Macerich(MAC) - 2022 Q2 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements (Unaudited) The unaudited consolidated financial statements detail the company's financial position, performance, and cash flows Consolidated Balance Sheets Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2022 | December 31, 2021 | Change | | :----------------------------- | :----------------------------- | :----------------------------- | :----- | | Total assets | $8,114,386 | $8,345,655 | -2.77% | | Total liabilities | $5,057,993 | $5,169,506 | -2.16% | | Total equity | $3,056,393 | $3,176,149 | -3.77% | | Property, net | $6,175,685 | $6,284,206 | -1.73% | | Mortgage notes payable | $4,361,131 | $4,423,554 | -1.41% | Consolidated Statements of Operations Consolidated Statements of Operations Highlights (in thousands) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | YoY Change | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | YoY Change | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :--------- | | Total revenues | $204,091 | $215,473 | -5.28% | $420,235 | $405,897 | 3.53% | | Total expenses | $227,710 | $228,536 | -0.36% | $456,765 | $465,079 | -1.79% | | Net loss | $(17,687) | $(4,062) | 335.44% | $(55,041) | $(71,792) | -23.33% | | Net loss attributable to the Company | $(15,384) | $(11,765) | 30.77% | $(52,566) | $(75,369) | -30.26% | | Basic EPS | $(0.07) | $(0.06) | 16.67% | $(0.25) | $(0.42) | -40.48% | Consolidated Statements of Comprehensive Loss Consolidated Statements of Comprehensive Loss Highlights (in thousands) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | YoY Change | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | YoY Change | | :----------------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :--------- | | Net loss | $(17,687) | $(4,062) | 335.44% | $(55,041) | $(71,792) | -23.33% | | Other comprehensive income: Interest rate cap/swap agreements | $9 | $2,739 | -99.67% | $40 | $5,433 | -99.26% | | Comprehensive loss | $(17,678) | $(1,323) | 1236.13% | $(55,001) | $(66,359) | -17.11% | | Comprehensive loss attributable to the Company | $(15,375) | $(9,026) | 70.34% | $(52,526) | $(69,936) | -24.90% | Consolidated Statements of Equity Consolidated Statements of Equity Highlights (in thousands) | Metric | June 30, 2022 | December 31, 2021 | Change | | :------------------------- | :------------ | :---------------- | :----- | | Total stockholders' equity | $2,941,474 | $3,046,867 | -3.46% | | Total equity | $3,056,393 | $3,176,149 | -3.77% | - Net loss attributable to the Company for the six months ended June 30, 2022, was $(52,566) thousand[18] - Distributions paid for the six months ended June 30, 2022, were $(64,531) thousand[18] - Additional paid-in capital increased by $11,661 thousand for the six months ended June 30, 2022, primarily due to amortization of share and unit-based plans and employee stock purchases[18] Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | YoY Change | | :---------------------------------------- | :--------------------------- | :--------------------------- | :--------- | | Net cash provided by operating activities | $115,422 | $113,027 | 2.12% | | Net cash provided by investing activities | $51,117 | $104,941 | -51.29% | | Net cash used in financing activities | $(175,066) | $(437,301) | -59.96% | | Net decrease in cash, cash equivalents and restricted cash | $(8,527) | $(219,333) | -96.11% | | Cash, cash equivalents and restricted cash, end of period | $158,444 | $263,326 | -39.83% | Notes to Consolidated Financial Statements Note 1. Organization - The Company is a Real Estate Investment Trust (REIT) involved in the acquisition, ownership, development, redevelopment, management, and leasing of regional town centers and community/power shopping centers in the United States[25] - As of June 30, 2022, the Company held a 96% ownership interest in The Macerich Partnership, L.P. (the "Operating Partnership")[26] - Property management, leasing, and redevelopment services are provided by the Company's seven management companies (the "Management Companies")[27] Note 2. Summary of Significant Accounting Policies - The Company's sole significant asset is its investment in the Operating Partnership, which includes investments in consolidated variable interest entities (VIEs) like Fashion District Philadelphia and SanTan Village Regional Center[29] - The Company elected to apply the lease modification accounting framework to COVID-19 related lease concessions that include rent abatement[33] Consolidated VIEs Assets and Liabilities (in thousands) | Metric | June 30, 2022 | December 31, 2021 | | :----------- | :------------ | :---------------- | | Total assets | $533,263 | $542,649 | | Total liabilities | $470,052 | $470,872 | Note 3. Earnings Per Share ("EPS") EPS Reconciliation (in thousands, except per share amounts) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :------------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss attributable to common stockholders | $(15,593) | $(11,979) | $(52,997) | $(75,798) | | Weighted average common shares outstanding | 214,990 | 205,757 | 214,905 | 182,299 | | Basic and Diluted EPS | $(0.07) | $(0.06) | $(0.25) | $(0.42) | - Diluted EPS excludes convertible preferred partnership units and Operating Partnership units (OP Units) due to their antidilutive impact[35] Note 4. Investments in Unconsolidated Joint Ventures - The Company's share of an impairment loss from its joint venture with Seritage Growth Properties (MS Portfolio LLC) was $30,426 thousand for the six months ended June 30, 2022[42] - FlatIron Crossing joint venture replaced a $197,011 thousand loan with a new $175,000 thousand loan at SOFR plus 3.70%, maturing February 9, 2025, with an interest rate cap at 4.0% SOFR through February 15, 2024[40] - The Shops at Atlas Park joint venture replaced an existing loan with a new $65,000 thousand loan at LIBOR plus 4.15%, maturing November 9, 2026, with an interest rate cap at 3.0% LIBOR through November 7, 2023[37] - Company's equity in net loss of unconsolidated joint ventures for the six months ended June 30, 2022, was $(22,744) thousand, compared to a net income of $21,945 thousand in the prior year[51] Note 5. Derivative Instruments and Hedging Activities - The Company recorded other comprehensive income related to marking-to-market derivative instruments of $9 thousand for the three months ended June 30, 2022, and $40 thousand for the six months ended June 30, 2022[52] - The fair value of derivatives is determined using discounted cash flow analysis (Level 2 measurement), incorporating credit valuation adjustments[53][54] Derivative Outstanding at June 30, 2022 (in thousands) | Property | Notional Amount | Product | LIBOR Rate | Maturity | Fair Value June 30, 2022 | | :---------------- | :-------------- | :------ | :--------- | :--------- | :----------------------- | | Santa Monica Place | $300,000 | Cap | 4.00 % | 12/9/2022 | $29 | Note 6. Property, net Property, net (in thousands) | Metric | June 30, 2022 | December 31, 2021 | Change | | :------------------------- | :------------ | :---------------- | :----- | | Property, net | $6,175,685 | $6,284,206 | -1.73% | | Land | $1,432,149 | $1,441,858 | -0.67% | | Buildings and improvements | $6,343,434 | $6,306,764 | 0.58% | | Accumulated depreciation | $(2,678,084) | $(2,563,344) | 4.48% | (Loss) gain on sale or write-down of assets, net (in thousands) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :----------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | (Loss) gain on sale or write-down of assets, net | $(1,091) | $(3,927) | $5,362 | $(25,210) | - The six months ended June 30, 2022, included an impairment loss of $5,492 thousand related to the Company's investment in MS Portfolio LLC[58] Note 7. Tenant and Other Receivables, net Tenant and Other Receivables, net (in thousands) | Metric | June 30, 2022 | December 31, 2021 | Change | | :----------------------------- | :------------ | :---------------- | :----- | | Tenant and other receivables, net | $162,310 | $211,361 | -23.11% | | Allowance for doubtful accounts | $12,286 | $14,917 | -17.51% | | Accrued percentage rents | $3,066 | $19,907 | -84.59% | | Deferred rent receivable | $108,398 | $110,969 | -2.32% | Note 8. Leases - Future undiscounted rental payments to the Company total $1,777,731 thousand[65] Leasing Revenue and Costs (in thousands) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total Leasing revenue | $188,590 | $196,987 | $392,002 | $376,522 | | Operating lease costs | $3,775 | $3,814 | $7,550 | $7,629 | Total Lease Liabilities (Lessee) at June 30, 2022 (in thousands) | Lease Type | Total Lease Liabilities | | :--------------- | :---------------------- | | Operating Leases | $85,045 | | Finance Leases | $13,381 | Note 9. Deferred Charges and Other Assets, net Deferred Charges and Other Assets, net (in thousands) | Metric | June 30, 2022 | December 31, 2021 | Change | | :------------------------------------ | :------------ | :---------------- | :----- | | Deferred charges and other assets, net | $238,847 | $254,908 | -6.30% | | Leasing | $112,492 | $134,887 | -16.59% | | Deferred compensation plan assets | $55,245 | $68,807 | -19.71% | | Below-Market Leases (Original allocated value) | $96,054 | $99,332 | -3.29% | Note 10. Mortgage Notes Payable - The Company expects to refinance, restructure, extend, or pay off all loan maturities during the next twelve months using its line of credit or cash on hand[77] - Interest expense capitalized was $4,292 thousand for the six months ended June 30, 2022, up from $3,709 thousand in 2021[78] Mortgage Notes Payable (in thousands) | Metric | June 30, 2022 | December 31, 2021 | Change | | :--------------------- | :------------ | :---------------- | :----- | | Mortgage notes payable | $4,361,131 | $4,423,554 | -1.41% | | Estimated fair value | $4,025,925 | $4,261,429 | -5.53% | Note 11. Bank and Other Notes Payable - The Company has a $700,000 thousand credit facility, including a $525,000 thousand revolving loan facility (matures April 14, 2023) and a $175,000 thousand term loan facility (matures April 14, 2024, but was paid off in September 2021)[80][82] - As of June 30, 2022, borrowings under the revolving loan facility were $86,000 thousand, with $438,719 thousand available for additional borrowings[82] - The borrowing rate on the credit facility was LIBOR plus 2.25% as of June 30, 2022[82] - The Company was in compliance with all financial loan covenants as of June 30, 2022[83] Note 12. Financing Arrangement - The Company's 49.9% interest in Chandler Fashion Center and Freehold Raceway Mall (Chandler Freehold) is accounted for as a financing arrangement[84] - The fair value of the financing arrangement obligation is a Level 3 measurement, sensitive to unobservable inputs like terminal capitalization rate (5.75%), discount rate (7.75% at June 30, 2022), and market rents[84] Interest Expense from Financing Arrangement (in thousands) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :---------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total interest expense from financing arrangement | $8,892 | $2,954 | $16,895 | $4,273 | Note 13. Noncontrolling Interests - The Company had a 96% ownership interest in the Operating Partnership as of June 30, 2022[86] - OP Units may be redeemed for shares of stock or cash at the Company's option, with the redemption value based on the average closing price of common stock[86] Aggregate Redemption Value of OP Units (in thousands) | Date | Redemption Value | | :------------- | :--------------- | | June 30, 2022 | $78,019 | | December 31, 2021 | $147,259 | Note 14. Stockholders' Equity - As of June 30, 2022, approximately $151,699 thousand remained available to be sold under the March 2021 ATM Program[92] - No shares of common stock were issued under the March 2021 ATM Program during the six months ended June 30, 2022[92] - The Company's Board of Directors authorized a stock buyback program of up to $500,000 thousand in February 2017, but no repurchases were made during the six months ended June 30, 2022 or 2021[94][95] Note 15. Dispositions - On March 29, 2021, Paradise Valley Mall was sold for $100,000 thousand, resulting in a gain of $5,563 thousand[96] - On September 17, 2021, Tucson La Encantada was sold for $165,250 thousand, resulting in a gain of approximately $117,242 thousand[97] - For the six months ended June 30, 2022, the Company sold various land parcels, resulting in gains of $15,147 thousand[99] Note 16. Commitments and Contingencies - As of June 30, 2022, the Company was contingently liable for $40,997 thousand in letters of credit, with $40,680 thousand secured by restricted cash[100] - Outstanding obligations under construction agreements totaled $6,443 thousand at June 30, 2022, expected to be settled within the next twelve months[101] Note 17. Related Party Transactions - Due from affiliates was $3,209 thousand at June 30, 2022, representing unreimbursed costs and fees from unconsolidated joint ventures[105] Fees Charged to Unconsolidated Joint Ventures (in thousands) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Management fees | $4,682 | $3,986 | $9,043 | $7,803 | | Development and leasing fees | $2,108 | $1,555 | $3,491 | $2,985 | Interest Expense from Related Party Transactions (in thousands) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :---------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Interest expense from related party transactions | $8,892 | $2,954 | $16,895 | $4,273 | Note 18. Share and Unit-Based Plans - During the six months ended June 30, 2022, the Company granted 1,092,698 LTI Units (376,153 service-based and 716,545 performance-based)[109] - Unrecognized compensation costs at June 30, 2022, included $13,007 thousand from LTI Units and $2,377 thousand from stock units[114] Compensation Cost Under Share and Unit-Based Plans (in thousands) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total compensation cost | $5,384 | $4,332 | $11,446 | $9,363 | Note 19. Income Taxes - Net deferred tax assets were $22,690 thousand at June 30, 2022[116] - The Company had no valuation allowance recorded as of June 30, 2022[117] Income Tax Provision of TRSs (in thousands) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total benefit (expense) | $670 | $(7,107) | $(1,129) | $(9,345) | Note 20. Subsequent Events - On July 20, 2022, the Company declared a cash dividend/distribution of $0.15 per share for common stockholders and OP Unitholders[119] - The dividend will be paid 100% in cash on September 8, 2022, to stockholders of record on August 19, 2022[119] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, operational results, strategic activities, and liquidity for the period ended June 30, 2022 IMPORTANT INFORMATION RELATED TO FORWARD-LOOKING STATEMENTS - Forward-looking statements include expectations regarding growth, acquisition, redevelopment, development, leasing, and operational activities, as well as financial condition and results of operations[120] - Risks include general economic conditions, demand for retail space, tenant bankruptcies, rising interest rates and inflation, financing availability, and adverse changes in real estate markets[121] - The Company does not intend to update forward-looking information unless required by law[121] Management's Overview and Summary - The Company owns or has an ownership interest in 44 regional town centers, five community/power shopping centers, and two redevelopment properties, totaling approximately 48 million square feet of gross leasable area (GLA)[122] - The Company is the sole general partner of, and owns a majority interest in, The Macerich Partnership, L.P. (the "Operating Partnership")[122] - The Company is a self-administered and self-managed REIT, conducting operations through the Operating Partnership and its seven Management Companies[123] Dispositions - Paradise Valley Mall was sold for $100.0 million on March 29, 2021, with a gain of approximately $5.6 million[126] - Tucson La Encantada was sold for $165.3 million on September 17, 2021, with a gain of approximately $117.2 million[127] - For the six months ended June 30, 2022, the Company's share of gain on land sales was $12.3 million, with proceeds of $27.3 million used to pay down debt[131] Financing Activities - In April 2021, the Company entered into a new $700 million credit facility, including a $525 million revolving loan and a $175 million term loan (which was subsequently paid off)[134] - On February 2, 2022, the FlatIron Crossing joint venture replaced a $197 million loan with a new $175 million loan[139] - On April 29, 2022, the Company replaced the existing $110.6 million loan on Pacific View with a new $72.0 million loan[140] - On July 1, 2022, the loan maturity on Danbury Fair Mall was further extended to July 1, 2023, with a $10.0 million repayment[141] Redevelopment and Development Activities - The One Westside redevelopment project (joint venture with Hudson Pacific Properties) is estimated to cost between $500.0 million and $550.0 million, with the Company's pro rata share being $125.0 million to $137.5 million. The office space is leased to Google and expected to be completed in Q3 2022[142] - The Company anticipates spending $130.0 million to $160.0 million (pro rata share) to redevelop former Sears stores[144] - As of June 30, 2022, the Company has funded $118.7 million for One Westside and $42.7 million for Sears redevelopments (pro rata share)[142][144] Other Transactions and Events - All Centers have been open and operating since October 7, 2020, with government-imposed capacity restrictions essentially eliminated[145] - The Company declared a cash dividend of $0.15 per share for Q3 2022, payable on September 8, 2022[146] - As of June 30, 2022, approximately $151.7 million of gross sales of common stock remained available under the March 2021 ATM Program[148] Inflation - Most leases include periodic rent adjustments, either fixed increments or based on the Consumer Price Index[150] - The annual expiration of leases for spaces 10,000 square feet and under allows the Company to secure higher base rents[150] - Most leases require tenants to pay their pro rata share of property taxes and utilities, but for operating expenses, tenants often pay a stated amount, placing cost control burden on the Company[150] Critical Accounting Policies and Estimates - Critical accounting policies include judgments on revenue recognition, estimates for common area maintenance and real estate tax accruals, provisions for uncollectible accounts, impairment of long-lived assets, purchase price allocation, capitalization of costs, and fair value measurements[152] - For acquisitions, purchase price is allocated to tangible and intangible assets/liabilities, including land, building, tenant improvements, and in-place lease values (leasing commissions, legal costs, above/below-market leases)[153] - Asset impairment is assessed by considering expected future operating income, trends, and economic factors, with recoverability based on estimated undiscounted future net cash flows[155] - Fair value measurements for financial instruments, including the financing arrangement, utilize a hierarchy (Level 1, 2, 3) based on observable and unobservable inputs[157][159] Results of Operations - "Same Centers" are defined as centers substantially complete and in operation for the entirety of both comparison periods, excluding "Redevelopment Properties" and "Disposition Properties"[161] - Key performance indicators include tenant annual sales, occupancy rates (excluding Anchors), and releasing spreads[164] - Comparable tenant sales for spaces less than 10,000 sq ft increased by 2.2% (YoY Q2 2021) and 16.8% (vs. pre-COVID Q2 2019)[165] - Leased occupancy rate was 91.8% at June 30, 2022, up 2.4% from 89.4% at June 30, 2021[165] - Releasing spreads for the trailing twelve months ended June 30, 2022, showed a 0.6% increase ($0.35 per sq ft)[165] Comparison of Three Months Ended June 30, 2022 and 2021 - The decrease in leasing revenue was attributed to decreases from Same Centers ($5.5 million) and Disposition Properties ($2.9 million)[180] - Interest expense decreased by $1.7 million, primarily due to lower outstanding balances on the revolving line of credit, offset by a $5.9 million increase from the financing arrangement[187] Key Financials (3 Months Ended June 30, in thousands) | Metric | 2022 | 2021 | YoY Change | | :---------------------------------------- | :--- | :--- | :--------- | | Total revenues | $204,091 | $215,473 | -5.28% | | Leasing revenue | $188,590 | $196,987 | -4.26% | | Shopping center and operating expenses | $69,728 | $67,655 | 3.06% | | Interest expense | $53,189 | $54,914 | -3.14% | | Equity in income of unconsolidated joint ventures | $6,353 | $20,035 | -68.29% | | Net loss | $(17,687) | $(4,062) | 335.44% | Comparison of Six Months Ended June 30, 2022 and 2021 - Leasing revenue increased by $15.5 million, primarily from Same Centers ($22.8 million increase), offset by Disposition Properties ($7.3 million decrease)[192] - Equity in (loss) income of unconsolidated joint ventures decreased by $44.7 million, mainly due to asset write-downs from reduced estimated holding periods[201] Key Financials (6 Months Ended June 30, in thousands) | Metric | 2022 | 2021 | YoY Change | | :---------------------------------------- | :--- | :--- | :--------- | | Total revenues | $420,235 | $405,897 | 3.53% | | Leasing revenue | $392,002 | $376,522 | 4.12% | | Shopping center and operating expenses | $142,648 | $143,810 | -0.81% | | Interest expense | $105,050 | $108,810 | -3.30% | | Equity in (loss) income of unconsolidated joint ventures | $(22,744) | $21,945 | -203.65% | | Gain (loss) on sale or write down of assets, net | $5,362 | $(25,210) | 121.27% | | Net loss | $(55,041) | $(71,792) | -23.33% | Operating Activities Net Cash Provided by Operating Activities (6 Months Ended June 30, in thousands) | Metric | 2022 | 2021 | YoY Change | | :---------------------------------------- | :--- | :--- | :--------- | | Net cash provided by operating activities | $115,422 | $113,027 | 2.12% | Investing Activities - Decrease primarily attributed to a $119.0 million decrease in proceeds from asset sales[206] - Offset by increases in distributions from unconsolidated joint ventures ($24.9 million) and proceeds from collection of receivable in connection with sale of joint venture property ($21.0 million)[206] Net Cash Provided by Investing Activities (6 Months Ended June 30, in thousands) | Metric | 2022 | 2021 | YoY Change | | :---------------------------------------- | :--- | :--- | :--------- | | Net cash provided by investing activities | $51,117 | $104,941 | -51.29% | Financing Activities - Decrease primarily due to a $1.5 billion decrease in payments on mortgages, bank, and other notes payable[207] - Offset by lower proceeds from stock offerings ($791.5 million in 2021 vs. $(120) thousand in 2022) and proceeds from mortgages, bank, and other notes payable ($470.0 million in 2021 vs. $25.0 million in 2022)[22][207] Net Cash Used in Financing Activities (6 Months Ended June 30, in thousands) | Metric | 2022 | 2021 | YoY Change | | :------------------------------------ | :--- | :--- | :--------- | | Net cash used in financing activities | $(175,066) | $(437,301) | -59.96% | Liquidity and Capital Resources - The Company anticipates meeting liquidity needs through cash from operations, distributions from unconsolidated joint ventures, working capital reserves, and borrowings under its line of credit[208] - Total outstanding loan indebtedness at June 30, 2022, was $6.86 billion (Company's pro rata share)[214] - The Company has successfully secured nine loan extensions totaling over $1.6 billion of debt since September 2020, including several in 2022[220] - Rising interest rates are increasing borrowing costs for floating-rate debt and new fixed-rate debt, and the Company expects increased interest expense from refinancing or extending loans[179][213] Uses of Capital - The Company expects to incur approximately $80.0 million to $90.0 million for development, redevelopment, expansion, and renovations during the remainder of 2022[210] - Capital for these expenditures is expected from cash on hand, debt/equity financings, line of credit borrowings, property financings, and construction loans[210] Capital Expenditures (6 Months Ended June 30, in thousands) | Capital Expenditures | 2022 | 2021 | YoY Change | | :---------------------------------- | :--- | :--- | :--------- | | Consolidated Centers Total | $40,909 | $39,617 | 3.26% | | Joint Venture Centers Total | $42,443 | $33,307 | 27.44% | Sources of Capital - Liquidity sources include equity offerings, property refinancings, joint venture transactions, and the sale of non-core assets[211] - The Company has a shelf registration statement for various securities[211] - As of June 30, 2022, approximately $151.7 million of gross sales of common stock remained available under the March 2021 ATM Program[212] - Access to capital is impacted by overall debt level, interest rates, interest coverage ratios, market conditions, and the impact of COVID-19[213] Material Cash Commitments Material Cash Commitments as of June 30, 2022 (in thousands) | Cash Commitments | Total | Less than 1 year | 1 - 3 years | 3 - 5 years | More than five years | | :------------------------------------------------------- | :------------ | :--------------- | :------------ | :------------ | :------------------- | | Long-term debt obligations (includes expected interest payments) | $5,175,862 | $1,040,506 | $1,739,771 | $690,717 | $1,704,868 | | Lease obligations | $189,350 | $12,197 | $34,045 | $22,574 | $120,534 | | Total | $5,365,212| $1,052,703 | $1,773,816| $713,291 | $1,825,402 | Funds From Operations ("FFO") - FFO is defined as net income (loss) excluding gains/losses from property sales, plus real estate related depreciation and amortization, impairment write-downs, and adjustments for unconsolidated joint ventures[226] - The Company excludes certain financing expenses related to the Chandler Freehold arrangement from its FFO definition[227] FFO Attributable to Common Stockholders and Unit Holders (in thousands) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | YoY Change | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | YoY Change | | :-------------------------------------------------------------------------------------------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :--------- | | FFO attributable to common stockholders and unit holders—basic and diluted | $93,710 | $123,447 | -24.17% | $198,575 | $196,407 | 1.10% | | FFO attributable to common stockholders and unit holders, excluding financing expense in connection with Chandler Freehold—basic and diluted | $102,850 | $127,594 | -19.40% | $215,221 | $203,097 | 5.97% | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate exposure, managed through fixed-rate debt and derivatives - Primary market risk exposure is interest rate risk[236] - Strategies to manage interest rate risk include maintaining a fixed-to-floating debt ratio, using interest rate caps/swaps, and treasury rate locks[236] - A 1% increase in interest rates would decrease future earnings and cash flows by approximately $9.1 million per year, based on $0.9 billion of floating rate debt outstanding at June 30, 2022[240] - The discontinuation of LIBOR after June 30, 2023, may result in higher interest costs for LIBOR-indexed contracts, though agreements provide for replacement rates[242][243] - Total fixed rate debt for Consolidated Centers at June 30, 2022, was $3.8 billion (average 4.01%), and floating rate debt was $705.9 million (average 3.56%)[237] - Company's pro rata share of unconsolidated joint venture fixed rate debt was $2.7 billion (average 3.82%), and floating rate debt was $200.9 million (average 3.94%)[238] Item 4. Controls and Procedures Management confirms the effectiveness of disclosure controls and procedures with no material changes to internal controls - The Company's disclosure controls and procedures were effective as of June 30, 2022[244] - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter[245] Part II. Other Information Item 1. Legal Proceedings The company is not involved in any material legal proceedings outside the ordinary course of business - No material legal proceedings are currently ongoing for the Company or its affiliates[247] - Involvement in various legal proceedings arises from time to time in the ordinary course of business[247] Item 1A. Risk Factors No material changes to risk factors have occurred since the last Annual Report on Form 10-K - No material changes to the risk factors were reported since the Annual Report on Form 10-K for the year ended December 31, 2021[248] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company issued 34,551 shares in private placements and made no share repurchases during Q2 2022 - The Company issued 34,551 shares of common stock in private placements on April 28, 2022, and June 23, 2022, upon redemption of Operating Partnership units[250] - No shares were purchased under the Company's stock buyback program during the three months ended June 30, 2022[251] - Approximately $278.7 million remained available under the stock buyback program as of June 30, 2022[251] Item 3. Defaults Upon Senior Securities This item is not applicable to the company for the reporting period - Not Applicable[252] Item 4. Mine Safety Disclosures This item is not applicable to the company for the reporting period - Not Applicable[252] Item 5. Other Information This item is not applicable to the company for the reporting period - Not Applicable[252] Item 6. Exhibits This section lists the exhibits filed as part of the Form 10-Q, including corporate governance and certification documents - Includes Articles of Amendment and Restatement, Articles Supplementary, Amended and Restated Bylaws, and Section 302 and 906 Certifications[253][256] - Also includes Inline XBRL Taxonomy Extension documents[256] Signature The report was signed on August 8, 2022, by the Senior Executive Vice President, Treasurer, and Chief Financial Officer - Signed by Scott W. Kingsmore, Senior Executive Vice President, Treasurer and Chief Financial Officer[257] - Date of signature: August 8, 2022[257]