# ACADIA REALTY TRUST (AKR) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from ACADIA REALTY TRUST's 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/899629/000095017022002570/akr-20211231.htm
Accession: 0000950170-22-002570
Filing date: 2022-03-01
Report date: 2021-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/AKR/
All MD&A years: /company/AKR/mda/
Next year: /company/AKR/mda/fy2022/ (FY 2022)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

OVERVIEW

As of December 31, 2021, there were 186 properties, which we own or have an ownership interest in, within our Core Portfolio and Funds. Our Core Portfolio consists of those properties either 100% owned, or partially owned through joint venture interests by the Operating Partnership, or subsidiaries thereof, not including those properties owned through our Funds. These properties primarily consist of street and urban retail, and suburban shopping centers. See Item 2. Properties for a summary of our wholly-owned and partially-owned retail properties and their physical occupancies at December 31, 2021.

The majority of our operating income is derived from rental revenues from operating properties, including expense recoveries from tenants, offset by operating and overhead expenses.

Our primary business objective is to acquire and manage commercial retail properties that will provide cash for distributions to shareholders while also creating the potential for capital appreciation to enhance investor returns. We focus on the following fundamentals to achieve this objective:

•
Own and operate a Core Portfolio of high-quality retail properties located primarily in high-barrier-to-entry, densely-populated metropolitan areas and create value through accretive development and re-tenanting activities coupled with the acquisition of high-quality assets that have the long-term potential to outperform the asset class as part of our Core asset recycling and acquisition initiative.

•
Generate additional external growth through an opportunistic yet disciplined acquisition program within our Funds. We target transactions with high inherent opportunity for the creation of additional value through:

o
value-add investments in street retail properties, located in established and “next generation” submarkets, with re-tenanting or repositioning opportunities,

o
opportunistic acquisitions of well-located real-estate anchored by distressed retailers, and

o
other opportunistic acquisitions which may include high-yield acquisitions and purchases of distressed debt.

•
Some of these investments historically have also included, and may in the future include, joint ventures with private equity investors for the purpose of making investments in operating retailers with significant embedded value in their real estate assets.

•
Maintain a strong and flexible balance sheet through conservative financial practices while ensuring access to sufficient capital to fund future growth.

SIGNIFICANT DEVELOPMENTS DURING THE year ended December 31, 2021

Restatement of Previously Issued Financial Statements

On February 14, 2022, the management and the audit committee of the board of trustees (the “Audit Committee”) of the Company, in consultation with BDO USA LLP (“BDO”), the Company’s independent registered public accounting firm, determined that the Company’s previously issued financial statements and the audit reports thereon, as of and for the years ended December 31, 2020 and 2019, and as of and for each of the quarterly periods ended March 31, 2021 and 2020, June 30, 2021 and 2020, September 30, 2021 and 2020, and December 31, 2020 (collectively, the “Prior Period Financial Statements”), should no longer be relied upon due to an error in accounting treatment at the time of formation related to the improper consolidation of two Fund investments that are less-than-wholly-owned through the Company's opportunity funds (the "Fund Investments"). The Fund Investments, which were formed in 2012 and 2013, have been adjusted from consolidated investments to investments in unconsolidated affiliates. Management and the Audit Committee have determined that these accounting changes required a restatement of the Prior Period Financial Statements (the "Restatement").

As part of the Company’s normal annual reporting process prior to releasing its 2021 fourth quarter and year-to-date December 31, 2021 results and prior to completion of the related audit, the Company and BDO identified the Restatement items described in more detail below. The Company has since reevaluated its accounting and determined that it needs to correct the previous accounting for such items. The Restatement:

•
is based on an error in the application of generally accepted accounting principles ("GAAP") as they relate to the consolidation of subsidiaries, which involves significant judgment and is related to the presentation of the Fund Investments within the Company’s consolidated balance sheets, statements of operations and statements of cash flows. The consolidation error, excluding the immaterial previously unrecorded adjustments noted below, had no impact on net income, funds from operations ("FFO"), or distributions in excess of accumulated earnings. However, substantially all of the changes to the consolidated balance sheets at each of December 31, 2020 and 2019 were due to the consolidation error as follows:

41

o
a $55.8 million and $57.4 million reduction in total assets, which includes a $23.0 million and $14.5 million increase to investments in unconsolidated affiliates; a $57.5 million and $58.8 million reduction in total liabilities; and a $1.9 million and $1.8 million increase to noncontrolling interests.

•
also includes other immaterial previously unrecorded adjustments, which had a minor impact on previously-reported net income (loss) and net earnings (loss) per share, FFO and FFO per share:

o
the impact on net income (loss) attributable to Acadia for the nine months ended September 30, 2021, the year ended December 31, 2020 and the year ended December 31, 2019 was a (reduction) increase of ($0.6) million or ($0.01) per share, ($0.2) million or ($0.01) per share, and $0.7 million or $0.01 per share, respectively;

o
the impact on FFO for the nine months ended September 30, 2021, the year ended December 31, 2020 and the year ended December 31, 2019 was a (reduction) increase of ($0.6) million or ($0.01) per share, ($0.2) million or ($0.01) per share, and $0.6 million or $0.01 per share, respectively;

•
is illustrated in detail in Note 2 and Note 17 to the consolidated financial statements.

Acquisitions

During the year ended December 31, 2021, we made one Core Portfolio investment for $26.3 million and Fund V acquired three shopping centers totaling $168.6 million, inclusive of transaction costs, as described below (Note 3).

•
On August 20, 2021, Fund V acquired a shopping center referred to as Canton Marketplace, located in Canton Georgia, for $51.0 million, inclusive of transaction costs, less the assumption of $31.8 million of first mortgage debt.

•
On September 9, 2021, Fund V acquired a shopping center referred to as Monroe Marketplace, located in Selinsgrove Pennsylvania, for $44.8 million, inclusive of transaction costs. On November 12, 2021, Fund V acquired a land parcel adjacent to the shopping center for $1.0 million.

•
On December 14, 2021, Fund V acquired a shopping center referred to as Midstate, located in East Brunswick, New Jersey, for $71.9 million, inclusive of transaction costs.

•
On December 23, 2021, we acquired three retail buildings, referred to as the 14th Street Portfolio, in northwest Washington, D.C. for a total of $26.3 million, inclusive of transaction costs.

Dispositions of Real Estate

During the year ended December 31, 2021, we disposed of one consolidated Core property for $16.4 million, five consolidated Fund properties for total proceeds of $49.9 million, two unconsolidated Fund land parcels for $10.5 million, and terminated one Fund ground lease recognizing an aggregate gain of $10.5 million, of which the Company's share was $6.6 million, as follows:

•

On January 29, 2021, we sold one Core Portfolio consolidated property, 60 Orange Street, for $16.4 million, repaid the related mortgage of $6.7 million and recognized a gain of $4.6 million (Note 3).

•
On January 4, 2021, Fund V sold two land parcels at its unconsolidated Family Center at Riverdale property for a total of $10.5 million, repaid $7.9 million of the related mortgage, and the venture recognized a gain of $3.2 million, of which the Company’s share was $0.6 million (Note 5).

•
On May 19, 2021, Fund III sold its consolidated 654 Broadway property for $10.0 million and recognized a gain on the sale of $0.1 million (Note 3), of which the Company's share was insignificant.

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•
On June 18, 2021, Fund IV sold four consolidated properties located in Maine within its NE Grocer Portfolio (the Airport Mall, Shaw's Waterville, Shaw's Windham and Wells properties) for aggregate proceeds of $39.9 million, repaid the related mortgages totaling $23.5 million, and recognized an aggregate gain on sale of $5.1 million of which the Company's share was $1.2 million (Note 3).

•
On June 25, 2021, Fund IV terminated its ground lease at 110 University Place and returned the property to the lessor, recognizing a gain on lease termination of $0.7 million, of which the Company's share was $0.2 million (Note 12).

In addition, during the fourth quarter of 2021, we entered into agreements to sell two Fund properties for aggregate proceeds of approximately $89.2 million. As these dispositions are deemed likely of completion within one year, these properties have been classified as "held-for-sale" on the Company's consolidated balance sheet (Note 3, Note 18).

Financing Activity

During the year ended December 31, 2021, we effected the following financing activities (Note 8):

•
entered into a new amended and restated credit facility on June 29, 2021, increasing the capacity under our revolving credit facility by $50.0 million and under our term loan by $50.0 million;

•
entered into a new $29.2 million Fund mortgage collateralized by Monroe Marketplace;

•
assumed a $31.8 million mortgage upon Fund V's acquisition of Canton Marketplace (Note 3);

•
extended 11 Fund mortgages, two during the first quarter with aggregate balances of $37.7 million (after principal reductions of $1.7 million), five during the second quarter totaling $125.7 million (after principal reductions of $6.5 million), two during the third quarter totaling $53.1 million (after principal reductions of $10.2 million), and two during the fourth quarter totaling $14.8 million (after principal reductions of $3.0 million);

•
modified and extended the Fund II term loan resulting in a one-year extension, the Fund IV bridge facility resulting in a six-month extension and a $15.0 million repayment, and the Fund V subscription line resulting in a one-year extension;

•
refinanced a Fund II loan for $18.5 million with a new loan for $16.8 million; and

•
made repayments of mortgages underlying property dispositions as noted above.

43

Structured Financing Investments

During the year ended December 31, 2021, we made two Core Portfolio loans totaling $59.0 million within our Structured Financing portfolio, of which $58.0 million was funded as follows (Note 4):

•
On April 20, 2021, we made a $16.0 million first mortgage loan collateralized by a retail building in Silver Spring, Maryland.

•
On September 17, 2021, we made a $43.0 million first mortgage loan collateralized by a retail condominium in Soho, New York, of which $42.0 million was funded.

In addition, one Core Portfolio and one Fund loan receivable remain in default (Note 4) at December 31, 2021.

ATM Program Activity

We sold 2,889,371 Common Shares under our ATM Program during the year ended December 31, 2021 for gross proceeds of $64.9 million, or $63.9 million net of issuance costs, at a weighted-average gross price per share of $22.46 (Note 11). During January 2022, we sold 4,281,576 common shares under our ATM program for gross proceeds of $96.3 million, at an average gross price of $22.48, or $92.5 million net of issuance costs (Note 18).

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RESULTS OF OPERATIONS

See Note 13 in the Notes to Consolidated Financial Statements for an overview of our three reportable segments.

Comparison of Results for the Year Ended December 31, 2021 to the Year Ended December 31, 2020 (As Restated)

The results of operations by reportable segment for the year ended December 31, 2021 compared to the year ended December 31, 2020 (As Restated) are summarized in the table below (in millions, totals may not add due to rounding):

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

Core Portfolio

The results of operations for our Core Portfolio segment are depicted in the table above under the headings labeled “Core.” Segment net income attributable to Acadia for our Core Portfolio increased $23.2 million for the year ended December 31, 2021 compared to the prior year as a result of the changes further described below.

Revenues for our Core Portfolio increased $21.0 million for the year ended December 31, 2021 compared to the prior year primarily due to (i) $14.9 million decrease in credit loss reserves in 2021 primarily related to additional COVID-19 Pandemic reserves in 2020 (Note 12), (ii) $5.1 million from the reversal of reserved amounts for cash received on past due balances, (iii) $2.5 million related to the consolidation of Town Center in 2020 (Note 5), (iv) $2.5 million for the write-off of a below-market lease at a property, (v) $2.2 million from increased tenant recoveries due to higher operating expenses including real estate taxes, and (vi) $1.8 million for higher termination income in 2021 for vacated tenants. These increases were partially offset by (i) decreases in revenues of $4.8 million for tenants that vacated during 2020, (ii) $2.0 million from an additional increase in abatements due to the COVID-19 Pandemic in 2021 and (iii) $1.0 million for property dispositions in 2021.

Depreciation and amortization for our Core Portfolio decreased $7.0 million for the year ended December 31, 2021 compared to the prior year primarily due to the write off of deferred leasing and tenant improvement costs associated with tenants that vacated during 2020 (Note 7).

The gain on disposition of properties for our Core Portfolio of $4.4 million for the year ended December 31, 2021 relates to the sale of 60 Orange Street (Note 3).

Equity in earnings (losses) of unconsolidated affiliates for our Core Portfolio increased $1.3 million for the year ended December 31, 2021 compared to the prior year as a result of a $2.5 million decrease in credit loss reserves at unconsolidated properties related to the COVID-19 Pandemic (Note 12) in 2021 offset by $1.4 million from the consolidation of Town Center in 2020.

Interest expense for our Core Portfolio decreased $3.7 million for the year ended December 31, 2021 compared to the prior year primarily due to (i) $1.8 million from default interest on a loan that was paid off in 2020, (ii) $1.2 million from higher average outstanding borrowings in 2020 and (iii) $1.2 million from the modification of a financing lease to an operating lease in 2020. These decreases were offset by $0.7 million due to higher loan cost amortization in 2021.

Realized and unrealized holding gains on investments and other for our Core Portfolio of $18.6 million in 2020 is due to a gain on debt extinguishment of $18.3 million related to the Brandywine Holdings note (Note 8).

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Net loss (income) attributable to noncontrolling interests for our Core Portfolio decreased $3.5 million for the year ended December 31, 2021 compared to the prior year based on the noncontrolling interests’ share of the variances discussed above.

Funds

The results of operations for our Funds segment are depicted in the table above under the headings labeled “Funds.” Segment net income attributable to Acadia for the Funds increased $17.3 million for the year ended December 31, 2021 compared to the prior year as a result of the changes described below.

Revenues for the Funds increased $20.6 million for the year ended December 31, 2021 compared to the prior year primarily due to (i) $22.2 million from a decrease in credit loss reserves in 2021 primarily related to additional COVID-19 Pandemic reserves in 2020 (Note 12), (ii) $4.5 million from the reversal of reserved amounts for cash received on past due balances (iii) $3.6 million from property acquisitions in 2021, and (iv) $1.4 million from an increase in percentage rent in 2021. These increases were partially offset by decreases of (i) $3.3 million for tenants that vacated during 2020, (ii) $3.1 million from property dispositions in 2021, and (iii) $2.5 million from an increase in rent abatements related to the COVID-19 Pandemic in 2021.

Depreciation and amortization for the Funds decreased $16.8 million for the year ended December 31, 2021 compared to the prior year primarily due to the write-off of costs associated with tenants that vacated during 2020 (Note 7).

Property operating expenses, other operating and real estate taxes for the Funds increased $1.1 million for the year ended December 31, 2021 compared to the prior year primarily due to an overall increase of operating expenses across our properties in 2021 following reduced levels in 2020 as a result of the COVID-19 Pandemic (Note 12).

Impairment charges for the Funds decreased $75.3 million for the year ended December 31, 2021 compared to the prior year (Note 9). Impairment charges totaling $9.9 million for the Funds in 2021 relate to 27 East 61st and 210 Bowery in Fund IV. Impairment charges totaling $85.2 million during 2020 for the Funds relate to $33.8 million for 654 Broadway and Cortlandt Crossing in Fund III and $51.4 million for 717 N Michigan, 801 Madison and 146 Geary Street in Fund IV.

Gain on disposition of properties for the Funds increased $5.4 million for the year ended December 31, 2021 compared to the prior year due to dispositions of 654 Broadway at Fund III, and the NE Grocer Portfolio and 110 University at Fund IV in 2021 compared to the sale of Colonie Plaza in 2020 at Fund IV (Note 3, Note 12).

Equity in earnings (losses) of unconsolidated affiliates for the Funds increased $7.2 million for the year ended December 31, 2021 compared to the prior year primarily due to the $3.3 million due to COVID-19 Pandemic related reserves at properties in 2020 (Note 12) and $3.2 million gain on sale related to two land parcels at Riverdale Family Center in Fund V (Note 5) in 2021.

Interest expense for the Funds increased $2.1 million for the year ended December 31, 2021 compared to the prior year due to a $3.7 million decrease in interest capitalized in 2021, $0.7 million from increased loan cost amortization in 2021 and a $0.4 million increase related to higher average outstanding borrowings in 2021. These increases were primarily offset by $2.3 million from lower average interest rates in 2021.

Realized and unrealized holding gains on investments and other for the Funds decreased $41.7 million for the year ended December 31, 2021 compared to the prior year . Realized and unrealized holding losses on investments and other includes primarily a $51.9 million mark-to-market adjustment on the Investment in Albertsons (Note 5) during the year ended December 31, 2021 compared to a $72.4 million mark-to-market adjustment and a $23.2 million net realized gain on disposition of shares related to the Investment in Albertsons in 2020.

Net loss (income) attributable to noncontrolling interests for the Funds increased $62.8 million for the year ended December 31, 2021 compared to the prior year based on the noncontrolling interests’ share of the variances discussed above. Net loss attributable to noncontrolling interests in the Funds includes asset management fees earned by the Company of $11.1 million and $15.2 million for the year ended December 31, 2021 and 2020, respectively.

Structured Financing

The results of operations for our Structured Financing segment are depicted in the table above under the headings labeled “SF.” Realized and unrealized holding gains on investments and other for the Structured Financing portfolio decreased $3.9 million for the year ended December 31, 2021 compared to the prior year primarily due to the increase in a CECL allowance on a note in 2021.

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Unallocated

The Company does not allocate general and administrative expense and income taxes to its reportable segments. These unallocated amounts are depicted in the table above under the headings labeled “Total.” Unallocated general and administrative expense increased $4.3 million for the year ended December 31, 2021 compared to the prior year due to increased compensation expense primarily attributable to an increase in the number of employees and the valuation of equity grants in 2021.

Comparison of Results for the Year Ended December 31, 2020 (As Restated) to the Year Ended December 31, 2019 (As Restated)

The results of operations by reportable segment for the year ended December 31, 2020 (As Restated) compared to the year ended December 31, 2019 (As Restated) are summarized in the table below (in millions, totals may not add due to rounding):

[[GREPCENT_TABLE]]
[["","","Year Ended","","","Year Ended"],["","","December 31, 2020 (As Restated)","","","December 31, 2019 (As Restated)","","","Increase (Decrease)"],["","","Core","","","Funds","","","SF","","","Total","","","Core","","","Funds","","","SF","","","Total","","","Core","","","Funds","","","SF","","","Total"],["Revenues","","$","160.3","","","$","90.6","","","$","\u2014","","","$","250.9","","","$","173.2","","","$","116.4","","","$","\u2014","","","$","289.6","","","$","(12.9",")","","$","(25.8",")","","$","\u2014","","","$","(38.7",")"],["Depreciation and amortization","","","(76.1",")","","","(71.1",")","","","\u2014","","","","(147.2",")","","","(61.8",")","","","(60.8",")","","","\u2014","","","","(122.6",")","","","14.3","","","","10.3","","","","\u2014","","","","24.6"],["Property operating expenses, other operating and real estate taxes","","","(57.2",")","","","(40.8",")","","","\u2014","","","","(98.0",")","","","(47.0",")","","","(41.2",")","","","\u2014","","","","(88.2",")","","","10.2","","","","(0.4",")","","","\u2014","","","","9.8"],["General and administrative expenses","","","\u2014","","","","\u2014","","","","\u2014","","","","(35.8",")","","","\u2014","","","","\u2014","","","","\u2014","","","","(34.3",")","","","\u2014","","","","\u2014","","","","\u2014","","","","1.5"],["Impairment charges","","","(0.4",")","","","(85.2",")","","","\u2014","","","","(85.6",")","","","\u2014","","","","(1.7",")","","","\u2014","","","","(1.7",")","","","0.4","","","","83.5","","","","\u2014","","","","83.9"],["Gain on disposition of properties","","","0.2","","","","0.5","","","","\u2014","","","","0.7","","","","16.8","","","","13.6","","","","\u2014","","","","30.3","","","","(16.6",")","","","(13.1",")","","","\u2014","","","","(29.6",")"],["Operating income (loss)","","","26.6","","","","(105.9",")","","","\u2014","","","","(115.1",")","","","81.1","","","","26.3","","","","\u2014","","","","73.1","","","","(54.5",")","","","(132.2",")","","","\u2014","","","","(188.2",")"],["Interest income","","","\u2014","","","","\u2014","","","","9.0","","","","9.0","","","","\u2014","","","","\u2014","","","","8.0","","","","8.0","","","","\u2014","","","","\u2014","","","","1.0","","","","1.0"],["Equity in earnings (losses) of unconsolidated affiliates","","","(0.9",")","","","(2.2",")","","","\u2014","","","","(3.1",")","","","9.0","","","","(3.1",")","","","\u2014","","","","5.9","","","","(9.9",")","","","0.9","","","","\u2014","","","","(9.0",")"],["Interest expense","","","(33.2",")","","","(36.5",")","","","\u2014","","","","(69.7",")","","","(28.3",")","","","(40.9",")","","","\u2014","","","","(69.2",")","","","4.9","","","","(4.4",")","","","\u2014","","","","0.5"],["Realized and unrealized holding gains on investments and other","","","18.6","","","","95.4","","","","(0.6",")","","","113.4","","","","0.3","","","","6.6","","","","\u2014","","","","6.9","","","","18.3","","","","88.8","","","","(0.6",")","","","106.5"],["Income tax provision","","","\u2014","","","","\u2014","","","","\u2014","","","","(0.3",")","","","\u2014","","","","\u2014","","","","\u2014","","","","(1.5",")","","","\u2014","","","","\u2014","","","","\u2014","","","","1.2"],["Net income (loss)","","","11.2","","","","(49.2",")","","","8.4","","","","(65.7",")","","","62.1","","","","(11.1",")","","","8.0","","","","23.2","","","","(50.9",")","","","(38.1",")","","","0.4","","","","(88.9",")"],["Net loss (income) attributable to noncontrolling interests","","","(5.8",")","","","62.6","","","","\u2014","","","","56.7","","","","0.3","","","","30.1","","","","\u2014","","","","30.5","","","","6.1","","","","(32.5",")","","","\u2014","","","","(26.2",")"],["Net income attributable to Acadia","","$","5.3","","","$","13.4","","","$","8.4","","","$","(9.0",")","","$","62.5","","","$","19.0","","","$","8.0","","","$","53.7","","","$","(57.2",")","","$","(5.6",")","","$","0.4","","","$","(62.7",")"]]
[[/GREPCENT_TABLE]]

Core Portfolio

The results of operations for our Core Portfolio segment are depicted in the table above under the headings labeled “Core.” Segment net income attributable to Acadia for our Core Portfolio decreased $57.2 million for the year ended December 31, 2020 compared to the prior year as a result of the changes further described below.

Revenues for our Core Portfolio decreased $12.9 million for the year ended December 31, 2020 compared to the prior year primarily due to (i) a $21.3 million increase in credit loss reserves (comprised of $12.9 million and $8.4 million of billed rent and straight-line rent, respectively) in 2020 related to the COVID-19 Pandemic (Note 12); (ii) the write-off of a below-market lease in the prior year period related to a tenant that vacated for $5.7 million, (iii) $4.0 million from tenant bankruptcies and (iv) $1.0 million from property dispositions in 2019. These decreases were partially offset by (i) $8.9 million related to the consolidation of Town Center in 2020 (Note 5) and (ii) additional rents of $8.1 million from Core Portfolio property acquisitions during 2019 and 2020 (Note 3).

Depreciation and amortization for our Core Portfolio increased $14.3 million for the year ended December 31, 2020 compared to the prior year primarily due to $6.1 million from the consolidation of Town Center, $5.1 million from the write-off of unamortized tenant improvements and leasing commissions related to a vacating tenant in 2020, and $4.2 million from Core Portfolio property acquisitions in 2019 and 2020.

Property operating expenses, other operating and real estate taxes for our Core Portfolio increased $10.2 million for the year ended December 31, 2020 compared to the prior year primarily due to $7.1 million for Brandywine Holdings litigation (Note 8), $1.8 million related to the consolidation of Town Center and $1.1 million from Core Portfolio property acquisitions in 2019 and 2020.

Gain on disposition of properties for our Core Portfolio decreased $16.6 million for the year ended December 31, 2020 compared to the prior year Gain on disposition of properties of $0.2 million in 2020 was related to two land parcel sales compared to $16.8 million for the sale of Pacesetter Park in 2019 (Note 3).

47

Equity in earnings (losses) of unconsolidated affiliates for our Core Portfolio decreased $9.9 million for the year ended December 31, 2020 compared to the prior year due to $5.4 million from the consolidation of Town Center in 2020 as well as a $4.5 million increase in credit loss reserves at unconsolidated properties related to the COVID-19 Pandemic (Note 12).

Interest expense for our Core Portfolio increased $4.9 million for the year ended December 31, 2020 compared to the prior year primarily due to higher average outstanding borrowings in 2020.

Realized and unrealized holding gains on investments and other for our Core Portfolio of $18.3 million in 2020 is due to a gain on debt extinguishment related to the Brandywine Holdings note (Note 8).

Net loss (income) attributable to noncontrolling interests for our Core Portfolio increased $6.1 million for the year ended December 31, 2020 compared to the prior year based on the noncontrolling interests’ share of the variances discussed above.

Funds

The results of operations for our Funds segment are depicted in the table above under the headings labeled “Funds.” Segment net income attributable to Acadia for the Funds decreased $5.6 million for the year ended December 31, 2020 compared to the prior year as a result of the changes described below.

Revenues for the Funds decreased $25.8 million for the year ended December 31, 2020 compared to the prior year primarily due to (i) a $25.6 million increase in credit loss reserves (comprised of $11.9 million and $13.7 million of billed rent and straight-line rent, respectively) in 2020 primarily related to the COVID-19 Pandemic (Note 12); (ii) $5.1 million from the acceleration of amortization on a below-market lease in 2019, (iii) $4.3 million from Fund property dispositions (Note 3) and (iv) $1.4 million from tenant bankruptcies. These decreases were partially offset $8.8 million from Fund property acquisitions in 2019.

Depreciation and amortization for the Funds increased $10.3 million for the year ended December 31, 2020 compared to the prior year primarily due to $11.3 million from the write-off of tenant improvements and leasing commissions related to vacated tenants in 2020 and $4.5 million from Fund property acquisitions in 2019 partially offset by $3.5 million for write-offs due to tenant bankruptcies in 2019 and $2.1 million from Fund property dispositions in 2019 and 2020.

Impairment charges for the Funds increased $83.5 million for the year ended December 31, 2020 compared to the prior year (Note 9). Impairment of $85.2 million during 2020 for the Funds relates to $33.8 million in Fund III and $51.4 million in Fund IV. Charges during 2019 relate to $1.7 million in Fund IV.

Gain on disposition of properties for the Funds decreased $13.1 million for the year ended December 31, 2020 compared to the prior year due to $13.6 million for the sale of 3104 M Street and Nostrand Avenue in Fund III and 938 W. North and JFK Plaza in Fund IV during 2019 compared to the sale of Fund IV’s Colonie Plaza during 2020 (Note 3, Note 5).

Interest expense for the Funds decreased $4.4 million for the year ended December 31, 2020 compared to the prior year due to $9.4 million from lower average interest rates in 2020 and $2.7 million from lower loan cost amortization in 2020. These decreases were offset by a $4.5 million decrease in interest capitalized in 2020 due to ceasing capitalization interest on Fund III’s Cortlandt Crossing and Fund IV’s 717 N. Michigan Avenue and a $0.4 million increase related to higher average outstanding borrowings in 2020.

Realized and unrealized holding gains on investments and other for the Funds increased $88.8 million for the year ended December 31, 2020 compared to the prior year due to a $72.4 million mark-to-market adjustment on the Albertson’s IPO shares and a $23.2 million net realized gain on disposition of Albertson’s shares during 2020 (Note 5). These increases were primarily offset by a $5.0 million New Market Tax Credit transaction at Fund II’s City Point investment and $1.6 million from an incentive fee earned from Fund III’s Storage investment during 2019.

Net loss (income) attributable to noncontrolling interests for the Funds decreased $32.5 million for the year ended December 31, 2020 compared to the prior year based on the noncontrolling interests’ share of the variances discussed above. Net loss attributable to noncontrolling interests in the Funds includes asset management fees earned by the Company of $15.2 million and $17.5 million for the year ended December 31, 2020 and 2019, respectively.

Structured Financing

The results of operations for our Structured Financing segment are depicted in the table above under the headings labeled “SF.” Interest income for the Structured Financing portfolio increased $0.4 million for the year ended December 31, 2020 compared to the prior year primarily due to $5.9 million of additional interest income from new notes issued in 2020 and 2019 partially offset by $4.1 million from the conversion of the Brandywine Note Receivable to equity in 2020 (Note 5) and the payoff of a Fund IV note during 2019 (Note 4).

48

Unallocated

The Company does not allocate general and administrative expense and income taxes to its reportable segments. These unallocated amounts are depicted in the table above under the headings labeled “Total.” Unallocated general and administrative expense increased $1.5 million for the year ended December 31, 2020 compared to the prior year due to an increase in stock based compensation in 2020. Unallocated income taxes increased $1.2 million for the year ended December 31, 2020 compared to the prior year due to the establishment of a $1.0 million deferred tax asset reserve at the Fund III Taxable REIT Subsidiary (“TRS”) which was primarily offset by the newly available carryback of net operating losses under Federal rules in 2020. In 2019, the Company established a $1.7 million deferred tax asset reserve at the Core TRS.

Restatement of Quarterly Financial Data

As announced on February 15, 2022, the Company has restated its unaudited interim financial statements for the three months ended March 31, 2021 and 2020, the three and six months ended June 30, 2021 and 2020, the three and nine months ended September 30, 2021 and 2020 and the three months ended December 31, 2020. Detailed restatements of the Company's consolidated quarterly financial statements are provided in Note 17. The Company determined that a comprehensive restatement of the results of operations and liquidity for each quarterly period was not as meaningful to the reader of the financial statements as the summary below.

All adjustments relate to one of the following categories:

(a)
an error in accounting treatment at the time of formation related to the improper consolidation of the two Fund Investments that have been adjusted from consolidated investments to equity in earnings from unconsolidated affiliates. These corrections had no impact on net income (loss), FFO, Core NOI or distributions in excess of accumulated earnings. Additionally, during the Restatement periods, the Fund Investments did not have any significant transactions (new borrowings, acquisitions, or dispositions) other than their ongoing rental operations in the normal course of business that would otherwise be discussed in management's discussion of results of operations or liquidity.

(b)
errors related to other immaterial previously unrecorded adjustments, which were also recorded as part of the Restatement. These adjustments were primarily adjustments which the Company deemed immaterial in prior periods. The total impact of these previously unrecorded adjustments was:

o
a reduction in each of net income attributable to Acadia and FFO of $0.3 million ($0.01 per share for net income and $0.00 for FFO) and $0.0 million ($0.00 per share), for the three months ended March 31, 2021 and 2020, respectively;

o
a reduction in each of net income attributable to Acadia and FFO of $0.2 million ($0.00 per share for net income and $0.01 for FFO) and $0.6 million ($0.01 per share) for the three and six months ended June 30, 2021, respectively;

o
a reduction in net income attributable to Acadia of $0.1 million ($0.00 per share) and $0.1 million ($0.00 per share) for the three and six months ended June 30, 2020, respectively; a reduction in FFO of $0.0 million ($0.00 per share) and $0.0 million ($0.00 per share) for the three and six months ended June 30, 2020, respectively;

o
a reduction in each of net income attributable to Acadia and FFO of $0.1 million ($0.00 per share) and $0.6 million ($0.01 per share), for the three and nine months ended September 30, 2021, respectively;

o
a reduction in net income attributable to Acadia of $0.0 million ($0.00 per share) and $0.1 million ($0.00 per share), for the three and nine months ended September 30, 2020, respectively; a reduction in FFO of $0.0 million ($0.00 per share) and $0.0 million ($0.00 per share), for the three and nine months ended September 30, 2020, respectively;

o
a reduction in each of net income attributable to Acadia and FFO of $0.1 million ($0.01 per share) for the three months ended December 31, 2020; and

o
The immaterial previously unrecorded adjustments include the recognition of additional reserves for the Company's Structured Financing notes receivable (Note 4) of $1.4 million or $0.3 million at the Company's share, for the three months ended March 31, 2021; $0.7 million and $2.3 million, or $0.2 million and $0.5 million at the Company's share for the three and six months ended June 30, 2021; $0.8 million and $3.1 million, or $0.2 million and $0.7 million at the Company's share, for the three and nine months ended September 30, 2021; and $0.7 million or $0.1 million at the Company's share for the three months ended December 31, 2020.

None of the errors significantly impacted Core NOI for any of the Restatement Periods.

49

SUPPLEMENTAL FINANCIAL MEASURES

Net Property Operating Income

The following discussion of net property operating income (“NOI”) and rent spreads on new and renewal leases includes the activity from both our consolidated and our pro-rata share of unconsolidated properties within our Core Portfolio. Our Funds invest primarily in properties that typically require significant leasing and development. Given that the Funds are finite-life investment vehicles, these properties are sold following stabilization. For these reasons, we believe NOI and rent spreads are not meaningful measures for our Fund investments.

NOI represents property revenues less property expenses. We consider NOI and rent spreads on new and renewal leases for our Core Portfolio to be appropriate supplemental disclosures of Core Portfolio operating performance due to their widespread acceptance and use within the REIT investor and analyst communities. NOI and rent spreads on new and renewal leases are presented to assist investors in analyzing our property performance, however, our method of calculating these may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

A reconciliation of consolidated operating income to net operating income (loss) - Core Portfolio follows (in thousands):

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2021","","","2020","","","2019"],["","","","","","(As Restated)","","","(As Restated)"],["Consolidated operating income (loss) (a)","","$","30,656","","","$","(115,062",")","","$","73,078"],["Add back:"],["General and administrative","","","40,125","","","","35,798","","","","34,299"],["Depreciation and amortization","","","123,439","","","","147,229","","","","122,580"],["Impairment charges","","","9,925","","","","85,598","","","","1,721"],["Less:"],["Above/below-market rent, straight-line rent and other adjustments (a)","","","(19,488",")","","","13,581","","","","(23,292",")"],["Gain on disposition of properties","","","(10,521",")","","","(683",")","","","(30,324",")"],["Consolidated NOI","","","174,136","","","","166,461","","","","178,062"],["Noncontrolling interest in consolidated NOI","","","(48,401",")","","","(46,316",")","","","(50,213",")"],["Less: Operating Partnership's interest in Fund NOI included above","","","(12,337",")","","","(11,518",")","","","(13,556",")"],["Add: Operating Partnership's share of unconsolidated joint ventures NOI (b)","","","13,811","","","","15,659","","","","25,949"],["NOI - Core Portfolio","","$","127,209","","","$","124,286","","","$","140,242"]]
[[/GREPCENT_TABLE]]

a)
Includes straight-line rent reserves. See Note 1 for additional information about straight-line rent reserves and adjustments for the periods presented.

b)
Does not include the Operating Partnership’s share of NOI from unconsolidated joint ventures within the Funds.

Same-Property NOI includes Core Portfolio properties that we owned for both the current and prior periods presented, but excludes those properties which we acquired, sold or expected to sell, and developed during these periods. The following table summarizes Same-Property NOI for our Core Portfolio (in thousands):

[[GREPCENT_TABLE]]
[["","","Three Months Ended December 31,","","","Year Ended December 31,"],["","","2021","","","2020","","","2021","","","2020"],["Core Portfolio NOI","","$","32,476","","","$","30,556","","","$","127,209","","","$","124,286"],["Less properties excluded from Same-Property NOI","","","(3,832",")","","","(2,798",")","","","(9,992",")","","","(8,856",")"],["Same-Property NOI","","$","28,644","","","$","27,758","","","$","117,217","","","$","115,430"],["Percent change from prior year period","","","3.2","%","","","","","","1.5","%"],["Components of Same-Property NOI:"],["Same-Property Revenues","","$","42,525","","","$","40,424","","","$","171,028","","","$","164,499"],["Same-Property Operating Expenses","","","(13,881",")","","","(12,666",")","","","(53,811",")","","","(49,069",")"],["Same-Property NOI","","$","28,644","","","$","27,758","","","$","117,217","","","$","115,430"]]
[[/GREPCENT_TABLE]]

50

Rent Spreads on Core Portfolio New and Renewal Leases

The following table summarizes rent spreads on both a cash basis and straight-line basis for new and renewal leases based on leases executed within our Core Portfolio for the periods presented. Cash basis represents a comparison of rent most recently paid on the previous lease as compared to the initial rent paid on the new lease. Straight-line basis represents a comparison of rents as adjusted for contractual escalations, abated rent and lease incentives for the same comparable leases.

[[GREPCENT_TABLE]]
[["","","Three Months Ended December 31, 2021","","","Year Ended December 31, 2021"],["Core Portfolio New and Renewal Leases","","Cash Basis","","","Straight- Line Basis","","","Cash Basis","","","Straight- Line Basis"],["Number of new and renewal leases executed","","","21","","","","21","","","","66","","","","66"],["GLA commencing","","","118,679","","","","118,679","","","","449,095","","","","449,095"],["New base rent","","$","28.82","","","$","30.29","","","$","26.73","","","$","27.80"],["Expiring base rent","","$","19.27","","","$","18.95","","","$","23.47","","","$","22.43"],["Percent growth in base rent","","","49.5","%","","","59.9","%","","","13.9","%","","","23.9","%"],["Average cost per square foot (a)","","$","29.22","","","$","29.22","","","$","12.41","","","$","12.41"],["Weighted average lease term (years)","","","11.3","","","","11.3","","","","7.1","","","","7.1"]]
[[/GREPCENT_TABLE]]

a)
The average cost per square foot includes tenant improvement costs, leasing commissions and tenant allowances.

Funds from Operations

We consider funds from operations (“FFO”) as defined by the National Association of Real Estate Investment Trusts (“NAREIT”) to be an appropriate supplemental disclosure of operating performance for an equity REIT due to its widespread acceptance and use within the REIT and analyst communities. FFO is presented to assist investors in analyzing our performance. It is helpful as it excludes various items included in net income that are not indicative of the operating performance, such as gains (losses) from sales of depreciated property, depreciation and amortization, and impairment of real estate. Our method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. FFO does not represent cash generated from operations as defined by generally accepted accounting principles (“GAAP”) and is not indicative of cash available to fund all cash needs, including distributions. It should not be considered as an alternative to net income for the purpose of evaluating our performance or to cash flows as a measure of liquidity. Consistent with the NAREIT definition, we define FFO as net income (computed in accordance with GAAP), excluding gains (losses) from sales of depreciated property and impairment of depreciable real estate, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Also consistent with NAREIT’s definition of FFO, the Company has elected to include gains and losses incidental to its main business (including those related to its RCP investments such as Albertsons) in FFO. A reconciliation of net income attributable to Acadia to FFO follows (dollars in thousands, except per share amounts):

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2021","","","2020","","","2019"],["","","","","","(As Restated)","","","(As Restated)"],["Net income (loss) attributable to Acadia","","$","23,548","","","$","(8,976",")","","$","53,717"],["Depreciation of real estate and amortization of leasing costs (net of noncontrolling interests' share)","","","93,388","","","","106,220","","","","89,311"],["Impairment charges (net of noncontrolling interests' share)","","","2,294","","","","17,323","","","","395"],["Gain on disposition of properties (net of noncontrolling interests' share)","","","(4,163",")","","","(291",")","","","(19,786",")"],["Income (loss) attributable to Common OP Unit holders","","","1,584","","","","(370",")","","","3,295"],["Distributions - Preferred OP Units","","","492","","","","495","","","","540"],["Funds from operations attributable to Common Shareholders and Common OP Unit holders","","$","117,143","","","$","114,401","","","$","127,472"],["Funds From Operations per Share - Diluted"],["Basic weighted-average shares outstanding, GAAP earnings","","","87,653,818","","","","86,441,922","","","","84,435,826"],["Weighted-average OP Units outstanding","","","5,115,319","","","","4,993,267","","","","5,111,262"],["Basic weighted-average shares and OP Units outstanding, FFO","","","92,769,137","","","","91,435,189","","","","89,547,088"],["Assumed conversion of Preferred OP Units to common shares","","","464,623","","","","464,623","","","","499,345"],["Diluted weighted-average number of Common Shares and Common OP Units outstanding, FFO","","","93,233,760","","","","91,899,812","","","","90,046,433"],["Diluted Funds from operations, per Common Share and Common OP Unit","","$","1.26","","","$","1.24","","","$","1.42"]]
[[/GREPCENT_TABLE]]

51

LIQUIDITY AND CAPITAL RESOURCES

Impact of Restatement

The Restatement (Note 2, Note 17) had the following impact on the Company's liquidity since the last report in which liquidity was discussed:

•
consolidated debt for the Fund Investments (with a balance of $59.7 million at September 30, 2021) is now reported within our unconsolidated (off-balance sheet) debt. See "Off-Balance Sheet Arrangements" section which follows

•
cash of and restricted cash for the Fund Investments (with balances of $1.2 million and $3.5 million, respectively, at September 30, 2021) is no longer included on the Company's balance sheet

Uses of Liquidity and Cash Requirements

Our principal uses of liquidity are (i) distributions to our shareholders and OP unit holders, (ii) investments which include the funding of our capital committed to the Funds and property acquisitions and development/re-tenanting activities within our Core Portfolio, (iii) distributions to our Fund investors, (iv) debt service and loan repayments and (v) share repurchases.

Distributions

In order to qualify as a REIT for federal income tax purposes, we must currently distribute at least 90% of our taxable income to our shareholders. During the year ended December 31, 2021, we paid dividends and distributions on our Common Shares, Common OP Units and Preferred OP Units totaling $42.7 million.

Investments in Real Estate

During the year ended December 31, 2021, we made one Core Portfolio investment for $26.3 million and Fund V acquired three shopping centers totaling $168.6 million, inclusive of transaction costs.

Structured Financing Investments

During the year ended December 31, 2021, we made two Core Portfolio loans totaling $59.0 million within our Structured Financing portfolio, of which $58.0 million was funded (Note 4).

Capital Commitments

During the year ended December 31, 2021, we made capital contributions aggregating $9.5 million to our Funds. At December 31, 2021, our share of the remaining capital commitments to our Funds aggregated $70.3 million as follows:

•
$1.1 million to Fund II. During August 2020, a recallable distribution of $15.7 million was made by Mervyn’s II to its investors, of which our share is $4.5 million. During 2021, Mervyn’s II recalled $11.9 million of the $15.7 million of which our share is $3.4 million.

•
$0.5 million to Fund III. Fund III was launched in May 2007 with total committed capital of $450.0 million of which our share was $89.6 million. During 2015, we acquired an additional interest, which had an original capital commitment of $20.9 million.

•
$9.7 million to Fund IV. Fund IV was launched in May 2012 with total committed capital of $530.0 million of which our share was $122.5 million.

•
$59.0 million to Fund V. Fund V was launched in August 2016 with total committed capital of $520.0 million of which our share is $104.5 million.

Development Activities

During the year ended December 31, 2021, capitalized costs associated with development activities totaled $9 million (Note 3). At December 31, 2021, we had a total of six consolidated and one unconsolidated projects under development or redevelopment for which the estimated total cost to complete these projects through 2025 was $79.2 million to $103.9 million and our share was approximately $45.6 million to $56.8 million.

52

Debt

A summary of our consolidated debt, which includes the full amount of Fund related obligations and excludes our pro rata share of debt at our unconsolidated subsidiaries, is as follows (in thousands):

[[GREPCENT_TABLE]]
[["","","December 31,"],["","","2021","","","2020"],["","","","","","(As Restated)"],["Total Debt - Fixed and Effectively Fixed Rate","","$","1,038,803","","","$","1,124,255"],["Total Debt - Variable Rate","","","780,935","","","","589,019"],["","","","1,819,738","","","","1,713,274"],["Net unamortized debt issuance costs","","","(7,946",")","","","(5,978",")"],["Unamortized premium","","","446","","","","548"],["Total Indebtedness","","$","1,812,238","","","$","1,707,844"]]
[[/GREPCENT_TABLE]]

As of December 31, 2021, our consolidated outstanding mortgage and notes payable aggregated $1,819.7 million, excluding unamortized premium of $0.4 million and unamortized loan costs of $7.9 million, and were collateralized by 37 properties and related tenant leases. Interest rates on our outstanding indebtedness ranged from 1.49% to 5.89% with maturities that ranged from February 2022 to April 2035. Taking into consideration $860.4 million of notional principal under variable to fixed-rate swap agreements currently in effect, $1,038.8 million of the portfolio debt, or 57.1%, was fixed at a 3.91% weighted-average interest rate and $780.9 million, or 42.9% was floating at a 2.44% weighted average interest rate as of December 31, 2021. Our variable-rate debt includes $110.5 million of debt subject to interest rate caps.

Without regard to available extension options, there is $749.5 million of debt maturing in 2022 at a weighted-average interest rate of 3.44%; there is $7.7 million of scheduled principal amortization due in 2022; and our share of scheduled 2022 principal payments and maturities on our unconsolidated debt was $22.7 million at December 31, 2021. In addition, $110.5 million of our total consolidated debt and $42.0 million of our pro-rata share of unconsolidated debt will come due in 2023. As it relates to the aforementioned maturing debt in 2022 and 2023, we have options to extend consolidated debt aggregating $187.2 million and $41.5 million, respectively; however, there can be no assurance that we will be able to successfully execute any or all of its available extension options. As it relates to the remaining maturing debt in 2022 and 2023, we may not have sufficient liquidity on hand to repay such indebtedness, and, therefore, we expect to refinance at least a portion of this indebtedness or select other alternatives based on market conditions as these loans mature; however, there can be no assurance that we will be able to obtain financing at acceptable terms.

Share Repurchase Program

We maintain a share repurchase program under which $122.6 million remains available as of December 31, 2021 (Note 11). The Company did not repurchase any of its Common Shares during the year ended December 31, 2021.

Sources of Liquidity

Our primary sources of capital for funding our short-term (less than 12 months) and long-term (12 months and longer) liquidity needs include (i) the issuance of both public equity and OP Units, (ii) the issuance of both secured and unsecured debt, (iii) unfunded capital commitments from noncontrolling interests within our Funds, (iv) future sales of existing properties, (v) repayments of structured financing investments, and (vi) cash on hand and future cash flow from operating activities. Our cash on hand in our consolidated subsidiaries at December 31, 2021 totaled $17.7 million. Our remaining sources of liquidity are described further below.

ATM Program

We have an ATM Program (Note 11) that provides us with an efficient and low-cost vehicle for raising capital through public equity issuances on an as-we-go basis to fund our capital needs. Through this program, we have been able to effectively “match-fund” the required capital for our Core Portfolio and Fund acquisitions through the issuance of Common Shares over extended periods employing a price averaging strategy. In addition, from time to time, we have issued and intend to continue to issue, equity in follow-on offerings separate from our ATM Program. Net proceeds raised through our ATM Program and follow-on offerings are primarily used for acquisitions, both for our Core Portfolio and our pro-rata share of Fund acquisitions, and for general corporate purposes. During the year ended December 31, 2021, we sold 2,889,371 shares under our ATM Program for gross proceeds of $64.9 million, or $63.9 million net of issuance costs, at a weighted-average gross price per share of $22.46. During January 2022, we sold 4,281,576 Common Shares under our ATM program for gross proceeds of $96.3 million, or $92.5 million net of issuance costs, at a weighted-average gross price per share of $22.48, (Note 18).

53

Fund Capital

During the year ended December 31, 2021, Funds II, IV and V called for capital contributions of $11.9 million, $18.7 million and $9.1 million, respectively, of which our aggregate share was $9.5 million. At December 31, 2021, unfunded capital commitments from noncontrolling interests within our Funds II, III, IV and V were $2.7 million, $1.4 million, $32.2 million and $234.8 million, respectively.

Asset Sales and Exchanges

During the year ended December 31, 2021, we disposed of one consolidated Core property for $16.4 million, five consolidated Fund properties for total proceeds of $49.9 million, two unconsolidated Fund land parcels for $10.5 million, and terminated one Fund ground lease recognizing an aggregate gain of $10.5 million, of which the Company's share was $6.6 million (Note 3, Note 12).

Structured Financing Repayments

As previously discussed, during the year ended December 31, 2021, we received no Structured Financing repayments. A Core Portfolio note for $17.8 million matured on April 1, 2020 and one $5.3 million Fund note matured on July 1, 2020, but neither has been repaid. The Company foreclosed on the $5.3 million note in 2022 (Note 18). Scheduled maturities of Structured Financing loans include $30.0 million maturing during 2022 (Note 4).

Financing and Debt

As of December 31, 2021, we had $199.4 million of additional capacity under existing consolidated Core and Fund revolving debt facilities. In addition, at that date within our Core and Fund portfolios, we had 84 unleveraged consolidated properties with an aggregate carrying value of approximately $1.7 billion, although there can be no assurance that we would be able to obtain financing for these properties at favorable terms, if at all.

HISTORICAL CASH FLOW

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

The following table compares the historical cash flow for the year ended December 31, 2021 with the cash flow for the year ended December 31, 2020 (in millions, totals may not add due to rounding):

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2021","","","2020","","","Variance"],["","","","","","(As Restated)"],["Net cash provided by operating activities","","$","105.0","","","$","103.9","","","$","1.1"],["Net cash used in investing activities","","","(198.5",")","","","(100.9",")","","","(97.6",")"],["Net cash provided by (used in) financing activities","","","91.3","","","","(1.3",")","","","92.6"],["(Decrease) increase in cash and restricted cash","","$","(2.2",")","","$","1.8","","","$","(4.0",")"]]
[[/GREPCENT_TABLE]]

Operating Activities

Our operating activities provided $1.1 million more cash during the year ended December 31, 2021 as compared to the year ended December 31, 2020, primarily due to an increase in cash receipts from tenants in 2021 offset by a decrease from the monetization of the Company's Investment in Albertsons in 2020.

Investing Activities

During the year ended December 31, 2021 as compared to the year ended December 31, 2020, our investing activities used $97.6 million more cash, primarily due to (i) $140.8 million more cash used to acquire properties in 2021 offset by $43.0 million more cash received from the disposition of properties.

54

Financing Activities

Our financing activities provided $92.6 million more cash during the year ended December 31, 2021 as compared to the year ended December 31, 2020, primarily from (i) $63.9 million more cash provided by the sale of Common Shares, (ii) $22.4 million less cash from the repurchase of common shares (iii) $20.9 million more cash provided from net borrowings and (iii) $10.7 million less cash used in dividends paid to Common Shareholders. These sources of cash were partially offset by (i) $22.0 million less cash provided from contributions from noncontrolling interests and (ii) $5.2 million more cash used for financing costs.

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

The following table compares the historical cash flow for the year ended December 31, 2020 year ended with the cash flow for the year ended December 31, 2019 (in millions, totals may not add due to rounding):

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2020","","","2019","","","Variance"],["","","(As Restated)","","","(As Restated)"],["Net cash provided by operating activities","","$","103.9","","","$","131.4","","","$","(27.5",")"],["Net cash used in investing activities","","","(100.9",")","","","(410.5",")","","","309.6"],["Net cash (used in) provided by financing activities","","","(1.3",")","","","274.0","","","","(275.3",")"],["Increase (decrease) in cash and restricted cash","","$","1.8","","","$","(5.2",")","","$","7.0"]]
[[/GREPCENT_TABLE]]

Operating Activities

Our operating activities provided $27.5 million less cash during the year ended December 31, 2020 as compared to the year ended December 31, 2019, primarily due to a decrease in cash receipts from tenants because of the COVID-19 Pandemic partially offset by the monetization of the Company's Investment in Albertsons in 2020, and $10.0 million from the collection of accrued interest on a note receivable in 2019.

Investing Activities

During the year ended December 31, 2020 as compared to the year ended December 31, 2019, our investing activities used $309.6 million less cash, primarily due to (i) $334.8 million less cash used in acquisition and lease of properties, (ii) $150.4 million less cash used in investments in unconsolidated affiliates, and (iii) $50.8 million less cash used in development, construction and property improvement costs. These sources of cash were partially offset by (i) $91.3 million less cash received from return of capital from unconsolidated affiliates, (ii) $67.8 million less cash received from the disposition of properties, (iii) $55.4 million more cash used to issue notes receivable, and (iv) $15.3 million less cash received from proceeds of notes receivable.

Financing Activities

Our financing activities provided $275.3 million less cash during the year ended December 31, 2020 as compared to the year ended December 31, 2019, primarily from (i) $145.5 million less cash received from the sale of Common Shares, (ii) $117.8 million less cash provided from net borrowings, (iii) $69.9 million less cash used for distributions to noncontrolling interests, (iv) $43.7 million less cash used in dividends paid to Common Shareholders and (v) $22.4 million more cash used to repurchase Common Shares. These sources of cash were partially offset by (i) $109.2 million less cash provided from contributions from noncontrolling interests and (ii) $4.4 million less cash used for financing costs.

55

OFF-BALANCE SHEET ARRANGEMENTS

We have the following investments made through joint ventures for the purpose of investing in operating properties. We account for these investments using the equity method of accounting. As such, our financial statements reflect our investment and our share of income and loss from, but not the individual assets and liabilities, of these joint ventures.

See Note 5 in the Notes to Consolidated Financial Statements, for a discussion of our unconsolidated investments. The Operating Partnership’s pro-rata share of unconsolidated non-recourse debt related to those investments is as follows (dollars in millions):

[[GREPCENT_TABLE]]
[["","","Operating Partnership","","","December 31, 2021"],["Investment","","Ownership Percentage","","","Pro-rata Share of Mortgage Debt","","","Effective Interest Rate (a)","","","Maturity Date"],["Eden Square","","","22.8","%","","$","5.2","","","","2.46","%","","Mar 2022"],["Family Center at Riverdale (b)","","","18.0","%","","","4.4","","","","3.68","%","","May 2022"],["640 Broadway (c)","","","15.5","%","","","5.6","","","","3.00","%","","July 2022"],["Promenade at Manassas (c)","","","22.8","%","","","6.3","","","","4.57","%","","Dec 2022"],["Gotham Plaza","","","49.0","%","","","9.0","","","","5.09","%","","Jun 2023"],["Renaissance Portfolio","","","20.0","%","","","32.0","","","","3.81","%","","Aug 2023"],["3104 M Street","","","20.0","%","","","0.8","","","","3.75","%","","Jan 2024"],["Crossroads","","","49.0","%","","","30.5","","","","3.94","%","","Oct 2024"],["Tri-City Plaza (c)","","","18.1","%","","","7.0","","","","3.01","%","","Oct 2024"],["Frederick Crossing (c)","","","18.1","%","","","4.4","","","","3.26","%","","Dec 2024"],["Paramus Plaza (b)","","","11.6","%","","","3.3","","","","2.41","%","","Dec 2024"],["Frederick County Square (c)","","","18.1","%","","","4.0","","","","4.00","%","","Jan 2025"],["840 N. Michigan","","","88.4","%","","","65.0","","","","4.36","%","","Feb 2025"],["650 Bald Hill Road","","","20.8","%","","","3.3","","","","3.75","%","","Jun 2026"],["Georgetown Portfolio","","","50.0","%","","","7.7","","","","4.72","%","","Dec 2027"],["Total","","","","","$","188.5"]]
[[/GREPCENT_TABLE]]

a)
Effective interest rates incorporate the effect of interest rate swaps and caps that were in effect at December 31, 2021, where applicable.

b)
The debt has two available 12-month extension options.

c)
The debt has one available 12-month extension option.

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CRITICAL ACCOUNTING ESTIMATES

Management’s discussion and analysis of financial condition and results of operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these Consolidated Financial Statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect the significant judgments and estimates used by us in the preparation of our Consolidated Financial Statements.

Impairment of Properties

On a periodic basis, we assess whether there are any indicators that the value of real estate assets, including undeveloped land and construction in progress, may be impaired. A property’s value is impaired only if the estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property are less than the carrying value of the property. The determination of undiscounted cash flows requires significant estimates by management. In management’s estimate of cash flows, it considers factors such as expected future sale of an asset or development alternatives, capitalization rates and the undiscounted future cash flows analysis, which is probability-weighted based upon management’s best estimate of the likelihood of the alternative courses of action. Expected future cash flows and recoverability conclusions could be materially impacted by changes in items such as future leasing activity, occupancy, property operating costs, market pricing, our view or strategy relative to a tenant’s business or industry, the manner in which a property is used and the expected hold period of an asset. Subsequent changes in estimated undiscounted cash flows arising from changes in anticipated actions could affect the determination of whether an impairment exists and whether the effects could have a material impact on the Company’s net income. To the extent an impairment has occurred, the loss will be measured as the excess of the carrying amount of the property over the fair value of the property.

The Company is required to make subjective assessments as to whether there are impairments in the value of its real estate properties and other investments. These assessments have a direct impact on the Company’s estimates of the projected future cash flows, anticipated holding periods or market conditions change, its evaluation of the impairment charges may be different, and such differences could be material to the Company’s consolidated financial statements. Plans to hold properties over longer periods decrease the likelihood of recording impairment losses.

During 2021, 2020 and 2019, the Company recognized impairment charges on properties (including right-of-use assets) of $9.9 million, $85.6 million and $1.7 million, respectively, reflecting additional impairments during 2020 due to the impact of the COVID-19 Pandemic. See Note 9 for a discussion of impairments recognized during the periods presented.

Investments in and Advances to Unconsolidated Joint Ventures

We periodically review our investment in unconsolidated joint ventures and other cost-method investments for other-than-temporary declines in market value. An impairment charge is recorded for a decline that is considered to be other-than-temporary as a reduction in the carrying value of the investment.

During 2020, the Company impaired an investment in an unconsolidated venture resulting in a charge of $0.4 million. See Note 9 for a discussion of impairments recognized during the periods presented.

Bad Debts

We assess the collectability of our accounts receivable related to tenant revenues under ASC Topic 842 “Leases” (“ASC 842”). Management exercises judgment in assessing collectability and considers customer credit worthiness, assessment of risk associated with the tenant, and current economic trends, among other factors. In addition to the lease-specific collectability assessment performed under ASC 842, the Company may also recognize a general reserve based on the Company’s historical collection experience, as provided under ASC 450-20, as a reduction to Lease income for its portfolio of operating lease receivables which are not expected to be fully collectible. Billed tenant receivables, and receivables arising from the straight-lining of rents, are reserved when management deems the collectability of substantially all future lease payments from a specific lease is not probable, at which point, the Company will begin recognizing revenue from such leases prospectively on a cash basis, based on actual amounts received. If the Company subsequently determines that it is probable it will collect substantially all of the lessee’s remaining lease payments under the lease term, the Company will reinstate the receivables balance, including those arising from the straight-lining of rents, adjusting for the amount related to the period when the lease was accounted for on a cash basis.

Rents receivable at December 31, 2021 and 2020 are shown net of an allowance for doubtful accounts of $38.5 million and $45.0 million, respectively. Rental income for the years ended December 31, 2021, 2020 and 2019 are reported net of adjustments to allowances for doubtful

57

accounts of $0.1 million, $46.4 million and $4.5 million, respectively, reflecting additional reserves and write-offs during 2020 due to the impact of the COVID-19 Pandemic.

Real Estate

Real estate assets are stated at cost less accumulated depreciation. Expenditures for acquisition, development, construction and improvement of properties, as well as significant renovations are capitalized. Interest costs are capitalized until construction is substantially complete. Construction in progress includes costs for significant property expansion and development. Depreciation is computed on the straight-line basis over estimated useful lives of 40 years for buildings, the shorter of the useful life or lease term for tenant improvements and five years for furniture, fixtures and equipment. Expenditures for maintenance and repairs are charged to operations as incurred.

Upon acquisitions of real estate, we assess the fair value of acquired assets (including land, buildings and improvements, and identified intangibles such as above and below-market leases and acquired in-place leases) and acquired liabilities in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805 “Business Combinations” and ASC Topic 350 “Intangibles – Goodwill and Other,” and allocate purchase price based on these assessments. When acquisitions of properties do not meet the criteria for business combinations, as is the case for the majority of the Company’s acquisitions, no goodwill is recorded and acquisition costs are capitalized. We assess fair value based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known trends, and market/economic conditions that may affect the property.

Revenue Recognition and Accounts Receivable

Leases with tenants are accounted for as operating leases. Minimum rents are recognized on a straight-line basis over the non-cancelable term of the respective leases. Certain of these leases also provide for percentage rents based upon the level of sales achieved by the tenant. Percentage rent is recognized in the period when the tenants’ sales breakpoint is met. In addition, leases typically provide for the reimbursement to us of real estate taxes, insurance and other property operating expenses. These reimbursements are recognized as revenue in the period the expenses are incurred.

We assess the collectability of our accounts receivable related to tenant revenues as described under the heading “Bad Debts” above.

Structured Financings

Real estate notes receivable investments and preferred equity investments (“Structured Financings”) are intended to be held to maturity and are carried at cost less an allowance for credit loss. Interest income from Structured Financings is recognized on the effective interest method over the expected life of the loan. Under the effective interest method, interest or fees to be collected at the origination of the Structured Financing investment is recognized over the term of the loan as an adjustment to yield. Changes in cash flows from previous estimates are included in future interest income on a prospective basis and a new effective interest rate is computed based on the current cost basis of the instrument and remaining cash flows.

Allowances for credit loss related to our Structured Financing investments are established based upon management’s quarterly review of the investments. In performing this review, management considers the estimated net recoverable value of the investment as well as other factors, including the fair value of any collateral, the amount and status of any senior debt, and the prospects for the borrower. Because this determination is based upon projections of future economic events, which are inherently subjective, the amounts ultimately realized from the Structured Financings may differ materially from the carrying value at the balance sheet date. Interest income recognition is generally suspended for investments when, in the opinion of management, a full recovery of income and principal becomes doubtful. Income recognition is resumed when the suspended investment becomes contractually current and performance is demonstrated to be resumed.

Notes receivable at December 31, 2021 and 2020 are reported net of an allowance for credit loss of $5.8 million and $1.2 million, respectively (Note 4).

Recently Issued Accounting Pronouncements

Reference is made to Note 1 for information about recently issued and recently adopted accounting pronouncements.

58