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" of this Quarterly Report on Form 10-Q and 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 ofMarch 31, 2021 , theOperating Partnership owned or had an ownership interest in 46 regional shopping centers and five community/power shopping centers. These 51 regional and community/power shopping centers (which include any related office space) consist of approximately 50 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. 26 -------------------------------------------------------------------------------- Table of Contents The following discussion is based primarily on the consolidated financial statements of the Company for the three months endedMarch 31, 2021 and 2020. It compares the results of operations for the three months endedMarch 31, 2021 to the results of operations for the three months endedMarch 31, 2020 . It also compares the results of operations and cash flows for the three months endedMarch 31, 2021 to the results of operations and cash flows for the three months endedMarch 31, 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"). 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 . The loan was further extended toJuly 1, 2021 , based on certain conditions. The loan amount and interest rate are unchanged following the extensions. 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. OnJanuary 22, 2021 , the Company closed on a one-year extension forGreen Acres Mall's $258.2 million loan toFebruary 3, 2022 , which also includes a one-year extension 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 on 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. 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"). 27 -------------------------------------------------------------------------------- Table of Contents 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$85.8 million of the total$343.2 million incurred by the joint venture as ofMarch 31, 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$39.6 million of the total$79.3 million incurred by the joint venture as ofMarch 31, 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$38.2 million at its pro rata share as ofMarch 31, 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 , and government mandated restrictions have generally been eased during the first quarter of 2021, including in the Company's key markets ofCalifornia andNew York , which were the most capacity-restricted markets upon re-opening in 2020. The Company continues to work with all of its stakeholders to mitigate the impact of COVID-19. The Company has developed and implemented a long list of operational protocols based onCenters for Disease Control and Prevention recommendations designed to ensure the safety of its employees, tenants, service providers and shoppers. Those measures include, among others: the use of sophisticated air filtration systems to increase air circulation and outside air flow and ventilation, significantly intensified cleaning and sanitizing procedures with special focus on high-touch and traffic areas, highly visible and accessible self-service sanitizing stations, providing masks at all properties as needed and requiring mask-wearing at nearly all properties in compliance with state and local requirements, touchless entries, social distance queuing including the use of digital technologies, path of travel guidelines including vertical transportation and deliveries, furniture placement and the use of sophisticated traffic-counting technology to ensure that its properties adhere to any relevant regulatory capacity constraints. The Company's indoor properties feature vast interior common areas, most with two to three story ceiling clearances, ample floor space and a comfortable environment to practice effective social distancing even during peak retail periods. The Company provides round-the-clock security to enforce policies and regulations, to discourage congregation and to encourage proper distancing. Each property deploys robust messaging to inform all of the Company's stakeholders of its operating standards and requirements within a multi-media platform that includes abundant on premise signage, digital and social messaging, and information within its property and corporate websites. The Company believes that, due to the quality of design and construction of its malls, it will be able to continue to provide a safe indoor environment for its employees, tenants, service providers and shoppers. Although the Company has incurred, and will continue to incur, some incremental costs associated with COVID-19 operating protocols and programs, these costs have not been, and are not anticipated to be, significant. 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 28 -------------------------------------------------------------------------------- Table of Contents dividend represents a reduction from the Company's first quarter 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 outbreak.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. OnJanuary 28, 2021 , the Company declared a first quarter cash dividend of$0.15 per share of its common stock, which was paid onMarch 3, 2021 to stockholders of record onFebruary 19, 2021 . OnApril 29, 2021 , the Company declared a second quarter cash dividend of$0.15 per share of its common stock, which will be paid onJune 3, 2021 to stockholders of record onMay 7, 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 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. 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, certain leases require the tenants to pay their pro rata share of operating expenses. 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. 29 -------------------------------------------------------------------------------- Table of Contents 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. 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. 30
-------------------------------------------------------------------------------- Table of Contents 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 the Disposition Property (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 Property"). The Company moves a Center in and out of Same Centers based on whether the Center is substantially complete 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 the Disposition Property, for the periods of comparison. For the comparison of the three months endedMarch 31, 2021 to the three months endedMarch 31, 2020 , the JV Transition Centers areFashion District Philadelphia and Sears South Plains. For the comparison of the three months endedMarch 31, 2021 to the three months endedMarch 31, 2020 , the Disposition Property isParadise Valley Mall . 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. As a result of continued loosening of government restrictions within the Company's operating markets, combined with pent up demand and the positive economic impact of fiscal stimulus, sales at the Company's Centers continue to greatly improve. During the first quarter of 2021, comparable tenant sales across the Company's portfolio were only 2.0% less than the pre-COVID-19 first quarter of 2019, and were 1.9% higher than the pre-COVID-19 first quarter of 2019, excluding the capacity-restricted food and beverage category. During the first quarter of 2021, comparable tenant sales withinArizona , the Company's least restricted region, were 7.2% higher than the pre-COVID-19 first quarter of 2019 and 11.5% higher than the pre-COVID-19 first quarter of 2019, excluding the capacity-restricted food and beverage category. The leased occupancy rate decreased from 93.1% atMarch 31, 2020 to 88.5% atMarch 31, 2021 . Releasing spreads declined as the Company executed leases at an average rent of$52.94 for new and renewal leases executed compared to$54.10 on leases expiring, resulting in a releasing spread of$1.16 per square foot representing a 2.1% decrease for the trailing twelve months endedMarch 31, 2021 . The Company continues to renew or replace leases that are scheduled to expire in 2021, however, the Company cannot be certain of the impact that COVID-19 will have on its ability to sign, renew or replace leases expiring in 2021 or beyond. These leases that are scheduled to expire in 2021 represent approximately 1.0 million square feet, accounting for 16.3% of the GLA of mall stores and freestanding stores, for spaces 10,000 square feet and under. These calculations exclude Centers under development or redevelopment and property dispositions (See "Dispositions" and "Redevelopment and Development Activities" in Management's Overview and Summary), and include square footage of Centers owned by joint ventures at the Company's share. 2021 lease expirations continue to be an important focal point for the Company. The Company now has commitments on 70% of the remaining 2021 expiring square footage with another 30% in the letter of intent stage, disregarding leases for stores that have closed or for stores that tenants have indicated they intend to close. The Company has entered into 102 leases for new stores totaling approximately 617,000 square feet that have opened or are planned for opening in 2021. While there may be additional new store openings in 2021, any such leases are not yet executed. During the trailing twelve months endedMarch 31, 2021 , the Company signed 160 new leases and 394 renewal leases comprising approximately 2.0 million square feet of GLA, of which 1.2 million square feet is related to the consolidated Centers. The average tenant allowance was$16.22 per square foot. The Company's COVID-19 related lease amendments are excluded from these numbers. 31 -------------------------------------------------------------------------------- Table of Contents 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 the Company believes that overall regional shopping center fundamentals in its markets appear to be improving, the Company expects that its results for 2021 will be negatively impacted by the COVID-19 pandemic, Anchor closures and tenant bankruptcies, among other factors. All Centers have been open and operating sinceOctober 7, 2020 , and government mandated restrictions have been greatly eased for most of the Centers during 2021, including in the Company's key markets ofCalifornia andNew York , which were the most capacity-restricted markets upon re-opening in 2020. The Company's rent collections continue to significantly improve. The Company collected approximately 97% of rents billed for the three months endedDecember 31, 2020 and approximately 95% of rents billed for the three months endedMarch 31, 2021 . The Company continues to make 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. The majority of such requests were made in 2020. For example, of the nearly 200 national tenants in the Company's portfolio, excluding tenants that have filed bankruptcy and vacated the Company's properties, the Company has yet to reach agreement with only 1% of those tenants, as measured based on total rent. The lease amendments negotiated by the Company have resulted in a combination of rent payment deferrals and rent abatements. The majority of the Company's leases require 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 the negative impact of such clauses on lease revenue will be significant. 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 six bankruptcy filings involving the Company's tenants, totaling 47 leases and involving approximately 207,000 square feet and$6.9 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 68,000 square feet. As previously disclosed by the Company in its prior filings with theSEC , the Company has submitted recovery claims under its insurance coverage due to business interruption from COVID-19. As ofMarch 31, 2021 , the Company does not believe it is likely that it will be able to collect on these claims given the facts and circumstances regarding the COVID-19 pandemic. During the year endedDecember 31, 2020 and the first quarter of 2021, the Company incurred$56.4 million and$28.9 million , respectively, of rent abatements at the Company's share relating to 2020 rents as a result of COVID-19. Additionally, the Company negotiated$32.9 million of rent deferrals during the year endedDecember 31, 2020 and$0.6 million during the first quarter 2021, each at the Company's share. As ofMarch 31, 2021 ,$11.8 million of the rent deferrals remain outstanding with$11.0 million scheduled to be repaid during 2021 and the remainder scheduled for repayment in 2022. The Company has experienced a significant decrease in requests for rent abatements and deferrals as 2021 has progressed, and the Company expects these requests to continue to decline as the economy reopens. The Company has experienced, and expects to continue to experience, a negative impact to its leasing revenue and the occupancy rates at its Centers due to COVID-19. For the three months endedMarch 31, 2021 , leasing revenue decreased by approximately 17%, including joint ventures at the Company's share, compared to the three months endedMarch 31, 2020 . Included within this decline were$28.9 million of retroactive rent abatements incurred in the first quarter of 2021 relating to 2020 rents. Excluding these retroactive rent abatements, leasing revenue for the three months endedMarch 31, 2021 decreased 8% compared to the three months endedMarch 31, 2020 . As ofMarch 31, 2021 , the leased occupancy rate decreased to 88.5% from 93.1% atMarch 31, 2020 . While the volume of leasing transactions declined significantly in the second and third quarters of 2020, the Company experienced significant improvement during the fourth quarter of 2020 and the first quarter of 2021 in leasing activity. During the first quarter of 2021, the Company signed 181 leases for 700,000 square feet (excluding COVID-19 workout deals), which equals the leased space that was signed during the first quarter of 2020. For the six months endedMarch 31, 2021 , the Company signed leases for nearly the same amount of space as the pre-COVID-19 six-month period endedMarch 31, 2020 . Further, the number of new and renewal leases executed throughmid-April 2021 is slightly greater than the number of leases signed during the same pre-COVID-19 period in 2019, and 2019 was a high leasing volume year for the Company. The 32 -------------------------------------------------------------------------------- Table of Contents Company has entered into 102 leases for new stores totaling approximately 617,000 square feet that have opened or are planned for opening in 2021. The Company is also negotiating nearly 100 other leases for new stores totaling nearly 800,000 square feet. There is no assurance that these pending lease negotiations will result in executed leases. As a result of continued loosening of government restrictions within the Company's operating markets, combined with pent up demand and the positive economic impact of fiscal stimulus, sales at the Company's Centers continue to greatly improve. During the first quarter of 2021, comparable tenant sales across the Company's portfolio were only 2.0% less than the pre-COVID-19 first quarter of 2019, and were 1.9% higher than the pre-COVID-19 first quarter of 2019, excluding the capacity-restricted food and beverage category. During the first quarter of 2021, comparable tenant sales withinArizona , the Company's least restricted region, were 7.2% higher than the pre-COVID-19 first quarter of 2019 and 11.5% higher than the pre-COVID-19 first quarter of 2019, excluding the capacity-restricted food and beverage category. During 2021, the Company expects to generate significant cash flow from operations after recurring operating capital expenditures, leasing capital expenditures and after dividend. This assumption does not include any potential capital generated from dispositions, refinancings or issuances of common equity. This surplus will be used to de-lever as well as to fund our development pipeline. Given the continued disruption and uncertainties from COVID-19 and the impact 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 onDanbury Fair Mall ,Fashion Outlets of Niagara ,FlatIron Crossing ,Green Acres Mall andGreen Acres Commons (See "Financing Activities" in Management's Overview and Summary). OnApril 14, 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 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"). 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 decreasing interest rate environment, the swap agreements that the Company has entered into have resulted in increases in interest expense. Those swap agreements expire inSeptember 2021 . Comparison of Three Months EndedMarch 31, 2021 and 2020 Revenues: Leasing revenue decreased by$31.2 million , or 14.8%, from 2020 to 2021. The decrease in leasing revenue is attributed to decreases of$34.2 million from the Same Centers and$0.5 million from the Disposition Property offset in part by increases of$3.5 million from the JV Transition Centers. Leasing revenue includes the amortization of above and below-market leases, the amortization of straight-line rents, lease termination income and the provision for bad debts. The amortization of above and below-market leases was$0.4 million in 2020 and 2021. Straight-line rents increased from$2.2 million in 2020 to$4.8 million in 2021. Lease termination income increased from$1.2 million in 2020 to$2.9 million in 2021. Provision for bad debts increased from$0.9 million in 2020 to$3.2 million in 2021. The increase in bad debt expense is a result of the Company assessing collectability by tenant and determining that it was no longer probable that substantially all leasing revenue would be collected from certain tenants, which includes tenants that have declared bankruptcy, tenants at risk of filing bankruptcy or other tenants where collectability was no longer probable. The decrease in leasing revenue and increase in bad debt at the Same Centers is primarily the result of COVID-19 (See "Other Transactions and Events" in Management's Overview and Summary). Other income decreased from$9.3 million in 2020 to$5.3 million in 2021. The decrease is primarily a decline in parking garage income as a result of COVID-19 (See "Other Transactions and Events" in Management's Overview and Summary). Management Companies' revenue decreased from$7.0 million in 2020 to$5.6 million in 2021 due to a decrease in management fees and development fees. Shopping Center and Operating Expenses: Shopping center and operating expenses increased$5.4 million , or 7.7%, from 2020 to 2021. The increase in shopping center and operating expenses is attributed to increases of$4.9 million from the JV Transition Centers and$0.5 million from the Same Centers. 33 -------------------------------------------------------------------------------- Table of Contents Leasing Expenses: Leasing expenses decreased from$7.4 million in 2020 to$5.2 million in 2021 due to a decrease in compensation expense. Management Companies' Operating Expenses: Management Companies' operating expenses decreased$1.4 million from 2020 to 2021 due to a decrease in compensation expense. REIT General and Administrative Expenses: REIT general and administrative expenses increased$1.3 million from 2020 to 2021 primarily due to an increase in consulting expense. Depreciation and Amortization: Depreciation and amortization decreased$3.8 million from 2020 to 2021. The decrease in depreciation and amortization is attributed to decreases of$7.1 million from the Same Centers offset in part by increases of$3.1 million from the JV Transition Centers and$0.2 million from the Disposition Property. Interest Expense: Interest expense increased$45.8 million from 2020 to 2021. The increase in interest expense was attributed to an increase of$45.6 million from the Financing Arrangement (See Note 12-Financing Arrangement in the Company's Notes to the Consolidated Financial Statements),$1.8 million from the JV Transition Centers and$0.9 million from the Company's revolving line of credit offset in part by decreases of$2.5 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 Income ofUnconsolidated Joint Ventures : Equity in income of unconsolidated joint ventures decreased$7.8 million from 2020 to 2021. The decrease in equity in income of unconsolidated joint ventures is primarily due to a decrease in leasing revenue as a result of COVID-19 (See "Other Transactions and Events" in Management's Overview and Summary). Loss on Sale or Write Down of Assets, net: Loss on sale or write down of assets, net decreased$15.4 million from 2020 to 2021. The decrease in loss on sale or write down of assets, net is primarily due to the$36.7 million of impairment losses onWilton Mall andParadise Valley Mall in 2020 and impairment loss of$27.3 million onEstrella Falls in 2021 offset in part by the gain of$4.2 million from the sale ofParadise Valley Mall and$4.1 million on land sales. The impairment losses were due to the reduction in the estimated holding periods of the properties. Net (Loss) Income: Net (loss) income decreased$76.5 million from 2020 to 2021. The decrease in net (loss) income is primarily the result of COVID-19 (See "Other Transactions and Events" in Management's Overview and Summary). 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 decreased 38.4% from$122.7 million in 2020 to$75.6 million in 2021. For a reconciliation of net (loss) income 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 FFO attributable to common stockholders and unit holders-diluted, excluding financing expense in connection with Chandler Freehold, see "Funds From Operations ("FFO")" below. Operating Activities: Cash provided by operating activities increased$2.5 million from 2020 to 2021. The increase is primarily due to the changes in assets and liabilities and the results, as discussed above. 34 -------------------------------------------------------------------------------- Table of Contents Investing Activities: Cash provided by investing activities increased$115.1 million from 2020 to 2021. The increase in cash provided by investing activities is primarily attributed to proceeds from the sale of assets of$100.3 million , proceeds from notes receivable of$1.3 million , a decrease in contributions to unconsolidated joint ventures of$8.2 million and a decrease of$11.6 million in development, redevelopment, expansion and renovation of properties offset in part by an increase in property improvements of$6.8 million . Financing Activities: Cash provided by financing activities increased$1.9 million from 2020 to 2021. The increase in cash provided by financing activities is primarily due to net proceeds from sales of common shares under the ATM Programs of$597 million and a decrease in dividends and distributions of$88.0 million offset by a decrease in proceeds from mortgages, bank and other notes payable of$660.0 million and a decrease in payments on mortgages, bank and other notes payable of$15.3 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. As a result of the uncertain environment resulting from the COVID-19 pandemic (See "Other Transactions and Events" in Management's Overview and Summary), the Company took a number of measures to enhance liquidity. These actions helped to ensure that funds were available to meet the Company's obligations for a sustained period of time as the extent and duration of the pandemic's impact became clearer. These measures included (i) reduction of the cash component of its dividend in the second quarter of 2020 and reduction of the amount of its cash dividend in the third and fourth quarter of 2020 and in the first quarter of 2021, (ii) reduction of planned capital and development expenditures, (iii) negotiated deferrals of debt service payments on nineteen mortgage loans totaling$47.2 million , (iv) reduction of the Company's controllable operating expenses, and (v) deferral of real estate taxes to the extent such relief was available. In addition, during the first quarter of 2020, the Company borrowed$660 million on its line of credit. As ofMarch 31, 2021 , the Company had approximately$1.2 billion of cash, including the joint ventures at the Company's pro rata share, and including proceeds raised under its ATM Programs and from the sale ofParadise Valley Mall , both as described below. The following tables summarize capital expenditures incurred at the Centers (at the Company's pro rata share):
For the Three Months Ended March
31, (Dollars in thousands) 2021 2020 Consolidated Centers: Acquisitions of property, building improvement and equipment$ 3,670 $ 2,381 Development, redevelopment, expansions and renovations of Centers 6,558 16,112 Tenant allowances 4,696 1,081 Deferred leasing charges 510 910$ 15,434 $ 20,484 Joint Venture Centers: Acquisitions of property, building improvement and equipment$ 842 $ 1,844 Development, redevelopment, expansions and renovations of Centers 12,232 29,628 Tenant allowances 2,550 355 Deferred leasing charges 815 725$ 16,439 $ 32,552 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 2020. The Company expects to incur less than$80.0 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 35 -------------------------------------------------------------------------------- Table of Contents 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 ofFebruary 1, 2021 andMarch 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$1.0 billion under the ATM Programs, in amounts and at times to be determined by the Company. The following table sets forth certain information with respect to issuances made under each of the ATM Programs as ofMarch 31, 2021 . (Dollars and shares in thousands) February 2021 ATM Program March 2021 ATM Program(1) Number of Number of For the Three Months Ended: Shares Issued Net Proceeds Sales Commissions Shares Issued Net Proceeds Sales Commissions March 31, 2021 36,001$ 477,283 $ 9,746 9,991$ 119,724 $ 2,449 Total 36,001$ 477,283 $ 9,746 9,991$ 119,724 $ 2,449 (1) The table does not reflect shares sold at the end of the quarter that did not settle untilApril 2021 (See Note 14-Stockholders' Equity). As ofMarch 31, 2021 , including sales of shares that did not settle untilApril 2021 , the Company had approximately$12.7 million of gross sales of its common stock available under theFebruary 2021 ATM Program and approximately$335.6 million of gross sales of its common stock available under theMarch 2021 ATM Program. 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. 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, atMarch 31, 2021 was$8.7 billion (consisting of$6.0 billion of consolidated debt, less$459.9 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 impact 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 onDanbury Fair Mall ,Fashion Outlets of Niagara ,FlatIron Crossing ,Green Acres Mall andGreen Acres Commons (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. OnMarch 29, 2021 , the Company soldParadise 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 (See "Dispositions"). For the quarter endedMarch 31, 2021 , the Company had a$1.5 billion revolving line of credit facility that bore interest at LIBOR plus a spread of 1.30% to 1.90%, depending on the Company's overall leverage level, and was to mature onJuly 6, 2020 . OnApril 8, 2020 , the Company exercised its option to extend the maturity of the facility toJuly 6, 2021 . The line of credit could be expanded, depending on certain conditions, up to a total facility of$2.0 billion . All obligations under the facility 36 -------------------------------------------------------------------------------- Table of Contents were unconditionally guaranteed only by the Company. Based on the Company's leverage level as ofMarch 31, 2021 , the borrowing rate on the facility was LIBOR plus 1.65%. The Company has four interest rate swap agreements that effectively convert a total of$400.0 million of the outstanding balance from floating rate debt of LIBOR plus 1.65% to fixed rate debt of 4.50% untilSeptember 30, 2021 . AtMarch 31, 2021 , total borrowings under the line of credit were$1.48 billion less unamortized deferred finance costs of$1.3 million with a total interest rate of 2.73%. The Company's availability under the line of credit was$19.7 million atMarch 31, 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 . The revolving loan facility can be expanded up to$800 million , subject to receipt of lender commitments and other conditions. Concurrently with entering into the new credit agreement, the Company drew the$175 million term loan in its entirety and drew$320 million of the amount available under the revolving loan facility. Simultaneously with entering into the new credit agreement, the Company repaid$985.0 million of debt, which included terminating and repaying all amounts outstanding under its prior revolving line of credit facility. 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. As ofApril 14, 2021 , the borrowing rate was LIBOR plus 2.75%. Cash dividends and distributions for the three months endedMarch 31, 2021 were$26.7 million , which were funded from cash on hand. AtMarch 31, 2021 , the Company was in compliance with all applicable loan covenants under its agreements. AtMarch 31, 2021 , the Company had cash and cash equivalents of$1,083.8 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 ofMarch 31, 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 ofMarch 31, 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 ofMarch 31, 2021 ,$40.6 million of these letters of credit are secured by restricted cash. The Company does not believe that these letters of credit will result in a liability to the Company. Contractual Obligations: The following is a schedule of contractual obligations as ofMarch 31, 2021 for the consolidated Centers over the periods in which they are expected to be paid (in thousands): Payment Due by Period Less than 1 - 3 3 - 5 More than Contractual Obligations Total 1 year years years five years Long-term debt obligations (includes expected interest payments)(1)$ 6,908,899 $ 1,938,408 (4)$ 1,569,251 $ 1,376,447 $ 2,024,793 Lease liabilities(2) 183,346 22,048 27,065 17,315 116,918 Purchase obligations(3) 3,318 3,318 - - - Other long-term liabilities 197,818 125,826 28,199 13,744 30,049$ 7,293,381 $ 2,089,600 $ 1,624,515 $ 1,407,506 $ 2,171,760
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(1)Interest payments on floating rate debt were based on rates in effect atMarch 31, 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. (4)OnApril 14, 2021 , in connection with entering into the new credit agreement, the Company repaid the entire$1.48 billion outstanding under its revolving line of credit facility and borrowed$495 million on its new credit facility. 37 -------------------------------------------------------------------------------- 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 ("Nareit") 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, net. 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. 38
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