# REGENCY CENTERS CORP (REG) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from REGENCY CENTERS CORP's 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/910606/000095017022001418/reg-20211231.htm
Accession: 0000950170-22-001418
Filing date: 2022-02-17
Report date: 2021-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

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

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

COVID-19 Pandemic

For a discussion of the COVID-19 pandemic, refer to Part I Item 1. Business.

Executing on our Strategy

During the year ended December 31, 2021, we had Net income attributable to common stockholders of $361.4 million, as compared to $44.9 million during the year ended December 31, 2020, as the impact of reopening following pandemic restrictions brought significant customer traffic back to our shopping centers. The year ended December 31, 2020, includes the impacts of a $132.1 million Goodwill impairment charge and $117.0 million of uncollectible Lease income, primarily as a result of the COVID-19 pandemic.

During the year ended December 31, 2021:

•
Our Pro-rata same property NOI, excluding termination fees, grew 16.2%, primarily attributable to collections of previously reserved rent and improvements in current period collection rates. Although rates continue to remain below pre-pandemic levels, they have improved to 99% for the three months ended December 31, 2021, as of February 7, 2022.

•
We executed 1,979 new and renewal leasing transactions representing 7.0 million Pro-rata SF with positive trailing twelve month rent spreads of 5.5% during 2021, as compared to 1,511 leasing transactions representing 5.8 million Pro-rata SF with positive trailing twelve month rent spreads of 2.2% in 2020. Rent spreads are calculated on all executed leasing transactions for comparable Retail Operating Property spaces, including spaces vacant greater than 12 months.

•
At December 31, 2021, our total property portfolio was 94.1% leased while our same property portfolio was 94.3% leased, as compared to 92.3% leased and 92.9% leased, respectively, at December 31, 2020.

We continued our development and redevelopment of high quality shopping centers:

•
Estimated Pro-rata project costs of our current in process development and redevelopment projects totaled $307.3 million as compared to $319.3 million at December 31, 2020.

•
Development and redevelopment projects completed during 2021 represent $67.6 million of estimated net project costs with an average stabilized yield of 9.0%.

We maintained a conservative balance sheet providing liquidity and financial flexibility to cost effectively fund investment opportunities and debt maturities:

•
On January 15, 2021, we repaid our $265 million Term Loan, leaving us with no unsecured debt maturities until 2024.

•
On February 9, 2021, we entered into an Amended and Restated Credit Agreement, which among other items, i) maintains our previous level of borrowing capacity of $1.25 billion, ii) includes a $125 million sublimit for swingline loans and $50 million available for issuance of letters of credit, iii) extends the maturity date to March 23, 2025, and iv) provides for two six-month extension options. The existing financial covenants under the Line remained unchanged. As of December 31, 2021, our borrowing capacity under the Line was $1.2 billion, with no borrowings outstanding.

•
During May and June 2021, we entered into forward sale agreements under our ATM program through which we can issue

2,316,760 shares of our common stock at an average offering price of $64.59 before underwriting discount and offering

expenses.

o
During September 2021, we settled and issued 1,332,142 shares under such forward sale agreements at a weighted average price of $63.71, before underwriting discounts and offering expenses. Net proceeds received at settlement were approximately $82.5 million, which were used to fund the acquisition of USAA's partnership interest in a seven property portfolio.

o
The remaining unsettled shares under the forward sale agreements must be settled within one year of their trade dates, which range from June 6, 2022 to June 11, 2022. Proceeds from the remaining issuance of shares are expected to be approximately $65 million before underwriting discounts and offering expenses and will be used to fund new investments which may include acquisitions of operating properties, developments and redevelopments, or for general corporate purposes.

37

•
At December 31, 2021, our Pro-rata net debt-to-operating EBITDAre ratio on a trailing twelve month basis was 5.1x as compared to 6.0x at December 31, 2020.

Leasing Activity and Significant Tenants

We believe our high-quality, grocery anchored shopping centers located in suburban trade areas with compelling demographics create attractive spaces for retail and service providers to operate their businesses.

Pro-rata Percent Leased

The following table summarizes Pro-rata percent leased of our combined Consolidated and Unconsolidated shopping center portfolio:

[[GREPCENT_TABLE]]
[["","","December 31, 2021","","","December 31, 2020"],["Percent Leased \u2013 All properties","","","94.1","%","","","92.3","%"],["Anchor space","","","97.0","%","","","95.1","%"],["Shop space","","","89.2","%","","","87.5","%"]]
[[/GREPCENT_TABLE]]

Our percent leased in both the Anchor and Shop space categories increased primarily due to leasing activity during 2021. This resulted from greater demand for space and confidence among existing tenants as their businesses recovered from the initial impacts of the pandemic in 2020, during which we experienced greater tenant closures and bankruptcies.

Pro-rata Leasing Activity

The following table summarizes leasing activity, including our Pro-rata share of activity within the portfolio of our co-investment partnerships:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31, 2021"],["","","Leasing Transactions","","","SF (in thousands)","","","Base Rent PSF","","","Tenant Allowance and Landlord Work PSF","","","Leasing Commissions PSF"],["Anchor Space Leases"],["New","","","25","","","","667","","","$","20.10","","","$","44.50","","","$","6.18"],["Renewal","","","124","","","","2,941","","","","15.34","","","","0.56","","","","0.21"],["Total Anchor Leases","","","149","","","","3,608","","","$","16.22","","","$","8.68","","","$","1.31"],["Shop Space Leases"],["New","","","573","","","","1,022","","","$","34.38","","","$","28.77","","","$","10.87"],["Renewal","","","1,257","","","","2,324","","","","34.31","","","","1.62","","","","0.79"],["Total Shop Space Leases","","","1,830","","","","3,346","","","$","34.33","","","$","9.92","","","$","3.87"],["Total Leases","","","1,979","","","","6,954","","","$","24.93","","","$","9.28","","","$","2.54"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","Year Ended December 31, 2020"],["","","Leasing Transactions","","","SF (in thousands)","","","Base Rent PSF","","","Tenant Allowance and Landlord Work PSF","","","Leasing Commissions PSF"],["Anchor Space Leases"],["New","","","19","","","","442","","","$","14.69","","","$","28.45","","","$","4.67"],["Renewal","","","107","","","","2,854","","","","13.77","","","","0.38","","","","0.25"],["Total Anchor Leases","","","126","","","","3,296","","","$","13.89","","","$","4.14","","","$","0.84"],["Shop Space Leases"],["New","","","369","","","","608","","","$","34.61","","","$","30.68","","","$","9.30"],["Renewal","","","1,016","","","","1,866","","","","32.30","","","","1.58","","","","0.54"],["Total Shop Space Leases","","","1,385","","","","2,474","","","$","32.87","","","$","8.74","","","$","2.69"],["Total Leases","","","1,511","","","","5,770","","","$","22.03","","","$","6.11","","","$","1.63"]]
[[/GREPCENT_TABLE]]

The weighted average base rent per square foot on signed shop space leases during 2021 was $34.33 PSF, which is higher than the weighted average annual base rent per square foot of all shop space leases due to expire during the next 12 months of $32.93 PSF. New and renewal rent spreads, as compared to prior rents on these same spaces leased, were positive at 5.5% for the twelve months ended December 31, 2021, as compared to 2.2% for the twelve months ended December 31, 2020.

38

While new and renewal rent spreads were positive during 2021, a worsening of the current economic environment could suppress demand for space in our centers which may result in pricing pressure on rents. Further, we could see higher rates for tenant build outs as costs of materials are increasing as labor and supply availability are decreasing.

Significant Tenants and Concentrations of Risk

We seek to reduce our operating and leasing risks through geographic diversification as seen in our Properties tables in Item 2. We avoid dependence on any single property, market, or tenant. Based on percentage of annualized base rent, the following table summarizes our most significant tenants, of which four of the top five are grocers:

[[GREPCENT_TABLE]]
[["","","December 31, 2021"],["Anchor","","Number of Stores","","","Percentage of Company- owned GLA (1)","","","Percentage of Annualized Base Rent (1)"],["Publix","","","68","","","","7.2","%","","","3.4","%"],["Kroger Co.","","","54","","","","7.5","%","","","3.3","%"],["Albertsons Companies, Inc.","","","45","","","","4.6","%","","","2.9","%"],["TJX Companies, Inc.","","","62","","","","3.5","%","","","2.6","%"],["Amazon/Whole Foods","","","35","","","","2.7","%","","","2.5","%"]]
[[/GREPCENT_TABLE]]

(1)
Includes Regency's Pro-rata share of Unconsolidated Properties and excludes those owned by anchors.

Bankruptcies and Credit Concerns

The impact of bankruptcies may increase significantly if tenants occupying our centers are unable to recover as a result of the continuing challenges from the COVID-19 pandemic, which could materially adversely impact Lease income. During 2021, the number of tenants filing for bankruptcy declined compared to 2020 with a number of tenants emerging from bankruptcy after reorganization. However, the potential severity of future variants of COVID-19, the challenges of operating with mask and vaccine mandates, combined with the impacts of inflation, labor shortages, and supply chain disruptions may adversely impact our tenants.

Although base rent is supported by long-term lease contracts, tenants who file bankruptcy generally have the legal right to reject any or all of their leases and close related stores. Any unsecured claim we hold against a bankrupt tenant for unpaid rent might be paid only to the extent that funds are available and only in the same percentage as is paid to all other holders of unsecured claims. As a result, it is likely that we would recover substantially less than the full value of any unsecured claims we hold. Additionally, we may incur significant expense to adjudicate our claim and to re-lease the vacated space. In the event that a tenant with a significant number of leases in our shopping centers files bankruptcy and cancels its leases, we could experience a significant reduction in our revenues.

Our management team devotes significant time to researching and monitoring retail trends, consumer preferences, customer shopping behaviors, changes in retail delivery methods, shifts to e-commerce, and changing demographics in order to anticipate the challenges and opportunities impacting the retail industry. As the economy recovers from the effects of the ongoing pandemic, our tenants may be adversely impacted by challenges such as rising costs, labor shortages, supply chain constraints, and reduced in-store sales, which could have an adverse effect on our results from operations. We seek to mitigate these potential impacts through tenant diversification, replacing weaker tenants with stronger operators, anchoring our centers with market leading grocery stores that drive customer traffic, and maintaining a presence in suburban trade areas with compelling demographic populations benefitting from high levels of disposal income.

The COVID-19 pandemic resulted in many tenants requesting concessions from rent obligations, particularly during 2020, primarily in the form of deferrals and, to a lesser extent, abatements and requests to negotiate future rents. See note 1 to the Consolidated Financial Statements for further information on deferrals. There can be no assurances that all such deferred rent will ultimately be collected, or collected within the timeframes agreed upon. Whether vaccination rates will continue to rise, whether state and local authorities impose new mandated closures or capacity restrictions, and whether current vaccines prove to be effective against variants of the COVID-19 virus will influence the success of our tenants and their ability to pay us rent.

39

Results from Operations

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. While the United States economy continues to recover from the effects of the COVID-19 pandemic, ongoing changes in economic conditions such as labor shortages, employee retention costs, increased material and shipping costs, and supply chain constraints have spurred a rise in wages and increased operating costs and challenges for our tenants and us.

Substantially all of our long-term leases contain provisions designed to mitigate the adverse impact of inflation on our operating centers by requiring tenants to pay their Pro-rata share of operating expenses, including common-area maintenance, real estate taxes, insurance and utilities. Over half of our leases are for terms of less than ten years, primarily within Shop space, which permits us to seek increased rents upon re-rental at market rates. However, our ability to pass through increases in our operating expenses to our tenants is dependent on the tenants' ability to absorb and pay these increases. Additionally, increases in operating expenses passed through to our tenants, without a corresponding increase in our tenants' profitability, may place pressure on our ability to grow base rent as tenants look to manage their total occupancy costs.

Comparison of the years ended December 31, 2021 and 2020:

Our revenues changed as summarized in the following table:

[[GREPCENT_TABLE]]
[["(in thousands)","","2021","","","2020","","","Change"],["Lease income","","$","1,113,368","","","","980,166","","","","133,202"],["Other property income","","","12,456","","","","9,508","","","","2,948"],["Management, transaction, and other fees","","","40,337","","","","26,501","","","","13,836"],["Total revenues","","$","1,166,161","","","","1,016,175","","","","149,986"]]
[[/GREPCENT_TABLE]]

Lease income increased $133.2 million, driven by the following contractually billable components of rent to the tenants per the lease agreements:

•
$105.9 million increase from favorable changes in Uncollectible lease income.

o
During 2021, Uncollectible lease income was a net positive $23.5 million driven by $42.0 million collection of prior year reserves on cash basis tenants partially offset by $18.5 million reserve recognition on current year billings.

o
During 2020, Uncollectible lease income was a net charge of $82.4 million driven by reserves recognized on cash basis tenants due to lower cash collections during the pandemic.

o
While we expect collections to remain below pre-pandemic levels over the next year, we continue to experience improvements in our collection rates. Approximately 99% of the base rent billed for the three months ended December 31, 2021, has been collected through February 7, 2022.

•
$37.1 million increase in straight-line rent from less uncollectible straight-line rent in 2021 due to fewer new cash basis tenants identified as compared to 2020 as well as re-establishing $11.4 million in straight-line rent receivable related to certain tenants converting back to accrual basis as we consider collections from them to be probable.

•
$11.7 million increase from contractual Recoveries from tenants, which represents the tenants' pro-rata share of the operating, maintenance, insurance and real estate tax expenses that we incur to operate our shopping centers. Recoveries from tenants increased, on a net basis, primarily from the following:

o
$12.6 million net increase from same properties due to higher operating costs in the current year and greater recovery of those expenses from tenants; and

o
$1.2 million increase from rent commencing at development properties and acquisitions of operating properties; offset by

o
$2.1 million decrease from the sale of operating properties.

•
$2.1 million increase in Other lease income primarily from an increase in termination and easement fees, temporary tenants, and income from electric vehicle charging stations.

•
$438,000 increase in Percentage rent due to improved tenant sales as pandemic restrictions eased.

•
$17.7 million decrease in Above and below market rent primarily from same properties driven by 2020 tenant move-outs and the timing of lease term modifications.

40

•
$6.3 million decrease from billable Base rent, as follows:

o
$8.9 million decrease from the sale of operating properties; offset by

o
$1.1 million increase from acquisitions of operating properties;

o
$945,000 increase from rent commencing at development properties; and

o
$476,000 net increase from same properties, particularly from a $5.4 million increase related to our consolidation of the seven properties previously held in the USAA partnership, offset by a $4.9 million net decrease in the remaining same properties due to loss of rents from tenant move-outs and deferral agreements that required lease modification treatment.

Other property income increased $2.9 million primarily due to an increase in settlements.

Management, transaction and other fees increased $13.8 million from promote income recognized for exceeding return thresholds for our performance as managing member of the USAA partnership.

Changes in our operating expenses are summarized in the following table:

[[GREPCENT_TABLE]]
[["(in thousands)","","2021","","","2020","","","Change"],["Depreciation and amortization","","$","303,331","","","","345,900","","","","(42,569",")"],["Operating and maintenance","","","184,553","","","","170,073","","","","14,480"],["General and administrative","","","78,218","","","","75,001","","","","3,217"],["Real estate taxes","","","142,129","","","","143,004","","","","(875",")"],["Other operating expenses","","","5,751","","","","12,642","","","","(6,891",")"],["Total operating expenses","","$","713,982","","","","746,620","","","","(32,638",")"]]
[[/GREPCENT_TABLE]]

Depreciation and amortization costs changed as follows:

•
$40.8 million decrease primarily attributable to:

o
$13.0 million decrease related to various acquired lease intangibles becoming fully amortized;

o
$13.6 million decrease related to higher early tenant move-outs recognized in 2020; and

o
$14.2 million decrease primarily attributable to higher depreciation in 2020 related to development and redevelopment projects;

•
$2.6 million decrease from the sale of operating properties; offset by

•
$847,000 increase from acquisitions of operating properties and corporate assets.

Operating and maintenance costs increased, on a net basis, as follows:

•
$2.5 million net increase from acquisitions of operating properties and development properties; and

•
$12.5 million net increase from same properties primarily attributable to higher insurance premiums, utility costs and general property maintenance as our centers return to normal operating levels; offset by

•
$518,000 decrease from the sale of operating properties.

General and administrative costs increased, on a net basis, as follows:

•
$4.0 million net increase in compensation costs primarily driven by performance based incentives; offset by

•
$1.0 million decrease due to higher development overhead capitalization based on the status and progress of development and redevelopment projects during the year.

•
We expect travel and entertainment costs to increase as we return to more normal operations. Additionally, we may continue to see increases in compensation costs and general corporate overhead due to inflation, labor shortages and the related cost of retaining our employee base.

41

Other operating expenses decreased $6.9 million primarily due to lower development pursuit costs.

The following table presents the components of other expense (income):

[[GREPCENT_TABLE]]
[["(in thousands)","","2021","","","2020","","","Change"],["Interest expense, net"],["Interest on notes payable","","$","147,439","","","","148,371","","","","(932",")"],["Interest on unsecured credit facilities","","","2,119","","","","9,933","","","","(7,814",")"],["Capitalized interest","","","(4,202",")","","","(4,355",")","","","153"],["Hedge expense","","","438","","","","4,329","","","","(3,891",")"],["Interest income","","","(624",")","","","(1,600",")","","","976"],["Interest expense, net","","","145,170","","","","156,678","","","","(11,508",")"],["Goodwill impairment","","","\u2014","","","","132,128","","","","(132,128",")"],["Provision for impairment of real estate","","","84,389","","","","18,536","","","","65,853"],["Gain on sale of real estate, net of tax","","","(91,119",")","","","(67,465",")","","","(23,654",")"],["Early extinguishment of debt","","","\u2014","","","","21,837","","","","(21,837",")"],["Net investment (income) loss","","","(5,463",")","","","(5,307",")","","","(156",")"],["Total other expense (income)","","$","132,977","","","","256,407","","","","(123,430",")"]]
[[/GREPCENT_TABLE]]

The $11.5 million net decrease in total interest expense is primarily due to:

•
$7.8 million decrease in Interest on unsecured credit facilities primarily related to the January 2021 repayment of the $265 million term loan and a lower average outstanding balance on the Line;

•
$932,000 net decrease in Interest on notes payable from the payoff of $300 million of senior unsecured notes in September 2020 together with the repayment of several mortgages, offset by the issuance of $600 million of senior unsecured notes in May 2020; and

•
$3.9 million decrease in Hedge expense as previously settled swaps hedging our ten-year notes fully amortized in 2020.

During the year ended December 31, 2020, we recognized $132.1 million of Goodwill impairment due to the significant adverse market and economic impacts of the COVID-19 pandemic.

During 2021, we recognized $84.4 million of impairment losses resulting from the impairment of two operating properties. During 2020, we recognized $18.5 million of impairment losses resulting from the impairment of two operating properties and one land parcel.

During 2021, we recognized gains of $91.1 million from the sale of five land parcels and six operating properties. During 2020, we recognized gains of $67.5 million from the sale of ten land parcels, five operating properties, and receipt of property insurance proceeds.

During 2020, we incurred $21.8 million of debt extinguishment costs of which $19.4 million related to the early redemption of our unsecured notes due to mature in 2022 and a $2.4 million charge for termination of an interest rate swap on our term loan that was repaid in January 2021.

Our equity in income (losses) of investments in real estate partnerships changed as follows:

[[GREPCENT_TABLE]]
[["(in thousands)","","Regency's Ownership","","2021","","","2020","","","Change"],["GRI - Regency, LLC (GRIR)","","40.00%","","$","34,655","","","$","25,425","","","","9,230"],["Equity One JV Portfolio LLC (NYC)","","30.00%","","","315","","","","488","","","","(173",")"],["Columbia Regency Retail Partners, LLC (Columbia I)","","20.00%","","","1,976","","","","1,030","","","","946"],["Columbia Regency Partners II, LLC (Columbia II)","","20.00%","","","10,987","","","","1,045","","","","9,942"],["Columbia Village District, LLC","","30.00%","","","1,522","","","","757","","","","765"],["RegCal, LLC (RegCal)","","25.00%","","","2,058","","","","1,296","","","","762"],["US Regency Retail I, LLC (USAA) (1)","","20.01%","","","631","","","","790","","","","(159",")"],["Other investments in real estate partnerships","","35.00% - 50.00%","","","(5,058",")","","","3,338","","","","(8,396",")"],["Total equity in income of investments in real estate partnerships","","$","47,086","","","$","34,169","","","","12,917"]]
[[/GREPCENT_TABLE]]

(1)
We acquired our partner’s 80% interest in the seven properties held in the USAA partnership on August 1, 2021; therefore results following the date of acquisition are included in consolidated results.

42

The $12.9 million increase in our Equity in income of investments in real estate partnerships is largely attributable to favorable uncollectible lease income along with re-instating straight-line rent on certain tenants returning to accrual basis during the year, including the following:

•
$9.2 million increase within GRIR primarily due to continued improvement in tenant rent collections; and

•
$9.9 million increase within Columbia II primarily due to an $8.9 million pro-rata gain on sale of one operating property; offset by

•
$8.4 million decrease within Other investments in real estate partnerships from a $9.2 million impairment of a single property partnership, which sold in August, offset by continued improvement in tenant rent collections at the remaining partnerships' properties.

The following represents the remaining components that comprise net income attributable to the common stockholders and unit holders:

[[GREPCENT_TABLE]]
[["(in thousands)","","2021","","","2020","","","Change"],["Net income","","$","366,288","","","","47,317","","","","318,971"],["Income attributable to noncontrolling interests","","","(4,877",")","","","(2,428",")","","","(2,449",")"],["Net income attributable to common stockholders","","$","361,411","","","","44,889","","","","316,522"],["Net income attributable to exchangeable operating partnership units","","","1,615","","","","203","","","","1,412"],["Net income attributable to common unit holders","","$","363,026","","","","45,092","","","","317,934"]]
[[/GREPCENT_TABLE]]

Comparison of the years ended December 31, 2020 and 2019:

For a comparison of our results from 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 Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 17, 2021.

Supplemental Earnings Information

We use certain non-GAAP performance measures, in addition to certain performance metrics determined under GAAP, as we believe these measures improve the understanding of our operating results. We believe these non-GAAP measures provide useful information to our Board of Directors, management and investors regarding certain trends relating to our financial condition and results of operations. Our management uses these non-GAAP measures to compare our performance to that of prior periods for trend analyses, purposes of determining management incentive compensation and budgeting, forecasting and planning purposes. We provide Pro-rata financial information because we believe it assists investors and analysts in estimating our economic interest in our consolidated and unconsolidated partnerships, when read in conjunction with our reported results under GAAP. We believe presenting our Pro-rata share of operating results, along with other non-GAAP measures, may assist in comparing our operating results to other REITs. We continually evaluate the usefulness, relevance, limitations, and calculation of our reported non-GAAP performance measures to determine how best to provide relevant information to the public, and thus such reported measures could change. See “Defined Terms” in Part I, Item 1.

We do not consider non-GAAP measures an alternative to financial measures determined in accordance with GAAP, rather they supplement GAAP measures by providing additional information we believe to be useful to shareholders. The principal limitation of these non-GAAP financial measures is they may exclude significant expense and income items that are required by GAAP to be recognized in our consolidated financial statements. In addition, they reflect the exercise of management’s judgment about which expense and income items are excluded or included in determining these non-GAAP financial measures. In order to compensate for these limitations, reconciliations of the non-GAAP financial measures we use to their most directly comparable GAAP measures are provided. Non-GAAP financial measures should not be relied upon in evaluating our financial condition, results of operations, or future prospects.

43

Pro-rata Same Property NOI:

Our Pro-rata same property NOI, excluding termination fees/expenses, changed from the following major components:

[[GREPCENT_TABLE]]
[["(in thousands)","","2021","","","2020","","","Change"],["Real estate revenues:"],["Base rent (1)","","$","856,993","","","","860,805","","","","(3,812",")"],["Recoveries from tenants (1)","","","290,481","","","","277,389","","","","13,092"],["Percentage rent (1)","","","7,715","","","","7,144","","","","571"],["Termination fees (1)","","","6,446","","","","7,775","","","","(1,329",")"],["Uncollectible lease income","","","25,684","","","","(91,015",")","","","116,699"],["Other lease income (1)","","","11,584","","","","9,982","","","","1,602"],["Other property income","","","9,873","","","","6,729","","","","3,144"],["Total real estate revenue","","","1,208,776","","","","1,078,809","","","","129,967"],["Real estate operating expenses:"],["Operating and maintenance","","","188,834","","","","175,299","","","","13,535"],["Termination expense","","","\u2014","","","","25","","","","(25",")"],["Real estate taxes","","","158,940","","","","158,413","","","","527"],["Ground rent","","","11,829","","","","11,964","","","","(135",")"],["Total real estate operating expenses","","","359,603","","","","345,701","","","","13,902"],["Pro-rata same property NOI","","$","849,173","","","","733,108","","","","116,065"],["Less: Termination fees / expense","","","6,446","","","","7,750","","","","(1,304",")"],["Pro-rata same property NOI, excluding termination fees / expense","","$","842,727","","","","725,358","","","","117,369"],["Pro-rata same property NOI growth, excluding termination fees / expense","","","","","","","","","16.2","%"]]
[[/GREPCENT_TABLE]]

(1)
Represents amounts included within Lease income, in the accompanying Consolidated Statements of Operations and further discussed in note 1, that are contractually billable to the tenant per the terms of the lease agreements.

•
Billable Base rent decreased $3.8 million due to loss of rents from bankruptcies and other tenant move-outs which were partially offset by contractual rent increases.

•
Recoveries from tenants increased $13.1 million due to higher operating costs in the current year and greater recovery of those expenses from tenants.

•
Termination fees decreased $1.3 million primarily due to strategic changes in anchor merchandising mix during 2020.

•
Uncollectible lease income decreased $116.7 million primarily driven by the collection of previously reserved amounts and improvements in current period collection rates.

•
Other lease income increased $1.6 million primarily due to increases in easement fees earned, rent from temporary tenants, and income from electric vehicle charging stations.

•
Other property income increased $3.1 million primarily due to an increase in settlements.

•
Operating and maintenance increased $13.5 million primarily due to increases in insurance costs and increases in utility costs and general property maintenance as our centers return to normal operating levels.

Same Property Rollforward:

Our same property pool includes the following property count, Pro-rata GLA, and changes therein:

[[GREPCENT_TABLE]]
[["","","2021","","","2020"],["(GLA in thousands)","","Property Count","","","GLA","","","Property Count","","","GLA"],["Beginning same property count","","","393","","","","40,228","","","","396","","","","40,525"],["Acquired properties owned for entirety of comparable periods","","","2","","","","924","","","","5","","","","315"],["Developments that reached completion by beginning of earliest comparable period presented","","","6","","","","683","","","","3","","","","553"],["Disposed properties","","","(8",")","","","(420",")","","","(8",")","","","(677",")"],["SF adjustments (1)","","","\u2014","","","","(121",")","","","\u2014","","","","(43",")"],["Properties under or being repositioned for redevelopment","","","\u2014","","","","\u2014","","","","(3",")","","","(445",")"],["Ending same property count","","","393","","","","41,294","","","","393","","","","40,228"]]
[[/GREPCENT_TABLE]]

(1)
SF adjustments arise from remeasurements or redevelopments.

44

Nareit FFO and Core Operating Earnings:

Our reconciliation of net income attributable to common stock and unit holders to Nareit FFO and to Core Operating Earnings is as follows:

[[GREPCENT_TABLE]]
[["(in thousands, except share information)","","2021","","","2020"],["Reconciliation of Net income to Nareit FFO"],["Net income attributable to common stockholders","","$","361,411","","","","44,889"],["Adjustments to reconcile to Nareit FFO: (1)"],["Depreciation and amortization (excluding FF&E)","","","330,364","","","","375,865"],["Goodwill impairment","","","\u2014","","","","132,128"],["Provision for impairment of real estate","","","95,815","","","","18,778"],["Gain on sale of real estate","","","(100,499",")","","","(69,879",")"],["Exchangeable operating partnership units","","","1,615","","","","203"],["Nareit FFO attributable to common stock and unit holders","","$","688,706","","","$","501,984"],["Reconciliation of Nareit FFO to Core Operating Earnings"],["Nareit Funds From Operations","","","688,706","","","","501,984"],["Adjustments to reconcile to Core Operating Earnings: (1)"],["Not Comparable Items"],["Early extinguishment of debt","","","\u2014","","","","22,043"],["Promote income","","","(13,589",")","","","\u2014"],["Certain Non Cash Items"],["Straight line rent","","","(13,534",")","","","(15,605",")"],["Uncollectible straight line rent","","","(5,965",")","","","39,255"],["Above/below market rent amortization, net","","","(23,889",")","","","(41,293",")"],["Debt premium/discount amortization","","","(565",")","","","(1,233",")"],["Core Operating Earnings","","$","631,164","","","$","505,151"]]
[[/GREPCENT_TABLE]]

(1)
Includes Regency's Pro-rata share of unconsolidated investment partnerships, net of Pro-rata share attributable to noncontrolling interests.

Reconciliation of Same Property NOI to Nearest GAAP Measure:

Our reconciliation of Net income attributable to common stockholders to Same Property NOI, on a Pro-rata basis, is as follows:

[[GREPCENT_TABLE]]
[["(in thousands)","","2021","","","2020"],["Net income attributable to common stockholders","","$","361,411","","","","44,889"],["Less:"],["Management, transaction, and other fees","","","40,337","","","","26,501"],["Other (1)","","","46,860","","","","25,912"],["Plus:"],["Depreciation and amortization","","","303,331","","","","345,900"],["General and administrative","","","78,218","","","","75,001"],["Other operating expense","","","5,751","","","","12,642"],["Other expense","","","132,977","","","","256,407"],["Equity in income of investments in real estate excluded from NOI (2)","","","53,119","","","","59,726"],["Net income attributable to noncontrolling interests","","","4,877","","","","2,428"],["Pro-rata NOI","","","852,487","","","","744,580"],["Less non-same property NOI (3)","","","(3,314",")","","","(11,472",")"],["Pro-rata same property NOI","","$","849,173","","","$","733,108"]]
[[/GREPCENT_TABLE]]

(1)
Includes straight-line rental income and expense, net of reserves, above and below market rent amortization, other fees, and noncontrolling interest.

(2)
Includes non-NOI income earned and expenses incurred at our unconsolidated real estate partnerships, including those separated out above for our consolidated properties.

(3)
Includes revenues and expenses attributable to non-same properties, sold properties, development properties, and corporate activities.

45

Liquidity and Capital Resources

General

We use cash flows generated from operating, investing, and financing activities to strengthen our balance sheet, finance our development and redevelopment projects, fund our investment activities, and maintain financial flexibility. A significant portion of our cash from operations is distributed to our common shareholders in the form of dividends in order to maintain our status as a REIT.

Except for $200 million of private placement debt, our Parent Company has no capital commitments other than its guarantees of the commitments of our Operating Partnership. All remaining debt is held by our Operating Partnership or by our co-investment partnerships. The Operating Partnership is a co-issuer and a guarantor of the $200 million of outstanding debt of our Parent Company. The Parent Company will from time to time access the capital markets for the purpose of issuing new equity and will simultaneously contribute all of the offering proceeds to the Operating Partnership in exchange for additional partnership units.

We continually assess our available liquidity and our expected cash uses, which includes monitoring our tenant rent collections. Our rent collection experience during the pandemic has been lower than historical pre-pandemic averages, but has substantially improved during 2021 as compared to its low in the second quarter of 2020. During the three months ended December 31, 2021, billed base rent collections were 99% as of February 7, 2022. Although having improved significantly, collection rates are expected to remain lower than historical pre-pandemic averages for the next twelve months.

The success of our tenants and their ability to pay rent continues to be significantly influenced by many challenges including rising costs, labor shortages, supply chain constraints, reduced sales, store closures, capacity restrictions, and on-going variants of COVID-19.

We draw on multiple financing sources to fund our long-term capital needs, including the capital requirements of our in process and planned developments, redevelopments, capital expenditures, and the repayment of debt. We expect to meet these needs by using a combination of the following: cash flow from operations after funding our dividend, proceeds from the sale of real estate, mortgage loan and unsecured bank financing, distributions received from our co-investment partnerships, and when the capital markets are favorable, proceeds from the sale of equity or the issuance of new unsecured debt. We continually evaluate alternative financing options, and we believe we can obtain financing on reasonable terms.

We have no unsecured debt maturities until 2024 and a manageable level of secured mortgage maturities during the next 12 months, including those mortgages within our real estate partnerships. Based upon our available cash balance, sources of capital, our current credit ratings, and the number of high quality, unencumbered properties we own, we believe our available capital resources are sufficient to meet our expected capital needs for the next year.

In addition to our $93.1 million of unrestricted cash, we have the following additional sources of capital available:

[[GREPCENT_TABLE]]
[["(in thousands)","","December 31, 2021"],["ATM equity program (see note 12 to our Consolidated Financial Statements)"],["Original offering amount","","$","500,000"],["Available capacity (1)","","$","350,363"],["Line of Credit (see note 9 to our Consolidated Financial Statements)"],["Total commitment amount","","$","1,250,000"],["Available capacity (2)","","$","1,240,619"],["Maturity (3)","","March 23, 2025"]]
[[/GREPCENT_TABLE]]

(1)
During May and June 2021, we entered into forward sales agreements with respect to 2,316,760 shares that were executed in several tranches at a weighted average offering price of $64.59 per share before any underwriting discount and offering expenses. During September 2021, we settled 1,332,142 of the shares subject to forward sales agreements, receiving proceeds of $82.5 million. The remaining shares subject to forward sales agreements must be settled within approximately one year of their trade dates, which vary by agreement, and range from June 6, 2022 through June 11, 2022, and are expected to result in net proceeds of approximately $65 million.

(2)
Net of letters of credit.

(3)
The Company has the option to extend the maturity for two additional six-month periods.

The declaration of dividends is determined quarterly by our Board of Directors. On February 9, 2022, our Board of Directors declared a common stock dividend of $0.625 per share, payable on April 5, 2022, to shareholders of record as of March 15, 2022. While future dividends will be determined at the discretion of our Board of Directors, we plan to continue paying an aggregate amount of distributions to our stock and unit holders that, at a minimum, meet the requirements to continue qualifying as a REIT for federal income tax purposes. We have historically generated sufficient cash flow from operations to fund our dividend distributions. During

46

the years ended December 31, 2021 and 2020, we generated cash flow from operations of $659.4 million and $499.1 million, respectively, and paid $404.9 million and $301.9 million in dividends to our common stock and unit holders, respectively.

We currently have development and redevelopment projects in various stages of construction, along with a pipeline of potential projects for future development or redevelopment. After funding our common stock dividend payment in January 2022, we estimate that we will require capital during the next twelve months of approximately $368.5 million. This required capital includes funding construction and related costs for leasing commissions and committed tenant improvements and in-process developments and redevelopments, making capital contributions to our co-investment partnerships, and repaying maturing debt.

If we start new developments or redevelopments, commit to property acquisitions, repay debt prior to maturity, declare future dividends, or repurchase shares of our common stock, our cash requirements will increase. If we refinance maturing debt, our cash requirements will decrease. We expect to generate the necessary cash to fund our long-term capital needs from cash flow from operations, borrowings from our Line, proceeds from the sale of real estate, mortgage loan and unsecured bank financing, and when the capital markets are favorable, proceeds from the sale of equity or the issuance of new unsecured debt.

We endeavor to maintain a high percentage of unencumbered assets. As of December 31, 2021, 89.4% of our wholly-owned real estate assets were unencumbered. Such assets allow us to access the secured and unsecured debt markets and to maintain availability on the Line. Our trailing twelve month Fixed charge coverage ratio, including our Pro-rata share of our partnerships, was 4.5x and 3.6x for the periods ended December 31, 2021 and 2020, respectively, and our Pro-rata net debt-to-operating EBITDAre ratio on a trailing twelve month basis was 5.1x and 6.0x, respectively, for the same periods.

Our Line and unsecured debt require that we remain in compliance with various covenants, which are described in note 9 to the Consolidated Financial Statements. We are in compliance with these covenants at December 31, 2021, and expect to remain in compliance.

Summary of Cash Flow Activity

The following table summarizes net cash flows related to operating, investing, and financing activities of the Company:

[[GREPCENT_TABLE]]
[["(in thousands)","","2021","","","2020","","","Change"],["Net cash provided by operating activities","","$","659,388","","","","499,118","","","","160,270"],["Net cash used in investing activities","","","(286,352",")","","","(25,641",")","","","(260,711",")"],["Net cash used in financing activities","","","(656,459",")","","","(210,589",")","","","(445,870",")"],["Net (decrease) increase in cash, cash equivalents, and restricted cash","","","(283,423",")","","","262,888","","","","(546,311",")"],["Total cash, cash equivalents, and restricted cash","","$","95,027","","","$","378,450","","","","(283,423",")"]]
[[/GREPCENT_TABLE]]

Net cash provided by operating activities:

Net cash provided by operating activities increased by $160.3 million due to:

•
$162.8 million increase in cash flows from higher rent collections on current and prior year rent billings, including collections of deferred rents, partially offset by,

•
$2.5 million decrease from cash paid in 2021 to settle interest rate swaps on our term loan which was repaid in January 2021.

47

Net cash used in investing activities:

Net cash used in investing activities changed by $260.7 million as follows:

[[GREPCENT_TABLE]]
[["(in thousands)","","2021","","","2020","","","Change"],["Cash flows from investing activities:"],["Acquisition of operating real estate, net of cash acquired of $2,991 in 2021","","$","(392,051",")","","","(16,767",")","","","(375,284",")"],["Real estate development and capital improvements","","","(177,631",")","","","(180,804",")","","","3,173"],["Proceeds from sale of real estate","","","206,193","","","","189,444","","","","16,749"],["Proceeds from property insurance casualty claims","","","\u2014","","","","7,957","","","","(7,957",")"],["Issuance of notes receivable, net","","","(20",")","","","(1,340",")","","","1,320"],["Investments in real estate partnerships","","","(23,476",")","","","(51,440",")","","","27,964"],["Return of capital from investments in real estate partnerships","","","99,945","","","","32,125","","","","67,820"],["Dividends on investment securities","","","813","","","","353","","","","460"],["Acquisition of investment securities","","","(23,971",")","","","(25,155",")","","","1,184"],["Proceeds from sale of investment securities","","","23,846","","","","19,986","","","","3,860"],["Net cash used in investing activities","","$","(286,352",")","","","(25,641",")","","","(260,711",")"]]
[[/GREPCENT_TABLE]]

Significant changes in investing activities include:

•
We paid $392.1 million to purchase twelve operating properties during 2021, including seven properties in which we previously held a 20% interest. We paid $16.8 million for the acquisition of one property during 2020.

•
We invested $3.2 million less in 2021 than 2020 in real estate development, redevelopment, and capital improvements, as further detailed in the tables below.

•
We received proceeds of $206.2 million from the sale of seven shopping centers and five land parcels in 2021, compared to $189.4 million for six shopping centers and eleven land parcels in 2020.

•
We received property insurance claim proceeds of $8.0 million during 2020 primarily related to a single property damaged by a tornado in 2020 and additional proceeds received on prior year fire and tornado claims.

•
We invested $23.5 million in our real estate partnerships during 2021, including:

o
$18.7 million to fund our share of debt refinancing activities,

o
$4.8 million to fund our share of development and redevelopment activities.

During the same period in 2020, we invested $51.4 million in our real estate partnerships, including:

o
$19.6 million to fund our share of development and redevelopment activities,

o
$16.0 million to fund our share of acquiring an additional equity interest in one partnership, and

o
$15.8 million to fund our share of debt refinancing activities.

•
Return of capital from our unconsolidated investments in real estate partnerships includes sales or financing proceeds. The $99.9 million received in 2021 is our share of proceeds from debt refinancing activities and the sale of four operating properties and one land parcel. During the same period in 2020, we received $32.1 million from the sale of two operating properties and our share of proceeds from debt refinancing activities.

•
Acquisition of securities and proceeds from sale of securities pertain to investment activities held in our captive insurance company and our deferred compensation plan.

48

We plan to continue developing and redeveloping shopping centers for long-term investment. During 2021, we deployed capital of $177.6 million for the development, redevelopment, and improvement of our real estate properties, comprised of the following:

[[GREPCENT_TABLE]]
[["(in thousands)","","2021","","","2020","","","Change"],["Capital expenditures:"],["Land acquisitions","","$","11,820","","","","\u2014","","","","11,820"],["Building and tenant improvements","","","53,752","","","","46,902","","","","6,850"],["Redevelopment costs","","","78,056","","","","98,177","","","","(20,121",")"],["Development costs","","","19,426","","","","20,155","","","","(729",")"],["Capitalized interest","","","4,085","","","","3,762","","","","323"],["Capitalized direct compensation","","","10,492","","","","11,808","","","","(1,316",")"],["Real estate development and capital improvements","","$","177,631","","","","180,804","","","","(3,173",")"]]
[[/GREPCENT_TABLE]]

•
Land acquisitions increased $11.8 million primarily driven by the purchase of land formerly held under ground leases at two of our existing centers.

•
Building and tenant improvements increased $6.9 million during the year ended December 31, 2021, primarily related to the timing of capital projects.

•
Redevelopment expenditures were lower during 2021 due to the timing and magnitude of projects in process. We intend to continuously improve our portfolio of shopping centers through redevelopment which can include adjacent land acquisition, existing building expansion, facade renovation, new out-parcel building construction, and redevelopment related tenant improvement costs. The size and magnitude of each redevelopment project varies with each redevelopment plan. The timing and duration of these projects could also result in volatility in NOI. See the tables below for more details about our redevelopment projects.

•
Development expenditures remained consistent based on the timing and magnitude of our development projects currently in process. See the tables below for more details about our development projects.

•
Interest is capitalized on our development and redevelopment projects and is based on cumulative actual costs expended. We cease interest capitalization when the property is no longer being developed or is available for occupancy upon substantial completion of tenant improvements, but in no event would we capitalize interest on the project beyond twelve months after the anchor opens for business. If we reduce our development and redevelopment activity, the amount of interest that we capitalize may be lower than historical averages.

•
We have a staff of employees who directly support our development program, which includes redevelopment of our existing properties. Internal compensation costs directly attributable to these activities are capitalized as part of each project. We currently expect that our development and redevelopment activities will approximate our recent historical averages, although the amount of activity will vary by type. Reduction in the level of future development activity could adversely impact results of operations by reducing the amount of internal costs for development or redevelopment activity without a corresponding reduction in compensation costs.

The following table summarizes our development projects in-process and completed:

[[GREPCENT_TABLE]]
[["(in thousands, except cost PSF)","","","","","","","","","","December 31, 2021"],["Property Name","","Market","","Ownership","","Start Date","","Estimated Stabilization Year (1)","","Estimated / Actual Net Development Costs (2) (3)","","","Center GLA (3)","","","Cost PSF of GLA (2) (3)","","","% of Costs Incurred"],["Developments In-Process"],["Carytown Exchange - Phase I & II","","Richmond, VA","","64%","","Q4-18","","2023","","$","29,174","","","","74","","","$","394","","","","73","%"],["East San Marco","","Jacksonville, FL","","100%","","Q4-20","","2024","","","19,519","","","","59","","","","331","","","","59","%"],["Developments Completed"],["Baybrook East 1A (4)","","Houston, TX","","50%","","Q4-20","","2022","","$","2,300","","","","55","","","$","42"]]
[[/GREPCENT_TABLE]]

(1)
Estimated Stabilization Year represents the estimated first full calendar year that the project will reach our expected stabilized yield.

(2)
Includes leasing costs and is net of tenant reimbursements.

(3)
Estimated Net Development Costs and GLA reported based on Regency’s ownership interest in the partnership at completion.

49

(4)
Estimated Net Development Costs for Baybrook East 1A is limited to our ownership interest in the value of land and site improvements to deliver a parcel to a grocer, under a ground lease agreement, to construct their building and improvements. This property is included in our Investments in real estate partnerships.

The following table summarizes our redevelopment projects in-process and completed:

[[GREPCENT_TABLE]]
[["(in thousands)","","","","","","","","December 31, 2021"],["Property Name","","Market","","Ownership","","Start Date","","Estimated Stabilization Year (1)","","Estimated Incremental Project Costs (2) (3)","","","Center GLA (3)","","","% of Costs Incurred"],["Redevelopments In-Process"],["The Crossing Clarendon","","Metro, DC","","100%","","Q4-18","","2024","","$","57,374","","","","129","","","","63","%"],["The Abbot","","Boston, MA","","100%","","Q2-19","","2023","","","58,217","","","","65","","","","71","%"],["Sheridan Plaza","","Hollywood, FL","","100%","","Q3-19","","2022","","","12,115","","","","507","","","","85","%"],["Preston Oaks","","Dallas, TX","","100%","","Q4-20","","2023","","","22,327","","","","103","","","","66","%"],["Serramonte Center","","San Francisco, CA","","100%","","Q4-20","","2026","","","55,000","","","","1,073","","","","53","%"],["Westbard Square Phase I","","Bethesda, MD","","100%","","Q2-21","","2025","","","37,038","","","","123","","","","18","%"],["Various Properties","","Various","","100%","","Various","","Various","","","16,542","","","","1,025","","","","55","%"],["Redevelopments Completed"],["Bloomingdale Square","","Tampa, FL","","100%","","Q3-18","","2022","","$","21,327"],["Point 50","","Metro, DC","","100%","","Q4-18","","2023","","","17,354"],["West Bird Plaza","","Miami, FL","","100%","","Q4-19","","2022","","","10,338"],["Various Properties","","Various","","40%-100%","","Various","","Various","","","16,270"]]
[[/GREPCENT_TABLE]]

(1)
Estimated Stabilization Year represents the estimated first full calendar year that the project will reach our expected stabilized yield.

(2)
Includes leasing costs and is net of tenant reimbursements.

(3)
Estimated Net Development Costs and GLA reported based on Regency’s ownership interest in the partnership at completion.

Despite management's planning and mitigations, including fixed construction contracts, contingencies in underwriting, and other planning efforts, inflation could have an effect on our construction costs necessary to complete our development and redevelopment projects. Additionally, labor shortages and supply chain issues could extend the time to completion.

Net cash used in financing activities:

Net cash flows used in financing activities changed during 2021, as follows:

[[GREPCENT_TABLE]]
[["(in thousands)","","2021","","","2020","","","Change"],["Cash flows from financing activities:"],["Net proceeds from common stock issuances","","$","82,510","","","","125,608","","","","(43,098",")"],["Repurchase of common shares in conjunction with equity award plans","","","(4,083",")","","","(5,512",")","","","1,429"],["Distributions to limited partners in consolidated partnerships, net","","","(4,345",")","","","(2,770",")","","","(1,575",")"],["Dividend payments and operating partnership distributions","","","(404,900",")","","","(301,903",")","","","(102,997",")"],["Repayments of unsecured credit facilities, net","","","(265,000",")","","","(220,000",")","","","(45,000",")"],["Proceeds from debt issuance","","","\u2014","","","","598,830","","","","(598,830",")"],["Debt repayment, including early redemption costs","","","(53,269",")","","","(400,048",")","","","346,779"],["Payment of loan costs","","","(7,468",")","","","(5,063",")","","","(2,405",")"],["Proceeds from sale of treasury stock, net","","","96","","","","269","","","","(173",")"],["Net cash used in financing activities","","$","(656,459",")","","","(210,589",")","","","(445,870",")"]]
[[/GREPCENT_TABLE]]

Significant financing activities during the years ended December 31, 2021 and 2020 include the following:

•
We received proceeds of $82.5 million, net of costs, in 2021, upon partially settling our forward equity sales

under our ATM program entered into during May and June 2021. We received proceeds of $125.6 million, net of costs, in 2020 upon settling our forward equity sales under our ATM program.

•
We repurchased for cash a portion of the common stock granted to employees for stock based compensation to satisfy employee tax withholding requirements, which totaled $4.1 million and $5.5 million during the years ended December 31, 2021 and 2020, respectively.

50

•
We paid $103.0 million more in dividends during 2021 compared to 2020 primarily as a result of shifting our fourth quarter 2020 dividend payment date to January 2021 and an increase in common stock shares outstanding from partially settling our forward equity sales.

•
We had the following debt related activity during 2021:

o
We paid $265 million to repay our outstanding term loan, and

o
We paid $53.3 million for secured debt payments, including:

▪
$42.0 million to repay four mortgages; and

▪
$11.3 million in principal mortgage payments.

o
We paid $7.5 million of loan costs in connection with the renewal of our Line.

•
We had the following debt related activity during 2020:

o
We repaid, net of draws, an additional $220 million on our Line.

o
We received net proceeds of $598.8 million upon issuance, in May 2020, of senior unsecured public notes.

o
We paid $400.0 million for other debt repayments, including:

▪
$321.7 million, including a make-whole premium, to redeem our senior unsecured public notes originally due November 2022;

▪
$67.2 million to repay four mortgages; and

▪
$11.1 million in principal mortgage payments.

o
We paid $5.1 million of loan costs in connection with our public note offerings above.

Contractual Obligations

We have contractual obligations at December 31, 2021, which are discussed in our notes to Consolidated Financial Statements and include:

•
Mortgage loans, unsecured notes, and unsecured credit facilities as discussed in note 9, and related interest rate swaps as discussed in note 10;

•
We have shopping centers that are subject to non-cancelable long-term ground leases where a third party owns and has leased the underlying land to us to construct and/or operate a shopping center. We also have non-cancelable operating leases pertaining to office space from which we conduct our business. These lease obligations are discussed in note 7;

•
Our share of mortgage loans within our Investments in real estate partnerships, as discussed in note 4;

•
Letters of credit of $9.4 million issued to cover our captive insurance program and performance obligations on certain development projects, which the latter will be satisfied upon completion of the development projects;

•
Obligations for retirement savings plans due to uncertainty around timing of participant withdrawals, which are solely within the control of the participant, and are further discussed in note 14 to the Consolidated Financial Statements; and

•
We will also incur obligations related to construction or development contracts on projects in process; however, future amounts under these construction contracts are not due until future satisfactory performance under the contracts.

Critical Accounting Estimates

Knowledge about our accounting policies is necessary for a complete understanding of our financial statements. The preparation of our financial statements requires that we make certain estimates that impact the balance of assets and liabilities as of a financial statement date and the reported amount of income and expenses during a financial reporting period. These accounting estimates are based upon, but not limited to, our judgments about historical and expected future results, current market conditions, and interpretation of industry accounting standards. They are considered to be critical because of their significance to the financial statements and the possibility that future events may differ from those judgments, or that the use of different assumptions could result in materially different estimates. We review these estimates on a periodic basis to ensure reasonableness; however, the amounts we may ultimately realize could differ from such estimates.

51

Collectibility of Lease Income

Lease income, which includes base rent, percentage rent, and recoveries from tenants for common area maintenance costs, insurance and real estate taxes are the Company's principal source of revenue. As a result of generating this revenue, we will routinely have accounts receivable due from tenants.

Lease income for operating leases with fixed payment terms is recognized on a straight-line basis over the expected term of the lease for all leases for which collectibility is considered probable at the commencement date. At lease commencement, the Company generally expects that collectibility is probable due to the Company’s credit assessment of tenants and other creditworthiness analysis undertaken before entering into a new lease; therefore, income from most operating leases is initially recognized on a straight-line basis. For operating leases in which collectibility of Lease income is not considered probable, Lease income is recognized on a cash basis and all previously recognized and uncollected Lease income is reversed in the period in which the Lease income is determined not to be probable of collection. In addition to the lease-specific collectibility assessment, the Company may recognize a general reserve, as a reduction to Lease income, for its portfolio of operating lease receivables which are not expected to be fully collectible based on the Company’s historical collection experience. Although we estimate uncollectible receivables and provide for them through charges against income, actual experience may differ from those estimates.

Real Estate Investments

Acquisition of Real Estate Investments

Upon acquisition of real estate operating properties, the Company estimates the fair value of acquired tangible assets (consisting of land, building, building improvements and tenant improvements) and identified intangible assets and liabilities (consisting of above and below-market leases and in-place leases), assumed debt, and any noncontrolling interest in the acquiree at the date of acquisition, based on evaluation of information and estimates available at that date. Based on these estimates, the Company allocates the estimated fair value to the applicable assets and liabilities. Transaction costs associated with asset acquisitions are capitalized, while such costs are expensed for business combinations in the period incurred. The acquisition of operating properties are generally considered asset acquisitions. If, however, the acquisition is determined to be a business combination, any excess consideration above the fair value allocated to the applicable assets and liabilities results in goodwill. Fair value is determined based on an exit price approach, which contemplates the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The Company's methodology for determining fair value of the acquired tangible and intangible assets and liabilities includes estimating an “as-if vacant” fair value of the physical property, which includes land, building, and improvements. In addition, the Company determines the estimated fair value of identifiable intangible assets and liabilities, considering the following categories: (i) value of in-place leases, and (ii) above and below-market value of in-place leases.

The value of in-place leases is estimated based on the value associated with the costs avoided in originating leases compared to the acquired in-place leases as well as the value associated with lost rental and recovery revenue during the assumed lease-up period. The value of in-place leases is recorded to Depreciation and amortization expense in the Consolidated Statements of Operations over the remaining expected term of the respective leases.

Above-market and below-market in-place lease values for acquired properties are recorded based on the present value of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management's estimate of fair market lease rates for comparable in-place leases, measured over a period equal to the remaining non-cancelable term of the lease, including below-market renewal options, if applicable. The value of above-market leases is amortized as a reduction of Lease income over the remaining terms of the respective leases and the value of below-market leases is accreted to Lease income over the remaining terms of the respective leases, including below-market renewal options, if applicable.

Changes to these assumptions could result in a different pattern of recognition. If tenants do not remain in their lease through the expected term or exercise an assumed renewal option, there could be a material impact to earnings.

Valuation of Real Estate Investments

In accordance with GAAP, we evaluate our real estate for impairment whenever there are events or changes in circumstances, including property operating performance, general market conditions or changes in expected hold periods, that indicate that the carrying value of our real estate properties (including any related amortizable intangible assets or liabilities) may not be recoverable. If such events or changes occur, we compare the current carrying value of the asset to the estimated undiscounted cash flows that are directly associated with the use and ultimate disposition of the asset. Our estimated cash flows are based on several key assumptions, including rental rates, expected leasing activity, costs of tenant improvements, leasing commissions, expected hold period, comparable sales information, and assumptions regarding the residual value upon disposition, including the exit capitalization rate. These key assumptions are subjective in nature and the resulting impairment, if any, could differ from the actual gain or loss recognized upon ultimate sale in an arm's length transaction. If the carrying value of the asset exceeds the estimated undiscounted cash flows, an impairment loss is recognized equal to the excess of carrying value over the estimated fair value.

The estimated fair value of real estate assets is subjective and is estimated through comparable sales information and other market data if available, as well as the use of an income approach such as the direct capitalization method or the discounted cash flow approach.

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The discounted cash flow method uses similar assumptions to the undiscounted cash flow method above, as well as a discount rate. Such cash flow projections and rates are subject to management judgment and changes in those assumptions could impact the estimation of fair value. In estimating the fair value of undeveloped land, we generally use market data and comparable sales information. Changes in our disposition strategy or changes in the marketplace may alter the expected hold period of an asset or asset group, which may result in an impairment loss and such loss could be material to the Company's financial condition or operating performance.

Recent Accounting Pronouncements

See Note 1 to Consolidated Financial Statements.

Environmental Matters

We are subject to numerous environmental laws and regulations as they apply to our shopping centers pertaining primarily to specific chemicals historically used by certain current and former dry cleaning and gas station tenants and the existence of asbestos in older shopping centers. We believe that the few tenants who currently operate dry cleaning plants or gas stations do so in accordance with current laws and regulations. Generally, we endeavor to require tenants to remove dry cleaning plants from our shopping centers or convert them to more environmentally friendly systems, in accordance with the terms of our leases. We have a blanket environmental insurance policy for third-party liabilities and remediation costs on shopping centers that currently have no known environmental contamination. We have also secured environmental insurance policies, where appropriate, on a relatively small number of specific properties with known contamination, in order to mitigate our environmental risk. We monitor the shopping centers containing environmental issues and in certain cases voluntarily remediate the sites. We also have legal obligations to remediate certain sites and we are in the process of doing so.

As of December 31, 2021, we had accrued liabilities of $9.0 million for our Pro-rata share of environmental remediation, including our Investments in real estate partnerships. We believe that the ultimate remediation of currently known environmental matters will not have a material effect on our financial position, liquidity, or results of operations. We can give no assurance that existing environmental studies on our shopping centers have revealed all potential environmental contamination; that our estimate of liabilities will not change as more information becomes available; that any previous owner, occupant or tenant did not create any material environmental condition not known to us; that the current environmental condition of the shopping centers will not be affected by tenants and occupants, by the condition of nearby properties, or by unrelated third parties; or that changes in applicable environmental laws and regulations or their interpretation will not result in additional environmental liability to us.