Item 5. Market for Registrant’s Common Equity
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our shares of common stock are not listed on a national securities exchange and there is not otherwise an established public trading market for our shares. 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 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
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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 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 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. This method is based on the fair value of real estate, real estate-related investments and all other assets, less the fair value of total liabilities. 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 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 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.
Duff & Phelps completed its work in conformance with Investment Program Association Practice Guideline 2013-01, "Valuations of Publicly Registered Non-Listed REITs," dated April 29, 2013 and guidelines published by FINRA. In addition, Duff & Phelps determined NAV in a manner consistent with the definition of fair value under U.S. 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 on a fully diluted basis as of December 1, 2020. 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 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 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 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; or
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• 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 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.
Stockholders
As of January 1, 2021, we had approximately 145,000 stockholders of record.
Distributions
We have been paying cash distributions since October 2005. Our quarterly distributions are paid one quarter in arrears.
During the years ended December 31, 2020 and 2019, we paid cash distributions of $54.2 million and $53.3 million, respectively, or $0.075 and $0.073 per share of common stock, respectively.
For federal income tax purposes, for the year ended December 31, 2020, $0.037 per share, or approximately 49% of the Company's total distributions would be treated as an ordinary dividend and $0.038 per share, or approximately 51%, 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.
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
Stockholders should be aware that the method by which a stockholder has chosen to receive his or her distributions affects the timing of the stockholder's receipt of those distributions. Specifically, under our transfer agent's payment processing procedures, distributions are paid in the following manner:
(1) those stockholders who have chosen to receive their distributions via wire transfer receive their distributions on the distribution payment date (as determined by our Board);
(2) those stockholders who have chosen to receive their distributions by paper check are typically mailed those checks on the distribution payment date, but sometimes paper checks are mailed on the day following the distribution payment date; and
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(3) for those stockholders holding shares through a broker or other nominee, the distribution payments are wired, or paper checks are mailed, to the broker or other nominee on the day following the distribution payment date.
All stockholders who hold shares directly in record name may change at any time the method through which they receive their distributions from our transfer agent, and those stockholders will not have to pay any fees to us or our transfer agent to make such a change. Accordingly, each stockholder may select the timing of receipt of distributions from our transfer agent by selecting the method above that corresponds to the desired timing for receipt of the distributions. Because all stockholders may elect to have their distributions sent via wire transfer on the distribution payment date, we treat all of our stockholders, regardless of the method by which they have chosen to receive their distributions, as having constructively received their distributions from us on the distribution payment date for federal income tax purposes.
Stockholders who hold shares directly in record name and who would like to change their distribution payment method should complete a "Change of Distribution Election Form." The form is available on our website under "Investor Relations-Forms page."
We note that the payment method for stockholders who hold shares through a broker or nominee is determined by the broker or nominee. Similarly, the payment method for stockholders who hold shares in a tax-deferred account, such as an individual retirement account, is generally determined by the custodian for the account. Stockholders that currently hold shares through a broker or other nominee and would like to receive distributions via wire transfer or paper check should contact their broker or other nominee regarding their processes for transferring shares to record name ownership. Similarly, stockholders who hold shares in a tax-deferred account may need to hold shares outside of their tax-deferred accounts to change the method through which they receive their distributions. Stockholders who hold shares through a tax-deferred account and who would like to change the method through which they receive their distributions should contact their custodians regarding the transfer process and should consult their tax advisor regarding the consequences of transferring shares outside of a tax-deferred account.
Recent Sales of Unregistered Securities
None.
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Item 6. Selected Financial Data
The following table shows selected financial data relating to our consolidated financial condition and results of operations required by Item 301 of Regulation S-K. Such selected data should be read in conjunction with " Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations " and the consolidated financial statements and related notes appearing elsewhere in this report (dollar amounts are stated in thousands, except share and per share amounts).
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 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:
Distributions declared on common stock $ 54,604 $ 53,473 $ 53,782 $ 53,758 $ 83,633
Distributions paid to common stockholders $ 54,214 $ 53,250 $ 54,194 $ 53,358 $ 98,606
Distributions declared per weighted average common share $ 0.08 $ 0.07 $ 0.07 $ 0.07 $ 0.10
Distributions paid per weighted average
common share $ 0.08 $ 0.07 $ 0.07 $ 0.07 $ 0.12
Cash Flow Data:
Net cash provided by operating activities $ 94,155 $ 106,008 $ 124,657 $ 118,152 $ 133,164
Net cash (used in) provided by investing activities $ (49,060) $ (41,797) $ 175,414 $ (209,088) $ 1,078,749
Net cash used in financing activities $ (82,073) $ (68,316) $ (207,096) $ (159,411) $ (1,013,112)
Other Information:
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 retail platform, including the following major dispositions classified as discontinued operations: the spin-off of Highlands REIT, Inc. in 2016, the sale of University House Communities Group, Inc. in 2016, the spin-off of Xenia Hotels & Resorts, Inc. in 2015, all as disclosed in our Annual Reports on Form 10-K for prior years. Information regarding our acquisitions and dispositions in 2020 and 2019 can be found in " Item 8. Note 4. Acquired Properties " and " Item 8. Note 5. Disposed Properties ", respectively, in the notes to the consolidated financial statements included herein.
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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with "Part II, Item 6. Selected Financial Data" and our consolidated financial statements included in this Annual Report. In addition to historical data, this discussion contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited to those discussed in "Special Note Regarding Forward-Looking Statements" and "Part I, Item 1A. Risk Factors" included elsewhere in this Annual Report.