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Item 7. Management’s Discussion and Analysis

2024-02-20 compared with 2023-02-21 · 194 added, 183 removed, 355 unchanged (52% of the section changed)

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Our Business and 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.

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 markets and select strategic gateway markets in the United States.

Following our merger with RPAI in 2021, we became a top-five open-air shopping center REIT based upon market capitalization.

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, the real estate market and overall economic conditions.

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

As of December 31, 2023, we owned interests in 180 operating retail properties totaling approximately 28.1 million square feet and one office property with 0.3 million square feet.

Of the 180 operating retail properties, 10 contain an office component.

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

Merger with RPAI

On October 22, 2021, we completed the Merger with RPAI in which 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 served to more than double 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 NOI margins, lowering the Company’s cost of capital, and completing select development projects.

Inflationary concerns have been counteracting the retail sector’s recovery from the COVID-19 pandemic and may affect consumer confidence and spending, which has impacted, and could continue to impact, our tenants’ sales and overall health and, in turn, put downward pricing pressure on rents that we are able to charge to new or renewing tenants, and in some cases, our percentage rents.

While many of our leases contain provisions designed to mitigate the adverse impact of inflation, including, for example, requirements for tenants to pay a share of operating expenses and rent increases that are tied to consumer price index increases, the stated rent increases or limits on such tenant’s obligation to pay its share of operating expenses could be lower than the increase in inflation at any given time.

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

We believe inflationary concerns could negatively impact consumer confidence and spending and our tenants’ sales and overall health.

This could, in turn, continue to put downward pricing pressure on rents that we are able to charge to new or renewing tenants, such that future rent spreads and, in some cases, our percentage rents, could be adversely impacted.

Many 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.

In 2023, we have made significant improvements converting leases to higher fixed rent bumps and including CPI protection.

However, the stated rent increases or limits on such tenant’s obligation to pay its share of operating expenses could be lower than the increase in inflation at any given time.

Inflation may also increase labor or other general and administrative expenses that cannot be easily reduced.

Portfolio Update

As has become more evident since the COVID-19 pandemic began and as we began to operate as a combined company, high-quality real estate located in high-quality markets matters.

Open-air centers are thriving for a variety of reasons including their ability to act as last mile fulfillment centers and their convenient and affordable nature for retailers and consumers.

In 2023, demand for open-air retail real estate was strong due to the limited availability of desirable retail space and limited new construction over the previous 15 years.

As a result, we experienced our highest quarterly new leasing activity in the Company’s history in the fourth quarter with over 380,000 square feet of new leasing volume.

Open-air centers are thriving for a variety of reasons including their ability to function as last mile fulfillment centers and their convenient and affordable nature for retailers and consumers.

This includes conveniently located and easily accessible parking fields, lower operating costs as compared to other retail formats, and essential anchors that drive daily trips.

In addition, the Company’s property types are particularly suited for retailers’ current and evolving needs, including curbside pick-up and buying online and picking up in store (“BOPIS”), that we believe

will benefit from tenant demand for additional space.

The strength of the Company’s real estate is evidenced by our continued strong cash leasing spreads and ABR for the retail portfolio of $20.02 per square foot.

The Company has continued to improve its asset quality and through the Merger, acquired a refined portfolio of high-quality, open-air shopping centers and mixed-use assets.

The strength of the Company’s real estate is further evidenced by our continued strong cash leasing spreads and ABR for the retail portfolio of $20.70 per square foot.

The Company has continued to improve its asset quality and through the October 2021 merger with RPAI acquired a refined portfolio of high-quality, open-air shopping centers and mixed-use assets.

In evaluating potential acquisition, development, and redevelopment opportunities, we look for strong sub-markets where average household income, educational attainment, population density, traffic counts and daytime workforce populations are above the broader market average.

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In our largest sub-markets, household incomes are significantly higher and state income taxes are relatively lower than the medians for the broader markets.

In addition to targeting sub-markets with strong consumer demographics, we focus on having the most desirable tenant mix at each center.

We have aggressively targeted and executed leases with prominent grocers including Publix, Lidl, Aldi, Whole Foods, and Trader Joe’s, expanding retailers such as T.J.

Maxx, HomeGoods, Ross Dress for Less, Burlington, Old Navy, and pOpshelf, service and restaurant retailers and other retailers such as Ulta Beauty, REI, Five Below and Total Wine & More.

Additionally, we have identified cost-efficient ways to relocate, re-tenant and renegotiate leases at several of our properties allowing us to attract more suitable tenants.

In addition to targeting sub-markets with strong consumer demographics, we focus on having the most desirable tenant mix at each shopping center.

We have aggressively targeted and executed leases with prominent grocers including Publix, Lidl, Aldi, Whole Foods, Trader Joe’s, Sprouts Farmers Market, and The Fresh Market, expanding retailers such as T.J.

Maxx, HomeGoods, Ross Dress for Less, Burlington, Old Navy, J.Crew Factory, Dick’s Sporting Goods, and pOpshelf, service and restaurant retailers and other retailers such as Ulta Beauty, REI, Five Below and Total Wine & More.

Additionally, we have identified cost-efficient ways to relocate, re-tenant and renegotiate leases at several of our properties, which allows us to attract more suitable tenants.

Capital and Financing Activities

In 2022, we were able to enhance our already-strong balance sheet, increase our financial flexibility, and improve our liquidity to fund future growth by increasing the capacity on our revolving line of credit to $1.1 billion in July 2022 and entering into a seven-year $300.0 million unsecured term loan.

We ended 2022 with approximately $1.2 billion of combined cash and borrowing capacity on our revolving line of credit.

In addition, as of December 31, 2022, we had $284.4 million of debt principal scheduled to mature through December 31, 2023, which we expect to retire using cash on hand and our revolving line of credit.

In 2023, we maintained a conservative balance sheet and improved our liquidity to fund future growth.

We ended 2023 with approximately $1.1 billion of combined cash and borrowing capacity on the Revolving Facility.

In addition, as of December 31, 2023, we had $269.6 million of debt principal scheduled to mature through December 31, 2024, which we expect will be satisfied with proceeds from the Notes Due 2034 that were issued in January 2024.

The three investment grade credit ratings we maintain provide us with access to the unsecured public bond market, which we may continue to use in the future to finance acquisitions, repay maturing debt and fix interest rates.

Results of Operations

As of December 31, 2022, we owned interests in 183 operating retail properties, one office property and three development projects currently under construction.

As of December 31, 2023, we owned interests in 180 operating retail properties, one office property, two development projects currently under construction, and two additional properties with future redevelopment opportunities.

The following table sets forth the total operating properties and development projects we owned as of December 31, 2023, 2022 and 2021:

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Office properties 1 1 1

Development and redevelopment projects 3 8 5

Active development and redevelopment projects 2 3 8

Future development and redevelopment opportunities 2 1 1

(1) Included within operating retail properties are 10, 11, and 11 properties that contain an office component as of December 31, 2023, 2022 and 2021, respectively.

The comparability of results of operations for the year ended December 31, 2022 is affected by our Merger with RPAI that was completed on October 22, 2021, in which we acquired 100 operating retail properties and five development projects, along with our development, redevelopment, and operating property acquisition and disposition activities in 2020 through 2022.

The comparability of results of operations for the year ended December 31, 2023 is affected by our development, redevelopment, and operating property acquisition and disposition activities between 2021 through 2023.

Therefore, we believe it is most useful to review the comparisons of our results of operations for these years (as set forth below under “Comparison of Operating Results for the Years Ended December 31, 2023 and 2022”) in conjunction with the discussion of our activities during those periods, which is set forth below.

Results from operations for the year ended December 31, 2021 reflect the combined operation for the approximately two and a half months following the Company’s Merger with RPAI on October 22, 2021.

In addition to the properties we acquired in the Merger, the following properties were acquired during the years ended December 31, 2022, 2021 and 2020:

Property Name MSA Acquisition Date Owned GLA

Eastgate Crossing Raleigh, NC December 2020 156,276

In addition to the 100 properties acquired in the October 2021 merger with RPAI, the following operating properties were acquired during the years ended December 31, 2023, 2022 and 2021:

Property Name MSA Acquisition Date GLA

Nora Plaza outparcel Indianapolis, IN December 22, 2021 23,722

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

The following operating properties were sold during the years ended December 31, 2022 and 2021.

We did not sell any operating properties during the year ended December 31, 2020.

Property Name MSA Disposition Date Owned GLA

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

The following operating and other properties were sold during the years ended December 31, 2023, 2022 and 2021:

Property Name MSA Disposition Date GLA

Westside Market Dallas, TX October 26, 2021 93,377

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Worcester, MA October 27, 2022 —

Kingwood Commons Houston, TX May 8, 2023 158,172

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

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

Eastside Dallas, TX October 24, 2023 43,640

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

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Development and Redevelopment Projects

The following properties were under active development or redevelopment during portions of the years ended December 31, 2022, 2021, and 2020 and removed from our operating portfolio:

The following properties were under active development or redevelopment during portions of the years ended December 31, 2023, 2022 and 2021 and removed from our operating portfolio during such period:

Project Name MSA Transition to

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Transition to

Operating Portfolio Owned

Commercial GLA

Courthouse Shadows (2)

Naples, FL June 2013 Sold 124,802

Operating Portfolio GLA

Active Projects

Carillon MOB (2)

Washington, D.C.

October 2021 Pending 126,000

The Corner – IN (2)

Indianapolis, IN December 2015 Pending 24,000

Future Opportunities

Hamilton Crossing Centre (2)(3)

Indianapolis, IN June 2014 Pending 92,283

The Corner (3)

Indianapolis, IN December 2015 Pending 24,000

Eddy Street Commons – Phase II South Bend, IN September 2017 December 2020 8,200

Edwards Multiplex – Ontario (2)

Los Angeles, CA March 2023 Pending 124,614

Completed Projects

Glendale Town Center Indianapolis, IN March 2019 December 2021 199,021

Eddy Street Commons – Phase III South Bend, IN September 2020 March 2022 18,600

Glendale Town Center (3)

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 (5)

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

One Loudoun Downtown – Pads G&H

Washington, D.C.

October 2021 Pending 126,000

Circle East (5)

Baltimore, MD October 2021 September 2022 82,000

One Loudoun Downtown – Residential

and Pads G&H Commercial (5)

October 2021 June 2022 —

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

One Loudoun Downtown – Pads G&H

Washington, D.C.

October 2021 Residential:

December 2022 67,000

Shoppes at Quarterfield (5)

Baltimore, MD October 2021 June 2022 58,000

October 2021 December 2022 67,000

The Landing at Tradition – Phase II Port St.

Lucie, FL September 2021 June 2023 39,900

(1) Transition date represents the date the property was transferred from our operating portfolio into redevelopment status.

For legacy RPAI projects, the transition date represents the later of the date of the closing of the Merger and the date the project was transferred into redevelopment status.

(2) This property was sold in July 2020.

For legacy 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.

The redevelopment projects at Hamilton Crossing Centre and The Corner will include the creation of a mixed-use development.

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

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

The redevelopment projects at Hamilton Crossing Centre and The Corner – IN will include the creation of a mixed-use development.

(3) Approximately half of the Hamilton Crossing site was sold in January 2022 to Republic Airways Inc.

In addition to the sale, the Company entered into a development and construction management agreement for the development of a corporate campus for Republic Airways.

Phase I of the corporate campus was completed in 2023.

Comparison of Operating Results for the Years Ended December 31, 2023 and 2022

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Depreciation and amortization 426,361 469,805 (43,444)

Impairment charges 477 — 477

Total expenses 693,364 737,396 (44,032)

Gain on sales of operating properties, net 22,601 27,069 (4,468)

Operating income (loss) 91,669 (21,524) 113,193

Operating income 152,241 91,669 60,572

Other (expense) income:

Interest expense (105,349) (104,276) (1,073)

Income tax (expense) benefit of taxable REIT subsidiary (43) 310 (353)

Equity in earnings (loss) of unconsolidated subsidiaries 256 (416) 672

Income tax expense of taxable REIT subsidiary (533) (43) (490)

Equity in earnings of unconsolidated subsidiaries 33 256 (223)

Other income, net 1,991 240 1,751

Net loss (12,154) (81,722) 69,568

Net (income) loss attributable to noncontrolling interests (482) 916 (1,398)

Net loss attributable to common shareholders $ (12,636) $ (80,806) $ 68,170

Net income (loss) 48,383 (12,154) 60,537

Net income attributable to noncontrolling interests (885) (482) (403)

Net income (loss) attributable to common shareholders $ 47,498 $ (12,636) $ 60,134

Property operating expense to total revenue ratio 13.1 % 13.4 %

Rental income (including tenant reimbursements) increased $27.8 million, or 3.6%, due to the following (in thousands) :

December 31, 2022 to 2023

Properties or components of properties sold during 2022 or 2023 $ (7,830)

Properties under redevelopment or acquired during 2022 and/or 2023 12,134

Properties acquired in the Merger with RPAI 402,842

Properties fully operational during 2022 and 2023 and other 23,493

Total $ 27,797

The net increase of $5.9 million in rental income for properties that were fully operational during 2021 and 2022 is primarily due to a $3.3 million increase in tenant reimbursements due to higher recoverable common area maintenance expenses and increases in base minimum rent of $2.8 million due to improved tenant performance, overage rent of $2.2 million and ancillary income of $1.4 million.

These variances were partially offset by a $2.6 million increase in bad debt expense and a $1.3 million decrease in lease termination income.

The net increase of $23.5 million in rental income for properties that were fully operational during 2022 and 2023 is primarily due to (i) increases in base minimum rent of $14.7 million due to contractual rent changes and tenant reimbursements of $2.9 million due to higher recoverable common area maintenance expenses, (ii) a decrease in bad debt expense of $2.1 million, and (iii) increases in lease termination income of $1.6 million, overage rent of $1.2 million due to improved tenant performance, and $1.0 million in ancillary income.

The occupancy of the fully operational properties increased from 91.8% for 2022 to 92.0% for 2023.

We continued to experience strong leasing volumes in 2022 and generate higher rents on new leases and renewals.

The average rents for new comparable leases signed in 2022 were $27.07 per square foot compared to average expiring base rents of $19.65 per square foot in that period.

The average base rents for renewals signed in 2022 were $18.52 per square foot compared to average expiring base rents of $17.06 per square foot in that period.

For the entire portfolio, the spread between leased and occupied square footage is approximately 270 basis points and represents approximately $33.0 million of NOI, the majority of

which will come online in 2023.

We continued to experience strong leasing volumes in 2023 and generate higher base rent on new leases and renewals.

The average base rents for new comparable leases signed in 2023 was $27.53 per square foot compared to average expiring base rents of $19.48 per square foot in that period.

The average base rents for renewals signed in 2023 was $18.10 per square foot

compared to average expiring base rents of $16.74 per square foot in that period.

For the entire portfolio, the spread between leased and occupied square footage is approximately 280 basis points and represents approximately $31.0 million of NOI, the majority of which is expected to come online in 2024.

In addition, the ABR per square foot of our operating retail portfolio continued to improve, as it increased to $20.70 per square foot as of December 31, 2023 from $20.02 per square foot as of December 31, 2022.

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

This revenue increased by $6.4 million primarily as a result of higher gains on sales of undepreciated assets of $4.0 million recognized during the year ended December 31, 2022 and increases in miscellaneous income of $1.6 million and parking revenue of $0.8 million.

This revenue decreased by $2.6 million primarily as a result of lower gains on sales of undepreciated assets of $2.8 million recognized during the year ended December 31, 2023 and a decrease in parking revenue of $1.3 million due to the sale of Pan Am Plaza Garage in June 2023, partially offset by an increase in miscellaneous income of $1.5 million.

We recorded fee income of $4.4 million and $8.5 million during the years ended December 31, 2023 and 2022, respectively, from property management and development services provided to third parties and unconsolidated joint ventures.

The increase in fee income is primarily due to $7.1 million of development fees earned related to the development of a corporate campus for Republic Airways at Hamilton Crossing Centre.

The decrease in fee income is primarily due 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 $0.7 million, or 0.7%, due to the following (in thousands) :

December 31, 2022 to 2023

Properties or components of properties sold during 2022 or 2023 $ (2,227)

Properties under redevelopment or acquired during 2022 and/or 2023 1,236

Properties acquired in the Merger with RPAI 49,725

Properties fully operational during 2022 and 2023 and other 1,732

Total $ 51,656

The net increase of $1.1 million in property operating expenses for properties that were fully operational during 2021 and 2022 is primarily due to increases in insurance expense of $4.0 million and utilities of $0.6 million, partially offset by a $3.8 million decrease in repairs and maintenance and landscaping expenses.

The net increase of $1.7 million in property operating expenses for properties that were fully operational during 2022 and 2023 is primarily due to increases of (i) $3.3 million in non-recoverable operating expenses, the majority of which relates to vacancies caused by retailer bankruptcies, (ii) $0.4 million in landscaping and repairs and maintenance expenses, and (iii) $0.2 million in security expenses, partially offset by a $3.0 million decrease in insurance expense.

As a percentage of revenue, property operating expenses decreased from 13.4% to 13.1% primarily due to an increase in revenue in 2023.

Real estate taxes increased $55.1 million, or 111.2%, primarily as a result of the Merger with RPAI as detailed below (in thousands) :

Real estate taxes decreased $2.2 million, or 2.1%, due to the following (in thousands) :

December 31, 2022 to 2023

Properties or components of properties sold during 2022 or 2023 $ (1,854)

Properties under redevelopment or acquired during 2022 and/or 2023 2,001

Properties acquired in the Merger with RPAI 55,038

Properties fully operational during 2022 and 2023 and other (2,310)

Total $ (2,163)

The net decrease of $0.7 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 net decrease of $2.3 million in real estate taxes for properties that were fully operational during 2022 and 2023 is primarily due to a decrease in real estate tax assessments at certain properties in the portfolio in 2023, most notably for certain of our Texas and Illinois properties.

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 $20.9 million, or 61.4%.

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

The Company incurred $0.9 million and $86.5 million of merger and acquisition costs related to the Merger with RPAI during the years ended December 31, 2022 and 2021, respectively.

Costs incurred during 2022 primarily consist of professional fees and technology costs while costs incurred during 2021 primarily consist of fairness opinion, severance charges, legal, professional, and data migration costs.

Depreciation and amortization expense increased $269.3 million, or 134.4%, primarily as a result of the Merger with RPAI as detailed below (in thousands) :

General, administrative and other expenses increased $1.3 million, or 2.3%, primarily due to an increase in transportation expenses and consulting fees, partially offset by a decrease in legal expenses and payroll costs due to lower head count.

The Company did not incur any significant merger and acquisition costs related to the October 2021 merger with RPAI during the year ended December 31, 2023.

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

Depreciation and amortization expense decreased $43.4 million, or 9.2%, due to the following (in thousands) :

December 31, 2022 to 2023

Properties or components of properties sold during 2022 or 2023 $ (9,444)

Properties under redevelopment or acquired during 2022 and/or 2023 6,218

Properties acquired in the Merger with RPAI 260,779

Properties fully operational during 2022 and 2023 and other (40,218)

Total $ (43,444)

The net increase of $4.7 million in depreciation and amortization for properties under redevelopment or acquired during 2021 and 2022 is primarily due to the acquisition of Pebble Marketplace and Palms Plaza in 2022.

The net increase of $1.2 million in depreciation and amortization at properties that were fully operational during 2021 and 2022 is due to the timing of additions and disposals at operating properties.

We recorded a net gain of $27.1 million for the year ended December 31, 2022 on the sale of Plaza Del Lago, a portion of Hamilton Crossing Centre and the ground lease interest in Lowe’s at Lincoln Plaza compared to a net gain of $31.2 million on the sale of Westside Market and a portfolio of 17 ground leases for the year ended December 31, 2021.

Interest expense increased $43.8 million, or 72.5%, primarily due to interest costs of $39.1 million related to debt assumed in conjunction with the Merger.

The net increase of $6.2 million in depreciation and amortization at properties under redevelopment or acquired during 2022 and 2023 is primarily due to the reclassification of Edwards Multiplex – Ontario into redevelopment in March 2023 along with the acquisitions of Palms Plaza in July 2022 and Prestonwood Place in September 2023.

The net decrease of $40.2 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 acquired in the October 2021 merger with RPAI that became fully depreciated during the prior year.

Based on the results of our evaluations for impairment, we recorded a $0.5 million impairment charge during the year ended December 31, 2023 related to Eastside, a retail operating property in the Dallas MSA that qualified for held-for-sale accounting treatment as of September 30, 2023 and was sold on October 24, 2023.

No impairment charges were recorded during the year ended December 31, 2022.

We recorded a net gain on sales of operating properties of $22.6 million for the year ended December 31, 2023 on the sale of Kingwood Commons, the undeveloped land and related parking garage at Pan Am Plaza, Reisterstown Road Plaza, and Eastside compared to a net gain of $27.1 million on the sale of Plaza Del Lago, a portion of Hamilton Crossing Centre and the ground lease interest in Lowe’s at Lincoln Plaza for the year ended December 31, 2022.

Interest expense increased $1.1 million, or 1.0%, 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.

Management’s discussion of the financial condition, changes in financial condition and results of operations for the year ended December 31, 2022, with comparison to the year ended December 31, 2021, was included in Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2021 , which is incorporated by reference in this Annual Report on Form 10-K.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022 .

Net Operating Income and Same Property Net Operating Income

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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.

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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 year ended December 31, 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 and commercial portion at One Loudoun Downtown – Pads G & H, (iii) three active development and redevelopment projects, (iv) Arcadia Village, Pebble Marketplace and Palms Plaza, which were each acquired subsequent to January 1, 2021, and (v) office properties.

The following table presents Same Property NOI and a reconciliation to net loss attributable to common shareholders for the years ended December 31, 2022 and 2021 (unaudited) (dollars in thousands) :

For the year ended December 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, Circle East and The Landing at Tradition – Phase II, which were reclassified from active redevelopment into our operating portfolio in June 2022, September 2022 and June 2023, respectively;

• our active development and redevelopment projects at Carillon medical office building and The Corner – IN;

• Hamilton Crossing Centre and Edwards Multiplex – Ontario, which were reclassified from our operating portfolio into redevelopment in June 2014 and March 2023, respectively;

• 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 years ended December 31, 2023 and 2022 (unaudited) (dollars in thousands) :

Year Ended December 31,

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Leased percentage at period end (2)

94.0 % 95.4 %

Economic occupancy percentage at period end (2)

91.2 % 92.5 %

Economic occupancy percentage (3)

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Net operating income – same properties $ 555,396 $ 530,021

Prior period collection impact – same properties 3,665 12,414

Net operating income – non-same activity (4)

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Merger and acquisition costs — (925)

Impairment charges (477) —

Depreciation and amortization (426,361) (469,805)

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Gain on sales of operating properties, net 22,601 27,069

Net (income) loss attributable to noncontrolling interests (482) 916

Net loss attributable to common shareholders $ (12,636) $ (80,806)

(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 and commercial portion at One Loudoun Downtown – Pads G & H, (iii) three active development and redevelopment projects, (iv) Arcadia Village, Pebble Marketplace and Palms Plaza, which were each acquired subsequent to January 1, 2021, and (v) office properties.

Net income attributable to noncontrolling interests (885) (482)

Net income (loss) attributable to common shareholders $ 47,498 $ (12,636)

(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, Circle East and The Landing at Tradition – Phase II, which were reclassified from active redevelopment into our operating portfolio in June 2022, September 2022 and June 2023, respectively, (iv) our active development and redevelopment projects at Carillon medical office building and The Corner – IN, (v) Hamilton Crossing Centre and Edwards Multiplex – Ontario, which were reclassified from our operating portfolio into redevelopment in June 2014 and March 2023, respectively;

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

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 5.1% in 2022 compared to 2021 primarily due to improved occupancy driven by continued strong leasing activity and an increase in overage rent.

Our Same Property NOI increased 4.8% in 2023 compared to 2022 primarily due to contractual rent growth, higher base rent driven by positive new and renewal leasing spreads, lower bad debt expense, and an increase in overage rent from certain tenants.

Funds From Operations

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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 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.

FFO (a) should not be considered as an alternative to net income (calculated in accordance with GAAP) for the purpose of measuring our financial performance, (b) is not an alternative to cash flow from operating activities (calculated in accordance with GAAP) as a measure of our liquidity, and (c) is not indicative of funds available to satisfy our cash needs, including our ability to make distributions.

Our computation of FFO may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than we do.

From time to time, the Company may report or provide guidance with respect to “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) 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 and reconciliation to net income and FFO, as adjusted, for the years ended December 31, 2022, 2021 and 2020 (unaudited) are as follows (in thousands) :

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 and 2021, 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 years ended December 31, 2023, 2022 and 2021 (unaudited) are as follows (dollars in thousands) :

Year Ended December 31,

2023 2022 2021

Net loss $ (12,154) $ (81,722) $ (16,123)

Net income (loss) $ 48,383 $ (12,154) $ (81,722)

net income attributable to noncontrolling interests in properties (257) (623) (514)

gain on sales of operating properties, net (22,601) (27,069) (31,209)

impairment charges 477 — —

depreciation and amortization of consolidated and

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$ 446,890 $ 425,845 $ 86,444

FFO per share of the Operating Partnership – diluted $ 2.03 $ 1.94 $ 0.78

FFO of the Operating Partnership (1)

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merger and acquisition costs — 925 86,522

severance charges — — 3,253

prior period collection impact — (2,556) (3,707)

FFO, as adjusted, of the Operating Partnership $ 453,337 $ 429,609 $ 171,204

FFO, as adjusted, per share of the Operating Partnership – diluted $ 2.03 $ 1.93 $ 1.50

(1) “FFO of the Operating Partnership” measures 100% of the operating performance of the Operating Partnership’s real estate properties.

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We define EBITDA, a non-GAAP financial measure, as net income before interest expense, income tax expense of the TRS, 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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December 31, 2023

Net loss $ (1,052)

Net income $ 8,164

Depreciation and amortization 102,898

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EBITDA 138,746

Unconsolidated EBITDA 957

Merger and acquisition costs (81)

Loss on sales of operating properties, net 57

Unconsolidated Adjusted EBITDA 828

Gain on sales of operating properties, net (133)

Other income and expense, net (540)

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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 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.

We continued to improve the strength of our balance sheet in 2022.

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

In July 2022, we amended our revolving credit facility to increase the capacity of the unsecured revolving credit facility to $1.1 billion (as amended, the “2022 Revolving Facility”), of which the available borrowing capacity was $1.1 billion as of December 31, 2022, and entered into a seven-year $300.0 million unsecured term loan that was used to retire 2022 and 2023 debt maturities.

As of December 31, 2022, we had approximately $115.8 million in cash on hand, $6.2 million in restricted cash and escrow deposits, $1.1 billion of remaining availability under the 2022 Revolving Facility, and $284.4 million of debt maturities due in 2023.

During the year ended December 31, 2022, we used the $125.0 million short-term deposit that matured on April 7, 2022 to repay borrowings on our revolving line of credit.

We 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 continuously 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 December 31, 2023, we had approximately $36.4 million in cash and cash equivalents on hand, $5.0 million in restricted cash and escrow deposits, $1.1 billion of remaining availability under the Revolving Facility, and $269.6 million of debt maturities due in 2024.

During the year ended December 31, 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.

In January 2024, we issued $350.0 million aggregate principal amount of 5.50% senior unsecured notes due 2034, which we expect will be used to satisfy all 2024 debt maturities.

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 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.

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

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, as amended, 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 entered into 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.

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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 December 31, 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.

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.

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.

As of December 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 or preferred shares or other securities.

We may also raise capital by disposing of properties, land parcels or other assets that are no longer core components of our growth strategy.

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Near-Term Debt Maturities .

As of December 31, 2022, we had $189.4 million of secured debt, excluding scheduled monthly principal payments, and $95.0 million of unsecured debt scheduled to mature in 2023.

We believe we have sufficient liquidity to repay these obligations from cash on hand and borrowings on the 2022 Revolving Facility.

As of December 31, 2023, we had no secured debt, excluding scheduled monthly principal payments, and $269.6 million of unsecured debt scheduled to mature in 2024.

We believe we have sufficient liquidity to repay these obligations with proceeds from the Notes Due 2034, available cash on hand, and borrowings on the Revolving Facility.

Other Short-Term Liquidity Needs.

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Such requirements cause us to have substantial liquidity needs over both the short and long term.

Our short-term liquidity needs consist primarily of funds necessary to pay operating expenses associated with our operating properties, scheduled interest and principal payments on our debt of approximately $120 million and $3.0 million, respectively, in 2023, expected dividend payments to our common shareholders and Common Unit holders, and recurring capital expenditures.

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, which is expected to be paid on April 14, 2023 to common shareholders and Common Unit holders of record as of April 7, 2023.

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 $125 million and $5.1 million, respectively, in 2024, expected dividend payments to our common shareholders and common unitholders, and recurring capital expenditures.

In February 2024, our Board of Trustees declared a cash distribution of $0.25 per common share and Common Unit for the first quarter of 2024, which is expected to be paid on April 12, 2024 to common shareholders and common unitholders of record as of April 5, 2024.

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 2022 Revolving Facility.

We believe we have sufficient liquidity to pay any dividend from available 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.

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We believe we have the ability to fund these costs through cash flows from operations or borrowings on the Revolving Facility.

During the year ended December 31, 2022, we completed major redevelopment construction activities at Eddy Street Commons – Phase III, Shoppes at Quarterfield, the residential and commercial portions of the project at One Loudoun Downtown and Circle East and placed these projects in service.

As of December 31, 2022, we had three development projects under construction.

Our share of total estimated costs for the three projects is $102.8 million, of which our share of the

remaining expected funding requirement is estimated to be $70.9 million.

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 part of its bankruptcy process, three of Bed Bath & Beyond’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 year ended December 31, 2023, we completed major development 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 December 31, 2023, we had development projects under construction at Carillon medical office building and The Corner – IN.

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

As of December 31, 2023, we have incurred $29.6 million of these costs.

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Share Repurchase Program

In February 2021, our 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 in February 2023, extended the program for another year so it will now terminate on February 28, 2024, if not terminated or extended prior to that date.

In April 2022, our 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 December 31, 2022, the Company has not repurchased any shares under the Share Repurchase Program.

In February 2021, our Board of Trustees approved a share repurchase program under which the Company may repurchase, from time to time, up to an aggregate of $150.0 million of its common shares.

In April 2022, our 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 of its common shares (the “Share Repurchase Program”).

The Company intends to fund any future repurchases under the Share Purchase 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 2024, the Company extended the Share Repurchase Program for an additional year to February 28, 2025, if not terminated or extended prior to that date.

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

Long-Term Liquidity Needs

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It is unlikely that we would have sufficient funds on hand to meet these long-term capital requirements;

We would have to satisfy these needs through additional borrowings, sales of common or preferred shares, issuance of Operating Partnership units, cash generated through property dispositions and/or participation in joint venture arrangements.

therefore, we would have to satisfy these needs through additional borrowings, sales of common or preferred shares, issuance of Operating Partnership units, cash generated through property dispositions and/or participation in joint venture arrangements.

We cannot be certain that we would have access to these sources of capital on satisfactory terms, if at all, to fund our long-term liquidity requirements.

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Potential Debt Repurchases.

We may from time to time, depending on market conditions and prices, contractual restrictions, our financial liquidity and other factors, seek to repurchase our senior unsecured notes maturing at various dates through September 2030 in open market transactions, by tender offer or otherwise, as market conditions warrant.

We may from time to time, depending on market conditions and prices, contractual restrictions, our financial liquidity and other factors, seek to repurchase our senior unsecured notes maturing at various dates through March 2034 in open market transactions, by tender offer or otherwise, as market conditions warrant.

Commitments under Ground Leases.

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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.

Assuming we exercise all available options to extend the terms of our ground leases, our ground leases will expire between 2043 and 2115.

Capital Expenditures on Consolidated Properties

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Active development and redevelopment projects $ 28,083

Redevelopment opportunities 363

Recurring operating capital expenditures (primarily tenant improvements) and other 114,495

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These ratings did not change in 2023.

We received a positive credit rating outlook from one of the rating agencies in 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.

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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 the Federal Deposit Insurance Corporation (“FDIC”) and the Securities Investor Protection Corporation (“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.

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

Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022

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Net cash used in investing activities (81,731) (45,149) (36,582)

Net cash (used in) provided by financing activities (312,527) 44,459 (356,986)

Increase in cash, cash equivalents and restricted cash 21,607 53,777 (32,170)

Net cash used in financing activities (393,457) (312,527) (80,930)

(Decrease) increase in cash, cash equivalents and restricted cash (80,540) 21,607 (102,147)

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

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Cash provided by operating activities was $394.6 million for the year ended December 31, 2023 and $379.3 million for the same period of 2022.

The cash flows were positively impacted by the Merger, which generated significant incremental operating income due to the increased scale of the Company.

This improvement was partially offset by higher general and administrative expenses due to increased head count and higher interest costs related to the debt assumed in the Merger.

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

Cash used in investing activities was $81.7 million for the year ended December 31, 2023 and $45.1 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 in April 2022;

• We acquired Pebble Marketplace, the two-tenant building adjacent to MacArthur Crossing and Palms Plaza in 2022 for $100.1 million compared to the acquisition of a multi-tenant retail outparcel at Nora Plaza in 2021 and acquisition deposits for $10.4 million;

• We received net proceeds of $80.4 million from the sale of Plaza Del Lago, a portion of Hamilton Crossing Centre and other land parcels in 2022 compared to net proceeds of $80.7 million from the sale of Westside Market, 17 ground leases and other land parcels in 2021;

• Capital expenditures increased by $101.2 million driven by the construction activity at our development projects and anchor leasing activity, partially offset by a change in construction payables of $6.3 million in 2022.

Cash used in financing activities was $312.5 million for the year ended December 31, 2022 compared to cash provided by financing activities of $44.5 million for the same period of 2021.

• We received net proceeds of $140.9 million from the sale of Kingwood Commons, the undeveloped land and related parking garage at Pan Am Plaza, Reisterstown Road Plaza, Eastside, and other land parcels in 2023 compared to net proceeds of $80.4 million from the sale of Plaza Del Lago, a portion of Hamilton Crossing Centre and other land parcels in 2022;

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

• We received the proceeds from a $125.0 million short-term deposit that matured on April 7, 2022 during the year ended December 31, 2022;

• Capital expenditures decreased by $16.0 million primarily related to the timing of capital projects along with a change in construction payables of $2.1 million in 2023.

Cash used in financing activities was $393.5 million for the year ended December 31, 2023 and $312.5 million for the same period of 2022.

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

• We entered into a seven-year $300.0 million unsecured term loan and borrowed $155.0 million on our unsecured revolving line of credit in 2022;

• In 2022, we repaid (i) a $200.0 million unsecured term loan that was scheduled to mature in 2023, (ii) $210.0 million of borrowings on our unsecured revolving line of credit, with no amount outstanding as of December 31, 2022, and (iii) mortgages payable totaling $155.2 million along with $3.8 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 borrowed $274.0 million on the Revolving Facility and received proceeds of $95.1 million from the origination of a mortgage payable in 2023 compared to borrowings of $155.0 million on the Revolving Facility and entering into a seven-year $300.0 million unsecured term loan in 2022;

• We repaid (i) $274.0 million of borrowings on the Revolving Facility, (ii) $175.4 million of mortgages payable, and (iii) the $95.0 million principal balance of the 4.23% senior unsecured notes in 2023 compared to repayments of (i) $210.0 million of borrowings on the Revolving Facility, (ii) a $200.0 million unsecured term loan that was scheduled to mature in 2023, and (iii) $159.0 million of mortgages payable in 2022;

• We made distributions to common shareholders and holders of common partnership interests in the Operating Partnership of $213.5 million in 2023 compared to distributions of $182.2 million in 2022.

• In 2021, we issued $175.0 million of exchangeable senior notes in a private placement offering to proactively fund a portion of our 2022 debt maturities and other borrowings.

In connection with this issuance, we incurred transaction costs of $6.0 million and purchased capped calls for $9.8 million.

Management’s discussion of the cash flows for the year ended December 31, 2021, with comparison to the year ended December 31, 2022, was included in Item 7.

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As of December 31, 2023, the outstanding balance of the loans was $61.0 million, of which our share was $30.5 million.

Our share of estimated future costs for under construction and future developments and redevelopments is further discussed beginning on page 43 in the “Short- and Long-Term Liquidity Needs” section.

Our share of estimated future costs for under construction and future developments and redevelopments is further discussed beginning on page 44 in the “Short- and Long-Term Liquidity Needs” sections.

Outstanding Indebtedness

The following table provides details on our outstanding consolidated indebtedness as of December 31, 2022 and 2021, adjusted for hedges (in thousands) :

The following table provides details on our outstanding consolidated indebtedness as of December 31, 2023 and 2022 (in thousands) :

December 31, 2023 December 31, 2022

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Debt discounts, premiums and issuance costs, net 26,261 32,043

Total mortgage and other indebtedness, net $ 3,010,299 $ 3,150,808

Consolidated indebtedness, including weighted average interest rates and weighted average maturities as of December 31, 2022, is summarized below (dollars in thousands) :

Mortgage and other indebtedness, net $ 2,829,202 $ 3,010,299

Consolidated indebtedness, including weighted average interest rates and weighted average maturities as of December 31, 2023, considering the impact of interest rate swaps, is summarized below (dollars in thousands) :

Outstanding Ratio Weighted Average

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Debt discounts, premiums and issuance costs, net 26,261 N/A N/A N/A

Total $ 3,010,299 100 % 4.21 % 4.2

Mortgage and other indebtedness, net $ 2,829,202 100 % 4.30 % 3.6

(1) Fixed rate debt includes the portion of variable rate debt that has been hedged by interest rate swaps.

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As of December 31, 2023, $155.0 million in fixed rate debt is hedged to a floating rate for a weighted average of 1.7 years.

Mortgage indebtedness is collateralized by certain real estate properties and leases and is generally repaid in monthly installments of interest and principal with maturities over various terms through 2032.

The variable interest rate on mortgage indebtedness is based on the Bloomberg Short Term Bank Yield Index (“BSBY”) plus 160 basis points.

Mortgage indebtedness is collateralized by certain real estate properties and leases and is generally repaid in monthly installments of principal and interest with maturities over various terms through 2033.

The variable interest rate on mortgage indebtedness is based on the Bloomberg Short Term Bank Yield Index (“BSBY”) plus 215 basis points as of December 31, 2023.

As of December 31, 2023, the one-month BSBY interest rate was 5.44%.

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Actual results could differ from those estimates.

We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the compilation of our financial condition and results of operations and, in some cases, require management’s most difficult, subjective, and complex judgments.

Acquisition of Investment Properties

In accordance with ASC 805, Business Combinations , we accounted for the October 2021 Merger with RPAI as a business combination using the acquisition method of accounting, which requires the application of a screen test to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets to determine whether a transaction is accounted for as an asset acquisition or business combination.

Upon acquisition of real estate operating properties, including those assets acquired in the Merger with RPAI, we estimate the fair value of acquired identifiable tangible assets and identified intangible assets and liabilities, assumed debt, and any noncontrolling interest in the acquiree at the date of acquisition, based on evaluation of information and estimates available at that date.

Real estate assets are recognized on our consolidated balance sheets at historical cost, less accumulated depreciation and amortization.

Upon acquisition of real estate operating properties, we estimate the fair value of acquired identifiable tangible assets (consisting of land, buildings and improvements) and identified intangible assets and liabilities (consisting of above-market and below-market leases and in-place leases), assumed debt, and any noncontrolling interest in the acquiree at the date of acquisition based on an evaluation of information and estimates available at the acquisition date.

Based on these estimates, we record the estimated fair value to the applicable assets and liabilities.

estimates of fair value, a number of sources are used, including information obtained as a result of pre-acquisition due diligence, marketing and leasing activities.

In making estimates of fair value, a number of sources are used, including information obtained as a result of pre-acquisition due diligence, marketing and leasing activities.

The estimates of fair value were determined to have primarily relied upon Level 2 and Level 3 inputs, as defined below.

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Any below-market renewal options are also considered in the in-place lease values.

The capitalized above-market and below-market lease values are amortized as a reduction of or addition to rental income over the term of the lease.

Should a tenant vacate, terminate its lease, or otherwise notify us of its intent to do so, the unamortized portion of the lease intangibles would be charged or credited to income;

The capitalized above-market and below-market lease values are amortized as a reduction of, or addition to, rental income over the term of the leases.

Should a tenant vacate, terminate its lease, or otherwise notify us of its intent to do so, the unamortized portion of the lease intangibles would be charged or credited to income as applicable;

• the value of having a lease in place at the acquisition date.

We use independent and internal sources for our estimates to determine the respective in-place lease values.

Our estimates of value are made using methods similar to those used by independent appraisers.

Factors we consider in our analysis include an estimate of costs to execute similar leases, including tenant improvements, leasing commissions and foregone costs and rent received during the estimated lease-up period as if the space was vacant.

The value of in-place leases is amortized to expense over the remaining initial terms of the respective leases;

Our estimates of value use methods similar to those used by independent appraisers.

Factors we consider in our analysis include an estimate of costs to execute similar leases, including tenant improvements, leasing commissions and foregone costs related to the reimbursement of property operating expenses, and fair market rent received during the estimated lease-up period as if the space was vacant.

The value of in-place leases is amortized to depreciation and amortization expense over the remaining initial terms of the respective leases;

• the fair value of any assumed financing that is determined to be above- or below-market terms.

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Characteristics we consider in determining these values include the nature and extent of existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality, and expectations of lease renewals, among other factors.

To date, no tenant relationship has been developed that is considered to have a current intangible value.

To date, we have not developed a tenant relationship that we consider to have a current intangible value.

Valuation of Investment Properties

Management reviews operational and development projects, land parcels and intangible assets for impairment on a property-by-property basis whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.

Management reviews our operating and development projects, land parcels and intangible assets for impairment on a property-by-property basis whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.

This review for possible impairment requires certain assumptions, estimates, and significant judgment.

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• a reduction in the anticipated holding period;

• a cost accumulation or delay in project completion date significantly above and beyond the original development or redevelopment estimate;

• a cost accumulation or delay in the project completion date significantly above and beyond the original development or redevelopment estimate;

• a significant decrease in the market price not in line with general market trends;

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Impairment losses for investment properties and intangible assets are measured when the undiscounted cash flows estimated to be generated by the investment properties during the expected holding period are less than the carrying amounts of those assets.

The evaluation of impairment is subject to certain management assumptions, including projected net operating income, anticipated hold period, expected capital expenditures and the capitalization rate used to estimate the property’s residual value.

The evaluation of impairment is subject to certain management assumptions, including projected net operating income, anticipated holding period, expected capital expenditures and the capitalization rate used to estimate the property’s residual value.

Impairment losses are recorded as the excess of the carrying value over the estimated fair value of the asset.

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Depreciation may be accelerated for a redevelopment project, including partial demolition of existing structures, after the asset is assessed for impairment.

Operating properties will be classified as held for sale only when those properties are available for immediate sale in their present condition and for which management believes it is probable that a sale of the property will be completed within one year, among other factors.

Operating properties classified as held for sale are carried at the lower of cost or fair value less estimated costs to sell.

The Company classifies an operating property as held for sale only when the property is available for immediate sale in its present condition and for which management believes it is probable that a sale of the property will be completed within one year, among other factors.

An operating property classified as held for sale is carried at the lower of cost or fair value less estimated costs to sell.

Depreciation and amortization are suspended during the held-for-sale period.

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Base minimum rents are recognized on a straight-line basis over the terms of the respective leases.

Certain lease agreements contain provisions that grant additional rents based on a tenant’s sales volume (contingent overage rent).

Certain lease agreements contain provisions that provide for additional rents based on a tenant’s sales volume (contingent overage rent).

Overage rent is recognized when tenants achieve the specified sales targets as defined in their lease agreements.

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If we determine that collectibility is not probable, we recognize income only to the extent that cash has been received from the tenant.

We have accounts receivable due from tenants and are subject to the risk of tenant defaults and bankruptcies that may affect the collection of outstanding receivables.

We have accounts receivable due from tenants and are subject to the risk of tenant defaults and bankruptcies, which may affect the collection of outstanding receivables.

These receivables are reduced for credit loss, which is recognized as a reduction to rental income.

We regularly evaluate the collectibility of these lease-related receivables by analyzing past due account balances and consider such facts as the credit quality of our customer, historical write-off experience, tenant credit-worthiness and current economic trends when evaluating the collectibility of rental income.

We regularly evaluate the collectibility of these lease-related receivables by analyzing past due account balances and consider such factors as the credit quality of the tenant, historical write-off experience, tenant creditworthiness and current economic trends when evaluating the collectibility of rental income.

Although we estimate uncollectible receivables and provide for them through charges against income, actual experience may differ from those estimates.

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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-K

Item 7. Management’s Discussion and Analysis