Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Quarterly Report on Form 10-Q, together with other statements and information publicly disseminated by Kimco Realty Corporation (the “Company”) contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with the safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe the Company’s future plans, strategies and expectations, are generally identifiable by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” “will,” “target,” “forecast” or similar expressions. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which, in some cases, are beyond the Company’s control and could materially affect actual results, performances or achievements. Factors which may cause actual results to differ materially from current expectations include, but are not limited to, (i) general adverse economic and local real estate conditions, (ii) the inability of major tenants to continue paying their rent obligations due to bankruptcy, insolvency or a general downturn in their business, (iii) financing risks, such as the inability to obtain equity, debt or other sources of financing or refinancing on favorable terms to the Company, (iv) the Company’s ability to raise capital by selling its assets, (v) changes in governmental laws and regulations and management’s ability to estimate the impact of such changes, (vi) the level and volatility of interest rates and management’s ability to estimate the impact thereof, (vii) pandemics or other health crises, such as coronavirus disease 2019 (“COVID-19”), (viii) the availability of suitable acquisition, disposition, development and redevelopment opportunities, and risks related to acquisitions not performing in accordance with our expectations, (ix) risks and uncertainties associated with the Company’s and Weingarten Realty Investor’s (“Weingarten”) ability to complete the Merger (as defined below) on the proposed terms or on the anticipated timeline, or at all, including risks and uncertainties related to securing the necessary shareholder approvals and satisfaction of other closing conditions to consummate the Merger, (x) the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement (as defined below), (xi) risks related to diverting the attention of the Company and Weingarten management from ongoing business operations, (xii) the Company's failure to realize the expected benefits of the Merger, (xiii) significant transaction costs and/or unknown or inestimable liabilities related to the Merger, (xiv) the risk of shareholder litigation in connection with the proposed Merger, including any resulting expense or delay, (xv) the risk that Weingarten’s business will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected, (xvi) the Company’s ability to obtain the expected financing to consummate the Merger, (xvii) risks related to future opportunities and plans for the combined company, including the uncertainty of expected future financial performance and results of the combined company following completion of the Merger, (xviii) effects relating to any further announcements regarding the Merger or the consummation of the Merger on the market price of the Company’s common stock or Weingarten’s common shares, (xix) the possibility that, if the Company does not achieve the perceived benefits of the Merger as rapidly or to the extent anticipated by financial analysts or investors, the market price of the Company’s common stock could decline, (xx) valuation and risks related to the Company’s joint venture and preferred equity investments, (xxi) valuation of marketable securities and other investments, including the shares of Albertsons Companies, Inc. common stock held by the Company, (xxii) increases in operating costs, (xxiii) changes in the dividend policy for the Company’s common and preferred stock and the Company’s ability to pay dividends at current levels, (xxiv) the reduction in the Company’s income in the event of multiple lease terminations by tenants or a failure of multiple tenants to occupy their premises in a shopping center, (xxv) impairment charges, (xxvi) unanticipated changes in the Company’s intention or ability to prepay certain debt prior to maturity and/or hold certain securities until maturity and (xxvii) the other risks and uncertainties identified under Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year-ended December 31, 2020, as supplemented by the risks and uncertainties identified under Item 1A, "Risk Factors" in this Quarterly Report on Form 10-Q. Accordingly, there is no assurance that the Company’s expectations will be realized. The Company disclaims any intention or obligation to update the forward-looking statements, whether as a result of new information, future events or otherwise. You are advised to refer to any further disclosures the Company makes in the Company’s Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that the Company files with the Securities and Exchange Commission (“SEC”).
The following discussion should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes thereto. These unaudited financial statements include all adjustments which are, in the opinion of management, necessary to reflect a fair statement of the results for the interim periods presented, and all such adjustments are of a normal recurring nature.
Executive Overview
Kimco Realty Corporation, a Maryland corporation, is one of North America’s largest publicly traded owners and operators of open-air, grocery-anchored shopping centers and mixed-use assets in the U.S. The terms “Kimco,” the “Company,” “we,” “our” and “us” each refers to Kimco Realty Corporation and our subsidiaries, unless the context indicates otherwise. The Company’s mission is to create destinations for everyday living that inspire a sense of community and deliver value to our many stakeholders.
The Company is a self-administered real estate investment trust (“REIT”) and has owned and operated open-air shopping centers for over 60 years. The Company has not engaged, nor does it expect to retain, any REIT advisors in connection with the operation of its properties. As of June 30, 2021, the Company had interests in 398 U.S. shopping center properties, aggregating 70.2 million square feet of gross leasable area (“GLA”), located in 27 states. In addition, the Company had 71 other property interests, primarily through the Company’s preferred equity investments and other real estate investments, totaling 5.1 million square feet of GLA. The Company’s ownership interests in real estate consist of its consolidated portfolio and portfolios where the Company owns an economic interest, such as properties in the Company’s investment real estate management programs, where the Company partners with institutional investors and also retains management.
The Company’s primary business objective is to be the premier owner and operators of open-air, grocery-anchored shopping centers and mixed-use assets in the U.S. The Company believes it can achieve this objective by:
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increasing the value of its existing portfolio of properties and generating higher levels of portfolio growth;
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increasing cash flows for reinvestment and/or for distribution to shareholders;
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continuing growth in desirable demographic areas with successful retailers; and
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increasing capital appreciation.
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The Company further concentrated its business objectives to three main areas:
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Sustainable Growth – Delivering consistent growth from a portfolio of well-located, essential-anchored shopping centers and mixed-use assets.
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Financial Strength – Maintaining a strong balance sheet that will sustain dividend growth, with liquidity to be an opportunistic investor during periods of disruption.
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Opportunistic Investment – Generating additional internal and external growth through accretive acquisitions, redevelopments and investments opportunities with retailers which have significant real estate holdings.
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Pending Merger with Weingarten Realty Investors
On April 15, 2021, the Company and Weingarten announced that they have entered into a definitive merger agreement (the “Merger Agreement”) under which Weingarten will merge with and into the Company, with the Company continuing as the surviving public company (the “Merger”). The Merger brings together two industry-leading retail real estate platforms with highly complementary portfolios and is expected to create, the preeminent open-air shopping center and mixed-use real estate owner in the country. The increased scale in targeted growth markets, coupled with a broader pipeline of redevelopment opportunities, is expected to position the combined company to create significant value for its shareholders.
Under the terms of the Merger Agreement, each Weingarten common share will be converted into 1.408 newly issued shares of the Company’s common stock plus $2.89 in cash, subject to certain adjustments specified in the Merger Agreement. This strategic transaction was unanimously approved by the Board of Directors of the Company and the Board of Trust Managers of Weingarten.
On July 15, 2021, Weingarten’s Board of Trust Managers declared a special cash distribution of $0.69 per Weingarten common share (the “Special Distribution”) payable on August 2, 2021 to shareholders of record on July 28, 2021. The Special Distribution is being paid in connection with the anticipated Merger and to satisfy the REIT taxable income distribution requirements. Under the terms of the Merger Agreement, Weingarten’s payment of the Special Distribution adjusts the cash consideration to be paid by the Company at the closing of the Merger from $2.89 per Weingarten common share to $2.20 per Weingarten common share, and does not affect the payment of the share consideration of 1.408 newly issued shares of Company common stock for each Weingarten common share owned immediately prior to the effective time of the Merger.
The Merger is expected to close on August 3, 2021, subject to the receipt of required shareholder approvals and the satisfaction or waiver of other closing conditions specified in the Merger Agreement. The amounts presented herein for the three and six months ended June 30, 2021, are solely the Company’s stand-alone results of operations and therefore do not include Weingarten’s results of operations for these periods.
The Merger will create a national operating portfolio of approximately 555 open-air grocery-anchored shopping centers and mixed-use assets comprising approximately 100 million square feet of gross leasable area. These properties are primarily concentrated in the top major metropolitan markets in the United States. The combined company is expected to benefit from increased scale and density in key Sun Belt markets, enhanced asset quality, tenant diversity, a larger redevelopment pipeline and a deleveraged balance sheet. As a result, the combined company should be uniquely positioned to drive further sustained growth in net operating income and asset value creation through continued strategic leasing and asset management.
COVID-19 Pandemic
The COVID-19 pandemic has resulted in a widespread health crisis that adversely affected businesses, economies and financial markets worldwide. The COVID-19 pandemic significantly impacted the retail sector in which the Company operates. The majority of the Company’s tenants and their operations have been, and may continue to be impacted. Through the duration of the pandemic, a substantial number of tenants had to temporarily or permanently close their business, shortened their operating hours or offer reduced services for some period of time.
The development and distribution of COVID-19 vaccines has assisted in allowing many restrictions to be lifted, providing a path to recovery. The U.S. economy continues to build upon the reopening trend as businesses reopen to full capacity and stimulus is flowing through to the consumer. The overall economy continues to recover but several issues including lack of qualified employees, inflation risk, supply chain bottlenecks and COVID-19 variants have impacted the pace of the recovery.
The extent to which the COVID-19 pandemic impacts the Company’s financial condition, results of operations and cash flows, in the near term, will continue to depend on future developments, which continue to be uncertain, including new information that may emerge concerning the severity of COVID-19 variants, the distribution and effectiveness as well as the willingness to take the vaccines, the impact of COVID-19 on economic activity, the effect of COVID-19 on the Company’s tenants and their businesses, the ability of tenants to make their rental payments and any additional closures of tenants’ businesses.
The Company continues to monitor the impact of COVID-19 on the Company’s business, tenants and industry as a whole. The magnitude and duration of the COVID-19 pandemic and its impact on the Company’s operations and liquidity remains uncertain as the pandemic continues to evolve globally and within the United States. The Company will continue to monitor the economic, financial, and social conditions resulting from the COVID-19 pandemic and will assess its asset portfolio for any impairment indicators. In addition, the Company will continue to monitor for any material or adverse effects resulting from the COVID-19 pandemic. If the Company determines that any of its assets are impaired, the Company would be required to take impairment charges, and such amounts could be material.
Although the Company continues to see an increase in collections of rental payments, the effects COVID-19 have had on its tenants are still heavily considered when evaluating the adequacy of the collectability of the tenant’s total accounts receivable balance, including the corresponding straight-line rent receivable. As of June 30, 2021, the Company’s consolidated accounts receivable balance was 48% potentially uncollectible, including receivables from tenants that are being accounted for on a cash basis, and 16% of the Company’s straight-line rent receivables were potentially uncollectible, also inclusive of tenants that are being accounted for on a cash basis. These elevated reserves are primarily attributable to the impact from the COVID-19 pandemic. Management’s estimate of the collectability of accrued rents and accounts receivable is based on the best information available to management at the time of evaluation. The Company will continue to monitor the economic, financial, and social conditions resulting from the COVID-19 pandemic and will continue to assess the collectability of its tenant accounts receivables. As such, the Company may determine that further adjustments to its accounts receivable may be required in the future, and such amounts may be material.
Results of Operations
Comparison of the three and six months ended June 30, 2021 and 2020
The following table presents the comparative results from the Company’s Condensed Consolidated Statements of Income for the three and six months ended June 30, 2021, as compared to the corresponding periods in 2020 (in thousands, except per share data):
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Three Months Ended March 31,
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Six Months Ended June 30,
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2021
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2020
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Change
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2021
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2020
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Change
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Revenues
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Revenues from rental properties, net
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$
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285,732
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$
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235,961
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$
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49,771
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$
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564,603
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$
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521,965
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$
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42,638
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Management and other fee income
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3,284
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2,955
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329
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6,721
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6,695
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26
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Operating expenses
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Rent (1)
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(2,993
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)
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(2,827
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)
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(166
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)
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(6,028
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)
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(5,662
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)
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(366
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)
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Real estate taxes
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(39,594
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)
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(38,678
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)
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(916
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)
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(78,530
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)
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(78,330
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)
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(200
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)
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Operating and maintenance (2)
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(46,897
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)
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(38,940
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)
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(7,957
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)
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(93,417
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)
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(81,348
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)
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(12,069
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)
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General and administrative (3)
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(24,754
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)
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(22,504
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)
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(2,250
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)
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(49,232
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)
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(43,521
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)
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(5,711
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)
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Impairment charges
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(104
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)
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(138
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)
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34
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(104
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)
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(3,112
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)
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3,008
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Merger charges
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(3,193
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)
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-
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(3,193
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)
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(3,193
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)
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-
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(3,193
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)
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Depreciation and amortization
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(72,573
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)
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(73,559
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)
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986
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(147,449
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)
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(142,956
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)
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(4,493
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)
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Gain on sale of properties
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18,861
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1,850
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17,011
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28,866
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5,697
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23,169
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Other income/(expense)
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Other income, net
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1,782
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49
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1,733
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5,138
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1,293
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3,845
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Gain on marketable securities, net
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24,297
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526,243
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(501,946
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)
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85,383
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521,577
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(436,194
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)
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Gain on sale of cost method investment
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-
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190,832
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(190,832
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)
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-
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190,832
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(190,832
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)
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Interest expense
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(46,812
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)
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(48,015
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)
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1,203
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(94,528
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)
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(94,075
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)
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(453
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)
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Provision for income taxes, net
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(1,275
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)
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(51
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)
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(1,224
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)
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(2,583
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)
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(94
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)
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(2,489
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)
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Equity in income of joint ventures, net
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16,318
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10,158
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6,160
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34,070
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23,806
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10,264
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Equity in income of other real estate investments, net
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5,039
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4,782
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|
|
|
257
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|
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8,826
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15,740
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(6,914
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)
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Net income attributable to noncontrolling interests
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(421
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)
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|
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(225
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)
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(196
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)
|
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(3,904
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)
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(514
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)
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(3,390
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)
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Preferred dividends
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(6,354
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)
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(6,354
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)
|
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-
|
|
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(12,708
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)
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(12,708
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)
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-
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Net income available to the Company's common shareholders
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$
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110,343
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$
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741,539
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$
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(631,196
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)
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$
|
241,931
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$
|
825,285
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$
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(583,354
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)
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Net income available to the Company's common shareholders:
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Diluted per common share
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$
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0.25
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$
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1.71
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$
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(1.46
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)
|
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$
|
0.56
|
|
|
$
|
1.90
|
|
|
$
|
(1.34
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)
|
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(1)
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Rent expense relates to ground lease payments for which the Company is the lessee.
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(2)
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Operating and maintenance expense consists of property related costs including repairs and maintenance costs, roof repair, landscaping, parking lot repair, snow removal, utilities, property insurance costs, security and various other property related expenses.
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(3)
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General and administrative expense includes employee-related expenses (including salaries, bonuses, equity awards, benefits, severance costs and payroll taxes), professional fees, office rent, travel and entertainment costs and other company-specific expenses.
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Net income available to the Company’s common shareholders was $110.3 million for the three months ended June 30, 2021, as compared to $741.5 million for the comparable period in 2020. On a diluted per common share basis, net income available to the Company's common shareholders for the three months ended June 30, 2021 was $0.25 as compared to $1.71 for the comparable period in 2020.
Net income available to the Company’s common shareholders was $241.9 million for the six months ended June 30, 2021, as compared to $825.3 million for the comparable period in 2020. On a diluted per common share basis, net income available to the Company's common shareholders for the six months ended June 30, 2021 was $0.56 as compared to $1.90 for the comparable period in 2020.
The following describes the changes of certain line items included on the Company’s Condensed Consolidated Statements of Income, that the Company believes changed significantly and affected Net income available to the Company's common shareholders during the three and six months ended June 30, 2021, as compared to the corresponding periods in 2020:
Revenues from rental properties, net –
The increase in Revenues from rental properties, net of $49.8 million for the three months ended June 30, 2021, as compared to the corresponding period in 2020, is primarily from (i) a net decrease in credit losses from tenants including straight-line rental income of $48.4 million, (ii) an increase in lease termination fee income for the three months ended June 30, 2021 of $2.7 million, as compared to the corresponding period in 2020, partially offset by (iii) a net decrease in revenues from tenants of $1.3 million, primarily due to rent relief provided in association with the COVID-19 pandemic and tenant vacancies for the three months ended June 30, 2021, as compared to the corresponding period in 2020.
The increase in Revenues from rental properties, net of $42.6 million for the six months ended June 30, 2021, as compared to the corresponding period in 2020, is primarily from (i) a net decrease in credit losses of $53.9 million from tenants including straight-line rental income, (ii) an increase in lease termination fee income for the six months ended June 30, 2021 of $7.5 million, as compared to the corresponding period in 2020 and (iii) an increase in revenues of $3.2 million due to property acquisitions during 2021, partially offset by (iv) a net decrease in revenues from tenants, including straight-line rental income, primarily due to rent relief provided in association with the COVID-19 pandemic and tenant vacancies for the six months ended June 30, 2021 of $22.0 million, as compared to the corresponding period in 2020.
Operating and maintenance –
The increase in Operating and maintenance expense of $8.0 million for the three months ended June 30, 2021, as compared to the corresponding period in 2020, is primarily due to (i) an increase in snow removal costs of $2.8 million, (ii) an increase in security and property maintenance services of $3.3 million, (iii) an increase in insurance expense of $1.0 million and (iv) an increase in overall spending on properties primarily due to the reopening of markets throughout the country due to the subsiding of the COVID-19 pandemic.
The increase in Operating and maintenance expense of $12.1 million for the six months ended June 30, 2021, as compared to the corresponding period in 2020, is primarily due to (i) an increase in snow removal costs of $5.3 million, (ii) an increase in security and property maintenance services of $3.6 million, (iii) an increase in insurance expense of $1.6 million and (iv) an increase in overall spending on properties primarily due to the reopening of markets throughout the country due to the subsiding of the COVID-19 pandemic.
General and administrative –
The increase in General and administrative expense of $5.7 million for the six months ended June 30, 2021, as compared to the corresponding period in 2020, is primarily due to (i) an increase of $3.0 million in personnel related costs primarily from an increase in bonus accrual due to improved financial metrics in 2021, as compared to 2020, and (ii) a decrease of $2.8 million in payroll capitalization due to less active development and redevelopment projects during the six months ended June 30, 2021, as compared to the corresponding period in 2020.
Impairment charges –
During the six months ended June 30, 2021 and 2020, the Company recognized impairment charges related to adjustments to property carrying values of $0.1 million and $3.1 million, respectively, for which the Company’s estimated fair values were primarily based upon signed contracts or letters of intent from third party offers. These adjustments to property carrying values were recognized in connection with the Company’s efforts to market certain properties and management’s assessment as to the likelihood and timing of such potential transactions. Certain of the calculations to determine fair values utilized unobservable inputs and, as such, were classified as Level 3 of the FASB’s fair value hierarchy.
Merger charges –
During the six months ended June 30, 2021, the Company incurred costs of $3.2 million associated with its pending merger with Weingarten. These charges are primarily comprised of legal and professional fees.
Depreciation and amortization –
The increase in Depreciation and amortization of $4.5 million for the six months ended June 30, 2021, as compared to the corresponding period in 2020, is primarily due to (i) an increase of $5.5 million due to depreciation commencing on certain development and redevelopment projects that were placed into service during 2021 and 2020, (ii) an increase of $1.0 million resulting from property acquisitions during 2021, partially offset by (iii) a decrease of $2.0 million due to write-offs of depreciable assets primarily due to tenant vacates during 2020 and the six months ended June 30, 2021.
Gain on sale of properties –
During the six months ended June 30, 2021, the Company disposed of three operating properties and seven parcels, in separate transactions, for an aggregate sales price of $132.2 million, which resulted in aggregate gains of $28.9 million. During the six months ended June 30, 2020, the Company disposed of three operating properties, in separate transactions, for an aggregate sales price of $17.2 million, which resulted in aggregate gains of $5.7 million.
Other income, net –
The increase in Other income, net of $3.8 million for the six months ended June 30, 2021, as compared to the corresponding period in 2020, is primarily due to (i) an increase in dividend income of $8.0 million from the shares of Albertsons Companies, Inc. (“ACI”) common stock held by the Company and (ii) an increase in mortgage and other financing income of $1.5 million as a result of new loans issued during 2020 and the six months ended June 30, 2021, partially offset by (iii) an increase of $3.2 million in costs associated with potential transactions for which the Company is no longer pursuing and (iv) a decrease of $2.5 million related to the recognition of income from the Company’s Puerto Rico properties, resulting from the receipt of casualty insurance claims in excess of the value of the assets written-off during the six months ended June 30, 2020.
Gain on marketable securities, net –
The gain on marketable securities, net of $24.3 million and $85.4 million for the three and six months ended June 30, 2021, respectively, as compared to the gain on marketable securities, net of $526.2 million and $521.6 million for the three and six months ended June 30, 2020, respectively, is primarily the result of mark-to-market fluctuations of the shares of ACI common stock held by the Company, which were obtained during ACI's initial public offering (“IPO”) in June 2020. This offering resulted in the Company changing the classification of its ACI investment from a cost method investment to a marketable security.
Gain on sale of cost method investment –
In June 2020, the Company recognized an aggregate gain of $190.8 million related to (i) a $131.6 million gain resulting from ACI’s partial repurchase of its common stock from existing shareholders in conjunction with its issuance of convertible preferred stock and (ii) a gain of $59.2 million in connection with the partial sale of the shares of ACI common stock held by the Company during ACI’s IPO.
Provision for income taxes, net –
The increase in Provision for income taxes, net of $2.5 million for the six months ended June 30, 2021, as compared to the corresponding period in 2020, is primarily due to an increase in gains on sales in the Company’s Taxable REIT Subsidiary (“TRS”) during 2021, as compared to the corresponding periods in 2020.
Equity in income of joint ventures, net –
The increase in Equity in income of joint ventures, net of $6.2 million for the three months ended June 30, 2021, as compared to the corresponding period in 2020, is primarily due to a decrease in credit losses from tenants, including straight-line rental income, within various joint venture investments.
The increase in Equity in income of joint ventures, net of $10.3 million for the six months ended June 30, 2021, as compared to the corresponding period in 2020, is primarily due to (i) an increase in net gains of $5.3 million resulting from the sale of properties within various joint venture investments during the six months ending June 30, 2021, as compared to the corresponding period in 2020, and (ii) increased equity in income of $5.0 million within various joint venture investments during 2021, as compared to the corresponding period in 2020, primarily resulting from a decrease in credit losses from tenants, including straight-line rental income.
Equity in income of other real estate investments, net –
The decrease in Equity in income of other real estate investments, net of $6.9 million for the six months ended June 30, 2021, as compared to the corresponding period in 2020, is primarily due to a decrease in profit participation from the sale of properties within the Company’s Preferred Equity Program during the six months ended June 30, 2021 as compared to the corresponding period in 2020.
Net income attributable to noncontrolling interests –
The increase in Net income attributable to noncontrolling interests of $3.4 million for the six months ended June 30, 2021, as compared to the corresponding period in 2020, is primarily due to an increase in net gain on sale of properties, within consolidated joint ventures, during six months ended June 30, 2021, as compared to the corresponding period in 2020.
Tenant Concentration
The Company seeks to reduce its operating and leasing risks through diversification achieved by the geographic distribution of its properties and a large tenant base. As of June 30, 2021, the Company had interests in 398 U.S. shopping center properties, aggregating 70.2 million square feet of gross leasable area (“GLA”), located in 27 states. At June 30, 2021, the Company’s five largest tenants were TJX Companies, Home Depot, Albertsons, Ahold Delhaize USA and PetSmart, which represented 4.0%, 2.6%, 2.2%, 2.1% and 2.0%, respectively, of the Company’s annualized base rental revenues, including the proportionate share of base rental revenues from properties in which the Company has less than a 100% economic interest.
Liquidity and Capital Resources
The Company’s capital resources include accessing the public debt and equity capital markets, unsecured term loans, mortgages and construction loan financing, and immediate access to the Company’s unsecured revolving credit facility (the “Credit Facility”) with bank commitments of $2.0 billion which can be increased to $2.75 billion through an accordion feature. In addition, the Company holds 39.8 million shares of ACI, which are subject to certain contractual lock-up provisions.
The Company’s cash flow activities are summarized as follows (in thousands):
|
|
Six Months Ended June 30,
|
|
|
|
2021
|
|
|
2020
|
|
Cash and cash equivalents, beginning of the period
|
|
$
|
293,188
|
|
|
$
|
123,947
|
|
Net cash flow provided by operating activities
|
|
|
293,671
|
|
|
|
237,447
|
|
Net cash flow (used for)/provided by investing activities
|
|
|
(45,882
|
)
|
|
|
96,597
|
|
Net cash flow used for financing activities
|
|
|
(310,915
|
)
|
|
|
(256,304
|
)
|
Net change in cash and cash equivalents
|
|
|
(63,126
|
)
|
|
|
77,740
|
|
Cash and cash equivalents, end of the period
|
|
$
|
230,062
|
|
|
$
|
201,687
|
|
Operating Activities
The Company anticipates that cash on hand, net cash flow provided by operating activities, borrowings under its Credit Facility and the issuance of equity and public debt, as well as other debt and equity alternatives, will provide the necessary capital required by the Company. The Company will continue to evaluate its capital requirements for both its short-term and long-term liquidity needs, all of which are highly uncertain and cannot be predicted, which could be affected by various risks and uncertainties, including, but not limited to, the effects of the COVID-19 pandemic.
Net cash flow provided by operating activities for the six months ended June 30, 2021 was $293.7 million, as compared to $237.4 million for the comparable period in 2020. The increase of $56.3 million is primarily attributable to:
|
●
|
new leasing, expansion and re-tenanting of core portfolio properties;
|
|
●
|
changes in operating assets and liabilities due to timing of receipts and payments; and
|
|
●
|
the acquisition of operating properties during 2021 and 2020; partially offset by
|
|
●
|
a decrease in distributions from the Company’s joint ventures programs;
|
|
●
|
rent relief provided to tenants as a result of the COVID-19 pandemic; and
|
|
●
|
the disposition of operating properties in 2021 and 2020.
|
Investing Activities
Net cash flow used for investing activities was $45.9 million for the six months ended June 30, 2021, as compared to net cash flow provided by investing activities of $96.6 million for the comparable period in 2020.
Investing activities during the six months ended June 30, 2021 primarily consisted of:
Cash inflows:
|
●
|
$130.1 million in proceeds from the sale of three consolidated properties and seven parcels;
|
|
●
|
$32.8 million in reimbursements of investments in and advances to other real estate investments; and
|
|
●
|
$3.4 million in reimbursements of investments in and advances to real estate joint ventures.
|
Cash outflows:
|
●
|
$84.3 million for the acquisition of two consolidated operating properties;
|
|
●
|
$66.3 million for improvements to operating real estate primarily related to the Company’s active redevelopment pipeline; and
|
|
●
|
$61.4 million for investments in and advances to real estate joint ventures, primarily related to a redevelopment project within the Company’s joint venture portfolio, and investments in other real estate investments, primarily related to the Company's investment in a new preferred equity investment located in San Antonio, TX.
|
Investing activities during the six months ended June 30, 2020 primarily consisted of:
Cash inflows:
|
●
|
$228.4 million in proceeds from the partial sale of shares of ACI common stock held by the Company prior to ACI's IPO and the sale of 4.7 million shares of ACI common stock during its IPO;
|
|
●
|
$13.4 million in proceeds from the sale of three consolidated operating properties; and
|
|
●
|
$2.5 million in proceeds from insurance casualty claims.
|
Cash outflows:
|
●
|
$133.2 million for improvements to operating real estate primarily related to the Company’s active redevelopment pipeline and improvements to real estate under development;
|
|
●
|
$9.3 million for investments in and advances to real estate joint ventures, primarily related to a redevelopment project within the Company’s joint venture portfolio, and investments in other real estate investments, primarily related to repayment of a mortgage within the Company’s Preferred Equity Program; and
|
|
●
|
$7.1 million for the acquisition of operating real estate.
|
Acquisition of Operating Real Estate –
During the six months ended June 30, 2021 and 2020, the Company expended $84.3 million and $7.1 million, respectively, towards the acquisition of operating real estate properties. The Company anticipates spending approximately $75.0 million to $150.0 million towards the acquisition of operating properties for the remainder of 2021, excluding amounts expended in connection with the Merger. The funding of these capital requirements will be provided by proceeds from property dispositions, net cash flow provided by operating activities and availability under the Company’s Credit Facility.
Improvements to Operating Real Estate –
During the six months ended June 30, 2021 and 2020, the Company expended $66.3 million and $110.8 million, respectively, towards improvements to operating real estate. These amounts consist of the following (in thousands):
|
|
Six Months Ended June 30,
|
|
|
|
2021
|
|
|
2020
|
|
Redevelopment and renovations
|
|
$
|
40,209
|
|
|
$
|
93,663
|
|
Tenant improvements and tenant allowances
|
|
|
26,133
|
|
|
|
17,163
|
|
Total improvements (1)
|
|
$
|
66,342
|
|
|
$
|
110,826
|
|
|
(1)
|
During the six months ended June 30, 2021 and 2020, the Company capitalized payroll of $2.8 million and $4.4 million, respectively, and capitalized interest of $0.4 million and $4.9 million, respectively, in connection with the Company’s improvements to operating real estate.
|
The Company has an ongoing program to redevelop and re-tenant its properties to maintain or enhance its competitive position in the marketplace. The Company is actively pursuing redevelopment opportunities within its operating portfolio which it believes will increase the overall value by bringing in new tenants and improving the assets’ value. The Company has identified three categories of redevelopment: (i) large scale redevelopment, which involves demolishing and building new square footage; (ii) value creation redevelopment, which includes the subdivision of large anchor spaces into multiple tenant layouts; and (iii) creation of out-parcels and pads located in the front of the shopping center properties.
The Company anticipates its capital commitment toward these redevelopment projects and re-tenanting efforts for the remainder of 2021 will be approximately $50.0 million to $100.0 million, which does not include any amounts that may result from the Merger. The funding of these capital requirements will be provided by proceeds from property dispositions, net cash flow provided by operating activities and availability under the Company’s Credit Facility.
Financing Activities
Net cash flow used for financing activities was $310.9 million for the six months ended June 30, 2021, as compared to $256.3 million for the comparable period in 2020.
Financing activities during the six months ended June 30, 2021 primarily consisted of:
Cash outflows:
|
●
|
$160.1 million of dividends paid;
|
|
●
|
$141.2 million in principal payment on debt, including normal amortization of rental property debt;
|
|
●
|
$9.2 million in shares repurchased for employee tax withholding on equity awards; and
|
|
●
|
$3.2 million in redemption/distribution of noncontrolling interests.
|
Financing activities during the six months ended June 30, 2020 primarily consisted of:
Cash inflows:
|
●
|
$590.0 million in proceeds from issuance of the Company’s unsecured term loan credit facility (the “Term Loan”).
|
Cash outflows:
|
●
|
$254.7 million of dividends paid;
|
|
●
|
$265.0 million in repayments of the Company’s Term Loan;
|
|
●
|
$200.0 million in repayments under the Company’s Credit Facility, net;
|
|
●
|
$93.9 million for principal payments on debt (primarily related to the repayment of debt on two encumbered properties and the payoff of a construction loan), including normal amortization on rental property debt;
|
|
●
|
$22.1 million for the redemption/distribution of noncontrolling interests, primarily related to the redemption of certain partnership interests by consolidated subsidiaries;
|
|
●
|
$6.4 million for financing origination costs, primarily related to the Credit Facility and Term Loan; and
|
|
●
|
$5.3 million in shares repurchased for employee tax withholding on equity awards.
|
The Company continually evaluates its debt maturities, and, based on management’s current assessment, believes it has viable financing and refinancing alternatives that will not materially adversely impact its expected financial results. The Company continues to pursue borrowing opportunities with large commercial U.S. and global banks, select life insurance companies and certain regional and local banks.
Debt maturities for the remainder of 2021 consist of: $53.5 million of unconsolidated joint venture debt and $9.1 million of debt included in the Company’s Preferred Equity Program, assuming the utilization of extension options where available. These 2021 debt maturities are anticipated to be repaid through operating cash flows, debt refinancing, unsecured credit facilities, proceeds from property sales and partner capital contributions, as deemed appropriate.
The Company intends to maintain strong debt service coverage and fixed charge coverage ratios as part of its commitment to maintain or improve its unsecured debt ratings. The Company may, from time to time, seek to obtain funds through additional common and preferred equity offerings, unsecured debt financings and/or mortgage/construction loan financings and other capital alternatives.
Since the completion of the Company’s IPO in 1991, the Company has utilized the public debt and equity markets as its principal source of capital for its expansion needs. Since the IPO, the Company has completed additional offerings of its public unsecured debt and equity, raising in the aggregate over $15.6 billion. Proceeds from public capital market activities have been used for the purposes of, among other things, repaying indebtedness, acquiring interests in open-air, grocery-anchored shopping centers and mixed-use assets, funding real estate under development projects, expanding and improving properties in the portfolio and other investments.
During February 2021, the Company filed a shelf registration statement on Form S-3, which is effective for a term of three years, for the future unlimited offerings, from time to time, of debt securities, preferred stock, depositary shares, common stock and common stock warrants. The Company, pursuant to this shelf registration statement may, from time to time, offer for sale its senior unsecured debt securities for any general corporate purposes, including (i) funding specific liquidity requirements in its business, including property acquisitions and development and redevelopment costs and (ii) managing the Company’s debt maturities.
Common Stock –
During February 2020, the Company extended its share repurchase program for a term of two years, which will expire in February 2022, pursuant to which the Company may repurchase shares of its common stock, par value $0.01 per share, with an aggregate gross purchase price of up to $300.0 million. The Company did not repurchase any shares under the share repurchase program during the six months ended June 30, 2021. As of June 30, 2021, the Company had $224.9 million available under this share repurchase program.
Senior Notes –
The Company’s indenture governing its senior notes contains the following covenants, all of which the Company is compliant with:
Covenant
|
|
Must Be
|
|
As of June 30, 2021
|
|
Consolidated Indebtedness to Total Assets
|
|
<65%
|
|
38%
|
|
Consolidated Secured Indebtedness to Total Assets
|
|
<40%
|
|
1%
|
|
Consolidated Income Available for Debt Service to Maximum Annual Service Charge
|
|
>1.50x
|
|
5.2x
|
|
Unencumbered Total Asset Value to Consolidated Unsecured Indebtedness
|
|
>1.50x
|
|
2.7x
|
|
For a full description of the various indenture covenants, refer to the Indenture dated September 1, 1993; the First Supplemental Indenture dated August 4, 1994; the Second Supplemental Indenture dated April 7, 1995; the Third Supplemental Indenture dated June 2, 2006; the Fourth Supplemental Indenture dated April 26, 2007; the Fifth Supplemental Indenture dated as of September 24, 2009; the Sixth Supplemental Indenture dated as of May 23, 2013; and the Seventh Supplemental Indenture dated as of April 24, 2014, each as filed with the SEC. See the Exhibits Index to our Annual Report on Form 10-K for the year ended December 31, 2020 for specific filing information.
Credit Facility –
In February 2020, the Company obtained a $2.0 billion Credit Facility with a group of banks. The Credit Facility is scheduled to expire in March 2024, with two additional six-month options to extend the maturity date, at the Company’s discretion, to March 2025. The Credit Facility is a green credit facility tied to sustainability metric targets, as described in the agreement. The Company achieved such targets, which effectively reduced the rate on the Credit Facility by one basis point. The Credit Facility, which accrues interest at a rate of LIBOR plus 76.5 basis points (0.85% as of June 30, 2021), can be increased to $2.75 billion through an accordion feature. Pursuant to the terms of the Credit Facility, the Company, among other things, is subject to covenants requiring the maintenance of (i) maximum indebtedness ratios and (ii) minimum interest and fixed charge coverage ratios. As of June 30, 2021, the Credit Facility had no outstanding balance, no appropriations for letters of credit and the Company was in compliance with its covenants.
Pursuant to the terms of the Credit Facility, the Company, among other things, is subject to maintenance of various covenants. The Company is currently in compliance with these covenants. The financial covenants for the Credit Facility are as follows:
Covenant
|
|
Must Be
|
|
As of June 30, 2021
|
|
Total Indebtedness to Gross Asset Value (“GAV”)
|
|
<60%
|
|
43.6%
|
|
Total Priority Indebtedness to GAV
|
|
<35%
|
|
0.1%
|
|
Unencumbered Asset Net Operating Income to Total Unsecured Interest Expense
|
|
>1.75x
|
|
4.0x
|
|
Fixed Charge Total Adjusted EBITDA to Total Debt Service
|
|
>1.50x
|
|
3.6x
|
|
For a full description of the Credit Facility’s covenants, refer to the Amended and Restated Credit Agreement dated as of February 27, 2020, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 28, 2020.
Pending Merger with Weingarten Realty Investors –
The Merger is expected to close on August 3, 2021, subject to the receipt of required shareholder approvals and the satisfaction or waiver of other closing conditions specified in the Merger Agreement. Under the terms of the Merger Agreement, each Weingarten common share will be converted into 1.408 newly issued shares of the Company’s common stock plus $2.89 in cash. Weingarten declared a Special Distribution payable on August 2, 2021 to shareholders of record on July 28, 2021 of $0.69. Under the terms of the Merger Agreement, Weingarten’s payment of the Special Distribution adjusts the cash consideration to be paid by the Company at the closing of the Merger from $2.89 per Weingarten common share to $2.20 per Weingarten common share. The Company plans to fund the $2.20 per share cash consideration portion of the Merger and transaction costs with cash on hand and borrowings under its Credit Facility.
Mortgages Payable –
During the six months ended June 30, 2021, the Company repaid $137.2 million of mortgage debt (including fair market value adjustment of $1.0 million) that encumbered 25 operating properties.
In addition to the public equity and debt markets as capital sources, the Company may, from time to time, obtain mortgage financing on selected properties and construction loan financing to partially fund the capital needs of its real estate development projects. As of June 30, 2021, the Company had over 355 unencumbered property interests in its portfolio.
COVID-19 –
As the COVID-19 pandemic continues to evolve, uncertainty remains regarding the long-term economic impact it will have. As a result, the Company has focused on creating a strong liquidity position, including, but not limited to, maintaining availability under its Credit Facility, cash and cash equivalents on hand and having access to unencumbered property interests.
The Company continues to monitor the impact of COVID-19 on the Company’s business, tenants and industry as a whole. The magnitude and duration of the COVID-19 pandemic and its impact on the Company’s operations and liquidity is uncertain as of the filing date of this Quarterly Report on Form 10-Q as this pandemic continues to evolve globally and within the United States. However, if the COVID-19 pandemic continues, such impacts could grow, become material and materially disrupt the Company’s business operations and materially adversely affect the Company’s liquidity.
Dividends –
The Company’s Board of Directors will continue to evaluate the Company’s dividend policy on a quarterly basis as they monitor sources of capital and evaluate the impact of the economy and capital markets availability on operating fundamentals. Since cash used to pay dividends reduces amounts available for capital investment, the Company generally intends to maintain a dividend payout ratio that reserves such amounts as it considers necessary for the expansion and renovation of shopping centers in its portfolio, debt reduction, the acquisition of interests in new properties and other investments as suitable opportunities arise and such other factors as the Board of Directors considers appropriate. Cash dividends paid for common and preferred issuances of stock for the six months ended June 30, 2021 and 2020 were $160.1 million and $254.7 million, respectively.
Although the Company receives substantially all of its rental payments on a monthly basis, it generally intends to continue paying dividends quarterly. Amounts accumulated in advance of each quarterly distribution will be invested by the Company in short-term money market or other suitable instruments. The Company’s Board of Directors will continue to monitor the impact the COVID-19 pandemic has on the Company's financial performance and economic outlook. The Company’s objective is to establish a dividend level that maintains compliance with the Company’s REIT taxable income distribution requirements. On April 27, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.17 per common share payable to shareholders of record on June 9, 2021, which was paid on June 23, 2021. Also, on April 27, 2021, the Company's Board of Directors also declared quarterly dividends with respect to the Company's classes of cumulative redeemable preferred shares (Classes L and M), which were paid on July 15, 2021, to shareholders of record on July 1, 2021.
On July 27, 2021, the Company’s Board of Directors declared quarterly dividends with respect to the Company’s classes of cumulative redeemable preferred shares (Classes L and M) which are scheduled to be paid on October 15, 2021, to shareholders of record on October 1, 2021. The Company’s Board of Directors anticipates declaring a quarterly cash dividend on its common shares during the third quarter 2021, subsequent to the completion of the Merger.
Funds From Operations
Funds From Operations (“FFO”) is a supplemental non-GAAP financial measure utilized to evaluate the operating performance of real estate companies. NAREIT defines FFO as net income/(loss) available to the Company’s common shareholders computed in accordance with generally accepted accounting principles in the United States (“GAAP”), excluding (i) depreciation and amortization related to real estate, (ii) gains or losses from sales of certain real estate assets, (iii) gains and losses from change in control, (iv) impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity and (v) after adjustments for unconsolidated partnerships and joint ventures calculated to reflect FFO on the same basis. The Company also made an election to exclude from its calculation of FFO (i) gains and losses on the sale of assets and impairments of assets incidental to its main business and (ii) mark-to-market changes in the value of its equity securities. As such, the Company does not include gains/impairments on land parcels, gains/losses (realized or unrealized) from marketable securities, allowance for credit losses on mortgage receivables or gains/impairments on preferred equity participations in NAREIT defined FFO. As a result of this election, the Company will no longer disclose FFO available to the Company’s common shareholders as adjusted (“FFO as adjusted”) as an additional supplemental measure. The incidental adjustments noted above which were previously excluded from NAREIT FFO and used to determine FFO as adjusted are now included in NAREIT FFO and therefore the Company believes FFO as adjusted is no longer necessary.
The Company presents FFO available to the Company’s common shareholders as it considers it an important supplemental measure of our operating performance and believes it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO available to the Company’s common shareholders when reporting results. Comparison of our presentation of FFO available to the Company’s common shareholders to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in the application of the NAREIT definition used by such REITs.
FFO is a supplemental non-GAAP financial measure of real estate companies’ operating performances, which does not represent cash generated from operating activities in accordance with GAAP and therefore, should not be considered an alternative for net income or cash flows from operations as a measure of liquidity. Our method of calculating FFO available to the Company’s common shareholders may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.
The Company’s reconciliation of net income available to the Company’s common shareholders to FFO available to the Company’s common shareholders is reflected in the table below (in thousands, except per share data).
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Net income available to the Company’s common shareholders
|
|
$
|
110,343
|
|
|
$
|
741,539
|
|
|
$
|
241,931
|
|
|
$
|
825,285
|
|
Gain on sale of properties
|
|
|
(18,861
|
)
|
|
|
(1,850
|
)
|
|
|
(28,866
|
)
|
|
|
(5,697
|
)
|
Gain on sale of joint venture properties
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,283
|
)
|
|
|
(18
|
)
|
Depreciation and amortization - real estate related
|
|
|
71,781
|
|
|
|
72,296
|
|
|
|
145,894
|
|
|
|
141,003
|
|
Depreciation and amortization - real estate joint ventures
|
|
|
10,234
|
|
|
|
10,178
|
|
|
|
20,241
|
|
|
|
20,742
|
|
Impairment charges of depreciable real estate properties
|
|
|
104
|
|
|
|
138
|
|
|
|
1,172
|
|
|
|
3,579
|
|
Gain on sale of cost method investment
|
|
|
-
|
|
|
|
(190,832
|
)
|
|
|
-
|
|
|
|
(190,832
|
)
|
Profit participation from other real estate investments, net
|
|
|
(1,346
|
)
|
|
|
(1,186
|
)
|
|
|
(1,151
|
)
|
|
|
(7,469
|
)
|
Gain on marketable securities, net
|
|
|
(24,297
|
)
|
|
|
(526,243
|
)
|
|
|
(85,382
|
)
|
|
|
(521,577
|
)
|
Provision for income taxes (1)
|
|
|
1,096
|
|
|
|
-
|
|
|
|
2,142
|
|
|
|
1
|
|
Noncontrolling interests (1)
|
|
|
(271
|
)
|
|
|
(559
|
)
|
|
|
2,355
|
|
|
|
(1,063
|
)
|
FFO available to the Company’s common shareholders (3)
|
|
$
|
148,783
|
|
|
$
|
103,481
|
|
|
$
|
293,053
|
|
|
$
|
263,954
|
|
Weighted average shares outstanding for FFO calculations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
431,011
|
|
|
|
429,967
|
|
|
|
430,769
|
|
|
|
429,851
|
|
Units
|
|
|
642
|
|
|
|
662
|
|
|
|
653
|
|
|
|
639
|
|
Dilutive effect of equity awards
|
|
|
1,356
|
|
|
|
970
|
|
|
|
1,528
|
|
|
|
1,469
|
|
Diluted (2)
|
|
|
433,009
|
|
|
|
431,599
|
|
|
|
432,950
|
|
|
|
431,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO per common share – basic (3)
|
|
$
|
0.35
|
|
|
$
|
0.24
|
|
|
$
|
0.68
|
|
|
$
|
0.61
|
|
FFO per common share – diluted (2) (3)
|
|
$
|
0.34
|
|
|
$
|
0.24
|
|
|
$
|
0.68
|
|
|
$
|
0.61
|
|
|
(1)
|
Related to gains, impairments, and depreciation on properties, where applicable.
|
|
(2)
|
Reflects the potential impact if certain units were converted to common stock at the beginning of the period, which would have a dilutive effect on FFO available to the Company’s common shareholders. FFO available to the Company’s common shareholders would be increased by $97 and $0 for the three months ended June 30, 2021 and 2020, respectively, and $195 and $160 for the six months ended June 30, 2021 and 2020, respectively. The effect of other certain convertible units would have an anti-dilutive effect upon the calculation of FFO available to the Company’s common shareholders per share. Accordingly, the impact of such conversion has not been included in the determination of diluted earnings per share calculations.
|
|
(3)
|
Includes Merger charges of $3.2 million (or $0.01 per basic and diluted share) recognized during the three and six months ended June 30, 2021 in connection with the pending Merger.
|
Same Property Net Operating Income (“Same property NOI”)
Same property NOI is a supplemental non-GAAP financial measure of real estate companies’ operating performance and should not be considered an alternative to net income in accordance with GAAP or cash flows from operations as a measure of liquidity. The Company considers Same property NOI as an important operating performance measure because it is frequently used by securities analysts and investors to measure only the net operating income of properties that have been owned by the Company for the entire current and prior year reporting periods. It excludes properties under redevelopment, development and pending stabilization; properties are deemed stabilized at the earlier of (i) reaching 90% leased or (ii) one year following a project’s inclusion in operating real estate. Same property NOI assists in eliminating disparities in net income due to the development, acquisition or disposition of properties during the particular period presented, and thus provides a more consistent performance measure for the comparison of the Company's properties.
Same property NOI is calculated using revenues from rental properties (excluding straight-line rent adjustments, lease termination fees, TIFs and amortization of above/below market rents) less charges for bad debt, operating and maintenance expense, real estate taxes and rent expense plus the Company’s proportionate share of Same property NOI from unconsolidated real estate joint ventures, calculated on the same basis. The Company’s method of calculating Same property NOI available to the Company’s common shareholders may differ from methods used by other REITs and, accordingly, may not be comparable to such other REITs.
The following is a reconciliation of Net income available to the Company’s common shareholders to Same property NOI (in thousands):
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Net income available to the Company’s common shareholders
|
|
$
|
110,343
|
|
|
$
|
741,539
|
|
|
$
|
241,931
|
|
|
$
|
825,285
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management and other fee income
|
|
|
(3,284
|
)
|
|
|
(2,955
|
)
|
|
|
(6,721
|
)
|
|
|
(6,695
|
)
|
General and administrative
|
|
|
24,754
|
|
|
|
22,504
|
|
|
|
49,232
|
|
|
|
43,521
|
|
Impairment charges
|
|
|
104
|
|
|
|
138
|
|
|
|
104
|
|
|
|
3,112
|
|
Merger charges
|
|
|
3,193
|
|
|
|
-
|
|
|
|
3,193
|
|
|
|
-
|
|
Depreciation and amortization
|
|
|
72,573
|
|
|
|
73,559
|
|
|
|
147,449
|
|
|
|
142,956
|
|
Gain on sale of properties
|
|
|
(18,861
|
)
|
|
|
(1,850
|
)
|
|
|
(28,866
|
)
|
|
|
(5,697
|
)
|
Interest and other expense, net
|
|
|
45,030
|
|
|
|
47,966
|
|
|
|
89,389
|
|
|
|
92,782
|
|
Gain on marketable securities, net
|
|
|
(24,297
|
)
|
|
|
(526,243
|
)
|
|
|
(85,382
|
)
|
|
|
(521,577
|
)
|
Gain on sale of cost method investment
|
|
|
-
|
|
|
|
(190,832
|
)
|
|
|
-
|
|
|
|
(190,832
|
)
|
Provision for income taxes, net
|
|
|
1,275
|
|
|
|
51
|
|
|
|
2,583
|
|
|
|
94
|
|
Equity in income of other real estate investments, net
|
|
|
(5,039
|
)
|
|
|
(4,782
|
)
|
|
|
(8,826
|
)
|
|
|
(15,740
|
)
|
Net income attributable to noncontrolling interests
|
|
|
421
|
|
|
|
225
|
|
|
|
3,904
|
|
|
|
514
|
|
Preferred dividends
|
|
|
6,354
|
|
|
|
6,354
|
|
|
|
12,708
|
|
|
|
12,708
|
|
Non same property net operating (income)/loss
|
|
|
(10,716
|
)
|
|
|
3,097
|
|
|
|
(26,780
|
)
|
|
|
(14,458
|
)
|
Non-operational expense from joint ventures, net
|
|
|
14,606
|
|
|
|
16,764
|
|
|
|
26,569
|
|
|
|
35,778
|
|
Same property NOI
|
|
$
|
216,456
|
|
|
$
|
185,535
|
|
|
$
|
420,487
|
|
|
$
|
401,751
|
|
Same property NOI increased by $30.9 million or 16.7% for the three months ended June 30, 2021, as compared to the corresponding period in 2020. This increase is primarily the result of (i) a decrease in potentially uncollectible revenues and disputed amounts of $43.9 million, partially offset by (ii) a decrease in revenues from rental properties of $11.7 million primarily related to tenant rent abatements and lower occupancy levels and (iii) an increase in non-recoverable operating expenses of $1.3 million.
Same property NOI increased by $18.7 million or 4.7% for the six months ended June 30, 2021, as compared to the corresponding period in 2020. This increase is primarily the result of (i) a decrease in potentially uncollectible revenues and disputed amounts of $47.5 million, partially offset by (ii) a decrease in revenues from rental properties of $27.1 million primarily related to tenant rent abatements and lower occupancy levels and (iii) an increase in non-recoverable operating expenses of $1.7 million.
Leasing Activity
During the six months ended June 30, 2021, the Company executed 508 leases totaling over 4.0 million square feet in the Company’s consolidated operating portfolio comprised of 196 new leases and 312 renewals and options. The leasing costs associated with these new leases are estimated to aggregate $38.7 million or $33.01 per square foot. These costs include $28.3 million of tenant improvements and $10.5 million of external leasing commissions. The average rent per square foot for (i) new leases was $21.01 and (ii) renewals and options was $15.15.
Tenant Lease Expirations
At June 30, 2021, the Company has a total of 5,324 leases in its consolidated operating portfolio. The following table sets forth the aggregate lease expirations for each of the next ten years, assuming no renewal options are exercised. For purposes of the table, the Total Annual Base Rent Expiring represents annualized rental revenue, excluding the impact of straight-line rent, for each lease that expires during the respective year. Amounts in thousands, except for number of lease data:
Year Ending
December 31,
|
|
|
Number of Leases
Expiring
|
|
|
Square Feet
Expiring
|
|
|
Total Annual Base
Rent Expiring
|
|
|
% of Gross
Annual Rent
|
|
(1)
|
|
|
|
160
|
|
|
|
490
|
|
|
$
|
10,935
|
|
|
|
1.3
|
%
|
2021
|
|
|
|
219
|
|
|
|
813
|
|
|
$
|
18,084
|
|
|
|
2.2
|
%
|
2022
|
|
|
|
778
|
|
|
|
4,852
|
|
|
$
|
88,361
|
|
|
|
10.6
|
%
|
2023
|
|
|
|
748
|
|
|
|
5,731
|
|
|
$
|
98,869
|
|
|
|
11.9
|
%
|
2024
|
|
|
|
694
|
|
|
|
5,159
|
|
|
$
|
95,228
|
|
|
|
11.5
|
%
|
2025
|
|
|
|
639
|
|
|
|
5,320
|
|
|
$
|
95,772
|
|
|
|
11.5
|
%
|
2026
|
|
|
|
563
|
|
|
|
7,154
|
|
|
$
|
101,489
|
|
|
|
12.2
|
%
|
2027
|
|
|
|
298
|
|
|
|
4,054
|
|
|
$
|
61,723
|
|
|
|
7.4
|
%
|
2028
|
|
|
|
323
|
|
|
|
3,390
|
|
|
$
|
61,484
|
|
|
|
7.4
|
%
|
2029
|
|
|
|
254
|
|
|
|
2,620
|
|
|
$
|
46,035
|
|
|
|
5.5
|
%
|
2030
|
|
|
|
225
|
|
|
|
1,921
|
|
|
$
|
39,920
|
|
|
|
4.8
|
%
|
2031
|
|
|
|
214
|
|
|
|
1,649
|
|
|
$
|
35,007
|
|
|
|
4.2
|
%
|
|
(1)
|
Leases currently under month-to-month lease or in process of renewal.
|