EXPLANATORY NOTE
This report combines the annual reports on Form 10-K for the year ended December 31, 20192021 of Urban Edge Properties and Urban Edge Properties LP. Unless stated otherwise or the context otherwise requires, references to “UE” and “Urban Edge” mean Urban Edge Properties, a Maryland real estate investment trust (“REIT”), and references to “UELP” and the “Operating Partnership” mean Urban Edge Properties LP, a Delaware limited partnership. References to the “Company,” “we,” “us” and “our” mean collectively UE, UELP and those entities/subsidiaries consolidated by UE.
UELP is the entity through which we conduct substantially all of our business and own, either directly or through subsidiaries, substantially all of our assets. UE is the sole general partner and also a limited partner of UELP. As the sole general partner of UELP, UE has exclusive control of UELP’s day-to-day management.
As of December 31, 2019,2021, UE owned an approximate 95.4%96.2% ownership interest in UELP. The remaining approximate 4.6%3.8% interest is owned by other limited partners. The other limited partners of UELP are members of management, our Board of Trustees and contributors of property interests acquired. Under the limited partnership agreement of UELP, unitholders may present their common units of UELP for redemption at any time (subject to restrictions agreed upon at the time of issuance of the units that may restrict such right for a period of time). Upon presentation of a common unit for redemption, UELP must redeem the unit for cash equal to the then value of a share of UE’s common shares, as defined by the limited partnership agreement. In lieu of cash redemption by UELP, however, UE may elect to acquire any common units so tendered by issuing common shares of UE in exchange for the common units. If UE so elects, its common shares will be exchanged for common units on a one-for-one basis. This one-for-one exchange ratio is subject to specified adjustments to prevent dilution. UE generally expects that it will elect to issue its common shares in connection with each such presentation for redemption rather than having UELP pay cash. With each such exchange or redemption, UE’s percentage ownership in UELP will increase. In addition, whenever UE issues common shares other than to acquire common units of UELP, UE must contribute any net proceeds it receives to UELP and UELP must issue to UE an equivalent number of common units of UELP. This structure is commonly referred to as an umbrella partnership REIT, or UPREIT.
The Company believes that combining the annual reports on Form 10-K of UE and UELP into this single report provides the following benefits:
•enhances investors’ understanding of UE and UELP by enabling investors to view the business as a whole in the same manner as management views and operates the business;
•eliminates duplicative disclosure and provides a more streamlined and readable presentation because a substantial portion of the disclosure applies to both UE and UELP; and
•creates time and cost efficiencies throughout the preparation of one combined report instead of two separate reports.
The Company believes it is important to understand the few differences between UE and UELP in the context of how UE and UELP operate as a consolidated company. The financial results of UELP are consolidated into the financial statements of UE. UE does not have any other significant assets, liabilities or operations, other than its investment in UELP, nor does it have employees of its own. UELP, not UE, generally executes all significant business relationships other than transactions involving the securities of UE. UELP holds substantially all of the assets of UE.UE and retains the ownership interests in the Company's joint ventures. UELP conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for the net proceeds from equity offerings by UE, which are contributed to the capital of UELP in exchange for units of limited partnership in UELP, as applicable, UELP generates all remaining capital required by the Company’s business. These sources may include working capital, net cash provided by operating activities, borrowings under the revolving credit agreement, the issuance of secured and unsecured debt and equity securities and proceeds received from the disposition of certain properties.
Shareholders’ equity, partners’ capital and noncontrolling interests are the main areas of difference between the consolidated financial statements of UE and UELP. The limited partners of UELP are accounted for as partners’ capital in UELP’s financial statements and as noncontrolling interests in UE’s financial statements. The noncontrolling interests in UELP’s financial statements include the interests of unaffiliated partners in consolidated entities. The noncontrolling interests in UE’s financial statements include the same noncontrolling interests at UELP’s level and limited partners of UELP. The differences between shareholders’ equity and partners’ capital result from differences in the equity issued at UE and UELP levels.
To help investors better understand the key differences between UE and UELP, certain information for UE and UELP in this report has been separated, as set forth below: Part II, Item 8. Financial Statements which includes specific disclosures for UE and UELP, and Note 14, Equity and Noncontrolling Interests and Note 16, Earnings Per Share and Unit and Note 17 thereto, Quarterly Financial Data.Unit.
This report also includes separate Part II, Item 9A. Controls and Procedures sections and separate Exhibits 31 and 32 certifications for each of UE and UELP in order to establish that the requisite certifications have been made and that UE and UELP are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 and 18 U.S.C. §1350.
URBAN EDGE PROPERTIES AND URBAN EDGE PROPERTIES LP
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 20192021
TABLE OF CONTENTS
| Business | ||||||||||||||
| Item 1A. | Risk Factors | |||||||||||||
| Item 1B. | Unresolved Staff Comments | |||||||||||||
| Item 2. | Properties | |||||||||||||
| Item 3. | Legal Proceedings | |||||||||||||
| Item 4. | Mine Safety Disclosures | |||||||||||||
| PART II | ||||||||||||||
| Item 5. | Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | |||||||||||||
| Item 6. | ||||||||||||||
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |||||||||||||
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | |||||||||||||
| Item 8. | Financial Statements and Supplementary Data | |||||||||||||
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | |||||||||||||
| Item 9A. | Controls and Procedures | |||||||||||||
| Item 9B. | Other Information | |||||||||||||
| Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | |||||||||||||
| PART III | ||||||||||||||
| Item 10. | Directors, Executive Officers, and Corporate Governance | |||||||||||||
| Item 11. | Executive Compensation | |||||||||||||
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | |||||||||||||
| Item 13. | Certain Relationships and Related Transactions, and Director Independence | |||||||||||||
| Item 14. | Principal Accounting Fees and Services | |||||||||||||
| PART IV | ||||||||||||||
| Item 15. | Exhibits and Financial Statement Schedules | |||||||||||||
| Item 16. | Form 10-K Summary | |||||||||||||
| Signatures | ||||||||||||||
FORWARD-LOOKING STATEMENTS
Certain statements contained herein constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of future performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can identify many of these statements by words such as “approximates,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “would,” “may” or other similar expressions in this Annual Report on Form 10-K. Many of the factors that will determine the outcome of forward-looking statements are beyond our ability to control or predict and include, among others: (i) the economic, political and social impact of, and uncertainty relating to, the COVID-19 pandemic, including its impact on our retail tenants and their ability to make rent and other payments or honor their commitments under existing leases; (ii) the loss or bankruptcy of major tenants; (iii) the ability and willingness of the Company’s tenants to renew their leases with the Company upon expiration, the Company’s ability to re-lease its properties on the same or better terms, or at all, in the event of non-renewal or in the event the Company exercises its right to replace an existing tenant; (iv) the impact of e-commerce on our tenants’ business; (v) macroeconomic conditions, such as a disruption of, or lack of access to the capital markets, as well as potential volatility in the Company’s share price; (vi) the Company’s success in implementing its business strategy and its ability to identify, underwrite, finance, consummate and integrate diversifying acquisitions and investments; (vii) changes in general economic conditions or economic conditions in the markets in which the Company competes, and their effect on the Company’s revenues, earnings and funding sources, and on those of its tenants; (viii) increases in the Company’s borrowing costs as a result of changes in interest rates and other factors, including the discontinuation of USD LIBOR, which is currently anticipated to occur in 2023; (ix) the Company’s ability to pay down, refinance, restructure or extend its indebtedness as it becomes due and potential limitations on the Company’s ability to borrow funds under its existing credit facility as a result of covenants relating to the Company’s financial results; (x) potentially higher costs associated with the Company’s development, redevelopment and anchor repositioning projects, and the Company’s ability to lease the properties at projected rates; (xi) the Company’s liability for environmental matters; (xii) damage to the Company’s properties from catastrophic weather and other natural events, and the physical effects of climate change; (xiii) the Company’s ability and willingness to maintain its qualification as a REIT in light of economic, market, legal, tax and other considerations; (xiv) information technology security breaches; and (xv) the loss of key executives. For further discussion of factors that could materially affect the outcome of our forward-looking statements, see “Risk Factors” in Part I, Item 1A, of this Annual Report on Form 10-K for the year ended December 31, 2021. A reader should also review carefully our audited consolidated financial statements and the notes thereto included in this Report.
We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for any forward-looking statements included in this Annual Report on Form 10-K. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances occurring after the date of this Annual Report on Form 10-K.
PART I - FINANCIAL INFORMATION
ITEM 1.BUSINESS
The Company
Urban Edge Properties (“UE”, “Urban Edge” or the “Company”) (NYSE: UE) is a Maryland REIT that manages, develops, redevelops, and acquires retail real estate, primarily in the Washington, D.C. to Boston corridor with a concentration on the New York metropolitan area. Urban Edge Properties LP (“UELP” or the “Operating Partnership”) is a Delaware limited partnership formed to serve as UE’s majority-owned partnership subsidiary and to own, through affiliates, all of our real estate and other assets. UE and UELP were created in 2014 to own the majority of Vornado Realty Trust’s (“Vornado”) (NYSE: VNO) former shopping center business (the “UE Business”), and separated from Vornado in January 2015. Our portfolio is currently comprised of 7468 shopping centers, fourfive malls and a warehouse parktwo industrial parks totaling approximately 15.217.0 million square feet (sf) with a consolidated occupancy rate of 92.9%88.8%.
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Company Strategies
Our goal is to be a leading owner and operator of retail real estate in major urban markets, with a focus on the context otherwise requires, “we”, “us”Washington, D.C. to Boston corridor. We believe urban markets offer attractive acquisition and “our” referredevelopment opportunities resulting from high population density, strong demand from consumers, above average retailer sales trends, a limited supply of institutional quality assets and a large number of older, undermanaged assets that remain privately owned. We seek to UE after giving effectcreate value through the following primary strategies:
Maximize the value of existing properties through proactive management. We intend to maximize the value of each of our assets through comprehensive, proactive management encompassing: continuous asset evaluation for highest-and-best-use; targeted leasing to desirable tenants; and efficient and cost-conscious day-to-day operations that minimize operating expenses and enhance property quality. Repurposing retail real estate with high-quality retailers, with a focus on grocers, and incorporating other uses including industrial, residential, self-storage, and medical are increasingly important to our business plan. Leasing and asset management add value through:
•Monitoring retailer sales, merchandising, store operations, timeliness of payments, overall financial condition and related factors;
•Being consistently aware of each asset’s competitive position within its trade area and recommending physical improvements or adjusting merchandising if circumstances warrant;
•Continuously canvassing trade areas to identify unique operators that can distinguish a property and enhance its offerings;
•Maintaining regular contact with the brokerage community to stay abreast of new merchants, potential relocations, new supply and overall trade area dynamics;
•Conducting regular portfolio reviews with key merchants;
•Building and nurturing deep relationships with tenant decision-makers;
•Focusing on spaces with below-market leases that might be recaptured;
•Understanding the impact of options, exclusives, co-tenancy and other restrictive lease provisions; and
•Optimizing required capital investment in every transaction.
Develop and redevelop assets to their highest and best use. Our existing portfolio presents considerable opportunity to generate additional income at attractive returns by redeveloping underutilized existing space, developing new space through expanding our properties and developing pad sites, and incorporating non-retail uses such as industrial, multifamily, office, self-storage and other uses. As of December 31, 2021, we have $218.7 million of active redevelopment projects, of which $146.6 million remains to be funded. These projects are expected to generate an approximate 8% unleveraged yield. Active redevelopment projects include $102.2 million of projects related to anchor leases executed during the year. We will continue to explore opportunities throughout our portfolio to achieve similar upgrades in tenancy, to densify sites where feasible and to repurpose certain retail space to non-retail uses.
Invest in target markets. We intend to selectively deploy capital through acquisitions in our target markets that meet our criteria for risk-adjusted returns and enhance the overall quality of our existing portfolio. At the same time, we plan to sell assets that no longer meet our return requirements and strategic objectives. Investment considerations for acquisitions include:
•Competition and Barriers-to-Entry: We seek assets in underserved, high barrier-to-entry markets in densely populated, affluent trade areas. We believe that properties located in such markets present more attractive risk-return profile relative to other markets.
•Geography: We focus primarily on the Washington, D.C. to Boston corridor with a concentration on the New York metropolitan area. We intend to invest in our existing core markets, and, over time, may expand into new markets that have similar characteristics.
•Product: We generally seek large properties that provide scale relative to the transfercompetition and optionality for redevelopment to meet the changing demands of the UE Businesslocal community.
•Tenancy: We consider tenant mix, sales performance and related occupancy cost, lease term, lease provisions, omni-channel capabilities, susceptibility to e-commerce disruption and other factors. Our tenant base comprises a diverse group of merchants, including department stores, supermarkets, discounters, entertainment offerings, health clubs, DIY stores, in-line specialty shops, restaurants and other food and beverage vendors and service providers.
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•Rent: We derive our revenue from Vornado,fixed and variable rents from our tenants. We consider existing rents relative to market rents and target submarkets that have potential for periods priormarket rent growth as evidenced by strong retailer sales performance.
•Access and Visibility: We seek assets with convenient access and good visibility.
•Physical Condition: We consider aesthetics, functionality, building and site conditions and environmental matters in evaluating asset quality.
Maintain capital discipline. We intend to such transfer, referkeep our balance sheet flexible and capable of supporting growth. We expect to generate increasing levels of cash flow from internally generated funds and to have substantial borrowing capacity under our existing revolving credit agreement, general access to equity markets and from potential secured debt financing on our existing assets.
Environmental, Social and Governance (“ESG”) Achievements, Initiatives, and Objectives
We seek to drive financial performance while engaging in environmentally and socially responsible business practices grounded in sound corporate governance. We believe that disclosure around our ESG practices allows our stakeholders to see our company holistically and understand its trajectory beyond fundamentals and financial metrics. In addition to a dedicated team of professionals, we have a robust suite of environmental, social, and governance policies that inform and guide our ESG approach and drive our ESG goals forward. We have aligned our sustainability practices in accordance with the Global Reporting Initiative (“GRI”) standards and commensurate with the Sustainability Accounting Standards Board (“SASB”) and the Task Force on Climate-Related Financial Disclosures (“TCFD”) frameworks. In line with our corporate transparency, we have completed our first Global Real Estate Sustainability Benchmarks (“GRESB”) submission and will continue to benchmark our progress against our peers. We routinely reassess our plans and policies to evaluate compliance with regional and national requirements as well as industry best practices.
From an environmental perspective, we have implemented and plan to continue to implement policies and practices with the goal of supporting the continued reduction of energy (thereby reducing greenhouse gas emissions), water, and waste production across the portfolio. Initiatives we have taken include the installation of energy-efficient roofing, LED lighting retrofits, electric vehicle charging stations and waste recycling and management. Additionally, we are continuing to research solar and alternative energy options to further reduce our consumption and carbon footprint. We are committed to maintaining sustainable operations and believe that our long-term sustainability goals will provide positive financial and environmental outcomes for shareholders, tenants, employees and the communities in which we invest.
We believe that through our business, we are able to provide the communities in which we operate a welcoming and safe environment for our tenants and customers to connect and engage with one another. We consciously choose to add retailers that we believe are needed to neighborhoods lacking vital resources and reposition spaces with uses that appeal to the UE Business while ownedrespective communities where the properties are located. Our community involvement also includes donations to various charitable organizations, hospitals and COVID-19 relief funds as well as food, coat and clothing drives. Many of these organizations and drives directly benefit the people and neighborhoods in which our properties are located.
Our corporate governance standards and policies aim to promote ethical conduct, fair dealing, transparency and accountability. The Company is governed by Vornado.a ten-member board comprised primarily of independent trustees. The Board of Trustees is focused on independence, diversity of thought and experience, and ethical leadership and is critical in the oversight of our risk-management processes. Additionally, we have three board committees made up of the Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee, each of which addresses risks specific to their respective functional responsibilities and works closely with the Board of Trustees. Our Corporate Governance Guidelines are re-evaluated annually, taking into account changing circumstances to ensure that the best interests of the Company and our shareholders are met. We maintain additional policies including our Code of Ethics, Conflict of Interest Policy, and Whistleblower Policy, on which all employees are trained.
Further information on our ESG practices can be found on our website in the Investors section. The information on our website is not incorporated by reference in this Annual Report on Form 10-K.
Human Capital
At December 31, 2021, we had 116 employees. We believe that our people are our most valuable asset. Our future success will depend, in part, on our ability to continue to attract, hire, and retain qualified personnel. Accordingly, we strive to offer competitive salaries and employee benefits to all employees and monitor salaries in our market areas. We provide professional training and development workshops and aim to provide a workplace environment where employees are informed, engaged, feel empowered, and can succeed. As part of our employee development, we have launched an employee-performance tracking
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platform which serves as a year-round benchmark tool and allows employees and managers to take notes, set goals and track progress.
Our employees enjoy subsidized health and wellness benefits, professional training and development workshops, ergonomic office equipment, telecommuting opportunities and policies encouraging work/life balance. We have created an employee wellness program which spans the entire year and focuses on five pillars of health and wellness, both inside and outside of the office. The areas of focus for this program include financial, emotional, physical, social and community wellness. Each month there is a theme with associated activities and employee incentives including the ability to earn additional money for health savings accounts and raffles for prizes.
We understand the importance of work/life balance and allow employees the flexibility to maintain a hybrid in-office and remote working schedule. We provide all employees with the equipment and resources necessary to work and perform their duties in a remote setting. In response to the COVID-19 pandemic, we have implemented enhanced cleaning protocols within our offices and our properties to promote employee health and safety, which include cleaning and disinfecting high-touch surfaces daily, providing hand sanitizer and personal protective equipment such as face masks.
Diversity, equity and inclusion (“DE&I”) are an integral part of our culture. We believe that a diverse workforce and an inclusive culture promotes growth, both personally and professionally, and is an important aspect in our ability to attract and retain talented employees. All employees are required to complete trainings on DE&I which cover a range of topics including best practices and education on unconscious bias. We aim to create an equitable workplace for all and our CEO has signed the CEO Diversity and Inclusion Action Pledge on behalf of our Company, joining thousands of other CEOs and peers across the country to cultivate a trusting environment where our employees feel comfortable and are empowered to have discussions about diversity and inclusion.
Through our Wellness program, health and safety protocols and quarterly town hall meetings with all employees, among other initiatives, we continually strive to provide a workplace environment where employees are informed, engaged, feel empowered and can succeed.
Our headquarters are located at 888 Seventh Avenue, New York, NY 10019.
Significant Tenants
None of our tenants accounted for more than 10% of total revenues in any of the years ended December 31, 2021, 2020 and 2019. The TJX Companies, Inc. is our largest tenant and accounted for approximately $20.6 million, or 4.8%, of our total revenue for the year ended December 31, 2021.
REIT Qualification
The Company elected to be taxed as a REIT under sections 856-860 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with the filing of its 2015 tax return for its tax year ended December 31, 2015. With the exception of the Company’s taxable REIT subsidiary (“TRS”), to the extent the Company meets certain requirements under the Code, the Company will not be taxed on its federal taxable income. If we fail to qualify as a REIT for any taxable year, we will be subject to federal income taxes at regular corporate rates (including any alternative minimum tax, which, for corporations, was repealed under the Tax Cut and Jobs Act (“TCJA”) for tax years beginning after December 31, 2017) and may not be able to qualify as a REIT for the four subsequent taxable years. In addition to its TRS, the Company is subject to certain foreign and state and local income taxes, including a 29% non-resident withholding tax onin particular income taxes arising from its twooperating activities in Puerto Rico, malls, which are included in income tax expense in the consolidated statements of income.
Available Information
Copies of our Annual Reports on Form 10‑K, Quarterly Reports on Form 10‑Q, Current Reports on Form 8‑K, and amendments to those reports, as well as Reports on Forms 3, 4 and 5 regarding officers, trustees or 10% beneficial owners of us, filed or furnished pursuant to Section 13(a), 15(d) or 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available free of charge through our website (www.uedge.com) as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission. Also available on our website are copies of our Audit Committee Charter, Compensation Committee Charter, Corporate Governance and Nominating Committee Charter, Code of Business Conduct and Ethics and Corporate Governance Guidelines. In the event of any changes to these charters or the code or guidelines, changed copies will also be made available on our website. Copies of these documents are also available directly from us free of charge. Our website also includes other financial information, including certain non-GAAP financial measures, none of which is a part of this Annual Report on Form 10-K. Copies of our charters, code, guidelines, and filings under the Exchange Act are also available free of charge from us, upon request.
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ITEM 1A. RISK FACTORS
Risk factors that may materially and adversely affect our business, results of operations and financial condition are summarized below. These risks have been separated into threethe following groups: (1)
•Risks Related to Our Business and OperationsOperations;
•Risks Related to Our Liquidity and Indebtedness;
•Risks Related to Business Continuity;
•Risks Related to Environmental Liability and Regulatory Compliance;
•Risks Related to Our Status as a REIT, (2) Risks Related to Our Common Shares and (3) REIT;
•Risks Related to Our Organization and Structure. Structure; and
•Risks Related to An Investment in Our Common Shares.
The risks and uncertainties described herein may not be the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial, may also adversely affect our business. See “Forward-Looking Statements” contained herein..
RISKS RELATED TO OUR BUSINESS AND OPERATIONS AND TO OUR STATUS AS A REIT
Epidemics, pandemics or other public health crises, including the COVID-19 pandemic, that impact economic and market conditions, particularly retail real estate, eachin the markets where our properties are located, and preventative measures taken to alleviate their impact, may have a material adverse effect on our and our tenants’ businesses, financial condition, results of operations, liquidity, and ability to access capital markets and satisfy debt service obligations.
The ongoing COVID-19 pandemic and restrictions intended to prevent and mitigate its spread have had, and could continue to have, additional adverse effects on our business, including with regards to:
•the ability and willingness of our tenants to renew their leases upon expiration, our ability to re-lease the properties on the same or better terms in the event of nonrenewal or in the event we exercise our right to replace an existing tenant, and obligations we may incur in connection with the replacement of an existing tenant;
•anticipated returns from development and redevelopment projects, some of which could have an adverseexperienced delays due to the COVID-19 pandemic;
•the broader impact of the pandemic and its effect on consumer behavior;
•our ability to pay down, refinance, restructure or extend our indebtedness as it becomes due and potential limitations on our ability to borrow funds under our credit facility as a result of covenants relating to our financial performanceresults; and
•the valuepotential reduction in our operating effectiveness if key personnel become unavailable due to illness or other personal circumstances related to COVID-19.
While the U.S. economy has shown signs of improvement compared to fiscal year 2020 and widespread use of vaccines has alleviated COVID-19 restrictions, the spread of new strains of the COVID-19 virus is likely to pose additional challenges. Accordingly, developments regarding the COVID-19 pandemic preclude prediction as to the ultimate economic, political and social impact, and may continue to present material risks and uncertainties with respect to our properties.and our tenants’ business, financial condition, results of operations, cash flows, liquidity and ability to access the capital markets and satisfy debt service obligations.
E-commerce may have an adverse impact on our tenants and our business.
E-commerce continues to gain popularity and growth in Internet sales is likely to continue in the future. E-commerce could result in a downturn in the business of some of our current tenants and could affect the way other current and future tenants lease space. For example, the migration towards e-commerce has led many omnichannel retailers to prune the number and size
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of their traditional “brick and mortar” locations to increasingly rely on e-commerce and alternative distribution channels. Many tenants also permit merchandise purchased on their websites to be picked up at, or returned to, their physical store locations, which may have the effect of decreasing the reported amount of their in-store sales and the amount of rent we are able to collect from them (particularly with respect to those tenants who pay rent based on a percentage of their in-store sales). We cannot predict with certainty how growth in e-commerce will impact the demand for space at our properties or how much revenue will be generated at traditional store locations in the future. If the shift towards e-commerce causes declines in the “brick and mortar” sales generated by our tenants and/or causes our tenants to reduce the size or number of their retail locations in the future, our cash flow, financial condition and results of operations could be materially and adversely affected.
Retail real estate is a competitive business.
Competition in the retail real estate industry is intense. We compete with a large number of public and private retail real estate companies, including property owners and developers. We compete with these companies to attract customers to our properties, as well as to attract anchor, non-anchor and other tenants. We also compete with these companies for development, redevelopment and acquisition opportunities. Other owners and developers may attempt to take existing tenants from our shopping centers by offering lower rents or other incentives to compel them to relocate. This competition could have a material adverse effect on our ability to lease space and on the amount of rent and expense reimbursements that we receive.
We depend on leasing space to tenants on economically favorable terms and on collecting rent from tenants who ultimately may not be able to pay.
Our financial results depend significantly on leasing space in our properties to tenants on economically favorable terms. A majority of our income depends on the ability of our tenants to pay the full amount of rent and other charges due under their leases on a timely basis. Some of our leases provide for the payment, in addition to base rent, of additional rent above the base amount according to a specified percentage of the gross sales generated by the tenants and generally provide for reimbursement of real estate taxes and expenses of operating the property. Economic and/or competitive conditions may impact the success of our tenants’ retail operations and therefore the amount of rent and expense reimbursements we receive from our tenants. While demand for our retail spaces has been strong, there can be no assurance in our ability to maintain our occupancy levels on favorable terms. Any reduction in our tenants’ abilities to pay base rent, percentage rent or other charges on a timely basis will decrease our income, funds available to pay indebtedness and funds available for distribution to shareholders. If a tenant does not pay its rent, we might not be able to enforce our rights as landlord without delays and might incur substantial legal and other costs. During periods of economic adversity, there may be an increase in the number of tenants that cannot pay their rent and an increase in vacancy rates, which could materially and adversely affect our cash flow, financial condition and results of operations.
We may be unable to renew leases or relet space as leases expire.expire on terms comparable to prior leases or at all.
When our tenants decide not to renew their leases upon their expiration, we may not be able to relet the space.space on terms comparable to prior leases or at all. Spaces that accounted for approximately 8%15.2% of physical occupancy were vacant as of December 31, 2021, excluding leases signed but not commenced. In addition, leases accounting for approximately 28% of our annualized base rent for the fiscal year ended December 31, 2019 were vacant as of December 31, 2019, excluding leases signed but not commenced. In addition, leases accounting for approximately 22% of our annualized base rent for the fiscal year ended December 31, 20192021 are scheduled to expire within the next three years. Even if tenants do renew or we can relet the space, the terms of the renewal or reletting, taking into account among other things, the cost of improvements to the property and leasing commissions, may be less favorable than the terms in the expired leases. In addition, changes in space utilization by our tenants may impact our ability to renew or relet space without the need to incur substantial costs in renovating or redesigning the internal configuration of the relevant property. If we are unable to promptly renew the leases or relet the space at similar rates or if we incur substantial costs in renewing or reletting the space, our cash flow and ability to service debt obligations and pay dividends and other distributions to security holders could be adversely affected.
Bankruptcy or insolvency of tenants may decrease our revenues, net income and available cash.
From time to time, somecertain of our tenants have become insolvent or declared bankruptcy and other tenants may declare bankruptcy or become insolvent in the future. For example, during the year ended December 31, 2018, Toys “R” Us Inc. (“Toys “R” Us”), Sears Holding Corporation (“Sears”), National Stores Inc. (“Fallas”) and National Wholesale Liquidators filed for Chapter 11 bankruptcy protection. See Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources included in Part II, Item 7. in this Annual Report on Form 10-K and the Notes to Consolidated Financial Statements included in Part II, Item 8. in this Annual Report on Form 10-K.
Tenants who file for bankruptcy protection have the legal right to reject any or all of their leases and close related stores. In the event that a tenant with a significant number of leases in our properties files for bankruptcy and rejects its leases, we could experience a significant reduction in our revenues and we may not be able to collect all pre-petition amounts owed by that party, which may adversely affect our cash flow, financial condition and results of operations. The bankruptcy or insolvency of a major tenant at one of our properties could also negatively impact our ability to lease other existing or future vacancies at any such property. In addition, our leases generally do not contain restrictions designed to ensure the ongoing creditworthiness of our tenants. The bankruptcy or insolvency of a major tenant could result in a
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lower level of net income, which may adversely affect our cash flow, financial condition and results of operations and decrease funds available to pay our indebtedness or make distributions to shareholders.
See Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources included in Part I,II, Item 2. “Properties”7 in this Annual Report on Form 10-K and the Notes to Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.
A significant number of our properties are located in the New York metropolitan area and are affected by the economic cycles there.
Because a significant number of our properties are located in the New York metropolitan area, we are particularly susceptible to adverse economic and other developments in that area. Notably, as of December 31, 2019,2021, one of our New York metropolitan area properties, The Outlets at Bergen Town Center, in Paramus, NJ, generated in excess of 10% of our rental revenue.annualized base rent. Collectively, our New York metropolitan area properties in the aggregate generated 75%approximately 74% of our rental revenueannualized base rent as of December 31, 2019.2021. Real estate markets are subject to economic downturns and we cannot predict the economic conditions in the New York metropolitan area in either the short-term or long-term. Poor economic or market conditions in the New York metropolitan area, may adversely affect our cash flow, financial condition and results of operations.
Some of our properties depend on anchor or major tenants and decisions made by these tenants, or adverse developments in the businesses of these tenants, could materially and adversely affect our business, results of operations and financial condition.
Some of our properties have anchor or major tenants that generally occupy larger spaces, sometimes pay a significant portion of a property’s total rent and often contribute to the success of other tenants by drawing customers to a property. If an anchor or major tenant closes, such closure could adversely affect the property even if the tenant continues to pay rent due to the loss of the anchor or major tenant’s drawing power. Additionally, closure of an anchor or major tenant could result in lease terminations by, or reductions in rent from, other tenants if the other tenants’ leases have co-tenancy clauses that permit cancellation or rent reduction if an anchor tenant closes. Retailer consolidation, store rationalization, competition from internet sales and general economic conditions may decrease the number of potential tenants available to fill available anchor tenant spaces. As a result, in the event one or more anchor tenants were to leave one or more of our centers, we cannot be sure that we would be able to lease the vacant space on equivalent terms or at all. In addition, we may not be able to recover costs owed to us by the closed tenant. In certain cases, some anchor and non-anchor tenants may be able to terminate their leases if they do not achieve defined sales levels.
Development and redevelopment activities have inherent risks, which could adversely impact our cash flow, financial condition and results of operations.
We may develop or redevelop properties when we believe that doing so is consistent with our business strategy. As of December 31, 2019,2021, we had 13 properties in our redevelopment project pipeline and nine21 active redevelopment projects. Weprojects in which we have invested a total of approximately $35.7$72.1 million, in our active projects, which are at various stages of completion, and based on our current plans and estimates, we anticipate it will cost an additional $29.9$146.6 million to complete our active projects.complete. We anticipate engaging in additional development and redevelopment activities in the future. In addition to the risks associated with real estate investments in general as described elsewhere, the risks associated with future development and redevelopment activities include:
•expenditure of capital and time on projects that may never be completed;
•failure or inability to obtain financing on favorable terms or at all;
•inability to secure necessary zoning or regulatory approvals;
•higher than estimated construction or operating costs, including labor and material costs;
•inability to complete construction on schedule due to a number of factors, including inclement weather, labor disruptions, construction delays, restrictions caused by the COVID-19 pandemic, delays or failure to receive zoning or other regulatory approvals, acts of terror or other acts of violence, or natural disasters (such as fires, seismic activity or floods);
•significant time lag between commencement and stabilization resulting in delayed returns and greater risks due to fluctuations in the general economy, shifts in demographics and competition;
•decrease in customer traffic during the redevelopment period causing a decrease in tenant sales;
•inability to secure key anchor or other tenants at anticipated pace of lease-up or at all; and
•occupancy and rental rates at a newly completed project that may not meet expectations.
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If any of the above events were to occur, they may hinder our growth and may have an adverse effect on our cash flow, financial condition and results of operations. In addition, new development and significant redevelopment activities, regardless of whether they are ultimately successful, typically require substantial time and attention from management.
We face significant competition for acquisitions of properties, which may reduce the number of acquisition opportunities available to us and increase the costs of these acquisitions.
The current market for acquisitions of properties in our core markets continues to be competitive. This competition may increase the demand for the types of properties in which we typically invest and, therefore, increase the prices paid for such acquisition properties. We also face significant competition for attractive acquisition opportunities from an indeterminate number of investors, including publicly-traded and privately-held REITs, private equity investors and institutional investment funds, some of which have greater financial resources, greater ability to borrow funds and the willingness to accept more risk than we can prudently manage, including risks with respect to the geographic proximity of investments and the payment of higher acquisition prices. This competition will increase if investments in real estate become more attractive relative to other forms of investment. Competition for investments may reduce the number of suitable investment opportunities available to us and may have the effect of increasing prices paid for such acquisition properties and, as a result, adversely affecting our ability to grow through acquisitions.
Our operating results at acquired properties may not meet our financial expectations.
Our ability to complete acquisitions on favorable terms and successfully operate or develop them is subject to the following risks:
•we may incur significant costs and divert management attention in connection with the evaluation and negotiation of potential acquisitions, including ones that are subsequently not completed;
•we may be unable to finance acquisitions on favorable terms and in the time period we desire, or at all;
•we may be unable to quickly and efficiently integrate new acquisitions, particularly the acquisition of portfolios of properties, into our existing operations;
•we may acquire properties that are not initially accretive to our results upon acquisition, and we may not successfully manage and lease those properties to meet our expectations; and
•we may acquire properties subject to liabilities and without any recourse, or with only limited recourse to former owners, with respect to unknown liabilities for clean-up of undisclosed environmental contamination, claims by tenants or other persons to former owners of the properties and claims for indemnification by general partners, trustees, officers and others indemnified by the former owners of the properties.
If we are unable to complete acquisitions on favorable terms, or efficiently integrate such acquisitions, our cash flow, financial condition and results of operations could be adversely affected.
It may be difficult to dispose of real estate quickly, which may limit our flexibility.
Real estate is relatively difficult to dispose of quickly. Consequently, we may have limited ability to promptly change our portfolio in response to changes in economic or other conditions. Moreover, our ability to dispose of, or finance real estate may be materially and adversely affected during periods of uncertainty or unfavorable conditions in the credit markets as we or potential buyers of our real estate may experience difficulty in obtaining financing. To dispose of low basis deferral or tax-protected properties efficiently we from time to time use like-kind exchanges, which are intended to qualify for non-recognition of taxable gain, but can be difficult to consummate and result in the property for which the disposed assets are exchanged inheriting their low tax bases and other tax attributes (including tax protection covenants). These challenges related to dispositions may limit our flexibility.
Many real estate costs are fixed, even if income from our properties decreases.
Our financial results depend primarily on leasing space in our properties to tenants on terms favorable to us. Costs associated with operating real estate, such as real estate taxes, insurance and maintenance costs, generally are not reduced even when a property is not fully occupied, rental rates decrease, or other circumstances cause a reduction in income from the property. As a result, cash flow from operations may be reduced if a tenant does not pay its rent or we are unable to rent our properties on favorable terms.
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A number of properties in our portfolio are subject to ground or building leases; if we are found to be in breach of a ground or building lease or are unable to renew a ground or building lease, we could be materially and adversely affected.
A number of the properties in our portfolio are either completely or partially on land that is owned by third parties and leased to us pursuant to ground or building leases. Accordingly, we only own a long-term leasehold or similar interest in those properties. If we are found to be in breach of a ground or building lease and that breach cannot be cured, we could lose our interest in the improvements and the right to operate the property. In addition, unless we can purchase a fee interest in the underlying land or building or extend the terms of these leases before or at their expiration, as to which no assurance can be given, we will lose our interest in the improvements and the right to operate these properties. However, in certain cases, our ability to exercise such options is subject to the condition that we are not in default under the terms of the ground or building lease at the time that we exercise such options, and we can provide no assurances that we will be able to exercise our options at such time. If we were to lose the right to operate a property due to a breach or non-renewal of the ground or building lease, we would be unable to derive income from such property, which could materially and adversely affect us.
Real estate is carried at cost, net of accumulated depreciation and amortization. Our properties are individually reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the property may not be recoverable. An impairment exists when the carrying amount of an asset exceeds the aggregate projected future cash flows over the anticipated holding period on an undiscounted basis, taking into account the appropriate capitalization rate in determining a future terminal value. An impairment loss is based on the excess of the property’s carrying amount over its estimated fair value. Recording an impairment charge results in an immediate reduction in our income in the period in which the charge is taken, which could materially and adversely affect our results of operations and financial condition.
RISKS RELATED TO OUR LIQUIDITY AND INDEBTEDNESS
Risks related to our outstanding debt.
We have historically used moderate levels of leverage and expect to continue to incur indebtedness to support our activities. As of December 31, 2021, our outstanding indebtedness was $1.7 billion, of which $161.1 million was variable rate indebtedness. If we are unable to obtain debt financing or refinance existing debt upon maturity on terms favorable to us or at all, our financial condition and results of operations would likely be adversely affected.
As of December 31, 2021, approximately 9.5% of our key personnelcurrent outstanding debt bore interest at variable rates which bears interest at a floating rate based on the London Interbank Offered Rate (“LIBOR”), plus an applicable margin. We are exposed to risks related to a potential rising interest rate environment for our current or any future variable interest rate debt. Interest expense on our variable rate debt at December 31, 2021 would increase by approximately $1.6 million annually for every 100-basis-point increase in interest rates. While we may enter into interest rate hedging transactions with counterparties, there can be no guarantee that the future financial condition of these counterparties will enable them to fulfill their obligations under such agreements.
In 2017, U.K. regulators announced that they intend to stop compelling banks to submit rates for the calculation of LIBOR after 2021. As a result, U.S. regulators identified the Secured Overnight Financing Rate (“SOFR”) as their preferred alternative to USD LIBOR in derivatives and other financial contracts. Additionally, while U.S. official guidance states that there should be no new LIBOR trading after December 31, 2021, USD LIBOR will continue to be published until June 2023 and we are not currently able to predict when LIBOR will cease to be available in the United States. When LIBOR is discontinued, the interest rates of our LIBOR-indexed debt following such event will be based on either alternate base rates, such as SOFR, or agreed upon replacement rates. While such an event would not affect our ability to borrow or maintain already outstanding borrowings, it could result in higher interest rates.
If the cost or amount of our debt increases or we cannot refinance our debt in sufficient amounts or on acceptable terms, we are at risk of default on our obligations, which could have a material adverse effect on our company, including our ability to make distributions to our shareholders.
Covenants in our existing financing agreements may restrict our operating, financing, redevelopment, development, acquisition and other activities.
The mortgages on our properties contain customary covenants such as those that limit our ability, without the prior consent of the lender, to further mortgage the applicable property or to reduce insurance coverage. Our existing revolving credit facility contains, and any debt that we may obtain in the future may contain, customary restrictions, requirements and other limitations on our ability to incur indebtedness, including covenants (i) that limit our ability to incur debt based upon (1) our ratio of total debt to total assets, (2) our ratio of secured debt to total assets, (3) our ratio of earnings before interest, tax, depreciation and
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amortization (EBITDA) to interest expense and (4) our ratio of EBITDA to fixed charges, and (ii) that require us to maintain a certain level of unencumbered assets to unsecured debt. Our ability to borrow is subject to compliance with these and other covenants. Failure to comply with our covenants could cause a default under the applicable debt instrument and we may then be required to repay such debt with capital from other sources or to give possession of a secured property to the lender. Under those circumstances, other sources of capital may not be available to us or may be available only on unattractive terms.
Defaults on secured indebtedness may result in foreclosure.
In the event that we default on mortgages in the future, either as a result of ceasing to make debt service payments or failing to meet applicable covenants, the lenders may accelerate the related debt obligations and foreclose and/or take control of the properties that secure their loans. As of December 31, 2021, we had $1.7 billion of secured debt outstanding and 33 of our properties were encumbered by secured debt. As of December 31, 2021, we were in compliance with all debt covenants. Further, for tax purposes, the foreclosure of a mortgage may result in the recognition of taxable income related to the extinguished debt without us having received any accompanying cash proceeds. As a result, since we are structured as a REIT, we may be required to identify and utilize sources for distributions to our shareholders related to such taxable income in order to avoid incurring corporate tax or to meet the REIT distribution requirements imposed by the Code.
We may not be able to obtain capital to make investments.
We depend primarily on external financing to fund the growth of our business because one of the requirements of the Code for a REIT is that it distributes at least 90% of its taxable income, excluding net capital gains, to its shareholders. There is a separate requirement to distribute net capital gains or pay a corporate level tax in lieu thereof. Our access to debt or equity financing depends on the willingness of third parties to lend to or to make equity investments and on conditions in the capital markets generally. There can be no assurance that new financing or other capital will be available or available on acceptable terms. The failure to obtain financing or other capital could materially and adversely affect the value of our business, results of operations and financial condition. For information about our available sources of funds, see Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources included in Part II, Item 7. in this Annual Report on Form 10-K and the Notes to Consolidated Financial Statements included in Part II, Item 8. in this Annual Report on Form 10-K.
RISKS RELATED TO BUSINESS CONTINUITY
Risks related to our malls in Puerto Rico.
Our two malls in Puerto Rico make up approximately 8% of our net operating income for the year ended December 31, 2021. Puerto Rico faces significant fiscal and economic challenges, including those resulting from natural disasters such as hurricanes and earthquakes, the COVID-19 pandemic, and its government filing for bankruptcy protection in 2017. These factors have led to an ongoing emigration trend of Puerto Rico residents to the United States and elsewhere. The combination of these circumstances could result in less disposable income for the purchase of goods sold in our malls and the inability of merchants to pay rent and other charges. Any of these events could negatively impact our ability to lease space on terms and conditions we seek and could have a material adverse effect on our business and results of operations. As of December 31, 2021, we have individual, non-recourse mortgages on each of our Puerto Rico properties.
Natural disasters could have a concentrated impact on us.
We own properties near the Atlantic Coast and in Puerto Rico which are dependentsubject to natural disasters such as hurricanes, floods and storm surges. We also have four properties in California that could be impacted by earthquakes. As a result, we could become subject to business interruption, significant losses and repair costs, such as those we experienced from Hurricane Maria, which damaged and caused the temporary closure of our two properties in Puerto Rico. We maintain comprehensive, all-risk property and rental value insurance coverage on our key executive personnel. Although we believe qualified replacementsproperties, however losses resulting from a natural disaster may be subject to a deductible or not fully covered and such losses could adversely affect our cash flow, financial condition and results of operations.
Some of our potential losses may not be covered by insurance.
We maintain numerous insurance policies including for general liability, property, pollution, acts of terrorism, trustees’ and officers’, cyber security, workers’ compensation and automobile-related liabilities. However, all such policies are subject to the terms, conditions, exclusions, deductibles and sub-limits, among other limiting factors.For example, our terrorism insurance policy excludes coverage for nuclear, biological, chemical or radiological terrorism events as defined by the Terrorism Risk Insurance Program Reauthorization Act.
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Certain of the insurance premiums are charged directly to each of the properties but not all of the cost of such premiums are recovered. We are responsible for deductibles, losses in excess of insurance coverage, and the portion of premiums not reimbursable by tenants at our properties, which could be found for these key executivesmaterial.
We continue to monitor the state of the insurance market and the scope and costs of available coverage. We cannot anticipate what coverage will be available on commercially reasonable terms in the future and expect premiums across most coverage lines to increase in light of recent events. The incurrence of uninsured losses, costs or uncovered premiums could materially and adversely affect our business, results of operations and financial condition. See Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources included in Part II, Item 7. in this Annual Report on Form 10-K and the Notes to Consolidated Financial Statements included in Part II, Item 8. in this Annual Report on Form 10-K.
Terrorist acts and shooting incidents could harm the demand for, and the value of, our properties.
Over the past several years, a number of highly publicized terrorist acts and shootings have occurred at domestic and international retail properties. In the event concerns regarding safety were to alter shopping habits or deter customers from visiting shopping centers, our tenants would be adversely affected as would the general demand for retail space. Additionally, if such incidents were to continue, insurance for such acts may become limited or subject to substantial cost increases. Such an incident at one of our properties, particularly one in which we generate a departure, the losssignificant amount of one or more of their services, market knowledge and business relationships,revenue, could materially and adversely affect our business, results of operations and financial condition.
Our business and operations would suffer in the event of system failures.
Despite system redundancy, the implementation of security measures and the existence of a disaster recovery plan for our information technology (“IT”) infrastructure, our systems are vulnerable to damages from any number of sources, including computer viruses, unauthorized access, energy blackouts, natural disasters, terrorism, war and telecommunication failures. We have placed reliance on third party managed services to perform a number of IT-related functions. We implemented a new information technology platform in August 2017, including a new enterprise resources planning (“ERP”) system. Wefunctions and we may experience system difficulties related to our new platform and integrating the services provided by third parties. If we experience a system failure or accident that causes interruptions in our operations, we could experience material and adverse disruptions to our business. We may also incur additional costs to remedy damages caused by such disruptions.
We face risks associated with security and cyber security breaches.
We face risks associated with security breaches, whether through cyber attacks or cyber intrusions over the internet, malware, computer viruses, attachments to emails, persons inside our organization or persons with access to systems, and other significant disruptions of our IT networks and related systems. Similarly, vendors from whom we receive outsourced IT-related services, including third-party platforms, face the same risks, which could in turn affect us. Our internal and outsourced IT networks and related systems are essential to the operation of our business and our ability to perform day to day operations. Although (i) we make efforts to maintain the security and integrity of our IT networks and related systems and ensure that our vendors do and (ii) we have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected. Accordingly, we or our vendors may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is impossible for us to entirely mitigate this risk.
A breach or significant and extended disruption in the functioning of our systems, including our primary website, may damage our reputation and cause us to lose customers, tenants and revenues, generate third-party claims, result in the unintended and/or unauthorized public disclosure or the misappropriation of proprietary, personal identifying and confidential information, and require us to incur significant expenses to address and remediate or otherwise resolve these kinds of issues, and we may not be able to recover these expenses in whole or in any part from our service providers, responsible parties, or insurance carriers which could have a material adverse effect on our business and operations.
RISKS RELATED TO ENVIRONMENTAL LIABILITY AND REGULATORY COMPLIANCE
We may be adversely affected by laws, regulations or other issues related to climate change.
We may become subject to laws or regulations related to climate change, which could cause our business, results of operations and financial condition to be impacted adversely. The federal government has enacted, and some of the states and localities in which we operate may enact, certain climate change laws and regulations or have begun regulating carbon footprints and greenhouse gas emissions. Although these laws and regulations have not had any known material adverse effects on our business to date, they could result in substantial costs, including compliance costs, increased energy costs, retrofit costs and construction costs, including monitoring and reporting costs, and capital expenditures for environmental control facilities and other new equipment. We have implemented strategies to support our continued effort to reduce energy and water consumption, greenhouse gas emissions, and waste production across our portfolio. We cannot predict how future laws and regulations, or future interpretations of current laws and regulations, related to climate change will affect our business, results of operations and financial condition. Additionally, the potential physical impacts of climate change on our operations are highly uncertain,
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and would be particular to the geographic circumstances in areas in which we operate. These may include changes to global weather patterns, which could include local changes in rainfall and storm patterns and intensities, water shortages, changing sea levels and changing temperature averages or extremes. These impacts may adversely affect our properties, our business, financial condition and results of operations.
We may incur significant costs to comply with environmental laws and environmental contamination may impair our ability to lease and/or sell real estate.
Our operations and properties are subject to various federal, state and local laws and regulations concerning the protection of the environment including air and water quality, hazardous or toxic substances and health and safety. These laws often impose liability without regard to whether the owner knew of, or was responsible for, the presence of hazardous or toxic substances. The cost of any required remediation may exceed the value of the property and/or the aggregate assets of the owner or the responsible party. The presence of, or the failure to properly remediate, hazardous or toxic substances may adversely affect our ability to sell or lease a contaminated property or to use the property as collateral for a loan. We can provide no assurance that we are aware of all potential environmental liabilities; that any previous owner, occupant or tenant did not create any material environmental condition not known to us; that our properties will not be affected by tenants or nearby properties or other unrelated third parties; and that future uses or conditions, or changes in environmental laws and regulations will not result in additional material environmental liabilities to us. For example, during the years ended December 31, 2019 and December 31, 2018, the Company recognized $1.4 million and $0.6 million, respectively, of environmental remediation costs at certain properties based on third-party estimates of the potential costs of remediation at these properties.
Generally, our tenants must comply with environmental laws and meet remediation requirements. Our leases typically impose obligations on our tenants to indemnify us from any compliance costs we may incur as a result of the environmental conditions on the property caused by the tenant. If a lease does not require compliance or if a tenant fails to or cannot comply, we could be forced to pay these costs.
If not addressed, environmental conditions could impair our ability to sell or re-lease the affected properties in the future or result in lower sales prices or rent payments, which could adversely impact our cash flow, financial condition and results of operations.
Companies across all industries are facing increasing scrutiny related to their ESG practices and reporting. Investors, customers, employees, and other stakeholders have begun to focus increasingly on ESG practices and to place increasing importance on the implications and social cost of their investments, purchases, and other interactions with companies. With this increased focus and demand, public reporting regarding ESG practices is becoming more broadly expected. If our potential lossesESG practices and reporting do not meet investor, customer, or employee expectations, which continue to evolve, our reputation and tenant retention may be negatively impacted. Any disclosure we make may include our policies and practices on a variety of ESG matters, including corporate governance, environmental compliance, employee health and safety practices, human capital management, and workforce inclusion and diversity. It is possible that stakeholders may not be covered by insurance.
Compliance or failure to comply with the Americans with Disabilities Act, safety regulations or other requirements could result in substantial costs.
The ADA generally requires that public buildings including our properties meet certain federal requirements related to access and use by disabled persons. Noncompliance could result in the imposition of fines by the federal government or the award of damages to private litigants and/or legal fees to their counsel. We could be required under the ADA to make substantial alterations to, and capital expenditures at, one or more of our properties, including the removal of access barriers, which could materially and adversely affect our business, results of operations and financial condition.
Our properties are subject to various federal, state and local regulatory requirements such as state and local fire and life safety regulations. If we fail to comply with these requirements, we could incur fines or private damage awards. We do not know whether existing requirements will change or whether compliance with future requirements will require significant unanticipated expenditures. If we incur substantial costs to comply with the ADA and any other legislation, our cash flow, financial condition and results of operations could be adversely affected.
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We may fail to qualify or remain qualified as a REIT and may be required to pay income taxes at corporate rates.
Although we believe that we will remain organized and will continue to operate so as to qualify as a REIT for federal income tax purposes, we may fail to remain so qualified. Qualifications are governed by highly technical and complex provisions of the Code for which there are only limited judicial or administrative interpretations and that depend on various facts and circumstances that are not entirely within our control. In addition, legislation, new regulations, administrative interpretations or court decisions may significantly change the relevant tax laws and/or the federal income tax consequences of qualifying as a REIT. If, with respect to any taxable year, we fail to maintain our qualification as a REIT and do not qualify under statutory relief provisions, we could not deduct distributions to shareholders in computing our taxable income and would have to pay federal income tax on our taxable income at regular corporate rates. The federal income tax payable would include any applicable alternative minimum tax (which, for corporations, was repealed for tax years beginning after December 31, 2017 under the TCJA). If we had to pay federal income tax, the amount of money available to distribute to shareholders and pay our indebtedness would be reduced for the year or years involved, and we would no longer be required to make distributions to shareholders. In addition, we would also be disqualified as a REIT for the four taxable years following the year during which qualification was lost unless we were entitled to relief under the relevant statutory provisions.
We are also required to pay certain corporate-level taxes on our assets located in Puerto Rico and such taxes may increase if recently proposed taxes are implemented.
REIT distribution requirements could adversely affect our liquidity and our ability to execute our business plan.
To qualify to be taxed as a REIT, and assuming that certain other requirements are also satisfied, we generally must distribute at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains, to our shareholders each year so that U.S. federal corporate income tax does not apply to earnings that we distribute. To the extent that we satisfy this distribution requirement and qualify for taxation as a REIT, but distribute less than 100% of our REIT taxable income, determined without regard to the dividends paid deduction and including any net capital gains, we will be subject to U.S. federal corporate income tax on our undistributed net taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we distribute to our shareholders in a calendar year is less than a minimum amount specified under U.S. federal income tax laws. We intend to distribute 100% of our REIT taxable income to our shareholders.
From time to time, we may generate taxable income greater than our cash flow as a result of differences in timing between the recognition of taxable income and the actual receipt of cash or the effect of nondeductible capital expenditures, the effect of limitations on interest and net operating loss deductibility under the TCJA, the creation of reserves, or required debt or amortization payments. If we do not have other funds available in these situations, we could be required to borrow funds on unfavorable terms, sell assets at disadvantageous prices, distribute amounts that would otherwise be invested in future acquisitions, capital expenditures or repayment of debt, or make taxable distributions of our shares or debt securities to make distributions sufficient to enable us to pay out enough of our taxable income to satisfy the REIT distribution requirement and avoid corporate income tax and the 4% excise tax in a particular year. These alternatives could increase our costs or reduce our equity. Further, amounts distributed will not be available to fund investment activities. Thus, compliance with the REIT requirements may hinder our ability to grow, which could adversely affect the value of our shares. Any restrictions on our ability to incur additional indebtedness or make certain distributions could preclude us from meeting the 90% distribution requirement. Decreases in funds from operations due to unfinanced expenditures for acquisitions of properties or increases in the number of shares outstanding without commensurate increases in funds from operations would adversely affect our ability to maintain distributions to our shareholders. Consequently, there can be no assurance that we will be able to make distributions at the anticipated distribution rate or any other rate.
Risks related to Section 1031 Exchanges.
From time to time we may dispose of properties in transactions that are intended to qualify as “like kind exchanges” under Section 1031 of the Code (“Section 1031 Exchanges”). It is possible that the qualification of a transaction as a Section 1031 Exchange could be successfully challenged and determined to be currently taxable. In such case, our taxable income and earnings and profits would increase. In some circumstances, we may be required to pay additional dividends or, in lieu of that, corporate income tax, possibly including interest and penalties. As a result, we may be required to borrow funds in order to pay additional dividends or taxes, and the payment of such taxes could cause us to have less cash available to distribute to our shareholders. In addition, if a Section 1031 Exchange were later to be determined to be taxable, we may be required to amend our tax returns for the applicable year in question, including any information reports we sent our shareholders. Moreover, it is possible that legislation could be enacted that could modify or repeal the laws with respect to Section 1031 Exchanges, which could make it more difficult or not possible for us to dispose of properties on a tax deferred basis.
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In 2019, the IRS issued proposed Treasury regulations related to Section 162(m) of the termsCode that extend the $1 million deduction limit that publicly traded corporations may take for compensation paid to “covered employees” to a REIT’s distributive share of any compensation paid by the REIT’s operating partnership to certain current and former executive officers of the REIT. This change may limit our agreements relatedability to our separation from Vornado.
RISKS RELATED TO OUR ORGANIZATION AND STRUCTURE
Our Declaration of Trust sets limits on the ownership of our shares.
Generally, for us to maintain a qualification as a REIT under the Code, not more than fifty percent (50%) in value of our outstanding shares of beneficial interest may be owned, directly or indirectly, by five or fewer individuals at any time during the last half of our taxable year. The Code defines “individuals” for purposes of the requirement described in the preceding sentence to include some types of entities. Under our Declaration of Trust, no person or entity (or group thereof) may own more than 9.8% (in value or number of shares, whichever is more restrictive) of our outstanding shares of any class or series, with some exceptions for persons or entities approved by the Board of Trustees. A transfer of our shares of beneficial interest to a person who, as a result of the transfer, violates the ownership limit will be void under certain circumstances, and, in any event, would deny that person any of the economic benefits of owning shares in excess of the ownership limit. These restrictions on transferability and ownership may delay, deter or prevent a change in control of us or other transaction that might involve a premium price or otherwise be in the best interest of the shareholders.
Our Declaration of Trust limits the removal of members of the Board of Trustees.
Our Declaration of Trust provides that, subject to the rights of holders of one or more classes or series of preferred shares to elect or remove one or more trustees, a trustee may be removed only for cause and only by the affirmative vote of two-thirds of the votes entitled to be cast in the election of trustees. This provision, when coupled with the exclusive power of the Board of Trustees to fill vacancies on the Board of Trustees, precludes shareholders from removing incumbent trustees except for cause and upon a substantial affirmative vote and filling the vacancies created by the removal with their own nominees. These limitations may delay, deter or prevent a change in control of us or other transactions that might involve a premium price or otherwise be in the best interest of our shareholders.
Maryland law contains provisions that may reduce the likelihood of certain takeover transactions.
Certain provisions of Maryland law, may have the effect of inhibiting a third-party from making a proposal to acquire us or of impeding a change in control under circumstances that otherwise could provide the holders of our shares, including:
•“Business combination” provisions that, subject to certain exceptions, prohibit certain business combinations between us and an “interested shareholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our shares or an affiliate thereof or an affiliate or associate of ours who was the beneficial owner, directly or indirectly, of 10% or more of the voting power of our then outstanding voting shares at any time within the two-year period immediately prior to the date in question) for five years after the most recent date on which the shareholder becomes an interested shareholder, and thereafter impose fair price or super majority shareholder voting requirements on these combinations; and
•“Control share” provisions that provide the holders of “control shares” of a company (defined as shares that, when aggregated with other shares controlled by the shareholder, entitle the shareholder to exercise voting power in the election of trustees within one of three increasing ranges) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of the voting power of issued and outstanding “control shares,” subject to certain exceptions) have no voting rights with respect to their control shares, except to the extent approved by our shareholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.
As permitted by Maryland law, our Bylaws provide that we will not be subject to the control share provisions of Maryland law. However, we cannot assure you that the Board of Trustees will not revise our Bylaws in order to be subject to such control share provisions in the future.
14
Certain provisions of Maryland law permit the board of trustees of a Maryland real estate investment trust with at least three independent trustees and a class of shares registered under the Exchange Act, without shareholder approval and regardless of what is currently provided in its declaration of trust or bylaws, to implement certain corporate governance provisions, some of which (for example, implementing a classified board) are not currently applicable to us. These provisions may have the effect of limiting or precluding a third party from making an unsolicited acquisition proposal for us or of delaying, deferring or preventing a change in control under circumstances that otherwise could provide the holders of shares of our shares with the opportunity to realize a premium over the then current market price.
We may issue additional shares in a manner that could adversely affect the likelihood of certain takeover transactions.
Our Declaration of Trust and Bylaws authorize the Board of Trustees in its sole discretion and without shareholder approval, to:
•cause us to issue additional authorized, but unissued, common or preferred shares;
•classify or reclassify, in one or more classes or series, any unissued common or preferred shares;
•set the preferences, rights and other terms of any classified or reclassified shares that we issue; and
•increase the number of shares of beneficial interest that we may issue.
The Board of Trustees can establish a class or series of common or preferred shares whose terms could delay, deter or prevent a change in control of us or other transaction that might involve a premium price or otherwise be in the best interest of our shareholders. Our Declaration of Trust and Bylaws contain other provisions that may delay, deter or prevent a change in control of us or other transaction that might involve a premium price or otherwise be in our best interest or the best interest of our shareholders.
RISKS RELATED TO AN INVESTMENT IN OUR COMMON SHARES
The market prices and trading volume of our equity securities may be volatile.
The market prices of our equity securities depend on various factors which may be unrelated to our operating performance or prospects. We cannot assure you that the market prices of our equity securities, including our common shares, will not fluctuate or decline significantly in the future.
A number of factors could negatively affect, or result in fluctuations in, the prices or trading volume of equity securities, including:
•actual or anticipated changes in our operating results and changes in expectations of future financial performance;
•our operating performance and the performance of other similar companies;
•changes in the real estate industry, and in the retail industry, including growth in e-commerce, catalog companies and direct consumer sales;
•our strategic decisions, such as acquisitions, dispositions, spin-offs, joint ventures, strategic investments or changes in business strategy;
•equity issuances or buybacks by us or the perception that such issuances or buybacks may occur or adverse reaction market reaction to any indebtedness we incur;
•increases in market interest rates;
•decreases in our distributions to shareholders;
•changes in real estate valuations or market valuations of similar companies;
•additions or departures of key management personnel;
•publication of research reports about us or our industry by securities analysts, or negative speculation in the press or investment community;
•the passage of legislation or other regulatory developments that adversely affect us, our tax status, or our industry;
•changes in accounting principles;
•our failure to satisfy the listing requirements of the NYSE;
•our failure to comply with the requirements of the Sarbanes‑Oxley Act;
•our failure to qualify as a REIT; and
15
•general market conditions, including factors unrelated to our performance.
In the past, securities class action litigation has often been instituted against companies following periods of volatility in the price of their common stock. This type of litigation could result in substantial costs and divert our management’s attention and resources, which could have a material adverse effect on our cash flow, financial condition and results of operations.
We cannot guarantee the timing, amount, or payment of dividends on our common shares.
Although we expect to pay regular cash dividends, the timing, declaration, amount and payment of dividends to shareholders falls within the discretion of the Board of Trustees. The Board of Trustees’ decisions regarding the payment of dividends dependsdepend on factors such as our financial condition, earnings, capital requirements, debt service obligations, limitations under our financing arrangements, industry practice, legal requirements, regulatory constraints, and other considerations that it deems relevant. Our ability to pay dividends depends on our ongoing ability to generate cash from operations and access to the capital markets. Wemarkets, and therefore, we cannot guarantee that we will pay dividends in the future.
Your percentage of ownership in theour Company may be diluted in the future.
In the future, your ownership in us may be diluted because of equity issuances for acquisitions, capital market transactions or compensatory equity awards to our trustees, officers or employees, or otherwise. The issuance of additional common shares would dilute the interests of our current shareholders, and could depress the market price of our common shares, impair our ability to raise capital through the sale of additional equity securities, or impact our ability to pay dividends. We cannot predict the effect that future sales of our common shares or other equity-related securities including the issuance of Operating Partnership units would have on the market price of our common shares.
In addition, the Company’sour Declaration of Trust authorizes us to issue, without the approval of our shareholders, one or more classes or series of preferred shares having such designation, voting powers, preferences, rights and other terms, including preferences over our common shares respecting dividends and other distributions, as the Board of Trustees generally may determine. The terms of one or more classes or series of preferred shares could dilute the voting power or reduce the value of our common shares. For example, we could grant the holders of preferred shares the right to elect some number of our trustees in all events or on the occurrence of specified events, or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we could assign to holders of preferred shares could affect the residual value of the common shares.
Increases in market interest rates may result in a decrease in the value of our publicly-traded equity securities.
One of the factors that may influence the prices of our publicly-traded equity securities is the interest rate on our debt and the dividend yield on our common shares relative to market interest rates. If market interest rates, which are currently at low levels relative to historical rates, rise, our borrowing costs could rise and result in less funds being available for distribution. Therefore, we may not be able to, or we may choose not to, provide a higher distribution rate on our common stock. In addition, fluctuations in interest rates could adversely affect the market value of our properties. These factors could result in a decline in the market prices of our publicly-traded equity securities.
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ITEM 1B. UNRESOLVED STAFF COMMENTS
There are no unresolved comments from the staff of the Securities and Exchange Commission as of the date of this Annual Report on Form 10-K.
ITEM 2. PROPERTIES
As of December 31, 2019,2021, our portfolio is comprised of 7468 shopping centers, fourfive malls and a warehouse parktwo industrial parks totaling approximately 15.217.0 million square feet.sf. We own our four malls, warehouse parktwo industrial parks and 5753 shopping centers 100% in fee simple. We own a 95% interest in Walnut Creek (Mt. Diablo), an 82.5% interest in Sunrise Mall in Massapequa, NY and lease 1614 of our shopping center properties under ground and/or building leases. As of December 31, 2019,2021, we had $1.6$1.7 billion of outstanding mortgage indebtedness which is secured by our properties. The following pages provide details of our properties as of December 31, 2019.2021.
| Property | Total Square Feet (1) | Percent Leased(1) | Weighted Average Annual Rent per sq ft (2) | Major Tenants | |||||||||||||||||||
| SHOPPING CENTERS AND MALLS: | |||||||||||||||||||||||
| California: | |||||||||||||||||||||||
| Walnut Creek (Olympic) | 31,000 | 100.0% | 80.50 | Anthropologie | |||||||||||||||||||
Walnut Creek (Mt. Diablo)(4) | 7,000 | 43.8% | 72.00 | Sweetgreen (lease not commenced) | |||||||||||||||||||
| Connecticut: | |||||||||||||||||||||||
| Newington | 189,000 | 90.0% | 9.75 | Walmart, Staples | |||||||||||||||||||
| Maryland: | |||||||||||||||||||||||
| Towson (Goucher Commons) | 155,000 | 92.5% | 24.25 | Staples, HomeGoods, Five Below, Ulta, Kirkland's, Sprouts, DSW | |||||||||||||||||||
| Rockville | 94,000 | 98.0% | 25.01 | Regal Entertainment Group | |||||||||||||||||||
Wheaton (leased through 2060)(3) | 66,000 | 100.0% | 18.27 | Best Buy | |||||||||||||||||||
Woodmore Towne Centre(6) | 712,000 | 96.7% | 17.43 | Costco, Wegmans, At Home, Best Buy, LA Fitness, Nordstrom Rack | |||||||||||||||||||
| Massachusetts: | |||||||||||||||||||||||
Cambridge (leased through 2033)(3) | 48,000 | 62.1% | 31.46 | PetSmart | |||||||||||||||||||
| Revere (Wonderland Marketplace) | 140,000 | 100.0% | 13.33 | Big Lots, Planet Fitness, Marshalls, Get Air | |||||||||||||||||||
| Missouri: | |||||||||||||||||||||||
| Manchester | 131,000 | 100.0% | 11.55 | Academy Sports, Bob's Discount Furniture, Pan-Asia Market | |||||||||||||||||||
| New Hampshire: | |||||||||||||||||||||||
Salem (leased through 2102)(3) | 39,000 | 100.0% | 10.00 | Fun City | |||||||||||||||||||
| New Jersey: | |||||||||||||||||||||||
| Bergen Town Center - East, Paramus | 253,000 | 93.8% | 22.39 | Lowe's, REI, Best Buy | |||||||||||||||||||
| Bergen Town Center - West, Paramus | 1,058,000 | 90.6% | 30.82 | Target, Whole Foods Market, Burlington, Marshalls, Nordstrom Rack, Saks Off 5th, HomeGoods, H&M, Bloomingdale's Outlet, Nike Factory Store, Old Navy, Kohl's (lease not commenced) | |||||||||||||||||||
| Brick | 278,000 | 97.0% | 19.95 | Kohl's, ShopRite, Marshalls, Old Navy | |||||||||||||||||||
Carlstadt (leased through 2050)(3) | 78,000 | 98.5% | 24.22 | Stop & Shop | |||||||||||||||||||
| Cherry Hill (Plaza at Cherry Hill) | 422,000 | 73.0% | 14.40 | LA Fitness, Aldi, Raymour & Flanigan, Restoration Hardware, Total Wine, Guitar Center, Sam Ash Music | |||||||||||||||||||
| East Brunswick | 427,000 | 100.0% | 14.76 | Lowe's, Kohl's, Dick's Sporting Goods, P.C. Richard & Son, T.J. Maxx, LA Fitness | |||||||||||||||||||
| East Hanover (200 - 240 Route 10 West) | 343,000 | 99.2% | 21.73 | The Home Depot, Dick's Sporting Goods, Saks Off Fifth, Marshalls, Paper Store | |||||||||||||||||||
| East Rutherford | 197,000 | 100.0% | 12.85 | Lowe's | |||||||||||||||||||
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| Property | Total Square Feet (1) | Percent Leased(1) | Weighted Average Annual Rent per sq ft (2) | Major Tenants | ||||
| SHOPPING CENTERS AND MALLS: | ||||||||
| California: | ||||||||
| Signal Hill | 45,000 | 100.0% | $26.49 | Best Buy | ||||
Vallejo (leased through 2043)(3) | 45,000 | 100.0% | 12.00 | Best Buy | ||||
| Walnut Creek (Olympic) | 31,000 | 100.0% | 70.00 | Anthropologie | ||||
Walnut Creek (Mt. Diablo)(4) | 7,000 | —% | — | |||||
| Connecticut: | ||||||||
| Newington | 189,000 | 100.0% | 9.97 | Walmart, Staples | ||||
| Maryland: | ||||||||
| Baltimore (Towson) | 155,000 | 98.6% | 24.47 | Staples, HomeGoods, Tuesday Morning, Five Below, Ulta, Kirkland's, Sprouts, DSW (lease not commenced) | ||||
| Rockville | 94,000 | 98.0% | 27.17 | Regal Entertainment Group | ||||
Wheaton (leased through 2060)(3) | 66,000 | 100.0% | 16.70 | Best Buy | ||||
| Massachusetts: | ||||||||
Cambridge (leased through 2033)(3) | 48,000 | 100.0% | 24.57 | PetSmart, A.C. Moore | ||||
| Revere (Wonderland Marketplace) | 140,000 | 100.0% | 13.16 | Big Lots, Planet Fitness, Marshalls, Get Air | ||||
| Missouri: | ||||||||
| Manchester | 131,000 | 100.0% | 11.22 | Academy Sports, Bob's Discount Furniture, Pan-Asia Market | ||||
| New Hampshire: | ||||||||
Salem (leased through 2102)(3) | 39,000 | 100.0% | 10.51 | Fun City (lease not commenced) | ||||
| New Jersey: | ||||||||
| Bergen Town Center - East, Paramus | 253,000 | 97.5% | 21.78 | Lowe's, REI, Kirkland's, Best Buy | ||||
| Bergen Town Center - West, Paramus | 1,059,000 | 97.8% | 32.83 | Target, Century 21, Whole Foods Market, Burlington, Marshalls, Nordstrom Rack, Saks Off 5th, HomeGoods, H&M, Bloomingdale's Outlet, Nike Factory Store, Old Navy, Nieman Marcus Last Call Studio | ||||
| Brick | 278,000 | 94.7% | 19.32 | Kohl's, ShopRite, Marshalls, Kirkland's | ||||
Carlstadt (leased through 2050)(3) | 78,000 | 100.0% | 23.79 | Stop & Shop | ||||
| Cherry Hill (Plaza at Cherry Hill) | 422,000 | 73.0% | 14.43 | LA Fitness, Aldi, Raymour & Flanigan, Restoration Hardware, Total Wine, Guitar Center, Sam Ash Music | ||||
| East Brunswick | 427,000 | 100.0% | 14.52 | Lowe's, Kohl's, Dick's Sporting Goods, P.C. Richard & Son, T.J. Maxx, LA Fitness | ||||
| East Hanover (200 - 240 Route 10 West) | 343,000 | 99.2% | 21.68 | The Home Depot, Dick's Sporting Goods, Saks Off Fifth, Marshalls, Paper Store | ||||
| Garfield | 298,000 | 100.0% | 15.82 | Walmart, Burlington, Marshalls, PetSmart, Ulta | |||||||||||||||||||
| Hackensack | 275,000 | 99.4% | 23.97 | The Home Depot, Staples, Petco, 99 Ranch | |||||||||||||||||||
| Hazlet | 95,000 | 100.0% | 3.70 | Stop & Shop(5) | |||||||||||||||||||
| Jersey City (Hudson Mall) | 382,000 | 85.4% | 18.14 | Marshalls, Big Lots, Retro Fitness, Staples, Old Navy, National retailer (lease not commenced) | |||||||||||||||||||
| Jersey City (Hudson Commons) | 236,000 | 100.0% | 13.90 | Lowe's, P.C. Richard & Son | |||||||||||||||||||
| Kearny | 116,000 | 100.0% | 23.17 | LA Fitness, Marshalls, Ulta | |||||||||||||||||||
Lodi (Washington Street)(6) | 43,000 | 100.0% | 20.08 | Dollar Tree | |||||||||||||||||||
| Manalapan | 208,000 | 87.7% | 20.44 | Best Buy, Bed Bath & Beyond, Raymour & Flanigan, PetSmart, Avalon Flooring | |||||||||||||||||||
| Marlton | 218,000 | 100.0% | 16.49 | Kohl's, ShopRite, PetSmart | |||||||||||||||||||
| Middletown (Town Brook Commons) | 231,000 | 98.9% | 13.92 | Kohl's, Stop & Shop | |||||||||||||||||||
| Millburn | 104,000 | 88.3% | 28.70 | Trader Joe's, CVS, PetSmart | |||||||||||||||||||
| Montclair | 18,000 | 100.0% | 32.00 | Whole Foods Market | |||||||||||||||||||
| Morris Plains (Briarcliff Commons) | 179,000 | 94.8% | 23.08 | Kohl's, Uncle Giuseppe's | |||||||||||||||||||
| North Bergen (Kennedy Commons) | 62,000 | 100.0% | 14.55 | Food Bazaar | |||||||||||||||||||
| North Bergen (Tonnelle Commons) | 408,000 | 100.0% | 21.89 | Walmart, BJ's Wholesale Club, PetSmart | |||||||||||||||||||
| North Plainfield (West End Commons) | 241,000 | 99.1% | 11.58 | Costco, The Tile Shop, La-Z-Boy, Petco, Da Vita Dialysis | |||||||||||||||||||
Paramus (leased through 2033)(3) | 63,000 | 100.0% | 44.56 | 24 Hour Fitness | |||||||||||||||||||
| Rockaway | 189,000 | 93.1% | 14.51 | ShopRite, T.J. Maxx | |||||||||||||||||||
South Plainfield (Stelton Commons) (leased through 2039)(3) | 56,000 | 100.0% | 21.97 | Staples, Party City | |||||||||||||||||||
| Totowa | 271,000 | 100.0% | 18.30 | The Home Depot, Bed Bath & Beyond, buybuy Baby, Marshalls, Staples | |||||||||||||||||||
| Union (2445 Springfield Ave) | 232,000 | 100.0% | 17.85 | The Home Depot | |||||||||||||||||||
| Union (West Branch Commons) | 278,000 | 98.7% | 16.60 | Lowe's, Burlington | |||||||||||||||||||
| Watchung (Greenbrook Commons) | 170,000 | 100.0% | 18.54 | BJ's Wholesale Club | |||||||||||||||||||
| Woodbridge (Woodbridge Commons) | 225,000 | 94.7% | 13.27 | Walmart, Charisma Furniture | |||||||||||||||||||
| Woodbridge (Plaza at Woodbridge) | 332,000 | 91.9% | 19.04 | Best Buy, Raymour & Flanigan, Lincoln Tech, Retro Fitness, Bed Bath & Beyond and buybuy Baby | |||||||||||||||||||
| New York: | |||||||||||||||||||||||
| Bronx (Gun Hill Commons) | 81,000 | 100.0% | 36.85 | Planet Fitness, Aldi | |||||||||||||||||||
Bronx (Bruckner Commons)(6) | 396,000 | 39.4% | 44.96 | ShopRite, Burlington | |||||||||||||||||||
| Bronx (Shops at Bruckner) | 115,000 | 85.2% | 38.73 | Marshalls, Old Navy, Aldi (lease not commenced), Five Below (lease not commenced) | |||||||||||||||||||
| Brooklyn (Kingswood Center) | 129,000 | 84.3% | 35.83 | T.J. Maxx, Visiting Nurse Service of NY | |||||||||||||||||||
| Brooklyn (Kingswood Crossing) | 107,000 | 69.5% | 41.72 | Target, Marshalls, Maimonides Medical | |||||||||||||||||||
| Buffalo (Amherst Commons) | 311,000 | 98.1% | 10.94 | BJ's Wholesale Club, T.J. Maxx, Burlington, HomeGoods, LA Fitness | |||||||||||||||||||
Dewitt (Marshall Plaza) (leased through 2041)(3) | 46,000 | 100.0% | 24.62 | Best Buy | |||||||||||||||||||
Freeport (Meadowbrook Commons) (leased through 2040)(3) | 44,000 | 100.0% | 22.31 | Bob's Discount Furniture | |||||||||||||||||||
| Freeport (Freeport Commons) | 173,000 | 100.0% | 26.32 | The Home Depot, Staples | |||||||||||||||||||
| Huntington | 216,000 | 71.6% | 19.70 | Marshalls, ShopRite (lease not commenced), Old Navy, Petco | |||||||||||||||||||
| Inwood (Burnside Commons) | 100,000 | 29.3% | 27.96 | ||||||||||||||||||||
| Mt. Kisco | 189,000 | 98.5% | 17.20 | Target, Stop & Shop | |||||||||||||||||||
New Hyde Park (leased through 2029)(3) | 101,000 | 100.0% | 21.93 | Stop & Shop | |||||||||||||||||||
| Queens (Cross Bay Commons) | 45,000 | 83.8% | 42.29 | Northwell Health | |||||||||||||||||||
Rochester (Henrietta) (leased through 2056)(3) | 165,000 | 100.0% | 4.65 | Kohl's | |||||||||||||||||||
| Staten Island (Forest Commons) | 165,000 | 96.6% | 24.68 | Western Beef, Planet Fitness, Mavis Discount Tire, NYC Public School | |||||||||||||||||||
| Yonkers Gateway Center | 448,000 | 91.6% | 15.80 | Burlington, Marshalls, Homesense, Best Buy, DSW, PetSmart, Alamo Drafthouse Cinema | |||||||||||||||||||
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| East Hanover (280 Route 10 West) | 28,000 | 100.0% | 34.71 | REI | ||||
| East Rutherford | 197,000 | 98.3% | 12.71 | Lowe's | ||||
| Garfield | 289,000 | 100.0% | 15.22 | Walmart, Burlington, Marshalls, PetSmart, Ulta | ||||
| Hackensack | 275,000 | 99.4% | 23.67 | The Home Depot, Staples, Petco, 99 Ranch | ||||
| Hazlet | 95,000 | 100.0% | 3.70 | Stop & Shop(5) | ||||
| Jersey City (Hudson Mall) | 382,000 | 80.8% | 16.94 | Marshalls, Big Lots, Retro Fitness, Staples, Old Navy | ||||
| Jersey City (Hudson Commons) | 236,000 | 100.0% | 12.62 | Lowe's, P.C. Richard & Son | ||||
| Kearny | 114,000 | 100.0% | 21.86 | LA Fitness, Marshalls, Ulta | ||||
| Lawnside | 151,000 | 100.0% | 16.31 | The Home Depot, PetSmart | ||||
| Lodi (Route 17 North) | 171,000 | —% | — | |||||
| Lodi (Washington Street) | 85,000 | 87.6% | 22.06 | Blink Fitness, Aldi | ||||
| Manalapan | 208,000 | 100.0% | 19.10 | Best Buy, Bed Bath & Beyond, Raymour & Flanigan, PetSmart, Avalon Flooring (lease not commenced) | ||||
| Marlton | 218,000 | 100.0% | 15.96 | Kohl's, ShopRite, PetSmart | ||||
| Middletown (Town Brook Commons) | 231,000 | 96.9% | 13.92 | Kohl's, Stop & Shop | ||||
| Millburn | 104,000 | 98.8% | 26.41 | Trader Joe's, CVS, PetSmart | ||||
| Montclair | 21,000 | 100.0% | 26.20 | Whole Foods Market | ||||
| Morris Plains (Briarcliff Commons) | 182,000 | 70.2% | 25.59 | Kohl's | ||||
| North Bergen (Kennedy Blvd) | 62,000 | 100.0% | 14.36 | Food Bazaar | ||||
| North Bergen (Tonnelle Ave) | 410,000 | 99.5% | 21.73 | Walmart, BJ's Wholesale Club, PetSmart, Staples | ||||
| North Plainfield (West End Commons) | 241,000 | 100.0% | 11.56 | Costco, The Tile Shop, La-Z-Boy, Petco, Da Vita Dialysis | ||||
Paramus (leased through 2033)(3) | 63,000 | 100.0% | 47.18 | 24 Hour Fitness | ||||
| Rockaway | 189,000 | 95.2% | 14.71 | ShopRite, T.J. Maxx | ||||
South Plainfield (Stelton Commons) (leased through 2039)(3) | 56,000 | 96.3% | 21.36 | Staples, Party City | ||||
| Totowa | 271,000 | 100.0% | 17.45 | The Home Depot, Bed Bath & Beyond, buybuy Baby, Marshalls, Staples | ||||
| Turnersville | 98,000 | 100.0% | 9.94 | At Home, Verizon Wireless | ||||
| Union (2445 Springfield Ave) | 232,000 | 100.0% | 17.85 | The Home Depot | ||||
| Union (Route 22 and Morris Ave) | 278,000 | 98.9% | 17.11 | Lowe's, Burlington, Office Depot | ||||
| Watchung (Greenbrook Commons) | 170,000 | 94.9% | 18.15 | BJ's Wholesale Club | ||||
| Westfield (One Lincoln Plaza) | 22,000 | 89.9% | 33.00 | Five Guys, PNC Bank | ||||
| Woodbridge (Woodbridge Commons) | 225,000 | 94.7% | 13.04 | Walmart, Charisma Furniture | ||||
| Woodbridge (Plaza at Woodbridge) | 337,000 | 74.1% | 18.88 | Best Buy, Raymour & Flanigan, Lincoln Tech, Harbor Freight, Retro Fitness | ||||
| New York: | ||||||||
| Bronx (1750-1780 Gun Hill Road) | 81,000 | 100.0% | 35.30 | Planet Fitness, Aldi | ||||
| Bronx (Bruckner Commons) | 375,000 | 82.1% | 27.09 | Kmart, ShopRite, Burlington | ||||
| Bronx (Shops at Bruckner) | 115,000 | 100.0% | 37.51 | Marshalls, Old Navy, LA Fitness (lease not commenced) | ||||
| Buffalo (Amherst Commons) | 311,000 | 98.1% | 10.94 | BJ's Wholesale Club, T.J. Maxx, Burlington, HomeGoods, LA Fitness | ||||
Commack (leased through 2021)(3) | 47,000 | 100.0% | 20.69 | PetSmart, Ace Hardware | ||||
Dewitt (Marshall Plaza) (leased through 2041)(3) | 46,000 | 100.0% | 22.38 | Best Buy | ||||
Freeport (Meadowbrook Commons) (leased through 2040)(3) | 44,000 | 100.0% | 22.31 | Bob's Discount Furniture | ||||
| Freeport (Freeport Commons) | 173,000 | 100.0% | 22.23 | The Home Depot, Staples | ||||
| Huntington | 204,000 | 43.8% | 22.84 | Marshalls, Old Navy, Petco | ||||
| Inwood (Burnside Commons) | 100,000 | 96.5% | 19.42 | Stop & Shop | ||||
| Mt. Kisco | 189,000 | 95.9% | 16.74 | Target, Stop & Shop | ||||
New Hyde Park (leased through 2029)(3) | 101,000 | 100.0% | 21.93 | Stop & Shop | ||||
| Queens (Cross Bay Commons) | 46,000 | 78.7% | 41.64 | |||||
Rochester (Henrietta) (leased through 2056)(3) | 165,000 | 100.0% | 4.62 | Kohl's | ||||
| Staten Island (Forest Commons) | 165,000 | 96.3% | 23.69 | Western Beef, Planet Fitness, Mavis Discount Tire, NYC Public School | ||||
| Yonkers Gateway Center | 437,000 | 97.2% | 17.15 | Burlington, Marshalls, Homesense, Best Buy, DSW, PetSmart, Alamo Drafthouse Cinema | |||||||||||||||||||||||||||
| Pennsylvania: | Pennsylvania: | ||||||||||||||||||||||||||||||
| Bensalem (Marten Commons) | 185,000 | 96.6% | 12.73 | Kohl's, Ross Dress for Less, Staples, Petco | Bensalem (Marten Commons) | 185,000 | 96.6% | 14.59 | Kohl's, Ross Dress for Less, Staples, Petco | ||||||||||||||||||||||
| Bethlehem (Easton Commons) | 153,000 | 94.5% | 8.50 | Giant Food, Petco | |||||||||||||||||||||||||||
| Broomall | 169,000 | 100.0% | 10.31 | Giant Food(5), Planet Fitness, A.C. Moore, PetSmart | |||||||||||||||||||||||||||
Broomall(6) | Broomall(6) | 169,000 | 64.1% | 16.56 | National retailer (lease not commenced), Planet Fitness, PetSmart | ||||||||||||||||||||||||||
| Glenolden (MacDade Commons) | 102,000 | 100.0% | 12.81 | Walmart | Glenolden (MacDade Commons) | 102,000 | 100.0% | 12.89 | Walmart | ||||||||||||||||||||||
| Lancaster (Lincoln Plaza) | 228,000 | 100.0% | 4.94 | Lowe's, Community Aid, Mattress Firm | Lancaster (Lincoln Plaza) | 228,000 | 100.0% | 5.17 | Lowe's, Community Aid, Mattress Firm | ||||||||||||||||||||||
Springfield (leased through 2025)(3) | 41,000 | 100.0% | 22.99 | PetSmart | Springfield (leased through 2025)(3) | 41,000 | 100.0% | 25.29 | PetSmart | ||||||||||||||||||||||
| Wilkes-Barre (461 - 499 Mundy Street) | 179,000 | 82.9% | 13.57 | Bob's Discount Furniture, Ross Dress for Less, Marshalls, Petco, Tuesday Morning | |||||||||||||||||||||||||||
| Wilkes-Barre | Wilkes-Barre | 184,000 | 88.1% | 12.89 | Bob's Discount Furniture, Ross Dress for Less, Marshalls, Petco, Wren Kitchen (lease not commenced) | ||||||||||||||||||||||||||
Wyomissing (leased through 2065)(3) | 76,000 | 100.0% | 16.76 | LA Fitness, PetSmart | Wyomissing (leased through 2065)(3) | 76,000 | 100.0% | 14.70 | LA Fitness, PetSmart | ||||||||||||||||||||||
| South Carolina: | South Carolina: | ||||||||||||||||||||||||||||||
Charleston (leased through 2063)(3) | 45,000 | 100.0% | 15.10 | Best Buy | Charleston (leased through 2063)(3) | 45,000 | 100.0% | 15.10 | Best Buy | ||||||||||||||||||||||
| Virginia: | Virginia: | ||||||||||||||||||||||||||||||
Norfolk (leased through 2069)(3) | 114,000 | 100.0% | 7.08 | BJ's Wholesale Club | Norfolk (leased through 2069)(3) | 114,000 | 100.0% | 7.79 | BJ's Wholesale Club | ||||||||||||||||||||||
| Puerto Rico: | Puerto Rico: | ||||||||||||||||||||||||||||||
| Las Catalinas | 356,000 | 54.8% | 45.34 | Forever 21, Old Navy | Las Catalinas | 356,000 | 85.4% | 28.84 | Sector Sixty6 (lease not commenced), Forever 21, Old Navy | ||||||||||||||||||||||
| Montehiedra | 539,000 | 95.3% | 18.64 | Kmart, The Home Depot, Marshalls, Caribbean Cinemas, Tiendas Capri, Old Navy | |||||||||||||||||||||||||||
Montehiedra(6) | Montehiedra(6) | 540,000 | 69.0% | 20.80 | The Home Depot, Marshalls, Caribbean Cinemas, Tiendas Capri, Old Navy | ||||||||||||||||||||||||||
| Total Shopping Centers and Malls | 14,277,000 | 92.4% | $19.22 | Total Shopping Centers and Malls | 14,469,000 | 91.1% | $19.70 | ||||||||||||||||||||||||
| WAREHOUSES: | |||||||||||||||||||||||||||||||
| East Hanover Warehouses | 943,000 | 100.0% | 5.70 | J & J Tri-State Delivery, Foremost Groups, PCS Wireless, Fidelity Paper & Supply, Meyer Distributing, Consolidated Simon Distributors, Givaudan Flavors, Reliable Tire, LineMart | |||||||||||||||||||||||||||
| INDUSTRIAL: | INDUSTRIAL: | ||||||||||||||||||||||||||||||
East Hanover Warehouses(7) | East Hanover Warehouses(7) | 1,218,000 | 100.0% | 5.63 | J & J Tri-State Delivery, Foremost Groups, PCS Wireless, Fidelity Paper & Supply, Meyer Distributing, Givaudan Flavors, Reliable Tire, LineMart, Nutra-Med | ||||||||||||||||||||||||||
| Lodi (Route 17 North) | Lodi (Route 17 North) | 127,000 | 100.0% | 9.95 | AAA Wholesale Group | ||||||||||||||||||||||||||
| Total Industrial | Total Industrial | 1,345,000 | 100.0% | $6.04 | |||||||||||||||||||||||||||
Massapequa, NY (Sunrise Mall) (portion leased through 2069)(3)(4)(6) | Massapequa, NY (Sunrise Mall) (portion leased through 2069)(3)(4)(6) | 1,217,000 | 49.2% | 8.50 | Macy's, Dick's Sporting Goods, Dave & Busters, Raymour & Flanigan | ||||||||||||||||||||||||||
| Total Urban Edge Properties | 15,220,000 | 92.9% | $18.31 | Total Urban Edge Properties | 17,031,000 | 88.8% | $18.04 | ||||||||||||||||||||||||
(1) Percent leased is expressed as the percentage of gross leasable area subject to a lease.lease, excluding temporary tenants. The Company also excludes 132,000 sf of self-storage from the report above.
(2) Weighted average annual base rent per square foot is the current base rent on an annualized basis. It includesincluding ground leases and executed leases for which rent has not commenced and excludes tenant expense reimbursements,is calculated by annualizing tenants’ current base rent (excluding any free rent periods,periods), and excluding tenant reimbursements, concessions and storage rent. Excluding the ground leases where the Company is the lessor, the weighted average annual rent per square foot for our retail portfolio is $21.18$20.08 per square foot.
(3) The Company is a lessee under a ground or building lease. Ground and building lease terms include exercised options and options that may be exercised in future periods. For building leases, theThe total square feet disclosed for the building will revert to the lessor upon lease expiration. At Salem, the ground lease is for a portion of the parking area only.
(4) Our ownershipWe own 95% of Walnut Creek (Mt. Diablo) is 95%.and 82.5% of Sunrise Mall with the remaining portions in each case owned by joint venture partners.
(5) The tenant never commenced operations at this location but continues to pay rent.
(7) Includes acquisitions of 151 Ridgedale Avenue and 601 Murray Road. These properties are included in our non-same property pool for the quarter and year ended December 31, 2021.
As of December 31, 2019,2021, we had approximately 1,100900 leases. Tenant leases for under 10,000 square feet generally have lease terms of five years or less. Tenant leases forcomprising 10,000 square feet or more generally have lease terms of 10 to 25 years, and are considered anchor leases with one or more renewal options available upon expiration of the initial lease term. The majority of our leases provide for reimbursements of real estate taxes, insurance and common area maintenance charges (including roof and structure in shopping centers, unless it is the tenant’s direct responsibility), and percentage rents based on tenant sales volume. Percentage rents accounted for 1%approximately 2% of our total revenues for the year ended December 31, 2019.2021.
19
Occupancy
The following table sets forth the consolidated retail portfolio leased occupancy rate (excluding warehousesindustrial and self-storage space), square footage and weighted average annual base rent per square foot of properties in our retail portfolio as of December 31 for the last five years:
| December 31, | ||||||||||||||||||||||||||||||||
2021(1) | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||||||||||||||
| Total square feet | 14,469,000 | 15,221,000 | 14,277,000 | 15,407,000 | 15,743,000 | |||||||||||||||||||||||||||
| Occupancy rate | 91.1 | % | 88.7 | % | 92.4 | % | 92.6 | % | 96.0 | % | ||||||||||||||||||||||
| Average annual base rent per sf | $19.70 | $18.97 | $19.22 | $17.90 | $17.38 | |||||||||||||||||||||||||||
| December 31, | ||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
| Total square feet | 14,277,000 | 15,407,000 | 15,743,000 | 13,831,000 | 13,901,000 | |||||||||||||||
| Occupancy rate | 92.4 | % | 92.6 | % | 96.0 | % | 97.2 | % | 96.2 | % | ||||||||||
| Average annual base rent per sf | $19.22 | $17.90 | $17.38 | $17.07 | $16.64 | |||||||||||||||
The following table sets forth the occupancy rate, square footage and weighted average annual base rent per square foot of our warehousesindustrial properties as of December 31 for the last five years:
| December 31, | ||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||||||||||||||
| Total square feet | 1,345,000 | 1,070,000 | 943,000 | 942,000 | 942,000 | |||||||||||||||||||||||||||
| Occupancy rate | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||||||||||
| Average annual base rent per sf | $6.04 | $6.34 | $5.70 | $5.34 | $5.15 | |||||||||||||||||||||||||||
| December 31, | ||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
| Total square feet | 943,000 | 942,000 | 942,000 | 942,000 | 942,000 | |||||||||||||||
| Occupancy rate | 100.0 | % | 100.0 | % | 100.0 | % | 91.7 | % | 79.1 | % | ||||||||||
| Average annual base rent per sf | $5.70 | $5.34 | $5.15 | $4.77 | $4.80 | |||||||||||||||
Major Tenants
The following table sets forth information for the 10our ten largest tenants by total revenues for the year ended December 31, 2019:2021:
| Tenant | Number of Stores | Square Feet | % of Total Square Feet | 2019 Revenues (in thousands) | % of Total Revenues | Tenant | Number of Stores | Square Feet | % of Total Square Feet | 2021 Revenues(1) (in thousands) | % of Total Revenues | |||||||||||||||||||||||||||||||||||
The TJX Companies, Inc.(2) | The TJX Companies, Inc.(2) | 22 | 714,731 | 4.2% | $20,589 | 4.8% | ||||||||||||||||||||||||||||||||||||||||
| The Home Depot, Inc. | 7 | 920,000 | 6.0% | $ | 23,032 | 5.9% | The Home Depot, Inc. | 6 | 808,926 | 4.8% | 19,904 | 4.7% | ||||||||||||||||||||||||||||||||||
The TJX Companies, Inc.(1) | 19 | 646,000 | 4.2% | 14,778 | 3.8% | |||||||||||||||||||||||||||||||||||||||||
| Lowe's Companies, Inc. | 6 | 976,000 | 6.4% | 13,372 | 3.4% | Lowe's Companies, Inc. | 6 | 976,415 | 5.7% | 13,570 | 3.2% | |||||||||||||||||||||||||||||||||||
| Walmart Inc. | Walmart Inc. | 5 | 708,435 | 4.2% | 12,692 | 3.0% | ||||||||||||||||||||||||||||||||||||||||
| Burlington Stores, Inc. | Burlington Stores, Inc. | 7 | 415,828 | 2.4% | 10,106 | 2.4% | ||||||||||||||||||||||||||||||||||||||||
| Best Buy Co., Inc. | 9 | 405,000 | 2.7% | 11,836 | 3.1% | Best Buy Co., Inc. | 8 | 359,551 | 2.1% | 9,731 | 2.3% | |||||||||||||||||||||||||||||||||||
Ahold Delhaize(2) | 8 | 590,000 | 3.9% | 11,706 | 3.0% | |||||||||||||||||||||||||||||||||||||||||
| Walmart Inc. | 5 | 727,000 | 4.8% | 10,460 | 2.7% | |||||||||||||||||||||||||||||||||||||||||
| Kohl's Corporation | 7 | 633,000 | 4.2% | 9,539 | 2.5% | Kohl's Corporation | 7 | 633,345 | 3.7% | 9,087 | 2.1% | |||||||||||||||||||||||||||||||||||
| PetSmart, Inc. | 12 | 287,000 | 1.9% | 9,044 | 2.3% | |||||||||||||||||||||||||||||||||||||||||
| BJ's Wholesale Club | 4 | 454,000 | 3.0% | 8,395 | 2.2% | BJ's Wholesale Club | 4 | 454,297 | 2.7% | 8,263 | 1.9% | |||||||||||||||||||||||||||||||||||
| Wakefern (ShopRite) | 4 | 296,000 | 1.9% | 7,385 | 1.9% | Wakefern (ShopRite) | 4 | 296,018 | 1.7% | 7,284 | 1.7% | |||||||||||||||||||||||||||||||||||
| PetSmart, Inc. | PetSmart, Inc. | 10 | 228,869 | 1.3% | 7,137 | 1.7% | ||||||||||||||||||||||||||||||||||||||||
(1) Based on contractual revenues as determined by the tenants’ operating lease agreements.
(2) Includes Marshalls (13)(14), T.J. Maxx (3)(4), HomeGoods (2)(3) and Homesense (1).
20
Lease Expirations
The following table sets forth the anticipated expirations of tenant leases in our consolidated retail portfolio for each year from 20202022 through 20302032 and thereafter, assuming no exercise of renewal options or early termination rights:
| Percentage of | Weighted Average Annual | Percentage of | Weighted Average Annual | ||||||||||||||||||||||||||||||||||||||||||||||
| Number of | Square Feet of | Retail Properties | Base Rent of Expiring Leases | Number of | Square Feet of | Retail Properties | Base Rent of Expiring Leases | ||||||||||||||||||||||||||||||||||||||||||
| Year | Expiring Leases | Expiring Leases | Square Feet | Total | Per Square Foot | Year | Expiring Leases | Expiring Leases | Square Feet | Total | Per Square Foot | ||||||||||||||||||||||||||||||||||||||
| Month-To-Month | 26 | 77,000 | 0.5% | $ | 2,110,570 | $27.41 | Month-To-Month | 29 | 113,000 | 0.8% | $ | 2,853,250 | $25.25 | ||||||||||||||||||||||||||||||||||||
| 2020 | 100 | 667,000 | 4.7% | 14,547,270 | 21.81 | ||||||||||||||||||||||||||||||||||||||||||||
| 2021 | 97 | 811,000 | 5.7% | 20,566,960 | 25.36 | ||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 85 | 1,100,000 | 7.7% | 18,854,000 | 17.14 | 2022 | 83 | 486,000 | 3.4% | 13,379,580 | 27.53 | ||||||||||||||||||||||||||||||||||||||
| 2023 | 89 | 1,639,000 | 11.5% | 31,190,170 | 19.03 | 2023 | 106 | 1,145,000 | 7.9% | 25,361,750 | 22.15 | ||||||||||||||||||||||||||||||||||||||
| 2024 | 102 | 1,495,000 | 10.5% | 30,542,850 | 20.43 | 2024 | 104 | 1,551,000 | 10.7% | 31,314,690 | 20.19 | ||||||||||||||||||||||||||||||||||||||
| 2025 | 59 | 1,091,000 | 7.6% | 17,870,580 | 16.38 | 2025 | 80 | 1,234,000 | 8.5% | 23,248,560 | 18.84 | ||||||||||||||||||||||||||||||||||||||
| 2026 | 63 | 626,000 | 4.4% | 10,585,660 | 16.91 | 2026 | 97 | 891,000 | 6.2% | 20,635,560 | 23.16 | ||||||||||||||||||||||||||||||||||||||
| 2027 | 51 | 706,000 | 5.0% | 14,663,620 | 20.77 | 2027 | 84 | 1,065,000 | 7.4% | 17,540,550 | 16.47 | ||||||||||||||||||||||||||||||||||||||
| 2028 | 43 | 491,000 | 3.4% | 13,595,790 | 27.69 | 2028 | 47 | 653,000 | 4.5% | 18,395,010 | 28.17 | ||||||||||||||||||||||||||||||||||||||
| 2029 | 59 | 1,490,000 | 10.4% | 29,829,800 | 20.02 | 2029 | 70 | 1,526,000 | 10.5% | 33,358,360 | 21.86 | ||||||||||||||||||||||||||||||||||||||
| 2030 | 26 | 862,000 | 6.0% | 13,447,200 | 15.60 | 2030 | 43 | 1,191,000 | 8.2% | 18,543,870 | 15.57 | ||||||||||||||||||||||||||||||||||||||
| 2031 | 2031 | 32 | 909,000 | 6.3% | 15,053,040 | 16.56 | |||||||||||||||||||||||||||||||||||||||||||
| 2032 | 2032 | 35 | 347,000 | 2.4% | 7,318,230 | 21.09 | |||||||||||||||||||||||||||||||||||||||||||
| Thereafter | 42 | 2,144,000 | 15.0% | 32,160,000 | 15.00 | Thereafter | 48 | 2,064,000 | 14.3% | 31,909,440 | 15.46 | ||||||||||||||||||||||||||||||||||||||
| Sub-total/Average | 842 | 13,199,000 | 92.4% | $ | 252,892,840 | $19.16 | |||||||||||||||||||||||||||||||||||||||||||
| Subtotal/Average | Subtotal/Average | 858 | 13,175,000 | 91.1% | $ | 259,547,500 | $19.70 | ||||||||||||||||||||||||||||||||||||||||||
| Vacant | 147 | 1,078,000 | 7.6% | N/A | N/A | Vacant | 185 | 1,294,000 | 8.9% | N/A | N/A | ||||||||||||||||||||||||||||||||||||||
Total(1) | 989 | 14,277,000 | 100.0% | $ | 252,892,840 | N/A | Total(1) | 1,043 | 14,469,000 | 100.0% | $ | 259,547,500 | N/A | ||||||||||||||||||||||||||||||||||||
(1) Total lease count excludes warehouseindustrial tenant leases, temporary tenant leases, and cart and kiosk leases.leases and Sunrise Mall.
ITEM 3. LEGAL PROCEEDINGS
We are party to various legal actions that arise in the ordinary course of business. In our opinion, after consultation with legal counsel, the outcome of such matters is not expected to have a material adverse effect on our financial position, results of operations or cash flows.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
21
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Urban Edge Properties
Market Information and Dividends
Our common shares are listed on the NYSE under the symbol “UE”. Our common shares began “regular way” trading on January 15, 2015. As of February 11, 2020,9, 2022, there were approximately 1,4141,134 holders of record of our common shares.
The Company elected to be taxed as a REIT under sections 856-860 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with the filing of its 2015 tax return for its tax year ended December 31, 2015. With the exception of the Company’s taxable REIT subsidiary (“TRS”), to the extent the Company meets certain requirements under the Code, the Company will not be taxed on its federal taxable income. If we fail to qualify as a REIT for any taxable year, we will be subject to federal income taxes at regular corporate rates (including any alternative minimum tax, which, for corporations, was repealed under the TCJA (defined above) for tax years beginning after December 31, 2017) and may not be able to qualify as a REIT for the four subsequent taxable years.
Future distributions will be declared and paid at the discretion of the Board of Trustees and will depend upon cash generated by operating activities, our financial condition, capital requirements, annual dividend requirements under the REIT provisions of the Internal Revenue Code of 1986, as amended, and such other factors as our Board of Trustees deems relevant.
Our Board of Trustees declared a quarterly dividend of $0.15 per share for each of the four quarters in 2021, which resulted in a total annual dividendsdividend per common share and OP unit of $0.60 for 2019 were $0.882021. Our Board of Trustees declared a quarterly dividend of $0.22 per share.common share and OP unit for the first quarter of 2020 and temporarily suspended quarterly dividend distributions for the second and third quarters as a result of COVID-19 and the uncertainties it generated. A special cash dividend of $0.46 per common share and OP unit was declared in December 2020, which resulted in a total annual dividend per common share and OP unit of $0.68 for 2020. The annual dividend amount may differ from dividends as calculated for federal income tax purposes. Distributions to the extent of our current and accumulated earnings and profits for federal income tax purposes generally will be taxable to a shareholder as ordinary dividend income. However, the TCJA provides a deduction of up to 20% of a non-corporate taxpayer’s ordinary REIT dividends with such deduction scheduled to expire for taxable years beginning after December 31, 2025. Distributions in excess of current and accumulated earnings and profits will be treated as a nontaxable reduction of the shareholder’s basis in such shareholder’s shares, to the extent thereof, and thereafter as taxable capital gains. Distributions that are treated as a reduction of the shareholder’s basis in its shares will have the effect of increasing the amount of gain, or reducing the amount of loss, recognized upon the sale of the shareholder’s shares. No assurances can be given regarding what portion, if any, of distributions in 20192021 or subsequent years will constitute a return of capital for federal income tax purposes. During a year in which a REIT earns a net long-term capital gain, the REIT can elect under Section 857(b)(3) of the Code to designate a portion of dividends paid to shareholders as capital gain dividends. If this election is made, the capital gain dividends are generally taxable to the shareholder as long-term capital gains.
We have determined the dividends paid on our common shares during 20192021 and 20182020 qualify for the following tax treatment:
| Total Distribution per Share | Ordinary Dividends | Long Term Capital Gains | Return of Capital | ||||||||||||||||||||
| 2021 | $ | 0.60 | $ | 0.60 | $ | — | $ | — | |||||||||||||||
| 2020 | 0.68 | 0.68 | — | — | |||||||||||||||||||
22
| Total Distribution per Share | Ordinary Dividends | Long Term Capital Gains | Return of Capital | ||||||||||||
| 2019 | $ | 0.88 | $ | 0.73 | $ | 0.15 | $ | — | |||||||
| 2018 | 0.88 | 0.88 | — | — | |||||||||||
Total Shareholder Return Performance
The following performance graph compares the cumulative total shareholder return of our common shares with the Russell 2000 Index, the S&P 500 Index, Dow Jones Equity All REIT (previously SNL U.S. REIT Equity IndexIndex) and the Dow Jones US Real Estate Strip Centers (previously SNL REIT Retail Shopping Center IndexIndex) as provided by SNL Financial LC, from January 15, 2015 (the date of our separation from Vornado) tofor the six fiscal years commencing December 31, 2019,2015 and ending December 31, 2021, assuming an investment of $100 and the reinvestment of all dividends into additional common shares during the holding period. Historical stock performance is not necessarily indicative of future results.
The performance graph shall not be deemed incorporated by reference by any general statement incorporating by reference this annual report into any filing under the Securities Act of 1933, as amended, or the Exchange Act except to the extent we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such acts.
COMPARISON OF CUMULATIVE TOTAL RETURN(1)
(1) $100 invested on January 15,December 31, 2015 in stock or index, including reinvestment of dividends.
Cumulative(1) Total Return % | Total Return $ as of | Cumulative(1) Total Return % | Total Return $ as of | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock/Index | 1/15/2015 | 12/31/2015 | 12/31/2016 | 12/31/2017 | 12/31/2018 | 12/31/2019 | Stock/Index | 12/31/2015 | 12/31/2016 | 12/31/2017 | 12/31/2018 | 12/31/2019 | 12/31/2020 | 12/31/2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| UE | (2.4) | 100 | 101.4 | 122.6 | 118.7 | 80.7 | 97.6 | UE | 2.7 | 100 | 120.9 | 116.0 | 78.9 | 95.4 | 67.7 | 102.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| S&P 500 | 79.5 | 100 | 104.7 | 117.2 | 142.8 | 136.5 | 179.5 | S&P 500 | 161.3 | 100 | 112.0 | 136.4 | 130.4 | 171.5 | 203.0 | 261.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Russell 2000 | 54.9 | 100 | 99.7 | 120.9 | 138.7 | 123.4 | 154.9 | Russell 2000 | 114.0 | 100 | 121.3 | 139.1 | 123.8 | 155.4 | 186.4 | 214.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SNL U.S. REIT Equity | 40.3 | 100 | 97.1 | 105.7 | 114.5 | 108.9 | 140.3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SNL U.S. REIT Retail Shopping Center | (3.1) | 100 | 98.9 | 102.4 | 91.1 | 76.4 | 96.9 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dow Jones Equity All REIT | Dow Jones Equity All REIT | 96.4 | 100 | 108.9 | 118.3 | 113.5 | 146.1 | 139.1 | 196.4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dow Jones US Real Estate Strip Centers | Dow Jones US Real Estate Strip Centers | (1.0) | 100 | 103.3 | 92.4 | 78.9 | 100.2 | 68.8 | 99.0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) Cumulative total return is for the period from the separation date on January 15, 2015 tosix fiscal years commencing December 31, 2019.2015 and ending December 31, 2021.
23
Operating Partnership
Market Information and Distributions
There is no established public market for our general and common limited partnership interests in the operating partnership (“OP Units”). As of February 11, 2020,9, 2022, there were 121,386,592117,398,896 general partnership units outstanding and 5,817,2234,412,654 common limited partnership units outstanding, held by approximately 1,4141,134 and 3740 holders of record, respectively.
Under the limited partnership agreement of UELP, unitholders may present their common units for redemption at any time (subject to restrictions agreed upon at the time of issuance of the units that may restrict such right for a period of time). Upon presentation of a common unit for redemption, UELP must redeem the unit for cash equal to the then value of a share of UE’s common shares, as defined by the limited partnership agreement. In lieu of cash redemption by UELP, however, UE may elect to acquire any common units so tendered by issuing common shares of UE in exchange for the common units. If UE so elects, its common shares will be exchanged for common units on a one-for-one basis. During the year ended December 31, 2019, 6,995,9412021, 100,000 units were redeemed for common shares and 357,998no units were redeemed for cash.
Recent Sales of Unregistered Shares
During the three monthsyear ended December 31, 2019,2021, the Company issued an aggregate of 134,249100,000 common shares in exchange for 134,249100,000 common limited partnership units held by certain limited partners of the Operating Partnership. All common shares were issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act. We relied on the exemption under Section 4(a)(2) based upon factual representations received from the limited partner who received the common shares.
Each time the Company issues common shares (other than in exchange for common limited partnership units when such units are presented for redemption), it contributes the proceeds of such issuance to the Operating Partnership in return for an equivalent number of partnership units with rights and preferences analogous to the shares issued. During the three monthsyear ended, December 31, 2019,2021, in connection with issuances of common shares by the Company pursuant to the Urban Edge Properties 2015 Employee Share Purchase Plan, the Operating Partnership issued an aggregate of 11,00524,544 common limited partnership units to the Company in exchange for approximately $0.2$0.3 million, the aggregate proceeds of such common share issuances to the Company. Such units were issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
During 2019, 5,672the year ended December 31, 2021, 5,305 restricted common shares were forfeited by former employees in connection with their departure from the Company. We did not repurchase any of our equity securities during the three monthsyear ended December 31, 2019.2021. Our employees will at times surrender common shares owned by them to satisfy statutory minimum federal, state and local tax obligations associated with the vesting of their restricted common shares. During the three monthsyear ended December 31, 2019, no2021, 13,062 restricted common shares were surrendered.
In March 2020, our Board of Trustees authorized a share repurchase program for up to $200 million of the Company’s common shares. During the year ended December 31, 2020, we repurchased 5,873,923 shares at a weighted average share price of $9.22 amounting to $54.1 million. During the year ended December 31, 2021, no shares were repurchased.
Equity Compensation Plan Information
Information regarding equity compensation plans is presented in Part III, Item 12 of this Annual Report on Form 10-K and incorporated herein by reference.
| Year Ended December 31, | |||||||||||||||||||
| (Amounts in thousands, except per share amounts) | 2019 | 2018 | 2017 | 2016 | 2015(4) | ||||||||||||||
| Operating Data: | |||||||||||||||||||
Rental revenue(1) | $ | 384,405 | $ | 411,298 | $ | 365,082 | $ | 321,719 | $ | 316,484 | |||||||||
| Management and development fees | 1,900 | 1,469 | 1,535 | 1,759 | 2,261 | ||||||||||||||
| Income from acquired leasehold interest | — | — | 39,215 | — | — | ||||||||||||||
| Other income | 1,344 | 1,393 | 1,210 | 2,498 | 4,200 | ||||||||||||||
| Total revenue | 387,649 | 414,160 | 407,042 | 325,976 | 322,945 | ||||||||||||||
| Total expenses | 283,781 | 292,295 | 245,278 | 192,958 | 224,869 | ||||||||||||||
| Net income | 116,197 | 116,963 | 72,938 | 96,630 | 41,348 | ||||||||||||||
| Net income attributable to operating partnership | (6,699 | ) | (11,768 | ) | (5,824 | ) | (5,812 | ) | (2,547 | ) | |||||||||
| Net (income) loss attributable to consolidated subsidiaries | 25 | (45 | ) | (44 | ) | (3 | ) | (16 | ) | ||||||||||
Net income attributable to common shareholders(2) | $ | 109,523 | $ | 105,150 | $ | 67,070 | $ | 90,815 | $ | 38,785 | |||||||||
Earnings per common share - Basic(3): | 0.91 | 0.92 | 0.62 | 0.91 | 0.39 | ||||||||||||||
Earnings per common share - Diluted(3): | 0.91 | 0.92 | 0.61 | 0.91 | 0.39 | ||||||||||||||
Weighted average shares outstanding - Basic(3) | 119,751 | 113,863 | 107,132 | 99,364 | 99,252 | ||||||||||||||
Weighted average shares outstanding - Diluted(3) | 119,896 | 114,051 | 118,390 | 99,794 | 99,278 | ||||||||||||||
| Dividends declared per common share | 0.88 | 0.88 | 0.88 | 0.82 | 0.80 | ||||||||||||||
Not applicable.
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| Year Ended December 31, | |||||||||||||||||||
| (Amounts in thousands) | 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||
| Balance Sheet Data as of period end: | |||||||||||||||||||
| Real estate, net of accumulated depreciation | $ | 2,076,839 | $ | 2,123,120 | $ | 2,084,727 | $ | 1,597,423 | $ | 1,575,530 | |||||||||
Total assets(1) | 2,846,358 | 2,798,994 | 2,820,808 | 1,904,138 | 1,918,931 | ||||||||||||||
| Mortgages payable, net | 1,546,195 | 1,550,242 | 1,564,542 | 1,197,513 | 1,233,983 | ||||||||||||||
Total liabilities(1) | 1,831,582 | 1,793,017 | 1,830,267 | 1,408,021 | 1,447,477 | ||||||||||||||
| Noncontrolling interests in operating partnership | 46,536 | 100,822 | 100,218 | 35,451 | 33,177 | ||||||||||||||
| Total equity | 1,014,776 | 1,005,977 | 990,541 | 496,117 | 471,454 | ||||||||||||||
| Other Data: | |||||||||||||||||||
| Cash flow Statement Data: | |||||||||||||||||||
| Provided by operating activities | 156,400 | 137,040 | 157,898 | 137,249 | 138,078 | ||||||||||||||
| Used in investing activities | (2,521 | ) | (64,803 | ) | (295,732 | ) | (59,230 | ) | (66,415 | ) | |||||||||
| (Used in) provided by financing activities | (126,265 | ) | (115,556 | ) | 498,489 | (115,858 | ) | 93,795 | |||||||||||
| Year Ended December 31, | |||||||||||||||||||
| (Amounts in thousands, except per unit amounts) | 2019 | 2018 | 2017 | 2016 | 2015(4) | ||||||||||||||
| Operating Data: | |||||||||||||||||||
Rental revenue(1) | $ | 384,405 | $ | 411,298 | $ | 365,082 | $ | 321,719 | $ | 316,484 | |||||||||
| Management and development fees | 1,900 | 1,469 | 1,535 | 1,759 | 2,261 | ||||||||||||||
| Income from acquired leasehold interest | — | — | 39,215 | — | — | ||||||||||||||
| Other income | 1,344 | 1,393 | 1,210 | 2,498 | 4,200 | ||||||||||||||
| Total revenue | 387,649 | 414,160 | 407,042 | 325,976 | 322,945 | ||||||||||||||
| Total expenses | 283,781 | 292,295 | 245,278 | 192,958 | 224,869 | ||||||||||||||
| Net income | 116,197 | 116,963 | 72,938 | 96,630 | 41,348 | ||||||||||||||
| Net (income) loss attributable to consolidated subsidiaries | 25 | (45 | ) | (44 | ) | (3 | ) | (16 | ) | ||||||||||
Net income attributable to unitholders(2) | $ | 116,222 | $ | 116,918 | $ | 72,894 | $ | 96,627 | $ | 41,332 | |||||||||
Earnings per unit - Basic(3): | 0.92 | 0.92 | 0.62 | 0.91 | 0.39 | ||||||||||||||
Earnings per unit - Diluted(3): | 0.92 | 0.92 | 0.61 | 0.91 | 0.39 | ||||||||||||||
Weighted average units outstanding - Basic(3) | 126,333 | 126,198 | 117,779 | 105,455 | 105,276 | ||||||||||||||
Weighted average units outstanding - Diluted(3) | 126,478 | 126,386 | 118,390 | 106,099 | 105,374 | ||||||||||||||
| Distributions declared per unit | 0.88 | 0.88 | 0.88 | 0.82 | 0.80 | ||||||||||||||
| Year Ended December 31, | |||||||||||||||||||
| (Amounts in thousands) | 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||
| Balance Sheet Data as of period end: | |||||||||||||||||||
| Real estate, net of accumulated depreciation | $ | 2,076,839 | $ | 2,123,120 | $ | 2,084,727 | $ | 1,597,423 | $ | 1,575,530 | |||||||||
Total assets(1) | 2,846,358 | 2,798,994 | 2,820,808 | 1,904,138 | 1,918,931 | ||||||||||||||
| Mortgages payable, net | 1,546,195 | 1,550,242 | 1,564,542 | 1,197,513 | 1,233,983 | ||||||||||||||
Total liabilities(1) | 1,831,582 | 1,793,017 | 1,830,267 | 1,408,021 | 1,447,477 | ||||||||||||||
| Total equity | 1,014,776 | 1,005,977 | 990,541 | 496,117 | 471,454 | ||||||||||||||
| Other Data: | |||||||||||||||||||
| Cash flow Statement Data: | |||||||||||||||||||
| Provided by operating activities | 156,400 | 137,040 | 157,898 | 137,249 | 138,078 | ||||||||||||||
| Used in investing activities | (2,521 | ) | (64,803 | ) | (295,732 | ) | (59,230 | ) | (66,415 | ) | |||||||||
| (Used in) provided by financing activities | (126,265 | ) | (115,556 | ) | 498,489 | (115,858 | ) | 93,795 | |||||||||||
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in Part II, Item 8 of this Annual Report on Form 10-K.
This section of this Annual Report on Form 10-K generally discusses 20192021 and 20182020 items and provides a year-to-year comparison between 20192021 and 2018.2020. A discussion of 20172019 items and year-to-year comparisons between 20182020 and 20172019 are not included in this Annual Report on Form 10-K but can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.2020.
Executive Overview
Urban Edge Properties (“UE”, “Urban Edge”, or the “Company”) (NYSE: UE) is a Maryland real estate investment trust that manages, develops, redevelops, and acquires retail real estate, primarily in the Washington, D.C. to Boston corridor with a concentration on the New York metropolitan area. Urban Edge Properties LP (“UELP” or the “Operating Partnership”) is a Delaware limited partnership formed to serve as UE’s majority-owned partnership subsidiary and to own, through affiliates, all of our real estate properties and other assets. Unless the context otherwise requires, references to “we”, “us” and “our” refer to Urban Edge Properties and UELP and their consolidated entities/subsidiaries.
The Operating Partnership’s capital includes general and common limited partnership interests in the operating partnership (“OP Units”). As of December 31, 2019,2021, Urban Edge owned approximately 95.4%96.2% of the outstanding common OP Units with the remaining limited OP Units held by members of management, Urban Edge’s Board of Trustees and contributors of property interests acquired. Urban Edge serves as the sole general partner of the Operating Partnership. The third party unitholders have limited rights over the Operating Partnership such that they do not have characteristics of a controlling financial interest. As such, the Operating Partnership is considered a variable interest entity (“VIE”), and the Company is the primary beneficiary that consolidates it. The Company’s only investment is the Operating Partnership. The VIE’s assets can be used for purposes other than the settlement of the VIE’s obligations and the Company’s partnership interest is considered a majority voting interest.
As of December 31, 2019,2021, our portfolio was comprised 74of 68 shopping centers, fourfive malls and a warehouse parktwo industrial parks totaling approximately 15.217.0 million square feet.
COVID-19 PandemicOur operating strategy is to maximize
On January 30, 2020, the valuespread of the COVID-19 outbreak was declared a Public Health Emergency of International Concern by the World Health Organization ("WHO"). On March 11, 2020, the WHO characterized the COVID-19 outbreak as a global pandemic. Early in the pandemic, the tri-state area of Connecticut, New York and New Jersey enforced preventive measures including mandatory business closures for non-essential businesses and quarantines or “shelter-in-place” requirements. Given our geographic concentration in the Northeast, many of our tenants faced adverse financial consequences from reduced business operations and social distancing requirements as a result of the COVID-19 pandemic. The Company’s results for 2020 were negatively impacted by tenant fallout from COVID-driven bankruptcies, uncollected or disputed rents from impacted tenants, and from abatements granted to tenants facing financial hardships due to the pandemic.
Throughout 2021, the widespread distribution of vaccines and reduction of restrictions boosted economic confidence and increased consumer spending, resulting in a strengthened existing assets through proactive management encompassing continuous asset evaluationretail tenant base and increase in demand for highest-and-best-use; efficientspace. The Company reached record leasing volumes with 161 total new leases, renewals and cost-conscious operations that minimize retailer operating expenseoptions, totaling approximately 2 million square feet. Foot traffic at our properties returned to near pre-pandemic levels, which has increased sales volume for our tenants and enhancewe have collected 98% of base rents billed during the year, inclusive of rent deferrals granted as part of our COVID-19 tenant relief efforts.
2021 Highlights
Set forth below are highlights of our development and redevelopment projects, property quality;acquisitions and targeteddispositions, and leasing activities:
•Acquired Woodmore Towne Centre in December 2021 for a purchase price of $198.1 million, including transaction costs. The property, located in Glenarden, MD, sits on 83 acres including an adjacent 22-acre vacant land parcel and is anchored by top-tier national and regional tenants including grocers Wegmans and Costco;
•Acquired two industrial warehouses aggregating 275,000 sf, for a total purchase price of $56.1 million, including transaction costs. The two properties, located at 601 Murray Road and 151 Ridgedale Avenue, are adjacent to desirable tenants. During 2019 we:our existing 943,000 sf warehouse park in East Hanover, NJ;
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•Terminated our remaining leases with Kmart and Sears at Bruckner Commons, The Outlets at Montehiedra, and Sunrise Mall for $20 million, effective October 15, 2021. Controlling these anchor spaces is a critical aspect of the plans we have under way to reposition and redevelop these spaces; •Stabilized five redevelopment projects aggregating $29.3 million, two of which stabilized during the fourth quarter. The 102,000 sf CubeSmart self-storage facility developed on excess land at Tonnelle Commons reached 87% occupancy. Additionally, the build-out of Fun City was completed at our property in Salem, NH, which opened in November 2021; •Activated six new redevelopment projects related to anchor leases executed during the year. These projects have an estimated cost of $102.2 million, of which $95.2 million remains to be funded as of December 31, 2021 and are expected to generate an approximate 8% unleveraged yield; •Signed 57 new leases totaling 677,817 square feet, including 46 new leases |
•Renewed or extended 104 leases totaling 1,259,467 square feet, including 97 leases on a same-space(1) basis totaling 1,247,758 square feet at an average rental rate of $20.69 per square foot on a GAAP basis and $20.52 per square foot on a cash basis, generating average rent spreads of 11.6%10.9% on a GAAP basis and 7.3%3.5% on a cash basis.
2022 Outlook
•Leasing vacant spaces, proactively extending expiring leases, at higher rents, processingmanaging the exercise of tenant options and, when possible, replacing underperforming tenants with tenantsoperators that can pay higher rents;rents and positively impact our properties;
There can be no assurance that we will be able to execute on our growth strategy, especially given the ongoing economic uncertainty. See Forward-Looking Statements in this Annual Report on Form 10-K.
(1) | ||||||||||||||
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Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, referred to as “GAAP”, requires management to make estimates and assumptions that in certain circumstances affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and revenue and expenses. These estimates are prepared using management’s best judgment, after considering past and current events and economic conditions. In addition, certain information relied upon by management in preparing such estimates includes internally generated financial and operating information, external market information, when available, and when necessary, information obtained from consultations with third party experts. Actual results could differ from these estimates. A discussion of possible risks which may affect these estimates is included in “Item 1A. Risk Factors” of this Annual Report on Form 10-K. Management considers an accounting estimate to be critical if changes in the estimate could have a material impact on our consolidated results of operations or financial condition.
Our significant accounting policies are more fully described in Note 3 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K; however, the most critical10-K. The following accounting policies, which involve the use of estimates and assumptions as to future uncertainties and, therefore, may result in actual amounts that differ from estimates are as follows:
Revenue Recognition and Receivables - Estimating Collectibility
Rental revenue comprises revenue from fixed and variable lease payments, as designated within tenant operating leases—. The natureComponents of our businessthis include contractual rents arising from tenant operating lease agreements, tenant expense reimbursements, and straight-line rental income. We evaluate the collectibility of amounts due from tenants and disputed enforceable charges on both a lease-by-lease and a portfolio-level basis, which result from the inability of tenants to make required payments under their operating lease agreements. We recognize changes in the collectibility assessment of these operating leases as an owner, redeveloper and operator of retail shopping centers means that we invest significant amounts of capital into our properties. Depreciation, amortization and maintenance costs relatingadjustments to our properties constitute substantial costs for us as well as the industry as a whole. Real estate is capitalized and depreciated on a straight-line basisrental revenue in accordance with GAAPASC 842 Leases which are recorded as rental revenue deemed uncollectible and consistent with industry standardsare included within the line items Rental revenue on our consolidated statements of income.
Management exercises judgement when evaluating the collectibility of these receivables and will look to both quantitative and qualitative factors. Such factors include tenants’ current credit status, either from third parties or using an internal risk assessment, payment history, amount of outstanding receivables, tenant sales performance, potential liquidity and current economic and sector specific trends. Tenant receivables, and receivables arising from the straight-lining of rents, are written-off directly when management deems the collectibility of substantially all future lease payments from a specific lease is not probable, at which point, the Company will begin recognizing revenue from such leases prospectively, based on our best estimatesactual cash received. This write-off effectively reduces cumulative non-cash rental income recognized from the straight-lining of rents since lease commencement. If the Company subsequently determines that it is probable it will collect substantially all of the assets’ physicallessee’s remaining lease payments under the lease term, the Company will reinstate the receivable balance, including those arising from the straight-lining of rents. Changes in our assessments of collectibility are recognized as adjustments to rental revenue in accordance with ASC 842.
These assessments are inherently sensitive as they are based on the judgement of management and economic useful lives which range from oneinformation available at the time of evaluation. We routinely reassess the quantitative and qualitative factors used to 40 years.derive these estimates and believe the methods and assumptions noted above to be reasonable in evaluating collectibility. We periodically reviewhave not had any changes to the estimated lives of our assetsmethods or assumptions used to evaluate collectibility. Although we routinely reassess these estimates, taking into consideration all information available and implement changes, as necessary,future projections, they are subject to these estimates. These assessmentsuncertainty and have a direct impact on our net income. Real estate is carried at cost, net of accumulated depreciationActual results may differ from these estimates and amortization. Expenditures for ordinary maintenance and repairs are expensed to operations as they are incurred. Significant renovations that improve or extend the useful lives of assets are capitalized.can have a material impact on our operating results.
Real estate undergoing redevelopment activities is also carried at cost but no depreciation is recognized. All property operating expenses directly associated withEstate - Estimates Related to Valuing Acquired Assets and attributable to the redevelopment, including interest, are capitalized to the extent the capitalized costs of the property do not exceed the estimated fair value of the property when completed. If the cost of the redeveloped property, including the net book value of the existing property, exceeds the estimated fair value of redeveloped property, the excess is charged to impairment expense. The capitalization period begins when redevelopment activities are underway and ends when the project is substantially complete. Generally, a redevelopment is considered substantially completed and ready for its intended use upon completion of tenant improvements, but no later than one year from completion of major construction activity. We make judgments as to the time period over which to capitalize such costs and these assumptions have a direct impact on net income because capitalized costs are not subtracted in calculating net income.
Upon the acquisition of real estate, we assess the fair value of acquired assets (including land, buildings and improvements, identified intangibles, such as acquired above and below-market leases, acquired in-place leases and tenant relationships) and acquired liabilities. We assess fair value based on estimated cash flow projections utilizing appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known trends, and market/economic conditions. Based on these estimates, we allocate the purchase price to the applicable assets and liabilities based on their relative fair values at date of acquisition.
In allocating the purchase price to identified intangible assets and liabilities of an acquired property, the value of above-market and below-market leases is estimated based on the present value of the difference between the contractual amounts, including fixed rate below-market renewal options, to be paid pursuant to the in-place leases and our estimate of the market lease rates and other lease provisions for comparable leases measured over a period equal to the estimated remaining term of the lease. Tenant related intangibles and improvements are amortized on a straight-line basis over the related lease term, including any
27
bargain renewal options. We amortize identified intangibles that have finite lives over the period they are expected to contribute directly or indirectly to the future cash flows of the property or business acquired. We consider qualitative and quantitative factors in evaluating the likelihood of a tenant exercising a below market renewal option and include such renewal options in the calculation of in-place leases. If the value of below-market lease intangibles includes renewal option periods, we include such renewal periods in the amortization period utilized. If a lease terminates prior to its stated expiration, all unamortized amounts relating to that lease are written off.
Since the assessment of fair value and allocation of these amounts is made at the time of acquisition, they are subject to future changes in market conditions and tenants’ ability to continue operations and their exercise of options and renewals. In the case that these assumptions change materially, they could have a material impact on our results and financial statements. During 2021, we acquired three properties and utilized the above factors, including the use of a third-party, to allocate the purchase price of these properties among various assets and liabilities. Further information on these allocations can be found in Part II, Item 8, Note 4 of this Annual Report on Form 10-K. We have had no changes to our methods of fair value assessment and allocations during the year ended December 31, 2021.
Real Estate - Estimates Related to Impairments
Our properties are individually reviewedevaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment exists when the carrying amount of an asset exceeds the aggregate projected future cash flows over the anticipated holding period on an undiscounted basis taking into account the appropriate capitalization rate.rate in determining a future terminal value. An impairment loss is measured based on the excess of the property’s carrying amount over its estimated fair value. Estimated fair value may be based on discounted future cash flows utilizing appropriate discount and capitalization rates and, in addition to available market
information, third-party appraisals, broker selling estimates or sale agreements under negotiation. Impairment analyses are based on our current plans, intended holding periods and available market information at the time the analyses are prepared. If our estimates of the projected future cash flows orchange based on uncertain market conditions, change, our evaluation of impairment losses may be different and such differences could be material to our consolidated financial statements. The carrying value of a property may also be individually reassessed in the event a casualty occurs at that property. Casualty events may include property damage from a natural disaster or fire. When such an event occurs, management estimates the net book value of assets damaged over the property’s total gross leasable area and adjusts the property’s carrying value to reflect the damages. Estimates are subjective and may change if additional damage is later assessed or if future cash flows are revised.
Recent Accounting Pronouncements
On June 1, 2017,January 11, 2021, the Public Company Accounting Oversight Board (PCAOB)SEC issued Auditing Standard 3101, The Auditor's ReportFinal Rule Release No. 33-10890, Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information. This rule, which became effective on an AuditFebruary 10, 2021, adopts amendments to modernize, simplify and enhance certain financial disclosure requirements in Regulation S-K. Specifically, the amendments eliminate the requirement for Selected Financial Data, streamline the requirement to disclose Supplementary Financial Information, and amend Management’s Discussion & Analysis of Financial Statements WhenCondition and Results of Operations (‘‘MD&A’’). We early adopted the Auditor Expresses an Unqualified Opinion (“AS 3101”). As a result of AS 3101, the most significant changeamendments to the auditor’s report on the financial statements is a new requirement to describe critical audit matters arising from the audit of the current period’s financial statementstwo items resulting in the auditor’s report.elimination of Item 301, Selected Financial Data, and the omission of Item 302(a), Supplementary Financial Information. The requirements relatedamendments to critical audit mattersItem 303(a)(b) MD&A were adopted in AS 3101 were effective for audits of fiscal years ending on or after June 30, 2019, for large accelerated filers; and for fiscal years ending on or after December 15, 2020, for all other companies to which the requirements apply. Therefore, critical audit matters are included in the Report of Independent Registered Public Accounting Firm for Urban Edge Properties’ consolidated financial statements as of andour current Form 10-K for the year ended December 31, 2019, and will be included in the Report of Independent Registered Public Accounting Firm for Urban Edge Properties LP’s financial statements as of and for the year ended December 31, 2020.
See Note 3 to the audited consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for information regarding recent accounting pronouncements that may affect us. Additionally, see Note 7 to the audited consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for information regarding recent amendments to the Internal Revenue Code.
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Results of Operations
We derive substantially all of our revenue from rents received from tenants under existing leases on each of our properties. This revenue includes fixed base rents, recoveries of expenses that we have incurred and that we pass through to the individual tenants and percentage rents that are based on specified percentages of tenants’ revenue, in each case as provided in the respective leases.
Our primary cash expenditures consist of our property operating and capital costs, general and administrative expenses, and interest and debt expense. Property operating expenses include: real estate taxes, repairs and maintenance, management expenses, insurance and utilities; general and administrative expenses, which include payroll, professional fees, information technology, office expenses and other administrative expenses; and interest and debt expense primarily consistconsists of interest on our mortgage debt. In addition, we incur substantial non-cash charges for depreciation and amortization on our properties. We also capitalize certain expenses, such as taxes, interest and salaries related to properties under development or redevelopment until the property is ready for its intended use.
Our consolidated results of operations often are not comparable from period to period due to the impact of property acquisitions, dispositions, the timing and magnitude of bankruptcies by anchor tenants, developments, redevelopments and changes in accounting policies. The results of operations of any acquired properties are included in our financial statements as of the date of acquisition. Our results of operations are affected by national, regional and local economic conditions, as well as macroeconomic conditions, which are at times subject to volatility and uncertainty. The current COVID-19 pandemic has increased volatility and uncertainty and has created significant economic disruption in many markets. Vaccinations for the COVID-19 virus have been widely distributed among the general U.S. population, which has facilitated the loosening of restrictions previously mandated on our tenants identified as nonessential; however the potential emergence of vaccine-resistant variants of COVID-19 may trigger restrictions to be put back in place. Such restrictions may include mandatory business shut-downs, reduced business operations and social distancing requirements. The long-term consequences of the various restrictions taken during the pandemic on consumer behavior is currently unknown. Specifically, the revenue and sales volume for certain tenants identified as nonessential may decline significantly as demand for their services and products declines potentially longer term. We are actively managing our business to respond to the ongoing economic and social impact and uncertainty relating to the COVID-19 pandemic; however, our future near term and potentially longer term results of operations may be significantly adversely affected. See “Pandemic-Related Contingencies” under Liquidity and Capital Resources and “Item 1A. Risk Factors” for more information.
The following provides an overview of our key non-GAAP measures based on our consolidated results of operations (refer to cash NOI, same-property cash NOI and Funds From Operations applicable to diluted common shareholders (“FFO”) described later in this section):
| Year Ended December 31, | Year Ended December 31, | |||||||||||||||||
| (Amounts in thousands) | 2019 | 2018 | (Amounts in thousands) | 2021 | 2020 | |||||||||||||
| Net income | $ | 116,197 | $ | 116,963 | Net income | $ | 107,815 | $ | 97,750 | |||||||||
FFO applicable to diluted common shareholders(1) | 167,123 | 168,511 | FFO applicable to diluted common shareholders(1) | 180,270 | 156,326 | |||||||||||||
Cash NOI(2) | 234,288 | 226,965 | ||||||||||||||||
Same-property cash NOI(2) | 199,865 | 203,621 | ||||||||||||||||
NOI(2) | NOI(2) | 223,811 | 200,383 | |||||||||||||||
Same-property NOI(2) | Same-property NOI(2) | 196,005 | 171,453 | |||||||||||||||
(1) Refer to page 3533 for a reconciliation to the nearest generally accepted accounting principles (“GAAP”) measure.
(2) Refer to page 3432 for a reconciliation to the nearest GAAP measure.
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Comparison of the Year Ended December 31, 20192021 to December 31, 20182020
Net income for the year ended December 31, 20192021 was $116.2$107.8 million, compared to net income of $117.0$97.8 million for the year ended December 31, 2018.2020. The following table summarizes certain line items from our consolidated statements of income that we believe are important in understanding our operations and/or those items which significantly changed in the year ended December 31, 20192021 as compared to the same period of 2018:2020:
| For the year Ended December 31, | For the year Ended December 31, | |||||||||||||||||||||||||||||||||
| (Amounts in thousands) | 2019 | 2018 | $ Change | (Amounts in thousands) | 2021 | 2020 | $ Change | |||||||||||||||||||||||||||
| Total revenue | $ | 387,649 | $ | 414,160 | $ | (26,511 | ) | Total revenue | $ | 425,082 | $ | 330,095 | $ | 94,987 | ||||||||||||||||||||
| Depreciation and amortization | 94,116 | 99,422 | (5,306 | ) | ||||||||||||||||||||||||||||||
| Real estate taxes | 60,179 | 63,655 | (3,476 | ) | Real estate taxes | 63,844 | 60,049 | $ | 3,795 | |||||||||||||||||||||||||
| Property operating expenses | 64,062 | 78,360 | (14,298 | ) | Property operating expenses | 68,531 | 56,126 | 12,405 | ||||||||||||||||||||||||||
| General and administrative | 38,220 | 34,984 | 3,236 | General and administrative | 39,152 | 48,682 | (9,530) | |||||||||||||||||||||||||||
| Casualty and impairment loss, net | 12,738 | 4,426 | 8,312 | Casualty and impairment loss, net | 468 | 3,055 | (2,587) | |||||||||||||||||||||||||||
| Lease expense | 14,466 | 11,448 | 3,018 | |||||||||||||||||||||||||||||||
| Gain on sale of real estate | 68,632 | 52,625 | 16,007 | Gain on sale of real estate | 18,648 | 39,775 | (21,127) | |||||||||||||||||||||||||||
| Gain on sale of lease | 1,849 | — | 1,849 | |||||||||||||||||||||||||||||||
| Interest income | 9,774 | 8,336 | 1,438 | Interest income | 360 | 2,599 | (2,239) | |||||||||||||||||||||||||||
| Interest and debt expense | 66,639 | 64,868 | 1,771 | Interest and debt expense | 57,938 | 71,015 | (13,077) | |||||||||||||||||||||||||||
| Gain on extinguishment of debt | — | 2,524 | (2,524 | ) | Gain on extinguishment of debt | — | 34,908 | (34,908) | ||||||||||||||||||||||||||
| Income tax expense | 1,287 | 3,519 | (2,232 | ) | ||||||||||||||||||||||||||||||
| Income tax (benefit) expense | Income tax (benefit) expense | 1,139 | (38,996) | 40,135 | ||||||||||||||||||||||||||||||