UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from __________to__________
Commission File Number: 001-36523 (Urban Edge Properties)
Commission File Number: 333-212951-01 (Urban Edge Properties LP)
URBAN EDGE PROPERTIES
URBAN EDGE PROPERTIES LP
(Exact name of Registrant as specified in its charter)
Maryland
Delaware
(Urban Edge Properties)
(Urban Edge Properties LP)
(State or other jurisdiction of incorporation or organization)
888 Seventh Avenue,
New York,
(Address of Principal Executive Offices)
47-6311266
36-4791544
(I.R.S. Employer Identification Number)
New York
10019
(Zip Code)
Registrant’s telephone number including area code:
(212)
956‑‑2556
Securities registered pursuant to Section 12(b) of the Act:
Urban Edge Properties
Title of Each Class
Common Shares, $.01 par value per share
Trading symbol
UE
Name of Each Exchange on Which Registered
New York Stock Exchange
Urban Edge Properties LP
Title of Each Class
None
Trading symbol
N/A
Name of Each Exchange on Which Registered
N/A
Urban Edge Properties: None Urban Edge Properties LP: None
_______________________________
Securities registered pursuant to Section 12(g) of the Act:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Urban Edge Properties Yes x NO o Urban Edge Properties LP Yes x NO o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Urban Edge Properties YES o No x Urban Edge Properties LP YES o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Urban Edge Properties Yes x NO o Urban Edge Properties LP Yes x NO o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Urban Edge Properties Yes x NO o Urban Edge Properties LP Yes x NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Urban Edge Properties:
Large Accelerated Filer
☒ Accelerated Filer o
Non-Accelerated Filer o
Smaller Reporting Company
☐ Emerging Growth Company
Urban Edge Properties LP:
Large Accelerated Filer o
Accelerated Filer o
Non-Accelerated Filer
☒ Smaller Reporting Company
☐ Emerging Growth Company
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards pursuant to Section 13(a) of the Exchange Act.
Urban Edge Properties o Urban Edge Properties LP o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Urban Edge Properties ☒ Urban Edge Properties LP ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Urban Edge Properties YES ☐ NO x Urban Edge Properties LP YES ☐ NO x
As of June 30, 2020, the last business day of the Registrant’s most recently completed second fiscal quarter, the aggregate market value of the Common Shares held by
nonaffiliates of the Registrant was approximately $1.4 billion based upon the last reported sale price of $11.87 per share on the New York Stock Exchange on such date.
As of January 29, 2021, Urban Edge Properties had 117,019,013 common shares outstanding. There is no public trading market for the common units of Urban Edge Properties
LP. As a result, the aggregate market value of the common units held by non-affiliates of Urban Edge Properties LP cannot be determined.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates by reference information from certain portions of the Urban Edge Properties’ definite proxy statement for the 2021 annual meeting of shareholders to be
filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year.
EXPLANATORY NOTE
This report combines the annual reports on Form 10-K for the year ended December 31, 2020 of Urban Edge Properties and Urban Edge Properties LP. Unless
stated otherwise or the context otherwise requires, references to “UE” and “Urban Edge” mean Urban Edge Properties, a Maryland real estate investment trust
(“REIT”), and references to “UELP” and the “Operating Partnership” mean Urban Edge Properties LP, a Delaware limited partnership. References to the
“Company,” “we,” “us” and “our” mean collectively UE, UELP and those entities/subsidiaries consolidated by UE.
UELP is the entity through which we conduct substantially all of our business and own, either directly or through subsidiaries, substantially all of our assets. UE is
the sole general partner and also a limited partner of UELP. As the sole general partner of UELP, UE has exclusive control of UELP’s day-to-day management.
As of December 31, 2020, UE owned an approximate 96.1% ownership interest in UELP. The remaining approximate 3.9% interest is owned by limited partners.
The other limited partners of UELP are members of management, our Board of Trustees and contributors of property interests acquired. Under the limited
partnership agreement of UELP, unitholders may present their common units of UELP for redemption at any time (subject to restrictions agreed upon at the time of
issuance of the units that may restrict such right for a period of time). Upon presentation of a common unit for redemption, UELP must redeem the unit for cash
equal to the then value of a share of UE’s common shares, as defined by the limited partnership agreement. In lieu of cash redemption by UELP, however, UE may
elect to acquire any common units so tendered by issuing common shares of UE in exchange for the common units. If UE so elects, its common shares will be
exchanged for common units on a one-for-one basis. This one-for-one exchange ratio is subject to specified adjustments to prevent dilution. UE generally expects
that it will elect to issue its common shares in connection with each such presentation for redemption rather than having UELP pay cash. With each such exchange
or redemption, UE’s percentage ownership in UELP will increase. In addition, whenever UE issues common shares other than to acquire common units of UELP,
UE must contribute any net proceeds it receives to UELP and UELP must issue to UE an equivalent number of common units of UELP. This structure is
commonly referred to as an umbrella partnership REIT, or UPREIT.
The Company believes that combining the annual reports on Form 10-K of UE and UELP into this single report provides the following benefits:
•
•
•
enhances investors’ understanding of UE and UELP by enabling investors to view the business as a whole in the same manner as management views and
operates the business;
eliminates duplicative disclosure and provides a more streamlined and readable presentation because a substantial portion of the disclosure applies to both
UE and UELP; and
creates time and cost efficiencies throughout the preparation of one combined report instead of two separate reports.
The Company believes it is important to understand the few differences between UE and UELP in the context of how UE and UELP operate as a consolidated
company. The financial results of UELP are consolidated into the financial statements of UE. UE does not have any other significant assets, liabilities or
operations, other than its investment in UELP, nor does it have employees of its own. UELP, not UE, generally executes all significant business relationships other
than transactions involving the securities of UE. UELP holds substantially all of the assets of UE and retains the ownership interests in the Company's joint
ventures. UELP conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for the net proceeds from equity
offerings by UE, which are contributed to the capital of UELP in exchange for units of limited partnership in UELP, as applicable, UELP generates all remaining
capital required by the Company’s business. These sources may include working capital, net cash provided by operating activities, borrowings under the revolving
credit agreement, the issuance of secured and unsecured debt and equity securities and proceeds received from the disposition of certain properties.
Shareholders’ equity, partners’ capital and noncontrolling interests are the main areas of difference between the consolidated financial statements of UE and UELP.
The limited partners of UELP are accounted for as partners’ capital in UELP’s financial statements and as noncontrolling interests in UE’s financial statements.
The noncontrolling interests in UELP’s financial statements include the interests of unaffiliated partners in consolidated entities. The noncontrolling interests in
UE’s financial statements include the same noncontrolling interests at UELP’s level and limited partners of UELP. The differences between shareholders’ equity
and partners’ capital result from differences in the equity issued at UE and UELP levels.
To help investors better understand the key differences between UE and UELP, certain information for UE and UELP in this report has been separated, as set forth
below: Part II, Item 8. Financial Statements which includes specific disclosures for UE and UELP, and Note 14, Equity and Noncontrolling Interests and Note 16,
Earnings Per Share and Unit.
This report also includes separate Part II, Item 9A. Controls and Procedures sections and separate Exhibits 31 and 32 certifications for each of UE and UELP in
order to establish that the requisite certifications have been made and that UE and UELP are compliant with Rule 13a-15 or Rule 15d-15 of the Securities
Exchange Act of 1934 and 18 U.S.C. §1350.
URBAN EDGE PROPERTIES AND URBAN EDGE PROPERTIES LP
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 2020
TABLE OF CONTENTS
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Reserved
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
PART III
Directors, Executive Officers, and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions and Director Independence
Principal Accounting Fees and Services
PART IV
Exhibits and Financial Statement Schedules
Form 10-K Summary
Signatures
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PART I - FINANCIAL INFORMATION
Certain statements contained herein constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of future performance. They represent our
intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Our future results, financial condition and business
may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as
“approximates,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “would,” “may” or other similar expressions in this Annual Report on Form
10-K. Many of the factors that will determine the outcome of forward-looking statements are beyond our ability to control or predict and include, among others: (i)
the economic, political and social impact of, and uncertainty relating to, the COVID-19 pandemic, including (a) the effectiveness or lack of effectiveness of
governmental relief in providing assistance individuals adversely impacted by the COVID-19 pandemic, and to large and small businesses, particularly our retail
tenants, that have suffered significant declines in revenues as a result of mandatory business shut-downs, “shelter-in-place” or “stay-at-home” orders and social
distancing practices, (b) the duration of any such orders or other formal recommendations for social distancing, and the speed and extent to which revenues of our
retail tenants recover following the lifting of any such orders or recommendations, (c) the potential impact of any such events on the obligations of the Company’s
tenants to make rent and other payments or honor other commitments under existing leases, (d) the potential adverse impact on returns from redevelopment
projects, and (e) the broader impact of the severe economic contraction and increase in unemployment that has occurred in the short term, and negative
consequences that will occur if these trends are not quickly reversed; (ii) the loss or bankruptcy of major tenants, particularly in light of the adverse impact to the
financial health of many retailers that has occurred and continues to occur as a result of the COVID-19 pandemic; (iii) the ability and willingness of the Company’s
tenants to renew their leases with the Company upon expiration, the Company’s ability to re-lease its properties on the same or better terms, or at all, in the event
of non-renewal or in the event the Company exercises its right to replace an existing tenant, particularly, in light of the adverse impact to the financial health of
many retailers that has occurred and continues to occur as a result of the COVID-19 pandemic and the significant uncertainty as to when and under which
conditions potential tenants will be able to operate physical retail locations in the future; (iv) the impact of e-commerce on our tenants’ business; (v)
macroeconomic conditions, such as a disruption of, or lack of access to the capital markets, as well as the recent significant decline in the Company’s share price
from prices prior to the spread of the COVID-19 pandemic; (vi) the Company’s success in implementing its business strategy and its ability to identify, underwrite,
finance, consummate and integrate diversifying acquisitions and investments; (vii) changes in general economic conditions or economic conditions in the markets
in which the Company competes, and their effect on the Company’s revenues, earnings and funding sources, and on those of its tenants; (viii) increases in the
Company’s borrowing costs as a result of changes in interest rates and other factors, including the potential phasing out of LIBOR after 2021; (ix) the Company’s
ability to pay down, refinance, restructure or extend its indebtedness as it becomes due and potential limitations on the Company’s ability to borrow funds under its
existing credit facility as a result of covenants relating to the Company’s financial results; (x) potentially higher costs associated with the Company’s development,
redevelopment and anchor repositioning projects, and the Company’s ability to lease the properties at projected rates; (xi) the Company’s liability for
environmental matters; (xii) damage to the Company’s properties from catastrophic weather and other natural events, and the physical effects of climate change;
(xiii) the Company’s ability and willingness to maintain its qualification as a REIT in light of economic, market, legal, tax and other considerations; (xiv)
information technology security breaches; and (xv) the loss of key executives. For further discussion of factors that could materially affect the outcome of our
forward-looking statements, see “Risk Factors” in Part I, Item 1A, of this Annual Report on Form 10-K for the year ended December 31, 2020.
For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. All
subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the
cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking
statements to reflect events or circumstances occurring after the date of this Annual Report on Form 10-K.
ITEM 1. BUSINESS
The Company
Urban Edge Properties (“UE”, “Urban Edge” or the “Company”) (NYSE: UE) is a Maryland REIT that manages, develops, redevelops, and acquires retail real
estate, primarily in the New York metropolitan area. Urban Edge Properties LP (“UELP” or the “Operating Partnership”) is a Delaware limited partnership formed
to serve as UE’s majority-owned partnership subsidiary and to own, through affiliates, all of our real estate and other assets. Our portfolio is currently comprised of
72 shopping
1
centers, five malls and two industrial parks totaling approximately 16.3 million square feet (sf) with a consolidated occupancy rate of 89.4%.
For additional information on recent business developments, see Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
in this Annual Report on Form 10-K.
Company Strategies
Our goal is to be a leading owner and operator of retail real estate in major urban markets, with a focus on the New York metropolitan area. We believe urban
markets offer attractive acquisition and redevelopment opportunities resulting from high population density, strong demand from consumers, above average retailer
sales trends, a limited supply of institutional quality assets and a large number of older, undermanaged assets that remain privately owned. We seek to create value
through the following primary strategies:
Maximize the value of existing properties through proactive management. We intend to maximize the value of each of our assets through comprehensive, proactive
management encompassing: continuous asset evaluation for highest-and-best-use; targeted leasing to desirable tenants; and efficient and cost-conscious day-to-day
operations that minimize operating expenses and enhances property quality. Repurposing retail real estate with high-quality retailers, with a focus on grocers, and
incorporating other uses including industrial, residential, self-storage, and medical are increasingly important to our business plan. Leasing and asset management
are critical value-creation functions that include:
• Monitoring retailer sales, merchandising, store operations, timeliness of payments, overall financial condition and related factors;
•
•
Being constantly aware of each asset’s competitive position within its trade area and recommending physical improvements or adjusting merchandising if
circumstances warrant;
Continuously canvassing trade areas to identify unique operators that can distinguish a property and enhance its offerings;
• Maintaining regular contact with the brokerage community to stay abreast of new merchants, potential relocations, new supply and overall trade area
dynamics;
Conducting regular portfolio reviews with key merchants;
Building and nurturing deep relationships with tenant decision-makers;
Focusing on spaces with below-market leases that might be recaptured;
Understanding the impact of options, exclusives, co-tenancy and other restrictive lease provisions; and
Optimizing required capital investment in every transaction.
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Develop and redevelop assets to their highest and best use. Our existing portfolio presents considerable opportunity to generate attractive returns through
upgrading and expanding our properties and replacing retail space with industrial, multifamily, self-storage and other uses. As of December 31, 2020, we have
$132.4 million of active redevelopment projects, of which $86.6 million remains to be funded. These projects are expected to generate an approximate 8%
unleveraged yield. Active redevelopment projects include $83.5 million of projects related to large anchor leases executed during the year including the addition of
best-in-class grocers to three properties. Additionally, our active redevelopment projects include the conversion of a former discounter retail space into an
industrial warehouse facility that has been fully leased to a wholesale grocery and distribution tenant. We will continue to explore opportunities throughout our
portfolio to achieve similar upgrades in tenancy, to densify sites where feasible and to repurpose certain retail space to non-retail uses.
Invest in target markets. We intend to selectively deploy capital through acquisitions in our target markets that meet our criteria for risk-adjusted returns and
enhance the overall quality of our existing portfolio. At the same time, we plan to sell assets that no longer meet our return requirements and strategic objectives.
Investment considerations for acquisitions include:
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•
Competition and Barriers-to-Entry: We seek assets in underserved, high barrier-to-entry markets in densely populated, affluent trade areas. We believe
that properties located in such markets present more attractive risk-return profile relative to other markets.
Geography: We focus primarily on the New York metropolitan area and secondarily on the Washington, DC to Boston corridor. We intend to invest in
our existing core markets, and, over time, may expand into new markets that have similar characteristics.
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•
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•
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•
Product: We generally seek large properties that provide scale relative to the competition and optionality for redevelopment to meet the changing
demands of the local community.
Tenancy: We consider tenant mix, sales performance and related occupancy cost, lease term, lease provisions, omni-channel capabilities, susceptibility to
e-commerce disruption and other factors. Our tenant base comprises a diverse group of merchants, including department stores, supermarkets,
discounters, entertainment offerings, health clubs, DIY stores, in-line specialty shops, restaurants and other food and beverage vendors and service
providers.
Rent: We derive our revenue from fixed and variable rents from our tenants. We consider existing rents relative to market rents and target submarkets that
have potential for market rent growth as evidenced by strong retailer sales performance.
Access and Visibility: We seek assets with convenient access and good visibility.
Physical Condition: We consider aesthetics, functionality, building and site conditions and environmental matters in evaluating asset quality.
Maintain capital discipline. We intend to keep our balance sheet flexible and capable of supporting growth. We expect to generate increasing levels of cash flow
from internally generated funds and to have substantial borrowing capacity under our existing revolving credit agreement and from potential secured debt financing
on our existing assets.
Environmental, Social and Governance (“ESG”) Achievements, Initiatives, and Objectives
We seek to drive financial performance while engaging in environmentally and socially responsible business practices grounded in sound corporate governance.
We believe that disclosure around our ESG practices allows our stakeholders to see our company holistically and understand its trajectory beyond fundamentals
and financial metrics. In addition to a dedicated team of professionals, we have a robust suite of environmental, social, and governance policies that inform and
guide our ESG approach and drive our ESG goals forward. From an environmental perspective, it is our goal to implement strategies to support the continued
reduction of energy, greenhouse gas water, and waste production across the portfolio. We are committed to maintaining sustainable operations and believe that our
long-term sustainability goals will provide positive financial and environmental outcomes for shareholders, tenants, employees and the communities in which we
invest.
Further information on our ESG practices can be found on our website in the Investors section. The information on our website is not incorporated by reference in
this Annual Report on Form 10-K.
Human Capital
At December 31, 2020, we had 106 employees. We believe that our employees are one of our greatest resources. Our future success will depend, in part, on our
ability to continue to attract, hire, and retain qualified personnel. Accordingly, we strive to offer competitive salaries and employee benefits to all employees and
monitor salaries in our market areas. We provide professional training and development workshops and aim to provide a workplace environment where employees
are informed, engaged, feel empowered, and can succeed. Our employees enjoy subsidized health and wellness benefits, professional training and development
workshops, ergonomic office equipment, telecommuting opportunities and policies encouraging work/life balance. Through our Wellness program, recently
launched volunteer platform and quarterly Town Hall meetings with all employees, among other initiatives, we continually strive to provide a workplace
environment where employees are informed, engaged, feel empowered and can succeed.
Our headquarters are located at 888 Seventh Avenue, New York, NY 10019.
Significant Tenants
None of our tenants accounted for more than 10% of total revenues in any of the years ended December 31, 2020, 2019 and 2018. The Home Depot, Inc. is our
largest tenant and accounted for approximately $20.7 million, or 6.3%, of our total revenue for the year ended December 31, 2020.
REIT Qualification
The Company elected to be taxed as a REIT under sections 856-860 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with the filing
of its 2015 tax return for its tax year ended December 31, 2015. With the exception of the Company’s taxable REIT subsidiary (“TRS”), to the extent the Company
meets certain requirements under the Code, the Company will not be taxed on its federal taxable income. If we fail to qualify as a REIT for any taxable year, we
will be subject to federal income taxes at regular corporate rates (including any alternative minimum tax, which, for corporations, was repealed
3
under the Tax Cut and Jobs Act (“TCJA”) for tax years beginning after December 31, 2017) and may not be able to qualify as a REIT for the four subsequent
taxable years. In addition to its TRS, the Company is subject to certain foreign and state and local income taxes, in particular income taxes arising from its
operating activities in Puerto Rico, which are included in income tax expense in the consolidated statements of income.
Available Information
Copies of our Annual Reports on Form 10‑K, Quarterly Reports on Form 10‑Q, Current Reports on Form 8‑K, and amendments to those reports, as well as
Reports on Forms 3, 4 and 5 regarding officers, trustees or 10% beneficial owners of us, filed or furnished pursuant to Section 13(a), 15(d) or 16(a) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available free of charge through our website (www.uedge.com) as soon as reasonably
practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission. Also available on our website are copies of our Audit
Committee Charter, Compensation Committee Charter, Corporate Governance and Nominating Committee Charter, Code of Business Conduct and Ethics and
Corporate Governance Guidelines. In the event of any changes to these charters or the code or guidelines, changed copies will also be made available on our
website. Our website also includes other financial information, including certain non-GAAP financial measures, none of which is a part of this Annual Report on
Form 10-K. Copies of our charters, code, guidelines, and filings under the Exchange Act are also available free of charge from us, upon request.
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ITEM 1A. RISK FACTORS
Risk factors that may materially and adversely affect our business, results of operations and financial condition are summarized below. These risks have been
separated into the following groups:
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Risks Related to Our Business and Operations;
Risks Related to Our Liquidity and Indebtedness;
Risks Related to Business Continuity;
Risks Related to Environmental Liability and Regulatory Compliance;
Risks Related to Our Status as a REIT;
Risks Related to Our Organization and Structure; and
Risks Related to An Investment in Our Common Shares.
The risks and uncertainties described herein may not be the only ones we face. Additional risks and uncertainties not presently known to us or that we currently
believe to be immaterial, may also adversely affect our business. See “Forward-Looking Statements”.
RISKS RELATED TO OUR BUSINESS AND OPERATIONS
Actual or perceived threats associated with epidemics, pandemics or other public health crises, including the COVID-19 pandemic, could have a material
adverse effect on our and our tenants’ businesses, financial condition, results of operations, cash flow, liquidity, and ability to access the capital markets and
satisfy debt service obligations.
Epidemics, pandemics or other public health crises, including the recent COVID-19 pandemic, that impact economic and market conditions, particularly in the
markets where our properties are located, and preventative measures taken to alleviate their impact, including mandatory business shutdowns, “stay-at-home”
orders or other operating limitations issued by local, state or federal authorities, may reduce customers’ ability or willingness to visit retail destinations which in
turn may have a material adverse effect on our and our tenants’ businesses, financial condition, results of operations, liquidity, and ability to access capital markets
and satisfy debt service obligations. As a result of our concentrated operations in the New York metropolitan area, the extent and magnitude or perception of the
impact of the current COVID-19 pandemic on our and our tenants’ business is heightened.
The ongoing COVID-19 pandemic and restrictions intended to prevent and mitigate its spread have had, and could continue to have, additional adverse effects on
our business, including with regards to:
•
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•
the ability and willingness of our tenants to renew their leases upon expiration, our ability to re-lease the properties on the same or better terms in the
event of nonrenewal or in the event we exercise our right to replace an existing tenant, and obligations we may incur in connection with the replacement
of an existing tenant, particularly in light of the adverse impact to the financial health of many retailers that has occurred and continues to occur as a result
of the COVID-19 pandemic and the significant uncertainty as to when and under what conditions potential tenants will be able to operate physical retail
locations in the future;
anticipated returns from development and redevelopment projects, some of which experienced delays;
the broader impact of the severe economic contraction due to the COVID-19 pandemic, the resulting increase in unemployment that has occurred and its
effect on consumer behavior, and the negative consequences that will occur if these trends are not timely reversed;
• macroeconomic conditions, such as a disruption of, or lack of access to, the capital markets as well as the significant decline in our share price from prices
prior to the spread of the COVID-19 pandemic;
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•
our decision to pay dividends at all, or pay them in stock, which in the case of the latter may result in our shareholders having a tax liability with respect
to such dividends that exceeds the amount of cash received, if any;
our ability to pay down, refinance, restructure or extend our indebtedness as it becomes due and potential limitations on our ability to borrow funds under
our existing credit facility as a result of covenants relating to our financial results in the current or future periods; and
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•
potential reduction in our operating effectiveness if key personnel become unavailable due to illness or other personal circumstances related to COVID-
19.
The COVID-19 pandemic and restrictions intended to prevent and mitigate its spread have already had a significant adverse impact on economic and market
conditions around the world, including the United States and markets where our properties are located, and could further trigger a period of sustained global and
U.S. economic downturn or recession. While the rapid developments regarding the COVID-19 pandemic preclude any prediction as to its ultimate adverse impact,
the current economic, political and social environment presents material risks and uncertainties with respect to our and our tenants’ business, financial condition,
results of operations, cash flows, liquidity and ability to access the capital markets and satisfy debt service obligations.
To the extent any of these risks and uncertainties adversely impact us in the ways described above or otherwise, they may also have the effect of heightening many
of the other risks described under this section.
E-commerce may have an adverse impact on our tenants and our business.
E-commerce continues to gain popularity and growth in Internet sales is likely to continue in the future. E-commerce could result in a downturn in the business of
some of our current tenants and could affect the way other current and future tenants lease space. For example, the migration towards e-commerce has led many
omnichannel retailers to prune the number and size of their traditional “brick and mortar” locations to increasingly rely on e-commerce and alternative distribution
channels. Many tenants also permit merchandise purchased on their websites to be picked up at, or returned to, their physical store locations, which may have the
effect of decreasing the reported amount of their in-store sales and the amount of rent we are able to collect from them (particularly with respect to those tenants
who pay rent based on a percentage of their in-store sales). We cannot predict with certainty how growth in e-commerce will impact the demand for space at our
properties or how much revenue will be generated at traditional store locations in the future. If the shift towards e-commerce causes declines in the “brick and
mortar” sales generated by our tenants and/or causes our tenants to reduce the size or number of their retail locations in the future, our cash flow, financial
condition and results of operations could be materially and adversely affected.
Retail real estate is a competitive business.
Competition in the retail real estate industry is intense. We compete with a large number of public and private retail real estate companies, including property
owners and developers. We compete with these companies to attract customers to our properties, as well as to attract anchor, non-anchor and other tenants. We also
compete with these companies for development, redevelopment and acquisition opportunities. Other owners and developers may attempt to take existing tenants
from our shopping centers by offering lower rents or other incentives to compel them to relocate. This competition could have a material adverse effect on our
ability to lease space and on the amount of rent and expense reimbursements that we receive.
We depend on leasing space to tenants on economically favorable terms and on collecting rent from tenants who ultimately may not be able to pay.
Our financial results depend significantly on leasing space in our properties to tenants on economically favorable terms. A majority of our income depends on the
ability of our tenants to pay the full amount of rent and other charges due under their leases on a timely basis. Some of our leases provide for the payment, in
addition to base rent, of additional rent above the base amount according to a specified percentage of the gross sales generated by the tenants and generally provide
for reimbursement of real estate taxes and expenses of operating the property. Economic and/or competitive conditions may impact the success of our tenants’
retail operations and therefore the amount of rent and expense reimbursements we receive from our tenants. While demand for our retail spaces has been strong,
there can be no assurance in our ability to maintain our occupancy levels on favorable terms. Any reduction in our tenants’ abilities to pay base rent, percentage
rent or other charges on a timely basis will decrease our income, funds available to pay indebtedness and funds available for distribution to shareholders. If a tenant
does not pay its rent, we might not be able to enforce our rights as landlord without delays and might incur substantial legal and other costs. During periods of
economic adversity, there may be an increase in the number of tenants that cannot pay their rent and an increase in vacancy rates, which could materially and
adversely affect our cash flow, financial condition and results of operations.
We may be unable to renew leases or relet space as leases expire on terms comparable to prior leases or at all.
When our tenants decide not to renew their leases upon their expiration, we may not be able to relet the space on terms comparable to prior leases or at all. Spaces
that accounted for approximately 13.1% of our annualized base rent for the fiscal year ended December 31, 2020 were vacant as of December 31, 2020, excluding
leases signed but not commenced. In addition, leases accounting for approximately 27% of our annualized base rent for the fiscal year ended December 31, 2020
are scheduled to expire within the next three years. Even if tenants do renew or we can relet the space, the terms of the renewal or
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reletting, taking into account among other things, the cost of improvements to the property and leasing commissions, may be less favorable than the terms in the
expired leases. In addition, changes in space utilization by our tenants may impact our ability to renew or relet space without the need to incur substantial costs in
renovating or redesigning the internal configuration of the relevant property. If we are unable to promptly renew the leases or relet the space at similar rates or if
we incur substantial costs in renewing or reletting the space, our cash flow and ability to service debt obligations and pay dividends and other distributions to
security holders could be adversely affected.
Bankruptcy or insolvency of tenants may decrease our revenues, net income and available cash.
From time to time, certain of our tenants have become insolvent or declared bankruptcy and other tenants may declare bankruptcy or become insolvent in the
future. Tenants who file for bankruptcy protection have the legal right to reject any or all of their leases and close related stores. In the event that a tenant with a
significant number of leases in our properties files for bankruptcy and rejects its leases, we could experience a significant reduction in our revenues and we may
not be able to collect all pre-petition amounts owed by that party, which may adversely affect our cash flow, financial condition and results of operations. The
bankruptcy or insolvency of a major tenant at one of our properties could also negatively impact our ability to lease other existing or future vacancies at any such
property. In addition, our leases generally do not contain restrictions designed to ensure the ongoing creditworthiness of our tenants. The bankruptcy or insolvency
of a major tenant could result in a lower level of net income, which may adversely affect our cash flow, financial condition and results of operations and decrease
funds available to pay our indebtedness or make distributions to shareholders. For example, during the year ended December 31, 2020, Century 21 Department
Stores LLC (“Century 21”) filed for Chapter 11 bankruptcy protection. See Management’s Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources included in Part II, Item 7 in this Annual Report on Form 10-K and the Notes to Consolidated Financial Statements
included in Part II, Item 8 in this Annual Report on Form 10-K.
A significant number of our properties are located in the New York metropolitan area and are affected by the economic cycles there.
Because a significant number of our properties are located in the New York metropolitan area, we are particularly susceptible to adverse economic and other
developments in that area. Notably, as of December 31, 2020, one of our New York metropolitan area properties, The Outlets at Bergen Town Center, in Paramus,
NJ, generated in excess of 10% of our rental revenue. Collectively, our New York metropolitan area properties in the aggregate generated over 75% of our rental
revenue as of December 31, 2020. Real estate markets are subject to economic downturns and we cannot predict the economic conditions in the New York
metropolitan area in either the short-term or long-term. Poor economic or market conditions in the New York metropolitan area, may adversely affect our cash
flow, financial condition and results of operations.
Some of our properties depend on anchor or major tenants and decisions made by these tenants, or adverse developments in the businesses of these tenants,
could materially and adversely affect our business, results of operations and financial condition.
Some of our properties have anchor or major tenants that generally occupy larger spaces, sometimes pay a significant portion of a property’s total rent and often
contribute to the success of other tenants by drawing customers to a property. If an anchor or major tenant closes, such closure could adversely affect the property
even if the tenant continues to pay rent due to the loss of the anchor or major tenant’s drawing power. Additionally, closure of an anchor or major tenant could
result in lease terminations by, or reductions in rent from, other tenants if the other tenants’ leases have co-tenancy clauses that permit cancellation or rent
reduction if an anchor tenant closes. Retailer consolidation, store rationalization, competition from internet sales and general economic conditions may decrease the
number of potential tenants available to fill available anchor tenant spaces. As a result, in the event one or more anchor tenants were to leave one or more of our
centers, we cannot be sure that we would be able to lease the vacant space on equivalent terms or at all. In addition, we may not be able to recover costs owed to us
by the closed tenant. In certain cases, some anchor and non-anchor tenants may be able to terminate their leases if they do not achieve defined sales levels.
Development and redevelopment activities have inherent risks, which could adversely impact our cash flow, financial condition and results of operations.
We may develop or redevelop properties when we believe that doing so is consistent with our business strategy. As of December 31, 2020, we had 10 properties in
our redevelopment project pipeline and 13 active redevelopment projects. We have invested a total of approximately $45.8 million in our active projects, which are
at various stages of completion, and based on our current plans and estimates, we anticipate it will cost an additional $86.6 million to complete our active projects.
We anticipate engaging in additional development and redevelopment activities in the future. In addition to the risks associated with
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real estate investments in general as described elsewhere, the risks associated with future development and redevelopment activities include:
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expenditure of capital and time on projects that may never be completed;
failure or inability to obtain financing on favorable terms or at all;
inability to secure necessary zoning or regulatory approvals;
higher than estimated construction or operating costs, including labor and material costs;
inability to complete construction on schedule due to a number of factors, including inclement weather, labor disruptions, construction delays, restrictions
caused by the COVID-19 pandemic, delays or failure to receive zoning or other regulatory approvals, acts of terror or other acts of violence, or natural
disasters (such as fires, seismic activity or floods);
significant time lag between commencement and stabilization resulting in delayed returns and greater risks due to fluctuations in the general economy,
shifts in demographics and competition;
decrease in customer traffic during the redevelopment period causing a decrease in tenant sales;
inability to secure key anchor or other tenants at anticipated pace of lease-up or at all; and
occupancy and rental rates at a newly completed project that may not meet expectations.
If any of the above events were to occur, they may hinder our growth and may have an adverse effect on our cash flow, financial condition and results of
operations. In addition, new development and significant redevelopment activities, regardless of whether they are ultimately successful, typically require
substantial time and attention from management.
We face significant competition for acquisitions of properties, which may reduce the number of acquisition opportunities available to us and increase the costs
of these acquisitions.
The current market for acquisitions of properties in our core markets continues to be competitive. This competition may increase the demand for the types of
properties in which we typically invest and, therefore, increase the prices paid for such acquisition properties. We also face significant competition for attractive
acquisition opportunities from an indeterminate number of investors, including publicly-traded and privately-held REITs, private equity investors and institutional
investment funds, some of which have greater financial resources, greater ability to borrow funds and the willingness to accept more risk than we can prudently
manage, including risks with respect to the geographic proximity of investments and the payment of higher acquisition prices. This competition will increase if
investments in real estate become more attractive relative to other forms of investment. Competition for investments may reduce the number of suitable investment
opportunities available to us and may have the effect of increasing prices paid for such acquisition properties and, as a result, adversely affecting our ability to
grow through acquisitions.
Our operating results at acquired properties may not meet our financial expectations.
Our ability to complete acquisitions on favorable terms and successfully operate or develop them is subject to the following risks:
• we may incur significant costs and divert management attention in connection with the evaluation and negotiation of potential acquisitions, including ones
that are subsequently not completed;
• we may be unable to finance acquisitions on favorable terms and in the time period we desire, or at all;
• we may be unable to quickly and efficiently integrate new acquisitions, particularly the acquisition of portfolios of properties, into our existing operations;
• we may acquire properties that are not initially accretive to our results upon acquisition, and we may not successfully manage and lease those properties to
meet our expectations; and
• we may acquire properties subject to liabilities and without any recourse, or with only limited recourse to former owners, with respect to unknown
liabilities for clean-up of undisclosed environmental contamination, claims by tenants or other persons to former owners of the properties and claims for
indemnification by general partners, trustees, officers and others indemnified by the former owners of the properties.
If we are unable to complete acquisitions on favorable terms, or efficiently integrate such acquisitions, our cash flow, financial condition and results of operations
could be adversely affected.
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It may be difficult to dispose of real estate quickly, which may limit our flexibility.
Real estate is relatively difficult to dispose of quickly. Consequently, we may have limited ability to promptly change our portfolio in response to changes in
economic or other conditions. Moreover, our ability to dispose of, or finance real estate may be materially and adversely affected during periods of uncertainty or
unfavorable conditions in the credit markets as we or potential buyers of our real estate may experience difficulty in obtaining financing. To dispose of low basis
deferral or tax-protected properties efficiently we from time to time use like-kind exchanges, which are intended to qualify for non-recognition of taxable gain, but
can be difficult to consummate and result in the property for which the disposed assets are exchanged inheriting their low tax bases and other tax attributes
(including tax protection covenants). These challenges related to dispositions may limit our flexibility.
Many real estate costs are fixed, even if income from our properties decreases.
Our financial results depend primarily on leasing space in our properties to tenants on terms favorable to us. Costs associated with operating real estate, such as real
estate taxes, insurance and maintenance costs, generally are not reduced even when a property is not fully occupied, rental rates decrease, or other circumstances
cause a reduction in income from the property. As a result, cash flow from operations may be reduced if a tenant does not pay its rent or we are unable to rent our
properties on favorable terms.
A number of properties in our portfolio are subject to ground or building leases; if we are found to be in breach of a ground or building lease or are unable to
renew a ground or building lease, we could be materially and adversely affected.
A number of the properties in our portfolio are either completely or partially on land that is owned by third parties and leased to us pursuant to ground or building
leases. Accordingly, we only own a long-term leasehold or similar interest in those properties. If we are found to be in breach of a ground or building lease and that
breach cannot be cured, we could lose our interest in the improvements and the right to operate the property. In addition, unless we can purchase a fee interest in
the underlying land or building or extend the terms of these leases before or at their expiration, as to which no assurance can be given, we will lose our interest in
the improvements and the right to operate these properties. However, in certain cases, our ability to exercise such options is subject to the condition that we are not
in default under the terms of the ground or building lease at the time that we exercise such options, and we can provide no assurances that we will be able to
exercise our options at such time. If we were to lose the right to operate a property due to a breach or non-renewal of the ground or building lease, we would be
unable to derive income from such property, which could materially and adversely affect us.
Our assets may be subject to impairment charges.
Real estate is carried at cost, net of accumulated depreciation and amortization. Our properties are individually reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of the property may not be recoverable. Such events and changes include macroeconomic conditions,
including those caused by global pandemics, like the recent COVID-19 pandemic, which resulted in property operational disruption and could indicate that the
carrying amount may not be recoverable. An impairment exists when the carrying amount of an asset exceeds the aggregate projected future cash flows over the
anticipated holding period on an undiscounted basis, taking into account the appropriate capitalization rate in determining a future terminal value. An impairment
loss is based on the excess of the property’s carrying amount over its estimated fair value. Recording an impairment charge results in an immediate reduction in our
income in the period in which the charge is taken, which could materially and adversely affect our results of operations and financial condition.
RISKS RELATED TO OUR LIQUIDITY AND INDEBTEDNESS
Risks related to our outstanding debt.
If we are unable to obtain debt financing or refinance existing indebtedness upon maturity on terms favorable to us, our financial condition and results of
operations would likely be adversely affected. In addition, the cost of our existing variable rate debt may increase, especially in a rising interest rate environment,
and we may not be able to refinance our existing debt in sufficient amounts or on acceptable terms. As of December 31, 2020, we had $169.4 million of variable
rate debt and our $600 million revolving credit facility, on which no balance is outstanding at December 31, 2020, bears interest at a floating rate based on the
London Interbank Offered Rate (“LIBOR”) plus an applicable margin, and we may continue to borrow additional funds at variable interest rates in the future. In
the event that LIBOR is discontinued, the interest rates of our debt following such event will be based on either alternate base rates or agreed upon replacement
rates. Such an event would not affect our ability to borrow or maintain already outstanding borrowings, although it could result in higher interest rates. Increases in
interest rates would increase the interest expense on our variable rate debt and reduce our cash flow, which could (i) adversely affect our ability to service our debt
and meet our other obligations and (ii) reduce the amount we are able to distribute to our
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shareholders. If the cost or amount of our indebtedness increases or we cannot refinance our debt in sufficient amounts or on acceptable terms, we are at risk of
default on our obligations, which could have a material adverse effect on us.
Covenants in our existing financing agreements may restrict our operating, financing, redevelopment, development, acquisition and other activities.
The mortgages on our properties contain customary covenants such as those that limit our ability, without the prior consent of the lender, to further mortgage the
applicable property or to reduce insurance coverage. Our existing revolving credit facility contains, and any debt that we may obtain in the future may contain,
customary restrictions, requirements and other limitations on our ability to incur indebtedness, including covenants (i) that limit our ability to incur debt based
upon (1) our ratio of total debt to total assets, (2) our ratio of secured debt to total assets, (3) our ratio of earnings before interest, tax, depreciation and amortization
(EBITDA) to interest expense and (4) our ratio of EBITDA to fixed charges, and (ii) that require us to maintain a certain level of unencumbered assets to
unsecured debt. Our ability to borrow is subject to compliance with these and other covenants. Failure to comply with our covenants could cause a default under
the applicable debt instrument and we may then be required to repay such debt with capital from other sources or to give possession of a secured property to the
lender. Under those circumstances, other sources of capital may not be available to us or may be available only on unattractive terms.
Defaults on secured indebtedness may result in foreclosure.
In the event that we default on mortgages in the future, either as a result of ceasing to make debt service payments or failing to meet applicable covenants, the
lenders may accelerate the related debt obligations and foreclose and/or take control of the properties that secure their loans. As of December 31, 2020, we had
$1.6 billion of secured debt outstanding and 33 of our properties were encumbered by secured debt. As of December 31, 2020, we were in compliance with all debt
covenants. Further, for tax purposes, the foreclosure of a mortgage may result in the recognition of taxable income related to the extinguished debt without us
having received any accompanying cash proceeds. As a result, since we are structured as a REIT, we may be required to identify and utilize sources for
distributions to our shareholders related to such taxable income in order to avoid incurring corporate tax or to meet the REIT distribution requirements imposed by
the Code.
We may not be able to obtain capital to make investments.
We depend primarily on external financing to fund the growth of our business because one of the requirements of the Code for a REIT is that it distributes at least
90% of its taxable income, excluding net capital gains, to its shareholders. There is a separate requirement to distribute net capital gains or pay a corporate level tax
in lieu thereof. Our access to debt or equity financing depends on the willingness of third parties to lend to or to make equity investments and on conditions in the
capital markets generally. There can be no assurance that new financing or other capital will be available or available on acceptable terms. The failure to obtain
financing or other capital could materially and adversely affect our business, results of operations and financial condition. For information about our available
sources of funds, see Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources included in Part
II, Item 7. in this Annual Report on Form 10-K and the Notes to Consolidated Financial Statements included in Part II, Item 8. in this Annual Report on Form 10-
K.
RISKS RELATED TO BUSINESS CONTINUITY
Risks related to our malls in Puerto Rico.
Our two malls in Puerto Rico make up approximately 7% of our net operating income. Puerto Rico faces significant fiscal and economic challenges, including
those resulting from natural disasters such as hurricanes and earthquakes, the COVID-19 pandemic in 2020, and its government filing for bankruptcy protection in
2017. These factors have led to an ongoing emigration trend of Puerto Rico residents to the United States and elsewhere. The combination of these circumstances
could result in less disposable income for the purchase of goods sold in our malls and the inability of merchants to pay rent and other charges. Any of these events
could negatively impact our ability to lease space on terms and conditions we seek and could have a material adverse effect on our business and results of
operations. As of December 31, 2020, we have individual, non-recourse mortgages on each of our Puerto Rico properties.
Natural disasters could have a concentrated impact on us.
We own properties near the Atlantic Coast and in Puerto Rico which are subject to natural disasters such as hurricanes, floods and storm surges. We also have four
properties in California that could be impacted by earthquakes. As a result, we could become subject to business interruption, significant losses and repair costs,
such as those we experienced from Hurricane Maria, which damaged and caused the temporary closure of our two properties in Puerto Rico. We maintain
comprehensive, all-risk
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property and rental value insurance coverage on our properties, however losses resulting from a natural disaster may be subject to a deductible or not fully covered
and such losses could adversely affect our cash flow, financial condition and results of operations.
Some of our potential losses may not be covered by insurance.
We maintain numerous insurance policies including for general liability, property, pollution, acts of terrorism, trustees’ and officers’, cyber security, workers’
compensation and automobile-related liabilities. However, all such policies are subject to the terms, conditions, exclusions, deductibles and sub-limits, among
other limiting factors. For example, our terrorism insurance policy excludes coverage for nuclear, biological, chemical or radiological terrorism events as defined
by the Terrorism Risk Insurance Program Reauthorization Act.
Certain of the insurance premiums are charged directly to each of the properties but not all of the cost of such premiums are recovered. We are responsible for
deductibles, losses in excess of insurance coverage, and the portion of premiums not reimbursable by tenants at our properties, which could be material.
We continue to monitor the state of the insurance market and the scope and costs of available coverage. We cannot anticipate what coverage will be available on
commercially reasonable terms in the future and expect premiums across most coverage lines to increase in light of recent events. The incurrence of uninsured
losses, costs or uncovered premiums could materially and adversely affect our business, results of operations and financial condition. See Management’s
Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources included in Part II, Item 7. in this Annual Report on
Form 10-K and the Notes to Consolidated Financial Statements included in Part II, Item 8. in this Annual Report on Form 10-K.
Terrorist acts and shooting incidents could harm the demand for, and the value of, our properties.
Over the past several years, a number of highly publicized terrorist acts and shootings have occurred at domestic and international retail properties. In the event
concerns regarding safety were to alter shopping habits or deter customers from visiting shopping centers, our tenants would be adversely affected as would the
general demand for retail space. Additionally, if such incidents were to continue, insurance for such acts may become limited or subject to substantial cost
increases. Such an incident at one of our properties, particularly one in which we generate a significant amount of revenue, could materially and adversely affect
our business, results of operations and financial condition.
Our business and operations would suffer in the event of system failures.
Despite system redundancy, the implementation of security measures and the existence of a disaster recovery plan for our information technology (“IT”)
infrastructure, our systems are vulnerable to damages from any number of sources, including computer viruses, unauthorized access, energy blackouts, natural
disasters, terrorism, war and telecommunication failures. We have placed reliance on third party managed services to perform a number of IT-related functions and
we may experience system difficulties related to our platform and integrating the services provided by third parties. If we experience a system failure or accident
that causes interruptions in our operations, we could experience material and adverse disruptions to our business. We may also incur additional costs to remedy
damages caused by such disruptions.
We face risks associated with security and cyber security breaches.
We face risks associated with security breaches, whether through cyber attacks or cyber intrusions over the internet, malware, computer viruses, attachments to
emails, persons inside our organization or persons with access to systems, and other significant disruptions of our IT networks and related systems. Similarly,
vendors from whom we receive outsourced IT-related services, including third-party platforms, face the same risks, which could in turn affect us. Our internal and
outsourced IT networks and related systems are essential to the operation of our business and our ability to perform day to day operations.
A breach or significant and extended disruption in the functioning of our systems, including our primary website, may damage our reputation and cause us to lose
customers, tenants and revenues, generate third-party claims, result in the unintended and/or unauthorized public disclosure or the misappropriation of proprietary,
personal identifying and confidential information, and require us to incur significant expenses to address and remediate or otherwise resolve these kinds of issues,
and we may not be able to recover these expenses in whole or in any part from our service providers, responsible parties, or insurance carriers which could have a
material adverse effect on our business and operations.
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RISKS RELATED TO ENVIRONMENTAL LIABILITY AND REGULATORY COMPLIANCE
We may incur significant costs to comply with environmental laws and environmental contamination may impair our ability to lease and/or sell real estate.
Our operations and properties are subject to various federal, state and local laws and regulations concerning the protection of the environment including air and
water quality, hazardous or toxic substances and health and safety. These laws often impose liability without regard to whether the owner knew of, or was
responsible for, the presence of hazardous or toxic substances. The cost of any required remediation may exceed the value of the property and/or the aggregate
assets of the owner or the responsible party. The presence of, or the failure to properly remediate, hazardous or toxic substances may adversely affect our ability to
sell or lease a contaminated property or to use the property as collateral for a loan. We can provide no assurance that we are aware of all potential environmental
liabilities; that any previous owner, occupant or tenant did not create any material environmental condition not known to us; that our properties will not be affected
by tenants or nearby properties or other unrelated third parties; and that future uses or conditions, or changes in environmental laws and regulations will not result
in additional material environmental liabilities to us.
Generally, our tenants must comply with environmental laws and meet remediation requirements. Our leases typically impose obligations on our tenants to
indemnify us from any compliance costs we may incur as a result of the environmental conditions on the property caused by the tenant. If a lease does not require
compliance or if a tenant fails to or cannot comply, we could be forced to pay these costs.
If not addressed, environmental conditions could impair our ability to sell or re-lease the affected properties in the future or result in lower sales prices or rent
payments, which could adversely impact our cash flow, financial condition and results of operations.
Compliance or failure to comply with the Americans with Disabilities Act, safety regulations or other requirements could result in substantial costs.
The ADA generally requires that public buildings including our properties meet certain federal requirements related to access and use by disabled persons.
Noncompliance could result in the imposition of fines by the federal government or the award of damages to private litigants and/or legal fees to their counsel. We
could be required under the ADA to make substantial alterations to, and capital expenditures at, one or more of our properties, including the removal of access
barriers, which could materially and adversely affect our business, results of operations and financial condition.
Our properties are subject to various federal, state and local regulatory requirements such as state and local fire and life safety regulations. If we fail to comply with
these requirements, we could incur fines or private damage awards. We do not know whether existing requirements will change or whether compliance with future
requirements will require significant unanticipated expenditures. If we incur substantial costs to comply with the ADA and any other legislation, our cash flow,
financial condition and results of operations could be adversely affected.
RISKS RELATED TO OUR STATUS AS A REIT
We may fail to qualify or remain qualified as a REIT and may be required to pay income taxes at corporate rates.
Although we believe that we will remain organized and will continue to operate so as to qualify as a REIT for federal income tax purposes, we may fail to remain
so qualified. Qualifications are governed by highly technical and complex provisions of the Code for which there are only limited judicial or administrative
interpretations and that depend on various facts and circumstances that are not entirely within our control. In addition, legislation, new regulations, administrative
interpretations or court decisions may significantly change the relevant tax laws and/or the federal income tax consequences of qualifying as a REIT. If, with
respect to any taxable year, we fail to maintain our qualification as a REIT and do not qualify under statutory relief provisions, we could not deduct distributions to
shareholders in computing our taxable income and would have to pay federal income tax on our taxable income at regular corporate rates. The federal income tax
payable would include any applicable alternative minimum tax (which, for corporations, was repealed for tax years beginning after December 31, 2017 under the
TCJA). If we had to pay federal income tax, the amount of money available to distribute to shareholders and pay our indebtedness would be reduced for the year or
years involved, and we would no longer be required to make distributions to shareholders. In addition, we would also be disqualified as a REIT for the four taxable
years following the year during which qualification was lost unless we were entitled to relief under the relevant statutory provisions.
We are also required to pay certain corporate-level taxes on our assets located in Puerto Rico and such taxes may increase if recently proposed taxes are
implemented.
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REIT distribution requirements could adversely affect our liquidity and our ability to execute our business plan.
To qualify to be taxed as a REIT, and assuming that certain other requirements are also satisfied, we generally must distribute at least 90% of our REIT taxable
income, determined without regard to the dividends paid deduction and excluding any net capital gains, to our shareholders each year so that U.S. federal corporate
income tax does not apply to earnings that we distribute. To the extent that we satisfy this distribution requirement and qualify for taxation as a REIT, but distribute
less than 100% of our REIT taxable income, determined without regard to the dividends paid deduction and including any net capital gains, we will be subject to
U.S. federal corporate income tax on our undistributed net taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount
that we distribute to our shareholders in a calendar year is less than a minimum amount specified under U.S. federal income tax laws. We intend to distribute 100%
of our REIT taxable income to our shareholders.
From time to time, we may generate taxable income greater than our cash flow as a result of differences in timing between the recognition of taxable income and
the actual receipt of cash or the effect of nondeductible capital expenditures, the effect of limitations on interest and net operating loss deductibility under the
TCJA, the creation of reserves, or required debt or amortization payments. If we do not have other funds available in these situations, we could be required to
borrow funds on unfavorable terms, sell assets at disadvantageous prices, distribute amounts that would otherwise be invested in future acquisitions, capital
expenditures or repayment of debt, or make taxable distributions of our shares or debt securities to make distributions sufficient to enable us to pay out enough of
our taxable income to satisfy the REIT distribution requirement and avoid corporate income tax and the 4% excise tax in a particular year. These alternatives could
increase our costs or reduce our equity. Further, amounts distributed will not be available to fund investment activities. Thus, compliance with the REIT
requirements may hinder our ability to grow, which could adversely affect the value of our shares. Any restrictions on our ability to incur additional indebtedness
or make certain distributions could preclude us from meeting the 90% distribution requirement. Decreases in funds from operations due to unfinanced expenditures
for acquisitions of properties or increases in the number of shares outstanding without commensurate increases in funds from operations would adversely affect our
ability to maintain distributions to our shareholders. Consequently, there can be no assurance that we will be able to make distributions at the anticipated
distribution rate or any other rate.
Risks related to Section 1031 Exchanges.
From time to time we may dispose of properties in transactions that are intended to qualify as “like kind exchanges” under Section 1031 of the Code (“Section
1031 Exchanges”). It is possible that the qualification of a transaction as a Section 1031 Exchange could be successfully challenged and determined to be currently
taxable. In such case, our taxable income and earnings and profits would increase. In some circumstances, we may be required to pay additional dividends or, in
lieu of that, corporate income tax, possibly including interest and penalties. As a result, we may be required to borrow funds in order to pay additional dividends or
taxes, and the payment of such taxes could cause us to have less cash available to distribute to our shareholders. In addition, if a Section 1031 Exchange were later
to be determined to be taxable, we may be required to amend our tax returns for the applicable year in question, including any information reports we sent our
shareholders. Moreover, it is possible that legislation could be enacted that could modify or repeal the laws with respect to Section 1031 Exchanges, which could
make it more difficult or not possible for us to dispose of properties on a tax deferred basis.
We face possible adverse changes in tax law.
Changes in U.S. federal, state and local tax laws or regulations, with or without retroactive application, could have a negative effect on us. New legislation,
Treasury regulations, administrative interpretations or court decisions could significantly and negatively affect our ability to qualify to be taxed as a REIT and/or
the U.S. federal income tax consequences to our investors and to us of such qualification. Even changes that do not impose greater taxes on us could potentially
result in adverse consequences to our shareholders.
In December 2019, the IRS issued proposed Treasury regulations related to Section 162(m) of the Code that extend the $1 million deduction limit that publicly
traded corporations may take for compensation paid to “covered employees” to a REIT’s distributive share of any compensation paid by the REIT’s operating
partnership to certain current and former executive officers of the REIT. This change may limit our ability to deduct certain compensation that would have been
deductible under prior law.
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RISKS RELATED TO OUR ORGANIZATION AND STRUCTURE
Our Declaration of Trust sets limits on the ownership of our shares.
Generally, for us to maintain a qualification as a REIT under the Code, not more than fifty percent (50%) in value of our outstanding shares of beneficial interest
may be owned, directly or indirectly, by five or fewer individuals at any time during the last half of our taxable year. The Code defines “individuals” for purposes
of the requirement described in the preceding sentence to include some types of entities. Under our Declaration of Trust, no person or entity (or group thereof) may
own more than 9.8% (in value or number of shares, whichever is more restrictive) of our outstanding shares of any class or series, with some exceptions for
persons or entities approved by the Board of Trustees. A transfer of our shares of beneficial interest to a person who, as a result of the transfer, violates the
ownership limit will be void under certain circumstances, and, in any event, would deny that person any of the economic benefits of owning shares in excess of the
ownership limit. These restrictions on transferability and ownership may delay, deter or prevent a change in control of us or other transaction that might involve a
premium price or otherwise be in the best interest of the shareholders.
Our Declaration of Trust limits the removal of members of the Board of Trustees.
Our Declaration of Trust provides that, subject to the rights of holders of one or more classes or series of preferred shares to elect or remove one or more trustees, a
trustee may be removed only for cause and only by the affirmative vote of two-thirds of the votes entitled to be cast in the election of trustees. This provision, when
coupled with the exclusive power of the Board of Trustees to fill vacancies on the Board of Trustees, precludes shareholders from removing incumbent trustees
except for cause and upon a substantial affirmative vote and filling the vacancies created by the removal with their own nominees. These limitations may delay,
deter or prevent a change in control of us or other transactions that might involve a premium price or otherwise be in the best interest of our shareholders.
Maryland law contains provisions that may reduce the likelihood of certain takeover transactions.
Certain provisions of Maryland law, may have the effect of inhibiting a third-party from making a proposal to acquire us or of impeding a change in control under
circumstances that otherwise could provide the holders of our shares, including:
•
•
“Business combination” provisions that, subject to certain exceptions, prohibit certain business combinations between us and an “interested shareholder”
(defined generally as any person who beneficially owns 10% or more of the voting power of our shares or an affiliate thereof or an affiliate or associate of
ours who was the beneficial owner, directly or indirectly, of 10% or more of the voting power of our then outstanding voting shares at any time within the
two-year period immediately prior to the date in question) for five years after the most recent date on which the shareholder becomes an interested
shareholder, and thereafter impose fair price or super majority shareholder voting requirements on these combinations; and
“Control share” provisions that provide the holders of “control shares” of a company (defined as shares that, when aggregated with other shares controlled
by the shareholder, entitle the shareholder to exercise voting power in the election of trustees within one of three increasing ranges) acquired in a “control
share acquisition” (defined as the direct or indirect acquisition of ownership or control of the voting power of issued and outstanding “control shares,”
subject to certain exceptions) have no voting rights with respect to their control shares, except to the extent approved by our shareholders by the
affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.
As permitted by Maryland law, our Bylaws provide that we will not be subject to the control share provisions of Maryland law. However, we cannot assure you
that the Board of Trustees will not revise our Bylaws in order to be subject to such control share provisions in the future.
Certain provisions of Maryland law permit the board of trustees of a Maryland real estate investment trust with at least three independent trustees and a class of
shares registered under the Exchange Act, without shareholder approval and regardless of what is currently provided in its declaration of trust or bylaws, to
implement certain corporate governance provisions, some of which (for example, implementing a classified board) are not currently applicable to us. These
provisions may have the effect of limiting or precluding a third party from making an unsolicited acquisition proposal for us or of delaying, deferring or preventing
a change in control under circumstances that otherwise could provide the holders of shares of our shares with the opportunity to realize a premium over the then
current market price.
We may issue additional shares in a manner that could adversely affect the likelihood of certain takeover transactions.
Our Declaration of Trust and Bylaws authorize the Board of Trustees in its sole discretion and without shareholder approval, to:
•
cause us to issue additional authorized, but unissued, common or preferred shares;
14
•
•
•
classify or reclassify, in one or more classes or series, any unissued common or preferred shares;
set the preferences, rights and other terms of any classified or reclassified shares that we issue; and
increase the number of shares of beneficial interest that we may issue.
The Board of Trustees can establish a class or series of common or preferred shares whose terms could delay, deter or prevent a change in control of us or other
transaction that might involve a premium price or otherwise be in the best interest of our shareholders. Our Declaration of Trust and Bylaws contain other
provisions that may delay, deter or prevent a change in control of us or other transaction that might involve a premium price or otherwise be in our best interest or
the best interest of our shareholders.
RISKS RELATED TO AN INVESTMENT IN OUR COMMON SHARES
The market prices and trading volume of our equity securities may be volatile.
The market prices of our equity securities depend on various factors which may be unrelated to our operating performance or prospects. We cannot assure you that
the market prices of our equity securities, including our common shares, will not fluctuate or decline significantly in the future.
A number of factors could negatively affect, or result in fluctuations in, the prices or trading volume of equity securities, including:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
actual or anticipated changes in our operating results and changes in expectations of future financial performance;
our operating performance and the performance of other similar companies;
changes in the real estate industry, and in the retail industry, including growth in e-commerce, catalog companies and direct consumer sales;
our strategic decisions, such as acquisitions, dispositions, spin-offs, joint ventures, strategic investments or changes in business strategy;
equity issuances or buybacks by us or the perception that such issuances or buybacks may occur or adverse reaction market reaction to any indebtedness
we incur;
increases in market interest rates;
decreases in our distributions to shareholders;
changes in real estate valuations or market valuations of similar companies;
additions or departures of key management personnel;
publication of research reports about us or our industry by securities analysts, or negative speculation in the press or investment community;
the passage of legislation or other regulatory developments that adversely affect us, our tax status, or our industry;
changes in accounting principles;
our failure to satisfy the listing requirements of the NYSE;
our failure to comply with the requirements of the Sarbanes‑Oxley Act;
our failure to qualify as a REIT; and
general market conditions, including factors unrelated to our performance.
In the past, securities class action litigation has often been instituted against companies following periods of volatility in the price of their common stock. This type
of litigation could result in substantial costs and divert our management’s attention and resources, which could have a material adverse effect on our cash flow,
financial condition and results of operations.
We cannot guarantee the timing, amount, or payment of dividends on our common shares.
Although we expect to pay regular cash dividends, the timing, declaration, amount and payment of dividends to shareholders falls within the discretion of the
Board of Trustees. As a result of COVID-19 and the uncertainties it generated, our Board of Trustees temporarily suspended quarterly dividend distributions for
the second and third quarters of 2020. The Board of Trustees’ decisions regarding the payment of dividends depends on factors such as our financial condition,
earnings, capital requirements, debt service obligations, limitations under our financing arrangements, industry practice, legal requirements,
15
regulatory constraints, and other considerations that it deems relevant. Our ability to pay dividends depends on our ongoing ability to generate cash from operations
and access to the capital markets. We cannot guarantee that we will pay dividends in the future.
Your percentage of ownership in our Company may be diluted in the future.
In the future, your ownership in us may be diluted because of equity issuances for acquisitions, capital market transactions or compensatory equity awards to our
trustees, officers or employees, or otherwise. The issuance of additional common shares would dilute the interests of our current shareholders, and could depress
the market price of our common shares, impair our ability to raise capital through the sale of additional equity securities, or impact our ability to pay dividends. We
cannot predict the effect that future sales of our common shares or other equity-related securities including the issuance of Operating Partnership units would have
on the market price of our common shares.
In addition, our Declaration of Trust authorizes us to issue, without the approval of our shareholders, one or more classes or series of preferred shares having such
designation, voting powers, preferences, rights and other terms, including preferences over our common shares respecting dividends and other distributions, as the
Board of Trustees generally may determine. The terms of one or more classes or series of preferred shares could dilute the voting power or reduce the value of our
common shares. For example, we could grant the holders of preferred shares the right to elect some number of our trustees in all events or on the occurrence of
specified events, or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we could assign to holders of
preferred shares could affect the residual value of the common shares.
Increases in market interest rates may result in a decrease in the value of our publicly-traded equity securities.
One of the factors that may influence the prices of our publicly-traded equity securities is the interest rate on our debt and the dividend yield on our common shares
relative to market interest rates. If market interest rates, which are currently at low levels relative to historical rates, rise, our borrowing costs could rise and result
in less funds being available for distribution. Therefore, we may not be able to, or we may choose not to, provide a higher distribution rate on our common stock.
In addition, fluctuations in interest rates could adversely affect the market value of our properties. These factors could result in a decline in the market prices of our
publicly-traded equity securities.
16
ITEM 1B. UNRESOLVED STAFF COMMENTS
There are no unresolved comments from the staff of the Securities and Exchange Commission as of the date of this Annual Report on Form 10-K.
ITEM 2. PROPERTIES
As of December 31, 2020, our portfolio is comprised of 72 shopping centers, five malls and two industrial parks totaling approximately 16.3 million sf. We own
our four malls, two industrial parks and 55 shopping centers 100% in fee simple. We own a 95% interest in Walnut Creek (Mt. Diablo), an 82.5% interest in
Sunrise Mall in Massapequa, NY and lease 16 of our shopping center properties under ground and/or building leases. As of December 31, 2020, we had $1.6
billion of outstanding mortgage indebtedness which is secured by our properties. The following pages provide details of our properties as of December 31, 2020.
Property
Total Square Feet
(1)
Percent Leased
(1)
Weighted Average
Annual Rent per sq
ft
(2)
Major Tenants
SHOPPING CENTERS AND MALLS:
California:
Vallejo (leased through 2043)
Walnut Creek (Olympic)
Walnut Creek (Mt. Diablo)
(3)
(4)
Connecticut:
Newington
Maryland:
Towson (Goucher Commons)
Rockville
Wheaton (leased through 2060)
(3)
Massachusetts:
Cambridge (leased through 2033)
Revere (Wonderland Marketplace)
(3)
Missouri:
Manchester
New Hampshire:
Salem (leased through 2102)
(3)
New Jersey:
Bergen Town Center - East, Paramus
Bergen Town Center - West, Paramus
Brick (Brick Commons)
Carlstadt (leased through 2050)
Cherry Hill (Plaza at Cherry Hill)
(3)
45,000
31,000
7,000
100.0%
100.0%
—%
$12.00
70.00
—
Best Buy
Anthropologie
189,000
90.0%
9.75
Walmart, Staples
155,000
92.5%
94,000
66,000
98.0%
100.0%
48,000
140,000
62.1%
99.2%
24.36
27.34
16.70
28.58
13.15
Staples, HomeGoods, Five Below, Ulta, Kirkland's, Sprouts,
DSW
Regal Entertainment Group
Best Buy
PetSmart
Big Lots, Planet Fitness, Marshalls, Get Air
131,000
100.0%
11.26
Academy Sports, Bob's Discount Furniture, Pan-Asia Market
39,000
100.0%
10.00
Fun City (lease not commenced)
253,000
1,059,000
278,000
78,000
422,000
93.8%
79.3%
93.8%
100.0%
73.0%
East Brunswick (Brunswick Commons)
427,000
100.0%
East Hanover (200 - 240 Route 10 West)
343,000
95.3%
East Hanover (280 Route 10 West)
East Rutherford
28,000
197,000
100.0%
98.3%
21.13
35.37
19.15
24.39
14.50
14.52
21.95
34.71
12.75
Lowe's, REI, Best Buy
Target, Whole Foods Market, Burlington, Marshalls, Nordstrom
Rack, Saks Off 5th, HomeGoods, H&M, Bloomingdale's Outlet,
Nike Factory Store, Old Navy
Kohl's, ShopRite, Marshalls, Old Navy
Stop & Shop
LA Fitness, Aldi, Raymour & Flanigan, Restoration Hardware,
Total Wine, Guitar Center, Sam Ash Music
Lowe's, Kohl's, Dick's Sporting Goods, P.C. Richard & Son, T.J.
Maxx, LA Fitness
The Home Depot, Dick's Sporting Goods, Saks Off Fifth,
Marshalls, Paper Store
REI
Lowe's
17
Garfield (Garfield Commons)
Hackensack
Hazlet
Jersey City (Hudson Mall)
Jersey City (Hudson Commons)
Kearny (Kearny Commons)
Lodi (Washington Street)
(6)
Manalapan
Marlton (Marlton Commons)
Middletown (Town Brook Commons)
Millburn
Montclair
Morris Plains (Briarcliff Commons)
North Bergen (Kennedy Commons)
North Bergen (Tonnelle Commons)
North Plainfield (West End Commons)
Paramus (leased through 2033)
Rockaway (Rockaway River Commons)
South Plainfield (Stelton Commons) (leased through 2039)
Totowa
(3)
(3)
Turnersville
Union (2445 Springfield Ave)
Union (West Branch Commons)
Watchung (Greenbrook Commons)
Westfield (One Lincoln Plaza)
Woodbridge (Woodbridge Commons)
Woodbridge (Plaza at Woodbridge)
New York:
Bronx (Gun Hill Commons)
Bronx (Bruckner Commons)
Bronx (Shops at Bruckner)
Brooklyn (Kingswood Center)
Brooklyn (Kingswood Crossing)
Buffalo (Amherst Commons)
(3)
Commack (leased through January 2021)
Dewitt (Marshall Plaza) (leased through 2041)
Freeport (Meadowbrook Commons) (leased through 2040)
Freeport (Freeport Commons)
Huntington (Huntington Commons)
Inwood (Burnside Commons)
Massapequa, NY (Sunrise Mall) (leased through 2069)
(3)(4)
(3)
(3)
Mt. Kisco (Mt. Kisco Commons)
New Hyde Park (leased through 2029)
Queens (Cross Bay Commons)
Rochester (Henrietta) (leased through 2056)
Staten Island (Forest Commons)
(3)
(3)
298,000
275,000
95,000
382,000
236,000
114,000
85,000
208,000
218,000
231,000
104,000
18,000
179,000
62,000
413,000
241,000
63,000
189,000
56,000
271,000
98,000
232,000
278,000
170,000
22,000
225,000
335,000
81,000
375,000
114,000
129,000
110,000
311,000
47,000
46,000
44,000
173,000
204,000
100,000
1,211,000
189,000
101,000
46,000
165,000
165,000
100.0%
99.4%
100.0%
78.1%
100.0%
100.0%
94.7%
87.7%
100.0%
96.4%
98.8%
100.0%
94.9%
100.0%
94.4%
99.1%
100.0%
91.5%
96.3%
100.0%
100.0%
100.0%
95.0%
96.6%
85.8%
94.7%
90.1%
90.9%
82.0%
66.6%
84.3%
67.9%
98.1%
100.0%
100.0%
100.0%
100.0%
71.1%
96.5%
65.7%
96.9%
100.0%
80.5%
100.0%
96.3%
15.45
23.91
3.70
16.77
13.81
21.99
20.17
20.44
16.17
13.85
27.25
32.00
22.75
14.45
21.46
11.45
44.56
14.41
21.45
18.30
10.06
17.85
16.45
18.15
32.39
13.24
18.04
36.48
27.18
39.19
35.67
41.72
10.94
20.69
22.38
22.31
22.23
18.82
19.46
8.77
16.97
21.93
42.70
4.64
24.87
(5)
Walmart, Burlington, Marshalls, PetSmart, Ulta
The Home Depot, Staples, Petco, 99 Ranch
Stop & Shop
Marshalls, Big Lots, Retro Fitness, Staples, Old Navy
Lowe's, P.C. Richard & Son
LA Fitness, Marshalls, Ulta
Blink Fitness, Aldi, Dollar Tree
Best Buy, Bed Bath & Beyond, Raymour & Flanigan, PetSmart,
Avalon Flooring
Kohl's, ShopRite, PetSmart
Kohl's, Stop & Shop
Trader Joe's, CVS, PetSmart
Whole Foods Market
Kohl's, Uncle Giuseppe's (lease not commenced)
Food Bazaar
Walmart, BJ's Wholesale Club, PetSmart
Costco, The Tile Shop, La-Z-Boy, Petco, Da Vita Dialysis
24 Hour Fitness
ShopRite, T.J. Maxx
Staples, Party City
The Home Depot, Bed Bath & Beyond, buybuy Baby, Marshalls,
Staples
At Home, Verizon Wireless
The Home Depot
Lowe's, Burlington, Office Depot
BJ's Wholesale Club
Five Guys, PNC Bank
Walmart, Charisma Furniture
Best Buy, Raymour & Flanigan, Lincoln Tech, Retro Fitness,
Bed Bath & Beyond and buybuy Baby (lease commenced
1/2021)
Planet Fitness, Aldi
Kmart, ShopRite, Burlington
Marshalls, Old Navy
T.J. Maxx, Visiting Nurse Service of NY
Target, Marshalls, Maimonides Medical (lease not commenced)
BJ's Wholesale Club, T.J. Maxx, Burlington, HomeGoods, LA
Fitness
PetSmart, Ace Hardware
Best Buy
Bob's Discount Furniture
The Home Depot, Staples
Marshalls, ShopRite (lease not commenced), Old Navy, Petco
Stop & Shop
Macy's, Sears, Dick's Sporting Goods, Dave & Buster's, Raymour
& Flanigan
Target, Stop & Shop
Stop & Shop
Northwell Health
Kohl's
Western Beef, Planet Fitness, Mavis Discount Tire, NYC Public
School
18
Yonkers Gateway Center
448,000
93.1%
16.18
Burlington, Marshalls, Homesense, Best Buy, DSW, PetSmart,
Alamo Drafthouse Cinema
Pennsylvania:
Bensalem (Marten Commons)
Broomall
Glenolden (MacDade Commons)
Lancaster (Lincoln Plaza)
Springfield (leased through 2025)
Wilkes-Barre (461 - 499 Mundy Street)
Wyomissing (leased through 2065)
(3)
(3)
South Carolina:
Charleston (leased through 2063)
(3)
Virginia:
Norfolk (leased through 2069)
(3)
Puerto Rico:
Las Catalinas
Montehiedra
185,000
169,000
102,000
228,000
41,000
179,000
76,000
96.6%
64.7%
100.0%
100.0%
100.0%
68.4%
100.0%
14.25
16.34
12.86
5.12
22.99
12.79
14.70
Kohl's, Ross Dress for Less, Staples, Petco
National retailer (lease not commenced), Planet Fitness,
PetSmart
Walmart
Lowe's, Community Aid, Mattress Firm
PetSmart
Bob's Discount Furniture, Ross Dress for Less, Marshalls, Petco
LA Fitness, PetSmart
45,000
100.0%
15.10
Best Buy
114,000
100.0%
7.79
BJ's Wholesale Club
356,000
539,000
51.7%
93.9%
Total Shopping Centers and Malls
15,221,000
88.7%
INDUSTRIAL:
East Hanover Warehouses
Lodi (Route 17 North)
Total Industrial
943,000
100.0%
127,000
1,070,000
100.0%
100.0%
46.86
18.27
$18.97
5.85
9.95
$6.34
Forever 21, Old Navy
Kmart, The Home Depot, Marshalls, Caribbean Cinemas,
Tiendas Capri, Old Navy
J & J Tri-State Delivery, Foremost Groups, PCS Wireless,
Fidelity Paper & Supply, Meyer Distributing, Consolidated
Simon Distributors, Givaudan Flavors, Reliable Tire, LineMart
AAA Wholesale Group (lease not commenced)
Total Urban Edge Properties
16,291,000
89.4%
$18.04
(1)
(2)
(3)
(4)
(5)
Percent leased is expressed as the percentage of gross leasable area subject to a lease. The Company excludes 132,000 sf of self-storage from the table above.
Weighted average annual base rent per square foot is the current base rent on an annualized basis. It includes executed leases for which rent has not commenced and excludes tenant expense
reimbursements, free rent periods, concessions and storage rent. Excluding ground leases where the Company is the lessor, the weighted average annual rent per square foot for our retail
portfolio is $20.65 per square foot.
The Company is a lessee under a ground or building lease. Ground and building lease terms include exercised options and options that may be exercised in future periods. For building leases,
the total square feet disclosed for the building will revert to the lessor upon lease expiration. At Salem, the ground lease is for a portion of the parking area only. At Massapequa, the ground
lease pertains to the land occupied by Sears and Macy's.
We own 95% of Walnut Creek (Mt. Diablo) and 82.5% of Sunrise Mall with the remaining portions in each case owned by joint venture partners.
The tenant never commenced operations at this location but continues to pay rent.
On January 8, 2021, the Company sold a 42,000 sf portion of this property, occupied by Blink Fitness and Aldi.
(6)
As of December 31, 2020, we had approximately 1,100 leases. Tenant leases under 10,000 square feet generally have lease terms of five years or less. Tenant
leases comprising 10,000 square feet or more generally have lease terms of 10 to 25 years, and are considered anchor leases with one or more renewal options
available upon expiration of the initial lease term. The majority of our leases provide for reimbursements of real estate taxes, insurance and common area
maintenance charges (including roof and structure in shopping centers, unless it is the tenant’s direct responsibility), and percentage rents based on tenant sales
volume. Percentage rents accounted for 1% of our total revenues for the year ended December 31, 2020.
19
Occupancy
The following table sets forth the consolidated retail portfolio occupancy rate (excluding industrial and self-storage space), square footage and weighted average
annual base rent per square foot of properties in our retail portfolio as of December 31 for the last five years:
Total square feet
Occupancy rate
Average annual base rent per sf
2020
15,221,000
88.7 %
$18.97
2019
14,277,000
92.4 %
$19.22
December 31,
2018
15,407,000
92.6 %
$17.90
2017
15,743,000
96.0 %
$17.38
2016
13,831,000
97.2 %
$17.07
The following table sets forth the occupancy rate, square footage and weighted average annual base rent per square foot of our industrial properties as of December
31 for the last five years:
Total square feet
Occupancy rate
Average annual base rent per sf
Major Tenants
2020
1,070,000
100.0 %
$6.34
2019
943,000
100.0 %
$5.70
December 31,
2018
942,000
100.0 %
$5.34
2017
2016
942,000
100.0 %
$5.15
942,000
91.7 %
$4.77
The following table sets forth information for our ten largest tenants by total revenues for the year ended December 31, 2020:
Tenant
The Home Depot, Inc.
The TJX Companies, Inc.
Lowe's Companies, Inc.
Walmart Inc.
Burlington Stores, Inc.
(2)
Ahold Delhaize (Stop & Shop)
Best Buy Co., Inc.
Kohl's Corporation
PetSmart, Inc.
BJ's Wholesale Club
Number of Stores
6
22
6
5
7
6
8
7
11
4
Square Feet
809,000
715,000
976,000
708,000
416,000
424,000
359,000
633,000
257,000
454,000
% of Total Square
Feet
5.0%
4.4%
6.0%
4.4%
2.6%
2.6%
2.2%
3.9%
1.6%
2.8%
(1)
2020 Revenues
(in thousands)
$20,664
17,569
13,609
12,809
11,151
10,602
9,860
9,693
8,622
8,479
% of Total
Revenues
6.3%
5.3%
4.1%
3.9%
3.4%
3.2%
3.0%
2.9%
2.6%
2.6%
(1)
(2)
Based on contractual revenues as determined by the tenants’ operating lease agreements.
Includes Marshalls (14), T.J. Maxx (4), HomeGoods (3) and Homesense (1).
20
Lease Expirations
The following table sets forth the anticipated expirations of tenant leases in our consolidated retail portfolio for each year from 2021 through 2031 and thereafter,
assuming no exercise of renewal options or early termination rights:
Year
Month-To-Month
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
Thereafter
Subtotal/Average
Vacant
(1)
Total
Number of
Expiring Leases
Square Feet of
Expiring Leases
Percentage of
Retail Properties
Square Feet
Weighted Average Annual
Base Rent of Expiring Leases
Total
Per Square Foot
38
106
101
97
102
79
80
51
41
66
38
18
43
860
277
1,137
114,000
603,000
1,044,000
1,558,000
1,469,000
1,432,000
765,000
543,000
506,000
1,617,000
1,012,000
663,000
2,174,000
13,500,000
1,721,000
15,221,000
0.7%
4.0%
6.9%
10.2%
9.7%
9.4%
5.0%
3.6%
3.3%
10.6%
6.6%
4.4%
14.3%
88.7%
11.3%
100.0%
$
$
$
3,735,780
14,230,800
18,739,800
31,082,100
30,437,680
22,840,400
17,250,750
10,691,670
13,591,160
33,601,260
16,121,160
10,448,880
29,783,800
254,340,000
N/A
254,340,000
$32.77
23.60
17.95
19.95
20.72
15.95
22.55
19.69
26.86
20.78
15.93
15.76
13.70
$18.84
N/A
N/A
(1)
Total lease count excludes industrial tenant leases, temporary tenant leases and cart and kiosk leases.
ITEM 3. LEGAL PROCEEDINGS
We are party to various legal actions that arise in the ordinary course of business. In our opinion, after consultation with legal counsel, the outcome of such matters
is not expected to have a material adverse effect on our financial position, results of operations or cash flows.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
21
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
PART II
SECURITIES
Urban Edge Properties
Market Information and Dividends
Our common shares are listed on the NYSE under the symbol “UE”. Our common shares began “regular way” trading on January 15, 2015. As of January 29,
2021, there were approximately 1,353 holders of record of our common shares.
The Company elected to be taxed as a REIT under sections 856-860 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with the filing
of its 2015 tax return for its tax year ended December 31, 2015. With the exception of the Company’s taxable REIT subsidiary (“TRS”), to the extent the Company
meets certain requirements under the Code, the Company will not be taxed on its federal taxable income. If we fail to qualify as a REIT for any taxable year, we
will be subject to federal income taxes at regular corporate rates (including any alternative minimum tax, which, for corporations, was repealed under the TCJA
(defined above) for tax years beginning after December 31, 2017) and may not be able to qualify as a REIT for the four subsequent taxable years.
Future distributions will be declared and paid at the discretion of the Board of Trustees and will depend upon cash generated by operating activities, our financial
condition, capital requirements, annual dividend requirements under the REIT provisions of the Internal Revenue Code of 1986, as amended, and such other factors
as our Board of Trustees deems relevant.
Our Board of Trustees declared a quarterly dividend of $0.22 per common share and OP unit for the first quarter of 2020, the same quarterly rate as in 2019. As a
result of COVID-19 and the uncertainties it generated, the Company temporarily suspended quarterly dividend distributions for the second and third quarters of
2020 and declared a special cash dividend of $0.46 per common share and OP unit in December 2020, which resulted in a total annual dividend per common share
and OP unit of $0.68 for 2020. The annual dividend amount may differ from dividends as calculated for federal income tax purposes. Distributions to the extent of
our current and accumulated earnings and profits for federal income tax purposes generally will be taxable to a shareholder as ordinary dividend income. However,
the TCJA provides a deduction of up to 20% of a non-corporate taxpayer’s ordinary REIT dividends with such deduction scheduled to expire for taxable years
beginning after December 31, 2025. Distributions in excess of current and accumulated earnings and profits will be treated as a nontaxable reduction of the
shareholder’s basis in such shareholder’s shares, to the extent thereof, and thereafter as taxable capital gains. Distributions that are treated as a reduction of the
shareholder’s basis in its shares will have the effect of increasing the amount of gain, or reducing the amount of loss, recognized upon the sale of the shareholder’s
shares. No assurances can be given regarding what portion, if any, of distributions in 2020 or subsequent years will constitute a return of capital for federal income
tax purposes. During a year in which a REIT earns a net long-term capital gain, the REIT can elect under Section 857(b)(3) of the Code to designate a portion of
dividends paid to shareholders as capital gain dividends. If this election is made, the capital gain dividends are generally taxable to the shareholder as long-term
capital gains.
We have determined the dividends paid on our common shares during 2020 and 2019 qualify for the following tax treatment:
Total Distribution per Share
Ordinary Dividends
Long Term Capital Gains
Return of Capital
2020
2019
$
$
0.68
0.88
$
0.68
0.73
$
—
0.15
—
—
22
Total Shareholder Return Performance
The following performance graph compares the cumulative total shareholder return of our common shares with the Russell 2000 Index, the S&P 500 Index, SNL
U.S. REIT Equity Index and the SNL REIT Retail Shopping Center Index as provided by SNL Financial LC, for the five fiscal years commencing December 31,
2015 and ending December 31, 2020, assuming an investment of $100 and the reinvestment of all dividends into additional common shares during the holding
period. Historical stock performance is not necessarily indicative of future results.
The performance graph shall not be deemed incorporated by reference by any general statement incorporating by reference this annual report into any filing
under the Securities Act of 1933, as amended, or the Exchange Act except to the extent we specifically incorporate this information by reference, and shall not
otherwise be deemed filed under such acts.
COMPARISON OF CUMULATIVE TOTAL RETURN
(1)
(1)
$100 invested on December 31, 2015 in stock or index, including reinvestment of dividends.
Stock/Index
UE
S&P 500
Russell 2000
SNL U.S. REIT Equity
SNL U.S. REIT Retail
Shopping Center
(1)
Cumulative
Total Return %
(32.3)
103.0
86.4
37.1
(29.0)
Total Return $ as of
12/31/2015
12/31/2016
12/31/2017
12/31/2018
12/31/2019
12/31/2020
100
100
100
100
100
120.9
112.0
121.3
108.9
103.5
116.0
136.4
139.1
118.0
92.0
78.9
130.4
123.8
112.5
77.2
95.4
171.5
155.4
144.5
98.1
67.7
203.0
186.4
137.1
71.0
(1)
Cumulative total return is for the five fiscal years commencing December 31, 2015 and ending December 31, 2020.
23
Operating Partnership
Market Information and Distributions
There is no established public market for our general and common limited partnership interests in the operating partnership (“OP Units”). As of January 29, 2021,
there were 117,019,013 general partnership units outstanding and 4,729,010 common limited partnership units outstanding, held by approximately 1,353 and 34
holders of record, respectively.
Under the limited partnership agreement of UELP, unitholders may present their common units for redemption at any time (subject to restrictions agreed upon at
the time of issuance of the units that may restrict such right for a period of time). Upon presentation of a common unit for redemption, UELP must redeem the unit
for cash equal to the then value of a share of UE’s common shares, as defined by the limited partnership agreement. In lieu of cash redemption by UELP, however,
UE may elect to acquire any common units so tendered by issuing common shares of UE in exchange for the common units. If UE so elects, its common shares
will be exchanged for common units on a one-for-one basis. During the year ended December 31, 2020, 1,355,836 units were redeemed for common shares and no
units were redeemed for cash.
Recent Sales of Unregistered Shares
During the three months ended December 31, 2020, the Company issued an aggregate of 300,000 common shares in exchange for 300,000 common limited
partnership units held by certain limited partners of the Operating Partnership. All common shares were issued in reliance on an exemption from registration under
Section 4(a)(2) of the Securities Act. We relied on the exemption under Section 4(a)(2) based upon factual representations received from the limited partner who
received the common shares.
Each time the Company issues common shares (other than in exchange for common limited partnership units when such units are presented for redemption), it
contributes the proceeds of such issuance to the Operating Partnership in return for an equivalent number of partnership units with rights and preferences analogous
to the shares issued. During the three months ended, December 31, 2020, in connection with issuances of common shares by the Company pursuant to the Urban
Edge Properties 2015 Employee Share Purchase Plan, the Operating Partnership issued an aggregate of 16,322 common limited partnership units to the Company
in exchange for approximately $0.2 million, the aggregate proceeds of such common share issuances to the Company. Such units were issued in reliance on an
exemption from registration under Section 4(a)(2) of the Securities Act.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
During 2020, 2,927 restricted common shares were forfeited by former employees in connection with their departure from the Company. We did not repurchase
any of our equity securities during the three months ended December 31, 2020. Our employees will at times surrender common shares owned by them to satisfy
statutory minimum federal, state and local tax obligations associated with the vesting of their restricted common shares. During the three months ended
December 31, 2020, no restricted common shares were surrendered.
In March 2020, our Board of Trustees authorized a share repurchase program for up to $200 million of the Company’s common shares. During the year ended
December 31, 2020, we repurchased 5,873,923 shares at a weighted average share price of $9.22 amounting to $54.1 million. During the three months ended
December 31, 2020, no shares were repurchased.
Equity Compensation Plan Information
Information regarding equity compensation plans is presented in Part III, Item 12 of this Annual Report on Form 10-K and incorporated herein by reference.
ITEM 6. RESERVED
24
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included Part II, Item 8 of this Annual Report
on Form 10-K.
This section of this Annual Report on Form 10-K generally discusses 2020 and 2019 items and provides a year-to-year comparison between 2020 and 2019. A
discussion of 2018 items and year-to-year comparisons between 2019 and 2018 are not included in this Annual Report on Form 10-K but can be found in
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2019.
Executive Overview
Our Company
Urban Edge Properties (“UE”, “Urban Edge”, or the “Company”) (NYSE: UE) is a Maryland real estate investment trust that manages, develops, redevelops, and
acquires retail real estate, primarily in the New York metropolitan area. Urban Edge Properties LP (“UELP” or the “Operating Partnership”) is a Delaware limited
partnership formed to serve as UE’s majority-owned partnership subsidiary and to own, through affiliates, all of our real estate properties and other assets. Unless
the context otherwise requires, references to “we”, “us” and “our” refer to Urban Edge Properties and UELP and their consolidated entities/subsidiaries.
The Operating Partnership’s capital includes general and common limited partnership interests in the operating partnership (“OP Units”). As of December 31,
2020, Urban Edge owned approximately 96.1% of the outstanding common OP Units with the remaining limited OP Units held by members of management,
Urban Edge’s Board of Trustees and contributors of property interests acquired. Urban Edge serves as the sole general partner of the Operating Partnership. The
third party unitholders have limited rights over the Operating Partnership such that they do not have characteristics of a controlling financial interest. As such, the
Operating Partnership is considered a variable interest entity (“VIE”), and the Company is the primary beneficiary that consolidates it. The Company’s only
investment is the Operating Partnership. The VIE’s assets can be used for purposes other than the settlement of the VIE’s obligations and the Company’s
partnership interest is considered a majority voting interest.
As of December 31, 2020, our portfolio was comprised of 72 shopping centers, five malls and two industrial parks totaling approximately 16.3 million square feet.
COVID-19 Pandemic
On January 30, 2020, the spread of the COVID-19 outbreak was declared a Public Health Emergency of International Concern by the World Health Organization
("WHO"). On March 11, 2020, the WHO characterized the COVID-19 outbreak as a global pandemic. Early in the pandemic, the tri-state area of Connecticut,
New York and New Jersey, enforced preventive measures including mandatory business closures for non-essential businesses and quarantines or “shelter-in-place”
requirements. Given our geographic concentration in the Northeast, many of our tenants have faced and continue to face adverse financial consequences from
reduced business operations and social distancing requirements as a result of the COVID-19 pandemic.
The Company’s results for 2020 were negatively impacted by tenant fallout from COVID-driven bankruptcies, uncollected or disputed rents from impacted
tenants, and from abatements granted to tenants facing financial hardships due to the pandemic. For the year ended December 31, 2020, the Company reported:
•
•
a decline in same-property net operating income (“NOI”)
$30.8 million of rental revenue deemed uncollectible and uncollected balances from cash basis tenants; and
a decline of same-property portfolio occupancy to 91.8% from 92.9% as of December 31, 2019, which includes the negative impact of 110 basis points
resulting from the bankruptcy of Century 21 at Bergen Town Center.
of 14.2% compared to the year ended December 31, 2019, which was negatively impacted by
(2)
(1)
As of December 31, 2020, substantially all of our tenants are now open for business at a reduced capacity. As of February 12, 2021, we have executed or approved
approximately 112 rent deferrals with an aggregate deferral amount of $8.2 million, many of which have resulted in value creation from eliminating use restrictions
and co-tenancy clauses, reducing no-build areas and increasing lease term. The Company may enter into additional agreements providing rent relief but expects the
vast majority of any such agreements will relate to uncollected 2020 rent as most tenants have resumed paying rent on schedule. The Company collected
approximately 91% of billed rents and recoveries for the fourth quarter, 87% for the third quarter and 79% for the second quarter as of February 12, 2021.
25
The Company’s response to COVID-19
The Company has been proactive in its approach to the pandemic with a focus on supporting our employees, tenants and the communities in which we operate,
maintaining the strength of our operations and balance sheet and growing our business despite the challenging environment. Key initiatives that the Company has
pursued and continues to support include:
Initiatives to support our tenants and communities
•
•
Assembled a cross-functional tenant support team to conduct individual tenant outreach to understand each tenant’s financial and operational position, and
disseminate information to our local and regional operators on federal and state assistance programs.
Collaborated with tenants regarding safety guidelines, social distancing, protective equipment and sanitizing solutions so they could continually operate
their businesses in accordance with local regulations.
Developed a dedicated COVID-19 page on our website to provide resources to our tenant community.
•
• Mobilized a task force to work closely with local municipal leaders to address the immediate needs of those living in the neighborhoods served by our
properties. These efforts included donation of personal protective equipment and meals to low-income communities, an orphanage in Puerto Rico,
hospitals and food pantries.
Raised funds from employees and the community in support of a number of hospitals, local food organizations and other entities, such as the Hackensack
Hospital COVID-19 Relief Fund, the RAP4Bronx initiative, and the Hogar Cuna San Cristobal Orphanage.
•
Initiatives to bolster our operations and grow our business
•
•
•
•
•
Executed five new large anchor (>30,000 sf) leases, including three grocers, totaling approximately 330,000 sf which will generate approximately $7
million in gross rents;
Assisted tenants by creating short term cash flow solutions while creatively enhancing the long-term viability and optionality of our portfolio;
Reduced operating costs appropriately in response to a decrease in foot traffic to minimize tenant maintenance charges;
Reevaluated the timing and amount of our redevelopment capital spend in response to COVID-19 while progressing those projects with appropriate risk-
return profiles; and
Implemented a curbside pick-up program at certain properties facilitating touchless transactions, designated dedicated parking spots for curbside
merchandise pickup for use by all tenants and their customers.
Initiatives to enhance our liquidity and reinforce the strength of our balance sheet
•
•
•
Amended our $600 million revolving credit facility on June 3, 2020, which among other things, modified certain definitions and the measurement period
for certain financial covenants.
Borrowed $250 million under our $600 million revolving credit facility in March 2020 as a precautionary measure to increase the Company's cash
position and facilitate financial flexibility in light of the various uncertainties resulting from COVID-19. This balance was fully repaid in November 2020
and $600 million remains available as of December 31, 2020.
Refinanced our $119 million commercial mortgage-backed securities (“CMBS”) mortgage on The Outlets at Montehiedra with a new $82 million 10-year
fixed rate mortgage. Lowered the interest rate on the $83 million senior note from 5.33% to 5.00%. The previous $30 million junior note including
accrued interest of $5 million was forgiven.
•
• Modified our $129 million mortgage loan bearing interest at 4.43% on Las Catalinas Mall in Puerto Rico to include a discounted payoff option to repay
the loan at a value of $72.5 million, a $56.5 million reduction to the balance at closing, beginning in August 2023 through the extended maturity date of
February 2026 and converted the mortgage from an amortizing 4.43% loan to interest-only payments at a reduced interest pay rate until returning to
4.43% in 2024 and thereafter.
Suspended our quarterly dividend for the second and third quarters of 2020 and declared a special cash dividend of $0.46 per common share in December
2020. The special dividend was based on the Company’s 2020 expected taxable income which includes the tax impacts associated with the Las Catalinas
Mall debt modification and the debt forgiveness and refinancing of the mortgage loan on The Outlets at Montehiedra.
Launched a share repurchase program and repurchased 5.9 million shares of our stock at a weighted average share price of $9.22 amounting to $54.1
million.
Utilized certain tax provisions under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") and the Consolidated Appropriations Act,
2021, legislation to reduce taxable income and other tax obligations.
Ended the year with cash and cash equivalents, including restricted cash, of $419.3 million and debt, net of cash, to total market capitalization of 37%.
•
•
•
26
Initiatives to protect and support our employees
•
Instituted a work from home policy shortly after the outbreak of the pandemic that allowed employees to work remotely while staying connected with
their colleagues.
Adopted numerous safety protocols and practices consistent with federal, state and local guidelines at both our corporate offices and shopping centers.
Offered additional medical and mental health resources tailored to the circumstances of the pandemic.
•
•
• Mobilized the equipment and technology necessary to ensure no disruption to our internal processes, service to our tenants or execution of our operations
in a remote working environment.
• Monitored and incorporated the recommendations of health authorities and mandates of federal, state and local governments to safeguard the protection,
safety, health and well-being of our employees, tenants and stakeholders.
2020 Highlights
Set forth below are highlights of our development and redevelopment projects, property acquisitions and dispositions and leasing activities:
•
•
•
•
•
•
Acquired Sunrise Mall in Massapequa, NY for $29.7 million on December 31, 2020, a 1.2 million sf mall with significant redevelopment opportunity
given its scale and in-place zoning that provides for industrial and other uses. In addition, we acquired three other assets, at an aggregate purchase price of
$165.5 million and 243,000 sf, comprising two assets located in the Midwood neighborhood of Brooklyn, NY and one asset adjacent to our existing
property, Bergen Town Center;
Completed the sale of three properties and received proceeds of $58.1 million, net of selling costs, resulting in a $39.8 million net gain on sale of real
estate.
Completed one development project with total estimated gross costs of $3.9 million at Garfield Commons in Garfield, NJ, where 18,000 sf of shops were
added;
Identified approximately 10 additional development and redevelopment projects expected to be completed over the next several years;
Signed 26 new leases totaling 430,752 square feet, including 16 new leases on a same-space basis totaling 249,812 square feet at an average rental rate
of $20.69 per square foot on a GAAP basis and $19.49 per square foot on a cash basis, and resulting in average rent spreads of 30.9% on a GAAP basis
and 17.5% on a cash basis; and
Renewed or extended 67 leases totaling 909,968 square feet, all on a same-space basis, at an average rental rate of $20.06 per square foot on a GAAP
basis and $19.67 per square foot on a cash basis and, generating average rent spreads of 8.8% on a GAAP basis and 1.9% on a cash basis.
(3)
2021 Outlook
We expect to grow earnings, funds from operations, and cash flows by:
•
•
•
•
•
leasing vacant spaces, proactively extending leases, processing the exercise of tenant options and, when possible, replacing underperforming tenants with
operators that can pay higher rents and positively impact our properties;
expediting the delivery of space to tenants and the collection of rents from executed leases that have not yet commenced;
restoring rent collections to achieve collection rates similar to those prior to the pandemic;
generating additional income from our existing assets by redeveloping underutilized existing space, developing new space and pad sites, repositioning
anchors, and incorporating non-retail uses such as industrial, self-storage, office and other uses; and
acquiring assets that meet our investment criteria.
There can be no assurance that we will be able to execute on our growth strategy, especially given the economic uncertainty caused by the COVID-19 pandemic.
See Forward-Looking Statements in this Annual Report on Form 10-K.
(1)
(2)
Refer to page 35 for a reconciliation to the nearest GAAP measure.
Information provided on a same-property basis excludes properties under development, redevelopment or that involve anchor repositioning where a substantial portion of the gross leasable area is taken out of service and also
excludes properties acquired or sold during the periods being compared and totals 71 properties for the years ended December 31, 2020 and December 31, 2019.
Same-space leases represent those leases signed on spaces for which there was a previous lease.
(3)
27
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, referred to as “GAAP”,
requires management to make estimates and assumptions that in certain circumstances affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities, and revenue and expenses. These estimates are prepared using management’s best judgment, after considering past and current events and
economic conditions. In addition, certain information relied upon by management in preparing such estimates includes internally generated financial and operating
information, external market information, when available, and when necessary, information obtained from consultations with third party experts. Actual results
could differ from these estimates. A discussion of possible risks which may affect these estimates is included in “Item 1A. Risk Factors” of this Annual Report on
Form 10-K. Management considers an accounting estimate to be critical if changes in the estimate could have a material impact on our consolidated results of
operations or financial condition.
Our significant accounting policies are more fully described in Note 3 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on
Form 10-K; however, the most critical accounting policies, which involve the use of estimates and assumptions as to future uncertainties and, therefore, may result
in actual amounts that differ from estimates, are as follows:
Real Estate — The nature of our business as an owner, redeveloper and operator of retail shopping centers means that we invest significant amounts of capital into
our properties. Depreciation, amortization and maintenance costs relating to our properties constitute substantial costs for us as well as the industry as a whole.
Real estate is capitalized and depreciated on a straight-line basis in accordance with GAAP and consistent with industry standards based on our best estimates of
the assets’ physical and economic useful lives which range from one to 40 years. We periodically review the estimated lives of our assets and implement changes,
as necessary, to these estimates. These assessments have a direct impact on our net income. Real estate is carried at cost, net of accumulated depreciation and
amortization. Expenditures for ordinary maintenance and repairs are expensed to operations as they are incurred. Significant renovations that improve or extend the
useful lives of assets are capitalized.
Real estate undergoing redevelopment activities is also carried at cost but no depreciation is recognized. All property operating expenses directly associated with
and attributable to the redevelopment, including interest, are capitalized to the extent the capitalized costs of the property do not exceed the estimated fair value of
the property when completed. If the cost of the redeveloped property, including the net book value of the existing property, exceeds the estimated fair value of
redeveloped property, the excess is charged to impairment expense. The capitalization period begins when redevelopment activities are underway and ends when
the project is substantially complete. Generally, a redevelopment is considered substantially completed and ready for its intended use upon completion of tenant
improvements, but no later than one year from completion of major construction activity. We make judgments as to the time period over which to capitalize such
costs and these assumptions have a direct impact on net income because capitalized costs are not subtracted in calculating net income.
Upon the acquisition of real estate, we assess the fair value of acquired assets (including land, buildings and improvements, identified intangibles, such as acquired
above and below-market leases, acquired in-place leases and tenant relationships) and acquired liabilities. We assess fair value based on estimated cash flow
projections utilizing appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors
including historical operating results, known trends, and market/economic conditions. Based on these estimates, we allocate the purchase price to the applicable
assets and liabilities based on their relative fair values at date of acquisition.
In allocating the purchase price to identified intangible assets and liabilities of an acquired property, the value of above-market and below-market leases is
estimated based on the present value of the difference between the contractual amounts, including fixed rate below-market renewal options, to be paid pursuant to
the in-place leases and our estimate of the market lease rates and other lease provisions for comparable leases measured over a period equal to the estimated
remaining term of the lease. Tenant related intangibles and improvements are amortized on a straight-line basis over the related lease term, including any bargain
renewal options. We amortize identified intangibles that have finite lives over the period they are expected to contribute directly or indirectly to the future cash
flows of the property or business acquired. We consider qualitative and quantitative factors in evaluating the likelihood of a tenant exercising a below market
renewal option and include such renewal options in the calculation of in-place leases. If the value of below-market lease intangibles includes renewal option
periods, we include such renewal periods in the amortization period utilized. If a lease terminates prior to its stated expiration, all unamortized amounts relating to
that lease are written off.
Our properties are individually reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
Such events and changes include macroeconomic conditions, including those caused by global
28
pandemics, like the recent coronavirus pandemic (“COVID-19” or the “COVID-19 pandemic”), which resulted in property operational disruption. An impairment
exists when the carrying amount of an asset exceeds the aggregate projected future cash flows over the anticipated holding period on an undiscounted basis taking
into account the appropriate capitalization rate in determining a future terminal value. An impairment loss is measured based on the excess of the property’s
carrying amount over its estimated fair value. Estimated fair value may be based on discounted future cash flows utilizing appropriate discount and capitalization
rates and, in addition to available market information, third-party appraisals, broker selling estimates or sale agreements under negotiation. Impairment analyses
are based on our current plans, intended holding periods and available market information at the time the analyses are prepared. If our estimates of the projected
future cash flows change based on uncertain market conditions, our evaluation of impairment losses may be different and such differences could be material to our
consolidated financial statements. The carrying value of a property may also be individually reassessed in the event a casualty occurs at that property. Casualty
events may include property damage from a natural disaster or fire. When such an event occurs, management estimates the net book value of assets damaged over
the property’s total gross leasable area and adjusts the property’s carrying value to reflect the damages. Estimates are subjective and may change if additional
damage is later assessed or if future cash flows are revised.
Revenue Recognition — We have the following revenue sources and revenue recognition policies:
•
Rental revenue for fiscal periods prior to January 1, 2019: Rental revenue comprises revenue from property rentals and tenant expense reimbursements, as
designated within tenant operating leases in accordance with ASC 840 Leases.
◦
◦
Property Rentals: We generate revenue from minimum lease payments from tenant operating leases. These rents are recognized over the
noncancelable terms of the related leases on a straight-line basis which includes the effects of rent steps and rent abatements under the leases in
accordance with ASC 840. We satisfy our performance obligations over time, under the noncancelable lease term, commencing when the tenant
takes possession of the leased space and the leased space is substantially ready for its intended use. In addition, in circumstances where we
provide a lease incentive to tenants, we recognize the incentive as a reduction of rental revenue on a straight-line basis over the remaining term
of the lease. The underlying leased asset remains on our consolidated balance sheet and continues to depreciate. In addition to minimum lease
payments, certain rental income derived from our tenant leases is contingent and dependent on percentage rent. Percentage rents are earned by
the Company in the event the tenant's gross sales exceed certain amounts.
Tenant expense reimbursements: In accordance with ASC 840, revenue arises from tenant leases, which provide for the recovery of all or a
portion of the operating expenses, real estate taxes and capital improvements of the respective property. This revenue is accrued in the period the
expenses are incurred.
•
Rental revenue for fiscal periods beginning on or after January 1, 2019: Rental revenue comprises revenue from fixed and variable lease payments, as
designated within tenant operating leases in accordance with ASC 842 Leases, as described further in our Leases accounting policy in Note 3 to the
audited consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.
◦
Rental revenue deemed uncollectible: We evaluate the collectibility of amounts due from tenants and disputed enforceable charges on both a
lease-by-lease and a portfolio-level, which result from the inability of tenants to make required payments under their operating lease agreements.
We recognize changes in the collectibility assessment of these operating leases as adjustments to rental revenue in accordance with ASC 842.
• Management and development fees: We generate management and development fee income from contractual property management agreements with third
parties. This revenue is recognized as the services are transferred in accordance with ASC 606 Revenue from Contracts with Customers.
•
Other Income: Other income is generated in connection with certain services provided to tenants for which we earn a fee. This revenue is recognized as
the services are transferred in accordance with ASC 606.
Recent Accounting Pronouncements
On January 11, 2021, the SEC issued Final Rule Release No. 33-10890, Management’s Discussion and Analysis, Selected Financial Data, and Supplementary
Financial Information. This rule, which became effective on February 10, 2021, adopts amendments to modernize, simplify and enhance certain financial
disclosure requirements in Regulation S-K. Specifically, the amendments eliminate the requirement for Selected Financial Data, streamline the requirement to
disclose Supplementary Financial Information, and amend Management’s Discussion & Analysis of Financial Condition and Results of Operations (‘‘MD&A’’).
We early adopted the amendments to two items resulting in the elimination of Item 301, Selected Financial Data, and the omission of Item 302(a), Supplementary
Financial Information. The amendments to Item 303(a)(b) MD&A will be adopted in our Form 10-K for the year ending December 31, 2021.
29
See Note 3 to the audited consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for information regarding recent accounting
pronouncements that may affect us. Additionally, see Note 7 to the audited consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K
for information regarding recent amendments to the Internal Revenue Code.
Results of Operations
We derive substantially all of our revenue from rents received from tenants under existing leases on each of our properties. This revenue includes fixed base rents,
recoveries of expenses that we have incurred and that we pass through to the individual tenants and percentage rents that are based on specified percentages of
tenants’ revenue, in each case as provided in the respective leases.
Our primary cash expenditures consist of our property operating and capital costs, general and administrative expenses, and interest and debt expense. Property
operating expenses include: real estate taxes, repairs and maintenance, management expenses, insurance and utilities; general and administrative expenses include
payroll, professional fees, information technology, office expenses and other administrative expenses; and interest and debt expense primarily consists of interest
on our mortgage debt. In addition, we incur substantial non-cash charges for depreciation and amortization on our properties. We also capitalize certain expenses,
such as taxes, interest and salaries related to properties under development or redevelopment until the property is ready for its intended use.
Our consolidated results of operations often are not comparable from period to period due to the impact of property acquisitions, dispositions, developments,
redevelopments and changes in accounting policies. The results of operations of any acquired properties are included in our financial statements as of the date of
acquisition. Our results of operations are affected by national, regional and local economic conditions, as well as macroeconomic conditions, which are at times
subject to volatility and uncertainty. The current COVID-19 pandemic has increased volatility and uncertainty and has created significant economic disruption in
many markets. The duration of measures taken to contain the pandemic, including mandatory business shut-downs, reduced business operations and social
distancing is unknown as is the long-term consequence of such measures on consumer behavior. Specifically, the revenue and sales volume for our tenants
identified as nonessential may decline significantly as demand for their services and products changes in the near term and potentially longer term. We are actively
managing our business to respond to the ongoing economic and social impact and uncertainty relating to the COVID-19 pandemic; however, our future near term
and potentially longer term results of operations may be significantly adversely affected. See “Pandemic-Related Contingencies” under Liquidity and Capital
Resources and “Item 1A. Risk Factors” for more information.
The following provides an overview of our key non-GAAP measures based on our consolidated results of operations (refer to NOI, same-property NOI and Funds
From Operations applicable to diluted common shareholders (“FFO”) described later in this section):
(Amounts in thousands)
Net income
FFO applicable to diluted common shareholders
NOI
Same-property NOI
(2)
(2)
(1)
$
Year Ended December 31,
2020
2019
97,750 $
156,326
200,383
186,059
116,197
167,123
234,288
216,836
(1)
(2)
Refer to page 36 for a reconciliation to the nearest generally accepted accounting principles (“GAAP”) measure.
Refer to page 35 for a reconciliation to the nearest GAAP measure.
30
Comparison of the Year Ended December 31, 2020 to December 31, 2019
Net income for the year ended December 31, 2020 was $97.8 million, compared to net income of $116.2 million for the year ended December 31, 2019. The
following table summarizes certain line items from our consolidated statements of income that we believe are important in understanding our operations and/or
those items which significantly changed in the year ended December 31, 2020 as compared to the same period of 2019:
(Amounts in thousands)
Total revenue
Property operating expenses
General and administrative
Casualty and impairment loss, net
Gain on sale of real estate
Interest income
Interest and debt expense
Gain on extinguishment of debt
Income tax (benefit) expense
$
2020
For the year Ended December 31,
2019
$ Change
330,095 $
56,126
48,682
3,055
39,775
2,599
71,015
34,908
(38,996)
387,649 $
64,062
38,220
12,738
68,632
9,774
66,639
—
1,287
(57,554)
(7,936)
10,462
(9,683)
(28,857)
(7,175)
4,376
34,908
(40,283)
Total revenue decreased by $57.6 million to $330.1 million in the year ended December 31, 2020 from $387.6 million in the year ended December 31, 2019. The
decrease is primarily attributable to:
•
•
•
•
•
•
•
$26.5 million increase in rental revenue deemed uncollectible;
$12.0 million increase in write-offs of receivables arising from the straight-lining of rents in connection to leases with rental revenue being recognized on
a cash basis;
$5.7 million decrease in write-offs of below-market lease intangible liabilities related to recaptured leases;
$5.7 million decrease in tenant reimbursement income due to lower common area maintenance expenses;
$3.8 million net decrease in property rentals due to lease terminations and modifications, partially offset by rent commencements and contractual rent
increases;
$2.9 million decrease as a result of property dispositions net of acquisitions; and
$1.0 million decrease in management and development fee income and tenant bankruptcy settlement income.
Property operating expenses decreased by $7.9 million to $56.1 million in the year ended December 31, 2020 from $64.1 million in the year ended December 31,
2019. The decrease is primarily attributable to:
•
•
•
$5.9 million decrease in common area maintenance expenses primarily related to reduced operating costs due to temporary tenant closures in connection
with COVID-19;
$1.1 million net decrease in accrued environmental remediation and compliance expenses; and
$0.9 million decrease as a result of property dispositions net of acquisitions.
General and administrative expenses increased by $10.5 million to $48.7 million in the year ended December 31, 2020 from $38.2 million in the year ended
December 31, 2019. The increase is primarily attributable to:
•
•
•
$6.8 million net increase in executive transition costs including accelerated amortization of unvested equity awards; and
$5.0 million net increase in transaction, severance and other expenses, partially offset by
$1.3 million net decrease in share-based compensation expense due to vesting of prior period awards.
We recognized a casualty and impairment loss, net of $3.1 million, in the year ended December 31, 2020 attributable to a real estate impairment charge recognized
against the carrying value of one property.
We recognized a casualty and impairment loss, net of $12.7 million, in the year ended December 31, 2019 attributable to:
•
•
$26.3 million of real estate impairment charges recognized against the carrying values of four properties, partially offset by
$13.6 million from insurance settlements for Hurricane Maria at our two malls in Puerto Rico and for tornado damage at our shopping center in Wilkes-
Barre, PA.
We recognized a gain on sale of real estate of $39.8 million in the year ended December 31, 2020 due to the sale of three operating properties. We recognized a
gain on sale of real estate of $68.6 million in the year ended December 31, 2019 due to the sale of eight operating properties.
31
Interest income decreased by $7.2 million to $2.6 million in the year ended December 31, 2020 from $9.8 million in the year ended December 31, 2019. The
decrease is primarily attributable to a decrease in interest rates.
Interest and debt expense increased by $4.4 million to $71.0 million in the year ended December 31, 2020 from $66.6 million in the year ended December 31,
2019. The increase is primarily attributable to:
•
•
•
•
•
•
$2.5 million incremental interest in connection with the temporary default of our mortgage at Las Catalinas Mall in Puerto Rico from April 2020 until the
loan was modified in December 2020;
$2.4 million of interest resulting from the $250 million draw on the Company’s revolving credit agreement in March 2020, with the borrowings fully
repaid in November 2020;
$2.3 million of interest due to the assumption of mortgage debt in connection with the acquisition of Kingswood Center in Brooklyn, NY in February
2020; and
$0.7 million decrease in interest capitalized due to the completion of development projects and lower capital spending during the year, partially offset by
$2.8 million decrease in interest on variable-rate debt due to lower interest rates; and
$0.7 million decrease as a result of the refinancing of the mortgage secured by The Outlets at Montehiedra in June 2020.
We recognized a gain on extinguishment of debt of $34.9 million in the year ended December 31, 2020 as a result of the refinancing of the mortgage secured by
The Outlets at Montehiedra, consisting of the forgiveness of the $30 million junior loan plus accrued interest of $5.4 million, offset by the write-off of $0.4 million
of unamortized deferred financing fees and $0.1 million of transaction costs.
Income tax expense decreased by $40.3 million due to an income tax benefit of $39.0 million recognized in the year ended December 31, 2020 compared to $1.3
million of expense in the year ended December 31, 2019. The decrease is primarily attributable to the tax impact of the mortgage refinancing and legal entity
restructuring transactions related to our malls in Puerto Rico, partially offset by state and local income tax expense resulting from tax strategies implemented to
limit the impact from the cancellation of debt at the Outlets at Montehiedra on the Company’s U.S. federal taxable income and the tax impact of the insurance
settlement received in 2019 related to Hurricane Maria.
32
Comparison of the Year Ended December 31, 2019 to December 31, 2018
Net income for the year ended December 31, 2019 was $116.2 million, compared to net income of $117.0 million for the year ended December 31, 2018. The
following table summarizes certain line items from our consolidated statements of income that we believe are important in understanding our operations and/or
those items which significantly changed in the year ended December 31, 2019 due to changes in accounting policies as compared to the same period of 2018:
(Amounts in thousands)
Total revenue
Property operating expenses
General and administrative
Lease expense
$
2019
For the year Ended December 31,
2018
$ Change
387,649 $
64,062
38,220
14,466
414,160 $
78,360
34,984
11,448
(26,511)
(14,298)
3,236
3,018
Total revenue decreased by $26.5 million to $387.6 million in the year ended December 31, 2019 from $414.2 million in the year ended December 31, 2018. The
decrease is primarily attributable to:
•
•
•
•
•
•
$15.4 million decrease in amortization of below-market lease intangible liabilities due to lower write-offs in 2019 related to recaptured leases;
$12.3 million as a result of dispositions, net of acquisitions; and
$1.4 million due to rental revenue deemed uncollectible recognized against rental income in 2019 in accordance with the new lease accounting standard,
effective January 1, 2019, as compared to being included in property operating expenses in 2018, partially offset by
$1.0 million increase in property rentals due to rent commencements, lease modifications and contractual rent increases;
$1.0 million increase due to rent abatements in 2018, recognized at our two malls in Puerto Rico and at our property in Wilkes-Barre, PA as a result of
natural disasters; and
$0.6 million increase in third-party management and development fee income due to higher leasing commissions.
Property operating expenses decreased by $14.3 million to $64.1 million in the year ended December 31, 2019 from $78.4 million in the year ended December 31,
2018. The decrease is primarily attributable to:
•
•
•
•
•
•
$15.5 million of lease termination payments to acquire the Toys “R” Us leases at Bruckner Commons in the Bronx, NY and Hudson Mall in Jersey City,
NJ in 2018;
$4.1 million due to rental revenue deemed uncollectible recognized in property operating expenses in 2018 versus rental revenue in 2019; and
$1.5 million decrease as a result of dispositions, net of acquisitions, partially offset by
$3.3 million increase in common area maintenance projects and repair costs for vacant spaces;
$2.7 million of common area maintenance expenses recognized on a gross basis at tenant-maintained centers in accordance with the new lease accounting
standard; and
$0.8 million increase in accrued environmental remediation costs.
General and administrative expenses increased by $3.2 million to $38.2 million in the year ended December 31, 2019 from $35.0 million in the year ended
December 31, 2018. The increase is primarily attributable to:
•
•
•
•
$3.4 million increase in share-based compensation expense due to additional equity awards granted; and
$1.7 million increase in professional fees for consulting, recruitment and legal services, partially offset by
$1.0 million decrease due to the recognition of office rent within lease expense in accordance with the lease accounting standard, effective January 1,
2019; and
$0.9 million net decrease in executive transition costs, severance and other expenses.
Lease expense increased by $3.0 million to $14.5 million in the year ended December 31, 2019 from $11.4 million in the year ended December 31, 2018. The
increase is primarily attributable to the recognition of office rent and common area maintenance and real estate taxes associated with ground or building leases
within lease expense in accordance with the new lease accounting standard, effective January 1, 2019.
33
Non-GAAP Financial Measures
We use NOI internally to make investment and capital allocation decisions and to compare the unlevered performance of our properties to our peers. Further, we
believe NOI is useful to investors as a performance measure because, when compared across periods, NOI reflects the impact on operations from trends in
occupancy rates, rental rates, operating costs and acquisition and disposition activity on an unleveraged basis, providing perspective not immediately apparent from
net income. The most directly comparable GAAP financial measure to NOI is net income. NOI excludes certain components from net income in order to provide
results that are more closely related to a property’s results of operations. We calculate NOI by adjusting net income to add back depreciation and amortization
expense, general and administrative expenses, casualty and real estate impairment losses, interest and debt expense, income tax expense and non-cash lease
expense, and deduct management and development fee income from non-owned properties, gains on sale of real estate, interest income, non-cash rental income
resulting from the straight-lining of rents and amortization of acquired below market leases net of above market leases. NOI should not be considered a substitute
for net income and may not be comparable to similarly titled measures employed by others. The Company has historically defined this metric as "Cash NOI."
There have been no changes to the calculation of this metric. However, the Company has decided to refer to this metric as "NOI" instead of "Cash NOI" to further
clarify that, consistent with the definition of this metric, the revenue and expenses reflected in this metric include some accrued amounts and are not limited to
amounts for which the Company actually received or made cash payments during the applicable period.
We calculate same-property NOI using net income as defined by GAAP reflecting only those income and expense items that are reflected in NOI (as described
above) and excluding properties that were under development, redevelopment or that involve anchor repositioning where a substantial portion of the gross leasable
area is taken out of service, and also excluding properties acquired or sold during the periods being compared. We also exclude for the following items in
calculating same-property NOI: lease termination fees, bankruptcy settlement income, and income and expenses that we do not believe are representative of
ongoing operating results, if any. As such, same-property NOI assists in eliminating disparities in net income due to the development, redevelopment, acquisition
or disposition of properties during the periods presented, and thus provides a more consistent performance measure for the comparison of the operating
performance of the Company’s properties, which the Company believes to be useful to investors. Same-property NOI should not be considered a substitute for net
income and may not be comparable to similarly titled measures employed by others. The Company has historically defined this metric as "same-property Cash
NOI." There have been no changes to the calculation of this metric.
Throughout this section, we have provided certain information on a “same-property” basis which includes the results of operations that were owned and operated
for the entirety of the reporting periods being compared, which total 71 properties for the years ended December 31, 2020 and 2019. Information provided on a
same-property basis excludes properties that were under development, redevelopment or that involve anchor repositioning where a substantial portion of the gross
leasable area is taken out of service and also excludes properties acquired or sold during the periods being compared. While there is judgment surrounding changes
in designations, a property is removed from the same-property pool when a property is considered to be a redevelopment property because it is undergoing
significant renovation or retenanting pursuant to a formal plan and is expected to have a significant impact on property operating income based on the retenanting
that is occurring. A development or redevelopment property is moved back to the same-property pool once a substantial portion of the NOI growth expected from
the development or redevelopment is reflected in both the current and comparable prior year period, generally one year after at least 80% of the expected NOI from
the project is realized on a cash basis. Acquisitions are moved into the same-property pool once we have owned the property for the entirety of the comparable
periods and the property is not under significant development or redevelopment.
Same-property NOI decreased by $30.8 million, or (14.2)%, for the year ended December 31, 2020 as compared to the year ended December 31, 2019. Same-
property NOI results for the year ended December 31, 2020 were negatively impacted by rental revenue deemed uncollectible primarily due to the COVID-19
pandemic.
34
The following table reconciles net income to NOI and same-property NOI for the years ended December 31, 2020 and 2019.
(Amounts in thousands)
Net income
Management and development fee income from non-owned properties
Other expense
Depreciation and amortization
General and administrative expense
(1)
Casualty and impairment loss, net
Gain on sale of real estate
Gain on sale of lease
Interest income
Interest and debt expense
Gain on extinguishment of debt
Income tax (benefit) expense
Non-cash (revenue) expense
(2)
NOI
Adjustments:
Non-same property NOI
Tenant bankruptcy settlement income and lease termination income
Environmental remediation costs
(3)
Same-property NOI
Adjustments:
NOI related to properties being redeveloped
Same-property NOI including properties in redevelopment
For the year ended December 31,
2019
2020
$
$
$
97,750 $
(1,283)
672
96,029
48,682
3,055
(39,775)
—
(2,599)
71,015
(34,908)
(38,996)
741
200,383
(13,230)
(1,094)
—
186,059 $
4,059
190,118 $
116,197
(1,900)
1,065
94,116
38,220
12,738
(68,632)
(1,849)
(9,774)
66,639
—
1,287
(13,819)
234,288
(17,166)
(1,643)
1,357
216,836
4,593
221,429
(1)
(2)
(3)
The year ended December 31, 2020 reflects an impairment loss recognized at one property. The year ended December 31, 2019 reflects real estate impairment losses at four
properties, offset by insurance proceeds for Hurricane Maria at our two malls in Puerto Rico and for tornado damage at our shopping center in Wilkes-Barre, PA.
The Company has historically defined this metric as “Cash NOI.” There have been no changes to the calculation.
Non-same property NOI includes NOI related to properties being redeveloped and properties acquired or disposed in the period.
35
Funds From Operations
FFO applicable to diluted common shareholders for the year ended December 31, 2020 was $156.3 million compared to $167.1 million for the year ended
December 31, 2019.
We calculate FFO in accordance with the National Association of Real Estate Investment Trusts’ (‘‘Nareit’’) definition. Nareit defines FFO as net income
(computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable real estate and land when connected to the main business of a REIT,
impairments on depreciable real estate or land related to a REIT's main business, and rental property depreciation and amortization expense. We believe FFO is a
meaningful non-GAAP financial measure useful in comparing our levered operating performance from period to period both internally and among our peers
because this non-GAAP measure excludes net gains on sales of depreciable real estate, real estate impairment losses, rental property depreciation and amortization
expense which implicitly assumes that the value of real estate diminishes predictably over time rather than fluctuating based on market conditions. We believe the
presentation of comparable period operating results generated from FFO provides useful information to investors because the definition excludes items included in
net income that do not relate to, or are not, indicative of our operating and financial performance, such as depreciation and amortization related to real estate, and
items which can make periodic and peer analyses of operating and financial performance more difficult, such as gains (or losses) from sales of depreciable real
estate and land when connected to the main business of a REIT and impairments on depreciable real estate or land related to a REIT's main business. FFO does not
represent cash flows from operating activities in accordance with GAAP, should not be considered an alternative to net income as an indication of our
performance, and is not indicative of cash flow as a measure of liquidity or our ability to make cash distributions. FFO may not be comparable to similarly titled
measures employed by others.
(Amounts in thousands)
Net income
Less net (income) loss attributable to noncontrolling interests in:
Operating partnership
Consolidated subsidiaries
Net income attributable to common shareholders
Adjustments:
Rental property depreciation and amortization
Gain on sale of real estate
Real estate impairment loss
Limited partnership interests in operating partnership
(1)
FFO applicable to diluted common shareholders
For the year ended December 31,
2019
2020
97,750 $
(4,160)
(1)
93,589
95,297
(39,775)
3,055
4,160
156,326 $
116,197
(6,699)
25
109,523
93,212
(68,632)
26,321
6,699
167,123
$
$
(1)
Represents earnings allocated to Long-Term Incentive Plan (“LTIP”) and OP unitholders for unissued common shares which have been excluded for purposes of calculating
earnings per diluted share for the periods presented.
36
Liquidity and Capital Resources
Due to the nature of our business, the cash generated from operations is primarily paid to our shareholders and unitholders of the Operating Partnership in the form
of distributions. Our status as a REIT requires that we generally distribute at least 90% of our REIT’s ordinary taxable income each year. Historically, we have
paid regular cash dividends; however, the timing, declaration, amount and payment of distributions to shareholders and unitholders of the Operating Partnership
fall within the discretion of our Board of Trustees. Our Board of Trustees’ decisions regarding the payment of dividends depends on many factors, such as
maintaining our REIT status, our financial condition, earnings, capital requirements, debt service obligations, limitations under our financing arrangements,
industry practice, legal requirements, regulatory constraints, and other factors. Our Board of Trustees declared a quarterly dividend of $0.22 per common share and
OP unit for the first quarter of 2020. As a result of COVID-19 and the uncertainties it generated, the Company temporarily suspended quarterly dividend
distributions for the second and third quarters of 2020 and declared a special cash dividend of $0.46 per common share in December 2020. The special dividend
was based on the Company’s 2020 expected taxable income which includes the tax impacts associated with the Las Catalinas Mall debt modification and the debt
forgiveness and refinancing of the mortgage loan on The Outlets at Montehiedra. The Company’s Board of Trustees will continue to monitor the Company’s
financial performance and economic outlook and, for 2021, intends to reinstate the dividend at a rate based on projected taxable income for the year, which is
expected to result in a quarterly dividend of $0.15 per common share, with any such future dividend is subject to approval of the Board of Trustees.
Property rental income is our primary source of cash flow and is dependent on a number of factors, including our occupancy level and rental rates, as well as our
tenants’ ability to pay rent. Our properties have historically provided us with a relatively consistent stream of cash flow that enables us to pay operating expenses,
debt service and recurring capital expenditures. As discussed herein, COVID-19 had an adverse impact on our short-term cash flow as a significant number of our
tenants did not pay rent that was due in the year ended December 31, 2020 and could have a significant longer term adverse impact on our cash flow and financial
condition. As of February 12, 2021, the Company collected 93% of rental revenue for the fourth quarter of 2020, up from 89% and 81% for the third and second
quarter of 2020, respectively. Other sources of liquidity to fund cash requirements include proceeds from financings, equity offerings and asset sales.
Our short-term cash requirements consist of normal recurring operating expenses, lease obligations, regular debt service requirements, recurring expenditures
(general & administrative expenses), expenditures related to leasing activity and distributions to shareholders and unitholders of the Operating Partnership. Our
long-term capital requirements consist primarily of maturities under our long-term debt agreements, development and redevelopment costs and potential
acquisitions.
At December 31, 2020, we had cash and cash equivalents, including restricted cash, of $419.3 million and no amounts drawn on our $600 million revolving credit
agreement, which matures on January 29, 2024.
The Company continues to monitor the COVID-19 pandemic and its impact on our overall liquidity position and outlook. The ultimate impact that COVID-19 may
have on our operational and financial performance over the next 12 months is currently uncertain and will depend on many factors, including without limitation, its
magnitude and duration and the adverse financial impact on our tenants from reduced business operations and social distancing requirements, which may impact
tenants’ ability to generate sales at sufficient levels to cover operating costs such as rent. In light of the various uncertainties resulting from the COVID-19
pandemic, the Company borrowed $250 million under its existing $600 million revolving credit agreement in March 2020 as a precautionary measure to increase
the Company's cash position and facilitate financial flexibility. The borrowings on the revolving credit facility were fully repaid in November 2020. Our ability to
utilize amounts available under our revolving credit facility in the future will depend on our continued compliance with the applicable financial covenants and
other terms of our revolving credit agreement, which may be impacted by tenant store closures and failure of tenants to pay rent. We have no debt scheduled to
mature until 2022. We currently believe that cash on hand, available revolving credit and general ability to access the capital markets, should be sufficient to
finance our operations and fund our debt service requirements and capital expenditures over the next 12 months.
On March 27, 2020 and December 27, 2020, the President of the United States signed the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act")
and the Consolidated Appropriations Act, 2021, respectively, each containing substantial tax-and-spending package intended to provide additional economic
stimulus to address the impact of the COVID-19 pandemic. The Company has not applied for or received any loans authorized under this legislation; however, the
Company may avail itself of certain tax provisions within the legislation that may be used to reduce taxable income or other tax obligations.
37
Summary of Cash Flows
Cash and cash equivalents including restricted cash was $419.3 million at December 31, 2020, compared to $485.1 million as of December 31, 2019, a decrease of
$65.9 million.
Our cash flow activities are summarized as follows:
(Amounts in thousands)
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Operating Activities
2020
$
Year Ended December 31,
2019
2018
112,822 $
(98,460)
(80,245)
156,400 $
(2,521)
(126,265)
137,040
(64,803)
(115,556)
Net cash provided by operating activities primarily consists of cash inflows from rental revenue and cash outflows for property operating expenses, general and
administrative expenses and interest expense.
Net cash provided by operating activities for the year ended December 31, 2020, decreased by $43.6 million as of December 31, 2019, due to the timing and
deferral of cash receipts and payments by tenants impacted by the COVID-19 pandemic, including the impact of recovery income.
Investing Activities
Net cash flow used in investing activities is impacted by the timing and extent of our real estate development, capital improvements, and acquisition and
disposition activities during the period.
Net cash used in investing activities for the year ended December 31, 2020, increased by $95.9 million compared to December 31, 2019 due to a (i) $77.0 million
increase in cash used for acquisitions, (ii) $62.1 million decrease in cash provided by the sale of properties, (iii) $12.7 million of insurance proceeds received for
physical property damages in the year ended December 31, 2019 and (iv) $6.9 million of cash received for the sale of an operating lease in 2019, partially offset by
(v) $62.8 million decrease in cash used for real estate development and capital improvements at existing properties.
Financing Activities
Net cash flow used in financing activities is impacted by the timing and extent of issuances of debt and equity securities, distributions paid to common shareholders
and unitholders of the Operating Partnership as well as principal and other payments associated with our outstanding indebtedness.
Net cash used in financing activities for the year ended December 31, 2020, decreased by $46.0 million from the year ended December 31, 2019 due to (i) $83.9
million decrease in distributions paid to partners due to the temporary suspension of dividends during 2020, (ii) $6.5 million of net proceeds from borrowings
under mortgage loans, (iii) $6.0 million of cash paid to redeem units in 2019, (iv) $5.4 million of cash contributed by noncontrolling interests in 2020, partially
offset by (v) $54.1 million of cash paid to repurchase common shares in 2020 (vi) $0.8 million increase in cash used to issue debt and (vii) $0.8 million increase in
tax withholdings on vested restricted stock.
Financing Activities and Contractual Obligations
Below is a summary of our outstanding debt and weighted average interest rate as of December 31, 2020.
(Amounts in thousands)
Mortgages payable:
Fixed rate debt
Variable rate debt
(1)
Principal balance at
December 31, 2020
Weighted Average
Interest Rate at December 31,
2020
$
Total mortgages payable
Unamortized debt issuance costs
Total mortgages payable, net of unamortized debt issuance costs $
1,428,026
169,371
1,597,397
(9,865)
1,587,532
4.16%
1.90%
3.92%
(1)
As of December 31, 2020, $80.4 million of our variable rate debt bears interest at one month LIBOR plus 190 bps and $89.0 million bears interest at one month LIBOR plus
160 bps.
38
The net carrying amount of real estate collateralizing the above indebtedness amounted to approximately $1.3 billion as of December 31, 2020. Our mortgage loans
contain covenants that limit our ability to incur additional indebtedness on these properties and in certain circumstances, require lender approval of tenant leases,
certain redevelopment projects and/or yield maintenance upon repayment prior to maturity. As of December 31, 2020, we were in compliance with all debt
covenants.
On January 15, 2015, we entered into a $500 million Revolving Credit Agreement (the “Agreement”) with certain financial institutions. On March 7, 2017, we
amended and extended the Agreement. The amendment increased the credit facility size by $100 million to $600 million and extended the maturity date to
March 7, 2021 with two six-month extension options. On July 29, 2019, we entered into a second amendment to the Agreement to extend the maturity date to
January 29, 2024 with two six-month extension options. Company borrowings under the Agreement are subject to interest at LIBOR plus 1.05% to 1.50% and an
annual facility fee of 15 to 30 basis points. Both the spread over LIBOR and the facility fee are based on our current leverage ratio and are subject to increase if our
leverage ratio increases above predefined thresholds. The Agreement contains customary financial covenants including a maximum leverage ratio of 60% and a
minimum fixed charge coverage ratio of 1.5x. No amounts had been drawn under the Agreement as of December 31, 2020.
On June 3, 2020, we entered into a third amendment to the Agreement. The third amendment, among other things, modifies certain definitions and the
measurement period for certain financial covenants to a trailing four-quarter period instead of the most recent quarter period annualized. Under the Agreement, our
financial covenants are generally measured using operating results of a trailing four-quarter period from the prior trailing four-quarter period, including the
maximum leverage ratio, which measures our asset value based on net operating income, as defined in the Agreement. Net operating income is defined, in part,
based on rents and other revenues received in the ordinary course of business from our properties. We currently believe that with our cash on hand, we will have
sufficient resources to finance our operations and fund our debt service requirements and capital expenditures for at least the next twelve months.
In the event that LIBOR is discontinued, the interest rates for our debt following such event will be based on either alternate base rates or agreed upon replacement
rates. Such an event would not affect our ability to borrow or maintain already outstanding borrowings, although it could result in higher interest rates.
We have contractual obligations related to our mortgage loans described further in Note 6 to the consolidated financial statements included in Part II, Item 8 of this
Annual Report on Form 10-K. In addition, we have contractual obligations for certain properties that are subject to long-term ground and building leases where a
third party owns and has leased the underlying land to us. We also have non-cancelable operating leases pertaining to office space from which we conduct our
business. Below is a summary of our contractual obligations as of December 31, 2020:
(Amounts in thousands)
Contractual cash obligations
Long-term debt obligations
Operating lease obligations
Finance lease obligations
(1)
Total
Less than 1 year
Commitments Due by Period
1 to 3 years
3 to 5 years
More than 5 years
$
$
1,895,499 $
105,428
6,968
2,007,895 $
67,836 $
9,363
109
77,308 $
548,872 $
17,084
218
566,174 $
275,208
15,099
218
290,525
$
$
1,003,583
63,882
6,423
1,073,888
(1)
Includes interest and principal payments. Interest on variable rate debt is computed using rates in effect as of December 31, 2020.
Additional contractual obligations that have been excluded from this table are as follows:
•
•
•
•
Obligations related to construction and development contracts, since amounts are not fixed or determinable. Such contracts will generally be due over the
next two years;
Obligations related to maintenance contracts, since these contracts typically can be canceled upon 30 to 60 days’ notice without penalty;
Obligations related to employment contracts with certain executive officers, since all agreements are subject to cancellation by either the Company or the
executive without cause upon notice; and
Recorded debt premiums or discounts that are not obligations.
39
Capital Expenditures
The following summarizes capital expenditures presented on a cash basis for the years ended December 31, 2020 and 2019:
(Amounts in thousands)
Capital expenditures:
Development and redevelopment costs
Capital improvements
Tenant improvements and allowances
(1)
Total capital expenditures
Year Ended December 31,
2020
2019
$
$
15,468 $
10,704
2,350
28,522 $
72,331
14,252
4,718
91,301
(1)
Amounts for the year ended December 31, 2019 have been reclassified to conform with current period presentation.
As of December 31, 2020, we had approximately $132.4 million of active redevelopment, development and anchor repositioning projects at various stages of
completion, an increase of $66.8 million from $65.6 million of projects as of December 31, 2019. We have advanced these projects and incurred $10.1 million of
additional spend since December 31, 2019. We anticipate that these projects will require an additional $86.6 million to complete, which we expect to occur over
the next six to eighteen months depending on any restrictions on construction activity. We expect to fund these projects using cash on hand, proceeds from
dispositions, or from secured debt.
Commitments and Contingencies
Legal Matters
There are various legal actions against us in the ordinary course of business. In our opinion, after consultation with legal counsel, the outcome of such matters will
not have a material adverse effect on our financial condition, results of operations or cash flows.
Insurance
The Company maintains numerous insurance policies including for general liability, property, pollution, acts of terrorism, trustees’ and officers’, cyber, workers’
compensation and automobile-related liabilities. However, all such policies are subject to terms, conditions, exclusions, deductibles and sub-limits, amount other
limiting factors. For example, the Company’s terrorism insurance excludes coverage for nuclear, biological, chemical or radiological terrorism events as defined by
the Terrorism Risk Insurance Program Reauthorization Act.
The Company’s primary and excess insurance policies providing coverage for pollution related losses have an aggregate limit of $50 million and provide
remediation and business interruption coverage for pollution incidents, which pursuant to our policies expressly include the presence and dispersal of viruses. On
December 23, 2020, the Company initiated litigation in New Jersey state court, Bergen County, under these policies to recover uncollected rents and other amounts
resulting from the COVID-19 virus.
Insurance premiums are typically charged directly to each of the properties but not all of the cost of such premiums are recovered. The Company is responsible for
deductibles, losses in excess of insurance coverage, and the portion of premiums not reimbursable by tenants at our properties, which could be material.
We continue to monitor the state of the insurance market and the scope and costs of available coverage. We cannot anticipate what coverage will be available on
commercially reasonable terms in the future and expect premiums across most coverage lines to increase in light of recent events. The incurrence of uninsured
losses, costs or uncovered premiums could materially and adversely affect our business, results of operations and financial condition.
Certain of our loans and other agreements contain customary covenants requiring the maintenance of insurance coverage. Although we believe that we currently
have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at reasonable costs in the
future. If lenders or other counterparties insist on greater coverage than we are able to obtain, such requirement could materially and adversely affect our ability to
finance our properties and expand our portfolio.
Hurricane-Related Charges
On September 20, 2017, Hurricane Maria damaged our two properties in Puerto Rico. During the year ended December 31, 2018, the Company received $1.5
million in casualty insurance proceeds, which were partially offset by $0.3 million of hurricane-related costs, resulting in net casualty gains of $1.2 million
included in casualty and impairment loss, net on the accompanying consolidated statements of income. During the year ended December 31, 2018, the Company
recognized $0.3 million of business interruption losses, comprised of $0.7 million of rent abatements due to tenants that had not reopened since
40
the hurricane, recorded as a reduction of rental revenue, offset by a $0.4 million reversal within property operating expenses to account for doubtful accounts for
payments received from tenants on rents previously reserved.
In June 2019, the Company finalized its insurance recovery related to Hurricane Maria with its carrier in the amount of $14.3 million, of which $3.3 million was
previously received, subject to deductibles of $2.3 million. We recognized a $8.7 million casualty gain during the year ended December 31, 2019 as a result of the
remaining insurance proceeds from the settlement agreement for our two malls in Puerto Rico.
Environmental Matters
Each of our properties has been subjected to varying degrees of environmental assessment at various times. Based on these assessments, we have accrued costs of
$1.8 million and $2.7 million on our consolidated balance sheets as of December 31, 2020 and December 31, 2019, respectively, for remediation costs for
environmental contamination at certain properties. While this accrual reflects third-party estimates of the potential costs of remediation at these properties, there
can be no assurance that the actual costs will not exceed these amounts. During the years ended December 31, 2019 and 2018, the Company recognized $1.4
million and $0.6 million, respectively, of environmental remediation costs included in property operating expenses on the consolidated statements of income.
Although we are not aware of any other material environmental contamination, there can be no assurance that the identification of new areas of contamination,
changes in the extent or known scope of contamination, the discovery of additional sites, or changes in cleanup requirements would not result in significant costs to
us.
Pandemic-Related Contingencies
During 2020, many of our tenants faced adverse financial consequences from reduced business operations and social distancing requirements resulting from the
COVID-19 pandemic. As of December 31, 2020, substantially all of our portfolio's gross leasable area was open for business and the Company collected
approximately 91% of rental revenue for the fourth quarter, 87% for the third quarter and 79% for the second quarter. Throughout 2020, the Company granted rent
concessions and other lease-related relief, such as rent deferrals, to certain impacted tenants, and anticipates granting further rent concessions or other relief going
forward. We valuate rent relief requests on a case-by-case basis and not all requests are granted. Rent relief, deferral or abatements and tenant defaults on lease
obligations, such as repayment of deferred rent may have a negative impact on our rental revenue and net income. As of February 12, 2021, we have executed or
approved approximately 112 rent deferrals for an aggregate deferral amount of $8.2 million.
The following table sets forth information as of December 31, 2020 regarding the collection status of quarterly billings since April 2020:
(in thousands)
Tenant Type
National
Regional
Mom and pop
Local franchise
Temporary
Total portfolio
Three Months Ended June 30,
2020
Three Months Ended September
30, 2020
Three Months Ended December 30,
2020
Tenant
Billings
% Collected
$
$
65,787
9,460
6,872
5,556
1,717
89,392
Tenant Billings
68,390
9,858
7,009
5,549
1,137
91,943
85 % $
63 %
62 %
64 %
50 %
79 % $
% Collected
Tenant Billings
63,809
9,286
6,575
5,181
1,642
86,493
90 % $
79 %
73 %
74 %
99 %
87 % $
% Collected
94 %
89 %
76 %
76 %
78 %
91 %
The Company is closely monitoring changes in the collectibility assessment of its tenant receivables as a result of certain tenants suffering adverse financial
consequences due to the COVID-19 pandemic. During the year ended December 31, 2020, rental revenue deemed uncollectible of $27.9 million was classified as a
reduction to rental revenue based on our assessment of the probability of collecting substantially all of the remaining rents for certain tenants. Additionally, during
the year ended December 31, 2020 we recognized write-offs of $12.0 million related to receivables arising from the straight-lining of rents as a result of tenants
impacted by the COVID-19 pandemic.
We experienced a decline in our percentage rent earned throughout 2020 as a result of reduced sales volumes from temporary store closures and changes in
consumer behavior. Percentage rents totaled $2.4 million and $4.0 million for the years ended December 31, 2020 and December 31, 2019, respectively and
approximated 1% of total revenue for the years ended December 31, 2020 and 2019, respectively.
The Company is not currently aware of any other loss contingencies related to the COVID-19 pandemic that would require recognition at this time, with the
exception of abatements already discussed with tenants or deferred rents that may not be collected.
41
Bankruptcies
Although our rental revenue is supported by long-term leases, leases may be rejected in a bankruptcy proceeding and the related tenant stores may permanently
vacate prior to lease expiration. In the event a tenant with a significant number of leases or square footage in our shopping centers files for bankruptcy and rejects
its leases with us, we could experience a reduction in our revenues. We monitor the operating performance and rent collections of all tenants in our shopping
centers, especially those tenants in arrears or operating retail formats that are experiencing significant changes in competition, business practice, or store closings in
other locations.
Given the economic environment brought upon by COVID-19, certain tenants experienced liquidity or financial hardships and filed for Chapter 11 bankruptcy
protection during the year ended December 31, 2020. Although some of these tenants intend to exit the Chapter 11 bankruptcy process and resume operations, the
outcomes of such proceedings are unknown and the Company is currently exploring leasing alternatives for these spaces. We anticipate tenant bankruptcies may
continue to increase in the future depending on the length and severity of the COVID-19 pandemic.
Century 21 filed for Chapter 11 bankruptcy protection on September 10, 2020. Prior to bankruptcy, the Company had one lease with Century 21 in Paramus, NJ
comprising approximately 157,000 sf, which generated $4.4 million in annual rental revenue. In connection with the bankruptcy, the Company recognized a write-
off of $2.5 million of receivables arising from the straight-lining of rents, and recognized $2.1 million as rental revenue deemed uncollectible (classified within
rental revenue) for the year ended December 31, 2020. The Company closed and vacated the store in December 2020.
Inflation and Economic Condition Considerations
Most of our leases contain provisions designed to partially mitigate the impact of inflation. Although inflation has been low in recent periods and has had a
minimal impact on the performance of our shopping centers, it is very possible that inflation will increase in future years. Most of our leases require tenants to pay
their share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing our exposure to increases in costs and
operating expenses resulting from inflation, although some larger tenants have capped the amount of these operating expenses they are responsible for under the
lease.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as of December 31, 2020 or December 31, 2019.
42
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
We have exposure to fluctuations in interest rates, which are sensitive to many factors that are beyond our control. The following table discusses our exposure to
hypothetical changes in market rates of interest on interest expense for our variable rate debt and fixed-rate debt. Interest rate risk amounts were determined by
considering the impact of hypothetical interest rates on our debt. This analysis does not take into account all of the factors that may affect our debt, such as the
effect that a changing interest rate environment could have on the overall level of economic activity or the action that our management might take to reduce our
exposure to the change. This analysis assumes no change in our financial structure. Our exposure to a change in interest rates is summarized in the table below. As
of December 31, 2020, all of our variable rate debt outstanding had rates indexed to LIBOR.
(Amounts in thousands)
Variable Rate
Fixed Rate
2020
2019
December 31,
Balance
Weighted Average
Interest Rate
Effect of 1%
Change in Base
Rates
December 31,
Balance
Weighted Average
Interest Rate
$
$
169,371
1,428,026
1,597,397
(1)
1.90%
4.16%
$
$
1,694
—
1,694
(2)
$
$
169,500
1,386,748
1,556,248
(1)
3.45%
4.12%
(1)
(2)
Excludes unamortized debt issuance costs of $9.9 million and $10.1 million as of December 31, 2020 and December 31, 2019, respectively.
If the weighted average interest rate of our fixed rate debt increased by 1% (i.e. due to refinancing at higher rates), annualized interest expense would increase by
approximately $14.3 million based on outstanding balances as of December 31, 2020.
We may utilize various financial instruments to mitigate the impact of interest rate fluctuations on our cash flows and earnings, including hedging strategies,
depending on our analysis of the interest rate environment and the costs and risks of such strategies. As of December 31, 2020, we did not have any material
hedging instruments in place.
Fair Value of Debt
The estimated fair value of our consolidated debt is calculated based on current market prices and discounted cash flows at the current rate at which similar loans
would be made to borrowers with similar credit ratings for the remaining term of such debt. As of December 31, 2020, the estimated fair value of our consolidated
debt was $1.6 billion.
Other Market Risks
As of December 31, 2020, we had no material exposure to any other market risks (including foreign currency exchange risk or commodity price risk).
In making this determination and for purposes of the SEC’s market risk disclosure requirements, we have estimated the fair value of our financial instruments at
December 31, 2020 based on pertinent information available to management as of that date. Although management is not aware of any factors that would
significantly affect the estimated amounts as of December 31, 2020, future estimates of fair value and the amounts which may be paid or realized in the future may
differ significantly from amounts presented.
43
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm for Urban Edge Properties
Report of Independent Registered Public Accounting Firm for Urban Edge Properties LP
Urban Edge Properties Consolidated Balance Sheets as of December 31, 2020 and 2019
Urban Edge Properties Consolidated Statements of Income for the years ended December 31, 2020, 2019 and 2018
Urban Edge Properties Consolidated Statement of Changes in Equity for the years ended December 31, 2020, 2019 and 2018
Urban Edge Properties Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018
Urban Edge Properties LP Consolidated Balance Sheets as of December 31, 2020 and 2019
Urban Edge Properties LP Consolidated Statements of Income for the years ended December 31, 2020, 2019 and 2018
Urban Edge Properties LP Consolidated Statement of Changes in Equity for the years ended December 31, 2020, 2019 and 2018
Urban Edge Properties LP Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018
Notes to Consolidated Financial Statements
CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Schedule II – Valuation and Qualifying Accounts
Schedule III – Real Estate and Accumulated Depreciation
Page
45
47
49
50
51
52
54
55
56
57
59
103
104
44
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of Urban Edge Properties
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Urban Edge Properties and subsidiaries (the “Company”) as of December 31, 2020 and 2019,
the related consolidated statements of income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related
notes and schedules listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in
all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal
control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 17, 2021, expressed an unqualified opinion on the
Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements
based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to
be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken
as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or
disclosures to which they relate.
Real Estate Impairment —Refer to Notes 2, 3 and 9 to the financial statements
Critical Audit Matter Description
The Company’s real estate assets are individually evaluated for impairment when events or changes in circumstances indicate that the carrying amount may not be
recoverable. The Company’s evaluation of the recoverability of real estate assets involves the comparison of the aggregate projected undiscounted future cash
flows expected to be generated by each real estate asset over the Company’s estimated holding period to the respective carrying amount. The Company’s
undiscounted future cash flow analyses require management to make significant estimates, including estimated terminal values determined using appropriate
capitalization rates. Total real estate assets as of December 31, 2020 had a net book value of $2.2 billion.
Given that the Company’s estimated capitalization rates used in the evaluation of impairment of real estate assets is a significant assumption made by management,
performing audit procedures to evaluate the reasonableness of management’s undiscounted future cash flow analyses required a high degree of auditor judgment
and an increased level of effort, including the need to involve our fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the Company’s estimated capitalization rates used in the evaluation of impairment of real estate assets included the following,
among others:
• We tested the effectiveness of the Company’s internal controls over management’s evaluation of the recoverability of real estate, including internal
controls over management’s determination of the reasonableness of the applicable capitalization rates.
45
•
Inquired with management regarding the appropriateness of the capitalization rates, including considerations related to the impact of COVID-19 and
evaluating the consistency of the capitalization rates used with evidence obtained in other areas of our audit.
• With the assistance of our fair value specialists, we evaluated the reasonableness of the Company’s estimated capitalization rates by:
◦
◦
Testing the source information underlying the determination of the capitalization rates by evaluating the reasonableness of the capitalization
rates used by management with independent market data, focusing on key factors, including the impact of the COVID-19 pandemic,
geographical location, tenant composition, and property type.
Developing a range of independent estimates of capitalization rates and comparing those to the capitalization rates utilized by management.
Evaluation of Collectibility of Receivables – Refer to Note 3 to the financial statements
Critical Audit Matter Description
The Company evaluates the collectibility of amounts due from tenants. In light of the recent and ongoing COVID-19 pandemic, the Company is closely monitoring
changes in the collectibility assessment of its tenant receivables as a result of certain tenants suffering adverse financial consequences. Management exercises
judgment in assessing collectibility and considers payment history, current credit status and publicly available information about the financial condition of the
tenant, among other factors. The Company recognizes changes in the collectibility assessment of these operating leases as adjustments to rental revenue. Tenant
receivables, including receivables arising from the straight-lining of rents, are written-off directly when management deems that the collectibility of substantially
all future lease payments from a specific lease is not probable of collection.
We identified management’s assumptions utilized in determining whether a tenant’s lease payments are collectible as a critical audit matter because of the
significant judgements involved and the material impact to receivables. Performing audit procedures to evaluate these assumptions required a high degree of
auditor judgment and an increased extent of effort.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to management’s assumptions in evaluating the collectibility of receivables included the following, among others:
• We tested the effectiveness of controls over management’s evaluation of collectibility including controls over the assumptions utilized by management.
• We evaluated the Company’s estimate of the collectibility of receivables by:
◦
◦
◦
Testing management’s estimate including reading available information of tenant filings, financial statements, news articles, and analyst reports
among other procedures based on the tenant’s payment history, current credit status and publicly available information about the financial
condition of the tenant.
Inquiring with the Company’s employees in departments outside of accounting to corroborate evidence regarding each of the tenant specific
collectibility assessments.
Evaluating positive and contradictory evidence obtained through the procedures described above, other evidence obtained throughout our audit,
and events or changes in facts and circumstances occurring subsequent to year end, but before the date the consolidated financial statements
were available to be issued.
DELOITTE & TOUCHE LLP
New York, New York
February 17, 2021
We have served as the Company’s auditor since 2014.
46
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of Urban Edge Properties LP
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Urban Edge Properties LP (the “Operating Partnership”) as of December 31, 2020 and 2019, the
related consolidated statements of income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related
notes and schedules listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in
all material respects, the financial position of the Operating Partnership as of December 31, 2020 and 2019, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Operating Partnership’s
internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 17, 2021, expressed an unqualified opinion on the Operating
Partnership’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Operating Partnership’s management. Our responsibility is to express an opinion on the Operating
Partnership’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect
to the Operating Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to
be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken
as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or
disclosures to which they relate.
Real Estate Impairment —Refer to Notes 2, 3 and 9 to the financial statements
Critical Audit Matter Description
The Operating Partnership’s real estate assets are individually evaluated for impairment when events or changes in circumstances indicate that the carrying amount
may not be recoverable. The Operating Partnership’s evaluation of the recoverability of real estate assets involves the comparison of the aggregate projected
undiscounted future cash flows expected to be generated by each real estate asset over the Operating Partnership’s estimated holding period to the respective
carrying amount. The Operating Partnership’s undiscounted future cash flow analyses require management to make significant estimates, including estimated
terminal values determined using appropriate capitalization rates. Total real estate assets as of December 31, 2020 had a net book value of $2.2 billion.
Given that the Operating Partnership’s estimated capitalization rates used in the evaluation of impairment of real estate assets is a significant assumption made by
management, performing audit procedures to evaluate the reasonableness of management’s undiscounted future cash flow analyses required a high degree of
auditor judgment and an increased level of effort, including the need to involve our fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the Operating Partnership’s estimated capitalization rates used in the evaluation of impairment of real estate assets included the
following, among others:
• We tested the effectiveness of the Operating Partnership’s internal controls over management’s evaluation of the recoverability of real estate, including
internal controls over management’s determination of the reasonableness of the applicable capitalization rates.
47
•
Inquired with management regarding the appropriateness of the capitalization rates, including considerations related to the impact of COVID-19 and
evaluating the consistency of the capitalization rates used with evidence obtained in other areas of our audit.
• With the assistance of our fair value specialists, we evaluated the reasonableness of the Operating Partnership’s estimated capitalization rates by:
◦
◦
Testing the source information underlying the determination of the capitalization rates by evaluating the reasonableness of the capitalization
rates used by management with independent market data, focusing on key factors, including the impact of the COVID-19 pandemic,
geographical location, tenant composition, and property type.
Developing a range of independent estimates of capitalization rates and comparing those to the capitalization rates utilized by management.
Evaluation of Collectibility of Receivables – Refer to Note 3 to the financial statements
Critical Audit Matter Description
The Operating Partnership evaluates the collectibility of amounts due from tenants. In light of the recent and ongoing COVID-19 pandemic, the Operating
Partnership is closely monitoring changes in the collectibility assessment of its tenant receivables as a result of certain tenants suffering adverse financial
consequences. Management exercises judgment in assessing collectibility and considers payment history, current credit status and publicly available information
about the financial condition of the tenant, among other factors. The Operating Partnership recognizes changes in the collectibility assessment of these operating
leases as adjustments to rental revenue. Tenant receivables, including receivables arising from the straight-lining of rents, are written-off directly when
management deems that the collectibility of substantially all future lease payments from a specific lease is not probable of collection.
We identified management’s assumptions utilized in determining whether a tenant’s lease payments are collectible as a critical audit matter because of the
significant judgements involved and the material impact to receivables. Performing audit procedures to evaluate these assumptions required a high degree of
auditor judgment and an increased extent of effort.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to management’s assumptions in evaluating the collectibility of receivables included the following, among others:
• We tested the effectiveness of controls over management’s evaluation of collectibility including controls over the assumptions utilized by management.
• We evaluated the Operating Partnership’s estimate of the collectibility of receivables by:
◦
◦
◦
Testing management’s estimate including reading available information of tenant filings, financial statements, news articles, and analyst reports
among other procedures based on the tenant’s payment history, current credit status and publicly available information about the financial
condition of the tenant.
Inquiring with the Operating Partnership’s employees in departments outside of accounting to corroborate evidence regarding each of the tenant
specific collectibility assessments.
Evaluating positive and contradictory evidence obtained through the procedures described above, other evidence obtained throughout our audit,
and events or changes in facts and circumstances occurring subsequent to year end, but before the date the consolidated financial statements
were available to be issued.
/s/ DELOITTE & TOUCHE LLP
New York, New York
February 17, 2021
We have served as the Operating Partnership’s auditor since 2016.
48
URBAN EDGE PROPERTIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
ASSETS
Real estate, at cost:
Land
Buildings and improvements
Construction in progress
Furniture, fixtures and equipment
Total
Accumulated depreciation and amortization
Real estate, net
Operating lease right-of-use assets
Cash and cash equivalents
Restricted cash
Tenant and other receivables
Receivables arising from the straight-lining of rents
Identified intangible assets, net of accumulated amortization of $37,009 and $30,942, respectively
Deferred leasing costs, net of accumulated amortization of $16,419 and $16,560, respectively
Prepaid expenses and other assets
Total assets
LIABILITIES AND EQUITY
Liabilities:
Mortgages payable, net
Operating lease liabilities
Accounts payable, accrued expenses and other liabilities
Identified intangible liabilities, net of accumulated amortization of $71,375 and $62,610, respectively
Total liabilities
Commitments and contingencies
Shareholders’ equity:
Common shares: $0.01 par value; 500,000,000 shares authorized and 117,014,317 and 121,370,125 shares issued and
outstanding, respectively
Additional paid-in capital
Accumulated deficit
Noncontrolling interests:
Operating partnership
Consolidated subsidiaries
Total equity
Total liabilities and equity
See notes to consolidated financial statements.
December 31,
2020
December 31,
2019
$
$
$
$
568,662 $
2,326,450
44,689
7,016
2,946,817
(730,366)
2,216,451
80,997
384,572
34,681
15,673
62,106
56,184
18,585
70,311
2,939,560 $
515,621
2,197,076
28,522
7,566
2,748,785
(671,946)
2,076,839
81,768
432,954
52,182
21,565
73,878
48,121
21,474
37,577
2,846,358
1,587,532 $
74,972
132,980
148,183
1,943,667
1,546,195
79,913
76,644
128,830
1,831,582
1,169
1,213
989,863
(39,467)
38,456
5,872
995,893
2,939,560 $
1,019,149
(52,546)
46,536
424
1,014,776
2,846,358
49
URBAN EDGE PROPERTIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share amounts)
REVENUE
Rental revenue
Management and development fees
Other income
Total revenue
EXPENSES
Depreciation and amortization
Real estate taxes
Property operating
General and administrative
Casualty and impairment loss, net
Lease expense
(1)
Total expenses
Gain on sale of real estate
Gain on sale of lease
Interest income
Interest and debt expense
Gain on extinguishment of debt
Income before income taxes
Income tax benefit (expense)
Net income
Less net (income) loss attributable to noncontrolling interests in:
Operating partnership
Consolidated subsidiaries
Net income attributable to common shareholders
Earnings per common share - Basic:
Earnings per common share - Diluted:
Weighted average shares outstanding - Basic
Weighted average shares outstanding - Diluted
$
$
$
$
2020
Year Ended December 31,
2019
2018
328,280 $
1,283
532
330,095
384,405 $
1,900
1,344
387,649
96,029
60,049
56,126
48,682
3,055
13,667
277,608
39,775
—
2,599
(71,015)
34,908
58,754
38,996
97,750
(4,160)
(1)
93,589 $
0.79 $
0.79 $
117,722
117,902
94,116
60,179
64,062
38,220
12,738
14,466
283,781
68,632
1,849
9,774
(66,639)
—
117,484
(1,287)
116,197
(6,699)
25
109,523 $
0.91 $
0.91 $
119,751
119,896
(1)
Refer to Note 2 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
See notes to consolidated financial statements.
411,298
1,469
1,393
414,160
99,422
63,655
78,360
34,984
4,426
11,448
292,295
52,625
—
8,336
(64,868)
2,524
120,482
(3,519)
116,963
(11,768)
(45)
105,150
0.92
0.92
113,863
114,051
50
Balance, January 1, 2018
Net income attributable to common shareholders
Net income attributable to noncontrolling interests
Limited partnership interests:
Units redeemed for common shares
Reallocation of noncontrolling interests
Common shares issued
Dividends to common shareholders ($0.88 per
share)
Distributions to redeemable NCI ($0.88 per unit)
Share-based compensation expense
Share-based awards retained for taxes
Balance, December 31, 2018
Net income attributable to common shareholders
Net income (loss) attributable to noncontrolling
interests
Impact of ASC 842 adoption
Limited partnership interests:
Units redeemed for common shares
Units redeemed for cash
Reallocation of noncontrolling interests
Common shares issued
Dividends to common shareholders ($0.88 per
share)
Distributions to redeemable NCI ($0.88 per unit)
Share-based compensation expense
Share-based awards retained for taxes
Balance, December 31, 2019
Net income attributable to common shareholders
Net income attributable to noncontrolling interests
Limited partnership interests:
Units redeemed for common shares
Reallocation of noncontrolling interests
Common shares issued
Repurchase of common shares
Dividends to common shareholders ($0.68 per
share)
Distributions to redeemable NCI ($0.68 per unit)
Contributions from noncontrolling interests
Share-based compensation expense
Share-based awards retained for taxes
Balance, December 31, 2020
URBAN EDGE PROPERTIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(In thousands, except share and per share amounts)
Common Shares
Noncontrolling Interests (“NCI”)
Shares
Amount
Additional
Paid-In Capital
Accumulated
Earnings
(Deficit)
Operating
Partnership
Consolidated
Subsidiaries
Total Equity
113,827,529
—
—
429,110
—
106,116
—
—
—
(17,190)
1,138
—
—
4
—
2
—
—
—
(1)
114,345,565
—
1,143
—
—
—
6,995,941
—
—
59,895
—
—
—
(31,276)
—
—
69
—
—
1
—
—
—
—
946,402
—
—
3,500
1,263
647
—
—
4,992
(384)
956,420
—
—
—
55,788
(3,422)
4,521
569
—
—
5,906
(633)
(57,621)
105,150
—
—
—
(172)
(100,244)
—
30
—
(52,857)
109,523
—
(2,918)
—
—
—
(131)
(106,163)
—
—
—
$
121,370,125
—
—
$
1,213
—
—
$
1,019,149
—
—
$
(52,546)
93,589
—
1,579,389
—
66,588
(5,873,923)
—
—
—
—
(127,862)
15
—
1
(59)
—
—
—
—
(1)
11,129
8,833
427
(54,082)
—
—
—
5,871
(1,464)
—
—
(30)
—
(80,480)
—
—
—
—
100,218
—
11,768
—
(4,767)
—
—
(11,116)
4,719
—
100,822
—
6,699
—
(4,279)
(2,556)
(56,099)
—
—
(5,694)
7,643
—
46,536
—
4,160
—
(19,977)
—
—
—
(3,386)
—
11,123
—
117,014,317
$
1,169
$
989,863
$
(39,467)
$
38,456
$
See notes to consolidated financial statements.
404
—
45
—
—
—
—
—
—
—
449
—
(25)
—
—
—
—
—
—
—
—
—
$
$
424
—
1
—
—
—
—
—
—
5,447
—
—
5,872
990,541
105,150
11,813
3,504
(3,504)
477
(100,244)
(11,116)
9,741
(385)
1,005,977
109,523
6,674
(2,918)
51,578
(5,978)
(51,578)
439
(106,163)
(5,694)
13,549
(633)
1,014,776
93,589
4,161
11,144
(11,144)
398
(54,141)
(80,480)
(3,386)
5,447
16,994
(1,465)
$
995,893
51
URBAN EDGE PROPERTIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
2020
Year Ended December 31,
2019
2018
$
97,750 $
116,197 $
116,963
Depreciation and amortization
Casualty and impairment loss, net
Gain on sale of real estate
Gain on sale of lease
Gain on extinguishment of debt
Amortization of below market leases, net
Noncash lease expense
Straight-lining of rent
Share-based compensation expense
Rental revenue deemed uncollectible
Change in operating assets and liabilities:
Tenant and other receivables
Deferred leasing costs
Prepaid and other assets
Lease liabilities
Accounts payable, accrued expenses and other liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Real estate development and capital improvements
Acquisitions of real estate
Proceeds from sale of operating properties
Proceeds from sale of operating lease
Insurance proceeds
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Debt repayments
Dividends paid to common shareholders
Distributions paid to redeemable noncontrolling interests
Taxes withheld for vested restricted shares
Debt issuance costs
Payment for redemption of units
Proceeds related to the issuance of common shares
Cash paid to repurchase shares
Contributions from noncontrolling interests
Proceeds from borrowings
Net cash used in financing activities
Net (decrease) increase in cash and cash equivalents and restricted cash
Cash and cash equivalents and restricted cash at beginning of year
Cash and cash equivalents and restricted cash at end of year
$
See notes to consolidated financial statements
97,751
3,055
(39,775)
—
(34,908)
(10,624)
7,522
10,523
16,994
27,890
(21,998)
(1,218)
(41,982)
(6,680)
8,522
112,822
(28,522)
(124,340)
54,402
—
—
(98,460)
96,641
12,738
(68,632)
(1,849)
—
(15,940)
8,205
1,021
13,549
1,385
6,734
(4,303)
(3,331)
(7,107)
1,092
156,400
(91,301)
(47,356)
116,510
6,949
12,677
(2,521)
(89,302)
(26,647)
(1,314)
(1,465)
(3,471)
—
398
(54,141)
5,447
90,250
(80,245)
(65,883)
485,136
419,253 $
(5,587)
(106,163)
(5,694)
(633)
(2,649)
(5,978)
439
—
—
—
(126,265)
27,614
457,522
485,136 $
102,942
5,574
(52,625)
—
(2,524)
(33,975)
—
(735)
9,741
4,138
(13,327)
(4,675)
1,867
—
3,676
137,040
(118,765)
(4,931)
57,593
—
1,300
(64,803)
(4,288)
(100,244)
(11,116)
(385)
—
—
477
—
—
—
(115,556)
(43,319)
500,841
457,522
52
2020
Year Ended December 31,
2019
2018
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash payments for interest net of amounts capitalized of $715, $1,425 and $3,313, respectively
Cash payments for income taxes
NON-CASH INVESTING AND FINANCING ACTIVITIES
Accrued capital expenditures included in accounts payable and accrued expenses
Write-off of fully depreciated and impaired assets
Forgiveness of mortgage debt
Assumption of debt from the acquisition of real estate
Dividend/distribution declared and payable on January 19, 2021
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents at beginning of year
Restricted cash at beginning of year
Cash and cash equivalents and restricted cash at beginning of year
Cash and cash equivalents at end of year
Restricted cash at end of year
Cash and cash equivalents and restricted cash at end of year
$
$
$
$
$
68,113 $
499
64,751 $
1,601
5,808
21,447
30,000
72,473
55,905
432,954 $
52,182
485,136 $
384,572 $
34,681
419,253 $
5,056
56,199
—
—
—
440,430 $
17,092
457,522 $
432,954 $
52,182
485,136 $
See notes to consolidated financial statements.
65,699
757
25,661
24,307
11,537
—
—
490,279
10,562
500,841
440,430
17,092
457,522
53
URBAN EDGE PROPERTIES LP
CONSOLIDATED BALANCE SHEETS
(In thousands, except unit and per unit amounts)
ASSETS
Real estate, at cost:
Land
Buildings and improvements
Construction in progress
Furniture, fixtures and equipment
Total
Accumulated depreciation and amortization
Real estate, net
Operating lease right-of-use assets
Cash and cash equivalents
Restricted cash
Tenant and other receivables
Receivables arising from the straight-lining of rents
Identified intangible assets, net of accumulated amortization of $37,009 and $30,942, respectively
Deferred leasing costs, net of accumulated amortization of $16,419 and $16,560, respectively
Prepaid expenses and other assets
Total assets
LIABILITIES AND EQUITY
Liabilities:
Mortgages payable, net
Operating lease liabilities
Accounts payable, accrued expenses and other liabilities
Identified intangible liabilities, net of accumulated amortization of $71,375 and $62,610, respectively
Total liabilities
Commitments and contingencies
Equity:
Partners’ capital:
General partner: 117,014,317 and 121,370,125 units outstanding, respectively
Limited partners: 4,729,010 and 5,833,318 units outstanding, respectively
Accumulated deficit
Total partners’ capital
Noncontrolling interest in consolidated subsidiaries
Total equity
Total liabilities and equity
See notes to consolidated financial statements.
December 31,
2020
December 31,
2019
$
$
$
$
568,662 $
2,326,450
44,689
7,016
2,946,817
(730,366)
2,216,451
80,997
384,572
34,681
15,673
62,106
56,184
18,585
70,311
2,939,560 $
515,621
2,197,076
28,522
7,566
2,748,785
(671,946)
2,076,839
81,768
432,954
52,182
21,565
73,878
48,121
21,474
37,577
2,846,358
1,587,532 $
74,972
132,980
148,183
1,943,667
1,546,195
79,913
76,644
128,830
1,831,582
991,032
41,302
(42,313)
990,021
5,872
995,893
2,939,560 $
1,020,362
50,156
(56,166)
1,014,352
424
1,014,776
2,846,358
54
URBAN EDGE PROPERTIES LP
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except unit and per unit amounts)
2020
Year Ended December 31,
2019
2018
REVENUE
Rental revenue
Management and development fees
Other income
Total revenue
EXPENSES
Depreciation and amortization
Real estate taxes
Property operating
General and administrative
Casualty and impairment loss, net
Lease expense
(1)
Total expenses
Gain on sale of real estate
Gain on sale of lease
Interest income
Interest and debt expense
Gain on extinguishment of debt
Income before income taxes
Income tax benefit (expense)
Net income
Less: net (income) loss attributable to NCI in consolidated subsidiaries
Net income attributable to unitholders
Earnings per unit - Basic:
Earnings per unit - Diluted:
Weighted average units outstanding - Basic
Weighted average units outstanding - Diluted
$
$
$
$
328,280 $
1,283
532
330,095
96,029
60,049
56,126
48,682
3,055
13,667
277,608
39,775
—
2,599
(71,015)
34,908
58,754
38,996
97,750
(1)
97,749 $
0.80 $
0.80 $
121,957
122,811
384,405 $
1,900
1,344
387,649
94,116
60,179
64,062
38,220
12,738
14,466
283,781
68,632
1,849
9,774
(66,639)
—
117,484
(1,287)
116,197
25
116,222 $
0.92 $
0.92 $
126,333
126,478
(1)
Refer to Note 2 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
See notes to consolidated financial statements.
411,298
1,469
1,393
414,160
99,422
63,655
78,360
34,984
4,426
11,448
292,295
52,625
—
8,336
(64,868)
2,524
120,482
(3,519)
116,963
(45)
116,918
0.92
0.92
126,198
126,386
55
Balance, January 1, 2018
Net income attributable to unitholders
Net income attributable to noncontrolling
interests
Common units issued as a result of common
shares issued by Urban Edge
Equity redemption of OP Units
Limited partnership units issued, net
Reallocation of noncontrolling interests
Distributions to Partners ($0.88 per unit)
Share-based compensation expense
Share-based awards retained for taxes
Balance, December 31, 2018
Net income attributable to unitholders
Net loss attributable to noncontrolling
interests
Impact of ASC 842 adoption
Common units issued as a result of common
shares issued by Urban Edge
Equity redemption of OP Units
Equity redemption for cash
Limited partnership units issued, net
Reallocation of noncontrolling interests
Distributions to Partners ($0.88 per unit)
Share-based compensation expense
Share-based awards retained for taxes
Balance, December 31, 2019
Net income attributable to unitholders
Net income attributable to noncontrolling
interests
Common units issued as a result of common
shares issued by Urban Edge
Equity redemption of OP units
Repurchase of common shares
Reallocation of noncontrolling interests
Distributions to Partners ($0.68 per unit)
Contributions from noncontrolling interests
Share-based compensation expense
Share-based awards retained for taxes
URBAN EDGE PROPERTIES LP
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(In thousands, except unit and per unit amounts)
Total Shares
General Partner
Total Units
113,827,529
—
947,540
—
12,812,954
—
Limited
Partners
(1)
Accumulated
Earnings
(Deficit)
NCI in
Consolidated
Subsidiaries
Total Equity
—
106,116
429,110
—
—
—
—
(17,190)
114,345,565
—
—
—
59,895
6,995,941
—
—
—
—
—
(31,276)
—
649
3,504
—
1,263
—
4,992
(385)
957,563
—
—
—
570
55,857
(3,422)
—
4,521
—
5,906
(633)
121,370,125
—
$
1,020,362
—
—
66,588
1,579,389
(5,873,923)
—
—
—
—
(127,862)
—
428
11,144
(54,141)
8,833
—
—
5,871
(1,465)
991,032
105,495
—
—
—
—
—
(4,767)
—
4,719
—
105,447
—
—
—
—
(4,279)
(2,556)
—
(56,099)
—
7,643
—
50,156
—
—
—
—
—
(19,977)
—
—
11,123
—
$
(62,898)
116,918
—
(172)
—
—
—
(111,360)
30
—
(57,482)
116,222
—
(2,918)
(131)
—
—
—
—
(111,857)
—
—
(56,166)
97,749
—
(30)
—
—
—
(83,866)
—
—
—
$
—
—
(429,110)
352,789
—
—
—
—
12,736,633
—
—
—
—
(6,995,941)
(357,998)
450,624
—
—
—
—
5,833,318
—
—
475,081
(1,579,389)
—
—
—
—
—
—
$
404
—
45
—
—
—
—
—
—
—
449
—
(25)
—
—
—
—
—
—
—
—
—
424
—
1
—
—
—
—
—
5,447
—
—
5,872
$
$
990,541
116,918
45
477
3,504
—
(3,504)
(111,360)
9,741
(385)
1,005,977
116,222
(25)
(2,918)
439
51,578
(5,978)
—
(51,578)
(111,857)
13,549
(633)
1,014,776
97,749
1
398
11,144
(54,141)
(11,144)
(83,866)
5,447
16,994
(1,465)
995,893
Balance, December 31, 2020
117,014,317
$
4,729,010
$
41,302
$
(42,313)
$
(1)
Limited partners have a 3.9% common limited partnership interest in the Operating Partnership as of December 31, 2020 in the form of units of interest in the Operating Partnership (“OP Units”) and Long-Term Incentive Plan
(“LTIP”) units.
See notes to consolidated financial statements.
56
URBAN EDGE PROPERTIES LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
2020
Year Ended December 31,
2019
2018
$
97,750 $
116,197 $
116,963
Depreciation and amortization
Casualty and impairment loss, net
Gain on sale of real estate
Gain on sale of lease
Gain on extinguishment of debt
Amortization of below market leases, net
Noncash lease expense
Straight-lining of rent
Share-based compensation expense
Rental revenue deemed uncollectible
Change in operating assets and liabilities:
Tenant and other receivables
Deferred leasing costs
Prepaid and other assets
Lease liabilities
Accounts payable, accrued expenses and other liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Real estate development and capital improvements
Acquisitions of real estate
Proceeds from sale of operating properties
Proceeds from sale of operating lease
Insurance proceeds
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Debt repayments
Distributions paid to partners
Taxes withheld for vested restricted units
Debt issuance costs
Payment for redemption of units
Proceeds related to the issuance of common shares
Cash paid to repurchase shares
Contributions from noncontrolling interests
Proceeds from borrowings
Net cash used in financing activities
Net (decrease) increase in cash and cash equivalents and restricted cash
Cash and cash equivalents and restricted cash at beginning of year
Cash and cash equivalents and restricted cash at end of year
$
See notes to consolidated financial statements.
97,751
3,055
(39,775)
—
(34,908)
(10,624)
7,522
10,523
16,994
27,890
(21,998)
(1,218)
(41,982)
(6,680)
8,522
112,822
(28,522)
(124,340)
54,402
—
—
(98,460)
96,641
12,738
(68,632)
(1,849)
—
(15,940)
8,205
1,021
13,549
1,385
6,734
(4,303)
(3,331)
(7,107)
1,092
156,400
(91,301)
(47,356)
116,510
6,949
12,677
(2,521)
(89,302)
(27,961)
(1,465)
(3,471)
—
398
(54,141)
5,447
90,250
(80,245)
(65,883)
485,136
419,253 $
(5,587)
(111,857)
(633)
(2,649)
(5,978)
439
—
—
—
(126,265)
27,614
457,522
485,136 $
102,942
5,574
(52,625)
—
(2,524)
(33,975)
—
(735)
9,741
4,138
(13,327)
(4,675)
1,867
—
3,676
137,040
(118,765)
(4,931)
57,593
—
1,300
(64,803)
(4,288)
(111,360)
(385)
—
—
477
—
—
—
(115,556)
(43,319)
500,841
457,522
57
2020
Year Ended December 31,
2019
2018
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash payments for interest net of amounts capitalized of $715, $1,425 and $3,313, respectively
Cash payments for income taxes
NON-CASH INVESTING AND FINANCING ACTIVITIES
Accrued capital expenditures included in accounts payable and accrued expenses
Write-off of fully depreciated and impaired assets
Forgiveness of mortgage debt
Assumption of debt from the acquisition of real estate
Dividend/distribution declared and payable on January 19, 2021
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents at beginning of year
Restricted cash at beginning of year
Cash and cash equivalents and restricted cash at beginning of year
Cash and cash equivalents at end of year
Restricted cash at end of year
Cash and cash equivalents and restricted cash at end of year
$
$
$
$
$
68,113 $
499
64,751 $
1,601
5,808
21,447
30,000
72,473
55,905
432,954 $
52,182
485,136 $
384,572 $
34,681
419,253 $
5,056
56,199
—
—
—
440,430 $
17,092
457,522 $
432,954 $
52,182
485,136 $
See notes to consolidated financial statements.
65,699
757
25,661
24,307
11,537
—
—
490,279
10,562
500,841
440,430
17,092
457,522
58
URBAN EDGE PROPERTIES AND URBAN EDGE PROPERTIES LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
ORGANIZATION
Urban Edge Properties (“UE”, “Urban Edge” or the “Company”) (NYSE: UE) is a Maryland real estate investment trust focused on managing, developing,
redeveloping, and acquiring retail real estate in urban communities, primarily in the New York metropolitan area. Urban Edge Properties LP (“UELP” or the
“Operating Partnership”) is a Delaware limited partnership formed to serve as UE’s majority-owned partnership subsidiary and to own, through affiliates, all of the
Company’s real estate properties and other assets. Unless the context otherwise requires, references to “we”, “us” and “our” refer to Urban Edge Properties and
UELP and their consolidated entities/subsidiaries.
The Operating Partnership’s capital includes general and common limited partnership interests in the operating partnership (“OP Units”). As of December 31,
2020, Urban Edge owned approximately 96.1% of the outstanding common OP Units with the remaining limited OP Units held by members of management,
Urban Edge’s Board of Trustees and contributors of property interests acquired. Urban Edge serves as the sole general partner of the Operating Partnership. The
third-party unitholders have limited rights over the Operating Partnership such that they do not have characteristics of a controlling financial interest. As such, the
Operating Partnership is considered a variable interest entity (“VIE”), and the Company is the primary beneficiary which consolidates it. The Company’s only
investment is the Operating Partnership. The VIE’s assets can be used for purposes other than the settlement of the VIE’s obligations and the Company’s
partnership interest is considered a majority voting interest.
As of December 31, 2020, our portfolio consisted of 72 shopping centers, five malls and two industrial parks totaling approximately 16.3 million sf, which is
inclusive of a 95% controlling interest in Walnut Creek, CA (Mt. Diablo), and an 82.5% controlling interest in Sunrise Mall, in Massapequa, NY.
2.
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of
America (“GAAP”) for annual financial information and with the instructions of Form 10-K. The consolidated financial statements as of and for the years ended
December 31, 2020, 2019 and 2018 reflect the consolidation of the Company, the Operating Partnership, wholly-owned subsidiaries and those entities in which we
have a controlling financial interest. All intercompany transactions have been eliminated in consolidation.
In accordance with ASC 205 Presentation of Financial Statements, the Company reclassified Property rentals and Tenant reimbursement income to Rental revenue
on its consolidated statements of income for the year ended December 31, 2018, as reflected beginning on Form 10-K for the year ended December 31, 2018.
Additionally, the Company includes rental revenue deemed uncollectible as a reduction to rental revenue in the consolidated statements of income for the year
ended December 31, 2020 as reflected in this Form 10-K due to the adoption of ASC 842 Leases (“ASU 2016-02”). Provision for doubtful accounts is included in
"Property operating expenses" in the consolidated statements of income for the year ended December 31, 2018.
In accordance with ASC 205, certain prior year balances have been reclassified in order to conform to the current period presentation.
The Company includes real estate impairment charges, and casualty losses (gains) resulting from natural disasters in Casualty and impairment loss, net on its
consolidated statements of income for the years ended December 31, 2019 and 2018 as reflected in this Form 10-K. Refer to Note 9, Fair Value Measurements and
Note 10, Commitments and Contingencies in Part II, Item 8 in this Annual Report on Form 10-K for information regarding real estate impairment charges and
casualty losses (gains), respectively.
Our primary business is the ownership, management, redevelopment, development and operation of retail shopping centers and malls. We do not distinguish our
primary business or group our operations on a geographical basis for purposes of measuring performance. The Company’s chief operating decision maker reviews
operating and financial information for each property on an individual basis and therefore, each property represents an individual operating segment. None of our
tenants accounted for more than 10% of our revenue or property operating income. We aggregate all of our properties into one reportable segment due to their
similarities with regard to the nature and economics of the properties, tenants and operations, as well as long-term average financial performance.
59
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ from those estimates.
Real Estate — Real estate is carried at cost, net of accumulated depreciation and amortization. Expenditures for ordinary maintenance and repairs are expensed to
operations as they are incurred. Significant renovations that improve or extend the useful lives of assets are capitalized. As real estate is undergoing redevelopment
activities, all property operating expenses directly associated with and attributable to the redevelopment, including interest, are capitalized to the extent the
capitalized costs of the property do not exceed the estimated fair value of the property when completed. If the cost of the redeveloped property, including the net
book value of the existing property, exceeds the estimated fair value of redeveloped property, the excess is charged to impairment expense. The capitalization
period begins when redevelopment activities are underway and ends when the project is substantially complete. Depreciation is recognized on a straight-line basis
over estimated useful lives which range from one to 40 years.
Upon the acquisition of real estate, we assess the fair value of acquired assets (including land, buildings and improvements, identified intangibles, such as acquired
above and below-market leases, acquired in-place leases and tenant relationships) and assumption of liabilities and we allocate the purchase price based on these
assessments on a relative fair value basis. We assess fair value based on estimated cash flow projections utilizing appropriate discount and capitalization rates and
available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known trends, and
market/economic conditions. We record acquired intangible assets (including acquired above-market leases, acquired in-place leases and tenant relationships) and
acquired intangible liabilities (including below-market leases) at their estimated fair value. We amortize identified intangibles that have finite lives over the period
they are expected to contribute directly or indirectly to the future cash flows of the property or business acquired.
Our properties are individually reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
Such events and changes include macroeconomic conditions, including those caused by global pandemics, like the recent COVID-19 pandemic, which resulted in
property operational disruption and could indicate that the carrying amount may not be recoverable. An impairment exists when the carrying amount of an asset
exceeds the aggregate projected future cash flows over the anticipated holding period on an undiscounted basis taking into account the appropriate capitalization
rate in determining a future terminal value. An impairment loss is measured based on the excess of the property’s carrying amount over its estimated fair value.
Estimated fair value may be based on discounted future cash flows utilizing appropriate discount and capitalization rates and, in addition to available market
information, third-party appraisals, broker selling estimates or sale agreements under negotiation. Impairment analyses are based on our current plans, intended
holding periods and available market information at the time the analyses are prepared. If our estimates of the projected future cash flows change based on
uncertain market conditions, our evaluation of impairment losses may be different and such differences could be material to our consolidated financial statements.
Real Estate Held For Sale — When a real estate asset is identified by management as held for sale, we cease depreciation of the asset and estimate its fair value,
net of estimated costs to sell. If the estimated fair value, net of estimated costs to sell, of an asset is less than its net carrying value, an impairment charge is
recorded to reflect the estimated fair value. The Company classifies properties as held for sale when executed contract contingencies have been satisfied, which
signify that the sale is legally binding. Refer to Note 4, Acquisitions and dispositions in Part II, Item 8. in this Annual Report on Form 10-K.
Cash and Cash Equivalents — Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less and are carried at
cost, which approximates fair value due to their short-term maturities. The majority of our cash and cash equivalents consists of (i) deposits at major commercial
banks, which may at times exceed the Federal Deposit Insurance Corporation limit, (ii) United States Treasury Bills, and (iii) Certificate of Deposits placed
through an Account Registry Service (“CDARS”). To date we have not experienced any losses on our invested cash.
Restricted Cash — Restricted cash consists of security deposits and cash escrowed under loan agreements for debt service, real estate taxes, property insurance,
tenant improvements, leasing commissions, capital expenditures and cash held for potential Internal Revenue Code Section 1031 tax deferred exchange
transactions.
Tenant and Other Receivables and Changes in Collectibility Assessment — Tenant receivables include unpaid amounts billed to tenants, disputed enforceable
charges and accrued revenues for future billings to tenants for property expenses. We evaluate
60
the collectibility of amounts due from tenants and disputed enforceable charges on both a lease-by-lease and a portfolio-level, which result from the inability of
tenants to make required payments under their operating lease agreements. In light of the recent and ongoing COVID-19 pandemic, the Company is closely
monitoring changes in the collectibility assessment of its tenant receivables as a result of certain tenants suffering adverse financial consequences. We recognize
changes in the collectibility assessment of these operating leases as adjustments to rental revenue in accordance with ASC 842 Leases. Management exercises
judgment in assessing collectibility and considers payment history, current credit status and publicly available information about the financial condition of the
tenant, among other factors. Tenant receivables, including receivables arising from the straight-lining of rents, are written-off directly when management deems
that the collectibility of substantially all future lease payments from a specific lease is not probable for collection, at which point, the Company will begin
recognizing revenue from such leases prospectively, based on actual amounts received. This write-off effectively reduces cumulative non-cash rental income
recognized from the straight-lining of rents since lease commencement. In addition, future revenue recognition is limited to amounts paid by the lessee. We will
generally return to an accrual basis of accounting, if and when, collectability of substantially all the remaining contractual lease payments is reasonably probable.
During the year ended December 31, 2020, rental revenue deemed uncollectible of $27.9 million was classified as a reduction to rental revenue based on our
assessment of the probability of collecting substantially all of the remaining rents for certain tenants. Additionally, during the year ended December 31, 2020 we
recognized write-offs of $12.0 million related to receivables arising from the straight-lining of rents as a result of tenants impacted by the COVID-19 pandemic.
Deferred Leasing Costs — Deferred leasing costs include incremental costs of a lease that would have not been incurred if the lease had not been executed,
including broker and sale commissions and contingent legal fees. Such costs are capitalized and amortized on a straight-line basis over the term of the related
leases.
Deferred Financing Costs — Deferred financing costs include fees associated with our revolving credit agreement. Such fees are amortized on a straight-line basis
over the terms of the related revolving credit agreement as a component of interest expense, which approximates the effective interest rate method, in accordance
with the terms of the agreement. No amounts were drawn or outstanding under the revolving credit agreement as of December 31, 2020. Deferred financing costs
are included in prepaid expenses and other assets on the consolidated balance sheets.
Revenue Recognition — We have the following revenue sources and revenue recognition policies:
•
Rental revenue for fiscal periods prior to January 1, 2019: Rental revenue comprises revenue from property rentals and tenant expense reimbursements, as
designated within tenant operating leases in accordance with ASC 840 Leases.
◦
◦
Property Rentals: We generate revenue from minimum lease payments from tenant operating leases. These rents are recognized over the
noncancelable terms of the related leases on a straight-line basis which includes the effects of rent steps and rent abatements under the leases in
accordance with ASC 840. We satisfy our performance obligations over time, under the noncancelable lease term, commencing when the tenant
takes possession of the leased space and the leased space is substantially ready for its intended use. In addition, in circumstances where we
provide a lease incentive to tenants, we recognize the incentive as a reduction of rental revenue on a straight-line basis over the remaining term
of the lease. The underlying leased asset remains on our consolidated balance sheet and continues to depreciate. In addition to minimum lease
payments, certain rental income derived from our tenant leases is contingent and dependent on percentage rent. Percentage rents are earned by
the Company in the event the tenant's gross sales exceed certain amounts. Terms of percentage rent are agreed upon in the tenant's lease and will
vary based on the tenant's sales.
Tenant expense reimbursements: In accordance with ASC 840, revenue arises from tenant leases, which provide for the recovery of all or a
portion of the operating expenses, real estate taxes and capital improvements of the respective property. This revenue is accrued in the period the
expenses are incurred.
•
Rental revenue for fiscal periods beginning on or after January 1, 2019: Rental revenue comprises revenue from fixed and variable lease payments, as
designated within tenant operating leases in accordance with ASC 842 Leases, as described further in our Leases accounting policy in Note 3 to the
audited consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.
◦
Rental revenue deemed uncollectible: We evaluate the collectibility of amounts due from tenants and disputed enforceable charges on both a
lease-by-lease and a portfolio-level, which result from the inability of tenants to make required payments under their operating lease agreements.
We recognize changes in the collectibility assessment of these operating leases as adjustments to rental revenue in accordance with ASC 842.
61
•
Other Income: Other income is generated in connection with certain services provided to tenants for which we earn a fee. This revenue is recognized as
the services are transferred in accordance with ASC 606 Revenue from Contracts with Customers.
• Management and development fees: We generate management and development fee income from contractual property management agreements with third
parties. This revenue is recognized as the services are transferred in accordance with ASC 606.
Leases — We have approximately 1,100 operating leases at our properties, which generate rental income from tenants and operating cash flows for the Company.
Our tenant leases are dependent on the Company, as lessor, agreeing to provide our tenants with the right to control the use of our real estate assets, as lessees. Our
real estate assets are comprised of retail shopping centers, malls and industrial parks. Tenants agree to use and control their agreed upon space for their business
purposes. Thus, our tenants obtain substantially all of the economic benefits from the use of our shopping center space and have the right to direct how and for
what purpose the real estate space is used throughout the period of use. Given these contractual terms, the Company has determined that all tenant contracts of this
nature contain a lease. The Company assesses lease classification for each new and modified lease. All new and modified leases which commenced in the year
ended December 31, 2020 have been assessed and classified as operating leases.
Contractual rent increases of renewal options are often fixed at the time of the initial lease agreement which may result in tenants being able to exercise their
renewal options at amounts that are less than the fair value of the rent at the date of renewal. In addition to fixed base rents, certain rental income derived from our
tenant leases is variable and may be dependent on percentage rent or the Consumer Price Index ("CPI"). Variable lease payments from percentage rents are earned
by the Company in the event the tenant's gross sales exceed certain amounts. Terms of percentage rent are agreed upon in the tenant's lease and will vary based on
the tenant's sales. Variable lease payments dependent on the CPI, will change in accordance with the corresponding increase or decrease in CPI if negotiated and
agreed upon in the tenant's lease. Variable lease payments dependent on percentage rent and the CPI were $2.4 million and $4.1 million for the years ended
December 31, 2020 and 2019, respectively. Variable lease payments also arise from tenant expense reimbursements, which provide for the recovery of all or a
portion of the operating expenses, common area maintenance expenses, real estate taxes, insurance and capital improvements of the respective property and
amounted to $96.7 million and $105.3 million for the years ended December 31, 2020 and 2019, respectively. The Company accounts for variable lease payments
as "Rental revenue" on the consolidated statement of income in the period in which the changes in facts and circumstances on which the variable lease payments
are based occur.
The Company also has 22 properties in its portfolio either completely or partially on land or a building that are owned by third parties. These properties are leased
or subleased to us pursuant to ground leases, building leases or easements, with remaining terms ranging from less than two years to over 80 years and provide us
the right to operate each such property. We also lease or sublease real estate for our three corporate offices with remaining terms of less than one year. Right-of-use
("ROU") assets are recorded for these leases, which represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to
make lease payments arising from these leases. ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present
value of lease payments over the lease term. The initial measurement of a ROU asset may differ from the initial measurement of the lease liability due to initial
direct costs, prepaid lease payments and lease incentives. As of December 31, 2020, no other contracts have been identified as leases . Our leases often offer
renewal options, which we assess against relevant economic factors to determine whether the Company is reasonably certain of exercising or not exercising the
option. Lease payments associated with renewal periods, for which the Company has determined are reasonably certain of being exercised, are included in the
measurement of the corresponding lease liability and ROU asset.
For finance leases and operating leases, the discount rate applied to measure each ROU asset and lease liability is based on the incremental borrowing rate of the
lease due to the rate implicit in the lease not being readily determinable. The Company initially considers the general economic environment and factors in various
financing and asset specific secured borrowings so that the overall incremental borrowing rate is appropriate to the intended use of the lease. Certain expenses
derived from these leases are variable and are not included in the measurement of the corresponding lease liability and ROU asset, but are recognized in the period
in which the obligation for those payments is incurred. These variable lease payments consist of payments for real estate taxes and common area maintenance,
which is dependent on projects and activities at each individual property under ground or building lease.
Noncontrolling Interests — Noncontrolling interests in consolidated subsidiaries represent the portion of equity that we do not own in those entities that we
consolidate. We identify our noncontrolling interests separately within the equity section on the consolidated balance sheets. Noncontrolling interests in Operating
Partnership include OP units and limited partnership interests in the Operating Partnership in the form of long-term incentive plan (“LTIP”) unit awards classified
as equity.
62
Variable Interest Entities — Certain entities that do not have sufficient equity at risk for the entity to finance its activities without additional subordinated
financial support from other parties, or which do not have the obligation to absorb expected losses, do not have the right to receive expected residual returns, or do
not have the characteristics of a controlling financial interest qualify as VIEs. VIEs are required to be consolidated by their primary beneficiary. The primary
beneficiary of a VIE has both the power to direct the activities that most significantly impact economic performance of the VIE and the obligation to absorb losses
or the right to receive benefits that could potentially be significant to the VIE. The consolidated financial statements reflect the consolidation of VIEs in which the
Company is the primary beneficiary.
Management uses its judgment when determining if we are the primary beneficiary of, or have a controlling financial interest in, an entity in which we have a
variable interest. Factors considered in determining whether we have the power to direct the activities that most significantly impact the entity’s economic
performance include voting rights, involvement in day-to-day capital and operating decisions and the extent of our involvement in the entity.
Excluding the Operating Partnership, the Company had two entities that met the criteria of a VIE in which we held variable interests as of December 31, 2020.
These entities are VIEs primarily because the noncontrolling interests do not have substantive kick-out or participating rights and we control the significant
operating decisions and consequently have the power to direct the activities that most significantly impact the economic performance of these entities. As we also
have the obligation to absorb the majority of the losses and/or the right to receive a majority of the benefits for these entities, they were consolidated in our
financial statements as of December 31, 2020. The majority of the operations of these VIEs are funded with cash flows generated by the property.
As of December 31, 2020, excluding the Operating Partnership, we consolidated two VIEs with total assets and liabilities of $43.6 million and $31.5 million,
respectively. As of December 31, 2019, excluding the Operating Partnership, we consolidated one VIE with total assets of $9.8 million and liabilities of $3.1
million.
Earnings Per Share and Unit — Basic earnings per common share and unit is computed by dividing net income attributable to common shareholders and
unitholders by the weighted average common shares and units outstanding during the period. Unvested share-based payment awards that entitle holders to receive
non-forfeitable dividends, such as our restricted stock awards, are classified as “participating securities.” Because the awards are considered participating
securities, the Company and the Operating Partnership are required to apply the two-class method of computing basic and diluted earnings that would otherwise
have been available to common shareholders and unitholders. Under the two-class method, earnings for the period are allocated between common shareholders and
unitholders and other shareholders and unitholders, based on their respective rights to receive dividends. During periods of net loss, losses are allocated only to the
extent the participating securities are required to absorb their share of such losses. Diluted earnings per common share and unit reflects the potential dilution of the
assumed exercises of shares including stock options and unvested restricted shares to the extent they are dilutive.
Share-Based Compensation — We grant stock options, LTIP units, OP units, deferred share units, restricted share awards and performance-based units to our
officers, trustees and employees. The term of each award is determined by the compensation committee of our Board of Trustees (the “Compensation
Committee”), but in no event can such term be longer than ten years from the date of grant. The vesting schedule of each award is determined by the Compensation
Committee, in its sole and absolute discretion, at the date of grant of the award. Dividends are paid on certain shares of unvested restricted stock, which makes the
restricted stock a participating security.
Fair value is determined, depending on the type of award, using either the Black-Scholes option-pricing model or the Monte Carlo method, both of which are
intended to estimate the fair value of the awards at the grant date. In using the Black-Scholes option-pricing model, expected volatilities and dividend yields are
primarily based on available implied data and peer group companies’ historical data. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at
the time of grant.
Compensation expense for restricted share awards is based on the fair value of our common shares at the date of the grant and is recognized ratably over the
vesting period. For grants with a graded vesting schedule or a cliff vesting schedule, we have elected to recognize compensation expense on a straight-line basis.
The OPP unrecognized compensation expense is recognized on a straight-line basis over the remaining life of the OPP awards issued. Share-based compensation
expense is included in general and administrative expenses on the consolidated statements of income.
When the Company issues common shares as compensation, it receives a like number of common units from the Operating Partnership. Accordingly, the
Company’s ownership in the Operating Partnership will increase based on the number of common shares awarded under our 2015 Omnibus Share Plan. As a result
of the issuance of common units to the Company for share-based compensation, the Operating Partnership accounts for share-based compensation in the same
manner as the Company.
63
Income Taxes — The Company elected to be taxed as a REIT under sections 856-860 of the Code, commencing with the filing of its 2015 tax return for its tax
year ended December 31, 2015. With the exception of the Company’s TRS, to the extent the Company meets certain requirements under the Code, the Company
will not be taxed on its federal taxable income. If we fail to qualify as a REIT for any taxable year, we will be subject to federal income taxes at regular corporate
rates (including any alternative minimum tax, which, for corporations, was repealed under the TCJA for tax years beginning after December 31, 2017) and may not
be able to qualify as a REIT for the four subsequent taxable years. In addition to its TRS, the Company is subject to certain foreign and state and local income
taxes, in particular income taxes arising from its operating activities in Puerto Rico, which are included in income tax expense in the consolidated statements of
income.
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and
tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are
expected to be recovered or settled. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to
be more likely than not.
The Company applies the FASB’s guidance relating to uncertainty in income taxes recognized in a Company’s financial statements. Under this guidance the
Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by
taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on
the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The guidance on accounting for uncertainty in income taxes
also provides guidance on derecognition, classification, interest and penalties on income taxes, and accounting in interim periods. The Company records interest
and penalties relating to unrecognized tax benefits, if any, as income tax expense
Concentration of Credit Risk — A concentration of credit risk arises in our business when a national or regionally-based tenant occupies a substantial amount of
space in multiple properties owned by us. In that event, if the tenant suffers a significant downturn in its business, it may become unable to make its contractual
rent payments to us, exposing us to potential losses in rental revenue, expense recoveries, and percentage rent. Further, the impact may be magnified if the tenant is
renting space in multiple locations. Generally, we do not obtain security from our national or regionally-based tenants in support of their lease obligations to us.
We regularly monitor our tenant base to assess potential concentrations of credit risk. None of our tenants accounted for more than 10% of total revenues in the
year ended December 31, 2020. As of December 31, 2020, The Home Depot was our largest tenant with six stores which comprised an aggregate of 809,000 sf and
accounted for approximately $20.7 million, or 6.3% of our total revenue for the year ended December 31, 2020.
Recently Issued Accounting Literature
Effective for the fiscal period beginning January 1, 2019, we adopted (“ASU 2016-02”) ASC 842 Leases, which sets out the principles for the recognition,
measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). In connection with the adoption of ASU 2016-02, we also
adopted (i) ASU 2019-01 Leases (ASC 842): Codification Improvements, (ii) ASU 2018-20 Leases (ASC 842): Narrow-Scope Improvements for Lessors, (iii) ASU
2018-11 Leases (ASC 842): Targeted Improvements, (iv) ASU 2018-10 Codification Improvements to ASC 842, Leases and (v) ASU 2018-01 Leases (ASC 842):
Land Easement Practical Expedient for Transition to Topic 842.
We initially applied the standard at the beginning of the period of adoption through the transition method issued by ASU 2018-11 and have presented comparative
periods under ASC 840 Leases. Due to the effects of applying ASC 842, the Company recognized a $2.9 million cumulative-effect adjustment to its accumulated
deficit in the year ended December 31, 2019 to adjust reserves on receivables from straight-line rents. The new standard requires lessees to apply a two-model
approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee.
This classification determines whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A
lessee is also required to record a ROU asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. The
Company has elected the short-term lease recognition exemption, and therefore, leases with a term of 12 months or less are not recognized on the balance sheet.
The new standard requires lessors to account for leases using an approach that is substantially equivalent to guidance for sales-type leases, direct financing leases
and operating leases under ASC 840. For purposes of transition, we did not elect the hindsight practical expedient but did elect the land easement practical
expedient to not reassess whether existing land easements contain leases and the practical expedient package, which has been applied consistently to all of our
leases. As a result of electing the practical expedient package, we did not (i) reassess whether any expired or existing contracts are or contain leases, (ii) reassess
the lease classification for any expired or existing leases or (iii) reassess initial direct costs for any existing leases.
64
From a lessee perspective, the initial adoption on January 1, 2019 resulted in the recognition of operating lease ROU assets and lease liabilities for 24 operating
leases with an aggregate balance of $98.5 million and $93.6 million, respectively. On January 1, 2019, we also reclassified $11.9 million of acquired below-market
lease intangibles and $7.1 million of accrued rent and adjusted the carrying values of our ROU assets by the corresponding amounts. As of December 31, 2020, the
Company had 26 operating leases and our operating lease ROU assets and lease liabilities were $81.0 million and $75.0 million, respectively, as presented on our
consolidated balance sheet. Subsequent to adoption, the Company recognized a finance lease in connection with the Company acquiring the lessee position of a
ground lease in 2019. As of December 31, 2020, our finance lease ROU asset and finance lease liability were $2.7 million and $3.0 million, respectively. The
finance lease ROU asset is included within prepaid expenses and other assets on our consolidated balance sheets as of December 31, 2020 and 2019 and the
finance lease liability is included within accounts payable, accrued expenses and other liabilities on our consolidated balance sheets as of December 31, 2020 and
2019. The Company recognizes interest expense on its finance lease liability. The standard's adoption has also impacted the presentation of our consolidated
income statement due to accounting for the lease and non-lease components as a single lease component for all classes of underlying assets, presented as lease
expense on the consolidated statement of income. Prior to the adoption of ASC 842, related lease and non-lease expense amounts were recognized within lease
expense, real estate taxes, property operating expenses and general administrative expenses on the consolidated statement of income.
From a lessor perspective, the adoption resulted in additional general and administrative expenses, attributable to internal leasing department costs not meeting the
definition of initial direct costs under ASC 842. The standard's adoption has also impacted the presentation of our consolidated income statement due to accounting
for lease and non-lease components as a single lease component, presented as rental revenue on the consolidated statement of income, however there has been no
change in the timing of revenue recognition since adoption. Additionally, under the amendments issued in ASU 2018-20, the Company has accounted for common
area maintenance expenses paid directly by tenants to third-parties as variable rental revenue and has reported the corresponding expense within property operating
expenses. Real estate taxes and insurance expenses paid directly by tenants have not been recognized as rental revenue or as expenses on the consolidated
statements of income.
The adoption of this standard has also resulted in additional quantitative and qualitative footnote disclosures (refer to Note 8 Leases to the consolidated financial
statements included in Part II, Item 8 of this Annual Report on Form 10-K).
Effective for the fiscal period beginning January 1, 2020, we adopted ASU 2016-13, Financial Instruments - Credit Losses (ASC 326): Measurement of Credit
Losses. In connection with the adoption of ASU 2016-03, we also adopted (i) ASU 2018-19 Codification Improvements to ASC 326, Financial Instruments - Credit
Losses, (ii) ASU 2019-04, Codification Improvements to ASC 326, Financial Statements - Credit Losses, Topic 815, Derivatives and Hedging and Topic 825,
Financial Instruments, (iii) ASU 2019-05 Financial Instruments - Credit Losses (ASC 326): Targeted Transition Relief and (iv) ASU 2019-11 Codification
Improvements to ASC 326, Financial Instruments - Credit Losses. ASU 2016-13 introduces a new model for estimating credit losses for certain types of financial
instruments and also modifies the impairment model with new methodology for estimating credits losses. In November 2018, the FASB issued ASU 2018-19
Codification Improvements to Topic 326, Financial Instruments — Credit Losses, which included amendments to clarify receivables arising from operating leases
are within the scope ASC 842 Leases. Due to the adoption of ASC 842 on January 1, 2019, the Company includes rental revenue deemed uncollectible as a
reduction to rental revenue in the consolidated statements of income. As of December 31, 2020, the Company did not have any material outstanding financial
instruments. The adoption of ASU 2016-13 has had no impact to our consolidated financial statements and disclosures.
In August 2018, the FASB issued ASU 2018-13 Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement to ASC 820, Fair
Value Measurement. ASU 2018-13 modifies the disclosure requirements for fair value measurements by removing, modifying, and/or adding certain disclosures.
ASU 2018-13 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2019. We elected to early adopt ASU 2018-13
effective January 1, 2019. The adoption of ASU 2018-13 did not have a material impact on our consolidated financial statements and disclosures.
In December 2019, the FASB issued ASU 2019-12 Income Taxes (ASC 740): Simplifying the Accounting for Income Taxes, which enhances and simplifies various
aspects of the income tax accounting. ASU 2019-12 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2020. Early
adoption is permitted. We adopted ASU 2019-12 effective January 1, 2021. The adoption of ASU 2019-12 did not have a material impact on our consolidated
financial statements and disclosures.
In March 2020, the FASB issued ASU 2020-04 Reference Rate Reform (ASC 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,
which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. ASU 2020-04 is effective for all entities as of
March 12, 2020 through December 31, 2022. We currently do not anticipate the need to modify our existing debt agreements as a result of reference rate reform in
the current year,
65
however if any modification is executed as a result of reference rate reform, the Company will elect the optional expedient available under ASU 2020-04, which
allows entities to account for the modification as if the modification was not substantial. We will disclose the nature of and reason for electing the optional
expedient in each interim and annual financial statement period if and when applicable through December 31, 2022.
In April 2020, the FASB issued a question-and-answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to
lease concessions provided as a result of COVID-19. Under existing lease guidance, the Company would have to determine, on a lease by lease basis, if a lease
concession was the result of a new arrangement reached with the tenant (treated with the lease modification accounting framework) or if a lease concession was
under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The
Lease Modification Q&A clarifies that entities may elect to not evaluate whether lease-related relief, that lessors provide to mitigate the economic effects of
COVID-19 on lessees, is a lease modification under ASC 842. Instead, when the cash flows resulting from the lease concession granted for COVID-19 rent relief
are substantially the same or less than the cash flows of the original contract, an entity may elect to apply the modification guidance (i.e. assume the relief was
always contemplated by the contract or assume the relief was not contemplated by the contract).
The FASB stated that there are multiple ways to account for rent concessions, none of which the FASB believes are more preferable than the others. Two of those
methods are: (i) account for the concessions as if no changes to the lease contract were made; under that accounting, a lessor would continue to increase its lease
receivable and continue to recognize income, referred to as the “receivable approach”; or (ii) account for the deferred payments or abatements as variable lease
payments; under that accounting, a lessor would recognize the payment as income in profit or loss in the period in which the changes in facts and circumstances on
which the variable lease payments are based occurred, referred to as the “variable approach”.
The Company has evaluated its election on a disaggregated basis, with such election applied consistently to leases with similar characteristics and similar
circumstances. As of December 31, 2020, the Company granted rent deferrals with an aggregate deferral amount of $5.1 million, with $4.5 million accounted for
under the receivable approach by electing the Lease Modification Q&A and $0.6 million accounted for as modifications due to term extensions of the leases. The
Company also granted abatements aggregating $3.9 million as of December 31, 2020, with $0.4 million accounted for under the variable approach and $3.5 million
accounted for as modifications due to the executed agreements including other rental term modifications, such as term extensions and substantial changes in cash
flows. The Company remains in active discussions with its impacted tenants to grant further concessions. The full future impact of the Lease Modification Q&A is
dependent upon the extent of lease concessions granted to tenants as a result of COVID-19 and the elections made by the Company at the time of entering into such
concessions. Refer to Note 10 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Any other recently issued accounting standards or pronouncements not disclosed above have been excluded as they are not relevant to the Company or the
Operating Partnership, or they are not expected to have a material impact on our consolidated financial statements.
66
4. ACQUISITIONS AND DISPOSITIONS
Acquisitions
During the years ended December 31, 2020 and December 31, 2019, we closed on the following acquisitions:
Date Purchased
Property Name
City
State
Square Feet
Purchase Price
(in thousands)
February 12, 2020
February 12, 2020
December 11, 2020
December 31, 2020
Kingswood Center
Kingswood Crossing
51 East Spring Valley Ave
Sunrise Mall
November 1, 2019
November 8, 2019
December 9, 2019
25 East Spring Valley Ave
Wonderland Marketplace
150 Route 4 East
Brooklyn
Brooklyn
Maywood
Massapequa
Maywood
Revere
Paramus
NY
NY
NJ
NY
NJ
MA
NJ
$
130,000
110,000
3,000
1,211,000
2020 Total $
$
43,800
139,500
12,000
2019 Total $
90,212
77,077
662
31,545
199,496
(1)
7,162
24,209
7,118
38,489
(1)
(1)
The total purchase price for the properties acquired in the year ended December 31, 2020 and December 31, 2019 include $3.1 million and $0.3 million, respectively, of
transaction costs incurred in relation to the transactions.
During the year ended December 31, 2020, the Company purchased four assets, at an aggregate purchase price of $199.5 million and 1.5 million sf, comprising
two assets located in Brooklyn, NY, one asset located in Massapequa, NY and one asset adjacent to our existing property, Bergen Town Center.
The Company acquired Sunrise Mall in Massapequa, NY for $31.5 million, including transaction costs on December 31, 2020. The Company’s acquired ownership
interest of the asset is 82.5% with the remaining 17.5% held by strategic partners. As of December 31, 2020, the Company was subject to $6.0 million of additional
consideration related to the acquisition of Sunrise Mall, the payment of which is contingent on the verdict of a property tax appeal. As of December 31, 2020, the
outcome of this appeal could not be estimated or determined and was therefore not recorded in the financial statements.
The Company acquired Kingswood Center and Kingswood Crossing for $167.3 million, including transaction costs on February 12, 2020. The properties are
located along Kings Highway in the Midwood neighborhood of Brooklyn, NY and were funded via 1031 exchanges using cash proceeds from dispositions.
Additionally, as part of the acquisition of Kingswood Center, the Company assumed a $65.5 million mortgage, which matures in 2028.
A portion of the acquisition of Kingswood Crossing was completed as a reverse Section 1031 like-kind exchange. We entered into a reverse Section 1031 like-kind
exchange agreement with third-party intermediaries, which, for a maximum of 180 days, allowed us to defer for tax purposes, gains on the sale of other properties
identified and sold within the period. Until the earlier of the termination of the exchange agreements or 180 days after the respective acquisition dates, the third-
party intermediaries are the legal owner of the properties; however, we controlled the activities that most significantly impact each property and retained all of the
economic benefits and risks associated with each property. Therefore, at the date of acquisition, we determined that we were the primary beneficiary of these
variable interest entities and consolidated the properties and their operations as of the acquisition date.
The Company purchased three assets with a total consideration of $38.5 million during the year ended December 31, 2019. Wonderland Marketplace is located in
the Boston metropolitan area and two assets are adjacent to our existing property, Bergen Town Center. The acquisitions were executed through Internal Revenue
Code Section 1031 tax deferred exchange transactions and funded using proceeds from dispositions.
67
The aggregate purchase price of the above property acquisitions has been allocated as follows:
Property Name
(in thousands)
Kingswood Center
Kingswood Crossing
51 East Spring Valley Ave
(2)
Sunrise Mall
$
2020 Total $
25 East Spring Valley Ave
Wonderland Marketplace
150 Route 4 East
(3)
$
2019 Total $
Land
Buildings and
improvements
Identified
intangible
assets
(1)
Identified
intangible
(1)
liabilities
Debt
Premium
ROU assets net
of lease
liabilities
Other assets,
net
Total Purchase
Price
15,690 $
8,150
662
44,035
68,537 $
— $
6,323
7,118
13,441 $
76,766 $
64,159
—
3,084
144,009
$
$
6,824
17,130
—
23,954 $
9,263 $
4,768
—
5,495
19,526
$
$
623
2,947
—
3,570 $
(4,534)
—
—
(26,495)
(31,029)
(31)
(2,191)
—
(2,222)
$
$
$
$
(6,973) $
—
—
—
(6,973) $
— $
—
—
— $
— $
—
—
5,012
5,012 $
(254) $
—
—
(254) $
—
—
—
414
414
—
—
—
—
$
$
$
$
90,212
77,077
662
31,545
199,496
7,162
24,209
7,118
38,489
(1)
(2)
(3)
As of December 31, 2020, the remaining weighted average amortization periods of the identified intangible assets and identified intangible liabilities acquired in 2020 were 11.0 years and
32.5 years, respectively and the remaining weighted average amortization periods of the identified intangible assets and identified intangible liabilities acquired in 2019 were 11.4 years and
23 years, respectively.
In connection with this acquisition, the Company acquired the lessee positions of ground leases and recognized operating lease ROU assets and operating lease liabilities. Refer to Note 8 to
the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information.
In connection with this acquisition, the Company acquired the lessee position of a ground lease and recognized a finance lease ROU asset and finance lease liability of $2.7 million and $3.0
million, respectively.
Dispositions
During the year ended December 31, 2020, we disposed of three properties and received proceeds of $58.1 million, net of selling costs, resulting in a $39.8 million
net gain on sale of real estate. The sale of all three dispositions were completed as 1031 exchanges with Kingswood Crossing as a result of the sales occurring
within 180 days of the Company’s acquisition.
During the year ended December 31, 2019, we disposed of eight properties and received proceeds of $112.8 million, net of selling costs, resulting in a $68.6
million net gain on sale of real estate on our consolidated statements of income during the year ended December 31, 2019.
During the year ended December 31, 2019, the Company also sold its lessee position in one of its ground leases and received proceeds of $6.9 million, net of
selling costs, and derecognized the lease’s ROU asset and corresponding lease liability. We recognized a gain on sale of lease of $1.8 million on our consolidated
statements of income during the year ended December 31, 2019 as a result of the sale.
Real Estate Held for Sale
As of December 31, 2020, a parcel of one property in Lodi, NJ was classified as held for sale based on an executed contract of sale with a third-party buyer. The
aggregate amount of this parcel was $7.1 million and was included in prepaid expenses and other assets in our consolidated balance sheets as of December 31,
2020. The parcel was sold in January 2021.
As of December 31, 2019, two properties in Lawnside, NJ and Bethlehem, PA were classified as held for sale based on executed contracts of sale with third-party
buyers. The aggregate amounts of the Lawnside, NJ and Bethlehem, PA properties were $3.5 million and $3.1 million, respectively, and were included in prepaid
expenses and other assets in our consolidated balance sheets as of December 31, 2019. Both properties were sold during the year ended December 31, 2020.
68
5. IDENTIFIED INTANGIBLE ASSETS AND LIABILITIES
The following table summarizes our identified intangible assets and liabilities:
(Amounts in thousands)
In-place leases
Accumulated amortization
Above-market leases
Accumulated amortization
Other intangible assets
Accumulated amortization
Identified intangible assets, net of accumulated amortization
Below-market leases
Accumulated amortization
Identified intangible liabilities, net of accumulated amortization
December 31, 2020
December 31, 2019
82,303 $
(32,515)
9,255
(3,570)
1,635
(924)
56,184
219,558
(71,375)
148,183 $
71,328
(27,254)
6,100
(2,998)
1,635
(690)
48,121
191,440
(62,610)
128,830
$
$
Amortization of acquired below-market leases, net of acquired above-market leases resulted in rental income of $10.6 million, $15.9 million, and $34.0 million for
the years ended December 31, 2020, 2019 and 2018, respectively.
Amortization of acquired in-place leases and customer relationships resulted in depreciation and amortization expense of $10.2 million, $8.8 million, $15.1 million
for the years ended December 31, 2020, 2019 and 2018, respectively.
The following table sets forth the estimated annual amortization (expense) and income related to intangible assets and liabilities for the five succeeding years
commencing January 1, 2021:
(Amounts in thousands)
Year
2021
2022
2023
2024
2025
Below-Market
Operating Lease Amortization
Above-Market
Operating Lease Amortization
In-Place Lease
Amortization
$
10,543 $
10,466
10,421
10,185
10,012
(1,170) $
(803)
(695)
(631)
(452)
(7,596)
(5,998)
(4,857)
(4,371)
(3,733)
69
6. MORTGAGES PAYABLE
The following is a summary of mortgages payable as of December 31, 2020 and December 31, 2019.
Interest Rate at
December 31, 2020
December 31,
2020
December 31,
2019
(Amounts in thousands)
First mortgages secured by:
Variable rate
(1)
Cherry Hill (Plaza at Cherry Hill)
(1)
Westfield (One Lincoln Plaza)
Woodbridge (Plaza at Woodbridge)
Jersey City (Hudson Commons)
Watchung
Bronx (1750-1780 Gun Hill Road)
Total variable rate debt
(2)
(2)
(2)
(1)
Fixed rate
Paramus (Bergen Town Center - West)
Bronx (Shops at Bruckner)
Jersey City (Hudson Mall)
Yonkers Gateway Center
Brick
North Plainfield
Las Catalinas
Middletown
Rockaway
East Hanover (200 - 240 Route 10 West)
North Bergen (Tonnelle Ave)
Manchester
Millburn
Totowa
Woodbridge (Woodbridge Commons)
East Brunswick
East Rutherford
Brooklyn (Kingswood Center)
Hackensack
Marlton
East Hanover Warehouses
Union (2445 Springfield Ave)
Freeport (Freeport Commons)
Montehiedra
Montclair
Garfield
Mt Kisco
Montehiedra (junior loan)
Total fixed rate debt
(3)
(3)
Maturity
5/24/2022
5/24/2022
5/25/2022
11/15/2024
11/15/2024
12/1/2024
4/8/2023
5/1/2023
12/1/2023
4/6/2024
12/10/2024
12/10/2025
2/1/2026
12/1/2026
12/1/2026
12/10/2026
4/1/2027
6/1/2027
6/1/2027
12/1/2027
12/1/2027
12/6/2027
1/6/2028
2/6/2028
3/1/2028
12/1/2028
12/1/2028
12/10/2028
12/10/2029
6/1/2030
8/15/2030
12/1/2030
11/15/2034
—
(1)
(2)
Bears interest at one month LIBOR plus 160 bps.
Bears interest at one month LIBOR plus 190 bps.
Total mortgages payable, net of unamortized debt issuance costs $
Total mortgages payable
Unamortized debt issuance costs
$
1.75%
1.75%
1.75%
2.05%
2.05%
2.05%
3.56%
3.90%
5.07%
4.16%
3.87%
3.99%
4.43%
3.78%
3.78%
4.03%
4.18%
4.32%
3.97%
4.33%
4.36%
4.38%
4.49%
5.07%
4.36%
3.86%
4.09%
4.01%
4.07%
5.00%
3.15%
4.14%
6.40%
—%
28,930 $
4,730
55,340
28,586
26,613
25,172
169,371
300,000
10,351
22,904
28,482
50,000
25,100
127,669
31,400
27,800
63,000
100,000
12,500
23,381
50,800
22,100
63,000
23,000
71,696
66,400
37,400
40,700
45,600
43,100
81,141
7,250
40,300
12,952
—
1,428,026
1,597,397
(9,865)
1,587,532 $
28,930
4,730
55,340
29,000
27,000
24,500
169,500
300,000
10,978
23,625
30,122
50,000
25,100
129,335
31,400
27,800
63,000
100,000
12,500
23,798
50,800
22,100
63,000
23,000
—
66,400
37,400
40,700
45,600
43,100
83,202
—
40,300
13,488
30,000
1,386,748
1,556,248
(10,053)
1,546,195
70
(3)
The mortgage payable balance on the loan secured by Kingswood Center includes $6.2 million of unamortized debt premium as of December 31, 2020. The effective
interest rate including amortization of the debt premium is 3.5% as of December 31, 2020.
The net carrying amount of real estate collateralizing the above indebtedness amounted to approximately $1.3 billion as of December 31, 2020. Our mortgage loans
contain covenants that limit our ability to incur additional indebtedness on these properties and in certain circumstances require lender approval of tenant leases
and/or yield maintenance upon repayment prior to maturity. As of December 31, 2020, we were in compliance with all debt covenants.
As of December 31, 2020, the principal repayments for the next five years and thereafter are as follows:
(Amounts in thousands)
Year Ending December 31,
2021
2022
2023
2024
2025
2026
Thereafter
Revolving Credit Agreement
$
14,460
103,526
349,742
163,625
40,867
231,056
694,121
On January 15, 2015, we entered into a $500 million Revolving Credit Agreement (the “Agreement”) with certain financial institutions. On March 7, 2017, we
amended and extended the Agreement. The amendment increased the credit facility size by $100 million to $600 million and extended the maturity date to
March 7, 2021 with two six-month extension options. On July 29, 2019, we entered into a second amendment to the Agreement to extend the maturity date to
January 29, 2024 with two six-month extension options.
On June 3, 2020, we entered into a third amendment to the Agreement, which among other things, modifies certain definitions and the measurement period for
certain financial covenants to a trailing four-quarter period instead of the most recent quarter period annualized. Company borrowings under the Agreement are
subject to interest at LIBOR plus 1.05% to 1.50% and an annual facility fee of 15 to 30 basis points. Both the spread over LIBOR and the facility fee are based on
our current leverage ratio and are subject to increase if our leverage ratio increases above predefined thresholds. The Agreement contains customary financial
covenants including a maximum leverage ratio of 60% and a minimum fixed charge coverage ratio of 1.5x.
In March 2020 we drew $250 million on our $600 million revolving credit facility and this balance was fully repaid in November 2020. No amounts were drawn or
outstanding under the Agreement as of December 31, 2020. Financing fees associated with the Agreement of $3.3 million and $3.9 million as of December 31,
2020 and December 31, 2019, respectively, are included in deferred financing fees, net in the consolidated balance sheets.
Mortgage on Las Catalinas Mall
In April 2020, we notified the servicer of the $129 million non-recourse mortgage loan on Las Catalinas Mall in Puerto Rico that cash flow would be insufficient to
service the debt and that we were unwilling to fund the shortfalls. In December 2020, the non-recourse mortgage loan on Las Catalinas Mall was modified to
convert the mortgage from an amortizing 4.43% loan to interest only payments, starting at 3.00% in 2021 and increasing 50 basis points annually until returning to
4.43% in 2024 and thereafter, and to include the ability for the Company to repay the loan at a discounted value of $72.5 million, beginning in August 2023
through the extended maturity date of February 2026. We have accrued interest of $6.5 million related to this mortgage, which is included in accounts payable,
accrued expenses and other liabilities on the consolidated balance sheet as of December 31, 2020. We incurred $1.2 million of lender fees in connection with the
loan modification which are treated as a reduction of the mortgage payable balance and amortized over the term of the loan in accordance with the provisions under
ASC 470-60 Troubled Debt Restructurings.
Mortgage on property in Montclair, NJ
On August 6, 2020, the Company obtained a 10-year non-recourse mortgage loan of $7.3 million at a rate of 3.15% on its property in Montclair, NJ.
71
Mortgage on The Outlets at Montehiedra
In June 2020, we completed the refinancing of our non-recourse mortgage on The Outlets at Montehiedra (“Montehiedra”) in Puerto Rico. Prior to the refinancing,
the mortgage was comprised of an $83 million senior loan bearing interest at 5.33% and a $30 million junior loan bearing interest at 3.00%, plus total accrued
interest of $5.7 million. Under the payoff provisions of the prior mortgage, the $30 million junior loan plus accrued interest of $5.4 million on the junior loan was
forgiven and the senior loan was replaced by a new $82 million 10-year fixed rate mortgage, bearing interest at 5.00%. As a result of the transaction, we
recognized a net gain on extinguishment of debt of $34.9 million during the year ended December 31, 2020, comprised of the forgiven $30 million junior loan plus
accrued interest of $5.4 million, offset by the write-off of $0.4 million of unamortized deferred financing fees and $0.1 million of transaction costs incurred.
The Company has provided a $12.5 million limited corporate guarantee of the mortgage secured by Montehiedra that is triggered only if any of the following
events occur: (1) certain reserve accounts were not funded as of a specified date (which funding did occur in full at closing), (2) the lease to Sears Holding
Corporation (“Kmart”) at Montehiedra is terminated for any reason or (3) the Kmart lease is materially amended and a debt service coverage ratio falls below a
specified threshold. In February 2021, Kmart announced that it would be closing the store related to such lease, but it is not yet evident whether the lease will be
terminated or amended. No triggering events have occurred that would require the release of the guarantee and the tenant has lease obligations through 2023. The
guarantee would be released should certain financial metrics at Montehiedra be achieved even if the Kmart box remains vacant. The guarantee is reduced
commensurate with the loan amortization schedule and will reduce to zero in approximately six years based on the scheduled amortization.
72
7. INCOME TAXES
The Company elected to be taxed as a REIT under sections 856-860 of the Code, commencing with the filing of its 2015 tax return for its tax year ended December
31, 2015. With the exception of the Company’s TRS, to the extent the Company meets certain requirements under the Code, the Company will not be taxed on its
federal taxable income. If we fail to qualify as a REIT for any taxable year, we will be subject to federal income taxes at regular corporate rates (including any
alternative minimum tax, which, for corporations, was repealed under the TCJA for tax years beginning after December 31, 2017) and may not be able to qualify as
a REIT for the four subsequent taxable years. In addition to its TRS, the Company is subject to certain foreign and state and local income taxes, in particular
income taxes arising from its operating activities in Puerto Rico, which are included in income tax expense in the consolidated statements of income.
The Company satisfied its REIT distribution requirement by distributing $0.68 per common share in 2020, which comprised a regular quarterly cash dividend of
$0.22 per common share declared for the first quarter of 2020 and a special cash dividend of $0.46 per common share declared in December 2020. During the years
ended December 31, 2019 and 2018, the Company declared cash distributions on our common shares of $0.88 per share. The taxability of such dividends for the
years ended December 31, 2020, 2019 and 2018 are as follows:
(1)
Dividend paid per share
Ordinary income
Return of capital
Capital gains
2020
$
Year Ended December 31,
2019
2018
$
0.68
100 %
— %
— %
0.88
$
83 %
— %
17 %
0.88
100 %
— %
— %
(1)
The special cash dividend of $0.46 per common share declared in December 2020, and paid in January 2021, was fully allocable to the 2020 tax year.
For U.S. federal income tax purposes, the REIT and other minority members are partners in the Operating Partnership. As such, the partners are required to report
their share of taxable income on their respective tax returns. However, during the years ended December 31, 2020 and 2019, certain non-real estate operating
activities that could not be performed by the REIT, occurred through the Company’s TRS, and the Company’s TRS is subject to federal, state and local income
taxes. These income taxes are included in the income tax expense in the consolidated statements of income.
On June 1, 2020, the Company completed a mortgage refinancing of its mall in Puerto Rico, The Outlets at Montehiedra (“Montehiedra”). The debt forgiven as a
part of this refinancing resulted in a write-down to our Puerto Rico tax basis in the mall equal to such amount of debt forgiven and the recognition of a deferred tax
liability on the Company’s consolidated balance sheet, which amounted to $10.3 million.
On June 5, 2020 and December 11, 2020, the Company completed a legal entity restructuring of Montehiedra and Las Catalinas Mall, respectively. Prior to the
legal entity restructuring, both malls were held in a special partnership for Puerto Rico tax purposes (the general partner being a qualified REIT subsidiary or
“QRS”) and subject to a 29% non-resident withholding tax which is included in income tax benefit (expense) in the consolidated statements of income. The legal
entity restructurings resulted in a step up in our Puerto Rico tax basis in each mall and the recognition of a deferred tax asset on the Company’s consolidated
balance sheet, which amounted to $23.7 million for Montehiedra and $29.5 million for Las Catalinas Mall. As a result of the legal entity restructurings, the
Operating Partnership, and therefore, the REIT and the other minority partners, are now deemed to be engaged in a trade or business for each mall with respect to
their allocable share of Puerto Rico taxable income and, as such, required to file Puerto Rico income tax returns. The REIT is subject to regular Puerto Rico
corporate income taxes on its allocable share of the Company’s Puerto Rico operating activities as opposed to the former 29% non-resident withholding tax on the
net income from such Puerto Rico operating activities allocated to the Operating Partnership. The Puerto Rico corporate income tax consists of a flat 18.5% tax
rate plus a graduated income surcharge tax for a maximum corporate income tax rate of 37.5%. In addition, the REIT is subject to a 10% branch profit tax on the
earnings and profits generated from its allocable share of the Company’s Puerto Rico operating activities and such tax is included in income tax expense in the
consolidated statements of income.
Together, the refinancing and legal entity restructuring transactions resulted in a net deferred tax asset of $42.9 million, which is included in prepaid expenses and
other assets on the consolidated balance sheets as of December 31, 2020, and the Company recognized an accompanying Puerto Rico income tax benefit on the
consolidated statements of income during the year ended December 31, 2020.
73
As a result of the Montehiedra refinancing and the Las Catalinas Mall troubled debt restructuring, the Company recognized a gain on extinguishment of debt for
U.S. federal income tax purposes and implemented various tax planning strategies to limit its impact on the Company’s overall U.S. federal taxable income. The
strategies implemented resulted in the recognition of a state and local income tax liability and corresponding deferred tax asset for the REIT of $4.5 million during
the year ended December 31, 2020.
Refer to Note 6 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information on the Montehiedra
refinancing and the Las Catalinas Mall troubled debt restructuring.
A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required if, based on the evidence available, it is more likely than not (a
likelihood of more than 50 percent) that some portion or all of the deferred tax assets will not be realized. Management’s determination of the ultimate realization
of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the underlying temporary differences become
deductible. As of December 31, 2020, no valuation allowance has been recorded against the deferred tax assets that resulted from the legal entity restructurings of
the Puerto Rico malls. In assessing the realizability of deferred tax assets, management determined it is more likely than not that these deferred tax assets will be
realized. During the year ended December 31, 2020, the Company recorded a $4.5 million valuation allowance against the deferred tax asset attributable to the
REIT’s state and local income tax liability incurred from strategies implemented to limit the impact of the Montehiedra refinancing and the Las Catalinas troubled
debt restructuring on the Company’s U.S. federal taxable income because management determined that it is not more likely than not that these deferred tax assets
will be realized. For the year ended December 31, 2019, the Company recorded a valuation allowance against the deferred tax asset related to a federal net
operating loss generated at the Company’s operating TRS. This determination was based on the operating TRS’ lack of anticipated future taxable income. As a
result of a change in circumstances in 2020 related to anticipated future profitability of the Company’s operating TRS, such valuation allowance was released. As
of December 31, 2020, the Company’s total valuation allowance was $4.5 million.
We record uncertain tax positions in accordance with ASC 740 Income Taxes on the basis of a two-step process whereby (i) we determine whether it is more likely
than not that the tax positions will be sustained on the basis of the technical merits of the position and (ii) for those tax positions that meet the more-likely-than-not
recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax
authority.
Income before income taxes from the Company’s operating activities in Puerto Rico during the years ended December 31, 2020 and 2019 was $26.4 million and
$9.4 million, respectively. For the year ended December 31, 2020, the REIT’s state and local income tax expense was $4.5 million and the Puerto Rico income tax
benefit was $43.5 million. The Puerto Rico tax expense recorded was $1.2 million and $3.3 million for the years ended December 31, 2019 and December 31,
2018, respectively. Income taxes are accounted for under the asset and liability method. Deferred income taxes are recognized for the tax effect of temporary
differences between the financial reporting basis and the tax basis of taxable assets and liabilities.
Income tax expense (benefit) for the years ended December 31, 2020, 2019 and 2018 consists of the following:
(Amounts in thousands)
Income tax expense (benefit):
Current:
U.S. federal income tax
U.S. state and local income tax
Puerto Rico income tax
Total current
Deferred:
U.S. federal income tax
U.S. state and local income tax
Puerto Rico income tax
(1)
Total deferred
Total income tax expense (benefit)
2020
Year Ended December 31,
2019
2018
$
$
— $
4,525
1,293
5,818
(6)
—
(44,808)
(44,814)
(38,996) $
— $
66
851
917
—
—
370
370
1,287 $
154
101
560
815
—
—
2,704
2,704
3,519
(1)
Due to the effects of applying ASC 842 on January 1, 2019, a deferred tax benefit of $0.8 million was recognized within a cumulative-effect adjustment to accumulated deficit to adjust
reserves on receivables from straight-line rents during the year ended December 31, 2019. Refer to Note 3 to the consolidated financial statements included in Part II, Item 8 of this Annual
Report on Form 10-K for more information.
74
Provision for income taxes differs from the amounts computed by applying the statutory federal income tax rate to consolidated net income before income taxes as
follows:
(1)
(Amounts in thousands)
Federal provision at statutory tax rate
REIT income before income taxes not subject to federal tax provision
TRS permanent book to tax adjustments
State and local income tax provision, net of federal benefit
Puerto Rico income tax provision
Change in valuation allowance
Total income tax expense (benefit)
(1)
Federal statutory tax rate of 21% for the years ended December 31, 2020, 2019 and 2018.
2020
Year Ended December 31,
2019
2018
12,338 $
(12,339)
—
11
(43,515)
4,509
(38,996) $
24,672 $
(24,677)
—
66
1,221
5
1,287 $
25,301
(14,390)
(10,740)
84
3,264
—
3,519
$
$
Below is a table summarizing the Company’s deferred tax assets and liabilities as of December 31, 2020 and 2019:
(Amounts in thousands)
Deferred tax assets:
Depreciation
Amortization of deferred financing costs
Rental revenue deemed uncollectible
Charitable contribution
Net operating loss
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Depreciation
Straight line rent
Amortization of acquired leases
Accrued interest expense
Total deferred tax liabilities
Net deferred tax assets (liabilities)
December 31, 2020
December 31, 2019
Balance at
$
$
41,942 $
1,105
2,109
7
107
(4,514)
40,756
—
(738)
(228)
(113)
(1,079)
39,677 $
—
69
461
5
5
(5)
535
(4,416)
(1,051)
(205)
—
(5,672)
(5,137)
75
8. LEASES
Leases as lessor
We have approximately 1,100 operating leases at our retail shopping centers, malls and industrial properties which generate rental income from tenants and
operating cash flows for the Company. Our tenant base comprises a diverse group of merchants including department stores, supermarkets, discounters,
entertainment offerings, health clubs, DIY stores, in-line specialty shops, restaurants and other food and beverage vendors and service providers. Tenant leases
under 10,000 sf generally have lease terms of 5 years or less. Tenant leases 10,000 sf or more are considered anchor leases and generally have lease terms of 10 to
25 years, with one or more renewal options available upon expiration of the initial lease term. Contractual rent increases for the renewal options are often fixed at
the time of the initial lease agreement which may result in tenants being able to exercise their renewal options at amounts that are less than the fair value of the rent
at the date of renewal.
The components of rental revenue for the years ended December 31, 2020 and 2019 were as follows:
(Amounts in thousands)
Rental Revenue
Fixed lease revenue
Variable lease revenue
Total rental revenue
Year Ended December 31,
2020
2019
$
$
235,488 $
92,792
328,280 $
274,397
110,008
384,405
As lessor under ASC 840, rental revenue from percentage rent was $2.0 million and rental revenue from tenant expense reimbursements was $108.7 million for the
year ended December 31, 2018.
Property, plant and equipment under operating leases as lessor
As of December 31, 2020 and 2019, substantially all of the Company’s real estate assets are subject to operating leases.
Maturity analysis of lease payments as lessor
The Company’s operating leases, including those with revenue recognized on a cash basis, are disclosed in the aggregate due to their consistent nature as real estate
leases. As of December 31, 2020, the undiscounted cash flows to be received from lease payments of our operating leases on an annual basis for the next five years
and thereafter are as follows:
(Amounts in thousands)
Year Ending December 31,
2021
2022
2023
2024
2025
2026
Thereafter
Total undiscounted cash flows
$
$
252,690
241,036
219,771
186,531
162,906
142,130
703,522
1,908,586
Leases as lessee
As of December 31, 2020, the Company had 22 properties in its portfolio either completely or partially on land or a building that was owned by third parties. These
properties are leased or subleased to us pursuant to ground leases, building leases or easements, with remaining terms ranging from less than two years to over 80
years and provide us the right to operate the property. We also lease or sublease real estate for our three corporate offices with remaining terms of less than one
year.
On December 31, 2020, the Company recognized $5.7 million of operating lease ROU assets and $0.7 million of corresponding operating lease liabilities in
connection with the Company’s acquisition of Sunrise Mall, which included the acquisition of the lessee positions of ground leases.
During the year ended December 31, 2019, the Company reassessed the lease term of one of its ground leases due to a change in circumstances in our election to
renew the ground lease. As a result of this reassessment, the Company remeasured the lease
76
liability by using revised inputs as of the reassessment date and recorded an additional ROU asset and lease liability of $5.0 million, respectively.
During the year ended December 31, 2019, the Company sold its lessee position in one of its operating ground leases for $6.9 million, net of selling costs, and
derecognized the lease’s ROU asset and corresponding lease liability. We recognized a gain on sale of lease of $1.8 million on our consolidated statements of
income during the year ended December 31, 2019 as a result of the sale. On July 31, 2019, the Company’s lessee position in one of its ground leases expired in
accordance with the terms of the lease.
Additionally, on November 1, 2019 the Company recognized a finance lease ROU asset and finance lease liability of $2.7 million and $3.0 million, respectively, in
connection with the Company’s acquisition of the lessee position of a ground lease at 25 East Spring Valley Ave in Maywood, NJ. The Company assessed the
lease classification as a finance lease due to the Company’s reasonably certain likelihood of exercising its option to purchase the lease.
The components of lease expense for the years ended December 31, 2020 and 2019 were as follows:
(Amounts in thousands)
Lease expense
Operating lease cost
Variable lease cost
Total lease expense
(1)
Year Ended December 31,
2020
2019
$
$
10,875 $
2,792
13,667 $
11,730
2,736
14,466
(1)
During the years ended December 31, 2020 and 2019, the Company recognized sublease income of $17.7 million and $19.7 million, respectively, included in rental revenue on the
consolidated statement of income in relation to certain ground and building lease arrangements. Operating lease cost includes amortization of below-market ground lease intangibles and
straight-line lease expense.
Supplemental balance sheet information related to leases as of December 31, 2020 and December 31, 2019 was as follows:
Supplemental noncash information
Operating leases
Finance lease
Operating leases
Finance lease
Weighted-average remaining lease term
Weighted-average discount rates
15.7 years
3.99 %
35.2 years
4.01 %
15.3 years
4.03 %
36.2 years
4.01 %
December 31, 2020
December 31, 2019
Supplemental cash information related to leases for the years ended December 31, 2020 and 2019 was as follows:
(Amounts in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Year Ended December 31,
2020
2019
Operating cash flows from operating leases
Operating cash flows from finance lease
Financing cash flows from finance lease
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases
Finance lease
$
$
10,033 $
120
11
1,740 $
—
10,698
10
8
98,980
2,991
77
Maturity analysis of lease payments as lessee
The undiscounted cash flows to be paid on an annual basis for the next five years and thereafter are presented in the table below. The total amount of lease
payments, on an undiscounted basis, are reconciled to the lease liability on the consolidated balance sheet by considering the present value discount.
(Amounts in thousands)
Year Ending December 31,
2021
2022
2023
2024
2025
2026
Thereafter
Total undiscounted cash flows
Present value discount
Discounted cash flows
9. FAIR VALUE MEASUREMENTS
Operating
leases
Finance
lease
$
$
9,363 $
8,598
8,486
8,500
6,599
6,341
57,541
105,428
(30,456)
74,972 $
109
109
109
109
109
124
6,299
6,968
(3,975)
2,993
ASC 820, Fair Value Measurement and Disclosures defines fair value and establishes a framework for measuring fair value. The objective of fair value is to
determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date (the exit price). ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into
three levels: Level 1 - quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities; Level 2 - observable prices
based on inputs not quoted in active markets, but corroborated by market data; and Level 3 - unobservable inputs used when little or no market data is available.
The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, we utilize valuation
techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty credit
risk in our assessment of fair value.
Financial Assets and Liabilities Measured at Fair Value on a Recurring or Non-Recurring Basis
There were no financial assets or liabilities measured at fair value on a recurring or non-recurring basis as of December 31, 2020 and December 31, 2019.
Financial Assets and Liabilities not Measured at Fair Value
Financial assets and liabilities that are not measured at fair value on the consolidated balance sheets include cash and cash equivalents and mortgages
payable. Cash and cash equivalents are carried at cost, which approximates fair value. The fair value of mortgages payable is calculated based on current market
prices and discounted cash flows at the current rate at which similar loans would be made to borrowers with similar credit ratings for the remaining term of such
debt, which is provided by a third-party specialist. The fair value of cash and cash equivalents is classified as Level 1 and the fair value of mortgages payable is
classified as Level 2. The table below summarizes the carrying amounts and fair value of these financial instruments as of December 31, 2020 and December 31,
2019.
(Amounts in thousands)
Assets:
Cash and cash equivalents
Liabilities:
Mortgages payable
(1)
As of December 31, 2020
As of December 31, 2019
Carrying Amount
Fair Value
Carrying Amount
Fair Value
$
$
384,572 $
384,572 $
432,954 $
432,954
1,597,397 $
1,611,868 $
1,556,248 $
1,590,503
(1)
Carrying amounts exclude unamortized debt issuance costs of $9.9 million and $10.1 million as of December 31, 2020 and December 31, 2019, respectively.
78
Nonfinancial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
We assess the carrying value of our properties for impairment, when events or changes in circumstances indicate that the carrying value may not be recoverable.
Such events and changes include macroeconomic conditions, including those caused by global pandemics, such as COVID-19, which may result in property
operational disruption and indicate that the carrying amount may not be recoverable.
During the year ended December 31, 2020, the Company recognized an impairment charge of $3.1 million on a parcel of our property in Lodi, NJ, which was sold
on January 8, 2021. Prior to the sale of the parcel, the book value of this property exceeded its estimated fair value less costs to sell. The fair value of the property
was based on an executed contract of sale with a third-party buyer less costs to sell.
During the year ended December 31, 2019, the Company recognized impairment charges on four retail properties that the Company was actively marketing. The
impairment loss was calculated as the difference between the assets’ individual carrying values and the estimated aggregated fair values of $38.5 million, less
estimated selling costs. The valuation of these properties were based on capitalization rates, discounted future cash flows, third-party appraisals, broker selling
estimates and sale agreements under negotiations. The capitalization rates (ranging from 9.9% to 12.1%) and discounts rates (ranging from 9.3% to 10.8%) utilized
in the analyses were based upon unobservable rates that the Company believes to be in a reasonable range of current market rates.
During the year ended December 31, 2018, we recognized a $3.1 million impairment charge on our property in Salem, NH as a result of the loss of the anchor
tenant at the property. The valuation of our property in Salem, NH was based on comparable property transactions in the property’s surrounding area. We also
recognized a $2.5 million impairment charge on our property in West Babylon, NY. The fair value for our property in West Babylon, NY was based on an
executed letter of intent with a third-party buyer less costs to sell.
The Company believes the inputs utilized to measure these fair values were reasonable in the context of applicable market conditions, however due to the
significance of the unobservable inputs in the overall fair value measures, including market conditions and expectations for growth, the Company determined that
such fair value measurements are classified as Level 3.
Aggregate impairment charges of $3.1 million, $26.3 million and $5.6 million, respectively, are included as an expense within casualty and impairment loss, net on
our consolidated statements of income for the years ended December 31, 2020, 2019 and 2018.
10. COMMITMENTS AND CONTINGENCIES
Legal Matters
There are various legal actions against us in the ordinary course of business. In our opinion, after consultation with legal counsel, the outcome of such matters will
not have a material adverse effect on our financial condition, results of operations or cash flows.
Redevelopment
As of December 31, 2020, we had approximately $132.4 million of active development, redevelopment and anchor repositioning projects underway, of which
$86.6 million remains to be funded. Further, while we have identified future projects in our development pipeline, we are under no obligation to execute and fund
any of these projects and each of these projects is being reevaluated considering market conditions. The Company has updated many of its active project
stabilization dates to reflect the impact of the COVID-19 pandemic on its contractors, tenants and vendors.
Insurance
The Company maintains numerous insurance policies including for general liability, property, pollution, acts of terrorism, trustees’ and officers’, cyber, workers’
compensation and automobile-related liabilities. However, all such policies are subject to terms, conditions, exclusions, deductibles and sub-limits, amount other
limiting factors. For example, the Company’s terrorism insurance excludes coverage for nuclear, biological, chemical or radiological terrorism events as defined by
the Terrorism Risk Insurance Program Reauthorization Act.
The Company’s primary and excess insurance policies providing coverage for pollution related losses have an aggregate limit of $50 million and provide
remediation and business interruption coverage for pollution incidents, which pursuant to our policies expressly include the presence and dispersal of viruses. On
December 23, 2020, the Company initiated litigation in
79
New Jersey state court, Bergen County, under these policies to recover uncollected rents and other amounts resulting from the COVID-19 virus.
Insurance premiums are typically charged directly to each of the properties but not all of the cost of such premiums are recovered. The Company is responsible for
deductibles, losses in excess of insurance coverage, and the portion of premiums not reimbursable by tenants at our properties, which could be material.
We continue to monitor the state of the insurance market and the scope and costs of available coverage. We cannot anticipate what coverage will be available on
commercially reasonable terms in the future and expect premiums across most coverage lines to increase in light of recent events. The incurrence of uninsured
losses, costs or uncovered premiums could materially and adversely affect our business, results of operations and financial condition.
Certain of our loans and other agreements contain customary covenants requiring the maintenance of insurance coverage. Although we believe that we currently
have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at reasonable costs in the
future. If lenders or other counterparties insist on greater coverage than we are able to obtain, such requirement could materially and adversely affect our ability to
finance our properties and expand our portfolio.
Tornado-Related Charges
On June 13, 2018, a tornado hit our shopping center in Wilkes-Barre, PA, damaging approximately 13% of the property’s gross leasable area. During the year
ended December 31, 2019, the Company settled the related insurance claim with its carrier for $5.5 million. Of this amount, the Company recognized $4.8 million
as a casualty gain during the year ended December 31, 2019 included in casualty and impairment loss, net on the accompanying consolidated statements of income.
As part of the settlement, the Company recognized $0.3 million as business interruption proceeds within rental revenue during the year ended December 31, 2019.
Hurricane-Related Charges
On September 20, 2017, Hurricane Maria damaged our two properties in Puerto Rico. During the year ended December 31, 2018, the Company received $1.5
million in casualty insurance proceeds, which were partially offset by $0.3 million of hurricane-related costs, resulting in net casualty gains of $1.2 million
included in casualty and impairment loss, net on the accompanying consolidated statements of income. During the year ended December 31, 2018, the Company
recognized $0.3 million of business interruption losses, comprised of $0.7 million of rent abatements due to tenants that had not reopened since the hurricane,
recorded as a reduction of rental revenue, offset by a $0.4 million reversal within property operating expenses to provision for doubtful accounts for payments
received from tenants on rents previously reserved.
In June 2019, the Company finalized its insurance recovery related to Hurricane Maria with its carrier at $14.3 million, of which $3.3 million was previously
received, subject to deductibles of $2.3 million. We recognized a $8.7 million casualty gain during the year ended December 31, 2019 based on insurance proceeds
received from the settlement agreement on our two malls in Puerto Rico.
Environmental Matters
Each of our properties has been subjected to varying degrees of environmental assessment at various times. Based on these assessments, we have accrued costs of
$1.8 million and $2.7 million on our consolidated balance sheets as of December 31, 2020 and December 31, 2019, respectively, for remediation costs for
environmental contamination at certain properties. While this accrual reflects third-party estimates of the potential costs of remediation at these properties, there
can be no assurance that the actual costs will not exceed these amounts. During the years ended December 31, 2019 and 2018, the Company recognized $1.4
million and $0.6 million, respectively, of environmental remediation costs included in property operating expenses on the consolidated statements of income.
Although we are not aware of any other material environmental contamination, there can be no assurance that the identification of new areas of contamination,
changes in the extent or known scope of contamination, the discovery of additional sites, or changes in cleanup requirements would not result in significant costs to
us.
Pandemic-Related Contingencies
On January 30, 2020, the spread of the COVID-19 outbreak was declared a Public Health Emergency of International Concern by the World Health Organization
("WHO"). On March 11, 2020, WHO characterized the COVID-19 outbreak as a pandemic. Since March, the continually evolving COVID-19 pandemic impacted
our tenants and business operations. The Company has taken precautions to protect the safety, health and well-being of its employees and tenants.
During 2020, many of our tenants faced adverse financial consequences from reduced business operations and social distancing requirements resulting from the
COVID-19 pandemic. As of December 31, 2020, substantially all of our portfolio's gross
80
leasable area was open for business and the Company collected approximately 91% of rental revenue for the fourth quarter, 87% for the third quarter and 79% for
the second quarter. Throughout 2020, the Company granted rent concessions and other lease-related relief, such as rent deferrals, to certain impacted tenants, and
anticipates granting further rent concessions or other relief going forward. We valuate rent relief requests on a case-by-case basis and not all requests are granted.
Rent relief, deferral or abatements and tenant defaults on lease obligations, such as repayment of deferred rent may have a negative impact on our rental revenue
and net income. As of December 31, 2020, the Company executed rent deferrals aggregating $5.1 million with a weighted average payback period of
approximately eight months. Additionally, as of December 31, 2020, the Company executed rent abatements aggregating $3.9 million.
The Company is not currently aware of any other loss contingencies related to the COVID-19 pandemic that would require recognition at this time, with the
exception of abatements already discussed with tenants or deferrals that may not be collected.
Bankruptcies
Although our rental revenue is supported by long-term leases, leases may be rejected in a bankruptcy proceeding and the related tenant stores may permanently
vacate prior to lease expiration. In the event a tenant with a significant number of leases or square footage in our shopping centers files for bankruptcy and rejects
its leases with us, we could experience a reduction in our revenues. We monitor the operating performance and rent collections of all tenants in our shopping
centers, especially those tenants in arrears or operating retail formats that are experiencing significant changes in competition, business practice, or store closings in
other locations. Given the economic environment brought upon by COVID-19, certain tenants experienced liquidity or financial hardships and filed for Chapter 11
bankruptcy protection during the year ended December 31, 2020. Although some of these tenants intend to exit the Chapter 11 bankruptcy process and resume
operations, the outcomes of such proceedings are unknown and the Company is currently exploring leasing alternatives for these spaces.
Century 21 filed for Chapter 11 bankruptcy protection on September 10, 2020. Prior to bankruptcy, the Company had one lease with Century 21 in Paramus, NJ
comprising approximately 157,000 sf, which generated $4.4 million in annual rental revenue. In connection with the bankruptcy, the Company recognized a write-
off of $2.5 million in receivables arising from the straight-lining of rents, and recognized $2.1 million as rental revenue deemed uncollectible (classified within
rental revenue) for the year ended December 31, 2020. Century 21 vacated and terminated its lease in December 2020.
81
11. PREPAID EXPENSES AND OTHER ASSETS
The following is a summary of the composition of the prepaid expenses and other assets in the consolidated balance sheets:
(Amounts in thousands)
Other assets
Deferred tax asset, net
Real estate held for sale
Finance lease right-of-use asset
Deferred financing costs, net of accumulated amortization of $4,819 and $3,765, respectively
Deposits for acquisitions
Prepaid expenses:
Real estate taxes
Insurance
Rent, licenses/fees
Total Prepaid expenses and other assets
$
$
Balance at
December 31, 2020
December 31, 2019
5,953 $
39,677
7,056
2,724
3,347
—
8,093
1,583
1,878
70,311 $
4,723
—
6,574
2,737
3,877
10,000
6,491
1,520
1,655
37,577
12. ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES
The following is a summary of the composition of accounts payable, accrued expenses and other liabilities in the consolidated balance sheets:
(Amounts in thousands)
Dividend payable
Deferred tenant revenue
Accrued capital expenditures and leasing costs
Finance lease liability
Accrued interest payable
Security deposits
Deferred tax liability, net
Accrued payroll expenses
Other liabilities and accrued expenses
Total accounts payable, accrued expenses and other liabilities
13. INTEREST AND DEBT EXPENSE
The following table sets forth the details of interest and debt expense:
(Amounts in thousands)
Interest expense
Amortization of deferred financing costs
Total Interest and debt expense
December 31, 2020
December 31, 2019
Balance at
$
$
55,905 $
26,594
7,797
2,993
11,095
5,884
—
5,797
16,915
132,980 $
—
26,224
7,893
2,982
9,729
5,814
5,137
5,851
13,014
76,644
2020
Year Ended December 31,
2019
2018
$
$
68,184 $
2,831
71,015 $
63,783 $
2,856
66,639 $
61,989
2,879
64,868
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14. EQUITY AND NONCONTROLLING INTEREST
Share Repurchase Program
In March 2020, the Company’s Board of Trustees authorized a share repurchase program for up to $200 million of the Company’s common shares. Under the
program, the Company may repurchase its shares from time to time in the open market or in privately negotiated transactions in compliance with Securities and
Exchange Commission Rule 10b-18. The amount and timing of the purchases will depend on a number of factors including the price and availability of the
Company’s shares, trading volume and general market conditions. The share repurchase program does not obligate the Company to acquire any particular amount
of common shares and may be suspended or discontinued at any time at the Company’s discretion.
Cumulative total purchases during the year ended December 31, 2020 amounted to 5.9 million shares at a weighted average share price of $9.22 amounting to
$54.1 million.
Units of the Operating Partnership
An equivalent number of common units were issued by the Operating Partnership to the Company in connection with the Company’s issuance of common shares
of beneficial interest under the ATM equity program.
The Operating Partnership’s capital includes general and common limited partnership interests in the operating partnership (“OP Units”). As of December 31,
2020, Urban Edge owned approximately 96.1% of the outstanding common OP Units with the remaining limited OP Units held by members of management,
Urban Edge’s Board of Trustees and contributors of property interests acquired. Urban Edge serves as the sole general partner of the Operating Partnership. The
third-party unitholders have limited rights over the Operating Partnership such that they do not have characteristics of a controlling financial interest. As such, the
Operating Partnership is considered a VIE, and the Company is the primary beneficiary which consolidates it. The Company’s only investment is the Operating
Partnership. The VIE’s assets can be used for purposes other than the settlement of the VIE’s obligations and the Company’s partnership interest is considered a
majority voting interest.
Dividends and Distributions
During the year ended December 31, 2020 the Company declared distributions on our common shares and OP units of $0.68 per share/unit in the aggregate, which
comprised a regular quarterly dividend of $0.22 per common share and OP unit declared for the first quarter of 2020 and a special cash dividend of $0.46 per
common share and OP unit declared in December 2020 and paid on January 19, 2021. As a result of COVID-19 and the uncertainties it generated, the Company
temporarily suspended quarterly dividend distributions for the second and third quarters of 2020.
During the years ended December 31, 2019 and 2018, the Company declared distributions on our common shares and OP units of $0.88 per share/unit in the
aggregate.
We have a Dividend Reinvestment Plan (the “DRIP”), whereby shareholders may use their dividends to purchase shares. During the years ended December 31,
2020 and 2019, 3,445 and 6,920 shares were issued under the DRIP, respectively.
Noncontrolling Interests in Operating Partnership
Noncontrolling interests in the Operating Partnership reflected on the consolidated balance sheets of the Company are comprised of OP units and limited
partnership interests in the Operating Partnership in the form of LTIP unit awards. LTIP unit awards were granted to certain executives pursuant to our 2015
Omnibus Share Plan (the “Omnibus Share Plan”) and our 2018 Inducement Equity Plan (the “Inducement Plan”). OP units were issued to contributors in exchange
for their property interests in connection with the Company’s property acquisitions in 2017.
The total of the OP units and LTIP units represent a 4.1% weighted-average interest in the Operating Partnership for the year ended December 31, 2020. Holders of
outstanding vested LTIP units may, from and after two years from the date of issuance, redeem their LTIP units for cash, or for the Company’s common shares on
a one-for-one basis, solely at our election. Holders of outstanding OP units may redeem their units for cash or the Company’s common shares on a one-for-one
basis, solely at our election. On August 5, 2019, the Company received requests from certain holders of OP units to redeem 357,998 units. The Company elected to
satisfy the redemption requests by repurchasing the units at a price of $16.70 per unit, for total cash consideration of $6.0 million.
In connection with the separation from Vornado Realty L.P. (“VRLP”), the Company issued 5.7 million OP units, which represented a 5.4% interest in the
Operating Partnership, to VRLP in exchange for interests in VRLP properties contributed by VRLP. On February 28, 2019, the Company issued 5.7 million
common shares to VRLP, in exchange for an equal number of
83
OP units after receiving a notice of redemption from VRLP. The issuance is exempt from registration in reliance upon Section 4(a)(2) of the Securities Act of
1933, as amended, on the basis that no public offering was made.
Noncontrolling Interests in Consolidated Subsidiaries
The Company’s noncontrolling interests relate to the 5% interest held by others in our property in Walnut Creek, CA (Mount Diablo) and 17.5% held by others in
our property in Massapequa, NY. The net income attributable to noncontrolling interests is presented separately in our consolidated statements of income.
15. SHARE-BASED COMPENSATION
Omnibus Share Plan
On January 7, 2015 our board and initial shareholder approved the Urban Edge Properties Omnibus Share Plan, under which awards may be granted up to a
maximum of 15,000,000 of our common shares or share equivalents. Pursuant to the Omnibus Share Plan, stock options, LTIP units, operating partnership units
and restricted shares were granted.
Outperformance Plans
The Compensation Committee of the Board of Trustees of the Company approved the Company’s 2015 Outperformance Plan (“2015 OPP”) on November 3, 2015
and the Company’s 2017 Outperformance Plan (“2017 OPP”) on February 24, 2017. Both Outperformance Plans are multi-year, performance-based equity
compensation plans under which participants, including our Chairman and Chief Executive Officer, have the opportunity to earn awards in the form of LTIP units
if, and only if, we outperform a predetermined total shareholder return (“TSR”) and/or outperform the market with respect to a relative TSR over the three-year
period beginning on the date the respective plan was approved. The aggregate notional amounts of the 2015 OPP grant and the 2017 OPP grant are $10.2 million
and $12.0 million, respectively.
Awards under the 2015 OPP and the 2017 OPP may be earned if we (i) achieve a TSR level greater than 7% per annum, or 21% over the three-year performance
measurement period, and/or (ii) achieve a TSR equal to or above, that of the 50 percentile of a retail REIT peer group (“Peer Group”) comprised of our peer
companies, over a three-year performance measurement period. Distributions on awards accrue during the measurement period, except that 10% of such
distributions are paid in cash. If the designated performance objectives are achieved, LTIP units are also subject to time-based vesting requirements. Awards
earned under the 2015 OPP and the 2017 OPP vest 50% in year three, 25% in year four and 25% in year five.
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The fair values of the 2015 OPP and the 2017 OPP on the dates of grant were $3.9 million and $4.1 million, respectively. A Monte Carlo simulation was used to
estimate the fair values based on the probability of satisfying the market conditions and the projected share prices at the time of payments, discounted to the
valuation dates over the three-year performance periods. For the 2015 OPP, assumptions include historical volatility (25.0%), risk-free interest rates (1.2%), and
historical daily return as compared to our Peer Group (which ranged from 19.0% to 27.0%). For the 2017 OPP, assumptions include historical volatility (19.7%),
risk-free interest rates (1.5%), and historical daily return as compared to our Peer Group. For both plans, such amounts are being amortized into share-based
compensation expense over a five-year period from the dates of grant, using graded vesting attribution models. The 2015 OPP was fully vested as of November 5,
2020 and there is no compensation cost remaining under the 2015 OPP as of December 31, 2020. In the years ending December 31, 2020, 2019, and 2018 we
recognized $0.6 million, $1.4 million and $1.7 million of compensation expense related to the 2015 and 2017 OPPs’ LTIP Units, respectively. As of December 31,
2020, there was $0.2 million of total unrecognized compensation cost related to the 2017 OPP LTIP Units, which will be recognized over a weighted-average
period of 0.5 years.
2018 Long-Term Incentive Plan
On February 22, 2018, the Compensation Committee of the Board of Trustees of the Company approved the Company’s 2018 Long-Term Incentive Plan ("2018
LTI Plan") under the Omnibus Share Plan, a multi-year equity compensation program, comprised of both performance-based and time-based vesting awards.
Equity awards granted under the 2018 LTI Plan are weighted, in terms of grant date and fair value, 80% performance-based and 20% time-based.
For the performance-based awards under the 2018 LTI Plan, participants have the opportunity to earn awards in the form of LTIP Units if, and only if, Urban
Edge’s absolute and/or relative total shareholder return (“TSR”) meets certain criteria over the three-year performance measurement period (the “Performance
Period”) beginning on February 22, 2018 and ending on February 21, 2021. The Company issued 328,107 LTIP Units under the 2018 LTI Plan.
Under the Absolute TSR component (25% of the performance-based awards), 40% of the LTIP Units will be earned if the Company’s TSR over the Performance
Period is equal to 18%, 100% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to 27%, and 165% of the LTIP Units
will be earned if the Company’s TSR over the Performance Period is equal to or greater than 36%. The Relative TSR component is based on the Company’s
performance
84
compared to a peer group comprised of 14 companies. Under the Relative TSR Component (75% of the performance-based awards), 40% of the LTIP Units will be
th
earned if the Company’s TSR over the Performance Period is equal to the 35 percentile of the peer group, 100% of the LTIP Units will be earned if the
Company’s TSR over the Performance Period is equal to the 55 percentile of the peer group, and 165% of the LTIP Units will be earned if the Company’s TSR
over the Performance Period is equal to or above the 75 percentile of the peer group, with earning determined using linear interpolation if between such relative
TSR thresholds.
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The fair value of the performance-based award portion of the 2018 LTI Plan on the date of grant was $3.6 million using a Monte Carlo simulation to estimate the
fair value through a risk-neutral premise. The time-based awards under the 2018 LTI Plan, also granted in the form of LTIP Units, vest ratably over three years
except in the case of our Chairman and Chief Executive Officer, where the vesting is ratably over four years. The Company granted time-based awards under the
2018 LTI Plan that represent 33,172 LTIP units with a grant date fair value of $0.7 million. During the years ended December 31, 2020, 2019 and 2018,
respectively, we recognized $1.0 million, $0.9 million and $1.0 million of compensation expense related to the 2018 LTI Plan.
2018 Inducement Equity Plan
The Inducement Plan was approved by the Compensation Committee of the Board of Trustees of the Company on September 26, 2018. Under the Inducement
Plan, the Compensation Committee of the Board of Trustees may grant, subject to any Company performance conditions as specified by the Compensation
Committee, awards to individuals who were not previously employees as an inducement material to the individual’s entry into employment with the Company. The
terms and conditions of the Inducement Plan and any awards thereunder granted are substantially similar to those under the 2015 Omnibus Share Plan. The
Company has granted an aggregate of 352,890 restricted LTIP Units and 2,000,000 stock options under the Inducement Plan with grant date fair values of $7.2
million and $9.3 million, respectively.
2019 Long-Term Incentive Plan
On April 4, 2019, the Compensation Committee of the Board of Trustees of the Company approved the Company’s 2019 Long-Term Incentive Plan (“2019 LTI
Plan”). The Plan is a multi-year, equity compensation program under which participants, including our Chairman and Chief Executive Officer, have the
opportunity to earn awards in the form of LTIP units that vest based on the passage of time (one-third of the program) and performance goals tied to our relative
and absolute total shareholder return (“TSR”) during the three-year performance period following their grant (two-thirds of the program).
For the performance-based awards under the 2019 LTI Plan, participants have the opportunity to earn awards in the form of LTIP Units if, and only if, Urban
Edge’s absolute and/or relative TSR meets certain criteria over the three-year performance measurement period (the “Performance Period”) beginning on
February 27, 2019 and ending on February 26, 2022. The Company issued 489,319 LTIP Units under the 2019 LTI Plan.
Under the Absolute TSR component, 40% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to 18%, 100% of the LTIP
Units will be earned if the Company’s TSR over the Performance Period is equal to 27%, and 165% of the LTIP Units will be earned if the Company’s TSR over
the Performance Period is equal to or greater than 36%. The Relative TSR component is based on the Company’s performance compared to a peer group
comprised of 14 companies. Under the Relative TSR Component, 40% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is
th
equal to the 35 percentile of the peer group, 100% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to the 55
percentile of the peer group, and 165% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to or above the 75 percentile
of the peer group, with earning determined using linear interpolation if between such relative and absolute TSR thresholds. The fair value of the performance-based
award portion of the 2019 LTI Plan on the date of grant was $4.3 million using a Monte Carlo simulation to estimate the fair value through a risk-neutral premise.
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The time-based awards under the 2019 LTI Plan, also granted in the form of LTIP Units, vest ratably over three years except in the case of our Chairman and Chief
Executive Officer, where the vesting is ratably over four years. The Company granted time-based awards under the 2019 LTI Plan that represent 112,910 LTIP
units with a grant date fair value of $2.0 million. During the years ended December 31, 2020 and 2019, respectively we recognized $1.9 million and $1.4 million of
compensation expense related to the 2019 LTI Plan.
2020 Long-Term Incentive Plan
On February 20, 2020, the Compensation Committee of the Board of Trustees of the Company approved the Company’s 2020 Long-Term Incentive Plan (“2020
LTI Plan”). The Plan is a multi-year, equity compensation program under which participants, including our Chairman and Chief Executive Officer, have the
opportunity to earn awards in the form of LTIP units that vest based on (i) the passage of time (one-third of the fair value of the program) and (ii) performance
goals tied to our relative and absolute total shareholder return (“TSR”) during the three-year performance period following their grant (two-thirds of the fair
85
value of the program). The total grant date fair value under the 2020 LTI Plan was $8.8 million comprising performance-based and time-based awards as described
further below:
Performance-based awards
For the performance-based awards under the 2020 LTI Plan, participants, have the opportunity to earn awards in the form of LTIP Units if Urban Edge’s absolute
and/or relative TSR meets certain criteria over the three-year performance measurement period (the “Performance Period”) beginning on February 20, 2020 and
ending on February 19, 2023. The Company granted performance-based awards under the 2020 LTI Plan that represent 630,774 LTIP Units. The fair value of the
performance-based award portion of the 2020 LTI Plan on the date of grant was $5.9 million using a Monte Carlo simulation to estimate the fair value through a
risk-neutral premise.
Under the Absolute TSR component, 40% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to 18%, 100% of the LTIP
Units will be earned if the Company’s TSR over the Performance Period is equal to 27%, and 165% of the LTIP Units will be earned if the Company’s TSR over
the Performance Period is equal to or greater than 36%. The Relative TSR component is based on the Company’s performance compared to a peer group
comprised of 14 companies. Under the Relative TSR Component, 40% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is
th
equal to the 35 percentile of the peer group, 100% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to the 55
percentile of the peer group, and 165% of the LTIP Units will be earned if the Company’s TSR over the Performance Period is equal to or above the 75 percentile
of the peer group, with earning determined using linear interpolation if in between such relative and absolute TSR thresholds. During the year ended December 31,
2020 we recognized $1.1 million of compensation expense related to the performance-based awards under the 2020 LTI Plan.
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Time-based awards
The time-based awards granted under the 2020 LTI Plan, also granted in the form of LTIP Units, vest ratably over three years except in the case of our Chairman
and Chief Executive Officer, where the vesting is ratably over four years. As of December 31, 2020, the Company granted time-based awards under the 2020 LTI
Plan that represent 169,004 LTIP units with a grant date fair value of $2.9 million. During the year ended December 31, 2020 we recognized $1.1 million of
compensation expense related to the time-based awards under the 2020 LTI Plan.
Units and Deferred Share Units Granted to Trustees
On May 6, 2020, certain trustees elected to receive a portion of their compensation in deferred share units and an aggregate of 12,121 shares were granted to those
trustees based on the weighted average grant date fair value of $8.25. On May 9, 2019, certain trustees elected to receive a portion of their compensation in
deferred share units and an aggregate of 5,608 shares were granted to those trustees based on the weighted average grant date fair value of $15.60.
On May 6, 2020 certain trustees elected to receive a portion of their compensation in LTIP units and an aggregate of 87,117 LTIP units, were granted to those
trustees based on the weighted average grant date fair value of $8.03. In addition, On May 9, 2019, certain trustees elected to receive a portion of their
compensation in LTIP units and an aggregate of 28,040 LTIP units, were granted to those trustees based on the weighted average grant date fair value of $14.98.
2021 Long-Term Incentive Plan
On February 10, 2021, the Compensation Committee of the Board of Trustees of the Company approved the Company’s 2021 Long-Term Incentive Plan (“2021
LTI Plan”). The Plan is a multi-year, equity compensation program under which participants, including our Chairman and Chief Executive Officer, have the
opportunity to earn awards in the form of LTIP units that vest based on the passage of time (one-half of the program) and performance goals tied to our relative and
absolute total shareholder return (“TSR”) during the three-year performance period following their grant (one-half of the program). The total grant date fair value
under the 2021 LTI Plan was $7.8 million, comprising both performance-based and time-based awards.
86
Shares Under Option
All stock options granted have ten-year contractual lives, containing vesting terms of three to five years. As of December 31, 2020, the weighted average
contractual term of shares under options outstanding at the end of the period is 7.7 years. The following table presents stock option activity for the years ended
December 31, 2020, 2019, and 2018:
Shares Under Options
Weighted Average
Exercise Price per Share
Weighted Average Remaining
Expected Term
(In years)
Outstanding at January 1, 2018
Granted
Exercised
Forfeited or expired
Outstanding at December 31, 2018
Granted
Exercised
Forfeited or expired
Outstanding at December 31, 2019
Granted
Exercised
Forfeited or expired
Outstanding at December 31, 2020
Exercisable at December 31, 2020
2,603,664
2,146,885
—
—
4,750,549
180,213
—
—
4,930,762
—
—
—
4,930,762
3,709,097
$
$
$
24.09
21.71
—
—
23.02
19.53
—
—
22.89
—
—
—
22.89
23.31
4.40
4.58
—
—
4.48
3.88
—
—
4.46
—
—
—
4.07
—
No options were granted during the year ended December 31, 2020. The weighted average grant date fair value of options granted in 2019 and 2018 was $3.88 and
$4.68, respectively. The options were granted with an exercise price equivalent to the average of the high and low share price on the grant date. No options were
exercised during the years ended December 31, 2018, 2019 and 2020. As of December 31, 2020, there was no intrinsic value for the outstanding and exercisable
shares under option.
During the years ended December 31, 2019 and 2018, the fair value of the options granted was estimated on the grant date using the Black-Scholes pricing model
with the following assumptions:
Risk-free interest rate
Expected option life
Expected volatility
February 22, 2018
2.73%
6.25
32.23%
September 27, 2018
3.00%
7.00
30.42%
February 27, 2019
2.54%
6.25
30.98%
87
Restricted Shares
The following table presents information regarding restricted share activity during the years ended December 31, 2020, 2019, and 2018:
Shares
Weighted Average Grant Date
Fair Value per Share
Unvested at January 1, 2018
Granted
Vested
Forfeited
Unvested at December 31, 2018
Granted
Vested
Forfeited
Unvested at December 31, 2019
Granted
Vested
Forfeited
Unvested at December 31, 2020
175,430 $
103,814
(84,185)
(32,482)
162,577
34,638
(96,378)
(5,672)
95,165
31,679
(51,524)
(2,927)
72,393 $
26.05
21.65
25.67
23.32
23.99
19.15
24.19
22.11
22.16
17.47
23.88
18.79
19.03
During the years ended December 31, 2020, 2019 and 2018, we granted 31,679, 34,638, and 103,814 restricted shares, respectively, that are subject to forfeiture
and vest over periods ranging from one to three years. The total grant date value of the 51,524, 96,378, and 84,185 restricted shares vested during the years ended
December 31, 2020, 2019 and 2018 was $1.2 million, $2.3 million and $2.2 million, respectively.
Restricted Units
During the years ended December 31, 2020, 2019 and 2018, respectively, there were 297,195, 276,482 and 444,954 additional LTIP units issued. During the years
ended December 31, 2020, 2019 and 2018, 433,016, 131,884, and 24,722 units vested, respectively. During the year ended December 31, 2020, 223,553 restricted
units were converted to common shares The remaining 568,619 units vest over a weighted average period of 2.4 years.
Share-Based Compensation Expense
Share-based compensation expense, which is included in general and administrative expenses in our consolidated statements of income, is summarized as follows:
(Amounts in thousands)
Share-based compensation expense components:
Restricted share expense
Stock option expense
LTIP expense
Performance-based LTI expense
DSU expense
(1)
(2)
Total Share-based compensation expense
2020
Year Ended December 31,
2019
2018
$
$
832 $
4,991
7,331
3,792
48
16,994 $
1,697 $
4,055
4,477
3,164
156
13,549 $
2,051
2,778
2,218
2,530
164
9,741
(1)
(2)
LTIP expense includes the time-based portion of the 2020, 2019 and 2018 LTI Plans.
Performance-based LTI expense includes the 2017 and 2015 OPP plans and the performance-based portion of the 2020, 2019 and 2018 LTI Plans.
As of December 31, 2020, we had a total of $15.1 million of unrecognized compensation expense related to unvested and restricted share-based payment
arrangements including unvested stock options, LTIP units, deferred share units, and restricted share awards which were granted under our Omnibus Share Plan as
well as OPP awards. This expense is expected to be recognized over a weighted average period of two years.
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16. EARNINGS PER SHARE AND UNIT
Urban Edge Earnings per Share
We have calculated earnings per share (“EPS”) under the two-class method. The two-class method is an earnings allocation methodology whereby EPS for each
class of Urban Edge common shares and participating securities is calculated according to dividends declared and participating rights in undistributed earnings.
Restricted shares issued pursuant to our share-based compensation program are considered participating securities, and as such have non-forfeitable rights to
receive dividends.
The computation of diluted EPS reflects potential dilution of securities by adding potential common shares, including stock options and unvested restricted shares,
to the weighted average number of common shares outstanding for the period. For the years ended December 31, 2020, 2019 and 2018, there were options
outstanding for 4,930,762, 4,930,762, and 4,750,549 shares, respectively, that potentially could be exercised for common shares. During the years ended
December 31, 2020, 2019 and 2018, no options were included in the diluted EPS calculation as their exercise prices were higher than the average market prices of
our common shares. In addition, as of December 31, 2020 there were 72,393 unvested restricted shares outstanding that potentially could become unrestricted
common shares. The computation of diluted EPS for the years ended December 31, 2020, 2019 and 2018 included the 77,289, 100,406, and 188,329 weighted
average unvested restricted shares outstanding, respectively, as their effect is dilutive.
The effect of the redemption of OP and vested LTIP units is not reflected in the computation of basic and diluted earnings per share, as they are redeemable for
common shares on a one-for-one basis. The income allocable to such units is allocated on this same basis and reflected as noncontrolling interests in the
accompanying consolidated financial statements. As such, the assumed redemption of these units would have no net impact on the determination of diluted
earnings per share since they would be anti-dilutive.
The following table sets forth the computation of our basic and diluted earnings per share:
(Amounts in thousands, except per share amounts)
Numerator:
Net income attributable to common shareholders
Less: Earnings allocated to unvested participating securities
Net income available for common shareholders - basic
Impact of assumed conversions:
OP and LTIP units
Net income available for common shareholders - dilutive
Denominator:
Weighted average common shares outstanding - basic
Effect of dilutive securities:
Stock options using the treasury stock method
Restricted share awards
Assumed conversion of OP and LTIP units
Weighted average common shares outstanding - diluted
Earnings per share available to common shareholders:
Earnings per common share - Basic
Earnings per common share - Diluted
Year Ended December 31,
2019
2020
2018
93,589 $
(62)
93,527 $
81
93,608 $
109,523 $
(92)
109,431 $
5
109,436 $
105,150
(184)
104,966
—
104,966
117,722
119,751
113,863
—
77
103
117,902
—
100
45
119,896
—
188
—
114,051
0.79 $
0.79 $
0.91 $
0.91 $
0.92
0.92
$
$
$
$
$
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Operating Partnership Earnings per Unit
The following table sets forth the computation of basic and diluted earnings per unit:
(Amounts in thousands, except per unit amounts)
Numerator:
Net income attributable to unitholders
Less: net income attributable to participating securities
Net income available for unitholders
Denominator:
Weighted average units outstanding - basic
Effect of dilutive securities issued by Urban Edge
Unvested LTIP units
Weighted average units outstanding - diluted
Earnings per unit available to unitholders:
Earnings per unit - Basic
Earnings per unit - Diluted
2020
Year Ended December 31,
2019
2018
97,749 $
(62)
97,687 $
116,222 $
(92)
116,130 $
121,957
77
777
122,811
126,333
100
45
126,478
116,918
(200)
116,718
126,198
188
—
126,386
0.80 $
0.80 $
0.92 $
0.92 $
0.92
0.92
$
$
$
$
90
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
ITEM 9A. CONTROLS AND PROCEDURES
Controls and Procedures (Urban Edge Properties)
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”))
that are designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated
to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.
Because of inherent limitations, disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute,
assurance that the objectives of disclosure controls and procedures are met.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our
disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period
covered by this report, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in
reports filed or submitted under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms.
Management’s Annual Report on Internal Control over Financial Reporting
The management of Urban Edge Properties and subsidiaries (the “Company”) is responsible for establishing and maintaining adequate internal control over
financial reporting for the Company, defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended, as a process
designed by, or under the supervision of, the Company’s principal executive and principal financial officers, or persons performing similar functions, and effected
by the Company’s Board of Trustees, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting, which
requires the use of certain estimates and judgments, and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles and includes those policies and procedures that:
•
•
•
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management
and trustees of the Company; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could
have a material effect on the financial statements.
Management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or internal control
over financial reporting will prevent all errors and fraud. In designing and evaluating our control system, management recognized that any control system, no
matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. Further, the design of a
control system must reflect the fact that there are resource constraints, and management necessarily was required to apply its judgment in evaluating the cost-
benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, that may affect our operation have been or will be detected. These inherent limitations include the
realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be
circumvented by the individual acts of some persons, by collusion of two or more people, or by management’s override of the control. The design of any system of
controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions that cannot be
anticipated at the present time, or the degree of
91
compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or
fraud may occur and may not be detected.
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making this
assessment, the Company’s management used the criteria set forth by the Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). Based on this assessment, management has concluded that, as
of December 31, 2020, the Company’s internal control over financial reporting was effective in providing reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2020 has been audited by Deloitte & Touche LLP, an independent
registered public accounting firm as stated in their attestation report which is included herein.
Changes in Internal Control Over Financial Reporting
There have not been any changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)) that occurred during the three
months ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Controls and Procedures (Urban Edge Properties LP)
Evaluation of Disclosure Controls and Procedures
The Operating Partnership’s management maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934 (the “Exchange Act”)) that are designed to provide reasonable assurance that information required to be disclosed in the reports that we file
or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such
information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer of our general partner, as
appropriate to allow timely decisions regarding required disclosures. Because of inherent limitations, disclosure controls and procedures, no matter how well
designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of disclosure controls and procedures are met.
The Operating Partnership’s management, with the participation of the Chief Executive Officer and Chief Financial Officer of our general partner, evaluated the
effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, the Chief Executive Officer and Chief Financial
Officer of our general partner concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to provide
reasonable assurance that information required to be disclosed by us in reports filed or submitted under the Exchange Act is processed, recorded, summarized and
reported within the time periods specified in the SEC’s rules and forms.
Management’s Annual Report on Internal Control over Financial Reporting
The Operating Partnership’s management is responsible for establishing and maintaining adequate internal control over financial reporting for the Operating
Partnership, defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the
supervision of, the Operating Partnership’s principal executive and principal financial officers, or persons performing similar functions, and effected by the Board
of Trustees, management and other personnel of the Operating Partnership’s general partner, to provide reasonable assurance regarding the reliability of financial
reporting, which requires the use of certain estimates and judgments, and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles and includes those policies and procedures that:
•
•
•
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management
and trustees of the Operating Partnership’s general partner; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could
have a material effect on the financial statements.
92
The Operating Partnership’s management, including the Chief Executive Officer and Chief Financial Officer of our general partner, does not expect that our
disclosure controls and procedures or internal control over financial reporting will prevent all errors and fraud. In designing and evaluating our control system,
management recognized that any control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the
desired control objectives. Further, the design of a control system must reflect the fact that there are resource constraints, and management necessarily was required
to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, that may affect our operation have been or will be
detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or
mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management’s override of
the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in
conditions that cannot be anticipated at the present time, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent
limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.
The Operating Partnership’s management assessed the effectiveness of the Operating Partnership’s internal control over financial reporting as of December 31,
2020. In making this assessment, the Operating Partnership’s management used the criteria set forth by the Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). Based on this assessment, management has
concluded that, as of December 31, 2020, the Operating Partnership’s internal control over financial reporting was effective in providing reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted
accounting principles.
The effectiveness of the Operating Partnership’s internal control over financial reporting as of December 31, 2020 has been audited by Deloitte & Touche LLP, an
independent registered public accounting firm as stated in their attestation report which is included herein.
Changes in Internal Control Over Financial Reporting
There have not been any changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)) that occurred during the three
months ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
93
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of Urban Edge Properties
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Urban Edge Properties and subsidiaries (the “Company”) as of December 31, 2020, based on
criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on
criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial
statements and financial statement schedules as of and for the year ended December 31, 2020, of the Company and our report dated February 17, 2021, expressed
an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to
express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
New York, New York
February 17, 2021
94
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of Urban Edge Properties LP
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Urban Edge Properties LP (the “Operating Partnership”) as of December 31, 2020, based on
criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). In our opinion, the Operating Partnership maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020,
based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial
statements and financial statement schedules as of and for the year ended December 31, 2020, of the Operating Partnership and our report dated February 17, 2021,
expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Operating Partnership’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the Operating Partnership’s internal control over financial reporting based on our audit. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the Operating Partnership in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
New York, New York
February 17, 2021
95
ITEM 9B. OTHER INFORMATION
None.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
PART III
The information required by Item 10 will be included in the Proxy Statement to be filed relating to Urban Edge Properties’ 2021 Annual Meeting of Shareholders
and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 will be included in the Proxy Statement to be filed relating to Urban Edge Properties’ 2021 Annual Meeting of Shareholders
and is incorporated herein by reference.
96
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Equity Compensation Plan Information
The following table summarizes information, as of December 31, 2020, relating to our equity compensation plans pursuant to which our common shares or other
equity securities may be granted from time to time.
Plan Category
Equity compensation plans approved by
security holders
Equity compensation plans not approved by
security holders
Total
(a)
Number of securities to be
issued upon exercise of
outstanding options, warrants
and rights
(b)
Weighted-average exercise
price of outstanding options,
warrants and rights
(2)
(c)
Number of securities remaining available
for future issuance under equity
compensation plans (excluding securities
reflected in column a)
2,853,238
(1)
$
(4)
1,352,890
4,206,128
$
21.14
21.72
21.33
3,592,281
(3)
N/A
3,592,281
(1)
(2)
(3)
(4)
Includes an aggregate of (i) 221,665 common shares issuable upon exercise of outstanding options and (ii) 2,631,573 common shares issuable in exchange for common units
which may, upon satisfaction of certain conditions, be issuable pursuant to outstanding LTIP Units in our Operating Partnership (“LTIP Units”). The LTIP Units outstanding
as of December 31, 2020 include 1,291,002 LTIP Units issued pursuant to our 2017 OPP, 2018 LTI Plan, 2019 LTI Plan, and 2020 LTI Plan which remain subject to
performance-based vesting criteria.
The LTIP Units do not have an exercise price. Accordingly, these awards are not included in the weighted-average exercise price calculation.
Includes (i) 1,671,191 common shares remaining available for issuance under the Urban Edge Properties 2015 Omnibus Incentive Plan (the “Plan”) and (ii) 1,921,090
common share remaining available under the Urban Edge Properties 2015 Employee Share Purchase Plan (“ESPP”). The number of common shares remaining available for
issuance under the Plan is based on awards being granted as "Full Value Awards," as defined in the Plan, including awards such as restricted stock, LTIP units or performance
units that do not require the payment of an exercise price. If we were to grant awards other than “Full Value Awards," as defined in the Plan, including stock options or stock
appreciation rights, the number of securities remaining available for future issuance under the Plan would be 3,342,381. Pursuant to the terms of the ESPP, on each January 1
prior to the tenth anniversary of the ESPP’s effective date, an additional number of common shares will be added to the maximum number of shares authorized for issuance
under the ESPP equal to the lesser of (a) 0.1% of the total number of common shares outstanding on December 31 of the preceding calendar year and (b) 150,000 common
shares; provided that the Compensation Committee of our Board of Trustees may act prior to January 1 of any calendar year to provide that there will be no increase in the
share reserve for that calendar year, or that the increase in the share reserve for that calendar year shall be less than the increase that would otherwise occur.
Relates to the Urban Edge Properties 2018 Inducement Equity Plan, which is an omnibus equity plan pursuant to which we may grant a variety of equity awards pursuant to
the employment inducement award exemption provided by Section 303A.08 of the New York Stock Exchange Listed Company Manual, including options, share appreciation
rights, performance shares, restricted shares and other share-based awards including LTIP Units. A total of 1,170,628 common shares are authorized to be issued under the
2018 Inducement Equity Plan. The 2018 Inducement Equity Plan has a ten-year term expiring on September 20, 2028 and generally may be amended at any time by our Board
of Trustees. Included in the 1,170,628 common shares authorized to be issued under the 2018 Inducement Equity Plan are an aggregate of (i) 1,000,000 common shares
issuable upon exercise of outstanding options and (ii) 170,628 common shares issuable in exchange for common units which may, upon satisfaction of certain conditions, be
issuable pursuant to outstanding LTIP Units.
Additional information concerning security ownership of certain beneficial owners and management required by Item 12 will be included in the Proxy Statement to
be filed relating to Urban Edge Properties’ 2021 Annual Meeting of Shareholders and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by Item 13 will be included in the Proxy Statement to be filed relating to Urban Edge Properties’ 2021 Annual Meeting of Shareholders
and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by Item 14 will be included in the Proxy Statement to be filed relating to Urban Edge Properties’ 2021 Annual Meeting of Shareholders
and is incorporated herein by reference.
97
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
(a)(1) Financial Statements
Our consolidated financial statements and notes thereto, together with the Reports of Independent Registered Public Accounting Firm are included in Item 8 of this
Annual Report on Form 10-K commencing on page 42.
(2) Financial Statement Schedules
Our financial statement schedules are included in Item 8 of this Annual Report on Form 10-K commencing on page 96.
(3) Exhibits
A list of exhibits to this Annual Report on Form 10-K is set forth on the Index to Exhibits commencing on page 92 and is incorporated herein by reference.
(b) See Index to Exhibits
(c) Schedules other than those listed above are omitted because they are not applicable or the information required is included in the consolidated financial
statements or the notes thereto.
ITEM 16. FORM 10-K SUMMARY
Not applicable.
98
The following exhibits are included as part of this Annual Report on Form 10-K:
INDEX TO EXHIBITS
Exhibit Number
2.1
3.1
3.2
4.1*
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9†
10.10†
10.11†
10.12†
10.13†
10.14†
10.15†
10.16†
21.1*
Exhibit Description
Separation and Distribution Agreement by and among Vornado Realty Trust, Vornado Realty L.P., Urban Edge Properties and Urban Edge
Properties LP, dated as of January 14, 2015 (incorporated by reference to Exhibit 2.1 to Form 8-K filed January 21, 2015)
Declaration of Trust of Urban Edge Properties, as amended and restated (incorporated by reference to Exhibit 3.1 to Form 8-K filed January
21, 2015)
Amended and Restated Bylaws of Urban Edge Properties (incorporated by reference to Exhibit 3.1 to Form 8-K filed March 24, 2020)
Description of Urban Edge Properties’ Securities Registered Under Section 12 of the Securities Exchange Act of 1934
Limited Partnership Agreement of Urban Edge Properties LP, dated as of January 14, 2015 (incorporated by reference to Exhibit 10.1 to
Form 8-K filed January 21, 2015)
Revolving Credit Agreement among Urban Edge Properties LP, as Borrower, the Banks party thereto, and Wells Fargo Bank, National
Association, as Administrative Agent, dated as of January 15, 2015 (incorporated by reference to Exhibit 10.10 to Form 8-K filed January
21, 2015)
First Amendment, dated as of March 7, 2017, to Revolving Credit Agreement among Urban Edge Properties LP, as Borrower, to the Banker
party thereto, and Wells Fargo Bank, National Association, as Administrative Agent (incorporated by reference to Exhibit 10.1 to Form 10-
Q filed on May 3, 2017)
Second Amendment, dated as of July 29, 2019, to Revolving Credit Agreement by and among Urban Edge Properties LP, as Borrower, each
of the Banks party thereto, and Wells Fargo Bank, National Association, as Administrative Agent (incorporated by reference to Exhibit 10.5
to Form 10-K filed on February 12, 2020)
Third Amendment, dated as of June 3, 2020, to Revolving Credit Agreement by and among Urban Edge Properties LP, as Borrower, each of
the Banks party thereto, and Wells Fargo Bank, National Association, as Administrative Agent (incorporated by reference to Exhibit 10.1 to
Form 8-K filed June 5, 2020)
Tax Protection Agreement dated as of May 24, 2017, by and among Urban Edge Properties LP; Urban Edge Properties; and Acklinis
Yonkers Realty, L.L.C., Acklinis Realty Holding, LLC, Acklinis Original Building, L.L.C., A & R Woodbridge Shopping Center, L.L.C., A
& R Millburn Associates, L.P., Ackrik Associates, L.P., A & R Manchester, LLC, A & R Westfield Lincoln Plaza, LLC and A & R
Westfield Broad Street, LLC. (incorporated by reference to Exhibit 10.1 to Form 10-Q filed on August 2, 2017)
Contribution Agreement dated as of April 7, 2017, by and among Urban Edge Properties LP; Urban Edge Properties; and Acklinis Yonkers
Realty, L.L.C., Acklinis Realty Holding, LLC, Acklinis Original Building, L.L.C., A & R Woodbridge Shopping Center, L.L.C., A & R
Millburn Associates, L.P., Ackrik Associates, L.P., A & R Manchester, LLC, A & R Westfield Lincoln Plaza, LLC and A & R Westfield
Broad Street, LLC. (incorporated by reference to Exhibit 10.2 to Form 10-Q filed on August 2, 2017)
Loan Agreement between VNO Bergen Mall Owner LLC and Wells Fargo Bank, National Association, dated March 25, 2013 (incorporated
by reference to Exhibit 10.6 to Amendment No. 2 to Form 10 filed November 13, 2014)
Urban Edge Properties 2015 Employee Share Purchase Plan (incorporated by reference to Exhibit 4.4 to Form S-8 filed February 17, 2015)
Urban Edge Properties 2015 Omnibus Share Plan (incorporated by reference to Exhibit 10.5 to Form 8-K filed January 21, 2015)
Urban Edge Properties 2018 Inducement Equity Plan (incorporated by reference to Exhibit 99.1 to Form S-8 filed September 26, 2018)
Employment Offer Letter between Urban Edge Properties and Herb Eilberg (incorporated by reference to Exhibit 10.1 to Form 10-Q filed
on May 4, 2016)
Employment Agreement between Urban Edge Properties and Christopher Weilminster (incorporated by reference to Exhibit 10.1 to Form
10-Q filed on October 31, 2018)
Employment Agreement between Urban Edge Properties and Jeffrey S. Olson (incorporated by reference to Exhibit 10.1 to Form 8-K filed
August 9, 2019)
Retention Agreement between Urban Edge Properties and Mark Langer (incorporated by reference to Exhibit 10.1 to Form 8-K filed
October 24, 2019)
Form of Indemnification Agreement between Urban Edge Properties and each of its trustees and executive officers (incorporated by
reference to Exhibit 10.15 to Form 10-K/A filed on March 23, 2015)
List of Subsidiaries
99
23.1*
23.2*
24.1*
31.1*
31.2*
31.3*
31.4*
32.1**
32.2**
101.SCH*
101.CAL*
101.LAB*
101.PRE*
101.DEF*
104*
Consent of Independent Registered Public Accounting Firm for Urban Edge Properties
Consent of Independent Registered Public Accounting Firm for Urban Edge Properties LP
Power of Attorney (included on signature page)
Certification by the Chief Executive Officer for Urban Edge Properties pursuant to rule 13a-14(a)/15d-14(a) of the Securities Exchange
Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification by the Chief Financial Officer for Urban Edge Properties pursuant to rule 13a-14(a)/15d-14(a) of the Securities Exchange Act
of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification by the Chief Executive Officer for Urban Edge Properties LP pursuant to rule 13a-14(a)/15d-14(a) of the Securities Exchange
Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification by the Chief Financial Officer for Urban Edge Properties LP pursuant to rule 13a-14(a)/15d-14(a) of the Securities Exchange
Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification by the Chief Executive Officer and Chief Financial Officer for Urban Edge Properties pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification by the Chief Executive Officer and Chief Financial Officer for Urban Edge Properties LP pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Inline XBRL Taxonomy Extension Schema
Inline XBRL Extension Calculation Linkbase
Inline XBRL Extension Labels Linkbase
Inline XBRL Taxonomy Extension Presentation Linkbase
Inline XBRL Taxonomy Extension Definition Linkbase
Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*)
* Filed herewith
** In accordance with Item 601 (b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject
to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act,
except to the extent that the registrant specifically incorporates it by reference.
† Management contracts and compensatory plans or arrangements required to be filed pursuant to Item 15(b) of Form 10-K.
100
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
SIGNATURES
URBAN EDGE PROPERTIES
(Registrant)
/s/ Mark Langer
Mark Langer, Chief Financial Officer
Date: February 17, 2021
URBAN EDGE PROPERTIES LP
By: Urban Edge Properties, General Partner
/s/ Mark Langer
Mark Langer, Chief Financial Officer
Date: February 17, 2021
101
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Urban Edge
Properties in its own capacity and in its capacity as the sole general partner of Urban Edge Properties LP, and in the capacities and on the dates indicated:
By:
By:
By:
By:
By:
By:
By:
By:
By:
By:
Signature
/s/ Jeffrey S. Olson
Jeffrey S. Olson
/s/ Mark Langer
Mark Langer
/s/ Jennifer Holmes
Jennifer Holmes
/s/ Michael A. Gould
Michael A. Gould
/s/ Steven H. Grapstein
Steven H. Grapstein
/s/ Steven J. Guttman
Steven J. Guttman
/s/ Amy B. Lane
Amy B. Lane
/s/ Kevin P. O’Shea
Kevin P. O’Shea
/s/ Steven Roth
Steven Roth
/s/ Douglas W. Sesler
Douglas W. Sesler
Title
Chairman of the Board of Trustees
and Chief Executive Officer
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial Officer)
Chief Accounting Officer
(Principal Accounting Officer)
Trustee
Trustee
Trustee
Trustee
Trustee
Trustee
Trustee
Date
February 17, 2021
February 17, 2021
February 17, 2021
February 17, 2021
February 17, 2021
February 17, 2021
February 17, 2021
February 17, 2021
February 17, 2021
February 17, 2021
102
URBAN EDGE PROPERTIES AND URBAN EDGE PROPERTIES LP
SCHEDULE II- VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Column A
Description
Year Ended December 31, 2020:
Allowance for doubtful accounts
Year Ended December 31, 2019:
Allowance for doubtful accounts
Year Ended December 31, 2018:
Allowance for doubtful accounts
(1)
(1)
Column B
Balance
at Beginning
of Year
Column C
Additions
(Reversals)
Expensed
Column D
Uncollectible
Accounts
Written-Off
Column E
Balance
at End
of Year
$
—
$
—
$
—
5,431
—
4,138
— $
—
—
—
(2,949)
6,620
(1)
Due to the adoption of ASC 842, we recognize changes in the collectibility assessment of operating leases as adjustments to rental revenue and thus no allowance for doubtful
accounts is maintained.
103
URBAN EDGE PROPERTIES AND URBAN EDGE PROPERTIES LP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
(in thousands)
Initial cost to company
Gross amount at which
carried at close of period
Description
Encumbrances
Land
Building and
improvements
Costs
capitalized
subsequent
to acquisition
Land
Building and
improvements
Total
(2)
Accumulated
depreciation
and
amortization
(1)
Date of
construction
Date
acquired
3,227
6,698
6,824
19,460
1,630
41,700
581
2,727
6,305
22,687
8,328
48,524
23,268
11,055
54,829
(8,317)
(4,488)
(11,618)
1968
1972/ 1999
1957/ 2009
89,358
388,291
43,630
456,949
500,579
(140,346)
1957/ 2009
581
2,727
6,305
22,930
1,391
66,100
8,150
6,427
850
5,743
—
—
—
—
—
—
300,000
50,000
—
10,351
71,696
SHOPPING CENTERS AND MALLS:
Baltimore (Towson), MD
Bensalem, PA
Bergen Town Center -
East, Paramus, NJ
Bergen Town Center -
West, Paramus, NJ
Brick, NJ
Bronx (Bruckner
Boulevard), NY
Bronx (Shops at
Bruckner), NY
Brooklyn (Kingswood
Center), NY
Brooklyn (Kingswood
Crossing), NY
Bronx (1750-1780 Gun
Hill Road), NY
Broomall, PA
Buffalo (Amherst), NY
Cambridge (leased
through 2033)
Carlstadt (leased through
2050)
, NJ
Charleston (leased
through 2063)
, SC
Cherry Hill (Plaza at
Cherry Hill), NJ
Commack (leased
through 2021)
Dewitt (leased through
2041)
Rockaway, NJ
East Brunswick, NJ
, MA
, NY
, NY
(3)
(3)
(3)
(3)
(3)
—
—
—
—
—
—
—
—
27,800
63,000
28,930
25,172
11,885
23,410
6,428
35,294
41,722
(11,776)
11,179
259,503
14,089
8,954
1,391
61,618
25,268
272,939
26,659
334,557
—
32,979
56
—
33,035
33,035
15,690
76,766
(1,644)
15,690
75,122
90,812
64,159
35
8,150
64,194
72,344
2,171
4,056
—
16,458
3,634
1,821
16,555
97
133
308
850
5,107
—
—
—
3,992
21,247
97
4,842
26,354
97
16,591
16,591
3,942
3,942
14,602
33,666
(2,916)
14,602
30,750
45,352
—
—
559
2,417
43
7,116
6,363
17,169
160
—
5,340
7,462
—
—
559
2,417
203
7,116
11,703
24,631
203
7,116
12,262
27,048
(16,983)
(42,036)
(3,708)
(2,235)
(1,729)
(3,089)
(10,023)
(17)
(5,479)
(1,336)
(5,329)
(193)
(2,561)
(7,476)
(19,259)
East Hanover (200 - 240
Route 10 West), NJ
East Hanover (280 Route
10 West), NJ
East Rutherford, NJ
Freeport (Meadowbrook
Commons) (leased
through 2040)
Freeport (Freeport
Commons), NY
Garfield, NJ
, NY
(3)
63,000
2,232
18,241
16,670
2,671
34,472
37,143
(19,280)
—
23,000
—
—
—
—
—
36,727
—
6,063
1,270
177
—
—
—
6,063
6,063
37,997
177
37,997
177
(2,028)
(9,683)
(2)
43,100
1,231
4,747
4,846
1,593
9,231
10,824
(7,106)
40,300
45
8,068
46,419
44
54,488
54,532
(18,785)
1968
N/A
N/A
N/A
N/A
2009
1966
1968
N/A
N/A
N/A
N/A
N/A
N/A
1964
1957/
1972
1962
N/A
2007
N/A
1981
2009
1968
1972
2003/
2019
2003/
2020
1968
2007
2017
2020
2020
2005
1966
1968
2007
2007
2006
2017
2006
2006
1964
1957/
1972
1962/
1998
1962/
1998
2007
2005
1981
1998
104
Description
Encumbrances
Land
Building and
improvements
Costs
capitalized
subsequent
to acquisition
Land
Building and
improvements
Total
(2)
Accumulated
depreciation
and
amortization
(1)
Date of
construction
Date
acquired
Initial cost to company
Gross amount at which
carried at close of period
(leased
(3)
, NY
Glenolden, PA
Hackensack, NJ
Hazlet, NJ
Huntington, NY
Inwood, NY
Jersey City (Hudson
Commons), NJ
Jersey City (Hudson
Mall), NJ
Kearny, NJ
Lancaster, PA
Las Catalinas, Puerto
Rico
Lodi (Washington
Street), NJ
Manalapan, NJ
Manchester, MO
Marlton, NJ
Massapequa,
through 2069)
Middletown, NJ
Millburn, NJ
Montclair, NJ
Montehiedra, Puerto
Rico
Morris Plains, NJ
Mount Kisco, NY
New Hyde Park (leased
through 2029)
Newington, CT
Norfolk (leased through
2069)
North Bergen (Kennedy
Boulevard), NJ
North Bergen (Tonnelle
Avenue), NJ
North Plainfield, NJ
Paramus (leased through
2033)
, NJ
Queens, NY
Rochester (Henrietta)
(leased through 2056)
NY
Rockville, MD
Revere (Wonderland),
MA
Salem (leased through
2102)
, NH
South Plainfield (leased
through 2039)
, NJ
Springfield (leased
through 2025)
, NY
, VA
, PA
(3)
(3)
(3)
(3)
(3)
(3)
(3)
,
—
66,400
—
—
—
28,586
850
692
7,400
21,200
12,419
652
1,820
10,219
9,413
33,667
19,097
7,495
818
7,548
(8,078)
9,662
3,163
950
850
692
5,211
21,200
12,419
652
2,638
17,767
3,524
43,329
22,260
8,445
3,488
18,459
8,735
64,529
34,679
9,097
(2,345)
(11,746)
(34)
(12,364)
(9,256)
(4,000)
22,904
15,824
37,593
(3,612)
15,824
33,981
49,805
(5,838)
—
—
127,669
309
3,140
15,280
3,376
63
64,370
17,700
2,059
15,866
296
3,140
15,280
21,089
2,122
80,236
21,385
5,262
95,516
(6,358)
(1,028)
(42,663)
—
7,606
13,125
(9,262)
3,823
7,646
11,469
(2,984)
—
12,500
37,400
—
31,400
23,381
7,250
81,141
—
12,952
—
—
—
—
725
4,409
1,611
44,035
283
15,783
66
9,182
1,104
22,700
—
2,421
—
2,308
7,189
13,756
3,464
3,084
5,248
25,837
419
66,751
6,411
26,700
4
1,200
3,927
636
7,217
(6,799)
14,432
—
2,836
(246)
1,439
29,921
10,363
4,218
—
1,641
15
1,046
2,858
1,454
44,035
283
15,783
448
9,267
1,104
23,297
—
2,421
—
261
2,308
14,085
8,508
18,053
3,084
8,084
25,591
1,476
96,587
16,774
30,321
4
2,841
3,942
897
15,131
11,366
19,507
47,119
8,367
41,374
1,924
105,854
17,878
53,618
4
5,262
3,942
3,205
(10,083)
(417)
(12,344)
—
(6,729)
(3,772)
(800)
(49,711)
(7,889)
(8,979)
(4)
(1,323)
(3,937)
(658)
100,000
24,978
10,462
66,254
34,473
67,221
101,694
(19,910)
25,100
—
—
—
—
—
—
—
—
6,577
—
14,537
—
3,470
6,323
6,083
—
—
13,983
—
12,304
2,647
20,599
17,130
790
12,569
4,269
1,181
6,577
—
14,537
—
3,101
(10)
3,470
6,323
14,773
12,569
16,573
3,828
23,700
17,120
21,350
12,569
31,110
3,828
27,170
23,443
—
(2,788)
2,994
301
3,295
(5,046)
(5,537)
(2,259)
(3,600)
(9,705)
(1,270)
—
10,044
1,926
—
80
—
—
11,970
11,970
(4,054)
80
80
(80)
1975
1963
N/A
N/A
N/A
1965
N/A
1938
1966
1996
N/A
1971
N/A
1973
N/A
1963
N/A
1972
1996/
2015
1961
N/A
1970
1965
N/A
1993
2009
1955
1957/
2009
N/A
1971
N/A
N/A
N/A
N/A
N/A
1975
1963
2007
2007
2004
1965
2017
1959
1966
2002
2004
1971
2017
1973
2020
1963
2017
1972
1997
1985
2007
1976
1965
2005
1959
2006
1989
2003
2015
1971
2005
2019
2006
2007
2005
105
Description
Encumbrances
Land
Building and
improvements
Costs
capitalized
subsequent
to acquisition
Land
Building and
improvements
Total
(2)
Accumulated
depreciation
and
amortization
(1)
Date of
construction
Date
acquired
Initial cost to company
Gross amount at which
carried at close of period
Staten Island, NY
Totowa, NJ
(3)
, CA
Turnersville, NJ
Union (2445 Springfield
Avenue), NJ
Union (Route 22 and
Morris Avenue), NJ
Vallejo (leased through
2043)
Walnut Creek (1149 South
Main Street), CA
Walnut Creek (Mt. Diablo),
CA
Watchung, NJ
Westfield, NJ
Wheaton (leased through
2060)
Wilkes-Barre (461 - 499
Mundy Street), PA
Woodbridge (Woodbridge
Commons), NJ
Woodbridge (Plaza at
Woodbridge), NJ
Wyomissing (leased
through 2065)
, PA
Yonkers, NY
, MD
(3)
(3)
4,971
4,883
4,067
—
11,446
92
900
19,700
26,233
16,905
5,409
45,090
37,679
16,997
6,309
64,790
(11,099)
(14,883)
(2,563)
(15,312)
N/A
1957/
1999
1974
N/A
7,118
3,025
14,588
17,613
(6,040)
1962
21,262
11,994
1,342
45,090
7,470
2,945
—
50,800
—
45,600
—
—
—
—
26,613
4,730
—
11,446
120
900
19,700
3,025
—
2,699
5,909
4,178
5,728
—
221
—
3,166
3,166
19,930
(1,003)
2,699
18,927
21,626
—
1,351
5,908
5,463
4,305
5,367
2,751
(4,459)
—
1,352
7,951
2,225
5,367
7,260
12,392
5,574
5,367
13,348
16,395
8,187
9,726
4,441
3,349
—
3,047
1,539
—
6,053
26,646
(16,304)
22,100
1,509
2,675
5,542
55,340
21,547
75,017
2,370
19,218
79,716
98,934
—
—
2,646
403
—
3,049
3,049
28,482
63,341
110,635
16,052
65,941
124,087
190,028
(14,717)
(1,276)
(2,890)
(285)
(6,338)
(93)
(1,912)
(102)
(3,700)
(7,916)
(2,629)
N/A
N/A
N/A
1994
N/A
N/A
N/A
1959
N/A
N/A
N/A
1972
1999
INDUSTRIAL:
East Hanover, NJ
Lodi (Route 17 North), NJ
TOTAL UE
PROPERTIES
Leasehold Improvements,
Equipment and Other
40,700
—
576
238
7,752
9,446
31,081
916
691
238
38,718
10,362
39,409
10,600
(20,571)
(5,016)
1,597,397
556,916
1,533,055
849,830
568,662
2,371,139
2,939,801
(728,947)
—
—
—
7,016
—
7,016
7,016
(1,419)
TOTAL
$
1,597,397
$ 556,916
$
1,533,055
$
856,846
$ 568,662
$
2,378,155
$ 2,946,817
$
(730,366)
(1)
(2)
(3)
Depreciation of the buildings and improvements are calculated over lives ranging from the life of the lease to forty years.
Adjusted tax basis for federal income tax purposes was $1.5 billion as of December 31, 2020.
The Company is a lessee under a ground or building lease. The building will revert to the lessor upon lease expiration.
2004
1957
1974
2007
1962
2006
2006
2007
1959
2017
2006
2007
1959
2017
2005
2017
1972
1975
106
URBAN EDGE PROPERTIES AND URBAN EDGE PROPERTIES LP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
(Amounts in thousands)
The following is a reconciliation of real estate assets and accumulated depreciation:
Real Estate
Balance at beginning of period
Additions during the period:
Land
Buildings & improvements
Construction in progress
Less: Impairments, assets sold, written-off or reclassified as held for sale
Balance at end of period
Accumulated Depreciation
Balance at beginning of period
Additions charged to operating expenses
Less: Accumulated depreciation on assets written-off
Balance at end of period
$
$
$
$
2020
Year Ended December 31,
2019
2018
2,748,785 $
2,768,992 $
2,671,854
68,536
145,800
27,550
2,990,671
(43,854)
2,946,817 $
671,946 $
81,691
753,637
(23,271)
730,366 $
13,441
31,806
61,641
2,875,880
(127,095)
2,748,785 $
645,872 $
80,774
726,646
(54,700)
671,946 $
4,120
12,394
118,389
2,806,757
(37,765)
2,768,992
587,127
80,578
667,705
(21,833)
645,872
107
Description of Securities
Exhibit 4.1
The following is a summary of the material terms of the common shares of beneficial interest, par value $0.01 per share (the “Common
Shares”), of Urban Edge Properties, a Maryland real estate investment trust (the “Company”), as well as certain relevant provisions of the
amended and restated declaration of trust (the “Declaration of Trust”) and amended and restated bylaws (the “Bylaws”) of the Company, the
Maryland General Corporation Law (the “MGCL”) and the Maryland REIT Law. A more complete description is available by referring to the
full text of the Declaration of Trust, the Bylaws and the MGCL. The Company’s Declaration of Trust authorizes 500,000,000 Common
Shares and 200,000,000 preferred shares of beneficial interest, par value $0.01 per share (the “Preferred Shares”).
Dividend, Voting and Other Rights of Holders of Common Shares
The holders of Common Shares are entitled to receive dividends if, when and as authorized by the Board of Trustees of the Company (the
“Board”) and declared by the Company out of assets legally available to pay dividends, if receipt of the dividends is in compliance with the
provisions in the Declaration of Trust restricting the ownership and transfer of shares and the preferential rights of any other class or series of
shares.
Subject to the provisions of the Declaration of Trust regarding the restrictions on ownership and transfer of shares and except as may
otherwise be specified in the terms of any class or series of shares of beneficial interest, holders of Common Shares will be entitled to one
vote for each Common Share on all matters on which shareholders are entitled to vote, including elections of trustees. There is no cumulative
voting in the election of trustees, which means that the holders of a majority of the outstanding Common Shares can elect all of the trustees
then standing for election. A majority of the votes cast at a meeting of shareholders at which a quorum is present is sufficient to approve any
matter, other than the election of trustees (see “Certain Provisions of Maryland Law and of the Declaration of Trust and Bylaws - The Board
of Trustees” below), on which shareholders are entitled to vote, unless more than a majority of the votes cast is required by statute or by the
Declaration of Trust.
Generally, the holders of Common Shares will not have any conversion, sinking fund, redemption, appraisal or preemptive rights to subscribe
to any securities of the Company. If the Company is dissolved, liquidated or wound up, subject to the preferential rights of any Preferred
Shares outstanding, holders of Common Shares will be entitled to share proportionally in any assets remaining after the Company satisfies (i)
the prior rights of creditors, including holders of indebtedness of the Company, and (ii) the aggregate liquidation preference of any Preferred
Shares then outstanding.
Subject to the provisions of the Declaration of Trust regarding the restrictions on ownership and transfer of shares, Common Shares will have
equal dividend, distribution, liquidation and other rights and will have no preference or exchange rights. The rights, preferences and
privileges of the holders of Common Shares will be subject to, and may be adversely affected by, the rights of the holders of shares of any
class or series of Preferred Shares that the Company may designate and issue in the future.
The transfer agent for the Common Shares is American Stock Transfer & Trust Company, New York, New York.
Listing
The Common Shares are listed on the New York Stock Exchange under the symbol “UE”.
Power to Increase Authorized Shares and Issue Additional Shares
The Board has the authority, without shareholder approval, to amend the Declaration of Trust to increase or decrease the aggregate number of
authorized shares or the number of shares of any class or series that the Company has authority to issue, to issue additional authorized but
unissued Common Shares or Preferred Shares and to
classify or reclassify unissued Common Shares or Preferred Shares and thereafter to issue such classified or reclassified shares. These actions
may be taken without shareholder approval, unless shareholder approval is required by applicable law, the terms of any other class or series
of shares or the rules of any securities exchange or automated quotation system on which the securities of the Company may be listed or
traded. The Board could authorize the Company to issue additional classes or series of Common Shares or Preferred Shares that could,
depending upon the terms of the particular class or series, delay, defer or prevent a transaction or a change of control of the Company, even if
such transaction or change of control involves a premium price for the shareholders of the Company or shareholders believe that such
transaction or change of control may be in their best interests.
Restrictions on Ownership and Transfer of Shares
The Beneficial Ownership Limit
For the Company to maintain its qualification as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as
amended (the “Code”), not more than 50% of the value of its outstanding shares of beneficial interest may be owned, directly or indirectly, by
five or fewer individuals at any time during the last half of a taxable year and the shares of beneficial interest must be beneficially owned by
100 or more persons during at least 335 days of a taxable year of 12 months, or during a proportionate part of a shorter taxable year (except,
in each case, with respect to the first taxable year for which an election to be taxed as a REIT is made). The Code defines “individuals” to
include some entities for purposes of the preceding sentence. All references to a shareholder’s ownership of Common Shares in this “The
Beneficial Ownership Limit” section assume application of the applicable attribution rules of the Code under which, for example, a
shareholder is deemed to own shares owned by his or her spouse.
The Declaration of Trust contains several provisions restricting the ownership and transfer of shares of the Company that are designed to
satisfy the REIT provisions of the Code. These provisions may also deter non-negotiated acquisitions of, and proxy contests for, control of
the Company by third parties. The Declaration of Trust contains a limitation that restricts, with some exceptions, shareholders from owning
more than 9.8% (in value or number of shares, whichever is more restrictive) of the outstanding shares of any class or series. This percentage
is referred to as the “beneficial ownership limit”.
Shareholders should be aware that events other than a purchase or other transfer of shares may result in ownership, under the applicable
attribution rules of the Code, of shares of the Company in excess of the beneficial ownership limit. For instance, if two shareholders, each of
whom owns 6% of the outstanding Common Shares, were to marry, then after their marriage both shareholders would be deemed to own 12%
of the outstanding Common Shares, which is in excess of the beneficial ownership limit. Similarly, if a shareholder who is treated as owning
6% of the outstanding Common Shares purchased a 50% interest in a corporation which owns 10% of the outstanding Common Shares, then
the shareholder would be deemed to own 11% of the outstanding Common Shares immediately after such purchase.
Closely Held and General Restriction on Ownership
In addition, shares of beneficial interest may not be transferred if, as a result, more than 50% in value of outstanding shares would be owned
by five or fewer individuals or if such transfer would otherwise cause the Company to fail to qualify as a REIT.
The Constructive Ownership Limit
Under the Code, rental income received by a REIT from persons in which the REIT is treated, under the applicable attribution rules of the
Code, as owning a 10% or greater interest does not constitute qualifying income for purposes of the income requirements that REITs must
satisfy. For these purposes, a REIT is treated as owning any shares owned, under the applicable attribution rules of the Code, by a person that
owns 10% or more of the value of the outstanding shares of the REIT. The attribution rules of the Code applicable for these purposes are
different from those applicable with respect to the beneficial ownership limit. All references to a shareholder’s ownership of shares
of the Company in this “The Constructive Ownership Limit” section assume application of the applicable attribution rules of the Code.
In order to ensure that rental income of the Company will not be treated as nonqualifying income under the rule described in the preceding
paragraph, and thus to ensure that the Company will not inadvertently lose its REIT status as a result of the ownership of shares by a tenant or
a person that holds an interest in a tenant, the Declaration of Trust restricts, with some exceptions, shareholders from owning, directly or
indirectly, more than 9.8% (in value or number of shares, whichever is more restrictive) of the outstanding shares of any class or series. The
9.8% ownership limit is referred to as the “constructive ownership limit”.
Shareholders should be aware that events other than a purchase or other transfer of shares may result in ownership, under the applicable
attribution rules of the Code, of shares in excess of the constructive ownership limit. As the attribution rules that apply with respect to the
constructive ownership limit differ from those that apply with respect to the beneficial ownership limit, the events other than a purchase or
other transfer of shares which may result in share ownership in excess of the constructive ownership limit may differ from those which may
result in share ownership in excess of the beneficial ownership limit.
Automatic Transfer to a Trust If the Ownership Limits Are Violated
The Declaration of Trust provides that a purported or attempted transfer of shares of any class or series that would otherwise result in
ownership, under the applicable attribution rules of the Code, of shares in excess of the beneficial ownership limit or the constructive
ownership limit, would cause the shares to be beneficially owned by fewer than 100 persons, would result in the Company being “closely
held” (within the meaning of Section 856(h) of the Code) or would otherwise cause the Company to fail to qualify as a REIT will be void and
the purported transferee will acquire no rights or economic interest in such shares. In addition, the Declaration of Trust provides that, if the
provisions causing a transfer to be void do not prevent a violation of the restrictions mentioned in the preceding sentence, the shares that
would otherwise be owned, under the applicable attribution rules of the Code, in excess of the beneficial ownership limit or the constructive
ownership limit will be automatically transferred to one or more trusts (each, a “charitable trust”) for the benefit of one or more charitable
beneficiaries, appointed by us, effective as of the close of business on the business day prior to the date of the relevant purported or attempted
transfer.
Shares held in a charitable trust will be issued and outstanding shares. Pursuant to the Declaration of Trust, the purported or attempted
transferee will have no rights in the shares held in a charitable trust and will not benefit economically from ownership of any shares held in
the charitable trust, will have no rights to dividends or other distributions and will have no right to vote or other rights attributable to the
shares held in the charitable trust. Instead, the Declaration of Trust provides that the trustee of the charitable trust will have all voting rights
and rights to dividends or other distributions with respect to Common Shares held in the charitable trust, to be exercised for the exclusive
benefit of the charitable beneficiary. Under the Declaration of Trust, any dividend or other distribution paid prior to the discovery by the
Company that the Common Shares have been transferred to the charitable trust shall be paid by the holder of such dividend or other
distribution to the trustee upon demand and any dividend or other distribution authorized but unpaid shall be paid when due to the trustee.
Subject to Maryland law, the trustee of the charitable trust has the authority (i) to rescind as void any vote cast by a purported transferee prior
to the discovery by the Company that the shares have been transferred to the charitable trust and (ii) to recast such vote in accordance with
the instructions of the trustee acting for the benefit of the charitable beneficiary. However, if the Company has already taken irreversible trust
action, then the trustee will not have the authority to rescind and recast the vote.
Under the Declaration of Trust, within 20 days of receiving notice from the Company that the shares have been transferred to the charitable
trust, the trustee of the charitable trust is required to sell the shares held in the charitable trust to a person or persons, designated by the
trustee, whose ownership of the shares will not violate the restrictions on ownership and transfer noted above. Upon such sale, the
Declaration of Trust provides that the interest of the charitable beneficiary in the shares sold terminates and the trustee of the charitable trust
is required to distribute the net proceeds of the sale to the purported transferee and to the charitable beneficiary as follows: the purported
transferee will receive the lesser of (i) the price paid by the purported transferee for the shares or, if the purported transferee did not give
value for the shares in connection with the event causing the shares to be held in the charitable trust (e.g., in the case of a gift, devise or other
such transaction), the market price (as defined in the Declaration of Trust) of the shares on the day of the event causing the shares to be held
in the charitable trust and (ii) the price per share received by the trustee (net of any commissions and other expenses of sale) from the sale or
other disposition of the shares held in the charitable trust. The trustee of the charitable trust may reduce the amount payable to the purported
transferee by the amount of dividends and other distributions which have been paid to the purported transferee and are owed by the purported
transferee to the charitable trust, as described above. Any net sales proceeds in excess of the amount payable to the purported transferee will
be paid immediately to the charitable beneficiary. If, prior to the discovery by the Company that Common Shares have been transferred to the
charitable trust, such shares are sold by a purported transferee, then (1) such shares shall be deemed to have been sold on behalf of the
charitable trust and (2) to the extent that the purported transferee received an amount for such shares that exceeds the amount that such
purported transferee would have been entitled to receive if such shares had been sold by the charitable trust, such excess shall be paid to the
trustee upon demand.
The Declaration of Trust provides that any shares transferred to the charitable trust are deemed to have been offered for sale to the Company,
or its designee. The price at which the Company, or its designee, may purchase the shares transferred to the charitable trust will be equal to
the lesser of (i) the price paid by the purported transferee for the shares or, if the purported transferee did not give value for the shares in
connection with the event causing the shares to be held in the charitable trust (e.g., in the case of a gift, devise or other such transaction), the
market price of the shares on the day of the event causing the shares to be held in the charitable trust and (ii) the market price of the shares on
the date that the Company, or its designee, accepts the offer. Upon a sale to the Company, the interest of the beneficiary in the shares sold
will terminate and the trustee will distribute the net proceeds of the sale to the purported transferee.
The Company may reduce the amount payable to the purported transferee by the amount of dividends and other distributions that have been
paid to the purported transferee and are owed by the purported transferee to the charitable trust, as described above. The right of the Company
to accept the offer described above exists for as long as the charitable trust has not otherwise sold the shares held in the charitable trust.
In addition, if the Board determines that a transfer or other event has occurred that would violate the restrictions on ownership and transfer of
shares described above, the Board may take such action as it deems advisable to refuse to give effect to or to prevent such transfer, including,
but not limited to, causing the Company to redeem shares, refusing to give effect to the transfer on the books of the Company or instituting
proceedings to enjoin the transfer.
Other Provisions Concerning the Restrictions on Ownership
The Board, in its sole discretion, may prospectively or retroactively exempt persons from the beneficial ownership limit and the constructive
ownership limit and increase or decrease the beneficial ownership limit and constructive ownership limit for one or more persons if, in each
case, the Board obtains such representations, covenants and undertakings as the Board may deem appropriate in order to conclude that such
exemption or modification will not cause the Company to lose its status as a REIT. In addition, the Board may require such opinions of
counsel, affidavits, undertakings or agreements or a ruling from the Internal Revenue Service as it may deem necessary or advisable in order
to determine or ensure the status of the Company as a REIT, and any such exemption or modification may be subject to such conditions or
restrictions as the Board may impose.
The foregoing restrictions on transfer and ownership will not apply if the Board determines that it is no longer in the best interests of the
Company to attempt to qualify, or to continue to qualify, as a REIT or that compliance with any of the foregoing restrictions is no longer
required for REIT qualification.
All persons who own, directly or by virtue of the applicable attribution rules of the Code, more than 1.0% (or such lower percentage as
required by the Code or the regulations promulgated thereunder) of outstanding shares of any class or series must give a written notice to the
Company containing the information specified in the Declaration of Trust by January 31 of each year. In addition, each shareholder will be
required to disclose to the Company upon
demand any information that the Company may request, in good faith, to determine the status of the Company as a REIT or to comply with
Treasury regulations promulgated under the REIT provisions of the Code.
The ownership restrictions described above may have the effect of precluding acquisition of control of the Company unless the Board
determines that maintenance of REIT status is no longer in the best interests of the Company or that compliance with any of the foregoing
restrictions is no longer required for REIT qualification.
Certain Provisions of Maryland Law and of the Declaration of Trust and Bylaws
The Board of Trustees
The Declaration of Trust and Bylaws provide that the number of trustees of the Company may be established, increased or decreased only by
a majority of the entire Board but may not be less than the number required by the Maryland REIT Law, which is currently one, nor, unless
the Bylaws are amended, more than 15; provided further, that the tenure of office of a trustee will not be affected by any decrease in the
number of trustees. The Declaration of Trust and Bylaws also provide that, except as may be provided by the Board in setting the terms of
any class or series of shares, any vacancy may be filled only by a majority of the remaining trustees in office, even if the remaining trustees
do not constitute a quorum, and any trustee elected to fill a vacancy will hold office until the next annual meeting of shareholders and until a
successor is duly elected and qualifies.
Each of the Company’s trustees is elected by the Company’s shareholders to serve until the next annual meeting of shareholders and until his
or her successor is duly elected and qualifies. There is no cumulative voting in the election of trustees. Consequently, at each annual meeting
of shareholders, the holders of a majority of Common Shares will be able to elect all of the trustees standing for election. Under the Bylaws, a
majority of all the votes cast with respect to a trustee’s election at a meeting of shareholders duly called and at which a quorum is present will
be required to elect a trustee, unless the election is contested, in which case a plurality of the votes cast will be sufficient.
Removal of Trustees
The Declaration of Trust provides that, subject to the rights of holders of one or more classes or series of Preferred Shares to elect or remove
one or more trustees, a trustee may be removed at any time, but only for cause and then only by the affirmative vote of two-thirds of the
holders of the shares outstanding and entitled to be cast in the election of trustees. This provision, when coupled with the exclusive power of
the Board to fill vacancies on the Board, precludes shareholders from removing incumbent trustees except for cause and upon a substantial
affirmative vote and thereafter filling the vacancies created by the removal with their own nominees.
Business Combinations
Under the Maryland Business Combination Act (the “MBCA”), a “business combination” between a Maryland real estate investment trust
and an interested shareholder or an affiliate of an interested shareholder is prohibited for five years after the most recent date on which the
interested shareholder becomes an interested shareholder. A business combination includes a merger, consolidation, share exchange, or, in
circumstances specified in the MBCA, an asset transfer or issuance or reclassification of equity securities. An interested shareholder is
defined as:
•
•
a person who beneficially owns, directly or indirectly, 10% or more of the voting power of the real estate investment trust’s
outstanding voting shares after the date on which the trust had 100 or more beneficial owners of its shares; or
an affiliate or associate of the real estate investment trust who, at any time within the two-year period prior to the date in question,
and after the date on which the trust had 100 or more beneficial owners of its shares, was the beneficial owner, directly or indirectly,
of 10% or more of the voting power of the then-outstanding voting shares of the real estate investment trust.
A person is not an interested shareholder under the MBCA if the board of trustees approved in advance the
transaction which otherwise would have resulted in the person becoming an interested shareholder. In approving a transaction, the board of
trustees may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by
the board of trustees.
After the five-year prohibition, any business combination between the Maryland real estate investment trust and an interested shareholder
generally must be recommended by the board of trustees of the real estate investment trust and approved by the affirmative vote of at least:
•
•
80% of the votes entitled to be cast by holders of outstanding voting shares of the real estate investment trust; and
two-thirds of the votes entitled to be cast by holders of voting shares of the real estate investment trust other than shares held by the
interested shareholder who will or whose affiliate will be a party to the business combination or by an affiliate or associate of the
interested shareholder, voting together as a single group.
These super-majority vote requirements do not apply if the consideration to be received by the real estate investment trust’s holders of any
class or series of outstanding shares in the business combination receive a minimum price, as defined under the MBCA, for their shares in the
form of cash or other consideration in the same form as previously paid by the interested shareholder for its shares of the same class or series.
The MBCA permits various exemptions from its provisions, including business combinations that are exempted by the board of trustees
before the time that the interested shareholder becomes an interested shareholder.
The MBCA may have the effect of delaying, deferring or preventing a change in control of the Company or other transaction that might
involve a premium price or otherwise be in the best interest of the shareholders. The MBCA may discourage others from trying to acquire
control of the Company and may increase the difficulty of consummating any offer.
Control Share Acquisitions
The Maryland Control Share Acquisition Act (the “MCSAA”) provides that “control shares” of a Maryland real estate investment trust
acquired in a “control share acquisition” have no voting rights with respect to any control shares except to the extent approved at a special
meeting of shareholders by a vote of two-thirds of the votes entitled to be cast on the matter, excluding shares in respect of which any of the
following persons is entitled to exercise or direct the exercise of the voting power of such shares in the election of trustees: (i) a person who
makes or proposes to make a control share acquisition; (ii) an officer of the trust; or (iii) an employee of the trust who is also a trustee of the
trust.
“Control shares” are voting shares which, if aggregated with all other shares owned by the acquiring person or in respect of which the
acquiring person is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the
acquiring person to exercise voting power in electing trustees within one of the following ranges of voting power:
•
•
•
one-tenth or more but less than one-third,
one-third or more but less than a majority, or
a majority or more of all voting power.
Control shares do not include shares that the acquiring person is then entitled to vote as a result of having previously obtained shareholder
approval or shares acquired directly from the real estate investment trust. A “control share acquisition” means the acquisition, directly or
indirectly, of ownership of, or the power to direct the exercise of voting power with respect to, issued and outstanding control shares, subject
to certain exceptions.
A person who has made or proposes to make a control share acquisition may compel the board of trustees of the real estate investment trust to
call a special meeting of shareholders to be held within 50 days of demand to consider the voting rights of the shares. The right to compel the
calling of a special meeting is subject to the satisfaction of
certain conditions, including an undertaking to pay the expenses of the meeting. If no request for a meeting is made, the real estate investment
trust may itself present the question at any shareholders meeting.
If voting rights are not approved at the meeting or if the acquiring person does not deliver an acquiring person statement as required by the
MCSAA, then the real estate investment trust may redeem for fair value any or all of the control shares, except those for which voting rights
have previously been approved. The right of the real estate investment trust to redeem control shares is subject to certain conditions and
limitations. Fair value is determined, without regard to the absence of voting rights for the control shares, as of the date of any meeting of
shareholders at which the voting rights of the shares are considered and not approved or, if no such meeting is held, as of the date of the last
control share acquisition by the acquirer. If voting rights for control shares are approved at a shareholders meeting and the acquiring person
becomes entitled to vote a majority of the shares entitled to vote, all other shareholders may exercise appraisal rights, unless these specific
appraisal rights are eliminated under the charter or bylaws. The fair value of the shares as determined for purposes of these appraisal rights
may not be less than the highest price per share paid by the acquiring person in the control share acquisition.
The MCSAA does not apply (a) to shares acquired in a merger, consolidation or share exchange if the real estate investment trust is a party to
the transaction, or (b) to acquisitions approved or exempted by the declaration of trust or bylaws of the real estate investment trust.
The Bylaws contain a provision exempting from the MCSAA any and all acquisitions by any person of shares of the Company. There can be
no assurance that this provision will not be amended or eliminated at any time in the future.
Appraisal Rights
Under the Maryland REIT Law, a shareholder of a Maryland REIT who objects to a merger or conversion is entitled to the same rights as an
objecting stockholder of a Maryland corporation under the MGCL. The MGCL provides that stockholders may exercise appraisal rights
unless appraisal rights are eliminated under a company’s charter. The Declaration of Trust generally eliminates all appraisal rights of
shareholders provided under the Maryland REIT Law and the MGCL, unless the Board determines that such rights apply.
Approval of Extraordinary Trust Action; Amendment of Declaration of Trust and Bylaws
Under the Maryland REIT Law, a Maryland real estate investment trust generally is not entitled to amend its declaration of trust or merge
with or convert into another entity, unless the action is declared advisable and submitted to shareholders by resolution of its board of trustees,
and approved by the affirmative vote of shareholders holding at least two-thirds of the shares entitled to vote on the matter. However, a
Maryland real estate investment trust may provide in its declaration of trust for approval of these matters by a lesser percentage, but not less
than a majority of all of the votes entitled to be cast on the matter. Except for certain amendments described in the Declaration of Trust that
require only approval by the Board, and for amendments to the provision in the Declaration of Trust relating to the removal of trustees and
the vote required to amend such provision, which require a vote of two-thirds of all of the votes entitled to be cast on the matter, the
Declaration of Trust provides for approval of any of these matters and for the approval of a sale of all or substantially all of our assets or our
termination by the affirmative vote of a majority of all of the votes entitled to be cast on such matters.
The Bylaws provide that the Board has the power to adopt new bylaws and to alter or repeal any provision of the Bylaws. In addition, to the
extent permitted by law, shareholders may alter or repeal any provision of the Bylaws and adopt new bylaw provisions with approval by the
affirmative vote of a majority of all the votes entitled to be cast on the matter, except that shareholders do not have the power to alter or
repeal Article XII of the Bylaws, which provides for indemnification of trustees and officers, or Article XV of the Bylaws, which relates to
the amendment of the Bylaws, or to adopt any bylaws inconsistent with the foregoing Bylaws, in either case, without the approval of the
Board.
Exclusive Forum
The Bylaws provide that, unless the Company consents in writing to the selection of an alternative forum, the sole and exclusive forum for (i)
any derivative action or proceeding brought on the behalf of the Company, (ii) any action asserting a claim of breach of any duty owed by
any trustees or officers or other employees to the Company or to the shareholders of the Company, (iii) any action asserting a claim against
the Company or any of its trustees or officers or other employees arising pursuant to any provision of the Maryland REIT Law or the
Declaration of Trust or Bylaws or (iv) any action asserting a claim against the Company or any of its trustees or officers or other employees
that is governed by the internal affairs doctrine will be the Circuit Court for Baltimore City, Maryland, or, if that Court does not have
jurisdiction, the United States District Court for the District of Maryland, Baltimore Division.
Advance Notice of Trustee Nominations and New Business
The Bylaws provide that with respect to an annual meeting of shareholders, nominations of persons for election to the Board and the proposal
of business to be considered by shareholders may be made only (i) pursuant to notice of the meeting, (ii) by or at the direction of the Board or
(iii) by a shareholder who is a shareholder of record both at the time of giving the advance notice required by the Bylaws and at the time of
the meeting, who is entitled to vote at the meeting and who has complied with the advance notice procedures of the Bylaws. With respect to
special meetings of shareholders, only the business specified in the notice of the meeting may be brought before the meeting. Nominations of
persons for election to the Board at a special meeting may be made only (i) by or at the direction of the Board, or (ii) provided that the special
meeting has been called in accordance with the Bylaws for the purpose of electing trustees, by a shareholder who is a shareholder of record
both at the time of giving the advance notice required by the Bylaws and at the time of the meeting, who is entitled to vote at the meeting and
who has complied with the advance notice provisions of the Bylaws.
Subtitle 8
Subtitle 8 of Title 3 of the MGCL permits a Maryland real estate investment trust with a class of equity securities registered under the
Securities Exchange Act of 1934, as amended, and at least three independent trustees to elect to be subject, by provision in its declaration of
trust or bylaws or a resolution of its board of trustees and notwithstanding any contrary provision in the declaration of trust or bylaws, to any
or all of the following five provisions:
•
•
•
•
•
a classified board;
a two-thirds vote requirement for removing a trustee;
a requirement that the number of trustees be fixed only by vote of the trustees;
a requirement that a vacancy on the board be filled only by the affirmative vote of a majority of the remaining trustees and for the
remainder of the full term of the class of trustees in which the vacancy occurred and until a successor is elected and qualifies; or
a majority requirement for the calling of a shareholder-requested special meeting of shareholders.
The Declaration of Trust provides that, except as may be provided by the Board in setting the terms of any class or series of shares, the
Company elects to be subject to the provisions of Subtitle 8 relating to the filling of vacancies on the Board. Through provisions in the
Declaration of Trust and Bylaws, (i) the affirmative vote of shareholders entitled to cast not less than two-thirds of all of the votes entitled to
be cast generally in the election of trustees is required to remove any trustee from the Board, which removal will be allowed only for cause,
(ii) the exclusive power to fix the number of trusteeships, subject to limitations set forth in the Bylaws, is vested in the Board, and (iii)
shareholders are not entitled to call special meetings of shareholders.
Anti-takeover Effect of Certain Provisions of Maryland Law and of the Declaration of Trust and Bylaws
The business combination provisions, other elections under Subtitle 8, and, if the applicable provision in the Bylaws is rescinded, the control
share acquisition provisions of Maryland law, the provisions of the Declaration of Trust on
removal of trustees and the advance notice provisions of the Bylaws could delay, defer or prevent a transaction or a change in control of the
Company that might involve a premium price for holders of Common Shares or otherwise be in their best interests.
Shareholder Meetings
The Bylaws provide that annual meetings of shareholders may only be held each year at a date, time and place set by the Board. The Board
may determine, in its sole discretion, that any meeting of shareholders (including an annual meeting) will not be held at any place but instead
will be held solely by means of remote communication. Special meetings of shareholders may only be called by the chairman of the Board,
the chief executive officer, the president or a majority of the Board. Only matters set forth in the notice of a special meeting of shareholders
may be considered and acted upon at such a meeting.
Shareholder Action by Written Consent
Under the Declaration of Trust and Bylaws, any action required or permitted to be taken at any annual or special meeting of shareholders may
be taken without a meeting, without prior notice and without a vote if (i) a unanimous consent setting forth the action is given in writing or by
electronic transmission by all shareholders entitled to vote on the matter and filed with the minutes of proceedings of shareholders or (ii) the
action is advised and submitted to the shareholders for approval by the Board, and a consent in writing or by electronic transmission is given
by shareholders entitled to cast not less than the minimum number of votes that would be necessary to authorize or take the action at a
meeting of shareholders.
Limitation of Liability and Indemnification of Trustees and Officers
Maryland law permits a Maryland real estate investment trust to include in its declaration of trust a provision limiting or eliminating the
liability of its current and former trustees and officers to the real estate investment trust and its shareholders for money damages except for
liability resulting from (i) actual receipt of an improper benefit or profit in money, property or services, for the amount of the benefit or profit
in money, property or services actually received or (ii) active and deliberate dishonesty that is established by a final judgment and which is
material to the cause of action. The Declaration of Trust includes such a provision eliminating such liability to the maximum extent permitted
by Maryland law.
The Declaration of Trust and Bylaws obligate the Company, to the maximum extent permitted by Maryland law in effect from time to time,
to indemnify and to pay or reimburse reasonable expenses in advance of final disposition of a proceeding, without requiring a preliminary
determination of the trustee’s or officer’s ultimate entitlement to indemnification, to (i) any present or former trustee or officer who is made
or threatened to be made a party to the proceeding by reason of his or her service in that capacity, or (ii) any individual who, while serving as
trustee or officer of the Company and at the request of the Company, serves or has served as a director, trustee, officer, partner, member or
manager of another corporation, real estate investment trust, partnership, limited liability company, joint venture, trust, employee benefit plan
or other enterprise and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity. The
Declaration of Trust and Bylaws also permit it, with the approval of the Board, to indemnify and advance expenses to any person who served
a predecessor of the Company in any of the capacities described above and to any employee or agent of the Company or a predecessor of the
Company.
Maryland law requires a Maryland real estate investment trust (unless its declaration of trust provides otherwise, which the Declaration of
Trust does not) to indemnify a trustee or officer who has been successful, on the merits or otherwise, in the defense of any proceeding to
which he or she is made a party by reason of his or her service in that capacity. Maryland law permits a real estate investment trust to
indemnify its present and former trustees and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses
actually incurred by them in connection with any proceeding to which they may be made or threatened to be made a party by reason of their
service in those or other capacities unless it is established that (a) the act or omission of the trustee or officer was material to the matter giving
rise to the proceeding and (i) was committed in bad faith or (ii) was the result of
active and deliberate dishonesty, (b) the trustee or officer actually received an improper personal benefit in money, property or services or (c)
in the case of any criminal proceeding, the trustee or officer had reasonable cause to believe that the act or omission was unlawful. However,
under Maryland law, a Maryland real estate investment trust may not indemnify for an adverse judgment in a suit by or in the right of the real
estate investment trust or for a judgment of liability on the basis that personal benefit was improperly received, unless in either case a court
orders indemnification and then only for expenses. In addition, Maryland law permits a real estate investment trust to advance reasonable
expenses to a trustee or officer upon the real estate investment trust’s receipt of (a) a written affirmation by the trustee or officer of his or her
good faith belief that he or she has met the standard of conduct necessary for indemnification by the real estate investment trust and (b) a
written undertaking by him or her or on his or her behalf to repay the amount paid or reimbursed by the real estate investment trust if it shall
ultimately be determined that the standard of conduct was not met.
The Company has entered into indemnification agreements with each of its trustees, and has entered or expect to enter into indemnification
agreements with each of its executive officers, in each case, that will provide for indemnification to the maximum extent permitted by
Maryland law.
Business Opportunities
The Declaration of Trust provides that the trustees of the Company who are also trustees, officers, employees or agents of Vornado Realty
Trust (“Vornado”), an entity from which the Company separated in 2015, or any of Vornado’s affiliates (each such trustee, a “Covered
Person”), have no duty to communicate or present any business opportunity to the Company, and the Company renounces on its behalf and
on behalf of its subsidiaries, any potential interest or expectation in, or right to be offered or to participate in, such business opportunity and
waives to the maximum extent permitted from time to time by Maryland law any claim against a Covered Person arising from the fact that he
or she does not present, communicate or offer any such business opportunity to the Company or any of its subsidiaries, as the case may be, or
pursues such business opportunity or facilitates the pursuit of such business opportunity by others; provided, however, that the foregoing shall
not apply in a case in which a Covered Person is presented with a business opportunity in writing expressly in his or her capacity as a trustee
of the Company. Accordingly, to the maximum extent permitted from time to time by Maryland law and except to the extent such business
opportunity is presented to a Covered Person in writing expressly in his or her capacity as a trustee of the Company, (i) no Covered Person is
required to present, communicate or offer any business opportunity to the Company or any of its subsidiaries, as the case may be, and (ii) any
Covered Person, on his or her own behalf or on behalf of Vornado, has the right to hold and exploit any business opportunity, or to direct,
recommend, offer, sell, assign or otherwise transfer such business opportunity to any person or entity other than the Company.
Termination of Operations or REIT Status
Subject to the provisions of any class or series of shares at the time outstanding, after approval by a majority of the entire Board, the
Company may be terminated at any meeting of shareholders, by the affirmative vote of a majority of all the votes entitled to be cast on the
matter. In addition, under the Declaration of Trust, the Board may authorize the Company to revoke or otherwise terminate its REIT election,
without shareholder approval, if it determines that it is no longer in the best interests of the Company to continue to qualify as a REIT.
SUBSIDIARIES OF THE REGISTRANT
URBAN EDGE PROPERTIES
as of December 31, 2020
EXHIBIT 21.1
Urban Edge Properties, a Maryland real estate investment trust, has only one subsidiary: Urban Edge Properties LP, a Delaware limited partnership. Below is a list
of the direct and indirect subsidiaries of Urban Edge Properties, and the corresponding states of incorporation or organization:
Name of Subsidiary
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
Amherst II UE LLC
Bethlehem UE LLC
Bricktown UE LLC
Bricktown UE Member LLC
Cherry Hill UE LLC
Dover UE LLC
Dover UE Member LLC
East Brunswick UE II LLC
East Brunswick UE Owner LLC
Freeport UE LLC
Freeport UE Member LLC
Glen Burnie UE LLC
Hackensack UE LLC
Hackensack UE Member LLC
Hanover UE LLC
Hanover UE Member LLC
Jersey City UE LLC
Jersey City UE Member LLC
Kearny Holding UE LLC
Kearny Leasing UE LLC
Lawnside UE LLC
Lodi II UE LLC
Lodi UE LLC
Manalapan UE LLC
Marlton UE LLC
Marlton UE Member LLC
Middletown UE LLC
Middletown UE Member LLC
Montclair UE II LLC
Montclair UE LLC
Morris Plains Holding UE LLC
Morris Plains Leasing UE LLC
New Hyde Park UE LLC
Newington UE LLC
State of
Organization
New York
Delaware
New Jersey
Delaware
New Jersey
New Jersey
Delaware
Delaware
Delaware
New York
Delaware
Maryland
New Jersey
Delaware
New Jersey
Delaware
New Jersey
Delaware
New Jersey
New Jersey
New Jersey
New Jersey
New Jersey
New Jersey
New Jersey
Delaware
New Jersey
Delaware
Delaware
New Jersey
New Jersey
New Jersey
New York
Connecticut
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
North Bergen UE LLC
North Plainfield UE LLC
North Plainfield UE Member LLC
Paramus UE II LLC
Paramus UE LLC
Patson UE Holdings LLC
Patson Urban Edge GP LLC
Patson Urban Edge LLC
Springfield UE LLC
Sunrise Mall Holdings LLC
Totowa UE LLC
Totowa UE Member LLC
Towson UE LLC
Turnersville UE LLC
UE 1105 State Highway 36 LLC
UE 195 North Bedford Road LLC
UE 197 Spring Valley LLC
UE 2100 Route 38 LLC
UE 2445 Springfield Avenue LLC
UE 25 Spring Valley LLC
UE 3098 Long Beach Road LLC
UE 447 South Broadway LLC
UE 51 Spring Valley LLC
UE 675 Paterson Avenue LLC
UE 675 Route 1 LLC
UE 7000 Hadley Road LLC
UE 713-715 Sunrise LLC
UE 839 New York Avenue LLC
UE 938 Spring Valley LLC
UE AP 195 N. Bedford Road LLC
UE AR Building LLC
UE Bensalem Holding Company LLC
UE Bergen East LLC
UE Bergen Mall 2017 License LLC
UE Bergen Mall License II LLC
UE Bergen Mall LLC
UE Bergen Mall Owner LLC
UE Bethlehem Holding LP
UE Bethlehem Properties Holding Company LLC
UE Bethlehem Property LP
UE Brick LLC
UE Bridgeland Warehouses LLC
UE Bruckner Plaza LLC
UE Bruckner Shops LLC
UE Burnside Plaza LLC
New Jersey
New Jersey
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Massachusetts
Delaware
New Jersey
Delaware
Maryland
New Jersey
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
New Jersey
Delaware
Pennsylvania
Delaware
Pennsylvania
New Jersey
New Jersey
Delaware
Delaware
Delaware
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
UE Caguas/Catalinas Holding LLC
UE Caguas/Catalinas Holding LP
UE Camden Holding LLC
UE Catalinas GP Inc.
UE Chicopee Holding LLC
UE CHLL LLC
UE Cross Bay LLC
UE Diablo Management LLC
UE Forest Plaza LLC
UE Freeport II LLC
UE Gun Hill Road LLC
UE Hanover Public Warehousing LLC
UE Harrison Holding Company LLC
UE Henrietta Holding LLC
UE Holding LP
UE Hudson Mall LLC
UE IT Management LLC
UE Kingswood One LLC
UE Kingswood Two LLC
UE Lancaster Leasing Company LLC
UE Las Catalinas LLC
UE Lodi Delaware LLC
UE Management LLC
UE Management TRS LLC
UE Manchester LLC
UE Marple Holding Company LLC
UE Massachusetts Holding LLC
UE Maywood License LLC
UE Maywood License II LLC
UE Millburn LLC
UE Montehiedra Acquisition LLC
UE Montehiedra Acquisition LP
UE Montehiedra Holding II LP
UE Montehiedra Holding LLC
UE Montehiedra Holding LP
UE Montehiedra Inc.
UE Montehiedra Lender LLC
UE Montehiedra Management LLC
UE Montehiedra OP LLC
UE Montehiedra Out Parcel LLC
UE Mundy Street LP
UE New Bridgeland Warehouses LLC
UE New Hanover LLC
UE New Hanover Public Warehousing LLC
Delaware
Delaware
New Jersey
Delaware
Massachusetts
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
New Jersey
Delaware
New York
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
New Jersey
Delaware
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
UE Norfolk Property LLC
UE One Lincoln Plaza LLC
UE PA 1 LP
UE PA 10 LP
UE PA 11 LP
UE PA 12 LP
UE PA 13 LP
UE PA 14 LP
UE PA 15 LP
UE PA 16 LP
UE PA 17 LP
UE PA 18 LP
UE PA 19 LP
UE PA 2 LP
UE PA 20 LP
UE PA 21 LP
UE PA 22 LP
UE PA 23 LP
UE PA 24 LP
UE PA 25 LP
UE PA 26 LP
UE PA 27 LP
UE PA 28 LP
UE PA 29 LP
UE PA 3 LP
UE PA 30 LP
UE PA 31 LP
UE PA 32 LP
UE PA 33 LP
UE PA 34 LP
UE PA 35 LP
UE PA 36 LP
UE PA 37 LP
UE PA 38 LP
UE PA 39 LP
UE PA 4 LP
UE PA 40 LP
UE PA 5 LP
UE PA 6 LP
UE PA 7 LP
UE PA 8 LP
UE PA 9 LP
UE PA GP LLC
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
167
168
169
170
171
172
173
174
175
176
177
178
179
180
181
182
183
184
185
186
187
188
189
190
191
192
193
194
195
196
197
198
199
200
201
202
203
204
205
206
207
208
209
UE Paramus License LLC
UE Paterson Plank Road LLC
UE Patson LLC
UE Patson Mt. Diablo A LP
UE Patson Walnut Creek LP
UE Pennsylvania Holding LLC
UE Philadelphia Holding Company LLC
UE Property Management LLC
UE Retail Management LLC
UE Retail Manager LLC
UE Revere LLC
UE Rochester Holding LLC
UE Rockaway LLC
UE Rockville LLC
UE Second Rochester Holding LLC
UE Sunrise LLC
UE Sunrise Property Management LLC
UE Tonnelle 8701 LLC
UE Tonnelle Commons LLC
UE Tonnelle Storage II LLC
UE Tonnelle Storage LLC
UE TRU Alewife Brook Pkwy LLC
UE TRU Baltimore Park LP
UE TRU CA LLC
UE TRU Callahan Drive LP
UE TRU Cherry Avenue LP
UE TRU Erie Blvd LLC
UE TRU Georgia Avenue LLC
UE TRU Jericho Turnpike LLC
UE TRU Leesburg Pike LLC
UE TRU PA LLC
UE TRU Sam Rittenburg Blvd LLC
UE TRU West Sunrise Hwy LLC
UE West Babylon LLC
UE Woodbridge King George LLC
UE Woodbridge Storage II LLC
UE Wyomissing Properties LP
UE Yonkers II LLC
UE Yonkers LLC
UE York Holding Company LLC
Union UE LLC
Urban Edge Acquisitions LLC
Urban Edge Bensalem LP
Delaware
Delaware
Delaware
Delaware
Delaware
Pennsylvania
Delaware
Delaware
Delaware
Delaware
Delaware
New York
New Jersey
Delaware
New York
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
New Jersey
Delaware
Pennsylvania
210
211
212
213
214
215
216
217
218
219
220
221
222
223
224
225
226
227
228
229
230
231
Urban Edge Bethlehem LP
Urban Edge Bethlehem Owner LLC
Urban Edge Caguas GP Inc.
Urban Edge DP LLC
Urban Edge EF Borrower LLC
Urban Edge Lancaster LP
Urban Edge Marple LP
Urban Edge Mass LLC
Urban Edge Massachusetts Holdings LLC
Urban Edge Montehiedra Mezz Loan LLC
Urban Edge Montehiedra OP LP
Urban Edge Pennsylvania LP
Urban Edge Philadelphia LP
Urban Edge Properties
Urban Edge Properties Auto LLC
Urban Edge Properties LP
Urban Edge York LP
Watchung UE LLC
Watchung UE Member LLC
Wayne UE LLC
Woodbridge UE LLC
Woodbridge UE Member LLC
Pennsylvania
Pennsylvania
Delaware
Delaware
Delaware
Pennsylvania
Pennsylvania
Massachusetts
Delaware
Delaware
Delaware
Pennsylvania
Pennsylvania
Maryland
Delaware
Delaware
Pennsylvania
New Jersey
Delaware
New Jersey
New Jersey
Delaware
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement No. 333-233232 on Form S-3 and Registration Statement No. 333-
227550 on Form S-8 of our reports dated February 17, 2021, relating to the consolidated financial statements of Urban Edge Properties and
the effectiveness of Urban Edge Properties’ internal control over financial reporting appearing in the Annual Report on Form 10-K of Urban
Edge Properties and Urban Edge Properties LP for the year ended December 31, 2020.
EXHIBIT 23.1
/s/ DELOITTE & TOUCHE LLP
New York, New York
February 17, 2021
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement No. 333-233232 on Form S-3 of our reports dated February 17, 2021,
relating to the consolidated financial statements of Urban Edge Properties LP and the effectiveness of Urban Edge Properties LP’s internal
control over financial reporting appearing in the Annual Report on Form 10-K of Urban Edge Properties and Urban Edge Properties LP for
the year ended December 31, 2020.
EXHIBIT 23.2
/s/ DELOITTE & TOUCHE LLP
New York, New York
February 17, 2021
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Jeffrey S. Olson, certify that:
1. I have reviewed this Annual Report on Form 10-K of Urban Edge Properties;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for
external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of trustees (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
February 17, 2021
/s/ Jeffrey S. Olson
Jeffrey S. Olson
Chairman of the Board of Trustees and Chief Executive Officer
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Mark Langer, certify that:
1. I have reviewed this Annual Report on Form 10-K of Urban Edge Properties;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for
external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of trustees (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
February 17, 2021
/s/ Mark Langer
Mark Langer
Chief Financial Officer
EXHIBIT 31.3
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Jeffrey S. Olson, certify that:
1. I have reviewed this Annual Report on Form 10-K of Urban Edge Properties LP;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for
external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of trustees (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
February 17, 2021
/s/ Jeffrey S. Olson
Jeffrey S. Olson
Chairman of the Board of Trustees and Chief Executive Officer of Urban Edge
Properties, general partner of registrant
EXHIBIT 31.4
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Mark Langer, certify that:
1. I have reviewed this Annual Report on Form 10-K of Urban Edge Properties LP;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for
external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of trustees (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
February 17, 2021
/s/ Mark Langer
Mark Langer
Chief Financial Officer of Urban Edge Properties, general partner of registrant
CERTIFICATION
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsection (a) and (b) of Section 1350 of Chapter 63 of Title 18 of the United States Code)
EXHIBIT 32.1
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350 of Chapter 63 of Title 18 of the United States Code), the
undersigned officer of Urban Edge Properties, hereby certifies, to such officer’s knowledge, that:
The Annual Report on Form 10-K for the year ended December 31, 2020 (the “Report”) of Urban Edge Properties fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of Urban Edge Properties.
February 17, 2021
February 17, 2021
Name:
Title:
Name:
Title:
/s/ Jeffrey S. Olson
Jeffrey S. Olson
Chairman of the Board of Trustees and Chief Executive Officer
/s/ Mark Langer
Mark Langer
Chief Financial Officer
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.
The foregoing certification is being furnished as an exhibit to the Report pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act
of 2002 and, accordingly, is not being filed with the Securities and Exchange Commission as part of the Report and is not to be incorporated by reference into any
filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of
the Report, irrespective of any general incorporation language contained in such filing).
CERTIFICATION
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsection (a) and (b) of Section 1350 of Chapter 63 of Title 18 of the United States Code)
EXHIBIT 32.2
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350 of Chapter 63 of Title 18 of the United States Code), the
undersigned officer of Urban Edge Properties, hereby certifies, to such officer’s knowledge, that:
The Annual Report on Form 10-K for the year ended December 31, 2020 (the “Report”) of Urban Edge Properties LP fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of Urban Edge Properties LP.
February 17, 2021
February 17, 2021
Name:
Title:
Name:
Title:
/s/ Jeffrey S. Olson
Jeffrey S. Olson
Chairman of the Board of Trustees and Chief Executive Officer of
Urban Edge Properties, general partner of registrant
/s/ Mark Langer
Mark Langer
Chief Financial Officer of Urban Edge Properties, general partner of
registrant
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.
The foregoing certification is being furnished as an exhibit to the Report pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act
of 2002 and, accordingly, is not being filed with the Securities and Exchange Commission as part of the Report and is not to be incorporated by reference into any
filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of
the Report, irrespective of any general incorporation language contained in such filing).