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Item 3. Quantitative and Qualitative Disclosures About Market Risk

2022-04-29 compared with 2021-11-05 · 6 added, 82 removed, 16 unchanged (85% of the section changed)

3 unchanged sentences

The Company has not entered, and does not plan to enter, into any derivative financial instruments for trading or speculative purposes.

The following table presents the Company’s aggregate fixed rate debt obligations outstanding, including fair market value adjustments and unamortized deferred financing costs, as of September 30, 2021, with corresponding weighted average interest rates sorted by maturity date.

The Company had no variable rate debt outstanding at September 30, 2021.

The following table presents the Company’s aggregate fixed rate and variable rate debt obligations outstanding, including fair market value adjustments and unamortized deferred financing costs, as of March 31, 2022, with corresponding weighted-average interest rates sorted by maturity date.

The table does not include extension options where available (amounts in millions).

Average Interest Rate

Variable Rate

Average Interest Rate

Unsecured Debt

Average Interest Rate

Based on the Company’s variable-rate debt balances, interest expense would have increased by $0.1 million for the three months ended March 31, 2022 if short-term interest rates were 1.0% higher.

Controls and Procedures.

1 unchanged sentence

Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective.

On August 3, 2021, the Company completed the Merger and accordingly the Company’s management is in the process of integrating Weingarten’s operations into its internal control over financial reporting, as necessary, to accommodate modifications to its business processes related to the Merger transaction.

None of these integration activities are expected to have a material impact on our system of internal control over financial reporting.

Other than as noted above, there have not been any changes in the Company’s internal control over financial reporting during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

There have not been any changes in the Company’s internal control over financial reporting during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

OTHER INFORMATION

3 unchanged sentences

Risk Factors.

Except as set forth below, as of the date of this report, there are no material changes to our risk factors as previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020. 

Risks Relating to the Company after Completion of the Merger

We have incurred substantial expenses related to the Merger and may continue to incur additional expenses.

We have incurred substantial expenses in connection with the Merger and may continue to incur additional expenses relating to integrating the business, operations, networks, systems, technologies, policies and procedures of the Company and Weingarten.

There are a large number of processes that must be integrated in the Merger, including leasing, billing, management information, purchasing, accounting and finance, sales, payroll and benefits, fixed asset, lease administration and regulatory compliance.

While we and Weingarten have assumed that a certain level of transaction and integration expenses would be incurred, there are a number of factors beyond our control that could affect the total amount or the timing of integration expenses.

Our stockholders have been diluted by the Merger and the trading price of shares of the combined company may be affected by factors different from those affecting the price of shares of our common stock before the Merger.

The Merger has diluted the ownership position of our stockholders.

Upon completion of the Merger, our legacy stockholders own approximately 71% of the issued and outstanding shares of our common stock, and legacy Weingarten stockholders own approximately 29% of the issued and outstanding shares of our common stock.

Consequently, our stockholders have less influence over our management and policies after the effective time of the Merger than they currently exercise over our management and policies.

The results of our operations and the trading price of our common stock after the Merger may also be affected by factors different from those currently affecting our results of operations and the trading prices of our common stock.

For example, some of our and Weingarten’s existing institutional investors may elect to decrease their ownership in the combined company.

Accordingly, the historical trading prices and financial results of the Company and Weingarten may not be indicative of these matters for the combined company after the Merger.

Following the Merger, we may be unable to integrate the business of Weingarten successfully or realize the anticipated synergies and related benefits of the Merger or do so within the anticipated time frame.

The Merger involves the combination of two companies which currently operate as independent public companies.

We will be required to devote significant management attention and resources to integrating the business practices and operations of Weingarten.

Potential difficulties we may encounter in the integration process include the following:

the inability to successfully combine the businesses of the Company and Weingarten in a manner that permits the Company to achieve the cost savings anticipated to result from the Merger, which would result in some anticipated benefits of the Merger not being realized in the time frame currently anticipated, or at all;

the inability to successfully realize the anticipated value from some of Weingarten’s assets, particularly from the redevelopment projects;

lost sales and tenants as a result of certain tenants of either of the Company or Weingarten deciding not to continue to do business with the combined company;

the complexities associated with integrating personnel from the two companies;

the additional complexities of combining two companies with different histories, cultures, markets, strategies and customer bases;

the failure of the combined company to retain key employees of either of the two companies;

potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the Merger;

performance shortfalls at one or both of the two companies as a result of the diversion of management’s attention caused by completing the Merger and integrating the companies’ operations.

For all these reasons, you should be aware that it is possible that the integration process could result in the distraction of our management, the disruption of our ongoing business or inconsistencies in our services, standards, controls, procedures and policies, any of which could adversely affect the ability of the Company to maintain relationships with tenants, vendors and employees or to achieve the anticipated benefits of the Merger, or could otherwise adversely affect our business and financial results.

Following the Merger, we have a substantial amount of indebtedness and may need to incur more in the future.

We have substantial indebtedness and, in connection with the Merger, incurred additional indebtedness.

The incurrence of new indebtedness could have adverse consequences on our business following the Merger, such as:

requiring the Company to use a substantial portion of our cash flow from operations to service our indebtedness, which would reduce the available cash flow to fund working capital, capital expenditures, development projects, and other general corporate purposes and reduce cash for distributions;

limiting our ability to obtain additional financing to fund our working capital needs, acquisitions, capital expenditures, or other debt service requirements or for other purposes;

increasing our costs of incurring additional debt;

increasing our exposure to floating interest rates;

limiting our ability to compete with other companies that are not as highly leveraged, as we may be less capable of responding to adverse economic and industry conditions;

restricting the Company from making strategic acquisitions, developing properties, or exploiting business opportunities;

restricting the way in which we conduct our business because of financial and operating covenants in the agreements governing our existing and future indebtedness;

exposing the Company to potential events of default (if not cured or waived) under covenants contained in our debt instruments that could have a material adverse effect on our business, financial condition, and operating results;

increasing our vulnerability to a downturn in general economic conditions;

limiting our ability to react to changing market conditions in its industry.

The impact of any of these potential adverse consequences could have a material adverse effect on our results of operations, financial condition, and liquidity.

Counterparties to certain agreements with the Company or Weingarten may exercise their contractual rights under such agreements in connection with the Merger.

We and Weingarten are each party to certain agreements that give the counterparty certain rights following a “change in control,”

including in some cases the right to terminate such agreements.

Under some such agreements, for example certain debt obligations, the Merger may constitute a change in control and therefore the counterparty may exercise certain rights under the agreement upon the closing of the Merger.

Any such counterparty may request modifications of its respective agreements as a condition to granting a waiver or consent under its agreement.

There is no assurance that such counterparties will not exercise their rights under the agreements, including termination rights where available, that the exercise of any such rights will not result in a material adverse effect or that any modifications of such agreements will not result in a material adverse effect to the combined company subsequent to the Merger.

We face risks relating to cybersecurity attacks and security incidents which could cause loss of confidential information, disrupt operations and materially affect our business and financial results.

We, like all businesses, are subject to cyberattacks and security incidents, which threaten the confidentiality, integrity, and availability of our systems and information resources.

Those attacks and incidents may be due to intentional or unintentional acts by employees, contractors or third-parties, who seek to gain unauthorized access to our or our service providers’

systems to disrupt operations, corrupt data, or steal confidential information.

through malware, computer viruses, ransomware, social engineering (e.g., phishing attachments to e-mails) or other vectors.

The risk of a cybersecurity attack, data breach or disruption, including by computer hackers, foreign governments and cyber terrorists, has increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.

Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations and, in some cases, may be critical to the operations of certain of our tenants.

While we maintain some of our own critical information technology systems, we also depend on third-parties to provide important software, technologies, tools and a broad array of services and functions, such as payroll, human resources, electronic communications and certain finance functions, among others.

In addition, in the ordinary course of our business, we collect, process, transmit and store sensitive data, including intellectual property, our proprietary business information and that of our customers, suppliers and business partners, as well as personally identifiable information.

Although we, and our service providers, have various measures in place to maintain and manage the security and integrity of IT networks, related systems and information assets, there can be no assurance that these efforts will be effective or that attempted attacks, breaches or disruptions will not be successful or damaging.

Our measures to prevent, detect and mitigate these threats, such as password protection, firewalls, backup servers, threat monitoring, log aggregation, vulnerability scanning, data encryption, periodic penetration testing and multifactor authentication, may not be successful in preventing a security incident or data breach or limiting the effects of such a breach.

Furthermore, the security measures employed by third-party service providers may prove to be ineffective at preventing breaches of their systems.

This is particularly so because attack methodologies change frequently or are not recognized until launched, and we also may be unable to investigate or remediate incidents because attackers are increasingly using techniques and tools designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence.

As a result of the COVID-19 pandemic, employees working remotely has amplified certain risks to our business.

The number of points of potential cyberattack, such as laptops and mobile devices have increased and any failure to effectively manage these risks, including to timely identify and appropriately respond to any cyberattacks or other disruption to our technology infrastructure, may adversely affect our business.

Cyber criminals are targeting their attacks on individual employees, utilizing interest in pandemic related information to increase business email compromise scams designed to trick victims into transferring sensitive data or funds, or steal credentials that compromise information systems which extend to multiple platforms throughout the Company.

The primary risks that could directly result from the occurrence of a cyberattack or security incident include operational interruption, damage to our relationship with our tenants, and private data exposure.

We could be required to expend significant capital and other resources to address an attack or incident, which may not be covered or fully covered by our insurance and which may involve payments for investigations, forensic analyses, legal advice, public relations advice, system repair or replacement, or other services, in addition to any remedies or relief that may result from legal proceedings.

Our financial results may be negatively impacted by such attacks and incidents or any resulting negative media attention.

A cyberattack or security incident could:

disrupt the proper functioning of our networks and systems and therefore our operations and/or those of certain of our tenants;

result in misstated financial reports, violations of loan covenants and/or missed reporting deadlines;

result in our inability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT;

result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive or otherwise valuable information of ours or others, which others could use to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes;

result in our inability to maintain the building systems relied upon by our tenants for the efficient use of their leased space;

require significant management attention and resources to remediate systems, fulfill compliance requirements and/or to remedy any damages that result;

subject us to regulatory enforcement, including investigative costs and fines or penalties, as the White House, SEC and other regulators have increased their focus on companies’ cybersecurity vulnerabilities and risks;

subject us to claims for breach of contract, damages, credits, penalties or termination of leases or other agreements or other causes of action;

damage our reputation among our tenants, investors and associates.

Moreover, cyber incidents perpetrated against our tenants, including unauthorized access to customers’

credit card data and other confidential information, could diminish consumer confidence and consumer spending and negatively impact our business.

There are no material changes to our risk factors as previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021. 

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

What changed 10-Q

Item 3. Quantitative and Qualitative Disclosures About Market Risk