RETAIL PROPERTIES OF AMERICA, INC. (Form: 10-Q, Received: 07/31/2019 16:24:05)

Term Loan Due 2023

Maturity Date

Leverage-Based Pricing

Credit Spread

Investment Grade Pricing

Credit Spread

$200,000 unsecured term loan

1.20% – 1.85%

0.85% – 1.65%

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

For the quarterly period ended June 30, 2019



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

For the transition period from to

Commission File Number: 001-35481

RETAIL PROPERTIES OF AMERICA, INC.

(Exact name of registrant as specified in its charter)



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

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

(630) 634-4200

(Registrant’s telephone number, including area code)

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



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.001 par value	RPAI	New York Stock Exchange

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

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

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



Large accelerated filer	x	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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

Number of shares outstanding of the registrant’s classes of common stock as of July 26, 2019:

Class A common stock: 213,654,824 shares

Table of Contents

RETAIL PROPERTIES OF AMERICA, INC.

TABLE OF CONTENTS



PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	42

Item 4.	Controls and Procedures	43

PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	44

Item 1A.	Risk Factors	44

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44

Item 3.	Defaults Upon Senior Securities	44

Item 4.	Mine Safety Disclosures	44

Item 5.	Other Information	44

Item 6.	Exhibits	45

SIGNATURES		46

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RETAIL PROPERTIES OF AMERICA, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except par value amounts)



	June 30, 2019			December 31, 2018
Assets
Investment properties:
Land	$	1,037,381		$	1,036,901
Building and other improvements	3,587,241			3,607,484
Developments in progress	69,963			48,369
	4,694,585			4,692,754
Less accumulated depreciation	(1,358,059		)	(1,313,602		)
Net investment properties	3,336,526			3,379,152
Cash and cash equivalents	28,456			14,722
Accounts and notes receivable, net	77,337			78,398
Acquired lease intangible assets, net	88,492			97,090
Right-of-use lease assets	50,881			—
Other assets, net	71,387			78,108
Total assets	$	3,653,079		$	3,647,470

Liabilities and Equity
Liabilities:
Mortgages payable, net	$	203,726		$	205,320
Unsecured notes payable, net	795,902			696,362
Unsecured term loans, net	447,757			447,367
Unsecured revolving line of credit	193,000			273,000
Accounts payable and accrued expenses	57,940			82,942
Distributions payable	35,388			35,387
Acquired lease intangible liabilities, net	67,505			86,543
Lease liabilities	91,129			—
Other liabilities	46,111			73,540
Total liabilities	1,938,458			1,900,461

Commitments and contingencies (Note 13)

Equity:
Preferred stock, $0.001 par value, 10,000 shares authorized, none issued or outstanding	—			—
Class A common stock, $0.001 par value, 475,000 shares authorized, 213,662 and 213,176 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively	214			213
Additional paid-in capital	4,507,488			4,504,702
Accumulated distributions in excess of earnings	(2,783,183		)	(2,756,802		)
Accumulated other comprehensive loss	(11,343		)	(1,522		)
Total shareholders’ equity	1,713,176			1,746,591
Noncontrolling interests	1,445			418
Total equity	1,714,621			1,747,009
Total liabilities and equity	$	3,653,079		$	3,647,470

See accompanying notes to condensed consolidated financial statements

Table of Contents

RETAIL PROPERTIES OF AMERICA, INC.

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

(Unaudited)

(in thousands, except per share amounts)



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Revenues:
Lease income	$	118,449		$	119,164		$	241,152		$	244,006

Expenses:
Operating expenses	17,129			19,384			34,815			39,639
Real estate taxes	18,534			17,701			36,937			38,169
Depreciation and amortization	42,882			43,710			86,149			88,938
Provision for impairment of investment properties	—			724			—			1,316
General and administrative expenses	9,353			10,274			19,852			22,769
Total expenses	87,898			91,793			177,753			190,831

Other (expense) income:
Interest expense	(17,363		)	(16,817		)	(34,793		)	(35,582		)
Gain on sales of investment properties	8,454			—			16,903			34,519
Other (expense) income, net	(472		)	328			(1,131		)	550
Net income	21,170			10,882			44,378			52,662
Net income attributable to noncontrolling interests	—			—			—			—
Net income attributable to common shareholders	$	21,170		$	10,882		$	44,378		$	52,662

Earnings per common share – basic and diluted:
Net income per common share attributable to common shareholders	$	0.10		$	0.05		$	0.21		$	0.24

Net income	$	21,170		$	10,882		$	44,378		$	52,662
Other comprehensive (loss) income:
Net unrealized (loss) gain on derivative instruments (Note 8)	(6,307		)	859			(9,821		)	3,613
Comprehensive income attributable to the Company	$	14,863		$	11,741		$	34,557		$	56,275

Weighted average number of common shares outstanding – basic	212,951			218,982			212,900			218,915

Weighted average number of common shares outstanding – diluted	213,090			219,410			213,156			219,406

See accompanying notes to condensed consolidated financial statements

Table of Contents

RETAIL PROPERTIES OF AMERICA, INC.

Condensed Consolidated Statements of Equity

(Unaudited)

(in thousands, except per share amounts)



	Class A Common Stock				Additional Paid-in Capital			Accumulated Distributions in Excess of Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity			Noncontrolling Interests		Total Equity
Three Months Ended	Shares		Amount		Additional Paid-in Capital			Accumulated Distributions in Excess of Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity			Noncontrolling Interests		Total Equity
Balance as of April 1, 2018	219,489		$	219	$	4,575,191		$	(2,684,606	)	$	3,840		$	1,894,644		$	—	$	1,894,644
Net income	—		—		—			10,882			—			10,882			—		10,882
Other comprehensive income	—		—		—			—			859			859			—		859
Distributions declared to common shareholders ($0.165625 per share)	—		—		—			(36,357		)	—			(36,357		)	—		(36,357		)
Issuance of restricted shares	77		—		—			—			—			—			—		—
Stock-based compensation expense, net of forfeitures	(12	)	—		1,596			—			—			1,596			—		1,596
Shares withheld for employee taxes	(4	)	—		(35		)	—			—			(35		)	—		(35		)
Balance as of June 30, 2018	219,550		$	219	$	4,576,752		$	(2,710,081	)	$	4,699		$	1,871,589		$	—	$	1,871,589
Three Months Ended
Balance as of April 1, 2019	213,585		$	214	$	4,505,631		$	(2,768,965	)	$	(5,036	)	$	1,731,844		$	776	$	1,732,620
Net income	—		—		—			21,170			—			21,170			—		21,170
Other comprehensive loss	—		—		—			—			(6,307		)	(6,307		)	—		(6,307		)
Contributions from noncontrolling interests	—		—		—			—			—			—			669		669
Distributions declared to common shareholders ($0.165625 per share)	—		—		—			(35,388		)	—			(35,388		)	—		(35,388		)
Issuance of restricted shares	77		—		—			—			—			—			—		—
Stock-based compensation expense	—		—		1,857			—			—			1,857			—		1,857
Balance as of June 30, 2019	213,662		$	214	$	4,507,488		$	(2,783,183	)	$	(11,343	)	$	1,713,176		$	1,445	$	1,714,621

Six Months Ended
Balance as of January 1, 2018	219,237		$	219	$	4,574,428		$	(2,690,021	)	$	1,074		$	1,885,700		$	—	$	1,885,700
Cumulative effect of accounting change	—		—		—			(12		)	12			—			—		—
Net income	—		—		—			52,662			—			52,662			—		52,662
Other comprehensive income	—		—		—			—			3,613			3,613			—		3,613
Distributions declared to common shareholders ($0.33125 per share)	—		—		—			(72,710		)	—			(72,710		)	—		(72,710		)
Issuance of common stock	59		—		—			—			—			—			—		—
Issuance of restricted shares	382		—		—			—			—			—			—		—
Stock-based compensation expense, net of forfeitures	(12	)	—		3,729			—			—			3,729			—		3,729
Shares withheld for employee taxes	(116	)	—		(1,405		)	—			—			(1,405		)	—		(1,405		)
Balance as of June 30, 2018	219,550		$	219	$	4,576,752		$	(2,710,081	)	$	4,699		$	1,871,589		$	—	$	1,871,589
Six Months Ended
Balance as of January 1, 2019	213,176		$	213	$	4,504,702		$	(2,756,802	)	$	(1,522	)	$	1,746,591		$	418	$	1,747,009
Net income	—		—		—			44,378			—			44,378			—		44,378
Other comprehensive loss	—		—		—			—			(9,821		)	(9,821		)	—		(9,821		)
Contributions from noncontrolling interests	—		—		—			—			—			—			1,027		1,027
Distributions declared to common shareholders ($0.33125 per share)	—		—		—			(70,759		)	—			(70,759		)	—		(70,759		)
Issuance of common stock	111		—		—			—			—			—			—		—
Issuance of restricted shares	469		1		—			—			—			1			—		1
Stock-based compensation expense, net of forfeitures	(9	)	—		3,823			—			—			3,823			—		3,823
Shares withheld for employee taxes	(85	)	—		(1,037		)	—			—			(1,037		)	—		(1,037		)
Balance as of June 30, 2019	213,662		$	214	$	4,507,488		$	(2,783,183	)	$	(11,343	)	$	1,713,176		$	1,445	$	1,714,621

See accompanying notes to condensed consolidated financial statements

Table of Contents

RETAIL PROPERTIES OF AMERICA, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)



	Six Months Ended June 30,
	2019			2018
Cash flows from operating activities:
Net income	$	44,378		$	52,662
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	86,149			88,938
Provision for impairment of investment properties	—			1,316
Gain on sales of investment properties	(16,903		)	(34,519		)
Amortization of loan fees and debt premium and discount, net	1,597			1,780
Amortization of stock-based compensation	3,823			3,729
Debt prepayment fees	—			974
Payment of leasing fees and inducements	(5,120		)	(3,652		)
Changes in accounts receivable, net	1,332			(1,520		)
Changes in right-of-use lease assets	961			—
Changes in accounts payable and accrued expenses, net	(16,999		)	(19,554		)
Changes in lease liabilities	(309		)	—
Changes in other operating assets and liabilities, net	4,234			3,287
Other, net	(3,957		)	(4,738		)
Net cash provided by operating activities	99,186			88,703

Cash flows from investing activities:
Purchase of investment properties	(26,576		)	—
Capital expenditures and tenant improvements	(39,934		)	(32,961		)
Proceeds from sales of investment properties	41,886			187,125
Investment in developments in progress	(7,784		)	(6,933		)
Net cash (used in) provided by investing activities	(32,408		)	147,231

Cash flows from financing activities:
Principal payments on mortgages payable	(1,530		)	(12,818		)
Proceeds from unsecured notes payable	100,000			—
Repayments of unsecured term loans	—			(100,000		)
Proceeds from unsecured revolving line of credit	143,000			196,000
Repayments of unsecured revolving line of credit	(223,000		)	(286,000		)
Payment of loan fees and deposits	(754		)	(5,393		)
Debt prepayment fees	—			(974		)
Distributions paid	(70,758		)	(72,658		)
Other, net	(10		)	(1,405		)
Net cash used in financing activities	(53,052		)	(283,248		)

Net increase (decrease) in cash, cash equivalents and restricted cash	13,726			(47,314		)
Cash, cash equivalents and restricted cash, at beginning of period	19,601			86,335
Cash, cash equivalents and restricted cash, at end of period	$	33,327		$	39,021
(continued)

Table of Contents

RETAIL PROPERTIES OF AMERICA, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)



	Six Months Ended June 30,
	2019			2018
Supplemental cash flow disclosure, including non-cash activities:
Cash paid for interest, net of interest capitalized	$	33,276		$	34,179
Cash paid for amounts included in the measurement of operating lease liabilities	$	3,052		$	—
Distributions payable	$	35,388		$	36,363
Accrued capital expenditures and tenant improvements	$	7,403		$	7,550
Accrued leasing fees and inducements	$	673		$	761
Accrued redevelopment costs	$	281		$	1,074
Amounts reclassified to developments in progress	$	13,570		$	—
Developments in progress placed in service	$	—		$	9,355
Lease liabilities arising from obtaining right-of-use lease assets	$	103,519		$	—
Straight-line ground rent liabilities reclassified to right-of-use lease asset	$	31,030		$	—
Straight-line office rent liability reclassified to right-of-use lease asset	$	507		$	—
Acquired ground lease intangible liability reclassified to right-of-use lease asset	$	11,898		$	—

Purchase of investment properties (after credits at closing):
Net investment properties	$	(25,438	)	$	—
Accounts receivable, acquired lease intangibles and other assets	(1,525		)	—
Accounts payable, acquired lease intangibles and other liabilities	387			—
Purchase of investment properties (after credits at closing)	$	(26,576	)	$	—

Proceeds from sales of investment properties:
Net investment properties	$	29,318		$	148,448
Right-of-use lease assets	8,242			—
Accounts receivable, acquired lease intangibles and other assets	1,591			10,999
Lease liabilities	(11,326		)	—
Accounts payable, acquired lease intangibles and other liabilities	(2,842		)	(6,841		)
Gain on sales of investment properties	16,903			34,519
Proceeds from sales of investment properties	$	41,886		$	187,125

Reconciliation of cash, cash equivalents and restricted cash reported on the Company’s condensed consolidated balance sheets to such amounts shown in the Company’s condensed consolidated statements of cash flows:
Cash and cash equivalents, at beginning of period	$	14,722		$	25,185
Restricted cash, at beginning of period (included within “Other assets, net”)	4,879			61,150
Total cash, cash equivalents and restricted cash, at beginning of period	$	19,601		$	86,335

Cash and cash equivalents, at end of period	$	28,456		$	29,125
Restricted cash, at end of period (included within “Other assets, net”)	4,871			9,896
Total cash, cash equivalents and restricted cash, at end of period	$	33,327		$	39,021

See accompanying notes to condensed consolidated financial statements

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Readers of this Quarterly Report should refer to the audited financial statements of Retail Properties of America, Inc. for the year ended December 31, 2018, which are included in its 2018 Annual Report on Form 10-K, as certain footnote disclosures which would substantially duplicate those contained in the Annual Report have been omitted from this Quarterly Report. In the opinion of management, all adjustments necessary, all of which were of normal recurring nature, for a fair presentation have been included in this Quarterly Report.

(1) ORGANIZATION AND BASIS OF PRESENTATION

Retail Properties of America, Inc. (the Company) was formed on March 5, 2003 and its primary purpose is to own and operate high quality, strategically located open-air shopping centers, including properties with a mixed-use component. As of June 30, 2019, the Company owned 104 retail operating properties in the United States.

The Company has elected to be taxed as a real estate investment trust (REIT) under the Internal Revenue Code of 1986, as amended (the Code). The Company believes it qualifies for taxation as a REIT and, as such, the Company generally will not be subject to U.S. federal income tax on taxable income that is distributed to its shareholders. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to U.S. federal income tax on its taxable income. Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes on its income, property or net worth and U.S. federal income and excise taxes on its undistributed income. The Company has one wholly-owned subsidiary that has jointly elected to be treated as a taxable REIT subsidiary (TRS) and is subject to U.S. federal, state and local income taxes at regular corporate tax rates. The income tax expense incurred by the TRS did not have a material impact on the Company’s accompanying condensed consolidated financial statements.

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

In accordance with Accounting Standards Codification Topic 205, Presentation of Financial Statements, certain prior year balances have been reclassified in order to conform to the current period presentation. Specifically, all lease-related revenues have been presented in a single line item, “Lease income,” rather than the previous presentation which separated revenues between “Rental income,” “Tenant recovery income” and “Other property income” in the accompanying condensed consolidated statements of operations and other comprehensive (loss) income.

All share amounts and dollar amounts in this Quarterly Report on Form 10-Q, including the condensed consolidated financial statements and notes thereto, are stated in thousands with the exception of per share, per square foot and per unit amounts.

The accompanying condensed consolidated financial statements include the accounts of the Company, as well as all wholly-owned subsidiaries and consolidated variable interest entities (VIEs). All intercompany balances and transactions have been eliminated in consolidation. Wholly-owned subsidiaries generally consist of limited liability companies, limited partnerships and statutory trusts.

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Company’s property ownership as of June 30, 2019 is summarized below:



	Property Count
Retail operating properties	104
Redevelopment projects:
Circle East (a)	1
Plaza del Lago – multi-family rental units (b)	—
One Loudoun Downtown – Pads G & H (c)	—
Carillon (d)	1
Total number of properties	106


(a)	The redevelopment at Circle East, formerly known as Towson Circle, is no longer presented combined with the Company’s neighboring retail operating property, Towson Square, which is included within the property count for retail operating properties. This change increased the Company’s redevelopment property count by one.


(b)	The operating portion of this property is included within the property count for retail operating properties.


(c)	The Company began redevelopment activities on Pads G & H at the property during the three months ended June 30, 2019. The operating portion of this property is included within the property count for retail operating properties.


(d)	The Company has begun activities in anticipation of the future redevelopment of this property.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Refer to the Company’s 2018 Annual Report on Form 10-K for a summary of its significant accounting policies. Except as disclosed below, there have been no changes to the Company’s significant accounting policies in the six months ended June 30, 2019.

Recently Adopted Accounting Pronouncements

Effective January 1, 2019, the Company adopted Accounting Standards Update (ASU) 2016-02, Leases. This new guidance, including related ASUs that were subsequently issued, requires lessees to recognize a liability to make lease payments and a right-of-use lease (ROU) asset, initially measured at the present value of lease payments, for both operating and financing leases. For leases with a term of 12 months or less, lessees are permitted to make an accounting policy election, by class of underlying asset, to not recognize lease liabilities and lease assets. The guidance allows lessees and lessors to make an accounting policy election, by class of underlying asset, to not separate non-lease components from lease components. The guidance also provides an optional transition method which would allow entities to initially apply the new guidance in the period of adoption, recognizing a cumulative-effect adjustment to the opening balance of retained earnings, if necessary, and provides a package of three practical expedients whereby companies are not required to reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification (operating vs. capital/financing leases) for any expired or existing leases and (iii) initial direct costs for any existing leases (Package of Three Practical Expedients), as well as practical expedients whereby companies are not required to reassess whether land easements contain a lease and can use hindsight in determining the lease term and assessing impairment of the ROU asset. The guidance requires changes in collectibility of operating lease receivables to be presented as an adjustment to revenue rather than the previous presentation within “Operating expenses” on the condensed consolidated statements of operations and other comprehensive (loss) income. Finally, only incremental direct leasing costs may be capitalized under the new guidance, which is consistent with the Company’s previous policies.

The Company adopted this new guidance on January 1, 2019, applied the requirements as of that date, elected the practical expedient to not separate non-lease components from lease components for all classes of assets, elected the Package of Three Practical Expedients as well as the practical expedient related to not reassessing whether land easements contain a lease. The Company did not elect the practical expedient related to hindsight for determining the lease term or assessing impairment of ROU assets. There was no retained earnings adjustment as a result of the adoption. The guidance regarding capitalization of leasing costs did not have any effect on the Company’s condensed consolidated financial statements.

Upon adoption, the Company recognized lease liabilities and ROU assets of $103,432 for operating leases where it is the lessee related to long-term ground leases and office leases, which are presented as “Right-of-use lease assets” and “Lease liabilities” in the accompanying condensed consolidated balance sheets. The ROU assets are presented net of the Company’s existing straight-line ground rent liabilities of $31,030 and acquired ground lease intangible liability of $11,898 as of January 1, 2019. For leases

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

with a term of 12 months or less, the Company made an accounting policy election to not recognize lease liabilities and lease assets.

For leases where the Company is the lessor, as noted above, the Company elected the practical expedient to not separate non-lease components from lease components for all classes of assets and has presented all lease-related revenues in a single line item, “Lease income,” rather than the previous presentation which separated revenues between “Rental income,” “Tenant recovery income” and “Other property income” in the condensed consolidated statements of operations and other comprehensive (loss) income for the current and comparative period. This resulted in the reclassification of (i) $92,646 and $187,101 of revenue previously presented as “Rental income,” (ii) $25,183 and $53,273 of revenue previously presented as “Tenant recovery income” and (iii) $1,335 and $3,632 of revenue previously presented as “Other property income” for the three and six months ended June 30, 2018, respectively, into “Lease income” in the accompanying condensed consolidated statements of operations and other comprehensive (loss) income. In addition, the Company began recording changes in collectibility of operating lease receivables as an adjustment to “Lease income” in the accompanying condensed consolidated statements of operations and other comprehensive (loss) income. For the three and six months ended June 30, 2018, changes in collectibility of operating lease receivables are presented within “Operating expenses” in the accompanying condensed consolidated statements of operations and other comprehensive (loss) income.

Effective January 1, 2019, the Company adopted ASU 2018-16, Derivatives and Hedging, due to the Company’s early adoption of ASU 2017-12, Derivatives and Hedging. This new guidance permits use of the Overnight Index Swap (OIS) Rate based on the Secured Overnight Financing Rate (SOFR) as a U.S. benchmark interest rate for hedge accounting purposes. SOFR represents the fifth permissible U.S. benchmark rate in addition to the following current eligible benchmark interest rates: (i) direct Treasury obligations of the U.S. government (UST), (ii) the London Interbank Offered Rate (LIBOR) swap rate, (iii) the OIS Rate based on the Fed Funds Effective Rate and (iv) the Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Rate. The adoption of this pronouncement did not have any effect on the Company’s condensed consolidated financial statements as the Company did not change its benchmark rate.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses. This new guidance is effective January 1, 2020, with early adoption permitted beginning January 1, 2019, and replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses. Financial assets that are measured at amortized cost will be required to be presented at the net amount expected to be collected with an allowance for credit losses deducted from the amortized cost basis. In addition, an entity must consider broader information in developing its expected credit loss estimate, including the use of forecasted information. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, which clarifies that receivables arising from operating leases are not within the scope of this new guidance. Generally, the pronouncement requires a modified retrospective method of adoption. The Company will continue to evaluate the impact of this guidance until it becomes effective.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement. This new guidance is effective January 1, 2020, with early adoption permitted, and provides new, and in some cases eliminates or modifies the existing disclosure requirements on fair value measurements. Public entities will now be required to disclose the following: (i) the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and (ii) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. In addition, public entities will no longer be required to disclose the following: (i) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, (ii) the policy for timing of transfers between levels and (iii) the valuation processes for Level 3 fair value measurements. The new pronouncement also clarifies and modifies certain existing provisions to promote the appropriate exercise of discretion by entities when considering fair value measurement disclosures and clarifies that materiality is an appropriate consideration when evaluating disclosure requirements. As permitted by the new pronouncement, the Company removed the discussion of its valuation processes for Level 3 fair value measurements beginning in its Form 10-Q for the quarter ended September 30, 2018. No other disclosures were removed as the Company did not have any transfers between levels of the fair value hierarchy during the current and comparative periods. The Company expects to adopt the new disclosures on a prospective basis as of January 1, 2020.

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(3) ACQUISITIONS AND DEVELOPMENTS IN PROGRESS

The Company closed on the following acquisitions during the six months ended June 30, 2019:

Date

Property Name

Metropolitan
Statistical Area (MSA)

Property Type

Square

Footage

Acquisition

Price

March 7, 2019

North Benson Center

Seattle

Multi-tenant retail

70,500

25,340

June 10, 2019

Paradise Valley Marketplace – Parcel

Phoenix

Land (a)

—

1,343

70,500

26,683

(b)


(a)	The Company acquired a parcel adjacent to its Paradise Valley Marketplace multi-tenant retail operating property. The total number of properties in the Company’s portfolio was not affected by this transaction.


(b)	Acquisition price does not include capitalized closing costs and adjustments totaling $291.

The Company did not acquire any properties during the six months ended June 30, 2018.

The following table summarizes the acquisition date values, before prorations, the Company recorded in conjunction with the acquisitions discussed above:



	Six Months Ended June 30, 2019
Land	$	14,819
Building and other improvements, net	10,619
Acquired lease intangible assets (a)	1,770
Acquired lease intangible liabilities (b)	(234		)
Net assets acquired	$	26,974


(a)	The weighted average amortization period for acquired lease intangible assets is five years.


(b)	The weighted average amortization period for acquired lease intangible liabilities is five years.

The above acquisitions were funded using a combination of available cash on hand, proceeds from dispositions and proceeds from the Company’s unsecured revolving line of credit. Both of the acquisitions completed during 2019 were considered asset acquisitions and, as such, transaction costs were capitalized upon closing.

Developments in Progress

The Company’s developments in progress are as follows:



Property Name	MSA	June 30, 2019		December 31, 2018
Active developments/redevelopments:
Circle East (a)	Baltimore	$	28,792	$	22,383
Plaza del Lago – multi-family rental units	Chicago	1,357		536
One Loudoun Downtown – Pads G & H (b)	Washington, D.C.	14,364		—
		44,513		22,919
Land held for development:
One Loudoun Uptown (c)	Washington, D.C.	25,450		25,450
Total developments in progress		$	69,963	$	48,369


(a)	During the year ended December 31, 2018, the Company received net proceeds of $11,820 in connection with the sale of air rights to a third party to develop multi-family rental units at Circle East, which is shown net in the “Developments in progress” balance as of June 30, 2019 in the accompanying condensed consolidated balance sheets.


(b)	During the three months ended June 30, 2019, the Company commenced the active redevelopment of Pads G & H at One Loudoun Downtown.


(c)	During the three months ended December 31, 2018, the Company acquired One Loudoun Uptown, a 58-acre land parcel, of which 32 acres are developable.

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Variable Interest Entities

During the three months ended June 30, 2019, the Company entered into a joint venture related to the medical office building portion of the redevelopment project at Carillon, of which the Company owns 95% of the joint venture. The joint venture is considered a VIE and the Company is considered the primary beneficiary as it has a controlling financial interest. As such, the Company has consolidated the joint venture and presented the joint venture partner’s interest as noncontrolling interest.

During the year ended December 31, 2018, the Company entered into two joint ventures related to (i) the multi-family rental portion of the expansion project at One Loudoun Downtown – Pads G & H and (ii) the multi-family rental redevelopment project at Carillon, of which the Company owns 90% and 95%, respectively, of the joint ventures. The joint ventures are considered VIEs and the Company is considered the primary beneficiary for each joint venture, as it has a controlling financial interest in each. As such, it has consolidated these joint ventures and presented the joint venture partners’ interests as noncontrolling interests.

The joint venture project at One Loudoun Downtown – Pads G & H began active development during the three months ended June 30, 2019, at which time all predevelopment costs related to the joint venture as well as the Company’s historical basis in the pads were reclassified from “Other assets, net” and “Investment properties,” respectively, to “Developments in progress” in the accompanying condensed consolidated balance sheets. As of June 30, 2019, the Company had recorded $1,188 of costs related to the joint venture, which are included within “Developments in progress” in the accompanying condensed consolidated balance sheets. As of December 31, 2018, the Company had recorded $414 of predevelopment costs related to the joint venture, which are included within “Other assets, net” in the accompanying condensed consolidated balance sheets. No income was attributed to the noncontrolling interest during the six months ended June 30, 2019 and 2018.

The joint venture projects at Carillon are in the predevelopment stage and each is currently being funded evenly by the Company and the respective joint venture partner. As of June 30, 2019 and December 31, 2018, the Company had recorded $1,702 and $422, respectively, of predevelopment costs related to the joint ventures at Carillon, which are included within “Other assets, net” in the accompanying condensed consolidated balance sheets. No income was attributed to the noncontrolling interests during the six months ended June 30, 2019 and 2018.

(4) DISPOSITIONS

The Company closed on the following dispositions during the six months ended June 30, 2019:



Date	Property Name	Property Type	Square Footage	Consideration		Aggregate Proceeds, Net (a)		Gain
March 8, 2019	Edwards Multiplex – Fresno (b)	Single-user retail	94,600	$	25,850	$	21,605	$	8,449
June 28, 2019	North Rivers Towne Center	Multi-tenant retail	141,500	18,900		17,989		6,881
			236,100	$	44,750	$	39,594	$	15,330


(a)	Aggregate proceeds are net of transaction costs.


(b)	Prior to the disposition, the Company was subject to a ground lease whereby it leased the underlying land from a third party. The ground lease was assumed by the purchaser in connection with the disposition.

During the six months ended June 30, 2019, the Company also received net proceeds of $2,292 and recognized a gain of $1,573 in connection with the sale of the second phase of a land parcel, which included rights to develop 10 residential units, at One Loudoun Downtown. The aggregate proceeds from the property dispositions and other transactions during the six months ended June 30, 2019 totaled $41,886, with aggregate gains of $16,903.

Subsequent to June 30, 2019, the Company closed on the final phase of the sale of a land parcel, which included rights to develop 12 residential units, at One Loudoun Downtown, for a sales price of $2,783.

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Company closed on the following dispositions during the six months ended June 30, 2018:



Date	Property Name	Property Type	Square Footage	Consideration		Aggregate Proceeds, Net (a)		Gain
January 19, 2018	Crown Theater	Single-user retail	74,200	$	6,900	$	6,350	$	2,952
February 15, 2018	Cranberry Square	Multi-tenant retail	195,200	23,500		23,163		10,174
March 7, 2018	Rite Aid Store (Eckerd)–Crossville, TN	Single-user retail	13,800	1,800		1,768		157
March 20, 2018	Home Depot Plaza (b)	Multi-tenant retail	135,600	16,250		15,873		—
March 21, 2018	Governor's Marketplace	Multi-tenant retail	243,100	23,500		20,993		7,429
March 28, 2018	Stony Creek I & Stony Creek II (c)	Multi-tenant retail	204,800	32,800		32,078		11,628
April 19, 2018	CVS Pharmacy – Lawton, OK	Single-user retail	10,900	1,600		1,596		—
May 31, 2018	Schaumburg Towers	Office	895,400	86,600		73,315		—
			1,773,000	$	192,950	$	175,136	$	32,340


(a)	Aggregate proceeds are net of transaction costs, as well as capital and tenant-related costs credited to the buyer at close, as applicable, and exclude $169 of condemnation proceeds, which did not result in any additional gain recognition.


(b)	The Company repaid a $10,750 mortgage payable in conjunction with the disposition of the property.


(c)	The terms of the disposition of Stony Creek I and Stony Creek II were negotiated as a single transaction.

During the six months ended June 30, 2018, the Company also received net proceeds of $11,820 and recognized a gain of $2,179 in connection with the sale of air rights at Circle East. The aggregate proceeds from the property dispositions and other transactions during the six months ended June 30, 2018 totaled $187,125, with aggregate gains of $34,519.

None of the dispositions completed during the six months ended June 30, 2019 and 2018 qualified for discontinued operations treatment and none are considered individually significant.

As of June 30, 2019 and December 31, 2018, no properties qualified for held for sale accounting treatment.

(5) EQUITY COMPENSATION PLANS

The Company’s Amended and Restated 2014 Long-Term Equity Compensation Plan, subject to certain conditions, authorizes the issuance of incentive and non-qualified stock options, restricted stock and restricted stock units, stock appreciation rights and other similar awards to the Company’s employees, non-employee directors, consultants and advisors in connection with compensation and incentive arrangements that may be established by the Company’s board of directors or executive management.

The following table summarizes the Company’s unvested restricted shares as of and for the six months ended June 30, 2019:



	Unvested Restricted Shares		Weighted Average Grant Date Fair Value per Restricted Share
Balance as of January 1, 2019	440		$	13.40
Shares granted (a)	469		$	12.22
Shares vested	(233	)	$	13.31
Shares forfeited	(9	)	$	13.02
Balance as of June 30, 2019 (b)	667		$	12.61


(a)	Shares granted vest over periods ranging from 0.9 years to three years in accordance with the terms of applicable award agreements.


(b)	As of June 30, 2019, total unrecognized compensation expense related to unvested restricted shares was $4,254, which is expected to be amortized over a weighted average term of 1.3 years.

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following table summarizes the Company’s unvested performance restricted stock units (RSUs) as of and for the six months ended June 30, 2019:



	Unvested RSUs		Weighted Average Grant Date Fair Value per RSU
RSUs eligible for future conversion as of January 1, 2019	649		$	14.54
RSUs granted (a)	382		$	10.98
Conversion of RSUs to common stock and restricted shares (b)	(192	)	$	13.74
RSUs eligible for future conversion as of June 30, 2019 (c)	839		$	13.10

(a)

Assumptions and inputs as of the grant date included a risk-free interest rate of 2.47%, the Company’s historical common stock performance relative to the peer companies within the National Association of Real Estate Investment Trusts (NAREIT) Shopping Center Index and the Company’s common stock dividend yield of 6.07%. Subject to continued employment, in 2022, following the performance period which concludes on December 31, 2021, one-third of the RSUs that are earned will convert into shares of common stock and two-thirds will convert into restricted shares with a one year vesting term.

(b)

On February 4, 2019, 192 RSUs converted into 82 shares of common stock and 125 restricted shares that will vest on December 31, 2019, subject to continued employment through such date, after applying a conversion rate of 107.5% based upon the Company’s Total Shareholder Return (TSR) relative to the TSRs of its peer companies, for the performance period that concluded on December 31, 2018. An additional 29 shares of common stock were also issued representing the dividends that would have been paid on the earned awards during the performance period.


(c)	As of June 30, 2019, total unrecognized compensation expense related to unvested RSUs was $6,485, which is expected to be amortized over a weighted average term of 2.3 years.

During the three months ended June 30, 2019 and 2018, the Company recorded compensation expense of $1,857 and $1,596, respectively, related to the amortization of unvested restricted shares and RSUs. During the six months ended June 30, 2019 and 2018, the Company recorded compensation expense of $3,823 and $3,729, respectively, related to the amortization of unvested restricted shares and RSUs. Included within the amortization of stock-based compensation expense recorded during the six months ended June 30, 2018 is compensation expense of $330 related to the accelerated vesting of 23 restricted shares and remaining amortization related to the 29 RSUs that remained eligible for future conversion in conjunction with the departure of the Company’s former Executive Vice President, General Counsel and Secretary. The total fair value of restricted shares that vested during the six months ended June 30, 2019 was $2,778. In addition, the total fair value of RSUs that converted into common stock during the six months ended June 30, 2019 was $1,052.

Prior to 2013, non-employee directors had been granted options to acquire shares under the Company’s Third Amended and Restated Independent Director Stock Option and Incentive Plan. As of June 30, 2019, options to purchase 22 shares of common stock remained outstanding and exercisable. The Company did not grant any options in 2019 or 2018 and did not record any compensation expense related to stock options during the six months ended June 30, 2019 and 2018.

(6) LEASES

Leases as Lessor

The majority of revenues from the Company’s properties consist of rents received under long-term operating leases, predominantly consisting of base rent. Also, certain leases provide for percentage rent based primarily on tenant sales volume.

Also, most leases provide for reimbursement of the tenant’s pro rata share of certain operating expenses incurred by the landlord, including, among others, real estate taxes, insurance, utilities, common area maintenance and management fees, subject to the terms of the respective lease. Certain other tenants are subject to net leases where the tenant is responsible for paying base rent to the Company, but is directly responsible for other costs associated with occupancy, such as real estate taxes. Expenses paid directly by the tenant rather than the landlord are not included in the accompanying condensed consolidated statements of operations and other comprehensive (loss) income. Expenses paid by the landlord, subject to reimbursement by the tenant, are included within “Operating expenses” or “Real estate taxes” and reimbursements are included within “Lease income” along with the associated base rent in the accompanying condensed consolidated statements of operations and other comprehensive (loss) income.

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Company has elected the practical expedient to not separate non-lease components (primarily reimbursement of common area maintenance costs) from the related lease components and has applied the guidance of ASC 842, Leases, to the combined component as (i) the fixed non-lease components have the same timing and pattern of transfer as the associated lease component, (ii) the lease component, if accounted for separately, would be classified as an operating lease and (iii) the Company considers the lease component to be the predominant component of the combined contract.

In addition, the Company records lease termination fee income when (i) a termination letter agreement is signed, (ii) all of the conditions of such agreement have been fulfilled, (iii) the tenant is no longer occupying the property and (iv) collectibility is reasonably assured. Upon early lease termination, the Company provides for losses related to recognized tenant specific intangibles and other assets or adjusts the remaining useful life of the assets if determined to be appropriate. The Company recorded lease termination fee income of $232 and $1,420 for the three and six months ended June 30, 2019, respectively, and $208 and $1,227 for the three and six months ended June 30, 2018, respectively, which is included within “Lease income” in the accompanying condensed consolidated statements of operations and other comprehensive (loss) income.

In certain municipalities, the Company is required to remit sales taxes to governmental authorities based upon the rental income received from properties in those regions. These taxes are reimbursed by the tenant to the Company in accordance with the terms of the applicable tenant lease. The presentation of the remittance and reimbursement of these taxes is on a gross basis with sales tax expenses included within “Operating expenses” and sales tax reimbursements included within “Lease income” in the accompanying condensed consolidated statements of operations and other comprehensive (loss) income. Such taxes remitted to governmental authorities, which are generally reimbursed by tenants, were $153 and $299 for the three and six months ended June 30, 2019, respectively, and $88 and $276 for the three and six months ended June 30, 2018, respectively.

Lease income related to the Company’s operating leases is comprised of the following:



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Lease income related to fixed lease payments	$	89,751	$	89,745	$	180,185	$	182,165
Lease income related to variable lease payments	28,383		27,311		59,014		59,120
Other (a)	315		2,108		1,953		2,721
Lease income	$	118,449	$	119,164	$	241,152	$	244,006


(a)	For the three and six months ended June 30, 2019, “Other” is comprised of revenue adjustments related to changes in collectibility and amortization of above and below market lease intangibles and lease inducements. For the three and six months ended June 30, 2018, “Other” is comprised of amortization of above and below market lease intangibles and lease inducements.

As of June 30, 2019, undiscounted lease payments to be received under operating leases, excluding additional percentage rent based on tenants’ sales volume and tenant reimbursements of certain operating expenses and assuming no exercise of renewal options or early termination rights, for the remainder of 2019, the next five years and thereafter are as follows:



	Lease Payments
2019	$	178,075
2020	335,785
2021	296,467
2022	249,370
2023	202,005
2024	147,653
Thereafter	467,127
Total	$	1,876,482

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

As of December 31, 2018, undiscounted lease payments to be received under operating leases, excluding additional percentage rent based on tenants’ sales volume and tenant reimbursements of certain operating expenses and assuming no exercise of renewal options or early termination rights, were as follows:



	Lease Payments
2019	$	351,145
2020	314,081
2021	274,135
2022	227,417
2023	180,199
Thereafter	569,758
Total	$	1,916,735

The remaining lease terms range from less than one year to approximately 64 years as of June 30, 2019 and December 31, 2018.

As of December 31, 2018, the Company had recorded an allowance for doubtful accounts of $7,976.

Many of the leases at the Company’s properties contain provisions that condition a tenant’s obligation to remain open, the amount of rent payable by the tenant or potentially the tenant’s obligation to remain in the lease, upon certain factors, including: (i) the presence and continued operation of a certain anchor tenant or tenants, (ii) minimum occupancy levels at the applicable property or (iii) tenant sales amounts. If such a provision is triggered by a failure of any of these or other applicable conditions, a tenant could have the right to cease operations at the applicable property, have its rent reduced or terminate its lease early. The Company does not expect that such provisions will have a material impact on its future operating results.

Leases as Lessee

The Company leases land under non-cancellable operating leases at certain of its properties expiring in various years from 2035 to 2073, exclusive of any available option periods. In addition, the Company leases office space for certain management offices and its corporate offices expiring in various years from 2019 to 2023, exclusive of any available option periods.

Upon adoption of the new lease accounting standard (ASU 2016-02 and related amendments) on January 1, 2019, the Company recorded lease liabilities and ROU assets of $103,432 for long-term ground and office leases where it is the lessee, calculated by discounting future lease payments by the Company’s incremental borrowing rate as of January 1, 2019. The incremental borrowing rate was determined through consideration of (i) the Company’s entity-specific risk premium, (ii) observable market interest rates and (iii) lease term. The weighted average incremental borrowing rate used to discount the future payments was 5.91% and the Company’s operating leases had a weighted average remaining lease term of 44 years as of January 1, 2019. The Company did not include option terms in its future lease payments as they were not reasonably certain to be exercised. The Company’s existing straight-line ground rent liabilities of $31,030 and acquired ground lease intangible liability of $11,898 were reclassified as of January 1, 2019 to be presented net of the ROU assets.

The following table summarizes total lease costs recognized during the period, including variable lease payments which were not significant, and non-cash rent expense. Lease costs recognized during the three and six months ended June 30, 2019 are presented under the new lease accounting standard and lease costs recognized during the three and six months ended June 30, 2018 are presented under the standard in effect prior to the Company’s adoption of ASU 2016-02.



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Ground lease rent expense (a)	$	1,563	$	1,892	$	3,267	$	3,852
Office rent expense (b)	$	290	$	242	$	571	$	575


(a)	Included within “Operating expenses” in the accompanying condensed consolidated statements of operations and other comprehensive (loss) income. Includes non-cash ground rent expense of $332 and $690 for the three and six months ended June 30, 2019, respectively, and $579 and $1,245 for the three and six months ended June 30, 2018, respectively.

(b)

Office rent related to property management operations is included within “Operating expenses” and office rent related to corporate office operations is included within “General and administrative expenses” in the accompanying condensed consolidated statements of operations and other comprehensive (loss) income. The Company has elected to not record a lease liability/ROU asset for leases with a term of less

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than 12 months. Office rent expense for the three and six months ended June 30, 2019 includes $11 and $29, respectively, of short-term lease costs.

As of June 30, 2019, undiscounted future rental obligations to be paid under the long-term ground and office leases, including fixed rental increases, for the remainder of 2019, the next five years and thereafter are as follows:



	Lease Obligations
2019	$	2,879
2020	6,076
2021	6,110
2022	6,140
2023	6,102
2024	5,698
Thereafter	247,793
Total	$	280,798
Adjustment for discounting	(189,669		)
Lease liabilities as of June 30, 2019	$	91,129

The Company’s operating leases for ground leases and office leases had a weighted average remaining lease term of 44 years and a weighted average discount rate of 5.93% as of June 30, 2019.

As of December 31, 2018, future rental obligations to be paid under the ground and office leases, including fixed rental increases, were as follows:



	Lease Obligations
2019	$	6,448
2020	6,656
2021	6,716
2022	6,761
2023	6,769
Thereafter	279,916
Total	$	313,266

(7) DEBT

The Company has the following types of indebtedness: (i) mortgages payable, (ii) unsecured notes payable, (iii) unsecured term loans and (iv) an unsecured revolving line of credit.

Mortgages Payable

The following table summarizes the Company’s mortgages payable:



	June 30, 2019						December 31, 2018
	Balance			Weighted Average Interest Rate		Weighted Average Years to Maturity	Balance			Weighted Average Interest Rate		Weighted Average Years to Maturity
Fixed rate mortgages payable (a)	$	203,920		4.65	%	4.0	$	205,450		4.65	%	4.5
Premium, net of accumulated amortization	650						775
Discount, net of accumulated amortization	(515		)				(536		)
Capitalized loan fees, net of accumulated amortization	(329		)				(369		)
Mortgages payable, net	$	203,726					$	205,320


(a)	The fixed rate mortgages had interest rates ranging from 3.75% to 7.48% as of June 30, 2019 and December 31, 2018.

During the six months ended June 30, 2019, the Company made scheduled principal payments of $1,530 related to amortizing loans.

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Unsecured Notes Payable

The following table summarizes the Company’s unsecured notes payable:



		June 30, 2019					December 31, 2018
Unsecured Notes Payable	Maturity Date	Balance			Interest Rate/ Weighted Average Interest Rate		Balance			Interest Rate/ Weighted Average Interest Rate
Senior notes – 4.12% due 2021	June 30, 2021	$	100,000		4.12	%	$	100,000		4.12	%
Senior notes – 4.58% due 2024	June 30, 2024	150,000			4.58	%	150,000			4.58	%
Senior notes – 4.00% due 2025	March 15, 2025	250,000			4.00	%	250,000			4.00	%
Senior notes – 4.08% due 2026	September 30, 2026	100,000			4.08	%	100,000			4.08	%
Senior notes – 4.24% due 2028	December 28, 2028	100,000			4.24	%	100,000			4.24	%
Senior notes – 4.82% due 2029	June 28, 2029	100,000			4.82	%	—			—	%
		800,000			4.27	%	700,000			4.19	%
Discount, net of accumulated amortization		(675		)			(734		)
Capitalized loan fees, net of accumulated amortization		(3,423		)			(2,904		)
	Total	$	795,902				$	696,362

Notes Due 2029

On June 28, 2019, the Company issued $100,000 of 10-year 4.82% senior unsecured notes due 2029 (Notes Due 2029) in a private placement transaction pursuant to a note purchase agreement it entered into with certain institutional investors on April 5, 2019. The proceeds were used to repay borrowings on the Company’s unsecured revolving line of credit.

The note purchase agreement governing the Notes Due 2029 contains customary representations, warranties and covenants, and events of default. Pursuant to the terms of such note purchase agreement, the Company is subject to various financial covenants, which include the following: (i) maximum unencumbered, secured and consolidated leverage ratios; (ii) a minimum interest coverage ratio; (iii) a minimum unencumbered interest coverage ratio (as set forth in the Company’s unsecured credit facility and the note purchase agreements governing the Notes Due 2021 and 2024 and the Notes Due 2026 and 2028 defined below); and (iv) a minimum fixed charge coverage ratio (as set forth in the Company’s unsecured credit facility).

Unsecured Term Loans and Revolving Line of Credit

The following table summarizes the Company’s term loans and revolving line of credit:



		June 30, 2019						December 31, 2018
	Maturity Date	Balance				Interest Rate		Balance			Interest Rate
Unsecured credit facility term loan due 2021 – fixed rate (a)	January 5, 2021	$	250,000			3.20	%	$	250,000		3.20	%
Unsecured term loan due 2023 – fixed rate (b)	November 22, 2023	200,000				4.05	%	200,000			4.05	%
Subtotal		450,000						450,000
Capitalized loan fees, net of accumulated amortization		(2,243		)				(2,633		)
Term loans, net		$	447,757		(c)			$	447,367

Unsecured credit facility revolving line of credit – variable rate (d)	April 22, 2022	$	193,000			3.45	%	$	273,000		3.57	%


(a)	$250,000 of LIBOR-based variable rate debt has been swapped to a fixed rate of 2.00% plus a credit spread based on a leverage grid ranging from 1.20% to 1.70% through January 5, 2021. The applicable credit spread was 1.20% as of June 30, 2019 and December 31, 2018.


(b)	$200,000 of LIBOR-based variable rate debt has been swapped to a fixed rate of 2.85% plus a credit spread based on a leverage grid ranging from 1.20% to 1.85% through November 22, 2023. The applicable credit spread was 1.20% as of June 30, 2019 and December 31, 2018.

(c)

Subsequent to June 30, 2019, the Company entered into a term loan agreement with a group of financial institutions for a five-year $120,000 unsecured term loan (Term Loan Due 2024) and a seven-year $150,000 unsecured term loan (Term Loan Due 2026). The term loans bear interest at a rate of LIBOR, adjusted based on applicable reserve percentages established by the Federal Reserve, plus a credit spread based on a leverage grid ranging from 1.20% to 1.70% for the Term Loan Due 2024 and 1.50% to 2.20% for the Term Loan Due 2026. In accordance with the term loan agreement, the Company may elect to convert to an investment grade pricing grid. The proceeds were used to repay

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outstanding indebtedness and for general corporate purposes. In addition, the Company entered into agreements to swap $120,000 of LIBOR-based variable rate debt to a fixed interest rate of 1.68% through July 2024 and $150,000 of LIBOR-based variable rate debt to a fixed interest rate of 1.77% through July 2026, each with an effective date of August 15, 2019.


(d)	Excludes capitalized loan fees, which are included within “Other assets, net” in the accompanying condensed consolidated balance sheets.

Unsecured Credit Facility

On April 23, 2018, the Company entered into its fifth amended and restated unsecured credit agreement (Unsecured Credit Agreement) with a syndicate of financial institutions led by Wells Fargo Bank, National Association serving as syndication agent and KeyBank National Association serving as administrative agent to provide for an unsecured credit facility aggregating $1,100,000 (Unsecured Credit Facility). The Unsecured Credit Facility consists of an $850,000 unsecured revolving line of credit and a $250,000 unsecured term loan and is priced on a leverage grid at a rate of LIBOR plus a credit spread. In accordance with the Unsecured Credit Agreement, the Company may elect to convert to an investment grade pricing grid. As of June 30, 2019, making such an election would have resulted in a higher interest rate and, as such, the Company has not made the election to convert to an investment grade pricing grid.

The following table summarizes the key terms of the Unsecured Credit Facility:

Leverage-Based Pricing

Investment Grade Pricing

Unsecured Credit Facility

Maturity Date

Extension Option

Extension Fee

Credit Spread

Facility Fee

Credit Spread

Facility Fee

$250,000 unsecured term loan

1/5/2021

N/A

1.20% - 1.70%

N/A

0.90% - 1.75%

N/A

$850,000 unsecured revolving line of credit

4/22/2022

2 six month

0.075%

1.05% - 1.50%

0.15% - 0.30%

0.825%-1.55%

0.125% - 0.30%

The Unsecured Credit Facility has a $500,000 accordion option that allows the Company, at its election, to increase the total Unsecured Credit Facility up to $1,600,000, subject to (i) customary fees and conditions including, but not limited to, the absence of an event of default as defined in the Unsecured Credit Agreement and (ii) the Company’s ability to obtain additional lender commitments.

Term Loan Due 2023

On January 3, 2017, the Company received funding on a seven-year $200,000 unsecured term loan (Term Loan Due 2023) with a group of financial institutions, which closed during the year ended December 31, 2016 and was amended on November 20, 2018. The Term Loan Due 2023 is priced on a leverage grid at a rate of LIBOR plus a credit spread. In accordance with the amended term loan agreement (Term Loan Agreement), the Company may elect to convert to an investment grade pricing grid. As of June 30, 2019, making such an election would have resulted in a higher interest rate and, as such, the Company has not made the election to convert to an investment grade pricing grid.

The following table summarizes the key terms of the Term Loan Due 2023:

The Term Loan Due 2023 has a $100,000 accordion option that allows the Company, at its election, to increase the total unsecured term loan up to $300,000, subject to (i) customary fees and conditions, including the absence of an event of default as defined in the Term Loan Agreement and (ii) the Company’s ability to obtain additional lender commitments.

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Debt Maturities

The following table shows the scheduled maturities and principal amortization of the Company’s indebtedness as of June 30, 2019 for the remainder of 2019, each of the next four years and thereafter and the weighted average interest rates by year. The table does not reflect the impact of any debt activity that occurred after June 30, 2019, such as the closing of the Term Loan Due 2024 and the Term Loan Due 2026.



	2019			2020			2021			2022			2023			Thereafter			Total
Debt:
Fixed rate debt:
Mortgages payable (a)	$	1,560		$	3,228		$	22,080		$	113,946		$	31,758		$	31,348		$	203,920
Fixed rate term loans (b)	—			—			250,000			—			200,000			—			450,000
Unsecured notes payable (c)	—			—			100,000			—			—			700,000			800,000
Total fixed rate debt	1,560			3,228			372,080			113,946			231,758			731,348			1,453,920

Variable rate debt:
Variable rate revolving line of credit	—			—			—			193,000			—			—			193,000
Total debt (d)	$	1,560		$	3,228		$	372,080		$	306,946		$	231,758		$	731,348		$	1,646,920

Weighted average interest rate on debt:
Fixed rate debt	4.48		%	4.48		%	3.56		%	4.90		%	4.06		%	4.29		%	4.11		%
Variable rate debt (e)	—			—			—			3.45		%	—			—			3.45		%
Total	4.48		%	4.48		%	3.56		%	3.99		%	4.06		%	4.29		%	4.04		%


(a)	Excludes mortgage premium of $650 and discount of $(515), net of accumulated amortization, as of June 30, 2019.

(b)

$250,000 of LIBOR-based variable rate debt has been swapped to a fixed rate of 2.00% plus a credit spread based on a leverage grid through January 5, 2021. As of June 30, 2019, the applicable credit spread was 1.20%. In addition, $200,000 of LIBOR-based variable rate debt has been swapped to a fixed rate of 2.85% plus a credit spread based on a leverage grid through November 22, 2023. As of June 30, 2019, the applicable credit spread was 1.20%.


(c)	Excludes discount of $(675), net of accumulated amortization, as of June 30, 2019.


(d)	The weighted average years to maturity of consolidated indebtedness was 4.7 years as of June 30, 2019. Total debt excludes capitalized loan fees of $(5,995), net of accumulated amortization, as of June 30, 2019, which are included as a reduction to the respective debt balances.


(e)	Represents interest rate as of June 30, 2019.

The Company’s unsecured debt agreements, consisting of (i) the Unsecured Credit Agreement, (ii) the Term Loan Agreement, (iii) the note purchase agreement governing the 4.12% senior unsecured notes due 2021 and the 4.58% senior unsecured notes due 2024 (Notes Due 2021 and 2024), (iv) the indenture, as supplemented, governing the 4.00% senior unsecured notes due 2025 (Notes Due 2025), (v) the note purchase agreement governing the 4.08% senior unsecured notes due 2026 and the 4.24% senior unsecured notes due 2028 (Notes Due 2026 and 2028), and (vi) the note purchase agreement governing the Notes Due 2029, contain customary representations, warranties and covenants, and events of default. These include financial covenants such as (i) maximum unencumbered, secured and consolidated leverage ratios; (ii) minimum interest coverage ratios; (iii) minimum fixed charge coverage ratios; (iv) minimum unencumbered interest coverage ratios; (v) minimum debt service coverage ratio; (vi) minimum unencumbered assets to unsecured debt ratio; and (vii) minimum consolidated net worth. As of June 30, 2019, management believes the Company was in compliance with the financial covenants and default provisions under the unsecured debt agreements.

The Company plans on addressing its debt maturities through a combination of cash flows generated from operations, working capital, capital markets transactions and its unsecured revolving line of credit.

(8) DERIVATIVES

The Company’s objective in using interest rate derivatives is to manage its exposure to interest rate movements and add stability to interest expense. To accomplish this objective, the Company uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable rate amounts from a counterparty in

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exchange for the Company making fixed rate payments over the life of the agreement without exchange of the underlying notional amount.

As of June 30, 2019, the Company used five interest rate swaps to hedge the variable cash flows associated with variable rate debt. Changes in fair value of the derivatives that are designated and that qualify as cash flow hedges are recorded in “Accumulated other comprehensive (loss) income” and are reclassified into interest expense as interest payments are made on the Company’s variable rate debt. Over the next 12 months, the Company estimates that an additional $2,374 will be reclassified as an increase to interest expense.

The following table summarizes the Company’s interest rate swaps as of June 30, 2019, which effectively convert one-month floating rate LIBOR to a fixed rate:



Effective Date	Notional		Fixed Interest Rate		Maturity Date
December 29, 2017	$	100,000	2.00	%	January 5, 2021
December 29, 2017	$	100,000	2.00	%	January 5, 2021
December 29, 2017	$	50,000	2.00	%	January 5, 2021
November 23, 2018	$	100,000	2.85	%	November 22, 2023
November 23, 2018	$	100,000	2.85	%	November 22, 2023

The following table summarizes the Company’s interest rate swaps that were designated as cash flow hedges of interest rate risk:



	Number of Instruments		Notional
Interest Rate Derivatives	June 30, 2019	December 31, 2018	June 30, 2019		December 31, 2018
Interest rate swaps	5	5	$	450,000	$	450,000

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

Derivatives

June 30, 2019

December 31, 2018

Balance Sheet

Location

Fair Value

Balance Sheet

Location

Fair Value

Derivatives designated as cash flow hedges:

Interest rate swaps

Other assets, net

—

Other assets, net

2,324

Interest rate swaps

Other liabilities

11,343

Other liabilities

3,846

The following table presents the effect of the Company’s derivative financial instruments on the accompanying condensed consolidated statements of operations and other comprehensive (loss) income for the three and six months ended June 30, 2019 and 2018:



Derivatives in Cash Flow Hedging Relationships	Amount of Loss (Gain) Recognized in Other Comprehensive Income on Derivative						Location of Gain Reclassified from Accumulated Other Comprehensive Income (AOCI) into Income	Amount of Gain Reclassified from AOCI into Income						Total Interest Expense Presented in the Statements of Operations in which the Effects of Cash Flow Hedges are Recorded
	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,
2019	$	6,215		$	9,601		Interest expense	$	(92	)	$	(220	)	$	17,363	$	34,793
2018	$	(1,138	)	$	(3,805	)	Interest expense	$	(279	)	$	(192	)	$	16,817	$	35,582

Subsequent to June 30, 2019, the Company entered into a five-year $120,000 unsecured term loan and a seven-year $150,000 unsecured term loan that bear interest at a rate of LIBOR, adjusted based on applicable reserve percentages established by the Federal Reserve, plus the applicable credit spread based on a leverage grid. The Company subsequently entered into agreements to swap $120,000 of LIBOR-based variable rate debt to a fixed interest rate of 1.68% through July 2024 and $150,000 of LIBOR-based variable rate debt to a fixed interest rate of 1.77% through July 2026, each with an effective date of August 15, 2019.

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(9) EQUITY

The Company has an existing common stock repurchase program under which it may repurchase, from time to time, up to a maximum of $500,000 of shares of its Class A common stock. The shares may be repurchased in the open market or in privately negotiated transactions and are canceled upon repurchase. The timing and actual number of shares repurchased will depend on a variety of factors, including price in absolute terms and in relation to the value of the Company’s assets, corporate and regulatory requirements, market conditions and other corporate liquidity requirements and priorities. The common stock repurchase program may be suspended or terminated at any time without prior notice. The Company did not repurchase any shares during the six months ended June 30, 2019 and 2018. As of June 30, 2019, $189,105 remained available for repurchases under the common stock repurchase program.

(10) EARNINGS PER SHARE

The following table summarizes the components used in the calculation of basic and diluted earnings per share (EPS):



	Three Months Ended June 30,								Six Months Ended June 30,
	2019				2018				2019				2018
Numerator:
Net income attributable to common shareholders	$	21,170			$	10,882			$	44,378			$	52,662
Earnings allocated to unvested restricted shares	(110		)		(90		)		(190		)		(172		)
Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares	$	21,060			$	10,792			$	44,188			$	52,490

Denominator:
Denominator for earnings per common share – basic:
Weighted average number of common shares outstanding	212,951			(a)	218,982			(b)	212,900			(a)	218,915			(b)
Effect of dilutive securities:
Stock options	—			(c)	—			(c)	—			(c)	—			(c)
RSUs	139			(d)	428			(e)	256			(d)	491			(e)
Denominator for earnings per common share – diluted:
Weighted average number of common and common equivalent shares outstanding	213,090				219,410				213,156				219,406


(a)	Excludes 667 shares of unvested restricted common stock as of June 30, 2019, which equate to 660 and 631 shares, respectively, on a weighted average basis for the three and six months ended June 30, 2019. These shares will continue to be excluded from the computation of basic EPS until contingencies are resolved and the shares are released.


(b)	Excludes 521 shares of unvested restricted common stock as of June 30, 2018, which equate to 529 and 551 shares, respectively, on a weighted average basis for the three and six months ended June 30, 2018. 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 22 and 38 shares of common stock as of June 30, 2019 and 2018, respectively, at a weighted average exercise price of $17.34 and $18.85, respectively. Of these totals, outstanding options to purchase 18 and 32 shares of common stock as of June 30, 2019 and 2018, respectively, at a weighted average exercise price of $18.58 and $20.19, respectively, have been excluded from the common shares used in calculating diluted EPS as including them would be anti-dilutive.


(d)	As of June 30, 2019, there were 839 RSUs eligible for future conversion upon completion of the performance periods (see Note 5 to the condensed consolidated financial statements), which equate to 839 and 835 RSUs, respectively, on a weighted average basis for the three and six months ended June 30, 2019. These contingently issuable shares are a component of calculating diluted EPS.


(e)	As of June 30, 2018, there were 649 RSUs eligible for future conversion upon completion of the performance periods, which equate to 649 and 667 RSUs, respectively, on a weighted average basis for the three and six months ended June 30, 2018. These contingently issuable shares are a component of calculating diluted EPS.

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(11) PROVISION FOR IMPAIRMENT OF INVESTMENT PROPERTIES

As of June 30, 2019, the Company did not identify indicators of impairment at any of its properties. As of June 30, 2018, the Company identified indicators of impairment at two of its properties. Such indicators included a low occupancy rate, difficulty in leasing space and related cost of re-leasing, financially troubled tenants or reduced anticipated holding periods. The following table summarizes the results of these analyses as of June 30, 2018:



	June 30, 2018
Number of properties for which indicators of impairment were identified	2		(a)
Less: number of properties for which an impairment charge was recorded	—
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 recorded	—
Remaining properties for which indicators of impairment were identified but no impairment charge was considered necessary	2

Weighted average percentage by which the projected undiscounted cash flows exceeded its respective carrying value for each of the remaining properties (b)	38	%


(a)	Includes one property which has subsequently been sold as of June 30, 2019.


(b)	Based upon the estimated holding period for each asset where an undiscounted cash flow analysis was performed.

The Company did not record any investment property impairment charges during the six months ended June 30, 2019.

The Company recorded the following investment property impairment charges during the six months ended June 30, 2018:



Property Name	Property Type	Impairment Date	Square Footage	Provision for Impairment of Investment Properties
Schaumburg Towers (a)	Office	Various	895,400	$	1,116
CVS Pharmacy – Lawton, OK (b)	Single-user retail	March 31, 2018	10,900	200
				$	1,316
	Estimated fair value of impaired properties as of impairment date			$	76,871


(a)	The Company recorded an impairment charge on March 31, 2018 based upon the terms and conditions of an executed sales contract. This property was classified as held for sale as of March 31, 2018 and was sold on May 31, 2018, at which time additional impairment was recognized pursuant to the terms and conditions of an executed sales contract.


(b)	The Company recorded an impairment charge based upon the terms and conditions of an executed sales contract. The property was sold on April 19, 2018.

The Company provides no assurance that material impairment charges with respect to its investment properties will not occur in future periods.

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(12) FAIR VALUE MEASUREMENTS

Fair Value of Financial Instruments

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



	June 30, 2019				December 31, 2018
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
Derivative asset	$	—	$	—	$	2,324	$	2,324
Financial liabilities:
Mortgages payable, net	$	203,726	$	210,852	$	205,320	$	208,173
Unsecured notes payable, net	$	795,902	$	808,275	$	696,362	$	671,492
Unsecured term loans, net	$	447,757	$	450,000	$	447,367	$	449,266
Unsecured revolving line of credit	$	193,000	$	192,731	$	273,000	$	272,553
Derivative liability	$	11,343	$	11,343	$	3,846	$	3,846

The carrying value of the derivative asset is included within “Other assets, net” and the carrying value of the derivative liability is included within “Other liabilities” in the accompanying condensed consolidated balance sheets.

Recurring Fair Value Measurements

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



	Fair Value
	Level 1		Level 2		Level 3		Total
June 30, 2019
Derivative liability	$	—	$	11,343	$	—	$	11,343

December 31, 2018
Derivative asset	$	—	$	2,324	$	—	$	2,324
Derivative liability	$	—	$	3,846	$	—	$	3,846

Derivatives: The fair value of the derivative asset and derivative liability is determined using a discounted cash flow analysis on the expected future cash flows of each derivative. This analysis uses observable market data including forward yield curves and implied volatilities to determine the market’s expectation of the future cash flows of the variable component. The fixed and variable components of the derivative are then discounted using calculated discount factors developed based on the LIBOR swap rate and are aggregated to arrive at a single valuation for the period. The Company also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives use Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of June 30, 2019 and December 31, 2018, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation. As a result, the Company has determined that its derivative valuations in their entirety are classified within Level 2 of the fair value hierarchy. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered any applicable credit enhancements. The Company’s derivative instruments are further described in Note 8 to the condensed consolidated financial statements.

Nonrecurring Fair Value Measurements

The Company did not remeasure any assets to fair value on a nonrecurring basis as of June 30, 2019 and December 31, 2018.

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Fair Value Disclosures

The following table presents the Company’s financial liabilities, which are measured at fair value for disclosure purposes, by the level in the fair value hierarchy within which those measurements fall.



	Fair Value
	Level 1		Level 2		Level 3		Total
June 30, 2019
Mortgages payable, net	$	—	$	—	$	210,852	$	210,852
Unsecured notes payable, net	$	247,777	$	—	$	560,498	$	808,275
Unsecured term loans, net	$	—	$	—	$	450,000	$	450,000
Unsecured revolving line of credit	$	—	$	—	$	192,731	$	192,731

December 31, 2018
Mortgages payable, net	$	—	$	—	$	208,173	$	208,173
Unsecured notes payable, net	$	235,788	$	—	$	435,704	$	671,492
Unsecured term loans, net	$	—	$	—	$	449,266	$	449,266
Unsecured revolving line of credit	$	—	$	—	$	272,553	$	272,553

The Company estimates the fair value of its Level 3 financial liabilities using a discounted cash flow model that incorporates future contractual principal and interest payments with the following discount rates:



	June 30, 2019	December 31, 2018
Mortgages payable, net range	3.5% to 3.8%	4.2% to 4.4%
Unsecured notes payable, net weighted average	4.06%	4.91%
Unsecured term loans, net weighted average	1.20%	1.25%
Unsecured revolving line of credit	1.10%	1.10%

There were no transfers between the levels of the fair value hierarchy during the six months ended June 30, 2019.

(13) COMMITMENTS AND CONTINGENCIES

As of June 30, 2019, the Company had letters of credit outstanding totaling $433 that serve as collateral for certain capital improvements at two of its properties and reduce the available borrowings on its unsecured revolving line of credit.

As of June 30, 2019, the Company had active redevelopment and expansion projects at Circle East, Plaza del Lago and One Loudoun Downtown – Pads G & H. The Company estimates that it will incur net costs of approximately $34,000 to $36,000 related to the Circle East redevelopment, approximately $1,350 to $1,400 related to the redevelopment of the multi-family rental units at Plaza del Lago and approximately $125,000 to $135,000 related to the expansion project at One Loudoun Downtown – Pads G & H. As of June 30, 2019, the Company has incurred $16,920, net of proceeds of $11,820 from the sale of air rights, related to the redevelopment at Circle East, $1,357 related to the redevelopment of the multi-family rental units at Plaza del Lago and $3,139, net of contributions from the Company’s joint venture partner, related to the expansion project at One Loudoun Downtown – Pads G & H.

(14) LITIGATION

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

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RETAIL PROPERTIES OF AMERICA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(15) SUBSEQUENT EVENTS

Subsequent to June 30, 2019, the Company:

•

entered into a term loan agreement with a group of financial institutions for a five-year $120,000 unsecured term loan (Term Loan Due 2024) and a seven-year $150,000 unsecured term loan (Term Loan Due 2026). The term loans bear interest at a rate of LIBOR, adjusted based on applicable reserve percentages established by the Federal Reserve, plus a credit spread based on a leverage grid ranging from 1.20% to 1.70% for the Term Loan Due 2024 and 1.50% to 2.20% for the Term Loan Due 2026. In accordance with the term loan agreement, the Company may elect to convert to an investment grade pricing grid. The proceeds were used to repay outstanding indebtedness and for general corporate purposes;


•	entered into agreements to swap $120,000 of LIBOR-based variable rate debt to a fixed interest rate of 1.68% through July 2024 and $150,000 of LIBOR-based variable rate debt to a fixed interest rate of 1.77% through July 2026, each with an effective date of August 15, 2019;


•	closed on the final phase of the sale of a land parcel, which included rights to develop 12 residential units, at One Loudoun Downtown, for a sales price of $2,783; and


•	declared the cash dividend for the third quarter of 2019 of $0.165625 per share on its outstanding Class A common stock, which will be paid on October 10, 2019 to Class A common shareholders of record at the close of business on September 26, 2019.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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


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


•	economic and other developments in markets 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;


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


•	adverse impact of e-commerce developments and shifting consumer retail behavior on our tenants;


•	interest rates or operating costs;


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


•	real estate valuations;


•	our leverage;


•	our ability to generate sufficient cash flows to service our outstanding indebtedness and make distributions to our shareholders;


•	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 and dispositions, including our ability to identify and pursue acquisition and disposition opportunities;


•	risks generally associated with redevelopment, including the impact of construction delays and cost overruns, our ability to lease redeveloped space and our ability to identify and pursue redevelopment opportunities;


•	composition of members of our senior management team;


•	our ability to attract and retain qualified personnel;


•	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;

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•	environmental uncertainties and exposure to natural disasters;


•	insurance coverage; and


•	the likelihood or actual occurrence of terrorist attacks in the U.S.

For further discussion of these and other factors that could impact our future results, performance or transactions, see Part II, “Item 1A. Risk Factors” in this document and in our Annual Report on Form 10-K for the year ended December 31, 2018 and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019. Readers should not place undue reliance on any forward-looking statements, which are based only on information currently available to us (or to third parties making the forward-looking statements). We undertake no obligation to publicly release any revisions to such forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q, except as required by applicable law.

The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the related notes included in this report.

Executive Summary

Retail Properties of America, Inc. is a REIT that owns and operates high quality, strategically located open-air shopping centers, including properties with a mixed-use component. As of June 30, 2019, we owned 104 retail operating properties in the United States representing 19,968,000 square feet of gross leasable area (GLA). Our retail operating portfolio includes (i) neighborhood and community centers, (ii) power centers, and (iii) lifestyle centers and multi-tenant retail-focused mixed-use properties, as well as single-user retail properties.

The following table summarizes our portfolio as of June 30, 2019:



Property Type	Number of Properties	GLA (in thousands)	Occupancy		Percent Leased Including Leases Signed (a)
Retail operating portfolio:
Multi-tenant retail:
Neighborhood and community centers	63	10,245	91.9	%	94.7	%
Power centers	23	4,922	93.2	%	94.3	%
Lifestyle centers and mixed-use properties	16	4,541	92.0	%	95.0	%
Total multi-tenant retail	102	19,708	92.3	%	94.7	%
Single-user retail	2	260	100.0	%	100.0	%
Total retail operating portfolio	104	19,968	92.4	%	94.7	%
Redevelopment projects:
Circle East (b)	1
Plaza del Lago – multi-family rental units (c)	—
One Loudoun Downtown – Pads G & H (d)	—
Carillon (e)	1
Total number of properties	106


(a)	Includes leases signed but not commenced.


(b)	The redevelopment at Circle East, formerly known as Towson Circle, is no longer presented combined with our neighboring retail operating property, Towson Square, which is included in lifestyle centers and mixed-use properties within the property count for our retail operating portfolio. This change increased our redevelopment property count by one.


(c)	The operating portion of this property is included in lifestyle centers and mixed-use properties within the property count for our retail operating portfolio.


(d)	We began redevelopment activities on Pads G & H at the property during the three months ended June 30, 2019. The operating portion of this property is included in lifestyle centers and mixed-use properties within the property count for our retail operating portfolio.


(e)	We have begun activities in anticipation of future redevelopment of this property.

During the first half of 2018, we completed our portfolio transformation, the core objective of which was to become a prominent owner of multi-tenant retail properties primarily located in the following markets: Dallas, Washington, D.C./Baltimore, New York, Chicago, Seattle, Atlanta, Houston, San Antonio, Phoenix and Austin.

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We are primarily focused on growing our portfolio organically through (i) accretive leasing activity and (ii) mixed-use redevelopment and expansion projects. For the six months ended June 30, 2019, we achieved positive comparable cash leasing spreads of 11.4% on signed new leases and 5.7% on signed renewal leases for a blended re-leasing spread of 6.8%. During this period, the Company achieved average annual contractual rent increases on signed new leases of approximately 175 basis points. Our active and near-term expansion and redevelopment projects consist of approximately $392,000 to $432,000 of expected investment during 2019 through 2022 and include the redevelopment at Circle East, the first phase of Carillon, the redevelopment of the existing multi-family rental units at Plaza del Lago and the expansion project of Pads G & H at One Loudoun Downtown, as well as pad developments and expansions at certain of our mixed-use and lifestyle centers, including Main Street Promenade and Downtown Crown. Our current portfolio of assets contains several additional projects in the longer-term pipeline, including, among others, future phases of Carillon, additional pad developments at One Loudoun Downtown and future projects at Merrifield Town Center, Tysons Corner, Southlake Town Square, Lakewood Towne Center and One Loudoun Uptown.

Company Highlights — Six Months Ended June 30, 2019

Acquisitions

The following table summarizes our acquisitions during the six months ended June 30, 2019:

Date

Property Name

Metropolitan
Statistical Area (MSA)

Property Type

Square

Footage

Acquisition

Price

March 7, 2019

North Benson Center

Seattle

Multi-tenant retail

70,500

25,340

June 10, 2019

Paradise Valley Marketplace – Parcel

Phoenix

Land (a)

—

1,343

70,500

26,683


(a)	We acquired a parcel adjacent to our Paradise Valley Marketplace multi-tenant retail operating property. The total number of properties in our portfolio was not affected by this transaction.

Developments in Progress

During the six months ended June 30, 2019, we invested $7,784 in our active redevelopment projects at Circle East, Plaza del Lago and One Loudoun Downtown – Pads G & H.

The following table summarizes developments in progress as of June 30, 2019:



Property Name	MSA	June 30, 2019
Active developments/redevelopments:
Circle East	Baltimore	$	28,792
Plaza del Lago – multi-family rental units	Chicago	1,357
One Loudoun Downtown – Pads G & H	Washington, D.C.	14,364
		44,513
Land held for development:
One Loudoun Uptown	Washington, D.C.	25,450
Total developments in progress		$	69,963

Dispositions

The following table summarizes our dispositions during the six months ended June 30, 2019:



Date	Property Name	Property Type	Square Footage	Consideration
March 8, 2019	Edwards Multiplex – Fresno (a)	Single-user retail	94,600	$	25,850
June 28, 2019	North Rivers Towne Center	Multi-tenant retail	141,500	18,900
			236,100	$	44,750


(a)	Prior to the disposition, we were subject to a ground lease whereby we leased the underlying land from a third party. The ground lease was assumed by the purchaser in connection with the disposition.

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In addition to the property dispositions listed above, during the six months ended June 30, 2019, we received consideration of $2,306 in connection with the second phase of the sale of a land parcel, which included rights to develop 10 residential units, at One Loudoun Downtown.

Subsequent to June 30, 2019, we closed on the final phase of the sale of a land parcel, which included rights to develop 12 residential units, at One Loudoun Downtown, for a sales price of $2,783.

Market Summary

The following table summarizes our retail operating portfolio by market as of June 30, 2019:



Property Type/Market	Number of Properties	Annualized Base Rent (ABR) (a)		% of Total Multi-Tenant Retail ABR (a)		ABR per Occupied Sq. Ft.		GLA (in thousands) (a)	% of Total Multi-Tenant Retail GLA (a)		Occupancy		% Leased Including Signed
Multi-Tenant Retail:
Top 25 MSAs (b)
Dallas	19	$	79,943	22.9	%	$	22.47	3,939	20.0	%	90.3	%	92.8	%
Washington, D.C.	8	38,360		11.0	%	28.78		1,387	7.0	%	96.1	%	96.4	%
New York	9	36,288		10.4	%	29.27		1,292	6.6	%	95.9	%	97.3	%
Chicago	8	28,828		8.2	%	23.43		1,358	6.9	%	90.6	%	92.3	%
Seattle	9	22,808		6.5	%	16.16		1,548	7.9	%	91.2	%	93.9	%
Baltimore	5	21,148		6.1	%	15.10		1,604	8.1	%	87.3	%	93.0	%
Atlanta	9	19,662		5.6	%	13.76		1,513	7.7	%	94.5	%	97.3	%
Houston	9	15,801		4.5	%	14.93		1,141	5.8	%	92.8	%	92.8	%
San Antonio	3	12,703		3.6	%	17.99		722	3.7	%	97.9	%	98.7	%
Phoenix	3	10,445		3.0	%	17.85		632	3.2	%	92.7	%	97.1	%
Los Angeles	1	5,264		1.5	%	29.29		241	1.2	%	74.5	%	95.3	%
Riverside	1	4,624		1.3	%	15.81		292	1.5	%	100.0	%	100.0	%
St. Louis	1	4,204		1.2	%	9.77		453	2.3	%	95.0	%	95.0	%
Charlotte	1	3,071		0.9	%	12.75		320	1.6	%	75.3	%	90.6	%
Tampa	1	2,379		0.7	%	19.51		126	0.6	%	97.0	%	97.0	%
Subtotal	87	305,528		87.4	%	20.08		16,568	84.1	%	91.9	%	94.6	%

Non-Top 25 MSAs (b)	15	44,228		12.6	%	14.91		3,140	15.9	%	94.5	%	95.0	%

Total Multi-Tenant Retail	102	349,756		100.0	%	19.23		19,708	100.0	%	92.3	%	94.7	%

Single-User Retail	2	5,679				21.78		260			100.0	%	100.0	%

Total Retail Operating Portfolio (c)	104	$	355,435			$	19.27	19,968			92.4	%	94.7	%

(a)

Excludes $1,898 of multi-tenant retail ABR and 395 square feet of multi-tenant retail GLA attributable to (i) Circle East, which is in active redevelopment and (ii) Carillon, where we have begun activities in anticipation of future redevelopment, which are located in the Baltimore and Washington, D.C. MSAs, respectively. Including these amounts, 87.4% of our multi-tenant retail ABR and 84.4% of our multi-tenant retail GLA is located in the top 25 MSAs.


(b)	Top 25 MSAs and Non-Top 25 MSAs are determined by the United States Census Bureau and ranked based on the most recently available population estimates.


(c)	Excludes the 18 multi-family rental units at Plaza del Lago, which are in active redevelopment. As of June 30, 2019, six multi-family rental units are leased at an average monthly rental rate per unit of $1,367.

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Leasing Activity

The following table summarizes the leasing activity in our retail operating portfolio during the six months ended June 30, 2019. Leases with terms of less than 12 months have been excluded from the table.



	Number of Leases Signed	GLA Signed (in thousands)	New Contractual Rent per Square Foot (PSF) (a)		Prior Contractual Rent PSF (a)		% Change over Prior ABR (a)		Weighted Average Lease Term	Tenant Allowances PSF
Comparable Renewal Leases	146	852	$	22.59	$	21.38	5.7	%	5.2	$	3.39
Comparable New Leases	43	176	$	28.43	$	25.52	11.4	%	8.7	$	52.30
Non-Comparable New and Renewal Leases (b)	48	346	$	22.69	N/A		N/A		7.0	$	32.05
Total	237	1,374	$	23.59	$	22.09	6.8	%	6.2	$	16.87


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


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

Our leasing efforts are primarily focused on (i) vacant anchor and small shop space, (ii) upcoming lease expirations and (iii) spaces within our redevelopment and expansion projects. As we lease these spaces, we look to capitalize on the opportunity to mark rents to market, upgrade our tenancy and optimize the mix of operators and unique retailers at our properties.

Capital Markets

During the six months ended June 30, 2019, we:


•	issued $100,000 of 10-year 4.82% senior unsecured notes in a private placement transaction pursuant to a note purchase agreement we entered into with certain institutional investors on April 5, 2019;


•	repaid $80,000, net of borrowings, on our unsecured revolving line of credit; and


•	made scheduled principal payments of $1,530 related to amortizing loans.

Subsequent to June 30, 2019, we entered into a term loan agreement with a group of financial institutions for a five-year $120,000 unsecured term loan (Term Loan Due 2024) and a seven-year $150,000 unsecured term loan (Term Loan Due 2026). The term loans bear interest at a rate of London Interbank Offered Rate (LIBOR), adjusted based on applicable reserve percentages established by the Federal Reserve, plus a credit spread based on a leverage grid ranging from 1.20% to 1.70% for the Term Loan Due 2024 and 1.50% to 2.20% for the Term Loan Due 2026. In accordance with the term loan agreement, we may elect to convert to an investment grade pricing grid. In addition, we entered into agreements to swap $120,000 of LIBOR-based variable rate debt to a fixed interest rate of 1.68% through July 2024 and $150,000 of LIBOR-based variable rate debt to a fixed interest rate of 1.77% through July 2026, each with an effective date of August 15, 2019.

Distributions

We declared quarterly distributions totaling $0.33125 per share of common stock during the six months ended June 30, 2019.

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Results of Operations

Comparison of Results for the Three Months Ended June 30, 2019 and 2018



	Three Months Ended June 30,
	2019			2018			Change
Revenues:
Lease income	$	118,449		$	119,164		$	(715	)

Expenses:
Operating expenses	17,129			19,384			(2,255		)
Real estate taxes	18,534			17,701			833
Depreciation and amortization	42,882			43,710			(828		)
Provision for impairment of investment properties	—			724			(724		)
General and administrative expenses	9,353			10,274			(921		)
Total expenses	87,898			91,793			(3,895		)

Other (expense) income:
Interest expense	(17,363		)	(16,817		)	(546		)
Gain on sales of investment properties	8,454			—			8,454
Other (expense) income, net	(472		)	328			(800		)
Net income	21,170			10,882			10,288
Net income attributable to noncontrolling interests	—			—			—
Net income attributable to common shareholders	$	21,170		$	10,882		$	10,288

Net income attributable to common shareholders increased $10,288 from $10,882 for the three months ended June 30, 2018 to $21,170 for the three months ended June 30, 2019 primarily as a result of the following:

•

an $8,454 increase in gain on sales of investment properties related to the sale of one investment property consisting of approximately 141,500 square feet of GLA and a land parcel during the three months ended June 30, 2019 compared to the sales of two investment properties, representing approximately 906,300 square feet of GLA, which incurred impairment charges upon disposition, during the three months ended June 30, 2018; and


•	a $2,255 decrease in operating expenses primarily due to $1,900 of termination fee expense incurred during the three months ended June 30, 2018 related to the Toys “R” Us auction process whereby we were the winning bidder on two leases. No such termination fee expense was incurred during the three months ended June 30, 2019.

Net operating income (NOI)

We define NOI as all revenues other than (i) straight-line rental income (non-cash), (ii) amortization of lease inducements, (iii) amortization of acquired above and below market lease intangibles and (iv) lease termination fee income, less real estate taxes and all operating expenses other than lease termination fee expense and non-cash ground rent expense, which is comprised of straight-line ground rent expense and amortization of acquired ground lease intangibles for the three and six months ended June 30, 2018 and amortization of right-of-use lease assets and amortization of lease liabilities for the three and six months ended June 30, 2019. NOI consists of same store NOI (Same Store NOI) and NOI from other investment properties (NOI from Other Investment Properties). We believe that NOI, Same Store NOI and NOI from Other Investment Properties, which are supplemental non-GAAP financial measures, provide an additional and useful operating perspective not immediately apparent from “Net income” or “Net income attributable to common shareholders” in accordance with accounting principles generally accepted in the United States (GAAP). We use these measures to evaluate our performance on a property-by-property basis because they allow management to evaluate the impact that factors such as lease structure, lease rates and tenant base have on our operating results. NOI, Same Store NOI and NOI from Other Investment Properties do not represent alternatives to “Net income” or “Net income attributable to common shareholders” in accordance with GAAP as indicators of our financial performance. Comparison of our presentation of NOI, Same Store NOI and NOI from Other Investment Properties to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in definition and application by such REITs. For reference and as an aid in understanding our computation of NOI, a reconciliation of net income attributable to common shareholders as computed in accordance with GAAP to Same Store NOI has been presented for each comparable period presented.

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Same store portfolio

For the three and six months ended June 30, 2019, our same store portfolio consisted of 102 retail operating properties acquired or placed in service and stabilized prior to January 1, 2018. The number of properties in our same store portfolio decreased to 102 as of June 30, 2019 from 103 as of March 31, 2019 as a result of the following:


•	the removal of one same store investment property sold during the three months ended June 30, 2019.

The properties and financial results reported in “Other investment properties” primarily include the following:


•	properties acquired during 2018 and 2019;


•	Reisterstown Road Plaza, which was reclassified from active redevelopment into our retail operating portfolio during 2018;


•	Circle East, which is in active redevelopment;


•	the multi-family rental units at Plaza del Lago, which are in active redevelopment;


•	One Loudoun Downtown – Pads G & H, which are in active redevelopment;


•	Carillon, where we have begun activities in anticipation of future redevelopment;


•	properties that were sold or held for sale in 2018 and 2019; and


•	the net income from our wholly-owned captive insurance company.

The following tables present a reconciliation of net income attributable to common shareholders to Same Store NOI and details of the components of Same Store NOI for the three months ended June 30, 2019 and 2018:



	Three Months Ended June 30,
	2019			2018			Change
Net income attributable to common shareholders	$	21,170		$	10,882		$	10,288
Adjustments to reconcile to Same Store NOI:
Gain on sales of investment properties	(8,454		)	—			(8,454		)
Depreciation and amortization	42,882			43,710			(828		)
Provision for impairment of investment properties	—			724			(724		)
General and administrative expenses	9,353			10,274			(921		)
Interest expense	17,363			16,817			546
Straight-line rental income, net	(616		)	(1,401		)	785
Amortization of acquired above and below market lease intangibles, net	(711		)	(2,354		)	1,643
Amortization of lease inducements	319			246			73
Lease termination fees, net	(232		)	1,692			(1,924		)
Non-cash ground rent expense, net	332			439			(107		)
Other expense (income), net	472			(328		)	800
NOI	81,878			80,701			1,177
NOI from Other Investment Properties	(2,186		)	(3,269		)	1,083
Same Store NOI	$	79,692		$	77,432		$	2,260

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	Three Months Ended June 30,
	2019			2018			Change
Same Store NOI:
Base rent	$	85,664		$	83,827		$	1,837
Percentage and specialty rent	630			733			(103		)
Tenant recoveries	24,988			24,511			477
Other lease-related income	1,461			1,094			367
Bad debt, net	(46		)	(246		)	200
Property operating expenses	(15,120		)	(15,033		)	(87		)
Real estate taxes	(17,885		)	(17,454		)	(431		)
Same Store NOI	$	79,692		$	77,432		$	2,260

Same Store NOI increased $2,260, or 2.9%, primarily due to an increase of $1,837 in base rent primarily as a result of increases in the following: $844 from contractual rent changes, $558 from re-leasing spreads and $204 from occupancy growth.

Comparison of Results for the Six Months Ended June 30, 2019 and 2018



	Six Months Ended June 30,
	2019			2018			Change
Revenues:
Lease income	$	241,152		$	244,006		$	(2,854	)

Expenses:
Operating expenses	34,815			39,639			(4,824		)
Real estate taxes	36,937			38,169			(1,232		)
Depreciation and amortization	86,149			88,938			(2,789		)
Provision for impairment of investment properties	—			1,316			(1,316		)
General and administrative expenses	19,852			22,769			(2,917		)
Total expenses	177,753			190,831			(13,078		)

Other (expense) income:
Interest expense	(34,793		)	(35,582		)	789
Gain on sales of investment properties	16,903			34,519			(17,616		)
Other (expense) income, net	(1,131		)	550			(1,681		)
Net income	44,378			52,662			(8,284		)
Net income attributable to noncontrolling interests	—			—			—
Net income attributable to common shareholders	$	44,378		$	52,662		$	(8,284	)

Net income attributable to common shareholders decreased $8,284 from $52,662 for the six months ended June 30, 2018 to $44,378 for the six months ended June 30, 2019 primarily as a result of the following:

•

a $17,616 decrease in gain on sales of investment properties related to the sale of two investment properties, representing approximately 236,100 square feet of GLA, and the sale of a land parcel during the six months ended June 30, 2019 compared to the sales of nine investment properties, representing approximately 1,773,000 square feet of GLA, and the sale of air rights at Circle East during the six months ended June 30, 2018; and


•	a $2,854 decrease in lease income primarily consisting of:


•	a $1,764 decrease in straight-line rent primarily related to our office complex, which was sold on May 31, 2018; and


•	a $659 decrease in tenant recoveries primarily from the operating properties sold during 2018 and 2019, partially offset by the growth from our same store portfolio and the operating property acquired during 2019;

partially offset by


•	a $4,824 decrease in operating expenses primarily due to the decreases from our same store portfolio and our office complex, which was sold on May 31, 2018;

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•	a $2,917 decrease in general and administrative expenses primarily due to executive separation charges incurred during the six months ended June 30, 2018 in conjunction with the departure of our former Executive Vice President, General Counsel and Secretary. No such charges were incurred during the six months ended June 30, 2019; and


•	a $2,789 decrease in depreciation and amortization primarily due to the investment properties sold during 2018.

The following tables present a reconciliation of net income attributable to common shareholders to Same Store NOI and details of the components of Same Store NOI for the six months ended June 30, 2019 and 2018:



	Six Months Ended June 30,
	2019			2018			Change
Net income attributable to common shareholders	$	44,378		$	52,662		$	(8,284	)
Adjustments to reconcile to Same Store NOI:
Gain on sales of investment properties	(16,903		)	(34,519		)	17,616
Depreciation and amortization	86,149			88,938			(2,789		)
Provision for impairment of investment properties	—			1,316			(1,316		)
General and administrative expenses	19,852			22,769			(2,917		)
Interest expense	34,793			35,582			(789		)
Straight-line rental income, net	(2,116		)	(3,880		)	1,764
Amortization of acquired above and below market lease intangibles, net	(3,045		)	(3,208		)	163
Amortization of lease inducements	615			487			128
Lease termination fees, net	(1,420		)	673			(2,093		)
Non-cash ground rent expense, net	690			965			(275		)
Other expense (income), net	1,131			(550		)	1,681
NOI	164,124			161,235			2,889
NOI from Other Investment Properties	(4,541		)	(6,117		)	1,576
Same Store NOI	$	159,583		$	155,118		$	4,465



	Six Months Ended June 30,
	2019			2018			Change
Same Store NOI:
Base rent	$	170,871		$	167,361		$	3,510
Percentage and specialty rent	1,835			1,833			2
Tenant recoveries	51,472			51,173			299
Other lease-related income	2,739			2,265			474
Bad debt, net	(485		)	(828		)	343
Property operating expenses	(30,693		)	(30,659		)	(34		)
Real estate taxes	(36,156		)	(36,027		)	(129		)
Same Store NOI	$	159,583		$	155,118		$	4,465

Same Store NOI increased $4,465, or 2.9%, primarily due to an increase of $3,510 in base rent primarily as a result of increases in the following: $1,742 from contractual rent changes, $1,079 from re-leasing spreads and $624 from occupancy growth.

Funds From Operations Attributable to Common Shareholders

The National Association of Real Estate Investment Trusts, or NAREIT, an industry trade group, has promulgated a financial measure known as funds from operations (FFO). In December 2018, NAREIT issued “NAREIT Funds From Operations White Paper – 2018 Restatement” (2018 FFO White Paper) to incorporate interpretive guidance and clarifications made by NAREIT subsequent to their previous FFO White Paper, which was issued in April 2002. The 2018 FFO White Paper was effective for annual periods beginning after December 15, 2018 and interim periods therein.

As defined by NAREIT, FFO means net income computed in accordance with GAAP, excluding (i) depreciation and amortization related to real estate, (ii) gains from sales of real estate assets, (iii) gains and losses from change in control and (iv) impairment write-downs of real estate assets and investments in entities directly attributable to decreases in the value of real estate held by the entity. We have adopted the NAREIT definition in our computation of FFO attributable to common shareholders. Management believes that, subject to the following limitations, FFO attributable to common shareholders provides a basis for comparing our performance and operations to those of other REITs.

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The 2018 FFO White Paper did not change the fundamental definition of FFO; however, it provided clarification and that, to the extent a REIT recognizes a gain on sale or impairment related to assets incidental to the main business of a REIT, the REIT has the option to include or exclude such gains or impairments in the calculation of FFO. In connection with the adoption of the 2018 FFO White Paper, we elected to exclude all gains on sale and impairments of real estate from FFO, whereas we previously only excluded gains on sale and impairments of depreciable investment properties. To be consistent with the current presentation, we restated FFO attributable to common shareholders for the six months ended June 30, 2018 to exclude the gain on sale of non-depreciable investment property of $2,179, which was previously included within FFO attributable to common shareholders but excluded from Operating FFO attributable to common shareholders.

We define Operating FFO attributable to common shareholders as FFO attributable to common shareholders excluding the impact of discrete non-operating transactions and other events which we do not consider representative of the comparable operating results of our real estate operating portfolio, which is our core business platform. Specific examples of discrete non-operating transactions and other events include, but are not limited to, the impact on earnings from gains or losses associated with the early extinguishment of debt or other liabilities, litigation involving the Company, including actual or anticipated settlement and associated legal costs, the impact on earnings from executive separation and the excess of redemption value over carrying value of preferred stock redemption, which are not otherwise adjusted in our calculation of FFO attributable to common shareholders. There was no change to previously reported Operating FFO attributable to common shareholders for the six months ended June 30, 2018, because gains on sale and impairments of non-depreciable investment property have been, and continue to be, excluded from our calculation of Operating FFO attributable to common shareholders.

We believe that FFO attributable to common shareholders and Operating FFO attributable to common shareholders, which are supplemental non-GAAP financial measures, provide an additional and useful means to assess the operating performance of REITs. FFO attributable to common shareholders and Operating FFO attributable to common shareholders do not represent alternatives to (i) “Net Income” or “Net income attributable to common shareholders” as indicators of our financial performance, or (ii) “Cash flows from operating activities” in accordance with GAAP as measures of our capacity to fund cash needs, including the payment of dividends. Comparison of our presentation of Operating FFO attributable to common shareholders to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in definition and application by such REITs.

The following table presents a reconciliation of net income attributable to common shareholders to FFO attributable to common shareholders and Operating FFO attributable to common shareholders:



	Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018		2019			2018
Net income attributable to common shareholders	$	21,170		$	10,882	$	44,378		$	52,662
Depreciation and amortization of real estate	42,531			43,415		85,444			88,365
Provision for impairment of investment properties	—			724		—			1,316
Gain on sales of investment properties	(8,454		)	—		(16,903		)	(34,519		)	(a)
FFO attributable to common shareholders	$	55,247		$	55,021	$	112,919		$	107,824		(a)

FFO attributable to common shareholders per common share outstanding – diluted	$	0.26		$	0.25	$	0.53		$	0.49		(a)

FFO attributable to common shareholders	$	55,247		$	55,021	$	112,919		$	107,824
Impact on earnings from the early extinguishment of debt, net	—			24		—			1,052
Impact on earnings from executive separation (b)	—			—		—			1,737
Other (c)	569			16		1,280			223
Operating FFO attributable to common shareholders	$	55,816		$	55,061	$	114,199		$	110,836

Operating FFO attributable to common shareholders per common share outstanding – diluted	$	0.26		$	0.25	$	0.54		$	0.51

(a)

FFO attributable to common shareholders for the six months ended June 30, 2018 has been restated to exclude $2,179 of gain on sale of non-depreciable investment property in connection with our adoption of the 2018 FFO White Paper effective January 1, 2019 on a retrospective basis. As the gain on sale of non-depreciable investment property was previously excluded from Operating FFO attributable to common shareholders, there was no change to Operating FFO attributable to common shareholders.


(b)	Reflected as an increase within “General and administrative expenses” in the accompanying condensed consolidated statements of operations and other comprehensive (loss) income.

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(c)	Primarily consists of the impact on earnings from litigation involving the Company, including actual or anticipated settlement and associated legal costs, which are included within “Other (expense) income, net” in the accompanying condensed consolidated statements of operations and other comprehensive (loss) income.

Liquidity and Capital Resources

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

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



	SOURCES		USES
▪	Operating cash flow	▪	Tenant allowances and leasing costs
▪	Cash and cash equivalents	▪	Improvements made to individual properties, certain of which are not
▪	Available borrowings under our unsecured revolving		recoverable through common area maintenance charges to tenants
	line of credit	▪	Debt repayments
▪	Proceeds from capital markets transactions	▪	Distribution payments
▪	Proceeds from asset dispositions	▪	Redevelopment, expansion and pad development activities
▪	Proceeds from the sales of air rights	▪	Acquisitions
		▪	New development
		▪	Repurchases of our common stock

We have made substantial progress over the last several years in strengthening our balance sheet, as demonstrated by our reduced leverage, improved financial flexibility and higher unencumbered asset ratio. We have funded debt maturities primarily through asset dispositions and capital markets transactions, including the public offering of our common stock and private and public offerings of senior unsecured notes. As of June 30, 2019, we had no scheduled debt maturities and $1,560 of principal amortization due through the end of 2019, which we plan on satisfying through a combination of cash flows from operations, working capital, capital markets transactions and our unsecured revolving line of credit.

The table below summarizes our consolidated indebtedness as of June 30, 2019:



Debt	Aggregate Principal Amount		Weighted Average Interest Rate		Maturity Date	Weighted Average Years to Maturity
Fixed rate mortgages payable (a)	$	203,920	4.65	%	Various	4.0 years

Unsecured notes payable:
Senior notes – 4.12% due 2021	100,000		4.12	%	June 30, 2021	2.0 years
Senior notes – 4.58% due 2024	150,000		4.58	%	June 30, 2024	5.0 years
Senior notes – 4.00% due 2025	250,000		4.00	%	March 15, 2025	5.7 years
Senior notes – 4.08% due 2026	100,000		4.08	%	September 30, 2026	7.3 years
Senior notes – 4.24% due 2028	100,000		4.24	%	December 28, 2028	9.5 years
Senior notes – 4.82% due 2029 (b)	100,000		4.82	%	June 28, 2029	10.0 years
Total unsecured notes payable (a)	800,000		4.27	%		6.3 years

Unsecured credit facility:
Term loan due 2021 – fixed rate (c)	250,000		3.20	%	January 5, 2021	1.5 years
Revolving line of credit – variable rate	193,000		3.45	%	April 22, 2022 (d)	2.8 years
Total unsecured credit facility (a)	443,000		3.31	%		2.1 years

Term Loan Due 2023 – fixed rate (a) (e)	200,000		4.05	%	November 22, 2023	4.4 years

Total consolidated indebtedness (f)	$	1,646,920	4.04	%		4.7 years

(a)

Fixed rate mortgages payable excludes mortgage premium of $650, discount of $(515) and capitalized loan fees of $(329), net of accumulated amortization, as of June 30, 2019. Unsecured notes payable excludes discount of $(675) and capitalized loan fees of $(3,423), net of accumulated amortization, as of June 30, 2019. Term loans exclude capitalized loan fees of $(2,243), net of accumulated amortization, as

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of June 30, 2019. Capitalized loan fees related to the revolving line of credit are included within “Other assets, net” in the accompanying condensed consolidated balance sheets.


(b)	On June 28, 2019, we issued $100,000 of 10-year 4.82% senior unsecured notes due 2029 in a private placement transaction pursuant to a note purchase agreement we entered into with certain institutional investors on April 5, 2019.


(c)	Reflects $250,000 of LIBOR-based variable rate debt that has been swapped to a fixed rate of 2.00% plus a credit spread based on a leverage grid ranging from 1.20% to 1.70% through January 5, 2021. The applicable credit spread was 1.20% as of June 30, 2019.


(d)	We have two six-month extension options on the 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 0.075% of the commitment amount being extended.


(e)	Reflects $200,000 of LIBOR-based variable rate debt that has been swapped to a fixed rate of 2.85% plus a credit spread based on a leverage grid ranging from 1.20% to 1.85% through November 22, 2023. The applicable credit spread was 1.20% as of June 30, 2019.

(f)

Subsequent to June 30, 2019, we entered into a term loan agreement with a group of financial institutions for a five-year $120,000 unsecured term loan (Term Loan Due 2024) and a seven-year $150,000 unsecured term loan (Term Loan Due 2026). The term loans bear interest at a rate of LIBOR, adjusted based on applicable reserve percentages established by the Federal Reserve, plus a credit spread based on a leverage grid ranging from 1.20% to 1.70% for the Term Loan Due 2024 and 1.50% to 2.20% for the Term Loan Due 2026. In accordance with the term loan agreement, we may elect to convert to an investment grade pricing grid. In addition, we entered into agreements to swap $120,000 of LIBOR-based variable rate debt to a fixed interest rate of 1.68% through July 2024 and $150,000 of LIBOR-based variable rate debt to a fixed interest rate of 1.77% through July 2026, each with an effective date of August 15, 2019.

Mortgages Payable

During the six months ended June 30, 2019, we made scheduled principal payments of $1,530 related to amortizing loans.

Unsecured Notes Payable

Notes Due 2029

On June 28, 2019, we issued $100,000 of 10-year 4.82% senior unsecured notes due 2029 (Notes Due 2029) in a private placement transaction pursuant to a note purchase agreement we entered into with certain institutional investors on April 5, 2019. The proceeds were used to repay borrowings on our unsecured revolving line of credit.

The note purchase agreement governing the Notes Due 2029 contains customary representations, warranties and covenants, and events of default. Pursuant to the terms of such note purchase agreement, we are subject to various financial covenants, which include the following: (i) maximum unencumbered, secured and consolidated leverage ratios; (ii) a minimum interest coverage ratio; (iii) a minimum unencumbered interest coverage ratio (as set forth in our unsecured credit facility and the note purchase agreements governing the Notes Due 2021 and 2024 and the Notes Due 2026 and 2028 defined below); and (iv) a minimum fixed charge coverage ratio (as set forth in our unsecured credit facility).

Unsecured Term Loans and Revolving Line of Credit

Unsecured Credit Facility

On April 23, 2018, we entered into our fifth amended and restated unsecured credit agreement (Unsecured Credit Agreement) with a syndicate of financial institutions led by Wells Fargo Bank, National Association serving as syndication agent and KeyBank National Association serving as administrative agent to provide for an unsecured credit facility aggregating $1,100,000 (Unsecured Credit Facility). The Unsecured Credit Facility consists of an $850,000 unsecured revolving line of credit and a $250,000 unsecured term loan and is priced on a leverage grid at a rate of LIBOR plus a credit spread. In accordance with the Unsecured Credit Agreement, we may elect to convert to an investment grade pricing grid. As of June 30, 2019, making such an election would have resulted in a higher interest rate and, as such, we have not made the election to convert to an investment grade pricing grid.

The following table summarizes the key terms of the Unsecured Credit Facility:

Leverage-Based Pricing

Investment Grade Pricing

Unsecured Credit Facility

Maturity Date

Extension Option

Extension Fee

Credit Spread

Facility Fee

Credit Spread

Facility Fee

$250,000 unsecured term loan

1/5/2021

N/A

1.20% - 1.70%

N/A

0.90% - 1.75%

N/A

$850,000 unsecured revolving line of credit

4/22/2022

2 six month

0.075%

1.05% - 1.50%

0.15% - 0.30%

0.825%-1.55%

0.125% - 0.30%

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The Unsecured Credit Facility has a $500,000 accordion option that allows us, at our election, to increase the total Unsecured Credit Facility up to $1,600,000, subject to (i) customary fees and conditions including, but not limited to, the absence of an event of default as defined in the Unsecured Credit Agreement and (ii) our ability to obtain additional lender commitments.

As of June 30, 2019, we had letters of credit outstanding totaling $433 that serve as collateral for certain capital improvements at two of our properties and reduce the available borrowings on our unsecured revolving line of credit.

Term Loan Due 2023

On January 3, 2017, we received funding on a seven-year $200,000 unsecured term loan (Term Loan Due 2023) with a group of financial institutions, which closed during the year ended December 31, 2016 and was amended on November 20, 2018. The Term Loan Due 2023 is priced on a leverage grid at a rate of LIBOR plus a credit spread. In accordance with the amended term loan agreement (Term Loan Agreement), we may elect to convert to an investment grade pricing grid. As of June 30, 2019, making such an election would have resulted in a higher interest rate and, as such, we have not made the election to convert to an investment grade pricing grid.

The following table summarizes the key terms of the Term Loan Due 2023:

The Term Loan Due 2023 has a $100,000 accordion option that allows us, at our election, to increase the total unsecured term loan up to $300,000, subject to (i) customary fees and conditions, including the absence of an event of default as defined in the Term Loan Agreement and (ii) our ability to obtain additional lender commitments.

Debt Maturities

The following table summarizes the scheduled maturities and principal amortization of our indebtedness as of June 30, 2019 for the remainder of 2019, each of the next four years and thereafter and the weighted average interest rates by year, as well as the fair value of our indebtedness as of June 30, 2019. The table does not reflect the impact of any debt activity that occurred after June 30, 2019, such as the closing of the Term Loan Due 2024 and the Term Loan Due 2026.



	2019			2020			2021			2022			2023			Thereafter			Total			Fair Value
Debt:
Fixed rate debt:
Mortgages payable (a)	$	1,560		$	3,228		$	22,080		$	113,946		$	31,758		$	31,348		$	203,920		$	210,852
Fixed rate term loans (b)	—			—			250,000			—			200,000			—			450,000			450,000
Unsecured notes payable (c)	—			—			100,000			—			—			700,000			800,000			808,275
Total fixed rate debt	1,560			3,228			372,080			113,946			231,758			731,348			1,453,920			1,469,127

Variable rate debt:
Variable rate revolving line of credit	—			—			—			193,000			—			—			193,000			192,731
Total debt (d)	$	1,560		$	3,228		$	372,080		$	306,946		$	231,758		$	731,348		$	1,646,920		$	1,661,858

Weighted average interest rate on debt:
Fixed rate debt	4.48		%	4.48		%	3.56		%	4.90		%	4.06		%	4.29		%	4.11		%
Variable rate debt (e)	—			—			—			3.45		%	—			—			3.45		%
Total	4.48		%	4.48		%	3.56		%	3.99		%	4.06		%	4.29		%	4.04		%


(a)	Excludes mortgage premium of $650 and discount of $(515), net of accumulated amortization, as of June 30, 2019.

(b)


(c)	Excludes discount of $(675), net of accumulated amortization, as of June 30, 2019.


(d)	The weighted average years to maturity of consolidated indebtedness was 4.7 years as of June 30, 2019. Total debt excludes capitalized loan fees of $(5,995), net of accumulated amortization, as of June 30, 2019, which are included as a reduction to the respective debt balances.

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(e)	Represents interest rate as of June 30, 2019.

Our unsecured debt agreements, consisting of (i) the Unsecured Credit Agreement, (ii) the Term Loan Agreement, (iii) the note purchase agreement governing the 4.12% senior unsecured notes due 2021 and the 4.58% senior unsecured notes due 2024 (Notes Due 2021 and 2024), (iv) the indenture, as supplemented, governing the 4.00% senior unsecured notes due 2025 (Notes Due 2025), (v) the note purchase agreement governing the 4.08% senior unsecured notes due 2026 and the 4.24% senior unsecured notes due 2028 (Notes Due 2026 and 2028), and (vi) the note purchase agreement governing the Notes Due 2029, contain customary representations, warranties and covenants, and events of default. These include financial covenants such as (i) maximum unencumbered, secured and consolidated leverage ratios; (ii) minimum interest coverage ratios; (iii) minimum fixed charge coverage ratios; (iv) minimum unencumbered interest coverage ratios; (v) minimum debt service coverage ratio; (vi) minimum unencumbered assets to unsecured debt ratio; and (vii) minimum consolidated net worth. As of June 30, 2019, management believes we were in compliance with the financial covenants and default provisions under the unsecured debt agreements.

We plan on addressing our debt maturities through a combination of cash flows from operations, working capital, capital markets transactions and our unsecured revolving line of credit.

Distributions and Equity Transactions

Our distributions of current and accumulated earnings and profits for U.S. federal income tax purposes are taxable to shareholders, generally, as ordinary income. Distributions in excess of these earnings and profits generally are treated as a non-taxable reduction of the shareholders’ basis in the shares to the extent thereof (non-dividend distributions) and thereafter as taxable gain. We intend to continue to qualify as a REIT for U.S. federal income tax purposes. The Internal Revenue Code of 1986, as amended (the Code) generally requires that a REIT annually distributes to its shareholders at least 90% of its REIT taxable income, determined without regard to the dividends paid deduction and excluding net capital gains. The Code imposes tax on any undistributed REIT taxable income.

To satisfy the requirements for qualification as a REIT and generally not be subject to U.S. federal income and excise tax, we intend to make regular quarterly distributions of all, or substantially all, of our taxable income to shareholders. Our future distributions will be at the discretion of our board of directors. When determining the amount of future distributions, we expect to consider, among other factors, (i) the amount of cash generated from our operating activities, (ii) our expectations of future cash flow, (iii) our determination of near-term cash needs for debt repayments and potential future share repurchases, (iv) the market of available acquisitions of new properties and redevelopment, expansion and pad development opportunities, (v) the timing of significant re-leasing activities and the establishment of additional cash reserves for anticipated tenant allowances and general property capital improvements, (vi) our ability to continue to access additional sources of capital, and (vii) the amount required to be distributed to maintain our status as a REIT, which is a requirement of our Unsecured Credit Agreement, and to avoid or minimize any income and excise taxes that we otherwise would be required to pay. Under certain circumstances, we may be required to make distributions in excess of cash available for distribution in order to meet the REIT distribution requirements.

We have an existing common stock repurchase program under which we may repurchase, from time to time, up to a maximum of $500,000 of shares of our Class A common stock. The shares may be repurchased in the open market or in privately negotiated transactions and are canceled upon repurchase. The timing and actual number of shares repurchased will depend on a variety of factors, including price in absolute terms and in relation to the value of our assets, corporate and regulatory requirements, market conditions and other corporate liquidity requirements and priorities. The common stock repurchase program may be suspended or terminated at any time without prior notice. We did not repurchase any shares during the six months ended June 30, 2019. As of June 30, 2019, $189,105 remained available for repurchases under the common stock repurchase program.

Capital Expenditures and Redevelopment Activity

We anticipate that obligations related to capital improvements and redevelopments, including expansions and pad developments, can be met with cash flows from operations, working capital, capital markets transactions and our unsecured revolving line of credit.

As of June 30, 2019, we had active redevelopment and expansion projects at Circle East, the multi-family rental units at Plaza del Lago and One Loudoun Downtown – Pads G & H. We have invested a total of approximately $21,000 in these projects, which is net of proceeds of $11,820 from the sale of air rights at Circle East and net of contributions from our joint venture partner at One Loudoun Downtown. These projects are at various stages of completion, and based on our current plans and estimates, we anticipate that it will require approximately $139,000 to $151,000 of additional funds from us to complete these projects. In addition, we expect to begin active redevelopment activities on the first phase of Carillon as well as pad development and expansions at

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Downtown Crown and Main Street Promenade during 2019, which we anticipate will require approximately $232,000 to $260,000 of our funds to complete these projects.

We capitalized internal salaries and related benefits of personnel directly involved in capital upgrades and tenant improvements of $650 and $1,325 during the three and six months ended June 30, 2019, respectively, and $366 and $757 during the three and six months ended June 30, 2018, respectively. We also capitalized internal leasing incentives of $82 and $136 during the three and six months ended June 30, 2019, respectively, and $133 and $170 during the three and six months ended June 30, 2018, respectively, all of which were incremental to signed leases.

In addition, we capitalized $659 and $1,233 of indirect project costs related to redevelopment projects during the three and six months ended June 30, 2019, including, among other costs, $335 and $700 of internal salaries and related benefits of personnel directly involved in the redevelopment projects and $226 and $370 of interest, respectively. We capitalized $519 and $964 of indirect project costs related to redevelopment projects during the three and six months ended June 30, 2018, including, among other costs, $223 and $413 of internal salaries and related benefits of personnel directly involved in the redevelopment projects and $77 and $250 of interest, respectively.

Dispositions

The following table highlights our property dispositions during 2018 and the six months ended June 30, 2019:



	Number of Properties Sold (a)	Square Footage	Consideration		Aggregate Proceeds, Net (b)		Debt Extinguished
2019 Dispositions (through June 30, 2019)	2	236,100	$	44,750	$	39,594	$	—
2018 Dispositions	10	1,831,200	$	201,400	$	184,109	$	10,750


(a)	2018 dispositions include the disposition of Crown Theater, which was classified as held for sale as of December 31, 2017.


(b)	Represents total consideration net of transaction costs, as well as capital and tenant-related costs credited to the buyer at close, as applicable.

In addition to the transactions presented in the preceding table, during the six months ended June 30, 2019, we received net proceeds of $2,292 in connection with the second phase of the sale of a land parcel, which included rights to develop 10 residential units, at One Loudoun Downtown. During the year ended December 31, 2018, we also received (i) net proceeds of $11,820 in connection with the sale of air rights at Circle East, (ii) net proceeds of $1,789 in connection with the sale of the first phase of a land parcel, which included rights to develop eight residential units, at One Loudoun Downtown and (iii) proceeds of $169 from a condemnation award.

Acquisitions

The following table highlights our asset acquisitions during 2018 and the six months ended June 30, 2019:



	Number of Assets Acquired	Square Footage	Acquisition Price		Mortgage Debt
2019 Acquisitions (through June 30, 2019) (a)	2	70,500	$	26,683	$	—
2018 Acquisition (b)	1	—	$	25,000	$	—


(a)	2019 acquisitions include the purchase of a parcel adjacent to our Paradise Valley Marketplace multi-tenant retail operating property. The total number of properties in our portfolio was not affected by this transaction.


(b)	2018 acquisition is a 58-acre land parcel, of which 32 acres are developable, located adjacent to our One Loudoun Downtown multi-tenant retail operating property. The total number of properties in our portfolio was not affected by this transaction.

Summary of Cash Flows



	Six Months Ended June 30,
	2019			2018			Change
Net cash provided by operating activities	$	99,186		$	88,703		$	10,483
Net cash (used in) provided by investing activities	(32,408		)	147,231			(179,639		)
Net cash used in financing activities	(53,052		)	(283,248		)	230,196
Increase (decrease) in cash, cash equivalents and restricted cash	13,726			(47,314		)	61,040
Cash, cash equivalents and restricted cash, at beginning of period	19,601			86,335
Cash, cash equivalents and restricted cash, at end of period	$	33,327		$	39,021

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Cash Flows from Operating Activities

Cash flows from operating activities consist primarily of net income from property operations, adjusted for the following, among others: depreciation and amortization and gain on sales of investment properties. Net cash provided by operating activities during the six months ended June 30, 2019 increased $10,483 primarily due to the following:


•	a $2,889 increase in NOI, consisting of an increase in Same Store NOI of $4,465, partially offset by a decrease in NOI from properties that were sold or held for sale in 2018 and 2019 and other properties not included in our same store portfolio of $1,576; and


•	ordinary course fluctuations in working capital accounts;

partially offset by


•	a $1,468 increase in cash paid for leasing fees and inducements; and


•	a $514 increase in cash bonuses paid.

Cash Flows from Investing Activities

Cash flows from investing activities consist primarily of proceeds from the sales of investment properties, net of cash paid to purchase investment properties and fund capital expenditures, tenant improvements and developments in progress. Net cash flows from investing activities during the six months ended June 30, 2019 decreased $179,639 due to the following:


•	a $145,239 decrease in proceeds from the sales of investment properties;


•	a $26,576 increase in cash paid to purchase investment properties;


•	a $6,973 increase in capital expenditures and tenant improvements; and


•	an $851 increase in investment in developments in progress.

In 2019, we expect to fund redevelopment, expansion and pad development activities, capital expenditures and tenant improvements through cash flows generated from operations, working capital, capital markets transactions and our unsecured revolving line of credit.

Cash Flows from Financing Activities

Cash flows used in financing activities primarily consist of repayments of our unsecured revolving line of credit and unsecured term loans, distribution payments, principal payments on mortgages payable, debt prepayment costs and payment of loan fees and deposits, partially offset by proceeds from our unsecured revolving line of credit and the issuance of debt instruments. Net cash flows used in financing activities during the six months ended June 30, 2019 decreased $230,196 primarily due to the following:


•	a $100,000 increase in proceeds from the issuance of unsecured notes payable to institutional investors in a private placement transaction during the six months ended June 30, 2019. No such proceeds were received in 2018;


•	a $100,000 decrease in repayments of unsecured term loans resulting from the repayment of our unsecured term loan due 2018 during the six months ended June 30, 2018. No such repayments were made in 2019;


•	an $11,288 decrease in principal payments on mortgages payable;


•	a $10,000 change in the activity on our unsecured revolving line of credit from net repayments of $90,000 during the six months ended June 30, 2018 compared to net repayments of $80,000 during the six months ended June 30, 2019;


•	a $4,639 decrease in the payment of loan fees and deposits; and


•	a $1,900 decrease in distributions paid as a result of a decrease in common shares outstanding due to the repurchase of common shares through our common stock repurchase program in 2018.

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We plan to continue to address our debt maturities through a combination of cash flows from operations, working capital, capital markets transactions and our unsecured revolving line of credit.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Contractual Obligations

During the six months ended June 30, 2019, except as otherwise disclosed herein, there were no material changes outside the normal course of business to the contractual obligations identified in our Annual Report on Form 10-K for the year ended December 31, 2018.

Critical Accounting Policies and Estimates

Our 2018 Annual Report on Form 10-K contains a description of our critical accounting policies, including those relating to the acquisition of investment properties, impairment of long-lived assets, development and redevelopment projects, and revenue recognition. For the six months ended June 30, 2019, there were no significant changes to these policies except for the policies related to the accounting for leases as a result of the adoption of ASU 2016-02, Leases, as of January 1, 2019 as described in Note 2 – Summary of Significant Accounting Policies and Note 6 – Leases in the accompanying condensed consolidated financial statements.

Impact of Recently Issued Accounting Pronouncements

See Note 2 – Summary of Significant Accounting Policies in the accompanying condensed consolidated financial statements regarding recently issued accounting pronouncements.

Subsequent Events

Subsequent to June 30, 2019, we:

•

entered into a term loan agreement with a group of financial institutions for a five-year $120,000 unsecured term loan (Term Loan Due 2024) and a seven-year $150,000 unsecured term loan (Term Loan Due 2026). The term loans bear interest at a rate of LIBOR, adjusted based on applicable reserve percentages established by the Federal Reserve, plus a credit spread based on a leverage grid ranging from 1.20% to 1.70% for the Term Loan Due 2024 and 1.50% to 2.20% for the Term Loan Due 2026. In accordance with the term loan agreement, we may elect to convert to an investment grade pricing grid. The proceeds were used to repay outstanding indebtedness and for general corporate purposes;


•	entered into agreements to swap $120,000 of LIBOR-based variable rate debt to a fixed interest rate of 1.68% through July 2024 and $150,000 of LIBOR-based variable rate debt to a fixed interest rate of 1.77% through July 2026, each with an effective date of August 15, 2019;


•	closed on the final phase of the sale of a land parcel, which included rights to develop 12 residential units, at One Loudoun Downtown, for a sales price of $2,783; and


•	declared the cash dividend for the third quarter of 2019 of $0.165625 per share on our outstanding Class A common stock, which will be paid on October 10, 2019 to Class A common shareholders of record at the close of business on September 26, 2019.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

As of June 30, 2019, we had $450,000 of variable rate debt based on LIBOR that has been swapped to fixed rate debt through interest rate swaps. Our interest rate swaps as of June 30, 2019 are summarized in the following table:



	Notional Amount		Maturity Date	Fair Value of Derivative Liability
Fixed rate portion of Unsecured Credit Facility	$	250,000	January 5, 2021	$	1,031
Term Loan Due 2023	200,000		November 22, 2023	10,312
	$	450,000		$	11,343

For a discussion concerning the scheduled debt maturities and principal amortization of our indebtedness as of June 30, 2019 for the remainder of 2019, each of the next four years and thereafter and the weighted average interest rates by year to evaluate the expected cash flows and sensitivity to interest rate changes, refer to Note 7 in the accompanying condensed consolidated financial statements and Part I, “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Debt Maturities” contained herein.

A decrease of 1% in market interest rates would result in a hypothetical increase in the net liability associated with our derivatives of approximately $12,583.

The combined carrying amount of our mortgages payable, unsecured notes payable, Term Loan Due 2023 and Unsecured Credit Facility is approximately $21,473 lower than the fair value as of June 30, 2019.

We had $193,000 of variable rate debt, excluding $450,000 of variable rate debt that has been swapped to fixed rate debt, with an interest rate of 3.45% based upon LIBOR as of June 30, 2019. An increase in the variable interest rate on this debt constitutes a market risk. If interest rates increase by 1% based on debt outstanding as of June 30, 2019, interest expense would increase by approximately $1,930 on an annualized basis.

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

In the event that LIBOR is discontinued, the interest rate for our debt, including our unsecured credit facility term loan due 2021, unsecured credit facility revolving line of credit and our Term Loan Due 2023, and interest rate swap agreements that are indexed to LIBOR will be based on a replacement rate or an alternate base rate as specified in the applicable documentation governing such debt or swaps or as otherwise agreed upon. Such an event would not affect our ability to borrow or maintain already outstanding borrowings or swaps, but the replacement rate or alternate base rate could be higher or more volatile than LIBOR prior to its discontinuance. We understand that LIBOR is expected to remain available through the end of 2021, but may be discontinued or otherwise become unavailable thereafter.

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ITEM 4. CONTROLS AND PROCEDURES

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

Based on management’s evaluation as of June 30, 2019, our Chief Executive Officer and our Executive Vice President, Chief Financial Officer and Treasurer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by us in our reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our Chief Executive Officer and our Executive Vice President, Chief Financial Officer and Treasurer, to allow timely decisions regarding required disclosure.

There were no changes to our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) during the fiscal quarter ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A. RISK FACTORS

Except to the extent updated below or to the extent additional factual information disclosed elsewhere in this Quarterly Report on Form 10-Q relates to such factors (including, without limitation, the matters discussed in Part I, “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations”), there have been no material changes to our risk factors during the three months ended June 30, 2019 compared to those risk factors presented in Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2018.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


(a)	Not applicable.


(b)	Not applicable.


(c)	Issuer Purchases of Equity Securities

From time to time, employees surrender shares of Class A common stock to the Company to satisfy their tax withholding obligations in connection with the vesting of common stock and restricted shares. There were no shares of Class A common stock surrendered or repurchased during the three months ended June 30, 2019.

As of June 30, 2019, $189,105 remained available for repurchases under our $500,000 common stock repurchase program, which has no scheduled expiration date.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

On July 29, 2019, following an ordinary course review of our existing executive compensation arrangements and in connection with the upcoming expiration of the current terms of our existing retention agreements with Steven P. Grimes and Shane C. Garrison, we entered into retention agreements with each of Messrs. Grimes and Garrison which, other than extending the term of such agreements, are substantially similar to their prior retention agreements with us. The retention agreements for Messrs. Grimes and Garrison replaced their prior retention agreements with us.

The retention agreements are effective July 29, 2019 with initial terms extending until October 31, 2022 and automatic two-year renewals thereafter unless written notice of termination is provided by either party. The term will also be automatically extended if a change in control, as defined in the agreement, occurs before the end of the then current term.

Provided the executive enters into a general release of claims for our benefit, the retention agreements provide for the following payments and benefits in connection with the termination of each executive’s employment by us without cause or termination by him for good reason: (1) cash payment equal to an agreed upon multiple (as described below) times the sum of (i) such executive’s annual base salary and (ii) an amount equal to the greater of (A) the dollar amount of such executive’s target annual cash bonus opportunity, or (B) the actual annual cash bonus earned for the most recent completed year for which an annual cash bonus had been determined; (2) cash payment of (i) any unpaid annual cash bonus earned for the prior year and (ii) a pro-rata annual cash bonus for the year in which the termination occurs; (3) acceleration of vesting of unvested equity awards that are only subject to time-based vesting conditions; (4) retention of outstanding equity awards that remain subject to performance-based vesting conditions, with the earning of such awards to be based on achievement of the original performance-based vesting conditions in

the same manner as if such termination had not occurred; provided that the portion of each such equity awards that is earned will be prorated based on the portion of the performance period that elapsed through the date of termination unless such termination occurred in connection with a change in control; and (5) healthcare continuation premiums for specified periods. The multiples to be used to determine the cash payment described above are two times for Mr. Grimes and one and a half times for Mr. Garrison if the termination does not occur in connection with or within two years after a change in control. If the termination occurs in connection with or within two years after a change in control, the multiples will be three times for Mr. Grimes and two times for Mr. Garrison.

Each retention agreement also provides that upon a change in control, the achievement of the performance-based vesting conditions of any outstanding equity awards that remain subject to such vesting conditions will be measured based on performance through the day prior to the date of the change in control using performance metrics that have been prorated, to the extent applicable, to reflect the shortened performance period. Vesting conditions for these awards that are based on continued employment will continue to apply unless accelerated due to a termination of employment or otherwise. Furthermore, each retention agreement also provides that upon a termination as a result of death or disability, the executive’s outstanding unvested equity awards will generally be treated in the same manner as they would in the event of a termination by us without cause or termination by such executive for good reason.

The foregoing summary is qualified in its entirety by reference to the copies of the retention agreements, which are filed with this report as Exhibits 10.1 and 10.2 and are incorporated herein by reference.

ITEM 6. EXHIBITS



Exhibit No.		Description

10.1		Retention Agreement dated July 29, 2019 by and between the Registrant and Steven P. Grimes (filed herewith).
10.2		Retention Agreement dated July 29, 2019 by and between the Registrant and Shane C. Garrison (filed herewith).
10.3		Note Purchase Agreement dated as of April 5, 2019 among the Registrant as Issuer and Certain Institutions as Purchasers (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on April 9, 2019).
10.4		Term Loan Agreement, dated as of July 17, 2019, by and among the Registrant, as borrower, and KeyBank National Association, as administrative agent, KeyBanc Capital Markets Inc., as book runner, KeyBanc Capital Markets Inc., Branch Banking and Trust Company, PNC Capital Markets LLC, TD Bank and Wells Fargo Bank, National Association, as joint lead arrangers, Branch Banking and Trust Company, PNC Bank, National Association, TD Bank and Wells Fargo Bank, National Association, as co-syndication agents, and the initial lenders named therein (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on July 23, 2019).
31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 (filed herewith).
31.2		Certification of Executive Vice President, Chief Financial Officer and Treasurer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 (filed herewith).
32.1		Certification of Chief Executive Officer and Executive Vice President, Chief Financial Officer and Treasurer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 (furnished herewith).
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibits 101).

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SIGNATURES

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

RETAIL PROPERTIES OF AMERICA, INC.



By:	/s/ STEVEN P. GRIMES

	Steven P. Grimes
	Chief Executive Officer
	(Principal Executive Officer)
Date:	July 31, 2019

By:	/s/ JULIE M. SWINEHART

	Julie M. Swinehart
	Executive Vice President,
	Chief Financial Officer and Treasurer
	(Principal Financial Officer and
	Principal Accounting Officer)
Date:	July 31, 2019

Exhibit 10.1

RETAIL PROPERTIES OF AMERICA, INC.

RETENTION AGREEMENT

This Retention Agreement (this “Agreement”) is made and entered into by and between Steven P. Grimes (“Executive”) and Retail Properties of America, Inc., a Maryland corporation (the “Company”), effective as of July 29, 2019 (the “Effective Date”).

R E C I T A L S

A.Although the Company anticipates the continuation of a mutually rewarding employment relationship with Executive, the Compensation Committee (the “Committee”) of the Board of Directors of the Company (the “Board”) believes that it is in the best interests of the Company and its stockholders to provide Executive with certain assurances in the event of the occurrence of an involuntary termination of Executive’s employment with the Company. Further, it is expected that the Company from time to time will consider the possibility of an acquisition by another company or other change in control. The Committee recognizes that such consideration as well as the possibility of an involuntary termination or reduction in responsibility can be a distraction to Executive and can cause Executive to consider alternative employment opportunities. Accordingly, the Committee has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication and objectivity of Executive, notwithstanding the possibility, threat or occurrence of such an event.

B.On October 31, 2016, Executive and the Company entered into that certain Amended and Restated Retention Agreement (the “Prior Retention Agreement”), which had an initial term extending for three years until October 31, 2019. Executive and the Company desire to enter into this Agreement, with an initial term extending until October 31, 2022 (i.e., a three-year extension from the end of the term of the Prior Retention Agreement) and otherwise substantially similar terms as the Prior Retention Agreement, to supersede the Prior Retention Agreement as of the Effective Date.

C.Certain capitalized terms used in this Agreement are defined in Section 8 below.

NOW THEREFORE, the parties hereto agree as follows:

1.Term of Agreement. This Agreement shall have a term commencing on the Effective Date and continuing until October 31, 2022 (i.e., three years after the end of the initial term of the Prior Retention Agreement) (the “Term”). The Term shall be automatically extended for successive two (2) year periods unless the Committee has delivered notice to Executive no later than ninety (90) days prior to the completion of the then effective Term that this Agreement is not be extended; provided, however, that if, during the then effective Term, a Change in Control has occurred or the Company has entered into a definitive agreement that, upon consummation, would result in a Change in Control, then the Term shall automatically be extended until the second anniversary of the effective date of such Change in Control or, in the event such a definitive agreement is terminated without the Change in Control being

consummated, the second anniversary of the date on which the Company entered into such definitive agreement.

2.Termination Upon Disability or Death. The Company may terminate Executive’s employment immediately at any time following Executive’s Disability. Executive’s employment shall terminate automatically upon Executive’s death. In the event that Executive’s employment is terminated in accordance with this Section 2, Executive shall be entitled to receive only the following payments and benefits: (i) unpaid base salary at the rate then in effect, prorated to the date of Executive’s termination of employment (the “Termination Date”), together with any amounts to which Executive is then entitled pursuant to any employee benefit or business expense reimbursement plan or arrangement in which Executive is then a participant, (ii) acceleration in full upon the Termination Date of the vesting of all then unvested equity awards granted to Executive pursuant to an agreement between the Company and Executive that are subject to vesting conditions that are based solely on Executive’s continued employment or service through specified dates (“Time-Based Equity Awards”) and (iii) treatment of unvested equity awards, if any, granted to Executive pursuant to an agreement between the Company and Executive that are subject to vesting conditions that are based on the achievement of corporate financial, stockholder return or other performance goals or any condition other than or in addition to Executive’s continued employment or service through specified dates (“Performance-Based Equity Awards”) in accordance with the provisions of this Section 2. In the event that Executive’s employment is terminated in accordance with this Section 2, Performance-Based Equity Awards will be treated as follows: (i) if the Termination Date occurs prior to the end of the performance period applicable to a Performance-Based Equity Award, then all of the vesting conditions applicable to such Performance-Based Equity Award that are based on Executive’s continued employment or service through specified dates will be deemed to have been satisfied and the portion of such Performance-Based Equity Award that will be earned and vest based the achievement of corporate financial, stockholder return or other performance goals or any condition other than or in addition to Executive’s continued employment or service through specified dates (the “Performance-Based Conditions” of such Performance-Based Equity Award) will equal the portion of such Performance-Based Equity Award that would have been earned or vested based on the achievement of such Performance-Based Conditions if Executive’s employment had not been terminated, determined in accordance with the applicable award agreement (and Section 5 below, if applicable), multiplied by a fraction, the numerator of which is the number of full and partial months in which Executive was employed by the Company during such performance period and the denominator of which is the total number of full and partial months in such performance period; and (b) if the Termination Date occurs after the end of the performance period applicable to a Performance-Based Equity Award, then the portion of such Performance-Based Equity Award that is or was earned based on the achievement of the Performance-Based Conditions of such Performance-Based Equity Award, but would not otherwise vest, will vest upon the later of the Termination Date or the date on which the portion of such Performance-Based Equity Award that is earned based on the achievement of such Performance-Based Conditions is determined. The foregoing provisions, as they relate to the acceleration of vesting, are hereby deemed to be a part of each agreement evidencing each applicable Time-Based Equity Award and Performance-Based Equity Award to which Executive is a party and to supersede any contrary provision in any such agreement unless such agreement

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specifically refers to and disclaims this provision. All other Company obligations to Executive pursuant to this Agreement shall be automatically terminated and completely extinguished. Executive shall not be entitled to receive the Severance Benefits described in Section 3 below.

3.Involuntary Termination. The Company may terminate Executive’s employment with the Company without Cause at any time. Executive may terminate Executive’s employment with the Company by reason of a Resignation for Good Reason. In the event of any such Involuntary Termination: (i) Executive shall be entitled to receive unpaid base salary at the rate then in effect, prorated to the Termination Date, together with any amounts to which Executive is then entitled pursuant to any employee benefit or business expense reimbursement plan or arrangement in which Executive is then a participant, and (ii) in addition, provided that Executive executes and delivers to the Company in connection with such termination of employment a release of claims substantially in the form attached hereto as Exhibit A, amended as necessary to comply with applicable law (the “Release”) and the period for revocation, if any, of the Release has lapsed on or before the sixtieth (60th) day following the Termination Date without the Release having been revoked, the Company shall provide Executive with the following (the “Severance Benefits”), and all other Company obligations to Executive pursuant to this Agreement shall be automatically terminated and completely extinguished:

(a)Cash Severance (Non-Change in Control). Executive shall receive on the sixtieth (60th) day following the Termination Date a lump sum cash amount (less applicable withholdings) equal to (i) two (2) times the sum of (x) Executive’s annual base salary at the rate then in effect (without giving effect to any reduction in the base salary rate amounting to Good Reason), (y) an amount equal to the greater of (1) Executive’s target annual cash bonus opportunity for the year in which Executive’s employment was terminated (or the prior year if a target annual cash bonus amount hadn’t yet been established for such year), (the “Target Bonus”) or (2) Executive’s actual annual cash bonus earned for the most recent completed year for which an annual cash bonus had been determined preceding the year in which Executive’s employment was terminated, plus (ii) to the extent not paid prior to the date of Executive’s termination of employment, Executive’s annual cash bonus for the year prior to the year in which Executive’s employment was terminated, determined based upon the Company’s and Executive’s actual performance, paid as and when such annual cash bonuses are paid to similarly situated active employees of the Company, plus (iii) an amount equal to the Target Bonus multiplied by a fraction the numerator of which is the number of days in the year up to the Termination Date and the denominator of which is 365.

(b)Cash Severance (Change in Control). In the event that Executive’s Involuntary Termination occurs in connection with a Change in Control or during a Change in Control Period, then, in lieu of the amounts set forth above under Section 3(a), Executive shall receive on the sixtieth (60th) day following the Termination Date a lump sum cash amount (less applicable withholdings) equal to (i) three (3) times the sum of (x) Executive’s annual base salary at the rate then in effect (without giving effect to any reduction in the base salary rate amounting to Good Reason), (y) an amount equal to the greater of (1) Executive’s Target Bonus or (2) Executive’s actual annual cash bonus earned for the most recent completed year for which an annual cash bonus had been determined preceding the year in which Executive’s employment

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was terminated, plus (ii) to the extent not paid prior to the date of Executive’s termination of employment, Executive’s annual cash bonus for the year prior to the year in which Executive’s employment was terminated, determined based upon the Company’s and Executive’s actual performance, paid as and when such annual cash bonuses are paid to similarly situated active employees of the Company, plus (iii) an amount equal to the Target Bonus multiplied by a fraction the numerator of which is the number of days in the year up to the Termination Date and the denominator of which is 365.

(c)Acceleration of Vesting.

(i)Time-Based Equity Awards. The vesting of all Time-Based Equity Awards shall accelerate in full upon the Termination Date.

(ii)Performance-Based Equity (Non-Change in Control). In the event that Executive’s Involuntary Termination does not occur in connection with a Change in Control or during a Change in Control Period, Performance-Based Equity Awards will be treated as follows: (i) if the Termination Date occurs prior to the end of the performance period applicable to a Performance-Based Equity Award, then all of the vesting conditions applicable to such Performance-Based Equity Award that are based on Executive’s continued employment or service through specified dates will be deemed to have been satisfied and the portion of such Performance-Based Equity Award that will be earned and vest based the achievement of the Performance-Based Conditions of such Performance-Based Equity Award will equal the portion of such Performance-Based Equity Award that would have been earned or vested based on the achievement of such Performance-Based Conditions if Executive’s employment had not been terminated, determined in accordance with the applicable award agreement (and Section 5 below, if applicable), multiplied by a fraction, the numerator of which is the number of full and partial months in which Executive was employed by the Company during such performance period and the denominator of which is the total number of full and partial months in such performance period; and (b) if the Termination Date occurs after the end of the performance period applicable to a Performance-Based Equity Award, then the portion of such Performance-Based Equity Award that is or was earned based on the achievement of the Performance-Based Conditions of such Performance-Based Equity Award, but would not otherwise vest, will vest upon the later of the Termination Date or the date on which the portion of such Performance-Based Equity Award that is earned based on the achievement of such Performance-Based Conditions is determined.

(iii)Performance-Based Equity (Change in Control). In the event that Executive’s Involuntary Termination occurs in connection with a Change in Control or during a Change in Control Period, all of the vesting conditions applicable to the Performance-Based Equity Awards that are based on Executive’s continued employment or service through specified dates will be deemed to have been satisfied and the portion of such Performance-Based Equity Awards that will be earned and vest based the achievement of the Performance-Based Conditions of such Performance-Based Equity Awards will equal the portion of such Performance-Based Equity Awards that would have been earned or vested based on the achievement of such Performance-Based Conditions if Executive’s employment had not been terminated, determined in accordance with the applicable award agreement (and Section 5 below, if applicable), with

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such vesting occurring, for each Performance-Based Equity Award, upon the later of the Termination Date or the date on which the portion of such Performance-Based Equity Award that is earned based on the achievement of such Performance-Based Conditions is determined.

(iv)The foregoing provisions are hereby deemed to be a part of each agreement evidencing each applicable Time-Based Equity Award and Performance-Based Equity Award to which Executive is a party and to supersede any contrary provision in any such agreement unless such agreement specifically refers to and disclaims this provision.

(d)Continued Healthcare. If Executive was participating in the Company’s group health plan immediately prior to the Termination Date then the Company shall pay Executive a monthly cash payment for a period of up to: (x) twenty four (24) months after the Termination Date, in the event of Executive’s Involuntary Termination other than in connection with a Change in Control; or (y) thirty six (36) months after the Termination Date, in the event that Executive’s Involuntary Termination occurs in connection with a Change in Control or during a Change in Control Period, as applicable, equal to the total premiums for such group health plan coverage (based on Executive’s coverage elections in effect as of the Termination Date) (the “Company Benefit Payment”); provided, that notwithstanding the foregoing, in no event will Executive be entitled to the Company Benefit Payment after the first date on which Executive becomes eligible for healthcare coverage under the plan of a subsequent employer of Executive.

4.Voluntary Resignation by Executive; Termination for Cause. Executive may voluntarily resign from employment with the Company for any reason, at any time, on thirty (30) days’ advance written notice. In addition, the Company may terminate Executive’s employment immediately at any time for Cause. In the event of Executive’s resignation which is not a Resignation for Good Reason or the Company’s termination of Executive’s employment for Cause, Executive will be entitled to receive only unpaid base salary at the rate then in effect, prorated to the Termination Date, together with any amounts to which Executive is then entitled pursuant to any employee benefit or business expense reimbursement plan or arrangement in which Executive is then a participant. All other Company obligations to Executive pursuant to this Agreement shall be automatically terminated and completely extinguished. Executive shall not be entitled to receive the Severance Benefits described in Section 3 above.

5.Determination of Performance Conditions upon a Change in Control. If, prior to the end of the performance period applicable to a Performance-Based Equity Award, a Change in Control occurs, then the portion of such Performance-Based Equity Award that will be earned and vest based the achievement of the Performance-Based Conditions will be determined: (i) immediately prior to, but subject to the consummation of, the Change in Control, (ii) as if the performance period ended on the day prior to the consummation of the Change in Change and (A) with respect to Performance-Based Conditions that are based on stock price, total return to stockholders or a similar market based metric, based on performance through such date and, to the extent applicable, based on the transaction price in connection with the Change in Control, (B) with respect to Performance-Based Conditions that are based on financial or operational metrics, based on performance through the most recently completed quarter prior to such date for

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which final results are available on such date and (C) with respect to Performance-Based Conditions that are based on other metrics, based on performance through a date on or before such date as may be set forth in the applicable award agreement for such Performance-Based Equity Award or as is otherwise agreed by Executive and the Company and (iii) using metrics for the Performance-Based Conditions that have been pro-rated based on the shortened length of the performance period, as applicable. For avoidance of doubt, this Section is not intended to impact any vesting conditions applicable to Performance-Based Equity Awards that are based on Executive’s continued employment or service through specified dates and such vesting conditions will continue to apply unless otherwise accelerated or waived (e.g., in the event of Executive’s Involuntary Termination in connection with the Change in Control). The foregoing provisions are hereby deemed to be a part of each agreement evidencing each applicable Performance-Based Equity Award to which Executive is a party and to supersede any contrary provision in any such agreement unless such agreement specifically refers to and disclaims this provision.

6.Recoupment. Bonus, incentive and equity compensation paid or provided to Executive, whether pursuant to this Agreement or otherwise, shall be subject to the terms and conditions of such policy of recoupment of compensation as shall be adopted from time to time by the Board or the Committee as it deems necessary or desirable to comply with the requirements of Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (providing for recovery of erroneously awarded compensation), Section 304 of the Sarbanes-Oxley Act of 2002 (providing for forfeiture of certain bonuses and profits), and any implementing rules and regulations of the U.S. Securities and Exchange Commission and applicable listing standards of a national securities exchange adopted in accordance with any such Act (the “Recoupment Policy”). The terms and conditions of the Recoupment Policy are hereby incorporated by reference into this Agreement.

7.Golden Parachute Payments. In the event that the severance payments and other benefits provided for in this Agreement or otherwise payable to Executive (i) constitute “parachute payments” within the meaning of Section 280G of the Code and (ii) but for this Section, would be subject to the excise tax imposed by Section 4999 of the Code (“Excise Tax”), then Executive’s severance payments and benefits under this Agreement or otherwise shall be payable either

(a)in full, or

(b)in such lesser amount which would result in no portion of such severance payments or benefits being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax, results in the receipt by Executive on an after-tax basis, of the greatest amount of severance payments and benefits under this Agreement, the Employment Agreement or otherwise, notwithstanding that all or some portion of such severance payments or benefits may be taxable under Section 4999 of the Code. Any reduction in the severance payments and benefits required by this Section will made in the following order: (i) reduction of cash payments; (ii) reduction of accelerated vesting of equity awards other than stock options; (iii) reduction of accelerated

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vesting of stock options; and (iv) reduction of other benefits paid or provided to Executive. In the event that acceleration of vesting of equity awards is to be reduced, such acceleration of vesting will be cancelled in the reverse order of the date of grant of Executive’s equity awards. If two or more equity awards are granted on the same date, each award will be reduced on a pro-rata basis.

The professional firm engaged by the Company for general tax purposes as of the day prior to the date of the event that might reasonably be anticipated to result in severance payments and benefits that would otherwise be subject to the Excise Tax will perform the foregoing calculations. If the tax firm so engaged by the Company is serving as accountant or auditor for the acquiring company, the Company will appoint a nationally recognized tax firm to make the determinations required by this Section. The Company will bear all expenses with respect to the determinations by such firm required to be made by this Section. The Company and Executive shall furnish such tax firm such information and documents as the tax firm may reasonably request in order to make its required determination. The tax firm will provide its calculations, together with detailed supporting documentation, to the Company and Executive as soon as practicable following its engagement. Any good faith determinations of the tax firm made hereunder will be final, binding and conclusive upon the Company and Executive.

8.Definition of Terms. Capitalized terms not otherwise defined by this Agreement shall have the following meanings:

(a)“Cause” means (i) theft, material dishonesty in connection with Executive’s employment, or intentional falsification of any employment or Company records; (ii) intentional and improper disclosure of the Company’s confidential or proprietary information; (iii) Executive’s conviction (including any plea of guilty or nolo contendere) for any criminal act that materially impairs Executive’s ability to perform his or her duties for Company; (iv) willful misconduct or breach of fiduciary duty for personal profit by Executive, (v) Executive’s material failure to abide by the Company’s code of conduct or code of ethics policies resulting in demonstrable injury to the Company or its reputation, or (vi) a material breach of this Agreement by Executive which is not cured within thirty (30) days of receipt by Executive of reasonably detailed written notice from the Company.

(b)“Change in Control” means the first day that any one or more of the following conditions shall have been satisfied:

(i)any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than Executive or a group that includes Executive, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of stock of the Company that, together with stock held by such person or group, constitutes more than thirty percent (30%) of either the total fair market value of the stock of the Company then outstanding or the total voting power of the stock of the Company then outstanding having the right to vote in an election of the Board (the “Voting Stock”), excluding the acquisition of beneficial ownership of additional stock by a person or group who, immediately prior to such acquisition, beneficially owned stock that constituted more than thirty percent (30%) of either the total fair market value of the stock of the Company then outstanding or the total voting power of the Voting Stock then outstanding;

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(ii)the members of the Board at the beginning of any consecutive 12- month period commencing on or after the date hereof (the “Incumbent Directors”) cease for any reason other than due to death to constitute at least a majority of the members of the Board prior to the end of such period; provided that any director whose appointment, election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors, shall be deemed to be an Incumbent Director; and provided, further, that notwithstanding the foregoing, no director initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be deemed an Incumbent Director;

(iii)there is consummated any consolidation or merger of the Company resulting in the Voting Stock of the Company outstanding immediately prior to the consolidation or merger representing (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) less than a majority of the total voting power of the voting securities of the surviving entity or its parent outstanding immediately after such consolidation or merger;

(iv)there is consummated any sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of the Company, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to a subsidiary of the Company or an entity in which securities constituting at least a majority of the voting power of the voting securities of such entity or its parent outstanding immediately after such transaction are owned by the stockholders of the Company in substantially the same proportion as their ownership of the Voting Stock immediately prior to such transaction; or

(v)the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company.

(c)“Change in Control Period” means a period commencing upon the consummation of a Change in Control and ending on the date occurring two (2) years thereafter.

(d)“Disability” means Executive has been determined by a physician selected by the Company and reasonably acceptable to Executive to be unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.

(e)“Involuntary Termination” means the occurrence of either (i) termination by the Company of Executive’s employment with the Company for any reason other than Cause or (ii) Executive’s Resignation for Good Reason; provided, however that Involuntary Termination shall not include any termination of Executive’s employment which is (x) for Cause, (y) a result of Executive’s death or Disability, or (z) a result of Executive’s voluntary termination of employment which is not a Resignation for Good Reason.

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(f)“Resignation for Good Reason” means the voluntary resignation by Executive from employment with the Company at any time on ten (10) days’ advance written notice to the Company given within a period of one hundred eighty (180) days following the initial existence, without Executive’s express written consent, of any of the following conditions (each, a “Good Reason”) which remains in effect for thirty (30) days after Executive’s delivery of written notice of the existence of such condition(s) to the Company within ninety (90) days following the initial existence of such condition(s):

(i)a material, adverse change in Executive’s authority, duties or responsibilities; provided, that for purposes of this Agreement and without limiting the generality of the foregoing, a material, adverse change shall be deemed to occur if Executive no longer serves as Chief Executive Officer (who shall be the most senior executive) reporting directly to the Board;

(ii)a failure to pay when due Executive’s base salary or any bonus actually earned;

(iii)any material reduction in Executive’s base salary rate or the stated target amount of Executive’s annual bonus (the earning of which may be made subject to performance requirements determined by the Company in its sole discretion);

(iv)the relocation of Executive work place for the Company to a location more than thirty (30) miles from location of Executive’s work place prior to such relocation; or

(v)the failure of the Company or any Successor to honor any material term of this Agreement.

9.Successors.

(a)Company’s Successors. Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets (a “Successor”) shall assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term “Company” shall include any Successor which executes and delivers the assumption agreement described in this Section 9(a) or which becomes bound by the terms of this Agreement by operation of law.

(b)Executive’s Successors. The terms of this Agreement and all rights of Executive hereunder shall inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

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10.Notice.

(a)General. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or one day following mailing via Federal Express or similar overnight courier service. In the case of Executive, mailed notices shall be addressed to Executive at Executive’s home address that the Company has on file for Executive. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Chief Financial Officer and Secretary.

(b)Notice of Termination. Any termination by the Company for Cause or by Executive pursuant to a Resignation for Good Reason shall be communicated by a notice of termination to the other party hereto given in accordance with Section 10(a) of this Agreement. Such notice shall indicate the specific termination provision in this Agreement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the termination date, consistent with the requirements of this Agreement. The failure by Executive to include in the notice any fact or circumstance that contributes to a showing of the existence of Good Reason shall not waive any right of Executive hereunder or preclude Executive from asserting such fact or circumstance in enforcing his rights hereunder.

11.Confidentiality; Non-Solicitation.

(a)Confidentiality. Executive hereby agrees to hold in strict confidence and not to disclose or make available to any person, firm, corporation, association or other entity for any reason or purpose whatsoever, any Confidential Information (as defined below). Upon termination of Executive’s employment with the Company, all Confidential Information in Executive’s possession that is in written or other tangible form (together with all copies or duplicates thereof, including computer files) shall be returned to the Company and shall not be retained by Executive or furnished to any third party, in any form except as provided herein; provided, however, that Executive shall not be obligated to treat as confidential, or return to the Company copies of any Confidential Information that (i) was publicly known at the time of disclosure to Executive, (ii) becomes publicly known or available thereafter other than by any means in violation of this Agreement or any other duty owed to the Company by any person or entity, or (iii) is lawfully disclosed to Executive by a third party. For purposes of this Agreement, the term “Confidential Information” shall mean information disclosed to Executive or known by Executive as a consequence of or through his or her relationship with the Company, about the customers, employees, business methods, public relations methods, organization, procedures or finances, including, without limitation, information of or relating to customer lists, of the Company and its affiliates. Executive understands that pursuant to the Defend Trade Secrets Act of 2016, Executive shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. In

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addition, nothing in this Agreement shall be interpreted or applied to prohibit Executive from making any good faith report to any governmental agency or other governmental entity concerning any acts or omissions that Executive may believe to constitute a possible violation of federal or state law or making other disclosures that are protected under the whistleblower provisions of applicable federal or state law or regulation. Further, this Agreement does not limit your ability to communicate with any government agency or otherwise participate in any investigation or proceeding that may be conducted by any government agency, including providing documents or other information, without notice to the Company nor does it limit any right you may have to receive an award for information provided to any government agencies.

(b)Non-Solicitation; Non-Disparagement. Executive shall not for a period of one (1) year following Executive’s termination of employment for any reason, either on Executive’s own account or jointly with or as a manager, agent, officer, employee, consultant, partner, joint venturer, owner or shareholder or otherwise on behalf of any other person, firm or corporation, directly or indirectly solicit or attempt to solicit away from the Company any of its officers or employees or offer employment to any person who is an officer or employee of the Company; provided, however, that a general advertisement to which an employee of the Company responds shall in no event be deemed to result in a breach of this Section 11(b). Executive also agrees not to harass or disparage the Company or its employees, clients, directors or agents.

(c)Survival of Provisions. The provisions of this Section 11 shall survive the termination or expiration of the Executive’s employment with the Company and shall be fully enforceable thereafter. If it is determined by a court of competent jurisdiction in any state that any restriction in this Section 11 is excessive in duration or scope or is unreasonable or unenforceable under the laws of that state, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the law of that state.

12.Dispute Resolution.

(a)To ensure the timely and economical resolution of disputes that arise in connection with this Agreement, Executive and the Company agree that any and all disputes, claims, or causes of action arising from or relating to the enforcement, breach, performance or interpretation of this Agreement, Executive’s employment, or the termination of Executive’s employment, shall be resolved to the fullest extent permitted by law by final, binding and confidential arbitration, by a single neutral arbitrator, in DuPage County, Illinois, conducted by the American Arbitration Association. (“AAA”) under its rules for arbitration of employment disputes. By agreeing to this arbitration procedure, both Executive and the Company waive the right to resolve any such dispute through a trial by jury or judge or administrative proceeding. The arbitrator shall: (i) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (ii) issue a written arbitration decision, to include the arbitrator’s essential findings and conclusions and a statement of the award. The arbitrator shall be authorized to award any or all remedies that Executive or the Company would be entitled to seek in a court of law. Each party shall bear its own respective

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attorney fees and all other costs, unless provided by law and awarded by the arbitrator; provided, however, that the Company shall pay all AAA arbitration fees in excess of the amount of court fees that would be required if the dispute were decided in a court of law. Nothing in this Agreement is intended to prevent either Executive or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration. Notwithstanding the foregoing, Executive and the Company each have the right to resolve any issue or dispute over intellectual property rights by Court action instead of arbitration.

(b)Executive understands that this Agreement does not prohibit Executive from pursuing an administrative claim with a local, state or federal administrative body such as the Department of Fair Employment and Housing, the Equal Employment Opportunity Commission or the workers’ compensation Committee. This Agreement, does, however, preclude Executive from pursuing court action regarding any such claim.

(c)Executive acknowledges and agrees that Executive is executing this Agreement voluntarily and without any duress or undue influence by the Company or anyone else. Executive further acknowledges and agrees that Executive has carefully read this Agreement and that Executive has asked any questions needed for Executive to understand the terms, consequences and binding effect of this Agreement and fully understands it, including that Executive is waiving Executive’s right to a jury trial. Finally, Executive agrees that Executive has been provided an opportunity to seek the advice of an attorney of Executive’s choice before signing this Agreement.

13.Compliance with Section 409A of the Code. The parties intend that this Agreement (and all payments and other benefits provided under this Agreement) be exempt from the requirements of Section 409A of the Code and the regulations and ruling issued thereunder (collectively “Section 409A”), to the maximum extent possible, whether pursuant to the short-term deferral exception described in Treasury Regulation Section 1.409A-1(b)(4), the involuntary separation pay plan exception described in Treasury Regulation Section 1.409A-1(b) (9)(iii), or otherwise. To the extent Section 409A is applicable to such payments, the parties intend that this Agreement (and such payments and benefits) comply with the deferral, payout and other limitations and restrictions imposed under Section 409A. Notwithstanding any other provision of this Agreement to the contrary, this Agreement shall be interpreted, operated and administered in a manner consistent with such intentions. Without limiting the generality of the foregoing, and notwithstanding any other provision of this Agreement to the contrary:

(a)No amount payable pursuant to this Agreement which constitutes a “deferral of compensation” within the meaning of Section 409A shall be paid unless and until Executive has incurred a “separation from service” within the meaning of Section 409A. Furthermore, to the extent that Executive is a “specified employee” within the meaning of Section 409A (determined using the identification methodology selected by the Company from time to time, or if none, the default methodology) as of the date of Executive’s separation from service, no amount that constitutes a deferral of compensation which is payable on account of Executive’s separation from service shall paid to Executive before the date (the “Delayed Payment Date”) which is first day of the seventh month after the date of Executive’s separation

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from service or, if earlier, the date of Executive’s death following such separation from service. All such amounts that would, but for this Section, become payable prior to the Delayed Payment Date will be accumulated and paid on the Delayed Payment Date.

(b)Each payment made under this Agreement shall be treated as a separate payment and the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments.

(c)With regard to any provision in this Agreement that provides for reimbursement of expenses or in-kind benefits, except for any expense, reimbursement or in-kind benefit provided pursuant to this Agreement that does not constitute a “deferral of compensation,” within the meaning of Section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, provided that the foregoing clause (ii) shall not be deemed to be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect, and (iii) such payments shall be made on or before the last day of Executive’s taxable year following the taxable year in which the expense occurred.

(d)The Company intends that income provided to Executive pursuant to this Agreement will not be subject to taxation under Section 409A of the Code. However, the Company does not guarantee any particular tax effect for income provided to Executive pursuant to this Agreement. In any event, except for the Company’s responsibility to withhold applicable income and employment taxes from compensation paid or provided to Executive, the Company shall not be responsible for the payment of any applicable taxes on compensation paid or provided to Executive pursuant to this Agreement.

14.Miscellaneous Provisions.

(a)At-Will Employment. Executive acknowledges and agrees that nothing in this Agreement shall be construed to imply that Executive’s employment is guaranteed for any period of time. Unless stated in a written agreement signed by an officer of the Company authorized by the Board or Committee and Executive, Executive’s employment is at-will and either the Company or Executive may terminate the employment relationship at any time with or without cause and with or without notice.

(b)Unfunded Obligation. Any amounts payable to Executive pursuant to this Agreement are unfunded obligations. The Company shall not be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any account shall not create or constitute a trust or fiduciary relationship between the Board or the

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Company and Executive, or otherwise create any vested or beneficial interest in Executive or Executive’s creditors in any assets of the Company.

(c)No Duty to Mitigate. Executive shall not be required to mitigate the amount of any payment or benefit contemplated by this Agreement by seeking employment with a new employer or otherwise, nor shall any such payment or benefit be reduced by any compensation or benefits that Executive may receive from employment by another employer other than as provided in Section 3(d).

(d)Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by an authorized officer of the Company (other than Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

(e)Whole Agreement. This Agreement represents the entire understanding of the parties hereto with respect to the subject matter hereof and supersedes, as of the Effective Date, all prior arrangements and understandings regarding same, including, but not limited to, the Prior Retention Agreement, which shall be terminated and of no further force and effect as of the Effective Date.

(f)Tax Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable taxes.

(g)Choice of Law; Venue. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Illinois without giving effect to any conflict of law principles. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties pursuant to this Agreement that is not subject to arbitration pursuant to Section 12, the parties hereby submit to and consent to the jurisdiction of the State of Illinois and agree that such litigation shall be conducted only in the courts of DuPage County, Illinois, or the federal courts of the United States for the Northern District of Illinois, and no other courts.

(h)Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.

(i)Benefits Not Assignable. Except as otherwise provided herein or by law, no right or interest of Executive under this Agreement shall be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including, without limitation, by execution, levy, garnishment, attachment, pledge or in any other manner, and no attempted transfer or assignment thereof shall be effective. No right or interest of Executive under this Agreement shall be liable for, or subject to, any obligation or liability of Executive.

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(j)Further Assurances. From time to time, at the Company’s request and without further consideration, Executive shall execute and deliver such additional documents and take all such further action as reasonably requested by the Company to be necessary or desirable to make effective, in the most expeditious manner possible, the terms of this Agreement and the Release, and to provide adequate assurance of Executive’s due performance thereunder.

(k)Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.

(l)Acknowledgment. Executive acknowledges that Executive has had the opportunity to discuss this matter with and obtain advice from his private attorney, has had sufficient time to, and has carefully read and fully understands all the provisions of this Agreement, and is knowingly and voluntarily entering into this Agreement.

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year set forth below.



RETAIL PROPERTIES OF AMERICA, INC.

By:	/s/ ANN M. SHARP	Date:	07/29/19

Title:	Vice President & Secretary



EXECUTIVE
/s/ STEVEN P. GRIMES		Date:	07/29/19

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EXHIBIT A

FORM OF
SEPARATION AGREEMENT AND GENERAL RELEASE

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

1. SEPARATION DATE

1.1 Employee and Employer are parties to a Retention Agreement, dated effective as of July 29, 2019 (the “Retention Agreement”). Employee’s last day of employment with Employer is ________________ (“Separation Date”).

2. VALUABLE CONSIDERATION

2.1 Severance Package. Employer agrees to provide Employee with the following payments and benefits (“Severance Package”). Employee acknowledges and agrees that the Severance Package constitutes adequate legal consideration for the promises and representations made by him or her in the Agreement. Receipt of the Severance Package is contingent upon the following conditions: (i) Employee must continue to abide by the covenants regarding confidentiality, non-solicitation and non-disparagement described in Section 11 of the Retention Agreement, and (ii) application of the Recoupment Policy described in Section 6 of the Retention Agreement, the Golden Parachute Payments provision described in Section 7 of the Retention Agreement, and the provisions regarding compliance with Section 409A of the Internal Revenue Code described in Section 13 of the Retention Agreement. Subject to the foregoing, Employer will pay the Severance Payment on the sixtieth (60th) day after the Separation Date.

2.1.1. Severance Payment. Employer agrees to pay Employee a total of $___________, computed in accordance with Section [3(a)] [3(b)] of the Retention Agreement, less all appropriate federal and state income and employment taxes (“Severance Payment”).

2.1.2. Acceleration of Vesting. The vesting of all unvested equity awards granted to Employee that are listed on Exhibit A hereto shall become vested in accordance with Section 3(c) of the Retention Agreement. The Performance-Based Equity Awards (as defined in the Retention Agreement), or the portions thereof, that are listed as such on Exhibit A will remain outstanding following the Separation Date and will vest based on the achievement of the Performance-Based Conditions (as defined in the Retention Agreement) of such Performance-Based Equity Awards determined in accordance with the applicable award agreement (and Section 5 of the Retention Agreement, if applicable) All other equity awards (or portions thereof) made to the Employee by the Employer that were unvested immediately prior to the Separation Date will be forfeited as of the Separation Date.

A-1

2.1.3. Continued Healthcare. Employer will pay the amounts described in Section 3(d) of the Retention Agreement on the terms set forth therein.

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

3. GENERAL RELEASE AND WAIVER

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

3.2 Employee acknowledges that Employee may discover facts or law different from, or in addition to, the facts or law that Employee knows or believes to be true with respect to the

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claims released in this Agreement and agrees, nonetheless, that this Agreement and the release contained in it shall be and remain effective in all respects notwithstanding such different or additional facts or the discovery of them.

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

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

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

4. ACKNOWLEDGEMENTS BY EMPLOYEE

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

4.2 Employee acknowledges that he or she has been paid all wages, commissions, incentive payments, and bonuses owed to him or her by Employer, to date.

5. NON-DISPARAGEMENT

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

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

6.1 Acknowledgements/Time to Consider. Employee acknowledges and agrees that (a) Employee has read and understands the terms of this Agreement; (b) Employee has been advised in writing to consult with an attorney before executing this Agreement; (c) Employee has obtained

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and considered such legal counsel as Employee deems necessary; (d) Employee has been given twenty-one (21) days to consider whether or not to enter into this Agreement (although Employee may elect not to use the full 21‑day period at Employee’s option); and (e) by signing this Agreement, Employee acknowledges that Employee does so freely, knowingly, and voluntarily.

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

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

7. CONFIDENTIALITY/RETURN OF COMPANY PROPERTY

7.1 Employee represents and warrants that as of the Separation Date, he or she will have returned all property belonging to Employer. Such property includes, but is not limited to, keys, passwords, access cards, credit or phone cards, any computer hardware or software, any products relating to Employer or its competition, any design work, product engineering, test results, customer information, pricing and cost information, financial data or information, any vendor samples or information, management materials, including all correspondence, manuals, letters, notes, notebooks, data report programs, plan proposals, and other confidential, proprietary and/or trade secret information, regardless of whether the information is in written, printed, electronic, or other form and regardless of whether it was written or compiled by Employee or other persons, as well as any and all other property that comprises property owned by Employer. Employee agrees that he or she will not retain any originals or copies of any Employer property, whether prepared or created by Employee or otherwise coming into Employee’s possession or control in the course of his or her employment with Employer. Employee agrees to keep the terms of the Agreement confidential between him or her and Employer, except that he or she may tell his or her immediate family and attorney or accountant, if any, as needed, but in no event should he or she discuss the Agreement or its terms with any current or prospective employee of Employer. Notwithstanding the foregoing, Executive understands that pursuant to the Defend Trade Secrets Act of 2016, Executive shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. In addition, nothing

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in this Agreement shall be interpreted or applied to prohibit Executive from making any good faith report to any governmental agency or other governmental entity concerning any acts or omissions that Executive may believe to constitute a possible violation of federal or state law or making other disclosures that are protected under the whistleblower provisions of applicable federal or state law or regulation. Further, this Agreement does not limit your ability to communicate with any government agency or otherwise participate in any investigation or proceeding that may be conducted by any government agency, including providing documents or other information, without notice to the Company nor does it limit any right you may have to receive an award for information provided to any government agencies.

8. MISCELLANEOUS

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

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

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

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

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

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

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

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

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

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

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



EMPLOYEE			RETAIL PROPERTIES OF AMERICA, INC.
			By:

Date:			Date:

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Exhibit A

Unvested Equity Awards

Exhibit 10.2

RETAIL PROPERTIES OF AMERICA, INC.

RETENTION AGREEMENT

This Retention Agreement (this “Agreement”) is made and entered into by and between Shane C. Garrison (“Executive”) and Retail Properties of America, Inc., a Maryland corporation (the “Company”), effective as of July 29, 2019 (the “Effective Date”).

R E C I T A L S

A. Although the Company anticipates the continuation of a mutually rewarding employment relationship with Executive, the Compensation Committee (the “Committee”) of the Board of Directors of the Company (the “Board”) believes that it is in the best interests of the Company and its stockholders to provide Executive with certain assurances in the event of the occurrence of an involuntary termination of Executive’s employment with the Company. Further, it is expected that the Company from time to time will consider the possibility of an acquisition by another company or other change in control. The Committee recognizes that such consideration as well as the possibility of an involuntary termination or reduction in responsibility can be a distraction to Executive and can cause Executive to consider alternative employment opportunities. Accordingly, the Committee has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication and objectivity of Executive, notwithstanding the possibility, threat or occurrence of such an event.

B. On October 31, 2016, Executive and the Company entered into that certain Amended and Restated Retention Agreement (the “Prior Retention Agreement”), which had an initial term extending for three years until October 31, 2019. Executive and the Company desire to enter into this Agreement, with an initial term extending until October 31, 2022 (i.e., a three-year extension from the end of the term of the Prior Retention Agreement) and otherwise substantially similar terms as the Prior Retention Agreement, to supersede the Prior Retention Agreement as of the Effective Date.

C. Certain capitalized terms used in this Agreement are defined in Section 8 below.

NOW THEREFORE, the parties hereto agree as follows:

consummated, the second anniversary of the date on which the Company entered into such definitive agreement.

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(a)Cash Severance (Non-Change in Control). Executive shall receive on the sixtieth (60th) day following the Termination Date a lump sum cash amount (less applicable withholdings) equal to (i) one and a half (1.5) times the sum of (x) Executive’s annual base salary at the rate then in effect (without giving effect to any reduction in the base salary rate amounting to Good Reason), (y) an amount equal to the greater of (1) Executive’s target annual cash bonus opportunity for the year in which Executive’s employment was terminated (or the prior year if a target annual cash bonus amount hadn’t yet been established for such year), (the “Target Bonus”) or (2) Executive’s actual annual cash bonus earned for the most recent completed year for which an annual cash bonus had been determined preceding the year in which Executive’s employment was terminated, plus (ii) to the extent not paid prior to the date of Executive’s termination of employment, Executive’s annual cash bonus for the year prior to the year in which Executive’s employment was terminated, determined based upon the Company’s and Executive’s actual performance, paid as and when such annual cash bonuses are paid to similarly situated active employees of the Company, plus (iii) an amount equal to the Target Bonus multiplied by a fraction the numerator of which is the number of days in the year up to the Termination Date and the denominator of which is 365.

(b) Cash Severance (Change in Control). In the event that Executive’s Involuntary Termination occurs in connection with a Change in Control or during a Change in Control Period, then, in lieu of the amounts set forth above under Section 3(a), Executive shall receive on the sixtieth (60th) day following the Termination Date a lump sum cash amount (less applicable withholdings) equal to (i) two (2) times the sum of (x) Executive’s annual base salary at the rate then in effect (without giving effect to any reduction in the base salary rate amounting to Good Reason), (y) an amount equal to the greater of (1) Executive’s Target Bonus or (2) Executive’s actual annual cash bonus earned for the most recent completed year for which an annual cash bonus had been determined preceding the year in which Executive’s employment

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(i)Time-Based Equity Awards. The vesting of all Time-Based Equity Awards shall accelerate in full upon the Termination Date.

(ii) Performance-Based Equity (Non-Change in Control). In the event that Executive’s Involuntary Termination does not occur in connection with a Change in Control or during a Change in Control Period, Performance-Based Equity Awards will be treated as follows: (i) if the Termination Date occurs prior to the end of the performance period applicable to a Performance-Based Equity Award, then all of the vesting conditions applicable to such Performance-Based Equity Award that are based on Executive’s continued employment or service through specified dates will be deemed to have been satisfied and the portion of such Performance-Based Equity Award that will be earned and vest based the achievement of the Performance-Based Conditions of such Performance-Based Equity Award will equal the portion of such Performance-Based Equity Award that would have been earned or vested based on the achievement of such Performance-Based Conditions if Executive’s employment had not been terminated, determined in accordance with the applicable award agreement (and Section 5 below, if applicable), multiplied by a fraction, the numerator of which is the number of full and partial months in which Executive was employed by the Company during such performance period and the denominator of which is the total number of full and partial months in such performance period; and (b) if the Termination Date occurs after the end of the performance period applicable to a Performance-Based Equity Award, then the portion of such Performance-Based Equity Award that is or was earned based on the achievement of the Performance-Based Conditions of such Performance-Based Equity Award, but would not otherwise vest, will vest upon the later of the Termination Date or the date on which the portion of such Performance-Based Equity Award that is earned based on the achievement of such Performance-Based Conditions is determined.

(iii) Performance-Based Equity (Change in Control). In the event that Executive’s Involuntary Termination occurs in connection with a Change in Control or during a Change in Control Period, all of the vesting conditions applicable to the Performance-Based Equity Awards that are based on Executive’s continued employment or service through specified dates will be deemed to have been satisfied and the portion of such Performance-Based Equity Awards that will be earned and vest based the achievement of the Performance-Based Conditions of such Performance-Based Equity Awards will equal the portion of such Performance-Based Equity Awards that would have been earned or vested based on the achievement of such Performance-Based Conditions if Executive’s employment had not been terminated, determined in accordance with the applicable award agreement (and Section 5 below, if applicable), with

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(iv) The foregoing provisions are hereby deemed to be a part of each agreement evidencing each applicable Time-Based Equity Award and Performance-Based Equity Award to which Executive is a party and to supersede any contrary provision in any such agreement unless such agreement specifically refers to and disclaims this provision.

(d) Continued Healthcare. If Executive was participating in the Company’s group health plan immediately prior to the Termination Date then the Company shall pay Executive a monthly cash payment for a period of up to: (x) eighteen (18) months after the Termination Date, in the event of Executive’s Involuntary Termination other than in connection with a Change in Control; or (y) twenty four (24) months after the Termination Date, in the event that Executive’s Involuntary Termination occurs in connection with a Change in Control or during a Change in Control Period, as applicable, equal to the total premiums for such group health plan coverage (based on Executive’s coverage elections in effect as of the Termination Date) (the “Company Benefit Payment”); provided, that notwithstanding the foregoing, in no event will Executive be entitled to the Company Benefit Payment after the first date on which Executive becomes eligible for healthcare coverage under the plan of a subsequent employer of Executive.

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(a) in full, or

(b) in such lesser amount which would result in no portion of such severance payments or benefits being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax, results in the receipt by Executive on an after-tax basis, of the greatest amount of severance payments and benefits under this Agreement, the Employment Agreement or otherwise, notwithstanding that all or some portion of such severance payments or benefits may be taxable under Section 4999 of the Code. Any reduction in the severance payments and benefits required by this Section will made in the following order: (i) reduction of cash payments; (ii) reduction of accelerated vesting of equity awards other than stock options; (iii) reduction of accelerated

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8.Definition of Terms. Capitalized terms not otherwise defined by this Agreement shall have the following meanings:

(a) “Cause” means (i) theft, material dishonesty in connection with Executive’s employment, or intentional falsification of any employment or Company records; (ii) intentional and improper disclosure of the Company’s confidential or proprietary information; (iii) Executive’s conviction (including any plea of guilty or nolo contendere) for any criminal act that materially impairs Executive’s ability to perform his or her duties for Company; (iv) willful misconduct or breach of fiduciary duty for personal profit by Executive, (v) Executive’s material failure to abide by the Company’s code of conduct or code of ethics policies resulting in demonstrable injury to the Company or its reputation, or (vi) a material breach of this Agreement by Executive which is not cured within thirty (30) days of receipt by Executive of reasonably detailed written notice from the Company.

(b) “Change in Control” means the first day that any one or more of the following conditions shall have been satisfied:

(i) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than Executive or a group that includes Executive, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of stock of the Company that, together with stock held by such person or group, constitutes more than thirty percent (30%) of either the total fair market value of the stock of the Company then outstanding or the total voting power of the stock of the Company then outstanding having the right to vote in an election of the Board (the “Voting Stock”), excluding the acquisition of beneficial ownership of additional stock by a person or group who, immediately prior to such acquisition, beneficially owned stock that constituted more than thirty percent (30%) of either the total fair market value of the stock of the Company then outstanding or the total voting power of the Voting Stock then outstanding;

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(ii) the members of the Board at the beginning of any consecutive 12- month period commencing on or after the date hereof (the “Incumbent Directors”) cease for any reason other than due to death to constitute at least a majority of the members of the Board prior to the end of such period; provided that any director whose appointment, election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors, shall be deemed to be an Incumbent Director; and provided, further, that notwithstanding the foregoing, no director initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be deemed an Incumbent Director;

(iii) there is consummated any consolidation or merger of the Company resulting in the Voting Stock of the Company outstanding immediately prior to the consolidation or merger representing (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) less than a majority of the total voting power of the voting securities of the surviving entity or its parent outstanding immediately after such consolidation or merger;

(iv) there is consummated any sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of the Company, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to a subsidiary of the Company or an entity in which securities constituting at least a majority of the voting power of the voting securities of such entity or its parent outstanding immediately after such transaction are owned by the stockholders of the Company in substantially the same proportion as their ownership of the Voting Stock immediately prior to such transaction; or

(v) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company.

(c) “Change in Control Period” means a period commencing upon the consummation of a Change in Control and ending on the date occurring two (2) years thereafter.

(d) “Disability” means Executive has been determined by a physician selected by the Company and reasonably acceptable to Executive to be unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.

(e) “Involuntary Termination” means the occurrence of either (i) termination by the Company of Executive’s employment with the Company for any reason other than Cause or (ii) Executive’s Resignation for Good Reason; provided, however that Involuntary Termination shall not include any termination of Executive’s employment which is (x) for Cause, (y) a result of Executive’s death or Disability, or (z) a result of Executive’s voluntary termination of employment which is not a Resignation for Good Reason.

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(f) “Resignation for Good Reason” means the voluntary resignation by Executive from employment with the Company at any time on ten (10) days’ advance written notice to the Company given within a period of one hundred eighty (180) days following the initial existence, without Executive’s express written consent, of any of the following conditions (each, a “Good Reason”) which remains in effect for thirty (30) days after Executive’s delivery of written notice of the existence of such condition(s) to the Company within ninety (90) days following the initial existence of such condition(s):

(i) a material, adverse change in Executive’s authority, duties or responsibilities; provided, that for purposes of this Agreement and without limiting the generality of the foregoing, a material, adverse change shall be deemed to occur if Executive no longer serves as President and Chief Operating Officer reporting directly to the Chief Executive Officer;

(ii) a failure to pay when due Executive’s base salary or any bonus actually earned;

(iii) any material reduction in Executive’s base salary rate or the stated target amount of Executive’s annual bonus (the earning of which may be made subject to performance requirements determined by the Company in its sole discretion);

(iv) the relocation of Executive work place for the Company to a location more than thirty (30) miles from location of Executive’s work place prior to such relocation; or

(v) the failure of the Company or any Successor to honor any material term of this Agreement.

9.Successors.

(a) Company’s Successors. Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets (a “Successor”) shall assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term “Company” shall include any Successor which executes and delivers the assumption agreement described in this Section 9(a) or which becomes bound by the terms of this Agreement by operation of law.

(b) Executive’s Successors. The terms of this Agreement and all rights of Executive hereunder shall inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

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10.Notice.

(a) General. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or one day following mailing via Federal Express or similar overnight courier service. In the case of Executive, mailed notices shall be addressed to Executive at Executive’s home address that the Company has on file for Executive. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Chief Executive Officer.

(b) Notice of Termination. Any termination by the Company for Cause or by Executive pursuant to a Resignation for Good Reason shall be communicated by a notice of termination to the other party hereto given in accordance with Section 10(a) of this Agreement. Such notice shall indicate the specific termination provision in this Agreement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the termination date, consistent with the requirements of this Agreement. The failure by Executive to include in the notice any fact or circumstance that contributes to a showing of the existence of Good Reason shall not waive any right of Executive hereunder or preclude Executive from asserting such fact or circumstance in enforcing his rights hereunder.

11.Confidentiality; Non-Solicitation.

(a) Confidentiality. Executive hereby agrees to hold in strict confidence and not to disclose or make available to any person, firm, corporation, association or other entity for any reason or purpose whatsoever, any Confidential Information (as defined below). Upon termination of Executive’s employment with the Company, all Confidential Information in Executive’s possession that is in written or other tangible form (together with all copies or duplicates thereof, including computer files) shall be returned to the Company and shall not be retained by Executive or furnished to any third party, in any form except as provided herein; provided, however, that Executive shall not be obligated to treat as confidential, or return to the Company copies of any Confidential Information that (i) was publicly known at the time of disclosure to Executive, (ii) becomes publicly known or available thereafter other than by any means in violation of this Agreement or any other duty owed to the Company by any person or entity, or (iii) is lawfully disclosed to Executive by a third party. For purposes of this Agreement, the term “Confidential Information” shall mean information disclosed to Executive or known by Executive as a consequence of or through his or her relationship with the Company, about the customers, employees, business methods, public relations methods, organization, procedures or finances, including, without limitation, information of or relating to customer lists, of the Company and its affiliates. Executive understands that pursuant to the Defend Trade Secrets Act of 2016, Executive shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. In

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(b) Non-Solicitation; Non-Disparagement. Executive shall not for a period of one (1) year following Executive’s termination of employment for any reason, either on Executive’s own account or jointly with or as a manager, agent, officer, employee, consultant, partner, joint venturer, owner or shareholder or otherwise on behalf of any other person, firm or corporation, directly or indirectly solicit or attempt to solicit away from the Company any of its officers or employees or offer employment to any person who is an officer or employee of the Company; provided, however, that a general advertisement to which an employee of the Company responds shall in no event be deemed to result in a breach of this Section 11(b). Executive also agrees not to harass or disparage the Company or its employees, clients, directors or agents.

(c) Survival of Provisions. The provisions of this Section 11 shall survive the termination or expiration of the Executive’s employment with the Company and shall be fully enforceable thereafter. If it is determined by a court of competent jurisdiction in any state that any restriction in this Section 11 is excessive in duration or scope or is unreasonable or unenforceable under the laws of that state, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the law of that state.

12.Dispute Resolution.

(a) To ensure the timely and economical resolution of disputes that arise in connection with this Agreement, Executive and the Company agree that any and all disputes, claims, or causes of action arising from or relating to the enforcement, breach, performance or interpretation of this Agreement, Executive’s employment, or the termination of Executive’s employment, shall be resolved to the fullest extent permitted by law by final, binding and confidential arbitration, by a single neutral arbitrator, in DuPage County, Illinois, conducted by the American Arbitration Association. (“AAA”) under its rules for arbitration of employment disputes. By agreeing to this arbitration procedure, both Executive and the Company waive the right to resolve any such dispute through a trial by jury or judge or administrative proceeding. The arbitrator shall: (i) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (ii) issue a written arbitration decision, to include the arbitrator’s essential findings and conclusions and a statement of the award. The arbitrator shall be authorized to award any or all remedies that Executive or the Company would be entitled to seek in a court of law. Each party shall bear its own respective

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(b) Executive understands that this Agreement does not prohibit Executive from pursuing an administrative claim with a local, state or federal administrative body such as the Department of Fair Employment and Housing, the Equal Employment Opportunity Commission or the workers’ compensation Committee. This Agreement, does, however, preclude Executive from pursuing court action regarding any such claim.

(c) Executive acknowledges and agrees that Executive is executing this Agreement voluntarily and without any duress or undue influence by the Company or anyone else. Executive further acknowledges and agrees that Executive has carefully read this Agreement and that Executive has asked any questions needed for Executive to understand the terms, consequences and binding effect of this Agreement and fully understands it, including that Executive is waiving Executive’s right to a jury trial. Finally, Executive agrees that Executive has been provided an opportunity to seek the advice of an attorney of Executive’s choice before signing this Agreement.

(a) No amount payable pursuant to this Agreement which constitutes a “deferral of compensation” within the meaning of Section 409A shall be paid unless and until Executive has incurred a “separation from service” within the meaning of Section 409A. Furthermore, to the extent that Executive is a “specified employee” within the meaning of Section 409A (determined using the identification methodology selected by the Company from time to time, or if none, the default methodology) as of the date of Executive’s separation from service, no amount that constitutes a deferral of compensation which is payable on account of Executive’s separation from service shall paid to Executive before the date (the “Delayed Payment Date”) which is first day of the seventh month after the date of Executive’s separation

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(b) Each payment made under this Agreement shall be treated as a separate payment and the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments.

(c) With regard to any provision in this Agreement that provides for reimbursement of expenses or in-kind benefits, except for any expense, reimbursement or in-kind benefit provided pursuant to this Agreement that does not constitute a “deferral of compensation,” within the meaning of Section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, provided that the foregoing clause (ii) shall not be deemed to be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect, and (iii) such payments shall be made on or before the last day of Executive’s taxable year following the taxable year in which the expense occurred.

(d) The Company intends that income provided to Executive pursuant to this Agreement will not be subject to taxation under Section 409A of the Code. However, the Company does not guarantee any particular tax effect for income provided to Executive pursuant to this Agreement. In any event, except for the Company’s responsibility to withhold applicable income and employment taxes from compensation paid or provided to Executive, the Company shall not be responsible for the payment of any applicable taxes on compensation paid or provided to Executive pursuant to this Agreement.

14.Miscellaneous Provisions.

(a) At-Will Employment. Executive acknowledges and agrees that nothing in this Agreement shall be construed to imply that Executive’s employment is guaranteed for any period of time. Unless stated in a written agreement signed by an officer of the Company authorized by the Board or Committee and Executive, Executive’s employment is at-will and either the Company or Executive may terminate the employment relationship at any time with or without cause and with or without notice.

(b) Unfunded Obligation. Any amounts payable to Executive pursuant to this Agreement are unfunded obligations. The Company shall not be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any account shall not create or constitute a trust or fiduciary relationship between the Board or the

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Company and Executive, or otherwise create any vested or beneficial interest in Executive or Executive’s creditors in any assets of the Company.

(c) No Duty to Mitigate. Executive shall not be required to mitigate the amount of any payment or benefit contemplated by this Agreement by seeking employment with a new employer or otherwise, nor shall any such payment or benefit be reduced by any compensation or benefits that Executive may receive from employment by another employer other than as provided in Section 3(d).

(d) Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by an authorized officer of the Company (other than Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

(e) Whole Agreement. This Agreement represents the entire understanding of the parties hereto with respect to the subject matter hereof and supersedes, as of the Effective Date, all prior arrangements and understandings regarding same, including, but not limited to, the Prior Retention Agreement, which shall be terminated and of no further force and effect as of the Effective Date.

(f) Tax Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable taxes.

(g) Choice of Law; Venue. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Illinois without giving effect to any conflict of law principles. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties pursuant to this Agreement that is not subject to arbitration pursuant to Section 12, the parties hereby submit to and consent to the jurisdiction of the State of Illinois and agree that such litigation shall be conducted only in the courts of DuPage County, Illinois, or the federal courts of the United States for the Northern District of Illinois, and no other courts.

(h) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.

(i) Benefits Not Assignable. Except as otherwise provided herein or by law, no right or interest of Executive under this Agreement shall be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including, without limitation, by execution, levy, garnishment, attachment, pledge or in any other manner, and no attempted transfer or assignment thereof shall be effective. No right or interest of Executive under this Agreement shall be liable for, or subject to, any obligation or liability of Executive.

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(j) Further Assurances. From time to time, at the Company’s request and without further consideration, Executive shall execute and deliver such additional documents and take all such further action as reasonably requested by the Company to be necessary or desirable to make effective, in the most expeditious manner possible, the terms of this Agreement and the Release, and to provide adequate assurance of Executive’s due performance thereunder.

(k) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.

(l) Acknowledgment. Executive acknowledges that Executive has had the opportunity to discuss this matter with and obtain advice from his private attorney, has had sufficient time to, and has carefully read and fully understands all the provisions of this Agreement, and is knowingly and voluntarily entering into this Agreement.

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year set forth below.



RETAIL PROPERTIES OF AMERICA, INC.

By:	/s/ STEVEN P. GRIMES	Date:	07/29/19

Title:	Chief Executive Officer



EXECUTIVE
/s/ SHANE C. GARRISON		Date:	07/29/19

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EXHIBIT A

FORM OF
SEPARATION AGREEMENT AND GENERAL RELEASE

1.SEPARATION DATE

2. VALUABLE CONSIDERATION

A-1

2.1.3. Continued Healthcare. Employer will pay the amounts described in Section 3(d) of the Retention Agreement on the terms set forth therein.

3. GENERAL RELEASE AND WAIVER

3.2 Employee acknowledges that Employee may discover facts or law different from, or in addition to, the facts or law that Employee knows or believes to be true with respect to the

A-2

4. ACKNOWLEDGEMENTS BY EMPLOYEE

4.2 Employee acknowledges that he or she has been paid all wages, commissions, incentive payments, and bonuses owed to him or her by Employer, to date.

5. NON-DISPARAGEMENT

A-3

7. CONFIDENTIALITY/RETURN OF COMPANY PROPERTY

A-4

8. MISCELLANEOUS

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

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

A-5

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



EMPLOYEE			RETAIL PROPERTIES OF AMERICA, INC.
			By:

Date:			Date:

A-6

Exhibit A

Unvested Equity Awards

Exhibit 31.1

CERTIFICATION

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

I, Steven P. Grimes, certify that:


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


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


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


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


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


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


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


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


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


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


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



By:	/s/ STEVEN P. GRIMES

	Steven P. Grimes
	Chief Executive Officer

Date:	July 31, 2019

Exhibit 31.2

CERTIFICATION

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

I, Julie M. Swinehart, certify that:


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


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


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


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


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


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


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


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


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


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


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



By:	/s/ JULIE M. SWINEHART

	Julie M. Swinehart
	Executive Vice President,
	Chief Financial Officer and Treasurer

Date:	July 31, 2019

Exhibit 32.1

Certification Pursuant to

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

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Retail Properties of America, Inc. (the “Company”) for the period ended June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Steven P. Grimes as Chief Executive Officer of the Company and Julie M. Swinehart as Executive Vice President, Chief Financial Officer and Treasurer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his or her knowledge:


(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, 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
	Chief Executive Officer

Date:	July 31, 2019

By:	/s/ JULIE M. SWINEHART

	Julie M. Swinehart
	Executive Vice President,
	Chief Financial Officer and Treasurer

Date:	July 31, 2019