THE MACERICH COMPANY IMPORTANT INFORMATION RELATED TO FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q ofThe Macerich Company (the "Company") contains or incorporates statements that constitute forward-looking statements within the meaning of the federal securities laws. Any statements that do not relate to historical or current facts or matters are forward-looking statements. You can identify some of the forward-looking statements by the use of forward-looking words, such as "may," "will," "could," "should," "expects," "anticipates," "intends," "projects," "predicts," "plans," "believes," "seeks," "estimates," "scheduled" and variations of these words and similar expressions. Statements concerning current conditions may also be forward-looking if they imply a continuation of current conditions. Forward-looking statements appear in a number of places in this Form 10-Q and include statements regarding, among other matters: •expectations regarding the Company's growth; •the Company's beliefs regarding its acquisition, redevelopment, development, leasing and operational activities and opportunities, including the performance and financial stability of its retailers; •the Company's acquisition, disposition and other strategies; •regulatory matters pertaining to compliance with governmental regulations; •the Company's capital expenditure plans and expectations for obtaining capital for expenditures; •the Company's expectations regarding income tax benefits; •the Company's expectations regarding its financial condition or results of operations; and •the Company's expectations for refinancing its indebtedness, entering into and servicing debt obligations and entering into joint venture arrangements. Stockholders are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company or the industry to differ materially from the Company's future results, performance or achievements, or those of the industry, expressed or implied in such forward-looking statements. Such factors include, among others, general industry, as well as national, regional and local economic and business conditions, which will, among other things, affect demand for retail space or retail goods, availability and creditworthiness of current and prospective tenants, anchor or tenant bankruptcies, closures, mergers or consolidations, lease rates, terms and payments, interest rate fluctuations, availability, terms and cost of financing and operating expenses; adverse changes in the real estate markets including, among other things, competition from other companies, retail formats and technology, risks of real estate development and redevelopment, acquisitions and dispositions; the continuing adverse impact of the novel coronavirus ("COVID-19") on theU.S. , regional and global economies and the financial condition and results of operations of the Company and its tenants; the liquidity of real estate investments, governmental actions and initiatives (including legislative and regulatory changes); environmental and safety requirements; and terrorist activities or other acts of violence which could adversely affect all of the above factors. You are urged to carefully review the disclosures we make concerning these risks and other factors that may affect our business and operating results, including those made in "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year endedDecember 31, 2020 , as well as our other reports filed with theSecurities and Exchange Commission (the "SEC"), which disclosures are incorporated herein by reference. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. The Company does not intend, and undertakes no obligation, to update any forward-looking information to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events, unless required by law to do so. Management's Overview and Summary The Company is involved in the acquisition, ownership, development, redevelopment, management and leasing of regional and community/power shopping centers located throughoutthe United States . The Company is the sole general partner of, and owns a majority of the ownership interests in,The Macerich Partnership, L.P. (the "Operating Partnership"). As ofSeptember 30, 2021 , theOperating Partnership owned or had an ownership interest in 45 regional town centers and five community/power shopping centers. These 50 regional town centers and community/power shopping centers (which include any related office space) consist of approximately 49 million square feet of gross leasable area and are referred to herein as the "Centers". The Centers consist of consolidated Centers ("Consolidated Centers") and unconsolidated joint venture Centers ("Unconsolidated Joint Venture Centers"), unless the context otherwise requires. The property management, leasing and redevelopment of the Company's portfolio is provided by the Company's seven management companies (collectively referred to herein as the "Management Companies"). The Company is a self-administered and self-managed real estate investment trust ("REIT") and conducts all of its operations through theOperating Partnership and the Management Companies. 28 -------------------------------------------------------------------------------- Table of Contents The following discussion is based primarily on the consolidated financial statements of the Company for the three and nine months endedSeptember 30, 2021 and 2020. It compares the results of operations for the three months endedSeptember 30, 2021 to the results of operations for the three months endedSeptember 30, 2020 . It also compares the results of operations and cash flows for the nine months endedSeptember 30, 2021 to the results of operations and cash flows for the nine months endedSeptember 30, 2020 . This information should be read in conjunction with the accompanying consolidated financial statements and notes thereto. Dispositions: OnMarch 29, 2021 , the Company soldParadise Valley Mall inPhoenix, Arizona to a newly formed joint venture for$100 million , resulting in a gain on sale of assets of approximately$5.6 million . Concurrent with the sale, the Company elected to reinvest into the new joint venture at a 5% ownership interest. The Company used the$95.3 million of net proceeds from the sale to pay down its line of credit (See "Liquidity and Capital Resources"). OnSeptember 17, 2021 , the Company sold Tucson La Encantada inTucson, Arizona for$165.3 million , resulting in a gain on sale of assets of approximately$117.2 million . The Company used the net cash proceeds of approximately$100.1 million to pay down debt (See "Liquidity and Capital Resources"). Financing Activities: OnSeptember 15, 2020 , the Company closed on a loan extension agreement for the$191.0 million loan onDanbury Fair Mall . Under the extension agreement, the original loan maturity date ofOctober 1, 2020 was extended toApril 1, 2021 and subsequently toOctober 1, 2021 . The loan amount and interest rate remained unchanged following these extensions. OnSeptember 15, 2021 , the Company further extended the loan maturity toJuly 1, 2022 . The interest rate remained unchanged, and the Company repaid$10.0 million of the outstanding loan balance at closing. OnNovember 17, 2020 , the Company's joint venture in Tysons VITA, the residential tower at Tysons Corner Center, placed a new$95.0 million loan on the property that bears interest at an effective rate of 3.43% and matures onDecember 1, 2030 . Initial loan funding for the Company's joint venture was$90.0 million with future advance potential of up to$5.0 million . The Company used its share of the initial proceeds of$45.0 million for general corporate purposes. OnDecember 10, 2020 , the Company made a loan (the "Partnership Loan") to the Company's joint venture in Fashion District Philadelphia to fund the entirety of a$100.0 million repayment to reduce the mortgage loan onFashion District Philadelphia from$301.0 million to$201.0 million . This mortgage loan now matures onJanuary 22, 2024 , assuming exercise of a one-year extension option, and bears interest at LIBOR plus 3.5%, with a LIBOR floor of 0.50%. The partnership agreement for the joint venture was amended in connection with the Partnership Loan, and pursuant to the amended agreement, the Partnership Loan plus 15% accrued interest must be repaid prior to the resumption of 50/50 cash distributions to the Company and its joint venture partner. OnDecember 15, 2020 , the Company closed on a loan extension agreement for the$101.5 million loan onFashion Outlets of Niagara . Under the extension agreement the original loan maturity date ofOctober 6, 2020 was extended toOctober 6, 2023 . The loan amount and interest rate are unchanged following the extension. OnDecember 29, 2020 , the Company's joint venture closed on a one-year maturity date extension for theFlatIron Crossing loan toJanuary 5, 2022 . The interest rate increased from 3.85% to 4.10%, and the Company's joint venture repaid$15.0 million ,$7.6 million at the Company's pro rata share, of the outstanding loan balance at closing. The Company's joint venture is currently negotiating a commitment for a new five-year$200.0 million loan to replace the existing$198.2 million loan on the property. OnJanuary 22, 2021 , the Company closed on a one-year extension for theGreen Acres Mall $258.2 million loan toFebruary 3, 2022 , which also includes a one-year extension option toFebruary 3, 2023 . The interest rate remained unchanged, and the Company repaid$9 million of the outstanding loan balance at closing. OnMarch 25, 2021 , the Company closed on a two-year extension for theGreen Acres Commons $124.6 million loan toMarch 29, 2023 . The interest rate is LIBOR plus 2.75% and the Company repaid$4.7 million of the outstanding loan balance at closing. OnOctober 26, 2021 , the Company's joint venture in The Shops atAtlas Park replaced the existing loan on the property with a new$65 million loan that bears interest at a floating rate of LIBOR plus 4.15% and matures onNovember 9, 2026 , including extension options. 29 -------------------------------------------------------------------------------- Table of Contents During the second quarter of 2020 and inJuly 2020 , the Company secured agreements with its mortgage lenders on 19 mortgage loans to defer approximately$47.2 million of both second and third quarter of 2020 debt service payments at the Company's pro rata share during the COVID-19 pandemic. Of the deferred payments,$28.1 million and$36.9 million was repaid in the three months and twelve months endedDecember 31, 2020 , respectively; and the remaining balance was fully repaid during the first quarter of 2021. OnApril 14, 2021 , the Company terminated its existing credit facility and entered into a new credit agreement, which provides for an aggregate$700 million facility, including a$525 million revolving loan facility that matures onApril 14, 2023 , with a one-year extension option, and a$175 million term loan facility that matures onApril 14, 2024 (See "Liquidity and Capital Resources"). Redevelopment and Development Activities: The Company's joint venture with Hudson Pacific Properties is redeveloping One Westside into 584,000 square feet of creative office space and 96,000 square feet of dining and entertainment space. The entire creative office space has been leased to$500.0 million and$550.0 million , with$125.0 million to$137.5 million estimated to be the Company's pro rata share. The Company has funded$100.3 million of the total$401.3 million incurred by the joint venture as ofSeptember 30, 2021 . The joint venture expects to fund the remaining costs of the development with its$414.6 million construction loan (See "Financing Activities"). The Company has a 50/50 joint venture with Simon Property Group to developLos Angeles Premium Outlets , a premium outlet center inCarson, California that is planned to open with approximately 400,000 square feet, followed by an additional 165,000 square feet in the second phase. The Company has funded$40.8 million of the total$81.6 million incurred by the joint venture as ofSeptember 30, 2021 . In connection with the closures and lease rejections of several Sears stores owned or partially owned by the Company, the Company anticipates spending between$130.0 million to$160.0 million at the Company's pro rata share to redevelop the Sears stores. The anticipated openings of such redevelopments are expected to occur over several years. The estimated range of redevelopment costs could increase if the Company or its joint venture decides to expand the scope of the redevelopments. The Company has funded$39.9 million at its pro rata share as ofSeptember 30, 2021 . Other Transactions and Events: InMarch 2020 , the COVID-19 outbreak was declared a pandemic by theWorld Health Organization . As a result, all of the markets that the Company operates in were subject to stay-at-home orders, and the majority of its properties were temporarily closed in part or completely. Following staggered re-openings during 2020, all Centers have been open and operating sinceOctober 7, 2020 . As of the date of this Quarterly Report on Form 10-Q, government-imposed capacity restrictions resulting from COVID-19 have been essentially eliminated across the Company's markets. OnDecember 31, 2020 , the Company and its joint venture partner, Seritage Growth Properties ("Seritage"), entered into a distribution agreement. The joint venture owned nine properties, including the former Sears parcels at theSouth Plains Mall and the Arrowhead Towne Center. The joint venture distributed the former Sears parcel atSouth Plains Mall to the Company and the former Sears parcel at Arrowhead Towne Center to Seritage. The joint venture partners agreed that the distributed properties were of equal value. The Company now owns 100% of the former Sears parcel atSouth Plains Mall . EffectiveDecember 31, 2020 , the Company consolidates its 100% interest in the Sears parcel atSouth Plains Mall in the Company's consolidated financial statements. InMarch 2020 , the Company declared a reduced second quarter dividend of$0.50 per share of its common stock, which was paid onJune 3, 2020 in a combination of cash and shares of common stock, at the election of the stockholder, subject to a limitation that the aggregate amount of cash payable to holders of the Company's common stock would not exceed 20% of the aggregate amount of the dividend, or$0.10 per share, for all stockholders of record onApril 22, 2020 . The amount of the dividend represented a reduction from the Company's first quarter 2020 dividend, and was paid in a combination of cash and shares of common stock to preserve liquidity in light of the impact and uncertainty arising out of the COVID-19 pandemic. The Company declared a further reduced cash dividend of$0.15 per share of its common stock for the third and fourth quarters of 2020 and for the first, second and third quarters of 2021. OnOctober 28, 2021 , the Company declared a fourth quarter cash dividend of$0.15 per share of its common stock, which will be paid onDecember 3, 2021 to stockholders of record onNovember 9, 2021 . The dividend amount will be reviewed by the Board on a quarterly basis. In connection with the commencement of separate "at the market" offering programs, on each ofFebruary 1, 2021 andMarch 26, 2021 , which are referred to as the "February 2021 ATM Program" and the "March 2021 ATM Program," respectively, and collectively as the "ATM Programs," the Company entered into separate equity distribution agreements with certain sales agents pursuant to which the Company may issue and sell shares of its common stock having an aggregate offering 30 -------------------------------------------------------------------------------- Table of Contents price of up to$500 million under each of theFebruary 2021 ATM Program and theMarch 2021 ATM Program, or a total of$1 billion under the ATM Programs. As ofSeptember 30, 2021 , the Company had approximately$152.1 million of gross sales of its common stock available under theMarch 2021 ATM Program. TheFebruary 2021 ATM Program was fully utilized as ofJune 30, 2021 and is no longer active. See "Liquidity and Capital Resources" for a further discussion of the Company's anticipated liquidity needs, and the measures taken by the Company to meet those needs, including the ATM Programs and the Company's new credit facility. Inflation: In the last five years, inflation has not had a significant impact on the Company because of a relatively low inflation rate. Most of the leases at the Centers have rent adjustments periodically throughout the lease term. These rent increases are either in fixed increments or based on using an annual multiple of increases in the Consumer Price Index. In addition, approximately 3% to 18% of the leases for spaces 10,000 square feet and under expire each year, which enables the Company to replace existing leases with new leases at higher base rents if the rents of the existing leases are below the then existing market rate. The Company has generally entered into leases that require tenants to pay a stated amount for operating expenses, generally excluding property taxes, regardless of the expenses actually incurred at any Center, which places the burden of cost control on the Company. Additionally, most leases require the tenants to pay their pro rata share of property taxes and utilities. Critical Accounting Policies The preparation of financial statements in conformity with generally accepted accounting principles ("GAAP") inthe United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Some of these estimates and assumptions include judgments on revenue recognition, estimates for common area maintenance and real estate tax accruals, provisions for uncollectible accounts, impairment of long-lived assets, the allocation of purchase price between tangible and intangible assets, capitalization of costs and fair value measurements. The Company's significant accounting policies are described in more detail in Note 2-Summary of Significant Accounting Policies in the Company's Notes to the Consolidated Financial Statements. However, the following policies are deemed to be critical. Acquisitions: Upon the acquisition of real estate properties, the Company evaluates whether the acquisition is a business combination or asset acquisition. For both business combinations and asset acquisitions, the Company allocates the purchase price of properties to acquired tangible assets and intangible assets and liabilities. For asset acquisitions, the Company capitalizes transaction costs and allocates the purchase price using a relative fair value method allocating all accumulated costs. For business combinations, the Company expenses transaction costs incurred and allocates purchase price based on the estimated fair value of each separately identified asset and liability. The Company allocates the estimated fair value of acquisitions to land, building, tenant improvements and identified intangible assets and liabilities, based on their estimated fair values. In addition, any assumed mortgage notes payable are recorded at their estimated fair values. The estimated fair value of the land and buildings is determined utilizing an "as if vacant" methodology. Tenant improvements represent the tangible assets associated with the existing leases valued on a fair value basis at the acquisition date prorated over the remaining lease terms. The tenant improvements are classified as an asset under property and are depreciated over the remaining lease terms. Identifiable intangible assets and liabilities relate to the value of in-place operating leases which come in three forms: (i) leasing commissions and legal costs, which represent the value associated with "cost avoidance" of acquiring in-place leases, such as lease commissions paid under terms generally experienced in the Company's markets; (ii) value of in-place leases, which represents the estimated loss of revenue and of costs incurred for the period required to lease the "assumed vacant" property to the occupancy level when purchased; and (iii) above or below-market value of in-place leases, which represents the difference between the contractual rents and market rents at the time of the acquisition, discounted for tenant credit risks. Leasing commissions and legal costs are recorded in deferred charges and other assets and are amortized over the remaining lease terms. The value of in-place leases are recorded in deferred charges and other assets and amortized over the remaining lease terms plus any below-market fixed rate renewal options. Above or below-market leases are classified in deferred charges and other assets or in other accrued liabilities, depending on whether the contractual terms are above or below-market, and the asset or liability is amortized to minimum rents over the remaining terms of the leases. The remaining lease terms of below-market leases may include certain below-market fixed-rate renewal periods. In considering whether or not a lessee will execute a below-market fixed-rate lease renewal option, the Company evaluates economic factors and certain qualitative factors at the time of acquisition such as tenant mix in the Center, the Company's relationship with the tenant and the availability of competing tenant space. 31 -------------------------------------------------------------------------------- Table of Contents Remeasurement gains and losses are recognized when the Company becomes the primary beneficiary of an existing equity method investment that is a variable interest entity to the extent that the fair value of the existing equity investment exceeds the carrying value of the investment, and remeasurement losses to the extent the carrying value of the investment exceeds the fair value. The fair value is determined based on a discounted cash flow model, with the significant unobservable inputs including discount rate, terminal capitalization rate and market rents. Asset Impairment: The Company assesses whether an indicator of impairment in the value of its properties exists by considering expected future operating income, trends and prospects, as well as the effects of demand, competition and other economic factors. Such factors include projected rental revenue, operating costs and capital expenditures as well as estimated holding periods and capitalization rates. If an impairment indicator exists, the determination of recoverability is made based upon the estimated undiscounted future net cash flows, excluding interest expense. The amount of impairment loss, if any, is determined by comparing the fair value, as determined by a discounted cash flows analysis or a contracted sales price, with the carrying value of the related assets. The Company generally holds and operates its properties long-term, which decreases the likelihood of their carrying values not being recoverable. A shortened holding period increases the risk that the carrying value of a long-lived asset is not recoverable. Properties classified as held for sale are measured at the lower of the carrying amount or fair value less cost to sell. The Company reviews its investments in unconsolidated joint ventures for a series of operating losses and other factors that may indicate that a decrease in the value of its investments has occurred which is other-than-temporary. The investment in each unconsolidated joint venture is evaluated periodically, and as deemed necessary, for recoverability and valuation declines that are other-than-temporary. Fair Value of Financial Instruments: The fair value hierarchy distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity and the reporting entity's own assumptions about market participant assumptions. Level 1 inputs utilize quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, which is typically based on an entity's own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. The Company calculates the fair value of financial instruments and includes this additional information in the Notes to the Consolidated Financial Statements when the fair value is different than the carrying value of those financial instruments. When the fair value reasonably approximates the carrying value, no additional disclosure is made. The Company records its Financing Arrangement (See Note 12-Financing Arrangement in the Company's Notes to the Consolidated Financial Statements) obligation at fair value on a recurring basis with changes in fair value being recorded as interest expense in the Company's consolidated statements of operations. The fair value is determined based on a discounted cash flow model, with the significant unobservable inputs including discount rate, terminal capitalization rate, and market rents. The fair value of the Financing Arrangement obligation is sensitive to these significant unobservable inputs and a change in these inputs may result in a significantly higher or lower fair value measurement. Results of Operations Many of the variations in the results of operations, discussed below, occurred because of the transactions affecting the Company's properties described in Management's Overview and Summary above, including theRedevelopment Properties and theDisposition Properties (as defined below). For purposes of the discussion below, the Company defines "Same Centers" as those Centers that are substantially complete and in operation for the entirety of both periods of the comparison.Non-Same Centers for comparison purposes include those Centers or properties that are going through a substantial redevelopment often resulting in the closing of a portion of the Center ("Redevelopment Properties "), those properties that have recently transitioned to or from equity method joint ventures to or from consolidated assets ("JV Transition Centers") and properties that have been disposed of ("Disposition Properties "). The Company moves a Center in and out of Same Centers based on whether the Center is substantially complete 32 -------------------------------------------------------------------------------- Table of Contents and in operation for the entirety of both periods of the comparison. Accordingly, the Same Centers consist of all consolidated Centers, excluding theRedevelopment Properties , the JV Transition Centers and theDisposition Properties , for the periods of comparison. For the comparison of the three and nine months endedSeptember 30, 2021 to the three and nine months endedSeptember 30, 2020 , the JV Transition Centers are Fashion District Philadelphia and Sears South Plains. For the comparison of the three and nine months endedSeptember 30, 2021 to the three and nine months endedSeptember 30, 2020 , theDisposition Properties areParadise Valley Mall and Tucson La Encantada. Unconsolidated joint ventures are reflected using the equity method of accounting. The Company's pro rata share of the results from these Centers is reflected in the Consolidated Statements of Operations as equity in income of unconsolidated joint ventures. The Company considers tenant annual sales, occupancy rates (excluding large retail stores or "Anchors") and releasing spreads (i.e. a comparison of initial average base rent per square foot on leases executed during the trailing twelve months to average base rent per square foot at expiration for the leases expiring during the trailing twelve months based on the spaces 10,000 square feet and under) to be key performance indicators of the Company's internal growth. During the third quarter of 2021, comparable tenant sales from spaces less than 10,000 square feet across the portfolio increased by 13.8% relative to pre-COVID sales during the third quarter of 2019. The leased occupancy rate decreased from 90.8% atSeptember 30, 2020 to 90.3% atSeptember 30, 2021 , but improved by 0.90% from 89.4% atJune 30, 2021 . Releasing spreads decreased as the Company executed leases at an average rent of$55.23 for new and renewal leases executed compared to$56.65 on leases expiring, resulting in a releasing spread decrease of$1.42 per square foot, or 2.5%, for the trailing twelve months endedSeptember 30, 2021 . The Company continues to renew or replace leases that are scheduled to expire in the remainder of 2021. As ofSeptember 30, 2021 , the Company has executed leases or commitments from retailers that are in lease documentation for 91% of the leased space expiring in 2021. The remaining leases expiring in 2021 represented approximately 257,000 square feet, and the Company is negotiating letters of intent for those spaces. These amounts exclude leases for stores that have closed or for stores that tenants have indicated they intend to close. The Company has entered into 215 leases for new stores totaling approximately 964,000 square feet that have previously opened in 2021 or are planned for opening in the remainder of 2021. While there may be additional new store openings in 2021, any such leases were not yet executed as ofSeptember 30, 2021 . During the trailing twelve months endedSeptember 30, 2021 , the Company signed 265 new leases and 559 renewal leases comprising approximately 3.0 million square feet of GLA, of which 1.8 million square feet is related to the consolidated Centers. The average tenant allowance was$22.82 per square foot. The Company's COVID-19 related lease amendments are excluded from these numbers. Outlook The Company has a long-term four-pronged business strategy that focuses on the acquisition, leasing and management, redevelopment and development of Regional Shopping Centers. Although overall regional town center fundamentals in its markets continued to improve during the third quarter, the Company expects that its results for the remainder of 2021 will be negatively impacted by the COVID-19 pandemic, reduced occupancy relative to pre-COVID levels and Anchor closures, among other factors. All Centers have been open and operating sinceOctober 7, 2020 . As of the date of this Quarterly Report on Form 10-Q, government-imposed capacity restrictions resulting from COVID-19 have been essentially eliminated across the Company's markets. The Company experienced a positive impact to its leasing revenue during the three months endingSeptember 30, 2021 . Leasing revenue increased by approximately 11%, including joint ventures at the Company's share, compared to the three months endedSeptember 30, 2020 . This increase was primarily due to (i) increases in percentage rent, which was primarily driven by accelerating tenant sales and all of the Company's Centers being fully open and operating in the third quarter of 2021 as compared to the third quarter of 2020; and (ii) decreases in bad debt reserves and decreases in retroactive rent abatements incurred in the third quarter of 2021 compared to the third quarter of 2020. During the three and nine months endedSeptember 30, 2021 , certain of the Company's previously reserved accounts receivable were collected resulting in a reduction of bad debt expense. These collections were a result of improving economic conditions that have become evident as the impact of the pandemic has eased as well as collection efforts by the Company. As a result of government-imposed capacity restrictions resulting from COVID-19 essentially being eliminated across the Company's markets, combined with pent up demand, the positive economic impacts of consumer savings, fiscal stimulus and 33 -------------------------------------------------------------------------------- Table of Contents other factors, sales and traffic at the Company's Centers continued to greatly improve during the third quarter of 2021 with extremely high customer conversion rates. Traffic levels continue to range in the mid 90%'s relative to 2019. Comparable tenant sales from spaces less than 10,000 square feet across the portfolio increased by 13.8% relative to pre-COVID sales during the third quarter of 2019. For the nine months endedSeptember 30, 2021 , comparable tenant sales from spaces less than 10,000 square feet across the portfolio increased by 8.7% relative to sales during the same pre-COVID nine-month period of 2019. During the third quarter of 2021, the Company signed 219 leases for approximately 1.13 million square feet (excluding COVID-19 workout deals), which represents a 15% increase in the leased square feet relative to what was leased during the pre-COVID third quarter of 2019. For the nine months endedSeptember 30, 2021 , the Company has signed 707 leases for approximately 2.98 million square feet, which represents a 26% increase in the amount of leased square feet relative to what was leased over the same pre-COVID nine month period endedSeptember 30, 2019 . 2019 was the highest volume leasing year for the Company since 2015. As ofSeptember 30, 2021 , the leased occupancy rate increased to 90.3% compared to the leased occupancy rate atJune 30, 2021 of 89.4%, which is also a sequential 1.80% occupancy improvement from 88.5% atMarch 31, 2021 . The Company's rent collections have continued to significantly improve and are now comparable to pre-COVID levels. The Company has made significant progress in its negotiations with national and local tenants to secure rental payments, despite a significant portion of the Company's tenants requesting rental assistance, whether in the form of deferral or rent reduction. This effort of negotiating COVID-19 rental assistance agreements is essentially now completed. The lease amendments negotiated by the Company related to COVID-19 have resulted in a combination of rent payment deferrals and rent abatements. The majority of the Company's leases required continued payment of rent by the Company's tenants during the period of government mandated closures caused by COVID-19. Additionally, many of the Company's leases contain co-tenancy clauses. Certain Anchor or small tenant closures have become permanent following the re-opening of the Company's Centers, and co-tenancy clauses within certain leases may be triggered as a result. The Company does not anticipate any negative impact of such clauses on lease revenue will be significant. During the year endedDecember 31, 2020 , the Company incurred$56.4 million of rent abatements at the Company's share relating primarily to 2020 rents as a result of COVID-19 and negotiated$32.9 million of rent deferrals during the year endedDecember 31, 2020 at the Company's share. During the three and nine months endedSeptember 30, 2021 , the Company incurred$2.0 million and$46.3 million , respectively, of rent abatements at the Company's share relating primarily to 2020 rents as a result of COVID-19, and negotiated$4.9 million of rent deferrals during the nine months endedSeptember 30, 2021 , at the Company's share. The Company did not negotiate any rent deferrals during the three months endedSeptember 30, 2021 . As ofSeptember 30, 2021 ,$6.7 million of the rent deferrals remain outstanding, with$2.8 million scheduled to be repaid during the remainder of 2021 and the balance scheduled for repayment in 2022 and 2023. During 2020, there were 42 bankruptcy filings involving the Company's tenants, totaling 322 leases and involving approximately 6.0 million square feet and$85.4 million of annual leasing revenue at the Company's share. During 2021, the pace of such filings has decreased substantially, as there were ten bankruptcy filings involving the Company's tenants, totaling 62 leases and involving approximately 369,000 square feet and$11.9 million of annual leasing revenue at the Company's share. This included two leases totaling 139,000 square feet with a single department store retailer that quickly emerged from bankruptcy and assumed both of its leases with the Company. Excluding this department store retailer, bankruptcy filings during 2021 are only 230,000 square feet. The current pace of 2021 bankruptcy filings is well lower than the past several years, dating back to 2015. During 2021, the Company expects to generate significant cash flow from operations after recurring operating capital expenditures, leasing capital expenditures and payment of dividends. This assumption does not include any potential capital generated from dispositions, refinancings or issuances of common equity. This expected surplus will be used to de-lever the Company's balance sheet as well as to fund the Company's development pipeline. Given the continued disruption and uncertainties from COVID-19 and the related impacts on the capital markets, the Company has secured extensions of term from one to three years of its near-term maturing non-recourse mortgage loans totaling an aggregate of approximately$950 million onDanbury Fair Mall , The Shops atAtlas Park ,Fashion Outlets of Niagara ,FlatIron Crossing ,Green Acres Mall andGreen Acres Commons . OnOctober 26, 2021 , the Company's joint venture closed a$65 million , five-year loan, including extension options, that bears interest at LIBOR plus 4.15% to refinance The Shops atAtlas Park , which replaced a$67.5 million loan on the property. The Company's joint venture inFlatIron Crossing is currently negotiating a commitment for a new five-year$200 million loan to replace the existing$198.2 million loan on the property. (See "Financing Activities" in Management's Overview and Summary). During the second quarter of 2021, the Company repaid and terminated its existing credit facility and entered into a new credit agreement, which provides for an aggregate$700 million facility, including a$525 million revolving loan facility that 34 -------------------------------------------------------------------------------- Table of Contents matures onApril 14, 2023 , with a one-year extension option, and a$175 million term loan facility that matures onApril 14, 2024 . Concurrent with the closing of this credit facility, the Company repaid$985.0 million of debt (See "Liquidity and Capital Resources"). As ofSeptember 30, 2021 , the balances on the term loan facility and the revolving loan facility were$0 and$130.0 million (less the amount of unamortized deferred financing costs of$15.7 million ), respectively. Rising interest rates could increase the cost of the Company's borrowings due to its outstanding floating-rate debt and lead to higher interest rates on new fixed-rate debt. In certain cases, the Company may limit its exposure to interest rate fluctuations related to a portion of its floating-rate debt by using interest rate cap and swap agreements. Such agreements, subject to current market conditions, allow the Company to replace floating-rate debt with fixed-rate debt in order to achieve its desired ratio of floating-rate to fixed-rate debt. In today's interest rate environment, the swap agreements that the Company had entered into resulted in increases in interest expense. Those swap agreements expired onSeptember 30, 2021 and have not been renewed by the Company. Comparison of Three Months EndedSeptember 30, 2021 and 2020 Revenues: Leasing revenue increased by$21.6 million , or 12.3%, from 2020 to 2021. The increase in leasing revenue is attributed to increases of$16.2 million from the Same Centers and$6.3 million from the JV Transition Centers offset in part by a decrease of$0.9 million from theDisposition Properties . Leasing revenue includes the amortization of above and below-market leases, the amortization of straight-line rents, lease termination income, percentage rent and the provision for bad debts. The amortization of above and below-market leases was$0.6 million for both 2020 and 2021. The amortization of straight-line rents decreased from$5.5 million in 2020 to$(2.6) million in 2021. Lease termination income increased from$4.3 million in 2020 to$8.9 million in 2021. Percentage rent increased from$2.8 million in 2020 to$13.7 million in 2021. Provision for bad debts decreased from$10.6 million in 2020 to$1.6 million in 2021. The increase in leasing revenue and decrease in bad debt at the Same Centers is primarily the result of all Centers being opened in 2021 compared to some Centers being closed for all or a portion of the third quarter of 2020 and an increase in tenant sales to pre-COVID 2019 levels (See "Other Transactions and Events" in Management's Overview and Summary). Other income increased from$4.3 million in 2020 to$8.2 million in 2021. This is primarily due to increased parking garage income resulting from increased traffic at the Centers. Management Companies' revenue increased from$6.0 million in 2020 to$6.8 million in 2021. Shopping Center and Operating Expenses: Shopping center and operating expenses increased$6.0 million , or 9.3%, from 2020 to 2021. The increase in shopping center and operating expenses is attributed to increases of$2.1 million from the Same Centers and$5.0 million from the JV Transition Centers offset in part by a decrease of$1.1 million from theDisposition Properties . The increase in shopping center and operating expenses at the Same Centers is primarily the result of some Centers being closed for all or a portion of the third quarter of 2020 (See "Other Transactions and Events" in Management's Overview and Summary). Leasing Expenses: Leasing expenses increased from$5.5 million in 2020 to$6.2 million in 2021. Management Companies' Operating Expenses: Management Companies' operating expenses increased$1.6 million from 2020 to 2021. REIT General and Administrative Expenses: REIT general and administrative expenses was$7.6 million for both 2020 and 2021. Depreciation and Amortization: Depreciation and amortization decreased$3.1 million from 2020 to 2021. The decrease in depreciation and amortization is attributed to a decrease of$4.7 million from the Same Centers and$1.4 million from theDisposition Properties offset in part by an increase of$2.9 million from the JV Transition Centers. Interest Expense: Interest expense increased$3.2 million from 2020 to 2021. The increase in interest expense is attributed to an increase of$7.8 million from the Financing Arrangement (See Note 12-Financing Arrangement in the Company's Notes to the Consolidated Financial Statements) and$1.4 million from the JV Transition Centers offset in part by decreases of$4.3 million 35 -------------------------------------------------------------------------------- Table of Contents from the Company's revolving line of credit and$1.7 million from the Same Centers. The increase in interest expense from the Financing Arrangement is primarily due to the change in fair value of the underlying properties and the mortgage notes payable on the underlying properties. Equity in Loss ofUnconsolidated Joint Ventures : Equity in loss of unconsolidated joint ventures decreased$10.8 million from 2020 to 2021. The decrease in equity in loss of unconsolidated joint ventures is primarily due to an increase in leasing revenue, percentage rent, other income and a decrease in the provision for bad debt as a result of the Centers being opened in 2021 compared to some Centers being closed for all or a portion of the third quarter of 2020 (See "Other Transactions and Events" in Management's Overview and Summary). Gain on Sale or Write Down of Assets, net: The gain on sale or write down of assets, net increased$106.8 million from 2020 to 2021 primarily due to the sale of Tucson La Encantada (See "Dispositions" in Management's Overview and Summary). Net Income (Loss): Net income increased$135.6 million from 2020 to 2021. The increase in net income is primarily due to the variances noted above and the sale of Tucson La Encantada. Funds From Operations ("FFO"): Primarily as a result of the factors mentioned above, FFO attributable to common stockholders and unit holders-diluted, excluding financing expense in connection with Chandler Freehold and loss on extinguishment of debt increased 21.6% from$83.4 million in 2020 to$101.4 million in 2021. For a reconciliation of net income (loss) attributable to the Company, the most directly comparable GAAP financial measure, to FFO attributable to common stockholders and unit holders, excluding financing expense in connection with Chandler Freehold and loss on extinguishment of debt and FFO attributable to common stockholders and unit holders-diluted, excluding financing expense in connection with Chandler Freehold and loss on extinguishment of debt, see "Funds From Operations ("FFO")" below. Comparison of Nine Months EndedSeptember 30, 2021 and 2020 Revenues: Leasing revenue increased by$18.7 million , or 3.4%, from 2020 to 2021. The increase in leasing revenue is attributed to increases of$24.0 million from the JV Transition Centers offset in part by decreases of$2.1 million from the Same Centers and$3.2 million from theDisposition Properties . Leasing revenue includes the amortization of above and below-market leases, the amortization of straight-line rents, lease termination income, percentage rent and the provision for bad debts. The amortization of above and below-market leases increased from$1.4 million in 2020 to$1.6 million in 2021. Straight-line rents increased from$5.9 million in 2020 to$8.2 million in 2021. Lease termination income increased from$7.0 million in 2020 to$16.9 million in 2021. Percentage rent increased from$6.5 million in 2020 to$31.0 million in 2021. Provision for bad debts decreased from$39.2 million in 2020 to a recovery of$(4.3) million in 2021. Other income increased from$16.6 million in 2020 to$25.4 million in 2021. This increase is primarily due to increased parking garage income resulting from increased traffic at the Centers in 2021 compared to 2020 (See "Other Transactions and Events" in Management's Overview and Summary). Management Companies' revenue decreased from$19.8 million in 2020 to$19.0 million in 2021 due to a decrease in management fees and development fees. Shopping Center and Operating Expenses: Shopping center and operating expenses increased$22.0 million , or 11.4%, from 2020 to 2021. The increase in shopping center and operating expenses is attributed to increases of$14.2 million from the JV Transition Centers and$9.7 million from the Same Centers. The increase in shopping center and operating expenses at the Same Centers is primarily the result of some Centers being closed for all or a portion of the third quarter of 2020 (See "Other Transactions and Events" in Management's Overview and Summary). Leasing Expenses: Leasing expenses decreased from$19.6 million in 2020 to$18.0 million in 2021 due to a decrease in compensation expense. 36 -------------------------------------------------------------------------------- Table of Contents Management Companies' Operating Expenses: Management Companies' operating expenses decreased$1.2 million from 2020 to 2021 due to a decrease in compensation expense. REIT General and Administrative Expenses: REIT general and administrative expenses decreased$0.3 million from 2020 to 2021. Depreciation and Amortization: Depreciation and amortization decreased$9.6 million from 2020 to 2021. The decrease in depreciation and amortization is attributed to decreases of$16.4 million from the Same Centers and$2.8 million from theDisposition Properties offset in part by an increase of$8.9 million from the JV Transition Centers. Interest Expense: Interest expense increased$83.9 million from 2020 to 2021. The increase in interest expense was attributed to an increase of$89.1 million from the Financing Arrangement (See Note 12-Financing Arrangement in the Company's Notes to the Consolidated Financial Statements) and$4.7 million from the JV Transition Centers offset in part by decreases of$5.1 million from the Same Centers and$4.8 million from the Company's revolving line of credit. The increase in interest expense from the Financing Arrangement is primarily due to the change in fair value of the underlying properties and the mortgage notes payable on the underlying properties. Equity in Income (Loss) ofUnconsolidated Joint Ventures : Equity in income (loss) of unconsolidated joint ventures increased$37.2 million from 2020 to 2021. The increase in equity in income (loss) of unconsolidated joint ventures is primarily due to a decrease in the provision for bad debts and an increase in percentage rent in 2021 compared to 2020. Gain (Loss) on Sale or Write Down of Assets, net: Gain (Loss) on sale or write down of assets, net increased from a loss of$28.8 million in 2020 to a gain of$93.4 million in 2021. The increase is primarily due to the$36.7 million of impairment losses onWilton Mall andParadise Valley Mall in 2020 and$117.2 million gain on the sale of Tucson La Encantada in 2021 offset in part by the sale and impairment loss of$41.6 million onEstrella Falls in 2021. The impairment losses were due to the reduction in the estimated holding periods of the properties (See "Dispositions" in Management's Overview and Summary). Net Income (Loss): Net income increased$81.8 million from 2020 to 2021. The increase in net income is primarily due to the variances noted above. Funds From Operations ("FFO"): Primarily as a result of the factors mentioned above, FFO attributable to common stockholders and unit holders-diluted, excluding financing expense in connection with Chandler Freehold and loss on extinguishment of debt increased 14.2% from$266.6 million in 2020 to$304.5 million in 2021. For a reconciliation of net income (loss) attributable to the Company, the most directly comparable GAAP financial measure, to FFO attributable to common stockholders and unit holders, excluding financing expense in connection with Chandler Freehold and loss on extinguishment of debt and FFO attributable to common stockholders and unit holders-diluted, excluding financing expense in connection with Chandler Freehold and loss on extinguishment of debt, see "Funds From Operations ("FFO")" below. Operating Activities: Cash provided by operating activities increased$146.5 million from 2020 to 2021. The increase is primarily due to the changes in assets and liabilities and the results, as discussed above. Investing Activities: Cash provided by investing activities increased$378.9 million from 2020 to 2021. The increase in cash provided by investing activities is primarily attributed to an increase in proceeds from the sale of assets of$306.7 million , proceeds from notes receivable of$1.3 million , a decrease in contributions to unconsolidated joint ventures of$44.0 million and an increase of$42.8 million in distributions from unconsolidated joint ventures. 37 -------------------------------------------------------------------------------- Table of Contents Financing Activities: Cash provided by financing activities decreased$1.3 billion from 2020 to 2021. The decrease in cash provided by financing activities is primarily due to decreases in proceeds from mortgages, bank and other notes payable of$165.0 million and an increase in payments on mortgages, bank and other notes payable of$2.0 billion offset in part by net proceeds from sales of common shares under the ATM Programs of$829.9 million and a decrease in dividends and distributions of$50.7 million . Liquidity and Capital Resources The Company has historically met its liquidity needs for its operating expenses, debt service and dividend requirements for the next twelve months through cash generated from operations, distributions from unconsolidated joint ventures, working capital reserves and/or borrowings under its line of credit. Following the uncertain environment brought about by COVID-19, the Company took a number of previously disclosed measures to enhance its liquidity position over the short-term, but currently anticipates meeting its liquidity needs as it has done historically.
The following tables summarize capital expenditures incurred at the Centers (at the Company's pro rata share):
For the Nine Months Ended September
30,
(Dollars in thousands) 2021 2020
Consolidated Centers:
Acquisitions of property, building improvement and equipment $ 13,092 $ 8,852
Development, redevelopment, expansions and renovations of Centers 34,678 28,120
Tenant allowances 13,445 8,182
Deferred leasing charges 1,956 2,162
$ 63,171 $ 47,316
Joint Venture Centers:
Acquisitions of property, building improvement and equipment $ 7,408 $ 5,866
Development, redevelopment, expansions and renovations of Centers 41,783 86,505
Tenant allowances 6,916 1,992
Deferred leasing charges 2,065 1,245
$ 58,172 $ 95,608
The Company expects amounts to be incurred during the next twelve months for
tenant allowances and deferred leasing charges to be less than or comparable to
2021. The Company expects to incur less than $20.0 million during the remaining
period of 2021 for development, redevelopment, expansion and renovations. This
excludes the Company's share of the remaining development costs associated with
One Westside, which is fully funded by a non-recourse construction facility.
Capital for these expenditures, developments and/or redevelopments has been, and
is expected to continue to be, obtained from a combination of cash on hand, debt
financings, which are expected to include borrowings under the Company's line of
credit, from property financings and construction loans, each to the extent
available.
The Company has also generated liquidity in the past, and may continue to do so
in the future, through equity offerings and issuances, property refinancings,
joint venture transactions and the sale of non-core assets. Furthermore, the
Company has filed a shelf registration statement, which registered an
unspecified amount of common stock, preferred stock, depositary shares, debt
securities, warrants, rights, stock purchase contracts and units that may be
sold from time to time by the Company.
On each of February 1, 2021 and March 26, 2021 , the Company registered a
separate "at the market" offering program, pursuant to which the Company may
issue and sell shares of its common stock having an aggregate offering price of
up to $500 million under each ATM Program, or a total of $1.0 billion under the
ATM Programs, in amounts and at times to be determined by the Company. The
following table sets forth certain information with respect to issuances made
under each of the ATM Programs as of September 30, 2021 .
38--------------------------------------------------------------------------------
Table of Contents
(Dollars and shares in
thousands) February 2021 ATM Program March 2021 ATM Program
Number of Number of
For the Three Months Ended: Shares Issued Net Proceeds Sales Commissions Shares Issued Net Proceeds Sales Commissions
March 31, 2021 36,001 $ 477,283 $ 9,746 9,991 $ 119,724 $ 2,449
June 30, 2021 686 $ 12,269 $ 254 13,229 $ 182,149 $ 3,719
September 30, 2021 - $ - $ - 2,122 $ 38,449 $ 787
Total 36,687 $ 489,552 $ 10,000 25,342 $ 340,322 $ 6,955
As of September 30, 2021 , the Company had approximately $152.1 million of gross
sales of its common stock available under the March 2021 ATM Program. The
February 2021 ATM Program was fully utilized as of June 30, 2021 and is no
longer active.
The capital and credit markets can fluctuate and, at times, limit access to debt
and equity financing for companies. The Company has been able to access capital;
however, there is no assurance the Company will be able to do so in future
periods or on similar terms and conditions as a result of COVID-19 or other
factors. Many factors impact the Company's ability to access capital, such as
its overall debt level, interest rates, interest coverage ratios and prevailing
market conditions. Increases in the Company's proportion of floating rate debt
will cause it to be subject to interest rate fluctuations in the future.
The Company's total outstanding loan indebtedness, which includes mortgages and
other notes payable, at September 30, 2021 was $7.2 billion (consisting of $4.5
billion of consolidated debt, less $456.8 million of noncontrolling interests,
plus $3.1 billion of its pro rata share of unconsolidated joint venture debt).
The majority of the Company's debt consists of fixed-rate conventional mortgage
notes collateralized by individual properties. The Company expects that all of
the maturities during the next twelve months will be refinanced, restructured,
extended and/or paid off from the Company's line of credit or cash on hand.
Given the continued disruption and uncertainties from COVID-19 and the related
impacts on the capital markets, the Company has secured extensions of term from
one to three years of its near-term maturing non-recourse mortgage loans
totaling an aggregate of approximately $950 million on Danbury Fair Mall , The
Shops at Atlas Park , Fashion Outlets of Niagara , FlatIron Crossing , Green Acres
Mall and Green Acres Commons . On October 26, 2021 , the Company's joint venture
closed a $65 million , five-year loan, including extension options, that bears
interest at LIBOR plus 4.15% to refinance The Shops at Atlas Park , which
replaced a $67.5 million loan on the property. The Company's joint venture in
FlatIron Crossing is currently negotiating a commitment for a new five-year $200
million loan to replace the existing $198.2 million loan on the property (See
"Financing Activities" in Management's Overview and Summary).
The Company believes that the pro rata debt provides useful information to
investors regarding its financial condition because it includes the Company's
share of debt from unconsolidated joint ventures and, for consolidated debt,
excludes the Company's partners' share from consolidated joint ventures, in each
case presented on the same basis. The Company has several significant joint
ventures and presenting its pro rata share of debt in this manner can help
investors better understand the Company's financial condition after taking into
account the Company's economic interest in these joint ventures. The Company's
pro rata share of debt should not be considered as a substitute for the
Company's total consolidated debt determined in accordance with GAAP or any
other GAAP financial measures and should only be considered together with and as
a supplement to the Company's financial information prepared in accordance with
GAAP.
On March 29, 2021 , the Company sold Paradise Valley Mall to a newly formed joint
venture for $100 million . Concurrent with the sale, the Company elected to
reinvest into the joint venture at a 5% ownership interest. The Company received
$95.3 million of net proceeds. On September 17, 2021 , the Company sold Tucson La
Encantada in Tucson, Arizona for $165.3 million . The Company received $100.1
million of net cash proceeds which was used to repay debt (See "Dispositions" in
Management's Overview and Summary).
On April 14, 2021 , the Company terminated its existing credit facility and
entered into a new credit agreement, which provides for an aggregate $700
million facility, including a $525 million revolving loan facility that matures
on April 14, 2023 , with a one-year extension option, and a $175 million term
loan facility that matures on April 14, 2024 . The revolving loan facility can be
expanded up to $800 million , subject to receipt of lender commitments and other
conditions. All obligations under the facility are guaranteed unconditionally by
the Company and are secured in the form of mortgages on certain wholly-owned
assets and pledges of equity interests held by certain of the Company's
subsidiaries. The new credit facility bears interest at LIBOR plus a spread of
2.25% to 3.25% depending on Company's overall leverage level. As of September
30, 2021 , the borrowing rate was LIBOR plus 2.25%. As of September 30, 2021 ,
borrowings under the facility were $130 million less unamortized deferred
finance costs of $15.7 million for the revolving loan facility at a total
interest rate of 3.69%. As of September 30, 2021 , the Company's availability
under the revolving loan facility for additional borrowings was $394.7 million .
39
--------------------------------------------------------------------------------
Table of Contents
The Company drew the $175 million term loan facility in its entirety
simultaneously with entering into the new credit agreement and subsequently paid
off the remaining balance outstanding on the term loan facility with proceeds
from the sale of Tucson La Encantada.
Concurrently with entering into the new credit agreement, the Company repaid
$985 million of debt, which included terminating and repaying all amounts
outstanding under its prior revolving line of credit facility. The Company had
four interest rate swap agreements that effectively converted a total of $400
million of the outstanding balance under the prior credit agreement from
floating rate debt of LIBOR plus 1.65% to fixed rate debt of 4.50% until
September 30, 2021 . These swaps were hedged against the Santa Monica Place
floating rate loan and a portion of the Green Acres Commons floating rate loan
and effectively converted the Santa Monica Place loan and a majority of the
Green Acres Commons loan to fixed rate debt through September 30, 2021 . The
Company did not renew the swaps that expired on September 30, 2021 and, as a
result, on October 1, 2021 , the Santa Monica Place and Green Acres Commons loans
reverted back to floating rate loans with an effective interest rate of 1.81%
and 3.1%, respectively, as of such date (See Note 5 - Derivative Instruments and
Hedging Activities and Note 10 - Mortgage Notes Payable in the Company's Notes
to the Consolidated Financial Statements).
Cash dividends and distributions for the nine months ended September 30, 2021
were $104.5 million , which were funded by operations.
At September 30, 2021 , the Company was in compliance with all applicable loan
covenants under its agreements.
At September 30, 2021 , the Company had cash and cash equivalents of $117.6
million .
Off-Balance Sheet Arrangements:
The Company accounts for its investments in joint ventures that it does not have
a controlling interest or is not the primary beneficiary using the equity method
of accounting and those investments are reflected on the consolidated balance
sheets of the Company as investments in unconsolidated joint ventures.
As of September 30, 2021 , one of the Company's joint ventures had $50.0 million
of debt that could become recourse to the Company should the joint venture be
unable to discharge the obligation of the related debt.
Additionally, as of September 30, 2021 , the Company was contingently liable for
$40.9 million in letters of credit guaranteeing performance by the Company of
certain obligations relating to the Centers. As of September 30, 2021 , $40.6
million of these letters of credit were secured by restricted cash. The Company
does not believe that these letters of credit will result in a liability to the
Company.
Contractual Obligations:
The following is a schedule of contractual obligations as of September 30, 2021
for the consolidated Centers over the periods in which they are expected to be
paid (in thousands):
Payment Due by Period
Less than 1 - 3 3 - 5 More than
Contractual Obligations Total 1 year years years five years
Long-term debt obligations (includes
expected interest payments)(1) $ 5,377,989 $ 657,110 $ 1,750,045 $ 981,389 $ 1,989,445
Lease liabilities(2) 173,529 6,387 29,258 22,056 115,828
Purchase obligations(3) 2,920 2,920 - - -
Other long-term liabilities 193,053 121,061 28,199 13,744 30,049
$ 5,747,491 $ 787,478 $ 1,807,502 $ 1,017,189 $ 2,135,322 __________________________________________________________
(1)Interest payments on floating rate debt were based on rates in effect atSeptember 30, 2021 . (2)See Note 8-Leases in the Company's Notes to the Consolidated Financial Statements. (3)See Note 16-Commitments and Contingencies in the Company's Notes to the Consolidated Financial Statements. 40
--------------------------------------------------------------------------------
Table of Contents
Funds From Operations ("FFO")
The Company uses FFO in addition to net income to report its operating and
financial results and considers FFO and FFO -diluted as supplemental measures
for the real estate industry and a supplement to GAAP measures. The National
Association of Real Estate Investment Trusts defines FFO as net income (loss)
(computed in accordance with GAAP), excluding gains (or losses) from sales of
properties, plus real estate related depreciation and amortization, impairment
write-downs of real estate and write-downs of investments in an affiliate where
the write-downs have been driven by a decrease in the value of real estate held
by the affiliate and after adjustments for unconsolidated joint ventures.
Adjustments for unconsolidated joint ventures are calculated to reflect FFO on
the same basis.
The Company accounts for its joint venture in Chandler Freehold as a financing
arrangement. In connection with this treatment, the Company recognizes financing
expense on (i) the changes in fair value of the financing arrangement
obligation, (ii) any payments to the joint venture partner equal to their pro
rata share of net income and (iii) any payments to the joint venture partner
less than or in excess of their pro rata share of net income. The Company
excludes from its definition of FFO the noted expenses related to the changes in
fair value and for the payments to the joint venture partner less than or in
excess of their pro rata share of net income.
The Company also presents FFO excluding financing expense in connection with
Chandler Freehold and loss on extinguishment of debt.
FFO and FFO on a diluted basis are useful to investors in comparing operating
and financial results between periods. This is especially true since FFO
excludes real estate depreciation and amortization, as the Company believes real
estate values fluctuate based on market conditions rather than depreciating in
value ratably on a straight-line basis over time. The Company believes that such
a presentation also provides investors with a meaningful measure of its
operating results in comparison to the operating results of other REITs. In
addition, the Company believes that FFO excluding financing expense in
connection with Chandler Freehold and non-routine costs associated with
extinguishment of debt provide useful supplemental information regarding the
Company's performance as they show a more meaningful and consistent comparison
of the Company's operating performance and allows investors to more easily
compare the Company's results. The Company further believes that FFO on a
diluted basis is a measure investors find most useful in measuring the dilutive
impact of outstanding convertible securities.
The Company believes that FFO does not represent cash flow from operations as
defined by GAAP, should not be considered as an alternative to net income as
defined by GAAP, and is not indicative of cash available to fund all cash flow
needs. The Company also cautions that FFO, as presented, may not be comparable
to similarly titled measures reported by other real estate investment trusts.
Management compensates for the limitations of FFO by providing investors with
financial statements prepared according to GAAP, along with this detailed
discussion of FFO and a reconciliation of net (loss) income to FFO and
FFO-diluted. Management believes that to further understand the Company's
performance, FFO should be compared with the Company's reported net (loss)
income and considered in addition to cash flows in accordance with GAAP, as
presented in the Company's consolidated financial statements.
41--------------------------------------------------------------------------------
Table of Contents The following reconciles net income (loss) attributable to the Company to FFO and FFO-diluted attributable to common stockholders and unit holders-basic and diluted, excluding financing expense in connection with Chandler Freehold and loss on extinguishment of debt for the nine months endedSeptember 30, 2021 and 2020 (dollars and shares in thousands):
© Edgar Online, source
