TANGER INC. Cautionary Statements
Certain statements made in Item 1 - Business and this Management's Discussion
and Analysis of Financial Condition and Results of Operations below are
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, or the Exchange Act. We intend such forward-looking statements to be
covered by the safe harbor provisions for forward-looking statements contained
in the Private Securities Reform Act of 1995 and included this statement for
purposes of complying with these safe harbor provisions. Forward-looking
statements, which are based on certain assumptions and describe our future
plans, strategies, beliefs and expectations, are generally identifiable by use
of the words "believe", "expect", "intend", "anticipate", "estimate", "project",
or similar expressions. Such forward-looking statements include, but are not
limited to, statements regarding: the expected impact of the novel coronavirus
("COVID-19") pandemic on our business, financial results and financial
condition; our ability to raise additional capital, including via future
issuances of equity and debt, and the use of proceeds from such issuances; our
results of operations and financial condition; capital expenditure and working
capital needs and the funding thereof; the repurchase of the Company's common
shares, including the potential use of a 10b5-1 plan to facilitate repurchases;
future dividend payments; the possibility of future asset impairments; potential
developments, expansions, renovations, acquisitions or dispositions of outlet
centers; compliance with debt covenants; renewal and re-lease of leased space;
the outlook for the retail environment, potential bankruptcies, and other store
closings; consumer shopping trends and preferences; the outcome of legal
proceedings arising in the normal course of business; and real estate joint
ventures. You should not rely on forward-looking statements since they involve
known and unknown risks, uncertainties and other important factors which are, in
some cases, beyond our control and which could materially affect our actual
results, performance or achievements.
Other important factors which may cause actual results to differ materially from
current expectations include, but are not limited to: our inability to develop
new outlet centers or expand existing outlet centers successfully; risks related
to the economic performance and market value of our outlet centers; the relative
illiquidity of real property investments; impairment charges affecting our
properties; our dispositions of assets may not achieve anticipated results;
competition for the acquisition and development of outlet centers, and our
inability to complete outlet centers we have identified; environmental
regulations affecting our business; risk associated with a possible terrorist
activity or other acts or threats of violence, public health crises and threats
to public safety; our dependence on rental income from real property; our
dependence on the results of operations of our retailers; the fact certain of
our lease agreements include co-tenancy and/or sales-based provisions that may
allow a tenant to pay reduced rent and/or terminate a lease prior to its natural
expiration; the fact that certain of our properties are subject to ownership
interests held by third parties, whose interests may conflict with ours; risks
related to uninsured losses; risks related to changes in consumer spending
habits; investor and regulatory focus on environmental, sustainability and
social initiatives; risks associated with our Canadian investments; risks
associated with attracting and retaining key personnel; risks associated with
debt financing; risk associated with our guarantees of debt for, or other
support we may provide to, joint venture properties; the effectiveness of our
interest rate hedging arrangements; uncertainty relating to the phasing out of
LIBOR; risk associated with our interest rate hedging arrangements; risk
associated to uncertainty related to determination of LIBOR; our potential
failure to qualify as a REIT; our legal obligation to make distributions to our
shareholders; legislative or regulatory actions that could adversely affect our
shareholders; our dependence on distributions from the Operating Partnership to
meet our financial obligations, including dividends; the risk of a cyber-attack
or an act of cyber-terrorism.
We qualify all of our forward-looking statements by these cautionary statements.
The forward-looking statements in this Annual Report on Form 10-K are only
predictions. We have based these forward-looking statements largely on our
current expectations and projections about future events and financial trends
that we believe may affect our business, financial condition and results of
operations. Because forward-looking statements are inherently subject to risks
and uncertainties, some of which cannot be predicted or quantified, you should
not rely on these forward-looking statements as predictions of future events.
The events and circumstances reflected in our forward-looking statements may not
be achieved or occur and actual results could differ materially from those
projected in the forward-looking statements. Except as required by applicable
law, we do not plan to publicly update or revise any forward-looking statements
contained herein, whether as a result of any new information, future events,
changed circumstances or otherwise. For a further discussion of the risks
relating to our business, see "Item 1A-Risk Factors" in Part I of this Annual
Report on Form 10-K.
40
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The following discussion should be read in conjunction with the consolidated
financial statements appearing elsewhere in this report. Historical results and
percentage relationships set forth in the consolidated statements of operations,
including trends which might appear, are not necessarily indicative of future
operations.
This Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") is intended to provide a reader of our financial statements
with a narrative from the perspective of our management regarding our financial
condition and results of operations, liquidity and certain other factors that
may affect our future results. Our MD&A is presented in the following sections:
•General Overview
•Leasing Activity
•COVID-19 Pandemic
•Results of Operations
•Liquidity and Capital Resources of the Company
•Liquidity and Capital Resources of the Operating Partnership
•Critical Accounting Estimates
•Recent Accounting Pronouncements
•Non-GAAP Supplemental Measures
•Economic Conditions and Outlook
General Overview
As ofDecember 31, 2021 , we had 30 consolidated outlet centers in 18 states totaling 11.5 million square feet. We also had 6 unconsolidated outlet centers totaling 2.1 million square feet, including 2 outlet centers inCanada . The table below details our acquisitions, new developments, expansions and dispositions of consolidated and unconsolidated outlet centers that significantly impacted our results of operations and liquidity fromJanuary 1, 2019 toDecember 31, 2021 :Consolidated Outlet Centers Unconsolidated Joint Venture Outlet Centers Square Feet (in Number of Square Feet (in Number of Outlet Center Quarter Acquired/Open/Disposed/Demolished thousands) Outlet Centers thousands) Outlet Centers As ofDecember 31, 2018 12,923 36 2,371 8 Dispositions: Nags Head First Quarter (82) (1) - -Ocean City First Quarter (200) (1) - - Park City First Quarter (320) (1) - -Williamsburg First Quarter (276) (1) - -Bromont Second Quarter - - (161) (1) Other 3 - 2 - As ofDecember 31, 2019 12,048 32 2,212 7 Dispositions:Terrell Third Quarter (178) (1) - - Other 3 - - - As ofDecember 31, 2020 11,873 31 2,212 7 Dispositions:Jeffersonville First Quarter (412) (1) - -Saint Sauveur First Quarter (99) (1) Other (8) - - - As ofDecember 31, 2021 11,453 30 2,113 6 41
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Leasing Activity
In 2021, we revised our rent spread presentation from a commenced basis to executed basis and we are presenting it for comparable and non- comparable space. Comparable space excludes leases for space that was vacant for more than 12 months (non-comparable space). We believe that this presentation provides additional information and improves comparability to other retail REITs. Prior period results have been revised to conform with the current period presentation.
The following table provides information for our consolidated outlet centers
related to leases for new stores that opened or renewals that were executed
during the years ended
Comparable Space for Executed Leases (1) (2) (3)
New Rent
Initial Rent Spread Tenant Allowance Average Initial Term
Leasing Transactions Square Feet (in 000s) (psf) (4) % (5) (psf) (6) (in years)
Total space
2021 266 1,170 $ 30.78 (0.6) % $ 7.75 3.43
2020 213 1,168 $ 23.46 (7.5) % $ 1.02 2.75
Comparable and Non-Comparable Spacefor Executed Leases (1) (2) (3)
New
Initial Rent Tenant Allowance Average Initial Term
Leasing Transactions Square Feet (in 000s) (psf) (4) (psf) (6) (in years)
Total space
2021 317 1,363 $ 30.46 $ 21.91 3.85
2020 235 1,220 $ 23.80 $ 1.46 2.85
(1)For consolidated properties owned as of the period-end date. Represents
leases for new stores or renewals that were executed during the respective
calendar years and excludes license agreements, seasonal tenants and
month-to-month leases.
(2)Comparable space excludes leases for space that was vacant for more than 12
months (non-comparable space).
(3)Leasing activity for commenced leases, or leases for new stores that opened
or renewals that began during the respective trailing twelve months ended
December 31 , were as follows:
Leasing activity for commenced leases
New Rent Average
Square Feet Initial Rent Spread Tenant Allowance Initial Term
Leasing Transactions (in 000s) (psf) (4) % (5) (psf) (6) (in years)
Comparable Space(2)
Total space
2021 280 1,378 $ 26.76 (2.4) % $ 4.22 3.35
2020 254 1,404 $ 25.01 (12.2) % $ 16.56 4.41
Comparable and Non-comparable Space(2)
Total space
2021 328 1,541 $ 26.84 $ 6.02 3.63
2020 279 1,483 $ 25.51 $ 16.64 4.54
(4)Represents average initial cash rent (base rent and common area maintenance
("CAM")).
(5)Represents change in average initial and expiring cash rent (base rent and
CAM).
(6)Tenant allowance includes other landlord costs.
COVID-19 Pandemic
Due to the COVID-19 pandemic, a number of our tenants requested rent deferrals, rent abatements or other types of rent relief during this pandemic. As a response, in lateMarch 2020 , we offered all tenants in our consolidated portfolio the option to defer 100% of April and May rents interest free, payable in equal installments due in January and February of 2021. 42 -------------------------------------------------------------------------------- As ofDecember 31, 2021 , contractual fixed rents billed during 2020 that were deferred as a direct result of the COVID-19 pandemic and remain outstanding totaled$82,000 . ThroughDecember 31, 2021 , the Company had collected 99% of the 2020 deferred rents due to be repaid during the year endedDecember 31, 2021 . The extent of future tenant requests for rent relief and the impact on our results of operations and cash flows is uncertain and cannot be predicted at this time. If store closures were to occur again in our domestic markets, this could have a material adverse impact on our financial position and results of operations. Results of Operations 2021 Compared to 2020 Net income (loss) Net income increased$47.6 million in the 2021 period to a net income of$9.6 million as compared to a net loss of$38.0 million for the 2020 period. The increase in net income is primarily due to the following: •2020 was impacted by the COVID-19 pandemic and had significant revenue reductions •variable revenue derived from tenant sales was significantly higher in 2021 as the COVID-19 pandemic impacted traffic to our centers in the 2020 period and our centers operated under reduced hours. •the 2020 period included$64.8 million in impairment charges recognized on the outlet center in Mashantucket,Connecticut and a$2.4 million impairment charge recognized on the outlet center inJeffersonville, Ohio , and •the 2020 period included our share of an impairment charge totaling$3.1 million in equity in earnings that related to theSaint-Sauveur, Quebec outlet center in our Canadian joint venture. The increase in net income was partially offset by the following: •2021 included$7.0 million in impairment charges recognized on the outlet center in Mashantucket,Connecticut , •the 2021 period included a loss on the early extinguishment of debt of$47.9 million related to the redemption of all of our bonds due in 2023 and 2024, •in the current period we recorded a foreign currency loss of approximately$3.6 million in other income (expense), which had been previously recorded in other comprehensive income associated with the sale the outlet center inSaint-Sauveur held in ourRioCan joint venture •the$9.9 million decrease in lease termination fees compared to the prior year, •the loss in revenues from the sale of our two centers in 2020 and 2021 described below, and •the 2020 period included a$2.3 million gain recorded on the sale of ourTerrell outlet center. In the tables below, information set forth for properties disposed includes theTerrell outlet center sold inAugust 2020 and theJeffersonville outlet center sold inJanuary 2021 . Rental Revenues Rental revenues increased$29.8 million in the 2021 period compared to the 2020 period. The following table sets forth the changes in various components of rental revenues (in thousands): 2021 2020 Increase/(Decrease) Rental revenues from existing properties$ 407,164 $ 364,214 $ 42,950 Rental revenues from properties disposed 272 7,315 (7,043) Straight-line rent adjustments (1,973) (3,372) 1,399 Lease termination fees 2,225 12,125 (9,900) Amortization of above and below market rent adjustments, net 78 (2,350) 2,428$ 407,766 $ 377,932 $ 29,834 43
-------------------------------------------------------------------------------- Rental revenues from existing properties in the prior year period included the impact of a$40.1 million COVID-19 pandemic-related revenue reduction. In addition, variable revenues, which are derived from tenant sales, were higher in the 2021 period as a result of the impact of the COVID-19 pandemic on the 2020 period, which included mandated store closures by local and state authorities during the second quarter, continued lower traffic levels to our centers in the third quarter and to the centers operating under reduced hours. The 2020 period includes a higher amount of lease termination fees from certain early lease terminations as a result of a significant amount of space recaptured due to bankruptcies and brand-wide restructuring in the 2020 period.
In addition, in the prior year, we recognized a write-off of revenue of
approximately
Management, Leasing and Other Services Management, leasing and other services increased$1.5 million in the 2021 period compared to the 2020 period. The following table sets forth the changes in various components of management, leasing and other services (in thousands): 2021 2020 Increase/(Decrease) Management and marketing$ 2,347 $ 1,859 $ 488 Leasing and other fees 228 60 168 Expense reimbursements from unconsolidated joint ventures 3,836 3,017 819 Total Fees$ 6,411 $ 4,936 $ 1,475 Management, leasing and other service revenue increased in the 2021 period due to the prior year impact of the COVID-19 pandemic. The COVID-19 pandemic resulted in materially lower rental revenues received during the 2020 period which resulted in lower management fees. In addition, expense reimbursements from unconsolidated joint ventures were higher in the 2021 period as our centers operated under reduced hours during 2020 as a result of the COVID-19 pandemic. Other Revenues Other revenues increased$5.2 million in the 2021 period as compared to the 2020 period. The following table sets forth the changes in other revenues (in thousands): 2021 2020
Increase/(Decrease)
Other revenues from existing properties
5,380
Other revenues from property disposed 18 173 (155)
$ 12,348 $ 7,123 $ 5,225
Other revenues from existing properties increased in the 2021 period due to the
prior year impact of the COVID-19 pandemic and our focus on increasing other
revenue streams in 2021 The 2020 period included large reductions in the
variable vending and other revenue sources due to the mandatory store closures
by local and state authorities for a portion of the 2020 period discussed above,
as well as the COVID-19 pandemic impacting traffic to our centers and the
centers operating under reduced hours.
44
-------------------------------------------------------------------------------- Property Operating Expenses Property operating expenses increased$3.6 million in the 2021 period compared to the 2020 period. The following table sets forth the changes in various components of property operating expenses (in thousands): 2021 2020 Increase/(Decrease) Property operating expenses from existing properties$ 135,738 $ 126,288 $ 9,450 Property operating expenses from property disposed (1,150) 5,066 (6,216) Expenses related to unconsolidated joint ventures 3,837 3,017 820 Other property operating expense 2,311 2,764 (453)$ 140,736 $ 137,135 $ 3,601 Property operating expenses at existing properties increased in the 2021 period compared to the 2020 period primarily due to the lower costs needed to operate and advertise the centers while stores were closed under government mandates in response to the COVID-19 pandemic in 2020, as well as operating the centers under reduced hours when the stores reopened during the 2020 period.
Property operating expenses from properties disposed for the 2021 period
includes
General and Administrative Expenses General and administrative expenses increased$18.1 million in the 2021 period compared to the 2020 period. The 2021 period includes higher compensation costs due to the addition of certain executives and other key employees added to drive operational and growth initiatives and increases in other professional and legal fees, some of which are related to collection of rents from periods during the COVID-19 mandated shut downs. The 2020 period included temporary reductions in compensation costs of our executive officers and other employees and virtually all travel and entertainment expenses were eliminated following the onset of the pandemic. In addition, 2021 includes compensation cost related to employees that accepted a voluntary retirement plan with an effective retirement date ofMarch 31, 2021 , as well as other executive severance costs incurred during 2021, totaling$3.6 million . Impairment Charges During the first quarter and fourth quarter of 2020 and the fourth quarter of 2021, we determined that the estimated future undiscounted cash flows of our Foxwoods outlet center in Mashantucket,Connecticut did not exceed the property's carrying value due to a continuing decline in operating results. Therefore, we recorded$64.8 million and$7.0 million of non-cash impairment charges in our consolidated statement of operations for both 2020 and 2021, respectively, which equaled the excess of the property's carrying value over its estimated fair value. In addition, in 2020, we recorded a$2.4 million impairment charge on the outlet center inJeffersonville, Ohio . Depreciation and Amortization Depreciation and amortization expense decreased$7.1 million in the 2021 period compared to the 2020 period. The following table sets forth the changes in various components of depreciation and amortization costs from the 2020 period to the 2021 period (in thousands): 2021 2020 Increase/(Decrease)
Depreciation and amortization expenses from existing properties
$ 109,970 $ 116,262 $ (6,292) Depreciation and amortization from property disposed 38 881 (843)$ 110,008 $ 117,143 $ (7,135) Depreciation and amortization decreased at our existing properties due to the lower basis in our Foxwoods property due to impairments recorded in the first and fourth quarters of 2020, and due to tenant improvements and lease related intangibles, which are amortized over shorter lives, in other parts of the portfolio becoming fully depreciated during the reporting periods. 45 -------------------------------------------------------------------------------- Interest Expense Interest expense decreased$10.3 million in the 2021 period compared to the 2020 period for the following reasons: •InAugust 2021 , we completed a public offering of$400.0 million in senior notes due 2031 in an underwritten public offering. The notes were priced at 98.552% of the principal amount to yield 2.917% to maturity. The notes pay interest semi-annually at a rate of 2.750% per annum and mature onSeptember 1, 2031 . •During 2021, we completed the early redemption of$250.0 million of our 3.875% senior notes dueDecember 2023 and$250.0 million of our 3.75% senior notes due 2024. •During 2021, we paid down$50.0 million of borrowings under our unsecured term loan. •Interest rate swap agreements in place during the 2021 period had lower average interest rates compared to the 2020 period. •The 2020 period included interest expense related to borrowing inMarch 2020 approximately$599.8 million under our unsecured lines of credit to increase liquidity and preserve financial flexibility as a result of the COVID-19 pandemic. InJune 2020 , we repaid$200.0 million of these borrowings, and byAugust 2020 , we had repaid the entire$599.8 million outstanding balance bringing the outstanding balance to zero as ofDecember 31, 2020 . During the 2021 period, we had no borrowings under our unsecured lines of credit. Loss on Early Extinguishment of Debt For the year endedDecember 31, 2021 , we recorded make-whole premiums of$44.9 million and the write-off of approximately$3.0 million of debt discount and debt origination costs due to the early redemption of our notes originally due 2023 and 2024. Gain on Sale of Assets InAugust 2020 , we sold a non-core outlet center inTerrell, Texas for net proceeds of$7.6 million , which resulted in a gain on sale of assets of$2.3 million . The proceeds from the sale of this unencumbered asset were used to pay down balances outstanding under our unsecured lines of credit. Other Income (Expense) Other income (expense) decreased approximately$2.5 million in the 2021 period compared to the 2020 period. InMarch 2021 , theRioCan joint venture closed on the sale of its outlet center inSaint-Sauveur , for net proceeds of approximately$9.4 million . Our share of the proceeds was approximately$4.7 million . As a result of this transaction, we recorded a foreign currency loss of approximately$3.6 million in other income (expense), which had been previously recorded in other comprehensive income. Equity in Earnings (Losses) ofUnconsolidated Joint Ventures Equity in earnings (losses) of unconsolidated joint ventures increased approximately$7.8 million in the 2021 period compared to the 2020 period. In the table below, information set forth for property disposed includes theSaint-Sauveur, Quebec outlet center in our Canadian joint venture, which was sold inMarch 2021 . 2021 2020 Increase/(Decrease) Equity in earnings from existing properties$ 8,714 $ 4,051 $ 4,663 Equity in earnings (losses) from property disposed 190 (2,925) 3,115$ 8,904 $ 1,126 $ 7,778
Equity in earnings (losses) of unconsolidated joint ventures from existing properties increased due to the impact of COVID-19 on revenues in the previous year.
Equity in earnings (losses) from properties disposed includes our share of an impairment charge totaling$3.1 million in the 2020 period related to theSaint-Sauveur, Quebec outlet center in our Canadian joint venture. The impairment charge was primarily driven by deterioration of net operating income caused by market competition and the COVID-19 pandemic. 46 --------------------------------------------------------------------------------
2020 Compared to 2019
For a discussion of our results of operations for the year endedDecember 31, 2019 , including a year-to-year comparison between 2020 and 2019, refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report Form 10-K for the year endedDecember 31, 2020 .
Liquidity and Capital Resources of the Company
In this "Liquidity and Capital Resources of the Company" section, the term, the
"Company", refers only to
The Company's business is operated primarily through theOperating Partnership . The Company issues public equity from time to time, but does not otherwise generate any capital itself or conduct any business itself, other than incurring certain expenses in operating as a public company, which are fully reimbursed by theOperating Partnership . The Company does not hold any indebtedness, and its only material asset is its ownership of partnership interests of theOperating Partnership . The Company's principal funding requirement is the payment of dividends on its common shares. The Company's principal source of funding for its dividend payments is distributions it receives from theOperating Partnership . Through its ownership of the sole general partner of theOperating Partnership , the Company has the full, exclusive and complete responsibility for theOperating Partnership's day-to-day management and control. The Company causes theOperating Partnership to distribute all, or such portion as the Company may in its discretion determine, of its available cash in the manner provided in theOperating Partnership's partnership agreement. The Company receives proceeds from equity issuances from time to time, but is required by theOperating Partnership's partnership agreement to contribute the proceeds from its equity issuances to theOperating Partnership in exchange for partnership units of theOperating Partnership . We are a well-known seasoned issuer with a shelf registration which expires inFebruary 2024 that allows the Company to register various unspecified classes of equity securities and theOperating Partnership to register various unspecified classes of debt securities. We expect to file a new joint shelf registration statement on Form S-3 prior to the expiration of the current registration statement. As circumstances warrant, the Company may issue equity from time to time on an opportunistic basis, dependent upon market conditions and available pricing.The Operating Partnership may use the proceeds to repay debt, including borrowings under its lines of credit, develop new or existing properties, make acquisitions of properties or portfolios of properties, invest in existing or newly created joint ventures, or for general corporate purposes. The liquidity of the Company is dependent on theOperating Partnership's ability to make sufficient distributions to the Company.The Operating Partnership is a party to loan agreements with various bank lenders that require theOperating Partnership to comply with various financial and other covenants before it may make distributions to the Company. The Company also guarantees some of theOperating Partnership's debt. If theOperating Partnership fails to fulfill its debt requirements, which trigger the Company's guarantee obligations, then the Company may be required to fulfill its cash payment commitments under such guarantees. However, the Company's only material asset is its investment in theOperating Partnership . The Company believes theOperating Partnership's sources of working capital, specifically its cash flow from operations, and borrowings available under its unsecured credit facilities, are adequate for it to make its distribution payments to the Company and, in turn, for the Company to make its dividend payments to its shareholders and to finance its continued operations, growth strategy and additional expenses we expect to incur. However, there can be no assurance that theOperating Partnership's sources of capital will continue to be available at all or in amounts sufficient to meet its needs, including its ability to make distribution payments to the Company. The unavailability of capital could adversely affect theOperating Partnership's ability to pay its distributions to the Company, which will in turn, adversely affect the Company's ability to pay cash dividends to its shareholders. 47
-------------------------------------------------------------------------------- We operate in a manner intended to enable us to qualify as a REIT under the Internal Revenue Code, or the Code. For the Company to maintain its qualification as a REIT, it must pay dividends to its shareholders aggregating annually at least 90% of its taxable income. While historically the Company has satisfied this distribution requirement by making cash distributions to its shareholders, it may choose to satisfy this requirement by making distributions of cash or other property, including, in limited circumstances, the Company's own shares. Based on our 2021 estimated taxable loss, we were not required make a distribution to our shareholders in order to maintain our REIT status as described above. For tax reporting purposes, we distributed approximately$71.4 million during 2021. Given the uncertainty related to the pandemic's near and potential long-term impact, inMay 2020 the Company's Board of Directors temporarily suspended dividend distributions to conserve approximately$35.0 million in cash per quarter and preserve our balance sheet strength and flexibility. Beginning inJanuary 2021 , the Board reinstated dividend distributions and declared and paid dividends on a quarterly basis for the year endedDecember 31, 2021 . OnJanuary 13, 2022 , the Board declared a dividend of$0.1825 per share paid inFebruary 2022 . The Board continues to evaluate the potential for future dividend distributions on a quarterly basis. If in any taxable year the Company were to fail to qualify as a REIT and certain statutory relief provisions were not applicable, we would not be allowed a deduction for distributions to shareholders in computing taxable income and would be subject toU.S. federal income tax (including any applicable alternative minimum tax for tax years prior to 2018) on our taxable income at the regular corporate rate. As a result of this distribution requirement, theOperating Partnership cannot rely on retained earnings to fund its on-going operations to the same extent that other companies whose parent companies are not real estate investment trusts can. The Company may need to continue to raise capital in the equity markets to fund theOperating Partnership's working capital needs, as well as potential developments of new or existing properties, acquisitions or investments in existing or newly created joint ventures. The Company currently consolidates theOperating Partnership because it has (1) the power to direct the activities of theOperating Partnership that most significantly impact theOperating Partnership's economic performance and (2) the obligation to absorb losses and the right to receive the residual returns of theOperating Partnership that could be potentially significant. The Company does not have significant assets other than its investment in theOperating Partnership . Therefore, the assets and liabilities and the revenues and expenses of the Company and theOperating Partnership are the same on their respective financial statements, except for immaterial differences related to cash, other assets and accrued liabilities that arise from public company expenses paid by the Company. However, all debt is held directly or indirectly at theOperating Partnership level, and the Company has guaranteed some of theOperating Partnership's unsecured debt as discussed below. Because the Company consolidates theOperating Partnership , the section entitled "Liquidity and Capital Resources of theOperating Partnership " should be read in conjunction with this section to understand the liquidity and capital resources of the Company on a consolidated basis and how the Company is operated as a whole. Under our ATM Offering program, which commenced inFebruary 2021 , we may offer and sell our common shares,$0.01 par value per share ("Common Shares"), having an aggregate gross sales price of up to$250.0 million (the "Shares"). We may sell the Shares in amounts and at times to be determined by us but we have no obligation to sell any of the Shares. Actual sales, if any, will depend on a variety of factors to be determined by us from time to time, including, among other things, market conditions, the trading price of the Common Shares, capital needs and determinations by us of the appropriate sources of its funding. We currently intend to use the net proceeds from the sale of shares pursuant to the ATM Offering for working capital and general corporate purposes. As ofDecember 31, 2021 , we had approximately$60.1 million remaining available for sale under our ATM Offering program. The following table sets forth information regarding settlements under our ATM offering program: 2021 2020 2019 Number of common shares settled during the period 10,009,263 - - Average price per share$ 18.97 $ - $ - Aggregate gross proceeds (in thousands)$ 189,868 $ - $ - Aggregate net proceeds after commissions and fees (in thousands)$ 186,969 $ - $ - 48
-------------------------------------------------------------------------------- InMay 2021 , the Company's Board of Directors authorized the repurchase of up to$80.0 million of the Company's outstanding shares throughMay 31, 2023 . This authorization replaced a previous repurchase authorization for approximately$80.0 million that expired inMay 2021 . InJune 2020 , we amended our debt agreements primarily to improve future covenant flexibility and such amendments included a prohibition on share repurchases for twelve months startingJuly 1, 2020 (the "Repurchase Covenant"). The Company temporarily suspended share repurchases for at least the twelve months startingJuly 1, 2020 and ending onJune 30, 2021 in light of the Repurchase Covenant. OnJuly 1, 2021 , the Repurchase Covenant expired. Repurchases may be made from time to time through open market, privately-negotiated, structured or derivative transactions (including accelerated share repurchase transactions), or other methods of acquiring shares. The Company intends to structure open market purchases to occur within pricing and volume requirements of Rule 10b-18. The Company may, from time to time, enter into Rule 10b5-1 plans to facilitate the repurchase of its shares under this authorization. The Company did not repurchase any shares for the year endedDecember 31, 2021 and 2020. The remaining amount authorized to be repurchased under the program as ofDecember 31, 2021 was approximately$80.0 million . Shares repurchased during the years endedDecember 31, 2021 , 2020 and 2019 were as follows: 2021 2020 2019 Total number of shares purchased - - 1,209,328 Average price paid per share $ - $ -$ 16.52 Total price paid exclusive of commissions and related fees (in thousands) $ -
$ -
In
Liquidity and Capital Resources of the
In this "Liquidity and Capital Resources of the
Summary of Our Major Sources and Uses of Cash and Cash Equivalents
General Overview Property rental income represents our primary source to pay property operating expenses, debt service, capital expenditures and distributions, excluding non-recurring capital expenditures and acquisitions. To the extent that our cash flow from operating activities is insufficient to cover such non-recurring capital expenditures and acquisitions, we finance such activities from borrowings under our unsecured lines of credit or from the proceeds from theOperating Partnership's debt offerings and the Company's equity offerings. We believe we achieve a strong and flexible financial position by attempting to: (1) maintain a conservative leverage position relative to our portfolio when pursuing new development, expansion and acquisition opportunities, (2) extend and sequence debt maturities, (3) manage our interest rate risk through a proper mix of fixed and variable rate debt, (4) maintain access to liquidity by using our lines of credit in a conservative manner and (5) preserve internally generated sources of capital by strategically divesting of our non-core assets and maintaining a conservative distribution payout ratio. We manage our capital structure to reflect a long-term investment approach and utilize multiple sources of capital to meet our requirements, including without limitation issuances of equity under our ATM program. 49 -------------------------------------------------------------------------------- Capital Expenditures The following table details our capital expenditures for consolidated outlet centers for the years endedDecember 31, 2021 and 2020, respectively (in thousands): 2021 2020 Change Capital expenditures analysis: New outlet center developments and expansions (1)$ 2,441 $ 2,432 $ 9 Renovations (2) 761 5,505 (4,744) Second generation tenant allowances (3) 3,020 12,273 (9,253) Other capital expenditures (4) 30,917
10,279 20,638
37,139 30,489 6,650
Conversion from accrual to cash basis 8,047 (1,923) 9,970
Additions to rental property-cash basis $ 45,186 $
28,566
(1)New outlet center developments and expansions in the 2021 period included a land acquisition at our Westgate outlet center. (2)Major outlet center renovations in the 2020 period included costs related to bringing two magnet tenants to ourLancaster outlet center. (3)In the 2021 period, second generation tenant allowances are presented net of$3.3 million tenant allowance reversals, which were the result of a lease modification. (4)The increase in other capital expenditures in 2021 was primarily due to our decision in 2020 to defer all capital projects except essential and life-safety projects, due to the impact on cash flows caused by the COVID-19 pandemic.
We expect total capital expenditures for 2022 to be approximately
Potential Future Developments, Acquisitions and Dispositions As of the date of this filing, we are in the initial study period for potential new developments, including a potential site inNashville, Tennessee . We may also use joint venture arrangements to develop other potential sites. However, there can be no assurance that these potential future projects will ultimately be developed. In the case of projects to be wholly-owned by us, we expect to fund these projects with borrowings under our unsecured lines of credit and cash flows from operations, but may also fund them with capital from additional public debt and equity offerings. For projects to be developed through joint venture arrangements, we may use collateralized construction loans to fund a portion of the project, with our share of the equity requirements funded from sources described above. We intend to continue to grow our portfolio by developing, expanding or acquiring additional outlet centers. However, you should note that any developments or expansions that we, or a joint venture that we have an ownership interest in, have planned or anticipated may not be started or completed as scheduled, or may not result in accretive net income or funds from operations ("FFO"). See the section "Non-GAAP Supplemental Earnings Measures" - "Funds From Operations" below for further discussion of FFO. In addition, we regularly evaluate acquisition or disposition proposals and engage from time to time in negotiations for acquisitions or dispositions of properties. We may also enter into letters of intent for the purchase or sale of properties. Any prospective acquisition or disposition that is being evaluated or which is subject to a letter of intent may not be consummated, or if consummated, may not result in an increase in earnings or liquidity.Unconsolidated Real Estate Joint Ventures From time to time, we form joint venture arrangements to develop outlet centers. As ofDecember 31, 2021 , we have partial ownership interests in six unconsolidated outlet centers totaling approximately 2.1 million square feet, including two outlet centers inCanada . See Note 5 to the Consolidated Financial Statements for details of our individual joint ventures, including, but not limited to, carrying values of our investments, fees we receive for services provided to the joint ventures, recent development and financing transactions and condensed combined summary financial information. 50
-------------------------------------------------------------------------------- We may elect to fund cash needs of a joint venture through equity contributions (generally on a basis proportionate to our ownership interests), advances or partner loans, although such funding is not typically required contractually or otherwise. We separately report investments in joint ventures for which accumulated distributions have exceeded investments in, and our share of net income or loss of, the joint ventures within other liabilities in the consolidated balance sheets because we are committed and intend to provide further financial support to these joint ventures. We believe our joint ventures will be able to fund their operating and capital needs during 2022 based on their sources of working capital, specifically cash flow from operations, access to contributions from partners, and ability to refinance all or portion of its debt obligations, including the ability to exercise upcoming extensions of near term maturities. Our joint ventures are typically encumbered by a mortgage on the joint venture property. We provide guarantees to lenders for our joint ventures which include standard non-recourse carve out indemnifications for losses arising from items such as but not limited to fraud, physical waste, payment of taxes, environmental indemnities, misapplication of insurance proceeds or security deposits and failure to maintain required insurance. A default by a joint venture under its debt obligations may expose us to liability under the guaranty. For construction and mortgage loans, we may include a guaranty of completion as well as a principal guaranty ranging from 5% to 100% of principal. The principal guarantees include terms for release based upon satisfactory completion of construction and performance targets including occupancy thresholds and minimum debt service coverage tests. Our joint ventures may contain make whole provisions in the event that demands are made on any existing guarantees. Our joint ventures are generally subject to buy-sell provisions which are customary for joint venture agreements in the real estate industry. Either partner may initiate these provisions (subject to any applicable lock up period), which could result in either the sale of our interest or the use of available cash or additional borrowings to acquire the other party's interest. Under these provisions, one partner sets a price for the property, then the other partner has the option to either (1) purchase their partner's interest based on that price or (2) sell its interest to the other partner based on that price. Since the partner other than the partner who triggers the provision has the option to be the buyer or seller, we do not consider this arrangement to be a mandatory redeemable obligation. Future Debt Obligations As described further in Note 8 of the notes to the consolidated financial statements, as ofDecember 31, 2021 , scheduled maturities of our existing long-term debt for 2022, 2023, 2024, 2025 and 2026 are$4.4 million ,$44.9 million ,$305.1 million ,$1.5 million and$355.7 million , respectively. As ofDecember 31, 2021 , scheduled maturities after 2026 aggregate to$700.0 million . Future Interest Payments We are obligated to make periodic interest payments at fixed and variable rates, depending on the terms of the applicable debt agreements. Based on applicable interest rates and scheduled debt maturities as ofDecember 31, 2021 , these interest obligations total approximately$239.1 million and range from approximately$30.2 million to$41.1 million on an annual basis over the next five years. Operating Lease Obligations As described further in Note 20 of the notes to the consolidated financial statements, as ofDecember 31, 2021 , we had a total of$244.0 million of minimum operating lease obligations. These minimum lease payments range from approximately$5.7 million to$5.9 million on an annual basis over the next five years. Other Contractual Obligations Other contractual obligations totaled$22.9 million as ofDecember 31, 2021 . These obligations range from approximately$1.2 million to$15.8 million on an annual basis over the next five years. The majority of these contractual obligations relate to our solar initiative and installation of electric vehicle charging stations in 2022. 51
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Cash Flows
The following table sets forth our changes in cash flows from 2021 and 2020 (in
thousands):
2021 2020 Change
Net cash provided by operating activities $ 217,697 $ 164,818 $ 52,879
Net cash used in investing activities (22,739) (18,771) (3,968)
Net cash used in financing activities (118,379) (77,593) (40,786) Effect of foreign currency rate changes on cash and equivalents
(177) (223) 46
Net increase in cash and cash equivalents $ 76,402 Operating Activities The increase in net cash provided by operating activities was primarily due to the collection of rent deferred from April and May of 2020 during the beginning of the COVID-19 pandemic. These rents were payable during 2021, the majority of which was due in the first quarter of 2021. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-COVID-19 Pandemic." In addition, our cash collections normalized during 2021, whereas the second and third quarters of 2020 had uncollected and deferred contractual rents as a result of COVID-19. Investing Activities The primary cause for the increase in net cash used in investing activities was due to additions in rental property, additions to non-real estate assets, and additions to deferred lease costs, which was offset by increased distributions in excess of cumulative earnings from unconsolidated joint ventures. Financing Activities The primary cause for the increase in net cash used in financing activities was due to early redemption of$250.0 million of our 3.875% senior notes dueDecember 2023 and$250.0 million of our 3.75% senior notes due 2024, including make whole premiums of$44.9 million . In addition, inMarch 2021 andJune 2021 , we paid down a total of$50.0 million of borrowings under our unsecured term loan with cash on hand. We also had higher dividend payments in 2021 compared to 2020. The increase in net cash used in financing activities was partially offset by proceeds received during 2021 from ourAugust 2021 public offering of$400.0 million in senior notes due 2031 and sales of commons shares under our ATM Offering program generating net proceeds of approximately$187.0 million .
Financing Arrangements
See Notes 7 and 8 to the Consolidated Financial Statements, for details of our current outstanding debt, financing transactions that have occurred over the past three years and debt maturities. As ofDecember 31, 2021 , unsecured borrowings represented 96% of our outstanding debt and 92% of the gross book value of our real estate portfolio was unencumbered. As ofDecember 31, 2021 , 3% of our outstanding debt, excluding variable rate debt with interest rate protection agreements in place, had variable interest rates and therefore was subject to market fluctuations. We intend to retain the ability to raise additional capital, including public debt or equity, to pursue attractive investment opportunities that may arise and to otherwise act in a manner that we believe to be in the best interests of our shareholders and unitholders. The Company andOperating Partnership are well-known seasoned issuers with a joint shelf registration statement on Form S-3, expiring inFebruary 2024 , that allows us to register unspecified amounts of different classes of securities. To generate capital to reinvest into other attractive investment opportunities, we may also consider the use of additional operational and developmental joint ventures, the sale or lease of outparcels on our existing properties and the sale of certain properties that do not meet our long-term investment criteria. Based on cash provided by operations, existing lines of credit, ongoing relationships with certain financial institutions and our ability to sell debt or issue equity subject to market conditions, we believe that we have access to the necessary financing to fund the planned capital expenditures for at least the next twelve months. 52 -------------------------------------------------------------------------------- We anticipate that adequate cash will be available to fund our operating and administrative expenses, regular debt service obligations, and the payment of dividends in accordance with REIT requirements in both the short and long-term. Although we receive most of our rental payments on a monthly basis, distributions to shareholders and unitholders are typically made quarterly and interest payments on the senior, unsecured notes are made semi-annually. Amounts accumulated for such payments will be used in the interim to reduce the outstanding borrowings under our existing unsecured lines of credit or invested in short-term money market or other suitable instruments. The extent to which the COVID-19 pandemic continues to impact our financial condition, results of operations and cash flows will depend on future developments which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, the availability or effectiveness of vaccines or treatments, future mutations or variants of the virus, and the direct and indirect economic effects of the pandemic and containment measures, among others. As ofDecember 31, 2021 , our total liquidity was approximately$681.3 million , including cash and cash equivalents on our balance sheet and the full undrawn capacity under our$520 million unsecured lines of credit. Based on estimated monthly cash expenditures of approximately$28.6 million (excluding dividends and debt maturities) for 2022, we expect to have sufficient liquidity to meet our obligations for at least the next 12 months. For further discussion of COVID-19, please see "Management's Discussion and Analysis of Financial Condition and Results of Operations-COVID-19 Pandemic." We believe our current balance sheet position is financially sound; however, due to the economic uncertainty caused by the COVID-19 pandemic and the inherent uncertainty and unpredictability of the capital and credit markets, we can give no assurance that affordable access to capital will exist between now and when our next significant debt matures, which is our unsecured term loan dueApril 2024 . Equity Offerings under the ATM Offering Program InFebruary 2021 , the Company implemented the ATM Offering program whereby it may offer and sell the Company's common shares having an aggregate gross sales price of up to$250.0 million . During 2021, under this program, the Company sold 10.0 million shares at a weighted average price of$18.97 per share, generating net proceeds of$187.1 million and leaving a remaining authorization of$60.1 million . The proceeds were contributed to theOperating Partnership and then used primarily to reduce indebtedness as described in the sections immediately below. Redemption of the 2023 and 2024 Senior Notes and public offering of aggregate$400.0 Million Unsecured Senior Notes due 2031 InApril 2021 , we completed a partial redemption of$150.0 million aggregate principal amount of our$250.0 million 3.875% senior notes dueDecember 2023 , for$163.0 million in cash, which includes a make-whole premium of$13.0 million and the write-off of approximately$1.0 million of debt discount and debt origination costs. The make-whole premium and the write-off of debt discount and debt origination costs was recorded as a loss on early extinguishment of debt within the consolidated statements of operations. Subsequent to this redemption,$100.0 million aggregate principal amount of the notes remained outstanding, until the redemption inAugust 2021 , described below. InAugust 2021 , we completed a public offering of$400.0 million in senior notes due 2031. The notes were priced at 98.552% of the principal amount to yield 2.917% to maturity. The notes pay interest semi-annually at a rate of 2.750% per annum and mature onSeptember 1, 2031 . The aggregate net proceeds from the offering, after deducting the underwriting discount and offering expenses, were approximately$390.7 million . We used the net proceeds from the sale of the notes to redeem all remaining 3.875% senior notes due 2023,$100.0 million in aggregate principal amount outstanding, and all 3.750% senior notes due 2024,$250.0 million in aggregate principal outstanding. The redemptions occurred inSeptember 2021 and included a make-whole premium of$31.9 million and the write-off of approximately$1.9 million of debt discount and debt origination costs. The make-whole premium and the write-off of debt discount and debt origination costs was recorded as a loss on early extinguishment of debt within the consolidated statements of operations. The remaining proceeds were used for general corporate purposes. 53
-------------------------------------------------------------------------------- Unsecured term loan InMarch 2021 andJune 2021 , we paid down a total of$50.0 million of borrowings under our$350.0 million unsecured term loan with cash on hand, reducing the balance outstanding to$300.0 million as ofDecember 31, 2021 . Unsecured Lines of Credit Amendments and Extension InJune 2020 , we amended the debt agreements for our lines of credit and bank term loan, primarily to improve future covenant flexibility. The amendments, among other things, allowed us to access the existing surge leverage provision, which provides for an increase to the maximum thresholds to 65% from 60% for total leverage and unsecured leverage, for twelve months fromJuly 1, 2020 toJune 30, 2021 , during which time share repurchases were prohibited. Additionally, the leverage covenants are determined based on the calculation period which is modified to be based on the immediately preceding three calendar month period annualized for the calculation date occurring onDecember 31, 2020 ; the immediately preceding six calendar month period annualized for the calculation date occurring onMarch 31, 2021 ; the immediately preceding nine calendar month period annualized for the calculation date occurring onJune 30, 2021 ; and for all other calculation dates occurring during the term on the agreement, the immediately preceding twelve calendar month period. Some definitional modifications related to the calculation of certain covenants are permanent, including the netting of cash balances in excess of$30.0 million (or debt maturing in the next 24 months, if less) as well as using adjusted EBITDA, which adds back general and administrative expenses not attributable to the subsidiaries or properties and deducts a management fee of 3% of rental revenues in liability and asset calculations for certain covenants. The amendments revised the interest rate to provide a LIBOR floor of 0.25% for the portions of the lines of credit and bank term loan that are not fixed with an interest rate swap. Although the amended covenants provide additional flexibility and we expect to remain in compliance with such covenants, the potential impacts from COVID-19 are highly uncertain and therefore could impact covenant compliance in the future. InJuly 2021 , we amended our unsecured lines of credit and extended the maturity date fromOctober 2021 toJuly 2025 , which may be extended by an additional year by exercising two six-month extension options. The amendment eliminated the LIBOR floor, which was previously 0.25%, and entitles us to a one basis point annual reduction in the interest rate if we meet certain sustainability thresholds. Other pricing terms remained the same. The lines provide for borrowings of up to$520.0 million , including a$20.0 million liquidity line and a$500.0 million syndicated line. A 0.25% facility fee is due annually on the entire committed amount of each facility. In certain circumstances, total line capacity may be increased to$1.2 billion through an accordion feature in the syndicated line. Other Financing Activity InApril 2021 , Moody's lowered the Company's credit rating to Baa3, stable. As the Company no longer had a split rating between the rating agencies, the pricing over LIBOR for the lines of credit, term loan and facility fee increased to 1.20%, 1.25% and 0.25%, respectively, effectiveMay 1, 2021 . InOctober 2021 , the joint venture that owns theSouthaven, MS outlet center exercised its option to extend the maturity of theSouthaven, MS mortgage toApril 2023 and paid down the principal balance by$11.3 million to$40.1 million . The interest rate remains LIBOR + 1.80%. The outlet center is consolidated for financial reporting purposes and we funded the entire$11.3 million . During 2021, we completed the principal payments of certain mortgage notes secured by theAtlantic City property with stated interest rates that ranged from 5.14% to 6.27% and which were scheduled to mature in 2021. The effective interest rate for the remaining notes remains 5.05% as established upon acquisition. The stated rates for the remaining secured notes ranged from 6.44% to 7.65% with maturity dates betweenDecember 2024 andDecember 2026 .The Operating Partnership's debt agreements require the maintenance of certain ratios, including debt service coverage and leverage, and limit the payment of dividends such that dividends and distributions will not exceed funds from operations, as defined in the agreements, for the prior fiscal year on an annual basis or 95% on a cumulative basis. 54
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Debt Covenants
We have historically been, and atDecember 31, 2021 are, in compliance with all of our debt covenants. The ongoing financial impact of the COVID-19 pandemic could potentially negatively impact our future compliance with financial covenants of our credit facilities, term loan and other debt agreements and result in a default and potentially an acceleration of indebtedness. Failure to comply with these covenants would result in a default which, if we were unable to cure or obtain a waiver from the lenders, could accelerate the repayment obligations. Further, in the event of default, the Company may be restricted from paying dividends to its shareholders in excess of dividends required to maintain its REIT qualification. Accordingly, an event of default could have a material and adverse impact on us. As a result, we have considered our short-term (one year or less from the date of filing these financial statements) liquidity needs and the adequacy of our estimated cash flows from operating activities and other financing sources to meet these needs. These other sources include but are not limited to: existing cash, ongoing relationships with certain financial institutions, our ability to sell debt or issue equity subject to market conditions and proceeds from the potential sale of non-core assets. We believe that we have access to the necessary financing to fund our short-term liquidity needs.
As of
Senior unsecured notes financial covenants Required Actual Total consolidated debt to adjusted total assets <60% 41 % Total secured debt to adjusted total assets <40% 2 % Total unencumbered assets to unsecured debt >150% 232 % Consolidated Income Available for Debt Service to Annual Debt Service Charge > 1.5 x 5.1 x
In addition, key financial covenants for our lines of credit and term loan,
include the following as of
Required Actual
Total Liabilities to Total Adjusted Asset Value <60% 40 %
Secured Indebtedness to Adjusted Unencumbered Asset Value < 35% 5 %
EBITDA to Fixed Charges > 1.5 x 4.1
Total Unsecured Indebtedness to Adjusted Unencumbered Asset Value
<60% 35 % Unencumbered Interest Coverage Ratio > 1.5 x 4.9 Depending on the future economic impact of COVID-19, other covenants related to credit facilities, term loans, and other debt obligations could become one of our most restrictive covenants.
Debt of unconsolidated joint ventures
The following table details information regarding the outstanding debt of the unconsolidated joint ventures and guarantees of such debt provided by us as ofDecember 31, 2021 (dollars in millions): Percent Guaranteed by Maximum Guaranteed Total Joint the Operating Amount by the Joint Venture Venture Debt Maturity Date Interest Rate Partnership Company Charlotte$ 100.0 July 2028 4.27 % - % $ - Columbus 71.0 November 2022 LIBOR + 1.85% 16.8 % 11.9 Galveston/Houston 64.5 July 2023 LIBOR + 1.85% 15.5 % 10.0 National Harbor 95.0 January 2030 4.63 % - % - Debt origination costs (1.0)$ 329.5 $ 21.9 55
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Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity withU.S. generally accepted accounting principles ("GAAP") and the Company's discussion and analysis of its financial condition and operating results require the Company's management to make judgments, assumptions and estimates that affect the amounts reported. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates, and such differences may be material. Management believes the Company's critical accounting estimates are those related to impairment of long-lived assets, impairment of investments, revenue recognition and collectibility of operating lease receivables. Management considers these estimates critical because they are both important to the portrayal of the Company's financial condition and operating results, and they require management to make judgments and estimates about inherently uncertain matters. The Company's senior management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of the Company's Board of Directors.
Evaluation of Impairment of long-lived assets
Rental property held and used by us is reviewed for impairment in the event that facts and circumstances indicate the carrying amount of an asset may not be recoverable. In such an event, we compare the estimated future undiscounted cash flows associated with the asset to the asset's carrying amount, and if less than such carrying amount, recognize an impairment loss in an amount by which the carrying amount exceeds its fair value. The cash flow estimates used both for determining recoverability and estimating fair value are inherently judgmental and reflect current and projected trends in rental, occupancy, capitalization and discount rates, and estimated holding periods for the applicable assets. Impairment analyses are based on our current plans, intended holding periods and available market information at the time the analyses are prepared. If our estimates of the projected future cash flows change based on uncertain market conditions or holding periods, our evaluation of impairment losses may be different and such differences could be material to our consolidated financial statements. The Foxwoods outlet center, which is part of a casino property, continues to face leasing challenges that led to declines in occupancy and estimated operating cash flows. As a result, duringDecember 2021 , due to a decrease in the estimated hold period and declining operating results, we determined the carrying value of the Foxwoods outlet center was not recoverable. Discount rates and terminal capitalization rates utilized in the approach above were derived from property-specific information, market transactions and other financial and industry data. The terminal capitalization rate and discount rate are significant unobservable inputs in determining the fair value. In estimating the fair value for our Foxwoods outlet center, the terminal capitalization rate changed from 7.8% in 2020 to 8.3% in 2021. The discount rate changed from 8.5% in 2020 to 9.3% in 2021. We recorded an impairment charge of$7.0 million in our consolidated statement of operations, which equaled the excess of the carrying value of our Foxwoods outlet center over its estimated fair value.
Evaluation of Impairment of investments
Our estimates of value for each joint venture investment are based on a number
of assumptions that are subject to economic and market uncertainties including,
among others, estimated hold period, terminal capitalization rates, demand for
space, competition for tenants, changes in market rental rates and operating
costs of the property. These above factors are considered in the estimation
process and are subject to significant management judgment, difficult to predict
and contingent on future events that may alter our assumptions and the values
estimated by us in our impairment analysis may not be realized.
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Revenue recognition and collectibility of operating lease receivables
We, as a lessor, retain substantially all of the risks and benefits of ownership of our outlet centers and account for our leases as operating leases. We accrue fixed lease income on a straight-line basis over the terms of the leases, when we believe substantially all lease income, including the related straight-line rent receivable, is probable of collection. Our assessment of collectability requires the exercise of considerable judgment and incorporates available operational performance measures such as sales and the aging of billed amounts as well as other publicly available information with respect to our tenant's financial condition, liquidity and capital resources, including declines in such conditions due to, or amplified by, the COVID-19 pandemic. When a tenant seeks to reorganize its operations through bankruptcy proceedings, we assess the collectability of receivable balances including, among other things, the timing of a tenant's bankruptcy filing and our expectations of the assumption by the tenant in bankruptcy proceeding of leases at the Company's properties on substantially similar terms. In the event that we determine accrued receivables are not probable of collection, lease income will be recorded on a cash basis, with the corresponding tenant receivable and straight-line rent receivable charged as a direct write-off against lease income in the period of the change in our collectability determination. Our financial results for 2020 were materially adversely impacted by COVID-19. During the year endedDecember 31, 2020 , as a direct result of the pandemic, bankruptcies and restructurings, the Company's earnings were negatively impacted by approximately$47.3 million due to (1) write-offs related to bankruptcies and other uncollectible accounts due to financial weakness, (2) one-time concessions in exchange for landlord-favorable amendments to lease structure, (3) reserves for a portion of deferred and under negotiation billings that we expect to become uncollectible in future periods and (4) and write-offs of straight-line rents associated with the bankruptcies and uncollectible accounts. As ofDecember 31, 2021 , contractual fixed rents billed during 2020 that were deferred as a direct result of the COVID-19 pandemic and remain outstanding totaled$82,000 . ThroughDecember 31, 2021 , the Company had collected 99% of the 2020 deferred rents due to be repaid during the year endedDecember 31, 2021 . During 2021, our business and financial results improved, and metrics such as average occupancy rates, traffic to our centers, sales reported by our tenants, and collections of rental revenues returned to near, at, or in some cases above, pre-pandemic levels. The extent of future tenant requests for rent relief and the impact on our results of operations and cash flows is uncertain and cannot be predicted at this time. If store closures were to occur again in our domestic markets, this could have a material adverse impact on our financial position and results of operations.
Recent Accounting Pronouncements
See Note 2 to the consolidated financial statements for information on recently adopted accounting standards and new accounting pronouncements issued.
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Non-GAAP Supplemental Measures
Funds From Operations
Funds From Operations ("FFO") is a widely used measure of the operating
performance for real estate companies that supplements net income (loss)
determined in accordance with GAAP. We determine FFO based on the definition set
forth by the National Association of Real Estate Investment Trusts ("NAREIT"),
of which we are a member. In December 2018 , NAREIT issued "NAREIT Funds From
Operations White Paper - 2018 Restatement" which clarifies, where necessary,
existing guidance and consolidates alerts and policy bulletins into a single
document for ease of use. NAREIT defines FFO as net income (loss) available to
the Company's common shareholders computed in accordance with GAAP, excluding
(i) depreciation and amortization related to real estate, (ii) gains or losses
from sales of certain real estate assets, (iii) gains and losses from change in
control, (iv) impairment write-downs of certain real estate assets and
investments in entities when the impairment is directly attributable to
decreases in the value of depreciable real estate held by the entity and (v)
after adjustments for unconsolidated partnerships and joint ventures calculated
to reflect FFO on the same basis.
FFO is intended to exclude historical cost depreciation of real estate as
required by GAAP which assumes that the value of real estate assets diminishes
ratably over time. Historically, however, real estate values have risen or
fallen with market conditions. Because FFO excludes depreciation and
amortization of real estate assets, gains and losses from property dispositions
and extraordinary items, it provides a performance measure that, when compared
year over year, reflects the impact to operations from trends in occupancy
rates, rental rates, operating costs, development activities and interest costs,
providing perspective not immediately apparent from net income (loss).
We present FFO because we consider it an important supplemental measure of our
operating performance. In addition, a portion of cash bonus compensation to
certain members of management is based on our FFO or Core FFO, which is
described in the section below. We believe it is useful for investors to have
enhanced transparency into how we evaluate our performance and that of our
management. In addition, FFO is frequently used by securities analysts,
investors and other interested parties in the evaluation of REITs, many of which
present FFO when reporting their results. FFO is also widely used by us and
others in our industry to evaluate and price potential acquisition candidates.
We believe that FFO payout ratio, which represents regular distributions to
common shareholders and unit holders of the Operating Partnership expressed as a
percentage of FFO, is useful to investors because it facilitates the comparison
of dividend coverage between REITs. NAREIT has encouraged its member companies
to report their FFO as a supplemental, industry-wide standard measure of REIT
operating performance.
FFO has significant limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
•FFO does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
•FFO does not reflect changes in, or cash requirements for, our working capital needs;
•Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and FFO does not reflect any cash requirements for such replacements; and
•Other companies in our industry may calculate FFO differently than we do, limiting its usefulness as a comparative measure.
Because of these limitations, FFO should not be considered as a measure of
discretionary cash available to us to invest in the growth of our business or
our dividend paying capacity. We compensate for these limitations by relying
primarily on our GAAP results and using FFO only as a supplemental measure.
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Core Funds From Operations
We present Core FFO (formerly referred to as AFFO) as a supplemental measure of our performance. We define Core FFO as FFO further adjusted to eliminate the impact of certain items that we do not consider indicative of our ongoing operating performance. These further adjustments are itemized in the table below, if applicable. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Core FFO you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Core FFO should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. We present Core FFO because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we believe it is useful for investors to have enhanced transparency into how we evaluate management's performance and the effectiveness of our business strategies. We use Core FFO when certain material, unplanned transactions occur as a factor in evaluating management's performance and to evaluate the effectiveness of our business strategies, and may use Core FFO when determining incentive compensation.
Core FFO has limitations as an analytical tool. Some of these limitations are:
•Core FFO does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
•Core FFO does not reflect changes in, or cash requirements for, our working capital needs;
•Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Core FFO does not reflect any cash requirements for such replacements;
•Core FFO does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and
•Other companies in our industry may calculate Core FFO differently than we do, limiting its usefulness as a comparative measure.
Because of these limitations, Core FFO should not be considered in isolation or
as a substitute for performance measures calculated in accordance with GAAP. We
compensate for these limitations by relying primarily on our GAAP results and
using Core FFO only as a supplemental measure.
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Below is a reconciliation of net income (loss) to FFO and Core FFO available to common shareholders (in thousands, except per share amounts):
2021 2020 2019
Net income (loss) $ 9,558 $ (38,013) $ 92,728
Adjusted for:
Depreciation and amortization of real estate assets - consolidated 107,698 114,021 120,856
Depreciation and amortization of real estate assets - unconsolidated joint ventures
11,618 12,024 12,512
Impairment charges - consolidated (1) 6,989 67,226 37,610
Impairment charges - unconsolidated joint ventures - 3,091 -
Loss on sale of joint venture property, including foreign currency
effect (2) 3,704 - 3,641
Gain on sale of assets - (2,324) (43,422)
FFO 139,567 156,025 223,925FFO attributable to noncontrolling interests in other consolidated partnerships
- (190) (195)
Allocation of earnings to participating securities (1,453) (1,713) (1,991)
FFO available to common shareholders (3) $ 138,114 $ 154,122 $ 221,739
As further adjusted for:
Compensation related to voluntary retirement plan and other
executive officer severance and retirement (4) 3,579 573 4,371
Casualty gain (969) - -
Gain on sale of outparcel - (992) -
Loss on early extinguishment of debt (5) 47,860 - -
Impact of above adjustments to the allocation of earnings to participating securities
(224) 5 (35)
Core FFO available to common shareholders (3) $ 188,360 $ 153,708 $ 226,075
FFO available to common shareholders per share - diluted (3) $ 1.29 $ 1.58 $ 2.27
Core FFO available to common shareholders per share - diluted (3) $ 1.76 $ 1.57 $ 2.31
Weighted Average Shares:
Basic weighted average common shares 100,418 92,618 92,808
Effect of notional units 809 - -
Effect of outstanding options and restricted common shares 752 - -
Diluted weighted average common shares (for earnings per share computations)
101,979 92,618 92,808
Effect of outstanding options - 94
Exchangeable operating partnership units 4,790 4,903 4,958
Diluted weighted average common shares (for FFO and Core FFO per share computations) (3)
106,769 97,615 97,766
(1)The 2020 amount includes $4.0 million of impairment loss attributable to the
right-of-use asset associated with the ground lease at the Mashantucket
(Foxwoods), Connecticut outlet center. The 2021 amount includes $563,000 of
impairment loss attributable to the right-of-use asset associated with the
ground lease at the Mashantucket (Foxwoods), Connecticut outlet center.
(2)Includes a $3.6 million charge related to the foreign currency effect of the
sale of the Saint-Sauveur, Quebec property by the RioCan joint venture in March
2021 .
(3)Assumes the Class A common limited partnership units of the Operating
Partnership held by the noncontrolling interests are exchanged for common shares
of the Company. Each Class A common limited partnership unit is exchangeable for
one of the Company's common shares, subject to certain limitations to preserve
the Company's REIT status.
(4)The 2019 amount represents the accelerated recognition of compensation cost
entitled to be received by the Company's former President and Chief Operating
Officer per the terms of a transition agreement executed in connection with his
retirement. The 2020 and 2021 amounts include compensation cost related to a
voluntary retirement plan offer which required eligible participants to give
notice of acceptance by December 1, 2020 for an effective retirement date of
March 31, 2021 . The 2021 amount also includes other executive officer severance
costs incurred during 2021.
(5)In April 2021 , the Company completed a partial redemption of $150.0 million
aggregate principal amount of its $250.0 million 3.875% senior notes due
December 2023 for $163.0 million in cash. In September 2021 , the Company
completed a redemption of the remaining senior notes due 2023, $100.0 million in
aggregate principal amount outstanding, and all of its 3.750% senior notes due
2024, $250.0 million in aggregate principal outstanding, for $381.9 million in
cash. The loss on extinguishment of debt includes make-whole premiums of $44.9
million for both of these redemptions.
60
--------------------------------------------------------------------------------Portfolio Net Operating Income and Same Center NOI
We present portfolio net operating income ("Portfolio NOI") and same center net
operating income ("Same Center NOI") as supplemental measures of our operating
performance. Portfolio NOI represents our property level net operating income
which is defined as total operating revenues less property operating expenses
and excludes termination fees and non-cash adjustments including straight-line
rent, net above and below market rent amortization, impairment charges and gains
or losses on the sale of assets recognized during the periods presented. We
define Same Center NOI as Portfolio NOI for the properties that were operational
for the entire portion of both comparable reporting periods and which were not
acquired, or subject to a material expansion or non-recurring event, such as a
natural disaster, during the comparable reporting periods.
We believe Portfolio NOI and Same Center NOI are non-GAAP metrics used by
industry analysts, investors and management to measure the operating performance
of our properties because they provide performance measures directly related to
the revenues and expenses involved in owning and operating real estate assets
and provide a perspective not immediately apparent from net income (loss), FFO
or Core FFO. Because Same Center NOI excludes properties developed, redeveloped,
acquired and sold; as well as non-cash adjustments, gains or losses on the sale
of outparcels and termination rents; it highlights operating trends such as
occupancy levels, rental rates and operating costs on properties that were
operational for both comparable periods. Other REITs may use different
methodologies for calculating Portfolio NOI and Same Center NOI, and
accordingly, our Portfolio NOI and Same Center NOI may not be comparable to
other REITs.
Portfolio NOI and Same Center NOI should not be considered alternatives to net
income (loss) or as an indicator of our financial performance since they do not
reflect the entire operations of our portfolio, nor do they reflect the impact
of general and administrative expenses, acquisition-related expenses, interest
expense, depreciation and amortization costs, other non-property income and
losses, the level of capital expenditures and leasing costs necessary to
maintain the operating performance of our properties, or trends in development
and construction activities which are significant economic costs and activities
that could materially impact our results from operations. Because of these
limitations, Portfolio NOI and Same Center NOI should not be viewed in isolation
or as a substitute for performance measures calculated in accordance with GAAP.
We compensate for these limitations by relying primarily on our GAAP results and
using Portfolio NOI and Same Center NOI only as supplemental measures.
61
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Below is a reconciliation of net income (loss) to Portfolio NOI and Same Center NOI for the consolidated portfolio (in thousands):
2021 2020
Net income (loss) $ 9,558 $ (38,013)
Adjusted to exclude:
Equity in earnings of unconsolidated joint ventures (8,904) (1,126)
Interest expense 52,866 63,142
Gain on sale of assets - (2,324)
Loss on early extinguishment of debt (1) 47,860 -
Other (income) expense 1,595 (925)
Impairment charges 6,989 67,226
Depreciation and amortization 110,008 117,143
Other non-property (income) expenses 165 1,359
Corporate general and administrative expenses 66,023 48,172 Non-cash adjustments (2) 2,316 6,170 Lease termination fees (2,225) (12,125) Portfolio NOI - Consolidated 286,251 248,699 Non-same center NOI - Consolidated (1,483)
(2,454)
Same Center NOI - Consolidated (3)$ 284,768 $
246,245
(1)InApril 2021 , the Company completed a partial redemption of$150.0 million aggregate principal amount of its$250.0 million 3.875% senior notes dueDecember 2023 for$163.0 million in cash. InSeptember 2021 , the Company completed a redemption of the remaining senior notes due 2023,$100.0 million in aggregate principal amount outstanding, and all of its 3.750% senior notes due 2024,$250.0 million in aggregate principal outstanding, for$381.9 million in cash. The loss on extinguishment of debt includes make-whole premiums of$44.9 million for both of these redemptions. (2)Non-cash items include straight-line rent, above and below market rent amortization, straight-line rent expense on land leases and gains or losses on outparcel sales, as applicable. (3)Sold outlet centers excluded from Same Center NOI Cash Basis:
Outlet centers sold:
Terrell August 2020 Jeffersonville January 2021 62
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Adjusted EBITDA, EBITDAre and Adjusted EBITDAre
We present Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA") as adjusted for items described below ("Adjusted EBITDA"), EBITDA for
Real Estate ("EBITDAre") and Adjusted EBITDAre, all non-GAAP measures, as
supplemental measures of our operating performance. Each of these measures is
defined as follows:
We define Adjusted EBITDA as net income (loss) available to the Company's common
shareholders computed in accordance with GAAP before interest expense, income
taxes (if applicable), depreciation and amortization, gains and losses on sale
of operating properties, joint venture properties, outparcels and other assets,
impairment write-downs of depreciated property and of investment in
unconsolidated joint ventures caused by a decrease in value of depreciated
property in the affiliate, compensation related to voluntary retirement plan and
other executive officer severance, casualty gains and losses, gains and losses
on early extinguishment of debt, net and other items that we do not consider
indicative of the Company's ongoing operating performance.
We determine EBITDAre based on the definition set forth by NAREIT, which is
defined as net income (loss) available to the Company's common shareholders
computed in accordance with GAAP before interest expense, income taxes (if
applicable), depreciation and amortization, gains and losses on sale of
operating properties, gains and losses on change of control and impairment
write-downs of depreciated property and of investment in unconsolidated joint
ventures caused by a decrease in value of depreciated property in the affiliate
and after adjustments to reflect our share of the EBITDAre of unconsolidated
joint ventures.
Adjusted EBITDAre is defined as EBITDAre excluding gains and losses on early
extinguishment of debt, net, casualty gains and losses, compensation related to
voluntary retirement plan and other executive officer severance, casualty gains
and losses, gains and losses on sale of outparcels, and other items that that we
do not consider indicative of the Company's ongoing operating performance.
We present Adjusted EBITDA, EBITDAre and Adjusted EBITDAre as we believe they
are useful for investors, creditors and rating agencies as they provide
additional performance measures that are independent of a Company's existing
capital structure to facilitate the evaluation and comparison of the Company's
operating performance to other REITs and provide a more consistent metric for
comparing the operating performance of the Company's real estate between
periods.
Adjusted EBITDA, EBITDAre and Adjusted EBITDAre have significant limitations as analytical tools, including:
•They do not reflect our interest expense;
•They do not reflect gains or losses on sales of operating properties or impairment write-downs of depreciated property and of investment in unconsolidated joint ventures caused by a decrease in value of depreciated property in the affiliate;
•Adjusted EBITDA and Adjusted EBITDAre do not reflect gains and losses on extinguishment of debt and other items that may affect operations; and
•Other companies in our industry may calculate these measures differently than we do, limiting its usefulness as a comparative measure.
Because of these limitations, Adjusted EBITDA, EBITDAre and Adjusted EBITDAre
should not be considered in isolation or as a substitute for performance
measures calculated in accordance with GAAP. We compensate for these limitations
by relying primarily on our GAAP results and using Adjusted EBITDA, EBITDAre and
Adjusted EBITDAre only as supplemental measures.
63
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Below is a reconciliation of Net Income (loss) to Adjusted EBITDA (in
thousands):
2021 2020 2019
Net income (loss) $ 9,558 $ (38,013) $ 92,728
Adjusted to exclude:
Interest expense 52,866 63,142 61,672
Depreciation and amortization 110,008 117,143 123,314
Impairment charges - consolidated (1) 6,989 67,226 37,610
Impairment charge - unconsolidated joint ventures - 3,091 -
Loss on sale of joint venture property, including
foreign currency effect (2) 3,704 - 3,641
Gain on sale of assets - (2,324) (43,422)
Compensation related to voluntary retirement plan and other executive severance (3)
3,579 573 4,371
Casualty gain (969) - -
Gain on sale of outparcel - unconsolidated joint
ventures - (992) -
Loss on early extinguishment of debt (4) 47,860 - -
Adjusted EBITDA $ 233,595 $ 209,846 $ 279,914
Below is a reconciliation of Net Income (loss) to EBITDAre and Adjusted EBITDAre
(in thousands):
2021 2020 2019
Net income (loss) $ 9,558 $ (38,013) $ 92,728
Adjusted to exclude:
Interest expense 52,866 63,142 61,672
Depreciation and amortization 110,008 117,143 123,314
Impairment charges - consolidated (1) 6,989 67,226 37,610
Impairment charge - unconsolidated joint ventures - 3,091 -
Loss on sale of joint venture property, including
foreign currency effect (2) 3,704 - 3,641
Gain on sale of assets - (2,324) (43,422)
Pro-rata share of interest expense - unconsolidated joint ventures
5,858 6,545 8,117
Pro-rata share of depreciation and amortization -
unconsolidated joint ventures 11,618 12,024 12,458
EBITDAre $ 200,601
3,579 573 4,371
Casualty gain (969) - -
Gain on sale of outparcel - unconsolidated joint
ventures - (992) -
Loss on early extinguishment of debt (4) 47,860 - -
Adjusted EBITDAre $ 251,071 $ 228,415 $ 300,489
(1)The 2020 amount includes $4.0 million of impairment loss attributable to the
right-of-use asset associated with the ground lease at the Mashantucket
(Foxwoods), Connecticut outlet center. The 2021 amount includes $563,000 of
impairment loss attributable to the right-of-use asset associated with the
ground lease at the Mashantucket (Foxwoods), Connecticut outlet center.
(2)Includes a $3.6 million charge related to the foreign currency effect of the
sale of the Saint-Sauveur, Quebec property by the RioCan joint venture in March
2021 .
(3)The 2019 amount represents the accelerated recognition of compensation cost
entitled to be received by the Company's former President and Chief Operating
Officer per the terms of a transition agreement executed in connection with his
retirement. The 2020 and 2021 amounts include compensation costs related to a
voluntary retirement plan offer which required eligible participants to give
notice of acceptance by December 1, 2020 for an effective retirement date of
March 31, 2021 . The 2021 amount also includes other executive officer severance
costs incurred during 2021.
(4)In April 2021 , the Company completed a partial redemption of $150.0 million
aggregate principal amount of its $250.0 million 3.875% senior notes due
December 2023 for $163.0 million in cash. In September 2021 , the Company
completed a redemption of the remaining senior notes due 2023, $100.0 million in
aggregate principal amount outstanding, and all of its 3.750% senior notes due
2024, $250.0 million in aggregate principal outstanding, for $381.9 million in
cash. The loss on extinguishment of debt includes make-whole premiums of $44.9
million for both of these redemptions.
64
--------------------------------------------------------------------------------Economic Conditions and Outlook
We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business and geographies, including how it will impact our tenants and business partners. For further discussion of COVID-19, see "Management's Discussion and Analysis of Financial Condition and Results of Operations - COVID-19 Pandemic."
The majority of our leases contain provisions designed to mitigate the impact of inflation. Such provisions include clauses for the escalation of base rent and clauses enabling us to receive percentage rentals based on tenants' gross sales (above predetermined levels) which generally increase as prices rise. A component of most leases includes a pro-rata share or escalating fixed contributions by the tenant for property operating expenses, including common area maintenance, real estate taxes, insurance and advertising and promotion, thereby reducing exposure to increases in costs and operating expenses resulting from inflation. A portion of our rental revenues are derived from rents that directly depend on the sales volume of certain tenants. Accordingly, declines in these tenants' sales would reduce the income produced by our properties. If the sales or profitability of our retail tenants decline sufficiently, whether due to a change in consumer preferences, health concerns, legislative changes that increase the cost of their operations or otherwise, such tenants may be unable to pay their existing rents as such rents would represent a higher percentage of their sales. As a result of the COVID-19 pandemic, we saw reductions in rental revenues during 2020 as a result of declines in the sales volumes of certain tenants. However, during 2021, our tenants' average sales per square foot for the consolidated portfolio was the highest in our company's history, resulting in significant increases in rental revenues compared to the prior year. In addition, certain of our lease agreements include co-tenancy and/or sales-based provisions that may allow a tenant to pay reduced rent and/or terminate a lease prior to its natural expiration if we fail to maintain certain occupancy levels or retain specified named tenants, or if the tenant does not achieve certain specified sales targets. If our occupancy declines, certain outlet centers may fall below the minimum co-tenancy thresholds and could trigger many tenants' contractual ability to pay reduced rents, which in turn may negatively impact our results of operations. Our occupancy at our consolidated centers improved from 92% at the end of 2020 to 95% at the end of 2021. Our outlet centers typically include well-known, national, brand name companies. By maintaining a broad base of well-known tenants and a geographically diverse portfolio of properties located acrossthe United States , we believe we reduce our operating and leasing risks. No one tenant (including affiliates) accounts for more than 8% of our square feet or 7% of our rental revenues. Due to the relatively short-term nature of our tenants' leases, a significant portion of the leases in our portfolio come up for renewal each year. During 2022, approximately 2.1 million square feet, or 17% to the total portfolio including our share of unconsolidated joint ventures, will come up for renewal. For the total portfolio, including the Company's pro rata share of unconsolidated joint ventures, as ofJanuary 31, 2022 , we had lease renewals executed or in process for 29.8% of the space scheduled to expire during 2022 compared to 42.9% of the space scheduled to expire during 2021 that was executed or in process as ofJanuary 31, 2021 . As ofJanuary 31, 2022 , we had lease renewals executed or in process for approximately 77.7% of the space that came up for renewal in 2021. The current challenging retail environment has impacted our business as our operations are subject to the operating results and operating decisions of our retail tenants. We are encouraged by the recent improvement in traffic and sales trends, which in many cases are exceeding 2019 levels, and the fact that collections of monthly rents have normalized. However, many retailers across the country are currently facing, or expect to face, potential logistics and staffing issues. While we believe many of these retailers are proactively navigating this situation, the ultimate impact of labor and supply chain issues is unknown. We may continue to experience pressure from current vacancies, potential additional store closures and potential rent modifications. As is typical in the retail industry, certain tenants have closed, or will close, certain stores by terminating their lease prior to its contractual expiration or as a result of filing for protection under bankruptcy laws, or may request modifications to their existing lease terms. We recaptured approximately 136,000 square feet within our consolidated portfolio during the year endedDecember 31, 2021 related to bankruptcies and brand-wide restructurings by retailers, compared to 903,000 square feet for the year endedDecember 31, 2020 . 65
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We believe outlet stores will continue to be a profitable and fundamental distribution channel for many brand name manufacturers. While we continue to attract and retain additional tenants, if we were unable to successfully renew or re-lease a significant amount of this space on favorable economic terms or in a timely manner, the loss in rent and our Same Center NOI could be further negatively impacted in 2022. As a result of COVID-19, occupancy could be negatively impacted in 2022. Occupancy at our consolidated centers was 95.2% and 91.9% as ofDecember 31, 2021 and 2020, respectively.
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