This section generally discusses 2020 and 2019 items and year-to-year comparisons between 2020 and 2019. Discussions of 2018 items and year-to-year comparisons between 2019 and 2018 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2019 filed with theSecurities and Exchange Commission onFebruary 10, 2020 . Forward-Looking Statements Certain statements in this section or elsewhere in this report may be deemed "forward-looking statements". See "Item 1A. Risk Factors" in this report for important information regarding these forward-looking statements and certain risk and uncertainties that may affect us. The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing in "Item 8. Financial Statements and Supplementary Data" of this report. Overview We are an equity real estate investment trust ("REIT") specializing in the ownership, management, and redevelopment of high quality retail and mixed-use properties located primarily in densely populated and affluent communities in strategically selected metropolitan markets in the Northeast and Mid-Atlantic regions ofthe United States ,California , andSouth Florida . As ofDecember 31, 2020 , we owned or had a majority interest in community and neighborhood shopping centers and mixed-use properties which are operated as 101 predominantly retail real estate projects comprising approximately 23.4 million square feet. In total, the real estate projects were 92.2% leased and 90.2% occupied atDecember 31, 2020 . We have paid quarterly dividends to our shareholders continuously since our founding in 1962 and have increased our dividends per common share for 53 consecutive years. Summary Financial Information The following table includes select financial information that is helpful in understanding the trends in financial condition and the results of operations discussed throughout this Item 7. and "Item 8. Financial Statements and Supplementary Data." 30
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Year Ended December 31, 2020 2019 2018 (In thousands, except per share data and ratios) Operating Data: Rental income$ 832,171 $ 932,738 $ 912,287 Property operating income(1)$ 545,332 $ 637,030 $ 627,566 Gain on sale of real estate, net of tax $ 98,117$ 116,393 $ 11,915 Operating income $
289,524
Net income available for common shareholders$ 123,664 $ 345,824 $ 233,865 Net cash provided by operating activities$ 369,929 $ 461,919 $ 516,688 Net cash used in investing activities$ (368,383) $ (316,532) $ (192,247) Net cash provided by (used in) financing activities $
661,736
Earnings per common share, diluted:
Net income available to common shareholders $
1.62
Dividends declared per common share $ 4.22$ 4.14 $ 4.04 Other Data: Funds from operations available to common shareholders (2)$ 333,849 $ 465,819 $ 461,777 Funds from operations available for common shareholders, per diluted share (2) $ 4.38$ 6.17 $ 6.23 EBITDAre(3)$ 501,813 $ 599,567 $ 595,558 Ratio of EBITDAre to combined fixed charges and preferred share dividends(3)(4) 2.7x 4.2x 4.2x As of December 31, 2020 2019 2018 (In thousands) Balance Sheet Data: Real estate, at cost$ 8,582,870 $ 8,298,132 $ 7,819,472 Total assets$ 7,607,624 $ 6,794,992 $ 6,289,644 Total debt$ 4,291,375 $ 3,356,594 $ 3,229,204 Total shareholders' equity$ 2,548,747 $ 2,636,132 $
2,467,330
Number of common shares outstanding 76,727 75,541
74,250
(1)Property operating income is a non-GAAP measure. See "Results of Operations" in this Item 7. for further discussion. (2)Funds from operations "FFO" is a supplemental non-GAAP measure. See "Liquidity and Capital Resources" in this Item 7. for further discussion. (3) EBITDA for Real Estate ("EBITDAre") is a non-GAAP measure that NAREIT defines as: net income computed in accordance with GAAP plus net interest expense, income tax expense, depreciation and amortization, gain or loss on sale of real estate, impairments of real estate, and adjustments to reflect the entity's share of EBITDAre of unconsolidated affiliates. We calculate EBITDAre consistent with the NAREIT definition. As EBITDA is a widely known and understood measure of performance, management believes EBITDAre represents an additional non-GAAP performance measure, independent of a company's capital structure that will provide investors with a uniform basis to measure the enterprise value of a company. EBITDAre also approximates a key performance measure in our debt covenants, but it should not be considered an alternative measure of operating results or cash flow from operations as determined in accordance with GAAP. The reconciliation of net income to EBITDAre for the periods presented is as follows: 31
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Table of Contents 2020 2019 2018 (In thousands) Net income$ 135,888 $ 360,542 $ 249,026 Interest expense 136,289 109,623 110,154 Other interest income (1,894) (1,266) (942) Early extinguishment of debt 11,179 - - (Benefit) provision for income tax (194) 772 1,521 Depreciation and amortization 255,027 239,758 244,245 Gain on sale of real estate (98,117) (116,779) (13,560) Impairment charge 57,218 - -
Adjustments of EBITDAre of unconsolidated affiliates 6,417
6,917 5,114 EBITDAre$ 501,813 $ 599,567 $ 595,558 (4) Fixed charges consist of interest on borrowed funds (including capitalized interest), amortization of debt discount/ premiums and debt costs, costs related to the early extinguishment of debt, and the portion of rent expense representing an interest factor. Excluding the$11.2 million early extinguishment of debt charge from fixed charges in 2020, the ratio of EBITDAre to combined fixed charges and preferred share dividends is 2.9x. Excluding the$11.9 million charge related to the buyout of the Kmart lease atAssembly Square Marketplace in 2019, our ratio of EBITDAre to combined fixed charges and preferred share dividends remained 4.2x. Impacts of COVID-19 Pandemic We continue to monitor and address risks related to the COVID-19 pandemic. InMarch 2020 , theWorld Health Organization characterized COVID-19 as a global pandemic and in response to the rapid spread of the virus, state, and local governments issued orders and recommendations to attempt to reduce the further spread of the disease. Such orders included shelter-in-place orders, travel restrictions, limitations on public gatherings, school closures, social distancing requirements and the closure of all but critical and essential businesses and services. These orders required closure of all of our corporate offices as non-essential businesses. Except for those employees who were critical to providing the necessary day-to-day property management functions required to keep our properties open and operating for essential businesses such as grocery stores and drug stores, and a few employees who were needed to carry out critical corporate functions, we transitioned our entire workforce to remote work inMarch 2020 . Although some of our corporate offices have reopened with capacity limitations, approximately 75% of our workforce continues to work remotely on a regular basis. We have not laid off, furloughed, or terminated any employees nor have we modified the compensation of any or our employees as a result of COVID-19, and the transition to a largely remote workforce has not had any material adverse impact on our financial reporting systems, our internal controls, or disclosure controls and procedures. The government imposed restrictions also required a significant number of tenants who do business in our properties, but were considered non-essential, to close their operations or to significantly limit the amount of business they are able to conduct in their stores. These closures and restrictions have impacted the tenants' ability to timely pay rent as required under our leases and also caused many tenants to close their business permanently. As a result, our cash flow and results of operations in 2020 were materially adversely impacted and our vacancy increased above historical levels. Although virtually all of our leases required the tenants to pay rent even while they were not operating, we entered into numerous agreements to abate, defer and/or restructure tenant rent payments for varying periods of time, all with the objective of collecting as much cash as reasonably possible and maintaining occupancy to the maximum extent. We believe those actions will position many of our tenants to be able to return to payment of contractual rent as soon as possible after the impacts from the pandemic have subsided. Given the impact to our cash flow caused by tenants not timely paying contractual rent, we took actions to improve our financial position and maximize our liquidity. Those actions included raising$1.1 billion inMay 2020 through a$400.0 million term loan and the issuance of$700.0 million of senior unsecured notes, amending the covenants on our revolving credit facility to provide us operating flexibility during the expected period during which our cash flow will be impacted, and raising an additional$400.0 million of senior unsecured notes inOctober 2020 . Throughout the last three quarters of 2020, we maintained levels of cash significantly in excess of the cash balances we have historically maintained which has adversely impacted our financial results; however, we believe that such action was prudent to position us with what we expect to be sufficient liquidity to allow us to continue fully operating until our operating revenues return to more typical levels. As ofDecember 31, 2020 , there is no outstanding balance on our$1.0 billion revolving credit facility, and we have cash and cash equivalents of$798.3 million . 32 -------------------------------------------------------------------------------- Table of Contents Given the adverse impact on our cash flow, we did not commence any significant new capital projects during 2020 and we stopped, at least temporarily, portions of our capital spend that could be stopped. We did, however, continue investing in a number of our larger projects which were in the middle of construction and could not be stopped without causing material adverse financial impact to the company. Additional discussion of the impact of COVID-19 on our results in 2020 and long-term operations can be found throughout Item 7 and Item 1A . Risk Factors. Corporate Responsibility We actively endeavor to operate and develop our properties in a sustainable, responsible, and effective manner with the objective being to drive long-term growth and aid in value creation for our shareholders, tenants, employees, and local communities. Our development activities have been heavily focused on owning, developing and operating properties that are certified under theU.S. Green Building Council's ® ("USGBC") Leadership in Energy and Environmental Design™ (LEED®) rating system which serves as a third-party verification that a building or community was designed and built to mitigate its environmental footprint. We currently have 15 LEED certified buildings and our Pike & Rose project has achieved LEED for Neighborhood Development Stage 3 Gold certification. The COVID-19 pandemic has also increased our focus on owning, developing and operating healthier buildings. To that end, our new corporate headquarters space at our909 Rose Avenue building has earned a Fitwel certification developed by theU.S. Centers for Disease Control and Prevention (CDC ) together with theGeneral Services Administration (GSA). This certification assesses a building's impact on seven distinct categories related to overall health and well-being. These development efforts earned us theSector Leader Development designation in 2020 from the Global Real Estate Environmental Sustainability Benchmark ("GRESB") and enabled us to issue our first green bond in 2020, a$400.0 million offering that will be supported by certain of our LEED gold and silver certified buildings. See Note 5 to the consolidated financial statements. We are also committed to implementing sustainable business practices at our operating properties that focus on energy efficiency, water conservation and waste minimization. As an example, under our solar program that we started in 2012, we have installed on-site solar systems at 25 of our properties with a capacity of over 13 MW and we anticipate adding solar installations at several more of our properties over the next few years to further our ability to source energy from renewable sources. Our current capacity placed us in the top 5 among real estate companies for onsite capacity in theSolar Energy Industry Association's annual Solar Means Business Report. We are also actively upgrading lighting at our properties with energy efficient LED lighting and installing electric vehicle car charging stations in numerous properties throughout our portfolio. Currently, we are evaluating the risks presented by climate change to help us better understand potential actions we could take to help mitigate our portfolio's environmental footprint while protecting our long-term investments. We are also highly committed to our employees and fostering a work environment that promotes growth, development and personal well-being. Our four core values are accountability, excellence, innovation and integrity and we seek to attract and retain talented professionals who embrace those values. All of our efforts with respect to corporate responsibility are overseen by ourBoard of Trustees . Critical Accounting Policies The preparation of financial statements in conformity with accounting principles generally accepted inthe United States of America , referred to as "GAAP", requires management to make estimates and assumptions that in certain circumstances affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and revenues and expenses. These estimates are prepared using management's best judgment, after considering past and current events and economic conditions. In addition, information relied upon by management in preparing such estimates includes internally generated financial and operating information, external market information, when available, and when necessary, information obtained from consultations with third party experts. Actual results could differ from these estimates. A discussion of possible risks which may affect these estimates is included in "Item 1A. Risk Factors" of this report. Management considers an accounting estimate to be critical if changes in the estimate could have a material impact on our consolidated results of operations or financial condition. Our significant accounting policies are more fully described in Note 2 to the consolidated financial statements; however, the most critical accounting policies, which involve the use of estimates and assumptions as to future uncertainties and, therefore, may result in actual amounts that differ from estimates, are as follows: Revenue Recognition and Accounts Receivable Our leases with our tenants are classified as operating leases. When collection of substantially all lease payments during the lease term is considered probable, the lease qualifies for accrual accounting. Lease payments are recognized on a straight-line 33 -------------------------------------------------------------------------------- Table of Contents basis from the point in time when the tenant controls the space through the term of the related lease. Variable lease payments relating to percentage rent are recognized at the end of the lease year or earlier if we have determined the required sales level is achieved. Real estate tax and other cost reimbursements are recognized on an accrual basis over the periods in which the related expenditures are incurred. Many of our leases contain tenant options that enable the tenant to extend the term of the lease at expiration at pre-established rental rates that often include fixed rent increases, consumer price index adjustments or other market rate adjustments from the prior base rent. For a tenant to terminate its lease agreement prior to the end of the agreed term, we may require that they pay a fee to cancel the lease agreement. Lease termination fees are generally recognized on the termination date if the tenant has relinquished control of the space. When a lease is terminated early but the tenant continues to control the space under a modified lease agreement, the lease termination fee is generally recognized evenly over the remaining term of the modified lease agreement. Lease concessions (unrelated to the COVID-19 pandemic) are evaluated to determine whether the concession represents a modification of the original lease contract. Modifications generally result in a reassessment of the lease term and lease classification, and remeasurement of lease payments received. Remeasured lease payments are recognized on a straight-line basis over the remaining term of the modified lease contract. InApril 2020 , theFinancial Accounting Standards Board ("FASB") issued interpretive guidance relating to the accounting for lease concessions provided as a result of the COVID-19 pandemic that allows entities to treat the concession as if it was a part of the existing contract instead of applying lease modification accounting. This guidance is only applicable to the COVID-19 pandemic related lease concessions that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. We have elected this option relating to qualifying rent deferral and rent abatement agreements. For qualifying lease modifications with rent deferrals, this results in no change to our revenue recognition but an increase in the lease receivable balance until the deferred rent has been repaid. For qualifying lease modifications that include rent abatement concessions, this results in a direct reduction of rental income in the current period. As ofDecember 31, 2020 , we have entered into rent deferral agreements and rent abatement agreements related to the COVID-19 pandemic representing approximately$36 million and$35 million , respectively, of rent otherwise owed during the year endedDecember 31, 2020 , and continue negotiations with other tenants. When collection of substantially all lease payments during the lease term is not considered probable, total lease revenue is limited to the lesser of revenue recognized under accrual accounting or cash received. Determining the probability of collection of substantially all lease payments during a lease term requires significant judgment. This determination is impacted by numerous factors including our assessment of the tenant's credit worthiness, economic conditions, tenant sales productivity in that location, historical experience with the tenant and tenants operating in the same industry, future prospects for the tenant and the industry in which it operates, and the length of the lease term. If leases currently classified as probable are subsequently reclassified as not probable, any outstanding lease receivables (including straight-line rent receivables) would be written-off with a corresponding decrease in rental income. For example, in the event that our collectibility determinations were not accurate and we were required to write off additional receivables equaling 1% of rental income, our rental income and net income would decrease by$8.3 million . If leases currently classified as not probable are subsequently changed to probable, any lease receivables (including straight-line rent receivables) are re-instated with a corresponding increase to rental income. SinceMarch 2020 , federal, state, and local governments have taken various actions to mitigate the spread of COVID-19. This includes initially ordering closures of nonessential business and ordering residents to generally stay at home, subsequent phased re-openings, and during the fourth quarter of 2020, additional closures and capacity limitations as infection levels increased in certain areas. These actions, along with the general concern over the spread of COVID-19, have resulted in many of our tenants temporarily or even permanently closing their businesses, and for some, it has impacted their ability to pay rent. As a result, we revised our collectibility assumptions for many of our tenants most significantly impacted by COVID-19. Accordingly, during the year endedDecember 31, 2020 , we recognized collectibility related adjustments of$106.6 million . This includes changes in our collectibility assessments from probable to not probable, disputed rents, and any rent abatements directly related to COVID-19, as well as the write-off of$12.7 million of straight-line rent receivables primarily related to tenants changed to a cash basis of revenue recognition during the year endedDecember 31, 2020 . As ofDecember 31, 2020 , the revenue from approximately 35% of our tenants (based on total number of commercial leases) is being recognized on a cash basis. As ofDecember 31, 2020 and 2019, our straight-line rent receivables balance was$103.3 million and$100.3 million , respectively, and is included in "accounts and notes receivable, net" on our consolidated balance sheet. Other revenue recognition policies When we enter into a transaction to sell a property or a portion of a property, we evaluate the recognition of the sale under ASC 610-20, "Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets." In accordance with ASC 610-20, we apply the guidance in ASC 606, "Revenue from Contracts with Customers," to determine whether and when control transfers and how to measure the associated gain or loss. We determine the transaction price based on the consideration we expect to receive. Variable consideration is included in the transaction price to the extent it is probable that a significant reversal of a gain recognized will not occur. We analyze the risk of a significant gain reversal and if necessary limit the amount of 34 -------------------------------------------------------------------------------- Table of Contents variable consideration recognized in order to mitigate this risk. The estimation of variable consideration requires us to make assumptions and apply significant judgment. Real Estate The nature of our business as an owner, redeveloper and operator of retail shopping centers and mixed-use properties means that we invest significant amounts of capital. Depreciation and maintenance costs relating to our properties constitute substantial costs for us as well as the industry as a whole. We capitalize real estate investments and depreciate them on a straight-line basis in accordance with GAAP and consistent with industry standards based on our best estimates of the assets' physical and economic useful lives. We periodically review the estimated lives of our assets and implement changes, as necessary, to these estimates and, therefore, to our depreciation rates. These reviews may take into account such factors as the historical retirement and replacement of our assets, expected redevelopments, and general economic and real estate factors. Certain events, such as unforeseen competition or changes in customer shopping habits, could substantially alter our assumptions regarding our ability to realize the expected return on investment in the property and therefore reduce the economic life of the asset and affect the amount of depreciation expense to be charged against both the current and future revenues. These assessments have a direct impact on our net income. The longer the economic useful life, the lower the depreciation expense will be for that asset in a fiscal period, which in turn will increase our net income. Similarly, having a shorter economic useful life would increase the depreciation for a fiscal period and decrease our net income. Land, buildings and real estate under development are recorded at cost. We calculate depreciation using the straight-line method with useful lives ranging generally from 35 years to a maximum of 50 years on buildings and major improvements. Maintenance and repair costs are charged to operations as incurred. Tenant work and other major improvements, which improve or extend the life of the asset, are capitalized and depreciated over the life of the lease or the estimated useful life of the improvements, whichever is shorter. Minor improvements, furniture and equipment are capitalized and depreciated over useful lives ranging from 2 to 20 years. Capitalized costs associated with leases are depreciated or amortized over the base term of the lease. Unamortized leasing costs are charged to expense if the applicable tenant vacates before the expiration of its lease. Undepreciated tenant work is written-off if the applicable tenant vacates and the tenant work is replaced or has no future value. Additionally, we make estimates as to the probability of certain development and redevelopment projects being completed. If we determine the redevelopment is no longer probable of completion, we immediately expense all capitalized costs which are not recoverable. Interest costs on developments and major redevelopments are capitalized as part of developments and redevelopments not yet placed in service. Capitalization of interest commences when development activities and expenditures begin and end upon completion, which is when the asset is ready for its intended use. Generally, rental property is considered substantially complete and ready for its intended use upon completion of tenant improvements, but no later than one year from completion of major construction activity. We make judgments as to the time period over which to capitalize such costs and these assumptions have a direct impact on net income because capitalized costs are not subtracted in calculating net income. If the time period for capitalizing interest is extended, more interest is capitalized, thereby decreasing interest expense and increasing net income during that period. Certain external and internal costs directly related to the development, redevelopment and leasing of real estate, including pre-construction costs, real estate taxes, insurance, and construction costs and salaries and related costs of personnel directly involved, are capitalized. We capitalized external and internal costs related to both development and redevelopment activities of$404 million and$9 million , respectively, for 2020 and$352 million and$9 million , respectively, for 2019. We capitalized external and internal costs related to other property improvements of$64 million and$3 million , respectively, for 2020 and$80 million and$3 million , respectively, for 2019. We capitalized external and internal costs related to leasing activities of$11 million and$2 million , respectively, for 2020 and$24 million and$2 million , respectively, for 2019. The amount of capitalized internal costs for salaries and related benefits for development and redevelopment activities, other property improvements, and leasing activities were$9 million ,$3 million , and$2 million , respectively, for 2020 and$8 million ,$3 million , and$2 million , respectively, for 2019. Total capitalized costs were$494 million for 2020 and$471 million for 2019, respectively. Real Estate Acquisitions Upon acquisition of operating real estate properties, we estimate the fair value of assets and liabilities acquired including land, building, improvements, leasing costs, intangibles such as in-place leases, assumed debt, and current assets and liabilities, if any. Based on these estimates, we allocate the purchase price to the applicable assets and liabilities. We utilize methods similar to those used by independent appraisers in estimating the fair value of acquired assets and liabilities. The value allocated to in-place leases is amortized over the related lease term and reflected as rental income in the statement of operations. We consider qualitative and quantitative factors in evaluating the likelihood of a tenant exercising a below market renewal option and 35 -------------------------------------------------------------------------------- Table of Contents include such renewal options in the calculation of in-place lease value when we consider these to be bargain renewal options. If the value of below market lease intangibles includes renewal option periods, we include such renewal periods in the amortization period utilized. If a tenant vacates its space prior to contractual termination of its lease, the unamortized balance of any in-place lease value is written off to rental income. Variable Interest Entities (VIEs) and Consolidation We have 17 entities that meet the criteria of a VIE and are consolidated. Net real estate assets related to VIEs included in our consolidated balance were approximately$1.4 billion and$1.5 billion as ofDecember 31, 2020 and 2019, respectively, and mortgage payables related to VIEs included in our consolidated balance sheets were approximately$413.7 million and$469.2 million , as ofDecember 31, 2020 and 2019, respectively. In addition, we hold equity method investments in two hotel joint ventures and one shopping center which are considered variable interests in a VIE as ofDecember 31, 2020 . OnJanuary 4, 2021 , we acquired our partner's interest in the Pike & Rose hotel joint venture. See Note 15 to the consolidated financial statements for additional details of this transaction. VIEs are required to be consolidated by their primary beneficiary. The primary beneficiary of a VIE has both the power to direct the activities that most significantly impact economic performance of the VIE and the obligation to absorb losses or the right to receive benefits that could be significant to the VIE. The determination of the power to direct the activities that most significantly impact economic performance requires judgment and is impacted by numerous factors including the purpose of the VIE, contractual rights and obligations of variable interest holders, and mechanisms for the resolution of disputes among the variable interest holders. Long-Lived Assets and Impairment There are estimates and assumptions made by management in preparing the consolidated financial statements for which the actual results will be determined over long periods of time. This includes the recoverability of long-lived assets, including our properties that have been acquired or redeveloped and our investment in certain joint ventures. Management's evaluation of impairment includes review for possible indicators of impairment as well as, in certain circumstances, undiscounted and discounted cash flow analysis. Since most of our investments in real estate are wholly-owned or controlled assets which are held for use, a property with impairment indicators is first tested for impairment by comparing the undiscounted cash flows, including residual value, to the current net book value of the property. If the undiscounted cash flows are less than the net book value, the property is written down to expected fair value. The calculation of both discounted and undiscounted cash flows requires management to make estimates of future cash flows including revenues, operating expenses, required maintenance and development expenditures, market conditions, demand for space by tenants and rental rates over long periods. Because our properties typically have a long life, the assumptions used to estimate the future recoverability of book value requires significant management judgment. Actual results could be significantly different from the estimates. These estimates have a direct impact on net income, because recording an impairment charge results in a negative adjustment to net income. Contingencies We are sometimes involved in lawsuits, warranty claims, and environmental matters arising in the ordinary course of business. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters. We accrue a liability for litigation if an unfavorable outcome is probable and the amount of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, we accrue the best estimate within the range; however, if no amount within the range is a better estimate than any other amount, the minimum within the range is accrued. Any difference between our estimate of a potential loss and the actual outcome would result in an increase or decrease to net income.
Recently Adopted and Recently Issued Accounting Pronouncements See Note 2 to the consolidated financial statements. 2020 Property Acquisitions, Dispositions, and Impairment
Gross Leasable Date Acquired Property City/State Area (GLA) Purchase Price (in square feet) (in millions) January 10, 2020 Fairfax Junction Fairfax, Virginia 49,000 $ 22.3 (1) Hoboken (2 mixed-use February 12, 2020 buildings) Hoboken, New Jersey 12,000 $ 14.3 (2) 36
-------------------------------------------------------------------------------- Table of Contents (1) This property is adjacent to, and will be operated as part of the property acquired in 2019. The purchase price was paid with a combination of cash and the issuance of 163,322 downREIT operating partnership units. Approximately$0.5 million and$0.4 million of net assets acquired were allocated to other assets for "above market leases," and other liabilities for "below market leases," respectively. (2) The purchase price includes the assumption of$8.9 million of mortgage debt, and is in addition to the 37 buildings previously acquired in 2019, and was completed through the same joint venture. Less than$0.1 million and approximately$3.3 million of net assets acquired were allocated to other assets for "above market leases," and other liabilities for "below market leases," respectively. OnSeptember 1, 2020 , the$60.6 million non-recourse mortgage loan on The Shops atSunset Place matured. The mortgage was not repaid, and thus the lender declared the loan in default. We evaluated our long-term plans for the property, taking into account current market conditions and prospective development and redevelopment returns, as well as the impact of COVID-19 on the revenue prospects for the property, and concluded we did not expect to move forward with the planned redevelopment or repay the mortgage balance, and thus, did not expect to be long term holders of the asset. Given these expectations, we recorded an impairment charge of$57.2 million during the third quarter of 2020. The fair value estimate used to determine the impairment charge was determined by market comparable data and discounted cash flow analyses. The cash flows utilized in such analyses are comprised of unobservable inputs which include forecasted rental revenue and expenses based upon market conditions and future expectations. The capitalization rates and discount rates utilized in such analyses are based upon unobservable rates that we believe to be within a reasonable range of current market rates for the property. Based on these inputs, we have determined that the$57 million estimated valuation of the property is classified within Level 3 of the fair value hierarchy. OnDecember 31, 2020 , we sold The Shops atSunset Place for$65.5 million and repaid the mortgage loan. The resulting gain of$9.2 million is included in the cumulative 2020 gain of$98.1 million noted in the disposals below. During the year endedDecember 31, 2020 , we sold three properties (including The Shops atSunset Place discussed above) and one building for a total sales price of$186.1 million , which resulted in a gain of$98.1 million . During the year endedDecember 31, 2020 , we closed on the sale of the remaining two condominium units at our Pike & Rose property, receiving proceeds net of closing costs of$2.1 million . 2020 Significant Debt and Equity Transactions In connection with the two buildings we acquired inHoboken, New Jersey onFebruary 12, 2020 , we assumed two mortgage loans with a net face amount of$8.9 million and a fair value of$9.0 million . The mortgage loans bear interest at 4.00% and mature onJuly 27, 2027 . InMarch 2020 , in order to strengthen our financial position and balance sheet, to maximize our liquidity, and to provide maximum financial flexibility to continue our business initiatives as the effects of COVID-19 continue to evolve, we borrowed$990.0 million under our revolving credit facility, representing a draw-down of almost the entirety of our$1.0 billion revolving credit facility. This amount was subsequently repaid when we entered into a$400.0 million unsecured term loan onMay 6, 2020 and issued$700.0 million of fixed rate unsecured senior notes onMay 11, 2020 . The unsecured term loan matures onMay 6, 2021 , plus one twelve month extension at our option, and bears interest at LIBOR plus 135 basis points based on our current credit rating. Our net proceeds from this transaction after underwriting fees and other costs were$398.7 million . The$700.0 million of unsecured senior notes issued inMay 2020 comprise a$300.0 million reopening of our 3.95% of senior notes maturing onJanuary 15, 2024 and a$400.0 million issuance of 3.50% senior notes maturing onJune 1, 2030 . The 3.95% senior notes were offered at 103.257% of the principal amount with a yield to maturity of 2.944%, and have the same terms and are of the same series as the$300.0 million senior notes issued onDecember 9, 2013 . The 3.50% senior notes were offered at 98.911% of the principal amount with a yield to maturity of 3.630%. Our net proceeds from these transactions after the net issuance premium, underwriting fees, and other costs were$700.1 million . OnSeptember 1, 2020 , the$60.6 million non-recourse mortgage loan on The Shops atSunset Place matured and was not repaid. The lender declared the loan in default until the non-recourse loan was repaid as part of the sale of the property onDecember 31, 2020 . The default did not trigger a cross default with any other indebtedness. The repayment amount including accrued interest and fees, net of$4.5 million of escrows was$58.5 million . OnOctober 13, 2020 , we issued$400.0 million of fixed rate senior unsecured notes that mature onFebruary 15, 2026 and bear interest at 1.25%. The notes were offered at 99.339% of the principal amount with a yield to maturity of 1.379%. The net proceeds of the notes, or "green bonds," after issuance discount, underwriting fees, and other costs were approximately$394.2 37 -------------------------------------------------------------------------------- Table of Contents million, and will be allocated to the financing and refinancing of recently completed and future eligible green projects, which includes (i) investments in acquisitions of buildings; (ii) building developments or redevelopments; (iii) renovations in existing buildings; and (iv) tenant improvement projects, in each case that have received, or are expected to receive, in the three years prior to the issuance of the notes or during the term of the notes, a LEED Silver, Gold, or Platinum certification (or environmentally equivalent successor standards). Net proceeds allocated to previously incurred costs associated with eligible green projects will be available for repayment of indebtedness. OnDecember 15, 2020 , we repaid our$250.0 million 2.55% notes prior to the original maturity date ofJanuary 15, 2021 at par. The redemption price of$252.7 million included accrued but unpaid interest of$2.7 million . OnDecember 17, 2020 , we acquired one of our partner's preferred and common interests in the partnership that owns ourPlaza El Segundo property for$7.3 million , bringing our ownership to approximately 78.2%. OnDecember 31, 2020 , we repaid our$250.0 million 3.00% notes prior to the original maturity date ofAugust 1, 2022 . The redemption price of$263.5 million included a make-whole premium of$10.4 million and accrued but unpaid interest of$3.1 million . The "early extinguishment of debt" charge in 2020 of$11.2 million includes the make-whole premium and the write off of the unamortized discount and debt issuance fees. OnDecember 31, 2020 , we also repaid the$3.6 million mortgage loan on 29th Place, at par, prior to its original maturity date. We have an at-the-market ("ATM") equity program in which we may from time to time offer and sell common shares having an aggregate offering price of up to$400.0 million . We intend to use the net proceeds to fund potential acquisition opportunities, fund our development and redevelopment pipeline, repay amounts outstanding under our revolving credit facility and/or for general corporate purposes. For the year endedDecember 31, 2020 , we sold 1,080,804 common shares at a weighted average price per share of$92.51 for net cash proceeds of$98.8 million including paying$1.0 million in commissions and$0.1 million in additional offering expenses related to the sales of these common shares. As ofDecember 31, 2020 , we had the capacity to issue up to$28.4 million in common shares under our ATM equity program. 2021 Transactions OnJanuary 4, 2021 , we acquired our partner's 20% interest in our joint venture arrangement related to the Pike & Rose hotel for$2.3 million , and repaid the$31.5 million mortgage loan. As a result of the transaction, we gained control of the hotel portion of this property, and effectiveJanuary 4, 2021 , we have consolidated this asset. OnFebruary 5, 2021 , we repaid the$16.2 million mortgage loan onSylmar Town Center , at par, prior to its original maturity date. Outlook We seek growth in earnings, funds from operations, and cash flows primarily through a combination of the following: •growth in our comparable property portfolio, •growth in our portfolio from property development and redevelopments, and •expansion of our portfolio through property acquisitions. While the ongoing COVID-19 pandemic is impacting us in the short-term, our long-term focus has not changed. Our comparable property growth is primarily driven by increases in rental rates on new leases and lease renewals, changes in portfolio occupancy, and the redevelopment of those assets. Over the long-term, the infill nature and strong demographics of our properties provide a strategic advantage allowing us to maintain relatively high occupancy and generally increase rental rates. However, our occupancy levels and ability to increase rental rates will be adversely impacted in the short-term as a result of COVID-19. We believe the locations and nature of our centers and diverse tenant base partially mitigates any potential negative changes in the economic environment. However, any significant reduction in our tenants' abilities to pay base rent, percentage rent or other charges, will adversely affect our financial condition and results of operations. We seek to maintain a mix of strong national, regional, and local retailers. AtDecember 31, 2020 , no single tenant accounted for more than 3.6% of annualized base rent. SinceMarch 2020 , federal, state, and local governments have taken various actions to mitigate the spread of COVID-19. This includes initially ordering closures of nonessential business and ordering residents to generally stay at home, subsequent phased re-openings, and during the fourth quarter of 2020, additional closures and capacity limitations as infection levels increased in certain areas. These actions, along with the general concern over the spread of COVID-19 have resulted in many of our tenants temporarily or even permanently closing their businesses, and for some, it has impacted their ability to pay rent. As ofJanuary 31, 2021 , approximately 98% of our retail tenants were open. These economic hardships have adversely impacted our business, and had a negative effect on our financial results during 2020. With very few exceptions, our leases require tenants to continue 38 -------------------------------------------------------------------------------- Table of Contents to pay rent even while closed as a result of the pandemic, however, many tenants did not pay rents and other charges during the second quarter of 2020. Subsequently, in the second half of 2020, a portion of our tenants have resumed paying their rent and/or other charges as their businesses were able to reopen; however government mandated restrictions are still in order in many of our markets. Our percentage of contractual rent collected each quarter has continued to increase since the low point inApril 2020 , including some tenants paying past due amounts. As ofDecember 31, 2020 , we have entered into agreements with approximately 32% of our tenants (based on total commercial leases) to defer rent payments to later periods, largely through 2021, although some extend beyond, and negotiations with other tenants are still ongoing. While increasing cash collection rates is a positive trend driven by government mandated restrictions gradually being lifted, we expect that our rent collections will continue to be below our tenants' contractual rent obligations and historical levels, which will continue to adversely impact our results of operations. The extent of such impact will depend on future developments, which are highly uncertain and cannot be predicted. Depending upon the duration of tenant closures, operating restrictions, and the overall economic downturn resulting from COVID-19, we may find that even deferred rents are difficult to collect, and we may experience higher vacancy levels. While the duration and severity of the economic impact resulting from COVID-19 is unknown, we seek to position the Trust to participate in the resulting economic recovery. We continue to have several development projects in process, albeit at a slower pace due to COVID-19 related restrictions, being delivered as follows: •In the 1st quarter of 2020, we delivered the fully leased eight story, 301,000 square foot office building atSantana Row . •The first phase of construction on the 12 acres of land that we control across fromSantana Row includes an eight story 376,000 square foot office building, with over 1,700 parking spaces. The building is expected to cost between$250 million and$270 million with openings beginning in 2022. •Phase III ofAssembly Row includes 277,000 square feet of office space (of which, 150,000 square feet is pre-leased), 56,000 square feet of retail space, 500 residential units, and over 800 additional parking spaces. The expected costs for Phase III are between$465 million and$485 million and is projected to open beginning in 2021. •At Pike & Rose, we have continued construction on a 212,000 square foot office building (which includes 7,000 square feet of ground floor retail space), and includes over 600 additional parking spaces. The building is expected to cost between$128 million and$135 million . AtDecember 31, 2020 , approximately 61,000 square feet of office space has been delivered, of which approximately 45,000 square feet is our new corporate headquarters. •Our properties are located primarily in densely populated and/or affluent areas with high barriers to entry which allow us to take advantage of redevelopment opportunities that enhance our operating performance through renovation, expansion, reconfiguration, and/or retenanting. We evaluate our properties on an ongoing basis to identify these types of opportunities. Throughout the portfolio, we currently have redevelopment projects underway with a projected total cost of approximately$320 million that we expect to stabilize over the next several years. The above includes our best estimates based on information currently known, however, the completion of construction, final costs, and the timing of openings and rent starts will be dependent upon the duration of governmental restrictions and the duration and severity of the economic impacts of COVID-19. The development of future phases ofAssembly Row , Pike & Rose andSantana Row will be pursued opportunistically based on, among other things, market conditions, tenant demand, and our evaluation of whether those phases will generate an appropriate financial return. We continue to review acquisition opportunities in our primary markets that complement our portfolio and provide long-term growth opportunities. Initially, some of our acquisitions do not contribute significantly to earnings growth; however, we believe they provide long-term re-leasing growth, redevelopment opportunities, and other strategic opportunities. Any growth from acquisitions is contingent on our ability to find properties that meet our qualitative standards at prices that meet our financial hurdles. Changes in interest rates may affect our success in achieving earnings growth through acquisitions by affecting both the price that must be paid to acquire a property, as well as our ability to economically finance the property acquisition. Generally, our acquisitions are initially financed by available cash and/or borrowings under our revolving credit facility which may be repaid later with funds raised through the issuance of new equity or new long-term debt. We may also finance our acquisitions through the issuance of common shares, preferred shares, or downREIT units as well as through assumed mortgages and property sales. AtDecember 31, 2020 , the leasable square feet in our properties was 92.2% leased and 90.2% occupied. The leased rate is higher than the occupied rate due to leased spaces that are being redeveloped or improved or that are awaiting permits and, therefore, are not yet ready to be occupied. Our occupancy and leased rates are subject to variability over time due to factors including acquisitions, the timing of the start and stabilization of our redevelopment projects, lease expirations and tenant closings and bankruptcies. 39 -------------------------------------------------------------------------------- Table of ContentsComparable Properties Throughout this section, we have provided certain information on a "comparable property" basis. Information provided on a comparable property basis includes the results of properties that we owned and operated for the entirety of both periods being compared except for properties that are currently under development or are being repositioned for significant redevelopment and investment. For the year endedDecember 31, 2020 and the comparison of 2020 and 2019, all or a portion of 95 properties were considered comparable properties and seven were considered non-comparable properties. For the year endedDecember 31, 2020 , two properties and two portions of properties were moved from non-comparable to comparable properties, two properties and one portion of a property were removed from comparable properties and one property was removed from non-comparable properties as they were sold during 2020, one property was moved from acquisitions to non-comparable properties, and one property was moved from comparable to non-comparable properties, compared to the designations as ofDecember 31, 2019 . While there is judgment surrounding changes in designations, we typically move non-comparable properties to comparable properties once they have stabilized, which is typically considered 90% physical occupancy or when the growth expected from the redevelopment has been included in the comparable periods. We typically remove properties from comparable properties when the repositioning of the asset has commenced and has or is expected to have a significant impact to property operating income within the calendar year. Acquisitions are moved to comparable properties once we have owned the property for the entirety of comparable periods and the property is not under development or being repositioned for significant redevelopment and investment. Comparable property information replaces our previous same center designations. 40
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YEAR ENDEDDECEMBER 31, 2020 COMPARED TO YEAR ENDEDDECEMBER 31, 2019 Change 2020 2019 Dollars % (Dollar amounts in thousands) Rental income$ 832,171 $ 932,738 $ (100,567) (10.8) % Mortgage interest income 3,323 3,050 273 9.0 % Total property revenue 835,494 935,788 (100,294) (10.7) % Rental expenses 170,920 187,831 (16,911) (9.0) % Real estate taxes 119,242 110,927 8,315 7.5 % Total property expenses 290,162 298,758 (8,596) (2.9) % Property operating income (1) 545,332 637,030 (91,698) (14.4) % General and administrative expense (41,680) (42,754) 1,074 (2.5) % Depreciation and amortization (255,027) (239,758) (15,269) 6.4 % Impairment charge (57,218) - (57,218) 100.0 % Gain on sale of real estate, net of tax 98,117 116,393 (18,276) (15.7) % Operating income 289,524 470,911 (181,387) (38.5) % Other interest income 1,894 1,266 628 49.6 % Interest expense (136,289) (109,623) (26,666) 24.3 % Early extinguishment of debt (11,179) - (11,179) 100.0 % Loss from partnerships (8,062) (2,012) (6,050) 300.7 % Total other, net (153,636) (110,369) (43,267) 39.2 % Net income 135,888 360,542 (224,654) (62.3) % Net income attributable to noncontrolling interests (4,182) (6,676) 2,494 (37.4) % Net income attributable to the Trust$ 131,706 $ 353,866 $ (222,160) (62.8) % (1) Property operating income is a non-GAAP measure that consists of rental income and mortgage interest income, less rental expenses and real estate taxes. This measure is used internally to evaluate the performance of property operations and we consider it to be a significant measure. Property operating income should not be considered an alternative measure of operating results or cash flow from operations as determined in accordance with GAAP. Property Revenues Total property revenue decreased$100.3 million , or 10.7%, to$835.5 million in 2020 compared to$935.8 million in 2019. The percentage occupied at our shopping centers was 90.2% atDecember 31, 2020 compared to 92.5% atDecember 31, 2019 . The most significant driver of the decrease in property revenues is the impact of COVID-19, as many of our tenants were forced to temporarily or in some cases permanently close their businesses, resulting in changes in our collectibility estimates and in some cases rent abatement. Changes in the components of property revenue are discussed below. Rental Income Rental income consists primarily of minimum rent, cost reimbursements from tenants and percentage rent, and is net of collectiblity related impacts. Rental income decreased$100.6 million , or 10.8%, to$832.2 million in 2020 compared to$932.7 million in 2019 due primarily to the following: •higher collectibility related impacts including rent abatements across all properties of$102.1 million primarily the result of COVID-19 impacts. This includes the write-off of$12.7 million of straight-line receivables primarily related to tenants who were changed to cash basis of revenue recognition during the year endedDecember 31, 2020 . •a decrease of$24.6 million at comparable properties due primarily to lower average occupancy rates of approximately$18.0 million , lower parking income and percentage rent of of$6.3 million primarily due to the impacts from COVID-19 related closures, lower recoveries of$5.3 million primarily the result of lower snow removal expense and utilities, and lower termination fee and legal fee income of$1.3 million , partially offset by higher rental rates of approximately$9.3 million , and 41 -------------------------------------------------------------------------------- Table of Contents •decrease of$14.4 million from property sales, partially offset by •and increase of$19.7 million from non comparable properties driven by the opening of our new office building atSantana Row in early 2020 and the opening ofFreedom Plaza in 2020 and •an increase of$19.5 million from acquisitions ofHoboken during the second half of 2019 and early 2020, andGeorgetowne Shopping Center inNovember 2019 . Property Expenses Total property expenses decreased$8.6 million , or 2.9%, to$290.2 million in 2020 compared to$298.8 million in 2019. Changes in the components of property expenses are discussed below. Rental Expenses Rental expenses decreased$16.9 million , or 9.0%, to$170.9 million in 2020 compared to$187.8 million in 2019. This decrease is primarily due to the following: •an$11.9 million charge in 2019 related to the buyout of a lease atAssembly Square Marketplace , •a decrease of$9.5 million from comparable properties due to lower snow removal expenses, and lower repairs and maintenance, management fees, and utilities primarily driven by the impact of COVID-19 partially offset by an increase in insurance costs, and •a decrease of$2.2 million from our property sales, partially offset by •an increase of$2.8 million from acquisitions ofHoboken during the second half of 2019 and early 2020, andGeorgetowne Shopping Center inNovember 2019 , and •an increase of$2.5 million from non comparable properties driven by the opening of our new office building atSantana Row in early 2020 and the opening ofFreedom Plaza in 2020. As a result of the changes in rental income and rental expenses as discussed above, rental expenses as a percentage of rental income increased to 20.5% for the year endedDecember 31, 2020 from 20.1% for the year endedDecember 31, 2019 . Real Estate Taxes Real estate tax expense increased$8.3 million , or 7.5% to$119.2 million in 2020 compared to$110.9 million in 2019 due primarily to the following: •an increase of$3.8 million from comparable properties due to higher current year assessments, and tax refunds recorded in 2019 from a multi-year appeal and reassessment at three of our properties, •an increase of$3.1 million from acquisitions ofHoboken during the second half of 2019 and early 2020 andGeorgetowne Shopping Center inNovember 2019 , and •an increase of$2.3 million from non-comparable properties due primarily to the opening of our new office building atSantana Row in early 2020, partially offset by •a decrease of$0.8 million from our property sales. Property Operating Income Property operating income decreased$91.7 million , or 14.4%, to$545.3 million in 2020 compared to$637.0 million in 2019. This decrease is primarily due to the impact of COVID-19, which resulted in higher collectibility related impacts, lower percentage rent, and lower parking income; as well as the impact of property sales, partially offset by the opening of our new office building atSantana Row in early 2020, property acquisitions, and the prior year charge related to the buyout of a lease atAssembly Square Marketplace . 42 -------------------------------------------------------------------------------- Table of Contents Other Operating General and Administrative Expense General and administrative expense decreased$1.1 million , or 2.5%, to$41.7 million in 2020 from$42.8 million in 2019. This decrease is due primarily to lower personnel related costs and COVID-19 impacts including office closures and cancellations of all non-essential business travel and company events. Depreciation and Amortization Depreciation and amortization expense increased$15.3 million , or 6.4%, to$255.0 million in 2020 from$239.8 million in 2019. The increase is due primarily to property acquisitions, the opening of our new office buildings atSantana Row in early 2020, and the write off of lease related assets for vacating tenants, partially offset by property sales. Impairment Charge The$57.2 million impairment charge for the year endedDecember 31, 2020 relates to The Shops atSunset Place . See Note 3 to the consolidated financial statements for further discussion. Gain on Sale of Real Estate, Net of Tax The$98.1 million gain on sale of real estate, net of tax for the year endedDecember 31, 2020 is due to the sale of three properties and one building. The$116.4 million gain on sale of real estate, net for the year endedDecember 31, 2019 is primarily due to the following: •$85.1 million related to the sale under the threat of condemnation of 11.7 acres of San Antonio Center, •$28.3 million related to the sale of three properties and one land parcel, and •$2.6 million net gain related to condominium unit sales that have closed at ourAssembly Row and Pike & Rose properties. Operating Income Operating income decreased$181.4 million , or 38.5%, to$289.5 million in 2020 compared to$470.9 million in 2019. This decrease is due primarily due to the impact of COVID-19, which resulted in higher collectibility related impacts, the impairment charge related to The Shops atSunset Place , a lower net gain on the sale of real estate, and the impact of property sales, lower percentage rent, and lower parking income, partially offset by the opening of our new office building atSantana Row in early 2020, property acquisitions, the prior year charge related to the buyout of a lease atAssembly Square Marketplace , and lower personnel related costs which were largely due to the impact of COVID-19. Other Interest Expense Interest expense increased$26.7 million , or 24.3%, to$136.3 million in 2020 compared to$109.6 million in 2019. This increase is due primarily to the following: •an increase of$20.2 million from higher borrowings in response to the COVID-19 pandemic (see further discussions in "2020 Significant Debt and Equity Transactions" in Part II, Item 7 of the Annual Report) and •an increase of$13.0 million due to higher weighted average borrowings primarily from the$400 million issuance of our 3.20% notes in 2019, and$106.9 million of mortgage loans associated with ourHoboken acquisitions, partially offset by •a decrease of$3.7 million due to a lower overall weighted average borrowing rate, and •an increase of$2.9 million in capitalized interest, primarily attributable to the development of Phase III ofAssembly Row and Pike & Rose. Gross interest costs were$159.7 million and$130.1 million in 2020 and 2019, respectively. Capitalized interest was$23.4 million and$20.5 million in 2020 and 2019, respectively. 43 -------------------------------------------------------------------------------- Table of Contents Early Extinguishment of Debt The$11.2 million early extinguishment of debt for the year endedDecember 31, 2020 relates to the make-whole premium paid as part of the early redemption of our 3.00% senior notes onDecember 31, 2020 and the related write-off of the unamortized discount and debt fees. Loss from Partnerships Loss from partnerships increased to$8.1 million in 2020 compared to$2.0 million in 2019. The increase is primarily due to our share of losses from our hotel investments atAssembly Row and Pike & Rose, largely the result of COVID-19 related reductions in travel. Net income attributable to noncontrolling interests Net income attributable to noncontrolling interests decreased to$4.2 million in 2020 compared to$6.7 million in 2019. The decrease is driven by lower net income at our partnership properties primarily due to the impact of COVID-19, partially offset by higher income attributable to our operating partnership units due to additional downREIT operating partnership units issued in connection with the acquisition of Fairfax Junction inJanuary 2020 . Discussions of year-to-year comparisons between 2019 and 2018 can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2019 filed with theSecurities and Exchange Commission onFebruary 10, 2020 . Liquidity and Capital Resources Due to the nature of our business and strategy, we typically generate significant amounts of cash from operations. The cash generated from operations is primarily paid to our common and preferred shareholders in the form of dividends. As a REIT, we must generally make annual distributions to shareholders of at least 90% of our taxable income (cash dividends paid in 2020 were approximately$325.4 million ). Remaining cash flow from operations after dividend payments is used to fund recurring and non-recurring capital projects (such as tenant improvements and redevelopments), and regular debt service requirements (including debt service relating to additional or replacement debt, as well as scheduled debt maturities). In 2020, our dividends were funded not only by cash from operations but also other sources of liquidity. We maintain a$1.0 billion revolving credit facility to fund short term cash flow needs and also look to the public and private debt and equity markets, joint venture relationships, and property dispositions to fund capital expenditures on a long-term basis. We are currently experiencing lower levels of cash from operations due to lower rent collections from tenants impacted by the COVID-19 pandemic (see further discussion under the "Outlook" section of this Item 2). While the overall economic impacts of the pandemic are unknown, we have taken multiple steps during the last several months to strengthen our financial position, maximize liquidity, and to provide maximum flexibility during these uncertain times. Throughout the last three quarters of 2020, we have maintained levels of cash significantly in excess of the cash balances we have historically maintained. InMarch 2020 , we borrowed$990.0 million under our revolving credit facility, representing a draw-down of almost the entirety of our$1.0 billion credit facility. InMay 2020 , we entered into a$400.0 million unsecured term loan and issued$700.0 million of fixed rate unsecured senior notes for combined net proceeds of$1.1 billion . We subsequently repaid the outstanding balance on our revolving credit facility and amended how certain covenants are calculated to provide us more operating flexibility. Additionally, onOctober 13, 2020 , we issued$400.0 million of fixed rate senior unsecured notes that mature onFebruary 15, 2026 and bear interest at 1.25%. During the fourth quarter 2020, we raised$98.8 million under our ATM equity program after fees and other costs. As ofDecember 31, 2020 , there is no outstanding balance on our$1.0 billion unsecured revolving credit facility, we had cash and cash equivalents of$798.3 million , and we had the capacity to issue up to$28.4 million in common shares under the ATM program. For the year ended 2020, the weighted average amount of borrowings outstanding on our revolving credit facility was$138.5 million , and the weighted average interest rate, before amortization of debt fees, was 1.5%. Subsequent toDecember 31, 2020 , we repaid one mortgage loan, resulting in only$7.9 million of debt maturing in 2021, excluding our$400.0 million term loan, which may be extended for an additional twelve months at our option. Our overall capital requirements during 2021 will be impacted by the extent and duration of COVID-19 related closures, impacts on our cash collections, and overall economic impacts including any halts to construction activities that might occur. It will also be impacted by acquisition opportunities and the level and general timing of our redevelopment and development activities. While the amount of future expenditures will depend on numerous factors, we expect to continue to see higher levels of capital investments in our properties under development and redevelopment, as we continue to invest in the current phase of 44 -------------------------------------------------------------------------------- Table of Contents these projects and are not expecting COVID-19 related halts in construction activities as we experienced in 2020. With respect to other capital investments related to our existing properties, we expect to incur levels more consistent with prior years with an overall increase compared to 2020. We believe that the cash on our balance sheet together with rents we collect, as well as our$1.0 billion revolving credit facility will allow us to continue to operate our business in the near-term. Given our recent ability to access capital markets, we also expect debt or equity to be available to us. We may also further delay the timing of certain development and redevelopment projects, as well as limit future acquisitions, reduce our operating expenditures, or re-evaluate our dividend policy. While the COVID-19 pandemic has negatively impacted our business during the year endedDecember 31, 2020 , and we expect it will continue to negatively impact our business in the short term, we intend to operate with and to maintain our long term commitment to a conservative capital structure that will allow us to maintain strong debt service coverage and fixed-charge coverage ratios as part of our commitment to investment-grade debt ratings. Summary of Cash Flows Year Ended December 31, 2020 2019 (In thousands) Cash provided by operating activities$ 369,929 $ 461,919 Cash used in investing activities (368,383) (316,532) Cash provided by (used in) financing activities 661,736 (100,105) Increase in cash and cash equivalents 663,282 45,282 Cash, cash equivalents, and restricted cash, beginning of year 153,614 108,332 Cash, cash equivalents, and restricted cash, end of year$ 816,896 $ 153,614 Net cash provided by operating activities decreased$92.0 million to$369.9 million during 2020 from$461.9 million during 2019. The decrease was primarily attributable to lower net income before non-cash items and the timing of cash receipts, both largely driven by impacts of the COVID-19 pandemic and payments of annual real estate tax recovery billings. Net cash used in investing activities increased$51.9 million to$368.4 million during 2020 from$316.5 million during 2019. The increase was primarily attributable to: •a$138.5 million decrease in proceeds from sales of real estate, resulting from the sale of three properties, one building, and the two remaining condominium units at our Pike & Rose property in 2020, as compared to the sale under the threat of condemnation of a portion of San Antonio Center and the sale of three properties, one land parcel, and the sale of 43 condominiums at ourAssembly Row and Pike & Rose properties in 2019, •a$81.6 million increase in capital expenditures and leasing costs as we continue to invest in Pike & Rose,Assembly Row ,Santana Row and other redevelopments, •$12.9 million for net costs paid in 2020 relating to the partial sale under threat of condemnation at San Antonio Center in 2019, and •a$9.6 million acquisition of two loans secured by a shopping center inRockville, Maryland , that is owned by a third party, partially offset by •a$194.9 million decrease in acquisitions of real estate, primarily due to the acquisitions ofGeorgetowne Shopping Center , 37 mixed-use buildings inHoboken, New Jersey , and Fairfax Junction in 2019, partially offset by the acquisition of two additional buildings inHoboken, New Jersey in 2020. Net cash provided by financing activities increased$761.8 million to$661.7 million during 2020 from$100.1 million used in during 2019. The increase was primarily attributable to: •a$694.4 million increase due to net proceeds of$700.1 million from the issuance of$400.0 million of 3.50% unsecured senior notes and the$300.0 million reopening of our 3.95% unsecured senior notes inMay 2020 , and$394.2 million from the issuance of$400.0 million of 1.25% unsecured senior notes inOctober 2020 , as compared to$399.9 million in net proceeds from the issuance of$300.0 million of 3.20% senior unsecured notes inJune 2019 and an additional$100.0 million of the same series inAugust 2019 , •$398.7 million in net proceeds from our unsecured term loan inMay 2020 , and 45 -------------------------------------------------------------------------------- Table of Contents •a$230.8 million decrease in repayment of mortgages, finance leases, and notes payable primarily due to the repayment of our$275.0 million unsecured term loan inJune 2019 and the$20.3 million payoff of the mortgage loan onRollingwood Apartments inJanuary 2019 , partially offset by the$60.6 million payoff of the mortgage loan on The Shops atSunset Place inDecember 2020 and the$3.6 million payoff of the mortgage loan on 29th Place, both inDecember 2020 , partially offset by •$510.4 million from theDecember 2020 redemptions of our our$250.0 million 2.55% unsecured senior notes and our$250.0 million 3.00% unsecured senior notes, with a make-whole premium of$10.4 million , •$43.9 million decrease in net proceeds from the issuance of 1.1 million common shares under our ATM program at a weighted average price of$92.51 during 2020, as compared to 1.1 million common shares at weighted average price of$134.71 in 2019, and •a$10.9 million increase in dividends paid to shareholders due to an increase in the common share dividend rate and an increase in the number of common shares outstanding. Cash Requirements The following table provides a summary of material cash requirements comprising our fixed, noncancelable obligations as ofDecember 31, 2020 : Cash Requirements by Period Next Twelve Greater than Total Months Twelve Months (In thousands) Fixed and variable rate debt (principal only) (1)$ 4,308,505 $ 428,777 3,879,728
Fixed and variable rate debt - our share of unconsolidated real estate partnerships (principal only)(2)
53,341 33,943 19,398 Lease obligations (minimum rental payments) (3) 355,687 10,877 344,810 Redevelopments/capital expenditure contracts 356,068 328,548 27,520 Real estate commitments (4) 100,100 - 100,100 Total estimated cash requirements $
5,173,701
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(1)The weighted average interest rate on our fixed and variable rate debt is 3.32% as ofDecember 31, 2020 . (2)The weighted average interest rate on the fixed and variable rate debt related to our unconsolidated real estate partnerships is 4.59% as ofDecember 31, 2020 .$25.2 million of the requirements in the next twelve months was repaid when we acquired our partners' share of the Pike & Rose hotel joint venture onJanuary 4, 2021 . See Note 15 to the consolidated financial statements for additional information. (3)This includes minimum rental payments related to both finance and operating leases. (4)This includes the liability related to the sale under threat of condemnation at San Antonio Center as further discussed in Note 3 and Note 7 to the consolidated financial statements. In addition to the amounts set forth in the table above and other liquidity requirements previously discussed, the following potential commitments exist: (a) Under the terms of theCongressional Plaza partnership agreement, a minority partner has the right to require us and the other minority partner to purchase its 26.63% interest inCongressional Plaza at the interest's then-current fair market value. If the other minority partner defaults in their obligation, we must purchase the full interest. Based on management's current estimate of fair market value as ofDecember 31, 2020 , our estimated liability upon exercise of the put option would range from approximately$69 million to$72 million . (b) Under the terms of various other partnership agreements, the partners have the right to exchange their operating partnership units for cash or the same number of our common shares, at our option. As ofDecember 31, 2020 , a total of 744,617 operating partnership units are outstanding. (c) Two of the members inPlaza El Segundo have the right to require us to purchase their 10.0% and 11.8% ownership interests at the interests' then-current fair market value. If the members fail to exercise their put options, we have the right to purchase each of their interests on or afterDecember 30, 2026 at fair market value. Based on management's current estimate of fair market value as ofDecember 31, 2020 , our estimated maximum liability upon exercise of the put option would range from approximately$28 million to$35 million . 46 -------------------------------------------------------------------------------- Table of Contents (d) The other member in The Grove atShrewsbury and Brook 35 has the right to require us to purchase all of its approximately 4.1% interest in The Grove atShrewsbury and approximately 6.5% interest in Brook 35 at the interests' then-current fair market value. Based on management's current estimate of fair market value as ofDecember 31, 2020 , our estimated maximum liability upon exercise of the put option would range from$6 million to$7 million . (e) EffectiveSeptember 18, 2023 , the other member inHoboken has the right to require us to purchase all of its 10% ownership interest at the interest's then-current fair market value. Based on management's current estimate of fair market value as ofDecember 31, 2020 , our estimated maximum liability upon exercise of the put option would range from$5 million to$6 million . (f) AtDecember 31, 2020 , we had letters of credit outstanding of approximately$4.7 million . Off-Balance Sheet Arrangements AtDecember 31, 2020 , we have three real estate related equity method investments with total debt outstanding of$109.7 million , of which our share is$53.3 million . Our investment in these ventures atDecember 31, 2020 was$18.7 million . Other than the items disclosed in the Cash Requirements table, we have no off-balance sheet arrangements as ofDecember 31, 2020 that are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, cash requirements, or capital resources. 47 -------------------------------------------------------------------------------- Table of Contents Debt Financing Arrangements The following is a summary of our total debt outstanding as ofDecember 31, 2020 : Original
Principal Balance Stated Interest
Debt as of December Rate as of December Description of Debt Issued 31, 2020 31, 2020 Maturity Date (Dollars in thousands) Mortgages payable Secured fixed rate Sylmar Towne Center Acquired$ 16,236 5.39 % June 6, 2021 Plaza Del Sol Acquired 8,041 5.23 % December 1, 2021 THE AVENUE at White Marsh 52,705 52,705 3.35 % January 1, 2022 Montrose Crossing 80,000 65,596 4.20 % January 10, 2022 Azalea Acquired 40,000 3.73 % November 1, 2025 Bell Gardens Acquired 12,408 4.06 % August 1, 2026 Plaza El Segundo 125,000 125,000 3.83 % June 5, 2027 The Grove at Shrewsbury (East) 43,600 43,600 3.77 % September 1, 2027 Brook 35 11,500 11,500 4.65 % July 1, 2029 Hoboken (24 Buildings) (1) 56,450 56,450 LIBOR + 1.95% December 15, 2029 Various Hoboken (14 Buildings) Acquired 32,705 Various (2) Various through 2029 Chelsea Acquired 5,234 5.36 % January 15, 2031 Hoboken (1 Building) (3) Acquired 16,560 3.75 % July 1, 2042 Subtotal 486,035 Net unamortized premium and debt issuance costs (1,924) Total mortgages payable 484,111 Notes payable Term Loan 400,000 400,000 LIBOR + 1.35% May 6, 2021 Revolving credit facility (4) 1,000,000 - LIBOR + 0.775% January 19, 2024 Various 7,239 3,270 11.31 % Various through 2028 Subtotal 403,270 Net unamortized debt issuance costs
(494)
Total notes payable
402,776
Senior notes and debentures Unsecured fixed rate 2.75% notes 275,000 275,000 2.75 % June 1, 2023 3.95% notes 600,000 600,000 3.95 % January 15, 2024 1.25% notes 400,000 400,000 1.25 % February 15, 2026 7.48% debentures 50,000 29,200 7.48 % August 15, 2026 3.25% notes 475,000 475,000 3.25 % July 15, 2027 6.82% medium term notes 40,000 40,000 6.82 % August 1, 2027 3.20% notes 400,000 400,000 3.20 % June 15, 2029 3.50% notes 400,000 400,000 3.50 % June 1, 2030 4.50% notes 550,000 550,000 4.50 % December 1, 2044 3.625% notes 250,000 250,000 3.625 % August 1, 2046 Subtotal 3,419,200 Net unamortized discount and debt issuance costs
(14,712)
Total senior notes and debentures 3,404,488 Total debt, net$ 4,291,375 _____________________ 1)OnNovember 26, 2019 , we entered into two interest rate swap agreements that fix the interest rate on the mortgage loan at 3.67%. 2)The interest rates on these mortgages range from 3.91% to 5.00%. 3)This mortgage loan has a fixed interest rate, however, the rate resets every five years until maturity. The current interest rate is fixed untilJuly 1, 2022 , and the loan is prepayable at par anytime after this date. 4)The maximum amount drawn under our revolving credit facility during 2020 was$990.0 million and the weighted average effective interest rate on borrowings under our revolving credit facility, before amortization of debt fees, was 1.5%. 48 -------------------------------------------------------------------------------- Table of Contents Our revolving credit facility, unsecured term loan, and other debt agreements include financial and other covenants that may limit our operating activities in the future. As ofDecember 31, 2020 , we were in compliance with all of the financial and other covenants related to our revolving credit facility, term loan, and senior notes. Additionally, we were in compliance with all of the financial and other covenants that could trigger loan default on our mortgage loans. If we were to breach any of these financial and other covenants and did not cure the breach within an applicable cure period, our lenders could require us to repay the debt immediately and, if the debt is secured, could immediately begin proceedings to take possession of the property securing the loan. Many of our debt arrangements, including our public notes and our revolving credit facility, are cross-defaulted, which means that the lenders under those debt arrangements can put us in default and require immediate repayment of their debt if we breach and fail to cure a default under certain of our other debt obligations. As a result, any default under our debt covenants could have an adverse effect on our financial condition, our results of operations, our ability to meet our obligations and the market value of our shares. Our organizational documents do not limit the level or amount of debt that we may incur. The following is a summary of our scheduled principal repayments as ofDecember 31, 2020 : Unsecured Secured Total (In thousands) 2021$ 400,676 (1)$ 28,101 $ 428,777 2022 751 119,706 120,457 2023 275,765 3,549 279,314 2024 600,656 (2) 3,688 604,344 2025 333 48,033 48,366 Thereafter 2,544,289 282,958 2,827,247$ 3,822,470 $ 486,035 $ 4,308,505 (3)
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1)Our$400.0 million term loan matures onMay 6, 2021 plus one twelve month extension, at our option. 2)Our$1.0 billion revolving credit facility matures onJanuary 19, 2024 , plus two six-month extensions at our option. As ofDecember 31, 2020 , there was no outstanding balance under this credit facility. 3)The total debt maturities differ from the total reported on the consolidated balance sheet due to the unamortized net premium/discount and debt issuance costs on mortgage loans, notes payable, and senior notes as ofDecember 31, 2020 . Interest Rate Hedging We may use derivative instruments to manage exposure to variable interest rate risk. We generally enter into interest rate swaps to manage our exposure to variable interest rate risk and treasury locks to manage the risk of interest rates rising prior to the issuance of debt. We enter into derivative instruments that qualify as cash flow hedges and do not enter into derivative instruments for speculative purposes. Interest rate swaps associated with cash flow hedges are recorded at fair value on a recurring basis. Effectiveness of cash flow hedges is assessed both at inception and on an ongoing basis. The effective portion of changes in fair value of the interest rate swaps associated with cash flow hedges is recorded in other comprehensive income (loss) which is included in "accumulated other comprehensive loss" on the balance sheet and statement of shareholders' equity. Cash flow hedges become ineffective if critical terms of the hedging instrument and the debt instrument do not perfectly match such as notional amounts, settlement dates, reset dates, calculation period and LIBOR rate. In addition, the default risk of the counterparty is evaluated by monitoring the credit worthiness of the counterparty which includes reviewing debt ratings and financial performance. If a cash flow hedge is deemed ineffective, the ineffective portion of changes in fair value of the interest rate swaps associated with cash flow hedges is recognized in earnings in the period affected. As ofDecember 31, 2020 , we have two interest rate swap agreements that effectively fix the interest rate on a mortgage payable associated with ourHoboken portfolio at 3.67%. OurAssembly Row hotel joint venture is also a party to two interest rate swap agreements that effectively fix the interest rate on the joint venture's mortgage debt at 5.206%. All swaps were designated and qualify as cash flow hedges. Hedge ineffectiveness has not impacted our earnings in 2020, 2019 and 2018. 49 -------------------------------------------------------------------------------- Table of Contents REIT Qualification We intend to maintain our qualification as a REIT under Section 856(c) of the Code. As a REIT, we generally will not be subject to corporate federal income taxes on income we distribute to our shareholders as long as we satisfy certain technical requirements of the Code, including the requirement to distribute at least 90% of our taxable income to our shareholders. Funds From Operations Funds from operations ("FFO") is a supplemental non-GAAP financial measure of real estate companies' operating performance.The National Association of Real Estate Investment Trusts ("NAREIT") defines FFO as follows: net income, computed in accordance withU.S. GAAP, plus real estate related depreciation and amortization, gains and losses on the sale of real estate, and impairment write-downs of depreciable real estate. We compute FFO in accordance with the NAREIT definition, and we have historically reported our FFO available for common shareholders in addition to our net income and net cash provided by operating activities. It should be noted that FFO: •does not represent cash flows from operating activities in accordance with GAAP (which, unlike FFO, generally reflects all cash effects of transactions and other events in the determination of net income); •should not be considered an alternative to net income as an indication of our performance; and •is not necessarily indicative of cash flow as a measure of liquidity or ability to fund cash needs, including the payment of dividends. We consider FFO available for common shareholders a meaningful, additional measure of operating performance primarily because it excludes the assumption that the value of the real estate assets diminishes predictably over time, as implied by the historical cost convention of GAAP and the recording of depreciation. We use FFO primarily as one of several means of assessing our operating performance in comparison with other REITs. Comparison of our presentation of FFO to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in the application of the NAREIT definition used by such REITs. An increase or decrease in FFO available for common shareholders does not necessarily result in an increase or decrease in aggregate distributions because ourBoard of Trustees is not required to increase distributions on a quarterly basis unless necessary for us to maintain REIT status. However, we must distribute at least 90% of our taxable income to remain qualified as a REIT. Therefore, a significant increase in FFO will generally require an increase in distributions to shareholders although not necessarily on a proportionate basis. The reconciliation of net income to FFO available for common shareholders is as follows: Year Ended December 31, 2020 2019 2018 (In thousands, except per share data) Net income$ 135,888 $ 360,542 $ 249,026 Net income attributable to noncontrolling interests (4,182) (6,676) (7,119) Gain on sale of real estate, net of tax (91,922) (116,393) (11,915) Impairment charge, net 50,728 - - Depreciation and amortization of real estate assets 228,850 215,139 213,098 Amortization of initial direct costs of leases 20,415 19,359 24,603 Funds from operations 339,777 471,971 467,693 Dividends on preferred shares (1) (8,042) (7,500) (7,500) Income attributable to operating partnership units 3,151 2,703 3,053 Income attributable to unvested shares (1,037) (1,355) (1,469)
Funds from operations available for common shareholders (2)
Weighted average number of common shares, diluted (1)(2)(3) 76,261 75,514 74,153 Funds from operations available for common shareholders, per diluted share (2)$ 4.38 $ 6.17 $ 6.23 _____________________ 50
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Table of Contents (1)For the years endedDecember 31, 2019 and 2018, dividends on our Series 1 preferred stock were not deducted in the calculation of FFO available to common shareholders, as the related shares were dilutive and included in "weighted average common shares, diluted." (2)For the year endedDecember 31, 2020 , FFO available for common shareholders includes a$11.2 million charge related to early extinguishment of debt. If this charge was excluded, our FFO available for common shareholders for 2020 would have been$345.0 million , and FFO available for common shareholders, per diluted share would have been$4.52 . For the year endedDecember 31, 2019 , FFO available for common shareholders includes an$11.9 million charge relating to the buyout of a lease atAssembly Square Marketplace . If this charge was excluded, our FFO available for common shareholders for 2019 would have been$477.7 million , and FFO available for common shareholders, per diluted share would have been$6.33 . (3)The weighted average common shares used to compute FFO per diluted common share also includes operating partnership units that were excluded from the computation of diluted EPS. Conversion of these operating partnership units is dilutive in the computation of FFO per diluted common share but is anti-dilutive for the computation of diluted EPS for the periods presented.
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