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Item 1A. Risk Factors

2021-03-12 compared with 2020-03-12 · 240 added, 278 removed, 359 unchanged (59% of the section changed)

You should specifically consider the following material risks in addition to the other information contained in this Annual Report on Form 10-K.

The occurrence of any of the following risks might have a material adverse effect on our business and financial condition.

The risks and uncertainties discussed below are not the only ones we face, but do represent those risks and uncertainties that we believe are most significant to our business, operating results, financial condition, prospects and forward-looking statements.

The occurrence of any of the following risks might have a material adverse effect on our business, operating results, financial condition, and cash flows.

Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business, operating results, financial condition, and cash flows.

Risks Related to Our Structure and an Investment in Us

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Until our shares of common stock are listed on a stock exchange, if ever, stockholders may not sell their shares unless the buyer meets the applicable suitability and minimum purchase standards.

Under the share repurchase program (“SRP”), any shares repurchased will be at the lesser of $10.00 per share or our most recent estimated value per share (“EVPS”).

Under the share repurchase program (“SRP”), any shares repurchased will be at the lesser of $5.75 per share or the most recent estimated value per share (“EVPS”) of our common stock.

Currently, standard repurchases under the SRP are suspended and repurchases are limited to those upon a stockholder’s qualifying death, disability, or determination of incompetence.

In addition, we may choose to repurchase fewer shares than have been requested in any particular month to be repurchased under the SRP, or none at all, in our discretion at any time.

We may repurchase fewer shares than have been requested to be repurchased due to lack of readily available funds because of adverse market conditions beyond our control, the need to maintain liquidity for our operations, or because we have determined that paying off our debt or investing in real property or other illiquid investments or other items is a better use of our capital than repurchasing our shares.

In addition, the amount of shares repurchased in any calendar year is limited to no more than 5% of the weighted average number of shares outstanding during the prior calendar year, and the cash available for repurchases at any particular date is generally limited to the proceeds from the DRIP during the period consisting of the preceding four fiscal quarters, less any cash already used for redemptions since the start of that same period;

however, subject to the limitations described above on the number of shares repurchased, we may use other sources of cash at the discretion of the Board.

Further, the Board may modify, suspend, or terminate the SRP at any time upon 30 days’ notice.

If the full amount of all shares of our common stock requested to be repurchased on a particular date are not repurchased, funds will be allocated pro rata based on the total number of shares of common stock being repurchased, except that (1) we will repurchase all shares of a stockholder who would hold less than half of the minimum purchase requirement as described in the most recently effective registration statement and (2) if stockholder would, after a pro rata repurchase, hold more than half but less than all of the minimum repurchase requirement, we would not repurchase any shares that would reduce his or her ownership below the minimum purchase requirement.

We may repurchase fewer shares than have been requested to be repurchased due to lack of readily available funds because of adverse market conditions beyond our control, the need to maintain liquidity for our operations, or because we have determined that paying off our debt or investing in real property or other investments or other items is a better use of our capital than repurchasing our shares.

The Board of Directors (“Board”) may modify, suspend, or terminate the SRP at any time upon 30 days’ notice.

In addition, because we are not required to authorize the recommencement of a suspension of the SRP, including the currently suspended standard repurchases, within any specified period of time, we may effectively terminate the SRP, or a portion of it, by suspending it indefinitely.

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Because of the illiquid nature of our shares, investors should purchase our shares only as a long-term investment and be prepared to hold them for an indefinite period of time.

The EVPS of our common stock is based on a number of assumptions that may not be accurate or complete and is also subject to a number of limitations.

Effective May 8, 2019, the Board approved an EVPS of our common stock of $11.10 based substantially on the estimated “as is” market value of our portfolio of real estate properties in various geographic locations in the United States and the estimated value of in-place contracts of our third-party asset management business as of March 31, 2019.

The EVPS of our common stock is based on a number of assumptions that may not be accurate or complete and the methodology used to calculate the EVPS is also subject to a number of limitations.

On May 6, 2020, our Board decreased the EVPS of our common stock to $8.75 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, 2020.

The decrease was primarily driven by the negative impact of the COVID-19 pandemic on our non-grocery Neighbors resulting from social distancing and “stay-at-home” guidelines and the uncertainty of the duration and full effect on the overall economy.

We engaged a third-party valuation firm to provide a calculation of the range in EVPS of our common stock as of March 31, 2020, which reflected certain balance sheet assets and liabilities as of that date.

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.

Our EVPS is based upon a number of estimates and assumptions that may not be accurate or complete.

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The EVPS is not audited and does not represent a determination of the fair value of our assets or liabilities based on accounting principles generally accepted in the United States (“GAAP”), nor does it represent a liquidation value of our assets and liabilities, the price a third party would pay to acquire us, the price at which our shares of common stock would trade in secondary markets, or the amount at which our shares of common stock would trade on a national securities exchange.

Accordingly, we can give no assurance that:

our shares would trade at or near the EVPS if listed on a national securities exchange;

a stockholder would be able to resell his or her shares at the EVPS;

a stockholder would ultimately realize distributions per share equal to the EVPS upon a liquidation of our assets and settlement of our liabilities;

a stockholder would receive an amount per share equal to the EVPS upon a sale of the Company;

a third party would offer the EVPS in an arm’s-length transaction to purchase all or substantially all of our shares of common stock;

another independent third-party appraiser or third-party valuation firm would agree with our EVPS;

the methodologies used to calculate our EVPS would be acceptable to the Financial Industry Regulatory Authority (“FINRA”) for use on customer account statements or that the EVPS will satisfy the applicable annual valuation requirements under the Employee Retirement Income Security Act of 1974 (“ERISA”).

Accordingly, we can give no assurance that, (i) our shares would trade at or near the EVPS if listed on a national securities exchange;

(ii) a stockholder would be able to resell his or her shares at the EVPS;

(iii) a stockholder would ultimately realize distributions per share equal to the EVPS upon a liquidation of our assets and settlement of our liabilities;

(iv) a stockholder would receive an amount per share equal to the EVPS upon a sale of the Company;

(v) a third party would offer the EVPS in an arm’s-length transaction to purchase all or substantially all of our shares of common stock;

(vi) another independent third-party appraiser or third-party valuation firm would agree with our EVPS;

or (vii) the methodologies used to calculate our EVPS would be acceptable to the Financial Industry Regulatory Authority (“FINRA”) for use on customer account statements or that the EVPS will satisfy the applicable annual valuation requirements under the Employee Retirement Income Security Act of 1974 (“ERISA”).

Furthermore, we have not made any adjustments to the valuation of our EVPS for the impact of other transactions occurring subsequent to May 6, 2020, including, but not limited to, (i) acquisitions or dispositions of assets;

( ii ) the issuance of common stock under the dividend reinvestment plan (“DRIP”);

(iii) net operating income (“NOI”) earned and dividends declared (see Item 7 of this 10-K for the calculation of NOI);

( ii ) the issuance of common stock under the DRIP;

(iii) Net Operating Income (“NOI”) earned and dividends declared (see “Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Measures - Same-Center Net Operating Income” of this filing on Form 10-K for the calculation of NOI);

(iv) the repurchase of shares;

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Accordingly, the EVPS may or may not be an accurate reflection of the fair market value of our stockholders’ investments and will not likely represent the amount of net proceeds that would result from an immediate sale of our assets.

Accordingly, investors should not rely on the EVPS in making a decision to buy or sell shares of our common stock.

The actual value of shares that we repurchase under the SRP may be substantially less than the price we pay.

The actual value of shares that we repurchase under the SRP, or any future tender offer, may be substantially less than the price we are willing to pay under this program.

Under the SRP, we repurchase eligible shares at the lesser of $5.75 per share or the most recent EVPS.

This price we pay is likely to differ from the price at which a stockholder could resell his or her shares or the price at which our shares would trade if listed on a national securities exchange.

The price we pay is likely to differ from the price at which a stockholder could resell his or her shares or the price at which our shares would trade if listed on a national securities exchange.

Thus, when we repurchase shares of our common stock, the repurchase may be dilutive to our remaining stockholders.

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There currently is no public trading market for shares of our common stock, and our charter does not contain a requirement to effect a liquidity event by a specific date.

In the future, our Board may consider various forms of liquidity, each of which is referred to as a liquidity event, including, but not limited to:

(1) the listing of shares of common stock on a national securities exchange;

(2) the sale of all or substantially all of our assets;

(3) a sale or merger that would provide stockholders with cash and/or securities of a publicly traded company;

or (4) the dissolution of the Company.

In the future, our Board may consider various forms of liquidity, each of which is referred to as a liquidity event, including, but not limited to, (i) the listing of shares of common stock on a national securities

(ii) the sale of all or substantially all of our assets;

(iii) a sale or merger that would provide stockholders with cash and/or securities of a publicly traded company;

or (iv) the dissolution of the Company.

However, there can be no assurance that we will cause a liquidity event to occur.

If we do not pursue a liquidity transaction, shares of our common stock may continue to be illiquid and stockholders may, for an indefinite period of time, be unable to easily convert their investment to cash and could suffer losses on their investments.

If we continue to pay distributions from sources other than our cash flows from operations, we may not be able to sustain our distribution rate, we may have fewer funds available for investment in properties and other assets, and our stockholders’ overall returns may be reduced.

If we pay distributions from sources other than our cash flows from operations, we may not be able to sustain our distribution rate, we may have fewer funds available for investment in properties and other assets, and our stockholders’ overall returns may be reduced.

Our organizational documents permit us to pay distributions from any source without limit (other than those limits set forth under Maryland law).

To the extent we continue to fund distributions from borrowings, we will have fewer funds available for investment in real estate properties and other real estate-related assets, and our stockholders’ overall returns may be reduced.

To the extent we fund distributions from borrowings, we will have fewer funds available for investment in real estate properties and other real estate-related assets, and our stockholders’ overall returns may be reduced.

At times, we may need to borrow funds to pay distributions, which could increase the costs to operate our business.

Furthermore, if we cannot cover our distributions with cash flows from operations, we may be unable to sustain our distribution rate.

For the year ended December 31, 2019 , we paid gross distributions to our common stockholders and noncontrolling interests of $220.2 million , including distributions reinvested through the DRIP of $67.4 million .

For the year ended December 31, 2019 , our net cash provided by operating activities was $226.9 million , which represents a surplus of $6.7 million , or 3.1% , of our distributions paid, while our funds from operations (“FFO”) Attributable to Stockholders and Convertible Noncontrolling Interests were $217.0 million , which represents a shortfall of $3.2 million , or 1.5% , of the distributions paid.

The shortfall was funded by cash flows from operations.

For the year ended December 31, 2018 , we paid distributions of $153.4 million , including distributions reinvested through the DRIP of $44.1 million .

For the year ended December 31, 2018 , our net cash provided by operating activities was $153.3 million , which represents a shortfall of $0.1 million , or 0.1% , of our distributions paid, while our FFO Attributable to Stockholders and Convertible Noncontrolling Interests was $156.2 million , which represents a surplus of $2.8 million , or 1.8% of our distributions paid.

We cannot assure stockholders that we will be able to continue paying distributions at the rate currently paid.

We expect to continue our current distribution practices.

Stockholders, however, may not receive distributions equivalent to those previously paid by us for various reasons, including the following:

we may not have enough cash to pay such distributions due to changes in our cash requirements, indebtedness, capital spending plans, operating cash flows, or financial position, or as a result of unknown or unforeseen liabilities incurred in connection with the PELP transaction, the Merger with REIT II, or the merger with REIT III;

We intend to evaluate distributions on a monthly basis throughout 2021.

It is possible that stockholders may not receive distributions equivalent to those previously paid by us for various reasons, including the following:

• we may not have enough cash to pay such distributions due to changes in our cash requirements, indebtedness, capital spending plans, operating cash flows, or financial position;

• decisions on whether, when, and in what amounts to make any future distributions will remain at all times entirely at the discretion of the Board, which reserves the right to change our distribution practices at any time and for any reason;

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Stockholders have no contractual or other legal right to distributions that have not been authorized by the Board and declared by the Company.

We are highly dependent on key personnel, and the loss of key personnel or inability to attract and retain personnel could adversely affect our business.

We are highly dependent on the leadership and performance of our senior management and other key personnel.

Our future success is dependent, in part, on our ability to attract, retain and motivate qualified senior management and other key personnel.

Competition for these individuals is intense and we cannot be assured that we will retain all of our senior management members or other key personnel or that we will be able to attract and retain other highly qualified individuals for these positions in the future.

Losing any one or more of these persons may have a material adverse effect on our business and operating results.

We have agreed to nominate Mr.

Edison to our Board for each annual meeting through 2027 and for Mr.

Edison to continue serving as Chairman of the Board through 2020.

As part of the PELP transaction, we agreed to nominate Jeffrey S.

Edison, Chairman of the Board and Chief Executive Officer, to our Board for each annual meeting through 2027.

As part of the transaction to acquire certain real estate assets and the third party investment management business of PELP in exchange for stock and cash (the “PELP transaction”), we agreed to nominate Mr.

Edison to the Board for each annual meeting through 2027, subject to certain terminating events.

In addition, our bylaws provide that Mr.

Edison will continue to serve as Chairman of the Board until October 7, 2020, subject to certain terminating events, including the listing of our common stock on a national securities exchange.

As a result, it is possible that Mr.

Edison may continue to be nominated as a director and serve as Chairman of the Board in circumstances when the independent directors would not otherwise have nominated or elected him.

Edison may continue to be nominated as a director in circumstances when the independent directors would not otherwise have nominated or elected him.

The Operating Partnership’s limited partnership agreement grants certain rights and protections to the limited partners, which may prevent or delay a change of control transaction that might involve a premium price for our shares of common stock.

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Edison currently has voting control over approximately 57% of the Operating Partnership’s limited partnership units (exclusive of those owned by us) and therefore could have a significant influence over votes on change of control transactions.

We may be liable for potentially large, unanticipated costs arising from our acquisition of companies contributed or transferred in the PELP transaction, the Merger, and the merger with REIT III.

Prior to completing the PELP transaction, the Merger, and the merger with REIT III, we performed certain due diligence reviews of the business of PELP, REIT II, and REIT III.

Our due diligence review may not have adequately uncovered all of the contingent or undisclosed liabilities we may incur as a consequence of the PELP transaction, the Merger, or the merger with REIT III.

Any such liabilities could cause us to experience potentially significant losses, which could materially adversely affect our business, results of operations and financial condition.

In addition, we have agreed to honor and fulfill, following the closing, the rights to indemnification and exculpation from liabilities for acts or omissions occurring at or prior to the closing of each of the PELP transaction, the Merger, and the merger with REIT III in existence at closing in favor of a manager, director, officer, trustee, agent or fiduciary of any company contributed or transferred under the PELP transaction, the Merger, or the merger with REIT III or their respective subsidiaries contained in (1) the organizational documents of such company or subsidiary and (2) all existing indemnification agreements of such companies and their subsidiaries.

For six years after the closing, we may not amend, modify or repeal the organizational documents of companies contributed under the PELP transaction, the Merger, or the merger with REIT III and their respective subsidiaries in any way that would adversely affect such rights.

We may incur substantial costs to address such claims and are limited in our ability to modify such indemnification obligations.

The tax protection agreement, during its term, could limit the Operating Partnership’s ability to sell or otherwise dispose of certain properties and may require the Operating Partnership to maintain certain debt levels that otherwise would not be required to operate its business.

We and the Operating Partnership entered into a tax protection agreement at the closing of the PELP transaction, pursuant to which if the Operating Partnership (1) sells, exchanges, transfers, conveys or otherwise disposes of certain properties in a taxable transaction for a period of ten years commencing on the closing, or (2) fails, prior to the expiration of such period, to maintain minimum levels of indebtedness that would be allocable to each protected partner for tax purposes or, alternatively, fails to offer such protected partners the opportunity to guarantee specific types of the Operating Partnership’s indebtedness in order to enable such partners to continue to defer certain tax liabilities, the Operating Partnership will indemnify each affected protected partner against certain resulting tax liabilities.

We and the Operating Partnership entered into a tax protection agreement at the closing of the PELP transaction, pursuant to which if the Operating Partnership:

(i) sells, exchanges, transfers, conveys or otherwise disposes of certain properties in a taxable transaction for a period of ten years commencing on the closing;

or (ii) fails, prior to the expiration of such period, to maintain minimum levels of indebtedness that would be allocable to each protected partner for tax purposes or, alternatively, fails to offer such protected partners the opportunity to guarantee specific types of the Operating Partnership’s indebtedness in order to enable such partners to continue to defer certain tax liabilities, the Operating Partnership will indemnify each affected protected partner against certain resulting tax liabilities.

Therefore, although it may be in the stockholders’ best interest for us to cause the Operating Partnership to sell, exchange, transfer, convey or otherwise dispose of one of these properties, it may be economically prohibitive for us to do so during the ten year protection period because of these indemnity obligations.

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As a result, the tax protection agreement will, during its term, restrict our ability to take actions or make decisions that otherwise would be in our best interests.

If the fiduciary of an employee benefit plan subject to ERISA (such as a profit sharing, Section 401(k) or pension plan) or an owner of a retirement arrangement subject to Section 4975 of the Internal Revenue Code (such as an individual retirement account) fails to meet the fiduciary and other standards under ERISA or the IRC as a result of an investment in our stock, the fiduciary could be subject to penalties and other sanctions.

There are special considerations that apply to employee benefit plans subject to ERISA (such as profit sharing, Section 401(k) or pension plans) and other retirement plans or accounts subject to Section 4975 of the Internal Revenue Code (“IRC”) (such as an individual retirement account or “IRA”) that are investing in shares of our common stock.

If the fiduciary of an employee benefit plan subject to ERISA (such as a profit sharing, Section 401(k) or pension plan) or an owner of a retirement arrangement subject to Section 4975 of the Internal Revenue Code (such as an individual retirement account) fails to meet the fiduciary and other standards under ERISA or the Internal Revenue Code (“IRC”) as a result of an investment in our stock, the fiduciary could be subject to penalties and other sanctions.

There are special considerations that apply to employee benefit plans subject to ERISA (such as profit sharing, Section 401(k) or pension plans) and other retirement plans or accounts subject to Section 4975 of the IRC (such as an individual retirement account or “IRA”) that are investing in shares of our common stock.

Fiduciaries and IRA owners investing the assets of such a plan or account in our common stock should satisfy themselves that:

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• the investment will not constitute a prohibited transaction under Section 406 of ERISA or Section 4975 of the IRC.

In addition, if an investment in our shares constitutes a prohibited transaction under ERISA or the IRC, the fiduciary or IRA owner who authorized or directed the investment may be subject to the imposition of excise taxes with respect to the amount invested.

Failure to satisfy the fiduciary standards of conduct and other applicable requirements of ERISA and the IRC may result in the imposition of civil and criminal penalties and could subject the fiduciary to claims for damages or for equitable remedies, including liability for investment losses, and if an investment in our shares constitutes a prohibited transaction under ERISA or the IRC, the fiduciary or IRA owner who authorized or directed the investment may be subject to the imposition of excise taxes with respect to the amount invested.

In addition, the investment transaction must be undone.

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If stockholders invested in our shares through an IRA or other retirement plan, they may be limited in their ability to withdraw required minimum distributions.

Our SRP limits the amount of repurchases (other than those repurchases as a result of a stockholder’s death or disability) that can be made in a given year.

As a result, they may not be able to have their shares repurchased at a time in which they need liquidity to satisfy the RMD requirements under their IRA or other retirement plan.

Even if they are able to have their shares repurchased, the applicable share repurchase price is the lower of $10.00 per share or the EVPS of our common stock as determined by our Board, and this value is expected to fluctuate over time.

As such, a repurchase may be at a price that is less than the price at which the shares were initially purchased.

If stockholders established an IRA or other retirement plan through which they invested in our shares, federal law may require them to withdraw required minimum distributions (“RMDs”) from such plan in the future as they may not be able to have their shares repurchased at a time in which they need liquidity to satisfy the RMD requirements under their IRA or other retirement plan.

A repurchase, if available, may be at a price that is less than the price at which the shares were initially purchased or the current EVPS.

If stockholders fail to withdraw RMDs from their IRA or other retirement plan, they may be subject to certain tax penalties.

Risks Related to the Retail Industry

The ongoing COVID-19 pandemic has had, and is expected to continue to have, a negative effect on our and our Neighbors’ businesses, financial condition, results of operations, cash flows, and liquidity.

In March 2020, the World Health Organization declared COVID-19 a global pandemic.

The COVID-19 pandemic has caused, and is expected to continue to cause, significant disruptions to the United States and global economy and has contributed to significant volatility and negative pressure in financial markets.

The global impact of the outbreak is continually evolving and, as additional cases of the virus are identified, many countries, including the United States, reacted by instituting quarantines, restrictions on travel, and/or mandatory closures of businesses.

Certain states and cities, including where our properties are located, also reacted by instituting quarantines, restrictions on travel, “shelter-in-place” or “stay-at-home” rules, restrictions on types of businesses that may continue to operate, and/or restrictions on the types of construction projects that may continue.

In May 2020, many state and local 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.

The COVID-19 pandemic has impacted our business and financial performance, and we expect this impact to continue.

Our retail and service-based Neighbors depend on in-person interactions with their customers to generate unit-level profitability, and the COVID-19 pandemic has decreased, and may continue to decrease, customers’ willingness to frequent, and mandated “shelter-in-place” or “stay-at-home” orders may prevent customers from frequenting our Neighbors’ businesses, which may result in their inability to maintain profitability and make timely rental payments to us under their leases or to otherwise seek lease modifications or to declare bankruptcy.

At the peak of the pandemic-related closure activity, for our wholly-owned properties and those owned through our joint ventures, our temporary closures reached approximately 2,100 Neighbors, or 37% of all Neighbor spaces, totaling 27% of our annualized base rent (“ABR”) and 22% of our gross leasable area (“GLA”).

As of March 8, 2021, 98% of our occupied Neighbor spaces, totaling 99% of our ABR and GLA, are open for business.

Certain Neighbors remain temporarily closed, have since closed after reopening, are limiting the number of customers allowed in their stores, 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.

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.

While most of our Neighbors have reopened, we cannot presently determine how many of the Neighbors that remain closed will reopen, or whether a portion of those that have reopened will be required by government mandates to temporarily close again or will encounter financial difficulties that require them to close permanently.

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.

However, we believe it is best to begin negotiation of relief only once a Neighbor has reopened and made payments toward rent and recovery charges accrued.

As of March 8, 2021, inclusive of our prorated share of properties owned through our joint ventures, we have executed payment plans with our Neighbors agreeing to defer approximately $8.7 million in rent and related charges, and we granted rent abatements totaling approximately $4.2 million.

These payment plans and rent abatements represented approximately 2% and 1% of portfolio ABR, respectively.

The weighted-average remaining term over which we expect to receive payment on executed payment plans is approximately twelve months.

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

As of March 8, 2021, we have collected approximately 93% of rent and recoveries billed during the second quarter of 2020, approximately 95% of rent and recoveries billed during the third quarter, and over 95% of rent and recoveries billed during the fourth quarter.

Further, as of March 8, 2021, our collections for January and February 2021 were approximately 94% in total.

In the event of any default by a Neighbor under its lease agreement or relief agreement, we may not be able to fully recover, and/or may experience delays in recovering and additional costs in enforcing our rights as landlord to recover, amounts due to us under the terms of the lease agreement and/or relief agreement.

Additionally, certain Neighbors have declared bankruptcy as a result of the effects of the pandemic.

As of December 31, 2020, we have several Neighbors currently in bankruptcy proceedings who continue to occupy space in our centers where we have not yet received notice that the lease has been assumed or rejected, representing an exposure of less than 1% of our total ABR.

Moreover, the ongoing COVID-19 pandemic, restrictions intended to prevent and mitigate its spread, resulting consumer behavior, and the economic slowdown or recession could have additional adverse effects on our business, including with regards to:

• the ability and willingness of our Neighbors to renew their leases upon expiration, our ability to re-lease the properties on the same or better terms in the event of nonrenewal or in the event we exercise our right to replace an existing Neighbor, and obligations we may incur in connection with the replacement of an existing Neighbor, particularly in light of the adverse impact to the financial health of many retailers and service providers that has occurred and continues to occur as a result of the COVID-19 pandemic and the significant uncertainty as to when and the conditions under which certain potential Neighbors will be able to operate physical retail locations in the future;

• a potential sustained or permanent increase in online shopping instead of shopping at physical retail properties, thereby reducing demand for space in our shopping centers and possible related reductions in rent or increased costs to lease space;

• the adverse impact of current economic conditions on the market value of our real estate portfolio and our third-party investment management business, and consequently on the estimated value per share of our common stock;

• the adverse impact of the current economic conditions on our ability to effect a liquidity event at an attractive price or at all in the near term and for a potentially lengthy period of time;

• the financial impact and continued economic uncertainty that could continue to negatively impact our ability to pay distributions to our stockholders and/or to repurchase shares;

• to the extent we were seeking to sell properties in the near term, significantly greater uncertainty regarding our ability to do so at attractive prices or at all;

• anticipated returns from development and redevelopment projects, which have been prioritized to support the reopening of our Neighbors and new leasing activity, or deferred if possible;

• the broader impact of the severe economic contraction due to the COVID-19 pandemic, the resulting increase in unemployment that has occurred in the short-term and its effect on consumer behavior, and negative consequences that will occur if these trends are not reversed in a timely way;

• state, local, or industry-initiated efforts, such as a rent freeze for Neighbors or a suspension of a landlord’s ability to enforce evictions, which may affect our ability to collect rent or enforce remedies for the failure to pay rent;

• severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions, which could make it difficult for us to access debt and equity capital on attractive terms, or at all, and impact our ability to fund business operations and activities and repay liabilities on a timely basis;

• our ability to pay down, refinance, restructure, or extend our indebtedness as it becomes due, and our potential inability to comply with the financial covenants of our credit facility and other debt agreements, which could result in a default and potential acceleration of indebtedness and impact our ability to make additional borrowings under our credit facility or otherwise in the future;

• the potential negative impact on the health of our personnel, particularly if a significant number of them and/or key personnel are impacted, and the potential impact of adaptations to our operations in order to protect our personnel, such as remote work arrangements, could introduce operational risk, including but not limited to cybersecurity risks, and could impair our ability to manage our business.

We temporarily suspended stockholder distributions beginning with the April 2020 distribution, and subsequently reinstated distributions beginning December 2020, in an effort to preserve cash due to current economic uncertainty, and we may choose to do the same in the future.

Additionally, we may in the future choose to pay distributions in shares of our common stock rather than solely in cash, which may result in our stockholders having a tax liability with respect to such distributions that exceed the amount of cash received, if any.

While the rapid developments regarding the COVID-19 pandemic preclude any prediction as to its ultimate adverse impact, the current economic, political, and social environment presents material risks and uncertainties with respect to our and our Neighbors’ business, financial condition, results of operations, cash flows, liquidity, and ability to satisfy debt service obligations.

The continued shift in retail sales towards e-commerce may adversely affect our revenues and cash flows.

Retailers are increasingly affected by e-commerce and changes in customer buying habits, including the delivery or curbside pick-up of items ordered online.

Retailers are increasingly affected by e-commerce and changes in customer buying habits, which have been further accelerated as a result of the COVID-19 pandemic, including the delivery or curbside pick-up of items ordered online.

Retailers are considering these e-commerce trends when making decisions regarding their brick and mortar stores and how they will compete and innovate in a rapidly changing e-commerce environment.

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however, the continuing increase in e-commerce sales in all retail categories (including online orders for immediate delivery or pickup in store) may cause retailers to adjust the size or number of retail locations in the future or close stores.

Our grocer tenants are incorporating e-commerce concepts through home delivery or curbside pickup, which could reduce foot traffic at our centers.

Our grocer Neighbors are incorporating e-commerce concepts through home delivery or curbside pickup, which could reduce foot traffic at our centers.

This shift may adversely affect our occupancy and rental rates, which would affect our revenues and cash flows.

Changes in shopping trends as a result of the growth in e-commerce may also affect the profitability of retailers that do not adapt to changes in market conditions.

These conditions may adversely impact our results of operations and cash flows if we are unable to meet the needs of our tenants or if our tenants encounter financial difficulties as a result of changing market conditions.

While we devote considerable effort and resources to analyze and respond to tenant trends, tenant and consumer preferences, and consumer spending patterns, we cannot predict with certainty what future tenants will want, what future retail spaces will look like, or how much revenue will be generated at traditional brick and mortar locations.

These conditions may adversely impact our results of operations and cash flows if we are unable to meet the needs of our Neighbors or if our Neighbors encounter financial difficulties as a result of changing market conditions.

While we devote considerable effort and resources to analyze and respond to Neighbor trends, Neighbor and consumer preferences, and consumer spending patterns, we cannot predict with certainty what future Neighbors will want, what future retail spaces will look like, or how much revenue will be generated at traditional brick and mortar locations.

If we are unable to anticipate and respond promptly to trends in the market (such as space for a drive through or curbside pickup), our occupancy levels and rental rates may decline.

Our business is dependent on perceptions by retailers and shoppers as to the safety, convenience, and attractiveness of our shopping centers.

We are dependent on perceptions by retailers or shoppers as to the safety, convenience, and attractiveness of our shopping centers.

Such perceptions may be affected by any number of factors within our control (including property maintenance, landscaping, and lighting) as well as those outside of our control (including negative publicity about crime in the area or public road work).

If retailers and shoppers perceive competing shopping centers and other retailing options to be safer, more convenient, or of a higher quality, our revenues may be adversely affected.

Changing economic and retail market conditions in geographic areas where our shopping centers are concentrated may reduce our revenues and cash flows.

Economic conditions in markets where our shopping centers are concentrated can greatly influence our financial performance.

During the year ended December 31, 2019, our properties in Florida and California accounted for 12.3% and 10.3% , respectively, of our Annualized Base Rent (“ABR”).

Our revenues and cash flows may be adversely affected by this geographic concentration if market conditions, such as supply of or demand for retail space or retail shopping trends, deteriorate more significantly in Florida or California compared to other geographic areas.

Actual or threatened epidemics, pandemics, outbreaks, or other public health crises may adversely affect our tenants’ financial condition and the profitability of our properties.

Our business and the businesses of our tenants could be materially and adversely affected by the risks, or the public perception of the risks, related to an epidemic, pandemic, outbreak, or other public health crisis, such as the recent outbreak of novel coronavirus (COVID-19).

The risk, or public perception of the risk, of a pandemic or media coverage of infectious

diseases could cause employees or customers to avoid our properties, which could adversely affect foot traffic to our tenants’ businesses and our tenants’ ability to adequately staff their businesses.

Such events could adversely impact tenants’ sales and/or cause the temporary closure of our tenants’ businesses, complete or partial closure of one or more of our tenants’ distribution centers, temporary or long-term disruption in our tenants’ supply chains from local and international suppliers, and/or delays in the delivery of our tenants’ inventory, all of which could severely disrupt their operations and have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Real Estate Investments and Operations

Adverse economic, regulatory, market, and real estate conditions may adversely affect our financial condition, operating results, and cash flows.

Our portfolio is predominantly comprised of neighborhood grocery-anchored shopping centers.

Therefore, our performance is subject to risks associated with owning and operating these types of real estate assets, including, but not limited to:

(1) changes in national, regional, and local economic climates or demographics;

(2) competition from other available properties and e-commerce, and the attractiveness of our properties to our tenants;

(3) increased competition for real estate assets targeted by our investment strategies;

(4) adverse local conditions, such as oversupply or reduction in demand for similar properties in an area and changes in real estate zoning laws that may reduce the desirability of real estate in an area;

(5) vacancies, changes in market rental rates, and the need to periodically repair, renovate, and re-lease space;

(6) ongoing disruption and/or consolidation in the retail sector, the financial stability of our tenants and the overall financial condition of our tenants, including their ability to pay rent and expense reimbursements;

(7) increases in operating costs, including common area expenses, utilities, insurance and real estate taxes, which are relatively inflexible and generally do not decrease if revenue or occupancy decreases;

(8) increases in the costs to repair, renovate, and re-lease space;

(9) changes in interest rates and the availability of financing, which may render the sale or refinance of a property or loan difficult or unattractive;

(10) earthquakes, tornadoes, hurricanes, wildfires, or other natural disasters, civil unrest, terrorist acts, or acts of war, which may result in uninsured or underinsured losses;

(11) epidemics, pandemics, or other widespread outbreaks or resulting public fear that disrupt the businesses of our tenants causing them to fail to pay rent on time or at all;

and (12) changes in laws and governmental regulations, including those governing usage, zoning, the environment, and taxes.

Our portfolio is predominantly comprised of neighborhood grocery-anchored shopping centers, and during the year ended December 31, 2020, our holdings in Florida and California accounted for 12.5% and 10.4%, respectively, of our ABR (including our wholly-owned portfolio as well as the prorated portion of properties owned through our joint ventures).

Therefore, our performance is subject to risks associated with owning and operating neighborhood grocery-anchored shopping centers, and may be further subject to additional risk as a result of the geographic concentration noted above.

Such risks include, but are not limited to:

(i) changes in national, regional, and local economic climates or demographics;

(ii) competition from other available properties and e-commerce, and the attractiveness of our properties to our Neighbors;

(iii) increased competition for real estate assets targeted by our investment strategies;

(iv) adverse local conditions, such as oversupply or reduction in demand for similar properties in an area and changes in real estate zoning laws that may reduce the desirability of real estate in an area;

(v) vacancies, changes in market rental rates, and the need to periodically repair, renovate, and re-lease space;

(vi) ongoing disruption and/or consolidation in the retail sector, the financial stability of our Neighbors and the overall financial condition of our Neighbors, including their ability to pay rent and expense reimbursements;

(vii) increases in operating costs, including common area expenses, utilities, insurance and real estate taxes, which are relatively inflexible and generally do not decrease if revenue or occupancy decreases;

(viii) increases in the costs to repair, renovate, and re-lease space;

(ix) changes in interest rates and the availability of financing, which may render the sale or refinance of a property or loan difficult or unattractive;

(x) earthquakes, tornadoes, hurricanes, wildfires, or other natural disasters, civil unrest, terrorist acts, or acts of war, which may result in uninsured or underinsured losses;

(xi) epidemics, pandemics, or other widespread outbreaks or resulting public fear that disrupt the businesses of our Neighbors causing them to fail to pay rent on time or at all;

and (xii) changes in laws and governmental regulations, including those governing usage, zoning, the environment, and taxes.

These and other factors could adversely affect our financial condition, operating results, and cash flows.

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We routinely evaluate whether there are any impairment indicators, including property operating performance, property occupancy trends, and actual marketing or listing price of properties being targeted for disposition, such that the value of the real estate properties (including any related tangible or intangible assets or liabilities) may not be recoverable.

Through the evaluation, we compare the current carrying value of the asset to the estimated undiscounted cash flows that are directly associated with the use and ultimate disposition of the asset.

Our estimated cash flows are based on several key assumptions, including rental rates, costs of tenant improvements, leasing commissions, anticipated holding periods, and assumptions regarding the residual value upon disposition, including the estimated exit capitalization rate.

If, through our evaluation, we determine that a given asset exhibits such indicator, we then compare the current carrying value of the asset to the estimated undiscounted cash flows that are directly associated with the use and ultimate disposition of the asset.

Our estimated cash flows are based on several key assumptions, including rental rates, costs of Neighbor improvements, leasing commissions, anticipated holding periods, and assumptions regarding the residual value upon disposition, including the estimated exit capitalization rate.

These key assumptions are subjective in nature and may differ materially from actual results.

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These subjective assessments have a direct effect on our net income because recording an impairment charge results in an immediate negative adjustment to net income, which may be material.

During the year ended December 31, 2019, we incurred $87.4 million of impairment charges related to real estate assets currently under contract or actively marketed for sale at a disposition price that was less than the carrying value.

During the years ended December 31, 2020 and 2019, we incurred impairment charges of $2.4 million and $87.4 million, respectively, related to real estate assets currently under contract or actively marketed for sale at a disposition price that was less than the carrying value.

We have recorded such impairment charges as we have been selling non-core assets to improve the quality of our portfolio.

We are targeting to complete this phase of our disposition program in the first half of 2020, but impairments may occur in the future as we expect core dispositions to continue as we continue to pay off debt to delever our balance sheet.

We continue to sell non-core assets and may potentially recognize impairments in future quarters.

Accordingly, there can be no assurance that we will not record additional impairment charges in the future related to our assets.

Our revenues and cash flows will be affected by the success and economic viability of our anchor tenants.

Anchor tenants (a tenant occupying 10,000 or more square feet) occupy large stores in our shopping centers, pay a significant portion of the total rent at a property, and contribute to the success of other tenants by attracting shoppers to the property.

Our revenues and cash flows may be adversely affected by the loss of revenues and additional costs in the event a significant anchor tenant (1) becomes bankrupt or insolvent, (2) experiences a downturn in its business, (3) materially defaults on its lease, (4) decides not to renew its lease as it expires, (5) renews its lease at lower rental rates and/or requires tenant improvements, or (6) renews its lease but reduces its store size, which results in down-time and additional tenant improvement costs to us to re-lease the space.

Our revenues and cash flows will be affected by the success and economic viability of our anchor Neighbors.

Anchor Neighbors (a Neighbor occupying 10,000 or more square feet) occupy large stores in our shopping centers, pay a significant portion of the total rent at a property, and contribute to the success of other Neighbors by attracting shoppers to the property.

Our revenues and cash flows may be adversely affected by the loss of revenues and additional costs in the event a significant anchor Neighbor:

(i) becomes bankrupt or insolvent;

(ii) experiences a downturn in its business;

(iii) materially defaults on its lease;

(iv) decides not to renew its lease as it expires;

(v) renews its lease at lower rental rates and/or requires tenant improvements;

or (vi) renews its lease but reduces its store size, which results in down-time and additional tenant improvement costs to us to re-lease the space.

Some anchors have the right to vacate their space and may prevent us from re-tenanting by continuing to comply and pay rent in accordance with their lease agreement.

Vacated anchor space, including space owned by the anchor, can reduce rental revenues generated by the shopping center in other spaces because of the loss of the departed anchor's customer drawing power.

In the event that we are unable to re-lease the vacated space to a new anchor tenant in such situations, we may incur additional expenses in order to re-model the space to be able to re-lease the space to more than one tenant.

If a significant tenant vacates a property, co-tenancy clauses in select lease contracts may allow other tenants to modify or terminate their rent or lease obligations.

In the event that we are unable to re-lease the vacated space to a new anchor Neighbor in such situations, we may incur additional expenses in order to re-model the space to be able to re-lease the space to more than one Neighbor.

If a significant Neighbor vacates a property, co-tenancy clauses in select lease contracts may allow other Neighbors to modify or terminate their rent or lease obligations.

Co-tenancy clauses have several variants:

they may allow a tenant to postpone a store opening if certain other tenants fail to open their stores;

they may allow a tenant to close its store prior to lease

expiration if another tenant closes its store prior to lease expiration;

or they may allow a tenant to pay reduced levels of rent until a certain number of tenants open their stores within the same shopping center.

The leases of some anchor tenants may permit the anchor tenant to transfer its lease to another retailer.

The transfer to a new anchor tenant could cause customer traffic in the retail center to decrease and thereby reduce the income generated by that retail center.

A lease transfer to a new anchor tenant could also allow other tenants to make reduced rental payments or to terminate their leases.

A significant percentage of our revenues is derived from non-anchor tenants and our net income and ability to make distributions to stockholders may be adversely affected if these tenants are not successful.

A significant percentage of our revenues is derived from non-anchor tenants.

Such tenants may be more vulnerable to negative economic conditions as they have more limited resources than anchor tenants.

A property may incur vacancies either by the expiration of a tenant lease, the continued default of a tenant under its lease, or the early termination of a lease by a tenant.

they may allow a Neighbor to postpone a store opening if certain other Neighbors fail to open their stores;

they may allow a Neighbor to close its store prior to lease expiration if another Neighbor closes its store prior to lease expiration;

or they may allow a Neighbor to pay reduced levels of rent until a certain number of Neighbors open their stores within the same shopping center.

The leases of some anchor Neighbors may permit the anchor Neighbor to transfer its lease to another retailer.

The transfer to a new anchor Neighbor could cause customer traffic in the retail center to decrease and thereby reduce the income generated by that retail center.

A lease transfer to a new anchor Neighbor could also allow other Neighbors to make reduced rental payments or to terminate their leases.

A significant percentage of our revenues is derived from non-anchor Neighbors, and our net income and ability to make distributions to stockholders may be adversely affected if these Neighbors are not successful.

A significant percentage of our revenues is derived from non-anchor Neighbors.

Such Neighbors may be more vulnerable to negative economic conditions as they have more limited resources than anchor Neighbors.

Significant Neighbor distress across our portfolio could adversely affect our financial condition, operating results, and cash flows.

A property may incur vacancies either by the expiration of a Neighbor lease, the continued default of a Neighbor under its lease, or the early termination of a lease by a Neighbor.

If vacancies continue for a long period of time, we may suffer reduced revenues resulting in less cash available to distribute to stockholders.

In order to maintain tenants, we may have to offer inducements, such as free rent and tenant improvements, to compete for attractive tenants.

If we are unable to attract the right type or mix of non-anchor tenants into our shopping centers, our revenues and cash flows may be adversely affected.

In addition, if we are unable to attract additional or replacement tenants, the resale value of the property could be diminished, even below our cost to acquire the property, because the market value of a particular property depends principally upon the value of the cash flow generated by the leases associated with that property.

In order to maintain Neighbors, we may have to offer inducements, such as free rent and tenant improvements, to compete for attractive Neighbors.

If we are unable to attract the right type or mix of non-anchor Neighbors into our shopping centers, our revenues and cash flows may be adversely affected.

In addition, if we are unable to attract additional or replacement Neighbors, the resale value of the property could be diminished, even below our cost to acquire the property, because the market value of a particular property depends principally upon the value of the cash flow generated by the leases associated with that property.

Such a reduction on the resale value of a property could also reduce the value of our stockholders’ investments.

We face considerable competition in the leasing market and may be unable to renew leases or re-lease space as leases expire.

Consequently, we may be required to make rent or other concessions and/or incur significant capital expenditures to retain and attract tenants, which could adversely affect our financial condition, operating results, and cash flows.

Consequently, we may be required to make rent or other concessions and/or incur significant capital expenditures to retain and attract Neighbors, which could adversely affect our financial condition, operating results, and cash flows.

There are numerous shopping venues, including other shopping centers and e-commerce, that compete with our portfolio in attracting and retaining retailers.

This competition may hinder our ability to attract and retain tenants, leading to increased vacancy rates, reduced rents, and/or increased capital investments.

This competition may hinder our ability to attract and retain Neighbors, leading to increased vacancy rates, reduced rents, and/or increased capital investments.

For leases that renew, rental rates upon renewal may be lower than current rates.

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In these situations, our financial condition, operating results, and cash flows could be adversely affected.

Properties for information regarding scheduled lease expirations and leases renewed subsequent to December 31, 2019 and the ABR of new leases signed during 2019.

We may be unable to sell properties when desired or at an attractive price, and the sale of a property could cause significant income tax payments.

See “Part I, Item 2.

Properties” of this filing on Form 10-K for information regarding scheduled lease expirations and leases renewed subsequent to December 31, 2020 and the ABR of new leases signed during 2020.

We may be unable to sell properties when desired, at an attractive price, or at all, and the sale of a property could cause significant income tax payments.

Our properties, including related tangible and intangible assets, represent the majority of our total consolidated assets and they may not be readily convertible to cash.

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Some of our properties have a low tax basis, which may result in a taxable gain on sale.

We intend to utilize tax-free exchanges under Section 1031 of the Code to mitigate taxable income (“1031 exchanges”);

We intend to utilize tax-deferred exchanges under Section 1031 of the IRC to mitigate taxable income (“Section 1031 Exchanges”);

however, there can be no assurance that we will identify exchange properties that meet our investment objectives for acquisitions.

In the event that we do not utilize Section 1031 Exchanges, we may be required to distribute the gain proceeds to stockholders or pay income tax, which may reduce our cash flows available to fund our commitments and distributions to stockholders.

Our performance depends on the financial health of tenants in our portfolio and our continued ability to collect rent when due.

Significant tenant distress across our portfolio could adversely affect our financial condition, operating results, and cash flows.

Our income is substantially derived from rental income on real property.

As a result, our performance depends on the collection of rent from tenants in our portfolio.

Our income would be adversely affected if a significant number of our tenants failed to make rental payments when due.

In addition, many of our tenants rely on external sources of financing to operate and grow their businesses, and disruptions in credit markets could adversely affect our tenants’ ability to obtain financing on favorable terms or at all.

If our tenants are unable to secure necessary financing to continue to operate or expand their businesses, they may be unable to meet their rent obligations, renew leases, or enter into new leases with us, which could adversely affect our financial condition, operating results, and cash flows.

In certain circumstances, a tenant may have a right to terminate its lease.

For example, in certain circumstances, a failure by an anchor tenant to occupy their leased premises could result in lease terminations or reductions in rent paid by other tenants in those shopping centers.

In such situations, we cannot be certain that we will be able to re-lease space on similar or economically advantageous terms.

The loss of rental revenues from a significant number of tenants and difficulty in replacing such tenants could adversely affect our financial condition, operating results, and cash flows.

We may be unable to collect balances due from tenants in bankruptcy.

The bankruptcy or insolvency of a significant tenant or a number of smaller tenants may adversely affect our financial condition and our ability to pay distributions to our stockholders.

Generally, under bankruptcy law, a debtor tenant has the legal right to reject any or all of their leases and close related stores.

If the tenant rejects the lease, we will have a claim against the tenant’s bankruptcy estate.

Moreover, it is possible that future legislation could be enacted that could modify or repeal the laws with respect to Section 1031 Exchanges, which

could make it more difficult or impossible for us to dispose of properties on a tax-deferred basis.

The current administration has also indicated its intention to modify the laws with respect to Section 1031 Exchanges in a manner that could make it more difficult or impossible for us to dispose of properties on a tax-deferred basis.

We may be unable to collect balances due from Neighbors in bankruptcy.

The bankruptcy or insolvency of a significant Neighbor or a number of smaller Neighbors may adversely affect our financial condition and our ability to pay distributions to our stockholders.

Generally, under bankruptcy law, a debtor Neighbor has the legal right to reject any or all of their leases and close related stores.

If the Neighbor rejects the lease, we will have a claim against the Neighbor’s bankruptcy estate.

Although rent owing for the period between filing for bankruptcy and rejection of the lease may be afforded administrative expense priority and paid in full, pre-bankruptcy arrears and amounts owing under the remaining term of the lease will be afforded general unsecured claim status (absent collateral securing the claim).

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Additionally, we may incur significant expense to recover our claim and to re-lease the vacated space.

In the event that a tenant with a significant number of leases in our shopping centers files bankruptcy and rejects its leases, we may experience a significant reduction in our revenues and may not be able to collect all pre-petition amounts owed by the bankrupt tenant.

Long-term leases with our tenants may not result in fair value over time.

From time to time, we enter into long-term leases with our shopping center tenants.

In the event that a Neighbor with a significant number of leases in our shopping centers files bankruptcy and rejects its leases, we may experience a significant reduction in our revenues and may not be able to collect all pre-petition amounts owed by the bankrupt Neighbor.

Long-term leases with our Neighbors may not result in fair value over time.

From time to time, we enter into long-term leases with our shopping center Neighbors.

Long-term leases do not typically allow for significant changes in rental payments and do not expire in the near term.

If we do not accurately judge the potential for increases in market rental rates when negotiating these long-term leases, significant increases in future property operating costs could result in receiving less than fair value from these leases, which would adversely affect our revenues and the funds available for distributions to stockholders.

We may be restricted from re-leasing space to certain tenants at our particular shopping centers.

Some of our leases contain provisions that give a specific tenant the exclusive right to sell particular types of goods or services within that shopping center.

These provisions may limit the number and types of prospective tenants to which we are able to lease space in a particular shopping center, which may result in increased costs to find a permissible tenant and decreased revenues if one or more spaces sit vacant or we have to accept lower rental rates or a less qualified tenant to fill the space.

We may be restricted from re-leasing space to certain Neighbors at our particular shopping centers.

Some of our leases contain provisions that give a specific Neighbor the exclusive right to sell particular types of goods or services within that shopping center.

These provisions may limit the number and types of prospective Neighbors to which we are able to lease space in a particular shopping center, which may result in increased costs to find a permissible Neighbor and decreased revenues if one or more spaces sit vacant or we have to accept lower rental rates or a less qualified Neighbor to fill the space.

We face competition and other risks in pursuing acquisition opportunities that could increase the cost of such acquisitions and/or limit our ability to grow, and we may not be able to generate expected returns or successfully integrate completed acquisitions into our existing operations.

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Once we acquire new properties, these properties may not yield expected returns for several reasons, including:

(1) failure to achieve expected occupancy and/or rent levels within the projected time frame, if at all;

(2) inability to successfully integrate new properties into existing operations;

and (3) exposure to fluctuations in the general economy, including due to the time lag between signing definitive documentation to acquire a new property and the closing of the acquisition.

(i) failure to achieve expected occupancy and/or rent levels within the projected time frame, if at all;

(ii) inability to successfully integrate new properties into existing operations;

and (iii) exposure to fluctuations in the general economy, including due to the time lag between signing definitive documentation to acquire a new property and the closing of the acquisition.

If any of these events occur, the cost of the acquisition may exceed initial estimates or the expected returns may not achieve those originally contemplated, which could adversely affect our financial condition, operating results, and cash flows.

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Conflicts arising between us and our partners may be difficult to manage and/or resolve and it could be difficult to manage or otherwise monitor the existing business arrangements.

In addition, joint venture arrangements may decrease our ability to manage risk and implicate additional risks, such as (1) potentially inferior financial capacity, diverging business goals and strategies and the need for our venture partners’ continued cooperation;

(2) our inability to take actions with respect to the joint ventures’ activities that we believe are favorable to us if our joint venture partners do not agree;

(3) our inability to control the legal entities that have title to the real estate associated with the joint ventures;

(4) our lenders may not be easily able to sell our joint venture assets and investments or may view them less favorably as collateral, which could negatively affect our liquidity and capital resources;

(5) our joint venture partners can take actions that we may not be able to anticipate or prevent, which could result in negative impacts on our debt and equity;

and (6) our joint venture partners’ business decisions or other actions or omissions may result in harm to our reputation or adversely affect the value of our investments.

In addition, joint venture arrangements may decrease our ability to manage risk and implicate additional risks, such as:

(i) potentially inferior financial capacity, diverging business goals and strategies and the need for our venture partners’ continued cooperation;

(ii) our inability to take actions with respect to the joint ventures’ activities that we believe are favorable to us if our joint venture partners do not agree;

(iii) our inability to control the legal entities that have title to the real estate associated with the joint ventures;

(iv) our lenders may not be easily able to sell our joint venture assets and investments or may view them less favorably as collateral, which could negatively affect our liquidity and capital resources;

(v) our joint venture partners can take actions that we may not be able to anticipate or prevent, which could result in negative impacts on our debt and equity;

and (vi) our joint venture partners’ business decisions or other actions or omissions may result in harm to our reputation or adversely affect the value of our investments.

If we set aside insufficient capital reserves, we may be required to defer necessary capital improvements.

If we do not have enough reserves for capital to supply needed funds for capital improvements throughout the life of the investment in a property and there is insufficient cash available from our operations, we may be required to defer necessary improvements to a property, which may cause that property to suffer from a greater risk of obsolescence or a decline in value, or a greater risk of decreased cash flow as a result of fewer potential tenants being attracted to the property.

If this happens,

we may not be able to maintain projected rental rates for affected properties, and our results of operations may be negatively affected.

We face considerable competition for tenants and the business of retail shoppers.

Consequently, we actively reinvest in our portfolio in the form of development and redevelopment projects.

Development and redevelopment projects have inherent risks that could adversely affect our financial condition, operating results, and cash flows.

If this happens, we may not be able to maintain projected rental rates for affected properties, and our results of operations may be negatively affected.

We actively reinvest in our portfolio in the form of development and redevelopment projects, which have inherent risks that could adversely affect our financial condition, operating results, and cash flows.

We actively pursue opportunities for outparcel development and existing property redevelopment.

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Also, to the extent we must pay unexpectedly large amounts for insurance, we could suffer reduced earnings that would result in lower distributions to stockholders .

Climate change may adversely affect our properties, operations, and business.

Climate change may adversely affect our business, operating results, financial condition, and cash flows.

Climate change, including the impact of global warming, creates physical and financial risk.

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The occurrence of one or more natural disasters, such as hurricanes, tropical storms, tornadoes, wildfires, floods, and earthquakes (whether or not caused by climate change), could cause considerable damage to our properties, disrupt our operations and negatively affect our financial performance.

To the extent any of these events result in significant damage to or closure of one or more of our shopping centers, our operations and financial performance could be adversely affected through lost tenants and an inability to lease or re‑lease the space.

To the extent any of these events result in significant damage to or closure of one or more of our shopping centers, our operations and financial performance could be adversely affected through lost Neighbors and an inability to lease or re‑lease the space.

In addition, these events could result in significant expenses to restore or remediate a property, increases in fuel or other energy costs or a fuel shortage, and increases in the costs of (or making unavailable) insurance on favorable terms if they result in significant loss of property or other insurable damage.

As of December 31, 2019 , our real estate investments, including our wholly-owned and the prorated portion of those owned through our unconsolidated joint ventures, in California, Florida, Texas, and Georgia represented 38.9% of our ABR, making us particularly susceptible to weather events and natural disasters in those states.

In addition, compliance with new or more stringent laws or regulations or stricter interpretations of existing laws may require material expenditures by us.

For example, various federal, state, and regional laws and regulations have been implemented or are under consideration to mitigate the effects of climate change caused by greenhouse gas emissions.

Among other things, “green” building codes may seek to reduce emissions through the imposition of standards for

design, construction materials, water and energy usage and efficiency, and waste management.

Among other things, “green” building codes may seek to reduce

emissions through the imposition of standards for design, construction materials, water and energy usage and efficiency, and waste management.

Such codes could require us to make improvements to our existing properties, increase the costs of maintaining or improving our existing properties or developing new properties, or increase taxes and fees assessed on us or our properties.

As an owner and/or operator of real estate, we could become subject to liability for environmental violations, regardless of whether we caused such violations.

As an owner and/or operator of real estate, we could become subject to liability for environmental violations, regardless of whether we caused such violations, and our efforts to identify environmental liabilities may not be successful.

We could become subject to liability in the form of fines or damages for noncompliance with environmental laws and regulations.

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The presence of hazardous or toxic substances, or the failure to remediate the related contamination, may also adversely affect our ability to sell, lease or redevelop a property or to borrow money using a property as collateral.

Our efforts to identify environmental liabilities may not be successful.

Although we believe that our portfolio is in substantial compliance with U.S.

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However, we cannot assure you that:

(1) previous environmental studies with respect to the portfolio revealed all potential environmental liabilities;

(2) any previous owner, occupant or tenant of a property did not create any material environmental condition not known to us;

(3) the current environmental condition of the portfolio will not be affected by tenants and occupants, by the condition of nearby properties, or by other unrelated third parties;

or (4) future uses or conditions (including, without limitation, changes in applicable environmental laws and regulations or the interpretation thereof) will not result in environmental liabilities.

(i) previous environmental studies with respect to the portfolio revealed all potential environmental liabilities;

(ii) any previous owner, occupant or tenant of a property did not create any material environmental condition not known to us;

(iii) the current environmental condition of the portfolio will not be affected by tenants and occupants, by the condition of nearby properties, or by other unrelated third parties;

or (iv) future uses or conditions (including, without limitation, changes in applicable environmental laws and regulations or the interpretation thereof) will not result in environmental liabilities.

Compliance or failure to comply with the Americans with Disabilities Act and fire, safety, and other regulations could result in substantial costs and may decrease cash available for stockholder distributions.

Our properties are, or may become subject to, the Americans with Disabilities Act of 1990, as amended (“ADA”), which generally requires that all places of public accommodation comply with federal requirements related to access and use by disabled persons.

Our properties are or may become subject to the ADA which generally requires that all places of public accommodation comply with federal requirements related to access and use by disabled persons.

Compliance with the ADA’s requirements could require the removal of access barriers and noncompliance may result in the imposition of injunctive relief, monetary penalties, or in some cases, an award of damages.

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We may be required to make substantial capital expenditures to comply with these requirements, and these expenditures may reduce our net income and may have a material adverse effect on our ability to meet our financial obligations and make distributions to our stockholders.

Our business and operations would suffer in the event of system failures.

Despite the implementation of security measures and the existence of a disaster recovery and business continuity plans for our internal information technology systems, our systems are vulnerable to damages from any number of sources, including computer viruses, unauthorized access, energy blackouts, natural disasters, terrorism, war, and telecommunication failures.

Any system failure or accident that causes interruptions in our operations could result in a material disruption to our business.

We may also incur additional costs to remedy damages caused by such disruptions, which we may not be able to recover fully or at all from our insurance providers.

We and our tenants face risks relating to cybersecurity attacks, which could cause loss of confidential information and other disruptions to business operations, and compliance with new laws and regulations regarding cybersecurity and privacy may result in substantial costs and may decrease cash available for distributions.

We and our Neighbors face risks relating to cybersecurity attacks, which could cause loss of confidential information and other disruptions to business operations, and compliance with new laws and regulations regarding cybersecurity and privacy may result in substantial costs and may decrease cash available for distributions.

Our business is at risk from and may be adversely affected by cybersecurity attacks.

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We may face such cybersecurity attacks through malware, computer viruses, attachments to e-mails, persons inside our organization or persons with access to systems inside our organization, and other significant disruptions of our information technology (IT) systems.

The risk of a cybersecurity attack, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity, and sophistication of attempted attacks and intrusions from

around the world have increased.

The techniques and sophistication used to conduct cyber attacks and breaches of IT systems, as well as the sources and targets of these attacks, change frequently and are often not recognized until such attacks are launched or have been in place for a period of time.

Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations and, in some cases, may be critical to the operations of certain of our tenants.

In addition to our own IT systems, we also depend third parties to provide IT services relating to several key business functions, such as administration, accounting, communications, document management and storage, human resources, payroll, tax, investor relations, and certain finance functions.

Any of our IT systems and those provided by third parties contain personal, financial, or other information that is entrusted to us by our tenants and employees as well as proprietary PECO information and other confidential information related to our business.

In addition to our own IT systems, we also depend on third parties to provide IT services relating to several key business functions, such as administration, accounting, communications, document management and storage, human resources, payroll, tax, investor relations, and certain finance functions.

Our IT systems and those provided by third parties may contain personal, financial, or other information that is entrusted to us by our Neighbors and employees, as well as proprietary PECO information and other

confidential information related to our business.

We and such third parties employ a number of measures to prevent, detect, and mitigate these threats, including password protection, firewalls, backup servers, malware detection, intrusion sensors, threat monitoring, user training, and periodic penetration testing;

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As our reliance on technology has increased, so have the risks posed to our systems, both internal and those we have outsourced.

The primary risks that could directly result from the occurrence of a cyber incident include operational interruption, damage to our relationship with our tenants, and private data exposure.

The primary risks that could directly result from the occurrence of a cyber incident include operational interruption, damage to our relationship with our Neighbors, and private data exposure.

Our financial results and business operations may be negatively affected by such an incident or the resulting negative media attention.

A cybersecurity attack could (1) disrupt the proper functioning of our networks and systems and therefore our operations and/or those of certain of our tenants;

(2) compromise the confidential or proprietary information of our tenants, employees, and vendors, which others could use to compete against us or for disruptive, destructive, or otherwise harmful purposes and outcomes;

(3) result in our inability to maintain the building systems relied upon by our tenants for the efficient use of their leased space;

(4) require significant management attention and resources to remedy and damages that result;

(5) result in misstated financial reports, violations of loan covenants and/or missed reporting deadlines;

(6) result in our inability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT;

(7) subject us to claims for breach of contract, damages, credits, penalties, or termination of leases or other agreements or relationships;

(8) cause reputational damage that adversely affects tenant, investor, and employee confidence in us, which could negatively affect our ability to attract and retain tenants, investors, and employees;

(9) result in significant remediation costs, some or all of which may not be recoverable from our insurance carriers;

and (10) result in increases in the cost of obtaining insurance on favorable terms, or at all, if the attack results in significant insured losses.

A cybersecurity attack could:

(i) disrupt the proper functioning of our networks and systems and therefore our operations and/or those of certain of our Neighbors;

(ii) compromise the confidential or proprietary information of our Neighbors, employees, and vendors, which others could use to compete against us or for disruptive, destructive, or otherwise harmful purposes and outcomes;

(iii) result in our inability to maintain the building systems relied upon by our Neighbors for the efficient use of their leased space;

(iv) require significant management attention and resources to remedy and damages that result;

(v) result in misstated financial reports, violations of loan covenants and/or missed reporting deadlines;

(vi) result in our inability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT;

(vii) subject us to claims for breach of contract, damages, credits, penalties, or termination of leases or other agreements or relationships;

(viii) cause reputational damage that adversely affects Neighbor, investor, and employee confidence in us, which could negatively affect our ability to attract and retain Neighbors, investors, and employees;

(ix) result in significant remediation costs, some or all of which may not be recoverable from our insurance carriers;

and (x) result in increases in the cost of obtaining insurance on favorable terms, or at all, if the attack results in significant insured losses.

Such security breaches also could result in a violation of applicable federal and state privacy and other laws, and subject us to private consumer, business partner, or securities litigation and governmental investigations and proceedings, any of which could result in our exposure to material civil or criminal liability, and we may not be able to recover these expenses from our service providers, responsible parties, or insurance carriers.

Similarly, our tenants rely extensively on IT systems to process transactions and manage their businesses and thus are also at risk from and may be adversely affected by cybersecurity attacks.

An interruption in the business operations of our tenants or a deterioration in their reputation resulting from a cybersecurity attack, including unauthorized access to customers’ credit card data and other confidential information, could indirectly negatively affect our business and cause lost revenues.

As of December 31, 2019, we have not had any material incidences involving cybersecurity attacks.

To mitigate the risk of a cybersecurity attack or other data security breach, new laws and regulations have been implemented by governments, including the state of California, and several other states currently have privacy or cybersecurity legislation under consideration.

Compliance with new or more stringent laws or regulations or stricter interpretations of existing laws regarding cybersecurity and privacy may require us to make significant expenditures and may cause increases in the cost of (or make unavailable) insurance on favorable terms, and these expenditures and increased costs may reduce our net income and may have an adverse effect on our ability to meet our financial obligations and make distributions to our stockholders.

Similarly, our Neighbors rely extensively on IT systems to process transactions and manage their businesses and thus are also at risk from and may be adversely affected by cybersecurity attacks.

An interruption in the business operations of our Neighbors or a deterioration in their reputation resulting from a cybersecurity attack, including unauthorized access to customers’ credit card data and other confidential information, could indirectly negatively affect our business and cause lost revenues.

As of December 31, 2020, we have not had any material incidents involving cybersecurity attacks.

We could be subject to legal or regulatory proceedings that may adversely affect our cash flows and results of operations.

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Additionally, the sale of properties resulting in significant tax gains may require higher distributions to our stockholders or payment of additional income taxes in order to maintain our REIT status.

We intend to utilize 1031 exchanges to mitigate taxable income, however there can be no assurance that we will identify exchange properties that meet our investment objectives for acquisitions.

We intend to utilize Section 1031 Exchanges to mitigate taxable income, however there can be no assurance that we will identify exchange properties that meet our investment objectives for acquisitions.

We have substantial indebtedness, and we may need to incur additional indebtedness in the future;

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We have obtained, and are likely to continue to obtain, lines of credit, and other long-term financing that are secured by our properties and other assets.

On December 31, 2019 , we had indebtedness of $2.4 billion , which comprises $395.0 million in outstanding secured loan facilities, $1.7 billion in unsecured debt, and $324.6 million in mortgage loans and finance lease obligations.

In connection with executing our business strategies, we expect to evaluate the possibility of additional

acquisitions and strategic investments, and we may elect to finance these endeavors by incurring additional indebtedness.

On December 31, 2020, we had indebtedness of $2.3 billion, which comprises $1.6 billion in unsecured debt, $0.4 billion in outstanding secured loan facilities, and $0.3 billion in mortgage loans and finance lease obligations.

In connection with executing our business strategies, we expect to evaluate the possibility of additional acquisitions and strategic investments, and we may elect to finance these endeavors by incurring additional indebtedness.

We may also incur mortgage debt on properties that we already own in order to obtain funds to acquire additional properties or make other capital investments.

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requiring the use of a substantial portion of our cash flow from operations for the payment of principal and interest on our debt, thereby limiting the amount of free cash flow available for future operations, acquisitions, distributions, stock repurchases, or other uses;

making us more vulnerable to economic or industry downturns, including interest rate increases;

making us more vulnerable to economic or industry

downturns, including interest rate increases;

and placing us at a competitive disadvantage compared to less leveraged competitors.

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Lock-out provisions may include terms that provide strong financial disincentives for borrowers to prepay their outstanding loan balance and exist in order to protect the yield expectations of lenders.

We currently own 15 properties with loans that are subject to lock-out provisions prohibiting prepayment.

We currently do not own any properties with loans that are subject to lock-out provisions prohibiting prepayment.

We may acquire additional properties in the future subject to such provisions.

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In particular, lock-out provisions could preclude us from participating in major transactions that could result in a disposition of our assets or a change in control even though that disposition or change in control might be in the best interests of our stockholders.

We may be adversely affected by changes in LIBOR reporting practices or the method in which LIBOR is determined.

As of December 31, 2019 , we had approximately $1.7 billion of indebtedness that is tied to the London Interbank Offered Rate (“LIBOR”) of which $1.4 billion of the LIBOR-based indebtedness was fixed through the use of interest rate swaps.

Additionally, we have a revolving credit facility that is tied to LIBOR with a capacity of $500.0 million of which we have no outstanding balance (excluding letters of credit, which reduce availability) as of December 31, 2019 .

In July 2017, the United

Kingdom regulator that regulates LIBOR announced its intention to phase out LIBOR rates by the end of 2021.

The Alternative Reference Rates Committee, a steering committee comprised of large U.S.

financial institutions, has proposed replacing LIBOR in derivatives and other financial contracts with a new index calculated by short-term repurchase agreements - the Secured Overnight Financing Rate.

At this time, no consensus exists as to what rate or rates may become accepted alternatives to LIBOR, and it is impossible to predict whether and to what extent banks will continue to provide LIBOR submissions to the administrator of LIBOR, whether LIBOR rates will cease to be published or supported before or after 2021, or whether any additional reforms to LIBOR may be enacted in the United Kingdom or elsewhere.

Such developments and any other legal or regulatory changes in the method by which LIBOR is determined or the transition from LIBOR to a successor benchmark may result in, among other things, a sudden or prolonged increase or decrease in LIBOR, a delay in the publication of LIBOR, and changes in the rules or methodologies in LIBOR, which may discourage market participants from continuing to administer or to participate in LIBOR’s determination and, in certain situations, could result in LIBOR no longer being determined and published.

If a published U.S.

dollar LIBOR rate is unavailable after 2021, the interest rates on our indebtedness that is indexed to LIBOR will be determined using various alternative methods, any of which may result in interest obligations that are more than or do not otherwise correlate over time with the payments that would have been made on such debt if U.S.

dollar LIBOR was available in its current form.

Further, the same costs and risks that may lead to the unavailability of U.S.

dollar LIBOR may make one or more of the alternative methods impossible or impracticable to determine.

Any of these proposals or consequences could have a material adverse effect on our financing costs, and as a result, our financial condition, operating results, and cash flows.

The phase-out, replacement, or unavailability of LIBOR could affect interest rates for a significant portion of our indebtedness, as well as our ability to obtain future debt financing on favorable terms.

As of December 31, 2020, we had approximately $1.6 billion of indebtedness tied to the London Interbank Offered Rate (“LIBOR”), $1.0 billion of which was fixed through the use of interest rate swaps.

Additionally, we have a revolving credit facility tied to LIBOR with a capacity of $500 million, on which we had no outstanding balance (excluding letters of credit in an amount of $9.6 million) as of December 31, 2020.

In July 2017, the Financial Conduct Authority (the regulatory authority over LIBOR) stated that it would phase out LIBOR as a benchmark.

In November 2020, the Federal Reserve Board announced that banks must stop writing new U.S.

dollar (“USD”) LIBOR contracts by the end of 2021 and that, no later than June 30, 2023, when USD LIBOR will no longer be published, market participants should amend legacy contracts to use the Secured Overnight Financing Rate (“SOFR”) or another alternative reference rate.

If a published USD LIBOR rate is unavailable after 2021, the interest rates on our indebtedness that is indexed to LIBOR will be determined using alternative methods, any of which may result in interest obligations that are more than, or do not otherwise correlate over time with, the payments that would have been made on such debt if USD LIBOR was available in its current form.

Additionally, the phase-out of USD LIBOR and the transition to SOFR or another alternative reference rate may be disruptive to financial markets.

Such disruption could have a material adverse effect on our financing costs, and as a result, on our financial condition, operating results, and cash flows.

Increases in interest rates could increase the amount of our loan payments and adversely affect our ability to pay distributions to our stockholders.

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As of December 31, 2020, 25.2% of our outstanding debt was variable rate debt.

Increases in interest rates would increase our interest expense on any variable rate debt to the extent we have not hedged our exposure to changes in interest rates.

Increases in interest rates would increase our interest expense on any variable rate debt to the extent we have not hedged

our exposure to changes in interest rates.

In addition, increases in interest rates will affect the terms under which we refinance our existing debt as it matures, to the extent we have not hedged our exposure to changes in interest rates, resulting in higher interest rates and increased interest expense.

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Our Board’s broad discretion in setting policies and our stockholders’ inability to exert control over those policies increases the uncertainty and risks our stockholders face.

Although we have currently opted out of the protection of the MGCL relating to deterring or defending hostile takeovers, the Board could elect to become subject to these provisions of Maryland law in the future, which may discourage others from trying to acquire control of us and may prevent our stockholders from receiving a premium price for their stock in connection with a business combination.

Under Maryland law, “business combinations” between a Maryland corporation and certain interested stockholders or affiliates of interested stockholders are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder.

These business combinations include a merger, consolidation, share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities.

Also under Maryland law, control shares of a Maryland corporation acquired in a control share acquisition have no voting rights except to the extent approved by stockholders by a vote of two-thirds of the votes entitled to be cast on the matter.

These restrictions may have the effect of delaying, deferring, or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer, or sale of all or substantially all of our assets) that might provide our stockholders a premium price for their shares of common stock.

Our charter limits the number of shares a person may own, which may discourage a takeover that could otherwise result in a premium price to our stockholders.

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To help us comply with the REIT ownership requirements of the IRC, among other purposes, our charter prohibits a person from directly or constructively owning more than 9.8% in value of our aggregate outstanding stock or more than 9.8% in value or number of shares, whichever is more restrictive, of our aggregate outstanding common stock, unless exempted by our Board.

This restriction may have the effect of delaying, deferring or preventing a change in control of

us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for holders of our common stock.

Our charter permits the Board to issue stock with terms that may subordinate the rights of our common stockholders or discourage a third party from acquiring us in a manner that could result in a premium price to our stockholders.

Our Board may classify or reclassify any unissued common stock or preferred stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications, and terms or conditions of redemption of any such stock.

This restriction may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for holders of our common stock.

Our charter, bylaws and Maryland law contain terms that may discourage a third party from acquiring us in a manner that could result in a premium price to our stockholders.

Our charter, bylaws, and the MGCL contain provisions that may delay, defer, or prevent a transaction or a change of control that might involve a premium price for our common stock or that our stockholders otherwise believe to be in their best interest.

Our charter permits our Board to classify or reclassify any unissued common stock or preferred stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications, and terms or conditions of redemption of any such stock.

Thus, our Board could authorize the issuance of preferred stock with priority as to distributions and amounts payable upon liquidation over the rights of the holders of our common stock.

Such preferred stock could also have the effect of delaying, deferring or preventing a change in control, including an extraordinary transaction (such as a merger, tender offer, or sale of all or substantially all of our assets) that might provide a premium price to holders of our common stock.

Because Maryland law permits the Board to adopt certain anti-takeover measures without stockholder approval, investors may be less likely to receive a “control premium” for their shares.

In 1999, the State of Maryland enacted legislation that enhances the power of Maryland corporations to protect themselves from unsolicited takeovers.

Among other things, the legislation permits our Board, without stockholder approval, to amend our charter to:

stagger our Board into three classes;

require a two-thirds stockholder vote for removal of directors;

provide that only the Board can fix the size of the Board;

require that special stockholder meetings may only be called by holders of a majority of the voting shares entitled to be cast at the meeting;

provide the Board with the exclusive right to fill vacancies on the Board, with any individual elected to fill such a vacancy to serve for the full term of the directorship.

Under Maryland law, a corporation can opt to be governed by some or all of these provisions if it has a class of equity securities registered under the Securities Exchange Act of 1934, as amended (“Exchange Act”), and has at least three independent directors.

Our charter does not prohibit our Board from opting into any of the above provisions permitted under Maryland law.

Becoming governed by any of these provisions could discourage an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for holders of our securities.

In addition, the MGCL permits our Board, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to implement certain takeover defenses, including adopting a classified board or increasing the vote required to remove a director.

These and other provisions of our charter, bylaws, and Maryland law could have the effect of delaying, deferring or preventing a change in control, including an extraordinary transaction (such as a merger, tender offer, or sale of all or substantially all of our assets) that might provide a premium price to holders of our common stock.

Our rights and the rights of our stockholders to recover claims against our officers and directors are limited, which could reduce our stockholders’ and our recovery against them if they cause us to incur losses.

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federal income tax purposes, or that a court would not sustain such a challenge.

If the Internal Revenue Service were successful in treating the Operating Partnership as an association or publicly traded partnership taxable as a corporation for U.S.

If the Internal Revenue Service were

successful in treating the Operating Partnership as an association or publicly traded partnership taxable as a corporation for U.S.

federal income tax purposes, we would fail to meet the gross income tests and certain of the asset tests applicable to REITs and, accordingly, would cease to qualify as a REIT.

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We use taxable REIT subsidiaries, which may cause us to fail to qualify as a REIT.

To qualify as a REIT for federal income tax purposes, we hold, and plan to continue to hold, substantially all of our non-qualifying REIT assets and conduct certain of our non-qualifying REIT income activities in or through one or more taxable REIT subsidiaries (each a “TRS”).

To qualify as a REIT for U.S.

federal income tax purposes, we hold, and plan to continue to hold, substantially all of our non-qualifying REIT assets and conduct certain of our non-qualifying REIT income activities in or through one or more taxable REIT subsidiary (“TRS”) entities.

A TRS is a corporation other than a REIT in which a REIT directly or indirectly holds stock, and that has made a joint election with such REIT to be treated as a TRS.

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Other than some activities relating to lodging and health care facilities, a TRS may generally engage in any business, including the provision of customary or non-customary services to tenants of its parent REIT.

A TRS is subject to income tax as a regular C-corporation.

A TRS is subject to income tax as a regular C-corporation at a current federal rate of 21%.

The net income of our TRS entities is not required to be distributed to us, and income that is not distributed to us will generally not be subject to the REIT income distribution requirement.

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Our ownership of TRS entities is subject to limitations that could prevent us from growing our management business, and our transactions with our TRS entities could cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on an arm’s-length basis.

No more than 20% of the value of a REIT’s gross assets may consist of interests in TRSs.

No more than 20% of the value of a REIT’s gross assets may consist of interests in TRS entities.

Compliance with this limitation could limit our ability to grow our management business.

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In that case, if we so elect, a stockholder would be taxed on its proportionate share of our undistributed long-term gain and would receive a credit or refund for its proportionate share of the tax we paid.

A stockholder, including a tax-exempt or foreign stockholder, would have to file a federal income tax return to claim that credit or refund.

A stockholder, including a tax-exempt or foreign stockholder, would have to file a U.S.

federal income tax return to claim that credit or refund.

Furthermore, we will be subject to a 4% nondeductible excise tax if the actual amount that we distribute to our stockholders in a calendar year is less than a minimum amount specified under federal tax laws.

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Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments.

To continue to qualify as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to stockholders and the ownership of our stock.

As discussed above, we may be required to make distributions to you at disadvantageous times or when we do not have funds readily available for distribution.

To continue to qualify as a REIT for U.S.

federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to stockholders and the ownership of our stock.

As discussed above, we may be required to make distributions to you at disadvantageous

times or when we do not have funds readily available for distribution.

Additionally, we may be unable to pursue investments that would be otherwise attractive to us in order to satisfy the requirements for qualifying as a REIT.

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These actions could have the effect of reducing our income and amounts available for distribution to stockholders.

The prohibited transactions tax may limit our ability to engage in transactions, including disposition of assets, which would be treated as sales for federal income tax purposes.

The prohibited transactions tax may limit our ability to engage in transactions, including disposition of assets, which would be treated as sales for U.S.

federal income tax purposes.

A REIT’s net income from prohibited transactions is subject to a 100% tax.

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Legislative or regulatory tax changes could adversely affect us or our stockholders.

At any time, the federal income tax laws or regulations governing REITs or the administrative interpretations of those laws or regulations may be amended.

We cannot predict when or if any new federal income tax law, regulation or administrative interpretation, or any amendment to any existing federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation or interpretation may take effect retroactively.

At any time, the U.S.

federal income tax laws or regulations governing REITs or the administrative interpretations of those laws or regulations may be amended.

We cannot predict when or if any new U.S.

federal income tax law, regulation or administrative interpretation, or any amendment to any existing U.S.

federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation or interpretation may take effect retroactively.

Any such change could result in an increase in our, or our stockholders’, tax liability or require changes in the manner in which we operate in order to minimize increases in our tax liability.

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These increased tax costs could, among other things, adversely affect our financial condition, the results of operations, and the amount of cash available for the payment of dividends.

We and our stockholders could be adversely affected by any such change in, or any new, federal income tax law, regulation, or administrative interpretation.

On December 22, 2017, H.R.

1, known as the “Tax Cuts and Jobs Act” (the “TCJA”), was enacted into law.

The TCJA makes major changes to the IRC, including a number of provisions of the IRC that affect the taxation of REITs and their stockholders.

The effect of the significant changes made by the TCJA remains uncertain, and administrative guidance, which has and will continue to be issued on an ongoing basis, is required in order to fully evaluate the effect of many provisions.

Our stockholders are urged to consult with their own tax advisors with respect to the impact that the TCJA and other legislation may have on their investment and the status of legislative, regulatory or administrative developments and proposals and their potential effect on their investment in shares of our common stock.

The TCJA imposed further limits on the deductibility of certain executive compensation expense, which could result in greater taxes for our TRS or the need to increase distributions to our stockholders.

Section 162(m) of the IRC limits the annual compensation deduction available to publicly-held corporations to $1 million for certain “covered employees”.

Prior to the enactment of the TCJA, a publicly held corporation’s covered employees included its chief executive officer and the three other most highly compensated executive officers (other than the chief financial officer).

Further, certain “performance-based compensation” was excluded from the $1 million compensation limitation.

The TCJA made certain changes to Section 162(m), effective for taxable years beginning after December 31, 2017, including, among other things, expanding the definition of “covered employee” to include the chief financial officer and repealing the performance-

based compensation exception to the $1 million compensation limitation.

The TCJA provided certain transition rules for compensation provided to covered employees pursuant to a written binding contract that was in effect on November 2, 2017 and that was not modified in any material respect on or after that date.

On December 20, 2019, the U.S.

Treasury Department published proposed regulations that reflect changes made to Section 162(m) from the TCJA.

The proposed regulations, among other things, expanded the definition of compensation to include a publicly-held corporate partner’s distributable share of a partnership’s deduction for compensation expense attributed to compensation paid by the partnership for services performed by a covered employee of the publicly-held corporation, subject to certain transition relief.

The expanded definition of compensation applies to any compensation deduction that is otherwise allowable for tax years ending on or after December 20, 2019.

As a REIT, we are generally not subject to federal income taxes other than through our TRS entities.

The application of the proposed regulations to our structure is uncertain until more guidance is issued by the U.S.

Treasury Department.

Moreover, the IRS has previously issued private letter rulings holding that, under certain circumstances, Section 162(m) does not apply to compensation paid to employees of a REIT’s operating partnership.

If the proposed regulations and Section 162(m) apply to our compensation arrangements, we may be required to make additional distributions to stockholders to comply with the REIT distribution requirements and minimize our U.S.

federal income tax liability for the REIT, and a larger portion of our distributions that would otherwise have been treated as a return of capital for our stockholders may be subject to U.S.

federal income tax as dividend income as a result of our increased taxable income.

Any such compensation allocated to our TRS entities, whose income is subject to U.S.

federal income tax, would result in an increase in income taxes due to the inability to deduct compensation in excess of $1 million.

We and our stockholders could be adversely affected by any such change in, or any new, U.S.

federal income tax law, regulation, or administrative interpretation.

In addition, the COVID-19 pandemic has left many state and local governments with reduced tax revenue, which may lead such governments to increase taxes or otherwise make significant changes to their state and local tax laws.

If such changes occur, we may be required to pay additional taxes on our assets or income.

If our assets are deemed to be plan assets, we may be exposed to liabilities under Title I of ERISA and the IRC.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors