What changed in this filing

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Item 1A. Risk Factors

2024-02-14 compared with 2023-02-14 · 37 added, 53 removed, 339 unchanged (21% of the section changed)

13 unchanged sentences

Inflation and related volatility in the economy could negatively impact our results of operations and our tenants.

Inflation in the United States accelerated in 2022 and may continue at an elevated level in the near-term.

This increase, and any related impacts, including increased prices for consumer goods and higher interest rates and wages, and any fiscal or other policy interventions by the U.S.

Inflation in the United States accelerated during 2021 and 2022.

During 2023, inflation decreased but remained at an elevated level relative to the years preceding 2021, and inflation may increase again in the future.

Rising inflation, and any related impacts, including increased prices for consumer goods and higher interest rates and wages, and any fiscal or other policy interventions by the U.S.

government in reaction to such events, could negatively impact our results of operations, and could also negatively impact our tenants’ businesses.

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

As a result, we believe that the structure of our leases reduces our exposure to increases in costs and operating expenses resulting from inflation.

However, there can be no assurance that our tenants will be able to absorb these expense increases and be able to continue to pay us their portion of operating expenses, capital expenditures and rent.

6 unchanged sentences

Higher construction costs could adversely impact our investments in real estate assets and expected yields on our redevelopment projects.

Actual or perceived threats associated with epidemics, pandemics or other public health crises, have had and could have a material adverse effect on our and our tenants’ businesses, financial condition, results of operations, cash flow, liquidity, and ability to access the capital markets and satisfy debt service obligations.

Actual or perceived threats associated with epidemics, pandemics or other public health crises have had, and could have in the future, a material adverse effect on our and our tenants’ businesses, financial condition, results of operations, cash flow, liquidity, and ability to access the capital markets and satisfy debt service obligations.

Epidemics, pandemics or other public health crises, that impact economic and market conditions, particularly in the markets where our properties are located, and preventative measures taken to alleviate their impact, may have a material adverse effect on our and our tenants’ businesses, financial condition, results of operations, liquidity, and ability to access capital markets and satisfy debt service obligations.

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Because a significant number of our properties are located in the New York metropolitan area, we are particularly susceptible to adverse economic and other developments in that area.

Notably, as of December 31, 2022, one of our New York metropolitan area properties, The Outlets at Bergen Town Center, in Paramus, NJ, generated in excess of 10% of our annualized base rent.

Collectively, our New York metropolitan area properties in the aggregate generated approximately 67% of our annualized base rent as of December 31, 2023.

19 unchanged sentences

• increased costs related to inflation, including higher costs of construction and financing;

• inability to complete construction on schedule due to a number of factors, including inclement weather, labor disruptions, construction delays, delays or failure to receive zoning or other regulatory approvals, acts of terror or other acts of violence, or natural disasters (such as fires, seismic activity or floods);

• inability to complete construction on schedule due to a number of factors, including inclement weather, labor disruptions, construction delays, supply chain issues, delays or failure to receive zoning or other regulatory approvals, acts of terror or other acts of violence, or natural disasters (such as fires, seismic activity or floods);

• significant time lag between commencement and stabilization resulting in delayed returns and greater risks due to fluctuations in the general economy, shifts in demographics and competition;

22 unchanged sentences

Moreover, our ability to dispose of, or finance real estate may be materially and adversely affected during periods of uncertainty or unfavorable conditions in the credit markets as we or potential buyers of our real estate may experience difficulty in obtaining financing.

To dispose of low basis deferral or tax-

protected properties efficiently we from time to time use like-kind exchanges, which are intended to qualify for non-recognition of taxable gain, but can be difficult to consummate and result in the property for which the disposed assets are exchanged inheriting their low tax bases and other tax attributes (including tax protection covenants).

To dispose of low basis deferral or tax-protected properties efficiently we from time to time use like-kind exchanges, which are intended to qualify for non-recognition of taxable gain, but can be difficult to consummate and result in the property for which the disposed assets are exchanged

inheriting their low tax bases and other tax attributes (including tax protection covenants).

These challenges related to dispositions may limit our flexibility.

22 unchanged sentences

If we are unable to obtain debt financing or refinance existing debt upon maturity on terms favorable to us, or at all, our financial condition and results of operations would likely be adversely affected.

We have approximately $329 million of debt, with a weighted average interest rate of 3.7%, maturing within the next 12 months related to mortgage loans encumbering three of our properties.

As of the date of this filing, w e have approximately $70.8 million of mortgage debt, with a weighted average interest rate of 4.0%, maturing within the next 12 months related to mortgage loans encumbering two of our properties.

We are actively exploring our options to refinance them, however, there is no guarantee that we will be able to do so prior to their maturities or at rates that are favorable to us.

As of December 31, 2022, approximately 9% of our current outstanding debt bore interest at variable rates based on the London Interbank Offered Rate (“LIBOR”), Secured Overnight Financing Rate (“SOFR”) or the Prime Rate, plus an applicable margin per the loan agreement.

As of December 31, 2023, approximately 16% of our current outstanding debt bore interest at variable rates based on the Secured Overnight Financing Rate (“SOFR”), plus an applicable margin per the respective loan agreements.

We are exposed to risks related to a potential rising interest rate environment for our current or any future variable interest rate debt.

1 unchanged sentence

While we may enter into interest rate hedging transactions with counterparties, there can be no guarantee that the future financial condition of these counterparties will enable them to fulfill their obligations under such agreements.

In 2017, U.K.

regulators announced that they intend to stop compelling banks to submit rates for the calculation of LIBOR after 2021.

As a result, U.S.

regulators identified SOFR as their preferred alternative to USD LIBOR in derivatives and other financial contracts.

Additionally, while U.S.

official guidance states that there should be no new LIBOR trading after December 31, 2021, we expect that USD LIBOR will continue to be published until June 30, 2023.

We are not currently able to predict when LIBOR will cease to be available in the United States.

When LIBOR is discontinued, the interest rates of our LIBOR-

indexed debt following such event will be based on either alternate reference rates, such as SOFR, or agreed upon replacement rates.

While such an event would not affect our ability to borrow or maintain already outstanding borrowings, it could result in higher interest rates or additional hedging costs.

If the cost or amount of our debt increases or we cannot refinance our debt in sufficient amounts or on acceptable terms, we are at risk of default on our obligations, which could have a material adverse effect on our company, including our ability to make distributions to our shareholders.

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As of December 31, 2023, we had $1.6 billion of secured debt outstanding and 32 of our properties were encumbered by secured debt.

As of December 31, 2022, we were in compliance with all debt covenants.

As of December 31, 2023, we were in compliance with all debt covenants, with the exception of those related to our mortgage on Kingswood Center which has been in default since May 2023.

Further, for tax purposes, the foreclosure of a mortgage may result in the recognition of taxable income related to the extinguished debt without us having received any accompanying cash proceeds.

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There is a separate requirement to distribute net capital gains or pay a corporate level tax in lieu thereof.

Our access to debt or equity financing depends on the willingness of third parties to lend to or to make equity investments and on conditions in the capital markets generally.

Our access to debt or equity financing depends on conditions in the capital markets generally and the willingness of third parties to lend to or to make equity investments.

There can be no assurance that new financing or other capital will be available or available on acceptable terms.

2 unchanged sentences

RISKS RELATED TO BUSINESS CONTINUITY

Risks related to our malls in Puerto Rico.

Our two malls in Puerto Rico make up approximately 7% of our net operating income (“NOI”) for the year ended December 31, 2022.

Puerto Rico faces significant fiscal and economic challenges, including those resulting from natural disasters such as hurricanes and earthquakes, the recent COVID-19 pandemic, and its government filing for bankruptcy protection in 2017.

These factors have led to an emigration trend of Puerto Rico residents to the United States and elsewhere over the last several years.

The combination of these circumstances could result in less disposable income for the purchase of goods sold in our malls and the inability of merchants to pay rent and other charges.

Risks related to our properties in Puerto Rico.

Our two properties in Puerto Rico made up approximately 8% of our net operating income (“NOI”) for the year ended December 31, 2023.

Puerto Rico has faced significant fiscal and economic challenges in previous years, including its government filing for bankruptcy protection in 2017, and continues to face challenges resulting from natural disasters such as hurricanes and earthquakes.

Such events, individually or in the aggregate, can disrupt the local economy and could result in less disposable income for the purchase of goods sold at our properties and the inability of merchants to pay rent and other charges.

Any of these events could negatively impact our ability to lease space on terms and conditions we seek and could have a material adverse effect on our business and results of operations.

As of December 31, 2022, we have individual, non-recourse mortgages on each of our Puerto Rico properties.

We also have a limited corporate guarantee related to our mortgage on the Outlets at Montehiedra of $12.5 million that is reduced commensurate with the loan amortization schedule.

As of December 31, 2022, our remaining exposure under the guarantee is $8.0 million, which will reduce to zero in approximately 3.8 years.

Natural disasters could have a concentrated impact on us.

We own properties near the Atlantic Coast and in Puerto Rico which are subject to natural disasters such as hurricanes, floods and storm surges.

We own properties near the Atlantic Coast and in Puerto Rico which are subject to natural disasters such as hurricanes, floods, earthquakes and storm surges.

We also have two properties in California that could be impacted by earthquakes.

As a result, we could become subject to business interruption, significant losses and repair costs, such as those we experienced from Hurricane Maria, which damaged and caused the temporary closure of our two properties in Puerto Rico.

As a result, we could become subject to business interruption, significant losses and repair costs, such as those we experienced from Hurricane Maria in 2017, which damaged and caused the temporary closure of our two properties in Puerto Rico.

We maintain comprehensive, all-risk property and rental value insurance coverage on our properties, however losses resulting from a natural disaster may be subject to a deductible or not fully covered and such losses could adversely affect our cash flow, financial condition and results of operations.

Some of our potential losses may not be covered by insurance.

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

We maintain 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 the terms, conditions, exclusions, deductibles and sub-limits, among other limiting factors.

3 unchanged sentences

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.

We cannot anticipate what coverage will be available on commercially reasonable terms in the future and expect premiums across most coverage lines to increase.

The incurrence of uninsured losses, costs or uncovered premiums could materially and adversely affect our business, results of operations and financial condition.

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Our internal and outsourced IT networks and related systems are essential to the operation of our business and our ability to perform day to day operations.

A breach or significant and extended disruption in the functioning of our systems, including our primary website, may damage our reputation and cause us to lose customers, tenants and revenues, generate third-party claims, result in the unintended and/or unauthorized public disclosure or the misappropriation of proprietary, personal identifying and confidential information, and require us to incur significant expenses to address and remediate or otherwise resolve these kinds of issues, and we may not be

able to recover these expenses in whole or in any part from our service providers, responsible parties, or insurance carriers which could have a material adverse effect on our business and operations.

See Part I, Item 1C.

“Cybersecurity” in this Annual Report on Form 10-K for further information on our risk management, strategy and governance as it pertains to cyber risks.

RISKS RELATED TO ENVIRONMENTAL LIABILITY AND REGULATORY COMPLIANCE

1 unchanged sentence

We may become subject to laws or regulations related to climate change, which could cause our business, results of operations and financial condition to be impacted adversely.

The federal government has enacted, and some of the states and localities in which we operate may enact, certain climate change laws and regulations or have begun regulating carbon footprints and greenhouse gas emissions.

The federal government has enacted, and some of the states and localities in which we operate may enact, certain climate change laws and regulations or have begun regulating carbon footprints and

greenhouse gas emissions.

Although these laws and regulations have not had any known material adverse effects on our business to date, they could result in substantial costs, including compliance costs, increased energy costs, retrofit costs and construction costs, including monitoring and reporting costs, and capital expenditures for environmental control facilities and other new equipment.

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Companies across all industries are facing increasing scrutiny related to their ESG practices and reporting.

Investors, customers, employees, and other stakeholders have begun to focus increasingly on ESG practices and to place increasing importance on the implications and social cost of their investments, purchases, and other interactions with companies.

Investors, customers, employees, and other stakeholders have begun to focus increasingly on ESG practices and to place more importance on the implications and social cost of their investments, purchases, and other interactions with companies.

With this increased focus and demand, public reporting regarding ESG practices is becoming more broadly expected.

If our ESG practices and reporting do not meet investor, customer, or employee expectations, which continue to evolve, our reputation and tenant retention may be negatively impacted.

Any disclosure we make may include our policies and practices on a variety of ESG matters, including corporate governance, environmental compliance, employee health and safety practices, human capital management, and workforce inclusion and diversity.

It is possible that stakeholders may not be satisfied with our ESG reporting, our ESG practices or our speed of adoption.

We could also incur additional costs and devote additional resources to monitor, report and implement various ESG practices.

If we fail, or are perceived to be failing, to meet the standards included in any sustainability

disclosure or the expectations of our various stakeholders, it could negatively impact our reputation, tenant and employee retention, and access to capital.

If our ESG practices (including the speed of adoption of certain practices) and reporting do not meet investor, tenant, customer, or employee expectations, which continue to evolve, our reputation and tenant retention may be negatively impacted.

Our failure, or perceived failure, to meet the standards included in any sustainability disclosure or the expectations of our various stakeholders, could negatively impact our reputation, tenant and employee retention, and access to capital.

In 2022, the SEC proposed extensive rules aimed at enhancing and standardizing climate-related disclosures in an effort to foster greater consistency, comparability and reliability of climate-related information among public issuers.

The proposal, if adopted, would require public issuers to include prescribed climate-related information in their registration statements and annual reports, including information regarding greenhouse gas emissions and climate-related risks and opportunities and related financial impacts, governance and strategy.

Additionally, we may become subject to new compliance requirements and/or new costs or taxes associated with natural resource or energy usage and related emissions (such as a “carbon tax”), which could increase our operating costs.

All of these factors could result in additional costs and devoting additional resources to monitor, report and implement various ESG practices.

Compliance or failure to comply with the Americans with Disabilities Act, safety regulations or other requirements could result in substantial costs.

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Any restrictions on our ability to incur additional indebtedness or make certain distributions could preclude us from meeting the 90% distribution requirement.

Decreases in funds from operations due to unfinanced expenditures for acquisitions of properties or increases in the number of shares outstanding without commensurate increases in funds from operations would adversely affect our ability to maintain distributions to our

shareholders.

Consequently, there can be no assurance that we will be able to make distributions at the anticipated distribution rate or any other rate.

28 unchanged sentences

• “Business combination” provisions that, subject to certain exceptions, prohibit certain business combinations between us and an “interested shareholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our shares or an affiliate thereof or an affiliate or associate of ours who was the beneficial owner, directly or indirectly, of 10% or more of the voting power of our then outstanding voting shares at any time within the two-year period immediately prior to the date in question) for five years after the most recent date on which the shareholder becomes an interested shareholder, and thereafter impose fair price or super majority shareholder voting requirements on these combinations;

• “Control share” provisions that provide the holders of “control shares” of a company (defined as shares that, when aggregated with other shares controlled by the shareholder, entitle the shareholder to exercise voting power in the election of trustees within one of three increasing ranges) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of the voting power of issued and outstanding “control shares,” subject to certain exceptions) have no voting rights with respect to their control shares, except to the extent approved by our shareholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.

direct or indirect acquisition of ownership or control of the voting power of issued and outstanding “control shares,” subject to certain exceptions) have no voting rights with respect to their control shares, except to the extent approved by our shareholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.

As permitted by Maryland law, our Bylaws provide that we will not be subject to the control share provisions of Maryland law.

6 unchanged sentences

We may also choose to adopt other takeover defenses in the future.

Any such actions could deter a transactions that may otherwise be in the interest of our shareholders.

Any such actions could deter a transaction that may otherwise be in the interest of our shareholders.

We may issue additional shares in a manner that could adversely affect the likelihood of certain takeover transactions.

42 unchanged sentences

Inflation and related volatility in the economy could negatively impact the value of our publicly-traded equity securities.

Volatility in the financial markets like we are currently experiencing could affect our ability to access the capital markets at a time when we desire, or impact the cost at which we are able to do so, which could slow or deter our future growth.

Volatility in the financial markets could affect our ability to access the capital markets at a time when we desire, or impact the cost at which we are able to do so, which could slow or deter our future growth.

To the extent our exposure to increases in interest rates on any of our debt is not eliminated through interest rate swaps and interest rate protection agreements, such increases will result in higher debt service costs, which will adversely affect our cash flows.

1 unchanged sentence

See “ Risks Related to Our Liquidity and Indebtedness – Risks related to our outstanding debt ”.

Increases in interest rates could increase our financing costs over time, either through near-term borrowings on our existing variable-rate borrowings or

refinancing of our existing borrowings that may incur higher interest expenses related to the issuance of new debt.

Increases in interest rates could increase our financing costs over time, either through near-term borrowings on our existing variable-rate borrowings or refinancing of our existing borrowings that may incur higher interest expenses related to the issuance of new debt.

There is no guarantee we will be able to mitigate the impact of rising inflation.

4 unchanged sentences

These factors could result in a decline in the market prices of our publicly-traded equity securities.

UNRESOLVED STAFF COMMENTS

There are no unresolved comments from the staff of the SEC as of the date of this Annual Report on Form 10-K.

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

What changed 10-K

Item 1A. Risk Factors