# Macerich Co: Form 10-Q for the period ended Mar 31, 2020

- Company: [Macerich Co](/companies/mac.md) (CIK 912242)
- Form: 10-Q
- Filed: 2020-05-11
- Accepted by EDGAR: May 11, 2020, 16:21 ET
- Period: 2020-03-31
- Accession: 0000912242-20-000007
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/912242/000091224220000007/mac-20200331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/912242/000091224220000007/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2020-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2020-01-01 to 2020-03-31 | $227.0m | us-gaap:Revenues |
| Interest expense | 3 months, 2020-01-01 to 2020-03-31 | $8.1m | us-gaap:InterestExpense |
| Income tax | 3 months, 2020-01-01 to 2020-03-31 | −$266.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2020-01-01 to 2020-03-31 | $8.7m | us-gaap:ProfitLoss |
| Diluted EPS | 3 months, 2020-01-01 to 2020-03-31 | $0.05 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2020-01-01 to 2020-03-31 | $0.05 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2020-01-01 to 2020-03-31 | 141,437,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2020-01-01 to 2020-03-31 | $49.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Dividends paid | 3 months, 2020-01-01 to 2020-03-31 | $114.7m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2020-03-31 | $652.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2020-03-31 | $9.30bn | us-gaap:Assets |
| Total liabilities | at 2020-03-31 | $6.58bn | us-gaap:Liabilities |
| Shareholders' equity | at 2020-03-31 | $2.53bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 55,569 characters.

### IMPORTANT INFORMATION RELATED TO FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q of The Macerich Company (the "Company") contains or incorporates statements that constitute forward-looking statements within the meaning of the federal securities laws. Any statements that do not relate to historical or current facts or matters are forward-looking statements. You can identify some of the forward-looking statements by the use of forward-looking words, such as "may," "will," "could," "should," "expects," "anticipates," "intends," "projects," "predicts," "plans," "believes," "seeks," "estimates," "scheduled" and variations of these words and similar expressions. Statements concerning current conditions may also be forward-looking if they imply a continuation of current conditions. Forward-looking statements appear in a number of places in this Form 10-Q and include statements regarding, among other matters:

- expectations regarding the Company's growth;
- the Company's beliefs regarding its acquisition, redevelopment, development, leasing and operational activities and opportunities, including the performance and financial stability of its retailers;
- the Company's acquisition, disposition and other strategies;
- regulatory matters pertaining to compliance with governmental regulations;
- the Company's capital expenditure plans and expectations for obtaining capital for expenditures;
- the Company's expectations regarding income tax benefits;
- the Company's expectations regarding its financial condition or results of operations; and
- the Company's expectations for refinancing its indebtedness, entering into and servicing debt obligations and entering into joint venture arrangements.

Stockholders are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company or the industry to differ materially from the Company's future results, performance or achievements, or those of the industry, expressed or implied in such forward-looking statements. Such factors include, among others, general industry, as well as national, regional and local economic and business conditions, which will, among other things, affect demand for retail space or retail goods, availability and creditworthiness of current and prospective tenants, anchor or tenant bankruptcies, closures, mergers or consolidations, lease rates, terms and payments, interest rate fluctuations, availability, terms and cost of financing and operating expenses; adverse changes in the real estate markets including, among other things, competition from other companies, retail formats and technology, risks of real estate development and redevelopment, acquisitions and dispositions; the adverse impact of the novel coronavirus ("COVID-19") on the U.S., regional and global economies and the financial condition and results of operations of the Company and its tenants; the liquidity of real estate investments, governmental actions and initiatives (including legislative and regulatory changes); environmental and safety requirements; and terrorist activities or other acts of violence which could adversely affect all of the above factors. You are urged to carefully review the disclosures we make concerning these risks and other factors that may affect our business and operating results, including those made in "Item 1A. Risk Factors" of this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2019, as well as our other reports filed with the Securities and Exchange Commission (the "SEC"), which disclosures are incorporated herein by reference. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. The Company does not intend, and undertakes no obligation, to update any forward-looking information to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events, unless required by law to do so.

### Management's Overview and Summary

The Company is involved in the acquisition, ownership, development, redevelopment, management and leasing of regional and community/power shopping centers located throughout the United States. The Company is the sole general partner of, and owns a majority of the ownership interests in, The Macerich Partnership, L.P. (the "Operating Partnership"). As of March 31, 2020, the Operating Partnership owned or had an ownership interest in 47 regional shopping centers and five community/power shopping centers aggregating approximately 51 million square feet of gross leasable area. These 52 regional and community/power shopping centers are referred to hereinafter as the "Centers," unless the context otherwise requires. The property management, leasing and redevelopment of the Company's portfolio is provided by the Company's seven management companies (collectively referred to herein as the "Management Companies"). The Company is a self-administered and self-managed real estate investment trust ("REIT") and conducts all of its operations through the Operating Partnership and the Management Companies.

The following discussion is based primarily on the consolidated financial statements of the Company for the three months ended March 31, 2020 and 2019. It compares the results of operations and cash flows for the three months ended March 31, 2020 to the results of operations and cash flows for the three months ended March 31, 2019.

This information should be read in conjunction with the accompanying consolidated financial statements and notes thereto.

#### Financing Activities:

On January 10, 2019, the Company replaced the existing loan on Fashion Outlets of Chicago with a new $300.0 million loan that bears interest at an effective rate of 4.61% and matures on February 1, 2031. The Company used the net proceeds to pay down its line of credit and for general corporate purposes.

On February 22, 2019, the Company’s joint venture in The Shops at Atlas Park entered into an agreement to increase the total borrowing capacity of the existing loan on the property from $57.8 million to $80.0 million, and to extend the maturity date to October 28, 2021, including extension options. Concurrent with the loan modification, the joint venture borrowed an additional $18.4 million. The Company used its $9.2 million share of the additional proceeds to pay down its line of credit and for general corporate purposes.

On June 3, 2019, the Company’s joint venture in SanTan Village Regional Center replaced the existing loan on the property with a new $220.0 million loan that bears interest at an effective rate of 4.34% and matures on July 1, 2029. The Company used its share of the additional proceeds to pay down its line of credit and for general corporate purposes.

On June 27, 2019, the Company replaced the existing loan on Chandler Fashion Center with a new $256.0 million loan that bears interest at an effective rate of 4.18% and matures on July 5, 2024. The Company used its share of the additional proceeds to pay down its line of credit and for general corporate purposes.

On July 25, 2019, the Company's joint venture in Fashion District Philadelphia amended the existing term loan on the joint venture to allow for additional borrowings up to $100.0 million at LIBOR plus 2.00%. Concurrent with the amendment, the joint venture borrowed an additional $26.0 million. On August 16, 2019, the joint venture borrowed an additional $25.0 million. The Company used its share of the additional proceeds to pay down its line of credit and for general corporate purposes.

On September 12, 2019, the Company’s joint venture in Tysons Tower placed a new $190.0 million loan on the property that bears interest at an effective rate of 3.38% and matures on November 11, 2029. The Company used its share of the proceeds to pay down its line of credit and for general corporate purposes.

On October 17, 2019, the Company’s joint venture in West Acres placed a construction loan on the property that allows for borrowing of up to $6.5 million, bears interest at an effective rate of 3.72% and matures on October 10, 2029. The joint venture intends to use the proceeds from the loan to fund the expansion of the property.

On December 3, 2019, the Company replaced the existing loan on Kings Plaza Shopping Center with a new $540.0 million loan that bears interest at an effective rate of 3.71% and matures on January 1, 2030. The Company used the additional proceeds to pay down its line of credit and for general corporate purposes.

On December 18, 2019, the Company’s joint venture in One Westside placed a $414.6 million construction loan on the redevelopment project (See "Redevelopment and Development Activities"). The loan bears interest at LIBOR plus 1.70%, which can be reduced to LIBOR plus 1.50% upon the completion of certain conditions, and matures on December 18, 2024. The joint venture intends to use the loan proceeds to fund the completion of the project.

#### Redevelopment and Development Activities:

The Company's joint venture with Hudson Pacific Properties is redeveloping One Westside into 584,000 square feet of creative office space and 96,000 square feet of dining and entertainment space. The entire creative office space has been leased to Google and is expected to be completed in 2022. The total cost of the project is estimated to be between $500.0 million and $550.0 million, with $125.0 million to $137.5 million estimated to be the Company's pro rata share. The Company has funded $54.8 million of the total $219.0 million incurred by the joint venture as of March 31, 2020. The joint venture expects to fund the remaining costs of the development with its new $414.6 million construction loan (See "Financing Activities").

The Company has a 50/50 joint venture with Simon Property Group to develop Los Angeles Premium Outlets, a premium outlet center in Carson, California that is planned to open with approximately 400,000 square feet, followed by an additional 165,000 square feet in the second phase. The Company has funded $36.1 million of the total $72.1 million incurred by the joint venture as of March 31, 2020.

In connection with the closures and lease rejections of several Sears stores owned or partially owned by the Company, the Company anticipates spending between $130.0 million to $160.0 million at the Company’s pro rata share to redevelop the Sears stores. The anticipated openings of such redevelopments are expected to occur over several years. The estimated range of redevelopment costs could increase if the Company or its joint venture decides to expand the scope of the redevelopments. The Company has funded $29.0 million at its pro rata share as of March 31, 2020.

#### Other Transactions and Events:

On March 11, 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. As a result, all of the markets that the Company operates in were subject to stay-at-home orders, and the majority of its properties were temporarily closed in part or completely. The Company has been proactively working with all its stakeholders, including its tenants, lenders and suppliers, to mitigate the impact of the economic shut down. While the ultimate scope and scale of this outbreak is unknown at this time, the Company’s financial condition and the results of its operations have been negatively impacted, as the majority of the Company's tenants have delayed April and May rent payments. As a result, on March 27, 2020, the Company withdrew its previously published 2020 earnings guidance, and it has not provided updated earnings guidance. See "Outlook" in Results of Operations for a further discussion of the forward-looking impact of COVID-19 and the Company's strategic plan to mitigate the anticipated negative impact on its financial condition and results of operations.

In April 2020, the Company hosted a webinar for retailers along with its tax advisors and a major commercial bank with which it has a long-term relationship to explain the Coronavirus Aid, Relief and Economic Security Act federal stimulus package and how retailers can access those funds and take advantage of various tax incentives. Nearly 400 retailers either attended live or have viewed the recorded webinar, which is available on the Company's website for continued replay use.

#### Inflation:

In the last five years, inflation has not had a significant impact on the Company because of a relatively low inflation rate. Most of the leases at the Centers have rent adjustments periodically throughout the lease term. These rent increases are either in fixed increments or based on using an annual multiple of increases in the Consumer Price Index ("CPI"). In addition, approximately 5% to 15% of the leases for spaces 10,000 square feet and under expire each year, which enables the Company to replace existing leases with new leases at higher base rents if the rents of the existing leases are below the then existing market rate. The Company has generally entered into leases that require tenants to pay a stated amount for operating expenses, generally excluding property taxes, regardless of the expenses actually incurred at any Center, which places the burden of cost control on the Company. Additionally, certain leases require the tenants to pay their pro rata share of operating expenses.

### Critical Accounting Policies

The preparation of financial statements in conformity with generally accepted accounting principles ("GAAP") in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Some of these estimates and assumptions include judgments on revenue recognition, estimates for common area maintenance and real estate tax accruals, provisions for uncollectible accounts, impairment of long-lived assets, the allocation of purchase price between tangible and intangible assets, capitalization of costs and fair value measurements. The Company's significant accounting policies are described in more detail in Note 2—Summary of Significant Accounting Policies in the Company's Notes to the Consolidated Financial Statements. However, the following policies are deemed to be critical.

#### Acquisitions:

The Company allocates the estimated fair value of acquisitions to land, building, tenant improvements and identified intangible assets and liabilities, based on their estimated fair values. In addition, any assumed mortgage notes payable are recorded at their estimated fair values. The estimated fair value of the land and buildings is determined utilizing an “as if vacant” methodology. Tenant improvements represent the tangible assets associated with the existing leases valued on a fair value basis at the acquisition date prorated over the remaining lease terms. The tenant improvements are classified as an asset under property and are depreciated over the remaining lease terms. Identifiable intangible assets and liabilities relate to the value of in-place operating leases which come in three forms: (i) leasing commissions and legal costs, which represent the value associated with “cost avoidance” of acquiring in-place leases, such as lease commissions paid under terms generally experienced in the Company's markets; (ii) value of in-place leases, which represents the estimated loss of revenue and of costs incurred for the period required to lease the “assumed vacant” property to the occupancy level when purchased; and (iii) above or below-market value of in-place leases, which represents the difference between the contractual rents and market rents at the time of the acquisition, discounted for tenant credit risks. Leasing commissions and legal costs are recorded in deferred charges and other assets and are amortized over the remaining lease terms. The value of in-place leases are recorded in deferred charges and other assets and amortized over the remaining lease terms plus any below-market fixed rate renewal options. Above or below-market leases are classified in deferred charges and other assets or in other accrued liabilities, depending on whether the contractual terms are above or below-market, and the asset or liability is amortized to minimum rents over the remaining terms of the leases. The remaining lease terms of below-market leases may include certain below-market fixed-rate renewal periods. In considering whether or not a lessee will execute a below-market fixed-rate lease renewal option, the Company evaluates economic factors and certain qualitative factors at the time of acquisition such as tenant mix in the Center, the Company's relationship with the tenant and the availability of competing tenant space. The initial allocation of purchase price is based on management's preliminary assessment, which may change when final information becomes available. Subsequent adjustments made to the initial purchase price allocation are made within the allocation period, which does not exceed one year. The purchase price allocation is described as preliminary if it is not yet final. The use of different assumptions in the allocation of the purchase price of the acquired assets and liabilities assumed could affect the timing of recognition of the related revenues and expenses.

The Company immediately expenses costs associated with business combinations as period costs and capitalizes costs associated with asset acquisitions.

#### Asset Impairment:

The Company assesses whether an indicator of impairment in the value of its properties exists by considering expected future operating income, trends and prospects, as well as the effects of demand, competition and other economic factors. Such factors include projected rental revenue, operating costs and capital expenditures as well as estimated holding periods and capitalization rates. If an impairment indicator exists, the determination of recoverability is made based upon the estimated undiscounted future net cash flows, excluding interest expense. The amount of impairment loss, if any, is determined by comparing the fair value, as determined by a discounted cash flows analysis or a contracted sales price, with the carrying value of the related assets. The Company generally holds and operates its properties long-term, which decreases the likelihood of their carrying values not being recoverable. Properties classified as held for sale are measured at the lower of the carrying amount or fair value less cost to sell.

The Company reviews its investments in unconsolidated joint ventures for a series of operating losses and other factors that may indicate that a decrease in the value of its investments has occurred which is other-than-temporary. The investment in each unconsolidated joint venture is evaluated periodically, and as deemed necessary, for recoverability and valuation declines that are other-than-temporary.

#### Fair Value of Financial Instruments:

The fair value hierarchy distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity and the reporting entity's own assumptions about market participant assumptions. Level 1 inputs utilize quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, which is typically based on an entity's own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

The Company calculates the fair value of financial instruments and includes this additional information in the Notes to the Consolidated Financial Statements when the fair value is different than the carrying value of those financial instruments. When the fair value reasonably approximates the carrying value, no additional disclosure is made.

The Company records its Financing Arrangement (See Note 12—Financing Arrangement in the Company's Notes to the Consolidated Financial Statements) obligation at fair value on a recurring basis with changes in fair value being recorded as interest expense in the Company’s consolidated statements of operations. The fair value is determined based on a discounted cash flow model, with the significant unobservable inputs including the multiple of net operating income, discount rate, and market rents. The fair value of the Financing Arrangement obligation is sensitive to these significant unobservable inputs and a change in these inputs may result in a significantly higher or lower fair value measurement.

### Results of Operations

Many of the variations in the results of operations, discussed below, occurred because of the transactions affecting the Company's properties described in Management's Overview and Summary above, including the Redevelopment Properties and the Disposition Properties (as defined below).

For purposes of the discussion below, the Company defines "Same Centers" as those Centers that are substantially complete and in operation for the entirety of both periods of the comparison. Non-Same Centers for comparison purposes include those Centers or properties that are going through a substantial redevelopment often resulting in the closing of a portion of the Center (“Redevelopment Properties”), those properties that have recently transitioned to or from equity method joint ventures to or from consolidated assets and properties that have been disposed of ("Disposition Properties"). The Company moves a Center in and out of Same Centers based on whether the Center is substantially complete and in operation for the entirety of both periods of the comparison. Accordingly, the Same Centers consist of all consolidated Centers, excluding the Redevelopment Properties and the Disposition Properties, for the periods of comparison.

For the comparison of the three months ended March 31, 2020 to the three months ended March 31, 2019, the Redevelopment Properties are Paradise Valley Mall and certain ground up developments. For the comparison of the three months ended March 31, 2020 to the three months ended March 31, 2019, there are no Disposition Properties.

Unconsolidated joint ventures are reflected using the equity method of accounting. The Company's pro rata share of the results from these Centers is reflected in the Consolidated Statements of Operations as equity in income of unconsolidated joint ventures.

The Company considers tenant annual sales per square foot (for tenants in place for a minimum of twelve months or longer and 10,000 square feet and under), occupancy rates (excluding large retail stores or "Anchors") and releasing spreads (i.e. a comparison of initial average base rent per square foot on leases executed during the trailing twelve months to average base rent per square foot at expiration for the leases expiring during the trailing twelve months based on the spaces 10,000 square feet and under) to be key performance indicators of the Company's internal growth.

Tenant sales per square foot increased from $746 for the twelve months ended March 31, 2019 to $801 for the twelve months ended February 29, 2020. Given the widespread closure of the majority of the Company's tenants during March 2020 as a result of COVID-19 (See "Other Transactions and Events" in Management's Overview and Summary), tenant sales reporting is reflected as of February 29, 2020. Occupancy rate decreased from 94.7% at March 31, 2019 to 93.1% at March 31, 2020. Releasing spreads remained positive as the Company was able to lease available space at higher average rents than the expiring rental rates, resulting in a releasing spread of $3.60 per square foot ($58.88 on new and renewal leases executed compared to $55.28 on leases expiring), representing a 6.5% increase for the trailing twelve months ended March 31, 2020. The Company continues to renew or replace leases that are scheduled to expire in 2020. However, the Company cannot be certain of the impact COVID-19 will have on its ability to sign, renew or replace 2020 lease expirations. These leases that are scheduled to expire in the next twelve months represent 0.9 million square feet of the Centers, accounting for 14.0% of the gross leasable area ("GLA") of mall stores and freestanding stores, for spaces 10,000 square feet and under, as of March 31, 2020. These calculations exclude Centers under development or redevelopment and property dispositions (See "Redevelopment and Development Activities" in Management's Overview and Summary). The Company has entered into leases for approximately 60% of the expiring square footage in 2020, and has another 25% of its 2020 lease expirations in lease documentation. Also, the Company has approximately 125 leases totaling approximately 860,000 square feet for new stores. After speaking with each prospective tenant of such new stores, only four tenants have currently indicated they no longer planned to open their new store, which equates to only 8,000 square feet of the total 860,000 square foot pipeline of new leases.

During the trailing twelve months ended March 31, 2020, the Company signed 321 new leases and 553 renewal leases comprising approximately 3.4 million square feet of GLA, of which 2.3 million square feet is related to the consolidated Centers. The annual initial average base rent for new and renewal leases was $58.88 per square foot for the trailing twelve months ended March 31, 2020 with an average tenant allowance of $24.35 per square foot.

### Outlook

As a result of COVID-19 (See "Other Transactions and Events" in Management's Overview and Summary) and subsequent government mandates, all but a few of the Company’s Centers had shuttered, except for the continued operation of essential retail and services, and approximately 74% of the gross leasable area, which was previously occupied prior to the COVID-19 closures, had closed. During the period following the stay-at-home mandates, the Company has continued to employ the appropriate levels of maintenance, cleaning and security protocols to ensure the maximum safety of its tenants, vendors, employees and properties. The Company is now actively planning for the re-opening of its Centers in all facets. Within the past two weeks, the Company has re-opened 13 Centers located in Texas, Colorado, Missouri, Iowa, Indiana and Arizona. By the end of May, the Company anticipates being able to open as permitted approximately 35 Centers. While still uncertain given the myriad of state and local ordinances, at this time, it is reasonable to assume that the vast majority of the Company’s Centers will be open in June. The Company is prepared and ready for re-opening, when permitted to do so.

The Company continues to refine its re-opening plans and guidelines as the COVID-19 outbreak evolves, gathering input and best practices from both international and domestic resources, as well as focusing on the jurisdictional differences in each community and state within which it operates. Those plans are focused on extensive retailer outreach, partnership and support, government compliance, consumer confidence building, promoting mall cleanliness and safety, and developing extensive communication and messaging plans through both digital and on premise mediums catered to all of the Company's local constituents where it does business. The Company anticipates significant near-term changes in operations at its properties as a result of numerous factors, including, among others, the potential for tenants to choose to not re-open, reduced consumer traffic and retail sales, extensive focus on cleanliness and hygiene protocols, requirements for social distancing both within its properties and within its tenant spaces, each of which may impact certain Centers more than others and require extensive coordination with retailers to accommodate new operation strategies, such as curbside pickup.

The Company collected approximately 26% of rents billed for April 2020. As of May 8, 2020, the Company collected approximately 18% of rents billed for May 2020. In addition, a significant portion of the Company’s tenants have requested rental assistance, whether in the form of deferral or rent reduction. There is too much uncertainty to assess the impact of these tenant requests. The majority of the Company’s leases require continued payment of rent by the Company’s tenants during the period of government mandated closures caused by COVID-19. Many of the Company’s leases contain co-tenancy clauses, which provide for reduced rent and/or termination rights if Anchors close and/or occupancy falls below threshold levels. The Company does not expect the temporary closures of department stores or small shop leases during the COVID-19 stay-at-home mandates to trigger co-tenancy clauses within its leases. However, it is possible that certain department stores or small shop closures may become permanent following the re-opening of the Company's properties, and that co-tenancy clauses within leases may be triggered as a result. It is too early to determine the impact of any such clauses, if triggered, given that the Company's properties have not yet re-opened.

During 2020, there have been eleven bankruptcy filings involving the Company’s tenants, totaling 85 leases and involving approximately 524,000 square feet and $19.9 million of annual leasing revenue at the Company’s share. The Company anticipates that there may likely be further bankruptcy filings by tenants at our properties, which could be accelerated as a result of general conditions caused by COVID-19.

While the Company has submitted recovery claims under its insurance coverage due to business interruption from COVID-19, the Company may not be able to collect on these claims given the facts and circumstances regarding the COVID-19 pandemic event.

The Company expects a negative impact to its leasing revenue due to COVID-19, but the impact is not currently estimable.

During this period of disrupted rent collections due to COVID-19, the Company has taken numerous measures to preserve its liquidity, including among others:

- The Company has drawn the majority of the remaining capacity on its $1.5 billion revolving line of credit. As of March 31, 2020, the Company had $735 million of cash, including its pro rata share from its unconsolidated joint ventures. The Company will incur additional interest expense during the period that it continues to carry higher than normal cash balances on its consolidated balance sheet. The period of continued cash retention is uncertain at this time.
- The Company recently announced a reduction to its upcoming quarterly dividend and the use of a stock dividend for at least 80% of that dividend, which if implemented on an annual basis, would allow it to retain approximately $400 million of cash (See Note 14—Stockholders' Equity in the Company's Notes to the Consolidated Financial Statements).
- The Company anticipates spending $60 million in the last three quarters of 2020 on redevelopment, which represents a 60% reduction in previously estimated 2020 redevelopment expenditures for that period of time. This excludes the redevelopment of One Westside, which is fully funded by a non-recourse construction facility.
- The Company has reduced planned capital expenditures at its properties by 65% down to approximately $15 million at the Company’s share in 2020.
- The Company has reduced its controllable shopping center expenses by approximately 45% during the period that its properties are substantially closed, except for essential retail and services.
- The Company continues to work with its mortgage lenders to defer debt service payments during the pandemic, while its facing significantly reduced rent collections from its tenants.

### Comparison of Three Months Ended March 31, 2020 and 2019

#### Revenues:

Leasing revenue decreased by $0.3 million, or 0.1%, from 2019 to 2020. The decrease in leasing revenue is attributed to decreases of $0.2 million from the Redevelopment Properties and $0.1 million from the Same Centers. Leasing revenue includes the amortization of above and below-market leases, the amortization of straight-line rents, lease termination income and the provision for bad debts. The amortization of above and below-market leases decreased from $0.6 million in 2019 to $0.4 million in 2020. Straight-line rents decreased from $2.4 million in 2019 to $2.2 million in 2020. Lease termination income increased from $0.6 million in 2019 to $1.2 million in 2020. Provision for bad debts decreased from $1.8 million in 2019 to $0.9 million in 2020.

Management Companies' revenue decreased from $10.2 million in 2019 to $7.0 million in 2020 due to a decrease in development fees and interest income due to the collection of a loan receivable in 2019.

#### Shopping Center and Operating Expenses:

Shopping center and operating expenses increased $1.1 million, or 1.6%, from 2019 to 2020. The increase in shopping center and operating expenses is attributed to increases of $0.9 million from the Same Centers and $0.2 million from the Redevelopment Properties.

#### Leasing Expenses:

Leasing expenses decreased from $7.5 million in 2019 to $7.4 million in 2020.

#### Management Companies' Operating Expenses:

Management Companies' operating expenses decreased $2.8 million from 2019 to 2020 due to a decrease in compensation expense.

#### REIT General and Administrative Expenses:

REIT general and administrative expenses decreased $0.1 million from 2019 to 2020.

#### Depreciation and Amortization:

Depreciation and amortization increased $0.7 million from 2019 to 2020. The increase in depreciation and amortization is attributed to increases of $0.6 million from the Same Centers and $0.1 million from the Redevelopment Properties.

#### Interest (Income) Expense:

Interest expense decreased $30.3 million from 2019 to 2020. The decrease in interest expense was attributed to a decrease of $33.8 million from the Financing Arrangement (See Note 12—Financing Arrangement in the Company's Notes to the Consolidated Financial Statements), offset in part by increases of $2.1 million from the Same Centers, $1.2 million from the Redevelopment Properties and $0.2 million from borrowings under the Company's line of credit. The decrease in interest expense from the Financing Arrangement is primarily due to the change in fair value of the underlying properties and the mortgage notes payable on the underlying properties.

#### Equity in Income of Unconsolidated Joint Ventures:

Equity in income of unconsolidated joint ventures decreased $2.5 million from 2019 to 2020.

#### Loss on Sale or Write Down of Assets, net:

Loss on sale or write down of assets, net increased $30.4 million from 2019 to 2020. The increase in loss on sale or write down of assets, net is primarily due to the $36.7 million of impairment losses in 2020, offset in part by the $6.9 million in the write down of development costs in 2019. The impairment losses were due to the reduction in the estimated holding periods of Wilton Mall and Paradise Valley Mall.

#### Net Income:

Net income decreased $0.1 million from 2019 to 2020.

#### Funds From Operations ("FFO"):

Primarily as a result of the factors mentioned above, FFO attributable to common stockholders and unit holders—diluted, excluding financing expense in connection with Chandler Freehold increased 0.6% from $121.9 million in 2019 to $122.7 million in 2020. For a reconciliation of net income attributable to the Company, the most directly comparable GAAP financial measure, to FFO attributable to common stockholders and unit holders, excluding financing expense in connection with Chandler Freehold and FFO attributable to common stockholders and unit holders—diluted, excluding financing expense in connection with Chandler Freehold, see "Funds From Operations ("FFO")" below.

#### Operating Activities:

Cash provided by operating activities decreased $49.1 million from 2019 to 2020. The decrease is primarily due to the $31.4 million decrease in other accrued liabilities and to the other changes in assets and liabilities and the results, as discussed above. The decrease in other accrued liabilities is primarily attributed to a decrease in prepaid rent as a result of COVID-19 (See "Other Transactions and Events" in Management's Overview and Summary).

#### Investing Activities:

Cash used in investing activities increased $40.2 million from 2019 to 2020. The increase in cash used in investing activities is primarily attributed to decreases in proceeds from notes receivable of $65.3 million and distributions from unconsolidated joint ventures of $19.7 million offset in part by a decrease in contributions to unconsolidated joint ventures of $29.2 million. The decrease in proceeds from notes receivable is due to the collection of the note receivable from the Lennar Corporation in 2019 (See Note 16—Related Party Transactions in the Company's Notes to the Consolidated Financial Statements).

#### Financing Activities:

Cash provided by financing activities increased $633.4 million from 2019 to 2020. The increase in cash provided by financing activities is primarily due to a decrease in payments on mortgages, bank and other notes payable of $388.7 million and an increase in proceeds from mortgages, bank and other notes payable of $235.0 million. The decrease in payments on mortgages, bank and other notes payable and the increase in proceeds from mortgages, bank and other notes payable are attributed to the Company's plan to increase liquidity in connection with COVID-19 (See "Other Transactions and Events" in Management's Overview and Summary).

### Liquidity and Capital Resources

The Company has historically met its liquidity needs for its operating expenses, debt service and dividend requirements for the next twelve months through cash generated from operations, distributions from unconsolidated joint ventures, working capital reserves and/or borrowings under its line of credit. As a result of the uncertain environment resulting from the COVID-19 pandemic (See "Other Transactions and Events" in Management's Overview and Summary), the Company has taken a number of measures to enhance liquidity. These actions ensure that funds are available to meet the Company's obligations for a sustained period of time as the extent and duration of the pandemic's impact becomes clearer. These measures include (i) reduction of the Company's controllable operating expenses, (ii) reduction of planned capital and development expenditures, (iii) reduction of the cash component of its second quarter dividend, (iv) negotiated deferrals of debt service payments, and (v) deferral of real estate taxes to the extent such relief is available. In addition, the Company recently borrowed $550 million on its line of credit. As of March 31, 2020, the Company has approximately $735 million of cash, including the unconsolidated joint ventures at the Company's pro rata share.

The following tables summarize capital expenditures incurred at the Centers (at the Company's pro rata share):

*(Dollars in thousands)*

| Consolidated Centers: | For the Three Months Ended March 31, 2020 | 2019 |
| --- | ---: | ---: |
| Acquisitions of property, building improvement and equipment | $2,381 | $9,932 |
| Development, redevelopment, expansions and renovations of Centers | 16,112 | 14,414 |
| Tenant allowances | 1,081 | 3,510 |
| Deferred leasing charges | 910 | 1,388 |
|  | $20,484 | $29,244 |
| **Joint Venture Centers:** |  |  |
| Acquisitions of property, building improvement and equipment | $1,844 | $1,225 |
| Development, redevelopment, expansions and renovations of Centers | 29,628 | 47,888 |
| Tenant allowances | 355 | 1,709 |
| Deferred leasing charges | 725 | 911 |
|  | $32,552 | $51,733 |

The Company expects amounts to be incurred during the next twelve months for tenant allowances and deferred leasing charges to be substantially less than 2019. The Company expects to incur approximately $60.0 million during the remaining period of 2020 for development, redevelopment, expansion and renovations. This amount excludes the Company's share of the remaining development cost of One Westside, which is fully funded by a non-recourse construction facility. Capital for these expenditures, developments and/or redevelopments has been, and is expected to continue to be, obtained from a combination of cash on hand, debt or equity financings, which are expected to include borrowings under the Company's line of credit, from property financings and construction loans, each to the extent available.

The Company has also generated liquidity in the past, and may continue to do so in the future, through equity offerings and issuances, property refinancings, joint venture transactions and the sale of non-core assets. Furthermore, the Company has filed a shelf registration statement, which registered an unspecified amount of common stock, preferred stock, depositary shares, debt securities, warrants, rights, stock purchase contracts and units that may be sold from time to time by the Company.

On March 16, 2020, the Company announced a reduction in its second quarter dividend and that the dividend would be payable with an aggregate combination of 20% cash and 80% shares of the Company's common stock. This will allow the Company to comply with the REIT taxable income distribution requirements, while retaining capital. The decision to use a stock dividend will be reviewed by the Board on a quarterly basis. The combination of the dividend reduction and the stock dividend will result in the Company retaining incremental cash in excess of $98 million on a quarterly basis, and approximately $400 million if implemented annually.

The capital and credit markets can fluctuate and, at times, limit access to debt and equity financing for companies. The Company has been able to access capital; however, there is no assurance the Company will be able to do so in future periods or on similar terms and conditions as a result of COVID-19. Many factors impact the Company's ability to access capital, such as its overall debt level, interest rates, interest coverage ratios and prevailing market conditions. Increases in the Company's proportion of floating rate debt, will cause it to be subject to interest rate fluctuations in the future.

The Company's total outstanding loan indebtedness, which includes mortgages and other notes payable, at March 31, 2020 was $8.7 billion (consisting of $5.9 billion of consolidated debt, less $359.2 million of noncontrolling interests, plus $3.2 billion of its pro rata share of unconsolidated joint venture debt). The majority of the Company's debt consists of fixed-rate conventional mortgage notes collateralized by individual properties. The Company expects that all of the maturities during the next twelve months will be refinanced, restructured, extended and/or paid off from the Company's line of credit or cash on hand.

The Company believes that the pro rata debt provides useful information to investors regarding its financial condition because it includes the Company’s share of debt from unconsolidated joint ventures and, for consolidated debt, excludes the Company’s partners’ share from consolidated joint ventures, in each case presented on the same basis. The Company has several significant joint ventures and presenting its pro rata share of debt in this manner can help investors better understand the Company’s financial condition after taking into account the Company's economic interest in these joint ventures. The Company’s pro rata share of debt should not be considered as a substitute for the Company’s total consolidated debt determined in accordance with GAAP or any other GAAP financial measures and should only be considered together with and as a supplement to the Company’s financial information prepared in accordance with GAAP.

The Company has a $1.5 billion revolving line of credit facility that bears interest at LIBOR plus a spread of 1.30% to 1.90%, depending on the Company's overall leverage level, and was to mature on July 6, 2020. On April 8, 2020, the Company exercised its option to extend the maturity of the facility to July 6, 2021. The line of credit can be expanded, depending on certain conditions, up to a total facility of $2.0 billion. All obligations under the facility are unconditionally guaranteed only by the Company. Based on the Company's leverage level as of March 31, 2020, the borrowing rate on the facility was LIBOR plus 1.55%. The Company has four interest rate swap agreements that effectively convert a total of $400.0 million of the outstanding balance from floating rate debt of LIBOR plus 1.55% to fixed rate debt of 4.30% until September 30, 2021. At March 31, 2020, total borrowings under the line of credit were $1.5 billion less unamortized deferred finance costs of $2.0 million with a total interest rate of 3.11%. The Company's availability under the line of credit was $19.7 million at March 31, 2020.

Cash dividends and distributions for the three months ended March 31, 2020 were $114.7 million. A total of $49.7 million was funded by operations. The remaining $65.0 million was funded from cash on hand.

At March 31, 2020, the Company was in compliance with all applicable loan covenants under its agreements.

At March 31, 2020, the Company had cash and cash equivalents of $652.4 million.

#### Off-Balance Sheet Arrangements:

The Company accounts for its investments in joint ventures that it does not have a controlling interest or is not the primary beneficiary using the equity method of accounting and those investments are reflected on the consolidated balance sheets of the Company as investments in unconsolidated joint ventures.

As of March 31, 2020, one of the Company's joint ventures has $149.6 million of debt that could become recourse to the Company, should the joint venture be unable to discharge the obligation of the related debt.

Additionally, as of March 31, 2020, the Company was contingently liable for $40.8 million in letters of credit guaranteeing performance by the Company of certain obligations relating to the Centers. The Company does not believe that these letters of credit will result in a liability to the Company.

#### Contractual Obligations:

The following is a schedule of contractual obligations as of March 31, 2020 for the consolidated Centers over the periods in which they are expected to be paid (in thousands):

| Contractual Obligations | Payment Due by Period Total | Less than 1 year | 1 - 3 years | 3 - 5 years | More than five years |
| --- | ---: | ---: | ---: | ---: | ---: |
| Long-term debt obligations (includes expected interest payments)(1) | $6,888,513 | $908,497 | $2,409,626 | $583,191 | $2,987,199 |
| Lease liabilities(2) | 217,396 | 15,080 | 47,417 | 23,552 | 131,347 |
| Purchase obligations(3) | 7,290 | 7,290 | — | — | — |
| Other long-term liabilities | 187,916 | 115,924 | 28,199 | 13,744 | 30,049 |
|  | $7,301,115 | $1,046,791 | $2,485,242 | $620,487 | $3,148,595 |

(1) Interest payments on floating rate debt were based on rates in effect at March 31, 2020.

(2) See Note 8—Leases in the Company's Notes to the Consolidated Financial Statements.

(3) See Note 15—Commitments and Contingencies in the Company's Notes to the Consolidated Financial Statements.

### Funds From Operations ("FFO")

The Company uses FFO in addition to net income to report its operating and financial results and considers FFO and FFO —diluted as supplemental measures for the real estate industry and a supplement to GAAP measures. The National Association of Real Estate Investment Trusts ("Nareit") defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of properties, plus real estate related depreciation and amortization, impairment write-downs of real estate and write-downs of investments in an affiliate where the write-downs have been driven by a decrease in the value of real estate held by the affiliate and after adjustments for unconsolidated joint ventures. Adjustments for unconsolidated joint ventures are calculated to reflect FFO on the same basis.

Beginning during the first quarter of 2018, the Company revised its definition of FFO so that FFO excluded the impact of the financing expense in connection with Chandler Freehold. Beginning in the third quarter of 2019, the Company now presents a separate non-GAAP measure - FFO excluding financing expense in connection with Chandler Freehold. The Company has revised the FFO presentation for the three months ended March 31, 2019 to conform to the current presentation.

The Company accounts for its joint venture in Chandler Freehold as a financing arrangement. In connection with this treatment, the Company recognizes financing expense on (i) the changes in fair value of the financing arrangement obligation, (ii) any payments to the joint venture partner equal to their pro rata share of net income and (iii) any payments to the joint venture partner less than or in excess of their pro rata share of net income. The Company excludes from its definition of FFO the noted expenses related to the changes in fair value and for the payments to the joint venture partner less than or in excess of their pro rata share of net income.

The Company also presents FFO excluding financing expense in connection with Chandler Freehold and loss on extinguishment of debt, net.

FFO and FFO on a diluted basis are useful to investors in comparing operating and financial results between periods. This is especially true since FFO excludes real estate depreciation and amortization, as the Company believes real estate values fluctuate based on market conditions rather than depreciating in value ratably on a straight-line basis over time. The Company believes that such a presentation also provides investors with a meaningful measure of its operating results in comparison to the operating results of other REITs. In addition, the Company believes that FFO excluding financing expense in connection with Chandler Freehold and non-routine costs associated with extinguishment of debt provide useful supplemental information regarding the Company’s performance as they show a more meaningful and consistent comparison of the Company’s operating performance and allows investors to more easily compare the Company’s results. The Company further believes that FFO on a diluted basis is a measure investors find most useful in measuring the dilutive impact of outstanding convertible securities.

The Company believes that FFO does not represent cash flow from operations as defined by GAAP, should not be considered as an alternative to net income as defined by GAAP, and is not indicative of cash available to fund all cash flow needs. The Company also cautions that FFO, as presented, may not be comparable to similarly titled measures reported by other real estate investment trusts.

### Funds From Operations ("FFO") (Continued)

Management compensates for the limitations of FFO by providing investors with financial statements prepared according to GAAP, along with this detailed discussion of FFO and a reconciliation of net income to FFO and FFO—diluted. Management believes that to further understand the Company's performance, FFO should be compared with the Company's reported net income and considered in addition to cash flows in accordance with GAAP, as presented in the Company's consolidated financial statements.

The following reconciles net income attributable to the Company to FFO and FFO—diluted attributable to common stockholders and unit holders-basic and diluted, excluding financing expense in connection with Chandler Freehold and loss on extinguishment of debt, net, for the three months ended March 31, 2020 and 2019 (dollars and shares in thousands):

|  | For the Three Months Ended March 31, 2020 | 2019 |
| --- | ---: | ---: |
| Net income attributable to the Company | $7,522 | $7,824 |
| Adjustments to reconcile net income attributable to the Company to FFO attributable to common stockholders and unit holders—basic and diluted: |  |  |
| Noncontrolling interests in the Operating Partnership | 557 | 577 |
| Loss on sale or write down of assets, net—consolidated assets | 36,703 | 6,316 |
| Add: gain on sale of undepreciated assets—consolidated assets | — | 534 |
| Loss on sale or write down of assets—unconsolidated joint ventures, net(1) | — | 71 |
| Depreciation and amortization—consolidated assets | 82,213 | 81,468 |
| Less: noncontrolling interests in depreciation and amortization—consolidated assets | (3,789) | (3,645) |
| Depreciation and amortization—unconsolidated joint ventures(1) | 49,509 | 44,998 |
| Less: depreciation on personal property | (4,326) | (3,865) |
| FFO attributable to common stockholders and unit holders—basic and diluted | 168,389 | 134,278 |
| Financing expense in connection with Chandler Freehold | (45,707) | (12,344) |
| FFO attributable to common stockholders and unit holders, excluding financing expense in connection with Chandler Freehold—basic and diluted | 122,682 | 121,934 |
| Loss on extinguishment of debt, net—consolidated assets | — | 351 |
| FFO attributable to common stockholders and unit holders, excluding financing expense in connection with Chandler Freehold and loss on extinguishment of debt, net—basic and diluted | $122,682 | $122,285 |
| Weighted average number of FFO shares outstanding for FFO attributable to common stockholders and unit holders—basic and diluted(2) | 151,915 | 151,677 |

(1) Unconsolidated joint ventures are presented at the Company's pro rata share.

(2) Calculated based upon basic net income as adjusted to reach basic FFO. Includes 10.4 million OP Units for the three months ended March 31, 2020 and 2019, respectively.

The computation of FFO—diluted shares outstanding includes the effect of share and unit-based compensation plans using the treasury stock method. It also assumes the conversion of MACWH, LP common and preferred units to the extent that they are dilutive to the FFO—diluted computation.

## Market risk

As filed, 5,519 characters.

The Company's primary market risk exposure is interest rate risk. The Company has managed and will continue to manage interest rate risk by (1) maintaining a ratio of fixed rate, long-term debt to total debt such that floating rate exposure is kept at an acceptable level, (2) reducing interest rate exposure on certain long-term floating rate debt through the use of interest rate caps and/or swaps with matching maturities where appropriate, (3) using treasury rate locks where appropriate to fix rates on anticipated debt transactions, and (4) taking advantage of favorable market conditions for long-term debt and/or equity.

The following table sets forth information as of March 31, 2020 concerning the Company's long-term debt obligations, including principal cash flows by scheduled maturity, weighted average interest rates and estimated fair value (dollars in thousands):

| CONSOLIDATED CENTERS: Long-term debt: | Expected Maturity Date For the twelve months ending March 31, 2021 | 2022 | 2023 | 2024 | 2025 | Thereafter | Total | Fair Value |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Fixed rate | $591,413 | $477,471 | $311,881 | $6,933 | $378,205 | $2,603,289 | $4,369,192 | $4,425,896 |
| Average interest rate | 4.56% | 4.27% | 4.07% | 3.49% | 4.05% | 3.79% | 3.99% |  |
| Floating rate | 130,000 | 1,080,000 | 300,000 | — | — | — | 1,510,000 | 1,522,496 |
| Average interest rate | 3.73% | 2.52% | 2.05% | —% | —% | —% | 2.53% |  |
| Total debt—Consolidated Centers | $721,413 | $1,557,471 | $611,881 | $6,933 | $378,205 | $2,603,289 | $5,879,192 | $5,948,392 |
| **UNCONSOLIDATED JOINT VENTURE CENTERS:** |  |  |  |  |  |  |  |  |
| Long-term debt (at Company's pro rata share): |  |  |  |  |  |  |  |  |
| Fixed rate | $149,723 | $43,002 | $366,514 | $688,786 | $33,845 | $1,747,977 | $3,029,847 | $3,066,899 |
| Average interest rate | 3.81% | 3.70% | 3.67% | 3.74% | 3.84% | 3.88% | 3.81% |  |
| Floating rate | — | 36,183 | 150,500 | 9,400 | — | — | 196,083 | 202,799 |
| Average interest rate | —% | 3.58% | 3.58% | 3.50% | —% | —% | 3.58% |  |
| Total debt—Unconsolidated Joint Venture Centers | $149,723 | $79,185 | $517,014 | $698,186 | $33,845 | $1,747,977 | $3,225,930 | $3,269,698 |

The consolidated Centers' total fixed rate debt at March 31, 2020 and December 31, 2019 was $4.4 billion. The average interest rate on the fixed rate debt at March 31, 2020 and December 31, 2019 was 3.99%. The consolidated Centers' total floating rate debt at March 31, 2020 and December 31, 2019 was $1.5 billion and $850.0 million, respectively. The average interest rate on the floating rate debt at March 31, 2020 and December 31, 2019 was 2.53% and 3.36%, respectively.

The Company's pro rata share of the unconsolidated joint venture Centers' fixed rate debt at March 31, 2020 and December 31, 2019 was $3.0 billion. The average interest rate on the fixed rate debt at March 31, 2020 and December 31, 2019 was 3.81%. The Company's pro rata share of the unconsolidated joint venture Centers' floating rate debt at March 31, 2020 and December 31, 2019 was $196.1 million. The average interest rate on the floating rate debt at March 31, 2020 and December 31, 2019 was 3.58% and 3.69%, respectively.

The Company uses derivative financial instruments in the normal course of business to manage or hedge interest rate risk and records all derivatives on the balance sheet at fair value. Interest rate cap agreements offer protection against floating rates on the notional amount from exceeding the rates noted in the above schedule, and interest rate swap agreements effectively replace a floating rate on the notional amount with a fixed rate as noted above. As of March 31, 2020, the Company has one interest rate cap agreement and four interest rate swap agreements in place (See Note 5—Derivative Instruments and Hedging Activities in the Company's Notes to the Consolidated Financial Statements).

In addition, the Company has assessed the market risk for its floating rate debt and believes that a 1% increase in interest rates would decrease future earnings and cash flows by approximately $17.1 million per year based on $1.7 billion of floating rate debt outstanding at March 31, 2020.

The fair value of the Company's long-term debt is estimated based on a present value model utilizing interest rates that reflect the risks associated with long-term debt of similar risk and duration. In addition, the method of computing fair value for mortgage notes payable included a credit value adjustment based on the estimated value of the property that serves as collateral for the underlying debt (See Note 10—Mortgage Notes Payable and Note 11—Bank and Other Notes Payable in the Company's Notes to the Consolidated Financial Statements).

In the event that LIBOR is discontinued, the interest rate for the variable rate debt of the Company and its joint ventures and the swap rate for the Company’s interest rate swaps following such event will be based on an alternative variable rate as specified in the applicable documentation governing such debt or swaps or as otherwise agreed upon. Such an event would not affect the Company’s ability to borrow or maintain already outstanding borrowings or swaps, but the alternative variable rate could be higher and more volatile than LIBOR prior to its discontinuance. The Company understands that LIBOR is expected to remain available through the end of 2021, but may be discontinued or otherwise become unavailable thereafter.

## Controls and procedures

As filed, 1,585 characters.

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, management carried out an evaluation, under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on their evaluation as of March 31, 2020, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is (a) recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms and (b) accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

In addition, there has been no change in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15(d)-15(f) under the Securities Exchange Act of 1934) that occurred during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

## Risk factors

As filed, 7,023 characters.

The following risk factor supplements the risk factors described under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, and should be read in conjunction with the other risk factors presented in the Annual Report on Form 10-K.

**The outbreak of the novel coronavirus ("COVID-19") has caused, and could continue to cause, severe disruptions in the U.S., regional and global economies and has impacted, and could continue to materially and adversely impact, our financial condition and results of operations and the financial condition and results of operations of our tenants.**

In March 2020, the World Health Organization declared COVID-19 a global pandemic. COVID-19 has caused, and could continue to cause, significant disruptions to the United States and global economy and has contributed to significant volatility and negative pressure in financial markets. The global impact of the outbreak is continually evolving and, as additional cases of the virus are identified, many countries, including the United States, have reacted by instituting quarantines, restrictions on travel and/or mandatory closures of businesses. Certain states and cities, including where the Centers are located, have also reacted by instituting quarantines, restrictions on travel, “stay-at-home” rules, restrictions on types of business that may continue to operate, and/or restrictions on the types of construction projects that may continue.

The extent to which COVID-19 impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of such pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. The rapid development and fluidity of this situation precludes any prediction as to the full adverse impact of COVID-19. Nevertheless, COVID-19 has, and may continue to, adversely affect our business, financial condition and results of operations, and it may also have the effect of heightening many of the risks described in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2019, including:

- a complete or partial closure of, or other operational issues at, one or more of our Centers resulting from government or tenant action, which has adversely affected, and is expected to continue to adversely effect, our operations and those of our tenants;
- reduced economic activity impacting the businesses, financial condition and liquidity of our tenants, which could cause one or more of our tenants, including one or more of our Anchors, or one or more of our joint venture partners, to be unable to meet their obligations to us in full, or at all, to otherwise seek modifications of such obligations or to declare bankruptcy;
- decreased levels of consumer spending and consumer confidence during the pandemic, as well as a decrease in individuals’ willingness to frequent our Centers once re-opened as a result of the public health risks and social impacts of such outbreak, which could affect the ability of the Centers to generate sufficient revenues to meet operating and other expenses in the short-term and accelerate a shift to online retail shopping, which, if sustained could result in prolonged decreases in revenue at the Centers even after the immediate impact of the pandemic is resolved;
- inability to renew leases, lease vacant space or re-let space as leases expire on favorable terms, or at all; which could cause interruptions or delays in the receipt of rental payments;
- a potential closure of one or more Anchors at one or more of our properties, which could trigger co-tenancy lease clauses within one or more of our leases at such properties and lead to a decline in revenue and occupancy;
- state, local or industry-initiated efforts, such as a rent freeze for tenants or a suspension of a landlord’s ability to enforce evictions, which may affect our ability to collect rent or enforce remedies for the failure to pay rent;
- severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions, which could make it difficult for us to access debt and equity capital on attractive terms, or at all, and impact our ability to fund business activities and repay debt on a timely basis;
- disruptions in the supply of materials or products or the inability of contractors to perform on a timely basis or at all, which could increase the costs of construction of new or existing projects and cause delays in completing ongoing or future construction, development or re-development projects;
- a potential negative impact on our financial results could adversely impact our compliance with the financial covenants within our credit facility and other debt agreements or cause a failure to meet certain of these financial covenants, which could cause an event of default, which, if not cured or waived, could accelerate some or all of such indebtedness and could have a material adverse effect on us;
- the potential that we may further reduce our dividend and/or continue to pay dividends at least partially in our stock instead of in cash, in which case stockholders may be required to pay U.S. federal income taxes in excess of the cash dividends they receive;
- a potential decline in asset values at one or more of our properties encumbered by mortgage debt, which could inhibit our ability to successfully refinance one or more such properties, result in a default under the applicable mortgage debt agreement and potentially cause the acceleration of such indebtedness;
- a general decline in business activity and demand for real estate transactions, which could adversely affect our ability or desire to make strategic acquisitions or dispositions;
- the potential negative impact on the health of our personnel, particularly if a significant number of our executive management team or key employees are impacted, which could result in a deterioration in our ability to ensure business continuity during a disruption;
- uncertainty as to what conditions must be satisfied before government authorities lift “stay-at-home” orders and public health officials begin the process of gradually allowing non-essential businesses to resume operations and whether government authorities will impose (or suggest) requirements on landlords, such as us, to protect the health and safety

of tenants and customers to our properties, which could result in increased operating costs and demands on our property management teams to ensure compliance with any such requirements; and

- the limited access to our facilities, management, tenants, support staff and professional advisors, which could hamper our ability to comply with regulatory obligations and prevent us from conducting our business as efficiently and effectively as we otherwise would.

Filed May 11, 2020.
Source: SEC EDGAR, the filing index for accession 0000912242-20-000007. Last ingested by Listed: Nov 5, 2026, 12:24 ET. No prices; not investment advice.