What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-03 compared with 2022-11-04 · 175 added, 280 removed, 263 unchanged (63% of the section changed)

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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.

(“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 potential economic slowdown or recession, rising interest rates, inflation, unemployment, or limited growth in consumer income or spending);

• national and local economic, business, banking, 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 a 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;

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• the financial stability of tenants;

• the competitive environment in which we operate, including potential oversupplies and reduction in demand for rental space;

• the competitive environment in which we operate, including potential oversupplies of and reduction in demand for rental space;

• acquisition, disposition, development and joint venture risks;

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• 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;

• 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;

• business continuity disruptions and a deterioration in our tenants’ 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 properties in Texas, Florida, Maryland, New York, and North Carolina;

• civil unrest, acts of violence, terrorism or war, acts of God, climate change, epidemics, pandemics (including the ongoing pandemic of the novel coronavirus (“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;

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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 the collection of contractual rents and reimbursement payments from tenants at our properties.

Kite Realty Group Trust is a publicly held REIT that, 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 that are primarily grocery-anchored and located in high-growth Sun Belt and select strategic gateway markets in the United States.

We derive our revenue primarily from the collection of contractual rents and reimbursement payments from tenants under existing lease agreements at each of 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 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.

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

As of March 31, 2023, we owned interests in 181 operating retail properties totaling approximately 28.5 million square feet, excluding one operating retail property classified as held for sale, and one office property with 0.3 million square feet.

Of the 181 operating retail properties, 11 contain an office component.

We also owned four 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 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.

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

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

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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.

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.

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.

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;

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.

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 space in our properties from new tenants.

Operating Activity

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).

During the first quarter of 2023, we executed new and renewal leases on 144 individual spaces totaling 831,231 square feet (13.0% cash leasing spread on 94 comparable leases).

New leases were signed on 44 individual spaces for 225,651 square feet of gross leasable area (“GLA”) (38.0% cash leasing spread on 17 comparable leases), while renewal leases were signed on 100 individual spaces for 605,580 square feet of GLA (10.0% cash leasing spread on 77 comparable leases).

Excluding option renewals, the blended cash spreads for comparable new and non-option renewal leases were 21.1%.

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 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.

The comparability of results of operations for the three months ended March 31, 2023 and 2022 is affected by 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 September 30, 2022:

The following operating properties were acquired at various times during the period from January 1, 2022 through March 31, 2023:

Property Name Metropolitan

Statistical Area (MSA) Acquisition Date Owned GLA

Nora Plaza outparcel Indianapolis, IN December 2021 23,722

Statistical Area (MSA) Acquisition Date GLA

Pebble Marketplace Las Vegas, NV February 16, 2022 85,796

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Palms Plaza Miami, FL July 15, 2022 68,976

Operating Property Dispositions

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

Property Name MSA Disposition Date Owned GLA

Westside Market Dallas, TX October 2021 93,377

The following operating properties were sold during the period from January 1, 2022 through March 31, 2023:

Property Name MSA Disposition Date GLA

Plaza Del Lago (1)

Chicago, IL June 16, 2022 100,016

Lincoln Plaza – Lowe’s (2)

Worcester, MA October 27, 2022 —

(1) Plaza Del Lago also contains 8,800 square feet of residential space comprised of 18 multifamily rental units.

(2) We sold the ground lease interest in one tenant at an existing multi-tenant operating retail property.

The total number of properties in our portfolio was not affected by this transaction.

Development and Redevelopment Projects

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:

The following properties were under active development or redevelopment at various times during the period from January 1, 2022 through March 31, 2023 and removed from our operating portfolio:

Project Name MSA Transition to

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Transition to

Operating Portfolio Owned

Commercial GLA

Operating Portfolio GLA

Hamilton Crossing Centre (2)(3)

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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.

Carillon MOB Washington, D.C.

October 2021 Pending 126,000

Circle East (4)

Baltimore, MD October 2021 September 2022 82,000

Circle East Baltimore, MD October 2021 September 2022 82,000

One Loudoun Downtown – Residential

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October 2021 Residential:

Pending 67,000

Shoppes at Quarterfield (4)

Baltimore, MD October 2021 June 2022 58,000

December 2022 67,000

Shoppes at Quarterfield Baltimore, MD October 2021 June 2022 58,000

Edwards Multiplex – Ontario Los Angeles, CA March 2023 Pending 124,614

(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.

For legacy Retail Properties of America, Inc.

(“RPAI”) projects, the transition date represents the later of the date of the closing of the merger (October 2021) 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.

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(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.

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

Comparison of Operating Results for the Three Months Ended March 31, 2023 to the Three Months Ended March 31, 2022

The following table reflects changes in the components of our consolidated statements of operations for the three months ended March 31, 2023 and 2022 (in thousands) :

Three Months Ended March 31,

2023 2022 Change

Rental income $ 203,063 $ 190,892 $ 12,171

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Income tax benefit of taxable REIT subsidiary 29 71 (42)

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

Other income, net 58 168 (110)

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

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

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

Equity in loss of unconsolidated subsidiaries (244) (314) 70

Other income (expense), net 403 (103) 506

Net income (loss) 5,561 (16,826) 22,387

Net (income) loss attributable to noncontrolling interests (170) 22 (192)

Net income (loss) attributable to common shareholders $ 5,391 $ (16,804) $ 22,195

Property operating expense to total revenue ratio 13.2 % 13.3 %

Rental income (including tenant reimbursements) increased $125.5 million, or 178.7%, due to the following:

($ in thousands) Net change

Rental income (including tenant reimbursements) increased $12.2 million, or 6.4%, due to the following (in thousands) :

three months ended

September 30, 2021 to 2022

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

March 31, 2022 to 2023

Properties or components of properties sold or held for sale during 2022 and/or 2023 $ (960)

Properties under redevelopment or acquired during 2022 and/or 2023 4,163

Properties acquired in the Merger with RPAI 122,923

Properties fully operational during 2022 and 2023 and other 8,968

Total $ 12,171

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 net increase of $9.0 million in rental income for properties that were fully operational during 2022 and 2023 is primarily due to increases in the following:

(i) base minimum rent of $6.3 million, (ii) tenant reimbursements of $2.9 million due to higher recoverable common area maintenance expenses and real estate taxes, and (iii) overage rent of $1.0 million due to improved tenant performance.

These variances were partially offset by an increase in bad debt expense of $1.2 million and lower lease termination fees of $0.3 million.

The occupancy of the fully operational properties increased from 90.4% for 2022 to 92.3% for 2023.

Other property-related revenue primarily consists of parking revenues, gains on the sale of land and other miscellaneous activity.

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.

Property operating expenses increased $15.0 million, or 143.3%, due to the following:

($ in thousands) Net change

This revenue increased by $0.7 million primarily as a result of insurance recovery proceeds of $0.3 million received during the three months ended March 31, 2023 and an increase in ancillary income.

We recorded fee income of $1.8 million and $2.3 million during the three months ended March 31, 2023 and 2022, respectively, from property management and development services provided to third parties and unconsolidated joint ventures.

The decrease in fee income is primarily related to a decrease in development fees earned related to the development of a corporate campus for Republic Airways at Hamilton Crossing Centre.

Property operating expenses increased $1.4 million, or 5.3%, due to the following (in thousands) :

three months ended

September 30, 2021 to 2022

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

March 31, 2022 to 2023

Properties or components of properties sold or held for sale during 2022 and/or 2023 $ (53)

Properties under redevelopment or acquired during 2022 and/or 2023 400

Properties acquired in the Merger with RPAI 13,367

Properties fully operational during 2022 and 2023 and other 1,039

Total $ 1,386

The net increase of $1.4 million in property operating expenses for properties fully operational during 2021 and 2022 is primarily due to increases in insurance expense of $1.1 million and utilities of $0.4 million, partially offset by a reduction in non-recoverable operating expenses.

The net increase of $1.0 million in property operating expenses for properties that were fully operational during 2022 and 2023 is primarily due to increases of $0.5 million in insurance expense and landscaping and a $0.2 million increase in utilities, partially offset by a $0.3 million decrease in repairs and maintenance.

As a percentage of revenue, property operating expenses decreased from 13.3% to 13.2% due to an increase in revenue in 2023.

Real estate taxes increased $17.1 million, or 198.0%, due to the following:

($ in thousands) Net change

Real estate taxes increased $0.3 million, or 1.2%, due to the following (in thousands) :

three months ended

September 30, 2021 to 2022

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

March 31, 2022 to 2023

Properties or components of properties sold or held for sale during 2022 and/or 2023 $ (443)

Properties under redevelopment or acquired during 2022 and/or 2023 190

Properties acquired in the Merger with RPAI 16,356

Properties fully operational during 2022 and 2023 and other 577

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 as well as lower real estate tax refunds received in 2022.

The net increase of $0.6 million in real estate taxes for properties that were fully operational during 2022 and 2023 is primarily due to lower real estate tax refunds received in 2023, partially offset by a decrease in real estate tax assessments at certain properties in the portfolio in 2023.

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 $0.1 million, or 0.6%.

This increase is primarily due to incremental head count as part of the Merger and higher share-based compensation expense.

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:

($ in thousands) Net change

This increase is primarily due to higher compensation expense, offset by lower head count than the comparative period.

The Company did not incur any significant merger and acquisition costs related to the merger with RPAI during the three months ended March 31, 2023.

The Company incurred $0.9 million of merger and acquisition costs during the three months ended March 31, 2022, primarily consisting of professional fees and technology costs.

Depreciation and amortization expense decreased $13.4 million, or 11.1%, due to the following (in thousands) :

three months ended

September 30, 2021 to 2022

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

Properties under redevelopment or acquired during 2021 and/or 2022 1,603

Properties acquired in the Merger with RPAI 83,857

Properties fully operational during 2021 and 2022 and other 433

Total $ 85,638

The net increase of $0.4 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 $13.3 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 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

Rental income $ 582,772 $ 206,097 $ 376,675

Other property-related revenue 7,932 3,133 4,799

Fee income 6,603 1,144 5,459

Total revenue 597,307 210,374 386,933

Property operating 77,558 30,978 46,580

Real estate taxes 80,445 26,574 53,871

General, administrative and other 41,977 23,676 18,301

Merger and acquisition costs 1,006 9,958 (8,952)

Depreciation and amortization 357,096 90,625 266,471

Total expenses 558,082 181,811 376,271

Gain on sales of operating properties, net 27,126 27,517 (391)

Operating income 66,351 56,080 10,271

Other (expense) income:

Interest expense (77,449) (37,386) (40,063)

Income tax benefit of taxable REIT subsidiary 259 308 (49)

Equity in loss of unconsolidated subsidiaries (56) (758) 702

Other (expense) income, net (207) 189 (396)

Net (loss) income (11,102) 18,433 (29,535)

Net income attributable to noncontrolling interests (408) (1,058) 650

Net (loss) income attributable to common shareholders $ (11,510) $ 17,375 $ (28,885)

Property operating expense to total revenue ratio 13.0 % 14.7 %

Rental income (including tenant reimbursements) increased $376.7 million, or 182.8%, due to the following:

($ in thousands) Net change

nine months ended

September 30, 2021 to 2022

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

Properties under redevelopment or acquired during 2021 and/or 2022 4,579

Properties acquired in the Merger with RPAI 370,191

Properties fully operational during 2021 and 2022 and other 1,620

Total $ 376,675

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 $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.

Property operating expenses increased $46.6 million, or 150.4%, due to the following:

($ in thousands) Net change

nine months ended

September 30, 2021 to 2022

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

Properties under redevelopment or acquired during 2021 and/or 2022 687

Properties acquired in the Merger with RPAI 45,872

Properties fully operational during 2021 and 2022 and other 112

Total $ 46,580

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.

Real estate taxes increased $53.9 million, or 202.7%, due to the following:

($ in thousands) Net change

nine months ended

September 30, 2021 to 2022

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

Properties under redevelopment or acquired during 2021 and/or 2022 493

Properties acquired in the Merger with RPAI 53,415

Properties fully operational during 2021 and 2022 and other (413)

Total $ 53,871

The net decrease of $0.4 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 $18.3 million, or 77.3%.

This increase is primarily due to incremental head count as part of the Merger and higher share-based compensation expense.

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.

Depreciation and amortization expense increased $266.5 million, or 294.0%, primarily as a result of the Merger with RPAI as detailed below:

($ in thousands) Net change

nine months ended

September 30, 2021 to 2022

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

March 31, 2022 to 2023

Properties or components of properties sold or held for sale during 2022 and/or 2023 $ (586)

Properties under redevelopment or acquired during 2022 and/or 2023 (1,271)

Properties acquired in the Merger with RPAI 263,671

Properties fully operational during 2022 and 2023 and other (11,576)

Total $ (13,433)

The net decrease of $3.9 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 $40.1 million, or 107.2%, primarily due to interest costs of $37.9 million related to debt assumed in conjunction with the Merger.

The net decrease of $11.6 million in depreciation and amortization at properties that were fully operational during 2022 and 2023 is primarily due to certain assets with shorter useful lives that became fully depreciated during 2022.

Interest expense decreased $0.1 million, or 0.3%, primarily due to favorable interest rate swaps, partially offset by higher interest costs related to our variable rate debt, including borrowings on the Revolving Facility that were used to repay mortgages payable at maturity.

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 use property net operating income (“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.

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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.

When we receive 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.

We believe 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.

We believe 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.

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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 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

Number of properties in same property pool

for the period (1)

177 177 177 177

For the three months ended March 31, 2023, the same property pool excludes the following:

• properties acquired or placed in service during 2022 and 2023;

• the multifamily rental units and commercial portion at One Loudoun Downtown – Pads G & H;

• Shoppes at Quarterfield and Circle East, which were reclassified from active redevelopment into our operating portfolio in June 2022 and September 2022, respectively;

• three active development and redevelopment projects;

• Edwards Multiplex – Ontario, which was reclassified from our operating portfolio into redevelopment in March 2023;

• properties sold or classified as held for sale during 2022 and 2023;

• office properties.

The following table presents Same Property NOI and a reconciliation to net income (loss) attributable to common shareholders for the three months ended March 31, 2023 and 2022 (dollars in thousands) :

Three Months Ended March 31,

2023 2022 Change

Number of properties in same property pool for the period (1)

Leased percentage at period end 94.9 % 93.8 %

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Net operating income – same properties $ 139,009 $ 130,477

Prior period collection impact – same properties 523 2,245 3,565 12,241

Net operating income – non-same activity (3)

13,357 (78,077) 34,226 (237,725)

Total property NOI 150,482 139,295 8.0 %

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Gain on sales of operating properties, net — 3,168

Net income attributable to noncontrolling interests

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

Net (loss) income attributable to common

Net (income) loss attributable to noncontrolling interests

Net income (loss) attributable to common shareholders

$ 5,391 $ (16,804)

(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.

(1) Same Property NOI excludes the following:

(i) properties acquired or placed in service during 2022 and 2023;

(ii) the multifamily rental units and commercial portion at One Loudoun Downtown – Pads G & H;

(iii) Shoppes at Quarterfield and Circle East, which were reclassified from active redevelopment into our operating portfolio in June 2022 and September 2022, respectively;

(iv) three active development and redevelopment projects;

(v) Edwards Multiplex – Ontario, which was reclassified from our operating portfolio into redevelopment in March 2023;

(vi) properties sold or classified as held for sale during 2022 and 2023;

and (vii) office properties.

(2) Excludes leases that are signed but for which tenants have not yet commenced the payment of cash rent;

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(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 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.

Our Same Property NOI increased 6.5% for the three months ended March 31, 2023 compared to the same period of the prior year primarily due to higher base rent driven by an increase in occupancy and an increase in overage rent.

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.

Funds From Operations (“FFO”) is a widely used performance measure for real estate companies and is provided here as a supplemental measure of our 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.

The NAREIT white paper defines FFO as net income (calculated in accordance with GAAP), excluding (i) depreciation and amortization related to real estate, (ii) gains and losses from the sale of certain real estate assets, (iii) gains and losses from change in control, and (iv) 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 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 flows 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 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 (loss) income $ (7,721) $ (6,828) $ (11,102) $ 18,433

From time to time, the Company may report or provide guidance with respect to “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, (i) gains or losses associated with the early extinguishment of debt, (ii) gains or losses associated with litigation involving the Company that is not in the normal course of business, (iii) merger and acquisition costs, (iv) the impact on earnings from employee severance, (v) the excess of redemption value over carrying value of preferred stock redemption, and (vi) in 2022, the impact of prior period bad debt or the collection of accounts receivable previously written off (“prior period collection impact”) due to the recovery from the COVID-19 pandemic, which are not otherwise adjusted in the Company’s calculation of FFO.

Our calculations of FFO and reconciliation to net income and FFO, as adjusted, for the three months ended March 31, 2023 and 2022 (unaudited) are as follows (dollars in thousands) :

Three Months Ended March 31,

Net income (loss) $ 5,561 $ (16,826)

net income attributable to noncontrolling interests in properties (104) (144)

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$ 112,259 $ 100,591

FFO per share of the Operating Partnership – diluted $ 0.51 $ 0.46

FFO of the Operating Partnership (1)

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FFO, as adjusted, of the Operating Partnership $ 113,766 $ 101,538

FFO, as adjusted, per share of the Operating Partnership – diluted $ 0.51 $ 0.46

(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)

Earnings before Interest, Taxes, 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.

For informational purposes, we also provide Adjusted EBITDA, which we define as EBITDA less (i) Adjusted 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 Adjusted 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.

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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.

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 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 September 30, 2022

Net loss $ (7,721)

Three Months Ended March 31, 2023

Net income $ 5,561

Depreciation and amortization 108,071

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EBITDA 139,028

Unconsolidated EBITDA 637

Merger and acquisition costs 108

Gain on sales of operating properties, net —

Unconsolidated Adjusted EBITDA 450

Other income and expense, net (159)

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Net Debt to Adjusted EBITDA 5.3x

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

(1) Represents Adjusted EBITDA for the three months ended March 31, 2023 (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.

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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 consider a number of factors when evaluating our level of indebtedness and 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 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.

As of March 31, 2023, we had approximately $43.7 million in cash on hand, $9.0 million in restricted cash and escrow deposits, $1.0 billion of remaining availability under the $1.1 billion unsecured revolving credit facility (the “Revolving Facility”), and $122.8 million of debt maturities for the remainder of 2023.

We believe we will have adequate liquidity over the next 12 months and beyond to operate our business and meet our cash requirements.

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.

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

Therefore, our ability to generate cash from operations is dependent upon 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, instability in the banking sector, 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

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We continue to focus on a balanced approach to growth and staggering debt maturities in order to retain our financial flexibility.

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, certain secured loans, and for other 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.

As of March 31, 2023, we had approximately $1.0 billion available under the Revolving Facility for future borrowings.

We also had $43.7 million in cash and cash equivalents as of March 31, 2023.

We were in compliance with all applicable financial covenants under the Revolving Facility, unsecured term loans and senior unsecured notes as of March 31, 2023.

In November 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.

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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.

In February 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 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.

In November 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.

The Operating Partnership intends to use the net proceeds, if any, to repay borrowings under the 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.

As of March 31, 2023, the Company has not sold any common shares under the ATM Program.

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.

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Near-Term Debt Maturities .

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.

As of March 31, 2023, we had $27.8 million of secured debt, excluding scheduled monthly principal payments, and $95.0 million of unsecured debt scheduled to mature prior to March 31, 2024.

We believe we have sufficient liquidity to repay these obligations from cash on hand and borrowings on the Revolving Facility.

Other Short-Term Liquidity Needs.

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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 $90.0 million and $2.3 million, respectively, for the remainder of 2023, expected dividend payments to our common shareholders and Common Unit holders, and recurring capital expenditures.

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.

In February 2023, our Board of Trustees declared a cash distribution of $0.24 per common share and Common Unit for the first quarter of 2023.

This distribution was paid on April 14, 2023 to common shareholders and Common Unit holders of record as of April 7, 2023.

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 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).

During the three months ended March 31, 2023, we incurred $3.0 million for recurring capital expenditures on operating properties and $15.1 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 March 31, 2023 (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 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.

In 2023, certain retailers have filed for Chapter 11 bankruptcy protection including Bed Bath & Beyond Inc., a tenant that, as of March 31, 2023, occupied 582,000 square feet across 22 locations in our portfolio and generates $7.8 million of annualized base rent.

If leases were rejected in the bankruptcy process, the re-leasing costs may be significant depending on the number of closures.

During the three months ended March 31, 2023, we began redevelopment activities at Edwards Multiplex – Ontario and reclassified this property from our operating portfolio into redevelopment.

As of March 31, 2023, we had development projects under construction at The Landing at Tradition – Phase II, the medical office building at Carillon, and The Corner (IN).

Our share of total estimated costs for these three projects is $102.8 million, of which our share of the remaining expected funding requirement is estimated to be $70.9 million.

As of March 31, 2023, we have incurred $33.0 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 flows 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 September 30, 2022, the Company has not repurchased any shares under its Share Repurchase Program.

The Company has an existing share repurchase program under which it may repurchase, from time to time, up to a maximum of $300.0 million of its common shares (the “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.

In February 2023, the Company extended the Share Repurchase Program for an additional year so it will now terminate on February 28, 2024, if not terminated or extended prior to that date.

As of March 31, 2023, the Company has not repurchased any shares under the Share Repurchase Program.

Long-Term Liquidity Needs

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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.

Our ability to access the capital markets will depend on a number of factors, including general capital market conditions.

Potential Debt Repurchases.

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Commitments under Ground Leases.

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

We are obligated under 12 ground leases for approximately 98 acres of land as of March 31, 2023.

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 2025 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 nine months ended September 30, 2022:

($ in thousands) Nine Months Ended

September 30, 2022

The following table summarizes cash capital expenditures for our development and redevelopment projects and other capital expenditures for the three months ended March 31, 2023 (in thousands) :

Three Months Ended

March 31, 2023

Active development and redevelopment projects $ 9,022

Redevelopment opportunities 326

Recurring operating capital expenditures (primarily tenant improvements) and other 30,099

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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 $0.2 million for the nine months ended September 30, 2022.

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 three months ended March 31, 2023.

Debt Maturities

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

($ in thousands)

The following table summarizes the scheduled maturities and principal amortization of the Company’s indebtedness as of March 31, 2023, presented on a calendar year basis (in thousands) :

Principal Payments Term

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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 2022 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.

In addition, certain of our variable rate loans contain cross-default provisions whereby a violation by the Company 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.

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We have received investment grade corporate credit ratings from three nationally recognized credit rating agencies.

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.

These ratings did not change as of March 31, 2023.

In the future, these 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 September 30, 2022, we had cash, cash equivalents and restricted cash of $96.5 million.

As of March 31, 2023, we had cash, cash equivalents and restricted cash of $52.7 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.

While we attempt to limit our exposure at any point in time, occasionally such cash and investments may temporarily exceed the Federal Deposit Insurance Corporation (“FDIC”) and the Securities Investor Protection

Corporation (“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 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 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.

Such compensating balances were not material to the accompanying consolidated balance sheets.

Comparison of the Three Months Ended March 31, 2023 to the Three Months Ended March 31, 2022

Our cash flow activities are summarized as follows (in thousands) :

Three Months Ended March 31,

2023 2022 Change

Net cash provided by operating activities $ 63,603 $ 49,583 $ 14,020

Net cash used in investing activities (41,514) (62,183) 20,669

Net cash used in financing activities (91,364) (5,573) (85,791)

Decrease in cash, cash equivalents and restricted cash (69,275) (18,173) (51,102)

Cash, cash equivalents and restricted cash, at beginning of period 121,970 100,363

Cash, cash equivalents and restricted cash, at end of period $ 52,695 $ 82,190

Cash provided by operating activities was $63.6 million for the three months ended March 31, 2023 and $49.6 million for the same period of 2022.

The cash flows were positively impacted from an increase in net operating income.

Cash used in investing activities was $41.5 million for the three months ended March 31, 2023 and $62.2 million for the same period of 2022.

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, 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.

• We acquired Pebble Marketplace and deposited funds for the acquisition of the two-tenant building adjacent to MacArthur Crossing for a total of $44.3 million during the three months ended March 31, 2022;

• Capital expenditures increased by $15.4 million driven by the construction activity at our development projects and anchor leasing activity, partially offset by a change in construction payables of $2.6 million for the three months ended March 31, 2023.

Cash used in financing activities was $91.4 million for the three months ended March 31, 2023 and $5.6 million for the same period of 2022.

Highlights of significant cash sources and uses in financing activities are as follows:

• 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.

In connection with this issuance, we incurred transaction costs of $5.3 million and purchased capped calls for $9.8 million.

• We borrowed $162.0 million on the Revolving Facility and used the proceeds to repay $199.3 million of mortgage debt during the three months ended March 31, 2023 compared to borrowings of $80.0 million on the Revolving Facility, a portion of which were used to repay $42.2 million of mortgage debt during the three months ended March 31, 2022;

• We made distributions to common shareholders and holders of common partnership interests in the Operating Partnership of $53.3 million during the three months ended March 31, 2023 compared to distributions of $42.2 million during the three months ended March 31, 2022.

Critical Accounting Estimates

1 unchanged sentence

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 September 30, 2022.

There were no changes made by management to the critical accounting policies in the three months ended March 31, 2023.

We discuss the most critical estimates in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 21, 2023.

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