BRIXMOR PROPERTY GROUP INC. The following discussion should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and the accompanying notes thereto. Historical results and percentage relationships set forth in the unaudited Condensed Consolidated Financial Statements and accompanying notes, including trends which might appear, should not be taken as indicative of future operations. Executive Summary Our CompanyBrixmor Property Group Inc. and subsidiaries (collectively, "BPG") is an internally-managed real estate investment trust ("REIT").Brixmor Operating Partnership LP and subsidiaries (collectively, the "Operating Partnership") is the entity through which BPG conducts substantially all of its operations and owns substantially all of its assets. BPG owns 100% of the limited liability company interests ofBPG Subsidiary LLC ("BPG Sub"), which, in turn, is the sole member ofBrixmor OP GP LLC (the "General Partner"), the sole general partner of theOperating Partnership . Unless stated otherwise or the context otherwise requires, "we," "our," and "us" mean BPG and theOperating Partnership , collectively. We believe we own and operate one of the largest open-air retail portfolios by gross leasable area ("GLA") inthe United States ("U.S."), comprised primarily of community and neighborhood shopping centers. As ofSeptember 30, 2021 , our portfolio was comprised of 386 shopping centers (the "Portfolio") totaling approximately 68 million square feet of GLA. Our high-quality national Portfolio is primarily located within established trade areas in the top 50 Metropolitan Statistical Areas in theU.S. , and our shopping centers are primarily anchored by non-discretionary and value-oriented retailers, as well as consumer-oriented service providers. As ofSeptember 30, 2021 , our three largest tenants by annualized base rent ("ABR") were The TJX Companies, Inc. ("TJX"), The Kroger Co. ("Kroger"), and Burlington Stores, Inc. BPG has been organized and operated in conformity with the requirements for qualification and taxation as a REIT under theU.S. federal income tax laws, commencing with our taxable year endedDecember 31, 2011 , has maintained such requirements through our taxable year endedDecember 31, 2020 , and intends to satisfy such requirements for subsequent taxable years. Our primary objective is to maximize total returns to our stockholders through consistent, sustainable growth in cash flow. Our key strategies to achieve this objective include proactively managing our Portfolio to drive internal growth, pursuing value-enhancing reinvestment opportunities and prudently executing on acquisition and disposition activity, while also maintaining a flexible capital structure positioned for growth. In addition, as we execute on our key strategies, we do so guided by a commitment to operate in a socially responsible manner that allows us to realize our purpose of owning and managing properties that are the centers of the communities we serve.
We believe the following set of competitive advantages positions us to successfully execute on our key strategies:
•Expansive Retailer Relationships - We believe that the scale of our asset base and our nationwide footprint represent competitive advantages in supporting the growth objectives of the nation's largest and most successful retailers. We believe that we are one of the largest landlords by GLA to TJX and Kroger, as well as a key landlord to most major grocers and retail category leaders. We believe that our strong relationships with leading retailers afford us unique insight into their strategies and priority access to their expansion plans. •Fully-Integrated Operating Platform - We manage a fully-integrated operating platform, leveraging our national scope and demonstrating our commitment to operating with a strong regional and local presence. We provide our tenants with dedicated service through both our national accounts leasing team based inNew York and our network of four regional offices inAtlanta ,Chicago ,Philadelphia andSan Diego , as well as our 13 leasing and property management satellite offices throughout the country. We believe that this structure enables us to obtain critical national market intelligence, while also benefitting from the regional and local expertise of our leasing and operations teams. •Experienced Management - Senior members of our management team are seasoned real estate operators with extensive public company leadership experience. Our management team has deep industry knowledge and well-established relationships with retailers, brokers and vendors through many years of operational and transactional experience, as well as significant capital markets capabilities and expertise in executing value-enhancing reinvestment opportunities. 30 -------------------------------------------------------------------------------- Factors That May Influence Our Future Results We derive our rental income primarily from base rent and expense reimbursements paid by tenants to us under existing leases at each of our properties. Expense reimbursements primarily consist of payments made by tenants to us for their proportionate share of property operating expenses, including common area expenses, utilities, insurance and real estate taxes, and certain capital expenditures related to the maintenance of our properties. Our ability to maintain or increase rental income is primarily dependent on our ability to maintain or increase rental rates, renew expiring leases and/or lease available space. Increases in our property operating expenses, including repairs and maintenance, landscaping, snow removal, security, ground rent related to properties for which we are the lessee, utilities, insurance, real estate taxes and various other costs, to the extent they are not reimbursed by tenants or offset by increases in rental income, will adversely impact our overall performance.
See " Forward-Looking Statements " included elsewhere in this Quarterly Report on Form 10-Q for the factors that could affect our rental income and/or property operating expenses. As discussed below, the COVID-19 pandemic has had, and is expected to continue to have, a significant impact on our business.
Impacts on Business from COVID-19
The global outbreak of the novel strain of coronavirus ("COVID-19") and the
public health measures that have been undertaken in response have had a
significant adverse impact on our business, our tenants, the real estate market,
the financial markets and the global economy. The effects of COVID-19, including
related government restrictions, border closings, quarantines,
"shelter-in-place" orders and "social distancing" guidelines, forced many of our
tenants to temporarily close stores, reduce hours or significantly limit
service, and resulted in a dramatic increase in national unemployment and a
significant economic contraction in 2020. Since we cannot estimate when the
COVID-19 pandemic and the responsive measures to combat it will end and to what
extent certain restrictions, though currently lifted, may later be reinstated,
we cannot estimate the ultimate operational and financial impact of COVID-19 on
our business. The degree to which COVID-19 impacts our operating results in the
future will depend on the factors discussed in " Forward-Looking
Statements " included elsewhere in this Quarterly Report on Form 10-Q and
in the "Risk Factors" section of our Annual Report on Form 10-K for the year
ended December 31, 2020 .
Approximately 70% of our shopping centers are anchored by grocery stores.
Grocery stores and other essential tenants remained open throughout the pandemic
and many have experienced stable or increased sales, which has helped and we
believe will continue to help to partially mitigate the adverse impact of
COVID-19 on our business. As of October 26, 2021 , we have collected 94% of base
rent for the nine months ended December 31, 2020 , 96% of first quarter 2021 base
rent, 97% of second quarter 2021 base rent, and 97% of third quarter 2021 base
rent. Certain tenants experiencing economic difficulties during the pandemic
have sought rent relief from us, which has been provided on a case-by-case basis
primarily in the form of rent deferrals and, in more limited cases, in the form
of rent abatements. Rent deferrals have significantly increased our Receivables,
net. We are in ongoing discussions with our tenants regarding rent that has not
yet been collected or addressed through executed deferral or abatement
agreements.
Leasing Highlights
As of September 30, 2021 , billed and leased occupancy were 88.2% and 91.5%,
respectively, as compared to 88.0% and 91.2%, respectively, as of September 30,
2020 .
31--------------------------------------------------------------------------------
The following table summarizes our executed leasing activity for the three
months ended
For the Three
Months Ended
Tenant Improvements Third Party Leasing
Leases GLA New ABR PSF and Allowances PSF Commissions PSF Rent Spread(1)
New, renewal and option
leases 386 2,770,003 $ 14.54 $ 3.23 $ 1.43 10.7 %
New and renewal leases 332 1,719,493 16.62 5.20 2.31 12.3 %
New leases 161 745,712 17.43 9.62 5.28 26.3 %
Renewal leases 171 973,781 15.99 1.82 0.04 7.6 %
Option leases 54 1,050,510 11.14 - - 7.6 %
For the Three
Months Ended
Tenant Improvements Third Party Leasing
Leases GLA New ABR PSF and Allowances PSF Commissions PSF Rent Spread(1)
New, renewal and option
leases 418 3,155,433 $ 14.20 $ 2.55 $ 1.08 6.1 %
New and renewal leases 368 2,152,872 15.53 3.71 1.58 5.7 %
New leases 103 683,517 16.22 10.05 4.94 14.1 %
Renewal leases 265 1,469,355 15.21 0.76 0.01 4.5 %
Option leases 50 1,002,561 11.35 0.07 - 7.1 %
(1) Based on comparable leases only, which consist of new leases signed on
units that were occupied within the prior 12 months and renewal or option leases
signed with the same tenant in all or a portion of the same location or that
include the expansion into space that was occupied within the prior 12 months.
Excludes leases executed for terms of less than one year.
ABR PSF includes the GLA of lessee-owned leasehold improvements.
The following table summarizes our executed leasing activity for the nine months
ended
For the Nine
Months Ended
Tenant Improvements Third Party Leasing
Leases GLA New ABR PSF and Allowances PSF Commissions PSF Rent Spread(1)
New, renewal and option
leases 1,174 7,175,306 $ 15.78 $ 4.12 $ 1.68 9.1 %
New and renewal leases 1,048 4,695,124 18.12 6.29 2.57 10.1 %
New leases 464 2,100,392 18.00 12.71 5.63 22.1 %
Renewal leases 584 2,594,732 18.22 1.10 0.09 6.1 %
Option leases 126 2,480,182 11.36 - - 7.1 %
For the Nine
Months Ended
Tenant Improvements Third Party Leasing
Leases GLA New ABR PSF and Allowances PSF Commissions PSF Rent Spread(1)
New, renewal and option
leases 1,035 7,344,267 $ 13.89 $ 3.23 $ 1.11 7.2 %
New and renewal leases 886 4,839,357 15.17 4.87 1.68 7.1 %
New leases 281 1,695,732 15.47 12.52 4.73 19.6 %
Renewal leases 605 3,143,625 15.01 0.74 0.04 4.5 %
Option leases 149 2,504,910 11.41 0.07 - 7.4 %
(1) Based on comparable leases only, which consist of new leases signed on
units that were occupied within the prior 12 months and renewal or option leases
signed with the same tenant in all or a portion of the same location or that
include the expansion into space that was occupied within the prior 12 months.
Excludes leases executed for terms of less than one year.
ABR PSF includes the GLA of lessee-owned leasehold improvements.
32
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Acquisition Activity
•During the nine months ended September 30, 2021 , we acquired two shopping
centers, one outparcel and two land parcels for an aggregate purchase price of
$66.7 million , including transaction costs and closing credits.
•During the nine months ended
Disposition Activity •During the nine months endedSeptember 30, 2021 , we disposed of nine shopping centers, 14 partial shopping centers and one land parcel for aggregate net proceeds of$124.4 million resulting in aggregate gain of$49.5 million and aggregate impairment of$1.5 million . In addition, during the nine months endedSeptember 30, 2021 , we received aggregate net proceeds of less than$0.1 million from previously disposed assets resulting in aggregate gain of less than$0.1 million . •During the nine months endedSeptember 30, 2020 , we disposed of eight shopping centers, three partial shopping centers and one land parcel for aggregate net proceeds of$81.9 million resulting in aggregate gain of$21.3 million and aggregate impairment of$6.0 million . In addition, during the nine months endedSeptember 30, 2020 , we received aggregate net proceeds of$1.0 million and resolved contingencies of$0.5 million from previously disposed assets resulting in aggregate gain of$1.5 million .
Results of Operations
The results of operations discussion is combined for BPG and the
Comparison of the Three Months EndedSeptember 30, 2021 to the Three Months EndedSeptember 30, 2020 Revenues (in thousands) Three Months Ended September 30, 2021 2020 $ Change Revenues Rental income $ 290,013$ 253,799 $ 36,214 Other revenues 173 136 37 Total revenues $ 290,186$ 253,935 $ 36,251 Rental income The increase in rental income for the three months endedSeptember 30, 2021 of$36.2 million , as compared to the corresponding period in 2020, was due to a$38.6 million increase for assets owned for the full period, partially offset by a$2.4 million decrease in rental income due to net disposition activity. The increase for assets owned for the full period was due to (i) a$25.7 million decrease in revenues deemed uncollectible; (ii) a$7.8 million increase in straight-line rental income, net; (iii) a$3.0 million increase in base rent; (iv) a$1.5 million increase in expense reimbursements; (v) a$1.0 million increase in ancillary and other rental income; (vi) a$0.6 million increase in lease termination fees; and (vii) a$0.3 million increase in percentage rents; partially offset by (viii) a$1.3 million decrease in accretion of below-market leases, net of amortization of above-market leases and tenant inducements. The decrease in revenues deemed uncollectible was primarily attributable to the impact of COVID-19 reserves in 2020 and recoveries of previously reserved amounts in 2021. The increase in straight-line rental income, net was primarily attributable to the impact of COVID-19 reserves in 2020. The$3.0 million increase in base rent for the remaining portfolio was primarily due to a decrease in COVID-19 rent deferrals accounted for as lease modifications and rent abatements, in addition to contractual rent increases and positive rent spreads for new and renewal leases and option exercises of 9.1% during the nine months endedSeptember 30, 2021 and 7.2% during the year endedDecember 31, 2020 , partially offset by a decrease in weighted average billed occupancy. 33 --------------------------------------------------------------------------------
Other revenues
Other revenues remained generally consistent for the three months ended
Operating Expenses (in thousands)
Three Months Ended September 30,
2021 2020 $ Change
Operating expenses
Operating costs $ 32,774 $ 24,794 $ 7,980
Real estate taxes 39,763 42,124 (2,361)
Depreciation and amortization 81,724 87,488 (5,764)
Impairment of real estate assets - 5,746 (5,746)
General and administrative 25,309 27,748 (2,439)
Total operating expenses $ 179,570 $ 187,900 $ (8,330)
Operating costs
The increase in operating costs for the three months ended September 30, 2021 of
$8.0 million , as compared to the corresponding period in 2020, was primarily due
to an $8.1 million increase for assets owned for the full period primarily due
to an increase in repair and maintenance costs and a decrease in favorable
insurance captive adjustments, partially offset by a $0.1 million decrease in
operating costs due to net disposition activity.
Real estate taxes
The decrease in real estate taxes for the three months ended September 30, 2021
of $2.4 million , as compared to the corresponding period in 2020, was primarily
due to a $1.8 million decrease for assets owned for the full period, primarily
due to an increase in favorable adjustments related to prior year assessments,
and a $0.6 million decrease in real estate taxes due to net disposition
activity.
Depreciation and amortization
The decrease in depreciation and amortization for the three months ended
September 30, 2021 of $5.8 million , as compared to the corresponding period in
2020, was primarily due to a $5.6 million decrease for assets owned for the full
period, primarily related to a decrease in accelerated depreciation and
amortization related to tenant move-outs, and a $0.2 million decrease in
depreciation and amortization due to net disposition activity.
Impairment of real estate assets
During the three months ended September 30, 2020 , aggregate impairment of $5.7
million was recognized on one shopping center as a result of disposition
activity and one operating property. Impairments recognized were due to changes
in anticipated hold periods primarily in connection with our capital recycling
program.
General and administrative
The decrease in general and administrative costs for the three months ended
September 30, 2021 of $2.4 million , as compared to the corresponding period in
2020, was primarily due to a decrease in litigation and other non-routine legal
expenses, partially offset by an increase in net compensation costs.
During the three months ended September 30, 2021 and 2020, construction
compensation costs of $4.2 million and $3.8 million , respectively, were
capitalized to building and improvements and leasing legal costs of $0.7 million
and $0.1 million , respectively and leasing commission costs of $2.0 million and
$1.4 million , respectively, were capitalized to deferred charges and prepaid
expenses, net.
34--------------------------------------------------------------------------------
Other Income and Expenses (in thousands)
Three Months Ended
2021 2020 $ Change
Other income (expense)
Dividends and interest $ 51 $ 109 $ (58)
Interest expense (48,918) (50,991) 2,073
Gain on sale of real estate assets 11,122 13,621 (2,499)
Loss on extinguishment of debt, net (27,116) (50) (27,066)
Other 390 (780) 1,170
Total other expense $ (64,471) $ (38,091) $ (26,380)
Dividends and interest
Dividends and interest remained generally consistent for the three months ended
September 30, 2021 as compared to the corresponding period in 2020.
Interest expense
The decrease in interest expense for the three months ended September 30, 2021
of $2.1 million , as compared to the corresponding period in 2020, was primarily
due to lower overall debt obligations.
Gain on sale of real estate assets
During the three months ended September 30, 2021 , three shopping centers, five
partial shopping centers and one land parcel were disposed of resulting in
aggregate gain of $11.1 million . During the three months ended September 30,
2020 , two shopping centers, one partial shopping center and one land parcel were
disposed of resulting in aggregate gain of $13.1 million . In addition, during
the three months ended September 30, 2020 , we received aggregate net proceeds of
less than $0.1 million and resolved contingencies of $0.1 million from
previously disposed assets resulting in aggregate gain of $0.1 million , and we
received final insurance proceeds related to two shopping centers that were
damaged by Hurricane Michael resulting in aggregate gain of $0.4 million .
Loss on extinguishment of debt, net
During the three months ended September 30, 2021 , we redeemed all $500.0 million
of our 3.250% Senior Notes due 2023, resulting in a $27.1 million loss on
extinguishment of debt. Loss on extinguishment of debt includes $25.5 million of
prepayment fees and $1.6 million of accelerated unamortized debt issuance costs
and debt discounts. During the three months ended September 30, 2020 , we
repurchased $0.7 million of our 3.875% Senior Notes due 2022 through a tender
offer, resulting in a $0.1 million loss on extinguishment of debt. Loss on
extinguishment of debt includes less than $0.1 million of prepayment fees and
less than $0.1 million of accelerated unamortized debt issuance costs and debt
discounts.
Other
The increase in other income for the three months endedSeptember 30, 2021 of$1.2 million , as compared to the corresponding period in 2020, was primarily due to favorable tax adjustments in the current year. Comparison of the Nine Months EndedSeptember 30, 2021 to the Nine Months EndedSeptember 30, 2020 Revenues (in thousands) Nine Months Ended September 30, 2021 2020 $ Change Revenues Rental income$ 853,407 $ 781,635 $ 71,772 Other revenues 3,549 2,221 1,328 Total revenues$ 856,956 $ 783,856 $ 73,100 Rental income The increase in rental income for the nine months endedSeptember 30, 2021 of$71.8 million , as compared to the corresponding period in 2020, was due to an$80.1 million increase for assets owned for the full period, partially 35 -------------------------------------------------------------------------------- offset by an$8.3 million decrease in rental income due to net disposition activity. The increase for assets owned for the full period was due to (i) a$56.6 million decrease in revenues deemed uncollectible; (ii) a$21.9 million increase in straight-line rental income, net; (iii) a$2.8 million increase in lease termination fees; (iv) a$2.2 million increase in ancillary and other rental income; (v) a$2.2 million increase in expense reimbursements; and (vi) a$1.1 million increase in percentage rents; partially offset by (vii) a$3.4 million decrease in base rent; and (viii) a$3.3 million decrease in accretion of below-market leases, net of amortization of above-market leases and tenant inducements. The decrease in revenues deemed uncollectible was primarily attributable to the impact of COVID-19 reserves in 2020 and recoveries of previously reserved amounts in 2021. The increase in straight-line rental income, net was primarily attributable to the impact of COVID-19 reserves in 2020. The$3.4 million decrease in base rent for the remaining portfolio was primarily due to a decrease in weighted average billed occupancy, partially offset by a decrease in COVID-19 rent deferrals accounted for as lease modifications and rent abatements, in addition to contractual rent increases and positive rent spreads for new and renewal leases and option exercises of 9.1% during the nine months endedSeptember 30, 2021 and 7.2% during the year endedDecember 31, 2020 . Other revenues The increase in other revenues for the nine months endedSeptember 30, 2021 of$1.3 million , as compared to the corresponding period in 2020, was primarily due to an increase in tax increment financing income.
Operating Expenses (in thousands)
Nine Months Ended September 30,
2021 2020 $ Change
Operating expenses
Operating costs $ 92,914 $ 80,286 $ 12,628
Real estate taxes 124,908 126,796 (1,888)
Depreciation and amortization 246,356 251,334 (4,978)
Impairment of real estate assets 1,898 16,306 (14,408) General and administrative 76,415 74,781 1,634 Total operating expenses$ 542,491 $ 549,503 $ (7,012) Operating costs The increase in operating costs for the nine months endedSeptember 30, 2021 of$12.6 million , as compared to the corresponding period in 2020, was primarily due to a$13.3 million increase for assets owned for the full period, primarily due to an increase in repair and maintenance, insurance and utility costs and a decrease in favorable insurance captive adjustments, partially offset by a$0.7 million decrease in operating costs due to net disposition activity. Real estate taxes The decrease in real estate taxes for the nine months endedSeptember 30, 2021 of$1.9 million , as compared to the corresponding period in 2020, was primarily due to a$2.1 million decrease in real estate taxes due to net disposition activity, partially offset by a$0.2 million increase for assets owned for the full period. Depreciation and amortization The decrease in depreciation and amortization for the nine months endedSeptember 30, 2021 of$5.0 million , as compared to the corresponding period in 2020, was primarily due to a$2.0 million decrease in depreciation and amortization due to net disposition activity and a$3.0 million decrease for assets owned for the full period, primarily related to a decrease in amortization of acquired in-place lease intangibles and accelerated depreciation and amortization related to tenant move-outs, partially offset by an increase in depreciation and amortization related to value-enhancing reinvestment capital expenditures. Impairment of real estate assets During the nine months endedSeptember 30, 2021 , aggregate impairment of$1.9 million was recognized on one shopping center as a result of disposition activity and one operating property. During the nine months endedSeptember 30, 2020 , aggregate impairment of$16.3 million was recognized on two shopping centers and one partial shopping center as a result of disposition activity and two operating properties. Impairments recognized were due to changes in anticipated hold periods primarily in connection with our capital recycling program. 36 -------------------------------------------------------------------------------- General and administrative The increase in general and administrative costs for the nine months endedSeptember 30, 2021 of$1.6 million , as compared to the corresponding period in 2020, was primarily due to an increase in net compensation costs and routine legal expenses, partially offset by a decrease in litigation and other non-routine legal expenses. During the nine months endedSeptember 30, 2021 and 2020, construction compensation costs of$12.1 million and$10.9 million , respectively, were capitalized to building and improvements and leasing legal costs of$1.5 million and$0.2 million , respectively and leasing commission costs of$4.8 million and$4.0 million , respectively, were capitalized to deferred charges and prepaid expenses, net.
Other Income and Expenses (in thousands)
Nine Months Ended
2021 2020 $ Change
Other income (expense)
Dividends and interest $ 242 $ 335 $ (93)
Interest expense (147,601) (148,197) 596
Gain on sale of real estate assets 49,489 23,218 26,271
Loss on extinguishment of debt, net (28,345) (10,441) (17,904)
Other 694 (2,499) 3,193
Total other expense $ (125,521) $ (137,584) $ 12,063
Dividends and interest
Dividends and interest remained generally consistent for the nine months ended
September 30, 2021 as compared to the corresponding period in 2020.
Interest expense
The decrease in interest expense for the nine months ended September 30, 2021 of
$0.6 million , as compared to the corresponding period in 2020, was primarily due
to lower overall debt obligations.
Gain on sale of real estate assets
During the nine months ended September 30, 2021 , eight shopping centers, 14
partial shopping centers and one land parcel were disposed of resulting in
aggregate gain of $49.5 million . In addition, during the nine months ended
September 30, 2021 , we received aggregate net proceeds of less than $0.1 million
from previously disposed assets resulting in aggregate gain of less than
$0.1 million . During the nine months ended September 30, 2020 , six shopping
centers, two partial shopping centers and one land parcel were disposed of
resulting in aggregate gain of $21.3 million . In addition, during the nine
months ended September 30, 2020 , we received aggregate net proceeds of $1.0
million and resolved contingencies of $0.5 million from previously disposed
assets resulting in aggregate gain of $1.5 million , and we received final
insurance proceeds related to two shopping centers that were damaged by
Hurricane Michael resulting in aggregate gain of $0.4 million .
Loss on extinguishment of debt, net
During the nine months ended September 30, 2021 , we redeemed all $500.0 million
of our 3.250% Senior Notes due 2023 and repaid $350.0 million of an unsecured
term loan under our senior unsecured credit facility agreement, as amended April
29, 2020 (the "Unsecured Credit Facility"), resulting in a $28.3 million loss on
extinguishment of debt. Loss on extinguishment of debt includes $25.5 million of
prepayment fees and $2.8 million of accelerated unamortized debt issuance costs
and debt discounts. During the nine months ended September 30, 2020 , we
repurchased $183.2 million of our 3.875% Senior Notes due 2022 through a tender
offer and repaid our $7.0 million secured loan, resulting in a $10.4 million
loss on extinguishment of debt, net. Loss on extinguishment of debt, net
includes $9.7 million of prepayment fees and $0.7 million of accelerated
unamortized debt issuance costs and debt discounts, net of premiums.
37
--------------------------------------------------------------------------------Other
The increase in other income for the nine months endedSeptember 30, 2021 of$3.2 million , as compared to the corresponding period in 2020, was primarily due to favorable tax adjustments and legal settlements in the current year. Liquidity and Capital Resources We anticipate that our cash flows from the sources listed below will provide adequate capital for the next 12 months and beyond for all anticipated uses, including all scheduled payments on our outstanding debt, current and anticipated tenant and other capital improvements, stockholder distributions to maintain our qualification as a REIT and other obligations associated with conducting our business. Our primary expected sources and uses of capital are as follows: Sources •cash and cash equivalent balances; •operating cash flow; •available borrowings under the Unsecured Credit Facility; •dispositions; •issuance of long-term debt; and •issuance of equity securities.
Uses
•maintenance capital expenditures; •leasing capital expenditures; •debt repayments; •dividend/distribution payments; •value-enhancing reinvestment capital expenditures; •acquisitions; and •repurchases of equity securities. We believe our capital structure provides us with the financial flexibility and capacity to fund our current capital needs as well as future growth opportunities. We have access to multiple forms of capital, including secured property level debt, unsecured corporate level debt, preferred equity, and common equity, which will allow us to efficiently execute on our strategic and operational objectives. We currently have investment grade credit ratings from all three major credit rating agencies. As ofSeptember 30, 2021 , we had$1.2 billion of available liquidity under the Revolving Facility and$404.4 million in cash and cash equivalents and restricted cash. We intend to continue to enhance our financial and operational flexibility through the additional extension of the duration of our debt. As ofSeptember 30, 2021 , our contractually scheduled debt maturities (excluding extension options) and interest payment obligations (excluding debt premiums and discounts and deferred financing costs) amount to$250.0 million and$182.4 million , respectively, over the next 12 months and$4.9 billion and$938.0 million , respectively, thereafter. As ofSeptember 30, 2021 , the weighted average time to maturity is 5.7 years with respect to our scheduled debt maturities. These amounts do not assume the issuance of new debt upon maturity of existing debt. Scheduled interest payments included in these amounts for variable rate loans are presented using rates (including the impact of interest rate swaps) as ofSeptember 30, 2021 . See Item 7A. "Quantitative and Qualitative Disclosures" in our Annual Report on Form 10-K for the year endedDecember 31, 2020 for a further discussion of these and other factors that could impact interest payments. As previously discussed under the header "Impacts on Business from COVID-19", the COVID-19 pandemic has had, and may continue to have, an adverse impact on our liquidity and capital resources. Future decreases in cash flow from operations resulting from rent deferrals or abatements, tenant defaults, or decreases in rental rates or occupancy, would decrease the cash available for the capital uses described above, including the payment of 38 -------------------------------------------------------------------------------- dividends. Since we do not know the ultimate severity, scope or duration of the pandemic and the response thereto, and thus cannot predict the impact it will ultimately have on our tenants and on the debt and equity capital markets, we cannot estimate the impact it will have on our liquidity and capital resources. In order to continue to qualify as a REIT for federal income tax purposes, we must distribute at least 90% of our REIT taxable income, determined before the deduction for dividends paid and excluding net capital gains, to our stockholders on an annual basis. We intend to continue to satisfy this requirement and maintain our REIT status. Cash dividends paid to common stockholders for the nine months endedSeptember 30, 2021 and 2020 were$193.2 million and$170.4 million , respectively. In response to COVID-19, our Board of Directors suspended the dividend in the second and third quarters of 2020. In the fourth quarter of 2020, our Board of Directors resumed the dividend at a rate of$0.215 per common share. InJuly 2021 , our Board of Directors declared a quarterly cash dividend of$0.215 per common share for the third quarter of 2021. The dividend was paid onOctober 15, 2021 to shareholders of record onOctober 5, 2021 . InOctober 2021 , our Board of Directors declared a quarterly cash dividend of$0.240 per common share for the fourth quarter of 2021. The dividend is payable onJanuary 18, 2022 to shareholders of record onJanuary 5, 2022 . Our Board of Directors will evaluate the dividend on a quarterly basis, taking into account a variety of relevant factors, including REIT taxable income.
Our cash flow activities are summarized as follows (dollars in thousands):
Nine Months
Ended
2021 2020
Net cash provided by operating activities $ 424,880 $ 323,632
Net cash used in investing activities (156,113) (140,254)
Net cash provided by (used in) financing activities (234,490) 406,319
Nine Months
Ended
2021 2020
Net cash provided by operating activities $ 424,880 $ 323,632
Net cash used in investing activities (156,113) (140,254)
Net cash provided by (used in) financing activities (234,489) 396,321
Cash and cash equivalents and restricted cash for BPG were $404.4 million and
$611.2 million as of September 30, 2021 and 2020, respectively. Cash and cash
equivalents and restricted cash for the Operating Partnership were $394.4
million and $601.2 million as of September 30, 2021 and 2020, respectively.
Operating Activities
Net cash provided by operating activities primarily consists of cash inflows
from tenant rental payments and expense reimbursements and cash outflows for
property operating expenses, general and administrative expenses and interest
expense.
During the nine months ended September 30, 2021 , our net cash provided by
operating activities increased $101.2 million as compared to the corresponding
period in 2020. The increase was primarily due to (i) an increase from net
working capital; (ii) an increase in same property net operating income; and
(iii) an increase in lease termination fees; partially offset by (iv) a decrease
in net operating income due to net disposition activity; (v) an increase in cash
outflows for interest expense; and (vi) an increase in cash outflows for general
and administrative expense.
Investing Activities
Net cash used in investing activities is impacted by the nature, timing and
magnitude of acquisition and disposition activity and improvements to and
investments in our shopping centers, including capital expenditures associated
with our value-enhancing reinvestment efforts.
During the nine months ended September 30, 2021 , our net cash used in investing
activities increased $15.9 million as compared to the corresponding period in
2020. The increase was primarily due to (i) an increase of $63.3 million
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in acquisitions of real estate assets; partially offset by (ii) an increase of
$41.5 million in net proceeds from sales of real estate assets; (iii) a decrease
of $5.6 million in improvements to and investments in real estate assets; and
(iv) a $0.3 million decrease in purchases of marketable securities, net of
proceeds from sales.
Improvements to and investments in real estate assets
During the nine months ended September 30, 2021 and 2020, we expended $212.4
million and $217.9 million , respectively, on improvements to and investments in
real estate assets. In addition, during the nine months ended September 30, 2021
and 2020, insurance proceeds of $2.9 million and $7.3 million , respectively,
were received and included in improvements to and investments in real estate
assets.
Maintenance capital expenditures represent costs to fund major replacements and
betterments to our properties. Leasing related capital expenditures represent
tenant specific costs incurred to lease space, including tenant improvements and
tenant allowances. In addition, we evaluate our Portfolio on an ongoing basis to
identify value-enhancing reinvestment opportunities. Such initiatives are tenant
driven and focus on upgrading our centers with strong, best-in-class retailers
and enhancing the overall merchandise mix and tenant quality of our Portfolio.
As of September 30, 2021 , we had 49 in-process anchor space repositioning,
redevelopment and outparcel development projects with an aggregate anticipated
cost of $396.3 million , of which $245.0 million had been incurred as of
September 30, 2021 . In addition, we have identified a pipeline of future
reinvestment projects aggregating approximately $900.0 million of potential
capital investment, which we expect to execute over the next several years. We
expect to fund these projects with cash and cash equivalents, net cash provided
by operating activities, proceeds from sales of real estate assets, and/or
available liquidity under the Revolving Facility.
Acquisitions of and proceeds from sales of real estate assets
We continue to evaluate the market for acquisition opportunities and we may
acquire shopping centers when we believe strategic opportunities exist,
particularly where we can further concentrate our Portfolio in attractive retail
submarkets and optimize the quality and long-term growth rate of our asset base.
During the nine months ended September 30, 2021 , we acquired two shopping
centers, one outparcel and two land parcels for an aggregate purchase price of
$66.7 million , including transaction costs and closing credits. During the nine
months ended September 30, 2020 , we acquired two land parcels for $3.4 million ,
including transaction costs.
We may also dispose of properties when we believe value has been maximized,
where there is downside risk, or where we have limited ability or desire to
build critical mass in a particular submarket. During the nine months ended
September 30, 2021 , we disposed of nine shopping centers, 14 partial shopping
centers and one land parcel for aggregate net proceeds of $124.4 million . In
addition, during the nine months ended September 30, 2021 , we received aggregate
net proceeds of less than $0.1 million from previously disposed assets. During
the nine months ended September 30, 2020 , we disposed of eight shopping centers,
three partial shopping centers and one land parcel for aggregate net proceeds of
$81.9 million . In addition, during the nine months ended September 30, 2020 , we
received aggregate net proceeds of $1.0 million from previously disposed assets.
Financing Activities
Net cash provided by (used in) financing activities is impacted by the nature,
timing and magnitude of issuances and repurchases of debt and equity securities,
as well as principal payments associated with our outstanding indebtedness and
distributions made to our common stockholders.
During the nine months ended September 30, 2021 , our net cash provided by (used
in) financing activities decreased $640.8 million as compared to the
corresponding period in 2020. The decrease was primarily due to (i) a $625.5
million decrease in debt borrowings, net of repayments; (ii) a $22.8 million
increase in distributions to our common stockholders; and (iii) a $15.6 million
increase in deferred financing and debt extinguishment costs; partially offset
by (iv) a $23.1 million decrease in repurchases of common stock. The decrease in
debt borrowings is primarily related to amounts drawn on the Revolving Facility
in the corresponding period in 2020 in order to bolster liquidity in response to
COVID-19.
Non-GAAP Performance Measures
We present the non-GAAP performance measures set forth below. These measures
should not be considered as alternatives to, or more meaningful than, net income
(calculated in accordance with GAAP) or other GAAP financial measures, as an
indicator of financial performance and are not alternatives to, or more
meaningful than, cash flow
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from operating activities (calculated in accordance with GAAP) as a measure of
liquidity. Non-GAAP performance measures have limitations as they do not include
all items of income and expense that affect operations, and accordingly, should
always be considered as supplemental financial results to those calculated in
accordance with GAAP. Our computation of these non-GAAP performance measures may
differ in certain respects from the methodology utilized by other REITs and,
therefore, may not be comparable to similarly titled measures presented by such
other REITs. Investors are cautioned that items excluded from these non-GAAP
performance measures are relevant to understanding and addressing financial
performance.
Funds From Operations
NAREIT FFO (defined hereafter) is a supplemental, non-GAAP performance measure
utilized to evaluate the operating and financial performance of real estate
companies. The National Association of Real Estate Investment Trusts ("NAREIT")
defines funds from operations ("FFO") as net income (loss), calculated in
accordance with GAAP, excluding (i) depreciation and amortization related to
real estate, (ii) gains and losses from the sale of certain real estate assets,
(iii) gains and losses from change in control, (iv) impairment write-downs of
certain real estate assets and investments in entities when the impairment is
directly attributable to decreases in the value of depreciable real estate held
by the entity and (v) after adjustments for unconsolidated joint ventures
calculated to reflect FFO on the same basis.
Considering the nature of our business as a real estate owner and operator, we
believe that NAREIT FFO is useful to investors in measuring our operating and
financial performance because the definition excludes items included in net
income that do not relate to or are not indicative of our operating and
financial performance, such as depreciation and amortization related to real
estate, and items which can make periodic and peer analyses of operating and
financial performance more difficult, such as gains and losses from the sale of
certain real estate assets and impairment write-downs of certain real estate
assets.
Our reconciliation of net income to NAREIT FFO for the three and nine months
ended September 30, 2021 and 2020 is as follows (in thousands, except per share
amounts):
Three Months Ended September
30, Nine Months Ended
2021 2020 2021 2020
Net income $ 46,145 $ 27,944 $ 188,944 $ 96,769
Depreciation and amortization related to real
estate 80,778 86,486 243,601 248,274
Gain on sale of real estate assets (11,122) (13,621) (49,489) (23,218)
Impairment of real estate assets - 5,746 1,898 16,306
NAREIT FFO $ 115,801 $ 106,555 $ 384,954 $ 338,131
NAREIT FFO per diluted share $ 0.39 $ 0.36 $ 1.29 $ 1.14
Weighted average diluted shares outstanding 298,269 296,862 298,209 297,317
Same Property Net Operating Income
Same property net operating income ("NOI") is a supplemental, non-GAAP
performance measure utilized to evaluate the operating performance of real
estate companies. Same property NOI is calculated (using properties owned for
the entirety of both periods and excluding properties under development and
completed new development properties which have been stabilized for less than
one year) as total property revenues (base rent, expense reimbursements,
adjustments for revenues deemed uncollectible, ancillary and other rental
income, percentage rents and other revenues) less direct property operating
expenses (operating costs and real estate taxes). Same property NOI excludes (i)
corporate level expenses (including general and administrative), (ii) lease
termination fees, (iii) straight-line rental income, net, (iv) accretion of
below-market leases, net of amortization of above-market leases and tenant
inducements, (v) straight-line ground rent expense, and (vi) income (expense)
associated with our captive insurance company.
Considering the nature of our business as a real estate owner and operator, we
believe that same property NOI is useful to investors in measuring the operating
performance of our property portfolio because the definition excludes various
items included in net income that do not relate to, or are not indicative of,
the operating performance of our properties, such as depreciation and
amortization and corporate level expenses (including general and
administrative), and because it eliminates disparities in NOI due to the
acquisition or disposition of properties or the stabilization of completed new
development properties during the period presented and therefore provides a more
consistent metric for comparing the operating performance of our real estate
between periods.
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Comparison of the Three and Nine Months Ended
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 Change 2021 2020 Change
Number of properties 373 373 - 371 371 -
Percent billed 88.1 % 88.1 % - % 88.2 % 88.2 % - %
Percent leased 91.5 % 91.3 % 0.2 % 91.6 % 91.5 % 0.1 %
Revenues
Rental income $ 273,234 $ 242,330 $ 30,904 $ 797,710 $ 740,071 $ 57,639
Other revenues 173 136 37 3,549 2,198 1,351
273,407 242,466 30,941 801,259 742,269 58,990
Operating expenses
Operating costs (31,907) (25,027) (6,880) (88,922) (76,979) (11,943)
Real estate taxes (38,747) (40,427) 1,680 (120,160) (119,783) (377)
(70,654) (65,454) (5,200) (209,082) (196,762) (12,320)
Same property NOI $ 202,753 $ 177,012 $ 25,741 $ 592,177 $ 545,507 $ 46,670 The following table provides a reconciliation of net income to same property NOI for the periods presented (in thousands):
Three Months Ended September
30, Nine Months Ended
2021 2020 2021 2020
Net income $ 46,145 $ 27,944 $ 188,944 $ 96,769
Adjustments:
Non-same property NOI (6,004) (8,339) (22,668) (28,575)
Lease termination fees (1,999) (1,394) (7,456) (4,528)
Straight-line rental income, net (4,951) 2,974 (10,627) 11,533
Accretion of below-market leases, net of
amortization of above-market leases and
tenant inducements (1,974) (3,281) (6,326) (9,802)
Straight-line ground rent expense 32 35 120 105
Depreciation and amortization 81,724 87,488 246,356 251,334
Impairment of real estate assets - 5,746 1,898 16,306
General and administrative 25,309 27,748 76,415 74,781
Total other expense 64,471 38,091 125,521 137,584
Same property NOI $ 202,753 $ 177,012 $ 592,177 $ 545,507
Inflation
Prior to 2021, inflation had been low and had a minimal impact on the operating
performance of our shopping centers; however, inflation has increased in 2021
and may continue to be elevated in the future. Most of our long-term leases
contain provisions designed to mitigate the adverse impact of inflation,
including contractual rent escalations and requirements for tenants to pay their
proportionate share of property operating expenses, including common area
expenses, utilities, insurance and real estate taxes, and certain capital
expenditures related to the maintenance of our properties, thereby reducing our
exposure to increases in property operating expenses resulting from inflation;
however, we have exposure to increases in non-reimbursable property operating
expenses, including expenses incurred on vacant units. In addition, we believe
that many of our existing rental rates are below current market rates for
comparable space and that upon renewal or re-leasing, such rates may be
increased to be consistent with, or closer to, current market rates. With
respect to our outstanding indebtedness, we periodically evaluate our exposure
to interest rate fluctuations, and may continue to enter into interest rate
protection agreements which mitigate, but do not eliminate, the impact of
changes in interest rates on our variable rate loans.
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