KITE REALTY GROUP TRUST 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the accompanying historical financial statements and related notes thereto. In this discussion, unless the context suggests otherwise, references to “our Company,” “we,” “us,” and “our” mean Kite Realty Group Trust and its direct and indirect subsidiaries, including Kite Realty Group, L.P. CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q, together with other statements and information publicly disseminated by us, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements are based on assumptions and expectations that may not be realized and are inherently subject to risks, uncertainties and other factors, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, performance, transactions or achievements, financial or otherwise, may differ materially from the results, performance, transactions or achievements, financial or otherwise, expressed or implied by the forward-looking statements. Currently, one significant factor that could cause actual outcomes to differ significantly from our forward-looking statements is the adverse effect of the current pandemic of the novel coronavirus (“COVID-19”), including possible resurgences, variants and mutations, on the financial condition, results of operations, cash flows and performance of the Company and its tenants, the real estate market and the global economy and financial markets. Moreover, investors are cautioned to interpret many of the risks identified under the section titled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 as being heightened as a result of the ongoing and numerous adverse effects of COVID-19. Additional risks, uncertainties and other factors that might cause such differences, some of which could be material, include but are not limited to: • risks associated with the Company’s Merger (defined below) with Retail Properties of America, Inc. (“RPAI”), including the integration of the businesses of the combined company, the ability to achieve expected synergies or cost savings and potential disruptions to the Company’s plans and operations; • national and local economic, business, real estate and other market conditions, particularly in connection with low or negative growth in the U.S. economy as well as economic uncertainty (including the potential effects of inflation and increases in interest rates); • financing risks, including the availability of, and costs associated with, sources of liquidity; • our ability to refinance, or extend the maturity dates of, our indebtedness; • the level and volatility of interest rates; • the financial stability of tenants; • the competitive environment in which we operate, including potential oversupplies and reduction in demand for rental space; • acquisition, disposition, development and joint venture risks; • property ownership and management risks, including the relative illiquidity of real estate investments, and expenses, vacancies or the inability to rent space on favorable terms or at all; • our ability to maintain our status as a real estate investment trust (“REIT”) for U.S. federal income tax purposes; • potential environmental and other liabilities; • impairment in the value of real estate property we own; • the attractiveness of our properties to tenants, the actual and perceived impact of e-commerce on the value of shopping center assets and changing demographics and customer traffic patterns; 28 • business continuity disruptions and a deterioration in our tenant’s ability to operate in affected areas or delays in the supply of products or services to us or our tenants from vendors that are needed to operate efficiently, causing costs to rise sharply and inventory to fall; • risks related to our current geographical concentration of our properties in Texas, Florida, New York, Maryland, and North Carolina; • civil unrest, acts of terrorism or war, acts of God, climate change, epidemics, pandemics (including COVID-19), natural disasters and severe weather conditions, including such events that may result in underinsured or uninsured losses or other increased costs and expenses; • changes in laws and government regulations including governmental orders affecting the use of our properties or the ability of our tenants to operate, and the costs of complying with such changed laws and government regulations; • possible short-term or long-term changes in consumer behavior due to COVID-19 and the fear of future pandemics; • our ability to satisfy environmental, social or governance standards set by various constituencies; • insurance costs and coverage; • risks associated with cybersecurity attacks and the loss of confidential information and other business disruptions; • other factors affecting the real estate industry generally; and • other risks identified in this Quarterly Report on Form 10-Q and, from time to time, in other reports we file with the Securities and Exchange Commission (the “SEC”) or in other documents that we publicly disseminate, including, in particular, the section titled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. We undertake no obligation to publicly update or revise these forward-looking statements, whether as a result of new information, future events or otherwise. Overview Our Business and Properties Kite Realty Group Trust is a publicly held REIT which, through its majority-owned subsidiary, Kite Realty Group, L.P., owns interests in various operating subsidiaries and joint ventures engaged in the ownership, operation, acquisition, development, and redevelopment of high-quality, open-air shopping centers and mixed-use assets in select markets in the United States. We derive revenues primarily from activities associated with the collection of contractual rents and reimbursement payments from tenants at our properties. Therefore, our operating results depend materially on, among other things, the ability of our tenants to make required lease payments, the health and resilience of the U.S. retail sector, interest rate volatility, job growth and real estate market and overall economic conditions. As of June 30, 2022, we owned interests in 181 operating retail properties totaling approximately 28.8 million square feet and one office property with 0.3 million square feet. Of the 181 operating retail properties, 11 contain an office component. We also owned five development projects under construction as of this date. Merger with RPAI On October 22, 2021, we completed a merger with RPAI in accordance with the Agreement and Plan of Merger dated July 18, 2021 (the “Merger Agreement”), by and among the Company, its wholly owned subsidiary KRG Oak, LLC (“Merger Sub”) and RPAI, pursuant to which RPAI merged with and into Merger Sub (the “Merger”). Immediately following the closing of the Merger, Merger Sub merged with and into the Operating Partnership so that all of the assets and liabilities of the Company continue to be held at or below the Operating Partnership level. As a result of the Merger, we acquired 100 operating retail properties and five development projects along with multiple parcels of entitled land for future value creation, creating a top five open-air shopping center REIT. The combined high-quality, open-air portfolio is a mixture of predominantly necessity-based, grocery-anchored neighborhood and community centers, combined with vibrant mixed-use assets. The Merger more than doubled the Company’s presence in high-growth markets that have mild or temperate climates and no or relatively low income taxes, while also introducing and/or enhancing its presence in strategic gateway markets. In addition, the combined company 29 has additional opportunities to further increase shareholder value, including leasing of pandemic-related vacancies, optimizing net operating income (“NOI”) margins, lowering the Company’s cost of capital, and completing select development projects. Pursuant to the terms of the Merger Agreement, each outstanding share of RPAI common stock converted into the right to receive 0.623 common shares of the Company plus cash in lieu of fractional Company shares. The Operating Partnership issued an equivalent amount of General Partner Units to the Parent Company. Inflation Most of our leases contain provisions designed to mitigate the adverse impact of inflation, including stated rent increases and requirements for tenants to pay a share of operating expenses, including common area maintenance, real estate taxes, insurance or other operating expenses related to the maintenance of our properties, including escalation clauses in certain leases. Most of our leases also include clauses that allow us to collect additional rent based on a percentage of tenants’ gross sales over stated thresholds, which sales generally increase as prices rise. In addition, we believe that the rental rates in many of our leases are below current market rates for comparable space and that upon renewal, such rates may be increased to be in line with current rates, which may offset certain inflationary expense pressures. We also periodically evaluate our exposure to interest rate fluctuations and enter into interest rate protection agreements to mitigate the impact of changes in interest rates on our variable rate debt. Impacts on Business from COVID-19 In 2020, the COVID-19 pandemic had a significant adverse impact on many of our tenants and on our business. The effects of COVID-19, including related government restrictions, mandatory quarantines, “shelter in place” orders, border closures, “social distancing” practices, masking requirements and other travel and gathering restrictions and practices, have caused many of our tenants to close stores, reduce hours or significantly limit service, each of which may continue to create headwinds for our tenants. Since we cannot estimate when the containment measures will roll back, end, or be reinstated, we cannot estimate the ultimate operational and financial impact of COVID-19 on our business. As the domestic economy recovered from many of the effects of COVID-19, retailers improved their operations to account for the pandemic, including using open-air centers as convenient shopping destinations and last-mile fulfillment through the use of in-store pickup, curbside pickup, and shipping from stores. Historically, economic indicators such as GDP growth, consumer confidence and employment have been correlated with demand for certain of our tenants’ products and services. If an economic recession returns, it could increase the number of our tenants that are unable to meet their lease obligations to us and could limit the demand for our space from new tenants. We expect the significance of the COVID-19 pandemic, including the extent of its effects on our business, financial performance and condition, operating results and cash flows and the economic slowdown, to be dictated by, among other things, the duration of the COVID-19 pandemic, including possible resurgences and mutations, the success of efforts to contain it, the efficacy of vaccines, including against variants of COVID-19, public adoption rates of vaccines and the impact of other actions taken in response to the pandemic. These uncertainties make it difficult to predict operating results for our business; therefore, there can be no assurances that we will not experience further declines in revenues, net income, Funds From Operations (“FFO”) or other operating metrics, which could be material. Operating Activity During the second quarter of 2022, we executed new and renewal leases on 206 individual spaces totaling 1,198,263 square feet (13.2% cash leasing spread on 145 comparable leases). New leases were signed on 68 individual spaces for 277,184 square feet of gross leasable area (“GLA”) (49.1% cash leasing spread on 26 comparable leases), while renewal leases were signed on 138 individual spaces for 921,079 square feet of GLA (8.0% cash leasing spread on 119 comparable leases). Comparable new and renewal leases are defined as those for which the space was occupied by a tenant within the last 12 months. Results of Operations The comparability of results of operations for the three and six months ended June 30, 2022 and 2021 is affected by our Merger with RPAI that was completed on October 22, 2021, in which we acquired 100 operating retail properties as well as five development projects, along with our development, redevelopment, and operating property acquisition and disposition activities during these periods. Therefore, we believe it is most useful to review the comparisons of our results of operations for these periods in conjunction with the discussion of our activities during those periods, which is set forth below. 30 Property Acquisitions In addition to the properties we acquired in the Merger, the following properties were acquired at various times during the period from January 1, 2021 through June 30, 2022: Property Name Metropolitan Statistical Area (MSA) Acquisition Date Owned GLA Nora Plaza outparcel Indianapolis, IN December 2021 23,722 Pebble Marketplace Las Vegas, NV February 2022 85,796 MacArthur Crossing two-tenant building Dallas, TX April 2022 56,077 Operating Property Dispositions The following operating properties were sold during the period from January 1, 2021 through June 30, 2022: Property Name MSA Disposition Date Owned GLA Westside Market Dallas, TX October 2021 93,377 Plaza Del Lago (1) Chicago, IL June 2022 100,016 (1) Plaza Del Lago also contains 8,800 square feet of residential space comprised of 18 multifamily rental units. Development and Redevelopment Projects The following properties were under active development or redevelopment at various times during the period from January 1, 2021 through June 30, 2022 and removed from our operating portfolio: Project Name MSA Transition to Development or Redevelopment ( 1) Transition to Operating Portfolio Owned Commercial GLA Hamilton Crossing Centre (2)(3) Indianapolis, IN June 2014 Pending 92,283 The Corner (2) Indianapolis, IN December 2015 Pending 24,000 Eddy Street Commons – Phase III South Bend, IN September 2020 March 2022 18,600 Glendale Town Center (2) Indianapolis, IN March 2019 December 2021 199,021 The Landing at Tradition – Phase II Port St. Lucie, FL September 2021 Pending 39,900 Carillon MOB (4) Washington, D.C. October 2021 Pending 126,000 Circle East (4) Baltimore, MD October 2021 Pending 82,000 One Loudoun Downtown – Residential and Pads G&H Commercial (4) Washington, D.C. October 2021 Residential: June 2022 Commercial: Pending 67,000 Shoppes at Quarterfield (4) Baltimore, MD October 2021 June 2022 58,000 (1) Transition date represents the date the property was transferred from our operating portfolio into redevelopment status. For legacy RPAI projects, the transition date represents the later of the date of the closing of the Merger and the date the project was transferred into redevelopment status. (2) This property has been identified as a redevelopment property and is not included in the operating portfolio or the same property pool. The redevelopment projects at Hamilton Crossing Centre and The Corner will include the creation of a mixed-used development. (3) A portion of the Hamilton Crossing Centre redevelopment was sold in January 2022. (4) Project was assumed as part of the Merger with RPAI in October 2021. 31 Comparison of Operating Results for the Three Months Ended June 30, 2022 to the Three Months Ended June 30, 2021 The following table reflects changes in the components of our consolidated statements of operations for the three months ended June 30, 2022 and 2021. Three Months Ended June 30, ($ in thousands) 2022 2021 Change Revenue: Rental income $ 194,261 $ 67,990 $ 126,271 Other property-related revenue 5,673 1,027 4,646 Fee income 2,671 515 2,156 Total revenue 202,605 69,532 133,073 Expenses: Property operating 26,123 10,227 15,896 Real estate taxes 27,883 8,550 19,333 General, administrative and other 13,809 8,159 5,650 Merger and acquisition costs (27) 760 (787) Depreciation and amortization 119,761 29,798 89,963 Total expenses 187,549 57,494 130,055 Gain on sales of operating properties, net 23,958 50 23,908 Operating income 39,014 12,088 26,926 Other (expense) income: Interest expense (25,709) (12,266) (13,443) Income tax benefit of taxable REIT subsidiary 188 100 88 Equity in earnings (loss) of unconsolidated subsidiaries 114 (244) 358 Other (expense) income, net (162) 227 (389) Net income (loss) 13,445 (95) 13,540 Net income attributable to noncontrolling interests (314) (147) (167) Net income (loss) attributable to common shareholders $ 13,131 $ (242) $ 13,373 Property operating expense to total revenue ratio 12.9 % 14.7 % Rental income (including tenant reimbursements) increased $126.3 million, or 185.7%, due to the following: ($ in thousands) Net change three months ended June 30, 2021 to 2022 Properties or components of properties sold during 2021 or 2022 $ 63 Properties under redevelopment or acquired during 2021 and/or 2022 1,663 Properties acquired in the Merger with RPAI 122,735 Properties fully operational during 2021 and 2022 and other 1,810 Total $ 126,271 The net increase of $1.8 million in rental income for properties fully operational during 2021 and 2022 is primarily due to higher base minimum rent of $0.4 million due to improved tenant performance and an increase in tenant reimbursements due to higher recoverable common area maintenance expenses and real estate taxes. These variances were partially offset by a decrease in lease termination income of $0.3 million. The occupancy of the fully operational properties increased from 88.8% for 2021 to 90.5% for 2022. Other property-related revenue primarily consists of parking revenues, gains on the sale of land and other miscellaneous activity. This revenue increased by $4.6 million primarily as a result of an increase in ancillary income of $1.9 million, higher gains on sales of undepreciated assets of $1.3 million recognized during the three months ended June 30, 2022, and an increase in parking revenue of $0.3 million. 32 We recorded fee income of $2.7 million and $0.5 million during the three months ended June 30, 2022 and 2021, respectively, from property management and development services provided to third parties and unconsolidated joint ventures. The increase in fee income is primarily related to development fee services for the development of a corporate campus for Republic Airways. Property operating expenses increased $15.9 million, or 155.4%, due to the following: ($ in thousands) Net change three months ended June 30, 2021 to 2022 Properties or components of properties sold during 2021 or 2022 $ (22) Properties under redevelopment or acquired during 2021 and/or 2022 236 Properties acquired in the Merger with RPAI 13,556 Properties fully operational during 2021 and 2022 and other 2,126 Total $ 15,896 The net increase of $2.1 million in property operating expenses for properties fully operational during 2021 and 2022 is primarily due to increases in insurance expense of $1.5 million and utilities of $0.4 million, partially offset by a reduction in non-recoverable operating expenses. As a percentage of revenue, property operating expenses decreased from 14.7% to 12.9% due to an increase in revenue in 2022. Real estate taxes increased $19.3 million, or 226.1%, due to the following: ($ in thousands) Net change three months ended June 30, 2021 to 2022 Properties or components of properties sold during 2021 or 2022 $ 231 Properties under redevelopment or acquired during 2021 and/or 2022 157 Properties acquired in the Merger with RPAI 18,380 Properties fully operational during 2021 and 2022 and other 565 Total $ 19,333 The net increase of $0.6 million in real estate taxes for properties that were fully operational during 2021 and 2022 is primarily due to a slight increase in real estate tax assessments at certain properties in the portfolio. The majority of real estate tax expense is recoverable from tenants and such recovery is reflected within rental income. General, administrative and other expenses increased $5.7 million, or 69.2%. This increase is primarily due to incremental head count as part of the Merger and higher share-based compensation expense. The Company did not incur any significant merger and acquisition costs related to the Merger with RPAI during the three months ended June 30, 2022 compared to $0.8 million of merger and acquisition costs incurred during the three months ended June 30, 2021. Depreciation and amortization expense increased $90.0 million, or 301.9%, primarily as a result of the Merger with RPAI as detailed below: ($ in thousands) Net change three months ended June 30, 2021 to 2022 Properties or components of properties sold during 2021 or 2022 $ 325 Properties under redevelopment or acquired during 2021 and/or 2022 1,259 Properties acquired in the Merger with RPAI 87,470 Properties fully operational during 2021 and 2022 and other 909 Total $ 89,963 The net increase of $0.9 million in depreciation and amortization at properties fully operational during 2021 and 2022 is primarily due to the timing of additions and disposals at operating properties. Interest expense increased $13.4 million, or 109.6%, primarily due to interest costs of $13.0 million related to debt assumed in conjunction with the Merger. 33 Comparison of Operating Results for the Six Months Ended June 30, 2022 to the Six Months Ended June 30, 2021 The following table reflects changes in the components of our consolidated statements of operations for the six months ended June 30, 2022 and 2021. Six Months Ended June 30, ($ in thousands) 2022 2021 Change Revenue: Rental income $ 384,119 $ 135,880 $ 248,239 Other property-related revenue 7,897 2,078 5,819 Fee income 4,980 948 4,032 Total revenue 396,996 138,906 258,090 Expenses: Property operating 52,051 20,496 31,555 Real estate taxes 54,742 17,950 36,792 General, administrative and other 27,118 15,435 11,683 Merger and acquisition costs 898 760 138 Depreciation and amortization 241,265 60,431 180,834 Total expenses 376,074 115,072 261,002 Gain on sales of operating properties, net 27,126 26,258 868 Operating income 48,048 50,092 (2,044) Other (expense) income: Interest expense (51,223) (24,508) (26,715) Income tax benefit of taxable REIT subsidiary 259 218 41 Equity in loss of unconsolidated subsidiaries (200) (562) 362 Other (expense) income, net (265) 19 (284) Net (loss) income (3,381) 25,259 (28,640) Net income attributable to noncontrolling interests (292) (926) 634 Net (loss) income attributable to common shareholders $ (3,673) $ 24,333 $ (28,006) Property operating expense to total revenue ratio 13.1 % 14.8 % Rental income (including tenant reimbursements) increased $248.2 million, or 182.7%, due to the following: ($ in thousands) Net change six months ended June 30, 2021 to 2022 Properties or components of properties sold during 2021 or 2022 $ 506 Properties under redevelopment or acquired during 2021 and/or 2022 2,546 Properties acquired in the Merger with RPAI 245,100 Properties fully operational during 2021 and 2022 and other 87 Total $ 248,239 The net increase of $0.1 million in rental income for properties fully operational during 2021 and 2022 is primarily due to higher base minimum rent of $0.9 million due to improved tenant performance, higher overage rent of $0.4 million, and an increase in tenant reimbursements due to higher recoverable common area maintenance expenses. These variances were partially offset by a $1.3 million decrease in lease termination income. Other property-related revenue primarily consists of parking revenues, gains on the sale of land and other miscellaneous activity. This revenue increased by $5.8 million primarily as a result of an increase in ancillary income of $3.0 million, higher gains on sales of undepreciated assets of $1.1 million recognized during the six months ended June 30, 2022, and an increase in parking revenue of $0.8 million. We recorded fee income of $5.0 million and $0.9 million during the six months ended June 30, 2022 and 2021, respectively, from property management and development services provided to third parties and unconsolidated joint ventures. 34 The increase in fee income is primarily related to development fee services for the development of a corporate campus for Republic Airways. Property operating expenses increased $31.6 million, or 154.0%, due to the following: ($ in thousands) Net change six months ended June 30, 2021 to 2022 Properties or components of properties sold during 2021 or 2022 $ (26) Properties under redevelopment or acquired during 2021 and/or 2022 252 Properties acquired in the Merger with RPAI 26,534 Properties fully operational during 2021 and 2022 and other 4,795 Total $ 31,555 The net increase of $4.8 million in property operating expenses for properties fully operational during 2021 and 2022 is primarily due to increases in insurance expense of $1.5 million and utilities of $0.4 million, as well as an increase in non-recoverable operating expenses. As a percentage of revenue, property operating expenses decreased from 14.8% to 13.1% due to an increase in revenue in 2022. Real estate taxes increased $36.8 million, or 205.0%, due to the following: ($ in thousands) Net change six months ended June 30, 2021 to 2022 Properties or components of properties sold during 2021 or 2022 $ 516 Properties under redevelopment or acquired during 2021 and/or 2022 214 Properties acquired in the Merger with RPAI 37,073 Properties fully operational during 2021 and 2022 and other (1,011) Total $ 36,792 The net decrease of $1.0 million in real estate taxes for properties that were fully operational during 2021 and 2022 is primarily due to successful real estate tax appeals at certain properties in the portfolio, most notably for certain of our Texas properties. The majority of real estate tax expense is recoverable from tenants and such recovery is reflected in rental income. General, administrative and other expenses increased $11.7 million, or 75.7%. This increase is primarily due to incremental head count as part of the Merger and higher share-based compensation expense. The Company incurred $0.9 million and $0.8 million of merger and acquisition costs related to the Merger with RPAI during the six months ended June 30, 2022 and 2021, respectively. These costs primarily consist of professional fees and technology costs. Depreciation and amortization expense increased $180.8 million, or 299.2%, primarily as a result of the Merger with RPAI as detailed below: ($ in thousands) Net change six months ended June 30, 2021 to 2022 Properties or components of properties sold during 2021 or 2022 $ 3,599 Properties under redevelopment or acquired during 2021 and/or 2022 1,722 Properties acquired in the Merger with RPAI 179,814 Properties fully operational during 2021 and 2022 and other (4,301) Total $ 180,834 The net decrease of $4.3 million in depreciation and amortization at properties fully operational during 2021 and 2022 is primarily due to the timing of additions and disposals at operating properties. Interest expense increased $26.7 million, or 109.0%, primarily due to interest costs of $26.5 million related to debt assumed in conjunction with the Merger. 35 Net Operating Income and Same Property Net Operating Income We use property NOI, a non-GAAP financial measure, to evaluate the performance of our properties. We define NOI as income from our real estate, including lease termination fees received from tenants, less our property operating expenses. NOI excludes amortization of capitalized tenant improvement costs and leasing commissions and certain corporate level expenses, including merger and acquisition costs. We believe that NOI is helpful to investors as a measure of our operating performance because it excludes various items included in net income that do not relate to or are not indicative of our operating performance, such as depreciation and amortization, interest expense, and impairment, if any. We also use same property NOI (“Same Property NOI”), a non-GAAP financial measure, to evaluate the performance of our properties. Same Property NOI is net income excluding properties that have not been owned for the full periods presented. However, due to the size of the RPAI portfolio acquired in the Merger with RPAI, which closed in October 2021, the legacy RPAI properties have been deemed to qualify for the same property pool beginning in 2022 if they had a full first quarter of operations in 2021 within the legacy RPAI portfolio prior to the Merger. Same Property NOI also excludes (i) net gains from outlot sales, (ii) straight-line rent revenue, (iii) lease termination income in excess of lost rent, (iv) amortization of lease intangibles, and (v) significant prior period expense recoveries and adjustments, if any. When the Company receives payments in excess of any accounts receivable for terminating a lease, Same Property NOI will include such excess payments as monthly rent until the earlier of the expiration of 12 months or the start date of a replacement tenant. The Company believes that Same Property NOI is helpful to investors as a measure of our operating performance because it includes only the NOI of properties that have been owned for the full periods presented. The Company believes such presentation eliminates disparities in net income due to the acquisition or disposition of properties during the particular periods presented and thus provides a more consistent metric for the comparison of our properties. Same Property NOI includes the results of properties that have been owned for the entire current and prior year reporting periods. In order to provide meaningful comparative information across periods that, in some cases, predate the Merger, all information regarding the performance of the same property pool is presented as though the Merger was consummated on January 1, 2021 (i.e., as though the properties owned by RPAI prior to the Merger that are included in our same property pool had been owned by the Company for the entirety of all comparison periods for which same property pool information is presented). NOI and Same Property NOI should not, however, be considered as alternatives to net income (calculated in accordance with GAAP) as indicators of our financial performance. Our computation of NOI and Same Property NOI may differ from the methodology used by other REITs, and therefore may not be comparable to such other REITs. When evaluating the properties that are included in the same property pool, we have established specific criteria for determining the inclusion of properties acquired or those recently under development. An acquired property is included in the same property pool when there is a full quarter of operations in both years subsequent to the acquisition date. The properties acquired in the Merger with RPAI qualify for the same property pool beginning in 2022 if they had a full first quarter of operations in 2021 within the legacy RPAI portfolio prior to the Merger. Development and redevelopment properties are included in the same property pool four full quarters after the properties have been transferred to the operating portfolio. A redevelopment property is first excluded from the same property pool when the execution of a redevelopment plan is likely and we (a) begin recapturing space from tenants or (b) the contemplated plan significantly impacts the operations of the property. For the three and six months ended June 30, 2022, the same property pool excludes (i) Glendale Town Center and Shoppes at Quarterfield, which were reclassified from active redevelopment into our operating portfolio in December 2021 and June 2022, respectively, (ii) the multifamily rental units at One Loudoun Downtown – Pads G & H, (iii) five active development and redevelopment projects, (iv) Arcadia Village and Pebble Marketplace, which were acquired subsequent to January 1, 2021, and (v) office properties. 36 The following table reflects Same Property NOI and a reconciliation to net income (loss) attributable to common shareholders for the three and six months ended June 30, 2022 and 2021: Three Months Ended June 30, Six Months Ended June 30, ($ in thousands) 2022 2021 Change 2022 2021 % Change Number of properties in same property pool for the period (1) 177 177 177 177 Leased percentage at period end 93.8 % 92.2 % 93.8 % 92.2 % Economic occupancy percentage (2) 91.2 % 90.1 % 90.8 % 89.9 % Same Property NOI $ 132,116 $ 127,246 3.8 % $ 261,312 $ 249,165 4.9 % Reconciliation of Same Property NOI to most directly comparable GAAP measure: Net operating income – same properties $ 132,116 $ 127,246 $ 261,312 $ 249,165 Prior period collection impact – same properties 1,078 4,007 3,042 9,996 Net operating income – non-same activity (3) 12,734 (81,013) 20,869 (159,649) Total property NOI 145,928 50,240 190.5 % 285,223 99,512 186.6 % Other income, net 2,811 598 4,774 623 General, administrative and other (13,809) (8,159) (27,118) (15,435) Merger and acquisition costs 27 (760) (898) (760) Depreciation and amortization (119,761) (29,798) (241,265) (60,431) Interest expense (25,709) (12,266) (51,223) (24,508) Gain on sales of operating properties, net 23,958 50 27,126 26,258 Net income attributable to noncontrolling interests (314) (147) (292) (926) Net income (loss) attributable to common shareholders $ 13,131 $ (242) $ (3,673) $ 24,333 (1) Same Property NOI excludes (i) Glendale Town Center and Shoppes at Quarterfield, which were reclassified from active redevelopment into our operating portfolio in December 2021 and June 2022, respectively, (ii) the multifamily rental units at One Loudoun Downtown – Pads G & H, (iii) five active development and redevelopment projects, (iv) Arcadia Village and Pebble Marketplace, which were acquired subsequent to January 1, 2021, and (v) office properties. (2) Excludes leases that are signed but for which tenants have not yet commenced the payment of cash rent. Calculated as a weighted average based on the timing of cash rent commencement and expiration during the period. (3) Includes non-cash activity across the portfolio as well as NOI from properties not included in the same property pool, including properties sold during both periods. Our Same Property NOI increased 3.8% for the three months ended June 30, 2022 compared to the same period of the prior year primarily due to improved occupancy driven by continued strong leasing activity. Funds From Operations FFO is a widely used performance measure for real estate companies and is provided here as a supplemental measure of operating performance. We calculate FFO, a non-GAAP financial measure, in accordance with the best practices described in the April 2002 National Policy Bulletin of the National Association of Real Estate Investment Trusts (“NAREIT”), as restated in 2018. The NAREIT white paper defines FFO as net income (calculated in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. Considering the nature of our business as a real estate owner and operator, the Company believes that FFO is helpful to investors in measuring our operational performance because it excludes various items included in net income that do not relate to or are not indicative of our operating performance, such as gains or losses from sales of depreciated property and depreciation and amortization, which can make periodic and peer analyses of operating performance more difficult. FFO excludes the 2021 gain on sale of the ground lease portfolios as these sales were part of our capital strategy distinct from our ongoing operating strategy of selling individual land parcels from time to time. FFO (a) should not be considered as an alternative to net income (calculated in accordance with GAAP) for the purpose of measuring our financial performance, (b) is 37 not an alternative to cash flow from operating activities (calculated in accordance with GAAP) as a measure of our liquidity, and (c) is not indicative of funds available to satisfy our cash needs, including our ability to make distributions. Our computation of FFO may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than we do. From time to time, the Company may report or provide guidance with respect to “NAREIT FFO as adjusted,” which removes the impact of certain non-recurring and non-operating transactions or other items the Company does not consider to be representative of its core operating results including, without limitation, gains or losses associated with the early extinguishment of debt, gains or losses associated with litigation involving the Company that is not in the normal course of business, merger and acquisition costs, the impact on earnings from employee severance, the excess of redemption value over carrying value of preferred stock redemption, and the impact of prior period bad debt or the collection of accounts receivable previously written off (“prior period collection impact”), which are not otherwise adjusted in the Company’s calculation of FFO. Our calculations of FFO (1) and reconciliation to consolidated net income and FFO, as adjusted, for the three and six months ended June 30, 2022 and 2021 (unaudited) are as follows: Three Months Ended June 30, Six Months Ended June 30, ($ in thousands) 2022 2021 2022 2021 Net income (loss) $ 13,445 $ (95) $ (3,381) $ 25,259 Less: net income attributable to noncontrolling interests in properties (182) (132) (326) (264) Less: gain on sales of operating properties, net (23,958) (50) (27,126) (26,258) Add: depreciation and amortization of consolidated and unconsolidated entities, net of noncontrolling interests 120,128 30,142 241,975 61,113 FFO of the Operating Partnership (1) 109,433 29,865 211,142 59,850 Less: Limited Partners’ interests in FFO (1,377) (888) (2,495) (1,758) FFO attributable to common shareholders (1) $ 108,056 $ 28,977 $ 208,647 $ 58,092 FFO of the Operating Partnership (1) $ 109,433 $ 29,865 $ 211,142 $ 59,850 Add: merger and acquisition costs (27) 760 898 760 Less: prior period collection impact (958) (1,057) (2,054) (1,267) FFO, as adjusted, of the Operating Partnership $ 108,448 $ 29,568 $ 209,986 $ 59,343 (1) “FFO of the Operating Partnership” measures 100% of the operating performance of the Operating Partnership’s real estate properties. “FFO attributable to common shareholders” reflects a reduction for the redeemable noncontrolling weighted average diluted interest in the Operating Partnership. Earnings before Interest, Tax, Depreciation and Amortization (EBITDA) We define EBITDA, a non-GAAP financial measure, as net income before interest expense, income tax expense of the taxable REIT subsidiary, and depreciation and amortization. For informational purposes, we also provide Adjusted EBITDA, which we define as EBITDA less (i) EBITDA from unconsolidated entities, (ii) gains on sales of operating properties or impairment charges, (iii) merger and acquisition costs, (iv) other income and expense, (v) noncontrolling interest EBITDA, and (vi) other non-recurring activity or items impacting comparability from period to period. Annualized Adjusted EBITDA is Adjusted EBITDA for the most recent quarter multiplied by four. Net Debt to Adjusted EBITDA is our share of net debt divided by Annualized Adjusted EBITDA. EBITDA, Adjusted EBITDA, Annualized Adjusted EBITDA and Net Debt to Adjusted EBITDA, as calculated by us, are not comparable to EBITDA and EBITDA-related measures reported by other REITs that do not define EBITDA and EBITDA-related measures exactly as we do. EBITDA, Adjusted EBITDA and Annualized Adjusted EBITDA do not represent cash generated from operating activities in accordance with GAAP and should not be considered alternatives to net income as an indicator of performance or as alternatives to cash flows from operating activities as an indicator of liquidity. Considering the nature of our business as a real estate owner and operator, we believe that EBITDA, Adjusted EBITDA and the ratio of Net Debt to Adjusted EBITDA are helpful to investors in measuring our operational performance because they exclude various items included in net income that do not relate to, or are not indicative of, our operating performance, such as gains or losses from sales of depreciated property and depreciation and amortization, which can make periodic and peer analyses of operating performance more difficult. For informational purposes, we also provide Annualized Adjusted EBITDA, adjusted as described above. We believe this supplemental information provides a meaningful measure of our operating 38 performance. We believe presenting EBITDA and the related measures in this manner allows investors and other interested parties to form a more meaningful assessment of our operating results. The following table presents a reconciliation of our EBITDA, Adjusted EBITDA and Annualized Adjusted EBITDA to net income (the most directly comparable GAAP measure) and a calculation of Net Debt to Adjusted EBITDA: ($ in thousands) Three Months Ended June 30, 2022 Net income $ 13,445 Depreciation and amortization 119,761 Interest expense 25,709 Income tax benefit of taxable REIT subsidiary (188) EBITDA 158,727 Unconsolidated EBITDA 673 Merger and acquisition costs (27) Gain on sales of operating properties, net (23,958) Other income and expense, net 48 Noncontrolling interests (182) Adjusted EBITDA 135,281 Annualized Adjusted EBITDA (1) $ 541,124 Company share of Net Debt: Mortgage and other indebtedness, net $ 3,001,170 Plus: Company share of unconsolidated joint venture debt 34,271 Less: Partner share of consolidated joint venture debt (2) (573) Less: cash, cash equivalents, and restricted cash (99,152) Less: debt discounts, premiums and issuance costs, net (44,717) Company share of Net Debt $ 2,890,999 Net Debt to Adjusted EBITDA 5.3x (1) Represents Adjusted EBITDA for the three months ended June 30, 2022 (as shown in the table above) multiplied by four. (2) Partner share of consolidated joint venture debt is calculated based upon the partner’s pro-rata ownership of the joint venture, multiplied by the related secured debt balance. Liquidity and Capital Resources Overview Our primary finance and capital strategy is to maintain a strong balance sheet with sufficient flexibility to fund our operating and investment activities in a cost-effective manner. We consider a number of factors when evaluating our level of indebtedness and when making decisions regarding additional borrowings or equity offerings, including the interest or dividend rate, the maturity date and the Company’s debt maturity ladder, the impact of financial metrics such as overall Company leverage levels and coverage ratios, and the Company’s ability to generate cash flow to cover debt service. We will continue to monitor the capital markets and may consider raising additional capital through the issuance of our common or preferred shares, unsecured debt securities, or other securities. One of the benefits of the Merger was a strengthened balance sheet to provide the Company with increased liquidity, a well-staggered debt maturity ladder, and an appropriately sized development pipeline. As part of the Merger, we assumed an $850.0 million unsecured revolving credit facility (the “Revolving Facility”), of which the borrowing capacity was $848.5 million as of June 30, 2022, along with other indebtedness. As of June 30, 2022, we had approximately $90.8 million in cash on hand, $8.4 million in restricted cash and escrow deposits, $848.5 million of remaining availability under the Revolving Facility, and only $46.0 million of debt maturities due for the remainder of 2022. During the three months ended June 30, 2022, we used the $125.0 million short-term deposit that matured on April 7, 2022 to repay borrowings on our revolving line of credit. We believe we will have adequate liquidity over the next 12 months and beyond to operate our business and meet our cash requirements. However, because we do not know the ultimate severity and length of the COVID-19 pandemic or the short- or long-term impact it may have on consumer behavior, 39 and thus cannot predict the impact it will have on our tenants and on the debt and equity capital markets, we cannot estimate the ultimate impact it will have on our liquidity and capital resources. Our Principal Capital Resources For a discussion of cash generated from operations, see “Cash Flows” beginning on page 43. In addition to cash generated from operations, our other principal capital resources are discussed below. Over the last several years, we have made substantial progress in enhancing our liquidity position and reducing our leverage and borrowing costs. We continue to focus on a balanced approach to growth and staggering debt maturities in order to retain our financial flexibility. As of June 30, 2022, we had approximately $848.5 million available under the Revolving Facility for future borrowings. We also had $90.8 million in cash and cash equivalents as of June 30, 2022. We were in compliance with all applicable financial covenants under the Revolving Facility, unsecured term loans and senior unsecured notes as of June 30, 2022. Subsequent to June 30, 2022, the Operating Partnership entered into the Second Amendment (the “Second Amendment”) to the sixth amended and restated credit agreement with a syndicate of financial institutions to provide for a $250.0 million increase to the Revolving Facility, resulting in a $1.1 billion unsecured revolving credit facility (the “2022 Revolving Facility”). Under the Second Amendment, the Operating Partnership has the option to increase the 2022 Revolving Facility to an aggregate committed amount of up to $1.7 billion upon the Operating Partnership’s request, subject to certain conditions. In addition, the Operating Partnership issued a seven-year $300.0 million unsecured term loan, the proceeds of which were used to repay the Operating Partnership’s existing $200.0 million unsecured term loan that was scheduled to mature on November 22, 2023 and for general corporate purposes. On November 16, 2021, the Company filed with the SEC a shelf registration statement on Form S-3, which is effective for a term of three years, relating to the offer and sale, from time to time, of an indeterminate amount of equity and debt securities. Equity securities may be offered and sold by the Parent Company, and the net proceeds of any such offerings would be contributed to the Operating Partnership in exchange for additional General Partner Units. Debt securities may be offered and sold by the Operating Partnership with the Operating Partnership receiving the proceeds. From time to time, we may issue securities under this shelf registration statement for general corporate purposes, which may include acquisitions of additional properties, repayment of outstanding indebtedness, capital expenditures, the expansion, redevelopment, and/or improvement of properties in our portfolio, working capital and other general purposes. On February 23, 2021, the Company and the Operating Partnership entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with each of BofA Securities, Inc., Citigroup Global Markets Inc., KeyBanc Capital Markets Inc. and Raymond James & Associates, Inc., pursuant to which the Company may sell, from time to time, up to an aggregate sales price of $150.0 million of its common shares of beneficial interest, $0.01 par value per share under an at-the-market offering program (the “ATM Program”). On November 30, 2021, the Company and the Operating Partnership amended the Equity Distribution Agreement to reflect their filing of a shelf registration statement on November 16, 2021 with the SEC. As of June 30, 2022, the Company has not sold any common shares under the ATM Program. The Operating Partnership intends to use the net proceeds, if any, to repay borrowings under its Revolving Facility and other indebtedness and for working capital and other general corporate purposes. The Operating Partnership may also use the net proceeds for acquisitions of operating properties and the development or redevelopment of properties, although there are currently no understandings, commitments or agreements to do so. In the future, we will continue to monitor the capital markets and may consider raising additional capital through the issuance of our common shares, preferred shares or other securities. We may also raise capital by disposing of properties, land parcels or other assets that are no longer core components of our growth strategy. The sale price may differ from our carrying value at the time of sale. 40 Our Principal Liquidity Needs Short-Term Liquidity Needs Near-Term Debt Maturities . As of June 30, 2022, we had $237.6 million of secured debt scheduled to mature prior to June 30, 2023, excluding scheduled monthly principal payments. We believe we have sufficient liquidity to repay this obligation from cash on hand and borrowings on the Revolving Facility. Other Short-Term Liquidity Needs. The requirements for qualifying as a REIT and for a tax deduction for some or all of the dividends paid to shareholders necessitate that we distribute at least 90% of our taxable income on an annual basis. Such requirements cause us to have substantial liquidity needs over both the short and long term. Our short-term liquidity needs consist primarily of funds necessary to pay operating expenses associated with our operating properties, scheduled interest and principal payments on our debt of approximately $60.0 million and $2.0 million, respectively, for the remainder of 2022, expected dividend payments to our common shareholders and Common Unit holders, and recurring capital expenditures. In May 2022, our Board of Trustees declared a cash distribution of $0.21 per common share and Common Unit for the second quarter of 2022. This distribution was paid on July 15, 2022 to common shareholders and Common Unit holders of record as of July 8, 2022. Future distributions, if any, are at the discretion of the Board of Trustees, who will continue to evaluate our sources and uses of capital, liquidity position, operating fundamentals, maintenance of our REIT qualification and other factors they may deem relevant. We believe we have sufficient liquidity to pay any dividend from cash on hand and borrowings on the Revolving Facility. Other short-term liquidity needs include expenditures for tenant improvements, external leasing commissions and recurring capital expenditures. During the six months ended June 30, 2022, we incurred $7.9 million for recurring capital expenditures on operating properties and $29.3 million for tenant improvements and external leasing commissions, which includes costs to re-lease anchor space at our operating properties related to tenants open and operating as of June 30, 2022 (excluding development and redevelopment properties). We currently anticipate incurring approximately $100 million of additional major tenant improvement costs related to executed leases for space that is currently vacant at a number of our operating properties over the next 12 to 18 months. We believe we have the ability to fund these costs through cash flow from operations or borrowings on the Revolving Facility. During the three months ended June 30, 2022, we completed major redevelopment construction activities at Shoppes at Quarterfield and the residential portion of the project at One Loudoun Downtown and placed these projects in service. As of June 30, 2022, we had five development projects under construction. Total estimated costs for the five projects are $159.8 million, of which our share is estimated to be $95.9 million. As of June 30, 2022, we have incurred $15.8 million of these costs. We anticipate incurring the majority of the remaining costs for these projects over the next 24 months and believe we have the ability to fund these projects through cash flow from operations or borrowings on the Revolving Facility. Share Repurchase Program In February 2021, the Company’s Board of Trustees approved a share repurchase program, authorizing share repurchases up to an aggregate of $150.0 million (the “Share Repurchase Program”). In February 2022, the Company extended its Share Repurchase Program for an additional year and it will now terminate on February 28, 2023, if not terminated or extended prior to that date. In April 2022, the Company’s Board of Trustees authorized a $150.0 million increase to the size of the Share Repurchase Program, authorizing share repurchases up to an aggregate of $300.0 million. As of June 30, 2022, the Company has not repurchased any shares under its Share Repurchase Program. The Company intends to fund any future repurchases under the Share Repurchase Program with cash on hand or availability under the Revolving Facility, subject to any applicable restrictions. The timing of share repurchases and the number of common shares to be repurchased under the Share Repurchase Program will depend upon prevailing market conditions, regulatory requirements and other factors. Long-Term Liquidity Needs Our long-term liquidity needs consist primarily of funds necessary to pay for any new development projects, redevelopment of existing properties, non-recurring capital expenditures, acquisitions of properties, payment of indebtedness at maturity and obligations under ground leases. Selective Acquisitions, Developments and Joint Ventures . We may selectively pursue the acquisition, development and redevelopment of other properties, which would require additional capital. It is unlikely that we would have sufficient funds on hand to meet these long-term capital requirements. We would have to satisfy these needs through additional borrowings, sales 41 of common or preferred shares, issuance of Operating Partnership units, cash generated through property dispositions and/or participation in joint venture arrangements. We cannot be certain that we would have access to these sources of capital on satisfactory terms, if at all, to fund our long-term liquidity requirements. We evaluate all future opportunities against pre-established criteria including, but not limited to, location, demographics, expected return, tenant credit quality, tenant relationships, and the amount of existing retail space. Our ability to access the capital markets will be dependent on a number of factors, including general capital market conditions. Potential Debt Repurchases. We may from time to time, depending on market conditions and prices, contractual restrictions, our financial liquidity and other factors, seek to repurchase our senior unsecured notes maturing at various dates through September 2030 in open-market transactions, by tender offer or otherwise, as market conditions warrant. Commitments under Ground Leases. We are obligated under 12 ground leases for approximately 98 acres of land as of June 30, 2022. Most of these ground leases require fixed annual rent payments and the expiration dates of the remaining initial terms of these ground leases range from 2023 to 2092. Capital Expenditures on Consolidated Properties The following table summarizes cash capital expenditures for our development and redevelopment projects and other capital expenditures for the six months ended June 30, 2022: ($ in thousands) Six Months Ended June 30, 2022 Active development and redevelopment projects $ 23,697 Recurring operating capital expenditures (primarily tenant improvements) and other 35,034 Total $ 58,731 We capitalize certain indirect costs such as interest, payroll, and other general and administrative costs related to these development activities. If we had experienced a 10% reduction in development and redevelopment activities, without a corresponding decrease in indirect project costs, we would have recorded additional expense of $0.1 million for the six months ended June 30, 2022. Debt Maturities The following table presents maturities of mortgage and corporate debt as of June 30, 2022, presented on a calendar year basis: Secured Debt ($ in thousands) Scheduled Principal Payments Term Maturities Unsecured Debt Total 2022 $ 1,953 $ 46,035 $ — $ 47,988 2023 3,020 219,599 295,000 517,619 2024 2,721 — 269,635 272,356 2025 2,848 — 430,000 432,848 2026 2,981 — 550,000 552,981 Thereafter 30,181 2,480 1,100,000 1,132,661 $ 43,704 $ 268,114 $ 2,644,635 $ 2,956,453 Debt discounts, premiums and issuance costs, net 44,717 Total $ 3,001,170 Failure to comply with the obligations under our debt agreements (including payment obligations) could cause an event of default under such debt, which, among other things, could result in the loss of title to the assets securing the debt, acceleration of the payment of all principal and interest and/or termination of the agreements, or exposure to the risk of foreclosure. In addition, certain of our variable rate loans contain cross-default provisions that provide that a violation by us of any financial covenant set forth in the Revolving Facility will constitute an “Event of Default” under the loans, which could allow the lenders to accelerate the amounts due under our debt agreements if we fail to satisfy these financial covenants. See “Item 1A. Risk Factors – Risks Related to Our Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021 for more information related to the risks associated with our indebtedness. 42 Impact of Changes in Credit Ratings on Our Liquidity We have received investment grade corporate credit ratings from three nationally recognized credit rating agencies. These ratings did not change as of June 30, 2022. In the future, the ratings could change based upon, among other things, the impact that prevailing economic conditions may have on our results of operations and financial condition. Credit rating reductions by one or more rating agencies could also adversely affect our access to funding sources, the cost and other terms of obtaining funding, as well as our overall financial condition, operating results and cash flow. Cash Flows As of June 30, 2022, we had cash, cash equivalents and restricted cash of $99.2 million. We may be subject to concentrations of credit risk with regard to our cash and cash equivalents. We place our cash and short-term investments with highly rated financial institutions. While we attempt to limit our exposure at any point in time, occasionally such cash and investments may temporarily be in excess of FDIC and SIPC insurance limits. We also maintain certain compensating balances in several financial institutions in support of borrowings from those institutions. Such compensating balances were not material to the consolidated balance sheets. Comparison of the Six Months Ended June 30, 2022 to the Six Months Ended June 30, 2021 Cash provided by operating activities was $154.3 million for the six months ended June 30, 2022 and $67.4 million for the same period of 2021. The cash flows were positively impacted by the Merger, which generated significant incremental operating income, along with improved collection activity including previously deferred rent from the COVID-19 pandemic. This improvement was partially offset by costs paid as part of the Merger along with higher interest costs related to the debt assumed in the Merger. Cash provided by investing activities was $68.6 million for the six months ended June 30, 2022 compared to cash used in investing activities of $99.5 million for the same period of 2021. Highlights of significant cash sources and uses in investing activities are as follows: • We received the proceeds from a $125.0 million short-term deposit that matured on April 7, 2022; • We acquired Pebble Marketplace and the two-tenant building adjacent to MacArthur Crossing totaling $65.8 million during the six months ended June 30, 2022; • We received net proceeds of $65.4 million from the sale of Plaza Del Lago and a portion of Hamilton Crossing Centre during the six months ended June 30, 2022 compared to net proceeds of $41.1 million related to the sale of 16 ground leases and a parcel of land during the six months ended June 30, 2021; and • Capital expenditures increased by $37.5 million, partially offset by a change in construction payables of $0.7 million for the six months ended June 30, 2022. Cash used in financing activities was $224.2 million for the six months ended June 30, 2022 compared to cash provided by financing activities of $79.6 million for the same period of 2021. Highlights of significant cash sources and uses in financing activities are as follows: • We repaid $135.8 million of debt, net of borrowings on the Revolving Facility, during the six months ended June 30, 2022 compared to borrowings of $123.5 million on the Revolving Facility, net of debt repayments, during the six months ended June 30, 2021; • We made distributions to common shareholders and holders of common partnership interests in the Operating Partnership of $86.6 million for the six months ended June 30, 2022 compared to distributions of $28.4 million for the six months ended June 30, 2021; and • In 2021, we issued $175.0 million of exchangeable senior notes in a private placement offering to fund a portion of our 2022 debt maturities and other borrowings. In connection with this issuance, we incurred transaction costs of $5.3 million and purchased capped calls for $9.8 million. 43 Critical Accounting Estimates We based the discussion and analysis of our financial condition and results of operations upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. There were no changes made by management to the critical accounting policies in the three months ended June 30, 2022. We discuss the most critical estimates in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 28, 2022.