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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)

11/05/2020 | 04:44pm 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 and restrictions 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, our Quarterly Report
on Form 10-Q for the quarter ended June 30, 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 September 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 of GLA.  As of September 30, 2020, the Company's
pro-rata share of the aggregate portfolio was 93.3% 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
                                    Page 28
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anticipates that any such statistics and information will potentially change
significantly. As a result, the information provided 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 third 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 re-opening 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 as 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
October 30, 2020.
•94% of our total tenants were open and operating, on a pro-rata basis, as of
October 30, 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
September 30, 2020.
•90% of October 2020 and 87% of third quarter 2020 rents have been paid, on a
pro-rata basis, as of October 30, 2020.
•6% of October 2020 and 9% of third quarter 2020 rents are subject to signed or
approved deferral agreements, on a pro-rata basis, as of October 30, 2020.
•Ended the third quarter 2020 with $220.1 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.
•During the second quarter 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. As of September 30, 2020, the Company has repaid $100.0 million
leaving $125.0 million outstanding.
•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 29
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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 third quarter preferred dividend in the amount of $1.7 million on
October 1, 2020 to shareholders of record as of September 18, 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 since
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 30
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The following table summarizes our aggregate operating portfolio by market as of
September 30, 2020:
                                                                            Market Summary (1)
MSA                               Number of Properties          GLA (in thousands)            Leased %               Occupied %             ABR/SF             % of ABR
Top 40 MSAs:
Atlanta                                       3                         527                        95.9  %                  90.9  %       $ 12.68                    3.7  %
Austin                                        1                          76                        91.5  %                  91.5  %         25.97                    1.1  %
Baltimore                                     1                         252                        91.6  %                  90.7  %          9.67                    1.4  %
Chicago                                       4                         767                        85.1  %                  84.8  %         14.71                    5.9  %
Cincinnati                                    3                       1,263                        93.7  %                  93.7  %         15.86                   11.6  %
Columbus                                      2                         435                        93.9  %                  89.0  %         17.80                    4.2  %
Denver                                        1                         504                        96.6  %                  87.5  %         20.15                    5.5  %
Detroit                                       9                       2,318                        94.4  %                  94.3  %         14.86                   19.6  %
Indianapolis                                  1                         251                        95.7  %                  87.9  %         14.60                    1.9  %
Jacksonville                                  2                         756                        91.2  %                  89.8  %         16.91                    7.1  %
Miami                                         6                       1,026                        91.8  %                  91.8  %         16.87                    7.5  %
Milwaukee                                     2                         546                        91.3  %                  91.3  %         12.64                    3.9  %
Minneapolis                                   2                         445                        88.9  %                  88.9  %         24.63                    6.0  %
Nashville                                     1                         633                        96.4  %                  95.6  %         13.16                    4.9  %
St. Louis                                     4                         827                        96.4  %                  95.1  %         14.45                    6.2  %
Tampa                                         4                         752                        96.2  %                  96.2  %         12.94                    5.8  %
Top 40 MSA subtotal                          46                      11,380                        93.4  %                  92.1  %       $ 15.45                   96.3  %
Non Top 40 MSA                                3                         516                        93.1  %                  93.1  %         12.45                    3.7  %
Total                                        49                      11,896                        93.3  %                  92.1  %       $ 15.31                  100.0  %

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

We accomplished the following activity during the nine months ended September 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                                            75                816,279                        $12.98$12.40$1.13$0.04
New Leases - Comparable                             15                 49,740                        $22.48$17.86$31.82$9.81
New Leases - Non-Comparable (4)                     23                130,013                        $17.94                    N/A                         $63.05$8.64
Total                                              113                996,032                        $14.10                    N/A                         $10.80$1.65


(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 31
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Investing Activity

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


Financing Activity

Debt

As of September 30, 2020, we had net debt of $833.8 million, reflecting net debt
to total market capitalization of 61.6% as compared to 42.1% at September 30,
2019. Net debt decreased by $52.1 million compared to September 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, partially offset by lower cash receipts related
to the impact of COVID-19.
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 nine months ended September 30, 2020, we did not issue any
common shares through the arrangement. As of September 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 September 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
September 30, 2020.

                                    Page 32
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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.

Comparison of three months ended September 30, 2020 to September 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 September 30, 2020 as compared to the same period in
2019:
                                                                                  Three Months Ended September 30,
                                                                                                          Dollar              Percent
                                                                  2020                  2019              Change               Change
                                                                                (In thousands)
Total revenue                                              $    46,487$ 58,921$ (12,434)                 (21.1) %
Real estate taxes                                                8,509                  9,123               (614)                  (6.7) %
Recoverable operating expense                                    5,118                  6,180             (1,062)                 (17.2) %
Non-recoverable operating expense                                2,126                  2,463               (337)                 (13.7) %
Depreciation and amortization                                   18,295                 20,018             (1,723)                  (8.6) %

General and administrative expense                               6,062                  6,249               (187)                  (3.0) %

Insured expenses, net                                           (1,092)                     -             (1,092)                       NM

Earnings from unconsolidated joint ventures                        456                    373                 83                        NM
Interest expense                                                 9,913                  9,917                 (4)                     -  %
Other gain on unconsolidated joint ventures                          -                    237               (237)                       NM

Preferred share dividends                                        1,676                  1,676                  -                      -  %

NM - Not meaningful



Total revenue for the three months ended September 30, 2020 decreased $12.4
million, or (21.1)%, from the same period in 2019. The decrease is primarily due
to the following:
•$6.0 million decrease related to properties that were contributed to the R2G
Venture LLC joint venture ("R2G") during the fourth quarter of 2019; and
•$5.5 million decrease due to increased rental income not probable of collection
as well as related straight-line rent reserves and rent abatements in the
current period, primarily due to the COVID-19 pandemic; and
•$1.4 million decrease from the acceleration of below market leases in the prior
period attributable to leases terminating earlier than originally estimated as a
result of the Charming Charlie bankruptcy filing; partially offset by
•$0.7 million increase related to a property acquired during the fourth quarter
of 2019; and
•$0.2 million increase related to management fees collected from the R2G joint
venture.

                                    Page 33
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Real estate tax expense for the three months ended September 30, 2020 decreased $0.6 million, or (6.7)% from the same period in 2019, primarily due to properties contributed to R2G during the fourth quarter of 2019, partially offset by a property acquired during the fourth quarter of 2019.


Recoverable operating expense for the three months ended September 30, 2020
decreased $1.1 million, or (17.2)% from the same period in 2019, primarily due
to properties contributed to R2G during the fourth quarter of 2019, as well as
lower common area maintenance expenses at existing properties.

Non-recoverable operating expense for the three months ended September 30, 2020
decreased $0.3 million, or (13.7)% from the same period in 2019, primarily due
to properties contributed to R2G during the fourth quarter of 2019 as well as
lower legal fees associated with a tenant dispute that concluded during the
second quarter of 2020.

Depreciation and amortization expense for the three months ended September 30,
2020 decreased $1.7 million, or (8.6)%, from the same period in 2019. The
decrease is primarily due to properties contributed to R2G during the fourth
quarter of 2019, partially offset by a property acquired during the fourth
quarter of 2019.

General and administrative expense for the three months ended September 30, 2020
decreased $0.2 million, or (3.0)%, from the same period in 2019.  The net
decrease is primarily related to lower management reorganization expense, which
includes severance costs associated with a former executives as well as a sign
on bonus attributable to a new executive team member, and lower legal and other
outside professional fees. These decreases were partially offset by higher
stock-based compensation expense and higher wages and payroll related expenses
in the current period.

During the three months ended September 30, 2020, the Company recorded an
insured benefit of $1.1 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.

Earnings from unconsolidated joint ventures for the three months ended
September 30, 2020 increased $0.1 million from the same period in 2019 primarily
due to the R2G joint venture which was formed in the fourth quarter of 2019,
partially offset by the gain on sale of the Nora Plaza property by one of our
joint ventures in the prior period.

Interest expense for the three months ended September 30, 2020 remained flat
with the same period in 2019. Interest expense increased during the current
period as a result of an 18.4% increase in our average outstanding debt, but was
fully offset by a 65 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. The
Company has subsequently repaid $100.0 million during the second and third
quarter of 2020, leaving $125.0 million outstanding.

During the three months ended September 30, 2019, the Company recorded an other
gain on unconsolidated joint ventures of $0.2 million, due to the sale of the
Nora Plaza property by one of our joint ventures in the prior period. The gain
represents the difference between our share of the distributed proceeds and the
carrying value of our equity investment in the joint venture.

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

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Comparison of nine months ended September 30, 2020 to September 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 nine months ended September 30, 2020 as compared to the same period in
2019:
                                                                                  Nine Months Ended September 30,
                                                                                                        Dollar              Percent
                                                                 2020                 2019              Change               Change
                                                                               (In thousands)
Total revenue                                              $   143,990$ 175,990$ (32,000)                 (18.2) %
Real estate taxes                                               25,113               27,667             (2,554)                  (9.2) %
Recoverable operating expense                                   15,894               18,204             (2,310)                 (12.7) %
Non-recoverable operating expense                                6,549                7,662             (1,113)                 (14.5) %
Depreciation and amortization                                   57,003               59,865             (2,862)                  (4.8) %
Transaction costs                                                  186                    -                186                        NM
General and administrative expense                              18,979               18,845                134                    0.7  %
Insured expenses, net                                           (2,745)                   -             (2,745)                       NM

Gain on sale of real estate                                          -                6,073             (6,073)                       NM
Earnings from unconsolidated joint ventures                      1,514                  453              1,061                        NM
Interest expense                                                29,491               30,350               (859)                  (2.8) %
Other gain on unconsolidated joint ventures                          -                  237               (237)                       NM
Loss on extinguishment of debt                                       -                  622               (622)                     -  %
Preferred share dividends                                        5,026                5,026                  -                      -  %

NM - Not meaningful



Total revenue for the nine months ended September 30, 2020 decreased $32.0
million, or (18.2)%, from the same period in 2019. The decrease is primarily due
to the following:
•$17.6 million decrease related to properties that were contributed to R2G
during the fourth quarter of 2019; and
•$12.7 million decrease due to increased rental income not probable of
collection as well as related straight-line rent reserves and rent abatements in
the current period, primarily due to the COVID-19 pandemic; and
•$2.8 million decrease from acceleration of below market leases in the prior
period attributable to tenants who vacated prior to the original estimated lease
end dates; partially offset by
•$0.8 million increase related to the net impact of two properties sold during
the first quarter of 2019 and one property acquired during the fourth quarter of
2019; and
•$0.7 million increase related to management fees collected due to the R2G joint
venture.

Real estate tax expense for the nine months ended September 30, 2020 decreased
$2.6 million, or (9.2)% from the same period in 2019, primarily due to
properties contributed to R2G during the fourth quarter of 2019 and lower net
expense at our existing properties, partially offset by a property acquired
during the fourth quarter of 2019.

Recoverable operating expense for the nine months ended September 30, 2020
decreased $2.3 million, or (12.7)% from the same period in 2019, primarily due
to properties contributed to R2G during the fourth quarter of 2019, as well as
lower common area maintenance expenses at existing properties.

Non-recoverable operating expense for the nine months ended September 30, 2020
decreased $1.1 million, or (14.5)% from the same period in 2019, primarily due
to properties contributed to R2G during the fourth quarter of 2019, as well as
lower legal fees associated with a tenant dispute that concluded during the
second quarter of 2020.

Depreciation and amortization expense for the nine months ended September 30,
2020 decreased $2.9 million, or (4.8)%, from the same period in 2019. The
decrease is primarily due to properties contributed to R2G during the fourth
quarter of 2019, partially offset by higher asset write offs in the current
period for tenants that vacated prior to their original lease end date.
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During the nine months ended September 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 nine months ended September 30, 2020
increased $0.1 million, or 0.7%, from the same period in 2019.  The net increase
is primarily a result of higher wages and payroll related expenses, higher
stock-based compensation expense and higher legal fees, partially offset by
lower management reorganization expense, which includes severance costs
associated with former executives, lower travel expenses and lower rent expense.

During the nine months ended September 30, 2020, the Company recorded an insured
benefit of $2.7 million. During fourth quarter of 2019 the Company wrote off
real estate assets that were damaged by a hail storm at one property, which will
be fully covered by insurance. This amount represents the approximate 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 nine
months ended September 30, 2019, generated from two shopping centers and one
land parcel.

Earnings from unconsolidated joint ventures for the nine months ended
September 30, 2020 increased $1.1 million from the same period in 2019 primarily
due to R2G which was formed in the fourth quarter of 2019, partially offset by
the gain on sale of the Nora Plaza property by one of our joint ventures in the
prior period.

Interest expense for the nine months ended September 30, 2020 decreased $0.9
million, or (2.8)% from the same period in 2019, primarily as a result of a 60
basis point decrease in our weighted average interest rate, partially offset by
a 12.9% increase in our average outstanding debt. The increase in our average
outstanding debt is the result of $225.0 million of borrowings in March 2020 on
our unsecured revolving credit facility to strengthen the Company's liquidity
position due to the COVID-19 pandemic. The Company has subsequently repaid
$100.0 million during the second and third quarter of 2020, leaving $125.0
million outstanding.

During the nine months ended September 30, 2019, the Company recorded an other
gain on unconsolidated joint ventures of $0.2 million, due to the sale of the
Nora Plaza property by one of our joint ventures in the prior period. The gain
represents the difference between our share of the distributed proceeds and the
carrying value of our equity investment in the joint venture.

During the nine months ended September 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 nine months
ended September 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 and third 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 September 30, 2020 and 2019, we had $220.1 million and $48.2 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 September 30, 2020,
we had no debt maturing for the remainder of 2020, and we had $225.0 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   of the notes
to the condensed consolidated financial statements for further discussion on 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 nine months ended September 30, 2020, our cash flows were as follows compared to the same period in 2019:

                                                                    Nine Months Ended September 30,
                                                                       2020                    2019
                                                                             (In thousands)
Net cash provided by operating activities                       $         41,036          $    69,642
Net cash (used in) provided by investing activities             $        (15,605)$    23,900
Net cash provided by (used in) financing activities             $         80,139          $   (90,028)



Operating Activities

Net cash provided by operating activities decreased $28.6 million in the nine
months ended September 30, 2020 compared to the same period in 2019 primarily
due to the following:
•Lower rental income receipts of $20.8 million as a result of the COVID-19
pandemic; and
•Impact of shopping centers contributed to R2G in 2019.

Investing Activities


Net cash used in investing activities was $15.6 million in the nine months ended
September 30, 2020, compared to net cash provided by investing activities
of $23.9 million for the same period in 2019. The $39.5 million change in net
cash from investing activities was primarily due to the following:
•Net proceeds from the sale of real estate decreased $69.9 million; and
•Net capital improvements covered by insurance increased $2.3 million; partially
offset by
•Development and capital improvements decreased $32.7 million.

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


Financing Activities

Net cash provided by financing activities was $80.1 million in the nine months
ended September 30, 2020, compared to net cash used in financing activities of
$90.0 million in 2019. The change of $170.2 million was primarily the result of
the following:
•net borrowings on our revolving credit facility in 2020 of $125.0 million,
•the suspension of our common dividend in 2020 due to the COVID-19 pandemic of
$18.0 million, and
•the repayment of junior subordinated notes in 2019 of $28.1 million.

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 July 29, 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 September 18, 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
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bank borrowings. During the nine months ended September 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 $9.0
million, and we used other sources of liquidity, including a portion of the
proceeds from asset sales, to meet our cash requirements. The $9.0 million
shortfall was primarily the result of our current year shareholder distributions
which totaled $41.2 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
nine months ended September 30, 2020, we did not issue any common shares through
the arrangement. As of September 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 September 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, $85.9 million of fixed rate mortgage loans encumbering certain
properties, and $125.0 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 September 30, 2020, we had
$125.0 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 September 30, 2020, our investments in unconsolidated joint ventures were
approximately $128.0 million representing our ownership interest in three joint
ventures. We account for these entities under the equity method. Refer to   Note
4   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 September 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                $     7,855$       609

$ 4,785$ 1,810$ 651 Payments due at maturity

                1,048,008                    -            341,508            306,500            400,000
 Total mortgages and notes payable
(2)                                     1,055,863                  609            346,293            308,310            400,651
Interest expense (3)                      183,906                9,540            100,697             43,949             29,720
Finance lease (4)                           1,300                  100                300                200                700
Operating leases                           99,500                  364              4,447              1,974             92,715
Construction commitments                    1,624                1,624                  -                  -                  -
Development obligations (5)                 2,842                  431                611                382              1,418

Total contractual obligations $ 1,345,035$ 12,668

$ 452,348$ 354,815$ 525,204



(1)Amounts represent balance of obligation for the remainder of 2020.
(2)Excludes $1.3 million of unamortized mortgage debt premium and $3.8 million
in net deferred financing costs.
(3)Variable-rate debt interest is calculated using rates at September 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 September 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 leasing activity and essential building improvments at various shopping centers as of September 30, 2020, we have entered into agreements for construction activities with an aggregate remaining cost of approximately $1.6 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 $5.0 million and $10.0
million for capital expenditures, of which $1.6 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 September 30, 2020 our total market capitalization was $1.4 billion. The table below reconciles total debt to net debt and sets forth our calculation of our total market capitalization as of September 30, 2020 and 2019:

                                                                         September 30,
                                                                   2020                 2019
                                                                        (In thousands)
Notes payable, net                                            $ 1,053,378$   933,509
Add: Unamortized premiums and deferred financing costs              2,485                 (315)
Finance lease obligation                                              926                  975
Cash, cash equivalents and restricted cash                       (220,122)             (48,236)

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

                                    (2,877)                   -
Net debt (1)                                                  $   833,790$   885,933

Common shares outstanding                                          80,055               79,850
Operating Partnership Units outstanding                             1,909                1,909
Restricted share awards (treasury method)                             167                  692
Total common shares and equivalents                                82,131               82,451

Market price per common share (at September 30, 2020 and 2019)

                                                         $      5.44$     13.55
Equity market capitalization                                  $   446,793

$ 1,117,211

7.25% Series D Cumulative Convertible Perpetual Preferred Shares

                                                              1,849                1,849

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

                                            $     40.00$     55.30
Convertible perpetual preferred shares (at market)            $    73,960$   102,250

Total market capitalization                                   $ 1,354,543$ 2,105,394

Net debt to total market capitalization                              61.6  %              42.1  %


(1)Net debt represents (i) our total debt principal, which excludes unamortized
premium and deferred financing costs, net, plus (ii) our finance lease
obligation, less (iii) our cash, cash equivalents and restricted cash, less (iv)
our pro-rata share of cash, cash equivalents and restricted cash of each of our
unconsolidated entities. We believe this calculation is useful to understand our
financial condition. Our method of calculating net debt may be different from
methods used by other companies and may not be comparable.

At September 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 82.0 million common shares of
beneficial interest outstanding at September 30, 2020, with a market value of
approximately $445.9 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                     Nine Months Ended
                                                                      September 30,                         September 30,
                                                                 2020                2019               2020              2019
                                                                            (In thousands, except per share data)
Net (loss) income                                           $     (1,993)$  5,574$  (4,607)$ 19,229
Net loss (income) attributable to noncontrolling partner
interest                                                              46              (129)               106              (448)
Preferred share dividends                                         (1,676)           (1,676)            (5,026)           (5,026)

Net (loss) income available to common shareholders                (3,623)            3,769             (9,527)           13,755

Adjustments:

Rental property depreciation and amortization expense             18,149            19,787             56,588            59,436
Pro-rata share of real estate depreciation from
unconsolidated joint ventures (1)                                  2,116                 7              4,898                35
Gain on sale of depreciable real estate                                -                 -                  -            (5,702)
Gain on sale of joint venture depreciable real estate                  -              (385)                 -              (385)

Other gain on unconsolidated joint ventures                            -              (237)                 -              (237)
FFO available to common shareholders                              16,642            22,941             51,959            66,902
Noncontrolling interest in Operating Partnership (2)                 (46)              129               (106)              448
Preferred share dividends (assuming conversion) (3)                    -             1,676                  -             5,026
FFO available to common shareholders and dilutive
securities                                                        16,596            24,746             51,853            72,376

Gain on sale of land                                                   -                 -                  -              (371)

Severance expense (4)                                                 88                32                216               130
Executive management reorganization, net (4) (5)                       -               329                  -               775
Transaction costs (6)                                                  -                 -                186                 -
Loss on extinguishment of debt                                         -                 -                  -               622
Insured expenses, net                                             (1,092)                -             (2,745)                -
Above and below market lease intangible write-offs                   135            (1,381)              (256)           (3,055)

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

                                                     6                 -                407                 -

Pro-rata share of above and below market lease intangible write-offs from unconsolidated joint ventures (1)

                   (506)                -               (506)                -
Payment of loan amendment fees (4)                                     -                 -                184                 -
Bond interest proceeds (7)                                             -                 -               (213)                -

Operating FFO available to common shareholders and dilutive securities

                                                  $     15,227

$ 23,726$ 49,126$ 70,477


Weighted average common shares                                    80,051            79,848             79,978            79,786
Shares issuable upon conversion of OP Units (2)                    1,909             1,909              1,909             1,909
Dilutive effect of restricted stock                                  167               692                297               693
Shares issuable upon conversion of preferred shares (3)                -             6,954                  -             6,954
Weighted average equivalent shares outstanding, diluted           82,127            89,403             82,184            89,342

Diluted (loss) earnings per share (8)                       $      (0.05)

$ 0.05$ (0.12)$ 0.17 Per share adjustments for FFO available to common shareholders and dilutive securities

                                0.25              0.23               0.75              0.64
FFO available to common shareholders and dilutive
securities per share, diluted                               $       0.20

$ 0.28$ 0.63$ 0.81

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

                               (0.01)            (0.01)             (0.03)            (0.02)

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

                               $       0.19

$ 0.27$ 0.60$ 0.79



(1)Amounts noted are included in Earnings from unconsolidated joint ventures.
(2)The total noncontrolling interest reflects OP Units convertible on a
one-to-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
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 loss per share for the three and nine
months ended September 30, 2020 includes weighted average common shares only.
The denominator to calculate diluted earnings per share for the three and nine
months ended September 30, 2019 includes weighted average common shares and
restricted stock.
                                    Page 44
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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 nine
months ended September 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 September 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
nine months ended September 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 September 30,                           Nine Months Ended September 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 nine months ended September
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 45
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The following is a reconciliation of our net income available to common shareholders to Same Property NOI:

                                                Three Months Ended September
                                                             30,                        Nine Months Ended September 30,
                                                   2020               2019                  2020                   2019
                                                                              (in thousands)
Net (loss) income available to common
shareholders                                   $  (3,623)$  3,769$        (9,527)$  13,755
Adjustments to reconcile to Same Property NOI:
Preferred share dividends                          1,676              1,676                    5,026               5,026
Net (loss) income attributable to
noncontrolling interest                              (46)               129                     (106)                448
Income tax (benefit) provision                       (87)                11                      (37)                 82
Interest expense                                   9,913              9,917                   29,491              30,350
Loss on extinguishment of debt                         -                  -                        -                 622
Earnings from unconsolidated joint ventures         (456)              (373)                  (1,514)               (453)
Gain on sale of real estate                            -                  -                        -              (6,073)
Other gain on unconsolidated joint venture             -               (237)                       -                (237)
Insured expenses, net                             (1,092)                 -                   (2,745)                  -
Other (income) expense, net                           92                 (4)                    (322)                227
Management and other fee income                     (338)               (88)                    (917)               (178)
Depreciation and amortization                     18,295             20,018                   57,003              59,865
Transaction costs                                      -                  -                      186                   -
General and administrative expenses                6,062              6,249                   18,979              18,845
Pro-rata share of NOI from unconsolidated
joint venture (1)                                  2,006                  -                    6,156                   -
Lease termination fees                               (43)              (102)                    (185)               (334)
Amortization of lease inducements                    225                135                      554                 359
Amortization of acquired above and below
market lease intangibles                            (515)            (2,172)                  (2,248)             (5,544)
Straight-line ground rent expense                     77                 77                      230                 230
Straight-line rental income                        1,100               (567)                   2,018              (1,951)
NOI (2)                                           33,246             38,438                  102,042             115,039
NOI from Other Investments                           811            
(1,293)                   1,602              (4,232)
Same Property NOI (3)                          $  34,057$ 37,145$       103,644$ 110,807

Period-end Occupancy                                92.4   %           93.0  %                  92.4   %            93.0  %


(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 46

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