Phillips Edison & Company, Inc. (PECO) FY 2021 MD&A

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

The following discussion and analysis should be read in conjunction with our accompanying consolidated financial statements and notes thereto. See also “Cautionary Note Regarding Forward-Looking Statements” preceding Part I.

KEY PERFORMANCE INDICATORS AND DEFINED TERMS

We use certain key performance indicators (“KPIs”), which include both financial and nonfinancial metrics, to measure the performance of our operations. We believe these KPIs, as well as the core concepts and terms defined below, allow our Board, management, and investors to analyze trends around our business strategy, financial condition, and results of operations in a manner that is focused on items unique to the retail real estate industry.

We do not consider our non-GAAP measures to be alternatives to measures required in accordance with accounting principles generally accepted in the United States (“GAAP”). Certain non-GAAP measures should not be viewed as an alternative measure of our financial performance as they may not reflect the operations of our entire portfolio, and they may not reflect the impact of general and administrative expenses, depreciation and amortization, interest expense, other income (expense), or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our shopping centers that could materially impact our results from operations. Additionally, certain non-GAAP measures should not be considered as an indication of our liquidity, nor as an indication of funds available to cover our cash needs, including our ability to fund distributions, and may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate our business in the manner currently contemplated. Accordingly, non-GAAP measures should be reviewed in connection with other GAAP measurements, and should not be viewed as more prominent measures of performance than net income (loss) or cash flows from operations prepared in accordance with GAAP. Other REITs may use different methodologies for calculating similar non-GAAP measures, and accordingly, our non-GAAP measures may not be comparable to other REITs.

Our KPIs and terminology can be grouped into three key areas:

PORTFOLIO—Portfolio metrics help management to gauge the health of our centers overall and individually.

•Anchor space—We define an anchor space as a space greater than or equal to 10,000 square feet of gross leasable area (“GLA”).

•Annualized Base Rent (“ABR”)—We use ABR to refer to the monthly contractual base rent at the end of the period multiplied by twelve months.

•ABR per Square Foot (“PSF”)—This metric is calculated by dividing ABR by leased GLA. Increases in ABR PSF can be an indication of our ability to create rental rate growth in our centers, as well as an indication of demand for our spaces, which generally provides us with greater leverage during lease negotiations.

•GLA—We use GLA to refer to the total occupied and unoccupied square footage of a building that is available for tenants (whom we refer to as a “Neighbor” or our “Neighbors”) or other retailers to lease.

•Inline space—We define an inline space as a space containing less than 10,000 square feet of GLA.

•Leased Occupancy—This metric is calculated as the percentage of total GLA for which a lease has been signed regardless of whether the lease has commenced or the Neighbor has taken possession. High occupancy is an indicator of demand for our spaces, which generally provides us with greater leverage during lease negotiations.

•Underwritten incremental unlevered yield—This reflects the yield we target to generate from a project upon expected stabilization and is calculated as the estimated incremental net operating income (“NOI”) for a project at stabilization divided by its estimated net project investment. The estimated incremental NOI is the difference between the estimated annualized NOI we target to generate by project upon stabilization and the estimated annualized NOI without the planned improvements. Underwritten incremental unlevered yield does not include peripheral impacts, such as lease rollover risk or the impact on the long term value of the property upon sale or disposition. Actual incremental unlevered yields may vary from our underwritten incremental unlevered yield range based on the actual total cost to complete a project and its actual incremental NOI at stabilization.

LEASING—Leasing is a key driver of growth for our company.

•Comparable lease—We use this term to refer to a lease with consistent terms that is executed for substantially the same space that has been vacant less than twelve months.

•Comparable rent spread—This metric is calculated as the percentage increase or decrease in first-year ABR (excluding any free rent or escalations) on new or renewal leases (excluding options) where the lease was considered a comparable lease. This metric provides an indication of our ability to generate revenue growth through leasing activity.

•Cost of executing new leases—We use this term to refer to certain costs associated with new leasing, namely, leasing commissions, tenant improvement costs, and tenant concessions.

•Portfolio retention rate—This metric is calculated by dividing (i) total square feet of retained Neighbors with current period lease expirations by (ii) the total square feet of leases expiring during the period. The portfolio retention rate

provides insight into our ability to retain Neighbors at our shopping centers as their leases approach expiration. Generally, the costs to retain an existing Neighbor are lower than costs to replace with a new Neighbor.

•Recovery rate—This metric is calculated by dividing (i) total recovery income by (ii) total recoverable expenses during the period. A high recovery rate is an indicator of our ability to recover certain property operating expenses and capital costs from our Neighbors.

FINANCIAL PERFORMANCE—In addition to financial metrics calculated in accordance with GAAP, such as net income or cash flows from operations, we utilize non-GAAP metrics to measure our operational and financial performance. See “Non-GAAP Measures” below for further discussion on the following metrics.

•Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization for Real Estate (“Adjusted EBITDAre”)—To arrive at Adjusted EBITDAre, we adjust EBITDAre, as defined below, to exclude certain recurring and non-recurring items including, but not limited to: (i) changes in the fair value of the earn-out liability; (ii) other impairment charges; (iii) amortization of basis differences in our investments in our unconsolidated joint ventures; (iv) transaction and acquisition expenses; and (v) realized performance income. We use EBITDAre and Adjusted EBITDAre as additional measures of operating performance which allow us to compare earnings independent of capital structure and evaluate debt leverage and fixed cost coverage.

•Core Funds from Operations (“FFO”)—To arrive at Core FFO, we adjust Nareit FFO attributable to stockholders and OP unit holders, as defined below, to exclude certain recurring and non-recurring items including, but not limited to: (i) depreciation and amortization of corporate assets; (ii) changes in the fair value of the earn-out liability; (iii) amortization of unconsolidated joint venture basis differences; (iv) gains or losses on the extinguishment or modification of debt and other; (v) other impairment charges; (vi) transaction and acquisition expenses; and (vii) realized performance income. We believe Nareit FFO provides insight into our operating performance as it excludes certain items that are not indicative of such performance. Core FFO provides further insight into the sustainability of our operating performance and provides an additional measure to compare our performance across reporting periods on a consistent basis by excluding items that may cause short-term fluctuations in net income (loss).

•EBITDAre—The National Association of Real Estate Investment Trusts (“Nareit”) defines EBITDAre as net income (loss) computed in accordance with GAAP before: (i) interest expense; (ii) income tax expense; (iii) depreciation and amortization; (iv) gains or losses from disposition of depreciable property; and (v) impairment write-downs of depreciable property. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect EBITDAre on the same basis.

•Equity Market Capitalization—We calculate equity market capitalization as the total dollar value of all outstanding shares using the closing price for the applicable date.

•Nareit FFO—Nareit defines FFO as net income (loss) computed in accordance with GAAP, excluding: (i) gains (or losses) from sales of property and gains (or losses) from change in control; (ii) depreciation and amortization related to real estate; (iii) impairment losses on real estate and impairments of in-substance real estate investments in investees that are driven by measurable decreases in the fair value of the depreciable real estate held by the unconsolidated partnerships and joint ventures; and (iv) adjustments for unconsolidated partnerships and joint ventures, calculated to reflect FFO on the same basis. We calculate Nareit FFO in a manner consistent with the Nareit definition.

•Net Debt—We calculate net debt as total debt, excluding discounts, market adjustments, and deferred financing expenses, less cash and cash equivalents.

•Net Debt to Adjusted EBITDAre—This ratio is calculated by dividing net debt by Adjusted EBITDAre (included on an annualized basis within the calculation). It provides insight into our leverage rate based on earnings and is not impacted by fluctuations in our equity price.

•Net Debt to Total Enterprise Value—This ratio is calculated by dividing net debt by total enterprise value, as defined below. It provides insight into our capital structure and usage of debt.

•NOI—We calculate NOI as total operating revenues, adjusted to exclude non-cash revenue items, less property operating expenses and real estate taxes. NOI provides insight about our financial and operating performance because it provides a performance measure of the revenues and expenses directly involved in owning and operating real estate assets and provides a perspective not immediately apparent from net income (loss).

•Same-Center—We use this term to refer to a property, or portfolio of properties, that have been owned and operational for the entirety of each reporting period (i.e., since January 1, 2020).

•Total Enterprise Value—We calculate total enterprise value as our net debt plus our equity market capitalization on a fully diluted basis.

OVERVIEW

We are a REIT and one of the nation’s largest owners and operators of omni-channel grocery-anchored shopping centers. Our portfolio primarily consists of neighborhood centers anchored by the #1 or #2 grocer tenants by sales within their respective formats by trade area. Our Neighbors are a mix of national, regional, and local retailers that primarily provide necessity-based goods and services.

As of December 31, 2021, we owned equity interests in 289 shopping centers, including 268 wholly-owned shopping centers and 21 shopping center properties owned through two unconsolidated joint ventures, which comprised approximately 33.0 million square feet in 31 states. In addition to managing our shopping centers, our third-party investment management

business provides comprehensive real estate management services to our unconsolidated joint ventures and one private fund (collectively, the “Managed Funds”).

UNDERWRITTEN INITIAL PUBLIC OFFERING—On July 19, 2021, we closed our underwritten IPO, through which we offered 17.0 million shares of our common stock, $0.01 par value per share, at an initial price to the public of $28.00 per share, pursuant to a registration statement filed with the U.S. Securities and Exchange Commission (“SEC”) on Form S-11 (File No. 333-255846), as amended. In connection with the underwritten IPO, the underwriters exercised a 30-day option to purchase additional shares of our common stock to cover overallotments, and, accordingly, on August 2, 2021, we settled the sale of an additional 2.6 million shares at a price of $28.00 per share. These shares are listed on Nasdaq under the trading symbol “PECO”. The underwritten IPO, including the underwriters’ overallotment election, resulted in gross proceeds of $547.4 million.

Basis of Presentation—The basis of presentation of our shares of common stock is described as follows:

•Recapitalization—On June 18, 2021, our stockholders approved an amendment to our charter (the “Articles of Amendment”) that effected a change of each share of our common stock outstanding at the time the amendment became effective into one share of a newly created class of Class B common stock (the “Recapitalization”). The Articles of Amendment became effective upon filing with, and acceptance by, the State Department of Assessments and Taxation of Maryland on July 2, 2021. Unless otherwise indicated, all information in this Form 10-K gives effect to the Recapitalization and references to “shares” and per share metrics refer to our common stock and Class B common stock, collectively. Our Class B common stock automatically converted into our publicly traded common stock on January 18, 2022 (see Note 12).

•Reverse Stock Split—On July 2, 2021, our Board approved an amendment to our charter to effect a one-for-three reverse stock split. Concurrent with the reverse split, the Operating Partnership enacted a one-for-three reverse stock split of its outstanding OP units. Unless otherwise indicated, the information in this Form 10-K gives effect to the reverse stock and OP unit splits (see Note 12).

•IPO—Following our underwritten IPO, we are presenting common stock and Class B common stock as separate classes within our consolidated balance sheets and consolidated statements of equity. Any references to “common stock” in this Form 10-K refer to our Nasdaq-listed shares sold through the underwritten IPO, whereas Class B common stock refers to the newly-created class of Class B common stock that is not listed. This applies to all historical periods presented herein.

2021 BOND OFFERING—On September 20, 2021, the SEC declared effective our bond offering registration statement as filed on Form S-3 (File Nos. 333-259059 and 333-259059-01) relating to the offer, from time to time, of an unspecified number of debt securities not to exceed a maximum aggregate offering of $1 billion (“Bond Registration”). In October 2021, in connection with this Bond Registration, we settled $350 million aggregate principal amount of 2.625% senior notes (“2021 Bond Offering”) priced at 98.692% of the principal amount and maturing in November 2031. The 2021 Bond Offering resulted in gross proceeds of $345.4 million. The notes are fully and unconditionally guaranteed by us.

AT-THE-MARKET OFFERING (“ATM”)—On February 10, 2022, we and the Operating Partnership entered into a sales agreement relating to the potential sale of shares of common stock pursuant to a continuous offering program. In accordance with the terms of the sales agreement, we may offer and sell shares of our common stock having an aggregate offering price of up to $250 million from time to time through our sales agents, or, if applicable, as forward sellers.

PORTFOLIO AND LEASING STATISTICS—Below are statistical highlights of our wholly-owned portfolio as of December 31, 2021 and 2020 (dollars and square feet in thousands):

(1)The average remaining lease term in years excludes future options to extend the term of the lease.

COVID-19 STRATEGY—During 2020, as a result of the coronavirus (“COVID-19”) pandemic, many state governments issued “stay-at-home” mandates that generally limited travel and movement of the general public to essential activities only and required all non-essential businesses to close. All temporarily closed Neighbors have since been permitted to reopen; however, a portion of our Neighbors have permanently closed, and we continually work to backfill any remaining vacant spaces. We believe our collections have returned to levels consistent with those prior to the onset of the pandemic. All statistics and financial results included in this COVID-19 Strategy section are approximate and include the prorated portion attributable to properties owned through our unconsolidated joint ventures.

We believe substantially all Neighbors, including those that were required to temporarily close under governmental mandates, are contractually obligated to continue with their rent payments as documented in our lease agreements with them. However, we decided to negotiate relief for a small subset of our Neighbors, including rent deferrals. As of January 20, 2022, we have $3.3 million of outstanding payment plans with our Neighbors of which approximately 84% are scheduled to be received by December 31, 2022. As of January 20, 2022, the weighted-average term over which we expect to receive remaining amounts owed on executed payment plans is approximately ten months. We cannot guarantee that we will ultimately be able to collect these amounts; however, as of January 20, 2022, the collection rate on our payment plans executed during the COVID-19 pandemic exceeded 90%.

Despite seeing improvements in collections for current and past due amounts during 2021, the negative impact the pandemic has had on our Neighbors continues to be considered in our evaluation of Neighbors who potentially pose a credit risk. For Neighbors with a higher degree of uncertainty as to their creditworthiness, we may not record revenue for amounts billed until the cash is received. For the years ended December 31, 2021 and 2020, we had $3.6 million and $28.5 million, respectively, in net unfavorable monthly revenue adjustments for Neighbors who were being accounted for on a cash basis. As of December 31, 2021, our Neighbors currently being accounted for on a cash basis represented approximately 7% of our total Neighbor spaces, or approximately 5.9% of portfolio ABR. Further, many of our Neighbors who are on a cash basis of accounting are actively making payments toward their outstanding balances. When considering the ABR associated with Neighbors who are currently on a cash basis of accounting, 84% of this ABR is represented by Neighbors who are actively making payments.

Certain of our Neighbors were unable to remain in their spaces as a result of the factors previously noted. Despite this fallout, our leasing activity has been strong as demand for space in our centers remains high, which generally allows us to re-lease these spaces to Neighbors who may increase our concentration of necessity-based and omni-channel retailers. For the year ended December 31, 2021, our wholly-owned portfolio retention rate was 87.8%. Additionally, for the year ended December 31, 2021, for our wholly-owned portfolio, we executed 538 new leases, an increase as compared to both 2020 and 2019.

FINANCIAL HIGHLIGHTS—Owning, operating, and managing well-occupied omni-channel grocery-anchored real estate is a core part of our business strategy, and as of December 31, 2021, 96.7% of our ABR was derived from omni-channel grocery-anchored shopping centers. As of December 31, 2021, total leased occupancy improved 1.6% to 96.3% and inline occupancy improved 3.8% to 92.7%, when compared to December 31, 2020. We believe that our differentiated focused strategy, coupled with our responsible balance sheet management, left our portfolio well-positioned to recover from the economic downturn resulting from the COVID-19 pandemic. Our financial performance highlights during 2021 are as follows:

•Net income of $17.2 million, an increase of $11.8 million from a year ago, primarily due to increased collections, higher gains on the disposal of property, and lower interest expense.

•We closed our underwritten IPO and settled the 2021 Bond Offering, which generated gross proceeds of $547.4 million and $345.4 million, respectively.

•Collections during the second half of the year reached 99% of our monthly billings; returning to pre-COVID levels.

•Core FFO improved by $0.21 to $2.19 per diluted share primarily due to increased collections and lower interest expense.

•Same-Center NOI improved 8.2% to $346.8 million.

•Acquired $308.4 million and disposed of $206.4 million of assets, beginning our external growth strategy while improving portfolio quality with our dispositions.

•We paid monthly distributions of $0.085 per share, or $1.02 annualized, through the period of September 2021 and increased monthly distributions to $0.09 per share, or $1.08 annualized, for the remainder of the year.

•Net debt to Adjusted EBITDAre - annualized was 5.6x as compared to 7.3x during the same period a year ago.

EXECUTING OUR STRATEGY—Our performance for the year is linked to our key initiatives: differentiated and focused strategy, integrated operating platform, and responsible balance sheet management. We believe these initiatives will result in long-term growth and value creation to all of our stakeholders.

Differentiated and Focused Strategy—We continually monitor the commercial real estate sector for shopping centers that meet our investment objectives. During 2021, in the wake of the COVID-19 pandemic, our opportunities for investment in assets improved over 2020. Further, capital raised through our underwritten IPO during the third quarter of 2021 has created liquidity that we intend to use, in part, to grow our portfolio of assets. Highlights of our asset composition and acquisitions are as follows:

•96.7% of our ABR was derived from omni-channel grocery-anchored shopping centers as of December 31, 2021.

•71.6% of our ABR was derived from Neighbors providing Necessity-based goods and services.

•Acquired nine properties and five outparcels for a net cash outlay of $308.4 million, adding 1.1 million of GLA to our portfolio.

Internal Growth Through Our Integrated Operating Platform—During 2021, our leasing activity has increased as compared to both 2020 and 2019. We have focused on improving our occupancy through leasing vacant spaces, increasing lease revenue through rent growth, and executing development and redevelopment opportunities. Highlights of our wholly-owned operational activity as of and for the year ended December 31, 2021 are as follows:

•Leased occupancy for our wholly-owned portfolio improved to 96.3% as of December 31, 2021, compared to 94.7% as of December 31, 2020.

•We executed 1,135 leases (new, renewal, and options) totaling 5.6 million square feet during the year ended December 31, 2021, which was an increase from 861 leases totaling 4.7 million square feet executed during the year ended December 31, 2020.

•Total ABR per leased square foot for executed new leases improved 6.0% to $17.11, and inline ABR per leased square foot for executed new leases improved 13.9% to $20.63 during the year ended December 31, 2021.

•As of and for the year ended December 31, 2021, we had 26 development and redevelopment projects completed or in process, which we estimate will comprise a total investment of $59.2 million.

•Created $1.0 million of incremental ABR in 2021 as a result of development and redevelopment projects completed in 2020.

Balance Sheet Management Positioned for External Growth—Our management team has executed strategies to improve the flexibility of our balance sheet, including gaining access to additional forms of liquidity and extending our debt maturity profile. This execution well-positions us to preserve our investment grade rating, fund distributions to our stockholders, and invest in our targeted acquisitions. As of December 31, 2021, we had $604.8 million of total liquidity, comprised of $115.5 million of cash, cash equivalents, and restricted cash, plus $489.3 million of borrowing capacity available on our $500.0 million revolving credit facility. Our balance sheet management highlights as of and for the year ended December 31, 2021 are as follows:

•Closed our underwritten IPO, in which we issued approximately 19.6 million shares of common stock at $28.00 per share, generating gross proceeds of $547.4 million.

•We were assigned investment grade ratings from Moody’s Investors Services (Baa3) and S&P Global Ratings (BBB-).

•We settled the 2021 Bond Offering, which resulted in gross proceeds of $345.4 million.

•We entered into a new $980 million credit facility comprised of a $500 million senior unsecured revolving credit facility and two $240 million senior unsecured term loan tranches (the “Refinancing”).

•We paid down or refinanced $1.1 billion in term loan debt in 2021 utilizing proceeds from the underwritten IPO, the Refinancing, the 2021 Bond Offering, and cash on hand. Additionally, we executed early repayments of $55.2 million in mortgage debt. In total, we reduced our net outstanding debt obligations by 17.5% from a year ago.

•Our ratio of net debt to Adjusted EBITDAre was 5.6x as of December 31, 2021, as compared to 7.3x as of December 31, 2020 (see “Liquidity and Capital Resources - Financial Leverage Ratios” below for a discussion and calculation).

•Following our activity this year, our debt maturity profile with the respective principal payment obligations as of December 31, 2021 is as follows (including the impact of derivatives on weighted-average interest rates):

LEASING ACTIVITY—Below is a summary of leasing activity for our wholly-owned properties for the years ended December 31, 2021 and 2020(1):

(1)Per square foot amounts may not recalculate exactly based on other amounts presented within the table due to rounding.

(2)During the third quarter of 2021, we refined our calculation of cost per square foot of executing renewals and options to better align with actual costs incurred. Prior period amounts have been adjusted to reflect costs on the same basis.

(3)Excludes exercise of options.

RESULTS OF OPERATIONS

KNOWN TRENDS AND UNCERTAINTIES OF THE COVID-19 PANDEMIC—The COVID-19 pandemic resulted in reduced revenues beginning with the second quarter of 2020 and continuing through early 2021. During the second half of 2021, we saw our collections return to pre-COVID levels, including increased rental income as a result of collections in 2021 related to rent amounts billed in 2020. We believe our collections have likely stabilized, which will reduce volatility in our earnings.

SUMMARY OF OPERATING ACTIVITIES FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020

(1)Line items that result in a percent change that exceed certain limitations are considered not meaningful (“NM”) and indicated as such.

Our basis for analyzing significant fluctuations in our results of operations generally includes review of the results of our same-center portfolio, non-same-center portfolio, and revenues and expenses from our management activities. We define our same-center portfolio as the 256 properties that were owned and operational prior to January 1, 2020. We define our non-same-center portfolio as those properties that were not fully owned and operational in both periods owing to real estate asset activity occurring after December 31, 2019, which includes 31 properties disposed of and eleven properties acquired. Below are explanations of the significant fluctuations in the results of operations for the years ended December 31, 2021 and 2020:

Rental Income increased $34.0 million as follows:

•$37.3 million increase related to our same-center portfolio as follows:

▪$30.9 million increase primarily due to stronger collections in 2021 as compared with lower collections in 2020, the increase owing largely to the ongoing recovery of our portfolio in the wake of the COVID-19 pandemic and its economic impact, including a decrease in Neighbors we have identified as a credit risk, as well as collections on charges that were uncollected in 2020;

▪$7.6 million increase primarily due to a $0.29 increase in average minimum rent per square foot, partially offset by a 0.4% decline in average occupancy;

▪$2.9 million increase primarily due to straight-line rent adjustments; and

▪$4.1 million decrease owing largely to lower recoverable income resulting from lower real estate taxes and decline in average occupancy.

•$3.3 million decrease related to our net disposition of 20 properties.

Property Operating Expenses increased $5.4 million primarily as follows:

• $6.0 million increase related to our same-center portfolio and corporate operating activities primarily as follows:

▪$5.1 million increase owing largely to lower expense for performance-based compensation in 2020 as a result of the COVID-19 pandemic, as compared to 2021; and

▪$0.8 million increase primarily due to higher insurance expenses attributed to higher market rates and an increase in claims and claim development.

•$0.5 million decrease related to our net disposition of 20 properties.

Real Estate Tax Expenses decreased $1.6 million primarily as follows:

•$1.3 million decrease related to our same-center portfolio primarily due to successful tax appeals and favorable assessments at our centers; and

•$0.4 million decrease related to our net disposition of 20 properties.

General and Administrative Expenses increased $7.4 million primarily as follows:

•$8.7 million increase owing largely to lower expense for performance-based compensation in 2020 as a result of the COVID-19 pandemic, as compared to 2021;

•$1.2 million increase due to an increase in directors and officers insurance as a result of our underwritten IPO; and

•$2.3 million decrease primarily due to lower transfer agent costs and information technology costs.

Depreciation and Amortization decreased $3.2 million as follows:

•$1.8 million decrease related to our same-center portfolio and corporate operating activities primarily as follows:

▪$5.0 million decrease primarily due to intangible assets becoming fully amortized; and

▪$3.1 million increase primarily due to an increase in tenant improvements and leasing commissions as a result of our recent leasing activity.

•$1.4 million decrease related to our net disposition of 20 properties.

Impairment of Real Estate Assets:

•The $4.3 million increase in impairment of real estate assets was due to assets that were sold during 2021 at a disposition price that was less than the carrying value.

Interest Expense, Net:

•The $8.9 million decrease during the year ended December 31, 2021 as compared to the same period in 2020 was due to: (i) lower debt balances outstanding as a result of early repayments of debt; (ii) minimal borrowings on our revolving credit facility in 2021 as compared to 2020; and (iii) lower average interest rates during 2021 primarily due to the Refinancing; partially offset by (iv) the 2021 Bond Offering. Interest Expense, Net was comprised of the following (dollars in thousands):

Gain on Disposal of Property, Net:

•The $23.9 million increase was primarily related to the sale of 24 properties and four outparcels (in addition to other property-related miscellaneous disposals and write-offs) with a net gain of $30.4 million during the year ended December 31, 2021, as compared to the sale of seven properties and one outparcel (in addition to other property-related miscellaneous disposals and write-offs) with a net gain of $6.5 million during the year ended December 31, 2020 (see Note 4).

Other (Expense) Income, Net:

•The $43.6 million change was largely due to: (i) the change in the fair value of our earn-out liability as a result of the commencement of our underwritten IPO as well as improved market conditions in 2021; (ii) an increase in transaction and acquisition expenses in connection with our underwritten IPO, including restricted stock units awarded; partially offset by (iii) an increase from equity in income of our unconsolidated joint ventures primarily due

to Necessity Retail Partners (“NRP”) property dispositions. Other (Expense) Income, Net was comprised of the following (dollars in thousands):

SUMMARY OF OPERATING ACTIVITIES FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

For a discussion of the year-to-year comparisons in the results of operations for the years ended December 31, 2020 and 2019, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2020 Annual Report on Form 10-K, filed with the SEC on March 12, 2021.

NON-GAAP MEASURES

See “Key Performance Indicators and Defined Terms” above for additional information related to the following non-GAAP measures.

SAME-CENTER NET OPERATING INCOME—Same-Center NOI is presented as a supplemental measure of our performance, as it highlights operating trends such as occupancy levels, rental rates, and operating costs for our Same-Center portfolio. Other REITs may use different methodologies for calculating Same-Center NOI, and accordingly, our Same-Center NOI may not be comparable to other REITs. For the years ended December 31, 2021 and 2020, Same-Center NOI represents the NOI for the 256 properties that were wholly-owned and operational for the entire portion of both comparable reporting periods.

Same-Center NOI should not be viewed as an alternative measure of our financial performance as it does not reflect the operations of our entire portfolio, nor does it reflect the impact of general and administrative expenses, depreciation and amortization, interest expense, other income (expense), or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties that could materially impact our results from operations.

The table below compares Same-Center NOI for the years ended December 31, 2021 and 2020 (dollars in thousands):

(1)Excludes straight-line rental income, net amortization of above- and below-market leases, and lease buyout income.

(2)Includes billings that will not be recognized as revenue until cash is collected or the Neighbor resumes regular payments and/or we deem it appropriate to resume recording revenue on an accrual basis, rather than on a cash basis.

Same-Center Net Operating Income Reconciliation—Below is a reconciliation of Net Income to NOI and Same-Center NOI for the years ended December 31, 2021 and 2020 (in thousands):

(1)Includes straight-line rent adjustments for Neighbors for whom revenue is being recorded on a cash basis.

(2)Includes operating revenues and expenses from non-same-center properties which includes properties acquired or sold and corporate activities.

NAREIT FFO AND CORE FFO—Nareit FFO is a non-GAAP financial performance measure that is widely recognized as a measure of REIT operating performance. Core FFO is an additional financial performance measure used by us as Nareit FFO includes certain non-comparable items that affect our performance over time. We believe that Core FFO is helpful in assisting management and investors with assessing the sustainability of our operating performance in future periods.

Nareit FFO, Nareit FFO Attributable to Stockholders and OP Unit Holders, and Core FFO should not be considered alternatives to net income (loss) under GAAP, as an indication of our liquidity, nor as an indication of funds available to cover our cash needs, including our ability to fund distributions. Core FFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate our business plan in the manner currently contemplated.

Accordingly, Nareit FFO, Nareit FFO Attributable to Stockholders and OP Unit Holders, and Core FFO should be reviewed in connection with other GAAP measurements, and should not be viewed as more prominent measures of performance than net income (loss) or cash flows from operations prepared in accordance with GAAP. Our Nareit FFO, Nareit FFO Attributable to Stockholders and OP Unit Holders, and Core FFO, as presented, may not be comparable to amounts calculated by other REITs.

The following table presents our calculation of Nareit FFO, Nareit FFO Attributable to Stockholders and OP Unit Holders, and Core FFO for the years ended December 31, 2021, 2020, and 2019 (in thousands, except per share amounts):

(1)Restricted stock awards were dilutive to Nareit FFO attributable to stockholders and OP unit holders per share and Core FFO per share for the years ended December 31, 2021, 2020, and 2019, and, accordingly, their impact was included in the weighted-average shares of common stock used in their respective per share calculations. For the year ended December 31, 2019, restricted stock units had an anti-dilutive effect upon the calculation of earnings per share and thus were excluded. For details related to the calculation of earnings per share, see Note 14.

EBITDAre and ADJUSTED EBITDAre—We use EBITDAre and Adjusted EBITDAre as additional measures of operating performance which allow us to compare earnings independent of capital structure, determine debt service and fixed cost coverage, and measure enterprise value. Additionally, we believe they are a useful indicator of our ability to support our debt obligations.

EBITDAre and Adjusted EBITDAre should not be considered as alternatives to net income (loss), as an indication of our liquidity, nor as an indication of funds available to cover our cash needs, including our ability to fund distributions. Accordingly, EBITDAre and Adjusted EBITDAre should be reviewed in connection with other GAAP measurements, and should not be viewed as more prominent measures of performance than net income (loss) or cash flows from operations prepared in accordance with GAAP. Our EBITDAre and Adjusted EBITDAre, as presented, may not be comparable to amounts calculated by other REITs.

The following table presents our calculation of EBITDAre and Adjusted EBITDAre for the years ended December 31, 2021, 2020, and 2019 (in thousands):

LIQUIDITY AND CAPITAL RESOURCES

GENERAL—Aside from standard operating expenses, we expect our principal cash demands to be for:

•investments in real estate;

•cash distributions to stockholders;

•redevelopment and repositioning projects;

•capital expenditures and leasing costs; and

•principal and interest payments on our outstanding indebtedness.

We expect our primary sources of liquidity to be:

•operating cash flows;

•proceeds received from the disposition of properties;

•proceeds from any ATM offering activities;

•proceeds from debt financings, including borrowings in connection with our Bond Registration and those under our unsecured revolving credit facility;

•distributions received from unconsolidated joint ventures; and

•available, unrestricted cash and cash equivalents.

At this time, we believe our current sources of liquidity are sufficient to meet our short- and long-term cash demands.

UNDERWRITTEN IPO—On July 19, 2021, we closed our underwritten IPO, through which we issued 19.6 million shares, including the underwriters’ overallotment election, of our common stock, $0.01 par value per share, at an initial price to the public of $28.00 per share. The underwritten IPO, including the underwriters’ overallotment election, resulted in gross proceeds of $547.4 million. See “Overview” above for more details.

DEBT—The following table summarizes information about our debt as of December 31, 2021 and 2020 (dollars in thousands):

(1)In July 2021, we refinanced the revolving credit facility and exercised our option to extend its maturity as noted below.

(2)Net of any outstanding balance and letters of credit.

Bond Registration—On September 20, 2021, the SEC declared effective our Bond Registration. We intend to use net proceeds from any sale of offered securities to repay outstanding indebtedness and for general corporate purposes, including funding future investment activity.

Debt Activity—During the years ended December 31, 2021 and 2020, we took steps to reduce our leverage and appropriately ladder our debt maturities. Our debt activity during the year ended December 31, 2021 was as follows:

•In July 2021, we completed the Refinancing. In connection with the Refinancing, we paid off a $472.5 million term loan due in November 2025. The revolving credit facility will mature in January 2026, and the two senior unsecured term loan tranches will mature in November 2025 and July 2026, respectively. Additionally, we used proceeds from the underwritten IPO to retire a $375.0 million term loan that was set to mature in April 2022.

•In August 2021, we executed a $150 million partial pay down on a term loan that was set to mature in November 2023 utilizing cash on hand.

•In October 2021, we settled the 2021 Bond Offering priced at 98.692% of the principal amount and maturing in November 2031. The 2021 Bond Offering resulted in gross proceeds of $345.4 million. In October 2021, net proceeds from the bond settlement were used, in part, to pay down the remaining $150 million balance of the term loan that was set to mature in November 2023. The notes are fully and unconditionally guaranteed by us.

•During 2021, we executed early repayments of $55.2 million in mortgage debt.

Our debt activity during the year ended December 31, 2020 was as follows:

•In January 2020, we paid down $30 million of term loan debt maturing in 2021 using proceeds from property dispositions in 2019.

•In April 2020, we borrowed $200 million on our revolving credit facility to meet our operating needs for a sustained period due to the COVID-19 pandemic.

•In June 2020, we fully repaid the outstanding balance on our revolving credit facility as our rent and recovery collections during the second quarter, combined with our COVID-19 expense reduction initiatives, sufficiently funded our operating needs and provided enough stability to allow for this repayment. Further, we did not borrow on our revolving credit facility during the remainder of 2020.

•In the fourth quarter, we executed early repayments of $24.5 million in mortgage debt.

Future Debt Obligations—As of December 31, 2021, including the impact of our swap agreements, our future contractual debt obligations were $123.5 million of debt principal and interest payments during 2022, and $2.1 billion of debt principal and interest payments thereafter (see Note 8).

Covenants—Credit agreements for our unsecured revolving credit facility and unsecured term loans contain customary financial covenants, including a leverage ratio of 60% or less, with a surge to 65% or less following a material acquisition, and require the fixed-charge ratio to be 1.5:1 or greater. Our unsecured senior notes due 2031 are also subject to customary financial covenants, including a leverage ratio of 65% or less, and require the fixed-charge ratio to be 150% or greater. As of December 31, 2021, we were in compliance with the restrictive covenants of our outstanding debt obligations and we expect to continue to meet the requirements of these covenants over the next twelve months.

OTHER CONTRACTUAL COMMITMENTS AND CONTINGENCIES AND OFF BALANCE SHEET ARRANGEMENTS—We enter into leases as a lessee as part of our real estate operations in the form of ground leases of land for certain properties, and as part of our corporate operations in the form of office space and office equipment leases. Currently, neither our operating leases nor our finance leases have residual value guarantees or other restrictions or covenants. We expect to fund these obligations through existing financing or cash flows from operations. As of December 31, 2021, our future contractual obligations as a lessee included operating lease obligations of $0.8 million during 2022, and $7.5 million thereafter. As of December 31, 2021, our future contractual finance lease obligations included $0.2 million during 2022, and $0.6 million thereafter.

We have an off-balance sheet arrangement that includes being the limited guarantor for up to $190 million, capped at $50 million in most instances, of debt for our NRP joint venture. Additionally, we are the limited guarantor of a $175 million mortgage loan secured by Grocery Retail Partners I LLC (“GRP I”) properties. Our guaranty for both the NRP and GRP I debt is limited to being the non-recourse carveout guarantor and the environmental indemnitor. Further, in both cases, we are also party to an agreement with our institutional joint venture partners in which any potential liability under such guarantees will be apportioned between us and our applicable joint venture partner based on our respective ownership percentages in the applicable joint venture. As of December 31, 2021, NRP and GRP I had outstanding debt balances of $15.3 million and $174.0 million, respectively.

Additionally, our off-balance sheet arrangements include the notional amount of our interest rate swaps which we use to hedge a portion of our exposure to interest rate fluctuations. Currently, all of our interest rate swaps fix the variable rate interest on our term loan debt. We intend to fund our interest rate swap payments utilizing cash flows from operations. As of December 31, 2021, the notional amount of our interest rate swaps was $0.9 billion. As of December 31, 2021, our future interest rate swap obligations are $17.8 million during 2022 and $32.6 million thereafter.

FINANCIAL LEVERAGE RATIOS—We believe our net debt to Adjusted EBITDAre, net debt to total enterprise value, and debt covenant compliance as of December 31, 2021 allow us access to future borrowings as needed in the near term. The following table presents our calculation of net debt and total enterprise value, inclusive of our prorated portion of net debt and cash and cash equivalents owned through our unconsolidated joint ventures, as of December 31, 2021 and 2020 (in thousands):

(1)As of December 31, 2021, total equity market capitalization was calculated as the 126.6 million diluted shares multiplied by the closing market price per share of $33.04. As of December 31, 2020, prior to the underwritten IPO, total equity value was calculated as 106.6 million diluted shares multiplied by the EVPS of $26.25. Fully diluted shares include Class B common stock, common stock, and OP units.

The following table presents our calculation of net debt to Adjusted EBITDAre and net debt to total enterprise value as of December 31, 2021 and 2020 (dollars in thousands):

(1)Adjusted EBITDAre is based on a trailing twelve months. See “Non-GAAP Measures - EBITDAre and Adjusted EBITDAre” above for a reconciliation to Net Income (Loss).

CAPITAL EXPENDITURES AND REDEVELOPMENT ACTIVITY—We make capital expenditures during the course of normal operations, including maintenance capital expenditures and tenant improvements, as well as value-enhancing anchor space repositioning and redevelopment, ground-up outparcel development, and other accretive projects.

During the years ended December 31, 2021 and 2020, we had capital spend of $75.0 million and $64.0 million, respectively. Below is a summary of our capital spending activity, excluding leasing commissions, on a cash basis for the years ended December 31, 2021 and 2020 (in thousands):

(1)Certain prior period amounts have been reclassified to conform with current year presentation.

(2)Amount includes internal salaries and related benefits of personnel who work directly on capital projects as well as capitalized interest expense.

We expect our capital expenditures to reach $95 million - $105 million in 2022, which includes $45 million - $55 million related to development and redevelopment projects. We anticipate that obligations related to capital improvements in 2022 can be met with cash flows from operations, cash flows from dispositions, or borrowings on our unsecured revolving credit facility.

Generally, we expect our development and redevelopment projects to stabilize within 24 months. Our underwritten incremental unlevered yields on development and redevelopment projects are expected to average between 10%-12%. Our current in process projects represent an estimated total investment of $45.4 million. Actual incremental unlevered yields may vary from our underwritten incremental unlevered yield range based on the actual total cost to complete a project and its actual incremental annual NOI at stabilization. See “Key Performance Indicators and Defined Terms” above for further information.

ACQUISITION ACTIVITY—We continually monitor the commercial real estate market for properties that have future growth potential, are located in attractive demographic markets, and support our business objectives. The following table highlights our property acquisitions during the years ended December 31, 2021 and 2020 (dollars in thousands):

(1)Outparcels acquired are adjacent to shopping centers that we own.

Subsequent to December 31, 2021, we acquired three properties for $100.4 million.

DISPOSITION ACTIVITY—We are actively evaluating our portfolio of assets for opportunities to make strategic dispositions of assets that no longer meet our growth and investment objectives or assets that have stabilized in order to capture their value. The following table highlights our property dispositions during the years ended December 31, 2021 and 2020 (dollars in thousands):

(1)We retained one outparcel related to property sales during each of the years ended December 31, 2021 and 2020; therefore, the sales did not result in reductions in our total property count.

(2)During the year ended December 31, 2021, one of our outparcel sales included the only remaining portion of a property we previously owned; therefore, the sale resulted in a reduction in our total property count.

(3)In addition to the four outparcels sold during the year ended December 31, 2021, a tenant at one of our properties exercised a bargain purchase option to acquire a parcel of land that we previously owned. This generated minimal proceeds for us.

(4)The gain on sale of property, net does not include miscellaneous write-off activity, which is also recorded in Gain on Disposal of Property, Net on the consolidated statements of operations and comprehensive income (loss).

Subsequent to December 31, 2021, we sold one property for $1.4 million.

DISTRIBUTIONS—The following table details distributions to our common stockholders and OP unit holders on a cash basis during the years ended December 31, 2021 and 2020:

(1)Due to the uncertainty of the COVID-19 pandemic, our Board suspended stockholder distributions effective after the payment of the March 2020 distribution on April 1, 2020 and continuing through November 2020. Our Board reinstated monthly stockholder distributions beginning December 2020.

The January 2022 distributions of $0.09 per share were paid on February 1, 2022. On February 9, 2022, our Board authorized 2022 distributions for February, March, and April of $0.09 per share to the stockholders of record at the close of business on February 15, 2022, March 15, 2022, and April 15, 2022, respectively. OP unit holders will receive distributions at the same rate as common stockholders. The timing and amount of distributions is determined by our Board and is influenced in part by our intention to comply with REIT requirements of the IRC.

To maintain our qualification as a REIT, we must make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (which is computed without regard to the dividends paid deduction or net capital gain, and which does not necessarily equal net income or loss as calculated in accordance with GAAP). We generally will not be subject to U.S. federal income tax on the income that we distribute to our stockholders each year due to meeting the REIT qualification requirements. However, we may be subject to certain state and local taxes on our income, property, or net worth and to federal income and excise taxes on our undistributed income.

We have not established a minimum distribution level, and our charter does not require that we make distributions to our stockholders.

DRIP AND THE SRP—On August 4, 2021, as a result of our underwritten IPO, our Board approved the termination of the DRIP and the SRP.

CASH FLOW ACTIVITIES—As of December 31, 2021, we had cash and cash equivalents and restricted cash of $115.5 million, a net cash decrease of $16.4 million during the year ended December 31, 2021.

Below is a summary of our cash flow activity for the years ended December 31, 2021 and 2020 (dollars in thousands):

OPERATING ACTIVITIES—Our net cash provided by operating activities was primarily impacted by the following:

•Property operations and working capital—Most of our operating cash comes from rental and tenant recovery income and is offset by property operating expenses, real estate taxes, and general and administrative costs. The increase in property operations was primarily due to a $26.4 million, or 8.2%, improvement in same-center NOI as

compared to 2020. During the year ended December 31, 2021, we had a net cash inflow of $4.0 million from changes in working capital as compared to a net cash outlay of $15.9 million during the same period in 2020. This change was primarily driven by improved collections on amounts due from Neighbors as well as expense reduction initiatives, and was partially offset by higher leasing commissions and prepaid expenses.

•Fee and management income—We also generate operating cash from our third-party investment management business, pursuant to various management and advisory agreements between us and the Managed Funds. Our fee and management income was $10.3 million for the year ended December 31, 2021, an increase of $0.5 million as compared to the same period in 2020.

•Cash paid for interest—During the year ended December 31, 2021, we paid $68.1 million for interest, a decrease of $10.4 million over the same period in 2020, largely due to: (i) lower debt balances outstanding as a result of early repayments of debt; (ii) minimal borrowings on our revolving credit facility in 2021 as compared to 2020; and (iii) lower average interest rates during 2021 primarily due to the Refinancing.

INVESTING ACTIVITIES—Our net cash used in investing activities was primarily impacted by the following:

•Real estate acquisitions—During the year ended December 31, 2021, our acquisitions resulted in a total cash outlay of $308.4 million, as compared to a total cash outlay of $41.5 million during the same period in 2020.

•Real estate dispositions—During the year ended December 31, 2021, our dispositions resulted in a net cash inflow of $206.4 million, as compared to a net cash inflow of $57.9 million during the same period in 2020.

•Capital expenditures—We invest capital into leasing our properties and maintaining or improving the condition of our properties. During the year ended December 31, 2021, we paid $75.0 million for capital expenditures, an increase of $11.1 million over the same period in 2020, primarily due to an increase in tenant improvements owing largely to an increase in leasing volume as compared to the same period a year ago.

•Return of investment in unconsolidated joint ventures—During the year ended December 31, 2021, we had a return of investment in unconsolidated joint ventures of $5.0 million, including $2.4 million in connection with NRP primarily as a result of property dispositions. During the year ended December 31, 2020, we had a return of investment in unconsolidated joint ventures of $3.5 million.

•Investment in marketable securities—During the the year ended December 31, 2021, we made an investment in marketable securities resulting in a net cash outflow of $5.5 million.

•Investment in third parties—During the year ended December 31, 2021, we made an investment into a third party company that resulted in a net cash outflow of $3.0 million.

FINANCING ACTIVITIES—Our net cash used in financing activities was primarily impacted by the following:

•Underwritten IPO—Upon consummation of our underwritten IPO in July 2021, including the over-allotment option exercised in full by the underwriters, we had gross proceeds from the issuance of common stock of $547.4 million, offset by a cash outflow of $39.0 million for offering costs, discounts, and commissions during the year ended December 31, 2021. We did not issue any shares of common stock during the year ended December 31, 2020, other than in connection with redemptions of OP units as set forth in our consolidated balance sheets under Noncontrolling Interests (see Note 12).

•Debt borrowings and payments—During the year ended December 31, 2021, we had $402.3 million in net repayment of debt as compared to $64.8 million in net repayment of debt during the same period a year ago. See “Debt Activity” above for more details.

•Distributions to stockholders and OP unit holders—Cash used for distributions to common stockholders and OP unit holders increased by $62.9 million during the year ended December 31, 2021 as compared to the same period in 2020, due to the suspension of our distributions from April 2020 through November 2020 and an increase in common shares outstanding as a result of our underwritten IPO.

•Share repurchases—Cash outflows for share repurchases increased by $72.5 million for the year ended December 31, 2021 as compared to the year ended December 31, 2020, primarily as a result of a tender offer, which was settled in January 2021.

INFLATION

Although inflation has been historically low and has had a minimal impact on the operating performance of our shopping centers, inflation has recently increased in the United States. Changes in economic conditions and supply chain constraints have driven a rise in wages and increased costs for materials. Further, monetary policy and stimulus measures implemented by the federal government and the Federal Reserve could lead to higher inflation rates or lengthen the period of inflation, which may negatively impact our Neighbors, our operating costs, and our construction costs. Substantially all of our leases contain provisions designed to mitigate the adverse effect of inflation, including rent escalations and requirements for Neighbors to pay their allocable share of operating expenses, including common area maintenance, utilities, real estate taxes, insurance, and certain capital expenditures. Additionally, many of our leases are for terms of less than ten years, which allows us to target increased rents to current market rates upon renewal.

CRITICAL ACCOUNTING ESTIMATES

Below is a discussion of our critical accounting estimates. Our accounting policies have been established to conform with GAAP. We consider these policies critical because they involve significant management judgments and assumptions, require estimates about matters that are inherently uncertain, and are important for understanding and evaluating our reported financial results. These judgments affect the reported amounts of assets at the dates of the consolidated financial statements, as well as the reported amounts of revenue during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our consolidated financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses.

Because of the adverse economic conditions that have occurred as a result of the impacts of the COVID-19 pandemic and any remaining uncertainty related to the pandemic, it is possible that the estimates and assumptions that have been utilized in the preparation of the consolidated financial statements could change or vary significantly from actual results. Please refer to Notes 2 and 16 for additional discussion on the potential impact that the COVID-19 pandemic could have on these significant accounting estimates.

Real Estate Valuation—We assess the fair value of acquired real estate and allocate the purchase price of real estate assets and liabilities acquired based upon their estimated fair values as of the acquisition date. The allocation requires the use of market based estimates and assumptions including estimated market lease rates and comparable acquisitions, historical operating results, carrying costs during lease-up periods, discount and capitalization rates, market absorption periods, and the number of years the property will be held for investment.

Quarterly, we review our owned real estate properties, including those classified as real estate held for sale, for evidence of impairment, which requires us, at times, to estimate the fair value of our real estate assets. Valuing our investment in real estate assets requires us to utilize a significant amount of judgment in the inputs that we select for impairment testing and other analyses. We select these inputs based on all available evidence and using techniques that are commonly employed by other real estate companies. Examples of these inputs include projected revenue and expense growth rates, estimates of future cash flows, anticipated holding periods, capitalization rates, general economic conditions and trends, and other available market data.

We believe that our real estate valuation estimates are based on reasonable assumptions. However, the use of inappropriate estimates could result in an incorrect valuation of our real estate properties, at acquisition or during our ownership period, which could result in material impairment losses in the future.

Rental Income—The majority of our revenue is lease revenue derived from our real estate assets, for which we are the lessor. Lease receivables are reviewed continually to determine whether or not it is probable that we will realize substantially all remaining lease payments for each of our Neighbors (i.e., whether a Neighbor is deemed to be a credit risk). If we determine it is not probable that we will collect substantially all of the remaining lease payments from a Neighbor, revenue for that Neighbor is recorded on a cash basis (“cash-basis Neighbor”), including no longer recognizing straight-line rent receivables and/or receivables for recoverable expenses. We will resume recording lease income on an accrual basis for cash-basis Neighbors once we believe the collection of rent for the remaining lease term is probable, which will generally be after a period of regular payments and no remaining unpaid rent for a certain timeframe.

Additionally, we record a general reserve based on our review of operating lease receivables at a company level to ensure they are properly valued based on analysis of historical uncollectible tenant receivables, outstanding balances, and the current economic climate.

The aforementioned adjustments, as well as any reserve for disputed charges, are recorded as a reduction of Rental Income on the consolidated statements of operations and comprehensive income (loss).

Our revenue collectibility estimates are made based on historical experience, the current economic climate, and other Neighbor-specific factors. While we do not believe there is a reasonable likelihood of a material change in the estimates or assumptions that we use to recognize revenue, if actual payment levels were to vary significantly from estimates, we may be exposed to decreases in rental income that could be material or increases of non-cash straight-line income when a cash-basis Neighbor moves back to accrual accounting in accordance with GAAP.