UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
Date of Report (Date of earliest event reported): August 3, 2021
 
Kimco Realty Corporation
(Exact name of registrant as specified in charter)
 
Maryland
(State or Other Jurisdiction of Incorporation)

1-10899
  13-2744380
(Commission File Number)
 
(IRS Employer Identification No.)
 
(Address of principal executive offices)
500 N. Broadway
Suite 201
Jericho, New York 11753
 
Registrant’s telephone number, including area code: (516) 869-9000
 
Not Applicable
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 

Written Communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class
 
Trading Symbol(s)
 
Name of Each Exchange on Which Registered
Common Stock, par value $.01 per share
  KIM
 
New York Stock Exchange
Depositary Shares, each representing one-thousandth of a share of 5.125% Class L Cumulative Redeemable, Preferred Stock, $1.00 par value per share.
  KIMprL
 
New York Stock Exchange
Depositary Shares, each representing one-thousandth of a share of 5.250% Class M Cumulative Redeemable, Preferred Stock, $1.00 par value per share.
  KIMprM
  New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
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 provided pursuant to Section 13(a) of the Exchange Act. ☐



Explanatory Note.
 
As previously disclosed, on August 3, 2021, Kimco Realty Corporation, a Maryland corporation (the “Company”), completed its previously announced acquisition of Weingarten Realty Investors, a Texas real estate investment trust (“WRI”), pursuant to the Agreement and Plan of Merger, dated as of April 15, 2021 (the “Merger Agreement”), by and between the Company and WRI.
 
This Amendment No. 1 on Form 8-K/A is being filed to amend Item 9.01(a) and (b) of the Current Report on Form 8-K that the Company filed with the Securities and Exchange Commission on August 4, 2021 regarding the completion of its acquisition of WRI to include the historical financial statements of WRI required by Item 9.01(a) of Form 8-K and the pro forma financial information required by Item 9.01(b) of Form 8-K. After reasonable inquiry, the Company is not aware of any other material factors relating to WRI that would cause the reported financial information not to be necessarily indicative of future operating results.

Item 9.01
Financial Statements and Exhibits.
 
(a) Financial Statements of Business Acquired.
 
The audited consolidated balance sheets of WRI and its subsidiaries as of December 31, 2020 and 2019 and the related consolidated statements of operations, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2020 are filed herewith as Exhibit 99.1 and incorporated to this Item 9.01(a) by reference.
 
The unaudited consolidated balance sheet of WRI and its subsidiaries as of June 30, 2021 and the related consolidated statements of operations, comprehensive income, equity and cash flows for the three-month periods and six-month periods ended June 30, 2021 and 2020 filed herewith as Exhibit 99.2 and incorporated to this Item 9.01(a) by reference.
 
(b) Pro Forma Financial Information.
 
The unaudited pro forma condensed combined balance sheet of the Company as of June 30, 2021 and the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2020, and for the six months ended June 30, 2021, after giving effect to the acquisition of WRI and adjustments described in such pro forma financial statements are filed herewith as Exhibit 99.3 and incorporated to this Item 9.01(a) by reference.
 
(d) Exhibits.

Exhibit No.
Description
   
Consent of Deloitte & Touche LLP.
   
Audited consolidated balance sheets of Weingarten Realty Investors and its subsidiaries as of December 31, 2020 and 2019, and the related consolidated statements of operations, comprehensive income, equity and cash flows, for each of the three years in the period ended December 31, 2020.
   
Unaudited consolidated balance sheet of Weingarten Realty Investors and its subsidiaries as of June 30, 2021, and the related consolidated statements of operations, comprehensive income, equity and cash flows for the three-month periods and the six-month periods ended June 30, 2021 and 2020.
   
Unaudited pro forma condensed combined balance sheet of Kimco Realty Corporation as of June 30, 2021 and the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2020, and for the six months ended June 30, 2021, giving effect to the acquisition of Weingarten Realty Investors.
   
104
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).


SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: August 17, 2021
KIMCO REALTY CORPORATION
   
 
/s/ Glenn G. Cohen
 
Glenn G. Cohen
 
Chief Financial Officer




Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the use in Registration Statement No. 333-253494 on Form S-3 and Registration Statement Nos. 333-61323, 333-85659, 333-62626, 333-135087, 333-167265, 333-184776 and 333-238131 on Form S-8 of Kimco Realty Corporation, of our report dated February 26, 2021, relating to the financial statements of Weingarten Realty Investors, appearing in this Current Report on Form 8-K/A dated August 17, 2021.

/s/ Deloitte & Touche LLP
Houston, Texas
August 17, 2021




Exhibit 99.1

WEINGARTEN REALTY INVESTORS

Index to Financial Statements

Page

(A)

Report of Independent Registered Public Accounting Firm

2

(B)

Financial Statements:

(i)

Consolidated Statements of Operations for the year ended December 31, 2020, 2019 and 2018

5

(ii)

Consolidated Statements of Comprehensive Income for the year ended December 31, 2020, 2019 and 2018

6

(iii)

Consolidated Balance Sheets as of December 31, 2020 and 2019

7

(iv)

Consolidated Statements of Cash Flows for the year ended December 31, 2020, 2019 and 2018

8

(v)

Consolidated Statements of Equity for the year ended December 31, 2020, 2019 and 2018

9

(vi)

Notes to Consolidated Financial Statements

10

(C)

Financial Statement Schedules:

II

Valuation and Qualifying Accounts

48

III

Real Estate and Accumulated Depreciation

49

IV

Mortgage Loans on Real Estate

54

All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule or because the information required is included in the consolidated financial statements and notes thereto.

1


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Trust Managers of Weingarten Realty Investors

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Weingarten Realty Investors and subsidiaries (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, equity, and cash flows, for each of the three years in the period ended December 31, 2020, the related notes and the financial statement schedules II, III, and IV (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 26, 2021 (not presented herein), 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) relate 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 matter below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

2


Summary of Significant Accounting Policies - Accrued Rent, Accrued Contract Receivables and Accounts Receivable, net – Refer to Note 1 to the financial statements

Critical Audit Matter Description

The Company evaluates individual leases to determine whether the future lease payments are not probable of collection over the remaining lease term. If it is concluded that the lease payments are not probable of collection, rental revenue is recognized on a cash basis. The Company considered the type of retailer, current discussions with the tenants, and current economic trends to determine the probability of collection for the individual leases. Changes in the probability of collection assumption could have a material impact on either the recorded accrued rent, accounts receivable, or rental revenues. The Company reduced revenues by $36.1 million, of which the majority includes amounts for the lease payments that are not probable of collection, for the year ended December 31, 2020.    

Given the significant judgments made by management to determine collectability, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions required significant auditor judgment.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s evaluation of the Company’s determination of the probability of collection of operating lease receivables included the following:

We tested the effectiveness of controls, including those related to management’s determination of revenue recognized on a cash basis based on management’s determination of the probability of collection.
We evaluated external market information including bankruptcy announcements, tenant filings, news articles, and analyst reports, and compared it to management’s lease collectability conclusions.
We corroborated management’s conclusions by making inquiries of management outside of accounting to understand the type of tenant and current tenant discussions and by reading the minutes of the board of trustees.  
We analyzed tenants that were deemed collectible and had large outstanding accounts receivable balances by assessing tenant filings, news articles, and analyst reports to evaluate management’s conclusions.
We evaluated the reasonableness of management’s estimates for the probability of collection by comparing to the actual lease payments received from tenants.

Summary of Significant Accounting Policies – Impairment of Investment in Real Estate Joint Ventures and Partnerships – Refer to Note 1 to the financial statements

Critical Audit Matter Description

The Company’s evaluation of impairment for their investments in real estate joint ventures and partnerships (“investments”) involves an initial assessment of various factors, including the Company’s ability to hold the investment, when determining if there is a decline in the investment value. Changes in this assumption could have a significant impact on the timing of if and when an other than temporary impairment is recorded. No impairment losses were recognized for the year ended December 31, 2020.

3


Given the significant judgment made by management of its ability to hold the investment when evaluating if a decline in fair value is other than temporary, performing audit procedures to evaluate whether management appropriately evaluated this factor required a high degree of auditor judgment.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s conclusion on their ability to hold the investment included the following:

We tested the effectiveness of controls, including those related to the evaluation of the Company’s ability to hold their investments.

We evaluated the Company’s conclusion related to their ability to hold the investment by analyzing:

o

the underlying investment for operating losses and

o

the liquidity needs of both the investee and the Company by assessing debt maturities over the next twelve months.  

We inquired of management about their intent and ability to hold the investment by reading the minutes of the board of trustees to determine if there was any contradictory evidence to management’s assertion.

/s/ Deloitte & Touche LLP

Houston, Texas

February 26, 2021

We have served as the Company’s auditor since 1963.

4


WEINGARTEN REALTY INVESTORS

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

Year Ended December 31, 

2020

2019

2018

Revenues:

  

 

  

  

  

  

  

Rentals, net

$

422,339

$

472,446

$

517,836

Other

 

11,578

 

14,179

 

13,311

Total Revenues

 

433,917

 

486,625

 

531,147

Operating Expenses:

 

  

 

  

 

  

Depreciation and amortization

 

149,930

 

135,674

 

161,838

Operating

 

91,075

 

94,620

 

90,554

Real estate taxes, net

 

62,564

 

60,813

 

69,268

Impairment loss

 

24,153

 

74

 

10,120

General and administrative

 

37,388

 

35,914

 

25,040

Total Operating Expenses

 

365,110

 

327,095

 

356,820

Other Income (Expense):

 

  

 

  

 

  

Interest expense, net

 

(61,148)

 

(57,601)

 

(63,348)

Interest and other income, net

 

7,143

 

11,003

 

2,807

Gain on sale of property

 

65,402

 

189,914

 

207,865

Total Other Income

 

11,397

 

143,316

 

147,324

Income Before Income Taxes and Equity in Earnings of Real Estate Joint Ventures and Partnerships

 

80,204

 

302,846

 

321,651

Provision for Income Taxes

 

(451)

 

(1,040)

 

(1,378)

Equity in Earnings of Real Estate Joint Ventures and Partnerships, net

 

39,206

 

20,769

 

25,070

Net Income

 

118,959

 

322,575

 

345,343

Less: Net Income Attributable to Noncontrolling Interests

 

(6,810)

 

(7,140)

 

(17,742)

Net Income Attributable to Common Shareholders

$

112,149

$

315,435

$

327,601

Earnings Per Common Share - Basic:

 

  

 

  

 

  

Net income attributable to common shareholders

$

0.88

$

2.47

$

2.57

Earnings Per Common Share - Diluted:

 

  

 

  

 

  

Net income attributable to common shareholders

$

0.88

$

2.44

$

2.55

See Notes to Consolidated Financial Statements.

5


WEINGARTEN REALTY INVESTORS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

Year Ended December 31, 

2020

   

2019

   

2018

Net Income

$

118,959

$

322,575

$

345,343

Cumulative effect adjustment of new accounting standards

 

 

 

(1,541)

Other Comprehensive Loss:

 

  

 

  

 

  

Net unrealized gain on derivatives

 

 

 

1,379

Reclassification adjustment of derivatives and designated hedges into net income

 

(890)

 

(887)

 

(4,302)

Retirement liability adjustment

 

123

 

153

 

85

Total

 

(767)

 

(734)

 

(2,838)

Comprehensive Income

 

118,192

 

321,841

 

340,964

Comprehensive Income Attributable to Noncontrolling Interests

 

(6,810)

 

(7,140)

 

(17,742)

Comprehensive Income Adjusted for Noncontrolling Interests

$

111,382

$

314,701

$

323,222

See Notes to Consolidated Financial Statements.

6


WEINGARTEN REALTY INVESTORS

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

    

December 31, 

2020

2019

ASSETS

  

  

Property

$

4,246,334

$

4,145,249

Accumulated Depreciation

(1,161,970)

(1,110,675)

Property, net *

3,084,364

3,034,574

Investment in Real Estate Joint Ventures and Partnerships, net

369,038

427,947

Total

3,453,402

3,462,521

Unamortized Lease Costs, net

174,152

148,479

Accrued Rent, Accrued Contract Receivables and Accounts Receivable, net *

81,016

83,639

Cash and Cash Equivalents *

35,418

41,481

Restricted Deposits and Escrows

12,338

13,810

Other, net

205,074

188,004

Total Assets

$

3,961,400

$

3,937,934

LIABILITIES AND EQUITY

 

  

 

  

Debt, net *

$

1,838,419

$

1,732,338

Accounts Payable and Accrued Expenses

104,990

111,666

Other, net

217,489

217,770

Total Liabilities

2,160,898

2,061,774

Commitments and Contingencies (see Note 17)

Equity:

  

  

Shareholders' Equity:

  

  

Common Shares of Beneficial Interest - par value, $.03 per share; shares authorized: 275,000; shares issued and outstanding:127,313 in 2020 and 128,702 in 2019

3,866

3,905

Additional Paid-In Capital

1,755,770

1,779,986

Net Income Less Than Accumulated Dividends

(128,813)

(74,293)

Accumulated Other Comprehensive Loss

(12,050)

(11,283)

Total Shareholders' Equity

1,618,773

1,698,315

Noncontrolling Interests

181,729

177,845

Total Equity

1,800,502

1,876,160

Total Liabilities and Equity

$

3,961,400

$

3,937,934

* Consolidated variable interest entities' assets and debt included in the above balances (see Note 18):

 

  

 

  

Property, net

$

193,271

$

196,636

Accrued Rent, Accrued Contract Receivables and Accounts Receivable, net

9,489

10,548

Cash and Cash Equivalents

10,089

8,135

Debt, net

44,177

44,993

See Notes to Consolidated Financial Statements.

7


WEINGARTEN REALTY INVESTORS

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Year Ended December 31, 

    

2020

    

2019

    

2018

Cash Flows from Operating Activities:

  

  

  

Net Income

$

118,959

$

322,575

$

345,343

Adjustments to reconcile net income to net cash provided by operating activities:

 

  

 

  

 

  

Depreciation and amortization

 

149,930

 

135,674

 

161,838

Amortization of debt deferred costs and intangibles, net

 

2,752

 

3,194

 

3,146

Non-cash lease expense

 

1,242

 

1,241

 

Impairment loss

 

24,153

 

74

 

10,120

Equity in earnings of real estate joint ventures and partnerships, net

 

(39,206)

 

(20,769)

 

(25,070)

Gain on sale of property

 

(65,402)

 

(189,914)

 

(207,865)

Distributions of income from real estate joint ventures and partnerships

 

29,803

 

20,083

 

19,605

Changes in accrued rent, accrued contract receivables and accounts receivable, net

 

1,154

 

10,001

 

(2,807)

Changes in unamortized lease costs and other assets, net

 

(8,024)

 

(14,298)

 

(8,632)

Changes in accounts payable, accrued expenses and other liabilities, net

 

5,744

 

(975)

 

(2,315)

Other, net

 

3,122

 

3,164

 

(7,403)

Net cash provided by operating activities

 

224,227

 

270,050

 

285,960

Cash Flows from Investing Activities:

 

  

 

  

 

  

Acquisition of real estate and land, net

 

(42,209)

 

(218,849)

 

(1,265)

Development and capital improvements

 

(137,059)

 

(183,188)

 

(155,528)

Proceeds from sale of property and real estate equity investments, net

 

119,442

 

445,319

 

607,486

Real estate joint ventures and partnerships - Investments

 

(8,671)

 

(74,602)

 

(38,096)

Real estate joint ventures and partnerships - Distribution of capital

 

22,228

 

2,482

 

6,936

Proceeds from investments

 

 

10,375

 

1,500

Other, net

 

(114)

 

2,437

 

11,921

Net cash (used in) provided by investing activities

 

(46,383)

 

(16,026)

 

432,954

Cash Flows from Financing Activities:

 

  

 

  

 

  

Proceeds from issuance of debt

 

 

 

638

Principal payments of debt

 

(22,977)

 

(55,556)

 

(257,028)

Changes in unsecured credit facilities

 

40,000

 

(5,000)

 

5,000

Proceeds from issuance of common shares of beneficial interest, net

 

212

 

1,098

 

6,760

Repurchase of common shares of beneficial interest, net

 

(32,107)

 

 

(18,564)

Common share dividends paid

 

(165,958)

 

(203,297)

 

(382,464)

Debt issuance and extinguishment costs paid

 

(6)

 

(3,271)

 

(1,271)

Distributions to noncontrolling interests

 

(4,076)

 

(6,782)

 

(19,155)

Contributions from noncontrolling interests

 

1,150

 

326

 

1,465

Other, net

 

(1,617)

 

(2,388)

 

508

Net cash used in financing activities

 

(185,379)

 

(274,870)

 

(664,111)

Net (decrease) increase in cash, cash equivalents and restricted cash equivalents

 

(7,535)

 

(20,846)

 

54,803

Cash, cash equivalents and restricted cash equivalents at January 1

 

55,291

 

76,137

 

21,334

Cash, cash equivalents and restricted cash equivalents at December 31

$

47,756

$

55,291

$

76,137

Supplemental disclosure of cash flow information:

 

  

 

  

 

  

Cash paid for interest (net of amount capitalized of $8,184, $13,586 and $7,938, respectively)

$

58,744

$

55,413

$

65,507

Cash paid for income taxes

$

793

$

1,526

$

1,545

Cash paid for amounts included in operating lease liabilities

$

2,678

$

2,785

$

See Notes to Consolidated Financial Statements.

8


WEINGARTEN REALTY INVESTORS

CONSOLIDATED STATEMENTS OF EQUITY

(In thousands)

Year Ended December 31, 2020, 2019 and 2018

    

Common

    

    

Net Income

    

Accumulated

    

    

 Shares of

Additional

 Less Than

 Other

 Beneficial

 Paid-In

 Accumulated

 Comprehensive

Noncontrolling

 Interest

 Capital

 Dividends

 Loss

 Interests

Total

Balance, January 1, 2018

$

3,897

$

1,772,066

$

(137,065)

$

(6,170)

$

177,114

$

1,809,842

Net income

 

 

 

327,601

 

  

 

17,742

 

345,343

Shares repurchased and cancelled

(20)

 

(18,544)

 

 

  

 

  

(18,564)

Shares issued under benefit plans, net

 

16

 

13,471

 

 

  

 

  

 

13,487

Cumulative effect adjustment of new accounting standards

 

 

 

5,497

 

(1,541)

 

  

 

3,956

Dividends paid – common shares ($2.98 per share)

 

 

 

(382,464)

 

  

 

  

 

(382,464)

Distributions to noncontrolling interests

 

 

 

  

 

  

 

(19,155)

 

(19,155)

Contributions from noncontrolling interests

 

 

  

 

  

 

1,465

 

1,465

Other comprehensive loss

 

 

  

 

(2,838)

 

  

 

(2,838)

Other, net

 

 

  

 

  

 

(373)

 

(373)

Balance, December 31, 2018

3,893

 

1,766,993

 

(186,431)

 

(10,549)

 

176,793

 

1,750,699

Net income

 

 

315,435

 

  

 

7,140

 

322,575

Shares issued under benefit plans, net

 

12

 

11,046

 

 

  

 

  

 

11,058

Dividends paid – common shares ($1.58 per share)

 

 

 

(203,297)

 

  

 

  

 

(203,297)

Distributions to noncontrolling interests

 

 

  

 

  

 

(6,782)

 

(6,782)

Contributions from noncontrolling interests

 

 

  

 

  

 

326

 

326

Other comprehensive loss

 

 

 

  

 

(734)

 

  

 

(734)

Other, net

 

 

1,947

 

  

 

368

 

2,315

Balance, December 31, 2019

3,905

 

1,779,986

 

(74,293)

 

(11,283)

 

177,845

 

1,876,160

Net income

 

112,149

  

6,810

 

118,959

Shares repurchased and cancelled

(50)

(32,057)

(32,107)

Shares issued under benefit plans, net

 

11

7,841

  

  

 

7,852

Cumulative effect adjustment of new accounting standards

(711)

(711)

Dividends paid – common shares ($1.30 per share)

 

(165,958)

  

  

 

(165,958)

Distributions to noncontrolling interests

 

(4,076)

 

(4,076)

Contributions from noncontrolling interests

 

  

  

1,150

 

1,150

Other comprehensive loss

 

  

(767)

 

(767)

Balance, December 31, 2020

$

3,866

$

1,755,770

$

(128,813)

$

(12,050)

$

181,729

$

1,800,502

See Notes to Consolidated Financial Statements.

9


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.     Summary of Significant Accounting Policies

Business

Weingarten Realty Investors is a REIT organized under the Texas Business Organizations Code. We currently operate, and intend to operate in the future, as a REIT.

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 neighborhood and community shopping centers, totaling approximately 30.2 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 2020. Total revenues generated by our centers located in Houston and its surrounding areas was 20.6% of total revenue for the year ended December 31, 2020, and an additional 9.8% of total revenue was generated in 2020 from centers that are located in other parts of Texas. Also, in Florida and California, an additional 20.4% and 16.4%, respectively, of total revenue was generated in 2020.

In March 2020, the World Health Organization declared the novel coronavirus (“COVID-19”) a pandemic. The impact of COVID-19 continues to evolve and most cities and states have imposed measures to control its spread including social distancing and limiting group gatherings. These measures have created risks and uncertainties surrounding our operations and geographic concentrations. The pandemic resulted in, at certain locations, the closure or limited operations of non-essential businesses and consumer/employee stay-at-home provisions. Given this continually evolving situation, the duration and severity of these matters and their ultimate effect are uncertain at this time.

Basis of Presentation

Our consolidated financial statements include the accounts of our subsidiaries, certain real estate joint ventures or partnerships and VIEs which meet the guidelines for consolidation. All intercompany balances and transactions have been eliminated.

Our financial statements are prepared in accordance with GAAP. Such statements require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. We have evaluated subsequent events for recognition or disclosure in our consolidated financial statements.

Leases

As part of our operations, we are primarily a lessor of commercial retail space. In certain instances, we are also a lessee, primarily of ground leases associated with our operations. Our contracts are reviewed to determine if they qualify, under the GAAP definition, as a lease. A contract is determined to be a lease when the right to obtain substantially all of the economic benefits and to direct the use of an identified asset is transferred to a customer over a defined period of time for consideration. During this review, we evaluate among other items, asset specification, substitution rights, purchase options, operating rights and control over the asset during the contract period.

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We have elected accounting policy practical expedients, both as a lessor and a lessee, to not separate any nonlease components (primarily common area maintenance) within a lease contract for all classes of underlying assets (primarily real estate assets). As a lessor, we have further determined that this policy will be effective only on a lease that has been classified as an operating lease and the revenue recognition pattern and timing is the same for both types of components. We have determined to account for both the lease and nonlease components as a single component when the lease component is the predominate component of a contract. Therefore, Accounting Standards Codification ("ASC") No. 842, “Leases” will be applied to these lease contracts for both types of components. Additionally, for lessee leases, we have also elected not to apply the overall balance sheet recognition requirements to short-term leases that are less than 12 months from the lease commencement date.

Significant judgments and assumptions are inherent in not only determining if a contract contains a lease but also the lease classification, terms, payments, and, if needed, discount rates. Judgments include the nature of any options with the determination if they will be exercised, evaluation of implicit discount rates, assessment and consideration of “fixed” payments for straight-line rent revenue calculations and the evaluation of asset identification and substitution rights.

The determination of the discount rate used in a lease is the incremental borrowing rate of the lease contract. For lessee leases, this rate is often not readily determinable as the lessor’s initial direct costs and expected residual value are at the end of the lease term and are unknown. Therefore, as the lessee, our incremental borrowing rate will be used. Selected discount rates will reflect rates that we would have to pay to borrow on a fully collateralized basis over a term similar to the lease. Additionally, we will obtain lender quotes with similar terms and if not available, we consider the asset type, risk free rates and financing spreads to account for creditworthiness and collateral.

Our lessor leases are principally related to our shopping centers. We believe risk of an inadequate residual value of the leased asset upon the termination of these leases is low due to our ability to re-lease the space, the long-lived nature of our real estate assets and the propensity of real estate assets to hold their value over a long period of time.

In April 2020, the Financial Accounting Standards Board ("FASB") published a Staff Q&A regarding Accounting for Lease Concessions Related to the Effects of the COVID-19 pandemic. As the pandemic is expected to result in numerous tenant rent and lease concessions, the intent of the publication was to provide relief to lessors in assessing whether a lease modification exists. The FASB publication provides for an election to bypass the lease-by-lease analysis and account for lease concessions, directly related to the effects of the COVID-19 pandemic, consistent with how those concessions would be accounted for as though enforceable rights and obligations for those concessions existed in the original contract. Accordingly, an entity would not have to analyze each contract to determine whether those rights exist in the contract and can elect to apply or not apply lease modification guidance to those contracts. Such election is required to be applied consistently to leases with similar characteristics and circumstances. This election is available for COVID-19 related concessions that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee and the total payments required by the modified lease are substantially the same as or less than total payments required by the original lease. As of April 1, 2020, we elected to not apply lease modification guidance to those contracts. As such, any lease deferral concessions will remain recorded in Accrued Rent, Accrued Contract Receivables and Accounts Receivable, net, and rent abatements will be recorded as a reduction to Rentals, net in our consolidated financial statements. Subject to this guidance, as of December 31, 2020, included in Accrued Rent, Accrued Contract Receivables and Accounts Receivable, net we have deferred lease concessions not currently due of $9.6 million and have recorded rent abatements of $3.2 million (see Note 9 for additional information). Discussions are continuing with tenants as the effects of COVID-19 and related mandates evolve.

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Revenue Recognition

At the inception of a revenue producing contract, we determine if a contract qualifies as a lease and if not, then as a customer contract. Additionally, we exclude all taxes assessed by a governmental authority that is collected by us from Revenue. Based on this determination, the appropriate GAAP is applied to the contract, including its revenue recognition.

Rentals, net

Rental revenue is primarily derived from operating leases and, therefore, is generally recognized on a straight-line basis over the term of the lease, which typically begins the date the tenant takes control of the space. Variable rental revenue consists primarily of tenant reimbursements of taxes, maintenance expenses and insurance, is subject to our interpretation of lease provisions and is recognized over the term of a lease as services are provided. Additionally, variable rental revenue based on a percentage of tenants’ sales is recognized only after the tenant exceeds its sales breakpoint. In circumstances where we provide a tenant improvement allowance for improvements that are owned by the tenant, we recognize the allowance as a reduction of rental revenue on a straight-line basis over the term of the lease. Further, at the lease commencement date and on an ongoing basis, we consider the collectability of a lease when determining revenue to be recognized. Prior to the adoption of ASC No. 842, rental revenues were recognized under ASC No. 840, “Leases.”

Other

Other revenue consists of both customer contract revenue and income from contractual agreements with third parties or real estate joint ventures or partnerships, which do not meet the definition of a lease or a customer contract. Revenues which do not meet the definition of a lease or customer contract are recognized as the related services are performed under the applicable agreement.

We have identified primarily three types of customer contract revenue: (1) management contracts with real estate joint ventures or partnerships or third parties, (2) licensing and occupancy agreements and (3) certain non-tenant contracts. At contract inception, we assess the services provided in these contracts and identify any performance obligations that are distinct. To identify the performance obligation, we consider all services, whether explicitly stated or implied by customary business practices. We have identified the following substantive services, which may or may not be included in each contract type, that represent performance obligations:

Contract Type

    

Performance Obligation Description

    

Elements of Performance Obligations

    

Payment Timing

Management Agreements

  Management and asset management services

  Construction and development services

  Marketing services

  Over time

  Right to invoice

  Long-term contracts

Typically monthly or quarterly

  Leasing and legal preparation services

  Sales commissions

  Point in time

  Long-term contracts

Licensing and Occupancy Agreements

  Rent of non-specific space

  Over time

  Right to invoice

  Short-term contracts

Typically monthly

  Set-up services

  Point in time

  Right to invoice

Non-tenant Contracts

  Placement of miscellaneous items at our centers that do not qualify as a lease, i.e. advertisements, trash bins, etc.

  Point in time

  Long-term contracts

Typically monthly

  Set-up services

  Point in time

  Right to invoice

12


We also assess collectability of the customer contract revenue prior to recognition. None of these customer contracts include a significant financing component.

Property

Real estate assets are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method, generally over estimated useful lives of 18-40 years for buildings and 10-20 years for parking lot surfacing and equipment. Major replacements where the betterment extends the useful life of the asset are capitalized, and the replaced asset and corresponding accumulated depreciation are removed from the accounts. All other maintenance and repair items are charged to expense as incurred.

Acquisitions of properties are accounted for utilizing the acquisition of a nonfinancial asset method and, accordingly, the results of operations of an acquired property are included in our results of operations from the date of acquisition. Estimates of fair values are based upon estimated future cash flows and other valuation techniques. Fair values are used to allocate and record the purchase price of acquired property among land, buildings on an “as if vacant” basis, tenant improvements, other identifiable intangibles and any goodwill or gain on purchase. Other identifiable intangible assets and liabilities include the effect of out-of-market leases, the value of having leases in place (“as is” versus “as if vacant” and absorption costs), out-of-market assumed mortgages and tenant relationships. Depreciation and amortization is computed using the straight-line method, generally over estimated useful lives of 40 years for buildings and over the lease term for other identifiable intangible assets. Costs associated with the successful acquisition of an asset are capitalized as incurred.

Property also includes costs incurred in the development and redevelopment of operating properties. These properties are carried at cost, and no depreciation is recorded on these assets until rent commences or no later than one year from the completion of major construction. These costs include preacquisition costs directly identifiable with the specific project, development and construction costs, interest, insurance and real estate taxes. Indirect development costs, including salaries and benefits, travel and other related costs that are directly attributable to the development of the property, are also capitalized. The capitalization of such costs ceases at the earlier of one year from the completion of major construction or when the property, or any completed portion, becomes available for occupancy.

Also included in property is costs for tenant improvements paid by us, including reimbursements to tenants for improvements that are owned by us and will remain our property after the lease expires.

Property identified for sale is reviewed to determine if it qualifies as held for sale based on the following criteria: management has approved and is committed to the disposal plan, the assets are available for immediate sale, an active plan is in place to locate a buyer, the sale is probable and expected to qualify as a completed sale within a year, the sales price is reasonable in relation to the current fair value, and it is unlikely that significant changes will be made to the sales plan or that the sales plan will be withdrawn. Upon qualification, these properties are segregated and classified as held for sale at the lower of cost or fair value less costs to sell. Also for disposal transactions, the presence of a significant financing component is considered and evaluated, if necessary. We have adopted the practical expedient in which the promised amount of consideration is not adjusted for the effects of a significant financing component when we expect, at contract inception, that the period between the sale and payment will be one year or less. Our individual property disposals do not qualify for discontinued operations presentation; thus, the results of operations through the disposal date and any associated gains are included in income from continuing operations.

Some of our properties are held in single purpose entities. A single purpose entity is a legal entity typically established at the request of a lender solely for the purpose of owning a property or group of properties subject to a mortgage. There may be restrictions limiting the entity’s ability to engage in an activity other than owning or operating the property, assuming or guaranteeing the debt of any other entity, or dissolving itself or declaring bankruptcy before the debt has been repaid. Most of our single purpose entities are 100% owned by us and are consolidated in our consolidated financial statements.

13


Real Estate Joint Ventures and Partnerships

To determine the method of accounting for real estate joint ventures and partnerships, management determines whether an entity is a VIE and, if so, determines which party is the primary beneficiary by analyzing whether we have both the power to direct the entity’s significant economic activities and the obligation to absorb potentially significant losses or receive potentially significant benefits. Significant judgments and assumptions inherent in this analysis include the design of the entity structure, the nature of the entity’s operations, future cash flow projections, the entity’s financing and capital structure, and contractual relationships and terms. We consolidate a VIE when we have determined that we are the primary beneficiary.

Primary risks associated with our involvement with our VIEs include the potential funding of the entities’ debt obligations or making additional contributions to fund the entities’ operations or capital activities.

Non-variable interest real estate joint ventures and partnerships over which we have a controlling financial interest are consolidated in our consolidated financial statements. In determining if we have a controlling financial interest, we consider factors such as ownership interest, authority to make decisions, kick-out rights and substantive participating rights. Real estate joint ventures and partnerships where we do not have a controlling financial interest, but have the ability to exercise significant influence, are accounted for using the equity method.

Management continually analyzes and assesses reconsideration events, including changes in the factors mentioned above, to determine if the consolidation or equity method treatment remains appropriate.

Unamortized Lease Costs, net

Lease costs represent the initial direct costs incurred in origination, negotiation and processing of a lease agreement. Upon the adoption of ASC No. 842, such costs include outside broker commissions and other independent third party costs, as well as internal leasing commissions paid directly related to completing a lease and are amortized over the life of the lease on a straight-line basis. Prior to the adoption of ASC No. 842, such costs included outside broker commissions and other independent third party costs, as well as salaries and benefits, travel and other internal costs directly related to completing a lease and are amortized over the life of the lease on a straight-line basis. Costs related to salaries and benefits, supervision, administration, unsuccessful origination efforts and other activities are charged to expense as incurred. Also included are in place lease costs which are amortized over the life of the applicable lease term on a straight-line basis.

Accrued Rent, Accrued Contract Receivables and Accounts Receivable, net

Receivables are relatively short-term in nature with terms due in less than one year. Receivables include rental revenue, amounts billed and currently due from customer contracts and receivables attributable to straight-line rental commitments. Accrued contract receivables includes amounts due from customers for contracts that do not qualify as a lease in which we earned the right to the consideration through the satisfaction of the performance obligation, but before the customer pays consideration or before payment is due. Individual leases are assessed for collectability and upon the determination that the collection of rents is not probable, accrued rent and accounts receivables are reduced as an adjustment to rental revenues. Revenue from leases where collection is deemed to be less than probable is recorded on a cash basis until collectability is determined to be probable. Further, we assess whether operating lease receivables, at a portfolio level, are appropriately valued based upon an analysis of balances outstanding, historical bad debt levels and current economic trends. An allowance for the uncollectible portion of the portfolio is recorded as an adjustment to rental revenues. Management’s estimate of the collectability of accrued rents and accounts receivable is based on the best information available to management at the time of evaluation.

Prior to the adoption of ASC No. 842, an allowance for the uncollectible portion of accrued rents and accounts receivable was determined based upon an analysis of balances outstanding, historical bad debt levels, tenant creditworthiness and current economic trends. At December 31, 2018, we had an allowance for doubtful accounts totaling $6.9 million (which included charges to bad debt of $2.4 million and deductions of $3.0 million for the year ended December 31, 2018) that was re-characterized upon the adoption of ASC No. 842 as of January 1, 2019, to be appropriately reflected as reductions in Revenues for uncollectible amounts.

14


The duration of the COVID-19 pandemic and its impact on our tenants’ operations, including, in some cases, their ability to resume full operations as governmental and legislative measures are eased, or in some cases reimposed, has caused uncertainty in our ongoing ability to collect rents when due. Considering the potential impact of these uncertainties, our collection assessment also took into consideration the type of tenant and current discussions with the tenants, as well as recent rent collection experience and tenant bankruptcies based on the best information available to management at the time of evaluation. For the year ended December 31, 2020, we reduced rental revenues by $36.1 million due to lease related reserves and write-offs, which included $15.0 million for straight-line rent receivables.

Cash and Cash Equivalents

All highly liquid investments with original maturities of three months or less are considered cash equivalents. Cash and cash equivalents are primarily held at major financial institutions in the U.S. We had cash and cash equivalents in certain financial institutions in excess of federally insured levels. We have diversified our cash and cash equivalents amongst several banking institutions in an attempt to minimize exposure to any one of these entities. We believe we are not exposed to any significant credit risk and regularly monitor the financial stability of these financial institutions.

Restricted Deposits and Escrows

Restricted deposits are held or restricted for a specific use or in a qualified escrow account for the purposes of completing like-kind exchange transactions. Escrows consist of deposits held by third parties or lenders for a specific use; including, capital improvements, rental income and taxes.

Our restricted deposits and escrows consist of the following (in thousands):

    

December 31, 

2020

2019

Restricted deposits

$

12,122

$

12,793

Escrows

216

1,017

Total

$

12,338

$

13,810

Other Assets, net

Other assets include an asset related to the debt service guaranty (see Note 6 for further information), tax increment revenue bonds, right-of-use assets, investments held in a grantor trust, deferred tax assets (see Income Taxes), the net value of above-market leases, deferred debt costs associated with our revolving credit facilities and other miscellaneous receivables. Right-of-use assets are amortized to achieve the recognition of rent expense on a straight-line basis after adjusting for the corresponding lease liabilities’ interest over the lives of the leases. Investments held in a grantor trust are adjusted to fair value at each period with changes included in our Consolidated Statements of Operations. Above-market leases are amortized as adjustments to rental revenues over terms of the acquired leases. Deferred debt costs, including those classified in debt, are amortized primarily on a straight-line basis, which approximates the effective interest rate method, over the terms of the debt. Other miscellaneous receivables are evaluated for credit risk and an allowance is established if there is an estimate for lifetime credit losses. These are based on available information, including historical loss information adjusted for current conditions and forecasts for future economic conditions. Prior to adoption of ASC No. 326, a reserve was applied to the carrying amount of other miscellaneous receivables when it becomes apparent that conditions existed that would lead to our inability to fully collect the outstanding amounts due. Such conditions include delinquent or late payments on receivables, deterioration in the ongoing relationship with the borrower and other relevant factors.

15


Our tax increment revenue bonds have been classified as held to maturity and are recorded at amortized cost offset by a recognized credit loss (see Note 19 for further information). Due to the recognized credit loss, interest on these bonds is recorded at an effective interest rate when cash payments are received. The bonds are evaluated for credit losses based on discounted estimated future cash flows. Any future receipts in excess of the amortized basis will be recognized as revenue when received. The credit risk associated with the amortized value of these bonds is low as the bonds are earmarked for repayments from sales and property taxes associated with a government entity. At December 31, 2020, no credit allowance has been recorded.

Other Liabilities, net

Other liabilities include non-qualified benefit plan liabilities (see Retirement Benefit Plans and Deferred Compensation Plan), lease liabilities and the net value of below-market leases. Lease liabilities are amortized to rent expense using the effective interest rate method, over the lease life. Below-market leases are amortized as adjustments to rental revenues over terms of the acquired leases.

Sales of Real Estate

Sales of real estate include the sale of tracts of land, property adjacent to shopping centers, operating properties, newly developed properties, investments in real estate joint ventures and partnerships and partial sales of real estate joint ventures and partnerships in which we participate.

These sales primarily fall under two types of contracts (1) sales of nonfinancial assets (primarily real estate) and (2) sales of investments in real estate joint ventures and partnerships of substantially nonfinancial assets. We review the sale contract to determine appropriate accounting guidance. Profits on sales of real estate are primarily not recognized until (a) a contract exists including: each party’s rights are identifiable along with the payment terms, the contract has commercial substance and the collection of consideration is probable; and (b) the performance obligation to transfer control of the asset has occurred; including transfer to the buyer of the usual risks and rewards of ownership.

We recognize gains on the sale of real estate to joint ventures and partnerships in which we participate to the extent we receive consideration from the joint venture or partnership, if it meets the sales criteria in accordance with GAAP.

Impairment

Our property, including right-of-use assets, is reviewed for impairment if events or changes in circumstances indicate that the carrying amount of the property, any capitalized costs and any identifiable intangible assets, may not be recoverable.

If such an event occurs, a comparison is made of the current and projected operating cash flows of each such property into the foreseeable future, with consideration of applicable holding periods, on an undiscounted basis to the carrying amount of such property. If we determine the carrying amount is not recoverable, our basis in the property is reduced to its estimated fair value to reflect impairment in the value of the asset. Fair values are determined by management utilizing cash flow models, market capitalization rates and market discount rates, or by obtaining third-party broker or appraisal estimates.

We review economic considerations at each reporting period, including the effects of tenant bankruptcies, the suspension of tenant expansion plans for new development projects, declines in real estate values, and any changes to plans related to our new development properties including land held for development, to identify properties where we believe market values may be deteriorating. Determining whether a property is impaired and, if impaired, the amount of write-down to fair value requires a significant amount of judgment by management and is based on the best information available to management at the time of evaluation. If market conditions deteriorate or management’s plans for certain properties change, additional write-downs could be required in the future.

16


Our investment in real estate joint ventures and partnerships is reviewed for impairment each reporting period. We evaluate various factors, including operating results of the investee, our ability and intent to hold the investment and our views on current market and economic conditions, when determining if there is a decline in the investment value. We will record an impairment charge if we determine that a decline in the estimated fair value of an investment below its carrying amount is other than temporary. The ultimate realization is dependent on a number of factors, including the performance of each investment and market conditions. There is no certainty that impairments will not occur in the future if market conditions decline or if management’s plans for these investments change.

See Note 10 for additional information regarding impairments.

Income Taxes

We have elected to be treated as a REIT under the Internal Revenue Code of 1986, as amended. As a REIT, we generally will not be subject to corporate level federal income tax on taxable income we distribute to our shareholders. To be taxed as a REIT, we must meet a number of requirements including defined percentage tests concerning the amount of our assets and revenues that come from, or are attributable to, real estate operations. As long as we distribute at least 90% of the taxable income of the REIT (without regard to capital gains or the dividends paid deduction) to our shareholders as dividends, we will not be taxed on the portion of our income we distribute as dividends unless we have ineligible transactions.

The Tax Relief Extension Act of 1999 gave REITs the ability to conduct activities which a REIT was previously precluded from doing as long as such activities are performed in entities which have elected to be treated as taxable REIT subsidiaries under the IRS code. These activities include buying or developing properties with the express purpose of selling them. We conduct certain of these activities in a taxable REIT subsidiary that we have created. We calculate and record income taxes in our consolidated financial statements based on the activities in this entity. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between our carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss and tax credit carry-forwards. These are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance for deferred tax assets is established for those assets when we do not consider the realization of such assets to be more likely than not.

On March 27, 2020, the President signed the Coronavirus Aid, Relief and Economic Security (“CARES”) Act into law. The enacted CARES Act tax provisions include, but are not limited to, changes to the NOL deduction, the business interest expense limitation and depreciation. Management’s evaluation of deferred taxes and the associated valuation allowance includes the impact of the CARES Act.

Additionally, GAAP prescribes a recognition threshold and measurement attribute for the financial statement recognition of a tax position taken, or expected to be taken, in a tax return. A tax position may only be recognized in the consolidated financial statements if it is more likely than not that the tax position will be sustained upon examination. We believe it is more likely than not that our tax positions will be sustained in any tax examinations.

In addition, we are subject to the State of Texas business tax (“Texas Franchise Tax”), which is determined by applying a tax rate to a base that considers both revenues and expenses. Therefore, the Texas Franchise Tax is considered an income tax and is accounted for accordingly.

17


Share-Based Compensation

We have both share options and share awards outstanding. Since 2012, our employee long-term incentive program under our Amended and Restated 2010 Long-Term Incentive Plan grants only awards that incorporate both service-based and market-based measures for share awards to promote share ownership among the participants and to emphasize the importance of total shareholder return. The terms of each grant vary depending upon the participant’s responsibilities and position within the Company. All awards are recorded at fair value on the date of grant and earn dividends throughout the vesting period; however, the dividends are subject to the same vesting terms as the award. Compensation expense is measured at the grant date and recognized over the vesting period. All share awards are awarded subject to the participant’s continued employment with us.

The share awards are subject to a three-year cliff vesting basis. Service-based and market-based share awards are subject to the achievement of select performance goals as follows:

Service-based awards and accumulated dividends typically vest three years from the grant date. These grants are subject only to continued employment and not dependent on future performance measures. Accordingly, if such vesting criteria are not met, compensation cost previously recognized would be reversed.
Market-based awards vest based upon the performance metrics at the end of a three-year period. These awards are based 50% on our three-year relative total shareholder return (“TSR”) as compared to the FTSE NAREIT U.S. Shopping Center Index. The other 50% is tied to our three-year absolute TSR, which is currently compared to a 6% hurdle. At the end of a three-year period, the performance measures are analyzed; the actual number of shares earned is determined; and the earned shares and the accumulated dividends vest. The probability of meeting the market criteria is considered when calculating the estimated fair value on the date of grant using a Monte Carlo simulation. These awards are accounted for as awards with market criteria, with compensation cost recognized over the service period, regardless of whether the market criteria are achieved and the awards are ultimately earned and vest.

Restricted shares granted to trust managers and share awards granted to retirement eligible employees are expensed immediately. Restricted shares and share awards have the same rights of a common shareholder, including the right to vote and receive dividends, except as otherwise provided by our Management Development and Executive Compensation Committee.

Options generally expire upon the earlier of termination of employment or 10 years from the date of grant, and all restricted shares are granted at no purchase price. Our policy is to recognize compensation expense for equity awards ratably over the vesting period, except for retirement eligible amounts.

Retirement Benefit Plans

Defined Benefit Plan:

We sponsor a noncontributory cash balance retirement plan (“Retirement Plan”) under which an account is maintained for each participant. Annual additions to each participant’s account include a service credit ranging from 3%-5% of compensation, depending on years of service, and an interest credit of 4.5%. Vesting generally occurs after three years of service.

18


Investments of Plan Assets

Our investment policy for our plan assets has been to determine the objectives for structuring a retirement savings program suitable to the long-term needs and risk tolerances of participants, to select appropriate investments to be offered by the plan and to establish procedures for monitoring and evaluating the performance of the investments of the plan. Our overall plan objectives for selecting and monitoring investment options are to promote and optimize retirement wealth accumulation; to provide a full range of asset classes and investment options that are intended to help diversify the portfolio to maximize return within reasonable and prudent levels of risk; to control costs of administering the plan; and to manage the investments held by the plan.

The selection of investment options is determined using criteria based on the following characteristics: fund history, relative performance, investment style, portfolio structure, manager tenure, minimum assets, expenses and operation considerations. Investment options selected for use in the plan are reviewed at least on a semi-annual basis to evaluate material changes from the selection criteria. Asset allocation is used to determine how the investment portfolio should be split between stocks, bonds and cash. The asset allocation decision is influenced by investment time horizon; risk tolerance; and investment return objectives. The primary factor in establishing asset allocation is demographics of the plan, including attained age and future service. A broad market diversification model is used in considering all these factors, and the percentage allocation to each investment category may also vary depending upon market conditions. Re-balancing of the allocation of plan assets occurs semi-annually.

Defined Contribution Plans:

We have two separate and independent nonqualified supplemental retirement plans (“SRP”) for certain employees that are classified as defined contribution plans. These unfunded plans provide benefits in excess of the statutory limits of our noncontributory cash balance retirement plan. For active participants, annual additions to each participant’s account include an actuarially-determined service credit ranging from 3% to 5% and an interest credit of 4.5%. Vesting generally occurs between five and 10 years of service. We have elected to use the actuarial present value of the vested benefits to which the participant was entitled if the participant separated immediately from the SRP, as permitted by GAAP.

The SRP participants’ account balances prior to 2012 no longer receive service credits but continue to receive a 7.5% interest credit for active participants. All inactive participants receive a December 31, 90-day LIBOR rate plus .50% interest credit.

We have a Savings and Investment Plan pursuant to which eligible employees may elect to contribute from 1% of their salaries to the maximum amount established annually by the IRS. Employee contributions are matched by us at the rate of 50% for the first 6% of the employee’s salary. The employees vest in the employer contributions ratably over a five-year period.

Deferred Compensation Plan

We have a deferred compensation plan for eligible employees allowing them to defer portions of their current cash salary or share-based compensation. Deferred amounts are deposited in a grantor trust, which are included in Other, net Assets, and are reported as compensation expense in the year service is rendered. Cash deferrals are invested based on the employee’s investment selections from a mix of assets selected using a broad market diversification model. Deferred share-based compensation cannot be diversified, and distributions from this plan are made in the same form as the original deferral.

19


Fair Value Measurements

Certain financial instruments, estimates and transactions are required to be calculated, reported and/or recorded at fair value. The estimated fair values of such financial items, including debt instruments, impaired assets, acquisitions and investment securities, have been determined using a market-based measurement. This measurement is determined based on the assumptions that management believes market participants would use in pricing an asset or liability; including, market capitalization rates, discount rates, current operating results, local economics and other factors. As a basis for considering market participant assumptions in fair value measurements, GAAP establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, which is typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. The fair value of such financial instruments, estimates and transactions was determined using available market information and appropriate valuation methodologies as prescribed by GAAP.

Internally developed and third party fair value measurements, including the unobservable inputs, are evaluated by management with sufficient experience for reasonableness based on current market knowledge, trends and transactional experience in the real estate and capital markets. Our valuation policies and procedures are determined by our Accounting Group, which reports to the Chief Financial Officer and the results of significant impairment transactions are discussed with the Audit Committee on a quarterly basis.

Fair value estimates are based on limited available market information for similar transactions, including our tax increment revenue bonds and debt, and there can be no assurance that the disclosed value of any financial instrument could be realized by immediate settlement of the instrument. The following provides information about the methods used to estimate the fair value of our financial instruments, including their estimated fair values:

Cash Equivalents and Restricted Cash

Cash equivalents and restricted cash are valued based on publicly-quoted market prices for identical assets.

Investments and Deferred Compensation Plan Obligations

Investments in mutual funds held in a grantor trust and mutual funds are valued based on publicly-quoted market prices for identical assets. The deferred compensation plan obligations corresponds to the value of our investments held in a grantor trust.

20


Tax Increment Revenue Bonds

The fair value estimates of our held to maturity tax increment revenue bonds, which were issued by the Agency in connection with our investment in a development project in Sheridan, Colorado, are based on assumptions that management believes market participants would use in pricing, using widely accepted valuation techniques including discounted cash flow analysis based on the expected future sales tax revenues of the project. This analysis reflects the contractual terms of the bonds, including the period to maturity, and uses observable market-based inputs, such as market discount rates and unobservable market-based inputs, such as future growth and inflation rates.

Debt

The fair value of our debt may be based on quoted market prices for publicly-traded debt, on a third-party established benchmark for inactively traded debt and on the discounted estimated future cash payments to be made for non-traded debt. For inactively traded debt, our third-party provider establishes a benchmark for all REIT securities based on the largest, most liquid and most frequent investment grade securities in the REIT bond market. This benchmark is then adjusted to consider how a market participant would be compensated for risk premiums such as, longevity of maturity dates, lack of liquidity and credit quality of the issuer. The discount rates used approximate current lending rates for loans or groups of loans with similar maturities and credit quality, assumes the debt is outstanding through maturity and considers the debt’s collateral (if applicable). We have utilized market information as available or present value techniques to estimate the amounts required to be disclosed.

Reportable Segments

Our primary focus is to lease space to tenants in shopping centers that we own, lease or manage. We evaluate the performance of the reportable segments based on net operating income, defined as total revenues less operating expenses and real estate taxes. Management does not consider the effect of gains or losses from the sale of property or interests in real estate joint ventures and partnerships in evaluating segment operating performance.

No individual property constitutes more than 10% of our revenues or assets, and we have no operations outside of the United States of America. Therefore, our properties have been aggregated into one reportable segment since such properties and the tenants thereof each share similar economic and operating characteristics.

21


Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss by component consists of the following (in thousands):

    

    

    

Defined

    

Benefit

Pension

Gain

Gain on

Plan-

on

Cash Flow

Actuarial

Investments

Hedges

Loss

Total

Balance, January 1, 2018

$

(1,541)

$

(7,424)

$

15,135

$

6,170

Cumulative effect adjustment of accounting standards

 

1,541

 

 

 

1,541

Change excluding amounts reclassified from accumulated other comprehensive loss

 

 

(1,379)

 

1,143

 

(236)

Amounts reclassified from accumulated other comprehensive loss

 

 

4,302

(1)

 

(1,228)

(2)

 

3,074

Net other comprehensive loss (income)

 

 

2,923

 

(85)

 

2,838

Balance, December 31, 2018

 

 

(4,501)

 

15,050

 

10,549

Change excluding amounts reclassified from accumulated other comprehensive loss

 

 

 

1,044

 

1,044

Amounts reclassified from accumulated other comprehensive loss

 

 

887

(1)

 

(1,197)

(2)

 

(310)

Net other comprehensive loss (income)

 

 

887

 

(153)

 

734

Balance, December 31, 2019

 

 

(3,614)

 

14,897

 

11,283

Change excluding amounts reclassified from accumulated other comprehensive loss

 

 

 

898

 

898

Amounts reclassified from accumulated other comprehensive loss

 

 

890

(1)

 

(1,021)

(2)

 

(131)

Net other comprehensive loss (income)

 

 

890

 

(123)

 

767

Balance, December 31, 2020

$

$

(2,724)

$

14,774

$

12,050

(1) This reclassification component is included in interest expense.
(2) This reclassification component is included in the computation of net periodic benefit cost (see Note 15 for additional information).

Additionally, as of December 31, 2020 and 2019, the net gain balance in accumulated other comprehensive loss relating to previously terminated cash flow interest rate swap contracts was $2.7 million and $3.6 million, respectively, which will be reclassified to net interest expense as interest payments are made on the originally hedged debt. Within the next 12 months, approximately $.9 million in accumulated other comprehensive loss is expected to be reclassified as a reduction to interest expense related to our interest rate contracts.

Note 2.     Newly Issued Accounting Pronouncements

Adopted

In June 2016, the FASB issued Accounting Standard Update ("ASU") No. 2016-13, "Measurement of Credit Losses on Financial Instruments." This ASU was further updated by ASU No. 2018-19, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses," ASU No. 2019-04, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses," ASU No. 2019-05, "Targeted Transition Relief," ASU No. 2019-11, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses" and ASU No. 2020-02, “Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119.” These ASUs amend prior guidance on the impairment of financial instruments, and adds an impairment model that is based on expected losses rather than incurred losses with the recognition of an allowance based on an estimate of expected credit losses. The provisions of ASU No. 2016-13, as amended in subsequently issued amendments, were effective for us as of January 1, 2020.

22


In identifying all of our financial instruments covered under this guidance, the majority of our instruments result from operating leasing transactions, which are not within the scope of the new standard and are to remain governed by the recently issued leasing guidance and other previously issued guidance. Upon adoption at January 1, 2020, we recognized, using the modified retrospective approach, a cumulative effect for credit losses, which has decreased each of retained earnings and other assets by $.7 million. In addition, we evaluated controls around the implementation of this ASU and have concluded there will be no significant impact on our control structure.

In August 2018, the FASB issued ASU No. 2018-13, "Changes to the Disclosure Requirements for Fair Value Measurement." This ASU amends and removes several disclosure requirements including the valuation processes for Level 3 fair value measurements. The ASU also modifies some disclosure requirements and requires additional disclosures for changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements and requires the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The provisions of ASU No. 2018-13 were effective for us as of January 1, 2020 using a prospective transition method for amendments effecting changes in unrealized gains and losses, significant unobservable inputs used to develop Level 3 fair value measurements and narrative description on uncertainty of measurements. The remaining provisions of the ASU were not applicable to us. The adoption of this ASU did not have a material impact to our consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-14, "Changes to the Disclosure Requirements for Defined Benefit Plans." This ASU clarifies current disclosures and removes several disclosures requirements including accumulated other comprehensive income expected to be recognized over the next fiscal year and amount and timing of plan assets expected to be returned to the employer. The ASU also requires additional disclosures for the weighted-average interest crediting rates for cash balance plans and explanations for significant gains and losses related to changes in the benefit plan obligation. The provisions of ASU No. 2018-14 are effective for us as of December 31, 2020 using a retrospective basis for all periods presented. The adoption of this ASU did not have a material impact to our consolidated financial statements. See Note 15 for additional information.

In December 2019, the FASB issued ASU No. 2019-12, "Simplifying the Accounting for Income Taxes." This ASU clarifies/simplifies current disclosures and removes several disclosures requirements. Simplification includes franchise taxes based partially on income as an income-based tax; entities should reflect enacted tax law and rate changes in the interim period that includes the enactment date; and allowing entities to allocate consolidated tax amounts to individual legal entities under certain elections. The provisions of ASU No. 2019-12 are effective for us as of January 1, 2021; however, we early adopted the provisions as permitted at December 31, 2020. The adoption of this ASU did not have a material impact to our consolidated financial statements.

Not Yet Adopted

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848)”, as amended by ASU No. 2021-01. This ASU contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in this ASU is optional and may be elected over time as reference rate reform activities occur. At January 1, 2020, we elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The adoption of this portion of the ASU did not have a material impact to our consolidated financial statements. We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

23


In August 2020, the FASB issued ASU No. 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” The guidance in this ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. This simplification results by removing major separation models required under current GAAP. Additionally, it removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and simplifies the diluted earnings per share calculation. The provisions of ASU No. 2020-06 are effective for us as of January 1, 2022 using either a modified retrospective method or a fully retrospective method, and early adoption is permitted beginning for us as of January 1, 2021. Although we are still assessing the impact of this ASU's adoption, we do not believe this ASU will have a material impact to our consolidated financial statements.

Note 3.     Property

Our property consists of the following (in thousands):

    

December 31, 

    

2020

    

2019

Land

$

948,622

$

911,521

Land held for development

 

39,936

 

40,667

Land under development

 

19,830

 

53,076

Buildings and improvements

 

3,082,509

 

2,898,867

Construction in-progress

 

155,437

 

241,118

Total

$

4,246,334

$

4,145,249

During the year ended December 31, 2020, we sold seven centers and other property. Aggregate gross sales proceeds from these transactions approximated $194.2 million and generated gains of approximately $65.4 million, which includes the December 2020 transaction discussed below. In addition, for the year ended December 31, 2020, we acquired one center, our partner’s interest in a center and other property with an aggregate gross purchase price of approximately $166.6 million, including the December 2020 transaction discussed below, and we invested $79.4 million in new development projects. In December 2020, we acquired our partner’s 42.25% interest in a center in an unconsolidated joint venture and redeemed our 57.75% interest in the related unconsolidated joint venture while simultaneously disposing of a wholly owned center to our former partner. The transaction resulted in the consolidation of the property in our consolidated financial statements. See Note 16 for additional information.

24


Note 4.     Investment in Real Estate Joint Ventures and Partnerships

We own interests in real estate joint ventures or limited partnerships and had tenancy-in-common interests in which we exercise significant influence, but do not have financial and operating control. We account for these investments using the equity method, and our interests ranged for the periods presented from 20%to 90% in both 2020 and 2019. Combined condensed financial information of these ventures (at 100%) is summarized as follows (in thousands):

December 31, 

2020

    

2019

Combined Condensed Balance Sheets

  

  

ASSETS

  

  

Property

$

1,093,504

$

1,378,328

Accumulated depreciation

 

(275,802)

 

(331,856)

Property, net

 

817,702

 

1,046,472

Other assets, net

 

81,285

 

108,366

Total Assets

$

898,987

$

1,154,838

LIABILITIES AND EQUITY

 

  

 

  

Debt, net (primarily mortgages payable)

$

192,674

$

264,782

Amounts payable to Weingarten Realty Investors and Affiliates

 

9,836

 

11,972

Other liabilities, net

 

15,340

 

25,498

Total Liabilities

 

217,850

 

302,252

Equity

 

681,137

 

852,586

Total Liabilities and Equity

$

898,987

$

1,154,838

Year Ended December 31, 

2020

    

2019

    

2018

Combined Condensed Statements of Operations

  

  

  

Revenues, net

$

124,409

$

135,258

$

133,975

Expenses:

 

  

 

  

 

  

Depreciation and amortization

 

35,971

 

32,126

 

32,005

Interest, net

 

9,175

 

9,664

 

11,905

Operating

 

24,775

 

25,046

 

24,112

Real estate taxes, net

 

16,733

 

18,070

 

18,839

General and administrative

 

601

 

551

 

696

Provision for income taxes

 

121

 

133

 

138

Total

 

87,376

 

85,590

 

87,695

Gain on dispositions

 

47,002

 

2,009

 

9,495

Net income

$

84,035

$

51,677

$

55,775

Our investment in real estate joint ventures and partnerships, as reported in our Consolidated Balance Sheets, differs from our proportionate share of the entities’ underlying net assets due to basis differences, which arose upon the transfer of assets to the joint ventures. The net positive basis differences, which totaled $10.7 million and $9.0 million at December 31, 2020 and 2019, respectively, are generally amortized over the useful lives of the related assets.

25


We recorded joint venture fee income included in Other revenues for the year ended December 31, 2020, 2019 and 2018 of $5.3 million, $6.5 million and $6.1 million, respectively. Additionally, as a result of COVID-19, for the year ended December 31, 2020, our joint venture and partnerships have reduced revenues by $6.9 million due to lease related reserves and write-offs, which includes $3.1 million for straight-line rent receivables. Of these amounts for the year ended December 31, 2020, our share totaled $2.5 million, which includes $.9 million for straight-line rent receivables. For additional information, see Note 1.

During 2020, we sold two centers and our interest in two centers, ranging from 20% to 50%, at an aggregate gross value of approximately $148.3 million, of which our share of the gain, included in equity earnings in real estate joint ventures and partnerships, totaled $23.5 million. Also during 2020, we invested an additional $8.7 million in a 90% owned unconsolidated real estate joint venture for a mixed-use new development.

In December 2020, we acquired our partner’s 42.25% interest in a center at an unconsolidated real estate joint venture for approximately $115.2 million. The transaction resulted in the consolidation of the property in our consolidated financial statements. For additional information, see Note 16.

During 2019, a parcel of land was sold with gross sales proceeds of approximately $2.3 million, of which our share of the gain, included in equity earnings in real estate joint ventures and partnerships, totaled $1.1 million. In July 2019, a 51% owned unconsolidated real estate joint venture acquired a center with a gross purchase price of $52.6 million. Also during 2019, we invested $47.6 million in a 90% owned unconsolidated real estate joint venture for a mixed-use new development.

Note 5.     Identified Intangible Assets and Liabilities

Identified intangible assets and liabilities associated with our property acquisitions are as follows (in thousands):

    

December 31, 

2020

2019

Identified Intangible Assets:

 

  

 

  

Above-market leases (included in Other Assets, net)

$

23,877

$

23,830

Above-market leases - Accumulated Amortization

 

(12,551)

 

(12,145)

In place leases (included in Unamortized Lease Costs, net)

 

235,082

 

196,207

In place leases - Accumulated Amortization

 

(102,772)

 

(92,918)

$

143,636

$

114,974

Identified Intangible Liabilities:

 

  

 

  

Below-market leases (included in Other Liabilities, net)

$

92,855

$

95,240

Below-market leases - Accumulated Amortization

 

(34,647)

 

(32,326)

Above-market assumed mortgages (included in Debt, net)

 

7,694

 

3,446

Above-market assumed mortgages - Accumulated Amortization

 

(2,408)

 

(1,987)

$

63,494

$

64,373

These identified intangible assets and liabilities are amortized over the applicable lease terms or the remaining lives of the assumed mortgages, as applicable.

26


The net amortization of above-market and below-market leases increased rental revenues by $7.8 million, $4.6 million and $12.8 million in 2020, 2019 and 2018, respectively. The significant year over year change in rental revenues from 2020 to 2019 is primarily due to the write-offs for multiple tenant fallouts of off-market lease intangibles in 2020, and the change from 2019 to 2018 is primarily due to a write-off of a below-market lease intangible from the termination of a tenant’s lease in 2018. The estimated net amortization of these intangible assets and liabilities will increase rental revenues for each of the next five years as follows (in thousands):

2021

    

$

4,691

2022

 

4,357

2023

 

4,172

2024

 

4,032

2025

 

3,234

The amortization of the in place lease intangible assets recorded in depreciation and amortization, was $19.4 million, $14.9 million and $29.8 million in 2020, 2019 and 2018, respectively. The significant year over year change in depreciation and amortization from 2020 to 2019 is primarily due to net acquisitions throughout late 2019 and 2020, and the change from 2019 to 2018 is primarily due to the write-off of in-place lease intangibles from the termination of tenant leases in 2018. The estimated amortization of these intangible assets will increase depreciation and amortization for each of the next five years as follows (in thousands):

2021

    

$

19,580

2022

 

17,103

2023

 

15,549

2024

 

13,491

2025

 

12,204

The net amortization of above-market assumed mortgages decreased net interest expense by $.4 million, $.3 million and $.7 million in 2020, 2019 and 2018, respectively. The estimated net amortization of these intangible liabilities will decrease net interest expense for each of the next five years as follows (in thousands):

2021

    

$

789

2022

 

643

2023

 

638

2024

 

638

2025

 

638

27


The following table details the identified intangible assets and liabilities and the remaining weighted-average amortization period associated with our asset acquisitions in 2020 and 2019 as follows:

    

December 31, 

 

2020

2019

Identified intangible assets and liabilities subject to amortization (in thousands):

Assets:

In place leases

$

48,562

$

30,253

Above-market leases

1,901

 

1,323

Liabilities:

  

 

  

Below-market leases

5,205

 

13,762

Above-market assumed mortgages

4,249

Identified intangible assets and liabilities remaining weighted-average amortization period (in years):

  

 

  

Assets:

  

 

  

In place leases

7.8

 

11.0

Above-market leases

7.1

 

7.2

Liabilities:

  

 

  

Below-market leases

7.8

 

13.5

Above-market assumed mortgages

8.3

Note 6.     Debt

Our debt consists of the following (in thousands):

    

December 31, 

    

2020

    

2019

Debt payable, net to 2038 (1)

$

1,723,073

$

1,653,154

Unsecured notes payable under credit facilities

40,000

Debt service guaranty liability

53,650

57,380

Finance lease obligation

21,696

21,804

Total

$

1,838,419

$

1,732,338

(1) At both December 31, 2020 and 2019, interest rates ranged from 3.3% to 7.0% at a weighted average rate of 3.9%.

The allocation of total debt between fixed and variable-rate as well as between secured and unsecured is summarized below (in thousands):

December 31, 

2020

    

2019

As to interest rate (including the effects of interest rate contracts):

  

  

Fixed-rate debt

$

1,798,419

$

1,714,890

Variable-rate debt

 

40,000

 

17,448

Total

$

1,838,419

$

1,732,338

As to collateralization:

 

  

 

  

Unsecured debt

$

1,488,909

$

1,450,762

Secured debt

 

349,510

 

281,576

Total

$

1,838,419

$

1,732,338

28


We maintain a $500 million unsecured revolving credit facility, which was amended and extended on December 11, 2019. This facility expires in March 2024, provides for two consecutive six-month extensions upon our request, and borrowing rates that float at a margin over LIBOR plus a facility fee. At both December 31, 2020 and 2019, 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.

Additionally, we have a $10 million unsecured short-term facility, which was amended and extended on January 3, 2020, that we maintain for cash management purposes, which matures in March 2021. At both December 31, 2020 and 2019, the facility provided for fixed interest rate loans at a 30-day LIBOR rate plus a borrowing margin, facility fee and an unused facility fee of 125, 10, and 5 basis points, respectively.

The following table discloses certain information regarding our unsecured notes payable under our credit facilities (in thousands, except percentages):

December 31, 

 

2020

    

2019

 

Unsecured revolving credit facility:

  

 

  

Balance outstanding

$

40,000

$

Available balance

 

458,068

 

497,946

Letters of credit outstanding under facility

 

1,932

 

2,054

Variable interest rate (excluding facility fee)

 

0.94

%  

 

%

Unsecured short-term facility:

 

  

 

  

Balance outstanding

$

$

Variable interest rate (excluding facility fee)

 

%  

 

%

Both facilities:

 

  

 

  

Maximum balance outstanding during the period (1)

$

497,000

$

5,000

Weighted average balance

 

74,311

 

123

Year-to-date weighted average interest rate (excluding facility fee)

 

1.0

%  

 

3.3

%

(1) At March 31, 2020, we drew down the available balance of our unsecured revolving credit facility to increase liquidity and preserve financial flexibility in light of the uncertainty regarding the COVID-19 pandemic on the markets at that time, which we subsequently repaid due to the stability of the financial markets.

Related to a development project in Sheridan, Colorado, we have provided a guaranty for the payment of any debt service shortfalls until a coverage rate of 1.4x is met on tax increment revenue bonds issued in connection with the project. 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 date the bond liability has been paid in full or 2040. Therefore, a debt service guaranty liability equal to the fair value of the amounts funded under the bonds was recorded. As of December 31, 2020 and December 31, 2019, we had $53.7 million and $57.4 million outstanding for the debt service guaranty liability, respectively.

During the year ended December 31, 2019, we repaid a $50 million secured fixed-rate mortgage with a 7.0% interest rate from cash from our disposition proceeds.

Various leases and properties, and current and future rentals from those leases and properties, collateralize certain debt. At December 31, 2020 and 2019, the carrying value of such assets aggregated $.6 billion and $.5 billion, respectively. Additionally at December 31, 2020 and 2019, investments of $6.0 million and $5.3 million, respectively, included in Restricted Deposits and Escrows are held as collateral for letters of credit totaling $6.0 million and $5.0 million, respectively.

29


Scheduled principal payments on our debt (excluding $40.0 million unsecured notes payable under our credit facilities, $21.7 million of a finance lease obligation, $(3.1) million net premium/(discount) on debt, $(4.5) million of deferred debt costs, $5.3 million of non-cash debt-related items, and $53.7 million debt service guaranty liability) are due during the following years (in thousands):

2021

    

$

18,795

2022

308,298

2023

 

348,207

2024

 

252,561

2025

 

294,232

2026

 

277,733

2027

 

53,604

2028

 

92,159

2029

 

70,304

2030

 

950

Thereafter

 

8,569

Total

$

1,725,412

Our various debt agreements contain restrictive covenants, including minimum interest and fixed charge coverage ratios, minimum unencumbered interest coverage ratios, minimum net worth requirements and maximum total debt levels. We are not aware of any non-compliance with our public debt and revolving credit facility covenants as of December 31, 2020.

Note 7.     Lease Obligations

Certain of our shopping centers are subject to operating ground leases that cover either partially or the entire center. These ground leases expire at various dates through 2069 with renewal options ranging from five years to 20 years and in some cases, include options to purchase the underlying asset by either the lessor or lessee. Generally, our ground lease variable payments for real estate taxes, insurance and utilities are paid directly by us and are not a component of rental expense. Most of our leases have increasing minimum rental rates during the terms of the leases through escalation provisions and also may include an amount based on a percentage of operating revenues or sublease tenant revenue. Space in our shopping centers is leased to tenants pursuant to agreements that generally provide for terms of 10 years or less and may include multiple options to extend the lease term in increments up to five years, for annual rentals subject to upward adjustments based on operating expense levels, sales volume, or contractual increases as defined in the lease agreements. As of December 31, 2020 and 2019, we were the lessee under ground lease agreements associated with 10 and 12 centers, respectively. Additionally, we were the lessee under administrative lease agreements with four offices as of both December 31, 2020 and 2019. Our right-of-use assets associated with our operating leases totaled $42.8 million and $43.8 million at December 31, 2020 and 2019, respectively.

Also, we have two properties under a finance lease that consists of variable lease payments with a purchase option. The right-of-use asset associated with this finance lease at December 31, 2020 and 2019 was $8.7 million and $8.9 million, respectively. Amortization of property under the finance lease is included in depreciation and amortization expense.

30


A schedule of lease costs including weighted average lease terms and weighted-average discount rates is as follows (in thousands, except as noted):

Year Ended December 31, 

 

2020

 

2019

 

Lease cost:

Operating lease cost:

  

  

Included in Operating expense

$

2,977

$

3,044

Included in General and administrative expense

 

370

 

302

Finance cost:

 

  

 

  

Amortization of right-of-use asset (included in Depreciation and Amortization)

 

182

 

174

Interest on lease liability (included in Interest expense, net)

 

1,635

 

1,642

Short-term lease cost

 

 

44

Variable lease cost

 

244

 

309

Sublease income (included in Rentals, net)

 

(26,539)

 

(27,400)

Total lease cost

$

(21,131)

$

(21,885)

December 31, 

2020

2019

Weighted-average remaining lease term (in years):

 

  

 

  

Operating leases

 

40.7

 

41.5

Finance lease

 

3.0

 

4.0

Weighted-average discount rate (percentage):

 

  

 

  

Operating leases

 

4.9

%

 

4.9

%

Finance lease

 

7.5

%

 

7.5

%

A reconciliation of our lease liabilities on an undiscounted cash flow basis, which primarily represents shopping center ground leases, for the subsequent five years and thereafter, as calculated as of December 31, 2020, is as follows (in thousands):

    

Operating

    

Finance

Lease payments:

 

  

 

  

2021

$

2,717

$

1,751

2022

2,698

1,759

2023

2,582

23,037

2024