What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2021-03-12 compared with 2020-03-12 · 72 added, 82 removed, 141 unchanged (52% of the section changed)

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Valuation Overview

On May 8, 2019, the independent directors of our Board increased the estimated value per share (“EVPS”) of our common stock to $11.10.

The valuation was based substantially on the estimated “as is” market value of our portfolio of real estate

properties in various geographic locations in the United States (“Portfolio”) and the estimated value of in-place contracts of our third-party asset management business as of March 31, 2019 .

We provided the EVPS to assist broker-dealers that participated in our public offering in meeting their customer account statement reporting obligations under National Association of Securities Dealers Conduct Rule 2340 as required by the Financial Industry Regulatory Authority (“FINRA”).

On May 6, 2020, the independent directors of our Board declared the estimated value per share (“EVPS”) of our common stock as $8.75.

The valuation was based substantially on the estimated “as is” market value of our portfolio of real estate properties

in various geographic locations in the United States as well as our pro rata share of those properties owned through our joint ventures (collectively, our “Portfolio”) and the estimated value of in-place contracts of our third-party asset management business as of March 31, 2020.

We provided the EVPS to assist broker-dealers that participated in our public offering in meeting their customer account statement reporting obligations under Financial Industry Regulatory Authority (“FINRA”) Rule 2231.

This valuation was performed in accordance with the provisions of Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs, issued by the Institute for Portfolio Alternatives (“IPA”) in April 2013 (“IPA Valuation Guidelines”).

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Duff & Phelps made adjustments to the aggregate estimated value of our Portfolio to reflect balance sheet assets and liabilities provided by our management as of March 31, 2020, before calculating a range of estimated values based on the number of outstanding shares of our common stock as of March 31, 2020.

These calculations produced an EVPS in the range of $10.07 to $11.48 as of March 31, 2019 .

The Independent Directors ultimately increased the EVPS of our common stock to $11.10 on May 8, 2019.

We previously established an EVPS on May 9, 2018 of $11.05 based substantially on the estimated “as is” market value of our Portfolio and the estimated value of in-place contracts of our third-party asset management business as of March 31, 2018 .

Prior to that, we established an EVPS on November 8, 2017, of $11.00 based substantially on the estimated market value of our Portfolio and our third-party asset management business as of October 5, 2017.

The COVID-19 pandemic has impacted the global financial markets.

As of the valuation date, Duff & Phelps attached less weight to previous market evidence for comparison purposes to arrive at opinions of value.

Due to a dearth of transaction activity that takes into account this impact, they were forced to infer conclusions from public market data (stock prices) and other data, which are very volatile.

They surveyed market participants on a daily basis to try to ascertain market inputs, but due to the overall uncertainty of the broader markets, the data points are not widely consistent.

The valuation is, therefore, reported on the basis of “material valuation uncertainty”.

Consequently, less certainty, and a higher degree of caution, should be attached to the valuation than would normally be the case.

These calculations produced an EVPS in the range of $8.45 to $9.68 as of March 31, 2020, and the independent directors, after discussions with management, approved $8.75 as the EVPS as of March 31, 2020.

We previously established an EVPS on May 8, 2019 of $11.10 based substantially on the same methodology and process as of March 31, 2019, with the exception of the weighting adjustments described previously.

We expect to review the EVPS at least annually.

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Joint venture properties (1)

87,345 94,290

Total market value 5,246,145 5,653,590

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Accounts receivable 49,645 49,645

Derivative assets, net

Derivative assets 18 18

Prepaid expenses and other assets 12,009 12,009

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Mark to market - debt 10,052 10,052

Joint venture net liabilities, including debt (1)

Derivative liability 62,756 62,756

Accounts payable and accrued expenses 82,138 82,138

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Net Asset Value $ 2,815,460 $ 3,222,905

Common stock and OP units outstanding

Common stock and Operating Partnership units (“OP units”) outstanding 333,092 333,092

Net Asset Value Per Share $ 8.45 $ 9.68

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We also provided lease information, such as current rent amounts, rent commencement and expiration dates, and rent increase amounts and dates.

Property-level cash flow projections were negatively impacted for the estimated effects of the COVID-19 pandemic.

Duff & Phelps did not investigate the legal description or legal matters relating to the Portfolio, including title or encumbrances, and title to the properties was assumed to be good and marketable.

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Duff & Phelps gathered comparable sales data throughout various markets as secondary support for its valuation estimate.

The following summarizes the range of capitalization rates that were used to arrive at the estimated market values of our Portfolio:

The following summarizes the upper and lower bounds of the average terminal capitalization rates and discount rates that were used to arrive at the estimated market values of our Portfolio:

Range in Values

Overall Capitalization Rate

6.41% - 6.93%

Terminal Capitalization Rate 7.08% - 7.58%

6.88% - 7.38%

Discount Rate 7.69% - 8.19%

7.48% - 7.98%

Management Company Valuation —Duff & Phelps estimated the aggregate market value associated with our third-party asset management business using various methodologies.

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Such services include property management services performed for the properties in the Portfolio, as well as property and asset management services for certain unaffiliated real estate investment portfolios.

performing this analysis, solely fee income related to properties owned as of March 31, 2019 was considered.

The income approach also considered a reasonable level of expenses to support such activities, as well as other adjustments, and a discount rate that accounted for the time value of money and the risk of achieving the projected cash flows.

In performing this analysis, solely fee income related to properties owned as of March 31, 2020 was considered.

approach also considered a reasonable level of expenses to support such activities, as well as other adjustments, and a discount rate that accounted for the time value of money and the risk of achieving the projected cash flows.

All other assets and liabilities acquired are short term in nature and therefore the carrying value is considered to approximate the fair value.

The result of the income approach analysis was the aggregate market value of the third-party asset management business, from which an estimated market value of net tangible assets (liabilities) was subtracted (added), to result in the aggregate intangible value of the management company.

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Resulting Range in Estimated Value Per Share

Increase of 25 basis points

Decrease of 25 basis points

Increase of 5%

Decrease of 5%

Increase of 25 basis points Decrease of 25 basis points Increase of 5% Decrease of 5%

Terminal Capitalization Rate $8.25 - $9.42 $8.81 - $10.10 $8.13 - $9.31 $8.95 - $10.24

$9.73 - $11.05

$10.37 - $11.83

$9.61 - $10.94

$10.52 - $11.96

Discount Rate $8.23 - $9.43 $8.81 - $10.07 $8.06 - $9.28 $8.99 - $10.24

$9.71 - $11.06

$10.37 - $11.80

$9.54 - $10.90

$10.56 - $11.97

Other Assets and Other Liabilities —Duff & Phelps made adjustments to the aggregate estimated values of our investments to reflect our other assets and other liabilities based on balance sheet information provided by us as of March 31, 2020.

Role of the Independent Directors —The independent directors received a copy of the Valuation Report and discussed the report with representatives of Duff & Phelps.

The independent directors also discussed the Valuation Report, the Portfolio, the third-party asset management business, our other assets and liabilities, and other matters with management.

Role of the Independent Directors —The independent directors discussed the valuation process and results with representatives of Duff & Phelps.

The independent directors also discussed the results, the Portfolio, the third-party asset management business, our other assets and liabilities, and other matters with management.

Management recommended to the independent directors that $8.75 per share be approved as the EVPS of our common stock.

The independent directors discussed the rationale for this value with management.

Following the independent directors’ receipt and review of the Valuation Report and the recommendation of management, and in light of other factors considered by the independent directors, the independent directors concluded that the range in EVPS of $10.07 to $11.48 was appropriate.

Following the independent directors’ discussion with Duff & Phelps and the recommendation of management, and in light of other factors considered by the independent directors, the independent directors concluded that the range in EVPS of $8.45 to $9.68 was appropriate.

The independent directors agreed to accept the recommendation of management and approved $8.75 as the EVPS of our common stock as of March 31, 2020, which determination was ultimately and solely the responsibility of the independent directors.

Limitations of Estimated Value per Share —We provided this EVPS to assist broker-dealers that participated in our public offering in meeting our customer account statement reporting obligations.

Limitations of Estimated Value per Share —We are providing this EVPS to assist broker-dealers that participated in our public offering in meeting our customer account statement reporting obligations.

This valuation was performed in accordance with the provisions of the IPA Valuation Guidelines.

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• the methodologies used to calculate our EVPS would be acceptable to FINRA for use on customer account statements or that the EVPS will satisfy the applicable annual valuation requirements under ERISA.

Further, we have not made any adjustments to the valuation of our EVPS for the impact of other transactions occurring subsequent to March 31, 2019 , including, but not limited to:

(i) acquisitions or dispositions of assets;

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

(iii) NOI earned and dividends declared;

(iv) the repurchase of shares;

and (v) changes in leases, tenancy or other business or operational changes.

Further, aside from estimates regarding the impact of the COVID-19 pandemic, we have not made any adjustments to the valuation of our EVPS for the impact of other transactions occurring subsequent to March 31, 2020, including, but not limited to, (1) acquisitions or dispositions of assets, (2) the issuance of common stock under the Dividend Reinvestment Plan (“DRIP”), (3) NOI 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), (4) the repurchase of shares, and (5) changes in leases, tenancy, or other business and operational changes.

The value of our shares of common stock will fluctuate over time in response to developments related to individual real estate assets, the management of those assets, and changes in the real estate and finance markets.

Because of, among other factors, the high concentration of our total assets in real estate and the number of shares of our common stock outstanding, changes in the value of individual real estate assets or changes in valuation assumptions could have a very significant impact on the value of our shares of common stock.

The EVPS does not take into account any disposition costs or fees for real estate properties, debt prepayment penalties that could apply upon the prepayment of certain of our debt obligations, or the impact of restrictions on the assumption of debt.

The EVPS does not take into account any disposition costs or fees for real estate properties, debt prepayment penalties that may be incurred upon the prepayment of certain of our debt obligations, or the impact of restrictions on the assumption of debt.

Accordingly, the EVPS of our common stock 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.

Distributions —We elected to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes commencing with our taxable year ended December 31, 2010.

As a REIT, we have made, and intend to continue to make, distributions each taxable year equal to at least 90% of our taxable income (excluding capital gains and computed without regard to the dividends paid deduction).

On March 27, 2020, our Board suspended stockholder distributions, effective after the payment of the March 2020 distribution on April 1, 2020, as a result of the uncertainty surrounding the COVID-19 pandemic.

On November 4, 2020, our Board authorized distributions for the month of December 2020, for stockholders of record at the close of business on December 28, 2020, equal to a monthly amount of $0.02833333 per share of common stock, or $0.34 annualized.

On December 14, 2020, our Board announced that the date of record for December distributions was moved to December 31, 2020.

OP unit holders received distributions at the same rate as common stockholders.

We paid this distribution on January 12, 2021.

Amended and Restated DRIP —We have adopted the DRIP, through which stockholders may elect to reinvest an amount equal to the distributions declared on their shares of common stock into additional shares of our common stock in lieu of receiving cash distributions.

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For the year ended December 31, 2019, 6.1 million shares were issued through the DRIP, resulting in proceeds of approximately $67.4 million.

Distributions —We elected to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes commencing with our taxable year ended December 31, 2010.

Unregistered Sales of Equity Securities —During the year ended December 31, 2019 , we issued an aggregate of 1.9 million shares of common stock in redemption of 1.9 million Operating Partnership units.

On March 27, 2020, the DRIP was suspended, and the March 2020 distribution was paid in all cash on April 1, 2020.

On November 4, 2020, our Board reinstated the DRIP, which became effective beginning with the December 2020 distribution paid in January 2021.

Unregistered Sales of Equity Securities —During the year ended December 31, 2020, we issued an aggregate of 3.0 million shares of common stock in redemption of 3.0 million OP units.

These shares of common stock were issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended.

We relied on the exemption under Section 4(a)(2) based upon factual representations received from the limited partner who received the shares of common stock.

Share Repurchases —Our Share Repurchase Program (“SRP”) provides a limited opportunity for stockholders to have shares of common stock repurchased, subject to certain restrictions and limitations that are discussed below:

During any calendar year, we may repurchase no more than 5% of the weighted-average number of shares outstanding during the prior calendar year.

We have no obligation to repurchase shares if the repurchase would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency.

The cash available for repurchases, of which we may use all or a portion, on any particular date will generally be limited to the proceeds from the DRIP during the preceding four fiscal quarters, less any cash already used for repurchases since the beginning of the same period;

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

The availability of DRIP proceeds is not a minimum repurchase requirement and we may use all or no portion.

The limitations described above do not apply to shares repurchased due to a stockholder’s death, “qualifying disability,” or “determination of incompetence.”

Only those stockholders who purchased their shares from us or received their shares from us (directly or indirectly) through one or more non-cash transactions may be able to participate in the SRP.

In other words, once our shares are transferred for value by a stockholder, the transferee and all subsequent holders of the shares are not eligible to participate in the SRP.

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

Share Repurchases —On August 7, 2019, the Board suspended the Share Repurchase Program (“SRP”) with respect to standard repurchases.

The SRP for death, qualifying disability, or determination of incompetence (“DDI”) was suspended effective March 27, 2020, in response to the uncertainty of COVID-19.

On January 8, 2021, the Board adopted the Fourth Amended and Restated Share Repurchase Program (“Fourth Amended SRP”), effective January 14, 2021.

Under the Fourth Amended SRP, share repurchases for DDI have been reinstated at $5.75 per share, and as of March 1, 2021, we have repurchased 0.1 million shares for a total value of $0.4 million.

The SRP with respect to standard repurchases remains suspended.

Our Board may amend, suspend, or terminate the program upon 30 days’ notice.

We may provide notice by including such information (a) in a current report on Form 8-K or in our annual or quarterly reports, all publicly filed with the SEC, or (b) in a separate mailing to the stockholders.

On August 7, 2019, the Board amended the SRP.

Under the amended SRP, the repurchase price per share is equal to the lesser of $10.00 or our most recent EVPS.

In addition, on August 7, 2019, the Board suspended the SRP for standard repurchases.

We will continue to fulfill repurchases sought upon a stockholder's death, “qualifying disability,” or “determination of incompetence” in accordance with the terms of the SRP.

We may provide notice by including such information (a) in a current report on Form 8-K or in our annual or quarterly reports, all publicly filed with the U.S.

Securities and Exchange Commission (“SEC”), or (b) in a separate mailing to the stockholders.

On November 4, 2020, our Board approved a voluntary tender offer that commenced on November 10, 2020 (the “Tender Offer”) for up to 4.5 million shares of our outstanding common stock at a price of $5.75 per share, for a total value of approximately $26 million.

On December 14, 2020, the Tender Offer was amended to extend the expiration date to December 29, 2020, and the offer to purchase shares was increased to approximately 17.4 million shares, for a total value of approximately $100 million.

All of the other terms and conditions of the Tender Offer remained unchanged.

In connection with the Tender Offer, we repurchased 13.5 million shares of common stock for a total value of $77.6 million, which includes the issuance of 2.8 million common shares in redemption of 2.8 million OP units converted at the time of repurchase.

The following table presents all non-employee share repurchases for the years ended December 31, 2020 and 2019 (in thousands, except per share amounts):

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Average repurchase price $ 5.85 $ 10.86

In addition, during the year ended December 31, 2019 , we repurchased 18,000 shares for an aggregate purchase price of $0.2 million (average price of $11.05 per share) in connection with common shares surrendered to us to satisfy statutory minimum tax withholding obligations associated with the vesting of restricted stock awards under our equity-based compensation plan.

(1) The average repurchase price is comprised of share repurchases in connection with the Tender Offer, and the SRP for DDI prior to its suspension effective March 27, 2020.

In addition, during the year ended December 31, 2020, we repurchased approximately 36,000 shares for an aggregate purchase price of $0.4 million (average price of $11.07 per share) in connection with common shares surrendered to us to

satisfy statutory minimum tax withholding obligations associated with the vesting of restricted stock awards under our equity-based compensation plan.

During the quarter ended December 31, 2020, we repurchased shares as follows (shares in thousands):

Total Number of Shares

Average Price Paid per Share (1)(2)

Period Total Number of Shares

Repurchased Average Price Paid per Share (1)(2)

Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program (1)

Approximate Dollar Value of Shares That May Yet Be Repurchased Under the Program

October 2020 — $ — — (2)

November 2020 — — — (2)

December 2020 13,452 5.75 13,452 (2)

We announced the commencement of the SRP in August 2010, and it was subsequently amended in September 2011, April 2016, and August 2019.

We currently limit the dollar value and number of shares that may be repurchased under the SRP, as described above.

(1) Share repurchases made during the three months ended December 31, 2020 were made in connection with the Tender Offer.

(2) As the SRP remained suspended as of December 31, 2020, the dollar value and number of shares that may be repurchased were subject to the limitations of the Tender Offer.

As of December 31, 2020 all share repurchases in connection with the Tender Offer had been executed.

SELECTED FINANCIAL DATA

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Balance Sheet Data:

Investment in real estate assets at cost

Total investment in real estate assets $ 5,295,137 $ 5,257,999 $ 5,380,344 $ 3,751,927 $ 2,584,005

Cash and cash equivalents 104,296 17,820 16,791 5,716 8,224

Total assets 4,678,563 4,828,195 5,163,477 3,526,082 2,380,188

Debt obligations, net 2,292,605 2,354,099 2,438,826 1,806,998 1,056,156

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Interest expense, net 85,303 103,174 72,642 45,661 32,458

Net (loss) income

Net (loss) income attributable to stockholders

Net income (loss) 5,462 (72,826) 46,975 (41,718) 9,043

Net income (loss) attributable to stockholders 4,772 (63,532) 39,138 (38,391) 8,932

Other Operational Data:

Net operating income (“NOI”) for real estate

NOI for real estate investments $ 332,023 $ 355,796 $ 272,450 $ 204,407 $ 173,910

Funds from operations (“FFO”) attributable to stock-

holders and convertible noncontrolling interests 221,681 217,010 156,222 84,150 110,406

Core FFO 220,407 230,866 176,126 132,011 114,636

Cash Flow Data:

Net cash provided by operating activities

Net cash provided by (used in) investing activities

Net cash (used in) provided by financing activities

Cash flows provided by operating activities $ 210,576 $ 226,875 $ 153,291 $ 108,861 $ 103,076

Cash flows (used in) provided by investing activities (44,092) 64,183 (258,867) (640,742) (191,328)

Cash flows (used in) provided by financing activities (129,655) (280,254) 162,435 509,380 90,685

Per Share Data:

Net (loss) income per share—basic and diluted

Common stock distributions declared

Net income (loss) per share - basic and diluted $ 0.02 $ (0.22) $ 0.20 $ (0.21) $ 0.05

Common stock distributions declared per share $ 0.19 $ 0.67 $ 0.67 $ 0.67 $ 0.67

Weighted-average shares outstanding - basic 290,280 283,909 196,602 183,784 183,876

Weighted-average shares outstanding - diluted 333,466 327,117 241,367 196,497 186,665

Includes the impact of the Merger (see Note 4 ).

Includes the impact of the PELP transaction (see Note 5 ).

Certain prior period balance sheet amounts have been reclassified to conform with our adoption in 2016 of Accounting Standards Update (“ASU”) 2015-03, Simplifying the Presentation of Debt Issuance Costs.

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

Management's Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Measures, for further discussion and for a reconciliation of the non-GAAP financial measures to Net (Loss) Income .

In 2019 , we are presenting Core FFO in place of Modified Funds from Operations.

Prior years have been updated to conform with the presentation of Core FFO.

Certain prior period cash flow amounts have been reclassified to conform with our adoption in 2018 of ASU 2016-15, Statement of Cash Flows (Topic 230):

Classification of Certain Cash Receipts and Cash Payments.

(1) See “Part II, Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Measures” of this filing on Form 10-K for further discussion and for a reconciliation of the non-GAAP financial measures to Net Income (Loss).

The selected financial data should be read in conjunction with the consolidated financial statements and notes appearing in this Annual Report on Form 10-K.

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 5. Market for Registrant’s Common Equity