pandemic have subsided.

We believe that the actions we have taken to improve our financial position and maximize our liquidity, as described further in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2020 Annual Report on Form 10-K, will continue to mitigate the impact to our cash flow caused by tenants not timely paying contractual rent.

Throughout 2021, we continued to maintain levels of cash significantly in excess of the cash balances we have historically maintained which has adversely impacted our financial results;

however, we believe that such action was prudent to position us with what we expect to be sufficient liquidity to allow us to continue fully operating as our operating revenues begin to return to more typical levels.

We believe those actions positioned many of our tenants to be able to return to payment of contractual rent as soon as possible after the initial impacts from the pandemic started to subside.

During 2022, we have continued to see improvements in overall cash collections from tenants with collection rates nearing pre-pandemic levels.

We have also taken multiple steps over the past two years to strengthen our financial position, maximize liquidity, and to provide maximum flexibility during these uncertain times, including maintaining levels of cash in excess of the cash balances we have historically maintained.

On October 5, 2022, we amended our revolving credit facility increasing the borrowing capacity from $1.0 billion to $1.25 billion and extending the maturity date to April 5, 2027, plus two six-month extensions at our option.

Additionally, we have an option (subject to bank approval) to increase the credit facility through an accordion feature to $1.75 billion.

We also amended our unsecured term loan borrowing an additional $300.0 million.

As of December 31, 2022, there is no outstanding balance on our $1.25 billion revolving credit facility, and we have cash and cash equivalents of $85.6 million.

Additional discussion of the impact of COVID-19 on our results and long-term operations can be found throughout Item 7 and Item 1A .

Additional discussion of the impact of current economic conditions and the COVID-19 pandemic on our results and long-term operations can be found throughout Item 7 and Item 1A .

Risk Factors.

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We actively endeavor to operate and develop our properties in a sustainable, responsible, and effective manner with the objective being to drive long-term growth and aid in value creation for our shareholders, tenants, employees, and local communities.

We have aligned our program and efforts with the United Nations Sustainable Development Goals, as described in our ESG Policy and our 2020 Corporate Responsibility Report, which are provided only for informational purposes on our website and not incorporated herein.

We have aligned our program and efforts with the United Nations Sustainable Development Goals, as described in our ESG Policy and our 2021 Corporate Responsibility Report, which are provided only for informational purposes on our website and not incorporated by reference herein.

Our development activities have been heavily focused on owning, developing and operating properties that are certified under the U.S.

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This certification assesses a building’s impact on seven distinct categories related to overall health and well-being.

We are also committed to implementing sustainable business practices at our operating properties that focus on energy efficiency, water conservation and waste minimization and have established energy and greenhouse gas (GHG) emissions reduction targets.

To achieve these targets, we are actively addressing energy efficiency projects on site such as upgrading to LED lighting;

and to address emissions we are procuring green energy, reducing electric consumption, and increasing our onsite solar generation capacity.

We have installed on-site solar systems at 25 of our properties with a capacity of over 13 MW with more projects actively in progress.

Our current capacity placed us in the top 5 among real estate companies for onsite capacity in the most recent Solar Energy Industry Association’s annual Solar Means Business Report.

We are also actively installing electric vehicle car charging stations in numerous properties throughout our portfolio.

We are also committed to implementing sustainable business practices at our operating properties that focus on energy efficiency, water conservation and waste minimization and have established greenhouse gas (GHG) emissions reduction targets in accordance with the Science-Based Targets initiative as well as energy reduction targets.

To achieve these targets, we are actively addressing energy efficiency projects on site such as upgrading to LED lighting, procuring green energy, reducing electric consumption, and increasing our onsite solar generation capacity.

We have installed on-site solar systems at 25 of our properties with a capacity of 14 MW with more projects actively in progress.

We also installed electric vehicle car charging stations in numerous properties throughout our portfolio.

We currently have over 300 charging stations in operation with more under construction.

We also understand that we face risks presented by climate change and are working to evaluate our risk exposure.

In our 2020 Corporate Responsibility Report, we provided a disclosure pursuant to the Task Force on Climate Related Financial Disclosure and we intend to provide that disclosure annually.

In our 2021 Sustainability report, we provided a disclosure pursuant to the Task Force on Climate Related Financial Disclosure and we intend to provide that disclosure annually.

We are also highly committed to our employees and fostering a work environment that promotes growth, development and personal well-being.

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If leases currently classified as not probable are subsequently changed to probable, any lease receivables (including straight-line rent receivables) are re-instated with a corresponding increase to rental income.

Since March 2020, federal, state, and local governments have taken various actions to mitigate the spread of COVID-19.

These actions included the closure of nonessential businesses and ordering residents to generally stay at home at the onset of the pandemic, phased re-openings and capacity limitations, and now generally lifted restrictions.

Closures and restrictions, along with the general concern over the spread of COVID-19, required a significant number of tenants to close their operations or to significantly limit the amount of business they were able to conduct, which impacted their ability to timely pay rent as required under our leases and also caused many tenants to close their business permanently.

As a result, we revised our collectibility assumptions for many of our tenants most significantly impacted by COVID-19.

Accordingly, during the years ended December 31, 2021 and 2020, we recognized collectibility related adjustments of $24.0 million and $106.6 million, respectively.

This includes changes in our collectibility assessments from probable to not probable, disputed rents, and any rent abatements directly related to COVID-19, as well as the write-off of $0.7 million and $12.7 million, respectively of straight-line rent receivables related to tenants changed to a cash basis of revenue recognition during the years ended December 31, 2021 and 2020.

Our collection of rents has continued to improve, including collecting rents related to prior periods.

As a result, our collectibility related adjustments for the year ended December 31, 2022 resulted in an increase to rental income of $4.1 million, as compared to a $24.0 million decrease to rental income during the year ended December 31, 2021, which reflected lower levels of cash collections and elevated levels of rent abatements and disputes directly related to COVID-19.

As of December 31, 2022 and 2021, the revenue from approximately 31% and 34% of our tenants (based on total commercial leases), respectively, is being recognized on a cash basis.

As of December 31, 2022 and 2021, our straight-line rent receivables balance was $126.6 million and $110.7 million, respectively, and is included in "accounts and notes receivable, net" on our consolidated balance sheet.

As of December 31, 2022, we executed rent deferral agreements related to the COVID-19 pandemic representing approximately $48 million of rent.

We have subsequently collected approximately $35 million of those amounts previously deferred.

Other revenue recognition policies

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If a tenant vacates its space prior to contractual termination of its lease, the unamortized balance of any acquired lease value is written off to rental income.

During 2021, we acquired properties with a total purchase price of $440.9 million.

$4.6 million, or 1% of the total purchase price was allocated to above market lease assets and $57.3 million, or 13% was allocated to below market lease liabilities.

During 2022, we acquired properties included in our consolidated financial statements with a total purchase price of $443.1 million.

$1.9 million, or less than 1% of the total purchase price was allocated to above market lease assets and $38.7 million, or 9% was allocated to below market lease liabilities.

If the amounts allocated in 2022 to below market lease liabilities and building assets were each reduced by 5% of the total purchase price, annual below market lease liability amortization increasing rental income would decrease by approximately $2.1 million (using the weighted average life of below market liabilities at each respective acquired property) and annual depreciation expense would decrease by approximately $0.6 million (using a depreciable life of 35 years).

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See Note 2 to the consolidated financial statements.

2021 Acquisitions and Dispositions

On January 4, 2021, we acquired our partner's 20% interest in our joint venture arrangement related to the Pike & Rose hotel for $2.3 million, and repaid the $31.5 million mortgage loan encumbering the hotel.

As a result of the transaction, we gained control of the hotel, and effective January 4, 2021, we have consolidated this asset.

We also recognized a gain on acquisition of the controlling interest of $2.1 million related to the difference between the carrying value and fair value of the previously held equity interest.

On February 22, 2021, we acquired the fee interest at our Mount Vernon Plaza property in Alexandria, Virginia for $5.6 million.

As a result of this transaction, the "operating lease right of use assets" and "operating lease liabilities" on our consolidated balance sheet decreased by $9.8 million.

We now own the entire fee interest on this property.

2022 Acquisitions, Dispositions, and Other Transactions

During the year ended December 31, 2022, we acquired the following properties:

Date Acquired Property City/State Gross Leasable Area (GLA) Ownership % Gross Value

Date Acquired Property City/State Gross Leasable Area (GLA) Gross Value

(in square feet) (in millions)

April 30, 2021 Chesterbrook (1) McLean, Virginia 90,000 80 % $ 32.1 (2)

June 1, 2021 Grossmont Center (1) La Mesa, California 933,000 60 % $ 175.0 (3)

June 14, 2021 Camelback Colonnade (1) Phoenix, Arizona 642,000 98 % $ 162.5 (4)

June 14, 2021 Hilton Village (1) Scottsdale, Arizona 93,000 98 % $ 37.5 (5)

September 2, 2021 Twinbrooke Shopping Centre Fairfax, Virginia 106,000 100 % $ 33.8 (6)

(1) These acquisitions were completed through newly formed joint ventures, for which we own the controlling interest listed above, and therefore, these properties are consolidated in our financial statements.

(2) Approximately $1.9 million and $0.6 million of net assets acquired were allocated to other assets for "acquired lease costs" and "above market leases," respectively, and $8.0 million of net assets acquired were allocated to other liabilities for "below market leases."

(3) Approximately $12.3 million and $2.6 million of net assets acquired were allocated to other assets for "acquired lease costs" and "above market leases," respectively, and $14.7 million of net assets acquired were allocated to other liabilities for "below market leases."

(4) Approximately $11.6 million of net assets acquired were allocated to other assets for "acquired lease costs" and $28.3 million were allocated to other liabilities for "below market leases."

(5) The land is controlled under a long-term ground lease that expires on December 31, 2076, for which we have recorded a $10.4 million "operating lease right of use asset" (net of a $1.3 million above market liability) and an $11.6 million "operating lease liability." Approximately $2.7 million and $1.1 million of net assets acquired were allocated to other assets for "acquired lease costs" and "above market leases," respectively, and $3.6 million were allocated to other liabilities for "below market leases."

April 20, 2022 &

July 27, 2022 Kingstowne Towne Center Kingstowne, Virginia 410,000 $ 200.0 (1)

July 18, 2022 Hilton Village (office building) Scottsdale, Arizona 212,000 $ 53.6 (2)

July 27, 2022 The Shops at Pembroke Gardens Pembroke Pines, Florida 391,000 $ 180.5 (3)

November 18, 2022 Hoboken (301 Washington St.) Hoboken, New Jersey N/A $ 9.0 (4)

(1) Approximately $11.3 million and $0.3 million of net assets were allocated to other assets for "acquired lease costs" and "above market leases," respectively, and $20.2 million of net assets acquired were allocated to other liabilities for "below market leases."

(2) This building is adjacent to, and will be operated as part of our Hilton Village property.

The land is controlled under a long-term ground lease that expires on September 30, 2075, for which we have recorded a $6.5 million "operating lease right of use asset" (net of a $0.8 million above market liability) and a $7.3 million "operating lease liability." Approximately $8.9 million of net assets acquired were allocated to other assets for "acquired lease costs" and $0.1 million of net assets acquired were allocated to other liabilities for "below market leases."

(3) Approximately $16.3 million and $1.6 million of net assets acquired were allocated to other assets for "acquired lease costs" and "above market leases," respectively, and $18.4 million of net assets acquired were allocated to other liabilities for "below market leases."

During the year ended December 31, 2021, we sold two properties and a portion of three properties for a total sales price of $141.6 million, which resulted in a net gain of $88.3 million.

(4) This property, that we own a 90% ownership interest in, was acquired through our Hoboken joint venture, and is in the beginning stages of redevelopment.

On October 6, 2022, we acquired a 47.5% net interest in an unconsolidated joint venture that owns two shopping centers for a combined price of $58.9 million.

On the date of acquisition, the properties had combined mortgage debt of $76.1 million, of which, our share is approximately $36.2 million.

Approximately $8.0 million and $2.0 million of net assets acquired were allocated to other assets for "acquired lease costs" and "above market leases," respectively, and $17.1 million of net assets acquired were allocated to other liabilities for "below market leases." Additional information on the properties is listed below:

Property City/State Gross Leasable Area (GLA) Purchase Price

(in square feet) (in millions)

Chandler Festival Chandler, Arizona 355,000 $ 40.8

Chandler Gateway Chandler, Arizona 262,000 $ 18.1

During the year ended December 31, 2022, we sold two residential properties (one included an adjacent retail pad), one retail property, one parcel of land, and one portion of a property for sales prices totaling $136.2 million, resulting in net gains totaling approximately $84.1 million.

Other Transactions

On July 13, 2022, we acquired the 21.8% redeemable noncontrolling interest in the partnership that owns our Plaza El Segundo shopping center for $23.6 million, bringing our ownership interest to 100%.

On August 25, 2022, we entered into a tenancy in common ("TIC") agreement with our partner in the partnership that owned Escondido Promenade.

As a result, the Company owns a 77.7% TIC interest, and our former partner owns the remaining 22.3% interest.

While the Company controlled and consolidated Escondido Promenade under the previous partnership arrangement, control is shared under the TIC agreement.

The transaction is considered a transfer of our previous controlling partner interest in exchange for a non-controlling TIC interest.

Accordingly, we deconsolidated the entity and recorded our TIC interest at fair value as an equity method investment.

We recognized a $70.4 million "gain on deconsolidation of VIE" on our consolidated statements of operations, which is the difference between the net carrying value of the deconsolidated entity and the fair value of our TIC interest.

As of August 25, 2022, the fair value of our investment in the entity was $110.0 million, and is included in "investment in partnerships" on our consolidated balance sheet as of December 31, 2022.

As a part of this transaction, we made a $3.5 million loan to our co-owner, which is included in "accounts and notes receivable, net" on our consolidated balance sheet at December 31, 2022.

In addition, we entered into a purchase option agreement to acquire the TIC interest from our co-owner, which was secured through an option payment of $1.5 million, and allows us to exercise our option at any time between February 1, 2023 and March 15, 2023.

2022 Significant Debt and Equity Transactions

On February 14, 2022, we replaced our existing at-the-market (“ATM”) equity program with a new ATM equity program in which we may from time to time offer and sell common shares having an aggregate offering price of up to $500.0 million.

On May 7, 2021, we amended this ATM equity program, which reset the limit to $500.0 million.

The new ATM equity program also allows shares to be sold through forward sales contracts.

We intend to use the net proceeds to fund potential acquisition opportunities, fund our development and redevelopment pipeline, repay indebtedness and/or for general corporate purposes.

Our ATM equity program also allows shares to be sold through forward sales contracts.

We intend to use the net proceeds from ATM equity program issuances to fund potential acquisition opportunities, fund our development and redevelopment pipeline, repay indebtedness and/or for general corporate purposes.

During 2022, we settled the remaining forward sales agreements entered into during 2021 by issuing 2,203,655 common shares for net proceeds of $259.4 million, and consequently, we have no outstanding open forward sales agreements as of December 31, 2022.

For the year ended December 31, 2022, we issued 430,473 common shares at a weighted average price per share of $111.49 for net cash proceeds of $47.4 million including paying $0.5 million in commissions and $0.1 million in additional offering expenses related to the sales of these common shares.

We also entered into forward sales contracts for the year ended December 31, 2021 for 2,999,955 common shares under our ATM equity program at a weighted average offering price of $120.22.

During 2021, we settled a portion of the forward sales agreements entered into during the year by issuing 796,300 common shares for net proceeds of $85.7 million.

The forward price that we will receive upon physical settlement of the remaining forward sale agreements is subject to the adjustment for (i) commissions, (ii) a floating interest rate factor equal to a specified daily rate less a spread, (iii) the forward purchasers' stock borrowing costs and (iv) scheduled dividends during the term of the forward sale agreements.

The remaining open forward shares may be settled at any time on or before multiple required settlement dates ranging from June 2022 to December 2022.

As of December 31, 2022, we had the capacity to issue up to $452.0 million in common shares under our ATM equity program.

On April 16, 2021, we repaid $100.0 million of our existing $400.0 million term loan, amended the agreement on the remaining $300.0 million to lower the current spread over LIBOR from 135 basis points to 80 basis points based on our current credit rating, and extended the initial maturity date to April 16, 2024, along with two one-year extensions, at our option.

In 2021, we repaid the following mortgage loans, at par, prior to their original maturity date:

Property Repayment Date Principal

(in millions)

Sylmar Towne Center February 5, 2021 $ 16.2

Plaza Del Sol September 1, 2021 $ 7.9

Montrose Crossing October 12, 2021 $ 64.1

The AVENUE at White Marsh November 2, 2021 $ 52.7

On June 29, 2022, we repaid the $16.1 million mortgage loan on one of the buildings at our Hoboken property, at par.

On October 5, 2022, we amended our revolving credit facility, increasing the borrowing capacity from $1.0 billion to $1.25 billion, extending the maturity date to April 5, 2027, plus two six-month extension options, transitioning the interest rate provisions from LIBOR to the secured overnight financing rate ("SOFR"), and adjusting the spread for SOFR based loans.

Our SOFR based loans bear interest at Daily Simple SOFR or Term SOFR as defined in the credit agreement plus 0.10% plus a spread, based on our credit rating.

The current spread is 77.5 basis points.

In addition, we have an option (subject to bank approval) to increase the credit facility through an accordion feature to $1.75 billion.

On October 5, 2022, we also amended our unsecured term loan and borrowed an additional $300.0 million, bringing the total outstanding to $600.0 million.

The term loan amendment also transitioned the interest rate provisions from LIBOR to SOFR.

This SOFR based loan bears interest at Term SOFR as defined in the agreement, plus 0.10%, plus an 85 basis point spread, based on our current credit rating.

The net proceeds from the term loan were used to repay the $267.0 million outstanding balance on the revolving credit facility and for general corporate purposes.

2023 Acquisition

On January 31, 2023, we acquired the 180,000 square foot portion of Huntington Square shopping center that was not previously owned, as well as the fee interest in the land underneath the portion of the shopping center which we control under a long-term ground lease for $35.5 million.

Capitalized Costs

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We capitalized external and internal costs related to leasing activities of $18 million and $4 million, respectively, for 2022 and $19 million and $3 million, respectively, for 2021.

The amount of capitalized

internal costs for salaries and related benefits for development and redevelopment activities, other property improvements, and leasing activities were $10 million, $3 million, and $3 million, respectively, for 2021 and $9 million, $3 million, and $2 million, respectively, for 2020.

The amount of capitalized internal costs for salaries and related benefits for development and redevelopment activities, other property improvements, and leasing activities were $10 million, $3 million, and $4 million, respectively, for 2022 and $10 million, $3 million, and $3 million, respectively, for 2021.

Total capitalized costs were $425 million for 2022 and $456 million for 2021, respectively.

Corporate Reorganization

In January of 2022, we completed the UPREIT reorganization described in the Explanatory Note at the beginning of this Annual Report.

Prior to the UPREIT Reorganization, our business was conducted through the Predecessor.

This Annual Report pertains to the business and results of operations of the Predecessor for its fiscal year ended December 31, 2021.

As a result of the UPREIT reorganization, the Parent Company became the successor issuer to the Predecessor under the Exchange Act.

The Parent Company and the Partnership have elected to co-file this Annual Report of the Predecessor to ensure continuity of information to investors.

For additional information on our UPREIT reorganization, please see our Current Reports on Form 8-K filed with the SEC on January 3, 2022 and January 5, 2022.

In January 2022, we completed a reorganization into an umbrella partnership real estate investment trust, or "UPREIT." For additional information on our UPREIT reorganization, please see our Current Reports on Form 8-K filed with the SEC on January 3, 2022 and January 5, 2022, as well our 2021 Annual Report on Form 10-K filed on February 10, 2022.

Immediately following the reorganization, the Parent Company had the same consolidated assets and liabilities as Federal Realty Investment Trust immediately before the reorganization.

The Parent Company exercises exclusive control over the General Partner and does not have assets or liabilities other than its investment in the Operating Partnership.

As a result, the UPREIT reorganization represented a merger of entities under common control in accordance with accounting principles generally accepted in the United States ("GAAP").

Accordingly, the accompanying consolidated financial statements including the notes thereto, are presented as if the UPREIT reorganization had occurred at the earliest period presented.

Our long-term growth strategy is focused on growth in earnings, funds from operations, and cash flows primarily through a combination of the following:

• growth in our comparable property portfolio,

• growth in our portfolio from property development and redevelopments, and

• growth in our portfolio from property redevelopments and expansions, and

• expansion of our portfolio through property acquisitions.

While the ongoing COVID-19 pandemic is impacting us in the short-term, our long-term focus has not changed.

While the general economic effects of the elevated levels of inflation, rising interest rates, and the COVID-19 pandemic are impacting us in the short-term, our long-term focus has not changed.

Our comparable property growth is primarily driven by increases in rental rates on new leases and lease renewals, changes in portfolio occupancy, and the redevelopment of those assets.

Over the long-term, the infill nature and strong demographics of our properties provide a strategic advantage allowing us to maintain relatively high occupancy and generally increase rental rates.

However, our occupancy levels and ability to increase rental rates will be adversely impacted in the short-term as a result of COVID-19.

We believe the locations and nature of our centers and diverse tenant base partially mitigates any potential negative changes in the economic environment.

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At December 31, 2022, no single tenant accounted for more than 2.8% of annualized base rent.

Federal, state, and local governments have taken various actions to mitigate the spread of COVID-19, including initially ordering closures of non-essential businesses and ordering residents to generally stay at home.

While many of these restrictions have since been lifted, they required a significant number of tenants to close their operations or to significantly limit the amount of business they were able to conduct in their stores.

These closures and restrictions, along with general concerns over the spread of COVID-19 have impacted the tenants' ability to timely pay rent as required under our leases and also caused many tenants to close their business permanently.

While we are seeing signs of considerable improvement, these economic hardships have adversely impacted our business, and continue to have a negative effect on our financial results during 2021 .

With very few exceptions, our leases require tenants to continue to pay rent even while closed as a result of the pandemic, and while many tenants did not pay rents and other charges during a portion of 2020, the majority of our tenants have resumed paying all or a p ortion of their rent and/or other charges as their businesses were able to reopen.

The effects of the current economic conditions, the COVID-19 pandemic, and inflation continue to negatively impact our business with the largest current impacts being lower occupancy, supply chain disruptions, and higher interest costs.

At December 31, 2022, our commercial space is 92.8% occupied, which is below historical levels largely due to tenant failures as a result of the pandemic.

This lower occupancy will adversely impact our results until we can release the space and then commences paying rent, as well as limit future vacancies.

We are, however, experiencing strong demand for our commercial space as evidenced by the 2.0 million square feet of comparable space leasing we've completed in 2022, and the 1.7% spread between our leased rate of 94.5% and our occupied rate of 92.8%.

Our percentage of contractual rent actually collected has continued to increase since the low point in April 2020, including some tenants paying past due amounts.

As of December 31, 2021, we have entered into agreements with approximately 32% of our tenants (based on total commercial leases) to defer rent payments to later periods, largely through 2022, although some extend beyond.

While increasing monthly cash collection rates is a positive trend driven by government mandated restrictions gradually being lifted and improved outlook by some tenants, we expect that our rent collections will continue to be below our tenants' contractual rent obligations and historical levels into 2022, which will continue to adversely impact our results of operations.

We are also experiencing a lower level of occupancy than in our past, largely due to the pandemic, which will adversely impact our results until we can release the space and the tenant commences paying rent as well as limit future vacancies caused by the pandemic.

We are, however, experiencing strong demand for our commercial space as evidenced by the 2.1 million square feet of comparable space retail leasing we've completed in 2021, as well as our overall leased percentage at 93.6%, compared to our occupied percentage of only 91.1%.

We have begun to see impacts of overall supply chain disruptions affecting the broader economy, including significantly longer lead times, limited availability, and increased costs for certain construction and other materials that support our leasing, development, and redevelopment activities.

We continue to see impacts of overall supply chain disruptions affecting the broader economy, including significantly longer lead times, limited availability, and increased costs for certain construction and other materials that support our development and redevelopment activities.

If disruptions continue to worsen, they could result in extended timeframes and/or increased costs for completion of our projects and tenant build-outs, which could delay the commencement of rent payments under new leases.

Similarly, if our tenants experience significant disruptions in supply chains supporting their own products, or staffing issues due to labor shortages, their ability to pay rent may be adversely affected.

We continue to

monitor these macroeconomic developments and are working with our tenants and our vendors to limit the overall impact to our business.

The extent of such impact from COVID-19 will depend on future developments, which are highly uncertain and cannot be predicted.

Depending upon the duration of tenant closures, future operating restrictions, and the overall economic downturn resulting from COVID-19, we may find that even deferred rents are difficult to collect, and we may experience higher vacancy levels.

While the duration and severity of the economic impact resulting from COVID-19 is unknown, we seek to position the Trust to continue to participate in the resulting economic recovery.

Similarly, if our

tenants experience significant disruptions in supply chains supporting their own products, or staffing issues due to labor shortages, their ability to pay rent may be adversely affected.

We continue to monitor these macroeconomic developments and are working with our tenants and our vendors to limit the overall impact to our business.

The duration and severity of the economic impact from the current economic environment and the COVID-19 pandemic will depend on future developments, which are highly uncertain and cannot be predicted, however , we seek to position the Trust to continue to participate in the resulting economic recovery.

We continue to have several development projects in process being delivered as follows:

• Phase III of Assembly Row includes 277,000 square feet of office space, 56,000 square feet of retail space, and 500 residential units.

The expected costs for Phase III are between $465 million and $485 million with spaces being delivered beginning in the second quarter of 2021.

At December 31, 2021, 162,000 square feet of office space has been delivered, all of the units in the residential building have been delivered, and 23,000 square feet of retail space has opened.

• Phase III at Pike & Rose includes a 212,000 square foot office building (which includes 7,000 square feet of ground floor retail space).

The building is expected to cost between $128 million and $135 million.

At December 31, 2021, approximately 162,000 square feet of office and retail space has been delivered, of which approximately 45,000 square feet is our new corporate headquarters.

As of December 31, 2022, Phase III is substantially complete, with expected final costs between $475 million and $485 million.

• Phase III at Pike & Rose includes a 212,000 square foot office building (which includes 7,000 square feet of ground floor retail space and approximately 45,000 square feet is our new corporate headquarters).

As of December 31, 2022, Phase III is substantially complete, with final estimated costs between $130 million and $135 million.

• Phase IV at Pike & Rose is a 276,000 square foot office building (which includes 10,000 square feet of ground floor retail space).

Approximately 105,000 square feet of the office space is pre-leased to a single tenant.

Approximately 157,000 square feet of the office space is pre-leased to two tenants.

The building is expected to cost between $185 million and $200 million, and begin delivering in late 2023.

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• Throughout the portfolio, we currently have redevelopment projects underway with a projected total cost of approximately $228 million that we expect to stabilize over the next several years.

The above includes our best estimates based on information currently known, however, the completion of construction, final costs, and the timing of leasing and openings may be further impacted by the current environment including the duration and severity of the economic impacts of COVID-19 and supply chain disruptions affecting the broader economy.

The above includes our best estimates based on information currently known, however, the completion of construction, final costs, and the timing of leasing and openings may be further impacted by the current environment including the duration and severity of the economic impacts of COVID-19, supply chain disruptions, broader economic conditions, and inflation.

The development of future phases of Assembly Row, Pike & Rose and Santana Row will be pursued opportunistically based on, among other things, market conditions, tenant demand, and our evaluation of whether those phases will generate an appropriate financial return.

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Generally, our acquisitions are initially financed by available cash and/or borrowings under our revolving credit facility which may be repaid later with funds raised through the issuance of new equity or new long-term debt.

We may also finance our acquisitions through the issuance of common shares, preferred shares, or units in our operating partnership (see "Corporate Reorganization" discussion in this Item 7), as well as through assumed mortgages and property sales.

We may also finance our acquisitions through the issuance of common shares, preferred shares, or units in the Operating Partnership, as well as through assumed mortgages and property sales.

At December 31, 2022, the leasable square feet in our properties was 94.5% leased and 92.8% occupied.

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For the year ended December 31, 2022 and the comparison of 2022 and 2021, all or a portion of 91 properties, were considered comparable properties and seven were considered non-comparable properties.

For the year ended December 31, 2021, two portions of properties were moved from non-comparable properties to comparable properties, one

property and two portions of properties were moved from acquisitions to comparable properties, one property was moved from comparable properties to non-comparable properties, two properties and one portion of a property were removed from comparable properties as they were sold, and two portions of properties were removed from non-comparable properties, as they were sold, compared to the designations as of December 31, 2020.

While there is judgment surrounding changes in designations, we typically move non-comparable properties to comparable properties once they have stabilized, which is typically considered 90% physical occupancy or when the growth expected from the redevelopment has been included in the comparable periods.

For the year ended December 31, 2022, one property was moved from comparable properties to non-comparable properties, one property was moved from non-comparable properties to comparable properties, three properties were removed from comparable properties, as they were sold, and one property was removed from comparable properties, as it was deconsolidated, compared to the designations as of December 31, 2021.

While there is judgment surrounding changes in designations, we typically move non-comparable properties to comparable properties once they have stabilized, which is typically considered 90% physical

occupancy or when the growth expected from the redevelopment has been included in the comparable periods.

We typically remove properties from comparable properties when the repositioning of the asset has commenced and has or is expected to have a significant impact to property operating income within the calendar year.

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Depreciation and amortization (302,409) (279,976) (22,433) 8.0 %

Impairment charge — (57,218) 57,218 100.0 %

Gain on deconsolidation of VIE 70,374 — 70,374 100.0 %

Gain on sale of real estate and change in control of interest 93,483 89,950 3,533 3.9 %

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Interest expense (136,989) (127,698) (9,291) 7.3 %

Early extinguishment of debt — (11,179) 11,179 100.0 %

Income (loss) from partnerships 1,245 (8,062) 9,307 115.4 %

Income from partnerships 5,170 1,245 3,925 315.3 %

Total other, net (130,747) (125,644) (5,103) 4.1 %

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Net income attributable to the Trust $ 385,491 $ 261,498 $ 123,993 47.4 %

(1) Property operating income is a non-GAAP measure.

See "Summary Financial Information" in this Item 7 for further discussion.

(1) Property operating income is a non-GAAP measure that consists of rental income and mortgage interest income, less rental expenses and real estate taxes.

This measure is used internally to evaluate the performance of property operations to the previous period and we consider it be a significant measure.

We believe that property operating income is useful to investors in measuring the operating performance of our property portfolio because the definition excludes various items included in operating income that do not relate to, or are not indicative of, the operating performance of our properties, such as general and administrative expenses and depreciation and amortization, and allows us to isolate disparities in operating income caused by acquisitions, dispositions, and stabilization of properties.

Property operating income may, therefore, provide a more consistent metric for comparing the operating performance of our real estate between periods.

Property operating income should not be considered an alternative measure of operating results or cash flow from operations as determined in accordance with GAAP.

The reconciliation of operating income to property operating income for 2022 and 2021 is as follows:

(in thousands)

Operating income $ 526,408 $ 394,725

General and administrative 52,636 49,856

Depreciation and amortization 302,409 279,976

Gain on deconsolidation of VIE (70,374) —

Gain on sale of real estate and change in control of interest (93,483) (89,950)

Property operating income $ 717,596 $ 634,607

Property Revenues

Total property revenue increased $115.7 million, or 13.9%, to $951.2 million in 2021 compared to $835.5 million in 2020.

Total property revenue increased $123.2 million, or 12.9%, to $1.1 billion in 2022 compared to $951.2 million in 2021.

The percentage occupied at our shopping centers was 92.8% at December 31, 2022 compared to 91.1% at December 31, 2021.

The most significant driver of the increase in property revenues is the generally lifted COVID-19 restrictions during 2021, as compared to 2020 when COVID-19 government imposed closures and restrictions were generally still in effect.

The most significant driver of the increase in property revenues is the ongoing recovery from the initial impacts of COVID-19

during 2022, as compared to 2021, when COVID-19 related restrictions were still in effect for a portion of the year.

Changes in the components of property revenue are discussed below.

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Rental income consists primarily of minimum rent, cost reimbursements from tenants and percentage rent, and is net of collectibility related adjustments.

Rental income increased $116.7 million, or 14.0%, to $948.8 million in 2021 compared to $832.2 million in 2020 due primarily to the following:

• an $82.6 million decrease in collectibility related impacts including rent abatements across all properties, primarily due to higher collection rates in 2021 as tenants begin to recover from the initial impacts of COVID-19, and moving a large number of tenants from accrual basis to cash basis in 2020,

• an increase of $32.2 million primarily from 2021 acquisitions (see Note 3 to the consolidated financial statements for additional information), and

• an increase of $25.4 million from non-comparable properties driven by the opening of Phase III at Assembly Row in 2021 and our Phase III office building at Pike & Rose in 2020, redevelopment related occupancy increases at CocoWalk, the opening of our new office building at Santana Row in early 2020, higher net termination fees, and the opening of Freedom Plaza in 2020,

Rental income increased $124.5 million, or 13.1%, to $1.1 billion in 2022 compared to $948.8 million in 2021 due primarily to the following:

• an increase of $39.8 million from 2021 and 2022 acquisitions,

• an increase of $36.3 million from comparable properties primarily related to higher percentage rent, parking income, and specialty leasing of $10.7 million primarily the result of the gradual lifting of COVID-19 closures and restrictions during 2021, higher rental rates of $9.9 million, higher average occupancy of approximately $8.3 million, a $5.7 million increase in CAM recoveries on higher CAM costs, and a $3.2 million increase in tenant recoveries, partially offset by lower net termination fees and legal fee income of $2.5 million,

• an increase of $30.6 million from non-comparable properties primarily driven by the opening of Phase III at Assembly Row in 2021, redevelopment related occupancy increases at CocoWalk, and the 2021 and 2022 openings at the Phase III office building at Pike & Rose, partially offset by redevelopment related occupancy decreases at Huntington Shopping Center,

• a $28.0 million decrease in collectibility related impacts across all properties primarily due to higher collection rates and lower rent abatements in 2022 as tenants continue to recover from the initial impacts of COVID-19, and

• an increase of $4.2 million from improving demand at our Pike & Rose hotel,

partially offset by

• a decrease of $17.1 million from property sales, and

• a decrease of $6.1 million at comparable properties due primarily to lower average occupancy of approximately $14.1 million, lower net termination fees and legal fee income of $5.1 million, and a $2.1 million decrease in recoveries primarily related to real estate tax recoveries, partially offset by higher percentage rent, specialty leasing, and parking income of $7.2 million, primarily due to the impact of COVID-19 related closures and restrictions in 2020, and higher rental rates of $6.7 million.

• a decrease of $11.4 million from property sales.

Mortgage Interest Income

Mortgage interest income decreased $0.9 million, or 28.3%, to $2.4 million in 2021 compared to $3.3 million in 2020 primarily due to the payoff of two mortgage notes receivable in May 2021 (see Note 2 to the consolidated financial statements for additional information).

Mortgage interest income decreased $1.3 million, or 54.4%, to $1.1 million in 2022 compared to $2.4 million in 2021 primarily due to the repayment of $31.1 million of mortgage notes receivable in May 2021.

Property Expenses

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This increase is primarily due to the following:

• an increase of $19.3 million from comparable properties due to higher repairs and maintenance costs, demolition costs, and utilities, as 2020 had lower costs as a result of COVID-19 impacts, higher snow removal costs, and higher insurance costs,

• an increase of $8.8 million primarily from 2021 acquisitions, and

• an increase of $6.1 million from non-comparable properties driven by the opening of Phase III at Assembly Row in 2021, the Phase III office building at Pike & Rose in 2020, the CocoWalk redevelopment in late 2020, and the opening of our new office building at Santana Row in early 2020,

• an increase of $12.2 million from comparable properties due primarily to higher repairs and maintenance costs, utilities, and management fees, as 2021 had lower costs as a result of COVID-19 impacts, as well as inflationary impacts in 2022 and higher insurance costs,

• an increase of $7.7 million from 2021 and 2022 acquisitions,

• an increase of $6.9 million from non-comparable properties due primarily to the 2021 openings of Phase III at Assembly Row, the Phase III office building at Pike & Rose, and CocoWalk, as well as increased costs associated with the redevelopment of Huntington Shopping Center, and

• an increase of $5.3 million from higher operating costs at our Pike & Rose hotel largely due to lifting of COVID-19 restrictions,

partially offset by

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Real Estate Taxes

Real estate tax expense decreased $0.7 million, or 0.6% to $118.5 million in 2021 compared to $119.2 million in 2020 due primarily to the following:

• a decrease of $3.5 million from our property sales, and

• a decrease of $3.3 million from comparable properties primarily due to a true-up of supplemental taxes at several of our California properties billed in 2020 and prior year tax refunds recorded in 2021,

Real estate tax expense increased $9.3 million, or 7.9% to $127.8 million in 2022 compared to $118.5 million in 2021 due primarily to the following:

• an increase of $5.6 million from 2021 and 2022 acquisitions,

• an increase of $2.6 million from non-comparable properties due primarily to the opening of Phase III at Assembly Row, and

• an increase of $2.1 million from comparable properties primarily due to a true-up in 2021 of prior year supplemental taxes at one of our properties and higher assessments,

partially offset by

• an increase of $3.1 million from 2021 acquisitions, and

• an increase of $2.9 million from non-comparable properties due primarily to the opening of Phase III at Assembly Row in 2021, the opening of our new office building at Santana Row in early 2020, increases in assessments as a result of our redevelopment activities, and the Phase III office building at Pike & Rose in 2020.

• a decrease of $0.8 million from our property sales.

Property Operating Income

Property operating income increased $83.0 million, or 13.1%, to $717.6 million in 2022 compared to $634.6 million in 2021.

This increase is primarily due to the lifting of COVID-19 restrictions during 2021, which resulted in lower collectibility related adjustments and higher specialty leasing, percentage rent, and parking income.

Also contributing to the increases were property acquisitions, placing redevelopment properties into service, the opening of Phase III at Assembly Row in 2021, and the opening of our new office building at Santana Row in early 2020, partially offset by lower average occupancy, property dispositions, higher repairs and maintenance and utilities expense, and higher snow removal expense.

This increase is primarily driven by the ongoing recovery from the initial impacts of COVID-19, which resulted in lower collectibility related adjustments and higher percentage rent, specialty leasing, and parking income, compared to 2021 during which COVID-19 related restrictions were gradually being lifted.

Also contributing to the increase were property acquisitions, higher occupancy and rental rates at comparable properties, and the opening of Phase III at Assembly Row in 2021, partially offset by property sales.

Other Operating

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Depreciation and amortization expense increased $22.4 million, or 8.0%, to $302.4 million in 2022 from $280.0 million in 2021.

This increase is due primarily to 2021 property acquisitions, accelerated depreciation related to the demolition of one of our buildings in the early stages of redevelopment, the opening of Phase III of Assembly Row and the Pike & Rose, placing redevelopment properties into service, and the acquisition of the previously unconsolidated Pike & Rose hotel joint venture in January 2021, partially offset by 2020 property sales and the lower write-off of lease related assets for vacating tenants.

Impairment Charge

The $57.2 million impairment charge for the year ended December 31, 2020 relates to The Shops at Sunset Place.

See Note 3 to the consolidated financial statements for further discussion.

This increase is due primarily to property acquisitions, the openings of Phase III at Assembly Row, the Phase III office building at Pike & Rose, and CocoWalk, partially offset by the net impact of accelerated depreciation related to 2021 and 2022 redevelopment activities and 2021 property sales.

Gain on Deconsolidation of VIE

The $70.4 million gain on deconsolidation of VIE for the year ended December 31, 2022 is the result of the deconsolidation of Escondido Promenade in connection with the execution of the related August 25, 2022 TIC agreement (see Note 3 for additional information).

Gain on Sale of Real Estate and Change in Control of Interest

The $90.0 million gain on sale of real estate for the year ended December 31, 2021 is due to the sale of two properties and portions of three properties, as well as the $2.1 million gain relating to the acquisition of the previously unconsolidated Pike & Rose hotel join venture (see Note 3 to the consolidated financial statements for additional information).

The $98.1 million gain on sale of real estate, net of tax for the year ended December 31, 2020 is due to the sale of three properties and one building.

The $93.5 million gain on sale of real estate for the year ended December 31, 2022 is due primarily to a net gain of $84.1 million from the sale of two residential properties (including an adjacent retail pad), one retail property, and one parcel of land (see Note 3 for additional information), and a $9.3 million gain related to the reduction of our liability for estimated condemnation and transaction costs associated with the sale under threat of condemnation in December 2019 at San Antonio Center (see Note 7 for additional information).

The $90.0 million gain on sale of real estate for the year ended December 31, 2021 is due to the sale of two properties and portions of three properties, as well as the $2.1 million gain relating to the acquisition of the previously unconsolidated Pike & Rose hotel joint venture (see Note 3 to the consolidated financial statements for additional information).

Operating Income

Operating income increased $131.7 million, or 33.4%, to $526.4 million in 2022 compared to $394.7 million in 2021.

This increase is primarily due to the lifting of COVID-19 restrictions, which resulted in lower collectibility related adjustments and higher specialty leasing, percentage rent, and parking income compared to 2020.

Also contributing to the increases were the prior year impairment charge related to The Shops at Sunset Place, property acquisitions, placing redevelopment properties into service, the opening of Phase III at Assembly Row in 2021, and the opening of our new office building at Santana Row in early 2020, partially offset by lower average occupancy, higher personnel related costs, property dispositions, higher repairs and maintenance and utilities expense, a lower gain on sales of real estate, and higher snow removal expense.

This increase is primarily due to the gain on the deconsolidation of a VIE, and the ongoing recovery from the impacts of COVID-19 restrictions, which resulted in lower collectibility related adjustments and higher percentage rent, specialty leasing, and parking income, compared to 2021 during which COVID-19 related restrictions were gradually being lifted.

Interest Expense

Interest expense decreased $8.6 million, or 6.3%, to $127.7 million in 2021 compared to $136.3 million in 2020.

This decrease is due primarily to the following:

• a decrease of $6.2 million due to a lower overall weighted average borrowing rate, and

• a decrease of $3.2 million due to lower weighted average borrowings,

partially offset by

Interest expense increased $9.3 million, or 7.3%, to $137.0 million in 2022 compared to $127.7 million in 2021.

This increase is due primarily to the following:

• an increase of $5.6 million due to a higher overall weighted average borrowing rate, and

• a decrease of $4.0 million in capitalized interest,

partially offset by

• a decrease of $0.2 million due to lower weighted average borrowings.

Gross interest costs were $155.7 million and $150.3 million in 2022 and 2021, respectively.

Capitalized interest was $18.7 million and $22.6 million in 2022 and 2021, respectively.

Early Extinguishment of Debt

The $11.2 million early extinguishment of debt charge for the year ended December 31, 2020 relates to the make-whole premium paid as part of the early redemption of our $250 million 3.00% senior notes on December 31, 2020 and the related write-off of the unamortized discount and debt fees.

Income (loss) from Partnerships

Income (loss) from partnerships increased $9.3 million or 115.4% to $1.2 million of income in 2021 compared to a loss of $8.1 million in 2020.

This increase is due primarily to the acquisition of the previously unconsolidated Pike & Rose hotel joint venture in January 2021 and improved operating results at our restaurant joint ventures and at our Assembly Row hotel joint venture, largely the result of the easing of COVID-19 closures and restrictions.

Income from Partnerships

Income from partnerships increased $3.9 million or 315.3% to $5.2 million in 2022 compared to $1.2 million in 2021.

This increase is due primarily to improved operating results at our Assembly Row hotel joint venture and our restaurant joint ventures, largely the result of the easing of COVID-19 closures and restrictions and the forgiveness of certain loans for some of our restaurants joint ventures and at our Assembly Row hotel joint venture.

Net income attributable to noncontrolling interests

Net income attributable to noncontrolling interests increased $2.6 million, or 34.1%, to $10.2 million in 2022 compared to $7.6 million in 2021.

The increase is primarily due to The Shops at Sunset Place prior year impairment charge and 2021 acquisitions.

The increase is primarily due to 2021 acquisitions and higher income at our properties with third party partners.

Discussions of year-to-year comparisons between 2021 and 2020 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission on February 10, 2022.

Liquidity and Capital Resources

Due to the nature of our business and strategy, we typically generate significant amounts of cash from operations which is largely paid to our common and preferred shareholders in the form of dividends because as a REIT, we are generally required to make annual distributions to shareholders of at least 90% of our taxable income (cash dividends paid in 2021 were approximately $337.4 million).

Due to the nature of our business and strategy, we typically generate significant amounts of cash from operations which is largely paid to our common and preferred shareholders in the form of dividends because as a REIT, the Trust is generally required to make annual distributions to shareholders of at least 90% of our taxable income (cash dividends paid in 2022 were approximately $349.0 million).

Remaining cash flow from operations after dividend payments is used to fund recurring and non-recurring capital projects (such as tenant improvements and redevelopments), and regular debt service requirements (including debt service relating to additional or replacement debt, as well as scheduled debt maturities).

We maintain a $1.25 billion revolving credit facility to fund short term cash flow needs and also look to the public and private debt and equity markets, joint venture relationships, and property dispositions to fund capital expenditures on a long-term basis.

During 2021, we have continued to see improvements in overall cash collections from tenants as compared to 2020, although not yet at pre-COVID-19 levels (see further discussion under the "Outlook" section of this Item 2).

While the overall economic impacts of the pandemic are unknown, we have taken multiple steps to strengthen our financial position, maximize liquidity, and to provide maximum flexibility during these uncertain times, including maintaining levels of cash in excess of the cash balances we have historically maintained.

During 2022, we have continued to see improvements in overall cash collections from tenants with collection rates nearing pre-pandemic levels.

We have also taken multiple steps over the past two years to strengthen our financial position, maximize liquidity, and to provide maximum flexibility during these uncertain times.

Additionally, we have an option (subject to bank approval) to increase the credit facility through an accordion feature to $1.75 billion.

We also amended our unsecured term loan, borrowing an additional $300.0 million.

As of December 31, 2022, there is no balance outstanding on our $1.25 billion unsecured revolving credit facility and we had cash and cash equivalents of $85.6 million.

We also had outstanding forward sales agreements for net proceeds of $264.0 million as of December 31, 2021, and the capacity to issue up to $175.0 million in common shares under the ATM program.

We have no debt maturing until June 2023.

For the year ended 2022, the weighted average amount of borrowings outstanding on our revolving credit facility was $80.3 million, and the weighted average interest rate, before amortization of debt fees, was 3.2%.

Our overall capital requirements during 2022 will be impacted by the extent and duration of COVID-19 related closures and restrictions, impacts on our cash collections, and overall economic impacts that might occur including supply chain issues.

Cash requirements will also be impacted by acquisition opportunities and the level and general timing of our redevelopment and development activities.

While the amount of future expenditures will depend on numerous factors, we expect to continue to see elevated levels of investment as we continue to invest in our overall portfolio to better position our properties for a post-COVID environment, costs to prepare vacant space for new tenants, and investments to complete the current phase and start on the next phase of our larger mixed-use development projects although at a slightly reduced level from 2021, largely due to deliveries in 2021 of our third phase of Assembly Row.

We believe that the cash on our balance sheet together with rents we collect, as well as our $1.0 billion revolving credit facility will allow us to continue to operate our business through the remainder of the COVID-19 pandemic.

Given our ability to access the capital markets, we also expect debt or equity to be available to us.

We also have the capacity to issue up to $452.0 million in common shares under the ATM program.

We have $275.0 million of debt maturing in 2023.

Our overall capital requirements during 2023 will be impacted by the overall economic environment including impacts of inflation, supply chain issues, and a potential recession, as well as acquisition opportunities and the level and general timing of our redevelopment and development activities.

We currently have development and redevelopment projects in various stages of construction with remaining costs of $274 million.

We expect to incur the majority of those costs in the next two years.

We expect overall capital costs to be at levels consistent with 2022 or slightly reduced as we complete current redevelopment

projects, prepare vacant space for new tenants, and complete the current phase and start on the next phase of our larger mixed use development projects.

We believe cash flow from operations, the cash on our balance sheet, and our $1.25 billion revolving credit facility will allow us to continue to operate our business in the short-term.

Given our ability to access the capital markets, we also expect debt or equity to be available to us, although newly issued debt would likely be at higher interest rates than we currently have outstanding.

We also have the ability to delay the timing of certain development and redevelopment projects as well as limit future acquisitions, reduce our operating expenditures, or re-evaluate our dividend policy.

While we have seen improvements from the initial negative impacts of the COVID-19 pandemic, it has continued to affect our

overall business during the year ended December 31, 2021, and we expect it will continue to negatively impact our business in the short term, we intend to operate with and to maintain our long term commitment to a conservative capital structure that will

allow us to maintain strong debt service coverage and fixed-charge coverage ratios as part of our commitment to investment-grade debt ratings.

We expect these sources of liquidity and opportunities for operating flexibility to allow us to meet our financial obligations over the long term.

While we have seen significant improvements from the initial negative impacts of the COVID-19 pandemic, it, along with the overall state of the economy continues to affect our overall business, and we expect it will continue to negatively impact our business in the short term.

However, we intend to operate with and to maintain our long term commitment to a conservative capital structure that will allow us to maintain strong debt service coverage and fixed-charge coverage ratios as part of our commitment to investment-grade debt ratings.

Summary of Cash Flows

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Net cash used in investing activities (785,998) (660,118)

Net cash (used in) provided by financing activities (452,967) 661,736

(Decrease) increase in cash and cash equivalents (641,733) 663,282

Net cash provided by (used in) financing activities 190,414 (452,967)

Decrease in cash and cash equivalents (78,815) (641,733)

Cash, cash equivalents, and restricted cash, beginning of year 175,163 816,896

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Net cash provided by operating activities increased $45.4 million to $516.8 million during 2022 from $471.4 million during 2021.

The increase was primarily attributable to higher net income before non-cash items and the timing of cash receipts including higher accounts receivable and lower prepaid rent balances in 2020 as a result of the COVID-19 pandemic.

The increase was primarily attributable to higher net income before non-cash items and gains on sale of real estate, partially offset by the timing of collections of real estate tax reconciliation billings during 2021 and the timing of payments.

Net cash used in investing activities increased $125.9 million to $786.0 million during 2022 from $660.1 million during 2021.

The increase was primarily attributable to:

• a $356.9 million increase in acquisition of real estate primarily due to 2021 property acquisitions (see Note 3 to the consolidated financial statements for additional information), and

• a $45.6 million decrease in proceeds from sales of real estate, resulting from the sale of two properties and a portion of three properties in 2021, as compared to the sale of three properties, one building, and the two remaining condominium units at our Pike & Rose property in 2020,

• a $72.0 million increase in acquisition of real estate primarily due to 2022 property acquisitions (see Note 3 to the consolidated financial statements for additional information), as compared to 2021 property acquisitions,

• the $31.1 million payoff of two mortgage notes receivable in May 2021,

• a $20.0 million increase in investment in partnerships, resulting from the 2022 acquisition of a 47.5% net interest in an unconsolidated joint venture that owns two shopping centers (see Note 3 to the consolidated financial statements for additional information), and

• $18.0 million for net costs paid in 2022 relating to the partial sale under threat of condemnation at San Antonio Center in 2019,

partially offset by

• a $54.5 million decrease in net capital expenditures and leasing costs,

• a $41.4 million increase in net repayments and acquisitions of mortgages and other notes receivable primarily due to the $31.1 million payoff of two mortgage notes receivable in May 2021, as compared to the $9.6 million acquisition of two mortgage notes receivable in September 2020, and

• $12.9 million paid in 2020 relating to the partial sale under threat of condemnation at San Antonio Center in 2019.

Net cash provided by financing activities decreased $1.1 billion to $453.0 million used during 2021 from $661.7 million provided during 2020.

• a $23.8 million decrease in net capital expenditures.

Net cash used in financing activities decreased $643.4 million to $190.4 million provided during 2022 from $453.0 million used during 2021.

The decrease was primarily attributable to:

• a $1.1 billion decrease due to net proceeds of $700.1 million from the issuance of $400.0 million of 3.50% unsecured senior notes and the $300.0 million reopening of our 3.95% unsecured senior notes in May 2020, and $394.2 million in net proceeds from our $400.0 million of 1.25% unsecured senior notes in October 2020,

• $398.7 million in net proceeds from our unsecured term loan in May 2020,

• a $207.4 million increase in repayment of mortgages, finance leases, and notes payable primarily due to the $140.9 million net repayments of four mortgage loans in 2021 (see Note 5 to the consolidated financial statements for more information), the $100.0 million repayment of our $400.0 million term loan which was amended in April 2021, and the $31.5 million repayment of the mortgage loan encumbering the Pike & Rose hotel in January 2021, partially offset by the $60.6 million payoff of the mortgage loan on The Shops at Sunset Place in December 2020 and the $3.6 million payoff of the mortgage loan on 29th Place, both in December 2020, and

• an $11.1 million increase in dividends paid to shareholders due to an increase in the common share dividend rate and an increase in the number of common shares outstanding,

• $298.6 million in net proceeds from our unsecured term loan in October 2022,

• a $258.2 million decrease in repayment of mortgages, finance leases, and notes payable primarily due to the $16.1 million mortgage loan repayment on one of the buildings at our Hoboken property in June 2022, as compared to the $140.9 million net repayments of four mortgage loans in 2021, the $100.0 million partial repayment of our $400.0 term loan which was amended in April 2021, and the $31.5 million repayment of the mortgage loan related to the Pike & Rose hotel in January 2021, and

• $134.3 million increase in net proceeds from the issuance of common shares under our ATM equity program for net proceeds of $306.8 million and $172.7 million, respectively, during 2022 and 2021,

partially offset by,

• $510.4 million from the December 2020 redemptions of our $250.0 million 2.55% unsecured senior notes and our $250.0 million 3.00% unsecured senior notes, with a make-whole premium of $10.4 million,

• $73.8 million increase in net proceeds from the issuance of 1.6 million common shares under our ATM program for net proceeds of $172.7 million (see Note 8 to our consolidated financial statements for additional details on these transactions), as compared to 1.1 million common shares for net proceeds of $98.8 million in 2020, and

• a $10.8 million decrease in distributions to and redemptions of noncontrolling interests primarily due to the 2020 acquisition of one of our partner's interests in the partnership that owns our Plaza El Segundo property for $7.3 million.

• a $27.6 million increase in distributions to and redemptions of noncontrolling interests primarily related to our acquisition of the redeemable noncontrolling interest in the partnership that owns the Plaza El Segundo shopping center for $23.6 million, and

• an $11.6 million increase in dividends paid to shareholders due to an increase in the common share dividend rate and an increase in the number of common shares outstanding.

Cash Requirements

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(3) This includes minimum rental payments related to both finance and operating leases.

(4) Lease obligations in the next twelve months include the $55 million fixed purchase price option for Mercer Mall as discussed in Note 7 to the consolidated financial statements.

(5) This includes the liability related to the sale under threat of condemnation at San Antonio Center as further discussed in Note 7 to the consolidated financial statements.

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As of December 31, 2022, a total of 644,554 downREIT operating partnership units are outstanding.

(c) Two of the members in Plaza El Segundo have the right to require us to purchase their 10.0% and 11.8% ownership interests at the interests' then-current fair market value.

If the members fail to exercise their put options, we have the right to purchase each of their interests on or after December 30, 2026 at fair market value.

Based on management’s current estimate of fair market value as of December 31, 2021, our estimated maximum liability upon exercise of the put option would range from approximately $25 million to $28 million.

(d) The other member in The Grove at Shrewsbury and Brook 35 has the right to require us to purchase all of its approximately 4.1% interest in The Grove at Shrewsbury and approximately 6.5% interest in Brook 35 at the interests' then-current fair market value.

(c) The other member in The Grove at Shrewsbury and Brook 35 has the right to require us to purchase all of its approximately 4.1% interest in The Grove at Shrewsbury and approximately 6.5% interest in Brook 35 at the interests' then-current fair market value.

Based on management's current estimate of fair market value as of December 31, 2022, our estimated maximum liability upon exercise of the put option would range from $6 million to $7 million.

(e) Effective September 18, 2023, the other member in Hoboken has the right to require us to purchase all of its 10% ownership interest at the interest's then-current fair market value.

(d) Effective September 18, 2023, the other member in Hoboken has the right to require us to purchase all of its 10% ownership interest at the interest's then-current fair market value.

Based on management's current estimate of fair market value as of December 31, 2022, our estimated maximum liability upon exercise of the put option would range from $8 million to $9 million.

(f) Effective June 14, 2026, the other member in Cambelback Colonnade and Hilton Village has the right to require us to purchase all of its 2.0% ownership interest at the interest's then-current fair market value.

Based on management's current estimate of fair value as of December 31, 2021, our estimated maximum liability upon exercise of the put option would range from $4 million to $5 million.

(e) Effective June 14, 2026, the other member in Camelback Colonnade and Hilton Village has the right to require us to purchase all of its 2.0% ownership interest at the interest's then-current fair market value.

Based on management's current

estimate of fair value as of December 31, 2022, our estimated maximum liability upon exercise of the put option would range from $4 million to $5 million.

(f) Effective October 6, 2027, the other member in the partnership that owns equity method investments in Chandler Festival and Chandler Gateway has the right to require us to purchase its 2.5% net ownership interest.

Based on management's current estimate of fair value as of December 31, 2022, our estimated maximum liability upon exercise of the put option would range from $1 million and $2 million.

(g) Effective June 1, 2029, the other member in Grossmont Center has the right to require us to purchase all of its 40.0% ownership interest at the interest's then-current fair market value.

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Off-Balance Sheet Arrangements

At December 31, 2021, we have two real estate related equity method investments with total debt outstanding of $79.8 million, of which our share is $28.6 million.

At December 31, 2022, we have four real estate related equity method investments with total debt outstanding of $154.1 million, of which our share is $63.8 million.

Our investment in these ventures at December 31, 2022 was $34.0 million.

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Chelsea Acquired 4,446 5.36 % January 15, 2031

Hoboken (1 Building) (3) Acquired 16,234 3.75 % July 1, 2042

Subtotal 322,317

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Notes payable

Revolving credit facility (4) 1,000,000 — LIBOR + 0.775% January 19, 2024

Term Loan 400,000 300,000 LIBOR + 0.80% April 16, 2024

Various 7,239 2,635 11.31 % Various through 2028

Term Loan (3)(5) 600,000 600,000 SOFR + 0.85% April 16, 2024

Revolving credit facility (3)(4)(5) 1,250,000 — SOFR + 0.775% April 5, 2027

Various 7,239 2,957 Various (6) Various through 2059

Subtotal 602,957

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(2) The interest rates on these mortgages range from 3.91% to 5.00%.

3) This mortgage loan has a fixed interest rate, however, the rate resets every five years until maturity.

The current interest rate is fixed until July 1, 2022, and the loan is prepayable at par anytime after this date.

(3) Our revolving credit facility SOFR loans bear interest at Daily Simple SOFR or Term SOFR as defined in the credit agreement and our term loan bears interest at Term SOFR, plus 0.10%, plus a spread, based on our current credit rating.

(4) The maximum amount drawn under our revolving credit facility during 2022 was $330.0 million and the weighted average effective interest rate on borrowings under our revolving credit facility, before amortization of debt fees, was 3.2%.

(5) The Operating Partnership is the obligor under our revolving credit facility, term loan, and senior notes and debentures.

(6) The interest rates on these notes payable range from 3.00% to 11.31%.

Our revolving credit facility, unsecured term loan, and other debt agreements include financial and other covenants that may limit our operating activities in the future.

As of December 31, 2021, we were in compliance with all of the financial and other covenants related to our revolving credit facility, term loan, and senior notes.

As of December 31, 2022, we were in compliance with all financial and other covenants related to our revolving credit facility, term loan, and senior notes.

Additionally, we were in compliance with all of the financial and other covenants that could trigger a loan default on our mortgage loans.

If we were to breach any of these financial and other covenants and did not cure the breach within an applicable cure period, our lenders could require us to repay

the debt immediately and, if the debt is secured, could immediately begin proceedings to take possession of the property securing the loan.

If we were to breach any of these financial and other covenants and did not cure the breach within an applicable cure period, our lenders could require us to repay the debt immediately and, if the debt is secured, could immediately begin proceedings to take possession of the property securing the loan.

Many of our debt arrangements, including our public notes and our revolving credit facility, are cross-defaulted, which means that the lenders under those debt arrangements can put us in default and require immediate repayment of their debt if we breach and fail to cure a default under certain of our other debt obligations.

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(1) Our $600.0 million term loan matures on April 16, 2024, plus two one-year extensions, at our option.

2) Our $1.0 billion revolving credit facility matures on January 19, 2024, plus two six-month extensions at our option.

(2) Our $1.25 billion revolving credit facility matures on April 5, 2027, plus two six-month extensions, at our option.

As of December 31, 2022, there was no outstanding balance under this credit facility.

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Net income attributable to noncontrolling interests (10,170) (7,583) (4,182)

Gain on deconsolidation of a VIE (70,374) — —

Gain on sale of real estate and change in control of interests, net (93,483) (89,892) (91,922)

11 unchanged sentences

(1) For the year ended December 31, 2022, dividends on our Series 1 preferred stock were not deducted in the calculation of FFO available to common shareholders, as the related shares were dilutive and included in "weighted average common shares, diluted."

(2) For the year ended December 31, 2020, FFO available for common shareholders includes a $11.2 million charge related to early extinguishment of debt.

(2) For the year ended December 31, 2020, FFO available for common shareholders includes an $11.2 million charge related to early extinguishment of debt.

If this charge was excluded, our FFO available for common shareholders for 2020 would have been $345.0 million, and FFO available for common shareholders, per diluted share would have been $4.52.

For the year ended December 31, 2019, FFO available for common shareholders includes an $11.9 million charge relating to the buyout of a lease at Assembly Square Marketplace.

If this charge was excluded, our FFO

available for common shareholders for 2019 would have been $477.7 million, and FFO available for common shareholders, per diluted share would have been $6.33.

(3) The weighted average common shares used to compute FFO per diluted common share includes operating partnership units that were excluded from the computation of diluted EPS.

Conversion of these operating partnership units is dilutive in the computation of FFO per diluted common share but is anti-dilutive for the computation of diluted EPS for the periods presented.

(3) The weighted average common shares used to compute FFO per diluted common share includes downREIT operating partnership units that were excluded from the computation of diluted EPS.

Conversion of these operating partnership units is dilutive in the computation of FFO per diluted common share but is anti-dilutive for the computation of diluted EPS for 2021 and 2020.

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-K

Item 7. Management’s Discussion and Analysis