What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-11-04 compared with 2022-08-05 · 123 added, 116 removed, 420 unchanged (36% of the section changed)

6 unchanged sentences

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, 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 adverse effect of the ongoing 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;

• risks associated with the Company’s Merger (defined below) with Retail Properties of America, Inc.

1 unchanged sentence

• 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);

economy as well as economic uncertainty (including potential economic slowdown or recession, rising interest rates, inflation, unemployment, or limited growth in consumer income or spending);

• financing risks, including the availability of, and costs associated with, sources of liquidity;

23 unchanged sentences

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.

We derive revenues primarily from 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.

retail sector, interest rate volatility, job growth and the real estate market and overall economic conditions.

As of September 30, 2022, we owned interests in 183 operating retail properties totaling approximately 28.9 million square feet and one office property with 0.3 million square feet.

Of the 183 operating retail properties, 11 contain an office component.

We also owned five development projects under construction as of this date.

We also owned four development projects under construction as of this date.

Merger with RPAI

4 unchanged sentences

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

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.

In addition, the combined company 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.

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.

Prior to 2021, inflation was relatively low and had a minimal impact on our operating and financial performance;

however, inflation has increased significantly in recent months and may continue to be elevated or increase further.

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.

Due to the current high inflation environment, the U.S.

Federal Reserve has aggressively raised short-term interest rates to slow the economy down, which has caused our borrowing costs to rise.

We continually 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.

However, because we cannot predict with any level of certainty what future actions the U.S.

Federal Reserve will take to combat the high inflationary environment, we cannot estimate the ultimate impact it will have on our operating and financial performance.

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.

Impacts on Business from COVID-19

In 2020 and 2021, the COVID-19 pandemic had a significant adverse impact on many of our tenants and on our business.

We expect the ongoing effects of COVID-19 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;

1 unchanged sentence

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).

During the third quarter of 2022, we executed new and renewal leases on 221 individual spaces totaling 1,574,338 square feet (10.8% cash leasing spread on 156 comparable leases).

New leases were signed on 61 individual spaces for 207,224 square feet of gross leasable area (“GLA”) (30.7% cash leasing spread on 22 comparable leases), while renewal leases were signed on 160 individual spaces for 1,367,114 square feet of GLA (8.5% cash leasing spread on 134 comparable leases).

1 unchanged sentence

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.

The comparability of results of operations for the three and nine months ended September 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.

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:

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 September 30, 2022:

Property Name Metropolitan

3 unchanged sentences

MacArthur Crossing two-tenant building Dallas, TX April 2022 56,077

Palms Plaza Miami, FL July 2022 68,976

Operating Property Dispositions

The following operating properties were sold during the period from January 1, 2021 through June 30, 2022:

The following operating properties were sold during the period from January 1, 2021 through September 30, 2022:

Property Name MSA Disposition Date Owned GLA

4 unchanged sentences

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:

The following properties were under active development or redevelopment at various times during the period from January 1, 2021 through September 30, 2022 and removed from our operating portfolio:

Project Name MSA Transition to

16 unchanged sentences

Circle East (4)

Baltimore, MD October 2021 Pending 82,000

Baltimore, MD October 2021 September 2022 82,000

One Loudoun Downtown – Residential

11 unchanged sentences

(4) Project was assumed as part of the Merger with RPAI in October 2021.

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,

Comparison of Operating Results for the Three Months Ended September 30, 2022 to the Three Months Ended September 30, 2021

The following table reflects changes in the components of our consolidated statements of operations for the three months ended September 30, 2022 and 2021.

Three Months Ended September 30,

($ in thousands) 2022 2021 Change

15 unchanged sentences

Equity in earnings (loss) of unconsolidated subsidiaries 144 (196) 340

Other (expense) income, net (162) 227 (389)

Net income (loss) 13,445 (95) 13,540

Other income, net 58 168 (110)

Net loss (7,721) (6,828) (893)

Net income attributable to noncontrolling interests (116) (132) 16

Net income (loss) attributable to common shareholders $ 13,131 $ (242) $ 13,373

Net loss attributable to common shareholders $ (7,837) $ (6,960) $ (877)

Property operating expense to total revenue ratio 12.7 % 14.7 %

2 unchanged sentences

three months ended

June 30, 2021 to 2022

September 30, 2021 to 2022

Properties or components of properties sold during 2021 or 2022 $ (367)

3 unchanged sentences

Total $ 125,459

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 net increase of $0.9 million in rental income for properties fully operational during 2021 and 2022 is primarily due to a $1.0 million increase in tenant reimbursements due to higher recoverable common area maintenance expenses and real estate taxes and higher overage rent of $0.9 million due to improved tenant performance.

These variances were partially offset by an increase in bad debt expense of $1.0 million and lower base minimum rent of $0.4 million due to the receipt of $1.4 million of previously unbilled base rent from a tenant during the three months ended September 30, 2021.

The occupancy of the fully operational properties increased from 88.9% for 2021 to 91.0% 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.

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.

This revenue increased by $2.0 million primarily as a result of higher gains on sales of undepreciated assets of $1.3 million recognized during the three months ended September 30, 2022 and an increase in parking revenue of $0.2 million.

We recorded fee income of $1.6 million and $0.2 million during the three months ended September 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.

2 unchanged sentences

three months ended

June 30, 2021 to 2022

September 30, 2021 to 2022

Properties or components of properties sold during 2021 or 2022 $ (118)

8 unchanged sentences

three months ended

June 30, 2021 to 2022

September 30, 2021 to 2022

Properties or components of properties sold during 2021 or 2022 $ (154)

3 unchanged sentences

Total $ 17,079

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.

1 unchanged sentence

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.

The Company incurred $0.1 million of merger and acquisition costs related to the Merger with RPAI during the three months ended September 30, 2022 compared to $9.2 million of merger and acquisition costs incurred during the three months ended September 30, 2021.

Depreciation and amortization expense increased $85.6 million, or 283.6%, primarily as a result of the Merger with RPAI as detailed below:

1 unchanged sentence

three months ended

June 30, 2021 to 2022

September 30, 2021 to 2022

Properties or components of properties sold during 2021 or 2022 $ (255)

5 unchanged sentences

Interest expense increased $13.3 million, or 103.6%, primarily due to interest costs of $11.4 million related to debt assumed in conjunction with the Merger.

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,

Comparison of Operating Results for the Nine Months Ended September 30, 2022 to the Nine Months Ended September 30, 2021

The following table reflects changes in the components of our consolidated statements of operations for the nine months ended September 30, 2022 and 2021.

Nine Months Ended September 30,

($ in thousands) 2022 2021 Change

22 unchanged sentences

($ in thousands) Net change

six months ended

June 30, 2021 to 2022

nine months ended

September 30, 2021 to 2022

Properties or components of properties sold during 2021 or 2022 $ 285

3 unchanged sentences

Total $ 376,675

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.

The net increase of $1.6 million in rental income for properties fully operational during 2021 and 2022 is primarily due to a $2.3 million increase in tenant reimbursements due to higher recoverable common area maintenance expenses, higher overage rent of $1.3 million and ancillary income of $0.9 million, and higher base minimum rent of $0.4 million due to improved tenant performance.

These variances were partially offset by a $2.1 million increase in bad debt expense and a $1.2 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.

This revenue increased by $4.8 million primarily as a result of higher gains on sales of undepreciated assets of $2.4 million recognized during the nine months ended September 30, 2022 and an increase in parking revenue of $0.9 million.

We recorded fee income of $6.6 million and $1.1 million during the nine months ended September 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.

1 unchanged sentence

($ in thousands) Net change

six months ended

June 30, 2021 to 2022

nine months ended

September 30, 2021 to 2022

Properties or components of properties sold during 2021 or 2022 $ (91)

3 unchanged sentences

Total $ 46,580

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.

The net increase of $0.1 million in property operating expenses for properties fully operational during 2021 and 2022 is primarily due to increases in insurance expense of $2.6 million and utilities of $0.8 million, partially offset by a $3.3 million decrease in repairs and maintenance and landscaping expenses.

As a percentage of revenue, property operating expenses decreased from 14.7% to 13.0% due to an increase in revenue in 2022.

1 unchanged sentence

($ in thousands) Net change

six months ended

June 30, 2021 to 2022

nine months ended

September 30, 2021 to 2022

Properties or components of properties sold during 2021 or 2022 $ 376

7 unchanged sentences

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.

The Company incurred $1.0 million and $10.0 million of merger and acquisition costs related to the Merger with RPAI during the nine months ended September 30, 2022 and 2021, respectively.

These costs primarily consist of professional fees and technology costs.

1 unchanged sentence

($ in thousands) Net change

six months ended

June 30, 2021 to 2022

nine months ended

September 30, 2021 to 2022

Properties or components of properties sold during 2021 or 2022 $ 3,343

26 unchanged sentences

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.

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,

For the three and nine months ended September 30, 2022, the same property pool excludes (i) Glendale Town Center, Shoppes at Quarterfield and Circle East, which were reclassified from active redevelopment into our operating portfolio in December 2021, June 2022 and September 2022, respectively, (ii) the multifamily rental units at One Loudoun Downtown – Pads G & H, (iii) four active development and redevelopment projects, (iv) Arcadia Village, Pebble Marketplace and Palms Plaza, which were acquired subsequent to January 1, 2021, and (v) office properties.

The following table reflects Same Property NOI and a reconciliation to net income (loss) attributable to common shareholders for the three and nine months ended September 30, 2022 and 2021:

Three Months Ended September 30, Nine Months Ended September 30,

($ in thousands) 2022 2021 Change 2022 2021 Change

21 unchanged sentences

(116) (132) (408) (1,058)

Net income (loss) attributable to common

Net (loss) income attributable to common

$ (7,837) $ (6,960) $ (11,510) $ 17,375

(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.

(1) Same Property NOI excludes (i) Glendale Town Center, Shoppes at Quarterfield and Circle East, which were reclassified from active redevelopment into our operating portfolio in December 2021, June 2022 and September 2022, respectively, (ii) the multifamily rental units at One Loudoun Downtown – Pads G & H, (iii) four active development and redevelopment projects, (iv) Arcadia Village, Pebble Marketplace and Palms Plaza, 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.

1 unchanged sentence

(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.

Our Same Property NOI increased 4.4% for the three months ended September 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

4 unchanged sentences

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

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.

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 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,

Our calculations of FFO (1) and reconciliation to consolidated net income and FFO, as adjusted, for the three and nine months ended September 30, 2022 and 2021 (unaudited) are as follows:

Three Months Ended September 30, Nine Months Ended September 30,

($ in thousands) 2022 2021 2022 2021

Net income (loss) $ 13,445 $ (95) $ (3,381) $ 25,259

Net (loss) income $ (7,721) $ (6,828) $ (11,102) $ 18,433

net income attributable to noncontrolling interests in properties (209) (132) (535) (396)

24 unchanged sentences

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

We believe this supplemental information provides a meaningful measure of our operating 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

($ in thousands) Three Months Ended September 30, 2022

Net loss $ (7,721)

Depreciation and amortization 115,831

17 unchanged sentences

Net Debt to Adjusted EBITDA 5.4x

(1) Represents Adjusted EBITDA for the three months ended June 30, 2022 (as shown in the table above) multiplied by four.

(1) Represents Adjusted EBITDA for the three months ended September 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.

4 unchanged sentences

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.

As part of the Merger, we assumed an $850.0 million unsecured revolving credit facility along with other indebtedness.

In July 2022, we increased the capacity of the unsecured revolving credit facility to $1.1 billion (the “2022 Revolving Facility”), of which the available borrowing capacity

was $1.1 billion as of September 30, 2022, and issued a seven-year $300.0 million unsecured term loan that was used to retire 2022 and 2023 debt maturities.

As of September 30, 2022, we had approximately $88.4 million in cash on hand, $8.1 million in restricted cash and escrow deposits, $1.1 billion of remaining availability under the 2022 Revolving Facility, and no debt maturities until 2023.

During the nine months ended September 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,

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.

We derive the majority of our revenue from tenants who lease space from us at our properties.

Therefore, our ability to generate cash from operations is dependent on the rents that we are able to charge and collect from our tenants.

While we believe that the nature of the properties in which we typically invest—primarily neighborhood and community shopping centers—provides a relatively stable revenue flow, an economic downturn and/or the ongoing effects of COVID-19, among other events, could adversely affect the ability of some of our tenants to meet their lease obligations.

Our Principal Capital Resources

3 unchanged sentences

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”).

As of September 30, 2022, we had approximately $1.1 billion available under the 2022 Revolving Facility for future borrowings.

We also had $88.4 million in cash and cash equivalents as of September 30, 2022.

We were in compliance with all applicable financial covenants under the 2022 Revolving Facility, unsecured term loans and senior unsecured notes as of September 30, 2022.

On July 29, 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 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.

5 unchanged sentences

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.

As of September 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 2022 Revolving Facility and other indebtedness and for working capital and other general corporate purposes.

6 unchanged sentences

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.

As of September 30, 2022, we had $189.3 million of secured debt scheduled to mature prior to September 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 2022 Revolving Facility.

3 unchanged sentences

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 $30.0 million and $0.9 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.

In August 2022, our Board of Trustees declared a cash distribution of $0.22 per common share and Common Unit for the third quarter of 2022.

This distribution was paid on October 14, 2022 to common shareholders and Common Unit holders of record as of October 7, 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.

1 unchanged sentence

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.

During the nine months ended September 30, 2022, we incurred $22.9 million for recurring capital expenditures on operating properties and $45.1 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 September 30, 2022 (excluding development and redevelopment properties).

We currently anticipate incurring approximately $100 million of additional major tenant improvement costs related to leasing activity 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 flows from operations or borrowings on the 2022 Revolving Facility.

During the nine months ended September 30, 2022, we completed major redevelopment construction activities at Shoppes at Quarterfield, the residential portion of the project at One Loudoun Downtown and Circle East and placed these projects in service.

As of September 30, 2022, we had four development projects under construction.

Total estimated costs for the four projects are $112.7 million, of which our share is estimated to be $80.8 million.

As of September 30, 2022, we have incurred $21.6 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 2022 Revolving Facility.

3 unchanged sentences

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.

As of September 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 2022 Revolving Facility, subject to any applicable restrictions.

5 unchanged sentences

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

of common or preferred shares, issuance of Operating Partnership units, cash generated through property dispositions and/or participation in joint venture arrangements.

We would have to satisfy these needs through additional borrowings, sales 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.

4 unchanged sentences

Commitments under Ground Leases.

We are obligated under 12 ground leases for approximately 98 acres of land as of June 30, 2022.

We are obligated under 12 ground leases for approximately 98 acres of land as of September 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

The following table summarizes cash capital expenditures for our development and redevelopment projects and other capital expenditures for the nine months ended September 30, 2022:

($ in thousands) Nine Months Ended

September 30, 2022

Active development and redevelopment projects $ 34,850

Redevelopment opportunities 326

Recurring operating capital expenditures (primarily tenant improvements) and other 71,360

1 unchanged sentence

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:

The following table presents maturities of mortgage and corporate debt as of September 30, 2022, presented on a calendar year basis:

($ in thousands)

16 unchanged sentences

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.

These ratings did not change as of September 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.

As of June 30, 2022, we had cash, cash equivalents and restricted cash of $99.2 million.

As of September 30, 2022, we had cash, cash equivalents and restricted cash of $96.5 million.

We may be subject to concentrations of credit risk with regard to our cash and cash equivalents.

3 unchanged sentences

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.

Comparison of the Nine Months Ended September 30, 2022 to the Nine Months Ended September 30, 2021

Cash provided by operating activities was $262.4 million for the nine months ended September 30, 2022 and $103.8 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.

This improvement was partially offset by costs paid as part of the Merger along with higher interest costs related to debt assumed in the Merger.

Cash used in investing activities was $13.7 million for the nine months ended September 30, 2022 and $109.1 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;

• 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.

• We acquired Pebble Marketplace, the two-tenant building adjacent to MacArthur Crossing and Palms Plaza for a total of $100.1 million during the nine months ended September 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 nine months ended September 30, 2022 compared to net proceeds of $47.7 million related to the sale of 17 ground leases and other land parcels during the nine months ended September 30, 2021;

• Capital expenditures increased by $69.6 million driven by the construction activity at our active development projects and anchor leasing activity, partially offset by a change in construction payables of $2.6 million for the nine months ended September 30, 2022.

Cash used in financing activities was $252.6 million for the nine months ended September 30, 2022 compared to cash provided by financing activities of $62.4 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;

• We issued a seven-year $300.0 million unsecured term loan and borrowed $145.0 million on our unsecured revolving line of credit during the nine months ended September 30, 2022;

• In 2022, we repaid (i) a $200.0 million unsecured term loan that was scheduled to mature in 2023, (ii) $200.0 million of borrowings on our unsecured revolving line of credit, with no amount outstanding as of September 30, 2022, and (iii) mortgages payable totaling $155.2 million along with $3.0 million of scheduled principal payments using proceeds from the $300.0 million unsecured term loan, $125.0 million short-term deposit and property sales;

• We made distributions to common shareholders and holders of common partnership interests in the Operating Partnership of $133.4 million for the nine months ended September 30, 2022 compared to distributions of $44.2 million for the nine months ended September 30, 2021;

• 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.

3 unchanged sentences

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.

There were no changes made by management to the critical accounting policies in the three months ended September 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.

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 2. Management’s Discussion and Analysis