UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED September 30, 2015
or
¨
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: 000-51609
INVENTRUST PROPERTIES CORP.
(Exact name of registrant as specified in its charter)

Maryland
 
34-2019608
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
2809 Butterfield Road, Suite 360, Oak Brook, Illinois
 
60523
(Address of principal executive offices)
 
(Zip Code)
855-377-0510
(Registrant’s telephone number, including area code)

_______________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days.
Yes x    No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x    No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. (See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act). (Check one)
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer   x
Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes   ¨    No x
As of November 6, 2015 there were 861,824,777 shares of the registrant’s common stock outstanding.

 



InvenTrust Properties Corp.

Quarterly Report on Form 10-Q
For the quarter ended September 30, 2015
Table of Contents

 
Part I - Financial Information
Page
Item 1.
Financial Statements (unaudited)
 
 
Consolidated Balance Sheets at September 30, 2015 and December 31, 2014
 
Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 30, 2015 and 2014
 
Consolidated Statements of Changes in Equity for the nine months ended September 30, 2015 and 2014
 
Consolidated Statements of Cash Flows for the nine months ended September 30, 2015 and 2014
 
Notes to Consolidated Financial Statements
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Item 4.
Controls and Procedures
 
Part II - Other Information
 
Item 1.
Legal Proceedings
Item 1A.
Risk Factors
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.
Defaults upon Senior Securities
Item 4.
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
 
Signatures



- i -
INVENTRUST PROPERTIES CORP.


Consolidated Balance Sheets
(unaudited)
(Dollar amounts in thousands, except share amounts)


 
 
September 30, 2015
 
December 31, 2014
Assets
 
 
 
Investment properties:
 
 
 
Land
$
784,522

 
$
770,220

Building and other improvements
3,229,318

 
3,030,645

Construction in progress
60,411

 
265,303

Total
4,074,251

 
4,066,168

Less accumulated depreciation
(686,475
)
 
(598,440
)
Net investment properties
3,387,776

 
3,467,728

Cash and cash equivalents
253,247

 
598,904

Restricted cash and escrows
19,174

 
32,950

Investment in marketable securities
184,375

 
154,753

Investment in unconsolidated entities
183,766

 
122,203

Intangible assets, net
70,307

 
89,705

Accounts and rents receivable (net of allowance of $3,772 and $5,658)
41,089

 
40,798

Deferred costs and other assets
50,405

 
59,476

Assets of discontinued operations
3,716

 
2,930,799

Total assets
$
4,193,855

 
$
7,497,316

Liabilities
 
 
 
Debt
$
1,849,557

 
$
1,991,608

Accounts payable and accrued expenses
95,669

 
79,368

Distributions payable
28,009

 
35,909

Intangible liabilities, net
46,458

 
43,258

Other liabilities
22,577

 
24,595

Liabilities of discontinued operations
64

 
1,325,749

Total liabilities
2,042,334

 
3,500,487

Commitments and contingencies


 


Stockholders’ Equity
 
 
 
Preferred stock, $.001 par value, 40,000,000 shares authorized, none outstanding
—

 
—

Common stock, $.001 par value, 1,460,000,000 shares authorized,
861,824,777 and 861,824,777 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively
861

 
861

Additional paid in capital
6,066,262

 
7,755,471

Accumulated distributions in excess of net loss
(3,959,240
)
 
(3,820,882
)
Accumulated other comprehensive income
43,513

 
57,599

Total Company stockholders’ equity
2,151,396

 
3,993,049

Noncontrolling interests
125

 
3,780

Total equity
2,151,521

 
3,996,829

Total liabilities and equity
$
4,193,855

 
$
7,497,316

See accompanying notes to the consolidated financial statements.

1
INVENTRUST PROPERTIES CORP.

Consolidated Statements of Operations and Comprehensive Income
(unaudited)
(Dollar amounts in thousands, except per share amounts)

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2015
 
2014
 
2015
 
2014
Income:
 
 
 
 
 
 
 
  Rental income
$
93,093

 
$
93,858

 
$
272,797

 
$
286,158

  Tenant recovery income
16,819

 
15,055

 
51,765

 
50,396

  Other property income
2,827

 
1,819

 
6,905

 
6,766

Total income
112,739

 
110,732

 
331,467

 
343,320

Expenses:
 
 
 
 
 
 
 
  General and administrative expenses
18,443

 
21,301

 
57,072

 
51,005

  Property operating expenses
20,750

 
24,921

 
56,779

 
69,230

  Real estate taxes
12,673

 
11,968

 
38,727

 
35,270

  Depreciation and amortization
37,314

 
38,895

 
110,927

 
116,564

  Business management fee
—

 
—

 
—

 
2,605

  Provision for asset impairment
92,167

 
670

 
92,167

 
75,616

Total expenses
181,347

 
97,755

 
355,672

 
350,290

Operating income (loss)
(68,608
)
 
12,977

 
(24,205
)
 
(6,970
)
Interest and dividend income
2,671

 
2,474

 
9,169

 
10,424

Gain on sale of investment properties
729

 
6,629

 
7,957

 
18,253

Gain on extinguishment of debt
13

 
12,125

 
1,395

 
12,517

Other income
1,451

 
577

 
6,107

 
4,125

Interest expense
(23,772
)
 
(31,888
)
 
(69,642
)
 
(96,531
)
Loss on contribution to unconsolidated joint venture
(12,919
)
 
—

 
(12,919
)
 
—

Equity in earnings (loss) of unconsolidated entities
5,358

 
(2,089
)
 
33,341

 
627

Realized gain on sale of marketable securities, net
304

 
27,852

 
20,459

 
42,998

Income (loss) before income taxes
(94,773
)
 
28,657

 
(28,338
)
 
(14,557
)
Income tax expense
(1,579
)
 
(454
)
 
(2,445
)
 
(1,196
)
Net income (loss) from continuing operations
(96,352
)
 
28,203

 
(30,783
)
 
(15,753
)
Net income from discontinued operations
713

 
24,357

 
3,042

 
208,292

Net income (loss)
(95,639
)
 
52,560

 
(27,741
)
 
192,539

Less: Net income attributable to noncontrolling interests
(8
)
 
(8
)
 
(16
)
 
(16
)
Net income (loss) attributable to Company
$
(95,647
)
 
$
52,552

 
$
(27,757
)
 
$
192,523

Net income (loss) per common share,
from continuing operations, basic and diluted
$
(0.11
)
 
$
0.03

 
$
(0.04
)
 
$
(0.02
)
Net income per common share,
from discontinued operations, basic and diluted
$
0.00

 
$
0.03

 
$
0.00

 
$
0.24

Net income (loss) per common share, basic and diluted
$
(0.11
)
 
$
0.06

 
$
(0.04
)
 
$
0.22

Weighted average number of common shares outstanding, basic and diluted
861,824,777

 
861,627,855

 
861,824,777

 
883,537,865

Comprehensive income:
 
 
 
 
 
 
 
Net income (loss) attributable to Company
$
(95,647
)
 
$
52,552

 
$
(27,757
)
 
$
192,523

  Unrealized gain (loss) on investment securities
(26,113
)
 
(6,927
)
 
7,242

 
13,508

  Unrealized gain (loss) on derivatives
(671
)
 
60

 
(76
)
 
(1,659
)
    Reclassification adjustment for amounts recognized in net
income
(570
)
 
(27,495
)
 
(21,252
)
 
(42,068
)
Comprehensive income (loss) attributable to the Company
$
(123,001
)
 
$
18,190

 
$
(41,843
)
 
$
162,304

See accompanying notes to the consolidated financial statements.

2

INVENTRUST PROPERTIES CORP.


Consolidated Statements of Changes in Equity
(unaudited)
(Dollar amounts in thousands)


For the nine months ended September 30, 2015


 
Number of Shares
 
Common
Stock
 
Additional Paid-in
Capital
 
Accumulated
Distributions in excess of Net Loss
 
Accumulated Other Comprehensive Income (Loss)
 
Noncontrolling Interests
 
Total
Balance at January 1, 2015
861,824,777

 
$
861

 
$
7,755,471

 
$
(3,820,882
)
 
$
57,599

 
$
3,780

 
$
3,996,829

Net income (loss)
—

 
—

 
—

 
(27,757
)
 
—

 
16

 
(27,741
)
Unrealized gain on investment securities
—

 
—

 
—

 
—

 
7,242

 
—

 
7,242

Unrealized loss on derivatives
—

 
—

 
—

 
—

 
(76
)
 
—

 
(76
)
Reclassification adjustment for amounts recognized in net income
—

 
—

 
—

 
—

 
(21,252
)
 
—

 
(21,252
)
Distributions declared
—

 
—

 
—

 
(110,601
)
 
—

 
—

 
(110,601
)
Contributions from noncontrolling interests, net
—

 
—

 
—

 
—

 
—

 
152

 
152

Restricted share units
—

 
—

 
1,202

 
—

 
—

 
—

 
1,202

Equity effect of Spin-Off of Xenia Hotels & Resorts, Inc.
—

 
—

 
(1,690,411
)
 
—

 
—

 
(3,823
)
 
(1,694,234
)
Balance at September 30, 2015
861,824,777
 
$
861

 
$
6,066,262

 
$
(3,959,240
)
 
$
43,513

 
$
125

 
$
2,151,521

See accompanying notes to the consolidated financial statements.

3

INVENTRUST PROPERTIES CORP.


Consolidated Statements of Changes in Equity
(unaudited)
(Dollar amounts in thousands)


For the nine months ended September 30, 2014


 
Number of Shares
 
Common
Stock
 
Additional Paid-in
Capital
 
Accumulated
Distributions in excess of Net Loss
 
Accumulated Other Comprehensive Income (Loss)
 
Noncontrolling Interests
 
Total
Balance at January 1, 2014
909,855,173

 
$
909

 
$
8,063,517

 
$
(3,870,649
)
 
$
71,128

 
$
1,736

 
$
4,266,641

Net income
—

 
—

 
—

 
192,523

 
—

 
16

 
192,539

Unrealized gain on investment securities
—

 
—

 
—

 
—

 
13,508

 
—

 
13,508

Unrealized loss on derivatives
—

 
—

 
—

 
—

 
(1,659
)
 
—

 
(1,659
)
Reclassification adjustment for amounts recognized in net income
—

 
—

 
—

 
—

 
(42,068
)
 
—

 
(42,068
)
Distributions declared
—

 
—

 
—

 
(329,144
)
 
—

 
—

 
(329,144
)
Contributions from noncontrolling interests
—

 
—

 
—

 
—

 
—

 
1,502

 
1,502

Proceeds from distribution reinvestment program
13,808,589

 
14

 
95,818

 
—

 
—

 
—

 
95,832

Share repurchase program
(1,077,829
)
 
(1
)
 
(7,480
)
 
—

 
—

 
—

 
(7,481
)
Repurchase of common stock
(60,761,166
)
 
(61
)
 
(396,369
)
 
 
 
—

 
—

 
(396,430
)
Balance at September 30, 2014
861,824,767

 
$
861

 
$
7,755,486

 
$
(4,007,270
)
 
$
40,909

 
$
3,254

 
$
3,793,240

See accompanying notes to the consolidated financial statements.


4
INVENTRUST PROPERTIES CORP.


Consolidated Statements of Cash Flows
(unaudited)
(Dollar amounts in thousands)

 
Nine months ended September 30,
 
2015
 
2014
Cash flows from operating activities:
 
 
 
Net income
$
(27,741
)
 
$
192,539

Adjustments to reconcile net income to net cash provided by operating activities
 
 
 
  Depreciation and amortization
122,914

 
259,566

  Amortization of above and below market leases, net
(1,241
)
 
(359
)
  Amortization of debt premiums, discounts and financing costs
5,829

 
10,118

  Straight-line rental income
901

 
(3,115
)
  Provision for asset impairment
92,167

 
80,281

  Gain on sale of investment properties, net
(7,957
)
 
(171,148
)
  Gain on extinguishment of debt
(1,395
)
 
(1,931
)
  Loss on contribution to unconsolidated joint venture
12,919

 
—

  Equity in earnings of unconsolidated entities
(33,341
)
 
(334
)
  Distributions from unconsolidated entities
3,883

 
6,206

  (Gain), loss and impairment of investment in unconsolidated entities, net
—

 
(4,509
)
  Realized gain on sale of marketable securities
(20,459
)
 
(42,998
)
Non-cash share based compensation
1,311

 
—

Changes in assets and liabilities:
 
 
 
  Accounts and rents receivable
(4,559
)
 
(11,357
)
  Deferred costs and other assets
15,533

 
5,182

  Accounts payable and accrued expenses
(8,335
)
 
25,712

  Other liabilities
(6,673
)
 
(19,023
)
Prepayment penalties and defeasance
—

 
(1,255
)
Net cash flows provided by operating activities
$
143,756

 
$
323,575

Cash flows from investing activities:
 
 
 
  Purchase of investment properties
(98,122
)
 
(194,900
)
  Acquired in-place and market lease intangibles, net
(4,645
)
 
(14,797
)
  Capital expenditures and tenant improvements
(21,768
)
 
(41,124
)
  Investment in development projects
(85,744
)
 
(73,470
)
  Proceeds from sale of investment properties, net
53,989

 
775,695

  Proceeds from sale of marketable securities
58,369

 
117,170

  Consolidation of joint venture
—

 
(2,944
)
Proceeds from the sale of and return of capital from unconsolidated entities
31,134

 
20,047

  Contributions to unconsolidated entities
(25,030
)
 
(38,909
)
  Distributions from unconsolidated entities
7,964

 
26,569

  Payment of leasing fees
(3,838
)
 
(3,055
)
  Restricted escrows and other assets
19,246

 
(22,144
)
  Payment of notes receivable
—

 
4

    Other liabilities
2,350

 
12,566

Net cash flows (used in) provided by investing activities
$
(66,095
)
 
$
560,708

 
 
 
 
 
 
 
 

5
INVENTRUST PROPERTIES CORP.


Consolidated Statements of Cash Flows
(unaudited)
(Dollar amounts in thousands)

 
Nine months ended September 30,
 
2015
 
2014
Cash flows from financing activities:
 
 
 
  Proceeds from distribution reinvestment program
$
—

 
$
95,832

  Shares repurchased
—

 
(403,911
)
  Distributions paid
(118,501
)
 
(331,147
)
  Proceeds from debt and notes payable
172,507

 
297,515

  Payoffs of debt
(293,404
)
 
(367,285
)
  Principal payments of mortgage debt
(20,384
)
 
(31,266
)
  Payoff of margin securities debt, net
—

 
(59,681
)
  Settlement of put/call arrangement
—

 
(47,762
)
  Payment of loan fees and deposits
(1,970
)
 
(636
)
  Contributions from noncontrolling interests, net
152

 
1,502

Payments for contingent consideration
—

 
(7,891
)
Cash contribution to Xenia Hotels & Resorts, Inc.
(165,884
)
 
—

Property level cash contributed to Xenia Hotels & Resorts, Inc.
(130,080
)
 
—

Net cash flows used in financing activities
$
(557,564
)
 
$
(854,730
)
Net (decrease) increase in cash and cash equivalents
(479,903
)
 
29,553

Cash and cash equivalents, at beginning of period
733,150

 
319,237

Cash and cash equivalents, at end of period
$
253,247

 
$
348,790




See accompanying notes to the consolidated financial statements.



6
INVENTRUST PROPERTIES CORP.


Consolidated Statements of Cash Flows
(unaudited)
(Dollar amounts in thousands)

 
Nine months ended September 30,
 
2015
 
2014
Supplemental disclosure of cash flow information:
 
 
 
Cash paid for interest, net capitalized interest of $6,569 and $3,022
$
72,332

 
$
159,193

 
 
 
 
Supplemental schedule of non-cash investing and financing activities:
 
 
 
Net equity distributed to Xenia Hotels & Resorts, Inc. (net of cash contributed)
$
1,484,872

 
$
—

Property surrendered in extinguishment of debt
$
—

 
$
11,000

Mortgage assumed by buyer upon disposal of property
$
—

 
$
657,339

Land contributed to an unconsolidated entity
$
46,174

 
$
—

Consolidation of assets from joint venture
$
—

 
$
21,833

Assumption of mortgage debt at consolidation of joint venture
$
—

 
$
11,967

Liabilities assumed at consolidation of joint venture
$
—

 
$
446






See accompanying notes to the consolidated financial statements.





7
INVENTRUST PROPERTIES CORP.


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)
September 30, 2015
(unaudited)

The accompanying Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. Readers of this Quarterly Report should refer to the audited consolidated financial statements of InvenTrust Properties Corp. (the "Company", and formerly known as Inland American Real Estate Trust, Inc.) for the year ended December 31, 2014, which are included in the Company’s 2014 Annual Report on Form 10-K, as certain note disclosures contained in such audited consolidated financial statements have been omitted from this Report. In the opinion of management, all adjustments (consisting of normal recurring accruals, except as otherwise noted) necessary for a fair presentation have been included in these financial statements.
1. Organization
Inland American Real Estate Trust, Inc., which on April 16, 2015, changed its name to InvenTrust Properties Corp., was formed on October 4, 2004 (inception) to acquire and manage a diversified portfolio of commercial real estate, primarily retail, office, industrial, multi-family (both conventional apartments and student housing), and lodging properties, located in the United States. The Company was party to a business management agreement with Inland American Business Manager and Advisor, Inc. (the "Business Manager") pursuant to which it served as the Company's business manager, with responsibility for overseeing and managing its day-to-day operations, under the supervision of the Company's board of directors. The Company was also party to property management agreements with each of its property managers (the "Property Managers").
On March 12, 2014, the Company began the process of becoming fully self-managed by terminating its business management agreement, hiring all of the employees of the Business Manager and acquiring the assets of its Business Manager necessary to perform the functions previously performed by the Business Manager. Similarly, as of March 12, 2014, certain functions performed by the Property Managers, such as property-level accounting, lease administration, leasing, marketing and construction functions, were transitioned to the Company. The self-management transactions were completed on December 31, 2014 when the Company acquired the assets of its property managers and hired substantially all of its employees and the remaining property management functions were transitioned to the Company.
On February 3, 2015, the Company completed the spin-off (the "Spin-Off") of its lodging subsidiary, Xenia Hotels & Resorts, Inc. ("Xenia"), through a taxable pro-rata distribution by the Company of 95% of the outstanding common stock of Xenia to holders of record of the Company’s common stock as of the close of business on January 20, 2015 (the “Record Date”). Each holder of record of the Company’s common stock received one share of Xenia’s common stock for every eight shares of the Company’s common stock held at the close of business on the Record Date. In lieu of fractional shares, stockholders of the Company received cash. On February 4, 2015, Xenia's common stock began trading on the New York Stock Exchange ("NYSE") under the ticker symbol "XHR". In connection with the Spin-Off, the Company entered into certain agreements that, among other things, provide a framework for the Company’s relationship with Xenia after the Spin-Off, including a Transition Services Agreement, an Employee Matters Agreement and an Indemnity Agreement. Following the Spin-Off, the Company no longer has a lodging segment. Therefore, the 46 lodging assets included in the Spin-Off have been classified as discontinued operations as the Spin-Off represents a strategic shift that has had a major effect on the Company's operations and financial results. The assets and liabilities of these 46 lodging assets are classified as assets and liabilities of discontinued operations on the consolidated balance sheet at September 30, 2015 and December 31, 2014 . The operations of these 46 lodging assets have been classified as income from discontinued operations on the consolidated statement of operations and comprehensive income for the three and nine months ended September 30, 2015 and 2014 .
The accompanying consolidated financial statements include the accounts of the Company, as well as all wholly-owned subsidiaries and consolidated joint venture investments. Wholly-owned subsidiaries generally consist of limited liability companies (LLCs) and limited partnerships (LPs). The effects of all significant intercompany transactions have been eliminated.
Each property is owned by a separate legal entity which maintains its own books and financial records and each entity's assets are not available to satisfy the liabilities of other affiliated entities, except as otherwise disclosed in "Note 8. Debt".
At September 30, 2015 , the Company owned 142 properties, in which the operating activity is reflected in continuing operations on the consolidated statements of operations and comprehensive income for the three and nine months ended September 30, 2015 and 2014 . At December 31, 2014 , the Company owned 188 properties, of which 46 lodging assets were

8
INVENTRUST PROPERTIES CORP.


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)
September 30, 2015
(unaudited)

included in the Spin-Off and classified as assets of discontinued operations. At September 30, 2014 , the Company owned 268 properties.
The breakdown, by segment, of the 142 owned properties at September 30, 2015 is as follows:
Segment
 
Property Count
 
Square Feet / Beds
Retail
 
110
 
15,876,103
Square feet
Student Housing
 
16
 
9,600
Beds
Non-core
 
16
 
5,844,751
Square feet
2. Summary of Significant Accounting Policies
The accompanying consolidated financial statements have been prepared in accordance with GAAP and require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Refer to the Company's audited financial statements for the year ended December 31, 2014, as certain note disclosures contained in such audited financial statements have been omitted from these interim consolidated financial statements.
Stock-Based Compensation
In accordance with FASB ASC Topic 718, Accounting for Share Based Compensation , companies are required to recognize in the income statement the grant-date fair value of stock options and other equity based compensation issued to employees. Under Topic 718, the way an award is classified will affect the measurement of compensation cost. Equity classified awards are measured at grant date fair value, and amortized on a straight-line basis over the vesting period of the stock and are not subsequently re-measured. Liability classified awards are measured at the grant date and are subsequently re-measured at the end of each period. The fair value of the non-vested stock awards for the purposes of recognizing stock-based compensation expense is the estimated market price of the Company's common stock on the grant date. At September 30, 2015 , the Company had two stock based compensation plans, which are discussed in "Note 13. Stock-Based Compensation". The compensation cost is based on awards that are expected to vest and has been reduced for estimated forfeitures.
Recently Issued Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers , which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in GAAP when it becomes effective, although it will not affect the accounting for rental related revenues. ASU No. 2014-09, as issued, was to be effective for financial statements issued for fiscal years and interim periods beginning after December 31, 2016. In April 2015, the FASB approved an amendment to the ASU, deferring the effective date one year to annual reporting periods beginning after December 15, 2017 for public entities. The standard permits the use of either the retrospective or cumulative effect transition method. Early adoption is prohibited. The Company is evaluating the effect that ASU No. 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.
In February 2015, the FASB issued ASU 2015-02, Consolidation .  This update includes amendments that change the requirements for evaluating limited partnerships and similar entities for consolidation.  Under the new guidance, limited partnerships and similar entities will be considered variable interest entities ("VIEs") unless a scope exception applies.  As such, entities that consolidate limited partnerships and similar entities that are considered to be VIEs will be subject to VIE primary beneficiary disclosure requirements, and entities that do not consolidate a VIE will be subject to the disclosure requirements that apply to variable interest holders other than the primary beneficiary.  The new guidance also eliminates three of the six criteria for determining if fees paid to a decision maker or service provider are considered to be variable interest in a VIE and changes the criteria used to determine if variable interests in a VIE held by related parties of a reporting entity require the reporting entity to consolidate the VIE.  This standard will be effective for financial statements issued by public companies for

9
INVENTRUST PROPERTIES CORP.


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)
September 30, 2015
(unaudited)

annual and interim reporting periods beginning after December 15, 2015.  The Company is continuing to evaluate this guidance; however, the Company does not expect its adoption to have a significant impact on the consolidated financial statements.
In April 2015, the FASB issued ASU 2015-03,  Simplifying the Presentation of Debt Issuance Costs , which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected. Upon adoption, the Company will apply the new guidance on a retrospective basis and adjust the balance sheet of each individual period presented to reflect the period-specific effects of applying the new guidance. This guidance is effective for the Company beginning January 1, 2016. The Company is continuing to evaluate this guidance; however, the Company does not expect its adoption to have a significant impact on the consolidated financial statements.
In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, which requires that if the initial accounting for a business combination is incomplete as of the end of the reporting period in which the acquisition occurs, the acquirer records provisional amounts based on information available at the acquisition date. This guidance is effective for the Company beginning January 1, 2016. The Company is continuing to evaluate this guidance; however, the Company does not expect its adoption to have a significant impact on the consolidated financial statements.

10
INVENTRUST PROPERTIES CORP.


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)
September 30, 2015
(unaudited)

3. Acquired Properties
The Company records identifiable assets, liabilities, noncontrolling interests and goodwill acquired in a business combination at fair value. The Company acquired two retail properties and one student housing property during the nine months ended September 30, 2015 , for an aggregate gross acquisition price of $103,000 . None were acquired during the three months ended September 30, 2015 . The student housing property acquired, Bishops Landing, has been demolished and the land will be used for a new student housing development. The table below reflects acquisition activity during the nine months ended September 30, 2015 .
Segment
 
Property
 
Date
 
Gross Acquisition Price
 
Square Feet
Retail
 
The Shops at Walnut Creek
 
4/10/2015
 
$
57,100

 
216,334

Square Feet
Retail
 
Westpark Shopping Center
 
5/12/2015
 
33,400

 
176,935

Square Feet
Retail, Subtotal
 
 
 
 
 
$
90,500

 
 
 
 
 
 
 
 
 
 
 
 
 
Student Housing
 
Bishops Landing (a)
 
4/27/2015
 
$
12,500

 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
 
$
103,000

 
 
 
(a) The Company has recorded the assets of the Bishops Landing acquisition as construction in progress on the consolidated balance sheet as of September 30, 2015 .
The following table summarizes the estimated fair value of the assets acquired and liabilities assumed for the nine months ended September 30, 2015 , as listed above.
 
2015 Acquisitions
Land
$
17,594

Building
70,138

Construction in progress
12,500

Total fixed assets
100,232

Net other assets and liabilities
2,768

Total
$
103,000

The Company placed in service two student housing properties and completed an addition on a third student housing property during the three and nine months ended September 30, 2015 . The following table summarizes the assets placed in service during the nine months ended September 30, 2015 :
 
2015 Assets
Placed In Service
Land
$
17,745

Building and other improvements
130,767

Total fixed assets
148,512

For properties acquired and assets placed in service during the nine months ended September 30, 2015 , the Company recorded revenue of $4,489 and $6,137 for the three and nine months ended September 30, 2015 , respectively. The Company recorded property net income of $2,924 and $4,083 , excluding related expensed acquisition costs, for the three and nine months ended September 30, 2015 . The Company incurred $155 and $577 of acquisition and transaction costs during the three and nine months ended September 30, 2015 , respectively, that were recorded in general and administrative expenses on the consolidated statements of operations and comprehensive income.

11
INVENTRUST PROPERTIES CORP.


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)
September 30, 2015
(unaudited)

The Company acquired three properties, including two retail properties and one lodging property for the nine months ended September 30, 2014 , for an aggregate gross acquisition price of $209,150 . The table below reflects acquisition activity during the nine months ended September 30, 2014 .
Segment
 
Property
 
Date
 
Gross Acquisition Price
 
Square Feet / Rooms
Retail
 
Suncrest Village
 
2/13/2014
 
$
14,050

 
93,358

Square Feet
Retail
 
Plantation Grove
 
2/13/2014
 
12,100

 
73,655

Square Feet
Retail, Subtotal
 
 
 
 
 
26,150

 
 
 
 
 
 
 
 
 
 
 
 
 
Lodging
 
Aston Waikiki Beach (a)
 
2/28/2014
 
183,000

 
645

Rooms
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
 
$
209,150

 
 
 
(a) Aston is the registered trademark of Aston Hotels & Resorts LLC and is the exclusive property of its owner.
The following table summarizes the estimated fair value of the assets acquired and liabilities assumed for the nine months ended September 30, 2014 , as listed above.
 
2014 Acquisitions
Land
$
10,446

Building
154,343

Furniture, fixtures, and equipment
27,087

Total fixed assets
$
191,876

Below market ground lease
9,516

Net other assets and liabilities
7,758

Total
$
209,150

For properties acquired as of September 30, 2014 , the Company recorded revenue of $12,399 and $26,601 for the three and nine months ended September 30, 2014 , respectively. The Company recorded property net income of $5,634 and $11,510 , excluding related expensed acquisition costs for the three and nine months ended September 30, 2014 . The Company incurred $27 and $1,337 of acquisition and transaction costs during the three and nine months ended September 30, 2014 , respectively, that were recorded in general and administrative expenses on the consolidated statements of operations and comprehensive income.

12
INVENTRUST PROPERTIES CORP.


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)
September 30, 2015
(unaudited)

4. Disposed Properties
The Company sold four operating properties and one land parcel during the nine months ended September 30, 2015 for an aggregate gross disposition price of $53,275 . The Company sold 249 properties, one parcel of land, and surrendered one property to the lender for the nine months ended September 30, 2014 for an aggregate gross disposition price of $1,476,500 . For the nine months ended September 30, 2015 and 2014 , the Company had generated net proceeds from the sale of properties of $53,989 and $775,695 , respectively.
The following properties were sold during the nine months ended September 30, 2015 . These properties have been included in continuing operations on the consolidated statement of operations and comprehensive income for the three and nine months ended September 30, 2015 . A parcel of land was also sold during the nine months ended September 30, 2015 for a gross disposition price of $1,410 .
Segment
 
Property
 
Date
 
Gross Disposition Price
 
Square Feet
Non-core
 
Las Plumas
 
4/1/2015
 
$
27,500

 
240,000

Square Feet
Non-core
 
Citizens - Manchester
 
7/9/2015
 
8,175

 
148,000

Square Feet
Non-core
 
SunTrust - Winston Salem
 
7/30/2015
 
1,875

 
10,188

Square Feet
Non-core
 
Tech II
 
7/31/2015
 
14,315

 
166,758

Square Feet
Total
 
 
 
 
 
$
51,865

 
 
 
For the three months ended September 30, 2015 and 2014 , the Company recorded a gain on sale of investment properties of $729 and $6,629 , respectively, in continuing operations. For the nine months ended September 30, 2015 and 2014 , the Company recorded a gain on sale of investment properties of $7,957 and $18,253 , respectively, in continuing operations.

13
INVENTRUST PROPERTIES CORP.


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)
September 30, 2015
(unaudited)

In line with the Company's adoption of the new accounting standard governing discontinued operations during the year ended December 31, 2014, only disposals representing a strategic shift that have (or will have) a major effect on results and operations would qualify as discontinued operations. On February 3, 2015, the Company completed the spin-off of its lodging subsidiary, Xenia Hotels & Resorts, Inc. The 46 assets included in the Spin-Off have been classified as discontinued operations as the Spin-Off represents a strategic shift that has had a major effect on the Company's operations and financial results. The assets and liabilities of these 46 assets are classified as assets and liabilities of discontinued operations on the consolidated balance sheet at December 31, 2014 . The operations of these 46 assets have been classified as income from discontinued operations on the consolidated statement of operations and comprehensive income for the three and nine months ended September 30, 2015 and 2014 . The major classes of assets and liabilities of discontinued operations as of September 30, 2015 and December 31, 2014 were as follows:
 
As of
 
September 30, 2015
 
December 31, 2014
Assets
 
 
 
Investment properties:
 
 
 
Land
$
—

 
$
338,313

Building and other improvements
—

 
2,710,647

Construction in progress
—

 
39,736

Total
—

 
3,088,696

Less accumulated depreciation
—

 
(505,986
)
Net investment properties
—

 
2,582,710

Cash and cash equivalents
—

 
134,245

Restricted cash and escrows
—

 
87,296

Accounts and rents receivable (net of allowance of $0 and $251)
—

 
26,502

Intangible assets, net
—

 
64,541

Deferred costs and other assets (a)
3,716

 
35,505

Total assets
$
3,716

 
$
2,930,799

Liabilities
 
 
 
Debt
—

 
1,199,027

Accounts payable and accrued expenses
—

 
88,356

Intangible liabilities, net
—

 
4,212

Other liabilities (b)
64

 
34,154

Total liabilities
$
64

 
$
1,325,749

(a) Deferred costs and other assets at September 30, 2015 primarily include receivables from Xenia related to hotel reserve escrows.
(b) Other liabilities at September 30, 2015 include tax liabilities related to hotel properties payable by the Company.

14
INVENTRUST PROPERTIES CORP.


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)
September 30, 2015
(unaudited)

For the three and nine months ended September 30, 2015 , the operations reflected in discontinued operations, shown in the table below, reflect the operations of the 46 lodging properties associated with the Spin-Off. For the three and nine months ended September 30, 2014 , the operations reflected in discontinued operations, shown in the table below, reflect the operations of the 46 lodging properties associated with the Spin-Off, the 52 select service lodging properties sold on November 17, 2014, the 3 stand-alone lodging properties sold in 2014, and the portfolio of 223 net lease properties sold in 2014. All other property disposals are now included as a component of income from continuing operations, consistent with the Company's adoption of ASU No. 2014-08.
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2015
 
September 30, 2014
 
September 30, 2015

September 30, 2014
Revenues
$
—

 
$
298,151

 
$
68,682

 
$
904,789

Depreciation and amortization expense
—

 
47,222

 
11,934

 
142,966

Other expenses
—

 
207,838

 
55,429

 
616,820

Provision for asset impairment
—

 
1,667

 
—

 
4,665

Operating income from discontinued operations
$
—

 
$
41,424

 
$
1,319

 
$
140,338

Interest expense, income taxes, and other miscellaneous income
713

 
(23,509
)
 
1,723

 
(74,355
)
Gain on sale of properties, net
—

 
6,557

 
—

 
152,895

Loss on extinguishment of debt
—

 
(115
)
 
—

 
(10,586
)
Net income from discontinued operations
$
713

 
$
24,357

 
$
3,042

 
$
208,292

Net cash (used in) provided by operating activities from the properties classified as discontinued operations was $(6,712) and $213,571 for the nine months ended September 30, 2015 and 2014 , respectively. Net cash (used in) provided by investing activities from the properties classified as discontinued operations was $(4,344) and $312,615 for the nine months ended September 30, 2015 and 2014 , respectively.

15
INVENTRUST PROPERTIES CORP.


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)
September 30, 2015
(unaudited)

5. Investment in Partially Owned Entities
Consolidated Entities
During the fourth quarter 2013, the Company entered into two joint ventures to each develop a lodging property. The Company had ownership interests of 75% in each joint venture. These entities were considered VIEs as defined in FASB ASC 810 because the entities did not have enough equity to finance their activities without additional subordinated financial support. The Company determined it had the power to direct the activities of the VIEs that most significantly impacted the VIEs' economic performance, as well as the obligation to absorb losses of the VIEs that could have potentially been significant to the VIEs or the right to receive benefits from the VIEs that could have potentially been significant to the VIEs. As such, the Company had a controlling financial interest and was considered the primary beneficiary of each of these entities. Therefore, these entities were consolidated by the Company and are included as a part of assets and liabilities of discontinued operations on the consolidated balance sheet at December 31, 2014. These entities were included in the Spin-Off on February 3, 2015 and are no longer part of the Company.
For the VIEs where the Company was the primary beneficiary, the following are the liabilities of the consolidated VIEs which were not recourse to the Company, and the assets that could only have been used to settle those obligations.
 
September 30, 2015
 
December 31, 2014
Net investment properties
$
—

 
$
39,736

Other assets
—

 
1,318

Total assets
—


41,054

Mortgages, notes and margins payable
—

 
(21,214
)
Other liabilities
—

 
(6,465
)
Total liabilities
—


(27,679
)
Net assets
$
—


$
13,375


16
INVENTRUST PROPERTIES CORP.


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)
September 30, 2015
(unaudited)

Unconsolidated Entities
The entities listed below are owned by the Company and other unaffiliated parties in joint ventures. Net income, distributions and capital transactions for these properties are allocated to the Company and its joint venture partners in accordance with the respective partnership agreements. Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 for details of each unconsolidated entity.
These entities are not consolidated by the Company and the equity method of accounting is used to account for these investments. Under the equity method of accounting, the net equity investment of the Company and the Company’s share of net income or loss from the unconsolidated entity are reflected in the consolidated balance sheets and the consolidated statements of operations and comprehensive income.
Entity
Description
Ownership %
Carrying Value of Investment at
Sept. 30, 2015
 
Carrying Value of Investment at
 December 31, 2014
IAGM Retail Fund I, LLC
Retail shopping centers
55%
$
126,694


$
109,273

Downtown Railyard Venture, LLC (a)
Land development
(a)
46,174

 
—

15th & Walnut Owner, LLC (b)
Student housing
62%
4,384

 
4,740

Cobalt Industrial REIT II  (c)
Industrial portfolio
36%
4,716


7,486

Other Unconsolidated Entities
Various real estate investments
Various
1,798


704




$
183,766

 
$
122,203

(a) On September 30, 2015, the Company was admitted as a member to Downtown Railyard Venture, LLC ("DRV"), which is a joint venture established in order to develop and sell a land development. Simultaneously, the Company structured and closed the sale of a non-core land development to DRV, which for accounting purposes is treated as a contribution of the land development to DRV in exchange for an equity interest of $46,174 in DRV (the foregoing transaction is referred to as the “Railyards Transaction”). The Company recorded a loss of $12,919 on the Railyards Transaction during the three and nine months ended September 30, 2015 due to the difference between the carrying value of the land and the fair value of the equity interest. The Company's ownership percentage in DRV is based upon a waterfall calculation outlined in the operating agreement. The joint venture partner is the developer and managing member of DRV, responsible for the day-to-day activities and earns fees for managing the venture. The Company analyzed the joint venture agreement and determined that DRV is not a variable interest entity. The Company also considered the participating rights under the joint venture agreement and determined that both partners have the ability to participate in major decisions, which equates to shared decision making ability. As such, both partners have significant influence but do not control DRV. Therefore, the Company does not consolidate this entity and accounts for its investment in the entity under the equity method of accounting. As of September 30, 2015, the carrying amount of the Company's investment in this entity was $46,174 .
(b) On February 4, 2013, the Company entered into a joint venture agreement with Gerding Edlen Investors, LLC ("GE") in order to develop, construct and manage a student housing community on the campus of the University of Oregon in Eugene, Oregon, which was completed later in 2013 and is now fully operational. The joint venture is known as 15th & Walnut Owner, LLC ("Eugene"). The Company contributed $5,200 for an equity stake of 62% . The Company analyzed the joint venture and determined it is a VIE because the entity did not have enough equity to finance its activities without additional subordinated financial support. The Company also considered its participating rights under the joint venture agreement and determined that such participating rights also required the agreement of GE, which equates to shared decision making ability, and therefore the Company did not have the power to direct the activities of the VIE that most significantly impacted the VIE's economic performance. As such, the Company has significant influence but does not control Eugene. Therefore, the Company does not consolidate this entity and accounts for its investment in the entity under the equity method of accounting.
(c) On December 18, 2014, Cobalt Industrial REIT II ("Cobalt") sold all of its real estate assets, and the Company recognized its share of the gain on the sale of the assets in equity in earnings for the year ended December 31, 2014. During the three months ended September 30, 2015 , the Company recorded receipt of a cash dividend from the joint venture. The balance of this joint venture at September 30, 2015 reflects the Company's expected return of the joint venture's remaining cash assets.

17
INVENTRUST PROPERTIES CORP.


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)
September 30, 2015
(unaudited)

On February 21, 2014, the Company purchased its partners' interest in one joint venture, which resulted in the Company obtaining control of the venture. Therefore, as of September 30, 2014 , the Company consolidated this entity, recorded the assets and liabilities of the joint venture at fair value, and recorded a gain of $4,509 on the purchase of this investment during the nine months ended September 30, 2014 . This gain is included as a discontinued operation on the consolidated statement of operations and comprehensive income for the nine months ended September 30, 2014 . This asset was included in the select service lodging portfolio sold on November 17, 2014.
During the three and nine months ended September 30, 2015 and 2014, the Company recorded no impairment on its unconsolidated entities.
Combined Financial Information
The following tables present the combined condensed financial information for the Company’s investment in unconsolidated entities.
 
September 30, 2015
 
December 31, 2014
Assets:
 
 
 
Real estate assets, net of accumulated depreciation
$
633,018

 
$
606,053

Other assets
119,209

 
186,220

Total assets
$
752,227

 
$
792,273

Liabilities and equity:
 
 
 
Mortgage debt
303,043

 
416,374

Other liabilities
77,453

 
72,994

Equity
371,731

 
302,905

Total liabilities and equity
$
752,227

 
$
792,273

Company’s share of equity
$
197,891

 
$
136,743

Net excess of the net book value of underlying assets over the cost of investments (net of accumulated amortization of $1,500 and $1,085, respectively)
(14,125
)
 
(14,540
)
Carrying value of investments in unconsolidated entities
$
183,766

 
$
122,203

 
Three Months Ended
 
Nine Months Ended
 
September 30, 2015
 
September 30, 2014
 
September 30, 2015
 
September 30, 2014
Revenues
$
17,120

 
$
48,036

 
$
85,836

 
$
148,760

Expenses:
 
 
 
 
 
 
 
Interest expense and loan cost amortization
5,257

 
6,713

 
13,075

 
31,718

Depreciation and amortization
4,849

 
23,215

 
17,465

 
56,978

Operating expenses, ground rent and general and administrative expenses
5,799

 
22,602

 
16,159

 
60,678

Total expenses
15,905

 
52,530

 
46,699


149,374

Net income (loss)
$
1,215

 
$
(4,494
)
 
$
39,137


$
(614
)
Company’s share of:
 
 
 
 
 
 
 
Net income (loss), net of excess basis depreciation of $130 and $129, and $390 and $385, respectively
$
794

 
$
(2,089
)
 
$
15,710

 
$
627


18
INVENTRUST PROPERTIES CORP.


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)
September 30, 2015
(unaudited)

Equity in earnings of unconsolidated entities on the consolidated statement of operations and comprehensive income of $5,358 and $33,341 for the three and nine months ended September 30, 2015 , respectively, include nonrecurring distributions from the sale of assets within two joint ventures that are in excess of the investments' carrying value by $4,564 and $17,631 for the three and nine months ended September 30, 2015 , respectively.
The unconsolidated entities had total third party debt of $303,043 at September 30, 2015 that matures as follows:
Year
Amount
2015
$
—

2016
31,490

2017
—

2018
204,028

2019
16,250

Thereafter
51,275

 
$
303,043

Of the total outstanding debt, approximately $24,000 is recourse to the Company. It is anticipated that the joint ventures will be able to repay or refinance all of their debt on a timely basis.

19
INVENTRUST PROPERTIES CORP.


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)
September 30, 2015
(unaudited)

6. Transactions with Related Parties
As of January 1, 2015, the Company is no longer a related party to The Inland Group, Inc. (the "Inland Group") as described below.
On March 12, 2014, the Company entered into a series of agreements and amendments to existing agreements with affiliates of the Inland Group pursuant to which the Company began the process of becoming entirely self-managed (collectively, the "Self-Management Transactions"). On March 12, 2014, as part of the Self-Management Transactions, the Company, the Business Manager, Inland American Lodging Advisor, Inc., a wholly owned subsidiary of the Business Manager ("ILodge"), the Property Managers, Inland American Industrial Management LLC ("Inland Industrial"), Inland American Office Management LLC ("Inland Office") and Inland American Retail Management LLC ("Inland Retail"), their parent, Inland American Holdco Management LLC (“Holdco”) and collectively with Inland Industrial, Inland Office and Inland Retail, and Eagle I Financial Corp. ("Eagle") entered into a Master Modification Agreement (the "Master Modification Agreement") pursuant to which the Company agreed with the Business Manager to terminate the management agreement with the Business Manager, hired all of the Business Manager’s employees and acquired the assets or rights necessary to conduct the functions previously performed for the Company by the Business Manager. The Company also hired certain Property Manager employees and assumed responsibility for performing significant property management activities. The Company assumed certain limited liabilities of the Business Manager and the Property Managers, including accrued liabilities for employee holiday, sick and vacation time for those Business Manager and Property Manager employees who became employees of the Company and liabilities arising after the closing of the Master Modification Agreement under leases and contracts assigned to the Company. The Company did not assume, and the Business Manager is obligated to indemnify the Company against, any liabilities related to the pre-closing operations of the Business Manager. Eagle, an indirect wholly owned subsidiary of the Inland Group, guaranteed the Business Manager’s indemnity and other obligations under the Master Modification Agreement. The Company did not pay an internalization fee or self-management fee in connection with the Master Modification Agreement but reimbursed the Business Manager and Property Managers for specified transaction related expenses and employee payroll costs. The Company entered into a consulting agreement with Inland Group affiliates for a term of three months at $200 per month, which the Company elected not to renew pursuant to its terms.
Concurrently, as part of the Self-Management Transactions, the Company entered into an Asset Acquisition Agreement (the "Asset Acquisition Agreement") with the Property Managers and Eagle, pursuant to which the Company agreed to terminate the management agreements with the Property Managers at the end of 2014, hire certain of the remaining Property Manager employees and acquire the assets or rights necessary to conduct the remaining functions performed for the Company by the Property Managers. The Company agreed to assume certain limited liabilities, including accrued liabilities for employee holiday, sick and vacation time for Property Manager employees that became Company employees and liabilities arising after the closing of the Asset Acquisition Agreement under leases and other contracts that the Company assumed in the transaction. The Company did not assume any liabilities related to the pre-closing operations of the Property Managers, and it did not pay an internalization fee or self-management fee in connection with the Asset Acquisition Agreement. The Company consummated the transactions contemplated thereby on December 31, 2014.
Also on March 12, 2014, as part of the Self-Management Transactions, the Company entered into separate Amended and Restated Master Management Agreements (collectively, the "Amended Property Management Agreements") with each of the Property Managers (excluding Holdco), pursuant to which the Property Managers continued to provide property management services to the Company through December 31, 2014, other than the property-level accounting, lease administration, leasing, marketing and construction functions that the Company began performing pursuant to the Master Modification Agreement. The Company transitioned the remaining property management functions on December 31, 2014. Many of the employees of the Company's former Business Manager and former Property Managers are now directly employed by the Company. The Amended Property Management Agreements terminated on December 31, 2014 pursuant to their terms.

20
INVENTRUST PROPERTIES CORP.


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)
September 30, 2015
(unaudited)

The following table summarizes the Company’s related party transactions for the three and nine months ended September 30, 2015 and 2014 .
 
Three Months Ended
 
Nine Months Ended
 
Unpaid amounts as of
 
September 30, 2015
September 30, 2014
 
September 30, 2015
September 30, 2014
 
September 30, 2015
December 31, 2014
General and administrative:
 
 
 
 
 
 
 
 
General and administrative reimbursement (a)
$
—

$
1,202

 
$
—

$
6,089

 
$
—

$
331

Investment advisor fee (b)
—

237

 
—

922

 
—

80

Total general and administrative to related parties
$
—

$
1,439

 
$
—

$
7,011

 
$
—

$
411

Property management
fees (c)
$
—

$
2,773

 
$
—

$
9,496

 
$
—

$
75

Business management
fee (d)
$
—

$
—

 
$
—

$
2,605

 
$
—

$
—

Loan placement fees (e)
$
—

$
1

 
$
—

$
224

 
$
—

$
—

(a)
In connection with the closing of the Master Modification Agreement and termination of the business management agreement on March 12, 2014 , the Company reimbursed the Business Manager for compensation and other ordinary course out-of-pocket expenses, which totaled approximately $3,401 . In addition, the Company reimbursed the Property Managers approximately $249 for compensation and out-of-pocket expenses incurred between January 1, 2014 and March 12, 2014 for the Property Manager employees the Company hired at closing to approximate the economics as though the Company had hired such employees on January 1, 2014. These costs are reflected in general and administrative reimbursements above.
In addition, the Company has directly retained affiliates of the Business Manager to provide back-office services that were provided to the Company through the Business Manager prior to the termination of the business management agreement. These service agreements are generally terminable without penalty by either party upon 60 days’ notice. These costs are reflected in general and administrative reimbursements above. During the year ended December 31, 2014, the Company sent termination notices for agreements with those affiliates of the Business Manager which provided information technology and investor services to the Company. During the nine months ended September 30, 2015 , the Company sent a termination notice for the agreement with those affiliates of the Business Manager which provided human resource services to the Company. The Business Manager and its related parties are entitled to reimbursement for general and administrative expenses of the Business Manager and its related parties relating to the Company's administration.
Unpaid amounts of $411 as of December 31, 2014 are included in accounts payable and accrued expenses on the consolidated balance sheet.
(b)
The Company paid a related party of the Business Manager to purchase and monitor its investment in marketable securities. The Company terminated this agreement during the nine months ended September 30, 2015 .
(c)
As part of the Self-Management Transactions, select Property Management fees charged to the Company were reduced effective January 1, 2014 to reflect, among other things, the hiring of the Property Manager employees and the services that were no longer being performed by the Property Managers. The Amended Property Management Agreements reduced the property management fees charged in respect of most of the Company’s multi-tenant retail properties to 3.50% of gross income generated by the applicable property for the first six months of 2014, and reduced fees charged in respect of the Company’s multi-tenant office properties to 3.50% of gross income generated by the applicable property for the first six months of 2014. The Company also agreed to assume responsibility for the compensation-related expenses of the Property Manager employees hired by the Company effective March 1, 2014 .

21
INVENTRUST PROPERTIES CORP.


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)
September 30, 2015
(unaudited)

Unpaid amounts of $75 as of December 31, 2014 are included in other liabilities on the consolidated balance sheet.
In addition to these fees, the Property Managers received reimbursements of payroll costs for property level employees. The Company reimbursed the Property Managers and other affiliates $1,274 and $4,569 for the three and nine months ended September 30, 2014 , respectively.
(d)
In connection with the closing of the Master Modification Agreement and termination of the business management agreement, the Company paid a business management fee for January 2014, which totaled approximately $3,333 . The Company did not pay a business management fee subsequent to January 31, 2014. Pursuant to the letter agreement dated May 4, 2012, the business management fee was reduced for investigation costs exclusive of legal fees incurred in conjunction with the SEC matter. The Master Modification Agreement contained a ninety-day reconciliation of certain payments and reimbursements, including the January 2014 business management fee. The reconciliation was completed during the nine months ended September 30, 2014, which resulted in $728 of SEC-related investigation costs and an adjusted January 2014 business management fee expense of $2,605 . Pursuant to the March 12, 2014 Self-Management Transactions, the May 4, 2012 letter agreement by the Business Manager has been terminated.
(e)
The Company pays a related party of the Business Manager 0.2% of the principal amount of each loan placed for the Company. Such costs are capitalized as loan fees and amortized over the respective loan term.
As of September 30, 2015 and December 31, 2014 , the Company had deposited $377 and $376 , respectively, in Inland Bank and Trust, a subsidiary of Inland Bancorp, Inc., an affiliate of The Inland Real Estate Group, Inc.
7. Investment in Marketable Securities
Investment in marketable securities of $184,375 and $154,753 at September 30, 2015 and December 31, 2014 , respectively, consists primarily of preferred and common stock investments in other REITs and certain real estate related bonds which are classified as available-for-sale securities and recorded at fair value. The cost basis net of impairments of available-for-sale securities was $138,318 and $95,480 as of September 30, 2015 and December 31, 2014 , respectively. The Company's investment in marketable securities includes a 5% ownership of the outstanding common stock of Xenia. The Company held an investment in Xenia securities reported at its fair value of $98,996 as of September 30, 2015 . The cost basis of the Xenia securities held by the Company was $80,748 as of September 30, 2015 , which is equal to 5% of the net equity, at historical cost basis, contributed to Xenia at the time of the Spin-Off.
Unrealized holding gains and losses on available-for-sale securities are excluded from earnings and reported as a separate component of comprehensive income until realized. The Company has net accumulated other comprehensive income related to its marketable securities portfolio of $46,057 and $59,273 , which includes gross unrealized losses of $1,723 and $1,328 related to its marketable securities as of September 30, 2015 and December 31, 2014 , respectively. Securities with gross unrealized losses have a related fair value of $7,842 and $11,502 as of September 30, 2015 and December 31, 2014 , respectively. The unrealized gain on the Xenia securities held by the Company was $18,248 as of September 30, 2015 .
The Company’s policy for assessing recoverability of its available-for-sale securities is to record a charge against net earnings when the Company determines that a decline in the fair value of a security drops below the cost basis and believes that decline to be other-than-temporary. Factors in the assessment of other-than-temporary impairment include determining whether (1) the Company has the ability and intent to hold the security until it recovers, and (2) the length of time and degree to which the security’s price has declined. No impairment to available-for-sale securities was recorded for the three and nine months ended September 30, 2015 and 2014.
Dividend income is recognized when earned. During the three months ended September 30, 2015 and 2014 , dividend income of $2,390 and $2,193 , respectively, was recognized and is included in interest and dividend income on the consolidated statements of operations and comprehensive income. During the nine months ended September 30, 2015 and 2014 , dividend income of $7,853 and $9,581 , respectively, was recognized and is included in interest and dividend income on the consolidated statements of operations and comprehensive income.

22
INVENTRUST PROPERTIES CORP.


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)
September 30, 2015
(unaudited)

8. Debt
Mortgages Payable
Mortgage loans outstanding as of September 30, 2015 and December 31, 2014 were $1,856,346 and $2,999,968 , respectively, and had a weighted average interest rate of 4.96% and 4.63% per annum, respectively. Of the mortgage loans outstanding at December 31, 2014 , approximately $1,200,688 related to liabilities of discontinued operations. Mortgage premium and discount, net, was a discount of $6,826 and $9,332 as of September 30, 2015 and December 31, 2014 , respectively. Of this net mortgage discount, $1,661 related to liabilities of discontinued operations at December 31, 2014 . As of September 30, 2015 , scheduled maturities for the Company’s outstanding mortgage indebtedness had various due dates through December 2041, as follows:
Maturity Date
 
As of September 30, 2015
 
Weighted average interest rate
2015
 
$
11,400

 
10.04%
2016
 
265,172

 
4.85%
2017
 
788,801

 
5.43%
2018
 
186,261

 
2.82%
2019
 
—

 
—%
Thereafter
 
604,712

 
4.95%
Total
 
$
1,856,346

 
4.96%
The Company is negotiating refinancing debt maturing in 2015. It is anticipated that the Company will be able to repay, refinance or extend the debt maturing in 2015, and the Company believes it has adequate sources of funds to meet short term cash needs related to these refinancings. Of the total outstanding debt for all years, approximately $41,629 is recourse to the Company at September 30, 2015 .
Some of the mortgage loans require compliance with certain covenants, such as debt coverage service ratios, investment restrictions and distribution limitations. As of September 30, 2015 , the Company was in compliance with all mortgage loan requirements except two loans with a carrying value of $14,087 . These loans are not cross collateralized with any other mortgage loans or recourse to the Company. The stated maturities of the mortgage loans in default at September 30, 2015 were reflected as follows: $11,400 in 2015 and $2,687 in 2016. Subsequent to September 30, 2015, the 2015 maturity of $11,400 was extinguished using proceeds from the sale of the underlying asset. As of December 31, 2014 , the Company was in compliance with all such covenants, with the exception of one lodging property which was closed for business during the fourth quarter of 2014 due to earthquake damage. This property was included in the Spin-Off.
Line of Credit
On February 3, 2015 , the Company entered into an amended and restated credit agreement for a $300,000 unsecured revolving line of credit with KeyBank National Association, JP Morgan Chase Bank National Association and other financial institutions. The accordion feature allows the Company to increase the size of its unsecured line of credit up to $600,000 , subject to certain conditions. The unsecured revolving line of credit matures on February 2, 2019 and contains one twelve-month extension option that the Company may exercise upon payment of an extension fee equal to 0.15% of the commitment amount on the maturity date and subject to certain other conditions. The unsecured revolving line of credit bears interest at a rate equal to LIBOR plus 1.40% and requires the maintenance of certain financial covenants. As of September 30, 2015 , the Company was in compliance with all of the covenants and default provisions under the credit agreement. The Company had $299,963 available under the revolving line of credit as of September 30, 2015 . As of September 30, 2015 , the interest rate of the revolving line of credit was 1.40% .
In 2013, the Company entered into a credit agreement with KeyBank National Association, JP Morgan Chase Bank National Association and other financial institutions to provide for a senior unsecured credit facility in the aggregate amount of $500,000 . The credit facility consisted of a $300,000 senior unsecured revolving line of credit and a total outstanding term loan of $200,000 . As of December 31, 2014, the interest rates of the revolving line of credit and unsecured term loan were 1.60% and 1.67% , respectively. Upon closing the credit agreement, the Company borrowed the full amount of the term loan which remained outstanding as of December 31, 2014 and was repaid during the nine months ended September 30, 2015 . As of December 31, 2014, the Company had $300,000 available under the revolving line of credit. This credit agreement was refinanced on February 3, 2015, as described above.

23
INVENTRUST PROPERTIES CORP.


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)
September 30, 2015
(unaudited)

9. Fair Value Measurements
In accordance with ASC 820, Fair Value Measurement and Disclosures, the Company defines fair value based on the price that would be received upon sale of an asset or the exit price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value. The fair value hierarchy consists of three broad levels, which are described below:
•
Level 1 - Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.
•
Level 2 - Observable inputs, other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
•
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
The Company has estimated the fair value of its financial and non-financial instruments using available market information and valuation methodologies the Company believes to be appropriate for these purposes. Considerable judgment and a high degree of subjectivity are involved in developing these estimates and, accordingly, they are not necessarily indicative of amounts that would be realized upon disposition.
Recurring Measurements
For assets and liabilities measured at fair value on a recurring basis, quantitative disclosure of the fair value for each major category of assets and liabilities is presented below:
 
 
Fair Value Measurements at September 30, 2015
 
 
Using Quoted Prices in Active Markets for Identical Assets
 
Using Significant
Other Observable Inputs
 
Using Significant
Other Unobservable Inputs
 
 
(Level 1)
 
(Level 2)
 
(Level 3)
Available-for-sale real estate equity securities
 
$
182,058

 
$
—

 
$
—

Real estate related bonds
 
—

 
2,317

 
—

    Total assets
 
$
182,058

 
$
2,317

 
$
—

Derivative interest rate instruments
 
—

 
(2,607
)
 
—

     Total liabilities
 
$
—

 
$
(2,607
)
 
$
—

 
 
Fair Value Measurements at December 31, 2014
 
 
Using Quoted Prices in Active Markets for Identical Assets
 
Using Significant
 Other Observable Inputs
 
Using Significant
 Other Unobservable Inputs
 
 
(Level 1)
 
(Level 2)
 
(Level 3)
Available-for-sale real estate equity securities
 
$
151,062


$
—


$
—

Real estate related bonds
 
—


3,691


—

    Total assets
 
$
151,062


$
3,691


$
—

Derivative interest rate instruments
 
—


(1,744
)

—

     Total liabilities
 
$
—


$
(1,744
)

$
—


24
INVENTRUST PROPERTIES CORP.


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)
September 30, 2015
(unaudited)

Level 1
At September 30, 2015 and December 31, 2014 , the fair value of the available-for-sale real estate equity securities have been valued based upon quoted market prices for the same or similar issues when current quoted market prices were available. Unrealized gains or losses on investment are reflected in unrealized gain (loss) on investment securities in comprehensive income on the consolidated statements of operations and comprehensive income.
Level 2
To calculate the fair value of the real estate related bonds and the derivative interest rate instruments, the Company primarily uses quoted prices for similar securities and contracts. For the real estate related bonds, the Company reviews price histories for similar market transactions. For the derivative interest rate instruments, the Company uses inputs based on data that is observed in the forward yield curve which is widely observable in the marketplace.  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 which utilizes Level 3 inputs, such as estimates of current credit spreads. However, as of September 30, 2015 and December 31, 2014 , the Company determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. As of September 30, 2015 and December 31, 2014 , the Company had outstanding interest rate swap agreements with a notional value of $47,000 and $51,283 , respectively.
Level 3
At September 30, 2015 and December 31, 2014 , the Company had no Level 3 recurring fair value measurements.
Nonrecurring Measurements
The following table summarizes activity for the Company’s assets measured at fair value on a nonrecurring basis. The Company recognized certain impairment charges to reflect the investments at their fair values for the three and nine months ended September 30, 2015 and 2014. The asset groups that were reflected at fair value through this evaluation are:
 
For the three months ended
 
September 30, 2015
 
September 30, 2014
 
Fair Value Measurements Using Significant Unobservable Inputs
 (Level 3)
 
Total
Impairment
Losses
 
Fair Value Measurements Using Significant Unobservable Inputs
(Level 3)
 
Total
 Impairment
Losses
Investment properties
$
59,092

 
$
92,167

 
$
7,343

 
$
670

Total
$
59,092


$
92,167


$
7,343


$
670

 
For the nine months ended
 
September 30, 2015
 
September 30, 2014
 
Fair Value Measurements Using Significant Unobservable Inputs
(Level 3)
 
Total
Impairment
Losses
 
Fair Value Measurements Using Significant Unobservable Inputs
(Level 3)
 
Total
Impairment
Losses
Investment properties
$
59,092

 
$
92,167

 
$
137,723

 
$
75,616

Total
$
59,092

 
$
92,167

 
$
137,723

 
$
75,616

Investment Properties
During the three and nine months ended September 30, 2015 , the Company completed the Railyards Transaction. See joint venture disclosure in "Note 5. Investment in Partially Owned Entities". The Company’s estimated fair value relating to the investment property's impairment analysis was based on a third party independent appraisal obtained as of September 30, 2015. The appraisal utilized a twelve -year discounted cash flow model, which includes inflows and outflows over a specific holding

25
INVENTRUST PROPERTIES CORP.


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)
September 30, 2015
(unaudited)

period. The cash flows consist of unobservable inputs such as forecasted revenues and expenses. These unobservable inputs are based on market conditions and expected growth rates. A discount rate of 14% was utilized in the model and is based upon observable rates within a reasonable range of current market rates. It was determined the property was impaired and therefore was written down to fair value. The Company recorded an impairment charge of $92,167 for this property for the three and nine months ended September 30, 2015 .
During the three and nine months ended September 30, 2014 , the Company identified certain properties which may have a reduction in the expected holding period and reviewed the probability of these assets' dispositions. The Company's estimated fair value relating to the investment properties' impairment analysis was based on a comparison of letters of intent or purchase contracts, broker opinions of value and ten -year discounted cash flow models, which includes contractual inflows and outflows over a specific holding period. The cash flows consist of observable inputs such as contractual revenues and unobservable inputs such as forecasted revenues and expenses. These unobservable inputs are based on market conditions and the Company's expected growth rates. During the three and nine months ended September 30, 2014 , capitalization rates ranging from 6.00% to 9.00% and discount rates ranging from 6.75% to 9.25% were utilized in the model. These rates are based upon observable rates that the Company believes to be within a reasonable range of current market rates. Additionally, during the nine months ended September 30, 2014 , one asset previously classified as held for sale was re-classified as held and used and was re-measured at the lesser of the carrying value or fair value as of May 8, 2014, resulting in an impairment charge to this asset of $67,647 .
For the three months ended September 30, 2015 and 2014, the Company recorded an impairment of investment properties of $92,167 and $670 , respectively, in continuing operations. For the nine months ended September 30, 2015 and 2014, the Company recorded an impairment of investment properties of $92,167 and $75,616 , respectively, in continuing operations.
Certain properties were impaired prior to disposal. There were no related impairment charges for those properties included in discontinued operations for the three and nine months ended September 30, 2015 . There were $1,667 and $4,665 related impairment charges for those properties included in discontinued operations for the three and nine months ended September 30, 2014 , respectively.
Financial Instruments Not Measured at Fair Value
The table below represents the fair value of financial instruments presented at carrying values in the Company's consolidated financial statements as of September 30, 2015 and December 31, 2014 .
 
September 30, 2015

December 31, 2014
 
Carrying Value
Estimated 
Fair Value

Carrying Value
Estimated 
Fair Value
Mortgages payable
$
1,856,346

$
1,870,328


$
2,999,968

$
3,022,002

Line of credit
$
37

$
37

 
$
200,000

$
200,000

The Company estimates the fair value of its mortgages payable using a weighted average effective interest rate of 4.45% per annum. The fair value estimate of the line of credit approximates the carrying value. The assumptions reflect the terms currently available on similar borrowing terms to borrowers with credit profiles similar to the Company's. The Company has determined that its debt instrument valuations are classified in Level 2 of the fair value hierarchy.

26
INVENTRUST PROPERTIES CORP.


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)
September 30, 2015
(unaudited)

10. Income Taxes
The Company has elected and has operated so as to qualify to be taxed as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"), commencing with the tax year ended December 31, 2005. So long as it qualifies as a REIT, the Company generally will not be subject to federal income tax on taxable income that is distributed currently to stockholders. A REIT is subject to a number of organizational and operational requirements including a requirement that it currently distribute at least 90% of its REIT taxable income (subject to certain adjustments) to its stockholders each year. If the Company fails to qualify as a REIT in any taxable year, without the benefit of certain relief provisions, the Company will be subject to federal and state income tax on its taxable income at regular corporate tax rates and would not be able to re-elect REIT during the four years following the year of the failure. 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 federal income and excise taxes on its undistributed income. In addition, the Company owns substantially all of the outstanding stock of a subsidiary REIT, MB REIT (Florida), Inc. ("MB REIT"), which the Company consolidates for financial reporting purposes but which is treated as a separate REIT for federal income tax purposes.
The Company has elected to treat certain of its consolidated subsidiaries, and may in the future elect to treat newly formed subsidiaries, as taxable REIT subsidiaries pursuant to the Code. Taxable REIT subsidiaries may participate in non-real estate related activities and/or perform non-customary services for tenants and are subject to federal and state income tax at regular corporate tax rates. The Company's hotels were leased to certain of the Company's taxable REIT subsidiaries. Lease revenue from these taxable REIT subsidiaries and the Company's wholly-owned subsidiaries is eliminated in consolidation.
For the three months ended September 30, 2015 and 2014 , an income tax expense of $1,579 and $454 , respectively, was included in continuing operations on the consolidated statements of operations and comprehensive income. For the nine months ended September 30, 2015 and 2014 , an income tax expense of $2,445 and $1,196 , respectively, was included in continuing operations on the consolidated statements of operations and comprehensive income.
For the three months ended September 30, 2015 and 2014 income tax benefit of $1,182 and expense of $1,862 , respectively, was included in net income from discontinued operations on the consolidated statements of operations and comprehensive income. For the nine months ended September 30, 2015 and 2014 , income tax expense of $988 and $5,786 , respectively, was included in net income from discontinued operations on the consolidated statements of operations and comprehensive income.

27
INVENTRUST PROPERTIES CORP.


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)
September 30, 2015
(unaudited)

11. Segment Reporting
The Company's current portfolio strategy is to tailor and grow the retail and student housing segments and dispose of the remaining non-core assets. The Company's objective has been, and will continue to be, maximizing stockholder value over the long-term. The non-core segment includes multi-tenant office and triple-net properties. Net operating income of the segments excludes interest expense, depreciation and amortization, general and administrative expenses, net income of noncontrolling interest and other investment income from corporate investments. The non-segmented assets primarily include the Company’s cash and cash equivalents, investments in marketable securities, construction in progress, investment in unconsolidated entities and notes receivable.
For the nine months ended September 30, 2015 , approximately 13% of the Company’s retail and non-core revenue from continuing operations was generated by three properties leased to AT&T, Inc. As a result of the concentration of revenue generated from these properties, if AT&T, Inc. were to cease paying rent or fulfilling its other monetary obligations, the Company would have significantly reduced revenues and/or higher expenses until the defaults were cured or the properties were leased to a new tenant or tenants, if at all. The student housing segment was not considered in this analysis as leases are on a per bed basis, for a year or less, and are immaterial when evaluated individually.
The following table summarizes net property operations income by segment as of and for the three months ended September 30, 2015 .
 
Total
 
Retail
 
Student Housing
 
Non-core
Rental income
$
92,877

 
$
51,637

 
$
20,342

 
$
20,898

Straight line adjustment
216

 
815

 
35

 
(634
)
Tenant recovery income
16,819

 
15,473

 
162

 
1,184

Other property income
2,827

 
684

 
1,273

 
870

Total income
112,739

 
68,609

 
21,812

 
22,318

Operating expenses
33,423

 
21,198

 
9,198

 
3,027

Net operating income
$
79,316

 
47,411

 
12,614

 
19,291

Non-allocated expenses (a)
(55,757
)
 
 
 
 
 
 
Other income and expenses (b)
(33,102
)
 
 
 
 
 
 
Equity in earnings of unconsolidated entities
5,358

 
 
 
 
 
 
Provision for asset impairment (c)
(92,167
)
 
 
 
 
 
 
Net loss from continuing operations
$
(96,352
)
 
 
 
 
 
 
Net income from discontinued operations (d)
713

 
 
 
 
 
 
Less: net income attributable to noncontrolling interests
(8
)
 
 
 
 
 
 
Net loss attributable to Company
$
(95,647
)
 
 
 
 
 
 
(a)  
Non-allocated expenses consists of general and administrative expenses and depreciation and amortization.
(b)  
Other income and expenses consists of gain on sale of investment properties, gain on extinguishment of debt, loss on contribution to joint venture, dividend income, interest expense, other income, realized gain on sale of marketable securities, net, and income tax expense.
(c)  
Total provision for asset impairment included $92,167 related to one non-core development.
(d)  
Net income from discontinued operations primarily relates to activity resulting from the Spin-Off of Xenia.

28
INVENTRUST PROPERTIES CORP.


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)
September 30, 2015
(unaudited)

The following table summarizes net property operations income by segment as of and for the three months ended September 30, 2014 .
 
Total
 
Retail
 
Student Housing
 
Non-core
Rental income
$
92,983

 
$
50,672

 
$
17,586

 
$
24,725

Straight line adjustment
875

 
1,524

 
17

 
(666
)
Tenant recovery income
15,055

 
14,063

 
134

 
858

Other property income
1,819

 
663

 
1,119

 
37

Total income
110,732

 
66,922

 
18,856

 
24,954

Operating expenses
36,889

 
21,631

 
11,563

 
3,695

Net operating income
$
73,843

 
45,291

 
7,293

 
21,259

Non-allocated expenses (a)
(60,196
)
 
 
 
 
 
 
Other income and expenses (b)
17,315

 
 
 
 
 
 
Equity in loss of unconsolidated entities
(2,089
)
 
 
 
 
 
 
Provision for asset impairment (c)
(670
)
 
 
 
 
 
 
Net income from continuing operations
$
28,203

 
 
 
 
 
 
Net income from discontinued operations (d)
24,357

 
 
 
 
 
 
Less: net income attributable to noncontrolling interests
(8
)
 
 
 
 
 
 
Net income attributable to Company
$
52,552

 
 
 
 
 
 
(a)  
Non-allocated expenses consists of general and administrative expenses, business management fee and depreciation and amortization.
(b)  
Other income and expenses consists of gain on sale of investment properties, gain on extinguishment of debt, interest and dividend income, interest expense, other income, realized gain on sale of marketable securities, net, and income tax expense.
(c)  
Total provision for asset impairment included $670 related to one non-core property.
(d)  
Net income from discontinued operations primarily relates to the gain on sale of net lease properties sold in 2014 and the lodging properties included in the Spin-Off of Xenia.

29
INVENTRUST PROPERTIES CORP.


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)
September 30, 2015
(unaudited)

The following table summarizes net property operations income by segment as of and for the nine months ended September 30, 2015 .
 
Total
 
Retail
 
Student Housing
 
Non-core
Rental income
$
272,468

 
$
152,331

 
$
55,797

 
$
64,340

Straight line adjustment
329

 
2,323

 
114

 
(2,108
)
Tenant recovery income
51,765

 
47,201

 
498

 
4,066

Other property income
6,905

 
2,334

 
3,550

 
1,021

Total income
331,467

 
204,189

 
59,959

 
67,319

Operating expenses
95,506

 
62,308

 
22,788

 
10,410

Net operating income
$
235,961

 
141,881

 
37,171

 
56,909

Non-allocated expenses (a)
(167,999
)
 
 
 
 
 
 
Other income and expenses (b)
(39,919
)
 
 
 
 
 
 
Equity in earnings of unconsolidated entities
33,341

 
 
 
 
 
 
Provision for asset impairment (c)
(92,167
)
 
 
 
 
 
 
Net loss from continuing operations
$
(30,783
)
 
 
 
 
 
 
Net income from discontinued operations (d)
3,042

 
 
 
 
 
 
Less: net income attributable to noncontrolling interests
(16
)
 
 
 
 
 
 
Net loss attributable to Company
$
(27,757
)
 
 
 
 
 
 
Balance Sheet Data
 
 
 
 
 
 
 
Real estate assets, net (e)
$
3,397,672

 
2,082,592

 
763,790

 
551,290

Non-segmented assets (f)
796,183

 
 
 
 
 
 
Total assets
4,193,855

 
 
 
 
 
 
Capital expenditures (g)
$
8,058

 
6,464

 
790

 
804

(a)  
Non-allocated expenses consists of general and administrative expenses and depreciation and amortization.
(b)  
Other income and expenses consists of gain on sale of investment properties, gain on extinguishment of debt, loss on contribution to joint venture, dividend income, interest expense, other income, realized gain on sale of marketable securities, net, and income tax expense.
(c)  
Total provision for asset impairment included $92,167 related to one non-core development.
(d)  
Net income from discontinued operations primarily relates to activity resulting from the Spin-Off of Xenia.
(e)  
Real estate assets include intangible assets, net of amortization.
(f)  
Construction in progress is included as non-segmented assets.
(g)  
Capital expenditures exclude capital expenditures related to the lodging properties included in the Spin-Off of Xenia.


30
INVENTRUST PROPERTIES CORP.


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)
September 30, 2015
(unaudited)

The following table summarizes net property operations income by segment as of and for the nine months ended September 30, 2014 .
 
Total
 
Retail
 
Student Housing
 
Non-core
Rental income
$
283,183

 
$
152,973

 
$
51,896

 
$
78,314

Straight line adjustment
2,975

 
3,776

 
192

 
(993
)
Tenant recovery income
50,396

 
45,431

 
401

 
4,564

Other property income
6,766

 
3,467

 
3,119

 
180

Total income
343,320

 
205,647

 
55,608

 
82,065

Operating expenses
104,500

 
65,872

 
25,637

 
12,991

Net operating income
$
238,820

 
139,775

 
29,971

 
69,074

Non-allocated expenses (a)
(170,174
)
 
 
 
 
 
 
Other income and expenses (b)
(9,410
)
 
 
 
 
 
 
Equity in earnings of unconsolidated entities
627

 
 
 
 
 
 
Provision for asset impairment (c)
(75,616
)
 
 
 
 
 
 
Net loss from continuing operations
(15,753
)
 
 
 
 
 
 
Net income from discontinued operations (d)
208,292

 
 
 
 
 
 
Less: net income attributable to noncontrolling interests
(16
)
 
 
 
 
 
 
Net income attributable to Company
$
192,523

 
 
 
 
 
 
(a)  
Non-allocated expenses consists of general and administrative expenses, business management fee and depreciation and amortization.
(b)  
Other income and expenses consists of gain on sale of investment properties, gain on extinguishment of debt, interest and dividend income, interest expense, other income, realized gain on sale of marketable securities, net, and income tax expense.
(c)  
Total provision for asset impairment included $75,616 related to five non-core properties.
(d)  
Net income from discontinued operations primarily relates to the gain on sale of net lease properties sold in 2014 and the lodging properties included in the Spin-Off of Xenia.







31
INVENTRUST PROPERTIES CORP.


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)
September 30, 2015
(unaudited)

12. Earnings (loss) per Share and Equity Transactions
Basic earnings (loss) per share ("EPS") are computed using the two-class method by dividing net income (loss) by the weighted average number of common shares outstanding for the period (the "common shares"). Diluted EPS is computed using the treasury method if more dilutive, by dividing net income (loss) by the common shares plus potential common shares issuable upon exercising options or other contracts. The following table reconciles the amounts used in calculating basic and diluted income (loss) per share (in thousands, except weighted average share and per share amounts):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2015
 
September 30, 2014
 
September 30, 2015
 
September 30, 2014
Net income (loss) from continuing operations
$
(96,352
)
 
$
28,203

 
$
(30,783
)
 
$
(15,753
)
Less: Dividends on common stock
(28,010
)
 
(107,709
)
 
(110,601
)
 
(329,144
)
Less: Dividends on unvested restricted stock units
—

 
—

 
—

 
—

Less: Undistributed (income) loss allocated to unvested shares
—

 
—

 
—

 
—

Less: Net income attributable to noncontrolling interests
(8
)
 
(8
)
 
(16
)
 
(16
)
Undistributed income (loss)
$
(124,370
)

$
(79,514
)

$
(141,400
)

$
(344,913
)
Add back: Dividends on common stock
28,010


107,709


110,601


329,144

Distributed and undistributed income (loss) from continuing operations - basic and diluted
$
(96,360
)

$
28,195


$
(30,799
)

$
(15,769
)
 
 
 
 
 
 
 
 
Income from discontinued operations allocated to common stockholders:
$
713

 
$
24,357

 
$
3,042

 
$
208,292

 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
Weighted average shares outstanding - basic and diluted
861,824,777

 
861,627,855

 
861,824,777

 
883,537,865

 
 
 
 
 
 
 
 
Basic and diluted income (loss) per share:
 
 

 
 
 
 
Income (loss) from continuing operations allocated common shareholders per share:
$
(0.11
)

$
0.03


$
(0.04
)

$
(0.02
)
Income (loss) from discontinued operations allocated common shareholders per share:
$
—


$
0.03


$
—


$
0.24

Due to their anti-dilutive effect, the computation of diluted loss per share does not reflect the adjustments for the following items (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2015
 
September 30, 2014
 
September 30, 2015
 
September 30, 2014
Net income (loss) allocated to common stockholders is not adjusted for:
 
 
 
 
 
 
 
Income allocated to unvested restricted stock units
$
—

 
$
—

 
$
—

 
$
—

Weighted average diluted shares are not adjusted for:
 
 
 
 
 
 
 
Effect of unvested restricted stock units
252

 
—

 
235

 
—

The Company completed a modified "Dutch Auction" tender offer for the purchase of up to $350,000 in value of shares of common stock (the "Offer") on April 25, 2014. In accordance with rules promulgated by the SEC, the Company had the option to increase the number of shares accepted for payment in the Offer by up to 2% of the outstanding shares without amending or extending the Offer. To avoid any proration to the stockholders that tendered shares, the Company decided to increase the number of shares accepted for payment in the Offer. On May 1, 2014, the Company accepted for purchase 60,665,233 shares of common stock at a purchase price (without brokerage commissions) of $6.50 per share, for an aggregate purchase price of $394,300 , excluding fees and expenses relating to the Offer. The 60,665,233 shares accepted for purchase in the Offer represented approximately 6.61% of the issued and outstanding shares of common stock at the time of purchase. Subsequent to the purchase of approved Offer shares, the final number of shares purchased, allowing for corrections, was 60,761,166 for a final aggregate purchase price of $394,900 as of December 31, 2014, excluding fees and expenses related to the Offer.

32
INVENTRUST PROPERTIES CORP.


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)
September 30, 2015
(unaudited)

13. Stock-Based Compensation
Share Unit Plans
During 2014, the Company maintained the following three long-term incentive plans: (1) the Inland American Real Estate Trust, Inc. 2014 Share Unit Plan (the "Retail Plan"), with respect to the Company’s retail business; (2) the Xenia Hotels & Resorts, Inc. 2014 Share Unit Plan (the "Lodging Plan"), with respect to the Company’s lodging business; and (3) the Inland American Communities Group, Inc. 2014 Share Unit Plan (the "Student Housing Plan"), with respect to the Company’s student housing business (collectively, the "Share Unit Plans").  Each Share Unit Plan provides for the grant of "share unit" awards to eligible participants.  The value of a "share unit" was determined based on a phantom capitalization of the Company’s retail/non-core business, lodging business and student housing business, and does not necessarily correspond to the value of a share of common stock of the Company, Xenia or Inland American Communities Group, Inc. (n/k/a "University House Communities Group, Inc."), as applicable.  Vesting of the share units granted in 2014 is conditioned upon the occurrence of a triggering event, such as a listing or a change in control of the applicable business, and if no triggering event occurs within five years following the applicable grant date, then the share units are forfeited. The Company does not recognize share based compensation expense with respect to the Share Unit Plans until the occurrence of a triggering event.
As of February 3, 2015, the share units outstanding under the Lodging Plan were included in the Spin-Off and Xenia terminated the Lodging Plan.
As of June 19, 2015, in connection with the adoption of the Incentive Award Plan (as defined below) the Company terminated the Retail Plan. Awards outstanding with a grant date value of $7,845 under the Retail Plan will remain outstanding and subject to the terms of the plan and the applicable award agreement. No additional awards will be granted under the Retail Plan. The Student Housing Plan was not terminated and remains in effect. As of September 30, 2015 , awards granted in 2014 and 2015 in the aggregate grant date value of $3,296 were outstanding under the Student Housing Plan. No additional awards were granted during the three months ended September 30, 2015 under the Student Housing Plan.
As a triggering event has not occurred, with respect to the Company's retail/non-core or student housing businesses, the Company did not recognize stock-based compensation expense related to the 2014 Retail Plan or the Student Housing Plan for the three and nine months ended September 30, 2015 and 2014.
Incentive Award Plan
Effective as of June 19, 2015, the board of directors adopted and approved the InvenTrust Properties Corp. 2015 Incentive Award Plan (the "Incentive Award Plan"), under which the Company may grant cash and equity incentive awards to eligible employees, directors, and consultants. Under the 2015 Incentive Award Plan, the Company is authorized to grant up to 30,000,000 shares of the Company's common stock pursuant to awards under the plan. At September 30, 2015 , 28,335,375 shares were available for future issuance under the Incentive Award Plan. A summary of the Company's restricted stock unit activity as of September 30, 2015 is as follows:
 
Restricted Stock Units
Weighted Average Price
 at Grant Date
Outstanding at January 1, 2015
—

—

Restricted stock units granted
1,664,625

$4.00
Restricted stock units vested
—

—

Restricted stock units forfeited
—

—

Outstanding at September 30, 2015
1,664,625


$4.00

At September 30, 2015 , there was $5,088 of total unrecognized compensation expense related to unvested stock-based compensation arrangements granted under the Incentive Award Plan. The outstanding restricted stock units have vesting schedules through December 2017. Stock-based compensation expense will be amortized on a straight-line basis over the vesting period. The Company recognized stock-based compensation expense of $1,123 and $1,260 related to the Incentive Award Plan for the three and nine months ended September 30, 2015 . No stock-based compensation expense was recognized for the three and nine months ended September 30, 2014 .

33
INVENTRUST PROPERTIES CORP.


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)
September 30, 2015
(unaudited)

14. Commitments and Contingencies
In May 2012, the Company disclosed that the SEC had initiated a non-public, formal, fact-finding investigation to determine whether there had been violations of certain provisions of the federal securities laws regarding the payment of fees to the Company's former Business Manager and Property Managers, transactions with the Company's former affiliates, timing and amount of distributions paid to the Company's investors, determination of property impairments, and any decision regarding whether the Company would become a self-administered REIT (the "SEC Investigation"). After a multi-year investigation, on March 24, 2015, the Staff of the SEC informed the Company that it had concluded its investigation and that, based on the information received as of that date, it did not intend to recommend any enforcement action against the Company.
Shortly after the Company disclosed the existence of the SEC Investigation, the Company received three related demands (“Derivative Demands”) by stockholders to conduct investigations regarding claims that the Company's officers, the Company's board of directors, former Business Manager, and affiliates of the Company's former Business Manager breached their fiduciary duties to the Company in connection with the matters that the Company disclosed were subject to the SEC Investigation.
Upon receiving the first of the Derivative Demands, on October 16, 2012, the full board of directors responded by authorizing the independent directors to investigate the claims contained in the first Derivative Demand, any subsequent stockholder demands, as well as any other matters the independent directors saw fit to investigate. Pursuant to this authority, the independent directors formed a special litigation committee comprised solely of independent directors to review and evaluate the alleged claims and to recommend to the full board of directors whether the maintenance of a derivative proceeding was in the best interests of the Company. The special litigation committee engaged independent legal counsel and experts to assist in the investigation.
On March 21, 2013, counsel for the stockholders who made the first Derivative Demand filed a derivative lawsuit in the Circuit Court of Cook County, Illinois, on behalf of the Company. The court stayed the case - Trumbo v. The Inland Group, Inc. - pending completion of the special litigation committee's investigation.
On December 8, 2014, the special litigation committee completed its investigation and issued its report and recommendation. The special litigation committee concluded that there is no evidence to support the allegations of wrongdoing in the Derivative Demands. Nonetheless, in the course of its investigation, the special litigation committee uncovered facts indicating that certain then-related parties breached their fiduciary duties to the Company by failing to disclose to the independent directors certain facts and circumstances associated with the payment of fees to its former Business Manager and Property Managers. The special litigation committee determined that it is advisable and in the best interests of the Company to maintain a derivative action against its former Business Manager, Property Managers, and Inland American Holdco Management LLC (the “Inland Entities”). The special litigation committee found that it was not in the best interests of the Company to pursue claims against any other entities or against any individuals.
On January 20, 2015, the board of directors adopted the report and recommendation of the special litigation committee in full and authorized the Company to file a motion to realign the Company as the party plaintiff in Trumbo v. The Inland Group, Inc. , and to take such further actions as are necessary to reject and dismiss claims related to allegations that the board of directors has determined lack merit and to pursue claims against the Inland Entities for breach of fiduciary duties in connection with the failure to disclose facts and circumstances associated with the payment of fees to related parties.
On March 2, 2015, counsel for the stockholders who made the second Derivative Demand filed a derivative lawsuit in the Circuit Court of Cook County, Illinois, on behalf of the Company. The court entered an order consolidating the action with the Trumbo case on March 26, 2015 (the "Consolidated Action"). On September 18, 2015, the parties entered into the Stipulation and Agreement of Compromise, Settlement, and Release (the "Settlement") to resolve all matters related to the Derivative Demands, including all claims raised in the Consolidated Action and the claims authorized by the Board. The Settlement calls for a payment to the Company of $7,400 in net proceeds from Midwest Risk Management, LLC, as agent for the Inland Entities. In addition, the Settlement releases the Company’s directors, officers, and former external managers and their affiliates from any liability related to the allegations asserted in the demand letters and the Consolidated Action, and any additional allegations investigated by the special litigation committee. The Settlement also results in the dismissal of the Consolidated Action with prejudice.

34
INVENTRUST PROPERTIES CORP.


Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts)
September 30, 2015
(unaudited)

On October 23, 2015, the Circuit Court of Cook County, Illinois approved the Settlement as fair, reasonable, adequate and in the best interests of the Company and its stockholders. Under the terms of the Settlement, the Settlement Payment will be remitted to InvenTrust when the time to appeal the court’s approval of the Settlement has expired. The Company has not accounted for this gain contingency in the financial statements as of September 30, 2015.
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 these 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 adverse effect on the financial statements of the Company.
15. Subsequent Events
Subsequent to September 30, 2015, the Company purchased two student housing properties consisting of 1,439 beds for an aggregate gross acquisition price of $165,525 .
On November 5, 2015, the Company entered into a term loan credit agreement for a $300,000 unsecured credit facility with a syndicate of seven lenders led by Wells Fargo Securities, LLC, Merrill Lynch, Pierce, Fenner & Smith, Incorporated and PNC Capital Markets LLC as joint lead arrangers. The accordion feature allows the Company to increase the size of the unsecured term loan credit facility to $600,000 , subject to certain conditions.
The term loan credit facility consists of two tranches: a five-year tranche maturing on January 15, 2021, and a seven-year tranche maturing on November 5, 2022. The credit facility can be drawn for one year from the agreement date, after which the unused portion of the credit facility will terminate. The credit facility is subject to maintenance of certain financial covenants. Interest rates are based on the Company's total leverage ratio. Based upon the Company's total leverage ratio at September 30, 2015, the five-year tranche bears an interest rate of LIBOR plus 1.30% and the seven-year tranche bears an interest rate of LIBOR plus 1.60% .

35

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
We electronically file our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports with the Securities and Exchange Commission ("SEC"). The public may read and copy any of the reports that are filed with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549-3628. The public may obtain information on the operation of the Public Reference room by calling the SEC at (800)-SEC-0330. The SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically.
Certain statements in this "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Form 10-Q, other than purely historical information, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include statements about InvenTrust Properties Corp.’s (the “Company”) plans, objectives, strategies, financial performance and outlook, trends, the amount and timing of future cash distributions, prospects or future events and involve known and unknown risks that are difficult to predict. As a result, our actual financial results, performance, achievements or prospects may differ materially from those expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as "may," "could," "expect," "intend," "plan," "seek," "anticipate," "believe," "estimate," "guidance," "predict," "potential," "continue," "likely," "will," "would," "illustrative" and variations of these terms and similar expressions, or the negative of these terms or similar expressions. Such forward-looking statements are necessarily based upon estimates and assumptions that, while considered reasonable by the Company and its management based on their knowledge and understanding of the business and industry, are inherently uncertain. These statements are not guarantees of future performance, and stockholders should not place undue reliance on forward-looking statements. There are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. Such risks, uncertainties and other important factors, include, among others, the risks, uncertainties and factors set forth in our filings with the U.S. Securities and Exchange Commission, including our Annual Report on Form 10-K, as may be updated elsewhere in this report and other Quarterly Reports on Form 10-Q; market and economic volatility experienced by the U.S. economy or real estate industry as a whole, and the local economic conditions in the markets in which the Company's properties are located; the Company’s ability to identify, execute and complete strategic transactions; the Company's ability to refinance maturing debt or to obtain new financing on attractive terms; the Company’s ability to identify disposition opportunities and to successfully execute on such dispositions; the Company’s ability to identify, execute and complete acquisition opportunities and to integrate and successfully operate any properties acquired in the future and the risks associated with such properties; the Company's ability to access capital for renovations and acquisitions on terms and at times that are acceptable to us; the impact of leasing and capital expenditures to improve the Company’s properties in order to retain and attract tenants; the Company's organizational and governance structure; loss of members of the Company’s senior management team or key personnel; adverse litigation judgments or settlements; the Company's ability to collect rent from tenants or to rent space on favorable terms or at all; the economic success and viability of the Company's anchor retail tenants; forthcoming expirations of certain of the Company’s leases and the Company’s ability to re-lease such properties; changes in the competitive environment in the leasing market and any other market in which the Company operates; events beyond the Company’s control, such as war, terrorist attacks, natural disasters and severe weather incidents, and any uninsured or underinsured loss resulting therefrom; the availability of cash flow from operating activities to fund distributions; future increases in interest rates; actions or failures by the Company’s joint venture partners, including development partners; the Company’s investment in equity and debt securities and in companies that the Company does not control, including Xenia Hotels & Resorts, Inc.; the Company’s status as a real estate investment trust (“REIT”) for federal tax purposes; the cost of compliance with and liabilities under environmental, health and safety laws; changes in real estate and zoning laws and increases in real property tax rates; changes in federal, state or local tax law, including legislative, administrative, regulatory or other actions affecting REITs; changes in governmental regulations and United States accounting standards or interpretations thereof; and the Company’s debt financing, including risk of default, loss and other restrictions placed on the Company.
These factors are not necessarily all of the important factors that could cause our actual financial results, performance, achievements or prospects to differ materially from those expressed in or implied by any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above. Forward-looking statements speak only as of the date they are made, and we do not undertake or assume any obligation to update publicly any of these forward-looking statements to reflect actual results, new information or future events, changes in assumptions or changes in other factors affecting forward-looking statements, except to the extent required by applicable laws. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.


36

The following discussion and analysis relates to the three and nine months ended September 30, 2015 and 2014 and as of September 30, 2015 and December 31, 2014. You should read the following discussion and analysis along with our Consolidated Financial Statements and the related notes included in this report.
Overview
Throughout 2015, we continued to implement our strategy of focusing our portfolio into two asset classes - retail and student housing - while completing the Spin-Off of our lodging segment on February 3, 2015. By tailoring, expanding and refining these two components of our portfolio, as well as seeking to dispose of our remaining non-core segment, our goals have been to enhance long-term stockholder value and position the Company to explore various strategic transactions and liquidity events for our stockholders. As of September 30, 2015 , our portfolio is comprised of 142 properties, excluding development properties, representing 15.9 million square feet of retail space, 9,600 student housing beds, and 5.8 million square feet of non-core space.
On a consolidated basis, substantially all of our revenues and cash flows from operations for the nine months ended September 30, 2015 were generated by collecting rental payments from our tenants, distributions from unconsolidated entities and dividend income earned from investments in marketable securities. Our largest cash expenses relate to the operation of our properties and the interest expense on our mortgages. Our property operating expenses include, but are not limited to: real estate taxes, regular repair and maintenance, utilities, and insurance (some of which are recoverable).
In evaluating our financial condition and operating performance, management focuses on the following financial and non-financial indicators, discussed in further detail herein:
•
Funds from Operations ("FFO"), a supplemental non-GAAP (U.S. generally accepted accounting principles, or "GAAP") measure to net income determined in accordance with GAAP;
•
Property net operating income ("NOI"), which excludes interest expense, depreciation and amortization, general and administrative expenses, net income of noncontrolling interest, and other investment income from corporate investments;
•
Modified net operating income, which reflects the income from operations excluding nonrecurring events and other GAAP rent adjustments;
•
Cash flow from operations as determined in accordance with GAAP;
•
Economic and physical occupancy and rental rates;
•
Leasing activity and lease rollover;
•
Managing operating expenses;
•
Managing general and administrative expenses;
•
Debt maturities and leverage ratios; and
•
Liquidity levels.


37

Company highlights for the nine months ended September 30, 2015
Distributions, including the Spin-off of Lodging Subsidiary, Xenia Hotels & Resorts, Inc.
On February 3, 2015, we completed the spin-off ("Spin-Off") of our subsidiary, Xenia Hotels & Resorts, Inc. ("Xenia"), which at the time owned 46 premium full service, lifestyle and urban upscale hotels and two hotels in development, through the pro rata taxable distribution of 95% of the outstanding common stock of Xenia to holders of record of the Company’s common stock as of the close of business on January 20, 2015 (the "Record Date"). Each holder of record of the Company’s common stock received one share of Xenia's common stock for every eight shares of the Company’s common stock held at the close of business on the Record Date (the "Distribution"). In lieu of fractional shares, stockholders of the Company received cash. On February 4, 2015, Xenia’s common stock began trading on the New York Stock Exchange ("NYSE") under the ticker symbol "XHR". In connection with the Spin-Off, we entered into certain agreements that, among other things, provide a framework for our relationship with Xenia as two separate companies, including a Transition Services Agreement, an Employee Matters Agreement and an Indemnity Agreement.
Upon completing the Spin-Off, our Board analyzed and reviewed our distribution rate and announced a new distribution rate of $0.13 per share on an annualized basis beginning with the distribution paid in March 2015. A number of factors were considered in establishing the new distribution rate. Xenia generated a substantial portion of our cash flows from operations and as a result, our previous distribution rate was not sustainable after the Spin-Off. In addition, the board of directors determined that it is in the best interest of the Company to retain additional operating cash flow in order to accumulate an appropriate level of capital reserves to enable the Company to tailor and grow its retail and student housing segments, consistent with our strategy and objectives, as well as to address future lease maturities and disposition plans related to several properties in our non-core segment. We believe that our current distribution rate is sustainable based upon our current property portfolio. 
In an effort to become a more efficient organization, we moved to quarterly distributions in the third quarter of this year. Switching from monthly to quarterly distributions will provide cost savings of approximately $1 million annually in printing and mailing costs.
Financing Activities
On February 3, 2015, we entered into an amended and restated credit agreement for a $300 million unsecured revolving line of credit with KeyBank National Association, JP Morgan Chase Bank National Association and other financial institutions. The accordion feature allows us to increase the size of our unsecured line of credit up to $600 million, subject to certain conditions. The unsecured revolving line of credit matures on February 2, 2019 and contains one 12-month extension option that we may exercise upon payment of an extension fee equal to 0.15% of the commitment amount on the maturity date and subject to certain other conditions. The unsecured revolving line of credit bears interest at a rate equal to LIBOR plus 1.40% and requires the maintenance of certain financial covenants. As of September 30, 2015 , we had $0.04 million outstanding under the revolving credit facility.
Name Change to InvenTrust Properties
On April 16, 2015, we announced that we changed our name to InvenTrust Properties Corp. Following the completion of the self-management transactions in 2014 and the Spin-Off of our lodging segment in 2015, we determined it was an appropriate time to change our name and develop a brand that is consistent with our strategy. Our new name is consistent with our multi-tenant retail strategy to bring innovation to the way we operate our retail properties. We also continue to develop and expand our student housing business segment, which operates under the University House Communities name.
Joint Venture Activity
We increased our equity in IAGM Retail Fund I, LLC with a contribution of $25.2 million during second quarter 2015, which was used to purchase a retail property in Flower Mound, Texas. Additionally, as part of wind-down activities, we recognized $11.9 million from the sale of assets within two joint ventures and also received nonrecurring distributions that are in excess of the investments' carrying value by $4.6 million and $17.6 million for the three and nine months ended September 30, 2015 , respectively, which were recognized in equity in earnings of unconsolidated entities.
On September 30, 2015, we were admitted as a member to Downtown Railyard Venture, LLC ("DRV"), which is a joint venture established in order to develop and sell a land development. Simultaneously, we structured and closed the sale of a non-core land development to DRV, which for accounting purposes is treated as a contribution of the land development to DRV in exchange for an equity interest of $46.2 million in DRV (the foregoing transaction is referred to as the “Railyards

38

Transaction”). We account for the joint venture under the equity method of accounting. We recognized a loss of $12.9 million for the three and nine months ended September 30, 2015 on the Railyards Transaction due to the difference between the carrying value of the land and the fair value of the retained equity interest in the joint venture. Prior to the Railyards Transaction, we recorded an impairment of $92,167 to write the land down to its fair value for the three and nine months ended September 30, 2015 .
Acquisitions
We acquired two retail properties during the nine months ended September 30, 2015 and one student housing property for a gross acquisition price of $103.0 million . The student housing property will be demolished and redeveloped into a student housing property in line with the rest of our portfolio. We also placed into service two student housing developments and one addition to an already existing student housing property during the three months ended September 30, 2015 .
Disposals
On February 3, 2015, we completed the Spin-Off of Xenia, which at the time owned 46 premium full service, lifestyle and urban upscale hotels and two hotels in development.
We sold one parcel of land for a gross disposition price of $1.4 million and four non-core properties for an aggregate gross disposition price of $51.9 million during the nine months ended September 30, 2015 .
Outlook
While we believe we will continue to see stable operating performance for the remainder of 2015, we expect to have increased disposition activity into 2016. This disposition activity could cause us to experience dilution in our operating performance during the period we dispose of properties and prior to reinvestment. We expect to reinvest in selective acquisitions into 2016, which are expected to enhance our portfolio. We believe that our debt maturities over the next five years are manageable and although we believe interest rates will rise in the future, we anticipate low interest rates to continue this year. We believe we will be able to continue cash distributions at our current distribution rate of $0.13 per share on an annualized basis based upon our current property portfolio and anticipate distributions to be funded by cash flow from operations as well as distributions from unconsolidated entities and gains on sales of properties.

39

Results of Operations
Consolidated Results of Operations
This section describes and compares our results of operations for the three and nine months ended September 30, 2015 and 2014 . We generate most of our net income from property operations. In order to evaluate our overall portfolio, management analyzes the operating performance of all properties from period to period and properties we have owned and operated for the same period during each year. Investment properties owned for the entire three and nine months ended September 30, 2015 and 2014 are referred to herein as "same store" properties. Unless otherwise noted, all dollar amounts are stated in thousands (except per share amounts and per square foot amounts).  
 
For the three months ended
 
For the nine months ended
 
September 30,
 
September 30,
 
2015
 
2014
 
2015
 
2014
Net income (loss) attributable to Company
$
(95,647
)
 
$
52,552

 
$
(27,757
)
 
$
192,523

Net income (loss) per common share, basic and diluted
$
(0.11
)
 
$
0.06

 
$
(0.04
)
 
$
0.22

Our net income decreased $148,199 for the three months ended September 30, 2015 compared to the same period in 2014 primarily due to the impairment expense of $92,167 related to a non-core land development in the Railyards Transaction incurred during the three months ended September 30, 2015 , whereas the Company recognized $670 in impairment expense for the three months ended September 30, 2014 . Additionally, we recognized a loss of $12,919 on the Railyards Transaction during the three months ended September 30, 2015 . During the three months ended September 30, 2014, we also recognized a $27,852 gain on sale of securities compared to $304 for the same period in 2015, a decrease of $27,548 . Income from discontinued operations during the three months ended September 30, 2014 was $24,357 , which is primarily related to the lodging properties classified as held for sale, compared to $713 for the three months ended September 30, 2015. The Company's net loss during the three months ended September 30, 2015 was primarily impacted by impairment expenses, minimal gains from marketable securities, and the disposition of properties.
Our net income decreased $220,280 for the nine months ended September 30, 2015 compared to the same period in 2014 primarily due to income from discontinued operations of $208,292 during the nine months ended September 30, 2014 compared to $3,042 recognized during the nine months ended September 30, 2015 , a decrease of $205,250 . During the nine months ended September 30, 2015 , we recognized impairment expense of $92,167 related to a non-core land development in the Railyards Transaction compared to impairment expense of $75,616 during the same period in 2014, an increase of $16,551 . Additionally, we recognized a loss of $12,919 on the Railyards Transaction during the nine months ended September 30, 2015 . The decrease in net income was offset by the recognition in equity in earnings of unconsolidated entities of $11,875 from the sale of assets within two joint ventures during the nine months ended September 30, 2015 . We also recognized the receipt of nonrecurring distributions in excess of two investments' carrying value by $17,631 in equity in earnings of unconsolidated entities during the nine months ended September 30, 2015 . The Company's net loss during the nine months ended September 30, 2015 , was primarily impacted by impairment expenses recognized in 2015 and the disposition of properties.
A detailed discussion of our financial performance is as follows.


40

Operating Income and Expenses:
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2015
September 30, 2014
 
Increase
(Decrease)
 
September 30, 2015
September 30, 2014
 
Increase
(Decrease)
Income:
 
 
 
 
 
 
 
 
 
  Rental income
$93,093
$93,858
 
$
(765
)
 
$
272,797

$
286,158

 
$
(13,361
)
  Tenant recovery income
16,819

15,055

 
1,764

 
51,765

50,396

 
1,369

  Other property income
2,827

1,819

 
1,008

 
6,905

6,766

 
139

Operating Expenses:
 
 
 
 
 
 
 
 
 
Property operating expenses
$20,750
$24,921
 
$
(4,171
)
 
$
56,779

$
69,230

 
$
(12,451
)
Real estate taxes
12,673

11,968

 
705

 
38,727

35,270

 
3,457

Depreciation and amortization
37,314

38,895

 
(1,581
)
 
110,927

116,564

 
(5,637
)
Provision for asset impairment
92,167

670

 
91,497

 
92,167

75,616

 
16,551

General and administrative expenses
18,443

21,301

 
(2,858
)
 
57,072

51,005

 
6,067

Business management fee
—

—

 
—

 
—

2,605

 
(2,605
)
Property Income and Operating Expenses
Rental income consists of basic monthly rent, straight-line rent adjustments, amortization of acquired above and below market leases, other property income, and percentage rental income recorded pursuant to tenant leases. Tenant recovery income consists of reimbursements for real estate taxes, common area maintenance costs, management fees, and insurance costs. Other property income consists of lease termination fees and other miscellaneous property income. Property operating expenses consist of regular repair and maintenance, real estate taxes, management fees, utilities, and insurance (some of which are recoverable from the tenant).
•
Total property income increased $2,007 for the three months ended September 30, 2015 compared to the same period in 2014. Our retail segment had an increase of $1,687 for the three months ended September 30, 2015 compared to the same period in 2014. Our student housing segment also saw an increase in property income of $2,956 for the three months ended September 30, 2015 compared to the same period in 2014. These increases were offset by a decrease in non-core property income of $2,636 for the three months ended September 30, 2015 compared to the same period in 2014 as a result of the disposition of twelve non-core properties subsequent to September 30, 2014. The increases in the retail and student housing segments were a result of three retail properties and one student housing property acquired after September 30, 2014, two student housing developments placed in service during third quarter 2015, and an addition to an existing student housing property placed in service during third quarter 2015. The rental income provided by these acquisitions and assets placed in service was offset by the disposal of fourteen properties after September 30, 2014.
Total property income decreased $11,853 for the nine months ended September 30, 2015 compared to the same period in 2014. These decreases were largely a result of the sale of non-core and retail properties that did not qualify as discontinued operations. Non-core property income decreased $14,746 for the nine months ended September 30, 2015 compared to the same period in 2014 as a result of the disposition of twelve non-core properties subsequent to September 30, 2014. Our retail segment had a decrease of $1,458 for the nine months ended September 30, 2015 compared to the same period in 2014. These decreases were offset by our student housing segment, which saw an increase in property income of $4,351 for the nine months ended September 30, 2015 compared to the same period in 2014 due to the acquisition of one property in fourth quarter 2014, two student housing developments placed in service during third quarter 2015, and an addition to an existing student housing property placed in service during third quarter 2015.
•
Property operating expenses, including real estate taxes, decreased $3,466 for the three months ended September 30, 2015 compared to the same period in 2014, and $8,994 for the nine months ended September 30, 2015 compared to the same period in 2014. The decrease in property operating expenses was primarily the result of the sale of properties that did not qualify as discontinued operations. Additionally, for the retail and non-core segments, as a result of our self-management transactions, there was a net decrease in property operating expenses because we no longer pay a property management fee to Inland American Holdco Management LLC. The elimination of this fee is offset by direct property costs related to payroll and overhead. Retail operating expenses decreased $433 and $3,564 for the three and nine months ended September 30, 2015 , respectively, compared to the same periods in 2014. Student housing

41

operating expenses decreased $2,365 and $2,849 for the three and nine months ended September 30, 2015 compared to the same periods in 2014 primarily as a result of one-time repair expenses incurred in 2014. Non-core operating expenses decreased $668 and $2,581 for the three and nine months ended September 30, 2015 , respectively, compared to the same periods in 2014.
Provision for asset impairment
•
For the three and nine months ended September 30, 2015 , we completed the Railyards Transaction. As a result of our analysis performed at the time of the Railyards Transaction, we determined the property was impaired and therefore, it was written down to fair value. An impairment charge of $92,167 was recorded for this asset.
•
For the three and nine months ended September 30, 2014 , we identified certain properties which may have a reduction in the expected holding period and reviewed the probability that we would dispose of these assets. As a result of our analysis, we identified one non-core property during the three months ended September 30, 2014 and four non-core properties during the nine months ended September 30, 2014 that we determined were impaired and subsequently were written down to fair value. Additionally, one asset which was previously classified as held-for-sale at December 31, 2013 and was re-classified as held and used and was then re-measured at the lesser of the carrying value or fair value as of May 8, 2014, resulting in an impairment charge to this asset of $67,647. We recorded a provision for asset impairment related to continuing operations of $670 and $75,616 for the three and nine months ended September 30, 2014 , respectively.
General administrative expenses and business management fee
•
General and administrative expenses decreased $2,858 and increased $6,067 for the three and nine months ended September 30, 2015 , respectively, compared to the same periods in 2014. The decrease of $2,858 when comparing the three months ended September 30, 2015 to the same period in 2014 is primarily a result of legal, other professional fees associated with our transition to self-management, and additional legal costs incurred in 2014. The increase when comparing the nine months ended September 30, 2015 and 2014 was a result of the completion of the self-management transaction and costs associated with the internalization of functions previously performed by the Business Manager or its related parties. We began internalizing functions such as IT, human resources and property management, which have resulted in an increase in employee salaries and implementation costs, which are reflected in the general and administrative expenses for the nine months ended September 30, 2015 . As part of a company reorganization, we eliminated certain roles and incurred severance costs of approximately $1,800 for the nine months ended September 30, 2015 . We also incurred amortization costs of $1,100 associated with our long term incentive program during the nine months ended September 30, 2015 .
•
We incurred a business management fee of $2,605 for the nine months ended September 30, 2014 . As of March 31, 2014, the Company no longer pays a business manager fee.
•
On March 12, 2014 , we entered into a series of agreements and amendments to existing agreements with affiliates of the Inland Group pursuant to which the Company began the process of becoming entirely self-managed (collectively, the "Self-Management Transactions"). Refer to Part I. Item 1. "Note 6. Transactions with Related Parties."

42

Non-Operating Income and Expenses:
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2015
September 30, 2014
 
Increase
(Decrease)
 
September 30, 2015
September 30, 2014
 
Increase
(Decrease)
Interest and dividend income
$
2,671

$
2,474

 
$
197

 
$
9,169

$
10,424

 
$
(1,255
)
Gain on sale of investment properties
729

6,629

 
(5,900
)
 
7,957

18,253

 
(10,296
)
Gain on extinguishment of debt
13

12,125

 
(12,112
)
 
1,395

12,517

 
(11,122
)
Other income
1,451

577

 
874

 
6,107

4,125

 
1,982

Interest expense
(23,772
)
(31,888
)
 
(8,116
)
 
(69,642
)
(96,531
)
 
(26,889
)
Loss on contribution to joint venture
(12,919
)
—

 
12,919

 
(12,919
)
—

 
12,919

Equity in earnings (loss) of unconsolidated entities
5,358

(2,089
)
 
7,447

 
33,341

627

 
32,714

Realized gain on sale of marketable securities, net
304

27,852

 
(27,548
)
 
20,459

42,998

 
(22,539
)
Net income from discontinued operations
713

24,357

 
(23,644
)
 
3,042

208,292

 
(205,250
)
Gain on sale of investment properties
•
Gain on sale of investment properties decreased to $729 from $6,629 for the three months ended September 30, 2015 , respectively, compared to the same period in 2014 due to a decrease in property sales that did not qualify as discontinued operations.
•
Gain on sale of investment properties decreased to $7,957 from $18,253 for the nine months ended September 30, 2015 , respectively, compared to the same period in 2014 due to a decrease in property sales that did not qualify as discontinued operations.
Gain on extinguishment of debt
•
Gain on extinguishment of debt of $12,125 and $12,517 during the three and nine months ended September 30, 2014 , respectively, primarily related to one non-core property sold in 2014.
Interest expense
•
Interest expense decreased to $23,772 from $31,888 for the three months ended September 30, 2015 , respectively, compared to the same period in 2014 due to property sales and mortgage pay-downs during the year ended December 31, 2014.
•
Interest expense decreased to $69,642 from $96,531 for the nine months ended September 30, 2015 , respectively, compared to the same period in 2014 due to property sales and mortgage pay-downs during the year ended December 31, 2014.
Loss on contribution to joint venture
•
On September 30, 2015, we completed the Railyards Transaction. We recognized a loss of $12,919 on the Railyards Transaction due to the difference between the carrying value of the land and the fair value of the retained equity interest in the joint venture for the three and nine months ended September 30, 2015 .
Equity in earnings (loss) of unconsolidated entities
•
Equity in earnings (loss) of unconsolidated entities increased $7,447 , to earnings of $5,358 from a loss of $2,089 for the three months ended September 30, 2015 compared to the same period in 2014. We received nonrecurring distributions that are in excess of the investments' carrying value by $4,564 , which was recognized in equity in earnings of unconsolidated entities.
•
Equity in earnings of unconsolidated entities increased $32,714 , to $33,341 from $627 for the nine months ended September 30, 2015 compared to the same period in 2014. As part of wind-down activities, we recognized $11,875 from the sale of assets within two joint ventures and also received nonrecurring distributions that are in excess of the investments' carrying value by $17,631 , which were both recognized in equity in earnings of unconsolidated entities.

43

Realized gain on sale of marketable securities, net
•
Realized gain on securities, net, decreased to $304 from $27,852 for the three months ended September 30, 2015 compared to the same period in 2014, due to fewer securities sold during the three months ended September 30, 2015 .
•
Realized gain on securities, net, decreased to $20,459 from $42,998 for the nine months ended September 30, 2015 compared to the same period in 2014 due to fewer securities sold during the nine months ended September 30, 2015 .
Net income from discontinued operations
In line with our adoption of the new accounting standard governing discontinued operations during the year ended December 31, 2014, only disposals representing a strategic shift that has (or will have) a major effect on our results and operations would qualify as discontinued operations. For the three and nine months ended September 30, 2015 , the hotels included in the Spin-Off of Xenia are included in discontinued operations. For the three and nine months ended September 30, 2014 , the net lease assets previously classified as held for sale on the consolidated balance sheet as of December 31, 2013 and the entire lodging segment, including the hotels sold during the year ended December 31, 2014 and the hotels included in the Spin-Off of Xenia are included in discontinued operations.
•
The decrease in net income from discontinued operations of $23,644 to $713 for the three months ended September 30, 2015 from $24,357 for the three months ended September 30, 2014 primarily reflects the operations of the lodging segment during the three months ended September 30, 2014 . There were no properties classified as discontinued operations during the three months ended September 30, 2015 . The $713 shown as net operating income from discontinued operations during the three months ended September 30, 2015 reflects residual non-operating activity.
•
The decrease in net income from discontinued operations of $205,250 to $3,042 for the nine months ended September 30, 2015 from $208,292 for the nine months ended September 30, 2014 is primarily a result of the 223 triple net properties classified as discontinued operations during the nine months ended September 30, 2014 , which sold for a gain of $152,895 . The remainder of the decrease reflects the operations of the lodging segment during the nine months ended September 30, 2014 . The hotels included in the Spin-Off of Xenia have been included as discontinued operations during the nine months ended September 30, 2015 .

44

Segment Reporting
Over the past two years, we have been implementing our strategy of focusing our diverse portfolio of real estate into three asset classes - retail, lodging and student housing. By tailoring, expanding and refining these three components of our portfolio, our goals are to enhance stockholder value and position the Company to explore various strategic transactions and liquidity events for our stockholders. Following the Spin-Off of Xenia, we seek to deliver value by continuing to tailor and grow our retail and student housing segments, consistent with our strategy and objectives, as well as seek to address future lease maturities and dispose of our remaining non-core segment.
We evaluate segment performance primarily based on net operating income and modified net operating income. Net operating income of the segments excludes interest expense, depreciation and amortization, general and administrative expenses, net income of noncontrolling interest and other investment income from corporate investments. Modified net operating income reflects the income from operations excluding nonrecurring events and other GAAP rent adjustments in order to provide a comparable presentation of operating activity across periods. Modified net operating income and net operating income is calculated and reconciled to U.S. generally accepted accounting principles ("GAAP") net income in "Part I, Item 1. Note 11 to the Consolidated Financial Statements" and "Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Selected Financial Data".
An analysis of results of operations by segment is below. The tables contained throughout summarize certain key operating performance measures for the nine months ended September 30, 2015 and 2014 . The rental rates reflected in retail and non-core are inclusive of rent abatements, lease inducements and straight-line rent GAAP adjustments, and exclusive of tenant improvements and lease commissions. The rental rates reflected for student housing are inclusive of rent concessions. Economic occupancy, shown for our retail and non-core segments, is defined as the percentage of total gross leasable area ("GLA") for which a tenant is obligated to pay rent under the terms of its lease agreement, regardless of the actual use or occupation by that tenant of the area being leased. Physical occupancy, shown for our student housing segment, is defined as the percentage of occupied beds compared to the total number of leasable beds.
 
Number of Properties
 
Gross Leasable Area / No. of Beds
 
Average Occupancy  (a)
Retail:
 
 
 
 
 
Community and neighborhood centers
67
 
6,060,142
 
92%
Power centers
43
 
9,815,961
 
95%
Total retail
110
 
15,876,103
 
94%
Student Housing:
 
 
 
 
 
Mid-rise
9
 
5,073
 
94%
High-rise
3
 
2,079
 
98%
Cottage style
2
 
1,257
 
90%
Garden style
2
 
1,191
 
97%
Total student housing
16
 
9,600
 
95%
Non-core:
 
 
 
 
 
Multi-tenant office
5
 
1,388,899
 
77%
Triple net
11
 
4,455,852
 
98%
Total non-core
16
 
5,844,751
 
93%
Total number of wholly owned properties (b)
142
 
 
 
 
IAGM Retail Fund I, LLC ("IAGM")
Retail joint venture, 55% ownership (c)
18
 
3,048,620
 
94%
15th & Walnut Owner, LLC ("Eugene")
Student housing joint venture, 62% ownership (c)
1
 
240
 
97%
Total number of joint venture and wholly owned properties
161
 
 
 
 
(a) As noted above, retail, non-core, and IAGM occupancy are shown as economic occupancy. Student housing and Eugene occupancy are shown as physical occupancy.
(b) Wholly owned properties are defined as those properties consolidated by the Company and not accounted for as an unconsolidated entity.
(c) These entities are not consolidated by the Company and the equity method of accounting is used to account for these investments.

45

Same Store
In order to evaluate our overall portfolio, management analyzes the operating performance of properties on a "same store" basis, which is defined as those properties that we have owned and operated for the entirety of both periods being compared, except for those properties for which significant redevelopment occurred during either period being compared. A total of 134 of our investment properties met our same store criteria for the three months ended September 30, 2015 and 2014 and 132 of our investment properties met our same store criteria for the nine months ended September 30, 2015 and 2014 . Properties are classified as same store once they have been owned and operated for the entirety of both periods presented and are fully operational. This same store analysis allows management to monitor the operations of our existing properties for comparable periods to determine the effects of our acquisitions and dispositions on net income.
Same Store Segment Modified Net Operating Income
The following table represents our same store modified net operating income for the nine months ended September 30, 2015 and 2014 . Same store properties are properties we have owned and operated for the same period during each year.
 
Nine Months Ended
 
Increase
 
Increase
 
Average Occupancy Sept. 30, 2015   (a)
 
Average Occupancy Sept. 30, 2014 (a)
 
September 30, 2015
 
September 30, 2014
 
 
 
 
Retail
$
131,798

 
$
125,156

 
$
6,642

 
5.3%
 
94%
 
94%
Student housing
29,450

 
24,619

 
4,831

 
19.6%
 
94%
 
91%
Non-core
58,778

 
55,829

 
2,949

 
5.3%
 
93%
 
94%
 
$
220,026

 
$
205,604

 
$
14,422

 
7.0%
 
 
 
 
 
(a)  
Economic occupancy, shown for the retail and non-core segments, is defined as the percentage of total gross leasable area for which a tenant is obligated to pay rent under the terms of its lease agreement, regardless of the actual use or occupation by that tenant of the area being leased. Physical occupancy is shown for the student housing segment.

46

Retail
As of September 30, 2015 , we owned 110 retail assets consisting of 15,876,103 square feet. There were 104 retail same store assets for the nine months ended September 30, 2015 and 2014. Our retail segment consists solely of multi-tenant retail properties, primarily community and neighborhood centers and power centers.
A significant focus in our retail segment will be to continue to maximize the performance of the portfolio by accretive acquisitions in key markets and select dispositions of properties that are in markets that we do not believe offer the same opportunities for growth. We will support our key market approach by expanding our regional offices and further embedding leasing and operations staff in these respective markets, which we believe will provide us with stronger local market knowledge and enhanced tenant relationships. This will continue in 2016 as we source acquisitions in key markets.
IAGM Retail Fund I, LLC ("IAGM") is a joint venture partnership between the Company and PGGM Private Real Estate Fund ("PGGM"). The joint venture was formed with the purpose of acquiring and managing retail properties in Texas and Oklahoma and sharing in the profits and losses from those properties and its activities. As of September 30, 2015 , IAGM consists of 18 retail assets representing 3,048,620 gross leasable square feet and has economic occupancy of 94% . The Company is responsible for the management and leasing of the retail properties included in the IAGM joint venture. The Company accounts for its investment in the IAGM joint venture using the equity method.
 
Retail
 
As of September 30,
 
2015
 
2014
Retail segment
 
 
 
Economic occupancy (a)
94%
 
94%
Rent per square foot (b)
$13.95
 
$13.74
Investment in properties, undepreciated
$2,640,754
 
$2,576,685
 
 
 
 
Retail segment, with IAGM joint venture  properties:
 
 
 
Economic occupancy  (a)
94%
 
94%
Rent per square foot  (b)
$14.26
 
$14.02
(a) Economic occupancy is defined as the percentage of total gross leasable area for which a tenant is obligated to pay rent under the terms of its lease agreement, regardless of the actual use or occupation by that tenant of the area being leased. Actual use may be less than economic square footage. Prior year economic occupancy excludes properties sold or classified as discontinued operations.
(b) Rent per square foot is computed as annualized rent divided by the total occupied square footage at the end of the period. Annualized rent is computed as revenue for the last month of the period multiplied by twelve months. Annualized rent includes the effect of rent abatements, lease inducements and straight-line rent GAAP adjustments. Prior year rent per square foot excludes properties sold or classified as discontinued operations.

47

The following table represents lease expirations for the retail segment as of September 30, 2015 :
Lease Expiration Year
 
Number of Expiring Leases
 
GLA of Expiring Leases (Sq. Ft.)
 
Annualized Rent of Expiring Leases
 
Percent of Total GLA
 
Percent of Total Annualized Rent
 
Expiring Rent/Square Foot
2015
 
64
 
269,208

 
$2,250
 
1.8%
 
1.1%
 
$8.36
2016
 
285
 
1,235,107

 
18,442

 
8.3%
 
8.8%
 
14.93

2017
 
384
 
1,872,370

 
31,681

 
12.5%
 
15.2%
 
16.92

2018
 
312
 
1,821,302

 
28,396

 
12.2%
 
13.6%
 
15.59

2019
 
302
 
2,454,213

 
33,387

 
16.4%
 
16.0%
 
13.60

2020
 
340
 
2,170,388

 
30,077

 
14.5%
 
14.4%
 
13.86

2021
 
101
 
1,092,675

 
14,654

 
7.3%
 
7.0%
 
13.41

2022
 
50
 
823,838

 
9,705

 
5.5%
 
4.6%
 
11.78

2023
 
55
 
770,705

 
11,190

 
5.2%
 
5.4%
 
14.52

2024
 
58
 
833,209

 
9,922

 
5.6%
 
4.8%
 
11.91

Month to Month
 
40
 
102,117

 
1,918

 
0.7%
 
0.9%
 
18.79

Thereafter
 
106
 
1,486,456

 
17,159

 
10.0%
 
8.2%
 
11.54

 
 
2,097
 
14,931,588

 
$208,781
 
100%
 
100%
 
$13.98
We believe the percentage of leases expiring annually over the next five years will allow us to capture an appropriate portion of future market rent increases while allowing us to manage any potential re-leasing risk. For purposes of preparing the table, we have not assumed that contractual lease options contained in certain of our leases and which have not yet been exercised as of September 30, 2015 will in fact be exercised.

The following table represents lease spread metrics for leases that commenced in 2015 compared to expiring leases for the prior tenant in the same unit.
 
Number of Leases Commenced
as of Sept. 30, 2015
GLA SF
New Contractual Rent ($PSF) (a)
Prior Contractual Rent
($PSF) (a)
Change
over
prior year (a)
Weighted Average Lease Term (Years)
Tenant Improvement Allowance ($PSF)
Lease Commissions ($PSF)
Comparable (b)  Renewal Leases
195
1,246,924
$14.39
$13.74
4.73%
5.22
$0.39
$0.12
Comparable (b)  New Leases
17
49,244
20.89
19.31
8.18%
8.84
20.49
8.02
Non-Comparable Renewal and New Leases
37
147,126
17.92
n/a
n/a
8.95
16.93
6.73
Total or weighted average
249
1,443,294
$14.64
$13.95
4.95%
5.73
$2.76
$1.06
(a) Non-comparable leases are not included in totals.
(b) Comparable lease is defined as a lease that meets all of the following criteria: same unit, leased within one year of prior tenant, square footage of unit stayed the same or within 10% of prior unit square footage, and rent structure is consistent.
During the nine months ended September 30, 2015 , 53 new leases and 196 renewals commenced with gross leasable area totaling 1,443,294 square feet, of which 212 were comparable. For our comparable new leases, base rent increased by 8.18% from prior base rent, from $19.31 to $20.89 per square foot. The weighted average term for comparable new leases was 8.84 years, with tenant improvement allowances and commissions at $20.49 and $8.02 per square foot, respectively.
Our comparable renewal leases saw rent growth of 4.73% , increasing from $13.74 to $14.39 per square foot. The weighted average term was 5.22 years, with tenant improvement allowances and lease commissions at $0.39 and $0.12 per square foot, respectively. The 37 non-comparable leases commenced with rents starting at $17.92 in year one and had a weighted average term of 8.95 years. Tenant improvement allowances and lease commissions were $16.93 and $6.73 per square foot, respectively.
Tenant improvement allowances were primarily given for our new leases. Lease commissions were consistent across the new lease activity. As of December 31, 2014, we had GLA totaling 1,533,074 square feet set to expire in the first nine months of 2015, of which 1,395,889 was rolled over. This achieved a retention rate of 91%.

48

Comparison of the three and nine months ended September 30, 2015 and 2014
The following table represents operating information for the retail segment and for the same store retail segment consisting of properties acquired prior to January 1, 2014. The properties in the same store portfolio were owned for the entire three months ended September 30, 2015 and 2014 and for the entire nine months ended September 30, 2015 and 2014. Activity in the non-same store row for the three and nine months ended September 30, 2015 and 2014 includes properties acquired after September 30, 2014 . Activity in the non-same store row for the three and nine months ended September 30, 2015 and 2014 also includes properties sold in 2015 and 2014 that did not qualify as discontinued operations.
For the three months ended September 30, 2015 compared to the same period in 2014, on a same store basis, our retail segment modified net operating income increased by $2,397 , or 5.8% , up to $43,899 from $41,502 . As a result of our self-management transactions, which eliminated the property management fee paid to Inland American Holdco Management LLC and was replaced by direct property costs related to payroll and overhead, there was a decrease of approximately $945 in property operating expenses. Contractual rental rate increases have contributed to an increase of rental income for the three months ended September 30, 2015 compared to the three months ended September 30, 2014 . During the same three month period, the total segment modified net operating income increased by $2,723 , or 6.2% , to $46,468 for the three months ended September 30, 2015 from $43,745 for the three months ended September 30, 2014 . This increase was primarily because we no longer pay a property management fee offset by direct property related costs to payroll and overhead. In addition, we also saw contractual rental rate increases, one acquisition in the fourth quarter of 2014 and two during the second quarter of 2015, offset by the sold properties that did not qualify as discontinued operations.
For the nine months ended September 30, 2015 compared to the same period in 2014, on a same store basis, our retail segment modified net operating income increased by $6,642 , or 5.3% , up to $131,798 from $125,156 . As a result of our self-management transactions, which eliminated the property management fee paid to Inland American Holdco Management LLC and was replaced by direct property costs related to payroll and overhead, there was a decrease of approximately $4,246 in property operating expenses. In addition, there was a controlled decrease in property operating expenses from repair and maintenance and non-recoverable marketing events. Contractual rental rate increases have contributed to an increase of rental income for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014 . During the same nine month period, the total segment modified net operating income increased by $4,501 , or 3.3% , to $139,356 for the nine months ended September 30, 2015 from $134,855 for the nine months ended September 30, 2014 .
 
Three Months Ended
 
 
 
 
 
Nine Months Ended
 
 
 
 
Retail Properties
Sept. 30, 2015
 
Sept. 30, 2014
 
Favorable (Unfav.) Variance
 
Favorable (Unfav.) Variance
 
Sept. 30, 2015
 
Sept. 30, 2014
 
Favorable (Unfav.) Variance
 
Favorable (Unfav.) Variance
No. of same store properties
106
 
106
 
 
 
 
 
104
 
104
 
 
 
 
Operating revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
48,710

 
$
47,790

 
$
920

 
1.9%
 
$
143,707

 
$
141,304

 
$
2,403

 
1.7%
Tenant recovery income
14,212

 
13,580

 
632

 
4.7%
 
43,573

 
42,894

 
679

 
1.6%
Other property income
366

 
582

 
(216
)
 
(37.1)%
 
1,410

 
2,094

 
(684
)
 
(32.7)%
Total income
63,288

 
61,952

 
1,336

 
2.2%
 
188,690

 
186,292

 
2,398

 
1.3%
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property operating expenses
10,135

 
11,465

 
1,330

 
11.6%
 
29,339

 
34,357

 
5,018

 
14.6%
Real estate taxes
9,254

 
8,985

 
(269
)
 
(3.0)%
 
27,553

 
26,779

 
(774
)
 
(2.9)%
Total operating expenses
19,389

 
20,450

 
1,061

 
5.2%
 
56,892

 
61,136

 
4,244

 
6.9%
Modified same store NOI (1)
43,899

 
41,502

 
2,397

 
5.8%
 
131,798

 
125,156

 
6,642

 
5.3%
Modified non-same store
NOI (1)
2,569

 
2,243

 
326

 
14.5%
 
7,558

 
9,699

 
(2,141
)
 
(22.1)%
Modified retail net operating income (1)
$
46,468

 
$
43,745

 
$
2,723

 
6.2%
 
$
139,356

 
$
134,855

 
$
4,501

 
3.3%
Adjustments (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments to rental income
795

 
1,502

 
(707
)
 
(47.1)%
 
2,270

 
3,740

 
(1,470
)
 
(39.3)%
Termination fee income
148

 
44

 
104

 
236.4%
 
255

 
1,180

 
(925
)
 
(78.4)%
Total adjustments
943

 
1,546

 
(603
)
 
(39.0)%
 
2,525

 
4,920

 
(2,395
)
 
(48.7)%
Net operating income, retail
$
47,411

 
$
45,291

 
$
2,120

 
4.7%
 
$
141,881

 
$
139,775

 
$
2,106

 
1.5%
(1) Modified net operating income reflects the income from operations excluding nonrecurring events and other GAAP rent adjustments in order to provide a comparable presentation of operating activity across periods.

49

(2) Includes adjustments for items that affect the comparability of, and were excluded from, the same store results. Such adjustments include lease termination income, GAAP rent adjustments, such as straight-line rent, and above/below market lease amortization .

Retail Outlook
Over the next three years, our retail portfolio is expected to maintain high occupancy. This high occupancy combined with appropriate lease rollover will allow us to capture market rent growth. Our leasing staff actively seeks to lease space at favorable rates, and our management team is focused on controlling expenses and maintaining strong tenant relationships. We also continue to focus on new consumer trends and tenant mix/complimentary uses as leases mature in an effort to maximize tenant performance at our properties.
As we have transitioned to self-management, we have made a significant commitment to enhancing our operational leadership team with key senior hires in Asset Management, Leasing and Property Management as well as meaningful investments in technology systems and staff.
We believe that the fundamentals in the retail segment continue to be favorable. As our community and neighborhood centers are typically grocery-anchored and necessity-based, there continues to be strong performance in these segments. Our larger power center properties continue to perform well as larger format retailers adapt their business model to embrace e-commerce. We see ongoing retailer demand for these well-located assets which supports our key market approach. With limited new development and increasing (albeit controlled) retailer expansion, we believe retail rental rates will continue to grow.
Our retail strategy continues to focus on key markets across the country and growing our presence in those markets. These key markets share fundamental characteristics such as job growth and population growth. We also may opportunistically dispose of retail properties in situations where the properties no longer fit with our strategic objectives.

50

Student Housing Segment
As of September 30, 2015 , we owned 16 student housing assets consisting of 9,600 beds. There were 12 student housing same store assets for the nine months ended September 30, 2015 and 2014. During the third quarter of 2015, we placed in service two developments, adding 1,371 beds, as well as an addition to an existing student housing property, adding another 242 beds to that property. We have increased and expect to continue to increase the size of our student housing portfolio into 2016 through acquisitions and developments. We continue our current construction of four student housing properties with expected delivery dates in 2016 and 2017.
On April 27, 2015 , we purchased Bishops Landing, a student housing facility in Norman, Oklahoma for $12,500 . This building will be demolished in order to develop and construct a brand new student housing facility, "UH Norman" on the land. This project is estimated to be completed in 2017 with an estimated 917 beds. On July 30, 2015, we executed a ground lease in Clemson, South Carolina for the development of a 428 bed, mixed use student housing property, "UH College Avenue". This project is expected to be completed in 2017. Our rental rates in student housing rose in 2015 compared to 2014 due to favorable market conditions as well as the addition of one property in December 2014, two properties placed in service during third quarter 2015, and an addition to an existing property also placed in service during third quarter 2015.
Student housing industry fundamentals continue to improve. We delivered three projects on time and on budget during third quarter 2015 with an average occupancy of over 95%.  Furthermore, new deliveries are being absorbed quickly and pre-leasing percentages are predicted to be higher going forward than in recent years. Rent per bed and occupancy increased in 2015, largely driven by the positive supply-and-demand environment in most markets. Particularly as the demand for modern housing with luxury amenities supersedes that for existing housing, we continue targeting newer core assets consistent with our investment strategy that we believe will be best positioned to succeed in this positive student housing environment.  Our student housing team continues to seek and evaluate opportunities for segment growth that are in line with our key community characteristics while minimizing transaction costs by completing acquisitions off-market.  We are committed to developing strategic business partnerships and relationships with universities that meet our target criteria in order to capitalize on potential segment growth.
Our joint venture, 15th & Walnut Owner, LLC ("Eugene"), is a partnership between the Company and Gerding Edlen Investors, LLC. ("GE"). The joint venture was formed with the purpose to develop, construct, and manage a student housing community on the campus of the University of Oregon in Eugene, Oregon, named "UH Arena District". UH Arena District consists of 240 beds and is at 97% physical occupancy as of September 30, 2015 . The Company is responsible for the management and leasing of this student housing asset. This entity is not consolidated by the Company and the equity method of accounting is used to account for this investment.
 
Student Housing
 
For the nine months ended September 30,
 
2015
 
2014
Student Housing segment
 
 
 
Physical occupancy  (a)
95%
 
92%
End of month scheduled rent per bed per month (b)
$775
 
$741
Investment in properties, undepreciated
$872,952
 
$712,511
 
 
 
 
Student Housing segment, with 15th & Walnut joint venture
 
 
 
Physical occupancy  (a)
95%
 
91%
End of month scheduled rent per bed per month (b)
$773
 
$740
(a) Physical occupancy is defined as a percentage of the number of beds, excluding models, for which a bed is being physically occupied. The percentage is based on a weighted daily average for the period.  Prior year physical occupancy excludes properties sold or classified as discontinued operations. Physical occupancy excludes student housing "turn," generally a two week move-in period typically during the month of August.

(b) End of month scheduled rent per student housing bed per month is defined as average net rental income for the period divided by the average occupied units for the same period. Average net rental income is defined as actual rent charged less concessions. Average occupied units are defined as physical occupancy multiplied by total number of beds (excluding models). Prior year rent per bed per month excludes properties classified as sold or discontinued operations.


51

Comparison of the three and nine months ended September 30, 2015 and 2014
The following table represents operating information for the student housing segment and for the same store student housing segment consisting of properties acquired prior to January 1, 2014. The properties in the same store portfolio were owned for the entire three months ended September 30, 2015 and 2014 and for the entire nine months ended September 30, 2015 and 2014. Activity in the non-same store row for the three and nine months ended September 30, 2015 and 2014 includes properties acquired or placed into service after September 30, 2014 . Activity in the non-same store row for the three and nine months ended September 30, 2015 and 2014 also includes properties sold in 2015 and 2014 that did not qualify as discontinued operations.
For the three months ended September 30, 2015 , same store modified net operating income increased by $3,253 , or 58.2% , compared to the same period in 2014 due to one-time repair expenses of $3,000 incurred at one of our properties during the three months ended September 30, 2014 that were not incurred in 2015. On a total segment basis, our student housing segment saw an increase in modified net operating income of $5,303 , or 72.9% , for the three months ended September 30, 2015 compared to the same period in 2014. These increases were driven by an increase in rental rates to $780 rent per bed from $726 rent per bed for the three months ended September 30, 2015 and 2014 , respectively, and an increase in occupancy to 94% from 93% for the three months ended September 30, 2015 and 2014 , respectively.
For the nine months ended September 30, 2015 , modified same store net operating income increased by $4,831 , or 19.6% , compared to the same period in 2014. This increase is primarily due to one-time repair expenses of $5,100 incurred at one of our properties during the nine months ended September 30, 2014 that were not incurred in 2015. Occupancy increased to 94% for the nine months ended September 30, 2015 from 91% for the nine months ended September 30, 2014 . Rental rates also increased to $750 rent per bed for the nine months ended September 30, 2015 from $733 rent per bed for the nine months ended September 30, 2014 on a same store basis. Total segment modified net operating income increased by $7,278 , or 24.4% , for the nine months ended September 30, 2015 compared to the same period in 2014 as a result of one acquisition in fourth quarter 2014, two properties placed in service during third quarter 2015, an addition to an existing property also placed in service during third quarter 2015, and an increase in rental rates to $775 rent per bed for the nine months ended September 30, 2015 from $741 rent per bed for the nine months ended September 30, 2014 .
 
Three Months Ended
 
 
 
 
 
Nine Months Ended
 
 
 
 
Student Housing
Sept. 30, 2015
 
Sept. 30, 2014
 
Favorable (Unfav.) Variance
 
Favorable (Unfav.) Variance
 
Sept. 30, 2015
 
Sept. 30, 2014
 
Favorable (Unfav.) Variance
 
Favorable (Unfav.) Variance
No. of same store properties
12
 
12
 
 
 
 
 
12
 
12
 
 
 
 
Operating revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
15,261

 
$
15,032

 
$
229

 
1.5%
 
$
45,771

 
$
44,449

 
$
1,322

 
3.0%
Tenant recovery income
162

 
128

 
34

 
26.6%
 
480

 
378

 
102

 
27.0%
Other property income
939

 
846

 
93

 
11.0%
 
2,790

 
2,522

 
268

 
10.6%
Total income
16,362

 
16,006

 
356

 
2.2%
 
49,041

 
47,349

 
1,692

 
3.6%
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property operating expenses
6,685

 
9,165

 
2,480

 
27.1%
 
16,176

 
20,458

 
4,282

 
20.9%
Real estate taxes
838

 
1,255

 
417

 
33.2%
 
3,415

 
2,272

 
(1,143
)
 
(50.3)%
Total operating expenses
7,523

 
10,420

 
2,897

 
27.8%
 
19,591

 
22,730

 
3,139

 
13.8%
Modified same store NOI (1)
8,839

 
5,586

 
3,253

 
58.2%
 
29,450

 
24,619

 
4,831

 
19.6%
Modified non-same store NOI (1)
3,740

 
1,690

 
2,050

 
121.3%
 
7,607

 
5,160

 
2,447

 
47.4%
Modified student housing NOI (1)
$
12,579

 
$
7,276

 
$
5,303

 
72.9%
 
$
37,057

 
$
29,779

 
$
7,278

 
24.4%
Adjustments (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments to rental income
35

 
17

 
18

 
105.9%
 
114

 
192

 
(78
)
 
(40.6)%
Total adjustments
35

 
17

 
18

 
105.9%
 
114

 
192

 
(78
)
 
(40.6)%
Net operating income, student housing
$
12,614

 
$
7,293

 
$
5,321

 
73.0%
 
$
37,171

 
$
29,971

 
$
7,200

 
24.0%
(1) Modified net operating income reflects the income from operations excluding nonrecurring events and other GAAP rent adjustments in order to provide a comparable presentation of operating activity across periods.
(2) Includes adjustments for items that affect the comparability of, and were excluded from, the same store results. Such adjustments include GAAP rent adjustments such as straight-line rent.

52

Student Housing Developments
We have student housing development projects that are in various stages of pre-development and development which are funded by borrowings secured by the properties and our equity investments or contributions. Specifically identifiable direct development and construction costs are capitalized, including, where applicable, salaries and related costs, real estate taxes and interest incurred in developing the property. All amounts stated in thousands.
The properties under development and all amounts set forth below are as of September 30, 2015 .
Name
Location
(City, State)
Beds
Total Costs
Incurred to
Date
(a)
Total
Estimated
Costs
(b)
Remaining Costs to be
Funded
(c)
Note Payable 
as of
Sept. 30, 2015
Estimated
Placed in
Service Date
(d) (e)
The Venue at the Ballpark
Birmingham, AL
327 Beds
$
22,487

$
39,354

$
—

$
6,197

Q1 2016
UH Austin
Austin, TX
504 Beds
13,738

53,542

5,002

1

Q3 2016
UH Norman
Norman, OK
917 Beds
13,163

86,724

17,191

—

Q3 2017
UH College Avenue
Clemson, SC
418 Beds
1,104

38,259

12,235

—

Q3 2017
(a)
The Total Costs Incurred to Date represent total costs incurred for the development, including any costs allocated to parcels placed in service, but excluding capitalized interest.
(b)
The Total Estimated Costs represent 100% of the development’s estimated costs, including the acquisition cost of the land and building, if any, and excluding capitalized interest. The Total Estimated Costs are subject to change upon, or prior to, the completion of the development and include amounts required to lease the property.
(c)
We anticipate funding remaining development, to the extent any remains, through construction financing secured by the properties and equity contributions.
(d)
The Estimated Placed in Service Date represents the date the certificate of occupancy is currently anticipated to be obtained. Subsequent to obtaining the certificate of occupancy, each property will go through a lease-up period.
(e)
Leasing activities related to student housing properties do not begin until six to nine months prior to the placed in service date.
Student Housing Outlook
We expect to continue to see increases in operating results compared to 2014 in our student housing portfolio due to increasing rental rates driven by the quality of our property metrics and strong demand. In addition, we anticipate the 2016 delivery of approximately 831 beds from two developments and the 2017 delivery of 1,335 beds from another two developments. Occasionally, we may recycle capital through strategic dispositions in order to maximize the financial performance of our student housing segment.

53

Non-core Segment
As of September 30, 2015 , we owned 16 non-core assets consisting of 5,844,751 square feet. There were 16 non-core same store assets for the nine months ended September 30, 2015 and 2014.
Our non-core segment is comprised of multi-tenant office and triple net properties, such as distribution centers, correctional facilities and single-tenant office prope rties. Our strategy includes the disposition of non-core assets in individual and portfolio transactions over time or to engage in other strategic transactions in an effort to maximize their value.
 
Non-core
 
As of September 30,
 
2015
 
2014
Economic occupancy (a)
93%
 
94%
Base rent per square foot  (b)
$14.86
 
$14.76
Investment in properties, undepreciated
$758,749
 
$889,122
(a) Economic occupancy is defined as the percentage of total gross leasable area for which a tenant is obligated to pay rent under the terms of its lease agreement, regardless of the actual use or occupation by that tenant of the area being leased. Actual use may be less than economic square footage. Prior year economic occupancy excludes properties sold or classified as discontinued operations.
(b)  
Rent per square foot is computed as annualized rent divided by the total occupied square footage at the end of the period. Annualized rent is computed as revenue for the last month of the period multiplied by twelve months. Annualized rent includes the effect of rent abatements, lease inducements and straight-line rent GAAP adjustments. Prior year rent per square foot excludes properties sold or classified as discontinued operations.
The following table represents lease expirations for the non-core segment as of September 30, 2015 :
Lease Expiration Year
 
Number of Expiring Leases
 
GLA of Expiring Leases (Sq. Ft.)
 
Annualized Rent of Expiring Leases
 
Percent of Total GLA
 
Percent of Total Annualized Rent
 
Expiring Rent/ Square Foot
2015
 
2
 
80,923

 
$896
 
1.5
%
 
1.1
%
 
$11.08
2016
 
9
 
2,421,297

 
36,325

 
44.7
%
 
45.2
%
 
15.00

2017
 
3
 
1,545,679

 
18,765

 
28.5
%
 
23.3
%
 
12.14

2018
 
4
 
231,315

 
6,056

 
4.3
%
 
7.5
%
 
26.18

2019
 
3
 
278,646

 
4,646

 
5.1
%
 
5.8
%
 
16.68

2020
 
1
 
301,029

 
9,850

 
5.6
%
 
12.2
%
 
32.72

2021
 
—
 
—

 
—

 
—
%
 
—
%
 
—

2022
 
1
 
41,690

 
1,145

 
0.8
%
 
1.4
%
 
27.46

2023
 
1
 
24,981

 
655

 
0.5
%
 
0.8
%
 
26.23

2024
 
—
 
—

 
—

 
—
%
 
—
%
 
—

MTM
 
—
 
—

 
—

 
—
%
 
—
%
 
—

Thereafter
 
2
 
489,649

 
2,113

 
9.0
%
 
2.6
%
 
4.32

 
 
26
 
5,415,209

 
$80,451
 
100
%
 
100
%
 
$14.86
Leases expiring in 2016 and 2017 represent approximately 45.2% and 23.3% , respectively, of our total annualized rental income of our non-core segment. In 2016 and 2017, the leases on two properties occupied by AT&T, Inc. expire. One property with approximately 1.7 million square feet is in Hoffman Estates, Illinois, which is in the greater metro Chicago market. The second property with approximately 1.5 million square feet is in St. Louis, Missouri. AT&T, Inc. may not renew such leases. If AT&T, Inc. does not renew such leases, based on current market conditions, we may be unable to re-lease some or all of these properties at a comparable rate in a timely manner or at all. To the extent we are able to re-lease any or all of such properties, the tenant improvement and leasing costs associated with any new tenants would likely be significant.

54

Comparison of the three and nine months ended September 30, 2015 and 2014
The following table represents operating information for the non-core segment and for the same store non-core segment consisting of properties acquired prior to January 1, 2014. The properties in the same store portfolio were owned for the entire three months ended September 30, 2015 and 2014 and for the entire nine months ended September 30, 2015 and 2014. Activity in the non-same store row for the three and nine months ended September 30, 2015 and 2014 includes properties sold in 2015 and 2014 that did not qualify as discontinued operations.
For the three months ended September 30, 2015 , same store modified net operating income increased by $1,502 , or 8.0% , compared to the same period in 2014. As a result of our self-management transactions, which eliminated the property management fee paid to Inland American Holdco Management LLC and was replaced by direct property costs related to payroll and overhead, there was a decrease of approximately $824 in property operating expenses. In addition, other property income increased $774 as a result of overtime HVAC usage at one property. For the three months ended September 30, 2015 , our total segment modified net operating income decreased by $2,000 , or 9.1% , compared to the same period in 2014. This decrease was a result of the twelve properties sold after third quarter 2014 that did not qualify as discontinued operations.
For the nine months ended September 30, 2015 , modified same store net operating income increased by $2,949 , or 5.3% , compared to the same period in 2014. As a result of our self-management transactions, which eliminated the property management fee paid to Inland American Holdco Management LLC and was replaced by direct property costs related to payroll and overhead, there was a decrease of approximately $2,255 in property operating expenses. Rental rates stayed consistent, increasing slightly to $14.86 per square foot at September 30, 2015 compared to $14.76 per square foot at September 30, 2014 . In addition, other property income increased $774 as a result of overtime HVAC usage at one property. Total segment modified net operating income decreased $11,050 , or 15.8% , when comparing the nine months ended September 30, 2015 and 2014. This decrease was a result of the twelve properties sold after third quarter 2014 that did not qualify as discontinued operations.
 
Three Months Ended
 
 
 
 
 
Nine Months Ended
 
 
 
 
Non-core
Sept. 30, 2015
 
Sept. 30, 2014
 
Favorable (Unfav.) Variance
 
Favorable (Unfav.) Variance
 
Sept. 30, 2015
 
Sept. 30, 2014
 
Favorable (Unfav.) Variance
 
Favorable (Unfav.) Variance
No. of same store properties
16
 
16
 
 
 
 
 
16
 
16
 
 
 
 
Operating revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
20,771

 
$
20,749

 
$
22

 
0.1%
 
$
62,452

 
$
62,356

 
$
96

 
0.2%
Tenant recovery income
1,150

 
1,045

 
105

 
10.0%
 
3,567

 
3,555

 
12

 
0.3%
Other property income
858

 
44

 
814

 
1,850.0%
 
970

 
140

 
830

 
592.9%
Total income
22,779

 
21,838

 
941

 
4.3%
 
66,989

 
66,051

 
938

 
1.4%
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property operating expenses
1,392

 
1,994

 
602

 
30.2%
 
4,671

 
6,692

 
2,021

 
30.2%
Real estate taxes
1,086

 
1,045

 
(41
)
 
(3.9)%
 
3,540

 
3,530

 
(10
)
 
(0.3)%
Total operating expenses
2,478

 
3,039

 
561

 
18.5%
 
8,211

 
10,222

 
2,011

 
19.7%
Modified same store NOI (1)
20,301

 
18,799

 
1,502

 
8.0%
 
58,778

 
55,829

 
2,949

 
5.3%
Modified non-same store NOI (1)
(376
)
 
3,126

 
(3,502
)
 
(112.0)%
 
239

 
14,238

 
(13,999
)
 
(98.3)%
Modified non-core
NOI (1)
$
19,925

 
$
21,925

 
$
(2,000
)
 
(9.1)%
 
$
59,017

 
$
70,067

 
$
(11,050
)
 
(15.8)%
Adjustments (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustment to rental income
(634
)
 
(666
)
 
32

 
(4.8)%
 
(2,108
)
 
(993
)
 
(1,115
)
 
112.3%
Total adjustments
(634
)
 
(666
)
 
32

 
(4.8)%
 
(2,108
)
 
(993
)
 
(1,115
)
 
112.3%
Net operating income, non-core
$
19,291

 
$
21,259

 
$
(1,968
)
 
(9.3)%
 
$
56,909

 
$
69,074

 
$
(12,165
)
 
(17.6)%
(1) Modified net operating income reflects the income from operations excluding nonrecurring events and other GAAP rent adjustments in order to provide a comparable presentation of operating activity across periods.

(2) Includes adjustments for items that affect the comparability of, and were excluded from, the same store results. Such adjustments include lease termination income, GAAP rent adjustments, such as straight-line rent, and above/below market lease amortization

55

Non-core Outlook
We expect to see similar or decreased operating performance in our non-core portfolio. We plan to sell these assets in individual and portfolio transactions or engage in other strategic transactions over time in an effort to maximize their value.
Other Non-core Activity
As part of our restructure and foreclosure of a note receivable, we began overseeing as the secured lender certain roadway and utility infrastructure projects that will provide access to the approximately 205 acre Sacramento Railyards ("Railyards") property. The Railyards property is located immediately adjacent to, and to the north of, Sacramento’s central business district. The infrastructure projects were planned, approved, and funded prior to the foreclosure of a note from Stan Thomas. The Railyards property is the subject of a collaborative planning and infrastructure funding effort of various federal, state, and local municipalities and its development is scheduled to be completed in phases during the years 2014-2030. We sold a parcel of land to the State of California for $10,000 on October 2, 2014. On September 30, 2015 , we completed the Railyards Transaction. Prior to the Railyards Transaction, we recorded an impairment of $92,167 to write the Railyards down to its fair value for the three and nine months ended September 30, 2015 . As a result of the difference between the carrying value of the Railyards and the fair value of our equity interest in the joint venture, we recorded a loss of $12,919 on the Railyards Transaction during the three and nine months ended September 30, 2015 .


56

Liquidity and Capital Resources
As of September 30, 2015 , we had $253.2 million of cash and cash equivalents. We continually evaluate the economic and credit environment and its impact on our business. We believe we are appropriately positioned to have significant liquidity to utilize in executing our strategy.
Short-Term Liquidity and Capital Resources
On a short-term basis, our principal demands for funds are to pay our corporate and operating expenses, as well as property capital expenditures, make distributions to our stockholders, and pay interest and principal payments on our current indebtedness. We expect to meet our short term liquidity requirements from cash flow from operations and distributions from our joint venture investments.
Long-Term Liquidity and Capital Resources
On a long-term basis, our objectives are to maximize revenue generated by our existing properties, to further enhance the value of our retail and student housing segments that produce attractive current yield and long-term risk-adjusted returns to our stockholders and to generate sustainable and predictable cash flow from our operations to distribute to our stockholders. We believe the repositioning of our retail properties and growth of our student housing segment will increase our operating cash flows. Our non-core properties have lease maturities within the next three years that may reduce our cash flows from operations. There is no assurance that we will be able to re-lease these properties at comparable rates, on comparable terms or at all. In addition, strategic transactions that we may pursue may also reduce our cash flows from operations.
Our principal demands for funds have been and will continue to be:
•
to pay our expenses and the operating expenses of our properties;
•
to make distributions to our stockholders;
•
to service or pay-down our debt;
•
to fund capital expenditures and leasing related costs;
•
to invest in properties and portfolios of properties; and
•
to fund development investments.
Generally, our cash needs have been and will be funded from:
•
cash flows from our investment properties;
•
income earned on our investment in marketable securities;
•
distributions from our joint venture investments;
•
proceeds from sales of properties and marketable securities;
•
proceeds from borrowings on properties; and
•
proceeds from our line of credit.
We may, from time to time, seek to retire or purchase additional amounts of our outstanding equity and/or debt securities through cash purchases for other securities. Such repurchases or exchanges, if any, will depend on our liquidity requirements, contractual restrictions, and other factors. The amounts involved may be material.

57

Distributions
We declared cash distributions to our stockholders per weighted average number of shares outstanding during the period from January 1, 2015 to September 30, 2015 totaling $ 110.6 million . For the nine months ended September 30, 2015 , we paid cash distributions of $118.5 million . These cash distributions were paid with $143.8 million from our cash flow from operations, $8.0 million provided by distributions from unconsolidated entities, as well as $8.0 million from the gain on sale of a parcel of land and four non-core properties. The difference between the cash distributions declared and the cash distributions paid is a timing difference due to our payment of distributions one month in arrears and a reduction of our dividend from $0.50 to $0.13 per share on an annualized basis beginning with the distribution paid in March 2015, which is discussed below.
In an effort to become a more efficient organization, we moved to quarterly distributions in the third quarter of this year. Switching from monthly to quarterly distributions will provide cost savings of approximately $1 million annually in printing and mailing costs. The change in the frequency of distributions also impacted the difference between the cash distribution declared and the cash distribution paid for the nine months ended September 30, 2015 .
The following chart summarizes the sources of our cash used to pay distributions. Our primary source of cash is cash flow provided by operating activities from our investments as presented in our cash flow statement. We also include distributions from unconsolidated entities to the extent that the underlying real estate operations in these entities generate these cash flows. Gain on sales of properties relate to net profits from the sale of certain properties. Our presentation is not intended to be an alternative to our consolidated statements of cash flow and does not present all the sources and uses of our cash.
The following table presents a historical view of our distribution coverage.
 
Nine months ended
 
Twelve months ended December 31,
 
September 30, 2015
 
2014
2013
2012
2011
2010
Cash flow provided by operations
$
143,756

 
$
340,335

$
422,813

456,221

397,949

356,660

Distributions from unconsolidated entities
7,964

 
33,891

20,121

31,710

33,954

31,737

Gain on sales of properties  (a)
7,957

 
360,934

456,563

40,691

6,141

55,412

Distributions paid
(118,501
)
 
(438,875
)
(449,253
)
(439,188
)
(428,650
)
(416,935
)
Excess
$
41,176

 
$
296,285

$
450,244

$
89,434

$
9,394

$
26,874

 
Three months ended
 
Three months ended
 
Three months ended
 
Nine months ended
 
March 31, 2015
 
June 30, 2015
 
September 30, 2015
 
September 30, 2015
Cash flow provided by operations
$
40,690

 
$
47,618

 
$
55,448

 
$
143,756

Distributions from unconsolidated entities
3,549

 
2,409

 
2,006

 
7,964

Gain on sales of properties  (a)
728

 
6,500

 
729

 
7,957

Distributions paid (b) (c)
(81,155
)
 
(28,009
)
 
(9,337
)
 
(118,501
)
(Deficiency) excess (d)
$
(36,188
)
 
$
28,518

 
$
48,846

 
$
41,176

(a) Excludes gains reflected on impaired values and excludes gain/loss on transfer of assets.
(b) Distributions paid for the three months ended March 31, 2015 reflect two months at the $0.50 per share annualized distribution rate and one month at the $0.13 per share annualized distribution rate. This reduction in the annualized distribution rate is a result of the Xenia Spin-Off, which is discussed in the following paragraphs.
(c) Distributions paid for the three months ended September 30, 2015 reflect one month at the $0.13 per share annualized distribution rate. Beginning in the third quarter, we moved to quarterly distributions. The distributions declared of $28,009 for the three months ended September 30, 2015 were paid in October 2015.
(d) Our cash flow from operations in the first quarter were impacted by the Xenia Spin-Off, as well as annual real estate taxes paid in January.

58

 
Nine Months Ended September 30,
 
Twelve months ended December 31,
 
2015
 
2014
 
2014
 
2013
 
2012
 
2011
 
2010
Distributions declared
$
110,601

 
$
329,144

 
$
436,875

 
$
450,106

 
$
440,031

 
$
429,599

 
$
417,885

Distributions paid
118,501

 
331,147

 
438,875

 
449,253

 
439,188

 
428,650

 
416,935

Distributions reinvested
—

 
95,832

 
95,832

 
181,630

 
191,785

 
199,591

 
207,296

On February 3, 2015, we completed the Spin-Off through the pro rata taxable distribution of 95% of the outstanding common stock of Xenia to holders of record of the Company’s common stock as of the close of business on January 20, 2015. Each holder of record of the Company’s common stock received one share of Xenia’s common stock for every eight shares of the Company’s common stock held at the close of business on the Record Date. In lieu of fractional shares, stockholders of the Company received cash. On February 4, 2015, Xenia’s common stock began trading on the NYSE under the ticker symbol "XHR".
Upon completing the Spin-Off, our Board analyzed and reviewed our distribution rate, and on February 24, 2015, announced a new distribution rate of $0.13 per share on an annualized basis beginning with the distribution paid in March 2015. We expect to fund our distributions from cash generated from operations, distributions from unconsolidated entities, and gain on sales of properties. We believe that our current distribution rate is sustainable based upon our current property portfolio. 
A number of factors were considered in establishing the new distribution rate. Xenia generated a substantial portion of our cash flows from operations and as a result, our previous distribution rate was not sustainable after the Spin-Off. In addition, the board of directors determined that it is in the best interest of the Company to retain additional operating cash flow in order to accumulate an appropriate level of capital reserves to enable the Company to tailor and grow its retail and student housing segments, consistent with our strategy and objectives, as well as address future lease maturities and disposition plans related to several properties in our non-core segment.
Borrowings
The table below presents, on a consolidated basis, the principal amount, weighted average interest rates and maturity date (by year) on our mortgage debt as of September 30, 2015 .
 
2015
 
2016
 
2017
 
2018
 
2019
 
Thereafter
 
Total
Maturing mortgage debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
  Fixed rate
$
11,400

 
$
197,692

 
$
782,603

 
$
65,849

 
$
—

 
$
557,712

 
$
1,615,256

  Variable rate
—

 
67,480

 
6,198

 
120,412

 
—

 
47,000

 
241,090

Total debt
11,400

 
265,172

 
788,801

 
186,261

 
—

 
604,712

 
1,856,346

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average interest rate on mortgage debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
  Fixed rate
10.04%
 
5.74%
 
5.46%
 
4.37%
 
—%
 
5.17%
 
5.38%
  Variable rate
—%
 
2.25%
 
2.15%
 
1.98%
 
—%
 
2.41%
 
2.14%
For consolidated borrowings, the debt maturity excludes mortgage discounts associated with debt assumed at acquisition of which a discount of $6.8 million , net of accumulated amortization, is outstanding as of September 30, 2015 . Of the total outstanding debt for all years at September 30, 2015 , approximately $41.6 million is recourse to the Company.
As of September 30, 2015 , we had approximately $11.4 million and $265.2 million in mortgage debt maturing in 2015 and 2016, respectively. The $11.4 million mortgage debt maturing in 2015 was paid off during the sale of the property encumbered by the debt subsequent to September 30, 2015. We will continue to negotiate refinancing the 2016 debt maturities as well as the 2017 maturities of $788.8 million . We currently anticipate that we will be able to repay or refinance all of our debt on a timely basis, and believe we have adequate sources of funds to meet our short term cash needs. However, there can be no assurance that we can obtain such refinancing on satisfactory terms. Volatility in the capital markets could expose us to the risk of not being able to borrow on terms and conditions acceptable to us for future acquisitions or refinancings. Mortgage loans outstanding as of September 30, 2015 and December 31, 2014 were $1.9 billion and $3.0 billion , respectively, and had weighted average interest rates of 4.96% and 4.63% per annum, respectively. Of these mortgage loans outstanding at December 31, 2014, approximately $1.2 billion related to properties in discontinued operations. As of September 30, 2015 , we had no margin securities payable balance. For the nine months ended September 30, 2014 , we had a net pay down of $ 59.7 million against our portfolio of marketable securities. For the nine months ended September 30, 2015 and 2014, we borrowed approximately $172.5 million and $ 297.5 million , respectively, secured by mortgages on our properties. On January 30, 2015,

59

we paid off our $200 million unsecured term loan, and on February 3, 2015, we entered into an amended and restated credit agreement for a $300 million unsecured revolving line of credit with KeyBank National Association, JP Morgan Chase Bank National Association and other financial institutions. The accordion feature allows us to increase the size of our unsecured line of credit up to $600 million, subject to certain conditions. The unsecured revolving line of credit matures on February 2, 2019 and contains one 12-month extension option that we may exercise upon payment of an extension fee equal to 0.15% of the commitment amount on the maturity date and subject to certain other conditions. The unsecured revolving line of credit bears interest at a rate equal to LIBOR plus 1.40% and requires the maintenance of certain financial covenants. As of September 30, 2015 , we believe we were in compliance with all of the covenants and default provisions under the credit agreement. As of September 30, 2015 , the interest rate of the revolving line of credit was 1.40% . As of September 30, 2015 , we had $0.04 million outstanding under the revolving credit facility.
On November 5, 2015, we entered into a term loan credit agreement for a $300,000 unsecured credit facility with a syndicate of seven lenders led by Wells Fargo Securities, LLC, Merrill Lynch, Pierce, Fenner & Smith, Incorporated and PNC Capital Markets LLC as joint lead arrangers. The accordion feature allows us to increase the size of the unsecured term loan credit facility to $600,000 , subject to certain conditions.
The term loan credit facility consists of two tranches: a five-year tranche maturing on January 15, 2021, and a seven-year tranche maturing on November 5, 2022. The credit facility can be drawn for one year from the agreement date, after which the unused portion of the credit facility will terminate. The credit facility is subject to maintenance of certain financial covenants. Interest rates are based on our total leverage ratio. Based upon our total leverage ratio at September 30, 2015, the five-year tranche bears an interest rate of LIBOR plus 1.30% and the seven-year tranche bears an interest rate of LIBOR plus 1.60%.

60

Summary of Cash Flows
 
Nine months ended September 30,
 
2015
 
2014
Cash provided by operating activities
$
143,756

 
$
323,575

Cash (used in) provided by investing activities
(66,095
)
 
560,708

Cash used in financing activities
(557,564
)
 
(854,730
)
(Decrease) increase in cash and cash equivalents
$
(479,903
)
 
$
29,553

Cash and cash equivalents, at beginning of period
733,150

 
319,237

Cash and cash equivalents, at end of period
$
253,247

 
$
348,790

Cash provided by operating activities was $ 143.8 million and $323.6 million for the nine months ended September 30, 2015 and 2014 , respectively, and was generated primarily from operating income from property operations, interest, and dividends. Cash provided by operating activities decreased for the nine months ended September 30, 2015 and 2014 mainly due to the disposition of 115 properties subsequent to September 30, 2014, including the Spin-Off of Xenia.
Cash used in investing activities was $ 66.1 million for the nine months ended September 30, 2015 . Cash provided by investing activities was $560.7 million for the nine months ended September 30, 2014 . The cash used in investing activities for the nine months ended September 30, 2015 was primarily due to the development of our seven student housing properties, the acquisition of two retail properties and one student housing property as well as capital expenditures. The cash provided by investing activities for the nine months ended September 30, 2014 was primarily due to the proceeds from the sale of properties associated with the net lease asset sale offset by the acquisition of one lodging property and two retail properties.
Cash used in financing activities was $ 557.6 million and $854.7 million for the nine months ended September 30, 2015 and 2014 , respectively. For the nine months ended September 30, 2015 , we contributed $165.9 million to Xenia as well as contributed $130.1 million held by the lodging properties to Xenia. Additionally, we paid off debt of $293.4 million and $367.3 million , for the nine months ended September 30, 2015 and 2014 , respectively. For the nine months ended September 30, 2014 , we repurchased shares of $403.9 million.
We consider all demand deposits, money market accounts and investments in certificates of deposit and repurchase agreements with a maturity of three months or less, at the date of purchase, to be cash equivalents. We maintain our cash and cash equivalents at financial institutions. The combined account balances at one or more institutions periodically exceed the Federal Depository Insurance Corporation (“FDIC”) insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage.
Off Balance Sheet Arrangements
Unconsolidated Real Estate Joint Ventures
Unconsolidated joint ventures are those where we have substantial influence over but do not control the entity. We account for our interest in these ventures using the equity method of accounting. For additional discussion of our investments in joint ventures, see "Part I, Item 1. Note 5 to the Consolidated Financial Statements." Our ownership percentage and related investment in each joint venture is summarized in the following table.
Joint Venture
 
Ownership %
 
Carrying Value of Investment at
September 30, 2015
IAGM Retail Fund I, LLC
 
55%
 
$
126,694

Downtown Railyard Venture, LLC
 
(a)
 
46,174

15th & Walnut Owner, LLC
 
62%
 
4,384

Cobalt Industrial REIT II
 
36%
 
4,716

Other Unconsolidated Entities
 
Various
 
1,798

 
 
 
 
$
183,766

(a) Our ownership percentage in Downtown Railyard Venture, LLC is based upon a waterfall calculation outlined in the joint venture operating agreement.

61

Selected Financial Data
The following table shows our consolidated selected financial data relating to our consolidated historical financial condition and results of operations. Such selected data should be read in conjunction with the consolidated financial statements and related notes appearing elsewhere in this report (dollar amounts are stated in thousands, except per share amounts).
 
As of
 
September 30, 2015
 
December 31, 2014
Balance Sheet Data:
 
 
 
  Total assets
$
4,193,855

 
$
7,497,316

Debt
$
1,849,557

 
$
1,991,608


 
For the three months ended
 
For the nine months ended
 
September 30, 2015
 
September 30, 2014
 
September 30, 2015
 
September 30, 2014
Operating Data:
 
 
 
 
 
 
 
Total income
$
112,739

 
$
110,732

 
$
331,467

 
$
343,320

Total interest and dividend income
$
2,671

 
$
2,474

 
$
9,169

 
$
10,424

Net income (loss) attributable to Company
$
(95,647
)
 
$
52,552

 
$
(27,757
)
 
$
192,523

Net income (loss) per common share, basic and diluted
$
(0.11
)
 
$
0.06

 
$
(0.04
)
 
$
0.22

Common Stock Distributions:
 
 
 
 
 
 
 
Distributions declared to common stockholders
$
28,010

 
$
107,709

 
$
110,601

 
$
329,144

Distributions paid to common stockholders
$
9,337

 
$
107,635

 
$
118,501

 
$
331,147

Distributions declared per weighted average common share
$
0.03

 
$
0.13

 
$
0.13

 
$
0.37

Distributions paid per weighted average common share
$
0.01

 
$
0.12

 
$
0.14

 
$
0.37

Supplemental Measures:
 
 
 
 
 
 
 
Funds from operations (a)
$
49,460

 
$
132,874

 
$
190,052

 
$
387,645

Modified net operating income (b)
$
78,972

 
$
72,946

 
$
235,430

 
$
234,701

Cash Flow Data:
 
 
 
 
 
 
 
Net cash flows provided by operating activities
$
55,448

 
$
123,201

 
$
143,756

 
$
323,575

Net cash flows (used in) provided by investing activities
$
14,995

 
$
142,873

 
$
(66,095
)
 
$
560,708

Cash flow used in financing activities
$
11,184

 
$
(281,472
)
 
$
(557,564
)
 
$
(854,730
)
Other Information:
 
 
 
 
 
 
 
Weighted average number of common shares outstanding, basic and diluted
861,824,777

 
861,627,855

 
861,824,777

 
883,537,865

(a)    We consider Funds from Operations, or "FFO" a widely accepted and appropriate measure of performance for a REIT. FFO provides a supplemental measure to compare our performance and operations to other REITs. Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts ("NAREIT"), an industry trade group, has promulgated a standard known as FFO, which it believes reflects the operating performance of a REIT. As defined by NAREIT, FFO means net income computed in accordance with GAAP, excluding gains (or losses) from sales of property, plus depreciation and amortization and impairment charges on depreciable property and after adjustments for unconsolidated partnerships and joint ventures in which we hold an interest. In calculating FFO, impairment charges of depreciable real estate assets are added back even though the impairment charge may represent a permanent decline in value due to decreased operating performance of the applicable property. Further, because gains and losses from sales of property are excluded from FFO, it is consistent and appropriate that impairments, which are often early recognition of losses on prospective sales of property, also be excluded. If evidence exists that a loss reflected in the investment of an unconsolidated entity is due to the write-down of depreciable real estate assets, these impairment charges are added back to FFO. The methodology is consistent with the concept of excluding impairment charges of depreciable assets or early recognition of losses on sale of depreciable real estate assets held by the Company.

62

FFO is neither intended to be an alternative to "net income" nor to "cash flows from operating activities" as determined by GAAP as a measure of our capacity to pay distributions. We believe that FFO is a better measure of our properties’ operating performance because FFO excludes non-cash items from GAAP net income. FFO is calculated as follows:
 
 
For the three months ended
 
For the nine months ended
 
 
September 30,
 
September 30,
Funds from Operations:
2015
 
2014
 
2015
 
2014
 
Net income (loss) attributable to Company
$
(95,647
)
 
$
52,552

 
$
(27,757
)
 
$
192,523

Add:
Depreciation and amortization related to investment properties
37,333

 
86,138

 
122,914

 
259,566

 
Depreciation and amortization related to investment in unconsolidated entities
3,417

 
6,800

 
9,641

 
32,698

 
Provision for asset impairment
92,167

 
670

 
92,167

 
75,616

 
Loss on contribution of real estate to an unconsolidated joint venture
12,919

 
—

 
12,919

 
—

 
Provision for asset impairment included in discontinued operations
—

 
1,667

 
—

 
4,665

 
 
 
 
 
 
 
 
 
Less:
Gain from property sales and transfer of assets
729

 
13,187

 
7,957

 
171,148

 
Gain from sales reflected in equity in earnings of unconsolidated entities
—

 
1,766

 
11,875

 
1,766

 
Gain from sales of investment in unconsolidated entities
—

 
—

 
—

 
4,509

 
NAREIT FFO Applicable to Common Shares
$
49,460

 
$
132,874

 
$
190,052

 
$
387,645


The table below reflects additional information related to certain items that significantly impact the comparability of our FFO and Net Income (Loss) or significant non-cash items from the periods presented:

For the three months ended

For the nine months ended

September 30,

September 30,

2015

2014

2015

2014
Straight-line rental income adjustment
$
379


$
(530
)

$
901


$
(3,115
)
Amortization of above/below market leases
(595
)

(388
)

(1,241
)

(359
)
Amortization of mark to market debt discounts
1,245


1,396


3,696


4,423

Gain on extinguishment of debt, continuing operations
(13
)
 
(12,125
)
 
(1,395
)
 
(12,517
)
Loss on extinguishment of debt, discontinued operations
—

 
115

 
—

 
10,586

Acquisition costs
155


27


577


1,337


(b)    We believe modified net operating income provides comparability across periods when evaluating our financial condition and operating performance. Modified net operating income reflects the income from operations excluding nonrecurring events and other GAAP rent adjustments in order to provide a comparable presentation of operating activity across periods. These adjustments include lease termination income, GAAP rent adjustments, such as straight-line rent, above/below market lease amortization, and other similar matters that affect comparability. Net operating income excludes interest expense, depreciation and amortization, general and administrative expenses, net income of noncontrolling interest, and other investment income from corporate investments.


63

The following table reflects a reconciliation of modified net operating income to the net income attributable to the Company on the consolidated statements of operations and other comprehensive income.
 
For the three months ended
 
For the nine months ended
 
September 30,
 
September 30,
 
2015
 
2014
 
2015
 
2014
Retail modified net operating income
$
46,468

 
$
43,745

 
$
139,356

 
$
134,855

Student housing modified net operating income
12,579

 
7,276

 
37,057

 
29,779

Non-core modified net operating income
19,925

 
21,925

 
59,017

 
70,067

Modified net operating income, total segments
78,972

 
72,946

 
235,430

 
234,701

Retail adjustments to modified net operating income
943

 
1,546

 
2,525

 
4,920

Student housing adjustments to modified net operating income
35

 
17

 
114

 
192

Non-core adjustments to modified net operating income
(634
)
 
(666
)
 
(2,108
)
 
(993
)
Adjustments, total segments
344

 
897

 
531

 
4,119

Net operating income, total segments
79,316

 
73,843

 
235,961

 
238,820

Non-allocated expenses
(55,757
)
 
(60,196
)
 
(167,999
)
 
(170,174
)
Other income and expenses
(33,102
)
 
17,315

 
(39,919
)
 
(9,410
)
Equity in earnings (loss) of unconsolidated entities
5,358

 
(2,089
)
 
33,341

 
627

Provision for asset impairment
(92,167
)
 
(670
)
 
(92,167
)
 
(75,616
)
Net income (loss) from continuing operations
(96,352
)
 
28,203

 
(30,783
)
 
(15,753
)
Net income from discontinued operations
713

 
24,357

 
3,042

 
208,292

Less: net income attributable to noncontrolling interests
(8
)
 
(8
)
 
(16
)
 
(16
)
Net income (loss) attributable to Company
$
(95,647
)
 
$
52,552

 
$
(27,757
)
 
$
192,523


Subsequent Events
Subsequent to September 30, 2015, the Company purchased two student housing properties consisting of 1,439 beds for a total gross acquisition price of $165,525 .
On November 5, 2015, the Company entered into a term loan credit agreement for a $300,000 unsecured credit facility with a syndicate of seven lenders led by Wells Fargo Securities, LLC, Merrill Lynch, Pierce, Fenner & Smith, Incorporated and PNC Capital Markets LLC as joint lead arrangers. The accordion feature allows the Company to increase the size of the unsecured term loan credit facility to $600,000 , subject to certain conditions.
The term loan credit facility consists of two tranches: a five-year tranche maturing on January 15, 2021, and a seven-year tranche maturing on November 5, 2022. The credit facility can be drawn for one year from the agreement date, after which the unused portion of the credit facility will terminate. The credit facility is subject to maintenance of certain financial covenants. Interest rates are based on the Company's total leverage ratio. Based upon the Company's total leverage ratio at September 30, 2015, the five-year tranche bears an interest rate of LIBOR plus 1.30% and the seven-year tranche bears an interest rate of LIBOR plus 1.60%.

64

Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are subject to market risk associated with changes in interest rates both in terms of variable-rate debt and the price of new fixed-rate debt upon maturity of existing debt and for acquisitions. We are also subject to market risk associated with our marketable securities investments.
Interest Rate Risk
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. If market rates of interest on all of the floating rate debt as of September 30, 2015 permanently increased by 1%, the increase in interest expense on the floating rate debt would decrease future earnings and cash flows by approximately $2.4 million . If market rates of interest on all of the floating rate debt as of September 30, 2015 permanently decreased by 1%, the decrease in interest expense on the floating rate debt would increase future earnings and cash flows by approximately $2.4 million .
With regard to our 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 of 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.
We monitor interest rate risk using a variety of techniques, including periodically evaluating fixed interest rate quotes on all variable rate debt and the costs associated with converting the debt to fixed rate debt. Also, existing fixed and variable rate loans that are scheduled to mature in the next year or two are evaluated for possible early refinancing and or extension due to consideration given to current interest rates.
We may use financial instruments to hedge exposures to changes in interest rates on loans secured by our properties. To the extent we do, we are exposed to credit risk and market risk. 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, it does not possess credit risk. In the alternative, we seek to minimize the credit risk in derivative instruments by entering into transactions with what we believe are high-quality counterparties. 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.
As of September 30, 2015 and December 31, 2014 , the Company had entered into interest rate swap agreements with a notional value of $47,000 and $51,283 , respectively. The fair value liabilities of our interest rate swap contracts outstanding as of September 30, 2015 and December 31, 2014 were $2,607 and $1,744 , respectively.
We have, and may in the future enter into, derivative positions that do not qualify for hedge accounting treatment. The gains or losses resulting from marking-to-market these derivatives at the end of each reporting period are recognized as an increase or decrease in interest expense on our consolidated statements of operations and comprehensive income. In addition, we are, and may in the future be, subject to additional expense based on the notional amount of the derivative positions and a specified spread over LIBOR.
  Equity Price Risk
We are exposed to equity price risk as a result of our investments in marketable equity securities. Equity price risk is based on volatility of equity prices and the values of corresponding equity indices.
We incurred no impairments on our investment in marketable securities for the nine months ended September 30, 2015 and 2014. We believe that our investments will continue to generate dividend income and we could continue to recognize gains on sale. However, due to general economic and credit market uncertainties it is difficult to project where the REIT market and our portfolio will perform in 2015.
Although it is difficult to project what factors may affect the prices of equity sectors and how much the effect might be, the table below illustrates the impact of a 10% increase and a 10% decrease in the price of the equities held by us would have on the value of the total assets and the book value of the Company as of September 30, 2015 .
 
 
 
Hypothetical 10% Decrease in
Hypothetical 10% Increase in
 
Cost
Fair Value
Market Value
Market Value
Equity securities
$136,562
$182,058
$163,852
$200,264

65

Item 4. Controls and Procedures
Controls and Procedures
As required by Rule 13a-15(b) and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, including our principal executive officer and our principal financial officer evaluated, as of September 30, 2015 , the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and Rule 15d-15(e) of the Exchange Act. Based on that evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures, as of September 30, 2015 , were effective at a reasonable assurance level for the purpose of ensuring that information required to be disclosed by us in this report is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Exchange Act and is accumulated and communicated to management, including our principal executive officer and our principal financial officer as appropriate to allow timely decisions regarding required disclosures.
Changes in Internal Control over Financial Reporting
There has been no change in the Company’s internal control over financial reporting during the quarter ended September 30, 2015 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

66

Part II - Other Information
Item 1. Legal Proceedings
In May 2012, we disclosed that the SEC had initiated a non-public, formal, fact-finding investigation to determine whether there had been violations of certain provisions of the federal securities laws regarding the payment of fees to our former Business Manager and Property Managers, transactions with our former affiliates, timing and amount of distributions paid to our investors, determination of property impairments, and any decision regarding whether we would become a self-administered REIT (the "SEC Investigation"). After a multi-year investigation, on March 24, 2015, the Staff of the SEC informed the Company that it had concluded its investigation and that, based on the information received as of that date, it did not intend to recommend any enforcement action against the Company.
Shortly after we disclosed the existence of the SEC Investigation, we received three related demands (“Derivative Demands”) by stockholders to conduct investigations regarding claims that our officers, our board of directors, our former Business Manager, and affiliates of our former Business Manager breached their fiduciary duties to us in connection with the matters that we disclosed were subject to the SEC Investigation.
Upon receiving the first of the Derivative Demands, on October 16, 2012, the full board of directors responded by authorizing the independent directors to investigate the claims contained in the first Derivative Demand, any subsequent stockholder demands, as well as any other matters the independent directors saw fit to investigate. Pursuant to this authority, the independent directors formed a special litigation committee comprised solely of independent directors to review and evaluate the alleged claims and to recommend to the full board of directors whether the maintenance of a derivative proceeding was in the best interests of the Company. The special litigation committee engaged independent legal counsel and experts to assist in the investigation.
On March 21, 2013, counsel for the stockholders who made the first Derivative Demand filed a derivative lawsuit in the Circuit Court of Cook County, Illinois, on behalf of the Company. The court stayed the case - Trumbo v. The Inland Group, Inc. - pending completion of the special litigation committee's investigation.
On December 8, 2014, the special litigation committee completed its investigation and issued its report and recommendation. The special litigation committee concluded that there is no evidence to support the allegations of wrongdoing in the Derivative Demands. Nonetheless, in the course of its investigation, the special litigation committee uncovered facts indicating that certain then-related parties breached their fiduciary duties to the Company by failing to disclose to the independent directors certain facts and circumstances associated with the payment of fees to our former Business Manager and Property Managers. The special litigation committee determined that it is advisable and in the best interests of the Company to maintain a derivative action against our former Business Manager, Property Managers, and Inland American Holdco Management LLC (the "Inland Entities"). The special litigation committee found that it was not in the best interests of the Company to pursue claims against any other entities or against any individuals.
On January 20, 2015, the board of directors adopted the report and recommendation of the special litigation committee in full and authorized the Company to file a motion to realign the Company as the party plaintiff in Trumbo v. The Inland Group, Inc. , and to take such further actions as are necessary to reject and dismiss claims related to allegations that the board of directors has determined lack merit and to pursue claims against the Inland Entities for breach of fiduciary duties in connection with the failure to disclose facts and circumstances associated with the payment of fees to related parties.
On March 2, 2015, counsel for the stockholders who made the second Derivative Demand filed a derivative lawsuit in the Circuit Court of Cook County, Illinois, on behalf of the Company. The court entered an order consolidating the action with the Trumbo case on March 26, 2015 (the "Consolidated Action"). On September 18, 2015, the parties entered into the Stipulation and Agreement of Compromise, Settlement, and Release (the "Settlement") to resolve all matters related to the Derivative Demands, including all claims raised in the Consolidated Action and the claims authorized by the Board. The Settlement calls for a payment to the Company of $7.4 million in net proceeds from Midwest Risk Management, LLC, as agent for the Inland Entities. In addition, the Settlement releases the Company’s directors, officers, and former external managers and their affiliates from any liability related to the allegations asserted in the demand letters and the Consolidated Action, and any additional allegations investigated by the special litigation committee. The Settlement also results in the dismissal of the Consolidated Action with prejudice.
On October 23, 2015, the Circuit Court of Cook County, Illinois approved the Settlement as fair, reasonable, adequate and in the best interests of the Company and its stockholders. Under the terms of the Settlement, the Settlement Payment will be remitted to the Company when the time to appeal the court’s approval of the Settlement has expired. The Company has not accounted for this gain contingency in the financial statements as of September 30, 2015.

67

Item 1A. Risk Factors
There have been no material changes from the risk factors previously disclosed in response to Item 1A. to Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 .
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits
The exhibits filed in response to Item 601 of Regulation S-K are listed on the Exhibit Index attached hereto and are incorporated herein by reference.

68

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.

InvenTrust Properties Corp.

Date:
November 12, 2015
By:
/s/ Thomas P. McGuinness
 
 
 
 
 
 
 
Thomas P. McGuinness
 
 
 
Director, President and Chief Executive Officer (Principal Executive Officer)
 
 
 
 
 
 
 
 
 
 
 
 
Date:
November 12, 2015
By:
/s/ Jack Potts
 
 
 
 
 
 
 
Jack Potts
 
 
 
Executive Vice President, Chief Financial Officer, Treasurer (Principal Financial Officer)
 
 
 
 

69


EXHIBIT NO.
 
DESCRIPTION
3.2*
 
Amended and Restated Bylaws of InvenTrust Properties Corp., as amended by Amendment No. 1
10.1*
 
Form of Director Restricted Stock Unit Agreement.+
10.2*
 
Form of University House Communities Group, Inc. Share Unit Award Agreement (2015).+
10.3*
 
InvenTrust Properties Corp. Director Compensation Program.+
31.1*
 
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
 
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*
 
Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*
 
Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101
 
The following financial information from our Quarterly Report on Form 10-Q for the period ended September 30, 2015, filed with the SEC on November 12, 2015, is formatted in Extensible Business Reporting Language (“XBRL”): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations and Comprehensive Income, (iii) Consolidated Statements of Equity, (iv) Consolidated Statements of Cash Flows (v) Notes to Consolidated Financial Statements (tagged as blocks of text).

*
Filed as part of this Quarterly Report on Form 10-Q.
+
Management contract or compensatory plan or agreement.


70

AMENDED AND RESTATED BYLAWS
OF
INLAND AMERICAN REAL ESTATE TRUST, INC.
INVENTRUST PROPERTIES CORP.
(AS AMENDED BY AMENDMENT NO. 1)
ARTICLE I
OFFICES
SECTION 1.      PRINCIPAL OFFICE. The principal office of the corporation in the State of Maryland shall be located at such place as the board of directors may designate.
SECTION 2.      OTHER OFFICES. The corporation may have additional offices, including a principal executive office, at such places as the board of directors may from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1.      ANNUAL MEETING. An annual meeting of stockholders for the election of directors and the transaction of any business within the powers of the corporation shall be held on the date and at the time and place set by the board of directors. Subject to Section 9(a) of this Article II, any business of the corporation may be transacted at the annual meeting without being specifically designated in the notice of meeting, except such business as is specifically required by any statute to be stated in the notice of meeting.
SECTION 2.      SPECIAL MEETINGS.
(a)      General . Each of the chairman of the board, chief executive officer, president and Board of Directors may call a special meeting of stockholders. Except as provided in subsection (b)(4) of this Section 2, a special meeting of stockholders shall be held on the date and at the time and place set by the chairman of the board, chief executive officer, president or Board of Directors, whoever has called the meeting. Subject to subsection (b) of this Section 2, a special meeting of stockholders shall also be called by the secretary of the corporation to act on any matter that may properly be considered at a meeting of stockholders upon the written request of stockholders entitled to cast not less than a majority of all the votes entitled to be cast on such matter at such meeting. No business shall be transacted at a special meeting of stockholders except as specifically designated in the notice of meeting.
(b)      Stockholder-Requested Special Meetings .



(1)      Any stockholder of record seeking to have stockholders request a special meeting shall, by sending written notice to the secretary (the “Record Date Request Notice”) by registered mail, return receipt requested, request the board of directors to fix a record date to determine the stockholders entitled to request a special meeting (the “Request Record Date”). The Record Date Request Notice shall set forth the purpose of the meeting and the matters proposed to be acted on at it, shall be signed by one or more stockholders of record as of the date of signature (or their agents duly authorized in a writing accompanying the Record Date Request Notice), shall bear the date of signature of each such stockholder (or such agent) and shall set forth all information relating to each such stockholder and each matter proposed to be acted on at the meeting that would be required to be disclosed in connection with the solicitation of proxies for the election of directors in an election contest (even if an election contest is not involved), or would otherwise be required in connection with such a solicitation, in each case pursuant to Regulation 14A (or any successor provision) under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the “Exchange Act”). Upon receiving the Record Date Request Notice, the board of directors may fix a Request Record Date. The Request Record Date shall not precede and shall not be more than ten (10) days after the close of business on the date on which the resolution fixing the Request Record Date is adopted by the board of directors. If the board of directors, within ten (10) days after the date on which a valid Record Date Request Notice is received, fails to adopt a resolution fixing the Request Record Date, the Request Record Date shall be the close of business on the tenth (10th) day after the first date on which a Record Date Request Notice is received by the secretary.
(2)      In order for any stockholder to request a special meeting to act on any matter that may properly be considered at a meeting of stockholders, one or more written requests for a special meeting (collectively, the “Special Meeting Request”) signed by stockholders of record (or their agents duly authorized in a writing accompanying the request) as of the Request Record Date entitled to cast not less than a majority of all of the votes entitled to be cast on such matter at such meeting (the “Special Meeting Percentage”) shall be delivered to the secretary. In addition, the Special Meeting Request shall (a) set forth the purpose of the meeting and the matters proposed to be acted on at it (which shall be limited to those lawful matters set forth in the Record Date Request Notice received by the secretary), (b) bear the date of signature of each such stockholder (or such agent) signing the Special Meeting Request, (c) set forth (i) the name and address, as they appear in the corporation’s books, of each stockholder signing such request (or on whose behalf the Special Meeting Request is signed), (ii) the class, series and number of all shares of stock of the corporation which are owned (beneficially or of record) by each such stockholder and (iii) the nominee holder for, and number of, shares of stock of the corporation owned beneficially but not of record by such stockholder, (d) be sent to the secretary by registered mail, return receipt requested, and (e) be received by the secretary within sixty (60) days after the Request Record Date. Any requesting stockholder (or agent duly authorized in a writing accompanying the revocation of the Special Meeting Request) may revoke his, her or its request for a special meeting at any time by written revocation delivered to the secretary.

2


(3)      The secretary shall inform the requesting stockholders of the reasonably estimated cost of preparing and mailing or delivering the notice of the meeting (including the corporation’s proxy materials). The secretary shall not be required to call a special meeting upon stockholder request and such meeting shall not be held unless, in addition to the documents required by paragraph (2) of this Section 2(b), the secretary receives payment of such reasonably estimated cost prior to the preparation and mailing or delivery of such notice of the meeting.
(4)      In the case of any special meeting called by the secretary upon the request of stockholders (a “Stockholder-Requested Meeting”), such meeting shall be held at such place, date and time as may be designated by the board of directors; provided , however, that the date of any Stockholder-Requested Meeting shall be not more than ninety (90) days after the record date for such meeting (the “Meeting Record Date”); and provided further that if the board of directors fails to designate, within ten days after the date that a valid Special Meeting Request is actually received by the secretary (the “Delivery Date”), a date and time for a Stockholder-Requested Meeting, then such meeting shall be held at 2:00 p.m., local time, on the ninetieth (90th) day after the Meeting Record Date or, if such ninetieth (90th) day is not a Business Day (as defined below), on the first preceding Business Day; and provided further that in the event that the board of directors fails to designate a place for a Stockholder-Requested Meeting within ten (10) days after the Delivery Date, then such meeting shall be held at the principal executive office of the corporation. In fixing a date for a Stockholder-Requested Meeting, the board of directors may consider such factors as it deems relevant, including, without limitation, the nature of the matters to be considered, the facts and circumstances surrounding any request for the meeting and any plan of the board of directors to call an annual meeting or a special meeting. In the case of any Stockholder-Requested Meeting, if the board of directors fails to fix a Meeting Record Date that is a date within thirty (30) days after the Delivery Date, then the close of business on the 30 th day after the Delivery Date shall be the Meeting Record Date. The board of directors may revoke the notice for any Stockholder-Requested Meeting in the event that the requesting stockholders fail to comply with the provisions of paragraph (3) of this Section 2(b).
(5)      If written revocations of the Special Meeting Request have been delivered to the secretary and the result is that stockholders of record (or their agents duly authorized in writing), as of the Request Record Date, entitled to cast less than the Special Meeting Percentage have delivered, and not revoked, requests for a special meeting on the matter to the secretary: (i) if the notice of meeting has not already been delivered, the secretary shall refrain from delivering the notice of the meeting and send to all requesting stockholders who have not revoked such requests written notice of any revocation of a request for a special meeting on the matter, or (ii) if the notice of meeting has been delivered and if the secretary first sends to all requesting stockholders who have not revoked requests for a special meeting on the matter written notice of any revocation of a request for the special meeting and written notice of the corporation’s intention to revoke the notice of the meeting or for the chairman of the meeting to adjourn the meeting without action on the matter, (A) the secretary may revoke the notice of the meeting at any time before ten (10) days before the commencement of the meeting or (B) the chairman of the meeting may call the meeting to order and adjourn the meeting without acting on

3


the matter. Any request for a special meeting received after a revocation by the secretary of a notice of a meeting shall be considered a request for a new special meeting.
(6)      The chairman of the board, chief executive officer, president or Board of Directors may appoint regionally or nationally recognized independent inspectors of elections to act as the agent of the corporation for the purpose of promptly performing a ministerial review of the validity of any purported Special Meeting Request received by the secretary. For the purpose of permitting the inspectors to perform such review, no such purported Special Meeting Request shall be deemed to have been received by the secretary until the earlier of (i) five (5) Business Days after actual receipt by the secretary of such purported request and (ii) such date as the independent inspectors certify to the corporation that the valid requests received by the secretary represent, as of the Request Record Date, stockholders of record entitled to cast not less than the Special Meeting Percentage. Nothing contained in this paragraph (6) shall in any way be construed to suggest or imply that the corporation or any stockholder shall not be entitled to contest the validity of any request, whether during or after such five (5) Business Day period, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation).
(7)      For purposes of these bylaws, “Business Day” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of Illinois are authorized or obligated by law or executive order to close.
SECTION 3.      PLACE OF MEETINGS. All meetings of stockholders shall be held at the principal executive office of the corporation or at such other place as shall be set in accordance with these bylaws and stated in the notice of the meeting.
SECTION 4.      NOTICE OF MEETINGS. Not less than ten (10) nor more than ninety (90) days before each meeting of stockholders, the secretary shall give to each stockholder entitled to vote at such meeting and to each stockholder not entitled to vote who is entitled to notice of the meeting notice in writing or by electronic transmission stating the time and place of the meeting and, in the case of a special meeting or as otherwise may be required by any statute, the purpose for which the meeting is called, by mail, by presenting it to such stockholder personally, by leaving it at the stockholder’s residence or usual place of business or by any other means permitted by Maryland law. If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the stockholder at the stockholder’s address as it appears on the records of the corporation, with postage thereon prepaid. If transmitted electronically, such notice shall be deemed to be given when transmitted to the stockholder by an electronic transmission to any address or number of the stockholder at which the stockholder receives electronic transmissions. The corporation may give a single notice to all stockholders who share an address, which single notice shall be effective as to any stockholder at such address, unless such stockholder objects to receiving such single notice or revokes a prior consent to receiving such single notice. Failure to give notice of any meeting to one or more stockholders, or any irregularity in such notice, shall not affect the validity of any meeting fixed in accordance with this Article II or the validity of any proceedings at any such meeting.

4


The corporation may postpone or cancel a meeting of stockholders by making a public announcement (as defined in Section 9(c)(3) of this Article II) of such postponement or cancellation prior to the meeting. Notice of the date, time and place to which the meeting is postponed shall be given not less than ten (10) days prior to such date and otherwise in the manner set forth in this Section 4.
SECTION 5.      QUORUM; MANNER OF ACTING AND ORDER OF BUSINESS. At any meeting of stockholders, the presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at such meeting on any matter shall constitute a quorum; but this section shall not affect any requirement under any statute or the charter of the corporation (the “Charter”) for the vote necessary for the approval of any matter. If such quorum is not established at any meeting of the stockholders, the chairman of the meeting may adjourn the meeting sine die or from time to time to a date not more than one hundred twenty (120) days after the original record date without notice other than announcement at the meeting. At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified. The stockholders present either in person or by proxy, at a meeting which has been duly called and at which a quorum has been established, may continue to transact business until adjournment, notwithstanding the withdrawal from the meeting of enough stockholders to leave fewer than would be required to establish a quorum.
Every meeting of stockholders shall be conducted by an individual appointed by the board of directors to be chairman of the meeting or, in the absence of such appointment or appointed individual, by the chairman of the board or, in the case of a vacancy in the office or absence of the chairman of the board, by one of the following officers present at the meeting in the following order: the vice chairman of the board, if there is one, the chief executive officer, the president, the vice presidents in their order of rank and seniority, the secretary or, in the absence of such officers, a chairman chosen by the stockholders by the vote of a majority of the votes cast by stockholders present in person or by proxy. The secretary or, in the secretary’s absence, an assistant secretary or, in the absence of both the secretary and assistant secretaries, an individual appointed by the board of directors or, in the absence of such appointment, an individual appointed by the chairman of the meeting shall act as secretary. In the event that the secretary presides at a meeting of stockholders, an assistant secretary or, in the absence of all assistant secretaries, an individual appointed by the board of directors or the chairman of the meeting shall record the minutes of the meeting. The order of business and all other matters of procedure at any meeting of stockholders shall be determined by the chairman of the meeting. The chairman of the meeting may prescribe such rules, regulations and procedures and take such action as, in the discretion of the chairman and without any action by the stockholders, are appropriate for the proper conduct of the meeting, including, without limitation, (a) restricting admission to the time set for the commencement of the meeting; (b) limiting attendance at the meeting to stockholders of record of the corporation, their duly authorized proxies and such other individuals as the chairman of the meeting may determine; (c) limiting participation at the meeting on any matter to stockholders of record of the corporation entitled to vote on such matter, their duly authorized proxies and other such individuals as the chairman of the meeting may determine; (d) limiting the time allotted to questions or comments; (e) determining when

5


and for how long the polls should be opened and when the polls should be closed; (f) maintaining order and security at the meeting; (g) removing any stockholder or any other individual who refuses to comply with meeting procedures, rules or guidelines as set forth by the chairman of the meeting; (h) concluding a meeting or recessing or adjourning the meeting, whether or not a quorum is present, to a later date and time and at a place announced at the meeting; and (i) complying with any state and local laws and regulations concerning safety and security. Unless otherwise determined by the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.
SECTION 6.      VOTING. A plurality of all the votes cast at a meeting of stockholders duly called and at which a quorum is present shall be sufficient to elect a director. Each share may be voted for as many individuals as there are directors to be elected and for whose election the holder is entitled to vote. A majority of the votes cast at a meeting of stockholders duly called and at which a quorum is present shall be sufficient to approve any other matter which may properly come before the meeting, unless more than a majority of the votes cast is required by statute or by the Charter. Voting on any question or in any election may be viva voce unless the chairman of the meeting shall order that voting be by ballot or otherwise.
SECTION 7.      PROXIES; VOTING OF SHARES OF CERTAIN HOLDERS. Unless otherwise provided by statute or by the Charter, each outstanding share, regardless of class, entitles the holder thereof to cast one vote on each matter submitted to a vote at a meeting of stockholders. A holder of record of shares of stock of the corporation may cast votes in person or by proxy executed by the stockholder or by the stockholder’s duly authorized agent in any manner permitted by law. Such proxy or evidence of authorization of such proxy shall be filed with the secretary of the corporation before or at the meeting. No proxy shall be valid more than eleven (11) months after its date unless otherwise provided in the proxy. Stockholders having voting power shall not be entitled to exercise cumulative voting rights.
Stock of the corporation registered in the name of a corporation, limited liability company, partnership, joint venture, trust or other entity, if entitled to be voted, may be voted by the president or a vice president, managing member, manager, general partner or trustee thereof, as the case may be, or a proxy appointed by any of the foregoing individuals, unless some other person who has been appointed to vote such stock pursuant to a bylaw or a resolution of the governing body of such corporation or other entity or agreement of the partners of a partnership presents a certified copy of such bylaw, resolution or agreement, in which case such person may vote such stock. Any trustee or fiduciary, in such capacity, may vote stock registered in such trustee’s or fiduciary’s name, either in person or by proxy.
Shares of stock of the corporation directly or indirectly owned by it shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares entitled to be voted at any given time, unless they are held by it in a fiduciary capacity, in which case they may be voted and shall be counted in determining the total number of outstanding shares at any given time.
The board of directors may adopt by resolution a procedure by which a stockholder may certify in writing to the corporation that any shares of stock registered in the name of the

6


stockholder are held for the account of a specified person other than the stockholder. The resolution shall set forth the class of stockholders who may make the certification, the purpose for which the certification may be made, the form of certification and the information to be contained in it; if the certification is with respect to a record date, the time after the record date within which the certification must be received by the corporation; and any other provisions with respect to the procedure which the board of directors considers necessary or desirable. On receipt by the corporation of such certification, the person specified in the certification shall be regarded as, for the purposes set forth in the certification, the holder of record of the specified stock in place of the stockholder who makes the certification.
SECTION 8.      ACTION WITHOUT A MEETING. Any action required or permitted to be taken at any meeting of stockholders may be taken without a meeting if a unanimous consent setting forth the action is given in writing or by electronic transmission by each stockholder entitled to vote on the matter and filed with the minutes of proceedings of the stockholders.
     SECTION 9.      NOMINATIONS AND STOCKHOLDER BUSINESS.
(a)      Annual Meetings of Stockholders .
(1)      Nominations of individuals for election to the board of directors and the proposal of other business to be considered by the stockholders may be made at an annual meeting of stockholders (i) pursuant to the corporation’s notice of meeting, (ii) by or at the direction of the board of directors or (iii) by any stockholder of the corporation who was a stockholder of record both at the time of giving of notice by the stockholder as provided for in this Section 9(a) and at the time of the annual meeting, who is entitled to vote at the meeting in the election of each individual so nominated or on any such other business and who has complied with this Section 9(a).
             (2)      For any nomination or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of paragraph (a)(1) of this Section 9, the stockholder must have given timely notice thereof in writing to the secretary of the corporation and any such other business must otherwise be a proper matter for action by the stockholders. To be timely, a stockholder’s notice shall set forth all information required under this Section 9 and shall be delivered to the secretary at the principal executive office of the corporation not earlier than the one hundred fiftieth (150th) day nor later than 5:00 p.m., Eastern Time, on the one hundred twentieth (120th) day prior to the first anniversary of the date of the proxy statement (as defined in Section 9(c)(3) of this Article II) for the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced or delayed by more than thirty (30) days from the first anniversary of the date of the preceding year’s annual meeting, in order for notice by the stockholder to be timely, such notice must be so delivered not earlier than the one hundred fiftieth (150th) day prior to the date of such annual meeting and not later than 5:00 p.m., Eastern Time, on the later of the one hundred twentieth (120th) day prior to the date of such annual meeting, as originally convened, or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made. The public announcement of a postponement or adjournment of an annual meeting shall not commence a new time period for the giving of a stockholder’s notice as described above.

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(3)      Such stockholder’s notice shall set forth:
(i)      as to each individual whom the stockholder proposes to nominate for election or reelection as a director (each a “Proposed Nominee”), all information relating to the Proposed Nominee that would be required to be disclosed in connection with the solicitation of proxies for the election of the Proposed Nominee as a director in an election contest (even if an election contest is not involved), or would otherwise be required in connection with such solicitation, in each case pursuant to Regulation 14A (or any successor provision) under the Exchange Act;
(ii)      as to any other business that the stockholder proposes to bring before the meeting, a description of such business, the stockholder’s reasons for proposing such business at the meeting and any material interest in such business of such stockholder or any Stockholder Associated Person (as defined below), individually or in the aggregate, including any anticipated benefit to the stockholder or the Stockholder Associated Person therefrom;
(iii)      as to the stockholder giving the notice, any Proposed Nominee and any Stockholder Associated Person,
(A)      the class, series and number of all shares of stock or other securities of the corporation or any affiliate thereof (collectively, the “Company Securities”), if any, which are owned (beneficially or of record) by such stockholder, Proposed Nominee or Stockholder Associated Person, the date on which each such Company Security was acquired and the investment intent of such acquisition, and any short interest (including any opportunity to profit or share in any benefit from any decrease in the price of such stock or other security) in any Company Securities of any such person,
(B)      the nominee holder for, and number of, any Company Securities owned beneficially but not of record by such stockholder, Proposed Nominee or Stockholder Associated Person,
(C)      whether and the extent to which such stockholder, Proposed Nominee or Stockholder Associated Person, directly or indirectly (through brokers, nominees or otherwise), is subject to or during the last six (6) months has engaged in any hedging, derivative or other transaction or series of transactions or entered into any other agreement, arrangement or understanding (including any short interest, any borrowing or lending of securities or any proxy or voting agreement), the effect or intent of which is to (I) manage risk or benefit of changes in the price of (x) Company Securities or (y) any security of any entity that was listed in the Peer Group in the Stock Performance Graph in the most recent annual report to security holders of the corporation (a “Peer Group Company”) for such stockholder, Proposed Nominee or Stockholder Associated Person or (II) increase or decrease the voting power of such stockholder, Proposed Nominee or Stockholder Associated Person in the corporation or any affiliate thereof (or, as applicable, in any Peer Group Company) disproportionately to such person’s economic interest in the Company Securities (or, as applicable, in any Peer Group Company) and

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(D)      any substantial interest, direct or indirect (including, without limitation, any existing or prospective commercial, business or contractual relationship with the corporation), by security holdings or otherwise, of such stockholder, Proposed Nominee or Stockholder Associated Person, in the corporation or any affiliate thereof, other than an interest arising from the ownership of Company Securities where such stockholder, Proposed Nominee or Stockholder Associated Person receives no extra or special benefit not shared on a pro rata basis by all other holders of the same class or series;
(iv)      as to the stockholder giving the notice, any Stockholder Associated Person with an interest or ownership referred to in clauses (ii) or (iii) of this paragraph (3) of this Section 9(a) and any Proposed Nominee,
(A)      the name and address of such stockholder, as they appear on the corporation’s stock ledger, and the current name and business address, if different, of each such Stockholder Associated Person and any Proposed Nominee and
(B)      the investment strategy or objective, if any, of such stockholder and each such Stockholder Associated Person who is not an individual and a copy of the prospectus, offering memorandum or similar document, if any, provided to investors or potential investors in such stockholder and each such Stockholder Associated Person;
(v)      the name and address of any person who contacted or was contacted by the stockholder giving the notice or any Stockholder Associated Person about the Proposed Nominee or other business proposal prior to the date of such stockholder’s notice; and
(vi)      to the extent known by the stockholder giving the notice, the name and address of any other stockholder supporting the nominee for election or reelection as a director or the proposal of other business on the date of such stockholder’s notice.
(4)      Such stockholder’s notice shall, with respect to any Proposed Nominee, be accompanied by a certificate executed by the Proposed Nominee (i) certifying that such Proposed Nominee (a) is not, and will not become, a party to any agreement, arrangement or understanding with any person or entity other than the corporation in connection with service or action as a director that has not been disclosed to the corporation and (b) will serve as a director of the corporation if elected; and (ii) attaching a completed Proposed Nominee questionnaire (which questionnaire shall be provided by the corporation, upon request, to the stockholder providing the notice and shall include all information relating to the Proposed Nominee that would be required to be disclosed in connection with the solicitation of proxies for the election of the Proposed Nominee as a director in an election contest (even if an election contest is not involved), or would otherwise be required in connection with such solicitation, in each case pursuant to Regulation 14A (or any successor provision) under the Exchange Act and the rules thereunder, or would be required pursuant to the rules of any national securities exchange on which any securities of the corporation are listed or over-the-counter market on which any securities of the corporation are traded).

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(5)      Notwithstanding anything in this subsection (a) of this Section 9 to the contrary, in the event that the number of directors to be elected to the board of directors is increased, and there is no public announcement of such action at least one hundred thirty (130) days prior to the first anniversary of the date of the proxy statement (as defined in Section 9(c)(3) of this Article II) for the preceding year’s annual meeting, a stockholder’s notice required by this Section 9(a) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the secretary at the principal executive office of the corporation not later than 5:00 p.m., Eastern Time, on the tenth (10th) day following the day on which such public announcement is first made by the corporation.
(6)      For purposes of this Section 9, “Stockholder Associated Person” of any stockholder shall mean (i) any person acting in concert with such stockholder, (ii) any beneficial owner of shares of stock of the corporation owned of record or beneficially by such stockholder (other than a stockholder that is a depositary) and (iii) any person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such stockholder or such Stockholder Associated Person.
         (b)      Special Meetings of Stockholders . Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the corporation’s notice of meeting. Nominations of individuals for election to the board of directors may be made at a special meeting of stockholders at which directors are to be elected only (i) by or at the direction of the board of directors or (ii) provided that the special meeting has been called in accordance with Section 3(a) of this Article II for the purpose of electing directors, by any stockholder of the corporation who is a stockholder of record both at the time of giving of notice provided for in this Section 9 and at the time of the special meeting, who is entitled to vote at the meeting in the election of each individual so nominated and who has complied with the notice procedures set forth in this Section 9. In the event the corporation calls a special meeting of stockholders for the purpose of electing one or more individuals to the board of directors, any stockholder may nominate an individual or individuals (as the case may be) for election as a director as specified in the corporation’s notice of meeting, if the stockholder’s notice, containing the information required by paragraphs (a)(3) and (4) of this Section 9, is delivered to the secretary at the principal executive office of the corporation not earlier than the one hundred twentieth (120th) day prior to such special meeting and not later than 5:00 p.m., Eastern Time, on the later of the ninetieth (90th) day prior to such special meeting or the tenth (10th) day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the board of directors to be elected at such meeting. The public announcement of a postponement or adjournment of a special meeting shall not commence a new time period for the giving of a stockholder’s notice as described above.
(c)      General .
             (1)      If information submitted pursuant to this Section 9 by any stockholder proposing a nominee for election as a director or any proposal for other business at a meeting of stockholders shall be inaccurate in any material respect, such information may be deemed not to have been provided in accordance with this Section 9. Any such stockholder shall

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notify the corporation of any inaccuracy or change (within two (2) Business Days of becoming aware of such inaccuracy or change) in any such information. Upon written request by the secretary or the board of directors, any such stockholder shall provide, within five (5) Business Days of delivery of such request (or such other period as may be specified in such request), (A) written verification, satisfactory, in the discretion of the board of directors or any authorized officer of the corporation, to demonstrate the accuracy of any information submitted by the stockholder pursuant to this Section 9, and (B) a written update of any information (including, if requested by the corporation, written confirmation by such stockholder that it continues to intend to bring such nomination or other business proposal before the meeting) submitted by the stockholder pursuant to this Section 9 as of an earlier date. If a stockholder fails to provide such written verification or written update within such period, the information as to which written verification or a written update was requested may be deemed not to have been provided in accordance with this Section 9.
             (2)      Only such individuals who are nominated in accordance with this Section 9 shall be eligible for election by stockholders as directors, and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with this Section 9. The chairman of the meeting shall have the power to determine whether a nomination or any other business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with this Section 9.
             (3)      For purposes of this Section 9, “the date of the proxy statement” shall have the same meaning as “the date of the company’s proxy statement released to shareholders” as used in Rule 14a-8(e) promulgated under the Exchange Act, as interpreted by the United States Securities and Exchange Commission from time to time. “Public announcement” shall mean disclosure (i) in a press release reported by the Dow Jones News Service, Associated Press, Business Wire, PR Newswire or other widely circulated news or wire service or (ii) in a document publicly filed by the corporation with the United States Securities and Exchange Commission pursuant to the Exchange Act.
(4)      Notwithstanding the foregoing provisions of this Section 9, a stockholder shall also comply with all applicable requirements of state law and of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 9. Nothing in this Section 9 shall be deemed to affect any right of a stockholder to request inclusion of a proposal in, or the right of the corporation to omit a proposal from, any proxy statement filed by the corporation with the United States Securities and Exchange Commission pursuant to Rule 14a-8 (or any successor provision) under the Exchange Act. Nothing in this Section 9 shall require disclosure of revocable proxies received by the stockholder or Stockholder Associated Person pursuant to a solicitation of proxies after the filing of an effective Schedule 14A by such stockholder or Stockholder Associated Person under Section 14(a) of the Exchange Act.
SECTION 10.      INSPECTORS OF ELECTION. The board of directors or the chairman of the meeting may appoint, before or at the meeting, one or more inspectors for the meeting and any successor to the inspector. Except as otherwise provided by the chairman of the meeting, the

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inspectors, if any, shall (a) determine the number of shares of stock represented at the meeting, in person or by proxy, and the validity and effect of proxies, (b) receive and tabulate all votes, ballots or consents, (c) report such tabulation to the chairman of the meeting, (d) hear and determine all challenges and questions arising in connection with the right to vote, and (e) do such acts as are proper to fairly conduct the election or vote. Each such report shall be in writing and signed by the inspector or by a majority of them if there is more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof.
SECTION 11.      CONTROL SHARE ACQUISITION ACT. Notwithstanding any other provision of the Charter or these bylaws, Title 3, Subtitle 7 of the Maryland General Corporation Law, or any successor statute (the “MGCL”), shall not apply to any acquisition by any person of shares of stock of the corporation. This section may be repealed, in whole or in part, at any time, whether before or after an acquisition of control shares and, upon such repeal, may, to the extent provided by any successor bylaw, apply to any prior or subsequent control share acquisition.
ARTICLE III
DIRECTORS
SECTION 1.      GENERAL POWERS. The business and affairs of the corporation shall be managed under the direction of its board of directors, which may exercise all of the powers of the corporation, except such as are by law or by the Charter or by these bylaws conferred upon or reserved to the stockholders.
SECTION 2.      NUMBER AND TENURE. At any regular meeting or at any special meeting called for that purpose, a majority of the entire Board of Directors may establish, increase or decrease the number of directors, provided that the number thereof shall never be less than the minimum number required by the MGCL or the Charter, nor more than eleven (11), and further provided that the tenure of office of a director shall not be affected by any decrease in the number of directors.
SECTION 3.      RESIGNATION. Any director of the corporation may resign at any time by delivering his or her resignation to the board of directors, the chairman of the board or the secretary. Any resignation shall take effect immediately upon its receipt or at such later time specified in the resignation. The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation.
SECTION 4.      FILLING OF VACANCIES. If for any reason any or all of the directors cease to be directors, such event shall not terminate the corporation or affect these bylaws or the powers of the remaining directors hereunder. Any vacancy on the board of directors for any cause other than an increase in the number of directors may be filled by a majority of the remaining directors, even if such majority is less than a quorum. Any vacancy in the number of directors created by an increase in the number of directors may be filled by a majority vote of the

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entire Board of Directors. Any individual so elected as director shall serve until the next annual meeting of stockholders and until his or her successor is elected and qualifies.
SECTION 5.      ANNUAL AND REGULAR MEETINGS. An annual meeting of the board of directors shall be held immediately after and at the same place as the annual meeting of stockholders, no notice other than this bylaw being necessary. In the event such meeting is not so held, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors. The board of directors may provide, by resolution, the time and place for the holding of regular meetings of the board of directors without other notice than such resolution.
SECTION 6.      SPECIAL MEETINGS. Special meetings of the board of directors may be called by or at the request of the chairman of the board, the chief executive officer, the president or a majority of the directors then in office. The person or persons authorized to call special meetings of the board of directors may fix any place as the place for holding any special meeting of the board of directors called by them. The board of directors may provide, by resolution, the time and place for the holding of special meetings of the board of directors without other notice than such resolution.
SECTION 7.      NOTICE OF MEETINGS. Notice of any special meeting of the board of directors shall be delivered personally or by telephone, electronic mail, facsimile transmission, courier or United States mail to each director at his or her business or residence address. Notice by personal delivery, telephone, electronic mail or facsimile transmission shall be given at least twenty-four (24) hours prior to the meeting. Notice by United States mail shall be given at least three (3) days prior to the meeting. Notice by courier shall be given at least two (2) days prior to the meeting. Telephone notice shall be deemed to be given when the director or his or her agent is personally given such notice in a telephone call to which the director or his or her agent is a party. Electronic mail notice shall be deemed to be given upon transmission of the message to the electronic mail address given to the corporation by the director. Facsimile transmission notice shall be deemed to be given upon completion of the transmission of the message to the number given to the corporation by the director and receipt of a completed answer-back indicating receipt. Notice by courier shall be deemed to be given when deposited with or delivered to a courier properly addressed. Notice by United States mail shall be deemed to be given when deposited in the United States mail properly addressed, with postage thereon prepaid. Neither the business to be transacted at, nor the purpose of, any annual, regular or special meeting of the board of directors need be stated in the notice, unless specifically required by statute or these bylaws.
SECTION 8.      ORGANIZATION. At each meeting of the board of directors, the chairman of the board or, in the absence of the chairman, the vice chairman of the board, if any, shall act as chairman of the meeting. In the absence of both the chairman and vice chairman of the board, the chief executive officer or, in the absence of the chief executive officer, the president or, in the absence of the president, a director chosen by a majority of the directors present shall act as chairman of the meeting. The secretary or, in his or her absence, an assistant

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secretary of the corporation or, in the absence of the secretary and all assistant secretaries, an individual appointed by the chairman of the meeting shall act as secretary of the meeting.
SECTION 9.      ATTENDANCE BY TELEPHONE. Directors may participate in a meeting by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting.
     SECTION 10.      QUORUM AND MANNER OF ACTING; ADJOURNMENT. A majority of the directors shall constitute a quorum for transaction of business at any meeting of the board of directors, provided that, if less than a majority of such directors is present at such meeting, a majority of the directors present may adjourn the meeting from time to time without further notice, and provided further that if, pursuant to applicable law, the Charter or these bylaws, the vote of a majority or other percentage of a particular group of directors is required for action, a quorum must also include a majority or such other percentage of such group. The directors present at a meeting which has been duly called and at which a quorum was established may continue to transact business until adjournment, notwithstanding the withdrawal from the meeting of enough directors to leave fewer than were required to establish a quorum.
The action of a majority of the directors present at a meeting at which a quorum is present shall be the action of the board of directors, unless the concurrence of a greater proportion is required for such action by applicable law, the Charter, or these bylaws. If enough directors have withdrawn from a meeting to leave fewer than were required to establish a quorum but the meeting is not adjourned, the action of the majority of that number of directors necessary to constitute a quorum at such meeting shall be the action of the board of directors, unless the concurrence of a greater proportion is required for such action by applicable law, the Charter or these bylaws.
SECTION 11.      ACTION WITHOUT A MEETING. Any action required or permitted to be taken at any meeting of the board of directors may be taken without a meeting, if a consent in writing or by electronic transmission to such action is given by each director and is filed with the minutes of proceedings of the board of directors.
SECTION 12.      COMMITTEES. The board of directors shall designate an audit committee consisting of at least three (3) independent directors. The audit committee shall govern itself in accordance with the terms of a charter which it shall adopt. The board of directors may appoint from among its members an executive committee and other committees composed of one or more directors, to serve at the pleasure of the board of directors. The board of directors may delegate to such committees any of the powers of the board of directors, except as prohibited by law. Notice of committee meetings shall be given in the same manner as notice for special meetings of the board of directors. A majority of the members of the committee shall constitute a quorum for the transaction of business at any meeting of the committee. The act of a majority of the committee members present at a meeting shall be the act of such committee. The board of directors may designate a chairman of any committee, and such chairman or, in the absence of a chairman, any two (2) members of any committee (if there are at least two (2) members of the committee) may fix the time and place of its meeting unless the Board shall

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otherwise provide. In the absence of any member of any such committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint another director to act in the place of such absent member. Members of a committee of the board of directors may participate in a meeting by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting. Any action required or permitted to be taken at any meeting of a committee of the board of directors may be taken without a meeting, if a consent in writing or by electronic transmission to such action is given by each member of the committee and is filed with the minutes of proceedings of such committee. Subject to the provisions hereof, the board of directors shall have the power at any time to change the membership of any committee, to fill any vacancy, to designate an alternate member to replace any absent or disqualified member or to dissolve any such committee.
SECTION 13.      COMPENSATION OF DIRECTORS. Effective as of April 1, 2008, independent directors shall each Directors shall not receive the sum of $30,000.00 per fiscal year as compensation any stated salary for their services as directors of the corporation; provided, however, that nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor. In addition to the foregoing, the chairperson of the audit committee of the board of directors shall receive the sum of $10,000.00 per fiscal year as compensation for his or her services in such capacity, and the chairperson of any other committee of the board shall receive the sum of $5,000.00 per fiscal year as compensation for his or her services in such capacity. Independent directors shall be reimbursed $1,000.00 for attendance at each in-person meeting of the board of directors or the audit committee and $500.00 for each meeting of the board of directors or the audit committee attended by telephone, and $500.00 for each meeting of any other committee of the board of directors attended in person or by telephone but, by resolution of the board of directors, or adoption by the board of directors of a director compensation plan or program, directors may receive compensation per year and/or per meeting and/or per visit to real property or other facilities owned or leased by the corporation and for any service or activity they performed or engaged in as directors . Directors shall may be reimbursed for expenses of attendance, if any, at each annual, regular or special meeting of the board of directors or of any committee thereof and for their expenses, if any, in connection with each property visit and any other service or activity they performed perform or engaged engage in as directors of ; but nothing herein contained shall be construed to preclude any directors from serving the corporation in any other capacity and receiving compensation therefor .
SECTION 14.      RELIANCE. Each director and officer of the corporation shall, in the performance of his or her duties with respect to the corporation, be entitled to rely on any information, opinion, report or statement, including any financial statement or other financial data, prepared or presented by an officer or employee of the corporation whom the director or officer reasonably believes to be reliable and competent in the matters presented, by a lawyer, certified public accountant or other person, as to a matter which the director or officer reasonably believes to be within the person’s professional or expert competence, or with respect to a director, by a committee of the board of directors on which the director does not serve, as to a

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matter within its designated authority, if the director reasonably believes the committee to merit confidence.
SECTION 15.      CERTAIN RIGHTS OF DIRECTORS. The directors shall have no responsibility to devote their full time to the affairs of the corporation. Any director, officer, employee or agent of the corporation, in his or her personal capacity or in a capacity as an affiliate, employee or agent of any other person, or otherwise, may have business interests and engage in business activities similar to or in addition to or in competition with those of or relating to the corporation.
SECTION 16.      RATIFICATION. The board of directors or the stockholders may ratify and make binding on the corporation any action or inaction by the corporation or its officers to the extent that the board of directors or the stockholders could have originally authorized the matter. Moreover, any action or inaction questioned in any stockholders’ derivative proceeding or any other proceeding on the ground of lack of authority, defective or irregular execution, adverse interest of a director, officer or stockholder, non-disclosure, miscomputation, the application of improper principles or practices of accounting or otherwise may be ratified, before or after judgment, by the board of directors or by the stockholders and, if so ratified, shall have the same force and effect as if the questioned action or inaction had been originally duly authorized, and such ratification shall be binding upon the corporation and its stockholders and shall constitute a bar to any claim or execution of any judgment in respect of such questioned action or inaction.
SECTION 17.      EMERGENCY PROVISIONS. Notwithstanding any other provision in the Charter or these bylaws, this Section 17 shall apply during the existence of any catastrophe, or other similar emergency condition, as a result of which a quorum of the board of directors under Article III of these bylaws cannot readily be obtained (an “Emergency”). During any Emergency, unless otherwise provided by the board of directors, (a) a meeting of the board of directors or a committee thereof may be called by any director or officer by any means feasible under the circumstances; (b) notice of any meeting of the board of directors during such an Emergency may be given less than twenty-four (24) hours prior to the meeting to as many directors and by such means as may be feasible at the time, including publication, television or radio; and (c) the number of directors necessary to constitute a quorum shall be one-third of the entire Board of Directors.
ARTICLE IV
WAIVER OF NOTICE
Whenever any notice of a meeting is required to be given pursuant to the Charter or these bylaws or pursuant to applicable law, a waiver thereof in writing or by electronic transmission, given by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at nor the purpose of any meeting need be set forth in the waiver of notice of such meeting, unless specifically required by statute. The attendance of any person at any meeting shall constitute a waiver of notice of such meeting, except where such person attends a meeting

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for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.
ARTICLE V
OFFICERS
     SECTION 1.      NUMBER. The officers of the corporation shall include a president, a secretary and a treasurer and may include a chairman of the board, a vice chairman of the board, a chief executive officer, one or more vice presidents, a chief operating officer, a chief financial officer, one or more assistant secretaries and one or more assistant treasurers. Any two (2) or more offices, except president and vice president, may be held by the same person.
SECTION 2.      ELECTION AND TERM OF OFFICE. The officers of the corporation shall be elected annually by the board of directors, except that the chief executive officer or president may from time to time appoint one or more vice presidents, assistant secretaries and assistant treasurers or other officers. Each officer shall serve until his or her successor is elected and qualifies or until his or her death, or his or her resignation or removal in the manner hereinafter provided. Election of an officer or agent shall not of itself create contract rights between the corporation and such officer or agent.
SECTION 3.      ADDITIONAL OFFICERS. The board of directors may from time to time elect such other officers with such powers and duties as it shall deem necessary or desirable.
SECTION 4.      COMPENSATION OF OFFICERS. The salaries of all officers of the corporation shall be fixed by the board of directors and no officer shall be prevented from receiving such salary or other compensation by reason of the fact that he or she is also a director.
SECTION 5.      REMOVAL AND RESIGNATION. Any officer or agent of the corporation may be removed, with or without cause, by the board of directors if in its judgment the best interests of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any officer of the corporation may resign at any time by delivering his or her resignation to the board of directors, the chairman of the board, the chief executive officer, the president or the secretary. Any resignation shall take effect immediately upon its receipt or at such later time specified in the resignation. The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation. Such resignation shall be without prejudice to the contract rights, if any, of the corporation.
SECTION 6.      FILLING OF VACANCIES. A vacancy in any office may be filled by the board of directors for the balance of the term.
SECTION 7.      CHIEF EXECUTIVE OFFICER. The board of directors may designate a chief executive officer. In the absence of such designation, the chairman of the board shall be the chief executive officer of the corporation. The chief executive officer shall have general responsibility for implementation of the policies of the corporation, as determined by the board

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of directors, and for the management of the business and affairs of the corporation. He or she may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the board of directors or by these bylaws to some other officer or agent of the corporation or shall be required by law to be otherwise executed; and in general shall perform all duties incident to the office of chief executive officer and such other duties as may be prescribed by the board of directors from time to time.
SECTION 8.      CHIEF FINANCIAL OFFICER. The board of directors may designate a chief financial officer. In the absence of such designation, the treasurer shall be the chief financial officer of the corporation. The chief financial officer shall have the responsibilities and duties as determined by the board of directors or the chief executive officer.
SECTION 9.      CHIEF OPERATING OFFICER. The board of directors may designate a chief operating officer. In the absence of such designation, the president shall be the chief operating officer of the corporation. The chief operating officer shall have the responsibilities and duties as determined by the board of directors or the chief executive officer.
SECTION 10.      CHAIRMAN OF THE BOARD. The board of directors may designate from among its members a chairman of the board, who shall not, solely by reason of these bylaws, be an officer of the corporation. The board of directors may designate the chairman of the board as an executive or non-executive chairman. The chairman of the board shall preside over the meetings of the board of directors. The chairman of the board shall perform such other duties as may be assigned to him or her by these bylaws or the board of directors.
SECTION 11.      PRESIDENT. In the absence of a chief executive officer, the president shall in general supervise and control all of the business and affairs of the corporation. He or she may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the board of directors or by these bylaws to some other officer or agent of the corporation or shall be required by law to be otherwise executed; and in general shall perform all duties incident to the office of president and such other duties as may be prescribed by the board of directors from time to time.
SECTION 12.      VICE PRESIDENT. The vice president (or in the event there be more than one vice president, each of the vice presidents), if one shall be elected, shall assist the president in the discharge of his or her duties, as the president may direct, and shall perform such other duties as from time to time may be assigned to him or her by the chief executive officer, the president or the board of directors. In the absence of the president or in the event of his or her inability or refusal to act, the vice president (or in the event there be more than one vice president, the vice presidents in the order designated by the board of directors or, in the absence of any designation, then in the order of seniority of tenure as vice president) shall perform the duties of the president and when so acting, shall have the powers of and be subject to all the restrictions upon the president. The vice president (or each of them if there are more than one) shall perform such other duties as from time to time may be assigned to such vice president by the chief executive officer, the president or the board of directors. If there is more than one vice president, the president may identify the seniority of the vice presidents with designations as

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follows, the first having the highest seniority and seniority declining in order as named: executive vice president; vice president; and assistant vice president.
SECTION 13.      SECRETARY. The secretary shall (a) keep the minutes of the proceedings of the stockholders, the board of directors and committees of the board of directors in one (1) or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the corporation; (d) keep a register of the post office address of each stockholder which shall be furnished to the secretary by such stockholder; (e) have general charge of the stock transfer books of the corporation; and (f) in general perform such other duties as from time to time may be assigned to him or her by the chief executive officer, the president or the board of directors.
SECTION 14.      TREASURER. The treasurer shall have the custody of the funds and securities of the corporation, shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation, shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors and in general perform such other duties as from time to time may be assigned to him or her by the chief executive officer, the president or the board of directors. In the absence of a designation of a chief financial officer by the board of directors, the treasurer shall be the chief financial officer of the corporation. The treasurer shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the president and Board of Directors, at the regular meetings of the board of directors or whenever it may so require, an account of all his or her transactions as treasurer and of the financial condition of the corporation.
SECTION 15.      ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The assistant secretaries and assistant treasurers, in general, shall perform such duties as shall be assigned to them by the secretary or treasurer, respectively, or by the chief executive officer, the president or the board of directors.
SECTION 16.      COMPENSATION. The compensation of the officers shall be fixed from time to time by or under the authority of the board of directors and no officer shall be prevented from receiving such compensation by reason of the fact that he or she is also a director.
ARTICLE VI
STOCK
SECTION 1.      CERTIFICATES. Except as may be otherwise provided by the board of directors, stockholders of the corporation are not entitled to certificates representing the shares of stock held by them. In the event that the corporation issues shares of stock represented by certificates, such certificates shall be in such form as prescribed by the board of directors or a duly authorized officer, shall contain the statements and information required by the MGCL and shall be signed by the officers of the corporation in any manner permitted by the MGCL. In the event that the corporation issues shares of stock without certificates, to the extent then required

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by the MGCL, the corporation shall provide to the record holders of such shares a written statement of the information required by the MGCL to be included on stock certificates. There shall be no differences in the rights and obligations of stockholders based on whether or not their shares are represented by certificates.
SECTION 2.      TRANSFERS. All transfers of shares of stock shall be made on the books of the corporation, by the holder of the shares, in person or by his or her attorney, in such manner as the board of directors or any officer of the corporation may prescribe and, if such shares are certificated, upon surrender of certificates duly endorsed. The issuance of a new certificate upon the transfer of certificated shares is subject to the determination of the board of directors that such shares shall no longer be represented by certificates. Upon the transfer of any uncertificated shares, the corporation shall provide to the record holders of such shares, to the extent then required by the MGCL, a written statement of the information required by the MGCL to be included on stock certificates. Notwithstanding the foregoing, transfers of shares of any class or series of stock will be subject in all respects to the Charter and all of the terms and conditions contained therein.
SECTION 3.      LOST CERTIFICATES. Any officer of the corporation may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, destroyed, stolen or mutilated, upon the making of an affidavit of that fact by the person claiming the certificate to be lost, destroyed, stolen or mutilated; provided, however, if such shares have ceased to be certificated, no new certificate shall be issued unless requested in writing by such stockholder and the board of directors has determined that such certificates may be issued. Unless otherwise determined by an officer of the corporation, the owner of such lost, destroyed, stolen or mutilated certificate or certificates, or his or her legal representative, shall be required, as a condition precedent to the issuance of a new certificate or certificates, to give the corporation a bond in such sums as it may direct as indemnity against any claim that may be made against the corporation.
SECTION 4. RECORD DATE. The board of directors may set, in advance, a record date for the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or determining stockholders entitled to receive payment of any dividend or the allotment of any other rights, or in order to make a determination of stockholders for any other proper purpose. Such date, in any case, shall not be prior to the close of business on the day the record date is fixed and shall be not more than ninety (90) days and, in the case of a meeting of stockholders, not less than ten (10) days, before the date on which the meeting or particular action requiring such determination of stockholders of record is to be held or taken.
When a record date for the determination of stockholders entitled to notice of and to vote at any meeting of stockholders has been set as provided in this section, such record date shall continue to apply to the meeting if adjourned or postponed, except if the meeting is adjourned or postponed to a date more than 120 days after the record date originally fixed for the meeting, in which case a new record date for such meeting shall be determined as set forth herein.
SECTION 5.      REGISTERED OWNERS. The corporation shall be entitled to treat the holder of record of any share of stock as the holder in fact thereof and, accordingly, shall not be

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bound to recognize any equitable or other claim to or interest in such share or on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by the laws of the State of Maryland.
SECTION 6.      FRACTIONAL SHARES. The board of directors may authorize the corporation to issue fractional stock or authorize the issuance of scrip, all on such terms and under such conditions as it may determine. Notwithstanding any other provision of the Charter or these bylaws, the board of directors may issue units consisting of different securities of the corporation. Any security issued in a unit shall have the same characteristics as any identical securities issued by the corporation, except that the board of directors may provide that for a specified period securities of the corporation issued in such unit may be transferred on the books of the corporation only in such unit.
ARTICLE VII
INDEMNIFICATION AND INSURANCE
SECTION 1.      INDEMNIFICATION. To the maximum extent permitted by Maryland law in effect from time to time, the corporation shall indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, shall pay or reimburse reasonable expenses in advance of final disposition of a proceeding to (a) any individual who is a present or former director or officer of the corporation and who is made or threatened to be made a party to, or witness in, the proceeding by reason of his or her service in that capacity or (b) any individual who, while a director or officer of the corporation and at the request of the corporation, serves or has served as a director, officer, partner, trustee, member or manager of another corporation, real estate investment trust, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise and who is made or threatened to be made a party to, or witness in, the proceeding by reason of his or her service in that capacity (each an “Indemnified Party”). The rights to indemnification and advance of expenses provided by the Charter and these bylaws shall vest immediately upon election of a director or officer. The corporation may, with the approval of its Board of Directors, provide such indemnification and advance for expenses to an individual who served a predecessor of the corporation in any of the capacities described in (a) or (b) above and to any employee or agent of the corporation or a predecessor of the corporation. The indemnification and payment or reimbursement of expenses provided in these bylaws shall not be deemed exclusive of or limit in any way other rights to which any person seeking indemnification or payment or reimbursement of expenses may be or may become entitled under any bylaw, resolution, insurance, agreement or otherwise.
Neither the amendment nor repeal of this Article, nor the adoption or amendment of any other provision of the Charter or these bylaws inconsistent with this Article, shall apply to or affect in any respect the applicability of the preceding paragraph with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption.
SECTION 2.      INSURANCE. The corporation shall have the power to purchase and maintain insurance on behalf of an Indemnified Party against any liability asserted which was incurred in any such capacity with the corporation, or arising out of such status. Nothing

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contained herein shall constitute a waiver by any Indemnified Party of any right which he, she or it may have against any party under federal or state securities laws.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 1.      DIVIDENDS OR DISTRIBUTIONS. Dividends and other distributions upon the stock of the corporation may be authorized by the board of directors, subject to the provisions of law and the Charter. Dividends and other distributions may be paid in cash, property or stock of the corporation, subject to the provisions of law and the Charter.
SECTION 2.      FUNDS FOR DIVIDENDS OR DISTRIBUTIONS. Before payment of any dividends or other distributions, there may be set aside out of any assets of the corporation available for dividends or other distributions such sum or sums as the board of directors may from time to time, in its absolute discretion, think proper as a reserve fund for contingencies, for equalizing dividends, for repairing or maintaining any property of the corporation or for such other purpose as the board of directors shall determine, and the board of directors may modify or abolish any such reserve.
SECTION 3.      CONTRACTS. The board of directors may authorize any officer or agent to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the corporation and such authority may be general or confined to specific instances. Any agreement, deed, mortgage, lease or other document shall be valid and binding upon the corporation when duly authorized or ratified by action of the board of directors and executed by an authorized person.
SECTION 4.      CHECKS. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or agent of the corporation in such manner as shall from time to time be determined by the board of directors.
SECTION 5.      DEPOSITS. All funds of the corporation not otherwise employed shall be deposited or invested from time to time to the credit of the corporation as the board of directors, the chief executive officer, the president, the chief financial officer or any other officer designated by the board of directors may determine.
SECTION 6.      FISCAL YEAR. The fiscal and taxable years of the corporation shall begin on January 1st and end on December 31st.
SECTION 7.      SEAL. The board of directors may authorize the adoption of a seal by the corporation. The corporate seal, if any, shall have inscribed thereon the name of the corporation, the year of its organization and the words “Incorporated Maryland.” The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. The board of directors may authorize one or more duplicate seals and provide for the custody thereof. Wherever the corporation is permitted or required to affix its seal to a document, it shall be

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sufficient to meet the requirements of any law, rule or regulation relating to a seal to place the word “(SEAL)” adjacent to the signature of the person authorized to execute the document on behalf of the corporation.
SECTION 8.      STOCK LEDGER. The corporation shall maintain at its principal office or at the office of its counsel, accountants or transfer agent, an original or duplicate stock ledger containing the name and address of each stockholder and the number of shares of each class held by such stockholder. The stock ledger may be in written form or any other form capable of being converted into written form within a reasonable time for visual inspection.
ARTICLE IX
AMENDMENTS
The board of directors shall have the exclusive power to adopt, alter or repeal any provision of these bylaws and to make new bylaws.
















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DIRECTOR RESTRICTED STOCK UNIT AGREEMENT
This Restricted Stock Unit Agreement (this “ Agreement ”), dated as of <GRANT_DT> (the “ Grant Date ”), is made by and between InvenTrust Properties Corp., a Maryland corporation (the “ Company ”), and <PARTC_NAME> (the “ Participant ”).
WHEREAS , the Participant serves as a non-employee director on the Board of Directors of the Company (a “ Non-Employee Director ”);
WHEREAS , the Company maintains the InvenTrust Properties Corp. 2015 Incentive Award Plan (as amended from time to time, the “ Plan ”) and the InvenTrust Properties Corp. Director Compensation Program (the “ Program ”);
WHEREAS , the Company wishes to carry out the Plan (the terms of which are hereby incorporated by reference and made a part of this Agreement) and the Program;
WHEREAS , Section 9.4 of the Plan provides for the issuance of Restricted Stock Units (“ RSUs ”);
WHEREAS , Section 9.2 of the Plan provides for the issuance of Dividend Equivalent awards;
WHEREAS , the Program provides for the grant to Non-Employee Directors of RSUs and Dividend Equivalents with respect thereto; and
WHEREAS , the Administrator has determined that it would be to the advantage and in the best interest of the Company to issue the RSUs and Dividend Equivalents provided for herein to the Participant as an inducement to enter into or remain in the service of the Company, and as an additional incentive during such service, and has advised the Company thereof.
NOW, THEREFORE , in consideration of the mutual covenants herein contained and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows:
1. Issuance of Award of RSUs . Pursuant to the Plan, in consideration of the Participant’s agreement to provide services to the Company, the Company hereby issues to the Participant an award of <RSUS_GRANTED> RSUs. Each RSU that vests shall represent the right to receive payment, in accordance with this Agreement, of one share of the Company’s common stock, par value $0.001 per share (the “ Common Stock ”) or the Fair Market Value thereof, as set forth herein. Unless and until an RSU vests, the Participant will have no right to payment in respect of any such RSU. Prior to actual payment in respect of any vested RSU, such RSU will represent an unsecured obligation of the Company, payable (if at all) only from the general assets of the Company.
2. Dividend Equivalents . Each RSU granted hereunder is hereby granted in tandem with a corresponding Dividend Equivalent, which Dividend Equivalent shall remain outstanding from the Grant Date until the earlier of the payment or forfeiture of the RSU to which it corresponds. With respect to each dividend for which the record date occurs on or after the Vesting Commencement Date specified in Exhibit A attached hereto and on or prior to the earlier to occur of the payment or forfeiture of the RSU underlying such Dividend Equivalent, each outstanding Dividend Equivalent shall entitle the Participant to receive payments equal to dividends paid, if any, on the Shares underlying the RSU to which such Dividend Equivalent relates, payable in the same form and amounts as dividends paid to each holder of a Share. Each such payment shall be made no later than sixty (60) days following the later of the Grant Date or the applicable dividend payment date. Dividend Equivalents shall not entitle the Participant to any payments relating to dividends for which the record date occurs after the earlier to occur of the payment or forfeiture of the RSU underlying such Dividend Equivalent. In addition, notwithstanding the foregoing, in the event of a Termination of Service for any reason, the Participant shall not be entitled to any Dividend Equivalent payments with respect to dividends declared but not paid prior to the date of such termination on Shares underlying RSUs which are unvested as of the date of such termination (after taking into account any accelerated vesting that occurs in connection with such termination). Dividend Equivalents and any amounts that may become distributable in respect thereof shall be treated separately from the RSUs and the rights arising in connection therewith for purposes of the designation of time and form of payments required by Section 409A of the Code.
3. Definitions . For purposes of this Agreement, the following terms shall have the meanings set forth below. All capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Plan.
(a) “ Disability ” means a disability that would qualify the Participant to receive long-term disability payments under the Company’s group long-term disability insurance plan or program, as it may be amended from time to time, had the Participant been a participant in such plan or program.

(b) “ Service Provider ” means an Employee, Consultant or member of the Board, as applicable.

4. RSUs and Dividend Equivalents Subject to the Plan; Ownership and Transfer Restrictions .
(a)      The RSUs and Dividend Equivalents are subject to the terms, definitions and provisions of the Plan, which is incorporated herein by reference, including, without limitation, the restrictions on transfer set forth in Section 10.3 of the Plan and the REIT restrictions set forth in Section 12.7 of the Plan.
(b)      Without limiting the foregoing, the RSUs and Common Stock issuable with respect thereto shall be subject to the restrictions on ownership and transfer set forth in the charter of the Company, as amended and supplemented from time to time.
5. Vesting .
(a)      Time Vesting . Subject to Sections 5(b) and 6 below, the RSUs will vest and become nonforfeitable in accordance with and subject to the vesting schedule set forth on Exhibit A attached hereto, subject to the Participant’s continued status as a Service Provider on the applicable vesting date.
(b)      Change in Control . Notwithstanding the foregoing, in the event that a Change in Control occurs and the Participant has not incurred a Termination of Service prior to such Change in Control, the RSUs will vest in full and become nonforfeitable immediately prior to such Change in Control.  
6. Effect of Termination of Service .
(a)      Termination of Service . Except as may otherwise be determined by the Administrator, and subject to Section 6(b) below, in the event of the Participant’s Termination of Service for any reason, any and all RSUs that have not vested as of the date of such Termination of Service (after taking into account any accelerated vesting that occurs in connection with such termination) will automatically and without further action be cancelled and forfeited without payment of any consideration therefor, and the Participant shall have no further right to or interest in such RSUs. No RSUs which have not vested as of the date of the Participant’s Termination of Service shall thereafter become vested.
(b)      Termination Due to Death or Disability . In the event of the Participant’s Termination of Service due to the Participant’s death or Disability, the RSUs will vest in full and become nonforfeitable upon such Termination of Service.
7. Payment . Payment in respect of seventy-five percent (75%) of the RSUs that vest in accordance herewith shall be made to the Participant (or in the event of the Participant’s death, to his or her estate) in whole Shares, and payment in respect of twenty-five percent (25%) of the RSUs that vest in accordance herewith shall be made to the Participant (or in the event of the Participant’s death, to his or her estate) in cash. Payments made in Shares shall be made by the Company in the form of whole shares of Common Stock, and any fractional share shall be distributed in cash in an amount equal to the value of such fractional share determined based on the Fair Market Value as of the date immediately prior to such distribution. With respect to the cash-settled RSUs, the amount payable in cash for each such vested RSU shall be equal to the Fair Market Value of a Share as of the date immediately prior to such payment. The Company shall make all such payments within sixty (60) days after such vesting date, provided that, in the event of vesting upon a Change in Control under Section 5(b) above, such payment shall be made or deemed made immediately preceding and effective upon the occurrence of such Change in Control.
8. Restrictions on New RSUs or Shares . In the event that the RSUs or the Shares underlying the RSUs are changed into or exchanged for a different number or kind of securities of the Company or of another corporation or other entity by reason of merger, consolidation, recapitalization, reclassification, stock split, stock dividend or combination of shares, such new or additional or different securities which are issued upon conversion of or in exchange or substitution for RSUs or the Shares underlying the RSUs which are then subject to vesting shall be subject to the same vesting conditions as such RSUs or Shares, as applicable, unless the Administrator provides for the vesting of the RSUs or the Shares underlying the RSUs, as applicable.
9. Conditions to Issuance of Shares . Shares issued as payment for the RSUs will be issued out of the Company’s authorized but unissued Shares. Upon issuance, such Shares shall be fully paid and nonassessable. The Shares issued pursuant to this Agreement shall be held in book-entry form and no certificates shall be issued therefor. In addition to the other requirements set forth herein, the Shares issued as payment for the RSUs shall be issued only upon the fulfillment of all of the following conditions:
(a)      In the event that the Common Stock is listed on an established securities exchange, the admission of such Shares to listing on such exchange;
(b)      The completion of any registration or other qualification of such shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Administrator shall, in its absolute discretion, deem necessary or advisable;
(c)      The obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, in its absolute discretion, determine to be necessary or advisable;
(d)      The lapse of such reasonable period of time as the Administrator may from time to time establish for reasons of administrative convenience; and
(e)      The receipt by the Company of full payment for any applicable withholding or other employment tax or required payments with respect to any such Shares to the Company with respect to the issuance or vesting of such Shares.
In the event that the Company delays a distribution or payment in settlement of RSUs because it reasonably determines that the issuance of Shares in settlement of RSUs will violate federal securities laws or other applicable law, such distribution or payment shall be made at the earliest date at which the Company reasonably determines that the making of such distribution or payment will not cause such violation, as required by Treasury Regulation Section 1.409A-2(b)(7)(ii). The Company shall not delay any payment if such delay will result in a violation of Section 409A of the Code.
10. Rights as Stockholder . Neither the Participant nor any person claiming under or through the Participant will have any of the rights or privileges of a stockholder of the Company in respect of any Shares deliverable hereunder unless and until such Shares will have been issued, recorded on the records of the Company or its transfer agents or registrars, and delivered to the Participant or any person claiming under or through the Participant.
11. Tax Withholding . The Company or any Subsidiary shall have the authority and the right to deduct or withhold, or require the Participant to remit to such entity, an amount sufficient to satisfy federal, state, local and foreign taxes (including the Participant’s FICA obligation) required by law to be withheld with respect to the issuance, vesting or payment of the RSUs and the Dividend Equivalents. The Administrator may in its discretion and in satisfaction of the foregoing requirement allow the Participant to elect to have the Company or the Subsidiary (as applicable) withhold Shares otherwise issuable under such award (or allow the return of Shares) having a Fair Market Value equal to the sums required to be withheld. Notwithstanding any other provision of the Plan or this Agreement, the number of Shares which may be withheld with respect to the issuance, vesting or payment of the RSUs in order to satisfy the Participant’s income and payroll tax liabilities with respect to the issuance, vesting or payment of the RSUs and the Dividend Equivalents shall be limited to the number of shares which have a fair market value on the date of withholding equal to the aggregate amount of such liabilities based on the minimum statutory withholding rates for income and payroll tax purposes that are applicable to such supplemental taxable income.
12. Remedies . The Participant shall be liable to the Company for all costs and damages, including incidental and consequential damages, resulting from a disposition of the RSUs which is in violation of the provisions of this Agreement. Without limiting the generality of the foregoing, the Participant agrees that the Company shall be entitled to obtain specific performance of the obligations of the Participant under this Agreement and immediate injunctive relief in the event any action or proceeding is brought in equity to enforce the same. The Participant will not urge as a defense that there is an adequate remedy at law.

13. Restrictions on Public Sale by the Participant . To the extent not inconsistent with applicable law, the Participant agrees not to effect any sale or distribution of the RSUs or the Shares underlying the RSUs or any similar security of the Company, or any securities convertible into or exchangeable or exercisable for such securities, including a sale pursuant to Rule 144 under the Securities Act, during the fourteen (14) days prior to, and during the up to 90-day period beginning on, the date of the pricing of any public or private debt or equity securities offering by the Company (except as part of such offering), if and to the extent requested in writing by the Company in the case of a non-underwritten public or private offering or if and to the extent requested in writing by the managing underwriter or underwriters (or initial purchaser or initial purchasers, as the case may be) and consented to by the Company, which consent may be given or withheld in the Company’s sole and absolute discretion, in the case of an underwritten public or private offering (such agreement to be in the form of a lock-up agreement provided by the Company, managing underwriter or underwriters, or initial purchaser or initial purchasers, as the case may be).

14. Conformity to Securities Laws . The Participant acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of all applicable federal and state laws, rules and regulations (including, but not limited to the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, including without limitation the applicable exemptive conditions of Rule 16b-3 of the Exchange Act) and to such approvals by any listing, regulatory or other governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the RSUs are granted, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan, this Agreement and the RSUs shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

15. Code Section 409A . To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the effective date of this Agreement. Notwithstanding any provision of this Agreement to the contrary, in the event that following the effective date of this Agreement, the Company determines that the RSUs may be subject to Section 409A of the Code and related Department of Treasury guidance (including such Department of Treasury guidance as may be issued after the effective date of this Agreement ), the Company may adopt such amendments to this Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect ), or take any other actions, that the Company determines are necessary or appropriate to (a) exempt the RSUs from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the RSUs, or (b) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance; provided, however , that this Section 15 shall not create any obligation on the part of the Company or any Subsidiary to adopt any such amendment, policy or procedure or take any such other action. For purposes of Section 409A of the Code, any right to a series of payments pursuant to this Agreement shall be treated as a right to a series of separate payments.

16. No Right to Continued Service . Nothing in this Agreement shall confer upon the Participant any right to continue as a Service Provider of the Company or any Subsidiary, or shall interfere with or restrict in any way the rights of the Company or any Subsidiary, which rights are hereby expressly reserved, to discharge the Participant at any time for any reason whatsoever, with or without cause.

17. Miscellaneous .

(a)      Incorporation of the Plan . This Agreement is made under and subject to and governed by all of the terms and conditions of the Plan. In the event of any discrepancy or inconsistency between this Agreement and the Plan, the terms and conditions of the Plan shall control. By signing this Agreement, the Participant confirms that he or she has received access to a copy of the Plan and has had an opportunity to review the contents thereof.

(b)      Successors and Assigns . Subject to the limitations set forth in this Agreement, this Agreement shall be binding upon, and inure to the benefit of, the executors, administrators, heirs, legal representatives, successors and assigns of the parties hereto, including, without limitation, any business entity that succeeds to the business of the Company.

(c)      Entire Agreement; Amendments and Waivers. This Agreement, together with the Plan, constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties. In the event that the provisions of such other agreement conflict or are inconsistent with the provisions of this Agreement, the provisions of this Agreement shall control. Except as set forth in Section 15 above, this Agreement may not be amended except in an instrument in writing signed on behalf of each of the parties hereto and approved by the Administrator. No amendment, supplement, modification or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.

(d)      Severability . If for any reason one or more of the provisions contained in this Agreement or in any other instrument referred to herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, then to the maximum extent permitted by law, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any other such instrument.

(e)      Titles . The titles, captions or headings of the Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

(f)      Counterparts . This Agreement may be executed in any number of counterparts, any of which may be executed and transmitted by facsimile (including, without limitation, transfer by .pdf), and each of which shall be deemed to be an original, but all of which together shall be deemed to be one and the same instrument.

(g)      Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Maryland applicable to contracts entered into and wholly to be performed within the State of Maryland by Maryland residents, without regard to any otherwise governing principles of conflicts of law that would choose the law of any state other than the State of Maryland.

(h)      Notices . Any notice to be given by the Participant under the terms of this Agreement shall be addressed to the Legal Department of the Company at the Company’s address set forth in Exhibit A attached hereto. Any notice to be given to the Participant shall be addressed to him or her at the Participant’s then current address on the books and records of the Company. By a notice given pursuant to this Section 17(h), either party may hereafter designate a different address for notices to be given to him or her. Any notice which is required to be given to the Participant shall, if the Participant is then deceased, be given to the Participant’s personal representative if such representative has previously informed the Company of his or her status and address by written notice under this Section 17(h) (and the Company shall be entitled to rely on any such notice provided to it that it in good faith believes to be true and correct, with no duty of inquiry). Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States mail by certified mail, with postage and fees prepaid, addressed as set forth above or upon confirmation of delivery by a nationally recognized overnight delivery service.


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


INVENTRUST PROPERTIES CORP.,
a Maryland corporation



By: __________________________________
Name:    _______________________________
Title: _________________________________


The Participant hereby accepts and agrees to be bound by all of the terms and conditions of this Agreement.

____________________________
<PARTC_NAME>


Exhibit A
Vesting Schedule and Notice Address
Vesting Commencement Date : December 15, 2014

Vesting Schedule : The RSUs shall vest in full on the date of the first annual meeting of the Company’s stockholders following the Vesting Commencement Date.

Company Address

2809 Butterfield Road
Suite 200
Oak Brook, IL 60523

1








CH\2069315.3


University House Communities Group, Inc.
Share Unit Award Agreement (2015)

This Share Unit Award Agreement (2015) (this “ Award Agreement ”) is made and entered into effective as of the Date of Grant (defined below) by and between University House Communities Group, Inc. (formerly IA Communities Group, Inc.) (the “ Company ”), and the participant named below (the “ Participant ”). Capitalized terms not defined herein shall have the meanings ascribed to them in the Inland American Communities Group, Inc. 2014 Share Unit Plan (the “ Plan ”). Where the context permits, references to the Company shall include any successor to the Company.

Name of Participant:

Number of Share Units:

Date of Grant:

Share Unit Value at Date of Grant:

Vesting Commencement Date:

Participant Address:

1. Grant of Share Units . The Company hereby grants to the Participant the total number of Share Units set forth above (this “ Award ”), subject to all of the terms and conditions of this Award Agreement and the Plan.

2. Definitions . As used in this Award Agreement, the following terms shall have the meanings set forth below:

“ Disabled ” or “ Disability ” shall have the same meaning as provided in the long-term disability plan or policy maintained by the Company or prior to a Triggering Event, InvenTrust Properties Corp. (formerly Inland American Real Estate Trust, Inc.) (“ InvenTrust ”), whichever entity maintains such plan or policy, and if both maintain such a plan or policy, then the plan or policy of the Company. If no such disability plan or policy is maintained by the Company or InvenTrust, such term shall mean the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment, which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months. If the Participant disputes the Company’s determination of Disability, the Participant (or Participant’s designated physician) and the Company (or its designated physician) shall jointly appoint a third party physician to examine the Participant and determine whether the Participant is Disabled.

“ Good Reason ” shall have the meaning set forth under an applicable employment agreement between the Participant and the Company or an Affiliate of the Company, provided that if no such definition is applicable, such term shall mean (i) a material diminution of the Participant’s base salary or annual target bonus opportunity; (ii) a material reduction in the Participant’s authority, duties or responsibilities; (iii) Participant being required to relocate Participant’s principal place of employment with the Company or an Affiliate more than 50 miles from Participant’s principal place of employment as of immediately prior to a Change in Control, it being understood that any requirement that Participant travel frequently and spend prolonged periods away from Participant’s principal residence shall not constitute Good Reason; or (iv) failure of any successor to the Company following a Change in Control to assume this Award Agreement and the obligations hereunder. A termination of employment by the Participant shall not be deemed to be for Good Reason unless (A) Participant gives the Company written notice describing the event or events which are the basis for such termination within sixty (60) days after the event or events occur, (B) such grounds for termination (if susceptible to correction) are not corrected by the Company within thirty (30) days of the Company’s receipt of such notice (“ Correction Period ”), and (C) Participant terminates Participant’s employment no later than thirty (30) days following the Correction Period.

3. Vesting of Share Units . Except for Share Units that vest pursuant to Sections 6(b) and 6(c) of this Award Agreement, the Share Units granted hereunder shall vest and be settled in cumulative installments as follows: (i) with respect to one-third (⅓) of the total number of Share Units, on the later to occur of the first anniversary of the Vesting Commencement Date or the date there first occurs a Triggering Event, (ii) with respect to one-third (⅓) of the total number of Share Units, on the later to occur of the second anniversary of the Vesting Commencement Date or the date there first occurs a Triggering Event, and (iii) with respect to one-third (⅓) of the total number of Share Units, on the later to occur of the third anniversary of the Vesting Commencement Date or the date there first occurs a Triggering Event (each, a “ Vesting Date ”); provided that the Participant is employed with the Company through the applicable Vesting Date; and provided further that in no event will the Share Units granted pursuant to this Award Agreement vest or be settled unless a Triggering Event occurs no later than the fifth (5 th ) anniversary of the Vesting Commencement Date.

4. Form of Payment .

(a) Change in Control . In the event that the first Triggering Event to occur is a Change in Control, upon the applicable Vesting Date, the Participant shall be entitled to receive an amount in cash equal to the Fair Market Value of the Share Units subject to this Award determined as of the date of the Change in Control; provided, however, that if the acquiring entity is a publicly traded company and the Share Units subject to this Award are converted into share units or other form of equity award of such acquiring entity at the time of the Change in Control, then the Share Units subject to this Award will be settled in shares of the acquiring entity, in either case, on the applicable Vesting Date.

(b) Qualified Event . In the event that the first Triggering Event to occur is a Qualified Event, upon the applicable Vesting Date, the Participant shall be entitled to receive a number of Shares having an aggregate value on the applicable Vesting Date equal to the Fair Market Value on the applicable Vesting Date of the Share Units subject to this Award.

5. Restrictions on Transfer . None of the Share Units subject to this Award, or the Participant’s rights with respect to such Share Units, shall be sold, assigned, transferred, pledged, hypothecated, given away or in any other manner disposed of, encumbered, whether voluntarily or involuntarily, or by operation of law or otherwise (each such action a “ Transfer ”). Unless the Company determines otherwise, any attempted Transfer of the Share Units subject to this Award shall be null and void, and the Company shall not reflect on its records any change in ownership of any Share Units as a result of any such Transfer, shall otherwise refuse to recognize any such Transfer and shall not in any way give effect to any such Transfer of any such Share Units. This Award of Share Units is personal to the Participant, non-assignable and not transferable in any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution.

6. Termination of Employment Services .

(a) Termination of Employment For Cause . In the event the Participant’s employment with the Company and its Subsidiaries is terminated for Cause, all of the Participant’s Share Units that are unvested as of the date of such termination shall be forfeited as of such date.

(b) Termination of Employment On Account of Death or Disability . If the Participant’s employment is terminated on account of death or Disability, with respect to all of the Participant’s Share Units that are unvested as of the date of such termination, then if a Triggering Event has (i) occurred prior to the date of such termination, upon such termination Participant shall be entitled to receive an amount in cash equal to the Fair Market Value of the Share Units subject to this Award, as determined as of the date of such termination, or (ii) not occurred prior to the date of such termination, upon the occurrence of a Triggering Event, Participant shall be entitled to receive an amount in cash equal to the Fair Market Value of the Share Units subject to this Award on the date of such Triggering Event.

(c) Termination of Employment by Participant For Good Reason or by the Company Without Cause following a Triggering Event . Except as may otherwise be provided under the terms of an applicable employment agreement between the Participant and the Company or an Affiliate of the Company and subject to any additional terms of such employment agreement, upon termination of the Participant’s employment by Participant for Good Reason or by the Company without Cause, in either case, following the occurrence of a Triggering Event, any Share Units that are unvested as of the date of such termination shall vest and be settled immediately as of such termination date.

(d) Termination of Employment For Any Other Reason . Unless otherwise provided in an applicable employment agreement between the Participant and the Company or any Affiliate of the Company, if the Participant’s employment terminates for any reason other than the reasons enumerated in paragraphs (a) through (c) above, any Share Units that are unvested as of the date of Participant’s termination of employment shall be forfeited effective as of the date of such termination.

7. No Shareholder Rights Prior to Vesting; Dividend Equivalents . The Participant shall have no rights of a stockholder unless and until Shares are issued to the Participant pursuant to the terms of this Award Agreement. Notwithstanding the foregoing, after the occurrence of a Qualified Event, the Share Units subject to this Award shall be entitled to accrue dividend equivalents until the settlement date of the Share Units. As of each dividend date with respect to shares of common stock of the Company (“ Common Stock ”), a dollar amount shall accrue to the Participant equal to the amount of the dividend that would have been paid on the number of shares of Common Stock that would have been held by the Participant as of the close of business on the record date for such dividend had such Share Units been converted on such date into the number of whole and fractional shares of Common Stock that could have been purchased at the closing price on the dividend payment date for an amount equal to the Fair Market Value of such Share Units. In the case of any dividend declared on shares of Common Stock that is payable in shares of Common Stock, the Participant will be credited with an additional number of Share Units equal to the number having a Fair Market Value equal to the Fair Market Value of the shares of Common Stock (including any fraction thereof) that would have been distributable to the Participant as a dividend had Participant’s Share Units been converted into the number of whole and fractional shares of Common Stock that could have been purchased at the closing price on the dividend payment date for an amount equal to the Fair Market Value of such Share Units. No dividend equivalents shall be paid out to the Participant unless and until the Share Units to which the dividend equivalents relate have become vested and settled.

8. Conflicts with Award Plan or Employment Agreements . This Award and the terms of this Award Agreement are made pursuant to all of the provisions of the Plan, which is incorporated herein by this reference, and is intended, and shall be interpreted in a manner, to comply therewith. In the event of any conflict between the provisions of this Award Agreement and the provisions of the Plan, the provisions of the Plan shall govern.

9. Participant Covenants . By accepting this Award, Participant acknowledges and agrees (i) to the covenants contained in Section 9 of this Award Agreement and that this Award, as well as Participant’s employment, is sufficient compensation for such covenants, and (ii) that the covenants contained in Section 9 of this Award Agreement are in addition to, and not in replacement of, any other agreements between Participant and Company or its Affiliates that contain covenants with respect to confidentiality or confidential information. For purposes of this Section 9 , “ Company ” means the Company and its subsidiaries, parent companies and affiliated companies.

(a) Nondisclosure of Confidential Information . “ Confidential Information ” means data and information relating to the business of the Company, which is disclosed to or created by Participant, or of which Participant becomes aware as a consequence of Participant’s relationship with the Company, that has value to the Company and is not generally known to competitors of the Company. Subject to the foregoing, Confidential Information includes, but is not limited to, business development, marketing and sales programs, customer, potential customer and supplier/vendor information, customer lists, employee information, marketing strategies, Company financial results, information related to mergers and acquisitions, pricing information, personnel information, financial data, regulatory approval strategies, investigative records, research, marketing strategy, testing methodologies and results, computer programs, programs and protocols, and related items used by the Company in its business, whether contained in written form, computerized records, models, prototypes or any other format, and any and all information obtained in writing, orally or visually during visits to offices of the Company. Confidential Information shall not include any information that (A) is or becomes generally available to the public other than as a result of an unauthorized disclosure, (B) has been independently developed and disclosed by others without violating this Award Agreement, or (C) otherwise enters the public domain through lawful means. Participant acknowledges that Participant will continue to receive and develop Confidential Information of the Company as a necessary part of Participant’s job. Participant agrees that while employed by the Company, Participant will continue to benefit and add to the Company goodwill with its clients and in the marketplace generally. Participant further agrees that loss of such clients will cause the Company significant and irreparable harm and that the restrictions on Participant’s use of such Confidential Information are reasonable and necessary to protect the Company’s legitimate business interests in its Confidential Information. Accordingly, Participant will not at any time during Participant’s employment by the Company, and for so long thereafter as the pertinent information or documentation constitutes Confidential Information as defined above, use or disclose to others any Confidential Information, except as specifically authorized in a signed writing by the Company or in the performance of work assigned to Participant by the Company. The covenants made by Participant herein are in addition to, and not exclusive of, any and all other rights to which the Company is entitled under federal and state law, including, but not limited to, rights provided under copyright and trade secret laws, and laws concerning fiduciary duties. Participant hereby agrees not to disclose, copy, or remove from the premises of the Company any documents, records, tapes or other media or format that contain or may contain Confidential Information, except as required by the nature of Participant’s duties for the Company.

(b) Return of Company Property . Promptly following the termination of Participant’s employment for any reason, or at any time at the request of the Company, Participant will return to Company all Confidential Information, physical property of the Company and any information relating to the clients or customers of the Company that Participant may possess or have under Participant’s control, together with all copies thereof, including but not limited to company hardware, records, memoranda, notes, plans, reports, computer tapes, software and other documents and data containing confidential information.

(c) Nonsolicitation and Noninterference . During Participant’s employment and (i) for 3 years following the termination of Participant’s employment for any reason or no reason by either the Company or Participant, Participant will not, directly or indirectly, recruit, hire, retain or attempt to recruit, hire or retain, any then-current employee or independent contractor of the Company or any former employee who was employed by the Company within the prior six (6) months, for employment or engagement with an entity other than the Company, or entice or attempt to persuade the Company’s then-current employee or independent contractor to leave employment or engagement with the Company and (ii) for 1 year following termination of Participant’s employment for any reason or no reason by either the Company or Participant, Participant will not engage in or attempt to engage in negotiations with any potential sellers or developers regarding specific projects identified by the Company in its most-recent internal pipeline report (i.e., the most recent internal pipeline report available prior to the date of the Participant’s termination of employment) as an active development deal (and for the avoidance of doubt, excluding former development deals no longer included in such reports) (“ Active Projects ”), but Participant shall be free to communicate and negotiate with any sellers or developers on topics other than Active Projects; provided, however, the Company may, in its sole discretion, waive the provisions of Section 9(c)(ii) after its receipt from Participant of (a) a written request for a waiver specifying the Active Project with respect to which such waiver is being sought and (b) an amount equal to the total cumulative expenditures or costs incurred by the Company with respect to such Active Projects, as determined by the Company in its sole discretion. The parties expressly acknowledge and agree that this section 9(c) shall constitute an amendment to, and shall hereby amend and supersede, any provision of any previously executed Share Unit Award Agreement between the Company and Participant pertaining to the subject matter of this Section 9(c).

(d) Nondisparagement . Participant shall not make, and the Company shall instruct each member of the Board and each executive officer of InvenTrust and the Company not to make, or cause to be made, during Participant’s employment and at all times thereafter, any statement or communicate any information (whether oral or written) that disparages the Company or Participant, respectively, including, with respect to Participant’s obligations, the Company’s subsidiaries or parent companies or any of their respective officers, directors, board members, investors, shareholders, agents or employees.

(e) Reasonableness . Participant acknowledges that the provisions contained in this Section 9 are reasonable and necessary to protect the Company’s interests in its good will, business relationships, and confidential information and that the Company will suffer substantial harm if Participant engages in any of the prohibited activities. Participant warrants that no provision of this Section 9 will work to prevent Participant from earning a living.

(f) Enforcement . It is the desire and intent of the parties hereto that the provisions of Section 9 of this Award Agreement be construed independently of one another to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Each restriction contained in this Section 9 is intended to be severable, and the unenforceability of any such provision shall not affect the enforceability of any other provision of Section 9 . The Company shall be entitled to all rights and remedies as set forth in this Section 9 until the expiration of the covenants contained herein in accordance with their terms. The parties agree and acknowledge that damages will be difficult, if not impossible, to calculate in the event of a breach, or threatened breach, of any of the provisions of this Section 9 and, in any event, damages will be an insufficient remedy in the event of such breach. Accordingly, the parties agree that the Company shall, in addition to all other remedies, be entitled to injunctive relief in the event of any breach of the provisions of this Section 9 .

10. Arbitration .

(a) The Company and Participant mutually consent to the resolution by final and binding arbitration of any and all disputes, controversies or claims related in any way to this Award or otherwise to Participant’s relationship with the Company and its parents and affiliates, including, but not limited to, any dispute, controversy or claim of alleged discrimination, harassment or retaliation (including, but not limited to, claims based on race, sex, sexual preference, religion, national origin, age, marital or family status, medical condition, handicap or disability); any dispute, controversy or claim arising out of or relating to this Award Agreement or the breach of this Award Agreement; and any dispute as to the arbitrability of a matter under this Award Agreement (collectively, “ Claims ”); provided, however, that nothing in this Award Agreement shall require arbitration of any Claims which, by law, cannot be the subject of a compulsory arbitration agreement.

(b) All Claims shall be resolved exclusively by arbitration administered by JAMS under its Employment Arbitration Rules and Procedures then in effect (the “ JAMS Rules ”). Notwithstanding the foregoing, the Company and Participant shall have the right to (i) seek a restraining order or other injunctive or equitable relief or order in aid of arbitration or to compel arbitration, from a court of competent jurisdiction, or (ii) interim injunctive or equitable relief from the arbitrator pursuant to the JAMS Rules, in each case, to prevent any violation of this Award Agreement or any other agreement between the Company and Participant. The Company and Participant must notify the other party in writing of a request to arbitrate any Claims within the same statute of limitations period applicable to such Claims.

(c) Prior to a Triggering Event, any arbitration proceeding brought under this Award Agreement shall be conducted before one arbitrator in DuPage County, Illinois, or such other location to which the parties mutually agree. After the occurrence of a Triggering Event, any arbitration proceeding brought under this Award Agreement shall be conducted before one arbitrator in Dallas, Texas, or such other location to which the parties mutually agree. The arbitrator shall be selected in accordance with the JAMS Rules, provided that the arbitrator shall be an attorney with significant experience in employment matters. Each party to any dispute shall pay its own expenses, including attorneys’ fees; provided, however, that the Company shall pay all costs and fees that Participant would not otherwise have been subject to paying if the claim had been resolved in a court of law and, to the extent required by applicable law for this arbitration provision to be enforceable, the Company shall reimburse Participant for any reasonable travel expenses incurred by Participant in connection with Participant’s travel to Illinois or Texas, as the case may be, for any arbitration proceedings. The arbitrator will be empowered to award either party any remedy at law or in equity that the party would otherwise have been entitled to had the matter been litigated in court, including, but not limited to, general, special and punitive damages, injunctive relief, costs and attorney fees; provided, however, that the authority to award any remedy is subject to whatever limitations, if any, exist in the applicable law on such remedies. The arbitrator shall issue a decision or award in writing, stating the essential findings of fact and conclusions of law, and the arbitrators shall be required to follow the laws of the State of Delaware consistent with Section 14 of this Award Agreement.

(d) Any judgment on or enforcement of any award, including an award providing for interim or permanent injunctive relief, rendered by the arbitrator may be entered, enforced or appealed in any court having jurisdiction thereof. Any arbitration proceedings, decision or award rendered hereunder, and the validity, effect and interpretation of this arbitration provision, shall be governed by the Federal Arbitration Act, 9 U.S.C. § 1 et seq.

(e) It is part of the essence of this Award Agreement that any Claims hereunder shall be resolved expeditiously and as confidentially as possible. Accordingly, the Company and Participant agree that all proceedings in any arbitration shall be conducted under seal and kept strictly confidential. In that regard, no party shall use, disclose or permit the disclosure of any information, evidence or documents produced by any other party in the arbitration proceedings or about the existence, contents or results of the proceedings except as necessary and appropriate for the preparation and conduct of the arbitration proceedings, or as may be required by any legal process, or as required in an action in aid of arbitration or for enforcement of or appeal from an arbitral award. Before making any disclosure permitted by the preceding sentence, the party intending to make such disclosure shall give the other party reasonable written notice of the intended disclosure and afford such other party a reasonable opportunity to protect its interests.

11. No Rights to Continuation of Employment . Nothing in the Plan or this Award Agreement shall confer upon the Participant any right to continue in the employ of the Company or any Subsidiary thereof or shall interfere with or restrict the right of the Company or its shareholders (or of a Subsidiary or its shareholders, as the case may be) to terminate the Participant’s employment at any time for any reason whatsoever, with or without Cause.

12. Tax Withholding . The Participant may be required to pay to the Company or any Subsidiary, and the Company or any Subsidiary shall have the right and is hereby authorized to withhold from any payment due or transfer made under this Award or under the Plan or from any compensation or other amount owing to the Participant the amount (in cash, securities, or other property) of, any applicable withholding taxes in respect of this Award or any payment pursuant to this Award and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes.

13. Section 409A . It is the intent of the parties that this Award comply with, or be exempt from, Section 409A of the Code and, accordingly, to the maximum extent permitted, this Award, and the terms of this Award Agreement, shall be interpreted and administered consistent with such intent. Notwithstanding anything contained in this Award Agreement to the contrary, to the extent required to avoid accelerated taxation or tax penalties under Section 409A of the Code, the Participant shall not be considered to have terminated employment for purposes of this Award to the extent the Award becomes payable upon the Participant’s termination of employment until the Participant would be considered to have incurred a “separation from service” from the Company within the meaning of Section 409A of the Code. In addition, each amount to be paid or benefit to be provided to the Participant pursuant to an Award shall be construed as a separate identified payment for purposes of Section 409A of the Code and any payments that are due within the “short term deferral period” as defined in Section 409A of the Code shall not be treated as deferred compensation unless applicable law requires otherwise. Notwithstanding anything contained herein to the contrary, if the Participant is a “specified employee,” as defined in Section 409A of the Code, as of the date of the Participant’s separation from service, then to the extent any Award, or payment therefor (i) constitutes the payment of nonqualified deferred compensation, within the meaning of Section 409A of the Code, (ii) is payable upon the Participant’s separation from service and (iii) under the terms of this Award Agreement would be payable prior to the six-month anniversary of the Participant’s separation from service, settlement of such Award or the payment therefor shall be delayed until the earlier to occur of (A) the six-month anniversary of the separation from service or (B) the date of the Participant’s death.
  
14. Governing Law . This Award Agreement shall be governed by, interpreted under, and construed and enforced in accordance with the internal laws, and not the laws pertaining to conflicts or choices of laws, of the State of Delaware applicable to agreements made and to be performed wholly within the State of Delaware.

15. Binding on Successors . The terms of this Award Agreement shall be binding upon the Participant and upon the Participant’s heirs, executors, administrators, personal representatives, transferees, assignees and successors in interest, and upon the Company and its successors and assignees, subject to the terms of the Plan.

16. No Assignment . Notwithstanding anything to the contrary in this Award Agreement or the Plan, neither this Award Agreement nor any rights granted herein shall be assignable by the Participant.

17. Necessary Acts . The Participant hereby agrees to perform all acts, and to execute and deliver any documents that may be reasonably necessary to carry out the provisions of this Award Agreement, including but not limited to all acts and documents related to compliance with federal and/or state securities and/or tax laws.

18. Headings . Headings are used solely for the convenience of the parties and shall not be deemed to be a limitation upon or descriptive of the contents of any such Section.

19. Counterparts . This Award Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument.

20. Notices . All notices and other communications under this Award Agreement shall be in writing and shall be given by first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given three days after mailing to the respective parties named below:


If to Company:    Scott Wilton
Executive Vice President, General Counsel and Secretary, InvenTrust Properties Corp .
2809 Butterfield Road
Oak Brook, IL 60523

If to the Participant :    At the Participant Address set forth above.
                                         
Either party hereto may change such party’s address for notices by notice duly given pursuant hereto.

21. Acceptance . The Participant hereby acknowledges receipt of a copy of the Plan and this Award Agreement. The Participant has read and understands the terms and provisions thereof, and accepts the Share Units subject to all the terms and conditions of the Plan and this Award Agreement.

[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have executed this Award Agreement as of the date first set forth above.


UNIVERSITY HOUSE COMMUNITIES GROUP, INC.


By     
Name:
Title:

PARTICIPANT


Signature     
Print Name:






INVENTRUST PROPERTIES CORP.
DIRECTOR COMPENSATION PROGRAM

This InvenTrust Properties Corp. (the “ Company ”) Director Compensation Program (this “ Program ”) for non-employee directors of the Company (the “ Directors ”) shall be effective as of June 19, 2015 (the “ Effective Date ”).

Cash Compensation

Effective as of January 1, 2015, annual retainers will be paid in the following amounts to Directors:

Director:

$65,000

Chair of Audit Committee:

$23,000

Chair of Compensation Committee:

$17,500

Chair of Nominating and Governance Committee:

$12,000

Non-Chair Audit Committee Member:

$10,000

Non-Chair Compensation Committee Member:

$7,500

Non-Chair Nominating and Governance Committee Member:

$5,000

Interim Non-Executive Chairman (additional retainer):

$30,000


All annual retainers will be paid in cash quarterly in arrears promptly following the end of the applicable calendar quarter, but in no event more than thirty (30) days after the end of such quarter.

Equity Compensation






2015 Grant:
Each Director who is serving on the board of directors of the Company (the “ Board ”) at the Effective Date shall, on the Effective Date, automatically be granted restricted stock units (“ RSUs ”) with a value of $110,000 (the “ 2015 Grant ”). Each 2015 Grant shall vest in full on the date of the first annual meeting of the Company’s stockholders following the Effective Date, subject to the Director’s continued service through the vesting date.
 
 
Annual Grant:
Each individual who is initially elected as a Director on the date of an annual meeting of the Company’s stockholders and each Director who is serving on the Board as of the date of each annual meeting of the Company’s stockholders and who is re-elected as a Director at such annual meeting shall, within thirty (30) days following the announcement of the Valuation (as defined below) applicable to the year in which the Director is initially elected or re-elected, as applicable, automatically be granted RSUs with a value of $110,000 (the “ Annual Grant ”), and a tandem dividend equivalent award with respect thereto. Each Annual Grant shall vest in full on the date of the first annual meeting of the Company’s stockholders following the Director’s election or re-election, as applicable, subject to the Director’s continued service on the vesting date.

For purposes of this Program, “ Valuation ” shall mean the annual determination by the Board of the estimated value of the common stock of the Company.

Business Expenses

The Company shall reimburse each Director for reasonable business expenses incurred by such Director in connection with his or her services to the Company (including, without limitation, expenses for continuing education programs), pursuant to the Company’s standard expense reimbursement policy as in effect from time to time.

Miscellaneous

For purposes of determining the number of RSUs subject to the 2015 Grant and each Annual Grant, the dollar value of such grant shall be divided by the fair market value of a share of common stock of the Company on the date of such grant, as determined by reference to the applicable Valuation, in each case rounded up to the nearest whole RSU.

The terms of each award of RSUs (including, without limitation, the form of payment under such award) and dividend equivalents shall be set forth in an award agreement in a form prescribed by the Board, and RSUs and dividend equivalents granted under this Program shall be subject to the terms of such award agreement and the applicable Company equity incentive plan under which the award is granted.

Effectiveness, Amendment, Modification and Termination






This Program shall become effective as of the Effective Date. This Program may be amended, modified or terminated by the Board at any time and from time to time its sole discretion.





Exhibit 31.1


Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


I, Thomas P. McGuinness, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of InvenTrust Properties Corp.;
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.


 
 
 
Date:
November 12, 2015
/s/ Thomas P. McGuinness
 
 
Name: Thomas P. McGuinness
 
 
Title: Director, President and Chief Executive Officer (Principal Executive Officer)





Exhibit 31.2


Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


I, Jack Potts, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of InvenTrust Properties Corp.;
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.


Date:
November 12, 2015
/s/ Jack Potts
 
 
Name: Jack Potts
 
 
Title: Executive Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)





Exhibit 32.1
Certification of Principal Executive Officer
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 InvenTrust Properties Corp. (the “Company”) for the period ended September 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to such officer’s 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.

Date:
November 12, 2015
/s/ Thomas P. McGuinness
 
 
Name: Thomas P. McGuinness
 
 
Title: Director, President and Chief Executive Officer (Principal Executive Officer)


A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.


The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as a part of the Report or on a separate disclosure document.





Exhibit 32.2
Certification of Principal Financial Officer
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 InvenTrust Properties Corp. (the “Company”) for the period ended September 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to such officer’s 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.

Date:
November 12, 2015
/s/ Jack Potts
 
 
Name: Jack Potts
 
 
Title: Executive Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)


A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.


The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as a part of the Report or on a separate disclosure document.