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Item 7. Management’s Discussion and Analysis

2021-02-17 compared with 2020-02-13 · 271 added, 219 removed, 259 unchanged (65% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain statements contained herein constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

Forward-looking statements are not guarantees of future performance.

They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties.

Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements.

You can find many of these statements by looking for words such as “approximates,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “would,” “may” or other similar expressions in this Annual Report on Form 10-K.

Many of the factors that will determine the outcome of these and our other forward-looking statements are beyond our ability to control or predict;

these factors include, among others, the impact of e-commerce;

the loss of or bankruptcy of major tenants;

general economic conditions and changes in the real estate market in particular;

adverse economic conditions in the areas in which our properties are located;

natural disasters;

potentially higher costs related to our development, redevelopment and anchor repositioning projects, and our ability to lease these projects at projected rates;

competition for acquisitions;

the loss of key personnel;

the availability of financing and changes in, and compliance with, tax law and REIT qualifications.

For further discussion of factors that could materially affect the outcome of our forward-looking statements, see “Risk Factors” in Part I, Item 1A, of this Annual Report on Form 10-K for the year ended December 31, 2019 .

For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K.

All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances occurring after the date of this Annual Report on Form 10-K.

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in Part II, Item 8 of this Annual Report on Form 10-K.

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included Part II, Item 8 of this Annual Report on Form 10-K.

This section of this Annual Report on Form 10-K generally discusses 2020 and 2019 items and provides a year-to-year comparison between 2020 and 2019.

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The VIE’s assets can be used for purposes other than the settlement of the VIE’s obligations and the Company’s partnership interest is considered a majority voting interest.

As of December 31, 2019 , our portfolio comprised 74 shopping centers, four malls and a warehouse park totaling approximately 15.2 million square feet.

Operating Strategy.

Our operating strategy is to maximize the value of our existing assets through proactive management encompassing continuous asset evaluation for highest-and-best-use;

efficient and cost-conscious operations that minimize retailer operating expense and enhance property quality;

and targeted leasing to desirable tenants.

During 2019 we:

reported a decline in same-property cash Net Operating Income (“NOI”) (1) by 1.8% over the year ended December 31, 2018 ;

reported a decline of same-property portfolio occupancy (2) to 93.4% from 94.2% as of December 31, 2018 ;

reported a decline of consolidated portfolio occupancy to 92.9% from 93.6% as of December 31, 2018 due to anchor bankruptcies;

As of December 31, 2020, our portfolio was comprised of 72 shopping centers, five malls and two industrial parks totaling approximately 16.3 million square feet.

COVID-19 Pandemic

On January 30, 2020, the spread of the COVID-19 outbreak was declared a Public Health Emergency of International Concern by the World Health Organization ("WHO").

On March 11, 2020, the WHO characterized the COVID-19 outbreak as a global pandemic.

Early in the pandemic, the tri-state area of Connecticut, New York and New Jersey, enforced preventive measures including mandatory business closures for non-essential businesses and quarantines or “shelter-in-place” requirements.

Given our geographic concentration in the Northeast, many of our tenants have faced and continue to face adverse financial consequences from reduced business operations and social distancing requirements as a result of the COVID-19 pandemic.

The Company’s results for 2020 were negatively impacted by tenant fallout from COVID-driven bankruptcies, uncollected or disputed rents from impacted tenants, and from abatements granted to tenants facing financial hardships due to the pandemic.

For the year ended December 31, 2020, the Company reported:

• a decline in same-property net operating income (“NOI”) (1) of 14.2% compared to the year ended December 31, 2019, which was negatively impacted by $30.8 million of rental revenue deemed uncollectible and uncollected balances from cash basis tenants;

• a decline of same-property portfolio occupancy (2) to 91.8% from 92.9% as of December 31, 2019, which includes the negative impact of 110 basis points resulting from the bankruptcy of Century 21 at Bergen Town Center.

As of December 31, 2020, substantially all of our tenants are now open for business at a reduced capacity.

As of February 12, 2021, we have executed or approved approximately 112 rent deferrals with an aggregate deferral amount of $8.2 million, many of which have resulted in value creation from eliminating use restrictions and co-tenancy clauses, reducing no-build areas and increasing lease term.

The Company may enter into additional agreements providing rent relief but expects the vast majority of any such agreements will relate to uncollected 2020 rent as most tenants have resumed paying rent on schedule.

The Company collected approximately 91% of billed rents and recoveries for the fourth quarter, 87% for the third quarter and 79% for the second quarter as of February 12, 2021.

The Company’s response to COVID-19

The Company has been proactive in its approach to the pandemic with a focus on supporting our employees, tenants and the communities in which we operate, maintaining the strength of our operations and balance sheet and growing our business despite the challenging environment.

Key initiatives that the Company has pursued and continues to support include:

Initiatives to support our tenants and communities

• Assembled a cross-functional tenant support team to conduct individual tenant outreach to understand each tenant’s financial and operational position, and disseminate information to our local and regional operators on federal and state assistance programs.

• Collaborated with tenants regarding safety guidelines, social distancing, protective equipment and sanitizing solutions so they could continually operate their businesses in accordance with local regulations.

• Developed a dedicated COVID-19 page on our website to provide resources to our tenant community.

• Mobilized a task force to work closely with local municipal leaders to address the immediate needs of those living in the neighborhoods served by our properties.

These efforts included donation of personal protective equipment and meals to low-income communities, an orphanage in Puerto Rico, hospitals and food pantries.

• Raised funds from employees and the community in support of a number of hospitals, local food organizations and other entities, such as the Hackensack Hospital COVID-19 Relief Fund, the RAP4Bronx initiative, and the Hogar Cuna San Cristobal Orphanage.

Initiatives to bolster our operations and grow our business

• Executed five new large anchor (>30,000 sf) leases, including three grocers, totaling approximately 330,000 sf which will generate approximately $7 million in gross rents;

• Assisted tenants by creating short term cash flow solutions while creatively enhancing the long-term viability and optionality of our portfolio;

• Reduced operating costs appropriately in response to a decrease in foot traffic to minimize tenant maintenance charges;

• Reevaluated the timing and amount of our redevelopment capital spend in response to COVID-19 while progressing those projects with appropriate risk-return profiles;

• Implemented a curbside pick-up program at certain properties facilitating touchless transactions, designated dedicated parking spots for curbside merchandise pickup for use by all tenants and their customers.

Initiatives to enhance our liquidity and reinforce the strength of our balance sheet

• Amended our $600 million revolving credit facility on June 3, 2020, which among other things, modified certain definitions and the measurement period for certain financial covenants.

• Borrowed $250 million under our $600 million revolving credit facility in March 2020 as a precautionary measure to increase the Company's cash position and facilitate financial flexibility in light of the various uncertainties resulting from COVID-19.

This balance was fully repaid in November 2020 and $600 million r emains available as of December 31, 2020.

• Refinanced our $119 million commercial mortgage-backed securities (“CMBS”) mortgage on The Outlets at Montehiedra with a new $82 million 10-year fixed rate mortgage.

Lowered the interest rate on the $83 million senior note from 5.33% to 5.00%.

The previous $30 million junior note including accrued interest of $5 million was forgiven.

• Modified our $129 million mortgage loan bearing interest at 4.43% on Las Catalinas Mall in Puerto Rico to include a discounted payoff option to repay the loan at a value of $72.5 million, a $56.5 million reduction to the balance at closing, beginning in August 2023 through the extended maturity date of February 2026 and converted the mortgage from an amortizing 4.43% loan to interest-only payments at a reduced interest pay rate until returning to 4.43% in 2024 and thereafter.

• Suspended our quarterly dividend for the second and third quarters of 2020 and declared a special cash dividend of $0.46 per common share in December 2020.

The special dividend was based on the Company’s 2020 expected taxable income which includes the tax impacts associated with the Las Catalinas Mall debt modification and the debt forgiveness and refinancing of the mortgage loan on The Outlets at Montehiedra.

• Launched a share repurchase program and repurchased 5.9 million shares of our stock at a weighted average share price of $9.22 amounting to $54.1 million.

• Utilized certain tax provisions under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") and the Consolidated Appropriations Act, 2021, legislation to reduce taxable income and other tax obligations.

• Ended the year with cash and cash equivalents, including restricted cash, of $419.3 million and debt, net of cash, to total market capitalization of 37%.

Initiatives to protect and support our employees

• Instituted a work from home policy shortly after the outbreak of the pandemic that allowed employees to work remotely while staying connected with their colleagues.

• Adopted numerous safety protocols and practices consistent with federal, state and local guidelines at both our corporate offices and shopping centers.

• Offered additional medical and mental health resources tailored to the circumstances of the pandemic.

• Mobilized the equipment and technology necessary to ensure no disruption to our internal processes, service to our tenants or execution of our operations in a remote working environment.

• Monitored and incorporated the recommendations of health authorities and mandates of federal, state and local governments to safeguard the protection, safety, health and well-being of our employees, tenants and stakeholders.

2020 Highlights

Set forth below are highlights of our development and redevelopment projects, property acquisitions and dispositions and leasing activities:

• Acquired Sunrise Mall in Massapequa, NY for $29.7 million on December 31, 2020, a 1.2 million sf mall with significant redevelopment opportunity given its scale and in-place zoning that provides for industrial and other uses.

In addition, we acquired three other assets, at an aggregate purchase price of $165.5 million and 243,000 sf, comprising two assets located in the Midwood neighborhood of Brooklyn, NY and one asset adjacent to our existing property, Bergen Town Center;

• Completed the sale of three properties and received proceeds of $58.1 million, net of selling costs, resulting in a $39.8 million net gain on sale of real estate.

• Completed one development project with total estimated gross costs of $3.9 million at Garfield Commons in Garfield, NJ, where 18,000 sf of shops were added;

• Identified approximately 10 additional development and redevelopment projects expected to be completed over the next several years;

• Signed 26 new leases totaling 430,752 square feet, including 16 new leases on a same-space (3) basis totaling 249,812 square feet at an average rental rate of $20.69 per square foot on a GAAP basis and $19.49 per square foot on a cash basis, and resulting in average rent spreads of 30.9% on a GAAP basis and 17.5% on a cash basis;

• Renewed or extended 67 leases totaling 909,968 square feet, all on a same-space basis, at an average rental rate of $20.06 per square foot on a GAAP basis and $19.67 per square foot on a cash basis and, generating average rent spreads of 8.8% on a GAAP basis and 1.9% on a cash basis.

Investment Strategy.

Our investment strategy is to selectively deploy capital through redevelopment and development of our existing assets and through acquisitions in our target markets that are expected to generate attractive risk-adjusted returns.

At the same time, we plan to sell assets that no longer meet our investment criteria.

During 2019 , we:

advanced six projects with estimated gross costs of $38.1 million to active development and redevelopment projects including four anchor backfills;

active projects as of December 31, 2019 have a total expected investment of $65.6 million of which $29.9 million remains to be funded;

completed 11 projects with total estimated gross costs of $167.2 million , of which $3.5 million remains to be funded;

this includes projects at Bruckner Commons in the Bronx, NY, where the shopping center underwent a complete renovation including a new ShopRite and Burlington, and Bergen Town Center where we added Burlington and opened new restaurants, upgrading the food options at the mall;

identified approximately 13 additional development and redevelopment projects expected to be completed over the next several years;

acquired three assets, at an aggregate purchase price of $38.5 million and 195,300 sf, comprising one asset located in the Boston metropolitan area and two assets adjacent to our existing property, Bergen Town Center;

completed the sale of eight properties and received proceeds of $112.8 million , net of selling costs, resulting in a $68.6 million net gain on sale of real estate;

sold our lessee position in a ground lease and received proceeds of $6.9 million , net of selling costs, resulting in a gain on sale of lease of $1.8 million .

Capital Strategy.

Our capital strategy is to keep our balance sheet strong, flexible and capable of supporting growth by using cash flow from operations, refinancing debt when opportunities are favorable, issuing debt when appropriate and reinvesting funds from selective asset sales.

During 2019 , we:

amended our $600 million revolving credit facility, extending the maturity date from March 2021 to January 2024 with two six-month extension options.

The amended facility contains terms and conditions materially consistent with the prior agreement except that borrowing rates are generally lower by 5 basis points depending on the Company's leverage level;

drew no amounts on our revolving credit agreement, of which $600 million remains available;

satisfied redemptions of certain OP unitholders by repurchasing 357,998 OP Units at a price of $16.70 per OP Unit, resulting in total cash consideration of $6.0 million ;

ended the year with cash and cash equivalents, including restricted cash, of $485.1 million and debt, net of cash, to total market capitalization of 27% .

2020 Outlook.

We seek growth in earnings, funds from operations, and cash flows primarily by:

leasing vacant spaces, extending expiring leases at higher rents, processing the exercise of tenant options and, when possible, replacing underperforming tenants with tenants that can pay higher rents;

expediting the delivery of space to and the collection of rents from tenants with executed leases that have not yet commenced;

creating additional value from our existing assets by redevelopment of existing space, development of new space and pad sites, and by anchor repositioning;

We expect to grow earnings, funds from operations, and cash flows by:

• leasing vacant spaces, proactively extending leases, processing the exercise of tenant options and, when possible, replacing underperforming tenants with operators that can pay higher rents and positively impact our properties;

• expediting the delivery of space to tenants and the collection of rents from executed leases that have not yet commenced;

• restoring rent collections to achieve collection rates similar to those prior to the pandemic;

• generating additional income from our existing assets by redeveloping underutilized existing space, developing new space and pad sites, repositioning anchors, and incorporating non-retail uses such as industrial, self-storage, office and other uses;

• acquiring assets that meet our investment criteria.

There can be no assurance that we will be able to execute on our growth strategy, especially given the economic uncertainty caused by the COVID-19 pandemic.

See Forward-Looking Statements in this Annual Report on Form 10-K.

(1) Refer to page 35 for a reconciliation to the nearest GAAP measure.

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Our properties are individually reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment exists when the carrying amount of an asset exceeds the aggregate projected future cash flows over the anticipated holding period on an undiscounted basis taking into account the appropriate capitalization rate.

Such events and changes include macroeconomic conditions, including those caused by global

pandemics, like the recent coronavirus pandemic (“COVID-19” or the “COVID-19 pandemic”), which resulted in property operational disruption.

An impairment loss is measured based on the excess of the property’s carrying amount over its estimated fair value.

Estimated fair value may be based on discounted future cash flows utilizing appropriate discount and capitalization rates and available market

information, third-party appraisals, broker selling estimates or sale agreements under negotiation.

Estimated fair value may be based on discounted future cash flows utilizing appropriate discount and capitalization rates and, in addition to available market information, third-party appraisals, broker selling estimates or sale agreements under negotiation.

Impairment analyses are based on our current plans, intended holding periods and available market information at the time the analyses are prepared.

If our estimates of the projected future cash flows, or market conditions change, our evaluation of impairment losses may be different and such differences could be material to our consolidated financial statements.

If our estimates of the projected future cash flows change based on uncertain market conditions, our evaluation of impairment losses may be different and such differences could be material to our consolidated financial statements.

The carrying value of a property may also be individually reassessed in the event a casualty occurs at that property.

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Rental revenue comprises revenue from fixed and variable lease payments, as designated within tenant operating leases in accordance with ASC 842 Leases, as described further in our Leases accounting policy in Note 3 to the audited consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.

Additionally, credit losses related to operating lease receivables are recognized as adjustments to rental revenue in accordance with ASC 842.

Credit losses related to operating lease receivables:

We periodically evaluate the collectibility of amounts due from tenants and disputed enforceable charges, resulting from the inability of tenants to make required payments under their lease agreements.

We recognize changes in the collectibility assessment of these operating leases as adjustments to rental revenue.

Income from acquired leasehold interest:

Income from acquired leasehold interest was revenue generated in connection with the write-off of an unamortized intangible liability balance related to the below-market ground lease as well as the balance of the straight-line receivable balance, upon acquisition of the leasehold interest of the property.

◦ Rental revenue deemed uncollectible:

We evaluate the collectibility of amounts due from tenants and disputed enforceable charges on both a lease-by-lease and a portfolio-level, which result from the inability of tenants to make required payments under their operating lease agreements.

We recognize changes in the collectibility assessment of these operating leases as adjustments to rental revenue in accordance with ASC 842.

• Management and development fees:

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Recent Accounting Pronouncements

On June 1, 2017, the Public Company Accounting Oversight Board (PCAOB) issued Auditing Standard 3101, The Auditor's Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion (“AS 3101”).

As a result of AS 3101, the most significant change to the auditor’s report on the financial statements is a new requirement to describe critical audit matters arising from the audit of the current period’s financial statements in the auditor’s report.

The requirements related to critical audit matters in AS 3101 were effective for audits of fiscal years ending on or after June 30, 2019, for large accelerated filers;

and for fiscal years ending on or after December 15, 2020, for all other companies to which the requirements apply.

Therefore, critical audit matters are included in the Report of Independent Registered Public Accounting Firm for Urban Edge Properties’ consolidated financial statements as of and for the year ended December 31, 2019, and will be included in the Report of Independent Registered Public Accounting Firm for Urban Edge Properties LP’s financial statements as of and for the year ended December 31, 2020.

On January 11, 2021, the SEC issued Final Rule Release No.

33-10890, Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information.

This rule, which became effective on February 10, 2021, adopts amendments to modernize, simplify and enhance certain financial disclosure requirements in Regulation S-K.

Specifically, the amendments eliminate the requirement for Selected Financial Data, streamline the requirement to disclose Supplementary Financial Information, and amend Management’s Discussion & Analysis of Financial Condition and Results of Operations (‘‘MD&A’’).

We early adopted the amendments to two items resulting in the elimination of Item 301, Selected Financial Data, and the omission of Item 302(a), Supplementary Financial Information.

The amendments to Item 303(a)(b) MD&A will be adopted in our Form 10-K for the year ending December 31, 2021.

See Note 3 to the audited consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for information regarding recent accounting pronouncements that may affect us.

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general and administrative expenses include payroll, professional fees, information technology, office expenses and other administrative expenses;

and interest and debt expense primarily consist of interest on our mortgage debt.

and interest and debt expense primarily consists of interest on our mortgage debt.

In addition, we incur substantial non-cash charges for depreciation and amortization on our properties.

We also capitalize certain expenses, such as taxes, interest and salaries related to properties under development or redevelopment until the property is ready for its intended use.

Our consolidated results of operations often are not comparable from period to period due to the impact of property acquisitions, dispositions, the timing and magnitude of bankruptcies by anchor tenants, developments, redevelopments and changes in accounting policies.

Our consolidated results of operations often are not comparable from period to period due to the impact of property acquisitions, dispositions, developments, redevelopments and changes in accounting policies.

The results of operations of any acquired properties are included in our financial statements as of the date of acquisition.

The following provides an overview of our key non-GAAP measures based on our consolidated results of operations (refer to cash NOI, same-property cash NOI and Funds From Operations applicable to diluted common shareholders (“FFO”) described later in this section):

Our results of operations are affected by national, regional and local economic conditions, as well as macroeconomic conditions, which are at times subject to volatility and uncertainty.

The current COVID-19 pandemic has increased volatility and uncertainty and has created significant economic disruption in many markets.

The duration of measures taken to contain the pandemic, including mandatory business shut-downs, reduced business operations and social distancing is unknown as is the long-term consequence of such measures on consumer behavior.

Specifically, the revenue and sales volume for our tenants identified as nonessential may decline significantly as demand for their services and products changes in the near term and potentially longer term.

We are actively managing our business to respond to the ongoing economic and social impact and uncertainty relating to the COVID-19 pandemic;

however, our future near term and potentially longer term results of operations may be significantly adversely affected.

See “Pandemic-Related Contingencies” under Liquidity and Capital Resources and “Item 1A.

Risk Factors” for more information.

The following provides an overview of our key non-GAAP measures based on our consolidated results of operations (refer to NOI, same-property NOI and Funds From Operations applicable to diluted common shareholders (“FFO”) described later in this section):

Year Ended December 31,

(Amounts in thousands) 2020 2019

Net income $ 97,750 $ 116,197

FFO applicable to diluted common shareholders (1)

Same-property cash NOI (2)

156,326 167,123

200,383 234,288

Same-property NOI (2)

186,059 216,836

(1) Refer to page 36 for a reconciliation to the nearest generally accepted accounting principles (“GAAP”) measure.

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For the year Ended December 31,

(Amounts in thousands)

(Amounts in thousands) 2020 2019 $ Change

Total revenue $ 330,095 $ 387,649 $ (57,554)

Depreciation and amortization

Real estate taxes

Property operating expenses 56,126 64,062 (7,936)

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Casualty and impairment loss, net 3,055 12,738 (9,683)

Lease expense

Gain on sale of real estate 39,775 68,632 (28,857)

Gain on sale of lease

Interest income 2,599 9,774 (7,175)

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Gain on extinguishment of debt 34,908 — 34,908

Income tax expense

Income tax (benefit) expense (38,996) 1,287 (40,283)

Total revenue decreased by $57.6 million to $330.1 million in the year ended December 31, 2020 from $387.6 million in the year ended December 31, 2019.

The decrease is primarily attributable to:

• $26.5 million increase in rental revenue deemed uncollectible;

• $12.0 million increase in write-offs of receivables arising from the straight-lining of rents in connection to leases with rental revenue being recognized on a cash basis;

• $5.7 million decrease in write-offs of below-market lease intangible liabilities related to recaptured leases;

• $5.7 million decrease in tenant reimbursement income due to lower common area maintenance expenses;

• $3.8 million net decrease in property rentals due to lease terminations and modifications, partially offset by rent commencements and contractual rent increases;

• $2.9 million decrease as a result of property dispositions net of acquisitions;

• $1.0 million decrease in management and development fee income and tenant bankruptcy settlement income.

Property operating expenses decreased by $7.9 million to $56.1 million in the year ended December 31, 2020 from $64.1 million in the year ended December 31, 2019.

The decrease is primarily attributable to:

• $5.9 million decrease in common area maintenance expenses primarily related to reduced operating costs due to temporary tenant closures in connection with COVID-19;

• $1.1 million net decrease in accrued environmental remediation and compliance expenses;

• $0.9 million decrease as a result of property dispositions net of acquisitions.

General and administrative expenses increased by $10.5 million to $48.7 million in the year ended December 31, 2020 from $38.2 million in the year ended December 31, 2019.

The increase is primarily attributable to:

• $6.8 million net increase in executive transition costs including accelerated amortization of unvested equity awards;

• $5.0 million net increase in transaction, severance and other expenses, partially offset by

• $1.3 million net decrease in share-based compensation expense due to vesting of prior period awards.

We recognized a casualty and impairment loss, net of $3.1 million, in the year ended December 31, 2020 attributable to a real estate impairment charge recognized against the carrying value of one property.

We recognized a casualty and impairment loss, net of $12.7 million, in the year ended December 31, 2019 attributable to:

• $26.3 million of real estate impairment charges recognized against the carrying values of four properties, partially offset by

• $13.6 million from insurance settlements for Hurricane Maria at our two malls in Puerto Rico and for tornado damage at our shopping center in Wilkes-Barre, PA.

We recognized a gain on sale of real estate of $39.8 million in the year ended December 31, 2020 due to the sale of three operating properties.

We recognized a gain on sale of real estate of $68.6 million in the year ended December 31, 2019 due to the sale of eight operating properties.

Interest income decreased by $7.2 million to $2.6 million in the year ended December 31, 2020 from $9.8 million in the year ended December 31, 2019.

The decrease is primarily attributable to a decrease in interest rates.

Interest and debt expense increased by $4.4 million to $71.0 million in the year ended December 31, 2020 from $66.6 million in the year ended December 31, 2019.

The increase is primarily attributable to:

• $2.5 million incremental interest in connection with the temporary default of our mortgage at Las Catalinas Mall in Puerto Rico from April 2020 until the loan was modified in December 2020;

• $2.4 million of interest resulting from the $250 million draw on the Company’s revolving credit agreement in March 2020, with the borrowings fully repaid in November 2020;

• $2.3 million of interest due to the assumption of mortgage debt in connection with the acquisition of Kingswood Center in Brooklyn, NY in February 2020;

• $0.7 million decrease in interest capitalized due to the completion of development projects and lower capital spending during the year, partially offset by

• $2.8 million decrease in interest on variable-rate debt due to lower interest rates;

• $0.7 million decrease as a result of the refinancing of the mortgage secured by The Outlets at Montehiedra in June 2020.

We recognized a gain on extinguishment of debt of $34.9 million in the year ended December 31, 2020 as a result of the refinancing of the mortgage secured by The Outlets at Montehiedra, consisting of the forgiveness of the $30 million junior loan plus accrued interest of $5.4 million, offset by the write-off of $0.4 million of unamortized deferred financing fees and $0.1 million of transaction costs.

Income tax expense decreased by $40.3 million due to an income tax benefit of $39.0 million recognized in the year ended December 31, 2020 compared to $1.3 million of expense in the year ended December 31, 2019.

The decrease is primarily attributable to the tax impact of the mortgage refinancing and legal entity restructuring transactions related to our malls in Puerto Rico, partially offset by state and local income tax expense resulting from tax strategies implemented to limit the impact from the cancellation of debt at the Outlets at Montehiedra on the Company’s U.S.

federal taxable income and the tax impact of the insurance settlement received in 2019 related to Hurricane Maria.

Comparison of the Year Ended December 31, 2019 to December 31, 2018

Net income for the year ended December 31, 2019 was $116.2 million, compared to net income of $117.0 million for the year ended December 31, 2018.

The following table summarizes certain line items from our consolidated statements of income that we believe are important in understanding our operations and/or those items which significantly changed in the year ended December 31, 2019 due to changes in accounting policies as compared to the same period of 2018:

For the year Ended December 31,

(Amounts in thousands) 2019 2018 $ Change

Total revenue $ 387,649 $ 414,160 $ (26,511)

Property operating expenses 64,062 78,360 (14,298)

General and administrative 38,220 34,984 3,236

Lease expense 14,466 11,448 3,018

Total revenue decreased by $26.5 million to $387.6 million in the year ended December 31, 2019 from $414.2 million in the year ended December 31, 2018.

The decrease is primarily attributable to:

• $15.4 million decrease in amortization of below-market lease intangible liabilities due to lower write-offs in 2019 related to recaptured leases;

• $12.3 million as a result of dispositions, net of acquisitions;

$1.4 million due to credit losses related to operating lease receivables recognized against rental income in 2019 in accordance with the new lease accounting standard, effective January 1, 2019, as compared to being included in property operating expenses in 2018, partially offset by

• $1.4 million due to rental revenue deemed uncollectible recognized against rental income in 2019 in accordance with the new lease accounting standard, effective January 1, 2019, as compared to being included in property operating expenses in 2018, partially offset by

• $1.0 million increase in property rentals due to rent commencements, lease modifications and contractual rent increases;

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• $0.6 million increase in third-party management and development fee income due to higher leasing commissions.

Depreciation and amortization decreased by $5.3 million to $94.1 million in the year ended December 31, 2019 from $99.4 million in the year ended December 31, 2018 .

The decrease is primarily attributable to:

$7.1 million decrease in depreciation and amortization as a result of lower write-offs of existing tenant improvements and intangible assets related to recaptured leases;

$2.1 million decrease as a result of property dispositions, net of acquisitions, partially offset by

$3.9 million increase from completed development projects and tenant improvements.

Real estate taxes decreased by $3.5 million to $60.2 million in the year ended December 31, 2019 from $63.7 million in the year ended December 31, 2018 .

The decrease is primarily attributable to:

$2.0 million decrease as a result of dispositions, net of acquisitions;

$1.5 million decrease due to successful appeals and tax refunds.

Property operating expenses decreased by $14.3 million to $64.1 million in the year ended December 31, 2019 from $78.4 million in the year ended December 31, 2018.

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• $15.5 million of lease termination payments to acquire the Toys “R” Us leases at Bruckner Commons in the Bronx, NY and Hudson Mall in Jersey City, NJ in 2018;

$4.1 million due to credit losses related to operating lease receivables recognized in property operating expenses in 2018 versus rental revenue in 2019;

• $4.1 million due to rental revenue deemed uncollectible recognized in property operating expenses in 2018 versus rental revenue in 2019;

• $1.5 million decrease as a result of dispositions, net of acquisitions, partially offset by

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• $0.9 million net decrease in executive transition costs, severance and other expenses.

Casualty and impairment losses increased by $8.3 million to $12.7 million in the year ended December 31, 2019 from $4.4 million in the year ended December 31, 2018 .

The increase is primarily attributable to:

$20.7 million higher real estate impairment losses recognized in 2019, partially offset by

$12.4 million higher proceeds from insurance settlements, net of casualty expenses, for Hurricane Maria in Puerto Rico in 2017 and for tornado damage at our shopping center in Wilkes-Barre, PA in June 2018.

Lease expense increased by $3.0 million to $14.5 million in the year ended December 31, 2019 from $11.4 million in the year ended December 31, 2018.

The increase is primarily attributable to the recognition of office rent and common area maintenance and real estate taxes associated with ground or building leases within lease expense in accordance with the new lease accounting standard, effective January 1, 2019.

We recognized a gain on sale of real estate of $68.6 million in the year ended December 31, 2019 due to the sale of eight operating properties.

A gain on sale of real estate of $52.6 million was recognized in the year ended December 31, 2018 comprised of $50.4 million as a result of the sale of our property in Allentown, PA on April 26, 2018 and $2.2 million as a result of the sale of a 5.7 acre land parcel on July 5, 2018 at our property, Cherry Hill Commons, in Cherry Hill, NJ.

We recognized a gain of $1.8 million in the year ended December 31, 2019 due to the sale of our ground lease in Tysons Corner, VA.

Interest income increased by $1.4 million to $9.8 million in the year ended December 31, 2019 from $8.3 million in the year ended December 31, 2018 .

The increase is attributable to an increase in interest rates and higher invested cash balances.

Interest and debt expense increased by $1.8 million to $66.6 million in the year ended December 31, 2019 from $64.9 million in the year ended December 31, 2018 .

The increase is primarily attributable to:

$1.8 million decrease in capitalized interest due to the completion of development projects;

$0.4 million increase resulting from higher interest rates on variable rate debt, partially offset by

$0.4 million decrease due to lower principal balances from monthly payments on fixed rate debt.

We recognized a $2.5 million gain on extinguishment of debt in the year ended December 31, 2018 as a result of the foreclosure sale and forgiveness of the $11.5 million mortgage debt secured by our property in Englewood, NJ.

Income tax expense decreased by $2.2 million to $1.3 million in the year ended December 31, 2019 from $3.5 million in the year ended December 31, 2018 .

The decrease is primarily attributable to:

$1.2 million decrease from the tax impact of Hurricane Maria and the related insurance settlements received in 2019 for our two malls in Puerto Rico;

$0.8 million decrease due to lower operating income at our Puerto Rico properties;

$0.2 million decrease resulting from lower TRS activities.

Non-GAAP Financial Measures

Throughout this section, we have provided certain information on a “same-property” cash basis which includes the results of operations that were owned and operated for the entirety of the reporting periods being compared, totaling 70 properties for the years ended December 31, 2019 and 2018 .

We use NOI internally to make investment and capital allocation decisions and to compare the unlevered performance of our properties to our peers.

Further, we believe NOI is useful to investors as a performance measure because, when compared across periods, NOI reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and disposition activity on an unleveraged basis, providing perspective not immediately apparent from net income.

The most directly comparable GAAP financial measure to NOI is net income.

NOI excludes certain components from net income in order to provide results that are more closely related to a property’s results of operations.

We calculate NOI by adjusting net income to add back depreciation and amortization expense, general and administrative expenses, casualty and real estate impairment losses, interest and debt expense, income tax expense and non-cash lease expense, and deduct management and development fee income from non-owned properties, gains on sale of real estate, interest income, non-cash rental income resulting from the straight-lining of rents and amortization of acquired below market leases net of above market leases.

NOI should not be considered a substitute for net income and may not be comparable to similarly titled measures employed by others.

The Company has historically defined this metric as "Cash NOI." There have been no changes to the calculation of this metric.

However, the Company has decided to refer to this metric as "NOI" instead of "Cash NOI" to further clarify that, consistent with the definition of this metric, the revenue and expenses reflected in this metric include some accrued amounts and are not limited to amounts for which the Company actually received or made cash payments during the applicable period.

We calculate same-property NOI using net income as defined by GAAP reflecting only those income and expense items that are reflected in NOI (as described above) and excluding properties that were under development, redevelopment or that involve anchor repositioning where a substantial portion of the gross leasable area is taken out of service, and also excluding properties acquired or sold during the periods being compared.

We also exclude for the following items in calculating same-property NOI:

lease termination fees, bankruptcy settlement income, and income and expenses that we do not believe are representative of ongoing operating results, if any.

As such, same-property NOI assists in eliminating disparities in net income due to the development, redevelopment, acquisition or disposition of properties during the periods presented, and thus provides a more consistent performance measure for the comparison of the operating performance of the Company’s properties, which the Company believes to be useful to investors.

Same-property NOI should not be considered a substitute for net income and may not be comparable to similarly titled measures employed by others.

The Company has historically defined this metric as "same-property Cash NOI." There have been no changes to the calculation of this metric.

Throughout this section, we have provided certain information on a “same-property” basis which includes the results of operations that were owned and operated for the entirety of the reporting periods being compared, which total 71 properties for the years ended December 31, 2020 and 2019 .

Information provided on a same-property basis excludes properties that were under development, redevelopment or that involve anchor repositioning where a substantial portion of the gross leasable area is taken out of service and also excludes properties acquired or sold during the periods being compared.

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Acquisitions are moved into the same-property pool once we have owned the property for the entirety of the comparable periods and the property is not under significant development or redevelopment.

We calculate same-property cash NOI using net income as defined by GAAP reflecting only those income and expense items that are reflected in cash NOI, adjusted for the following items:

lease termination fees, bankruptcy settlement income and income and expenses that we do not believe are representative of ongoing operating results, if any.

The most directly comparable GAAP financial measure to cash NOI is net income.

Cash NOI excludes certain components from net income in order to provide results that are more closely related to a property’s results of operations.

We calculate cash NOI by adjusting net income to add back depreciation and amortization expense, general and administrative expenses, casualty and real estate impairment losses and non-cash lease expense, and deduct non-cash rental income resulting from the straight-lining of rents and amortization of acquired below market leases net of above market leases.

We use cash NOI internally to make investment and capital allocation decisions and to compare the unlevered performance of our properties to our peers.

Further, we believe cash NOI is useful to investors as a performance measure because, when compared across periods, cash NOI reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and disposition activity on an unleveraged basis, providing perspective not immediately apparent from net income.

As such, cash NOI assists in eliminating disparities in net income due to the development, redevelopment, acquisition or disposition of properties during the periods presented, and thus provides a more consistent performance measure for the comparison of the operating performance of the Company’s properties.

Cash NOI and same-property cash NOI should not be considered substitutes for net income and may not be comparable to similarly titled measures employed by others.

Same-property cash NOI decreased by $3.8 million , or (1.8)% , for the year ended December 31, 2019 as compared to the year ended December 31, 2018 .

The following table reconciles net income to cash NOI and same-property cash NOI for the years ended December 31, 2019 and 2018 .

Same-property NOI decreased by $30.8 million, or (14.2)%, for the year ended December 31, 2020 as compared to the year ended December 31, 2019.

Same-property NOI results for the year ended December 31, 2020 were negatively impacted by rental revenue deemed uncollectible primarily due to the COVID-19 pandemic.

The following table reconciles net income to NOI and same-property NOI for the years ended December 31, 2020 and 2019.

For the year ended December 31,

(Amounts in thousands) 2020 2019

Net income $ 97,750 $ 116,197

Management and development fee income from non-owned properties (1,283) (1,900)

Other expense (income)

Other expense 672 1,065

Depreciation and amortization 96,029 94,116

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Gain on extinguishment of debt (34,908) —

Income tax expense

Non-cash revenue and expenses

Non-same property cash NOI (2)

Income tax (benefit) expense (38,996) 1,287

Non-cash (revenue) expense 741 (13,819)

200,383 234,288

Non-same property NOI (3)

(13,230) (17,166)

Tenant bankruptcy settlement income and lease termination income (1,094) (1,643)

Environmental remediation costs — 1,357

Construction rental abatement

Lease termination payment

Natural disaster related operating loss

Same-property cash NOI

Cash NOI related to properties being redeveloped

Same-property cash NOI including properties in redevelopment

(1) The year ended December 31, 2019 reflects real estate impairment losses, offset by insurance proceeds for Hurricane Maria at our two malls in Puerto Rico and for tornado damage at our shopping center in Wilkes-Barre, PA.

The year ended December 31, 2018 reflects hurricane-related insurance proceeds net of expenses.

(2) Non-same property cash NOI includes cash NOI related to properties being redeveloped and properties acquired or disposed.

Same-property NOI $ 186,059 $ 216,836

NOI related to properties being redeveloped 4,059 4,593

Same-property NOI including properties in redevelopment $ 190,118 $ 221,429

(1) The year ended December 31, 2020 reflects an impairment loss recognized at one property.

The year ended December 31, 2019 reflects real estate impairment losses at four properties, offset by insurance proceeds for Hurricane Maria at our two malls in Puerto Rico and for tornado damage at our shopping center in Wilkes-Barre, PA.

(2) The Company has historically defined this metric as “Cash NOI.” There have been no changes to the calculation.

(3) Non-same property NOI includes NOI related to properties being redeveloped and properties acquired or disposed in the period.

Funds From Operations

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We believe FFO is a meaningful non-GAAP financial measure useful in comparing our levered operating performance from period to period both internally and among our peers because this non-GAAP measure excludes net gains on sales of depreciable real estate, real estate impairment losses, rental property depreciation and amortization expense which implicitly assumes that the value of real estate diminishes predictably over time rather than fluctuating based on market conditions.

We believe the presentation of comparable period operating results generated from FFO provides useful information to investors because the definition excludes items included in net income that do not relate to, or are not, indicative of our operating and financial performance, such as depreciation and amortization related to real estate, and items which can make periodic and peer analyses of operating and financial performance more difficult, such as gains (or losses) from sales of depreciable real estate and land when connected to the main business of a REIT and impairments on depreciable real estate or land related to a REIT's main business.

FFO does not represent cash flows from operating activities in accordance with GAAP, should not be considered an alternative to net income as an indication of our performance, and is not indicative of cash flow as a measure of liquidity or our ability to make cash distributions.

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(Amounts in thousands) 2020 2019

Net income $ 97,750 $ 116,197

Less net (income) loss attributable to noncontrolling interests in:

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Liquidity and Capital Resources

Due to the nature of our business, we typically generate significant amounts of cash from operations;

however, the cash generated from operations is primarily paid to our shareholders and unitholders of the Operating Partnership in the form of distributions.

Our status as a REIT requires that we distribute 90% of our REIT taxable income each year.

O ur Board of Trustees declared a quarterly dividend of $0.22 per common share and OP Unit for each of the four quarters in 2019, or an annual rate of $0.88 .

We expect to pay regular cash dividends, however, the timing, declaration, amount and payment of distributions to shareholders and unitholders of the Operating Partnership falls within the discretion of our Board of Trustees.

Our Board of Trustees’ decisions regarding the payment of dividends depends on many factors, such as maintaining our REIT tax status, our financial condition, earnings, capital requirements, debt service obligations, limitations under our financing arrangements, industry practice, legal requirements, regulatory constraints, and other factors.

Due to the nature of our business, the cash generated from operations is primarily paid to our shareholders and unitholders of the Operating Partnership in the form of distributions.

Our status as a REIT requires that we generally distribute at least 90% of our REIT’s ordinary taxable income each year.

Historically, we have paid regular cash dividends;

however, the timing, declaration, amount and payment of distributions to shareholders and unitholders of the Operating Partnership fall within the discretion of our Board of Trustees.

Our Board of Trustees’ decisions regarding the payment of dividends depends on many factors, such as maintaining our REIT status, our financial condition, earnings, capital requirements, debt service obligations, limitations under our financing arrangements, industry practice, legal requirements, regulatory constraints, and other factors.

O ur Board of Trustees declared a quarterly dividend of $0.22 per common share and OP unit for the first quarter of 2020.

As a result of COVID-19 and the uncertainties it generated, the Company temporarily suspended quarterly dividend distributions for the second and third quarters of 2020 and declared a special cash dividend of $0.46 per common share in December 2020.

The Company’s Board of Trustees will continue to monitor the Company’s financial performance and economic outlook and, for 2021, intends to reinstate the dividend at a rate based on projected taxable income for the year, which is expected to result in a quarterly dividend of $0.15 per common share, with any such future dividend is subject to approval of the Board of Trustees.

Property rental income is our primary source of cash flow and is dependent on a number of factors, including our occupancy level and rental rates, as well as our tenants’ ability to pay rent.

Our properties provide us with a relatively consistent stream of cash flow that enables us to pay operating expenses, debt service and recurring capital expenditures.

Our properties have historically prov ided us with a relatively consistent stream of cash flow that enables us to pay operating expenses, debt service and recurring capital expenditures.

As discussed herein, COVID-19 had an adverse impact on our short-term cash flow as a significant number of our tenants did not pay rent that was due in the year ended December 31, 2020 and could have a significant longer term adverse impact on our cash flow and financial condition.

As of February 12, 2021, the Company collected 93% of rental revenue for the fourth quarter of 2020, up from 89% and 81% for the third and second quarter of 2020, respectively.

Other sources of liquidity to fund cash requirements include proceeds from financings, equity offerings and asset sales.

Our short-term liquidity requirements consist of normal recurring operating expenses, lease obligations, regular debt service requirements, recurring expenditures (general & administrative expenses), expenditures related to leasing activity and distributions to shareholders and unitholders of the Operating Partnership.

Our short-term cash requirements consist of normal recurring operating expenses, lease obligations, regular debt service requirements, recurring expenditures (general & administrative expenses), expenditures related to leasing activity and distributions to shareholders and unitholders of the Operating Partnership.

Our long-term capital requirements consist primarily of maturities under our long-term debt agreements, development and redevelopment costs and potential acquisitions.

At December 31, 2019 , we had cash and cash equivalents, including restricted cash, of $485.1 million and no amounts drawn on our revolving credit agreement.

In addition, the Company has the following sources of capital available:

Year Ended December 31,

(Amounts in thousands)

Revolving credit agreement (1)

Total commitment amount

Available capacity

January 29, 2024

(1) Refer to Note 6 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

We have no debt scheduled to mature in 2020.

We currently believe that cash flows from operations over the next 12 months, together with cash on hand, our revolving credit agreement and our general ability to access the capital markets will be sufficient to finance our operations and fund our debt service requirements and capital expenditures.

At December 31, 2020, we had cash and cash equivalents, including restricted cash, of $419.3 million and no amounts drawn on our $600 million revolving credit agreement, which matures on January 29, 2024.

T he Company continues to monitor the COVID-19 pandemic and its impact on our overall liquidity position and outlook.

The ultimate impact that COVID-19 may have on our operational and financial performance over the next 12 months is currently uncertain and will depend on many factors, including without limitation, its magnitude and duration and the adverse financial impact on our tenants from reduced business operations and social distancing requirements, which may impact tenants’ ability to generate sales at sufficient levels to cover operating costs such as rent.

In light of the various uncertainties resulting from the COVID-19 pandemic, the Company borrowed $250 million under its existing $600 million revolving credit agreement in March 2020 as a precautionary measure to increase the Company's cash position and facilitate financial flexibility.

The borrowings on the revolving credit facility were fully repaid in November 2020.

Our ability to utilize amounts available under our revolving credit facility in the future will depend on our continued compliance with the applicable financial covenants and other terms of our revolving credit agreement, which may be impacted by tenant store closures and failure of tenants to pay rent.

We have no debt scheduled to mature until 2022.

We currently believe that cash on hand, available revolving credit and general ability to access the capital markets, should be sufficient to finance our operations and fund our debt service requirements and capital expenditures over the next 12 months.

On March 27, 2020 and December 27, 2020, the President of the United States signed the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") and the Consolidated Appropriations Act, 2021, respectively, each containing substantial tax-and-spending package intended to provide additional economic stimulus to address the impact of the COVID-19 pandemic.

The Company has not applied for or received any loans authorized under this legislation;

however, the Company may avail itself of certain tax provisions within the legislation that may be used to reduce taxable income or other tax obligations.

Summary of Cash Flows

Cash and cash equivalents including restricted cash was $485.1 million at December 31, 2019 , compared to $457.5 million as of December 31, 2018, an increase of $27.6 million .

Cash and cash equivalents including restricted cash was $419.3 million at December 31, 2020, compared to $485.1 million as of December 31, 2019, a decrease of $65.9 million.

Our cash flow activities are summarized as follows:

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Net cash used in investing activities (98,460) (2,521) (64,803)

Net cash (used in) provided by financing activities

Net cash used in financing activities (80,245) (126,265) (115,556)

Operating Activities

Net cash provided by operating activities primarily consists of cash inflows from rental revenue and cash outflows for property operating expenses, general and administrative expenses and interest expense.

Net cash provided by operating activities of $156.4 million for the year ended December 31, 2019 , increased by $19.4 million from $137.0 million as of December 31, 2018 .

The increase was driven by $15.5 million of lease termination payments to acquire the Toys “R” Us leases at Bruckner Commons in the Bronx, NY and Hudson Mall in Jersey City, NJ during the year ended

December 31, 2018 , partially offset by a decrease in cash due to timing of cash receipts and payments related to tenant collections including the impact of recovery income.

Net cash provided by operating activities for the year ended December 31, 2020, decreased by $43.6 million as of December 31, 2019, due to the timing and deferral of cash receipts and payments by tenants impacted by the COVID-19 pandemic, including the impact of recovery income.

Investing Activities

Net cash flow used in investing activities is impacted by the timing and extent of our real estate development, capital improvements, and acquisition and disposition activities during the period.

Net cash used in investing activities of $2.5 million for the year ended December 31, 2019 , increased by $62.3 million compared to net cash used in investing activities of $64.8 million as of December 31, 2018 due to a (i) $58.9 million increase in cash provided by the sale of properties, (ii) $27.5 million decrease in cash used for real estate development and capital improvements at existing properties, (iii) $11.4 million increase in cash from insurance proceeds for physical property damages received in the year ended December 31, 2019 , and (iv) $6.9 million increase due to the sale of an operating lease, partially offset by (v) $42.4 million increase in cash used for acquisitions.

Net cash used in investing activities for the year ended December 31, 2020, increased by $95.9 million compared to December 31, 2019 due to a (i) $77.0 million increase in cash used for acquisitions, (ii) $62.1 million decrease in cash provided by the sale of properties, (iii) $12.7 million of insurance proceeds received for physical property damages in the year ended December 31, 2019 and (iv) $6.9 million of cash received for the sale of an operating lease in 2019, partially offset by (v) $62.8 million decrease in cash used for real estate development and capital improvements at existing properties.

Financing Activities

Net cash flow used in or provided by financing activities is impacted by the timing and extent of issuances of debt and equity securities, distributions paid to common shareholders and unitholders of the Operating Partnership as well as principal and other payments associated with our outstanding indebtedness.

Net cash used in financing activities of $126.3 million for the year ended December 31, 2019 , increased by $10.7 million from $115.6 million for the year ended December 31, 2018 due to (i) $6.0 million paid to redeem units in 2019, (ii) $2.6 million of cash used to amend our revolving credit agreement in 2019, (iii) $1.3 million increase in debt repayments, (iv) $0.5 million increase in distributions to shareholders and unitholders and (v) $0.2 million increase in tax withholdings on vested restricted stock.

Net cash flow used in financing activities is impacted by the timing and extent of issuances of debt and equity securities, distributions paid to common shareholders and unitholders of the Operating Partnership as well as principal and other payments associated with our outstanding indebtedness.

Net cash used in financing activities for the year ended December 31, 2020, decreased by $46.0 million from the year ended December 31, 2019 due to (i) $83.9 million decrease in distributions paid to partners due to the temporary suspension of dividends during 2020, (ii) $6.5 million of net proceeds from borrowings under mortgage loans, (iii) $6.0 million of cash paid to redeem units in 2019, (iv) $5.4 million of cash contributed by noncontrolling interests in 2020, partially offset by (v) $54.1 million of cash paid to repurchase common shares in 2020 (vi) $0.8 million increase in cash used to issue debt and (vii) $0.8 million increase in tax withholdings on vested restricted stock.

Financing Activities and Contractual Obligations

Below is a summary of our outstanding debt and weighted average interest rate as of December 31, 2020.

(Amounts in thousands)

Principal balance at December 31, 2019

Weighted Average Interest Rate at December 31, 2019

(Amounts in thousands) Principal balance at December 31, 2020 Weighted Average Interest Rate at December 31, 2020

Mortgages payable:

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Variable rate debt (1)

169,371 1.90%

Total mortgages payable 1,597,397 3.92%

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The Agreement contains customary financial covenants including a maximum leverage ratio of 60% and a minimum fixed charge coverage ratio of 1.5x.

No amounts have been drawn to date under the Agreement.

No amounts had been drawn under the Agreement as of December 31, 2020.

On June 3, 2020, we entered into a third amendment to the Agreement.

The third amendment, among other things, modifies certain definitions and the measurement period for certain financial covenants to a trailing four-quarter period instead of the most recent quarter period annualized.

Under the Agreement, our financial covenants are generally measured using operating results of a trailing four-quarter period from the prior trailing four-quarter period, including the maximum leverage ratio, which measures our asset value based on net operating income, as defined in the Agreement.

Net operating income is defined, in part, based on rents and other revenues received in the ordinary course of business from our properties.

We currently believe that with our cash on hand, we will have sufficient resources to finance our operations and fund our debt service requirements and capital expenditures for at least the next twelve months.

In the event that LIBOR is discontinued, the interest rates for our debt following such event will be based on either alternate base rates or agreed upon replacement rates.

We do not believe that such an event would affect our ability to borrow or maintain already outstanding borrowings, although it could result in higher interest rates.

During 2017, our property in Englewood, NJ was transferred to a receiver.

On January 31, 2018 , the property was sold at a foreclosure sale and on February 23, 2018 , the court order was received approving the sale and discharging the receiver of all assets and liabilities related to the property.

We recognized a gain on extinguishment of debt of $2.5 million as a result of the forgiveness of outstanding mortgage debt of $11.5 million , which is included in the consolidated statement of income for the year ended December 31, 2018.

Such an event would not affect our ability to borrow or maintain already outstanding borrowings, although it could result in higher interest rates.

We have contractual obligations related to our mortgage loans described further in Note 6 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

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Commitments Due by Period

(Amounts in thousands)

Less than 1 year

More than 5 years

(Amounts in thousands) Total Less than 1 year 1 to 3 years 3 to 5 years More than 5 years

Contractual cash obligations

Long-term debt obligations (1)

$ 1,895,499 $ 67,836 $ 548,872 $ 275,208 $ 1,003,583

Operating lease obligations 105,428 9,363 17,084 15,099 63,882

Finance lease obligations 6,968 109 218 218 6,423

$ 2,007,895 $ 77,308 $ 566,174 $ 290,525 $ 1,073,888

(1) Includes interest and principal payments.

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Development and redevelopment costs (1)

$ 15,468 $ 72,331

Capital improvements 10,704 14,252

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(1) Amounts for the year ended December 31, 2019 have been reclassified to conform with current period presentation.

As of December 31, 2019 , we had approximately $65.6 million of active redevelopment, development and anchor repositioning projects at various stages of completion, a decrease of $130.9 million from $196.5 million of projects as of December 31, 2018 .

As of December 31, 2020, we had approximately $132.4 million of active redevelopment, development and anchor repositioning projects at various stages of completion, an increase of $66.8 million from $65.6 million of projects as of December 31, 2019.

We have advanced these projects and incurred $10.1 million of additional spend since December 31, 2019.

We anticipate that these projects will require an additional $29.9 million over the next two years to complete.

We expect to fund these projects using cash on hand, proceeds from dispositions, using secured debt or issuing equity.

We anticipate that these projects will require an additional $86.6 million to complete, which we expect to occur over the next six to eighteen months depending on any restrictions on construction activity.

We expect to fund these projects using cash on hand, proceeds from dispositions, or from secured debt.

Commitments and Contingencies

The Company maintains (i) general liability insurance with limits of $200 million for properties in the U.S.

and Puerto Rico and (ii) all-risk property insurance with limits of $500 million per occurrence and in the aggregate for properties in the U.S.

and $139 million for properties in Puerto Rico, subject to the terms, conditions, exclusions, deductibles and sub-limits when applicable for

certain perils such as floods and earthquakes and (iii) numerous other insurance policies including trustees’ and officers’ insurance, workers’ compensation and automobile-related liabilities insurance.

The Company’s insurance includes coverage for acts of terrorism but excludes coverage for nuclear, biological, chemical or radiological terrorism events as defined by the Terrorism Risk Insurance Program Reauthorization Act, which expires in December 2020.

In addition, the Company maintains coverage for certain cybersecurity losses providing first and third-party coverage including network interruption, event management, cyber extortion and claims for media content, security and privacy liability.

Insurance premiums are typically charged directly to each of the retail properties and warehouses but not all of the cost of such premiums are recovered.

Legal Matters

There are various legal actions against us in the ordinary course of business.

In our opinion, after consultation with legal counsel, the outcome of such matters will not have a material adverse effect on our financial condition, results of operations or cash flows.

The Company maintains numerous insurance policies including for general liability, property, pollution, acts of terrorism, trustees’ and officers’, cyber, workers’ compensation and automobile-related liabilities.

However, all such policies are subject to terms, conditions, exclusions, deductibles and sub-limits, amount other limiting factors.

For example, the Company’s terrorism insurance excludes coverage for nuclear, biological, chemical or radiological terrorism events as defined by the Terrorism Risk Insurance Program Reauthorization Act.

The Company’s primary and excess insurance policies providing coverage for pollution related losses have an aggregate limit of $50 million and provide remediation and business interruption coverage for pollution incidents, which pursuant to our policies expressly include the presence and dispersal of viruses.

On December 23, 2020, the Company initiated litigation in New Jersey state court, Bergen County, under these policies to recover uncollected rents and other amounts resulting from the COVID-19 virus.

Insurance premiums are typically charged directly to each of the properties but not all of the cost of such premiums are recovered.

The Company is responsible for deductibles, losses in excess of insurance coverage, and the portion of premiums not reimbursable by tenants at our properties, which could be material.

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Hurricane-Related Charges

On September 20, 2017, Hurricane Maria made landfall, damaging our two properties in Puerto Rico.

During the year ended December 31, 2017, the Company incurred a $2.2 million charge reflecting the net book value of assets damaged and incurred $1.7 million of hurricane-related expenses, included in casualty and impairment loss, net on the accompanying consolidated statements of income.

During the year ended December 31, 2017, the Company recognized $2.2 million of business interruption losses, net of $1.8 million in cash advances received from its insurance carrier.

Losses of $0.9 million pertained to rent abatements when the malls were closed or inoperable as a result of the hurricane, recorded as a reduction of rental revenue, and $1.3 million was recorded within property operating expenses to provision for doubtful accounts for unpaid rents.

On September 20, 2017, Hurricane Maria damaged our two properties in Puerto Rico.

During the year ended December 31, 2018, the Company received $1.5 million in casualty insurance proceeds, which were partially offset by $0.3 million of hurricane-related costs, resulting in net casualty gains of $1.2 million included in casualty and impairment loss, net on the accompanying consolidated statements of income.

During the year ended December 31, 2018, the Company recognized $0.3 million of business interruption losses, comprised of $0.7 million of rent abatements due to tenants that had not reopened since the hurricane, recorded as a reduction of rental revenue, offset by a $0.4 million reversal within property operating expenses to provision for doubtful accounts for payments received from tenants on rents previously reserved.

In June 2019, the Company finalized its insurance recovery related to Hurricane Maria with its carrier at $14.3 million , of which $3.3 million was previously received, subject to deductibles of $2.3 million .

We recognized an $8.7 million casualty gain during the year ended December 31, 2019 as a result of the remaining insurance proceeds from the settlement agreement for our two malls in Puerto Rico.

During the year ended December 31, 2018, the Company recognized $0.3 million of business interruption losses, comprised of $0.7 million of rent abatements due to tenants that had not reopened since

the hurricane, recorded as a reduction of rental revenue, offset by a $0.4 million reversal within property operating expenses to account for doubtful accounts for payments received from tenants on rents previously reserved.

In June 2019, the Company finalized its insurance recovery related to Hurricane Maria with its carrier in the amount of $14.3 million, of which $3.3 million was previously received, subject to deductibles of $2.3 million.

We recognized a $8.7 million casualty gain during the year ended December 31, 2019 as a result of the remaining insurance proceeds from the settlement agreement for our two malls in Puerto Rico.

Environmental Matters

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While this accrual reflects third-party estimates of the potential costs of remediation at these properties, there can be no assurance that the actual costs will not exceed these amounts.

During the years ended December 31, 2019 and December 31, 2018 , the Company recognized $1.4 million and $0.6 million , respectively, of environmental remediation costs included in property operating expenses on the consolidated statements of income.

During the years ended December 31, 2019 and 2018, the Company recognized $1.4 million and $0.6 million, respectively, of environmental remediation costs included in property operating expenses on the consolidated statements of income.

Although we are not aware of any other material environmental contamination, there can be no assurance that the identification of new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites, or changes in cleanup requirements would not result in significant costs to us.

Pandemic-Related Contingencies

During 2020, many of our tenants faced adverse financial consequences from reduced business operations and social distancing requirements resulting from the COVID-19 pandemic.

As of December 31, 2020, substantially all of our portfolio's gross leasable area was open for business and the Company collected approximately 91% of rental revenue for the fourth quarter, 87% for the third quarter and 79% for the second quarter.

Throughout 2020, the Company granted rent concessions and other lease-related relief, such as rent deferrals, to certain impacted tenants, and anticipates granting further rent concessions or other relief going forward.

We valuate rent relief requests on a case-by-case basis and not all requests are granted.

Rent relief, deferral or abatements and tenant defaults on lease obligations, such as repayment of deferred rent may have a negative impact on our rental revenue and net income.

As of February 12, 2021, we have executed or approved approximately 112 rent deferrals for an aggregate deferral amount of $8.2 million.

The following table sets forth information as of December 31, 2020 regarding the collection status of quarterly billings since April 2020:

(in thousands) Three Months Ended June 30, 2020 Three Months Ended September 30, 2020 Three Months Ended December 30, 2020

Tenant Type Tenant Billings % Collected Tenant Billings % Collected Tenant Billings % Collected

National $ 65,787 85 % $ 68,390 90 % $ 63,809 94 %

Regional 9,460 63 % 9,858 79 % 9,286 89 %

Mom and pop 6,872 62 % 7,009 73 % 6,575 76 %

Local franchise 5,556 64 % 5,549 74 % 5,181 76 %

Temporary 1,717 50 % 1,137 99 % 1,642 78 %

Total portfolio $ 89,392 79 % $ 91,943 87 % $ 86,493 91 %

The Company is closely monitoring changes in the collectibility assessment of its tenant receivables as a result of certain tenants suffering adverse financial consequences due to the COVID-19 pandemic.

During the year ended December 31, 2020, rental revenue deemed uncollectible of $27.9 million was classified as a reduction to rental revenue based on our assessment of the probability of collecting substantially all of the remaining rents for certain tenants.

Additionally, during the year ended December 31, 2020 we recognized write-offs of $12.0 million related to receivables arising from the straight-lining of rents as a result of tenants impacted by the COVID-19 pandemic.

We experienced a decline in our percentage rent earned throughout 2020 as a result of reduced sales volumes from temporary store closures and changes in consumer behavior.

Percentage rents totaled $2.4 million and $4.0 million for the years ended December 31, 2020 and December 31, 2019, respectively and approximated 1% of total revenue for the years ended December 31, 2020 and 2019, respectively.

The Company is not currently aware of any other loss contingencies related to the COVID-19 pandemic that would require recognition at this time, with the exception of abatements already discussed with tenants or deferred rents that may not be collected.

Although our rental revenue is supported by long-term leases, leases may be rejected in a bankruptcy proceeding and the related tenant stores may permanently vacate prior to lease expiration.

In the event a tenant with a significant number of leases or square footage in our shopping centers files for bankruptcy and rejects its leases with us, we could experience a reduction in our revenues.

We monitor the operating performance and rent collections of all tenants in our shopping centers, especially those tenants in arrears

or operating retail formats that are experiencing significant changes in competition, business practice, or store closings in other locations.

During the year ended December 31, 2018, tenants including Toys “R” Us, Sears, Fallas, and National Wholesale Liquidators filed for Chapter 11 bankruptcy protection.

During September 2017, Toys “R” Us filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code and announced an orderly wind-down of its U.S.

business and liquidation of all U.S.

stores on March 15, 2018.

Prior to the liquidation, the Company had leases with Toys “R” Us at nine locations with annual rental revenue of $7.6 million .

In connection with the Toys “R” Us bankruptcy, the Company recognized a write-off of $21.6 million of below-market intangible liabilities (classified within rental revenue), $15.5 million of lease termination payments (classified within property operating expense) and a $1.0 million write-off of reserves on receivables from straight-line rents in the year ended December 31, 2018.

During the year ended December 31, 2019 , the Company received $1.2 million of bankruptcy settlement income in connection with the bankruptcy proceedings of Toys "R" Us.

The settlement proceeds were used to offset outstanding credit losses and the remaining proceeds were recorded to other income.

No determination has been made as to the amount or timing of additional bankruptcy settlement proceeds, if any, that may be received.

Fallas filed for Chapter 11 bankruptcy protection on August 6, 2018.

Prior to the tenant vacating, the Company had one lease with Fallas at the Shops at Bruckner in the Bronx, NY comprising approximately 38,000 sf which generated $1.4 million in annual rental revenue.

In connection with the bankruptcy, the Company recognized a write-off of $0.8 million of below-market intangible liabilities (classified within rental revenue) in the year ended December 31, 2018.

As of December 31, 2019, the Company had executed a lease with LA Fitness for this space.

Sears filed for Chapter 11 bankruptcy protection on October 15, 2018.

The Company had four Kmart leases with Sears comprising approximately 547,000 sf, which generated $8.5 million in annual rental revenue.

Property rents were paid on all four Kmart locations through April 2019.

In April 2019, our Kmart leases at Las Catalinas and Huntington, NY were rejected and we recognized a $7.4 million write-off of the below-market intangible liability connected with the lease in Huntington, NY (classified within rental revenues).

ESL Investments (“ESL”) assumed the Company’s remaining two Kmart leases at Montehiedra and at Bruckner Commons in 2018.

In January 2020 the Company executed a lease with ShopRite for its former Kmart space in Huntington, NY.

National Wholesale Liquidators filed for Chapter 11 bankruptcy protection on October 24, 2018.

The Company had one lease with National Wholesale Liquidators in Lodi, NJ comprising approximately 171,000 sf, which generated $3.1 million in annual rental revenue.

This lease was rejected and returned to us on November 30, 2018.

In connection with the bankruptcy, the Company recorded a $0.8 million write-off of reserves on receivables from straight-line rents in the year ended December 31, 2018.

The Company is in active negotiations to lease this property.

We monitor the operating performance and rent collections of all tenants in our shopping centers, especially those tenants in arrears or operating retail formats that are experiencing significant changes in competition, business practice, or store closings in other locations.

Given the economic environment brought upon by COVID-19, certain tenants experienced liquidity or financial hardships and filed for Chapter 11 bankruptcy protection during the year ended December 31, 2020.

Although some of these tenants intend to exit the Chapter 11 bankruptcy process and resume operations, the outcomes of such proceedings are unknown and the Company is currently exploring leasing alternatives for these spaces.

We anticipate tenant bankruptcies may continue to increase in the future depending on the length and severity of the COVID-19 pandemic.

Century 21 filed for Chapter 11 bankruptcy protection on September 10, 2020.

Prior to bankruptcy, the Company had one lease with Century 21 in Paramus, NJ comprising approximately 157,000 sf, which generated $4.4 million in annual rental revenue.

In connection with the bankruptcy, the Company recognized a write-off of $2.5 million of receivables arising from the straight-lining of rents, and recognized $2.1 million as rental revenue deemed uncollectible (classified within rental revenue) for the year ended December 31, 2020.

The Company closed and vacated the store in December 2020.

Inflation and Economic Condition Considerations

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Most of our leases require tenants to pay their share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing our exposure to increases in costs and operating expenses resulting from inflation, although some larger tenants have capped the amount of these operating expenses they are responsible for under the lease.

A small number of our leases also include percentage rent clauses enabling us to receive additional rent based on tenant sales above a predetermined level, which sales generally increase as prices rise and are typically related to increases in the Consumer Price Index or similar inflation indices.

Off-Balance Sheet Arrangements

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

What changed 10-K

Item 7. Management’s Discussion and Analysis