# InvenTrust Properties Corp. (IVT) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from InvenTrust Properties Corp.'s 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1307748/000130774822000021/ivtp-20211231.htm
Accession: 0001307748-22-000021
Filing date: 2022-02-15
Report date: 2021-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

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

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis relates to the operations of the Company for the years ended December 31, 2021 and 2020 and its financial position as of December 31, 2021 and 2020. Discussion of 2019 items and year-to-year comparisons between 2020 and 2019 that are not included in this Annual Report can be found in "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended December 31, 2020. The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes included in this Annual Report. This discussion contains forward-looking statements about our business. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors discussed in "Forward-Looking Statements" and "Part I-Item 1A. Risk Factors" contained in this Annual Report and in our other reports that we file from time to time with the SEC.

Executive Summary

InvenTrust is a premier Sun Belt, multi-tenant essential retail REIT that owns, leases, redevelops, acquires, and manages grocery-anchored neighborhood and community centers, as well as high-quality power centers that often have a grocery component. We pursue our business strategy by:

•Acquiring retail properties in Sun Belt markets;

•Opportunistically disposing of retail properties;

•Maintaining a flexible capital structure; and

•Enhancing environmental, social and governance practices and standards.

Current Strategy and Outlook

InvenTrust focuses on Sun Belt grocery-anchored neighborhood and community centers, and select power centers that often have a grocery component, in markets with favorable demographics, including above average growth in population, employment, income and education levels. We believe these conditions create favorable demand characteristics for grocery-anchored and necessity-based essential retail centers which will position us to capitalize on potential future rent increases while benefiting from sustained occupancy at our centers. Our strategically located regional field offices are within a two-hour drive of 90% of our properties which affords us the ability to respond to the needs of our tenants and provides us with in-depth local market knowledge. We believe that our Sun Belt portfolio of high quality grocery-anchored assets is a distinct differentiator for us in the marketplace.

Evaluation of Financial Condition and Operating Results

Historically, management has evaluated our financial condition and operating performance by focusing on the following financial and non-financial indicators, discussed in further detail herein:

•NAREIT Funds From Operations ("NAREIT FFO") Applicable to Common Shares and Dilutive Securities, a supplemental non-GAAP measure;

•Core FFO Applicable to Common Shares and Dilutive Securities, a supplemental non-GAAP measure;

•Cash flow from operations as determined in accordance with GAAP;

•Net Operating Income ("NOI") and Same Property NOI, supplemental non-GAAP measures;

•Economic and leased occupancy and rental rates;

•Leasing activity and lease rollover;

•Operating expense levels and trends;

•General and administrative expense levels and trends;

•Debt maturities and leverage ratios; and

•Liquidity levels.

20

Impact of the COVID-19 Pandemic on the Company's Business and Financial Statements

The impact of the pandemic was and continues to be related to a portion of our tenants' ability to make their future rental payments in a timely fashion or at all. We have been working with these tenants to collect rental payments to which we are entitled.

At this time, given the uncertainty related to variants of the virus, we are unable to predict whether cases of COVID-19 in our markets will decrease, increase, or remain the same, whether the approved COVID-19 vaccines will be effective against the virus and new variants of the virus, and whether local governments will mandate closures of our tenants' businesses or implement other restrictive measures on their and our operations in the future in response to a resurgence of the pandemic. We have taken and will continue to consider a number of measures to mitigate the impact of the pandemic on our business and financial condition. We continue to believe that the long-term prospects for our business remain strong despite the uncertainty related to the new variants of COVID-19.

Tenant Assistance Efforts and Deferred Rental Payments

As of December 31, 2021, we have granted approximately $5.8 million of rental payment deferrals on a cumulative basis since the start of the pandemic, including our proportionate share of IAGM, with contractual payment terms through the year ending December 31, 2024.

During the year ended December 31, 2021, deferred rental payments of $5.4 million, including our proportionate share of IAGM, became due; we have collected $5.3 million of such deferred rental payments as of December 31, 2021.

In addition to collections of deferred rental payments, during the year ended December 31, 2021, we collected approximately $2.1 million of rent, including our proportionate share of IAGM, for which we previously recognized credit losses in 2020.

21

Highlights for the year ended December 31, 2021

New York Stock Exchange Listing

On October 12, 2021, our common stock began trading on the New York Stock Exchange ("NYSE") under the ticker symbol "IVT".

"Dutch Auction" Tender Offer

On October 12, 2021, in conjunction with the NYSE listing, we commenced a modified "Dutch Auction" tender offer (the "Tender Offer") to purchase for cash up to $100.0 million of its shares of common stock at a price not greater than $28.00 nor less than $25.00 per share, net to the seller in cash, less any applicable withholding of taxes and without interest. The Tender Offer expired on November 8, 2021.

As a result of the Tender Offer, the Company accepted for purchase 4,000,000 shares of its common stock (which represented approximately 5.6% of the total number of shares of common stock outstanding as of November 8, 2021) at a purchase price of $25.00 per share, for an aggregate cost of $100.0 million, excluding related fees and expenses. Aggregate fees and expenses of $3.3 million were recognized as reductions to common stock and additional paid-in capital.

Acquisitions

On July 12, 2021, we purchased Prestonwood Town Center, a 233 thousand square foot grocery-anchored power center located in Dallas, Texas, from our unconsolidated joint venture, IAGM for a gross acquisition price of $52.8 million. On September 2, 2021, we purchased a seven thousand square foot retail outparcel adjacent to Rio Pinar Plaza for a gross acquisition price of $1.9 million.

Dispositions

On July 20, 2021, we disposed of Kroger Tomball, a 74 thousand square foot grocery store located in Tomball, Texas, for a gross disposition price of $13.7 million and completed partial condemnations at four retail properties for a total gain on sale, net of $1.5 million.

On September 3, 2021, IAGM disposed of Westover Marketplace, a 243 thousand square foot retail property located in San Antonio, Texas, for a gross disposition price of $28.8 million and recognized a gain on sale of $0.4 million. Our share of IAGM's gain on sale was $0.2 million.

On December 1, 2021, IAGM disposed of South Frisco Village, a 227 thousand square foot retail power center located in Frisco, Texas, for a gross disposition price of $32.6 million and recognized a gain on sale of $5.5 million. Our share of IAGM's gain on sale was $3.0 million.

Revolving Credit Agreement

On September 22, 2021, we entered into an amendment to our unsecured revolving credit agreement (the "Amended Revolving Credit Agreement"), which provides for, among other things, an extension of the maturity of our $350.0 million unsecured revolving line of credit to September 22, 2025, with two six-month extension options.

Unsecured Term Loans

On September 22, 2021, we entered into an amendment to our $400.0 million unsecured term loan agreement (the "Amended Term Loan Agreement"), which provides for, among other things, an extension of the maturity and a reallocation of indebtedness under the two outstanding tranches of term loans thereunder. The Amended Term Loan Agreement consists of a $200.0 million 5-year tranche maturing on September 22, 2026, and a $200.0 million 5.5-year tranche maturing on March 22, 2027.

22

Our Retail Portfolio

Our wholly-owned and managed retail properties include grocery-anchored community and neighborhood centers and power centers, including those classified as necessity-based. As of December 31, 2021, we owned or had an interest in 62 retail properties with a GLA of approximately 10.3 million square feet, which includes 7 retail properties with a GLA of approximately 1.8 million square feet owned through the Company's 55% ownership interest in an unconsolidated joint venture, IAGM.

The following table summarizes our retail portfolio, on a wholly-owned, IAGM, and pro rata combined basis, as of December 31, 2021 and 2020.

[[GREPCENT_TABLE]]
[["","Wholly-Owned Retail Properties","","IAGM Retail Properties","","Pro Rata Combined Retail Portfolio"],["","2021","","2020","","2021","","2020","","2021","","2020"],["No. of properties","55","","55","","7","","10","","62","","65"],["GLA (square feet)","8,560","","8,392","","1,768","","2,470","","9,532","","9,751"],["Economic occupancy","93.4%","","92.2%","","87.6%","","84.7%","","92.8%","","91.1%"],["Leased occupancy","94.6%","","93.7%","","88.2%","","86.8%","","93.9%","","92.8%"],["ABR PSF","$18.76","","$18.39","","$16.98","","$16.99","","$18.59","","$18.21"]]
[[/GREPCENT_TABLE]]

Retail Portfolio Summary by Center Type

Our retail properties consist of community and neighborhood centers and power centers.

•Community and neighborhood centers are generally open-air and designed for tenants that offer a wide array of merchandise and services, including groceries, soft goods and convenience-oriented offerings. Our community centers contain large anchor stores and a significant presence of national retail tenants. Our neighborhood centers are generally smaller open-air centers with a grocery store anchor and/or drugstore and other small service-type retailers.

•Power centers are generally larger and consist of several anchors, such as discount department stores, off-price stores, specialty grocers and warehouse clubs. Typically, the number of specialty tenants is limited and most are national or regional in scope.

The following tables summarize our retail portfolio, by center type, as of December 31, 2021 and 2020.

Community and neighborhood centers

[[GREPCENT_TABLE]]
[["","Wholly-Owned Retail Properties","","IAGM Retail Properties","","Pro Rata Combined Retail Portfolio"],["","2021","","2020","","2021","","2020","","2021","","2020"],["No. of properties","43","","44","","5","","5","","48","","49"],["GLA (square feet)","4,984","","5,049","","1,387","","1,386","","5,747","","5,812"],["Economic occupancy","94.1%","","93.0%","","86.1%","","88.1%","","93.1%","","92.3%"],["Leased occupancy","95.0%","","94.8%","","86.8%","","88.3%","","93.9%","","94.0%"],["ABR PSF","$19.93","","$19.40","","$17.02","","$16.62","","$19.57","","$19.05"]]
[[/GREPCENT_TABLE]]

Power centers

[[GREPCENT_TABLE]]
[["","Wholly-Owned Retail Properties","","IAGM Retail Properties","","Pro Rata Combined Retail Portfolio"],["","2021","","2020","","2021","","2020","","2021","","2020"],["No. of properties","12","","11","","2","","5","","14","","16"],["GLA (square feet)","3,576","","3,343","","381","","1,084","","3,785","","3,939"],["Economic occupancy","92.3%","","91.0%","","93.1%","","80.5%","","92.3%","","89.4%"],["Leased occupancy","93.9%","","92.0%","","93.1%","","85.0%","","93.9%","","90.9%"],["ABR PSF","$17.10","","$16.86","","$16.85","","$17.50","","$17.08","","$16.95"]]
[[/GREPCENT_TABLE]]

23

Same Property Retail Portfolio Summary

The following table summarizes the GLA, economic occupancy and ABR PSF of the properties included in our retail portfolio classified as same property for the years ended December 31, 2021 and 2020. The properties classified as same property were owned for the entirety of both periods presented.

[[GREPCENT_TABLE]]
[["","Wholly-Owned Retail Properties","","IAGM Retail Properties","","Pro Rata Combined Retail Portfolio"],["","2021","","2020","","2021","","2020","","2021","","2020"],["No. of properties","52","","52","","7","","7","","59","","59"],["GLA (square feet)","8,088","","8,082","","1,767","","1,767","","9,060","","9,054"],["Economic occupancy","93.5%","","91.9%","","87.6%","","85.5%","","92.9%","","91.2%"],["Leased occupancy","94.8%","","93.5%","","88.2%","","87.9%","","94.1%","","92.9%"],["ABR PSF","$18.91","","$18.71","","$16.98","","$16.69","","$18.72","","$18.50"]]
[[/GREPCENT_TABLE]]

Leasing Activity, Pro Rata Combined Retail Portfolio

The following tables summarize the leasing activity for leases that were executed during the year ended December 31, 2021, compared with expiring or expired leases for the same or previous tenant for renewals and the same unit for new leases at the 62 properties in our Pro Rata Combined Retail Portfolio. These tables do not include rent deferral lease amendments executed as a result of the impact of the COVID-19 pandemic.

In our Pro Rata Combined Retail Portfolio, we had GLA totaling 875 thousand square feet expiring during the year ended December 31, 2021, of which 784 thousand square feet was re-leased. This achieved a retention rate of approximately 89.7%.

[[GREPCENT_TABLE]]
[["","No. of Leases Executed for the year ended Dec. 31, 2021","","GLA SF (in thousands)","","New Contractual Rent ($PSF)(b)","","Prior Contractual Rent ($PSF)(b)","","% Change over Prior Lease Rent (b)","","Weighted Average Lease Term (Years)","","Tenant Improvement Allowance ($PSF)","","Lease Commissions ($PSF)"],["All tenants"],["Comparable Renewal Leases (a)","184","","1,268","","$18.79","","$18.06","","4.0%","","5.0","","$0.55","","$\u2014"],["Comparable New Leases (a)","32","","86","","$24.53","","$24.57","","(0.2)%","","9.3","","$16.58","","$9.90"],["Non-Comparable Renewal and New Leases","82","","351","","$21.43","","N/A","","N/A","","8.9","","$13.47","","$5.77"],["Total","298","","1,705","","$19.16","","$18.48","","3.7%","","6.0","","$4.03","","$1.70"],["Anchor tenants (leases ten thousand square feet and over)"],["Comparable Renewal Leases (a)","28","","922","","$14.41","","$13.58","","6.1%","","5.0","","$0.27","","$\u2014"],["Comparable New Leases (a)","2","","27","","$14.28","","$12.16","","17.4%","","10.3","","$16.04","","$7.43"],["Non-Comparable Renewal and New Leases","8","","179","","$13.91","","N/A","","N/A","","10.0","","$6.76","","$1.28"],["Total","38","","1,128","","$14.40","","$13.54","","6.4%","","5.9","","$1.69","","$0.39"],["Small shop tenants (leases under ten thousand square feet)"],["Comparable Renewal Leases (a)","156","","346","","$30.48","","$30.02","","1.5%","","5.0","","$1.29","","$0.01"],["Comparable New Leases (a)","30","","59","","$29.34","","$30.42","","(3.6)%","","8.8","","$16.84","","$11.06"],["Non-Comparable Renewal and New Leases","74","","172","","$29.87","","N/A","","N/A","","7.8","","$20.45","","$10.44"],["Total","260","","577","","$30.32","","$30.08","","0.8%","","6.2","","$8.60","","$4.26"]]
[[/GREPCENT_TABLE]]

(a)Comparable leases are leases that meet all of the following criteria: terms greater than or equal to one year, unit was vacant less than one year prior to executed lease, square footage of unit remains unchanged or within 10% of prior unit square footage, and has a rent structure consistent with the previous tenant.

(b)Non-comparable leases are not included in totals.

24

Results of Operations

Comparison of results for the years ended December 31, 2021 and 2020

We generate substantially all of our earnings from property operations. Since January 1, 2020, we have acquired three retail properties and disposed of two retail properties.

The following table presents the changes in our income for the years ended December 31, 2021 and 2020.

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["","2021","","2020","","Increase (Decrease)"],["Income"],["Lease income, net","$","207,350","","","$","192,957","","","$","14,393"],["Other property income","1,087","","","1,229","","","(142)"],["Other fee income","3,542","","","3,647","","","(105)"],["Total income","$","211,979","","","$","197,833","","","$","14,146"]]
[[/GREPCENT_TABLE]]

Lease income, net, for the year ended December 31, 2021, increased $14.4 million when compared to the same period in 2020, primarily as a result of net positive changes in credit losses and related reversals of $13.4 million, increased minimum rent of $1.3 million, increased recovery income of $2.1 million, and increased short-term lease income of $0.4 million, which were partially offset by decreased termination fee income of $0.8 million and net decreased GAAP rent adjustments of $2.0 million.

The following table presents the changes in our operating expenses for the years ended December 31, 2021 and 2020.

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["","2021","","2020","","Increase (Decrease)"],["Operating expenses"],["Depreciation and amortization","$","87,143","","","$","87,755","","","$","(612)"],["Property operating","32,788","","","27,909","","","4,879"],["Real estate taxes","31,312","","","30,845","","","467"],["General and administrative","38,192","","","33,141","","","5,051"],["Direct listing costs","19,769","","","\u2014","","","19,769"],["Total operating expenses","$","209,204","","","$","179,650","","","$","29,554"]]
[[/GREPCENT_TABLE]]

Property operating expenses, for the year ended December 31, 2021, increased $4.9 million when compared to the same period in 2020, primarily as a result of increased recoverable expenses of $3.1 million principally relating to utilities, landscaping, and maintenance costs and increased non-recoverable expenses of $2.2 million principally relating to the completion of property projects and initiatives which were put on hold in 2020 during the onset of the COVID-19 pandemic, which were partially offset by decreased lease termination expenses of $0.4 million.

General and administrative expenses for the year ended December 31, 2021, increased $5.1 million when compared to the same period in 2020, primarily as a result of increased long-term incentive plan costs of $4.9 million and increased other compensation costs of $1.9 million, which were partially offset by decreased non-compensation costs of $1.7 million. On February 23, 2021, the Company announced the expected retirement of its President and Chief Executive Officer in August 2021, which resulted in accelerated recognition of certain stock-based compensation expenses. The Company also announced the appointment of certain executives in establishing a plan of succession.

During the year ended December 31, 2021, we recognized $19.8 million of expense relating to the direct listing of our common stock on the NYSE.

25

The following table presents the changes in our other income and expenses for the years ended December 31, 2021 and 2020.

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["","2021","","2020","","Change, net"],["Other (expense) income"],["Interest expense, net","$","(16,261)","","","$","(18,749)","","","$","2,488"],["Loss on extinguishment of debt","(400)","","","(2,543)","","","2,143"],["Provision for asset impairment","\u2014","","","(9,002)","","","9,002"],["Gain on sale of investment properties, net","1,522","","","1,752","","","(230)"],["Equity in earnings (losses) of unconsolidated entities","6,398","","","(3,141)","","","9,539"],["Other income and expense, net","606","","","3,326","","","(2,720)"],["Total other (expense) income, net","$","(8,135)","","","$","(28,357)","","","$","20,222"]]
[[/GREPCENT_TABLE]]

Interest expense, net

Interest expense, net, for the year ended December 31, 2021, decreased $2.5 million when compared to the same period in 2020, primarily as a result of fluctuations in our line of credit balances, declining 1-month LIBOR interest rates on our corporate credit facilities, and repaying total mortgages payable of $67.5 million across three retail properties, generating decreased interest expense of $1.2 million, $0.6 million and $0.7 million, respectively.

Loss on extinguishment of debt

During the year ended December 31, 2021, we recognized a loss of $0.4 million in connection with amending our corporate debt facilities. During the year ended December 31, 2020, we recognized a loss of $2.5 million on the extinguishment of total mortgages payable of $26.3 million on two retail properties, primarily related to prepayment penalties.

Provision for asset impairment

During the year ended December 31, 2020, we identified one retail property that had a reduction in its expected hold period. We recorded a provision for asset impairment of $9.0 million as a result of the executed sales contract price being lower than the property's carrying value. This property was sold on May 1, 2020.

Gain on sale of investment properties, net

During the year ended December 31, 2021, we recognized a gain of $1.5 million on the sale of one retail property and the completion of partial condemnations at four retail properties. During the year ended December 31, 2020, we recognized a gain of $1.8 million on the sale of one retail property, partial sale of one retail property, and the completion of partial condemnations at three retail properties.

Equity in earnings (losses) of unconsolidated entities

Equity in earnings of unconsolidated entities for the year ended December 31, 2021, increased $9.5 million when compared to the same period in 2020, primarily as a result of decreased impairment charges of $6.0 million, increased gains on sales of properties of $3.2 million, and decreased interest expense of $1.0 million, which were partially offset by decreased earnings from property operations of $0.7 million. The aforementioned amounts represent our proportionate share of the activity.

Other income and expense, net

Under the federal legislation enacted on March 27, 2020, known as the CARES Act, certain limitations on the deductibility of net operating losses ("NOLs") enacted under prior federal tax legislation have been temporarily rolled back. As a result of the anticipated NOL carryback claims for our taxable REIT subsidiaries, total additional tax benefits of $1.2 million were recognized during the year ended December 31, 2020. The remaining $1.5 million decrease in other income and expense, net is the result of decreased interest income of $0.7 million and net decreases in all other income and expenses of $0.8 million.

26

Net Operating Income

We evaluate the performance of our retail properties based on NOI, which excludes general and administrative expenses, direct listing costs, depreciation and amortization, provision for asset impairment, other income and expense, net, gains (losses) from sales of properties, gains (losses) on extinguishment of debt, interest expense, net, equity in earnings (losses) from unconsolidated entities, lease termination income and expense, and GAAP rent adjustments (such as straight-line rent, above/below market lease amortization and amortization of lease incentives). We bifurcate NOI into Same Property NOI and NOI from other investment properties based on whether the underlying retail properties meet our same property criteria.

We believe the supplemental non-GAAP financial measures of NOI, same property NOI, and NOI from other investment properties provide added comparability across periods when evaluating our financial condition and operating performance that is not readily apparent from "Operating income" or "Net income" in accordance with GAAP.

Comparison of Same Property results for the years ended December 31, 2021 and 2020

A total of 52 wholly-owned retail properties met our Same Property criteria for the years ended December 31, 2021 and 2020. The following table represents the reconciliation of net loss, the most directly comparable GAAP measure, to NOI and Same Property NOI for the years ended December 31, 2021 and 2020:

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["","2021","","2020","","Change, net"],["Net loss","$","(5,360)","","","$","(10,174)","","","$","4,814"],["Adjustments to reconcile to non-GAAP metrics:"],["Other income and expense, net","(606)","","","(3,326)","","","2,720"],["Equity in (earnings) losses of unconsolidated entities","(6,398)","","","3,141","","","(9,539)"],["Interest expense, net","16,261","","","18,749","","","(2,488)"],["Loss on extinguishment of debt","400","","","2,543","","","(2,143)"],["Gain on sale of investment properties, net","(1,522)","","","(1,752)","","","230"],["Provision for asset impairment","\u2014","","","9,002","","","(9,002)"],["Depreciation and amortization","87,143","","","87,755","","","(612)"],["General and administrative","38,192","","","33,141","","","5,051"],["Direct listing costs","19,769","","","\u2014","","","19,769"],["Other fee income","(3,542)","","","(3,647)","","","105"],["Adjustments to NOI (a)","(7,528)","","","(7,249)","","","(279)"],["NOI","136,809","","","128,183","","","8,626"],["NOI from other investment properties","(4,646)","","","(2,808)","","","(1,838)"],["Same Property NOI","132,163","","","125,375","","","6,788"],["IAGM Same Property NOI at share","12,625","","","13,300","","","(675)"],["Pro Rata Same Property NOI","$","144,788","","","$","138,675","","","$","6,113"]]
[[/GREPCENT_TABLE]]

(a)Adjustments to NOI include termination fee income and expense and GAAP rent adjustments.

27

Comparison of the components of Same Property NOI for the years ended December 31, 2021 and 2020

[[GREPCENT_TABLE]]
[["","Year ended December 31,","","Change"],["","2021","","2020","","","Variance"],["Lease income, net","$","192,925","","","$","181,472","","","$","11,453","","","6.3%"],["Other property income","1,083","","","1,208","","","(125)","","","(10.3)%"],["","194,008","","","182,680","","","11,328","","","6.2%"],["Property operating expenses","31,499","","","26,948","","","4,551","","","16.9%"],["Real estate taxes","30,346","","","30,357","","","(11)","","","\u2014%"],["","61,845","","","57,305","","","4,540","","","7.9%"],["Same Property NOI","$","132,163","","","$","125,375","","","$","6,788","","","5.4%"]]
[[/GREPCENT_TABLE]]

Same Property NOI increased by $6.8 million, or 5.4%, when comparing the year ended December 31, 2021 to the same period in 2020, and was primarily a result of:

•net changes in credit losses and related reversals of $10.5 million,

•increased recovery income of $1.0 million,

•a net increase in short-term and percentage rent of $0.5 million, and was offset by:

•decreased minimum rent of $0.6 million,

•increased recoverable expenses of $2.5 million, and

•increased non-recoverable expenses of $2.1 million.

During the year ended December 31, 2021, we recognized credit losses relating to billed rent and recoveries of $2.2 million and reversals of credit losses of $4.9 million. During the year ended December 31, 2020, we recognized credit losses relating to billed rent and recoveries of $9.1 million and reversals of credit losses of $1.3 million. Credit losses principally relate to our assessment of how the COVID-19 pandemic may impact our tenants' ability to make future rental payments.

The increase in real estate taxes and recoverable operating expenses, net of associated recoveries, primarily reflects leases which either fix or limit recoveries.

The increase in short-term and percentage rent primarily reflects increased short-term leasing arrangements and additional rent from grocers experiencing heightened sales volumes.

The decrease in minimum rent primarily reflects our efforts to renegotiate certain leases of tenants markedly impacted by the COVID-19 pandemic, which often resulted in rent reductions or partial rent abatements.

In line with our improved results of operations, certain non-recoverable operating expenses relating property projects and initiatives were completed during 2021. These projects and initiatives had been put on hold during 2020 due to the onset of the COVID-19 pandemic.

28

Funds From Operations

The National Association of Real Estate Investment Trusts ("NAREIT"), an industry trade group, has promulgated a widely accepted non-GAAP financial measure of operating performance known as Funds From Operations ("NAREIT FFO"). Our NAREIT FFO is net income (or loss) in accordance with GAAP, excluding gains (or losses) resulting from dispositions of properties, plus depreciation and amortization and impairment charges on depreciable real property. Adjustments for unconsolidated joint ventures are calculated to reflect our proportionate share of the joint venture's funds from operations on the same basis.

In calculating NAREIT FFO, impairment charges of depreciable real estate assets are added back even though the impairment charge may represent a permanent decline in value due to the decreased operating performance of the applicable property. Furthermore, because gains and losses from sales of property are excluded from NAREIT FFO, it is consistent and appropriate that impairments, which are often early recognition of losses on prospective sales of property, also be excluded. If evidence exists that a loss reflected in the investment of an unconsolidated entity is due to the impairment of depreciable real estate assets, our share of these impairments is added back to net income in the determination of NAREIT FFO.

We believe NAREIT FFO Applicable to Common Shares and Dilutive Securities, when considered with the financial statements determined in accordance with GAAP, is helpful to investors in understanding our performance because the historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time. Since real estate values historically rise and fall with market conditions, presentations of operating results for a REIT, using historical accounting for depreciation, could be less informative.

Core Funds From Operations ("Core FFO") is an additional supplemental non-GAAP financial measure of our operating performance. In particular, Core FFO provides an additional measure to compare the operating performance of different REITs without having to account for certain remaining amortization assumptions within NAREIT FFO and other unique revenue and expense items which some may consider not pertinent to measuring a particular company's on-going operating performance. In that regard, we use Core FFO as an input to our compensation plan to determine cash bonuses and measure the achievement of certain performance-based equity awards.

Our adjustments to NAREIT FFO to arrive at Core FFO include removing the impact of (i) amortization of debt premiums, discounts, and financing costs, (ii) amortization of above and below-market leases and lease inducements, (iii) depreciation and amortization of corporate assets, (iv) straight-line rent adjustments, (v) gains (or losses) resulting from debt extinguishments (vi) other non-operating revenue and expense items which, in our judgement, are not pertinent to measuring on-going operating performance, (vii) adjustments for unconsolidated joint ventures to reflect our share of the ventures' Core FFO on the same basis. Our calculation of Core FFO Applicable to Common Shares and Dilutive Securities does not consider any capital expenditures.

Other REITs may use alternative methodologies for calculating similarly titled measures, which may not be comparable to our definition and calculation of NAREIT FFO Applicable to Common Shares and Dilutive Securities or Core FFO Applicable to Common Shares and Dilutive Securities. Furthermore, NAREIT FFO and Core FFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as alternatives to net income as an indication of our performance. NAREIT FFO and Core FFO should not be considered as alternatives to our cash flows from operating, investing, and financing activities. Nor should NAREIT FFO and Core FFO be considered as measures of liquidity, our ability to make cash distributions, or our ability to service our debt.

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NAREIT FFO Applicable to Common Shares and Dilutive Securities and Core FFO Applicable to Common Shares and Dilutive Securities is calculated as follows:

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["","2021","","2020"],["Net loss","$","(5,360)","","","$","(10,174)"],["Depreciation and amortization related to investment properties","86,257","","","86,524"],["Provision for asset impairment","\u2014","","","9,002"],["Gain on sale of investment properties, net","(1,522)","","","(1,752)"],["Unconsolidated joint venture adjusting items, net (a)","4,713","","","15,026"],["NAREIT FFO Applicable to Common Shares and Dilutive Securities","84,088","","","98,626"],["Amortization of above and below-market leases and lease inducements, net","(4,318)","","","(7,060)"],["Straight-line rent adjustments, net","(2,805)","","","624"],["Direct listing costs","19,769","","","\u2014"],["Adjusting items, net (b)","2,201","","","4,043"],["Unconsolidated joint venture adjusting items, net (c)","672","","","931"],["Core FFO Applicable to Common Shares and Dilutive Securities","$","99,607","","","$","97,164"],["Weighted average common shares outstanding - basic","71,072,933","","","72,040,623"],["Dilutive effect of unvested restricted shares (d)","\u2014","","","\u2014"],["Weighted average common shares outstanding - diluted","71,072,933","","","72,040,623"],["Net loss per common share","$","(0.08)","","","$","(0.14)"],["Per share adjustments for NAREIT FFO Applicable to Common Shares and Dilutive Securities","1.26","","","1.51"],["NAREIT FFO Applicable to Common Shares and Dilutive Securities per share","$","1.18","","","$","1.37"],["Per share adjustments for Core FFO Applicable to Common Shares and Dilutive Securities","0.22","","","(0.02)"],["Core FFO Applicable to Common Shares and Dilutive Securities per share","$","1.40","","","$","1.35"]]
[[/GREPCENT_TABLE]]

(a)Represents our share of depreciation, amortization, impairment, and gains on sale related to investment properties held in IAGM.

(b)Adjusting items, net, are primarily loss on extinguishment of debt, amortization of debt discounts and financing costs, depreciation and amortization of corporate assets, and non-operating income and expenses, net, which includes items which are not pertinent to measuring on-going operating performance, such as miscellaneous and settlement income.

(c)Represents our share of amortization of above and below-market leases and lease inducements, net, straight-line rent adjustments, net and adjusting items, net related to IAGM.

(d)For purposes of calculating non-GAAP per share metrics, the same denominator is used as that which would be used in calculating diluted earnings per share in accordance with GAAP. For the year ended December 31, 2021 and 2020, unvested restricted shares were antidilutive and therefore excluded from the denominator in the diluted earnings per share calculation in accordance with GAAP.

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Critical Accounting Estimates

General

The accompanying consolidated financial statements have been prepared in accordance with GAAP, which require 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates, judgments, and assumptions are required in a number of areas, including, but not limited to, evaluating the collectability of accounts receivable, allocating the purchase price of acquired retail properties, and evaluating the impairment of long-lived assets. We base these estimates, judgments and assumptions on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results may differ from these estimates.

Revenue Recognition

Credit Losses

We review the collectability of amounts due from our tenants on a regular basis. Such reviews consider the tenant's financial condition and payment history and other economic conditions impacting the tenant. Changes in collectability occur when we no longer believes it is probable that substantially all the lease payments will be collected over the term of the lease.

If collection is not probable, regardless of whether we have entered into an amendment to provide the tenant with rent relief, the lease payments will be accounted for on a cash basis, and revenue will be recorded as cash is received. If reassessed, and the collection of substantially all of the lease payments from the tenant becomes probable, the accrual basis of revenue recognition is reestablished.

The provision for estimated credit losses resulting from changes in the expected collectability of lease payments, including variable payments, is recognized as a direct adjustment to lease income, and a direct write-off of the operating lease receivables, including straight-line rent receivable.

Acquisition of Real Estate

We evaluate the inputs, processes and outputs of each asset acquired to determine if the transaction is a business combination or asset acquisition. If an acquisition qualifies as a business combination, the related transaction costs are expensed. If an acquisition qualifies as an asset acquisition, the related transaction costs are generally capitalized and amortized over the useful life of the acquired assets. Generally, our acquisitions of real estate qualify as asset acquisitions.

We allocate the purchase price of real estate to land, building, other building improvements, tenant improvements, intangible assets and liabilities (such as the value of above- and below-market leases, in-place leases and origination costs associated with in-place leases). The values of above- and below-market leases are recorded as intangible assets and intangible liabilities, respectively, and are amortized as either a decrease (in the case of above-market leases) or an increase (in the case of below-market leases) to lease income, net over the remaining term of the associated tenant lease. The values, if any, associated with in-place leases are recorded in intangible assets and are amortized to depreciation and amortization expense over the remaining lease term.

The difference between the contractual rental rates and our estimate of market rental rates is measured over a period equal to the remaining non-cancelable term of the leases plus the term of any below-market renewal options. For the amortization period, the remaining term of leases with renewal options at terms below market reflect the assumed exercise of such below-market renewal options, if reasonably assured.

If a tenant vacates its space prior to the contractual expiration of the lease and no rental payments are being made on the lease, any unamortized balance of the related intangible asset or liability is written off. Tenant improvements are depreciated and origination costs are amortized over the remaining term of the lease or charged against earnings if the lease is terminated prior to its contractual expiration date.

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With the assistance of a third-party valuation specialist, we perform the following procedures for assets acquired:

•Estimate the value of the property "as if vacant" as of the acquisition date;

•Allocate the value of the property among land, building, and other building improvements and determine the associated useful life for each;

•Calculate the value and associated life of above- and below-market leases on a tenant-by-tenant basis. The difference between the contractual rental rates and our estimate of market rental rates is measured over a period equal to the remaining term of the leases (using a discount rate which reflects the risks associated with the leases acquired, including geographical location, size of leased area, tenant profile and credit risk);

•Estimate the fair value of the tenant improvements, legal costs and leasing commissions incurred to obtain the leases and calculate the associated useful life for each;

•Estimate the fair value of assumed debt, if any; and

•Estimate the intangible value of the in-place leases based on lease execution costs of similar leases as well as lost rent payments during an assumed lease-up period and their associated useful lives on a tenant-by-tenant basis.

Impairment of Long Lived Assets

We assess the carrying values of our long-lived tangible and intangible assets whenever events or changes in circumstances indicate that they may not be fully recoverable. An example of an event or changed circumstance is a reduction in the expected holding period of a property. When such event or circumstances occur, if it is expected that the carrying value is not recoverable, because the expected undiscounted cash flows do not exceed that carrying value, we recognize an impairment loss to the extent that the carrying value exceeds the estimated fair value. The valuation and possible subsequent impairment of investment properties is a significant estimate that can and does change based on our continuous process of analyzing each property's economic condition over time and reviewing and updating assumptions about uncertain inherent factors, including observable inputs such as contractual revenues and unobservable inputs such as forecasted revenues and expenses, estimated net disposition proceeds, discount and capitalization rates. These unobservable inputs are based on market conditions and the property's expected growth rates. Assumptions and estimates about future cash flows and discount and capitalization rates are complex and subjective. Changes in economic and operating conditions and in our ultimate investment intent that occur subsequent to the impairment analyses could impact these assumptions and result in additional impairment.

Our assessment of expected hold period for investment properties evaluated for impairment is of particular significance because of the material impact it has on the evaluation of the property's recoverability. Changes in our disposition strategy or changes in the marketplace may alter the expected hold period of a property which may result in an impairment loss and such loss could be material to the Company's financial condition or operating performance.

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Liquidity and Capital Resources

Development, Re-development, Capital Expenditures and Leasing Activities

The following table summarizes capital resources used through development and re-development, capital expenditures, and leasing activities at our retail properties owned during the year ended December 31, 2021. These costs are classified as cash used in capital expenditures and tenant improvements and investment in development and re-development projects on the consolidated statements of cash flows during the year ended December 31, 2021.

[[GREPCENT_TABLE]]
[["","Development and Re-development","","Capital Expenditures","","Leasing","","Total"],["Direct costs","$","4,562","","(a)","$","8,588","","","$","5,308","","(c)","$","18,458"],["Indirect costs","904","","(b)","1,465","","","\u2014","","","2,369"],["Total","$","5,466","","","$","10,053","","","$","5,308","","","$","20,827"]]
[[/GREPCENT_TABLE]]

(a)Direct development and re-development costs relate to construction of buildings at our retail properties.

(b)Indirect development and re-development costs relate to capitalized interest, real estate taxes, insurance, and payroll attributed to improvements at our retail properties.

(c)Direct leasing costs relate to improvements to a tenant space that are either paid directly by us or reimbursed to the tenants.

Short-Term Liquidity and Capital Resources

On a short-term basis, our principal uses for funds are to pay our operating and corporate expenses, interest and principal on our indebtedness, property capital expenditures, and to make distributions to our stockholders.

Our ability to maintain adequate liquidity for our operations in the future is dependent upon a number of factors, including our revenue, macroeconomic conditions, our ability to contain costs, including capital expenditures, and to collect rents and other receivables, and various other factors, many of which are beyond our control. We will continue to monitor our liquidity position and may seek to raise funds through debt or equity financing in the future to fund operations, significant investments or acquisitions that are consistent with our strategy. Our ability to raise these funds may also be diminished by other macroeconomic factors.

Long-Term Liquidity and Capital Resources

Our objectives are to maximize revenue generated by our retail platform, to further enhance the value of our retail properties to produce attractive current yield and long-term returns for our stockholders, and to generate sustainable and predictable cash flow from our operations to distribute to our stockholders.

Any future determination to pay distributions will be at the discretion of our Board and will depend on our financial condition, capital requirements, restrictions contained in current or future financing instruments, and such other factors as our Board deems relevant. In August 2021, our Board approved an increase to our annual distribution rate effective for the quarterly distribution paid in January 2022.

Our primary sources and uses of capital are as follows:

[[GREPCENT_TABLE]]
[["Sources","","Uses"],["\u2022Operating cash flows from our real estate investments;\u2022Distributions from our joint venture investment; \u2022Proceeds from sales of properties; \u2022Proceeds from mortgage loan borrowings on properties;\u2022Proceeds from corporate borrowings; and\u2022Interest earned on cash and cash equivalents.","","\u2022To invest in properties;\u2022To fund development, re-development, maintenance and capital expenditures or leasing incentives;\u2022To make distributions to our stockholders; \u2022To service or pay down our debt; \u2022To pay our operating expenses; and\u2022To fund other general corporate uses."]]
[[/GREPCENT_TABLE]]

We believe our recent listing on the NYSE will facilitate supplementing these sources by selling equity securities of the Company if and when we believe appropriate to do so. Also, from time to time, we may seek to acquire additional amounts of our outstanding common stock through cash purchases or exchanges for other securities. Such purchases or exchanges, if any, will depend on our liquidity requirements, contractual restrictions, and other factors.

33

Off Balance Sheet Arrangements

The Company does not have off balance sheet arrangements other than its joint venture, IAGM, as disclosed in "Part IV. Item 8. Note 6. Investment in Unconsolidated Entities."

Summary of Cash Flows

[[GREPCENT_TABLE]]
[["","Year ended December 31,","","Change"],["","2021","","2020"],["Cash provided by operating activities","$","89,956","","","$","94,155","","","$","(4,199)"],["Cash used in investing activities","(64,701)","","","(49,060)","","","(15,641)"],["Cash used in financing activities","(204,171)","","","(82,073)","","","(122,098)"],["Decrease in cash, cash equivalents and restricted cash","(178,916)","","","(36,978)","","","(141,938)"],["Cash, cash equivalents and restricted cash at beginning of year","223,770","","","260,748","","","(36,978)"],["Cash, cash equivalents and restricted cash at end of year","$","44,854","","","$","223,770","","","$","(178,916)"]]
[[/GREPCENT_TABLE]]

Cash provided by operating activities of $90.0 million and $94.2 million for the years ended December 31, 2021 and 2020, respectively, was generated primarily from income from property operations and operating distributions from IAGM. Cash provided by operating activities decreased $4.2 million when comparing 2021 to 2020, primarily as a result of direct listing costs of $19.8 million in 2021, which was partially offset by our collection of deferred rental payments of $4.9 million, increased distributions from IAGM of $1.7 million, decreased interest expense of $2.5 million, and overall other increased cash from property operations of $6.5 million, inclusive of our property acquisitions and dispositions since January 1, 2020.

Cash used in investing activities of $64.7 million for the year ended December 31, 2021, was primarily the result of:

•$53.1 million for acquisitions of investment properties,

•$15.4 million for capital expenditures and tenant improvements,

•$5.5 million for investment in development and re-development projects,

•$4.1 million for lease commissions and other leasing costs,

•$1.4 million for other investing cash outflows, and was partially offset by cash provided of

•$14.8 million from net proceeds received from the sale of investment properties.

Cash used in investing activities of $49.1 million for the year ended December 31, 2020, was primarily the result of:

•$41.4 million for acquisitions of investment properties,

•$12.9 million for capital expenditures and tenant improvements,

•$2.2 million for investment in development and re-development projects,

•$1.4 million for lease commissions and other leasing costs, and was partially offset by cash provided of

•$8.0 million from net proceeds received from the sale of investment properties, and

•$0.8 million from other investing cash inflows.

Cash used in financing activities of $204.2 million for the year ended December 31, 2021, was primarily the result of:

•$457.4 million for pay-offs of debt, principal payments of mortgage debt, and payment of loan fees and other deposits,

•$16.7 million for the repurchase of common stock under our share repurchase plan,

•$103.3 million for the repurchase of common stock through a tender offer,

•$55.6 million to pay distributions,

•$1.8 million for the payment of tax withholdings for share-based compensation,

•$0.4 million for the payment of finance lease liabilities, and was partially offset by cash provided of

•$431.0 million from proceeds received under our unsecured credit agreements.

34

Cash used in financing activities of $82.1 million for the year ended December 31, 2020, was primarily the result of:

•$171.4 million for pay-offs of debt, debt prepayment penalties, principal payments of mortgage debt, and payment of loan fees and other deposits,

•$5.2 million for the repurchase of common stock under our share repurchase plan,

•$54.2 million to pay distributions,

•$1.1 million for the payment of tax withholdings for share-based compensation,

•$0.2 million for other financing cash outflows, net, and was partially offset by cash provided of

•$150.0 million from proceeds received under our unsecured credit agreements.

We consider all demand deposits, money market accounts and investments in certificates of deposit and repurchase agreements with a maturity of three months or less, at the date of purchase, to be cash equivalents. We maintain our cash and cash equivalents at major financial institutions. The combined account balances at one or more institutions generally exceed the FDIC insurance coverage. We periodically assess the credit risk associated with these financial institutions. We believe insignificant credit risk exists related to amounts on deposit in excess of FDIC insurance coverage.

Acquisitions and Dispositions of Real Estate Investments

In 2021, we acquired one retail property and an outparcel adjacent to an existing retail property. In 2020, we acquired two retail properties and the underlying real estate of a grocery tenant adjacent to an existing retail property. During the years ended December 31, 2021 and 2020, we invested net cash of approximately $53.1 million and $41.4 million, respectively, for these acquisitions.

In 2021, we disposed of one retail property and completed partial condemnations at four retail properties for an aggregate gross disposition price of $15.0 million. In 2020, we disposed of one retail property, completed a partial sale of one retail property, and completed partial condemnations at three retail properties for an aggregate gross disposition price of $8.5 million.

Distributions

During the year ended December 31, 2021, we declared cash distributions to our stockholders totaling $55.7 million and paid cash distributions of $55.6 million.

As we execute on our retail strategy, the Board evaluated and expects to continue to evaluate our distribution rate on a periodic basis. See "Part I. Item 1. Business - Current Strategy and Outlook" for more information regarding our retail strategy. The following table presents a historical summary of distributions declared, paid and reinvested.

[[GREPCENT_TABLE]]
[["","Year ended December 31,"],["","2021","","2020","","2019","","2018","","2017"],["Distributions declared","$","55,721","","","$","54,604","","","$","53,473","","","$","53,782","","","$","53,758"],["Distributions paid","$","55,561","","","$","54,214","","","$","53,250","","","$","54,194","","","$","53,358"],["Distributions reinvested","$","\u2014","","","$","185","","","$","50","","","$","\u2014","","","$","\u2014"]]
[[/GREPCENT_TABLE]]

.

35

Borrowings

Mortgages Payable, Maturities

The following table shows the scheduled maturities for the Company's mortgages payable as of December 31, 2021, for each of the next five years and thereafter:

[[GREPCENT_TABLE]]
[["Scheduled maturities by year:","As of December 31, 2021"],["2022","$","22,399"],["2023","39,226"],["2024","15,700"],["2025","28,630"],["2026","\u2014"],["Thereafter","\u2014"],["Total mortgages payable","$","105,955"]]
[[/GREPCENT_TABLE]]

Credit Agreements, Maturities

As of December 31, 2021, we had outstanding borrowings of $31.0 million under our revolving credit facility at an interest rate of 1.15%.

The following table shows the Company's outstanding borrowings under its unsecured term loans as of December 31, 2021.

[[GREPCENT_TABLE]]
[["","Principal Balance","","Interest Rate","","Maturity Date"],["$200.0 million 5 year - swapped to fixed rate","$","100,000","","","2.6795% (a)","","September 22, 2026"],["$200.0 million 5 year - swapped to fixed rate","100,000","","","2.6795% (a)","","September 22, 2026"],["$200.0 million 5.5 year - swapped to fixed rate","50,000","","","2.6915% (a)","","March 22, 2027"],["$200.0 million 5.5 year - swapped to fixed rate","50,000","","","2.6990% (a)","","March 22, 2027"],["$200.0 million 5.5 year - variable rate","100,000","","","1.2993% (b)","","March 22, 2027"],["Total unsecured term loans","400,000"]]
[[/GREPCENT_TABLE]]

(a)Interest rates reflect the fixed rates achieved through the Company's interest rate swaps.

(b)Interest rate reflects 1-Month LIBOR plus 1.20% effective December 2, 2021.

36

Contractual Obligations

We have obligations related to our mortgage loans, term loan, and revolving credit facility as described in "Note 8. Debt" in the consolidated financial statements. The unconsolidated joint venture in which we have an investment has third party mortgage debt of $166.7 million at December 31, 2021, as described in "Note 6. Investment in Unconsolidated Entities" in the consolidated financial statements. It is anticipated that our unconsolidated entity will be able to repay or refinance all of its debt on a timely basis.

The following table presents, on a consolidated basis, obligations and commitments to make future payments under debt obligations and lease agreements. It excludes third-party debt associated with our unconsolidated joint venture and debt discounts that are not future cash obligations as of December 31, 2021.

[[GREPCENT_TABLE]]
[["","Payments due by year ending December 31,"],["","2022","","2023","","2024","","2025","","2026","","Thereafter","","Total"],["Long term debt:"],["Fixed rate debt, principal (a)","$","22,399","","","$","39,226","","","$","15,700","","","$","28,630","","","$","200,000","","","$","100,000","","","$","405,955"],["Variable rate debt, principal","\u2014","","","\u2014","","","\u2014","","","31,000","","","\u2014","","","100,000","","","131,000"],["Interest","14,067","","","13,228","","","13,342","","","12,492","","","9,642","","","1,227","","","63,998"],["Total long term debt","36,466","","","52,454","","","29,042","","","72,122","","","209,642","","","201,227","","","600,953"],["Operating lease obligations (b)","152","","","513","","","575","","","456","","","460","","","1,740","","","3,896"],["Finance lease obligations (c)","279","","","21","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","300"],["Grand total","$","36,897","","","$","52,988","","","$","29,617","","","$","72,578","","","$","210,102","","","$","202,967","","","$","605,149"]]
[[/GREPCENT_TABLE]]

(a)Includes $200.0 million of variable-rate unsecured term loans that have been swapped to a fixed rate until September 22, 2026, and $100.0 million of variable-rate unsecured term loans that have been swapped to a fixed rate until March 22, 2027.

(b)Includes leases on corporate office spaces.

(c)Includes contracts for property improvements which have been deemed to contain finance leases.

Inflation

Although inflation has been low in recent years and has had minimal impact on the operating performance of our shopping centers, it began to increase in the fourth quarter of 2021, together with consumer prices. With respect to current economic conditions and governmental fiscal policy, inflation has become a greater risk. Rising inflation may affect our and our tenants' expenses, including, without limitation, by increasing product prices and costs such as wages, benefits, taxes, property and casualty insurance, borrowing costs and utilities. We rely on the performance of our assets to increase revenues in order to keep pace with inflation. We may not be able to offset high rates of inflation through rent increases due to the long-term nature of some of our leases.

A number of our leases contain provisions designed to partially mitigate adverse impacts of inflation. Our leases typically require the tenant to pay its share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing our exposure to increases in these costs resulting from inflation, although some larger tenants have capped the amount of these operating costs they are responsible for. A portion of our leases also include clauses enabling us to receive percentage rents based on a tenant's gross sales above specified levels or rental escalation clauses which are typically based on increases in the Consumer Price Index or similar inflation indices.

37