Excel Trust 10-Q 2013 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

Commission File Number: 001-34698 (Excel Trust, Inc.)

Commission File Number: 000-54962 (Excel Trust, L.P.)

EXCEL TRUST, INC.

EXCEL TRUST, L.P.

(Exact name of registrant as specified in its charter)

Excel Trust, Inc.	Maryland	27-1493212
	(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
Excel Trust, L.P.	Delaware	27-1495445
	(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

Excel Centre

17140 Bernardo Center Drive, Suite 300

San Diego, California 92128

(Address of principal executive office, including zip code)

(858) 613-1800

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Excel Trust, Inc.    Yes  x    No  ¨

Excel Trust, L.P.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Excel Trust, Inc.    Yes  x    No  ¨

Excel Trust, L.P.    Yes  x    No  ¨

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

Excel Trust, Inc.:

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Excel Trust, L.P.:

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Excel Trust, Inc.    Yes  ¨    No  x

Excel Trust, L.P.    Yes  ¨    No  x

Number of shares of Excel Trust, Inc. common stock outstanding as of November 6, 2013, $0.01 par value per share: 48,172,773 shares

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the quarter ended September 30, 2013 of Excel Trust, Inc., a Maryland corporation, and Excel Trust, L.P., a Delaware limited partnership of which Excel Trust, Inc. is the parent company and general partner. Unless stated otherwise or the context otherwise requires, all references in this report to “we,” “our,” “us” or “the Company” refer to Excel Trust, Inc., together with its controlled and consolidated subsidiaries, including Excel Trust, L.P. Unless otherwise indicated or unless the context requires otherwise, all references to the “Operating Partnership” refer to Excel Trust, L.P., a Delaware limited partnership, and its controlled and consolidated subsidiaries.

Excel Trust, Inc. is a real estate investment trust, or REIT, and the general partner of the Operating Partnership. As of September 30, 2013, Excel Trust, Inc. owned an approximate 97.5% partnership interest in the Operating Partnership. The remaining 2.5% partnership interests are owned by non-affiliated investors and certain of our directors and executive officers. As the sole general partner of the Operating Partnership, Excel Trust, Inc. exercises exclusive and complete discretion over the Operating Partnership’s day-to-day management and control, can cause it to enter into certain major transactions, including acquisitions, dispositions and refinancings, and can cause changes in its line of business, capital structure and distribution policies.

There are a few differences between Excel Trust, Inc. and the Operating Partnership, which are reflected in the disclosures in this report. We believe it is important to understand the differences between Excel Trust, Inc. and the Operating Partnership in the context of how Excel Trust, Inc. and the Operating Partnership operate as an interrelated, consolidated company. Excel Trust, Inc. is a REIT, whose only material asset is the partnership interests it holds in the Operating Partnership. As a result, Excel Trust, Inc. does not conduct business itself, other than acting as the sole general partner of the Operating Partnership, issuing equity from time to time and guaranteeing certain debt of the Operating Partnership. The Operating Partnership owns substantially all of the assets of the Company either directly or through its subsidiaries, conducts the operations of the business and is structured as a limited partnership with no publicly traded equity. Except for net proceeds from equity issuances by Excel Trust, Inc., which it is required to contribute to the Operating Partnership in exchange for operating partnership units, the Operating Partnership generates the capital required by the Company’s business through the Operating Partnership’s operations, by the Operating Partnership’s incurrence of indebtedness or through the issuance of operating partnership units.

Non-controlling interests and stockholders’ equity and partners’ capital are the main areas of difference between the consolidated financial statements of Excel Trust, Inc. and those of Excel Trust, L.P. The partnership interests in the Operating Partnership that are not owned by Excel Trust, Inc. are accounted for as limited partners’ capital in the Operating Partnership’s financial statements and as non-controlling interests in Excel Trust, Inc.’s financial statements. The non-controlling interests in Excel Trust, L.P.’s financial statements include the interests of its joint venture partner AB Dothan, LLC. The non-controlling interests in Excel Trust, Inc.’s financial statements include the same non-controlling interests as Excel Trust, L.P., as well as the owners of limited partnership interests in the Operating Partnership, not including Excel Trust, Inc. The differences between stockholders’ equity, partners’ capital and non-controlling interests result from the differences in the equity issued at the Excel Trust, Inc. and Operating Partnership levels.

We believe combining the quarterly reports on Form 10-Q of Excel Trust, Inc. and the Operating Partnership into this single report results in the following benefits:

• Combined reports better reflect how management and the analyst community view the business as a single operating unit;

• Combined reports enhance investors’ understanding of Excel Trust, Inc. and the Operating Partnership by enabling them to view the business as a whole and in the same manner as management;

• Combined reports are more efficient for Excel Trust, Inc. and the Operating Partnership and result in savings in time, effort and expense; and

• Combined reports are more efficient for investors by reducing duplicative disclosure and providing a single document for their review.

To help investors understand the significant differences between Excel Trust, Inc. and the Operating Partnership, this report presents the following separate sections for each of Excel Trust, Inc. and the Operating Partnership:

• consolidated financial statements;

• the following notes to the consolidated financial statements:

• Equity/Partners’ Capital;

• Debt; and

• Earnings per Share/Unit;

1

• Liquidity and Capital Resources in Management’s Discussion and Analysis of Financial Condition and Results of Operations; and;

• Unregistered Sales of Equity Securities and Use of Proceeds.

This report also includes separate Item 4. Controls and Procedures sections and separate Exhibit 31 and 32 certifications for each of Excel Trust, Inc. and Excel Trust, L.P. in order to establish that the Chief Executive Officer and the Chief Financial Officer of Excel Trust, Inc. have made the requisite certifications and Excel Trust, Inc. and Excel Trust, L.P. are compliant with Rule 13a-15 or Rule 15d-15 under the Securities Exchange Act of 1934 and 18 U.S.C. §1350.

2

PART 1 — FINANCIAL INFORMATION

EXCEL TRUST, INC.

FORM 10-Q — QUARTERLY REPORT

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2013

TABLE OF CONTENTS

PART I	Financial Information	4
Item 1.	Financial Statements of Excel Trust, Inc.	4
	Condensed Consolidated Balance Sheets as of September 30, 2013 (unaudited) and December 31, 2012	4
	Condensed Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 30, 2013 and 2012 (unaudited)	5
	Condensed Consolidated Statements of Equity for the nine months ended September 30, 2013 and 2012 (unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012 (unaudited)	8
	Financial Statements of Excel Trust, L.P.
	Condensed Consolidated Balance Sheets as of September 30, 2013 (unaudited) and December 31, 2012	9
	Condensed Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 30, 2013 and 2012 (unaudited)	10
	Condensed Consolidated Statements of Capital for the nine months ended September 30, 2013 and 2012 (unaudited)	11
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012 (unaudited)	12
	Notes to Condensed Consolidated Financial Statements of Excel Trust, Inc. and Excel Trust, L.P. (unaudited)	13
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	55
Item 4.	Controls and Procedures	56
PART II	Other Information	57
Item 1.	Legal Proceedings	57
Item 1A.	Risk Factors	57
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 3.	Defaults Upon Senior Securities	57
Item 4.	Mine Safety Disclosures	57
Item 5.	Other Information	57
Item 6.	Exhibits	58
Signatures		59

3

PART 1 — FINANCIAL INFORMATION

Item 1. Financial Statements

EXCEL TRUST, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)

	September 30,  2013 (unaudited)			December 31, 2012
ASSETS:
Property:
Land	$	355,509		$	320,289
Buildings		620,840			564,352
Site improvements		60,459			51,875
Tenant improvements		52,254			42,903
Construction in progress		3,297			1,709
Less accumulated depreciation		(54,409	)		(36,765	)
Property, net		1,037,950			944,363
Cash and cash equivalents		3,483			5,596
Restricted cash		41,139			5,657
Tenant receivables, net		3,500			5,376
Lease intangibles, net		80,273			85,646
Deferred rent receivable		8,462			5,983
Other assets		18,944			17,618
Investment in unconsolidated entities		8,371			9,015
Total assets(1)	$	1,202,122		$	1,079,254
LIABILITIES AND EQUITY:
Liabilities:
Mortgages payable, net	$	308,365		$	333,935
Notes payable		193,500			75,000
Accounts payable and other liabilities		25,893			25,319
Lease intangibles, net		27,884			26,455
Dividends/distributions payable		10,684			9,773
Total liabilities(2)		566,326			470,482
Commitments and contingencies
Equity:
Stockholders’ equity
Preferred stock, 50,000,000 shares authorized
7.0% Series A cumulative convertible perpetual preferred stock, $50,000 liquidation preference ($25.00 per share), 2,000,000 shares issued and outstanding at September 30, 2013 and December 31, 2012		47,703			47,703
8.125% Series B cumulative redeemable preferred stock, $92,000 liquidation preference ($25.00 per share), 3,680,000 shares issued and outstanding at September 30, 2013 and December 31, 2012		88,720			88,720
Common stock, $.01 par value, 200,000,000 shares authorized; 48,172,773 and 44,905,683 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively		480			448
Additional paid-in capital		469,034			459,151
Retained Earnings (cumulative deficit)		15,732			(1,414	)
		621,669			594,608
Accumulated other comprehensive loss		(107	)		(572	)
Total stockholders’ equity		621,562			594,036
Non-controlling interests		14,234			14,736
Total equity		635,796			608,772
Total liabilities and equity	$	1,202,122		$	1,079,254

⁽¹⁾ Excel Trust, Inc.’s consolidated total assets at September 30, 2013 and December 31, 2012 include $15,596 and $15,871, respectively, of assets (primarily real estate assets) of a variable interest entity (“VIE”) that can only be used to settle the liabilities of that VIE.

⁽²⁾ Excel Trust, Inc.’s consolidated total liabilities at September 30, 2013 and December 31, 2012 include $185 and $154 of accounts payable and other liabilities of a VIE, respectively, that do not have recourse to Excel Trust, Inc.

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

4

EXCEL TRUST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except per share data)

(Unaudited)

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2013			September 30, 2012			September 30, 2013			September 30, 2012
Revenues:
Rental revenue	$	23,556		$	16,800		$	67,685		$	48,800
Tenant recoveries		5,022			4,000			14,099			10,297
Other income		353			285			954			972
Total revenues		28,931			21,085			82,738			60,069
Expenses:
Maintenance and repairs		1,821			1,411			5,239			4,020
Real estate taxes		3,354			2,521			9,312			6,929
Management fees		698			181			1,331			539
Other operating expenses		1,845			977			4,707			2,735
Change in fair value of contingent consideration		(10	)		(121	)		(1,568	)		(121	)
General and administrative		3,399			3,318			10,536			10,155
Depreciation and amortization		11,637			8,321			34,613			24,488
Total expenses		22,744			16,608			64,170			48,745
Operating income		6,187			4,477			18,568			11,324
Interest expense		(4,728	)		(3,939	)		(13,751	)		(11,149	)
Interest income		49			19			146			125
Loss from equity in unconsolidated entities		12			(158	)		(13	)		(158	)
Changes in fair value of financial instruments and gain on OP unit redemption		—			61			230			1,112
Income from continuing operations		1,520			460			5,180			1,254
Income from discontinued operations before gain on sale of real estate assets		345			43			481			39
Gain on sale of real estate assets		11,974			—			11,974			—
Income from discontinued operations		12,319			43			12,455			39
Net income		13,839			503			17,635			1,293
Net (income) loss attributable to non-controlling interests		(356	)		(2	)		(489	)		14
Net income attributable to Excel Trust, Inc.		13,483			501			17,146			1,307
Preferred stock dividends		(2,744	)		(2,744	)		(8,232	)		(7,609	)
Net income (loss) attributable to the common stockholders	$	10,739		$	(2,243	)	$	8,914		$	(6,302	)
Loss from continuing operations per share attributable to the common stockholders - basic and diluted		(0.03	)		(0.07	)		(0.08	)		(0.21	)
Net income (loss) per share attributable to the common stockholders - basic and diluted	$	0.22		$	(0.07	)	$	0.18		$	(0.21	)
Weighted-average common shares outstanding - basic and diluted		47,497			33,294			46,674			32,616
Dividends declared per common share	$	0.17		$	0.1625		$	0.51		$	0.488
Net income	$	13,839		$	503		$	17,635		$	1,293
Other comprehensive income (loss):
Change in unrealized gain on investment in equity securities		—			(30	)		—			73
Gain on sale of equity securities (reclassification adjustment)		—			(1	)		—			(12	)
Change in unrealized loss on interest rate swaps		163			72			476			180
Comprehensive income		14,002			544			18,111			1,534
Comprehensive (income) loss attributable to non-controlling interests		(359	)		(3	)		(500	)		5
Comprehensive income attributable to Excel Trust, Inc.	$	13,643		$	541		$	17,611		$	1,539

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

5

EXCEL TRUST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Dollars in thousands)

(Unaudited)

	Series A Preferred Stock		Series B Preferred Stock		Common Stock				Additional Paid-in Capital			Cumulative Retained Earnings (Deficit)			Accumulated other Comprehensive Loss			Total Stockholders’ Equity			Non- controlling Interests			Total Equity
					Shares		Amount
Balance at January 1, 2013	$	47,703	$	88,720		44,905,683	$	448	$	459,151		$	(1,414	)	$	(572	)	$	594,036		$	14,736		$	608,772
Net proceeds from sale of common stock		—		—		3,211,928		32		40,695			—			—			40,727			—			40,727
Issuance of restricted common stock awards		—		—		33,088		—		—			—			—			—			—			—
Redemption of OP units for common stock and cash		—		—		22,074		—		279			—			—			279			(235	)		44
Noncash amortization of share-based compensation		—		—		—		—		1,713			—			—			1,713			—			1,713
Common stock dividends		—		—		—		—		(24,349	)		—			—			(24,349	)		—			(24,349	)
Distributions to non-controlling interests		—		—		—		—		—			—			—			—			(990	)		(990	)
Net income		—		—		—		—		—			17,146			—			17,146			489			17,635
Preferred stock dividends		—		—		—		—		(8,232	)		—			—			(8,232	)		—			(8,232	)
Change in unrealized loss on interest rate swaps		—		—		—		—		—			—			465			465			11			476
Adjustment for non-controlling interests		—		—		—		—		(223	)		—			—			(223	)		223			—
Balance at September 30, 2013	$	47,703	$	88,720		48,172,773	$	480	$	469,034		$	15,732		$	(107	)	$	621,562		$	14,234		$	635,796

6

	Series A Preferred Stock		Series B Preferred Stock		Common Stock				Additional Paid-in Capital			Cumulative (Deficit)			Accumulated other Comprehensive Loss			Total Stockholders’ Equity			Non- controlling Interests			Total Equity
					Shares		Amount
Balance at January 1, 2012	$	47,703	$	—		30,289,813	$	302	$	319,875		$	(3,277	)	$	(811	)	$	363,792		$	17,194		$	380,986
Net proceeds from sale of preferred stock		—		88,720		—		—		—			—			—			88,720			—			88,720
Net proceeds from sale of common stock		—		—		1,082,051		11		12,576			—			—			12,587			—			12,587
Issuance of restricted common stock awards		—		—		18,356		—		—			—			—			—			—			—
Redemption of OP units for common stock and cash		—		—		270,112		3		3,196			—			—			3,199			(4,315	)		(1,116	)
Issuance of common stock for acquisition		—		—		3,230,769		32		39,076			—			—			39,108			—			39,108
Noncash amortization of share-based compensation		—		—		—		—		2,406			—			—			2,406			—			2,406
Common stock dividends		—		—		—		—		(16,619	)		—			—			(16,619	)		—			(16,619	)
Distributions to non-controlling interests		—		—		—		—		—			—			—			—			(889	)		(889	)
Net income		—		—		—		—		—			1,307			—			1,307			(14	)		1,293
Preferred stock dividends		—		—		—		—		(7,609	)		—			—			(7,609	)		—			(7,609	)
Change in unrealized gain on investment in equity securities		—		—		—		—		—			—			70			70			3			73
Change in unrealized loss on interest rate swaps		—		—		—		—		—			—			174			174			6			180
Adjustment for non-controlling interests		—		—		—		—		(619	)		—			—			(619	)		619			—
Balance at September 30, 2012	$	47,703	$	88,720		34,891,101	$	348	$	352,282		$	(1,970	)	$	(567	)	$	486,516		$	12,604		$	499,120

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

7

EXCEL TRUST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	Nine Months Ended September 30, 2013			Nine Months Ended September 30, 2012
Cash flows from operating activities:
Net income	$	17,635		$	1,293
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		35,306			25,432
Changes in fair value of financial instruments and gain on OP unit redemption		(230	)		(1,112	)
Change in fair value of contingent consideration		(1,568	)		(121	)
Gain on sale of real estate assets		(11,974	)		—
Income from equity in unconsolidated entities		13			158
Deferred rent receivable		(2,913	)		(2,021	)
Amortization of above- and below-market leases		205			(12	)
Amortization of deferred balances		1,127			1,461
Bad debt expense		959			495
Share-based compensation expense		1,713			2,406
Distributions from unconsolidated entities		518			—
Change in assets and liabilities (net of the effect of acquisitions):
Tenant and other receivables		1,295			(517	)
Other assets		(1,289	)		(1,196	)
Accounts payable and other liabilities		2,198			2,562
Net cash provided by operating activities		42,995			28,828
Cash flows from investing activities:
Acquisitions of property		(121,175	)		(99,306	)
Development of property and property improvements		(16,215	)		(4,791	)
Proceeds from the contribution of real estate assets		—			21,317
Investments in unconsolidated entities		(106	)		—
Return of capital from unconsolidated entities		139			—
Disposition of real estate assets		4,355			—
Receipt of master lease payments		384			—
Capitalized leasing costs		(1,538	)		(1,397	)
Advance of note receivable		—			(750	)
Collection of mortgage loan receivable		—			2,000
Purchases of equity securities		—			(125	)
Proceeds from sale of equity securities		—			4,241
Restricted cash		(3,439	)		(1,585	)
Net cash used in investing activities		(137,595	)		(80,396	)
Cash flows from financing activities:
Issuance of common stock		41,098			12,587
Issuance of preferred stock		—			89,102
Preferred stock offering costs		—			(382	)
OP unit redemptions		—			(1,915	)
Payments on mortgages payable		(33,771	)		(3,326	)
Proceeds from mortgages payable		—			13,713
Payments on notes payable		(40,500	)		(71,000	)
Proceeds from notes payable		159,000			50,000
Payments of contingent consideration		—			(1,613	)
Distribution to non-controlling interests		(971	)		(946	)
Preferred stock dividends		(8,232	)		(6,051	)
Common stock dividends		(23,457	)		(15,796	)
Deferred financing costs		(680	)		(2,060	)
Net cash provided by financing activities		92,487			62,313
Net increase		(2,113	)		10,745
Cash and cash equivalents, beginning of period		5,596			5,292
Cash and cash equivalents, end of period	$	3,483		$	16,037
Supplemental cash flow information:
Cash payments for interest, net of amounts capitalized of $50 and $110	$	12,114		$	9,185
Non-cash investing and financing activity:
Acquisition of real estate for common shares and OP units	$	—		$	39,108
Assumption of net mortgage debt in connection with property acquisitions	$	8,204		$	29,670
Assets received in connection with property acquisitions	$	—		$	3,784
Liabilities assumed in connection with property acquisitions	$	140		$	1,445
Dispositions of real estate assets classified as a 1031 exchange (including gain on sale of real estate assets of $10,854)	$	31,104		$	—
Common stock dividends payable	$	8,189		$	5,669
Preferred stock dividends payable	$	2,287		$	2,287
OP unit distributions payable	$	208		$	169
Accrued additions to operating and development properties	$	3,356		$	948
Change in unrealized loss on interest rate swaps	$	476		$	180
Change in unrealized gain on marketable securities	$	—		$	73
OP unit redemptions (common stock)	$	279		$	3,199
Investment in unconsolidated entities	$	—		$	1,348
Reclassification of offering costs	$	364		$	—
Reclassification of real estate to held for sale	$	3,226		$	—

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

8

EXCEL TRUST, L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per unit amounts)

	September 30,  2013 (unaudited)			December 31, 2012
ASSETS:
Property:
Land	$	355,509		$	320,289
Buildings		620,840			564,352
Site improvements		60,459			51,875
Tenant improvements		52,254			42,903
Construction in progress		3,297			1,709
Less accumulated depreciation		(54,409	)		(36,765	)
Property, net		1,037,950			944,363
Cash and cash equivalents		3,483			5,596
Restricted cash		41,139			5,657
Tenant receivables, net		3,500			5,376
Lease intangibles, net		80,273			85,646
Deferred rent receivable		8,462			5,983
Other assets		18,944			17,618
Investment in unconsolidated entities		8,371			9,015
Total assets(1)	$	1,202,122		$	1,079,254
LIABILITIES AND CAPITAL:
Liabilities:
Mortgages payable, net	$	308,365		$	333,935
Notes payable		193,500			75,000
Accounts payable and other liabilities		25,893			25,319
Lease intangibles, net		27,884			26,455
Distributions payable		10,684			9,773
Total liabilities(2)		566,326			470,482
Commitments and contingencies
Capital:
Partners’ capital:
Preferred operating partnership units, 50,000,000 units authorized
7.0% Series A cumulative convertible perpetual preferred units, $50,000 liquidation preference ($25.00 per unit), 2,000,000 units issued and outstanding at September 30, 2013 and December 31, 2012, respectively		47,703			47,703
8.125% Series B cumulative redeemable preferred units, $92,000 liquidation preference ($25.00 per unit), 3,680,000 units issued and outstanding at September 30, 2013 and December 31, 2012, respectively		88,720			88,720
Limited partners’ capital, 1,225,115 and 1,245,019 common operating partnership units issued and outstanding at September 30, 2013 and December 31, 2012, respectively		4,893			5,512
General partner’s capital, 48,172,773 and 44,905,683 common operating partnership units issued and outstanding at September 30, 2013 and December 31, 2012, respectively		492,896			465,612
		634,212			607,547
Accumulated other comprehensive loss		(144	)		(620	)
Total partners’ capital		634,068			606,927
Non-controlling interests		1,728			1,845
Total capital		635,796			608,772
Total liabilities and capital	$	1,202,122		$	1,079,254

⁽¹⁾  Excel Trust, L.P.’s consolidated total assets at September 30, 2013 and December 31, 2012 include $15,596 and $15,871, respectively, of assets (primarily real estate assets) of a VIE that can only be used to settle the liabilities of that VIE.

⁽²⁾ Excel Trust, L.P.’s consolidated total liabilities at September 30, 2013 and December 31, 2012 include $185 and $154 of accounts payable and other liabilities of a VIE, respectively, that do not have recourse to Excel Trust, L.P.

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

9

EXCEL TRUST, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except per unit data)

(Unaudited)

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2013			September 30, 2012			September 30, 2013			September 30, 2012
Revenues:
Rental revenue	$	23,556		$	16,800		$	67,685		$	48,800
Tenant recoveries		5,022			4,000			14,099			10,297
Other income		353			285			954			972
Total revenues		28,931			21,085			82,738			60,069
Expenses:
Maintenance and repairs		1,821			1,411			5,239			4,020
Real estate taxes		3,354			2,521			9,312			6,929
Management fees		698			181			1,331			539
Other operating expenses		1,845			977			4,707			2,735
Change in fair value of contingent consideration		(10	)		(121	)		(1,568	)		(121	)
General and administrative		3,399			3,318			10,536			10,155
Depreciation and amortization		11,637			8,321			34,613			24,488
Total expenses		22,744			16,608			64,170			48,745
Operating income		6,187			4,477			18,568			11,324
Interest expense		(4,728	)		(3,939	)		(13,751	)		(11,149	)
Interest income		49			19			146			125
Loss from equity in unconsolidated entities		12			(158	)		(13	)		(158	)
Changes in fair value of financial instruments and gain on OP unit redemption		—			61			230			1,112
Income from continuing operations		1,520			460			5,180			1,254
Income from discontinued operations before gain on sale of real estate assets		345			43			481			39
Gain on sale of real estate assets		11,974			—			11,974			—
Income from discontinued operations		12,319			43			12,455			39
Net income		13,839			503			17,635			1,293
Net income attributable to non-controlling interests		(77	)		(75	)		(249	)		(216	)
Net income attributable to Excel Trust, L.P.		13,762			428			17,386			1,077
Preferred operating partnership unit distributions		(2,744	)		(2,744	)		(8,232	)		(7,609	)
Net income (loss) attributable to the unitholders	$	11,018		$	(2,316	)	$	9,154		$	(6,532	)
Loss from continuing operations per unit attributable to the unitholders - basic and diluted		(0.03	)		(0.07	)		(0.08	)		(0.21	)
Net income (loss) per unit attributable to the unitholders - basic and diluted	$	0.22		$	(0.07	)	$	0.18		$	(0.21	)
Weighted-average common operating partnership units outstanding - basic and diluted		48,722			34,351			47,905			33,834
Dividends declared per common operating partnership unit	$	0.17		$	0.1625		$	0.51		$	0.488
Net income	$	13,839		$	503		$	17,635		$	1,293
Other comprehensive income (loss):
Change in unrealized gain on investment in equity securities		—			(30	)		—			73
Gain on sale of equity securities (reclassification adjustment)		—			(1	)		—			(12	)
Change in unrealized loss on interest rate swaps		163			72			476			180
Comprehensive income attributable to Excel Trust, L.P.	$	14,002		$	544		$	18,111		$	1,534

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

10

EXCEL TRUST, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF CAPITAL

(Dollars in thousands)

(Unaudited)

	Preferred Operating Partnership Units						Limited Partners’ Capital						General Partner’s Capital
	Series A			Series B			Common Operating Partnership Units			Amount			Common Operating Partnership Units		Amount			Accumulated other Comprehensive Loss			Total Partners’ Capital			Non- controlling Interests			Total Capital
Balance at January 1, 2013	$	47,703		$	88,720			1,245,019		$	5,512			44,905,683	$	465,612		$	(620	)	$	606,927		$	1,845		$	608,772
Net proceeds from sale of common operating partnership units		—			—			—			—			3,211,928		40,727			—			40,727			—			40,727
Issuance of restricted common operating partnership unit awards		—			—			—			—			33,088		—			—			—			—			—
Redemption of common operating partnership units		—			—			(19,904	)		(235	)		22,074		279			—			44			—			44
Noncash amortization of share-based compensation		—			—			—			—			—		1,713			—			1,713			—			1,713
OP unit distributions		(2,625	)		(5,607	)		—			(624	)		—		(24,349	)		—			(33,205	)		(366	)		(33,571	)
Net income (loss)		2,625			5,607			—			240			—		8,914			—			17,386			249			17,635
Change in unrealized loss on interest rate swaps		—			—			—			—			—		—			476			476			—			476
Balance at September 30, 2013	$	47,703		$	88,720			1,225,115		$	4,893			48,172,773	$	492,896		$	(144	)	$	634,068		$	1,728		$	635,796
	Preferred Operating Partnership Units						Limited Partners’ Capital						General Partner’s Capital
	Series A			Series B			Common Operating Partnership Units			Amount			Common Operating Partnership Units		Amount			Accumulated other Comprehensive Loss			Total Partners’ Capital			Non- controlling Interests			Total Capital
Balance at January 1, 2012	$	47,703		$	—			1,405,405		$	8,230			30,289,813	$	323,914		$	(872	)	$	378,975		$	2,011		$	380,986
Net proceeds from sale of preferred operating partnership units		—			88,720			—			—			—		—			—			88,720			—			88,720
Net proceeds from sale of preferred operating partnership units		—			—			—			—			1,082,051		12,587			—			12,587			—			12,587
Issuance of restricted common operating partnership unit awards		—			—			—			—			18,356		—			—			—			—			—
Redemption of common operating partnership units		—			—			(365,053	)		(4,315	)		270,112		3,199			—			(1,116	)		—			(1,116	)
Issuance of common operating partnership units for acquisition		—			—			—			—			3,230,769		39,108			—			39,108			—			39,108
Noncash amortization of share-based compensation		—			—			—			—			—		2,406			—			2,406			—			2,406
OP unit distributions		(2,625	)		(4,984	)		—			(558	)		—		(16,619	)		—			(24,786	)		(331	)		(25,117	)
Net income (loss)		2,625			4,984			—			(230	)		—		(6,302	)		—			1,077			216			1,293
Change in unrealized gain on investment in equity securities		—			—			—			—			—		—			73			73			—			73
Change in unrealized loss on interest rate swaps		—			—			—			—			—		—			180			180			—			180
Balance at September 30, 2012	$	47,703		$	88,720			1,040,352		$	3,127			34,891,101	$	358,293		$	(619	)	$	497,224		$	1,896		$	499,120

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

11

EXCEL TRUST, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	Nine Months Ended September 30, 2013			Nine Months Ended September 30, 2012
Cash flows from operating activities:
Net income	$	17,635		$	1,293
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		35,306			25,432
Changes in fair value of financial instruments and gain on OP unit redemption		(230	)		(1,112	)
Change in fair value of contingent consideration		(1,568	)		(121	)
Gain on sale of real estate assets		(11,974	)		—
Income from equity in unconsolidated entities		13			158
Deferred rent receivable		(2,913	)		(2,021	)
Amortization of above- and below-market leases		205			(12	)
Amortization of deferred balances		1,127			1,461
Bad debt expense		959			495
Share-based compensation expense		1,713			2,406
Distributions from unconsolidated entities		518			—
Change in assets and liabilities (net of the effect of acquisitions):
Tenant and other receivables		1,295			(517	)
Other assets		(1,289	)		(1,196	)
Accounts payable and other liabilities		2,198			2,562
Net cash provided by operating activities		42,995			28,828
Cash flows from investing activities:
Acquisitions of property		(121,175	)		(99,306	)
Development of property and property improvements		(16,215	)		(4,791	)
Proceeds from contribution of real estate assets		—			21,317
Investments in unconsolidated entities		(106	)		—
Return of capital from unconsolidated entities		139			—
Disposition of real estate assets		4,355			—
Receipt of master lease payments		384			—
Capitalized leasing costs		(1,538	)		(1,397	)
Advance of note receivable		—			(750	)
Collection of mortgage loan receivable		—			2,000
Purchases of equity securities		—			(125	)
Proceeds from sale of equity securities		—			4,241
Restricted cash		(3,439	)		(1,585	)
Net cash used in investing activities		(137,595	)		(80,396	)
Cash flows from financing activities:
Issuance of common OP units		41,098			12,587
Issuance of preferred OP units		—			89,102
Preferred stock offering costs		—			(382	)
OP unit redemptions		—			(1,915	)
Payments on mortgages payable		(33,771	)		(3,326	)
Proceeds from mortgages payable		—			13,713
Payments on notes payable		(40,500	)		(71,000	)
Proceeds from notes payable		159,000			50,000
Payments of contingent consideration		—			(1,613	)
Distribution to non-controlling interests		(366	)		(946	)
Preferred OP unit distributions		(8,232	)		(6,051	)
Common OP unit distributions		(24,062	)		(15,796	)
Deferred financing costs		(680	)		(2,060	)
Net cash provided by financing activities		92,487			62,313
Net (decrease) increase		(2,113	)		10,745
Cash and cash equivalents, beginning of period		5,596			5,292
Cash and cash equivalents, end of period	$	3,483		$	16,037
Supplemental cash flow information:
Cash payments for interest, net of amounts capitalized of $50 and $110	$	12,114		$	9,185
Non-cash investing and financing activity:
Acquisition of real estate for common OP units	$	—		$	39,108
Assumption of net mortgage debt in connection with property acquisitions	$	8,204		$	29,670
Assets received in connection with property acquisitions	$	—		$	3,784
Liabilities assumed in connection with property acquisitions	$	140		$	1,445
Dispositions of real estate assets classified as a 1031 exchange (including gain on sale of real estate assets of $10,845)	$	31,104		$	—
Common OP unit distributions payable	$	8,397		$	5,838
Preferred OP unit distributions payable	$	2,287		$	2,287
Accrued additions to operating and development properties	$	3,356		$	948
Change in unrealized loss on interest rate swaps	$	476		$	180
Change in unrealized gain on marketable securities	$	—		$	73
OP unit redemptions	$	279		$	3,199
Investment in unconsolidated entities	$	—		$	1,348
Reclassification of offering costs	$	364		$	—
Reclassification of real estate to held for sale	$	3,226		$	—

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

12

EXCEL TRUST, INC. AND EXCEL TRUST, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization:

Excel Trust, Inc., a Maryland corporation (the “Parent Company”), is a vertically integrated, self-administered, self-managed real estate firm with the principal objective of acquiring, financing, developing, leasing, owning and managing value oriented community and power centers, grocery anchored neighborhood centers and freestanding retail properties. It conducts substantially all of its business through its subsidiary, Excel Trust, L.P., a Delaware limited partnership (the “Operating Partnership” and together with the Parent Company referred to as the “Company”). The Company seeks investment opportunities throughout the United States, but focuses on the Northeast, Northwest and Sunbelt regions. The Company generally leases anchor space to national and regional supermarket chains, big-box retailers and select national retailers that frequently offer necessity and value oriented items and generate regular consumer traffic.

The Parent Company is the sole general partner of the Operating Partnership and, as of September 30, 2013, owned a 97.5% interest in the Operating Partnership. The remaining 2.5% interest in the Operating Partnership is held by limited partners. Each partner’s percentage interest in the Operating Partnership is determined based on the number of common operating partnership units (“OP units”) owned as compared to total OP units (and potentially issuable OP units, as applicable) outstanding as of each period end and is used as the basis for the allocation of net income or loss to each partner.

2. Summary of Significant Accounting Policies

Basis of Presentation:

The accompanying condensed consolidated financial statements of the Company include all the accounts of the Company and its subsidiaries. The financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. They do not include all the information and footnotes required by GAAP for complete financial statements and have not been audited by independent registered public accountants.

The unaudited interim condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto in the Parent Company’s Annual Report on Form 10-K for the year ended December 31, 2012 and the Operating Partnership’s Registration Statement on Form 10. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements for the interim periods have been made. Operating results for the three and nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. All significant intercompany balances and transactions have been eliminated in consolidation.

Cash and Cash Equivalents:

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents, for which cost approximates fair value, due to their short term maturities.

Restricted Cash:

Restricted cash is comprised of impound reserve accounts for property taxes, insurance, capital improvements and tenant improvements. The balance at September 30, 2013 also includes approximately $31.1 million of net proceeds from the disposition of the Grant Creek Town Center property on September 13, 2013 (see Note 15). The sale was classified as an exchange pursuant to section 1031 of the Internal Revenue Code of 1986, as amended (the “Code”); therefore, the funds are restricted as to their usage. The Company subsequently utilized a portion of the funds to provide the purchase price for the acquisition of a retail center property located in San Diego, California on October 4, 2013 (see Note 20).

Accounts Payable and Other Liabilities:

Included in accounts payable and other liabilities are deferred rents in the amount of $3.5 million and $4.4 million at September 30, 2013 and December 31, 2012, respectively.

Revenue Recognition:

The Company commences revenue recognition on its leases based on a number of factors. In most cases, revenue recognition under a lease begins when the lessee takes possession of or controls the physical use of the leased asset. Generally, this occurs on the lease commencement date. In determining what constitutes the leased asset, the Company evaluates whether the Company or the lessee is the owner, for accounting purposes, of the tenant improvements. If the Company is the owner, for accounting purposes, of the

13

tenant improvements, then the leased asset is the finished space and revenue recognition begins when the lessee takes possession of the finished space, typically when the improvements are substantially complete. If the Company concludes that it is not the owner, for accounting purposes, of the tenant improvements (the lessee is the owner), then the leased asset is the unimproved space and any tenant improvement allowances funded under the lease are treated as lease incentives, which reduce revenue recognized on a straight-line basis over the remaining non-cancelable term of the respective lease. In these circumstances, the Company begins revenue recognition when the lessee takes possession of the unimproved space for the lessee to construct improvements. The determination of who is the owner, for accounting purposes, of the tenant improvements is highly subjective and determines the nature of the leased asset and when revenue recognition under a lease begins. The Company considers a number of different factors to evaluate whether it or the lessee is the owner of the tenant improvements for accounting purposes. These factors include:

• whether the lease stipulates how and on what a tenant improvement allowance may be spent;

• whether the tenant or landlord retains legal title to the improvements;

• the uniqueness of the improvements;

• the expected economic life of the tenant improvements relative to the length of the lease;

• the responsible party for construction cost overruns; and

• who constructs or directs the construction of the improvements.

Minimum rental revenues are recognized on a straight-line basis over the terms of the related lease. The difference between the amount of cash rent due in a year and the amount recorded as rental income is referred to as the “straight-line rent adjustment.” Rental income increased by $937,000 and $632,000 in the three months ended September 30, 2013 and 2012, respectively, and $2.9 million and $2.0 million in the nine months ended September 30, 2013 and 2012, respectively, due to the straight-line rent adjustment. Percentage rent is recognized after tenant sales have exceeded defined thresholds (if applicable) and was $171,000 and $196,000 for the three months ended September 30, 2013 and 2012, respectively, and $741,000 and $557,000 for the nine months ended September 30, 2013 and 2012, respectively.

Estimated recoveries from certain tenants for their pro rata share of real estate taxes, insurance and other operating expenses are recognized as revenues in the period the applicable expenses are incurred or as specified in the leases. Other tenants pay a fixed rate and these tenant recoveries are recognized as revenue on a straight-line basis over the term of the related leases.

Property:

Costs incurred in connection with the development or construction of properties and improvements are capitalized. Capitalized costs include pre-construction costs essential to the development of the property, development costs, construction costs, interest costs, real estate taxes and related costs and other direct costs incurred during the period of development. The Company capitalizes costs on land and buildings under development until construction is substantially complete and the property is held available for occupancy. The determination of when a development project is substantially complete and when capitalization must cease involves a degree of judgment. The Company considers a construction project as substantially complete and held available for occupancy upon the completion of landlord-owned tenant improvements or when the lessee takes possession of the unimproved space for construction of its own improvements, but no later than one year from cessation of major construction activity. The Company ceases capitalization on the portion substantially completed and occupied or held available for occupancy, and capitalizes only those costs associated with any remaining portion under construction. In March 2012, the Company reclassified the majority of construction in progress costs relating to two non-operating properties into the corresponding buildings, site improvements and tenant improvements financial statement line items upon substantial completion of development activities.

Maintenance and repairs expenses are charged to operations as incurred. Costs for major replacements and betterments, which include HVAC equipment, roofs, parking lots, etc., are capitalized and depreciated over their estimated useful lives. Gains and losses are recognized upon disposal or retirement of the related assets and are reflected in earnings.

Property is recorded at cost and is depreciated using the straight-line method over the estimated lives of the assets as follows:

Building and improvements	15 to 40 years
Tenant improvements	Shorter of the useful lives or the terms of the related leases

Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed:

The Company reviews long-lived assets and certain identifiable intangible assets for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. This assessment considers expected future operating income, trends and prospects, as well as the effects of demand, competition and other economic factors. Such factors include the tenants’ ability to perform their duties and pay rent under the terms of the leases. The determination of recoverability is made

14

based upon the estimated undiscounted future net cash flows, excluding interest expense, expected to result from the long-lived asset’s use and eventual disposition. The Company’s evaluation as to whether impairment may exist, including estimates of future anticipated cash flows, are highly subjective and could differ materially from actual results in future periods. The amount of impairment loss, if any, is determined by comparing the fair value, as determined by a discounted cash flows analysis, with the carrying value of the related assets. Although the Company’s strategy is to hold its properties over a long-term period, if the strategy changes or market conditions dictate that the sale of properties at an earlier date would be preferable, a property may be classified as held for sale and an impairment loss may be recognized to reduce the property to the lower of the carrying amount or fair value less cost to sell. There was no impairment recorded for the nine months ended September 30, 2013 or 2012.

Investments in Partnerships and Limited Liability Companies:

The Company evaluates its investments in limited liability companies and partnerships to determine whether such entities may be a VIE and, if a VIE, whether the Company is the primary beneficiary. Generally, an entity is determined to be a VIE when either (1) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support provided by any parties or (2) as a group, the holders of the equity investment lack one or more of the essential characteristics of a controlling financial interest. The primary beneficiary is the entity that has both (1) the power to direct matters that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. The Company considers a variety of factors in identifying the entity that holds the power to direct matters that most significantly impact the VIE’s economic performance including, but not limited to, the ability to direct financing, leasing, construction and other operating decisions and activities. In addition, the Company considers the form of ownership interest, voting interest, the size of the investment (including loans) and the rights of other investors to participate in policy making decisions, to replace or remove the manager and to liquidate or sell the entity. The obligation to absorb losses and the right to receive benefits when a reporting entity is affiliated with a VIE must be based on ownership, contractual, and/or other pecuniary interests in that VIE.

If the foregoing conditions do not apply, the Company considers whether a general partner or managing member controls a limited partnership or limited liability company. The general partner in a limited partnership or managing member in a limited liability company is presumed to control that limited partnership or limited liability company. The presumption may be overcome if the limited partners or members have either (1) the substantive ability to dissolve the limited partnership or limited liability company or otherwise remove the general partner or managing member without cause or (2) substantive participating rights, which provide the limited partners or members with the ability to effectively participate in significant decisions that would be expected to be made in the ordinary course of the limited partnership’s or limited liability company’s business and thereby preclude the general partner or managing member from exercising unilateral control over the partnership or company. If these criteria are not met and the Company is the general partner or the managing member, as applicable, the Company will consolidate the partnership or limited liability company.

Investments that are not consolidated, over which the Company exercises significant influence but does not control, are accounted for under the equity method of accounting. These investments are recorded initially at cost and subsequently adjusted for the Company’s portion of earnings or losses and for cash contributions and distributions. Under the equity method of accounting, the Company’s investment is reflected in the consolidated balance sheets and its share of net income or loss is included in the consolidated statements of operations and comprehensive income.

Share-Based Payments:

All share-based payments to employees are recognized in earnings based on their fair value on the date of grant. Through September 30, 2013, the Company has awarded only restricted stock awards under its incentive award plan, which are based on shares of the Parent Company’s common stock. The fair value of equity awards that include only service or performance vesting conditions is determined based on the closing market price of the underlying common stock on the date of grant. The fair value of equity awards that include one or more market vesting conditions is determined based on the use of a widely accepted valuation model. The fair value of equity grants is amortized to general and administrative expense ratably over the requisite service period for awards that include only service vesting conditions and utilizing a graded vesting method (an accelerated vesting method in which the majority of compensation expense is recognized in earlier periods) for awards that include one or more market vesting conditions, adjusted for anticipated forfeitures.

Purchase Accounting:

The Company, with the assistance of independent valuation specialists as needed, records the purchase price of acquired properties as tangible and identified intangible assets and liabilities based on their respective fair values. Tangible assets (building and land) are recorded based upon the Company’s determination of the value of the property as if it were vacant using discounted cash flow models similar to those used by independent appraisers. Factors considered include an estimate of carrying costs during the expected lease-up periods taking into account current market conditions and costs to execute similar leases. The fair value of land is derived from comparable sales of land within the same submarket and/or region. The fair value of buildings and improvements, tenant improvements, site improvements and leasing costs are based upon current market replacement costs and other relevant market rate information. Additionally, the purchase price of the applicable property is recorded as the above- or below-market value of in-place leases, the value of in-place leases and above- or below-market value of debt assumed, as applicable.

15

The value recorded as the above- or below-market component of the acquired in-place leases is determined based upon the present value (using a discount rate which reflects the risks associated with the acquired leases) of the difference between: (1) the contractual amounts to be paid pursuant to the lease over its remaining term, and (2) the Company’s estimate of the amounts that would be paid using fair market rates at the time of acquisition over the remaining term of the lease. The amounts recorded as above-market leases are included in lease intangible assets, net in the Company’s accompanying condensed consolidated balance sheets and amortized to rental income over the remaining non-cancelable lease term of the acquired leases with each property. The amounts recorded as below-market lease values are included in lease intangible liabilities, net in the Company’s accompanying condensed consolidated balance sheets and amortized to rental income over the remaining non-cancelable lease term plus any below-market fixed price renewal options of the acquired leases with each property.

The value recorded as above- or below-market debt is determined based upon the present value of the difference between the cash flow stream of the assumed mortgage and the cash flow stream of a market rate mortgage. The amounts recorded as above- or below-market debt are included in mortgage payables, net in the Company’s accompanying condensed consolidated balance sheets and are amortized to interest expense over the remaining term of the assumed mortgage.

Tenant receivables:

Tenant receivables and deferred rent are carried net of the allowances for uncollectible current tenant receivables and deferred rent. An allowance is maintained for estimated losses resulting from the inability of certain tenants to meet the contractual obligations under their lease agreements. The Company maintains an allowance for deferred rent receivable arising from the straight-lining of rents. Such allowances are charged to bad debt expense which is included in other operating expenses on the accompanying condensed consolidated statement of operations. The Company’s determination of the adequacy of these allowances is based primarily upon evaluations of historical loss experience, the tenant’s financial condition, security deposits, letters of credit, lease guarantees, current economic conditions and other relevant factors. At September 30, 2013 and December 31, 2012, the Company had $1.3 million and $719,000, respectively, in allowances for uncollectible accounts (including straight-line deferred rent receivables) as determined to be necessary to reduce receivables to the estimate of the amount recoverable. During the three months ended September 30, 2013 and 2012, $517,000 and $100,000, respectively, of receivables were charged to bad debt expense. During the nine months ended September 30, 2013 and 2012, $959,000 and $495,000, respectively, of receivables were charged to bad debt expense.

Non-controlling Interests:

Non-controlling interests on the consolidated balance sheets of the Parent Company relate to the OP units that are not owned by the Parent Company and the portion of consolidated joint ventures not owned by the Parent Company. The OP units not held by the Parent Company may be redeemed by the Parent Company at the holder’s option for cash. The Parent Company, at its option, may satisfy the redemption obligation with common stock on a one-for-one basis, which has been further evaluated to determine that permanent equity classification on the balance sheet is appropriate.

In October 2012, the Operating Partnership issued 411,184 OP units in connection with the Company’s acquisition of the West Broad Village property. During the three months ended March 31, 2013, a total of 19,904 OP units related to the Edwards Theatres acquisition were tendered to the Company for redemption, resulting in the issuance of 22,074 shares of common stock by the Parent Company (an equivalent number of OP units were issued by the Operating Partnership to the Parent Company). The OP units were redeemed for common stock on a one-for-one basis, with additional common stock provided as a result of the accompanying additional redemption obligation that guaranteed consideration equal to $14.00 per OP unit on the date of redemption. The remaining additional redemption obligation of $246,000 associated with the Edwards Theatres acquisition expired on March 11, 2013 and was reclassified and recognized as a gain in changes in fair value of financial instruments and gain on OP unit redemption (net of a loss of $16,000 on the OP unit redemption) on the accompanying condensed consolidated financial statements. At September 30, 2013, 172,869 OP units related to the Edwards Theatres acquisition remained outstanding, which continue to be redeemable by the OP unitholders for cash or common stock on a one-for-one basis (the determination of redemption for cash or common stock is at the Parent Company’s option).

Non-controlling interests on the consolidated balance sheets of the Operating Partnership represent the portion of equity that the Operating Partnership does not own in those entities it consolidates.

Concentration of Risk:

The Company maintains its cash accounts in a number of commercial banks. Accounts at these banks are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At various times during the periods, the Company had deposits in excess of the FDIC insurance limit.

16

In the three and nine months ended September 30, 2013 and 2012, no tenant accounted for more than 10% of revenues.

At September 30, 2013, the Company’s gross real estate assets in the states of California, Arizona, Virginia and Texas represented approximately 25.9%, 18.0%, 14.9% and 11.8% of the Company’s total assets, respectively. At December 31, 2012, the Company’s gross real estate assets in the states of Arizona, California and Virginia represented approximately 16.6%, 16.5% and 14.6% of the Company’s total assets, respectively. For the nine months ended September 30, 2013, the Company’s revenues derived from properties located in the states of California, Arizona, Virginia and Texas represented approximately 22.5%, 18.2%, 11.8% and 11.2% of the Company’s total revenues, respectively. For the nine months ended September 30, 2012, the Company’s revenues derived from properties located in the states of California and Arizona represented approximately 21.3% and 16.8% of the Company’s total revenues, respectively.

Management Estimates:

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments:

The Company measures financial instruments and other items at fair value where required under GAAP, but has elected not to measure any additional financial instruments and other items at fair value as permitted under fair value option accounting guidance.

Fair value measurement is determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, there is a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Level 1 inputs utilize quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the assets or liabilities, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety.

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

The Company has used interest rate swaps to manage its interest rate risk (see Note 11). The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees.

Although the Company has determined that the majority of the inputs used to value its derivatives classified as cash flow hedges fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of September 30, 2013, the Company has determined that the impact of the credit valuation adjustments on the overall valuation of its derivative positions is not significant. As a result, the Company has determined that its valuations related to derivatives classified as cash flow hedges in their entirety are classified in Level 2 of the fair value hierarchy (see Note 19).

Changes in the fair value of financial instruments (other than derivative instruments for which an effective hedging relationship exists and available-for-sale securities) are recorded as a charge against earnings in the consolidated statements of operations in the period in which they occur. The Company estimates the fair value of financial instruments at least quarterly based on current facts and circumstances, projected cash flows, quoted market prices and other criteria (primarily utilizing Level 3 inputs). The Company may also utilize the services of independent third-party valuation experts to estimate the fair value of financial instruments, as necessary.

17

The Company’s investments in equity securities fall within Level 1 of the fair value hierarchy as the Company utilizes observable market-based inputs, based on the closing trading price of securities as of the balance sheet date, to determine the fair value of the investments.

Derivative Instruments:

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity and credit risk primarily by managing the amount, sources and duration of its debt funding and the use of derivative financial instruments. Specifically, from time to time the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings.

In addition, from time to time the Company may execute agreements in connection with business combinations that include embedded derivative instruments as part of the consideration provided to the sellers of the properties. Although these embedded derivative instruments are not intended as hedges of risks faced by the Company, they can provide additional consideration to the Company’s selling counterparties and may be a key component of negotiations.

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

The Company records all derivative instruments on the consolidated balance sheets at their fair value. In determining the fair value of derivative instruments, the Company also considers the credit risk of its counterparties, which typically constitute larger financial institutions engaged in providing a wide variety of financial services. These financial institutions generally face similar risks regarding changes in market and economic conditions, including, but not limited to, changes in interest rates, exchange rates, equity and commodity pricing and credit spreads.

Accounting for changes in the fair value of derivative instruments depends on the intended use of the derivative, whether it has been designated as a hedging instrument and whether the hedging relationship has continued to satisfy the criteria to apply hedge accounting. For derivative instruments qualifying as cash flow hedges, the effective portion of changes in the fair value is initially recorded in Accumulated Other Comprehensive Income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. The Company assesses the effectiveness of each hedging relationship by comparing the changes in the cash flows of the derivative hedging instrument with the changes in the cash flows of the hedged item or transaction.

The Company formally documents the hedging relationship for all derivative instruments, has accounted for its interest rate swap agreements as cash flow hedges and does not utilize derivative instruments for trading or speculative purposes.

18

Changes in Accumulated Other Comprehensive Loss:

The following table reflects amounts that were reclassified from accumulated other comprehensive loss and included in earnings for the nine months ended September 30, 2013 (dollars in thousands):

	Parent Company						Operating Partnership
	Nine Months Ended						Nine Months Ended
	September 30, 2013			September 30, 2012			September 30, 2013			September 30, 2012
Balance – January 1	$	(572	)	$	(811	)	$	(620	)	$	(872	)
Unrealized loss on interest rate swaps:
Unrealized losses		(19	)		(304	)		(19	)		(304	)
Amount reclassified and recognized in net income(1)		495			484			495			484
Unrealized gain on investment in equity securities:
Unrealized gain		—			85			—			85
Amount reclassified and recognized in net income (2)		—			(12	)		—			(12	)
Net change in other comprehensive income		476			253			476			253
Total other comprehensive loss allocable to non-controlling interests		(11	)		(9	)		—			—
Balance – September 30	$	(107	)	$	(567	)	$	(144	)	$	(619	)

⁽¹⁾ Amounts reclassified from unrealized loss on derivative instruments are included in interest expense in the condensed consolidated statements of operations (interest expense of $171,000 and $164,000 was recognized in interest expense for the three months ended September 30, 2013 and 2012, respectively – see Note 11).

⁽²⁾ Amounts reclassified from unrealized gain on investments in equity securities are included in other income in the condensed consolidated statements of operations (a gain of $0 and $1,000 was recognized in other income for the three months ended September 30, 2013 and 2012, respectively).

Recent Accounting Pronouncements:

In July 2012, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment (“ASU 2012-02”). The amendments in this update provide an entity with the option to make a qualitative assessment about the likelihood that an indefinite-lived intangible asset is impaired to determine whether it should perform a quantitative impairment test. ASU 2012-02 became effective for fiscal years and interim periods beginning after September 15, 2012. The adoption of ASU 2012-02 on January 1, 2013 did not have a material impact on the Company’s condensed consolidated financial position or results of operations.

19

In January 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”). The amendments in this update require an entity to provide information about the amounts reclassified from accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the income statement or in the notes, significant amounts reclassified from accumulated other comprehensive income by the net income line item. The adoption of ASU 2013-02 on January 1, 2013 did not have a material impact on the Company’s condensed consolidated financial position or results of operations.

3. Acquisitions:

The Company completed the following property acquisition in the nine months ended September 30, 2013, which were acquired for cash unless specified below (dollars in thousands):

Property	Date Acquired	Location	Debt Assumed
Tracy Pavilion	January 24, 2013	Tracy, CA	$	—
Stadium Center	July 1, 2013	Manteca, CA	$	—
League City Towne Center	August 1, 2013	League City, TX	$	—
Living Spaces-Promenade	August 27, 2013	Scottsdale, AZ	$	7,268

The following summary provides an allocation of purchase price for each of the above acquisitions (dollars in thousands):

	Building		Land		Above-Market Leases		Below-Market Leases			In-Place Leases		Debt (Premium)/Discount			Other		Purchase Price
Tracy Pavilion	$	22,611	$	6,193	$	163	$	(1,136	)	$	2,907	$	—		$	—	$	30,738
Stadium Center(1)		28,988		10,309		931		(3,197	)		4,119		—			—		41,150
League City Towne Center		24,767		10,858		315		(1,249	)		4,809		—			—		39,500
Living Spaces-Promenade(2)		1,038		14,514		—		(116	)		1,500		(936	)		—		16,000
Total	$	77,404	$	41,874	$	1,409	$	(5,698	)	$	13,335	$	(936	)	$	—	$	127,388
Remaining useful life(3)						54		108			75		76

⁽¹⁾ As of September 30, 2013, the purchase price allocation related to the acquisition of the Stadium Center property was preliminary and the final purchase price allocation will be determined pending the receipt of information necessary to complete the valuation of assets and liabilities, which may result in a change from the intial estimates.

⁽²⁾ On August 27, 2013, the Company acquired a land parcel that was previously not owned at The Promenade retail property in Scottsdale, Arizona (not considered a separate property). The land parcel contains a building, which was constructed by the tenant and is subject to a ground lease.

⁽³⁾ Weighted-average remaining useful life (months) for recorded intangible assets and liabilities as of the date of acquisition.

The Company completed the following property acquisitions in the nine months ended September 30, 2012, which were acquired for cash unless specified below (dollars in thousands):

Consolidated Property	Date Acquired	Location	Debt Assumed
Promenade Corporate Center	January 23, 2012	Scottsdale, AZ	$	—
EastChase Market Center	February 17, 2012	Montgomery, AL	$	—
Lake Pleasant Pavilion	May 16, 2012	Peoria, AZ	$	28,250
Chimney Rock	August 31, 2012	Odessa, TX	$	—
Unconsolidated Property	Date Acquired	Location	Debt Assumed
La Costa Town Center	February 29, 2012	La Costa, CA	$	—

20

The following summary provides an allocation of purchase price for the above acquisitions (dollars in thousands):

Consolidated Property	Building		Land		Above-Market Leases		Below-Market Leases			In-Place Leases		Debt (Premium)/Discount			Other		Purchase Price
Promenade Corporate Center(1)	$	44,465	$	4,477	$	781	$	(749	)	$	3,279	$	—		$	—	$	52,253
EastChase Market Center		19,567		4,215		360		(1,296	)		1,804		—			—		24,650
Lake Pleasant Pavilion		28,127		9,958		2,857		(184	)		2,412		(1,420	)		—		41,750
Chimney Rock(2)		14,089		7,368		—		(2,291	)		2,532		—			2,106		23,804
Total	$	106,248	$	26,018	$	3,998	$	(4,520	)	$	10,027	$	(1,420	)	$	2,106	$	142,457
Unconsolidated Property	Building		Land		Above-Market Leases		Below-Market Leases			In-Place Leases		Debt (Premium)/Discount			Other		Purchase Price
La Costa Town Center(3)	$	15,054	$	8,383	$	86	$	(2,069	)	$	2,046	$	—		$	—	$	23,500
Total	$	15,054	$	8,383	$	86	$	(2,069	)	$	2,046	$	—		$	—	$	23,500

⁽¹⁾ The purchase price of $52.3 million reflects $13.9 million in cash paid and the issuance of 3,230,769 shares of common stock with a fair value of approximately $39.1 million based on a closing price of $12.11 per share on the date of acquisition. The purchase price noted above is net of master lease agreements between the Company and the seller in the amount of $772,000 (included in other assets on the accompanying condensed consolidated balance sheets) based on the estimated fair value of funds expected to be received from escrow in connection with the acquisition. Payments under the master lease agreements commenced upon the expiration of two existing leases in June 2012 and February 2013 (with terms through May 2013 and January 2015, respectively). In addition, the seller has agreed to reimburse the Company for any expenditures resulting from tenant improvements or leasing commissions related to the spaces to the extent that funds remain available pertaining to the master lease agreements. See Note 19 for a discussion of changes in the fair value of this asset after the initial acquisition.

⁽²⁾ The purchase price of $23.8 million noted above includes a long-term asset recognized at acquisition with a valuation of approximately $3.0 million (included in other assets) and a long-term liability with a preliminary valuation of approximately $906,000 (included in accounts payable and other liabilities). The long-term asset and the long-term liability reflect the estimated fair value of funds expected to be received pursuant to an economic development agreement executed between the previous owner of the property and the City of Odessa and the portion of such funds that is owed to a third party. As a result of the agreement, the Company is eligible to receive a refund of up to $5.1 million in municipal sales taxes generated by retail sales at the property over a period of up to 15 years. Both the long-term asset and the long-term liability will be accreted to their respective gross balances of $5.1 million and $1.0 million, respectively, over periods of 14 years and three years, respectively.

⁽³⁾ This property was originally purchased as a consolidated property. However, in September 2012 the La Costa Town Center property was contributed in exchange for proceeds of approximately $21.2 million to a newly-formed entity in which the Company holds a 20% ownership interest (see Note 14). The Company accounts for its remaining equity ownership in the property in a manner similar to the equity method of accounting, which is reflected in the accompanying condensed consolidated balance sheets as an investment in unconsolidated entities.

The Company recorded revenues and a net income for the three months ended September 30, 2013 of $2.6 million and $414,000, respectively, and for the nine months ended September 30, 2013 of $3.9 million and $401,000, respectively, related to the 2013 acquisitions. The Company recorded revenues and net income for the three months ended September 30, 2012 of $3.6 million and $153,000, respectively, and recorded revenues and a net loss for the nine months ended September 30, 2012 of $8.4 million and $413,000, respectively, related to the 2012 acquisitions.

The following unaudited pro forma information for the three and nine months ended September 30, 2013 and 2012 has been prepared to reflect the incremental effect of the properties acquired in 2013 and 2012, as if such acquisitions had occurred on January 1, 2012 and January 1, 2011, respectively (dollars in thousands):

	Three Months Ended				Nine Months Ended
	September 30, 2013		September 30, 2012		September 30, 2013		September 30, 2012
Revenues	$	29,556	$	24,581	$	88,492	$	73,235
Net income (loss)(1)	$	14,056	$	578	$	18,282	$	1,890

21

⁽¹⁾ Pro forma results for the three and nine months ended September 30, 2013 were adjusted to exclude non-recurring acquisition costs of approximately $109,000 and $166,000, respectively, related to the 2013 acquisitions. Pro forma results for the three and nine months ended September 30, 2012 were adjusted to exclude non-recurring acquisition costs of approximately $84,000 and $377,000, respectively, related to the 2012 acquisitions. The pro forma results for the three and nine months ended September 30, 2012 were adjusted to include these costs relating to the 2013 acquisitions. A portion of the 2012 acquisitions were funded with proceeds from the offering of 8.125% Series B Cumulative Redeemable Preferred Stock (“Series B preferred stock”) that closed in January 2012. However, pro forma net income for the three and nine months ended September 30, 2012 is not adjusted for this funding as the assumed Series B preferred stock quarterly dividends of approximately $1.9 million are not included in the determination of net income (included only as a reduction of net income (loss) attributable to the common stockholders).

As of September 30, 2013, the Company had completed the reconciliation of common area maintenance expenses related to periods prior to the acquisition of the West Broad Village property, resulting in no change to the original estimated credit received at the closing of the acquisition in the amount of $450,000 (recorded as a liability).

4. Lease Intangible Assets, Net

Lease intangible assets, net consisted of the following at September 30, 2013 and December 31, 2012:

	September 30, 2013		December 31, 2012
	(in thousands)
In-place leases, net of accumulated amortization of $24.9 million and $20.7 million as of September 30, 2013 and December 31, 2012, respectively (with a weighted average remaining life of 79 and 82 months as of September 30, 2013 and December 31, 2012, respectively)	$	48,276	$	50,666
Above-market leases, net of accumulated amortization of $7.0 million and $5.2 million as of September 30, 2013 and December 31, 2012, respectively (with a weighted average remaining life of 64 and 70 months as of September 30, 2013 and December 31, 2012, respectively)		14,119		15,888
Leasing commissions, net of accumulated amortization of $6.5 million and $4.9 million as of September 30, 2013 and December 31, 2012, respectively (with a weighted average remaining life of 101 and 111 months as of September 30, 2013 and December 31, 2012, respectively)		17,878		19,092
	$	80,273	$	85,646

Estimated amortization of lease intangible assets as of September 30, 2013 for each of the next five years and thereafter is as follows (dollars in thousands):

Year Ending December 31,	Amount
2013 (remaining three months)	$	4,966
2014		17,028
2015		12,228
2016		9,250
2017		8,070
Thereafter		28,731
Total	$	80,273

Amortization expense recorded on the lease intangible assets for the three months ended September 30, 2013 and 2012 was $5.5 million and $4.6 million, respectively. Included in these amounts are $1.0 million and $902,000, respectively, of amortization of above-market lease intangible assets recorded against rental revenue. Amortization expense recorded on the lease intangible assets for the nine months ended September 30, 2013 and 2012 was $18.3 million and $14.1 million, respectively. Included in these amounts are $3.6 million and $2.5 million, respectively, of amortization of above-market lease intangible assets recorded against rental revenue.

5. Lease Intangible Liabilities, Net

Lease intangible liabilities, net consisted of the following at September 30, 2013 and December 31, 2012:

	September 30, 2013		December 31, 2012
	(in thousands)
Below-market leases, net of accumulated amortization of $7.1 million and $5.0 million as of September 30, 2013 and December 31, 2012, respectively (with a weighted average remaining life of 123 and 134 months as of September 30, 2013 and December 31, 2012, respectively)	$	27,884	$	26,455

22

Amortization recorded on the lease intangible liabilities for the three months ended September 30, 2013 and 2012 was $1.1 million and $744,000, respectively. Amortization recorded on the lease intangible liabilities for the nine months ended September 30, 2013 and 2012 was $3.4 million and $2.5 million, respectively. These amounts were recorded as rental revenue in the Company’s condensed consolidated statements of operations.

Estimated amortization of lease intangible liabilities as of September 30, 2013 for each of the next five years and thereafter is as follows (dollars in thousands):

Year Ending December 31,	Amount
2013 (remaining three months)	$	995
2014		3,683
2015		3,125
2016		2,754
2017		2,583
Thereafter		14,744
Total	$	27,884

6. Variable Interest Entities

Consolidated Variable Interest Entities

Included within the condensed consolidated financial statements is the 50% owned joint venture with AB Dothan, LLC, that is deemed a VIE, and for which the Company is the primary beneficiary as it has the power to direct activities that most significantly impact the economic performance of the VIE. The joint venture’s activities principally consist of owning and operating a neighborhood retail center with 171,670 square feet of gross leasable area (“GLA”) located in Dothan, Alabama.

As of September 30, 2013 and December 31, 2012, total carrying amount of assets was approximately $15.6 million and $15.9 million, respectively, which includes approximately $13.4 million and $13.6 million, respectively, of real estate assets at the end of each period. As of September 30, 2013 and December 31, 2012, the total carrying amount of liabilities was approximately $14.3 million.

Unconsolidated Variable Interest Entities

On December 9, 2010, the Company loaned $2.0 million to an unaffiliated borrower which has been identified as a VIE. In June 2012, the counterparty repaid the loan in full. The Company did not consolidate the VIE because it did not have the ability to control the activities that most significantly impacted the VIE’s economic performance. See Note 7 for an additional description of the nature, purposes and activities of the Company’s VIEs and interests therein.

7. Mortgage Loan and Note Receivable

On December 9, 2010, the Company loaned $2.0 million to an unaffiliated borrower. The proceeds were used to facilitate the land acquisition and development of a shopping center anchored by Publix in Brandon, Florida. The loan was secured with a second mortgage trust deed on the property and was personally guaranteed by members of the borrower. In June 2012, the mortgage loan receivable was repaid in full, including interest accrued through the date of repayment.

In connection with the loan, the Company entered into a purchase and sale agreement to acquire this property upon completion of development, at the Company’s election. In June 2012, the Company executed an amendment whereby the closing date for the potential acquisition was extended through December 31, 2012. On October 1, 2012, the Company completed the acquisition of the retail shopping center with 68,000 square feet of GLA in Brandon, Florida for a purchase price of approximately $13.1 million.

In June 2012, the Company extended a note receivable in the amount of $750,000 to a third party. The note receivable bears interest at 10.0% per annum, with the principal and accrued interest due upon maturity in June 2014. The loan is recourse to the borrower. The balance is included in other assets on the accompanying condensed consolidated balance sheets.

8. Debt

Debt of the Parent Company

The Parent Company does not directly hold any indebtedness. All of the Company’s debt is held directly or indirectly by the Operating Partnership. However, the Parent Company has guaranteed the Operating Partnership’s mortgage loan secured by the Red Rock Commons property, a portion of the Operating Partnership’s mortgage loan secured by the Park West Place property and the Operating Partnership’s unsecured revolving credit facility (including the letter of credit that secures the redevelopment revenue bonds at the Northside Mall property).

23

Debt of the Operating Partnership

Mortgages Payable

Mortgages payable held by the Operating Partnership at September 30, 2013 and December 31, 2012 consist of the following (dollars in thousands):

	Carrying Amount of Mortgage Notes				Contractual Interest Rate			Effective Interest Rate			Monthly Payment(1)		Maturity Date
Property Pledged as Collateral	September 30, 2013		December 31, 2012
Five Forks Place	$	—	$	4,882		—			—		$	—		June 2013
Grant Creek Town Center		—		15,342		—			—			—		June 2013
Park West Place(2)		55,800		55,800		2.44	%		3.66	%		106		December 2013
Edwards Theatres		11,605		11,859		6.74	%		5.50	%		95		February 2014
Red Rock Commons(3)		13,970		13,800		1.84	%		1.84	%		20		March 2014
Excel Centre		12,084		12,284		6.08	%		6.08	%		85		May 2014
Merchant Central		4,395		4,468		5.94	%		6.75	%		30		July 2014
Gilroy Crossing		46,037		46,646		5.01	%		5.01	%		263		October 2014
The Promenade		48,396		49,703		4.80	%		4.80	%		344		October 2015
5000 South Hulen		13,481		13,655		5.60	%		6.90	%		83		April 2017
Lake Pleasant Pavilion		27,933		28,176		6.09	%		5.00	%		143		October 2017
Rite Aid — Vestavia Hills		1,058		1,184		7.25	%		7.25	%		21		October 2018
Living Spaces-Promenade(4)		7,268		—		7.88	%		4.59	%		80		November 2019
West Broad Village(5)		39,700		50,000		3.33	%		3.33	%		110		May 2020
Lowe’s, Shippensburg		13,248		13,511		7.20	%		7.20	%		110		October 2031
Northside Mall(6)		12,000		12,000		0.08	%		1.08	%		1		November 2035
		306,975		333,310
Plus: premium(7)		1,390		625
Mortgage notes payable, net	$	308,365	$	333,935

⁽¹⁾ Amount represents the monthly payment of principal and interest at September 30, 2013.

⁽²⁾ The loan bears interest at a rate of LIBOR plus 2.25% (variable interest rate of 2.44% and 2.50% at September 30, 2013 and December 31, 2012, respectively). In December 2010, the Company entered into interest rate swap contracts, which fix LIBOR at an average of 1.41% for the term of the loan. The maturity date may be extended for an additional one-year period through December 2014 at the Company’s option and upon the satisfaction of conditions precedent and the payment of an extension fee.

⁽³⁾ The maturity date for the Red Rock Commons construction loan is March 2014, but may be extended for an additional one-year period through March 2015 at the Company’s option and upon the satisfaction of conditions precedent and the payment of an extension fee. As of September 30, 2013, the construction loan bore interest at the rate of LIBOR plus a margin of 165 to 225 basis points, depending on the Company’s leverage ratio (variable interest rate of 1.84% at September 30, 2013 and 2.45% at December 31, 2012). On October 9, 2013, the Company entered into an agreement that lowered the margin to 145 to 205 basis points (if in the future the Parent Company obtains an investment-grade credit rating from S&P, Fitch or Moody’s, the interest rate would be LIBOR plus a margin of 90 to 170 basis points, depending on the Parent Company’s credit rating).

⁽⁴⁾ The Company acquired an additional land parcel that it did not previously own at The Promenade retail property in August 2013 and in connection with such acquisition, the Company assumed a mortgage note with a fixed interest rate of 7.88% (see Note 3).

⁽⁵⁾ The loan at the West Broad Village property was refinanced in April 2013 and bears a fixed rate of 3.33% with a new maturity date of May 1, 2020. Debt payments are interest-only through May 2016.

⁽⁶⁾ The debt represents redevelopment revenue bonds to be used for the redevelopment of this property, which mature in November 2035. Interest is reset weekly and determined by the bond remarketing agent based on the market value of the bonds (interest rate of 0.08% at September 30, 2013 and 0.14% at December 31, 2012). The interest rate on the bonds is currently priced off of the Securities Industry and Financial Markets Association index but could change based on the credit of the bonds. The bonds are secured by a $12.1 million letter of credit issued by the Company from the Company’s unsecured revolving credit facility. An underwriter’s discount related to the original issuance of the bonds with a remaining balance of $106,000 and $110,000 at September 30, 2013 and December 31, 2012, respectively, is being amortized as additional interest expense through November 2035.

⁽⁷⁾ Represents (a) the fair value adjustment on assumed debt on acquired properties at the time of acquisition to account for below- or above-market interest rates and (b) an underwriter’s discount for the issuance of redevelopment bonds.

24

Total interest cost capitalized for the three months ended September 30, 2013 and 2012 was $34,000 and $0, respectively, and for the nine months ended September 30, 2013 and 2012 was $50,000 and $139,000, respectively.

The Company’s mortgage debt maturities at September 30, 2013 for each of the next five years and thereafter are as follows (dollars in thousands):

Year Ending December 31,	Amount
2013 (remaining three months)	$	57,094
2014		91,130
2015		47,920
2016		2,364
2017		41,415
Thereafter		67,052
	$	306,975

Unsecured Revolving Credit Facility

On October 8, 2013, the Operating Partnership entered into an amended and restated credit agreement (the “2013 Amendment”), which provided for an increase in borrowings available under its existing credit facility from $250.0 million to $300.0 million, decreased the applicable interest rate and extended the maturity date. The Operating Partnership has the ability from time to time to increase the size of the unsecured revolving credit facility by up to an additional $200.0 million for a total borrowing capacity of $500.0 million, subject to receipt of lender commitments and other conditions precedent. The amended maturity date is April 6, 2018 and may be extended for an additional six months at the Operating Partnership’s option. The Operating Partnership, among other things, is subject to covenants requiring the maintenance of (1) maximum leverage ratios on unsecured, secured and overall debt and (2) minimum fixed coverage ratios. At September 30, 2013, the Operating Partnership believes that it was in compliance with all the covenants in the credit agreement.

As of September 30, 2013, the unsecured revolving credit facility bore interest at the rate of LIBOR plus a margin of 165 to 225 basis points (which was decreased pursuant to the 2013 Amendment to a margin of 145 to 205 basis points), depending on the Operating Partnership’s leverage ratio. Under the 2013 Amendment, if in the future the Parent Company obtains an investment-grade credit rating from S&P, Fitch or Moody’s, the interest rate would be LIBOR plus a margin of 90 to 170 basis points, depending on the Parent Company’s credit rating. As of September 30, 2013, the Operating Partnership was also responsible for paying a fee of 0.25% or 0.35% for any unused portion of the unsecured revolving credit facility, depending on the amount of the unused portion (or a fee of 0.25% or 0.30% pursuant to the 2013 Amendment on the full capacity of the facility in the future if the Parent Company obtains an investment-grade credit rating from S&P, Fitch or Moody’s). Borrowings from the unsecured revolving credit facility were $193.5 million at September 30, 2013 at a weighted-average interest rate of 1.83%. The Operating Partnership issued a $12.1 million letter of credit from the unsecured revolving credit facility, which secures an outstanding $12.0 million bond payable for the Northside Mall. This bond is included with the mortgages payable on the Company’s condensed consolidated balance sheets. At September 30, 2013, there was approximately $44.3 million available for borrowing under the unsecured revolving credit facility (amount available for borrowing increased subsequent to September 30, 2013 as a result of the 2013 amendment).

9. Earnings Per Share of the Parent Company

Basic earnings (loss) per share is computed by dividing income (loss) applicable to common stockholders by the weighted average shares outstanding, as adjusted for the effect of participating securities. The Parent Company’s unvested restricted share awards are participating securities as they contain non-forfeitable rights to dividends. The impact of unvested restricted share awards on earnings (loss) per share has been calculated using the two-class method whereby earnings are allocated to the unvested restricted share awards based on dividends and the unvested restricted shares’ participation rights in undistributed earnings (losses).

The calculation of diluted earnings per share for the three and nine months ended September 30, 2013 does not include 657,873 and 683,922 shares, respectively, of unvested restricted common stock or 1,225,115 and 1,230,437 OP units, respectively, as the effect of including these equity securities was anti-dilutive to net income or net loss attributable to the common stockholders. The calculation of diluted earnings per share for the three and nine months ended September 30, 2012 does not include 905,433 and 942,810 shares, respectively, of unvested restricted common stock, 90,207 and 90,513 shares, respectively, of contingently issuable common stock related to the 2011 Edwards Theatres acquisition, or 1,056,894 and 1,217,732 OP units, respectively, as the effect of including these equity securities was anti-dilutive to net loss attributable to the common stockholders. In addition, 3,356,178 and 3,341,076 shares of common stock for the three and nine months ended September 30, 2013, respectively, and 3,333,400 shares of common stock for both

25

the three and nine months ended September 30, 2012, respectively, which were issuable upon settlement of the conversion feature of the 7.00% Series A Cumulative Convertible Perpetual Preferred Stock (“Series A preferred stock”), were anti-dilutive and were not included in the calculation of diluted earnings per share based on the “if converted” method.

Computations of basic and diluted earnings per share for the three and nine months ended September 30, 2013 and 2012 (in thousands, except share data) were as follows:

	Three Months Ended						Nine Months Ended
	September 30, 2013			September 30, 2012			September 30, 2013			September 30, 2012
Basic earnings per share:
Income from continuing operations	$	1,520		$	460		$	5,180		$	1,254
Preferred dividends		(2,744	)		(2,744	)		(8,232	)		(7,609	)
Allocation to participating securities		(109	)		(144	)		(326	)		(432	)
Income from continuing operations attributable to non-controlling interests		(108	)		(8	)		(260	)		7
Income (loss) from continuing operations applicable to the common stockholders	$	(1,441	)	$	(2,436	)	$	(3,638	)	$	(6,780	)
Net income (loss) attributable to the common stockholders	$	10,739		$	(2,243	)	$	8,914		$	(6,302	)
Allocation to participating securities		(143	)		(144	)		(326	)		(432	)
Net income (loss) applicable to the common stockholders	$	10,596		$	(2,387	)	$	8,588		$	(6,734	)
Weighted-average common shares outstanding:
Basic and diluted		47,496,811			33,293,772			46,674,386			32,616,052
Basic and diluted earnings per share:
Income (loss) from continuing operations per share attributable to the common stockholders	$	(0.03	)	$	(0.07	)	$	(0.08	)	$	(0.21	)
Income from discontinued operations per share attributable to the common stockholders		0.25			—			0.26			—
Net income (loss) per share attributable to the common stockholders	$	0.22		$	(0.07	)	$	0.18		$	(0.21	)

10. Earnings Per Unit of the Operating Partnership

Basic earnings (loss) per unit is computed by dividing income (loss) applicable to unitholders by the weighted average OP units outstanding, as adjusted for the effect of participating securities. The Operating Partnership’s unvested restricted OP unit awards are participating securities as they contain non-forfeitable rights to dividends. The impact of unvested restricted OP unit awards on earnings (loss) per share has been calculated using the two-class method whereby earnings are allocated to the unvested restricted OP unit awards based on distributions and the unvested restricted OP units’ participation rights in undistributed earnings (losses).

The calculation of diluted earnings per unit for the three and nine months ended September 30, 2013 does not include 657,873 and 683,922 units, respectively, of unvested restricted OP units, as the effect of including these equity securities was anti-dilutive to net income or net loss attributable to the unitholders. The calculation of diluted earnings per share for the three and nine months ended September 30, 2012 does not include 905,433 and 942,810 units, respectively, of unvested restricted OP units, or 90,207 and 90,513 units, respectively, of contingently issuable OP units related to the 2011 Edwards Theatres acquisition, respectively, as the effect of including these equity securities was anti-dilutive to net loss attributable to the common stockholders. In addition, 3,356,178 and 3,341,076 OP units for the three and nine months ended September 30, 2013, respectively, and 3,333,400 OP units for both the three and nine months ended September 30, 2012, respectively, which were issuable upon settlement of the conversion feature of the 7.00% Series A Cumulative Convertible Perpetual Preferred Units (“Series A preferred units”), were anti-dilutive and were not included in the calculation of diluted earnings per unit based on the “if converted” method.

26

Computations of basic and diluted earnings per unit for the three and nine months ended September 30, 2013 and 2012 (in thousands, except share data) were as follows:

	Three Months Ended						Nine Months Ended
	September 30, 2013			September 30, 2012			September 30, 2013			September 30, 2012
Basic earnings per unit:
Income from continuing operations	$	1,520		$	460		$	5,180		$	1,254
Preferred distributions		(2,744	)		(2,744	)		(8,232	)		(7,609	)
Allocation to participating securities		(109	)		(144	)		(326	)		(432	)
Income from continuing operations attributable to non-controlling interests		(77	)		(75	)		(249	)		(216	)
Income (loss) from continuing operations applicable to the unitholders	$	(1,410	)	$	(2,503	)	$	(3,627	)	$	(7,003	)
Net income (loss) attributable to the unitholders	$	11,018		$	(2,316	)	$	9,154		$	(6,532	)
Allocation to participating securities		(109	)		(144	)		(326	)		(432	)
Net income (loss) applicable to the unitholders	$	10,909		$	(2,460	)	$	8,828		$	(6,964	)
Weighted-average common OP units outstanding:
Basic and diluted		48,721,926			34,350,666			47,904,824			33,833,784
Basic and diluted earnings per unit:
Income (loss) from continuing operations per unit attributable to the unitholders	$	(0.03	)	$	(0.07	)	$	(0.08	)	$	(0.21	)
Income from discontinued operations per unit attributable to the unitholders		0.25			—			0.26			—
Net income (loss) per unit attributable to the unitholders	$	0.22		$	(0.07	)	$	0.18		$	(0.21	)

11. Derivatives and Hedging Activities

In December 2010, the Company executed two pay-fixed interest rate swaps with a notional value of $55.8 million (weighted average interest rate of 1.41%) to hedge the variable cash flows associated with one of the Company’s mortgage payables. As a result of the interest rate swaps, the Company either (1) receives the difference between a fixed interest rate (the “Strike Rate”) and one-month LIBOR if the Strike Rate is less than LIBOR or (2) pays such difference if the Strike Rate is greater than LIBOR. No initial investment was made to enter into either of the interest rate swap agreements. The Company had no derivative financial instruments prior to the execution of the two swaps.

During the three months ended September 30, 2013 and 2012, the Company recorded no amounts in earnings attributable to hedge ineffectiveness. During the next twelve months, the Company estimates that an additional $144,000 will be reclassified from other comprehensive income as an increase to interest expense.

As of September 30, 2013, the Company had the following outstanding interest rate swaps and other derivatives instruments (dollars in thousands):

	Fair Value(1)				Current Notional Amount		Strike Rate		Expiration Date
Type of Derivative Instrument	September 30, 2013		December 31, 2012
Interest rate swaps(2)	$	144	$	620	$	55,800		1.34% to 1.48%	December 2013
Other derivative instrument(3)		—		274					March 2013
Total derivative instruments	$	144	$	894

⁽¹⁾ Fair value of derivative instruments does not include any related accrued interest payable to the counterparty.

⁽²⁾ The interest rate swaps are classified within accounts payable and other liabilities on the accompanying condensed consolidated balance sheets.

27

⁽³⁾ The Company’s purchase agreement executed in connection with the acquisition of the Edwards Theatres property in March 2011 contained a provision determined to be an embedded derivative instrument. The embedded derivative provided a guaranteed fair value for the OP units provided to the sellers of the property if redeemed for shares of the Parent Company’s common stock or cash, at the Company’s election, prior to its expiration in March 2013. The fair value of the embedded derivative at each period was calculated through the use of a Monte Carlo valuation model based on the historical volatility and closing price of the Parent Company’s common stock and a risk-free interest rate (see Note 19 for discussion of changes in the fair value of this derivative). The embedded derivative was classified within accounts payable and other liabilities in the accompanying condensed consolidated balance sheets.

Tabular Disclosure of the Effect of Derivative Instruments on the Income Statement

The tables below present the effect of the Company’s derivative financial instruments on the condensed consolidated statements of operations for the three and nine months ended September 30, 2013 and 2012 (dollars in thousands):

	Three Months Ended						Nine Months Ended
	September 30, 2013			September 30, 2012			September 30, 2013			September 30, 2012
Amount of unrealized loss recognized in OCI (effective portion):
Interest rate swaps	$	(7	)	$	(92	)	$	(19	)	$	(304	)
Other derivatives		—			—			—			—
Total	$	(7	)	$	(92	)	$	(19	)	$	(304	)
Amount of loss reclassified from accumulated OCI into income (effective portion):
Interest rate swaps (interest expense)	$	(171	)	$	(164	)	$	(495	)	$	(484	)
Other derivatives		—			—			—			—
Total	$	(171	)	$	(164	)	$	(495	)	$	(484	)
Amount of gain recognized in income (ineffective portion and amount excluded from effectiveness testing):
Interest rate swaps (other income/expense)	$	—		$	—		$	—		$	—
Other derivatives (changes in fair value of financial instruments and gain on OP unit redemption)		—			61			230			1,112
Total	$	—		$	61		$	230		$	1,112

Credit-risk-related Contingent Features

Under the terms of the two interest rate swaps detailed above, the Company could be declared in default on its obligations under the swap agreements in the event that it defaults on any of its indebtedness, even if repayment of the indebtedness has not been accelerated by the lender. Additionally, because the Company’s derivative counterparty is also the lender for the hedged floating rate credit agreement, the swap agreements incorporate the loan covenant provisions of the Company’s indebtedness. Failure to comply with the loan covenant provisions would result in the Company being in default on any derivative instrument obligations covered by the agreement.

If the Company had breached any of these provisions at September 30, 2013, it could have been required to settle its obligations under the agreements at their termination value. As of September 30, 2013, the termination value defined as the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, was a liability of approximately $196,000. As of September 30, 2013, the Company has not posted any collateral related to these agreements.

Although the Company’s derivative contracts are subject to a master netting arrangement, the Company does not net its derivative fair values or any existing rights or obligations to cash collateral on the consolidated balance sheets.

12. Equity of the Parent Company

The Parent Company has issued restricted stock awards to senior executives, directors and employees totaling 1,133,130 shares of common stock (net of forfeitures of 23,000 shares), which are included in the total shares of common stock outstanding as of September 30, 2013.

28

As of September 30, 2013, the Parent Company had outstanding 2,000,000 shares of Series A preferred stock, with a liquidation preference of $25.00 per share. The Parent Company pays cumulative dividends on the Series A preferred stock when, as and if declared by the Parent Company’s board of directors, at a rate of 7.00% per annum, subject to adjustment in certain circumstances. The annual dividend on each share of Series A preferred stock is $1.75, payable quarterly in arrears on or about the 15th day of January, April, July and October of each year. Holders of the Series A preferred stock generally have no voting rights except for limited voting rights if the Parent Company fails to pay dividends for six or more quarterly periods (whether or not consecutive) and in certain other circumstances. The Series A preferred stock is convertible, at the holders’ option, at any time and from time to time, into common stock of the Parent Company. The initial conversion rate of the Series A preferred stock was 1.6667 shares of common stock per share of Series A preferred stock. Effective July 31, 2013, the conversion rate was adjusted to 1.6836 shares of common stock per share of Series A preferred stock as a result of the aggregate dividends that the Parent Company declared and paid on its common stock, beginning with the quarter ended September 30, 2011 and through the quarter ended September 30, 2013, being in excess of the reference dividend of $0.15 per share. The conversion rate will continue to be subject to customary adjustments in certain circumstances. On or after April 1, 2014, the Parent Company may, at its option, convert some or all of the Series A preferred stock if the closing price of the common stock equals or exceeds 140% of the conversion price for at least 20 of the 30 consecutive trading days ending the day before the notice of exercise of conversion is sent and the Parent Company has either declared and paid, or declared and set apart for payment, any unpaid dividends that are in arrears on the Series A preferred stock.

As of September 30, 2013, the Parent Company had outstanding 3,680,000 shares of Series B preferred stock, with a liquidation preference of $25.00 per share. The Parent Company pays cumulative dividends on the Series B preferred stock, when, as and if declared by the Parent Company’s board of directors, at a rate of 8.125% per annum, subject to adjustment in certain circumstances. The annual dividend on each share of Series B preferred stock is $2.03125, payable quarterly in arrears on or about the 15th day of January, April, July and October of each year. Holders of the Series B preferred stock generally have no voting rights except for limited voting rights if the Parent Company fails to pay dividends for six or more quarterly periods (whether or not consecutive) and in certain other circumstances. At any time on and after January 31, 2017, the Parent Company may, at its option, redeem the Series B preferred stock, in whole or from time to time in part, by paying $25.00 per share, plus any accrued and unpaid dividends to, but not including, the date of redemption. In addition, upon the occurrence of a change of control, the Parent Company or a successor may, at its option, redeem the Series B preferred stock, in whole or in part and within 120 days after the first date on which such change of control occurred, by paying $25.00 per share, plus any accrued and unpaid dividends to, but not including, the date of redemption.

The Parent Company’s board of directors has authorized a stock repurchase program under which the Parent Company may acquire up to $30.0 million of its common stock in open market and negotiated purchases with no expiration date. As of September 30, 2013, approximately $23.3 million remained available under the stock repurchase program to acquire outstanding shares of the Parent Company’s common stock.

The Parent Company has entered into equity distribution agreements (the “Equity Distribution Agreements”) with four sales agents, under which it can issue and sell shares of the Parent Company’s common stock from time to time through, at its discretion, any of the sales agents. The Equity Distribution Agreements were initially entered into in March 2012 with an aggregate offering price of up to $50.0 million. The Equity Distribution Agreements were subsequently amended and restated in May 2013, permitting additional sales with an aggregate offering price of up to $100.0 million. The sales of common stock made under the Equity Distribution Agreements are made in “at the market” offerings as defined in Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”). During the nine months ended September 30, 2013, the Parent Company completed the issuance of 3,211,928 shares pursuant to the Equity Distribution Agreements, resulting in net proceeds of approximately $40.7 million at an average stock issuance price of $13.05 per share. The Company used the net proceeds to repay outstanding indebtedness under its unsecured revolving credit facility and for other general corporate and working capital purposes.

Consolidated net income is reported in the Company’s consolidated financial statements at amounts that include the amounts attributable to both the common stockholders and the non-controlling interests. During the period from March 2012 to March 2013, a total of 591,474 OP units related to the Edwards Theatres acquisition were tendered to the Parent Company for redemption, resulting in the issuance of an additional 531,768 shares of common stock and cash payments totaling approximately $1.9 million to former unitholders (see Note 19 for further discussion). In October 2012, the Operating Partnership issued an additional 411,184 OP units in connection with the acquisition of the Company’s West Broad Village property.

A charge/credit is recorded each period in the consolidated statements of income for the non-controlling interests’ proportionate share of the Company’s net income (loss). Ownership interests held by the Company do not include unvested restricted stock.

2010 Equity Incentive Award Plan

The Company has established the 2010 Equity Incentive Award Plan of Excel Trust, Inc. and Excel Trust, L.P. (the “2010 Plan”), pursuant to which the Parent Company’s board of directors or a committee of its independent directors may make grants of stock options, restricted stock, stock appreciation rights and other stock-based awards to its non-employee directors, employees and consultants (an equivalent amount of common OP units are issued to the Parent Company for each such grant with similar terms and conditions). The maximum number of shares of the Parent Company’s common stock that may be issued pursuant to the 2010 Plan is 1,350,000 (of which 239,870 shares of common stock remain available for issuance as of September 30, 2013).

29

The following shares of restricted common stock were issued during the nine months ended September 30, 2013:

Grant Date	Price at Grant Date		Number		Vesting Period (yrs.)
March 6, 2013(1)	$	13.43		41,500		4
May 7, 2013(2)	$	15.11		10,588		1
June 7, 2013(2)	$	13.36		1,000		4

⁽¹⁾ Shares issued to certain of the Company’s employees. These shares vest over four years with 25% vesting on the first anniversary of the grant date and the remainder vesting in equal quarterly installments thereafter.

⁽²⁾ Shares issued to members of the Company’s board of directors. These shares vest in equal quarterly installments.

Shares of the Parent Company’s restricted common stock generally may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution or, subject to the consent of the administrator of the 2010 Plan, a domestic relations order, unless and until all restrictions applicable to such shares have lapsed. Such restrictions expire upon vesting. Shares of the Parent Company’s restricted common stock have full voting rights and rights to dividends upon grant. The Company recognized compensation expense during the three months ended September 30, 2013 and 2012 of $583,000 and $817,000, respectively, and during the nine months ended September 30, 2013 and 2012 of $1.7 million and $2.4 million, respectively, related to the restricted common stock grants ultimately expected to vest. ASC Topic 718,Compensation — Stock Compensation, requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company has estimated $0 in forfeitures. Stock compensation expense is included in general and administrative expense in the accompanying condensed consolidated statements of operations.

As of September 30, 2013 and December 31, 2012, there was approximately $2.1 million and $3.4 million, respectively, of total unrecognized compensation expense related to the non-vested shares of the Parent Company’s restricted common stock. As of September 30, 2013 and December 31, 2012, this expense was expected to be recognized over a weighted-average remaining period of 1.3 and 2.0 years, respectively.

	Number of Unvested Shares of Restricted Common Stock			Weighted Average Grant Date Fair Value
Balance - January 1, 2013		701,396		$	10.02
Grants		53,088		$	13.76
Forfeitures		(20,000	)	$	13.43
Vested		(94,376	)	$	12.47
Balance - September 30, 2013		640,108		$	9.86

401(k) Retirement Plan

The Company maintains a 401(k) retirement plan covering substantially all employees, which permits participants to defer up to the maximum allowable amount of their eligible compensation as determined by the Internal Revenue Service. This deferred compensation, together with Company matching contributions equal to 100% of employee deferrals up to 3.0% of eligible compensation and 50% of employee deferrals for the next 2.0% of eligible compensation, is fully vested and funded as of September 30, 2013. Costs related to the matching portion of the plan for the three months ended September 30, 2013 and 2012 were approximately $39,000 and $30,000, respectively, and for the nine months ended September 30, 2013 and 2012 were approximately $113,000 and $87,000, respectively.

13. Equity of the Operating Partnership

As of September 30, 2013, the Operating Partnership had outstanding 49,397,888 OP units. The Parent Company owned 97.5% of the partnership interests in the Operating Partnership at September 30, 2013, is the Operating Partnership’s general partner and is responsible for the management of the Operating Partnership’s business. As the general partner of the Operating Partnership, the Parent Company effectively controls the ability to issue common stock of the Parent Company upon a limited partner’s notice of redemption. In addition, the Parent Company has generally acquired OP units upon a limited partner’s notice of redemption in exchange for shares of its common stock. The redemption provisions of OP units owned by limited partners that permit the Parent Company to settle in either cash or common stock at the option of the Parent Company are further evaluated in accordance with

30

applicable accounting guidance to determine whether temporary or permanent equity classification on the balance sheet is appropriate. The Operating Partnership evaluated this guidance, including the requirement to settle in unregistered shares, and determined that these OP units meet the requirements to qualify for presentation as permanent equity.

In addition, as of September 30, 2013, the Operating Partnership had outstanding 2,000,000 7.00% Series A preferred units and 3,680,000 8.125% Series B Cumulative Redeemable Preferred Units (collectively referred to as the “Preferred Units”). The Preferred Units were issued to the Parent Company in exchange for the net proceeds from the issuance of preferred stock of the Parent Company and contain the same terms and conditions as the preferred stock instruments (including distribution rates, exchange or redemption provisions, etc.).

In connection with the Parent Company’s Equity Distribution Agreements, during the nine months ended September 30, 2013 the Operating Partnership issued 3,211,928 OP units to the Parent Company in exchange for net proceeds of approximately $40.7 million, which were used to repay outstanding indebtedness under its unsecured revolving credit facility and for other general corporate and working capital purposes.

Consolidated net income is reported in the Operating Partnership’s consolidated financial statements at amounts that include the amounts attributable to both the unitholders and the non-controlling interests in a consolidated joint venture property. During the period from March 2012 to March 2013, a total of 591,474 OP units related to the 2011 Edwards Theatres acquisition were tendered to the Parent Company for redemption, resulting in the issuance of an additional 531,768 shares of the Parent Company’s common stock (and the issuance of an equivalent number of OP units to the Parent Company) and cash payments totaling approximately $1.9 million to former unitholders (see Note 19 for further discussion). In October 2012, the Operating Partnership issued an additional 411,184 OP units in connection with the acquisition of the Company’s West Broad Village property.

The following table shows the vested partnership interests in the Operating Partnership as of September 30, 2013 and December 31, 2012:

	September 30, 2013					December 31, 2012
	OP Units		Percentage of Total			OP Units		Percentage of Total
Excel Trust, Inc.		47,532,665		97.5	%		44,204,287		97.3	%
Non-controlling interests consisting of:
OP units held by employees and third parties		1,225,115		2.5	%		1,245,019		2.7	%
Total		48,757,780		100.0	%		45,449,306		100.0	%

31

14. Investment in Unconsolidated Entities

On September 7, 2012, the Company contributed the La Costa Town Center property to a limited liability company (“La Costa LLC”) with GEM Realty Capital, Inc. (“GEM”) in which the Company and GEM hold 20% and 80% ownership interests, respectively. The Company received approximately $21.2 million in exchange for the 80% ownership interest acquired by GEM. The Company’s remaining interest is reflected in the accompanying balance sheets at the Company’s historical cost basis as an investment in a profit-sharing arrangement. The contribution was not considered a sale of real estate due to terms in the La Costa LLC formation documents that could require the Company’s continuing participation in the future under certain circumstances. La Costa LLC does not qualify as a VIE and consolidation is not required as the Company does not control the operations of the property and the majority owner will bear the majority of any losses incurred. The Company will receive 20% of the cash flow distributions and may receive a greater portion of cash distributions in the future based upon the performance of the property and the availability of cash for distribution. In addition, the Company receives fees in its role as the day-to-day property manager and for any development services that it provides. The Company’s interest in the income or losses of the underlying venture is reflected in a manner similar to the equity method of accounting.

On October 19, 2012, the Company acquired a 50% tenant-in-common ownership interest in a property (The Fountains at Bay Hill, or “Bay Hill”) for a purchase price of approximately $19.8 million as a part of a larger acquisition. The remaining 50% undivided interest in the Bay Hill property is held by MDC Fountains, LLC (“MDC”). The Bay Hill property does not qualify as a VIE and consolidation is not required as the Company does not control the operations of the property. The Company will receive 50% of the cash flow distributions and recognize 50% of the results of operations. In addition, the Company receives fees in its role as the day-to-day property manager. The Company’s 50% ownership interest is reflected in the accompanying balance sheets as an investment in unconsolidated entities and the Company’s interest in the income or losses of the property is recorded based on the equity method of accounting.

General information on the La Costa LLC and Bay Hill properties as of September 30, 2013 was as follows:

Unconsolidated Investment	Partner		Ownership Interest			Formation/ Acquisition Date	Property
La Costa LLC(1)		GEM		20	%	September 7, 2012	La Costa Town Center
Bay Hill(2)		MDC		50	%	October 19, 2012	The Fountains at Bay Hill

⁽¹⁾  At September 30, 2013, La Costa LLC had real estate assets of $23.4 million, total assets of $25.1 million, mortgages payable of $14.1 million and total liabilities of $15.1 million. At December 31, 2012, La Costa LLC had real estate assets of $23.4 million, total assets of $26.3 million, mortgages payable of $14.1 million and total liabilities of $16.0 million. For the three months ended September 30, 2013, total revenues were $430,000, total expenses were $798,000 (including interest expense) and net loss was $368,000. For the nine months ended September 30, 2013, total revenues were $2.7 million, total expenses were $3.3 million (including interest expense) and net loss was $632,000. The mortgage note was assumed with the contribution of the property. Total revenues were $165,000, total expenses were $955,000 (including interest expense) and net loss was $790,000 for both the three and nine months ended September 30, 2012 (representing only a partial month of operating activity after the contribution of the property on September 7, 2012) . The mortgage note bears interest at the rate of LIBOR plus a margin of 575 basis points (5.9% at September 30, 2013 and 6.0% at December 31, 2012). The mortgage note has a maturity date of October 1, 2014, which may be extended for three additional one-year periods at La Costa LLC’s election and upon the satisfaction of certain conditions (including the payment of an extension fee upon the exercise of the 2^nd and 3^rdrenewal options, execution of an interest rate cap and the establishment of certain reserve accounts). La Costa LLC has also entered into an interest rate cap related to the mortgage note, which limits LIBOR to a maximum of 3.0% and expires on October 1, 2014.

⁽²⁾  At September 30, 2013 and December 31, 2012, there were $23.5 million and $23.9 million, respectively, in outstanding borrowings on the mortgage note assumed with the acquisition of the Bay Hill property. The mortgage note bears interest at the rate of LIBOR plus a margin of 325 basis points (3.4% at September 30, 2013 and 3.5% at December 31, 2012). The mortgage note has a maturity date of April 2, 2015, which may be extended for two additional one-year periods at the borrower’s election and upon the satisfaction of certain conditions.

15. Discontinued Operations

On July 19, 2013, the Company completed the disposition of the Walgreens property, located in North Corbin, Kentucky, for a sales price of approximately $4.5 million, excluding closing costs. On September 13, 2013, the Company completed the disposition of the Grant Creek Town Center property, located in Missoula, Montana, for a sales price of approximately $32.3 million, excluding closing costs. The Grant Creek Town Center property sale was classified as an exchange pursuant to section 1031 of the Code; therefore, the funds are restricted as to their usage and are reflected as restricted cash on the accompany condensed consolidated balance sheets. The Company subsequently utilized a portion of the funds to provide the purchase price for the acquisition of a retail center property located in San Diego, California on October 4, 2013 (see Note 20).

32

Both properties were part of the retail properties segment – see Note 21. The following table provides information regarding the disposition of the properties:

	(in thousands)
Property	Sales Price		Gain on Sale		Date of Sale		Acquisition Date
Walgreens — North Corbin	$	4,514	$	1,129		7/19/2013		5/24/2010
Grant Creek Town Center	$	32,343	$	10,845		9/13/2013		8/27/2010

The results of operations for the properties are reported as discontinued operations for all periods presented in the accompanying condensed consolidated statements of operations. The following table summarizes the revenue and expense components that comprise income from discontinued operations (dollars in thousands):

	Three Months Ended					Nine Months Ended
	September 30, 2013			September 30, 2012		September 30, 2013			September 30, 2012
Total revenues	$	559		$	668	$	1,815		$	1,992
Total expenses		214			625		1,334			1,953
Income before non-controlling interests and gain on sale of real estate assets		345			43		481			39
Gain on sale of real estate assets		11,974			—		11,974			—
Non-controlling interest in discontinued operations(1)		(248	)		6		(229	)		7
Income from discontinued operations available to the common stockholders	$	12,071		$	49	$	12,226		$	46

⁽¹⁾  Amounts represent the portion of non-controlling interest related to OP units not held by the Parent Company that would be attributable to discontinued operations (no amounts would be allocable with respect to the consolidated financial statements of the Operating Partnership).

16. Related Party Transactions

Many of the employees of Excel Realty Holdings, LLC (“ERH”) became employees of the Company subsequent to the Company’s initial public offering. ERH reimburses the Company for estimated time the Company employees spend on ERH related matters. In the three months ended September 30, 2013 and 2012, approximately $82,000 and $88,000, respectively, and in the nine months ended September 30, 2013 and 2012, approximately $230,000 and $236,000, respectively, was reimbursed to the Company from ERH and included in other income in the condensed consolidated statements of operations.

17. Income Taxes

Income Taxes of the Parent Company

The Parent Company elected to be taxed as a REIT under the Code, beginning with the taxable year ended December 31, 2010. To qualify as a REIT, the Parent Company must meet a number of organizational and operational requirements, including the requirement that it distribute currently at least 90% of its REIT taxable income to its stockholders. It is the Parent Company’s intention to comply with these requirements and maintain the Parent Company’s REIT status. As a REIT, the Parent Company generally will not be subject to corporate federal, state or local income taxes on income it distributes currently (in accordance with the Code and applicable regulations) to its stockholders. If the Parent Company fails to qualify as a REIT in any taxable year, then it will be subject to federal, state and local income taxes at regular corporate rates and may not be able to qualify as a REIT for subsequent tax years. Even if the Parent Company qualifies for taxation as a REIT, it may be subject to certain state and local taxes on its income, properties and operations and to federal income and excise taxes on its taxable income not distributed in the amounts and in the time frames prescribed by the Code and applicable regulations thereunder and on the taxable income of any of its taxable REIT subsidiaries.

Income Taxes of the Operating Partnership

As a partnership, the allocated share of income of the Operating Partnership is included in the income tax returns of the general and limited partners. Accordingly, no accounting for income taxes is required in the accompanying consolidated financial statements. The Operating Partnership may be subject to certain state or local taxes on its income and property.

The Operating Partnership has formed a taxable REIT subsidiary (the “TRS”) on behalf of the general partner. In general, the TRS may perform non-customary services for tenants, hold assets that the general partner cannot hold directly and, except for the operation or management of health care facilities or lodging facilities or the providing of any person, under a franchise, license or otherwise, rights to any brand name under which any lodging facility or health care facility is operated, may engage in any real estate

33

or non-real estate related business. The TRS is subject to corporate federal income taxes on its taxable income at regular corporate tax rates. There is no tax provision for the TRS for the periods presented in the accompanying consolidated statements of income due to net operating losses incurred. No tax benefits have been recorded since it is not considered more likely than not that the deferred tax asset related to the net operating loss carry-forwards will be utilized.

18. Commitments and Contingencies

Litigation:

The Company is not presently subject to any material litigation nor, to its knowledge, is any material litigation threatened against it which if determined unfavorably, would have a material effect on its condensed consolidated financial position, results of operations or cash flows.

Environmental Matters:

The Company follows the policy of monitoring its properties for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist at its properties, the Company is not currently aware of any environmental liability with respect to its properties that would have a material effect on its condensed consolidated balance sheets, results of operations or cash flows. Further, the Company is not aware of any environmental liability or any unasserted claim or assessment with respect to an environmental liability that it believes would require additional disclosure or the recording of a loss contingency.

Other

The Company’s other commitments and contingencies include the usual obligations of real estate owners and operators in the normal course of business. In management’s opinion, these matters are not expected to have a material adverse effect on its condensed consolidated balance sheets, results of operations or cash flows. In addition, the Company expects to incur construction costs relating to development projects on portions of existing operating properties (including the Company’s proportionate share of costs related to the redevelopment of the unconsolidated La Costa Town Center property).

19. Fair Value of Financial Instruments

The Company is required to disclose fair value information relating to financial instruments that are remeasured on a recurring basis and those that are only initially recognized at fair value (not required to be subsequently remeasured). The Company’s disclosures of estimated fair value of financial instruments were determined using available market information and appropriate valuation methods. The use of different assumptions or methods of estimation may have a material effect on the estimated fair value of financial instruments.

The following table reflects the fair values of the Company’s financial assets and liabilities that are required to be measured at fair value on a recurring basis (dollars in thousands):

	Balance at September 30, 2013			Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Fair value measurements on a recurring basis:
Assets:
Other assets related to business combinations(1)	$	614		$	—	$	—		$	614
Liabilities:
Interest rate swaps (see Note 11)	$	(144	)	$	—	$	(144	)	$	—
Contingent consideration related to business combinations(2)		(205	)	$	—		—			(205	)
Total	$	(349	)	$	—	$	(144	)	$	(205	)

34

	Balance at December 31, 2012			Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Fair value measurements on a recurring basis:
Assets:
Other assets related to business combinations(1)	$	992		$	—	$	—		$	992
Liabilities:
Interest rate swaps (see Note 11)	$	(620	)	$	—	$	(620	)	$	—
Contingent consideration related to business combinations(2)		(1,787	)	$	—		—			(1,787	)
Derivative instrument related to business combinations (see Note 11)(3)		(274	)		—		—			(274	)
Total	$	(2,681	)	$	—	$	(620	)	$	(2,061	)

⁽¹⁾ Amount reflects the fair value of funds expected to be received pursuant to master lease agreements executed in connection with the Promenade Corporate Center acquisition. The Company has estimated the fair value of the asset based on its expectations of the probability of leasing or releasing spaces within the term of the master lease agreements and corresponding estimates for time required to lease, lease rates and funds required for tenant improvements and lease commissions. This amount has been included in other assets in the accompanying condensed consolidated balance sheets, with subsequent changes in the fair value of the asset recorded as a gain (loss) in earnings in the period in which the change occurs.

⁽²⁾ Additional consideration was potentially due to the prior owners of two properties purchased in 2012 contingent upon their ability to lease-up vacant space at those properties during 2013. The balance of $1.8 million at December 31, 2012 represented the Company’s best estimate of the fair value of funds expected to be paid to the former owners. The earn-out period for one of the two properties expired at June 30, 2013, resulting in a reversal of the contingent liability of approximately $1.6 million based on a short-fall in the expected leasing. At September 30, 2013, a contingent liability with a fair value of approximately $205,000 was due to the previous owner of the other property acquired in 2012 based on the lease-up of vacant space subsequent to the acquisition of the property. The Company recognized a gain of approximately $10,000 in the three months ended September 30, 2013 due to an increase in the actual leasing costs as compared to the initial estimates. The earn-out period expired on September 30, 2013 and the balance of $205,000 was paid in full in October 2013.

⁽³⁾ Amount reflects the fair value of a provision within a purchase agreement that provides a guaranteed redemption value for OP units provided to the sellers of the Edwards Theatres property acquired in March 2011. The Company has estimated the fair value of the embedded derivative instrument using a Monte Carlo valuation model based on the historical volatility and closing price of the Parent Company’s common stock and a risk-free interest rate. This amount is included in accounts payable and other liabilities in the accompanying condensed consolidated balance sheets, with changes in the fair value of the embedded derivative recorded as gain (loss) on changes in fair value of financial instruments and gain on OP unit redemption in the condensed consolidated statements of operations. This embedded derivative instrument expired on March 11, 2013.

35

During the period from March 2012 to March 2013, 591,474 OP units were tendered to the Company for redemption, resulting in the issuance of 531,768 shares of common stock and cash payments totaling approximately $1.9 million. The Company has recognized the acquisition of non-controlling interests based on the fair value of shares issuable in connection with the one-for-one redemption right available to all holders of OP units. The Company recognized a loss of approximately $16,000 for the nine months ended September 30, 2013 as a result of the deficit of the fair value of the guarantee over the fair value of the consideration required to settle. The Company recognized gains of approximately $47,000 and $396,000 for the three and nine months ended September 30, 2012, respectively, as a result of the excess of the fair value of the guarantee over the fair value of the consideration required to settle. In total, the Company recognized increases in additional paid-in capital and common stock, par value, of approximately $279,000 and $3.2 million for the nine months ended September 30, 2013 and 2012, respectively. The Company also recognized additional gains of $246,000 and $716,000 in the nine months ended September 30, 2013 and 2012, respectively, as a result of revaluations of the redemption obligation.

The following table reconciles the beginning and ending balances of financial instruments that are remeasured on a recurring basis using significant unobservable inputs (Level 3) as of September 30, 2013 (dollars in thousands):

	Other Assets Related to Business Combinations (1)			Contingent Consideration Related to Business Combinations (2)			Derivative Instruments Related to Business Combinations (3)
Beginning balance, January 1, 2013	$	992		$	(1,787	)	$	(274	)
Total gains:
Included in earnings		6			1,562			246
Purchases, issuances, or settlements		(384	)		20			28
Ending balance, September 30, 2013	$	614		$	(205	)	$	—

⁽¹⁾ The change of $378,000 for other assets related to business combinations during the nine months ended September 30, 2013 is comprised of payments received on the master lease assets of $384,000 and an increase in the estimated fair value of funds to be received from escrow of $6,000.

⁽²⁾ The change of $1.6 million for contingent consideration related to business combinations represents the reversal of a contingent liability related to the earn-out for one property as a result of a shortfall in expected leasing of vacant space at the property and a reduction in the contingent liability related to another property as a result of higher leasing costs than originally estimated (recognized as changes in fair value of contingent consideration in the condensed consolidated statements of operations). The remaining earn-out has a fair value of approximately $205,000 based on the funds due to the former owner, which were paid in full in October 2013.

⁽³⁾ The change of $274,000 for derivative instruments related to business combinations during the nine months ended September 30, 2013 is related to changes to the redemption provision for OP units issued in connection with the 2011 Edwards Theatres acquisition as a result of (a) a decrease of $246,000 due to recognition of a gain included in earnings related to changes in the fair value of the redemption obligation and (b) a decrease of $28,000 due to the redemption of corresponding OP units.

The following table reconciles the beginning and ending balances of financial instruments that are remeasured on a recurring basis using significant unobservable inputs (Level 3) as of September 30, 2012 (dollars in thousands):

	Other Assets Related to Business Combinations (1)		Contingent Consideration Related to Business Combinations (2)			Derivative Instruments Related to Business Combinations (3)
Beginning balance, January 1, 2012	$	—	$	(1,613	)	$	(3,050	)
Total gains:
Included in earnings		121		—			1,112
Purchases, issuances, or settlements		723		1,613			796
Ending balance, September 30, 2012	$	844	$	—		$	(1,142	)

⁽¹⁾ The change of $844,000 for other assets related to business combinations during the nine months ended September 30, 2012 is comprised of (a) an increase in the master lease asset of $121,000 due to changes in the Company’s initial estimates of the fair value of funds expected to be received from escrow that was included in earnings, (b) the recognition of a master lease asset of $772,000 related to the acquisition of the Promenade Corporate Center property and (c) a decrease in the master lease asset due to payments received in the amount of $49,000.

36

⁽²⁾ The change of $1.6 million for contingent consideration related to business combinations during the nine months ended September 30, 2012 is comprised of a decrease in the obligation due to the payment of approximately $1.6 million in earn-outs in January 2012.

⁽³⁾ The change of $1.9 million for derivative instruments related to business combinations during the nine months ended September 30, 2012 is related to changes to the redemption provision for OP units issued in connection with the 2011 Edwards Theatres acquisition and is comprised of (a) a decrease of $716,000 due to recognition of a gain related to changes in the fair value of the redemption obligation and a gain of $349,000 resulting from the redemption of OP units and (b) a decrease in the redemption obligation of $796,000 due to the redemption of corresponding OP units.

There were no additional gains or losses, purchases, sales, issuances, settlements, or transfers in or out related to any of the three levels of the fair value hierarchy during the three months ended September 30, 2013 and 2012.

The following table provides quantitative disclosure about significant unobservable inputs related to financial assets and liabilities measured on a recurring basis (Level 3 of the fair value hierarchy) as of September 30, 2013:

	Fair Value at September 30, 2013			Valuation Technique(s)		Unobservable Input		Range (Weighted Average)
Other assets related to business combinations(1)	$	614			Cash flow		Tenant improvement allowance Lease commission TI construction period	$ $	12.00/sf - 35.00/sf 6.0 2-5 months	%
Contingent consideration related to business combinations(2)	$	(205	)		Cash flow		Tenant improvement allowance Lease commission TI construction period	$	37.50/sf 6.0 2 months	%

⁽¹⁾ The significant unobservable inputs used in the fair value measurement of the master lease agreement asset are any estimated tenant improvement allowances, leasing commissions and the construction periods associated with projected new leasing. Significant increases (decreases) in any of these inputs in isolation would result in a significantly higher (lower) fair value measurement. Generally, a change in the assumption used for market lease rates is accompanied by a directionally similar change in the assumption used for tenant improvement allowances and/or leasing commissions.

⁽²⁾ The significant unobservable inputs used in the fair value measurement of the contingent consideration are any estimated tenant improvement allowances, construction periods, leasing commissions and lease rates. Significant increases (decreases) in any of these inputs in isolation would result in a significantly lower (higher) fair value measurement. Generally, a change in the assumption used for market lease rates is accompanied by a directionally similar change in the assumption used for tenant improvement allowances and/or leasing commissions.

The Company has not elected the fair value measurement option for any of its other financial assets or liabilities. The Company has estimated the fair value of its financial assets using a discounted cash flow analysis based on an appropriate market rate for a similar type of instrument. The Company has estimated the fair value of its financial liabilities by using either (1) a discounted cash flow analysis using an appropriate market discount rate for similar types of instruments, or (2) a present value model and an interest rate that includes a credit value adjustment based on the estimated value of the property that serves as collateral for the underlying debt. The fair values of financial instruments not included in this table are estimated to be equal to their carrying amounts.

The fair values of certain additional financial assets and liabilities at September 30, 2013 and December 31, 2012 (fair value measurements categorized as Level 3 of the fair value hierarchy) are as follows (dollars in thousands):

	September 30, 2013				December 31, 2012
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Note receivable (Other Assets)	$	750	$	750	$	750	$	750
Financial liabilities:
Mortgage notes payable		308,365		312,834		333,935		341,288
Notes payable		193,500		193,024		75,000		74,862

37

20. Subsequent Events

On October 4, 2013, the Company completed the acquisition of a retail center with 38,000 square feet of GLA located in San Diego, California for a contractual purchase price, excluding closing costs, of approximately $14.3 million. The purchase was funded by proceeds from the sale of the Company’s Grant Creek Town Center property in September 2013 (see Note 15). The sole tenant of the retail property is LA Fitness. An allocation of purchase price for the acquisition of the retail property has not yet been performed as the Company is continuing to collect the necessary information.

On October 8, 2013, the Operating Partnership entered into the 2013 Amendment, which provided an increase in borrowings available under its credit facility from $250.0 million to $300.0 million, decreased the applicable interest rate and extended the maturity date. The Operating Partnership has the ability from time to time to increase the size of the unsecured revolving credit facility by up to an additional $200.0 million for a total borrowing capacity of $500.0 million, subject to receipt of lender commitments and other conditions precedent. The amended maturity date is April 6, 2018 and may be extended for an additional six months at the Operating Partnership’s option (see Note 8).

On October 9, 2013, the Operating Partnership entered into an amendment to its Red Rock Commons construction loan, which decreased the applicable interest rate (see Note 8).

On October 14, 2013, the Company entered into a purchase agreement to acquire a retail shopping center with approximately 105,000 square feet of GLA, located in Las Vegas, Nevada for a contractual purchase price, excluding closing costs, of approximately $16.4 million. The purchase of the property is subject to due diligence and other customary closing conditions.

21. Segment Disclosure

The Company’s reportable segments consist of the three types of commercial real estate properties for which management internally evaluates operating performance and financial results: Office Properties, Multi-family Properties (new in 2012) and Retail Properties. The Company was formed for the primary purpose of owning and operating Retail Properties. As such, administrative costs are shown under the Retail Properties segment. The Retail Properties operating segment also includes undeveloped land which the Company intends to develop into retail properties.

The Company evaluates the performance of the operating segments based upon property operating income. “Property Operating Income” is defined as operating revenues (rental revenue and tenant recoveries) less property operating expenses (maintenance and repairs, real estate taxes, management fees, and other operating expenses). The Company also evaluates interest expense, interest income and depreciation and amortization by segment. Corporate general and administrative expense, interest expense related to corporate indebtedness and other non-recurring gains or losses are reflected within the Retail Properties operating segment as this constitutes the Company’s primary business objective and represents the majority of its operations. There is no intersegment activity.

38

The following tables reconcile the Company’s segment activity to its condensed consolidated results of operations and financial position for the three and nine months ended September 30, 2013 and 2012 (dollars in thousands):

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2013			September 30, 2012			September 30, 2013			September 30, 2012
Office Properties:
Total revenues	$	2,052		$	2,261		$	6,428		$	6,367
Property operating expenses		(906	)		(950	)		(2,593	)		(2,366	)
Property operating income, as defined		1,146			1,311			3,835			4,001
Changes in fair value of contingent consideration		—			121			6			121
General and administrative costs		(9	)		(1	)		(16	)		(98	)
Depreciation and amortization		(980	)		(973	)		(2,832	)		(2,822	)
Interest expense		(194	)		(198	)		(579	)		(593	)
Net income	$	(37	)	$	260		$	414		$	609
Multi-family Properties:
Total revenues	$	1,397		$	—		$	4,053		$	—
Property operating expenses		(675	)		—			(1,374	)		—
Property operating income, as defined		722			—			2,679			—
General and administrative costs		206			—			(104	)		—
Depreciation and amortization		(460	)		—			(2,298	)		—
Net income (loss)	$	468		$	—		$	277		$	—
Retail Properties:
Total revenues	$	25,482		$	18,824		$	72,257		$	53,702
Property operating expenses		(6,137	)		(4,140	)		(16,622	)		(11,857	)
Property operating income, as defined		19,345			14,684			55,635			41,845
Changes in fair value of contingent consideration		10			—			1,562			—
General and administrative costs		(3,596	)		(3,317	)		(10,416	)		(10,057	)
Depreciation and amortization		(10,197	)		(7,348	)		(29,483	)		(21,666	)
Interest expense		(4,534	)		(3,741	)		(13,172	)		(10,556	)
Interest income		49			19			146			125
Income (loss) from equity in unconsolidated entities		12			(158	)		(13	)		(158	)
Changes in fair value of financial instruments and gain on OP unit redemption		—			61			230			1,112
Income from continuing operations		1,089			200			4,489			645
Income from discontinued operations		12,319			43			12,455			39
Net income	$	13,408		$	243		$	16,944		$	684
Total Reportable Segments:
Total revenues	$	28,931		$	21,085		$	82,738		$	60,069
Property operating expenses		(7,718	)		(5,090	)		(20,589	)		(14,223	)
Property operating income, as defined		21,213			15,995			62,149			45,846
Changes in fair value of contingent consideration		10			121			1,568			121
General and administrative costs		(3,399	)		(3,318	)		(10,536	)		(10,155	)
Depreciation and amortization		(11,637	)		(8,321	)		(34,613	)		(24,488	)
Interest expense		(4,728	)		(3,939	)		(13,751	)		(11,149	)
Interest income		49			19			146			125
Loss from equity in unconsolidated entities		12			(158	)		(13	)		(158	)
Changes in fair value of financial instruments and gain on OP unit redemption		—			61			230			1,112
Income from continuing operations		1,520			460			5,180			1,254
Income from discontinued operations		12,319			43			12,455			39
Net income	$	13,839		$	503		$	17,635		$	1,293
Reconciliation to Condensed Consolidated Net Income Attributable to the Common Stockholders (Parent Company):
Total net income for reportable segments	$	13,839		$	503		$	17,635		$	1,293
Net income attributable to non-controlling interests		(356	)		(2	)		(489	)		14
Net income attributable to Excel Trust, Inc.	$	13,483		$	501		$	17,146		$	1,307
Reconciliation to Condensed Consolidated Net Income Attributable to the Unitholders (Operating Partnership):
Total net income for reportable segments	$	13,839		$	503		$	17,635		$	1,293
Net income attributable to non-controlling interests		(77	)		(75	)		(249	)		(216	)
Net income attributable to Excel Trust, L.P.	$	13,762		$	428		$	17,386		$	1,077

39

	September 30,		December 31,
	2013		2012
Assets:
Office Properties:
Total assets	$	67,772	$	70,473
Multi-family Properties:
Total assets		71,164		72,627
Retail Properties:
Total assets		1,063,186		936,154
Total Reportable Segments & Consolidated Assets:
Total assets	$	1,202,122	$	1,079,254

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

As used herein, the terms “we,” “us,” “our” or the “Company” refer to Excel Trust, Inc., a Maryland corporation, and any of our subsidiaries, including Excel Trust, L.P., a Delaware limited partnership of which Excel Trust, Inc. is the parent company and general partner, which may be referred to herein as the “Operating Partnership.”

The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto appearing elsewhere in this report. We make statements in this report that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In particular, statements pertaining to our capital resources, portfolio performance and results of operations contain forward-looking statements. Forward-looking statements involve numerous risks and uncertainties, and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods which may be incorrect or imprecise, and we may not be able to realize them. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “pro forma,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases. You can also identify forward-looking statements by discussions of strategy, plans or intentions. The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: adverse economic or real estate developments in the retail industry or the markets in which we operate; changes in local, regional and national economic conditions; our inability to compete effectively; our inability to collect rent from tenants; defaults on or non-renewal of leases by tenants; increased interest rates and operating costs; decreased rental rates or increased vacancy rates; our failure to obtain necessary outside financing on favorable terms or at all; changes in the availability of additional acquisition opportunities; our inability to successfully complete real estate acquisitions; our failure to successfully operate acquired properties and operations; our failure to maintain our status as a REIT; our inability to attract and retain key personnel; government approvals, actions and initiatives, including the need for compliance with environmental requirements; financial market fluctuations; changes in real estate and zoning laws and increases in real property tax rates; the effects of earthquakes and other natural disasters; and lack of or insufficient amounts of insurance. While forward-looking statements reflect our good faith beliefs (or those of the indicated third parties); they are not guarantees of future performance. We disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The risks included here are not exhaustive, and additional factors could adversely affect our business and financial performance, including factors and risks included in other sections of this report. In addition, we discussed a number of material risks in our Annual Report on Form 10-K for the year ended December 31, 2012 and the Operating Partnership’s Registration Statement on Form 10. Those risks continue to be relevant to our performance and financial condition. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on our company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

Management’s Overview and Summary

We are a vertically integrated, self-administered, self-managed real estate firm with the principal objective of acquiring, financing, developing, leasing, owning and managing community and power centers, grocery anchored neighborhood centers and freestanding retail properties. Our strategy is to acquire high quality, well-located, dominant retail properties that generate attractive risk-adjusted returns. We target competitively protected properties in communities that have stable demographics and have historically exhibited favorable trends, such as strong population and income growth. We generally lease our properties to national and regional supermarket chains, big-box retailers and select national retailers that frequently offer necessity and value oriented items and generate regular consumer traffic. Our tenants often carry goods that are less impacted by fluctuations in the broader U.S. economy and consumers’ disposable income, which we believe generates more predictable property-level cash flows.

40

The following table reflects our total portfolio at September 30, 2013 (a property is reclassified from development to the operating portfolio at the earlier of 85% occupancy or one year from completion and delivery of the space):

	Gross Leasable Area (GLA)		% Occupied			% Leased			Number of Properties
Operating Portfolio:
Retail properties		5,618,485		92.9	%		94.0	%		31
Multi-family properties(1)		339 units		92.0	%		95.3	%		n/a
Office properties		338,339		80.8	%		80.8	%		2
Total/weighted-average operating portfolio		5,956,824		92.2	%		93.2	%		33
Development properties(2)		169,961		11.5	%		26.9	%		n/a
Unconsolidated properties(3)		224,952		82.7	%		82.7	%		2
Total Portfolio:
Total/weighted-average total portfolio		6,351,737		89.7	%		91.1	%		35

⁽¹⁾ Includes the 339 apartment units on the upper levels of our West Broad Village retail shopping center (the number of apartment units and leased percentage are not included in the total/weighted-average).

⁽²⁾ Our development properties consist of Phase II of each of our Chimney Rock and Red Rock Commons properties (Phase I of each such property is classified as an operating property).

⁽³⁾ Includes our La Costa Town Center and The Fountains at Bay Hill, or Bay Hill, properties in which we hold 20% and 50% ownership interests, respectively.

Our operations are carried out primarily through the Operating Partnership. We receive income primarily from rents and reimbursement payments received from tenants under existing leases at each of our properties. Potential impacts to our income include unanticipated tenant vacancies, vacancy of space that takes longer to re-lease and, for non-triple-net leases, operating costs that cannot be recovered from our tenants through contractual reimbursement formulas in our leases. Our operating results therefore depend materially on the ability of our tenants to make required payments and overall real estate market conditions.

Critical Accounting Policies

A complete discussion of our critical accounting policies can be found in our Annual Report on Form 10-K for the year ended December 31, 2012 and the Operating Partnership’s Registration Statement on Form 10, which were filed with the Securities and Exchange Commission, or SEC, and are accessible on the SEC’s website at www.sec.gov.

New Accounting Standards

See Note 2 to the condensed consolidated financial statements included elsewhere herein for disclosure of new accounting standards.

Results of Operations

We operate through three reportable business segments: retail properties, multi-family properties and office properties. At September 30, 2013, we owned 31 consolidated retail operating properties with a total of approximately 5.6 million square feet of gross leasable area (including a consolidated joint venture owned 50% by us). The multi-family segment consists of 339 apartment units at one retail property, West Broad Village, which is located in Richmond, Virginia. The office segment consists of two properties, Excel Centre, a portion of which is utilized as our headquarters, and the Promenade Corporate Center (these properties total 338,339 square feet of gross leasable area). All of our other properties are reported in the retail segment.

41

The following table reflects leasing activity at our consolidated retail and office operating properties for comparable leases (leases executed for spaces in which there was a tenant at some point during the previous twelve-month period) and non-comparable leases during the nine months ended September 30, 2013:

	Number of Leases		GLA		Weighted- Average Lease Rate		Weighted- Average Prior Lease Rate		% Increase (Decrease)			Tenant Improvement Allowance (sf)		Leasing Commission (sf)
Comparable leases		66		272,615	$	19.28	$	18.81		2.5	%	$	6.93	$	2.17
Non-comparable leases		36		132,374	$	19.26		n/a		n/a		$	25.84	$	7.00
Total leasing activity		102		404,989

In the nine months ended September 30, 2013, we acquired three retail operating properties (including the additional land parcel at The Promenade retail center, which is not considered a property separate from The Promenade) for approximately $127.4 million in the aggregate (comprised of cash payments of approximately $120.1 million and the assumption of $7.3 million of mortgage indebtedness). We utilized borrowings from our unsecured revolving credit facility to acquire these properties.

42

Comparison of the Three Months Ended September 30, 2013 to the Three Months Ended September 30, 2012

The following table sets forth historical financial information for same properties (all properties that we consolidated, owned and operated for the entirety of both periods being compared, except for properties that were entirely or primarily under redevelopment or development during either or both of the periods being compared), new properties (properties that were not owned during the entirety of the periods being compared), redevelopment/development properties (properties that were entirely or primarily under redevelopment or development during either or both of the periods being compared) and corporate entities (legal entities performing general and administrative functions) (dollars in thousands, except on a per square foot basis):

	Same Properties						New Properties						Redevelopment/ Development Properties				Corporate						Total
	As of September 30,
	2013			2012			2013			2012			2013		2012		2013			2012			2013			2012
Rentable GLA		4,606,688			4,606,688			1,350,136			151,339			—		—		—			—			5,956,824			4,758,027
Percent leased		93.9	%		91.9	%		90.9	%		97.8	%		—		—		—			—			93.2	%		92.0	%
Number of properties		23			23			10			1			—		—		—			—			33			24
Percent of total portfolio		77.3	%		96.8	%		22.7	%		3.2	%		—		—		—			—			100.0	%		100.0	%
	Same Properties						New Properties(1)						Redevelopment/ Development Properties				Corporate						Total
	Three months ended September 30,
	2013			2012			2013			2012			2013		2012		2013			2012			2013			2012
Rental revenue	$	16,391		$	16,365		$	7,223		$	492		$	—	$	—	$	(58	)	$	(57	)	$	23,556		$	16,800
Tenant recoveries		3,811			3,925			1,211			75			—		—		—			—			5,022			4,000
Other income		55			89			168			—			—		—		130			196			353			285
Total revenues		20,257			20,379			8,602			567			—		—		72			139			28,931			21,085
Rental operations(2)		5,662			5,195			2,318			156			—		—		(262	)		(261	)		7,718			5,090
Property operating income	$	14,595		$	15,184		$	6,284		$	411		$	—	$	—	$	334		$	400		$	21,213		$	15,995

⁽¹⁾ Includes a property that was consolidated in 2012, but is part of an unconsolidated joint venture in 2013.

⁽²) Amount includes the following expenses that are directly attributable to a property: maintenance and repairs, real estate taxes, management fees and other operating expenses.

43

The following table provides a reconciliation of property operating income (as defined in the table above) to net income for the three months ended September 30, 2013 and 2012 (dollars in thousands):

	Three Months Ended
	September 30, 2013			September 30, 2012			Change			Percent Change
Property operating income	$	21,213		$	15,995		$	5,218			32.6	%
Unallocated (income) expense:
Changes in fair value of contingent consideration		(10	)		(121	)		111			91.7	%
General and administrative		3,399			3,318			81			2.4	%
Depreciation and amortization		11,637			8,321			3,316			39.9	%
Operating income		6,187			4,477			1,710			38.2	%
Interest expense, net		(4,679	)		(3,920	)		(759	)		19.4	%
Loss from equity in unconsolidated entities		12			(158	)		170			107.6	%
Changes in fair value of financial instruments and gain on redemption of OP units		—			61			(61	)		n/a
Income from continuing operations		1,520			460			1,060			230.4	%
Income from discontinued operations		12,319			43			12,276			28,548.8	%
Net income	$	13,839		$	503		$	13,336			2,651.3	%

Property operating income: Property operating income increased by $5.2 million, or 32.6%, to $21.2 million for the three months ended September 30, 2013 compared to $16.0 million for the three months ended September 30, 2012. The increase was primarily related to the acquisition of ten consolidated operating properties after June 30, 2012 (including our acquisition of the additional land parcel at The Promenade retail center, which is not considered a property separate from The Promenade).

Changes in fair value of contingent consideration:A gain of approximately $10,000 was recognized in the three months ended September 30, 2013 related to the expiration of an earn-out period for a 2012 acquisition due to an increase in the actual leasing costs as compared to the initial estimates. The earn-out period expired on September 30, 2013 and the balance of $205,000 was paid in full in October 2013. A gain of approximately $121,000 was recognized in the three months ended September 30, 2012 as a result of an increase in the estimated fair value of funds to be received from escrow in connection with a master lease agreement related to the Promenade Corporate Center acquisition.

General and administrative:General and administrative expenses increased by $81,000, or 2.4%, to $3.4 million for the three months ended September 30, 2013 compared to $3.3 million for the three months ended September 30, 2012. An increase in transaction costs and corporate infrastructure costs due to our continued growth was partially offset by a decrease in audit and professional fees and compensation and benefit costs, primarily related to stock compensation as a result of the graded vesting method of recognizing compensation expense related to the 2012 performance-based stock awards, which resulted in declining amounts of stock compensation expense in 2013 as compared to 2012. Included in general and administrative expenses was share-based compensation expense for the three months ended September 30, 2013 and 2012 of $583,000 and $817,000, respectively.

Depreciation and amortization:Depreciation and amortization expense increased $3.3 million, or 39.9%, to $11.6 million for the three months ended September 30, 2013 compared to $8.3 million for the three months ended September 30, 2012. The increase was primarily related to our acquisition of ten consolidated operating properties after June 30, 2012 (including our acquisition of the additional land parcel at The Promenade retail center, which is not considered a property separate from The Promenade).

Interest expense, net: Interest expense, net increased $759,000, or 19.4%, to $4.7 million for the three months ended September 30, 2013 compared to $3.9 million for the three months ended September 30, 2012. The increase was primarily due to the assumption of approximately $85.5 million of mortgage debt in connection with our property acquisitions acquired in 2012 and 2013 and higher levels of outstanding borrowings under our unsecured revolving credit facility during the three months ended September 30, 2013.

Loss from equity in unconsolidated entities: In September 2012, we contributed our La Costa Town Center property to a newly-formed entity in which we hold a 20% ownership interest. We account for our ownership interest in a manner similar to the equity method of accounting. In October 2012, we purchased a 50% tenant-in-common interest in our Bay Hill property, which we account for under the equity method of accounting. Both of these ownership interests are reflected in the accompanying condensed consolidated balance sheets as investments in unconsolidated entities (see Note 14 to the condensed consolidated financial statements contained elsewhere herein for further discussion). Income of $12,000 and losses of $158,000 for the three months ended September 30, 2013 and 2012, respectively, are comprised of our proportionate share of the net losses from the operations of these properties.

44

Changes in fair value of financial instruments and gain on redemption of OP units: A gain on changes in fair value of financial instruments of approximately $61,000 recognized in the three months ended September 30, 2012 is the result of (1) a decrease in the estimated fair value of the redemption provision of OP units issued in connection with a property acquired in 2011 and (2) the redemption of 65,126 common operating partnership units, or OP units (see Note 19 of the condensed consolidated financial statements contained elsewhere herein for further discussion).

Income from discontinued operations: Income of $12.3 million (including a gain on sale of approximately $12.0 million) and $43,000 for the three months ended September 30, 2013 and 2012, respectively, represent the operations of our Walgreens and Grant Creek Town Center properties, which were sold on July 19, 2013 and September 13, 2013, respectively. As a result of these dispositions, at September 30, 2013 the operations of the properties were classified as discontinued operations within the condensed consolidated statements of income for all periods presented (see Note 15 of the condensed consolidated financial statements contained elsewhere herein for further discussion).

45

Comparison of the Nine Months Ended September 30, 2013 to the Nine Months Ended September 30, 2012

The following table sets forth historical financial information for same properties (all properties that we consolidated, owned and operated for the entirety of both periods being compared, except for properties that were entirely or primarily under redevelopment or development during either or both of the periods being compared), new properties (properties that were not owned during the entirety of the periods being compared), redevelopment/development properties (properties that were entirely or primarily under redevelopment or development during either or both of the periods being compared) and corporate entities (legal entities performing general and administrative functions) (dollars in thousands, except on a per square foot basis):

	Same Properties						New Properties						Redevelopment/ Development Properties						Corporate						Total
	As of September 30,
	2013			2012			2013			2012			2013			2012			2013			2012			2013			2012
Rentable GLA		3,872,106			3,872,106			1,966,125			767,328			118,593			118,593			—			—			5,956,824			4,758,027
Percent leased		94.8	%		91.5	%		89.8	%		94.7	%		100.0	%		93.2	%		—			—			93.2	%		92.0	%
Number of properties		19			19			13			4			1			1			—			—			33			24
Percent of total portfolio		65.0	%		81.4	%		33.0	%		16.1	%		2.0	%		2.5	%		—			—			100.0	%		100.0	%
	Same Properties						New Properties(1)						Redevelopment/ Development Properties						Corporate						Total
	Nine months ended September 30,
	2013			2012			2013			2012			2013			2012			2013			2012			2013			2012
Rental revenue	$	40,839		$	40,809		$	25,686		$	7,388		$	1,332		$	775		$	(172	)	$	(172	)	$	67,685		$	48,800
Tenant recoveries		9,979			9,351			3,884			835			254			111			(18	)		—			14,099			10,297
Other income		60			86			488			142			—			1			406			743			954			972
Total revenues		50,878			50,246			30,058			8,365			1,586			887			216			571			82,738			60,069
Rental operations(2)		12,562			12,236			8,435			2,689			358			139			(766	)		(841	)		20,589			14,223
Property operating income	$	38,316		$	38,010		$	21,623		$	5,676		$	1,228		$	748		$	982		$	1,412		$	62,149		$	45,846

⁽¹⁾ Includes a property that was consolidated in 2012, but is part of an unconsolidated joint venture in 2013.

⁽²⁾ Amount includes the following expenses that are directly attributable to a property: maintenance and repairs, real estate taxes, management fees and other operating expenses.

46

The following table provides a reconciliation of property operating income (as defined in the table above) to net income for the nine months ended September 30, 2013 and 2012 (dollars in thousands):

	Nine Months Ended
	September 30, 2013			September 30, 2012			Change			Percent Change
Property operating income	$	62,149		$	45,846		$	16,303			35.6	%
Unallocated (income) expense:
Changes in fair value of contingent consideration		(1,568	)		(121	)		(1,447	)		1,195.9	%
General and administrative		10,536			10,155			381			3.8	%
Depreciation and amortization		34,613			24,488			10,125			41.3	%
Operating income		18,568			11,324			7,244			64.0	%
Interest expense, net		(13,605	)		(11,024	)		(2,581	)		23.4	%
Loss from equity in unconsolidated entities		(13	)		(158	)		145			91.8	%
Changes in fair value of financial instruments and gain on redemption of OP units		230			1,112			(882	)		79.3	%
Income from continuing operations		5,180			1,254			3,926			313.1	%
Income from discontinued operations		12,455			39			12,416			31,835.9	%
Net income	$	17,635		$	1,293		$	16,342			1,263.9	%

Property operating income: Property operating income increased by $16.3 million, or 35.6%, to $62.1 million for the nine months ended September 30, 2013 compared to $45.8 million for the nine months ended September 30, 2012. The increase was primarily related to the acquisition of thirteen consolidated operating properties in 2012 and 2013 (including our acquisition of the additional land parcel at The Promenade retail center, which is not considered a property separate from The Promenade) and the commencement of additional leases at former development properties in 2012 and 2013.

Changes in fair value of contingent consideration:A gain of approximately $1.6 million was recognized in the nine months ended September 30, 2013 related to the reversal of an estimated contingent earn-out liability for one property as a result of a shortfall in expected leasing of vacant space at the property and a reduction in the contingent earn-out liability related to another property as a result of higher leasing costs than originally estimated (recognized as changes in fair value of contingent consideration in the condensed consolidated statements of operations). A gain of approximately $121,000 was recognized in the nine months ended September 30, 2012 as a result of an increase in the estimated fair value of funds to be received from escrow in connection with a master lease agreement related to the Promenade Corporate Center acquisition.

General and administrative:General and administrative expenses increased by $381,000, or 3.8%, to $10.5 million for the nine months ended September 30, 2013 compared to $10.2 million for the nine months ended September 30, 2012. The increase was primarily related to higher compensation and benefits costs associated with an increase in the number of employees due to our continued growth, partially offset by a decrease in share-based compensation expense as a result of the graded vesting method of recognizing compensation expense related to the 2012 performance-based stock awards, which resulted in declining amounts of compensation expense in 2013 as compared to 2012. Included in general and administrative expenses was share-based compensation expense for the nine months ended September 30, 2013 and 2012 of $1.7 million and $2.4 million, respectively. An increase in corporate infrastructure and statutory reporting costs were partially offset by a decrease in audit and other professional fees.

Depreciation and amortization:Depreciation and amortization expense increased $10.1 million, or 41.3%, to $34.6 million for the nine months ended September 30, 2013 compared to $24.5 million for the nine months ended September 30, 2012. The increase was primarily related to our acquisition of thirteen operating properties in 2012 and 2013 (including our acquisition of the additional land parcel at The Promenade retail center, which is not considered a property separate from The Promenade) and the commencement of depreciation at former development properties in 2012.

Interest expense, net: Interest expense, net increased $2.6 million, or 23.4%, to $13.6 million for the nine months ended September 30, 2013 compared to $11.0 million for the nine months ended September 30, 2012. The increase was primarily due to the assumption of approximately $85.5 million of mortgage debt in connection with our property acquisitions in 2012 and 2013, partially offset by a decrease in the interest rate associated with our unsecured revolving credit facility as a result of an amendment in July 2012.

47

Loss from equity in unconsolidated entities: In September 2012, we contributed our La Costa Town Center property to a newly-formed entity in which we hold a 20% ownership interest. We account for our ownership interest in a manner similar to the equity method of accounting. In October 2012, we purchased a 50% tenant-in-common interest in our Bay Hill property, which we account for under the equity method of accounting. Both of these ownership interests are reflected in the accompanying condensed consolidated balance sheets as investments in unconsolidated entities (see Note 14 to the condensed consolidated financial statements contained elsewhere herein for further discussion). The losses of $13,000 and $158,000 for the nine months ended September 30, 2013 and 2012, respectively, are comprised of our proportionate share of the net losses from the operations of these properties.

Changes in fair value of financial instruments and gain on redemption of OP units: A gain on changes in fair value of financial instruments and gain on OP unit redemption of approximately $230,000 was recognized in the nine months ended September 30, 2013 due to (1) the redemption of 19,904 OP units and (2) the expiration of the guaranteed redemption period for OP units issued in connection with the 2011 Edwards acquisition, which resulted in the recognition of a gain of approximately $246,000 representing the unutilized portion of the remaining redemption provision (see Note 19 to the condensed consolidated financial statements contained elsewhere herein for further discussion). A gain on changes in fair value of financial instruments of approximately $1.1 million was recognized in the nine months ended September 30, 2012 is the result of (1) a decrease in the estimated fair value of the redemption provision and (2) the redemption of 365,053 OP units.

Income from discontinued operations: Income of $12.5 million (including a gain on sale of approximately $12.0 million) and $39,000 for the nine months ended September 30, 2013 and 2012, respectively, represent the operations of our Walgreens and Grant Creek Town Center properties, which were sold on July 19, 2013 and September 13, 2013, respectively. As a result of these dispositions, at September 30, 2013 the operations of the properties were classified as discontinued operations within the condensed consolidated statements of income for all periods presented (see Note 15 of the condensed consolidated financial statements contained elsewhere herein for further discussion).

Results of Operations – Segments

We evaluate the performance of our segments based upon property operating income. “Property Operating Income” is defined as operating revenues (rental revenue, tenant recoveries and other income) less property operating expenses (maintenance and repairs, real estate taxes, management fees, and other operating expenses).

You should read the following discussion in conjunction with the segment information disclosed in Note 21 to our condensed consolidated financial statements in accordance with ASC 280, Segment Reporting. Our results of operations for the three months ended September 30, 2013 and 2012 may not be indicative of our future results of operations.

The following table sets forth results of operations presented by segments for the three months ended September 30, 2013 and 2012 (dollars in thousands):

	Three Months Ended
	September 30, 2013		September 30, 2012		Change			Percent Change
Revenues:
Office properties	$	2,052	$	2,261	$	(209	)		9.2	%
Multi-family properties		1,397		—		1,397			n/a
Retail properties		25,482		18,824		6,658			35.4	%
Total revenues		28,931		21,085		7,846			37.2	%
Property operating expenses:
Office properties	$	906	$	950	$	44			4.6	%
Multi-family properties		675		—		(675	)		n/a
Retail properties		6,137		4,140		(1,997	)		48.2	%
Total property operating expenses		7,718		5,090		(2,628	)		51.6	%

Comparison of the Three Months Ended September 30, 2013 to the Three Months Ended September 30, 2012

Revenue-office properties:Office properties revenue decreased by $209,000, or 9.2%, to $2.1 million for the three months ended September 30, 2013 compared to $2.3 million for the three months ended September 30, 2012. The decrease was the result of the expirations of certain acquisition leases at our Promenade Corporate Center property in 2013, resulting in lower occupancy at September 30, 2013 compared to the prior year.

Revenue-multi-family properties:Multi-family property revenue was $1.4 million for the three months ended September 30, 2013 as a result of our acquisition of the West Broad Village property in October 2012, which includes 339 apartments on the upper levels of the shopping center.

48

Revenue-retail properties:Retail property revenue increased by $6.7 million, or 35.4%, to $25.5 million for the three months ended September 30, 2013 compared to $18.8 million for the three months ended September 30, 2012. The increase was primarily related to our acquisition of ten consolidated operating properties after June 30, 2012 (including our acquisition of the Living Spaces land parcel at our Promenade retail center, which is not considered a separate property).

Property operating expenses-office properties:Property operating expenses related to our office properties decreased by $44,000, or 4.6%, to $906,000 for the three months ended September 30, 2013 compared to $950,000 for the three months ended September 30, 2012.

Property operating expenses-multi-family properties:Multi-family operating expenses were $675,000 for the three months ended September 30, 2013 as a result of our acquisition of the West Broad Village property in October 2012.

Property operating expenses-retail properties:Property operating expenses related to our retail properties increased by $2.0 million, or 48.2%, to $6.1 million for the three months ended September 30, 2013 compared to $4.1 million for the three months ended September 30, 2012. The increase was primarily related to the acquisition of ten consolidated operating properties after June 30, 2012 (including our acquisition of the additional land parcel at our Promenade retail center, which is not considered a separate property).

The following table sets forth results of operations presented by segments for the nine months ended September 30, 2013 and 2012 (dollars in thousands):

	Nine Months Ended
	September 30, 2013		September 30, 2012		Change			Percent Change
Revenues:
Office properties	$	6,428	$	6,367	$	61			1.0	%
Multi-family properties		4,053		—		4,053			n/a
Retail properties		72,257		53,702		18,555			34.6	%
Total revenues		82,738		60,069		22,669			37.7	%
Property operating expenses:
Office properties	$	2,593	$	2,366	$	(227	)		9.6	%
Multi-family properties		1,374		—		(1,374	)		n/a
Retail properties		16,622		11,857		(4,765	)		40.2	%
Total property operating expenses		20,589		14,223		(6,366	)		44.8	%

Comparison of the Nine Months Ended September 30, 2013 to the Nine Months Ended September 30, 2012

Revenue-office properties:Office property revenue was $6.4 million for both the nine months ended September 30, 2013 and 2012 due to the lack of a significant change in the tenants at our two office properties.

Revenue-multi-family properties:Multi-family property revenue was $4.1 million for the nine months ended September 30, 2013 as a result of our acquisition of the West Broad Village property in October 2012, which includes 339 apartments on the upper levels of the shopping center.

Revenue-retail properties:Retail property revenue increased by $18.6 million, or 34.6%, to $72.3 million for the nine months ended September 30, 2013 compared to $53.7 million for the nine months ended September 30, 2012. The increase was primarily related to our acquisition of thirteen consolidated operating properties (including our acquisition of the Living Spaces land parcel at our Promenade retail center, which is not considered a separate property) in 2012 and 2013 and the commencement of additional leases at our development property in 2012 and 2013.

Property operating expenses-office properties:Property operating expenses related to our office properties increased by $227,000, or 9.6%, to $2.6 million for the nine months ended September 30, 2013 compared to $2.4 million for the nine months ended September 30, 2012. The increase was primarily related to non-recurring maintenance and repairs activities at our Promenade Corporate Center property.

Property operating expenses-multi-family properties:Multi-family operating expenses were $1.4 million for the nine months ended September 30, 2013 as a result of our acquisition of the West Broad Village property in October 2012.

Property operating expenses-retail properties:Property operating expenses related to our retail properties increased by $4.8 million, or 40.2%, to $16.6 million for the nine months ended September 30, 2013 compared to $11.9 million for the nine months ended September 30, 2012. The increase was primarily related to the acquisition of thirteen operating properties in 2012 and 2013 (including our acquisition of the Living Spaces land parcel at our Promenade retail center, which is not considered a separate property).

49

Cash Flows

The following is a comparison, for the nine months ended September 30, 2013 and 2012, of our cash flows.

Cash and cash equivalents were $3.5 million and $16.0 million at September 30, 2013 and 2012, respectively.

Net cash provided by operating activities was $43.0 million for the nine months ended September 30, 2013 compared to $28.8 million for the nine months ended September 30, 2012, an increase of $14.2 million. The increase was primarily due to an increase in net income compared to the prior period, partially offset by an increase in non-cash gains for the nine months ended September 30, 2013.

Net cash used in investing activities was $137.6 million for the nine months ended September 30, 2013 compared to $80.4 million for the nine months ended September 30, 2012, an increase of $57.2 million. The increase in net cash used was primarily the result of a increase in the volume of property acquisitions of $21.9 million and an increase in expenditures for the development of property and property improvements of $11.4 million, partially offset by a decrease in proceeds from the sale of equity securities of $4.2 million and proceeds from the contribution of real estate assets of $21.3 million.

Net cash provided by financing activities was $92.5 million for the nine months ended September 30, 2013 compared to $62.3 million for the nine months ended September 30, 2012, an increase of $30.2 million. The increase was primarily due to greater net borrowings of $95.3 million, partially offset by lower proceeds from equity offerings of $60.2 million.

Funds From Operations

We present funds from operations, or FFO, because we consider FFO an important supplemental measure of our operating performance and believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO excludes depreciation and amortization unique to real estate, gains and losses from property dispositions and extraordinary items, it provides a performance measure that, when compared year-over-year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income. We compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts, or NAREIT. As defined by NAREIT, FFO represents net income (loss) (computed in accordance with GAAP), excluding real estate-related depreciation and amortization, impairment charges and net gains (losses) on the disposition of real estate assets and after adjustments for unconsolidated partnerships and joint ventures. Our computation may differ from the methodology for calculating FFO utilized by other equity REITs and, accordingly, may not be comparable to such other REITs. Further, FFO does not represent amounts available for management’s discretionary use because of needed capital replacement or expansion, debt service obligations, or other commitments and uncertainties. FFO should not be considered as an alternative to net income (loss) (computed in accordance with GAAP) as an indicator of our financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions.

50

The following table presents a reconciliation of FFO of Excel Trust, Inc. for the three and nine months ended September 30, 2013 and 2012 (dollars in thousands):

	Three Months Ended						Nine Months Ended
	September 30, 2013			September 30, 2012			September 30, 2013			September 30, 2012
Net income (loss) attributable to the common stockholders(1)	$	10,739		$	(2,243	)	$	8,914		$	(6,302	)
Non-controlling interest in operating partnership(1)		279			(73	)		240			(230	)
Depreciation and amortization		11,766			8,602			35,306			25,432
Depreciation and amortization related to joint ventures(2)		214			(41	)		879			(165	)
Gain on acquisition of real estate and sale of land parcel		—			—			—			—
Gain on sale of real estate assets		(11,974	)		—			(11,974	)		—
Funds from operations	$	11,024		$	6,245		$	33,365		$	18,735

⁽¹⁾ Net income allocable to non-controlling interests in the operating partnership is included in net income (loss) attributable to unitholders of the operating partnership as reflected in the condensed consolidated financial statements of Excel Trust, L.P., included elsewhere herein.

⁽²⁾ Includes a reduction for 50% of the depreciation and amortization expense associated with the proportionate share of our consolidated Dothan property not owned by us and an increase for our proportionate share of depreciation and amortization expense at our unconsolidated La Costa Town Center and Bay Hill properties.

Liquidity and Capital Resources of Excel Trust, Inc.

In this “Liquidity and Capital Resources of Excel Trust, Inc.” section, the terms “we,” “us,” “our” or the “Company” refer only to Excel Trust, Inc. on an unconsolidated basis and exclude the Operating Partnership and all other subsidiaries.

The Company’s business is operated primarily through the Operating Partnership. The Company issues public equity from time to time, but does not otherwise generate any capital itself or conduct any business itself, other than incurring certain expenses in operating as a public company which are fully reimbursed by the Operating Partnership. The Company’s principal funding requirement is the payment of dividends on its common and preferred stock. Distributions from the Operating Partnership are the Company’s principal source of funding for its dividend payments. The Company believes the Operating Partnership’s sources of working capital, specifically its cash flow from operations and borrowings available under its unsecured revolving credit facility, are adequate for it to make its distribution payments to the Company and, in turn, for the Company to make its dividend payments to its preferred and common stockholders for at least the next twelve months. However, there can be no assurance that the Operating Partnership’s sources of capital will continue to be available at all or in amounts sufficient to meet its needs, including its ability to make distributions to the Company. The unavailability of capital could adversely affect the Operating Partnership’s ability to make distributions to the Company, which would in turn adversely affect the Company’s ability to pay cash dividends to its stockholders.

The Company itself does not hold any indebtedness, but it guarantees some of the Operating Partnership’s debt, as discussed further in Note 8 to the accompanying condensed consolidated financial statements contained elsewhere herein. If the Operating Partnership fails to fulfill certain of its debt requirements, triggering the Company’s guarantee obligations, then the Company will be required to fulfill its cash payment commitments under such guarantees.

For the Company to maintain its qualification as a REIT, it must pay dividends to its stockholders aggregating annually at least 90% of its ordinary taxable income. While historically the Company has satisfied this distribution requirement by making cash distributions to its stockholders, it may choose to satisfy this requirement by making distributions of cash or other property, including, in limited circumstances, the Company’s own stock. As a result of this distribution requirement, the Operating Partnership cannot rely on retained earnings to fund its future growth to the same extent as other companies whose parent companies are not REITs. The Company may need to continue to raise capital in the equity markets to fund the Operating Partnership’s working capital needs, acquisitions and developments.

As the sole general partner with control of the Operating Partnership, the Company consolidates the Operating Partnership for financial reporting purposes, and the Company does not have significant assets other than its investment in the Operating Partnership. Therefore, the assets and liabilities and the revenues and expenses of the Company and the Operating Partnership are substantially the same on their respective financial statements. The section entitled “Liquidity and Capital Resources of Excel Trust, L.P.” should be read in conjunction with this section to understand the liquidity and capital resources of the Company on a consolidated basis and how the Company is operated as a whole.

51

The Company and the Operating Partnership have an effective shelf registration statement that provides for the public offering and sale from time to time by the Company of its preferred stock, common stock, debt securities and guarantees of debt securities, and by the Operating Partnership of its debt securities. The Company evaluates the capital markets on an ongoing basis for opportunities to raise capital, and, as circumstances warrant, the Company may issue securities of all of these types in one or more offerings at any time and from time to time on an opportunistic basis, depending upon, among other things, market conditions, available pricing and capital needs. When the Company receives proceeds from the sales of its preferred or common stock, it is required by the Operating Partnership’s partnership agreement to contribute the net proceeds from those sales to the Operating Partnership in exchange for corresponding preferred or common units of the Operating Partnership. The Operating Partnership may use these proceeds and proceeds from the sale of its debt securities to repay debt, including borrowings under its unsecured revolving credit facility, to develop new or existing properties, to make acquisitions of properties or portfolios of properties, or for general corporate purposes.

The Company has entered into equity distribution agreements with four sales agents, under which we can issue and sell shares of our common stock having an aggregate offering price of up to $100.0 million from time to time through, at our discretion, any of the sales agents. The sales of common stock made under the equity distribution agreements are made in “at the market” offerings as defined in the Securities Act of 1933, as amended, or the Securities Act. During the nine months ended September 30, 2013, the Company completed the issuance of 3,211,928 shares pursuant to the equity distribution agreements, resulting in net proceeds of approximately $40.7 million at an average stock issuance price of $13.05 per share. The Company contributed the net proceeds from these issuances to the Operating Partnership, which used the proceeds to repay outstanding indebtedness under its unsecured revolving credit facility and for other general corporate and working capital purposes.

The Company may from time to time seek to repurchase or redeem the Operating Partnership’s outstanding debt, the Company’s outstanding shares of common stock or preferred stock or other securities in open market purchases, privately negotiated transactions or otherwise. Such repurchases or redemptions, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Liquidity and Capital Resources of Excel Trust, L.P.

In this “Liquidity and Capital Resources of Excel Trust, L.P.” section, the terms “we,” “our” and “us” refer to the Operating Partnership or the Operating Partnership and Excel Trust, Inc. together, as the context requires.

Our short-term liquidity requirements consist primarily of funds to pay for operating expenses and other expenditures directly associated with our properties, including:

• interest expense and scheduled principal payments on outstanding indebtedness,

• general and administrative expenses,

• future distributions expected to be paid to Excel Trust, Inc.’s stockholders and limited partners of the Operating Partnership,

• anticipated and unanticipated capital expenditures, tenant improvements and leasing commissions, and

• construction of our non-operating properties.

Our long term liquidity requirements consist primarily of funds to pay for property acquisitions, scheduled debt maturities, renovations, expansions, capital commitments, construction obligations and other non-recurring capital expenditures that need to be made periodically, and the costs associated with acquisitions and developments of new properties that we pursue.

We intend to satisfy our short-term liquidity requirements primarily through our existing working capital and cash provided by our operations. We believe our rental revenue net of operating expenses will generally provide sufficient cash inflows to meet our debt service obligations (excluding debt maturities), pay general and administrative expenses and fund regular distributions. We anticipate being able to refinance our debt service obligations or borrow from our unsecured credit facility to pay for upcoming debt maturities. The only remaining loan maturity date in 2013 is the $55.8 million mortgage note at our Park West Place property, which is scheduled to mature in December 2013, but can be extended through December 2014 (see Note 8 to the accompanying condensed consolidated financial statements contained elsewhere herein for further discussion). We expect to incur approximately $22.4 million in construction costs relating to redevelopment or development projects on portions of existing operating properties (including the redevelopment of our unconsolidated La Costa Town Center property). Funds for these costs are expected to come from new mortgage financing, borrowings from our unsecured revolving credit facility and existing cash. We intend to satisfy our other long-term liquidity requirements through our existing working capital, cash provided by indebtedness, long-term secured and unsecured indebtedness and the use of net proceeds from the disposition of non-strategic assets. In addition, we may, from time to time, offer and sell additional shares of common stock and preferred stock, as well as debt securities, warrants, rights and other securities to the extent necessary or advisable to meet our liquidity needs.

52

On October 8, 2013, we entered into an amended and restated credit agreement, or the 2013 Amendment, which provided for an increase in borrowings available under our existing credit facility from $250.0 million to $300.0 million, decreased the applicable interest rate and extended the maturity date. We have the ability from time to time to increase the size of our credit facility by up to an additional $200.0 million for a total borrowing capacity of $500.0 million, subject to receipt of lender commitments and other conditions precedent. The amended maturity date is April 6, 2018 and may be extended for an additional six months at our option.

As of September 30, 2013, the unsecured revolving credit facility bore interest at the rate of LIBOR plus a margin of 165 to 225 basis points (which was decreased pursuant to the 2013 Amendment to a margin of 145 to 205 basis points), depending on our leverage ratio. Under the 2013 Amendment, if in the future the Parent Company obtains an investment-grade credit rating from S&P, Fitch or Moody’s, the interest rate would be LIBOR plus a margin of 90 to 170 basis points, depending on the Parent Company’s credit rating. As of September 30, 2013, we were also responsible for paying a fee of 0.25% or 0.35% for any unused portion of the unsecured revolving credit facility, depending on our utilization of the borrowing capacity (or a fee pursuant to the 2013 Amendment of 0.25% to 0.30% on the full capacity of the facility if in the future the Parent Company obtains an investment-grade credit rating from S&P, Fitch or Moody’s). Borrowings under the unsecured revolving credit facility were $193.5 million at September 30, 2013 at a weighted-average interest rate of 1.83%. In addition, we issued a $12.1 million letter of credit from the unsecured revolving credit facility, which secures an outstanding $12.0 million bond payable for the Northside Mall. This bond is included with the mortgages payable on our condensed consolidated balance sheets. At September 30, 2013, there was approximately $44.3 million available for borrowing under the unsecured revolving credit facility (amount available for borrowing increased subsequent to September 30, 2013 as a result of the 2013 amendment).

On October 1, 2013, we reached an agreement in principle to issue $100.0 million in senior unsecured notes to a private party. It is anticipated that $75.0 million in principal amount of notes will mature in 2020 and $25.0 million will mature in 2023 for a weighted average maturity of 7.8 years and a weighted average fixed interest rate of 4.6%. We expect to use the proceeds upon completion of the proposed transaction to repay borrowings under our unsecured revolving credit facility and for general corporate purposes. The issuance of the notes is subject to customary conditions including the negotiation and execution of definitive loan documents. There can be no assurances that these conditions will be satisfied or that the issuance will occur on the terms described herein, or at all.

On October 9, 2013, we entered into an amendment to its Red Rock Commons construction loan, which decreased the applicable interest rate to LIBOR plus a margin of 145 to 205 basis points. If in the future our Parent Company obtains an investment-grade credit rating from S&P, Fitch or Moody’s, the interest rate would be LIBOR plus a margin of 90 to 170 basis points, depending on our Parent Company’s credit rating (see Note 8).

Our ability to borrow funds under the credit agreement, and the amount of funds available under the credit agreement at any particular time, are subject to our meeting borrowing base requirements. The amount of funds we can borrow is determined by the net operating income of our unencumbered assets that comprise the borrowing base (as defined in the credit agreement). We are also subject to financial covenants relating to maximum leverage ratios on unsecured, secured and overall debt, minimum fixed coverage ratios, minimum amount of net worth, dividend payment restrictions and certain investment limitations.

The following is a summary of key financial covenants and their covenant levels as of September 30, 2013:

	Required			Actual
Key financial covenant:
Ratio of total liabilities to total asset value (maximum)		60.0	%		42.6	%
Ratio of adjusted EBITDA to fixed charges (minimum)		1.50			2.17
Ratio of secured indebtedness to total asset value (maximum)		40.0	%		26.6	%

⁽¹⁾ For a complete listing of all debt covenants related to our consolidated indebtedness as well as definitions of the above terms, please refer to our applicable filings with the SEC.

As of September 30, 2013, we believe that we were in compliance with all of the covenants under our credit agreement.

As of September 30, 2013, our ratio of debt-to-gross undepreciated asset value was approximately 39.8%. Our organizational documents do not limit the amount or percentage of debt that we may incur, nor do they limit the types of properties we may acquire or develop, and our board of directors may modify our debt policy from time to time. The amount of leverage we will deploy for particular investments in our target assets will depend upon our management team’s assessment of a variety of factors, which may include the anticipated liquidity and price volatility of the target assets in our investment portfolio, the potential for losses, the availability and cost of financing the assets, our opinion of the creditworthiness of our financing counterparties, the health of the U.S. economy and commercial mortgage markets, our outlook for the level, slope and volatility of interest rates, the credit quality of our target assets and the collateral underlying our target assets. Accordingly, the ratio of debt-to-gross undepreciated asset value may increase or decrease beyond the current amount.

53

Commitments, Contingencies and Contractual Obligations

The following table outlines our contractual obligations (dollars in thousands) at September 30, 2013 related to our mortgage and note indebtedness and other commitments:

	Payments by Period
	2013 (three months)		2014-2015		2016-2017		Thereafter		Total
Principal payments — fixed rate debt(1)	$	57,094	$	125,081	$	43,779	$	55,051	$	281,005
Principal payments — variable rate debt(2)		—		13,970		—		205,500		219,470
Interest payments — fixed rate debt(1)		3,387		16,984		9,066		10,378		39,815
Interest payments — variable rate debt(2)		952		7,144		1,858		155		10,109
Contingent consideration related to business combinations(3)		205		—		—		—		205
Construction costs(4)		3,393		18,995		—		—		22,388
	$	65,031	$	182,174	$	54,703	$	271,084	$	572,992

⁽¹⁾ Includes a mortgage payable at our Park West Place property, which bears interest at a rate of LIBOR plus 2.25% (contractual interest rate of 2.44% at September 30, 2013). In December 2010, we entered into two interest rate swap contracts equal to the notional value of the mortgage payable, which fix LIBOR at an average of 1.41% for the term of the mortgage.

⁽²⁾ Includes redevelopment revenue bonds at our Northside Mall property, a construction loan at our Red Rock Commons property and outstanding borrowings on our unsecured revolving credit facility (our unsecured revolving credit facility had a balance of $193.5 million at September 30, 2013). Interest on the redevelopment bonds is reset weekly and determined by the bond remarketing agent based on the market value of the bonds (interest rate of 0.08% at September 30, 2013). At September 30, 2013, the construction loan bore interest at the rate of LIBOR plus a margin of 165 basis points to 225 basis points, depending on our leverage ratio (interest rate of 1.84% at September 30, 2013). At September 30, 2013, the unsecured revolving credit facility bore interest at the rate of LIBOR plus a margin of 165 to 225 basis points (weighted-average interest rate of 1.83% at September 30, 2013), depending on our leverage ratio. The above information reflects the new maturity date of April 6, 2018 for the unsecured revolving credit facility pursuant to the amended and restated credit agreement.

⁽³⁾ Additional consideration was due to the prior owner of one property purchased in 2012 based on the leasing of vacant space subsequent to the acquisition of the property. The earn-out period expired on September 30, 2013 and the additional consideration in the amount of $205,000 was paid in October 2013 (see Note 19 to the condensed consolidated financial statements contained elsewhere herein).

⁽⁴⁾ Amount represents our estimate of costs expected to be incurred primarily to complete the redevelopment of our unconsolidated La Costa Town Center property (representing our proportionate share of the estimated costs) and to complete the undeveloped portion of our Chimney Rock property.

Off-Balance Sheet Arrangements

In connection with the formation of La Costa LLC in September 2012, we contributed the La Costa Town Center property to the entity in exchange for proceeds of approximately $21.2 million (see Note 14 to the accompanying condensed consolidated financial statements contained elsewhere herein for further discussion). La Costa LLC does not qualify as a variable interest entity, or VIE, and consolidation is not required as we do not control the operations of the property. The majority owner will bear the majority of any losses incurred. We will receive 20% of the cash flow distributions and may receive a greater portion of cash distributions in the future based upon the performance of the property and the availability of cash for distribution. In addition, we receive fees in our role as the day-to-day property manager and for any development services that we provide. We account for our interest in La Costa LLC as a profit-sharing arrangement, which is reflected in a manner that is similar to the equity method of accounting. The assets and liabilities of La Costa LLC were $25.1 million and $15.1 million, respectively, at September 30, 2013.

54

We hold a 50% tenant-in-common ownership interest in a company, Bay Hill Fountains, LLC (“Bay Hill LLC”). In connection with our acquisition of a portfolio of properties in October 2012, we acquired a 50% undivided interest in the Bay Hill property. The Bay Hill property does not qualify as a VIE and consolidation is not required as we do not control the operations of the property. We will receive 50% of the cash flow distributions and recognize 50% of the results of operations. In addition, we receive fees in our role as the day-to-day property manager. We account for our interest in the Bay Hill property under the equity method of accounting. The assets and liabilities of the Bay Hill property were $40.5 million and $33.5 million, respectively, at September 30, 2013.

Our proportionate share of outstanding indebtedness at the unconsolidated entities is as follows (dollars in thousands):

Name	Ownership Interest			Principal  Amount(1)		Interest Rate			Maturity Date
La Costa LLC		20	%	$	2,820		5.9	%		October 1, 2014
Bay Hill LLC		50	%	$	11,768		3.4	%		April 2, 2015

⁽¹⁾ Amount represents our proportionate share of a secured mortgage note, which bears interest at the rate of LIBOR plus a margin of 575 basis points (La Costa LLC) and at the rate of LIBOR plus a margin of 325 basis points (Bay Hill).

We do not have any other relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purposes entities, which typically are established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities nor do we have any commitments or intent to provide funding to any such entities. Accordingly, we are not materially exposed to any other financing, liquidity, market or credit risk that could arise if we had engaged in these relationships, other than as described above.

Distribution Policy

We have elected to be taxed as a REIT under the Code. To continue to qualify as a REIT, we must meet a number of organizational and operational requirements, including the requirement that we distribute currently at least 90% of our REIT taxable income to our stockholders. It is our intention to comply with these requirements and maintain our REIT status. As a REIT, we generally will not be subject to corporate United States federal, state or local income taxes on income we distribute currently (in accordance with the Code and applicable regulations) to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to United States federal, state and local income taxes at regular corporate rates and may not be able to qualify as a REIT for subsequent tax years. Even if we qualify for United States federal taxation as a REIT, we may be subject to certain state and local taxes on our income properties and operations and to United States federal income and excise taxes on our taxable income not distributed in the amounts and in the time frames prescribed by the Code and applicable regulations thereunder.

Inflation

Some of our leases contain provisions designed to mitigate the adverse impact of inflation. These provisions generally increase rental rates during the terms of the leases either at fixed rates or indexed escalations (based on the Consumer Price Index or other measures). We may be adversely impacted by inflation on our leases that do not contain indexed escalation provisions. In addition, most of our leases require the tenant to pay its share of operating expenses, including common area maintenance costs, real estate taxes and insurance. This may reduce our exposure to increases in costs and operating expenses resulting from inflation, assuming our properties remain leased and tenants fulfill their obligations to reimburse us for such expenses.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our future income, cash flows and fair values relevant to financial instruments depend upon prevailing market interest rates. Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices and equity prices. The primary market risk to which we believe we are exposed is interest rate risk. Many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors that are beyond our control contribute to interest rate risk.

The fair value of our mortgages payable at September 30, 2013, including our construction loan, was approximately $312.8 million compared to the carrying amount of $308.4 million. A 100 basis point increase in market interest rates would result in a decrease in the fair value of our fixed-rate debt by approximately $6.4 million at September 30, 2013. A 100 basis point decrease in market interest rates would result in an increase in the fair market value of our fixed-rate debt by approximately $6.8 million at September 30, 2013.

We have entered into a $300.0 million unsecured revolving credit facility. As of September 30, 2013, the unsecured revolving credit facility bore interest at the rate of LIBOR plus a margin of 165 to 225 basis points (which was decreased pursuant to the 2013 Amendment to a margin of 145 to 205 basis points), depending on our leverage ratio. As of September 30, 2013, we had $205.6

55

million of debt and commitments outstanding under our unsecured revolving credit facility, which included a $12.1 million letter of credit issued under the facility. At September 30, 2013, the outstanding balance on our unsecured revolving credit facility was $193.5 million at a weighted-average interest rate of 1.83%. The fair value of our unsecured revolving credit facility at September 30, 2013 was approximately $193.0 million. Based on outstanding borrowings of $193.5 million at September 30, 2013, an increase of 100 basis points in LIBOR would result in an increase in the interest we incur in the amount of approximately $1.9 million.

We have entered into an $18.0 million construction loan agreement in connection with construction activities at our Red Rock Commons property. The construction loan bears interest at the rate of LIBOR plus a margin of 165 basis points to 225 basis points, depending on our leverage ratio. At September 30, 2013, the outstanding balance on our construction loan was $14.0 million at an interest rate of 1.84%. Based on outstanding borrowings of $14.0 million at September 30, 2013, an increase of 100 basis points in LIBOR would result in an increase in the interest we incur in the amount of approximately $140,000.

In order to modify and manage the interest rate characteristics of our outstanding debt and to limit the effects of interest rate risks on our operations, we may utilize a variety of financial instruments, including interest rate swaps, caps, floors and other interest rate exchange contracts. The use of these types of instruments to hedge our exposure to changes in interest rates carries additional risks, including counterparty credit risk, the enforceability of hedging contracts and the risk that unanticipated and significant changes in interest rates will cause a significant loss of basis in the contract. To limit counterparty credit risk we will seek to enter into such agreements with major financial institutions with high credit ratings. There can be no assurance that we will be able to adequately protect against the foregoing risks and that we will ultimately realize an economic benefit that exceeds the related amounts incurred in connection with engaging in such hedging activities. We do not enter into such contracts for speculative or trading purposes.

As of September 30, 2013, we had two interest rate derivatives that were designated as cash flow hedges of interest rate risk. Both derivatives were interest rate swaps and the notional amount totaled $55.8 million. The interest rate swap contracts fixed LIBOR at an average of 1.41% for the term of a mortgage loan which expires in December 2013. The fair value of these derivative financial instruments was approximately $143,000 at September 30, 2013, and is classified in accounts payable and other liabilities on the accompanying condensed consolidated balance sheets.

Item 4. Controls and Procedures

Controls and Procedures (Excel Trust, Inc.)

Excel Trust, Inc. maintains disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) that are designed to ensure that information required to be disclosed in its reports under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b) under the Exchange Act, Excel Trust, Inc. carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Excel Trust, Inc.’s disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, Excel Trust, Inc.’s Chief Executive Officer and Chief Financial Officer concluded, as of that time, that its disclosure controls and procedures were effective at the reasonable assurance level.

There has been no change in Excel Trust, Inc.’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, Excel Trust, Inc.’s internal control over financial reporting.

Controls and Procedures (Excel Trust, L.P.)

Excel Trust, L.P. maintains disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in its reports under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

56

As required by Rule 13a-15(b) under the Exchange Act, Excel Trust, L.P. carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, the Chief Executive Officer and Chief Financial Officer concluded, as of that time, that Excel Trust, L.P.’s disclosure controls and procedures were effective at the reasonable assurance level.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

We are not presently involved in any material litigation nor, to our knowledge, is any material litigation threatened against us or our properties that we believe would have a material adverse effect on our financial position, results of operations or liquidity. We are involved in routine litigation arising in the ordinary course of business, none of which we believe to be material.

Item 1A. Risk Factors

For a discussion of our potential risks and uncertainties, see the section entitled “Risk Factors” beginning on page 9 in our Annual Report on Form 10-K for the year ended December 31, 2012 and on page 6 of the Operating Partnership’s Registration Statement on Form 10, which were filed with the SEC and are accessible on the SEC’s website at www.sec.gov. There have been no material changes to the risk factors disclosed in the Form 10-K or Form 10.

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

Unregistered Sales of Equity Securities and Use of Proceeds (Excel Trust, Inc.)

None.

Unregistered Sales of Equity Securities and Use of Proceeds (Excel Trust, L.P.)

In the three months ended September 30, 2013, Excel Trust, Inc. issued 146,400 shares of its common stock in “at the market” offerings pursuant to equity distribution agreements with four sales agents. Excel Trust, Inc. contributed the net proceeds from this offering of approximately $1.9 million to us in exchange for 146,400 OP units. We issued these OP units in reliance on Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder. The shares of common stock were offered and sold under a prospectus supplement and related prospectus filed with the SEC pursuant to an effective shelf registration statement of Excel Trust, Inc.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

57

Item 6. Exhibits

Exhibit Number	Description of Exhibit
10.1	First Amendment to Amended and Restated Credit Agreement, dated October 8, 2013, by and among Excel Trust, L.P., as Borrower, Excel Trust, Inc., as Parent, Wells Fargo Bank, National Association, as Administrative Agent, and certain other lenders party thereto. (1).
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

(1) Incorporated herein by reference to Excel Trust, Inc.’s and Excel Trust, L.P.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 9, 2013.

58

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.

EXCEL TRUST, INC.		EXCEL TRUST, L.P. By: Excel Trust, Inc. Its general partner
By:	/S/    GARY B. SABIN	By:	/S/    GARY B. SABIN
	Gary B. Sabin Chairman and Chief Executive Officer (Principal Executive Officer)		Gary B. Sabin Chairman and Chief Executive Officer (Principal Executive Officer)
By:	/S/    JAMES Y. NAKAGAWA	By:	/S/    JAMES Y. NAKAGAWA
	James Y. Nakagawa Chief Financial Officer (Principal Financial Officer)		James Y. Nakagawa Chief Financial Officer (Principal Financial Officer)
Dated: November 7, 2013		Dated: November 7, 2013

59

EXHIBIT INDEX

Exhibit Number	Description of Exhibit
10.1	First Amendment to Amended and Restated Credit Agreement, dated October 8, 2013, by and among Excel Trust, L.P., as Borrower, Excel Trust, Inc., as Parent, Wells Fargo Bank, National Association, as Administrative Agent, and certain other lenders party thereto. (1).
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

(1) Incorporated herein by reference to Excel Trust, Inc.’s and Excel Trust, L.P.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 9, 2013.

60