What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-04 compared with 2023-04-28 · 189 added, 75 removed, 520 unchanged (34% 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 months ended March 31, 2023 with the three months ended March 31, 2022.

The discussion of our results of operations reported in the unaudited, consolidated statements of operations compares the three and six months ended June 30, 2023 with the three and six months ended June 30, 2022.

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

the expected impact of 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 effectiveness of our interest rate hedging arrangements;

uncertainty relating to the phasing out of LIBOR;

risk associated with our interest rate hedging arrangements;

risk associated to uncertainty related to determination of LIBOR;

our potential failure to qualify as a REIT;

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General Overview

As of March 31, 2023, we had 29 consolidated outlet centers in 18 states totaling 11.4 million square feet, one managed center and one center under construction.

As of June 30, 2023, we had 29 consolidated outlet centers in 18 states totaling 11.3 million square feet, one managed center and one center under construction.

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, 2022 to March 31, 2023 (square feet in thousands):

Consolidated Outlet Centers Unconsolidated Joint Venture Outlet Centers Managed Centers

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Other (4) — — — — —

As of March 31, 2023

As of June 30, 2023

11,349 29 2,113 6 457 1

The following table summarizes certain information for our existing outlet centers in which we have an ownership interest as of March 31, 2023.

The following table summarizes certain information for our existing outlet centers in which we have an ownership interest as of June 30, 2023.

Except as noted, all properties are fee owned.

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Leasing Activity

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 March 31, 2023 and 2022:

Comparable Space for Executed Leases (1) (2)

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RESULTS OF OPERATIONS

Comparison of the three months ended March 31, 2023 to the three months ended March 31, 2022

Comparison of the three months ended June 30, 2023 to the three months ended June 30, 2022

Net income increased $4.5 million in the 2023 period to $25.3 million as compared to net income of $20.8 million for the 2022 period.

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

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

• a higher average portfolio occupancy rate in the current period,

• lower common area maintenance snow removal costs in the current period as a result of a mild 2023 winter comparatively, and

• positive leasing spreads upon renewal and re-tenanting since the previous period

• higher management, leasing and other services income from the addition of management responsibilities for a center during the third quarter of 2022, and

• lower general and administrative costs due to the previous period containing executive severance costs that did not recur.

In the tables below, information set forth for properties disposed includes the Blowing Rock outlet center sold in December 2022.

RENTAL REVENUES

Rental revenues increased $3.2 million in the 2023 period compared to the 2022 period.

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

2023 2022 Increase/(Decrease)

Rental revenues from existing properties $ 104,837 $ 100,640 $ 4,197

Rental revenues from properties disposed 133 477 (344)

Straight-line rent adjustments (321) 302 (623)

Lease termination fees 1 35 (34)

Amortization of above and below market rent adjustments, net (62) (45) (17)

$ 104,588 $ 101,409 $ 3,179

Rental revenues at existing properties was positively impacted by higher occupancy between the periods, 97.1% compared to 94.8% and positive leasing spreads upon renewal and re-tenanting since the previous period.

These increases were partially offset by lower variable revenues, which are derived from tenant sales.

MANAGEMENT, LEASING AND OTHER SERVICES

Management, leasing and other services increased $686,000 in the 2023 period compared to the 2022 period.

The following table sets forth the changes in various components of management, leasing and other services (in thousands):

2023 2022 Increase/(Decrease)

Management and marketing $ 793 $ 552 $ 241

Leasing and other fees 220 — 220

Expense reimbursements from unconsolidated joint ventures 1,109 884 225

$ 2,122 $ 1,436 $ 686

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

OTHER REVENUES

Other revenues increased $938,000 in the 2023 period as compared to the 2022 period.

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

2023 2022 Increase/(Decrease)

Other revenues from existing properties $ 3,931 $ 2,970 $ 961

Other revenues from properties disposed — 23 (23)

$ 3,931 $ 2,993 $ 938

Other revenues from existing properties increased in the 2023 p eriod due to an increase in other revenue streams, such as EV charging, paid media, sponsorships and onsite signage, on a local and national level.

PROPERTY OPERATING EXPENSES

Property operating expenses increased $1.0 million in the 2023 period compared to the 2022 period.

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

2023 2022 Increase/(Decrease)

Property operating expenses from existing properties $ 31,093 $ 30,139 $ 954

Property operating expenses from sold properties — 208 (208)

Expenses related to unconsolidated joint ventures 1,109 884 225

Other property operating expenses 1,510 1,466 44

$ 33,712 $ 32,697 $ 1,015

Property operating expenses from existing properties increas ed in the 2023 period primarily due to higher common area maintenance expenses in the 2023 period compared to the 2022 period and high er property tax costs at certain centers.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses decreased $1.0 million in the 2023 period compared to the 2022 period.

The prior period included $2.4 million of compensation costs related to executive severance.

The 2023 period included no such executive severance.

Excluding executive severance, expenses increased from the hiring of key employees since the 2022 period to drive operational and growth initiatives.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization costs decreased $831,000 in the 2023 period compared to the 2022 period.

2023 2022 Increase/(Decrease)

Depreciation and amortization expenses from existing properties $ 25,389 $ 25,987 $ (598)

Depreciation and amortization from property disposed — 233 (233)

$ 25,389 $ 26,220 $ (831)

INTEREST EXPENSE

Interest expense increased $390,000 in the 2023 period compared to the 2022 period due to the combination of higher interest rates and higher amounts of variable rate debt.

During the fourth quarter of 2022 we refinanced the variable rate mortgage in our Memphis consolidated joint venture, increasing the outstanding balance to $51.7 million from $40.1 million.

In addition, also during the fourth quarter of 2022, we amended and restated our unsecured term loan and increased the outstanding balance from $300.0 million to $325.0 million.

These factors were partially offset by higher capitalized interest on our Nashville, TN development project.

OTHER INCOME (EXPENSE)

Other income (expense) decreased approximately $252,000 in the 2023 period.

The 2023 period had significantly higher investment income from short-term investments of cash at higher interest rates than were available in the 2022 period.

This was offset by a $2.4 million gain on sale of a non-real estate asset in the 2022 period.

EQUITY IN EARNINGS OF UNCONSOLIDATED JOINT VENTURES

Equity in earnings of unconsolidated joint ventures decreased approximately $521,000 in the 2023 period compared to the 2022 period.

The decrease is primarily due to the increase in interest rates during the second half of 2022 that has negatively impacted two of our joint ventures.

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

The Galveston/Houston joint venture mortgage was floating rate during the majority of both periods.

Interest rates rose approximately 4% during the comparable periods.

The Galveston mortgage was refinanced during June 2023 and is now SOFR +3.00%.

Comparison of the six months ended June 30, 2023 to the six months ended June 30, 2022

Net income increased $7.9 million in the 2023 period to $50.2 million as compared to net income of $42.3 million for the 2022 period.

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

• a higher average portfolio occupancy rate in the current period,

• positive leasing spreads upon renewal and re-tenanting since the previous period

• higher management, leasing and other services income from the addition of management responsibilities for a center during the third quarter of 2022, and

• lower common area maintenance snow removal costs in the current period as a result of a comparatively mild 2023 winter, and

• higher investment income from investments of cash available at significantly higher rates.

partially offset by

• the current period did not contain lease termination fees and the prior year period included significant termination rents from several tenants, and

• higher general and administrative costs as a result of hiring certain executives and other key employees after March 2022 and additional expenses to drive operational and growth initiatives.

• the current period did not contain lease termination fees and the prior year period included significant termination rents from several tenants

In the tables below, information set forth for properties disposed includes the Blowing Rock outlet center sold in December 2022.

RENTAL REVENUES

Rental revenues decreased $1.0 million in the 2023 period compared to the 2022 period.

Rental revenues increased $2.2 million in the 2023 period compared to the 2022 period.

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

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$ 208,170 $ 206,018 $ 2,152

Rental revenues at existing properties were positively impacted by higher occupancy between the periods, 97.1% compared to 94.8% and positive leasing spreads upon renewal and re-tenanting since the previous period.

These increases were partially offset by lower variable revenues, which are derived from tenant sales.

Lease termination fees decreased primarily because the 2022 period included isolated terminations of certain leases with multiple years of remaining term.

No such significant terminations occurred in the 2023 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

Management, leasing and other services increased $387,000 in the 2023 period compared to the 2022 period.

Management, leasing and other services increased $1.1 million in the 2023 period compared to the 2022 period.

The following table sets forth the changes in various components of management, leasing and other services (in thousands):

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$ 4,036 $ 2,963 $ 1,073

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

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

OTHER REVENUES

Other revenues increased $715,000 in the 2023 period as compared to the 2022 period.

Other revenues increased $1.7 million in the 2023 period as compared to the 2022 period.

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

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$ 7,378 $ 5,725 $ 1,653

Other revenues from existing properties increased in the 2023 period due to an increase in other revenue streams, such as paid media, sponsorships and onsite signage, on a local and national level.

Other revenues from existing properties increased in the 2023 period due to an increase in other revenue streams, such as EV charging, paid media, sponsorships and onsite signage, on a local and national level.

PROPERTY OPERATING EXPENSES

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GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses increased $2.0 million in the 2023 period compared to the 2022 period.

The increase was primarily from the hiring of certain key employees after March 2022 and additional expenses to drive operational and growth initiatives.

General and administrative expenses increased $942,000 in the 2023 period compared to the 2022 period.

The prior period included $2.4 million of compensation costs related to executive severance.

The 2023 period included a $806,000 reversal of previously expensed compensation related to a voluntary executive departure.

Excluding the impact of executive departures, expenses increased from the hiring of key employees since the 2022 period to drive operational and growth initiatives.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization costs decreased $350,000 in the 2023 period compared to the 2022 period.

Depreciation and amortization costs decreased $1.2 million in the 2023 period compared to the 2022 period.

2023 2022 Increase/(Decrease)

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INTEREST EXPENSE

Interest expense increased $709,000 in the 2023 period compared to the 2022 period due to the combination of higher interest rates and higher amounts of variable rate debt.

Interest expense increased $1.1 million in the 2023 period compared to the 2022 period due to the combination of higher interest rates and higher amounts of variable rate debt.

During the fourth quarter of 2022 we refinanced the variable rate mortgage in our Memphis consolidated joint venture, increasing the outstanding balance to $51.7 million from $40.1 million.

In addition, also during the fourth quarter of 2022, we amended and restated our unsecured term loan and increased the outstanding balance from $300.0 million to $325.0 million.

These factors were partially offset by higher capitalized interest on our Nashville, T N development project.

OTHER INCOME (EXPENSE)

Other income (expense) increased approximately $2.6 million in the 2023 period, primarily due to higher investment income from short-term investments of cash at higher interest rates than were available in the 2022 period.

Other income (expense) increased approximately $2.4 million in the 2023 period, primarily due to higher investment income from short-term investments of cash at higher interest rates partially offset by a $2.4 million gain on sale of a non-real estate asset in the 2022 period.

EQUITY IN EARNINGS OF UNCONSOLIDATED JOINT VENTURES

Equity in earnings of unconsolidated joint ventures decreased approximately $578,000 in the 2023 period compared to the 2022 period.

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

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

Equity in earnings of unconsolidated joint ventures decreased approximately $1.1 million in the 2023 period compared to the 2022 period.

The decrease is primarily due to the increase in interest rates during the second half of 2022 that has negatively impacted two of our joint ventures.

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

The Galveston/Houston joint venture was floating rate during the majority of both periods.

Interest rates rose approximately 4% during the comparable periods.

The Galveston mortgage was refinanced during June 2023 and is now SOFR +3.00%.

LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY

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We currently intend to use the net proceeds from any sale of shares pursuant to the ATM Offering for working capital and general corporate purposes.

As of March 31, 2023, we had approximately $60.1 million remaining available for sale under the ATM Offering program.

There were no sales of our shares during the first quarters of 2023 or 2022.

As of June 30, 2023, we had approximately $60.1 million remaining available for sale under the ATM Offering program.

There were no sales of our shares during the first six months of 2023 or for the full year 2022.

In May 2023, the Company’s Board of Directors authorized the repurchase of up to $100.0 million of the Company’s outstanding shares through May 31, 2025.

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

This authorization replaced a previous repurchase authorization for approximately $80 million that was set to expire in May 2023.

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 the three months ended March 31, 2023 or 2022.

The remaining amount authorized to be repurchased under the program as of March 31, 2023 was approximately $80 million.

The Company did not repurchase any shares for the three months ended June 30, 2023 or 2022.

The remaining amount authorized to be repurchased under the program as of June 30, 2023 was approximately $100 million.

In January 2023, the Company's Board of Directors declared a $0.22 cash dividend per common share payable on February 15, 2023 to each shareholder of record on January 31, 2023, 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.

In April 2023, the Company's Board of Directors declared a $0.245 cash dividend per common share payable on May 15, 2023 to each shareholder of record on April 28, 2023, and in its capacity as General Partner of the Operating Partnership a $0.245 cash distribution per Operating Partnership unit to the Operating Partnership's unitholders.

In July 2023, the Company’s Board of Directo rs declared a $0.245 cash dividend per common share payable on August 15, 2023 to each shareholder on record on July 31, 2023, and in its capacity as General Partner of the Operating Partnership a $0.245 cash distribution per Operating P artnership 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 three months ended March 31, 2023 and 2022 (in thousands):

Three months ended March 31,

The following table details our capital expenditures for consolidated outlet centers for the six months ended June 30, 2023 and 2022 (in thousands):

Six months ended June 30,

2023 2022 Change

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In May 2022, we broke ground on our center in Nashville, Tennessee.

The center, which will be approximately 290,000 square feet, is expected to open in the third quarter of 2023 at an estimated cost of $142.0 million to $150.0 million with a projected stabilized yield of 7.0% to 7.5%.

Through March 31, 2023, we had incurred costs of $62.8 million associated with this development.

The center, which will be approximately 290,000 square feet, has a planned grand opening of October 27, 2023 at an estimated cost of $143.0 million to $147.0 million with a projected stabilized yield of 7.5% to 8.0%.

Through June 30, 2023, we had incurred costs of $89.3 million associated with this development.

Potential Future Developments, Acquisitions and Dispositions

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

As of March 31, 2023 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 June 30, 2023 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 4 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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Contractual Obligations

There were no material changes in our contractual commitments during the three months ended March 31, 2023 from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, other than the following updates to our contractual obligations for future debt and interest payments over the next five years and thereafter as of March 31, 2023.

There were no material changes in our contractual commitments during the six months ended June 30, 2023 from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023, 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, 2023.

Future Debt Obligations

As described further in Note 6 of the notes to the consolidated financial statements, as of March 31, 2023, scheduled maturities of our existing long-term debt for the remainder 2023 and for 2024, 2025, 2026 and 2027 are $3.6 million, $5.1 million, $1.5 million, $407.4 million and $625.0 million, respectively.

As of March 31, 2023, scheduled maturities after 2027 aggregate to $400.0 million.

As described further in Note 6 of the notes to the consolidated financial statements, as of June 30, 2023, scheduled maturities of our existing long-term debt for the remainder 2023 and for 2024, 2025, 2026 and 2027 are $2.4 million, $5.1 million, $1.5 million, $407.4 million and $625.0 million, respectively.

As of June 30, 2023, scheduled maturities after 2027 aggregate to $400.0 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 March 31, 2023, these interest obligations total approximately $46.5 million over the next twelve months.

The following table sets forth our changes in cash flows from March 31, 2023 and 2022 (in thousands):

Three months ended March 31,

Based on applicable interest rates and scheduled debt maturities as of June 30, 2023, these interest obligations total approximately $47.9 million over the next twelve months.

The following table sets forth our changes in cash flows from June 30, 2023 and 2022 (in thousands):

Six months ended June 30,

2023 2022 Change

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Effect of foreign currency rate changes on cash and equivalents (356) (27) (329)

Net decrease in cash and cash equivalents $ (9,382) $ (8,574) $ (808)

Net increase in cash and cash equivalents $ 831 $ 33,056 $ (32,225)

Operating Activities

In the first quarter of 2023, our net cash provided by operating activities increased year over year primarily due to changes in working capital and lower property operating expenses.

In the first and second quarter of 2023, our net cash provided by operating activities increased year over year primarily due to changes in working capital and lower property operating expenses.

Investing Activities

The decrease in net cash used in investing activities was primarily due to increased capital expenditures related to new development at existing centers and the investment in our Nashville location, offset by proceeds from short-term investments.

The increase in net cash used in investing activities was primarily due to increased capital expenditures related to new development at existing centers and the investment in our Nashville location, offset by proceeds from short-term investments.

Financing Activities

Net cash used in financing activities increased during the first quarter of 2023 primarily due to an increase in dividends paid and a higher amount of net share settlements related to vesting of equity awards.

Net cash used in financing activities increased during the first six months of 2023 primarily due to an increase in dividends paid and a higher amount of net share settlements related to vesting of equity awards.

Financing Arrangements

As of March 31, 2023, unsecured borrowings represented 95% 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 March 31, 2023, we maintained unsecured lines of credit that provided for borrowings of up to $520.0 million.

The unsecured lines of credit as of March 31, 2023 included a $20.0 million liquidity line and a $500.0 million syndicated line.

As of June 30, 2023, unsecured borrowings represented 95% of our outstanding debt and 93% 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 and our term loan.

As of June 30, 2023, 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, 2023 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.

In May 2023, Fitch Ratings assigned a first-time ‘BBB’ long-term issuer default rating to the Company and the Operating Partnership, along with a Stable rating outlook.

Fitch also assigned a ‘BBB’ rating to Operating Partnership’s senior unsecured debt, which includes our lines of credit, a term loan and senior notes.

As a result, the applicable pricing margin on each of our unsecured lines of credit and our term loan was reduced by 25 basis points (including a 5 basis point reduction in the facility fee on the unsecured lines of credit).

Credit Ratings:

Agency Rating Outlook Latest Action

Fitch BBB Stable May 25, 2023

Moody’s Investors Services Baa3 Stable April 14, 2021

Standard & Poor’s Ratings Services BBB- Stable February 19, 2021

We intend to retain the ability to raise additional capital, including public debt or equity, to pursue attractive investment opportunities that may arise and to otherwise act in a manner that we believe to be in the best interests of our shareholders and unitholders.

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Amounts accumulated for such payments will be used in the interim to reduce the outstanding borrowings under our existing unsecured lines of credit or invested in short-term money market or other suitable instruments.

As of March 31, 2023, the Company’s total liquidity was approximately $755.8 million, including cash and cash equivalents on the Company’s balance sheet, short-term investments and the full undrawn capacity under its $520.0 million unsecured lines of credit.

As of June 30, 2023, the Company’s total liquidity was approximately $748.4 million, including cash and cash equivalents on the Company’s balance sheet, short-term investments and the full undrawn capacity under its $520.0 million unsecured lines of credit.

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

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In February 2021, we established the ATM Offering program whereby we may offer and sell the Company's common shares having an aggregate gross sales price of up to $250.0 million.

During 2022 and the first quarter of 2023, we did not sell any shares under the ATM Offering program and $60.1 million remains available for sale under the ATM Offering program.

During 2022 and the first six months of 2023, we did not sell any shares under the ATM Offering program and $60.1 million remains available for sale under the ATM Offering program.

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 March 31, 2023 are, in compliance with all of our debt covenants.

We have historically been, and at June 30, 2023 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.

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

As of March 31, 2023, we were in compliance with all financial and non-financial covenants related to our debt obligations.

As of June 30, 2023, we were in compliance with all financial and non-financial covenants related to our debt obligations.

Senior unsecured notes financial covenants Required Actual

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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 March 31, 2023 (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 June 30, 2023 (dollars in millions):

Joint Venture Total Joint

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Columbus 71.0 October 2032 6.25% — % —

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

Galveston/Houston 58.0 June 2026 SOFR + 3.00% 17.2 % 10.0

National Harbor 94.4 January 2030 4.63 % — % —

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$ 321.1 $ 10.0

Galveston/Houston

In June 2023, the Galveston/Houston joint venture completed the refinance of its mortgage.

The new $58.0 million loan has a maturity date of June 2026 and an interest rate of Daily SOFR + 3.00%.

In conjunction with this refinance, the joint venture entered into a $29.0 million interest rate swap that fixes Daily SOFR at 4.44% until December 2025.

The Company’s share of of the outstanding debt is $29.0 million.

Critical Accounting Estimates

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Our Annual Report on Form 10-K for the year ended December 31, 2022 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 ended March 31, 2023.

There have been no material changes to these estimates during the six months ended June 30, 2023.

Recent Accounting Pronouncements

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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

Three months ended Six months ended

June 30, June 30,

2023 2022 2023 2022

Net income $ 25,300 $ 20,819 $ 50,160 $ 42,281

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Compensation-related adjustments (2)

— 2,447 (806) 2,447

Gain on sale of non-real estate asset (3)

— (2,418) — (2,418)

Impact of above adjustment to the allocation of earnings to participating securities — — 6 —

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Each Class A common limited partnership unit is exchangeable for one of the Company’s common shares, subject to certain limitations to preserve the Company’s REIT status.

(2) Represents reversal of previously expensed compensation related to a voluntary executive departure.

(2) For the 2023 period, represents the reversal of previously expensed compensation related to a voluntary executive departure.

For the 2022 periods, represents executive severance costs.

(3) Represents gain on sale of the corporate aircraft.

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

Three months ended Six months ended

June 30, June 30,

2023 2022 2023 2022

Net income $ 25,300 $ 20,819 $ 50,160 $ 42,281

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Non-cash adjustments (1)

481 (157) 1,301 1,363

Lease termination fees (1) (35) (7) (2,631)

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Non-same center NOI - Consolidated

Same Center NOI - Consolidated (2)

(106) (214) 40 (470)

Portfolio NOI - Consolidated $ 76,552 $ 71,225

Pro rata share of unconsolidated joint ventures 6,874 7,130

Portfolio NOI - total portfolio at pro rata share 83,426 78,355

Non-same center NOI - total portfolio at pro rata share 146 (575)

Same Center NOI - total portfolio at pro rata share (2)

Same Center NOI - Consolidated (2)

$ 76,324 $ 72,797 $ 153,023 $ 143,764

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

Three months ended

Three months ended Six months ended

June 30, June 30,

2023 2022 2023 2022

Net income $ 25,300 $ 20,819 $ 50,160 $ 42,281

1 unchanged sentence

Interest expense, net (1)

9,522 11,430 19,301 22,963

Income tax expense (benefit) 164 129 (36) 152

1 unchanged sentence

Compensation-related adjustments (2)

— 2,447 (806) 2,447

Gain on sale of non-real estate asset (3)

— (2,418) — (2,418)

Adjusted EBITDA $ 60,375 $ 58,627 $ 119,901 $ 117,888

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

Three months ended

Three months ended Six months ended

June 30, June 30,

2023 2022 2023 2022

Net income $ 25,300 $ 20,819 $ 50,160 $ 42,281

1 unchanged sentence

Interest expense, net (1)

9,522 11,430 19,301 22,963

Income tax expense (benefit) 164 129 (36) 152

Depreciation and amortization 25,389 26,220 51,282 52,463

Pro-rata share of interest expense - unconsolidated joint ventures 2,200 1,458

Pro-rata share of interest expense, net - unconsolidated joint ventures (1)

2,195 1,577 4,326 3,034

Pro-rata share of depreciation and amortization - unconsolidated joint ventures 2,615 2,791 5,285 5,545

1 unchanged sentence

Compensation-related adjustments (2)

— 2,447 (806) 2,447

Gain on sale of non-real estate asset (3)

— (2,418) — (2,418)

Adjusted EBITDAre $ 65,185 $ 62,995 $ 129,512 $ 126,467

1 unchanged sentence

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

(2) Represents the reversal of previously expensed compensation related to an executive departure.

(2) For the 2023 period, represents the reversal of previously expensed compensation related to a voluntary executive departure.

For the 2022 periods, represents executive severance costs.

(3) Represents gain on sale of the corporate aircraft.

ECONOMIC CONDITIONS AND OUTLOOK

8 unchanged sentences

During 2023, approximately 1.9 million square feet, or 16% 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 March 31, 2023, we had lease renewals executed or in process for 57.5% of the space scheduled to expire during 2023 compared to 49.0% of the space scheduled to expire during 2022 that was executed or in process as of March 31, 2022.

For the total portfolio, including the Company’s pro rata share of unconsolidated joint ventures, as of June 30, 2023, we had lease renewals executed or in process for 64.4% of the space scheduled to expire during 2023 compared to 64.5% of the space scheduled to expire during 2022 that was executed or in process as of June 30, 2022.

The majority of our leases contain provisions designed to mitigate the impact of inflation.

3 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 March 31, 2023 no one tenant (including affiliates) accounted for more than 8% of our square feet or 6% of our rental revenues.

As of June 30, 2023 no one tenant (including affiliates) accounted for more than 8% of our square feet or 6% of our rental revenues.

We believe retail real estate will continue to be a profitable and fundamental distribution channel for many brands and retailers.

While we continue to attract and retain additional tenants, if we were unable to successfully renew or re-lease a significant amount of this space on favorable economic terms or in a timely manner, the loss in rent and our Same Center NOI could be negatively impacted in future periods.

Occupancy for our total portfolio, including our share of unconsolidated joint ventures, was 96.5% and 94.3% as of March 31, 2023 and 2022, respectively.

Occupancy for our total portfolio, including our share of unconsolidated joint ventures, was 97.2% and 94.9% as of June 30, 2023 and 2022, 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