What changed in this filing

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Item 1A. Risk Factors

2025-02-12 compared with 2024-02-14 · 52 added, 36 removed, 340 unchanged (21% of the section changed)

14 unchanged sentences

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.

During 2023 and 2024, 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.

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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.

While our leases generally provide for fixed annual rent increases, high levels of inflation will likely outpace our contractual rent increases.

While our leases generally provide for fixed annual rent increases, high levels of inflation would likely outpace our contractual rent increases.

As a result, our business, financial condition, results of operations, cash flows, liquidity and ability to satisfy our debt service obligations and to pay dividends and distributions to shareholders could be adversely affected over time.

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

International trade disputes, including U.S.

trade tariffs and retaliatory tariffs, could adversely impact our business.

International trade disputes, including threatened or implemented tariffs imposed by the U.S.

and threatened or implemented tariffs imposed by foreign countries in retaliation, could adversely impact our business.

Many of our tenants sell imported goods, and tariffs or other trade restrictions could materially increase costs for these tenants.

To the extent our tenants are unable to pass these costs on to their customers, our tenants’ operations could be adversely impacted, which among other things, could weaken demand by those tenants for our real estate.

If the operations of potential future tenants are similarly adversely impacted, overall demand for our real estate may also weaken.

In addition, international trade disputes, including those related to tariffs, could result in inflationary pressures that directly impact our costs, such as costs for steel, lumber and other materials applicable to our redevelopment projects.

Trade disputes could also adversely impact global supply chains which could further increase costs for us and our tenants or delay delivery of key inventories and supplies.

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.

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.

The actual and potential restrictions intended to prevent and mitigate such events have had, and could have in the future, additional adverse effects on our business, including with regards to:

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E-commerce may have an adverse impact on our tenants and our business.

E-commerce continues to gain popularity and growth in internet sales is likely to continue in the future.

E-commerce is a vital part of our tenants’ business and continues to gain popularity, with growth in internet sales likely to continue in the future.

E-commerce could result in a downturn in the business of some of our current tenants and could affect the way other current and future tenants lease space.

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A majority of our income depends on the ability of our tenants to pay the full amount of rent and other charges due under their leases on a timely basis.

Some of our leases provide for the payment, in addition to base rent, of additional rent above the base amount according to a specified percentage of the gross sales generated by the tenants and generally provide for reimbursement of real estate taxes and expenses of operating the property.

Economic and/or competitive conditions may impact the success of our tenants’ retail operations and therefore the amount of rent and expense reimbursements we receive from our tenants.

While demand for our retail spaces has been strong, there can be no assurance in our ability to maintain our occupancy levels on favorable terms.

Any reduction in our tenants’ abilities to pay base rent, percentage rent or other charges on a timely basis will decrease our income, funds available to pay indebtedness and funds available for distribution to shareholders.

Any reduction in our tenants’ abilities to pay base rent, percentage rent or other charges on a timely basis, or at all, will decrease our income, funds available to pay indebtedness and funds available for distribution to shareholders.

If a tenant does not pay its rent, we might not be able to enforce our rights as landlord without delays and might incur substantial legal and other costs.

During periods of economic adversity, there may be an increase in the number of tenants that cannot pay their rent and an increase in vacancy rates, which could materially and adversely affect our cash flow, financial condition and results of operations.

During periods of economic adversity, there may be an increase in the number of tenants

that cannot pay their rent and an increase in vacancy rates, which could materially and adversely affect our cash flow, financial condition and results of operations.

We may be unable to renew leases or relet space as leases expire on terms comparable to prior leases or at all.

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In addition, changes in space utilization by our tenants may impact our ability to renew or relet space without the need to incur substantial costs in renovating or redesigning the internal configuration of the relevant property.

If we are unable to promptly renew the leases or relet the space at similar rates or if we incur substantial costs

in renewing or reletting the space, our cash flow and ability to service debt obligations and pay dividends and other distributions to security holders could be adversely affected.

If we are unable to promptly renew the leases or relet the space at similar rates or if we incur substantial costs in renewing or reletting the space, or if we are unable to renew or relet the space at all, our cash flow and ability to service debt obligations and pay dividends and other distributions to security holders could be adversely affected.

Bankruptcy or insolvency of tenants may decrease our revenues, net income and available cash.

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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).

These challenges related to dispositions may limit our flexibility.

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Costs associated with operating real estate, such as real estate taxes, insurance and maintenance costs, generally are not reduced even when a property is not fully occupied, rental rates decrease, or other circumstances cause a reduction in income from the property.

As a result, cash flow from operations may be reduced if a tenant does not pay its rent or we are unable to rent our properties on favorable terms.

As a result, cash flow from operations may be reduced.

A number of properties in our portfolio are subject to ground or building leases;

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Recording an impairment charge results in an immediate reduction in our income in the period in which the charge is taken, which could materially and adversely affect our results of operations and financial condition.

For example, we recognized such an impairment in the first quarter of 2023 related to an office and retail property located in Brooklyn, NY.

RISKS RELATED TO OUR LIQUIDITY AND INDEBTEDNESS

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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.

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 the date of this filing, w e have approximately $23.7 million of mortgage debt, with an interest rate of 4.0%, maturing within the next 12 months related to a

mortgage loan encumbering one of our properties.

We are actively exploring our options to refinance;

however, there is no guarantee that we will be able to do so prior to maturity or at a rate that is favorable to us.

As of December 31, 2024, approximately 6% 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.

Interest expense on our variable rate debt at December 31, 2023 would increase by approximately $2.3 million annually for every 100-basis-point increase in interest rates.

Interest expense on our variable rate debt at December 31, 2024, excluding the mortgage loan secured by Plaza at Woodbridge as the loan is hedged with an interest rate cap, would increase by approximately $0.5 million annually for every 100-basis-point increase in interest rates.

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.

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The mortgages on our properties contain customary covenants such as those that limit our ability, without the prior consent of the lender, to further mortgage the applicable property or to reduce insurance coverage.

Our existing revolving credit facility contains, and any debt that we may obtain in the future may contain, customary restrictions, requirements and other limitations on our ability to incur indebtedness, including covenants (i) that limit our ability to incur debt based upon (1) our ratio of total debt to total assets, (2) our ratio of secured debt to total assets, (3) our ratio of earnings before interest, tax, depreciation and amortization (“EBITDA”) to interest expense and (4) our ratio of EBITDA to fixed charges, and (ii) that require us to maintain a certain level of unencumbered assets to unsecured debt.

The Revolving Credit Agreement contains, and any debt that we may obtain in the future may contain, customary restrictions, requirements and other limitations on our ability to incur indebtedness, including covenants (i) that limit our ability to incur debt based upon (1) our ratio of total debt to total assets, (2) our ratio of secured debt to total assets, (3) our ratio of earnings before interest, tax, depreciation and amortization (“EBITDA”) to interest expense and (4) our ratio of EBITDA to fixed charges, and (ii) that require us to maintain a certain level of unencumbered assets to unsecured debt.

Our ability to borrow is subject to compliance with these and other covenants.

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In the event that we default on mortgages in the future, either as a result of ceasing to make debt service payments or failing to meet applicable covenants, the lenders may accelerate the related debt obligations and foreclose and/or take control of the properties that secure their loans.

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, 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.

As of December 31, 2024, we had $1.6 billion of secured debt outstanding, encumbering 31 of our properties.

As of December 31, 2024, we were in compliance with all debt covenants.

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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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.

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

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.

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

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

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

We are 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.

Certain premiums have increased significantly and may continue to do so in the future.

We cannot anticipate what coverage will be available on commercially reasonable terms, or at all, and expect premiums across most coverage lines will continue to increase in light of recent events, including hurricanes and flooding in our core markets.

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.

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.

3 unchanged sentences

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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If not addressed, environmental conditions could impair our ability to sell or re-lease the affected properties in the future, or result in lower sales prices or rent payments, which could adversely impact our cash flow, financial condition and results of operations.

Increased scrutiny and changing expectations from investors, customers, employees, and others regarding our environmental, social and governance practices and reporting could cause us to incur additional costs, devote additional resources and expose us to additional risks, which could adversely impact our reputation, customer acquisition and retention, access to capital and employee retention.

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 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 (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.

Increased scrutiny and changing expectations from investors, customers, employees, and others regarding our Corporate Responsibility practices and reporting could cause us to incur additional costs, devote additional resources and expose us to additional risks, which could adversely impact our reputation, customer acquisition and retention, access to capital and employee retention.

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

Investors, customers, employees, and other stakeholders have begun to focus increasingly on Corporate Responsibility 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 Corporate Responsibility practices is becoming more broadly expected.

If our Corporate Responsibility 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.

In March 2024, the SEC issued their final ruling on the “Enhancement and Standardization of Climate-Related Disclosures for Investors” which includes extensive rules aimed at creating consistency, comparability and reliability of climate-related information among public issuers.

In April 2024, in response to petitions and litigation from state officials, business and environmental groups alike, the SEC issued an order staying the rules until the litigation process is complete.

As of the date of this filing, the timeline for resolution is not easily determinable and it is uncertain whether the rules will be upheld, amended or abolished.

The rules 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, capital expenditures, 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.

All of these factors could result in additional costs and devoting additional resources to monitor, report and implement various Corporate Responsibility 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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We intend to distribute 100% of our REIT taxable income to our shareholders.

From time to time, we may generate taxable income greater than our cash flow as a result of differences in timing between the recognition of taxable income and the actual receipt of cash or the effect of nondeductible capital expenditures, the effect of limitations on interest and net operating loss deductibility, the creation of reserves, or required debt or amortization payments.

limitations on interest and net operating loss deductibility, the creation of reserves, or required debt or amortization payments.

If we do not have other funds available in these situations, we could be required to borrow funds on unfavorable terms, sell assets at disadvantageous prices, distribute amounts that would otherwise be invested in future acquisitions, capital expenditures or repayment of debt, or make taxable distributions of our shares or debt securities to make distributions sufficient to enable us to pay out enough of our taxable income to satisfy the REIT distribution requirement and avoid corporate income tax and the 4% excise tax in a particular year.

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• “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;

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.

• “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.

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

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• our strategic decisions, such as acquisitions, dispositions, spin-offs, joint ventures, strategic investments or changes in business strategy;

• equity issuances or buybacks by us or the perception that such issuances or buybacks may occur or adverse reaction market reaction to any indebtedness we incur;

• equity issuances or buybacks by us or the perception that such issuances or buybacks may occur or adverse market reaction to any indebtedness we incur;

• changes in the interest rate environment and/or the impact of rising inflation;

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

What changed 10-K

Item 1A. Risk Factors