What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-02 compared with 2023-08-07 · 138 added, 120 removed, 403 unchanged (39% of the section changed)

37 unchanged sentences

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

As of June 30, 2023, we owned interests in 181 operating retail properties totaling approximately 28.6 million square feet and one office property with 0.3 million square feet.

As of September 30, 2023, we owned interests in 180 operating retail properties totaling approximately 28.3 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 180 operating retail properties, 10 contain an office component.

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

We also owned two development projects under construction as of this date and an additional two properties with future redevelopment opportunities.

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.

however, inflation increased significantly over the past two years and remained elevated with a slow downtrend.

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, with escalation clauses in certain leases.

Most of our leases also include clauses that allow us to collect additional rent based on a percentage of tenants’ gross sales over stated thresholds, which sales generally increase as prices rise.

In addition, we believe that the rental rates in many of our leases are below current market rates for comparable space and that upon renewal, such rates may be increased to be in line with current rates, which may offset certain inflationary expense pressures.

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.

In addition, we believe that rental rates in many of our leases are below current market rates for comparable space and that upon renewal or re-leasing, such rates may be increased to be in line with current rates, which may offset certain inflationary expense pressures.

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

Federal Reserve 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.

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Operating Activity

During the second quarter of 2023, we executed new and renewal leases on 190 individual spaces totaling 1,331,056 square feet (14.8% cash leasing spread on 146 comparable leases).

During the third quarter of 2023, we executed new and renewal leases on 214 individual spaces totaling 1,398,695 square feet (14.2% cash leasing spread on 165 comparable leases).

New leases were signed on 67 individual spaces for 226,593 square feet of gross leasable area (“GLA”) (36.0% cash leasing spread on 33 comparable leases), while non-option renewal leases were signed on 83 individual spaces for 329,048 square feet of GLA (17.8% cash leasing spread on 68 comparable leases) and option renewals were signed on 64 individual spaces for 843,054 square feet of GLA (8.3% cash leasing spread).

2 unchanged sentences

Results of Operations

The comparability of results of operations for the three and six months ended June 30, 2023 and 2022 is affected by 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, 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.

The following operating properties were acquired at various times during the period from January 1, 2022 through June 30, 2023:

The following operating properties were acquired at various times during the period from January 1, 2022 through September 30, 2023:

Property Name Metropolitan

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

The following operating and other properties were sold during the period from January 1, 2022 through June 30, 2023:

Prestonwood Place Dallas, TX September 22, 2023 155,975

The following operating and other properties were sold during the period from January 1, 2022 through September 30, 2023:

Property Name MSA Disposition Date GLA

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Pan Am Plaza & Garage Indianapolis, IN June 8, 2023 —

Reisterstown Road Plaza Baltimore, MD September 11, 2023 376,683

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

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

In addition to the above dispositions, Eastside, a 43,640 square foot operating retail property located in the Dallas MSA, is classified as held for sale as of September 30, 2023 and was sold on October 24, 2023.

Development and Redevelopment Projects

The following properties were under active development or redevelopment at various times during the period from January 1, 2022 through June 30, 2023 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 September 30, 2023 and removed from our operating portfolio:

Project Name MSA Transition to

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(3) A portion of the Hamilton Crossing Centre redevelopment was sold in January 2022.

Comparison of Operating Results for the Three Months Ended June 30, 2023 to the Three Months Ended June 30, 2022

The following table reflects changes in the components of our consolidated statements of operations for the three months ended June 30, 2023 and 2022 (in thousands) :

Three Months Ended June 30,

Comparison of Operating Results for the Three Months Ended September 30, 2023 to the Three Months Ended September 30, 2022

The following table reflects changes in the components of our consolidated statements of operations for the three months ended September 30, 2023 and 2022 (in thousands) :

Three Months Ended September 30,

2023 2022 Change

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Depreciation and amortization 105,930 115,831 (9,901)

Impairment charges 477 — 477

Total expenses 174,421 182,008 (7,587)

Gain on sales of operating properties, net 28,440 23,958 4,482

Loss on sales of operating properties, net (5,972) — (5,972)

Operating income 26,826 18,303 8,523

1 unchanged sentence

Interest expense (25,484) (26,226) 742

Income tax (expense) benefit of taxable REIT subsidiary (45) 188 (233)

Equity in earnings of unconsolidated subsidiaries 118 114 4

Other income (expense), net 304 (162) 466

Net income 32,481 13,445 19,036

Income tax expense of taxable REIT subsidiary (68) — (68)

Equity in (loss) earnings of unconsolidated subsidiaries (47) 144 (191)

Other income, net 950 58 892

Net income (loss) 2,177 (7,721) 9,898

Net income attributable to noncontrolling interests (107) (116) 9

Net income attributable to common shareholders $ 32,058 $ 13,131 $ 18,927

Net income (loss) attributable to common shareholders $ 2,070 $ (7,837) $ 9,907

Property operating expense to total revenue ratio 13.3 % 12.7 %

1 unchanged sentence

three months ended

June 30, 2022 to 2023

September 30, 2022 to 2023

Properties or components of properties sold or held for sale during 2022 and/or 2023 $ (1,709)

3 unchanged sentences

The net increase of $8.7 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 $5.2 million, (ii) lease termination income of $1.9 million, and (iii) overage rent of $0.6 million due to improved tenant performance, along with lower bad debt expense of $0.8 million.

These variances were partially offset by decreases in ancillary income of $0.6 million and tenant reimbursements of $0.4 million mainly due to current year real estate tax refunds due to tenants.

The occupancy of the fully operational properties increased from 91.5% for 2022 to 92.3% for 2023.

(i) base minimum rent of $3.6 million, (ii) tenant reimbursements due to higher recoverable common area maintenance expenses of $2.3 million, and (iii) overage rent of $0.2 million due to improved tenant performance, along with lower bad debt expense of $1.7 million.

The occupancy of the fully operational properties decreased from 91.9% for the three months ended September 30, 2022 to 91.6% for the three months ended September 30, 2023.

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

This revenue decreased by $1.8 million primarily as a result of lower gains on sales of undepreciated assets recognized during the three months ended June 30, 2023 and a decrease in parking revenue.

We recorded fee income of $1.0 million and $2.7 million during the three months ended June 30, 2023 and 2022, respectively, from property management and development services provided to third parties and unconsolidated joint ventures.

This revenue decreased by $0.8 million primarily as a result of lower gains on sales of undepreciated assets recognized during the three months ended September 30, 2023 and a decrease in parking revenue due to the sale of Pam Am Plaza Garage in June 2023.

We recorded fee income of $1.1 million and $1.6 million during the three months ended September 30, 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.

1 unchanged sentence

three months ended

June 30, 2022 to 2023

September 30, 2022 to 2023

Properties or components of properties sold or held for sale during 2022 and/or 2023 $ (658)

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Total $ 2,137

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 $0.8 million in non-recoverable operating expenses and $0.6 million in landscaping and repairs and maintenance expense, partially offset by a $0.5 million decrease in insurance expense.

The net increase of $2.7 million in property operating expenses for properties that were fully operational during 2022 and 2023 is primarily due to increases in the following:

(i) $2.0 million in non-recoverable operating expenses, (ii) $0.2 million in landscaping and repairs and maintenance expense, and (iii) $0.2 million in utilities.

As a percentage of revenue, property operating expenses increased from 12.7% to 13.3% due to an increase in expenses in 2023.

Real estate taxes decreased $1.2 million, or 4.3%, due to the following (in thousands) :

Real estate taxes increased $0.8 million, or 2.9%, due to the following (in thousands) :

three months ended

June 30, 2022 to 2023

September 30, 2022 to 2023

Properties or components of properties sold or held for sale during 2022 and/or 2023 $ (187)

1 unchanged sentence

Properties fully operational during 2022 and 2023 and other 606

Total $ (1,186)

The net decrease of $1.4 million in real estate taxes for properties that were fully operational during 2022 and 2023 is primarily due to higher real estate tax refunds received in 2023 and lower real estate tax assessments at certain properties in the portfolio in 2023.

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 higher 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 $0.7 million, or 5.0%, primarily due to higher 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, 2023 and 2022.

General, administrative and other expenses decreased $0.9 million, or 6.3%, primarily due to lower incremental head count and the timing of backfills, partially offset by an increase in executive transportation expenses.

The Company did not incur any significant merger and acquisition costs related to the merger with RPAI during the three months ended September 30, 2023 and 2022.

Depreciation and amortization expense decreased $9.9 million, or 8.5%, due to the following (in thousands) :

three months ended

June 30, 2022 to 2023

September 30, 2022 to 2023

Properties or components of properties sold or held for sale during 2022 and/or 2023 $ (1,811)

2 unchanged sentences

Total $ (9,901)

The net decrease of $10.9 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 the prior year.

We recorded a net gain on sales of operating properties of $28.4 million for the three months ended June 30, 2023 on the sale of Kingwood Commons and the undeveloped land and related parking garage at Pan Am Plaza compared to a net gain of $24.0 million on the sale of Plaza Del Lago for the three months ended June 30, 2022.

Interest expense increased $1.5 million, or 5.8%, primarily due to higher interest costs related to our variable rate debt, partially offset by favorable interest rate swaps.

Comparison of Operating Results for the Six Months Ended June 30, 2023 to the Six Months Ended June 30, 2022

The following table reflects changes in the components of our consolidated statements of operations for the six months ended June 30, 2023 and 2022 (in thousands) :

Six Months Ended June 30,

The net decrease of $9.1 million in depreciation and amortization at properties that were fully operational during 2022 and 2023 is primarily due to the timing of placing assets in service and writing-off tenant-related assets as a result of tenant move-outs.

Based on the results of our evaluations for impairment, we recorded a $0.5 million impairment charge during the three months ended September 30, 2023 on Eastside, a retail operating property located in the Dallas MSA that qualified for held-for-sale accounting treatment as of September 30, 2023.

No impairment charges were recorded during the three months ended September 30, 2022.

We recorded a net loss on sales of operating properties of $6.0 million for the three months ended September 30, 2023 on the sale of Reisterstown Road Plaza.

We did not sell any properties during the three months ended September 30, 2022.

Interest expense decreased $0.7 million, or 2.8%, primarily due to favorable interest rate swaps, partially offset by higher interest costs related to our variable rate debt.

Comparison of Operating Results for the Nine Months Ended September 30, 2023 to the Nine Months Ended September 30, 2022

The following table reflects changes in the components of our consolidated statements of operations for the nine months ended September 30, 2023 and 2022 (in thousands) :

Nine Months Ended September 30,

2023 2022 Change

8 unchanged sentences

Depreciation and amortization 323,463 357,096 (33,633)

Impairment charges 477 — 477

Total expenses 528,263 558,082 (29,819)

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Rental income (including tenant reimbursements) increased $30.1 million, or 5.2%, due to the following (in thousands) :

six months ended

June 30, 2022 to 2023

nine months ended

September 30, 2022 to 2023

Properties or components of properties sold or held for sale during 2022 and/or 2023 $ (3,779)

3 unchanged sentences

The net increase of $24.7 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 $11.4 million due to an increase in occupancy, (ii) tenant reimbursements of $2.5 million due to higher recoverable common area maintenance expenses, (iii) overage rent of $1.7 million due to improved tenant performance, and (iv) lease termination income of $1.6 million.

These variances were partially offset by an increase in bad debt expense of $0.4 million and a decrease in ancillary income of $0.3 million.

(i) base minimum rent of $13.5 million due to an increase in occupancy, (ii) tenant reimbursements of $4.9 million due to higher recoverable common area maintenance expenses, (iii) overage rent of $1.8 million due to improved tenant performance, and (iv) lease termination income of $1.7 million, along with a decrease in bad debt expense of $1.2 million.

These variances were partially offset by a decrease in ancillary income of $0.4 million.

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

This revenue decreased by $1.1 million primarily as a result of lower gains on sales of undepreciated assets recognized during the six months ended June 30, 2023 and a decrease in parking revenue.

We recorded fee income of $2.8 million and $5.0 million during the six months ended June 30, 2023 and 2022, respectively, from property management and development services provided to third parties and unconsolidated joint ventures.

This revenue decreased by $2.0 million primarily as a result of lower gains on sales of undepreciated assets recognized during the nine months ended September 30, 2023 and a decrease in parking revenue due to the sale of Pam Am Plaza Garage in June 2023.

We recorded fee income of $3.9 million and $6.6 million during the nine months ended September 30, 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 $4.6 million, or 6.0%, due to the following (in thousands) :

six months ended

June 30, 2022 to 2023

nine months ended

September 30, 2022 to 2023

Properties or components of properties sold or held for sale during 2022 and/or 2023 $ (1,218)

2 unchanged sentences

Total $ 4,632

The net increase of $2.0 million in property operating expenses for properties that were fully operational during 2022 and 2023 is primarily due to increases of $1.0 million in non-recoverable operating expenses and $0.9 million in landscaping and repairs and maintenance expense, partially offset by a $0.2 million decrease in insurance expense.

As a percentage of revenue, property operating expenses remained flat at 13.1% for both periods.

The net increase of $4.8 million in property operating expenses for properties that were fully operational during 2022 and 2023 is primarily due to increases of $2.8 million in non-recoverable operating expenses, $1.3 million in landscaping and repairs and maintenance expense, and $0.3 million in utilities, partially offset by a $0.3 million decrease in insurance expense.

As a percentage of revenue, property operating expenses increased from 13.0% to 13.2% due to an increase in expenses in 2023.

Real estate taxes decreased $0.1 million, or 0.1%, due to the following (in thousands) :

six months ended

June 30, 2022 to 2023

nine months ended

September 30, 2022 to 2023

Properties or components of properties sold or held for sale during 2022 and/or 2023 $ (1,313)

4 unchanged sentences

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 $0.8 million, or 2.8%.

This increase is primarily due to higher compensation expense, partially 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 six months ended June 30, 2023.

The Company incurred $0.9 million of merger and acquisition costs during the six months ended June 30, 2022, primarily consisting of professional fees and technology costs.

General, administrative and other expenses decreased $0.2 million, or 0.4%, primarily due to lower incremental head count and the timing of backfills, partially offset by an increase in executive transportation expenses.

The Company did not incur any significant merger and acquisition costs related to the merger with RPAI during the nine months ended September 30, 2023.

The Company incurred $1.0 million of merger and acquisition costs during the nine months ended September 30, 2022, primarily consisting of professional fees and technology costs.

Depreciation and amortization expense decreased $33.6 million, or 9.4%, due to the following (in thousands) :

six months ended

June 30, 2022 to 2023

nine months ended

September 30, 2022 to 2023

Properties or components of properties sold or held for sale during 2022 and/or 2023 $ (6,925)

3 unchanged sentences

The net decrease of $30.7 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 the prior year.

We recorded a net gain on sales of operating properties of $28.4 million for the six months ended June 30, 2023 on the sale of Kingwood Commons and the undeveloped land and related parking garage at Pan Am Plaza compared to a net gain of $27.1 million on the sale of Plaza Del Lago and a portion of Hamilton Crossing Centre for the six months ended June 30, 2022.

Interest expense increased $1.4 million, or 2.7%, primarily due to higher interest costs related to our variable rate debt, including borrowings on the Revolving Facility that were used to repay mortgages payable at maturity, partially offset by favorable interest rate swaps.

Based on the results of our evaluations for impairment, we recorded a $0.5 million impairment charge during the nine months ended September 30, 2023 on Eastside, a retail operating property located in the Dallas MSA that qualified for held-for-sale accounting treatment as of September 30, 2023.

No impairment charges were recorded during the nine months ended September 30, 2022.

We recorded a net gain on sales of operating properties of $22.5 million for the nine months ended September 30, 2023 on the sale of Kingwood Commons, the undeveloped land and related parking garage at Pan Am Plaza, and Reisterstown Road Plaza compared to a net gain of $27.1 million on the sale of Plaza Del Lago and a portion of Hamilton Crossing Centre for the nine months ended September 30, 2022.

Interest expense increased $0.7 million, or 0.9%, primarily due to higher interest costs related to our variable rate debt, including borrowings on the $1.1 billion unsecured revolving credit facility (the “Revolving Facility”) that were used to repay mortgages payable at maturity, partially offset by favorable interest rate swaps.

Net Operating Income and Same Property Net Operating Income

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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, 2023, the same property pool excludes the following:

For the three and nine months ended September 30, 2023, the same property pool excludes the following:

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

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• office properties.

The following table presents Same Property NOI and a reconciliation to net income (loss) attributable to common shareholders for the three and six months ended June 30, 2023 and 2022 (dollars in thousands) :

Three Months Ended June 30, Six Months Ended June 30,

The following table presents Same Property NOI and a reconciliation to net income (loss) attributable to common shareholders for the three and nine months ended September 30, 2023 and 2022 (dollars in thousands) :

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

2023 2022 Change 2023 2022 Change

2 unchanged sentences

Leased percentage at period end (2)

93.5 % 94.7 % 93.5 % 94.7 %

Economic occupancy percentage at period end (2)

91.3 % 91.8 % 91.3 % 91.8 %

Economic occupancy percentage (3)

10 unchanged sentences

Merger and acquisition costs — (108) — (1,006)

Impairment charges (477) — (477) —

Depreciation and amortization (105,930) (115,831) (323,463) (357,096)

Interest expense (25,484) (26,226) (78,114) (77,449)

Gain on sales of operating properties, net 28,440 23,958 28,440 27,126

(Loss) gain on sales of operating properties, net (5,972) — 22,468 27,126

Net income attributable to noncontrolling interests

10 unchanged sentences

and (vii) office properties.

(2) Decrease in leased and economic occupancy percentages is primarily attributable to the Bed Bath & Beyond Inc.

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

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(4) 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 5.7% for the three months ended June 30, 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.

Our Same Property NOI increased 4.7% for the three months ended September 30, 2023 compared to the same period of the prior year primarily due to higher base rent driven by positive new and renewal leasing spreads, contractual rent growth, an increase in overage rent, and lower bad debt expense.

Funds From Operations

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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 (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.

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 (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 “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 and six months ended June 30, 2023 and 2022 (unaudited) are as follows (dollars in thousands) :

Three Months Ended June 30, Six Months Ended June 30,

Our calculations of FFO and reconciliation to net income and FFO, as adjusted, for the three and nine months ended September 30, 2023 and 2022 (unaudited) are as follows (dollars in thousands) :

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

1 unchanged sentence

net income attributable to noncontrolling interests in properties (67) (209) (201) (535)

gain on sales of operating properties, net (28,440) (23,958) (28,440) (27,126)

loss (gain) on sales of operating properties, net 5,972 — (22,468) (27,126)

impairment charges 477 — 477 —

depreciation and amortization of consolidated and

18 unchanged sentences

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.

Annualized Adjusted

EBITDA is Adjusted EBITDA for the most recent quarter multiplied by four.

Net Debt to Adjusted EBITDA is our share of net debt divided by Annualized Adjusted EBITDA.

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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.

2 unchanged sentences

Three Months Ended

June 30, 2023

September 30, 2023

Net income $ 2,177

4 unchanged sentences

Unconsolidated Adjusted EBITDA 591

Impairment charges 477

Loss on sales of operating properties, net 5,972

Other income and expense, net (903)

10 unchanged sentences

Net Debt to Adjusted EBITDA 5.1x

(1) Represents Adjusted EBITDA for the three months ended June 30, 2023 (as shown in the table above) multiplied by four.

(1) Represents Adjusted EBITDA for the three months ended September 30, 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.

1 unchanged sentence

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 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.

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.

As of June 30, 2023, we had approximately $129.3 million in cash on hand, $5.7 million in restricted cash and escrow deposits, $1.1 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.

During the three months ended June 30, 2023, we originated a 10-year $95.1 million mortgage payable at a fixed interest rate of 5.36% secured by the multifamily rental portion of the expansion project at One Loudoun Downtown – Pads G & H.

As of September 30, 2023, we had approximately $52.3 million in cash and cash equivalents on hand, $6.0 million in restricted cash and escrow deposits, $1.1 billion of remaining availability under the Revolving Facility, and no debt maturities until June 2024.

During the nine months ended September 30, 2023, we originated a 10-year $95.1 million mortgage payable at a fixed interest rate of 5.36% secured by the multifamily rental portion of the expansion project at One Loudoun Downtown – Pads G & H and repaid the $95.0 million principal balance of the 4.23% senior unsecured notes due 2023 using available cash on hand.

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

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

in the banking sector, tenant bankruptcies, inflation, labor shortages, supply chain constraints, and/or increasing energy prices and interest rates, among other events, could adversely affect the ability of some of our tenants to meet their lease obligations.

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, tenant bankruptcies, inflation, labor shortages, supply chain constraints, and/or increasing energy prices and interest rates, 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 June 30, 2023, we had approximately $1.1 billion available under the Revolving Facility for future borrowings.

We also had $129.3 million in cash and cash equivalents as of June 30, 2023.

We were in compliance with all applicable financial covenants under the Revolving Facility, unsecured term loans and senior unsecured notes as of June 30, 2023.

As of September 30, 2023, we had approximately $1.1 billion available under the Revolving Facility for future borrowings.

We also had $52.3 million in cash and cash equivalents as of September 30, 2023.

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

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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 June 30, 2023, the Company has not sold any common shares under the ATM Program.

As of September 30, 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 June 30, 2023, we had $27.8 million of secured debt, excluding scheduled monthly principal payments, and $244.6 million of unsecured debt scheduled to mature prior to or on June 30, 2024.

As of September 30, 2023, we had no secured debt, excluding scheduled monthly principal payments, and $269.6 million of unsecured debt scheduled to mature prior to September 30, 2024.

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

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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 $30.0 million and $1.3 million, respectively, for the remainder of 2023, expected dividend payments to our common shareholders and Common Unit holders, and recurring capital expenditures.

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

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

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

This distribution was paid on October 13, 2023 to common shareholders and Common Unit holders of record as of October 6, 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.

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Other short-term liquidity needs include expenditures for tenant improvements, external leasing commissions and recurring capital expenditures.

During the six months ended June 30, 2023, we incurred $8.0 million for recurring capital expenditures on operating properties and $39.3 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, 2023 (excluding development and redevelopment properties).

During the nine months ended September 30, 2023, we incurred $13.4 million for recurring capital expenditures on operating properties and $65.4 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, 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.

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In 2023, certain retailers have filed for bankruptcy protection including Bed Bath & Beyond Inc., a tenant that, as of December 31, 2022, occupied 613,000 square feet across 23 locations in our portfolio and generated $8.3 million of annualized base rent.

As of June 30, 2023, eight tenant leases have been rejected in the bankruptcy process and we expect that additional leases will be rejected during the third quarter of 2023.

Re-leasing costs may be significant for the leases that were rejected and we could experience a significant reduction in our revenues from those properties.

During the six months ended June 30, 2023, we completed major redevelopment construction activities at The Landing at Tradition – Phase II and placed this project in service.

As part of its bankruptcy process, three of the former tenant’s leases were acquired by other retailers and the remaining leases were rejected.

Re-leasing costs may be significant for the leases that were rejected, and we could experience a significant reduction in our revenues from those properties over the next 12 to 18 months.

During the nine months ended September 30, 2023, we completed major redevelopment construction activities at The Landing at Tradition – Phase II and placed this project in service.

In addition, we began redevelopment activities at Edwards Multiplex – Ontario and reclassified this property from our operating portfolio into redevelopment.

As of June 30, 2023, we had development projects under construction at the medical office building at Carillon and The Corner (IN).

Our share of total estimated costs for these two projects is $91.6 million, of which our share of the remaining expected funding requirement is estimated to be $59.7 million.

As of June 30, 2023, we have incurred $24.8 million of these costs.

As of September 30, 2023, we had development projects under construction at the medical office building at Carillon and The Corner (IN).

Our share of total estimated costs for these two projects is $91.6 million, of which our share of the expected funding requirement is estimated to be $59.7 million.

As of September 30, 2023, we have incurred $27.1 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.

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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 June 30, 2023, the Company has not repurchased any shares under the Share Repurchase Program.

As of September 30, 2023, the Company has not repurchased any shares under the Share Repurchase Program.

Long-Term Liquidity Needs

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Commitments under Ground Leases.

We are obligated under 12 ground leases for approximately 98 acres of land as of June 30, 2023.

We are obligated under 12 ground leases for approximately 98 acres of land as of September 30, 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 six months ended June 30, 2023 (in thousands) :

Six Months Ended

June 30, 2023

The following table summarizes cash capital expenditures for our development and redevelopment projects and other capital expenditures for the nine months ended September 30, 2023 (in thousands) :

Nine Months Ended

September 30, 2023

Active development and redevelopment projects $ 21,110

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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 six months ended June 30, 2023.

Debt Maturities

The following table summarizes the scheduled maturities and principal amortization of the Company’s indebtedness as of June 30, 2023, 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 September 30, 2023, presented on a calendar year basis (in thousands) :

Principal Payments Term

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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 June 30, 2023.

These ratings did not change as of September 30, 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 June 30, 2023, we had cash, cash equivalents and restricted cash of $135.0 million.

As of September 30, 2023, we had cash, cash equivalents and restricted cash of $58.3 million.

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

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

Comparison of the Six Months Ended June 30, 2023 to the Six Months Ended June 30, 2022

Comparison of the Nine Months Ended September 30, 2023 to the Nine Months Ended September 30, 2022

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

Six Months Ended June 30,

Nine Months Ended September 30,

2023 2022 Change

Net cash provided by operating activities $ 291,177 $ 262,429 $ 28,748

Net cash provided by investing activities 8,013 68,646 (60,633)

Net cash used in investing activities (55,483) (13,694) (41,789)

Net cash used in financing activities (299,350) (252,591) (46,759)

Increase (decrease) in cash, cash equivalents and restricted cash 12,984 (1,211) 14,195

Decrease in cash, cash equivalents and restricted cash (63,656) (3,856) (59,800)

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

Cash, cash equivalents and restricted cash, at end of period $ 58,314 $ 96,507

Cash provided by operating activities was $180.4 million for the six months ended June 30, 2023 and $154.3 million for the same period of 2022.

Cash provided by operating activities was $291.2 million for the nine months ended September 30, 2023 and $262.4 million for the same period of 2022.

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

Cash provided by investing activities was $8.0 million for the six months ended June 30, 2023 and $68.6 million for the same period of 2022.

Cash used in investing activities was $55.5 million for the nine months ended September 30, 2023 and $13.7 million for the same period of 2022.

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

• We received net proceeds of $78.6 million from the sale of Kingwood Commons and the undeveloped land and related parking garage at Pan Am Plaza during the six months ended June 30, 2023 compared to 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;

• 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 the proceeds from a $125.0 million short-term deposit that matured on April 7, 2022 during the six months ended June 30, 2022;

• Capital expenditures increased by $9.0 million driven by the construction activity at our development projects and anchor leasing activity, partially offset by a change in construction payables of $4.0 million for the six months ended June 30, 2023.

Cash used in financing activities was $175.5 million for the six months ended June 30, 2023 and $224.2 million for the same period of 2022.

• We received net proceeds of $123.9 million from the sale of Kingwood Commons, the undeveloped land and related parking garage at Pan Am Plaza, and Reisterstown Road Plaza during the nine months ended September 30, 2023 compared to 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;

• We acquired Prestonwood Place for $78.3 million during the nine months ended September 30, 2023 compared to the acquisitions of Pebble Marketplace, the two-tenant building adjacent to MacArthur Crossing, and Palms Plaza for $100.1 million during the nine months ended September 30, 2022;

• We received the proceeds from a $125.0 million short-term deposit that matured on April 7, 2022 during the nine months ended September 30, 2022;

• Capital expenditures decreased by $7.8 million primarily related to the timing of capital projects along with a change in construction payables of $3.7 million for the nine months ended September 30, 2023.

Cash used in financing activities was $299.4 million for the nine months ended September 30, 2023 and $252.6 million for the same period of 2022.

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

• We borrowed $198.0 million on the Revolving Facility and received proceeds of $95.1 million from the origination of a mortgage payable during the six months ended June 30, 2023 compared to borrowings of $120.0 million on the Revolving Facility during the six months ended June 30, 2022;

• We repaid $198.0 million of borrowings on the Revolving Facility and $163.2 million of mortgages payable during the six months ended June 30, 2023 compared to repayments of $175.0 million on the Revolving Facility and $80.8 million of mortgages payable during the six months ended June 30, 2022;

• We made distributions to common shareholders and holders of common partnership interests in the Operating Partnership of $106.6 million during the six months ended June 30, 2023 compared to distributions of $86.6 million during the six months ended June 30, 2022.

• We borrowed $237.0 million on the Revolving Facility and received proceeds of $95.1 million from the origination of a mortgage payable during the nine months ended September 30, 2023 compared to borrowings of $145.0 million on the Revolving Facility and entering into a seven-year $300.0 million unsecured term loan during the nine months ended September 30, 2022;

• We repaid (i) $198.0 million of borrowings on the Revolving Facility, (ii) $174.1 million of mortgages payable, and (iii) the $95.0 million principal balance of the 4.23% senior unsecured notes due 2023 during the nine months ended September 30, 2023 compared to repayments of (i) $200.0 million of borrowings on the Revolving Facility, (ii) a $200.0 million unsecured term loan that was scheduled to mature in 2023, and (iii) $158.2 million of mortgages payable during the nine months ended September 30, 2022;

• We made distributions to common shareholders and holders of common partnership interests in the Operating Partnership of $160.0 million during the nine months ended September 30, 2023 compared to distributions of $133.4 million during the nine months ended September 30, 2022.

Critical Accounting Estimates

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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, 2023.

There were no changes made by management to the critical accounting policies in the three months ended September 30, 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