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Item 5. Market for Registrant’s Common Equity

2021-02-19 compared with 2020-02-21 · 42 added, 40 removed, 71 unchanged (54% of the section changed)

3 unchanged sentences

We publish an estimated per share value of our common stock to assist broker dealers that sold our common stock in our initial and follow-on "best efforts" offerings to comply with the rules published by FINRA.

On May 9, 2019, we announced an estimated value of our common stock as of May 1, 2019, equal to $3.14 per share.

The Audit Committee of our Board and our Board engaged Duff & Phelps LLC ("Duff & Phelps"), an independent third-party global valuation advisory and corporate finance consulting firm that specializes in providing real estate valuation services, to advise the Audit Committee and the Board in their estimate of the per share value of our common stock outstanding as of May 1, 2019.

Duff & Phelps has extensive experience estimating the fair values of commercial real estate.

On December 21, 2020, we announced an estimated value of our common stock as of December 1, 2020, equal to $2.89 per share.

The Audit Committee of our Board and our Board engaged Duff & Phelps, an independent third-party global valuation advisory and corporate finance consulting firm that specializes in providing real estate valuation services, to advise the Audit Committee and the Board in their estimate of the per share value of our common stock as of December 1, 2020.

Duff & Phelps has

extensive experience estimating the fair values of commercial real estate.

The report furnished to the Audit Committee and the Board by Duff & Phelps complies with the reporting requirements set forth under Standard Rule 2-2(b) of the Uniform Standards of Professional Appraisal Practice and is certified by a member of the Appraisal Institute with the MAI designation.

The Duff & Phelps report, dated May 1, 2019, reflects values as of May 1, 2019.

The Duff & Phelps report, dated December 11, 2020, reflects values as of December 1, 2020.

Duff & Phelps does not have any direct or indirect interests in any transaction with us or in any currently proposed transaction to which we are a party, and there are no conflicts of interest between Duff & Phelps, on one hand, and the Company or any of our directors, on the other.

Previously, Duff & Phelps provided services to us in connection with the allocation of the purchase price of acquired properties for accounting and financial reporting purposes, but those services are no longer provided.

The Board is ultimately and solely responsible for the determination of the estimated value per share of our common stock.

The estimated value per share was determined and approved by the Board based on the recommendation of the Audit Committee.

The Board is ultimately and solely responsible for the determination of the estimated per share value of our common stock.

The estimated per share value was determined and approved by the Board based on the recommendation of the Audit Committee.

Duff & Phelps provided a range of per share values for the Audit Committee and the Board to consider and utilized the "net asset value" or "NAV" method.

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The fair value estimate of the real estate assets is equal to the sum of its individual real estate values.

Generally, Duff & Phelps estimated the value of our real estate and real estate-related assets at our ownership interest using the income capitalization approach, which included using a discounted cash flow calculation of projected net operating income, less capital expenditures, for each property for the ten-year hold period ending April 30, 2029 or the residual stabilized year, and applying a market supported discount rate and capitalization rate.

Generally, Duff & Phelps estimated the value of our real estate and real estate-related assets at our ownership interest using the income capitalization approach, which included using a discounted cash flow calculation of projected net operating income, less capital expenditures, for each property for the ten-year hold period ending November 30, 2030 or the residual stabilized year, and applying a market supported discount rate and capitalization rate.

For properties under contract for sale, Duff & Phelps valued the assets at the contractual purchase price.

For all other assets, including cash, other current assets, non-retail joint ventures, land developments and marketable securities, fair value was determined separately.

For all other assets, including cash and other current assets, fair value was determined separately.

A fair value of our long-term debt obligations, including current liabilities, was also estimated by Duff & Phelps, by comparing market interest rates to the contract rates on our long-term debt and discounting to present value the difference in future payments.

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GAAP set forth in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 820 Fair Value Measurement and Disclosures .

The NAV per share provided by Duff & Phelps was estimated by subtracting the fair value of the total liabilities from the fair value of the total assets and then dividing the result by the number of shares of common stock outstanding as of May 1, 2019.

Duff & Phelps then applied a discount rate sensitivity analysis on the discount rates used to value the multi-tenant retail properties and single tenant properties resulting in a value range of $3.00 to $3.29 per share.

The mid-point in that range is $3.14.

On May 9, 2019, our Audit Committee and our Board met to review and discuss the Duff & Phelps report.

Following this review, the Audit Committee recommended and the Board unanimously determined a new estimated per share value of our common stock of $3.14 as of May 1, 2019.

Limitations of the Estimated Value per Share

Duff & Phelps then applied a discount rate sensitivity analysis on the discount rates used to value the retail properties resulting in a value range of $2.76 to $3.03 per share, with a midpoint of $2.89 per share.

On December 17, 2020, our Audit Committee and our Board met to review and discuss the Duff & Phelps report.

Following this review, the Audit Committee recommended and the Board unanimously determined a new estimated per share value of our common stock of $2.89 as of December 1, 2020.

Limitations of the Estimated Per Share Value

As with any methodology used to estimate value, the methodology employed and the recommendations made by the Company were based upon a number of estimates and assumptions that may not be accurate or complete.

Further, different parties using different assumptions and estimates could derive a different estimated value per share, which could be significantly different

from our estimated value per share.

Further, different parties using different assumptions and estimates could derive a different estimated per share value, which could be significantly different from our estimated per share value.

The estimated per share value does not represent (i) the amount at which our shares would trade at on a national securities exchange, (ii) the amount a stockholder would obtain if he or she tried to sell his or her shares, or (iii) the amount stockholders would receive if we liquidated our assets and distributed the proceeds after paying all of our expenses and liabilities.

Accordingly, with respect to the estimated value per share, we can give no assurance that:

Accordingly, with respect to the estimated per share value, we can give no assurance that:

• a stockholder would be able to resell his or her shares at this estimated value;

a stockholder would ultimately realize distributions per share equal to our estimated value per share upon liquidation of our assets and settlement of our liabilities or a sale of the Company;

our shares would trade at a price equal to or greater than the estimated value per share if we listed them on a national securities exchange;

the methodology used to estimate our value per share would be acceptable to FINRA or that the estimated value per share will satisfy the applicable annual valuation requirements under the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and the Code, with respect to employee benefit plans subject to ERISA and other retirement plans or accounts subject to Section 4975 of the Code;

this estimated value will increase, stay at the current level, or not continue to decrease, over time.

The estimated value per share was determined by our Board on May 9, 2019, and reflects the fact that the estimate was calculated at a moment in time.

• a stockholder would ultimately realize distributions per share equal to our estimated per share value upon liquidation of our assets and settlement of our liabilities or a sale of the Company;

• our shares would trade at a price equal to or greater than the estimated per share value if we listed them on a national securities exchange;

• the methodology used to estimate our per share value would be acceptable to FINRA or that the estimated per share value will satisfy the applicable annual valuation requirements under ERISA and the Code, with respect to employee benefit plans subject to ERISA and other retirement plans or accounts subject to Section 4975 of the Code;

• the estimated value will increase, stay at the current level, or not continue to decrease, over time.

The estimated per share value was determined by our Board on December 17, 2020 and reflects the fact that the estimate was calculated at a moment in time.

The value of our shares will likely change over time and will be influenced by changes to the value of our individual assets as well as changes and developments in the real estate and capital markets and the economy as a whole.

We currently anticipate publishing a new estimated share value within one year.

Nevertheless, stockholders should not rely on the estimated value per share in making a decision to buy or sell shares of our common stock.

Second Amended and Restated Share Repurchase Program

On November 1, 2019, we adopted a Second Amended and Restated Share Repurchase Program ("Share Repurchase Program"), authorizing redemption of the Company's shares of common stock, subject to certain conditions and limitations, to provide limited liquidity to qualifying stockholders.

Our obligation to repurchase any shares under the Share Repurchase Program is conditioned upon our having sufficient funds available to complete the repurchase.

The repurchase price per share for all stockholders is equal to a 25% discount to the most recent estimated NAV per share of our common stock established by our Board, which was $3.14 per share as of May 1, 2019.

During the year ended December 31, 2019, 8,517,605 shares were repurchased in connection with the Share Repurchase Program.

The price per share for all shares repurchased was $2.355 for an aggregate consideration of $20.1 million.

Amended and Restated Distribution Reinvestment Plan

On November 1, 2019, we began offering shares of our common stock to our existing stockholders pursuant to our Third Amended and Restated Distribution Reinvestment Plan.

Under the DRP, stockholders may elect to reinvest an amount equal to the distributions declared on their shares of common stock into additional shares of our common stock in lieu of receiving cash distributions.

In accordance with the DRP, participants may acquire shares of common stock at a 25% discount to the most recent estimated NAV per share of our common stock established by our Board, which was $3.14 per share as of May 1, 2019.

As of December 31, 2019, the DRP purchase price was $2.355 per share.

In connection with the DRP, in January 2020, we sold a total of 21,249 shares and generated $0.05 million in gross offering proceeds under the DRP.

As of January 3, 2020, we had 140,015 stockholders of record.

We currently anticipate publishing a new estimated per share value within one year.

Nevertheless, stockholders should not rely on the estimated per share value in making a decision to buy or sell shares of our common stock.

Suspension of Second Amended and Restated Share Repurchase Program and the Amended and Restated Distribution Reinvestment Plan

On November 1, 2019, we adopted a Second Amended and Restated Share Repurchase Program ("Share Repurchase Program", or "SRP"), authorizing redemption of the Company's shares of common stock, subject to certain conditions and limitations, to provide limited liquidity to qualifying stockholders.

During the year ended December 31, 2020, 2,136,119 shares were repurchased in connection with the SRP at a price per share of $2.355.

During the year ended December 31, 2019, 8,517,605 shares were repurchased in connection with the SRP at a price per share of $2.355.

On November 1, 2019, we began offering shares of our common stock to our existing stockholders pursuant to our Third Amended and Restated Distribution Reinvestment Plan ("DRP").

During the year ended December 31, 2020 we sold a total of 79,040 shares in connection with the DRP at a price per share of $2.355.

On June 11, 2020, we announced that our Board voted to suspend the SRP and the DRP until further notice, in light of the COVID-19 pandemic.

Pursuant to the terms of the SRP and DRP, the suspensions went into effect on July 11, 2020.

As of January 1, 2021, we had approximately 145,000 stockholders of record.

Distributions

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For federal income tax purposes, for the year ended December 31, 2019, $0.003 per share, or approximately 4% of the Company's total distributions would be treated as an ordinary dividend and $0.070 per share, or approximately 96%, of the Company's total distributions would be treated as a non-taxable return of capital and will reduce the tax basis of each share of the Company's common stock held.

Any future determination to pay distributions will be at the discretion of our Board and will depend on our financial condition, capital requirements, restrictions contained in current or future financing instruments, and such other factors as our board of directors deems relevant.

Notification Regarding Payments of Distributions

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As of and for the year ended December 31,

2020 2019 2018 2017 2016

Balance Sheet Data:

Total assets $ 2,407,339 $ 2,507,188 $ 2,536,006 $ 2,698,604 $ 2,786,754

Debt, net $ 555,109 $ 572,850 $ 561,782 $ 667,891 $ 730,605

Operating Data:

Total interest, dividend and other income

Net income per common share, basic and diluted

Total income $ 197,833 $ 226,490 $ 242,674 $ 251,809 $ 242,693

Other income and expense, net $ 3,326 $ 1,384 $ 2,708 $ 2,616 $ 13,979

Net (loss) income $ (10,174) $ 38,399 $ 83,849 $ 61,793 $ 252,722

Net (loss) income per common share, basic and diluted $ (0.01) $ 0.05 $ 0.11 $ 0.07 $ 0.29

Common Stock Distributions:

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Distributions paid per weighted average

common share $ 0.08 $ 0.07 $ 0.07 $ 0.07 $ 0.12

Cash Flow Data:

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Weighted average number of common shares outstanding, basic and diluted 719,882,476 728,620,309 761,139,011 773,445,341 854,638,497

Since 2015, we have continued to implement a strategy of focusing, tailoring, and refining our multi-tenant retail platform, including the following major dispositions classified as discontinued operations:

Since 2015, we have continued to implement a strategy of focusing, tailoring, and refining our retail platform, including the following major dispositions classified as discontinued operations:

the spin-off of Highlands REIT, Inc.

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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-K

Item 5. Market for Registrant’s Common Equity