PENNSYLVANIA REAL ESTATE INVESTMENT TRUST The following analysis of our consolidated financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the notes thereto included elsewhere in this report. The disclosures in this report are complementary to those made in our Annual Report on Form 10-K for the year endedDecember 31, 2021 .
OVERVIEW
PREIT, aPennsylvania business trust founded in 1960 and one of the first equity real estate investment trusts ("REITs") inthe United States , has a primary investment focus on shopping malls located in the eastern half ofthe United States , primarily in the Mid-Atlantic region. We currently own interests in 24 retail properties, of which 23 are operating properties and one is a development property. The 23 operating properties include 20 shopping malls and three other retail properties, have a total of 19.3 million square feet and are located in eight states. We and partnerships in which we hold an interest own 14.8 million square feet at these properties (excluding space owned by anchors or third parties). There are 17 operating retail properties in our portfolio that we consolidate for financial reporting purposes. These consolidated properties have a total of 14.7 million square feet, of which we own 11.5 million square feet. The six operating retail properties that are owned by unconsolidated partnerships with third parties have a total of 4.6 million square feet of which 3.3 million square feet are owned by such partnerships. When we refer to "Same Store" properties, we are referring to properties that have been owned for the full periods presented and exclude properties acquired or disposed of, under redevelopment or designated as a non-core property during the periods presented. Core properties include all operating retail properties except forExton Square Mall .Valley View Mall was previously designated as a non-core property, but has since been removed altogether. As discussed further in Note 2 to our consolidated financial statements, a foreclosure sale judgment with respect toValley View Mall was ordered by the court and we no longer operate the property. The foreclosure proceedings forValley View Mall were completed inMay 2022 . "Core Malls" consists of core proprieties other than power centers.
We have one property in our portfolio that is classified as under development; however, we do not currently have any activity occurring at this property.
Our primary business is owning, operating and redeveloping shopping malls, which we do primarily through our operating partnership,PREIT Associates, L.P. ("PREIT Associates " or the "Operating Partnership"). We believe our distinctive real estate is at the forefront of enabling communities to flourish through the built environment by providing opportunities to create vibrant multi-use destinations. In general, our malls include carefully curated retail and lifestyle offerings, including national and regional department stores, large format retailers and other anchors, mixed with destination dining and entertainment experiences. In recent years, we have increased the portion of our mall properties that are leased to non-traditional mall tenants, including life sciences, healthcare, supermarkets and self-storage facilities. We provide management, leasing and real estate development services throughPREIT Services, LLC ("PREIT Services"), which generally develops and manages properties that we consolidate for financial reporting purposes, andPREIT-RUBIN, Inc. ("PRI"), which generally develops and manages properties that we do not consolidate for financial reporting purposes, including properties owned by partnerships in which we own an interest, and properties that are owned by third parties in which we do not have an interest. PRI is a taxable REIT subsidiary, as defined by federal tax laws, which means that it is able to offer additional services to tenants without jeopardizing our continuing qualification as a REIT under federal tax law. Our revenue consists primarily of fixed rental income, additional rent in the form of expense reimbursements, and percentage rent (rent that is based on a percentage of our tenants' sales or a percentage of sales in excess of thresholds that are specified in the leases) derived from our income producing properties. We also receive income from our real estate partnership investments and from the management and leasing services PRI provides. The COVID-19 global pandemic that began in early 2020 has adversely impacted and continues to impact our business, financial condition, liquidity and operating results, as well as our tenants' businesses. The prolonged and increased spread of COVID-19 has also led to unprecedented global economic disruption and volatility in financial markets. Some of our tenants' financial health and business viability have been adversely impacted and their creditworthiness has deteriorated. We anticipate that our future business, financial condition, liquidity and results of operations, including in 2021 and potentially in future periods, will continue to be materially impacted by the COVID-19 pandemic. Although we have operated in the COVID-19 environment for approximately two years, uncertainty remains as to how long the global pandemic, economic challenges and restrictions on day-to-day life and business operations will continue to impact us or our tenants. COVID-19 closures of our properties began onMarch 12, 2020 and continued through the reopening of our last property onJuly 3, 2020 ; all of our properties have remained open since that time and are employing safety and sanitation measures designed to address the risks posed by COVID-19. As ofAugust 9, 2022 , government-imposed capacity restrictions are no longer in place in the Company's markets. Following the pandemic-related closures, approximately 4% of our tenants failed to re-open (inclusive of tenants that filed for bankruptcy protection in the aftermath). As a result of the challenging environment created by COVID-19, primarily beginning in the second quarter of 2020, many of our 23
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tenants have sought rent relief and deferral and several have failed to pay rent due. Although we continue to make progress in collecting COVID-19-period rents, we have also initiated legal proceedings against certain tenants for failure to pay. Collections improved in 2022 and 2021 as compared to 2020. We believe that our rent collections are probable, but expect that collections will continue to be below our tenants' rent obligations as long as the effects of COVID-19 affect the financial strength of our tenants. Although market fundamentals improved during 2021 and into 2022, the impacts of COVID-19, including the emergence of new variants and various impacts on the global supply chain, create significant uncertainty and are likely to continue impact our operations and results in 2022. Net loss for the three months endedJune 30, 2022 was$11.0 million compared to net loss of$25.4 million for the three months endedJune 30, 2021 . This$14.4 million decrease in net loss was primarily due to: : (a) a decrease in real estate revenue of$0.9 million ; (b) a decrease in gain on debt extinguishment of debt of$4.6 million ; (c) an increase in gain on sales of interest in real estate of$2.7 million ; (d) an increase on gain on sales of equity method investment of$9.1 million ; (e) a decrease in gain on sales of real estate by equity method investee of$1.3 million ; and (f) an increase in gain on sales of non-operating real estate of$8.8 million . Net loss for the six months endedJune 30, 2022 was$44.0 million compared to net loss of$69.4 million for the six months endedJune 30, 2021 . This$25.4 million decrease in net loss was primarily due to: (a) an increase in real estate revenue of$3.0 million resulting from the recovering economic conditions following the impact of COVID-19 on our tenants; (b) a decrease in gain on debt extinguishment of debt of$4.6 million ; (c) an increase in gain on sales of interest in real estate of$2.7 million ; (d) an increase on gain on sales of equity method investment of$9.1 million ; (e) a decrease in gain on sales of real estate by equity method investee of$1.3 million ; (f) an increase in gain on sales of non-operating real estate of$8.8 million ; and (g) an increase in gain on sale of preferred equity interest of$3.7 million . We evaluate operating results and allocate resources on a property-by-property basis, and do not distinguish or evaluate our consolidated operations on a geographic basis. Due to the nature of our operating properties, which involve retail shopping, dining and entertainment, we have concluded that our individual properties have similar economic characteristics and meet all other aggregation criteria. Accordingly, we have aggregated our individual properties into one reportable segment. In addition, no single tenant accounts for 10% or more of our consolidated revenue, and none of our properties are located outsidethe United States .
Current Economic and Industry Conditions and Impact of COVID-19
Conditions in the economy have caused fluctuations and variations in business
and consumer confidence, retail sales, and consumer spending on retail goods,
destination dining and entertainment. Further, traditional mall tenants,
including department store anchors and smaller format retail tenants face
significant challenges resulting from changing consumer expectations, the
convenience of e-commerce shopping, competition from fast fashion retailers, the
expansion of outlet centers, and declining mall traffic, among other factors. In
recent years, there has been an increased level of tenant bankruptcies and store
closings by tenants who have been significantly impacted by these factors. All
of these factors have been exacerbated by the ongoing impact of the COVID-19
pandemic.
The table below sets forth information related to our tenants in bankruptcy for
our consolidated and unconsolidated properties (excluding tenants in bankruptcy
at sold properties):
Pre-bankruptcy Units Closed
PREIT's PREIT's
Share of Share of
Number of Annualized Number of Annualized
Number of locations Gross Rent(3) locations Gross Rent(3)
Year Tenants (1) impacted GLA(2) (in thousands) closed GLA(2) (in thousands)
2022 (through June 30, 2022 )
Consolidated properties - - - $ - - - $ -
Unconsolidated properties - - - - - - -
Total - - - $ - - - $ -
2021 (Full Year)
Consolidated properties 5 10 331,314 $ 1,589 5 18,344 $ 380
Unconsolidated properties 1 1 4,046 57 1 4,046 57
Total 5 11 335,360 $ 1,646 6 22,390 $ 437
(1) Total represents unique tenants and includes both tenant-owned and
landlord-owned stores. As a result, amounts may not total.
(2) Gross Leasable Area ("GLA") in square feet.
(3) Includes our share of tenant gross rent from partnership properties based on
PREIT's ownership percentage in the respective equity method investments as of
June 30, 2022 .
Anchor Replacements
In recent years, through property dispositions, proactive store recaptures, lease terminations and other activities, we have made efforts to reduce our risks associated with certain department store concentrations.
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During 2019, we re-opened or introduced additional tenants to former anchor positions atWoodland Mall inGrand Rapids, Michigan ,Valley Mall inHagerstown, Maryland andPlymouth Meeting Mall , inPlymouth Meeting, Pennsylvania . Dick's Sporting Goods atValley Mall opened in the first quarter of 2020. AtPlymouth Meeting Mall , we opened Michaels in the first quarter of 2020. In 2017, we purchased the Macy's location atMoorestown Mall inMoorestown, New Jersey and opened HomeSense, Sierra Trading, Five Below and Michaels between 2018 and the first quarter of 2020. During 2021, we openedPower Warehouse and during the first quarter of 2022, we openedHomeGoods atCumberland Mall inVineland, New Jersey . Construction was completed in the first quarter of 2020 giving way to the opening ofBurlington in place of a former Sears atDartmouth Mall inDartmouth, Massachusetts .Aldi also opened in the space adjacent toBurlington inSeptember 2021 . We expect to continue to move forward with several outparcels atDartmouth Mall resulting from the Sears recapture and to work with large format prospects for the additional space adjacent toBurlington , but have experienced delays due to the impact of the COVID-19 pandemic. During 2019, an anchor tenant, Sears, closed atExton Square Mall inExton, Pennsylvania . InJanuary 2020 , the Lord & Taylor store atMoorestown Mall inMoorestown, New Jersey closed and we executed a lease with Turn 7, which opened in the fourth quarter of 2021. Sears closed its stores atMoorestown Mall inMoorestown, New Jersey andJacksonville Mall inJacksonville, North Carolina inApril 2020 . Sears continues to be financially obligated pursuant to the lease at theJacksonville Mall location. InJuly 2021 , the former Sears site atMoorestown Mall was sold toCooper University Health Care . InMay 2020 , J.C.Penney filed for bankruptcy and announced the closure of its stores atThe Mall at Prince George's inHyattsville, Maryland , andMagnolia Mall inFlorence, South Carolina .The Magnolia Mall location has been leased toTilt Studio , an entertainment concept that opened inOctober 2021 . In response to anchor store closings and other trends in the retail space, we have been changing the mix of tenants at our properties. In general, our malls include national and regional department stores, large format retailers and other anchors, mixed with destination dining and entertainment experiences, however, in recent years, we have been reducing the percentage of traditional mall tenants and increasing the share of space dedicated to non-traditional mall tenants. Approximately 29% of our mall space is committed to non-traditional tenants offering services such as dining and entertainment, health and wellness, off-price retail and fast fashion. See "- Capital Improvements, Redevelopment and Development Projects." To fund the capital necessary to replace anchors and to maintain a reasonable level of leverage, we expect to use a variety of means available to us, subject to and in accordance with the terms of our Credit Agreements. These steps might include (i) making additional borrowings under our Credit Agreements (assuming availability and continued compliance with the financial covenants thereunder), (ii) obtaining construction loans on specific projects, (iii) selling properties or interests in properties with values in excess of their mortgage loans (if applicable) and applying the excess proceeds to fund capital expenditures or for debt reduction, or (iv) obtaining capital from joint ventures or other partnerships or arrangements involving our contribution of assets with institutional investors, private equity investors or other REITs.
Capital Improvements, Redevelopment and Development Projects
We might engage in various types of capital improvement projects at our operating properties. Such projects vary in cost and complexity, and can include building out new or existing space for individual tenants, upgrading common areas or exterior areas such as parking lots, or redeveloping the entire property, among other projects. Project costs are accumulated in "Construction in progress" on our consolidated balance sheet until the asset is placed into service, and amounted to$45.5 million as ofJune 30, 2022 . As ofJune 30, 2022 , we had unaccrued contractual and other commitments related to our capital improvement projects and development projects at our consolidated and unconsolidated properties of$4.3 million , including$0.5 million of commitments related to the redevelopment of Fashion District Philadelphia, in the form of contracts with general service providers and other professional service providers. In 2014, we entered into a 50/50 joint venture with The Macerich Company ("Macerich") to redevelop Fashion District Philadelphia. As we redevelop Fashion District Philadelphia, operating results in the short term, as measured by sales, occupancy, real estate revenue, property operating expenses, Net Operating Income ("NOI") and depreciation, will continue to be affected until the newly constructed space is completed, leased and occupied. InJanuary 2018 , the Company and Macerich entered into a$250.0 million term loan (as amended inJuly 2019 to increase the total maximum potential borrowings to$350.0 million ) to fund the ongoing redevelopment ofFashion District Philadelphia and to repay capital contributions to the venture previously made by the partners. A total of$51.0 million was drawn during the third quarter of 2019 and we received aggregate distributions of$25.0 million as our share of the draws. OnDecember 10, 2020 ,PM Gallery LP , together with certain other subsidiaries owned indirectly by us and Macerich (including the fee and leasehold owners of the properties that are part of theFashion District Philadelphia project), entered into an Amended and Restated Term Loan Agreement (the "FDP Loan Agreement"). In connection with the execution of the FDP Loan Agreement, a$100.0 million principal payment was made (and funded indirectly by Macerich, the "Partnership Loan") to pay down the existing loan, reducing the outstanding principal under the FDP Loan Agreement from$301.0 million to$201.0 million . The joint venture must repay the Partnership Loan plus 15% accrued interest to Macerich, in its capacity as the lender, prior to the resumption of 50/50 cash distributions to us and Macerich. In connection with the execution of the FDP Loan Agreement, the governing structure ofPM Gallery LP was 25
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modified such that, effective as ofJanuary 1, 2021 , Macerich is responsible for the entity's operations and, subject to limited exceptions, controls major decisions. The Company considered the changes to the governing structure ofPM Gallery LP and determined the investment qualifies as a variable interest entity and would continue to be accounted for under the equity method of accounting. The FDP Loan Agreement provides for (i) a maturity date ofJanuary 22, 2023 , with the potential for a one-year extension upon the borrowers' satisfaction of certain conditions, (ii) an interest rate at the borrowers' option with respect to each advance of either (A) the Base Rate (defined as the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50%, and (c) the LIBOR Market Index Rate plus 1.00%) plus 2.50% or (B) LIBOR for the applicable period plus 3.50%, (iii) a full recourse guarantee of 50% of the borrowers' obligations byPREIT Associates, L.P. , on a several basis, (iv) a full recourse guarantee of certain of the borrowers' obligations byThe Macerich Partnership, L.P. , up to a maximum of$50.0 million , on a several basis, (v) a pledge of the equity interests of certain indirect subsidiaries of PREIT and Macerich, as well as ofPREIT-RUBIN, Inc. and one of its subsidiaries, that have a direct or indirect ownership interest in the borrowers, (vi) a non-recourse carve-out guaranty and a hazardous materials indemnity by each ofPREIT Associates, L.P. andThe Macerich Partnership, L.P. , and (vii) mortgages of the borrowers' fee and leasehold interests in the properties that are part of theFashion District Philadelphia project and certain other properties. The FDP Loan Agreement contains certain covenants typical for loans of its type.
We also own an interest in a development property, but we do not expect to make any significant investment at this property in the short term.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Critical Accounting Policies are those that require the application of management's most difficult, subjective, or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that might change in subsequent periods. In preparing the unaudited consolidated financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. In preparing the unaudited consolidated financial statements, management has utilized available information, including our past history, industry standards and the current economic environment, among other factors, in forming its estimates and judgments, giving due consideration to materiality. Management has also considered events and changes in property, market and economic conditions, estimated future cash flows from property operations and the risk of loss on specific accounts or amounts in determining its estimates and judgments. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may affect comparability of our results of operations to those of companies in a similar business. The estimates and assumptions made by management in applying critical accounting policies have not changed materially during 2022 and 2021, except as otherwise noted, and none of these estimates or assumptions have proven to be materially incorrect or resulted in our recording any significant adjustments relating to prior periods. We will continue to monitor the key factors underlying our estimates and judgments, but no change is currently expected.
For additional information regarding our Critical Accounting Policies, see
"Critical Accounting Policies and Estimates" in Part II, Item 7 of our Annual
Report on Form 10-K for the year ended
Asset Impairment
Real estate investments and related intangible assets are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the property might not be recoverable, which is referred to
as a "triggering event.". A property to be held and used is considered impaired
only if management's estimate of the aggregate future cash flows, less estimated
capital expenditures, to be generated by the property, undiscounted and without
interest charges, are less than the carrying value of the property. This
estimate takes into consideration factors such as expected future operating
income, trends and prospects, as well as the effects of demand, competition and
other factors.
If there is a triggering event in relation to a property to be held and used, we
will estimate the aggregate future cash flows, less estimated capital
expenditures, to be generated by the property, undiscounted and without interest
charges. In addition, this estimate may consider a probability weighted cash
flow estimation approach when alternative courses of action to recover the
carrying amount of a long-lived asset are under consideration or when a range of
possible values is estimated.
The determination of undiscounted cash flows requires significant estimates by
management, including the expected course of action at the balance sheet date
that would lead to such cash flows. Subsequent changes in estimated undiscounted
cash flows arising from changes in the anticipated action to be taken with
respect to the property could impact the determination of whether an impairment
exists and whether the effects could materially affect our net income. To the
extent estimated undiscounted cash flows are less than the carrying value of the
property, the loss will be measured as the excess of the carrying amount of the
property over the estimated fair value of the property. Our intent is to hold
and operate our properties long-term, which reduces the likelihood that our
carrying value is not recoverable. A shortened holding period would increase the
likelihood that the carrying value is not recoverable.
Assessment of our ability to recover certain lease related costs must be made
when we have a reason to believe that the tenant might not be able to perform
under the terms of the lease as originally expected. This requires us to make
estimates as to the recoverability of such costs.
An other-than-temporary impairment of an investment in an unconsolidated joint
venture is recognized when the carrying value of the investment is not
considered recoverable based on evaluation of the severity and duration of the
decline in value. To the extent impairment has occurred, the excess carrying
value of the asset over its estimated fair value is recorded as reduction to
income.
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During the three and six months endedJune 30, 2022 , no asset impairment loss was recorded. During the three months endedJune 30, 2021 , we recorded an impairment loss of$1.3 million in connection with our classification of Valley View Center as held for sale. TheJune 30, 2021 impairment loss is included in the consolidated statement of operations.
Revenue and Receivables
We derive over 95% of our revenue from tenant rent and other tenant-related activities. Tenant rent includes base rent, percentage rent, expense reimbursements (such as reimbursements of costs of common area maintenance ("CAM"), real estate taxes and utilities), and the amortization of above-market and below-market lease intangibles.
We accrue revenue under leases, provided that it is probable that we will collect substantially all of the lease revenue that is due under the terms of the lease both at inception and on an ongoing basis. When collectability of lease revenue is not probable, leases are prospectively accounted for on a cash basis and any difference between the revenue that has been accrued and the cash collected from the tenant over the life of the lease is recognized as a current period adjustment to lease revenue. We review the collectability of our tenant receivables related to tenant rent including base rent, straight-line rent, expense reimbursements and other revenue or income by specifically analyzing billed and unbilled revenues, including straight-line rent receivable, and considering historical collection issues, tenant creditworthiness and current economic and industry trends. Our revenue recognition and receivables collectability analysis places particular emphasis on past-due accounts and considers the nature and age of the receivables, the payment history and financial condition of the payor, the basis for any disputes or negotiations with the payor, and other information that could affect collectability. We record base rent on a straight-line basis, which means that the monthly base rent revenue according to the terms of our leases with our tenants is adjusted so that an average monthly rent is recorded for each tenant over the term of its lease. When tenants vacate prior to the end of their lease, we accelerate amortization of any related unamortized straight-line rent balances, and unamortized above-market and below-market intangible balances are amortized as a decrease or increase to real estate revenue, respectively.
Percentage rent represents rental revenue that the tenant pays based on a percentage of its sales, either as a percentage of its total sales or as a percentage of sales over a certain threshold. In the latter case, we do not record percentage rent until the sales threshold has been reached.
Revenue for rent received from tenants prior to their due dates is deferred until the period to which the rent applies.
In addition to base rent, certain lease agreements contain provisions that require tenants to reimburse a fixed or pro rata share of certain CAM costs, real estate taxes and utilities. Tenants generally make monthly expense reimbursement payments based on a budgeted amount determined at the beginning of the year. EffectiveJanuary 1, 2019 , we recognize fixed CAM revenue prospectively on a straight-line basis. Certain lease agreements contain co-tenancy clauses that can change the amount of rent or the type of rent that tenants are required to pay, or, in some cases, can allow the tenant to terminate their lease, in the event that certain events take place, such as a decline in property occupancy levels below certain defined levels or the vacating of an anchor store. Co-tenancy clauses do not generally have any retroactive effect when they are triggered. The effect of co-tenancy clauses is applied on a prospective basis to recognize the new rent that is in effect. Payments made to tenants as inducements to enter into a lease are treated as deferred costs that are amortized as a reduction of rental revenue over the term of the related lease. Lease termination fee revenue is recognized in the period when a termination agreement is signed, collectability is assured, and the tenant has vacated the space. In the event that a tenant is in bankruptcy when the termination agreement is signed, termination fee income is deferred and recognized when it is received.
Utility reimbursement revenue is presented separate from rental revenue based on actual usage as the pattern of transfer is not aligned with the use of the property.
We also generate revenue by providing management services to third parties,
including property management, brokerage, leasing and development. Management
fees generally are a percentage of managed property revenue or cash receipts.
Leasing fees are earned upon the consummation of new leases. Development fees
are earned over the time period of the development activity and are recognized
on the percentage of completion method. These activities are collectively
included in "Other income" in the consolidated statements of operations.
Revenue from the reimbursement of marketing expenses is generated through tenant
leases that require tenants to reimburse a defined amount of property marketing
expenses. Our contractual performance obligations are fulfilled as marketing
expenditures are made. Tenant payments are received monthly as required by the
respective lease terms. We defer income recognition if the reimbursements exceed
the aggregate marketing expenditures made through that date. Deferred marketing
reimbursement revenue is recorded in tenants' deposits and deferred rent on the
consolidated balance sheet. The marketing reimbursements are recognized as
revenue at the time that the marketing expenditures occur.
Property management revenue from management and development activities is
generated through contracts with third party owners of real estate properties or
with certain of our joint ventures, and is recorded in other income in the
consolidated statements of operations. In the case of management fees, our
performance obligations are fulfilled over time as the management services are
performed and the associated revenues are recognized on a monthly basis when the
customer is billed. In the case of development fees, our performance obligations
are fulfilled over
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time as we perform certain stipulated development activities as set forth in the respective development agreements and the associated revenues are recognized on a monthly basis when the customer is billed.
New Accounting Developments
See Note 1 to our unaudited consolidated financial statements for descriptions of new accounting developments.
RESULTS OF OPERATIONS
Overview
Net loss for the three months endedJune 30, 2022 was$11.0 million compared to net loss of$25.4 million for the three months endedJune 30, 2021 . This$14.4 million decrease in net loss was primarily due to: (a) a decrease in real estate revenue of$0.9 million ; (b) a decrease in gain on debt extinguishment of debt of$4.6 million ; (c) an increase in gain on sales of interest in real estate of$2.7 million ; (d) an increase on gain on sales of equity method investment of$9.1 million ; (e) a decrease in gain on sales of real estate by equity method investee of$1.3 million ; and (f) an increase in gain on sales of non-operating real estate of$8.8 million . Net loss for the six months endedJune 30, 2022 was$44.0 million compared to net loss of$69.4 million for the six months endedJune 30, 2021 . This$25.4 million decrease in net loss was primarily due to: (a) an increase in real estate revenue of$3.0 million resulting from the recovering economic conditions following the impact of COVID-19 on our tenants; (b) a decrease in gain on debt extinguishment of debt of$4.6 million ; (c) an increase in gain on sales of interest in real estate of$2.7 million ; (d) an increase on gain on sales of equity method investment of$9.1 million ; (e) a decrease in gain on sales of real estate by equity method investee of$1.3 million ; (f) an increase in gain on sales of non-operating real estate of$8.8 million ; and (g) an increase in gain on sale of preferred equity interest of$3.7 million .
Occupancy
The table below sets forth certain occupancy statistics for our properties as ofJune 30, 2022 and 2021: Occupancy(1) at June 30, Consolidated Unconsolidated Properties Properties Combined(2) 2022 2021 2022 2021 2022 2021 Retail portfolio weighted average (3): Total excluding anchors 90.5 % 86.5 % 87.6 % 80.8 % 89.8 % 84.8 % Total including anchors 92.3 % 89.0 % 90.2 % 84.4 % 91.8 % 87.9 % Core Malls weighted average: (4) Total excluding anchors 92.7 % 88.5 % 80.3 % 74.6 % 90.5 % 86.0 % Total including anchors 95.3 % 90.5 % 85.6 % 81.4 % 93.8 % 89.0 % (1) Occupancy for all periods presented includes all tenants irrespective of the term of their agreement. (2) Combined occupancy is calculated by using occupied gross leasable area ("GLA") for consolidated and unconsolidated properties and dividing by total GLA for consolidated and unconsolidated properties. (3) Retail portfolio includes all retail properties includingFashion District Philadelphia . (4) Core Malls excludesExton Square Mall and power centers. 28
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Table of Contents Leasing Activity The table below sets forth summary leasing activity information with respect to our consolidated and unconsolidated properties for the three months endedJune 30, 2022 : Annualized Initial Rent Average Rent Tenant per square Previous Initial Gross Rent Renewal Improvements Number GLA Term foot ("psf") Rent psf Renewal Spread(1) Spread(2) psf(3) $ % % Non Anchor New Leases Under 10k square feet 51 131,077 5.0$ 30.92 N/A N/A N/A N/A$ 4.40 ("sf") Over 10k sf 2 33,246 10.0 21.31 N/A N/A N/A N/A 11.39 Total New 53 164,323 6.0$ 28.98 N/A N/A N/A N/A$ 6.76 Leases Renewal Leases Under 10k sf 30 51,340 3.2$ 80.12 $ 79.07 $ 1.05 1.3 % 5.7 % $ - Over 10k sf 3 87,431 2.2 12.67 14.73 (2.06 ) (14.0 %) (14.4 %) - Total Fixed 33 138,771 2.6$ 37.62 $ 38.53 $ (0.91 ) (2.4 %) 0.3 % $ - Rent Total Percentage in 22 47,313 2.9 44.50 44.16 0.34 0.8 % N/A - Lieu Total Renewal 55 186,084 2.7$ 39.37 $ 39.96 $ (0.59 ) (1.5 %) N/A $ - Leases Total Non 108 350,407 4.2$ 34.50 Anchor (4) Anchor New Leases - - - $ - $ - $ - N/A N/A $ - Renewal 2 447,900 7.8 5.06 5.06 - - N/A - Leases Total 2 447,900 7.8$ 5.06 (1) Initial gross rent renewal spread is computed by comparing the initial rent per square foot in the new lease to the final rent per square foot amount in the expiring lease. For purposes of this computation, the rent amount includes minimum rent, common area maintenance ("CAM") charges, estimated real estate tax reimbursements and marketing charges, but excludes percentage rent. In certain cases, a lower rent amount may be payable for a period of time until specified conditions in the lease are satisfied. (2) Average rent renewal spread is computed by comparing the average rent per square foot over the new lease term to the final rent per square foot amount in the expiring lease. For purposes of this computation, the rent amount includes minimum rent and fixed CAM charges, but excludes pro rata CAM charges, estimated real estate tax reimbursements, marketing charges and percentage rent. (3) These leasing costs are presented as annualized amounts per square foot and are spread uniformly over the initial lease term. (4) Includes 9 leases and 21,079 square feet of GLA with respect to our unconsolidated partnerships. We own a 25% to 50% interest in each of our unconsolidated properties and do not control such properties. Our percentage ownership is not necessarily indicative of the legal and economic implications of our ownership interest. See "- Non-GAAP Supplemental Financial Measures" for further details on our ownership interests in our unconsolidated properties. 29
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The table below sets forth summary leasing activity information with respect to our consolidated and unconsolidated properties for the six months endedJune 30, 2022 : Annualized Initial Rent Average Rent Tenant per square Previous Initial Gross Rent Renewal Improvements Number GLA Term foot ("psf") Rent psf Renewal Spread(1) Spread(2) psf(3) $ % % Non Anchor New Leases Under 10k square feet 86 209,130 5.5$ 34.65 N/A N/A N/A N/A $ 5.57 ("sf") Over 10k sf 4 74,696 11.4$ 16.98 N/A N/A N/A N/A 8.08 Total New 90 283,826 7.1$ 30.00 N/A N/A N/A N/A $ 6.63 Leases Renewal Leases Under 10k sf 63 151,321 3.9$ 61.40 $ 61.87 $ (0.47 ) (0.8 %) 4.7 % $ 0.94 Over 10k sf 6 157,166 3.1 17.83 18.63 (0.80 ) (4.3 %) (4.4 %) 2.08 Total Fixed 69 308,487 3.4$ 39.20 $ 39.84 $ (0.64 ) (1.6 %) 2.3 % $ 1.46 Rent Total Percentage in 35 95,660 2.6$ 31.96 $ 32.18 (0.22 ) (0.7 %) 0.0 % 0.75 Lieu Total Renewal 104 404,147 3.2$ 37.49 $ 38.03 $ (0.54 ) (1.4 %) N/A $ 1.33 Leases (4) Total Non 194 687,973 4.8$ 34.40 Anchor Anchor New Leases - - - $ - N/A N/A N/A N/A $ - Renewal 2 447,900 7.8 5.06 5.06 - 0.0 % N/A - Leases Total 2 447,900 7.8$ 5.06 (1) Initial gross rent renewal spread is computed by comparing the initial rent per square foot in the new lease to the final rent per square foot amount in the expiring lease. For purposes of this computation, the rent amount includes minimum rent, common area maintenance ("CAM") charges, estimated real estate tax reimbursements and marketing charges, but excludes percentage rent. In certain cases, a lower rent amount may be payable for a period of time until specified conditions in the lease are satisfied. (2) Average rent renewal spread is computed by comparing the average rent per square foot over the new lease term to the final rent per square foot amount in the expiring lease. For purposes of this computation, the rent amount includes minimum rent and fixed CAM charges, but excludes pro rata CAM charges, estimated real estate tax reimbursements, marketing charges and percentage rent. (3) These leasing costs are presented as annualized amounts per square foot and are spread uniformly over the initial lease term. (4) Includes 12 leases and 33,335 square feet of GLA with respect to our unconsolidated partnerships. We own a 25% to 50% interest in each of our unconsolidated properties and do not control such properties. Our percentage ownership is not necessarily indicative of the legal and economic implications of our ownership interest. See "- Non-GAAP Supplemental Financial Measures" for further details on our ownership interests in our unconsolidated properties. 30
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The following table sets forth our results of operations for the three and six
months ended
Three Months Ended % Change Six Months Ended % Change
June 30, 2021 to 2022 June 30, 2021 to 2022
(in thousands of dollars) 2022 2021 2022 2021
Real estate revenue $ 73,058 $ 73,956 (1.2 ) % $ 142,252 $ 139,234 2.2 %
Property operating
expenses (31,802 ) (30,765 ) 3.4 % (65,375 ) (63,924 ) 2.3 %
Other income 69 162 (57.4 ) % 310 288 7.6 %
Depreciation and
amortization (28,382 ) (29,686 ) (4.4 ) % (57,492 ) (59,525 ) (3.4 ) %
General and
administrative expenses (9,744 ) (13,535 ) (28.0 ) % (21,227 ) (25,366 ) (16.3 ) %
Provision for employee
separation expenses 85 (149 ) (157.0 ) % 1 (240 ) (100.4 ) %
Insurance recoveries, net - 670 (100.0 ) % - 670 (100.0 ) %
Project costs and other
expenses (19 ) (77 ) (75.3 ) % (79 ) (179 ) (55.9 ) %
Interest expense, net (32,601 ) (31,978 ) 1.9 % (63,992 ) (62,709 ) 2.0 %
Reorganization expenses - (69 ) (100.0 ) % - (267 ) (100.0 ) %
Gain on debt
extinguishment, net - 4,587 (100.0 ) % - 4,587 (100.0 ) %
Impairment of assets - (1,302 ) (100.0 ) % - (1,302 ) (100.0 ) %
Equity in (loss) income
of partnerships (1,188 ) 2,433 (148.8 ) % (1,583 ) (1,000 ) 58.3 %
Gain (loss) on sales of
interests in real estate 1,701 (974 ) (274.6 ) % 1,701 (974 ) (274.6 ) %
Gain on sale of equity
method investment 9,053 100.0 % 9,053 100.0 %
Gain on sales of real
estate by equity method
investee - 1,347 (100.0 ) % - 1,347 (100.0 ) %
Gain on sales of non
operating real estate 8,755 - 0.0 % 8,755 - 0.0 %
Gain on sale of preferred
equity interest - - 100.0 % 3,688 - 100.0 %
Net loss $ (11,015 ) $ (25,380 ) (56.6 ) % $ (43,988 ) $ (69,360 ) (36.6 ) %
The amounts in the preceding tables reflect our consolidated properties and our
unconsolidated properties. Our unconsolidated properties are presented under the
equity method of accounting in the line item "Equity in (loss) income of
partnerships."
Real Estate Revenue
We include all rental income earned pursuant to tenant leases under the "Lease revenue" line item in the consolidated statements of operations. Utility reimbursements are presented separately in "Expense reimbursements" as the pattern of transfer is not aligned with the use of the property. We review the collectability of both billed and unbilled lease revenues each reporting period, taking into consideration the tenant's payment history, credit profile and other factors, including the tenant's operating performance. For any tenant receivable balance deemed to be uncollectible, we record an offset for credit losses directly to Lease revenue in the consolidated statements of operations. The following table reports the breakdown of real estate revenues based on the terms of the lease contracts for the three and six months endedJune 30, 2022 and 2021: Three Months Ended June 30, Six Months Ended June 30, (in thousands of dollars) 2022 2021 2022 2021 Contractual lease payments: Base rent$ 48,452 $ 49,613 96,107$ 95,530 CAM reimbursement income$ 8,306 8,301 16,782 16,660 Real estate tax income$ 7,154 6,677 14,321 13,621 Percentage rent $ 472 217 585 205 Lease termination revenue$ 1,530 622 1,539 659 65,914 65,430 129,334 126,675 Less: credit losses 738 2,682 759 1,345 Lease revenue 66,652 68,112 130,093 128,020 Expense reimbursements 4,215 3,887 8,359 7,786 Other real estate revenue 2,191 1,957 3,800 3,428 Total real estate revenue$ 73,058 $ 73,956 142,252$ 139,234 Real Estate Revenue Real estate revenue decreased by$0.9 million , or 1%, in the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 , primarily due to: 31
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•
an increase of$1.5 million in same store credit losses due to the collection of receivables from the resolution of COVID-19 related issues with tenants across our portfolio for the three months endedJune 30, 2021 ;
•
a decrease of$0.9 million at non-same store propertiesValley View Mall andExton Square Mall due to lower occupancy and the collection of receivables from the resolution of COVID-19 related issues with tenants for the three months endedJune 30, 2021 atExton Square Mall , and the sale of the strip center atValley View Mall in the third quarter of 2021;
•
a decrease of$0.6 million in same store base rent due to decreases of$1.8 million from the treatment and amortization of COVID-19 related rent credits and$0.1 million from comparable tenants paying a percentage of sales in lieu of minimum rent partially offset by an increase of$1.3 million from net new store openings over the previous twelve months; partially offset by,
•
an increase of$0.9 million in lease termination revenue, including$1.5 million from the termination of leases with two tenants during 2022, partially offset by$0.6 million received from four tenants during 2021;
•
an increase of
•
an increase of
•
an increase of
Real estate revenue increased by
•
an increase of$1.3 million in same store base rent due to increases of$2.8 million from net new store openings over the previous twelve months and$0.3 million from comparable tenants paying a percentage of sales in lieu of minimum rent, partially offset by a decrease of$1.8 million from the treatment and amortization of COVID-19 related rent credits;
•
an increase of
•
an increase of
•
an increase of
•
an increase of
•
an increase of
•
an increase of
•
a decrease of$1.0 million at non-same store propertiesValley View Mall andExton Square Mall due to lower occupancy and the collection of receivables from the resolution of COVID-19 related issues with tenants for the six months endedJune 30, 2021 atExton Square Mall , and the sale of the strip center atValley View Mall in the third quarter of 2021; and
•
an increase of$0.3 million in same store credit losses due to credit losses due to the collection of receivables from the resolution of COVID-19 related issues with tenants across our portfolio for the six months endedJune 30, 2021 . Property Operating Expenses Property operating expenses increased by$1.0 million , or 3%, in the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 , primarily due to:
•
an increase of
•
an increase of
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•
an increase of$0.2 million in same store common area maintenance expense, including a$0.3 million increase in repairs and maintenance, a$0.2 million increase in utility expense due to a combination of higher electricity usage and electricity rates and a$0.1 million increase in insurance expense, partially offset by a$0.4 million decrease in security expense due to negotiated credits with our vendor; partially offset by
•
a decrease of
Property operating expenses increased by$1.5 million , or 2%, in the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 , primarily due to:
•
an increase of
•
an increase of$0.4 million in same store common area maintenance expense, including a$0.5 million increase in utility expense due to a combination of higher electricity usage and electricity rates, a$0.3 million increase in insurance expense and a$0.1 million increase in repairs and maintenance, partially offset by a$0.4 million decrease in security expense due to negotiated credits with our vendor and a$0.1 million decrease in snow removal expense due to higher snowfall amounts during 2021 across the Mid-Atlantic States; and
•
an increase of
•
a decrease of
•
a decrease of
Depreciation and Amortization Depreciation and amortization expense decreased by$1.3 million , or 4%, in the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 , primarily due to:
•
a decrease of
•
a decrease of
Depreciation and amortization expense decreased by$2.0 million , or 3%, in the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 , primarily due to:
•
a decrease of
•
a decrease of
General and Administrative Expenses
General and administrative expenses decreased by$3.8 million , or 28.0%, in the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 primarily due to lower incentive compensation expenses in 2022. General and administrative expenses decreased by$4.1 million , or 16.3%, in the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 primarily due to lower incentive compensation expenses in 2022.
Interest Expense
Interest expense increased by$0.6 million , or 1.9%, in the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . This increase was primarily due to higher weighted average interest rates. Our weighted average effective borrowing rate was 7.07% for the three months endedJune 30, 2022 compared to 5.90% for the three months endedJune 30, 2021 . Our weighted average debt balance was$1,846.2 million for the three months endedJune 30, 2022 , compared to$1,856.8 million for the three months endedJune 30, 2021 . Interest expense increased by$1.3 million , or 2.0%, in the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 . This increase was primarily due to higher weighted average interest rates. Our weighted average effective borrowing rate was 6.90% for the six months endedJune 30, 2022 compared to 6.28% for the six months endedJune 30, 2021 . Our weighted average debt balance was$1,855.0 million for the six months endedJune 30, 2022 , compared to$1,855.5 million for the six months endedJune 30, 2021 .
Gain on Debt Extinguishment
For the three and six months ended
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OnJune 10, 2021 , we were notified that the full principal balance and accrued interest on our loan under the Paycheck Protection Program (PPP) of the Coronavirus Aid, Relief, and Economic Security (CARES) Act was forgiven. As a result of the forgiveness, we recorded a gain on debt extinguishment of$4.6 million during the three and six months endedJune 30, 2021 .
Reorganization Expenses
For the three and six months ended
For the three and six months endedJune 30, 2021 , we incurred costs and fees of$0.1 million and$0.3 million in connection with our efforts to finalize our Financial Restructuring that were directly attributable to our bankruptcy proceedings, which we classified within reorganization expenses in the consolidated statement of operations.
Equity in Loss (Income) of Partnerships
Equity in loss of partnerships was a loss of$1.2 million in the three months endedJune 30, 2022 compared to income of$2.4 million in the prior year period, reflecting a decrease of$3.6 million , or 148.8%. The increase in loss was primarily due to a significant lease termination atFashion District Philadelphia in 2021 as the payment was applied to rent and outstanding charges with the remainder being recorded as lease termination income. Equity in loss of partnerships was$1.6 million in the six months endedJune 30, 2022 compared to a loss of$1.0 million in the prior year period, reflecting a change of$0.6 million , or 58.3% due to the lease termination in 2021 at Fashion District Philadelphia offset by higher real estate revenues across all of our partnership properties in 2022 due to the economic rebound following the COVID-19 impact. Gain (Loss) on Sales of Real Estate During the three and six months endedJune 30, 2022 , there was a$1.7 million gain on sales of real estate compared to a loss of$1.0 million in the prior year period. InJune 2022 , we closed on the sale of an outparcel atFrancis Scott Key Mall for$2.4 million and recorded a gain on sales of real estate of$1.7 million . InMay 2021 , we closed on the sale of a parcel of property atMoorestown Mall for$10.1 million . In connection with the sale, we paid a$9.0 million lease termination fee for a portion of the property that was under a lease agreement along with closing costs that resulted in net proceeds of$0.8 million . For the six months endedJune 30, 2021 , we recorded a loss on sales of real estate of$1.0 million in connection with the sale. Gain on Sale ofEquity Method Investment During the three and six months endedJune 30, 2022 , there was a$9.1 million gain on sale of equity method investment. InJune 2022 , we closed on the sale of our 25% interest inGloucester Premium Outlets for$35.4 million for which we recorded a gain on sale of equity method investment of$9.1 million .
There was no gain on sale of equity method investment for the three and six
months ended
Gain on Sales of Interests inNon Operating Real Estate During the three and six months endedJune 30, 2022 , there was an$8.8 million gain on sales of interests in non-operating real estate. InJune 2022 , we sold a parcel of land adjacent toMoorestown Mall for$11.8 million for residential development purposes. The gain resulting from the sale was$8.8 million .
There was no gain on sale of interest in non operating real estate for the three
and six months ended
Gain on Sale of Preferred Equity Interest During the three months endedJune 30, 2022 there was no gain on sale of preferred equity interest. During the six months endedJune 30, 2022 , there was a$3.7 million gain on sale of preferred equity interest in a property that we received in exchange for the sale of a property we previously owned, respectively.
There was no gain on sale of preferred equity interest for the three and six
months ended
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NON-GAAP SUPPLEMENTAL FINANCIAL MEASURES
Overview
The preceding discussion analyzes our financial condition and results of
operations in accordance with generally accepted accounting principles, or GAAP,
for the periods presented. We also use Net Operating Income ("NOI") and Funds
from Operations ("FFO") which are non-GAAP financial measures, to supplement our
analysis and discussion of our operating performance:
•
We believe that NOI is helpful to management and investors as a measure of
operating performance because it is an indicator of the return on property
investment and provides a method of comparing property performance over time.
When we use and present NOI, we also do so on a same store ("Same Store NOI")
and non-same store ("Non Same Store NOI") basis to differentiate between
properties that we have owned for the full periods presented and properties
acquired, sold or under redevelopment during those periods. Furthermore, our use
and presentation of NOI combines NOI from our consolidated properties and NOI
attributable to our share of unconsolidated properties in order to arrive at
total NOI. We believe that this is also helpful information because it reflects
the pro rata contribution from our unconsolidated properties that are owned
through investments accounted for under GAAP as equity in income of
partnerships. See "Unconsolidated Properties and Proportionate Financial
Information" below.
•
We believe that FFO is also helpful to management and investors as a measure of operating performance because it excludes various items included in net loss that do not relate to or are not indicative of operating performance, such as gains on sales of operating real estate and depreciation and amortization of real estate, among others. In addition to FFO and FFO per diluted share and OP Unit, when applicable, we also present FFO, as adjusted and FFO per diluted share and OP Unit, as adjusted, which we believe is helpful to management and investors because they adjust FFO to exclude items that management does not believe are indicative of operating performance, such as gain on debt extinguishment and insurance recoveries.
•
We use both NOI and FFO, or related terms like Same Store NOI and, when applicable, Funds From Operations, as adjusted, for determining incentive compensation amounts under certain of our performance-based executive compensation programs.
NOI and FFO are commonly used non-GAAP financial measures of operating performance in the real estate industry, and we use them as supplemental non-GAAP measures to compare our performance between different periods and to compare our performance to that of our industry peers. Our computation of NOI, FFO and other non-GAAP financial measures, such as Same Store NOI, Non Same Store NOI, NOI attributable to our share of unconsolidated properties, and FFO, as adjusted, may not be comparable to other similarly titled measures used by our industry peers. None of these measures are measures of performance in accordance with GAAP, and they have limitations as analytical tools. They should not be considered as alternative measures of our net loss, operating performance, cash flow or liquidity. They are not indicative of funds available for our cash needs, including our ability to make cash distributions. Please see below for a discussion of these non-GAAP measures and their respective reconciliation to the most directly comparable GAAP measure.
The non-GAAP financial measures presented below incorporate financial information attributable to our share of unconsolidated properties. This proportionate financial information is non-GAAP financial information, but we believe that it is helpful information because it reflects the pro rata contribution from our unconsolidated properties that are owned through investments accounted for under GAAP using the equity method of accounting. Under such method, earnings from these unconsolidated partnerships are recorded in our statements of operations prepared in accordance with GAAP under the caption entitled "Equity in (loss) income of partnerships." To derive the proportionate financial information reflected in the tables below as "unconsolidated," we multiplied the percentage of our economic interest in each partnership on a property-by-property basis by each line item. Under the partnership agreements relating to our current unconsolidated partnerships with third parties, we own a 25% to 50% economic interest in such partnerships, and there are generally no provisions in such partnership agreements relating to special non-pro rata allocations of income or loss, and there are no preferred or priority returns of capital or other similar provisions. While this method approximates our indirect economic interest in our pro rata share of the revenue and expenses of our unconsolidated partnerships, we do not have a direct legal claim to the assets, liabilities, revenues or expenses of the unconsolidated partnerships beyond our rights as an equity owner in the event of any liquidation of such entity. Our percentage ownership is not necessarily indicative of the legal and economic implications of our ownership interest. Accordingly, NOI and FFO results based on our share of the results of unconsolidated partnerships do not represent cash generated from our investments in these partnerships.
We have determined that we hold a noncontrolling interest in each of our unconsolidated partnerships, and account for such partnerships using the equity method of accounting, because:
•
Except for one property that we co-manage with our partner, all of the other entities are managed on a day-to-day basis by one of our other partners as the managing general partner in each of the respective partnerships. In the case of the co-managed property, all decisions in the ordinary course of business are made jointly.
•
The managing general partner is responsible for establishing the operating and
capital decisions of the partnership, including budgets, in the ordinary course
of business.
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•
All major decisions of each partnership, such as the sale, refinancing, expansion or rehabilitation of the property, require the approval of all partners.
•
Voting rights and the sharing of profits and losses are generally in proportion to the ownership percentages of each partner.
We hold legal title to a property owned by one of our unconsolidated partnerships through a tenancy in common arrangement. For this property, such legal title is held by us and another entity, and each has an undivided interest in title to the property. With respect to this property, under the applicable agreements between us and the entity with ownership interests, we and such other entity have joint control because decisions regarding matters such as the sale, refinancing, expansion or rehabilitation of the property require the approval of both us and the other entity owning an interest in the property. Hence, we account for this property like our other unconsolidated partnerships using the equity method of accounting. The balance sheet items arising from this property appear under the caption "Investments in partnerships, at equity."
For further information regarding our unconsolidated partnerships, see note 3 to our unaudited consolidated financial statements.
Net Operating Income ("NOI")
NOI (a non-GAAP measure) is derived from real estate revenue (determined in accordance with GAAP, including lease termination revenue), minus property operating expenses (determined in accordance with GAAP), plus our pro rata share of revenue and property operating expenses of our unconsolidated partnership investments. NOI does not represent cash generated from operating activities in accordance with GAAP and should not be considered to be an alternative to net loss (determined in accordance with GAAP) as an indication of our financial performance or to be an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity. It is not indicative of funds available for our cash needs, including our ability to make cash distributions. We believe NOI is helpful to management and investors as a measure of operating performance because it is an indicator of the return on property investment, and provides a method of comparing property performance over time. We believe that net loss is the most directly comparable GAAP measure to NOI. NOI excludes other income, depreciation and amortization, general and administrative expenses, insurance recoveries (net), provision for employee separation expenses, project costs and other expenses, interest expense, reorganization expenses, impairment of assets, equity in loss/income of partnerships, gain on extinguishment of debt, gain/loss on sales of real estate and gain/loss on sale of preferred equity interest. Same Store NOI is calculated using retail properties owned for the full periods presented and excludes properties acquired or disposed of, under redevelopment, or designated as non-core during the periods presented. Non Same Store NOI is calculated using the retail properties excluded from the calculation of Same Store NOI.
The table below reconciles net loss to NOI of our consolidated properties for
the three and six months ended
Three Months Ended June 30, Six Months Ended June 30,
(in thousands of dollars) 2022 2021 2022 2021
Net loss $ (11,015 ) $ (25,380 ) $ (43,988 ) $ (69,360 )
Other income (69 ) (162 ) (310 ) (288 )
Depreciation and amortization 28,382 29,686 57,492 59,525
General and administrative expenses 9,744 13,535 21,227 25,366
Insurance recoveries, net - (670 ) - (670 )
Provision for employee separation
expenses (85 ) 149 (1 ) 240
Project costs and other expenses 19 77 79 179
Interest expense, net 32,601 31,978 63,992 62,709
Reorganization expenses - 69 - 267
Impairment of assets - 1,302 - 1,302
Equity in loss (income) of partnerships 1,188 (2,433 ) 1,583 1,000
Gain on extinguishment of debt - (4,587 ) - (4,587 )
(Gain) loss on sales of interests in
real estate (1,701 ) 974 (1,701 ) 974
Gain on sale of equity method
investment (9,053 ) - (9,053 ) -
Gain on sales of real estate by equity
method investee - (1,347 ) - (1,347 )
Gain on sales of non-operating real
estate (8,755 ) - (8,755 ) -
Gain on sale of preferred equity
interest - - (3,688 ) -
NOI from consolidated properties
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The table below reconciles equity in (loss) income of partnerships to NOI of our share of unconsolidated properties for the three and six months endedJune 30, 2022 and 2021: Three Months Ended June 30, Six Months Ended June 30, (in thousands of dollars) 2022 2021 2022 2021
Equity in (loss) income of partnerships
2,973 2,974 5,995 6,162
Impairment of assets - 265 - 265
Interest and other expenses 6,050 5,531 11,852 10,818
NOI from equity method investments at
ownership share $ 7,835 $ 11,203 $ 16,264 $ 16,245 The table below presents total NOI and total NOI excluding lease termination
revenue for the three months ended
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