UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

For the quarterly period ended June 30, 20182021

OR

For the transition period from to

Commission file number 1-38517

RETAIL VALUE INC.

(Exact name of registrant as specified in its charter)

3300 Enterprise Parkway, Beachwood, Ohio 44122

(Address of principal executive offices - zip code)

(216) 755-5500

(Registrant’s telephone number, including area code)code:  (216) 755-5500

(Former name, former address and former fiscal year, if changed since last report)Securities registered pursuant to Section 12(b) of the Act:

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

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

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

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

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

As of July 31, 2018,30, 2021, the registrant had 18,465,046 outstanding21,117,150 shares of common shares,stock, $0.10 par value per share.

share, outstanding.

Retail Value Inc.

QUARTERLY REPORT ON FORM 10-Q

QUARTER ENDED June 30, 20182021

TABLE OF CONTENTS

Retail Value Inc.

COMBINEDCONSOLIDATED BALANCE SHEETS

(Unaudited, In thousands)  unaudited, in thousands, except share amounts)

The accompanying notes are an integral part of these condensed combinedconsolidated financial statements.

Retail Value Inc.

COMBINEDCONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited, In thousands)unaudited, in thousands, except per share amounts)

The accompanying notes are an integral part of these condensed combinedconsolidated financial statements.

Retail Value Inc.

COMBINEDCONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited, In thousands)unaudited, in thousands, except per share amounts)

The accompanying notes are an integral part of these condensed combinedconsolidated financial statementsstatements.

Retail Value Inc.

COMBINED STATEMENTCONSOLIDATED STATEMENTS OF EQUITY

(Unaudited, Inunaudited, in thousands)

The accompanying notes are an integral part of these condensed combinedconsolidated financial statements.

Retail Value Inc.

COMBINEDCONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, Inunaudited, in thousands)

The accompanying notes are an integral part of these condensed combinedconsolidated financial statements.

Notes to Condensed CombinedConsolidated Financial Statements

On July 1, 2018, DDR Corp. (“DDR” or the “Manager”) completed the separationNature of Business

Retail Value Inc., an Ohio corporation and its related consolidated real estate subsidiaries (collectively, the “Company” or “RVI”) were formed in December 2017 that owns and operatesowned and operated a portfolio of 48 real estate assets that includedretail shopping centers, comprised of 36 continental U.S. assets and 12 Puerto Rico assets, (collectively, “RVI”at the “RVI Predecessor” or the “Company”time of their separation from SITE Centers Corp. (“SITE Centers”), into an independent public company. RVI’s properties comprised 16 on July 1, 2018.  The Company focuses on realizing value in its business through operations and sales of its assets.  At June 30, 2021, RVI owned 17 retail shopping centers that included 8 continental U.S. assets and 9 Puerto Rico assets (including 4 enclosed malls) comprising 7.3 million square feet of Company-owned gross leasable area (“GLA”) and are located in 178 states and Puerto Rico.  These properties serve as direct or indirect collateral for a mortgage loan which, as of June 30, 2021, had an aggregate principal balance of $214.5 million.

In connection with the separation from DDR, on July 1, 2018, the Company and DDR entered into a separation and distribution agreement (the “Separation and Distribution Agreement”), pursuant to which, among other things, DDR agreed to transfer properties and certain related assets, liabilities and obligations to RVI, and to distribute 100% of the outstanding common shares of RVI to holders of record of DDR’s common shares as of the close of business on June 26, 2018, the record date. On July 1, 2018, holders of DDR’s common shares received one common share of RVI for every ten shares of DDR common stock held on the record date.  In connection with the separation from DDR, DDRSITE Centers, SITE Centers retained 1,000 shares of RVI’s series A preferred stock having an aggregate dividend preference equal to $190 million, which amount may increase by up to an additional $10 million depending on the amount of aggregate gross proceeds generated by RVI asset sales (Note 7).sales.

On July 1, 2018, the Company and DDRSITE Centers also entered into an external management agreement (the “External Management Agreement”) which, together with various property management agreement,agreements, governs the fees, terms and conditions pursuant to which DDR will manageSITE Centers manages RVI and its properties.  DDR will provideSITE Centers provides RVI with day-to-day management, subject to supervision and certain discretionary limits and authorities granted by the RVI Board and theof Directors.  The Company isdoes not expected to have any employees.  In general, either DDRSITE Centers or RVI may terminate the management agreements on December 31, 2019,2021, or at the end of any six-month renewal period thereafter.  DDRSITE Centers and RVI also entered into a tax matters agreement whichthat governs the rights and responsibilities of the parties following theRVI’s separation from DDRSITE Centers with respect to various tax matters and provides for the allocation of tax-related assets, liabilities and obligations.

The Company intends to elect to be treated as a Real Estate Investment Trust (“REIT”) for U.S. federal income tax purposes, commencing with the taxable year ending December 31, 2018, and intends to maintain its status as a REIT for U.S. federal income tax purposesUse of Estimates in future periods.

Through June 30, 2018, the Company is operated as one segment, which owns, operates and finances shopping centers. The tenant basePreparation of the Company primarily includes national and regional retail chains and local retailers. Consequently, the Company’s credit risk is concentrated in the retail industry.Financial Statements

The accompanying historical condensed combined financial statements and related notespreparation of the Company do not represent the balance sheet, statement of operations and cash flows of a legal entity, but rather a combination of entities under common control that have been “carved-out” of DDR’s consolidated financial statements in accordanceconformity with accounting principles generally accepted in the United States (“U.S. GAAP”). All intercompany transactions and balances have been eliminated in combination. The preparation of these combined financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the dates of the combined financial statements and the reported amounts of revenues and expenses during the reportingyear.  The Company considered impacts to its estimates related to the COVID-19 pandemic, as appropriate, within its unaudited condensed consolidated financial statements, and there may be changes to those estimates in future periods.  The Company believes that its accounting estimates are appropriate after giving consideration to the uncertainties surrounding the severity and duration of the COVID‑19 pandemic.  Actual results could differ from those estimates.

These combined financial statements reflect the revenues and direct expenses of the RVI Predecessor and include material assets and liabilities of DDR that are specifically attributable to the Company. RVI Predecessor equity in these combined financial statements represents the excess of total assets over total liabilities. RVI Predecessor equity is impacted by contributions from and distributions to DDR, which are the result of treasury activities and net funding provided by or distributed to DDR prior to the separation from DDR, as well as the allocated costs and expenses described below. The combined financial statements also include the consolidated results of certain of the Company’s wholly-owned subsidiaries, as applicable. All significant inter-company balances and transactions have been eliminated in consolidation.

The combined financial statements include the revenues and direct expenses of the RVI Predecessor. Certain direct costs historically paid by the properties but contracted through DDR include, but are not limited to, management fees, insurance, compensation costs and out-of-pocket expenses directly related to the management of the properties (Note 10). Further, the combined financial statements include an allocation of indirect costs and expenses incurred by DDR related to the Company, primarily consisting of compensation and other general and administrative costs that have been allocated using the relative percentage of property revenue of the Company and DDR management’s knowledge of the Company. In addition, the combined financial

statements reflect interest expense on DDR unsecured debt, excluding debt that is specifically attributable to the Company (Note 5); interest expense was allocated by calculating the unencumbered net assets of each property held by the Company as a percentage of DDR’s total consolidated unencumbered net assets and multiplying that percentage by the interest expense on DDR unsecured debt. Included in the allocation of General and Administrative expenses for the six months ended June 30, 2018 and 2017, are employee separation charges aggregating $1.1 million and $3.7 million, respectively, related to DDR’s management transition and staffing reduction. The amounts allocated in the accompanying combined financial statements are not necessarily indicative of the actual amount of such indirect expenses that would have been recorded had the RVI Predecessor been a separate independent entity. DDR believes the assumptions underlying DDR’s allocation of indirect expenses are reasonable.

The Company will seek to realize value for its shareholders through operations and asset sales. However, these combined financial statements are presented on a going concern basis and, consequently, no adjustments to the combined financial statements have been made.

Unaudited Interim Financial Statements

These combined financial statements have been prepared by the Company in accordance with U.S. GAAP for interim financial information and the applicable rules and regulations of the Securities and Exchange Commission.  Accordingly, they do not include all information and footnotes required by U.S. GAAP for complete financial statements.  However, in the opinion of management, the interim financial statements include all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the results of the periods presented.  The results of operations for the three and six months ended June 30, 20182021 and 2017,2020, are not necessarily indicative of the results that may be expected for the full year.  These condensed consolidated financial statements should be read in conjunction with the Company’s condensed combinedaudited financial statements and notes thereto included in Amendment No. 1 to the Company’s Annual Report on Form 10 filed with10-K for the Securities and Exchange Commission on June 14, 2018.  year ended December 31, 2020.

Statements of Cash Flows and Supplemental Disclosure of Non-Cash Investing and Financing Information

Non-cash investing and financing activities are summarized as follows (in millions):

New Accounting Standards Adopted

Impact of COVID-19 Pandemic on Revenue Recognitionand Receivables

On January 1, 2018,Beginning in March 2020, the Company adoptedretail sector within the new accounting guidance for Revenue from Contracts with Customers (“Topic 606”) using the modified retrospective approach. The guidancecontinental U.S. and Puerto Rico has been applied to contracts that were not completed assignificantly impacted by the COVID-19 pandemic.  Though the impact of the date of the initial application. The core principle of this standard is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Most significantly for the real estate industry, leasing transactions are not within the scope of the new standard.  A majorityCOVID-19 pandemic on tenant operations has varied by tenant category, local conditions and applicable government mandates, a significant number of the Company’s tenant-related revenuetenants have experienced a reduction in sales and foot traffic, and many tenants were forced to limit their operations or close their businesses for a period of time.  The COVID-19 pandemic had a significant impact on the Company’s collection of rents from April 2020 through the end of 2020.

The Company engaged in discussions with most of its larger tenants that failed to satisfy all or a portion of their rent obligations and has agreed to terms on rent-deferral arrangements (and, in a small number of cases, rent abatements) and other lease modifications with a significant number of such tenants, of which $1.0 million remains outstanding under these deferral arrangements at June 30, 2021 for tenants that are not accounted for on the cash basis.  The Company continues to evaluate its options with respect to tenants with which the Company has not reached satisfactory resolution of unpaid rents and has commenced collections actions against several tenants.

For those tenants where the Company is unable to assert that collection of amounts due over the lease term is probable, regardless if the Company has entered into a deferral agreement to extend the payment terms, the Company has categorized these tenants on the cash basis of accounting.  As a result, all existing accounts receivable relating to these tenants have been reserved in full, including straight-line rental income and no rental income is recognized pursuant to lease agreementsfrom such tenants once they have been placed on the cash basis of accounting until payments are received.  The Company will remove the cash basis designation and will be governed byresume recording rental income from such tenants on a straight-line basis at such time it believes collection from the leasing guidance (Topic 842)tenants is probable based upon a demonstrated payment history or a recapitalization event.

During the three and there are no material revenue streams within the scope of Topic 606.  The adoption of this standard did not have a material impact to the Company’s combined financial statements at adoption and for the six months ended June 30, 2018.

Real Estate Sales

On January 1, 2018,2021, the Company adopted Accounting Standards Update (“ASU”) 2017-05, Other Income-Gainsrecorded net uncollectible revenue that resulted in rental income of $2.8 million and Losses$3.1 million, respectively, primarily due to rental income paid in 2021 related to outstanding receivables in 2020 from the Derecognition of Nonfinancial Assets (“Topic 610”). Topic 610 provides that sales of nonfinancial assets, such as real estate, are to be recognized when control of the asset transfers to the buyer, which will occur when the buyer has the ability to direct the use of, or obtain substantially all of the remaining benefits from, the asset. This generally occurs when the transaction closes and consideration is exchanged for control of the asset. The Company adopted Topic 610 using the modified retrospective approach for

contracts that are not completed as of the date of initial application. The adoption of this standard did not have a material impact to the Company’s combined financial statements.

New Accounting Standards to Be Adopted

Accounting for Leases

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases (Topic 842). The amendments in this update govern a number of areas including, but not limited to, accounting for leases, replacing the existing guidance in ASC No. 840, Leases. Under this standard, among other changes in practice, a lessee’s rights and obligations under most leases, including existing and new arrangements, would be recognized as assets and liabilities, respectively,tenants on the balance sheet. Other significant provisionscash basis of this standard include (i) defining the “lease term” to include the non-cancelable period together with periods for which there is a significant economic incentive for the lessee to extend or not terminate the lease, (ii) defining the initial lease liability to be recorded on the balance sheet to contemplate only those variable lease payments that depend on an index or that are in substance “fixed,” (iii) a dual approach for determining whether lease expense is recognized on a straight-line or accelerated basis, depending on whether the lessee is expected to consume more than an insignificant portion of the leased asset’s economic benefits and (iv) a requirement to bifurcate certain lease and non-lease components. The lease standard is effective for fiscal years beginning after December 15, 2018 (including interim periods within those fiscal years), with early adoption permitted. The Company will adopt the standard using the modified retrospective approach for financial statements issued after January 1, 2019.

The Company is in the process of evaluating the impact that the adoption of ASU No. 2016-02 will have on its combined financial statements and disclosures. The Company has currently identified several areas within its accounting policies it believes could be impacted by the new standard, including where the Company is a lessor under its tenant lease agreements and a lessee under its ground leases. The Company may have a change in presentation on its combined statements of operations with regards to Recoveries from Tenants, which includes reimbursements from tenants for certain operating expenses, real estate taxes and insurance. The Company also has certain lease arrangements with its tenants for space at its shopping centers in which the contractual amounts due under the lease by the lessee are not allocated between the rental and expense reimbursement components (“Gross Leases”).accounting. The aggregate amount of uncollectible revenue earned under Gross Leases is presented as Minimum rents inreported during the combined statements of operations. In July 2018, the FASB approved targeted improvementsquarter primarily was due to the Leases standard that provides lessors with a practical expedient, by class of underlying asset, to avoid separating non-lease components from the lease component of certain contracts. Such practical expedient is limited to circumstances in which (i) the timing and pattern of transfer are the same for the non-lease component and the related lease component and (ii) the stand alone lease component would be classified as an operating lease if accounted for separately. The Company will elect the practical expedient which would allow the Company the ability to account for the combined component based on its predominant characteristics if the underlying asset meets the two criteria defined above.

In addition, the Company has ground lease agreements in which the Company is the lessee for land beneath all or a portion of the buildings at two shopping centers. Currently, the Company accounts for these arrangements as operating leases. Under the new standard, the Company will record its rights and obligations under these leases as a right of use asset and lease liability on its combined balance sheets. The Company is currently in the process of evaluating the inputs required to calculate the amount that will be recorded on its balance sheet for each ground lease. Lastly, this standard impacts the lessor’s ability to capitalize initial direct costs related to the leasing of vacant space. However, the Company does not believe this change regarding capitalization will have a material impact on its combined financial statements.

Accounting for Credit Losses

In June 2016, the FASB issued an amendment on measurement of credit losses on financial assets held by a reporting entity at each reporting date. The guidance requires the use of a new current expected credit loss ("CECL") model in estimating allowances for doubtful accounts with respect to accounts receivable, straight-line rents receivable and notes receivable. The CECL model requires that the Company estimate its lifetime expected credit loss with respect to these receivables and record allowances that, when deducted from the balance of the receivables, represent the estimated net amounts expected to be collected. This guidance is effective for fiscal years, and for interim reporting periods within those fiscal years, beginning after December 15, 2019. The Company is in the process of evaluating the impact of this guidance.the COVID-19 pandemic.  

Income Taxes

The aggregate net tax basis of the assets for federal income tax purposes was approximately $1.3 billion at June 30, 2021, of which $0.8 billion relates to the assets in Puerto Rico (Note 9).

Other assetsAssets and intangibles consistIntangibles, net consists of the following (in thousands):

Mortgages PayableMortgage Indebtedness

On February 14, 2018, certain wholly-owned subsidiaries of theThe Company entered intohas a mortgage loan, withwhich had an initialoutstanding aggregate principal amount of $1.35 billion. The borrowers’ obligations to pay principal, interest$214.5 million at June 30, 2021, and other amountsis secured, directly and indirectly, by all of its properties.  In June 2021, the Company made a $20.0 million voluntary prepayment on the mortgage loan.  

On March 9, 2021, the Company exercised its first one-year extension option under the mortgage loan are evidenced by certain promissory notes executed byagreement to extend the borrowers, which are referredmaturity date to collectively as the notes, which are secured by, among other things: (i) mortgages encumbering the borrowers’ respective continental U.S. properties (a total of an initial 38 properties); (ii) a pledge of the equity of the Company’s subsidiaries that own the 12 Puerto Rico properties and a pledge of rents and other cash flows, insurance proceeds and condemnation awards in connection with the 12 Puerto Rico properties; and (iii) a pledge of any reserves and accounts of any borrower. Subsequent to closing, the originating lenders placed the notes into a securitization trust that issued and sold mortgage-backed securities to investors.

The loan facility will mature on FebruaryMarch 9, 2021,2022, subject to two 2 remaining one-year extensions at the borrowers’ option conditioned upon, among other items, (i) an event of default shall not be continuing, (ii) in the case of the firstsecond one-year extension option (exercisable March 2022), in addition to (i) above, evidence that the Debt Yield (as defined and calculated in accordance with the loan agreement, but which is the ratio of net operating income of the continental U.S. properties to the outstanding principal amount of the loan facility)agreement) equals or exceeds 11% and the ratio of the outstanding principal amount of the notes to the value of the continental U.S. properties (based on appraisal values determined at the time of the initial closing) is less than 50%,13% and (iii) in the case of the secondthird one-year extension option (exercisable March 2023), in addition to (i) above, evidence that the Debt Yield equals or exceeds 12%14% on the extension date.  

As of June 30, 2021, the Company was in compliance with all provisions of the loan agreements. The Company expects to continue to use cash flow from operations and asset sales to repay the loan-to-value ratiomortgage loan.  As of August 3, 2021, the Company plans to exercise the second one-year extension option effective March 9, 2022 to the extent the mortgage loan remains outstanding.  The Debt Yield as of June 30, 2021 was 23.84%, which is less than 45%.in excess of the required threshold of 13% in order to exercise the second one-year extension option.  If the Debt Yield requirement is not met at the time of the extension exercise, the Company can utilize unrestricted cash to pay down principal to satisfy the Debt Yield requirement.  If the Company does not have sufficient cash to pay down the principal to satisfy the required Debt Yield, the Company would need to obtain alternative sources of capital, which could include a refinancing of the current mortgage loan or other financing options.

The initial weighted-averageAs of June 30, 2021, the interest rate applicable toof the notesCompany’s mortgage loan was 4.5% per annum.  The interest rate on the mortgage loan is equal to the one-month LIBOR plus a weighted-average spread of 3.15%4.4% per annum as of June 30, 2021, provided that such spread is subject to an increase of 0.25% per annum in connection with any exercise of the first extension option and an additional increase of 0.25% per annum in connection with any exercise of the secondthird extension option.  Borrowers are required to maintain an interest rate cap with respect to the principal amount of the notes having (i) during the initial three-year term of the loan, a LIBOR strike rate equal to 3.0% and (ii) with respect to any extension period, a LIBOR strike rate that would result in a

debt service coverage ratio of 1.20x based on the continental U.S. properties. Mortgage-backed securities securitized by the notes were sold by the lenders to investors at a blended rate (prior to exercise of any extension option) of one-month LIBOR plus a spread of 2.91% per annum; the spread paid by the Company increased to 3.15% per annum based on terms included in the originating lenders’ initial financing commitment to borrowers. Application of voluntary prepayments as described below maywill cause the weighted-average interest rate spread to increase over time.time as senior tranches of the mortgage debt are repaid first.

Credit Agreement

The loan facility is structuredCompany maintains a Credit Agreement (the “Revolving Credit Agreement”) with PNC Bank, National Association, as an interest only loan throughoutlender and administrative agent (“PNC”) that was amended and extended in February 2021.  The Revolving Credit Agreement provides for borrowings of up to $30.0 million.  Borrowings under the initial three-year term and any exercised extension options. As a result, so long as no Amortization Period (as described below) or event of default exists, any property cash flows available following payment of debt service and funding of certain required reserve accounts (including reserves for payment of real estate taxes, insurance premiums, ground rents, tenant improvements and capital expenditures), willRevolving Credit Agreement may be available to the borrowers to pay operating expenses and for other general corporate purposes. An Amortization Period will be deemed to commence in the event the borrowers fail to achieve a Debt Yield of 10.8% as of March 31, 2019, 11.9% as of September 30, 2019, 14.1% as of March 31, 2020 and 19.2% as of September 30, 2020. The Debt Yield as of February 14, 2018 was 9.8%. In the event an Amortization Period occurs, any property cash flows available following payment of debt service and the funding of certain reserve accounts (including the reserve accounts referenced above and additional reserves established for payment of approved operating expenses, DDR management fees, certain public company costs, certain taxes and the minimum cash portion of required REIT distributions) shall be applied to the repayment of the notes. During an Amortization Period, cash flow from the borrowers’ operations will only be made available to the Company to pay required REIT distributions in an amount equal to the minimum portion of required REIT distributions allowed by law to be paid in cash (20% as of June 30, 2018), with the remainder of required REIT distributions during an Amortization Period likely to be paidused by the Company in shares offor general corporate purposes and working capital.  The Company’s borrowings under the Revolving Credit Agreement bear interest at variable rates at the Company’s common stock.

Subjectelection, based on either (i) LIBOR plus a specified spread ranging from 1.30% to certain conditions described1.75% per annum depending on the Company’s Leverage Ratio (as defined in the mortgage loan agreement, the borrowers may prepay principal amounts outstanding under the loan facility in whole or in part by providing (i) advance notice of prepayment to the lenders and (ii) remitting the prepayment premium described in the mortgage loan agreement. No prepayment premium is required with respect to any prepayments made after March 9, 2019. Additionally, no prepayment premium will apply to prepayments made in connection with permitted property sales. Each continental U.S. property has a portion of the original principal amount of the mortgage loan allocated to it. The amount of proceeds from the sale of an individual continental U.S. property required to be applied towards prepayment of the notes (i.e., the property’s “release price”), will depend upon the Debt Yield at the time of the sale as follows:

To the extent the net cash proceeds from the sale of a continental U.S. property that are applied to repay the mortgage loan exceed the amount specified in applicable clause (ii) above with respect to such property, the excess may be applied by the Company as a credit against the release price applicable to future sales of continental U.S. properties.

Once the aggregate principal amount of the notes is less than $270.0 million, 100% of net proceeds from the sales of continental U.S. properties must be applied towards prepayment of the notes. Properties in Puerto Rico do not have allocated loan amounts or minimum release prices; all proceeds from sales of Puerto Rico properties are required to be used to prepay the notes, except that borrowers can obtain a release of all of the Puerto Rico properties for a minimum release price of $350.0 million.

Voluntary prepayments made by the borrowers (including prepayments made with proceeds from asset sales) up to $337.5 million in the aggregate will be applied ratably to the senior and junior tranches of the notes. All other prepayments (including prepayments made with property cash flows following commencement of any Amortization Period) will be applied to tranches of notes (i) absent an event of default, in descending order of seniority (i.e., such prepayments will first be applied to the most senior tranches of notes) and (ii) following any event of default, in such order as the loan servicer determines in its sole discretion. As a result, the Company expects that the weighted average interest rate of the notes will increase during the term of the loan facility.

In the event of a default, the contract rate of interest on the notes will increase to the lesser of (i) the maximum rate allowed by law,Revolving Credit Agreement) or (ii) the greater of (A) 4% above the interest rate otherwise applicable and (B) the PrimeAlternate Base Rate (as defined in the mortgage loan)Revolving Credit Agreement) plus 1.0%.a specified spread ranging from 0.30% to 0.75% per annum depending on the Company’s Leverage Ratio.  The notes contain other terms and provisionsCompany is also required to pay a facility fee on the aggregate revolving commitments at a rate per annum that are customary for instrumentsranges from 0.15% to 0.30% depending on the Company’s Leverage Ratio.

The Revolving Credit Agreement matures on the earliest of this nature. In addition,(i) February 9, 2022, (ii) the Company executed a certain environmental indemnity agreement and a certain guaranty agreement in favor of the lenders underdate on which the

Company agreed External Management Agreement is terminated, (iii) the date on which DDR Asset Management, LLC or another wholly-owned subsidiary of SITE Centers ceases to indemnifybe the lenders for certain environmental risks and guaranty the borrowers’ obligations“Service Provider” under the exceptions toExternal Management Agreement as a result of assignment or operation of law or otherwise and (iv) the non-recourse provisions indate on which the principal amount outstanding under the Company’s mortgage loan agreement. The mortgage loan agreement includes representations, warranties, affirmative and restrictive covenants and other provisions customary for agreements of this nature. The mortgage loan agreement also includes customary events of default, including, among others, principal and interest payment defaults, and breaches of affirmativeis repaid or negative covenants; the mortgage loan agreement does not contain any financial maintenance covenants. Upon the occurrence of an event of default, the lenders may avail themselves of various customary remedies under the loan agreement and other agreements executed in connection therewith or applicable law, including accelerating the loan facility and realizing on the real property collateral or pledged collateral.

The proceeds from the loan were used to repay all of the Company’s outstanding mortgage indebtedness and Parent Company unsecured debt. In connection with the repayment of debt, the Company incurred $107.1 million of aggregate debt extinguishment costs. Included in this amount, are $70.9 million of make-whole premiums incurred related to the repayment of the Parent Company unsecured debt, $20.3 million of make-whole premiums incurred related to the repayment of the mortgage indebtedness, as well as the write off of unamortized deferred financing costs and the cost of a treasury rate lock.refinanced.

At June 30, 2018,2021, there were 0 amounts outstanding under the mortgage balance outstanding was $1.27 billion. This mortgage was assumed in connection with the separation from DDR on July 1, 2018.

Allocated Parent Company Interest

Included in interest expense was $4.4 million for the three and six months ended June 30, 2018 and $8.3 million and $16.5 million, respectively, for the three and six months ended June 30, 2017 of interest expense on DDR’s unsecured debt, excluding debt that was specifically attributable to RVI.  Interest expense was allocated by calculating the unencumbered net assets of each property held by RVI as a percentage of DDR’s total consolidated unencumbered net assets and multiplying that percentage by the interest expense on DDR unsecured debt (Note 2).Revolving Credit Agreement.

The following methods and assumptions were used by the Company in estimating fair value disclosures of financial instruments:

Cash and Cash Equivalents, Restricted Cash, Accounts Receivable and Accounts Payable and Other Liabilities

The carrying amounts reported in the Company’s combinedconsolidated balance sheets for these financial instruments approximated fair value because of their short-term maturities.

Debt

The fair market value of the Parent Company unsecured debt is determined using the trading price of DDR’s public debt. The fair market value for all other debt is estimated using a discounted cash flow technique that incorporates future contractual interest and principal payments and a market interest yield curve with adjustments for duration, optionality and risk profile, including the Company’s non-performance risk and loan to value. The Company’s Parent Company unsecured debtvalue and all other debt areis classified as Level 2 and Level 3 respectively, in the fair value hierarchy.

Considerable judgment is necessary to develop estimated fair values of financial instruments.  Accordingly, the estimates presented are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments.

Debt instruments with The carrying values that are different than estimated fair values are summarized as follows (in thousands):

Interest Rate Cap

In March 2018, the Company entered into a $1.35 billion interest rate cap, in connection with entering into the mortgage loan (Note 5). Atamount of debt, including deferred financing costs, was $207.2 million and $344.5 million at June 30, 2018, the notional amount of the interest rate cap was $1.27 billion.  2021 and December 31, 2020, respectively.The fair value of the interest rate capdebt was $4.8$222.8 million and $362.7 million at June 30, 2018,2021 and was included in Other Assets. Changes in fair value are marked-to-market to earnings in Other Income (Expense). For the three and six months ended June 30, 2018, the Company recorded income of $0.4 million and $0.2 million,December 31, 2020, respectively.  The Company did not elect to apply hedge accounting related to the interest rate cap and has applied the guidance under economic hedging. As such, the Company has elected the policy to classify cash flows related to an economic hedge following the cash flows of the hedged item.

The Company’s objective in using interest rate derivatives is to manage its exposure to interest rate movements. The valuation of this instrument was determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivative. The Company determined that the significant inputs used to value this derivative fell within Level 2 of the fair value hierarchy. To accomplish this objective, the Company generally uses interest rate instruments as part of its interest rate risk management strategy. The Company is exposed to credit risk in the event of non-performance by the counterparties. The Company believes it mitigates its credit risk by entering into these arrangements with major financial institutions. The Company continually monitors and actively manages interest costs on it variable-rate debt portfolio and may enter into additional interest rate positions or other derivative interest rate instruments based on market conditions. The Company has not entered, and does not plan to enter, into any derivative financial instruments for trading or speculative purposes.

On June 30, 2018, the Company issued 1,000 shares of its series A preferred stock (the “RVI Preferred Shares”) to DDR, which are noncumulative and have no mandatory dividend rate.  The RVI Preferred Shares rank, with respect to dividend rights, and rights upon liquidation, dissolution or winding up of the Company, senior in preference and priority to the Company’s common shares and any other class or series of the Company’s capital stock.  Subject to the requirement that the Company distribute to its common shareholders the minimum amount required to be distributed with respect to any taxable year in order for the Company to maintain its status as a REIT and to avoid U.S. federal income taxes, the RVI Preferred Shares will be entitled to a dividend preference for all dividends declared on the Company’s capital stock at any time up to a “preference amount” equal to $190 million in the aggregate, which amount may increase by up to an additional $10 million if the aggregate gross proceeds of the Company’s asset sales subsequent to July 1, 2018 exceeds $2.0 billion. Notwithstanding the foregoing, the RVI Preferred Shares are only entitled to receive dividends when, as and if declared by the Company’s board of directors and the Company’s ability to pay dividends is subject to any restrictions set forth in the terms of its indebtedness.  Upon payment to DDR of aggregate dividends on the RVI Preferred Shares equaling the maximum preference amount of $200 million, the RVI Preferred Shares are required to be redeemed by the Company for $1.00 per share.

Subject to the terms of any of the Company’s indebtedness, and unless prohibited by Ohio law governing distributions to stockholders, the RVI Preferred Shares must be redeemed upon (i) the Company’s failure to maintain its status as a REIT, (ii) any failure by the Company to comply with the terms of the RVI Preferred Shares or (iii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that the Company sells, assigns, transfers, conveys or otherwise disposes of all or substantially all of its properties or assets, in one or more related transactions, to any person or entity or any person or entity, directly or indirectly, becomes the beneficial owner of 40% or more of the Company’s common shares, measured by voting power. The RVI Preferred Shares also contain restrictions on the Company’s ability to invest in joint ventures, acquire assets or properties, develop or redevelop real estate or make loans or advances to third parties.

The Company may redeem the RVI Preferred Shares, or any part thereof, at any time at a price payable per share calculated by dividing the number of RVI Preferred Shares outstanding on the redemption date into the difference of (x) $200 million minus (y) the aggregate amount of dividends previously distributed on the RVI Preferred Shares to be redeemed.  The RVI Preferred Stock is classified as Preferred Redeemable Equity outside of permanent Equity in the combined balance sheet due to the redemption provisions.

Hurricane Loss

In 2017, Hurricane Maria made landfall in Puerto Rico.  At June 30, 2018,the time of the hurricane, the Company owned 12 assets in Puerto Rico, aggregating 4.4 million square feet of Company-owned GLA. One of the 12 assets (Plaza Palma Real, consisting of approximately 0.4 million of Company-owned GLA) was severely damaged and is currently not operational, except for one anchor tenant and a few

other tenants representing a minimal amount of Company-owned GLA. The other 11 assetsGLA, which sustained varying degrees of damage, consisting primarily of roof and HVAC system damage and water intrusion. Withdamage.  In August 2019, the Company reached a settlement with its insurer with respect to the Company’s anchor spaces comprising greater than 25,000 square feetclaims relating to the hurricane damage.  The Company continued to own 9 of GLA inthese Puerto Rico 27, or 82%assets at June 30, 2021.

The remaining unutilized property damage settlement proceeds of such tenants, were open$30.7 million, along with other related reserves required by the mortgage lender of $6.5 million, are reflected in the Company’s consolidated balance sheets as of July 25, 2018, including all seven Walmart stores, a Sam’s Club, both Home Depot stores, all three Sears/Kmart storesRestricted Cash and all five grocery stores (including Pueblo, Econo and Selectos Supermarket). Although some tenant spaces remain untenantable, as of July 25, 2018, 86%will be disbursed to the Company in accordance with the terms of the Company’s leased GLA in Puerto Rico was open for business, excluding Plaza Palma Real (or 82% including Plaza Palma Real).mortgage financing upon the lender’s satisfaction that all necessary restoration work has been completed.

Legal Matters

The Company has engaged various consultants to assist with the damage scoping assessment. The Company continues to work withand its consultants to finalize the scope and schedule of work to be performed. Restoration work is underway at all of the shopping centers, including Plaza Palma Real. The Company anticipates that repairs will be substantially complete at all 12 properties by the third quarter of 2019. The timing and schedule of additional repair work to be completed are highly dependent upon any changes in the scope of work, as well as the availability of building materials, supplies and skilled labor.

The Company maintains insurance on its assets in Puerto Rico with policy limits of approximately $330 million for both property damage and business interruption. The Company’s insurance policiessubsidiaries are subject to various terms and conditions, including a combined property damage and business interruption deductible of approximately $6.0 million. The Company expects that its insurance for property damage and business interruption claims will include the costs to clean up, repair and rebuild the properties, as well as lost revenue. Certain continental-U.S.-based anchor tenants maintain their own property insurance on their Company-owned premises andlegal proceedings, which, taken together, are not expected to makehave a material adverse effect on the required repairs to their stores.Company.  The Company is unablealso subject to estimatea variety of legal actions for personal injury or property damage arising in the impact of potential increased costs associated with resource constraints in Puerto Rico relating to building materials, supplies and labor. The Company believes it maintains adequate insurance coverage on eachordinary course of its properties and is working closelybusiness, most of which are covered by insurance.  While the resolution of all matters cannot be predicted with certainty, management believes that the insurance carriers to obtain the maximum amount of insurance recovery provided under the policies. However, the Company can give no assurances as to the amountsfinal outcome of such legal proceedings and claims timing of payments and resolution of the claims.

As of June 30, 2018, the estimated net book value of the property damage written off for damage to the Company’s Puerto Rico assets was $78.8 million. However, the Company continues to assess the impact of the hurricane on its properties, and the final net book value write-offs could vary significantly from this estimate. Any changes to this estimate will be recorded in the periods in which they are determined.

The Company’s Property Insurance Receivable was $49.2 million at June 30, 2018, which represents estimated insurance recoveries related to the net book value of the property damage written off, as well as other expenses, as the Company believes it is probable that the insurance recovery, net of the deductible, will exceed the net book value of the damaged property. The outstanding receivable is recorded as Property Insurance Receivablenot have a material adverse effect on the Company’s combined balance sheet asliquidity, financial position or results of June 30, 2018. The Company received an additional $20.2 million toward the property damage portion of its insurance claim in the second quarter.operations.

The Company’s business interruption insurance covers lost revenue through the period of property restoration and for up to 365 days following completion of restoration. For the three and six months ended June 30, 2018, rental revenues of $2.8 million and $6.6 million, respectively, were not recorded because of lost tenant revenue attributable to Hurricane Maria that has been partially defrayed by insurance proceeds. The Company will record revenue for covered business interruption in the period it determines that it is probable it will be compensated. This income recognition criteria will likely result in business interruption insurance proceeds being recorded in a period subsequent to the period that the Company experiences lost revenue from the damaged properties. For the three and six months ended June 30, 2018, the Company received insurance proceeds of approximately $3.1 million and $5.1 million, respectively, related to business interruption claims, which is recorded on the Company’s combined statements of operations as Business Interruption Income.

Pursuant to the terms of the Separation and Distribution Agreement in connection with the separation from DDR, DDR will be entitled to insurance claim proceeds for unreimbursed restoration costs incurred through June 30, 2018, as well as business interruption losses for the same period.  Business interruption proceeds will continue to be recorded to revenue in the period that it is determined that DDR will be compensated.  

Commitments and Guaranties

The Company has entered into agreements with general contractors related to its shopping centers aggregating commitments of approximately $20.6 million as of June 30, 2018.

DDR’s senior managementImpairment charges were recorded impairment charges on assets included in RVI Predecessor based on the difference between the carrying value of the assets and the estimated fair market value after the assets failed a step-one analysis that compared the sum of $48.7 million and $8.6 millionestimated future undiscounted cash flows to the assets’ carrying value.  In the second quarter of 2021, the impairment charges recorded were triggered by a change in the hold period assumptions for the six months ended June 30, 2018 and 2017, respectively.

Puerto Rico assets.  The impairments recorded on eight assets during six months ended June 30, 2018in the first quarter of 2021 and prior years primarily were triggered by indicative bids received and changes in market assumptions due to the disposition process.process, as well as changes in projected cash flows.  The impairments recordedfollowing table summarizes the impairment charges during the three and six months ended June 30, 2017 primarily were triggered by changes in asset hold-period assumptions and/or expected future cash flows.2021 and 2020 (in millions):

Items Measured at Fair Value  on a Non-Recurring Basis

The valuation of impaired real estate assets and investments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each asset, as well as the income capitalization approach considering prevailing market capitalization rates, analysis of recent comparable sales transactions, actual sales negotiations and bona fide purchase offers received from third parties, and/or considerationan income capitalization approach considering prevailing market capitalization rates and analysis of recent comparable sales transactions, as well as discounted cash flow analysis on the amount that currently would be required to replace the asset, as adjusted for obsolescence.expected cash flows of each asset.  In general, the Company considers multiple valuation techniques when measuring fair value of real estate.  However, in certain circumstances, a single valuation technique may be appropriate.

For operational real estate assets, the significant assumptions included the capitalization rate used in the income capitalization valuation, as well as the projected property net operating income.  These valuation adjustments were calculated based on market conditions and assumptions made by DDRSITE Centers or the Company at the time the valuation adjustments and impairments were recorded, which may differ materially from actual results if market conditions or the underlying assumptions change.

The following table presents information about the Company’s impairment charges on nonfinancial assetsfair value of real estate that werewas impaired, and therefore, measured on a fair value basis, along with the related impairment charge, for the six months ended June 30, 2018.2021.  The table also indicates the fair value hierarchy of the valuation techniques used by DDRthe Company to determine such fair value (in millions).

The following table presents quantitative information about the significant unobservable inputs used by DDR managementthe Company to determine the fair value of non-recurring itemsfor the six months ended June 30, 2021 (in millions):

The following table presents fees and other amounts charged to the Company by DDR for the three and six months ended June 30, 2018 and 2017SITE Centers (in thousands):