Excel Trust 10-Q 2014 Q2 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 June 30, 2014

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 July 31, 2014, $0.01 par value per share: 61,116,598 shares

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the quarter ended June 30, 2014 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 June 30, 2014, Excel Trust, Inc. owned an approximate 98.3% partnership interest in the Operating Partnership. The remaining 1.7% 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 (“OP 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 OP units.

Non-controlling interests and stockholders’ equity and partners’ capital are the main areas of difference between the condensed 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:

• condensed consolidated financial statements;

• the following notes to the condensed 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

EXCEL TRUST, INC.

EXCEL TRUST, L.P.

FORM 10-Q — QUARTERLY REPORT

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2014

TABLE OF CONTENTS

PART I	Financial Information	4
Item 1.	Financial Statements of Excel Trust, Inc.	4
	Condensed Consolidated Balance Sheets as of June 30, 2014 (unaudited) and December 31, 2013	4
	Condensed Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2014 and 2013 (unaudited)	5
	Condensed Consolidated Statements of Equity for the six months ended June 30, 2014 and 2013 (unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2013 (unaudited)	8
	Financial Statements of Excel Trust, L.P.
	Condensed Consolidated Balance Sheets as of June 30, 2014 (unaudited) and December 31, 2013	9
	Condensed Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2014 and 2013 (unaudited)	10
	Condensed Consolidated Statements of Capital for the six months ended June 30, 2014 and 2013 (unaudited)	11
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2013 (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	37
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51
Item 4.	Controls and Procedures	52
PART II	Other Information	53
Item 1.	Legal Proceedings	53
Item 1A.	Risk Factors	53
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 3.	Defaults Upon Senior Securities	53
Item 4.	Mine Safety Disclosures	53
Item 5.	Other Information	53
Item 6.	Exhibits	54
Signatures		55

3

PART 1 — FINANCIAL INFORMATION

Item 1. Financial Statements

EXCEL TRUST, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)

	June 30, 2014 (unaudited)			December 31, 2013
ASSETS:
Property:
Land	$	380,363		$	380,366
Buildings		647,401			642,356
Site improvements		64,769			63,242
Tenant improvements		56,459			54,025
Construction in progress		14,980			7,576
Less accumulated depreciation		(75,834	)		(61,479	)
Property, net		1,088,138			1,086,086
Cash and cash equivalents		183,749			3,245
Restricted cash		6,973			8,147
Tenant receivables, net		3,205			5,117
Lease intangibles, net		68,213			78,345
Deferred rent receivable		10,342			9,226
Other assets		22,572			20,135
Investment in unconsolidated entities		8,303			8,520
Total assets(1)	$	1,391,495		$	1,218,821
LIABILITIES AND EQUITY:
Liabilities:
Mortgages payable, net	$	207,048		$	251,191
Notes payable		—			179,500
Unsecured notes		348,693			100,000
Accounts payable and other liabilities		29,110			21,700
Lease intangibles, net		25,845			28,114
Dividends/distributions payable		13,160			10,932
Total liabilities(2)		623,856			591,437
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 June 30, 2014 and December 31, 2013		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 June 30, 2014 and December 31, 2013		88,720			88,720
Common stock, $.01 par value, 200,000,000 shares authorized; 61,116,598 and 48,381,365 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively		610			482
Additional paid-in capital		618,578			478,541
Retained Earnings		—			—
Total stockholders’ equity		755,611			615,446
Non-controlling interests		12,028			11,938
Total equity		767,639			627,384
Total liabilities and equity	$	1,391,495		$	1,218,821

⁽¹⁾  Excel Trust, Inc.’s consolidated total assets at June 30, 2014 and December 31, 2013 include $15,231 and $15,470, 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 June 30, 2014 and December 31, 2013 include $207 and $220 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 Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Revenues:
Rental revenue	$	25,179		$	22,227		$	50,086		$	44,129
Tenant recoveries		4,855			4,446			10,110			9,076
Other income		596			285			1,030			601
Total revenues		30,630			26,958			61,226			53,806
Expenses:
Maintenance and repairs		2,186			1,737			4,409			3,418
Real estate taxes		2,930			2,992			6,295			5,958
Management fees		519			415			1,037			633
Other operating expenses		1,615			1,354			3,346			2,862
Change in fair value of contingent consideration		—			(1,558	)		—			(1,558	)
General and administrative		4,158			3,306			7,973			7,137
Depreciation and amortization		11,411			10,810			23,207			22,976
Total expenses		22,819			19,056			46,267			41,426
Operating income		7,811			7,902			14,959			12,380
Interest expense		(5,981	)		(4,444	)		(10,970	)		(9,022	)
Interest income		54			48			103			97
Income (loss) from equity in unconsolidated entities		95			(65	)		165			(25	)
Changes in fair value of financial instruments and gain on OP unit redemption		—			—			—			230
Income from continuing operations		1,979			3,441			4,257			3,660
Income from discontinued operations		—			31			—			136
Net income		1,979			3,472			4,257			3,796
Net income attributable to non-controlling interests		(74	)		(105	)		(157	)		(133	)
Net income attributable to Excel Trust, Inc.		1,905			3,367			4,100			3,663
Preferred stock dividends		(2,744	)		(2,744	)		(5,488	)		(5,488	)
Net (loss) income attributable to the common stockholders	$	(839	)	$	623		$	(1,388	)	$	(1,825	)
(Loss) income from continuing operations per share attributable to the common stockholders - basic and diluted		(0.02	)		0.01			(0.03	)		(0.05	)
Net (loss) income per share attributable to the common stockholders - basic and diluted	$	(0.02	)	$	0.01		$	(0.03	)	$	(0.04	)
Weighted-average common shares outstanding - basic and diluted		48,567			47,150			48,178			46,256
Dividends declared per common share	$	0.175		$	0.17		$	0.35		$	0.34
Net income	$	1,979		$	3,472		$	4,257		$	3,796
Other comprehensive income:
Change in unrealized loss on interest rate swaps		—			152			—			313
Comprehensive income		1,979			3,624			4,257			4,109
Comprehensive income attributable to non-controlling interests		(74	)		(109	)		(157	)		(141	)
Comprehensive income attributable to Excel Trust, Inc.	$	1,905		$	3,515		$	4,100		$	3,968

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			Retained Earnings			Accumulated other Comprehensive Loss		Total Stockholders’ Equity			Non- controlling Interests			Total Equity
					Shares			Amount
Balance at January 1, 2014	$	47,703	$	88,720		48,381,365		$	482		$	460,431		$	18,110		$	—	$	615,446		$	11,938		$	627,384
Reclassification of dividends, see Note 2		—		—		—			—			18,110			(18,110	)		—		—			—			—
Balance at January 1, 2014, as corrected		47,703		88,720		48,381,365			482			478,541			—			—		615,446			11,938			627,384
Net proceeds from sale of common stock		—		—		12,650,000			127			160,606			—			—		160,733			—			160,733
Repurchase of common stock		—		—		(105,775	)		(1	)		(1,406	)		—			—		(1,407	)		—			(1,407	)
Forfeiture of restricted common stock awards		—		—		(466,864	)		(4	)		4			—			—		—			—			—
Issuance of restricted common stock awards		—		—		657,872			6			(6	)		—			—		—			—			—
Noncash amortization of share-based compensation		—		—		—			—			1,964			—			—		1,964			—			1,964
Common stock dividends		—		—		—			—			(19,174	)		—			—		(19,174	)		—			(19,174	)
Distributions to non-controlling interests		—		—		—			—			—			—			—		—			(630	)		(630	)
Net income		—		—		—			—			—			4,100			—		4,100			157			4,257
Preferred stock dividends		—		—		—			—			(1,388	)		(4,100	)		—		(5,488	)		—			(5,488	)
Adjustment for non-controlling interests		—		—		—			—			(563	)		—			—		(563	)		563			—
Balance at June 30, 2014	$	47,703	$	88,720		61,116,598		$	610		$	618,578		$	—		$	—	$	755,611		$	12,028		$	767,639

6

	Series A Preferred Stock		Series B Preferred Stock		Common Stock				Additional Paid-in Capital			Cumulative (Deficit) Retained Earnings			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		—		—		3,065,528		31		38,867			—			—			38,898			—			38,898
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		—		—		—		—		1,130			—			—			1,130			—			1,130
Common stock dividends		—		—		—		—		(16,160	)		—			—			(16,160	)		—			(16,160	)
Distributions to non-controlling interests		—		—		—		—		—			—			—			—			(653	)		(653	)
Net income		—		—		—		—		—			3,663			—			3,663			133			3,796
Preferred stock dividends, as corrected (see Note 2)		—		—		—		—		(3,239	)		(2,249	)		—			(5,488	)		—			(5,488	)
Change in unrealized loss on interest rate swaps		—		—		—		—		—			—			305			305			8			313
Adjustment for non-controlling interests		—		—		—		—		(410	)		—			—			(410	)		410			—
Balance at June 30, 2013, as corrected (see Note 2)	$	47,703	$	88,720		48,026,373	$	479	$	479,618		$	—		$	(267	)	$	616,253		$	14,399		$	630,652

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)

	Six Months Ended June 30, 2014			Six Months Ended June 30, 2013
Cash flows from operating activities:
Net income	$	4,257		$	3,796
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		23,207			23,540
Changes in fair value of financial instruments and gain on OP unit redemption		—			(230	)
Change in fair value of contingent consideration		—			(1,558	)
(Income) loss from equity in unconsolidated entities		(165	)		25
Deferred rent receivable		(1,154	)		(1,977	)
Amortization of above- and below-market leases		(360	)		219
Amortization of deferred balances		813			806
Bad debt expense		372			442
Share-based compensation expense		1,964			1,130
Distributions from unconsolidated entities		322			303
Change in assets and liabilities (net of the effect of acquisitions):
Tenant and other receivables		1,638			2,190
Other assets		(482	)		(787	)
Accounts payable and other liabilities		2,707			(2,456	)
Net cash provided by operating activities		33,119			25,443
Cash flows from investing activities:
Acquisitions of property (including deposits for potential acquisition)		(1,000	)		(30,707	)
Development of property and property improvements		(11,935	)		(9,234	)
Investments in unconsolidated entities		—			(106	)
Return of capital from unconsolidated entities		—			139
Receipt of master lease payments		507			277
Capitalized leasing costs		(492	)		(1,001	)
Restricted cash		1,174			(1,536	)
Net cash used in investing activities		(11,746	)		(42,168	)
Cash flows from financing activities:
Issuance of common stock		160,908			39,294
Common stock offering costs		(94	)		—
Repurchase of common stock		(1,407	)		—
Payments on mortgages payable		(43,996	)		(32,696	)
Payments on notes payable		(222,000	)		(35,000	)
Proceeds from notes payable		42,500			69,000
Proceeds from unsecured notes		248,693			—
Distribution to non-controlling interests		(630	)		(634	)
Preferred stock dividends		(5,488	)		(5,488	)
Common stock dividends		(16,946	)		(15,293	)
Deferred financing costs		(2,409	)		(855	)
Net cash provided by financing activities		159,131			18,328
Net increase		180,504			1,603
Cash and cash equivalents, beginning of period		3,245			5,596
Cash and cash equivalents, end of period	$	183,749		$	7,199
Supplemental cash flow information:
Cash payments for interest, net of amounts capitalized of $459 and $16	$	6,287		$	7,852
Non-cash investing and financing activity:
Liabilities assumed in connection with property acquisitions	$	—		$	44
Common stock dividends payable	$	10,695		$	8,164
Preferred stock dividends payable	$	2,287		$	2,287
OP unit distributions payable	$	178		$	208
Accrued additions to operating and development properties	$	6,808		$	3,220
Change in unrealized loss on interest rate swaps	$	—		$	313
OP unit redemptions (common stock)	$	—		$	279
Reclassification of offering costs	$	—		$	396
Accrued offering costs	$	81		$	—
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)

	June 30, 2014 (unaudited)			December 31, 2013
ASSETS:
Property:
Land	$	380,363		$	380,366
Buildings		647,401			642,356
Site improvements		64,769			63,242
Tenant improvements		56,459			54,025
Construction in progress		14,980			7,576
Less accumulated depreciation		(75,834	)		(61,479	)
Property, net		1,088,138			1,086,086
Cash and cash equivalents		183,749			3,245
Restricted cash		6,973			8,147
Tenant receivables, net		3,205			5,117
Lease intangibles, net		68,213			78,345
Deferred rent receivable		10,342			9,226
Other assets		22,572			20,135
Investment in unconsolidated entities		8,303			8,520
Total assets(1)	$	1,391,495		$	1,218,821
LIABILITIES AND CAPITAL:
Liabilities:
Mortgages payable, net	$	207,048		$	251,191
Notes payable		—			179,500
Unsecured notes		348,693			100,000
Accounts payable and other liabilities		29,110			21,700
Lease intangibles, net		25,845			28,114
Distributions payable		13,160			10,932
Total liabilities(2)		623,856			591,437
Commitments and contingencies
Capital:
Partners’ capital:
Preferred OP 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 June 30, 2014 and December 31, 2013, 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 June 30, 2014 and December 31, 2013, respectively		88,720			88,720
Limited partners’ capital, 1,019,523 and 1,019,523 common OP units issued and outstanding at June 30, 2014 and December 31, 2013, respectively		1,784			2,167
General partner’s capital, 61,116,598 and 48,381,365 common OP units issued and outstanding at June 30, 2014 and December 31, 2013, respectively		627,862			487,133
Total partners’ capital		766,069			625,723
Non-controlling interests		1,570			1,661
Total capital		767,639			627,384
Total liabilities and capital	$	1,391,495		$	1,218,821

⁽¹⁾  Excel Trust, L.P.’s consolidated total assets at June 30, 2014 and December 31, 2013 include $15,231 and $15,470, 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 June 30, 2014 and December 31, 2013 include $207 and $220 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 Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Revenues:
Rental revenue	$	25,179		$	22,227		$	50,086		$	44,129
Tenant recoveries		4,855			4,446			10,110			9,076
Other income		596			285			1,030			601
Total revenues		30,630			26,958			61,226			53,806
Expenses:
Maintenance and repairs		2,186			1,737			4,409			3,418
Real estate taxes		2,930			2,992			6,295			5,958
Management fees		519			415			1,037			633
Other operating expenses		1,615			1,354			3,346			2,862
Change in fair value of contingent consideration		—			(1,558	)		—			(1,558	)
General and administrative		4,158			3,306			7,973			7,137
Depreciation and amortization		11,411			10,810			23,207			22,976
Total expenses		22,819			19,056			46,267			41,426
Operating income		7,811			7,902			14,959			12,380
Interest expense		(5,981	)		(4,444	)		(10,970	)		(9,022	)
Interest income		54			48			103			97
Income (loss) from equity in unconsolidated entities		95			(65	)		165			(25	)
Changes in fair value of financial instruments and gain on OP unit redemption		—			—			—			230
Income from continuing operations		1,979			3,441			4,257			3,660
Income from discontinued operations		—			31			—			136
Net income		1,979			3,472			4,257			3,796
Net income attributable to non-controlling interests		(90	)		(85	)		(183	)		(172	)
Net income attributable to Excel Trust, L.P.		1,889			3,387			4,074			3,624
Preferred operating unit distributions		(2,744	)		(2,744	)		(5,488	)		(5,488	)
Net (loss) income attributable to the unitholders	$	(855	)	$	643		$	(1,414	)	$	(1,864	)
(Loss) income from continuing operations per unit attributable to the unitholders - basic and diluted		(0.02	)		0.01			(0.03	)		(0.05	)
Net (loss) income per unit attributable to the unitholders - basic and diluted	$	(0.02	)	$	0.01		$	(0.03	)	$	(0.04	)
Weighted-average common OP units outstanding - basic and diluted		49,586			48,375			49,198			47,490
Distributions declared per common OP unit	$	0.175		$	0.17		$	0.35		$	0.34
Net income	$	1,979		$	3,472		$	4,257		$	3,796
Other comprehensive income:
Change in unrealized loss on interest rate swaps		—			152			—			313
Comprehensive income		1,979			3,624			4,257			4,109
Comprehensive income attributable to non-controlling interests		(90	)		(85	)		(183	)		(172	)
Comprehensive income attributable to Excel Trust, L.P.	$	1,889		$	3,539		$	4,074		$	3,937

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 OP Units			Amount			Common OP Units			Amount			Accumulated other Comprehensive Loss			Total Partners’ Capital			Non- controlling Interests			Total Capital
Balance at January 1, 2014	$	47,703		$	88,720			1,019,523		$	2,166			48,381,365		$	487,134		$	—		$	625,723		$	1,661		$	627,384
Net proceeds from issuance of common OP units		—			—			—			—			12,650,000			160,733			—			160,733			—			160,733
Repurchase of common OP units		—			—			—			—			(105,775	)		(1,407	)		—			(1,407	)		—			(1,407	)
Forfeiture of restricted common OP unit awards		—			—			—			—			(466,864	)		—			—			—			—			—
Issuance of restricted common OP unit awards		—			—			—			—			657,872			—			—			—			—			—
Noncash amortization of share-based compensation		—			—			—			—			—			1,964			—			1,964			—			1,964
OP unit distributions		(1,750	)		(3,738	)		—			(356	)		—			(19,174	)		—			(25,018	)		(274	)		(25,292	)
Net income (loss)		1,750			3,738			—			(26	)		—			(1,388	)		—			4,074			183			4,257
Balance at June 30, 2014	$	47,703		$	88,720			1,019,523		$	1,784			61,116,598		$	627,862		$	—		$	766,069		$	1,570		$	767,639
	Preferred Operating Partnership Units						Limited Partners’ Capital						General Partner’s Capital
	Series A			Series B			Common OP Units			Amount			Common OP 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 OP units		—			—			—			—			3,065,528			38,898			—			38,898			—			38,898
Issuance of restricted common OP unit awards		—			—			—			—			33,088			—			—			—			—			—
Redemption of common OP units		—			—			(19,904	)		(235	)		22,074			279			—			44			—			44
Noncash amortization of share-based compensation		—			—			—			—			—			1,130			—			1,130			—			1,130
OP unit distributions		(1,750	)		(3,738	)		—			(416	)		—			(16,160	)		—			(22,064	)		(237	)		(22,301	)
Net income (loss)		1,750			3,738			—			(39	)		—			(1,825	)		—			3,624			172			3,796
Change in unrealized loss on interest rate swaps		—			—			—			—			—			—			313			313			—			313
Balance at June 30, 2013	$	47,703		$	88,720			1,225,115		$	4,822			48,026,373		$	487,934		$	(307	)	$	628,872		$	1,780		$	630,652

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)

	Six Months Ended June 30, 2014			Six Months Ended June 30, 2013
Cash flows from operating activities:
Net income	$	4,257		$	3,796
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		23,207			23,540
Changes in fair value of financial instruments and gain on OP unit redemption		—			(230	)
Change in fair value of contingent consideration		—			(1,558	)
(Income) loss from equity in unconsolidated entities		(165	)		25
Deferred rent receivable		(1,154	)		(1,977	)
Amortization of above- and below-market leases		(360	)		219
Amortization of deferred balances		813			806
Bad debt expense		372			442
Share-based compensation expense		1,964			1,130
Distributions from unconsolidated entities		322			303
Change in assets and liabilities (net of the effect of acquisitions):
Tenant and other receivables		1,638			2,190
Other assets		(482	)		(787	)
Accounts payable and other liabilities		2,707			(2,456	)
Net cash provided by operating activities		33,119			25,443
Cash flows from investing activities:
Acquisitions of property (including deposits for potential acquisition)		(1,000	)		(30,707	)
Development of property and property improvements		(11,935	)		(9,234	)
Investments in unconsolidated entities		—			(106	)
Return of capital from unconsolidated entities		—			139
Receipt of master lease payments		507			277
Capitalized leasing costs		(492	)		(1,001	)
Restricted cash		1,174			(1,536	)
Net cash used in investing activities		(11,746	)		(42,168	)
Cash flows from financing activities:
Issuance of common OP units		160,814			36,304
Repurchase of common OP units		(1,407	)		—
Payments on mortgages payable		(43,996	)		(32,696	)
Payments on notes payable		(222,000	)		(35,000	)
Proceeds from notes payable		42,500			69,000
Proceeds from unsecured notes		248,693			—
Distribution to non-controlling interests		(274	)		(237	)
Preferred OP unit distributions		(5,488	)		(5,488	)
Common OP unit distributions		(17,302	)		(15,690	)
Deferred financing costs		(2,409	)		(855	)
Net cash provided by financing activities		159,131			15,338
Net increase (decrease)		180,504			(1,387	)
Cash and cash equivalents, beginning of period		3,245			5,596
Cash and cash equivalents, end of period	$	183,749		$	4,209
Supplemental cash flow information:
Cash payments for interest, net of amounts capitalized of $459 and $16	$	6,287		$	7,852
Non-cash investing and financing activity:
Liabilities assumed in connection with property acquisitions	$	—		$	44
Common OP unit distributions payable	$	10,873		$	8,372
Preferred OP unit distributions payable	$	2,287		$	2,287
Accrued additions to operating and development properties	$	6,808		$	3,220
Change in unrealized loss on interest rate swaps	$	—		$	313
OP unit redemptions	$	—		$	279
Reclassification of offering costs	$	—		$	396
Accrued offering costs	$	81		$	—
Reclassification of real estate to held for sale	$	—		$	3,226
Amount due from Parent Company (proceeds from issuance of common OP units)	$	—		$	2,990

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 West Coast, East Coast 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 June 30, 2014, owned a 98.3% interest in the Operating Partnership. The remaining 1.7% 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 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 all entities in which the Company has a controlling interest. 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 Company’s Annual Report on Form 10-K for the year ended December 31, 2013. 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 six months ended June 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. All significant intercompany balances and transactions have been eliminated in consolidation.

The Company is required to continually evaluate its VIE relationships and consolidate investments in these entities when it is determined to be the primary beneficiary of their operations. A VIE is broadly defined as an entity where either (1) the equity investors as a group, if any, lack the power through voting or similar rights to direct the activities of an entity that most significantly impact the entity’s economic performance or (2) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support.

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.

Accounts Payable and Other Liabilities:

Included in accounts payable and other liabilities are deferred rents in the amount of $3.0 million and $3.5 million at June 30, 2014 and December 31, 2013, 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

13

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 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 (net of write-offs for uncollectible amounts) increased by $552,000 and $1.1 million in the three months ended June 30, 2014 and 2013, respectively, and by $1.2 million and $2.0 million in the six months ended June 30, 2014 and 2013, respectively, due to the straight-line rent adjustment. Percentage rent is recognized after tenant sales have exceeded defined thresholds (if applicable) and was $183,000 and $185,000 in the three months ended June 30, 2014 and 2013, respectively, and $398,000 and $570,000 in the six months ended June 30, 2014 and 2013, 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.

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

14

the tenants’ ability to perform their duties and pay rent under the terms of the leases. The determination of recoverability is made 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 six months ended June 30, 2014 or 2013.

Investments in Partnerships and Limited Liability Companies:

The Company evaluates its investments in limited liability companies and partnerships to determine whether any 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 condensed consolidated balance sheets and its share of net income or loss is included in the condensed consolidated statements of operations and comprehensive income.

For all investments in unconsolidated entities, if a decline in the fair value of an investment below its carrying value is determined to be other-than-temporary, such investment is written down to its estimated fair value with a non-cash charge to earnings. The factors that the Company considers in making these assessments include, but are not limited to, severity and duration of the unrealized loss, market prices, market conditions, the occurrence of ongoing financial difficulties, available financing, new product initiatives and new collaborative agreements.

Share-Based Payments:

All share-based payments to employees are recognized in earnings based on their fair value on the date of grant. Through June 30, 2014, 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.

15

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.

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 June 30, 2014 and December 31, 2013, the Company had $466,000 and $895,000, 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 June 30, 2014 and 2013, $165,000 and $104,000, respectively, of receivables were charged to bad debt expense. During the six months ended June 30, 2014 and 2013, $372,000 and $442,000, respectively, of receivables were charged to bad debt expense.

Non-controlling Interests:

Non-controlling interests on the condensed 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 sheets is appropriate.

During the six months ended June 30, 2013, a total of 19,904 OP units related to the 2011 Edwards Theatres acquisition were tendered to the Company for redemption, resulting in the issuance of 22,074 shares of the Parent Company’s common stock. 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 2011 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. The remaining outstanding OP units related to the 2011 Edwards Theatres acquisition 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 condensed consolidated balance sheets of the Operating Partnership represent the portion of equity that the Operating Partnership does not own in those entities it consolidates.

16

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.

In the three and six months ended June 30, 2014 and 2013, no tenant accounted for more than 10% of revenues.

At June 30, 2014, the Company’s gross real estate assets in the states of California, Arizona, Virginia and Texas represented approximately 33.5%, 15.0%, 12.9% and 12.6%, respectively, of the Company’s total assets. At December 31, 2013, the Company’s gross real estate assets in the states of California, Arizona, Virginia and Texas represented approximately 23.9%, 17.6%, 14.7% and 13.7%, respectively, of the Company’s total assets. For the six months ended June 30, 2014, the Company’s revenues derived from properties located in the states of California, Arizona, Texas and Virginia represented approximately 23.9%, 17.4%, 14.1% and 11.4%, respectively, of the Company’s total revenues. For the six months ended June 30, 2013, the Company’s revenues derived from properties located in the states of California, Arizona, Virginia and Texas represented approximately 21.5%, 18.9%, 12.0% and 10.6%, respectively, of the Company’s total revenues.

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.

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 condensed 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.

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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 condensed 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.

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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 six months ended June 30, 2014 and 2013 (dollars in thousands):

	Parent Company					Operating Partnership
	Six Months Ended					Six Months Ended
	June 30, 2014		June 30, 2013			June 30, 2014		June 30, 2013
Balance – January 1	$	—	$	(572	)	$	—	$	(620	)
Unrealized loss on interest rate swaps:
Unrealized losses		—		(12	)		—		(12	)
Amount reclassified and recognized in net income(1)		—		325			—		325
Net change in other comprehensive income		—		313			—		313
Total other comprehensive loss allocable to non-controlling interests		—		(8	)		—		—
Balance – June 30	$	—	$	(267	)	$	—	$	(307	)

⁽¹⁾  Amounts reclassified from unrealized loss on derivative instruments are included in interest expense in the condensed consolidated statements of operations.

Revision to Consolidated Financial Statements:

Subsequent to the issuance of the Parent Company’s consolidated financial statements for the year ended December 31, 2013, the Parent Company determined that certain dividends paid that were reflected as a reduction of additional paid-in capital should have been reflected as a reduction of available retained earnings. The Parent Company reviewed the impact of this correction with respect to the prior period consolidated financial statements and determined that the correction was not material. However, the Parent Company has revised the accompanying condensed consolidated balance sheet at December 31, 2013 to reflect this correction in the prior period. The effect of the correction to the consolidated balance sheets is an increase to additional paid-in capital and a corresponding decrease to retained earnings of $18.1 million at December 31, 2013. The effect of the correction to the consolidated statement of equity for the six months ended June 30, 2013 was an increase in reported additional paid-in capital from $477.4 million to $479.6 million and a decrease in reported cumulative (deficit) retained earnings from $2.2 million to $0. The effect of the correction on previously issued unaudited quarterly reports for the nine months ended September 30, 2013 is an increase to additional paid-in capital and a corresponding decrease to retained earnings of $15.7 million. The condensed consolidated statement of equity for the six months ended June 30, 2014 included herein reflects a reclassification of $18.1 million from additional paid-in capital to retained earnings relating to the year ended December 31, 2013. This correction had no effect on previously reported revenues, net income, earnings per share, cash flows or total stockholders’ equity.

Recent Accounting Pronouncements:

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”). The amendments in this update change the requirements for reporting discontinued operations. As a result of ASU 2014-08, a disposal of a component of an entity or a group of components is required to be reported in discontinued operations only if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. ASU 2014-08 also requires an entity to provide certain disclosures about a disposal of an individually significant component of such entity that does not qualify for discontinued operations presentation in the financial statements. The Company chose to early adopt ASU 2014-08 on January 1, 2014, which did not have a material impact on the Company’s consolidated financial position or results of operations.

In May 2014, the FASB issued ASU No. 2014-09, Revenue Recognition – Revenue from Contracts with Customers (“ASU 2014-09”). The amendments in this update require companies to recognize revenue when a customer obtains control rather than when companies have transferred substantially all risks and rewards of a good or service. This update is effective for annual reporting periods beginning on or after December 31, 2016 and for interim periods therein and requires expanded disclosures. The Company is currently assessing the impact of the adoption of ASU 2014-09 on our consolidated financial position and results of operations.

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3. Acquisitions:

The Company completed the following property acquisition in the six months ended June 30, 2013, which was acquired for cash (dollars in thousands):

Property	Date Acquired	Location	Debt Assumed
Tracy Pavilion	January 24, 2013	Tracy, CA	$	—

The following summary provides an allocation of purchase price for the above acquisition (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
Remaining useful life(1)						54		95			62

⁽¹⁾  Weighted-average remaining useful life (months) for recorded intangible assets and liabilities as of the date of acquisition.

The Company recorded revenues and a net loss for the three months ended June 30, 2013 of $746,000 and $10,000, respectively, and for the six months ended June 30, 2013 of $1.3 million and $12,000, respectively, related to the 2013 acquisition.

The following unaudited pro forma information for the three and six months ended June 30, 2013 has been prepared to reflect the incremental effect of the property acquired in 2013, as if such acquisition had occurred on January 1, 2012 (dollars in thousands):

	Three Months Ended		Six Months Ended
	June 30, 2013		June 30, 2013
Revenues	$	27,463	$	55,113
Net income(1)	$	3,472	$	3,840

⁽¹⁾  Pro forma results for the six months ended June 30, 2013 were adjusted to exclude non-recurring acquisition costs of approximately $57,000 related to the 2013 acquisition.

In May and June 2014, the Company entered into purchase agreements to acquire four retail properties for approximately $367.1 million (of which approximately $324.4 million is to be paid in cash at closing due to the assumption of approximately $42.7 million of debt). These four properties are located in Florida and Utah and comprise approximately 1.9 million square feet of gross leasable area. The acquisition of these properties is subject to due diligence and other customary closing conditions. There can be no assurances that these conditions will be satisfied or that the acquisitions will close on the terms described herein, or at all.

4. Lease Intangible Assets, Net

Lease intangible assets, net consisted of the following at June 30, 2014 and December 31, 2013:

	June 30, 2014		December 31, 2013
	(in thousands)
In-place leases, net of accumulated amortization of $27.8 million and $26.7 million as of June 30, 2014 and December 31, 2013, respectively (with a weighted-average remaining life of 77 and 78 months as of June 30, 2014 and December 31, 2013, respectively)	$	40,600	$	47,058
Above-market leases, net of accumulated amortization of $8.1 million and $7.5 million as of June 30, 2014 and December 31, 2013, respectively (with a weighted-average remaining life of 60 and 62 months as of June 30, 2014 and December 31, 2013, respectively)		11,816		13,725
Leasing commissions, net of accumulated amortization of $7.9 million and $7.1 million as of June 30, 2014 and December 31, 2013, respectively (with a weighted-average remaining life of 97 and 99 months as of June 30, 2014 and December 31, 2013, respectively)		15,797		17,562
	$	68,213	$	78,345

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Estimated amortization of lease intangible assets as of June 30, 2014 for each of the next five years and thereafter is as follows (dollars in thousands):

Year Ending December 31,	Amount
2014 (remaining six months)	$	8,083
2015		12,451
2016		9,477
2017		8,301
2018		6,854
Thereafter		23,047
Total	$	68,213

Amortization expense recorded on the lease intangible assets for the three months ended June 30, 2014 and 2013 was $4.8 million and $5.5 million, respectively. Included in these amounts are $909,000 and $1.1 million, respectively, of amortization of above-market lease intangible assets recorded against rental revenue. Amortization expense recorded on the lease intangible assets for the six months ended June 30, 2014 and 2013 was $10.1 million and $12.8 million, respectively. Included in these amounts are $1.9 million and $2.6 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 June 30, 2014 and December 31, 2013:

	June 30, 2014		December 31, 2013
	(in thousands)
Below-market leases, net of accumulated amortization of $9.1 million and $7.9 million as of June 30, 2014 and December 31, 2013, respectively (with a weighted-average remaining life of 119 and 123 months as of June 30, 2014 and December 31, 2013, respectively)	$	25,845	$	28,114

Amortization recorded on the lease intangible liabilities for the three months ended June 30, 2014 and 2013 was $1.2 million and $877,000, respectively. Amortization recorded on the lease intangible liabilities for the six months ended June 30, 2014 and 2013 was $2.3 million for both periods. These amounts were recorded as rental revenue in the Company’s condensed consolidated statements of operations.

Estimated amortization of lease intangible liabilities as of June 30, 2014 for each of the next five years and thereafter is as follows (dollars in thousands):

Year Ending December 31,	Amount
2014 (remaining six months)	$	1,801
2015		3,160
2016		2,771
2017		2,639
2018		2,437
Thereafter		13,037
Total	$	25,845

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 June 30, 2014 and December 31, 2013, total carrying amount of assets was approximately $15.2 million and $15.5 million, respectively, which includes approximately $13.2 million and $13.3 million, respectively, of real estate assets at the end of each period. As of June 30, 2014 and December 31, 2013, the total carrying amount of liabilities was approximately $12.3 million and $12.4 million, respectively.

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7. Mortgage Loan and Note Receivable

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 maturity date of the loan was extended for an additional two-month period, with a new maturity date of August 25, 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 unsecured revolving credit facility (including the letter of credit that secures the redevelopment revenue bonds at the Northside Mall property) and the Operating Partnership’s senior unsecured notes.

Debt of the Operating Partnership

Mortgages Payable

Mortgages payable held by the Operating Partnership at June 30, 2014 and December 31, 2013 consist of the following (dollars in thousands):

	Carrying Amount of Mortgage Notes				Contractual Interest Rate (June 30, 2014)			Effective Interest Rate (June 30, 2014)			Monthly Payment(1)		Maturity Date
Property Pledged as Collateral	June 30, 2014		December 31, 2013
Edwards Theatres	$	—		11,520		—			—			—		—
Excel Centre		—		12,018		—			—			—		—
Merchant Central		—		4,370		—			—			—		—
Red Rock Commons(2)		—		13,970		—			—			—		—
Gilroy Crossing		45,406		45,836		5.01	%		5.01	%		263		October 2014
The Promenade		47,042		47,957		4.80	%		4.80	%		344		October 2015
5000 South Hulen		13,300		13,421		5.60	%		6.90	%		83		April 2017
Lake Pleasant Pavilion		27,679		27,855		6.09	%		5.00	%		143		October 2017
Rite Aid — Vestavia Hills		925		1,015		7.25	%		7.25	%		21		October 2018
Living Spaces-Promenade(3)		6,875		7,075		7.88	%		4.59	%		80		November 2019
West Broad Village(4)		39,700		39,700		3.33	%		3.33	%		110		May 2020
Lowe’s, Shippensburg		12,970		13,157		7.20	%		7.20	%		110		October 2031
Northside Mall(5)		12,000		12,000		0.07	%		1.07	%		1		November 2035
		205,897		249,894
Plus: premium(6)		1,151		1,297
Mortgage notes payable, net	$	207,048	$	251,191

⁽¹⁾  Amount represents the monthly payment of principal and interest at June 30, 2014.

⁽²⁾  The Red Rock Commons construction loan was voluntarily prepaid by the Company in June 2014.

⁽³⁾  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%.

⁽⁴⁾  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.

⁽⁵⁾  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 0.07% at June 30, 2014 and 0.10% at December 31, 2013). 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 $102,000 and $105,000 at June 30, 2014 and December 31, 2013, respectively, is being amortized as additional interest expense through November 2035.

⁽⁶⁾  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.

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Total interest cost capitalized for the three months ended June 30, 2014 and 2013 was $264,000 and $16,000, respectively, and for the six months ended June 30, 2014 and 2013 was $459,000 and $16,000, respectively.

The Company’s mortgage debt maturities at June 30, 2014 for each of the next five years and thereafter are as follows (dollars in thousands):

Year Ending December 31,	Amount
2014 (remaining six months)	$	47,129
2015		47,918
2016		2,362
2017		41,436
2018		2,196
Thereafter		64,856
	$	205,897

Notes Payable

Unsecured Revolving Credit Facility

The Operating Partnership’s unsecured revolving credit facility has a borrowing capacity of $300.0 million, which may be increased from time to time 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 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 June 30, 2014, the Operating Partnership believes that it was in compliance with all financial covenants in the credit agreement.

As of June 30, 2014, the unsecured revolving credit facility bore interest at the rate of LIBOR plus a margin of 90 to 170 basis points, depending on the Parent Company’s credit rating. As of June 30, 2014, the Operating Partnership was responsible for paying a fee of 0.25% or 0.30% on the full capacity of the facility. Borrowings from the unsecured revolving credit facility were $0 and $179.5 million (with a weighted-average interest rate of 1.67%) at June 30, 2014 and December 31, 2013, respectively. The Operating Partnership has issued $16.9 million in letters of credit from the unsecured revolving credit facility, which secure an outstanding $12.0 million bond payable for the Northside Mall property and construction activities at the Southlake Park Village property. The Northside Mall property bond is included with the mortgages payable on the Company’s condensed consolidated balance sheets. At June 30, 2014, there was approximately $262.6 million available for borrowing under the unsecured revolving credit facility.

Unsecured Notes

Unsecured Senior Notes due 2020 and 2023

As of June 30, 2014, the Operating Partnership had outstanding $100.0 million aggregate principal amount of senior unsecured notes issued to various entities associated with the Prudential Capital Group. Of the senior unsecured notes, $75.0 million are designated Series A Notes and will mature in November 2020, with a fixed interest rate of 4.40%, and $25.0 million are designated Series B Notes and will mature in November 2023, with a fixed interest rate of 5.19% (the Series A Notes and the Series B Notes are referred to collectively as the “Notes due 2020 and 2023”). The terms of the Notes due 2020 and 2023 are governed by a Note Purchase Agreement, dated November 12, 2013 (the “Purchase Agreement”), among the Operating Partnership, as issuer, the Parent Company and the purchasers named therein. Interest on the Notes due 2020 and 2023 is payable quarterly, beginning on February 12, 2014. The Operating Partnership may prepay all or a portion of the Notes due 2020 and 2023 upon notice to the holders for 100% of the principal amount so prepaid plus a make-whole premium as set forth in the Purchase Agreement.

The Purchase Agreement contains various restrictive covenants, including limitations on the Operating Partnership’s ability to incur additional indebtedness and requirements to maintain a pool of unencumbered assets. The Operating Partnership’s obligations under the Notes due 2020 and 2023 are fully and unconditionally guaranteed by the Parent Company and certain of its subsidiaries. Certain events would be considered events of default and could result in the acceleration of the maturity of the Notes.

Unsecured Senior Notes due 2024

On May 12, 2014, the Operating Partnership completed the issuance of $250.0 million aggregate principal amount of 4.625% senior unsecured notes due 2024 (the “Notes due 2024”). The Notes due 2024 bear interest at 4.625% per annum and were issued at 99.477% of the principal amount to yield 4.691% to maturity. Interest is payable on May 15 and November 15 of each year beginning November 15, 2014 until the maturity date of May 15, 2024. The Operating Partnership’s obligations under the Notes due 2024 are

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fully and unconditionally guaranteed by the Parent Company. On or before February 15, 2024, the Operating Partnership may redeem all or a portion of the Notes due 2024 upon notice to the holders at a redemption price equal to the greater of (1) 100% of the principal amount of the Notes due 2024 being redeemed and (2) 100% of the principal amount plus a make-whole premium as set forth in the Indenture governing the Notes due 2024 (the “Indenture”), plus accrued and unpaid interest up to, but not including, the redemption date. After February 15, 2024, the redemption price will be equal to 100% of the principal amount of the Notes due 2024 being redeemed, plus accrued and unpaid interest up to, but not including, the redemption date. Proceeds from the issuance of the Notes due 2024 were used to repay a portion of the outstanding indebtedness under the Company’s unsecured revolving credit facility and for other general corporate and working capital purposes.

The Notes due 2024 are senior unsecured obligations of the Operating Partnership and rank equally in right of payment with all other senior unsecured indebtedness of the Operating Partnership. However, the Notes due 2024 are effectively subordinated to the Operating Partnership’s existing and future mortgages and other secured indebtedness (to the extent of the value of the collateral securing such indebtedness) and to all existing and future preferred equity and liabilities, whether secured or unsecured, of the Operating Partnership’s subsidiaries, including guarantees provided by the Operating Partnership’s subsidiaries under the Company’s unsecured line of credit.

The Indenture contains certain covenants that, among other things, limit the Parent Company’s and the Operating Partnership’s ability to consummate a merger, consolidation or sale of all or substantially all of their assets or incur additional indebtedness.

The carrying value of the Notes due 2024:

	June 30, 2014			December 31, 2013
	(in thousands)
Principal amount	$	250,000		$	—
Unamortized debt discount		(1,307	)		—
	$	248,693		$	—

In connection with this debt offering, the Operating Partnership incurred approximately $1.6 million of underwriting discount, which has been recorded as deferred financing costs and is being amortized over the term of the Notes due 2024.

The Notes due 2020, 2023 and 2024 are senior unsecured obligations of the Operating Partnership and rank equally in right of payment with all other senior unsecured indebtedness of the Operating Partnership with the exception of the Notes due 2024, which are subordinated to the Notes due 2020 and 2023. However, the Notes due 2020, 2023 and 2024 are effectively subordinated to the Operating Partnership’s existing and future mortgages and other secured indebtedness (to the extent of the value of the collateral securing such indebtedness) and to all existing and future preferred equity and liabilities, whether secured or unsecured, of the Operating Partnership’s subsidiaries, including guarantees provided by the Operating Partnership’s subsidiaries under the Company’s unsecured line of credit.

9. Earnings Per Share of the Parent Company

Basic earnings (loss) per share of the Parent Company 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 six months ended June 30, 2014 does not include 747,365 and 487,961 shares, respectively, of unvested restricted common stock or 1,019,523 OP units as the effect of including these equity securities was anti-dilutive to loss from continuing operations and net loss attributable to the common stockholders. The calculation of diluted earnings per share for the three and six months ended June 30, 2013 does not include 694,162 and 697,162 shares, respectively, of unvested restricted common stock or 1,225,115 and 1,233,143 OP units, respectively, as the effect of including these equity securities was anti-dilutive to loss from continuing operations and net loss attributable to the common stockholders. In addition, 3,367,200 shares of common stock for the three and six months ended June 30, 2014 and 3,333,400 shares of common stock for the three and six months ended June 30, 2013, 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.

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Computations of basic and diluted earnings per share for the three and six months ended June 30, 2014 and 2013 (in thousands, except share data) were as follows:

	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Basic earnings per share:
Income from continuing operations	$	1,979		$	3,441		$	4,257		$	3,660
Preferred dividends		(2,744	)		(2,744	)		(5,488	)		(5,488	)
Allocation to participating securities		(129	)		(114	)		(257	)		(228	)
Income from continuing operations attributable to non-controlling interests		(74	)		(105	)		(157	)		(152	)
(Loss) income from continuing operations applicable to the common stockholders	$	(968	)	$	478		$	(1,645	)	$	(2,208	)
Net (loss) income attributable to the common stockholders	$	(839	)	$	623		$	(1,388	)	$	(1,825	)
Allocation to participating securities		(129	)		(114	)		(257	)		(228	)
Net (loss) income applicable to the common stockholders	$	(968	)	$	509		$	(1,645	)	$	(2,053	)
Weighted-average common shares outstanding:
Basic and diluted		48,566,816			47,150,296			48,178,118			46,256,359
Basic and diluted earnings per share:
(Loss) income from continuing operations per share attributable to the common stockholders	$	(0.02	)	$	0.01		$	(0.03	)	$	(0.05	)
Income from discontinued operations per share attributable to the common stockholders		—			—			—			0.01
Net (loss) income per share attributable to the common stockholders	$	(0.02	)	$	0.01		$	(0.03	)	$	(0.04	)

10. Earnings Per Unit of the Operating Partnership

Basic earnings (loss) per unit of the Operating Partnership 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 unit 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 six months ended June 30, 2014 does not include 747,365 and 487,961 unvested restricted OP units, respectively, as the effect of including these equity securities was anti-dilutive to loss from continuing operations and net loss attributable to the unitholders. The calculation of diluted earnings per unit for the three and six months ended June 30, 2013 does not include 694,633 and 697,162 unvested restricted OP units, respectively, as the effect of including these equity securities was anti-dilutive to loss from continuing operations and net loss attributable to the unitholders. In addition, 3,367,200 OP units for the three and six months ended June 30, 2014 and 3,333,400 OP units for the three and six months ended June 30, 2013, 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.

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Computations of basic and diluted earnings per unit for the three and six months ended June 30, 2014 and 2013 (in thousands, except unit data) were as follows:

	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Basic earnings per unit:
Income from continuing operations	$	1,979		$	3,441		$	4,257		$	3,660
Preferred distributions		(2,744	)		(2,744	)		(5,488	)		(5,488	)
Allocation to participating securities		(129	)		(114	)		(257	)		(228	)
Income from continuing operations attributable to non-controlling interests		(90	)		(85	)		(183	)		(172	)
(Loss) income from continuing operations applicable to the unitholders	$	(984	)	$	498		$	(1,671	)	$	(2,228	)
Net (loss) income attributable to the unitholders	$	(855	)	$	643		$	(1,414	)	$	(1,864	)
Allocation to participating securities		(129	)		(114	)		(257	)		(228	)
Net (loss) income applicable to the unitholders	$	(984	)	$	529		$	(1,671	)	$	(2,092	)
Weighted-average common OP units outstanding:
Basic and diluted		49,586,339			48,375,411			49,197,641			47,489,502
Basic and diluted earnings per unit:
Income (loss) from continuing operations per unit attributable to the unitholders	$	(0.02	)	$	0.01		$	(0.03	)	$	(0.05	)
Income from discontinued operations per unit attributable to the unitholders		—			—			—			0.01
Net (loss) income per unit attributable to the unitholders	$	(0.02	)	$	0.01		$	(0.03	)	$	(0.04	)

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) received the difference between a fixed interest rate (the “Strike Rate”) and one-month LIBOR if the Strike Rate was less than LIBOR or (2) paid such difference if the Strike Rate was greater than LIBOR. No initial investment was made to enter into either of the interest rate swap agreements. The two interest rate swaps were settled in December 2013 in connection with the repayment of the underlying mortgage note at the Park West Place property. The Company had no derivative financial instruments outstanding at June 30, 2014 and had no derivative financial instruments outstanding prior to the execution of the two swaps.

During the three and six months ended June 30, 2013, the Company did not record any amounts in earnings attributable to hedge ineffectiveness.

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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 six months ended June 30, 2014 and 2013 (dollars in thousands):

	Three Months Ended					Six Months Ended
	June 30, 2014		June 30, 2013			June 30, 2014		June 30, 2013
Amount of unrealized loss recognized in OCI (effective portion):
Interest rate swaps	$	—	$	(12	)	$	—	$	(12	)
Other derivatives		—		—			—		—
Total	$	—	$	(12	)	$	—	$	(12	)
Amount of loss reclassified from accumulated OCI into income (effective portion):
Interest rate swaps (interest expense)	$	—	$	(163	)	$	—	$	(325	)
Other derivatives		—		—			—		—
Total	$	—	$	(163	)	$	—	$	(325	)
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)		—		—			—		230
Total	$	—	$	—		$	—	$	230

12. Equity of the Parent Company

The Parent Company has issued restricted stock awards to senior executives, directors and employees totaling 1,327,509 shares of common stock (net of forfeitures of 489,864 shares), which are included in the total shares of common stock outstanding as of June 30, 2014.

As of June 30, 2014, 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 September 26, 2013 (the ex-dividend date), 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. Beginning on 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 June 30, 2014, the Parent Company had outstanding 3,680,000 shares of 8.125% Series B Cumulative Redeemable Preferred Stock (“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.

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The Parent Company’s board of directors has authorized a stock repurchase program under which the Parent Company may acquire up to $50.0 million of its common stock and preferred stock in open market and negotiated purchases with no expiration date (the repurchase program was increased from $30.0 million to $50.0 million in February 2014). In the six months ended June 30, 2014, the Parent Company repurchased 105,775 shares of its common stock for an aggregate cost of approximately $1.4 million (including transaction costs) at a weighted-average purchase price of $12.52 per share. The repurchased shares of common stock were subsequently retired by the Parent Company with the funds provided from the sale of the OP units to the Operating Partnership. No stock was repurchased during the year ended December 31, 2013. As of June 30, 2014, approximately $41.9 million remained available under the stock repurchase program to acquire outstanding shares of the Parent Company’s common stock and preferred stock.

The Parent Company and the Operating Partnership have entered into equity distribution agreements (the “Equity Distribution Agreements”) with four sales agents, under which the Parent Company can issue and sell shares of its 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 and 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 under the Securities Act of 1933, as amended. During the year ended December 31, 2013, the Parent Company issued 3,211,928 shares of common stock 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 net proceeds of $40.7 million were contributed to the Operating Partnership in exchange for 3,211,928 OP units. During the six months ended June 30, 2014, the Parent Company did not issue any shares pursuant to the Equity Distribution Agreements.

On June 25, 2014, the Parent Company completed the issuance of 12,650,000 shares of common stock, including the exercise of an option to purchase an additional 1,650,000 shares, resulting in net proceeds of approximately $160.7 million, after deducting the underwriters’ discount and commissions and offering expenses. The net proceeds were contributed to the Operating Partnership in exchange for 12,650,000 OP units.

Consolidated net income is reported in the Company’s condensed 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 2011 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).

A charge/credit is recorded each period in the condensed consolidated statements of income for the non-controlling interests’ proportionate share of the Company’s net income (loss).

On June 30, 2014, the Parent Company accrued a liability for a dividend of $10.7 million payable to the common stockholders of record, a dividend of $2.7 million payable to the preferred stockholders of record and a distribution of $178,000 payable to the holders of record of OP units as of June 30, 2014, each of which was paid in July 2014.

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 2,850,000 (of which 1,523,016 shares of common stock remain available for issuance as of June 30, 2014).

The following shares of restricted common stock were issued during the six months ended June 30, 2014:

Grant Date	Price at Grant Date		Number		Vesting Period (yrs.)
March 7, 2014(1)	$	12.57		4,000		4
March 18, 2014(2)	$	12.80		558,331		1, 3
March 24, 2014(3)	$	12.56		83,500		3
May 13, 2014(4)	$	12.89		12,412		1

⁽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 senior management and other employees of the Company. A portion of the stock grants (452,500 shares of restricted common stock) vest over a three-year period and include performance or service conditions. The remaining stock grants (105,831 shares of restricted common stock) include a variety of performance and market conditions, with the restricted shares vesting at the discretion of the Parent Company’s board of directors on December 31, 2014 based on the achievement of the Company’s objectives during the year ended December 31, 2014.

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⁽³⁾  Shares issued to certain of the Company’s employees. These shares vest over a three-year period with 33% vesting in equal annual installments on December 31, 2014, 2015 and 2016.

⁽⁴⁾  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 and six months ended June 30, 2014 of $1.4 million and $2.0 million, respectively, and for the three and six months ended June 30, 2013 of $568,000 and $1.1 million, respectively, related to the restricted common stock grants ultimately expected to vest. Accounting Standards Codification (“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 for all periods presented. Stock compensation expense is included in general and administrative expense in the accompanying condensed consolidated statements of operations.

As of June 30, 2014 and December 31, 2013, there was approximately $8.0 million and $1.6 million, respectively, of total unrecognized compensation expense related to the non-vested shares of the Parent Company’s restricted common stock. As of June 30, 2014 and December 31, 2013, this expense was expected to be recognized over a weighted-average remaining period of 2.1 and 1.1 years, respectively.

	Number of Unvested Shares of Restricted Common Stock			Weighted- Average Grant Date Fair Value
Balance - January 1, 2014		611,683		$	9.73
Grants		658,243		$	12.77
Forfeitures		(466,864	)	$	8.88
Vested(1)		(68,589	)	$	12.70
Balance - June 30, 2014		734,473		$	12.72

⁽¹⁾  During the six months ended June 30, 2014, 525 shares of common stock were surrendered to the Parent Company and subsequently retired in lieu of cash payments for taxes due on the vesting of restricted stock. The forfeiture of these shares is reflected in the accompanying condensed consolidated statements of equity and capital as a decrease of the total restricted common shares issued during each period presented.

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 June 30, 2014. Costs related to the matching portion of the plan for the three months ended June 30, 2014 and 2013 were approximately $41,000 and $38,000, respectively. Costs related to the matching portion of the plan for the six months ended June 30, 2014 and 2013 were approximately $80,000 and $73,000, respectively.

13. Equity of the Operating Partnership

As of June 30, 2014, the Operating Partnership had outstanding 62,136,121 OP units. The Parent Company owned 98.3% of the partnership interests in the Operating Partnership at June 30, 2014, 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 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.

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In addition, as of June 30, 2014, the Operating Partnership had outstanding 2,000,000 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, among other things, distribution rates and exchange or redemption provisions).

In the six months ended June 30, 2014, the Operating Partnership repurchased 105,775 common OP units from the Parent Company (in connection with the Parent Company’s repurchase of its common stock) for an aggregate cost of approximately $1.4 million (including transaction costs) at a weighted-average purchase price of $12.52 per unit. The OP units were subsequently retired by the Operating Partnership. No OP units were repurchased from the Parent Company in connection with repurchases of its common stock during the year ended December 31, 2013.

In connection with the Equity Distribution Agreements, during the year ended December 31, 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. During the six months ended June 30, 2014, the Operating Partnership did not issue any OP units to the Parent Company in connection with the Equity Distribution Agreements.

On June 25, 2014, the Operating Partnership issued 12,650,000 OP units to the Parent Company in exchange for net proceeds of approximately $160.7 million, which are intended to partially fund certain property acquisitions that have recently been placed under contract and for other general corporate and working capital purposes. These acquisitions are subject to the completion of due diligence and the satisfaction of other closing conditions.

Consolidated net income is reported in the Operating Partnership’s condensed 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).

The following table shows the vested partnership interests in the Operating Partnership as of June 30, 2014 and December 31, 2013:

	June 30, 2014					December 31, 2013
	OP Units		Percentage of Total			OP Units		Percentage of Total
Excel Trust, Inc.		60,382,125		98.3	%		47,769,682		97.9	%
Non-controlling interests consisting of:
OP units held by employees and third parties		1,019,523		1.7	%		1,019,523		2.1	%
Total		61,401,648		100.0	%		48,789,205		100.0	%

14. Investment in Unconsolidated Entities

The Company has formed 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. La Costa LLC is the owner of the La Costa Town Center property. The Company’s ownership interest in La Costa LLC is reflected in the accompanying balance sheets at the Company’s historical cost basis as an investment in a profit-sharing arrangement. 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 bears the majority of any losses incurred. The Company receives 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 June 18, 2014, La Costa LLC entered into a purchase and sale agreement for the disposition of the La Costa Town Center property for a sales price of approximately $33.0 million, excluding closing costs. The sale of the property is subject to due diligence and other customary closing conditions. There can be no assurances that these conditions will be satisfied or that the disposition will close on the terms described herein, or at all.

The Company also holds a 50% tenant-in-common ownership interest in The Fountains at Bay Hill property (“Bay Hill”). 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

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receives 50% of the cash flow distributions and recognizes 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 June 30, 2014 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 June 30, 2014, La Costa LLC had real estate assets of $23.8 million, total assets of $25.1 million, mortgages payable of $14.1 million and total liabilities of $14.4 million. At December 31, 2013, La Costa LLC had real estate assets of $23.4 million, total assets of $25.7 million, mortgages payable of $14.1 million and total liabilities of $14.5 million. Total revenues were $471,000 and $862,000, total expenses were $662,000 and $1.3 million (including interest expense) and net loss was $191,000 and $452,000 for the three and six months ended June 30, 2014, respectively. Total revenues were $393,000 and $2.3 million, total expenses were $844,000 and $2.5 million (including interest expense) and net loss was $451,000 and $264,000 for the three and six months ended June 30, 2013, respectively. The mortgage note was assumed with the contribution of the property and bears interest at the rate of LIBOR plus a margin of 575 basis points (5.9% at each of June 30, 2014 and December 31, 2013). 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 second and third renewal 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 June 30, 2014, Bay Hill had real estate assets of $36.7 million, total assets of $39.4 million, mortgages payable of $23.2 million and total liabilities of $25.4 million. At December 31, 2013, Bay Hill had real estate assets of $37.0 million, total assets of $39.9 million, mortgages payable of $23.4 million and total liabilities of $25.6 million. Total revenues were $950,000 and $1.9 million, total expenses were $683,000 and $1.4 million (including interest expense) and net income was $267,000 and $511,000 for the three and six months ended June 30, 2014, respectively. Total revenues were $895,000 and $1.9 million, total expenses were $843,000 and $1.8 million (including interest expense) and net loss was $52,000 and $56,000 for the three and six months ended June 30, 2013, respectively. The mortgage note assumed with the acquisition of the Bay Hill property bears interest at the rate of LIBOR plus a margin of 325 basis points (3.4% at each of June 30, 2014 and December 31, 2013). 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 Internal Revenue Code of 1986, as amended (the “Code”); therefore, the funds were restricted as to their usage and were reflected as restricted cash on the condensed consolidated balance sheets at September 30, 2013. The Company subsequently utilized the funds to provide the purchase price for the acquisition of two properties during the three months ended December 31, 2013.

All properties sold 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	$	10,926		9/13/2013		8/27/2010

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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				Six Months Ended
	June 30, 2014		June 30, 2013		June 30, 2014		June 30, 2013
Total revenues	$	—	$	575	$	—	$	1,257
Total expenses		—		544		—		1,121
Income before non-controlling interests and gain on sale of real estate assets		—		31		—		136
Gain on sale of real estate assets		—		—		—		—
Non-controlling interest in discontinued operations(1)		—		—		—		19
Income from discontinued operations available to the common stockholders	$	—	$	31	$	—	$	155

⁽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 condensed consolidated financial statements of the Operating Partnership).

16. Related Party Transactions

Subsequent to the Parent Company’s initial public offering, many of the employees of Excel Realty Holdings, LLC (“ERH”, a company that managed the operations of the Parent Company’s predecessor under various management agreements) became employees of the Company. ERH reimburses the Company for estimated time the Company employees spend on ERH related matters. For the three months ended June 30, 2014 and 2013, approximately $84,000 and $65,000, respectively, was reimbursed to the Company from ERH and included in other income in the condensed consolidated statements of operations. For the six months ended June 30, 2014 and 2013, approximately $160,000 and $148,000, respectively, was reimbursed to the Company from ERH and included in other income in the condensed consolidated statements of operations.

At June 30, 2013, the Operating Partnership had recognized an amount due from the Parent Company of approximately $2.9 million (classified within other assets in the condensed consolidated balance sheets) relating to proceeds from the issuance of the Parent Company’s common stock (with the issuance of an equivalent number of common OP units to the Parent Company), which had not yet been contributed to the Operating Partnership. The Operating Partnership collected the receivable in July 2013.

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 (excluding any net capital gain). 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 condensed 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 Parent Company. In general, the TRS may perform non-customary services for tenants, hold assets that the Parent Company 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

32

or non-real estate related business. The TRS is subject to corporate federal income taxes on its taxable income at regular corporate tax rates. The TRS accounts for income taxes in accordance with the provisions of the Income Taxes Topic of the FASB ASC, which requires the Company to account for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between GAAP carrying amounts and their respective tax bases.

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 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 and at its non-operating properties (Chimney Rock Phase II and Southlake Park Village) and the redevelopment of its 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 June 30, 2014		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	$	—	$	—	$	—	$	—
	Balance at December 31, 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)	$	507	$	—	$	—	$	507

⁽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.

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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 June 30, 2014 (dollars in thousands):

	Other Assets Related to Business Combinations (1)
Beginning balance, January 1, 2014	$	507
Total gains: included in earnings		—
Purchases, issuances or settlements		(507	)
Ending balance, June 30, 2014	$	—

⁽¹⁾  The change of $507,000 for other assets related to business combinations during the six months ended June 30, 2014 is comprised of cash payments received on the master lease asset.

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 June 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			1,552			246
Purchases, issuances or settlements		(277	)		—			28
Ending balance, June 30, 2013	$	721		$	(235	)	$	—

⁽¹⁾  The change of $271,000 for other assets related to business combinations during the six months ended June 30, 2013 is comprised of payments received on the master lease assets 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 (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 $235,000 based on the funds expected to be paid to the former owner, with the earn-out period expiring on September 30, 2013.

⁽³⁾  The change of $274,000 for derivative instruments related to business combinations during the six months ended June 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.

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 six months ended June 30, 2014 and 2013.

The Company has not elected the fair value measurement option for any of its other financial assets or liabilities. The Company estimates 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 estimates 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.

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The fair values of certain additional financial assets and liabilities at June 30, 2014 and December 31, 2013 (fair value measurements categorized as Level 3 of the fair value hierarchy) are as follows (dollars in thousands):

	June 30, 2014				December 31, 2013
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Note receivable (Other Assets)	$	750	$	750	$	750	$	750
Financial liabilities:
Mortgage notes payable		207,048		213,866		251,191		254,473
Notes payable		—		—		179,500		179,500
Unsecured notes		350,000		353,176		100,000		100,000

20. Subsequent Events

On July 1, 2014, the Company entered into a purchase and sale agreement for the disposition of the Lowe’s property for a sales price of approximately $24.4 million, excluding closing costs. The sale of the property is subject to due diligence and other customary closing conditions. There can be no assurances that these conditions will be satisfied or that the disposition will close on the terms described herein, or at all.

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 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, tenant recoveries and other income) 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.

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The following tables reconcile the Company’s segment activity to its consolidated results of operations and financial position for the three and six months ended June 30, 2014 and 2013 (dollars in thousands):

	For the Three Months Ended						For the Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Office Properties:
Total revenues	$	2,233		$	2,326		$	4,394		$	4,376
Property operating expenses		(890	)		(841	)		(1,743	)		(1,686	)
Property operating income, as defined		1,343			1,485			2,651			2,690
Changes in fair value of contingent consideration		—			6			—			6
General and administrative costs		—			(2	)		(5	)		(7	)
Depreciation and amortization		(911	)		(913	)		(1,803	)		(1,853	)
Interest expense		(4	)		(193	)		(191	)		(385	)
Net income	$	428		$	383		$	652		$	451
Multi-family Properties:
Total revenues	$	1,382		$	1,336		$	2,783		$	2,656
Property operating expenses		(505	)		(395	)		(958	)		(700	)
Property operating income, as defined		877			941			1,825			1,956
General and administrative costs		(11	)		(167	)		(25	)		(310	)
Depreciation and amortization		(463	)		(689	)		(926	)		(1,838	)
Net income (loss)	$	403		$	85		$	874		$	(192	)
Retail Properties:
Total revenues	$	27,015		$	23,296		$	54,049		$	46,774
Property operating expenses		(5,855	)		(5,262	)		(12,386	)		(10,485	)
Property operating income, as defined		21,160			18,034			41,663			36,289
Changes in fair value of contingent consideration		—			1,552			—			1,552
General and administrative costs		(4,147	)		(3,137	)		(7,943	)		(6,820	)
Depreciation and amortization		(10,037	)		(9,208	)		(20,478	)		(19,285	)
Interest expense		(5,977	)		(4,251	)		(10,779	)		(8,637	)
Interest income		54			48			103			97
Income (loss) from equity in unconsolidated entities		95			(65	)		165			(25	)
Changes in fair value of financial instruments and gain on OP unit redemption		—			—			—			230
Income from continuing operations		1,148			2,973			2,731			3,401
Income from discontinued operations		—			31			—			136
Net income	$	1,148		$	3,004		$	2,731		$	3,537
Total Reportable Segments:
Total revenues	$	30,630		$	26,958		$	61,226		$	53,806
Property operating expenses		(7,250	)		(6,498	)		(15,087	)		(12,871	)
Property operating income, as defined		23,380			20,460			46,139			40,935
Changes in fair value of contingent consideration		—			1,558			—			1,558
General and administrative costs		(4,158	)		(3,306	)		(7,973	)		(7,137	)
Depreciation and amortization		(11,411	)		(10,810	)		(23,207	)		(22,976	)
Interest expense		(5,981	)		(4,444	)		(10,970	)		(9,022	)
Interest income		54			48			103			97
Income (loss) from equity in unconsolidated entities		95			(65	)		165			(25	)
Changes in fair value of financial instruments and gain on OP unit redemption		—			—			—			230
Income from continuing operations		1,979			3,441			4,257			3,660
Income from discontinued operations		—			31			—			136
Net income	$	1,979		$	3,472		$	4,257		$	3,796
Reconciliation to Condensed Consolidated Net Income Attributable to the Common Stockholders (Parent Company):
Total net income for reportable segments	$	1,979		$	3,472		$	4,257		$	3,796
Net income attributable to non-controlling interests		(74	)		(105	)		(157	)		(133	)
Net income attributable to Excel Trust, Inc.	$	1,905		$	3,367		$	4,100		$	3,663
Reconciliation to Condensed Consolidated Net Income Attributable to the Unitholders (Operating Partnership):
Total net income for reportable segments	$	1,979		$	3,472		$	4,257		$	3,796
Net income attributable to non-controlling interests		(90	)		(85	)		(183	)		(172	)
Net income attributable to Excel Trust, L.P.	$	1,889		$	3,387		$	4,074		$	3,624

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	June 30,		December 31,
	2014		2013
Assets:
Office Properties:
Total assets	$	64,460	$	67,273
Multi-family Properties:
Total assets		69,836		70,732
Retail Properties:
Total assets		1,257,199		1,080,816
Total Reportable Segments & Consolidated Assets:
Total assets	$	1,391,495	$	1,218,821

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; our failure to maintain our credit ratings or a downgrade in our credit ratings from one or more of the rating agencies; 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, 2013. 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.

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The following table reflects our total portfolio at June 30, 2014 (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		5,879,696		92.9	%		94.0	%		34
Multi-family properties(1)		339 units		92.3	%		95.6	%		n/a
Office properties		338,339		85.5	%		85.5	%		2
Total/weighted-average operating portfolio		6,218,035		92.5	%		93.5	%		36
Development properties(2)		311,735		4.0	%		39.2	%		n/a
Unconsolidated properties(3)		225,863		65.2	%		65.2	%		2
Total Portfolio:
Total/weighted-average total portfolio		6,755,633		87.5	%		90.1	%		38

⁽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 non-operating properties consisted of Phase II of our Chimney Rock property and an undeveloped land parcel, Southlake Park Village, which are currently under development and are expected to contain approximately 312,000 square feet of GLA upon completion. Phase I of our Chimney Rock property is classified as an operating property).

⁽³⁾  Includes our La Costa Town Center and The Fountains at 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, 2013, which was filed with the Securities and Exchange Commission, or SEC, and is 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 June 30, 2014, we owned 34 consolidated retail operating properties with a total of approximately 5.9 million square feet of GLA. The multi-family segment consists of 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 office properties total 338,339 square feet of GLA.

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 six months ended June 30, 2014:

	Number of Leases		GLA		Weighted- Average Lease Rate		Weighted- Average Prior Lease Rate		% Increase (Decrease)			Tenant Improvement Allowance (sf)		Leasing Commission (sf)
Comparable leases		74		375,465	$	18.07	$	17.28		4.6	%	$	0.46	$	1.41
Non-comparable leases		26		52,370	$	24.42		n/a		n/a		$	31.76	$	8.16
Total leasing activity		100		427,835

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Comparison of the Three Months Ended June 30, 2014 to the Three Months Ended June 30, 2013

The following table sets forth historical financial information related to our operating portfolio 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(1)						New Properties					Redevelopment/ Development Properties				Corporate						Total
	As of June 30,
	2014			2013			2014			2013		2014		2013		2014			2013			2014			2013
Rentable GLA		5,510,488			5,510,488			707,547			—		—		—		—			—			6,218,035			5,510,488
Percent leased		93.3	%		92.3	%		95.8	%		—		—		—		—			—			93.5	%		92.3	%
Number of properties		31			31			5			—		—		—		—			—			36			31
Percent of total portfolio		88.6	%		100.0	%		11.4	%		—		—		—		—			—			100.0	%		100.0	%
	Same Properties						New Properties					Redevelopment/ Development Properties(3)				Corporate						Total
	Three months ended June 30,
	2014			2013			2014			2013		2014		2013		2014			2013			2014			2013
Rental revenue	$	22,603		$	22,284		$	2,559		$	—	$	76	$	—	$	(59	)	$	(57	)	$	25,179		$	22,227
Tenant recoveries		4,215			4,446			628			—		12		—		—			—			4,855			4,446
Other income		419			165			12			—		—		—		165			120			596			285
Total revenues		27,237			26,895			3,199			—		88		—		106			63			30,630			26,958
Rental operations(2)		6,821			6,648			686			—		19		—		(276	)		(150	)		7,250			6,498
Property operating income	$	20,416		$	20,247		$	2,513		$	—	$	69	$	—	$	382		$	213		$	23,380		$	20,460

⁽¹⁾  Excludes two properties, Walgreens — North Corbin and Grant Creek Towne Center, which were sold in 2013 and have been reflected as discontinued operations for all periods presented in the condensed consolidated financial statements contained elsewhere herein. These properties had been classified as same properties in previous filings with the SEC.

⁽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.

⁽³⁾  Includes development activities at our non-operating properties, consisting of Phase II of our Chimney Rock property and an undeveloped land parcel, Southlake Park Village, which are expected to contain approximately 312,000 square feet of GLA upon completion .

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The following table provides a reconciliation of property operating income (as defined in the table above) to net income for the three months ended June 30, 2014 and 2013 (dollars in thousands):

	Three Months Ended
	June 30, 2014			June 30, 2013			Change			Percent Change
Property operating income	$	23,380		$	20,460		$	2,920			14.3	%
Unallocated (income) expense:
Changes in fair value of contingent consideration		—			(1,558	)		1,558			n/a
General and administrative		4,158			3,306			852			25.8	%
Depreciation and amortization		11,411			10,810			601			5.6	%
Operating income		7,811			7,902			(91	)		1.2	%
Interest expense, net		(5,927	)		(4,396	)		(1,531	)		34.8	%
Income (loss) from equity in unconsolidated entities		95			(65	)		160			246.2	%
Income from continuing operations		1,979			3,441			(1,462	)		42.5	%
Income from discontinued operations		—			31			(31	)		n/a
Net income	$	1,979		$	3,472		$	(1,493	)		43.0	%

Property operating income: Property operating income increased by $2.9 million, or 14.3%, to $23.4 million for the three months ended June 30, 2014 compared to $20.5 million for the three months ended June 30, 2013. The increase was primarily related to the acquisition of five consolidated operating properties after June 30, 2013 (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 on changes in fair value of contingent consideration of approximately $1.6 million was recognized in the three months ended June 30, 2013 as a result of the reversal of a contingent liability related to an earn-out at one property due to a shortfall in expected leasing of vacant space at the property.

General and administrative:General and administrative expenses increased by $852,000, or 25.8%, to $4.2 million for the three months ended June 30, 2014 compared to $3.3 million for the three months ended June 30, 2013. The increase in general and administrative expenses was primarily due to an increase in share-based compensation expense compared to the prior period as a result of new restricted stock grants issued in March 2014 (share-based compensation expense of $1.4 million and $568,000 for the three months ended June 30, 2014 and 2013, respectively). In addition, there was an increase in personnel, technology and other infrastructure costs due to our continued growth, partially offset by a decrease in transaction costs.

Depreciation and amortization:Depreciation and amortization expense increased $601,000, or 5.6%, to $11.4 million for the three months ended June 30, 2014 compared to $10.8 million for the three months ended June 30, 2013. The increase was primarily related to the depreciation and amortization of assets acquired in connection with the purchase of five consolidated operating properties after June 30, 2013 (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 $1.5 million, or 34.8%, to $5.9 million for the three months ended June 30, 2014 compared to $4.4 million for the three months ended June 30, 2013. The increase was primarily due to the issuance of $100.0 million of unsecured notes at a weighted-average interest rate of 4.6% in November 2013 and the issuance of $250.0 million of unsecured notes at an interest rate of 4.625% in May 2014. The proceeds from these issuances were primarily utilized to repay outstanding borrowings under our unsecured revolving credit facility, which carried a lower variable interest rate. In addition, the increase was due to our assumption of approximately $7.3 million of mortgage debt in connection with our acquisition of the additional land parcel at The Promenade retail center in August 2013, partially offset by lower levels of outstanding borrowings under our unsecured revolving credit facility as a result of the repayment of outstanding borrowings.

Income from equity in unconsolidated entities: Income of $95,000 for the three months ended June 30, 2014 and a loss of $65,000 for the three months ended June 30, 2013, respectively, are comprised of our proportionate share of the net income or loss from the operations of our unconsolidated properties.

Income from discontinued operations:Income of $31,000 for the three months ended June 30, 2013 represents 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, the operations of the properties as of June 30, 2013 are classified as discontinued operations within the condensed consolidated statements of income (see Note 15 of the condensed consolidated financial statements contained elsewhere herein for further discussion).

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Comparison of the Six Months Ended June 30, 2014 to the Six Months Ended June 30, 2013

The following table sets forth historical financial information related to our operating portfolio 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(1)						New Properties						Redevelopment/ Development Properties				Corporate						Total
	As of June 30,
	2014			2013			2014			2013			2014		2013		2014			2013			2014			2013
Rentable GLA		5,348,025			5,348,025			870,010			162,463			—		—		—			—			6,218,035			5,510,488
Percent leased		93.2	%		92.3	%		95.6	%		92.4	%		—		—		—			—			93.5	%		92.3	%
Number of properties		30			30			6			1			—		—		—			—			36			31
Percent of total portfolio		86.0	%		97.1	%		14.0	%		2.9	%		—		—		—			—			100.0	%		100.0	%
	Same Properties						New Properties						Redevelopment/ Development Properties(3)				Corporate						Total
	Six months ended June 30,
	2014			2013			2014			2013			2014		2013		2014			2013			2014			2013
Rental revenue	$	43,621		$	43,180		$	6,445		$	1,064		$	139	$	—	$	(119	)	$	(115	)	$	50,086		$	44,129
Tenant recoveries		8,507			8,863			1,581			231			22		—		—			(18	)		10,110			9,076
Other income		654			325			20			—			—		—		356			276			1,030			601
Total revenues		52,782			52,368			8,046			1,295			161		—		237			143			61,226			53,806
Rental operations(2)		13,839			13,092			1,735			282			36		—		(523	)		(503	)		15,087			12,871
Property operating income	$	38,943		$	39,276		$	6,311		$	1,013		$	125	$	—	$	760		$	646		$	46,139		$	40,935

⁽¹⁾  Excludes two properties, Walgreens — North Corbin and Grant Creek Towne Center, which were sold in 2013 and have been reflected as discontinued operations for all periods presented in the condensed consolidated financial statements contained elsewhere herein. These properties had been classified as same properties in previous filings with the SEC.

⁽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.

⁽³⁾  Includes development activities at our non-operating properties, consisting of Phase II of our Chimney Rock property and an undeveloped land parcel, Southlake Park Village, which are expected to contain approximately 312,000 square feet of GLA upon completion .

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The following table provides a reconciliation of property operating income (as defined in the table above) to net income for the six months ended June 30, 2014 and 2013 (dollars in thousands):

	Six Months Ended
	June 30, 2014			June 30, 2013			Change			Percent Change
Property operating income	$	46,139		$	40,935		$	5,204			12.7	%
Unallocated (income) expense:
Changes in fair value of contingent consideration		—			(1,558	)		1,558			n/a
General and administrative		7,973			7,137			836			11.7	%
Depreciation and amortization		23,207			22,976			231			1.0	%
Operating income		14,959			12,380			2,579			20.8	%
Interest expense, net		(10,867	)		(8,925	)		(1,942	)		21.8	%
Income (loss) from equity in unconsolidated entities		165			(25	)		190			760.0	%
Changes in fair value of financial instruments and gain on redemption of OP units		—			230			(230	)		n/a
Income from continuing operations		4,257			3,660			597			16.3	%
Income from discontinued operations		—			136			(136	)		n/a
Net income	$	4,257		$	3,796		$	461			12.1	%

Property operating income: Property operating income increased by $5.2 million, or 12.7%, to $46.1 million for the six months ended June 30, 2014 compared to $40.9 million for the six months ended June 30, 2013. The increase was primarily related to the acquisition of five consolidated operating properties after June 30, 2013 (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 on changes in fair value of contingent consideration of approximately $1.6 million was recognized in the six months ended June 30, 2013 as a result of the reversal of a contingent liability related to an earn-out at one property due to a shortfall in expected leasing of vacant space at the property.

General and administrative:General and administrative expenses increased by $836,000, or 11.7%, to $8.0 million for the six months ended June 30, 2014 compared to $7.1 million for the six months ended June 30, 2013. The increase in general and administrative expenses was primarily due to an increase in share-based compensation expense compared to the prior period as a result of new restricted stock grants issued in March 2014 (share-based compensation expense of $2.0 million and $1.1 million for the six months ended June 30, 2014 and 2013, respectively). In addition, there was an increase in personnel, technology, legal and other infrastructure costs due to our continued growth, partially offset by a decrease in audit and tax fees and transaction costs as compared to the prior period.

Depreciation and amortization:Depreciation and amortization expense increased $231,000, or 1.0%, to $23.2 million for the six months ended June 30, 2014 compared to $23.0 million for the six months ended June 30, 2013. The increase was primarily related to the depreciation and amortization of assets acquired in connection with the purchase of five consolidated operating properties after June 30, 2013 (including our acquisition of the additional land parcel at The Promenade retail center, which is not considered a property separate from The Promenade), partially offset by the full amortization of assets associated with certain of our earlier property acquisitions.

Interest expense, net: Interest expense, net increased $1.9 million, or 21.8%, to $10.8 million for the six months ended June 30, 2014 compared to $8.9 million for the six months ended June 30, 2013. The increase was primarily due to the issuance of $100.0 million of unsecured notes at a weighted-average interest rate of 4.6% in November 2013 and the issuance of $250.0 million of unsecured notes at an interest rate of 4.625% in May 2014. The proceeds from these issuances were primarily utilized to repay outstanding borrowings under our unsecured revolving credit facility, which carried a lower variable interest rate. In addition, the increase was due to our assumption of approximately $7.3 million of mortgage debt in connection with our acquisition of the additional land parcel at The Promenade retail center in August 2013, partially offset by lower levels of outstanding borrowings under our unsecured revolving credit facility as a result of the repayment of outstanding borrowings.

Income from equity in unconsolidated entities: Income of $165,000 for the six months ended June 30, 2014 and a loss of $25,000 for the six months ended June 30, 2013 are comprised of our proportionate share of the net income or loss from the operations of our unconsolidated properties.

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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 redemption of OP units of approximately $230,000 was recognized in the six months ended June 30, 2013 as a result of (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.

Income from discontinued operations: Income of $136,000 for the six months ended June 30, 2013 represents 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, the operations of the properties as of June 30, 2013 are classified as discontinued operations within the condensed consolidated statements of income (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 and six months ended June 30, 2014 and 2013 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 June 30, 2014 and 2013 (dollars in thousands):

	Three Months Ended
	June 30, 2014		June 30, 2013		Change			Percent Change
Revenues:
Office properties	$	2,233	$	2,326	$	(93	)		4.0	%
Multi-family properties		1,382		1,336		46			3.4	%
Retail properties		27,015		23,296		3,719			16.0	%
Total revenues	$	30,630	$	26,958	$	3,672			13.6	%
Property operating expenses:
Office properties	$	890	$	841	$	49			5.8	%
Multi-family properties		505		395		110			27.8	%
Retail properties		5,855		5,262		593			11.3	%
Total property operating expenses	$	7,250	$	6,498	$	752			11.6	%

Comparison of the Three Months Ended June 30, 2014 to the Three Months Ended June 30, 2013

Revenue-office properties:Office properties revenue decreased by $93,000, or 4.0%, to $2.2 million for the three months ended June 30, 2014 compared to $2.3 million for the three months ended June 30, 2013. The decrease was the result of the expiration of certain leases at our Promenade Corporate Center property, which were not immediately released, although there has been an overall increase in the leased percentage at our office properties from 84.0% at June 30, 2013 to 85.5% at June 30, 2014.

Revenue-multi-family properties:Multi-family property revenue increased by $46,000, or 3.4%, to $1.4 million for the three months ended June 30, 2014 compared to $1.3 million for the three months ended June 30, 2013. The increase was primarily the result of sustained high levels of leasing and small increases in the monthly rental rates.

Revenue-retail properties:Retail property revenue increased by $3.7 million, or 16.0%, to $27.0 million for the three months ended June 30, 2014 compared to $23.3 million for the three months ended June 30, 2013. The increase was primarily related to the acquisition of five consolidated retail operating properties after June 30, 2013 (including our acquisition of the additional land parcel at The Promenade retail center, which is not considered a property separate from The Promenade). In addition, we recognized an increase in contractual lease rates of approximately 4.9% for new or renewed leases executed during the twelve months ended June 30, 2014 for spaces previously occupied.

Property operating expenses-office properties:Office property operating expenses increased by $49,000, or 5.8%, to $890,000 for the three months ended June 30, 2014 compared to $841,000 for the three months ended June 30, 2013.

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Property operating expenses-multi-family properties:Multi-family property operating expenses increased by $110,000, or 27.8%, to $505,000 for the three months ended June 30, 2014 compared to $395,000 for the three months ended June 30, 2013. The increase was primarily related to the hiring of on-site management employees after March 31, 2013. The expenses related to these employees are now included in property operating expenses. Prior to the hiring of on-site management employees, expenses related to personnel managing the multi-family property were included in general and administrative expenses.

Property operating expenses-retail properties:Property operating expenses related to our retail properties increased by $593,000, or 11.3%, to $5.9 million for the three months ended June 30, 2014 compared to $5.3 million for the three months ended June 30, 2013. The increase was primarily related to the acquisition of five consolidated retail operating properties after June 30, 2013 (including our acquisition of the additional land parcel at The Promenade retail center, which is not considered a property separate from The Promenade).

The following table sets forth results of operations presented by segments for the six months ended June 30, 2014 and 2013 (dollars in thousands):

	Six Months Ended
	June 30, 2014		June 30, 2013		Change		Percent Change
Revenues:
Office properties	$	4,394	$	4,376	$	18		0.4	%
Multi-family properties		2,783		2,656		127		4.8	%
Retail properties		54,049		46,774		7,275		15.6	%
Total revenues	$	61,226	$	53,806	$	7,420		13.8	%
Property operating expenses:
Office properties	$	1,743	$	1,686	$	57		3.4	%
Multi-family properties		958		700		258		36.9	%
Retail properties		12,386		10,485		1,901		18.1	%
Total property operating expenses	$	15,087	$	12,871	$	2,216		17.2	%

Comparison of the Six Months Ended June 30, 2014 to the Six Months Ended June 30, 2013

Revenue-office properties:Office properties revenue was $4.4 million for the both the six months ended June 30, 2014 and 2013.

Revenue-multi-family properties:Multi-family property revenue increased by $127,000, or 4.8%, to $2.8 million for the six months ended June 30, 2014 compared to $2.7 million for the six months ended June 30, 2013. The increase was primarily the result of sustained high levels of leasing and small increases in the monthly rental rates.

Revenue-retail properties:Retail property revenue increased by $7.3 million, or 15.6%, to $54.1 million for the six months ended June 30, 2014 compared to $46.8 million for the six months ended June 30, 2013. The increase was primarily related to the acquisition of five consolidated retail operating properties after June 30, 2013 (including our acquisition of the additional land parcel at The Promenade retail center, which is not considered a property separate from The Promenade). In addition, we recognized an increase in contractual lease rates of approximately 4.9% for new or renewed leases executed during the twelve months ended June 30, 2014 for spaces previously occupied.

Property operating expenses-office properties:Office property operating expenses were $1.7 million for both the six months ended June 30, 2014 and 2013.

Property operating expenses-multi-family properties:Multi-family property operating expenses increased by $258,000, or 36.9%, to $958,000 for the six months ended June 30, 2014 compared to $700,000 for the six months ended June 30, 2013. The increase was primarily related to the hiring of on-site management employees after March 31, 2013. The expenses related to these employees are now included in property operating expenses. Prior to the hiring of on-site management employees, expenses related to personnel managing the multi-family property were included in general and administrative expenses.

Property operating expenses-retail properties:Property operating expenses related to our retail properties increased by $1.9 million, or 18.1%, to $12.4 million for the six months ended June 30, 2014 compared to $10.5 million for the six months ended June 30, 2013. The increase was primarily related to the acquisition of five consolidated retail operating properties after June 30, 2013 (including our acquisition of the additional land parcel at The Promenade retail center, which is not considered a property separate from The Promenade).

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Cash Flows

The following is a comparison, for the six months ended June 30, 2014 and 2013, of our cash flows.

Cash and cash equivalents were $183.7 million and $7.2 million ($4.2 million for the Operating Partnership) at June 30, 2014 and 2013, respectively.

Net cash provided by operating activities was $33.1 million for the six months ended June 30, 2014 and $25.4 million for the six months ended June 30, 2013, an increase of $7.7 million. The increase was primarily due to cash flow generated from operations of new acquisitions and an increase in accrued liabilities in 2014 due to development activities at our non-operating properties (Phase II of our Chimney Rock property and an undeveloped land parcel, Southlake Park Village).

Net cash used in investing activities was $11.8 million for the six months ended June 30, 2014 compared to $42.2 million for the six months ended June 30, 2013, a decrease of $30.4 million. The decrease was primarily the result of no significant acquisitions of property in 2014 compared to property acquisitions of $30.7 million in 2013 and a refund of restricted cash related to the Red Rock Commons property due to the repayment of the construction loan in June 2014, partially offset by an increase in expenditures for the development of real estate of approximately $2.7 million.

Net cash provided by financing activities related to the Parent Company was $159.1 million for the six months ended June 30, 2014 compared to $18.3 million for the six months ended June 30, 2013, an increase of $140.8 million. Net cash provided by financing activities related to the Operating Partnership was $159.1 million for the six months ended June 30, 2014 compared to cash provided by financing activities of $15.3 million for the six months ended June 30, 2013, an increase of $143.8 million (net cash provided by financing activities for the six months ended June 30, 2013 does not include approximately $2.9 million of proceeds from equity offerings of the Parent Company not yet contributed in exchange for common OP units). The increase for both the Parent Company and the Operating Partnership was primarily due to higher net proceeds from the issuance of common stock of approximately $121.5 million for the Parent Company and from the issuance of common OP units of $124.5 million for the Operating Partnership as a result of the Parent Company’s June 2014 common stock offering and proceeds from the issuance of the $250.0 aggregate principal amount of unsecured notes in May 2014. This was partially offset by an increase in the repayment of mortgage notes and outstanding borrowings on the unsecured line of credit of approximately $11.3 million and $187.0 million, respectively.

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.

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The following table presents a reconciliation of FFO of Excel Trust, Inc. for the three and six months ended June 30, 2014 and 2013 (in thousands):

	Three Months Ended					Six Months Ended
	June 30, 2014			June 30, 2013		June 30, 2014			June 30, 2013
Net income (loss) attributable to the common stockholders(1)	$	(839	)	$	623	$	(1,388	)	$	(1,825	)
Non-controlling interests in operating partnership(1)		(16	)		20		(26	)		(39	)
Depreciation and amortization		11,411			11,149		23,207			23,540
Depreciation and amortization related to joint ventures(2)		156			255		326			666
Funds from operations	$	10,712		$	12,047	$	22,119		$	22,342

⁽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 the Operating Partnership, 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 term the “Company” refers only to Excel Trust, Inc. on an unconsolidated basis, and excludes the Operating Partnership and all other subsidiaries. For further discussion of the liquidity and capital resources of the Company on a consolidated basis, see the section entitled “Liquidity and Capital Resources of Excel Trust, L.P.” below.

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 itself does not hold any indebtedness, and its only material asset is its ownership of partnership interests of the Operating Partnership. The Company’s principal funding requirement is the payment of dividends on its common and preferred shares. The Company’s principal source of funding for its dividend payments is distributions it receives from the Operating Partnership.

As of June 30, 2014, the Company owned an approximate 98.3% partnership interest in the Operating Partnership. The remaining 1.7% partnership interests are owned by non-affiliated investors and certain of the Company’s directors and executive officers. As the sole general partner of the Operating Partnership, the Company 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.

The liquidity of the Company is dependent on the Operating Partnership’s ability to make sufficient distributions to the Company. The primary cash requirement of the Company is its payment of dividends to its stockholders. The Company also guarantees some of the Operating Partnership’s debt, as discussed further in Note 8 of the condensed consolidated financial statements contained elsewhere herein. If the Operating Partnership fails to fulfill certain of its debt requirements, which trigger the Company’s guarantee obligations, then the Company will be required to fulfill its cash payment commitments under such guarantees. However, the Company’s only significant asset is its investment in the Operating Partnership.

We believe 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 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 distribution payments to the Company. The unavailability of capital could adversely affect the Operating Partnership’s ability to pay distributions to the Company, which would in turn adversely affect the Company’s ability to pay cash dividends to its stockholders.

The Company’s short-term liquidity requirements consist primarily of funds to pay for future dividends expected to be paid to the Company’s stockholders and operating expenses and other expenditures directly associated with our properties, including:

• interest expense and scheduled principal payments on outstanding indebtedness,

• general and administrative expenses,

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

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• construction of the non-operating portion of some of our properties, and

• properties under contract or acquired after June 30, 2014.

We have entered into equity distribution agreements, or the Equity Distribution Agreements, with four sales agents, under which the Company can issue and sell shares of its 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 and 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 under the Securities Act of 1933, as amended, or the Securities Act. During the year ended December 31, 2013, the Company issued 3,211,928 shares of its common stock 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 net proceeds of $40.7 million were contributed to the Operating Partnership in exchange for 3,211,928 OP units. During the six months ended June 30, 2014, the Company did not issue any shares pursuant to the Equity Distribution Agreements. As of June 30, 2014, the remaining aggregate offering price for sales of the Company’s shares permitted under the Equity Distribution Agreements was $95.0 million.

On June 25, 2014, The Company completed the issuance of 12,650,000 shares of its common stock, including the exercise of an option to purchase an additional 1,650,000 shares, resulting in net proceeds of approximately $160.7 million, after deducting the underwriters’ discount and commissions and offering expenses. The net proceeds were contributed to the Operating Partnership in exchange for 12,650,000 OP units.

Future Uses of Cash

The Company may from time to time seek to repurchase or redeem the Operating Partnership’s outstanding debt, the Company’s 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, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

The Company’s board of directors has authorized a stock repurchase program under which the Company may acquire up to $50.0 million of its common stock and preferred stock in open market and negotiated purchases with no expiration date. As of June 30, 2014, approximately $41.9 million remained available under the stock repurchase program to acquire outstanding shares of the Company’s common stock and preferred stock. See Note 13 to the condensed consolidated financial statements contained elsewhere herein for further discussion).

As circumstances warrant, the Company may issue equity from time to time, dependent upon market conditions and available pricing. When the Company receives proceeds from preferred or common equity issuances, it is required by the Operating Partnership’s partnership agreement to contribute the proceeds from its equity issuances to the Operating Partnership in exchange for preferred or common partnership OP units. The Operating Partnership may use the proceeds to repay debt, including borrowings under its unsecured revolving credit facility, for acquisitions and for other general corporate purposes.

We are also subject to the commitments discussed below under “Dividends and Distributions.”

Dividends and Distributions

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 (excluding any net capital gain). 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 ongoing operations to the same extent that other companies whose parent companies are not REITs can. 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.

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 together with its consolidated subsidiaries or the Operating Partnership and Excel Trust, Inc. together with their consolidated subsidiaries, as the context requires. Excel Trust, Inc. is our sole general partner and consolidates our results of operations for financial reporting purposes. Because we operate on a consolidated basis with Excel Trust, Inc., the section entitled “Liquidity and Capital Resources of Excel Trust, Inc.” should be read in conjunction with this section to understand our liquidity and capital resources on a consolidated basis.

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Analysis of Liquidity and Capital Resources

At June 30, 2014, we had $183.7 million of cash and cash equivalents on hand.

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

• interest expense and scheduled principal payments on outstanding indebtedness,

• general and administrative expenses,

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

• construction of the non-operating portion of some of our properties, and

• properties under contract or acquired after June 30, 2014.

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 revolving credit facility to pay for upcoming debt maturities. We expect to incur approximately $46.0 million in construction costs relating to redevelopment or development projects on portions of existing operating properties and at our non-operating properties (Chimney Rock Phase II and Southlake Park Village) and the redevelopment of our unconsolidated La Costa Town Center property (our proportionate share of estimated redevelopment costs, or $5.8 million). 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 equity and debt securities, warrants, rights and other securities to the extent necessary or advisable to meet our liquidity needs.

As of June 30, 2014, our mortgage indebtedness consisted of the following:

Property Pledged as Collateral	Principal Balance		Contractual Interest Rate			Monthly Payment(1)		Maturity Date
Gilroy Crossing	$	45,406		5.01	%		263		October 2014
The Promenade		47,042		4.80	%		344		October 2015
5000 South Hulen		13,300		5.60	%		83		April 2017
Lake Pleasant Pavilion		27,679		6.09	%		143		October 2017
Rite Aid — Vestavia Hills		925		7.25	%		21		October 2018
Living Spaces-Promenade(2)		6,875		7.88	%		80		November 2019
West Broad Village(3)		39,700		3.33	%		110		May 2020
Lowe’s, Shippensburg		12,970		7.20	%		110		October 2031
Northside Plaza(4)		12,000		0.07	%		1		November 2035
	$	205,897
Plus: premium(5)		1,151
Mortgage notes payable, net	$	207,048

⁽¹⁾  Amount represents the monthly payment of principal and interest at June 30, 2014.

⁽²⁾  We acquired an additional land parcel that we did not previously own at The Promenade retail property in August 2013, and in connection with such acquisition, we assumed a mortgage note with a fixed interest rate of 7.88%.

⁽³⁾  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.

⁽⁴⁾  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 0.07% at June 30, 2014). 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 us from our unsecured revolving credit facility. An underwriter’s discount related to the original issuance of the bonds with a remaining balance of $102,000 at June 30, 2014 will be amortized as additional interest expense through November 2035.

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(5) 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.

Our unsecured revolving credit facility has a borrowing capacity of $300.0 million, which may be increased from time to time 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 maturity date is April 6, 2018 and may be extended for an additional six months at our option.

As of June 30, 2014, the unsecured revolving credit facility bore interest at the rate of LIBOR plus a margin of 90 to 170 basis points, depending on Excel Trust, Inc.’s credit rating. As of June 30, 2014, we were also responsible for paying a fee of 0.25% to 0.30% on the full capacity of the facility. There were no borrowings under the unsecured revolving credit facility at June 30, 2014. We have issued $16.9 million in letters of credit from the unsecured revolving credit facility, which secure an outstanding $12.0 million bond payable for the Northside Mall property and construction activities at the Southlake Park Village property. The Northside Mall property bond is included with the mortgages payable on our condensed consolidated balance sheets. At June 30, 2014, there was approximately $262.6 million available for borrowing under the unsecured revolving credit facility.

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, as amended). 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 June 30, 2014:

	Required			Actual
Key financial covenant:
Ratio of total liabilities to total asset value (maximum)		60.0	%		40.8	%
Ratio of adjusted EBITDA to fixed charges (minimum)		1.50x			2.0x
Ratio of secured indebtedness to total asset value (maximum)		40.0	%		15.8	%

⁽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 June 30, 2014, we believe that we were in compliance with all of the covenants under our credit agreement.

On May 12, 2014, we completed the issuance of $250.0 million aggregate principal amount of 4.625% senior unsecured notes due 2024 (the “Notes due 2024”). The Notes due 2024 bear interest at 4.625% per annum and were issued at 99.477% of the principal amount to yield 4.691% to maturity. Interest is payable on May 15 and November 15 of each year beginning November 15, 2014 until the maturity date of May 15, 2024. Our obligations under the Notes due 2024 are fully and unconditionally guaranteed by our Parent Company. On or before February 15, 2024, we may redeem all or a portion of the Notes due 2024 upon notice to the holders at a redemption price equal to the greater of (1) 100% of the principal amount of the Notes due 2024 being redeemed and (2) 100% of the principal amount plus a make-whole premium as set forth in the Indenture governing the Notes due 2024 (the “Indenture”), plus accrued and unpaid interest up to, but not including, the redemption date. After February 15, 2024, the redemption price will be equal to 100% of the principal amount of the Notes due 2024 being redeemed, plus accrued and unpaid interest up to, but not including, the redemption date. Proceeds from the issuance of the Notes due 2024 were used to repay a portion of the outstanding indebtedness under our unsecured revolving credit facility and for other general corporate and working capital purposes.

Future Uses of Cash

We may from time to time seek to repurchase or redeem our outstanding debt, OP units or preferred units (subject to the repurchase or redemption of an equivalent number of shares of common stock or preferred stock by Excel Trust, Inc.) or other securities, and Excel Trust, Inc. may seek to repurchase or redeem its outstanding shares of common stock or preferred stock or other securities, in each case in open market purchases, privately negotiated transactions or otherwise. Such repurchases or redemptions, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

As of June 30, 2014, our ratio of debt-to-gross undepreciated asset value was approximately 37.9%. 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 Excel Trust, Inc.’s 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,

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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.

We intend to utilize the majority of the balance of our cash and cash equivalents at June 30, 2014 to fund a portion of the purchase price relating to purchase agreements we have executed to acquire four retail properties for approximately $367.1 million and for other potential acquisitions or the repayment of future debt maturities. The acquisition of the properties currently under contract is subject to due diligence and other customary closing conditions. There can be no assurances that these conditions will be satisfied or that the acquisitions will close on the terms described herein, or at all.

Commitments, Contingencies and Contractual Obligations

The following table outlines our contractual obligations (dollars in thousands) at June 30, 2014 related to our mortgage and note indebtedness and other commitments:

	Payments by Period
	2014 (six months)		2015-2016		2017-2018		Thereafter		Total
Principal payments — fixed rate debt	$	47,129	$	50,280	$	43,632	$	402,856	$	543,897
Principal payments — variable rate debt(1)		—		—		—		12,000		12,000
Interest payments — fixed rate debt		7,971		23,916		18,390		27,479		77,756
Interest payments — variable rate debt(1)		4		17		17		127		165
Construction costs(2)		25,122		20,837		—		—		45,959
	$	80,226	$	95,050	$	62,039	$	442,462	$	679,777

⁽¹⁾  Includes redevelopment revenue bonds at our Northside Mall property and our unsecured revolving credit facility (there were no outstanding borrowings under our unsecured revolving credit facility at June 30, 2014). 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 0.07% at June 30, 2014). The unsecured revolving credit facility bears interest at the rate of LIBOR plus a margin of 90 basis points to 170 basis points, depending on our credit rating. Interest payments for variable rate debt are based on the interest rates in effect and debt balances outstanding on June 30, 2014.

⁽²⁾  Amount represents our estimate of costs expected to be incurred relating to development projects on portions of existing operating properties and at our non-operating properties (Chimney Rock Phase II and Southlake Park Village) and the redevelopment of our unconsolidated La Costa Town Center property (our proportionate share of estimated redevelopment costs, or $5.8 million).

Off-Balance Sheet Arrangements

We hold a 20% ownership interest in an unconsolidated limited liability company, La Costa LLC, which owns the La Costa Town Center property. 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 bears the majority of any losses incurred. We 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 $23.8 million and $14.4 million, respectively, at June 30, 2014.

On June 18, 2014, we entered into a purchase and sale agreement for the disposition of the La Costa Town Center property for a sales price of approximately $33.0 million, excluding closing costs. The sale of the property is subject to due diligence and other customary closing conditions. There can be no assurances that these conditions will be satisfied or that the disposition will close on the terms described herein, or at all.

We hold a 50% tenant-in-common ownership interest in a company, Bay Hill Fountains, LLC, or Bay Hill LLC, which owns The Fountains at Bay Hill property, or the Bay Hill property. The Bay Hill LLC does not qualify as a VIE and consolidation is not required as we do not control the operations of the property. We 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 $39.4 million and $25.4 million, respectively, at June 30, 2014.

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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	%	$	11,599		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

Excel Trust, Inc. has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, or the Code. To continue to qualify as a REIT, Excel Trust, Inc. must meet a number of organizational and operational requirements, including the requirement that Excel Trust, Inc. distribute currently at least 90% of its REIT taxable income (excluding any net capital gain) to its stockholders. It is our intention to comply with these requirements and maintain Excel Trust, Inc.’s REIT status. As a REIT, Excel Trust, Inc. generally will not be subject to corporate United States federal, state or local income taxes on income it distributes currently (in accordance with the Code and applicable regulations) to its stockholders. If Excel Trust, Inc. fails to qualify as a REIT in any taxable year, it 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 Excel Trust, Inc. qualifies 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 mortgages payable at June 30, 2014, including our construction loan, was approximately $213.9 million compared to the carrying amount of $207.0 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 $5.4 million at June 30, 2014. 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 $5.7 million at June 30, 2014.

We have a $300.0 million unsecured revolving credit facility. As of June 30, 2014, the unsecured revolving credit facility bore interest at the rate of LIBOR plus a margin of 90 basis points to 170 basis points, depending on our credit rating. As of June 30, 2014, we had $16.9 million of debt and commitments outstanding under our unsecured revolving credit facility. At June 30, 2014, we had no outstanding balance on our unsecured revolving credit facility.

We have entered into $350.0 million aggregate principal amount of senior unsecured notes with a weighted-average fixed interest rate of 4.62%. The fair value of the senior unsecured notes at June 30, 2014 was approximately $353.2 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 $25.0 million at June 30, 2014. 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 $27.4 million at June 30, 2014.

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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.

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 its 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 its 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 of Excel Trust, Inc. concluded, as of that time, that Excel Trust, Inc.’s 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 of its general partner, Excel Trust, Inc., 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, 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 its general partner, 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 of its general partner concluded, as of that time, that Excel Trust, L.P.’s disclosure controls and procedures were effective at the reasonable assurance level.

There has been no change in Excel Trust, L.P.’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, L.P.’s internal control over financial reporting.

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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 11 in our Annual Report on Form 10-K for the year ended December 31, 2013, which was filed with the SEC and is 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.

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.)

During the quarter ended June 30, 2014, Excel Trust, Inc. issued, net of forfeitures, an aggregate of 12,412 shares of its common stock in connection with restricted stock awards under its incentive award plan for no cash consideration. For each share of common stock issued by Excel Trust, Inc. in connection with such an award, we issued a restricted common OP unit to Excel Trust, Inc. During the quarter ended June 30, 2014, we issued, net of forfeitures, an aggregate of 12,412 restricted common OP units to Excel Trust, Inc., as required by our partnership agreement. These issuances were made in private placements in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act.

On June 25, 2014, Excel Trust, Inc. issued 12,650,000 shares of common stock, including the exercise of an option to purchase an additional 1,650,000 shares, resulting in net proceeds of approximately $160.7 million, after deducting the underwriters’ discount and commissions and offering expenses. The net proceeds were contributed to the Operating Partnership in exchange for 12,650,000 OP units. The OP units were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibit Number	Description of Exhibit
4.1	Indenture, dated as of May 12, 2014, by and among Excel Trust, L.P., Excel Trust, Inc. and Wells Fargo Bank, National Association, as trustee. (1)
4.2	Supplemental Indenture, dated as of May 12, 2014, by and among Excel Trust, L.P., Excel Trust, Inc. and Wells Fargo Bank, National Association, as trustee, including the form of 4.625% Senior Notes due 2024 and guarantee thereof. (1)
10.1	2010 Equity Incentive Award Plan of Excel Trust, Inc. and Excel Trust, L.P. (as Amended and Restated Effective May 13, 2014). (2)
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 May 12, 2014.

(2) 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 May 15, 2014.

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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: July 31, 2014		Dated: July 31, 2014

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EXHIBIT INDEX

Exhibit Number	Description of Exhibit
4.1	Indenture, dated as of May 12, 2014, by and among Excel Trust, L.P., Excel Trust, Inc. and Wells Fargo Bank, National Association, as trustee. (1)
4.2	Supplemental Indenture, dated as of May 12, 2014, by and among Excel Trust, L.P., Excel Trust, Inc. and Wells Fargo Bank, National Association, as trustee, including the form of 4.625% Senior Notes due 2024 and guarantee thereof. (1)
10.1	2010 Equity Incentive Award Plan of Excel Trust, Inc. and Excel Trust, L.P. (as Amended and Restated Effective May 13, 2014). (2)
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 May 12, 2014.

(2) 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 May 15, 2014.

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