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Item 2. Management’s Discussion and Analysis

2022-11-04 compared with 2022-08-08 · 129 added, 124 removed, 632 unchanged (29% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The discussion of our results of operations reported in the unaudited, consolidated statements of operations compares the three and six months ended June 30, 2022 with the three and six months ended June 30, 2021.

The discussion of our results of operations reported in the unaudited, consolidated statements of operations compares the three and nine months ended September 30, 2022 with the three and nine months ended September 30, 2021.

The results of operations discussion is combined for Tanger Factory Outlet Centers, Inc.

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Such forward-looking statements include, but are not limited to, statements regarding:

the expected impact of the novel coronavirus (“COVID-19”) pandemic, rising inflation, supply chain and labor issues, and rising interest rates on our business, financial results and financial condition;

the expected impact of the COVID-19 pandemic, rising inflation, supply chain and labor issues, and rising interest rates on our business, financial results and financial condition;

our ability to raise additional capital, including via future issuances of equity and debt, and the use of proceeds from such issuances;

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the possibility of future asset impairments;

potential developments, expansions, renovations, acquisitions or dispositions of outlet centers;

potential developments, expansions, renovations, acquisitions or dispositions of outlet centers, including our Nashville development;

compliance with debt covenants;

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General Overview

As of June 30, 2022, we had 30 consolidated outlet centers in 18 states totaling 11.5 million square feet.

As of September 30, 2022, we had 30 consolidated outlet centers in 18 states totaling 11.5 million square feet.

We also had 6 unconsolidated outlet centers totaling 2.1 million square feet, including 2 outlet centers in Canada.

The table below details our new developments, expansions and dispositions of consolidated and unconsolidated outlet centers that significantly impacted our results of operations and liquidity from January 1, 2021 to June 30, 2022 (square feet in thousands):

Consolidated Outlet Centers Unconsolidated Joint Venture Outlet Centers

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Jeffersonville First Quarter (412) (1) — —

Saint-Saveur First Quarter — — (99) (1)

Saint-Sauveur First Quarter — — (99) (1)

Other (8) — — —

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Other 4 — — —

As of June 30, 2022

As of September 30, 2022

11,457 30 2,113 6

The following table summarizes certain information for our existing outlet centers in which we have an ownership interest as of June 30, 2022.

The following table summarizes certain information for our existing outlet centers in which we have an ownership interest as of September 30, 2022.

Except as noted, all properties are fee owned.

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Prior period results have been revised to conform with the current period presentation.

The following table provides information for our consolidated outlet centers related to leases for new stores that opened or renewals that were executed during the respective trailing twelve month periods ended June 30, 2022 and 2021:

Comparable Space for Executed Leases (1) (2)

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RESULTS OF OPERATIONS

Comparison of the three months ended June 30, 2022 to the three months ended June 30, 2021

Comparison of the three months ended September 30, 2022 to the three months ended September 30, 2021

NET INCOME (LOSS)

Net income increased $18.2 million in the 2022 period to $20.8 million as compared to net income of $2.6 million for the 2021 period.

Net income increased $35.4 million in the 2022 period to $24.3 million as compared to a net loss of $11.1 million for the 2021 period.

Significant items impacting the comparability for the two periods include the following:

• the current period had a higher average occupancy rate,

• the current period includes $2.4 million of executive severance costs,

• the current period includes a gain of $2.4 million related to the sale of a non-real estate asset,

• the prior year period included a loss on the early extinguishment of debt of $14.0 million, and

• we sold one operating property in the first quarter of 2021, as discussed below.

In the tables below, information set forth for properties disposed includes our Jeffersonville, Ohio outlet center sold in January 2021.

• the current period had a higher average portfolio occupancy rate, and

• the prior year period included a loss on the early extinguishment of debt of $33.8 million.

RENTAL REVENUES

Rental revenues increased $4.6 million in the 2022 period compared to the 2021 period.

Rental revenues decreased $1.7 million in the 2022 period compared to the 2021 period.

The following table sets forth the changes in various components of rental revenues (in thousands):

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Rental revenues from existing properties $ 105,589 $ 105,491 $ 98

Rental revenues from properties disposed 59 (85) 144

Straight-line rent adjustments (155) 383 (538)

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$ 105,569 $ 107,265 $ (1,696)

Rental revenues increased primarily due to an increase in occupancy rate for the consolidated portfolio to 94.8% as of June 30, 2022 compared to 93.0% as of June 30, 2021.

Rental revenues decreased primarily because the 2021 period included lease termination fees from a single tenant that vacated multiple locations throughout the portfolio.

No such significant terminations occurred in the 2022 period.

Rental revenues at existing properties was positively impacted by higher occupancy between the periods, 96% compared to 94%, but this was offset by lower variable revenues, which are derived from tenant sales.

MANAGEMENT, LEASING AND OTHER SERVICES

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$ 1,897 $ 1,641 $ 256

Management fee income increased due to our addition of property management responsibilities during the 2022 period for a center in West Palm Beach, Florida.

OTHER REVENUES

Other revenues decreased $97,000 in the 2022 period as compared to the 2021 period.

Other revenues increased $421,000 in the 2022 period as compared to the 2021 period.

The following table sets forth the changes in various components of other revenues (in thousands):

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Other revenues from existing properties $ 3,980 $ 3,559 $ 421

Other revenues from properties disposed — 2 (2)

$ 2,993 $ 3,090 $ (97)

Other revenues from existing properties increased in the 2022 period due to an increase in other revenue streams, such as paid media, sponsorships and onsite signage, on a local and national level.

PROPERTY OPERATING EXPENSES

Property operating expenses increased $1.4 million in the 2022 period compared to the 2021 period.

Property operating expenses decreased $1.1 million in the 2022 period compared to the 2021 period.

The following table sets forth the changes in various components of property operating expenses (in thousands):

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Property operating expenses from existing properties $ 34,433 $ 35,670 $ (1,237)

Properties operating expenses from properties disposed — (1,726) 1,726

Expenses related to unconsolidated joint ventures 1,175 1,039 136

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$ 36,076 $ 37,186 $ (1,110)

Property operating expenses increased in the 2022 period primarily because property operating expenses for the 2021 included $1.7 million in net proceeds received from the successful appeal of property taxes for tax years prior to disposition.

The 2022 period included no such refunds.

Property operating expenses from existing properties decreased in the 2022 period primarily due to the timing of certain advertising and promotional costs.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses increased $2.6 million in the 2022 period compared to the 2021 period.

The increase was primarily due to $2.4 million of compensation costs related to executive severance that occurred in the 2022 period.

In addition, expenses increased on a comparative basis from the hiring of certain executives and other key employees during the second half of 2021 to drive operational and growth initiatives.

The increase was primarily from the hiring of certain executives and other key employees during the second half of 2021 to drive operational and growth initiatives.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization costs decreased $1.5 million in the 2022 period compared to the 2021 period, primarily due to certain construction and development related assets, as well as lease related intangibles recorded as part of the acquisition price of acquired properties, which are amortized over shorter lives, became fully depreciated during the reporting periods.

Depreciation and amortization costs decreased $1.5 million in the 2022 period compared to the 2021 period, primarily due to a slow down in the development and acquisition pipeline in recent years due to COVID-19 and certain assets becoming fully depreciated.

INTEREST EXPENSE

Interest expense decreased $1.8 million in the 2022 period compared to the 2021 period for the following reasons:

• During August and September 2021, we completed a public offering of $400.0 million 2.750% of senior notes and completed the early redemption of $100.0 million of 3.875% senior notes and $250.0 million of 3.75% senior notes.

• During April 2021, we completed the redemption of $150.0 million of 3.875% senior notes.

• During 2021, we paid down approximately $50.0 million of borrowings under our unsecured term loan.

Interest expense decreased $1.6 million in the 2022 period compared to the 2021 period primarily because during August and September 2021, we completed a public offering of $400.0 million 2.750% of senior notes and completed the early redemption of $100.0 million of 3.875% senior notes due in 2023 (“2023 notes”) and $250.0 million of 3.75% senior notes due in 2024 (“2024 notes”), reducing our average interest rate.

LOSS ON EARLY EXTINGUISHMENT OF DEBT

In April 2021, we completed a partial redemption of $150.0 million of 3.875% senior notes.

As part of completing the redemption, we paid a make-whole premium of $13.0 million and expensed approximately $1.0 million of unamortized debt origination costs and debt discount related to the senior notes.

For the three months ended September 30, 2021, we recorded a make-whole premium of $31.9 million and the write off of approximately $1.9 million of debt discount and debt origination costs due to the early redemption of our remaining 2023 notes and all of our 2024 notes.

OTHER INCOME (EXPENSE)

Other income (expense) increased approximately $1.9 million in the 2022 period, primarily due to the gain on sale of a non-real estate asset for $2.4 million.

Other income (expense) increased approximately $1.1 million in the 2022 period, primarily due to higher investment income from opportunities available in the current rising interest rate environment.

EQUITY IN EARNINGS OF UNCONSOLIDATED JOINT VENTURES

Equity in earnings of unconsolidated joint ventures decreased approximately $206,000 in the 2022 period compared to the 2021 period.

The decrease is primarily due to the 2021 period including the recognition of termination rents at two joint venture centers and the increase in variable interest rates in 2022 that has negatively impacted two of our joint ventures that have variable rate mortgages.

Comparison of the six months ended June 30, 2022 to the six months ended June 30, 2021

Net income increased $35.3 million in the 2022 period to $42.3 million as compared to net income of $6.9 million for the 2021 period.

The decrease is primarily due to the increase in variable interest rates in 2022 that has negatively impacted two of our joint ventures that have variable rate mortgages.

The Columbus variable interest rate mortgage was refinanced in September 2022 and now has a fixed interest rate of 6.25%.

Comparison of the nine months ended September 30, 2022 to the nine months ended September 30, 2021

Net income increased $70.8 million in the 2022 period to $66.6 million as compared to a net loss of $4.1 million for the 2021 period.

Significant items impacting the comparability for the two periods include the following:

• the current period had a higher average occupancy rate and an increase in lease termination fees,

• the 2021 period included a loss on the early extinguishment of debt of $14.0 million,

• the current period had a higher average portfolio occupancy rate

• the 2021 period included a loss on the early extinguishment of debt of $47.9 million related to the redemption of all of our 2023 and 2024 notes,

• the 2021 period included a foreign currency loss of approximately $3.6 million in other income (expense), which had been previously recorded in other comprehensive income associated with the sale of our RioCan joint venture outlet center in Saint-Sauveur,

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$ 311,587 $ 301,556 $ 10,031

Rental revenues increased primarily due to an increase in occupancy rate for the consolidated portfolio to 94.8% as of June 30, 2022 compared to 93.0% as of June 30, 2021.

Termination fees were recognized for several tenants in the 2022 period.

The 2021 period had fewer tenants with termination fees.

Rental revenues increased primarily due to an increase in occupancy rate for the consolidated portfolio to 96.4% as of September 30, 2022 compared to 94.3% as of September 30, 2021.

Additionally, rental revenues were also impacted by the reversal of revenue reserves in the 2022 period of approximately $3.7 million, compared to $2.8 million in the same period of the prior year.

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Total Fees $ 4,860 $ 4,372 $ 488

Management fee income increased due to our addition of property management responsibilities during the 2022 period for a center in West Palm Beach, Florida.

Leasing fee income decreased due to the 2021 period containing more renewal and re-tenant opportunities at our unconsolidated joint ventures.

OTHER REVENUES

Other revenues increased $780,000 in the 2022 period as compared to the 2021 period.

Other revenues increased $1.2 million in the 2022 period as compared to the 2021 period.

The following table sets forth the changes in other revenues (in thousands):

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$ 105,531 $ 103,747 $ 1,784

Property operating expenses from existing properties increased in the 2022 period compared to the 2021 period, primarily due to the timing of certain advertising and promotional costs and higher property insurance costs.

The 2021 period for properties disposed includes net proceeds received from the successful appeal of property taxes for tax years prior to disposition.The 2022 period included no such refunds.

Property operating expenses from existing properties increased in the 2022 period compared to the 2021 period, primarily due to higher property insurance costs.

The 2021 period for properties disposed includes net proceeds received from the successful appeal of property taxes for tax years prior to disposition.

The 2022 period included no such refunds.

GENERAL AND ADMINISTRATIVE EXPENSES

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$ 77,908 $ 82,826 $ (4,918)

Depreciation and amortization costs decreased at existing properties as certain construction and development related assets, as well as lease related intangibles recorded as part of the acquisition price of acquired properties, which are amortized over shorter lives, became fully depreciated during the reporting periods.

Depreciation and amortization costs decreased primarily due to a slow down in the development and acquisition pipeline and certain assets becoming fully depreciated.

INTEREST EXPENSE

Interest expense decreased $6.1 million in the 2022 period compared to the 2021 period for the following reasons:

• During August and September 2021, we completed a public offering of $400.0 million 2.750% of senior notes and completed the early redemption of $250.0 million of 3.875% senior notes and $250.0 million of 3.75% senior notes.

• During April 2021, we completed the redemption of $150.0 million of 3.875% senior notes.

• During 2021, we paid down approximately $50.0 million of borrowings under our unsecured term loan.

• During August and September 2021, we completed a public offering of $400.0 million 2.750% of senior notes and completed the early redemption of $250.0 million of the 2023 notes and $250.0 million of the 2024 notes, reducing our average interest rate.

• During different times in 2021, we paid down approximately $50.0 million of borrowings under our unsecured term loan.

The 2022 period reflects the full impact of those paydowns.

LOSS ON EARLY EXTINGUISHMENT OF DEBT

In April 2021, we completed a partial redemption of $150.0 million of 3.875% senior notes.

For the nine months ended September 30, 2021, we recorded make-whole premiums of $44.9 million and the write offs of approximately $2.9 million of debt discount and debt origination costs due to the early redemption of our 2023 and 2024 notes.

OTHER INCOME (EXPENSE)

Other income (expense) increased approximately $6.8 million in the 2022 period compared to the 2021 period.

The increase was primarily due to a $2.4 million gain on sale of a non-real estate asset and the 2021 period including a $3.6 million foreign currency loss from the sale by the RioCan joint venture of its outlet center in Saint-Sauveur, Quebec in which we had a 50% ownership interest.

The increase was primarily due to a $2.4 million gain on sale of a non-real estate asset, higher investment income in the 2022 period and the inclusion in the 2021 period of a $3.6 million foreign currency loss from the sale by the RioCan joint venture of its outlet center in Saint-Sauveur, Quebec in which we had a 50% ownership interest.

EQUITY IN EARNINGS OF UNCONSOLIDATED JOINT VENTURES

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$ 6,795 $ 6,758 $ 37

The increase in equity in earnings from existing properties is primarily due to strong variable rent performance at certain joint ventures in 2022 partially offset by the 2021 period including the recognition of termination rents at two joint venture centers and the increase in variable interest rates in 2022 that has negatively impacted two of our joint ventures that have variable rate mortgages.

LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY

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The Operating Partnership currently intends to use the net proceeds from the sale of shares pursuant to the ATM Offering for working capital and general corporate purposes.

As of June 30, 2022, we had approximately $60.1 million remaining available for sale under the ATM Offering program.

As of September 30, 2022, we had approximately $60.1 million remaining available for sale under the ATM Offering program.

The following table sets forth information regarding settlements under our ATM Offering program:

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

Number of common shares settled during the period — 331,682 — 10,009,263

— 2,810,503 — 9,677,581

Average price per share $ — $ 18.85 $ — $ 18.97

$ — $ 18.85 $ — $ 18.97

Aggregate gross proceeds (in thousands) $ — $ 6,253 $ — $ 189,868

Aggregate net proceeds after selling commissions and fees (in thousands) $ — $ 6,092 $ — $ 186,969

$ — $ 52,221 $ — $ 180,876

(1) In July 2021, we had an additional 331,682 shares settle at an average price per share of $18.85 with aggregate net proceeds after commissions and fees of $6.2 million.

In May 2021, the Company’s Board of Directors authorized the repurchase of up to $80.0 million of the Company’s outstanding shares through May 31, 2023.

This authorization replaced a previous repurchase authorization for approximately $80 million that expired in May 2021.

The Company temporarily suspended share repurchases for the twelve months starting July 1, 2020 and ending on June 30, 2021 in light of a repurchase covenant.

On July 1, 2021, a covenant in the Company’s debt agreements (the “repurchase covenant”) prohibiting share repurchases expired.

Repurchases may be made from time to time through open market, privately-negotiated, structured or derivative transactions (including accelerated share repurchase transactions), or other methods of acquiring shares.

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The Company may, from time to time, enter into Rule 10b5-1 plans to facilitate the repurchase of its shares under this authorization.

The Company did not repurchase any shares for both the three and six months ended June 30, 2022 and 2021.

The remaining amount authorized to be repurchased under the program as of June 30, 2022 was approximately $80.0 million.

In April 2022, the Company's Board of Directors declared a $0.20 cash dividend per common share payable on May 13, 2022 to each shareholder of record on April 29, 2022, and in its capacity as General Partner of the Operating Partnership a $0.20 cash distribution per Operating Partnership unit to the Operating Partnership's unitholders.

The Company did not repurchase any shares for both the three and nine months ended September 30, 2022 and 2021.

The remaining amount authorized to be repurchased under the program as of September 30, 2022 was approximately $80.0 million.

In July 2022, the Company's Board of Directors declared a $0.20 cash dividend per common share payable on August 15, 2022 to each shareholder of record on July 29, 2022, and in its capacity as General Partner of the Operating Partnership, a $0.20 cash distribution per Operating Partnership unit to the Operating Partnership's unitholders.

In October 2022, the Company's Board of Directors declared a $0.22 cash dividend per common share payable on November 15, 2022 to each shareholder of record on October 29, 2022, and in its capacity as General Partner of the Operating Partnership a $0.22 cash distribution per Operating Partnership unit to the Operating Partnership's unitholders.

LIQUIDITY AND CAPITAL RESOURCES OF THE OPERATING PARTNERSHIP

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Capital Expenditures

The following table details our capital expenditures for consolidated outlet centers for the six months ended June 30, 2022 and 2021 (in thousands):

Six months ended June 30,

The following table details our capital expenditures for consolidated outlet centers for the nine months ended September 30, 2022 and 2021 (in thousands):

Nine months ended September 30,

2022 2021 Change

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Second generation tenant allowances (2)

4,938 (5) 4,943

Other capital expenditures (3)

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Additions to rental property-cash basis $ 45,748 $ 23,685 $ 22,063

(1) The increase in new outlet center developments and expansions is primarily due to pre-development costs at our site in Nashville, TN and other projects.

(2) The increase in other capital expenditures in 2022 was primarily due to timing of projects and our decision in 2020 to defer all capital projects except essential and life-safety projects to 2021 due to the impact on cash flows caused by the COVID-19 pandemic.

(1) The increase in new outlet center developments and expansions is primarily due to development costs at our site in Nashville, TN and other projects.

(2) In the 2021 period, second generation tenant allowances are presented net of $3.3 million tenant allowance reversals, which were the result of a lease modification.

(3) The increase in other capital expenditures in 2022 was primarily related to our ongoing solar initiatives.

New Development of Consolidated Outlet Centers

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From time to time, we form joint venture arrangements to develop outlet centers.

As of June 30, 2022 we have partial ownership interests in six unconsolidated outlet centers totaling approximately 2.1 million square feet, including two outlet centers in Canada.

As of September 30, 2022 we have partial ownership interests in six unconsolidated outlet centers totaling approximately 2.1 million square feet, including two outlet centers in Canada.

See Note 5 to the consolidated financial statements for details of our individual joint ventures, including, but not limited to, carrying values of our investments, fees we receive for services provided to the joint ventures, recent development and financing transactions and condensed combined summary financial information.

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A default by a joint venture under its debt obligations may expose us to liability under the guaranty.

For construction and mortgage loans, we may include a guaranty of completion as well as a principal guaranty ranging from 0% to 17% of principal.

The principal guarantees include terms for release based upon satisfactory completion of construction and performance targets including occupancy thresholds and minimum debt service coverage tests.

For secured term loans, we may include a guaranty of completion as well as a principal guaranty ranging from 0% to 15.5% of principal.

Our joint ventures may contain make whole provisions in the event that demands are made on any existing guarantees.

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Contractual Obligations

There were no material changes in our commitments during the six months ended June 30, 2022 under contractual obligations from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021, other than the following updates to our contractual obligations for future debt and interest payments over the next five years and thereafter as of June 30, 2022.

There were no material changes in our commitments during the nine months ended September 30, 2022 under contractual obligations from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021, other than the following updates to our contractual obligations for future debt and interest payments over the next five years and thereafter as of September 30, 2022.

Future Debt Obligations

As described further in Note 7 of the notes to the consolidated financial statements, as of June 30, 2022, scheduled maturities of our existing long-term debt for the remainder of 2022, 2023, 2024, 2025 and 2026 are $2.3 million, $44.9 million, $305.1 million, $1.5 million and $355.7 million, respectively.

As of June 30, 2022, scheduled maturities after 2026 aggregate to $700.0 million.

As described further in Note 7 of the notes to the consolidated financial statements, as of September 30, 2022, scheduled maturities of our existing long-term debt for the remainder of 2022, 2023, 2024, 2025 and 2026 are $1.1 million, $44.9 million, $305.1 million, $1.5 million and $355.7 million, respectively.

As of September 30, 2022, scheduled maturities after 2026 aggregate to $700.0 million.

Future Interest Payments

We are obligated to make periodic interest payments at fixed and variable rates, depending on the terms of the applicable debt agreements.

Based on applicable interest rates and scheduled debt maturities as of June 30, 2022, these interest obligations total approximately $198.3 million and range from approximately $17.3 million to $40.4 million on an annual basis over the next five years.

If prevailing interest rates continue to rise, then future interest payments related to our variable debt outstanding would increase.

The following table sets forth our changes in cash flows from June 30, 2022 and 2021 (in thousands):

Six months ended June 30,

Based on applicable interest rates and scheduled debt maturities as of September 30, 2022, these interest obligations total approximately $40.4 million over the next twelve months.

The following table sets forth our changes in cash flows from September 30, 2022 and 2021 (in thousands):

Nine months ended September 30,

2022 2021 Change

Net cash provided by operating activities $ 122,686 $ 143,729 $ (21,043)

Net cash provided by (used in) investing activities (8,095) 4,009 (12,104)

Net cash used in investing activities (31,371) (1,928) (29,443)

Net cash used in financing activities (71,824) (83,607) 11,783

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Investing Activities

The decrease in net cash provided by (used in) investing activities was primarily due to the purchase of land at our new center in Nashville, Tennessee, paired with increased additions to rental properties in the 2022 period.

The increase in net cash used in investing activities was primarily due to the purchase of land at our new center in Nashville, Tennessee, paired with increased additions to rental properties in the 2022 period.

The 2021 period included net proceeds of approximately $8.1 million received in 2021 from the sale of our Jeffersonville outlet center, while the 2022 period included lower distributions in excess of cumulative earnings from unconsolidated joint ventures and lower other investing activities.

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Financing Activities

Net cash used in financing activities decreased during the first six months of 2022 primarily due to 2021 activity that included a partial redemption of $150.0 million aggregate principal amount of our $250.0 million 3.875% senior notes due December 2023, for $163.0 million in cash, which included a make-whole premium of $13.0 million.

Net cash used in financing activities decreased during the first nine months of 2022 primarily due to 2021 activity that included an early redemption of $250.0 million aggregate principal amount of our 3.875% senior notes due December 2023 and $250 million of our 3.75% senior notes due 2024, which included make-whole premiums of $44.9 million.

In addition, in March 2021 and June 2021, we paid down a total of $50.0 million of borrowings under our unsecured term loan with cash on hand.

These decreases were partially offset by the proceeds from our common share offering of $400.00 million in 2021 under our ATM offering program.

Additionally, for the six months ended June 30, 2022, there was an increase in dividends paid.

Additionally, for the nine months ended September 30, 2022, there was an increase in dividends paid.

Financing Arrangements

As of June 30, 2022, unsecured borrowings represented 96% of our outstanding debt and 92% of the gross book value of our real estate portfolio was unencumbered.

As of September 30, 2022, unsecured borrowings represented 96% of our outstanding debt and 92% of the gross book value of our real estate portfolio was unencumbered.

The Company guarantees the Operating Partnership’s obligations under our lines of credit.

As of June 30, 2022, we maintained unsecured lines of credit that provided for borrowings of up to $520.0 million.

The unsecured lines of credit as of June 30, 2022 included a $20.0 million liquidity line and a $500.0 million syndicated line.

As of September 30, 2022, we maintained unsecured lines of credit that provided for borrowings of up to $520.0 million.

The unsecured lines of credit as of September 30, 2022 included a $20.0 million liquidity line and a $500.0 million syndicated line.

The syndicated line may be increased up to $1.2 billion through an accordion feature in certain circumstances.

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The extent to which the COVID-19 pandemic continues to impact our financial condition, results of operations and cash flows will depend on future developments which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, the timing or effectiveness of any vaccines or treatments, and the direct and indirect economic effects of the pandemic and containment measures, among others.

As of June 30, 2022, the Company’s total liquidity was approximately $714.2 million, including cash and cash equivalents on the Company’s balance sheet and the full undrawn capacity under its $520 million unsecured lines of credit.

As of September 30, 2022, the Company’s total liquidity was approximately $700.7 million, including cash and cash equivalents on the Company’s balance sheet and the full undrawn capacity under its $520 million unsecured lines of credit.

We expect to have sufficient liquidity to meet our obligations for at least the next twelve months.

Memphis Consolidated Joint Venture

Additionally, in October 2022, the Southaven, MS joint venture amended and restated its secured term loan, increasing the outstanding balance to $51.7 million from $40.1 million, extending maturity to October 2026 plus a one year extension option, from April 2023, with an interest rate of Adjusted SOFR plus 200 basis points.

Operating Partnership Term Loan

In October 2022, we amended and restated our unsecured term loan.

The outstanding balance was increased from $300.0 million to $325.0 million and the maturity was extended to January 2027 plus a one-year extension option.

The interest rate changed from LIBOR + 1.25% to Adjusted SOFR + 1.20% based on our current credit rating.

The amendment also incorporates a sustainability metric, reducing the applicable grid-based interest rate spread by one basis point annually, subject to meeting certain thresholds.

We believe our current balance sheet position is financially sound;

however, due to the economic uncertainty caused by the COVID-19 pandemic, rising interest rates and inflation, and the inherent uncertainty and unpredictability of the capital and credit markets, we can give no assurance that affordable access to capital will exist between now and when our next significant debt matures, which is our unsecured term loan due April 2024.

Equity Offerings under the ATM Offering Program

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During 2021, under this program, the Company sold 10.0 million shares at a weighted average price of $18.97 per share, generating net proceeds of $187.1 million and leaving a remaining authorization of $60.1 million.

The proceeds were contributed to the Operating Partnership and then used primarily to reduce indebtedness as described in the sections immediately below.

There were no shares sold under the ATM program for the three and six months ended June 30, 2022.

The proceeds were contributed to the Operating Partnership and then used primarily to reduce indebtedness.

There were no shares sold under the ATM program for the three and nine months ended September 30, 2022.

Debt Covenants

The Operating Partnership’s debt agreements require the maintenance of certain ratios, including debt service coverage and leverage, and limit the payment of dividends such that dividends and distributions will not exceed funds from operations, as defined in the agreements, for the prior fiscal year on an annual basis or 95% on a cumulative basis.

We have historically been, and at June 30, 2022 are, in compliance with all of our debt covenants.

We have historically been, and at September 30, 2022 are, in compliance with all of our debt covenants.

Our continued compliance with these covenants depends on many factors and could be impacted by current or future economic conditions, including those associated with the COVID-19 pandemic.

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We believe that we have access to the necessary financing to fund our short-term liquidity needs.

As of June 30, 2022, we believe our most restrictive covenants are contained in our senior, unsecured notes.

As of September 30, 2022, we believe our most restrictive covenants are contained in our senior, unsecured notes.

Key financial covenants and their covenant levels, which are calculated based on contractual terms, include the following:

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Consolidated Income Available for Debt Service to Annual Debt Service Charge > 1.5 x 5.7

In addition, key financial covenants for our lines of credit and term loan, include the following as of June 30, 2022:

In addition, key financial covenants for our lines of credit and term loan, include the following as of September 30, 2022:

Required Actual

4 unchanged sentences

Unencumbered Interest Coverage Ratio > 1.5 x 5.7

Depending on the future economic impact of COVID-19, other covenants related to credit facilities, term loans, and other debt obligations could become one of our most restrictive covenants.

Depending on the future economic impact of COVID-19, inflation and rising interest rates, other covenants related to credit facilities, term loans, and other debt obligations could become one of our most restrictive covenants.

Debt of unconsolidated joint ventures

The following table details information regarding the outstanding debt of the unconsolidated joint ventures and guarantees of such debt provided by us as of June 30, 2022 (dollars in millions):

The following table details information regarding the outstanding debt of the unconsolidated joint ventures and guarantees of such debt provided by us as of September 30, 2022 (dollars in millions):

Joint Venture Total Joint

1 unchanged sentence

Charlotte $ 100.0 July 2028 4.27% — % $ —

Columbus 71.0 November 2022 LIBOR + 1.85% 16.8 % 11.9

Columbus 71.0 October 2032 6.25% — % —

Galveston/Houston 64.5 July 2023 LIBOR + 1.85% 15.5 % 10.0

2 unchanged sentences

$ 329.2 $ 10.0

In September 2022, the Columbus joint venture completed the refinance of its mortgage.

The new $71.0 million non-recourse loan has a maturity date of October 2032 and a fixed interest rate of 6.25%.

Critical Accounting Estimates

7 unchanged sentences

Our Annual Report on Form 10-K for the year ended December 31, 2021 contains a discussion of our critical accounting estimates in the Management's Discussion and Analysis of Financial Condition and Results of Operations section.

There have been no material changes to these estimates during the three months and six months ended June 30, 2022, other than discussed below.

There have been no material changes to these estimates during the three and nine months ended September 30, 2022, other than discussed below.

Revenue recognition and collectibility of operating lease receivables

49 unchanged sentences

Below is a reconciliation of net income to FFO and Core FFO available to common shareholders (in thousands, except per share amounts):

Three months ended Six months ended

June 30, June 30,

Three months ended Nine months ended

September 30, September 30,

2022 2021 2022 2021

Net income $ 20,819 $ 2,596 $ 42,281 $ 6,938

Net income (loss) $ 24,345 $ (11,071) $ 66,626 $ (4,133)

Adjusted for:

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Diluted weighted average common shares (for earnings per share computations) 104,937 103,269 104,829 99,446

Effect of notional units — 583 — 518

Effect of outstanding options — 753 — 736

Exchangeable operating partnership units 4,762 4,795 4,762 4,795

8 unchanged sentences

(5) In April 2021, the Company completed a partial redemption of $150.0 million aggregate principal amount of its $250.0 million 3.875% senior notes due December 2023, for $163.0 million in cash.

The loss on extinguishment of debt includes a make-whole premium of $13.0 million.

In September 2021, the Company completed a redemption of the remaining 2023 Notes, $100.0 million in aggregate principal amount outstanding, and all of its 3.750% senior notes due 2024, $250.0 million in aggregate principal outstanding, for $381.9 million in cash.

The loss on extinguishment of debt includes make-whole premiums of $44.9 million, of which $31.9 million occurred during the third quarter of 2021.

In the same period, we also recorded write-offs of approximately $2.9 million of debt discount and debt origination costs due to the early redemption of our 2023 and 2024 notes, of which $1.9 million occurred in the third quarter of 2021.

Portfolio Net Operating Income and Same Center Net Operating Income

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Below is a reconciliation of net income to Portfolio NOI and Same Center NOI for the consolidated portfolio and total portfolio at pro rata share (in thousands):

Three months ended Six months ended

June 30, June 30,

Three months ended Nine months ended

September 30, September 30,

2022 2021 2022 2021

Net income $ 20,819 $ 2,596 $ 42,281 $ 6,938

Net income (loss) $ 24,345 $ (11,071) $ 66,626 $ (4,133)

Adjusted to exclude:

22 unchanged sentences

(1) In April 2021, the Company completed a partial redemption of $150.0 million aggregate principal amount of its $250.0 million 3.875% senior notes due December 2023, for $163.0 million in cash.

The loss on extinguishment of debt includes a make-whole premium of $13.0 million.

The loss on extinguishment of debt includes make-whole premiums of $44.9 million, of which $31.9 million occurred during the third quarter of 2021.

(2) Non-cash items include straight-line rent, above and below market rent amortization, straight-line rent expense on land leases and gains or losses on outparcel sales, as applicable.

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Each of these measures is defined as follows:

We define Adjusted EBITDA as net income (loss) available to the Company’s common shareholders computed in accordance with GAAP before interest expense, income taxes (if applicable), depreciation and amortization, gains and losses on sale of operating properties, joint venture properties, outparcels and other assets, impairment write-downs of depreciated property and of investment in unconsolidated joint ventures caused by a decrease in value of depreciated property in the affiliate, compensation related to voluntary retirement plan and other executive officer severance, gain on sale of non-real estate asset, casualty gains and losses, gains and losses on early extinguishment of debt, net and other items that we do not consider indicative of the Company's ongoing operating performance.

We determine EBITDAre based on the definition set forth by NAREIT, which is defined as net income (loss) available to the Company’s common shareholders computed in accordance with GAAP before interest expense, income taxes (if applicable), depreciation and amortization, gains and losses on sale of operating properties, gains and losses on change of control and impairment write-downs of depreciated property and of investment in unconsolidated joint ventures caused by a decrease in value of depreciated property in the affiliate and after adjustments to reflect our share of the EBITDAre of unconsolidated joint ventures.

Adjusted EBITDAre is defined as EBITDAre excluding gains and losses on early extinguishment of debt, net, casualty gains and losses, compensation related to voluntary retirement plan and other executive officer severance, gain on sale of non-real estate asset, casualty gains and losses, gains and losses on sale of outparcels, and other items that that we do not consider indicative of the Company's ongoing operating performance.

We define Adjusted EBITDA as net income (loss) available to the Company’s common shareholders computed in accordance with GAAP before net interest expense, income taxes (if applicable), depreciation and amortization, gains and losses on sale of operating properties, joint venture properties, outparcels and other assets, impairment write-downs of depreciated property and of investment in unconsolidated joint ventures caused by a decrease in value of depreciated property in the affiliate, compensation related to voluntary retirement plan and other executive officer severance, gain on sale of non-real estate asset, casualty gains and losses, gains and losses on early extinguishment of debt, net and other items that we do not consider indicative of the Company's ongoing operating performance.

We determine EBITDAre based on the definition set forth by NAREIT, which is defined as net income (loss) available to the Company’s common shareholders computed in accordance with GAAP before net interest expense, income taxes (if applicable), depreciation and amortization, gains and losses on sale of operating properties, gains and losses on change of control and impairment write-downs of depreciated property and of investment in unconsolidated joint ventures caused by a decrease in value of depreciated property in the affiliate and after adjustments to reflect our share of the EBITDAre of unconsolidated joint ventures.

Adjusted EBITDAre is defined as EBITDAre excluding gains and losses on early extinguishment of debt, net, casualty gains and losses, compensation related to voluntary retirement plan and other executive officer severance, gain on sale of non-real estate asset, gains and losses on sale of outparcels, and other items that that we do not consider indicative of the Company's ongoing operating performance.

We present Adjusted EBITDA, EBITDAre and Adjusted EBITDAre as we believe they are useful for investors, creditors and rating agencies as they provide additional performance measures that are independent of a Company’s existing capital structure to facilitate the evaluation and comparison of the Company’s operating performance to other REITs and provide a more consistent metric for comparing the operating performance of the Company’s real estate between periods.

Adjusted EBITDA, EBITDAre and Adjusted EBITDAre have significant limitations as analytical tools, including:

• They do not reflect our interest expense;

• They do not reflect our net interest expense;

• They do not reflect gains or losses on sales of operating properties or impairment write-downs of depreciated property and of investment in unconsolidated joint ventures caused by a decrease in value of depreciated property in the affiliate;

4 unchanged sentences

Below is a reconciliation of Net Income to Adjusted EBITDA (in thousands):

Three months ended Six months ended

June 30, June 30,

Three months ended Nine months ended

September 30, September 30,

2022 2021 2022 2021

Net income $ 20,819 $ 2,596 $ 42,281 $ 6,938

Net income (loss) $ 24,345 $ (11,071) $ 66,626 $ (4,133)

Adjusted to exclude:

Interest expense 11,576 13,338 23,210 27,700

Interest expense, net (5)

10,297 13,178 33,260 40,654

Depreciation and amortization 25,445 26,944 77,908 82,826

8 unchanged sentences

Below is a reconciliation of Net Income to EBITDAre and Adjusted EBITDAre (in thousands):

Three months ended Six months ended

June 30, June 30,

Three months ended Nine months ended

September 30, September 30,

2022 2021 2022 2021

Net income $ 20,819 $ 2,596 $ 42,281 $ 6,938

Net income (loss) $ 24,345 $ (11,071) $ 66,626 $ (4,133)

Adjusted to exclude:

Interest expense 11,576 13,338 23,210 27,700

Interest expense, net (5)

10,297 13,178 33,260 40,654

Depreciation and amortization 25,445 26,944 77,908 82,826

15 unchanged sentences

(4) In April 2021, we completed a partial redemption of $150.0 million aggregate principal amount of our $250.0 million 3.875% senior notes due December 2023, for $163.0 million in cash.

The loss on extinguishment of debt includes a make-whole premium of $13.0 million.

The loss on extinguishment of debt includes make-whole premiums of $44.9 million, of which $31.9 million occurred during the third quarter of 2021.

(5) Interest expense, net includes interest expense less interest income, which is included in other income on our statement of operations.

ECONOMIC CONDITIONS AND OUTLOOK

10 unchanged sentences

By maintaining a broad base of well-known tenants and a geographically diverse portfolio of properties located across the United States, we believe we reduce our operating and leasing risks.

As of June 30, 2022 no one tenant (including affiliates) accounts for more than 8% of our square feet or 6% of our rental revenues.

As of September 30, 2022 no one tenant (including affiliates) accounts for more than 8% of our square feet or 6% of our rental revenues.

Due to the relatively short-term nature of our tenants’ leases, a significant portion of the leases in our portfolio come up for renewal each year.

During 2022, approximately 2.1 million square feet, or 17% of the total portfolio, including our share of unconsolidated joint ventures, will come up for renewal.

For the total portfolio, including the Company’s pro rata share of unconsolidated joint ventures, as of July 31, 2022, we had lease renewals executed or in process for 66.4% of the space scheduled to expire during 2022 compared to 59.8% of the space scheduled to expire during 2021 that was executed or in process as of July 31, 2021.

For the total portfolio, including the Company’s pro rata share of unconsolidated joint ventures, as of September 30, 2022, we had lease renewals executed or in process for 75.6% of the space scheduled to expire during 2022 compared to 67.6% of the space scheduled to expire during 2021 that was executed or in process as of September 30, 2021.

The current challenging retail environment has impacted our business as our operations are subject to the operating results and operating decisions of our retail tenants.

We are encouraged by the recent improvement in traffic and sales trends, which in many cases are exceeding 2019 levels.

We continue to be encouraged by the stability of our sales trends which remain elevated above pre-pandemic levels.

However, many retailers across the country are currently facing, or expect to face, potential impact of rising inflation, logistics and staffing issues.

5 unchanged sentences

As a result of COVID-19, inflation, rising interest rates, and other current or future economic conditions, occupancy could be negatively impacted.

Occupancy for our total portfolio, including our share of unconsolidated joint ventures, was 94.9% and 93.2% as of June 30, 2022 and 2021, respectively.

Occupancy for our total portfolio, including our share of unconsolidated joint ventures, was 96.5% and 94.4% as of September 30, 2022 and 2021, respectively.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis