EDGAR 10-K Filing

Company CIK: 842183
Filing Year: 2022
Filename: 842183_10-K_2022_0000842183-22-000015.json

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ITEM 1. BUSINESS
Item 1. Business
The terms “Company,” “RPT,” “we,” “our,” or “us” refer to RPT Realty, RPT Realty, L.P., and/or their subsidiaries, as the context may require. The content of our website and the websites of third parties noted herein is not incorporated by reference in this Annual Report on Form 10-K.
General
RPT Realty owns and operates a national portfolio of open-air shopping destinations principally located in top U.S. markets. The Company's shopping centers offer diverse, locally-curated consumer experiences that reflect the lifestyles of their surrounding communities and meet the modern expectations of the Company's retail partners. The Company is a fully integrated and self-administered REIT publicly traded on the New York Stock Exchange (the “NYSE”). The common shares of beneficial interest of the Company, par value $0.01 per share (the “common shares”), are listed and traded on the NYSE under the ticker symbol “RPT”. As of December 31, 2021, the Company's property portfolio (the “aggregate portfolio”) consisted of 47 wholly-owned shopping centers, ten shopping centers owned through its grocery anchored joint venture, 38 retail properties owned through its net lease joint venture and one net lease retail property that was held for sale by the Company which together represent 14.6 million square feet of gross leasable area (“GLA”). As of December 31, 2021, the Company's pro-rata share of the aggregate portfolio was 93.1% leased.
The Company's principal executive offices are located at 19 West 44th Street, Suite 1002, New York, New York 10036 and its telephone number is (212) 221-1261. The Company’s website is rptrealty.com.
We conduct substantially all of our business through our operating partnership, RPT Realty, L.P., a Delaware limited partnership (the “Operating Partnership” or “OP”). The Operating Partnership, either directly or indirectly through partnerships or limited liability companies, holds fee title to all of our properties. As the sole general partner of the Operating Partnership, we have the exclusive power to manage and conduct the business of the Operating Partnership. As of December 31, 2021, we owned approximately 98.0% of the Operating Partnership. The interests of the limited partners are reflected as noncontrolling interests in our financial statements and the limited partners are generally individuals or entities that contributed interests in certain assets or entities to the Operating Partnership in exchange for units of limited partnership interest (“OP Units”). The holders of OP Units are entitled to exchange them for our common shares on a 1:1 basis or for cash. The form of payment is at our election.
We operate in a manner intended to qualify as a REIT pursuant to the provisions of the Internal Revenue Code of 1986, as amended (the “Code”). Certain of our operations, including property and asset management, as well as ownership of certain land parcels, are conducted through taxable REIT subsidiaries (“TRSs”), which are subject to federal and state income taxes.
COVID-19
The Company continues to closely monitor the COVID-19 pandemic, including the impact on our business, our tenants, our vendors and our partners, and implement policies to mitigate the impact of COVID-19 on the Company's business as well as for the safety and protection of its employees, tenants and communities.
The spread of COVID-19, including variants thereof, has caused significant market volatility and adverse impacts on the U.S. retail market, the U.S. economy, the global economy, and financial markets. To mitigate the spread of COVID-19, federal, state and local governments issued recommendations and mandatory business closures, quarantines, restrictions on travel and “shelter-in-place” or “stay at home” orders and social distancing protocols. However, the development and distribution of COVID-19 vaccines has assisted in allowing many restrictions to be lifted, providing a path to recovery. The overall economy continues to recover but several issues, including the changes in consumer behavior, lack of qualified employees, inflation risk, supply chain bottlenecks and COVID-19 variants have impacted the pace of the recovery.
The Company’s predominant source of revenue is from rents and reimbursable expenses received from tenants pursuant to lease agreements. Therefore, the Company’s financial results may be adversely impacted in the event our tenants are unable to make rental payments due to the COVID-19 pandemic. Although current rent collections during the second half of 2021 approached pre-pandemic levels, our rental income not probable of collection did remain elevated and new restrictions or a worsening of the COVID-19 pandemic could adversely impact the ability of tenants to pay rent. Our strong balance sheet and operational flexibility allowed us to successfully manage through the initial impact of COVID-19 while protecting our cash flow and liquidity. The factors described above, as well as additional factors that the Company may not currently be aware of, could materially negatively impact the Company’s ability to collect rent and could lead to tenant bankruptcies, rejection of tenant leases in bankruptcy, difficulties in renewing or re-leasing retail space, difficulties in accessing capital, impairment of the Company’s assets and other effects that could materially and adversely affect the Company’s business, results of operations, financial condition and ability to pay distributions to shareholders. See “Risk Factors” in this report.
Business Strategy
Over the past three years, the Company entered two strategic joint ventures, positioning itself to meaningfully transform the portfolio, primarily focusing on major metropolitan U.S. markets in the Northeast and Southeast regions, which are supported by strong demographics, educational attainment, tech/life science/university adjacencies, pro-business environments and job growth. As a result of our continued portfolio refinement, the Company owns a predominantly grocery anchored portfolio in the top national markets which has positioned the Company to address many of the challenges from COVID-19, while remaining opportunistic with value creation opportunities. As of December 31, 2021, the Company derived 96.1% of its annualized base rent from the top 40 national markets, such as Boston, Atlanta, Detroit and Nashville, in addition to several markets in Florida, including Tampa, Miami and Jacksonville.
Our primary business goals are to increase operating cash flows and deliver above average relative shareholder return. Specifically, we pursue the following methods to achieve these goals:
•Capitalize on accretive acquisition opportunities of open-air shopping centers through our complimentary joint venture platforms and balance sheet. We intend to pursue growth through the strategic acquisition of attractively priced open-air shopping centers and, in certain cases, sell certain separately subdivided single tenant parcels in the shopping center to our single tenant, net lease joint venture platform, highlighting the meaningful arbitrage opportunities that we can create for our shareholders.
•Acquire high quality open-air shopping centers and single tenant, net lease retail assets in the top U.S. metropolitan statistical areas (“MSA”). Our data-driven and stringent criteria for acquisition opportunities include a strong demographic profile, educational attainment, tech/life science/university adjacencies, pro-business environments, job growth, high exposure to essential tenants, tenant credit/term and an attractive risk-adjusted return.
•Disciplined capital recycling strategy. We employ a data-driven and rigorous investment management strategy by selectively selling assets with returns and value that have been maximized and redeploying the capital into leasing, redevelopment and acquisition of properties.
•Remerchandise and redevelop our assets. Our strategy is to strategically remerchandise and redevelop certain of our existing properties where we have significant pre-leasing and can improve tenant credit and term, enhance the merchandising mix or augment the consumer experience with an alternative non-retail use, while generating attractive returns, and driving meaningful value creation.
•Hands-on active asset management. We proactively manage our properties, employ data-driven targeted leasing strategies, maintain strong tenant relationships, drive rent and occupancy, focus on reducing operating expenses and property capital expenditures, and attract high quality and creditworthy tenants; all of which we believe enhances the value of our properties.
•Curate our real estate to align with the current and future shopping center landscape. We intend to leverage technology and data, optimize distribution points for brick-and-mortar and e-commerce purchases, engage in best-in-class sustainability programs and create an optimal merchandising mix to continue to attract and engage our shoppers.
•Maintain a strong, flexible and investment grade balance sheet. Our strategy is to maintain low leverage and high liquidity, proactively manage and stagger our debt maturities and retain access to diverse sources of capital to support the business in any environment.
•Retain motivated, talented and high performing employees. To facilitate the attraction, retention and promotion of a talented and diverse workforce, we provide competitive compensation, best-in-class benefits and health and wellness programs, and champion programs that build connections between our employees and the communities where they live and at the properties we own.
Operating Strategies and Significant Transactions
Our operating objective is to maximize the risk-adjusted return on invested capital at our shopping centers. We proactively manage our properties, employ data-drive targeted leasing strategies, maintain strong tenant relationships, drive rent and occupancy, focus on reducing operating expenses and property capital expenditures, and attract high quality and creditworthy tenants; all of which we believe enhances the value of our properties.
During 2021, our properties reported the following leasing activity, which is shown at pro-rata except for number of leasing transactions and square feet:
Leasing Transactions Square Footage Base Rent/SF (1)
Prior Rent/SF (2)
Tenant Improvements/SF (3)
Leasing Commissions/SF
Renewals 141 1,015,429 $16.12 $15.40 $1.68 $0.01
New Leases - Comparable 32 272,580 $16.31 $12.31 $85.34 $7.94
New Leases - Non-Comparable (4)
66 374,702 $17.71 N/A $48.98 $5.74
Total 239 1,662,711 $16.51 N/A $24.65 $2.48
(1) Base rent represents contractual minimum rent under the new lease for the first 12 months of the term.
(2) Prior rent represents minimum rent, if any, paid by the prior tenant in the final 12 months of the term.
(3) Includes estimated tenant improvement cost, tenant allowances, and landlord costs.
(4) Non-comparable lease transactions include (i) leases for space vacant for greater than 12 months and (ii) leases signed where the previous and current lease do not have a consistent lease structure.
Investing Activities and Significant Transactions
Our investment thesis is to acquire high quality open-air shopping centers and single tenant, net lease retail assets in the top U.S. MSA’s at attractive risk-adjusted returns. Our data-driven and stringent criteria for acquisition opportunities include a strong demographic profile, educational attainment, tech/life science/university adjacencies, pro-business environments, job growth, high exposure to essential tenants and tenant credit/term. We also employ a disciplined data driven capital recycling strategy by selectively selling assets with returns and value that have been maximized and redeploying the capital into leasing, remerchandising, redevelopment, and acquisition of properties.
On March 4, 2021, we formed a new core net lease retail real estate joint venture, RGMZ Venture REIT LLC (“RGMZ”), with an affiliate of GIC Private Limited (“GIC”), an affiliate of Zimmer Partners (“Zimmer”) and an affiliate of Monarch Alternative Capital LP (“Monarch”). RGMZ is to be seeded with single-tenant, net lease retail properties that have been, or will be created, by the Company upon the subdivision of certain parcels from our existing open-air shopping centers. As of December 31, 2021, the Company had contributed 31 net lease retail properties of the initial agreed-upon seeded properties, that had been created by us upon the subdivision of certain parcels from our existing open-air shopping centers, valued at $120.3 million to RGMZ. Upon contribution, the Company received $108.5 million in gross cash proceeds ($104.2 million in net cash proceeds), as well as a combined $8.2 million preferred equity investment stake in the Zimmer and Monarch affiliates, in exchange for the 93.6% stake in RGMZ that was acquired by the other joint venture partners. The Company retained a 6.4% stake in RGMZ, maintains day-to-day management of the portfolio and earns management, leasing and construction fees. The Company is also responsible for sourcing future acquisitions for RGMZ. GIC, Zimmer, Monarch and the Company have committed to fund $470.0 million in RGMZ within the first three years for approved acquisitions, including the initial investment portfolio that was contributed by the Company. RGMZ will target the acquisition of over $1.2 billion of strategic assets, with 60-65% target leverage, creating a scalable, stable-growth investment platform. RGMZ has a $240.0 million secured credit facility that includes an accordion feature allowing it to increase future potential commitments up to a total capacity of $500.0 million. As of December 31, 2021, RGMZ had $109.5 million of unused capacity under its $240.0 million secured credit facility. RPT and certain of the other joint venture partners will have consent rights for all future acquisitions, and also have approval rights in connection with annual budgets and other specified major decisions. We cannot make significant decisions without our partner’s approval. Accordingly, we account for our interest in the joint ventures using the equity method.
During the year ended December 31, 2021, we closed on five shopping center acquisitions for an aggregate amount of $202.6 million. Also, during the year ended December 31, 2021, we closed on two shopping center dispositions for an aggregate amount of $59.5 million. Refer to Note 4 of the notes to our consolidated financial statements in this report for additional information related to acquisitions and dispositions.
During the year ended December 31, 2021, our R2G Venture LLC (“R2G”) joint venture closed on five shopping center acquisitions for an aggregate amount of $301.9 million. Refer to Note 6 of the notes to our consolidated financial statements in this report for additional information related to acquisitions and dispositions by our unconsolidated joint ventures.
Financing Strategies and Significant Transactions
The strength and flexibility of the Company's balance sheet is core to its strategy. Our strong balance sheet and liquidity profile is evidenced by our investment grade credit ratings of BBB- from a nationally recognized credit rating agency. Our strategy is to maintain low leverage and high liquidity, proactively manage and stagger our debt maturities and retain access to diverse sources of capital to support the business in any environment.
Debt
On June 28, 2021, we repaid $37.0 million of outstanding debt, which constituted repayment in full of the Operating Partnership's 3.75% senior unsecured notes due 2021, issued pursuant to the note purchase agreement dated June 27, 2013, as amended. Accordingly, on June 28, 2021, all outstanding notes and other obligations of the Operating Partnership and guarantors under such note purchase agreement were paid and satisfied.
On October 8, 2021, the Company and the Operating Partnership entered into a note purchase agreement with the various institutional investors named therein and, on December 22, 2021, closed a private placement of the Operating Partnership’s (i) $75.0 million aggregate principle amount of 3.70% Senior Guaranteed Notes, Series A, due November 30, 2030 (the “2030 Notes”) and (ii) $55.0 million aggregate principle amount of 3.82% Senior Guaranteed Notes, Series B, due November 30, 2031 (the “2031 Notes”). Such notes are unsecured and are guaranteed by the Company and certain subsidiaries of the Operating Partnership. The 2030 Notes bear interest at an annual fixed rate of 3.70%, and the 2031 Notes bear interest at an annual fixed rate of 3.82%. A portion of the proceeds were used to repay the Operating Partnership's (i) $41.5 million aggregate principal amount of 4.12% senior unsecured notes due 2023 for an aggregate amount of $43.6 million, which included a prepayment penalty of $2.1 million, (ii) $50.0 million aggregate principal amount of 4.65% senior unsecured notes due 2024 for an aggregate amount of $54.3 million, which included a prepayment penalty of $4.3 million and (iii) $25.0 million aggregate principal amount of 4.05% senior unsecured notes due 2024 for an aggregate amount of $27.0 million, which included a prepayment penalty of $2.0 million. In conjunction with these early repayments, we wrote off unamortized deferred financing costs of $0.2 million.
On November 8, 2021, the Company repaid a mortgage note secured by Bridgewater Falls Shopping Center totaling $51.5 million with an interest rate of 5.70%.
During the fourth quarter 2021, our R2G joint venture closed on two new mortgages totaling $29.1 million, or $15.0 million at the Company's pro-rata share at a weighted average interest rate of 2.94%.
At December 31, 2021, we had $315.0 million available to draw under our unsecured revolving line of credit, subject to compliance with applicable covenants. See the subsection “Debt” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation” below for additional discussion regarding the Company's outstanding financial covenants and related amendments thereto.
Equity
In February 2020, the Company entered into an Equity Distribution Agreement (“Equity Distribution Agreement”) pursuant to which the Company may offer and sell, from time to time, the Company's common shares having an aggregate gross sales price of up to $100 million. Sales of the shares of common stock may be made, in the Company's discretion, from time to time in “at-the-market” offerings as defined in Rule 415 of the Securities Act of 1933. The Equity Distribution Agreement also provides that the Company may enter into forward contracts for shares of its common stock with forward sellers and forward purchasers. For the year ended December 31, 2021, the Company issued 3,483,120 shares of its common stock, receiving $45.7 million of gross proceeds before issuance costs, which were used for working capital and general corporate purposes. As of December 31, 2021, $54.3 million of common stock remained available for issuance under this Equity Distribution Agreement. The sale of such shares issuable pursuant to the Equity Distribution Agreement was registered with the SEC pursuant to a prospectus supplement filed in February 2020 and the accompanying base prospectus statement forming part of the Company's shelf registration statement on Form S-3 (No. 333-232007) which was filed with the SEC in June 2019.
Sustainability
We continue to advance our commitment to sustainability with a focus on each of the Environmental, Social and Governance (“ESG”) areas of sustainability. We believe that sustainability initiatives are a vital part of supporting our primary goal to maximize value for our shareholders. The following components are the foundation of our ESG program:
•Stakeholder Engagement: We maintain regular engagement with our various key stakeholders, including employees, shareholders, tenants, communities and vendors in order to report, discuss and highlight issues of importance, including ESG topics, to each of the stakeholder groups.
•Environmental Stewards: We are focused on becoming model environmental stewards by implementing measures that will reduce our carbon footprint and consumption of natural resources. Our environmental sustainability initiatives aim to safeguard the environment and improve the energy efficiency of our portfolio and corporate office locations, while lowering operating costs.
•Employees: We strive to create an environment for our employees that results in high levels of employee satisfaction by focusing on diversity, equity and inclusion, health and well-being programs, employee development and training at all levels and equitable and competitive pay policies. Our employees also strive to give back to the communities in which we operate through charitable giving and volunteer opportunities.
•Governance: “Executing with Integrity” is one of our core values. We believe that good corporate governance will yield long-term success and create a culture of uncompromising integrity and transparency in all levels of our Company’s governance structure, reporting, business and transactions.
In 2021, we published our inaugural Corporate Sustainability Report highlighting our 2020 initiatives, goals and achievements. More information about our corporate responsible and ESG practices can be found on the Company’s website in the Corporate Sustainability Report. The content of our website, including information relating to corporate responsibility, is not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our website are intended to be inactive textual references only.
Human Capital
We employed 125 full-time employees as of December 31, 2021. None of our employees are represented by a competitive bargaining unit, and we believe our relations with our employees are good. We believe our employees are key to achieving our business objectives and our corporate purpose of Turning Commercial Ground into Common Ground.
The Company is committed to continually building upon a culture that promotes empowerment, transparency and excellence and we strive to make the Company a safe workplace, with opportunities for our employees to grow and develop in their careers. We appreciate the importance of having a diverse and inclusive workforce and are committed to integrating diversity and inclusion practices and initiatives into all aspects of our business, training and development. As a demonstration of our commitment to maintaining an inclusive and safe work environment, all of our employees are required to comply with and complete training on our Code of Business Conduct and Ethics that governs the standard for appropriate behaviors as well as complete discrimination, harassment and retaliation prevention training.
To facilitate the attraction, retention and promotion of a talented and diverse workforce, we provide competitive compensation, best in class benefits and health and wellness programs, training and professional development programs and champion programs that build connections between our employees and the communities where they live and at the properties we own.
Our comprehensive benefits package offers flexible and convenient health and wellness options such as health insurance benefits, health savings and flexible spending accounts, paid time off, family leave, parental leave and family care resources. Throughout the COVID-19 pandemic and beyond we have emphasized the importance of mental wellness and have offered several virtual healthcare options. On an ongoing basis, we further promote the health and wellness of our associates by encouraging work-life balance through RPT Remote, our flexible work initiative, and sponsoring various wellness programs and corporate challenges, whereby employees are encouraged to incorporate healthy habits into their daily routines. In response to the COVID-19 pandemic, we implemented significant changes that we determined were in the best interest of our employees, as well as the communities in which we operate, and which comply with government regulations. This includes requiring our employees to work from home and implementing additional safety measures for employees continuing to work on-site and those returning to the office upon reopening. In order to promote transparency and employee engagement, we distribute employee surveys to gauge employee satisfaction on a variety of issues and hold companywide town halls. Additionally, RPT supports philanthropical initiatives and partners with organizations that are committed to improving the overall quality of life in our communities. We support various organizations annually through charitable giving and volunteerism through our “Act Locally Give Globally” program. We also provide competitive compensation packages to our employees. In addition to base salaries, these packages include annual bonuses, stock awards and participation in a 401(k) Plan.
Competition
We compete with many other entities for the acquisition of shopping centers and land suitable for new developments, including other REITs, private institutional investors and other owner-operators of shopping centers. In particular, larger REITs may enjoy competitive advantages that result from, among other things, a lower cost of capital. These competitors may increase the market prices we would have to pay in order to acquire properties. If we are unable to acquire properties that meet our criteria at prices we deem reasonable, our ability to grow will be adversely affected.
Our tenants compete with alternate forms of retailing, including on-line shopping, home shopping networks and mail order catalogs. Alternate forms of retailing may reduce the demand for space in our shopping centers. We indirectly share exposure to these same competitive factors because our ability to generate revenue may be connected to the success of our tenants.
Further, our shopping centers generally compete for tenants with similar properties located in the same neighborhood, community or region. Although we believe we own high quality centers in desirable geographic locations, competing centers may be newer, better located or have a better tenant mix. We also believe we compete with other centers on the basis of rental rates and management and operational expertise. In addition, new centers or retail stores may be developed, increasing the supply of retail space competing with our centers or taking retail sales from our tenants. To remain competitive, we evaluate all of the factors affecting our centers and work to position them accordingly to enable us to compete effectively.
Governmental Regulation
Compliance with various governmental regulations has an impact on our business, including our capital expenditures, earnings and competitive position, which can be material. We incur costs to monitor and take actions to comply with governmental regulations that are applicable to our business, which include, among others, federal securities laws and regulations, applicable stock exchange requirements, REIT and other tax laws and regulations, environmental and health and safety laws and regulations, local zoning, usage and other regulations relating to real property. In addition to the discussion below regarding certain environmental matters, see “Item 1A - Risk Factors” for a discussion of material risks to us, including, to the extent material, to our competitive position, relating to governmental regulations, and see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation” together with our consolidated financial statements, including the related notes included therein, for a discussion of material information relevant to an assessment of our financial condition and results of operations, including, to the extent material, the effects that compliance with governmental regulations may have upon our capital expenditures and earnings.
Environmental Matters
Under various federal, state and local laws, ordinances and regulations relating to the protection of the environment, a current or previous owner or operator of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances disposed, stored, released, generated, manufactured or discharged from, on, at, onto, under or in such property. Environmental laws often impose such liability without regard to whether the owner or operator knew of, or was responsible for, the presence or release of such hazardous or toxic substance.
We are not aware of any contamination which may have been caused by us or any of our tenants that would have a material effect on our consolidated financial statements. As part of our risk management activities, we have applied and been accepted into state sponsored environmental programs, the purpose of which is to expedite and facilitate satisfactory compliance with environmental laws and regulations should contaminants need to be remediated. We also have an environmental insurance policy that covers us against third party liabilities and remediation costs. While we believe that we do not have any material exposure to environmental remediation costs, we cannot give assurance that changes in the law or new discoveries of contamination will not result in additional liabilities to us.
Available Information
All reports we electronically file with, or furnish to, the SEC, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to such reports, are available, free of charge, on our website at rptrealty.com, as soon as reasonably practicable after we electronically file such reports with, or furnish those reports to, the SEC. These filings are also available at the SEC's website at www.sec.gov. Our Corporate Governance Guidelines, Code of Business Conduct and Ethics and Board of Trustees’ committee charters also are available on our website. The information on our website is neither part of nor incorporated by reference in this Annual Report on Form 10-K.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
You should carefully consider each of the risks and uncertainties described below and elsewhere in this Annual Report on Form 10-K, as well as any amendments or updates reflected in subsequent filings with the SEC. We believe these risks and uncertainties, individually or in the aggregate, could cause our actual results to differ materially from expected and historical results and could materially and adversely affect our business operations, results of operations and financial condition. This list should not be considered to be a complete statement of all potential risks and uncertainties, and additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our results and business operations. We may update our risk factors from time to time in our future periodic reports.
Operating Risks
A shift in retail shopping from brick and mortar stores to online shopping may have an adverse impact on our cash flow, financial condition and results of operations.
In recent periods, sales by online retailers such as Amazon have increased, and many retailers operating brick and mortar stores have made online sales a vital piece of their businesses. Although many of the retailers operating in our properties sell groceries and other necessity-based soft goods or provide services, including entertainment and dining options, the shift to online shopping may cause declines in brick and mortar sales generated by certain of our tenants and/or may cause certain of our tenants to reduce the size or number of their retail locations in the future. As a result, our cash flow, financial condition and results of operations could be adversely affected.
National economic conditions and retail sales trends may adversely affect the performance of our properties.
Demand to lease space in our shopping centers generally fluctuates with the overall economy. Economic downturns often result in a lower rate of retail sales growth, or even declines in retail sales. In response, retailers that lease space in shopping centers typically reduce their demand for retail space during such downturns. As a result, economic downturns and unfavorable retail sales trends may diminish the income, cash flow, and value of our properties.
The COVID-19 pandemic and the future outbreak of other highly infectious or contagious diseases, could materially and adversely impact or disrupt our financial condition, results of operations, cash flows and performance.
The COVID-19 pandemic, including the emergence of various variants, has had and could continue to have, and another pandemic in the future could have, significant adverse repercussions across regional and global economies and financial markets and contribute to significant volatility and negative pressure in financial markets. The extent to which COVID-19, or any future pandemic, epidemic or outbreak of any other highly infectious disease, impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted accurately, including the scope, severity and duration of such pandemic, the emergence and characteristics of new variants, the actions taken to contain the pandemic or mitigate its impact, including the adoption, administration and effectiveness of available COVID-19 vaccines, all of which could vary by geographic area, and the direct and indirect economic effects of the pandemic and containment measures, among others. The rapid development and fluidity of this situation precludes any prediction as to the full adverse impact of COVID-19 on our business and the businesses of our tenants. Nevertheless. COVID-19, or any future pandemic, epidemic or outbreak of any other highly infectious disease, may materially and adversely impact or disrupt our financial condition, results of operations, cash flows and performance and may also have the effect of heightening many of the risks described below and within this “Risk Factors” section, including:
•A complete or partial closure of, or other operational issues, including a decrease in customer traffic at, one or more of our properties resulting from government or tenant action, which have and could continue to adversely affect our operations and those of our tenants;
•The downturn in the economy may result in the inability of one or more of our tenants to be able to meet their obligations to us in full, or at all, or to otherwise seek modifications of such obligations, (including early lease terminations) or may result in bankruptcy or insolvency of one or more tenants;
•The reduced economic activity could result in a prolonged recession, which could negatively impact consumer discretionary spending and changes in consumer behavior, as well as a decrease in individuals' willingness to frequent our properties once tenants reopen as a result of the public health risks and social impacts of such pandemic, which could affect the ability of our properties to generate sufficient revenues to meet operating and other expenses in the short and long term;
•Difficulty accessing debt and equity capital on attractive terms, or at all, impacts to our credit ratings, and severe disruption and instability in the global financial markets or deterioration in credit and financing conditions may affect our access to capital necessary to fund business operations or address maturing liabilities on a timely basis or at all and our tenants' ability to fund their business operations and meet their obligations to us;
•Our ability to remain in compliance with financial covenants of our credit facility and other debt agreements, as amended, which non-compliance could result in a default and potentially an acceleration of indebtedness, and could negatively impact our ability to make additional borrowings;
•Any impairment in value of our tangible or intangible assets which could be recorded as a result of weaker economic conditions;
•A general decline in business activity and demand for real estate transactions could adversely affect our ability or desire to grow our portfolio of properties;
•A decrease in retail demand could make it difficult for us to renew or re-lease our properties at favorable rates, or at all, which could cause interruptions or delays in the receipt of rental payments, and we could incur significant increased re-leasing costs;
•A deterioration in our or our tenants' ability to operate in affected areas or delays in the supply of products or services to us or our tenants from vendors that are needed for our or our tenants' efficient operations could adversely affect our operations and those of our tenants;
•The potential negative impact on the health of our personnel or the personnel of our tenants, particularly if a significant number of our or their executive management team or key personnel are impacted, could result in a deterioration in our and our tenants' ability to ensure business continuity during this disruption;
•Moratoriums imposed by certain jurisdictions on landlord commercial eviction proceedings and collection actions. We may experience delays in commencing actions and recovering costs, and we may be unable to recover all amounts due under the applicable lease agreements;
•The failure of our tenants to reopen may result in co-tenancy claims as a result of the failure to satisfy occupancy thresholds;
•The increase in unanticipated operating costs as a result of compliance with regulations, additional sanitation measures, remote working arrangements and changes to regulations requiring mandatory paid time off for employees;
•Any inability to effectively manage our portfolio and operations while working remotely during the COVID-19 pandemic and for a time after such pandemic, which could adversely impact our business;
•The limited access to our facilities, management, tenants, support staff and professional advisors, which could decrease the effectiveness of our disclosure controls and procedures and internal control over financial reporting, increase our susceptibility to cybersecurity breaches or hamper our ability to comply with regulatory obligations leading to reputational harm and regulatory issues or fines; and
•Our insurance may not cover loss of revenue or other expenses resulting from the pandemic and related shelter-in-place rules.
Our concentration of properties in Florida and Michigan makes us more susceptible to adverse market conditions in these states.
Our performance depends on the economic conditions in the markets in which we operate. As of December 31, 2021 and 2020, the pro-rata portion of our aggregate properties located in Florida and Michigan accounted for approximately 20.7% and 16.2%, and 22.1% and 19.2%, respectively, of our annualized base rent. To the extent that market conditions in these or other states in which we operate deteriorate, the performance or value of our properties may be adversely affected.
Increasing sales through non-retail channels and changes in the supply and demand for the type of space we lease to our tenants could affect the income, cash flow and value of our properties.
Our tenants compete with alternate forms of retailing, including on-line shopping, home shopping networks and mail order catalogs. Alternate forms of retailing may reduce the demand for space in our shopping centers. Our shopping centers generally compete for tenants with similar properties located in the same neighborhood, community or region. Although we believe we own high quality centers, competing centers may be newer, better located or have a better tenant mix. In addition, new centers or retail stores may be developed, increasing the supply of retail space competing with our centers or taking retail sales from our tenants.
As a result, we may not be able to renew leases or attract replacement tenants as leases expire. When we do renew tenants or attract replacement tenants, the terms of renewals or new leases may be less favorable to us than current lease terms. In order to lease our vacancies, we often incur costs to reconfigure or modernize our properties to suit the needs of a particular tenant. Under competitive circumstances, such costs may exceed our budgets. If we are unable to lease vacant space promptly, if the rental rates upon a renewal or new lease are lower than expected, or if the costs incurred to lease space exceed our expectations, then the income and cash flow of our properties will decrease.
Our reliance on key tenants for significant portions of our revenues exposes us to increased risk of tenant bankruptcies that could adversely affect our income and cash flow.
As of December 31, 2021, 42.2% of our contractual combined annualized base rents was from our top 25 tenants, including our top five tenants: TJX Companies (5.2%), Dick's Sporting Goods (3.8%), Bed Bath & Beyond (2.7%), LA Fitness (2.6%) and PetSmart (2.2%). No other tenant represented more than 2.0% of our total annualized base rent. The credit risk posed by our major tenants varies.
If any of our major tenants experiences financial difficulties, or if a significant number of our tenants experience financial difficulties, such that they are unable to make rental payments or file for bankruptcy protection, our operating results could be adversely affected. Bankruptcy filings by our tenants or lease guarantors generally delay our efforts to collect pre-bankruptcy receivables and could ultimately preclude full collection of these sums. If a tenant rejects a lease, we would have only a general unsecured claim for damages, which may be collectible only to the extent that funds are available and only in the same percentage as is paid to all other holders of unsecured claims.
Our properties generally rely on anchor tenants (tenants greater than or equal to 10,000 square feet) to attract customers. The loss of anchor tenants may adversely impact the performance of our properties.
If any of our anchor tenants becomes insolvent, suffers a downturn in business, abandons occupancy or decides not to renew its lease, such event could adversely impact the performance of the affected center. An abandonment or lease termination by an anchor tenant may give other tenants in the same shopping center the right to terminate their leases or pay less rent pursuant to the terms of their leases. Our leases with anchor tenants may, in certain circumstances, permit them to transfer their leases to other retailers. The transfer to a new anchor tenant could result in lower customer traffic to the center, which would affect our other tenants. In addition, a transfer of a lease to a new anchor tenant could give other tenants the right to make reduced rental payments or to terminate their leases.
We may be restricted from leasing vacant space based on existing exclusivity lease provisions with some of our tenants.
In a number of cases, our leases give a tenant the exclusive right to sell clearly identified types of merchandise or provide specific types of services at a particular shopping center. In other cases, leases with a tenant may limit the ability of other tenants to sell similar merchandise or provide similar services to that tenant. When leasing a vacant space, these restrictions may limit the number and types of prospective tenants suitable for that space. If we are unable to lease space on satisfactory terms, our operating results would be adversely impacted.
Increases in operating expenses could adversely affect our operating results.
Our operating expenses include, among other items, property taxes, insurance, utilities, repairs and the maintenance of the common areas of our shopping centers. We may experience increases in our operating expenses, some or all of which may be out of our control. Most of our leases require that tenants pay for a share of property taxes, insurance and common area maintenance costs. However, if any property is not fully occupied or if recovery income from tenants is not sufficient to cover operating expenses, then we could be required to expend our own funds for operating expenses. In addition, we may be unable to renew leases or negotiate new leases with terms requiring our tenants to pay all the property tax, insurance and common area maintenance costs that tenants currently pay, which would adversely affect our operating results.
Our real estate assets may be subject to additional impairment provisions based on market and economic conditions.
On a periodic basis, we assess whether there are any indicators that the value of our real estate properties and other investments may be impaired. Under generally accepted accounting principles (“GAAP”) a property’s value is impaired only if the estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property is less than the carrying value of the property. In our estimate of cash flows, we consider factors such as expected future operating income, trends and prospects, the effects of demand, competition and other factors. We are required to make subjective assessments as to whether there are impairments in the value of our real estate properties and other investments.
No assurance can be given that we will be able to recover the current carrying amount of all of our properties and those of our unconsolidated joint ventures. There can be no assurance that we will not take charges in the future related to the impairment of our assets. Impairment may be impacted by macroeconomic conditions, including those caused by global pandemics, such as COVID-19, which may result in property operational disruption and indicate that the carrying amount may not be recoverable. Any future impairment could have a material adverse effect on our results of operations in the period in which the charge is taken. We recorded an impairment provision of $17.2 million in 2021 related to our income producing shopping centers. Refer to Note 1 of the notes to the consolidated financial statements for further information related to impairment provisions.
Our redevelopment projects may not yield anticipated returns, which would adversely affect our operating results.
Our redevelopment activities generally call for a capital commitment and project scope greater than that required to lease vacant space. To the extent a significant amount of construction is required, we are susceptible to risks such as permitting, cost overruns and timing delays as a result of the lack of availability of materials and labor, the failure of tenants to commit or fulfill their commitments, weather conditions and other factors outside of our control. Any substantial unanticipated delays or expenses would adversely affect the investment returns from these redevelopment projects and adversely impact our operating results.
Current or future joint venture investments could be adversely affected by our lack of sole decision-making authority.
We have in the past, are currently and may in the future acquire and own properties in joint ventures with other persons or entities when we believe circumstances warrant the use of such structures. Our existing joint ventures are subject to various risks, and any additional joint venture arrangements in which we may engage in the future are likely to be subject to various risks, including the following:
•lack of exclusive control over the joint venture, which may prevent us from taking actions that are in our best interest;
•future capital constraints of our partners or failure of our partners to fund their share of required capital contributions, which may require us to contribute more capital than we anticipated to fund developments and/or cover the joint venture's liabilities;
•our partners may at any time have business or economic goals that are inconsistent with ours;
•actions by our partners that could jeopardize our REIT status, require us to pay taxes or subject the properties owned by the joint venture to liabilities greater than those contemplated by the terms of the joint venture agreements;
•disputes between us and our partners that may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and effort on our business;
•changes in economic and market conditions for any adjacent non-retail use that may adversely impact the cash flow of our retail property;
•joint venture agreements that may require prior consent of our joint venture partners for a sale or transfer to a third party of our interest in the joint venture, which would restrict our ability to dispose of our interest in such a joint venture; and
•joint venture agreements may include the right to trigger a buy-sell, put right or forced sale arrangement, which could cause us to sell our interest, or acquire our partner’s interest, or to sell the underlying asset, at a time when we otherwise would not have initiated such a transaction, without our consent or on unfavorable terms.
If any of the foregoing were to occur, our cash flow, financial condition and results of operations could be adversely affected.
If we suffer losses that are uninsured or in excess of our insurance coverage limits, we could lose invested capital and anticipated profits.
Catastrophic losses, such as losses resulting from wars, acts of terrorism, earthquakes, floods, hurricanes and tornadoes or other natural disasters, and pollution or environmental matters, generally are either uninsurable or not economically insurable, or may be subject to insurance coverage limitations, such as large deductibles or co-payments. Although we currently maintain “all risk” replacement cost insurance for our buildings, rents and personal property, commercial general liability insurance and pollution and environmental liability insurance, our insurance coverage may be inadequate if any of the events described above occurs to, or causes the destruction of, one or more of our properties. Under that scenario, we could lose both our invested capital and anticipated profits from that property.
Investing Risks
We face competition for the acquisition and development of real estate properties, which may impede our ability to grow our operations or may increase the cost of these activities.
We compete with many other entities for the acquisition of shopping centers and land suitable for new developments, including other REITs, private institutional investors and other owner-operators of shopping centers. In particular, larger REITs may enjoy competitive advantages that result from, among other things, a lower cost of capital. These competitors may increase the market prices we would have to pay in order to acquire properties. If we are unable to acquire properties that meet our criteria at prices we deem reasonable, our ability to grow will be adversely affected.
We may be unable to complete acquisitions and, even if acquisitions are completed, our operating results at acquired properties may not meet our financial expectations.
We continue to evaluate the market of available properties and expect to continue to acquire properties when we believe strategic opportunities exist. Our ability to acquire properties on favorable terms and successfully operate or develop them is subject to the following risks:
•we may be unable to acquire a desired property because of competition from other real estate investors with substantial capital, including other REITs, real estate operating companies and institutional investment funds;
•even if we are able to acquire a desired property, competition from other potential investors may significantly increase the purchase price;
•we may incur significant costs and divert management’s attention in connection with the evaluation and negotiation of potential acquisitions, including ones that are subsequently not completed;
•we may be unable to finance acquisitions on favorable terms and in the time period we desire, or at all;
•we may be unable to quickly and efficiently integrate newly acquired properties, particularly the acquisition of portfolios of properties, into our existing operations;
•we may acquire properties that are not initially accretive to our results and we may not successfully manage and lease those properties to meet our expectations; and
•we may acquire properties that are subject to liabilities without any recourse, or with only limited recourse to former owners, with respect to unknown liabilities for clean-up of undisclosed environmental contamination, claims by tenants or other persons to former owners of the properties and claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the properties.
If we are unable to acquire properties on favorable terms, obtain financing in a timely manner and on favorable terms or operate acquired properties to meet our financial expectations, our cash flow, financial condition and results of operations could be adversely affected.
Commercial real estate investments are relatively illiquid, which could hamper our ability to dispose of properties that no longer meet our investment criteria or respond to adverse changes in the performance of our properties.
Our ability to promptly sell one or more properties in our portfolio in response to changing economic, financial and investment conditions is limited because real estate investments are relatively illiquid. The real estate market is affected by many factors, such as general economic conditions, supply and demand, availability of financing, interest rates and other factors that are beyond our control. We cannot be certain that we will be able to sell any property for the price and other terms we seek, or that any price or other terms offered by a prospective purchaser would be acceptable to us. We also cannot estimate with certainty the length of time needed to find a willing purchaser and to complete the sale of a property. We may be required to expend funds to correct defects or to make improvements before a property can be sold. Factors that impede our ability to dispose of properties could adversely affect our financial condition and operating results.
We are seeking to develop new properties or redevelop existing properties, an activity that has inherent risks that could adversely impact our cash flow, financial condition and results of operations. These activities are subject to the following risks:
•We may not be able to complete construction on schedule due to labor disruptions, construction delays, and delays or failure to receive zoning or other regulatory approvals;
•We may abandon our development, redevelopment and expansion opportunities after expending resources to determine feasibility and we may incur an impairment loss on our investment;
•Construction and other project costs may exceed our original estimates because of increases in material and labor costs, interest rates, operating costs, and leasing costs;
•We may not be able to obtain financing on favorable terms for construction;
•We might not be able to secure key anchor or other tenants;
•We may experience a decrease in customer traffic during the redevelopment period causing a decrease in tenant sales;
•Occupancy rates and rents at a completed project may not meet our projections; and
•The time frame required for development, constructions and lease-up of these properties means that we may have to wait years for a significant cash return.
If any of these events occur, our development activities may have an adverse effect on our results of operations, including additional impairment provisions. For a detailed discussion of development projects, refer to Notes 3 and 5 of the notes to the consolidated financial statements.
Financing Risks
Increases in interest rates may affect the cost of our variable-rate borrowings, our ability to refinance maturing debt and the cost of any such refinancings.
As of December 31, 2021, we had ten interest rate swap agreements in effect for an aggregate notional amount of $310.0 million converting our floating rate corporate debt to fixed rate debt. After accounting for these interest rate swap agreements, we had $35.0 million of variable rate debt outstanding at December 31, 2021. Increases in interest rates on our existing indebtedness would increase our interest expense, which would adversely affect our cash flow and our ability to distribute cash to our shareholders. For example, if market rates of interest on our variable rate debt outstanding as of December 31, 2021 increased by 1.0%, the increase in interest expense on our existing variable rate debt would decrease future earnings and cash flows by approximately $0.4 million annually. Interest rate increases could also constrain our ability to refinance maturing debt because lenders may reduce their advance rates in order to maintain debt service coverage ratios.
Our debt must be refinanced upon maturity, which makes us reliant on the capital markets on an ongoing basis.
We are not structured in a manner to generate and retain sufficient cash flow from operations to repay our debt at maturity. Instead, we expect to refinance our debt by raising equity, debt or other capital prior to the time that it matures. As of December 31, 2021, we had $885.0 million of outstanding indebtedness, net of deferred financing costs, including $0.8 million of finance lease obligations. The availability, price and duration of capital can vary significantly. If we seek to refinance maturing debt when capital market conditions are restrictive, we may find capital scarce, costly or unavailable. Refinancing debt at a higher cost would affect our operating results and cash available for distribution. The failure to refinance our debt at maturity would result in default and the exercise by our lenders of the remedies available to them, including foreclosure and, in the case of recourse debt, liability for unpaid amounts.
We could increase our outstanding debt.
Our management and Board of Trustees (“Board”) generally have discretion to increase the amount of our outstanding debt at any time. Subject to existing financial covenants, we could become more highly leveraged, resulting in an increase in debt service costs that could adversely affect our cash flow and the amount available for distribution to our shareholders. If we increase our debt, we may also increase the risk of default on our debt.
Our mortgage debt exposes us to the risk of loss of property, which could adversely affect our financial condition.
As of December 31, 2021, we had $31.9 million of mortgage debt, net of unamortized premiums and deferred financing costs, encumbering our properties. A default on any of our mortgage debt may result in foreclosure actions by lenders and ultimately our loss of the mortgaged property. For federal income tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure but would not receive any cash proceeds.
Financial covenants may restrict our operating, investing or financing activities, which may adversely impact our financial condition and operating results.
The financial covenants contained in our mortgages and debt agreements reduce our flexibility in conducting our operations and create a risk of default on our debt if we cannot continue to satisfy them. The mortgages on our properties contain customary negative covenants such as those that limit our ability, without the prior consent of the lender, to further mortgage the applicable property or to discontinue insurance coverage. In addition, if we breach covenants in our debt agreements, the lender can declare a default and require us to repay the debt immediately and, if the debt is secured, can ultimately take possession of the property securing the loan.
Our outstanding unsecured revolving line of credit contains customary restrictions, requirements and other limitations on our ability to incur indebtedness, including limitations on the maximum ratio of total liabilities to assets, the minimum fixed charge coverage and the minimum tangible net worth. Our ability to borrow under our unsecured revolving line of credit is subject to compliance with these financial and other covenants. We rely on our ability to borrow under our unsecured revolving line of credit to finance acquisition, development and redevelopment activities and for working capital. If we are unable to borrow under our unsecured revolving line of credit, our financial condition and results of operations would be adversely impacted.
Further, if we are not able to maintain compliance with our covenants due to the impact of COVID-19 or otherwise, or obtain waivers or modifications in order to maintain compliance, our lenders and note holders of our unsecured debt would have the right to accelerate payment, including make whole payments where applicable, which would have a material adverse impact on our financial condition.
We must distribute a substantial portion of our income annually in order to maintain our REIT status, and as a result we may not retain sufficient cash from operations to fund our investing needs.
As a REIT, we are subject to annual distribution requirements under the Code. In general, we must distribute at least 90% of our REIT taxable income annually, excluding net capital gains, to our shareholders to maintain our REIT status. We intend to make distributions to our shareholders to comply with the requirements of the Code.
Differences in timing between the recognition of taxable income and the actual receipt of cash could require us to sell assets or borrow funds on a short-term or long-term basis to meet the 90% distribution requirement. In addition, the distribution requirement reduces the amount of cash we retain for use in funding our capital requirements and our growth. As a result, we have historically funded our acquisition, development and redevelopment activities by any of the following: selling assets that no longer meet our investment criteria; selling common shares and preferred shares; borrowing from financial institutions; and entering into joint venture transactions with third parties. Our failure to obtain funds from these sources could limit our ability to grow, which could have a material adverse effect on the value of our securities.
There may be future dilution to holders of our common shares.
Our Articles of Restatement of Declaration of Trust (the “Declaration of Trust”) authorizes our Board to, among other things, issue additional common or preferred shares, or securities convertible or exchangeable into equity securities, without shareholder approval. We may issue such additional equity or convertible securities to raise additional capital. The issuance of any additional common or preferred shares or convertible securities could be dilutive to holders of our common shares. Moreover, to the extent that we issue restricted shares, options or warrants to purchase our common shares in the future and those options or warrants are exercised or the restricted shares vest, our shareholders will experience further dilution. Holders of our common shares have no preemptive rights that entitle them to purchase a pro rata share of any offering of shares of any class or series and, therefore, such sales or offerings could result in increased dilution to our shareholders.
We may issue debt and equity securities or securities convertible into equity securities, any of which may be senior to our common shares as to distributions and in liquidation, which could negatively affect the value of our common shares.
There were 849,547 shares of unvested restricted common shares outstanding at December 31, 2021.
The discontinuance of LIBOR and the replacement of LIBOR with an alternative reference rate may adversely affect our borrowing costs and could impact our business and results of operations.
The LIBOR benchmark has been the subject of national, international, and other regulatory guidance and proposals for reform and replacement, with most LIBOR tenors not expected to be published after June 30, 2023. In the U.S., the Alternative Reference Rates Committee (“AARC”), which was convened by the Federal Reserve Board and the Federal Reserve Bank of New York, has recommended the Secured Overnight Financing Rate (“SOFR”) plus a recommended spread adjustment as its preferred alternative to USD-LIBOR. There are significant differences between LIBOR and SOFR, such as LIBOR being an unsecured lending rate while SOFR is a secured rate, and SOFR is an overnight rate while LIBOR reflects term rates at different maturities.
We expect that all LIBOR settings relevant to us will cease to be published or will no longer be representative after June 30, 2023. As a result, any of our LIBOR-based borrowings that extend beyond such date will need to be converted to a replacement rate. Certain risks may arise in connection with transitioning contracts to SOFR or any other alternative variable rate, including any resulting value transfer that may occur. The value of loans, securities, or derivative instruments tied to LIBOR could also be impacted. We have material contracts that are indexed to USD-LIBOR, and for some instruments, the method of transitioning to an alternative rate may be challenging, as they may require substantial negotiation with each respective counterparty. If a contract is not transitioned to an alternative variable rate and LIBOR is discontinued, the impact is likely to vary by contract.
The discontinuation of LIBOR will not affect our ability to borrow or maintain already outstanding borrowings or swaps, but if our contracts indexed to LIBOR, including certain contracts governing our variable rate debt and our interest rate swaps, are converted to SOFR, the differences between LIBOR and SOFR, plus the recommended spread adjustment, could result in interest costs that are higher than if LIBOR remained available. Additionally, although SOFR is the AARC’s recommended replacement rate, it is also possible that lenders may instead choose alternative replacement rates that may differ from LIBOR in ways similar to SOFR or in ways that would result in higher interest costs for us. It is not yet possible to predict the magnitude of LIBOR’s end on our borrowing costs given the remaining uncertainty about which rates will replace LIBOR.
Adverse changes in our credit rating could affect our borrowing capacity and borrowing terms.
Our creditworthiness is rated by a nationally recognized credit rating agency. The credit rating assigned is based on our operating performance, liquidity and leverage ratios, financial condition and prospects, and other factors viewed by the credit agency as relevant to our industry. Our credit rating can affect our ability to access debt capital, as well as the terms of certain existing and future debt financing we may obtain. Since we depend on debt financing to fund our business, an adverse change in our credit rating, including changes in our credit outlook, or even the initiation of a review of our credit rating that could result in an adverse change, could adversely affect our financial condition, operating results and cash flow.
Corporate Risks
The price of our common shares may fluctuate significantly.
The market price of our common shares fluctuates based upon numerous factors, many of which are outside of our control. A decline in our share price, whether related to our operating results or not, may constrain our ability to raise equity in pursuit of our business objectives. In addition, a decline in price may affect the perceptions of lenders, tenants or others with whom we transact. Such parties may withdraw from doing business with us as a result. An inability to raise capital at a suitable cost or at any cost, or to do business with certain tenants or other parties, would affect our operations and financial condition.
Our failure to qualify as a REIT would result in higher taxes and reduced cash available for distribution to our shareholders.
We intend to operate in a manner so as to qualify as a REIT for federal income tax purposes. Our continued qualification as a REIT will depend on our satisfaction of certain asset, income, investment, organizational, distribution, shareholder ownership and other requirements on a continuing basis. Our ability to satisfy the asset requirements depends upon our analysis of the fair market values of our assets, some of which are not susceptible to a precise determination and for which we will not obtain independent appraisals. In addition, our compliance with the REIT income and asset requirements depends upon our ability to manage successfully the composition of our income and assets on an ongoing basis. Moreover, the proper classification of an instrument as debt or equity for federal income tax purposes may be uncertain in some circumstances, which could affect the application of the REIT qualification requirements. Accordingly, there can be no assurance that the Internal Revenue Service (“IRS”) will not contend that our interests in subsidiaries or other issuers constitute a violation of the REIT requirements. Moreover, future economic, market, legal, tax or other considerations may cause us to fail to qualify as a REIT.
If we were to fail to qualify as a REIT in any taxable year, we would be subject to federal income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates and distributions to shareholders would not be deductible by us in computing our taxable income. Any such corporate tax liability could be substantial and would reduce the amount of cash available for distribution to our shareholders, which in turn could have an adverse impact on the value of and trading prices for, our common shares. Unless entitled to relief under certain Code provisions, we also would be disqualified from taxation as a REIT for the four taxable years following the year during which we ceased to qualify as a REIT.
If our subsidiary REITs failed to qualify as REITs, we could be subject to higher taxes and could fail to remain qualified as a REIT.
Our Operating Partnership indirectly owns 51.5% of the common shares of each of five subsidiary REITs that will elect to be taxed as REITs under the U.S. federal income tax law for their short taxable year ended December 31, 2021. Our subsidiary REITs are subject to the various REIT qualification requirements and other limitations described herein that are applicable to us. If any of our subsidiary REITs were to fail to qualify as a REIT, then (i) such subsidiary REITs would become subject to U.S. federal income tax and (ii) our ownership of shares in such subsidiary REITs would cease to be a qualifying asset for purposes of the asset tests applicable to REITs. If our subsidiary REITs were to fail to qualify as a REIT, it is possible that we would fail certain of the asset tests applicable to REITs, in which event we would fail to qualify as a REIT unless we could avail ourselves of certain relief provisions. We intend to implement certain protective arrangements intended to avoid such an outcome if our subsidiary REITs were not to qualify as a REIT, but there can be no assurance that such arrangements will be effective to avoid the resulting adverse consequences to us.
Even as a REIT, we may be subject to various federal income and excise taxes, as well as state and local taxes.
Even as a REIT, we may be subject to federal income and excise taxes in various situations, such as if we fail to distribute all of our REIT taxable income. We also will be required to pay a 100% tax on non-arm’s length transactions between us and our TRSs and on any net income from sales of property that the IRS successfully asserts was property held for sale to customers in the ordinary course of business. Additionally, we may be subject to state or local taxation in various state or local jurisdictions, including those in which we transact business. The state and local tax laws may not conform to the federal income tax treatment. Any taxes imposed on us would reduce our operating cash flow and net income.
The rules dealing with federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the United States Treasury Department. Changes to tax laws, which may have retroactive application, could adversely affect our shareholders or us. We cannot predict how changes in tax laws might affect our shareholders or us.
We are party to litigation in the ordinary course of business, and an unfavorable court ruling could have a negative effect on us.
We are the defendant in a number of claims brought by various parties against us. Although we intend to exercise due care and consideration in all aspects of our business, it is possible additional claims could be made against us. We maintain insurance coverage including general liability coverage to help protect us in the event a claim is awarded; however, some claims may be uninsured. In the event that claims against us are successful and uninsured or under insured, or we elect to settle claims that we determine are in our interest to settle, our operating results and cash flow could be adversely impacted. In addition, an increase in claims and/or payments could result in higher insurance premiums, which could also adversely affect our operating results and cash flow.
We are subject to various environmental laws and regulations which govern our operations and which may result in potential liability.
Under various federal, state and local laws, ordinances and regulations relating to the protection of the environment, a current or previous owner or operator of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances disposed, stored, released, generated, manufactured or discharged from, on, at, onto, under or in such property. Environmental laws often impose such liability without regard to whether the owner or operator knew of, or was responsible for, the presence or release of such hazardous or toxic substance. The presence of such substances, or the failure to properly remediate such substances when present, released or discharged, may adversely affect the owner’s ability to sell or rent such property or to borrow using such property as collateral. The cost of any required remediation and the liability of the owner or operator therefore as to any property is generally not limited under such environmental laws and could exceed the value of the property and/or the aggregate assets of the owner or operator. Persons who arrange for the disposal or treatment of hazardous or toxic substances may also be liable for the cost of removal or remediation of such substances at a disposal or treatment facility, whether or not such facility is owned or operated by such persons. In addition to any action required by federal, state or local authorities, the presence or release of hazardous or toxic substances on or from any property could result in private plaintiffs bringing claims for personal injury or other causes of action.
In connection with ownership (direct or indirect), operation, management and development of real properties, we have the potential to be liable for remediation, releases or injury. In addition, environmental laws impose on owners or operators the requirement of ongoing compliance with rules and regulations regarding business-related activities that may affect the environment. Such activities include, for example, the ownership or use of transformers or underground tanks, the treatment or discharge of waste waters or other materials, the removal or abatement of asbestos-containing materials (“ACMs”) or lead-containing paint during renovations or otherwise, or notification to various parties concerning the potential presence of regulated matters, including ACMs. Failure to comply with such requirements could result in difficulty in the lease or sale of any affected property and/or the imposition of monetary penalties, fines or other sanctions in addition to the costs required to attain compliance. Several of our properties have or may contain ACMs or underground storage tanks; however, we are not aware of any potential environmental liability which could reasonably be expected to have a material impact on our financial position or results of operations. No assurance can be given that future laws, ordinances or regulations will not impose any material environmental requirement or liability, or that a material adverse environmental condition does not otherwise exist.
Our success depends on key personnel whose continued service is not guaranteed.
We depend on the efforts and expertise of our senior management team to manage our day-to-day operations and strategic business direction. While we have retention and severance agreements with certain members of our executive management team that provide for certain payments in the event of a change of control or termination without cause, we do not have employment agreements with all of the members of our executive management team. Therefore, we cannot guarantee their continued service. The loss of their services, and our inability to find suitable replacements, could have an adverse effect on our operations.
Our business and operations would suffer in the event of system failures, security breaches, cyber security intrusions, cyber-attacks or other disruptions of our information technology systems.
We rely extensively upon information technology networks and systems, some of which are managed by third parties, to process, transmit and store electronic information, and to manage and support a variety of business processes and activities. Although we employ a number of security measures to prevent, detect and mitigate these risks, including a disaster recovery plan for our internal information technology systems, a dedicated IT team, employee training and background checks and password protection, along with purchasing cyber liability insurance coverage, there can be no assurance that these measures will be effective and our systems, networks and services remain vulnerable to damages from any number of sources, including system failures due to energy blackouts, natural disasters, terrorism, war or telecommunication failures, security breaches, cyber intrusions and cyber security attacks, such as computer viruses, malware or e-mail attachments or any unauthorized access to our data and/or computer systems. In recent years, there has been an increased number of significant cyber security attacks that include, but are not limited to, gaining unauthorized access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data or causing operational disruption. A system failure, security breach, cyber intrusion, cyber-attack or other disruption of our information technology systems may cause interruptions in our operations and other negative consequences, which may include but are not limited to the following, any of which could have a material adverse effect on our cash flow, financial condition and results of operations:
•Compromising of confidential information;
•Manipulation and destruction of data;
•System downtime and operational disruptions;
•Remediation cost that may include liability for stolen assets or information, expenses related to repairing system damage, costs associated with damage to business relationships or due to legal requirements imposed;
•Loss of revenues resulting from unauthorized use of proprietary information;
•Cost to deploy additional protection strategies, training employees and engaging third party experts and consultants;
•Reputational damage adversely affecting investor confidence;
•Damage to tenant relationships;
•Violation of applicable privacy and other laws;
•Litigation; and
•Loss of trade secrets.
Restrictions on the ownership of our common shares are in place to preserve our REIT status.
Our Declaration of Trust restricts ownership by any one shareholder to no more than 9.8% of our outstanding common shares, subject to certain exceptions granted by our Board. The ownership limit is intended to ensure that we maintain our REIT status given that the Code imposes certain limitations on the ownership of the stock of a REIT. Not more than 50% in value of our outstanding shares of beneficial interest may be owned, directly or indirectly by five or fewer individuals (as defined in the Code) during the last half of any taxable year. If an individual or entity were found to own constructively more than 9.8% in value of our outstanding shares, then any excess shares would be transferred by operation of our Declaration of Trust to a charitable trust, which would sell such shares for the benefit of the shareholder in accordance with procedures specified in our Declaration of Trust.
The ownership limit may discourage a change in control, may discourage tender offers for our common shares and may limit the opportunities for our shareholders to receive a premium for their shares. Upon due consideration, our Board previously has granted limited exceptions to this restriction for certain shareholders who requested an increase in their ownership limit. However, the Board has no obligation to grant such limited exceptions in the future.
Certain anti-takeover provisions of our Declaration of Trust and Bylaws may inhibit a change of our control.
Certain provisions contained in our Declaration of Trust and Amended and Restated Bylaws (the “Bylaws”) and the Maryland General Corporation Law, as applicable to Maryland REITs, may discourage a third party from making a tender offer or acquisition proposal to us. These provisions and actions may delay, deter or prevent a change in control or the removal of existing management. These provisions and actions also may delay or prevent the shareholders from receiving a premium for their common shares of beneficial interest over then-prevailing market prices.
These provisions and actions include:
•the REIT ownership limit described above;
•authorization of the issuance of our preferred shares of beneficial interest with powers, preferences or rights to be determined by our Board;
•special meetings of our shareholders may be called only by the chairman of our Board, the president, one-third of the Trustees, or the secretary upon the written request of the holders of shares entitled to cast not less than a majority of all the votes entitled to be cast at such meeting;
•a two-thirds shareholder vote is required to approve some amendments to our Declaration of Trust;
•our Bylaws contain advance-notice requirements for proposals to be presented at shareholder meetings; and
•our Board, without the approval of our shareholders, may from time to time (i) amend our Declaration of Trust to increase or decrease the aggregate number of shares of beneficial interest, or the number of shares of beneficial interest of any class, that we have authority to issue, and (ii) reclassify any unissued shares of beneficial interest into one or more classes or series of shares of beneficial interest.
In addition, the Trust, by Board action, may elect to be subject to certain provisions of the Maryland General Corporation Law that inhibit takeovers such as the provision that permits the Board by way of resolution to classify itself, notwithstanding any provision our Declaration of Trust or Bylaws.
Changes in accounting standards may adversely impact our financial results.
The Financial Accounting Standards Board, in conjunction with the SEC, has several projects on its agenda, as well as recently issued updates that could impact how we currently account for material transactions. At this time, we are unable to predict with certainty which, if any, proposals may be passed or what level of impact that new standards may have on the presentation of our consolidated financial statements, results of operations and financial ratios required by our debt covenants. Refer to Note 2 of the notes to the consolidated financial statements in this report for further information related to recently issued accounting pronouncements.
U.S. federal tax reform legislation could affect REITs generally, the geographic markets in which we operate, our stock and our results of operations, both positively and negatively in ways that are difficult to anticipate.
Changes to the federal income tax laws are proposed regularly. Additionally, the REIT rules are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Department of the Treasury, which may result in revisions to regulations and interpretations in addition to statutory changes. If enacted, certain such changes could have an adverse impact on our business and financial results. In particular, H.R. 1, which generally took effect for taxable years that began on or after January 1, 2018 (subject to certain exceptions), made many significant changes to the federal income tax laws that profoundly impacted the taxation of individuals, corporations (both regular C corporations as well as corporations that have elected to be taxed as REITs), and the taxation of taxpayers with overseas assets and operations. A number of changes that affect non-corporate taxpayers will expire at the end of 2025 unless Congress acts to extend them. These changes will impact us and our shareholders in various ways, some of which are adverse or potentially adverse compared to prior law. To date, the IRS has issued guidance with respect to many of the new provisions but there are several interpretive issues that still require further guidance. It is likely that technical corrections legislation will be needed to clarify certain aspects of the new law and give proper effect to Congressional intent. There can be no assurance, however, that technical clarifications or further changes needed to prevent unintended or unforeseen tax consequences will be enacted by Congress in the near future. In addition, while certain elements of tax reform legislation do not impact us directly as a REIT, they could impact the geographic markets in which we operate, the tenants that populate our shopping centers and the customers who frequent our properties in ways, both positive and negative, that are difficult to anticipate.
Other legislative proposals could be enacted in the future that could affect REITs and their shareholders. Prospective investors are urged to consult their tax advisors regarding the effect of H.R. 1 and any other potential tax law changes on an investment in our common stock.
We may have to borrow funds or sell assets to meet our distribution requirements.
Subject to some adjustments that are unique to REITs, a REIT generally must distribute 90% of its taxable income. For the purpose of determining taxable income, we may be required to accrue interest, rent and other items treated as earned for tax purposes but that we have not yet received. In addition, we may be required not to accrue as expenses for tax purposes some that which actually have been paid, including, for example, payments of principal on our debt, or some of our deductions might be disallowed by the Internal Revenue Service. As a result, we could have taxable income in excess of cash available for distribution. If this occurs, we may have to borrow funds or liquidate some of our assets in order to meet the distribution requirement applicable to a REIT.
Liquidation of our assets may jeopardize our REIT qualification.
To qualify as a REIT, we must comply with requirements regarding our assets and our sources of income. If we are compelled to liquidate our investments to repay obligations to our lenders, we may be unable to comply with these requirements, ultimately jeopardizing our qualification as a REIT, or we may be subject to a 100% tax on any gain if we sell assets in transactions that are considered to be “prohibited transactions,” which are explained in the risk factor “Even as a REIT, we may be subject to various federal income and excise taxes, as well as state and local taxes”.
Dividends payable by REITs do not qualify for the reduced tax rates on dividend income from regular corporations.
The maximum federal income tax rate applicable to “qualified dividend income” payable by non-REIT corporations to certain non-corporate U.S. stockholders is generally 20%, and a 3.8% Medicare tax may also apply. Dividends paid by REITs, however, generally are not eligible for the reduced rates applicable to qualified dividend income. Commencing with taxable years beginning on or after January 1, 2018 and continuing through 2025, H.R. 1 temporarily reduces the effective tax rate on ordinary REIT dividends (i.e., dividends other than capital gain dividends and dividends attributable to certain qualified dividend income received by us) for U.S. holders of our common stock that are individuals, estates or trusts by permitting such holders to claim a deduction in determining their taxable income equal to 20% of any such dividends they receive. Taking into account H.R. 1’s reduction in the maximum individual federal income tax rate from 39.6% to 37%, this results in a maximum effective rate of regular income tax on ordinary REIT dividends of 29.6% through 2025 (as compared to the 20% maximum federal income tax rate applicable to qualified dividend income received from a non-REIT corporation). The more favorable rates applicable to regular corporate distributions could cause investors who are individuals to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay distributions. This could materially and adversely affect the value of the stock of REITs, including our common stock.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments.
None.

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ITEM 2. PROPERTIES
Item 2. Properties
As of December 31, 2021, the Company's property portfolio (the “aggregate portfolio”) consisted of 47 wholly-owned shopping centers, ten shopping centers owned through its grocery anchored joint venture (R2G) and 38 retail properties owned through its net lease joint venture (RGMZ) and one net lease retail property that was held for sale by the Company which together represent 14.6 million square feet (“SF”) of GLA. Our wholly-owned properties comprised approximately 11.3 million square feet of GLA.
Property Name Location City State Ownership % Year Built / Acquired / Redeveloped Total GLA % Leased Average base rent per leased SF (1)
Major Tenants (2)
Atlanta [MSA Rank 9]
Holcomb Center Alpharetta GA 100% 1986/1996/2010 107,193 37.8 % $ 12.52 Zoo Health Club
Newnan Pavilion Newnan GA 100% 1998/2021/2013 460,962 91.4 % 8.50 Aldi, Home Depot, Kohl's, PetSmart, Ross Dress for Less
Peachtree Hill Duluth GA 100% 1986/2015/NA 89,075 97.6 % 20.97 LA Fitness, (Kroger)
Promenade at Pleasant Hill Duluth GA 100% 1993/2004/NA 258,692 100.0 % 11.62 BioLife Plasma Services, K1 Speed, LA Fitness, Publix
Woodstock Square Woodstock GA 100% 2001/2021/NA 218,859 98.4 % 14.98 Kohl's, Office Max, Old Navy, PetSmart, Ulta Salon, (Target)
Austin [MSA Rank 29]
Lakehills Plaza Austin TX 100% 1980/2019/2019 75,910 95.3 % 26.76 Dollar Tree, TruFusion, (Target)
Baltimore [MSA Rank 21]
Crofton Centre Crofton MD 100% 1974/2015/NA 252,230 98.7 % 10.15 At Home, Dollar Tree, Gold's Gym, Shoppers Food Warehouse
Boston [MSA Rank 11]
Northborough Crossing Northborough MA 100% 2011/2021/NA 377,613 94.1 % 12.49 Dick's Sporting Goods, Homesense, Kohl's, Michaels, Old Navy, PetSmart, TJ Maxx, Ulta Beauty, (BJ's Wholesale Club), (Wegmans)
Chicago [MSA Rank 3]
Deer Grove Centre Palatine IL 100% 1997/2013/2013 209,256 79.8 % 9.56 Dollar Tree, Hobby Lobby, Petco, Ross Dress for Less, T.J. Maxx, (Aldi), (Target)
Mount Prospect Plaza Mount Prospect IL 100% 1958/2013/2013 227,690 94.2 % 14.38 Aldi, AutoZone, Burlington Coat Factory, Dollar Tree, LA Fitness, Marshalls, Ross Dress for Less, (Wal-Mart)
Cincinnati [MSA Rank 30]
Bridgewater Falls Hamilton OH 100% 2005/2014/NA 503,340 92.2 % 14.35 Bed Bath & Beyond, Best Buy, Dick's Sporting Goods, J.C. Penney, Michaels, Old Navy, PetSmart, Staples, T.J. Maxx, Ulta Beauty, (Target)
Buttermilk Towne Center Crescent Springs KY 100% 2005/2014/NA 183,020 97.9 % 13.28 Field & Stream, LA Fitness, Petco, Remke Market, (Home Depot)
Deerfield Towne Center Mason OH 100% 2004/2013/2018 469,250 89.2 % 20.81 Ashley Furniture HomeStore, Bed Bath & Beyond, buybuy Baby, CoHatch, Crunch Fitness Dick's Sporting Goods, Regal Cinemas, Ulta Beauty, Whole Foods Market
Columbus [MSA Rank 32]
Olentangy Plaza Columbus OH 100% 1981/2015/1997 252,143 91.8 % 13.39 Aveda Institute Columbus, BioLife Plasma Services, Dollar Tree, Eurolife Furniture, Marshalls, Micro Center
The Shops on Lane Avenue Upper Arlington OH 100% 1952/2015/2004 184,280 94.7 % 26.52 Bed Bath & Beyond, CoHatch, Ulta Beauty, Whole Foods Market
Property Name Location City State Ownership % Year Built /Acquired / Redeveloped Total GLA % Leased Average base rent per leased SF (1)
Major Tenants (2)
Denver [MSA Rank 19]
Front Range Village Fort Collins CO 100% 2008/2014/NA 467,824 97.6 % 20.04 2nd and Charles, Burlington Coat Factory, Cost Plus World Market, DSW, Microsoft Corporation, Nike, Staples, Ulta Beauty, Urban Air Adventure Park, Zone Athletic Clubs, (Fort Collins Library), (Lowes), (Sprouts Farmers Market), (Target)
Detroit [MSA Rank 14]
Clinton Pointe Clinton Township MI 100% 1992/2003/NA 135,450 78.2 % 10.32 Dollar Tree, Famous Footwear, OfficeMax, Planet Fitness, T.J. Maxx, (Target)
Hunter's Square Farmington Hills MI 100% 1988/2013/NA 352,772 92.5 % 16.64 Bed Bath & Beyond, buybuy Baby, Dollar Tree, DSW, Marshalls, Old Navy, Saks Fifth Avenue Off 5th, T.J. Maxx
Southfield Plaza Southfield MI 100% 1969/1996/2003 190,099 94.4 % 9.54 Big Lots, Burlington Coat Factory, Forman Mills
Tel-Twelve Southfield MI 100% 1968/1996/2005 193,850 99.2 % 19.69 Best Buy, buybuy Baby (3), DSW, Michaels, PetSmart, Ulta Beauty, (Lowe's), (Meijer)
Troy Marketplace Troy MI 100% 2000/2013/2010 249,466 96.5 % 22.44 Golf Galaxy, LA Fitness, Nordstrom Rack, PetSmart, (REI)
West Oaks I Shopping Center Novi MI 100% 1979/1996/2004 259,183 100.0 % 17.71 DSW, Gardner White Furniture, Home Goods, Michaels, Nordstrom Rack, Old Navy, The Container Store
West Oaks II Shopping Center Novi MI 100% 1986/1996/2000 191,050 78.1 % 19.45 Jo-Ann, Marshalls, (ABC Warehouse), (Bed Bath & Beyond), (Bob's Discount Furniture), (Kohl's), (Value City Furniture)
Winchester Center Rochester Hills MI 100% 1980/2013/NA 315,856 90.8 % 12.75 Bed Bath & Beyond, Burlington Coat Factory, Dick's Sporting Goods, Marshalls, Michaels, PetSmart
Indianapolis [MSA Rank 33]
Merchants' Square Carmel IN 100% 1970/2010/2014 232,284 94.6 % 12.70 Aveda Fredric's Institute, Cost Plus World Market, Flix Brewhouse, Petco, Planet Fitness
Jacksonville [MSA Rank 39]
Parkway Shops Jacksonville FL 100% 2013/2008/NA 144,114 100.0 % 12.04 Dick's Sporting Goods, Hobby Lobby, Marshalls, (Aldi), (Wal-Mart Supercenter)
River City Marketplace Jacksonville FL 100% 2005/2005/NA 580,661 90.0 % 17.91 Ashley Furniture HomeStore, Bed Bath & Beyond, Best Buy, Burlington Coat Factory, Dollar Tree, Duluth Trading, Michaels, OfficeMax, Old Navy, PetSmart, Regal Cinemas, Ross Dress for Less, (Aldi), (Lowe's), (Wal-Mart Supercenter)
Miami [MSA Rank 7]
Marketplace of Delray Delray Beach FL 100% 1981/2013/2010 213,202 91.8 % 13.66 Dollar Tree, Office Depot, Ross Dress for Less, Winn-Dixie
Rivertowne Square Deerfield Beach FL 100% 1980/1998/2010 143,702 93.0 % 9.50 Bealls, Winn-Dixie
West Broward Shopping Center Plantation FL 100% 1965/2013/NA 129,426 73.6 % 12.56 Badcock, DD's Discounts, Dollar Tree, Save-A-Lot, US Post Office, (Walgreens)
Property Name Location City State Ownership % Year Built /Acquired / Redeveloped Total GLA % Leased Average base rent per leased SF (1)
Major Tenants (2)
Milwaukee [MSA Rank 40]
Nagawaukee Center Delafield WI 100% 1994/2012-13/NA 220,083 100.0 % 15.82 HomeGoods, Kohl's, Marshalls, Sierra Trading Post, (Sentry Foods)
West Allis Towne Centre West Allis WI 100% 1987/1996/2011 326,223 86.0 % 10.74 Burlington Coat Factory, Citi Trends, Dollar Tree, Harbor Freight Tools, Hobby Lobby, Ross Dress for Less, Xperience Fitness
Minneapolis [MSA Rank 16]
Centennial Shops Edina MN 100% 2008/2016/NA 85,230 100.0 % 43.21 Pinstripes, The Container Store, West Elm
Woodbury Lakes Woodbury MN 100% 2005/2014/NA 360,038 88.6 % 20.49 Alamo Drafthouse Cinema, buybuy Baby, DSW, GAP, H&M, Michaels, Victoria's Secret, (Trader Joe's)
Nashville [MSA Rank 36]
Bellevue Plaza Nashville TN 100% 2002/2021/NA 77,099 97.9 % 13.20 Bed Bath & Beyond, Petco, Planet Fitnees
Providence Marketplace Mt. Juliet TN 100% 2006/2017/NA 622,718 98.0 % 13.42 Belk, Best Buy, Books A Million, Dick's Sporting Goods, J.C. Penney, JoAnn Fabrics, Old Navy, PetSmart, Regal Cinema, Ross Dress for Less, Staples, T.J. Maxx/HomeGoods, (Kroger), (Target)
St. Louis [MSA Rank 20]
Central Plaza Ballwin MO 100% 1970/2012/2012 163,625 95.7 % 12.38 buybuy Baby, Dollar Tree, Jo-Ann, Old Navy, Ross Dress for Less
Deer Creek Shopping Center Maplewood MO 100% 1975/2013/2013 208,122 98.5 % 10.70 buybuy Baby, Club Fitness, Dollar Tree, Jo-Ann, Marshalls, Ross Dress for Less
Heritage Place Creve Coeur MO 100% 1989/2011/2005 269,197 97.8 % 14.73 Dierbergs Markets, Dollar Tree, Marshalls, Office Depot, Petco, T.J. Maxx
Tampa [MSA Rank 18]
Cypress Point Clearwater FL 100% 1983/2013/NA 168,736 98.5 % 13.01 At Home, The Fresh Market
Highland Lakes Palm Harbor FL 100% 1979/2021/NA 81,544 92.8 % 14.96 Michaels
Lakeland Park Center Lakeland FL 100% 2014/NA/NA 232,313 98.3 % 14.39 Dick's Sporting Goods, Floor & Décor, Northern Tool, Old Navy, Petsmart, Ross Dress for Less, Ulta Beauty, (Target)
Shoppes of Lakeland Lakeland FL 100% 1985/1996/NA 179,470 100.0 % 13.50 Ashley Furniture HomeStore, Dollar Tree, Michaels, Petco, Staples, T.J. Maxx, (Target)
Village Lakes Shopping Center Land O' Lakes FL 100% 1987/1997/NA 168,048 100.0 % 10.91 Bealls Outlet, Dollar Tree, Marshalls, Ross Dress for Less, You Fit Health Club
Properties Not in Top 40 MSA's
Spring Meadows Place Holland OH 100% 1987/1996/2005 314,514 85.7 % 11.25 Ashley Furniture HomeStore, Big Lots, Dollar Tree, DSW, Guitar Center, HomeGoods, Michaels, OfficeMax, PetSmart, T.J. Maxx, (Best Buy), (Dick's Sporting Goods), (Sam's Club), (Target), (Wal-Mart)
Treasure Coast Commons Jensen Beach FL 100% 1996/2013/NA 91,656 100.0 % 12.92 Barnes & Noble, Beall's Outlet Store, Dick's Sporting Goods
Vista Plaza Jensen Beach FL 100% 1998/2013/NA 109,761 100.0 % 15.17 Bed Bath & Beyond, Michaels, Total Wine & More
CONSOLIDATED SHOPPING CENTERS TOTAL/AVERAGE 11,346,829 93.1 % $ 14.98
Property Name Location City State Ownership % Year Built /Acquired / Redeveloped Total GLA % Leased Average base rent per leased SF (1)
Major Tenants (2)
JOINT VENTURE PORTFOLIO
Coral Creek Shops Coconut Creek FL 51.5% 1992/2002/NA 112,736 96.3 % 20.91 Advance Auto Parts, Publix
East Lake Woodlands Palm Harbor FL 51.5% 1982/2021/NA 104,431 100.0 % 18.50 Walgreens, Wal-Mart
Mission Bay Plaza Boca Raton FL 51.5% 1989/2013/NA 262,701 81.6 % 28.49 Dick's Sporting Goods, LA Fitness, The Fresh Market
South Pasadena South Pasadena FL 51.5% 1959/2021/1971 163,746 97.2 % 13.26 Ace Hardware, Bealls, CVS, Wal-Mart
The Crossroads Royal Palm Beach FL 51.5% 1988/2002/NA 121,509 91.6 % 18.07 Dollar Tree, Publix, Walgreens
Bedford Marketplace Bedford MA 51.5% 1966/2021/2016 153,725 97.4 % 22.55 Marshalls, Whole Foods Market
Dedham Mall Dedham MA 51.5% 1960/2021/NA 510,154 95.7 % 20.32 At Home, Bob's Discount Furniture, Burlington Coat Factory, Dick's Sporting Goods, DSW, Old Navy, Super Stop & Shop, TJ Maxx
Village Shoppes at Canton Canton MA 51.5% 1966/2021/2001 283,979 86.6 % 19.50 CVS, Marshalls, Shaws Supermarket, Wow Workout World
The Shops at Old Orchard West Bloomfield MI 51.5% 1972/2013/2011 96,798 100.0 % 19.85 Plum Market
Town & Country Crossing Town & Country MO 51.5% 2008/2011/2011 188,288 92.7 % 28.23 HomeGoods, Whole Foods Market, (Target)
Net Lease Portfolio - RGMZ Venture REIT LLC Various N/A 6.4% Various 1,247,071 96.7 % 11.95
AGGREGATE PORTFOLIO TOTAL/AVERAGE 14,591,967 93.1 % $ 15.45
(1) Average base rent per leased square foot is calculated based on annual minimum contractual base rent pursuant to the tenant lease, excluding percentage rent and recovery income from tenants and COVID-19 related abatements, and is net of tenant concessions. Percentage rent and recovery income from tenants is presented separately in our consolidated statements of operations and comprehensive income (loss).
(2) Tenants in parenthesis represent non-company owned GLA.
(3) Space delivered to tenant.
Our leases for tenant space under 10,000 square feet generally have terms ranging from three to five years. Tenant leases greater than or equal to 10,000 square feet generally have lease terms of five years or longer, and are considered anchor leases. Many of the anchor leases provide tenants with the option of extending the lease term at expiration at contracted rental rates that often include fixed rent increases, consumer price index adjustments or other market rate adjustments from the prior base rent. The majority of our leases provide for monthly payment of base rent in advance, reimbursement of the tenant’s allocable real estate taxes, insurance and common area maintenance expenses and reimbursement for utility costs if not directly metered.
The following table sets forth as of December 31, 2021 the breakdown of GLA between anchor and small shop tenants, of our wholly-owned properties portfolio comprised of 47 properties, the pro-rata share of the 10 shopping centers owned through R2G, the pro-rata share of 38 retail properties owned through RGMZ and the pro-rata share of one net lease retail property that was held for sale as of December 31, 2021 (the “aggregate pro-rata portfolio”):
Type of Tenant Annualized Base Rent % of Total Annualized Base Rent GLA % of Total GLA
Anchor (1)
$ 100,506,563 57.5 % 8,846,862 71.0 %
Small Shop (2)
74,176,827 42.5 % 3,608,572 29.0 %
Total $ 174,683,390 100.0 % 12,455,434 100.0 %
(1) Anchor tenant is defined as any tenant leasing 10,000 square feet or more.
(2) Small shop tenant is defined as any tenant leasing less than 10,000 square feet.
The following table provides, as of December 31, 2021, information regarding leases with the 25 largest retail tenants (in terms of annualized base rent) for the aggregate pro-rata portfolio:
Tenant Name Credit Rating S&P/Moody's (1)
Number of Leases Number of Leases in the R2G Portfolio GLA % of Total Company Owned GLA Total Annualized Base Rent Annualized Base Rent / SF % of Annualized Base Rent
TJX Companies (2)
A/A2 28 4 814,694 6.5 % $ 9,066,533 $ 11.13 5.2 %
Dick's Sporting Goods (3)
--/-- 12 2 533,850 4.3 % 6,665,145 12.49 3.8 %
Bed Bath & Beyond (4)
B+/Ba3 13 - 401,568 3.2 % 4,688,096 11.67 2.7 %
LA Fitness CCC+/Caa1 6 1 233,419 1.9 % 4,458,844 19.10 2.6 %
PetSmart B/B2 11 - 243,963 2.0 % 3,790,868 15.54 2.2 %
Regal Cinemas CCC/Caa2 3 - 169,660 1.4 % 3,570,686 21.05 2.0 %
Michaels Stores B/B1 11 - 257,790 2.1 % 3,409,234 13.22 2.0 %
Gap, Inc. (5)
BB/Ba2 15 2 187,600 1.5 % 3,277,902 17.47 1.9 %
Burlington Coat Factory BB+/Ba2 7 1 292,026 2.4 % 3,135,517 10.74 1.8 %
ULTA Salon --/-- 11 - 113,867 0.9 % 2,869,969 25.20 1.6 %
Ross Stores (6)
BBB+/A2 12 - 312,524 2.5 % 2,851,348 9.12 1.6 %
Kohl's BBB-/Baa2 5 - 365,671 2.9 % 2,597,303 7.10 1.5 %
DSW --/-- 6 - 119,656 1.0 % 2,344,792 19.60 1.3 %
Five Below --/-- 15 2 125,034 1.0 % 2,181,781 17.45 1.3 %
Whole Foods AA/A1 4 2 112,888 0.9 % 2,151,674 19.06 1.2 %
Best Buy BBB+/A3 4 - 134,129 1.1 % 2,104,147 15.69 1.2 %
Dollar Tree BBB/Baa2 20 2 195,057 1.6 % 2,049,552 10.51 1.2 %
Jo-Ann Fabrics and Craft Stores B/B2 5 - 153,188 1.2 % 1,961,088 12.80 1.1 %
At Home B/B2 3 1 225,985 1.8 % 1,845,831 8.17 1.1 %
Office Depot (7)
--/-- 6 - 140,394 1.1 % 1,787,098 12.73 1.0 %
Pinstripes --/-- 1 - 32,414 0.2 % 1,600,000 49.36 0.9 %
Ashley Furniture HomeStore --/-- 4 - 147,778 1.2 % 1,463,243 9.90 0.8 %
Nordstrom BB+/Ba1 2 - 69,803 0.5 % 1,360,182 19.49 0.8 %
The Container Store B/B1 2 - 45,011 0.3 % 1,251,857 27.81 0.7 %
Hobby Lobby --/-- 3 - 159,970 1.3 % 1,150,000 7.19 0.7 %
Total top 25 tenants 209 17 5,587,939 44.8 % $ 73,632,690 $ 13.18 42.2 %
(1)Source: Latest Company filings, as of December 31, 2021, per CreditRiskMonitor, Standard and Poors, and Moody's. Credit ratings relate to the parent or other affiliated entity that has obtained a rating and may not relate solely to the entities that are financially responsible for the lease.
(2)Marshalls (12) / TJ Maxx (10) / HomeGoods (4) / Sierra Trading Post (1) / Homesense (1)
(3)Dick's Sporting Goods (10) / Field & Stream (1) / Golf Galaxy (1)
(4)Bed Bath & Beyond (8) / Buy Buy Baby (5)
(5)Old Navy (10) / Gap (1) / Banana Republic (1) / Athleta (3)
(6)Ross Dress for Less (11) / DD's Discounts (1)
(7)OfficeMax (4) / Office Depot (2)
Lease Expirations
The following tables set forth a schedule of lease expirations for the aggregate pro-rata portfolio, for each of the next ten years and thereafter, assuming that no renewal options are exercised:
ALL TENANTS
Expiring Leases As of December 31, 2021
Year Number of Leases GLA Average Annualized
Base Rent Total
Annualized
Base Rent (1)
% of Total Annualized
Base Rent
(per square foot)
2022 163 736,636 $ 18.94 $ 13,954,675 8.0 %
2023 211 1,544,736 15.37 23,738,615 13.6 %
2024 177 1,295,976 15.23 19,744,075 11.3 %
2025 143 1,445,213 14.72 21,274,226 12.2 %
2026 196 1,942,481 15.47 30,049,532 17.2 %
2027 107 913,518 14.63 13,366,440 7.7 %
2028 105 873,219 18.36 16,027,991 9.2 %
2029 102 924,536 13.23 12,227,895 7.0 %
2030 59 451,091 16.29 7,347,623 4.2 %
2031 64 292,049 18.46 5,391,665 3.1 %
2032+ 54 656,329 12.60 8,270,299 4.6 %
Tenants month to month 35 227,019 14.49 3,290,354 1.9 %
Sub-Total 1,416 11,302,803 $ 15.45 $ 174,683,390 100.0 %
Leased (2)
45 288,859 N/A N/A N/A
Vacant 223 863,772 N/A N/A N/A
Total 1,684 12,455,434 N/A $ 174,683,390 100.0 %
(1) Annualized Base Rent is based upon rents currently in place.
(2) Includes signed leases where rent has not yet commenced.
ANCHOR TENANTS (greater than or equal to 10,000 square feet)
Expiring Anchor Leases As of December 31, 2021
Year Number of Leases GLA
Average Annualized
Base Rent Total
Annualized
Base Rent (1)
% of Total Annualized
Base Rent
(per square foot)
2022 15 328,034 $ 14.59 $ 4,786,070 4.8 %
2023 39 1,119,326 11.47 12,835,225 12.8 %
2024 38 932,305 11.66 10,866,727 10.8 %
2025 39 1,145,027 12.65 14,483,179 14.4 %
2026 54 1,551,477 12.63 19,598,244 19.5 %
2027 30 692,760 11.64 8,060,647 8.0 %
2028 24 661,873 15.72 10,401,393 10.3 %
2029 20 710,152 9.70 6,886,923 6.9 %
2030 12 308,778 11.06 3,414,084 3.4 %
2031 10 150,257 12.55 1,885,340 1.9 %
2032+ 19 566,420 9.97 5,649,918 5.6 %
Tenants month to month 6 162,136 10.11 1,638,813 1.6 %
Sub-Total 306 8,328,545 $ 12.07 $ 100,506,563 100.0 %
Leased (2)
9 196,415 N/A N/A N/A
Vacant 18 321,902 N/A N/A N/A
Total 333 8,846,862 N/A $ 100,506,563 100.0 %
(1) Annualized Base Rent is based upon rents currently in place.
(2) Includes signed leases where rent has not yet commenced.
SMALL SHOP TENANTS (less than 10,000 square feet)
Expiring Small Shop Leases As of December 31, 2021
Year Number of Leases GLA Average Annualized
Base Rent Total
Annualized
Base Rent (1)
% of Total Annualized
Base Rent
(per square foot)
2022 148 408,602 $ 22.44 $ 9,168,605 12.4 %
2023 172 425,410 25.63 10,903,390 14.7 %
2024 139 363,671 24.41 8,877,348 12.0 %
2025 104 300,186 22.62 6,791,047 9.2 %
2026 142 391,004 26.73 10,451,288 14.1 %
2027 77 220,758 24.03 5,305,793 7.2 %
2028 81 211,346 26.62 5,626,598 7.6 %
2029 82 214,384 24.91 5,340,972 7.2 %
2030 47 142,313 27.64 3,933,539 5.3 %
2031 54 141,792 24.73 3,506,325 4.7 %
2032+ 35 89,909 29.14 2,620,381 3.5 %
Tenants month to month 29 64,883 25.45 1,651,541 2.1 %
Sub-Total 1,110 2,974,258 $ 24.94 $ 74,176,827 100.0 %
Leased (2)
36 92,444 N/A N/A N/A
Vacant 205 541,870 N/A N/A N/A
Total 1,351 3,608,572 N/A $ 74,176,827 100.0 %
(1) Annualized Base Rent is based upon rents currently in place.
(2) Includes signed leases where rent has not yet commenced.
Land Available for Development
At December 31, 2021, our three largest development sites, Parkway Shops, Lakeland Park Center and Hartland Towne Square, had environmental phase one assessments completed. It is our policy to start construction on new development projects only after the project has received entitlements, significant anchor commitments and construction financing, if appropriate. At December 31, 2021, we had received entitlements at our Parkway Shops site. We continue to evaluate the best use for land available for development, portions of which are adjacent to our existing shopping centers.
Our development and construction activities are subject to risks and uncertainties including, among others, our inability to obtain the necessary governmental approvals for a project, our determination that the expected return on a project is not sufficient to warrant continuation of the planned development, or our change in plan or scope for the development. If any of these events occur, we may record an impairment provision. See Item 1A. Risk Factors, for further information regarding our risk factors.
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 fair value is determined to be less than the asset's carrying value. During 2021, we recorded a no impairment charges on land available for development. We recorded an impairment provision of $0.6 million in 2020 related to a land parcel that was ultimately sold. Refer to Note 1 of the notes to the consolidated financial statements in this report for further information related to impairment provisions.
Insurance
Our tenants are generally responsible under their leases for providing adequate insurance on the spaces they lease. In addition, we believe our properties are adequately covered by commercial general liability, fire, flood, terrorism, environmental, and where necessary, hurricane and windstorm insurance coverages, which are all provided by reputable companies, with commercially reasonable exclusions, deductibles and limits.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
From time to time, we are involved in certain litigation arising in the ordinary course of business. We do not believe that any of this litigation will have a material effect on our consolidated financial statements. There are no material pending governmental proceedings.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common shares are currently listed and traded on the NYSE under the symbol “RPT”. On February 10, 2022, the closing price of our common shares on the NYSE was $12.41.
Sale of Unregistered Securities
There were no unregistered sales of equity securities during the quarter ended December 31, 2021.
Issuer Purchases of Equity Securities
Common share repurchases during the quarterly period ended December 31, 2021 were as follows:
Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
October 1, 2021 to October 31, 2021
- $ - - -
November 1, 2021 to November 30, 2021
- - - -
December 1, 2021 to December 31, 2021
229 12.70 - -
Total 229 $ 12.70 - -
During the quarterly period ended December 31, 2021, we withheld 229 shares from employees to satisfy estimated statutory income tax obligations related to vesting of restricted share awards. The value of the common shares withheld was based on the closing price of our common shares on the applicable vesting date.
Shareholder Return Performance Graph
The following line graph sets forth the cumulative total return on a $100 investment (assuming the reinvestment of dividends, if any) in each of our common shares, the NAREIT Equity Index, the S&P 500 Index, the Russell 2000 Index and the S&P SmallCap 600 Index for the period December 31, 2016 through December 31, 2021. The stock price performance shown is not necessarily indicative of future price performance. The data shown is based on the share prices or index values, as applicable, at the end of each month shown.
The performance graph and related information shall not be deemed “soliciting material” or be deemed to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing, except to the extent that the Company specifically incorporates it by reference into such filing.
Holders
The number of holders of record of our common shares was 966 at February 10, 2022. A substantially greater number of holders are beneficial owners whose shares of record are held by banks, brokers and other financial institutions.
Dividends
Under the Code, a REIT must meet requirements, including a requirement that it distribute to its shareholders at least 90% of its REIT taxable income annually, excluding net capital gain. Distributions paid by us are at the discretion of our Board and depend on our actual net income available to common shareholders, cash flow, financial condition, capital requirements, the annual distribution requirements under REIT provisions of the Code, and such other factors as the Board deems relevant. We do not believe that the preferential rights available to the holders of our preferred shares or the financial covenants contained in our debt agreements had or will have an adverse effect on our ability to pay dividends in the normal course of business to our common shareholders or to distribute amounts necessary to maintain our qualification as a REIT. See “Dividends and Equity” under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in this report.
For information on our equity compensation plans as of December 31, 2021, refer to Item 12 of Part III of this report and Note 15 of the notes to the consolidated financial statements included in this report.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Reserved
Not applicable.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the consolidated financial statements, the notes thereto, and the comparative summary of selected financial data included in this report.
Overview
RPT Realty owns and operates a national portfolio of open-air shopping destinations principally located in top U.S. markets. The Company's shopping centers offer diverse, locally-curated consumer experiences that reflect the lifestyles of their surrounding communities and meet the modern expectations of the Company's retail partners. As of December 31, 2021, the Company's property portfolio consisted of 47 wholly-owned shopping centers, ten shopping centers owned through its grocery anchored joint venture (R2G), 38 retail properties owned through its net lease joint venture (RGMZ) and one net lease retail property that was held for sale by the Company which together represent 14.6 million square feet of GLA. As of December 31, 2021, the Company's pro-rata share of the aggregate portfolio was 93.1% leased.
Our primary business goals are to increase operating cash flows and deliver above average relative shareholder return. Specifically, we pursue the following methods to achieve these goals:
•Capitalize on accretive acquisition opportunities of open-air shopping centers through our complimentary joint venture platforms and balance sheet. We intend to pursue growth through the strategic acquisition of attractively priced open-air shopping centers and, in certain cases, sell certain separately subdivided single tenant parcels in the shopping center to our single tenant, net lease joint venture platform, highlighting the meaningful arbitrage opportunities that we can create for our shareholders.
•Acquire high quality open-air shopping centers and single tenant, net lease retail assets in the top U.S. MSAs. Our data-driven and stringent criteria for acquisition opportunities include a strong demographic profile, educational attainment, tech/life science/university adjacencies, pro-business environments, job growth, high exposure to essential tenants, tenant credit/term and an attractive risk-adjusted return.
•Disciplined capital recycling strategy. We employ a data-driven and rigorous investment management strategy by selectively selling assets with returns and value that have been maximized and redeploying the capital into leasing, redevelopment and acquisition of properties.
•Remerchandise and redevelop our assets. Our strategy is to strategically remerchandise and redevelop certain of our existing properties where we have significant pre-leasing and can improve tenant credit and term, enhance the merchandising mix or augment the consumer experience with an alternative non-retail use, while generating attractive returns, and driving meaningful value creation.
•Hands-on active asset management. We proactively manage our properties, employ data-driven targeted leasing strategies, maintain strong tenant relationships, drive rent and occupancy, focus on reducing operating expenses and property capital expenditures and attract high quality and creditworthy tenants; all of which we believe enhances the value of our properties.
•Curate our real estate to align with the current and future shopping center landscape. We intend to leverage technology and data, optimize distribution points for brick-and-mortar and e-commerce purchases, engage in best-in-class sustainability programs and create an optimal merchandising mix to continue to attract and engage our shoppers.
•Maintain a strong, flexible and investment grade balance sheet. Our strategy is to maintain low leverage and high liquidity, proactively manage and stagger our debt maturities and retain access to diverse sources of capital to support the business in any environment.
•Retain motivated, talented and high performing employees. To facilitate the attraction, retention and promotion of a talented and diverse workforce, we provide competitive compensation, best in class benefits and health and wellness programs, and champion programs that build connections between our employees and the communities where they live and at the properties we own.
See “COVID-19” under Item 1. Business, included in this report, for a discussion on the impact of COVID-19 on our business.
The following highlights the Company's significant transactions, events and results that occurred during the year ended December 31, 2021:
Financial Results:
•Net income (loss) available to common shareholders was $61.9 million, or $0.75 per diluted share, for the year ended December 31, 2021, as compared to $(16.9) million, or $(0.21) per diluted share, for the same period in 2020.
•FFO was $70.2 million, or $0.85 per diluted share, for the year ended December 31, 2021, as compared to $66.5 million, or $0.81 per diluted share, for the same period in 2020.
•Operating FFO was $78.4 million, or $0.95 per diluted share, for the year ended December 31, 2021, as compared to $64.2 million, or $0.78 per diluted share, for the same period in 2020.
•Same property net operating income increased 6.3% for the year ended December 31, 2021, as compared to the same period in 2020.
•Executed 239 new leases and renewals, totaling approximately 1.7 million square feet in the aggregate portfolio.
•As of December 31, 2021, the Company's aggregate portfolio leased rate was 93.1% as compared to 92.8% at December 31, 2020.
Acquisition Activity (See Note 4 and Note 6 of the notes to consolidated financial statements in this report):
•Acquired five multi-tenant operating properties for the aggregate purchase price of $202.6 million.
•Our R2G joint venture acquired five multi-tenant operating properties for the aggregate purchase price of $301.9 million.
Disposition Activity (See Note 4 and Note 6 of the notes to consolidated financial statements in this report):
•Disposed of two multi-tenant operating properties for aggregate gross proceeds of $59.5 million. These transactions resulted in an aggregate gain on sale of real estate of $0.8 million.
•Contributed 36 properties valued at $186.4 million to the newly formed RGMZ. Upon the initial contribution, the Company received $167.7 million in gross cash proceeds, as well as a combined $12.2 million preferred equity investment stake in the Zimmer and Monarch affiliates, in exchange for the 93.6% stake in RGMZ that was acquired by the other joint venture partners. These transactions resulted in a net gain on the sale of real estate of $87.9 million.
Inflation
A significant portion of our operating expenses is sensitive to inflation. Our operating expenses are typically recoverable through our lease arrangements, which allow us to pass through substantially all operating expenses to our tenants. As of December 31, 2021, approximately 70% of our existing leases (on a gross leasable area basis) were triple net leases, which allow us to recover operating expenses. Of our remaining leases approximately 27% provide for recoveries of operating expenses at a fixed amount which have annual escalations ranging from 3% to 5%. During inflationary periods, we expect to recover increases in operating expenses from approximately 97% of our existing leases. As a result, we do not believe that inflation would result in a significant adverse effect on our net operating income, results of operations, and operating cash flows at the property level.
Our general and administrative expenses consist primarily of compensation costs and professional service fees. Annually, our employee compensation is adjusted to reflect merit increases; however, to maintain our ability to successfully compete for the best talent, rising inflation rates may require us to provide compensation increases beyond historical annual merit increases, which may significantly increase our compensation costs. Similarly, professional service fees are also subject to the impact of inflation and expected to increase proportionately with increasing market prices for such services. Consequently, inflation is expected to increase our general and administrative expenses over time and may adversely impact our results of operations and operating cash flows.
Also, during inflationary periods, interest rates have historically increased, which would have a direct effect on the interest expense of our borrowings. Our exposure to increases in interest rates in the short term is limited to our variable-rate borrowings, which as of December 31, 2021, was 4% of our total debt. Therefore, we do not expect that the effect of inflation on our interest expense would have a material adverse impact on our financing costs in the short term, but it could increase our financing costs over time as we refinance our existing long-term borrowings, or incur additional interest related to the issuance of incremental debt.
We have long-term lease agreements with our tenants, of which 6% - 13% (based on occupied gross leasable area) expire each year over the next three years. We believe these annual lease expirations allow us to reset these leases to market rents upon renewal or re-leasing and that annual rent escalations within our long-term leases are generally sufficient to offset the effect of inflation. However, it is possible that during higher inflationary periods, the impact of inflation will not be adequately offset by the resetting of rents from our renewal and re-leasing activities or our annual rent escalations. As a result, during inflationary periods in which the inflation rate exceeds the annual rent escalation percentages within our lease contracts, we may not adequately mitigate the impact of inflation, which may adversely affect to our business, financial condition, results of operations, and cash flows.
Additionally, inflationary pricing may have a negative effect on construction costs necessary to complete our development and redevelopment projects, including costs of construction materials, labor, and services from third-party contractors and suppliers. Higher construction costs could adversely impact our net investments in real estate and expected yields on our development and redevelopment projects, which over time may adversely affect our financial condition, results of operations, and cash flows over time.
Critical Accounting Estimates
Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Our estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions.
We believe the following critical accounting policies require our most subjective judgment and use of estimates in the preparation of our consolidated financial statements.
Revenue Recognition and Accounts Receivable
Most of our leases contain non-contingent rent escalations for which we recognize income on a straight-line basis over the non-cancelable lease term. This method results in rental income in the early years of a lease being higher than actual cash received, creating a straight-line rent receivable asset which is included in the “Other Assets” line item in our consolidated balance sheets. We review our unbilled straight-line rent receivable balance to determine the future collectability of revenue that will not be billed to or collected from tenants due to early lease terminations, lease modifications, bankruptcies and other factors. Our evaluation is based on our assessment of tenant credit risk changes indicating that expected future straight-line rent may not be realized. Depending on circumstances, we may provide a reserve against the previously recognized straight-line rent receivable asset for a portion, up to its full value, that we estimate may not be received.
Additionally, we monitor the collectability of our accounts receivable from specific tenants on an ongoing basis, analyze historical experience, customer creditworthiness, current economic trends and changes in tenant payment terms when evaluating the likelihood of tenant payment. For operating leases in which collectability of rental income is not considered probable, rental income is recognized on a cash basis and allowances are taken for those balances that we have reason to believe may be uncollectible in the period it is determined not to be probable of collection.
For more information refer to Note 1 of the notes to the consolidated financial statements in this report.
Acquisitions
Acquisitions of properties are accounted for utilizing the acquisition method (which requires all assets acquired and liabilities assumed be measured at acquisition date fair value) and, accordingly, the results of operations of an acquired property are included in our results of operations from the date of acquisition. Estimates of fair values are based upon future cash flows and other valuation techniques in accordance with our fair value measurements policy, which are used to allocate the purchase price of acquired property among land, buildings, tenant improvements, identifiable intangibles and any gain on purchase. Identifiable intangible assets and liabilities include the effect of above-and below-market leases, the value of having leases in place (“as-is” versus “as if vacant” and absorption costs), other intangible assets such as assumed tax increment revenue bonds and out-of-market assumed mortgages. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of 40 years for buildings, and over the remaining terms of any intangible asset contracts and the respective tenant leases, which may include bargain renewal options. The impact of these estimates, including estimates in connection with acquisition values and estimated useful lives, could result in significant differences related to the purchased assets, liabilities and subsequent depreciation or amortization expense. For more information, refer to Note 1 of the notes to the consolidated financial statements in this report.
Impairment of Real Estate Investments
We review our investment in real estate, including any related intangible assets, for impairment on a property-by-property basis whenever events or changes in circumstances indicate that the carrying value of the property may not be recoverable. These changes in circumstances include, but are not limited to, changes in occupancy, rental rates, tenant sales, net operating income, geographic location, real estate values and expected holding period. The viability of all projects under construction or development, including those owned by unconsolidated joint ventures, is regularly evaluated under applicable accounting requirements, including requirements relating to abandonment of assets or changes in use. To the extent a project or an individual component of the project, is no longer considered to have value, the related capitalized costs are charged against operations. We recognize an impairment of an investment in real estate when the estimated undiscounted cash flows are less than the net carrying value of the property. If it is determined that an investment in real estate or an equity investment is impaired, then the carrying value is reduced to the estimated fair value as determined by cash flow models and discount rates or comparable sales in accordance with our fair value measurement policy.
We have equity investments in unconsolidated joint venture entities which own multi-tenant shopping centers and net lease retail properties. We review our equity investments in unconsolidated entities for impairment on a nonrecurring basis if a decline in the fair value of the investment below the carrying amount is determined to be a decline that is other-than-temporary. In testing for impairment of these equity investments, we primarily use cash flow models, discount rates, and capitalization rates to estimate the fair value of properties held in joint ventures. Considerable judgment by management is applied when determining whether an equity investment in an unconsolidated entity is impaired and, if so, the amount of the impairment.
Impairment provisions resulting from any event or change in circumstances, including changes in our intentions or our analysis of varying scenarios, could be material to our consolidated financial statements.
Impairment may be impacted by macroeconomic conditions, including those caused by global pandemics, such as COVID-19, which may result in property operational disruption and indicate that the carrying amount may not be recoverable. Refer to Note 1 of the notes to the consolidated financial statements in this report.
Results of Operations
Comparison of the Year Ended December 31, 2021 to the Year Ended December 31, 2020
The following summarizes certain line items from our audited statements of operations which we believe are important in understanding our operations and/or those items that have significantly changed during the year ended December 31, 2021 as compared to 2020:
Year Ended December 31,
2021 2020 Dollar Change Percent Change
(In thousands)
Total revenue $ 213,488 $ 191,712 $ 21,776 11.4 %
Real estate taxes 32,816 33,086 (270) (0.8) %
Recoverable operating expenses 25,452 21,915 3,537 16.1 %
Non-recoverable operating expense 10,009 8,962 1,047 11.7 %
Depreciation and amortization 72,254 77,213 (4,959) (6.4) %
Transaction costs 607 186 421 NM
General and administrative expense 32,328 25,801 6,527 25.3 %
Provision for impairment 17,201 598 16,603 NM
Insured expenses, net - (2,745) 2,745 NM
Gain on sale of real estate 88,915 318 88,597 NM
Earnings from unconsolidated joint ventures 3,995 1,590 2,405 151.3 %
Interest expense 37,025 39,317 (2,292) (5.8) %
Loss on extinguishment of debt (8,294) - (8,294) NM
NM - Not meaningful
Total revenue in 2021 increased $21.8 million, or 11.4%, from 2020. The increase is primarily due to the following:
•$14.2 million increase due to decreased rental income not probable of collection in the current period, as well as related straight-line rent reserve adjustments, primarily due to the COVID-19 pandemic;
•$9.5 million increase due to properties acquired during the current period;
•$2.5 million increase in recovery income at existing properties due to higher net recoverable expenses as compared to the prior year;
•$0.6 million increase related to management and leasing fees collected from our unconsolidated joint ventures; and
•$0.5 million increase due to higher lease termination income in the current period; partially offset by
•$5.4 million decrease related to properties that were contributed to RGMZ in the current period.
Real estate tax expense in 2021 decreased by $0.3 million, or (0.8)%, from 2020, primarily due to lower net expense at our existing properties and decreases associated with properties that were contributed to RGMZ during the current period, partially offset by increases associated with properties acquired since the prior period.
Recoverable operating expense in 2021 increased by $3.5 million, or 16.1%, from 2020, primarily due to higher common area maintenance expenses at existing properties as well as increases associated with properties acquired since the prior period, partially offset by decreases associated with properties that were contributed to RGMZ during the current period.
Non-recoverable operating expense in 2021 increased by $1.0 million, or 11.7%, from 2020, primarily due to increases in expenses associated with properties acquired since the prior period as well as higher legal expenses in the current period.
Depreciation and amortization expense in 2021 decreased by $5.0 million, or (6.4)%, from 2020. The decrease is primarily a result of higher asset write offs in the prior period for tenant lease terminations prior to their original estimated term, as well as decreases associated with properties contributed to RGMZ during the current period. These decreases were partially offset by increases associated with properties acquired during the current period.
During 2021, we recorded transaction costs of $0.6 million, primarily related to professional fees associated with property acquisitions that were terminated during the current period. During 2020, the Company recorded transaction costs of $0.2 million related to legal and professional fees associated with a property acquisition and property sale of a center that were terminated during the prior period.
General and administrative expense in 2021 increased by $6.5 million, or 25.3%, from 2020. The net increase is primarily the result of higher incentive pay, stock-based compensation and wage expense in the current period, partially offset by lower professional fees.
During 2021, we recorded an impairment provision totaling $17.2 million related to shopping centers classified as income producing. The current period adjustment was triggered by changes in the expected hold period assumptions related to such shopping centers. We recorded an impairment change of $0.6 million related to land held for development in 2020. The prior period adjustment was triggered by changes in the expected use of the land and in the associated sales price assumptions. Refer to Note 1 of the notes to the consolidated financial statements in this report for further information related to impairment provisions.
During 2020, the Company recorded an insured benefit of $2.7 million. During fourth quarter of 2019, the Company wrote off real estate assets that were damaged by a hail storm at one property, which was fully covered by insurance. The 2020 amount represents the approximate insurance proceeds that were received by the Company during that period.
Gain on sale of real estate was $88.9 million in 2021. In the comparable period in 2020 we had a gain on sale of real estate of $0.3 million. The current period activity is primarily related to contributions to our RGMZ joint venture. Refer to Note 4 of the notes to the consolidated financial statements in this report for further detail on dispositions.
Earnings from unconsolidated joint ventures in 2021 increased $2.4 million from 2020 primarily due to acquisition activity by our unconsolidated joint ventures during the current period, transaction costs associated with terminated acquisitions that were incurred by our R2G joint venture during the prior period which did not recur and decreased rental income not probable of collection in the current period incurred by our R2G joint venture as a result of the COVID-19 pandemic.
Interest expense in 2021 decreased by $2.3 million, or (5.8)%, from 2020. The Company had a 8.5% decrease in our average outstanding debt, which was partially offset by a 10 basis point increase in our weighted average interest rate. The decrease in our average outstanding debt is the result of $225.0 million of borrowings in March 2020 on our unsecured revolving credit facility to strengthen the Company's liquidity position due to the COVID-19 pandemic, which the Company repaid in February 2021. As of December 31, 2021, the Company had $35.0 million outstanding on our unsecured revolving credit facility.
During 2021, we recorded a loss on extinguishment of debt of $8.3 million, which is primarily related to prepayment penalties associated with our senior unsecured notes that were repaid in November 2021.
Comparison of the Year Ended December 31, 2020 to the Year Ended December 31, 2019
The following summarizes certain line items from our audited statements of operations which we believe are important in understanding our operations and/or those items which have significantly changed during the year ended December 31, 2020 as compared to 2019:
Year Ended December 31,
2020 2019 Dollar Change Percent Change
(In thousands)
Total revenue $ 191,712 $ 234,088 $ (42,376) (18.1) %
Real estate taxes 33,086 35,961 (2,875) (8.0) %
Recoverable operating expenses 21,915 25,256 (3,341) (13.2) %
Non-recoverable operating expenses 8,962 10,292 (1,330) (12.9) %
Depreciation and amortization 77,213 78,647 (1,434) (1.8) %
Transaction costs 186 - 186 NM
General and administrative expense 25,801 27,634 (1,833) (6.6) %
Provision for impairment 598 - 598 NM
Insured expenses, net (2,745) 2,276 (5,021) NM
Gain on sale of real estate 318 81,856 (81,538) NM
Earnings from unconsolidated joint ventures 1,590 581 1,009 173.7 %
Interest expense 39,317 40,057 (740) (1.8) %
Other gain on unconsolidated joint ventures - 237 (237) NM
Loss on extinguishment of debt - (2,571) 2,571 NM
NM - Not meaningful
Total revenue in 2020 decreased by $42.4 million, or (18.1)%, from 2019. The decrease is primarily due to the following:
•$22.1 million decrease related to five properties that were contributed to R2G during the fourth quarter of 2019;
•$16.7 million decrease due to increased rental income not probable of collection as well as related straight-line rent reserves and rent abatement in the current period, primarily due to the COVID-19 pandemic;
•$3.3 million decrease from acceleration of below market leases in the prior period attributable to tenants who vacated prior to the original estimated lease end dates; and
•$1.2 million decrease in recovery income at existing properties as compared to the prior period; partially offset by
•$1.1 million increase related to the net impact of two properties sold during the first quarter of 2019 and one property acquired during the fourth quarter of 2019; and
•$1.2 million increase related to management and leasing fees collected due to R2G.
Real estate tax expense in 2020 decreased by $2.9 million, or (8.0)% from 2019, primarily due to properties contributed to R2G during the fourth quarter of 2019.
Recoverable operating expense in 2020 decreased by $3.3 million, or (13.2)% from 2019, primarily due to properties contributed to R2G during the fourth quarter of 2019, as well as lower common area maintenance expenses at existing properties.
Non-recoverable operating expense in 2020 decreased by $1.3 million, or (12.9)% from 2019, primarily due to lower legal fees associated with a tenant dispute that concluded during the second quarter of 2020, less travel expense and properties contributed to R2G during the fourth quarter of 2019.
Depreciation and amortization expense in 2020 decreased by $1.4 million, or (1.8)%, from 2019. The decrease is primarily due to properties contributed to R2G during the fourth quarter of 2019, partially offset by higher asset write offs in the current year for tenants that vacated prior to their original lease end date.
During 2020, we recorded transaction costs of $0.2 million related to legal and professional fees associated with a property acquisition and property sale of a center that were terminated
General and administrative expense in 2020 decreased $1.8 million, or (6.6)%, from 2019. The net decrease is primarily a result of lower severance and management reorganization expense, which in the prior year was largely comprised of severance to a former executive officer and performance award expense related to the Company's former Chief Executive Officer, as well as lower bonus expense and lower travel expense in the current year. These decreases were partially offset by higher wages and payroll related expenses, higher stock-based compensation expense and higher legal fees.
During 2020, we recorded an impairment provision totaling $0.6 million. The adjustment was triggered by changes in the expected use of the land and in the associated sales price assumptions. Refer to Note 1 of the notes to the consolidated financial statements in this report for further information related to impairment provisions. We did not record any impairments in 2019.
During 2020, the Company recorded an insured benefit of $2.7 million, related to insurance proceeds received in connection with a property damaged by a hail storm in 2019. During fourth quarter of 2019 the Company wrote off the corresponding damaged real estate assets, net of insurance proceeds received as of December 31, 2019.
Gain on sale of real estate was $0.3 million in 2020. In the comparable period in 2019, we had a gain of $81.9 million. The increase is primarily a result of the five properties contributed to R2G during the fourth quarter of 2019.
Earnings from unconsolidated joint ventures in 2020 increased $1.0 million from 2019 primarily due to R2G which was formed in the fourth quarter of 2019, partially offset by the gain on sale of the Nora Plaza property by one of our joint ventures in the prior period.
Interest expense in 2020 decreased by $0.7 million, or (1.8)%, from 2019. The decrease is primarily as a result of a 50 basis point decrease in our weighted average interest rate, partially offset by a 12.9% increase in our average outstanding debt. The increase in our average outstanding debt is the result of $225.0 million of borrowings in March 2020 on our unsecured revolving credit facility to strengthen the Company's liquidity position due to the COVID-19 pandemic. The Company subsequently repaid $125.0 million during the remainder of 2020, leaving $100.0 million outstanding as of December 31, 2020.
Other gain on unconsolidated joint ventures in 2019 decreased by $0.2 million primarily due to the sale of the Nora Plaza property by one of our joint ventures in the prior period. The gain represents the difference between our share of the distributed proceeds and the carrying value of our equity investment in such joint venture.
During 2019, we recorded a loss on extinguishment of debt of $2.6 million, which represented the write-off of unamortized deferred financing costs associated with the junior subordinated notes that were redeemed in full in April 2019 and term loans that were repaid in November 2019, as well as deferred financing costs and a prepayment penalty associated with our senior unsecured notes that were repaid in December 2019.
Liquidity and Capital Resources
Our primary uses of capital include principal and interest payments on our outstanding indebtedness, ongoing capital expenditures such as leasing capital expenditures and building improvements, shareholder distributions, operating expenses of our business, debt maturities, acquisitions, investments in equity interests in unconsolidated joint ventures and discretionary capital expenditures such as targeted remerchandising, expansions, redevelopment and development. We generally strive to cover our principal and interest payments, operating expenses, shareholder distributions, and ongoing capital expenditures from cash flow from operations, although from time to time we have borrowed or sold assets to finance a portion of those uses. We believe the combination of cash flow from operations, cash balances, favorable relationships with our lenders, issuance of debt, property dispositions and issuance of equity securities will provide adequate capital resources to fund all of our expected uses over at least the next 12 months. Although we believe that the combination of factors discussed above will provide sufficient liquidity, no such assurance can be given. As discussed above, the COVID-19 pandemic has at different times over the past two years adversely impacted states and cities where the Company’s tenants operate their businesses and where the Company’s properties are located. The effects of the COVID-19 pandemic and attempts to mitigate its outbreak have had an adverse impact on our short-term cash flow due to a significant number of tenants not paying full rent and in some cases any rent, while their businesses were closed or adversely impacted by the pandemic. Our cash collections from tenants on monthly recurring charges has returned to almost pre-COVID-19 levels and we have rent relief agreements in place with a significant number of tenants requiring repayment of deferred rents over a period of time. Changing future business conditions related to the COVID-19 pandemic could have an adverse impact on our future cash flows, which would adversely impact our liquidity and the achievement of our financial forecast.
We believe our current capital structure provides us with the financial flexibility to fund our current capital needs. We intend to continue to enhance our financial and operational flexibility by extending the duration of our debt, laddering our debt maturities, expanding our unencumbered asset base, and improving our leverage profile. In addition, we believe we have access to multiple forms of capital which includes unsecured corporate debt, secured mortgage debt, and preferred and common equity. However, there can be no assurances in this regard and additional financing and capital may not ultimately be available to us going forward, on favorable terms or at all.
At December 31, 2021 and 2020, we had $14.0 million and $211.5 million, respectively, in cash and cash equivalents and restricted cash and escrows. Restricted cash generally consists of funds held in escrow by mortgage lenders to pay real estate taxes, insurance premiums and certain capital expenditures. As of December 31, 2021, we had no debt maturing in 2022, and we had $315.0 million of unused capacity under our $350.0 million unsecured revolving credit facility that could be borrowed subject to compliance with applicable financial covenants. Refer to Note 8 of the notes to the consolidated financial statements in this report for further discussion on our covenants.
We expect development and capital improvements to range between $45.0 million and $55.0 million in 2022 compared to $28.1 million in 2021. The increase is primarily building improvements, of which a significant portion was delayed as a result of COVID-19, and higher leasing capital expenditures based on tenant demand.
We consolidate entities in which we own less than 100% equity interest if we have a controlling interest or are the primary beneficiary in a variable interest entity, as defined in the Consolidation Topic of FASB ASC 810. From time to time, we enter into joint venture arrangements from which we believe we can benefit by owning a partial interest in one or more properties. As of December 31, 2021, our investments in unconsolidated joint ventures were approximately $267.2 million representing our ownership interest in three joint ventures. We accounted for these entities under the equity method. Refer to Note 6 of the notes to the consolidated financial statements in this report for further information regarding our equity investments in unconsolidated joint ventures. We are engaged by certain of our joint ventures to provide asset management, property management, construction management, leasing and investing services for such ventures' respective properties. We receive fees for our services, including a property management fee calculated as a percentage of gross revenues received.
Our liquidity needs consist primarily of funds necessary to pay indebtedness at maturity, potential acquisitions of properties, redevelopment of existing properties, the development of land and discretionary capital expenditures. We continually search for investment opportunities that may require additional capital and/or liquidity. We will continue to pursue the strategy of selling non-core properties or land that no longer meet our investment criteria or advance our business strategy. Our ability to obtain acceptable selling prices and satisfactory terms and financing will impact the timing of future sales. We anticipate using net proceeds from the sale of properties or land to reduce outstanding debt and support current and future growth-oriented initiatives. To the extent that asset sales are not sufficient to meet our long-term liquidity needs, we expect to meet such needs by raising debt or issuing equity.
We have on file with the SEC an automatic shelf registration statement relating to the offer and sale of an indeterminable amount of debt securities, preferred shares, common shares, depository shares, warrant and rights. From time to time, we may issue securities under this registration statement for working capital and other general corporate purposes.
For the year ended December 31, 2021, our cash flows were as follows compared to the same period in 2020 and 2019:
Year Ended December 31,
2021 2020 2019
(In thousands)
Cash provided by operating activities $ 92,864 $ 63,059 $ 90,593
Cash (used in) provided by investing activities (167,132) (18,929) 95,095
Cash (used in) provided by financing activities (123,183) 52,802 (115,858)
Operating Activities
Net cash provided by operating activities increased $29.8 million in 2021 compared to 2020 primarily due to the following:
•Higher rental income receipts as a result of the adverse impact the COVID-19 pandemic had on 2020;
•Increase in operating cash from properties acquired in 2021; and
•Increase in cash distributions from our unconsolidated joint ventures; partially offset by
•The contribution of net lease retail assets to RGMZ at various times throughout the year and the sale of our Market Plaza shopping center in November 2021.
Investing Activities
Net cash used in investing activities was $167.1 million in 2021, compared to net cash used in investing activities of $18.9 million in 2020. The $148.2 million change in net cash used in investing activities was primarily due to the following:
•An increase in the acquisition of real estate of $202.6 million and an increase in the investment in unconsolidated joint ventures of $156.5 million; partially offset by
•An increase in the net proceeds from the sale of real estate of $220.0 million.
On March 4, 2021, we formed RGMZ and subsequently contributed properties valued at $186.4 million to RGMZ and received $167.7 million in gross cash proceeds, as well as a combined $12.2 million preferred equity investment stake in the Zimmer and Monarch affiliates, in exchange for the 93.6% stake in RGMZ that was acquired by the other joint venture partners. In the fourth quarter of 2021, we sold two shopping centers with a combined gross sales price of $59.5 million, for which we received net cash proceeds of $57.6 million. Refer to Note 4 of the notes to the consolidated financial statements in this report for additional information related to dispositions.
Financing Activities
Net cash used in financing activities was $123.2 million in 2021, compared to net cash provided by financing activities of $52.8 million in 2020. The change of $176.0 million was primarily the result of the following:
•Net payments on our revolving credit facility of $65.0 million in 2021, compared to net borrowings of $100.0 million in 2020;
•Repayment of our 3.75% senior unsecured notes due 2021 at maturity of $37.0 million;
•Repayment of the senior unsecured notes originally due in 2023 and 2024 in the aggregate principal amount of $116.5 million; and
•Repayment of the Bridgewater Falls mortgage of $51.5 million; partially offset by
•Proceeds of $130.0 million from a note purchase agreement with certain institutional investors in a private placement transaction;
•Net proceeds from the issuance of common stock of $44.6 million; and
•Decrease of $13.6 million in distributions made to our common shareholders and operating partnership unit holders.
For further information on our unsecured revolving credit facility and other debt, refer to Note 8 of notes to the condensed consolidated financial statements in this report.
Dividends and Equity
We and our subsidiary REITs currently qualify, and intend to continue to qualify in the future, as a REIT under the Code. As a REIT, we must distribute to our shareholders at least 90% of our REIT taxable income annually, excluding net capital gains. Distributions paid are at the discretion of our Board of Trustees and depend on our actual net income available to common shareholders, cash flow, financial condition, capital requirements, restrictions in financing arrangements, the annual distribution requirements under REIT provisions of the Code and such other factors as our Board of Trustees deems relevant.
We paid cash dividends of $0.27 per common share to shareholders in 2021, as compared to cash dividends of $0.44 per common share to shareholders in 2020. Our dividend policy is to make distributions to shareholders of at least 90% of our REIT taxable income, excluding net capital gains, in order to maintain qualification as a REIT. Distributions paid by us are generally expected to be funded from cash flows from operating activities. To the extent that cash flows from operating activities are insufficient to pay total distributions for any period, alternative funding sources are used. Examples of alternative funding sources include proceeds from sales of real estate and bank borrowings. In light of the disruption caused by the COVID-19 pandemic, the Board of Trustees temporarily suspended the $0.22 quarterly common dividend and $0.22 quarterly operating unit holder distributions to retain cash starting with the second quarter of 2020. The Board of Trustees reinstated the common cash dividend and operating unit holder distributions at $0.075 for the first and second quarter of 2021 and subsequently raised the quarterly common dividend and quarterly operating unit holder distributions to $0.12 for the third and fourth quarter of 2021. In 2022, the Board of Trustees will continue to evaluate the Company’s dividend policy based upon the Company's financial performance and economic outlook and intends to maintain a quarterly common dividend of at least the amount required to continue qualifying as a REIT for U.S. federal income tax requirements.
In February 2020, the Company entered into an Equity Distribution Agreement (“Equity Distribution Agreement”) pursuant to which the Company may offer and sell, from time to time, the Company's common shares having an aggregate gross sales price of up to $100.0 million. Sales of the shares of common stock may be made, in the Company's discretion, from time to time, in “at-the-market” offerings as defined in Rule 415 of the Securities Act. The Equity Distribution Agreement also provides that the Company may enter into forward contracts for shares of its common stock with forward sellers and forward purchasers. In 2021, the Company issued 3,483,120 shares of its common stock, receiving $45.7 million of gross proceeds before issuance costs, which were used for working capital and general corporate purposes. As of December 31, 2021, $54.3 million of common stock remained available for issuance under this Equity Distribution Agreement. The sale of such shares issuable pursuant to the Equity Distribution Agreement was registered with the SEC pursuant to a prospectus supplement filed in February 2020 and the accompanying base prospectus statement forming part of the Company's shelf registration statement on Form S-3 (No. 333-232007) which was filed with the SEC in June 2019.
Debt
On June 28, 2021, we repaid $37.0 million which constituted repayment in full of the Operating Partnership's 3.75% senior unsecured notes due 2021.
On October 8, 2021, we entered into a note purchase agreement with the various institutional investors named therein and, on December 22, 2021, closed a private placement of the Operating Partnership’s (i) $75.0 million aggregate principal amount of 3.70% Senior Guaranteed Notes, Series A, due November 30, 2030 (the “2030 Notes”) and (ii) $55.0 million aggregate principal amount of 3.82% Senior Guaranteed Notes, Series B, due November 30, 2031 (the “2031 Notes”). Such notes are unsecured and are guaranteed by the Company and certain subsidiaries of the Operating Partnership. The 2030 Notes bear interest at an annual fixed rate of 3.70%, and the 2031 Notes bear interest at an annual fixed rate of 3.82%. A portion of the proceeds were used to repay the Operating Partnership's (i) $41.5 million aggregate principal amount of 4.12% senior unsecured notes due 2023, (ii) $50.0 million aggregate principal amount of 4.65% senior unsecured notes due 2024 and (iii) $25.0 million aggregate principal amount of 4.05% senior unsecured notes due 2024.
On November 8, 2021, the Company repaid a mortgage note secured by Bridgewater Falls Shopping Center totaling $51.5 million with an interest rate of 5.70%.
At December 31, 2021, we had $888.2 million of debt outstanding consisting of $511.5 million in senior unsecured notes, $310.0 million of unsecured term loan facilities, and $31.7 million of fixed rate mortgage loans encumbering certain properties, and $35.0 million of borrowings on our revolving credit facility.
Our $821.5 million of senior unsecured notes and unsecured term loans have interest rates ranging from 2.51% to 4.74% and are due at various maturity dates from March 2023 through November 2031.
Our $31.7 million of fixed rate mortgages have interest rates ranging from 3.76% to 5.80% and are due at various maturity dates from January 2023 through June 2026. The fixed rate mortgage notes are secured by mortgages on properties that have an approximate net book value of $72.3 million as of December 31, 2021.
In addition, we have ten interest rate swap agreements in effect for an aggregate notional amount of $310.0 million converting our floating rate corporate debt to fixed rate debt. After taking into account the impact of converting our variable rate debt to fixed rate debt by use of the interest rate swap agreements, at December 31, 2021, we had $35.0 million of variable rate debt outstanding.
A redevelopment agreement was entered into between the City of Jacksonville, the Jacksonville Economic Development Commission and the Company, to construct and develop River City Marketplace in 2005. As part of the agreement, the city agreed to finance up to $12.2 million of bonds. Repayment of the bonds is to be made in accordance with a level-payment amortization schedule over 20 years, and repayments are made out of tax revenues generated by the redevelopment. The remaining debt service payments due over the life of the bonds, including principal and interest, are $6.8 million. As part of the redevelopment, the Company executed a guaranty agreement whereby the Company would fund debt service payments if incremental revenues were not sufficient to fund repayment. There have been no payments made by the Company under this guaranty agreement to date.
Our revolving credit facility, senior unsecured notes and term loan facilities contain representations, warranties and covenants, and events of default. These include financial covenants such as total leverage, fixed charge coverage ratio, unsecured leverage ratio, tangible net worth and various other calculations, which are detailed in the specific agreements governing our indebtedness, many of which are exhibits to this Annual Report on Form 10-K. Additionally, our senior unsecured notes only permitted us to include an unencumbered real estate asset in the measurement of our unsecured leverage ratio if such asset satisfied 80% and 85% occupancy tests for the prior quarter. Such occupancy tests were generally based on the percentage of tenants operating, paying rent and not otherwise in default based on leases requiring current rental payments. Accordingly, as a result of the various uncertainties and factors surrounding COVID-19 and its impact on our tenants and their businesses and, therefore, its potential impact on our ability to maintain compliance with our loan covenants, on June 30, 2020, we entered into amendments to the note purchase agreements governing all of our outstanding senior unsecured notes. The following is a summary of the material amendments to the note purchase agreements:
•The occupancy tests relating to the minimum ratio of consolidated total unencumbered asset value to unsecured indebtedness were eliminated during the period from June 30, 2020 through and including September 30, 2021 (the “Specified Period”) and were otherwise reduced during the fiscal quarters ended December 31, 2021 and March 31, 2022;
•The minimum ratio of consolidated total unencumbered asset value to unsecured indebtedness that the Operating Partnership is required to maintain was reduced during the Specified Period; and
•The Operating Partnership agreed to a minimum liquidity requirement during the Specified Period.
Material Cash Commitments
The Company believes that our current capital structure provides us with the financial flexibility to fund our current capital needs. We incur certain operating expenses in the ordinary course of business, such as real estate taxes, common area maintenance, insurance, general and administrative expenses and capital expenditures related to the maintenance of our properties, which are generally all covered through our cash flow from operations.
In order to continue to qualify as a REIT for federal income tax purposes, we must meet several organizational and operational requirements, including a requirement that we annually distribute to our stockholders at least 90% of our REIT taxable income. We intend to continue to satisfy this requirement and maintain our REIT status by making annual distributions to our shareholders.
In addition, we intend to pursue growth through the strategic acquisition of attractively priced open-air shopping centers and by remerchandising and redeveloping certain of our existing properties. We may also selectively dispose of properties that have returns and value that have been maximized. The Company believes its anticipated cash flow from operations, cash on hand and borrowing capacity under the current credit facility will be adequate to meet all short-term and long-term commitments. The Company's ability to leverage its balance sheet through the sale of properties or the issuance of debt provides the flexibility to take advantage of strategic opportunities which may require additional funding.
The Company's other material cash commitments include debt maturities, interest payment obligations, obligations under non-cancelable operating and financing leases, construction commitments, and development obligations. The following table shows these other material cash commitments as of December 31, 2021:
Payments due by period
Material Cash Commitments Total Less than 1 year 1-3 years 3-5 years More than 5 years
(In thousands)
Mortgages and notes payable:
Scheduled amortization $ 4,638 $ 1,348 $ 1,708 $ 1,582 $ -
Payments due at maturity 883,559 - 172,059 306,500 405,000
Total mortgages and notes payable (1)
888,197 1,348 173,767 308,082 405,000
Interest expense (2)
166,883 31,477 56,900 41,400 37,106
Finance lease (3)
1,100 100 200 200 600
Operating leases 97,666 1,482 2,613 1,757 91,814
Construction commitments 2,846 2,846 - - -
Development obligations (4)
2,252 429 407 386 1,030
Total material cash commitments $ 1,158,944 $ 37,682 $ 233,887 $ 351,825 $ 535,550
(1)Excludes $0.2 million of unamortized mortgage debt premium and $4.2 million in deferred financing costs.
(2)Variable rate debt interest is calculated using rates at December 31, 2021.
(3)Includes interest payments associated with the finance lease obligation of $0.3 million.
(4)Includes interest payments associated with the development obligations of $0.4 million.
Mortgages and Notes Payable
See the analysis of our debt included in “Liquidity and Capital Resources” above.
Operating and Finance Leases
We have an operating ground lease at Centennial Shops located in Edina, Minnesota. The lease includes rent escalations throughout the lease period and expires in April 2105.
We have an operating lease for our 12,572 square foot corporate office in Southfield, Michigan, which commenced in August 2019, and an operating lease for our 5,629 square foot corporate office in New York, New York. These leases are set to expire in December 2024 and January 2024, respectively. Our Southfield, Michigan corporate office lease includes two additional five year renewal options to extend the lease through December 2034 and our New York, New York corporate office lease includes an additional five year renewal to extend the lease through January 2029.
We also have a ground finance lease at our Buttermilk Towne Center with the City of Crescent Springs, Kentucky. The lease provides for fixed annual payments of $0.1 million through maturity in December 2032, at which time we can acquire the land for one dollar.
Construction Costs
In connection with the development and expansion of various shopping centers as of December 31, 2021, we have entered into agreements for construction activities with an aggregate cost of approximately $2.8 million.
Planned Capital Spending
We are focused on enhancing the value of our existing portfolio of shopping centers through successful leasing efforts, including the reconfiguration of anchor-space and small shop lease-up.
For 2022, we anticipate spending between $45.0 million and $55.0 million for capital expenditures, of which $2.8 million is reflected in the construction commitments in the above material cash commitments table. Our 2022 estimate includes ongoing capital expenditure spending between $30.0 million and $35.0 million and discretionary capital expenditure spending between $15.0 million and $20.0 million. Ongoing capital expenditures relates to leasing costs and building improvements whereas discretionary capital expenditures relate to targeted remerchandising, outlots/expansion, and development/redevelopment. Estimates for future spending will change as new projects are approved.
Non-GAAP Financial Measures
Certain of our key performance indicators are considered non-GAAP financial measures. Management uses these measures along with our GAAP financial statements in order to evaluate our operations results. We believe these additional measures provide additional and useful means to assess our performance. However, these measures do not represent alternatives to GAAP measures as indicators of performance and a comparison of the Company's presentations to similarly titled measures of other REITs may not necessarily be meaningful due to possible differences in definitions and application by such REITs.
Capitalization
At December 31, 2021 and 2020, our total market capitalization was $2.2 billion and $1.6 billion, respectively, and is detailed below:
December 31,
2021 2020
(In thousands)
Notes payable, net $ 884,185 $ 1,027,751
Unamortized premiums and deferred financing costs 4,012 2,503
Finance lease obligation 821 875
Pro-rata share of unconsolidated entities debt 23,017 -
Cash, cash equivalents and restricted cash (14,033) (211,484)
Pro-rata share of unconsolidated entities cash, cash equivalents and restricted cash (3,088) (1,914)
Net debt (1)
$ 894,914 $ 817,731
Common shares outstanding 83,894 80,055
OP Units outstanding 1,755 1,909
Restricted share awards (treasury method) 1,322 410
Total common shares and equivalents 86,971 82,374
Market price per common share $ 13.38 $ 8.65
Equity market capitalization $ 1,163,672 $ 712,535
7.25% Series D Cumulative Convertible Perpetual Preferred Shares 1,849 1,849
Market price per convertible preferred share $ 58.91 $ 49.84
Convertible perpetual preferred shares (at market) $ 108,925 $ 92,154
Total market capitalization $ 2,167,511 $ 1,622,420
Net debt to total market capitalization 41.3 % 50.4 %
(1) Net debt represents (i) our total debt principal, which excludes unamortized premium and deferred financing costs, net, plus (ii) our finance lease obligation, plus (iii) our pro-rata share of total debt principal of each of our unconsolidated joint entities, less (iv) our cash, cash equivalents and restricted cash, less (v) our pro-rata share of cash, cash equivalents and restricted cash of each of our unconsolidated entities. We believe this calculation is useful to understand our financial condition. Our method of calculating net debt may be different from methods used by other companies and may not be comparable.
At December 31, 2021, noncontrolling interests represented a 2.0% ownership in the Operating Partnership. The OP Units may, under certain circumstances, be exchanged for our common shares on a one-for-one basis. We, as sole general partner of the Operating Partnership, have the option, but not the obligation, to settle exchanged OP Units held by others in cash. Assuming the exchange of all OP Units, there would have been approximately 85.6 million of our common shares outstanding at December 31, 2021, with a market value of approximately $1.1 billion.
Funds From Operations
We consider funds from operations, also known as “FFO,” to be an appropriate supplemental measure of the financial performance of an equity REIT. The National Association of Real Estate Investment Trusts (“NAREIT”) is an industry body public REITs participate in and provides guidance to its members on Non-GAAP financial measures. Under the NAREIT definition, FFO represents net income (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable property and impairment provisions on depreciable real estate or on investments in non-consolidated investees that are driven by measurable decreases in the fair value of depreciable real estate held by the investee, plus depreciation and amortization, (excluding amortization of financing costs). Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect funds from operations on the same basis. We have adopted the NAREIT definition in our computation of FFO.
In addition to FFO, we include Operating FFO as an additional measure of our financial and operating performance. Operating FFO excludes transactions costs and periodic items such as gains (or losses) from sales of non-operating real estate assets and impairment provisions on non-operating real estate assets, bargain purchase gains, severance expense, accelerated amortization of debt premiums, gains or losses on extinguishment of debt, insured expenses, net, accelerated write-offs of above and below market lease intangibles, accelerated write-offs of lease incentives and bond interest proceeds that are not adjusted under the current NAREIT definition of FFO. We provide a reconciliation of FFO to Operating FFO. In future periods, Operating FFO may also include other adjustments, which will be detailed in the reconciliation for such measure, that we believe will enhance comparability of Operating FFO from period to period. FFO and Operating FFO should not be considered alternatives to GAAP net income available to common shareholders or as alternatives to cash flow as measures of liquidity.
While we consider FFO and Operating FFO useful measures for reviewing our comparative operating and financial performance between periods or to compare our performance to different REITs, our computations of FFO and Operating FFO may differ from the computations utilized by other real estate companies, and therefore, may not be comparable.
We recognize the limitations of FFO and Operating FFO when compared to GAAP net income available to common shareholders. FFO and Operating FFO do not represent amounts available for needed capital replacement or expansion, debt service obligations, or other commitments and uncertainties. In addition, FFO and Operating FFO do not represent cash generated from operating activities in accordance with GAAP and are not necessarily indicative of cash available to fund cash needs, including the payment of dividends.
The following table illustrates the calculations of FFO and Operating FFO:
Years Ended December 31,
2021 2020 2019
(In thousands, except per share data)
Net income (loss) $ 70,264 $ (10,474) $ 93,686
Net (income) loss attributable to noncontrolling partner interest (1,625) 241 (2,175)
Preferred share dividends (6,701) (6,701) (6,701)
Net income (loss) available to common shareholders 61,938 (16,934) 84,810
Adjustments:
Rental property depreciation and amortization expense 71,655 76,649 78,095
Pro-rata share of real estate depreciation from unconsolidated joint ventures (1)
8,144 7,044 459
Gain on sale of depreciable real estate (88,693) - (81,485)
Gain on sale of joint venture depreciable real estate - - (385)
Provision for impairment on income-producing properties 17,201 - -
Other gain on unconsolidated joint ventures - - (237)
FFO available to common shareholders 70,245 66,759 81,257
Noncontrolling interest in Operating Partnership (2)
- (241) -
Preferred share dividends (assuming conversion) (3)
- - 6,701
FFO available to common shareholders and dilutive securities $ 70,245 $ 66,518 $ 87,958
Gain on sale of land (222) (318) (371)
Provision for impairment on land available for development - 598 -
Transaction costs (4)
607 186 -
Insured expenses, net - (2,745) 2,276
Loss on extinguishment of debt 8,294 - 2,571
Severance expense (5)
62 506 130
Executive management reorganization, net (5)(6)
- - 1,402
R2G Venture LLC related costs (5)(7)
- - 499
Above and below market lease intangible write-offs (562) (256) (3,525)
Pro-rata share of transaction costs from unconsolidated joint ventures (1)
- 407 -
Pro-rata share of above and below market lease intangible write-offs from unconsolidated joint ventures (1)
(41) (626) -
Payment of loan amendment fees (5)
- 184 -
Bond interest proceeds (8)
- (213) -
Operating FFO available to common shareholders and dilutive securities $ 78,383 $ 64,241 $ 90,940
Weighted average common shares 81,083 79,998 79,802
Shares issuable upon conversion of OP Units (2)
- 1,909 -
Dilutive effect of restricted stock 1,215 496 939
Shares issuable upon conversion of preferred shares (3)
- - 6,981
Weighted average equivalent shares outstanding, diluted 82,298 82,403 87,722
Diluted earnings (loss) per share (9)
$ 0.75 $ (0.21) $ 1.04
Per share adjustments for FFO available to common shareholders and dilutive securities 0.10 1.02 (0.04)
FFO available to common shareholders and dilutive securities per share, diluted $ 0.85 $ 0.81 $ 1.00
Per share adjustments for Operating FFO available to common shareholders and dilutive securities 0.10 (0.03) 0.04
Operating FFO available to common shareholders and dilutive securities per share, diluted $ 0.95 $ 0.78 $ 1.04
(1)Amounts noted are included in Earnings from unconsolidated joint ventures.
(2)The total noncontrolling interest reflects OP Units convertible on a one-for-one basis into common shares. The Company's net income for the year ended December 31, 2021 and December 31, 2019 (largely driven by gain on sale of real estate), resulted in an income allocation to OP Units which drove an OP Unit ratio of $0.87 and $1.14, respectively (based on 1,876 and 1,909 weighted average OP Units outstanding as of December 31, 2021 and December 31, 2019, respectively). In instances when the OP Unit ratio exceeds basic FFO, the OP Units are considered anti-dilutive, and as a result are not included in the calculation of fully diluted FFO and Operating FFO for the year ended December 31, 2021 and December 31, 2019.
(3)7.25% Series D Cumulative Convertible Perpetual Preferred Shares of Beneficial Interest, $0.01 par value per share paid annual dividends of $6.7 million and are currently convertible into approximately 7.0 million common shares. They are dilutive only when earnings or FFO exceed approximately $0.96 per diluted share per year. The conversion ratio is subject to adjustment based upon a number of factors, and such adjustment could affect the dilutive impact of the Series D convertible preferred shares on FFO and earnings per share in future periods.
(4)For 2021, costs associated with terminated acquisitions. For 2020, costs associated with a terminated acquisition and a terminated disposition.
(5)Amounts noted are included in General and administrative expense.
(6)For 2019, largely comprised of severance to a former executive officer and performance award expense related to the Company's former Chief Executive Officer.
(7)For 2019, comprised of special incentive expense related to the execution of the R2G Venture LLC joint venture agreement.
(8)Amounts noted are included in Other (expense) income, net.
(9)The denominator to calculate diluted earnings (loss) per share includes weighted average common shares and restricted stock for the year ended December 31, 2021, includes weighted average common shares only for the year ended December 31, 2020 and includes weighted average common shares, restricted stock and preferred shares for the year ended December 31, 2019.
NOI, Same Property NOI and NOI from Other Investments
NOI consists of (i) rental income and other property income, before straight-line rental income, amortization of lease inducements, amortization of acquired above and below market lease intangibles and lease termination fees less (ii) real estate taxes and all recoverable and non-recoverable operating expenses other than straight-line ground rent expense, in each case, including our share of these items from our R2G Venture LLC and RGMZ Venture REIT LLC unconsolidated joint ventures.
NOI, Same Property NOI and NOI from Other Investments are supplemental non-GAAP financial measures of real estate companies' operating performance. Same Property NOI is considered by management to be a relevant performance measure of our operations because it includes only the NOI of comparable operating properties for the reporting period. Same Property NOI for the three and twelve months ended December 31, 2021 and 2020 represents NOI from the Company's same property portfolio consisting of 41 consolidated operating properties and our 51.5% pro-rata share of five properties owned by our R2G Venture LLC unconsolidated joint venture and 100% of the 30 properties owned by our RGMZ Venture REIT LLC unconsolidated joint venture (excludes one property that is part of our Rivertowne Square multi-tenant property where activities have started in preparation for redevelopment). All properties included in Same Property NOI were either acquired or placed in service and stabilized prior to January 1, 2020. We present Same Property NOI primarily to show the percentage change in our NOI from period to period across a consistent pool of properties. The properties contributed to RGMZ Venture REIT LLC had previously been parts of larger shopping centers that we own. Accordingly, 100.0% of the NOI from these properties is included in our results for periods on or prior to March 4, 2021 and, for these prior periods, we had not separately allocated expenses attributable to the larger shopping centers between these properties and the remainder of these shopping centers. As a result, in order to help ensure the comparability of our Same Property NOI for the periods presented, we are continuing to include 100.0% of the NOI from these properties in our Same Property NOI following their contribution even though our pro rata share following March 4, 2021 is only 6.4%. Same Property NOI excludes properties under redevelopment or where activities have started in preparation for redevelopment. A property is designated as a redevelopment when planned improvements significantly impact the property. NOI from Other Investments for the three and twelve months ended December 31, 2021 and 2020 represents pro-rata NOI primarily from (i) properties disposed of and acquired during 2021, (ii) Rivertowne Square where the Company has begun activities in anticipation of future redevelopment, (iii) certain property related employee compensation, benefits, and travel expense and (iv) noncomparable operating income and expense adjustments. Non-RPT NOI from RGMZ Venture REIT LLC represents 93.6% of the properties contributed to RGMZ Venture REIT LLC after March 4, 2021, which is our partners' share of RGMZ Venture REIT LLC.
NOI, Same Property NOI and NOI from Other Investments should not be considered alternatives to net income in accordance with GAAP or as measures of liquidity. Our method of calculating these measures may differ from methods used by other REITs and, accordingly, may not be comparable to such other REITs.
The following is a summary of our owned properties for the periods noted with consistent classification in the prior period for presentation of Same Property NOI:
Three Months Ended December 31, Twelve Months Ended December 31,
Property Designation 2021 2020 2021 2020
Wholly-owned and R2G retail properties:
Same property 46 46 46 46
Acquisitions (1)
10 - 10 -
Redevelopment (2)
1 1 1 1
Total wholly-owned and R2G properties 57 47 57 47
RGMZ retail properties:
Same property 30 30 30 30
Acquisitions 7 - 7 -
Redevelopment 1 1 1 1
Total retail properties: 95 78 95 78
(1)Includes the following wholly-owned properties for the three and twelve months ended December 31, 2021: Northborough Crossing, Bellevue Place, Woodstock Square, Newnan Pavilion and Highland Lakes. Also includes the following properties owned by our R2G joint venture: East Lake Woodlands, South Pasadena, Village Shoppes of Canton, Bedford Marketplace and Dedham Mall.
(2)Includes Rivertowne Square for the three months and twelve months ended December 31, 2021 and 2020. The entire property indicated for each period is completely excluded from the Same Property NOI.
The following is a reconciliation of our Net (loss) income available to common shareholders to Same Property NOI at Pro-Rata:
Three Months Ended December 31, Twelve Months Ended December 31,
2021 2020 2021 2020
(in thousands)
Net (loss) income available to common shareholders $ (12,029) $ (7,407) $ 61,938 $ (16,934)
Preferred share dividends 1,675 1,675 6,701 6,701
Net (loss) income attributable to noncontrolling partner interest (218) (135) 1,625 (241)
Income tax (benefit) provision (41) 12 (88) (25)
Interest expense 9,017 9,826 37,025 39,317
Loss on extinguishment of debt 8,294 - 8,294 -
Earnings from unconsolidated joint ventures (1,048) (76) (3,995) (1,590)
Gain on sale of real estate (13,500) (318) (88,915) (318)
Insured expenses, net - - - (2,745)
Other expense (income), net 13 108 236 (214)
Management and other fee income (714) (478) (1,986) (1,395)
Depreciation and amortization 18,791 20,210 72,254 77,213
Transaction costs 218 - 607 186
General and administrative expenses 10,030 6,822 32,328 25,801
Provision for impairment 17,196 598 17,201 598
Pro-rata share of NOI from R2G Venture LLC (1)
4,372 1,999 11,876 8,155
Pro-rata share of NOI from RGMZ Venture REIT LLC (2)
144 - 308 -
Lease termination fees (264) (183) (845) (368)
Amortization of lease inducements 214 212 848 766
Amortization of acquired above and below market lease intangibles, net (523) (655) (2,662) (2,903)
Straight-line ground rent expense 76 76 306 306
Straight-line rental income (410) 8 (2,412) 2,026
NOI at Pro-Rata 41,293 32,294 150,644 134,336
NOI from Other Investments (5,112) 1,338 (8,868) 2,635
Non-RPT NOI from RGMZ Venture REIT LLC (3)
1,635 - 3,884 -
Same Property NOI at Pro-Rata (3)
$ 37,816 $ 33,632 $ 145,660 $ 136,971
(1) Represents 51.5% of the NOI from the properties owned by R2G Venture LLC for all periods presented.
(2) Represents 6.4% of the NOI from the properties owned by RGMZ Venture REIT LLC after March 4, 2021.
(3) Represents 93.6% of the properties owned by RGMZ Venture REIT LLC after March 4, 2021.
Recent Accounting Pronouncements
Refer to Note 2 of the notes to the consolidated financial statements in this report for a discussion of Recent Accounting Pronouncements.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We have exposure to interest rate risk on our variable rate debt obligations. Based on market conditions, we may manage our exposure to interest rate risk by entering into interest rate swap agreements to hedge our variable rate debt. We are not subject to any foreign currency exchange rate risk or commodity price risk, or other material rate or price risks. Based on our debt and interest rates and interest rate swap agreements in effect at December 31, 2021, a 100 basis point change in interest rates would impact our future earnings and cash flows by approximately $0.4 million annually. We believe that a 100 basis point increase in interest rates would decrease the fair value of our total outstanding debt by approximately $28.5 million at December 31, 2021.
We had interest rate swap agreements with an aggregate notional amount of $310.0 million as of December 31, 2021. The agreements provided for swapping one-month LIBOR to fixed interest rates ranging from 1.26% to 1.77% and had expirations ranging from 2023 to 2027. The following table sets forth information as of December 31, 2021 concerning our long-term debt obligations, including principal cash flows by scheduled amortization payment and scheduled maturity, weighted average interest rates of maturing amounts and fair market value:
2022 2023 2024 2025 2026 Thereafter Total Fair Market Value
(dollars in thousands)
Fixed-rate debt $ 1,348 $ 87,888 $ 50,879 $ 182,431 $ 125,651 $ 405,000 $ 853,197 $ 865,490
Weighted average interest rate 4.9 % 3.3 % 2.6 % 3.7 % 3.9 % 3.7 % 3.6 % 3.2 %
Variable-rate debt $ - $ 35,000 $ - $ - $ - $ - $ 35,000 $ 35,000
Weighted average interest rate - % 1.3 % - % - % - % - % 1.3 % 1.3 %
We estimated the fair market value of our fixed rate mortgages using a discounted cash flow analysis, based on borrowing rates for similar types of borrowing arrangements with the same remaining maturity. Considerable judgment is required to develop estimated fair values of financial instruments. The table incorporates only those exposures that exist at December 31, 2021 and does not consider those exposures or positions which could arise after that date or firm commitments as of such date. Therefore, the information presented therein has limited predictive value. Our actual interest rate fluctuations will depend on the exposures that arise during the period and on market interest rates at that time.
In July 2017, the Financial Conduct Authority announced it intended to stop compelling banks to submit rates for the calculation of LIBOR after 2021. In March 2021, the ICE Benchmark Administration, the administrator of LIBOR, announced its intention to cease publication of certain LIBOR settings after 2021, while continuing to publish overnight and one-, three-, six-, and twelve-month U.S. dollar LIBOR rates through June 30, 2023. While this announcement extended the transition period to June 2023, the United States Federal Reserve Board and other regulatory bodies concurrently issued guidance encouraging banks and other financial market participants to cease entering into new contracts that use U.S. dollar LIBOR as a reference rate as soon as practicable and in any event no later than December 31, 2021. In the U.S., the AARC, which was convened by the Federal Reserve Board and the Federal Reserve Bank of New York, has recommended the SOFR plus a recommended spread adjustment as its preferred alternative to USD-LIBOR. There are significant differences between LIBOR and SOFR, such as LIBOR being an unsecured lending rate while SOFR is a secured rate, and SOFR is an overnight rate while LIBOR reflects term rates at different maturities.
We expect that all LIBOR settings relevant to us will cease to be published or will no longer be representative after June 30, 2023. As a result, any of our LIBOR-based borrowings that extend beyond such date will need to be converted to a replacement rate. Certain risks may arise in connection with transitioning contracts to SOFR or any other alternative variable rate, including any resulting value transfer that may occur. The value of loans, securities, or derivative instruments tied to LIBOR could also be impacted. We have material contracts that are indexed to USD-LIBOR, and for some instruments, the method of transitioning to an alternative rate may be challenging, as they may require substantial negotiation with each respective counterparty. If a contract is not transitioned to an alternative variable rate and LIBOR is discontinued, the impact is likely to vary by contract.
The discontinuation of LIBOR will not affect our ability to borrow or maintain already outstanding borrowings or swaps, but if our contracts indexed to LIBOR, including certain contracts governing our variable rate debt and our interest rate swaps, are converted to SOFR, the differences between LIBOR and SOFR, plus the recommended spread adjustment, could result in interest costs that are higher than if LIBOR remained available. Additionally, although SOFR is the AARC’s recommended
replacement rate, it is also possible that lenders may instead choose alternative replacement rates that may differ from LIBOR in ways similar to SOFR or in ways that would result in higher interest costs for us. It is not yet possible to predict the magnitude of LIBOR’s end on our borrowing costs given the remaining uncertainty about which rates will replace LIBOR. See Note 2 to the Consolidated Financial Statements.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
Our consolidated financial statements and supplementary data are included as a separate section in this Annual Report on Form 10-K commencing on page and are incorporated herein by reference.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our reports under the Exchange Act, such as this report on Form 10-K, is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the design control objectives, and management was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
We carried out an assessment as of December 31, 2021 of the effectiveness of the design and operation of our disclosure controls and procedures. This assessment was done under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. Based on such evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that such disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2021.
Statement of Our Management
Our management has issued a report on its assessment of the Company’s internal control over financial reporting, which appears on page of this Annual Report on Form 10-K.
Statement of Our Independent Registered Public Accounting Firm
Grant Thornton LLP, our independent registered public accounting firm that audited the financial statements in this Annual Report on Form 10-K, has issued an attestation report on the Company’s internal control over financial reporting, which appears on page of this Annual Report on Form 10-K.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the fiscal quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
None.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
Incorporated by reference from our definitive proxy statement to be filed within 120 days after the end of our fiscal year covered by this Form 10-K.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
Incorporated by reference from our definitive proxy statement to be filed within 120 days after the end of our fiscal year covered by this Form 10-K.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Incorporated by reference from our definitive proxy statement to be filed within 120 days after the end of our fiscal year covered by this Form 10-K.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence
Incorporated by reference from our definitive proxy statement to be filed within 120 days after the end of our fiscal year covered by this Form 10-K.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services
Incorporated by reference from our definitive proxy statement to be filed within 120 days after the end of our fiscal year covered by this Form 10-K.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits and Financial Statement Schedules
(a)
(1) Consolidated financial statements. See “Item 8 - Financial Statements and Supplementary Data.”
(2) Financial statement schedule. See “Item 8 - Financial Statements and Supplementary Data.”
(3) Exhibits
3.1 Articles of Restatement of Declaration of Trust of the Company, effective June 8, 2010, incorporated by reference to Appendix A to the Company's 2010 Proxy dated April 30, 2010.
3.2 Articles of Amendment, as filed with the State Department of Assessments and Taxation of Maryland on April 5, 2011, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated April 6, 2011.
3.3 Articles Supplementary, as filed with the State Department of Assessments and Taxation of Maryland on April 5, 2011, incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K dated April 6, 2011.
3.4 Articles Supplementary, as filed with the State Department of Assessments and Taxation of Maryland on April 28, 2011, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated April 28, 2011.
3.5 Articles of Amendment, as filed with the State Department of Assessments and Taxation of Maryland on September 21, 2012, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated September 21, 2012.
3.6 Articles of Amendment, as filed with the State Department of Assessments and Taxation of Maryland on July 31, 2013, incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K dated July 31, 2013.
3.7 Articles of Amendment, as filed with the State Department of Assessments and Taxation of Maryland on November 9, 2018, incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K dated November 13, 2018.
3.8 Articles of Amendment, as filed with the State Department of Assessments and Taxation of Maryland on February 28, 2020, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated February 28, 2020.
3.9 Amended and Restated Bylaws of the Company, effective November 13, 2018, incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K dated November 13, 2018.
3.10 Amendment No. 1 to the Amended and Restated Bylaws of the Company, effective February 13, 2020, incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K dated February 20, 2020.
3.11 Amendment No. 2 to the Amended and Restated Bylaws of the Company, effective March 27, 2020, incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K dated April 1, 2020.
4.1 Description of the Company's Securities Registered Pursuant to Section 12 of the Securities Exchange Act, as amended, incorporated by reference to Exhibit 4.1 to the Company's Annual Report on Form 10-K on February 20, 2020.
10.1 Registration Rights Agreement, dated May 10, 1996, among the Company, Dennis Gershenson, Joel Gershenson, Bruce Gershenson, Richard Gershenson, Michael A. Ward U/T/A dated 2/22/77, as amended, and each of the Persons set forth on Exhibit A attached thereto, incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 1996.
10.2 Exchange Rights Agreement, dated May 10, 1996, among the Company and each of the Persons whose names are set forth on Exhibit A attached thereto, incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 1996.
10.3 Amended and Restated Limited Partnership Agreement of Ramco/Lion Venture LP, dated as of December 29, 2004, by Ramco-Gershenson Properties, L.P., as a limited partner, Ramco Lion LLC, as a general partner, CLPF-Ramco, L.P., as a limited partner, and CLPF-Ramco GP, LLC as a general partner, incorporated by reference to Exhibit 10.62 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.
10.4* Summary of Trustee Compensation Program.**
10.5 Ramco-Gershenson Properties Trust 2012 Omnibus Long-Term Incentive Plan, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated June 12, 2012.**
10.6 Change in Control Policy, dated May 14, 2013, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated May 16, 2013.
10.7 $110 Million Note Purchase Agreement, by Ramco-Gershenson Properties, L.P. incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated July 2, 2013.
10.8 Second Amendment, dated June 30, 2020, to the $110 Million Note Purchase Agreement, dated June 27, 2013, by RPT Realty, L.P., incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated July 6, 2020.
10.9 $100 Million Note Purchase Agreement, by Ramco-Gershenson Properties, L.P. dated May 28, 2014, incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2014.
10.10 Third Amendment, dated June 30, 2020, to the $100 Million Note Purchase Agreement, dated May 28, 2014, by RPT Realty, L.P., incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K dated July 6, 2020.
10.11 $100 Million Note Purchase Agreement, by Ramco-Gershenson Properties, L.P. dated September 30, 2015, incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2015.
10.12 Second Amendment, dated June 30 2020, to the $100 Million Note Purchase Agreement, dated September 30, 2015, by RPT Realty, L.P., incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K dated July 6, 2020.
10.13 $75 Million Note Purchase Agreement, by Ramco-Gershenson Properties, L.P. dated August 19, 2016, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated December 7, 2016.
10.14 Second Amendment, dated June 30 2020, to the $75 Million Note Purchase Agreement, dated August 19, 2016, by RPT Realty, L.P., incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K dated July 6, 2020.
10.15 $75 Million Note Purchase Agreement, by Ramco-Gershenson Properties, L.P. dated December 21, 2017 incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated December 27, 2017.
10.16 First Amendment, dated June 30, 2020, to the $75 Million Note Purchase Agreement, dated December 21, 2017, by RPT Realty, L.P., incorporated by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K dated July 6, 2020.
10.17 Employment Agreement, dated June 11, 2020 between the Company and Brian Harper, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated June 15, 2020.**
10.18 Ramco-Gershenson Properties Trust Inducement Incentive Plan, incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K dated April 12, 2018.**
10.19 Employment Agreement, dated June 11, 2020 between the Company and Michael Fitzmaurice, incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K dated June 15, 2020.**
10.20 RPT Realty Amended and Restated 2019 Omnibus Long-Term Incentive Plan effective as of April 28, 2021, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated April 28, 2021.**
10.21 Employment Offer, dated June 25, 2018, between the Company and Timothy Collier, incorporated by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the period ended March 31, 2019.**
10.22 Employment Offer with Raymond Merk, dated July 9, 2019, incorporated by reference to Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2019.**
10.23 Fifth Amended and Restated Credit Agreement dated November 6, 2019 among RPT Realty, L.P., as Borrower, KeyBank National Association, as Administrative Agent, KeyBanc Capital Markets Inc., BMO Capital Markets, and Capital One, National Association, as Joint-Lead Arrangers, BMO Capital Markets, N.A., and Capital One, National Association, as Syndication Agents, certain lenders from time to time parties thereto, as Lenders, and RPT Realty and certain subsidiaries of RPT Realty, L.P., as a Guarantors, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated November 8, 2019.
10.24 Employment Offer with Heather Ohlberg, dated October 5, 2018, incorporated by reference to Exhibit 10.24 to the Company's Annual Report on Form 10-K for the period ended December 31, 2020.**
10.25 Ramco-Gershenson Properties Trust Deferred Fee Plan for Trustees, incorporated by reference to Exhibit 10.25 to the Company's Annual Report on Form 10-K for the period ended December 31, 2020.
10.26 Note Purchase Agreement, dated October 8, 2021, by and among RPT Realty, RPT Realty, L.P. and the purchasers of the notes party thereto, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated October 8, 2021.
21.1* Subsidiaries.
23.1* Consent of Grant Thornton LLP.
31.1* Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2* Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (furnished herewith)
32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (furnished herewith)
101.SCH* Inline XBRL Taxonomy Extension Schema Document.
101.CAL* Inline XBRL Extension Calculation Linkbase Document
101.DEF* Inline XBRL Extension Definition Linkbase Document.
101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE * Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104* Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*).
* Filed herewith
** Management contract or compensatory plan or arrangement
15(b) The exhibits listed at Item 15(a)(3) that are noted ‘filed herewith’ are hereby filed with this report.
15(c) The financial statement schedules listed at Item 15(a)(2) are hereby filed with this report.