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MarketScreener Homepage  >  Equities  >  Nyse  >  RPT Realty    RPT

RPT REALTY

(RPT)
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RPT REALTY : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

08/05/2020 | 04:14pm EST

Where we say "Company," "we," "us," or "our," we mean RPT Realty, RPT Realty, L.P., and/or their subsidiaries, as the context may require.


The following discussion and analysis of the financial condition and results of
operations should be read in conjunction with the condensed consolidated
financial statements, including the respective notes thereto, which are included
in this Form 10-Q.

Forward-Looking Statements

This document contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These forward-looking statements represent our
expectations, plans or beliefs concerning future events and may be identified by
terminology such as "may," "will," "should," "believe," "expect," "estimate,"
"anticipate," "continue," "predict" or similar terms. Although the
forward-looking statements made in this document are based on our good faith
beliefs, reasonable assumptions and our best judgment based upon current
information, certain factors could cause actual results to differ materially
from those in the forward-looking statements. Many of the factors that will
determine the outcome of forward-looking statements are beyond our ability to
predict or control. Currently, one of the most significant factors is the
potential adverse effect of the current COVID-19 pandemic on the financial
condition, results of operations, cash flows and performance of the Company and
our tenants (including their ability to timely make rent payments), the real
estate market (including the local markets where our properties are located),
the financial markets and general global economy as well as the potential
adverse impact on our ability to enter into new leases or renew leases with
existing tenants on favorable terms or at all. The impact COVID-19 has, and will
continue to have, on the Company and its tenants is highly uncertain, cannot be
predicted and will vary based upon the duration, magnitude and scope of the
COVID-19 pandemic as well as the actions taken by federal, state and local
governments to mitigate the impact of COVID-19, including social distancing
protocols, restrictions or relaxations on business activities and
"shelter-in-place" and "stay at home" mandates, and the effect of any relaxation
or revocation of current restrictions. Additional factors which may cause actual
results to differ materially from current expectations include, but are not
limited to: our success or failure in implementing our business strategy;
economic conditions generally and in the commercial real estate and finance
markets specifically; the cost and availability of capital, which depends in
part on our asset quality and our relationships with lenders and other capital
providers; risks associated with bankruptcies or insolvencies or general
downturn in the businesses of tenants; the potential adverse impact from tenant
defaults generally or from the unpredictability of the business plans and
financial condition of the Company's tenants, which are heightened as a result
of the COVID-19 pandemic; the execution of deferral or rent concession
agreements by tenants; our business prospects and outlook; changes in
governmental regulations, tax rates and similar matters; our continuing to
qualify as a REIT; and other factors detailed from time to time in our filings
with the Securities and Exchange Commission ("SEC"), including in particular
those set forth under "Risk Factors" in our Annual Report on Form 10-K for the
year ended December 31, 2019, our Quarterly Report on Form 10-Q for the quarter
ended March 31, 2020, and this Quarterly Report on Form 10-Q, which you should
interpret as being heightened as a result of the numerous and ongoing adverse
impacts of COVID-19. Given these uncertainties, you should not place undue
reliance on any forward-looking statements. Except as required by law, we assume
no obligation to update these forward-looking statements, even if new
information becomes available in the future.

Overview


RPT Realty owns and operates a national portfolio of open-air shopping
destinations principally located in top U.S. markets. The Company's shopping
centers offer diverse, locally-curated consumer experiences that reflect the
lifestyles of their surrounding communities and meet the modern expectations of
the Company's retail partners. The Company is a fully integrated and
self-administered REIT publicly traded on the NYSE. The common shares of
beneficial interest of the Company, par value $0.01 per share, are listed and
traded on the NYSE under the ticker symbol "RPT". As of June 30, 2020, the
Company's portfolio consisted of 49 shopping centers (including five shopping
centers owned through our joint venture, R2G Venture LLC "R2G") representing
11.9 million square feet square feet of GLA.  As of June 30, 2020, the Company's
pro-rata share of the aggregate portfolio was 93.6% leased.

Impact of COVID-19


The Company is closely monitoring the COVID-19 pandemic, including the impact on
our business, our tenants, our vendors and our partners. The following summary
is intended to provide shareholders with information pertaining to the impacts
of the COVID-19 pandemic on the Company's business and management's strategy and
actions to respond to these impacts. Unless otherwise specified, the statistical
and other information regarding the Company's portfolio and tenants included in
this subsection are based on information available to the Company and includes
its consolidated properties and its pro-rata share of unconsolidated joint
ventures. Due to the uncertainty and rapidly changing nature of the COVID-19
situation, the Company anticipates that any such statistics and information will
potentially change significantly. As a result, the information provided
                                    Page 27
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may not be indicative of the actual impact of the COVID-19 pandemic on the Company's business, operations, cash flows and financial condition for the second quarter of 2020 and future periods.


The spread of COVID-19 has caused significant market volatility and adverse
impacts on the U.S. retail market, the U.S. economy, the global economy, and
financial markets. In order to mitigate the spread of COVID-19, federal, state
and local governments have issued recommendations and mandatory business
closures, quarantines, restrictions on travel and "shelter-in-place" or "stay at
home" orders and social distancing protocols. These measures have impacted our
tenants in various ways based upon their business classifications. For example,
many jurisdictions have permitted only "essential" businesses to continue to
fully operate, have required all "non-essential" businesses to cease or
significantly modify operations and have limited restaurants to take-out and
delivery services. While the Company is actively monitoring each jurisdiction's
plans, it is impossible to predict when restrictions will be partially or
completely lifted or relaxed, when tenants will fully re-open or what
restrictions will remain in place when re-opening occurs, how such re-opening
restrictions will continue to impact, or the effect of any reopening or
relaxation of such restrictions will have on, the business of our tenants and
whether consumer demand and spending will return to the same levels prior to the
COVID-19 pandemic. COVID-19 has impacted the Company's properties and tenants by
these and other factors as follows:
•100% of the Company's 49 shopping centers remain open and operating as of July
31, 2020.
•92% of our total tenants were open and operating, on a pro-rata basis, as of
July 31, 2020 based on ABR.
•67% of the Company's properties by ABR had a grocery or grocer component and
87% of ABR stemmed from national or regional tenants, on a pro-rata basis, as of
June 30, 2020.
•75% of July 2020 and 65% of second quarter 2020 rents have been paid, on a
pro-rata basis, as of July 31, 2020.
•18% of July 2020 and 24% of second quarter 2020 rents are subject to signed or
approved deferral agreements, on a pro-rata basis, as of July 31, 2020.
•Ended the second quarter 2020 with $249.7 million in cash, cash equivalents and
restricted cash with no debt maturities until June 27, 2021.

The Company has taken a number of proactive measures to maintain the strength of
its business and manage the impact of COVID-19 on the Company's operations and
liquidity, including the following:
•The health and safety of our employees and their families, our tenants and our
shopping center customers is our priority. Employees were required to work from
home pursuant to the Company's pre-existing work-from-home infrastructure
already in-place, mitigating concerns regarding the loss of employee
productivity, cybersecurity concerns, and greater difficulty in maintaining
internal controls over financial reporting.
•The Company maintains continuous communication with its tenants and is
providing resources and assisting tenants in identifying local, state and
federal aid that may be available to support their businesses and employees
during the pandemic, including stimulus funds that may be available under the
Coronavirus Aid, Relief, and Economic Security Act of 2020.
•The Company completed a workforce reduction and instituted temporary
compensation reductions for the executive officers ranging from 10% to 20% of
their annual base salaries. Certain executive officers also agreed to further
reductions of 10% to 20% of their annual base salaries in exchange for
restricted common shares with an equal value.
•To enhance its liquidity position and maintain financial flexibility, the
Company borrowed $225.0 million on its unsecured revolving credit facility in
March 2020. On June 30, 2020, the Company repaid $50.0 million leaving $175.0
million outstanding.
•As of June 30, 2020, the Company had approximately $249.7 million in cash, cash
equivalents and restricted cash.
•The Company has taken proactive measures to manage liquidity, by suspending the
Company's acquisition and disposition activity until further notice with no
transactions made since December 31, 2019. We have suspended all new development
and redevelopment project starts until further notice and currently have no
committed development or redevelopment projects in progress. Further, the
Company started deferring all but essential maintenance capital expenditures in
early March. We now estimate our capital expenditures for 2020 will range
between $20.0 million to $25.0 million. Our original range of capital
expenditures was $40.0 million to $50.0 million for the full year.
•In light of the disruption caused by the COVID-19 pandemic, the Board of
Trustees has temporarily suspended the quarterly common dividend to retain cash.
The Board of Trustees will continue to evaluate the Company's dividend policy
based upon the Company's financial performance and economic outlook and, at a
later date, intends to reinstate the quarterly common dividend of at least the
amount required to continue qualifying as a REIT for U.S. federal income tax
requirements.
                                    Page 28
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•We paid our first quarter dividend in the amount of $19.4 million on April 1,
2020, to shareholders of record as of March 20, 2020.
•We paid our second quarter preferred dividend in the amount of $1.7 million on
July 1, 2020 to shareholders of record as of June 20, 2020. The Company
anticipates it will continue to pay its preferred stock dividend.

The Company's predominant source of revenue is from rents and reimbursable
expenses received from tenants pursuant to lease agreements. Therefore, the
Company's financial results may be adversely impacted in the event our tenants
are unable to make rental payments due to the COVID-19 pandemic. The ability of
tenants to pay rent is highly uncertain and cannot be predicted based upon the
uncertainty surrounding the magnitude, duration and scope of the COVID-19
pandemic. The Company also experienced a slow-down in leasing activity during
March 2020 caused by uncertainty and tenant concern related to the COVID-19
pandemic. While January 2020 and February 2020 leasing activity was relatively
consistent with historical levels, the volume of new leasing activity has since
slowed. As a result, the full impact of COVID-19 on our business is currently
unknown. The factors described above, as well as additional factors that the
Company may not currently be aware of, could materially negatively impact the
Company's ability to collect rent and could lead to tenant bankruptcies,
rejection of tenant leases in bankruptcy, difficulties in renewing or re-leasing
retail space, difficulties in accessing capital, impairment of the Company's
assets and other effects that could materially and adversely affect the
Company's business, results of operations, financial condition and ability to
pay distributions to shareholders. See "Risk Factors" in this report.

Our Strategy


Our goal is to be a dominant shopping center owner, with a focus on the
following:
•Own and manage high quality open-air shopping centers predominantly
concentrated in the top U.S. metropolitan statistical areas ("MSA");
•Curate our real estate to maximize its value while being aligned with the
future of the shopping center industry by leveraging technology, optimizing
distribution points for brick-and-mortar and e-commerce purchases, engaging in
best-in-practice sustainability programs and developing a personalized appeal to
attract and engage the next generation of shoppers;
•Maintain value creation redevelopment and expansion pipeline;
•Maximize balance sheet liquidity and flexibility; and
•Retain motivated, talented and high performing employees.

Key methods to achieve our long-term strategy:
•Deliver above average relative shareholder return and generate outsized
consistent and sustainable Consolidated Same Property Net Operating Income
("Same Property NOI") and Operating Funds from Operations ("Operating FFO") per
share growth;
•Evaluate selective redevelopment projects with significant pre-leasing for
which we expect to achieve attractive returns on investment;
•Sell assets that no longer meet our long-term strategy and redeploy the
proceeds to lease, redevelop and acquire assets in our core and target markets;
•Achieve lower leverage while maintaining low variable interest rate risk; and
•Retain access to diverse sources of capital, maintain liquidity through
borrowing capacity under our unsecured line of credit and minimize the amount of
debt maturities in a single year.

                                    Page 29
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The following table summarizes our consolidated operating portfolio by market as
of June 30, 2020:
                                                                         Market Summary (1)
                                     Number of
MSA                                  Properties           GLA (in thousands)           Leased %               Occupied %             ABR/SF             % of ABR
Top 40 MSAs:
Atlanta                                        3                      527                   95.0  %                  94.1  %       $ 12.13                    3.7  %
Austin                                         1                       76                   94.4  %                  94.4  %         25.78                    1.1  %
Baltimore                                      1                      252                   96.3  %                  96.3  %          9.82                    1.4  %
Chicago                                        4                      767                   85.3  %                  85.3  %         14.76                    5.9  %
Cincinnati                                     3                    1,263                   94.5  %                  93.0  %         16.02                   11.4  %
Columbus                                       2                      435                   93.9  %                  89.0  %         18.14                    4.3  %
Denver                                         1                      504                   89.0  %                  88.6  %         20.07                    5.4  %
Detroit                                        9                    2,317                   94.9  %                  94.9  %         14.89                   19.5  %
Indianapolis                                   1                      251                   95.7  %                  87.9  %         14.54                    1.9  %
Jacksonville                                   2                      756                   92.2  %                  92.2  %         17.05                    7.2  %
Miami                                          6                    1,035                   93.0  %                  91.6  %         16.75                    7.4  %
Milwaukee                                      2                      546                   91.7  %                  91.7  %         12.66                    3.9  %
Minneapolis                                    2                      445                   89.8  %                  89.8  %         25.37                    6.2  %
Nashville                                      1                      633                   97.7  %                  97.7  %         13.50                    5.1  %
St. Louis                                      4                      827                   95.4  %                  95.4  %         14.49                    6.2  %
Tampa                                          4                      752                   97.4  %                  97.4  %         12.96                    5.8  %
Top 40 MSA subtotal                           46                   11,388                   93.6  %                  92.9  %       $ 15.50                   96.4  %
Non Top 40 MSA                                 3                      516                   93.1  %                  92.7  %         12.42                    3.6  %
Total                                         49                   11,904                   93.6  %                  92.9  %       $ 15.37                  100.0  %

(1) Shown at pro-rata except for number of properties and GLA.

We accomplished the following activity during the six months ended June 30, 2020:

Leasing Activity

Our properties reported the following leasing activity, which is shown at pro-rata except for number of leasing transactions and square feet:

                                        Leasing Transactions          

Square Footage Base Rent/SF (1) Prior Rent/SF (2) Tenant Improvements/SF (3) Leasing Commissions/SF Renewals

                                               50                 643,429                   $13.19$12.55$1.22$0.00
New Leases - Comparable                                 6                  15,166                   $24.70$24.19$27.06$11.24
New Leases - Non-Comparable (4)                        13                  58,599                   $21.37                   N/A                        $59.52$10.31
Total                                                  69                 717,194                   $14.11                   N/A                         $6.60$1.09


(1) Base rent represents contractual minimum rent under the new lease for the
first 12 months of the term.
(2) Prior rent represents minimum rent, if any, paid by the prior tenant in the
final 12 months of the term.
(3) Includes estimated tenant improvement cost, tenant allowances, and landlord
costs. Excludes first generation space and leases related to development and
redevelopment activity.
(4) Non-comparable lease transactions include (i) leases for space vacant for
greater than 12 months and (ii) leases signed where the previous and current
lease do not have a consistent lease structure.

The Company also experienced a slow-down in leasing activity beginning in March
2020 caused by uncertainty and tenant concern related to the COVID-19 pandemic.
While January 2020 and February 2020 leasing activity was relatively consistent
with historical levels, the volume of new leasing activity with respect to
newly-leased space has since slowed.
                                    Page 30
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Investing Activity

At June 30, 2020, we did not have any active development or redevelopment projects ongoing.


Financing Activity

Debt

As of June 30, 2020, we had net debt of $855.2 million, reflecting net debt to
total market capitalization of 57.4% as compared to 44.8% at June 30, 2019. Net
debt decreased by $28.3 million compared to June 30, 2019, primarily as a result
of an increase in cash and cash equivalents from proceeds received upon the
contribution of properties to the newly formed R2G Venture LLC joint venture in
December 2019.
Equity

In February 2020, the Company entered into an Equity Distribution Agreement
("Equity Distribution Agreement") pursuant to which the Company may offer and
sell, from time to time, the Company's common shares having an aggregate gross
sales price of up to $100.0 million. Sales of the shares of common stock may be
made, in the Company's discretion, from time to time in "at-the-market"
offerings as defined in Rule 415 of the Securities Act of 1933. The Equity
Distribution Agreement also provides that the Company may enter into forward
contracts for shares of its common stock with forward sellers and forward
purchasers. For the six months ended June 30, 2020, we did not issue any common
shares through the arrangement. As of June 30, 2020, we have full capacity
remaining under the agreement. The sale of such shares issuable pursuant to the
Equity Distribution Agreement was registered with the SEC pursuant to a
prospectus supplement filed in February 2020 and the accompanying base
prospectus statement forming part of the Company's shelf registration statement
on Form S-3 (No. 333-232007) which was filed with the SEC in June 2019.

Land Available for Development


At June 30, 2020, our three largest development sites are Hartland Towne Square,
Lakeland Park Center and Parkway Shops. We continue to evaluate the best use for
land available for development, portions of which are adjacent to our existing
shopping centers. It is our policy to start vertical construction on new
development projects only after the project has received entitlements,
significant anchor commitments and construction financing, if appropriate.

Our development and construction activities are subject to risks such as our
inability to obtain the necessary governmental approvals for a project, our
determination that the expected return on a project is not sufficient to warrant
continuation of the planned development, or our change in plan or scope for the
development. If any of these events occur, we may record an impairment
provision.

The Company started deferring all but essential maintenance capital expenditures in early March 2020 in response to the COVID-19 pandemic.

Accounting Policies and Estimates


Our Annual Report on Form 10-K for the year ended December 31, 2019, contains a
description of our critical accounting policies, including policies for the
initial adoption of accounting policies, revenue recognition and accounts
receivable, real estate investment, off balance sheet arrangements, fair value
measurements and deferred charges.

As discussed above, the COVID-19 pandemic has impacted states and cities where
the Company's tenants operate their businesses and where the Company's
properties are located, and, accordingly our tenants may be unable to operate
their businesses, maintain profitability and make timely rental payments to the
Company under their leases. Under such circumstances it is possible our
estimates for rental income not probable of collection for future periods may be
higher than our recent historical trends. Also, the worsening of estimated
future cash flows could result in the recognition of an impairment charge on
certain of the Company's long-lived assets. Management does not believe that the
value of any of the Company's real estate investments was impaired as of June
30, 2020.

                                    Page 31
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In April 2020, the Financial Accounting Standards Board ("FASB") issued a staff
question-and-answer document ("Q&A") focused on the application of the lease
guidance in ASC 842, Leases, for lease concessions related to the effects of the
COVID-19 pandemic. Included in this Q&A, the FASB staff determined that it would
be acceptable for entities to make an election to account for lease concessions
related to the effects of the COVID-19 pandemic consistent with how those
concessions would be accounted for under Topic 842 and Topic 840 as though
enforceable rights and obligations for those concessions existed (regardless of
whether those enforceable rights and obligations for the concessions explicitly
exist in the contract). Consequently, for concessions related to the effects of
the COVID-19 pandemic, an entity will not have to analyze each contract to
determine whether enforceable rights and obligations for concessions exist in
the contract and can elect to apply or not apply the lease modification guidance
in Topic 842 and Topic 840 to those contracts.

The FASB also acknowledged that some concessions would provide a deferral of
payments with no substantive changes to the consideration in the original
contract. The FASB indicated that a deferral affects the timing, but the amount
of the consideration is substantially the same as that required by the original
contract. In cases where we grant a deferral for future periods, as a result of
COVID-19, we account for the concessions as if no changes to the lease contract
were made. Under that accounting, we increase our lease receivable as
receivables accrue. In our income statement, we continue to recognize income
during the deferral period.

                                    Page 32
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Comparison of three months ended June 30, 2020 to June 30, 2019


The following summarizes certain line items from our unaudited condensed
consolidated statements of operations and comprehensive income that we believe
are important in understanding our operations and/or have significantly changed
in the three months ended June 30, 2020 as compared to the same period in 2019:
                                                                Three 

Months Ended June 30,

                                                                                   Dollar        Percent
                                                     2020           2019           Change        Change
                                                                (In thousands)
 Total revenue                                    $ 44,627$ 57,361$ (12,734)       (22.2) %
 Real estate taxes                                   8,453          8,722            (269)        (3.1) %
 Recoverable operating expense                       4,797          5,343   

(546) (10.2) %

 Non-recoverable operating expense                   2,146          2,709   

(563) (20.8) %

 Depreciation and amortization                      17,860         20,628   

(2,768) (13.4) %

 Transaction costs                                      12              -              12              NM
 General and administrative expense                  6,695          6,530   

165 2.5 %


 Insured expenses, net                              (1,713)             -          (1,713)             NM
 Gain on sale of real estate                             -            371            (371)             NM
 Earnings from unconsolidated joint ventures           802             26             776              NM
 Interest expense                                   10,177         10,084              93          0.9  %

 Loss on extinguishment of debt                          -            622            (622)             NM
 Preferred share dividends                           1,675          1,675               -            -  %

 NM - Not meaningful



Total revenue for the three months ended June 30, 2020 decreased $12.7 million,
or (22.2)%, from the same period in 2019. The decrease is primarily due to the
following:
•$6.7 million decrease due to increased rental income not probable of collection
as well as related straight-line rent reserves in the current period, primarily
due to the COVID-19 pandemic; and
•$5.7 million decrease related to properties that were contributed to the R2G
Venture LLC joint venture ("R2G") during the fourth quarter of 2019; and
•$1.4 million decrease from acceleration of a below market lease in the prior
period attributable to a specific tenant who vacated prior to the original
estimated lease termination date; partially offset by
•$0.6 million increase related to a property acquired during the fourth quarter
of 2019; and
•$0.2 million increase related to management fees collected from R2G joint
venture.

Real estate tax expense for the three months ended June 30, 2020 decreased $0.3
million, or (3.1)% from the same period in 2019, primarily due to properties
contributed to R2G during the fourth quarter of 2019, partially offset by higher
net expense at our existing properties.

Recoverable operating expense for the three months ended June 30, 2020 decreased $0.5 million, or (10.2)% from the same period in 2019, primarily due to properties contributed to R2G during the fourth quarter of 2019.


Non-recoverable operating expense for the three months ended June 30, 2020
decreased $0.6 million, or (20.8)% from the same period in 2019, primarily due
to lower legal fees associated with a tenant dispute that concluded during the
current period, as well as properties contributed to R2G during the fourth
quarter of 2019.

Depreciation and amortization expense for the three months ended June 30, 2020
decreased $2.8 million, or (13.4)%, from the same period in 2019. The decrease
is primarily due to properties contributed to R2G during the fourth quarter of
2019, as well as higher asset write offs in the prior period for tenants that
vacated prior to their original lease end date.

                                    Page 33
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General and administrative expense for the three months ended June 30, 2020
increased $0.2 million, or 2.5%, from the same period in 2019.  The net increase
is primarily a result of higher wages and payroll related expenses, as well as
higher legal and other outside professional fees, partially offset by lower
management reorganization expense, which includes severance costs associated
with former executives, and lower travel expenses.

During the three months ended June 30, 2020, the Company recorded an insured
benefit of $1.7 million. During fourth quarter of 2019 the Company wrote off
real estate assets that were damaged by a hail storm at one property, which is
fully covered by insurance. This amount represents the approximate insurance
proceeds that were received by the Company in the current period.

The Company had a gain of $0.4 million during the three months ended June 30, 2019, generated from one land parcel sale.


Earnings from unconsolidated joint ventures for the three months ended June 30,
2020 increased $0.8 million from the same period in 2019 primarily due to the
R2G joint venture which was formed in the fourth quarter of 2019.

Interest expense for the three months ended June 30, 2020 increased $0.1
million, or 0.9% from the same period in 2019, primarily as a result of a 22.8%
increase in our average outstanding debt, partially offset by a 70 basis point
decrease in our weighted average interest rate. The increase in our average
outstanding debt is the result of $225.0 million of borrowings in March 2020 on
our unsecured revolving credit facility to strengthen the Company's liquidity
position due to the COVID-19 pandemic. On June 30, 2020, the Company repaid
$50.0 million leaving $175.0 million outstanding.

During the three months ended June 30, 2019, the Company wrote off $0.6 million
of unamortized deferred financing costs associated with the junior subordinated
notes that were redeemed in April 2019.

The comparability of the Company's results of operations for the three months ended June 30, 2020 to future periods may be significantly impacted by the effects of the COVID-19 pandemic.

Comparison of six months ended June 30, 2020 to June 30, 2019


The following summarizes certain line items from our unaudited condensed
consolidated statements of operations and comprehensive income that we believe
are important in understanding our operations and/or have significantly changed
in the six months ended June 30, 2020 as compared to the same period in 2019:
                                                                Six Months Ended June 30,
                                                                                   Dollar        Percent
                                                    2020            2019           Change        Change
                                                               (In thousands)
Total revenue                                    $ 97,503$ 117,069$ (19,566)       (16.7) %
Real estate taxes                                  16,604          18,544          (1,940)       (10.5) %
Recoverable operating expense                      10,776          12,024          (1,248)       (10.4) %
Non-recoverable operating expense                   4,423           5,199            (776)       (14.9) %
Depreciation and amortization                      38,708          39,847          (1,139)        (2.9) %
Transaction costs                                     186               -             186              NM
General and administrative expense                 12,917          12,596             321          2.5  %
Insured expenses, net                              (1,653)              -          (1,653)             NM

Gain on sale of real estate                             -           6,073          (6,073)             NM
Earnings from unconsolidated joint ventures         1,058              80             978              NM
Interest expense                                   19,578          20,433   

(855) (4.2) %


Loss on extinguishment of debt                          -             622            (622)           -  %
Preferred share dividends                           3,350           3,350               -            -  %

NM - Not meaningful



Total revenue for the six months ended June 30, 2020 decreased $19.6 million, or
(16.7)%, from the same period in 2019. The decrease is primarily due to the
following:
•$11.6 million decrease related to properties that were contributed to R2G
during the fourth quarter of 2019;
                                    Page 34
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•$7.1 million decrease due to increased rental income not probable of collection
as well as related straight-line rent reserves in the current period, primarily
due to the COVID-19 pandemic; and
•$1.4 million decrease from acceleration of a below market lease in the prior
period attributable to a specific tenant who vacated prior to the original
estimated lease end date; partially offset by
•$0.6 million increase related to management fees collected due to the R2G joint
venture; and
•$0.2 million increase related to the net impact of two properties sold during
the first quarter of 2019 and one property acquired during the fourth quarter of
2019.

Real estate tax expense for the six months ended June 30, 2020 decreased $1.9
million, or (10.5)% from the same period in 2019, primarily due to properties
contributed to R2G during the fourth quarter of 2019, as well as lower net
expense at our existing properties.

Recoverable operating expense for the six months ended June 30, 2020 decreased $1.2 million, or (10.4)% from the same period in 2019, primarily due to properties contributed to R2G during the fourth quarter of 2019 and two properties sold during the first quarter of 2019.


Non-recoverable operating expense for the six months ended June 30, 2020
decreased $0.8 million, or (14.9)% from the same period in 2019, primarily due
to lower legal fees associated with a tenant dispute that concluded during the
current period, as well as properties contributed to R2G during the fourth
quarter of 2019.

Depreciation and amortization expense for the six months ended June 30, 2020
decreased $1.1 million, or (2.9)%, from the same period in 2019. The decrease is
primarily due to properties contributed to R2G during the fourth quarter of
2019, as well as higher asset write offs in the prior period for tenants that
vacated prior to their original lease end date.

During the six months ended June 30, 2020, the Company recorded transaction
costs of $0.2 million related to legal and professional fees associated with a
property acquisition and property sale of a center that were terminated during
the current period.

General and administrative expense for the six months ended June 30, 2020
increased $0.3 million, or 2.5%, from the same period in 2019.  The net increase
is primarily a result of higher wages and payroll related expenses, as well as
higher legal and other outside professional fees, partially offset by lower
management reorganization expense, which includes severance costs associated
with former executives, and lower travel expenses.

During the six months ended June 30, 2020, the Company recorded an insured
benefit of $1.7 million. During fourth quarter of 2019 the Company wrote off
real estate assets that were damaged by a hail storm at one property, which will
be fully covered by insurance. This amount represents the insurance proceeds
that were received by the Company in the current period.

The Company had gains on real estate disposals of $6.1 million during the six
months ended June 30, 2019, generated from two shopping centers and one land
parcel.

Earnings from unconsolidated joint ventures for the six months ended June 30,
2020 increased $1.0 million from the same period in 2019 primarily due to the
R2G joint venture which was formed in the fourth quarter of 2019.

Interest expense for the six months ended June 30, 2020 decreased $0.9 million,
or (4.2)% from the same period in 2019, primarily as a result of a 50 basis
point decrease in our weighted average interest rate, partially offset by a
10.3% increase in our average outstanding debt. The increase in our average
outstanding debt is the result of $225.0 million of borrowings in March 2020 on
our unsecured revolving credit facility to strengthen the Company's liquidity
position due to the COVID-19 pandemic. On June 30, 2020, the Company repaid
$50.0 million leaving $175.0 million outstanding.

During the six months ended June 30, 2019, the Company wrote off $0.6 million of
unamortized deferred financing costs associated with the junior subordinated
notes that were redeemed in April 2019.

The comparability of the Company's results of operations for the six months ended June 30, 2020 to future periods may be significantly impacted by the effects of the COVID-19 pandemic.

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Liquidity and Capital Resources


Our primary uses of capital include principal and interest payments on our
outstanding indebtedness, ongoing capital expenditures such as leasing capital
expenditures and building improvements, shareholder distributions, operating
expenses of our business, debt maturities, acquisitions and discretionary
capital expenditures such as targeted remerchandising, expansions, redevelopment
and development. We generally strive to cover our principal and interest
payments, operating expenses, shareholder distributions, and ongoing capital
expenditures from cash flow from operations, although from time to time we have
borrowed or sold assets to finance a portion of those uses. We believe the
combination of cash flow from operations, cash balances, favorable relationships
with our lenders, issuance of debt, property dispositions, reducing our planned
capital expenditures, suspension of our quarterly common share dividend and
issuance of equity securities will provide adequate capital resources to fund
all of our expected uses over at least the next 12 months. Although we believe
that the combination of factors discussed above will provide sufficient
liquidity, no such assurance can be given. As discussed above, the COVID-19
pandemic outbreak has adversely impacted states and cities where the Company's
tenants operate their businesses and where the Company's properties are located.
The effects of COVID-19 and attempts to mitigate its outbreak have had an
adverse impact on our short-term cash flow due to a significant number of
tenants not paying rent for the second quarter and could continue to have a
material adverse effect on our financial condition, results of operations and
cash flows as the reduced economic activity severely impacts certain of our
tenants' businesses, financial condition and liquidity and may cause certain
tenants to be unable to meet their obligations to us in full, timely or at all.
Nonpayment of rent or closures by our tenants of their stores could reduce our
cash flows, which would adversely impact our liquidity and the achievement of
our financial forecast.

We believe our current capital structure provides us with the financial
flexibility to fund our current capital needs. We intend to continue to enhance
our financial and operational flexibility by extending the duration of our debt,
laddering our debt maturities, expanding our unencumbered asset base, and
improving our leverage profile. In addition, we believe we have access to
multiple forms of capital which includes unsecured corporate debt, secured
mortgage debt, and preferred and common equity. However, there can be no
assurances in this regard and additional financing and capital may not
ultimately be available to us going forward, on favorable terms or at all.

At June 30, 2020 and 2019, we had $249.7 million and $51.3 million,
respectively, in cash and cash equivalents and restricted cash. Restricted cash
generally consists of funds held in escrow by lenders to pay real estate taxes,
insurance premiums and certain capital expenditures. As of June 30, 2020, we had
no debt maturing for the remainder of 2020, and we had $175.0 million of unused
capacity under our $350.0 million unsecured revolving credit facility that could
be borrowed subject to compliance with applicable financial covenants. The
current amount of outstanding indebtedness is close to the maximum permitted
amount under the covenants contained in our revolving credit facility, and as a
result our ability to retain our outstanding borrowings and utilize the limited
remaining amount available under our revolving credit facility would depend on
our continued compliance with financial covenants and other terms of our
revolving credit agreement, which may be impacted by certain factors including
tenant store closures and the nonpayment of rent, unless we obtain waivers or
modifications to our loan document covenants. These covenants are generally
based on our financial results from the most recently completed four fiscal
quarters and, as a result, the impact on these financial covenants from adverse
short-term impacts on operating results is partially mitigated by previous
and/or subsequent operating results. Refer to   Note 5   for further discussion
on current quarter amendments to our covenants.

Our long-term, post-COVID-19 pandemic, liquidity needs consist primarily of
funds necessary to pay indebtedness at maturity, potential acquisitions of
properties, redevelopment of existing properties, the development of land and
discretionary capital expenditures. We continually search for investment
opportunities that may require additional capital and/or liquidity. We will
continue to pursue the strategy of selling non-core properties or land that no
longer meet our investment criteria. Our ability to obtain acceptable selling
prices and satisfactory terms and financing will impact the timing of future
sales. We anticipate using net proceeds from the sale of properties or land to
reduce outstanding debt and support current and future growth oriented
initiatives. To the extent that asset sales are not sufficient to meet our
long-term liquidity needs, we expect to meet such needs by raising debt or
issuing equity.

We have on file with the SEC an automatic shelf registration statement relating
to the offer and sale of an indeterminable amount of debt securities, preferred
shares, common shares, depository shares, warrant and rights. From time to time,
we may issue securities under this registration statement for working capital
and other general corporate purposes.

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For the six months ended June 30, 2020, our cash flows were as follows compared
to the same period in 2019:
                                                                          Six Months Ended June 30,
                                                                        2020                      2019
                                                                               (In thousands)
Net cash provided by operating activities                         $     13,371$    37,311
Net cash (used in) provided by investing activities               $    (10,732)$    38,907
Net cash provided by (used in) financing activities               $    132,468$   (69,594)



Operating Activities

Net cash provided by operating activities decreased $23.9 million in the six
months ended June 30, 2020 compared to the same period in 2019 primarily due to
the following:
•Impact of the COVID-19 pandemic on rental income not probable of collection of
$5.6 million and deferred accounts receivable of $12.3 million; and
•Impact of shopping centers contributed to R2G in 2019; partially offset by
•Reduction in interest expense.

Investing Activities


Net cash used by investing activities was $(10.7) million in the six months
ended June 30, 2020, compared to net cash provided by investing activities
of $38.9 million for the same period in 2019. The $49.6 million change in net
cash provided by (used in) investing activities was primarily due to the
following:
•Net proceeds from the sale of real estate decreased $67.9 million; partially
offset by
•Net capital improvements covered by insurance increased $2.1 million; and
•Development and capital improvements decreased $20.4 million.

At June 30, 2020, we did not have any active development or redevelopment projects ongoing.

Financing Activities


Net cash provided by financing activities was $132.5 million in the six months
ended June 30, 2020, compared to net cash used by financing activities of
$(69.6) million in 2019. The increase of $202.1 million was primarily the result
of net borrowings on our revolving credit facility in 2020 and the repayment of
junior subordinated notes in 2019.

For further information on our unsecured revolving credit facility and other
debt, refer to   Note 5   of the notes to the condensed consolidated financial
statements.

Dividends and Equity

We currently qualify, and intend to continue to qualify in the future, as a REIT
under the Internal Revenue Code ("Code"). As a REIT, we must distribute to our
shareholders at least 90% of our REIT taxable income annually, excluding net
capital gains. Distributions paid are at the discretion of our Board of Trustees
and depend on our actual net income available to common shareholders, cash flow,
financial condition, capital requirements, restrictions in financing
arrangements, the annual distribution requirements under REIT provisions of the
Code and such other factors as our Board of Trustees deems relevant.

On May 8, 2020, our Board of Trustees declared a quarterly cash dividend of
$0.90625 per Series D Cumulative Convertible Perpetual Preferred Share to
preferred shareholders of record as of June 20, 2020. Our dividend policy is to
make distributions to shareholders of at least 90% of our REIT taxable income,
excluding net capital gains, in order to maintain qualification as a
REIT. Distributions paid by us are generally expected to be funded from cash
flows from operating activities. To the extent that cash flows from operating
activities are insufficient to pay total distributions for any period,
alternative funding sources are used. Examples of alternative funding sources
include proceeds from sales of real estate and bank borrowings. During the six
months ended June 30, 2020, the sum of our principal and interest payments,
operating expenses, shareholder distributions and ongoing capital expenditures
exceeded our cash flow from operations by $31.4 million, and we used other
sources of liquidity,
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including a portion of the proceeds from asset sales, to meet our cash
requirements. The $31.4 million shortfall was primarily the result of our first
and second quarter shareholder distributions which totaled $39.5 million. In
light of the disruption caused by the COVID-19 pandemic, the Board of Trustees
temporarily suspended the quarterly common dividend to retain cash. The Board of
Trustees will continue to evaluate the Company's dividend policy based upon the
Company's financial performance and economic outlook and, at a later date,
intends to reinstate the quarterly common dividend of at least the amount
required to continue qualifying as a REIT for U.S. federal income tax
requirements.

In February 2020, the Company entered into an Equity Distribution Agreement
("Equity Distribution Agreement") pursuant to which the Company may offer and
sell, from time to time, the Company's common shares having an aggregate gross
sales price of up to $100.0 million. Sales of the shares of common stock may be
made, in the Company's discretion, from time to time, in "at-the-market"
offerings as defined in Rule 415 of the Securities Act. The Equity Distribution
Agreement also provides that the Company may enter into forward contracts for
shares of its common stock with forward sellers and forward purchasers. For the
six months ended June 30, 2020, we did not issue any common shares through the
arrangement. As of June 30, 2020, we have full capacity remaining under the
agreement. The sale of such shares issuable pursuant to the Equity Distribution
Agreement was registered with the SEC pursuant to a prospectus supplement filed
in February 2020 and the accompanying base prospectus statement forming part of
the Company's shelf registration statement on Form S-3 (No. 333-232007) which
was filed with the SEC in June 2019.

Debt

At June 30, 2020, we had $1.1 billion of debt outstanding consisting of $535.0 million in senior unsecured notes, $310.0 million of unsecured term loan facilities, $86.5 million of fixed rate mortgage loans encumbering certain properties, and $175.0 million of borrowings on our revolving credit facility.


In addition, we have eleven interest rate swap agreements in effect for an
aggregate notional amount of $310.0 million and two forward starting interest
rate swap agreements for an aggregate notional amount of $75.0 million
converting our floating rate corporate debt to fixed rate debt. After taking
into account the impact of converting our variable rate debt to fixed rate debt
by use of the interest rate swap agreements, at June 30, 2020, we had $175.0
million of variable rate debt outstanding.

Our revolving credit facility, senior unsecured notes and term loan facilities
contain representations, warranties and covenants, and events of default. These
include financial covenants such as total leverage, fixed charge coverage ratio,
unsecured leverage ratio, tangible net worth and various other calculations,
which are detailed in the specific agreements governing our indebtedness, many
of which are exhibits to our most recent Annual Report on Form 10-K. On June 30,
2020, we entered into amendments to the note purchase agreements governing all
of our outstanding senior unsecured notes. The following is a summary of the
material amendments to the note purchase agreements:

•The occupancy tests relating to the minimum ratio of consolidated total
unencumbered asset value to unsecured indebtedness were eliminated during the
period from June 30, 2020 through and including September 30, 2021 (the
"Specified Period") and were otherwise reduced during the fiscal quarters ended
December 31, 2021 and March 31, 2022;

•The minimum ratio of consolidated total unencumbered asset value to unsecured
indebtedness that the Operating Partnership is required to maintain was reduced
during the Specified Period; and

•The Operating Partnership agreed to a minimum liquidity requirement during the Specified Period.

Off Balance Sheet Arrangements

Real Estate Joint Ventures


We consolidate entities in which we own less than 100% equity interest if we
have a controlling interest or are the primary beneficiary in a variable
interest entity, as defined in the Consolidation Topic of FASB ASC 810. From
time to time, we enter into joint venture arrangements from which we believe we
can benefit by owning a partial interest in one or more properties.

As of June 30, 2020, our investments in unconsolidated joint ventures were
approximately $128.8 million representing our ownership interest in four joint
ventures. We account for these entities under the equity method. Refer to   Note
4 Equity Investments in Unconsolidated Joint Ventures   of the notes to the
condensed consolidated financial statements for more information.

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We review our equity investments in unconsolidated entities for impairment on a
venture-by-venture basis whenever events or changes in circumstances indicate
that the carrying value of the equity investment may not be recoverable. In
testing for impairment of these equity investments, we primarily use cash flow
models, discount rates, and capitalization rates to estimate the fair value of
properties held in joint ventures, and we also estimate the fair value of the
debt of the joint ventures based on borrowing rates for similar types of
borrowing arrangements with the same remaining maturity. Considerable judgment
by management is applied when determining whether an equity investment in an
unconsolidated entity is impaired and, if so, the amount of the
impairment. Changes to assumptions regarding cash flows, discount rates, or
capitalization rates could be material to our condensed consolidated financial
statements.

We are engaged by our joint ventures to provide asset management, property management, leasing and investing services for such venture's respective properties. We receive fees for our services, including a property management fee calculated as a percentage of gross revenues received.

Guarantee


A redevelopment agreement was entered into between the City of Jacksonville, the
Jacksonville Economic Development Commission and the Company, to construct and
develop River City Marketplace in 2005. As part of the agreement, the city
agreed to finance up to $12.2 million of bonds. Repayment of the bonds is to be
made in accordance with a level-payment amortization schedule over 20 years, and
repayments are made out of tax revenues generated by the redevelopment. The
remaining debt service payments due over the life of the bonds, including
principal and interest, are $8.9 million. As part of the redevelopment, the
Company executed a guaranty agreement whereby the Company would fund debt
service payments if incremental tax revenues were not sufficient to fund
repayment. There have been no payments made by the Company under this guaranty
agreement to date.

Contractual Obligations

The following are our contractual cash obligations as of June 30, 2020:

                                                                        Payments due by period
                                                            Less than                                                More than
Contractual Obligations                   Total             1 year (1)         1-3 years          3-5 years           5 years
                                                                            (In thousands)
Mortgages and notes payable:
Scheduled amortization                $     8,447$   1,201$   4,785$   1,810$     651
Payments due at maturity                1,098,008                  -            391,508            306,500            400,000
 Total mortgages and notes payable
(2)                                     1,106,455              1,201            396,293            308,310            400,651
Interest expense (3)                      194,765             19,334            102,041             43,748             29,642
Finance lease (4)                           1,300                100                300                200                700
Operating leases                           99,864                728              4,447              1,974             92,715
Construction commitments                    3,731              3,731                  -                  -                  -
Development obligations (5)                 2,842                431                611                382              1,418

Total contractual obligations $ 1,408,957$ 25,525

$ 503,692$ 354,614$ 525,126



(1)Amounts represent balance of obligation for the remainder of 2020.
(2)Excludes $1.5 million of unamortized mortgage debt premium and $4.0 million
in net deferred financing costs.
(3)Variable-rate debt interest is calculated using rates at June 30, 2020.
(4)Includes interest payments associated with the finance lease obligation of
$0.4 million.
(5)Includes interest payments associated with the development obligations of
$0.6 million.

At June 30, 2020, we did not have any contractual obligations that required or allowed settlement, in whole or in part, with consideration other than cash.

Debt

See the analysis of our debt included in "Liquidity and Capital Resources."

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Operating and Finance Leases

We have an operating ground lease at Centennial Shops located in Edina, Minnesota. The lease includes rent escalations throughout the lease period and expires in April 2105.


We have an operating lease for our 12,572 square foot corporate office in
Southfield, Michigan, which commenced in August 2019, and an operating lease for
our 5,629 square foot corporate office in New York, New York. These leases are
set to expire in December 2024 and January 2024, respectively. Our Southfield,
Michigan corporate office lease includes two additional five year renewal
options to extend the lease through December 2034 and our New York, New York
corporate office lease includes an additional five year renewal to extend the
lease through January 2029.

We also have a ground finance lease at our Buttermilk Towne Center with the City
of Crescent Springs, Kentucky. The lease provides for fixed annual payments of
$0.1 million through maturity in December 2032, at which time we can acquire the
land for one dollar.

Construction Costs

In connection with the pad development and expansion of various shopping centers
as of June 30, 2020, we have entered into agreements for construction activities
with an aggregate remaining cost of approximately $3.7 million.

Planned Capital Spending

We are focused on our core strengths of enhancing the value of our existing portfolio of shopping centers through successful leasing efforts and the completion of our pad development and expansion projects currently in process.


For the remainder of 2020, we anticipate spending between $10.0 million and
$15.0 million for capital expenditures, of which $3.7 million is reflected in
the construction commitments in the contractual obligations table. The total
anticipated spending relates to leasing capital expenditures and essential
building improvements. Estimates for future spending will change as new projects
are approved and will depend on the continuing impact of the COVID-19 among
other factors.

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Capitalization


At June 30, 2020 our total market capitalization was $1.5 billion. The table
below reconciles total debt to net debt and sets forth our calculation of our
total market capitalization as of June 30, 2020 and 2019:
                                                                            June 30,
                                                                   2020                  2019
                                                                         (In thousands)
Notes payable, net                                            $  1,103,996$    934,223
Add: Unamortized premiums and deferred financing costs               2,459                  (381)
Finance lease obligation                                               926                   975
Cash, cash equivalents and restricted cash                        (249,659)              (51,346)

Pro-rata share of unconsolidated entities cash, cash equivalents and restricted cash

                                     (2,557)                    -
Net debt(1)                                                   $    855,165$    883,471

Common shares outstanding                                           80,008                79,816
Operating Partnership Units outstanding                              1,909                 1,909
Restricted share awards (treasury method)                              100                   392
Total common shares and equivalents                                 82,017                82,117

Market price per common share (at June 30, 2020 and 2019) $ 6.96

         $      12.11
Equity market capitalization                                  $    570,838

$ 994,437

7.25% Series D Cumulative Convertible Perpetual Preferred Shares

                                                               1,849                 1,849

Market price per convertible preferred share (at June 30, 2020 and 2019)

                                                $      34.16$      50.78
Convertible perpetual preferred shares (at market)            $     63,162$     93,892

Total market capitalization                                   $  1,489,165$  1,971,800

Net debt to total market capitalization                               57.4  %               44.8  %


(1)Net debt represents total debt (reported in accordance with GAAP) adjusted to
exclude deferred financing costs and unamortized premiums, and reduced for cash,
cash equivalents and restricted cash. By excluding deferred financing costs and
unamortized premiums, and reduced for cash, cash equivalents and restricted
cash, net debt provides an estimate of borrowed capital to be repaid, net of
cash available to repay it. We believe this calculation is useful to understand
our financial condition. Our method of calculating net debt may be different
from methods used by other companies and may not be comparable.

At June 30, 2020, the non-controlling interest in the Operating Partnership was
approximately 2.3%. The OP Units outstanding may, under certain circumstances,
be exchanged for our common shares of beneficial interest on a one-for-one
basis. We, as sole general partner of the Operating Partnership, have the
option, but not the obligation, to settle exchanged OP Units held by others in
cash based on the current trading price of our common shares of beneficial
interest. Assuming the exchange of all non-controlling interest OP units, there
would have been approximately 81.9 million common shares of beneficial interest
outstanding at June 30, 2020, with a market value of approximately $570.1
million.

Inflation


Inflation has been relatively low in recent years and has not had a significant
detrimental impact on the results of our operations.  Should inflation rates
increase in the future, substantially all of our tenant leases contain
provisions designed to mitigate the negative impact of inflation in the near
term. Such lease provisions include clauses that require our tenants to
reimburse us for real estate taxes and many of the operating expenses we
incur. Also, many of our leases provide for periodic increases in base rent
which are either of a fixed amount or based on changes in the consumer price
index and/or percentage rents (where the tenant pays us rent based on percentage
of its sales). Significant inflation rate increases over a prolonged period of
time may have a material adverse impact on our business.


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Non-GAAP Financial Measures

Certain of our key performance indicators are considered non-GAAP financial measures. Management uses these measures along with our GAAP financial statements in order to evaluate our operating results. We believe these additional measures provide users of our financial information additional comparable indicators of our industry, as well as, our performance.

Funds from Operations


We consider funds from operations, also known as "FFO," to be an appropriate
supplemental measure of the financial performance of an equity REIT. The
National Association of Real Estate Investment Trusts ("NAREIT") is an industry
body public REITs participate in and provides guidance to its members. Under the
NAREIT definition, FFO represents net income (computed in accordance with GAAP),
excluding gains (or losses) from sales of depreciable property and impairment
provisions on depreciable real estate or on investments in non-consolidated
investees that are driven by measurable decreases in the fair value of
depreciable real estate held by the investee, plus depreciation and
amortization, (excluding amortization of financing costs). Adjustments for
unconsolidated partnerships and joint ventures are calculated to reflect funds
from operations on the same basis. We have adopted the NAREIT definition in our
computation of FFO.

In addition to FFO, we include Operating FFO as an additional measure of our
financial and operating performance. Operating FFO excludes acquisition costs
and periodic items such as gains (or losses) from sales of land and impairment
provisions on land, bargain purchase gains, severance expense, executive
management reorganization costs, net, accelerated amortization of debt premiums,
gains or losses on extinguishment of debt, uncapitalized financing costs,
insured expenses, net, accelerated write-offs of above and below market lease
intangibles and R2G Venture LLC related costs that are not adjusted under the
current NAREIT definition of FFO. We provide a reconciliation of FFO to
Operating FFO. FFO and Operating FFO should not be considered alternatives to
GAAP net income available to common shareholders or as alternatives to cash flow
as measures of liquidity.

While we consider FFO and Operating FFO useful measures for reviewing our
comparative operating and financial performance between periods or to compare
our performance to different REITs, our computations of FFO and Operating FFO
may differ from the computations utilized by other real estate companies, and
therefore, may not be comparable.

We recognize the limitations of FFO and Operating FFO when compared to GAAP net
income available to common shareholders. FFO and Operating FFO do not represent
amounts available for needed capital replacement or expansion, debt service
obligations, or other commitments and uncertainties. In addition, FFO and
Operating FFO do not represent cash generated from operating activities in
accordance with GAAP and are not necessarily indicative of cash available to
fund cash needs, including the payment of dividends.

The following table illustrates the calculations of FFO and Operating FFO:

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                                                                 Three Months Ended                                Six Months Ended
                                                                      June 30,                                         June 30,
                                                               2020              2019              2020               2019
                                                                          (In thousands, except per share data)
Net (loss) income                                           $ (2,956)

$ 2,962$ (2,614)$ 13,655 Net loss (income) attributable to noncontrolling partner interest

                                                          68               (69)               60               (319)
Preferred share dividends                                     (1,675)           (1,675)           (3,350)            (3,350)

Net (loss) income available to common shareholders            (4,563)            1,218            (5,904)             9,986

Adjustments:

Rental property depreciation and amortization expense 17,719

     20,527            38,439             39,649
Pro-rata share of real estate depreciation from
unconsolidated joint ventures (1)                              1,369                14             2,782                 28
Gain on sale of depreciable real estate                            -                 -                 -             (5,702)

FFO available to common shareholders                          14,525            21,759            35,317             43,961
Noncontrolling interest in Operating Partnership (2)             (68)               69               (60)               319
Preferred share dividends (assuming conversion) (3)                -             1,675                 -              3,350
FFO available to common shareholders and dilutive
securities                                                    14,457            23,503            35,257             47,630

Gain on sale of land                                               -              (371)                -               (371)

Severance expense (4)                                             66                 -               128                 98
Executive management reorganization, net (4) (5)                   -               698                 -                446
Transaction costs (6)                                             12                 -               186                  -
Loss on extinguishment of debt                                     -               622                 -                622
Insured expenses, net                                         (1,713)                -            (1,653)                 -
Above and below market lease intangible write-offs                10            (1,663)             (391)            (1,674)

Pro-rata share of acquisition costs from unconsolidated joint ventures (1)

                                              (217)                -               401                  -

Payment of loan amendment fees (4)                               184                 -               184                  -
Bond interest proceeds (7)                                         -                 -              (213)                 -

Operating FFO available to common shareholders and dilutive securities

                                                  $ 12,799

$ 22,789$ 33,899$ 46,751


Weighted average common shares                                79,976            79,764            79,942             79,754

Shares issuable upon conversion of Operating Partnership Units (2)

                                                      1,909             1,909             1,909              1,909
Dilutive effect of restricted stock                              100               392               299                394
Shares issuable upon conversion of preferred shares (3)            -             6,923                 -              6,923

Weighted average equivalent shares outstanding, diluted 81,985

     88,988            82,150             88,980

Diluted (loss) earnings per share (8)                       $  (0.06)$   0.01$  (0.08)$    0.12
Per share adjustments for FFO available to common
shareholders and dilutive securities                            0.24              0.25              0.51               0.42
FFO available to common shareholders and dilutive
securities per share, diluted                               $   0.18

$ 0.26$ 0.43$ 0.54

Per share adjustments for Operating FFO available to common shareholders and dilutive securities

                           (0.02)                -             (0.02)             (0.01)

Operating FFO available to common shareholders and dilutive securities per share, diluted

                               $   0.16

$ 0.26$ 0.41$ 0.53



(1)Amounts noted are included in Earnings from unconsolidated joint ventures.
(2)The total noncontrolling interest reflects OP units convertible on a
one-of-one basis into common shares.
(3)7.25% Series D Cumulative Convertible Perpetual Preferred Shares of
Beneficial Interest, $0.01 par value per share paid annual dividends of $6.7
million and are currently convertible into approximately 7.0 million common
shares. They are dilutive only when earnings or FFO exceed approximately $0.24
per diluted share per quarter and $0.96 per diluted share per year. The
conversion ratio is subject to adjustment based upon a number of factors, and
such adjustment could affect the dilutive impact of the Series D convertible
preferred shares on FFO and earnings per share in future periods.
(4)Amounts noted are included in General and Administrative expense.
(5)For 2019, largely comprised of severance to a former executive officer and a
performance award expense related to the former Chief Executive Officer.
(6)Costs associated with terminated transactions.
(7)Amounts noted are included in Other income (expense), net.
(8)The denominator to calculate diluted earnings per share excludes shares
issuable upon the conversion of preferred shares for the three and six months
ended June 30, 2020 and 2019.
                                    Page 43
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NOI, Same Property NOI and NOI from Other Investments


NOI consists of (i) rental income and other property income, before
straight-line rental income, amortization of lease inducements, amortization of
acquired above and below market lease intangibles and lease termination fees
less (ii) real estate taxes and all recoverable and non-recoverable operating
expenses other than straight-line ground rent expense, in each case, including
our share of these items from our R2G Venture LLC unconsolidated joint venture.

NOI, Same Property NOI and NOI from Other Investments are supplemental non-GAAP
financial measures of real estate companies' operating performance. Same
Property NOI is considered by management to be a relevant performance measure of
our operations because it includes only the NOI of comparable operating
properties for the reporting period. Same Property NOI for the three and six
months ended June 30, 2020 and 2019 represents NOI from the Company's same
property portfolio consisting of 41 consolidated operating properties acquired
or placed in service and stabilized prior to January 1, 2019 and five previously
consolidated properties contributed to the newly formed joint venture, R2G
Venture LLC, in December 2019. Same property NOI from these five properties
includes 51.5% of their NOI as a consolidated property for the period January 1,
2019 through December 9, 2019 and 51.5% of their NOI as an unconsolidated
property accounted for under the equity method for the period December 10, 2019
through June 30, 2020. Same Property NOI excludes properties under redevelopment
or where activities have started in preparation for redevelopment. A property is
designated as a redevelopment when planned improvements significantly impact the
property. NOI from Other Investments for the three and six months ended June 30,
2020 and 2019 represents NOI primarily from (i) properties disposed of and
acquired during 2019 and 2020, (ii) 48.5% of the NOI prior to December 10, 2019
from the five previously consolidated properties contributed to the R2G Venture
LLC unconsolidated joint venture, (iii) Webster Place and Rivertowne Square
where the Company has begun activities in anticipation of future redevelopment,
(iv) certain property related employee compensation, benefits, and travel
expense and (v) non-comparable operating income and expense adjustments.

NOI, Same Property NOI and NOI from Other Investments should not be considered
alternatives to net income in accordance with GAAP or as measures of liquidity.
Our method of calculating these measures may differ from methods used by other
REITs and, accordingly, may not be comparable to such other REITs.

The following is a summary of our properties for the periods noted with
consistent classification in the prior period for presentation of Same Property
NOI:
                                                                  Three Months Ended June 30,                                               Six Months Ended June 30,
Property Designation                              2020                        2019                       2020                2019
Same-property                                                   46                           46                     46                     46
Acquisitions (1)                                                 1                            -                      1                      -
Redevelopment (2)                                                2                            2                      2                      2
Total properties                                                49                           48                     49                     48


(1)Includes the following property for the three and six months ended June 30,
2020: Lakehills Plaza.
(2)Includes the following properties: Rivertowne Square and Webster Place. The
entire property indicated for each period is completely excluded from Same
Property NOI.


                                    Page 44
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The following is a reconciliation of our net income available to common shareholders to Same Property NOI:

                                                                                                             Six Months Ended June
                                                     Three Months Ended June 30,                                      30,
                                                       2020                 2019              2020                2019
                                                                               (in thousands)
Net (loss) income available to common
shareholders                                     $      (4,563)$  1,218$ (5,904)$    9,986
Adjustments to reconcile to Same Property NOI:
Preferred share dividends                                1,675              1,675             3,350               3,350
Net (loss) income attributable to noncontrolling
interest                                                   (68)                69               (60)                319
Income tax provision                                        19                 35                50                  71
Interest expense                                        10,177             10,084            19,578              20,433
Loss on extinguishment of debt                               -                622                 -                 622
Earnings from unconsolidated joint ventures               (802)               (26)           (1,058)                (80)
Gain on sale of real estate                                  -               (371)                -              (6,073)

Insured expenses, net                                   (1,713)                 -            (1,653)                  -
Other (income) expense, net                                (61)               123              (414)                231
Management and other fee income                           (228)               (39)             (579)                (90)
Depreciation and amortization                           17,860             20,628            38,708              39,847
Transaction costs                                           12                  -               186                   -
General and administrative expenses                      6,695              6,530            12,917              12,596
Pro-rata share of NOI from unconsolidated joint
venture (1)                                              1,918                  -             4,150                   -
Lease termination fees                                       -                (83)             (142)               (232)
Amortization of lease inducements                          191                128               329                 224
Amortization of acquired above and below market
lease intangibles                                         (638)            (2,463)           (1,733)             (3,372)
Straight-line ground rent expense                           76                 76               153                 153
Straight-line rental income                              1,219               (574)              918              (1,384)
NOI (2)                                                 31,769             37,632            68,796              76,601
NOI from Other Investments                                 331               (635)              790              (2,940)
Same Property NOI (3)                            $      32,100$ 36,997$ 69,586$   73,661

Period-end Occupancy                                      93.2   %           92.2  %           93.2  %             92.2    %


(1)Represents 51.5% of the NOI from the five properties contributed to R2G
Venture LLC after December 9, 2019.
(2)Includes 100.0% of the NOI from the five properties contributed to R2G
Venture LLC prior to December 10, 2019 and 51.5% of the NOI from the same five
properties after December 9, 2019
(3)Includes 51.5% of the NOI from the five properties contributed to R2G Venture
LLC for all periods presented.
                                    Page 45

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