Urban Edge Properties 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES Page CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm for Urban Edge Properties 45 Report of Independent Registered Public Accounting Firm for Urban Edge Properties LP 47 Urban Edge Properties Consolidated Balance Sheets as of December 31, 2020 and 2019 49 Urban Edge Properties Consolidated Statements of Income for the years ended December 31, 2020, 2019 and 2018 50 Urban Edge Properties Consolidated Statement of Changes in Equity for the years ended December 31, 2020, 2019 and 2018 51 Urban Edge Properties Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018 52 Urban Edge Properties LP Consolidated Balance Sheets as of December 31, 2020 and 2019 54 Urban Edge Properties LP Consolidated Statements of Income for the years ended December 31, 2020, 2019 and 2018 55 Urban Edge Properties LP Consolidated Statement of Changes in Equity for the years ended December 31, 2020, 2019 and 2018 56 Urban Edge Properties LP Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018 57 Notes to Consolidated Financial Statements 59 CONSOLIDATED FINANCIAL STATEMENT SCHEDULES Schedule II – Valuation and Qualifying Accounts 103 Schedule III – Real Estate and Accumulated Depreciation 104 44 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Trustees of Urban Edge Properties Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Urban Edge Properties and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and schedules listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 17, 2021, expressed an unqualified opinion on the Company’s internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate. Real Estate Impairment —Refer to Notes 2, 3 and 9 to the financial statements Critical Audit Matter Description The Company’s real estate assets are individually evaluated for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company’s evaluation of the recoverability of real estate assets involves the comparison of the aggregate projected undiscounted future cash flows expected to be generated by each real estate asset over the Company’s estimated holding period to the respective carrying amount. The Company’s undiscounted future cash flow analyses require management to make significant estimates, including estimated terminal values determined using appropriate capitalization rates. Total real estate assets as of December 31, 2020 had a net book value of $2.2 billion. Given that the Company’s estimated capitalization rates used in the evaluation of impairment of real estate assets is a significant assumption made by management, performing audit procedures to evaluate the reasonableness of management’s undiscounted future cash flow analyses required a high degree of auditor judgment and an increased level of effort, including the need to involve our fair value specialists. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the Company’s estimated capitalization rates used in the evaluation of impairment of real estate assets included the following, among others: • We tested the effectiveness of the Company’s internal controls over management’s evaluation of the recoverability of real estate, including internal controls over management’s determination of the reasonableness of the applicable capitalization rates. 45 • Inquired with management regarding the appropriateness of the capitalization rates, including considerations related to the impact of COVID-19 and evaluating the consistency of the capitalization rates used with evidence obtained in other areas of our audit. • With the assistance of our fair value specialists, we evaluated the reasonableness of the Company’s estimated capitalization rates by: ◦ Testing the source information underlying the determination of the capitalization rates by evaluating the reasonableness of the capitalization rates used by management with independent market data, focusing on key factors, including the impact of the COVID-19 pandemic, geographical location, tenant composition, and property type. ◦ Developing a range of independent estimates of capitalization rates and comparing those to the capitalization rates utilized by management. Evaluation of Collectibility of Receivables – Refer to Note 3 to the financial statements Critical Audit Matter Description The Company evaluates the collectibility of amounts due from tenants. In light of the recent and ongoing COVID-19 pandemic, the Company is closely monitoring changes in the collectibility assessment of its tenant receivables as a result of certain tenants suffering adverse financial consequences. Management exercises judgment in assessing collectibility and considers payment history, current credit status and publicly available information about the financial condition of the tenant, among other factors. The Company recognizes changes in the collectibility assessment of these operating leases as adjustments to rental revenue. Tenant receivables, including receivables arising from the straight-lining of rents, are written-off directly when management deems that the collectibility of substantially all future lease payments from a specific lease is not probable of collection. We identified management’s assumptions utilized in determining whether a tenant’s lease payments are collectible as a critical audit matter because of the significant judgements involved and the material impact to receivables. Performing audit procedures to evaluate these assumptions required a high degree of auditor judgment and an increased extent of effort. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to management’s assumptions in evaluating the collectibility of receivables included the following, among others: • We tested the effectiveness of controls over management’s evaluation of collectibility including controls over the assumptions utilized by management. • We evaluated the Company’s estimate of the collectibility of receivables by: ◦ Testing management’s estimate including reading available information of tenant filings, financial statements, news articles, and analyst reports among other procedures based on the tenant’s payment history, current credit status and publicly available information about the financial condition of the tenant. ◦ Inquiring with the Company’s employees in departments outside of accounting to corroborate evidence regarding each of the tenant specific collectibility assessments. ◦ Evaluating positive and contradictory evidence obtained through the procedures described above, other evidence obtained throughout our audit, and events or changes in facts and circumstances occurring subsequent to year end, but before the date the consolidated financial statements were available to be issued. DELOITTE & TOUCHE LLP New York, New York February 17, 2021 We have served as the Company’s auditor since 2014. 46 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Partners of Urban Edge Properties LP Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Urban Edge Properties LP (the “Operating Partnership”) as of December 31, 2020 and 2019, the related consolidated statements of income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and schedules listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Operating Partnership as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Operating Partnership’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 17, 2021, expressed an unqualified opinion on the Operating Partnership’s internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Operating Partnership’s management. Our responsibility is to express an opinion on the Operating Partnership’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Operating Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate. Real Estate Impairment —Refer to Notes 2, 3 and 9 to the financial statements Critical Audit Matter Description The Operating Partnership’s real estate assets are individually evaluated for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. The Operating Partnership’s evaluation of the recoverability of real estate assets involves the comparison of the aggregate projected undiscounted future cash flows expected to be generated by each real estate asset over the Operating Partnership’s estimated holding period to the respective carrying amount. The Operating Partnership’s undiscounted future cash flow analyses require management to make significant estimates, including estimated terminal values determined using appropriate capitalization rates. Total real estate assets as of December 31, 2020 had a net book value of $2.2 billion. Given that the Operating Partnership’s estimated capitalization rates used in the evaluation of impairment of real estate assets is a significant assumption made by management, performing audit procedures to evaluate the reasonableness of management’s undiscounted future cash flow analyses required a high degree of auditor judgment and an increased level of effort, including the need to involve our fair value specialists. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the Operating Partnership’s estimated capitalization rates used in the evaluation of impairment of real estate assets included the following, among others: • We tested the effectiveness of the Operating Partnership’s internal controls over management’s evaluation of the recoverability of real estate, including internal controls over management’s determination of the reasonableness of the applicable capitalization rates. 47 • Inquired with management regarding the appropriateness of the capitalization rates, including considerations related to the impact of COVID-19 and evaluating the consistency of the capitalization rates used with evidence obtained in other areas of our audit. • With the assistance of our fair value specialists, we evaluated the reasonableness of the Operating Partnership’s estimated capitalization rates by: ◦ Testing the source information underlying the determination of the capitalization rates by evaluating the reasonableness of the capitalization rates used by management with independent market data, focusing on key factors, including the impact of the COVID-19 pandemic, geographical location, tenant composition, and property type. ◦ Developing a range of independent estimates of capitalization rates and comparing those to the capitalization rates utilized by management. Evaluation of Collectibility of Receivables – Refer to Note 3 to the financial statements Critical Audit Matter Description The Operating Partnership evaluates the collectibility of amounts due from tenants. In light of the recent and ongoing COVID-19 pandemic, the Operating Partnership is closely monitoring changes in the collectibility assessment of its tenant receivables as a result of certain tenants suffering adverse financial consequences. Management exercises judgment in assessing collectibility and considers payment history, current credit status and publicly available information about the financial condition of the tenant, among other factors. The Operating Partnership recognizes changes in the collectibility assessment of these operating leases as adjustments to rental revenue. Tenant receivables, including receivables arising from the straight-lining of rents, are written-off directly when management deems that the collectibility of substantially all future lease payments from a specific lease is not probable of collection. We identified management’s assumptions utilized in determining whether a tenant’s lease payments are collectible as a critical audit matter because of the significant judgements involved and the material impact to receivables. Performing audit procedures to evaluate these assumptions required a high degree of auditor judgment and an increased extent of effort. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to management’s assumptions in evaluating the collectibility of receivables included the following, among others: • We tested the effectiveness of controls over management’s evaluation of collectibility including controls over the assumptions utilized by management. • We evaluated the Operating Partnership’s estimate of the collectibility of receivables by: ◦ Testing management’s estimate including reading available information of tenant filings, financial statements, news articles, and analyst reports among other procedures based on the tenant’s payment history, current credit status and publicly available information about the financial condition of the tenant. ◦ Inquiring with the Operating Partnership’s employees in departments outside of accounting to corroborate evidence regarding each of the tenant specific collectibility assessments. ◦ Evaluating positive and contradictory evidence obtained through the procedures described above, other evidence obtained throughout our audit, and events or changes in facts and circumstances occurring subsequent to year end, but before the date the consolidated financial statements were available to be issued. /s/ DELOITTE & TOUCHE LLP New York, New York February 17, 2021 We have served as the Operating Partnership’s auditor since 2016. 48 URBAN EDGE PROPERTIES CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) December 31, December 31, 2020 2019 ASSETS Real estate, at cost: Land $ 568,662 $ 515,621 Buildings and improvements 2,326,450 2,197,076 Construction in progress 44,689 28,522 Furniture, fixtures and equipment 7,016 7,566 Total 2,946,817 2,748,785 Accumulated depreciation and amortization ( 730,366 ) ( 671,946 ) Real estate, net 2,216,451 2,076,839 Operating lease right-of-use assets 80,997 81,768 Cash and cash equivalents 384,572 432,954 Restricted cash 34,681 52,182 Tenant and other receivables 15,673 21,565 Receivables arising from the straight-lining of rents 62,106 73,878 Identified intangible assets, net of accumulated amortization of $ 37,009 and $ 30,942 , respectively 56,184 48,121 Deferred leasing costs, net of accumulated amortization of $ 16,419 and $ 16,560 , respectively 18,585 21,474 Prepaid expenses and other assets 70,311 37,577 Total assets $ 2,939,560 $ 2,846,358 LIABILITIES AND EQUITY Liabilities: Mortgages payable, net $ 1,587,532 $ 1,546,195 Operating lease liabilities 74,972 79,913 Accounts payable, accrued expenses and other liabilities 132,980 76,644 Identified intangible liabilities, net of accumulated amortization of $ 71,375 and $ 62,610 , respectively 148,183 128,830 Total liabilities 1,943,667 1,831,582 Commitments and contingencies Shareholders’ equity: Common shares: $ 0.01 par value; 500,000,000 shares authorized and 117,014,317 and 121,370,125 shares issued and outstanding, respectively 1,169 1,213 Additional paid-in capital 989,863 1,019,149 Accumulated deficit ( 39,467 ) ( 52,546 ) Noncontrolling interests: Operating partnership 38,456 46,536 Consolidated subsidiaries 5,872 424 Total equity 995,893 1,014,776 Total liabilities and equity $ 2,939,560 $ 2,846,358 See notes to consolidated financial statements. 49 URBAN EDGE PROPERTIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except share and per share amounts) Year Ended December 31, 2020 2019 2018 REVENUE Rental revenue $ 328,280 $ 384,405 $ 411,298 Management and development fees 1,283 1,900 1,469 Other income 532 1,344 1,393 Total revenue 330,095 387,649 414,160 EXPENSES Depreciation and amortization 96,029 94,116 99,422 Real estate taxes 60,049 60,179 63,655 Property operating 56,126 64,062 78,360 General and administrative 48,682 38,220 34,984 Casualty and impairment loss, net (1) 3,055 12,738 4,426 Lease expense 13,667 14,466 11,448 Total expenses 277,608 283,781 292,295 Gain on sale of real estate 39,775 68,632 52,625 Gain on sale of lease — 1,849 — Interest income 2,599 9,774 8,336 Interest and debt expense ( 71,015 ) ( 66,639 ) ( 64,868 ) Gain on extinguishment of debt 34,908 — 2,524 Income before income taxes 58,754 117,484 120,482 Income tax benefit (expense) 38,996 ( 1,287 ) ( 3,519 ) Net income 97,750 116,197 116,963 Less net (income) loss attributable to noncontrolling interests in: Operating partnership ( 4,160 ) ( 6,699 ) ( 11,768 ) Consolidated subsidiaries ( 1 ) 25 ( 45 ) Net income attributable to common shareholders $ 93,589 $ 109,523 $ 105,150 Earnings per common share - Basic: $ 0.79 $ 0.91 $ 0.92 Earnings per common share - Diluted: $ 0.79 $ 0.91 $ 0.92 Weighted average shares outstanding - Basic 117,722 119,751 113,863 Weighted average shares outstanding - Diluted 117,902 119,896 114,051 (1) Refer to Note 2 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K. See notes to consolidated financial statements. 50 URBAN EDGE PROPERTIES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (In thousands, except share and per share amounts) Common Shares Noncontrolling Interests (“NCI”) Shares Amount Additional Paid-In Capital Accumulated Earnings (Deficit) Operating Partnership Consolidated Subsidiaries Total Equity Balance, January 1, 2018 113,827,529 1,138 946,402 ( 57,621 ) 100,218 404 990,541 Net income attributable to common shareholders — — — 105,150 — — 105,150 Net income attributable to noncontrolling interests — — — — 11,768 45 11,813 Limited partnership interests: Units redeemed for common shares 429,110 4 3,500 — — — 3,504 Reallocation of noncontrolling interests — — 1,263 — ( 4,767 ) — ( 3,504 ) Common shares issued 106,116 2 647 ( 172 ) — — 477 Dividends to common shareholders ($ 0.88 per share) — — — ( 100,244 ) — — ( 100,244 ) Distributions to redeemable NCI ($ 0.88 per unit) — — — — ( 11,116 ) — ( 11,116 ) Share-based compensation expense — — 4,992 30 4,719 — 9,741 Share-based awards retained for taxes ( 17,190 ) ( 1 ) ( 384 ) — — — ( 385 ) Balance, December 31, 2018 114,345,565 1,143 956,420 ( 52,857 ) 100,822 449 1,005,977 Net income attributable to common shareholders — — — 109,523 — — 109,523 Net income (loss) attributable to noncontrolling interests — — — — 6,699 ( 25 ) 6,674 Impact of ASC 842 adoption — — — ( 2,918 ) — — ( 2,918 ) Limited partnership interests: Units redeemed for common shares 6,995,941 69 55,788 — ( 4,279 ) — 51,578 Units redeemed for cash — — ( 3,422 ) — ( 2,556 ) — ( 5,978 ) Reallocation of noncontrolling interests — — 4,521 — ( 56,099 ) — ( 51,578 ) Common shares issued 59,895 1 569 ( 131 ) — — 439 Dividends to common shareholders ($ 0.88 per share) — — — ( 106,163 ) — — ( 106,163 ) Distributions to redeemable NCI ($ 0.88 per unit) — — — — ( 5,694 ) — ( 5,694 ) Share-based compensation expense — — 5,906 — 7,643 — 13,549 Share-based awards retained for taxes ( 31,276 ) — ( 633 ) — — — ( 633 ) Balance, December 31, 2019 121,370,125 $ 1,213 $ 1,019,149 $ ( 52,546 ) $ 46,536 $ 424 $ 1,014,776 Net income attributable to common shareholders — — — 93,589 — — 93,589 Net income attributable to noncontrolling interests — — — — 4,160 1 4,161 Limited partnership interests: Units redeemed for common shares 1,579,389 15 11,129 — — — 11,144 Reallocation of noncontrolling interests — — 8,833 — ( 19,977 ) — ( 11,144 ) Common shares issued 66,588 1 427 ( 30 ) — — 398 Repurchase of common shares ( 5,873,923 ) ( 59 ) ( 54,082 ) — — — ( 54,141 ) Dividends to common shareholders ($ 0.68 per share) — — — ( 80,480 ) — — ( 80,480 ) Distributions to redeemable NCI ($ 0.68 p er unit) — — — — ( 3,386 ) — ( 3,386 ) Contributions from noncontrolling interests — — — — — 5,447 5,447 Share-based compensation expense — — 5,871 — 11,123 — 16,994 Share-based awards retained for taxes ( 127,862 ) ( 1 ) ( 1,464 ) — — — ( 1,465 ) Balance, December 31, 2020 117,014,317 $ 1,169 $ 989,863 $ ( 39,467 ) $ 38,456 $ 5,872 $ 995,893 See notes to consolidated financial statements. 51 URBAN EDGE PROPERTIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2020 2019 2018 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 97,750 $ 116,197 $ 116,963 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 97,751 96,641 102,942 Casualty and impairment loss, net 3,055 12,738 5,574 Gain on sale of real estate ( 39,775 ) ( 68,632 ) ( 52,625 ) Gain on sale of lease — ( 1,849 ) — Gain on extinguishment of debt ( 34,908 ) — ( 2,524 ) Amortization of below market leases, net ( 10,624 ) ( 15,940 ) ( 33,975 ) Noncash lease expense 7,522 8,205 — Straight-lining of rent 10,523 1,021 ( 735 ) Share-based compensation expense 16,994 13,549 9,741 Rental revenue deemed uncollectible 27,890 1,385 4,138 Change in operating assets and liabilities: Tenant and other receivables ( 21,998 ) 6,734 ( 13,327 ) Deferred leasing costs ( 1,218 ) ( 4,303 ) ( 4,675 ) Prepaid and other assets ( 41,982 ) ( 3,331 ) 1,867 Lease liabilities ( 6,680 ) ( 7,107 ) — Accounts payable, accrued expenses and other liabilities 8,522 1,092 3,676 Net cash provided by operating activities 112,822 156,400 137,040 CASH FLOWS FROM INVESTING ACTIVITIES Real estate development and capital improvements ( 28,522 ) ( 91,301 ) ( 118,765 ) Acquisitions of real estate ( 124,340 ) ( 47,356 ) ( 4,931 ) Proceeds from sale of operating properties 54,402 116,510 57,593 Proceeds from sale of operating lease — 6,949 — Insurance proceeds — 12,677 1,300 Net cash used in investing activities ( 98,460 ) ( 2,521 ) ( 64,803 ) CASH FLOWS FROM FINANCING ACTIVITIES Debt repayments ( 89,302 ) ( 5,587 ) ( 4,288 ) Dividends paid to common shareholders ( 26,647 ) ( 106,163 ) ( 100,244 ) Distributions paid to redeemable noncontrolling interests ( 1,314 ) ( 5,694 ) ( 11,116 ) Taxes withheld for vested restricted shares ( 1,465 ) ( 633 ) ( 385 ) Debt issuance costs ( 3,471 ) ( 2,649 ) — Payment for redemption of units — ( 5,978 ) — Proceeds related to the issuance of common shares 398 439 477 Cash paid to repurchase shares ( 54,141 ) — — Contributions from noncontrolling interests 5,447 — — Proceeds from borrowings 90,250 — — Net cash used in financing activities ( 80,245 ) ( 126,265 ) ( 115,556 ) Net (decrease) increase in cash and cash equivalents and restricted cash ( 65,883 ) 27,614 ( 43,319 ) Cash and cash equivalents and restricted cash at beginning of year 485,136 457,522 500,841 Cash and cash equivalents and restricted cash at end of year $ 419,253 $ 485,136 $ 457,522 See notes to consolidated financial statements 52 Year Ended December 31, 2020 2019 2018 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash payments for interest net of amounts capitalized of $ 715 , $ 1,425 and $ 3,313 , respectively $ 68,113 $ 64,751 $ 65,699 Cash payments for income taxes 499 1,601 757 NON-CASH INVESTING AND FINANCING ACTIVITIES Accrued capital expenditures included in accounts payable and accrued expenses 5,808 5,056 25,661 Write-off of fully depreciated and impaired assets 21,447 56,199 24,307 Forgiveness of mortgage debt 30,000 — 11,537 Assumption of debt from the acquisition of real estate 72,473 — — Dividend/distribution declared and payable on January 19, 2021 55,905 — — RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH Cash and cash equivalents at beginning of year $ 432,954 $ 440,430 $ 490,279 Restricted cash at beginning of year 52,182 17,092 10,562 Cash and cash equivalents and restricted cash at beginning of year $ 485,136 $ 457,522 $ 500,841 Cash and cash equivalents at end of year $ 384,572 $ 432,954 $ 440,430 Restricted cash at end of year 34,681 52,182 17,092 Cash and cash equivalents and restricted cash at end of year $ 419,253 $ 485,136 $ 457,522 See notes to consolidated financial statements. 53 URBAN EDGE PROPERTIES LP CONSOLIDATED BALANCE SHEETS (In thousands, except unit and per unit amounts) December 31, December 31, 2020 2019 ASSETS Real estate, at cost: Land $ 568,662 $ 515,621 Buildings and improvements 2,326,450 2,197,076 Construction in progress 44,689 28,522 Furniture, fixtures and equipment 7,016 7,566 Total 2,946,817 2,748,785 Accumulated depreciation and amortization ( 730,366 ) ( 671,946 ) Real estate, net 2,216,451 2,076,839 Operating lease right-of-use assets 80,997 81,768 Cash and cash equivalents 384,572 432,954 Restricted cash 34,681 52,182 Tenant and other receivables 15,673 21,565 Receivables arising from the straight-lining of rents 62,106 73,878 Identified intangible assets, net of accumulated amortization of $ 37,009 and $ 30,942 , respectively 56,184 48,121 Deferred leasing costs, net of accumulated amortization of $ 16,419 and $ 16,560 , respectively 18,585 21,474 Prepaid expenses and other assets 70,311 37,577 Total assets $ 2,939,560 $ 2,846,358 LIABILITIES AND EQUITY Liabilities: Mortgages payable, net $ 1,587,532 $ 1,546,195 Operating lease liabilities 74,972 79,913 Accounts payable, accrued expenses and other liabilities 132,980 76,644 Identified intangible liabilities, net of accumulated amortization of $ 71,375 and $ 62,610 , respectively 148,183 128,830 Total liabilities 1,943,667 1,831,582 Commitments and contingencies Equity: Partners’ capital: General partner: 117,014,317 and 121,370,125 units outstanding, respectively 991,032 1,020,362 Limited partners: 4,729,010 and 5,833,318 units outstanding, respectively 41,302 50,156 Accumulated deficit ( 42,313 ) ( 56,166 ) Total partners’ capital 990,021 1,014,352 Noncontrolling interest in consolidated subsidiaries 5,872 424 Total equity 995,893 1,014,776 Total liabilities and equity $ 2,939,560 $ 2,846,358 See notes to consolidated financial statements. 54 URBAN EDGE PROPERTIES LP CONSOLIDATED STATEMENTS OF INCOME (In thousands, except unit and per unit amounts) Year Ended December 31, 2020 2019 2018 REVENUE Rental revenue $ 328,280 $ 384,405 $ 411,298 Management and development fees 1,283 1,900 1,469 Other income 532 1,344 1,393 Total revenue 330,095 387,649 414,160 EXPENSES Depreciation and amortization 96,029 94,116 99,422 Real estate taxes 60,049 60,179 63,655 Property operating 56,126 64,062 78,360 General and administrative 48,682 38,220 34,984 Casualty and impairment loss, net (1) 3,055 12,738 4,426 Lease expense 13,667 14,466 11,448 Total expenses 277,608 283,781 292,295 Gain on sale of real estate 39,775 68,632 52,625 Gain on sale of lease — 1,849 — Interest income 2,599 9,774 8,336 Interest and debt expense ( 71,015 ) ( 66,639 ) ( 64,868 ) Gain on extinguishment of debt 34,908 — 2,524 Income before income taxes 58,754 117,484 120,482 Income tax benefit (expense) 38,996 ( 1,287 ) ( 3,519 ) Net income 97,750 116,197 116,963 Less: net (income) loss attributable to NCI in consolidated subsidiaries ( 1 ) 25 ( 45 ) Net income attributable to unitholders $ 97,749 $ 116,222 $ 116,918 Earnings per unit - Basic: $ 0.80 $ 0.92 $ 0.92 Earnings per unit - Diluted: $ 0.80 $ 0.92 $ 0.92 Weighted average units outstanding - Basic 121,957 126,333 126,198 Weighted average units outstanding - Diluted 122,811 126,478 126,386 (1) Refer to Note 2 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K. See notes to consolidated financial statements. 55 URBAN EDGE PROPERTIES LP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (In thousands, except unit and per unit amounts) Total Shares General Partner Total Units Limited Partners (1) Accumulated Earnings (Deficit) NCI in Consolidated Subsidiaries Total Equity Balance, January 1, 2018 113,827,529 947,540 12,812,954 105,495 ( 62,898 ) 404 990,541 Net income attributable to unitholders — — — — 116,918 — 116,918 Net income attributable to noncontrolling interests — — — — — 45 45 Common units issued as a result of common shares issued by Urban Edge 106,116 649 — — ( 172 ) — 477 Equity redemption of OP Units 429,110 3,504 ( 429,110 ) — — — 3,504 Limited partnership units issued, net — — 352,789 — — — — Reallocation of noncontrolling interests — 1,263 — ( 4,767 ) — — ( 3,504 ) Distributions to Partners ($ 0.88 per unit) — — — — ( 111,360 ) — ( 111,360 ) Share-based compensation expense — 4,992 — 4,719 30 — 9,741 Share-based awards retained for taxes ( 17,190 ) ( 385 ) — — — — ( 385 ) Balance, December 31, 2018 114,345,565 957,563 12,736,633 105,447 ( 57,482 ) 449 1,005,977 Net income attributable to unitholders — — — — 116,222 — 116,222 Net loss attributable to noncontrolling interests — — — — — ( 25 ) ( 25 ) Impact of ASC 842 adoption — — — — ( 2,918 ) — ( 2,918 ) Common units issued as a result of common shares issued by Urban Edge 59,895 570 — — ( 131 ) — 439 Equity redemption of OP Units 6,995,941 55,857 ( 6,995,941 ) ( 4,279 ) — — 51,578 Equity redemption for cash — ( 3,422 ) ( 357,998 ) ( 2,556 ) — — ( 5,978 ) Limited partnership units issued, net — — 450,624 — — — — Reallocation of noncontrolling interests — 4,521 — ( 56,099 ) — — ( 51,578 ) Distributions to Partners ($ 0.88 per unit) — — — — ( 111,857 ) — ( 111,857 ) Share-based compensation expense — 5,906 — 7,643 — — 13,549 Share-based awards retained for taxes ( 31,276 ) ( 633 ) — — — — ( 633 ) Balance, December 31, 2019 121,370,125 $ 1,020,362 5,833,318 $ 50,156 $ ( 56,166 ) $ 424 $ 1,014,776 Net income attributable to unitholders — — — — 97,749 — 97,749 Net income attributable to noncontrolling interests — — — — — 1 1 Common units issued as a result of common shares issued by Urban Edge 66,588 428 475,081 — ( 30 ) — 398 Equity redemption of OP units 1,579,389 11,144 ( 1,579,389 ) — — — 11,144 Repurchase of common shares ( 5,873,923 ) ( 54,141 ) — — — — ( 54,141 ) Reallocation of noncontrolling interests — 8,833 — ( 19,977 ) — — ( 11,144 ) Distributions to Partners ($ 0.68 per unit) — — — — ( 83,866 ) — ( 83,866 ) Contributions from noncontrolling interests — — — — — 5,447 5,447 Share-based compensation expense — 5,871 — 11,123 — — 16,994 Share-based awards retained for taxes ( 127,862 ) ( 1,465 ) — — — — ( 1,465 ) Balance, December 31, 2020 117,014,317 $ 991,032 4,729,010 $ 41,302 $ ( 42,313 ) $ 5,872 $ 995,893 (1) Limited partners have a 3.9 % common limited partnership interest in the Operating Partnership as of December 31, 2020 in the form of units of interest in the Operating Partnership (“OP Units”) and Long-Term Incentive Plan (“LTIP”) units. See notes to consolidated financial statements. 56 URBAN EDGE PROPERTIES LP CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2020 2019 2018 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 97,750 $ 116,197 $ 116,963 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 97,751 96,641 102,942 Casualty and impairment loss, net 3,055 12,738 5,574 Gain on sale of real estate ( 39,775 ) ( 68,632 ) ( 52,625 ) Gain on sale of lease — ( 1,849 ) — Gain on extinguishment of debt ( 34,908 ) — ( 2,524 ) Amortization of below market leases, net ( 10,624 ) ( 15,940 ) ( 33,975 ) Noncash lease expense 7,522 8,205 — Straight-lining of rent 10,523 1,021 ( 735 ) Share-based compensation expense 16,994 13,549 9,741 Rental revenue deemed uncollectible 27,890 1,385 4,138 Change in operating assets and liabilities: Tenant and other receivables ( 21,998 ) 6,734 ( 13,327 ) Deferred leasing costs ( 1,218 ) ( 4,303 ) ( 4,675 ) Prepaid and other assets ( 41,982 ) ( 3,331 ) 1,867 Lease liabilities ( 6,680 ) ( 7,107 ) — Accounts payable, accrued expenses and other liabilities 8,522 1,092 3,676 Net cash provided by operating activities 112,822 156,400 137,040 CASH FLOWS FROM INVESTING ACTIVITIES Real estate development and capital improvements ( 28,522 ) ( 91,301 ) ( 118,765 ) Acquisitions of real estate ( 124,340 ) ( 47,356 ) ( 4,931 ) Proceeds from sale of operating properties 54,402 116,510 57,593 Proceeds from sale of operating lease — 6,949 — Insurance proceeds — 12,677 1,300 Net cash used in investing activities ( 98,460 ) ( 2,521 ) ( 64,803 ) CASH FLOWS FROM FINANCING ACTIVITIES Debt repayments ( 89,302 ) ( 5,587 ) ( 4,288 ) Distributions paid to partners ( 27,961 ) ( 111,857 ) ( 111,360 ) Taxes withheld for vested restricted units ( 1,465 ) ( 633 ) ( 385 ) Debt issuance costs ( 3,471 ) ( 2,649 ) — Payment for redemption of units — ( 5,978 ) — Proceeds related to the issuance of common shares 398 439 477 Cash paid to repurchase shares ( 54,141 ) — — Contributions from noncontrolling interests 5,447 — — Proceeds from borrowings 90,250 — — Net cash used in financing activities ( 80,245 ) ( 126,265 ) ( 115,556 ) Net (decrease) increase in cash and cash equivalents and restricted cash ( 65,883 ) 27,614 ( 43,319 ) Cash and cash equivalents and restricted cash at beginning of year 485,136 457,522 500,841 Cash and cash equivalents and restricted cash at end of year $ 419,253 $ 485,136 $ 457,522 See notes to consolidated financial statements. 57 Year Ended December 31, 2020 2019 2018 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash payments for interest net of amounts capitalized of $ 715 , $ 1,425 and $ 3,313 , respectively $ 68,113 $ 64,751 $ 65,699 Cash payments for income taxes 499 1,601 757 NON-CASH INVESTING AND FINANCING ACTIVITIES Accrued capital expenditures included in accounts payable and accrued expenses 5,808 5,056 25,661 Write-off of fully depreciated and impaired assets 21,447 56,199 24,307 Forgiveness of mortgage debt 30,000 — 11,537 Assumption of debt from the acquisition of real estate 72,473 — — Dividend/distribution declared and payable on January 19, 2021 55,905 — — RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH Cash and cash equivalents at beginning of year $ 432,954 $ 440,430 $ 490,279 Restricted cash at beginning of year 52,182 17,092 10,562 Cash and cash equivalents and restricted cash at beginning of year $ 485,136 $ 457,522 $ 500,841 Cash and cash equivalents at end of year $ 384,572 $ 432,954 $ 440,430 Restricted cash at end of year 34,681 52,182 17,092 Cash and cash equivalents and restricted cash at end of year $ 419,253 $ 485,136 $ 457,522 See notes to consolidated financial statements. 58 URBAN EDGE PROPERTIES AND URBAN EDGE PROPERTIES LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION Urban Edge Properties (“UE”, “Urban Edge” or the “Company”) (NYSE: UE) is a Maryland real estate investment trust focused on managing, developing, redeveloping, and acquiring retail real estate in urban communities, primarily in the New York metropolitan area. Urban Edge Properties LP (“UELP” or the “Operating Partnership”) is a Delaware limited partnership formed to serve as UE’s majority-owned partnership subsidiary and to own, through affiliates, all of the Company’s real estate properties and other assets. Unless the context otherwise requires, references to “we”, “us” and “our” refer to Urban Edge Properties and UELP and their consolidated entities/subsidiaries. The Operating Partnership’s capital includes general and common limited partnership interests in the operating partnership (“OP Units”). As of December 31, 2020, Urban Edge owned approximately 96.1 % of the outstanding common OP Units with the remaining limited OP Units held by members of management, Urban Edge’s Board of Trustees and contributors of property interests acquired. Urban Edge serves as the sole general partner of the Operating Partnership. The third-party unitholders have limited rights over the Operating Partnership such that they do not have characteristics of a controlling financial interest. As such, the Operating Partnership is considered a variable interest entity (“VIE”), and the Company is the primary beneficiary which consolidates it. The Company’s only investment is the Operating Partnership. 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, 2020, our portfolio consisted of 72 shopping centers, five malls and two industrial parks totaling approximately 16.3 million sf, which is inclusive of a 95 % controlling interest in Walnut Creek, CA (Mt. Diablo), and an 82.5 % controlling interest in Sunrise Mall, in Massapequa, NY. 2. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for annual financial information and with the instructions of Form 10-K . The consolidated financial statements as of and for the years ended December 31, 2020, 2019 and 2018 reflect the consolidation of the Company, the Operating Partnership, wholly-owned subsidiaries and those entities in which we have a controlling financial interest. All intercompany transactions have been eliminated in consolidation. In accordance with ASC 205 Presentation of Fin ancial Statements, the Company reclassified Property rentals and Tenant reimbursement income to Rental revenue on its consolidated statements of income for the year ended December 31, 2018, as reflected beginning on Form 10-K for the year ended December 31, 2018. Additionally, the Company includes rental revenue deemed uncollectible as a reduction to rental revenue in the consolidated statements of income for the year ended December 31, 2020 as reflected in this Form 10-K due to the adoption of ASC 842 Leases (“ASU 2016-02”) . Provision for doubtful accounts is included in "Property operating expenses" in the consolidated statements of income for the year ended December 31, 2018. In accordance with ASC 205 , certain prior year balances have been reclassified in order to conform to the current period presentation. The Company includes real estate impairment charges, and casualty losses (gains) resulting from natural disasters in Casualty and impairment loss, net on its consolidated statements of income for the years ended December 31, 2019 and 2018 as reflected in this Form 10-K. Refer to Note 9, Fair Value Measurements and Note 10, Commitments and Contingencies in Part II, Item 8 in this Annual Report on Form 10-K for information regarding real estate impairment charges and casualty losses (gains), respectively. Our primary business is the ownership, management, redevelopment, development and operation of retail shopping centers and malls. We do not distinguish our primary business or group our operations on a geographical basis for purposes of measuring performance. The Company’s chief operating decision maker reviews operating and financial information for each property on an individual basis and therefore, each property represents an individual operating segment. None of our tenants accounted for more than 10% of our revenue or property operating income. We aggregate all of our properties into one reportable segment due to their similarities with regard to the nature and economics of the properties, tenants and operations, as well as long-term average financial performance. 59 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Real Estate — Real estate is carried at cost, net of accumulated depreciation and amortization. Expenditures for ordinary maintenance and repairs are expensed to operations as they are incurred. Significant renovations that improve or extend the useful lives of assets are capitalized. As real estate is undergoing redevelopment activities, all property operating expenses directly associated with and attributable to the redevelopment, including interest, are capitalized to the extent the capitalized costs of the property do not exceed the estimated fair value of the property when completed. If the cost of the redeveloped property, including the net book value of the existing property, exceeds the estimated fair value of redeveloped property, the excess is charged to impairment expense. The capitalization period begins when redevelopment activities are underway and ends when the project is substantially complete. Depreciation is recognized on a straight-line basis over estimated useful lives which range from one to 40 years. Upon the acquisition of real estate, we assess the fair value of acquired assets (including land, buildings and improvements, identified intangibles, such as acquired above and below-market leases, acquired in-place leases and tenant relationships) and assumption of liabilities and we allocate the purchase price based on these assessments on a relative fair value basis. We assess fair value based on estimated cash flow projections utilizing appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known trends, and market/economic conditions. We record acquired intangible assets (including acquired above-market leases, acquired in-place leases and tenant relationships) and acquired intangible liabilities (including below-market leases) at their estimated fair value. We amortize identified intangibles that have finite lives over the period they are expected to contribute directly or indirectly to the future cash flows of the property or business acquired. Our properties are individually reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Such events and changes include macroeconomic conditions, including those caused by global pandemics, like the recent COVID-19 pandemic, which resulted in property operational disruption and could 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 in determining a future terminal value. 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, 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 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. Real Estate Held For Sale — When a real estate asset is identified by management as held for sale, we cease depreciation of the asset and estimate its fair value, net of estimated costs to sell. If the estimated fair value, net of estimated costs to sell, of an asset is less than its net carrying value, an impairment charge is recorded to reflect the estimated fair value. The Company classifies properties as held for sale when executed contract contingencies have been satisfied, which signify that the sale is legally binding. Refer to Note 4, Acquisitions and dispositions in Part II, Item 8. in this Annual Report on Form 10-K. Cash and Cash Equivalents — Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less and are carried at cost, which approximates fair value due to their short-term maturities. The majority of our cash and cash equivalents consists of (i) deposits at major commercial banks, which may at times exceed the Federal Deposit Insurance Corporation limit, (ii) United States Treasury Bills, and (iii) Certificate of Deposits placed through an Account Registry Service (“CDARS”). To date we have not experienced any losses on our invested cash. Restricted Cash — Restricted cash consists of security deposits and cash escrowed under loan agreements for debt service, real estate taxes, property insurance, tenant improvements, leasing commissions, capital expenditures and cash held for potential Internal Revenue Code Section 1031 tax deferred exchange transactions. Tenant and Other Receivables and Changes in Collectibility Assessment — Tenant receivables include unpaid amounts billed to tenants, disputed enforceable charges and accrued revenues for future billings to tenants for property expenses. We evaluate 60 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. In light of the recent and ongoing COVID-19 pandemic, the Company is closely monitoring changes in the collectibility assessment of its tenant receivables as a result of certain tenants suffering adverse financial consequences. We recognize changes in the collectibility assessment of these operating leases as adjustments to rental revenue in accordance with ASC 842 Leases . Management exercises judgment in assessing collectibility and considers payment history, current credit status and publicly available information about the financial condition of the tenant, among other factors. Tenant receivables, including receivables arising from the straight-lining of rents, are written-off directly when management deems that the collectibility of substantially all future lease payments from a specific lease is not probable for collection, at which point, the Company will begin recognizing revenue from such leases prospectively, based on actual amounts received. This write-off effectively reduces cumulative non-cash rental income recognized from the straight-lining of rents since lease commencement. In addition, future revenue recognition is limited to amounts paid by the lessee. We will generally return to an accrual basis of accounting, if and when, collectability of substantially all the remaining contractual lease payments is reasonably probable. 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. Deferred Leasing Costs — Deferred leasing costs include incremental costs of a lease that would have not been incurred if the lease had not been executed, including broker and sale commissions and contingent legal fees. Such costs are capitalized and amortized on a straight-line basis over the term of the related leases. Deferred Financing Costs — Deferred financing costs include fees associated with our revolving credit agreement. Such fees are amortized on a straight-line basis over the terms of the related revolving credit agreement as a component of interest expense, which approximates the effective interest rate method, in accordance with the terms of the agreement. No amounts were drawn or outstanding under the revolving credit agreement as of December 31, 2020. Deferred financing costs are included in prepaid expenses and other assets on the consolidated balance sheets. Revenue Recognition — We have the following revenue sources and revenue recognition policies: • Rental revenue for fiscal periods prior to January 1, 2019: Rental revenue comprises revenue from property rentals and tenant expense reimbursements, as designated within tenant operating leases in accordance with ASC 840 Leases . ◦ Property Rentals: We generate revenue from minimum lease payments from tenant operating leases. These rents are recognized over the noncancelable terms of the related leases on a straight-line basis which includes the effects of rent steps and rent abatements under the leases in accordance with ASC 840. We satisfy our performance obligations over time, under the noncancelable lease term, commencing when the tenant takes possession of the leased space and the leased space is substantially ready for its intended use. In addition, in circumstances where we provide a lease incentive to tenants, we recognize the incentive as a reduction of rental revenue on a straight-line basis over the remaining term of the lease. The underlying leased asset remains on our consolidated balance sheet and continues to depreciate. In addition to minimum lease payments, certain rental income derived from our tenant leases is contingent and dependent on percentage rent. Percentage rents are earned by the Company in the event the tenant's gross sales exceed certain amounts. Terms of percentage rent are agreed upon in the tenant's lease and will vary based on the tenant's sales. ◦ Tenant expense reimbursements: In accordance with ASC 840, revenue arises from tenant leases, which provide for the recovery of all or a portion of the operating expenses, real estate taxes and capital improvements of the respective property. This revenue is accrued in the period the expenses are incurred. • Rental revenue for fiscal periods beginning on or after January 1, 2019: 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. ◦ 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. 61 • Other Income: Other income is generated in connection with certain services provided to tenants for which we earn a fee. This revenue is recognized as the services are transferred in accordance with ASC 606 Revenue from Contracts with Customers . • Management and development fees: We generate management and development fee income from contractual property management agreements with third parties. This revenue is recognized as the services are transferred in accordance with ASC 606. Leases — We have approximately 1,100 operating leases at our properties, which generate rental income from tenants and operating cash flows for the Company. Our tenant leases are dependent on the Company, as lessor, agreeing to provide our tenants with the right to control the use of our real estate assets, as lessees. Our real estate assets are comprised of retail shopping centers, malls and industrial parks. Tenants agree to use and control their agreed upon space for their business purposes. Thus, our tenants obtain substantially all of the economic benefits from the use of our shopping center space and have the right to direct how and for what purpose the real estate space is used throughout the period of use. Given these contractual terms, the Company has determined that all tenant contracts of this nature contain a lease. The Company assesses lease classification for each new and modified lease. All new and modified leases which commenced in the year ended December 31, 2020 have been assessed and classified as operating leases. Contractual rent increases of renewal options are often fixed at the time of the initial lease agreement which may result in tenants being able to exercise their renewal options at amounts that are less than the fair value of the rent at the date of renewal. In addition to fixed base rents, certain rental income derived from our tenant leases is variable and may be dependent on percentage rent or the Consumer Price Index ("CPI"). Variable lease payments from percentage rents are earned by the Company in the event the tenant's gross sales exceed certain amounts. Terms of percentage rent are agreed upon in the tenant's lease and will vary based on the tenant's sales. Variable lease payments dependent on the CPI, will change in accordance with the corresponding increase or decrease in CPI if negotiated and agreed upon in the tenant's lease. Variable lease payments dependent on percentage rent and the CPI were $ 2.4 million and $ 4.1 million for the years ended December 31, 2020 and 2019, respectively. Variable lease payments also arise from tenant expense reimbursements, which provide for the recovery of all or a portion of the operating expenses, common area maintenance expenses, real estate taxes, insurance and capital improvements of the respective property and amounted to $ 96.7 million and $ 105.3 million for the years ended December 31, 2020 and 2019, respectively. The Company accounts for variable lease payments as "Rental revenue" on the consolidated statement of income in the period in which the changes in facts and circumstances on which the variable lease payments are based occur. The Company also has 22 properties in its portfolio either completely or partially on land or a building that are owned by third parties. These properties are leased or subleased to us pursuant to ground leases, building leases or easements, with remaining terms ranging from less than two years to over 80 years and provide us the right to operate each such property. We also lease or sublease real estate for our three corporate offices with remaining terms of less than one year . Right-of-use ("ROU") assets are recorded for these leases, which represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from these leases. ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The initial measurement of a ROU asset may differ from the initial measurement of the lease liability due to initial direct costs, prepaid lease payments and lease incentives. As of December 31, 2020, no other contracts have been identified as leases . Our leases often offer renewal options, which we assess against relevant economic factors to determine whether the Company is reasonably certain of exercising or not exercising the option. Lease payments associated with renewal periods, for which the Company has determined are reasonably certain of being exercised, are included in the measurement of the corresponding lease liability and ROU asset. For finance leases and operating leases, the discount rate applied to measure each ROU asset and lease liability is based on the incremental borrowing rate of the lease due to the rate implicit in the lease not being readily determinable. The Company initially considers the general economic environment and factors in various financing and asset specific secured borrowings so that the overall incremental borrowing rate is appropriate to the intended use of the lease. Certain expenses derived from these leases are variable and are not included in the measurement of the corresponding lease liability and ROU asset, but are recognized in the period in which the obligation for those payments is incurred. These variable lease payments consist of payments for real estate taxes and common area maintenance, which is dependent on projects and activities at each individual property under ground or building lease. Noncontrolling Interests — Noncontrolling interests in consolidated subsidiaries represent the portion of equity that we do not own in those entities that we consolidate. We identify our noncontrolling interests separately within the equity section on the consolidated balance sheets. Noncontrolling interests in Operating Partnership include OP units and limited partnership interests in the Operating Partnership in the form of long-term incentive plan (“LTIP”) unit awards classified as equity. 62 Variable Interest Entities — Certain entities that do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties, or which do not have the obligation to absorb expected losses, do not have the right to receive expected residual returns, or do not have the characteristics of a controlling financial interest qualify as VIEs. VIEs are required to be consolidated by their primary beneficiary. The primary beneficiary of a VIE has both the power to direct the activities that most significantly impact economic performance of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The consolidated financial statements reflect the consolidation of VIEs in which the Company is the primary beneficiary. Management uses its judgment when determining if we are the primary beneficiary of, or have a controlling financial interest in, an entity in which we have a variable interest. Factors considered in determining whether we have the power to direct the activities that most significantly impact the entity’s economic performance include voting rights, involvement in day-to-day capital and operating decisions and the extent of our involvement in the entity. Excluding the Operating Partnership, the Company had two entities that met the criteria of a VIE in which we held variable interests as of December 31, 2020. These entities are VIEs primarily because the noncontrolling interests do not have substantive kick-out or participating rights and we control the significant operating decisions and consequently have the power to direct the activities that most significantly impact the economic performance of these entities. As we also have the obligation to absorb the majority of the losses and/or the right to receive a majority of the benefits for these entities, they were consolidated in our financial statements as of December 31, 2020. The majority of the operations of these VIEs are funded with cash flows generated by the property. As of December 31, 2020, excluding the Operating Partnership, we consolidated two VIEs with total assets and liabilities of $ 43.6 million and $ 31.5 million, respectively. As of December 31, 2019, excluding the Operating Partnership, we consolidated one VIE with total assets of $ 9.8 million and liabilities of $ 3.1 million. Earnings Per Share and Unit — Basic earnings per common share and unit is computed by dividing net income attributable to common shareholders and unitholders by the weighted average common shares and units outstanding during the period. Unvested share-based payment awards that entitle holders to receive non-forfeitable dividends, such as our restricted stock awards, are classified as “participating securities.” Because the awards are considered participating securities, the Company and the Operating Partnership are required to apply the two-class method of computing basic and diluted earnings that would otherwise have been available to common shareholders and unitholders. Under the two-class method, earnings for the period are allocated between common shareholders and unitholders and other shareholders and unitholders, based on their respective rights to receive dividends. During periods of net loss, losses are allocated only to the extent the participating securities are required to absorb their share of such losses. Diluted earnings per common share and unit reflects the potential dilution of the assumed exercises of shares including stock options and unvested restricted shares to the extent they are dilutive. Share-Based Compensation — We grant stock options, LTIP units, OP units, deferred share units, restricted share awards and performance-based units to our officers, trustees and employees. The term of each award is determined by the compensation committee of our Board of Trustees (the “Compensation Committee”), but in no event can such term be longer than ten years from the date of grant. The vesting schedule of each award is determined by the Compensation Committee, in its sole and absolute discretion, at the date of grant of the award. Dividends are paid on certain shares of unvested restricted stock, which makes the restricted stock a participating security. Fair value is determined, depending on the type of award, using either the Black-Scholes option-pricing model or the Monte Carlo method, both of which are intended to estimate the fair value of the awards at the grant date. In using the Black-Scholes option-pricing model, expected volatilities and dividend yields are primarily based on available implied data and peer group companies’ historical data. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. Compensation expense for restricted share awards is based on the fair value of our common shares at the date of the grant and is recognized ratably over the vesting period. For grants with a graded vesting schedule or a cliff vesting schedule, we have elected to recognize compensation expense on a straight-line basis. The OPP unrecognized compensation expense is recognized on a straight-line basis over the remaining life of the OPP awards issued. Share-based compensation expense is included in general and administrative expenses on the consolidated statements of income. When the Company issues common shares as compensation, it receives a like number of common units from the Operating Partnership. Accordingly, the Company’s ownership in the Operating Partnership will increase based on the number of common shares awarded under our 2015 Omnibus Share Plan. As a result of the issuance of common units to the Company for share-based compensation, the Operating Partnership accounts for share-based compensation in the same manner as the Company. 63 Income Taxes — The Company elected to be taxed as a REIT under sections 856-860 of the Code, commencing with the filing of its 2015 tax return for its tax year ended December 31, 2015. With the exception of the Company’s TRS, to the extent the Company meets certain requirements under the Code, the Company will not be taxed on its federal taxable income. If we fail to qualify as a REIT for any taxable year, we will be subject to federal income taxes at regular corporate rates (including any alternative minimum tax, which, for corporations, was repealed under the TCJA for tax years beginning after December 31, 2017) and may not be able to qualify as a REIT for the four subsequent taxable years. In addition to its TRS, the Company is subject to certain foreign and state and local income taxes, in particular income taxes arising from its operating activities in Puerto Rico, which are included in income tax expense in the consolidated statements of income. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not. The Company applies the FASB’s guidance relating to uncertainty in income taxes recognized in a Company’s financial statements. Under this guidance the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The guidance on accounting for uncertainty in income taxes also provides guidance on derecognition, classification, interest and penalties on income taxes, and accounting in interim periods. The Company records interest and penalties relating to unrecognized tax benefits, if any, as income tax expense Concentration of Credit Risk — A concentration of credit risk arises in our business when a national or regionally-based tenant occupies a substantial amount of space in multiple properties owned by us. In that event, if the tenant suffers a significant downturn in its business, it may become unable to make its contractual rent payments to us, exposing us to potential losses in rental revenue, expense recoveries, and percentage rent. Further, the impact may be magnified if the tenant is renting space in multiple locations. Generally, we do not obtain security from our national or regionally-based tenants in support of their lease obligations to us. We regularly monitor our tenant base to assess potential concentrations of credit risk. None of our tenants accounted for more than 10% of total revenues in the year ended December 31, 2020. As of December 31, 2020, The Home Depot was our largest tenant with six stores which comprised an aggregate of 809,000 sf and accounted for approximately $ 20.7 million, or 6.3 % of our total revenue for the year ended December 31, 2020. Recently Issued Accounting Literature Effective for the fiscal period beginning January 1, 2019, we adopted (“ASU 2016-02”) ASC 842 Leases, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). In connection with the adoption of ASU 2016-02, we also adopted (i) ASU 2019-01 Leases (ASC 842): Codification Improvements , (ii) ASU 2018-20 Leases (ASC 842): Narrow-Scope Improvements for Lessors , (iii) ASU 2018-11 Leases (ASC 842): Targeted Improvements , (iv) ASU 2018-10 Codification Improvements to ASC 842, Leases and (v) ASU 2018-01 Leases (ASC 842): Land Easement Practical Expedient for Transition to Topic 842. We initially applied the standard at the beginning of the period of adoption through the transition method issued by ASU 2018-11 and have presented comparative periods under ASC 840 Leases . Due to the effects of applying ASC 842, the Company recognized a $ 2.9 million cumulative-effect adjustment to its accumulated deficit in the year ended December 31, 2019 to adjust r eserves on receivables from straight-line rents . The new standard requires lessees to apply a two-model approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification determines whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a ROU asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. The Company has elected the short-term lease recognition exemption, and therefore, leases with a term of 12 months or less are not recognized on the balance sheet. The new standard requires lessors to account for leases using an approach that is substantially equivalent to guidance for sales-type leases, direct financing leases and operating leases under ASC 840. For purposes of transition, we did not elect the hindsight practical expedient but did elect the land easement practical expedient to not reassess whether existing land easements contain leases and the practical expedient package, which has been applied consistently to all of our leases. As a result of electing the practical expedient package, we did not (i) reassess whether any expired or existing contracts are or contain leases, (ii) reassess the lease classification for any expired or existing leases or (iii) reassess initial direct costs for any existing leases. 64 From a lessee perspective, the initial adoption on January 1, 2019 resulted in the recognition of operating lease ROU assets and lease liabilities for 24 operating leases with an aggregate balance of $ 98.5 million and $ 93.6 million, respectively. On January 1, 2019, we also reclassified $ 11.9 million of acquired below-market lease intangibles and $ 7.1 million of accrued rent and adjusted the carrying values of our ROU assets by the corresponding amounts. As of December 31, 2020, the Company had 26 operating leases and our operating lease ROU assets and lease liabilities were $ 81.0 million and $ 75.0 million, respectively, as presented on our consolidated balance sheet. Subsequent to adoption, the Company recognized a finance lease in connection with the Company acquiring the lessee position of a ground lease in 2019. As of December 31, 2020, our finance lease ROU asset and finance lease liability were $ 2.7 million and $ 3.0 million, respectively. The finance lease ROU asset is included within prepaid expenses and other assets on our consolidated balance sheets as of December 31, 2020 and 2019 and the finance lease liability is included within accounts payable, accrued expenses and other liabilities on our consolidated balance sheets as of December 31, 2020 and 2019. The Company recognizes interest expense on its finance lease liability. The standard's adoption has also impacted the presentation of our consolidated income statement due to accounting for the lease and non-lease components as a single lease component for all classes of underlying assets, presented as lease expense on the consolidated statement of income. Prior to the adoption of ASC 842, related lease and non-lease expense amounts were recognized within lease expense, real estate taxes, property operating expenses and general administrative expenses on the consolidated statement of income. From a lessor perspective, the adoption resulted in additional general and administrative expenses, attributable to internal leasing department costs not meeting the definition of initial direct costs under ASC 842. The standard's adoption has also impacted the presentation of our consolidated income statement due to accounting for lease and non-lease components as a single lease component, presented as rental revenue on the consolidated statement of income, however there has been no change in the timing of revenue recognition since adoption. Additionally, under the amendments issued in ASU 2018-20, the Company has accounted for common area maintenance expenses paid directly by tenants to third-parties as variable rental revenue and has reported the corresponding expense within property operating expenses. Real estate taxes and insurance expenses paid directly by tenants have not been recognized as rental revenue or as expenses on the consolidated statements of income. The adoption of this standard has also resulted in additional quantitative and qualitative footnote disclosures (refer to Note 8 Leases to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K). Effective for the fiscal period beginning January 1, 2020, we adopted ASU 2016-13, Financial Instruments - Credit Losses (ASC 326): Measurement of Credit Losses . In connection with the adoption of ASU 2016-03, we also adopted (i) ASU 2018-19 Codification Improvements to ASC 326, Financial Instruments - Credit Losses, (ii) ASU 2019-04, Codification Improvements to ASC 326, Financial Statements - Credit Losses, Topic 815, Derivatives and Hedging and Topic 825, Financial Instruments , ( iii) ASU 2019-05 Financial Instruments - Credit Losses (ASC 326): Targeted Transition Relief and (iv) ASU 2019-11 Codification Improvements to ASC 326, Financial Instruments - Credit Losses. ASU 2016-13 introduces a new model for estimating credit losses for certain types of financial instruments and also modifies the impairment model with new methodology for estimating credits losses. In November 2018, the FASB issued ASU 2018-19 Codification Improvements to Topic 326, Financial Instruments — Credit Losses , which included amendments to clarify receivables arising from operating leases are within the scope ASC 842 Leases . Due to the adoption of ASC 842 on January 1, 2019, the Company includes rental revenue deemed uncollectible as a reduction to rental revenue in the consolidated statements of income . As of December 31, 2020, the Company did not have any material outstanding financial instruments. The adoption of ASU 2016-13 has had no impact to our consolidated financial statements and disclosures. In August 2018, the FASB issued ASU 2018-13 Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement to ASC 820, Fair Value Measurement . ASU 2018-13 modifies the disclosure requirements for fair value measurements by removing, modifying, and/or adding certain disclosures. ASU 2018-13 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2019. We elected to early adopt ASU 2018-13 effective January 1, 2019. The adoption of ASU 2018-13 did not have a material impact on our consolidated financial statements and disclosures. In December 2019, the FASB issued ASU 2019-12 Income Taxes (ASC 740): Simplifying the Accounting for Income Taxes , which enhances and simplifies various aspects of the income tax accounting. ASU 2019-12 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2020. Early adoption is permitted. We adopted ASU 2019-12 effective January 1, 2021. The adoption of ASU 2019-12 did not have a material impact on our consolidated financial statements and disclosures. In March 2020, the FASB issued ASU 2020-04 Reference Rate Reform (ASC 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. We currently do not anticipate the need to modify our existing debt agreements as a result of reference rate reform in the current year, 65 however if any modification is executed as a result of reference rate reform, the Company will elect the optional expedient available under ASU 2020-04, which allows entities to account for the modification as if the modification was not substantial. We will disclose the nature of and reason for electing the optional expedient in each interim and annual financial statement period if and when applicable through December 31, 2022. In April 2020, the FASB issued a question-and-answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of COVID-19. Under existing lease guidance, the Company would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated with the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A clarifies that entities may elect to not evaluate whether lease-related relief, that lessors provide to mitigate the economic effects of COVID-19 on lessees, is a lease modification under ASC 842. Instead, when the cash flows resulting from the lease concession granted for COVID-19 rent relief are substantially the same or less than the cash flows of the original contract, an entity may elect to apply the modification guidance (i.e. assume the relief was always contemplated by the contract or assume the relief was not contemplated by the contract). The FASB stated that there are multiple ways to account for rent concessions, none of which the FASB believes are more preferable than the others. Two of those methods are: (i) account for the concessions as if no changes to the lease contract were made; under that accounting, a lessor would continue to increase its lease receivable and continue to recognize income, referred to as the “receivable approach”; or (ii) account for the deferred payments or abatements as variable lease payments; under that accounting, a lessor would recognize the payment as income in profit or loss in the period in which the changes in facts and circumstances on which the variable lease payments are based occurred, referred to as the “variable approach”. The Company has evaluated its election on a disaggregated basis, with such election applied consistently to leases with similar characteristics and similar circumstances. As of December 31, 2020, the Company granted rent deferrals with an aggregate deferral amount of $ 5.1 million, with $ 4.5 million accounted for under the receivable approach by electing the Lease Modification Q&A and $ 0.6 million accounted for as modifications due to term extensions of the leases. The Company also granted abatements aggregating $ 3.9 million as of December 31, 2020, with $ 0.4 million accounted for under the variable approach and $ 3.5 million accounted for as modifications due to the executed agreements including other rental term modifications, such as term extensions and substantial changes in cash flows. The Company remains in active discussions with its impacted tenants to grant further concessions. The full future impact of the Lease Modification Q&A is dependent upon the extent of lease concessions granted to tenants as a result of COVID-19 and the elections made by the Company at the time of entering into such concessions. Refer to Note 10 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K. Any other recently issued accounting standards or pronouncements not disclosed above have been excluded as they are not relevant to the Company or the Operating Partnership, or they are not expected to have a material impact on our consolidated financial statements. 66 4. ACQUISITIONS AND DISPOSITIONS Acquisitions During the years ended December 31, 2020 and December 31, 2019, we closed on the following acquisitions: Date Purchased Property Name City State Square Feet Purchase Price (in thousands) February 12, 2020 Kingswood Center Brooklyn NY 130,000 $ 90,212 February 12, 2020 Kingswood Crossing Brooklyn NY 110,000 77,077 December 11, 2020 51 East Spring Valley Ave Maywood NJ 3,000 662 December 31, 2020 Sunrise Mall Massapequa NY 1,211,000 31,545 2020 Total $ 199,496 (1) November 1, 2019 25 East Spring Valley Ave Maywood NJ 43,800 $ 7,162 November 8, 2019 Wonderland Marketplace Revere MA 139,500 24,209 December 9, 2019 150 Route 4 East Paramus NJ 12,000 7,118 2019 Total $ 38,489 (1) (1) The total purchase price for the properties acquired in the year ended December 31, 2020 and December 31, 2019 include $ 3.1 million and $ 0.3 million, respectively, of transaction costs incurred in relation to the transactions. During the year ended December 31, 2020, the Company purchased four assets, at an aggregate purchase price of $ 199.5 million and 1.5 million sf, comprising two assets located in Brooklyn, NY, one asset located in Massapequa, NY and one asset adjacent to our existing property, Bergen Town Center. The Company acquired Sunrise Mall in Massapequa, NY for $ 31.5 million, including transaction costs on December 31, 2020. The Company’s acquired ownership interest of the asset is 82.5 % with the remaining 17.5 % held by strategic partners. As of December 31, 2020, the Company was subject to $ 6.0 million of additional consideration related to the acquisition of Sunrise Mall, the payment of which is contingent on the verdict of a property tax appeal. As of December 31, 2020, the outcome of this appeal could not be estimated or determined and was therefore not recorded in the financial statements. The Company acquired Kingswood Center and Kingswood Crossing for $ 167.3 million, including transaction costs on February 12, 2020. The properties are located along Kings Highway in the Midwood neighborhood of Brooklyn, NY and were funded via 1031 exchanges using cash proceeds from dispositions. Additionally, as part of the acquisition of Kingswood Center, the Company assumed a $ 65.5 million mortgage, which matures in 2028. A portion of the acquisition of Kingswood Crossing was completed as a reverse Section 1031 like-kind exchange. We entered into a reverse Section 1031 like-kind exchange agreement with third-party intermediaries, which, for a maximum of 180 days, allowed us to defer for tax purposes, gains on the sale of other properties identified and sold within the period. Until the earlier of the termination of the exchange agreements or 180 days after the respective acquisition dates, the third-party intermediaries are the legal owner of the properties; however, we controlled the activities that most significantly impact each property and retained all of the economic benefits and risks associated with each property. Therefore, at the date of acquisition, we determined that we were the primary beneficiary of these variable interest entities and consolidated the properties and their operations as of the acquisition date. The Company purchased three assets with a total consideration of $ 38.5 million during the year ended December 31, 2019. Wonderland Marketplace is located in the Boston metropolitan area and two assets are adjacent to our existing property, Bergen Town Center. The acquisitions were executed through Internal Revenue Code Section 1031 tax deferred exchange transactions and funded using proceeds from dispositions. 67 The aggregate purchase price of the above property acquisitions has been allocated as follows: Property Name Land Buildings and improvements Identified intangible assets (1) Identified intangible liabilities (1) Debt Premium ROU assets net of lease liabilities Other assets, net Total Purchase Price (in thousands) Kingswood Center $ 15,690 $ 76,766 $ 9,263 $ ( 4,534 ) $ ( 6,973 ) $ — $ — $ 90,212 Kingswood Crossing 8,150 64,159 4,768 — — — — 77,077 51 East Spring Valley Ave 662 — — — — — — 662 Sunrise Mall (2) 44,035 3,084 5,495 ( 26,495 ) — 5,012 414 31,545 2020 Total $ 68,537 $ 144,009 $ 19,526 $ ( 31,029 ) $ ( 6,973 ) $ 5,012 $ 414 $ 199,496 25 East Spring Valley Ave (3) $ — $ 6,824 $ 623 $ ( 31 ) $ — $ ( 254 ) $ — $ 7,162 Wonderland Marketplace 6,323 17,130 2,947 ( 2,191 ) — — — 24,209 150 Route 4 East 7,118 — — — — — — 7,118 2019 Total $ 13,441 $ 23,954 $ 3,570 $ ( 2,222 ) $ — $ ( 254 ) $ — $ 38,489 (1) As of December 31, 2020, the remaining weighted average amortization periods of the identified intangible assets and identified intangible liabilities acquired in 2020 were 11.0 years and 32.5 years, respectively and the remaining weighted average amortization periods of the identified intangible assets and identified intangible liabilities acquired in 2019 were 11.4 years and 23 years, respectively. (2) In connection with this acquisition, the Company acquired the lessee positions of ground leases and recognized operating lease ROU assets and operating lease liabilities. Refer to Note 8 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information. (3) In connection with this acquisition, the Company acquired the lessee position of a ground lease and recognized a finance lease ROU asset and finance lease liability of $ 2.7 million and $ 3.0 million, respectively. Dispositions During the year ended December 31, 2020, we disposed 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. The sale of all three dispositions were completed as 1031 exchanges with Kingswood Crossing as a result of the sales occurring within 180 days of the Company’s acquisition. During the year ended December 31, 2019, we disposed 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 on our consolidated statements of income d uring the year ended December 31, 2019. During the year ended December 31, 2019 , the Company also sold its lessee position in one of its ground leases and received proceeds of $ 6.9 million, net of selling costs, and derecognized the lease’s ROU asset and corresponding lease liability. We recognized a gain on sale of lease of $ 1.8 million on our consolidated statements of income d uring the year ended December 31, 2019 as a result of the sale. Real Estate Held for Sale As of December 31, 2020, a parcel of one property in Lodi, NJ was classified as held for sale based on an executed contract of sale with a third-party buyer. The aggregate amount of this parcel was $ 7.1 million and was included in prepaid expenses and other assets in our consolidated balance sheets as of December 31, 2020. The parcel was sold in January 2021. As of December 31, 2019, two properties in Lawnside, NJ and Bethlehem, PA were classified as held for sale based on executed contracts of sale with third-party buyers. The aggregate amounts of the Lawnside, NJ and Bethlehem, PA properties were $ 3.5 million and $ 3.1 million, respectively, and were included in prepaid expenses and other assets in our consolidated balance sheets as of December 31, 2019. Both properties were sold during the year ended December 31, 2020. 68 5. IDENTIFIED INTANGIBLE ASSETS AND LIABILITIES The following table summarizes our identified intangible assets and liabilities: (Amounts in thousands) December 31, 2020 December 31, 2019 In-place leases $ 82,303 $ 71,328 Accumulated amortization ( 32,515 ) ( 27,254 ) Above-market leases 9,255 6,100 Accumulated amortization ( 3,570 ) ( 2,998 ) Other intangible assets 1,635 1,635 Accumulated amortization ( 924 ) ( 690 ) Identified intangible assets, net of accumulated amortization 56,184 48,121 Below-market leases 219,558 191,440 Accumulated amortization ( 71,375 ) ( 62,610 ) Identified intangible liabilities, net of accumulated amortization $ 148,183 $ 128,830 Amortization of acquired below-market leases, net of acquired above-market leases resulted in rental income of $ 10.6 million, $ 15.9 million, and $ 34.0 million for the years ended December 31, 2020, 2019 and 2018, respectively. Amortization of acquired in-place leases and customer relationships resulted in depreciation and amortization expense of $ 10.2 million, $ 8.8 million, $ 15.1 million for the years ended December 31, 2020, 2019 and 2018, respectively. The following table sets forth the estimated annual amortization (expense) and income related to intangible assets and liabilities for the five succeeding years commencing January 1, 2021: (Amounts in thousands) Below-Market Above-Market In-Place Lease Year Operating Lease Amortization Operating Lease Amortization Amortization 2021 $ 10,543 $ ( 1,170 ) $ ( 7,596 ) 2022 10,466 ( 803 ) ( 5,998 ) 2023 10,421 ( 695 ) ( 4,857 ) 2024 10,185 ( 631 ) ( 4,371 ) 2025 10,012 ( 452 ) ( 3,733 ) 69 6. MORTGAGES PAYABLE The following is a summary of mortgages payable as of December 31, 2020 and December 31, 2019. Interest Rate at December 31, December 31, (Amounts in thousands) Maturity December 31, 2020 2020 2019 First mortgages secured by: Variable rate Cherry Hill (Plaza at Cherry Hill) (1) 5/24/2022 1.75 % $ 28,930 $ 28,930 Westfield (One Lincoln Plaza) (1) 5/24/2022 1.75 % 4,730 4,730 Woodbridge (Plaza at Woodbridge) (1) 5/25/2022 1.75 % 55,340 55,340 Jersey City (Hudson Commons) (2) 11/15/2024 2.05 % 28,586 29,000 Watchung (2) 11/15/2024 2.05 % 26,613 27,000 Bronx (1750-1780 Gun Hill Road) (2) 12/1/2024 2.05 % 25,172 24,500 Total variable rate debt 169,371 169,500 Fixed rate Paramus (Bergen Town Center - West) 4/8/2023 3.56 % 300,000 300,000 Bronx (Shops at Bruckner) 5/1/2023 3.90 % 10,351 10,978 Jersey City (Hudson Mall) 12/1/2023 5.07 % 22,904 23,625 Yonkers Gateway Center 4/6/2024 4.16 % 28,482 30,122 Brick 12/10/2024 3.87 % 50,000 50,000 North Plainfield 12/10/2025 3.99 % 25,100 25,100 Las Catalinas 2/1/2026 4.43 % 127,669 129,335 Middletown 12/1/2026 3.78 % 31,400 31,400 Rockaway 12/1/2026 3.78 % 27,800 27,800 East Hanover (200 - 240 Route 10 West) 12/10/2026 4.03 % 63,000 63,000 North Bergen (Tonnelle Ave) 4/1/2027 4.18 % 100,000 100,000 Manchester 6/1/2027 4.32 % 12,500 12,500 Millburn 6/1/2027 3.97 % 23,381 23,798 Totowa 12/1/2027 4.33 % 50,800 50,800 Woodbridge (Woodbridge Commons) 12/1/2027 4.36 % 22,100 22,100 East Brunswick 12/6/2027 4.38 % 63,000 63,000 East Rutherford 1/6/2028 4.49 % 23,000 23,000 Brooklyn (Kingswood Center) (3) 2/6/2028 5.07 % 71,696 — Hackensack 3/1/2028 4.36 % 66,400 66,400 Marlton 12/1/2028 3.86 % 37,400 37,400 East Hanover Warehouses 12/1/2028 4.09 % 40,700 40,700 Union (2445 Springfield Ave) 12/10/2028 4.01 % 45,600 45,600 Freeport (Freeport Commons) 12/10/2029 4.07 % 43,100 43,100 Montehiedra 6/1/2030 5.00 % 81,141 83,202 Montclair 8/15/2030 3.15 % 7,250 — Garfield 12/1/2030 4.14 % 40,300 40,300 Mt Kisco (3) 11/15/2034 6.40 % 12,952 13,488 Montehiedra (junior loan) — — % — 30,000 Total fixed rate debt 1,428,026 1,386,748 Total mortgages payable 1,597,397 1,556,248 Unamortized debt issuance costs ( 9,865 ) ( 10,053 ) Total mortgages payable, net of unamortized debt issuance costs $ 1,587,532 $ 1,546,195 (1) Bears interest at one month LIBOR plus 160 bps. (2) Bears interest at one month LIBOR plus 190 bps. 70 (3) The mortgage payable balance on the loan secured by Kingswood Center includes $ 6.2 million of unamortized debt premium as of December 31, 2020. The effective interest rate including amortization of the debt premium is 3.5 % as of December 31, 2020. The net carrying amount of real estate collateralizing the above indebtedness amounted to approximately $ 1.3 billion as of December 31, 2020. Our mortgage loans contain covenants that limit our ability to incur additional indebtedness on these properties and in certain circumstances require lender approval of tenant leases and/or yield maintenance upon repayment prior to maturity. As of December 31, 2020, we were in compliance with all debt covenants. As of December 31, 2020, the principal repayments for the next five years and thereafter are as follows: (Amounts in thousands) Year Ending December 31, 2021 $ 14,460 2022 103,526 2023 349,742 2024 163,625 2025 40,867 2026 231,056 Thereafter 694,121 Revolving Credit Agreement On January 15, 2015, we entered into a $ 500 million Revolving Credit Agreement (the “Agreement”) with certain financial institutions. On March 7, 2017, we amended and extended the Agreement. The amendment increased the credit facility size by $ 100 million to $ 600 million and extended the maturity date to March 7, 2021 with two six-month extension options. On July 29, 2019, we entered into a second amendment to the Agreement to extend the maturity date to January 29, 2024 with two six-month extension options. On June 3, 2020, we entered into a third amendment to the Agreement, which 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. Company borrowings under the Agreement are subject to interest at LIBOR plus 1.05 % to 1.50 % and an annual facility fee of 15 to 30 basis points. Both the spread over LIBOR and the facility fee are based on our current leverage ratio and are subject to increase if our leverage ratio increases above predefined thresholds. The Agreement contains customary financial covenants including a maximum leverage ratio of 60 % and a minimum fixed charge coverage ratio of 1.5 x. In March 2020 we drew $ 250 million on our $ 600 million revolving credit facility and this balance was fully repaid in November 2020. No amounts were drawn or outstanding under the Agreement as of December 31, 2020. Financing fees associated with the Agreement of $ 3.3 million and $ 3.9 million as of December 31, 2020 and December 31, 2019, respectively, are included in deferred financing fees, net in the consolidated balance sheets. Mortgage on Las Catalinas Mall In April 2020, we notified the servicer of the $ 129 million non-recourse mortgage loan on Las Catalinas Mall in Puerto Rico that cash flow would be insufficient to service the debt and that we were unwilling to fund the shortfalls. In December 2020, the non-recourse mortgage loan on Las Catalinas Mall was modified to convert the mortgage from an amortizing 4.43 % loan to interest only payments, starting at 3.00 % in 2021 and increasing 50 basis points annually until returning to 4.43 % in 2024 and thereafter, and to include the ability for the Company to repay the loan at a discounted value of $ 72.5 million, beginning in August 2023 through the extended maturity date of February 2026. We have accrued interest of $ 6.5 million related to this mortgage, which is included in accounts payable, accrued expenses and other liabilities on the consolidated balance sheet as of December 31, 2020. We incurred $ 1.2 million of lender fees in connection with the loan modification which are treated as a reduction of the mortgage payable balance and amortized over the term of the loan in accordance with the provisions under ASC 470-60 Troubled Debt Restructurings . Mortgage on property in Montclair, NJ On August 6, 2020, the Company obtained a 10-year non-recourse mortgage loan of $ 7.3 million at a rate of 3.15 % on its property in Montclair, NJ. 71 Mortgage on The Outlets at Montehiedra In June 2020, we completed the refinancing of our non-recourse mortgage on The Outlets at Montehiedra (“Montehiedra”) in Puerto Rico. Prior to the refinancing, the mortgage was comprised of an $ 83 million senior loan bearing interest at 5.33 % and a $ 30 million junior loan bearing interest at 3.00 %, plus total accrued interest of $ 5.7 million. Under the payoff provisions of the prior mortgage, the $ 30 million junior loan plus accrued interest of $ 5.4 million on the junior loan was forgiven and the senior loan was replaced by a new $ 82 million 10-year fixed rate mortgage, bearing interest at 5.00 %. As a result of the transaction, we recognized a net gain on extinguishment of debt of $ 34.9 million during the year ended December 31, 2020, comprised of the forgiven $ 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 incurred. The Company has provided a $ 12.5 million limited corporate guarantee of the mortgage secured by Montehiedra that is triggered only if any of the following events occur: (1) certain reserve accounts were not funded as of a specified date (which funding did occur in full at closing), (2) the lease to Sears Holding Corporation (“Kmart”) at Montehiedra is terminated for any reason or (3) the Kmart lease is materially amended and a debt service coverage ratio falls below a specified threshold. In February 2021, Kmart announced that it would be closing the store related to such lease, but it is not yet evident whether the lease will be terminated or amended. No triggering events have occurred that would require the release of the guarantee and the tenant has lease obligations through 2023. The guarantee would be released should certain financial metrics at Montehiedra be achieved even if the Kmart box remains vacant. The guarantee is reduced commensurate with the loan amortization schedule and will reduce to zero in approximately six years based on the scheduled amortization. 72 7. INCOME TAXES The Company elected to be taxed as a REIT under sections 856-860 of the Code, commencing with the filing of its 2015 tax return for its tax year ended December 31, 2015. With the exception of the Company’s TRS, to the extent the Company meets certain requirements under the Code, the Company will not be taxed on its federal taxable income. If we fail to qualify as a REIT for any taxable year, we will be subject to federal income taxes at regular corporate rates (including any alternative minimum tax, which, for corporations, was repealed under the TCJA for tax years beginning after December 31, 2017) and may not be able to qualify as a REIT for the four subsequent taxable years. In addition to its TRS, the Company is subject to certain foreign and state and local income taxes, in particular income taxes arising from its operating activities in Puerto Rico, which are included in income tax expense in the consolidated statements of income. The Company satisfied its REIT distribution requiremen t by distributing $ 0.68 per common share in 2020, which comprised a regular quarterly cash dividend of $ 0.22 per common share declared for the first quarter of 2020 and a special cash dividend of $ 0.46 per common share declared in December 2020. During the years ended December 31, 2019 and 2018, the Company declared cash distributions on our common shares of $ 0.88 per share . Th e taxability of such dividends for the years ended December 31, 2020, 2019 and 2018 are as follows: Year Ended December 31, 2020 2019 2018 Dividend paid per share (1) $ 0.68 $ 0.88 $ 0.88 Ordinary income 100 % 83 % 100 % Return of capital — % — % — % Capital gains — % 17 % — % (1) The special cash dividend of $ 0.46 per common share declared in December 2020, and paid in January 2021, was fully allocable to the 2020 tax year. For U.S. federal income tax purposes, the REIT and other minority members are partners in the Operating Partnership. As such, the partners are required to report their share of taxable income on their respective tax returns. However, during the years ended December 31, 2020 and 2019, certain non-real estate operating activities that could not be performed by the REIT, occurred through the Company’s TRS, and the Company’s TRS is subject to federal, state and local income taxes. These income taxes are included in the income tax expense in the consolidated statements of income. On June 1, 2020, the Company completed a mortgage refinancing of its mall in Puerto Rico, The Outlets at Montehiedra (“Montehiedra”). The debt forgiven as a part of this refinancing resulted in a write-down to our Puerto Rico tax basis in the mall equal to such amount of debt forgiven and the recognition of a deferred tax liability on the Company’s consolidated balance sheet, which amounted to $ 10.3 million. On June 5, 2020 and December 11, 2020, the Company completed a legal entity restructuring of Montehiedra and Las Catalinas Mall, respectively. Prior to the legal entity restructuring, both malls were held in a special partnership for Puerto Rico tax purposes (the general partner being a qualified REIT subsidiary or “QRS”) and subject to a 29 % non-resident withholding tax which is included in income tax benefit (expense) in the consolidated statements of income. The legal entity restructurings resulted in a step up in our Puerto Rico tax basis in each mall and the recognition of a deferred tax asset on the Company’s consolidated balance sheet, which amounted to $ 23.7 million for Montehiedra and $ 29.5 million for Las Catalinas Mall. As a result of the legal entity restructurings, the Operating Partnership, and therefore, the REIT and the other minority partners, are now deemed to be engaged in a trade or business for each mall with respect to their allocable share of Puerto Rico taxable income and, as such, required to file Puerto Rico income tax returns. The REIT is subject to regular Puerto Rico corporate income taxes on its allocable share of the Company’s Puerto Rico operating activities as opposed to the former 29 % non-resident withholding tax on the net income from such Puerto Rico operating activities allocated to the Operating Partnership. The Puerto Rico corporate income tax consists of a flat 18.5 % tax rate plus a graduated income surcharge tax for a maximum corporate income tax rate of 37.5 %. In addition, the REIT is subject to a 10 % branch profit tax on the earnings and profits generated from its allocable share of the Company’s Puerto Rico operating activities and such tax is included in income tax expense in the consolidated statements of income. Together, the refinancing and legal entity restructuring transactions resulted in a net deferred tax asset of $ 42.9 million, which is included in prepaid expenses and other assets on the consolidated balance sheets as of December 31, 2020, and the Company recognized an accompanying Puerto Rico income tax benefit on the consolidated statements of income during the year ended December 31, 2020. 73 As a result of the Montehiedra refinancing and the Las Catalinas Mall troubled debt restructuring, the Company recognized a gain on extinguishment of debt for U.S. federal income tax purposes and implemented various tax planning strategies to limit its impact on the Company’s overall U.S. federal taxable income. The strategies implemented resulted in the recognition of a state and local income tax liability and corresponding deferred tax asset for the REIT of $ 4.5 million during the year ended December 31, 2020. Refer to Note 6 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information on the Montehiedra refinancing and the Las Catalinas Mall troubled debt restructuring. A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required if, based on the evidence available, it is more likely than not (a likelihood of more than 50 percent) that some portion or all of the deferred tax assets will not be realized. Management’s determination of the ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the underlying temporary differences become deductible. As of December 31, 2020, no valuation allowance has been recorded against the deferred tax assets that resulted from the legal entity restructurings of the Puerto Rico malls. In assessing the realizability of deferred tax assets, management determined it is more likely than not that these deferred tax assets will be realized. During the year ended December 31, 2020, the Company recorded a $ 4.5 million valuation allowance against the deferred tax asset attributable to the REIT’s state and local income tax liability incurred from strategies implemented to limit the impact of the Montehiedra refinancing and the Las Catalinas troubled debt restructuring on the Company’s U.S. federal taxable income because management determined that it is not more likely than not that these deferred tax assets will be realized. For the year ended December 31, 2019, the Company recorded a valuation allowance against the deferred tax asset related to a federal net operating loss generated at the Company’s operating TRS. This determination was based on the operating TRS’ lack of anticipated future taxable income. As a result of a change in circumstances in 2020 related to anticipated future profitability of the Company’s operating TRS, such valuation allowance was released. As of December 31, 2020, the Company’s total valuation allowance was $ 4.5 million. We record uncertain tax positions in accordance with ASC 740 Income Taxes on the basis of a two-step process whereby (i) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority . Income before income taxes from the Company’s operating activities in Puerto Rico during the years ended December 31, 2020 and 2019 was $ 26.4 million and $ 9.4 million, respectively. For the year ended December 31, 2020, the REIT’s state and local income tax expense was $ 4.5 million and the Puerto Rico income tax benefit was $ 43.5 million. The Puerto Rico tax expense recorded was $ 1.2 million and $ 3.3 million for the years ended December 31, 2019 and December 31, 2018, respectively. Income taxes are accounted for under the asset and liability method. Deferred income taxes are recognized for the tax effect of temporary differences between the financial reporting basis and the tax basis of taxable assets and liabilities. Income tax expense (benefit) for the years ended December 31, 2020, 2019 and 2018 consists of the following: Year Ended December 31, (Amounts in thousands) 2020 2019 2018 Income tax expense (benefit): Current: U.S. federal income tax $ — $ — $ 154 U.S. state and local income tax 4,525 66 101 Puerto Rico income tax 1,293 851 560 Total current 5,818 917 815 Deferred: U.S. federal income tax ( 6 ) — — U.S. state and local income tax — — — Puerto Rico income tax (1) ( 44,808 ) 370 2,704 Total deferred ( 44,814 ) 370 2,704 Total income tax expense (benefit) $ ( 38,996 ) $ 1,287 $ 3,519 (1) Due to the effects of applying ASC 842 on January 1, 2019, a deferred tax benefit of $ 0.8 million was recognized within a cumulative-effect adjustment to accumulated deficit to adjust r eserves on receivables from straight-line rents during the year ended December 31, 2019. Refer to Note 3 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information. 74 Provision for income taxes differs from the amounts computed by applying the statutory federal income tax rate to consolidated net income before income taxes as follows: Year Ended December 31, (Amounts in thousands) 2020 2019 2018 Federal provision at statutory tax rate (1) $ 12,338 $ 24,672 $ 25,301 REIT income before income taxes not subject to federal tax provision ( 12,339 ) ( 24,677 ) ( 14,390 ) TRS permanent book to tax adjustments — — ( 10,740 ) State and local income tax provision, net of federal benefit 11 66 84 Puerto Rico income tax provision ( 43,515 ) 1,221 3,264 Change in valuation allowance 4,509 5 — Total income tax expense (benefit) $ ( 38,996 ) $ 1,287 $ 3,519 (1) Federal statutory tax rate of 21% for the years ended December 31, 2020, 2019 and 2018. Below is a table summarizing the Company’s deferred tax assets and liabilities as of December 31, 2020 and 2019: Balance at (Amounts in thousands) December 31, 2020 December 31, 2019 Deferred tax assets: Depreciation $ 41,942 $ — Amortization of deferred financing costs 1,105 69 Rental revenue deemed uncollectible 2,109 461 Charitable contribution 7 5 Net operating loss 107 5 Valuation allowance ( 4,514 ) ( 5 ) Total deferred tax assets 40,756 535 Deferred tax liabilities: Depreciation — ( 4,416 ) Straight line rent ( 738 ) ( 1,051 ) Amortization of acquired leases ( 228 ) ( 205 ) Accrued interest expense ( 113 ) — Total deferred tax liabilities ( 1,079 ) ( 5,672 ) Net deferred tax assets (liabilities) $ 39,677 $ ( 5,137 ) 75 8. LEASES Leases as lessor We have approximately 1,100 operating leases at our retail shopping centers, malls and industrial properties which generate rental income from tenants and operating cash flows for the Company. Our tenant base comprises a diverse group of merchants including department stores, supermarkets, discounters, entertainment offerings, health clubs, DIY stores, in-line specialty shops, restaurants and other food and beverage vendors and service providers. Tenant leases under 10,000 sf generally have lease terms of 5 years or less. Tenant leases 10,000 sf or more are considered anchor leases and generally have lease terms of 10 to 25 years, with one or more renewal options available upon expiration of the initial lease term. Contractual rent increases for the renewal options are often fixed at the time of the initial lease agreement which may result in tenants being able to exercise their renewal options at amounts that are less than the fair value of the rent at the date of renewal. The components of rental revenue for the years ended December 31, 2020 and 2019 were as follows: Year Ended December 31, (Amounts in thousands) 2020 2019 Rental Revenue Fixed lease revenue $ 235,488 $ 274,397 Variable lease revenue 92,792 110,008 Total rental revenue $ 328,280 $ 384,405 As lessor under ASC 840, rental revenue from percentage rent was $ 2.0 million and rental revenue from tenant expense reimbursements was $ 108.7 million for the year ended December 31, 2018. Property, plant and equipment under operating leases as lessor As of December 31, 2020 and 2019 , substantially all of the Company’s real estate assets are subject to operating leases. Maturity analysis of lease payments as lessor The Company’s operating leases, including those with revenue recognized on a cash basis, are disclosed in the aggregate due to their consistent nature as real estate leases. As of December 31, 2020 , the undiscounted cash flows to be received from lease payments of our operating leases on an annual basis for the next five years and thereafter are as follows: (Amounts in thousands) Year Ending December 31, 2021 $ 252,690 2022 241,036 2023 219,771 2024 186,531 2025 162,906 2026 142,130 Thereafter 703,522 Total undiscounted cash flows $ 1,908,586 Leases as lessee As of December 31, 2020, the Company had 22 properties in its portfolio either completely or partially on land or a building that was owned by third parties. These properties are leased or subleased to us pursuant to ground leases, building leases or easements, with remaining terms ranging from less than two years to over 80 years and provide us the right to operate the property. We also lease or sublease real estate for our three corporate offices with remaining terms of less than one year . On December 31, 2020, the Company recognized $ 5.7 million of operating lease ROU assets and $ 0.7 million of corresponding operating lease liabilities in connection with the Company’s acquisition of Sunrise Mall, which included the acquisition of the lessee positions of ground leases. During the year ended December 31, 2019 , the Company reassessed the lease term of one of its ground leases due to a change in circumstances in our election to renew the ground lease. As a result of this reassessment, the Company remeasured the lease 76 liability by using revised inputs as of the reassessment date and recorded an additional ROU asset and lease liability of $ 5.0 million , respectively. During the year ended December 31, 2019 , the Company sold its lessee position in one of its operating ground leases for $ 6.9 million, net of selling costs, and derecognized the lease’s ROU asset and corresponding lease liability. We recognized a gain on sale of lease of $ 1.8 million on our consolidated statements of income during the year ended December 31, 2019 as a result of the sale. On July 31, 2019, the Company’s lessee position in one of its ground leases expired in accordance with the terms of the lease. Additionally, on November 1, 2019 the Company recognized a finance lease ROU asset and finance lease liability of $ 2.7 million and $ 3.0 million, respectively, in connection with the Company’s acquisition of the lessee position of a ground lease at 25 East Spring Valley Ave in Maywood, NJ. The Company assessed the lease classification as a finance lease due to the Company’s reasonably certain likelihood of exercising its option to purchase the lease. The components of lease expense for the years ended December 31, 2020 and 2019 were as follows: Year Ended December 31, (Amounts in thousands) 2020 2019 Lease expense Operating lease cost (1) $ 10,875 $ 11,730 Variable lease cost 2,792 2,736 Total lease expense $ 13,667 $ 14,466 (1) During the years ended December 31, 2020 and 2019, the Company recognized sublease income of $ 17.7 million and $ 19.7 million, respectively, included in rental revenue on the consolidated statement of income in relation to certain ground and building lease arrangements. Operating lease cost includes amortization of below-market ground lease intangibles and straight-line lease expense. Supplemental balance sheet information related to leases as of December 31, 2020 and December 31, 2019 was as follows: December 31, 2020 December 31, 2019 Supplemental noncash information Operating leases Finance lease Operating leases Finance lease Weighted-average remaining lease term 15.7 years 35.2 years 15.3 years 36.2 years Weighted-average discount rates 3.99 % 4.01 % 4.03 % 4.01 % Supplemental cash information related to leases for the years ended December 31, 2020 and 2019 was as follows: (Amounts in thousands) Year Ended December 31, Cash paid for amounts included in the measurement of lease liabilities: 2020 2019 Operating cash flows from operating leases $ 10,033 $ 10,698 Operating cash flows from finance lease 120 10 Financing cash flows from finance lease 11 8 Right-of-use assets obtained in exchange for lease liabilities: Operating leases $ 1,740 $ 98,980 Finance lease — 2,991 77 Maturity analysis of lease payments as lessee The undiscounted cash flows to be paid on an annual basis for the next five years and thereafter are presented in the table below. The total amount of lease payments, on an undiscounted basis, are reconciled to the lease liability on the consolidated balance sheet by considering the present value discount. (Amounts in thousands) Operating Finance Year Ending December 31, leases lease 2021 $ 9,363 $ 109 2022 8,598 109 2023 8,486 109 2024 8,500 109 2025 6,599 109 2026 6,341 124 Thereafter 57,541 6,299 Total undiscounted cash flows 105,428 6,968 Present value discount ( 30,456 ) ( 3,975 ) Discounted cash flows $ 74,972 $ 2,993 9. FAIR VALUE MEASUREMENTS ASC 820, Fair Value Measurement and Disclosures defines fair value and establishes a framework for measuring fair value. The objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels: Level 1 - quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities; Level 2 - observable prices based on inputs not quoted in active markets, but corroborated by market data; and Level 3 - unobservable inputs used when little or no market data is available. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty credit risk in our assessment of fair value. Financial Assets and Liabilities Measured at Fair Value on a Recurring or Non-Recurring Basis There were no financial assets or liabilities measured at fair value on a recurring or non-recurring basis as of December 31, 2020 and December 31, 2019. Financial Assets and Liabilities not Measured at Fair Value Financial assets and liabilities that are not measured at fair value on the consolidated balance sheets include cash and cash equivalents and mortgages payable. Cash and cash equivalents are carried at cost, which approximates fair value. The fair value of mortgages payable is calculated based on current market prices and discounted cash flows at the current rate at which similar loans would be made to borrowers with similar credit ratings for the remaining term of such debt, which is provided by a third-party specialist. The fair value of cash and cash equivalents is classified as Level 1 and the fair value of mortgages payable is classified as Level 2. The table below summarizes the carrying amounts and fair value of these financial instruments as of December 31, 2020 and December 31, 2019. As of December 31, 2020 As of December 31, 2019 (Amounts in thousands) Carrying Amount Fair Value Carrying Amount Fair Value Assets: Cash and cash equivalents $ 384,572 $ 384,572 $ 432,954 $ 432,954 Liabilities: Mortgages payable (1) $ 1,597,397 $ 1,611,868 $ 1,556,248 $ 1,590,503 (1) Carrying amounts exclude unamortized debt issuance costs of $ 9.9 million and $ 10.1 million as of December 31, 2020 and December 31, 2019, respectively. 78 Nonfinancial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis We assess the carrying value of our properties for impairment, when events or changes in circumstances indicate that the carrying value may not be recoverable. Such events and changes include macroeconomic conditions, including those caused by global pandemics, such as COVID-19, which may result in property operational disruption and indicate that the carrying amount may not be recoverable. During the year ended December 31, 2020, the Company recognized an impairment charge of $ 3.1 million on a parcel of our property in Lodi, NJ, which was sold on January 8, 2021 . Prior to the sale of the parcel, the book value of this property exceeded its estimated fair value less costs to sell. The fair value of the property was based on an executed contract of sale with a third-party buyer less costs to sell. During the year ended December 31, 2019, the Company recognized impairment charges on four retail properties that the Company was actively marketing. The impairment loss was calculated as the difference between the assets’ individual carrying values and the estimated aggregated fair values of $ 38.5 million, less estimated selling costs. The valuation of these properties were based on capitalization rates, discounted future cash flows, third-party appraisals, broker selling estimates and sale agreements under negotiations. The capitalization rates (ranging from 9.9 % to 12.1 %) and discounts rates (ranging from 9.3 % to 10.8 %) utilized in the analyses were based upon unobservable rates that the Company believes to be in a reasonable range of current market rates. During the year ended December 31, 2018, we recognized a $ 3.1 million impairment charge on our property in Salem, NH as a result of the loss of the anchor tenant at the property. The valuation of our property in Salem, NH was based on comparable property transactions in the property’s surrounding area. We also recognized a $ 2.5 million impairment charge on our property in West Babylon, NY. The fair value for our property in West Babylon, NY was based on an executed letter of intent with a third-party buyer less costs to sell. The Company believes the inputs utilized to measure these fair values were reasonable in the context of applicable market conditions, however due to the significance of the unobservable inputs in the overall fair value measures, including market conditions and expectations for growth, the Company determined that such fair value measurements are classified as Level 3. Aggregate impairment charges of $ 3.1 million, $ 26.3 million and $ 5.6 million, respectively, are included as an expense within casualty and impairment loss, net on our consolidated statements of income for the years ended December 31, 2020, 2019 and 2018. 10. COMMITMENTS AND CONTINGENCIES 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. Redevelopment As of December 31, 2020, we had approximately $ 132.4 million of active development, redevelopment and anchor repositioning projects underway, of which $ 86.6 million remains to be funded. Further, while we have identified future projects in our development pipeline, we are under no obligation to execute and fund any of these projects and each of these projects is being reevaluated considering market conditions. The Company has updated many of its active project stabilization dates to reflect the impact of the COVID-19 pandemic on its contractors, tenants and vendors. Insurance 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 79 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. We continue to monitor the state of the insurance market and the scope and costs of available coverage. We cannot anticipate what coverage will be available on commercially reasonable terms in the future and expect premiums across most coverage lines to increase in light of recent events. The incurrence of uninsured losses, costs or uncovered premiums could materially and adversely affect our business, results of operations and financial condition. Certain of our loans and other agreements contain customary covenants requiring the maintenance of insurance coverage. Although we believe that we currently have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future. If lenders or other counterparties insist on greater coverage than we are able to obtain, such requirement could materially and adversely affect our ability to finance our properties and expand our portfolio. Tornado-Related Charges On June 13, 2018, a tornado hit our shopping center in Wilkes-Barre, PA, damaging approximately 13 % of the property’s gross leasable area. During the year ended December 31, 2019, the Company settled the related insurance claim with its carrier for $ 5.5 million. Of this amount, the Company recognized $ 4.8 million as a casualty gain during the year ended December 31, 2019 included in casualty and impairment loss, net on the accompanying consolidated statements of income. As part of the settlement, the Company recognized $ 0.3 million as business interruption proceeds within rental revenue during the year ended December 31, 2019. Hurricane-Related Charges 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 a $ 8.7 million casualty gain during the year ended December 31, 2019 based on i nsurance proceeds received from the settlement agreement on our two malls in Puerto Rico. Environmental Matters Each of our properties has been subjected to varying degrees of environmental assessment at various times. Based on these assessments, we have accrued costs of $ 1.8 million and $ 2.7 million on our consolidated balance sheets as of December 31, 2020 and December 31, 2019, respectively, for remediation costs for environmental contamination at certain properties. 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 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 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, WHO characterized the COVID-19 outbreak as a pandemic. Since March, the continually evolving COVID-19 pandemic impacted our tenants and business operations. The Company has taken precautions to protect the safety, health and well-being of its employees and tenants. 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 80 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 December 31, 2020, the Company executed rent deferrals aggregating $ 5.1 million with a weighted average payback period of approximately eight months. Additionally, as of December 31, 2020, the Company executed rent abatements aggregating $ 3.9 million. 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 deferrals that may not be collected. Bankruptcies 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. 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. 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 in receivables arising from the straight-lining of rents, and r ecognized $ 2.1 million as rental revenue deemed uncollectible (classified within rental revenue) for the year ended December 31, 2020. Century 21 vacated and terminated its lease in December 2020. 81 11. PREPAID EXPENSES AND OTHER ASSETS The following is a summary of the composition of the prepaid expenses and other assets in the consolidated balance sheets: Balance at (Amounts in thousands) December 31, 2020 December 31, 2019 Other assets $ 5,953 $ 4,723 Deferred tax asset, net 39,677 — Real estate held for sale 7,056 6,574 Finance lease right-of-use asset 2,724 2,737 Deferred financing costs, net of accumulated amortization of $ 4,819 and $ 3,765 , respectively 3,347 3,877 Deposits for acquisitions — 10,000 Prepaid expenses: Real estate taxes 8,093 6,491 Insurance 1,583 1,520 Rent, licenses/fees 1,878 1,655 Total Prepaid expenses and other assets $ 70,311 $ 37,577 12. ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES The following is a summary of the composition of accounts payable, accrued expenses and other liabilities in the consolidated balance sheets: Balance at (Amounts in thousands) December 31, 2020 December 31, 2019 Dividend payable $ 55,905 $ — Deferred tenant revenue 26,594 26,224 Accrued capital expenditures and leasing costs 7,797 7,893 Finance lease liability 2,993 2,982 Accrued interest payable 11,095 9,729 Security deposits 5,884 5,814 Deferred tax liability, net — 5,137 Accrued payroll expenses 5,797 5,851 Other liabilities and accrued expenses 16,915 13,014 Total accounts payable, accrued expenses and other liabilities $ 132,980 $ 76,644 13. INTEREST AND DEBT EXPENSE The following table sets forth the details of interest and debt expense: Year Ended December 31, (Amounts in thousands) 2020 2019 2018 Interest expense $ 68,184 $ 63,783 $ 61,989 Amortization of deferred financing costs 2,831 2,856 2,879 Total Interest and debt expense $ 71,015 $ 66,639 $ 64,868 82 14. EQUITY AND NONCONTROLLING INTEREST Share Repurchase Program In March 2020, the Company’s Board of Trustees authorized a share repurchase program for up to $ 200 million of the Company’s common shares. Under the program, the Company may repurchase its shares from time to time in the open market or in privately negotiated transactions in compliance with Securities and Exchange Commission Rule 10b-18. The amount and timing of the purchases will depend on a number of factors including the price and availability of the Company’s shares, trading volume and general market conditions. The share repurchase program does not obligate the Company to acquire any particular amount of common shares and may be suspended or discontinued at any time at the Company’s discretion. Cumulative total purchases during the year ended December 31, 2020 amounted to 5.9 million shares at a weighted average share price of $ 9.22 amounting to $ 54.1 million. Units of the Operating Partnership An equivalent number of common units were issued by the Operating Partnership to the Company in connection with the Company’s issuance of common shares of beneficial interest under the ATM equity program. The Operating Partnership’s capital includes general and common limited partnership interests in the operating partnership (“OP Units”). As of December 31, 2020, Urban Edge owned approximately 96.1 % of the outstanding common OP Units with the remaining limited OP Units held by members of management, Urban Edge’s Board of Trustees and contributors of property interests acquired. Urban Edge serves as the sole general partner of the Operating Partnership. The third-party unitholders have limited rights over the Operating Partnership such that they do not have characteristics of a controlling financial interest. As such, the Operating Partnership is considered a VIE, and the Company is the primary beneficiary which consolidates it. The Company’s only investment is the Operating Partnership. 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. Dividends and Distributions During the year ended December 31, 2020 the Company declared distributions on our common shares and OP units of $ 0.68 per share/unit in the aggregate, which comprised a regular quarterly dividend of $ 0.22 per common share and OP unit declared for the first quarter of 2020 and a special cash dividend of $ 0.46 per common share and OP unit declared in December 2020 and paid on January 19, 2021. 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. During the years ended December 31, 2019 and 2018, the Company declared distributions on our common shares and OP units of $0.88 per share/unit in the aggregate. We have a Dividend Reinvestment Plan (the “DRIP”), whereby shareholders may use their dividends to purchase shares. During the years ended December 31, 2020 and 2019, 3,445 and 6,920 shares were issued under the DRIP, respectively. Noncontrolling Interests in Operating Partnership Noncontrolling interests in the Operating Partnership reflected on the consolidated balance sheets of the Company are comprised of OP units and limited partnership interests in the Operating Partnership in the form of LTIP unit awards. LTIP unit awards were granted to certain executives pursuant to our 2015 Omnibus Share Plan (the “Omnibus Share Plan”) and our 2018 Inducement Equity Plan (the “Inducement Plan”). OP units were issued to contributors in exchange for their property interests in connection with the Company’s property acquisitions in 2017. The total of the OP units and LTIP units represent a 4.1 % weighted-average interest in the Operating Partnership for the year ended December 31, 2020. Holders of outstanding vested LTIP units may, from and after two years from the date of issuance, redeem their LTIP units for cash, or for the Company’s common shares on a one -for-one basis, solely at our election. Holders of outstanding OP units may redeem their units for cash or the Company’s common shares on a one -for-one basis, solely at our election. On August 5, 2019, the Company received requests from certain holders of OP units to redeem 357,998 units. The Company elected to satisfy the redemption requests by repurchasing the units at a price of $ 16.70 per unit, for total cash consideration of $ 6.0 million. In connection with the separation from Vornado Realty L.P. (“VRLP”), the Company issued 5.7 million OP units, which represented a 5.4 % interest in the Operating Partnership, to VRLP in exchange for interests in VRLP properties contributed by VRLP. On February 28, 2019, the Company issued 5.7 million common shares to VRLP, in exchange for an equal number of 83 OP units after receiving a notice of redemption from VRLP. The issuance is exempt from registration in reliance upon Section 4(a)(2) of the Securities Act of 1933, as amended, on the basis that no public offering was made. Noncontrolling Interests in Consolidated Subsidiaries The Company’s noncontrolling interests relate to the 5 % interest held by others in our property in Walnut Creek, CA (Mount Diablo) and 17.5 % held by others in our property in Massapequa, NY. T he net income attributable to noncontrolling interests is presented separately in our consolidated statements of income. 15. SHARE-BASED COMPENSATION Omnibus Share Plan On January 7, 2015 our board and initial shareholder approved the Urban Edge Properties Omnibus Share Plan, under which awards may be granted up to a maximum of 15,000,000 of our common shares or share equivalents. Pursuant to the Omnibus Share Plan, stock options, LTIP units, operating partnership units and restricted shares were granted. Outperformance Plans The Compensation Committee of the Board of Trustees of the Company approved the Company’s 2015 Outperformance Plan (“2015 OPP”) on November 3, 2015 and the Company’s 2017 Outperformance Plan (“2017 OPP”) on February 24, 2017. Both Outperformance Plans are multi-year, performance-based equity compensation plans under which participants, including our Chairman and Chief Executive Officer, have the opportunity to earn awards in the form of LTIP units if, and only if, we outperform a predetermined total shareholder return (“TSR”) and/or outperform the market with respect to a relative TSR over the three-year period beginning on the date the respective plan was approved. The aggregate notional amounts of the 2015 OPP grant and the 2017 OPP grant are $ 10.2 million and $ 12.0 million, respectively. Awards under the 2015 OPP and the 2017 OPP may be earned if we (i) achieve a TSR level greater than 7 % per annum, or 21 % over the three-year performance measurement period, and/or (ii) achieve a TSR equal to or above, that of the 50 th percentile of a retail REIT peer group (“Peer Group”) comprised of our peer companies, over a three-year performance measurement period. Distributions on awards accrue during the measurement period, except that 10 % of such distributions are paid in cash. If the designated performance objectives are achieved, LTIP units are also subject to time-based vesting requirements. Awards earned under the 2015 OPP and the 2017 OPP vest 50 % in year three, 25 % in year four and 25 % in year five. The fair values of the 2015 OPP and the 2017 OPP on the dates of grant were $ 3.9 million and $ 4.1 million, respectively. A Monte Carlo simulation was used to estimate the fair values based on the probability of satisfying the market conditions and the projected share prices at the time of payments, discounted to the valuation dates over the three-year performance periods. For the 2015 OPP, assumptions include historical volatility ( 25.0 %), risk-free interest rates ( 1.2 %), and historical daily return as compared to our Peer Group (which ranged from 19.0 % to 27.0 %). For the 2017 OPP, assumptions include historical volatility ( 19.7 %), risk-free interest rates ( 1.5 %), and historical daily return as compared to our Peer Group. For both plans, such amounts are being amortized into share-based compensation expense over a five-year period from the dates of grant, using graded vesting attribution models. The 2015 OPP was fully vested as of November 5, 2020 and there is no compensation cost remaining under the 2015 OPP as of December 31, 2020. In the years ending December 31, 2020, 2019, and 2018 we recognized $ 0.6 million, $ 1.4 million and $ 1.7 million of compensation expense related to the 2015 and 2017 OPPs’ LTIP Units, respectively. As of December 31, 2020, there was $ 0.2 million of total unrecognized compensation cost related to the 2017 OPP LTIP Units, which will be recognized over a weighted-average period of 0.5 years. 2018 Long-Term Incentive Plan On February 22, 2018, the Compensation Committee of the Board of Trustees of the Company approved the Company’s 2018 Long-Term Incentive Plan ("2018 LTI Plan") under the Omnibus Share Plan, a multi-year equity compensation program, comprised of both performance-based and time-based vesting awards. Equity awards granted under the 2018 LTI Plan are weighted, in terms of grant date and fair value, 80 % performance-based and 20 % time-based. For the performance-based awards under the 2018 LTI Plan, participants have the opportunity to earn awards in the form of LTIP Units if, and only if, Urban Edge’s absolute and/or relative total shareholder return (“TSR”) meets certain criteria over the three-year performance measurement period (the “Performance Period”) beginning on February 22, 2018 and ending on February 21, 2021. The Company issued 328,107 LTIP Units under the 2018 LTI Plan. Under the Absolute TSR component ( 25 % of the performance-based awards), 40 % of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to 18 %, 100 % of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to 27 %, and 165 % of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to or greater than 36 %. The Relative TSR component is based on the Company’s performance 84 compared to a peer group comprised of 14 companies. Under the Relative TSR Component ( 75 % of the performance-based awards), 40 % of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to the 35 th percentile of the peer group, 100 % of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to the 55 th percentile of the peer group, and 165 % of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to or above the 75 th percentile of the peer group, with earning determined using linear interpolation if between such relative TSR thresholds. The fair value of the performance-based award portion of the 2018 LTI Plan on the date of grant was $ 3.6 million using a Monte Carlo simulation to estimate the fair value through a risk-neutral premise. The time-based awards under the 2018 LTI Plan, also granted in the form of LTIP Units, vest ratably over three years except in the case of our Chairman and Chief Executive Officer, where the vesting is ratably over four years . The Company granted time-based awards under the 2018 LTI Plan that represent 33,172 LTIP units with a grant date fair value of $ 0.7 million. During the years ended December 31, 2020, 2019 and 2018, respectively, we recognized $ 1.0 million, $ 0.9 million and $ 1.0 million of compensation expense related to the 2018 LTI Plan. 2018 Inducement Equity Plan The Inducement Plan was approved by the Compensation Committee of the Board of Trustees of the Company on September 26, 2018. Under the Inducement Plan, the Compensation Committee of the Board of Trustees may grant, subject to any Company performance conditions as specified by the Compensation Committee, awards to individuals who were not previously employees as an inducement material to the individual’s entry into employment with the Company. The terms and conditions of the Inducement Plan and any awards thereunder granted are substantially similar to those under the 2015 Omnibus Share Plan. The Company has granted an aggregate of 352,890 restricted LTIP Units and 2,000,000 stock options under the Inducement Plan with grant date fair values of $ 7.2 million and $ 9.3 million, respectively. 2019 Long-Term Incentive Plan On April 4, 2019, the Compensation Committee of the Board of Trustees of the Company approved the Company’s 2019 Long-Term Incentive Plan (“2019 LTI Plan”). The Plan is a multi-year, equity compensation program under which participants, including our Chairman and Chief Executive Officer, have the opportunity to earn awards in the form of LTIP units that vest based on the passage of time (one-third of the program) and performance goals tied to our relative and absolute total shareholder return (“TSR”) during the three-year performance period following their grant (two-thirds of the program). For the performance-based awards under the 2019 LTI Plan, participants have the opportunity to earn awards in the form of LTIP Units if, and only if, Urban Edge’s absolute and/or relative TSR meets certain criteria over the three-year performance measurement period (the “Performance Period”) beginning on February 27, 2019 and ending on February 26, 2022. The Company issued 489,319 LTIP Units under the 2019 LTI Plan. Under the Absolute TSR component, 40 % of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to 18 %, 100 % of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to 27 %, and 165 % of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to or greater than 36 %. The Relative TSR component is based on the Company’s performance compared to a peer group comprised of 14 companies. Under the Relative TSR Component, 40 % of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to the 35 th percentile of the peer group, 100 % of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to the 55 th percentile of the peer group, and 165 % of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to or above the 75 th percentile of the peer group, with earning determined using linear interpolation if between such relative and absolute TSR thresholds. The fair value of the performance-based award portion of the 2019 LTI Plan on the date of grant was $ 4.3 million using a Monte Carlo simulation to estimate the fair value through a risk-neutral premise. The time-based awards under the 2019 LTI Plan, also granted in the form of LTIP Units, vest ratably over three years except in the case of our Chairman and Chief Executive Officer, where the vesting is ratably over four years . The Company granted time-based awards under the 2019 LTI Plan that represent 112,910 LTIP units with a grant date fair value of $ 2.0 million. During the years ended December 31, 2020 and 2019, respectively we recognized $ 1.9 million and $ 1.4 million of compensation expense related to the 2019 LTI Plan. 2020 Long-Term Incentive Plan On February 20, 2020, the Compensation Committee of the Board of Trustees of the Company approved the Company’s 2020 Long-Term Incentive Plan (“2020 LTI Plan”). The Plan is a multi-year, equity compensation program under which participants, including our Chairman and Chief Executive Officer, have the opportunity to earn awards in the form of LTIP units that vest based on (i) the passage of time (one-third of the fair value of the program) and (ii) performance goals tied to our relative and absolute total shareholder return (“TSR”) during the three-year performance period following their grant (two-thirds of the fair 85 value of the program). The total grant date fair value under the 2020 LTI Plan was $ 8.8 million comprising performance-based and time-based awards as described further below: Performance-based awards For the performance-based awards under the 2020 LTI Plan, participants, have the opportunity to earn awards in the form of LTIP Units if Urban Edge’s absolute and/or relative TSR meets certain criteria over the three-year performance measurement period (the “Performance Period”) beginning on February 20, 2020 and ending on February 19, 2023. The Company granted performance-based awards under the 2020 LTI Plan that represent 630,774 LTIP Units. The fair value of the performance-based award portion of the 2020 LTI Plan on the date of grant was $ 5.9 million using a Monte Carlo simulation to estimate the fair value through a risk-neutral premise. Under the Absolute TSR component, 40 % of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to 18 %, 100 % of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to 27 %, and 165 % of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to or greater than 36 %. The Relative TSR component is based on the Company’s performance compared to a peer group comprised of 14 companies. Under the Relative TSR Component, 40 % of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to the 35 th percentile of the peer group, 100 % of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to the 55 th percentile of the peer group, and 165 % of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to or above the 75 th percentile of the peer group, with earning determined using linear interpolation if in between such relative and absolute TSR thresholds. During the year ended December 31, 2020 we recognized $ 1.1 million of compensation expense related to the performance-based awards under the 2020 LTI Plan. Time-based awards The time-based awards granted under the 2020 LTI Plan, also granted in the form of LTIP Units, vest ratably over three years except in the case of our Chairman and Chief Executive Officer, where the vesting is ratably over four years . As of December 31, 2020, the Company granted time-based awards under the 2020 LTI Plan that represent 169,004 LTIP units with a grant date fair value of $ 2.9 million. During the year ended December 31, 2020 we recognized $ 1.1 million of compensation expense related to the time-based awards under the 2020 LTI Plan. Units and Deferred Share Units Granted to Trustees On May 6, 2020, certain trustees elected to receive a portion of their compensation in deferred share units and an aggregate of 12,121 shares were granted to those trustees based on the weighted average grant date fair value of $ 8.25 . On May 9, 2019, certain trustees elected to receive a portion of their compensation in deferred share units and an aggregate of 5,608 shares were granted to those trustees based on the weighted average grant date fair value of $ 15.60 . On May 6, 2020 certain trustees elected to receive a portion of their compensation in LTIP units and an aggregate of 87,117 LTIP units, were granted to those trustees based on the weighted average grant date fair value of $ 8.03 . In addition, On May 9, 2019, certain trustees elected to receive a portion of their compensation in LTIP units and an aggregate of 28,040 LTIP units, were granted to those trustees based on the weighted average grant date fair value of $ 14.98 . 2021 Long-Term Incentive Plan On February 10, 2021, the Compensation Committee of the Board of Trustees of the Company approved the Company’s 2021 Long-Term Incentive Plan (“2021 LTI Plan”). The Plan is a multi-year, equity compensation program under which participants, including our Chairman and Chief Executive Officer, have the opportunity to earn awards in the form of LTIP units that vest based on the passage of time (one-half of the program) and performance goals tied to our relative and absolute total shareholder return (“TSR”) during the three-year performance period following their grant (one-half of the program). The total grant date fair value under the 2021 LTI Plan was $ 7.8 million, comprising both performance-based and time-based awards. 86 Shares Under Option All stock options granted have ten-year contractual lives, containing vesting terms of three to five years . As of December 31, 2020, the weighted average contractual term of shares under options outstanding at the end of the period is 7.7 years. The following table presents stock option activity for the years ended December 31, 2020, 2019, and 2018: Shares Under Options Weighted Average Exercise Price per Share Weighted Average Remaining Expected Term (In years) Outstanding at January 1, 2018 2,603,664 $ 24.09 4.40 Granted 2,146,885 21.71 4.58 Exercised — — — Forfeited or expired — — — Outstanding at December 31, 2018 4,750,549 23.02 4.48 Granted 180,213 19.53 3.88 Exercised — — — Forfeited or expired — — — Outstanding at December 31, 2019 4,930,762 22.89 4.46 Granted — — — Exercised — — — Forfeited or expired — — — Outstanding at December 31, 2020 4,930,762 $ 22.89 4.07 Exercisable at December 31, 2020 3,709,097 $ 23.31 — No options were granted during the year ended December 31, 2020. The weighted average grant date fair value of options granted in 2019 and 2018 was $ 3.88 and $ 4.68 , respectively. The options were granted with an exercise price equivalent to the average of the high and low share price on the grant date. No options were exercised during the years ended December 31, 2018, 2019 and 2020. As of December 31, 2020, there was no intrinsic value for the outstanding and exercisable shares under option. D uring the years ended December 31, 2019 and 2018, the fair value of the options granted was estimated on the grant date using the Black-Scholes pricing model with the following assumptions: February 22, 2018 September 27, 2018 February 27, 2019 Risk-free interest rate 2.73 % 3.00 % 2.54 % Expected option life 6.25 7.00 6.25 Expected volatility 32.23 % 30.42 % 30.98 % 87 Restricted Shares The following table presents information regarding restricted share activity during the years ended December 31, 2020, 2019, and 2018: Shares Weighted Average Grant Date Fair Value per Share Unvested at January 1, 2018 175,430 $ 26.05 Granted 103,814 21.65 Vested ( 84,185 ) 25.67 Forfeited ( 32,482 ) 23.32 Unvested at December 31, 2018 162,577 23.99 Granted 34,638 19.15 Vested ( 96,378 ) 24.19 Forfeited ( 5,672 ) 22.11 Unvested at December 31, 2019 95,165 22.16 Granted 31,679 17.47 Vested ( 51,524 ) 23.88 Forfeited ( 2,927 ) 18.79 Unvested at December 31, 2020 72,393 $ 19.03 During the years ended December 31, 2020, 2019 and 2018, we granted 31,679 , 34,638 , and 103,814 restricted shares, respectively, that are subject to forfeiture and vest over periods ranging from one to three years . The total grant date value of the 51,524 , 96,378 , and 84,185 restricted shares vested during the years ended December 31, 2020, 2019 and 2018 was $ 1.2 million, $ 2.3 million and $ 2.2 million, respectively. Restricted Units During the years ended December 31, 2020, 2019 and 2018, respectively, there were 297,195 , 276,482 and 444,954 additional LTIP units issued. During the years ended December 31, 2020, 2019 and 2018, 433,016 , 131,884 , and 24,722 units vested, respectively. During the year ended December 31, 2020, 223,553 restricted units were converted to common shares The remaining 568,619 units vest over a weighted average period of 2.4 years. Share-Based Compensation Expense Share-based compensation expense, which is included in general and administrative expenses in our consolidated statements of income, is summarized as follows: Year Ended December 31, (Amounts in thousands) 2020 2019 2018 Share-based compensation expense components: Restricted share expense $ 832 $ 1,697 $ 2,051 Stock option expense 4,991 4,055 2,778 LTIP expense (1) 7,331 4,477 2,218 Performance-based LTI expense (2) 3,792 3,164 2,530 DSU expense 48 156 164 Total Share-based compensation expense $ 16,994 $ 13,549 $ 9,741 (1) LTIP expense includes the time-based portion of the 2020, 2019 and 2018 L TI Plans. (2) Performance-based LTI expense include s the 2017 and 2015 OPP p lans and the performance-based portion of the 2020, 2019 and 2018 L TI Plans. As of December 31, 2020, we had a total of $ 15.1 million of unrecognized compensation expense related to unvested and restricted share-based payment arrangements including unvested stock options, LTIP units, deferred share units, and restricted share awards which were granted under our Omnibus Share Plan as well as OPP awards. This expense is expected to be recognized over a weighted average period of two years . 88 16. EARNINGS PER SHARE AND UNIT Urban Edge Earnings per Share We have calculated earnings per share (“EPS”) under the two-class method. The two-class method is an earnings allocation methodology whereby EPS for each class of Urban Edge common shares and participating securities is calculated according to dividends declared and participating rights in undistributed earnings. Restricted shares issued pursuant to our share-based compensation program are considered participating securities, and as such have non-forfeitable rights to receive dividends. The computation of diluted EPS reflects potential dilution of securities by adding potential common shares, including stock options and unvested restricted shares, to the weighted average number of common shares outstanding for the period. For the years ended December 31, 2020, 2019 and 2018, there were options outstanding for 4,930,762 , 4,930,762 , and 4,750,549 shares, respectively, that potentially could be exercised for common shares. During the years ended December 31, 2020, 2019 and 2018, no o ptions were included in the diluted EPS calculation as their exercise prices were higher than the average market prices of our common shares. In addition, as of December 31, 2020 there were 72,393 unvested restricted shares outstanding that potentially could become unrestricted common shares. The computation of diluted EPS for the years ended December 31, 2020, 2019 and 2018 included the 77,289 , 100,406 , and 188,329 weighted average unvested restricted shares outstanding, respectively, as their effect is dilutive. The effect of the redemption of OP and vested LTIP units is not reflected in the computation of basic and diluted earnings per share, as they are redeemable for common shares on a one-for-one basis. The income allocable to such units is allocated on this same basis and reflected as noncontrolling interests in the accompanying consolidated financial statements. As such, the assumed redemption of these units would have no net impact on the determination of diluted earnings per share since they would be anti-dilutive. The following table sets forth the computation of our basic and diluted earnings per share: Year Ended December 31, (Amounts in thousands, except per share amounts) 2020 2019 2018 Numerator: Net income attributable to common shareholders $ 93,589 $ 109,523 $ 105,150 Less: Earnings allocated to unvested participating securities ( 62 ) ( 92 ) ( 184 ) Net income available for common shareholders - basic $ 93,527 $ 109,431 $ 104,966 Impact of assumed conversions: OP and LTIP units 81 5 — Net income available for common shareholders - dilutive $ 93,608 $ 109,436 $ 104,966 Denominator: Weighted average common shares outstanding - basic 117,722 119,751 113,863 Effect of dilutive securities: Stock options using the treasury stock method — — — Restricted share awards 77 100 188 Assumed conversion of OP and LTIP units 103 45 — Weighted average common shares outstanding - diluted 117,902 119,896 114,051 Earnings per share available to common shareholders: Earnings per common share - Basic $ 0.79 $ 0.91 $ 0.92 Earnings per common share - Diluted $ 0.79 $ 0.91 $ 0.92 89 Operating Partnership Earnings per Unit The following table sets forth the computation of basic and diluted earnings per unit: Year Ended December 31, (Amounts in thousands, except per unit amounts) 2020 2019 2018 Numerator: Net income attributable to unitholders $ 97,749 $ 116,222 $ 116,918 Less: net income attributable to participating securities ( 62 ) ( 92 ) ( 200 ) Net income available for unitholders $ 97,687 $ 116,130 $ 116,718 Denominator: Weighted average units outstanding - basic 121,957 126,333 126,198 Effect of dilutive securities issued by Urban Edge 77 100 188 Unvested LTIP units 777 45 — Weighted average units outstanding - diluted 122,811 126,478 126,386 Earnings per unit available to unitholders: Earnings per unit - Basic $ 0.80 $ 0.92 $ 0.92 Earnings per unit - Diluted $ 0.80 $ 0.92 $ 0.92 90 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES None.