TANGER INC. 10-Q

Item 2. 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, 2024 with the three months ended March 31, 2023. The results of operations discussion is combined for Tanger Inc. and Tanger Properties Limited Partnership because the results are virtually the same for both entities. The following discussion should be read in conjunction with the unaudited consolidated financial statements appearing elsewhere in this report. Historical results and percentage relationships set forth in the unaudited, consolidated statements of operations, including trends which might appear, are not necessarily indicative of future operations. Unless the context indicates otherwise, the term “Company” refers to Tanger Inc. and subsidiaries and the term “Operating Partnership” refers to Tanger Properties Limited Partnership and subsidiaries. The terms “we”, “our” and “us” refer to the Company or the Company and the Operating Partnership together, as the text requires. Cautionary Statements Certain statements made in this Quarterly Report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and included this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies, beliefs and expectations, are generally identifiable by use of the words “anticipate,” “believe,” “can,” “continue,” “could,” “designed,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would,” or similar expressions. Such forward-looking statements include, but are not limited to, risks related to pandemics, 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; our results of operations and financial condition; capital expenditure and working capital needs and the funding thereof; the repurchase of the Company's common shares, including the potential use of a 10b5-1 plan to facilitate repurchases; future dividend payments; interest rates, the possibility of future asset impairments, development initiatives and strategic partnerships, the anticipated impact of the Company’s newly acquired assets in Huntsville and Asheville, as well as its newly opened Nashville development, compliance with debt covenants; renewal and re-lease of leased space; the outlook for the retail environment, potential bankruptcies, and other store closings; consumer shopping trends and preferences; the outcome of legal proceedings arising in the normal course of business; and real estate joint ventures. You should exercise caution in relying on forward-looking statements since they involve known and unknown risks, uncertainties and other important factors which are, in some cases, beyond our control and which could materially affect our actual results, performance or achievements. 35 Other important factors that may cause actual results to differ materially from current expectations include, but are not limited to: our inability to develop new retail centers or expand existing retail centers successfully; risks related to the economic performance and market value of our retail centers; the relative illiquidity of real property investments; impairment charges affecting our properties; our acquisitions or dispositions of assets may not achieve anticipated results; competition for the acquisition and development of retail centers, and our inability to complete the acquisitions of retail centers we may identify; competition for tenants with competing retail centers; the diversification of our tenant mix and our entry into the operation of full price retail may not achieve our expected results; environmental regulations affecting our business; risks associated with possible terrorist activity or other acts or threats of violence and threats to public safety; risks related to the impact of macroeconomic conditions, including rising interest rates and inflation, on our tenants and on our business, financial condition, liquidity, results of operations and compliance with debt covenants; our dependence on rental income from real property; the fact that certain of our leases include co-tenancy and/or sales-based provisions that may allow a tenant to pay reduced rent and/or terminate a lease prior to its natural expiration; our dependence on the results of operations of our retailers and their bankruptcy, early termination or closing could adversely affect us; the impact of geopolitical conflicts; the immediate and long-term impact of the outbreak of a highly infectious or contagious disease on our tenants and on our business (including the impact of actions taken to contain the outbreak or mitigate its impact); the fact that certain of our properties are subject to ownership interests held by third parties, whose interests may conflict with ours; risks related to climate change; increased costs and reputational harm associated with the increased focus on environmental, sustainability and social initiatives; risks related to uninsured losses; the risk that consumer, travel, shopping and spending habits may change; risks associated with our Canadian investments; risks associated with attracting and retaining key personnel; risks associated with debt financing; risks associated with our guarantees of debt for, or other support we may provide to, joint venture properties; the effectiveness of our interest rate hedging arrangements; our potential failure to qualify as a REIT; our legal obligation to pay dividends to our shareholders; legislative or regulatory actions that could adversely affect our shareholders, our dependence on distributions from the Operating Partnership to meet our financial obligations, including dividends; the risk of a cyber-attack or an act of cyber-terrorism on our systems; the uncertainties of costs to comply with regulatory changes (including potential costs to comply with proposed rules of the SEC to standardize climate-related disclosures); and other important factors which may cause actual results to differ materially from current expectations include, but are not limited to, those set forth under Item 1A - “Risk Factors” in the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2023. We qualify all of our forward-looking statements by these cautionary statements. The forward-looking statements in this Quarterly Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise. The following discussion should be read in conjunction with the consolidated financial statements appearing elsewhere in this report. Historical results and percentage relationships set forth in the consolidated statements of operations, including trends which might appear, are not necessarily indicative of future operations. This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide a reader of our financial statements with a narrative from the perspective of our management regarding our financial condition and results of operations, liquidity and certain other factors that may affect our future results. Our MD&A is presented in the following sections: • General Overview • Leasing Activity • Results of Operations • Liquidity and Capital Resources of the Company • Liquidity and Capital Resources of the Operating Partnership • Critical Accounting Estimates • Recent Accounting Pronouncements • Non-GAAP Supplemental Measures • Economic Conditions and Outlook 36 General Overview As of March 31, 2024, we owned and operated 31 consolidated outlet centers and one open-air lifestyle center, with a total gross leasable area of approximately 12.7 million square feet. We also had partial ownership interests in 6 unconsolidated centers totaling approximately 2.1 million square feet, including 2 centers in Canada. Our portfolio also includes two managed centers totaling approximately 760,000 square feet. The table below details our acquisitions, new developments, expansions and dispositions of consolidated and unconsolidated centers that significantly impacted our results of operations and liquidity from January 1, 2023 to March 31, 2024 (square feet in thousands): Consolidated Centers Unconsolidated Joint Venture Centers Managed Centers Center Quarter Acquired/Developed/Disposed Square Feet Number of Centers Square Feet Number of Centers Square Feet Number of Centers As of January 1, 2023 11,353 29 2,113 6 457 1 Additions: Palm Beach, Florida Third Quarter — — — — 301 1 Nashville, Tennessee Fourth Quarter 291 1 — — — — Asheville, North Carolina Fourth Quarter 382 1 — — — — Huntsville, Alabama Fourth Quarter 651 1 — — — — Other — — — — — — As of December 31, 2023 12,690 32 2,113 6 758 2 Other 2 — — — — — As of March 31, 2024 12,692 32 2,113 6 758 2 37 The following table summarizes certain information for our existing consolidated centers in which we have an ownership interest as of March 31, 2024. Except as noted, all properties are owned in fee simple. Consolidated Centers Legal Square % Property Name Location Ownership % Feet (4) Occupied (4) Tanger Outlets Deer Park Deer Park, NY 100 739,148 99.7 Tanger Outlets Riverhead Riverhead, NY (1) 100 729,280 93.3 Bridge Street Town Centre, a Tanger Property Huntsville, AL 100 650,942 88.2 Tanger Outlets Foley Foley, AL 100 554,736 93.4 Tanger Outlets Rehoboth Beach Rehoboth Beach, DE (1) 100 547,937 99.4 Tanger Outlets Atlantic City Atlantic City, NJ (1) (3) 100 484,748 90.6 Tanger Outlets San Marcos San Marcos, TX 100 471,816 100.0 Tanger Outlets Sevierville Sevierville, TN (1) 100 449,968 97.5 Tanger Outlets Savannah Savannah, GA 100 449,583 100.0 Tanger Outlets Myrtle Beach Hwy 501 Myrtle Beach, SC 100 426,523 96.7 Tanger Outlets Phoenix Glendale, AZ 100 410,753 98.1 Tanger Outlets Myrtle Beach Hwy 17 Myrtle Beach, SC (1) 100 404,710 97.8 Tanger Outlets Charleston Charleston, SC 100 386,328 98.3 Tanger Outlets Asheville Asheville, NC 100 381,600 94.0 Tanger Outlets Lancaster Lancaster, PA 100 376,203 100.0 Tanger Outlets Pittsburgh Pittsburgh, PA 100 373,863 100.0 Tanger Outlets Commerce Commerce, GA 100 371,408 97.2 Tanger Outlets Grand Rapids Grand Rapids, MI 100 357,133 96.3 Tanger Outlets Fort Worth Fort Worth, TX 100 351,834 100.0 Tanger Outlets Daytona Beach Daytona Beach, FL 100 351,691 100.0 Tanger Outlets Branson Branson, MO 100 329,861 99.1 Tanger Outlets Memphis Southaven, MS (2) (3) 50 324,801 100.0 Tanger Outlets Atlanta Locust Grove, GA 100 321,082 98.1 Tanger Outlets Gonzales Gonzales, LA 100 321,066 99.1 Tanger Outlets Mebane Mebane, NC 100 319,762 97.6 Tanger Outlets Howell Howell, MI 100 314,438 83.9 Tanger Outlets Foxwoods Mashantucket, CT (1) 100 311,229 88.8 Tanger Outlets Nashville Nashville, TN 100 290,651 95.3 Tanger Outlets Tilton Tilton, NH 100 250,558 93.7 Tanger Outlets Hershey Hershey, PA 100 249,696 100.0 Tanger Outlets Hilton Head II Hilton Head, SC 100 206,564 97.2 Tanger Outlets Hilton Head I Hilton Head, SC 100 181,687 98.6 Totals 12,691,599 96.5 (5) (1) These properties or a portion thereof are subject to a ground lease. (2) Based on capital contribution and distribution provisions in the joint venture agreement, we expect our economic interest in this venture’s cash flow to exceed our legal ownership percentage. We currently receive substantially all the economic interest of the property. (3) Property encumbered by mortgage. See Notes 4 and 5 to the consolidated financial statements for further details of our debt obligations. (4) Excludes square footage and occupancy associated with ground leases to tenants. (5) Total excludes the Nashville, TN center which opened in October 2023 and has yet to stabilize. 38 Unconsolidated joint venture properties Legal Square % Location Ownership % Feet (4) Occupied (4) Charlotte, North Carolina (1) 50 398,368 96 Ottawa, Ontario 50 357,213 96 Columbus, Ohio (1) 50 355,245 100 Texas City, Texas (Galveston/Houston) (1) 50 352,705 98 National Harbor, Maryland (1) 50 341,156 100 Cookstown, Ontario 50 307,883 94 Total 2,112,570 97 (1) Property encumbered by a mortgage. See Note 3 to the consolidated financial statements for further details of the joint venture debt obligations. Location Square Feet Managed Properties Palm Beach, Florida 758,156 Leasing Activity The following table provides information for our consolidated centers related to leases for new stores that opened or renewals that were executed during the respective trailing twelve-month periods ended March 31, 2024 and 2023: Comparable Space for Executed Leases (1) (2) Leasing Transactions Square Feet (in 000’s) New Initial Rent (psf) (3) Rent Spread % (4) Tenant Allowance (psf) (5) Average Initial Term (in years) Total space 2024 397 1,887 $39.38 13.6 % $6.90 3.43 2023 304 1,358 $34.38 14.1 % $2.96 3.76 Comparable and Non-Comparable Space for Executed Leases (1) (2) Leasing Transactions Square Feet (in 000’s) New Initial Rent (psf) (3) Tenant Allowance (psf) (5) Average Initial Term (in years) Total space 2024 465 2,138 $39.55 $10.74 3.70 2023 362 1,565 $34.53 $9.08 4.36 (1) For consolidated properties owned as of the period-end date. Represents leases for new stores or renewals that were executed during the respective trailing 12-month periods and excludes license agreements, seasonal tenants, month-to-month leases and new developments. (2) Comparable space excludes leases for space that was vacant for more than 12 months (non-comparable space). (3) Represents average initial cash rent (base rent and common area maintenance (“CAM”)). (4) Represents change in average initial and expiring cash rent (base rent and CAM). (5) Includes other landlord costs. 39 RESULTS OF OPERATIONS Comparison of the three months ended March 31, 2024 to the three months ended March 31, 2023 NET INCOME Net income decreased $1.6 million in the 2024 period to $23.3 million as compared to net income of $24.9 million for the 2023 period. Significant items impacting the comparability of the two periods include the following: • higher depreciation and amortization from the opening of our center in Nashville, TN and the acquisition of centers in Huntsville, AL and Asheville, NC during the fourth quarter of 2024 • higher general and administrative expenses primarily due to executive departure adjustments, and • lower investment income during 2024 due to much lower cash balances compared to the 2023 period. These amounts were partially offset by the incremental net operating income from the fourth quarter opening and acquisitions in 2023. In the tables below, information set forth for new developments and acquired properties includes our center in Nashville, TN that o pened in October of 2023 and our centers in Asheville, NC and Huntsville, AL that were acquired in November of 2023. RENTAL REVENUES Rental revenues increased $14.2 million in the 2024 period compared to the 2023 period. The following table sets forth the changes in various components of rental revenues (in thousands): 2024 2023 Increase/(Decrease) Rental revenues from existing properties $ 107,434 $ 104,245 $ 3,189 Revenues from new developments and acquired properties 10,634 — 10,634 Rental revenues from properties disposed (8) (125) 117 Straight-line rent adjustments (511) (673) 162 Lease termination fees 262 6 256 Amortization of above and below market rent adjustments, net (2) 129 (131) $ 117,809 $ 103,582 $ 14,227 Rental revenues at existing properties were positively impacted by higher average occupancy betwee n the periods and higher rents on new and existing tenants during 2024. 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 $365,000 in the 2024 period compared to the 2023 period. The following table sets forth the changes in various components of management, leasing and other services (in thousands): 2024 2023 Increase/(Decrease) Management and marketing $ 860 $ 781 $ 79 Leasing and other fees 300 56 244 Expense reimbursements from unconsolidated joint ventures 1,119 1,077 42 $ 2,278 $ 1,914 $ 365 Management and leasing fee income increased in the 2024 period due to our addition of property management responsibilities for centers in West Palm Beach, Florida. 40 OTHER REVENUES Other revenues decreased $163,000 in the 2024 period as compared to the 2023 period. The following table sets forth the changes in various components of other revenues (in thousands): 2024 2023 Increase/(Decrease) Other revenues from existing properties $ 2,857 $ 3,447 $ (590) Other revenues from new developments and acquired properties 427 — 427 $ 3,284 $ 3,447 $ (163) Other revenues from existing properties decreased in the 2024 period due to the timing of certain marketing events. PROPERTY OPERATING EXPENSES Property operating expenses increased $2.3 million in the 2024 period compared to the 2023 period. The following table sets forth the changes in various components of property operating expenses (in thousands): 2024 2023 Increase/(Decrease) Property operating expenses from existing properties $ 29,794 $ 31,467 $ (1,673) Properties operating expenses from new developments and acquired properties 3,802 — 3,802 Expenses related to unconsolidated joint ventures 1,119 1,076 43 Other property operating expenses 750 605 145 $ 35,465 $ 33,148 $ 2,317 Property operating expenses from existing properties decreased in the 2024 period in part due to certain expense refunds and the timing of certain operating expenses versus the comparative period. This decrease was partially offset by an increase in snow removal costs on a comparative period basis. GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses increased $2.1 million in the 2024 period compared to the 2023 period. We recorded executive separation amounts totaling $1.6 million and ($806,000) in the 2024 period and the 2023 period, respectively. Exclusive of those adjustments, general and administrative expenses decreased due to reductions in professional fees related to consulting and legal fees. DEPRECIATION AND AMORTIZATION Depreciation and amortization costs increased $8.0 million in the 2024 period compared to the 2023 period. 2024 2023 Increase/(Decrease) Depreciation and amortization from existing properties $ 25,220 $ 25,893 $ (673) Depreciation and amortization from new developments and acquired properties 8,640 — 8,640 $ 33,860 $ 25,893 $ 7,967 INTEREST EXPENSE Interest expense increased $2.0 million in the 2024 period compared to the 2023 period primarily due to the $325.0 million of Daily SOFR interest rate swaps which we entered into throughout 2023 becoming effective on February 1, 2024 at average fixed pay rate of 3.90%. These swaps replaced $300.0 million of existing swaps that expired on February 1, 2024 which had an average fixed pay rate of 0.40%. In addition, we had outstanding balances on our lines of credit in the 2024 period and none in the 2023 period. 41 OTHER INCOME (EXPENSE) Other income (expense) decreased approximately $2.2 million in the 2024 period. The 2023 period had higher investment income due to higher cash balances than were available in the 2024 period. The majority of the cash balances were utilized during the fourth quarter of 2023 for the acquisitions of the Asheville, NC and Huntsville, AL centers. In addition, cash was utilized throughout 2023 to complete the construction of our Nashville, TN center which opened in October 2023. EQUITY IN EARNINGS OF UNCONSOLIDATED JOINT VENTURES Equity in earnings of unconsolidated joint ventures increased approximately $581,000 in the 2024 period compared to the 2023 period. The increase is primarily related to improved performance year over year at one of our joint ventures. LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY In this “Liquidity and Capital Resources of the Company” section, the term “the Company” refers only to Tanger Inc. on an unconsolidated basis, excluding the Operating Partnership. The Company’s business is operated primarily through the Operating Partnership. The Company issues public equity from time to time, but does not otherwise generate any capital itself or conduct any business itself, other than incurring certain expenses in operating as a public company, which are fully reimbursed by the Operating Partnership. The Company does not hold any indebtedness, and its only material asset is its ownership of partnership interests of the Operating Partnership. The Company’s principal funding requirement is the payment of dividends on its common shares. The Company’s principal source of funding for its dividend payments is distributions it receives from the Operating Partnership. Through its status as the sole general partner of the Operating Partnership, the Company has the full, exclusive and complete responsibility for the Operating Partnership’s day-to-day management and control. The Company causes the Operating Partnership to distribute all, or such portion as the Company may in its discretion determine, of its available cash in the manner provided in the Operating Partnership’s partnership agreement. The Company receives proceeds from equity issuances from time to time, but is required by the Operating Partnership’s partnership agreement to contribute the proceeds from its equity issuances to the Operating Partnership in exchange for partnership units of the Operating Partnership. We are a well-known seasoned issuer (as defined in the Securities Act) with a shelf registration that expires in December 2026 that allows the Company to register unspecified, various classes of equity securities and the Operating Partnership to register unspecified, various classes of debt securities. We expect to file a new joint shelf registration statement on Form S-3 prior to the expiration of the current registration statement. As circumstances warrant, the Company may issue equity from time to time on an opportunistic basis, dependent upon market conditions and available pricing. The Operating Partnership may use the proceeds to repay debt, including borrowings under its lines of credit, to develop new or existing properties, to make acquisitions of properties or portfolios of properties, to invest in existing or newly created joint ventures or for general corporate purposes. The liquidity of the Company is dependent on the Operating Partnership’s ability to make sufficient distributions to the Company. The Operating Partnership is a party to loan agreements with various bank lenders that require the Operating Partnership to comply with various financial and other covenants before it may make distributions to the Company. The Company also guarantees some of the Operating Partnership’s debt. If the Operating Partnership fails to fulfill its debt requirements, which trigger the Company’s guarantee obligations, then the Company may be required to fulfill its cash payment commitments under such guarantees. However, the Company’s only material asset is its investment in the Operating Partnership. 42 The Company believes the Operating Partnership's sources of working capital, specifically its cash flow from operations, cash on hand and, if necessary from time to time, borrowings available under its unsecured credit facilities, are adequate for it to make its distribution payments to the Company and, in turn, for the Company to make its dividend payments to its shareholders and to finance its continued operations, investment and growth strategy and additional expenses we expect to incur for at least the next twelve months. However, there can be no assurance that the Operating Partnership's sources of capital will continue to be available at all or in amounts sufficient to meet its needs, including its ability to make distribution payments to the Company. The unavailability of capital could adversely affect the Operating Partnership's ability to pay its distributions to the Company, which will in turn, adversely affect the Company's ability to pay cash dividends to its shareholders. Risks are detailed in “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2023. We operate in a manner intended to enable us to qualify as a REIT under the Internal Revenue Code of 1986, or the Code. For the Company to maintain its qualification as a REIT, it must pay dividends to its shareholders aggregating annually at least 90% of its taxable income. While historically the Company has satisfied this distribution requirement by making cash distributions to its shareholders, it may choose to satisfy this requirement by making distributions of cash or other property, including, in limited circumstances, the Company's own shares. As a result of this distribution requirement, the Operating Partnership cannot rely on retained earnings to fund its on-going operations to the same extent that other companies whose parent companies are not real estate investment trusts can. The Company may need to continue to raise capital in the equity markets to fund the Operating Partnership’s working capital needs, as well as potential new developments, expansions and renovations of existing properties, acquisitions, or investments in existing or newly created joint ventures. The Company currently consolidates the Operating Partnership because it has (1) the power to direct the activities of the Operating Partnership that most significantly impact the Operating Partnership’s economic performance and (2) the obligation to absorb losses and the right to receive the residual returns of the Operating Partnership that could be potentially significant. The Company does not have significant assets other than its investment in the Operating Partnership. Therefore, the assets and liabilities and the revenues and expenses of the Company and the Operating Partnership are the same on their respective financial statements, except for immaterial differences related to cash, other assets and accrued liabilities that arise from public company expenses paid by the Company. However, all debt is held directly or indirectly at the Operating Partnership level, and the Company has guaranteed some of the Operating Partnership’s unsecured debt as discussed below. Because the Company consolidates the Operating Partnership, the section entitled “Liquidity and Capital Resources of the Operating Partnership” should be read in conjunction with this section to understand the liquidity and capital resources of the Company on a consolidated basis and how the Company is operated as a whole. Under our ATM Offering, which commenced in February 2021, and was replaced with a new program in December 2023, we may offer and sell our common shares, having an aggregate gross sales price of up to $250.0 million. We may sell the common shares in amounts and at times to be determined by us but we have no obligation to sell any of the common shares. Actual sales, if any, will depend on a variety of factors to be determined by us from time to time, including, among other things, market conditions, the trading price of the common shares, capital needs and determinations by us of the appropriate sources of its funding. We currently intend to use the net proceeds from any sale of common shares pursuant to the ATM Offering for working capital and general corporate purposes. As of March 31, 2024, we had approximately $220.1 million remaining available for sale under our ATM Offering program. In May 2023, the Board authorized the repurchase of up to $100.0 million of the Company’s outstanding shares through May 31, 2025. 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 common shares. The Company intends to structure open market purchases to occur within pricing and volume requirements of Rule 10b-18. The Company may, from time to time, enter into Rule 10b5-1 plans to facilitate the repurchase of its common shares under this authorization. The Company did not repurchase any shares for the three months ended March 31, 2024 or 2023. The remaining amount of common shares authorized to be repurchased under the program as of March 31, 2024 was approximately $100 million. 43 Dividends In January 2024, the Board declared a $0.26 cash dividend per common share payable on February 15, 2024 to each shareholder of record on January 31, 2023, and in its capacity as General Partner of the Operating Partnership, authorized a $0.26 cash distribution per Operating Partnership unit to the Operating Partnership's unitholders. In April 2024, the Board declared a $0.275 cash dividend per common share payable on May 15, 2024 to each shareholder of record on April 30, 2024, and in its capacity as General Partner of the Operating Partnership, authorized a $0.275 cash distribution per Operating Partnership unit to the Operating Partnership's unitholders. LIQUIDITY AND CAPITAL RESOURCES OF THE OPERATING PARTNERSHIP In this “Liquidity and Capital Resources of the Operating Partnership” section, the terms “we”, “our” and “us” refer to the Operating Partnership or the Operating Partnership and the Company together, as the text requires. Summary of Our Major Sources and Uses of Cash and Cash Equivalents General Overview Property rental income represents our primary source to pay property operating expenses, debt service, capital expenditures and distributions, excluding non-recurring capital expenditures, redevelopments, and acquisitions. To the extent that our cash flow from operating activities is insufficient to cover such non-recurring capital expenditures and acquisitions, we finance such activities from cash on hand, borrowings under our unsecured lines of credit, to the extent available, or from the proceeds from the Operating Partnership’s debt offerings and the Company’s equity offerings. We believe we achieve a strong and flexible financial position by attempting to: (1) maintain a conservative leverage position relative to our portfolio when pursuing new development, expansion and acquisition opportunities, (2) extend and sequence debt maturities, (3) manage our interest rate risk through an appropriate mix of fixed and variable rate debt and interest rate hedging strategies, (4) maintain access to liquidity by using our lines of credit in a conservative manner and (5) preserve internally generated sources of capital by maintaining a conservative distribution payout ratio. We manage our capital structure to reflect a long-term investment approach and utilize multiple sources of capital to meet our requirements, including without limitation, cash on hand, retained cash flow from operations and debt and equity issuances. Our ability to access capital on favorable terms could be affected by various risks and uncertainties, including, but not limited to, macroeconomic conditions, including rising interest rates and inflation, geopolitical conflict and other risks detailed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2023. 44 Capital Expenditures The following table details our capital expenditures for consolidated centers for the three months ended March 31, 2024 and 2023 (in thousands): Three months ended March 31, 2024 2023 Change Capital expenditures analysis: New developments and expansions (1) $ 9,755 $ 27,483 $ (17,728) Renovations 2,600 199 2,401 Second generation tenant allowances 4,283 2,030 2,253 Other capital expenditures (2) 2,757 6,555 (3,798) 19,395 36,267 (16,872) Conversion from accrual to cash basis 5,421 (10,327) 15,748 Additions to rental property-cash basis $ 24,816 $ 25,940 $ (1,124) (1) The decrease in new center developments and expansions is primarily due to development costs at our site in Nashville, TN and other projects in the prior year. (2) Other capital expenditures in 2024 decreased over the 2023 period due to a lower number of major capital expenditure projects within our existing portfolio. Potential Future Developments and Acquisitions We intend to continue to grow our portfolio by developing, expanding or acquiring additional outlet and retail real estate assets. Future real estate assets may be wholly-owned by us, owned through joint ventures or partnership arrangements, or through management agreements. However, you should note that any developments or expansions that we, or a joint venture that we have an ownership interest in, have planned or anticipated may not be started or completed as scheduled, or may not result in accretive net income or funds from operations ("FFO"). See the section "Non-GAAP Supplemental Earnings Measures" - "Funds From Operations" below for further discussion of FFO. In addition, we regularly evaluate acquisition or disposition proposals and engage from time to time in negotiations for acquisitions or dispositions of properties. We may also enter into letters of intent for the purchase or sale of properties. Any prospective acquisition or disposition that is being evaluated or which is subject to a letter of intent may not be consummated. As of the date of this filing, we are not in the pre-development period for any other new developments. We may use joint venture arrangements to develop potential sites. In the case of projects to be wholly-owned by us, we expect to fund these projects with cash on hand, borrowings under our unsecured lines of credit and cash flows from operations, but may also fund them with capital from additional public debt and equity offerings. For projects to be developed through joint venture arrangements, we may use collateralized construction loans to fund a portion of the project, with our share of the equity requirements funded from sources described above. Unconsolidated Real Estate Joint Ventures From time to time, we form joint venture arrangements to develop centers. As of March 31, 2024 we have partial ownership interests in six unconsolidated centers totaling approximately 2.1 million square feet, including two centers in Canada. See Note 3 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. We may elect to fund cash needs of a joint venture through equity contributions (generally on a basis proportionate to our ownership interests), advances or partner loans, although such funding is not typically required contractually or otherwise. We separately report investments in joint ventures for which accumulated distributions have exceeded investments in, and our share of net income or loss of, the joint ventures within other liabilities in the consolidated balance sheets because we are committed and intend to provide further financial support to these joint ventures. We believe our joint ventures will be able to fund their operating and capital needs for the next twelve months based on their sources of working capital, specifically cash flow from operations, access to contributions from partners, and ability to refinance debt obligations, including the ability to exercise upcoming extensions of near term maturities. 45 Our joint ventures are typically encumbered by a mortgage on the joint venture property. We provide guarantees to lenders for our joint ventures, which include standard non-recourse carve out indemnifications for losses arising from items such as but not limited to fraud, physical waste, payment of taxes, environmental indemnities, misapplication of insurance proceeds or security deposits and failure to maintain required insurance. A default by a joint venture under its debt obligations may expose us to liability under the guaranty. For secured term loans, we may include a guaranty of completion as well as principal. Our joint ventures may contain make whole provisions in the event that demands are made on any existing guarantees. Our joint ventures are generally subject to buy-sell provisions that are customary for joint venture agreements in the real estate industry. Either partner may initiate these provisions (subject to any applicable lock up period), which could result in either the sale of our interest or the use of available cash or additional borrowings to acquire the other party's interest. Under these provisions, one partner sets a price for the property, then the other partner has the option to either (1) purchase their partner's interest based on that price or (2) sell its interest to the other partner based on that price. Since the partner other than the partner who triggers the provision has the option to be the buyer or seller, we do not consider this arrangement to be a mandatory redeemable obligation. Contractual Obligations There were no material changes in our contractual commitments during the three months ended March 31, 2024 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 March 31, 2024. Future Debt Obligations As described further in Note 5 of the notes to the consolidated financial statements, as of March 31, 2024, scheduled maturities of our existing long-term debt for the remainder 2024 and for 2025, 2026, 2027 and 2028 are $3.9 million, $47.5 million, $407.4 million, $625.0 million and $0.0 million, respectively. As of March 31, 2024, scheduled maturities after 2028 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, 2024, these interest obligations total approximately $56.9 million over the next twelve months. Cash Flows The following table sets forth our changes in cash flows from March 31, 2024 and 2023 (in thousands): Three months ended March 31, 2024 2023 Change Net cash provided by operating activities $ 30,908 $ 25,495 $ 5,413 Net cash used in investing activities (26,299) (1,873) (24,426) Net cash used in financing activities (9,336) (33,011) 23,675 Effect of foreign currency rate changes on cash and equivalents (87) 7 (94) Net decrease in cash and cash equivalents $ (4,814) $ (9,382) $ 4,568 Operating Activities In the first quarter of 2024, our net cash provided by operating activities increased period over period primarily due to our new dev elopment and acquired properties including our center in Nashville, TN that o pened in October of 2023 and our centers in Asheville, NC and Huntsville, AL that were acquired in November of 2023. Investing Activities The increase in net cash used in investing activities was primarily due to lower cash balances and related short-term investing activities. 46 Financing Activities Net cash used in financing activities decreased during the first quarter of 2024 primarily due to borrowings on our revolving credit facility, partially offset by higher dividends paid. Financing Arrangements As of March 31, 2024, unsecured borrowings represented 96% 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 unsecured lines of credit and our term loan. As of March 31, 2024, 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, 2024 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 April 2024, the Operating Partnership entered into amendments to its unsecured lines of credit, which, among other things, increased the borrowing capacity from $520 million to $620 million, with an accordion feature to increase total borrowing capacity to $1.2 billion, extended the maturity date from July 14, 2025 to April 12, 2028 (which may be extended by one additional year by exercising extension options), and reduced the applicable pricing margin from Adjusted SOFR plus 100 basis points to Adjusted SOFR plus 85 basis points based on the Company's current credit rating. 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. The Company and Operating Partnership are well-known seasoned issuers with a joint shelf registration statement on Form S-3, expiring in December 2026, that allows us to offer and sell unspecified amounts of different classes of securities. To generate capital to reinvest into other attractive investment opportunities, we may also consider the use of additional operational and developmental joint ventures, property management opportunities, the sale or lease of outparcels on our existing properties and the sale of certain properties that do not meet our long-term investment criteria. Based on cash provided by operations, existing lines of credit, ongoing relationships with certain financial institutions and our ability to sell debt or issue equity subject to market conditions, we believe that we have access to the necessary financing to fund the planned capital expenditures for at least the next twelve months. We anticipate that adequate cash will be available to fund our operating and administrative expenses, regular debt service obligations, and the payment of dividends in accordance with REIT requirements in both the short- and long-term. Although we receive most of our rental payments on a monthly basis, dividends and distributions to shareholders and unitholders, respectively, are typically made quarterly and interest payments on the senior, unsecured notes are made semi-annually. 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. We believe our current balance sheet position is financially sound; however, due to the economic uncertainty caused by the current macroeconomic environment, including 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 $350.0 million senior notes due September 2026. Equity Offerings under the ATM Offering Program We did not sell any common shares during the first quarter of 2024 and as of March 31, 2024, we have a remaining authorization of $220.1 million of common shares under the ATM Offering program. Our ATM Offering program also provides that we may sell common shares through forward sale contracts. Actual sales under the ATM Offering program will depend on a variety of factors including market conditions, the trading price of our common shares, our capital needs, and our determination of the appropriate sources of funding to meet such needs. 47 Derivatives Throughout 2023, we entered into $325.0 million of forward-starting Daily SOFR interest rate swaps at average fixed pay rate of 3.90%. The swaps were effective February 1, 2024, and end at various dates from February 1, 2026 to January 1, 2027. These swaps replaced $300.0 million of existing swaps that expired on February 1, 2024 as part of our interest rate risk management strategy. 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, 2024 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. Failure to comply with these covenants would result in a default, which, if we were unable to cure or obtain a waiver from the lenders, could accelerate the repayment obligations. Further, in the event of default, the Company may be restricted from paying dividends to its shareholders in excess of dividends required to maintain its REIT qualification. Accordingly, an event of default could have a material and adverse impact on us. As a result, we have considered our short-term (one year or less from the date of filing these financial statements) liquidity needs and the adequacy of our estimated cash flows from operating activities and other financing sources to meet these needs. These other sources include but are not limited to: existing cash, ongoing relationships with certain financial institutions, our ability to sell debt or issue equity subject to market conditions and proceeds from the potential sale of non-core assets. We believe that we have access to the necessary financing to fund our short-term liquidity needs. As of March 31, 2024, we were in compliance with all financial and non-financial covenants related to our debt obligations. Senior unsecured notes financial covenants Required Actual Total Consolidated Debt to Adjusted Total Assets < 60% 39 % Total Secured Debt to Adjusted Total Assets < 40% 2 % Total Unencumbered Assets to Unsecured Debt > 150% 246 % Consolidated Income Available for Debt Service to Annual Debt Service Charge > 1.5 x 5.8 x Lines of credit and term loan Required Actual Total Liabilities to Total Adjusted Asset Value < 60% 37 % Secured Indebtedness to Total Adjusted Asset Value < 35% 5 % EBITDA to Fixed Charges > 1.5 x 4.6 x Total Unsecured Indebtedness to Adjusted Unencumbered Asset Value < 60% 33 % Unencumbered Interest Coverage Ratio > 1.5 x 5.9 x 48 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, 2024 (dollars in millions): Joint Venture Ownership % Total Joint Venture Debt Maturity Date Interest Rate Percent Guaranteed by the Operating Partnership Maximum Guaranteed Amount by the Company Charlotte 50% $ 99.0 July 2028 4.27% — % $ — Columbus 50% 71.0 October 2032 6.25% — % — Galveston/Houston 50% 58.0 June 2026 SOFR + 3.00% 17.2 % 10.0 National Harbor 50% 93.2 January 2030 4.63 % — % — Debt origination costs (2.0) 50% $ 319.2 $ 10.0 Critical Accounting Estimates The preparation of financial statements and related disclosures in conformity with U.S. GAAP and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. Our Annual Report on Form 10-K for the year ended December 31, 2023 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, 2024. Recent Accounting Pronouncements See Note 17 to the consolidated financial statements for information on recently adopted accounting standards and new accounting pronouncements issued. 49 NON-GAAP SUPPLEMENTAL MEASURES Funds From Operations Funds From Operations (“FFO”) is a widely used measure of the operating performance for real estate companies that supplements net income (loss) determined in accordance with GAAP. We determine FFO based on the definition set forth by the National Association of Real Estate Investment Trusts (“NAREIT”), of which we are a member. In December 2018, NAREIT issued “NAREIT Funds From Operations White Paper - 2018 Restatement,” which clarifies, where necessary, existing guidance and consolidates alerts and policy bulletins into a single document for ease of use. NAREIT defines FFO as net income (loss) available to the Company’s common shareholders computed in accordance with GAAP, excluding (i) depreciation and amortization related to real estate, (ii) gains or losses from sales of certain real estate assets, (iii) gains and losses from change in control, (iv) impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity and (v) after adjustments for unconsolidated partnerships and joint ventures calculated to reflect FFO on the same basis. FFO is intended to exclude historical cost depreciation of real estate as required by GAAP, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO excludes depreciation and amortization of real estate assets, gains and losses from property dispositions and extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income (loss). We present FFO because we consider it an important supplemental measure of our operating performance. In addition, a portion of cash bonus compensation to certain members of management is based on our FFO or Core FFO, which is described in the section below. We believe it is useful for investors to have enhanced transparency into how we evaluate our performance and that of our management. In addition, FFO is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is also widely used by us and others in our industry to evaluate and price potential acquisition candidates. We believe that FFO payout ratio, which represents regular distributions to common shareholders and unit holders of the Operating Partnership expressed as a percentage of FFO, is useful to investors because it facilitates the comparison of dividend coverage between REITs. NAREIT has encouraged its member companies to report their FFO as a supplemental, industry-wide standard measure of REIT operating performance. FFO has significant limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are: • FFO does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; • FFO does not reflect changes in, or cash requirements for, our working capital needs; • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and FFO does not reflect any cash requirements for such replacements; and • Other companies in our industry may calculate FFO differently than we do, limiting its usefulness as a comparative measure. Because of these limitations, FFO should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or our dividend paying capacity. We compensate for these limitations by relying primarily on our GAAP results and using FFO only as a supplemental measure. 50 Core FFO We present Core Funds From Operations (“Core FFO”) as a supplemental measure of our performance. We define Core FFO as FFO further adjusted to eliminate the impact of certain items that we do not consider indicative of our ongoing operating performance. These further adjustments are itemized in the table below. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Core FFO you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Core FFO should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. We present Core FFO because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we believe it is useful for investors to have enhanced transparency into how we evaluate management’s performance and the effectiveness of our business strategies. We use Core FFO when certain material, unplanned transactions occur as a factor in evaluating management’s performance and to evaluate the effectiveness of our business strategies, and may use Core FFO when determining incentive compensation. Core FFO has limitations as an analytical tool. Some of these limitations are: • Core FFO does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; • Core FFO does not reflect changes in, or cash requirements for, our working capital needs; • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Core FFO does not reflect any cash requirements for such replacements; • Core FFO does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and • Other companies in our industry may calculate Core FFO differently than we do, limiting its usefulness as a comparative measure. Because of these limitations, Core FFO should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Core FFO only as a supplemental measure. 51 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 March 31, 2024 2023 Net income $ 23,306 $ 24,860 Adjusted for: Depreciation and amortization of real estate assets - consolidated 33,052 25,172 Depreciation and amortization of real estate assets - unconsolidated joint ventures 2,540 2,670 FFO 58,898 52,702 FFO attributable to noncontrolling interests in other consolidated partnerships 80 (248) Allocation of earnings to participating securities (418) (424) FFO available to common shareholders (1) $ 58,560 $ 52,030 As further adjusted for: Executive departure-related adjustments (2) 1,554 (806) Impact of above adjustment to the allocation of earnings to participating securities (10) 6 Core FFO available to common shareholders (1) $ 60,104 $ 51,230 FFO available to common shareholders per share - diluted (1) $ 0.51 $ 0.47 Core FFO available to common shareholders per share - diluted (1) $ 0.52 $ 0.46 Weighted Average Shares: Basic weighted average common shares 108,369 104,088 Effect of notional units 731 693 Effect of outstanding options and restricted common shares 923 741 Diluted weighted average common shares (for earnings per share computations) 110,023 105,522 Exchangeable operating partnership units 4,708 4,738 Diluted weighted average common shares (for FFO and Core FFO per share computations) (1) 114,731 110,260 (1) Assumes the Class A common limited partnership units of the Operating Partnership held by the noncontrolling interests are exchanged for common shares of the Company. 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) For the 2024 period, represents executive severance costs and for the 2023 period, represents the reversal of previously expensed compensation related to a voluntary executive departure. 52 Portfolio Net Operating Income and Same Center Net Operating Income We present portfolio net operating income (“Portfolio NOI”) and same center net operating income (“Same Center NOI”) as supplemental measures of our operating performance. Portfolio NOI represents our property level net operating income which is defined as total operating revenues less property operating expenses and excludes termination fees and non-cash adjustments including straight-line rent, net above and below market rent amortization, impairment charges, loss on early extinguishment of debt and gains or losses on the sale of assets recognized during the periods presented. We define Same Center NOI as Portfolio NOI for the properties that were operational for the entire portion of both comparable reporting periods and which were not acquired, or subject to a material expansion or non-recurring event, such as a natural disaster, during the comparable reporting periods. We present Portfolio NOI and Same Center NOI on a consolidated basis. We believe Portfolio NOI and Same Center NOI are non-GAAP metrics used by industry analysts, investors and management to measure the operating performance of our properties because they provide performance measures directly related to the revenues and expenses involved in owning and operating real estate assets and provide a perspective not immediately apparent from net income (loss), FFO or Core FFO. Because Same Center NOI excludes properties developed, redeveloped, acquired and sold; as well as non-cash adjustments, gains or losses on the sale of outparcels and termination rents; it highlights operating trends such as occupancy levels, rental rates and operating costs on properties that were operational for both comparable periods. Other REITs may use different methodologies for calculating Portfolio NOI and Same Center NOI, and accordingly, our Portfolio NOI and Same Center NOI may not be comparable to other REITs. Portfolio NOI and Same Center NOI should not be considered alternatives to net income (loss) or as an indicator of our financial performance since they do not reflect the entire operations of our portfolio, nor do they reflect the impact of general and administrative expenses, acquisition-related expenses, interest expense, depreciation and amortization costs, other non-property income and losses, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, or trends in development and construction activities which are significant economic costs and activities that could materially impact our results from operations. Because of these limitations, Portfolio NOI and Same Center NOI should not be viewed in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Portfolio NOI and Same Center NOI only as supplemental measures. 53 Below is a reconciliation of net income to Portfolio NOI and Same Center NOI for the consolidated portfolio (in thousands): Three months ended March 31, 2024 2023 Net income $ 23,306 $ 24,860 Adjusted to exclude: Equity in earnings of unconsolidated joint ventures (2,516) (1,935) Interest expense 14,353 12,343 Other (income) expense (587) (2,800) Depreciation and amortization 33,860 25,893 Other non-property income (395) (48) Corporate general and administrative expenses 19,489 17,426 Non-cash adjustments (1) 609 819 Lease termination fees (262) (6) Portfolio NOI - Consolidated 87,857 76,552 Non-same center NOI - Consolidated (7,256) 146 Same Center NOI - Consolidated (2) $ 80,601 $ 76,698 (1) 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. (2) Centers excluded from Same Center NOI Cash Basis: Center Date Event Nashville, TN October 2023 New Development Asheville, NC November 2023 Acquired Huntsville, AL November 2023 Acquired 54 Adjusted EBITDA, EBITDAre and Adjusted EBITDAre We present Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) as adjusted for items described below (“Adjusted EBITDA”), EBITDA for Real Estate (“EBITDAre”) and Adjusted EBITDAre, all non-GAAP measures, as supplemental measures of our operating performance. 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 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, certain executive departure-related adjustments, 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 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; • Adjusted EBITDA and Adjusted EBITDAre do not reflect gains and losses on extinguishment of debt and other items that may affect operations; and • Other companies in our industry may calculate these measures differently than we do, limiting its usefulness as a comparative measure. Because of these limitations, Adjusted EBITDA, EBITDAre and Adjusted EBITDAre should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA, EBITDAre and Adjusted EBITDAre only as supplemental measures. 55 Below is a reconciliation of Net Income to Adjusted EBITDA (in thousands): Three months ended March 31, 2024 2023 Net income $ 23,306 $ 24,860 Adjusted to exclude: Interest expense, net 14,151 9,779 Income tax expense (benefit) (335) (200) Depreciation and amortization 33,860 25,893 Executive departure-related adjustments (1) 1,554 (806) Adjusted EBITDA $ 72,536 $ 59,526 Below is a reconciliation of Net Income to EBITDAre and Adjusted EBITDAre (in thousands): Three months ended March 31, 2024 2023 Net income $ 23,306 $ 24,860 Adjusted to exclude: Interest expense, net 14,151 9,779 Income tax expense (benefit) (335) (200) Depreciation and amortization 33,860 25,893 Pro-rata share of interest expense, net - unconsolidated joint ventures 2,169 2,131 Pro-rata share of depreciation and amortization - unconsolidated joint ventures 2,540 2,670 EBITDAre $ 75,691 $ 65,133 Executive departure-related adjustments (1) 1,554 (806) Adjusted EBITDAre $ 77,245 $ 64,327 (1) For the 2024 period, represents executive severance costs and for the 2023 period, represents the reversal of previously expensed compensation related to a voluntary executive departure. 56 ECONOMIC CONDITIONS AND OUTLOOK We are closely monitoring the impact of the overall macroeconomic environment on all aspects of our business and geographies, including how it will impact our tenants and business partners, along with continuing to monitor retail challenges such as supply chain and labor issues, inflationary pressures and rising interest rates. While we believe many of these retailers are proactively navigating this situation, the ultimate impact of interest rates, inflation, labor and supply chain issues and overall macroeconomic environment is unknown. A portion of our rental revenues are derived from rents that directly depend on the sales volume of certain tenants. Accordingly, declines in these tenants’ sales would reduce the income produced by our properties. If the sales or profitability of our retail tenants decline sufficiently, whether due to a change in consumer preferences, health concerns, legislative changes that increase the cost of their operations or otherwise, such tenants may be unable to pay their existing rents as such rents would represent a higher percentage of their sales. In addition, certain of our lease agreements include co-tenancy and/or sales-based provisions that may allow a tenant to pay reduced rent and/or terminate a lease prior to its natural expiration if we fail to maintain certain occupancy levels or retain specified named tenants, or if the tenant does not achieve certain specified sales targets. If our occupancy declines, certain centers may fall below the minimum co-tenancy thresholds and could trigger many tenants' contractual ability to pay reduced rents, which in turn may negatively impact our results of operations. 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 2024, approximately 2.6 million square feet, or 19% 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 April 30, 2024, we had lease renewals executed or in process for 46.6% of the space scheduled to expire during 2024 compared to 58.0% of the space scheduled to expire during 2023 that was executed or in process as of March 31, 2023. The majority of our leases contain provisions designed to mitigate the impact of inflation. Such provisions include clauses for the escalation of base rent and clauses enabling us to receive percentage rentals based on tenants’ gross sales (above predetermined levels) which generally increase as prices rise. A component of most leases includes a pro-rata share or escalating fixed contributions by the tenant for property operating expenses, including common area maintenance, real estate taxes, insurance and advertising and promotion, thereby reducing exposure to increases in costs and operating expenses resulting from inflation. Our centers typically include well-known, national, brand name companies. 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, 2024 no one tenant (including affiliates) accounted for more than 8% of our aggregate square feet or 6% of our aggregate 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 96.6% and 96.5% as of March 31, 2024 and 2023, respectively.