RETAIL PROPERTIES OF AMERICA, INC. (Form: 10-Q, Received: 08/06/2013 16:22:32)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013



o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-35481

RETAIL PROPERTIES OF AMERICA, INC.

(Exact name of registrant as specified in its charter)



Maryland		42-1579325
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2021 Spring Road, Suite 200, Oak Brook, Illinois		60523
(Address of principal executive offices)		(Zip Code)

( 630) 634-4200

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer x		Accelerated filer o

Non-accelerated filer o		Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Number of shares outstanding of the registrant’s classes of common stock as of August 2, 2013 :

Class A common stock: 187,741,584 shares

Class B-3 common stock: 48,518,033 shares

Table of Contents

RETAIL PROPERTIES OF AMERICA, INC.

TABLE OF CONTENTS



PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	40

Item 4.	Controls and Procedures	41

PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	42

Item 1A.	Risk Factors	42

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42

Item 3.	Defaults Upon Senior Securities	42

Item 4.	Mine Safety Disclosures	42

Item 5.	Other Information	42

Item 6.	Exhibits	43

SIGNATURES		44

Table of Contents

Part I — Financial Information

Item 1. Financial Statements

RETAIL PROPERTIES OF AMERICA, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except par value amounts)



	June 30, 2013			December 31, 2012
Assets
Investment properties:
Land	$	1,199,025		$	1,209,523
Building and other improvements	4,665,617			4,703,859
Developments in progress	49,988			49,496
	5,914,630			5,962,878
Less accumulated depreciation	(1,349,165		)	(1,275,787		)
Net investment properties	4,565,465			4,687,091
Cash and cash equivalents	73,575			138,069
Investment in unconsolidated joint ventures	52,691			56,872
Accounts and notes receivable (net of allowances of $8,032 and $6,452, respectively)	78,463			85,431
Acquired lease intangibles, net	107,653			125,706
Assets associated with investment properties held for sale	14,917			8,922
Other assets, net	127,644			135,336
Total assets	$	5,020,408		$	5,237,427

Liabilities and Equity
Liabilities:
Mortgages and notes payable, net	$	1,915,120		$	2,212,089
Credit facility	470,000			380,000
Accounts payable and accrued expenses	58,323			73,983
Distributions payable	41,493			38,200
Acquired below market lease intangibles, net	72,408			74,648
Liabilities associated with investment properties held for sale	1,566			60
Other liabilities	69,092			82,694
Total liabilities	2,628,002			2,861,674

Commitments and contingencies (Note 13)

Equity:
Preferred stock, $0.001 par value, 10,000 shares authorized
7.00% Series A cumulative redeemable preferred stock, 5,400 shares issued and outstanding at June 30, 2013 and December 31, 2012; liquidation preference $135,000	5			5
Class A common stock, $0.001 par value, 475,000 shares authorized, 187,741 and 133,606 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively	187			133
Class B-2 common stock, $0.001 par value, 55,000 shares authorized, 0 and 48,518 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively	—			49
Class B-3 common stock, $0.001 par value, 55,000 shares authorized, 48,519 shares issued and outstanding at June 30, 2013 and December 31, 2012	49			49
Additional paid-in capital	4,919,162			4,835,370
Accumulated distributions in excess of earnings	(2,528,338		)	(2,460,093		)
Accumulated other comprehensive loss	(153		)	(1,254		)
Total shareholders’ equity	2,390,912			2,374,259
Noncontrolling interests	1,494			1,494
Total equity	2,392,406			2,375,753
Total liabilities and equity	$	5,020,408		$	5,237,427

See accompanying notes to condensed consolidated financial statements

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RETAIL PROPERTIES OF AMERICA, INC.

Condensed Consolidated Statements of Operations and Other Comprehensive Income (Loss)

(Unaudited)

(in thousands, except per share amounts)



	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Revenues:
Rental income	$	112,688		$	111,558		$	225,705		$	223,880
Tenant recovery income	25,308			24,622			50,211			52,448
Other property income	2,467			2,807			5,013			5,545
Total revenues	140,463			138,987			280,929			281,873

Expenses:
Property operating expenses	22,801			22,945			46,851			47,266
Real estate taxes	18,592			18,764			37,023			37,881
Depreciation and amortization	62,950			54,085			117,306			108,316
Provision for impairment of investment properties	9,176			1,323			9,176			1,323
Loss on lease terminations	381			1,174			592			4,860
General and administrative expenses	8,288			6,543			16,343			11,464
Total expenses	122,188			104,834			227,291			211,110

Operating income	18,275			34,153			53,638			70,763

Gain on extinguishment of debt	26,331			—			26,331			3,879
Equity in loss of unconsolidated joint ventures, net	(461		)	(1,286		)	(862		)	(3,604		)
Interest expense (Note 7)	(35,824		)	(36,906		)	(82,951		)	(87,928		)
Co-venture obligation expense	—			(397		)	—			(3,300		)
Recognized gain on marketable securities	—			7,265			—			7,265
Other income, net	2,085			3,113			3,161			453
Income (loss) from continuing operations	10,406			5,942			(683		)	(12,472		)

Discontinued operations:
Income, net	5,151			564			5,187			1,096
Gain on sales of investment properties	21			6,847			1,935			7,762
Income from discontinued operations	5,172			7,411			7,122			8,858
Gain on sales of investment properties	393			4,323			7,652			5,002
Net income	15,971			17,676			14,091			1,388
Net income attributable to the Company	15,971			17,676			14,091			1,388
Preferred stock dividends	(2,363		)	—			(4,725		)	—
Net income attributable to common shareholders	$	13,608		$	17,676		$	9,366		$	1,388

Earnings (loss) per common share — basic and diluted:
Continuing operations	$	0.04		$	0.05		$	0.01		$	(0.04	)
Discontinued operations	0.02			0.03			0.03			0.05
Net income per common share attributable to common shareholders	$	0.06		$	0.08		$	0.04		$	0.01

Net income	$	15,971		$	17,676		$	14,091		$	1,388
Other comprehensive income (loss):
Net unrealized gain on derivative instruments (Note 7)	635			253			1,101			390
Net unrealized (loss) gain on marketable securities	—			(1,342		)	—			3,644
Reversal of unrealized gain to recognized gain on marketable securities	—			(7,265		)	—			(7,265		)
Comprehensive income (loss)	16,606			9,322			15,192			(1,843		)
Comprehensive income (loss) attributable to common shareholders	$	16,606		$	9,322		$	15,192		$	(1,843	)

Weighted average number of common shares outstanding — basic	233,624			226,543			232,117			210,331

Weighted average number of common shares outstanding — diluted	233,627			226,543			232,120			210,331

See accompanying notes to condensed consolidated financial statements

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RETAIL PROPERTIES OF AMERICA, INC.

Condensed Consolidated Statements of Equity

(Unaudited)

(in thousands, except per share amounts)



	Preferred Stock			Class A Common Stock				Class B Common Stock					Additional Paid-in Capital			Accumulated Distributions in Excess of Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity			Noncontrolling Interests		Total Equity
	Shares	Amount		Shares		Amount		Shares		Amount			Additional Paid-in Capital			Accumulated Distributions in Excess of Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity			Noncontrolling Interests		Total Equity
Balance at January 1, 2012	—	$	—	48,382		$	48	145,147		$	146		$	4,427,977		$	(2,312,877	)	$	19,730		$	2,135,024		$	1,494	$	2,136,518
Net income	—	—		—		—		—		—			—			1,388			—			1,388			—		1,388
Other comprehensive loss	—	—		—		—		—		—			—			—			(3,231		)	(3,231		)	—		(3,231		)
Distributions declared to common shareholders ($0.33125 per share)	—	—		—		—		—		—			—			(70,369		)	—			(70,369		)	—		(70,369		)
Issuance of common stock, net of offering costs	—	—		36,570		37		—		—			266,454			—			—			266,491			—		266,491
Redemption of fractional shares of common stock	—	—		(39	)	—		(118	)	—			(1,253		)	—			—			(1,253		)	—		(1,253		)
Distribution reinvestment program (DRP)	—	—		167		—		502		—			11,626			—			—			11,626			—		11,626
Issuance of restricted common stock	—	—		8		—		24		—			—			—			—			—			—		—
Stock based compensation expense	—	—		—		—		—		—			158			—			—			158			—		158
Balance at June 30, 2012	—	$	—	85,088		$	85	145,555		$	146		$	4,704,962		$	(2,381,858	)	$	16,499		$	2,339,834		$	1,494	$	2,341,328

Balance at January 1, 2013	5,400	$	5	133,606		$	133	97,037		$	98		$	4,835,370		$	(2,460,093	)	$	(1,254	)	$	2,374,259		$	1,494	$	2,375,753
Net income	—	—		—		—		—		—			—			14,091			—			14,091			—		14,091
Other comprehensive income	—	—		—		—		—		—			—			—			1,101			1,101			—		1,101
Distributions declared to common shareholders ($0.33125 per share)	—	—		—		—		—		—			—			(77,348		)	—			(77,348		)	—		(77,348		)
Distributions declared to preferred shareholders	—	—		—		—		—		—			—			(4,988		)	—			(4,988		)	—		(4,988		)
Issuance of common stock, net of offering costs	—	—		5,547		5		—		—			83,522			—			—			83,527			—		83,527
Issuance of restricted common stock	—	—		73		—		—		—			—			—			—			—			—		—
Conversion of Class B-2 common stock to Class A common stock	—	—		48,518		49		(48,518	)	(49		)	—			—			—			—			—		—
Stock based compensation expense, net of shares withheld for employee taxes and forfeitures	—	—		(3	)	—		—		—			270			—			—			270			—		270
Balance at June 30, 2013	5,400	$	5	187,741		$	187	48,519		$	49		$	4,919,162		$	(2,528,338	)	$	(153	)	$	2,390,912		$	1,494	$	2,392,406

See accompanying notes to condensed consolidated financial statements

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RETAIL PROPERTIES OF AMERICA, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)



	Six Months Ended June 30,
	2013			2012
Cash flows from operating activities:
Net income	$	14,091		$	1,388
Adjustments to reconcile net income to net cash provided by operating activities (including discontinued operations):
Depreciation and amortization	117,464			116,910
Provision for impairment of investment properties	9,176			1,323
Gain on sales of investment properties	(9,587		)	(12,764		)
Gain on extinguishment of debt	(26,331		)	(3,879		)
Loss on lease terminations	592			4,901
Amortization of loan fees, mortgage debt premium and discount on debt assumed, net	6,304			(5,531		)
Equity in loss of unconsolidated joint ventures, net	862			3,604
Distributions on investments in unconsolidated joint ventures	4,737			2,707
Recognized gain on sale of marketable securities	—			(7,265		)
Payment of leasing fees and inducements	(6,405		)	(7,176		)
Changes in accounts receivable, net	4,676			7,469
Changes in accounts payable and accrued expenses, net	(2,625		)	(12,032		)
Changes in other operating assets and liabilities, net	(15,758		)	8,863
Other, net	4,394			(1,686		)
Net cash provided by operating activities	101,590			96,832

Cash flows from investing activities:
Proceeds from sale of marketable securities	—			5,719
Changes in restricted escrows, net	6,866			8,202
Capital expenditures and tenant improvements	(21,250		)	(16,567		)
Proceeds from sales of investment properties	38,961			12,997
Investment in developments in progress	(492		)	(309		)
Investment in unconsolidated joint ventures	(2,254		)	(7,333		)
Distributions of investments in unconsolidated joint ventures	836			17,403
Other, net	—			21
Net cash provided by investing activities	22,667			20,133

Cash flows from financing activities:
Repayments of margin debt related to marketable securities	—			(5,287		)
Proceeds from mortgages and notes payable	—			281,874
Principal payments on mortgages and notes payable	(277,584		)	(461,834		)
Proceeds from credit facility	240,000			150,000
Repayments of credit facility	(150,000		)	(275,000		)
Payment of loan fees and deposits, net	(5,299		)	(7,212		)
Settlement of co-venture obligation	—			(50,000		)
Proceeds from issuance of common stock	84,835			272,081
Redemption of fractional shares of common stock	—			(1,253		)
Distributions paid, net of DRP	(79,043		)	(51,991		)
Other, net	(1,660		)	(2,006		)
Net cash used in financing activities	(188,751		)	(150,628		)

Net decrease in cash and cash equivalents	(64,494		)	(33,663		)
Cash and cash equivalents, at beginning of period	138,069			136,009
Cash and cash equivalents, at end of period	$	73,575		$	102,346
(continued)

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RETAIL PROPERTIES OF AMERICA, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)



	Six Months Ended June 30,
	2013			2012
Supplemental cash flow disclosure, including non-cash activities:
Cash paid for interest	$	70,970		$	106,186
Distributions payable	$	41,493		$	38,200
Distributions reinvested	$	—		$	11,626
Accrued capital expenditures and tenant improvements	$	3,523		$	3,398
Accrued leasing fees and inducements	$	985		$	29,843
Accrued offering costs	$	103		$	—
Marketable securities proceeds receivable	$	—		$	8,276
Forgiveness of mortgage debt	$	19,615		$	27,449
Forgiveness of accrued interest, net of escrows held by the lender	$	6,716		$	—
Shares of Class B-2 common stock converted to Class A common stock	48,518			—

Proceeds from sales of investment properties:
Land, building and other improvements, net	$	25,468		$	23,236
Accounts receivable, acquired lease intangibles and other assets	3,028			1,043
Accounts payable and other liabilities	—			(158		)
Mortgages payable	(26		)	—
Forgiveness of mortgage debt	—			(23,570		)
Deferred gains	904			(318		)
Gain on sales of investment properties	9,587			12,764
	$	38,961		$	12,997
(concluded)

See accompanying notes to condensed consolidated financial statements

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Readers of this Quarterly Report should refer to the audited financial statements of Retail Properties of America, Inc. for the year ended December 31, 2012, which are included in its 2012 Annual Report on Form 10-K, as certain footnote disclosures which would substantially duplicate those contained in the Annual Report have been omitted from this Quarterly Report. In the opinion of management, all adjustments necessary, all of which were of normal recurring nature, for a fair presentation have been included in this Quarterly Report.

(1) Organization and Basis of Presentation

Retail Properties of America, Inc. (the Company) was formed to acquire and manage a diversified portfolio of real estate, primarily multi-tenant shopping centers. The Company was initially formed on March 5, 2003 as Inland Western Retail Real Estate Trust, Inc. On March 8, 2012, the Company changed its name to Retail Properties of America, Inc.

All share amounts and dollar amounts in this Quarterly Report are stated in thousands with the exception of per share amounts and per square foot amounts.

The Company elected to be taxed as a real estate investment trust (REIT) under the Internal Revenue Code of 1986, as amended (the Code). The Company believes it has qualified for taxation as a REIT and, as such, the Company generally will not be subject to U.S. federal income tax on taxable income that is distributed to shareholders. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to U.S. federal income tax on its taxable income at regular corporate tax rates.

Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes on its income, property or net worth and U.S. federal income and excise taxes on its undistributed income. The Company has one wholly-owned subsidiary that has jointly elected to be treated as a taxable REIT subsidiary (TRS) for U.S. federal income tax purposes. A TRS is taxed on its taxable income at regular corporate tax rates. The income tax expense incurred as a result of the TRS did not have a material impact on the Company’s accompanying condensed consolidated financial statements. Through a merger consummated on November 15, 2007, the Company acquired four qualified REIT subsidiaries. Their income is consolidated with REIT income for federal and state income tax purposes.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. For example, significant estimates and assumptions have been made with respect to useful lives of assets, capitalization of development and leasing costs, fair value measurements, provision for impairment, including estimates of holding periods, capitalization rates and discount rates (where applicable), provision for income taxes, recoverable amounts of receivables, deferred taxes and initial valuations and related amortization periods of deferred costs and intangibles, particularly with respect to property acquisitions. Actual results could differ from those estimates.

Reclassifications to condense certain captions have been made to the 2012 condensed consolidated statement of operations to conform to the 2013 presentation. Amounts previously reflected in “Dividend income” and “Interest income” are now included in “Other income, net”.

The accompanying condensed consolidated financial statements include the accounts of the Company, as well as all wholly-owned subsidiaries and consolidated joint venture investments. Wholly-owned subsidiaries generally consist of limited liability companies (LLCs), limited partnerships (LPs) and statutory trusts.

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Company’s property ownership as of June 30, 2013 is summarized below:



	Wholly-owned	Consolidated Joint Ventures (a)	Unconsolidated Joint Ventures (b)
Operating properties (c)	240	—	20
Development properties	2	1	—


(a)	The Company has a 50% ownership interest in one LLC.


(b)	The Company has a 20% ownership interest in one LLC and one LP.


(c)	Excludes one wholly-owned property classified as held for sale as of June 30, 2013 .

As of June 30, 2013 , the Company is the controlling member in one less-than-wholly-owned consolidated entity. Noncontrolling interest is the portion of equity in a subsidiary not attributable, directly or indirectly, to a parent. In the condensed consolidated statements of operations and other comprehensive income (loss), revenues, expenses and net income or loss from such less-than-wholly-owned subsidiaries are reported at the consolidated amounts, including both the amounts attributable to common shareholders and noncontrolling interests. Condensed consolidated statements of equity are included in the quarterly financial statements, including beginning balances, activity for the period and ending balances for total shareholders’ equity, noncontrolling interests and total equity. Noncontrolling interests are adjusted for additional contributions from and distributions to noncontrolling interest holders, as well as the noncontrolling interest holders’ share of the net income or loss of each respective entity, as applicable.

The Company evaluates the classification and presentation of noncontrolling interests associated with its consolidated joint venture investments on an ongoing basis as facts and circumstances necessitate. Such determinations are based on numerous factors, including evaluations of the terms in applicable agreements, specifically the redemption provisions. The amount at which these interests would be redeemed is based on a formula contained in each respective agreement and, as of June 30, 2013 and December 31, 2012 , was determined to approximate the carrying value of these interests. No adjustment to the carrying value of the noncontrolling interests in the Company’s consolidated joint venture investments was made during the six months ended June 30, 2013 and 2012 .

(2) Summary of Significant Accounting Policies

There have been no changes to the Company’s significant accounting policies in the six months ended June 30, 2013 . Refer to the Company’s 2012 Annual Report on Form 10-K for a summary of the Company’s significant accounting policies.

Recent Accounting Pronouncements

Effective January 1, 2013, companies are required to disclose additional information about reclassification adjustments out of accumulated other comprehensive income (AOCI), including (1) changes in AOCI balances by component and (2) significant items reclassified out of AOCI. For significant items reclassified out of AOCI to net income in their entirety in the reporting period, disclosure of the effect of the reclassifications on the respective line items in the statement where net income is presented is required. For items that are not reclassified to net income in their entirety in the reporting period, a cross reference to other disclosures in the notes is required. The adoption resulted in the addition of a cross reference to other disclosures in the notes on the face of the accompanying condensed consolidated statements of operations and other comprehensive income (loss).

(3) Discontinued Operations and Investment Properties Held for Sale

The Company employs a business model that utilizes asset management as a key component of monitoring its investment properties to ensure that each property continues to meet expected investment returns and strategic objectives. This strategy incorporates the sale of non-core and non-strategic assets that no longer meet the Company’s criteria.

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Company sold four properties during the six months ended June 30, 2013 , as summarized below:



Date	Property Name	Property Type	Square Footage	Consideration		Mortgage Debt Extinguished		Net Sales Proceeds		Gain
January 16, 2013	Mervyns - Ridgecrest	Single-user retail	59,000	$	500	$	—	$	477	$	—	(a)
January 16, 2013	Mervyns - Highland	Single-user retail	80,500	2,133		—		2,030		—		(a)
January 25, 2013	American Express - DePere	Single-user office	132,300	17,233		—		17,168		1,914
June 21, 2013	Dick's Sporting Goods-Fresno	Multi-tenant retail	77,400	6,500		—		6,401		21
			349,200	$	26,366	$	—	$	26,076	$	1,935


(a)	No gain or loss recognized at disposition due to previously recognized impairment charges.

The Company also received net proceeds of $12,885 and recorded gains of $7,652 from earnouts and the sale of parcels at two of its operating properties. The aggregate proceeds, net of closing costs, from the property sales and additional transactions during the six months ended June 30, 2013 totaled $38,961 with aggregate gains of $9,587 .

During the year ended December 31, 2012 , the Company sold 31 properties, two of which were sold during the six months ended June 30, 2012 . The dispositions and additional transactions, including condemnation awards and earnouts, during the six months ended June 30, 2012 resulted in aggregate proceeds, net of closing costs, to the Company of $12,997 with aggregate gains of $12,764 .

As of June 30, 2013 , the Company had entered into a contract to sell LA Fitness - Oceanside, a 75,400 square foot single-user retail property located in Oceanside, California. This property qualified for held for sale accounting treatment upon meeting all applicable GAAP criteria on June 30, 2013, at which time depreciation and amortization were ceased. As such, the assets and liabilities associated with this property are separately classified as held for sale in the condensed consolidated balance sheet as of June 30, 2013 and the operations for all periods presented are classified as discontinued operations in the condensed consolidated statements of operations and other comprehensive income (loss). Three properties were classified as held for sale as of December 31, 2012 . The following table presents the assets and liabilities associated with the held for sale properties:



	June 30, 2013			December 31, 2012
Assets
Land, building and other improvements	$	15,805		$	8,746
Accumulated depreciation	(1,541		)	(17		)
Net investment properties	14,264			8,729
Other assets	653			193
Assets associated with investment properties held for sale	$	14,917		$	8,922

Liabilities
Other liabilities	$	1,566		$	60
Liabilities associated with investment properties held for sale	$	1,566		$	60

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Company does not allocate general corporate interest expense to discontinued operations. The results of operations for the investment properties that are accounted for as discontinued operations, inclusive of investment properties sold and those classified as held for sale, are presented in the table below:



	Three Months Ended June 30,					Six Months Ended June 30,
	2013			2012		2013			2012
Revenues:
Rental income	$	113		$	8,951	$	304		$	18,833
Tenant recovery income	(56		)	614		(25		)	1,249
Other property income	5,342			18		5,348			50
Total revenues	5,399			9,583		5,627			20,132

Expenses:
Property operating expenses	178			604		360			1,370
Real estate taxes	4			577		(44		)	1,417
Depreciation and amortization	50			4,204		158			8,594
Loss on lease terminations	—			3		—			41
Interest expense	—			3,631		—			7,614
Other expense (income), net	16			—		(34		)	—
Total expenses	248			9,019		440			19,036

Income from discontinued operations, net	$	5,151		$	564	$	5,187		$	1,096

(4) Compensation Plans

The Company’s Equity Compensation Plan (Equity Plan), subject to certain conditions, authorizes the issuance of stock options, restricted stock, stock appreciation rights and other similar awards to the Company’s employees in connection with compensation and incentive arrangements that may be established by the Company’s board of directors.

The following represents a summary of the Company’s unvested restricted shares, all of which were granted to Company employees pursuant to the Equity Plan, as of and for the six months ended June 30, 2013 :



	Unvested Restricted Shares		Weighted Average Grant Date Fair Value per Restricted Share
Balance at January 1, 2013	46		$	17.30
Shares granted (a)	73		$	14.48
Shares vested	(9	)	$	15.53
Shares forfeited	—		$	—
Balance at June 30, 2013	110		$	15.65


(a)	Of the shares granted to the Company’s executives, 50% vest on each of the third and fifth anniversaries of the grant date. Shares granted to Company employees vest ratably over three years .

During the three months ended June 30, 2013 and 2012 , the Company recorded compensation expense of $124 and $49 , respectively, related to unvested restricted shares. During the six months ended June 30, 2013 and 2012 , the Company recorded compensation expense of $187 and $114 , respectively, related to unvested restricted shares. As of June 30, 2013 , total unrecognized compensation expense related to unvested restricted shares was $1,267 , which is expected to be amortized over a weighted average term of 3.1 years . During the three months ended June 30, 2013, the Company recorded $113 of additional compensation expense related to the accelerated vesting of nine restricted shares in conjunction with the resignation of its former Chief Accounting Officer. The total fair value of shares vested during the six months ended June 30, 2013 was $139 .

The Company’s Independent Director Stock Option Plan (Option Plan), as amended, provides, subject to certain conditions, for the grant to each independent director of options to acquire shares following their becoming a director and for the grant of additional options to acquire shares on the date of each annual shareholders’ meeting. As of June 30, 2013 , options to purchase 84 shares of common stock had been granted, of which options to purchase one share had been exercised and five shares had expired. As of

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

June 30, 2012 , options to purchase 70 shares of common stock had been granted, of which options to purchase one share had been exercised and none had expired.

The Company calculates the per share weighted average grant date fair value of options using the Black-Scholes option pricing model utilizing certain assumptions regarding the expected dividend yield, risk-free interest rate, expected life and expected volatility rate. Compensation expense of $8 and $13 related to these stock options was recorded during the three months ended June 30, 2013 and 2012 , respectively. Compensation expense of $15 and $27 related to these stock options was recorded during the six months ended June 30, 2013 and 2012 , respectively.

(5) Mortgages and Notes Payable

The following table summarizes the Company’s mortgages and notes payable:



	June 30, 2013			December 31, 2012
Fixed rate mortgage loans (a)	$	1,905,937		$	2,078,162
Variable rate construction loan	10,419			10,419
Mortgages payable	1,916,356			2,088,581
Discount, net of accumulated amortization	(1,236		)	(1,492		)
Mortgages payable, net	1,915,120			2,087,089
Notes payable	—			125,000
Mortgages and notes payable, net	$	1,915,120		$	2,212,089


(a)	Includes $69,544 and $76,055 of variable rate mortgage debt that was swapped to a fixed rate as of June 30, 2013 and December 31, 2012 , respectively.

Mortgages Payable

Mortgages payable outstanding as of June 30, 2013 were $1,916,356 (excluding mortgage discount of $1,236 , net of accumulated amortization) and had a weighted average interest rate of 6.15% . Of this amount, $1,905,937 had fixed rates ranging from 3.50% to 8.00% and a weighted average fixed rate of 6.17% at June 30, 2013 . The weighted average interest rate for the fixed rate mortgages payable excludes the impact of the discount amortization, capitalized loan fee amortization and the increase in the contractual interest rate for the mortgage where the Company had triggered the provision of the loan agreement requiring it to make accelerated principal payments, which mortgage was fully repaid on July 1, 2013. The remaining $10,419 of mortgages payable represented a variable rate construction loan with an interest rate of 2.50% at June 30, 2013 based on London Interbank Offered Rate (LIBOR). Properties and the related tenant leases are pledged as collateral for the mortgage loans and a consolidated joint venture property and the related tenant leases are pledged as collateral for the construction loan. As of June 30, 2013 , the Company’s outstanding mortgage indebtedness had a weighted average years to maturity of 5.3 years .

In the second quarter of 2010, the Company ceased making the monthly debt service payment on a $26,865 mortgage payable (University Square) that matured in July 2010. On June 17, 2013, the Company settled this matured mortgage payable and $8,618 of accrued interest for $7,250 plus a $1,902 restricted escrow that had been held by the lender and received debt forgiveness for the remaining amount outstanding on the mortgage of $19,615 and the remaining accrued interest balance of $6,716 , resulting in a gain on debt extinguishment of $26,331 . During the six months ended June 30, 2013 , the Company made mortgages payable repayments in the total amount of $140,824 (including $26 from condemnation proceeds which were paid directly to the lender and excluding scheduled principal payments related to amortizing loans of $11,786 ) and received forgiveness of mortgage debt of $19,615 . The loans repaid during the six months ended June 30, 2013 had either a fixed interest rate or a variable rate that was swapped to a fixed rate, and a weighted average interest rate of 6.18% .

The majority of the Company’s mortgages payable require monthly payments of principal and interest, as well as reserves for real estate taxes and certain other costs. Although the mortgage loans obtained by the Company are generally non-recourse, occasionally, when it is deemed necessary, the Company may guarantee all or a portion of the debt on a full-recourse basis. As of June 30, 2013 , the Company had guaranteed $15,444 of the outstanding mortgage and construction loans with maturity dates ranging from December 16, 2013 through September 30, 2016 (see Note 13). At times, the Company has borrowed funds financed as part of a cross-collateralized package, with cross-default provisions, in order to enhance the financial benefits of a transaction. In those circumstances, one or more of the properties may secure the debt of another of the Company’s properties. Individual decisions

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

regarding interest rates, loan-to-value, debt yield, fixed versus variable rate financing, term and related matters are often based on the condition of the financial markets at the time the debt is originated, which may vary from time to time.

Some of the mortgage payable agreements include periodic reporting requirements and/or debt service coverage ratios which allow the lender to control property cash flow or require partial principal payments if the Company fails to meet such requirements. Management believes the Company was in compliance with such provisions as of June 30, 2013 .

Notes Payable

Notes payable outstanding as of December 31, 2012 consisted of senior and junior mezzanine notes, which totaled $125,000 in aggregate and had a weighted average interest rate of 12.80% . These notes payable represented proceeds from a third party lender related to the debt refinancing transaction for IW JV 2009, LLC (IW JV), which is a wholly-owned entity as of June 30, 2013 . The notes had fixed interest rates of 12.24% and 14.00% , respectively, were scheduled to mature on December 1, 2019 and were secured by 100% of the Company’s equity interest in the IW JV investment properties. On February 1, 2013, the Company repaid the entire balance of the IW JV senior and junior mezzanine notes. The Company paid a 5% prepayment fee totaling $6,250 and wrote off $2,492 of loan fees related to the prepayment, both of which are included within “Interest expense” in the condensed consolidated statements of operations and other comprehensive income (loss).

Debt Maturities

The following table shows the scheduled maturities and required principal payments of the Company’s mortgages payable and unsecured credit facility (as described in Note 6) as of June 30, 2013 for the remainder of 2013, each of the next four years and thereafter and does not reflect the impact of any debt activity that occurred after June 30, 2013 :



	2013			2014			2015			2016			2017			Thereafter			Total
Maturing debt (a):
Fixed rate debt:
Mortgages payable (b)	$	96,810		$	162,237		$	451,934		$	37,823		$	285,617		$	871,516		$	1,905,937
Unsecured credit facility - fixed rate portion of term loan (c)	—			—			—			—			—			300,000			300,000
Total fixed rate debt	96,810			162,237			451,934			37,823			285,617			1,171,516			2,205,937

Variable rate debt:
Mortgages payable	—			10,419			—			—			—			—			10,419
Unsecured credit facility	—			—			—			—			20,000			150,000			170,000
Total variable rate debt	—			10,419			—			—			20,000			150,000			180,419
Total maturing debt (d)	$	96,810		$	172,656		$	451,934		$	37,823		$	305,617		$	1,321,516		$	2,386,356

Weighted average interest rate on debt:
Fixed rate debt	4.92		%	7.21		%	5.81		%	6.22		%	5.73		%	5.31		%	5.61		%
Variable rate debt	—		%	2.50		%	—		%	—		%	1.70		%	1.65		%	1.70		%
Total	4.92		%	6.92		%	5.81		%	6.22		%	5.47		%	4.89		%	5.31		%


(a)	The debt maturity table does not include mortgage discount of $1,236 , net of accumulated amortization, which was outstanding as of June 30, 2013 .


(b)	Includes $69,544 of variable rate mortgage debt that was swapped to a fixed rate.


(c)	In July 2012, the Company entered into an interest rate swap transaction to convert the variable rate portion of $300,000 of LIBOR-based debt to a fixed rate through February 24, 2016. The swap effectively converts one-month floating rate LIBOR to a fixed rate of 0.53875% over the term of the swap.


(d)	As of June 30, 2013 , the weighted average years to maturity of consolidated indebtedness was 5.2 years .

The maturity table excludes accelerated principal payments that may be required as a result of covenants or conditions included in certain loan agreements. As of June 30, 2013 , the Company was making accelerated principal payments on one mortgage payable with an outstanding principal balance of $56,142 , which is reflected in the column corresponding to the loan maturity date (December 1, 2034). The Company repaid this mortgage on July 1, 2013. The Company plans on addressing its mortgages payable maturities by using proceeds from its amended credit facility, asset sales and capital markets transactions.

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(6) Credit Facility

On May 13, 2013 , the Company entered into its third amended and restated unsecured credit agreement with a syndicate of financial institutions led by KeyBank National Association and Wells Fargo Securities LLC to provide for an unsecured credit facility aggregating $1,000,000 . The third amended and restated credit facility consists of a $550,000 unsecured revolving line of credit and a $450,000 unsecured term loan. The Company has the ability to increase available borrowings up to $1,450,000 in certain circumstances. The unsecured revolving line of credit matures on May 12, 2017 and the unsecured term loan matures on May 11, 2018 . The Company has a one year extension option on the unsecured revolving line of credit which it may exercise as long as it is in compliance with the terms of the credit agreement and it pays an extension fee equal to 0.15% of the commitment amount being extended.

The credit facility is priced on a leverage grid at a rate of LIBOR plus a margin ranging from 1.50% to 2.05% for the revolving line of credit and LIBOR plus a margin ranging from 1.45% to 2.00% for the unsecured term loan, along with quarterly unused fees ranging from 0.25% to 0.30% depending on the undrawn amount. In the event the Company becomes investment grade rated, the pricing on the credit facility will be determined based on an investment grade pricing grid with the interest rate equal to LIBOR plus a margin ranging from 0.90% to 1.70% for the unsecured revolving line of credit and LIBOR plus a margin ranging from 1.05% to 2.05% for the unsecured term loan, plus a facility fee ranging from 0.15% to 0.35% depending on the Company's credit rating.

Pursuant to the terms of the unsecured credit agreement, the Company is subject to various covenants, including the requirement to maintain the following: (i) maximum unsecured and secured leverage ratios; (ii) minimum fixed charge and unencumbered interest coverage ratios; and (iii) a minimum consolidated net worth. As of June 30, 2013, management believes the Company was in compliance with all of the covenants and default provisions under the credit agreement.

The Company has an interest rate swap with one of the financial institutions associated with the unsecured credit facility to convert the variable rate portion of $300,000 of LIBOR-based debt to a fixed rate of 0.53875% through February 24, 2016. As of June 30, 2013, the interest rate on the revolving line of credit was 1.70% and the weighted average interest rate on the term loan was 1.88% . Upon closing the amended credit agreement, the Company borrowed the full amount of the term loan. As of June 30, 2013, the Company had borrowed $20,000 under the revolving line of credit.

The Company previously had a $650,000 unsecured credit facility that consisted of a $350,000 unsecured revolving line of credit and a $300,000 unsecured term loan. The previous unsecured credit facility bore interest at a rate of LIBOR plus a margin ranging from 1.75% to 2.50% and was scheduled to mature on February 24, 2015 for the revolving line of credit and February 24, 2016 for the term loan.

(7) Derivative Instruments

The Company’s objective in using interest rate derivatives is to manage its exposure to interest rate movements and add stability to interest expense. To accomplish this objective, the Company uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable rate amounts from a counterparty in exchange for the Company making fixed rate payments over the life of the agreement without exchange of the underlying notional amount.

The Company utilizes three interest rate swaps to hedge the variable cash flows associated with variable rate debt. The effective portion of changes in fair value of the derivatives that are designated and that qualify as cash flow hedges is recorded in “Accumulated other comprehensive loss” and is subsequently reclassified to interest expense as interest payments are made on the Company’s variable rate debt. Over the next 12 months, the Company estimates that an additional $1,278 will be reclassified as an increase to interest expense. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.

During the three months ended June 30, 2013, the Company repaid a $6,405 variable rate mortgage payable that had previously been swapped to a fixed rate in accordance with its scheduled maturity date and terminated the associated interest rate swap. The Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:



	Number of Instruments		Notional
Interest Rate Derivatives	June 30, 2013	December 31, 2012	June 30, 2013		December 31, 2012
Interest Rate Swap	3	4	$	369,544	$	376,055

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The table below presents the estimated fair value of the Company’s derivative financial instruments as well as their classification in the condensed consolidated balance sheets. The valuation techniques utilized are described in Note 12 to the condensed consolidated financial statements.



	Derivatives
	June 30, 2013			December 31, 2012
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as cash flow hedges:
Interest rate swaps	Other assets, net	$	444	N/A	$	—
Interest rate swaps	Other liabilities	$	878	Other liabilities	$	2,783

The table below presents the effect of the Company’s derivative financial instruments in the condensed consolidated statements of operations and other comprehensive income (loss).



Derivatives in Cash Flow Hedging Relationships	Amount of (Gain) Loss Recognized in OCI on Derivative (Effective Portion)						Location of Loss Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Loss Reclassified from Accumulated OCI into Income (Effective Portion)				Location of (Gain) Loss Recognized In Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of (Gain) Loss Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Interest rate swaps	Three Months Ended June 30,			Six Months Ended June 30,				Three Months Ended June 30,		Six Months Ended June 30,			Three Months Ended June 30,			Six Months Ended June 30,
2013	$	(147	)	$	(96	)	Interest expense	$	488	$	1,005	Other income, net	$	(1,085	)	$	(932	)
2012	$	44		$	199		Interest expense	$	297	$	589	Other income, net	$	155		$	310

(8) Investment in Unconsolidated Joint Ventures

Investment Summary

The following table summarizes the Company’s investments in unconsolidated joint ventures:



		Ownership Interest				Investment at
Joint Venture	Date of Investment	June 30, 2013		December 31, 2012		June 30, 2013		December 31, 2012
MS Inland Fund, LLC (a)	4/27/2007	20.0	%	20.0	%	$	7,339	$	8,334
Hampton Retail Colorado, L.L.C. (b)	8/31/2007	95.9	%	95.9	%	—		124
RC Inland L.P. (c)	9/30/2010	20.0	%	20.0	%	37,877		39,468
Oak Property and Casualty LLC (d)	10/1/2006	20.0	%	25.0	%	7,475		8,946
						$	52,691	$	56,872


(a)	The MS Inland Fund, LLC (MS Inland) joint venture was formed with a large state pension fund; the Company is the managing member of the venture and earns fees for providing property management, acquisition and leasing services.


(b)	On May 6, 2013, the Hampton Retail Colorado, L.L.C. (Hampton) joint venture sold its one remaining property; subsequent to such transaction, the Company and its partner in the Hampton joint venture initiated steps to wind down and dissolve the joint venture pursuant to the terms of the organizational agreements and applicable laws and regulations.

(c)

The RC Inland L.P. (RioCan) joint venture was formed with a wholly-owned subsidiary of RioCan Real Estate Investment Trust, a REIT based in Canada. A subsidiary of the Company is the general partner of the joint venture and earns fees for providing property management, asset management and other customary services. In May 2013, the Company entered into an agreement to dissolve the existing joint venture arrangement. The transaction is expected to close on October 1, 2013, subject to customary closing conditions.

(d)

Oak Property & Casualty LLC (the Captive) is an insurance association owned by the Company and four other unaffiliated parties. The Captive was formed to insure/reimburse the members’ deductible obligations for property and general liability insurance claims subject to certain limitations. The Company entered into the Captive to stabilize insurance costs, manage exposures and recoup expenses through the function of the Captive.

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Company has the ability to exercise significant influence, but does not have financial or operating control over these investments, and as a result the Company accounts for these investments pursuant to the equity method of accounting. Under the equity method of accounting, the net equity investment of the Company is reflected in the accompanying condensed consolidated balance sheets and the accompanying condensed consolidated statements of operations and other comprehensive income (loss) includes the Company’s share of net income or loss from each unconsolidated joint venture. Distributions from these investments that are related to income from operations are included as operating activities and distributions that are related to capital transactions are included in investing activities in the Company’s condensed consolidated statements of cash flows.

Combined condensed financial information of these joint ventures (at 100% ) is summarized as follows:



	As of June 30, 2013
	RioCan			Hampton		Other Joint Ventures			Combined Condensed Total
Assets
Real estate assets	$	343,233		$	—	$	270,475		$	613,708
Less accumulated depreciation	(20,726		)	—		(48,589		)	(69,315		)
Real estate, net	322,507			—		221,886			544,393

Assets associated with investment properties held for sale	105,810			—		—			105,810
Other assets, net	107,205			—		42,205			149,410
Total assets	$	535,522		$	—	$	264,091		$	799,613

Liabilities
Mortgage debt	$	235,749		$	—	$	142,998		$	378,747
Liabilities associated with investment properties held for sale	72,268			—		—			72,268
Other liabilities, net	31,704			—		17,704			49,408
Total liabilities	339,721			—		160,702			500,423

Total equity	195,801			—		103,389			299,190
Total liabilities and equity	$	535,522		$	—	$	264,091		$	799,613



	As of December 31, 2012
	RioCan			Hampton			Other Joint Ventures			Combined Condensed Total
Assets
Real estate assets	$	434,704		$	14,326		$	270,386		$	719,416
Less accumulated depreciation	(19,287		)	(2,286		)	(44,554		)	(66,127		)
Real estate, net	415,417			12,040			225,832			653,289

Other assets, net	148,511			1,285			49,658			199,454
Total assets	$	563,928		$	13,325		$	275,490		$	852,743

Liabilities
Mortgage debt	$	312,844		$	14,828		$	143,450		$	471,122
Other liabilities, net	50,076			300			22,960			73,336
Total liabilities	362,920			15,128			166,410			544,458

Total equity (deficit)	201,008			(1,803		)	109,080			308,285
Total liabilities and equity	$	563,928		$	13,325		$	275,490		$	852,743

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Notes to Condensed Consolidated Financial Statements

(Unaudited)



	Three Months Ended June 30,
	RioCan						Hampton						Other Joint Ventures					Combined Condensed Total
	2013			2012			2013			2012			2013		2012			2013			2012
Revenues:
Property related income	$	12,371		$	12,116		$	—		$	—		$	7,181	$	6,797		$	19,552		$	18,913
Other income	—			—			—			—			2,050		2,049			2,050			2,049
Total revenues	12,371			12,116			—			—			9,231		8,846			21,602			20,962

Expenses:
Property operating expenses	1,619			1,815			—			—			860		1,756			2,479			3,571
Real estate taxes	1,990			1,853			—			—			1,360		1,429			3,350			3,282
Depreciation and amortization	7,006			8,075			—			—			2,417		2,596			9,423			10,671
Loss on lease terminations	293			—			—			—			10		168			303			168
General and administrative expenses	149			174			4			8			153		95			306			277
Interest expense, net	2,341			2,508			(232		)	(68		)	1,783		1,969			3,892			4,409
Other expense (income), net	6			—			(13		)	—			1,920		1,152			1,913			1,152
Total expenses	13,404			14,425			(241		)	(60		)	8,503		9,165			21,666			23,530

(Loss) income from continuing operations	(1,033		)	(2,309		)	241			60			728		(319		)	(64		)	(2,568		)
(Loss) income from discontinued operations	(369		)	995			(70		)	68			4		(1,404		)	(435		)	(341		)
Net (loss) income	$	(1,402	)	$	(1,314	)	$	171		$	128		$	732	$	(1,723	)	$	(499	)	$	(2,909	)



	Six Months Ended June 30,
	RioCan						Hampton						Other Joint Ventures					Combined Condensed Total
	2013			2012			2013			2012			2013		2012			2013			2012
Revenues:
Property related income	$	24,721		$	23,980		$	—		$	—		$	13,938	$	13,878		$	38,659		$	37,858
Other income	—			—			—			—			4,074		3,930			4,074			3,930
Total revenues	24,721			23,980			—			—			18,012		17,808			42,733			41,788

Expenses:
Property operating expenses	3,302			3,486			—			—			1,723		2,590			5,025			6,076
Real estate taxes	4,033			3,807			—			—			2,667		2,776			6,700			6,583
Depreciation and amortization	14,360			16,332			—			—			4,892		5,191			19,252			21,523
Loss on lease terminations	832			704			—			—			16		318			848			1,022
General and administrative expenses	294			654			6			20			250		186			550			860
Interest expense, net	4,815			5,042			(1,758		)	(119		)	3,566		4,037			6,623			8,960
Other expense (income), net	6			816			(13		)	—			3,875		2,770			3,868			3,586
Total expenses	27,642			30,841			(1,765		)	(99		)	16,989		17,868			42,866			48,610

(Loss) income from continuing operations	(2,921		)	(6,861		)	1,765			99			1,023		(60		)	(133		)	(6,822		)
(Loss) income from discontinued operations	(820		)	(995		)	(117		)	(1,489		)	51		(190		)	(886		)	(2,674		)
Gain on sales of investment properties - discontinued operations	—			—			1,019			—			—		2,444			1,019			2,444
Net (loss) income	$	(3,741	)	(7,856		)	$	2,667		(1,390		)	$	1,074	$	2,194		$	—		$	(7,052	)

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Profits, Losses and Capital Activity

The following table summarizes the Company’s share of net income (loss) as well as net cash distributions from (contributions to) each unconsolidated joint venture:



	The Company’s Share of Net Income (Loss) for the Three Months Ended June 30,						Net Cash Distributions from/(Contributions to) Joint Ventures for the Three Months Ended June 30,					Fees Earned by the Company for the Three Months Ended June 30,
Joint Venture	2013			2012			2013		2012			2013		2012
MS Inland	$	188		$	(140	)	$	501	$	375		$	190	$	194
Hampton (a)	167			—			839		15			—		1
RioCan	(144		)	(431		)	455		1,504			542		513
Captive	(552		)	(768		)	—		(25		)	—		—
	$	(341	)	$	(1,339	)	$	1,795	$	1,869		$	732	$	708



	The Company’s Share of Net Income (Loss) for the Six Months Ended June 30,							Net Cash Distributions from/(Contributions to) Joint Ventures for the Six Months Ended June 30,					Fees Earned by the Company for the Six Months Ended June 30,
Joint Venture	2013			2012				2013		2012			2013		2012
MS Inland	$	312		$	(124	)		$	1,453	$	3,391		$	418	$	430
Hampton (a)	2,576			(1,092		)	(b)	855		37			1		2
RioCan	(466		)	(1,143		)		1,011		9,542			1,125		1,047
Captive	(1,473		)	(1,325		)		—		(193		)	—		—
	$	949		$	(3,684	)		$	3,319	$	12,777		$	1,544	$	1,479

(a)

During the three and six months ended June 30, 2013 , Hampton determined that the carrying value of certain of its assets was not recoverable and, accordingly, recorded property level impairment charges in the amounts of $64 and $298 , of which the Company’s share was $62 and $286 , respectively. During the three and six months ended June 30, 2012 , Hampton recorded impairment charges in the amounts of $65 and $1,522 , of which the Company’s share was $63 and $1,460 , respectively. The joint venture’s estimates of fair value relating to these impairment assessments were based upon bona fide purchase offers.

(b)

During the six months ended June 30, 2012 , the Company’s share of net losses realized by and distributions received from the venture since its inception exceeded the carrying amount of the Company’s investment in Hampton. At such point, application of the equity method of accounting was discontinued and through March 31, 2012, $230 , representing the Company’s share of losses in excess of its investment in Hampton, was not recorded in the Company’s condensed consolidated financial statements. Due to income realized by Hampton for the period between April 1, 2012 and December 31, 2012, application of the equity method of accounting was re-established for this investment prior to December 31, 2012.

In addition to the Company’s share of net income (loss) for each unconsolidated joint venture, amortization of basis differences resulting from the Company’s previous contributions of investment properties to its unconsolidated joint ventures is recorded within “Equity in loss of unconsolidated joint ventures, net” in the condensed consolidated statements of operations and other comprehensive income (loss). Such basis differences resulted from the differences between the historical cost net book values and fair values of the contributed properties and are amortized over the depreciable lives of the joint ventures’ property assets. The Company recorded amortization of $14 and $53 during the three months ended June 30, 2013 and 2012 , respectively, related to this difference. The Company recorded amortization of $23 and $80 related to this difference during the six months ended June 30, 2013 and 2012 , respectively.

The Company’s investments in unconsolidated joint ventures are reviewed for potential impairment, in addition to impairment evaluations of the individual assets underlying these investments, whenever events or changes in circumstances warrant such an evaluation. To determine whether impairment, if any, is other-than-temporary, the Company considers whether it has the ability and intent to hold the investment until the carrying value is fully recovered. As a result of such evaluations, impairment charges of $134 and $1,834 were recorded during the three and six months ended June 30, 2013 , respectively, to write down the carrying value of the Company’s investment in Hampton. No impairment charges were recorded during the six months ended June 30, 2012 .

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Property Acquisitions and Dispositions

During the six months ended June 30, 2013 , none of the Company’s unconsolidated joint ventures acquired any investment properties.

During the six months ended June 30, 2013 , Hampton sold the two remaining properties in its portfolio. Such transactions aggregated a combined sales price of $13,300 , resulting in a gain on sale of $1,019 on one of the properties. Proceeds from the sales were used to pay down the entire $12,631 balance of the joint venture’s outstanding debt.

As previously discussed, in May 2013, the Company entered into an agreement with its partner in RioCan to dissolve the existing joint venture arrangement. The transaction is expected to close on October 1, 2013, subject to customary closing conditions. Highlights of the anticipated transaction are as follows:


•	The Company will acquire its partner’s 80% ownership interest in five properties. The properties have an agreed upon value, net of mark-to-market adjustments on financing, of $124,800 . The Company will assume the joint venture’s in-place mortgage financing on those properties as of October 1, 2013 of $67,900 at a weighted average interest rate of 4.8% ;

•

The Company will sell to its partner its 20% ownership interest in the remaining eight properties owned by the venture. The properties have an agreed upon value, net of mark-to-market adjustments on financing, of $477,500 . The partner will assume the joint venture’s in-place mortgage financing on those properties as of October 1, 2013 of $209,200 at a weighted average interest rate of 3.7% ; and


•	The Company will receive approximately $8,100 of cash as well as a distribution of the Company’s share of working capital in the joint venture.

(9) Equity

In March 2012, the Company completed a recapitalization of its then outstanding common stock through a ten -to-one reverse stock split and redesignation of all of its common stock as Class A common stock. The Company then paid a stock dividend pursuant to which each then outstanding share of its Class A common stock received one share of each of its Class B-1, Class B-2 and Class B-3 common stock.

The Company listed its Class A common stock on the New York Stock Exchange (NYSE) on April 5, 2012 under the symbol RPAI. The Company’s Class B common stock is identical to the Company’s Class A common stock except that (i) the Company does not intend to list its Class B common stock on a national securities exchange and (ii) shares of the Company’s Class B common stock will convert automatically into shares of the Company’s Class A common stock at specified times. On October 5, 2012, all 48,518 shares of Class B-1 common stock automatically converted to shares of Class A common stock. On April 5, 2013, all 48,518 shares of Class B-2 common stock automatically converted to shares of Class A common stock. Class B-3 common stock will automatically convert to shares of Class A common stock on October 7, 2013. Each share of Class A common stock and Class B common stock participates in distributions equally.

On December 20, 2012, the Company issued 5,400 shares of 7.00% Series A cumulative redeemable preferred stock (Series A preferred stock) at a price of $25.00 per share in an underwritten public offering pursuant to an effective registration statement. The Company retained aggregate net proceeds of $130,289 , after the underwriting discount and offering costs. Dividends on the Series A preferred stock are cumulative and payable quarterly in arrears at the rate of 7.00% per annum based on the $25.00 per share offering price, or $1.75 per annum. On or after five years from the date of issuance (or sooner under limited circumstances), the Company may, at its option, redeem the Series A preferred stock, in whole or in part, at any time or from time to time, for cash at a redemption price of $25.00 per share, plus any accrued and unpaid dividends to, but excluding, the redemption date. The Series A preferred stock has no maturity date and will remain outstanding indefinitely unless redeemed by the Company. The Company used the net proceeds from the offering to repay the $125,000 IW JV senior and junior mezzanine notes and the associated prepayment premium of $6,250 on February 1, 2013. These notes had a weighted average interest rate of 12.80% . See Note 5 for further discussion.

On March 7, 2013, the Company established an at-the-market (ATM) equity program under which it may sell shares of its Class A common stock, having an aggregate offering price of up to $200,000 , from time to time. Actual sales may depend on a variety of factors, including, among others, market conditions and the trading price of the Company’s Class A common stock. The net

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

proceeds are expected to be used for general corporate purposes, which may include repaying debt, including the Company's revolving line of credit, and funding acquisitions.

The following table presents activity under the Company’s ATM equity program:



	Number of common shares sold	Total net consideration		Average price per share
First quarter 2013	56	$	688	$	14.94
Second quarter 2013	5,491	$	82,839	$	15.30
Year to date June 30, 2013	5,547	$	83,527	$	15.29

As of June 30, 2013 , the Company had common shares having an aggregate offering price of up to $115,165 remaining available for sale under its ATM equity program.

(10) Earnings per Share

The following is a reconciliation between weighted average shares used in the basic and diluted EPS calculations, excluding amounts attributable to noncontrolling interests:



	Three Months Ended June 30,								Six Months Ended June 30,
	2013				2012				2013				2012
Numerator:
Income (loss) from continuing operations	$	10,406			$	5,942			$	(683	)		$	(12,472	)
Gain on sales of investment properties	393				4,323				7,652				5,002
Preferred stock dividends	(2,363		)		—				(4,725		)		—
Income (loss) from continuing operations attributable to common shareholders	8,436				10,265				2,244				(7,470		)
Income from discontinued operations	5,172				7,411				7,122				8,858
Net income attributable to common shareholders	13,608				17,676				9,366				1,388
Distributions paid on unvested restricted shares	(15		)		(8		)		(23		)		(10		)
Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares	$	13,593			$	17,668			$	9,343			$	1,378

Denominator:
Denominator for income (loss) per common share — basic:
Weighted average number of common shares outstanding	233,624			(a)	226,543			(b)	232,117			(a)	210,331			(b)
Effect of dilutive securities — stock options	3			(c)	—			(c)	3			(c)	—			(c)
Denominator for income (loss) per common share — diluted:
Weighted average number of common and common equivalent shares outstanding	233,627				226,543				232,120				210,331


(a)	Excluded from these weighted average amounts are 110 shares of restricted common stock, which equate to 105 and 86 shares, respectively, on a weighted average basis for the three and six months ended June 30, 2013 . These shares will continue to be excluded from the computation of basic EPS until contingencies are resolved and the shares are released.


(b)	Excluded from these weighted average amounts are 46 shares of restricted common stock, which equate to 46 and 33 shares, respectively, on a weighted average basis for the three and six months ended June 30, 2012 . These shares will continue to be excluded from the computation of basic EPS until contingencies are resolved and the shares are released.

(c)

Outstanding options to purchase shares of common stock, the effect of which would be anti-dilutive, were 64 and 69 shares as of June 30, 2013 and 2012 , respectively, at a weighted average exercise price of $20.71 and $20.83 , respectively. These shares were not included in the computation of diluted EPS because either a loss from continuing operations attributable to common shareholders was reported for the respective periods, including gain on sales of investment properties from continuing operations and excluding distributions paid on unvested restricted shares, or the options were out of the money, or both.

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(11) Provision for Impairment of Investment Properties

During the six months ended June 30, 2013 , the Company identified certain indicators of impairment for 11 of its properties, one of which was classified as held for sale as of June 30, 2013 . Such indicators included a low occupancy rate, difficulty in leasing space and related cost of re-leasing, reduced anticipated holding periods or financially troubled tenants. The Company performed cash flow analyses during the six months ended June 30, 2013 and determined it necessary to record impairment charges to write down the carrying value of its investment in two properties. For the remaining nine properties with identified impairment indicators, the Company determined that the projected undiscounted cash flows based upon the estimated holding period for each asset exceeded their respective carrying value by a weighted average of 48% .

As part of its analyses performed during the six months ended June 30, 2012 , the Company identified certain indicators of impairment at 22 of its properties ( 13 of which were subsequently sold). The Company performed cash flow analyses during the six months ended June 30, 2012 and determined that the carrying value exceeded the projected undiscounted cash flows based upon the estimated holding period for a parcel at one of its operating properties. Therefore, the Company recorded an impairment charge related to this parcel consisting of the excess carrying value over the estimated fair value of the asset within the accompanying condensed consolidated statements of operations and other comprehensive income (loss). For the remaining 21 properties with identified impairment indicators, the Company determined that the projected undiscounted cash flows based upon the estimated holding period for each asset exceeded their respective carrying value by a weighted average of 40% .

The investment property impairment charges recorded by the Company during the six months ended June 30, 2013 are summarized below:



Property Name	Property Type		Impairment Date	Approximate Square Footage	Provision for Impairment of Investment Properties
Raytheon Facility (a)	Single-user office		June 30, 2013	105,000	$	2,482
University Square (b)	Multi-tenant retail		June 30, 2013	287,000	6,694
				Total	$	9,176
		Estimated fair value of impaired properties			$	11,328


(a)	The Company recorded an impairment charge based upon the terms and conditions of a bona fide purchase offer received from an unaffiliated third party.


(b)	The Company recorded an impairment charge upon re-evaluating the strategic alternatives for the property. See Note 12 for further discussion.

The investment property impairment charge recorded by the Company during the six months ended June 30, 2012 is summarized below:



Property Name	Property Type		Impairment Date	Approximate Square Footage	Provision for Impairment of Investment Properties
Towson Circle	Land parcel		June 25, 2012	n/a (a)	$	1,323
		Estimated fair value of impaired properties			$	1,000


(a)	The Company sold a parcel of land to an unaffiliated third party for which the allocated carrying value was $1,323 greater than the sales price. Such disposition did not qualify for discontinued operations accounting treatment.

The Company can provide no assurance that material impairment charges with respect to the Company’s investment properties will not occur in future periods.

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(12) Fair Value Measurements

Fair Value of Financial Instruments

The following table presents the carrying value and estimated fair value of the Company’s financial instruments.



	June 30, 2013				December 31, 2012
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
Derivative asset	$	444	$	444	$	—	$	—
Financial liabilities:
Mortgages and notes payable, net	$	1,915,120	$	2,071,116	$	2,212,089	$	2,401,883
Credit facility	$	470,000	$	470,000	$	380,000	$	382,723
Derivative liability	$	878	$	878	$	2,783	$	2,783

The carrying values shown in the table are included in the condensed consolidated balance sheets under the indicated captions, except for derivative asset, which is included in “Other assets, net” and derivative liability, which is included in “Other liabilities.”

Recurring Fair Value Measurements

The following table presents the Company’s financial instruments, which are measured at fair value on a recurring basis, by the level in the fair value hierarchy within which those measurements fall. Methods and assumptions used to estimate the fair value of these instruments are described after the table.



	Level 1		Level 2		Level 3		Total
June 30, 2013
Derivative asset	$	—	$	444	$	—	$	444
Derivative liability	$	—	$	878	$	—	$	878

December 31, 2012
Derivative liability	$	—	$	2,783	$	—	$	2,783

Derivatives: The fair values of the derivative asset and derivative liability are determined using a discounted cash flow analysis on the expected future cash flows of each derivative. This analysis utilizes observable market data including forward yield curves and implied volatilities to determine the market’s expectation of the future cash flows of the variable component. The fixed and variable components of the derivative are then discounted using calculated discount factors developed based on the LIBOR swap rate and are aggregated to arrive at a single valuation for the period. The Company also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of June 30, 2013 and December 31, 2012 , the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation. As a result, the Company has determined that its derivative valuations in their entirety are classified within Level 2 of the fair value hierarchy. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered any applicable credit enhancements. The Company’s derivative instruments are further described in Note 7.

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Nonrecurring Fair Value Measurements

The following table presents the Company’s assets measured on a nonrecurring basis at June 30, 2013 and December 31, 2012 , aggregated by the level within the fair value hierarchy in which those measurements fall. Methods and assumptions used to estimate the fair value of these assets are described after the table.



	Level 1		Level 2		Level 3		Total		Provision for Impairment (a)
June 30, 2013
Investment properties (b)	$	—	$	11,328	$	—	$	11,328	$	9,176

December 31, 2012
Investment property - held for sale (c)	$	—	$	9,133	$	—	$	9,133	$	6,901


(a)	Excludes impairment charges recorded on investment properties sold prior to June 30, 2013 and December 31, 2012 , respectively. Additionally, excludes joint venture investment impairment charges recorded on the Company’s Hampton joint venture as the June 30, 2013 investment balance is $0 following receipt of the final distribution for the venture.

(b)

Includes impairment charges to write down the carrying value of the Company’s Raytheon Facility and University Square investment properties to estimated fair value. The estimated fair value of the Raytheon Facility, or $11,328 , was based upon a bona fide purchase offer (a Level 2 measurement) received by the Company from an unaffiliated third party. The estimated fair value of University Square of $0 was based upon consideration of the current and projected operating losses (a Level 3 measurement) that will continue to be realized through ownership of the property. Management does not believe a willing market participant would pay greater than $0 to acquire the property in an arm’s length transaction without substantial modification of existing agreements.

(c)

Includes impairment charges recorded during 2012 for three investment properties classified as held for sale as of December 31, 2012; such charges, calculated as the expected sales prices from executed sales agreements less estimated selling costs, were determined to be Level 2 inputs. The estimated transaction costs totaling $197 are not reflected as a reduction to the fair value disclosed in the table above.

Fair Value Disclosures

The following table presents the Company’s financial liabilities, which are measured at fair value for disclosure purposes, by the level in the fair value hierarchy within which they fall. Methods and assumptions used to estimate the fair value of these instruments are described after the table.



	Level 1		Level 2		Level 3		Total
June 30, 2013
Mortgages and notes payable, net	$	—	$	—	$	2,071,116	$	2,071,116
Credit facility	$	—	$	—	$	470,000	$	470,000

December 31, 2012
Mortgages and notes payable, net	$	—	$	—	$	2,401,883	$	2,401,883
Credit facility	$	—	$	—	$	382,723	$	382,723

Mortgages and notes payable, net: The Company estimates the fair value of its mortgages and notes payable by discounting the future cash flows of each instrument at rates currently offered to the Company for similar debt instruments of comparable maturities by the Company’s lenders. The rates used are not directly observable in the marketplace and judgment is used in determining the appropriate rate for each of the Company’s individual mortgages and notes payable based upon the specific terms of the agreement, including the term to maturity, the quality and nature of the underlying property and its leverage ratio. The rates used range from 2.5% to 5.1% and 2.5% to 4.5% at June 30, 2013 and December 31, 2012 , respectively.

Credit facility: The Company estimates the fair value of its credit facility by discounting the future cash flows related to the fixed rate credit spreads at rates currently offered to the Company for comparable facilities by the Company’s lenders. The rates used are not directly observable in the marketplace and judgment is used in determining the appropriate rate. The Company used a discount rate of 1.5% at June 30, 2013 and 2.0% at December 31, 2012 .

There were no transfers of liabilities between the levels of the fair value hierarchy during the six months ended June 30, 2013 .

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(13) Commitments and Contingencies

Although the mortgage loans obtained by the Company are generally non-recourse, occasionally, when it is deemed necessary, the Company may guarantee all or a portion of the debt on a full-recourse basis. As of June 30, 2013 , the Company has guaranteed $15,444 of its outstanding mortgage and construction loans, with maturity dates ranging from December 16, 2013 through September 30, 2016 .

(14) Litigation

As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, in 2012, certain shareholders of the Company filed putative class action lawsuits against the Company and certain of its officers and directors, which are currently pending in the U.S. District Court in the Northern District of Illinois. The lawsuits allege, among other things, that the Company’s directors and officers breached their fiduciary duties to the shareholders and, as a result, unjustly enriched the Company and the individual defendants. The lawsuits further allege that the breaches of fiduciary duty led certain shareholders to acquire additional stock and caused the shareholders to suffer a loss in share value, all measured in some manner by reference to the Company’s 2012 offering price when it listed its shares on the NYSE. The lawsuits seek unspecified damages and other relief. Based on its initial review of the complaints, the Company believes the lawsuits to be without merit and intends to defend the actions vigorously. While the resolution of these matters cannot be predicted with certainty, management believes, based on currently available information, that the final outcomes of these matters will not have a material effect on the financial statements of the Company.

On April 19, 2013, the defendants filed motions to dismiss the shareholder complaints, which remain pending before the court.

The Company is subject, from time to time, to various legal proceedings and claims that arise in the ordinary course of business. While the resolution of such matters cannot be predicted with certainty, management believes, based on currently available information, that the final outcome of such matters will not have a material effect on the financial statements of the Company.

(15) Subsequent Events

Subsequent to June 30, 2013 , the Company:

•

drew $185,000 on its unsecured revolving line of credit and used the proceeds to repay mortgages payable with an aggregate balance of $180,967 and $5,554 of accrued interest. The mortgages repaid had a weighted average interest rate of 6.41% , excluding the increase in the contractual interest rate for the loan repaid where the Company had triggered the provision of the loan agreement requiring it to make accelerated principal payments; and


•	closed on the sale of Raytheon Facility, a 105,000 square foot single-user office property located in State College, Pennsylvania for a sales price of $11,500 and no significant gain or loss on sale due to impairment charges recognized on June 30, 2013.

On July 30, 2013, the Company’s board of directors declared the third quarter cash dividend for the Company’s 7.00% Series A cumulative redeemable preferred stock. The dividend of $0.4375 per preferred share will be paid on September 30, 2013 to preferred shareholders of record at the close of business on September 19, 2013.

On July 30, 2013, the Company’s board of directors declared the distribution for the third quarter of 2013 of $0.165625 per share on all classes of the Company’s outstanding common shares, which will be paid on October 10, 2013 to common shareholders of record at the close of business on September 27, 2013.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q may constitute “forward-looking statements” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act). Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods which may be incorrect or imprecise and we may not be able to realize them. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “should,” “seeks,” “approximately,” “intends,” “plans,” “pro forma,” “estimates,” “focus,” “contemplates,” “aims,” “continues,” “would” or “anticipates” or the negative of these words and phrases or similar words or phrases. You can also identify forward-looking statements by discussions of strategies, plans or intentions. Risks, uncertainties and other factors could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements. The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:


•	general economic, business and financial conditions, and changes in our industry and changes in the real estate markets in particular;


•	adverse economic and other developments in the Dallas-Fort Worth-Arlington area, where we have a high concentration of properties;


•	changes in our business strategy;


•	our projected operating results;


•	decreased rental rates or increased vacancy rates;


•	defaults on, early terminations of or non-renewal of leases by tenants;


•	bankruptcy or insolvency of a major tenant or a significant number of smaller tenants;


•	increased interest rates or operating costs;


•	changes in real estate and zoning laws and increases in real property tax rates;


▪	declining real estate valuations and impairment charges;


•	our expected leverage;


•	our failure to generate sufficient cash flows to service our outstanding indebtedness;


•	our failure to obtain necessary outside financing;


•	availability, terms and deployment of capital;


•	general volatility of the capital and credit markets and the market price of our Class A common stock;


•	risks of real estate acquisitions, dispositions and redevelopment, including the cost of construction delays and cost overruns;


•	difficulties in identifying properties to acquire and completing acquisitions;


•	our failure to successfully operate acquired properties;


•	our ability to manage our growth effectively;


•	retention of our senior management team;


•	availability of and our ability to attract and retain qualified personnel;


•	estimates relating to our ability to make distributions to our shareholders in the future;


•	our failure to qualify as a REIT;

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•	impact of changes in governmental regulations, tax law and rates and similar matters;


•	our ability to comply with the laws, rules and regulations applicable to companies;


•	environmental uncertainties and risks related to natural disasters;


•	lack or insufficient amounts of insurance; and


•	future terrorist attacks in the U.S.;

For a further discussion of these and other factors that could impact our future results, performance or transactions, see Item 1A. “Risk Factors” in this document, in our Annual Report on Form 10-K for the year ended December 31, 2012 and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2013. Readers should not place undue reliance on any forward-looking statements, which are based only on information currently available to us (or to third parties making the forward-looking statements). We undertake no obligation to publicly release any revisions to such forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q, except as required by applicable law.

The following discussion and analysis compares the three months ended June 30, 2013 to the three months ended June 30, 2012 and the six months ended June 30, 2013 to the six months ended June 30, 2012 and should be read in conjunction with our condensed consolidated financial statements and the related notes included in this report.

Executive Summary

We are a fully-integrated, self-administered and self-managed REIT formed to own and operate high quality, strategically located shopping centers. We are one of the largest owners and operators of shopping centers in the United States. As of June 30, 2013 , our retail operating portfolio consisted of 229 properties with approximately 32,474,000 square feet of gross leasable area (GLA), was geographically diversified across 35 states and included power centers, community centers, neighborhood centers and lifestyle centers, as well as single-user retail properties. Our retail properties are primarily located in retail districts within densely populated areas in highly visible locations with convenient access to interstates and major thoroughfares. Our retail properties have a weighted average age, based on annualized base rent (ABR), of approximately 11.0 years since initial construction. As of June 30, 2013 , our retail operating portfolio was 91.0% occupied and 93.0% leased, including leases signed but not commenced. In addition to our retail operating portfolio, as of June 30, 2013 , we also held interests in nine office properties, two industrial properties, 20 retail operating properties held by two unconsolidated joint ventures, three retail properties under development and one retail operating property classified as held for sale. The following summarizes our consolidated operating portfolio as of June 30, 2013 :



Description	Number of Properties	GLA (in thousands)	Occupancy		Percent Leased Including Leases Signed (a)
Retail
Wholly-owned	229	32,474	91.0	%	93.0	%

Office/Industrial
Wholly-owned	11	2,052	100.0	%	100.0	%
Total consolidated operating portfolio	240	34,526	91.5	%	93.4	%


(a)	Includes leases signed but not commenced.

As of June 30, 2013 , over 90% of our shopping centers, based on GLA, were anchored or shadow anchored by a grocer, discount department store, wholesale club or retailer that sells basic household goods or clothing, including Target, TJX Companies, PetSmart, Best Buy, Bed Bath & Beyond, Home Depot, Kohl’s, Wal-Mart, Publix and Lowe’s. Overall, we have a broad and highly diversified retail tenant base that includes approximately 1,500 tenants with no one tenant representing more than 3.3% of the total ABR generated from our retail operating properties, or our retail ABR.

Company Highlights — Six Months Ended June 30, 2013

Leasing Activity

Leasing activity remained strong during the six months ended June 30, 2013 in our retail operating portfolio, including our pro rata share of unconsolidated joint ventures. During the three and six months ended June 30, 2013 , we signed 257 and 416 leases, respectively, for a total of approximately 1,344,000 and 2,250,000 square feet, respectively, achieving a renewal rate of 88.8% and 86.3% , respectively. While rental rates for new leases signed in 2012 were volatile on a quarterly basis as compared to prior

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rental rates, they were nearly flat for the full year. Rental rates for comparable new leases signed during 2013 increased 8.0% and we may see additional volatility throughout 2013. Rental rates on comparable renewal leases signed during the first six months of 2013 continue to be positive, increasing by 4.8% over previous rental rates. Based on current market conditions, we expect similar increases in rental rates for renewals throughout the remainder of 2013 .

The following table summarizes the leasing activity in our retail operating portfolio, including our pro rata share of unconsolidated joint ventures, during the six months ended June 30, 2013 . Leases of less than 12 months have been excluded.



	Number of Leases Signed	GLA Signed (in thousands)	New Contractual Rent per Square Foot (PSF) (a)		Prior Contractual Rent PSF (a)		% Change over Prior ABR (a)		Weighted Average Lease Term	Tenant Allowances PSF
Comparable Renewal Leases	288	1,832	$	15.15	$	14.46	4.8	%	4.32	$	1.81
Comparable New Leases	41	112	22.73		21.05		8.0	%	5.82	16.89
Non-Comparable New and Renewal Leases (b)	87	306	15.23		n/a		n/a		6.74	23.20
Total	416	2,250	$	15.59	$	14.84	5.0	%	4.95	$	5.48


(a)	Total excludes the impact of Non-Comparable New and Renewal Leases.


(b)	Includes leases signed on units that were vacant for over 12 months, leases signed without fixed rental payments and leases signed where the previous and the current lease do not have a consistent lease structure.

Capital Markets and Balance Sheet Activity

During the six months ended June 30, 2013 , we maintained our focus on strengthening our balance sheet by raising capital and deleveraging through asset dispositions and capital markets transactions. Specifically, we:


•	sold four operating properties and closed on additional transactions, including condemnations, earnouts and parcel sales, which resulted in net proceeds of $38,961;

•

borrowed $90,000, net of repayments, on our unsecured credit facility and made notes payable repayments of $125,000 (IW JV senior and junior mezzanine notes), mortgages payable repayments of $140,824 (including a $26 condemnation where proceeds were paid directly to the lender and excluding scheduled principal payments related to amortizing loans of $11,786) and received forgiveness of mortgage debt of $19,615;

•

amended and restated our existing credit agreement, increasing the aggregate capacity to $1,000,000 from $650,000 comprised of a $550,000 unsecured revolving line of credit with a four year term and a $450,000 unsecured term loan with a five year term. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” for further details about the amended and restated agreement; and


•	established an at-the-market (ATM) equity program under which we sold 5,547 shares of Class A common stock at an average price per share of $15.29 resulting in net proceeds of $83,527.

We plan to continue to pursue opportunistic dispositions of select non-strategic and non-core properties as well as strategic acquisitions in order to focus our portfolio on high quality multi-tenant retail assets in target markets with substantial long-term retail demand attributes.

Joint Ventures

In May 2013, we entered into an agreement with our partner in RioCan to dissolve the existing joint venture arrangement. The transaction is expected close on October 1, 2013, subject to customary closing conditions. Highlights of the anticipated transaction are as follows:


•	We will acquire our partner’s 80% ownership interest in five properties. The properties have an agreed upon value, net of mark-to-market adjustments on financing, of $124,800. We will assume the joint venture’s in-place mortgage financing on those properties as of October 1, 2013 of $67,900 at a weighted average interest rate of 4.8%;


•	We will sell to our partner our 20% ownership interest in the remaining eight properties owned by the venture. The properties have an agreed upon value, net of mark-to-market adjustments on financing, of $477,500. Our partner will

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assume the joint venture’s in-place mortgage financing on those properties as of October 1, 2013 of $209,200 at a weighted average interest rate of 3.7%; and


•	We will receive approximately $8,100 of cash as well as a distribution of our share of working capital in the joint venture.

During the six months ended June 30, 2013 , our Hampton Retail Colorado, L.L.C. (Hampton) joint venture sold its two remaining properties for a combined sales price of $13,300, resulting in a gain on sale of $1,019 on one of the properties. Proceeds from the sales were used to pay down the joint venture’s outstanding debt in its entirety. As of June 30, 2013 , no properties remained in the Hampton joint venture and the venture is in the process of being wound up and dissolved. Prior to June 30, 2013, we received a distribution of $836, representing our pro rata share of the final net assets of the venture.

Distributions

We declared distributions of $0.9236 per share of preferred stock for the period beginning December 20, 2012 to, but excluding, June 30, 2013. We declared quarterly distributions totaling $0.33125 per share of common stock during the six months ended June 30, 2013 .

Results of Operations

We believe that net operating income (NOI) is a useful measure of our operating performance. We define NOI as operating revenues (rental income, tenant recovery income, other property income, excluding straight-line rental income, amortization of lease inducements and amortization of acquired above and below market lease intangibles) less property operating expenses (real estate tax expense and property operating expense, excluding straight-line ground rent expense and straight-line bad debt expense). Other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to other REITs.

This measure provides an operating perspective not immediately apparent from GAAP operating income or net income attributable to common shareholders. We use NOI to evaluate our performance on a property-by-property basis because NOI allows us to evaluate the impact that factors such as lease structure, lease rates and tenant base, which vary by property, have on our operating results. However, NOI should only be used as an alternative measure of our financial performance. For reference and as an aid in understanding our computation of NOI, a reconciliation of NOI to net income attributable to common shareholders as computed in accordance with GAAP has been presented.

Comparison of the Three Months Ended June 30, 2013 and 2012

The following table presents operating information for our same store portfolio consisting of 238 operating properties acquired or placed in service prior to April 1, 2012, along with a reconciliation to net operating income. The number of properties in our same store portfolio decreased to 238 as of June 30, 2013 from 239 as of March 31, 2013 as a result of one investment property being classified as held for sale as of June 30, 2013 and, therefore, accounted for within discontinued operations. Although one investment property was sold during the three months ended June 30, 2013, it was classified as held for sale as of March 31, 2013, and, as such, it was accounted for within discontinued operations. The properties in “Other investment properties” primarily include our development properties, a former development property that was not classified within our operating property portfolio for both periods presented and University Square, due to the continued exploration of strategic alternatives for the property.

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	Three Months Ended June 30,
	2013			2012			Impact			Percentage
Revenues:
Same store investment properties (238 properties):
Rental income	$	111,404		$	109,551		$	1,853		1.7
Tenant recovery income	25,050			24,825			225			0.9
Other property income	2,370			2,584			(214		)	(8.3	)
Other investment properties:
Rental income	1,446			1,491			(45		)
Tenant recovery income	258			(203		)	461
Other property income	97			223			(126		)
Expenses:
Same store investment properties (238 properties):
Property operating expenses	(21,404		)	(21,529		)	125			0.6
Real estate taxes	(17,651		)	(17,098		)	(553		)	(3.2	)
Other investment properties:
Property operating expenses	(503		)	(506		)	3
Real estate taxes	(941		)	(1,666		)	725
Net operating income:
Same store investment properties	99,769			98,333			1,436			1.5
Other investment properties	357			(661		)	1,018
Total net operating income	100,126			97,672			2,454			2.5

Other (expense) income:
Straight-line rental income, net	(297		)	176			(473		)
Amortization of acquired above and below market lease intangibles, net	222			356			(134		)
Amortization of lease inducements	(87		)	(16		)	(71		)
Straight-line ground rent expense	(894		)	(910		)	16
Depreciation and amortization	(62,950		)	(54,085		)	(8,865		)
Provision for impairment of investment properties	(9,176		)	(1,323		)	(7,853		)
Loss on lease terminations	(381		)	(1,174		)	793
General and administrative expenses	(8,288		)	(6,543		)	(1,745		)
Gain on extinguishment of debt	26,331			—			26,331
Equity in loss of unconsolidated joint ventures, net	(461		)	(1,286		)	825
Interest expense	(35,824		)	(36,906		)	1,082
Co-venture obligation expense	—			(397		)	397
Recognized gain on marketable securities	—			7,265			(7,265		)
Other income, net	2,085			3,113			(1,028		)
Total other expense	(89,720		)	(91,730		)	2,010			2.2

Income from continuing operations	10,406			5,942			4,464			75.1
Discontinued operations:
Income, net	5,151			564			4,587
Gain on sales of investment properties	21			6,847			(6,826		)
Income from discontinued operations	5,172			7,411			(2,239		)	(30.2	)
Gain on sales of investment properties	393			4,323			(3,930		)
Net income	15,971			17,676			(1,705		)	(9.6	)
Net income attributable to the Company	15,971			17,676			(1,705		)	(9.6	)
Preferred stock dividends	(2,363		)	—			(2,363		)
Net income attributable to common shareholders	$	13,608		$	17,676		$	(4,068	)	(23.0	)

Total net operating income increased by $2,454 , or 2.5% . Total rental income, tenant recovery and other property income increased by $2,154 , or 1.6% , and total property operating expenses and real estate taxes decreased by $300 , or 0.7% , for the three months ended June 30, 2013 as compared to June 30, 2012 . Same store net operating income increased by $1,436 , or 1.5% .

Rental income. Rental income increased $1,853 , or 1.7% , on a same store basis from $109,551 to $111,404 . The same store increase is primarily due to:


•	an increase of $2,360 consisting of $1,248 from contractual rent changes, $646 from occupancy growth and $466 from releasing spreads;

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partially offset by


•	a decrease of $493, primarily due to reduced percentage rent from various tenants.

Overall, rental income increased $1,808 , or 1.6% , from $111,042 to $112,850 , due to the increase in the same store portfolio described above partially offset by a decrease of $45 in other investment properties.

Tenant recovery income. Tenant recovery income increased $225 , or 0.9% , on a same store basis from $24,825 to $25,050 , primarily due to increases related to adjustments from the common area maintenance (CAM) and real estate tax reconciliation process, partially offset by decreases related to the increase in real estate tax refunds described below.

Total tenant recovery income increased $686 , or 2.8% , from $24,622 to $25,308 , primarily due to an increase in recovery income at our other investment properties and the increase in the same store portfolio described above.

Property operating expenses. Property operating expenses decreased $125 , or 0.6% , on a same store basis from $21,529 to $21,404 . The same store decrease is primarily due to decreases in certain non-recoverable property operating expenses of $345, partially offset by an increase in bad debt expense of $180.

Total property operating expenses decreased $128 , or 0.6% , from $22,035 to $21,907 , primarily due to the decrease in the same store portfolio described above.

Real estate taxes. Real estate taxes increased $553 , or 3.2% , on a same store basis from $17,098 to $17,651 . This increase is primarily due to a net increase in real estate taxes of $1,241 primarily due to increases in assessed values, partially offset by a $672 increase in real estate tax refunds received.

Overall, real estate taxes decreased $172 , or 0.9% , from $18,764 to $18,592 primarily due to a decrease of $725 from other investment properties, partially offset by the increase in the same store portfolio described above.

Other income (expense). Total other expense decreased $2,010 , or 2.2% , from $91,730 to $89,720 , primarily due to:


•	a $26,331 increase in gain on extinguishment of debt resulting from the settlement of the $26,865 mortgage payable that had matured in 2010 and the extinguishment of the related accrued interest of $8,618 for $7,250 plus the release of a $1,902 restricted escrow that had been held by the lender;

partially offset by


•	an $8,865 increase in depreciation and amortization primarily due to the write-off of assets demolished as part of a re-development effort at an operating property in the second quarter of 2013;

•

a $7,853 increase in provision for impairment of investment properties. Based on the results of our evaluations for impairment (see Notes 11 and 12 to the condensed consolidated financial statements), we recognized impairment charges on two operating properties totaling $9,176 and an impairment charge on a parcel of an operating property for $1,323 for the three months ended June 30, 2013 and 2012, respectively, and


•	a $7,265 decrease in recognized gain on marketable securities due to the liquidation of our marketable securities portfolio in 2012.

Discontinued operations. Discontinued operations consist of amounts related to four properties that were sold and one property classified as held for sale as of and for the six months ended June 30, 2013 . Income, net from discontinued operations for the three months ended June 30, 2013 includes $5,309 of income attributable to settlement proceeds received from the Mervyns bankruptcy. We closed on the sale of two single-user retail properties, one multi-tenant retail property and one single-user office property for consideration totaling $26,366 and gains of $1,935 during the six months ended June 30, 2013 . Discontinued operations also consist of 31 properties that were sold during the year ended December 31, 2012 . We closed on the sale of 22 single-user retail properties, five multi-tenant retail properties, a single-user industrial property and three single-user office properties, one of which was transferred to the lender in a deed-in-lieu of foreclosure transaction, during the year ended December 31, 2012 for consideration totaling $475,631, extinguishment of mortgage debt of $254,306 and total gains of $30,141.

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Comparison of the Six Months Ended June 30, 2013 and 2012

The following table presents operating information for our same store portfolio consisting of 238 operating properties acquired or placed in service prior to January 1, 2012 , along with a reconciliation to net operating income. The number of properties in our same store portfolio decreased to 238 as of June 30, 2013 from 239 as of December 31, 2012 as a result of one investment property being classified as held for sale as of June 30, 2013 and, therefore, accounted for within discontinued operations. Although four investment properties were sold during the six months ended June 30, 2013, three of them were classified as held for sale as of December 31, 2012, and, as such, they were accounted for within discontinued operations. In addition, one former development property changed categorization from “Other investment properties” to same store during the six months ended June 30, 2013 because it was part of our operating property portfolio for both periods presented. The properties in “Other investment properties” primarily include our development properties, a former development property that was not classified within our operating property portfolio for both periods presented and University Square, due to the continued exploration of strategic alternatives for the property.

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	Six Months Ended June 30,
	2013			2012			Impact			Percentage
Revenues:
Same store investment properties (238 properties):
Rental income	$	223,435		$	219,777		$	3,658		1.7
Tenant recovery income	49,632			52,073			(2,441		)	(4.7	)
Other property income	4,855			5,245			(390		)	(7.4	)
Other investment properties:
Rental income	2,911			2,741			170
Tenant recovery income	579			375			204
Other property income	158			300			(142		)
Expenses:
Same store investment properties (238 properties):
Property operating expenses	(43,784		)	(44,570		)	786			1.8
Real estate taxes	(35,242		)	(35,451		)	209			0.6
Other investment properties:
Property operating expenses	(1,266		)	(870		)	(396		)
Real estate taxes	(1,781		)	(2,430		)	649
Net operating income:
Same store investment properties	198,896			197,074			1,822			0.9
Other investment properties	601			116			485
Total net operating income	199,497			197,190			2,307			1.2

Other (expense) income:
Straight-line rental income, net	(961		)	511			(1,472		)
Amortization of acquired above and below market lease intangibles, net	487			879			(392		)
Amortization of lease inducements	(167		)	(28		)	(139		)
Straight-line ground rent expense	(1,801		)	(1,826		)	25
Depreciation and amortization	(117,306		)	(108,316		)	(8,990		)
Provision for impairment of investment properties	(9,176		)	(1,323		)	(7,853		)
Loss on lease terminations	(592		)	(4,860		)	4,268
General and administrative expenses	(16,343		)	(11,464		)	(4,879		)
Gain on extinguishment of debt	26,331			3,879			22,452
Equity in loss of unconsolidated joint ventures, net	(862		)	(3,604		)	2,742
Interest expense	(82,951		)	(87,928		)	4,977
Co-venture obligation expense	—			(3,300		)	3,300
Recognized gain on marketable securities	—			7,265			(7,265		)
Other income, net	3,161			453			2,708
Total other expense	(200,180		)	(209,662		)	9,482			4.5

Loss from continuing operations	(683		)	(12,472		)	11,789			94.5
Discontinued operations:
Income, net	5,187			1,096			4,091
Gain on sales of investment properties	1,935			7,762			(5,827		)
Income from discontinued operations	7,122			8,858			(1,736		)	(19.6	)
Gain on sales of investment properties	7,652			5,002			2,650
Net income	14,091			1,388			12,703			915.2
Net income attributable to the Company	14,091			1,388			12,703			915.2
Preferred stock dividends	(4,725		)	—			(4,725		)
Net income attributable to common shareholders	$	9,366		$	1,388		$	7,978		574.8

Total net operating income increased by $2,307 , or 1.2% . Total rental income, tenant recovery and other property income increased by $1,059 , or 0.4% , and total property operating expenses and real estate taxes decreased by $1,248 , or 1.5% , for the six months ended June 30, 2013 as compared to June 30, 2012 . Same store net operating income increased by $1,822 , or 0.9% .

Rental income. Rental income increased $3,658 , or 1.7% , on a same store basis from $219,777 to $223,435 . The same store increase is primarily due to:

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•	an increase of $3,948 consisting of $2,225 from contractual rent changes, $901 from releasing spreads and $822 from occupancy growth;

partially offset by


•	a decrease of $360, primarily due to reduced percentage rent from various tenants.

Overall, rental income increased $3,828 , or 1.7% , from $222,518 to $226,346 , due to the increase in the same store portfolio described above and an increase of $170 in other investment properties.

Tenant recovery income. Tenant recovery income decreased $2,441 , or 4.7% , on a same store basis from $52,073 to $49,632 , primarily due to adjustments from the CAM and real estate tax reconciliation process, which represented $1,472 of the decrease. In addition, $939 of the decrease related to tenant recovery adjustments due to the increase in real estate tax refunds described below.

Total tenant recovery income decreased $2,237 , or 4.3% , from $52,448 to $50,211 , primarily due to the decrease in the same store portfolio described above and a decrease in recovery income at our other investment properties.

Property operating expenses. Property operating expenses decreased $786 , or 1.8% , on a same store basis from $44,570 to $43,784 . The same store decrease is primarily due to decreases in certain non-recoverable property operating expenses of $1,307, partially offset by an increase in certain recoverable property operating expenses of $441.

Total property operating expenses decreased $390 , or 0.9% , from $45,440 to $45,050 , primarily due to the decrease in the same store portfolio described above and a decrease in certain non-recoverable property operating expenses at our other investment properties of $164, partially offset by an increase in bad debt expense of $624 at our other investment properties.

Real estate taxes. Real estate taxes decreased $209 , or 0.6% , on a same store basis from $35,451 to $35,242 . This decrease is primarily due to a decrease of $1,546 related to an increase in real estate tax refunds received and a decrease in tax consulting fees, partially offset by a net increase in real estate taxes of $1,166, primarily due to increases in assessed values and an increase of $171 in prior year estimates adjusted during the six months ended June 30, 2013 based on actual real estate taxes paid.

Overall, real estate taxes decreased $858 , or 2.3% , from $37,881 to $37,023 primarily due to a decrease of $649 from other investment properties and the decrease in the same store portfolio described above.

Other income (expense). Total other expense decreased $9,482 , or 4.5% , from $209,662 to $200,180 , primarily due to:


•	a $22,452 increase in gain on extinguishment of debt resulting from the $26,331 gain recognized in 2013 related to the settlement of the mortgage payable that had matured in 2010 and the extinguishment of the related accrued interest, partially offset by $3,879 of debt forgiveness in 2012 related to the payoff of a construction loan;


•	a $4,977 decrease in interest expense primarily consisting of:


•	a $13,642 decrease in interest on mortgages payable and construction loans due to the repayment of mortgage debt;


•	a $7,440 decrease in interest on notes payable due to the repayment of notes payable with an aggregate balance of $138,900 and a weighted average interest rate of 12.62%;


•	a decrease in interest on our credit facility of $2,536 due to lower interest rates following the May 2013 amendment and restatement of the facility;

partially offset by


•	the 2013 payment of $6,250 in prepayment penalties and non-cash loan fee write-offs of $2,492 related to the repayment of the IW JV senior and junior mezzanine notes, and


•	a net decrease of $10,858 in mortgage premium amortization related to the repayment of a cross-collateralized pool of mortgages in 2012.


•	a decrease of $4,268 in loss on lease terminations in the first half of 2013 as compared to the first half of 2012;


•	a decrease in co-venture obligation expense of $3,300 related to our purchase of the remainder of our partner’s interest in IW JV in April 2012;

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•	a decrease in equity in loss of unconsolidated joint ventures of $2,742 primarily due to a decrease in property level impairment charges recorded during 2012 at one of our unconsolidated joint ventures;

partially offset by


•	an $8,990 increase in depreciation and amortization primarily due to the write-off of assets demolished as part of a re-development effort at an operating property in the second quarter of 2013;

•

a $7,853 increase in provision for impairment of investment properties. Based on the results of our evaluations for impairment (see Notes 11 and 12 to the condensed consolidated financial statements), we recognized impairment charges on two operating properties totaling $9,176 and an impairment charge on a parcel of an operating property for $1,323 for the six months ended June 30, 2013 and 2012, respectively;


•	a $7,265 decrease in recognized gain on marketable securities due to the liquidation of our marketable securities portfolio in 2012, and


•	a $4,879 increase in general and administrative expenses primarily due to costs incurred during the six months ended June 30, 2013 in conjunction with our information technology platform, increased costs associated with being a publicly-traded company and increased legal expenses.

Funds From Operations

One of our objectives is to provide cash distributions to our shareholders from cash generated from our operations. Cash generated from operations is not equivalent to our income (loss) from continuing operations as determined under GAAP. Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts, or NAREIT, an industry trade group, has promulgated a standard known as funds from operations (FFO). We believe that FFO, which is a non-GAAP performance measure, provides an additional and useful means to assess the operating performance of REITs. As defined by NAREIT, FFO means net income (loss) computed in accordance with GAAP, excluding gains (or losses) from sales of depreciable investment properties, plus depreciation and amortization and impairment charges on depreciable investment properties, including amounts from continuing and discontinued operations as well as adjustments for unconsolidated joint ventures in which the reporting entity holds an interest. We have adopted the NAREIT definition in our computation of FFO. Management believes that, subject to the following limitations, FFO provides a basis for comparing our performance and operations to those of other REITs.

We define Operating FFO as FFO excluding the impact to earnings from the early extinguishment of debt and other items as denoted within the calculation. We consider Operating FFO a meaningful additional measure of operating performance primarily because it excludes the effects of transactions and other events which we do not consider representative of the operating results of our core business platform. Neither FFO nor Operating FFO represent alternatives to “Net Income” as an indicator of our performance and “Cash Flows from Operating Activities” as determined by GAAP as a measure of our capacity to fund cash needs, including the payment of dividends. Further comparison of our presentation of Operating FFO to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in definition and application by such REITs.

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FFO and Operating FFO are calculated as follows:



	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Net income attributable to common shareholders	$	13,608		$	17,676		$	9,366		$	1,388
Depreciation and amortization	65,753			62,156			123,126			127,381
Provision for impairment of investment properties	9,238			1,498			9,462			2,553
Gain on sales of investment properties	(414		)	(11,170		)	(10,564		)	(12,764		)
FFO	$	88,185		$	70,160		$	131,390		$	118,558

Impact on earnings from the early extinguishment of debt, net	(26,483		)	(9,900		)	(19,150		)	(13,749		)
Joint venture investment impairment	134			—			1,834			—
Recognized gain on marketable securities	—			(7,265		)	—			(7,265		)
Excise tax accrual	—			—			—			4,594
Provision for hedge ineffectiveness	(1,085		)	155			(932		)	310
Other	(150		)	(1,627		)	(350		)	(1,627		)
Operating FFO	$	60,601		$	51,523		$	112,792		$	100,821

Depreciation and amortization related to investment properties for purposes of calculating FFO includes a portion of loss on lease terminations, encompassing the write-off of tenant-related assets, including tenant improvements and in-place lease values, as a result of early lease terminations. Total loss on lease terminations included in depreciation and amortization above for the three months ended June 30, 2013 and 2012 were $479 and $1,169 , respectively. Total loss on lease terminations included in depreciation and amortization above for the six months ended June 30, 2013 and 2012 were $831 and $4,893 , respectively.

Liquidity and Capital Resources

We anticipate that cash flows from the below-listed sources will provide adequate capital for the next 12 months and beyond for all scheduled principal and interest payments on our outstanding indebtedness, including maturing debt, current and anticipated tenant improvement or other capital obligations, the shareholder distribution required to maintain our REIT status and compliance with the financial covenants of our credit agreement.

Our primary expected sources and uses of liquidity are as follows:



	SOURCES		USES
▪	Cash and cash equivalents		Short-Term:
▪	Operating cash flow	▪	Tenant improvement allowances and leasing costs
▪	Available borrowings under our amended credit facility	▪	Improvements made to individual properties that are not
▪	Asset sales		recoverable through common area maintenance charges to tenants
▪	Proceeds from capital markets transactions	▪	Debt repayment requirements
		▪	Distribution payments
		▪	Acquisitions
			Long-Term:
		▪	Major redevelopment, renovation or expansion
		▪	New development

We have made substantial progress over the last several years in strengthening our balance sheet and addressing debt maturities. We have pursued this goal through a combination of the refinancing or repayment of maturing debt, total or partial dispositions of assets through sales or contributions to joint ventures and capital markets transactions, including the completion of a public offering and listing of our Class A common stock on the NYSE, the completion of a public offering of our Series A preferred stock and the establishment of our ATM equity program. As of June 30, 2013 , we had $96,810 of debt scheduled to mature through the end of 2013 , substantially all of which we plan on satisfying by using a combination of proceeds from our amended credit facility, asset sales and capital markets transactions.

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The table below summarizes our consolidated indebtedness at June 30, 2013 :



Debt	Aggregate Principal Amount at June 30, 2013			Weighted Average Interest Rate		Weighted Average Years to Maturity
Fixed rate mortgages payable (a)	$	1,905,937		6.17	%	5.3 years
Variable rate construction loan	10,419			2.50	%	1.3 years
Total mortgages payable	1,916,356			6.15	%	5.3 years
Discount, net of accumulated amortization	(1,236		)
Total mortgages payable, net	1,915,120			6.15	%	5.3 years
Unsecured credit facility:
Fixed rate portion of term loan (b)	300,000			1.99	%	4.9 years
Variable rate portion of term loan	150,000			1.65	%	4.9 years
Variable rate revolving line of credit	20,000			1.70	%	3.9 years
Total unsecured credit facility	470,000			1.87	%	4.8 years

Total consolidated indebtedness, net	$	2,385,120		5.31	%	5.2 years


(a)	Includes $69,544 of variable rate mortgage debt that was swapped to a fixed rate as of June 30, 2013.


(b)	Reflects $300,000 of variable rate debt that matures in May 2018 that is swapped to a fixed rate through February 2016.

Mortgages Payable and Construction Loans

Mortgages payable outstanding as of June 30, 2013 , including a construction loan and excluding mortgage discount of $1,236 , net of accumulated amortization, were $1,916,356 and had a weighted average interest rate of 6.15% . Of this amount, $1,905,937 had fixed rates ranging from 3.50% to 8.00% and a weighted average fixed rate of 6.17% at June 30, 2013 . The weighted average interest rate for the fixed rate mortgages payable excludes the impact of the discount amortization, capitalized loan fee amortization and the increase in the contractual interest rate for the mortgage where we had triggered the provision of the loan agreement requiring us to make accelerated principal payments, which mortgage was fully repaid on July 1, 2013. The remaining $10,419 of mortgages payable represented a variable rate construction loan with an interest rate of 2.50% at June 30, 2013 based on LIBOR. Properties and the related tenant leases are pledged as collateral for the mortgage loans and a consolidated joint venture property and the related tenant leases are pledged as collateral for the construction loan. Generally, our mortgages payable are secured by individual properties or groups of properties. As of June 30, 2013 , our outstanding mortgage indebtedness had a weighted average years to maturity of 5.3 years .

During the six months ended June 30, 2013 , we made mortgages payable repayments of $140,824 (including $26 from condemnation proceeds which were paid directly to the lender and excluding scheduled principal payments related to amortizing loans of $11,786 ) and received forgiveness of mortgage debt of $19,615. The loans repaid during the six months ended June 30, 2013 had either a fixed interest rate or a variable rate that was swapped to a fixed rate, and a weighted average interest rate of 6.18% .

IW JV Mezzanine Notes

IW JV is a former joint venture that has been 100% owned since April 26, 2012. The mezzanine notes payable were scheduled to mature on December 1, 2019. On February 1, 2013, we repaid the entire $125,000 balance of the notes payable. We paid a 5% prepayment fee totaling $6,250 and wrote-off $2,492 of loan fees related to the prepayment.

Credit Facility

On May 13, 2013, we entered into our third amended and restated unsecured credit agreement with a syndicate of financial institutions to provide for an unsecured credit facility aggregating $1,000,000, consisting of a $550,000 unsecured revolving line of credit which matures on May 12, 2017 and a $450,000 unsecured term loan which matures on May 11, 2018. The unsecured credit facility also contains an accordion feature that allows us to increase the availability thereunder to up to $1,450,000 in certain circumstances. Upon closing, we borrowed the full amount of the term loan and as of June 30, 2013 , we had a total of $20,000 outstanding under the unsecured revolving line of credit.

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fees ranging from 0.25% to 0.30%, depending on the undrawn amount. In the event we become investment grade rated, the pricing on the credit facility will be determined based on an investment grade pricing grid with the interest rate equal to LIBOR plus a margin ranging from 0.90% to 1.70% for the unsecured revolving line of credit and LIBOR plus a margin ranging from 1.05% to 2.05% for the unsecured term loan, plus a facility fee ranging from 0.15% to 0.35%, depending on our credit rating.

We have an interest rate swap to convert the variable rate portion of $300,000 of LIBOR-based debt to a fixed rate of 0.53875% through February 24, 2016. As of June 30, 2013, the weighted average interest rate under the unsecured revolving line of credit and unsecured term loan was 1.87%.

Pursuant to the terms of the unsecured credit agreement, we are subject to various covenants, including the requirement to maintain the following: (i) maximum unsecured and secured leverage ratios, (ii) minimum fixed charge and unencumbered interest coverage ratios, and (iii) a minimum consolidated net worth requirement. As of June 30, 2013, management believes we were in compliance with all of the covenants and default provisions under the credit agreement.

For a full list of all covenants related to our unsecured credit facility, refer to the Third Amended and Restated Credit Agreement, dated May 13, 2013, incorporated herein by reference to Exhibit 10.1 to this Form 10-Q.

As of December 31, 2012, we had a $650,000 unsecured credit facility pursuant to an agreement with KeyBank National Association and other financial institutions. The credit facility consisted of a $350,000 unsecured revolving line of credit and a $300,000 unsecured term loan, which were scheduled to mature on February 24, 2015 and February 24, 2016, respectively.

Debt Maturities

The following table shows the scheduled maturities and required principal payments of our mortgages payable and unsecured credit facility as of June 30, 2013 for the remainder of 2013, each of the next four years and thereafter and does not reflect the impact of any debt activity that occurred after June 30, 2013 :



	2013			2014			2015			2016			2017			Thereafter			Total			Fair Value
Maturing debt (a) :
Fixed rate debt:
Mortgages payable (b)	$	96,810		$	162,237		$	451,934		$	37,823		$	285,617		$	871,516		$	1,905,937		$	2,060,697
Unsecured credit facility - fixed rate portion of term loan (c)	—			—			—			—			—			300,000			300,000			300,000
Total fixed rate debt	96,810			162,237			451,934			37,823			285,617			1,171,516			2,205,937			2,360,697

Variable rate debt:
Mortgages payable	—			10,419			—			—			—			—			10,419			10,419
Unsecured credit facility	—			—			—			—			20,000			150,000			170,000			170,000
Total variable rate debt	—			10,419			—			—			20,000			150,000			180,419			180,419
Total maturing debt (d)	$	96,810		$	172,656		$	451,934		$	37,823		$	305,617		$	1,321,516		$	2,386,356		$	2,541,116

Weighted average interest rate on debt:
Fixed rate debt	4.92		%	7.21		%	5.81		%	6.22		%	5.73		%	5.31		%	5.61		%
Variable rate debt	—		%	2.50		%	—		%	—		%	1.70		%	1.65		%	1.70		%
Total	4.92		%	6.92		%	5.81		%	6.22		%	5.47		%	4.89		%	5.31		%


(a)	The debt maturity table does not include mortgage discount of $1,236 , net of accumulated amortization, which was outstanding as of June 30, 2013 .


(b)	Includes $69,544 of variable rate mortgage debt that was swapped to a fixed rate.


(c)	In July 2012, we entered into an interest rate swap transaction to convert the variable rate portion of $300,000 of LIBOR-based debt to a fixed rate through February 24, 2016. The swap effectively converts one-month floating rate LIBOR to a fixed rate of 0.53875% over the term of the swap.


(d)	As of June 30, 2013 , the weighted average years to maturity of consolidated indebtedness was 5.2 years .

The maturity table excludes accelerated principal payments that may be required as a result of covenants or conditions included in certain loan agreements. As of June 30, 2013 , we were making accelerated principal payments on one mortgage payable with an outstanding principal balance of $56,142 , which is reflected in the year corresponding to the loan maturity date (December 1,

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2034). We repaid this mortgage on July 1, 2013. We plan on addressing our mortgages payable maturities by using proceeds from our amended credit facility, asset sales and capital markets transactions.

Distributions and Equity Transactions

Our distributions of current and accumulated earnings and profits for U.S. federal income tax purposes are taxable to shareholders, generally, as ordinary income. Distributions in excess of these earnings and profits generally are treated as a non-taxable reduction of the shareholders’ basis in the shares to the extent thereof (non-dividend distributions) and thereafter as taxable gain. We intend to continue to qualify as a REIT for U.S. federal income tax purposes. The Code generally requires that a REIT distribute annually at least 90% of its REIT taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gain, in order to qualify as a REIT, and the Code generally taxes a REIT on any retained income.

To satisfy the requirements for qualification as a REIT and generally not be subject to U.S. federal income and excise tax, we intend to make regular quarterly distributions of all or substantially all of our REIT taxable income to holders of our common stock out of assets legally available for such purposes. Our future distributions will be at the sole discretion of our board of directors. When determining the amount of future distributions, we expect that our board of directors will consider, among other factors, (i) the amount of cash generated from our operating activities, (ii) our expectations of future cash flow, (iii) our determination of near-term cash needs for debt repayments, existing or future share repurchases, and acquisitions of new properties, (iv) the timing of significant re-leasing activities and the establishment of additional cash reserves for anticipated tenant allowances and general property capital improvements, (v) our ability to continue to access additional sources of capital, (vi) the amount required to be distributed to maintain our status as a REIT and to reduce any income and excise taxes that we otherwise would be required to pay, (vii) the amount required to declare and pay in cash, or set aside for the payment of, the dividends on our Series A preferred stock for all past dividend periods, and (viii) any limitations on our distributions contained in our credit or other agreements, including, without limitation, in our unsecured revolving line of credit and unsecured term loan, which limit our distributions to the greater of 95% of FFO as defined in the credit agreement (which equals FFO, as set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Funds From Operations,” excluding gains or losses from extraordinary items, impairment charges not already excluded from FFO and other non-cash charges) or the amount necessary for us to maintain our qualification as a REIT. Under certain circumstances, we may be required to make distributions in excess of cash available for distribution in order to meet the REIT distribution requirements.

Prior to listing our Class A common stock on the NYSE, we maintained a distribution reinvestment program (DRP) which allowed our shareholders who had purchased shares in our previous offerings to automatically reinvest distributions by purchasing additional shares from us. During the year ended December 31, 2012, we received $11,626 in investor proceeds through our DRP, all of which were received in the first quarter of 2012.

On April 5, 2012, we completed a public offering of 36,570 shares of Class A common stock resulting in gross proceeds of $292,560, or $272,081, net of the underwriting discount ($266,454, net of the underwriting discount and offering costs), and the listing of our Class A common stock on the NYSE under the symbol RPAI. Upon listing, our DRP and share repurchase program (SRP) were terminated.

In November 2012, we filed a universal shelf registration statement which is effective for three years. On December 20, 2012, we completed a public offering of 5,400 shares of Series A preferred stock resulting in gross proceeds of $135,000, or $130,747, net of the underwriting discount ($130,289, net of the underwriting discount and offering costs). On February 1, 2013, we used the net proceeds from the preferred offering to repay the $125,000 IW JV senior and junior mezzanine notes and the associated prepayment premium of $6,250. These notes had a weighted average interest rate of 12.80%.

On March 7, 2013, we established an ATM equity program under which we may sell shares of our Class A common stock, having an aggregate offering price of up to $200,000, from time to time. The net proceeds are expected to be used for general corporate purposes, which may include repaying debt, including our revolving line of credit, and funding acquisitions. During the six months ended June 30, 2013 , 5,547 shares were issued and sold at a weighted average price per share of $15.29 for proceeds of $83,527, net of commissions and offering costs. As of June 30, 2013 , we had common shares having an aggregate offering price of up to $115,165 remaining available for sale under our ATM equity program. We will continue to closely monitor both the debt and equity markets and carefully consider our available financing alternatives, including both public offerings and private placements.

Capital Expenditures and Development Activity

We anticipate that obligations related to capital improvements to our properties can be met with cash flows from operations and working capital.

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The following table provides summary information regarding our properties under development as of June 30, 2013 , including one consolidated joint venture and three wholly-owned properties. As of June 30, 2013 , we did not have any significant active construction ongoing at these properties, and, currently, we only intend to develop the remaining potential GLA to the extent that we have pre-leased the space to be developed.



Location	Property Name	Our Ownership Percentage	Carrying Value at June 30, 2013			Construction Loan Balance at June 30, 2013
Henderson, Nevada	Green Valley Crossing	50.0%	$	3,607		$	10,419
Billings, Montana	South Billings Center	100.0%	5,627			—
Nashville, Tennessee	Bellevue Mall	100.0%	23,432			—
Henderson, Nevada	Lake Mead Crossing	100.0%	17,322			—
			$	49,988	(a)	$	10,419


(a)	Total excludes $25,696 of costs, net of accumulated depreciation, placed in service, none of which was placed in service during the six months ended June 30, 2013 . As of June 30, 2013 , the ABR from the portion of our development properties with respect to which construction has been completed and placed in service was $1,455.

Asset Dispositions

During 2012 and the six months ended June 30, 2013 , our asset sales were an integral component of our deleveraging and recapitalization efforts. The following table highlights the results of our asset dispositions during 2012 and the six months ended June 30, 2013 .



	Number of Assets Sold	GLA	Consideration		Total Debt Extinguished		Net Sales Proceeds
2013 Dispositions (through June 30, 2013)	4	349,200	$	26,366	$	—	$	26,076
2012 Dispositions	31	4,420,300	$	475,631	$	254,306	$	211,381

In addition to the above, we received net proceeds of $12,885 during the six months ended June 30, 2013 and $11,203 during the year ended December 31, 2012 from condemnation awards, earnouts and the sale of parcels at certain of our properties.

Statement of Cash Flows Comparison for the Six Months Ended June 30, 2013 and 2012

Cash Flows from Operating Activities

Cash flows provided by operating activities were $101,590 and $96,832 for the six months ended June 30, 2013 and 2012 , respectively, which consist primarily of net income from property operations, adjusted for non-cash charges for depreciation and amortization and gains on sales of investment properties and extinguishment of debt. The $4,758 increase in operating cash flows is primarily attributable to a reduction of cash paid for interest of $35,216 and an increase in distributions on investments in unconsolidated joint ventures of $2,030, partially offset by a decrease in NOI of $9,682 (including a decrease of $11,989 in NOI from discontinued operations, offset by an increase in NOI from continuing operations of $2,307), an increase of $3,977 in cash paid for general and administrative expenses, a $1,562 decrease in dividends received, as well as ordinary course fluctuations in prepaid rent and other working capital accounts.

Cash Flows from Investing Activities

Cash flows provided by investing activities were $22,667 and $20,133, respectively, for the six months ended June 30, 2013 and 2012 . During the six months ended June 30, 2013 and 2012 , we sold certain properties and received condemnation and earnout proceeds which resulted in sales proceeds of $38,961 and $12,997, respectively. During the six months ended June 30, 2013 and 2012 , $21,250 and $16,567, respectively, were used for capital expenditures and tenant improvements, $2,254 and $7,333, respectively, were invested in our unconsolidated joint ventures, and $492 and $309, respectively, were used for existing development projects. During the six months ended June 30, 2013 and 2012 , amounts returned from restricted escrow accounts, some of which are required under certain mortgage arrangements, were $6,866 and $8,202, respectively, and distributions of investments in unconsolidated joint ventures were $836 and $17,403, respectively. During the six months ended June 30, 2012, we received proceeds from the sale of marketable securities of $5,719, due to the liquidation of our marketable securities portfolio in 2012.

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Cash Flows from Financing Activities

Cash flows used in financing activities were $188,751 and $150,628, respectively, for the six months ended June 30, 2013 and 2012 . We used $192,883 and $312,172 during these periods, respectively, in cash flow related to the net activity from principal payments on mortgages and notes payable, including the repayment of $125,000 of IW JV notes payable in 2013, the payment of loan fees and net proceeds from our credit facility. During the six months ended June 30, 2013, we paid $79,043 in distributions to our shareholders and we received $84,835 in proceeds from the issuance of common stock through our ATM equity program in 2013. During the six months ended June 30, 2012, we paid $51,991 in distributions, net of distributions reinvested through the DRP, to our shareholders and we used $5,287 for the repayment of margin debt. We also repaid $50,000 in settlement of the co-venture obligation during the six months ended June 30, 2012. In 2012, we also received $272,081 in proceeds from the issuance of our Class A common stock and paid $1,253 to shareholders holding fractional shares in connection with our April 2012 public offering.

Off-Balance-Sheet Arrangements

Effective April 27, 2007, we formed a joint venture (MS Inland) with a large state pension fund. As of June 30, 2013 , the joint venture owned six multi-tenant retail properties, which we contributed at inception of the venture.

On May 20, 2010, we entered into definitive agreements to form a joint venture (RioCan) with a wholly-owned subsidiary of RioCan Real Estate Investment Trust. As of June 30, 2013 , our RioCan joint venture owned 14 multi-tenant retail properties, of which we contributed nine. In May 2013, we entered into an agreement with our partner in RioCan to dissolve the existing joint venture arrangement. The transaction is expected close on October 1, 2013, subject to customary closing conditions.

In addition, as of June 30, 2013 , we held investments in one other unconsolidated joint venture. Our investments in unconsolidated joint ventures are further discussed in Note 8 to the accompanying condensed consolidated financial statements.

The table below summarizes the outstanding debt of our unconsolidated joint ventures as of June 30, 2013 , none of which has been guaranteed by us:



Joint Venture	Ownership Interest		Aggregate Principal Amount		Weighted Average Interest Rate		Years to Maturity/ Weighted Average Years to Maturity
RioCan (a)	20.0	%	$	304,129	4.11	%	3.7 years
MS Inland	20.0	%	$	142,998	4.79	%	4.4 years


(a)	Aggregate principal amount excludes mortgage premium of $637 and discount of $903 , net of accumulated amortization.

Other than described above, we have no off-balance-sheet arrangements as of June 30, 2013 that are reasonably likely to have a current or future material effect on our financial condition, results of operations and cash flows.

Critical Accounting Policies and Estimates

Our 2012 Annual Report on Form 10-K contains a description of our critical accounting policies, including acquisition of investment property, impairment of long-lived assets, cost capitalization, depreciation and amortization, loss on lease terminations, investment properties held for sale, partially-owned entities, derivatives and hedging, revenue recognition, allowance for doubtful accounts and income taxes. For the six months ended June 30, 2013 , there were no significant changes to these policies.

Impact of Recently Issued Accounting Pronouncements

See Note 2 — Summary of Significant Accounting Policies to our condensed consolidated financial statements contained herein regarding certain recent accounting pronouncements that we have adopted.

Subsequent Events

Subsequent to June 30, 2013 , we:

•

drew $185,000 on our unsecured revolving line of credit and used the proceeds to repay mortgages payable with an aggregate balance of $180,967 and $5,554 of accrued interest. The mortgages repaid had a weighted average interest rate of 6.41%, excluding the increase in the contractual interest rate for the loan repaid where we had triggered the provision of the loan agreement requiring us to make accelerated principal payments; and

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•	closed on the sale of Raytheon Facility, a 105,000 square foot single-user office property located in State College, Pennsylvania for a sales price of $11,500 and no significant gain or loss on sale due to impairment charges recognized on June 30, 2013.

On July 30, 2013, our board of directors declared the third quarter cash dividend for our 7.00% Series A cumulative redeemable preferred stock. The dividend of $0.4375 per preferred share will be paid on September 30, 2013 to preferred shareholders of record at the close of business on September 19, 2013.

On July 30, 2013, our board of directors declared the distribution for the third quarter of 2013 of $0.165625 per share on all classes of our outstanding common shares, which will be paid on October 10, 2013 to common shareholders of record at the close of business on September 27, 2013.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

We may be exposed to interest rate changes primarily as a result of long-term debt used to maintain liquidity and fund capital expenditures and expansion of our real estate investment portfolio and operations. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve our objectives, we borrow primarily at fixed rates or variable rates with the lowest margins available and in some cases with the ability to convert variable rates to fixed rates.

With regard to variable rate financing, we assess interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities. We maintain risk management control systems to monitor interest rate cash flow risk attributable to both our outstanding or forecasted debt obligations as well as our potential offsetting hedge positions. The risk management control systems involve the use of analytical techniques, including cash flow sensitivity analysis, to estimate the expected impact of changes in interest rates on our future cash flows.

As of June 30, 2013 , we had $369,544 of variable rate debt based on LIBOR that was swapped to fixed rate debt through interest rate swaps. Our interest rate swaps are summarized in the following table:



	Notional Amount		Termination Date	Fair Value of Derivative Asset (Liability) at June 30, 2013
Fixed rate portion of credit facility	$	300,000	February 24, 2016	$	444
The Shops at Legacy	61,100		December 15, 2013	(685		)
Heritage Towne Crossing	8,444		September 30, 2016	(193		)
	$	369,544

For a discussion concerning our scheduled debt maturities and required principal payments of our mortgages payable and unsecured credit facility as of June 30, 2013 for the remainder of 2013, each of the next four years and thereafter and the weighted average interest rates by year to evaluate the expected cash flows and sensitivity to interest rate changes, refer to Note 5 to the condensed consolidated financial statements and “Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Debt Maturities.”

A decrease of 1% in market interest rates would result in a hypothetical increase in our net liability associated with our derivatives of approximately $4,997 .

The combined carrying amount of our mortgages payable and unsecured credit facility is approximately $155,996 lower than the fair value as of June 30, 2013 .

We had $180,419 of variable rate debt, excluding $369,544 of variable rate debt that was swapped to fixed rate debt, with interest rates varying based upon LIBOR, with a weighted average interest rate of 1.70% at June 30, 2013 . An increase in the variable interest rate on this debt constitutes a market risk. If interest rates increase by 1% based on debt outstanding as of June 30, 2013 , interest expense would increase by approximately $1,804 on an annualized basis.

We may use additional derivative financial instruments to hedge exposures to changes in interest rates. To the extent we do, we are exposed to market and credit risk. Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates. The market risk associated with interest rate contracts is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. When the fair value of a derivative contract is negative, we owe the counterparty and, therefore, we generally are not exposed to the credit risk of the counterparty. It is our policy to enter into these transactions with the same party providing the financing, with the right of offset. Alternatively, we will minimize the credit risk in derivative instruments by entering into transactions with high-quality counterparties.

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Item 4. Controls and Procedures

We have established disclosure controls and procedures to ensure that material information relating to us, including our consolidated subsidiaries, is made known to the officers who certify our financial reports and to the members of senior management and the Board of Directors.

Based on management’s evaluation as of June 30, 2013 , our president and chief executive officer and our executive vice president, chief financial officer and treasurer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by us in our reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our president and chief executive officer and our executive vice president, chief financial officer and treasurer to allow timely decisions regarding required disclosure.

There were no changes to our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) during the fiscal quarter ended June 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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Part II — Other Information

Item 1. Legal Proceedings

As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2012, in 2012, certain of our shareholders filed putative class action lawsuits against us and certain of our officers and directors, which are currently pending in the U.S. District Court in the Northern District of Illinois. The lawsuits allege, among other things, that our directors and officers breached their fiduciary duties to our shareholders and, as a result, unjustly enriched our Company and the individual defendants. The lawsuits further allege that the breaches of fiduciary duty led certain shareholders to acquire additional stock and caused our shareholders to suffer a loss in share value, all measured in some manner by reference to our 2012 offering price when we listed our shares on the NYSE. The lawsuits seek unspecified damages and other relief. Based on our initial review of the complaints, we believe the lawsuits to be without merit and intend to defend the actions vigorously. While the resolution of these matters cannot be predicted with certainty, we believe, based on currently available information, that the final outcomes of these matters will not have a material effect on our financial statements.

On April 19, 2013, the defendants filed motions to dismiss the shareholder complaints, which remain pending before the court.

We are subject, from time to time, to various legal proceedings and claims that arise in the ordinary course of business. While the resolution of such matters cannot be predicted with certainty, we believe, based on currently available information, that the final outcome of such matters will not have a material effect on our financial statements.

Item 1A. Risk Factors

Except to the extent updated below or the the extent additional factual information disclosed elsewhere in this Quarterly Report on Form 10-Q relates to such factors (including, without limitation, the matters discussed in Part I, “Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations”), there have been no material changes to our risk factors during the three months ended June 30, 2013 compared to those risk factors presented in Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2012 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2013.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits



Exhibit No.		Description

10.1		Third Amended and Restated Credit Agreement dated May 13, 2013 among the Registrant and KeyBank National Association as Administrative Agent, Wells Fargo Securities LLC as Co-Lead Arranger and Joint Book Manager, and Wells Fargo Bank, National Association as Syndication Agent and KeyBanc Capital Markets Inc. as Co-Lead Arranger and Joint Book Manager and Citibank, N.A. as Co-Documentation Agent, Deutsche Bank Securities Inc. as Co-Documentation Agent and Certain Lenders from time to time parties hereto, as Lenders (Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 16, 2013).
10.2		Resignation Agreement, dated May 15, 2013, by and between the Registrant and James W. Kleifges (filed herewith).
10.3		Separation Agreement, dated May 15, 2013, by and between the Registrant and James W. Kleifges (filed herewith).
10.4		Indemnification Agreement, dated June 13, 2013, by and between the Registrant and Thomas J. Sargeant (filed herewith).
31.1		Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 (filed herewith).
31.2		Certification of Executive Vice President, Chief Financial Officer and Treasurer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 (filed herewith).
32.1		Certification of President and Chief Executive Officer and Executive Vice President, Chief Financial Officer and Treasurer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C Section 1350 (furnished herewith).
101		Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012, (ii) Condensed Consolidated Statements of Operations and Other Comprehensive Income (Loss) for the Three-Month Periods and Six-Month Periods Ended June 30, 2013 and 2012, (iii) Condensed Consolidated Statements of Equity for the Six-Month Periods Ended June 30, 2013 and 2012, (iv) Condensed Consolidated Statements of Cash Flows for the Six-Month Periods Ended June 30, 2013 and 2012, and (v) Notes to Condensed Consolidated Financial Statements.*

* In accordance with Rule 406T of Regulations S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration or other document filed under the Securities Act or the Exchange Act, except as expressly set forth by specific reference in such filing.

Table of Contents

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 thereunto duly authorized.

RETAIL PROPERTIES OF AMERICA, INC.



By:	/s/ STEVEN P. GRIMES

	Steven P. Grimes
	President and Chief Executive Officer

Date:	August 6, 2013

By:	/s/ ANGELA M. AMAN

	Angela M. Aman
	Executive Vice President,
	Chief Financial Officer and Treasurer (Principal Financial Officer)

Date:	August 6, 2013

By:	/s/ JULIE M. SWINEHART

	Julie M. Swinehart
	Senior Vice President and Corporate Controller (Principal Accounting Officer)

Date:	August 6, 2013

Exhibit 10.2

RESIGNATION AGREEMENT

This Resignation Agreement (“ Agreement ”) is being entered into by Retail Properties of America, Inc. (“ Employer ”) and James W. Kleifges (“ Employee ”) (together the “ Parties ”) as of May 15, 2013 (“ Effective Date ”). The Parties are parties to a Retention Agreement, dated effective as of February 19, 2013 (“ Retention Agreement ”).


1.	RESIGNATION

Employee hereby resigns from employment and all positions with Employer and all of its subsidiaries, including Employee’s position as Executive Vice President and Chief Accounting Officer of Employer, effective as of the Effective Date (“ Resignation Date ”). Employee hereby acknowledges that his resignation is not as a result of any disagreement regarding Employer’s financial reporting or accounting policies, procedures, estimates or judgments. Employer shall continue Employee’s base salary and employee benefit plan participation as an employee to and including the Resignation Date and shall pay Employee for all unused vacation pay that is accrued and due to him as of the Resignation Date.


2.	NOTICE PAYMENT

On or before the first regular Employer payroll date following the Resignation Date, Employer shall pay Employee an amount equal to $24,658, less all appropriate federal and state income and employment taxes (“ Notice Payment ”). The Notice Payment shall be in addition to all salary and vacation pay that is due to him pursuant to Section 1.


3.	SEPARATION AGREEMENT AND GENERAL RELEASE

On the Resignation Date, Employer shall tender to Employee the attached Separation Agreement and General Release (“ Separation Agreement ”). Employer agrees to enter into the Separation Agreement with Employee if Employee enters into the Separation Agreement by delivering a signed copy to Employer within 21 days after the Effective Date. Employee’s resignation and right to the Notice Payment shall not be affected by whether or not Employee enters into the Separation Agreement.


4.	TIME-BASED EQUITY AWARDS

Employee has been granted certain “ Time-Based Equity Awards ,” as defined in the Retention Agreement. In the event that any Time-Based Equity Awards (or portion thereof) made by the Employer to Employee would, in the absence of this Retention Agreement and the Separation Agreement, terminate or be forfeited as a result of Employee’s resignation from employment with Employer, then such Time-Based Equity Awards shall only terminate or be forfeited upon the later of (A) the date upon which it is determined that such Time-Based Equity Awards will not vest pursuant to Section 2.1.2 of the Separation Agreement (or, if Employee does not enter into the Separation Agreement within 21 days after the Effective Date, on the 22 ^nd day after the Effective Date) or (B) the date otherwise provided for in such Time-Based Equity Awards; provided that no additional vesting shall occur solely as a result of the operation of this sentence.


5.	MISCELLANEOUS


5.1	The Parties agree that this Agreement, including the surviving provisions of the Retention Agreement expressly incorporated herein by reference, set forth the entire agreement between them and supersedes all other written or oral understandings or contracts. This Agreement may not be modified or amended except by a written instrument executed by both of the Parties.


5.2	This Agreement shall be subject to and construed in accordance with the laws of the State of Illinois. Venue shall be in DuPage County for any disputes arising out of the interpretation or enforcement of this Agreement.


5.3	This Agreement is binding on and inures to the benefit of Employer, its successors and assigns, and is binding on and inures to the benefit of Employee, his heirs and assigns.

5.4 This Agreement may be executed in counterparts. Signatures transmitted electronically are as effective as original signatures.


5.5	Each person signing this Agreement hereby expressly represents and warrants that he is expressly authorized in law and in fact to do so individually and/or on behalf of any entity listed herein as a signatory of this Agreement.

HAVING READ AND UNDERSTOOD THIS AGREEMENT, CONSULTED COUNSEL OR VOLUNTARILY ELECTED NOT TO CONSULT COUNSEL, AND HAVING HAD SUFFICIENT TIME TO CONSIDER WHETHER TO ENTER INTO THIS AGREEMENT, THE UNDERSIGNED HEREBY EXECUTE THIS AGREEMENT ON THE DATES SET FORTH BELOW.



EMPLOYEE	RETAIL PROPERTIES OF
	AMERICA, INC.

/s/ James W. Kleifges	By:	/s/ Dennis K. Holland
James W. Kleifges		Name: Dennis K. Holland
		Title: Executive Vice President, General Counsel and Secretary

Attachment: Separation Agreement and General Release

Exhibit 10.3

SEPARATION AGREEMENT AND GENERAL RELEASE

This Separation Agreement and General Release (“ Agreement ”) is being entered into by Retail Properties of America, Inc. (“ Employer ” or “ Company ”) and James W. Kleifges (“ Employee ”) (together, the “ Parties ”).


1.	RESIGNATION

1.1 Resignation from Employment . Employee and Employer are parties to a Retention Agreement, dated effective as of February 19, 2013 (the “ Retention Agreement ”). Employee resigned from employment with the Employer effective on May 15, 2013 (the “ Resignation Date ”). Notwithstanding Employee’s resignation from employment, Employer shall not contest a claim by Employee that Employee’s separation from employment qualifies Employee for unemployment insurance from the Illinois Department of Employment Security (“IDES”). The previous sentence shall not be construed to prevent Employer from providing truthful information in response to inquiries by IDES.


2.	VALUABLE CONSIDERATION

2.1 Severance Package . Employer agrees to provide Employee with the following payments and benefits (“ Severance Package ”). Employee acknowledges and agrees that the Severance Package constitutes adequate legal consideration for the promises and representations made by him in the Agreement. Receipt of the Severance Package is contingent upon the following conditions: (i) Employee must continue to abide by the covenants regarding confidentiality, non-solicitation and non-disparagement described in Section 11 of the Retention Agreement, and (ii) application of the Recoupment Policy described in Section 6 of the Retention Agreement, the Golden Parachute Payments provision described in Section 7 of the Retention Agreement, and the provisions regarding compliance with Section 409A of the Internal Revenue Code described in Section 13 of the Retention Agreement. Subject to the foregoing, Employer will pay the Severance Payment on or before the thirtieth (30th) day after the Resignation Date.

2.1.1 Severance Payment . Employer agrees to pay Employee a total of $350,000, less all appropriate federal and state income and employment taxes (“ Severance Payment ”).

2.1.2 Acceleration of Vesting . The vesting of all unvested equity awards granted to Employee that are listed on Exhibit A hereto shall accelerate in full on the Effective Date (as set forth in Section 6.2 below). All other equity awards (or portions thereof) made to the Employee by the Employer that were unvested immediately prior to the Resignation Date will be forfeited as of the Resignation Date. Employer will satisfy the required minimum tax withholding obligation in connection with the vesting of such unvested equity awards by withholding a number of shares of common stock of Employer with a fair market value (based on the closing price of such common stock on the New York Stock Exchange on the vesting date) equal to such minimum tax withholding obligation.

2.2 Employee acknowledges that the benefits described above are over and above anything owed to him by law, contract or under the policies of Employer, and that they are being provided to him expressly in exchange for his entering into this Agreement.


3.	GENERAL RELEASE AND WAIVER

3.1 In consideration of Employer’s promises made within this Agreement, Employee unconditionally, irrevocably and absolutely waives, releases and discharges Employer, and any parent and subsidiary corporations, divisions and affiliated corporations, partnerships or other affiliated entities of Employer, past and present, as well as the past and present employees, officers, directors, agents, successors and assigns of Employer (collectively, “ Released Parties ”), from all claims related in any way to the transactions or occurrences between them to date, to the fullest extent permitted by law, including, but not limited to, Employee’s employment with Employer, the

termination of Employee’s employment with Employer, and all other losses, liabilities, claims, charges, demands and causes of action, known or unknown, suspected or unsuspected, arising directly or indirectly out of or in any way connected with Employee’s employment with Employer. This release is intended to have the broadest possible application and includes, but is not limited to, any tort, contract, common law, constitutional or other statutory claims, including, but not limited to claims involving intellectual property or innovations that Employee may have worked on or come up with during the period in which he was being compensated by any of the Released Parties, alleged violations of the Illinois Human Rights Act, the Illinois Minimum Wage Law, the Illinois Wage Payment and Collection Act, the Illinois One Day Rest in Seven Act, the Illinois Victims’ Economic Security and Safety Act, the Illinois Personnel Record Review Act, the Illinois Worker Adjustment and Retraining Notification Act, the Illinois Right to Privacy in the Workplace Act, the Illinois Workers’ Compensation Act and any other statute set forth in Chapter 820 or any other chapter of the Illinois Compiled Statutes that pertains or relates to, or otherwise touches upon, the employment relationship between Employer and Employee, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Age Discrimination in Employment Act, and all claims for attorneys’ fees, costs and expenses. Employee expressly waives Employee’s right to recovery of any type, including damages, in any administrative or court action, whether state or federal, and whether brought by Employee or on Employee’s behalf, related in any way to the matters released herein. However, this general release is not intended to bar any claims that, by statute, may not be waived, such as claims for any challenge to the validity of Employee’s release of claims under the Age Discrimination in Employment Act, as set forth in this Agreement. Further, nothing in this Section 3.1 shall release any of the Released Parties’ obligations, covenants, and agreements under this Agreement or Employee’s rights under applicable law, the Company’s Bylaws, any Company officer indemnity agreement to which Employee is a party or the Company’s director and officer liability policy to seek indemnity for acts committed, or omissions, within the course and scope of Employee’s employment duties.

3.2 Employee acknowledges that Employee may discover facts or law different from, or in addition to, the facts or law that Employee knows or believes to be true with respect to the claims released in this Agreement and agrees, nonetheless, that this Agreement and the release contained in it shall be and remain effective in all respects notwithstanding such different or additional facts or the discovery of them.

3.3 Employee declares and represents that Employee intends this Agreement to be complete and not subject to any claim of mistake, and that the release herein expresses a full and complete release and Employee intends the release herein to be final and complete.

3.4 Employee represents that, as of the date of this Agreement, he has not filed any lawsuits, charges, complaints, petitions, claims or other accusatory pleadings against Employer or any of the other Released Parties in any court or with any governmental agency.

3.5 Employee acknowledges and agrees that the general release and waiver clause in this Agreement is an essential and material term of the Agreement, and that without such clause, no agreement would have been reached by the Parties.


4.	ACKNOWLEDGEMENTS BY EMPLOYEE

4.1 Employee acknowledges that he is subject to, and will continue to abide by, all surviving provisions of the Retention Agreement, including, without limitation, the covenants regarding confidentiality, non-solicitation and non-disparagement set forth in Section 11 of the Retention Agreement (the “ Covenants ”), all of which are incorporated herein by reference as if set forth herein in their entirety. Nothing in this Agreement is intended to modify, supersede or replace any provision, right or obligation of Employee under the Covenants.

4.2 Employee acknowledges that he has been paid all wages, commissions, incentive payments, and bonuses owed to him by Employer, to date, other than accrued but unpaid salary and vacation pay and the Notice Payment (as defined in that certain Resignation Agreement entered into by Empoyer and Employee as of May 15, 2013) to the extent unpaid as of the date hereof.


5.	NON-DISPARAGEMENT

5.1 Employee confirms and agrees that he will not make any oral or written statements to any third party about any of the Released Parties that are either intended or reasonably likely to disparage any of the Released Parties. Employee acknowledges and agrees that the non-disparagement clause in this Agreement is an essential and material term of the Agreement, and that without such clause, no agreement would have been reached by the Parties. Additionally, if Employee is compelled by the legal process to provide statements, information, or testimony regarding his employment with any of the Released Parties, he will do so in a truthful manner, and doing so is not a breach of the terms of this Agreement.

5.2 Employer shall direct the members of its Board of Directors, its executive officers and its Director of Human Resources that, during their service for Employer, they shall not make any oral or written statements to any third party about Employee that are either intended or reasonably likely to disparage Employee; provided that if compelled by the legal process to provide statements, information or testimony regarding Employee, they should do so in a truthful manner, and doing so is not a breach of this Agreement.


6.	OLDER WORKERS’ BENEFIT PROTECTION ACT . This Agreement is intended to satisfy the requirements of the Older Workers’ Benefit Protection Act, 29 U.S.C. sec. 626(f). Employee is advised to consult with an attorney before executing this Agreement.

6.1 Acknowledgements/Time to Consider . Employee acknowledges and agrees that (a) Employee has read and understands the terms of this Agreement; (b) Employee has been advised in writing to consult with an attorney before executing this Agreement; (c) Employee has obtained and considered such legal counsel as Employee deems necessary; (d) Employee has been given twenty-one (21) days to consider whether or not to enter into this Agreement (although Employee may elect not to use the full 21‑day period at Employee’s option); and (e) by signing this Agreement, Employee acknowledges that Employee does so freely, knowingly, and voluntarily.

6.2 Revocation/Effective Date . This Agreement shall not become effective or enforceable until the eighth day after Employee signs this Agreement. In other words, Employee may revoke Employee’s acceptance of this Agreement within seven (7) days after the date Employee signs it. Employee’s revocation must be in writing and received by Dennis K. Holland, the Company’s Executive Vice President and General Counsel, 2021 Spring Road, Suite 200, Oak Brook, IL 60523 by 5:00 p.m. Central Time on the seventh day in order to be effective. If Employee does not revoke acceptance within the seven (7) day period, Employee’s acceptance of this Agreement shall become binding and enforceable on the eighth day (“ Effective Date ”). The Severance Package shall become due and payable in accordance with Section 2 above after the Effective Date.

6.3 Preserved Rights of Employee . This Agreement does not waive or release any rights or claims that Employee may have under the Age Discrimination in Employment Act that arise after the execution of this Agreement. In addition, this Agreement does not prohibit Employee from challenging the validity of this Agreement’s waiver and release of claims under the Age Discrimination in Employment Act.


7.	CONFIDENTIALITY/RETURN OF COMPANY PROPERTY

7.1 Employee represents and warrants that as of the Resignation Date, he will have returned all property belonging to Employer. Such property includes, but is not limited to, keys, passwords, access cards, credit or phone cards, any computer hardware or software, any products relating to Employer or its competition, any design work, product engineering, test results, customer information, pricing and cost information, financial data or information, any vendor samples or information, management materials, including all correspondence, manuals, letters, notes, notebooks, data report programs, plan proposals, and other confidential, proprietary and/or trade secret information, regardless of whether the information is in written, printed, electronic, or other form and regardless of whether it was written or compiled by Employee or other persons, as well as any and all other property that comprises property owned by Employer. Employee agrees that he will not retain any originals or copies of any Employer property, whether prepared or created by Employee or otherwise coming into Employee’s possession or control in the course of his employment with Employer. Employee agrees to keep the terms of the Agreement confidential between him and Employer, except that he may tell his immediate family and attorney or accountant, if

any, as needed, but in no event should he discuss the Agreement or its terms with any current or prospective employee of Employer; provided that the obligations in this sentence shall not apply after any public disclosure of this Agreement or its material terms by Employer.


8.	MISCELLANEOUS

8.1 The Parties agree that this Agreement, including the surviving provisions of the Retention Agreement expressly incorporated herein by reference, set forth the entire agreement between them and supersedes all other written or oral understandings or contracts. This Agreement may not be modified or amended except by a written instrument executed by both of the Parties.

8.2 The Parties agree to do all things necessary and to execute all further documents necessary and appropriate to carry out and effectuate the terms and purposes of this Agreement.

8.3 Each of the Parties to this Agreement represents and warrants that: (a) no other person or entity has or has had any interest in the claims released under this Agreement and (b) he, she or it has not assigned, transferred, conveyed, subjected to a security interest, or otherwise encumbered or impaired in any way any of the claims released under this Agreement.

8.4 In the event any provision of this Agreement is adjudicated to be unenforceable in whole or in part, the Parties intend for such provision to be modified to the extent necessary to render it enforceable, or alternatively, excised from the Agreement without affecting the validity of the remaining provisions of the Agreement.

8.5 By entering into this Agreement, the Released Parties make no admission that they have engaged, or are now engaging, in any unlawful conduct. This Agreement is not an admission of wrongdoing or liability by either Employer or Employee and shall not be used or construed as such in any legal or administrative proceeding.

8.6 This Agreement may be pled as a full and complete defense to, and may be used as a basis for an injunction against, any action, suit or other proceeding that may be prosecuted, instituted or attempted by Employee in breach hereof.

8.7 This Agreement shall be subject to and construed in accordance with the laws of the State of Illinois. Venue shall be in DuPage County for any disputes arising out of the interpretation or enforcement of this Agreement.

8.8 This Agreement is binding on and inures to the benefit of Employer, its successors and assigns, and is binding on and inures to the benefit of Employee, his heirs and assigns.

8.9 This Agreement may be executed in counterparts. Signatures transmitted electronically are as effective as original signatures.

8.10 Each person signing this Agreement hereby expressly represents and warrants that he is expressly authorized in law and in fact to do so individually and/or on behalf of any entity listed herein as a signatory of this Agreement.

HAVING READ AND UNDERSTOOD THIS AGREEMENT, CONSULTED COUNSEL OR VOLUNTARILY ELECTED NOT TO CONSULT COUNSEL, AND HAVING HAD SUFFICIENT TIME TO CONSIDER WHETHER TO ENTER INTO THIS AGREEMENT,

THE UNDERSIGNED HEREBY EXECUTE THIS AGREEMENT ON THE DATES SET FORTH BELOW.



EMPLOYEE		RETAIL PROPERTIES OF
		AMERICA, INC.

/s/ James W. Kleifges		By:	/s/ Dennis K. Holland
James W. Kleifges			Name: Dennis K. Holland
			Title: Executive Vice President, General Counsel and Secretary
Date:	5/15/2013	Date:	5/15/2013

Exhibit A

Unvested Equity Awards

Restricted Stock Award Agreement dated as of April 12, 2011 pursuant to which Employee was granted 728 shares of common stock of Employer, all of which remain unvested

Restricted Stock Award Agreement dated as of April March 13, 2012 pursuant to which Employee was granted 3,704 shares of common stock of Employer, all of which remain unvested

Restricted Stock Award Agreement dated as of February 21, 2013 pursuant to which Employee was granted 5,057 shares of common stock of Employer, all of which remain unvested

Exhibit 10.4

INDEMNIFICATION AGREEMENT

THIS INDEMNIFICATION AGREEMENT is made and entered into this 13th day of June, 2013 ("Agreement"), by and between RETAIL PROPERTIES OF AMERICA, INC., a Maryland corporation (the "Company"), and THOMAS J. SARGEANT ("Indemnitee").

WHEREAS, at the request of the Company, Indemnitee currently serves as a director of the Company and may, therefore, be subjected to claims, suits or proceedings arising as a result of his/her service; and

WHEREAS, as an inducement to Indemnitee to continue to serve as such director, the Company has agreed to indemnify and to advance expenses and costs incurred by Indemnitee in connection with any such claims, suits or proceedings, to the maximum extent permitted by law; and

WHEREAS, the parties by this Agreement desire to set forth their agreement regarding indemnification and advance of expenses;

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

Section I. Definitions. For purposes of this Agreement:

(a) "Change in Control" means a change in control of the Company occurring after the Effective Date of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934, as amended (the "Act"), whether or not the Company is then subject to such reporting requirement; provided, however, that, without limitation, such a Change in Control shall be deemed to have occurred if after the Effective Date (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing 15% or more of the combined voting power of the Company's then outstanding securities without the prior approval of at least two-thirds of the members of the Board of Directors in office immediately prior to such person attaining such percentage interest; (ii) there occurs a proxy contest, or the Company is a party to a merger, consolidation, sale of assets, plan of liquidation or other reorganization not approved by at least two-thirds of the members of the Board of Directors then in office, as a consequence of which members of the Board of Directors in office immediately prior to such transaction or event constitute less than a majority of the Board of Directors thereafter; or (iii) during any period of two consecutive years, other than as a result of an event described in clause (a)(ii) of this Section 1, individuals who at the beginning of such period constituted the Board of Directors (including for this purpose any new director whose election or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board of Directors.

(b) "Corporate Status" means the status of a person who is or was a director, trustee, officer, employee or agent of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise for which such person is or was serving at the request of the Company.

(c) "Disinterested Director" means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(d) "Effective Date" means the date set forth in the first paragraph of this Agreement.

(e) "Expenses" shall include all reasonable and out-of-pocket attorneys' fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone

charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in a Proceeding.

(f) "Independent Counsel" means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party, or (ii) any other party to or witness in the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee's rights under this Agreement. If a Change of Control has not occurred, Independent Counsel shall be selected by the Board of Directors, with the approval of Indemnitee, which approval will not be unreasonably withheld. If a Change of Control has occurred, Independent Counsel shall be selected by Indemnitee, with the approval of the Board of Directors, which approval will not be unreasonably withheld.

(g) "Proceeding" includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other proceeding, whether civil, criminal, administrative or investigative (including on appeal), except one pending or completed on or before the Effective Date, unless otherwise specifically agreed in writing by the Company and Indemnitee.

Section 2. Services by Indemnitee. Indemnitee will serve as an officer of the Company. However, this Agreement shall not impose any obligation on Indemnitee or the Company to continue Indemnitee's service to the Company beyond any period otherwise required by law or by other agreements or commitments of the parties, if any.

Section 3. Indemnification - General. The Company shall indemnify, and advance Expenses to, Indemnitee (a) as provided in this Agreement and (b) otherwise to the maximum extent permitted by Maryland law in effect on the date hereof and as amended from time to time; provided, however, that no change in Maryland law shall have the effect of reducing the benefits available to Indemnitee hereunder based on Maryland law as in effect on the date hereof. The rights of Indemnitee provided in this Section 3 shall include, without limitation, the rights set forth in the other sections of this Agreement, including any additional indemnification permitted by Section 2-418(g) of the Maryland General Corporation Law ("MGCL").

Section 4. Proceedings Other Than Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section 4 if, by reason of his/her Corporate Status, he/she is, or is threatened to be, made a party to or a witness in any threatened, pending, or completed Proceeding, other than a Proceeding by or in the right of the Company. Pursuant to this Section 4, Indemnitee shall be indemnified against all judgments, penalties, fines and amounts paid in settlement and all Expenses actually and reasonably incurred by him/her or on his/her behalf in connection with a Proceeding by reason of his/her Corporate Status unless it is established that (i) the act or omission of Indemnitee was material to the matter giving rise to the Proceeding and (a) was committed in bad faith or (b) was the result of active and deliberate dishonesty, (ii) Indemnitee actually received an improper personal benefit in money, property or services, or (iii) in the case of any criminal Proceeding, Indemnitee had reasonable cause to believe that his/her conduct was unlawful.

Section 5. Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section 5 if, by reason of his/her Corporate Status, he/she is, or is threatened to be, made a party to or a witness in any threatened, pending or completed Proceeding brought by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 5, Indemnitee shall be indemnified against all amounts paid in settlement and all Expenses actually and reasonably incurred by him/her or on his/her behalf in connection with such Proceeding unless it is established that (i) the act or omission of Indemnitee was material to the matter giving rise to such a Proceeding and (a) was committed in bad faith or (b) was the result of active and deliberate dishonesty or (ii) Indemnitee actually received an improper personal benefit in money, property or services.

Section 6. Court-Ordered Indemnification. Notwithstanding any other provision of this Agreement, a court of appropriate jurisdiction, upon application of Indemnitee and such notice as the court shall require, may order indemnification in the following circumstances:

(a) if it determines Indemnitee is entitled to reimbursement under Section 2-418(d)(1) of the MGCL, the court shall order indemnification, in which case Indemnitee shall be entitled to recover the expenses of securing such reimbursement; or

(b) if it determines that Indemnitee is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not Indemnitee (i) has met the standards of conduct set forth in Section 2-418(b) of the MGCL or (ii) has been adjudged liable for receipt of an improper personal benefit under Section 2-418(c) of the MGCL, the court may order such indemnification as the court shall deem proper. However, indemnification with respect to any Proceeding by or in the right of the Company or in which liability shall have been adjudged in the circumstances described in Section 2-418(c) of the MGCL shall be limited to Expenses actually and reasonably incurred by him/her or on his/her behalf in connection with a Proceeding.

Section 7. Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement, and without limiting any such provision, to the extent that Indemnitee is, by reason of his/her Corporate Status, made a party to and is successful, on the merits or otherwise, in the defense of any Proceeding, he/she shall be indemnified for all Expenses actually and reasonably incurred by him/her or on his/her behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee under this Section 7 for all Expenses actually and reasonably incurred by him/her or on his/her behalf in connection with each successfully resolved claim, issue or matter, allocated on a reasonable and proportionate basis. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

Section 8. Advance of Expenses. The Company shall advance all reasonable Expenses actually and reasonably incurred by or on behalf of Indemnitee in connection with any Proceeding (other than a Proceeding brought to enforce indemnification under this Agreement, applicable law, the Charter or Bylaws of the Company, any agreement or a resolution of the stockholders entitled to vote generally in the election of directors or of the Board of Directors) to which Indemnitee is, or is threatened to be, made a party or a witness, within ten days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by a written affirmation by Indemnitee of Indemnitee's good faith belief that the standard of conduct necessary for indemnification by the Company as authorized by law and by this Agreement has been met and a written undertaking by or on behalf of Indemnitee, in substantially the form attached hereto as Exhibit A or in such form as may be required under applicable law as in effect at the time of the execution thereof, to reimburse the portion of any Expenses advanced to Indemnitee relating to claims, issues or matters in the Proceeding as to which it shall ultimately be established that the standard of conduct has not been met and which have not been successfully resolved as described in Section 7. To the extent that Expenses advanced to Indemnitee do not relate to a specific claim, issue or matter in the Proceeding, such Expenses shall be allocated on a reasonable and proportionate basis. The undertaking required by this Section 8 shall be an unlimited general obligation by or on behalf of Indemnitee and shall be accepted without reference to Indemnitee's financial ability to repay such advanced Expenses and without any requirement to post security therefor.

Section 9. Procedure for Determination of Entitlement to Indemnification.

(a) To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board of Directors in writing that Indemnitee has requested indemnification.

(b) Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 9(a) hereof, a determination, if required by applicable law, with respect to Indemnitee's entitlement thereto shall promptly be made in the specific case: (i) if a Change in Control shall have occurred, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee; or (ii) if a Change of Control shall not have occurred, (A) by the Board of Directors (or a duly authorized committee thereof) by a majority vote of a quorum consisting of Disinterested Directors (as herein defined), or (B) if a quorum of the Board of Directors consisting of Disinterested Directors is not obtainable or, even if obtainable, such quorum of Disinterested Directors so directs, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee, or (C) if so directed by a majority of the members of the Board of Directors, by the stockholders of the Company. If it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee's entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination in the discretion of the Board of Directors or Independent Counsel if retained pursuant to clause (ii)(B) of this Section 9. Any Expenses actually and reasonably incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee's entitlement to indemnification) and the Company shall indemnify and hold Indemnitee harmless therefrom.

Section 10. Presumptions and Effect of Certain Proceedings.

(a) In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 9(a) of this Agreement, and the Company shall have the burden of proof to overcome that presumption in connection with the making of any determination contrary to that presumption.

(b) The termination of any Proceeding by judgment, order, settlement, conviction, a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, does not create a presumption that Indemnitee did not meet the requisite standard of conduct described herein for indemnification.

Section 11. Remedies of Indemnitee.

(a) If (i) a determination is made pursuant to Section 9 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advance of Expenses is not timely made pursuant to Section 8 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 9(b) of this Agreement within 60 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 7 of this Agreement within ten days after receipt by the Company of a written request therefor, or (v) payment of indemnification is not made within ten days after a determination has been made that Indemnitee is entitled to indemnification, Indemnitee shall be entitled to an adjudication in an appropriate court located in the State of Maryland, or in any other court of competent jurisdiction, of his/her entitlement to such indemnification or advance of Expenses. Alternatively, Indemnitee, at his/her option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 11(a); provided, however, that the foregoing clause shall not apply to a proceeding brought by Indemnitee to enforce his/her rights under Section 7 of this Agreement.

(b) In any judicial proceeding or arbitration commenced pursuant to this Section 11 the Company shall have the burden of proving that Indemnitee is not entitled to indemnification or advance of Expenses, as the case may be.

(c) If a determination shall have been made pursuant to Section 9(b) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration

commenced pursuant to this Section 11, absent a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee's statement not materially misleading, in connection with the request for indemnification.

(d) In the event that Indemnitee, pursuant to this Section 11, seeks a judicial adjudication of or an award in arbitration to enforce his/her rights under, or to recover damages for breach of, this Agreement, Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company for, any and all Expenses actually and reasonably incurred by him/her in such judicial adjudication or arbitration. If it shall be determined in such judicial adjudication or arbitration that Indemnitee is entitled to receive part but not all of the indemnification or advance of Expenses sought, the Expenses incurred by Indemnitee in connection with such judicial adjudication or arbitration shall be appropriately prorated.

Section 12. Defense of the Underlying Proceeding.

(a) Indemnitee shall notify the Company promptly upon being served with or receiving any summons, citation, subpoena, complaint, indictment, information, notice, request or other document relating to any Proceeding which may result in the right to indemnification or the advance of Expenses hereunder; provided, however, that the failure to give any such notice shall not disqualify Indemnitee from the right, or otherwise affect in any manner any right of Indemnitee, to indemnification or the advance of Expenses under this Agreement unless the Company's ability to defend in such Proceeding or to obtain proceeds under any insurance policy is materially and adversely prejudiced thereby, and then only to the extent the Company is thereby actually so prejudiced.

(b) Subject to the provisions of the last sentence of this Section 12(b) and of Section 12(c) below, the Company shall have the right to defend Indemnitee in any Proceeding which may give rise to indemnification hereunder; provided, however, that the Company shall notify Indemnitee of any such decision to defend within 15 calendar days following receipt of notice of any such Proceeding under Section 12(a) above. The Company shall not, without the prior written consent of Indemnitee, which shall not be unreasonably withheld or delayed, consent to the entry of any judgment against Indemnitee or enter into any settlement or compromise which (i) includes an admission of fault of Indemnitee or (ii) does not include, as an unconditional term thereof, the full release of Indemnitee from all liability in respect of such Proceeding, which release shall be in form and substance reasonably satisfactory to Indemnitee. This Section 12(b) shall not apply to a Proceeding brought by Indemnitee under Section 11 above or Section 18 below.

(c) Notwithstanding the provisions of Section 12(b) above, if in a Proceeding to which Indemnitee is a party by reason of Indemnitee's Corporate Status, (i) Indemnitee reasonably concludes, based upon an opinion of counsel approved by the Company, which approval shall not be unreasonably withheld, that he/she may have separate defenses or counterclaims to assert with respect to any issue which may not be consistent with other defendants in such Proceeding, (ii) Indemnitee reasonably concludes, based upon an opinion of counsel approved by the Company, which approval shall not be unreasonably withheld, that an actual or apparent conflict of interest or potential conflict of interest exists between Indemnitee and the Company, or (iii) if the Company fails to assume the defense of such Proceeding in a timely manner, Indemnitee shall be entitled to be represented by separate legal counsel of Indemnitee's choice, subject to the prior approval of the Company, which shall not be unreasonably withheld, at the expense of the Company. In addition, if the Company fails to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any Proceeding to deny or to recover from Indemnitee the benefits intended to be provided to Indemnitee hereunder, Indemnitee shall have the right to retain counsel of Indemnitee's choice, subject to the prior approval of the Company, which shall not be unreasonably withheld, at the expense of the Company (subject to Section 11(d)), to represent Indemnitee in connection with any such matter.

Section 13. Non-Exclusivity; Survival of Rights; Subrogation; Insurance.

(a) The rights of indemnification and advance of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Charter or Bylaws of the Company, any agreement or a resolution of the stockholders entitled to vote generally in the election of directors or of the Board of Directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any

provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his/her Corporate Status prior to such amendment, alteration or repeal.

(b) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

(c) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable or payable or reimbursable as Expenses hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

Section 14. Insurance. The Company will use its reasonable best efforts to acquire directors and officers liability insurance, on terms and conditions deemed appropriate by the Board of Directors of the Company, with the advice of counsel, covering Indemnitee or any claim made against Indemnitee for service as a director or officer of the Company and covering the Company for any indemnification or advance of Expenses made by the Company to Indemnitee for any claims made against Indemnitee for service as a director or officer of the Company. Without in any way limiting any other obligation under this Agreement, the Company shall indemnify Indemnitee for any payment by Indemnitee arising out of the amount of any deductible or retention and the amount of any excess of the aggregate of all judgments, penalties, fines, settlements and reasonable Expenses actually and reasonably incurred by Indemnitee in connection with a Proceeding over the coverage of any insurance referred to in the previous sentence.

Section 15. Indemnification for Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is or may be, by reason of his/her Corporate Status, a witness in any Proceeding, whether instituted by the Company or any other party, and to which Indemnitee is not a party but in which the Indemnitee receives a subpoena to testify, he/she shall be advanced all reasonable Expenses and indemnified against all Expenses actually and reasonably incurred by him/her or on his/her behalf in connection therewith.

Section 16. Duration of Agreement; Binding Effect.

(a) This Agreement shall continue until and terminate ten years after the date that Indemnitee's Corporate Status shall have ceased; provided, that the rights of Indemnitee hereunder shall continue until the final termination of any Proceeding then pending in respect of which Indemnitee is granted rights of indemnification or advance of Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Section 11 of this Agreement relating thereto.

(b) The indemnification and advance of Expenses provided by, or granted pursuant to, this Agreement shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), shall continue as to an Indemnitee who has ceased to be a director, trustee, officer, employee or agent of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the written request of the Company, and shall inure to the benefit of Indemnitee and his/her spouse, assigns, heirs, devisees, executors and administrators and other legal representatives.

(c) The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

Section 17. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Agreement

(including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

Section 18. Exception to Right of Indemnification or Advance of Expenses. Notwithstanding any other provision of this Agreement, Indemnitee shall not be entitled to indemnification or advance of Expenses under this Agreement with respect to any Proceeding brought by Indemnitee, unless (a) the Proceeding is brought to enforce indemnification under this Agreement, and then only to the extent in accordance with and as authorized by Sections 8 and 11 of this Agreement, or (b) the Company's Bylaws, as amended, the Charter, a resolution of the stockholders entitled to vote generally in the election of directors or of the Board of Directors or an agreement approved by the Board of Directors to which the Company is a party expressly provide otherwise.

Section 19. Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. One such counterpart signed by the party against whom enforceability is sought shall be sufficient to evidence the existence of this Agreement.

Section 20. Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

Section 21. Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

Section 22. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:

(a) If to Indemnitee, to: The address set forth on the signature page hereto.

(b) If to the Company to:

Retail Properties of America, Inc.

2021 Spring Road, Suite 200

Oak Brook, Illinois 60523

Attn: President and Chief Executive Officer

With a copy to:

Retail Properties of America, Inc.

2021 Spring Road, Suite 200

Oak Brook, Illinois 60523

Attn: General Counsel

or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.

Section 23. Governing Law. The parties agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Maryland, without regard to its conflicts of laws rules.

Section 24. Miscellaneous. Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written.



ATTEST:	COMPANY

	RETAIL PROPERTIES OF AMERICA, INC., a Maryland corporation

/s/ Dennis K. Holland	By:	/s/ Steven P. Grimes
Dennis K. Holland		Steven P. Grimes
Secretary		President and Chief Executive Officer

	INDEMNITEE

	/s/ Thomas J. Sargeant
	Thomas J. Sargeant

	Address: Retail Properties of America, Inc.
		2021 Spring Road, Suite 200
		Oak Brook, Illinois 60523

EXHIBIT A

FORM OF UNDERTAKING TO REPAY EXPENSES ADVANCED

The Board of Directors of Retail Properties of America, Inc.

Re: Undertaking to Repay Expenses Advanced

Ladies and Gentlemen:

This undertaking is being provided pursuant to that certain Indemnification Agreement dated the ____ day of ___________________, 20___, by and between Retail Properties of America, Inc. (the "Company") and the undersigned Indemnitee (the "Indemnification Agreement"), pursuant to which I am entitled to advance of expenses in connection with [description of proceeding] (the "Proceeding").

Terms used herein and not otherwise defined shall have the meanings specified in the Indemnification Agreement.

I am subject to the Proceeding by reason of my Corporate Status or by reason of alleged actions or omissions by me in such capacity. I hereby affirm that at all times, insofar as I was involved as a [director or officer] of the Company, in any of the facts or events giving rise to the Proceeding, I (1) acted in good faith and honestly, (2) did not receive any improper personal benefit in money, property or services and (3) in the case of any criminal proceeding, had no reasonable cause to believe that any act or omission by me was unlawful.

In consideration of the advance of Expenses by the Company for reasonable attorneys' fees and related expenses incurred by me in connection with the Proceeding (the "Advanced Expenses"), I hereby agree that if, in connection with the Proceeding, it is established that (1) an act or omission by me was material to the matter giving rise to the Proceeding and (a) was committed in bad faith or (b) was the result of active and deliberate dishonesty or (2) I actually received an improper personal benefit in money, property or services or (3) in the case of any criminal proceeding, I had reasonable cause to believe that the act or omission was unlawful, then I shall promptly reimburse the portion of the Advanced Expenses relating to the claims, issues or matters in the Proceeding as to which the foregoing findings have been established and which have not been successfully resolved as described in Section 7 of the Indemnification Agreement. To the extent that Advanced Expenses do not relate to a specific claim, issue or matter in the Proceeding, I agree that such Expenses shall be allocated on a reasonable and proportionate basis.

IN WITNESS WHEREOF, I have executed this Affirmation and Undertaking on this day of __________________, _______ .

WITNESS:

________________________ (SEAL)

Exhibit 31.1

CERTIFICATION

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Steven P. Grimes, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of Retail Properties of America, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



By:	/s/ STEVEN P. GRIMES

	Steven P. Grimes
	President and Chief Executive Officer

Date:	August 6, 2013

Exhibit 31.2

CERTIFICATION

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Angela M. Aman, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of Retail Properties of America, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



By:	/s/ ANGELA M. AMAN

	Angela M. Aman
	Executive Vice President,
	Chief Financial Officer and Treasurer

Date:	August 6, 2013

Exhibit 32.1

Certification Pursuant to

18 U.S.C. Section 1350, as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Retail Properties of America, Inc. (the “Company”) for the period ended June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Steven P. Grimes as President and Chief Executive Officer of the Company and Angela M. Aman as Executive Vice President, Chief Financial Officer and Treasurer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his or her knowledge:


(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



By:	/s/ STEVEN P. GRIMES

	Steven P. Grimes
	President and Chief Executive Officer

Date:	August 6, 2013

By:	/s/ ANGELA M. AMAN

	Angela M. Aman
	Executive Vice President,
	Chief Financial Officer and Treasurer

Date:	August 6, 2013