RETAIL PROPERTIES OF

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RETAIL PROPERTIES OF AMERICA : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

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02/19/2020 | 04:56 pm


Certain statements in "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Risk Factors," "Business" and elsewhere
in this Annual Report on Form 10-K may constitute "forward-looking statements"
within the meaning of the safe harbor from civil liability provided for such
statements by the Private Securities Litigation Reform Act of 1995 (set forth in
Section 27A of the Securities Act of 1933, as amended, or the Securities Act,
and Section 21E of the Securities Exchange Act of 1934, as amended, or the
Exchange Act). Forward-looking statements involve numerous risks and
uncertainties and you should not rely on them as predictions of future events.
Forward-looking statements depend on assumptions, data or methods which may be
incorrect or imprecise and we may not be able to realize them. We do not
guarantee that the transactions and events described will happen as described
(or that they will happen at all). You can identify forward-looking statements
by the use of forward-looking terminology such as "believes," "expects," "may,"
"should," "intends," "plans," "estimates" or "anticipates" and variations of
such words or similar expressions or the negative of such words. You can also
identify forward-looking statements by discussions of strategies, plans or
intentions. Risks, uncertainties and changes in the following factors, among
others, could cause actual results and future events to differ materially from
those set forth or contemplated in the forward-looking statements:
• economic, business and financial conditions, and changes in our industry
and changes in the real estate markets in particular;


• economic and other developments in markets where we have a high
concentration of properties;



• our business strategy;



• our projected operating results;



• rental rates and/or vacancy rates;





• frequency and magnitude of defaults on, early terminations of or
non-renewal of leases by tenants;


• bankruptcy or insolvency of a major tenant or a significant number of
smaller tenants;



• adverse impact of e-commerce developments and shifting consumer retail



behavior on our tenants;



• interest rates or operating costs;



• the discontinuation of LIBOR;



• real estate and zoning laws and changes in real property tax rates;





? real estate valuations;


• our leverage;



• our ability to generate sufficient cash flows to service our outstanding



indebtedness and make distributions to our shareholders;



• our ability to obtain necessary outside financing;



• the availability, terms and deployment of capital;



• general volatility of the capital and credit markets and the market price



of our Class A common stock;



• risks generally associated with real estate acquisitions and dispositions,



including our ability to identify and pursue acquisition and disposition



opportunities;



• risks generally associated with redevelopment, including the impact of



construction delays and cost overruns, our ability to lease redeveloped



space and our ability to identify and pursue redevelopment opportunities;



• composition of members of our senior management team;



• our ability to attract and retain qualified personnel;



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• our ability to continue to qualify as a REIT;



• governmental regulations, tax laws and rates and similar matters;



• our compliance with laws, rules and regulations;



• environmental uncertainties and exposure to natural disasters;



• insurance coverage; and



• the likelihood or actual occurrence of terrorist attacks in the U.S.





For a further discussion of these and other factors that could impact our future
results, performance or transactions, see Item 1A. "Risk Factors." Readers
should not place undue reliance on any forward-looking statements, which are
based only on information currently available to us (or to third parties making
the forward-looking statements). We undertake no obligation to publicly release
any revisions to such forward-looking statements to reflect events or
circumstances after the date of this Annual Report on Form 10-K, except as
required by applicable law.
The following discussion and analysis should be read in conjunction with our
consolidated financial statements and the related notes included in this report.
Executive Summary
Retail Properties of America, Inc. is a REIT that owns and operates high
quality, strategically located open-air shopping centers, including properties
with a mixed-use component. As of December 31, 2019, we owned 104 retail
operating properties in the United States representing 19,972,000 square feet of
GLA and had three active expansion and redevelopment projects. Our retail
operating portfolio includes (i) neighborhood and community centers, (ii) power
centers, and (iii) lifestyle centers and multi-tenant retail-focused mixed-use
properties, as well as single-user retail properties.
The following table summarizes our portfolio as of December 31, 2019:
Percent Leased
Number of GLA Including Leases
Property Type Properties (in thousands) Occupancy Signed (a)
Retail operating portfolio:
Multi-tenant retail:
Neighborhood and community
centers 63 10,244 95.5 % 96.8 %
Power centers 23 4,922 96.2 % 96.8 %
Lifestyle centers and mixed-use
properties (b) 16 4,545 93.4 % 94.0 %
Total multi-tenant retail 102 19,711 95.2 % 96.2 %
Single-user retail 2 261 100.0 % 100.0 %
Total retail operating
properties 104 19,972 95.2 % 96.2 %
Expansion and redevelopment
projects:
Circle East (c) 1
One Loudoun Downtown - Pads G &
H (d) -
Carillon 1
Total number of properties 106



(a) Includes leases signed but not commenced.



(b) Excludes the 18 multi-family rental units at Plaza del Lago. As of



December 31, 2019, 14 multi-family rental units were leased at an average



monthly rental rate per unit of $1,309.



(c) The redevelopment at Circle East is no longer combined with our neighboring



property Towson Square, which increased our property count within expansion



and redevelopment projects by one. There was no change to the property count



of lifestyle centers and mixed-use properties as Towson Square remains within



our retail operating portfolio.



(d) The operating portion of this property is included in the property count of



lifestyle centers and mixed-use properties within our retail operating
portfolio.



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During the first half of 2018, we completed our portfolio transformation and are
now a prominent owner of multi-tenant retail properties, many with a mixed-use
component, primarily located in the following markets: Dallas, Washington,
D.C.
/Baltimore, New York, Chicago, Seattle, Atlanta, Houston, San Antonio,
Phoenix and Austin.
We are primarily focused on growing our portfolio organically through (i)
accretive leasing activity and (ii) mixed-use expansion and redevelopment
projects. During 2019, we recorded a series of accomplishments in each of these
primary areas of focus.
Our 2019 leasing activity was accretive as we signed 498 new and renewal leases
across 3,255,000 square feet of GLA for a blended comparable re-leasing spread
of 8.1%, achieving positive comparable cash leasing spreads of 19.7% on signed
new leases and 5.3% on signed renewal leases. This 2019 signed leasing activity
represents approximately 16% of our portfolio GLA, just shy of our record high
of approximately 17% achieved in 2018. These signings helped us achieve record
highs in a number of leasing, occupancy and ABR statistics as of December 31,
2019
, including (i) retail portfolio occupancy of 95.2%, (ii) retail portfolio
percent leased, including leases signed but not commenced, of 96.2%, (iii)
retail anchor tenant occupancy of 97.6% and (iv) retail anchor tenant percent
leased, including leases signed but not commenced, of 98.8%, as well as retail
portfolio ABR per occupied square foot of $19.52. During 2019, we also achieved
average annual contractual rent increases on signed new leases of approximately
180 basis points.
Our active and near-term expansion and redevelopment projects consist of
approximately $372,000 to $407,000 of expected investment through 2022,
equivalent to approximately 12% of the net book value of our investment
properties as of December 31, 2019. These predominantly mixed use-focused
projects include the redevelopments at Circle East and phase one at Carillon,
the expansion projects of Pads G & H at One Loudoun Downtown and site and
building reconfiguration at The Shoppes at Quarterfield as well as the vacant
pad development at Southlake Town Square. Our current portfolio of assets
contains numerous additional projects in the longer-term pipeline, including,
among others, future phases at Carillon, additional pad developments at One
Loudoun Downtown, pad developments and expansions at Main Street Promenade and
Downtown Crown, and future projects at Merrifield Town Center, Tysons Corner,
Southlake Town Square, Lakewood Towne Center and One Loudoun Uptown.
During 2019, we recorded several milestones related to our expansion and
redevelopment projects. We placed the redevelopment of the multi-family rental
units at Plaza del Lago, our first multi-family rental redevelopment, in
service. At Carillon, we executed a joint venture agreement for the medical
office building component at phase one of the project and completed demolition
work on approximately 290,000 square feet of vacant retail GLA. We also broke
ground on Pads G & H at One Loudoun Downtown. Lastly, we signed our first lease
at the Circle East redevelopment with a prominent fast casual restaurant
operator.
2019 Company Highlights
Developments in Progress
During the year ended December 31, 2019, we:
• invested $29,470 in our expansion and redevelopment projects at Circle
East, Plaza del Lago, One Loudoun Downtown and Carillon;


• commenced development of Pads G & H at One Loudoun Downtown and
redevelopment at Carillon and reclassified the related costs from



"Buildings and other improvements" into "Developments in progress" in the



accompanying consolidated balance sheets; and



• placed the Plaza del Lago multi-family rental redevelopment project in



service and reclassified the related costs from "Developments in progress"



into "Buildings and other improvements" in the accompanying consolidated



balance sheets.



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The following table summarizes the carrying amount of developments in progress
as of December 31, 2019:
Property Name MSA December 31, 2019
Active expansion and
redevelopment projects:
Circle East Baltimore $ 33,628
One Loudoun Downtown Washington, D.C. 27,868
Carillon Washington, D.C. 26,407
87,903
Land held for future
development:
One Loudoun Uptown Washington, D.C. 25,450
Total developments in
progress $ 113,353


Acquisitions



The following table summarizes our acquisitions during the year ended
December 31, 2019:



Square Acquisition
Date Property Name MSA Property Type Footage Price
March 7, Multi-tenant
2019 North Benson Center Seattle retail 70,500 $ 25,340
June 10, Paradise Valley
2019 Marketplace - Parcel Phoenix Land (a) - 1,343
August Southlake Town Square Single-user
13, 2019 - Parcel Dallas parcel (b) 3,100 3,293
73,600 $ 29,976



(a) We acquired a parcel adjacent to our Paradise Valley Marketplace multi-tenant



retail operating property. The total number of properties in our portfolio



was not affected by this transaction.



(b) We acquired a single-user parcel at our Southlake Town Square multi-tenant



retail operating property. The total number of properties in our portfolio



was not affected by this transaction.



Dispositions



The following table summarizes our dispositions during the year ended
December 31, 2019:



Square
Date Property Name Property Type Footage Consideration
Edwards Multiplex -
March 8, 2019 Fresno (a) Single-user retail


94,600 $ 25,850



North Rivers Towne
June 28, 2019 Center Multi-tenant retail 141,500 18,900
236,100 $ 44,750



(a) Prior to the disposition, we were subject to a ground lease whereby we leased



the underlying land from a third party. The ground lease was assumed by the



purchaser in connection with the disposition.





In addition to the property dispositions listed above, during the year ended
December 31, 2019, we received consideration of $5,089 in connection with the
second and third phases of the sale of a land parcel at One Loudoun Downtown,
which included rights to develop 22 residential units.

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Market Summary
The following table summarizes our retail operating portfolio by market as of
December 31, 2019. Square feet of GLA is presented in thousands.
% of Total ABR per % of Total % Leased
Number of Multi-Tenant Occupied Multi-Tenant Including
Property Type/Market Properties ABR (a) Retail ABR (a) Sq. Ft. GLA (a) Retail GLA (a) Occupancy Signed
Multi-Tenant Retail:
Top 25 MSAs (b)
Dallas 19 $ 84,821 23.2 % $ 22.77 3,942 20.0 % 94.5 % 94.8 %
Washington, D.C. 8 39,860 10.9 % 29.44 1,388 7.0 % 97.5 % 97.5 %
New York 9 37,797 10.3 % 29.80 1,292 6.6 % 98.1 % 98.1 %
Chicago 8 29,156 8.0 % 23.63 1,358 6.9 % 90.9 % 91.3 %
Seattle 9 23,879 6.5 % 16.45 1,548 7.9 % 93.8 % 98.2 %
Baltimore 5 23,066 6.3 % 16.07 1,604 8.1 % 89.5 % 94.0 %
Atlanta 9 20,648 5.7 % 13.85 1,513 7.7 % 98.5 % 98.5 %
Houston 9 16,446 4.5 % 15.01 1,141 5.8 % 96.0 % 97.1 %
San Antonio 3 12,825 3.5 % 18.04 722 3.7 % 98.5 % 98.5 %
Phoenix 3 10,959 3.0 % 17.92 632 3.2 % 96.8 % 98.1 %
Los Angeles 1 5,711 1.6 % 25.98 241 1.2 % 91.1 % 93.8 %
Riverside 1 4,508 1.2 % 15.72 292 1.5 % 98.1 % 98.1 %
St. Louis 1 4,275 1.2 % 9.60 453 2.3 % 98.3 % 98.3 %
Charlotte 1 3,964 1.1 % 13.68 320 1.6 % 90.6 % 90.6 %
Tampa 1 2,378 0.7 % 19.51 126 0.6 % 97.0 % 97.0 %
Subtotal 87 320,293 87.7 % 20.35 16,572 84.1 % 95.0 % 96.1 %

Non-Top 25 MSAs (b) 15 44,978 12.3 % 14.91 3,139 15.9 % 96.0 % 96.5 %

Total Multi-Tenant Retail 102 365,271 100.0 % 19.47 19,711 100.0 % 95.2 % 96.2 %

Single-User Retail 2 5,864 22.49 261 100.0 % 100.0 %

Total Retail
Operating Portfolio (c) 104 371,135 $ 19.52 19,972 95.2 % 96.2 %



(a) Excludes $1,898 of multi-tenant retail ABR and 106 square feet of



multi-tenant retail GLA attributable to Circle East and Carillon, both of



which are in active redevelopment and are located in the Baltimore and



Washington, D.C. MSAs, respectively. Including these amounts, 87.8% of our



multi-tenant retail ABR and 84.2% of our multi-tenant retail GLA is located



in the top 25 MSAs.



(b) Top 25 MSAs and Non-Top 25 MSAs are determined by the United States Census



Bureau and ranked based on the most recently available population estimates.



(c) Excludes the 18 multi-family rental units at Plaza del Lago, which were



placed in service during the three months ended September 30, 2019. As of



December 31, 2019, 14 multi-family rental units were leased at an average



monthly rental rate per unit of $1,309.





Leasing Activity
The following table summarizes the leasing activity in our retail operating
portfolio during the year ended December 31, 2019. Leasing activity related to
our active and near-term expansion and redevelopment projects is also included
beginning in the fourth quarter of 2019. Leases with terms of less than 12
months have been excluded from the table.
New
Contractual Prior % Change Weighted Tenant
Number of GLA Signed Rent per Square Contractual over Prior Average Allowances
Leases Signed (in thousands) Foot (PSF) (a)



Rent PSF (a) ABR (a) Lease Term PSF (b)
Comparable
Renewal Leases 310 1,989 $ 20.59 $ 19.56 5.3 % 4.8 $ 2.15
Comparable New
Leases 76 469 23.93 20.00 19.7 % 9.7 58.31
Non-Comparable
New and Renewal
Leases (c) 112 797 18.53 N/A N/A 7.7 31.96
Total 498 3,255 $ 21.23 $ 19.64 8.1 % 6.3 $ 17.05



(a) Total excludes the impact of Non-Comparable New and Renewal Leases.



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(b) Excludes tenant allowances and related square foot amounts at our active and



near-term expansion and redevelopment projects. These tenant allowances are



included in the expected investment for each project.



(c) Includes (i) leases signed on units that were vacant for over 12 months, (ii)



leases signed without fixed rental payments and (iii) leases signed where the



previous and the current lease do not have a consistent lease structure.





We anticipate our leasing efforts in 2020 will focus on (i) vacant anchor and
small shop space, (ii) upcoming lease expirations and (iii) spaces within our
expansion and redevelopment projects. As we lease these spaces, we look to
capitalize on the opportunity to mark rents to market, upgrade our tenancy and
optimize the mix of operators and unique retailers at our properties.
Capital Markets
During the year ended December 31, 2019, we:
• issued $100,000 of 10-year 4.82% senior unsecured notes in a private


placement transaction pursuant to a note purchase agreement we entered



into with certain institutional investors;



• entered into a term loan agreement with a group of financial institutions



for a five-year $120,000 unsecured term loan (Term Loan Due 2024) and a



seven-year $150,000 unsecured term loan (Term Loan Due 2026). The term



loans bear interest at a rate of LIBOR, adjusted based on applicable



reserve percentages established by the Federal Reserve, plus a credit



spread based on a leverage grid ranging from 1.20% to 1.70% for the Term



Loan Due 2024 and 1.50% to 2.20% for the Term Loan Due 2026;



• entered into agreements to swap $120,000 of LIBOR-based variable rate debt



to a fixed interest rate of 1.68% through July 2024 and $150,000 of



LIBOR-based variable rate debt to a fixed interest rate of 1.77% through



July 2026;



• repaid $255,000, net of borrowings, on our unsecured revolving line of



credit; and



• repaid $107,671 of mortgages payable, incurred $8,151 of debt prepayment



fees and made scheduled principal payments of $2,875 related to amortizing



loans.



Distributions



We declared quarterly distributions totaling $0.6625 per share of our Class A
common stock during 2019.
Results of Operations
The following information summarizes our results of operations for the year
ended December 31, 2019 compared to the year ended December 31, 2018.
Information pertaining to fiscal year 2017 was included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2018 beginning on page 25
under Part II, "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations," which was filed with the SEC on February
13, 2019
and which information is incorporated by reference in this Item 7.

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Comparison of Results for the Years Ended December 31, 2019 to 2018



Year Ended December 31,
2019 2018 Change
Revenues:
Lease income $ 481,686 $ 482,497 $ (811 )

Expenses:
Operating expenses 68,396 74,885 (6,489 )
Real estate taxes 73,247 73,683 (436 )
Depreciation and amortization 194,573 175,977 18,596
Provision for impairment of investment properties 12,298 2,079 10,219
General and administrative expenses 40,489 42,363 (1,874 )
Total expenses 389,003 368,987 20,016

Other (expense) income:
Interest expense (76,571 ) (73,746 ) (2,825 )
Gain on sales of investment properties 18,872 37,211 (18,339 )
Other (expense) income, net (2,587 ) 665 (3,252 )
Net income 32,397 77,640 (45,243 )
Net income attributable to noncontrolling interests - - -


Net income attributable to common shareholders $ 32,397 $ 77,640 $ (45,243 )





Net income attributable to common shareholders decreased $45,243 from $77,640
for the year ended December 31, 2018 to $32,397 for the year ended December 31,
2019
primarily as a result of the following:
• an $18,596 increase in depreciation and amortization primarily due to the


write-off of assets taken out of service due to the demolition of existing



structures at our Carillon redevelopment during the year ended December



31, 2019. No such write-off occurred during the year ended December 31,
2018
;



• an $18,339 decrease in gain on sales of investment properties related to



the sale of two investment properties, representing approximately 236,100



square feet of GLA, and the sale of two land parcels during the year ended
December 31, 2019 compared to the sale of 10 investment properties and a



land parcel, representing approximately 1,831,200 square feet of GLA, and



the sale of air rights at Circle East during the year ended December 31,
2018
; and



• a $10,219 increase in provision for impairment of investment properties.



Based on the results of our evaluations for impairment (see Notes 12 and



13 to the accompanying consolidated financial statements), we recognized



impairment charges of $12,298 and $2,079 during the years ended



December 31, 2019 and 2018, respectively;



partially offset by
• a $6,489 decrease in operating expenses primarily due to the sales of



operating properties during 2018 and 2019 as well as termination fee



expense of $1,900 incurred during 2018 related to the Toys "R" Us auction



process whereby we were the winning bidder on two leases. No such



termination fee expense was incurred during 2019.





Net operating income (NOI)
We define NOI as all revenues other than (i) straight-line rental income
(non-cash), (ii) amortization of lease inducements, (iii) amortization of
acquired above and below market lease intangibles and (iv) lease termination fee
income, less real estate taxes and all operating expenses other than lease
termination fee expense and non-cash ground rent expense, which is comprised of
straight-line ground rent expense and amortization of acquired ground lease
intangibles for the year ended December 31, 2018 and amortization of
right-of-use lease assets and amortization of lease liabilities for the year
ended December 31, 2019. NOI consists of same store NOI (Same Store NOI) and NOI
from other investment properties (NOI from Other Investment Properties). We
believe that NOI, Same Store NOI and NOI from Other Investment Properties, which
are supplemental non-GAAP financial measures, provide an additional and useful
operating perspective not immediately apparent from "Net income" or "Net income
attributable to common shareholders" in accordance with accounting principles
generally accepted in the United States (GAAP). We use these measures to
evaluate our performance on a property-by-property basis because they allow
management to evaluate the impact that factors such as lease structure, lease
rates and tenant base have on our operating results. NOI, Same Store NOI and

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NOI from Other Investment Properties do not represent alternatives to "Net
income" or "Net income attributable to common shareholders" in accordance with
GAAP as indicators of our financial performance. Comparison of our presentation
of NOI, Same Store NOI and NOI from Other Investment Properties to similarly
titled measures for other REITs may not necessarily be meaningful due to
possible differences in definition and application by such REITs. For reference
and as an aid in understanding our computation of NOI, a reconciliation of net
income attributable to common shareholders as computed in accordance with GAAP
to Same Store NOI has been presented for each comparable period presented.
Same store portfolio - 2019 and 2018
For the year ended December 31, 2019, our same store portfolio consisted of 102
retail operating properties acquired or placed in service and stabilized prior
to January 1, 2018. The number of properties in our same store portfolio
increased to 102 as of December 31, 2019 from 101 as of December 31, 2018 as a
result of the following:
• the addition of three same store investment properties acquired prior to
January 1, 2018;



partially offset by
• the removal of two same store investment properties sold during the year



ended December 31, 2019.





The properties and financial results reported in "Other investment properties"
primarily include the following:
• properties acquired after December 31, 2017;



Reisterstown Road Plaza, which was reclassified from active redevelopment



into our retail operating portfolio during 2018;



• the multi-family rental units at Plaza del Lago, a redevelopment project



that was placed in service during 2019;



• Circle East, which is in active redevelopment;



• One Loudoun Downtown - Pads G & H, which are in active development;



• Carillon, which is in active redevelopment;



• properties that were sold or held for sale in 2018 and 2019; and



• the net income from our wholly owned captive insurance company.



The following tables present a reconciliation of net income attributable to
common shareholders to Same Store NOI and details of the components of Same
Store NOI for the years ended December 31, 2019 and 2018:



Year Ended December 31,
2019
2018


Change



Net income attributable to common shareholders $ 32,397 $ 77,640 $ (45,243 )
Adjustments to reconcile to Same Store NOI:
Gain on sales of investment properties (18,872 ) (37,211 ) 18,339
Depreciation and amortization 194,573 175,977 18,596
Provision for impairment of investment
properties 12,298 2,079 10,219
General and administrative expenses 40,489 42,363 (1,874 )
Interest expense 76,571 73,746 2,825
Straight-line rental income, net (4,533 ) (5,717 ) 1,184
Amortization of acquired above and below market
lease intangibles, net (5,429 ) (5,467 ) 38
Amortization of lease inducements 1,329 1,020 309
Lease termination fees, net (2,024 ) 179 (2,203 )
Non-cash ground rent expense, net 1,356 1,844 (488 )
Other expense (income), net 2,587 (665 ) 3,252
NOI 330,742 325,788 4,954
NOI from Other Investment Properties (10,099 ) (13,556 ) 3,457
Same Store NOI $ 320,643 $ 312,232 $ 8,411



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Year Ended December 31,
2019 2018 Change
Same Store NOI:
Base rent $ 344,872 $ 336,713 $ 8,159
Percentage and specialty rent 3,187 3,681 (494 )
Tenant recoveries 102,932 101,313 1,619
Other lease-related income 5,569 4,675 894
Bad debt, net (2,387 ) (1,915 ) (472 )
Property operating expenses (62,047 ) (61,502 ) (545 )
Real estate taxes (71,483 ) (70,733 ) (750 )
Same Store NOI $ 320,643 $ 312,232 $ 8,411


Same Store NOI increased $8,411, or 2.7%, primarily due to an increase of $8,159
in base rent driven by increases of (i) $3,575 from contractual rent changes,
(ii) $3,105 from occupancy growth and (iii) $2,177 from re-leasing spreads,
partially offset by $1,595 from higher rent abatements.
Funds From Operations Attributable to Common Shareholders
The National Association of Real Estate Investment Trusts, or NAREIT, an
industry trade group, has promulgated a financial measure known as funds from
operations (FFO). In December 2018, NAREIT issued "NAREIT Funds From Operations
White Paper - 2018 Restatement" (2018 FFO White Paper) to incorporate
interpretive guidance and clarifications made by NAREIT subsequent to their
previous FFO White Paper, which was issued in April 2002. The 2018 FFO White
Paper was effective for annual periods beginning after December 15, 2018 and
interim periods therein. We adopted the 2018 FFO White Paper effective January
1, 2019
on a retrospective basis.
As defined by NAREIT, FFO means net income computed in accordance with GAAP,
excluding (i) depreciation and amortization related to real estate, (ii) gains
from sales of real estate assets, (iii) gains and losses from change in control
and (iv) impairment write-downs of real estate assets and investments in
entities directly attributable to decreases in the value of real estate held by
the entity. We have adopted the NAREIT definition in our computation of FFO
attributable to common shareholders. Management believes that, subject to the
following limitations, FFO attributable to common shareholders provides a basis
for comparing our performance and operations to those of other REITs.
The 2018 FFO White Paper did not change the fundamental definition of FFO;
however, it provided clarification and that, to the extent a REIT recognizes a
gain on sale or impairment related to assets incidental to the main business of
a REIT, the REIT has the option to include or exclude such gains or impairments
in the calculation of FFO. In connection with the adoption of the 2018 FFO White
Paper, we elected to exclude all gains on sale and impairments of real estate
from FFO, whereas we previously only excluded gains on sale and impairments of
depreciable investment properties. To be consistent with the current
presentation, we restated FFO attributable to common shareholders for the year
ended December 31, 2018 to exclude the gain on sale of non-depreciable
investment property of $3,464, which was previously included within FFO
attributable to common shareholders. There was no change to FFO attributable to
common shareholders for the year ended December 31, 2017 as a result of the
adoption of the 2018 FFO White Paper as there was no gain on sale or impairment
of non-depreciable investment property recorded during the year ended December
31, 2017
.
We define Operating FFO attributable to common shareholders as FFO attributable
to common shareholders excluding the impact of discrete non-operating
transactions and other events which we do not consider representative of the
comparable operating results of our real estate operating portfolio, which is
our core business platform. Specific examples of discrete non-operating
transactions and other events include, but are not limited to, the impact on
earnings from gains or losses associated with the early extinguishment of debt
or other liabilities, litigation involving the Company, the impact on earnings
from executive separation and the excess of redemption value over carrying value
of preferred stock redemption, which are not otherwise adjusted in our
calculation of FFO attributable to common shareholders. There was no change to
previously reported Operating FFO attributable to common shareholders for the
years ended December 31, 2018 and 2017 as a result of the adoption of the 2018
FFO White Paper because gains on sale and impairments of non-depreciable
investment property have been, and continue to be, excluded from our calculation
of Operating FFO attributable to common shareholders.
We believe that FFO attributable to common shareholders and Operating FFO
attributable to common shareholders, which are supplemental non-GAAP financial
measures, provide additional and useful means to assess the operating
performance of REITs. FFO attributable to common shareholders and Operating FFO
attributable to common shareholders do not represent alternatives to (i) "Net
income" or "Net income attributable to common shareholders" as indicators of our
financial performance, or (ii) "Cash

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flows from operating activities" in accordance with GAAP as measures of our
capacity to fund cash needs, including the payment of dividends. Comparison of
our presentation of Operating FFO attributable to common shareholders to
similarly titled measures for other REITs may not necessarily be meaningful due
to possible differences in definition and application by such REITs.
The following table presents a reconciliation of net income attributable to
common shareholders to FFO attributable to common shareholders and Operating FFO
attributable to common shareholders:
Year Ended


December 31,



2019 2018


2017



Net income attributable to common shareholders $ 32,397 $ 77,640


$ 237,624
Depreciation and amortization of real estate 193,183 (a) 174,672


202,110



Provision for impairment of investment
properties 12,298 2,079


67,003



Gain on sales of investment properties (18,872 ) (37,211 )


(b) (337,975 )
FFO attributable to common shareholders $ 219,006 $ 217,180 (b) $ 168,762




FFO attributable to common shareholders per
common share outstanding - diluted $ 1.03 $ 1.00


(b) $ 0.73



FFO attributable to common shareholders $ 219,006 $ 217,180


$ 168,762
Impact on earnings from the early
extinguishment of debt, net 7,581 5,944


72,654



Provision for hedge ineffectiveness - - 9
Impact on earnings from executive separation
(c) - 1,737 (1,086 )
Excess of redemption value over carrying value
of preferred stock redemption (d) - -


4,706



Other (e) 3,106 629


441



Operating FFO attributable to common
shareholders $ 229,693 $ 225,490


(b) $ 245,486




Operating FFO attributable to common
shareholders
per common share outstanding - diluted $ 1.08 $ 1.03 (b) $ 1.06



(a) Includes $26,330 of accelerated depreciation recorded in connection with the



write-off of assets taken out of service due to the demolition of existing



structures at our Carillon redevelopment during the year ended December 31,



2019.



(b) FFO attributable to common shareholders for the year ended December 31, 2018



has been restated to exclude $3,464 of gain on sale of non-depreciable



investment property in connection with our adoption of the 2018 FFO White



Paper effective January 1, 2019 on a retrospective basis. As the gain on sale



of non-depreciable investment property was previously excluded from Operating



FFO attributable to common shareholders, there was no change to Operating FFO



attributable to common shareholders.



(c) Reflected as an increase (decrease) within "General and administrative



expenses" in the accompanying consolidated statements of operations and other



comprehensive (loss) income.



(d) Included within "Preferred stock dividends" in the accompanying consolidated



statements of operations and other comprehensive (loss) income.



(e) Primarily consists of the impact on earnings from litigation involving the



Company, including costs to engage outside counsel related to litigation with



former tenants, which are included in "Other (expense) income, net" in the



accompanying consolidated statements of operations and other comprehensive



(loss) income.





Liquidity and Capital Resources
We anticipate that cash flows from the below-listed sources will provide
adequate capital for the next 12 months and beyond for all scheduled principal
and interest payments on our outstanding indebtedness, including maturing debt,
current and anticipated tenant allowances or other capital obligations, the
shareholder distributions required to maintain our REIT status and compliance
with the financial covenants of our unsecured debt agreements.

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Our primary expected sources and uses of liquidity are as follows:



SOURCES USES
? Operating cash flow ? Tenant allowances and leasing costs
? Cash and cash equivalents ? Improvements made to individual
properties, certain of which are not



? Available borrowings under our recoverable through common area



unsecured revolving maintenance charges to tenants
line of credit ? Debt repayments


? Proceeds from capital markets ? Distribution payments



transactions



? Proceeds from asset dispositions ? Redevelopment, expansion and pad



development activities


? Proceeds from the sales of air ? Acquisitions



rights
? New development
? Repurchases of our common stock


We have made substantial progress over the last several years in strengthening
our balance sheet, as demonstrated by our reduced leverage, improved financial
flexibility and higher unencumbered asset ratio. We have funded debt maturities
primarily through asset dispositions and capital markets transactions, including
the public offering of our common stock and private and public offerings of
senior unsecured notes. As of December 31, 2019, we had no scheduled debt
maturities and $2,494 of principal amortization due through the end of 2020,
which we plan on satisfying through a combination of cash flows from operations,
working capital and our unsecured revolving line of credit.
The table below summarizes our consolidated indebtedness as of December 31,
2019
:
Aggregate Weighted Weighted
Principal Average Average Years
Debt Amount Interest Rate Maturity Date to Maturity
Fixed rate mortgages payable
(a) $ 94,904 4.37 % Various 5.1 years

Unsecured notes payable:
Senior notes - 4.12% due
2021 100,000 4.12 % June 30, 2021 1.5 years
Senior notes - 4.58% due
2024 150,000 4.58 % June 30, 2024 4.5 years
Senior notes - 4.00% due
2025 250,000 4.00 % March 15, 2025 5.2 years
Senior notes - 4.08% due
2026 100,000 4.08 % September 30, 2026 6.8 years
Senior notes - 4.24% due
2028 100,000 4.24 % December 28, 2028 9.0 years
Senior notes - 4.82% due
2029 100,000 4.82 % June 28, 2029 9.5 years
Total unsecured notes
payable (a) 800,000 4.27 % 5.8 years

Unsecured credit facility:
Term loan due 2021 - fixed
rate (b) 250,000 3.20 % January 5, 2021 1.0 year
Revolving line of credit -
variable rate 18,000 2.85 % April 22, 2022 (c) 2.3 years
Total unsecured credit
facility (a) 268,000 3.18 % 1.1 years

Unsecured term loans:
Term Loan Due 2023 - fixed
rate (d) 200,000 4.05 % November 22, 2023 3.9 years
Term Loan Due 2024 - fixed
rate (e) 120,000 2.88 % July 17, 2024 4.5 years
Term Loan Due 2026 - fixed
rate (f) 150,000 3.27 % July 17, 2026 6.5 years
Total unsecured term loans
(a) 470,000 3.50 % 4.9 years

Total consolidated
indebtedness $ 1,632,904 3.88 % 4.7 years



(a) Fixed rate mortgages payable excludes mortgage discount of $(493) and



capitalized loan fees of $(256), net of accumulated amortization, as of



December 31, 2019. Unsecured notes payable excludes discount of $(616) and



capitalized loan fees of $(3,137), net of accumulated amortization, as of



December 31, 2019. Unsecured term loans exclude capitalized loan fees of



$(3,477), net of accumulated amortization, as of December 31, 2019.



Capitalized loan fees related to the revolving line of credit are included in



"Other assets, net" in the accompanying consolidated balance sheets.



(b) Reflects $250,000 of LIBOR-based variable rate debt that has been swapped to



a fixed rate of 2.00% plus a credit spread based on a leverage grid ranging



from 1.20% to 1.70% through January 5, 2021. The applicable credit spread was



1.20% as of December 31, 2019.



(c) We have two six-month extension options on the revolving line of credit,



which we may exercise as long as we are in compliance with the terms of the



unsecured credit agreement and we pay an extension fee equal to 0.075% of the



commitment amount being extended.



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(d) Reflects $200,000 of LIBOR-based variable rate debt that has been swapped to



a fixed rate of 2.85% plus a credit spread based on a leverage grid ranging



from 1.20% to 1.85% through November 22, 2023. The applicable credit spread



was 1.20% as of December 31, 2019.



(e) Reflects $120,000 of LIBOR-based variable rate debt that has been swapped to



a fixed rate of 1.68% plus a credit spread based on a leverage grid ranging



from 1.20% to 1.70% through July 17, 2024. The applicable credit spread was



1.20% as of December 31, 2019.



(f) Reflects $150,000 of LIBOR-based variable rate debt that has been swapped to



a fixed rate of 1.77% plus a credit spread based on a leverage grid ranging



from 1.50% to 2.20% through July 17, 2026. The applicable credit spread was



1.50% as of December 31, 2019.





Mortgages Payable
During the year ended December 31, 2019, we repaid mortgages payable in the
total amount of $107,671, which had a weighted average fixed interest rate of
4.91%, incurred $8,151 of debt prepayment fees and made scheduled principal
payments of $2,875 related to amortizing loans.
Unsecured Notes Payable
Notes Due 2029
On June 28, 2019, we issued $100,000 of 4.82% senior unsecured notes due 2029
(Notes Due 2029) in a private placement transaction pursuant to a note purchase
agreement we entered into with certain institutional investors on April 5, 2019.
The proceeds were used to repay borrowings on our unsecured revolving line of
credit.
The note purchase agreement governing the Notes Due 2029 contains customary
representations, warranties and covenants, and events of default. Pursuant to
the terms of such note purchase agreement, we are subject to various financial
covenants, which include the following: (i) maximum unencumbered, secured and
consolidated leverage ratios; (ii) a minimum interest coverage ratio; (iii) a
minimum unencumbered interest coverage ratio (as set forth in our unsecured
credit facility and the note purchase agreements governing the Notes Due 2021
and 2024 and the Notes Due 2026 and 2028 defined below); and (iv) a minimum
fixed charge coverage ratio (as set forth in our unsecured credit facility).
Notes Due 2026 and 2028
On September 30, 2016, we issued $100,000 of 4.08% senior unsecured notes due
2026 in a private placement transaction pursuant to a note purchase agreement we
entered into with certain institutional investors on September 30, 2016.
Pursuant to the same note purchase agreement, on December 28, 2016, we also
issued $100,000 of 4.24% senior unsecured notes due 2028 (Notes Due 2026 and
2028). The proceeds were used to pay down our unsecured revolving line of
credit, early repay certain longer-dated mortgages payable and for general
corporate purposes.
The note purchase agreement governing the Notes Due 2026 and 2028 contains
customary representations, warranties and covenants, and events of default.
Pursuant to the terms of the note purchase agreement, we are subject to various
financial covenants, including the requirement to maintain the following: (i)
maximum unencumbered, secured and consolidated leverage ratios; (ii) a minimum
interest coverage ratio; (iii) an unencumbered interest coverage ratio (as set
forth in our unsecured credit facility and the note purchase agreement governing
the Notes Due 2021 and 2024 described below); and (iv) a fixed charge coverage
ratio (as set forth in our unsecured credit facility).
Notes Due 2025
On March 12, 2015, we completed a public offering of $250,000 in aggregate
principal amount of 4.00% senior unsecured notes due 2025 (Notes Due 2025). The
Notes Due 2025 were priced at 99.526% of the principal amount to yield 4.058% to
maturity. The proceeds were used to repay a portion of our unsecured revolving
line of credit.
The indenture, as supplemented, governing the Notes Due 2025 (the Indenture)
contains customary covenants and events of default. Pursuant to the terms of the
Indenture, we are subject to various financial covenants, including the
requirement to maintain the following: (i) maximum secured and total leverage
ratios; (ii) a debt service coverage ratio; and (iii) maintenance of an
unencumbered assets to unsecured debt ratio.
Notes Due 2021 and 2024
On June 30, 2014, we completed a private placement of $250,000 of unsecured
notes, consisting of $100,000 of 4.12% senior unsecured notes due 2021 and
$150,000 of 4.58% senior unsecured notes due 2024 (Notes Due 2021 and 2024). The
proceeds were used to repay a portion of our unsecured revolving line of credit.

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The note purchase agreement governing the Notes Due 2021 and 2024 contains
customary representations, warranties and covenants, and events of default.
Pursuant to the terms of the note purchase agreement, we are subject to various
financial covenants, some of which are based upon the financial covenants in
effect in our unsecured credit facility, including the requirement to maintain
the following: (i) maximum unencumbered, secured and consolidated leverage
ratios; (ii) minimum interest coverage and unencumbered interest coverage
ratios; and (iii) a minimum consolidated net worth.
As of December 31, 2019, management believes we were in compliance with the
financial covenants under the Indenture and the note purchase agreements.
Unsecured Term Loans and Revolving Line of Credit
Unsecured Credit Facility
On April 23, 2018, we entered into our fifth amended and restated unsecured
credit agreement (Unsecured Credit Agreement) with a syndicate of financial
institutions led by Wells Fargo Bank, National Association serving as
syndication agent and KeyBank National Association serving as administrative
agent to provide for an unsecured credit facility aggregating $1,100,000
(Unsecured Credit Facility). The Unsecured Credit Facility consists of an
$850,000 unsecured revolving line of credit and a $250,000 unsecured term loan
and is priced on a leverage grid at a rate of LIBOR plus a credit spread. In
accordance with the Unsecured Credit Agreement, we may elect to convert to an
investment grade pricing grid. As of December 31, 2019, making such an election
would have resulted in a higher interest rate and, as such, we have not made the
election to convert to an investment grade pricing grid.
The following table summarizes the key terms of the Unsecured Credit Facility:
Leverage-Based Pricing Investment Grade Pricing
Unsecured Credit Extension
Facility Maturity Date Option Extension Fee Credit Spread Facility Fee Credit Spread Facility Fee
$250,000 unsecured
term loan due 2021 1/5/2021 N/A N/A 1.20%-1.70% N/A 0.90%-1.75% N/A
$850,000 unsecured
revolving line of 2-six
credit 4/22/2022 month 0.075% 1.05%-1.50% 0.15%-0.30% 0.825%-1.55% 0.125%-0.30%


The Unsecured Credit Facility has a $500,000 accordion option that allows us, at
our election, to increase the total Unsecured Credit Facility up to $1,600,000,
subject to (i) customary fees and conditions including, but not limited to, the
absence of an event of default as defined in the Unsecured Credit Agreement and
(ii) our ability to obtain additional lender commitments.
The Unsecured Credit Agreement contains customary representations, warranties
and covenants, and events of default. Pursuant to the terms of the Unsecured
Credit Agreement, we are subject to various financial covenants, including the
requirement to maintain the following: (i) maximum unencumbered, secured and
consolidated leverage ratios; and (ii) minimum fixed charge and unencumbered
interest coverage ratios. As of December 31, 2019, management believes we were
in compliance with the financial covenants and default provisions under the
Unsecured Credit Agreement.
As of December 31, 2019, we had letters of credit outstanding totaling $291 that
serve as collateral for certain capital improvements at one of our properties
and reduce the available borrowings on our unsecured revolving line of credit.
Unsecured Term Loans
Term Loan Due 2024 and Term Loan Due 2026
On July 17, 2019, we entered into a term loan agreement (2019 Term Loan
Agreement) with a group of financial institutions for a five-year $120,000
unsecured term loan (Term Loan Due 2024) and a seven-year $150,000 unsecured
term loan (Term Loan Due 2026). The Term Loan Due 2024 and Term Loan Due 2026
bear interest at a rate of LIBOR, adjusted based on applicable reserve
percentages established by the Federal Reserve, plus a credit spread based on a
leverage grid. In accordance with the 2019 Term Loan Agreement, we may elect to
convert to an investment grade pricing grid. As of December 31, 2019, making
such an election would have resulted in a higher interest rate and, as such, we
have not made the election to convert to an investment grade pricing grid. The
proceeds were used to repay outstanding indebtedness and for general corporate
purposes.
Term Loan Due 2023
On January 3, 2017, we received funding on a seven-year $200,000 unsecured term
loan (Term Loan Due 2023) with a group of financial institutions, which closed
during the year ended December 31, 2016 and was amended on November 20, 2018.
The Term Loan Due 2023 is priced on a leverage grid at a rate of LIBOR plus a
credit spread. In accordance with the amended term loan

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agreement (Amended 2017 Term Loan Agreement), we may elect to convert to an
investment grade pricing grid. As of December 31, 2019, making such an election
would have resulted in a higher interest rate and, as such, we have not made the
election to convert to an investment grade pricing grid.
The following table summarizes the key terms of the unsecured term loans:
Investment Grade
Leverage-Based Pricing Pricing
Unsecured Term Loans Maturity Date Credit Spread Credit Spread
$200,000 unsecured term
loan due 2023 11/22/2023 1.20% - 1.85% 0.85% - 1.65%
$120,000 unsecured term
loan due 2024 7/17/2024 1.20% - 1.70% 0.80% - 1.65%
$150,000 unsecured term
loan due 2026 7/17/2026 1.50% - 2.20% 1.35% - 2.25%


The Term Loan Due 2024 has a $130,000 accordion option and the Term Loan Due
2026 has a $100,000 accordion option that, collectively, allow us, at our
election, to increase the total of the Term Loan Due 2024 and Term Loan Due 2026
up to $500,000, subject to (i) customary fees and conditions, including the
absence of an event of default as defined in the 2019 Term Loan Agreement and
(ii) our ability to obtain additional lender commitments.
The Term Loan Due 2023 has a $100,000 accordion option that allows us, at our
election, to increase the Term Loan Due 2023 up to $300,000, subject to (i)
customary fees and conditions, including the absence of an event of default as
defined in the Amended 2017 Term Loan Agreement and (ii) our ability to obtain
additional lender commitments.
The 2019 Term Loan Agreement and the Amended 2017 Term Loan Agreement contain
customary representations, warranties and covenants, and events of default.
These include financial covenants such as (i) maximum unencumbered, secured and
consolidated leverage ratios; (ii) minimum fixed charge coverage ratios; and
(iii) minimum unencumbered interest coverage ratios. As of December 31, 2019,
management believes we were in compliance with the financial covenants and
default provisions under the 2019 Term Loan Agreement and the Amended 2017 Term
Loan Agreement.
Debt Maturities
The following table summarizes the scheduled maturities and principal
amortization of our indebtedness as of December 31, 2019, for each of the next
five years and thereafter and the weighted average interest rates by year, as
well as the fair value of our indebtedness as of December 31, 2019. The table
does not reflect the impact of any 2020 debt activity.
2020 2021 2022 2023 2024 Thereafter Total Fair Value
Debt:
Fixed rate debt:
Mortgages payable (a) $ 2,494 $ 2,626 $ 26,678 $ 31,758 $ 1,737 $ 29,611 $ 94,904 $ 98,082
Fixed rate term loans
(b) - 250,000 - 200,000 120,000 150,000 720,000 720,000
Unsecured notes payable
(c) - 100,000 - -



150,000 550,000 800,000 822,883
Total fixed rate debt 2,494 352,626 26,678 231,758


271,737 729,611 1,614,904 1,640,965

Variable rate debt:
Variable rate revolving
line of credit - - 18,000 - - - 18,000 18,000
Total debt (d) $ 2,494 $ 352,626 $ 44,678 $ 231,758 $ 271,737 $ 729,611 $ 1,632,904 $ 1,658,965

Weighted average
interest rate on debt:
Fixed rate debt 4.38 % 3.47 % 4.81 % 4.06 % 3.83 % 4.02 % 3.89 %
Variable rate debt (e) - - 2.85 % - - - 2.85 %
Total 4.38 % 3.47 % 4.02 % 4.06 % 3.83 % 4.02 % 3.88 %



(a) Excludes mortgage discount of $(493) and capitalized loan fees of $(256), net



of accumulated amortization, as of December 31, 2019.



(b) Excludes capitalized loan fees of $(3,477), net of accumulated amortization,



as of December 31, 2019. The following variable rate term loans have been



swapped to fixed rate debt: (i) $250,000 of LIBOR-based variable rate debt



has been swapped to a fixed rate of 2.00% plus a credit spread based on a



leverage grid through January 5, 2021; (ii) $200,000 of LIBOR-based variable



rate debt has been swapped to a fixed rate of 2.85% plus a credit spread



based on a leverage grid through November 22, 2023; (iii) $120,000 of



LIBOR-based variable rate debt has been swapped to a fixed rate of 1.68% plus



a credit spread based on a leverage grid through July 17, 2024; and (iv)



$150,000 of LIBOR-based variable rate debt has been swapped to a fixed rate



of 1.77% plus a credit spread based on a leverage grid through July 17, 2026.



As of December 31, 2019, the applicable credit spread for (i), (ii) and (iii)



was 1.20% and for (iv) was 1.50%.



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(c) Excludes discount of $(616) and capitalized loan fees of $(3,137), net of



accumulated amortization, as of December 31, 2019.



(d) The weighted average years to maturity of consolidated indebtedness was 4.7



years as of December 31, 2019.



(e) Represents interest rate as of December 31, 2019.





We plan on addressing our debt maturities through a combination of cash flows
from operations, working capital, capital markets transactions and our unsecured
revolving line of credit.
Distributions and Equity Transactions
Our distributions of current and accumulated earnings and profits for U.S.
federal income tax purposes are taxable to shareholders, generally, as ordinary
income. Distributions in excess of these earnings and profits generally are
treated as a non-taxable reduction of the shareholders' basis in the shares to
the extent thereof (non-dividend distributions) and thereafter as taxable gain.
We intend to continue to qualify as a REIT for U.S. federal income tax purposes.
The Code generally requires that a REIT annually distributes to its shareholders
at least 90% of its REIT taxable income, determined without regard to the
dividends paid deduction and excluding net capital gains. The Code imposes tax
on any undistributed REIT taxable income.
To satisfy the requirements for qualification as a REIT and generally not be
subject to U.S. federal income and excise tax, we intend to make regular
quarterly distributions of all, or substantially all, of our taxable income to
shareholders. Our future distributions will be at the sole discretion of our
board of directors. When determining the amount of future distributions, we
expect to consider, among other factors, (i) the amount of cash generated from
our operating activities, (ii) our expectations of future cash flow, (iii) our
determination of near-term cash needs for debt repayments and potential future
share repurchases, (iv) the market of available acquisitions of new properties
and redevelopment, expansion and pad development opportunities, (v) the timing
of significant re-leasing activities and the establishment of additional cash
reserves for anticipated tenant allowances and general property capital
improvements, (vi) our ability to continue to access additional sources of
capital, and (vii) the amount required to be distributed to maintain our status
as a REIT, which is a requirement of our Unsecured Credit Agreement, and to
avoid or minimize any income and excise taxes that we otherwise would be
required to pay. Under certain circumstances, we may be required to make
distributions in excess of cash available for distribution in order to meet the
REIT distribution requirements.
In December 2015, our board of directors authorized a common stock repurchase
program under which we may repurchase, from time to time, up to a maximum of
$250,000 of shares of our Class A common stock. In December 2017, our board of
directors authorized a $250,000 increase to the common stock repurchase program.
The shares may be repurchased in the open market or in privately negotiated
transactions and are canceled upon repurchase. The timing and actual number of
shares repurchased will depend on a variety of factors, including price in
absolute terms and in relation to the value of our assets, corporate and
regulatory requirements, market conditions and other corporate liquidity
requirements and priorities. The common stock repurchase program may be
suspended or terminated at any time without prior notice. We did not repurchase
any shares during the year ended December 31, 2019. During the years ended
December 31, 2018 and 2017, we repurchased 6,341 and 17,683 shares,
respectively, at an average price per share of $11.80 and $12.82, respectively,
for a total of $74,952 and $227,102, respectively. As of December 31, 2019,
$189,105 remained available for repurchases of shares of our Class A common
stock under our common stock repurchase program.
Capital Expenditures and Redevelopment Activity
We anticipate that obligations related to capital improvements and
redevelopments, including expansions and pad developments, in 2020 can be met
with cash flows from operations, working capital, capital markets transactions
and our unsecured revolving line of credit.
As of December 31, 2019, we have active expansion and redevelopment projects at
Circle East, One Loudoun Downtown and Carillon. We have invested a total of
approximately $42,000 in these projects, which is net of proceeds of $11,820
from the sale of air rights at Circle East and net of contributions from our
joint venture partners at One Loudoun Downtown and Carillon. These projects are
at various stages of completion, and based on our current plans and estimates,
we anticipate that it will require approximately $319,000 to $352,000 of
additional investment from us to complete these projects. In addition, we have a
near-term expansion project at The Shoppes at Quarterfield and a vacant pad
development at Southlake Town Square that we anticipate commencing in 2020 and
will require approximately $11,000 to $13,000 of investment.
We capitalized $3,730, $2,128 and $1,202 of indirect project costs, which
includes $1,414, $1,123 and $268 of internal salaries and related benefits of
personnel directly involved in the expansion and redevelopment projects and
$1,594, $462 and $485 of interest, related to expansion and redevelopment
projects during the years ended December 31, 2019, 2018 and 2017, respectively.

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In addition, we capitalized $2,685, $2,032 and $1,187 of internal salaries and
related benefits of personnel directly involved in capital projects and tenant
improvements during the years ended December 31, 2019, 2018 and 2017,
respectively. We also capitalized $359, $384 and $368 of internal leasing
incentives, all of which were incremental to signed leases, during the years
ended December 31, 2019, 2018 and 2017, respectively.
Dispositions
The following table highlights our property dispositions during 2019, 2018 and
2017:
Aggregate
Number of Square Proceeds, Net Debt
Properties Sold (a) Footage Consideration (b) Extinguished
2019 Dispositions 2 236,100 $ 44,750 $ 39,594 $ -
2018 Dispositions 10 1,831,200 $ 201,400 $ 184,109 $ 10,750
2017 Dispositions 47 5,810,700 $ 917,808 $ 896,301 $ 27,353 (c)



(a) 2018 dispositions include the disposition of Crown Theater, which was



classified as held for sale as of December 31, 2017. 2017 dispositions



include the dispositions of CVS Pharmacy - Sylacauga and Century III Plaza,



including the Home Depot parcel, both of which were classified as held for



sale as of December 31, 2016.



(b) Represents total consideration net of transaction costs, as well as capital



and tenant-related costs credited to the buyer at close, as applicable. 2017



dispositions include proceeds of $54,087, which were temporarily restricted



related to potential 1031 Exchanges as of December 31, 2017.



(c) Excludes $214,505 of mortgages payable repayments or defeasances completed



prior to disposition of the respective property for the year ended



December 31, 2017.





In addition to the transactions presented in the preceding table, during the
year ended December 31, 2019, we received net proceeds of $5,062 in connection
with the second and third phases of the sale of a land parcel, which included
rights to develop 22 residential units, at One Loudoun Downtown. During the year
ended December 31, 2018, we also received (i) net proceeds of $11,820 in
connection with the sale of air rights at Circle East, (ii) net proceeds of
$1,789 in connection with the sale of the first phase of a land parcel, which
included rights to develop eight residential units, at One Loudoun Downtown, and
(iii) proceeds of $169 from a condemnation award. During the year ended December
31, 2017
, we also received net proceeds of $155 from other transactions,
including escrow funds related to a property disposition and a condemnation
award.
Acquisitions
The following table highlights our asset acquisitions during 2019, 2018 and
2017:
Number of
Assets
Acquired Square Footage Acquisition Price Mortgage Debt
2019 Acquisitions (a) 3 73,600 $ 29,976 $ -
2018 Acquisition (b) 1 - $ 25,000 $ -
2017 Acquisitions (c) 10 443,800 $ 202,915 $ -



(a) In addition to the acquisition of one multi-tenant retail operating property,



2019 acquisitions include the purchase of the following that did not affect



our property count: (i) a parcel adjacent to our Paradise Valley Marketplace



multi-tenant retail operating property and (ii) a single-user parcel at our



Southlake Town Square multi-tenant retail operating property.



(b) 2018 acquisition is One Loudoun Uptown, a 58-acre land parcel, which contains



32 acres that are developable, located adjacent to our One Loudoun Downtown



multi-tenant retail operating property. The total number of properties in our



portfolio was not affected by this transaction.



(c) In addition to the acquisition of three multi-tenant retail operating



properties, 2017 acquisitions include the purchase of the following that did



not affect our property count: (i) the fee interest in our Carillon



multi-tenant retail property that was previously subject to a ground lease



with a third party, (ii) the remaining five phases under contract, including



the development rights for additional residential units, at our One Loudoun



Downtown multi-tenant retail operating property that were acquired in phases



as the seller completed construction on stand-alone buildings at the



property, and (iii) a multi-tenant retail outparcel located at our Southlake



Town Square multi-tenant retail operating property.



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Summary of Cash Flows
Year Ended December 31,
2019 2018 Change



Net cash provided by operating activities $ 231,491 $ 204,163


$ 27,328
Net cash (used in) provided by investing
activities (90,302 ) 87,275 (177,577 )
Net cash used in financing activities (146,343 ) (358,172 ) 211,829
Decrease in cash, cash equivalents and
restricted cash (5,154 ) (66,734 ) 61,580
Cash, cash equivalents and restricted cash, at
beginning of year 19,601 86,335
Cash, cash equivalents and restricted cash, at
end of year $ 14, $ 19,601


Cash Flows from Operating Activities
Cash flows from operating activities consist primarily of net income from
property operations, adjusted for the following, among others: (i) depreciation
and amortization, (ii) provision for impairment of investment properties and
(iii) gain on sales of investment properties. Net cash provided by operating
activities in 2019 increased $27,328 primarily due to the following:
• a $4,954 increase in NOI, consisting of an increase in Same Store NOI of


$8,411, partially offset by a decrease in NOI from properties that were



sold or held for sale in 2018 and 2019 and other properties not included



in our same store portfolio of $3,457; and



• ordinary course fluctuations in working capital accounts;





partially offset by
• a $1,661 increase in cash paid for leasing fees and inducements;



• a $1,230 increase in cash paid for interest, excluding debt prepayment



fees; and



• a $514 increase in cash bonuses paid.





Cash Flows from Investing Activities
Cash flows from investing activities consist primarily of cash paid to purchase
investment properties and fund capital expenditures, tenant improvements and
developments in progress, net of proceeds from the sales of investment
properties. Net cash flows from investing activities in 2019 decreased $177,577
due to the following:
• a $153,231 decrease in proceeds from the sales of investment properties;



• a $17,244 increase in investment in developments in progress;



• a $4,441 increase in cash paid to purchase investment properties; and



• a $2,661 increase in capital expenditures and tenant improvements.





In 2020, we expect to fund redevelopment, expansion and pad development
activities, capital expenditures and tenant improvements through cash flows
generated from operations, working capital, capital markets transactions and our
unsecured revolving line of credit.
Cash Flows from Financing Activities
Cash flows used in financing activities primarily consist of (i) repayments of
our unsecured revolving line of credit and unsecured term loans, (ii)
distribution payments, (iii) principal payments on mortgages payable, (iv) debt
prepayment costs, (v) payment of loan fees and deposits and (vi) shares
repurchased through our common stock repurchase program, partially offset by
proceeds from our unsecured revolving line of credit and the issuance of debt
instruments. Net cash flows used in financing activities in 2019 decreased
$211,829 primarily due to the following:
• a $270,000 increase in proceeds from the issuance of the Term Loan Due
2024 and the Term Loan Due 2026 during the year ended December 31, 2019.
No such proceeds were received in 2018;



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• a $100,000 increase in proceeds from the issuance of unsecured notes



payable to institutional investors in a private placement transaction



during the year ended December 31, 2019. No such proceeds were received in



2018;



• a $100,000 decrease in repayments of unsecured term loans resulting from



the repayment of our unsecured term loan due 2018 during the year ended
December 31, 2018. No such repayments were made in 2019;



• a $74,952 decrease in cash paid to repurchase common shares through our



common stock repurchase program resulting from the common stock
repurchased in 2018. No such repurchases were completed in 2019;


• a $3,805 decrease in distributions paid as a result of a decrease in



common shares outstanding due to the repurchase of common shares through



our common stock repurchase program in 2018; and



• a $3,435 decrease in the payment of loan fees and deposits;



partially offset by
• a $312,000 change in the activity on our unsecured revolving line of



credit from net borrowings of $57,000 during the year ended December 31,



2018 compared to net repayments of $255,000 during the year ended



December 31, 2019;



• a $28,758 increase in principal payments on mortgages payable; and



• a $2,360 increase in debt prepayment fees.





In 2020, we plan to continue to address our debt maturities through a
combination of cash flows from operations, working capital and our unsecured
revolving line of credit.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Contractual Obligations
The following table presents our obligations and commitments to make future
payments under our debt obligations and lease agreements as of December 31, 2019
and excludes the following:
• the impact of any 2020 debt activity;



• recorded debt discounts and capitalized loan fees, which are not obligations;



• obligations related to developments, redevelopments, expansions and pad



developments as well as recurring capital additions, as payments are only
due upon satisfactory performance under the contracts; and



• letters of credit totaling $291 that serve as collateral for certain



capital improvements at one of our properties, which will be satisfied



upon completion of the project.





Payment due by period
Less than 1-3 3-5 More than
1 year (b) years (c) years (d) 5 years (e) Total
Long-term debt (a):
Fixed rate $ 2,494 $ 379,304 $ 503,495 $ 729,611 $ 1,614,904
Variable rate - 18,000 - - 18,000
Interest (f) 63,672 103,400 82,104 58,862 308,038
Operating lease obligations (g) 6,152 12,438 11,800 247,798 278,188
$ 72,318 $ 513,142 $ 597,399 $ 1,036,271 $ 2,219,130



(a) Fixed rate amounts for each year include scheduled principal amortization



payments. Interest payments related to variable rate debt were calculated



using interest rates as of December 31, 2019.



(b) We plan on addressing our 2020 scheduled principal payments on our mortgages



payable through a combination of cash flows from operations, working capital



and our unsecured revolving line of credit.



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(c) Included in fixed rate debt is $250,000 of LIBOR-based variable rate debt



that has been swapped to a fixed rate through three interest rate swaps



through January 2021.



(d) Included in fixed rate debt is (i) $200,000 of LIBOR-based variable rate debt



that has been swapped to a fixed rate through two interest rate swaps through



November 2023 and (ii) $120,000 of LIBOR-based variable rate debt that has



been swapped to a fixed rate through three interest rate swaps through July



2024.



(e) Included in fixed rate debt is $150,000 of LIBOR-based variable rate debt



that has been swapped to a fixed rate through three interest rate swaps



through July 2026.



(f) Represents expected interest payments on our consolidated debt obligations as



of December 31, 2019, including any capitalized interest.



(g) We lease land under non-cancellable leases at certain of our properties



expiring in various years from 2035 to 2073, not inclusive of any available



option period. In addition, unless we can purchase a fee interest in the



underlying land or extend the terms of these leases before or at their



expiration, we will lose our interest in the improvements and the right to



operate these properties. We lease office space under non-cancellable leases



expiring in various years from 2020 to 2023.





Use of Estimates
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions. These estimates and assumptions
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting periods. For example, significant estimates and assumptions have been
made with respect to capitalization of development costs; provision for
impairment, including estimates of holding periods, capitalization rates and
discount rates (where applicable); and initial valuations and related
amortization periods of deferred costs and intangibles, particularly with
respect to property acquisitions. Actual results could differ from these
estimates.
Summary of Significant Accounting Policies
Critical Accounting Policies and Estimates
The following disclosure pertains to accounting policies and estimates we
believe are most "critical" to the portrayal of our financial condition and
results of operations and require our most difficult, subjective or complex
judgments. These judgments often result from the need to make estimates about
the effect of matters that are inherently uncertain. GAAP requires information
in financial statements about accounting principles, methods used and
disclosures pertaining to significant estimates. This discussion addresses our
judgment pertaining to known trends, events or uncertainties which were taken
into consideration upon the application of those policies and the likelihood
that materially different amounts would be reported upon taking into
consideration different conditions and assumptions.
Acquisition of Investment Property
We allocate the purchase price of each acquired investment property accounted
for as an asset acquisition based upon the relative fair value of the individual
assets acquired and liabilities assumed, which generally include (i) land, (ii)
building and other improvements, (iii) in-place lease value intangibles, (iv)
acquired above and below market lease intangibles, (v) any assumed financing
that is determined to be above or below market and (vi) the value of customer
relationships. Asset acquisitions do not give rise to goodwill and the related
transaction costs are capitalized and included with the allocated purchase
price.
For tangible assets acquired, including land, building and other improvements,
we consider available comparable market and industry information in estimating
the acquisition date fair value. We allocate a portion of the purchase price to
the estimated acquired in-place lease value intangibles based on estimated lease
execution costs for similar leases as well as lost rental payments during an
assumed lease-up period. We also evaluate each acquired lease as compared to
current market rates. If an acquired lease is determined to be above or below
market, we allocate a portion of the purchase price to such above or below
market leases based upon the present value of the difference between the
contractual lease payments and estimated market rent payments over the remaining
lease term. Renewal periods are included within the lease term in the
calculation of above and below market lease intangibles if, based upon factors
known at the acquisition date, market participants would consider it reasonably
assured that the lessee would exercise such options. Fair value estimates used
in acquisition accounting, including the discount rate used, require us to
consider various factors, including, but not limited to, market knowledge,
demographics, age and physical condition of the property, geographic location,
size and location of tenant spaces within the acquired investment property, and
tenant profile.

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Impairment of Long-Lived Assets
Our investment properties, including developments in progress, are reviewed for
potential impairment at the end of each reporting period or whenever events or
changes in circumstances indicate that the carrying value may not be
recoverable. At the end of each reporting period, we separately determine
whether impairment indicators exist for each property. Examples of situations
considered to be impairment indicators for both operating properties and
developments in progress include, but are not limited to:
• a substantial decline in or continued low occupancy rate or cash flow;



• expected significant declines in occupancy in the near future;



• continued difficulty in leasing space;



• a significant concentration of financially troubled tenants;



• a reduction in anticipated holding period;



• a cost accumulation or delay in project completion date significantly



above and beyond the original development or redevelopment estimate;



• a significant decrease in market price not in line with general market



trends; and



• any other quantitative or qualitative events or factors deemed significant



by our management or board of directors.





If the presence of one or more impairment indicators as described above is
identified at the end of a reporting period or at any point throughout the year
with respect to a property, the asset is tested for recoverability by comparing
its carrying value to the estimated future undiscounted cash flows. An
investment property is considered to be impaired when the estimated future
undiscounted cash flows are less than its current carrying value. When
performing a test for recoverability or estimating the fair value of an impaired
investment property, we make certain complex or subjective assumptions that
include, but are not limited to:
• projected operating cash flows considering factors such as vacancy rates,
rental rates, lease terms, tenant financial strength, competitive
positioning and property location;


• estimated holding period or various potential holding periods when
considering probability-weighted scenarios;



• projected capital expenditures and lease origination costs;



• estimated interest and internal costs expected to be capitalized, dates of



construction completion and grand opening dates for developments in



progress;



• projected cash flows from the eventual disposition of an operating



property or development in progress;



• comparable selling prices; and



• a property-specific discount rate.





To the extent impairment has occurred, we will record an impairment charge
calculated as the excess of the carrying value of the asset over its estimated
fair value.
Lease Income
We commence recognition of lease income on our leases based on a number of
factors. In most cases, revenue recognition under a lease begins when the lessee
takes possession or controls the physical use of the leased asset. Generally,
this occurs on the lease commencement date. At lease commencement, we expect
that collectibility is probable for all of our leases due to the
creditworthiness analysis performed by us before entering into a new lease.
Lease income, for leases that have fixed and measurable rent escalations, is
recognized on a straight-line basis over the term of each lease. The difference
between such lease income earned and the cash rent due under the provisions of a
lease is recorded as deferred rent receivable and is included as a component of
"Accounts and notes receivable" in the accompanying consolidated balance sheets.

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Certain leases provide for percentage rent based primarily on tenant sales
volume. We recognize percentage rent when the specified target (i.e. breakpoint)
that triggers the percentage rent is achieved.
Also, most leases provide for the reimbursement of the tenant's pro rata share
of certain operating expenses incurred by the landlord including, among others,
real estate taxes, insurance, utilities, common area maintenance and management
fees, subject to the terms of the respective lease. Certain other tenants are
subject to net leases where the tenant is responsible for paying base rent to us
but is directly responsible for other costs associated with occupancy, such a
real estate taxes. Expenses paid directly by the tenant rather than the landlord
are not included in the accompanying consolidated statements of operations and
other comprehensive (loss) income. Expenses paid by the landlord, subject to
reimbursement by the tenant, are included within "Operating expenses" or "Real
estate taxes" and reimbursements are included within "Lease income" along with
the associated base rent in the accompanying consolidated statements of
operations and other comprehensive (loss) income.
We made an accounting policy election to not separate non-lease components
(primarily reimbursement of common area maintenance costs) from the related
lease components as (i) the fixed non-lease components have the same timing and
pattern of transfer as the associated lease component, (ii) the lease component,
if accounted for separately, would be classified as an operating lease and (iii)
we consider the lease component to be the predominant component of the combined
contract. Reimbursements from tenants for recoverable operating expenses are
recognized within "Lease income" in the accompanying consolidated statements of
operations and other comprehensive (loss) income.
In addition, we record lease termination fee income when (i) a termination
letter agreement is signed, (ii) all of the conditions of such agreement have
been fulfilled, (iii) the tenant is no longer occupying the property and (iv)
collectibility is reasonably assured. Upon early lease termination, we provide
for losses related to recognized tenant specific intangibles and other assets or
adjust the remaining useful life of the assets if determined to be appropriate.
Impact of Recently Issued Accounting Pronouncements
Recently Adopted Accounting Pronouncements - Prior to 2020
Effective January 1, 2019, we adopted Accounting Standards Update (ASU) 2016-02,
Leases. This new guidance, including related ASUs that were subsequently issued,
requires lessees to recognize a liability to make lease payments and a
right-of-use lease (ROU) asset, initially measured at the present value of lease
payments, for both operating and financing leases. For leases with a term of 12
months or less, lessees are permitted to make an accounting policy election, by
class of underlying asset, to not recognize lease liabilities and lease assets.
The guidance allows lessees and lessors to make an accounting policy election,
by class of underlying asset, to not separate non-lease components from lease
components. The guidance also provides an optional transition method that would
allow entities to initially apply the new guidance in the period of adoption,
recognizing a cumulative-effect adjustment to the opening balance of retained
earnings, if necessary, and provides a package of three practical expedients
whereby companies are not required to reassess (i) whether any expired or
existing contracts are or contain leases, (ii) the lease classification
(operating vs. capital/financing leases) for any expired or existing leases and
(iii) initial direct costs for any existing leases (Package of Three Practical
Expedients), as well as practical expedients whereby companies are not required
to reassess whether land easements contain a lease and can use hindsight in
determining the lease term and assessing impairment of the ROU asset. The
guidance requires changes in collectibility of operating lease receivables to be
presented as an adjustment to revenue rather than the previous presentation
within "Operating expenses" on the consolidated statements of operations and
other comprehensive (loss) income. Finally, only incremental direct leasing
costs may be capitalized under the new guidance, which is consistent with our
previous policies.
We adopted this new guidance on January 1, 2019, applied the requirements as of
that date, made an accounting policy election to not separate non-lease
components from lease components for all classes of assets, and elected the
Package of Three Practical Expedients as well as the practical expedient related
to not reassessing whether land easements contain a lease. We did not elect the
practical expedient related to hindsight for determining the lease term or
assessing impairment of ROU assets. There was no retained earnings adjustment as
a result of the adoption. The guidance regarding capitalization of leasing costs
did not have any effect on our consolidated financial statements.
Upon adoption, we recognized lease liabilities and ROU assets of $103,432 for
operating leases where we are the lessee related to long-term ground leases and
office leases, which are presented as "Right-of-use lease assets" and "Lease
liabilities" in the accompanying consolidated balance sheets. The ROU assets are
presented net of our existing straight-line ground rent liabilities of $31,030
and acquired ground lease intangible liability of $11,898 as of January 1, 2019.
For leases with a term of 12 months or less, we made an accounting policy
election to not recognize lease liabilities and lease assets.

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For leases where we are the lessor, as noted above, we made an accounting policy
election to not separate non-lease components from lease components for all
classes of assets and have presented all lease-related revenues in a single line
item, "Lease income," rather than the previous presentation that separated
revenues between "Rental income," "Tenant recovery income" and "Other property
income" in the consolidated statements of operations and other comprehensive
(loss) income for the current and comparative periods. This resulted in the
reclassification of (i) $370,638 and $414,804 of revenue previously presented as
"Rental income," (ii) $105,170 and $115,944 of revenue previously presented as
"Tenant recovery income" and (iii) $6,689 and $7,391 of revenue previously
presented as "Other property income" for the years ended December 31, 2018 and
2017, respectively, into "Lease income" in the accompanying consolidated
statements of operations and other comprehensive (loss) income. In addition, we
began recording changes in collectibility of operating lease receivables as an
adjustment to "Lease income" in the accompanying consolidated statements of
operations and other comprehensive (loss) income. For the years ended
December 31, 2018 and 2017, changes in collectibility of operating lease
receivables are presented within "Operating expenses" in the accompanying
consolidated statements of operations and other comprehensive (loss) income.
Effective January 1, 2019, we adopted ASU 2018-16, Derivatives and Hedging, due
to our early adoption of ASU 2017-12, Derivatives and Hedging. This new guidance
permits use of the Overnight Index Swap (OIS) Rate based on the Secured
Overnight Financing Rate (SOFR) as a U.S. benchmark interest rate for hedge
accounting purposes. SOFR represents the fifth permissible U.S. benchmark rate
in addition to the following current eligible benchmark interest rates: (i)
direct Treasury obligations of the U.S. government (UST), (ii) the LIBOR swap
rate, (iii) the OIS Rate based on the Fed Funds Effective Rate and (iv) the
Securities Industry and Financial Markets Association (SIFMA) Municipal Swap
Rate. The adoption of this pronouncement did not have any effect on our
consolidated financial statements as we did not change our benchmark rate.
Recently Adopted Accounting Pronouncements - 2020
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit
Losses. This new guidance was effective January 1, 2020 and replaces the current
incurred loss impairment methodology with a methodology that reflects expected
credit losses. Financial assets that are measured at amortized cost are required
to be presented at the net amount expected to be collected with an allowance for
credit losses deducted from the amortized cost basis. In addition, an entity
must consider broader information in developing its expected credit loss
estimate, including the use of forecasted information. In November 2018, the
FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial
Instruments - Credit Losses, which clarifies that receivables arising from
operating leases are not within the scope of this new guidance. Generally, the
pronouncement requires a modified retrospective method of adoption. The adoption
of this pronouncement on January 1, 2020 did not have any effect on our
consolidated financial statements as we did not have any financial assets within
the scope of this guidance.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement. This new
guidance was effective January 1, 2020 and provides new and, in some cases,
eliminates or modifies the existing disclosure requirements on fair value
measurements. Public entities are now required to disclose the following: (i)
the changes in unrealized gains and losses for the period included in other
comprehensive income for recurring Level 3 fair value measurements held at the
end of the reporting period and (ii) the range and weighted average of
significant unobservable inputs used to develop Level 3 fair value measurements.
In addition, public entities are no longer required to disclose the following:
(i) the amount of and reasons for transfers between Level 1 and Level 2 of the
fair value hierarchy, (ii) the policy for timing of transfers between levels and
(iii) the valuation processes for Level 3 fair value measurements. The new
pronouncement also clarifies and modifies certain existing provisions to promote
the appropriate exercise of discretion by entities when considering fair value
measurement disclosures and clarifies that materiality is an appropriate
consideration when evaluating disclosure requirements. As permitted by the new
pronouncement, we removed the discussion of our valuation processes for Level 3
fair value measurements. We did not remove any other disclosures as we did not
have any transfers between levels of the fair value hierarchy during the current
and comparative periods. The adoption of this pronouncement on January 1, 2020
did not have any effect on our consolidated financial statements. The amended
disclosure guidance will be applied prospectively.
Inflation
Certain of our leases contain provisions designed to mitigate the adverse impact
of inflation. Such provisions include clauses enabling us to receive payment of
additional rent calculated as a percentage of tenants' gross sales above
predetermined thresholds, which generally increase as prices rise, and/or
escalation clauses, which generally increase rental rates during the terms of
the leases. While most escalation clauses are fixed in nature, some may include
increases based upon changes in the consumer price index or similar inflation
indices. In addition, many of our leases are for terms of less than 10 years,
which permits us to seek to increase rents to market rates upon renewal. Most of
our leases require the tenant to pay an allocable share of operating expenses,
including common area maintenance costs, real estate taxes and insurance,
thereby reducing our exposure to increases in costs and operating expenses
resulting from inflation.

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Subsequent Events
Subsequent to December 31, 2019, we:
• closed on the disposition of King Philip's Crossing, a 105,900 square foot


multi-tenant retail operating property located in Seekonk, Massachusetts,



for a sales price of $13,900 with no anticipated gain on sale or



additional impairment due to previously recognized impairment charges;



• closed on the acquisition of the fee interest in Fullerton Metrocenter,



our existing multi-tenant retail operating property located in Fullerton,



California, for a gross purchase price of $55,000. In connection with this



acquisition, we also assumed the lessor position in a ground lease with a



shadow anchor;



• granted 116 restricted shares at a grant date fair value of $13.07 per



share and 331 RSUs at a grant date fair value of $13.67 per RSU to our



executives in conjunction with our long-term equity compensation plan. The



restricted shares will vest over three years and the RSUs granted are



subject to a three-year performance period. Refer to Note 5 to the



accompanying consolidated financial statements for additional details



regarding the terms of the RSUs;


• issued 105 shares of common stock and 175 restricted shares with a one



year vesting term for the RSUs with a performance period that concluded on



December 31, 2019. An additional 43 shares of common stock were also
issued for dividends that would have been paid on the common stock and
restricted shares during the performance period; and



• declared the cash dividend for the first quarter of 2020 of $0.165625 per



share on our outstanding Class A common stock, which will be paid on April



9, 2020 to Class A common shareholders of record at the close of business



on March 26, 2020.



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