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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Maryland
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42-1579325
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(State or other jurisdiction
of incorporation or organization)
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(I.R.S. Employer Identification No.)
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2021 Spring Road, Suite 200, Oak Brook, Illinois
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60523
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
x
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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June 30,
2015 |
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December 31,
2014 |
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Assets
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Investment properties:
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Land
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$
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1,308,227
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$
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1,195,369
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Building and other improvements
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4,584,542
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4,442,446
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Developments in progress
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41,139
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42,561
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5,933,908
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5,680,376
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Less accumulated depreciation
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(1,419,065
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)
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(1,365,471
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)
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Net investment properties
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4,514,843
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4,314,905
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Cash and cash equivalents
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84,701
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112,292
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Accounts and notes receivable (net of allowances of $8,215 and $7,497, respectively)
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76,192
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86,013
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Acquired lease intangible assets, net
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145,368
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125,490
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Assets associated with investment properties held for sale
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20,262
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33,640
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Other assets, net
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102,836
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131,520
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Total assets
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$
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4,944,202
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$
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4,803,860
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Liabilities and Equity
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Liabilities:
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Mortgages payable, net
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$
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1,438,806
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$
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1,634,465
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Unsecured notes payable, net
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498,851
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250,000
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Unsecured term loan
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450,000
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450,000
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Unsecured revolving line of credit
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110,000
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—
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Accounts payable and accrued expenses
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61,340
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61,129
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Distributions payable
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39,291
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39,187
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Acquired lease intangible liabilities, net
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118,801
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100,641
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Liabilities associated with investment properties held for sale
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409
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8,203
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Other liabilities
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72,543
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70,860
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Total liabilities
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2,790,041
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2,614,485
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Commitments and contingencies (Note 14)
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Equity:
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Preferred stock, $0.001 par value, 10,000 shares authorized, 7.00% Series A cumulative
redeemable preferred stock, 5,400 shares issued and outstanding as of June 30, 2015
and December 31, 2014; liquidation preference $135,000
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5
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5
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Class A common stock, $0.001 par value, 475,000 shares authorized, 237,227 and 236,602
shares issued and outstanding as of June 30, 2015 and December 31, 2014, respectively
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237
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237
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Additional paid-in capital
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4,927,188
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4,922,864
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Accumulated distributions in excess of earnings
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(2,774,228
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)
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(2,734,688
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)
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Accumulated other comprehensive loss
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(535
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)
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(537
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)
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Total shareholders’ equity
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2,152,667
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2,187,881
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Noncontrolling interests
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1,494
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1,494
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Total equity
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2,154,161
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2,189,375
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Total liabilities and equity
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$
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4,944,202
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$
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4,803,860
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Three Months Ended June 30,
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Six Months Ended June 30,
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2015
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2014
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2015
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2014
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Revenues
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Rental income
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$
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119,022
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$
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117,419
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$
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238,810
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$
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234,950
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Tenant recovery income
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29,416
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27,108
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60,716
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56,856
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Other property income
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2,450
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1,919
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4,559
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3,831
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Total revenues
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150,888
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146,446
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304,085
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295,637
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Expenses
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Property operating expenses
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23,153
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22,142
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48,848
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48,668
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Real estate taxes
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20,486
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19,067
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40,996
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37,481
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Depreciation and amortization
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55,798
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55,061
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110,474
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108,891
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Provision for impairment of investment properties
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3,944
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5,400
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3,944
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5,794
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General and administrative expenses
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14,018
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7,362
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25,010
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15,812
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Total expenses
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117,399
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109,032
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229,272
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216,646
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Operating income
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33,489
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37,414
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74,813
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78,991
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Gain on extinguishment of other liabilities
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—
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—
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—
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4,258
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Equity in loss of unconsolidated joint ventures, net
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—
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(433
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—
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(1,211
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Gain on change in control of investment properties
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—
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24,158
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—
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24,158
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Interest expense
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(36,140
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(31,873
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(70,185
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(63,736
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)
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Other (expense) income, net
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(306
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)
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250
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919
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677
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(Loss) income from continuing operations
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(2,957
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29,516
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5,547
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43,137
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Discontinued operations:
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Loss, net
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—
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—
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—
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(148
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)
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Gain on sales of investment properties
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—
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—
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—
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655
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Income from discontinued operations
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—
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—
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—
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507
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Gain on sales of investment properties
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33,641
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527
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38,213
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527
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Net income
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30,684
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30,043
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43,760
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44,171
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Net income attributable to the Company
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30,684
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30,043
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43,760
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44,171
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Preferred stock dividends
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(2,363
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)
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(2,363
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(4,725
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)
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(4,725
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)
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Net income attributable to common shareholders
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$
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28,321
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$
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27,680
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$
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39,035
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$
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39,446
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Earnings per common share — basic and diluted:
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Continuing operations
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$
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0.12
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$
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0.12
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$
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0.16
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$
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0.17
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Discontinued operations
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—
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—
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—
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—
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Net income per common share attributable to common shareholders
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$
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0.12
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$
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0.12
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$
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0.16
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$
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0.17
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Net income
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$
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30,684
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$
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30,043
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$
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43,760
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$
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44,171
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Other comprehensive income (loss):
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Net unrealized gain (loss) on derivative instruments (Note 9)
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97
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(137
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)
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2
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(155
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)
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Comprehensive income attributable to the Company
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$
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30,781
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$
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29,906
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$
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43,762
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$
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44,016
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Weighted average number of common shares outstanding — basic
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236,354
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236,176
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236,302
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236,164
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Weighted average number of common shares outstanding — diluted
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236,356
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236,179
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236,305
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236,166
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Preferred Stock
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Class A
Common Stock
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Additional
Paid-in
Capital
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Accumulated
Distributions
in Excess of
Earnings
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Accumulated
Other
Comprehensive
(Loss) Income
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Total
Shareholders’
Equity
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Noncontrolling
Interests
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Total
Equity
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||||||||||||||||||||||
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Shares
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Amount
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Shares
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Amount
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Balance as of January 1, 2014
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5,400
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$
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5
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236,302
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$
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236
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$
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4,919,633
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$
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(2,611,796
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)
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$
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(738
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)
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$
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2,307,340
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$
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1,494
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$
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2,308,834
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Net income
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—
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—
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—
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—
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—
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44,171
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—
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44,171
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—
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44,171
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Other comprehensive loss
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—
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—
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—
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—
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—
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—
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(155
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)
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(155
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)
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—
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(155
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)
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Distributions declared to preferred shareholders ($0.875 per share)
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—
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—
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—
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—
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—
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(4,725
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)
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—
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(4,725
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)
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—
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(4,725
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)
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||||||||
Distributions declared to common shareholders ($0.33125 per share)
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—
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—
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—
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—
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—
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|
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(78,368
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)
|
|
—
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(78,368
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)
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—
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(78,368
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)
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||||||||
Issuance of common stock, net of offering costs
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—
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—
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—
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—
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(78
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)
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|
—
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|
—
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(78
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)
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—
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(78
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)
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Issuance of restricted shares
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—
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—
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|
303
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1
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—
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|
—
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—
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1
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—
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1
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||||||||
Stock-based compensation expense, net of shares withheld for employee taxes and forfeitures
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—
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—
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(5
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)
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—
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|
|
1,505
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|
|
—
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|
|
—
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|
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1,505
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|
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—
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|
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1,505
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||||||||
Balance as of June 30, 2014
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5,400
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|
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$
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5
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|
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236,600
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|
$
|
237
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|
|
$
|
4,921,060
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|
|
$
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(2,650,718
|
)
|
|
$
|
(893
|
)
|
|
$
|
2,269,691
|
|
|
$
|
1,494
|
|
|
$
|
2,271,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Balance as of January 1, 2015
|
5,400
|
|
|
$
|
5
|
|
|
236,602
|
|
|
$
|
237
|
|
|
$
|
4,922,864
|
|
|
$
|
(2,734,688
|
)
|
|
$
|
(537
|
)
|
|
$
|
2,187,881
|
|
|
$
|
1,494
|
|
|
$
|
2,189,375
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
43,760
|
|
|
—
|
|
|
43,760
|
|
|
—
|
|
|
43,760
|
|
||||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
|
—
|
|
|
2
|
|
||||||||
Distributions declared to preferred shareholders ($0.875 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,725
|
)
|
|
—
|
|
|
(4,725
|
)
|
|
—
|
|
|
(4,725
|
)
|
||||||||
Distributions declared to common shareholders ($0.33125 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(78,575
|
)
|
|
—
|
|
|
(78,575
|
)
|
|
—
|
|
|
(78,575
|
)
|
||||||||
Issuance of common stock, net of offering costs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(79
|
)
|
|
—
|
|
|
—
|
|
|
(79
|
)
|
|
—
|
|
|
(79
|
)
|
||||||||
Issuance of restricted shares
|
—
|
|
|
—
|
|
|
737
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Stock-based compensation expense, net of shares withheld for employee taxes and forfeitures
|
—
|
|
|
—
|
|
|
(112
|
)
|
|
—
|
|
|
4,403
|
|
|
—
|
|
|
—
|
|
|
4,403
|
|
|
—
|
|
|
4,403
|
|
||||||||
Balance as of June 30, 2015
|
5,400
|
|
|
$
|
5
|
|
|
237,227
|
|
|
$
|
237
|
|
|
$
|
4,927,188
|
|
|
$
|
(2,774,228
|
)
|
|
$
|
(535
|
)
|
|
$
|
2,152,667
|
|
|
$
|
1,494
|
|
|
$
|
2,154,161
|
|
|
Six Months Ended June 30,
|
||||||
|
2015
|
|
2014
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
43,760
|
|
|
$
|
44,171
|
|
Adjustments to reconcile net income to net cash provided by operating activities
(including discontinued operations):
|
|
|
|
||||
Depreciation and amortization
|
110,474
|
|
|
108,891
|
|
||
Provision for impairment of investment properties
|
3,944
|
|
|
5,794
|
|
||
Gain on sales of investment properties
|
(38,213
|
)
|
|
(1,182
|
)
|
||
Gain on extinguishment of other liabilities
|
—
|
|
|
(4,258
|
)
|
||
Gain on change in control of investment properties
|
—
|
|
|
(24,158
|
)
|
||
Amortization of loan fees and debt premium and discount, net
|
2,040
|
|
|
2,916
|
|
||
Amortization of stock-based compensation
|
6,126
|
|
|
1,571
|
|
||
Premium paid in connection with defeasance of mortgages payable
|
6,288
|
|
|
—
|
|
||
Equity in loss of unconsolidated joint ventures, net
|
—
|
|
|
1,211
|
|
||
Distributions on investments in unconsolidated joint ventures
|
—
|
|
|
1,360
|
|
||
Payment of leasing fees and inducements
|
(3,986
|
)
|
|
(4,623
|
)
|
||
Changes in accounts receivable, net
|
11,441
|
|
|
3,011
|
|
||
Changes in accounts payable and accrued expenses, net
|
(6,816
|
)
|
|
(4,125
|
)
|
||
Changes in other operating assets and liabilities, net
|
7,099
|
|
|
(2,047
|
)
|
||
Other, net
|
834
|
|
|
(845
|
)
|
||
Net cash provided by operating activities
|
142,991
|
|
|
127,687
|
|
||
|
|
|
|
||||
Cash flows from investing activities:
|
|
|
|
||||
Changes in restricted escrows, net
|
21,699
|
|
|
651
|
|
||
Purchase of investment properties
|
(382,016
|
)
|
|
(152,236
|
)
|
||
Capital expenditures and tenant improvements
|
(23,070
|
)
|
|
(20,977
|
)
|
||
Proceeds from sales of investment properties
|
150,699
|
|
|
78,550
|
|
||
Investment in developments in progress
|
(833
|
)
|
|
(2,378
|
)
|
||
Investment in unconsolidated joint ventures
|
—
|
|
|
(25
|
)
|
||
Other, net
|
(25
|
)
|
|
—
|
|
||
Net cash used in investing activities
|
(233,546
|
)
|
|
(96,415
|
)
|
||
|
|
|
|
||||
Cash flows from financing activities:
|
|
|
|
||||
Proceeds from mortgages payable
|
757
|
|
|
2,905
|
|
||
Principal payments on mortgages payable
|
(178,546
|
)
|
|
(89,089
|
)
|
||
Proceeds from unsecured notes payable
|
248,815
|
|
|
250,000
|
|
||
Proceeds from unsecured credit facility
|
460,000
|
|
|
255,500
|
|
||
Repayments of unsecured credit facility
|
(350,000
|
)
|
|
(365,500
|
)
|
||
Payment of loan fees and deposits, net
|
(2,233
|
)
|
|
(1,522
|
)
|
||
Purchase of Treasury securities in connection with defeasance of mortgages payable
|
(30,840
|
)
|
|
—
|
|
||
Distributions paid
|
(83,196
|
)
|
|
(83,044
|
)
|
||
Other, net
|
(1,793
|
)
|
|
(144
|
)
|
||
Net cash provided by (used in) financing activities
|
62,964
|
|
|
(30,894
|
)
|
||
|
|
|
|
||||
Net (decrease) increase in cash and cash equivalents
|
(27,591
|
)
|
|
378
|
|
||
Cash and cash equivalents, at beginning of period
|
112,292
|
|
|
58,190
|
|
||
Cash and cash equivalents, at end of period
|
$
|
84,701
|
|
|
$
|
58,568
|
|
(continued)
|
|
|
Six Months Ended June 30,
|
||||||
|
2015
|
|
2014
|
||||
Supplemental cash flow disclosure, including non-cash activities:
|
|
|
|
||||
Cash paid for interest
|
$
|
56,692
|
|
|
$
|
57,204
|
|
Distributions payable
|
$
|
39,291
|
|
|
$
|
39,187
|
|
Accrued capital expenditures and tenant improvements
|
$
|
5,309
|
|
|
$
|
3,518
|
|
Accrued leasing fees and inducements
|
$
|
669
|
|
|
$
|
485
|
|
Developments in progress placed in service
|
$
|
2,288
|
|
|
$
|
4,047
|
|
Treasury securities transferred in connection with defeasance of mortgages payable
|
$
|
30,840
|
|
|
$
|
—
|
|
Defeasance of mortgages payable
|
$
|
24,552
|
|
|
$
|
—
|
|
|
|
|
|
||||
Purchase of investment properties (after credits at closing):
|
|
|
|
||||
Land, building and other improvements, net
|
$
|
(375,443
|
)
|
|
$
|
(318,666
|
)
|
Accounts receivable, acquired lease intangible and other assets
|
(39,641
|
)
|
|
(29,163
|
)
|
||
Accounts payable, acquired lease intangible and other liabilities
|
33,068
|
|
|
24,950
|
|
||
Mortgages payable assumed, net
|
—
|
|
|
146,485
|
|
||
Gain on change in control of investment properties
|
—
|
|
|
24,158
|
|
||
|
$
|
(382,016
|
)
|
|
$
|
(152,236
|
)
|
|
|
|
|
||||
Proceeds from sales of investment properties:
|
|
|
|
||||
Land, building and other improvements, net
|
$
|
111,651
|
|
|
$
|
75,474
|
|
Accounts receivable, acquired lease intangible and other assets
|
2,518
|
|
|
2,396
|
|
||
Accounts payable, acquired lease intangible and other liabilities
|
(1,715
|
)
|
|
(1,044
|
)
|
||
Deferred gain
|
32
|
|
|
542
|
|
||
Gain on sales of investment properties
|
38,213
|
|
|
1,182
|
|
||
|
$
|
150,699
|
|
|
$
|
78,550
|
|
|
Wholly-owned
|
|
Consolidated
Joint Ventures (a)
|
||
Operating properties (b)
|
209
|
|
|
—
|
|
Development properties
|
2
|
|
|
1
|
|
(a)
|
The Company has a
50%
ownership interest in
one
LLC.
|
(b)
|
Excludes
two
wholly-owned properties classified as held for sale as of
June 30, 2015
.
|
Date
|
|
Property Name
|
|
Metropolitan
Statistical Area
(MSA)
|
|
Property Type
|
|
Square
Footage
|
|
Acquisition
Price
|
|||
January 8, 2015
|
|
Downtown Crown
|
|
Washington, D.C.
|
|
Multi-tenant retail
|
|
258,000
|
|
|
$
|
162,785
|
|
January 23, 2015
|
|
Merrifield Town Center
|
|
Washington, D.C.
|
|
Multi-tenant retail
|
|
84,900
|
|
|
56,500
|
|
|
January 23, 2015
|
|
Fort Evans Plaza II
|
|
Washington, D.C.
|
|
Multi-tenant retail
|
|
228,900
|
|
|
65,000
|
|
|
February 19, 2015
|
|
Cedar Park Town Center
|
|
Austin
|
|
Multi-tenant retail
|
|
179,300
|
|
|
39,057
|
|
|
March 24, 2015
|
|
Lake Worth Towne Crossing - Parcel (a)
|
|
Dallas
|
|
Land
|
|
—
|
|
|
400
|
|
|
May 4, 2015
|
|
Tysons Corner
|
|
Washington, D.C.
|
|
Multi-tenant retail
|
|
37,700
|
|
|
31,556
|
|
|
June 10, 2015
|
|
Woodinville Plaza
|
|
Seattle
|
|
Multi-tenant retail
|
|
170,800
|
|
|
35,250
|
|
|
|
|
|
|
|
|
|
|
959,600
|
|
|
$
|
390,548
|
|
(a)
|
The Company acquired a parcel located at its Lake Worth Towne Crossing multi-tenant retail operating property.
|
Date
|
|
Property Name
|
|
MSA
|
|
Property Type
|
|
Square
Footage
|
|
Acquisition
Price
|
|
Pro Rata
Acquisition
Price
|
|||||
February 27, 2014
|
|
Heritage Square
|
|
Seattle
|
|
Multi-tenant retail
|
|
53,100
|
|
|
$
|
18,022
|
|
|
$
|
18,022
|
|
February 27, 2014
|
|
Bed Bath & Beyond Plaza - Fee Interest (a)
|
|
Miami
|
|
Ground lease interest
|
|
—
|
|
|
10,350
|
|
|
10,350
|
|
||
June 5, 2014
|
|
MS Inland Portfolio (b)
|
|
Various
|
|
Multi-tenant retail
|
|
1,194,800
|
|
|
292,500
|
|
|
234,000
|
|
||
June 23, 2014
|
|
Southlake Town Square - Outparcel (c)
|
|
Dallas
|
|
Single-user outparcel
|
|
8,500
|
|
|
6,369
|
|
|
6,369
|
|
||
|
|
|
|
|
|
|
|
1,256,400
|
|
|
$
|
327,241
|
|
|
$
|
268,741
|
|
(a)
|
The Company acquired the fee interest in an existing wholly-owned multi-tenant retail operating property located in Miami, Florida, which was previously subject to a ground lease with a third party. In conjunction with this transaction, the Company reversed a straight-line ground rent liability of
$4,258
, which is presented in “Gain on extinguishment of other liabilities” in the accompanying condensed consolidated statements of operations and other comprehensive income.
|
(b)
|
The Company dissolved its joint venture arrangement with its partner in MS Inland by acquiring its partner’s
80%
ownership interest in the
six
multi-tenant retail properties owned by the joint venture (collectively, the MS Inland acquisitions). The Company paid total cash consideration of approximately
$120,600
before transaction costs and prorations and after assumption of the joint venture’s in-place mortgage financing on those properties of
$141,698
at a weighted average interest rate of
4.79%
. The Company accounted for this transaction as a business combination achieved in stages and recognized a gain on change in control of investment properties of
$24,158
as a result of remeasuring the carrying value of its
20%
interest in the
six
acquired properties to fair value. Such gain is presented as “Gain on change in control of investment properties” in the accompanying condensed consolidated statements of operations and other comprehensive income. The following table summarizes the calculation of the gain on change in control of investment properties recognized in conjunction with this transaction:
|
Fair value of the net assets acquired at 100%
|
|
$
|
150,802
|
|
|
|
|
||
Fair value of the net assets acquired at 20%
|
|
30,160
|
|
|
Carrying value of the Company’s previous investment in the six properties
acquired on June 5, 2014
|
|
(6,002
|
)
|
|
Gain on change in control of investment properties
|
|
$
|
24,158
|
|
(c)
|
The Company acquired a single-user outparcel located at its Southlake Town Square multi-tenant retail operating property that was subject to a ground lease with the Company prior to the transaction.
|
|
|
Six Months Ended June 30,
|
||||||
|
|
2015
|
|
2014
|
||||
Land
|
|
$
|
141,085
|
|
|
$
|
112,804
|
|
Building and other improvements
|
|
234,358
|
|
|
205,862
|
|
||
Acquired lease intangible assets (a)
|
|
38,121
|
|
|
33,568
|
|
||
Acquired lease intangible liabilities (b)
|
|
(23,016
|
)
|
|
(20,206
|
)
|
||
Mortgages payable (c)
|
|
—
|
|
|
(146,485
|
)
|
||
Net assets acquired (d)
|
|
$
|
390,548
|
|
|
$
|
185,543
|
|
(a)
|
The weighted average amortization period for acquired lease intangible assets is
16 years
and
eight years
for acquisitions completed during the
six
months ended
June 30, 2015
and
2014
, respectively.
|
(b)
|
The weighted average amortization period for acquired lease intangible liabilities is
21 years
and
18 years
for acquisitions completed during the
six
months ended
June 30, 2015
and
2014
, respectively.
|
(c)
|
2014 amount includes mortgage premium of
$4,787
.
|
(d)
|
Net assets attributable to the MS Inland acquisitions are presented at
100%
.
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Total revenues
|
|
$
|
151,432
|
|
|
$
|
155,863
|
|
|
$
|
306,618
|
|
|
$
|
317,086
|
|
Net income
|
|
$
|
30,608
|
|
|
$
|
6,186
|
|
|
$
|
43,906
|
|
|
$
|
42,893
|
|
Net income attributable to common shareholders
|
|
$
|
28,245
|
|
|
$
|
3,823
|
|
|
$
|
39,181
|
|
|
$
|
38,168
|
|
Earnings per common share — basic and diluted
|
|
|
|
|
|
|
|
|
||||||||
Net income per common share attributable to common shareholders
|
|
$
|
0.12
|
|
|
$
|
0.02
|
|
|
$
|
0.16
|
|
|
$
|
0.16
|
|
Weighted average number of common shares outstanding — basic
|
|
236,354
|
|
|
236,176
|
|
|
236,302
|
|
|
236,164
|
|
Date
|
|
Property Name
|
|
Property Type
|
|
Square
Footage
|
|
Consideration
|
|
Aggregate
Proceeds, Net (a)
|
|
Gain
|
|||||||
January 20, 2015
|
|
Aon Hewitt East Campus
|
|
Single-user office
|
|
343,000
|
|
|
$
|
17,233
|
|
|
$
|
16,495
|
|
|
$
|
—
|
|
February 27, 2015
|
|
Promenade at Red Cliff
|
|
Multi-tenant retail
|
|
94,500
|
|
|
19,050
|
|
|
18,848
|
|
|
4,572
|
|
|||
April 7, 2015
|
|
Hartford Insurance Building
|
|
Single-user office
|
|
97,400
|
|
|
6,015
|
|
|
5,663
|
|
|
860
|
|
|||
April 30, 2015
|
|
Rasmussen College
|
|
Single-user office
|
|
26,700
|
|
|
4,800
|
|
|
4,449
|
|
|
1,334
|
|
|||
May 15, 2015
|
|
Mountain View Plaza
|
|
Multi-tenant retail
|
|
162,000
|
|
|
28,500
|
|
|
27,949
|
|
|
10,184
|
|
|||
June 4, 2015
|
|
Massillon Commons
|
|
Multi-tenant retail
|
|
245,900
|
|
|
12,520
|
|
|
12,145
|
|
|
—
|
|
|||
June 5, 2015
|
|
Citizen's Property Insurance Building
|
|
Single-user office
|
|
59,800
|
|
|
3,650
|
|
|
3,368
|
|
|
440
|
|
|||
June 17, 2015
|
|
Pine Ridge Plaza
|
|
Multi-tenant retail
|
|
236,500
|
|
|
33,200
|
|
|
31,858
|
|
|
12,938
|
|
|||
June 17, 2015
|
|
Bison Hollow
|
|
Multi-tenant retail
|
|
134,800
|
|
|
18,800
|
|
|
18,657
|
|
|
4,061
|
|
|||
June 17, 2015
|
|
The Village at Quail Springs
|
|
Multi-tenant retail
|
|
100,400
|
|
|
11,350
|
|
|
11,267
|
|
|
3,824
|
|
|||
|
|
|
|
|
|
1,501,000
|
|
|
$
|
155,118
|
|
|
$
|
150,699
|
|
|
$
|
38,213
|
|
(a)
|
Aggregate proceeds are net of transaction costs.
|
(a)
|
Aggregate proceeds are net of transaction costs and exclude
$11
of condemnation proceeds, which did not result in any additional gain recognition.
|
(b)
|
The terms of the disposition of Beachway Plaza and Cornerstone Plaza were negotiated as a single transaction. The Company recognized an additional gain on sale of
$292
during the fourth quarter of 2014 that was deferred at disposition.
|
|
June 30,
2015 |
|
December 31,
2014 |
||||
Assets
|
|
|
|
||||
Land, building and other improvements
|
$
|
26,754
|
|
|
$
|
36,020
|
|
Accumulated depreciation
|
(7,178
|
)
|
|
(5,358
|
)
|
||
Net investment properties
|
19,576
|
|
|
30,662
|
|
||
Other assets
|
686
|
|
|
2,978
|
|
||
Assets associated with investment properties held for sale
|
$
|
20,262
|
|
|
$
|
33,640
|
|
|
|
|
|
||||
Liabilities
|
|
|
|
||||
Mortgage payable
|
$
|
—
|
|
|
$
|
8,075
|
|
Other liabilities
|
409
|
|
|
128
|
|
||
Liabilities associated with investment properties held for sale
|
$
|
409
|
|
|
$
|
8,203
|
|
|
Unvested
Restricted
Shares
|
|
Weighted Average
Grant Date
Fair Value per
Restricted Share
|
|||
Balance as of January 1, 2015
|
396
|
|
|
$
|
14.26
|
|
Shares granted (a)
|
737
|
|
|
$
|
15.88
|
|
Shares vested
|
(345
|
)
|
|
$
|
14.78
|
|
Balance as of June 30, 2015
|
788
|
|
|
$
|
15.55
|
|
(a)
|
Shares granted vest ratably over periods ranging from seven months to
three years
in accordance with the terms of applicable award documents.
|
|
Unvested
RSUs
|
|
Grant Date
Fair Value
per RSU
|
|||
Balance as of January 1, 2015
|
—
|
|
|
$
|
—
|
|
RSUs granted (a)
|
157
|
|
|
$
|
14.10
|
|
Balance as of June 30, 2015
|
157
|
|
|
$
|
14.10
|
|
(a)
|
In 2018, following the performance period which concludes on December 31, 2017, one-third of the RSUs will convert into shares of common stock and two-thirds will convert into restricted shares with a
one year
vesting term. As long as the minimum hurdle is achieved, the RSUs will convert into shares of common stock and restricted shares
|
|
June 30, 2015
|
|
December 31, 2014
|
||||||||||||||
|
Aggregate
Principal
Balance
|
|
Weighted
Average
Interest Rate
|
|
Weighted
Average Years
to Maturity
|
|
Aggregate
Principal
Balance
|
|
Weighted
Average
Interest Rate
|
|
Weighted
Average Years
to Maturity
|
||||||
Fixed rate mortgages payable (a)
|
$
|
1,421,040
|
|
|
5.97
|
%
|
|
3.8
|
|
$
|
1,616,063
|
|
|
6.03
|
%
|
|
4.0
|
Variable rate construction loan (b)
|
15,657
|
|
|
2.44
|
%
|
|
0.3
|
|
14,900
|
|
|
2.44
|
%
|
|
0.8
|
||
Mortgages payable
|
1,436,697
|
|
|
5.94
|
%
|
|
3.8
|
|
1,630,963
|
|
|
5.99
|
%
|
|
3.9
|
||
Premium, net of accumulated amortization
|
2,324
|
|
|
|
|
|
|
3,972
|
|
|
|
|
|
||||
Discount, net of accumulated amortization
|
(215
|
)
|
|
|
|
|
|
(470
|
)
|
|
|
|
|
||||
Mortgages payable, net
|
$
|
1,438,806
|
|
|
|
|
|
|
$
|
1,634,465
|
|
|
|
|
|
(a)
|
Includes
$8,017
and
$8,124
of variable rate mortgage debt that was swapped to a fixed rate as of
June 30, 2015
and
December 31, 2014
, respectively, and excludes mortgages payable of
$8,075
associated with
one
investment property classified as held for sale as of
December 31, 2014
. The fixed rate mortgages had interest rates ranging from
3.35%
to
8.00%
as of
June 30, 2015
and
December 31, 2014
, respectively.
|
(b)
|
The variable rate construction loan bears interest at a floating rate of London Interbank Offered Rate (LIBOR) plus
2.25%
.
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
Thereafter
|
|
Total
|
||||||||||||||
Debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Fixed rate debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Mortgages payable (a)
|
$
|
229,667
|
|
|
$
|
67,014
|
|
|
$
|
320,341
|
|
|
$
|
11,565
|
|
|
$
|
486,705
|
|
|
$
|
305,748
|
|
|
$
|
1,421,040
|
|
Unsecured credit facility - fixed rate portion of term loan (b)
|
—
|
|
|
—
|
|
|
—
|
|
|
300,000
|
|
|
—
|
|
|
—
|
|
|
300,000
|
|
|||||||
Unsecured notes payable (c)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
500,000
|
|
|
500,000
|
|
|||||||
Total fixed rate debt
|
229,667
|
|
|
67,014
|
|
|
320,341
|
|
|
311,565
|
|
|
486,705
|
|
|
805,748
|
|
|
2,221,040
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Variable rate debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Construction loan
|
15,657
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,657
|
|
|||||||
Unsecured credit facility
|
—
|
|
|
—
|
|
|
110,000
|
|
|
150,000
|
|
|
—
|
|
|
—
|
|
|
260,000
|
|
|||||||
Total variable rate debt
|
15,657
|
|
|
—
|
|
|
110,000
|
|
|
150,000
|
|
|
—
|
|
|
—
|
|
|
275,657
|
|
|||||||
Total debt (d)
|
$
|
245,324
|
|
|
$
|
67,014
|
|
|
$
|
430,341
|
|
|
$
|
461,565
|
|
|
$
|
486,705
|
|
|
$
|
805,748
|
|
|
$
|
2,496,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Weighted average interest rate on debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Fixed rate debt
|
5.21
|
%
|
|
5.03
|
%
|
|
5.52
|
%
|
|
2.17
|
%
|
|
7.50
|
%
|
|
4.42
|
%
|
|
5.04
|
%
|
|||||||
Variable rate debt (e)
|
2.44
|
%
|
|
—
|
|
|
1.69
|
%
|
|
1.64
|
%
|
|
—
|
|
|
—
|
|
|
1.71
|
%
|
|||||||
Total
|
5.03
|
%
|
|
5.03
|
%
|
|
4.54
|
%
|
|
2.00
|
%
|
|
7.50
|
%
|
|
4.42
|
%
|
|
4.67
|
%
|
(a)
|
Includes
$8,017
of variable rate mortgage debt that was swapped to a fixed rate as of
June 30, 2015
. Excludes mortgage premium of
$2,324
and discount of
$(215)
, net of accumulated amortization, which was outstanding as of
June 30, 2015
.
|
(b)
|
$300,000
of LIBOR-based variable rate debt has been swapped 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.
|
(c)
|
Excludes discount of
$(1,149)
, net of accumulated amortization, which was outstanding as of
June 30, 2015
.
|
(d)
|
As of
June 30, 2015
, the weighted average years to maturity of consolidated indebtedness was
4.5 years
.
|
(e)
|
Represents interest rates as of
June 30, 2015
.
|
Unsecured Notes Payable
|
|
Maturity Date
|
|
Principal Balance
|
|
Interest Rate/
Weighted Average
Interest Rate
|
|||
Senior notes - 4.12% Series A due 2021
|
|
June 30, 2021
|
|
$
|
100,000
|
|
|
4.12
|
%
|
Senior notes - 4.58% Series B due 2024
|
|
June 30, 2024
|
|
150,000
|
|
|
4.58
|
%
|
|
Senior notes - 4.00% due 2025
|
|
March 15, 2025
|
|
250,000
|
|
|
4.00
|
%
|
|
|
|
|
|
500,000
|
|
|
4.20
|
%
|
|
Discount, net of accumulated amortization
|
|
|
|
(1,149
|
)
|
|
|
||
|
|
Total
|
|
$
|
498,851
|
|
|
|
|
|
|
|
June 30, 2015
|
|
December 31, 2014
|
||||||||||
Unsecured Credit Facility
|
|
Maturity Date
|
|
Balance
|
|
Interest Rate/
Weighted Average
Interest Rate
|
|
Balance
|
|
Interest Rate/
Weighted Average Interest Rate |
||||||
Term loan - fixed rate portion (a)
|
|
May 11, 2018
|
|
$
|
300,000
|
|
|
1.99
|
%
|
|
$
|
300,000
|
|
|
1.99
|
%
|
Term loan - variable rate portion
|
|
May 11, 2018
|
|
150,000
|
|
|
1.64
|
%
|
|
150,000
|
|
|
1.62
|
%
|
||
Revolving line of credit - variable rate
|
|
May 12, 2017 (b)
|
|
110,000
|
|
|
1.69
|
%
|
|
—
|
|
|
1.67
|
%
|
||
|
|
Total
|
|
$
|
560,000
|
|
|
1.84
|
%
|
|
$
|
450,000
|
|
|
1.87
|
%
|
(a)
|
$300,000
of the term loan has been swapped to a fixed rate of
0.53875%
plus a margin based on a leverage grid ranging from
1.45%
to
2.00%
through February 24, 2016. The applicable margin was
1.45%
as of
June 30, 2015
and
December 31, 2014
.
|
(b)
|
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 unsecured credit agreement and it pays an extension fee equal to
0.15%
of the commitment amount being extended.
|
|
|
Number of Instruments
|
|
Notional
|
||||||||||
Interest Rate Derivatives
|
|
June 30,
2015 |
|
December 31,
2014 |
|
June 30,
2015 |
|
December 31,
2014 |
||||||
Interest rate swaps
|
|
2
|
|
|
2
|
|
|
$
|
308,017
|
|
|
$
|
308,124
|
|
|
|
Fair Value
|
||||||
|
|
June 30,
2015 |
|
December 31,
2014 |
||||
Derivatives designated as cash flow hedges:
|
|
|
|
|
||||
Interest rate swaps
|
|
$
|
539
|
|
|
$
|
562
|
|
Derivatives in
Cash Flow
Hedging
Relationships
|
|
Amount of Loss
Recognized in Other
Comprehensive Income
on Derivative
(Effective Portion)
|
|
Location of Loss
Reclassified from
Accumulated Other
Comprehensive Income (AOCI)
into Income
(Effective Portion)
|
|
Amount of Loss
Reclassified from
AOCI into Income
(Effective Portion)
|
|
Location of Loss
(Gain) Recognized in
Income on Derivative
(Ineffective Portion
and Amount
Excluded from
Effectiveness Testing)
|
|
Amount of Loss (Gain)
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, |
||||||||||||
2015
|
|
$
|
196
|
|
|
$
|
582
|
|
|
Interest expense
|
|
$
|
293
|
|
|
$
|
584
|
|
|
Other (expense)
income, net
|
|
$
|
4
|
|
|
$
|
(21
|
)
|
2014
|
|
$
|
432
|
|
|
$
|
741
|
|
|
Interest expense
|
|
$
|
295
|
|
|
$
|
586
|
|
|
Other (expense)
income, net |
|
$
|
—
|
|
|
$
|
(13
|
)
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
|
||||||||
(Loss) income from continuing operations
|
$
|
(2,957
|
)
|
|
$
|
29,516
|
|
|
$
|
5,547
|
|
|
$
|
43,137
|
|
|
Gain on sales of investment properties
|
33,641
|
|
|
527
|
|
|
38,213
|
|
|
527
|
|
|
||||
Preferred stock dividends
|
(2,363
|
)
|
|
(2,363
|
)
|
|
(4,725
|
)
|
|
(4,725
|
)
|
|
||||
Income from continuing operations attributable to common shareholders
|
28,321
|
|
|
27,680
|
|
|
39,035
|
|
|
38,939
|
|
|
||||
Income from discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
507
|
|
|
||||
Net income attributable to common shareholders
|
28,321
|
|
|
27,680
|
|
|
39,035
|
|
|
39,446
|
|
|
||||
Distributions paid on unvested restricted shares
|
(144
|
)
|
|
(69
|
)
|
|
(210
|
)
|
|
(94
|
)
|
|
||||
Net income attributable to common shareholders excluding
amounts attributable to unvested restricted shares
|
$
|
28,177
|
|
|
$
|
27,611
|
|
|
$
|
38,825
|
|
|
$
|
39,352
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Denominator:
|
|
|
|
|
|
|
|
|
||||||||
Denominator for earnings per common share — basic:
|
|
|
|
|
|
|
|
|
||||||||
Weighted average number of common shares outstanding
|
236,354
|
|
(a)
|
236,176
|
|
(b)
|
236,302
|
|
(a)
|
236,164
|
|
(b)
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
||||||||
Stock options
|
2
|
|
(c)
|
3
|
|
(c)
|
3
|
|
(c)
|
2
|
|
(c)
|
||||
RSUs
|
—
|
|
(d)
|
—
|
|
|
—
|
|
(d)
|
—
|
|
|
||||
Denominator for earnings per common share — diluted:
|
|
|
|
|
|
|
|
|
|
|
||||||
Weighted average number of common and common equivalent
shares outstanding
|
236,356
|
|
|
236,179
|
|
|
236,305
|
|
|
236,166
|
|
|
(a)
|
Excludes
788
shares of unvested restricted common stock, which equate to
851
and
731
shares, respectively, on a weighted average basis for the three and
six
months ended
June 30, 2015
. These shares will continue to be excluded from the computation of basic EPS until contingencies are resolved and the shares are released.
|
(b)
|
Excludes
397
shares of unvested restricted common stock, which equate to
399
and
331
shares, respectively, on a weighted average basis for the three and
six
months ended
June 30, 2014
. These shares were excluded from the computation of basic EPS as the contingencies remained and the shares had not been released as of the end of the reporting period.
|
(c)
|
There were outstanding options to purchase
64
and
77
shares of common stock as of
June 30, 2015
and
2014
, respectively, at a weighted average exercise price of
$19.28
and
$19.05
, respectively. Of these totals, outstanding options to purchase
54
and
63
shares of common stock as of
June 30, 2015
and
2014
, respectively, at a weighted average exercise price of
$20.69
and
$20.68
, respectively, have been excluded from the common shares used in calculating diluted earnings per share as including them would be anti-dilutive.
|
(d)
|
There were
157
RSUs outstanding as of
June 30, 2015
(see Note 5 to the condensed consolidated financial statements). These contingently issuable shares are included in diluted EPS based on the weighted average number of shares that would be outstanding during the period, if any, assuming the end of the reporting period were the end of the contingency period. Assuming
June 30, 2015
was the end of the contingency period, none of these contingently issuable shares would be outstanding.
|
Property Name
|
|
Property Type
|
|
Impairment Date
|
|
Square
Footage
|
|
Provision for
Impairment of
Investment
Properties
|
|||
Massillon Commons (a)
|
|
Multi-tenant retail
|
|
June 4, 2015
|
|
245,900
|
|
|
$
|
2,289
|
|
Traveler’s Office Building (b)
|
|
Single-user office
|
|
June 30, 2015
|
|
50,800
|
|
|
1,655
|
|
|
|
|
|
|
|
|
|
|
$
|
3,944
|
|
|
|
|
Estimated fair value of impaired properties as of impairment date
|
$
|
17,970
|
|
(a)
|
The Company recorded an impairment charge based upon the terms and conditions of an executed sales contract for the property, which was sold on June 4, 2015.
|
(b)
|
The Company recorded an impairment charge based upon the terms and conditions of an executed sales contract. This property is classified as held for sale as of June 30, 2015 and was sold on July 30, 2015.
|
|
|
June 30, 2015
|
|
June 30, 2014
|
|
||
Number of properties for which indicators of impairment were identified
|
|
6
|
|
|
8
|
|
(a)
|
Less: number of properties for which an impairment charge was recorded
|
|
1
|
|
(b)
|
1
|
|
|
Less: number of properties that were held for sale as of the date the analysis was performed for which
indicators of impairment were identified but no impairment charge was considered necessary
|
|
1
|
|
|
1
|
|
|
Remaining properties for which indicators of impairment were identified but no impairment
charge was considered necessary
|
|
4
|
|
|
6
|
|
|
|
|
|
|
|
|
||
Weighted average percentage by which the projected undiscounted cash flows exceeded
its respective carrying value for each of the remaining properties (c)
|
|
53
|
%
|
|
22
|
%
|
|
(a)
|
Includes
five
properties which were subsequently sold or classified as held for sale as of
June 30, 2015
.
|
(b)
|
Traveler’s Office Building was classified as held for sale as of
June 30, 2015
.
|
(c)
|
Based upon the estimated holding period for each asset where an undiscounted cash flow analysis was performed.
|
Property Name
|
|
Property Type
|
|
Impairment Date
|
|
Square
Footage
|
|
Provision for
Impairment of
Investment
Properties
|
|||
Midtown Center (a)
|
|
Multi-tenant retail
|
|
March 31, 2014
|
|
408,500
|
|
|
$
|
394
|
|
Gloucester Town Center (b)
|
|
Multi-tenant retail
|
|
June 30, 2014
|
|
107,200
|
|
|
5,400
|
|
|
|
|
|
|
|
|
|
|
$
|
5,794
|
|
|
|
|
Estimated fair value of impaired properties as of impairment date
|
$
|
57,650
|
|
(a)
|
The Company recorded an impairment charge based upon the terms and conditions of an executed sales contract for this property, which was sold on April 1, 2014.
|
(b)
|
An impairment charge was recorded on June 30, 2014 based upon the terms of a bona fide purchase offer and additional impairment was recognized on September 30, 2014 pursuant to the terms and conditions of an executed sales contract. The property was sold on October 2, 2014.
|
|
June 30, 2015
|
|
December 31, 2014
|
||||||||||||
|
Carrying Value
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
||||||||
Financial liabilities:
|
|
|
|
|
|
|
|
||||||||
Mortgages payable, net
|
$
|
1,438,806
|
|
|
$
|
1,537,338
|
|
|
$
|
1,634,465
|
|
|
$
|
1,749,671
|
|
Unsecured notes payable, net
|
$
|
498,851
|
|
|
$
|
502,704
|
|
|
$
|
250,000
|
|
|
$
|
258,360
|
|
Unsecured credit facility
|
$
|
560,000
|
|
|
$
|
562,243
|
|
|
$
|
450,000
|
|
|
$
|
451,502
|
|
Derivative liability
|
$
|
539
|
|
|
$
|
539
|
|
|
$
|
562
|
|
|
$
|
562
|
|
|
Fair Value
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
June 30, 2015
|
|
|
|
|
|
|
|
||||||||
Derivative liability
|
$
|
—
|
|
|
$
|
539
|
|
|
$
|
—
|
|
|
$
|
539
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2014
|
|
|
|
|
|
|
|
||||||||
Derivative liability
|
$
|
—
|
|
|
$
|
562
|
|
|
$
|
—
|
|
|
$
|
562
|
|
|
Fair Value
|
|
|
||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Provision for
Impairment (a)
|
||||||||||
June 30, 2015
|
|
|
|
|
|
|
|
|
|
||||||||||
Investment properties -
held for sale
(b)
|
$
|
—
|
|
|
$
|
5,450
|
|
|
$
|
—
|
|
|
$
|
5,450
|
|
|
$
|
1,655
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
December 31, 2014
|
|
|
|
|
|
|
|
|
|
||||||||||
Investment properties
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
86,500
|
|
(c)
|
$
|
86,500
|
|
|
$
|
59,352
|
|
Investment properties -
held for sale
(d)
|
$
|
—
|
|
|
$
|
17,233
|
|
|
$
|
—
|
|
|
$
|
17,233
|
|
|
$
|
563
|
|
(a)
|
Excludes impairment charges recorded on investment properties sold prior to
June 30, 2015
and
December 31, 2014
, respectively.
|
(b)
|
Represents an impairment charge recorded during the three months ended June 30, 2015 for Traveler’s Office Building, which was classified as held for sale as of June 30, 2015. Such charge, calculated as the expected sales price from the executed sales contract less estimated transaction costs as compared to the Company’s carrying value of its investment, was determined to be a Level 2 input. The estimated transaction costs totaling
$154
are not reflected as a reduction to the fair value disclosed in the table above, but were included in the calculation of the impairment charge.
|
(c)
|
Represents the fair values of the Company’s Shaw’s Supermarket, The Gateway, Hartford Insurance Building and Citizen’s Property Insurance Building investment properties. The estimated fair values of Shaw’s Supermarket and The Gateway of
$3,100
and
$75,400
, respectively, were determined using the income approach. The income approach involves discounting the estimated income stream and reversion (presumed sale) value of a property over an estimated holding period to a present value at a risk-adjusted rate. Discount rates, growth assumptions and terminal capitalization rates utilized in this approach are derived from property-specific information, market transactions and other industry data. The terminal capitalization rate and discount rate are significant inputs to this valuation. The following were the key Level 3 inputs used in estimating the fair value of Shaw’s Supermarket and The Gateway as of September 30, 2014, the date the assets were measured at fair value.
|
|
|
2014
|
||
|
|
Low
|
|
High
|
Rental growth rates
|
|
Varies (i)
|
|
Varies (i)
|
Operating expense growth rates
|
|
1.39%
|
|
3.70%
|
Discount rates
|
|
8.25%
|
|
9.50%
|
Terminal capitalization rates
|
|
7.50%
|
|
8.50%
|
(i)
|
Since cash flow models are established at the tenant level, projected rental revenue growth rates fluctuate over the course of the estimated holding period based upon the timing of lease rollover, amount of available space and other property and space-specific factors.
|
(d)
|
Represents an impairment charge recorded during the three months ended December 31, 2014 for Aon Hewitt East Campus, which was classified as held for sale as of December 31, 2014. Such charge, calculated as the expected sales price from the executed sales contract less estimated transaction costs as compared to the Company’s carrying value of its investment, was determined to be a Level 2 input. The estimated transaction costs totaling
$738
are not reflected as a reduction to the fair value disclosed in the table above, but were included in the calculation of the impairment charge.
|
|
Fair Value
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
June 30, 2015
|
|
|
|
|
|
|
|
||||||||
Mortgages payable, net
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,537,338
|
|
|
$
|
1,537,338
|
|
Unsecured notes payable, net
|
$
|
244,690
|
|
|
$
|
—
|
|
|
$
|
258,014
|
|
|
$
|
502,704
|
|
Unsecured credit facility
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
562,243
|
|
|
$
|
562,243
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2014
|
|
|
|
|
|
|
|
||||||||
Mortgages payable, net
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,749,671
|
|
|
$
|
1,749,671
|
|
Unsecured notes payable
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
258,360
|
|
|
$
|
258,360
|
|
Unsecured credit facility
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
451,502
|
|
|
$
|
451,502
|
|
•
|
repaid
$20,000
, net of borrowings, on its unsecured revolving line of credit and repaid mortgages payable with an aggregate principal balance of
$54,178
and a weighted average interest rate of
5.92%
using proceeds from dispositions;
|
•
|
closed on the following dispositions:
|
•
|
Greensburg Commons, a
272,500
square foot multi-tenant retail property located in Greensburg, Indiana, which was classified as held for sale as of June 30, 2015, for a sales price of
$18,400
with an anticipated gain on sale of approximately
$2,810
;
|
•
|
Arvada Connection and Arvada Marketplace, a
367,500
square foot multi-tenant retail property located in Arvada, Colorado, for a sales price of
$54,900
with an anticipated gain on sale of approximately
$20,208
; and
|
•
|
Traveler’s Office Building, a
50,800
square foot single-user office property located in Knoxville, Tennessee, which was classified as held for sale as of June 30, 2015, for a sales price of
$4,841
with no significant gain or loss on sale due to impairment charges previously recognized.
|
•
|
closed on the acquisition of a
13,800
square foot single-user outparcel located at Southlake Town Square, its existing multi-tenant retail operating property located in Southlake, Texas, for a gross purchase price of
$8,440
.
|
•
|
economic, business and financial conditions, and changes in our industry and changes in the real estate markets in particular;
|
•
|
economic and other developments in the state of Texas, where we have a high concentration of properties;
|
•
|
our business strategy;
|
•
|
our projected operating results;
|
•
|
rental rates and/or vacancy rates;
|
•
|
frequency and magnitude of defaults on, early terminations of or non-renewal of leases by tenants;
|
•
|
interest rates or operating costs;
|
•
|
real estate and zoning laws and changes in real property tax rates;
|
▪
|
real estate valuations, potentially resulting in impairment charges;
|
•
|
our leverage;
|
•
|
our ability to generate sufficient cash flows to service our outstanding indebtedness;
|
•
|
our ability to obtain necessary outside financing;
|
•
|
the 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 generally associated with real estate acquisitions, dispositions and redevelopment, including the impact of construction delays and cost overruns;
|
•
|
our ability to identify properties to acquire and complete acquisitions;
|
•
|
our ability to successfully operate acquired properties;
|
•
|
our ability to effectively manage growth;
|
•
|
composition of members of our senior management team;
|
•
|
our ability to attract and retain qualified personnel;
|
•
|
our ability to make distributions to our shareholders;
|
•
|
our ability to continue to qualify as a real estate investment trust (REIT);
|
•
|
governmental regulations, tax laws and rates and similar matters;
|
•
|
our compliance with laws, rules and regulations;
|
•
|
environmental uncertainties and exposure to natural disasters;
|
•
|
insurance coverage; and
|
•
|
the likelihood or actual occurrence of terrorist attacks in the U.S.
|
Property Type
|
|
Number of
Properties
|
|
GLA
(in thousands)
|
|
Occupancy
|
|
Percent Leased
Including Leases
Signed (a)
|
||||
Operating portfolio:
|
|
|
|
|
|
|
|
|
||||
Multi-tenant retail
|
|
|
|
|
|
|
|
|
||||
Power centers
|
|
58
|
|
|
14,183
|
|
|
94.5
|
%
|
|
95.7
|
%
|
Neighborhood and community centers
|
|
89
|
|
|
10,607
|
|
|
91.1
|
%
|
|
93.5
|
%
|
Lifestyle centers and mixed-use properties
|
|
11
|
|
|
4,186
|
|
|
88.7
|
%
|
|
90.2
|
%
|
Total multi-tenant retail
|
|
158
|
|
|
28,976
|
|
|
92.4
|
%
|
|
94.1
|
%
|
Single-user retail
|
|
50
|
|
|
1,358
|
|
|
100.0
|
%
|
|
100.0
|
%
|
Total retail operating portfolio
|
|
208
|
|
|
30,334
|
|
|
92.8
|
%
|
|
94.4
|
%
|
Office
|
|
1
|
|
|
895
|
|
|
100.0
|
%
|
|
100.0
|
%
|
Total operating portfolio (b)
|
|
209
|
|
|
31,229
|
|
|
93.0
|
%
|
|
94.5
|
%
|
(a)
|
Includes leases signed but not commenced.
|
(b)
|
Excludes one multi-tenant retail operating property and one single-user office property classified as held for sale as of
June 30, 2015
.
|
|
|
Number of
Leases
Signed
|
|
GLA Signed
(in thousands)
|
|
New
Contractual
Rent per Square
Foot (PSF) (a)
|
|
Prior
Contractual
Rent PSF (a)
|
|
% Change
over Prior
Annualized
Base Rent
(ABR) (a)
|
|
Weighted
Average
Lease Term
|
|
Tenant
Allowances
PSF
|
||||||||||
Comparable Renewal Leases
|
|
181
|
|
|
1,016
|
|
|
$
|
17.82
|
|
|
$
|
16.78
|
|
|
6.2
|
%
|
|
4.73
|
|
|
$
|
1.40
|
|
Comparable New Leases
|
|
28
|
|
|
115
|
|
|
$
|
21.23
|
|
|
$
|
17.22
|
|
|
23.3
|
%
|
|
8.03
|
|
|
$
|
28.66
|
|
Non-Comparable New and
Renewal Leases (b)
|
|
72
|
|
|
416
|
|
|
$
|
18.90
|
|
|
n/a
|
|
|
n/a
|
|
|
8.62
|
|
|
$
|
29.51
|
|
|
Total
|
|
281
|
|
|
1,547
|
|
|
$
|
18.16
|
|
|
$
|
16.83
|
|
|
7.9
|
%
|
|
6.09
|
|
|
$
|
11.10
|
|
(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.
|
•
|
the removal of seven same store investment properties sold during the three months ended
June 30, 2015
; and
|
•
|
the removal of two same store investment properties classified as held for sale as of
June 30, 2015
;
|
•
|
the addition of one investment property acquired during the first quarter of 2014.
|
|
Three Months Ended June 30,
|
|
|
|
|
|||||||||
|
2015
|
|
2014
|
|
Change
|
|
Percentage
|
|||||||
Operating revenues:
|
|
|
|
|
|
|
|
|||||||
Same store investment properties (193 properties):
|
|
|
|
|
|
|
|
|||||||
Rental income
|
$
|
101,612
|
|
|
$
|
99,250
|
|
|
$
|
2,362
|
|
|
2.4
|
|
Tenant recovery income
|
24,436
|
|
|
23,503
|
|
|
933
|
|
|
4.0
|
|
|||
Other property income
|
1,009
|
|
|
845
|
|
|
164
|
|
|
19.4
|
|
|||
Other investment properties:
|
|
|
|
|
|
|
|
|||||||
Rental income
|
16,581
|
|
|
16,837
|
|
|
(256
|
)
|
|
|
||||
Tenant recovery income
|
4,980
|
|
|
3,605
|
|
|
1,375
|
|
|
|
||||
Other property income
|
1,108
|
|
|
1,071
|
|
|
37
|
|
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|||||||
Same store investment properties (193 properties):
|
|
|
|
|
|
|
|
|||||||
Property operating expenses
|
(18,050
|
)
|
|
(18,156
|
)
|
|
106
|
|
|
0.6
|
|
|||
Real estate taxes
|
(17,217
|
)
|
|
(16,554
|
)
|
|
(663
|
)
|
|
(4.0
|
)
|
|||
Other investment properties:
|
|
|
|
|
|
|
|
|||||||
Property operating expenses
|
(4,311
|
)
|
|
(3,195
|
)
|
|
(1,116
|
)
|
|
|
||||
Real estate taxes
|
(3,269
|
)
|
|
(2,513
|
)
|
|
(756
|
)
|
|
|
||||
NOI from continuing operations:
|
|
|
|
|
|
|
|
|||||||
Same store investment properties
|
91,790
|
|
|
88,888
|
|
|
2,902
|
|
|
3.3
|
|
|||
Other investment properties
|
15,089
|
|
|
15,805
|
|
|
(716
|
)
|
|
|
||||
Total NOI from continuing operations
|
106,879
|
|
|
104,693
|
|
|
2,186
|
|
|
2.1
|
|
|||
|
|
|
|
|
|
|
|
|||||||
Other income (expense):
|
|
|
|
|
|
|
|
|||||||
Straight-line rental income, net
|
630
|
|
|
1,161
|
|
|
(531
|
)
|
|
|
||||
Amortization of acquired above and below market lease intangibles, net
|
390
|
|
|
370
|
|
|
20
|
|
|
|
||||
Amortization of lease inducements
|
(191
|
)
|
|
(199
|
)
|
|
8
|
|
|
|
||||
Lease termination fees
|
333
|
|
|
28
|
|
|
305
|
|
|
|
||||
Straight-line ground rent expense
|
(932
|
)
|
|
(956
|
)
|
|
24
|
|
|
|
||||
Amortization of acquired ground lease intangibles
|
140
|
|
|
140
|
|
|
—
|
|
|
|
||||
Depreciation and amortization
|
(55,798
|
)
|
|
(55,061
|
)
|
|
(737
|
)
|
|
|
||||
Provision for impairment of investment properties
|
(3,944
|
)
|
|
(5,400
|
)
|
|
1,456
|
|
|
|
||||
General and administrative expenses
|
(14,018
|
)
|
|
(7,362
|
)
|
|
(6,656
|
)
|
|
|
||||
Equity in loss of unconsolidated joint ventures, net
|
—
|
|
|
(433
|
)
|
|
433
|
|
|
|
||||
Gain on change in control of investment properties
|
—
|
|
|
24,158
|
|
|
(24,158
|
)
|
|
|
||||
Interest expense
|
(36,140
|
)
|
|
(31,873
|
)
|
|
(4,267
|
)
|
|
|
||||
Other (expense) income, net
|
(306
|
)
|
|
250
|
|
|
(556
|
)
|
|
|
||||
Total other expense
|
(109,836
|
)
|
|
(75,177
|
)
|
|
(34,659
|
)
|
|
|
||||
|
|
|
|
|
|
|
|
|||||||
(Loss) income from continuing operations
|
(2,957
|
)
|
|
29,516
|
|
|
(32,473
|
)
|
|
|
||||
Gain on sales of investment properties
|
33,641
|
|
|
527
|
|
|
33,114
|
|
|
|
||||
Net income
|
30,684
|
|
|
30,043
|
|
|
641
|
|
|
|
||||
Net income attributable to the Company
|
30,684
|
|
|
30,043
|
|
|
641
|
|
|
|
||||
Preferred stock dividends
|
(2,363
|
)
|
|
(2,363
|
)
|
|
—
|
|
|
|
||||
Net income attributable to common shareholders
|
$
|
28,321
|
|
|
$
|
27,680
|
|
|
$
|
641
|
|
|
|
•
|
rental income increased
$2,362
primarily due to increases of $949 from contractual rent changes, $596 from re-leasing spreads and $572 from occupancy growth; and
|
•
|
total operating expenses, net of tenant recovery income, decreased $376 primarily as a result of negative tenant recovery income adjustments from the real estate tax reconciliation process in 2014, which did not reoccur in 2015, and a decrease in certain non-recoverable property operating expenses, partially offset by an increase in certain recoverable property operating expenses, real estate taxes and bad debt expense.
|
•
|
a $24,158 gain on change in control of investment properties recognized during the three months ended June 30, 2014 associated with the dissolution of our MS Inland unconsolidated joint venture (see Note 3 to the accompanying condensed consolidated financial statements). No such gain was recorded during the three months ended June 30, 2015;
|
•
|
a $6,656 increase in general and administrative expenses primarily consisting of executive separation charges of $3,537 and an increase in compensation expense, including bonuses and amortization of restricted stock awards, of $2,968; and
|
•
|
a $4,267 increase in interest expense primarily consisting of:
|
•
|
a $5,248 increase in interest on our unsecured notes payable, which were issued in June 2014 and March 2015; and
|
•
|
a $2,334 increase in prepayment penalties and defeasance premiums;
|
•
|
a $3,055 decrease in interest on mortgages payable and our Unsecured Credit Facility due to the repayment of mortgage debt and lower average balances on our unsecured revolving line of credit; and
|
•
|
a $522 increase in the amortization of mortgage premium resulting from the assumption of mortgages payable in connection with the dissolution of our MS Inland unconsolidated joint venture during the second quarter of 2014.
|
|
Six Months Ended June 30,
|
|
|
|
|
|||||||||
|
2015
|
|
2014
|
|
Change
|
|
Percentage
|
|||||||
Operating revenues:
|
|
|
|
|
|
|
|
|||||||
Same store investment properties (192 properties):
|
|
|
|
|
|
|
|
|||||||
Rental income
|
$
|
203,137
|
|
|
$
|
197,636
|
|
|
$
|
5,501
|
|
|
2.8
|
|
Tenant recovery income
|
50,568
|
|
|
48,978
|
|
|
1,590
|
|
|
3.2
|
|
|||
Other property income
|
2,050
|
|
|
1,674
|
|
|
376
|
|
|
22.5
|
|
|||
Other investment properties:
|
|
|
|
|
|
|
|
|||||||
Rental income
|
33,570
|
|
|
33,685
|
|
|
(115
|
)
|
|
|
||||
Tenant recovery income
|
10,148
|
|
|
7,878
|
|
|
2,270
|
|
|
|
||||
Other property income
|
2,042
|
|
|
2,024
|
|
|
18
|
|
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|||||||
Same store investment properties (192 properties):
|
|
|
|
|
|
|
|
|||||||
Property operating expenses
|
(37,906
|
)
|
|
(39,503
|
)
|
|
1,597
|
|
|
4.0
|
|
|||
Real estate taxes
|
(34,485
|
)
|
|
(32,735
|
)
|
|
(1,750
|
)
|
|
(5.3
|
)
|
|||
Other investment properties:
|
|
|
|
|
|
|
|
|||||||
Property operating expenses
|
(9,356
|
)
|
|
(7,467
|
)
|
|
(1,889
|
)
|
|
|
||||
Real estate taxes
|
(6,511
|
)
|
|
(4,746
|
)
|
|
(1,765
|
)
|
|
|
||||
NOI from continuing operations:
|
|
|
|
|
|
|
|
|||||||
Same store investment properties
|
183,364
|
|
|
176,050
|
|
|
7,314
|
|
|
4.2
|
|
|||
Other investment properties
|
29,893
|
|
|
31,374
|
|
|
(1,481
|
)
|
|
|
||||
Total NOI from continuing operations
|
213,257
|
|
|
207,424
|
|
|
5,833
|
|
|
2.8
|
|
|||
|
|
|
|
|
|
|
|
|||||||
Other income (expense):
|
|
|
|
|
|
|
|
|||||||
Straight-line rental income, net
|
1,642
|
|
|
3,104
|
|
|
(1,462
|
)
|
|
|
||||
Amortization of acquired above and below market lease intangibles, net
|
841
|
|
|
882
|
|
|
(41
|
)
|
|
|
||||
Amortization of lease inducements
|
(380
|
)
|
|
(357
|
)
|
|
(23
|
)
|
|
|
||||
Lease termination fees
|
467
|
|
|
133
|
|
|
334
|
|
|
|
||||
Straight-line ground rent expense
|
(1,866
|
)
|
|
(1,978
|
)
|
|
112
|
|
|
|
||||
Amortization of acquired ground lease intangibles
|
280
|
|
|
280
|
|
|
—
|
|
|
|
||||
Depreciation and amortization
|
(110,474
|
)
|
|
(108,891
|
)
|
|
(1,583
|
)
|
|
|
||||
Provision for impairment of investment properties
|
(3,944
|
)
|
|
(5,794
|
)
|
|
1,850
|
|
|
|
||||
General and administrative expenses
|
(25,010
|
)
|
|
(15,812
|
)
|
|
(9,198
|
)
|
|
|
||||
Gain on extinguishment of other liabilities
|
—
|
|
|
4,258
|
|
|
(4,258
|
)
|
|
|
||||
Equity in loss of unconsolidated joint ventures, net
|
—
|
|
|
(1,211
|
)
|
|
1,211
|
|
|
|
||||
Gain on change in control of investment properties
|
—
|
|
|
24,158
|
|
|
(24,158
|
)
|
|
|
||||
Interest expense
|
(70,185
|
)
|
|
(63,736
|
)
|
|
(6,449
|
)
|
|
|
||||
Other income, net
|
919
|
|
|
677
|
|
|
242
|
|
|
|
||||
Total other expense
|
(207,710
|
)
|
|
(164,287
|
)
|
|
(43,423
|
)
|
|
|
||||
|
|
|
|
|
|
|
|
|||||||
Income from continuing operations
|
5,547
|
|
|
43,137
|
|
|
(37,590
|
)
|
|
|
||||
Discontinued operations:
|
|
|
|
|
|
|
|
|||||||
Loss, net
|
—
|
|
|
(148
|
)
|
|
148
|
|
|
|
||||
Gain on sales of investment properties
|
—
|
|
|
655
|
|
|
(655
|
)
|
|
|
||||
Income from discontinued operations
|
—
|
|
|
507
|
|
|
(507
|
)
|
|
|
||||
Gain on sales of investment properties
|
38,213
|
|
|
527
|
|
|
37,686
|
|
|
|
||||
Net income
|
43,760
|
|
|
44,171
|
|
|
(411
|
)
|
|
|
||||
Net income attributable to the Company
|
43,760
|
|
|
44,171
|
|
|
(411
|
)
|
|
|
||||
Preferred stock dividends
|
(4,725
|
)
|
|
(4,725
|
)
|
|
—
|
|
|
|
||||
Net income attributable to common shareholders
|
$
|
39,035
|
|
|
$
|
39,446
|
|
|
$
|
(411
|
)
|
|
|
•
|
rental income increased
$5,501
primarily due to increases of $2,234 from occupancy growth, $1,892 from contractual rent increases and $1,250 from re-leasing spreads; and
|
•
|
total operating expenses, net of tenant recovery income, decreased $1,437 primarily as a result of a decrease in certain non-recoverable property operating expenses and negative tenant recovery income adjustments from the real estate tax reconciliation process in 2014, which did not reoccur in 2015, partially offset by an increase in bad debt expense and real estate taxes.
|
•
|
a $24,158 gain on change in control of investment properties recognized during the
six
months ended
June 30, 2014
associated with the dissolution of our MS Inland unconsolidated joint venture (see Note 3 to the accompanying condensed consolidated financial statements). No such gain was recorded during the
six
months ended
June 30, 2015
;
|
•
|
a $9,198 increase in general and administrative expenses primarily consisting of an increase in compensation expense, including bonuses and amortization of restricted stock awards, of $5,377 and executive separation charges of $3,537;
|
•
|
a $6,449 increase in interest expense primarily consisting of:
|
•
|
an $8,551 increase in interest on our unsecured notes payable, which were issued in June 2014 and March 2015; and
|
•
|
a $3,415 increase in prepayment penalties and defeasance premiums;
|
•
|
a $4,680 decrease in interest on mortgages payable and our Unsecured Credit Facility due to the repayment of mortgage debt and lower average balances on our unsecured revolving line of credit; and
|
•
|
a $1,131 increase in the amortization of mortgage premium resulting from the assumption of mortgages payable in connection with the dissolution of our MS Inland unconsolidated joint venture during the second quarter of 2014; and
|
•
|
a $4,258 gain on extinguishment of other liabilities recognized during the
six
months ended
June 30, 2014
related to the acquisition of the fee interest in one of our existing investment properties that was previously subject to a ground lease with a third party. The amount recognized represents the reversal of a straight-line ground rent liability associated with the ground lease.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Net income attributable to common shareholders
|
$
|
28,321
|
|
|
$
|
27,680
|
|
|
$
|
39,035
|
|
|
$
|
39,446
|
|
Depreciation and amortization
|
55,523
|
|
|
55,357
|
|
|
109,924
|
|
|
109,600
|
|
||||
Provision for impairment of investment properties
|
3,944
|
|
|
5,400
|
|
|
3,944
|
|
|
5,794
|
|
||||
Gain on sales of investment properties (a)
|
(33,641
|
)
|
|
(24,685
|
)
|
|
(38,213
|
)
|
|
(25,340
|
)
|
||||
FFO attributable to common shareholders
|
$
|
54,147
|
|
|
$
|
63,752
|
|
|
$
|
114,690
|
|
|
$
|
129,500
|
|
|
|
|
|
|
|
|
|
||||||||
Impact on earnings from the early extinguishment of debt, net
|
4,231
|
|
|
1,951
|
|
|
7,017
|
|
|
3,631
|
|
||||
Provision for hedge ineffectiveness
|
4
|
|
|
—
|
|
|
(21
|
)
|
|
(13
|
)
|
||||
Gain on extinguishment of other liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,258
|
)
|
||||
Executive separation charges (b)
|
3,537
|
|
|
—
|
|
|
3,537
|
|
|
—
|
|
||||
Other (c)
|
—
|
|
|
(11
|
)
|
|
(1,000
|
)
|
|
(126
|
)
|
||||
Operating FFO attributable to common shareholders
|
$
|
61,919
|
|
|
$
|
65,692
|
|
|
$
|
124,223
|
|
|
$
|
128,734
|
|
(a)
|
Results for the three and
six
months ended
June 30, 2014
include the gain on change in control of investment properties of $24,158 recognized pursuant to the dissolution of our joint venture arrangement with our partner in our MS Inland unconsolidated joint venture on June 5, 2014.
|
(b)
|
Included in “General and administrative expenses” in the condensed consolidated statements of operations and other comprehensive income.
|
(c)
|
Consists of settlement and easement proceeds, which are included in “Other income, net” in the condensed consolidated statements of operations and other comprehensive income.
|
|
SOURCES
|
|
|
USES
|
▪
|
Operating cash flow
|
|
|
Short-Term:
|
▪
|
Cash and cash equivalents
|
|
▪
|
Tenant allowances and leasing costs
|
▪
|
Available borrowings under our unsecured revolving
|
|
▪
|
Improvements made to individual properties that are not
|
|
line of credit
|
|
|
recoverable through common area maintenance charges to tenants
|
▪
|
Proceeds from asset dispositions
|
|
▪
|
Debt repayment requirements
|
▪
|
Proceeds from capital markets transactions
|
|
▪
|
Distribution payments
|
|
|
|
▪
|
Acquisitions
|
|
|
|
|
|
|
|
|
|
Long-Term:
|
|
|
|
▪
|
Major redevelopment, renovation or expansion activities
|
|
|
|
▪
|
New development
|
Debt
|
|
Aggregate
Principal
Amount
|
|
Weighted
Average
Interest Rate
|
|
Maturity Date
|
|
Weighted
Average Years
to Maturity
|
|||
Fixed rate mortgages payable (a)
|
|
$
|
1,421,040
|
|
|
5.97
|
%
|
|
Various
|
|
3.8 years
|
Variable rate construction loan
|
|
15,657
|
|
|
2.44
|
%
|
|
November 2, 2015
|
|
0.3 years
|
|
Total mortgages payable
|
|
1,436,697
|
|
|
5.94
|
%
|
|
|
|
3.8 years
|
|
Premium, net of accumulated amortization
|
|
2,324
|
|
|
|
|
|
|
|
||
Discount, net of accumulated amortization
|
|
(215
|
)
|
|
|
|
|
|
|
||
Total mortgages payable, net
|
|
1,438,806
|
|
|
|
|
|
|
|
||
Unsecured notes payable:
|
|
|
|
|
|
|
|
|
|||
Senior notes - 4.12% Series A due 2021
|
|
100,000
|
|
|
4.12
|
%
|
|
June 30, 2021
|
|
6.0 years
|
|
Senior notes - 4.58% Series B due 2024
|
|
150,000
|
|
|
4.58
|
%
|
|
June 30, 2024
|
|
9.0 years
|
|
Senior notes - 4.00% due 2025
|
|
250,000
|
|
|
4.00
|
%
|
|
March 15, 2025
|
|
9.7 years
|
|
Subtotal
|
|
500,000
|
|
|
4.20
|
%
|
|
|
|
8.8 years
|
|
Discount, net of accumulated amortization
|
|
(1,149
|
)
|
|
|
|
|
|
|
||
Total unsecured notes payable, net
|
|
498,851
|
|
|
|
|
|
|
|
||
Unsecured credit facility:
|
|
|
|
|
|
|
|
|
|||
Fixed rate portion of term loan (b)
|
|
300,000
|
|
|
1.99
|
%
|
|
May 11, 2018
|
|
2.9 years
|
|
Variable rate portion of term loan
|
|
150,000
|
|
|
1.64
|
%
|
|
May 11, 2018
|
|
2.9 years
|
|
Variable rate revolving line of credit (c)
|
|
110,000
|
|
|
1.69
|
%
|
|
May 12, 2017
|
|
1.9 years
|
|
Total unsecured credit facility
|
|
560,000
|
|
|
1.84
|
%
|
|
|
|
2.7 years
|
|
|
|
|
|
|
|
|
|
|
|||
Total consolidated indebtedness, net
|
|
$
|
2,497,657
|
|
|
4.67
|
%
|
|
|
|
4.5 years
|
(a)
|
Includes
$8,017
of variable rate mortgage debt that was swapped to a fixed rate as of
June 30, 2015
.
|
(b)
|
Reflects $300,000 of variable rate debt that matures in May 2018 and is swapped to a fixed rate of 0.53875% plus a margin based on a leverage grid ranging from 1.45% to 2.00% through February 2016. The applicable margin was 1.45% as of
June 30, 2015
.
|
(c)
|
We have a one year extension option on the unsecured revolving line of credit, which we may exercise as long as we are in compliance with the terms of the unsecured credit agreement and we pay an extension fee equal to 0.15% of the commitment amount being extended.
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
Thereafter
|
|
Total
|
|
Fair Value
|
||||||||||||||||
Debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Fixed rate debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Mortgages payable (a)
|
$
|
229,667
|
|
|
$
|
67,014
|
|
|
$
|
320,341
|
|
|
$
|
11,565
|
|
|
$
|
486,705
|
|
|
$
|
305,748
|
|
|
$
|
1,421,040
|
|
|
$
|
1,521,681
|
|
Unsecured credit facility - fixed rate portion of term loan (b)
|
—
|
|
|
—
|
|
|
—
|
|
|
300,000
|
|
|
—
|
|
|
—
|
|
|
300,000
|
|
|
301,287
|
|
||||||||
Unsecured notes payable (c)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
500,000
|
|
|
500,000
|
|
|
502,704
|
|
||||||||
Total fixed rate debt
|
229,667
|
|
|
67,014
|
|
|
320,341
|
|
|
311,565
|
|
|
486,705
|
|
|
805,748
|
|
|
2,221,040
|
|
|
2,325,672
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Variable rate debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Construction loan
|
15,657
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,657
|
|
|
15,657
|
|
||||||||
Unsecured credit facility
|
—
|
|
|
—
|
|
|
110,000
|
|
|
150,000
|
|
|
—
|
|
|
—
|
|
|
260,000
|
|
|
260,956
|
|
||||||||
Total variable rate debt
|
15,657
|
|
|
—
|
|
|
110,000
|
|
|
150,000
|
|
|
—
|
|
|
—
|
|
|
275,657
|
|
|
276,613
|
|
||||||||
Total debt (d)
|
$
|
245,324
|
|
|
$
|
67,014
|
|
|
$
|
430,341
|
|
|
$
|
461,565
|
|
|
$
|
486,705
|
|
|
$
|
805,748
|
|
|
$
|
2,496,697
|
|
|
$
|
2,602,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Weighted average interest rate on debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Fixed rate debt
|
5.21
|
%
|
|
5.03
|
%
|
|
5.52
|
%
|
|
2.17
|
%
|
|
7.50
|
%
|
|
4.42
|
%
|
|
5.04
|
%
|
|
|
|||||||||
Variable rate debt (e)
|
2.44
|
%
|
|
—
|
|
|
1.69
|
%
|
|
1.64
|
%
|
|
—
|
|
|
—
|
|
|
1.71
|
%
|
|
|
|||||||||
Total
|
5.03
|
%
|
|
5.03
|
%
|
|
4.54
|
%
|
|
2.00
|
%
|
|
7.50
|
%
|
|
4.42
|
%
|
|
4.67
|
%
|
|
|
(a)
|
Includes
$8,017
of variable rate mortgage debt that was swapped to a fixed rate as of
June 30, 2015
. Excludes mortgage premium of
$2,324
and discount of
$(215)
, net of accumulated amortization, which was outstanding as of
June 30, 2015
.
|
(b)
|
$300,000 of LIBOR-based variable rate debt has been swapped 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.
|
(c)
|
Excludes discount of
$(1,149)
, net of accumulated amortization, which was outstanding as of
June 30, 2015
.
|
(d)
|
As of
June 30, 2015
, the weighted average years to maturity of consolidated indebtedness was
4.5 years
.
|
(e)
|
Represents interest rates as of
June 30, 2015
.
|
Location
|
|
Property Name
|
|
Our
Ownership
Percentage
|
|
Carrying Value
|
|
Construction
Loan Balance
|
||||
Henderson, Nevada
|
|
Green Valley Crossing
|
|
50.0%
|
|
$
|
1,556
|
|
(a)
|
$
|
15,657
|
|
Billings, Montana
|
|
South Billings Center
|
|
100.0%
|
|
5,154
|
|
|
—
|
|
||
Nashville, Tennessee
|
|
Bellevue Mall
|
|
100.0%
|
|
23,569
|
|
(b)
|
—
|
|
||
Henderson, Nevada
|
|
Lake Mead Crossing
|
|
100.0%
|
|
10,860
|
|
|
—
|
|
||
|
|
|
|
|
|
$
|
41,139
|
|
(c)
|
$
|
15,657
|
|
(a)
|
The carrying value represents the portion of the property under development and excludes $28,457 of costs, net of accumulated depreciation, placed in service, $2,288 of which was placed in service during the
six
months ended
June 30, 2015
based upon completion of construction of approximately 18,500 square feet of available retail space at Green Valley Crossing. The construction loan encumbers the entire property, including the portion placed in service as well as the portion currently under development.
|
(b)
|
The carrying value represents the portion of the property under development and excludes $3,056 of land.
|
(c)
|
There is no income attributable to developments in progress.
|
|
|
Number of
Assets Sold
|
|
Square
Footage
|
|
Consideration
|
|
Aggregate
Proceeds, Net (a)
|
|
Mortgage Debt
Extinguished (b)
|
||||||||
2015 Dispositions (through June 30, 2015)
|
|
10
|
|
|
1,501,000
|
|
|
$
|
155,118
|
|
|
$
|
150,699
|
|
|
$
|
9,775
|
|
2014 Dispositions
|
|
24
|
|
|
2,490,100
|
|
|
$
|
322,989
|
|
|
$
|
314,377
|
|
|
$
|
9,713
|
|
(a)
|
Represents total consideration net of transaction costs.
|
(b)
|
Excludes mortgages payable repaid prior to disposition transactions.
|
|
|
Number of
Assets Acquired
|
|
Square
Footage
|
|
Acquisition
Price
|
|
Pro Rata
Acquisition
Price (a)
|
|
Mortgage
Debt
|
|
Pro Rata
Mortgage
Debt (a)
|
||||||||||
2015 Acquisitions (through June 30, 2015) (b)
|
|
7
|
|
|
959,600
|
|
|
$
|
390,548
|
|
|
$
|
390,548
|
|
|
$
|
—
|
|
|
$
|
—
|
|
2014 Acquisitions (c)
|
|
11
|
|
|
1,339,400
|
|
|
$
|
348,061
|
|
|
$
|
289,561
|
|
|
$
|
141,698
|
|
|
$
|
113,358
|
|
(a)
|
Includes amounts associated with the 2014 acquisition of our partner’s 80% ownership interest in our MS Inland unconsolidated joint venture as well as acquisitions from unaffiliated third parties.
|
(b)
|
2015 acquisitions include the purchase of a land parcel at our Lake Worth Towne Crossing multi-tenant retail operating property. The total number of properties in our portfolio was not affected by this transaction.
|
(c)
|
2014 acquisitions include the purchase of the following: 1) the fee interest in our Bed Bath & Beyond Plaza multi-tenant retail operating property that was previously subject to a ground lease with a third party, 2) a single-user outparcel located at our Southlake Town Square multi-tenant retail operating property that was subject to a ground lease with us prior to the transaction, and 3) a parcel located at our
|
|
|
Six Months Ended June 30,
|
||||||||||
|
|
2015
|
|
2014
|
|
Change
|
||||||
Cash provided by operating activities
|
|
$
|
142,991
|
|
|
$
|
127,687
|
|
|
$
|
15,304
|
|
Cash used in investing activities
|
|
(233,546
|
)
|
|
(96,415
|
)
|
|
(137,131
|
)
|
|||
Cash provided by (used in) financing activities
|
|
62,964
|
|
|
(30,894
|
)
|
|
93,858
|
|
|||
(Decrease) increase in cash and cash equivalents
|
|
(27,591
|
)
|
|
378
|
|
|
(27,969
|
)
|
|||
Cash and cash equivalents, at beginning of period
|
|
112,292
|
|
|
58,190
|
|
|
|
||||
Cash and cash equivalents, at end of period
|
|
$
|
84,701
|
|
|
$
|
58,568
|
|
|
|
•
|
a $5,914 increase in NOI (including an increase in NOI from continuing operations of $5,833);
|
•
|
a $637 decrease in cash paid for leasing fees and inducements;
|
•
|
a $512 reduction in cash paid for interest; and
|
•
|
ordinary course fluctuations in working capital accounts.
|
•
|
a $229,780 increase in cash paid to purchase investment properties;
|
•
|
a $72,149 increase in proceeds from the sales of investment properties; and
|
•
|
a $21,048 net change in restricted escrow activity, of which $19,010 relates to acquisition deposits.
|
•
|
a $220,000 increase in net proceeds from our Unsecured Credit Facility;
|
•
|
a $89,457 increase in principal payments on mortgages payable; and
|
•
|
the purchase of $30,840 of Treasury securities in connection with defeasance of mortgages payable during the
six
months ended
June 30, 2015
.
|
•
|
repaid $20,000, net of borrowings, on our unsecured revolving line of credit and repaid mortgages payable with an aggregate principal balance of $54,178 and a weighted average interest rate of 5.92% using proceeds from dispositions;
|
•
|
closed on the following dispositions:
|
•
|
Greensburg Commons, a 272,500 square foot multi-tenant retail property located in Greensburg, Indiana, which was classified as held for sale as of June 30, 2015, for a sales price of $18,400 with an anticipated gain on sale of approximately $2,810;
|
•
|
Arvada Connection and Arvada Marketplace, a 367,500 square foot multi-tenant retail property located in Arvada, Colorado, for a sales price of $54,900 with an anticipated gain on sale of approximately $20,208; and
|
•
|
Traveler’s Office Building, a 50,800 square foot single-user office property located in Knoxville, Tennessee, which was classified as held for sale as of June 30, 2015, for a sales price of $4,841 with no significant gain or loss on sale due to impairment charges previously recognized.
|
•
|
closed on the acquisition of a 13,800 square foot single-user outparcel located at Southlake Town Square, its existing multi-tenant retail operating property located in Southlake, Texas, for a gross purchase price of $8,440.
|
|
|
Notional
Amount
|
|
Termination Date
|
|
Fair Value of
Derivative
Liability
|
||||
Fixed rate portion of unsecured credit facility
|
|
$
|
300,000
|
|
|
February 24, 2016
|
|
$
|
438
|
|
Heritage Towne Crossing
|
|
8,017
|
|
|
September 30, 2016
|
|
101
|
|
||
|
|
$
|
308,017
|
|
|
|
|
$
|
539
|
|
(a)
|
Not applicable.
|
(b)
|
Not applicable.
|
(c)
|
Issuer Purchases of Equity Securities
|
Period
|
|
Total number
of shares of Class A common stock purchased |
|
Average price
paid per share of Class A
common stock
|
|
Total number of
shares purchased as part of publicly announced plans or programs |
|
Maximum number
(or approximate dollar value) of shares that may yet be purchased under the plans or programs |
|||
April 1, 2015 to April 30, 2015
|
|
—
|
|
|
$
|
—
|
|
|
N/A
|
|
N/A
|
May 1, 2015 to May 31, 2015
|
|
2,216
|
|
|
$
|
15.57
|
|
|
N/A
|
|
N/A
|
June 1, 2015 to June 30, 2015
|
|
56,363
|
|
|
$
|
14.84
|
|
|
N/A
|
|
N/A
|
Total
|
|
58,579
|
|
|
$
|
14.87
|
|
|
N/A
|
|
N/A
|
Exhibit No.
|
|
Description
|
|
|
|
10.1
|
|
Separation Agreement and General Release, dated May 7, 2015, by and between the Registrant and Angela M. Aman (filed herewith).
|
10.2
|
|
Offer Letter, dated July 13, 2015, by and between the Registrant and Heath R. Fear (filed herewith).
|
10.3
|
|
Indemnification Agreement, dated July 28, 2015, by and between the Registrant and Bonnie S. Biumi (filed herewith).
|
31.1
|
|
Certification of President and Chief Executive Officer and Interim 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 Interim 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, 2015 and December 31, 2014, (ii) Condensed Consolidated Statements of Operations and Other Comprehensive Income for the Three-Month Periods and Six-Month Periods Ended June 30, 2015 and 2014, (iii) Condensed Consolidated Statements of Equity for the Six-Month Periods Ended June 30, 2015 and 2014, (iv) Condensed Consolidated Statements of Cash Flows for the Six-Month Periods Ended June 30, 2015 and 2014, and (v) Notes to Condensed Consolidated Financial Statements.
|
By:
|
/s/ STEVEN P. GRIMES
|
|
|
|
|
|
Steven P. Grimes
|
|
|
President and Chief Executive Officer
|
|
|
Interim Chief Financial Officer and Treasurer
|
|
|
(Principal Executive Officer and Interim Principal Financial Officer)
|
|
|
|
|
Date:
|
August 5, 2015
|
|
|
|
|
By:
|
/s/ JULIE M. SWINEHART
|
|
|
|
|
|
Julie M. Swinehart
|
|
|
Senior Vice President and Chief Accounting Officer
|
|
|
(Principal Accounting Officer)
|
|
|
|
|
Date:
|
August 5, 2015
|
|
EMPLOYEE
|
|
RETAIL PROPERTIES OF
AMERICA, INC.
|
||
/s/ Angela M. Aman
|
|
By:
|
/s/ Steven P. Grimes
|
|
Date:
|
5/12/15
|
|
Date:
|
5/12/15
|
•
|
Medical, dental and vision insurance, effective the first of the month following 60 days of employment;
|
•
|
Reimbursement of costs of annual executive physical at Northwestern Executive Health;
|
•
|
Company paid life insurance (equal to one times your annual base salary not to exceed $400,000), short-term and long-term disability benefits to be effective the first of the month following 60 days of employment;
|
•
|
Auto enrollment in the RPAI 401(k) plan on the first of the month following date of hire and immediate participation in company matching under the plan;
|
•
|
You will be eligible for 30 paid time off (“PTO”) days each calendar year. You will receive a prorated amount for calendar year 2015. PTO days will accrue on a monthly basis at a rate of 20 hours/month.
|
/s/ Heath R. Fear
|
|
7/15/2015
|
Heath R. Fear
|
|
Date
|
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/ BONNIE S. BIUMI
|
|
|
|
Bonnie S. Biumi
|
|
|
|
|
|
|
|
Address:
|
Retail Properties of America, Inc.
|
|
|
|
2021 Spring Road, Suite 200
|
|
|
|
Oak Brook, Illinois 60523
|
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.
|
I am 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.
|
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
|
|
Interim Chief Financial Officer and Treasurer
|
|
|
Date:
|
August 5, 2015
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; 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
|
|
Interim Chief Financial Officer and Treasurer
|
|
|
Date:
|
August 5, 2015
|