WEINGARTEN REALTY INVESTORS The COVID-19 pandemic has resulted in a widespread health crisis, which has adversely affected international, national and local economies and financial markets generally, and has had an unprecedented negative effect on the commercial real estate industry. While the distribution of vaccinations and the declining infection rates from the peak of the pandemic andDecember 31, 2020 has provided us reasonable optimistic expectations, there remains significant uncertainty regarding the future impact of the pandemic. The discussions below, including without limitation with respect to outlooks and liquidity, are subject to the future effects of the COVID-19 pandemic and the responses to curb its spread, all of which continue to evolve. OnApril 15, 2021 , we announced our entry into the Merger Agreement with Kimco pursuant to which, subject to the satisfaction or waiver of certain conditions, we will merge with and into Kimco, with Kimco continuing as the surviving corporation. Pursuant to the terms of the Merger Agreement, each share of our common shares outstanding immediately prior to the Effective Time will be converted into the right to receive (i) 1.408 shares of common stock of Kimco and (ii)$2.89 in cash, subject to customary anti-dilution adjustments and any adjustment that may be made pursuant to the terms of the Merger Agreement in certain circumstances relating to a special pre-closing distribution by us. OnJuly 15, 2021 , ourBoard of Trust Managers declared a special dividend, which is payable onAugust 2, 2021 to shareholders of record onJuly 28, 2021 . The special dividend is being paid in connection with the anticipated Merger and to satisfy the REIT taxable income distribution requirements. Under the terms of the Merger Agreement, our payment of the special dividend adjusts the cash consideration to be paid by Kimco at the closing of the Merger from$2.89 per share to$2.20 per share, and does not affect the payment of the share consideration of 1.408 newly issued shares of common stock of Kimco for each of our common shares owned immediately prior to the Effective Time. During the period from the date of the Merger Agreement until the completion of the Merger, we are subject to certain restrictions on our ability to engage with third parties regarding alternative acquisition proposals and on the conduct of our business. The closing of the Merger is expected to occur onAugust 3, 2021 , pending the receipt of the necessary shareholder approvals and satisfaction or waiver of the other closing conditions specified in the Merger Agreement. Kimco and we have each scheduled a special meeting of their shareholders forAugust 3, 2021 seeking their approval of Merger related proposals. There can be no assurance that all closing conditions will be satisfied or waived byAugust 3, 2021 , that the Merger will close onAugust 3, 2021 or that the Merger will be consummated. Please see the risks described in Item 1A. "Risk Factors" in our Form 10-K for the year endedDecember 31, 2020 and in Part II, Item 1A of this Quarterly Report on Form 10-Q. It is uncertain as to the magnitude of the impact of such risks on our results of operations, cash flows, financial condition, or liquidity for fiscal year 2021 and beyond. 24 Table of Contents Forward-Looking Statements This quarterly report on Form 10-Q, together with other statements and information publicly disseminated by us, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," or similar expressions. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect actual results, performances or achievements. Factors which may cause actual results to differ materially from current expectations include, but are not limited to, (i) disruptions in financial markets; (ii) general and regional economic and real estate conditions; (iii) the inability of major tenants to continue paying their rent obligations due to bankruptcy, insolvency or general downturn in their business; (iv) changes in consumer retail shopping patterns; (v) financing risks, such as the inability to obtain equity, debt, or other sources of financing on favorable terms and changes in LIBOR availability; (vi) changes in governmental laws and regulations; (vii) the level and volatility of interest rates; (viii) the availability of suitable acquisition opportunities; (ix) the ability to dispose of properties; (x) changes in expected development activity; (xi) increases in operating costs; (xii) tax matters, including the effect of changes in tax laws and the failure to qualify as a real estate investment trust; (xiii) technology system failures, disruptions or cybersecurity attacks; (xiv) investments through real estate joint ventures and partnerships, which involve risks not present in investments in which we are the sole investor; (xv) the impact of public health issues, such as the current novel coronavirus ("COVID-19") pandemic, natural disasters or severe weather conditions; and (xvi) risks associated with the Merger , including our ability to consummate the Merger on the proposed terms or on the anticipated timeline, or at all, including risks and uncertainties related to securing the necessary shareholder approvals and satisfaction of other closing conditions to consummate the Merger and the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement. Accordingly, there is no assurance that our expectations will be realized. For further discussion of the factors that could materially affect the outcome of our forward-looking statements and our future results and financial condition, see Item 1A. "Risk Factors" in our Form 10-K for the year endedDecember 31, 2020 and in Part II, Item 1A of this Quarterly Report on Form 10-Q. 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 Quarterly Report on Form 10-Q. The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto and the comparative summary of selected financial data appearing elsewhere in this report. Historical results and trends which might appear should not be taken as indicative of future operations. Our results of operations and financial condition, as reflected in the accompanying condensed consolidated financial statements and related footnotes, are subject to management's evaluation and interpretation of business conditions, retailer performance, changing capital market conditions and other factors which could affect the ongoing viability of our tenants.
Executive Overview
Weingarten Realty Investors is a REIT organized under the Texas Business Organizations Code. We, and our predecessor entity, began the ownership of shopping centers and other commercial real estate in 1948. Our primary business is leasing space to tenants in the shopping centers we own or lease. These centers may be mixed-use properties that have both retail and residential components. We also provide property management services for which we charge fees to either joint ventures where we are partners or other outside owners. We operate a portfolio of rental properties, primarily neighborhood and community shopping centers, totaling approximately 29.7 million square feet of gross leasable area that is either owned by us or others. We have a diversified tenant base with two of our largest tenants each comprising only 2.6% of base minimum rental revenues during the six months of 2021. 25
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AtJune 30, 2021 , we owned or operated under long-term leases, either directly or through our interest in real estate joint ventures or partnerships, a total of 155 properties, which are located in 15 states spanning the country from coast to coast.
We also owned interests in 20 parcels of land held for development that totaled
approximately 11.1 million square feet at
We had approximately 3,400 leases with 2,700 different tenants atJune 30, 2021 . Rental revenue is primarily derived from operating leases with terms of 10 years or less, and may include multiple options, upon tenant election, to extend the lease term in increments up to five years. Many of our leases have increasing minimum rental rates during the terms of the leases through escalation provisions. In addition, the majority of our leases provide for variable rental revenues, such as reimbursements of real estate taxes, maintenance and insurance and may include an amount based on a percentage of the tenants' sales. Our anchor tenants are supermarkets, value-oriented apparel/discount stores and other retailers or service providers who generally sell basic necessity-type goods and services. Although there is a broad shift in shopping patterns, including internet shopping that continues to affect our tenants, we believe our anchor tenants, most of which have adopted omni-channel networks which help drive foot traffic, combined with convenient locations, attractive and well-maintained properties, high quality retailers and a strong tenant mix, should lessen the effects of these conditions and maintain the viability of
our portfolio. Proposed Merger OnApril 15, 2021 , we announced our entry into the Merger Agreement with Kimco. The Merger Agreement provides that, among other things and on the terms and subject to the conditions set forth therein, (1) the Company will be merged with and into Kimco, with Kimco continuing as the surviving corporation in the Merger, and (2) at the Effective Time, each common share of the Company (other than certain shares as set forth in the Merger Agreement) issued and outstanding immediately prior to the Effective Time will be automatically converted into the right to receive (i) 1.408 shares of common stock of Kimco and (ii)$2.89 in cash, subject to customary anti-dilution adjustments and any adjustment that may be made pursuant to the terms of the Merger Agreement in certain circumstances relating to a special pre-closing distribution by us. OnJuly 15, 2021 , ourBoard of Trust Managers declared a special dividend, which is payable onAugust 2, 2021 to shareholders of record onJuly 28, 2021 . The special dividend is being paid in connection with the anticipated Merger and to satisfy the REIT taxable income distribution requirements. Under the terms of the Merger Agreement, our payment of the special dividend adjusts the cash consideration to be paid by Kimco at the closing of the Merger from$2.89 per share to$2.20 per share, and does not affect the payment of the share consideration of 1.408 newly issued shares of common stock of Kimco for each of our common shares owned immediately prior to the Effective Time. During the period from the date of the Merger Agreement until the completion of the Merger, we are subject to certain restrictions on our ability to engage with third parties regarding alternative acquisition proposals and on the conduct of our business. The closing of the Merger is expected to occur onAugust 3, 2021 , pending the receipt of the necessary shareholder approvals and satisfaction or waiver of the other closing conditions specified in the Merger Agreement. Kimco and we have each scheduled a special meeting of their shareholders forAugust 3, 2021 seeking their approval of Merger related proposals. There can be no assurance that all closing conditions will be satisfied or waived byAugust 3, 2021 , that the Merger will close onAugust 3, 2021 or that the Merger will be consummated. 26 Table of Contents Pandemic
The COVID-19 pandemic has dramatically impacted our business due largely to the hardships facing our tenants. Our tenants have been impacted greatly due to a number of factors, including federal, state and local governmental and legislative mandates to temporarily close and/or limit the operations of non-essential businesses, as well as encouraging or mandating most people to shelter in place and general economic conditions. While all of our markets have embarked upon a reopening of select businesses, including retailers, service providers and restaurants, the impact of these measures on the ability of our tenants to pay rent is indeterminable at this time. Many of our tenants have moved to include on-line sales with curbside pickup or delivery, including restaurants, apparel discounters and electronics. The grocery stores and other retailers with a grocery component that anchor the majority of our shopping centers remain strong in this environment. The economy continues to gain traction in the majority of our markets with substantially all of our tenants open for business. Based on annualized base rents, including our share of interest in real estate joint ventures or partnerships, we have estimated that 63% of our tenants are designated as essential businesses, including restaurants. During the six months endedJune 30, 2021 , tenant fallouts have decreased significantly compared to the prior year. During the six months endedJune 30, 2021 and 2020, tenant fallout represented approximately 252,000 and 762,000 square feet, respectively, representing approximately$6.8 million and$16.3 million in annualized base rents, respectively, either directly or through our interest in real estate joint ventures or partnerships. We are optimistic that this trend will continue through 2021; however, there can be no assurance that this favorable trend will continue. We continue negotiations and have entered into rental concession agreements with our tenants to provide some relief to the tenants greatly impacted by the COVID-19 pandemic. As ofJuly 19, 2021 , we have negotiated deferrals with tenants on approximately 1,001 leases, of which nearly$11.5 million remains of rental payments that have been billed or are to be billed and are primarily scheduled to be repaid byDecember 31, 2021 . In addition, for the three and six months endedJune 30, 2021 , rental revenues increased by$1.2 million and$2.9 million due to the realization of net recoveries. Due to the anticipated impact from the administration of the COVID-19 vaccinations and the likely ensuing increase in our tenant operations, our current expectation is that rent collections will trend upward throughout 2021; however, no assurances can be given that this will occur due to the uncertainties surrounding our tenants' reopening and any resurgence of the pandemic and the governmental reaction to any resurgence. As ofJuly 19, 2021 , tenant billing data, which includes base minimum rental revenues and escrows for common area maintenance, real estate taxes and insurance either directly or through our interest in real estate joint ventures or partnerships, was as follows: Percent of Cash Percent of Collections for Annualized the Three Months Base Rent Ending June 30, 2021 Essential 63 % 98 % Non-essential 37 95 Total Cash Collections 100 % 97 Deferrals 0 Abatements 1 Total Cash Collections and Other 98 % 27 Table of Contents To conserve liquidity and preserve financial flexibility in light of the uncertainty surrounding the impact of COVID-19, we reduced our quarterly dividend payments in 2020. At the pre-pandemic level we had been paying a quarterly amount of$.395 per common share. Due to the magnitude of gain generated by our dispositions during 2020, we paid a special dividend near year-end of$.36 per common share. For the six months endedJune 30, 2021 , we paid dividends of$.53 per common share. OnJuly 15, 2021 , ourBoard of Trust Managers declared a special dividend of$.69 per common share that is being paid in connection with the anticipated Merger and to satisfy the REIT taxable income distribution requirements. Absent a significant deterioration in cash collections, we believe our cash flow from operations and the availability under of revolving credit facility will meet our currently planned capital needs; however, no assurances can be given that this level of cash flow will occur due to the uncertainty in the duration and restrictions of operations for our tenants. Further, subject to the applicable restrictions contained in the Merger Agreement, our ability to draw down under our revolving credit facility should provide ample liquidity for us to operate and maintain compliance with our
debt covenants. Strategy Subject to the proposed Merger, our goal is to remain a leader in owning and operating top-tier neighborhood and community shopping centers and mixed-use properties in certain markets ofthe United States . Our strategic initiatives include: (1) owning quality shopping centers in preferred locations that attract strong tenants, (2) growing net income from our existing portfolio by increasing occupancy and rental rates, (3) raising net asset value and cash flow through quality acquisitions and new developments, (4) continuously redeveloping our existing shopping centers to increase cash flow and enhance the value of the centers and (5) maintaining a strong, flexible consolidated balance sheet and a well-managed debt maturity schedule. We believe these initiatives will keep our portfolio of properties among the strongest in our sector. Due to current capitalization rates in the market along with the uncertainty of changes in interest rates and various other market conditions, and subject to the applicable restrictions contained in the Merger Agreement, we intend to continue to be very prudent in our evaluation of all new investment opportunities. We have been focused on dispositions of properties with characteristics that impact our willingness to own them going forward, and although we intend to continue with this strategy, subject to the applicable restrictions contained in the Merger Agreement, our dispositions are expected to decrease in 2021 from 2020. We intend to utilize the proceeds from dispositions to, among other things, fund the special dividend along with acquisitions and both new development and redevelopment projects.
Dispositions
As we discussed above, we continuously recycle non-core operating centers that no longer meet our ownership criteria and that will provide capital for growth opportunities. During the six months endedJune 30, 2021 , we disposed of real estate assets, which were owned by us either directly or through our interest in real estate joint ventures or partnerships, with our share of aggregate gross sales proceeds totaling$70.9 million . We have approximately$21.0 million of dispositions currently under contracts or letters of intent; however, there are no assurances that these transactions will close at such prices or at all. Subsequent toJune 30, 2021 , we sold two centers and other property, which were owned by us either directly or through our interest in real estate joint ventures or partnerships, with aggregate gross proceeds totaling$48.9 million .
Acquisitions
Subject to evolving market conditions and the applicable restrictions contained in the Merger Agreement, we intend to continue to seek acquisition properties that meet our return hurdles and to actively evaluate other opportunities as they enter the market. Due to the significant amount of capital available in the market, it has been difficult to participate at price points that meet our investment criteria. During the six months endedJune 30, 2021 , we acquired real estate assets with an aggregate gross purchase price of$5.2 million .
During the six months endedJune 30, 2021 , we invested$6.4 million in two mixed-use new development projects that are partially or wholly owned and a 30-story, high-rise residential tower at ourRiver Oaks Shopping Center inHouston, Texas , and we invested$1.3 million in redevelopment projects that were partially or wholly owned. Also during the six months endedJune 30, 2021 , three completed redevelopment projects added approximately 100,000 square feet to the portfolio with an incremental investment to date totaling$19.5 million . 28 Table of Contents Capital We strive to maintain a strong, conservative capital structure, which should provide ready access to a variety of attractive long and short-term capital sources. We carefully balance lower cost, short-term financing with long-term liabilities associated with acquired or developed long-term assets. Additionally, proceeds from our disposition program and cash generated from operations further strengthened our balance sheet in 2021. Due to the variability in the capital markets and the applicable restrictions contained in the Merger Agreement, there can be no assurance that favorable pricing and accessibility will be available in the future.
Operational Metrics
In assessing the performance of our centers, management carefully monitors
various operating metrics of the portfolio. In light of current circumstances
and the continuing impact related to potentially uncollectible revenues, the
operating metrics of our portfolio performed well through the first six months
of 2021. We focused on collections and leasing efforts; including maintaining
our current tenants, to minimize the decline in same property net operating
income ("SPNOI"). See Non-GAAP Financial Measures for additional information.
Our portfolio delivered the following operating results:
? signed occupancy of 93.9% at
30, 2020;
? an increase of 24.1% in SPNOI for the three months ended
same period of 2020; and
? rental rate increases of 4.8% for new leases and 3.0% for renewals during the
six months ended
Below are performance metrics associated with our signed and commenced occupancy, SPNOI growth and leasing activity on a pro rata basis:
June 30,
2021 2020
Signed Occupancy:
Anchor (space of 10,000 square feet or greater) 96.4 % 95.9 %
Non-Anchor 89.6 % 89.0 %
Total 93.9 % 93.4 %
Commenced Occupancy 90.9 % 91.2 %
Three Months Ended Six Months Ended
June 30, 2021 June 30, 2021
SPNOI (1) 24.1 % 10.6 %
See Non-GAAP Financial Measures for a definition of the measurement of SPNOI
(1) and a reconciliation to net income attributable to common shareholders within
this section of Item 2.
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Average Average Average Cost
New Prior of Tenant Change in
Number Square Rent per Rent per Improvements Base Rent
of Feet Square Square per Square on Cash
Leases ('000's) Foot ($) Foot ($) Foot ($) Basis
Leasing Activity:
Three Months Ended June 30, 2021
New leases (1) 53 275 $ 19.93 $ 19.52 $ 37.03 2.1 %
Renewals 104 427 20.61 20.18 - 2.2 %
Not comparable spaces 36 107
Total 193 809 $ 20.35 $ 19.92 $ 14.52 2.1 %
Six Months Ended June 30, 2021
New leases (1) 100 402 $ 22.94 $ 21.88 $ 36.56 4.8 %
Renewals 217 1,223 18.53 17.99 - 3.0 %
Not comparable spaces 67 198
Total 384 1,823 $ 19.63 $ 18.95 $ 9.05 3.5 %
(1) Average external lease commissions per square foot for the three and six
months ended
Changing shopping habits, driven by rapid expansion of internet-driven
procurement and accelerated by the pandemic, led to increased financial problems
for many businesses, which has had a negative impact on the retail real estate
sector. We continue to monitor the effects of these trends, including the impact
of retail customer spending over the long-term. We believe the desirability of
our physical locations, the significant diversification of our portfolio, both
geographically and by tenant base, and the quality of our portfolio, along with
its leading retailers and service providers that sell primarily grocery and
basic necessity-type goods and services, position us well to mitigate the impact
of these changes. Additionally, most retailers have implemented omni-channel
models that integrate on-line shopping with in-store experiences that has
further reinforced the need for bricks and mortar locations. Despite recent
market disruption and tenant bankruptcies, we continue to believe there is
long-term retailer demand for quality space within strong, strategically located
centers.
In 2020, we experienced fluctuations in tenant demand for retail space due to,
among other factors, announced bankruptcies and the repositioning of those
spaces. Currently, the future impact to occupancy is unknown due to the
uncertainty and duration of the pandemic. With an increase in availability of
quality retail space, some tenants have started to take advantage of accessing
these prime locations which contributed to the increase in overall rental rates
on a same-space basis as we completed new leases and renewed existing leases.
Given the uncertainty surrounding the impact of the pandemic, we are unclear of
its impact to rental rates and the funding of tenant improvements and
allowances. The variability in the mix of leasing transactions as to size of
space, market, use and other factors may impact the magnitude of these changes,
both positively and negatively. Leasing volume is anticipated to fluctuate due
to the uncertainty in tenant fallouts; including those related to both
bankruptcies and tenant non-renewals; however, leasing activity continues to
remain strong compared to the prior year.
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Critical Accounting Policies and Estimates
Our discussion and analysis of financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and contingencies as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We evaluate our assumptions and estimates on an ongoing basis using available information. We base our estimates on current economic conditions, historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Uncertainty in the current economic environment due to the outbreak of COVID-19 has and may continue to significantly impact the judgments regarding estimates and assumptions utilized by management. The disclosure of our critical accounting policies and estimates which affect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements is included in our Annual Report on Form 10-K for the year endedDecember 31, 2020 in Management's Discussion and Analysis of Financial Condition and Results of Operations. There have been no significant changes to our critical accounting policies during 2021.
Results of Operations
The COVID-19 pandemic has created uncertainties surrounding the global economy. Additionally, as noted earlier, tenants have been markedly impacted by the pandemic, which has affected our results. As a result, the full magnitude of the pandemic and the ultimate effect upon our future revenues and operations is uncertain at this time. While we are optimistic there will be a gradual improvement in the retail environment resulting from the distribution of vaccinations and the related reopening of the economy, we do not expect revenues and operations to return to pre-COVID levels in the near term. In addition, during the period from the date of the Merger Agreement until the Effective Time, we are subject to certain restrictions on our ability to engage with third parties regarding alternative acquisition proposals and on the conduct of our business.
Comparison of the Three Months Ended
The following table is a summary of certain items in net income from our
Condensed Consolidated Statements of Operations, which we believe represent
items that significantly changed during the three months ended
Three Months Ended June 30,
2021 2020 Change % Change
Revenues $ 122,665 $ 98,135 $ 24,530 25.0 %Depreciation and amortization 40,022 37,627
2,395 6.4 Operating expenses 22,767 19,978 2,789 14.0 Real estate taxes, net 16,285 15,733 552 3.5 General and administrative expenses 11,691 12,920 (1,229) (9.5) Interest expense, net 17,303 15,776 1,527 9.7 Interest and other (expense) income, net (4,713) 5,293 (10,006) 189.0 Gain on sale of property 480 7,898 (7,418) (93.9) Equity in earnings of real estate joint ventures and partnerships, net 4,285 3,428
857 25.0
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Revenues
The increase in revenues of $24.5 million is attributable primarily to a
decrease of $20.6 million for COVID related reserves and write-offs primarily
recorded in the second quarter of 2020 and the impact of $4.5 million and $2.8
million related to acquisitions and mixed-use new developments, respectively.
Revenues have also increased by $2.1 million due primarily to changes in
occupancy and rental rates and by a decline of $.1 million from rent abatements.
Partially offsetting these increases are revenues from dispositions of $5.6
million .
Depreciation and Amortization
The increase in depreciation and amortization of$2.4 million is attributable primarily to the$5.2 million impact of acquisitions and mixed-use new developments. Partially offsetting this increase is$1.9 million from dispositions, and a decrease of$.9 million from the existing portfolio related primarily with a reduction in the amortization/write-offs of in-place lease intangibles associated with terminated tenant leases.
Operating Expenses
The$2.8 million increase in operating expenses is attributable primarily to the impact from both acquisitions and mixed-use developments of$.5 million and$.8 million , respectively. In addition, an increase of$1.5 million is attributable primarily to increases in landscaping due to winter storm damage, parking lot repairs and management fees. Also, an increase of$.7 million was realized between the respective periods due primarily to increases in professional fees, insurance and other various fees associated primarily with vacancy. Partially offsetting these increases is the impact of dispositions of$.7 million .
Real Estate Taxes, net
The$.6 million increase in real estate taxes, net is attributable primarily to the impact from both acquisitions and mixed-use developments of$.7 million and$.4 million , respectively. In addition, an increase of$.4 million is attributable primarily to rate and valuation changes for the portfolio between the respective periods, which is partially offset by dispositions of$.9 million .
General and Administrative Expenses
The decrease in general and administrative expenses of
Interest Expense, net
Net interest expense increased
Three Months Ended
June 30,
2021 2020
Gross interest expense $ 17,001 $ 17,003 Amortization of debt deferred costs, net 818 783 Over-market mortgage adjustment
(207) (100)
Capitalized interest (309) (1,910)
Total $ 17,303 $ 15,776
The increase in net interest expense is attributable primarily to a reduction in
capitalized interest, which is primarily due to the near completion of two of
the residential portions of our mixed-use new developments. For the three months
ended June 30, 2021 , the weighted average debt outstanding was $1.8 billion at a
weighted average interest rate of 3.9% as compared to $2.0 billion outstanding
at a weighted average interest rate of 3.6% in the same period of 2020.
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Interest and Other (Expense) Income, net
The increase in net other expense of$10.0 million is attributable primarily to$8.4 million associated with merger related costs and a$2.1 million decrease in the fair value adjustment for the assets held in a grantor trust related to deferred compensation. Partially offsetting this increase is$.5 million associated with the components of net periodic benefit costs from our pension plan. Gain on Sale of Property
The decrease of$7.4 million in gain on sale of property is attributable to a decrease on the gain on sale of one center and other property in the second quarter of 2021 as compared to one center and other property in the same period of 2020.
Equity in Earnings of
The increase of$.9 million is attributable primarily to a reduction in COVID related reserves and write-offs of$1.8 million , which is offset by disposition activities between the respective periods of$.9 million .
Comparison of the Six Months Ended
The following table is a summary of certain items in net income from our
Condensed Consolidated Statements of Operations, which we believe represent
items that significantly changed during the six months ended
Six Months Ended June 30,
2021 2020 Change % Change
Revenues $ 244,036 $ 209,487 $ 34,549 16.5 %Depreciation and amortization 78,578 74,283
4,295 5.8 Operating expenses 46,054 43,138 2,916 6.8 Real estate taxes, net 33,020 30,741 2,279 7.4
General and administrative expenses 22,295 15,227 7,068 46.4 Interest expense, net 33,922 30,378 3,544 11.7 Interest and other (expense) income, net (3,059) (535) (2,524) 471.8 Gain on sale of property 9,611 21,474 (11,863) (55.2) Equity in earnings of real estate joint ventures and partnerships, net 8,372 30,525
(22,153) (72.6) Revenues The increase in revenues of$34.5 million is attributable primarily to a decrease of$31.7 million for COVID related reserves and write-offs primarily recorded in the first six months of 2020 and the impact of$9.8 million and$5.0 million related to acquisitions and mixed-use new developments, respectively. Partially offsetting these increases are revenues from dispositions of$11.0 million and rent abatements of$.4 million . Revenues have also declined by$.6 million due primarily to the fluctuations in occupancy related to tenant mix and lease space size. Depreciation and Amortization The increase in depreciation and amortization of$4.3 million is attributable primarily to the$10.6 million impact of acquisitions and mixed-use new developments. Partially offsetting this increase is$4.0 million from dispositions, and a decrease of$2.3 million from the existing portfolio related primarily with a reduction in the amortization/write-offs of in-place lease intangibles associated with terminated tenant leases. 33 Table of Contents Operating Expenses The$2.9 million increase in operating expenses is attributable primarily to the impact from both acquisitions and mixed-use developments of$1.2 million and$1.5 million , respectively. In addition, an increase of$1.0 million is attributable primarily to increases in landscaping due to winter storm damage, parking lot repairs and management fees. Also, an increase of$.8 million was realized between the respective periods due primarily to increases in professional fees, insurance and other various fees associated primarily with vacancy. Partially offsetting these increases is the impact of dispositions
of$1.6 million . Real Estate Taxes, net The$2.3 million increase in real estate taxes, net is attributable primarily to the impact from both acquisitions and mixed-use developments of$1.7 million and$1.0 million , respectively. In addition, an increase of$1.3 million is attributable primarily to rate and valuation changes for the portfolio between the respective periods, which is partially offset by dispositions of$1.7 million .
General and Administrative Expenses
The increase in general and administrative expenses of$7.1 million is attributable primarily to a fair value increase of$5.2 million associated with assets held in a grantor trust related to deferred compensation, an increase of$.2 million in severance costs between the respective periods and by an increase in personnel and associated costs.
Interest Expense, net
Net interest expense increased
Six Months Ended
June 30,
2021 2020
Gross interest expense $ 34,074 $ 33,559 Amortization of debt deferred costs, net 1,637 1,579 Over-market mortgage adjustment
(414) (187)
Capitalized interest (1,375) (4,573)
Total $ 33,922 $ 30,378
The increase in net interest expense is attributable primarily to a reduction in
capitalized interest and an increase in gross interest expense. The reduction of
capitalized interest is primarily due to the near completion of two of the
residential portions of our mixed-use new developments. The increase in gross
interest expense between the respective periods is attributable primarily to an
increase in weighted average interest rates, which is offset by a reduction in
the weighted average debt outstanding. For the six months ended June 30, 2021 ,
the weighted average debt outstanding was $1.8 billion at a weighted average
interest rate of 3.9% as compared to $1.9 billion outstanding at a weighted
average interest rate of 3.7% in the same period of 2020.
Interest and Other (Expense) Income, net
The net other expense increase of$2.5 million is attributable primarily to$8.4 million associated with merger related costs. Partially offsetting this increase is a$5.2 million fair value adjustment associated with assets held in a grantor trust related to deferred compensation and$.8 million associated with components of net periodic benefit costs from our pension plan.
Gain on Sale of Property
The decrease of$11.9 million in gain on sale of property is attributable to a decrease on the gain on sale of three centers and other property in the first six months of 2021 as compared to two centers and other property in the same period of 2020. 34 Table of Contents
Equity in Earnings of
The decrease of$22.2 million is attributable primarily to disposition activities between the respective periods of$24.5 million . Partially offsetting this decrease is a reduction in COVID related reserves and write-offs of$2.2 million .
Capital Resources and Liquidity
Our primary operating liquidity needs are paying our common share dividends, maintaining and operating our existing properties, paying our debt service costs, excluding debt maturities, and funding capital expenditures. Our anticipated cash flows from operating activities, as well as the availability of funds under our unsecured revolving credit facility are expected to meet these planned capital needs; however, no assurance can be given due to, among other factors, the evolving impact of the pandemic and the restrictions in the Merger Agreement on the conduct of our business. The primary sources of capital for funding any debt maturities, acquisitions, share repurchases, new developments and redevelopments are our excess cash flow generated by our operating and new development properties; credit facilities; proceeds from both secured and unsecured debt issuances; proceeds from equity issuances; cash generated from the sale of property or interests in real estate joint ventures and partnerships and the formation of joint ventures. Amounts outstanding under the unsecured revolving credit facility are retired as needed with proceeds from the issuance of long-term debt, equity, cash generated from the disposition of properties and cash flow generated by our operating properties. As ofJune 30, 2021 , we had an available borrowing capacity of$498.1 million under our unsecured revolving credit facility, and had cash and cash equivalents available of$73.3 million . Subject to the provisions of the Merger Agreement, currently, we anticipate our disposition activities to continue, albeit at a lower rate. We believe other debt and equity alternatives are available to us based on recent market transactions within our industry sector, subject to the applicable restrictions contained in the Merger Agreement. Subject to the applicable restrictions contained in the Merger Agreement, we believe net proceeds from planned capital recycling and operations, combined with our available capacity under the revolving credit and short-term borrowing facilities, will provide adequate liquidity to fund our capital needs, including any acquisitions, redevelopment and new development activities and, if necessary, special dividends. In the event our capital recycling program does not progress as expected, we believe other debt and equity alternatives are available to us, subject to the applicable restrictions contained in the Merger Agreement. OnJuly 15, 2021 , ourBoard of Trust Managers declared a special dividend of$.69 per common share, which is payable onAugust 2, 2021 to shareholders of record onJuly 28, 2021 . The special dividend is being paid in connection with the anticipated Merger and to satisfy the REIT taxable income distribution requirements. We anticipate the payment of the dividend using operational cash inflows and available cash. We generally have the ability to sell or otherwise dispose of our assets subject to the applicable restrictions contained in the Merger Agreement and in certain cases, where we are required to obtain our joint venture partners' consent or a lender's consent for assets held in special purpose entities. Additionally under many of our joint venture agreements, we and our joint venture partners are required to fund operating capital upon shortfalls in working capital. As operating manager of most of these entities, we have considered these funding requirements in our forecasting. Also our material real estate joint ventures are with entities which appear sufficiently stable; however, if market conditions were to deteriorate and our partners are unable to meet their commitments, our venture agreements provide multiple remedies, including but not limited to, the liquidation of the venture. Further, under these conditions, we would be required to reconsider our consolidation conclusions for those ventures, and it is possible we may have to consolidate any unconsolidated
interests.
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Operating Activities
For the six months ended June 30, 2021 , cash flows from operations have
increased by $16.4 million compared to the same period in 2020. This increase is
attributable primarily to the impact in 2020 of the pandemic on rent collections
including an increase in the number of tenants placed on a cash basis and
concession agreements put in place to assist them during the uncertainty.
Collections of rents due were initially hindered in the latter part of the first
quarter and continued into the second quarter of 2020; however, during the six
months ended June 30, 2021 , we have collected approximately 97% of our tenant
billings. We expect operating activities in 2021 to cover our human capital
expenditures including salaries and related benefits, along with property
operating expenses.
Since 2018, we have experienced a downward trend in revenues due to dispositions
related to our portfolio transformation in which we have pruned our portfolio to
concentrate on high-quality, grocery anchored, open-air centers located in the
southern and western U.S. that provide basic goods and services. Additionally,
revenues in 2020 also declined due to the impact of the pandemic. We anticipate
that 2021 may see some recovery of revenues originally impacted by the pandemic;
however, recoveries will be offset by lower revenues as a result of our 2020
dispositions and any continuing effects or resurgence of the pandemic.
Investing Activities
Acquisitions
During the six months ended
Dispositions
During the six months endedJune 30, 2021 , we sold three centers and other property, including real estate assets owned through our interest in unconsolidated real estate joint ventures and partnerships. Our share of aggregate gross sales proceeds from these transactions totaled$70.9 million and generated our share of the gains of approximately$9.5 million . Operating cash flows from assets disposed are included in net cash from operating activities in our Condensed Consolidated Statements of Cash Flows, while proceeds from these disposals are included as investing activities. We have approximately$21.0 million of dispositions currently under contracts or letters of intent; however, there are no assurances that these transactions will close at such prices or at all. Subsequent toJune 30, 2021 , we sold two centers and other property, which were owned by us either directly or through our interest in real estate joint ventures or partnerships, with aggregate gross proceeds totaling$48.9 million . As mentioned under operating activities, our transformation program resulted in significant dispositions over the last few years, which has resulted in a downward trend in our cash flows from dispositions and associated gains. Dispositions have been an essential component of our ongoing strategy to remove properties that no longer meet our growth or geographic targets.
AtJune 30, 2021 , we had two mixed-use projects in theWashington D. C . market and a 30-story, high-rise residential tower at ourRiver Oaks Shopping Center inHouston in various stages of development, which are partially or wholly owned. We have funded$450.8 million throughJune 30, 2021 on these projects. Upon completion, we expect our aggregate net investment in these multi-use projects to be$485.0 million and will add approximately .2 million of total square footage for retail and 962 residential units to the property portfolio; however, the timing of the realization of a stabilized return is currently unknown due to the uncertainties regarding the impact of COVID-19. 36
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AtJune 30, 2021 , we had five redevelopment projects with an expected final investment estimated to be$25.4 million , of which we have funded approximately$22.7 million . Realization of the stabilized return may take longer than originally planned due to the impact of COVID-19. During the six months endedJune 30, 2021 , three completed redevelopment projects added approximately 100,000 square feet to the portfolio with an incremental investment to date totaling$19.5 million .
We had approximately
Capital Expenditures
Capital expenditures for additions to the existing portfolio, acquisitions,
tenant improvements, new development, redevelopment and our share of investments
in unconsolidated real estate joint ventures and partnerships are as follows (in
thousands):
Six Months Ended
June 30,
2021 2020
Acquisitions $ 5,220 $ 25,506
New Development 11,138 50,778
Redevelopment 1,676 6,585
Tenant Improvements 12,434 16,224
Capital Improvements 7,765 7,338
Other 359 1,724
Total $ 38,592 $ 108,155
The decrease in capital expenditures is attributable primarily to a reduction in
acquisitions and new development activity as a result of the near completion of
two of the residential portions of our mixed-use new developments.
Further, we have entered into commitments aggregating $42.2 million comprised
principally of construction contracts, which are generally due in 12 to
36 months and anticipated to be funded through our excess cash flow funded by
operating activities or with proceeds from our unsecured revolving credit
facility.
Capital expenditures for additions described above relate to cash flows from investing activities as follows (in thousands):
Six Months Ended
June 30,
2021 2020Acquisition of real estate and land, net$ 5,220 $
25,506
Development and capital improvements 31,548
78,258
Real estate joint ventures and partnerships - Investments 1,824
4,391 Total$ 38,592 $ 108,155 Capitalized soft costs, including payroll and other general and administrative costs, interest, insurance and real estate taxes, totaled$4.6 million and$9.5 million for the six months endedJune 30, 2021 and 2020, respectively. 37 Table of Contents Financing Activities Debt Total debt outstanding was$1.8 billion atJune 30, 2021 , which bears interest at fixed rates. Additionally, of our total debt,$333.1 million was secured by operating properties while the remaining$1.5 billion was unsecured. We also had letters of credit totaling$7.9 million outstanding atJune 30, 2021 . Our debt maturities for the remainder of 2021 and for 2022 total$2.8 million and$308.3 million , respectively (see Note 5 for additional information on Debt maturities). For 2021, we expect to fund our outstanding maturities through our excess cash flow generated by our operating properties, credit facilities and cash generated from dispositions. If the Merger does not occur prior to such time, the 2022 maturities are expected be funded through our excess cash flow generated by our operating properties, credit facilities, cash generated from dispositions or with proceeds from the issuance of long-term debt. AtJune 30, 2021 , we have a$500 million unsecured revolving credit facility, which expires inMarch 2024 and provides borrowing rates that float at a margin over LIBOR plus a facility fee. AtJune 30, 2021 , the borrowing margin and facility fee, which are priced off a grid that is tied to our senior unsecured credit ratings, were 82.5 and 15 basis points, respectively. The facility also contains a competitive bid feature that allows us to request bids for up to$250 million . Additionally, an accordion feature allows us to increase the facility amount up to$850 million . As ofJuly 27, 2021 , we had no outstanding balance, and the available balance was$498.1 million , net of$1.9 million in outstanding letters of credit. AtJune 30, 2021 , we have a$10 million unsecured short-term facility that we maintain for cash management purposes. The facility, which matures inMarch 2022 , provides for fixed interest rate loans at a 30-day LIBOR rate plus borrowing margin, facility fee and an unused facility fee of 125, 10, and 5 basis points, respectively. As ofJuly 27, 2021 , we had no amounts outstanding under this facility. For the six months endedJune 30, 2021 , the maximum balance and weighted average balance outstanding under both facilities combined were$40.0 million and$2.7 million , respectively, at a weighted average interest rate of .9%. We have non-recourse debt secured by properties held in several of our real estate joint ventures and partnerships. AtJune 30, 2021 , off-balance sheet mortgage debt for our unconsolidated real estate joint ventures and partnerships totaled$191.1 million , of which our pro rata ownership is$44.6 million . Scheduled principal mortgage payments on this debt, excluding deferred debt costs and non-cash related items totaling$(.2) million , at 100% are as follows (in millions): 2021 remaining$ 1.4 2022 172.1 2023 2.2 2024 2.3 2025 2.3 Thereafter 11.0 Total$ 191.3 During the first quarter 2021, a joint venture extended its$170 million loan under an available one-year extension. The remaining 2021 maturities are expected to be paid by excess operating funds from the related venture or partnership and/or capital calls of which we would use our funds from our other operating properties, credit facilities and cash generated from dispositions. For the 2022 maturities, we expect the joint venture to extend its$170 million loan under an available one-year extension or refinance the loan. Our five most restrictive covenants, composed from both our public debt and revolving credit facility, include debt to asset, secured debt to asset, fixed charge, unencumbered asset test and unencumbered interest coverage ratios. We are not aware of any non-compliance with our public debt and revolving credit facility covenants as ofJune 30, 2021 . 38
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Our most restrictive public debt covenant ratios, as defined in our indenture
and supplemental indenture agreements, were as follows at
Covenant Restriction Actual
Debt to Asset Ratio Less than 60.0 % 36.8 %
Secured Debt to Asset Ratio Less than 40.0 % 6.8 %
Fixed Charge Ratio Greater than 1.5 4.2
Unencumbered Asset Test Greater than 150 % 290.8 %
Included in our debt balance is a guaranty we provided for the payment of any
debt service shortfalls on tax increment revenue bonds issued in connection with
a development project in Sheridan, Colorado . The Sheridan Redevelopment Agency
issued Series A bonds used for an urban renewal project, of which $53.7 million
remain outstanding at June 30, 2021 . The bonds are to be repaid with incremental
sales and property taxes and a PIF to be assessed on current and future retail
sales and, to the extent necessary, any amounts we may have to provide under a
guaranty. The incremental taxes and PIF are to remain intact until the earlier
of the payment of the bond liability in full or 2040.
Equity
Common share dividends paid totaled$67.6 million for the six months endedJune 30, 2021 . Our dividend payout ratio (as calculated as dividends paid on common shares divided by core funds from operations attributable to common shareholders - basic) for the six months endedJune 30, 2021 approximated 53.9% (see Non-GAAP Financial Measures for additional information). OnJuly 15, 2021 , ourBoard of Trust Managers declared a special dividend of$.69 per common share, which is payable onAugust 2, 2021 to shareholders of record onJuly 28, 2021 . The special dividend is being paid in connection with the anticipated Merger and to satisfy the REIT taxable income distribution requirements. Funds to pay dividends and share repurchases would come initially from excess proceeds from operations, dispositions and our outstanding credit facilities. We have a$200 million share repurchase plan. Under this plan, subject to the applicable restrictions set forth in the Merger Agreement, we may repurchase common shares from time-to-time in open-market or in privately negotiated purchases. The timing and amount of any shares repurchased will be determined by management based on its evaluation of market conditions and other factors. The repurchase plan may be suspended or discontinued at any time, and we have no obligations to repurchase any amount of our common shares under the plan. During the six months endedJune 30, 2021 , no common shares were repurchased. AtJune 30, 2021 and as of the date of this filing,$149.4 million of common shares remained available to be repurchased under this plan. We have an effective universal shelf registration statement, which expires inSeptember 2023 . Subject to the provisions of the Merger Agreement, we will continue to closely monitor both the debt and equity markets and carefully consider our available financing alternatives, including both public offerings and private placements. Merger Costs The closing of the Merger is expected to occur onAugust 3, 2021 , pending the receipt of the necessary shareholder approvals and satisfaction or waiver of the other closing conditions specified in the Merger Agreement (although there can be no assurance that all closing conditions will be satisfied or waived byAugust 3, 2021 , that the Merger will close onAugust 3, 2021 or that the Merger will be consummated). For the six months endedJune 30, 2021 , we have recorded costs of$8.4 million associated with the Merger. Estimated additional costs to be paid, if and when the Merger closes are$46.1 million which includes costs associated primarily with personnel and financial, legal, tax and audit advisors. These costs are expected to be funded through our credit facilities or cash generated from dispositions. These estimates are based on the best information available to management and may be impacted by future developments related to the Merger that could result in inaccurate estimates that could be material to our consolidated financial statements. 39
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Non-GAAP Financial Measures
Certain of our key performance indicators are considered non-GAAP financial measures. Management uses these measures along with our GAAP financial statements in order to evaluate our operating results. We believe these additional measures provide users of our financial information additional comparable indicators of our industry, as well as, our performance.
Funds from Operations Attributable to Common Shareholders
The National Association of Real Estate Investment Trusts ("NAREIT") defines NAREIT FFO as net income (loss) attributable to common shareholders computed in accordance with GAAP, excluding gains or losses from sales of certain real estate assets (including: depreciable real estate with land, land, development property and securities), change in control of real estate equity investments, and interests in real estate equity investments and their applicable taxes, plus depreciation and amortization related to real estate and impairment of certain real estate assets and in substance real estate equity investments, including our share of unconsolidated real estate joint ventures and partnerships. We calculate NAREIT FFO in a manner consistent with the NAREIT definition. Management believes NAREIT FFO is a widely recognized measure of REIT operating performance, which provides our shareholders with a relevant basis for comparison among other REITs. Management uses NAREIT FFO as a supplemental internal measure to conduct and evaluate our business because there are certain limitations associated with using GAAP net income by itself as the primary measure of our operating performance. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, management believes that the presentation of operating results for real estate companies that uses historical cost accounting is insufficient by itself. There can be no assurance that NAREIT FFO presented by us is comparable to similarly titled measures of other REITs. We also present Core FFO as an additional supplemental measure as it is more reflective of the core operating performance of our portfolio of properties. Core FFO is defined as NAREIT FFO excluding charges and gains related to non-cash, non-operating assets and other transactions or events that hinder the comparability of operating results. Specific examples of items excluded from Core FFO include, but are not limited to, gains or losses associated with the extinguishment of debt or other liabilities and transactional costs associated with unsuccessful development activities. NAREIT FFO and Core FFO should not be considered as alternatives to net income or other measurements under GAAP as indicators of operating performance or to cash flows from operating, investing or financing activities as measures of liquidity. NAREIT FFO and Core FFO do not reflect working capital changes, cash expenditures for capital improvements or principal payments on indebtedness. 40 Table of Contents
NAREIT FFO and Core FFO is calculated as follows (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
Net income attributable to common
shareholders $ 12,692 $ 11,368 $ 40,729 $ 63,990
Depreciation and amortization of real estate 39,841 37,520 78,256 73,995
Depreciation and amortization of real estate
of unconsolidated real estate joint ventures
and partnerships 4,145 4,322 8,306 8,119
Impairment of properties and real estate
equity investments 122 - 447 44
Gain on sale of property, investment
securities and interests in real estate
equity investments (429) (7,903) (9,526) (21,477)
Gain on dispositions of unconsolidated real
estate joint ventures and partnerships (7) (1,044) (31) (23,416)
Provision for income taxes (1) - - 20 -
Noncontrolling interests and other (2) (634) (652) (1,190) (1,227)
NAREIT FFO - basic 55,730 43,611 117,011 100,028
Income attributable to operating partnership
units 302 241 703 769
NAREIT FFO - diluted 56,032 43,852 117,714 100,797
Adjustments for Core FFO:
Contract terminations - - - 340
Merger costs 8,411 - 8,411 -
Other 1 - 1 -
Core FFO - diluted $ 64,444 $ 43,852 $ 126,126 $ 101,137
FFO weighted average shares outstanding -
basic 126,600 127,242 126,559 127,552
Effect of dilutive securities:
Share options and awards 1,039 861 1,096 899
Operating partnership units 1,409 1,432 1,419 1,432
FFO weighted average shares outstanding -
diluted 129,048 129,535 129,074 129,883
NAREIT FFO per common share - basic$ 0.44 $ 0.34
NAREIT FFO per common share - diluted$ 0.43 $ 0.34
Core FFO per common share - diluted$ 0.50 $ 0.34
(1) The applicable taxes related to gains and impairments of operating and
non-operating real estate assets.
(2) Related to gains, impairments and depreciation on operating properties and
unconsolidated real estate joint ventures, where applicable.
Same Property Net Operating Income
We consider SPNOI an important additional financial measure because it reflects
only those income and expense items that are incurred at the property level, and
when compared across periods, reflects the impact on operations from trends in
occupancy rates, rental rates and operating costs. We calculate this most useful
measurement by determining our proportional share of SPNOI from all owned
properties, including our share of SPNOI from unconsolidated joint ventures and
partnerships, which cannot be readily determined under GAAP measurements and
presentation. Although SPNOI is a widely used measure among REITs, there can be
no assurance that SPNOI presented by us is comparable to similarly titled
measures of other REITs. Additionally, we do not control these unconsolidated
joint ventures and partnerships, and the assets, liabilities, revenues or
expenses of these joint ventures and partnerships, as presented, do not
represent our legal claim to such items.
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Properties are included in the SPNOI calculation if they are owned and operated
for the entirety of the most recent two fiscal year periods, except for
properties for which significant redevelopment or expansion occurred during
either of the periods presented, and properties that have been sold. While there
is judgment surrounding changes in designations, we move new development and
redevelopment properties once they have stabilized, which is typically upon
attainment of 90% occupancy. A rollforward of the properties included in our
same property designation is as follows:
Three Months Ended Six Months Ended
June 30, 2021 June 30, 2021
Beginning of the period 145 142
Properties added:
Acquisitions - 6
Properties removed:
Dispositions (1) (4)
End of the period 144 144
We calculate SPNOI using net income attributable to common shareholders and
adjusted for net income attributable to noncontrolling interests, other income
(expense), income taxes and equity in earnings of real estate joint ventures and
partnerships. Additionally to reconcile to SPNOI, we exclude the effects of
property management fees, certain non-cash revenues and expenses such as
straight-line rental revenue and the related reversal of such amounts upon early
lease termination, depreciation and amortization, impairment losses, general and
administrative expenses and other items such as lease cancellation income,
environmental abatement costs, demolition expenses, and lease termination fees.
Consistent with the capital treatment of such costs under GAAP, tenant
improvements, leasing commissions and other direct leasing costs are excluded
from SPNOI. A reconciliation of net income attributable to common shareholders
to SPNOI is as follows (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
Net income attributable to common
shareholders $ 12,692 $ 11,368 $ 40,729 $ 63,990
Add:
Net income attributable to noncontrolling
interests 1,749 1,009 3,591 2,635
Provision for income taxes 86 343 324 515
Interest expense, net 17,303 15,776 33,922 30,378
Property management fees 947 829 2,128 1,907
Depreciation and amortization 40,022 37,627 78,578 74,283
Impairment loss 122 - 447 44
General and administrative 11,691 12,920 22,295 15,227
Other (1) 98 79 149 167
Less:
Gain on sale of property (480) (7,898) (9,611) (21,474)
Equity in earnings of real estate joint
ventures and partnership interests, net (4,285) (3,428) (8,372) (30,525)
Interest and other expense (income), net 4,713 (5,293) 3,059 535 Other (2) (4,517) 866 (9,860) 3,991 Adjusted income 80,141 64,198 157,379 141,673 Less: Adjusted income related to consolidated entities not defined as same property and noncontrolling interests (7,395) (5,970) (13,872) (12,321) Add: Pro rata share of unconsolidated entities defined as same property 6,487 5,603 12,873 12,014 Same Property Net Operating Income$ 79,233 $ 63,831 $
156,380
(1) Other includes items such as environmental abatement costs, demolition
expenses and lease termination fees.
(2) Other consists primarily of straight-line rentals, lease cancellation income
and fee income primarily from real estate joint ventures and partnerships.
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Newly Issued Accounting Pronouncements
See Note 2 to our condensed consolidated financial statements in Item 1 for additional information related to recent accounting pronouncements.
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