SITE CENTERS CORP.
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") provides readers with a perspective from management on the
financial condition, results of operations and liquidity of SITE Centers Corp.
and its related consolidated real estate subsidiaries (collectively, the
"Company" or "SITE Centers") and other factors that may affect the Company's
future results. The Company believes it is important to read the MD&A in
conjunction with its Annual Report on Form 10-K for the year ended December 31,
2019 , as well as other publicly available information.
EXECUTIVE SUMMARY
The Company is a self-administered and self-managed Real Estate Investment Trust
("REIT") in the business of acquiring, owning, developing, redeveloping,
expanding, leasing, financing and managing shopping centers. As of March 31,
2020 , the Company's portfolio consisted of 148 shopping centers (including 79
shopping centers owned through joint ventures). At March 31, 2020 , the Company
owned approximately 47.2 million total square feet of gross leasable area
("GLA") through all its properties (wholly-owned and joint venture) and managed
approximately 11.5 million total square feet of GLA for Retail Value Inc.
("RVI"). At March 31, 2020 , the aggregate occupancy of the Company's operating
shopping center portfolio was 90.1%, and the average annualized base rent per
occupied square foot was $18.49 , both on a pro rata basis.
The following provides an overview of the Company's key financial metrics (see
Non-GAAP Financial Measures described later in this section) (in thousands,
except per share amounts):
Three Months
Ended March 31,
2020 2019
Net income attributable to common shareholders
$ 47,422 $ 60,666
Operating FFO attributable to common shareholders
$ 0.15 $ 0.15 For the three months endedMarch 31, 2020 , net income attributable to common shareholders increased compared to the same period in the prior year, primarily due to gain on sale of the Company's interest in the DDRTC joint venture offset by recognition of a valuation allowance with respect to the Company's preferred investment in the BRE DDR joint ventures and debt extinguishment costs relating to redemption of the Company's 4.625% Senior Notes due 2022 (the "Senior Notes due 2022"). InMarch 2020 , theWorld Health Organization categorized the novel coronavirus ("COVID-19") as a pandemic, and it continues to spread throughoutthe United States and other countries across the world. To limit the spread of COVID-19, federal, state and local governments have taken various actions including the issuance of stay-at-home orders, social distancing guidelines and ordering the temporary closure of non-essential businesses, including many of the Company's tenants. Accordingly, many of the Company's tenants have adjusted, reduced or suspended operating activities. In addition, the Company closed all of its offices inMarch 2020 and successfully transitioned to working remote. The ultimate impact of the pandemic and secondary social and economic effects on the Company's results of operations, financial position, liquidity and capital resources remains unclear and cannot be reasonably forecasted at this time.
For
further discussion see "Liquidity, Capital Resources and Financing Activities" and "Economic Conditions" included in this section and Item 1A. Risk Factors in Part II of this Quarterly Report.
Company Activity
The growth opportunities within the Company's core property operations include rental rate increases, continued lease-up of the portfolio, and the adaptation of existing square footage to generate higher blended rental rates and operating cash flows. Additional growth opportunities include opportunistic investments and tactical redevelopment. Management intends to use proceeds from the sale of lower growth assets and other investments to fund opportunistic investing and tactical redevelopment activity. InFebruary 2020 , the Company sold its interest in the DDRTC joint venture to its partner, an affiliate of TIAA-CREF, which resulted in net proceeds to the Company of$140.5 million prior to any working capital adjustments to be finalized in the second quarter of 2020.
During the first three months of 2020, one shopping center was sold by an
unconsolidated joint venture and the Company sold land parcels for an aggregate
of
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In
In addition, in the first three months of 2020, the Company repurchased 0.8
million common shares for
Company Highlights
During the three months ended
• Leased approximately 1.0 million square feet of GLA including 30 new
leases and 105 renewals for a total of 135 leases. The remaining 2020
lease expirations as of
million square feet of GLA, (representing approximately 54.2% of total
annualized base rent of 2020 expiring leases as of
compared to 1.9 million square feet of GLA as of
• The Company continued to execute both new leases and renewals at positive
rental spreads. At
in 2020, with an average base rent per square foot of $19.41 , on a pro
rata basis, as adjusted for the Company's sale of its interest in the
DDRTC joint venture. For the comparable leases executed in the three
months ended March 31, 2020 , the Company generated positive leasing
spreads on a pro rata basis of 20.1% for new leases and 3.3% forrenewals. Leasing spreads are a key metric in real estate, representing
the percentage increase over rental rates on existing leases versus rental
rates on new and renewal leases. The Company's leasing spread calculation
includes only those deals that were executed within one year of the date
the prior tenant vacated, and as a result, is a good benchmark to compare
the average annualized base rent of expiring leases with the comparable
executed market rental rates;
• The Company's total portfolio average annualized base rent per square foot
increased to
$18.25 atDecember 31, 2019 (excluding the DDRTC joint venture was$18.43 ), and$17.92 atMarch 31, 2019 ;
• The aggregate occupancy of the Company's operating shopping center
portfolio was 90.1% at
90.8% at
and 89.2% at
• For new leases executed during the three months ended
the Company's interest, the Company expended a weighted-average cost of
commissions over the lease term. The Company generally does not expend a
significant amount of capital on lease renewals.
RESULTS OF OPERATIONS
Consolidated shopping center properties owned as of
Revenues from Operations (in thousands)
Three Months
Ended March 31,
2020 2019 $ Change
Rental income(A)
(A) The following table summarizes the key components of the 2020 rental income
as compared to 2019:
Three Months
Ended March 31,
Contractual Lease Payments 2020 2019 $ Change
Base and percentage rental income(1) $ 80,710 $ 81,355 $ (645 )
Recoveries from tenants(2) 27,199 27,461 (262 )
Lease termination fees, ancillary and other
rental income 5,109 3,846 1,263
Bad debt (489 ) (441 ) (48 ) Total contractual lease payments$ 112,529 $ 112,221 $ 308 19
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(1) The changes were due to the following (in millions):
Increase (Decrease)
Comparable Portfolio Properties $ 1.5
Acquisition of shopping centers 1.3
Redevelopment properties (0.2 )
Disposition of shopping centers (1.6 )
Straight-line rents (1.6 )
Total $ (0.6 )
The decrease in straight-line relates to additional reversals associated with credit risk tenants primarily triggered by COVID-19.
The following tables present the statistics for the Company's assets affecting
base and percentage rental income summarized by the following portfolios: pro
rata combined shopping center portfolio, wholly-owned shopping center portfolio
and joint venture shopping center portfolio.
Pro Rata Combined
Shopping Center Portfolio
March 31,
2020 2019
Centers owned 148 173
Aggregate occupancy rate 90.1 % 89.2 %
Average annualized base rent per occupied square foot $ 18.49 $ 17.92
Wholly-Owned Shopping Centers
March 31,
2020 2019
Centers owned 69 69
Aggregate occupancy rate 90.2 % 88.8 %Average annualized base rent per occupied square foot $ 18.86
$ 18.48
Joint Venture Shopping Centers
March 31,
2020 2019
Centers owned 79 104
Aggregate occupancy rate 89.0 % 90.8 %Average annualized base rent per occupied square foot $ 15.10
$ 14.83
At
(2) Recoveries from tenants for the
approximately 78.3% and 79.3% of reimbursable operating expenses and real
estate taxes for the three months ended
respectively. The decrease in the recovery percentage primarily relates to
reserves established for bankrupt tenants.
(B) Decreased primarily due to a refinancing fee earned from RVI of
during the three months ended
from joint ventures as a result of the sale of joint venture assets offset by
higher disposition fees from RVI.
The components of Fee and Other Income are presented in Note 2, "Revenue
Recognition," to the Company's consolidated financial statements included
herein. Changes in the number of assets under management, including the number
of assets owned by RVI, or the fee structures applicable to such arrangements
will impact the amount of revenue recorded in future periods. Such changes could
occur because the Company's property management agreements contain termination
provisions, and RVI and the Company's joint venture partners could dispose of
shopping centers under the Company's management. The Company's joint venture
partners may also elect to terminate their joint venture arrangements with the
Company in connection with a change in investment strategy or otherwise.
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Expenses from Operations (in thousands)
Three Months
Ended March 31,
2020 2019 $ Change
Operating and maintenance(A) $ 18,480 $ 18,841 $ (361 )
Real estate taxes(A) 17,657 17,743 (86 )
Impairment charges(B) - 620 (620 )General and administrative(C) 11,376 14,112 (2,736 ) Depreciation and amortization(A) 42,993 42,608
385
$ 90,506 $ 93,924 $ (3,418 ) (A) The changes were due to the following (in millions):
Operating Depreciation
and Real Estate and
Maintenance Taxes Amortization
(0.1 )
Acquisition of shopping centers 0.2 0.2 1.0
Redevelopment properties 0.3 0.4
0.3
Disposition of shopping centers (0.4 ) (0.3 ) (0.8 )
$ (0.4 ) $ (0.1 ) $ 0.4
(B) Changes in (i) an asset's expected future undiscounted cash flows due to
changes in market or leasing conditions, (ii) various courses of action that
may occur or (iii) holding periods each could result in the recognition of
additional impairment charges. Impairment charges are presented in Note 10,
"Impairment Charges and Reserves," to the Company's consolidated financial
statements included herein.
(C) General and administrative expenses for the three months ended
and 2019 were approximately 4.3% and 4.7% of total revenues, respectively,
including total revenues of unconsolidated joint ventures and managed
properties for the comparable periods. The Company continues to expense
certain internal leasing salaries, legal salaries and related expenses
associated with leasing and re-leasing of existing space.
Other Income and Expenses (in thousands)
Three Months
Ended March 31,
2020 2019 $ Change
Interest income(A) $ 3,485 $ 4,521 $ (1,036 )
Interest expense(B) (20,587 ) (21,726 ) 1,139Other (expense) income, net(C) (17,409 ) 153 (17,562 )
$ (34,511 ) $ (17,052 ) $ (17,459 )
(A) The decrease in the amount of interest income recognized primarily was due to
the decrease in the face amount of the preferred equity investments in the
unconsolidated joint ventures with
as a result of repayments by the joint ventures from asset sale proceeds (see
"Sources and Uses of Capital" included elsewhere herein). The Company had a
gross preferred investment (including accrued interest in the
joint ventures) of
2019, respectively. A portion of the proceeds generated from assets sold by
the
the preferred equity. Any repayment of this preferred interest would impact
the amount of interest income recorded by the Company in future periods. See
Note 3, "Investments in and Advances to Joint Ventures," in the Company's
consolidated financial statements included herein. Decrease in interest
income was also related to the repayment of loan investments.
21
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(B) The weighted-average debt outstanding and related weighted-average interest
rate are as follows:
Three Months
Ended March 31,
2020 2019
Weighted-average debt outstanding (in billions)
4.0 % 4.4 %
The Company's overall balance sheet strategy is to continue to reduce
leverage. The weighted-average interest rate (based on contractual rates and
excluding fair market value of adjustments and debt issuance costs) was 3.4% and
4.2% at March 31, 2020 and 2019, respectively.
Interest costs capitalized in conjunction with redevelopment projects were
(C) Debt extinguishment costs related to the redemption of the Senior Notes due
2022.
Other Items (in thousands)
Three Months
Ended March 31,
2020 2019 $ Change
Equity in net income of joint ventures(A) $ 2,171 $ 1,043 $ 1,128
Reserve of preferred equity interests, net(B) (18,057 ) (1,099 ) (16,958 )
Gain on sale of joint venture interest(C) 45,681 - 45,681
Gain on disposition of real estate, net(D) 773 16,377 (15,604 ) Tax expense of taxable REIT subsidiaries and state franchise and income taxes (233 ) (272 )
39
Income attributable to non-controlling interests, net (295 ) (305 ) 10 (A) The increase primarily was the result of higher gain on sale, offset by
higher impairment charges and asset sales. Joint venture property sales
could significantly impact the amount of income or loss recognized in future
periods.
(B) The valuation allowance is more fully described in Note 3, "Investments in
and Advances to Joint Ventures," to the Company's consolidated financial
statements included herein.
(C) In February 2020, the Company sold its 15% interest in the DDRTC joint
venture to its partner TIAA-CREF, which resulted in net proceeds to the
Company of
(D) Sold land parcels during the three months ended
Net Income (in thousands)
Three Months
Ended March 31,
2020 2019 $ Change
Net income attributable to
The decrease in net income as compared to the prior year period was primarily attributable to gain on sale of DDRTC Joint Venture investment inFebruary 2020 offset by a valuation allowance relating to the Company's preferred investments in the joint ventures withBlackstone and debt extinguishment costs relating to the redemption of the Senior Notes due 2022. 22 -------------------------------------------------------------------------------- NON-GAAP FINANCIAL MEASURES
Funds from Operations and Operating Funds from Operations
Definition and Basis of Presentation
The Company believes that Funds from Operations ("FFO") and Operating FFO, both
non-GAAP financial measures, provide additional and useful means to assess the
financial performance of REITs. FFO and Operating FFO are frequently used by the
real estate industry, as well as securities analysts, investors and other
interested parties, to evaluate the performance of REITs. The Company also
believes that FFO and Operating FFO more appropriately measure the core
operations of the Company and provide benchmarks to its peer group.
FFO excludes GAAP historical cost depreciation and amortization of real estate
and real estate investments, which assume that the value of real estate assets
diminishes ratably over time. Historically, however, real estate values have
risen or fallen with market conditions, and many companies use different
depreciable lives and methods. Because FFO excludes depreciation and
amortization unique to real estate and gains and losses from property
dispositions, it can provide a performance measure that, when compared year over
year, reflects the impact on operations from trends in occupancy rates, rental
rates, operating costs, interest costs and acquisition, disposition and
development activities. This provides a perspective of the Company's financial
performance not immediately apparent from net income determined in accordance
with GAAP.
FFO is generally defined and calculated by the Company as net income (loss)
(computed in accordance with GAAP), adjusted to exclude (i) preferred share
dividends, (ii) gains and losses from disposition of real estate property and
related investments, which are presented net of taxes, (iii) impairment charges
on real estate property and related investments, including reserve adjustments
of preferred equity interest, (iv) gains and losses from changes in control and
(v) certain non-cash items. These non-cash items principally include real
property depreciation and amortization of intangibles, equity income (loss) from
joint ventures and equity income (loss) from non-controlling interests and
adding the Company's proportionate share of FFO from its unconsolidated joint
ventures and non-controlling interests, determined on a consistent basis. The
Company's calculation of FFO is consistent with the definition of FFO provided
by NAREIT.
The Company believes that certain charges, income and gains recorded in its
operating results are not comparable or reflective of its core operating
performance. Operating FFO is useful to investors as the Company removes
non-comparable charges, income and gains to analyze the results of its
operations and assess performance of the core operating real estate
portfolio. As a result, the Company also computes Operating FFO and discusses it
with the users of its financial statements, in addition to other measures such
as net income (loss) determined in accordance with GAAP and FFO. Operating FFO
is generally defined and calculated by the Company as FFO excluding certain
charges, income and gains that management believes are not comparable and
indicative of the results of the Company's operating real estate portfolio. Such
adjustments include gains/losses on the early extinguishment of debt,
hurricane-related activity, certain transaction fee income, transaction costs
and other restructuring type costs. The disclosure of these adjustments is
regularly requested by users of the Company's financial statements.
The adjustment for these charges, income and gains may not be comparable to how
other REITs or real estate companies calculate their results of operations, and
the Company's calculation of Operating FFO differs from NAREIT's definition of
FFO. Additionally, the Company provides no assurances that these charges, income
and gains are non-recurring. These charges, income and gains could be reasonably
expected to recur in future results of operations.
These measures of performance are used by the Company for several business
purposes and by other REITs. The Company uses FFO and/or Operating FFO in part
(i) as a disclosure to improve the understanding of the Company's operating
results among the investing public, (ii) as a measure of a real estate asset
company's performance, (iii) to influence acquisition, disposition and capital
investment strategies and (iv) to compare the Company's performance to that of
other publicly traded shopping center REITs.
For the reasons described above, management believes that FFO and Operating FFO
provide the Company and investors with an important indicator of the Company's
operating performance. They provide recognized measures of performance other
than GAAP net income, which may include non-cash items (often
significant). Other real estate companies may calculate FFO and Operating FFO in
a different manner.
Management recognizes the limitations of FFO and Operating FFO when compared to
GAAP's net income. FFO and Operating FFO do not represent amounts available for
dividends, capital replacement or expansion, debt service obligations or other
commitments and uncertainties. Management does not use FFO or Operating FFO as
an indicator of the Company's cash obligations and funding requirements for
future commitments, acquisitions or development activities. Neither FFO nor
Operating FFO represents cash generated from operating activities in accordance
with GAAP, and neither is necessarily indicative of cash available to fund cash
needs. Neither FFO nor Operating FFO should be considered an alternative to net
income (computed in accordance with GAAP) or as
23
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an alternative to cash flow as a measure of liquidity. FFO and Operating FFO are
simply used as additional indicators of the Company's operating performance. The
Company believes that to further understand its performance, FFO and Operating
FFO should be compared with the Company's reported net income (loss) and
considered in addition to cash flows determined in accordance with GAAP, as
presented in its consolidated financial statements. Reconciliations of these
measures to their most directly comparable GAAP measure of net income (loss)
have been provided below.
Reconciliation Presentation
FFO and Operating FFO attributable to common shareholders were as follows (in
thousands):
Three Months
Ended March 31,
2020 2019 $ Change
FFO attributable to common shareholders $ 47,422 $ 60,666 $ (13,244 )
Operating FFO attributable to common shareholders 61,150 58,701 2,449
The decrease in FFO for the three months ended
The Company's reconciliation of net income (loss) attributable to common
shareholders computed in accordance with GAAP to FFO attributable to common
shareholders and Operating FFO attributable to common shareholders is as follows
(in thousands). The Company provides no assurances that these charges and gains
are non-recurring. These charges and gains could reasonably be expected to recur
in future results of operations.
Three Months
Ended March 31,
2020 2019
Net income attributable to common shareholders $ 29,200 $ 27,407
Depreciation and amortization of real estate investments 41,619 40,957 Equity in net income of joint ventures
(2,171 ) (1,043 )
Joint ventures' FFO(A) 7,143 7,975
Non-controlling interests (OP Units) 28
28
Impairment of real estate -
620
Reserve of preferred equity interests 18,057
1,099
Gain on sale of joint venture interest (45,681 )
-
Gain on disposition of real estate, net (773 ) (16,377 ) FFO attributable to common shareholders 47,422
60,666
RVI disposition and refinancing fees (1,556 ) (2,900 ) Mark-to-market adjustment (PRSUs) (2,167 )
899
Debt extinguishment, transaction, other, net(B) 17,409
22
Joint ventures - debt extinguishment and other, net 42
14
Non-operating items, net 13,728
(1,965 )
Operating FFO attributable to common shareholders
24
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(A) At
unconsolidated joint venture interests related to 78 and 103 shopping
center properties, respectively. These joint ventures represent the
investments in which the Company recorded its share of equity in net
income or loss and, accordingly, FFO and Operating FFO.
Joint ventures' FFO and Operating FFO are summarized as follows (in thousands):
Three Months
Ended March 31,
2020 2019Net (loss) income attributable to unconsolidated joint
ventures$ (18,654 ) $
6,666
Depreciation and amortization of real estate investments 30,104 39,504 Impairment of real estate
31,720 12,267
Gain on disposition of real estate, net (8,906 ) (15,966 ) FFO$ 34,264 $
42,471
FFO at SITE Centers' ownership interests$ 7,143 $
7,975
Operating FFO at
(B) Amounts included in this line item are as follows (in thousands):
Three Months
Ended March 31,
2020 2019
Debt extinguishment costs, net $ 17,186 $ 10
Transaction costs - RVI spin-off - 27
Transaction and other expense (income), net 223 (15 )
$ 17,409 $ 22
Net Operating Income and Same Store Net Operating Income
Definition and Basis of Presentation
The Company uses Net Operating Income ("NOI"), which is a non-GAAP financial
measure, as a supplemental performance measure. NOI is calculated as property
revenues less property-related expenses. The Company believes NOI provides
useful information to investors regarding the Company's financial condition and
results of operations because it reflects only those income and expense items
that are incurred at the property level and, when compared across periods,
reflects the impact on operations from trends in occupancy rates, rental rates,
operating costs and acquisition and disposition activity on an unleveraged
basis.
The Company also presents NOI information on a same store basis, or Same Store
Net Operating Income ("SSNOI"). The Company defines SSNOI as property revenues
less property-related expenses, which exclude straight-line rental income
(including reimbursements) and expenses, lease termination income, management
fee expense, fair market value of leases and expense recovery adjustments. SSNOI
includes assets owned in comparable periods (15 months for quarter
comparisons). In addition, SSNOI is presented both including and excluding
activity associated with development and major redevelopment. In addition, SSNOI
excludes all non-property and corporate level revenue and expenses. Other real
estate companies may calculate NOI and SSNOI in a different manner. The Company
believes SSNOI at its effective ownership interest provides investors with
additional information regarding the operating performances of comparable assets
because it excludes certain non-cash and non-comparable items as noted
above. SSNOI is frequently used by the real estate industry, as well as
securities analysts, investors and other interested parties, to evaluate the
performance of REITs.
SSNOI is not, and is not intended to be, a presentation in accordance with
GAAP. SSNOI information has its limitations as it excludes any capital
expenditures associated with the re-leasing of tenant space or as needed to
operate the assets. SSNOI does not represent amounts available for dividends,
capital replacement or expansion, debt service obligations or other commitments
and uncertainties. Management does not use SSNOI as an indicator of the
Company's cash obligations and funding requirements for future commitments,
acquisitions or development activities. SSNOI does not represent cash generated
from operating activities in accordance with GAAP and is not necessarily
indicative of cash available to fund cash needs. SSNOI should not be considered
as an alternative to net income (computed in accordance with GAAP) or as an
alternative to cash flow as a measure of liquidity. A reconciliation of NOI and
SSNOI to their most directly comparable GAAP measure of net income (loss) is
provided below.
25
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Reconciliation Presentation
The Company's reconciliation of net income computed in accordance with GAAP to
NOI and SSNOI for the Company at 100% and at its effective ownership interest of
the assets is as follows (in thousands):
For the
Three Months Ended
2020 2019 2020 2019
At 100% At the Company's Interest
Net income attributable to SITE Centers $ 34,333 $ 35,790 $ 34,333 $ 35,790
Fee income (15,228 ) (17,332 ) (15,228 ) (17,332 )
Interest income (3,485 ) (4,521 ) (3,485 ) (4,521 )
Interest expense 20,587 21,726 20,587 21,726
Depreciation and amortization 42,993 42,608 42,993 42,608
General and administrative 11,376 14,112 11,376 14,112
Other expense (income), net 17,409 (153 ) 17,409 (153 )
Impairment charges - 620 - 620
Equity in net income of joint ventures (2,171 ) (1,043 ) (2,171 ) (1,043 )
Reserve of preferred equity interests 18,057 1,099 18,057 1,099
Tax expense 233 272 233 272
Gain on sale of joint venture interest (45,681 ) - (45,681 ) -
Gain on disposition of real estate, net (773 ) (16,377 ) (773 ) (16,377 )
Income from non-controlling interests 295 305 295 305
Consolidated NOI $ 77,945 $ 77,106 $ 77,945 $ 77,106
SITE Centers' consolidated joint venture - - (476 ) (444 )
Consolidated NOI, net of non-controlling interests
Net (loss) income from unconsolidated joint ventures
17,755 25,656 3,329 4,429
Depreciation and amortization 30,104 39,504 5,196 6,167
Impairment charges 31,720 12,267 1,586 2,453
Preferred share expense 4,530 5,459 227 273
Other expense, net 4,657 5,456 936 996
Gain on disposition of real estate, net (8,906 ) (15,966 ) (1,739 ) (1,555 )
Unconsolidated NOI $ 61,206 $
79,042
Total Consolidated + Unconsolidated NOI$ 88,985 $ 90,199 Less: Non-Same Store NOI adjustments (4,505 ) (8,220 ) Total SSNOI including redevelopment$ 84,480 $ 81,979 Less: Redevelopment Same Store NOI adjustments (5,240 ) (5,566 ) Total SSNOI excluding redevelopment
SSNOI % Change including redevelopment 3.1 % SSNOI % Change excluding redevelopment 3.7 % The increase in SSNOI at the Company's effective ownership interest for the three months endedMarch 31, 2020 as compared to 2019 primarily was due to increases in the base rent per occupied square foot resulting from a combination of new leases and renewals, increased occupancy and continued tenant bankruptcy settlements. 26
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LIQUIDITY, CAPITAL RESOURCES AND FINANCING ACTIVITIES
The Company periodically evaluates opportunities to issue and sell additional
debt or equity securities, obtain credit facilities from lenders or repurchase
or refinance long-term debt as part of its overall strategy to further
strengthen its financial position. The Company remains committed to monitoring
liquidity and maintaining low leverage in an effort to lower its overall risk
profile.
The Company's consolidated and unconsolidated debt obligations generally require
monthly or semi-annual payments of principal and/or interest over the term of
the obligation. While the Company currently believes it has several viable
sources to obtain capital and fund its business, including capacity under its
credit facilities described below, no assurance can be provided that these
obligations will be refinanced or repaid as currently anticipated.
The Company has historically accessed capital sources through both the public
and private markets. Acquisitions and redevelopments are generally financed
through cash provided from operating activities, Revolving Credit Facilities (as
defined below), mortgages assumed, secured debt, unsecured debt, common and
preferred equity offerings, joint venture capital and asset sales. Total
consolidated debt outstanding was $2.3 billion at March 31, 2020 , compared to
$1.8 billion at December 31, 2019 .
As a result of the uncertain impact that COVID-19 may have on the Company's
business and the duration thereof, the Company has taken proactive measures to
further improve its financial position and liquidity. In March 2020 , the Company
drew a total of $645.0 million on its Revolving Credit Facilities (defined
below). Proceeds from the sale of its interest in the DDRTC joint venture, along
with a portion of the credit facility borrowings, were used to redeem all $200.0
million aggregate principal amount of the Senior Notes due 2022. As a result,
the Company had an unrestricted cash balance of $514.3 million at March 31, 2020
and remaining availability under the Revolving Credit Facilities of $325.0
million (subject to satisfaction of applicable borrowing conditions). The
Company has no consolidated mortgage debt maturing in 2020, $16.2 million of
consolidated mortgage debt maturing in 2021 and no unsecured debt maturities
prior to 2023. The Company's unconsolidated joint ventures have $59.0 million
and $48.1 million of mortgage debt at the Company's share maturing in 2020 and
2021, respectively. The Company has also taken steps to substantially reduce
capital spending and anticipates that it has approximately $30 million remaining
to fund on its redevelopment pipeline as of March 31, 2020 . The Company's Board
of Directors has also elected not to declare a dividend on its common shares for
the second quarter of 2020. The Company believes that these collective actions
will provide sufficient liquidity to operate its business.
Revolving Credit Facilities
The Company maintains an unsecured revolving credit facility with a syndicate of financial institutions, arranged byWells Fargo Securities, LLC ,J.P. Morgan Chase Bank, N.A. ,Citizens Bank, N.A. ,RBC Capital Markets andU.S. Bank National Association (the "Unsecured Credit Facility.") The Unsecured Credit Facility provides for borrowings of up to$950 million (which may be increased to$1.45 billion provided that the new or existing lenders agree to provide the incremental commitments) and a maturity date ofJanuary 2024 , subject to two six-month options to extend the maturity toJanuary 2025 upon the Company's request (subject to satisfaction of certain conditions). The Company also maintains an unsecured revolving credit facility withPNC Bank, National Association , which provides for borrowings of up to$20 million (the "PNC Facility," and together with the Unsecured Credit Facility, the "Revolving Credit Facilities"), and has terms substantially the same terms as those contained in the Unsecured Credit Facility. The Company's borrowings under the Revolving Credit Facilities bear interest at variable rates at the Company's election, based on either LIBOR plus a specified spread (0.90% atMarch 31, 2020 ), or the Alternate Base Rate, as defined in the respective facility, plus a specified spread (0% atMarch 31, 2020 ). The Company also pays an annual facility fee of 20 basis points on the aggregate commitments applicable to each Revolving Credit Facility. The specified spreads and commitment fees vary depending on the Company's long-term senior unsecured debt ratings from Moody's Investors Service, Inc. ("Moody's"), S&P Global Ratings ("S&P"),Fitch Investor Services Inc. ("Fitch") and their successors. The Revolving Credit Facilities and the indentures under which the Company's senior and subordinated unsecured indebtedness are, or may be, issued contain certain financial and operating covenants including, among other things, leverage ratios and debt service coverage and fixed charge coverage ratios, as well as limitations on the Company's ability to incur secured and unsecured indebtedness, sell all or substantially all of the Company's assets and engage in mergers and certain acquisitions. These credit facilities and indentures also contain customary default provisions including the failure to make timely payments of principal and interest payable thereunder, the failure to comply with the Company's financial and operating covenants and the failure of the Company or its majority-owned subsidiaries (i.e., entities in which the Company has a greater than 50% interest) to pay, when due, certain indebtedness in excess of certain thresholds beyond applicable grace and cure periods. In the event the Company's lenders or note holders declare a default, as defined in the applicable agreements governing the debt, the Company may be unable to obtain further funding and/or an acceleration of any outstanding borrowings may occur. As ofMarch 31, 2020 , the Company was in compliance with all of its financial covenants in the agreements governing its debt. Although the Company intends to operate in compliance with these covenants, if the Company were to violate these covenants, the Company may be subject to higher finance costs and fees or accelerated maturities. Though the Company is closely monitoring the impact of COVID-19 on its business, the Company believes it will continue to operate in compliance with these covenants in 2020. 27
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Consolidated Indebtedness - as of
As discussed above, the Company is committed to maintaining low leverage and may utilize proceeds from asset sales and other investments to repay additional debt. No assurance can be provided that these obligations will be refinanced or repaid as currently anticipated. These sources of funds could be affected by various risks and uncertainties. See Item 1A. Risk Factors in the Company's Annual Report on Form 10-K for the year endedDecember 31, 2019 and this Quarterly Report on Form 10-Q. The Company continually evaluates its debt maturities and, based on management's assessment, believes it has viable financing and refinancing alternatives. The Company has sought to manage its debt maturities through executing a strategy to extend debt duration, increase liquidity, maintain low leverage and improve the Company's credit profile with a focus of lowering the Company's balance sheet risk and cost of capital.
Unconsolidated Joint Ventures Mortgage Indebtedness - as of
The outstanding indebtedness of the Company's unconsolidated joint ventures atMarch 31, 2020 , which matures in the subsequent 13-month period (i.e. thruApril 30, 2021 ), is as follows (in millions): Outstanding
At
at March 31, 2020 Share
DDR Domestic Retail Fund I(A) $ 274.2 $ 54.8 BRE DDR Retail Holdings IV(A) 91.1 4.5 DDR SAU Retail Fund LLC(B) 20.8 4.2 Total debt maturities through April 2021 $ 386.1 $ 63.5
(A) Expected to be extended at the joint venture's option in accordance with
the loan agreement.
(B) Expected to enter into an extension agreement with the lender.
Subject to the uncertain impact of COVID-19 on capital and transactions markets,
it is expected that the joint ventures will fund these obligations from
refinancing opportunities, including extension options or possible asset sales.
No assurance can be provided that these obligations will be refinanced or repaid
as currently anticipated. The Company's joint ventures have experienced a
reduction in April 2020 rent collections as a result of COVID-19. Depending on
the duration of COVID-19's impact, and subject to discussions with applicable
lenders, reduced rent collections may cause one or more of these joint ventures
to be unable to satisfy applicable debt yield or debt service requirements in
the future thereby allowing the mortgage lender to assume control of property
cash flows, limit distributions of cash to joint venture members, declare a
default, increase the interest rate or accelerate the loan's maturity. No
assurance can be provided that these obligations will be refinanced or repaid as
currently anticipated.
Cash Flow Activity
The Company's cash flow activities are summarized as follows (in thousands):
Three Months
Ended March 31,
2020 2019
Cash flow provided by operating activities $ 35,850 $ 42,263
Cash flow provided by investing activities 129,139
76,460
Cash flow provided by (used for) financing activities 330,234 (120,697 )
Changes in cash flow for the three months ended
Operating Activities: Cash provided by operating activities decreased
• Reduction in income due to properties sold in 2019 and • Reduction in fee and interest income.
Investing Activities: Cash provided by investing activities increased
• Increase in proceeds of
and joint venture interest;
• Increase in repayment of notes receivable of $7.5 million and
• Decrease in net cash received from joint ventures of $21.4 million .
Financing Activities: Cash provided by financing activities increased
• Increase in proceeds from revolving credit facilities offset by higher
debt repayments of $443.5 million and
• Decrease in common share repurchases of $6.6 million .
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RVI Preferred Shares
In 2018, RVI issued to the Company 1,000 shares of its series A preferred stock (the "RVI Preferred Shares"), which are noncumulative and have no mandatory dividend rate. The RVI Preferred Shares rank, with respect to dividend rights and rights upon liquidation, dissolution or winding up of RVI, senior in preference and priority to RVI's common shares and any other class or series of RVI capital stock. Subject to the requirement that RVI distribute to its common shareholders the minimum amount required to be distributed with respect to any taxable year in order for RVI to maintain its status as a REIT and to avoidU.S. federal income taxes, the RVI Preferred Shares will be entitled to a dividend preference for all dividends declared on RVI's capital stock at any time up to a "preference amount" equal to$190 million in the aggregate, which amount may increase by up to an additional$10 million if the aggregate gross proceeds of RVI asset sales subsequent toJuly 1, 2018 , exceeds$2.0 billion . Notwithstanding the foregoing, the RVI Preferred Shares are entitled to receive dividends only when, as and if declared by the Board of Directors of RVI, and RVI's ability to pay dividends is subject to any restrictions set forth in the terms of its indebtedness. Dividend Distribution The Company declared common and preferred cash dividends of$44.0 million and$44.6 million for the three months endedMarch 31, 2020 and 2019, respectively. The Company intends to distribute at least 100% of ordinary taxable income in the form of common and preferred dividends during the year endingDecember 31, 2020 in order to maintain compliance with REIT requirements and in order to not incur federal income taxes (excluding federal income taxes applicable to TRS activities). The Company declared a quarterly cash dividend of$0.20 per common share in the first three months of 2020, which was paid onApril 2, 2020 . In order to maintain maximum flexibility given the uncertain impact of the COVID-19 pandemic on the its business, the Company's Board of Directors has elected not to declare a dividend on its common shares for the second quarter of 2020. The Board of Directors has not made any decisions with respect to its dividend policy beyond the second quarter of 2020 and will continue to evaluate its dividend policy on a quarterly basis based on operating cash flows. The Company intends to maintain compliance with REIT taxable income distribution requirements.
Common Shares and Common Share Repurchase Program
The Company has a$250.0 million continuous equity program. AtApril 30, 2020 , the Company had all$250.0 million available for the future issuance of common shares under that program. InNovember 2018 , the Company's Board of Directors authorized a common share repurchase program. Under the terms of the program, the Company may purchase up to a maximum value of$100 million of its common shares. In the first quarter of 2020, the Company repurchased 0.8 million shares at a cost of$7.5 million . ThroughApril 30, 2020 , the Company had repurchased 5.1 million of its common shares under this program in open market transactions at an aggregate cost of approximately$57.9 million . SOURCES AND USES OF CAPITAL
Strategic Transaction Activity
The Company remains committed to monitoring liquidity and maintaining low leverage in an effort to lower its overall risk profile. Asset sales and proceeds from the repayment of other investments continue to represent a potential source of proceeds to be used to achieve these objectives.
Proceeds from Transactional Activity
The Company sold its 15% interest in the DDRTC Joint Venture to its partner, an affiliate of TIAA-CREF, based on a gross fund value of$1.14 billion , which included$184.9 million of mortgage debt atDecember 31, 2019 . As ofDecember 31, 2019 , the DDRTC Joint Venture was composed of 21 assets, totaling 7.1 million square feet, and completion of the sale inFebruary 2020 resulted in net proceeds to the Company of$140.5 million in the three months endedMarch 31, 2020 and prior to any working capital adjustments (which are expected to be finalized in the second quarter of 2020). During the three months endedMarch 31, 2020 , one shopping center asset was sold by an unconsolidated joint venture, aggregating 0.1 million square feet, together with wholly owned land sales, generated proceeds totaling$25.9 million , of which the Company's proportionate share of the proceeds was$5.9 million . The Company's pro rata share of proceeds is before giving effect to the repayment of indebtedness and transaction costs. InMarch 2020 , the Company also received$7.5 million related to the repayment of a loan investment. Changes in investment strategies for assets may impact the Company's hold-period assumptions for those properties. The disposition of certain assets could result in a loss or impairment recorded in future periods. The Company evaluates all potential sale 29
-------------------------------------------------------------------------------- opportunities taking into account the long-term growth prospects of the assets, the use of proceeds and the impact to the Company's balance sheet, in addition to the impact on operating results.
Redevelopment Opportunities
A key component to the Company's strategic plan will be the evaluation of additional redevelopment potential within the portfolio, particularly as it relates to the efficient use of the real estate. The Company will generally commence construction on various redevelopments only after substantial tenant leasing has occurred. The Company will continue to closely monitor its expected spending in 2020 for redevelopments, as the Company considers this funding to be discretionary spending. The Company has taken steps to substantially reduce capital spending and anticipates that it has approximately$30 million remaining to fund on its redevelopment pipeline as ofMarch 31, 2020 . The Company does not anticipate expending significant funds on joint venture redevelopment projects in 2020. The Company's consolidated land holdings are classified in two separate line items on the Company's consolidated balance sheets included herein, (i) Land and (ii) Construction in Progress and Land. AtMarch 31, 2020 , the$881.4 million of Land primarily consisted of land that is part of the Company's shopping center portfolio. However, this amount also includes a small portion of vacant land composed primarily of outlots or expansion pads adjacent to the shopping center properties. Approximately 130 acres of this land, which has a recorded cost basis of approximately$15 million , is available for future development or sale. Included in Construction in Progress and Land atMarch 31, 2020 was approximately$8 million of recorded costs related to undeveloped land being marketed for sale for which active construction never commenced or previously ceased. The Company evaluates these assets each reporting period and records an impairment charge equal to the difference between the current carrying value and fair value when the expected undiscounted cash flows are less than the asset's carrying value. Redevelopment Projects As part of its strategy to expand, improve and re-tenant various properties, atMarch 31, 2020 , the Company has invested approximately$83 million in various consolidated active redevelopment projects. The Company's major redevelopment projects are typically substantially complete within two years of the construction commencement date. AtMarch 31, 2020 , the Company's significant consolidated redevelopment projects were as follows (in thousands): Cost Estimated Incurred at Stabilized Estimated March 31, Location Quarter Gross Cost 2020 The Collection at Brandon Boulevard (Tampa, Florida) 4Q20$ 27,732 $ 20,959 1000 Van Ness (San Francisco, California) 4Q20 4,810 - West Bay Plaza (Phase II) (Cleveland, Ohio) 2Q22 2,686 1,736 Woodfield Village Green (Chicago, Illinois) TBD - 53 Sandy Plains Village (Atlanta, Georgia) TBD - 1,218 Perimeter Pointe (Atlanta, Georgia) TBD - 1,004 Total$ 35,228 $ 24,970
For redevelopment assets completed in 2020, the assets placed in service were
completed at a cost of approximately
OFF-BALANCE SHEET ARRANGEMENTSThe Company has a number of off-balance sheet joint ventures with varying economic structures. Through these interests, the Company has investments in operating properties and one development project. Such arrangements are generally with institutional investors.
The Company's unconsolidated joint ventures had aggregate outstanding indebtedness to third parties of$1.4 billion and$2.2 billion atMarch 31, 2020 and 2019, respectively (see Item 3. Quantitative and Qualitative Disclosures About Market Risk). Such mortgages are generally non-recourse to the Company and its partners; however, certain mortgages may have recourse to the Company and its partners in certain limited situations, such as misuse of funds and material misrepresentations. CAPITALIZATION AtMarch 31, 2020 , the Company's capitalization consisted of$2.3 billion of debt,$325.0 million of preferred shares and$1.0 billion of market equity (market equity is defined as common shares and OP Units outstanding multiplied by$5.21 , the closing price of the Company's common shares on theNew York Stock Exchange onMarch 31, 2020 ), resulting in a debt to total market 30 -------------------------------------------------------------------------------- capitalization ratio of 0.63 to 1.0, as compared to the ratio of 0.38 to 1.0 atMarch 31, 2019 . The closing price of the Company's common shares on theNew York Stock Exchange was$13.62 atMarch 29, 2019 , the last trading day of March. AtMarch 31, 2020 and 2019, the Company's total debt consisted of$1.5 billion and$1.7 billion of fixed-rate debt, respectively, and$0.8 billion and$0.1 billion of variable-rate debt, respectively. It is management's strategy to have access to the capital resources necessary to manage the Company's balance sheet and to repay upcoming maturities. Accordingly, the Company may seek to obtain funds through additional debt or equity financings and/or joint venture capital in a manner consistent with its intention to operate with a conservative debt capitalization policy and to reduce the Company's cost of capital by maintaining an investment grade rating with Moody's, S&P and Fitch. A security rating is not a recommendation to buy, sell or hold securities, as it may be subject to revision or withdrawal at any time by the rating organization. Each rating should be evaluated independently of any other rating. The Company may not be able to obtain financing on favorable terms, or at all, which may negatively affect future ratings. The Company's credit facilities and the indentures under which the Company's senior and subordinated unsecured indebtedness are, or may be, issued contain certain financial and operating covenants, including, among other things, debt service coverage and fixed charge coverage ratios, as well as limitations on the Company's ability to incur secured and unsecured indebtedness, sell all or substantially all of the Company's assets, engage in mergers and certain acquisitions and make distribution to its shareholders. Although the Company intends to operate in compliance with these covenants, if the Company were to violate these covenants, the Company may be subject to higher finance costs and fees or accelerated maturities. In addition, certain of the Company's credit facilities and indentures permit the acceleration of maturity in the event certain other debt of the Company is in default or has been accelerated. Foreclosure on mortgaged properties or an inability to refinance existing indebtedness would have a negative impact on the Company's financial condition and results of operations. CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS
The Company has no consolidated debt maturing until
RVI Guaranty
In 2018, the Company provided an unconditional guaranty toPNC Bank with respect to any obligations of RVI outstanding from time to time under a$30 million revolving credit agreement entered into by RVI withPNC Bank . RVI has agreed to reimburse the Company for any amounts paid by it toPNC Bank pursuant to the guaranty plus interest at a contracted rate and to pay an annual commitment fee to the Company on account of the guaranty.
Other Guaranties
In conjunction with the redevelopment of shopping centers, the Company had entered into commitments with general contractors aggregating approximately$15.0 million for its consolidated properties atMarch 31, 2020 . These obligations, composed principally of construction contracts, are generally due within 12 to 24 months, as the related construction costs are incurred, and are expected to be financed through operating cash flow, asset sales or borrowings under the Revolving Credit Facilities. These contracts typically can be changed or terminated without penalty. The Company routinely enters into contracts for the maintenance of its properties. These contracts typically can be canceled upon 30 to 60 days' notice without penalty. AtMarch 31, 2020 , the Company had purchase order obligations, typically payable within one year, aggregating approximately$1.9 million related to the maintenance of its properties and general and administrative expenses. INFLATION Most of the Company's long-term leases contain provisions designed to mitigate the adverse impact of inflation. Such provisions include clauses enabling the Company to receive additional rental income from escalation clauses that generally increase rental rates during the terms of the leases and/or percentage rentals based on tenants' gross sales. Such escalations are determined by negotiation, increases in the consumer price index or similar inflation indices. In addition, many of the Company's leases are for terms of less than 10 years, permitting the Company to seek increased rents at market rates upon renewal. Most of the Company's leases require the tenants to pay their share of operating expenses, including common area maintenance, real estate taxes, insurance and utilities, thereby reducing the Company's exposure to increases in costs and operating expenses resulting from inflation. 31 -------------------------------------------------------------------------------- ECONOMIC CONDITIONS Despite recent bankruptcies and the increase of e-commerce distribution, the Company continued to see demand from a broad range of tenants for its space, particularly in the off-price sector, for most of the first quarter of 2020, which the Company believes reflects an increasingly value-oriented consumer. This demand was evidenced by leasing activity in January and February that was relatively consistent with recent historical levels, though the Company experienced a slow-down in lease activity in March caused by uncertainty and tenant concern around the COVID-19 pandemic. Ultimately, the Company executed new leases and renewals aggregating approximately 0.6 million square feet of space for the three months endedMarch 31, 2020 , on a pro rata basis, which is below historical levels. The Company benefits from a diversified tenant base, with only two tenants whose annualized rental revenue equals or exceeds 3% of the Company's annualized consolidated revenues plus the Company's proportionate share of unconsolidated joint venture revenues (TJX Companies at 6.1% and Bed Bath & Beyond at 3.3%). Other significant tenants include Dick's Sporting Goods, Ulta, Best Buy,Nordstrom Rack , Ross Stores, Kroger,Whole Foods and Home Depot, all of which have relatively strong financial positions, have outperformed other retail categories over time and we believe remain well-capitalized. Historically these tenants have provided a stable revenue base, and we believe that they will continue to provide a stable revenue base going forward, given the long-term nature of these leases. The majority of the tenants in the Company's shopping centers provide day-to-day consumer necessities with a focus on value and convenience, versus discretionary items, which the Company believes will enable many of its tenants to outperform under a variety of economic conditions. The Company recognizes the risks posed by current economic conditions but believes that the position of its transformed portfolio and the general diversity and credit quality of its tenant base should enable it to successfully navigate through a potentially challenging economic environment. The Company has relatively little reliance on overage rents generated by tenant sales performance. The Company believes that its shopping center portfolio is well positioned, as evidenced by its historical property income growth and consistent growth in the average annualized base rent per occupied square foot. AtMarch 31, 2020 andDecember 31, 2019 , the shopping center portfolio occupancy was 90.1% and 90.8%, respectively, and total portfolio average annualized base rent per occupied square foot was$18.49 and$18.25 , respectively, on a pro rata basis. The Company's portfolio has been impacted by anchor tenant bankruptcies, lease expirations and asset sales and the Company has had to invest capital to re-lease anchor units; however, the per square foot cost to do so has been predominantly consistent with the Company's historical trends. The weighted-average cost of tenant improvements and lease commissions estimated to be incurred over the expected lease term for new and renewal leases executed during the three months endedMarch 31, 2020 and 2019, on a pro rata basis, was$1.83 and$2.78 per rentable square, respectively. The Company generally does not expend a significant amount of capital on lease renewals. Beginning inMarch 2020 , the retail sector has been significantly impacted by the outbreak of COVID-19. Though the impact of COVID-19 on tenant operations has varied by tenant category, local conditions and applicable government mandates, a significant number of the Company's tenants have experienced a drastic reduction in sales and foot traffic and many tenants have been forced to limit their operations or close their businesses for a period of time. As monthly rents are generally due from tenants at the beginning of each month, the outbreak of COVID-19 had a relatively minimal impact on the Company's collection ofMarch 2020 rents, but it has had a significant impact on collection ofApril 2020 rents. Discussions with individual tenants that failed to satisfy their April rent obligations are underway. Though the outcome of these discussions is expected to vary from tenant to tenant, the Company expects that it may enter into rent-deferral arrangements with some tenants, including smaller local operators, whose operations have been significantly impacted by COVID-19. It is also unclear to what extent, if any, the Company or its tenants will be able to mitigate the impact of COVID-19 on their operations through business interruption insurance coverage. While the Company is unable to forecast the resolution of tenant relief and abatement claims forApril 2020 , the degree to which similar requests and claims may be made by tenants in subsequent months or the duration of the disruption to tenant and Company operations caused by the COVID-19 pandemic, the Company expects that its results of operations will be adversely impacted by the outbreak and its impact on the economy. Additionally, the outbreak of the COVID-19 pandemic has resulted in a slow-down in the volume of new leasing activity and in delivery and rent commencement with respect to newly-leased space, and may ultimately lead to tenant closures and bankruptcies which may further adversely impact the Company's results of operations in the future. For additional risks relating to the outbreak of COVID-19, see Item 1A. Risk Factors in Part II of this Quarterly Report on Form 10-Q. NEW ACCOUNTING STANDARDS New Accounting Standards are more fully described in Note 1, "Nature of Business and Financial Statement Presentation," to the Company's consolidated financial statements included herein. FORWARD-LOOKING STATEMENTS MD&A should be read in conjunction with the Company's consolidated financial statements and the notes thereto appearing elsewhere in this report. Historical results and percentage relationships set forth in the Company's consolidated financial statements, 32
-------------------------------------------------------------------------------- including trends that might appear, should not be taken as indicative of future operations. The Company considers portions of this information to be "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended, with respect to the Company's expectations for future periods. Forward-looking statements include, without limitation, statements related to acquisitions (including any related pro forma financial information) and other business development activities, future capital expenditures, financing sources and availability and the effects of environmental and other regulations. Although the Company believes that the expectations reflected in these forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. For this purpose, any statements contained herein that are not statements of historical fact should be deemed to be forward-looking statements. Without limiting the foregoing, the words "will," "believes," "anticipates," "plans," "expects," "seeks," "estimates" and similar expressions are intended to identify forward-looking statements. Readers should exercise caution in interpreting and relying on forward-looking statements because such statements involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond the Company's control and that could cause actual results to differ materially from those expressed or implied in the forward-looking statements and that could materially affect the Company's actual results, performance or achievements. For additional factors that could cause the results of the Company to differ materially from those indicated in the forward-looking statements see Item 1A. Risk Factors in the Company's Annual Report on Form 10-K for the year endedDecember 31, 2019 and of this Quarterly Report on Form 10-Q. The impact of COVID-19 may also exacerbate the risks discussed therein and herein, any of which could have a material effect on the Company.
Factors that could cause actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, but are not limited to, the following:
• The Company is subject to general risks affecting the real estate industry,
including the need to enter into new leases or renew leases on favorable
terms to generate rental revenues, and any economic downturn may adversely
affect the ability of the Company's tenants, or new tenants, to enter into
new leases or the ability of the Company's existing tenants to renew their
leases at rates at least as favorable as their current rates;
• The Company could be adversely affected by changes in the local markets
where its properties are located, as well as by adverse changes in national
economic and market conditions;
• The Company may fail to anticipate the effects on its properties of changes
in consumer buying practices, including sales over the internet and the
resulting retailing practices and space needs of its tenants, or a general
downturn in its tenants' businesses, which may cause tenants to close
stores or default in payment of rent;
• The Company is subject to competition for tenants from other owners of
retail properties, and its tenants are subject to competition from other
retailers and methods of distribution. The Company is dependent upon the
successful operations and financial condition of its tenants, in particular
its major tenants, and could be adversely affected by the bankruptcy of
those tenants;
• The Company relies on major tenants, which makes it vulnerable to changes
in the business and financial condition of, or demand for its space by,
such tenants;
• The Company may not realize the intended benefits of acquisition or merger
transactions. The acquired assets may not perform as well as the Company
anticipated, or the Company may not successfully integrate the assets and
realize improvements in occupancy and operating results. The acquisition of
certain assets may subject the Company to liabilities, including
environmental liabilities;
• The Company may fail to identify, acquire, construct or develop additional
properties that produce a desired yield on invested capital, or may fail to
effectively integrate acquisitions of properties or portfolios of
properties. In addition, the Company may be limited in its acquisition
opportunities due to competition, the inability to obtain financing on
reasonable terms or any financing at all and other factors;
• The Company may fail to dispose of properties on favorable terms,especially in regions experiencing deteriorating economic conditions. In
addition, real estate investments can be illiquid, particularly as
prospective buyers may experience increased costs of financing or
difficulties obtaining financing due to local or global conditions, andcould limit the Company's ability to promptly make changes to its portfolio
to respond to economic and other conditions;
• The Company may abandon a development or redevelopment opportunity after
expending resources if it determines that the development opportunity is
not feasible due to a variety of factors, including a lack of availability
of construction financing on reasonable terms, the impact of the economic
environment on prospective tenants' ability to enter into new leases or pay
contractual rent, or the inability of the Company to obtain all necessary
zoning and other required governmental permits and authorizations;
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• The Company may not complete development or redevelopment projects on
schedule as a result of various factors, many of which are beyond the
Company's control, such as weather, labor conditions, governmentalapprovals, material shortages or general economic downturn, resulting in
limited availability of capital, increased debt service expense and
construction costs and decreases in revenue;
• The Company's financial condition may be affected by required debt service
payments, the risk of default and restrictions on its ability to incur
additional debt or to enter into certain transactions under its credit
facilities and other documents governing its debt obligations. In addition,
the Company may encounter difficulties in obtaining permanent financing or
refinancing existing debt. Borrowings under the Company's Revolving Credit
Facilities are subject to certain representations and warranties and
customary events of default, including any event that has had or could
reasonably be expected to have a material adverse effect on the Company's
business or financial condition;
• Changes in interest rates could adversely affect the market price of the
Company's common shares, as well as its performance and cash flow;
• Debt and/or equity financing necessary for the Company to continue to grow
and operate its business may not be available or may not be available on
favorable terms;
• Disruptions in the financial markets could affect the Company's ability to
obtain financing on reasonable terms and have other adverse effects on the
Company and the market price of the Company's common shares;
• The Company is subject to complex regulations related to its status as a
REIT and would be adversely affected if it failed to qualify as a REIT;
• The Company must make distributions to shareholders to continue to qualifyas a REIT, and if the Company must borrow funds to make distributions,
those borrowings may not be available on favorable terms or at all;
• Joint venture investments may involve risks not otherwise present for
investments made solely by the Company, including the possibility that a
partner or co-venturer may become bankrupt, may at any time have interests
or goals different from those of the Company and may take action contrary
to the Company's instructions, requests, policies or objectives, including
the Company's policy with respect to maintaining its qualification as a
REIT. In addition, a partner or co-venturer may not have access to
sufficient capital to satisfy its funding obligations to the joint venture
or may seek to terminate the joint venture, resulting in a loss to the
Company of property revenues and management fees. The partner could cause a
default under the joint venture loan for reasons outside the Company's
control. Furthermore, the Company could be required to reduce the carrying
value of its equity investments, including preferred investments, if a loss
in the carrying value of the investment is realized;
• The Company's decision to dispose of real estate assets, includingundeveloped land and construction in progress, would change the holding
period assumption in the undiscounted cash flow impairment analyses, which
could result in material impairment losses and adversely affect the
Company's financial results;
• The outcome of pending or future litigation, including litigation with
tenants or joint venture partners, may adversely affect the Company's
results of operations and financial condition;
• Property damage, expenses related thereto, and other business and economic
consequences (including the potential loss of revenue) resulting from
extreme weather conditions or natural disasters in locations where the
Company owns properties may adversely affect the Company's results of
operations and financial condition;
• Sufficiency and timing of any insurance recovery payments related to
damages and lost revenues from extreme weather conditions or natural
disasters may adversely affect the Company's results of operations and
financial condition;
• The Company and its tenants could be negatively affected by the impacts of
pandemics and other public health crises, including the recent outbreak of
COVID-19;
• The Company is subject to potential environmental liabilities;
• The Company may incur losses that are uninsured or exceed policy coverage
due to its liability for certain injuries to persons, property or the
environment occurring on its properties;
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• The Company could incur additional expenses to comply with or respond to
claims under the Americans with Disabilities Act or otherwise be adversely
affected by changes in government regulations, including changes in
environmental, zoning, tax and other regulations;
• Changes in accounting standards or other standards may adversely affect the
Company's business;
• The Company's Board of Directors, which regularly reviews the Company's
business strategy and objectives, may change the Company's strategic plan
based on a variety of factors and conditions, including in response to
changing market conditions and
• The Company and its vendors could sustain a disruption, failure or breach
of their respective networks and systems, including as a result of
cyber-attacks, which could disrupt the Company's business operations,
compromise the confidentiality of sensitive information and result in fines
or penalties.
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