What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-08-13 compared with 2020-05-12 · 392 added, 194 removed, 261 unchanged (69% of the section changed)

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We intend for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in those Acts.

Such forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” “possible,” “initiatives,” “focus,” “seek,” “objective,” “goal,” “strategy,” “plan,” “potential,” “potentially,” “preparing,” “projected,” “future,” “long-term,” “once,” “should,” “could,” “would,” “might,” “uncertainty,” or other similar words.

Such forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “can,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” “possible,” “initiatives,” “focus,” “seek,” “objective,” “goal,” “strategy,” “plan,” “potential,” “potentially,” “preparing,” “projected,” “future,” “long-term,” “once,” “should,” “could,” “would,” “might,” “uncertainty,” or other similar words.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this report is filed with the U.S.

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Such statements include, but are not limited to, statements about our focus, plans, strategies, initiatives, and prospects;

statements about the global pandemic of a novel coronavirus (“COVID-19”), including its duration and potential or expected impact on our tenants, our business, and our estimated value per share;

statements about our estimated value per share and when it may be updated;

statements about the COVID-19 pandemic, including its duration and potential or expected impact on our tenants, our business, and our estimated value per share;

statements about the duration or extent of the suspension of our distributions, share repurchase program, and dividend reinvestment program;

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This business provides comprehensive real estate and asset management services to the Managed Funds.

During the first quarter of 2020, the COVID-19 pandemic began spreading globally, with the outbreak being classified as a pandemic by the World Health Organization on March 11, 2020.

We began preparing for the effects of the COVID-19 pandemic on our business as well as the economic climate as a whole.

Our employees are almost entirely working remotely to help combat the spread of the virus, while also allowing us to be as productive as possible during this time.

Some of our initiatives to respond to the ongoing pandemic are:

COVID-19 Strategy —During the first quarter of 2020, the COVID-19 pandemic began spreading globally, with the outbreak being classified as a pandemic by the World Health Organization on March 11, 2020.

As a result of the pandemic, many state governments issued “stay-at-home” mandates that generally limited travel and movement of the general public to essential activities only and required all non-essential businesses to close.

The following initiatives were enacted in response to the pandemic and remain in effect as of the date of this filing (unless otherwise noted):

We temporarily suspended stockholder distributions (see Note 9 for more detail);

We temporarily suspended the SRP for death, qualifying disability, or determination of incompetence, while our standard SRP remains suspended;

We suspended the SRP for death, qualifying disability, or determination of incompetence, while our standard SRP remains suspended;

Our Compensation Committee approved a temporary 25% reduction to the base salary of our chief executive officer;

a temporary 10% reduction to the base salaries of our president, chief operating officer, chief financial officer, and general counsel;

and a 10% reduction to board members’ base compensation for the 2020-2021 term;

We have implemented expense reductions at the property and corporate levels, including the temporary reductions in executive salaries and director compensation, and workforce reductions;

We are delaying capital projects to the extent possible;

We have borrowed $200 million on our revolving credit facility to ensure that we are able to meet our operating needs for a sustained period.

As a result of the pandemic, many state governments have issued “stay-at-home” mandates that generally limit travel and movement of the general public to essential activities only and require all non-essential businesses to close.

The impact these measures are having on our portfolio has evolved since March 31, 2020 and will continue to do so.

Our wholly-owned properties and those owned through our joint ventures contained approximately 5,550 tenant spaces as of May 11, 2020 .

The following statistics are related to our wholly-owned properties and those owned through our joint ventures as of May 11, 2020 (all statistics are approximate;

ABR, GLA, and rent include the prorated portion attributable to properties owned through our joint ventures):

30% of all tenant spaces, totaling 21% of our ABR and 16% of our GLA, remained temporarily closed

Temporary closures include 7% of tenant spaces that we believe are considered to be essential retail and service businesses, totaling 3% of the ABR and 2% of the GLA associated with all essential retail and service businesses;

even though they are generally exempted from “stay-at-home” mandates, some essential businesses have temporarily closed due to sharp decreases in foot traffic and customer patronage as a result of these mandates and social distancing guidelines

Received 2,120 rent relief requests from tenant spaces representing 29% of our ABR, all of which are still being evaluated

Collected 77% of rent and recoveries billed for April 2020 and 74% of rent and recoveries billed for the month of May

We believe substantially all tenants, including those that have been deemed non-essential businesses, are contractually obligated to continue with their rent payments as documented in our lease agreements with them.

The Coronavirus Aid, Relief, and Economic Security Act, including the Paycheck Protection Program and Health Care Enhancement Act (collectively, the “CARES Act”), is intended to provide economic relief and stimulus to taxpayers and businesses in order to mitigate the economic impact of the pandemic, and provides an estimated $2.7 trillion to combat the COVID-19 pandemic and stimulate the economy through the provision of government loans and grants to affected individuals and businesses.

We have begun working directly with our tenants to inform them of the benefits available through the CARES Act and other small business programs.

We have created a resource page on our website to assist in these information efforts.

and a temporary 10% reduction to board members’ base compensation for the 2020-2021 term;

We have implemented expense reductions at the property and corporate levels, including the temporary reductions in executive salaries and director compensation, and reductions to our workforce and travel costs;

Our capital investments have been prioritized to support the reopening of our neighbors and new leasing activity, or deferred if possible;

We borrowed $200 million on our revolving credit facility in April 2020 to ensure that we were able to meet our operating needs for a sustained period.

Our rent and recovery collections during the second quarter, combined with the above initiatives, sufficiently funded our short-term operating needs and allowed us to repay in full the outstanding balance on our revolving credit facility in June 2020.

In May 2020, many state governments began lifting, in whole or in part, the “stay-at-home” mandates, effectively removing or lessening the limitations on travel and allowing many businesses to reopen in full or limited capacity.

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

The impact these measures and the resulting consumer behavior are having on our portfolio has evolved throughout the second quarter, and we expect that it will continue to do so.

Our management team has determined the following are key indicators of recovery for our portfolio and is executing a strategy to guide our tenants (which we refer to as a “neighbor” or our “neighbors”) through these phases (all statistics are approximate;

ABR, Gross Leasable Area or “GLA”, and rent and recovery collections include the prorated portion attributable to properties owned through our joint ventures):

Assisting Neighbors in Reopening —Our wholly-owned properties and those owned through our joint ventures contained approximately 5,600 occupied neighbor spaces as of August 10, 2020 .

At the peak of the pandemic-related closure activity, temporary closures reached 37% of all neighbor spaces, totaling 27% of our ABR and 22% of our GLA;

of the neighbor spaces that temporarily closed, 88% , totaling 89% of our ABR and 90% of our GLA, have since reopened.

We believe that the best way to ensure that we receive monthly payment of rent and other amounts due is to first have neighbors open and operating.

In order to facilitate communication with our neighbors, we launched PECO Connect TM , a webpage designed to provide resources, information, and tools to assist our neighbors in reopening as states lift “stay-at-home” requirements and other restrictions.

Resources made available through PECO Connect include, but are not limited to:

the implementation of our Front Row To-Go TM program;

a digital tool kit providing various marketing options, industry guides, and blueprints to facilitate effective communication between our neighbors and their customers;

educational videos and webinars to help neighbors prepare for and adjust to the consumer environment as businesses reopen;

a neighbor rewards program;

and DashComm ® , our proprietary internal communications platform designed to deliver important updates and information to our neighbors as well as to facilitate our responses to neighbor questions and concerns.

Returning to Monthly Payments —We continue to work with our neighbors to resume normal monthly rent payments.

Our efforts have included raising awareness of the benefits available through the Coronavirus Aid, Relief, and Economic Security Act, including the Paycheck Protection Program and Health Care Enhancement Act (collectively, the “CARES Act”) and other small business programs.

The CARES Act was intended to provide economic relief and stimulus to taxpayers and businesses in order to mitigate the economic impact of the pandemic, and provided an estimated $2.7 trillion to combat the COVID-19 pandemic and stimulate the economy through the provision of government loans and grants to affected individuals and businesses.

As more of our neighbors continue to reopen, we are seeing our collections improve as a result.

The table below shows the improvement since April, the month in which we began to see decreased collections resulting from the COVID-19 pandemic and related neighbor impacts:

% of Rent and Recoveries Collected (1)

% of ABR Open (1)

All Neighbor Spaces

Grocer Neighbor Spaces

Collections for April, May, June, and July 2020 include any amounts billed for those respective months that were received through August 10, 2020 .

For other statistics, April, May, June, and July 2020 are approximate as of April 30, 2020, May 31, 2020, June 30, 2020, and July 31, 2020, respectively.

The total number of neighbor spaces that are or were temporarily closed in connection with COVID-19 is approximately 2,100 .

As of August 10, 2020 , 97% of total neighbor spaces, or 98% of our portfolio ABR, was open.

Establishing Payment Plans —We believe substantially all neighbors, including those that were required to temporarily close under governmental mandates, are contractually obligated to continue with their rent payments as documented in our lease agreements with them.

We further believe that it is best to begin negotiation of relief only once a neighbor has reopened, and we have continued to see payments made toward rent and recovery charges owed during the second quarter.

As of August 10, 2020 , we have executed relief agreements for approximately 240 neighbor spaces, primarily in the form of short-term payment plans without a reduction in amounts owed to us.

These relief agreements totaled approximately $3.8 million , or 1.0% of portfolio ABR, and the weighted-average term over which we expect to receive payment on executed payment plans is less than twelve months.

We are in negotiations with additional neighbors, which we believe will lead to more neighbors repaying their past due charges.

We will continue to work with neighbors on establishing plans to repay past due amounts, and will monitor the impact of such payment plans on our results of operations in future quarters.

Collecting on Payment Plans —The final measure of recovery for our portfolio is to collect the past due amounts under the terms negotiated with our neighbors.

Whether we are ultimately able to collect these amounts will be determined

by a number of factors, many of which are outside our control, especially the impact of the COVID-19 pandemic on the overall economy and each of our neighbors.

Portfolio and Leasing Statistics —Below are statistical highlights of our wholly-owned portfolio:

March 31, 2020

June 30, 2020

Number of properties

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The average remaining lease term in years excludes future options to extend the term of the lease.

The following table details information for our joint ventures, which is the basis for determining the prorated information included in the subsequent tables as of March 31, 2020 (dollars and square feet in thousands):

March 31, 2020

The following table details information for our joint ventures, which is the basis for determining the prorated information included in the subsequent tables as of June 30, 2020 (dollars and square feet in thousands):

June 30, 2020

Joint Venture

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Grocery Retail Partners II

We calculate ABR as monthly contractual rent as of March 31, 2020 , multiplied by 12 months.

Gross leasable area (“GLA”) is defined as the portion of the total square feet of a building that is available for tenant leasing.

Lease Expirations —The following chart shows, on an aggregate basis, all of the scheduled lease expirations after March 31, 2020 for each of the next ten years and thereafter for our wholly-owned properties and the prorated portion of those owned through our joint ventures:

Our ability to create rental rate growth generally depends on our leverage during new and renewal lease negotiations with prospective and existing tenants, which typically occurs when occupancy at our centers is high or during periods of economic growth and recovery.

Conversely, we may experience rental rate decline when occupancy at our centers is low or during periods of economic recession, as the leverage during new and renewal lease negotiations may shift to prospective and existing tenants.

We continued to meet or exceed average rental rates on expiring leases during the first quarter of 2020 and our leased occupancy remained high as of March 31, 2020 at 95.6% ;

however, due to the impact of the COVID-19 pandemic, a large number of our tenant spaces have temporarily closed.

Most of our grocery tenants remain open and continue to service their customers during this pandemic;

however, many other tenants are either not currently operating or have significantly reduced sales due to government-mandated social distancing and “stay-at-home” guidelines.

We expect increased volatility in new and renewal rental rates until the business environment becomes more stable.

For our wholly-owned properties and the prorated share of those owned through our joint ventures, subsequent to March 31, 2020 , we renewed approximately 0.3 million total square feet and $2.6 million of total ABR of future expiring leases.

This includes four anchor leases that were renewed pursuant to the exercise of an option to extend the lease.

We calculate ABR as monthly contractual rent as of June 30, 2020 , multiplied by 12 months.

GLA is defined as the portion of the total square feet of a building that is available for leasing.

Lease Expirations —The following chart shows, on an aggregate basis, all of the scheduled lease expirations after June 30, 2020 for each of the next ten years and thereafter for our wholly-owned properties and the prorated portion of those owned through our joint ventures:

Our ability to create rental rate growth generally depends on our leverage during new and renewal lease negotiations with prospective and existing neighbors, which typically occurs when occupancy at our centers is high or during periods of economic growth and recovery.

Most of our grocery neighbors have remained open throughout the COVID-19 pandemic, and many other neighbor spaces were allowed to remain open, though their sales may have been impacted by social distancing and “stay-at-home” mandates.

The number of our neighbor spaces that temporarily closed as a result of the COVID-19 pandemic peaked in April 2020 and has significantly decreased as states began to lift in full or in part “stay-at-home” mandates in May 2020.

Certain neighbors 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 average rental rates on expiring leases.

As of June 30, 2020 , our average rental rates on new leases have exceeded the average rental rates on expiring leases and our occupancy remained flat as compared to December 31, 2019 .

We anticipate increased volatility in new and renewal rental rates until the business environment becomes more stable.

For our wholly-owned properties and the prorated share of those owned through our joint ventures, subsequent to June 30, 2020 , we renewed approximately 0.3 million total square feet and $3.5 million of total ABR of future expiring leases.

This includes six anchor lease renewals, some of which were pursuant to the exercise of an option to extend the lease.

See the section below titled Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Leasing Activity for further discussion of leasing activity.

Portfolio Tenancy —We define national tenants as those tenants that operate in at least three states.

Regional tenants are defined as those tenants that have at least three locations in fewer than three states.

The following charts present the composition of our portfolio, including our wholly-owned properties and the prorated portion of those owned through our joint ventures, by tenant type as of March 31, 2020 :

The following charts present the composition of our portfolio by tenant industry as of March 31, 2020 :

In response to the COVID-19 pandemic, as of May 11, 2020 , 15 states have state-wide “stay-at-home” mandates in place and 26 states have partial mandates in place, with 4 states that we expect to begin lifting mandates in the coming weeks.

We estimate that approximately 51.1% of our ABR, including the pro rata portion attributable to our properties owned through our joint ventures, is from retail and service businesses generally deemed essential under most state and local mandates as of March 31, 2020 :

Includes tenants that we believe are considered to be essential retail and service businesses but that may have temporarily closed due to sharp decreases in foot traffic and customer patronage as a result of “stay-at-home” mandates and social distancing guidelines.

The following table presents our top twenty tenants by ABR, including our wholly-owned properties and the prorated portion of those owned through our joint ventures, as of March 31, 2020 (dollars and square feet in thousands):

March 31, 2020

Portfolio Tenancy —We define national neighbors as those neighbors that operate in at least three states.

Regional neighbors are defined as those neighbors that have at least three locations in fewer than three states.

The following charts present the composition of our portfolio, including our wholly-owned properties and the prorated portion of those owned through our joint ventures, by neighbor type as of June 30, 2020 :

The following charts present the composition of our portfolio by neighbor industry as of June 30, 2020 :

We estimate that approximately 51% of our ABR, including the pro rata portion attributable to our properties owned through our joint ventures, is from retail and service businesses generally deemed essential under most state and local mandates issued in response to the COVID-19 pandemic.

The composition of our portfolio as a percentage of ABR is as follows:

June 30, 2020

Essential Retail and Services:

Dollar stores

Hardware/Automotive

Wine, beer, and liquor

Other essential

Total essential retail and services (1)

Quick service

Total restaurants

Other Retail and Services:

Entertainment

Total other retail and services

Includes neighbors that we believe are considered to be essential retail and service businesses but that may have temporarily closed due to decreases in foot traffic and customer patronage as a result of “stay-at-home” mandates and social distancing guidelines implemented in response to the COVID-19 pandemic.

The following table presents our top twenty neighbors by ABR, including our wholly-owned properties and the prorated portion of those owned through our joint ventures, as of June 30, 2020 (dollars and square feet in thousands):

June 30, 2020

Leased Square Feet

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Albertsons-Safeway

TJX Companies

Sprouts Farmers Market

TJX Companies

Southeastern Grocers

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Petco Animal Supplies, Inc.

Tenants are grouped by parent company and may represent multiple subsidiaries and banners.

Neighbors are grouped by parent company and may represent multiple subsidiaries and banners.

Number of locations excludes auxiliary leases with grocery anchors such as fuel stations, pharmacies, and liquor stores.

Additionally, in the event that a parent company has multiple subsidiaries or banners serving as tenants in a single shopping center, those subsidiaries are included as one location.

Of our top 20 tenants, TJX Companies and Kohl’s Corporation had announced the temporary closure of all their stores nationwide as of March 31, 2020.

As of May 11, certain TJX Companies and Kohl’s Corporation store locations have begun to reopen.

While no other top 20 tenants have announced company-wide closures, certain locations may be closed due to specific state regulations.

We are not aware, at this time, of the bankruptcy or permanent closure of any of the top 20 tenants in our shopping centers.

No tenant represents more than 6.9% of our ABR on a pro-rata basis.

Additionally, in the event that a parent company has multiple subsidiaries or banners in a single shopping center, those subsidiaries are included as one location.

Results of Operations

Impact of the COVID-19 Pandemic

The COVID-19 pandemic did not significantly affect our results of operations for the first quarter of 2020, with the exception of certain items noted in our discussion of results below.

However, the negative impact on our results of operations in the second quarter of 2020 and future quarters could be significant, depending on a number of factors outside of our control, including the duration and severity of the pandemic;

the nature and duration of “stay-at-home” mandates and business shut-downs as well as physical and social distancing guidelines and recommendations from governmental authorities;

the nature and effectiveness of any economic stimulus or relief measures, including the CARES Act;

overall economic conditions on both a macro and micro level, including consumer demand as well as retailer demand for space within our shopping centers;

and the impact of all of the factors above, including other potentially unknown factors, on our tenants’ ability to continue paying rent and related charges on time or at all and tenants’ willingness to renew their leases on the same terms or at all.

The potential impact of the COVID-19 pandemic to our second quarter results may be significant and may include reduced revenue from tenant concessions, increased collectability reserves, decreased recovery rates on expenses, and other unforeseen impacts that may arise in the course of operating during these circumstances.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Overview for our observation of certain of these factors through May 11, 2020 .

The duration of the pandemic and mitigating measures, and their economic impact, may cause some of our current tenants to permanently vacate their spaces and/or not renew their leases, and we may have difficulty leasing these spaces on the same or better terms or at all, and/or incur additional costs to lease the space.

Extended periods of vacancy or reduced revenues could also trigger impairments of our real estate assets.

Moreover, we anticipate a reduction in our disposition and acquisition activity, as well as potential joint venture activities, during the second quarter and potentially for the remainder of 2020.

Conversely, the disruption to our workforce upon the emergence of the COVID-19 pandemic has been and is expected to be minimal as the nature of our operations, coupled with our IT infrastructure, allows our employees to successfully work remotely.

We believe that our investment focus on grocery-anchored shopping centers that provide daily necessities will help lessen the negative effect of the pandemic on our business compared to non-grocery anchored retail shopping centers.

We are closely monitoring the occupancy, operating performance, and tenants’ sales in our centers, including those tenants operating with reduced hours or under government-imposed restrictions.

We are also taking action to maximize our financial flexibility by implementing expense reductions at the property and corporate level, delaying capital projects to the extent possible, drawing on our revolving credit facility, and temporarily suspending monthly distributions and share repurchases for death, disability, or determination of incompetence.

Summary of Operating Activities

The COVID-19 pandemic did not significantly impact our results of operations for the first quarter of 2020.

In the second quarter, we noted significant impacts to rental income, including our collectability reserves.

While our overall collections in the second quarter were lower than previous periods, we have seen steady improvement in each month since April, which corresponds with the number of neighbors who have reopened their business.

At the same time, the COVID-19 pandemic has increased the uncertainty of collecting rents from a number of our neighbors.

For neighbors with a higher degree of uncertainty, we may not record revenue for amounts billed until the cash is received.

Based on our analysis, no individual neighbor category was deemed to be entirely non-creditworthy.

We continue to perform our analysis by examining each individual neighbor.

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 neighbor resumes payment and is considered creditworthy.

As of June 30, 2020, this represented approximately 8% of out of nearly 5,100 total neighbors.

This has resulted in reduced revenues for the quarter, and our estimates around collectability will likely continue to create volatility in our earnings at least in the short term.

A portion of these neighbors may eventually vacate their space, and we may see a decline in occupancy in future quarters.

The duration of any decline will depend on many factors and cannot be estimated at this time.

In our efforts to maximize collections in the near term while also supporting our neighbors 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.

As more neighbors resume paying their full monthly charges, we will enter into additional discussions on how to recover outstanding amounts.

The ultimate impact on revenue in the future cannot be determined at this time, but may ultimately be the result of negotiated rental revenue reductions and changes in the timing of cash payments, which may or may not be material.

The negative economic impact of the COVID-19 pandemic has placed significant financial strain on certain businesses, leading to uncertainty in their ability to continue operations.

As such, we have received notification of entry into bankruptcy proceedings from several of our neighbors, representing an exposure of only 1.1% of our total ABR.

However, some of these neighbors may assume their leases during the course of the bankruptcy proceedings, which would further lower our exposure.

We have included our assessment of the impact of these bankruptcies in our estimate of rent collectability, which impacted recorded revenue, as noted previously.

The ongoing impact of the COVID-19 pandemic and the resulting economic downturn will likely continue to be significant to our results of operations for the remainder of 2020 and potentially beyond as a result of a number of factors outside of our control.

These factors include, but are not limited to, overall economic conditions on both a macro and micro level, including consumer demand as well as retailer demand for space within our shopping centers;

the impact of social distancing guidelines, recommendations from governmental authorities, and consumer shopping preferences;

the nature and effectiveness of any economic stimulus or relief measures;

and the impact of all of the factors above, including other potentially unknown factors, on our neighbors’ ability to continue paying rent and related charges on time or at all and neighbors’ willingness to renew their leases on the same terms or at all.

The impact of these factors, some of which have already been realized, could include reduced revenue from neighbor concessions, increased collectability reserves, decreased recovery rates on expenses, and other unforeseen impacts that may arise in the course of operating during these circumstances.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Overview for our observation of neighbor impacts through August 10, 2020 .

The duration of the pandemic and mitigating measures, and their economic impact, has caused some of our current neighbors to permanently vacate their spaces and/or not renew their leases, and we may have difficulty leasing these spaces on the same or better terms or at all, and/or incur additional costs to lease vacant spaces.

Extended periods of vacancy or reduced revenues may trigger impairments of our real estate assets.

Additionally, these factors may impact disposition activity by decreasing demand and negatively impacting capitalization rates.

Our disposition and acquisition activity was reduced as a result of the pandemic during the second quarter.

We are closely monitoring the occupancy, operating performance, and neighbor sales results at our centers, including those neighbors operating with reduced hours or under government-imposed restrictions.

We took action to maximize our financial flexibility by implementing expense reductions at the property and corporate level;

prioritizing capital projects to support the reopening of our neighbors and new leasing activity, or deferring if possible;

and suspending monthly distributions and share repurchases.

Summary of Operating Activities for the Three Months Ended June 30, 2020 and 2019

Three Months Ended

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Interest expense, net

Loss on disposal of property, net

Other expense, net

Net loss attributable to noncontrolling interests

Net loss attributable to stockholders

Our basis for analyzing significant fluctuations in our results of operations generally includes review of the results of our same-center portfolio, non-same-center portfolio, and revenues and expenses from our management activities.

We define our same-center portfolio as the 278 properties that were owned and operational prior to January 1, 2019 .

We define our non-same-center portfolio as those properties that were not fully owned and operational in both periods owing to real estate asset activity occurring after December 31, 2018 , which includes 25 properties disposed of and five properties acquired.

Below are explanations of the significant fluctuations in the results of operations for the three months ended June 30, 2020 and 2019 :

Rental Income decreased $13.4 million as follows:

$8.5 million decrease related to our same-center portfolio.

We have identified an increased number of neighbors as a credit risk, largely due to the COVID-19 pandemic and its economic impact.

As a result, we saw a decrease to rental income of $12.1 million related to revenue that will not be recognized until cash is collected or the neighbor resumes payment and is considered creditworthy, including $3.1 million in straight-line rent reversals for the related leases.

This impact offsets an improvement of $1.9 million primarily due to an increase in average minimum rent per square foot and average occupancy, as well as a $2.8 million increase in recovery income;

$4.9 million decrease primarily related to our net disposition of 20 properties.

Property Operating Expenses decreased $1.3 million as follows:

$0.8 million decrease related to our net disposition of 20 properties;

$0.5 million decrease related to our same-center portfolio and corporate operating activities, including $1.6 million of reduced compensation in connection with our expense reduction initiatives and performance compensation, partially offset by higher insurance costs.

Real Estate Tax Expenses decreased $1.5 million primarily as follows:

$0.9 million decrease related to our same-center portfolio, primarily as a result of successful real estate tax appeals;

$0.5 million decrease related to our net disposition of 20 properties.

General and Administrative Expenses:

The $3.7 million decrease in general and administrative expenses was primarily related to expense reductions taken to reduce the impact of the COVID-19 pandemic, with the majority of these decreases related to compensation.

Depreciation and Amortization decreased $3.2 million primarily as follows:

$2.3 million decrease related to our net disposition of 20 properties;

$0.9 million decrease related to our same-center portfolio and corporate operating activities, primarily due to intangible assets becoming fully amortized by December 31, 2019 .

Impairment of Real Estate Assets:

Our decrease in impairment of real estate assets of $25.2 million was primarily due to reduced disposition activity.

Our impairments during the three months ended June 30, 2019 were related to assets under contract or actively marketed for sale at a disposition price that was less than the carrying value, the proceeds from which were used to fund tax-efficient acquisitions, to fund redevelopment opportunities in owned centers, and for general corporate purposes.

We continue to sell non-core assets and may potentially recognize impairments in future quarters, but our anticipated disposition activity will likely be delayed or reduced due to current market conditions as a result of the COVID-19 pandemic.

Interest Expense, Net:

The $3.6 million decrease was largely due to repricing activities in 2019 as well as the decrease in LIBOR during the three months ended June 30, 2020 as compared to the same period in 2019 .

Interest Expense, Net was comprised of the following (dollars in thousands):

Three Months Ended June 30,

Interest on revolving credit facility, net

Interest on term loans, net

Interest on secured debt

Non-cash amortization and other

Interest expense, net

Weighted-average interest rate as of end of period

Weighted-average term (in years) as of end of period

Other Expense, Net :

The $10.1 million decrease was largely due to other impairment charges of $9.7 million in connection with the REIT III public offering recognized during the three months ended June 30, 2019 , which included a $7.8 million impairment of a corporate intangible asset and a $1.9 million impairment of organization and offering costs.

Other Expense, Net was comprised of the following (dollars in thousands):

Three Months Ended June 30,

Equity in loss of unconsolidated joint ventures

Transaction and acquisition expenses

Federal, state, and local income tax expense

Other impairment charges

Other expense, net

Summary of Operating Activities for the Six Months Ended June 30, 2020 and 2019

Six Months Ended

Favorable (Unfavorable)

(Dollars in thousands)

Rental income

Fee and management income

Other property income

Operating Expenses:

Property operating expenses

Real estate tax expenses

General and administrative expenses

Depreciation and amortization

Impairment of real estate assets

Interest expense, net

(Loss) gain on disposal of property, net

Other income, net

Other income (expense), net

Net income (loss)

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Net income (loss) attributable to stockholders

We define our same-center portfolio as the 279 properties that were owned and operational prior to January 1, 2019 .

We define our non-same-center portfolio as those properties that were not fully owned and operational in both periods owing to real estate asset activity occurring after December 31, 2018 , which includes 24 properties disposed of and five properties acquired.

Below are explanations of the significant fluctuations in the results of operations for the three months ended March 31, 2020 and 2019 :

For details surrounding our basis for analyzing significant fluctuations in our results of operations as well as definitions related to our portfolio of real estate assets, please see the Summary of Operating Activities for the Three Months Ended June 30, 2020 and 2019 section above.

Below are explanations of the significant fluctuations in the results of operations for the six months ended June 30, 2020 and 2019 :

Rental Income decreased $13.8 million as follows:

$3.4 million decrease related to our non-same-center portfolio, namely our net disposition of 19 properties;

$3.0 million increase related to our same-center portfolio primarily as follows:

$2.3 million increase in rental revenues primarily due to a $0.23 increase in average minimum rent per square foot and a 1.7% increase in average occupancy;

$2.1 million increase in recovery income largely as a result of higher recoverable real estate taxes and insurance expenses ;

$0.6 million increase in temporary and variable rent as well as non-cash adjustments;

partially offset by

$2.1 million decrease due to higher adjustments for tenants that have been identified as a credit risk, including as a result of the COVID-19 pandemic.

$5.4 million decrease related to our same-center portfolio.

We have identified an increased number of neighbors as a credit risk, largely due to the COVID-19 pandemic and its economic impact.

As a result, we saw a decrease to rental income of $14.3 million related to revenue that will not be recognized until cash is collected or the neighbor resumes payment and is considered creditworthy, including $3.1 million in straight-line rent reversals for the related leases.

This offsets an improvement of $4.2 million primarily related to increases in average minimum rent per square foot and average occupancy, as well as a $5.2 million increase in recovery income;

$8.4 million decrease primarily related to our net disposition of 20 properties.

Fee and Management Income:

The $1.1 million decrease in fee and management income is primarily due to fees no longer received from REIT III following its acquisition by us in October 2019.

Property Operating Expenses decreased $1.1 million primarily as follows:

The $1.4 million decrease in fee and management income is primarily due to fees no longer received from REIT III following its acquisition by us in October 2019 and a decrease in fees received from NRP, primarily due to property dispositions.

Property Operating Expenses decreased $2.4 million as follows:

$1.6 million decrease related to our net disposition of 20 properties;

$0.3 million decrease related to our same-center portfolio and corporate operating activities.

$0.8 million decrease related to our same-center portfolio and corporate operating activities, including $2.0 million of reduced compensation in connection with our expense reduction initiatives and performance compensation, partially offset by higher insurance costs.

Real Estate Tax Expenses decreased $1.7 million as follows:

$1.1 million decrease related to our net disposition of 20 properties;

$0.6 million decrease related to our same-center portfolio primarily as a result of successful real estate tax appeals.

General and Administrative Expenses:

The $2.5 million decrease in general and administrative expenses was primarily due to a decrease in estimated performance-based compensation, including adjustments made as a result of the COVID-19 pandemic.

The $6.2 million decrease in general and administrative expenses was primarily related to expense reductions taken to reduce the impact of the COVID-19 pandemic, with the majority of these decreases related to compensation.

Depreciation and Amortization decreased $7.9 million primarily as follows:

$4.6 million decrease related to our net disposition of 20 properties;

$1.8 million decrease related to our same-center portfolio, primarily due to intangible lease assets becoming fully amortized by December 31, 2019 .

$3.4 million decrease related to our same-center portfolio and corporate operating activities, primarily due to intangible lease assets becoming fully amortized by December 31, 2019 .

Impairment of Real Estate Assets:

The decrease in impairment of real estate assets of $13.7 million was primarily due to less disposition activity.

Our impairments during the three months ended March 31, 2019 were related to assets under contract or actively marketed for sale at a disposition price that was less than the carrying value, the proceeds from which were or will be used to fund tax-efficient acquisitions, to fund redevelopment opportunities in owned centers, and for general corporate purposes.

We continue to sell non-core assets and may potentially recognize impairments in future quarters, but such disposition activity will likely be delayed or reduced due to current market conditions as a result of the COVID-19 pandemic.

The decrease in impairment of real estate assets of $38.9 million was primarily due to reduced disposition activity.

Our impairments during the six months ended June 30, 2019 were related to assets under contract or actively marketed for sale at a disposition price that was less than the carrying value, the proceeds from which were used to fund tax-efficient acquisitions, to fund redevelopment opportunities in owned centers, and for general corporate purposes.

Interest Expense, Net:

The $2.2 million decrease was largely due to repricing activities executed during 2019 .

The $5.9 million decrease was largely due to repricing activities in 2019 as well as the decrease in LIBOR during the six months ended June 30, 2020 as compared to the same period in 2019 .

Interest Expense, Net was comprised of the following (dollars in thousands):

Three Months Ended March 31,

Six Months Ended June 30,

Interest on revolving credit facility, net

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Weighted-average term (in years) as of end of period

(Loss) Gain on Disposal of Property, Net:

The $8.7 million decrease was primarily related to the sale of three properties with a net loss and associated write-offs of $1.6 million during the three months ended March 31, 2020 , as compared to the sale of three properties with a net gain of $7.1 million during the three months ended March 31, 2019 (see Note 4 ).

Other Income, Net:

The $2.3 million increase was largely due to the change in the fair value of our earn-out liability during the three months ended March 31, 2020 as compared to the same period in 2019 .

Other Income, Net was comprised of the following (dollars in thousands):

Three Months Ended March 31,

(Loss) Gain on the Disposal of Property, Net :

The $8.0 million change was primarily related to the sale of four properties with a net loss and associated write-offs of $2.1 million during the six months ended June 30, 2020 , as compared to the sale of six properties with a net gain of $5.9 million during the six months ended June 30, 2019 (see Note 4 ).

Other Income (Expense), Net :

The $12.4 million change was largely due to other impairment charges of $9.7 million in connection with the REIT III public offering during the three months ended June 30, 2019 , which included a $7.8 million impairment of a corporate intangible asset and a $1.9 million impairment of organization and offering costs, and the change in the fair value of our earn-out liability.

Other Income (Expense), Net was comprised of the following (dollars in thousands):

Six Months Ended June 30,

Change in fair value of earn-out liability

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Federal, state, and local income tax expense

Other income, net

Leasing Activity —The average rent per square foot and cost of executing leases fluctuates based on the tenant mix, size of the leased space, and lease term.

Leases with national and regional tenants generally require a higher cost per square foot to execute than those with local tenants.

However, generally such national and regional tenants will also pay higher rates for a longer term.

Below is a summary of leasing activity for our wholly-owned properties for the three months ended March 31, 2020 and 2019 :

Other impairment charges

Other income (expense), net

Leasing Activity —The volume of our leasing activity slowed as a result of the COVID-19 pandemic during the second quarter.

The average rent per square foot and cost of executing leases fluctuates based on the neighbor mix, size of the leased space, and lease term.

Leases with national and regional neighbors generally require a higher cost per square foot to execute than those with local neighbors.

However, generally such national and regional neighbors will also pay higher rates for a longer term.

Below is a summary of leasing activity for our wholly-owned properties for the three months ended June 30, 2020 and 2019 :

Total Deals (1)

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The costs associated with landlord work are excluded for repositioning and redevelopment projects, if any.

A comparable lease is a lease that is executed for the exact same space (location and square feet) in which a tenant was previously located.

For a lease to be considered comparable, it must have been executed within 365 days from the earlier of legal possession or the day the prior tenant physically vacated the space.

A comparable lease is a lease that is executed for the exact same space (location and square feet) in which a neighbor was previously located.

For a lease to be considered comparable, it must have been executed within 365 days from the earlier of legal possession or the day the prior neighbor physically vacated the space.

The comparable rent spread compares the percentage increase (or decrease) of new or renewal leases (excluding options) to the expiring lease of a unit that was occupied within the past twelve months.

The portfolio retention rate is calculated by dividing (a) total square feet of retained tenants with current period lease expirations by (b) the square feet of leases expiring during the period.

The portfolio retention rate is calculated by dividing (a) total square feet of retained neighbors with current period lease expirations by (b) the square feet of leases expiring during the period.

Below is a summary of leasing activity for our wholly-owned properties for the six months ended June 30, 2020 and 2019 (1) :

Number of leases

Square footage (in thousands)

ABR (in thousands)

ABR per square foot

Cost per square foot of executing new leases

Number of comparable leases

Comparable rent spread

Weighted average lease term (in years)

Renewals and options:

Number of leases

Square footage (in thousands)

ABR (in thousands)

ABR per square foot

ABR per square foot prior to renewals

Percentage increase in ABR per square foot

Cost per square foot of executing renewals and options

Number of comparable leases

Comparable rent spread

Weighted average lease term (in years)

Portfolio retention rate

See the footnotes to the summary of leasing activity table for the three months ended June 30, 2020 and 2019 for more detail regarding certain items throughout this table.

Additionally, subsequent to June 30, 2020, through July 31, we executed a total of 44 new leases.

Non-GAAP Measures

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We define NOI as total operating revenues, adjusted to exclude non-cash revenue items, less property operating expenses and real estate taxes.

For the three months ended March 31, 2020 , Same-Center NOI represents the NOI for the 279 properties that were wholly-owned and operational for the entire portion of both comparable reporting periods.

For the three and six months ended June 30, 2020 and 2019 , Same-Center NOI represents the NOI for the 278 properties that were wholly-owned and operational for the entire portion of both comparable reporting periods.

We believe Same-Center NOI provides useful information to our investors about our financial and operating performance because it provides a performance measure of the revenues and expenses directly involved in owning and operating real estate assets and provides a perspective not immediately apparent from net income (loss).

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The table below compares Same-Center NOI (dollars in thousands):

Three Months Ended March 31,

Three Months Ended

(Unfavorable)

Six Months Ended June 30,

Favorable (Unfavorable)

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Excludes straight-line rental income, net amortization of above- and below-market leases, and lease buyout income.

Same-Center NOI Reconciliation —Below is a reconciliation of Net Income (Loss) to NOI for our real estate investments and Same-Center NOI (in thousands):

Three Months Ended March 31,

Net income (loss)

Same-Center NOI Reconciliation —Below is a reconciliation of Net (Loss) Income to NOI for our real estate investments and Same-Center NOI (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Net (loss) income

Adjusted to exclude:

Fees and management income

Straight-line rental income and expense

Straight-line rental expense (income) (2)

Net amortization of above- and below-market leases

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Loss (gain) on disposal of property, net

Other income, net

Property operating expenses related to fees and management income

Other expense (income), net

Property operating expenses related to fees and

management income

NOI for real estate investments

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Certain prior period amounts have been reclassified to conform with current year presentation.

Excludes straight-line rent adjustments for neighbors deemed to be non-creditworthy.

Includes operating revenues and expenses from non-same-center properties which includes properties acquired or sold and corporate activities.

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We believe it is more reflective of our core operating performance and provides an additional measure to compare our performance across reporting periods on a consistent basis by excluding items that may cause short-term fluctuations in net income (loss).

To arrive at Core FFO, we adjust FFO attributable to stockholders and convertible noncontrolling interests to exclude certain recurring and non-recurring items including, but not limited to, depreciation and amortization of corporate assets, changes in the fair value of the earn-out liability, gains or losses on the extinguishment or modification of debt, transaction and acquisition expenses, and amortization of unconsolidated joint venture basis differences.

To arrive at Core FFO, we adjust FFO attributable to stockholders and convertible noncontrolling interests to exclude certain recurring and non-recurring items

including, but not limited to, depreciation and amortization of corporate assets, changes in the fair value of the earn-out liability, amortization of unconsolidated joint venture basis differences, gains or losses on the extinguishment or modification of debt, other impairment charges, and transaction and acquisition expenses.

FFO, FFO Attributable to Stockholders and Convertible Noncontrolling Interests, and Core FFO should not be considered alternatives to net income (loss) or income (loss) from continuing operations under GAAP, as an indication of our liquidity, nor as an indication of funds available to cover our cash needs, including our ability to fund distributions.

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The following table presents our calculation of FFO, FFO Attributable to Stockholders and Convertible Noncontrolling Interests, and Core FFO and provides additional information related to our operations (in thousands, except per share amounts):

Three Months Ended March 31,

Calculation of FFO Attributable to Stockholders and Convertible Noncontrolling Interests

Net income (loss)

Three Months Ended June 30,

Six Months Ended June 30,

Calculation of FFO Attributable to Stockholders and

Convertible Noncontrolling Interests

Net (loss) income

Depreciation and amortization of real estate assets

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FFO attributable to the Company

Adjustments attributable to noncontrolling interests not convertible

into common stock

FFO attributable to stockholders and convertible noncontrolling interests

Adjustments attributable to noncontrolling interests

not convertible into common stock

FFO attributable to stockholders and convertible

noncontrolling interests

Calculation of Core FFO

FFO attributable to stockholders and convertible noncontrolling interests

FFO attributable to stockholders and convertible

noncontrolling interests

Depreciation and amortization of corporate assets

Change in fair value of earn-out liability

Amortization of unconsolidated joint venture basis differences

Amortization of unconsolidated joint venture

basis differences

Loss on extinguishment or modification of debt, net

Other impairment charges

Transaction and acquisition expenses

FFO Attributable to Stockholders and Convertible Noncontrolling Interests per share and Core FFO per share

FFO Attributable to Stockholders and Convertible

Noncontrolling Interests per share and Core FFO per share

Weighted-average common shares outstanding - diluted (2)

FFO attributable to stockholders and convertible noncontrolling interests

per share - diluted

FFO attributable to stockholders and convertible

noncontrolling interests per share - diluted

Core FFO per share - diluted

Certain prior period amounts have been reclassified to conform with current year presentation.

Restricted stock awards were dilutive to FFO Attributable to Stockholders and Convertible Noncontrolling Interests and Core FFO for the three months ended March 31, 2020 and 2019 , and, accordingly, their impact was included in the weighted-average common shares used to calculate diluted FFO Attributable to Stockholders and Convertible Noncontrolling Interests per share and Core FFO per share.

For the three months ended March 31, 2019 , restricted stock awards with a weighted-average impact of 0.7 million shares had an anti-dilutive effect upon the calculation of earnings per share , as further detailed in Note 10 , and thus were excluded.

As these shares were not anti-dilutive to diluted FFO Attributable to Stockholders and Convertible Noncontrolling Interests and Core FFO per share, they are included here.

Restricted stock awards were dilutive to FFO Attributable to Stockholders and Convertible Noncontrolling Interests per share and Core FFO per share for the three and six months ended June 30, 2020 and 2019 , and, accordingly, their impact was included in the weighted-average common shares used in their respective per share calculations.

For the three months ended June 30, 2020 and for the three and six months ended June 30, 2019 , restricted stock awards had an anti-dilutive effect upon the calculation of earnings per share and thus were excluded.

For details related to the calculation of earnings per share, see Note 10 .

Earnings Before Interest, Taxes, Depreciation, and Amortization for Real Estate (“EBITDAre”) and Adjusted EBITDAre — We have included the calculation of EBITDA re to better align with publicly traded REITs.

Additionally, we believe that, as another important earnings metric, it is a useful indicator of our ability to support our debt obligations.

Nareit defines EBITDA re as net income (loss) computed in accordance with GAAP before (i) interest expense, (ii) income tax expense, (iii) depreciation and amortization, (iv) gains or losses from disposition of depreciable property, and (v) impairment write-downs

of depreciable property.

Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect EBITDA re on the same basis.

Adjusted EBITDA re is an additional performance measure used by us as EBITDA re includes certain non-comparable items that affect our performance over time.

To arrive at Adjusted EBITDA re, we exclude certain recurring and non-recurring items from EBITDAre, including, but not limited to:

(i) changes in the fair value of the earn-out liability;

(ii) other impairment charges;

(iii) amortization of basis differences in our investments in our unconsolidated joint ventures;

and (iv) transaction and acquisition expenses.

We use EBITDA re and Adjusted EBITDA re as additional measures of operating performance which allow us to compare earnings independent of capital structure, determine debt service and fixed cost coverage, and measure enterprise value.

EBITDA re and Adjusted EBITDA re should not be considered as alternatives to net income (loss), as an indication of our liquidity, nor as an indication of funds available to cover our cash needs, including our ability to fund distributions.

Accordingly, EBITDA re and Adjusted EBITDA re should be reviewed in connection with other GAAP measurements, and should not be viewed as more prominent measures of performance than net income (loss) or cash flows from operations prepared in accordance with GAAP.

Our EBITDA re and Adjusted EBITDA re , as presented, may not be comparable to amounts calculated by other REITs.

The following table presents our calculation of EBITDA re and Adjusted EBITDA re and provides additional information related to our operations (in thousands, except per share amounts):

Three Months Ended June 30,

Six Months Ended June 30,

Calculation of EBITDA re

Net (loss) income

Depreciation and amortization

Interest expense, net

Loss (gain) on disposal of property, net

Impairment of real estate assets

Federal, state, and local tax expense

Adjustments related to unconsolidated

joint ventures

Calculation of Adjusted EBITDA re

Change in fair value of earn-out liability

Other impairment charges

Transaction and acquisition expenses

Amortization of unconsolidated joint

venture basis differences

Adjusted EBITDA re

Liquidity and Capital Resources

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available, unrestricted cash and cash equivalents;

reinvested distributions once distributions to stockholders and thus the DRIP are reactivated/reinstated.

We anticipate that cash from operations may be reduced at least in the near term as a result of the immediate impact of the COVID-19 pandemic as we may temporarily experience reduced cash payments and/or revenue from tenants.

Additionally,

our cash from financing activities will be impacted by actions taken to preserve liquidity, as we have temporarily suspended our distributions, the DRIP, and the SRP for death, qualifying disability, or determination of incompetence (standard SRP repurchases remain suspended).

We are monitoring events closely and managing our cash usage, which also includes delaying capital spending and redevelopment where possible as well as reducing other property and corporate expenses.

reinvested distributions once distributions to stockholders resume and thus the DRIP is reactivated/reinstated.

Our cash from operations has been reduced, and we anticipate that it may continue to be be negatively impacted, at least in the near term, as a result of the immediate impact of the COVID-19 pandemic as we temporarily experience reduced or delayed cash payments and/or revenue from neighbors.

Additionally, our cash from financing activities has been and will continue to be impacted by actions taken to preserve liquidity, as we have suspended our distributions, the DRIP, and the SRP.

We are monitoring events closely and managing our cash usage, which also includes prioritizing our capital spending and redevelopment to support the reopening of our neighbors and new leasing activity, or deferring if possible, as well as reducing other property and corporate expenses.

At this time, we believe our current sources of liquidity, most significantly our operating cash flows and borrowing availability on our revolving credit facility, are sufficient to meet our short- and long-term cash demands.

Debt —The following table summarizes information about our debt as of March 31, 2020 and December 31, 2019 (dollars in thousands):

March 31, 2020

Debt —The following table summarizes information about our debt as of June 30, 2020 and December 31, 2019 (dollars in thousands):

June 30, 2020

December 31, 2019

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The revolving credit facility has an additional option to extend the maturity to October 2022, with its execution being subject to compliance with certain terms included in the loan agreement, including the absence of any defaults and the payment of relevant fees.

As of March 31, 2020 , we were in compliance with these terms and expect to be in compliance over the next twelve months .

In January 2020, we paid down $30.0 million of term loan debt maturing in 2021 using proceeds from property dispositions in 2019.

Following this repayment, our 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.

To the extent we continue to maintain a balance on our revolving credit facility, our interest expense will be higher in future quarters.

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.

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.

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.

We expect to continue to meet the requirements of our debt covenants over the next twelve months.

We believe our debt to total enterprise value and debt covenant compliance as of March 31, 2020 allows us access to future borrowings as needed in the near term.

The following table presents our calculation of net debt to total enterprise value, inclusive of our prorated portion of net debt and cash and cash equivalents owned through our joint ventures, as of March 31, 2020 and December 31, 2019 (dollars in thousands):

March 31, 2020

Financial Leverage Ratios — We believe our debt to Adjusted EBITDA re , debt to total enterprise value, and debt covenant compliance as of June 30, 2020 allow us access to future borrowings as needed in the near term.

The following table presents our calculation of net debt and total enterprise value, inclusive of our prorated portion of net debt and cash and cash equivalents owned through our joint ventures, as of June 30, 2020 and December 31, 2019 (dollars in thousands):

June 30, 2020

December 31, 2019

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Cash and cash equivalents

Total net debt

Enterprise value:

Total net debt

Total equity value (1)

Total enterprise value

Total equity value is calculated as the number of common shares and OP units outstanding multiplied by the EVPS as of June 30, 2020 and December 31, 2019, respectively.

There were 333.1 million diluted shares outstanding with an EVPS of $8.75 and 331.7 million diluted shares outstanding with an EVPS of $11.10 as of June 30, 2020 and December 31, 2019 , respectively.

The following table presents our calculation of net debt to Adjusted EBITDA re and net debt to total enterprise value as of June 30, 2020 and December 31, 2019 (dollars in thousands):

June 30, 2020

December 31, 2019

Net debt to Adjusted EBITDA re - annualized :

Adjusted EBITDA re - annualized (1)

Net debt to Adjusted EBITDA re - annualized

Net debt to total enterprise value

Total equity value is calculated as the number of common shares and OP units outstanding multiplied by the EVPS as of March 31, 2020 and December 31, 2019, respectively.

There were 333.1 million diluted shares outstanding with an EVPS of $8.75 and 331.7 million diluted shares outstanding with an EVPS of $11.10 as of March 31, 2020 and December 31, 2019 , respectively.

Total enterprise value

Net debt to total enterprise value

Adjusted EBITDA re is annualized based on trailing twelve months.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Measures - EBITDA re and Adjusted EBITDA re for a reconciliation to Net (Loss) Income .

Capital Expenditures and Redevelopment Activity —We make capital expenditures during the course of normal operations, which include maintenance capital expenditures and tenant improvements as well as value-enhancing anchor space repositioning and redevelopment, ground-up outparcel development, and other accretive projects.

Currently, we are delaying all capital projects to the extent possible in order to maximize our available capital in response to the uncertainty around the duration and negative impact of the COVID-19 pandemic.

During the three months ended March 31, 2020 and 2019 , we had capital spend of $16.0 million and $8.6 million , respectively.

Our capital spend during the three months ended March 31, 2020 included development and redevelopment spend of $8.8 million primarily related to projects originating in 2019 .

These projects have an estimated total remaining spend of $30.8 million , of which $4.1 million of expected spend in 2020 has been paused due to the delay in capital projects as a result of the COVID-19 pandemic.

Upon resumption of increased capital expenditures, we anticipate that obligations related to capital improvements as well as redevelopment and development can be met with cash flows from operations, cash flows from dispositions, or borrowings on our unsecured revolving line of credit.

Merger and Acquisition Activity —We continually monitor the commercial real estate market for properties that have future growth potential, are located in attractive demographic markets, and support our business objectives.

Given the uncertainty around the COVID-19 pandemic as well as the resulting market conditions, we expect a lower volume of acquisition activity for the remainder of 2020 .

During the three months ended March 31, 2020 , we acquired two parcels of land, as described in Note 4 to the consolidated financial statements, for a total cash outlay of $4.3 million .

We did not acquire any properties during the same period in 2019 .

Our capital investments are being prioritized to support the reopening of our neighbors and new leasing activity, or deferred if possible, in order to maximize our available capital in response to the uncertainty around the duration and negative impact of the COVID-19 pandemic.

During the six months ended June 30, 2020 and 2019 , we had capital spend of $28.5 million and $27.2 million , respectively.

Our capital spend during the six months ended June 30, 2020 included $16.1 million related to development and redevelopment projects.

We anticipate that obligations related to capital improvements as well as redevelopment and development can be met with cash flows from operations, cash flows from dispositions, or borrowings on our unsecured revolving line of credit.

Acquisition Activity —We continually monitor the commercial real estate market for properties that have future growth potential, are located in attractive demographic markets, and support our business objectives.

Given the uncertainty around the COVID-19 pandemic as well as the resulting market conditions, we expect acquisition activity to remain low for the remainder of 2020 .

During the six months ended June 30, 2020 , we acquired two parcels of land, as described in Note 4 to the consolidated financial statements, for a total cash outlay of $4.3 million .

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

Disposition and Contribution Activity —We are actively evaluating our portfolio of assets for opportunities to make strategic dispositions of assets that no longer meet our growth and investment objectives or assets that have stabilized in order to capture their value.

We expect to continue to make strategic dispositions during 2020, though it is possible that our disposition activity, including any activity to expand our investment management business through seeded joint ventures, may be delayed or otherwise disrupted depending on the impact of the COVID-19 pandemic.

The following table highlights our property dispositions for the three months ended March 31, 2020 and 2019 (dollars and square feet in thousands):

Three Months Ended March 31,

We expect to continue to make strategic dispositions during 2020, though the volume will likely be less than anticipated due to the impact of the COVID-19 pandemic and the resulting economic downturn.

The following table highlights our property dispositions for the six months ended June 30, 2020 and 2019 (dollars and square feet in thousands):

Six Months Ended June 30,

Number of properties sold

Number of outparcels sold

Proceeds from the sale of real estate

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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.

Distributions —Distributions to our common stockholders and OP unit holders, including key financial metrics for comparison purposes, for the three months ended March 31, 2020 and 2019 , are as follows (in thousands):

Distributions —Distributions to our common stockholders and OP unit holders, including key financial metrics for comparison purposes, for the six months ended June 30, 2020 and 2019 , are as follows (in thousands):

Cash distributions to OP unit holders

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Cash distributions to common stockholders

FFO attributable to stockholders and nonconvertible noncontrolling interests (1)

Distributions reinvested through the DRIP

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Measures - Funds from Operations and Modified Funds from Operations for the definition of FFO, for information regarding why we present FFO, as well as for a reconciliation of this non-GAAP financial measure to Net Income (Loss).

We paid distributions monthly of $0.05583344 per share for the months of January, February, and March 2020 .

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Measures - Funds from Operations and Core Funds from Operations for the definition of Core FFO, for information regarding why we present Core FFO, and for a reconciliation of this non-GAAP financial measure to Net Income (Loss).

During 2020, we paid distributions monthly of $0.05583344 per share for the months of December 2019 and January, February, and March 2020 on a cash basis.

The timing and amount of distributions is determined by our Board and is influenced in part by our intention to comply with REIT requirements of the Internal Revenue Code, as well as our results of operations, our general financial condition, general economic conditions, and other factors.

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We have not established a minimum distribution level, and our charter does not require that we make distributions to our stockholders.

On March 27, 2020, our Board temporarily suspended stockholder distributions, effective after the payment of the March 2020 dividend on April 1, 2020.

On March 27, 2020, our Board temporarily suspended stockholder distributions, which became effective after the payment of the March 2020 distribution on April 1, 2020.

The DRIP was also temporarily suspended, and the March 2020 distribution paid on April 1, 2020 was paid all in cash.

In August 2019, our Board suspended the SRP with respect to standard repurchases.

On March 27, 2020, our Board temporarily suspended the SRP for death, qualifying disability, or determination of incompetence.

In determining to suspend the payment of distributions and the operation of the DRIP and the SRP, the Board considered various factors, including the impact that the COVID-19 pandemic and the measures taken by governmental agencies and tenants in response

to the COVID-19 pandemic are expected to continue to have on our shopping centers and our financial condition, liquidity sources, and capital needs.

Cash Flow Activities —As of March 31, 2020 , we had cash and cash equivalents and restricted cash of $84.6 million , a net cash decrease of $10.5 million during the three months ended March 31, 2020 .

Below is a summary of our cash flow activity for the three months ended March 31, 2020 and 2019 (dollars in thousands):

Three Months Ended March 31,

On March 27, 2020, our Board suspended the SRP for death, qualifying disability, or determination of incompetence.

condition, liquidity sources, and capital needs.

The suspension of distributions and share repurchases is expected to be re-evaluated at the November Board meeting.

Cash Flow Activities —As of June 30, 2020 , we had cash and cash equivalents and restricted cash of $79.3 million , a net cash decrease of $15.8 million during the six months ended June 30, 2020 .

Below is a summary of our cash flow activity for the six months ended June 30, 2020 and 2019 (dollars in thousands):

Six Months Ended June 30,

Net cash provided by operating activities

Net cash (used in) provided by investing activities

Net cash used in investing activities

Net cash used in financing activities

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Property operations and working capita l—Most of our operating cash comes from rental and tenant recovery income and is offset by property operating expenses, real estate taxes, and general and administrative costs.

Our change in cash flows from property operations is primarily due to fluctuations in working capital accounts attributable to slightly lower cash receipts at the end of March during the normal course of our property operations.

Our change in cash flows from property operations is primarily due to reduced revenue and collections as a result of the COVID-19 pandemic, partially mitigated by expense reduction measures at the property and corporate levels.

Fee and management income —We also generate operating cash from our third-party investment management business, pursuant to various management and advisory agreements between us and the Managed Funds.

Our fee and management income was $2.2 million for the three months ended March 31, 2020 , a decrease of $1.1 million as compared to the same period in 2019 , primarily due to fee and management income no longer received from REIT III following its acquisition by us in October 2019.

Cash paid for interest —During the three months ended March 31, 2020 , we paid $20.3 million for interest, a decrease of $1.4 million over the same period in 2019 largely due to our repricing activity executed during 2019 .

Investing Activities —Our net cash (used in) provided by investing activities was primarily impacted by the following:

Real estate acquisitions —During the three months ended March 31, 2020 , we acquired two parcels of land, as described in Note 4 to the consolidated financial statements, for a total cash outlay of $4.3 million .

We did not acquire any properties during the same period in 2019 .

Real estate dispositions —During the three months ended March 31, 2020 , we disposed of three properties for a net cash inflow of $17.4 million , as compared to three property dispositions for a net cash inflow of $35.8 million during the same period in 2019 .

Our fee and management income was $4.9 million for the six months ended June 30, 2020 , a decrease of $1.4 million as compared to the same period in 2019 , primarily due to fee and management income no longer received from REIT III following its acquisition by us in October 2019 and a decrease in fees received from NRP largely due to property dispositions.

Cash paid for interest —During the six months ended June 30, 2020 , we paid $41.0 million for interest, a decrease of $3.2 million over the same period in 2019 largely due to lower debt and a decrease in LIBOR as compared to the same period in 2019 .

Investing Activities —Our net cash used in investing activities was primarily impacted by the following:

Real estate acquisitions —During the six months ended June 30, 2020 , we acquired two parcels of land, for a total cash outlay of $4.3 million .

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

Real estate dispositions —During the six months ended June 30, 2020 , we disposed of four properties for a net cash inflow of $25.8 million , as compared to the disposal of six properties and one outparcel for a net cash inflow of $47.9 million during the same period in 2019 .

Capital expenditures —We invest capital into leasing our properties and maintaining or improving the condition of our properties.

During the three months ended March 31, 2020 , we paid $16.0 million for capital expenditures, an increase of $7.4 million over the same period in 2019 , primarily driven by our investment in value-added redevelopment and new development in our existing centers during the three months ended March 31, 2020 .

During the six months ended June 30, 2020 , we paid $28.5 million for capital expenditures, an increase of $1.3 million over the same period in 2019 , primarily driven by our investment in value-added redevelopment and new development in our existing centers during the first quarter of 2020 .

Our capital expenditures were reduced during the second quarter of 2020 as our capital investments have been prioritized to support the reopening of our neighbors and new leasing activity, or deferred if possible, in response to the uncertainty around the duration and negative impact of the COVID-19 pandemic.

Financing Activities —Our net cash used in financing activities was primarily impacted by the following:

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As our debt obligations mature, we intend to refinance the remaining balance, if possible, or pay off the balances at maturity using proceeds from operations and/or corporate-level debt.

During the three months ended March 31, 2020 , we had net borrowings of $1.5 million , primarily as a result of drawing $34.0 million on our revolving credit facility, offset by a pay down in January 2020 of $30.0 million on term loan debt maturing in 2021.

During the three months ended March 31, 2019 our net borrowings decreased $24.4 million primarily as a result of payments on our revolving credit facility, funded by cash inflows from the disposition of properties.

Distributions to stockholders and OP unit holders —Cash used for distributions to common stockholders and OP unit holders increased $2.8 million for the three months ended March 31, 2020 , primarily due to an increase in shares outstanding as compared to the same period in 2019 .

Share repurchases —Cash outflows for share repurchases decreased by $0.3 million for the three months ended March 31, 2020 as compared to the same period in 2019 due to the suspension of the SRP for death, qualifying disability, or determination of incompetence which became effective March 27, 2020.

During the six months ended June 30, 2020 , we had $35.2 million in net repayment of debt primarily as a result of a pay down in January 2020 of $30.0 million on term loan debt maturing in 2021.

During the six months ended June 30, 2019 we had $18.2 million in net repayment of debt primarily as a result of payments on our revolving credit facility, funded primarily by cash inflows from a 1031 exchange escrow release.

Distributions to stockholders and OP unit holders —Cash used for distributions to common stockholders and OP unit holders decreased $16.1 million for the six months ended June 30, 2020 as compared to the same period in 2019 , primarily due to the temporary suspension of stockholder distributions which became effective after the payment of the March 2020 dividend on April 1, 2020.

Share repurchases —Cash outflows for share repurchases decreased by $6.6 million for the six months ended June 30, 2020 as compared to the same period in 2019 due to the suspension of the SRP for death, qualifying disability, or determination of incompetence which became effective March 27, 2020, and the suspension of the SRP with respect to standard repurchases in August 2019.

Critical Accounting Policies and Estimates

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Impact of Recently Issued Accounting Pronouncements

In response to the COVID-19 pandemic, in April 2020, 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 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.

In response to the COVID-19 pandemic, the 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.

We continue to assess the impact of this accounting pronouncement.

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.

Please refer to Note 2 for discussion of the impact of other recently issued accounting pronouncements.

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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-Q

Item 2. Management’s Discussion and Analysis