What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-08-13 compared with 2020-05-12 · 197 added, 143 removed, 403 unchanged (46% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2020 AND DECEMBER 31, 2019

AS OF JUNE 30, 2020 AND DECEMBER 31, 2019

(Condensed and Unaudited)

(In thousands, except per share amounts)

March 31, 2020

June 30, 2020

December 31, 2019

17 unchanged sentences

Earn-out liability

Derivative liability

Derivative liabilities

Deferred income

3 unchanged sentences

Preferred stock, $0.01 par value per share, 10,000 shares authorized, zero shares issued and

outstanding at March 31, 2020 and December 31, 2019

outstanding at June 30, 2020 and December 31, 2019

Common stock, $0.01 par value per share, 1,000,000 shares authorized, 290,465 and 289,047

shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively

Additional paid-in capital

shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively

Additional paid-in capital (“APIC”)

Accumulated other comprehensive loss (“AOCI”)

6 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

(Condensed and Unaudited)

(In thousands, except per share amounts)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Rental income

11 unchanged sentences

(Loss) gain on disposal of property, net

Other income, net

Net income (loss)

Net (income) loss attributable to noncontrolling interests

Net income (loss) attributable to stockholders

Other (expense) income, net

Net (loss) income

Net loss (income) attributable to noncontrolling interests

Net (loss) income attributable to stockholders

Earnings per common share:

Net income (loss) per share attributable to stockholders - basic and diluted (See Note 10)

Net (loss) income per share attributable to stockholders - basic and diluted (Note 10)

Comprehensive loss

Net income (loss)

Net (loss) income

Other comprehensive loss:

1 unchanged sentence

Comprehensive loss

Net (income) loss attributable to noncontrolling interests

Net loss (income) attributable to noncontrolling interests

Other comprehensive loss attributable to noncontrolling interests

3 unchanged sentences

CONSOLIDATED STATEMENTS OF EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

(Condensed and Unaudited)

(In thousands, except per share amounts)

Additional Paid-In Capital

Three Months Ended June 30, 2020 and 2019

Accumulated Deficit

1 unchanged sentence

Noncontrolling Interests

Balance at January 1, 2019

Balance at April 1, 2019

Dividend reinvestment plan (“DRIP”)

5 unchanged sentences

Conversion of noncontrolling interests

Balance at March 31, 2019

Balance at June 30, 2019

Balance at April 1, 2020

Change in unrealized value on interest

Share-based compensation

Conversion of noncontrolling interests

Balance at June 30, 2020

Six Months Ended June 30, 2020 and 2019

Accumulated Deficit

Total Stockholders’ Equity

Noncontrolling Interests

Balance at January 1, 2019

5 unchanged sentences

Conversion of noncontrolling interests

Balance at March 31, 2020

Balance at June 30, 2019

Balance at January 1, 2020

Share repurchases

Change in unrealized value on interest

Common distributions declared, $0.17

Distributions to noncontrolling interests

Share-based compensation

Conversion of noncontrolling interests

Balance at June 30, 2020

See notes to consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

(Condensed and Unaudited)

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

11 unchanged sentences

Share-based compensation

Other impairment charges

Changes in operating assets and liabilities:

7 unchanged sentences

Return of investment in unconsolidated joint ventures

Net cash (used in) provided by investing activities

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Net change in credit facility

Proceeds from mortgages and loans payable

Payments on mortgages and loans payable

3 unchanged sentences

Net cash used in financing activities

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH:

7 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

(Condensed and Unaudited)

(In thousands)

17 unchanged sentences

In addition to managing our own shopping centers, our third-party investment management business provides comprehensive real estate and asset management services to three institutional joint ventures, in which we have a partial ownership interest, and one private fund (collectively, the “Managed Funds”).

As of March 31, 2020 , we wholly-owned 285 real estate properties.

As of June 30, 2020 , we wholly-owned 284 real estate properties.

Additionally, we owned a 20% equity interest in Necessity Retail Partners (“NRP”), a joint venture that owned seven properties;

8 unchanged sentences

Because of the adverse economic conditions that exist as a result of the impacts of the COVID-19 pandemic, it is possible that the estimates and assumptions that have been utilized in the preparation of the consolidated financial statements could change significantly.

Specifically as it relates to our business, the current economic situation has resulted in temporary tenant closures at our shopping centers, often as a result of “stay-at-home” government mandates which limit travel and movement of the general public to essential activities only and require all non-essential businesses to close.

These mandates could result in increased permanent retail store closings nationally if the duration of the closures is prolonged.

This could reduce the demand for leasing space in our shopping centers and result in a decline in occupancy and rental revenues in our real estate portfolio.

Specifically as it relates to our business, the current economic situation resulted in temporary tenant closures at our shopping centers, often as a result of “stay-at-home” government mandates which limited travel and movement of the general public to essential activities only and required all non-essential businesses to close.

Temporary closures of tenant spaces at our centers peaked in April and have significantly decreased as states have reduced or removed restrictions on business operations and the travel and movement of the general public.

Certain tenants remain temporarily closed, have since closed after reopening, are limiting the number of customers allowed in their locations, or have modified their operations in other ways that may impact their profitability, either as a result of government mandates or self-elected efforts to reduce the spread of COVID-19.

Some states and localities have temporarily reinstated certain mandates in response to increasing reported cases of COVID-19.

These actions could result in increased permanent store closings and could reduce the demand for leasing space in our shopping centers and result in a decline in occupancy and rental revenues in our real estate portfolio.

All of this activity impacts our estimates around the collectability of revenue and valuation of real estate assets, goodwill and other intangible assets, and certain liabilities, among others.

There were no changes to our significant accounting policies during the three months ended March 31, 2020 .

There were no changes to our significant accounting policies during the six months ended June 30, 2020 .

For a full summary of our accounting policies, refer to our 2019 Annual Report on Form 10-K filed with the SEC on March 11, 2020.

3 unchanged sentences

In the opinion of management, all normal and recurring adjustments necessary for the fair presentation of the unaudited consolidated financial statements for the periods presented have been included in this Quarterly Report.

Our results of operations for the three months ended March 31, 2020 are not necessarily indicative of the operating results expected for the full year.

Our results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the operating results expected for the full year.

The accompanying consolidated financial statements include our accounts and those of our majority-owned subsidiaries.

All intercompany balances and transactions are eliminated upon consolidation.

Income Taxes —Our consolidated financial statements include the operations of wholly owned subsidiaries that have jointly elected to be treated as Taxable REIT Subsidiaries (“TRS”) and are subject to U.S.

Leases —Lease receivables are reviewed continually to determine whether or not it is probable that we will realize all amounts owed to us for each of our tenants (i.e., whether a tenant is deemed to be a credit risk).

If we determine that the tenant is not a credit risk, no reserve or reduction of revenue is recorded, except in the case of disputed charges.

If we determine that the

tenant is a credit risk, revenue for that tenant is recorded on a cash basis, including any amounts relating to straight-line rent receivables and/or receivables for recoverable expenses.

The COVID-19 pandemic has increased the uncertainty of collecting rents from a number of our tenants.

For the three and six months ended June 30, 2020 , we had $12.0 million and $14.8 million , respectively, in revenue that will not be recognized until cash is collected or the tenant resumes payment and is considered creditworthy.

In our efforts to maximize collections in the near term while also supporting our tenants as they operate through this pandemic, we have begun negotiating rent relief primarily in the form of payment plans and deferrals on rent and recovery charges, which allow for changes in the timing of payments, but not the total amount of consideration due to us under the lease.

In a limited number of instances, we may also agree to waive certain charges due to us under the lease.

During the three months ended June 30, 2020 , our negotiated rent relief was minimal.

Income Taxes —Our consolidated financial statements include the operations of wholly owned subsidiaries that have jointly elected to be treated as Taxable REIT Subsidiaries and are subject to U.S.

federal, state, and local income taxes at regular corporate tax rates.

During the three months ended March 31, 2020 , an immaterial amount of federal income tax benefit was reported, and we recorded a full valuation allowance for our net deferred tax asset.

We recorded no income tax expense or benefit for the three months ended March 31, 2019 .

We recognized an immaterial amount of state and local income tax expense for the three months ended March 31, 2020 and 2019 , which is included in Other Income, Net on the consolidated statements of operations and comprehensive loss (“consolidated statements of operations”).

Recently Issued and Newly Adopted Accounting Pronouncements —The following table provides a brief description of newly adopted accounting pronouncements and their effect on our consolidated financial statements:

During the three and six months ended June 30, 2020 , an insignificant amount of federal income tax benefit was reported, and we recorded a full valuation allowance for our net deferred tax asset.

We recorded no income tax expense or benefit for the three and six months ended June 30, 2019 .

We recognized an insignificant amount of state and local income tax expense for the three and six months ended June 30, 2020 and 2019 .

All income tax amounts are included in Other (Expense) Income, Net on the consolidated statements of operations and comprehensive loss (“consolidated statements of operations”).

Recently Issued and Newly Adopted Accounting Pronouncements — In response to the COVID-19 pandemic, the Financial Accounting Standards Board (“FASB”) issued interpretive guidance addressing the accounting treatment for lease concessions attributable to the pandemic.

Under this guidance, entities may elect to account for such lease concessions consistent with how they would be accounted for under ASC Topic 842, Leases, (“ASC 842”) if the enforceable rights and obligations for the lease concessions already existed within the lease agreement, regardless of whether such enforceable rights and obligations are explicitly outlined within the lease.

This accounting treatment may only be applied if (1) the lease concessions were granted as a direct result of the pandemic, and (2) the total cash flows under the modified lease are less than or substantially the same as the cash flows under the original lease agreement.

As a result, entities that make this election will not have to analyze each lease to determine whether enforceable rights and obligations for concessions exist within the contract, and may elect not to account for these concessions as lease modifications within the scope of ASC 842.

Some concessions will provide a deferral of payments, which may affect the timing of cash receipts without substantively impacting the total consideration per the original lease agreement.

The FASB has stated that there are multiple acceptable methods to account for deferrals under the interpretive guidance:

Account for the concession as if no changes to the lease contract were made, increasing the lease receivable as payments accrue and continuing to recognize income;

Account for deferred lease payments as variable lease payments.

We have elected not to account for any qualifying lease concessions granted as a result of the COVID-19 pandemic as lease modifications and will account for any qualifying concessions granted as if no changes to the lease contract were made.

This will result in an increase to the related lease receivable as payments accrue while we continue to recognize rental income.

We will, however, assess the impact of any such concessions on estimated collectability of the related lease payments and will reflect any adjustments as necessary as an offset to Rental Income on the consolidated statements of operations.

The following table provides a brief description of newly adopted accounting pronouncements and their effect on our consolidated financial statements:

Date of Adoption

36 unchanged sentences

We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

In response to the COVID-19 pandemic, the FASB issued interpretive guidance addressing the accounting treatment of lease concessions stemming from the pandemic.

Under this guidance, entities may make an election to account for lease concessions granted in conjunction with the pandemic consistent with how those concessions would be accounted for under ASC Topic 842, Leases (“ASC 842”) if those enforceable rights and obligations for those concessions already existed within the lease agreement.

This accounting treatment may be applied regardless of whether enforceable rights and obligations for those concessions are explicitly outlined within the lease.

We will continue to assess the potential impact of this accounting treatment.

As of May 11, 2020 , we had not yet made any such concessions.

Reclassifications —The following line item on our consolidated balance sheets as of December 31, 2019 was reclassified to conform to current year presentation:

Reclassifications —The following line item on our consolidated balance sheet as of December 31, 2019 was reclassified to conform to current year presentation:

Corporate Intangible Assets, Net was included in Other Assets, Net.

The following line items on our consolidated statements of cash flows for the three months ended March 31, 2019 were reclassified to conform to current year presentation:

The following line items on our consolidated statement of cash flows for the six months ended June 30, 2019 were reclassified to conform to current year presentation:

Amortization of Debt and Derivative Adjustments was listed on a separate line from Other Cash Flows from Operating Activities;

Equity in Net Loss of Unconsolidated Joint Ventures was combined with Other Cash Flows from Operating Activities.

Equity in Net Loss of Unconsolidated Joint Ventures was included in Other Cash Flows from Operating Activities.

Lessor —The majority of our leases are largely similar in that the leased asset is retail space within our properties, and the lease agreements generally contain similar provisions and features, without substantial variations.

All of our leases are currently classified as operating leases.

Lease income related to our operating leases was as follows for the three months ended March 31, 2020 and 2019 (dollars in thousands):

March 31, 2020

March 31, 2019

Lease income related to our operating leases was as follows for the three and six months ended June 30, 2020 and 2019 (dollars in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Rental income related to fixed lease payments

Rental income related to variable lease payments

Amortization of lease assets

Lease buyout income

Adjustments for collectability (1)

Total rental income

Amounts consist of amortization of above- and below-market lease intangibles, lease inducements, revenue adjustments related to changes in collectability, settlement income, and lease buyout income.

Approximate future fixed contractual lease payments to be received under non-cancelable operating leases in effect as of March 31, 2020 , assuming no new or renegotiated leases or option extensions on lease agreements, are as follows (in thousands):

Contains general reserves as well as revenue adjustments for tenants deemed to be non-creditworthy.

Approximate future fixed contractual lease payments to be received under non-cancelable operating leases in effect as of June 30, 2020 , assuming no new or renegotiated leases or option extensions on lease agreements, are as follows (in thousands):

Remaining 2020

No single tenant comprised 10% or more of our aggregate annualized base rent (“ABR”) as of March 31, 2020 .

As of March 31, 2020 , our real estate investments in Florida and California represented 12.3% and 10.5% of our ABR, respectively.

As of June 30, 2020 , executed payment plans and rent concessions related to the COVID-19 pandemic were not material.

No single tenant comprised 10% or more of our aggregate annualized base rent (“ABR”) as of June 30, 2020 .

As of June 30, 2020 , our real estate investments in Florida and California represented 12.3% and 10.6% of our ABR, respectively.

As a result, the geographic concentration of our portfolio makes it particularly susceptible to adverse weather or economic events, including the impact of the COVID-19 pandemic, in the Florida and California real estate markets.

As of May 11, 2020, there were approximately 210 and 170 tenant spaces temporarily closed as a result of the COVID-19 pandemic in Florida and California, respectively.

States have issued “stay-at-home” orders that have resulted in temporary business closures but have exempted businesses providing essential goods and services from these mandatory closures.

While the definition of what constitutes an essential business and related guidelines vary between different states and municipalities, as it pertains to our portfolio, we believe this generally includes grocers and supermarkets, healthcare providers and pharmacies, banks, gas stations, automotive repair shops, pet stores, laundromats, and other businesses offering goods and services that would similarly be considered critical for a functional society and life-sustaining activities.

Even among those that are considered to be essential, many businesses have seen sharp decreases in foot traffic and customer patronage as a result of “stay-at-home” mandates and social distancing guidelines.

State mandates have continued to evolve from the initial closures in late March, with certain states implementing “stay-at-home” orders in April, and other states beginning to ease restrictions in late April and early May.

As of March 31, 2020 , we believe tenants comprising approximately 51% of our portfolio’s ABR are considered essential retail businesses and services.

In addition to these essential retail businesses and services, restaurants, comprising approximately 15% of our ABR, are also characterized as essential in many states and municipalities, and may remain open for takeout and delivery.

Lessee —Lease assets and liabilities, grouped by balance sheet line where they are recorded, consisted of the following as of March 31, 2020 and December 31, 2019 (in thousands):

Lessee —Lease assets and liabilities, grouped by balance sheet line where they are recorded, consisted of the following as of June 30, 2020 and December 31, 2019 (in thousands):

Balance Sheet Information

Balance Sheet Location

March 31, 2020

June 30, 2020

December 31, 2019

7 unchanged sentences

Debt Obligations, Net

During the three months ended March 31, 2020 , one of our acquisitions was land upon which one of our shopping centers is situated that was previously subject to a ground lease in which the lessor controlled an option requiring us to purchase the land subject to the lease.

During the six months ended June 30, 2020 , one of our acquisitions was land upon which one of our shopping centers is situated that was previously subject to a ground lease in which the lessor controlled an option requiring us to purchase the land subject to the lease.

Our valuation of the ROU asset and lease liability as of December 31, 2019 for this ground lease reflected the assumption that the lessor would exercise this option and that we would purchase the underlying land asset.

1 unchanged sentence

Property Sales —The following table summarizes our real estate disposition activity (dollars in thousands):

Three Months Ended March 31,

Six Months Ended June 30,

Number of properties sold (1)

Number of outparcels sold

Proceeds from sale of real estate

(Loss) gain on sale of properties, net (2)

We retained certain outparcels of land associated with one of our property dispositions during the three months ended March 31, 2020 , and as a result, this property is still included in our total property count.

We retained certain outparcels of land associated with one of our property dispositions during the six months ended June 30, 2020 , and as a result, this property is still included in our total property count.

The (loss) gain on sale of properties, net does not include miscellaneous write-off activity, which is also recorded in (Loss) Gain on Disposal of Property, Net on the consolidated statements of operations.

Impairment of Real Estate Assets —During the three months ended March 31, 2020 , we did not recognize any impairment charges.

During the three months ended March 31, 2019 , we recognized impairment charges totaling $13.7 million .

Subsequent to June 30, 2020 , we sold one property for $8.5 million .

Impairment of Real Estate Assets —During the three and six months ended June 30, 2020 , we did not recognize any impairment charges.

During the three and six months ended June 30, 2019 , we recognized impairment charges totaling $25.2 million and $38.9 million , respectively.

The impairments were associated with certain anticipated property dispositions where the net book value exceeded the estimated fair value.

Our estimated fair value was based upon the contracted price to sell or the marketed price for disposition, less estimated costs to sell.

We have applied reasonable estimates and judgments in determining the amount of impairment recognized.

Acquisitions —During the three months ended March 31, 2020 , we acquired two parcels of land for a total of $4.3 million , both of which are either underneath or adjacent to shopping centers that we own.

There were no acquisitions during the three months ended March 31, 2019 .

We applied reasonable estimates and judgments in determining the amount of impairment recognized.

Acquisitions —During the six months ended June 30, 2020 , we acquired two parcels of land for a total of $4.3 million , both of which are either underneath or adjacent to shopping centers that we own.

During the six months ended June 30, 2019 , we acquired one property and one outparcel for a total of $49.9 million .

For the six months ended June 30, 2020 , our acquisitions did not have any lease intangibles.

The fair value and weighted-average useful life at acquisition for lease intangibles acquired as part of acquisitions in the six months ended June 30, 2019 are as follows (dollars in thousands, weighted-average useful life in years):

Six Months Ended June 30, 2019

Weighted-Average Useful Life

In-place leases

Above-market leases

Below-market leases

OTHER ASSETS, NET

The following is a summary of Other Assets, Net outstanding as of March 31, 2020 and December 31, 2019 , excluding amounts related to assets classified as held for sale (in thousands):

March 31, 2020

The following is a summary of Other Assets, Net outstanding as of June 30, 2020 and December 31, 2019 , excluding amounts related to assets classified as held for sale (in thousands):

June 30, 2020

December 31, 2019

10 unchanged sentences

Deferred rent receivable, net

Derivative asset

Derivative assets

Prepaid expenses and other

Total other assets, net

Net of $6.2 million and $6.9 million of reserves for uncollectible amounts.

Net of $5.7 million and $6.9 million of general reserves for uncollectible amounts, excluding $19.4 million and $6.9 million in receivables that were removed for tenants considered to be non-creditworthy as of June 30, 2020 and December 31, 2019 , respectively.

DEBT OBLIGATIONS

The following is a summary of the outstanding principal balances and interest rates, which include the effect of derivative financial instruments, for our debt obligations as of March 31, 2020 and December 31, 2019 (dollars in thousands):

The following is a summary of the outstanding principal balances and interest rates, which include the effect of derivative financial instruments, for our debt obligations as of June 30, 2020 and December 31, 2019 (dollars in thousands):

Interest Rate (1)

March 31, 2020

June 30, 2020

December 31, 2019

8 unchanged sentences

Deferred financing expenses, net

Interest rates are as of March 31, 2020 .

The gross borrowings and payments under our revolving credit facility were $55.0 million and $21.0 million , respectively, during the three months ended March 31, 2020 .

The gross borrowings and payments under our revolving credit facility were $64.0 million and $86.0 million , respectively, during the three months ended March 31, 2019 .

Interest rates are as of June 30, 2020 .

We had $255.0 million of gross borrowings and payments under our revolving credit facility during the six months ended June 30, 2020 .

The gross borrowings and payments under our revolving credit facility were $105.6 million and $179.0 million , respectively, during the six months ended June 30, 2019 .

Our term loans carry an interest rate of LIBOR plus a spread.

While most of the rates are fixed through the use of swaps, there is still a portion of these loans that is not fixed through a swap, and thus is still indexed to LIBOR.

While a majority of the rates are fixed through the use of swaps, some of these rates are not fixed through a swap, and thus are still indexed to LIBOR.

In January 2020, we made the final $30 million payment on our term loan maturing in 2021.

Following this payment, the next term loan maturity is in April 2022.

In March 2020, we borrowed $34 million on our $500 million revolving credit facility in order to satisfy general operating needs.

In April 2020, we borrowed an additional $200 million on our revolving credit facility to meet our operating needs for a sustained period due to the COVID-19 pandemic.

As of May 11, 2020 , total availability on our revolving credit facility, net of any letters of credit, was $254.7 million .

Our debt is subject to certain covenants, and as of March 31, 2020 , we were in compliance with the restrictive covenants of our outstanding debt obligations.

The allocation of total debt between fixed-rate and variable-rate as well as between secured and unsecured, excluding market debt adjustments and deferred financing expenses, net, as of March 31, 2020 and December 31, 2019 , is summarized below (in thousands):

March 31, 2020

In April 2020, we borrowed $200 million on our revolving credit facility to meet our operating needs for a sustained period due to the COVID-19 pandemic.

In June 2020, we paid down the outstanding balance on our revolving credit facility.

Our debt is subject to certain covenants, and as of June 30, 2020 , we were in compliance with the restrictive covenants of our outstanding debt obligations.

The allocation of total debt between fixed-rate and variable-rate as well as between secured and unsecured, excluding market debt adjustments and deferred financing expenses, net, as of June 30, 2020 and December 31, 2019 , is summarized below (in thousands):

June 30, 2020

December 31, 2019

14 unchanged sentences

The changes in the fair value of derivatives designated, and that qualify, as cash flow hedges are recorded in AOCI and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

During the three months ended March 31, 2020 and 2019 , such derivatives were used to hedge the variable cash flows associated with certain variable-rate debt.

During the six months ended June 30, 2020 and 2019 , such derivatives were used to hedge the variable cash flows associated with certain variable-rate debt.

Amounts reported in AOCI related to these derivatives will be reclassified to Interest Expense, Net as interest payments are made on the variable-rate debt.

During the next twelve months, we estimate that an additional $19.7 million will be reclassified from AOCI as an increase to Interest Expense, Net.

The following is a summary of our interest rate swaps that were designated as cash flow hedges of interest rate risk as of March 31, 2020 and December 31, 2019 (notional amounts in thousands):

March 31, 2020

The following is a summary of our interest rate swaps that were designated as cash flow hedges of interest rate risk as of June 30, 2020 and December 31, 2019 (notional amounts in thousands):

June 30, 2020

December 31, 2019

2 unchanged sentences

The table below details the nature of the gain or loss recognized on interest rate derivatives designated as cash flow hedges in the consolidated statements of operations (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Amount of (loss) recognized in other comprehensive income on derivatives

1 unchanged sentence

Credit-risk-related Contingent Features —We have agreements with our derivative counterparties that contain provisions where, if we default, or are capable of being declared in default, on any of our indebtedness, we could also be declared to be in default on our derivative obligations.

As of March 31, 2020 , the fair value of our derivatives in a net liability position, which included accrued interest but excluded any adjustment for nonperformance risk related to these agreements, was approximately $62.8 million .

As of March 31, 2020 , we had not posted any collateral related to these agreements and were not in breach of any agreement provisions.

As of June 30, 2020 , the fair value of our derivatives in a net liability position, which included accrued interest but excluded any adjustment for nonperformance risk related to these agreements, was approximately $65.4 million .

As of June 30, 2020 , we had not posted any collateral related to these agreements and were not in breach of any agreement provisions.

If we had breached any of these provisions, we could have been required to settle our obligations under the agreements at their termination value of $65.4 million .

15 unchanged sentences

Premiums paid to Silver Rock may be adjusted based on these estimates, and such premiums may be reimbursed by tenants pursuant to specific lease terms.

As of March 31, 2020 , we had four cash collateralized letters of credit outstanding totaling approximately $9.7 million to provide security for our obligations under Silver Rock’s insurance and reinsurance contracts.

COVID-19 —As of March 31, 2020 , we were not aware of any significant liabilities or obligations to waive rent that we have incurred under force majeure or co-tenancy clauses in tenant leases.

As of June 30, 2020 , we had four cash collateralized letters of credit outstanding totaling approximately $8.0 million to provide security for our obligations under Silver Rock’s insurance and reinsurance contracts.

COVID-19 —As of June 30, 2020 , we were not aware of any significant liabilities or obligations to waive rent that we have incurred under force majeure or co-tenancy clauses in tenant leases.

General —The holders of common stock are entitled to one vote per share on all matters voted on by stockholders, including one vote per nominee in the election of our board of directors (“Board”).

4 unchanged sentences

Previously, our EVPS was $11.10 , based substantially on the estimated market value of our portfolio of real estate properties and our third-party investment management business as of March 31, 2019.

Shares of our common stock were issued under the DRIP, as discussed below, at the same price as the EVPS in effect at the time of issuance.

Dividend Reinvestment Plan —The DRIP allows stockholders to invest distributions in additional shares of our common stock, subject to certain limits.

2 unchanged sentences

federal income taxation laws, will incur a tax liability on an amount equal to the fair value on the relevant distribution date of the shares of our common stock purchased with reinvested distributions, even though such stockholders have elected not to receive the distributions in cash.

On March 27, 2020, the DRIP was temporarily suspended.

On March 27, 2020, the DRIP was temporarily suspended and remains suspended as of June 30, 2020 .

The March 2020 distribution was paid all in cash on April 1, 2020.

Distributions —On March 27, 2020, our Board temporarily suspended stockholder distributions, effective after the payment of the March 2020 dividend on April 1, 2020 as a result of the uncertainty surrounding the COVID-19 pandemic, including the impact that the pandemic and the measures taken by governmental agencies and tenants in response to the pandemic are expected to continue to have on our shopping centers and our financial condition, liquidity sources, and capital needs.

Distributions paid entirely in cash to stockholders and OP unit holders of record subsequent to March 31, 2020 were as follows (in thousands, except distribution rate):

Date of Record

Distribution Rate

Date Distribution Paid

Amount of Distribution Paid

Share Repurchase Program (“SRP”) —Our SRP provides an opportunity for stockholders to have shares of common stock repurchased, subject to certain restrictions and limitations.

Distributions —On March 27, 2020, our Board temporarily suspended stockholder distributions, effective after the payment of the March 2020 distribution on April 1, 2020, as a result of the uncertainty surrounding the COVID-19 pandemic, including the impact that the pandemic and the measures taken by governmental authorities and tenants in response to the pandemic are expected to continue to have on our shopping centers and our financial condition, liquidity sources, and capital needs.

Share Repurchase Program (“SRP”) —The SRP provides an opportunity for stockholders to have shares of common stock repurchased, subject to certain restrictions and limitations.

The Board reserves the right, in its sole discretion, at any time and from time to time, to reject any request for repurchase.

On August 7, 2019, the Board suspended the SRP with respect to standard repurchases.

Our SRP for death, qualifying disability, or determination of incompetence was temporarily suspended effective March 27, 2020.

The SRP for death, qualifying disability, or determination of incompetence was also suspended, effective March 27, 2020.

Both the SRP with respect to standard repurchases and the SRP for death, qualifying disability, or determination of incompetence remain suspended as of June 30, 2020 .

Convertible Noncontrolling Interests —Under the terms of the Fourth Amended and Restated Agreement of Limited Partnership (the “Partnership Agreement”), Operating Partnership unit (“OP unit”) holders may elect to exchange OP units.

The Operating Partnership controls the form of the redemption, and may elect to exchange OP units for shares of our common stock, provided that the OP units have been outstanding for at least one year, or for cash.

As the form of redemption for OP units is within our control, the OP units outstanding as of March 31, 2020 and December 31, 2019 are classified as Noncontrolling Interests within permanent equity on our consolidated balance sheets.

As the form of redemption for OP units is within our control, the OP units outstanding as of June 30, 2020 and December 31, 2019 are classified as Noncontrolling Interests within permanent equity on our consolidated balance sheets.

The distributions that have been paid on OP units are included in Distributions to Noncontrolling Interests on the consolidated statements of equity.

During the three months ended March 31, 2020 and 2019 , 0.1 million and 0.7 million OP units were converted into shares of our common stock at a 1:1 ratio, respectively.

There were approximately 42.7 million OP units outstanding as of March 31, 2020 and December 31, 2019 .

During the six months ended June 30, 2020 and 2019 , 0.2 million and 1.9 million OP units were converted into shares of our common stock at a 1:1 ratio, respectively.

There were approximately 42.7 million OP units outstanding as of June 30, 2020 and December 31, 2019 .

Additionally, certain of our outstanding time- and performance-based equity awards will result in the issuance of shares or OP units upon vesting in future periods.

1 unchanged sentence

We use the two-class method of computing earnings per share (“EPS”), which is an earnings allocation formula that determines EPS for common stock and any participating securities according to dividends declared (whether paid or unpaid).

Under the two-class method, basic EPS is computed by dividing Net Income (Loss) Attributable to Stockholders by the weighted-average number of shares of common stock outstanding for the period.

Under the two-class method, basic EPS is computed by dividing Net (Loss) Income Attributable to Stockholders by the weighted-average number of shares of common stock outstanding for the period.

Diluted EPS reflects the potential dilution that could occur from share equivalent activity.

3 unchanged sentences

The impact of outstanding OP units on basic and diluted EPS has been calculated using the two-class method whereby earnings are allocated to the OP units based on dividends declared and the OP units’ participation rights in undistributed earnings.

The effects of the two-class method on basic and diluted EPS were immaterial to the consolidated financial statements as of March 31, 2020 and 2019 .

The effects of the two-class method on basic and diluted EPS were immaterial to the consolidated financial statements as of June 30, 2020 and 2019 .

The following table provides a reconciliation of the numerator and denominator of the earnings per share calculations (in thousands, except per share amounts):

Three Months Ended March 31,

Net income (loss) attributable to stockholders - basic

Net income (loss) attributable to convertible OP units (1)

Net income (loss) - diluted

Three Months Ended June 30,

Six Months Ended June 30,

Net (loss) income attributable to stockholders - basic

Net (loss) income attributable to convertible OP units (1)

Net (loss) income - diluted

Weighted-average shares - basic

2 unchanged sentences

Earnings per common share:

Basic and diluted

Basic and diluted (loss) income per share

(1) OP units include units that are convertible into common stock or cash, at the Operating Partnership’s option.

The Operating Partnership income or loss attributable to these OP units, which is included as a component of Net (Income) Loss Attributable to Noncontrolling Interests on the consolidated statements of operations, has been added back in the numerator as these OP units were included in the denominator for all years presented.

Approximately 2.6 million unvested time- and performance-based stock awards were outstanding as of March 31, 2019 .

These securities were anti-dilutive for the three months ended March 31, 2019 , and, as a result, their impact was excluded from the weighted-average common shares used to calculate diluted EPS for that period.

The Operating Partnership income or loss attributable to these OP units, which is included as a component of Net Loss (Income) Attributable to Noncontrolling Interests on the consolidated statements of operations, has been added back in the numerator as these OP units were included in the denominator for all years presented.

Approximately 1.1 million time-based and 2.7 million performance-based unvested stock awards were outstanding as of June 30, 2020 .

Approximately 1.1 million time-based and 1.5 million performance-based unvested stock awards were outstanding as of June 30, 2019 .

These securities were anti-dilutive for the three months ended June 30, 2020 and the three

and six months ended June 30, 2019 .

As a result, their impact was excluded from the weighted-average common shares used to calculate diluted EPS for those periods.

REVENUE RECOGNITION AND RELATED PARTY TRANSACTIONS

1 unchanged sentence

The revenue includes the fees and reimbursements earned by us from the Managed Funds, and other revenues that are not in the scope of ASC Topic 606, Revenue from Contracts with Customers, but that are included in this table for the purpose of disclosing all related party revenues (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Recurring fees (1)

5 unchanged sentences

Insurance premium income from other parties includes amounts from third parties not affiliated with us.

Certain related party accounts receivable and organization and offering costs payable that were outstanding as of March 31, 2019 related to Phillips Edison Grocery Center REIT III, Inc.

(“REIT III”) and were settled when we merged with REIT III in October 2019.

During the six months ended June 30, 2019, we recognized a net charge of $1.9 million in Other Expense, Net on our consolidated statements of operations.

The charge was related to a reduction in our related party accounts receivable and organization and offering costs payable for amounts incurred in connection with the Phillips Edison Grocery Center REIT III, Inc.

(“REIT III”) public offering.

Remaining accounts receivable and organization and offering costs payable that were outstanding as of June 30, 2019 related to REIT III were settled when we merged with REIT III in October 2019.

Other Related Party Matters —We are the limited guarantor for up to $190 million , capped at $50 million in most instances, of debt for our NRP joint venture.

2 unchanged sentences

We are also party to a separate agreement with our joint venture partner in which any potential liability under our guaranty for GRP I will be apportioned between us and our joint venture partner based on our respective ownership percentages in GRP I.

We have no liability recorded on our consolidated balance sheets for either guaranty as of March 31, 2020 and December 31, 2019 .

We have no liability recorded on our consolidated balance sheets for either guaranty as of June 30, 2020 and December 31, 2019 .

FAIR VALUE MEASUREMENTS

5 unchanged sentences

We have utilized market information, as available, or present value techniques to estimate the amounts required to be disclosed.

The following is a summary of borrowings as of March 31, 2020 and December 31, 2019 (in thousands):

March 31, 2020

The following is a summary of borrowings as of June 30, 2020 and December 31, 2019 (in thousands):

June 30, 2020

December 31, 2019

1 unchanged sentence

Recorded Principal Balance (1)

Revolving credit facility

Secured portfolio loan facilities

Mortgages (2)

Recorded principal balances include net deferred financing expenses of $16.3 million and $17.2 million as of March 31, 2020 and December 31, 2019 , respectively.

Recorded principal balances also include assumed market debt adjustments of $1.3 million and $1.2 million as of March 31, 2020 and December 31, 2019 , respectively.

Recorded principal balances include net deferred financing expenses of $15.4 million and $17.2 million as of June 30, 2020 and December 31, 2019 , respectively.

Recorded principal balances also include assumed market debt adjustments of $1.4 million and $1.2 million as of June 30, 2020 and December 31, 2019 , respectively.

There are deferred financing expenses related to our revolving credit facility that are in an asset position and thus are not included in these balances.

1 unchanged sentence

Recurring and Nonrecurring Fair Value Measurements —Our earn-out liability and interest rate swaps are measured and recognized at fair value on a recurring basis, while certain real estate assets and liabilities are measured and recognized at fair value as needed.

Fair value measurements that occurred as of and during the three months ended March 31, 2020 and the year ended December 31, 2019 , were as follows (in thousands):

March 31, 2020

Fair value measurements that occurred as of and during the six months ended June 30, 2020 and the year ended December 31, 2019 , were as follows (in thousands):

June 30, 2020

December 31, 2019

Derivative assets (1)

Derivative liability (1)

Derivative liabilities (1)

Earn-out liability

1 unchanged sentence

Impaired corporate intangible asset, net (3)

We record derivative assets in Other Assets, Net and derivative liabilities in Derivative Liability on our consolidated balance sheets.

We record derivative assets in Other Assets, Net and derivative liabilities in Derivative Liabilities on our consolidated balance sheets.

The carrying value of impaired real estate assets may have subsequently increased or decreased after the measurement date due to capital improvements, depreciation, or sale.

The carrying value of our impaired corporate intangible asset, net, which consists of in-place management contracts, subsequently decreased after the measurement date due to amortization as well as through derecognition as part of the merger with REIT III.

Derivative Instruments— As of March 31, 2020 and December 31, 2019 , we had interest rate swaps that fixed LIBOR on portions of our unsecured term loan facilities.

Derivative Instruments— As of June 30, 2020 and December 31, 2019 , we had interest rate swaps that fixed LIBOR on portions of our unsecured term loan facilities.

All interest rate swap agreements are measured at fair value on a recurring basis.

6 unchanged sentences

Although we determined that the significant inputs used to value our derivatives fell within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our counterparties and our own credit risk utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counterparties.

However, as of March 31, 2020 and December 31, 2019 , we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives.

However, as of June 30, 2020 and December 31, 2019 , we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives.

As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

2 unchanged sentences

We estimate the fair value of this liability on a quarterly basis using the Monte Carlo method.

This method requires us to make assumptions about future dividend yields, volatility, and timing and pricing of liquidity events, which are unobservable and are considered Level 3 inputs in the fair value hierarchy.

This method requires us to make assumptions about future dividend yields, volatility, and timing and pricing of liquidity events, which are unobservable and are

considered Level 3 inputs in the fair value hierarchy.

A change in these inputs to a different amount might result in a significantly higher or lower fair value measurement at the reporting date.

In calculating the fair value of this liability, we have determined that the most likely range of potential outcomes includes a possibility of no additional OP units issued as well as up to a maximum of five million units being issued.

In calculating the fair value of this liability as of June 30, 2020 , we have determined that the most likely range of potential outcomes includes a possibility of no additional OP units issued as well as up to a maximum of five million units being issued.

Changes in the fair value of the earn-out liability have been and will continue to be recognized in earnings.

The following table presents a reconciliation of the change in the earn-out liability measured at fair value on a recurring basis using Level 3 inputs and recognized as Other Income, Net in the consolidated statements of operations (in thousands):

The following table presents a reconciliation of the change in the earn-out liability measured at fair value on a recurring basis using Level 3 inputs and recognized as Other (Expense) Income, Net in the consolidated statements of operations (in thousands):

Earn-Out Liability

Balance at December 31, 2019

Change in fair value recognized in Other Income, Net

Balance at March 31, 2020

Real Estate Asset Impairment —Our real estate assets are measured and recognized at fair value less costs to sell on a nonrecurring basis dependent upon when we determine an impairment has occurred.

During the three months ended March 31, 2019 , we impaired assets that were under contract or actively marketed for sale at a disposition price that was less

than carrying value, or that had other operational impairment indicators.

Change in fair value recognized in Other (Expense) Income, Net

Balance at June 30, 2020

Real Estate Asset Impairment —Our real estate assets are measured and recognized at fair value, less costs to sell for held-for-sale properties, on a nonrecurring basis dependent upon when we determine an impairment has occurred.

During the three and six months ended June 30, 2019 , we impaired assets that were under contract or actively marketed for sale at a disposition price that was less than carrying value, or that had other operational impairment indicators.

The valuation technique used for the fair value of all impaired real estate assets was the expected net sales proceeds, which we consider to be a Level 2 input in the fair value hierarchy.

We did not impair any assets during the three months ended March 31, 2020 .

There were no impairment charges recorded during the three and six months ended June 30, 2020 .

On a quarterly basis, we employ a multi-step approach to assess our real estate assets for possible impairment and record any impairment charges identified.

9 unchanged sentences

Our quarterly impairment procedures have not been altered by the COVID-19 pandemic, as we believe key impairment indicators such as temporary store closings and large dark or vacant spaces will continue to be identified in our review.

We have utilized forecasts that incorporate estimated decreases in net operating income (“NOI”) and cash flows as a result of the COVID-19 pandemic in performing our review procedures for the three months ended March 31, 2020 .

However, it is possible that we could experience unanticipated changes in assumptions that are employed in our impairment review which could impact our cash flows and fair value conclusions.

Such unanticipated changes relative to our expectations include but are not limited to:

Such unanticipated changes relative to our expectations may include but are not limited to:

increases or decreases in the duration or permanence of tenant closures, increases or decreases in collectability reserves and write-offs, additional capital required to fill vacancies, extended lease-up periods, future closings of large tenants, changes in macroeconomic assumptions such as rate of inflation and capitalization rates, and changes to the estimated timing of disposition of the properties under review.

We recorded the following expense upon impairment of real estate assets (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Impairment of real estate assets

Corporate Intangible Asset Impairment —In connection with our acquisition of PELP, we acquired a corporate intangible asset consisting of in-place management contracts.

We evaluate our corporate intangible asset for impairment when a triggering event occurs, or circumstances change, that indicate the carrying value may not be recoverable.

In June 2019, the suspension of the REIT III public offering constituted a triggering event for further review of the corporate intangible asset’s fair value compared to its carrying value.

We estimated the fair value of the corporate intangible asset using a discounted cash flow model, leveraging certain Level 3 inputs.

The evaluation of corporate intangible assets for potential impairment required management to exercise significant judgment and to make certain assumptions.

The assumptions utilized in the evaluation included future cash flows and a discount rate.

For the corporate intangible asset during the three months ended June 2019, we used a discount rate of 19% in our discounted cash flow model.

Based on this analysis, we concluded the carrying value exceeded the estimated fair value of the corporate intangible asset, and an impairment charge of $7.8 million was recorded in Other (Expense) Income, Net on the consolidated statements of operations in the second quarter of 2019.

SUBSEQUENT EVENTS

2 unchanged sentences

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 1. Financial Statements