PHIS EDIS The following discussion and analysis should be read in conjunction with our accompanying consolidated financial statements and notes thereto. All references to "Notes" throughout this document refer to the footnotes to the consolidated financial statements in "Part I, Item 1. Financial Information". See also "Cautionary Note Regarding Forward-Looking Statements" below. Cautionary Note Regarding Forward-Looking Statements Certain statements contained in this Quarterly Report on Form 10-Q (this "Report") ofPhillips Edison & Company, Inc. ("we," the "Company," "our," or "us") other than historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Private Securities Litigation Reform Act of 1995 (collectively with the Securities Act and the Exchange Act, the "Acts"). We intend for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in the Acts. Such forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "can," "expect," "intend," "anticipate," "estimate," "believe," "continue," "possible," "initiatives," "focus," "seek," "objective," "goal," "strategy," "plan," "potential," "potentially," "preparing," "projected," "future," "long-term," "once," "should," "could," "would," "might," "uncertainty," or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this report is filed with theSEC . Such statements include, but are not limited to, (a) statements about our focus, plans, strategies, initiatives, and prospects; (b) statements about the COVID-19 pandemic, including its duration and potential or expected impact on our tenants, our business, and our estimated value per share; (c) statements about our distributions, share repurchase program, and dividend reinvestment program; (d) statements about our underwritten incremental yields; and (e) statements about our future results of operations, capital expenditures, and liquidity (including any potential listing). Such statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those projected or anticipated, including, without limitation: (i) changes in national, regional, or local economic climates; (ii) local market conditions, including an oversupply of space in, or a reduction in demand for, properties similar to those in our portfolio; (iii) vacancies, changes in market rental rates, and the need to periodically repair, renovate, and re-let space; (iv) changes in interest rates and the availability of permanent mortgage financing; (v) competition from other available properties and the attractiveness of properties in our portfolio to our tenants; (vi) the financial stability of tenants, including the ability of tenants to pay rent; (vii) changes in tax, real estate, environmental, and zoning laws; (viii) the concentration of our portfolio in a limited number of industries, geographies, or investments; (ix) the effects of the COVID-19 pandemic, including on the demand for consumer goods and services and levels of consumer confidence in the safety of visiting shopping centers as a result of the COVID-19 pandemic; (x) the measures taken by federal, state, and local government agencies and tenants in response to the COVID-19 pandemic, including mandatory business shutdowns, "stay-at-home" orders and social distancing guidelines; (xi) the impact of the COVID-19 pandemic on our tenants and their ability to pay rent on time or at all, or to renew their leases and, in the case of non-renewal, our ability to re-lease the space at the same or more favorable terms or at all; (xii) the length and severity of the COVID-19 pandemic inthe United States ; (xiii) the pace of recovery following the COVID-19 pandemic given the current severe economic contraction and increase in unemployment rates; (xiv) our ability to implement cost containment strategies; (xv) our and our tenants' ability to obtain loans under government programs; (xvi) our ability to pay down, refinance, restructure, or extend our indebtedness as it becomes due; (xvii) to the extent we were seeking to dispose of properties in the near term, significantly greater uncertainty regarding our ability to do so at attractive prices or at all; (xviii) the impact of the COVID-19 pandemic on our business, results of operations, financial condition, and liquidity; and (xix) supply chain disruptions due to the COVID-19 pandemic. Additional important factors that could cause actual results to differ are described in the filings made from time to time by the Company with theSEC and include the risk factors and other risks and uncertainties described in our 2020 Annual Report on Form 10-K, filed with theSEC onMarch 12, 2021 , and those included in this Report, in each case as updated from time to time in our periodic and/or current reports filed with theSEC , which are accessible on theSEC's website at www.sec.gov. Except as required by law, we do not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. Key Performance Indicators and Defined Terms We use certain key performance indicators ("KPIs"), which include both financial and nonfinancial metrics, to measure the performance of our operations. We believe these KPIs, as well as the core concepts and terms defined below, allow our Board, management, and investors to analyze trends around our business strategy, financial condition, and results of operations in a manner that is focused on items unique to the real estate industry. We do not consider our non-GAAP measures included as KPIs to be alternatives to measures calculated in accordance with GAAP. Certain non-GAAP measures should not be viewed as an alternative measure of our financial performance as they may not reflect the operations of our entire portfolio, and they may not reflect the impact of general and administrative expenses, depreciation and amortization, interest expense, other income (expense), or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties that could materially impact our results from operations. Additionally, certain non-GAAP measures should not be considered as an indication of our liquidity, nor as an indication of funds available to cover our cash needs, including our ability to fund distributions, and may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate our business in the manner currently contemplated. Accordingly, non-GAAP measures should be reviewed in connection with other GAAP measurements, and should not be viewed as more prominent measures of performance than net income (loss) or cash flows from operations prepared in 17 -------------------------------------------------------------------------------- accordance with GAAP. Other REITs may use different methodologies for calculating similar non-GAAP measures, and accordingly, our non-GAAP measures may not be comparable to other REITs. Our KPIs and terminology can be grouped into three key areas: Portfolio-Portfolio metrics help management to gauge the health of our centers overall and individually. •Anchor space-We define an anchor space as a space greater than or equal to 10,000 square feet of gross leasable area ("GLA"). •ABR-We use ABR to refer to the monthly contractual base rent as ofMarch 31, 2021 , multiplied by twelve months. •ABR per Square Foot ("PSF")-This metric is calculated by dividing ABR by leased GLA. Increases in ABR PSF can be an indication of our ability to create rental rate growth in our centers, as well as an indication of demand for our spaces, which generally provides us with greater leverage during lease negotiations. •Inline space-We define an inline space as a space containing less than 10,000 square feet of GLA. •GLA-We use GLA to refer to the total occupied and unoccupied square footage of a building that is available for tenants (whom we refer to as a "Neighbor" or our "Neighbors") to lease. •Leased Occupancy-This metric is calculated as the percentage of total GLA for which a lease has been signed regardless of whether the lease has commenced or the Neighbor has taken possession. High occupancy is an indicator of demand for our spaces, which generally provides us with greater leverage during lease negotiations. •Underwritten incremental yield-This reflects the yield we target to generate from a project upon expected stabilization and is calculated as the estimated incremental NOI for a project at stabilization divided by its estimated net project investment. The estimated incremental NOI is the difference between the estimated annualized NOI we target to generate by project upon stabilization and the estimated annualized NOI without the planned improvements. Underwritten incremental yield does not include peripheral impacts, such as lease rollover risk or the impact on the long term value of the property upon sale or disposition. Actual incremental yields may vary from our underwritten incremental yield range based on the actual total cost to complete a project and its actual incremental NOI at stabilization.Leasing-Leasing is a key driver of growth for our company. •Comparable lease-We use this term to refer to a lease with consistent structure that is executed for the exact same space that has been vacant less than twelve months. •Comparable rent spread-This metric is calculated as being the percentage increase or decrease in first-year ABR (excluding any free rent or escalations) on new or renewal leases (excluding options) where the lease was considered a comparable lease. This metric provides an indication of our ability to generate revenue growth through leasing activity. •Cost of executing new leases-We use this term to refer to certain costs associated with new leasing, namely, leasing commissions, tenant improvement costs, and tenant concessions. •Portfolio retention rate-This metric is calculated by dividing (a) total square feet of retained Neighbors with current period lease expirations by (b) the square feet of leases expiring during the period. The portfolio retention rate provides insight into our ability to retain Neighbors at our shopping centers as their leases approach expiration. Generally, the costs to retain an existing Neighbor are lower than costs to replace with a new Neighbor. •Recovery rate-This metric is calculated by dividing (a) total recovery income by (b) total recoverable expenses during the period. A high recovery rate is an indicator of our ability to recover certain property operating expenses and capital costs from our Neighbors. Financial Performance-In addition to financial metrics calculated in accordance with GAAP, such as net income or cash flows from operations, we utilize non-GAAP metrics to measure our operational and financial performance. See the section within this Item 2 titled Management's Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Measures for further discussion on the following metrics. •Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization for Real Estate ("Adjusted EBITDAre")-To arrive at Adjusted EBITDAre, we adjust EBITDAre, as defined below, to exclude certain recurring and non-recurring items including, but not limited to: (i) changes in the fair value of the earn-out liability; (ii) other impairment charges; (iii) amortization of basis differences in our investments in our unconsolidated joint ventures; and (iv) transaction and acquisition expenses. We use EBITDAre and Adjusted EBITDAre as additional measures of operating performance which allow us to compare earnings independent of capital structure and evaluate debt leverage and fixed cost coverage. •Core Funds From Operations ("Core FFO")-To arrive at Core FFO, we adjust FFO attributable to stockholders and OP unit holders, as defined below, to exclude certain recurring and non-recurring items including, but not limited to: (i) depreciation and amortization of corporate assets; (ii) changes in the fair value of the earn-out liability; (iii) amortization of unconsolidated joint venture basis differences; (iv) gains or losses on the extinguishment or modification of debt, (v) other impairment charges; and (vi) transaction and acquisition expenses. We believe FFO provides insight into our operating performance as it excludes certain items that are not indicative of such performance. Core FFO provides further insight into the sustainability of our operating performance and provides an additional measure to compare our performance across reporting periods on a consistent basis by excluding items that may cause short-term fluctuations in net income (loss). 18 -------------------------------------------------------------------------------- •EBITDAre-The National Association of Real Estate Investment Trusts ("Nareit") defines EBITDAre as net income (loss) computed in accordance with GAAP before: (i) interest expense; (ii) income tax expense; (iii) depreciation and amortization; (iv) gains or losses from disposition of depreciable property; and (v) impairment write-downs of depreciable property. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect EBITDAre on the same basis. •FFO-Nareit defines FFO as net income (loss) computed in accordance with GAAP, excluding: (i) gains (or losses) from sales of property and gains (or losses) from change in control; (ii) depreciation and amortization related to real estate; (iii) impairment losses on real estate and impairments of in-substance real estate investments in investees that are driven by measurable decreases in the fair value of the depreciable real estate held by the unconsolidated partnerships and joint ventures; and (iv) adjustments for unconsolidated partnerships and joint ventures, calculated to reflect FFO on the same basis. We calculate FFO Attributable to Stockholders and OP Unit Holders in a manner consistent with the Nareit definition. •Net Debt to Adjusted EBITDAre-This ratio is calculated by dividing net debt by Adjusted EBITDAre (included on an annualized basis within the calculation). It provides insight into our leverage rate based on earnings and is not impacted by fluctuations in our equity price. •Net Debt to Total Enterprise Value-This ratio is calculated by dividing net debt by total enterprise value. It provides insight into our capital structure and usage of debt. •NOI-We calculate NOI as total operating revenues, adjusted to exclude non-cash revenue items, less property operating expenses and real estate taxes. NOI provides insight about our financial and operating performance because it provides a performance measure of the revenues and expenses directly involved in owning and operating real estate assets and provides a perspective not immediately apparent from net income (loss). •Same-Center-We use this term to refer to a property, or portfolio of properties, that have been owned and operational for the entirety of each reporting period (i.e., sinceJanuary 1, 2020 ).
Overview
We are an internally-managed REIT and one of the nation's largest owners and operators of grocery-anchored neighborhood shopping centers. The majority of our revenue is lease revenue derived from our real estate investments. Additionally, we operate an investment management business providing property management and advisory services to over$460 million of third-party institutional joint ventures. This business provides comprehensive real estate and asset management services to the Managed Funds. As ofMarch 31, 2021 , we wholly-owned 278 real estate properties. Additionally, we owned a 20% interest in NRP, a joint venture that owned two properties, and a 14% interest in GRP I, a joint venture that owned 20 properties. Liquidity Alternative Review Process-OnMarch 25, 2021 , our Board announced that we are reviewing alternatives in order to provide liquidity to our shareholders. In connection with the review process, the DRIP has been suspended, beginning with the distribution payableApril 1, 2021 . Additionally, the Fourth Amended SRP, which is currently limited to repurchases resulting from stockholder DDI, has been suspended. The SRP for both standard and DDI requests will remain suspended until further notice. COVID-19 Strategy-During 2020, as a result of the COVID-19 pandemic, many state governments issued "stay-at-home" mandates that generally limited travel and movement of the general public to essential activities only and required all non-essential businesses to close. In response to the pandemic, we enacted several initiatives including: (1) the implementation of expense reduction initiatives at the property and corporate levels, including reductions to our workforce and travel costs; (2) the reprioritization of our capital investments to support the reopening of our Neighbors and new leasing activity, or deferment of such capital expenditures if possible; (3) temporary reductions in compensation for certain of our executives and our Board; and (4) the temporary suspension of dividends, the DRIP, and the SRP. At the peak of the pandemic-related closure activity, temporary closures reached 37% of all Neighbor spaces, totaling 27% of our ABR and 22% of our GLA. All temporarily closed Neighbors have since been permitted to reopen; however, a portion of our Neighbors have permanently closed, and we are working to backfill these spaces. We continue to closely monitor the occupancy, operating performance, and Neighbor sales results at our centers, including any Neighbors operating with reduced hours or under government-imposed restrictions. Our management team has determined the following are the key actions for recovery in our portfolio (all statistics are approximate and include the prorated portion attributable to properties owned through our joint ventures): •Returning to Monthly Payments-We continue to work with our Neighbors to resume normal monthly rent payments, and our efforts have included raising awareness of the benefits available through numerous governmental relief programs. We have seen our collections continue to improve from the second quarter of 2020. The following table 19 --------------------------------------------------------------------------------
summarizes our collections by quarter, as they were originally reported as well as updated for payments received subsequent to the month billed:
Originally Reported Current(1)
Q2 2020 86 % 93 %
Q3 2020 94 % 96 %
Q4 2020 95 % 96 %
Q1 2021 N/A 95 %
(1)Including collections received through April 20, 2021 .
As of April 20, 2021 , approximately 79% of our Neighbor spaces are paying their
rent in full.
•Recovering Missed Rent Charges-We believe substantially all Neighbors,
including those that were required to temporarily close under governmental
mandates, are contractually obligated to continue with their rent payments as
documented in our lease agreements with them. However, we may negotiate relief
for our Neighbors in the form of rent deferrals or abatements. As of April 20,
2021 , we have $5.4 million of outstanding payment plans with our Neighbors, and
we had recorded rent abatements of approximately $4.4 million during 2021. These
payment plans and rent abatements represented 1.4% and 1.1% of portfolio ABR,
respectively, and the weighted-average term over which we expect to receive
remaining amounts owed on executed payment plans is approximately 13 months.
We are still actively pursuing past due amounts under the terms negotiated with
our Neighbors. For our entire portfolio, inclusive of our prorated share of
properties owned through joint ventures, 43% of missed monthly charges billed
during the first quarter of 2021 have been collected subsequent to the month
billed and 5% have been waived, as of April 20, 2021 . We will continue to work
with Neighbors on establishing plans to repay past due amounts, and will monitor
the impact of such payment plans on our results of operations in future
quarters. We cannot guarantee that we will ultimately be able to collect these
amounts.
•Monitoring for Credit Risk-The COVID-19 pandemic and resulting economic
downturn has increased the uncertainty of collecting rents from a number of our
Neighbors. We have been closely monitoring the status of our Neighbors to
identify those who potentially pose a credit risk in order to appropriately
account for the impact to revenue and in order to quickly take action when a
Neighbor is ultimately unable to remain in a space.
For Neighbors with a higher degree of uncertainty as to their creditworthiness,
we may not record revenue for amounts billed until the cash is received. Based
on our analysis, no individual Neighbor category has been accounted for entirely
on a cash basis as of March 31, 2021 ; however, we continue to evaluate each
Neighbor individually to determine if they should be accounted for on a cash
basis. For the three months ended March 31, 2021 and 2020, inclusive of the
prorated portion attributable to properties owned through our joint ventures, we
had $4.9 million and $2.9 million , respectively, in unfavorable monthly revenue
adjustments for Neighbors who are being accounted for on a cash basis. As of
March 31, 2021 , our Neighbors currently being accounted for on a cash basis
represented approximately 10% of our total Neighbor spaces, which represented
8.4% of portfolio ABR. Further, many of our Neighbors who are on a cash basis of
accounting are actively making payments toward their outstanding balances. When
considering the ABR associated with Neighbors who are currently on a cash basis
of accounting, 56% of this ABR is represented by Neighbors who are actively
making payments.
Additionally, certain of our Neighbors have entered into bankruptcy proceedings.
While some of these cases have already been resolved, with the assumption or
rejection of the lease already reflected in our results, in some cases these
claims have yet to be resolved, and as such, the potential fallout is not yet
reflected in our occupancy rate or ABR metrics. We believe that Neighbors in the
bankruptcy process represent an exposure of approximately 1% of our total
portfolio ABR as of March 31, 2021 . We have included our assessment of the
impact of these bankruptcies in our estimate of rent collectibility, which
impacted recorded revenue, as noted previously.
Certain of our Neighbors have been unable to remain in their spaces as a result
of the factors previously noted. Despite this fallout, our leasing activity has
been strong as demand for space in our centers remains high, allowing us to
re-lease these spaces to Neighbors who may increase our concentration of
necessity-based and omni-channel retailers. For the three months ended March 31,
2021 , our portfolio retention rate was 88.8%, and we executed 153 new leases, an
increase as compared to the same period a year ago.
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Portfolio and Leasing Statistics-Below are statistical highlights of our
wholly-owned portfolio as of March 31, 2021 and 2020 (dollars and square feet in
thousands):
March 31, 2021 March 31, 2020
Number of properties 278 285
Number of states 31 31
Total square feet 31,306 31,862
ABR $ 386,971 $ 385,457
% ABR from grocery-anchored properties 96.4 % 97.0 %
Leased % of rentable square feet:
Total portfolio spaces 94.8 % 95.6 %
Anchor spaces 97.3 % 98.3 %
Inline spaces 89.8 % 90.1 %
Average remaining lease term (in years)(1) 4.6 4.6
(1)The average remaining lease term in years excludes future options to extend the term of the lease.
The following table details information for our joint ventures as ofMarch 31, 2021 , which is the basis for determining the prorated information included in the subsequent tables (dollars and square feet in thousands): March 31, 2021 Ownership Joint Venture Percentage Number of Properties ABR GLA Necessity Retail Partners 20% 2$ 3,845 228 Grocery Retail Partners I 14% 20 28,735 2,215 21
-------------------------------------------------------------------------------- Lease Expirations-The following chart shows the aggregate scheduled lease expirations, excluding our Neighbors who are occupying space on a temporary basis, afterMarch 31, 2021 for each of the next ten years and thereafter for our wholly-owned properties and the prorated portion of those owned through our joint ventures: [[Image Removed: cik0001476204-20210331_g2.jpg]] Our ability to create rental rate growth generally depends on our leverage during new and renewal lease negotiations with prospective and existing Neighbors, which typically occurs when occupancy at our centers is high or during periods of economic growth and recovery. Conversely, we may experience rental rate decline when occupancy at our centers is low or during periods of economic recession, as the leverage during new and renewal lease negotiations may shift to prospective and existing Neighbors. See "Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Leasing Activity" of this filing on Form 10-Q for further discussion of leasing activity. 22 -------------------------------------------------------------------------------- Portfolio Tenancy-We define national Neighbors as those Neighbors that operate in at least three states. Regional Neighbors are defined as those Neighbors that have at least three locations in fewer than three states. The following charts present the composition of our portfolio, including our wholly-owned properties and the prorated portion of those owned through our joint ventures, by Neighbor type as ofMarch 31, 2021 : [[Image Removed: cik0001476204-20210331_g3.jpg]][[Image Removed: cik0001476204-20210331_g4.jpg]]
The following charts present the composition of our portfolio by Neighbor
industry as of
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We define "Necessity-based goods and services" as goods and services that are
indispensable, necessary, or common for day-to-day living, or that tend to be
inelastic (i.e., the demand for which does not change based on a consumer's
income level). We estimate that approximately 73% of our ABR, including the pro
rata portion attributable to properties owned through our joint ventures, is
from Neighbors providing necessity-based goods and services. Additionally,
within these categories, we estimate that approximately 51% of our ABR is from
retail and service businesses generally deemed essential under most state and
local mandates issued in response to the COVID-19 pandemic. The composition of
our portfolio as a percentage of ABR is as follows:
March 31, 2021
Essential/Necessity retail and services:
Grocery 35.5 %
Medical/pharmacy 2.8 %
Banks 2.5 %
Dollar stores 2.3 %
Pet supply 2.1 %
Hardware/automotive 1.7 %
Wine, beer, and liquor 1.4 %
Other essential 2.7 %
Total Essential/Necessity-based retail and services(1) 51.0 %
Other Necessity:
Quick service - restaurant 9.6 %
Beauty and hair care 4.9 %
Health care services 3.8 %
Other necessity 3.3 %
Total ABR from other Necessity 21.6 %
Total ABR from Necessity-based goods and services 72.6 %
Other retail stores:
Soft goods 12.2 %
Full service - restaurant 6.3 %
Fitness and lifestyle services 5.2 %
Other retail 3.7 %
Total ABR from other retail and services 27.4 %
Total ABR 100.0 %
(1)Includes Neighbors that we believe are considered to be essential retail and
service businesses but that may have temporarily closed at various points during
the COVID-19 pandemic due to decreases in foot traffic and customer patronage as
a result of "stay-at-home" mandates and social distancing guidelines implemented
in response to the pandemic.
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The following table presents our top twenty Neighbors by ABR, including our
wholly-owned properties and the prorated portion of those owned through our
joint ventures, as of March 31, 2021 (dollars and square feet in thousands):
% of Leased
Neighbor(1) ABR % of ABR Leased Square Feet Square Feet Number of Locations(2)
Kroger $ 26,032 6.6 % 3,296 11.0 % 60
Publix 22,003 5.6 % 2,240 7.5 % 56
Ahold Delhaize 17,274 4.4 % 1,240 4.1 % 23
Albertsons-Safeway 16,897 4.3 % 1,624 5.4 % 30
Walmart 8,933 2.3 % 1,770 5.9 % 13
Giant Eagle 7,293 1.9 % 738 2.5 % 11
TJX Companies 5,061 1.3 % 428 1.4 % 15
Sprouts Farmers Market 4,952 1.3 % 334 1.1 % 11
Dollar Tree 3,954 1.0 % 406 1.4 % 42
Raley's 3,884 1.0 % 253 0.8 % 4
SUPERVALU 3,209 0.8 % 336 1.1 % 5
Subway Group 2,829 0.7 % 115 0.4 % 82
Schnucks 2,785 0.7 % 329 1.1 % 5
Anytime Fitness, Inc. 2,662 0.7 % 177 0.6 % 36
Save Mart 2,618 0.7 % 309 1.0 % 6
Southeastern Grocers 2,513 0.6 % 281 0.9 % 7
Lowe's 2,469 0.6 % 369 1.2 % 4
Kohl's Corporation 2,281 0.6 % 365 1.2 % 4
Food 4 Less (PAQ) 2,215 0.6 % 119 0.4 % 2
Petco Animal Supplies, Inc. 2,118 0.5 % 127 0.4 % 11
Total $ 141,982 36.2 % 14,856 49.4 % 427
(1)Neighbors are grouped by parent company and may represent multiple
subsidiaries and banners.
(2)Number of locations excludes auxiliary leases with grocery anchors such as
fuel stations, pharmacies, and liquor stores. Additionally, in the event that a
parent company has multiple subsidiaries or banners in a single shopping center,
those subsidiaries are included as one location.
Results of Operations
Known Trends and Uncertainties of the COVID-19 Pandemic
The COVID-19 pandemic has resulted in reduced revenues beginning with the second
quarter of 2020 and continuing through the first quarter of 2021, and our
estimates around collectibility will likely continue to create volatility in our
earnings. The total impact on revenue in the future cannot be determined at this
time. The duration of the pandemic and mitigating measures, and the resulting
economic impact, has caused some of our Neighbors to permanently vacate their
spaces and/or not renew their leases, and we may have difficulty leasing these
spaces on the same or better terms or at all, and/or incur additional costs to
lease vacant spaces, which may reduce our occupancy rates in the future and
ultimately reduce our revenue. Extended periods of vacancy or reduced revenues
may trigger impairments of our real estate assets. Additionally, these factors
have impacted disposition activity by decreasing demand and negatively impacting
capitalization rates.
The magnitude and duration of the COVID-19 pandemic and its impact on our
results of operations in the near term and potentially beyond are uncertain as a
result of a number of factors outside of our control. These factors include, but
are not limited to: overall economic conditions on both a macro and micro level,
including consumer demand as well as retailer demand for space within our
shopping centers; the impact of social distancing guidelines, recommendations
from governmental authorities, and consumer shopping preferences; the nature and
effectiveness of any economic stimulus or relief measures; the timing of
availability and distribution of vaccines to the general public and the
resulting vaccination rates; and the impact of all of the factors above,
including other potentially unknown factors, on our Neighbors' ability to
continue paying rent and related charges on time or at all and Neighbors'
willingness to renew their leases on the same terms or at all. The impact of
these factors, some of which have already been realized, could include reduced
revenue from Neighbor concessions, increased collectibility reserves, decreased
recovery rates on expenses, and other unforeseen impacts that may arise in the
course of operating during these circumstances. See "Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Overview" for our observation of Neighbor impacts through April 20, 2021 .
We believe that our investment focus on grocery-anchored shopping centers that
provide daily necessities has helped and will continue to help lessen the
negative effect of the pandemic on our business compared to non-grocery anchored
shopping centers.
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Summary of Operating Activities for the Three Months Ended March 31, 2021 and
2020
Three Months Ended Favorable (Unfavorable)
March 31, Change
(Dollars in thousands) 2021 2020 $ %
Revenues:
Rental income $ 127,623 $ 128,466 $ (843) (0.7) %
Fee and management income 2,286 2,165 121 5.6 %
Other property income 472 892 (420) (47.1) %
Total revenues 130,381 131,523 (1,142) (0.9) %
Operating Expenses:
Property operating expenses 22,202 21,762 (440) (2.0) %
Real estate tax expenses 16,573 17,112 539 3.1 %
General and administrative expenses 9,341 10,740 1,399 13.0 %
Depreciation and amortization 55,341 56,227 886 1.6 %
Impairment of real estate assets 5,000 - (5,000) NM
Total operating expenses 108,457 105,841 (2,616) (2.5) %
Other:
Interest expense, net (20,063) (22,775) 2,712 11.9 % Gain (loss) on disposal of property, net 13,841 (1,577) 15,418 NM Other (expense) income, net (15,585) 9,869 (25,454) NM Net income 117 11,199 (11,082) (99.0) % Net income attributable to noncontrolling interests (14) (1,430) 1,416 99.0 % Net income attributable to stockholders$ 103 $ 9,769 $ (9,666) (98.9) % (1)Line items that result in a percent change that exceed certain limitations are considered not meaningful ("NM") and indicated as such. Our basis for analyzing significant fluctuations in our results of operations generally includes review of the results of our same-center portfolio, non-same-center portfolio, and revenues and expenses from our management activities. We define our same-center portfolio as the 274 properties that were owned and operational prior toJanuary 1, 2020 . We define our non-same-center portfolio as those properties that were not fully owned and operational in both periods owing to real estate asset activity occurring afterDecember 31, 2019 , which includes 13 properties disposed of and four properties acquired. Below are explanations of the significant fluctuations in the results of operations for the three months endedMarch 31, 2021 and 2020: Rental Income decreased$0.8 million as follows: •$0.5 million decrease primarily related to our net disposition of 9 properties; and •$0.3 million decrease related to our same-center portfolio as follows: ?$1.3 million decrease largely due to the COVID-19 pandemic and its economic impact including a$1.1 million decrease due to rent abatement and a$0.2 million decrease in connection with Neighbors we have identified as a credit risk, including the impact of straight-line rent adjustments for the related leases; ?$0.7 million increase due to lease buyout income owing largely to Neighbors (representing less than 1% of ABR and GLA) who opted not to remain in their space following negative impacts as a result of COVID-19; and ?$0.3 million increase primarily due to a$0.52 increase in average minimum rent per square foot, partially offset by a 0.8% decrease in average economic occupancy. General and Administrative Expenses: •The$1.4 million decrease in general and administrative expenses is primarily related to expense reductions taken to reduce the impact of the COVID-19 pandemic, with the majority of these decreases related to overhead costs at our corporate offices, as well as decreased travel and related costs. Impairment of Real Estate Assets: •The$5.0 million increase in impairment of real estate assets was due to an asset under contract at a disposition price that was less than the carrying value, the proceeds from which will be used to fund tax-efficient acquisitions, to fund redevelopment opportunities in owned centers, and for general corporate purposes. We continue to sell non-core assets and may potentially recognize impairments in future quarters. 26 -------------------------------------------------------------------------------- Interest Expense, Net: •The$2.7 million decrease during the three months endedMarch 31, 2021 as compared to the same period in 2020 was largely due to the decrease in LIBOR and expiring interest rate swaps in 2020 and the first quarter of 2021. Interest Expense, Net was comprised of the following (dollars in thousands):
Three Months Ended
2021 2020
Interest on revolving credit facility, net $ 228 $ 216
Interest on term loans, net 10,633 12,731
Interest on secured debt 6,780 7,350
Loss on extinguishment of debt 691 73
Non-cash amortization and other 1,731 2,405
Interest expense, net $ 20,063 $ 22,775
Weighted-average interest rate as of end of period 3.0 % 3.3 % Weighted-average term (in years) as of end of period 3.8 4.7 Gain (Loss) on Disposal of Property, Net: •The$15.4 million change was primarily related to the sale of six properties and one outparcel (plus other miscellaneous disposals and write-offs) with a net gain of$13.8 million during the three months endedMarch 31, 2021 , as compared to the sale of three properties with a net loss of$1.6 million during the three months endedMarch 31, 2020 (see Note 4). Other (Expense) Income, Net: •The$25.5 million change was largely due to the change in the fair value of our earn-out liability as a result of an increase in the EVPS of our common stock as well as improved market conditions during the first quarter of 2021. Other Expense (Income), Net was comprised of the following (in thousands): Three
Months Ended
2021 2020
Change in fair value of earn-out liability $ (16,000) $ 10,000
Equity in income (loss) of unconsolidated joint ventures 714 (280)
Transaction and acquisition expenses (141) (45)
Federal, state, and local income tax expense (166) (29)
Other 8 223
Other (expense) income, net $ (15,585) $ 9,869
27--------------------------------------------------------------------------------
Leasing Activity-Below is a summary of leasing activity for our wholly-owned
properties for the three months ended
Total Deals(1) Inline Deals(1)
2021 2020 2021 2020
New leases:
Number of leases 153 87 147 77
Square footage (in thousands) 467 382 341 180
ABR (in thousands) $ 8,120 $ 5,563 $ 6,605 $ 3,214
ABR per square foot $ 17.39 $ 14.56 $ 19.34 $ 17.84
Cost per square foot of executing new leases $ 29.00 $ 22.03 $ 29.65 $ 27.94
Number of comparable leases 70 25 70 25
Comparable rent spread 12.4 % 6.8 % 12.4 % 6.8 %
Weighted-average lease term (in years) 8.0 9.1 6.2 6.6
Renewals and options:
Number of leases 163 127 147 113
Square footage (in thousands) 978 739 312 249
ABR (in thousands) $ 11,472 $ 9,720 $ 7,069 $ 5,364
ABR per square foot $ 11.73 $ 13.15 $ 22.67 $ 21.53
ABR per square foot prior to renewals $ 10.97 $ 12.33 $ 21.02 $ 19.18
Percentage increase in ABR per square foot 6.9 % 6.7 % 7.8 % 12.2 %
Cost per square foot of executing renewals and
options $ 2.20 $ 3.41 $ 4.85 $ 4.36
Number of comparable leases(2) 136 89 133 86
Comparable rent spread(2) 8.0 % 11.2 % 7.9 % 14.4 %
Weighted-average lease term (in years) 3.9 4.7 4.0 4.0
Portfolio retention rate 88.8 % 71.2 % 80.3 % 67.3 %
(1)Per square foot amounts may not recalculate exactly based on other amounts
presented within the table due to rounding.
(2)Excludes exercise of options.
Non-GAAP Measures
See "Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Key Performance Indicators and Defined Terms" of this
filing on Form 10-Q for a discussion related to the following non-GAAP measures.
Same-Center Net Operating Income-Same-Center NOI is presented as a supplemental
measure of our performance, as it highlights operating trends such as occupancy
levels, rental rates, and operating costs for our Same-Center portfolio. Other
REITs may use different methodologies for calculating Same-Center NOI, and
accordingly, our Same-Center NOI may not be comparable to other REITs. For the
three months ended March 31, 2021 and 2020, Same-Center NOI represents the NOI
for the 274 properties that were wholly-owned and operational for the entire
portion of both comparable periods.
Same-Center NOI should not be viewed as an alternative measure of our financial
performance as it does not reflect the operations of our entire portfolio, nor
does it reflect the impact of general and administrative expenses, depreciation
and amortization, interest expense, other income (expense), or the level of
capital expenditures and leasing costs necessary to maintain the operating
performance of our properties that could materially impact our results from
operations.
28
--------------------------------------------------------------------------------The table below presents our Same-Center NOI for the current period and the comparable prior period (dollars in thousands):
Three Months Ended March 31, Favorable (Unfavorable)
2021 2020 $ Change % Change
Revenues:
Rental income(1) $ 92,641 $ 93,322 $ (681)
Tenant recovery income 31,072 31,265 (193)
Reserves for uncollectibility(2) (1,731) (2,510) 779
Other property income 469 871 (402)
Total revenues 122,451 122,948 (497) (0.4) %
Operating expenses:
Property operating expenses 19,501 18,410 (1,091)
Real estate taxes 16,431 17,241 810
Total operating expenses 35,932 35,651 (281) (0.8) %
Total Same-Center NOI $ 86,519 $ 87,297 $ (778) (0.9) %
(1)Excludes straight-line rental income, net amortization of above- and
below-market leases, and lease buyout income.
(2)Includes billings that will not be recognized as revenue until cash is
collected or the Neighbor resumes regular payments and/or we deem it appropriate
to resume recording revenue on an accrual basis, rather than on a cash basis.
Same-Center NOI Reconciliation-Below is a reconciliation of Net Income to NOI
and Same-Center NOI (in thousands):
Three Months Ended
March 31,
2021 2020
Net income $ 117 $ 11,199
Adjusted to exclude:
Fees and management income (2,286) (2,165)
Straight-line rental income(1) (1,422) (2,312)
Net amortization of above- and below-market leases (838) (788)
Lease buyout income (797) (94)
General and administrative expenses 9,341 10,740
Depreciation and amortization 55,341 56,227
Impairment of real estate assets 5,000 -
Interest expense, net 20,063 22,775
(Gain) loss on disposal of property, net (13,841) 1,577
Other expense (income), net 15,585 (9,869)
Property operating expenses related to fees and management income
816 646
NOI for real estate investments 87,079 87,936
Less: Non-same-center NOI(2) (560) (639)
Total Same-Center NOI $ 86,519 $ 87,297
(1)Includes straight-line rent adjustments for Neighbors for whom revenue is
being recorded on a cash basis.
(2)Includes operating revenues and expenses from non-same-center properties
which includes properties acquired or sold and corporate activities.
FFO and Core FFO-FFO is a non-GAAP financial performance measure that is widely
recognized as a measure of REIT operating performance. Core FFO is an additional
financial performance measure used by us as FFO includes certain non-comparable
items that affect our performance over time. Core FFO is helpful in assisting
management and investors with assessing the sustainability of our operating
performance in future periods.
FFO, FFO Attributable to Stockholders and OP Unit Holders, and Core FFO should
not be considered alternatives to net income (loss) under GAAP, as an indication
of our liquidity, nor as an indication of funds available to cover our cash
needs, including our ability to fund distributions. Core FFO may not be a useful
measure of the impact of long-term operating performance on value if we do not
continue to operate our business plan in the manner currently contemplated.
Accordingly, FFO, FFO Attributable to Stockholders and OP Unit Holders, and Core
FFO should be reviewed in connection with other GAAP measurements, and should
not be viewed as more prominent measures of performance than net income (loss)
or cash flows from operations prepared in accordance with GAAP. Our FFO, FFO
Attributable to Stockholders and OP Unit Holders, and Core FFO, as presented,
may not be comparable to amounts calculated by other REITs.
29
--------------------------------------------------------------------------------The following table presents our calculation of FFO Attributable to Stockholders and OP Unit Holders, and Core FFO (in thousands, except per share amounts):
Three Months Ended
March 31,
2021 2020Calculation of FFO Attributable to Stockholders and OP Unit Holders Net income
$ 117 $ 11,199 Adjustments: Depreciation and amortization of real estate assets 54,341 54,817 Impairment of real estate assets 5,000 - (Gain) loss on disposal of property, net (13,841) 1,577 Adjustments related to unconsolidated joint ventures (637) 654 FFO attributable to stockholders and OP unit holders$ 44,980 $ 68,247 Calculation of Core FFO FFO attributable to stockholders and OP unit holders$ 44,980 $ 68,247 Adjustments: Depreciation and amortization of corporate assets 1,000 1,410 Change in fair value of earn-out liability 16,000 (10,000) Amortization of unconsolidated joint venture basis differences 746 467 Loss on extinguishment of debt, net 691 73 Transaction and acquisition expenses 141 45 Core FFO
FFO Attributable to Stockholders and OP Unit Holders/Core FFO per Share Weighted-average common shares outstanding - diluted
320,985 333,228
FFO attributable to stockholders and OP unit holders per share - diluted
$ 0.14 $ 0.20 Core FFO per share - diluted 0.20 0.18 30
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EBITDAre and Adjusted EBITDAre-We use EBITDAre and Adjusted EBITDAre as
additional measures of operating performance which allow us to compare earnings
independent of capital structure, determine debt service and fixed cost
coverage, and measure enterprise value. Additionally, we believe they are a
useful indicator of our ability to support our debt obligations.
EBITDAre and Adjusted EBITDAre should not be considered as alternatives to net
income (loss), as an indication of our liquidity, nor as an indication of funds
available to cover our cash needs, including our ability to fund distributions.
Accordingly, EBITDAre and Adjusted EBITDAre should be reviewed in connection
with other GAAP measurements, and should not be viewed as more prominent
measures of performance than net income (loss) or cash flows from operations
prepared in accordance with GAAP. Our EBITDAre and Adjusted EBITDAre, as
presented, may not be comparable to amounts calculated by other REITs.
The following table presents our calculation of EBITDAre and Adjusted EBITDAre
(in thousands):
Three Months Ended Year Ended
March 31, December 31,
2021 2020 2020
Calculation of EBITDAre
Net income $ 117 $ 11,199 $ 5,462
Adjustments:
Depreciation and amortization 55,341 56,227 224,679
Interest expense, net 20,063 22,775 85,303
(Gain) loss on disposal of property, net (13,841) 1,577 (6,494)
Impairment of real estate assets 5,000 - 2,423
Federal, state, and local tax expense 166 29 491
Adjustments related to unconsolidated joint ventures 1,132 1,177 3,355
EBITDAre $ 67,978 $ 92,984 $ 315,219
Calculation of Adjusted EBITDAre
EBITDAre $ 67,978 $ 92,984 $ 315,219
Adjustments:
Change in fair value of earn-out liability 16,000 (10,000) (10,000)
Other impairment charges - - 359
Amortization of unconsolidated joint venture basis differences
746 467 1,883
Transaction and acquisition expenses 141 45 539
Adjusted EBITDAre $ 84,865 $ 83,496 $ 308,000
Liquidity and Capital Resources
General-Aside from standard operating expenses, we expect our principal cash
demands to be for:
•cash distributions to stockholders;
•investments in real estate;
•capital expenditures and leasing costs;
•redevelopment and repositioning projects; and
•principal and interest payments on our outstanding indebtedness.
We expect our primary sources of liquidity to be:
•operating cash flows;
•proceeds received from the disposition of properties;
•reinvested distributions;
•proceeds from debt financings, including borrowings under our unsecured
revolving credit facility;
•distributions received from our third-party institutional joint ventures; and
•available, unrestricted cash and cash equivalents.
At this time, we believe our current sources of liquidity, most significantly
our operating cash flows and borrowing availability on our revolving credit
facility, are sufficient to meet our short- and long-term cash demands.
31
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Debt-The following table summarizes information about our debt as of
March 31, 2021 December 31, 2020
Total debt obligations, gross $ 2,291,181 $ 2,307,686
Weighted-average interest rate 3.0 % 3.1 % Weighted-average term (in years) 3.8
4.1
Revolving credit facility capacity(1)
490,310 490,404
(1)The revolving credit facility matures inOctober 2021 and includes an option to extend the maturity toOctober 2022 , with its execution being subject to compliance with certain terms included in the loan agreement, including the absence of any defaults and the payment of relevant fees. We intend to either exercise our option to extend the maturity or to negotiate under new terms. (2)Net of any outstanding balance and letters of credit. As our debt obligations mature, we intend to refinance or pay off the balances at maturity using proceeds from operations and/or corporate-level debt. Our debt is subject to certain covenants, and as ofMarch 31, 2021 , we were in compliance with the restrictive covenants of our outstanding debt obligations. We expect to continue to meet the requirements of our debt covenants over the next twelve months. Financial Leverage Ratios-We believe our debt to Adjusted EBITDAre, debt to total enterprise value, and debt covenant compliance as ofMarch 31, 2021 allow us access to future borrowings as needed in the near term. The following table presents our calculation of net debt and total enterprise value, inclusive of our prorated portion of net debt and cash and cash equivalents owned through our third-party institutional joint ventures, as ofMarch 31, 2021 andDecember 31, 2020 (in thousands):March 31, 2021 December 31, 2020
Net debt: Total debt, excluding market adjustments and deferred financing expenses
$ 2,322,096 $ 2,345,620 Less: Cash and cash equivalents 20,738 104,952 Total net debt$ 2,301,358 $ 2,240,668 Enterprise value: Net debt$ 2,301,358 $ 2,240,668 Total equity value(1) 3,384,978 2,797,234 Total enterprise value$ 5,686,336 $ 5,037,902 (1)Total equity value is calculated as the number of common shares and OP units outstanding multiplied by the EVPS as ofMarch 31, 2021 andDecember 31, 2020 , respectively. There were 320.9 million diluted shares outstanding with an EVPS of$10.55 as ofMarch 31, 2021 and 319.7 million diluted shares outstanding with an EVPS of$8.75 as ofDecember 31, 2020 . The following table presents our calculation of net debt to Adjusted EBITDAre and net debt to total enterprise value as ofMarch 31, 2021 andDecember 31, 2020 (dollars in thousands): March 31, 2021 December 31, 2020 Net debt to Adjusted EBITDAre - annualized: Net debt $ 2,301,358 $ 2,240,668 Adjusted EBITDAre - annualized(1) 309,369 308,000 Net debt to Adjusted EBITDAre - annualized 7.4x 7.3x Net debt to total enterprise value Net debt $ 2,301,358 $ 2,240,668 Total enterprise value 5,686,336 5,037,902 Net debt to total enterprise value 40.5% 44.5% (1)Adjusted EBITDAre is based on a trailing twelve month period. See "Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Measures - EBITDAre and Adjusted EBITDAre" of this filing on Form 10-Q for a reconciliation to Net Income. Capital Expenditures and Redevelopment Activity-We make capital expenditures during the course of normal operations, including maintenance capital expenditures and tenant improvements as well as value-enhancing anchor space repositioning and redevelopment, ground-up outparcel development, and other accretive projects. 32 -------------------------------------------------------------------------------- During the three months endedMarch 31, 2021 and 2020, we had capital spend of$13.5 million and$16.0 million , respectively. Generally, we expect our development and redevelopment projects to stabilize within 24 months. We anticipate that obligations related to capital improvements as well as redevelopment and development in 2021 can be met with cash flows from operations, cash flows from dispositions, or borrowings on our unsecured revolving line of credit. Below is a summary of our capital spending activity on a cash basis (dollars in thousands): Three Months Ended
2021 2020
Capital expenditures for real estate: Capital improvements $ 848$ 833 Tenant improvements 3,741
3,714
Redevelopment and development 8,098
10,484
Total capital expenditures for real estate 12,687
15,031
Corporate asset capital expenditures 439
553
Capitalized indirect costs(1) 411
381
Total capital spending activity$ 13,537
(1)Amount includes internal salaries and related benefits of personnel who work directly on capital projects as well as capitalized interest expense. Our underwritten incremental yields on development and redevelopment projects are expected to range between 8% to 11%. Our current in process projects represent an estimated total investment of$35.1 million , and the total underwritten incremental yield range on this estimated investment is approximately 9.5% - 10.5%. Actual incremental yields may vary from our underwritten incremental yield range based on the actual total cost to complete a project and its actual incremental annual NOI at stabilization. See "Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Key Performance Indicators and Defined Terms" and "Part II, Item 1A. Risk Factors" of this filing on Form 10-Q for further information. Acquisition Activity-We continually monitor the commercial real estate market for properties that have future growth potential, are located in attractive demographic markets, and support our business objectives. During the three months endedMarch 31, 2021 , we acquired two properties and two parcels of land for a total cash outlay of$39.9 million . During the three months endedMarch 31, 2020 , we acquired two parcels of land for a total cash outlay of$4.3 million . See Note 4 to the consolidated financial statements. Disposition Activity-We are actively evaluating our portfolio of assets for opportunities to make strategic dispositions of assets that no longer meet our growth and investment objectives or assets that have stabilized in order to capture their value. We expect to continue to make strategic dispositions during the remainder of 2021. The following table highlights our property dispositions (dollars and square feet in thousands): Three Months Ended March 31, 2021 2020 Number of properties sold 6 3 Number of outparcels sold(1) 1 - Proceeds from sale of real estate$ 58,356 $ 17,447 Gain (loss) on sale of property, net(2) 14,355
(826)
(1)The outparcel sold in the first quarter of 2021 was the only remaining
portion of one of our properties, and therefore the sale resulted in a reduction
in our total property count.
(2)The gain (loss) on sale of property, net does not include miscellaneous
write-off activity, which is also recorded in Gain (Loss) on Disposal of
Property, Net on the consolidated statements of operations.
33
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Distributions-Distributions to our common stockholders and OP unit holders,
including key financial metrics for comparison purposes, for the three months
ended
[[Image Removed: cik0001476204-20210331_g7.jpg]]
Cash distributions to OP unit holders Net cash provided by operating activities
Cash distributions to common stockholders Core FFO(1) Distributions reinvested through the DRIP (1)See "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Key Performance Indicators" for the definition of Core FFO, or information regarding why we present Core FFO. See "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Measures - FFO and Core FFO" for a reconciliation of this non-GAAP financial measure to Net Income. We paid monthly distributions of$0.02833333 per share, or$0.34 annualized, for the months ofDecember 2020 and January, February, andMarch 2021 . OnApril 14, 2021 , our Board authorized distributions forMay 2021 equal to a monthly amount of$0.02833333 per share of common stock. TheMay 2021 distributions were paid onMay 3, 2021 . OnMarch 25, 2021 , our Board announced that we are reviewing alternatives in order to provide liquidity to our shareholders. In connection with the review process, the Third Amended and Restated Dividend Reinvestment Plan has been suspended, beginning with the distribution payable onApril 1, 2021 . Stockholders will receive their full monthly distribution of$0.02833333 per share in cash until further notice. The timing and amount of distributions is determined by our Board and is influenced in part by our intention to comply with REIT requirements of the Internal Revenue Code, as well as our results of operations, our general financial condition, general economic conditions, and other factors. Our Board intends to evaluate distributions on a monthly basis throughout 2021. To maintain our qualification as a REIT, we must make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (which is computed without regard to the dividends paid deduction or net capital gain, and which does not necessarily equal net income (loss) as calculated in accordance with GAAP). We generally will not be subject toU.S. federal income tax on the income that we distribute to our stockholders each year due to meeting the REIT qualification requirements. However, we may be subject to certain state and local taxes on our income, property, or net worth and to federal income and excise taxes on our undistributed income. We have not established a minimum distribution level, and our charter does not require that we make distributions to our stockholders. 34
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Cash Flow Activities-As ofMarch 31, 2021 , we had cash and cash equivalents and restricted cash of$62.3 million , a net cash decrease of$69.7 million during the three months endedMarch 31, 2021 . Below is a summary of our cash flow activity (dollars in thousands): Three Months Ended March 31, 2021 2020 $ Change % Change Net cash provided by operating activities$ 48,751 $ 35,613 $ 13,138 36.9 % Net cash provided by (used in) investing activities 4,690 (2,413) 7,103 NM Net cash used in financing activities (123,125) (43,733) (79,392) NM Operating Activities-Our net cash provided by operating activities was primarily impacted by the following: •Property operations and working capital-Most of our operating cash comes from rental and tenant recovery income and is offset by property operating expenses, real estate taxes, and general and administrative costs. During the three months endedMarch 31, 2021 , we had a net cash outlay of$15.3 million from changes in working capital as compared to a net cash outlay of$23.4 million during the same period in 2020. This change was primarily driven by improved collections on amounts due from Neighbors as well as expense reduction initiatives, and was partially offset by higher leasing commissions. Additionally, we had an increase in returns on our investments in unconsolidated joint ventures. •Fee and management income-We also generate operating cash from our third-party investment management business, pursuant to various management and advisory agreements between us and the Managed Funds. Our fee and management income was$2.3 million for the three months endedMarch 31, 2021 , an increase of$0.1 million as compared to the same period in 2020. •Cash paid for interest-During the three months endedMarch 31, 2021 , we paid$18.9 million for interest, a decrease of$1.4 million over the same period in 2020, largely due to a decrease in LIBOR and expiring interest rate swaps. Investing Activities-Our net cash provided by (used in) investing activities was primarily impacted by the following: •Real estate acquisitions-During the three months endedMarch 31, 2021 , our acquisitions resulted in a total cash outlay of$39.9 million , as compared to a total cash outlay of$4.3 million during the same period in 2020. •Real estate dispositions-During the three months endedMarch 31, 2021 , our dispositions resulted in a net cash inflow of$58.4 million , as compared to a net cash inflow of$17.4 million during the same period in 2020. •Capital expenditures-We invest capital into leasing our properties and maintaining or improving the condition of our properties. During the three months endedMarch 31, 2021 , we paid$13.5 million for capital expenditures, a decrease of$2.4 million over the same period in 2020, primarily due to the timing of our development and redevelopment projects. •Investment in third parties-During the three months endedMarch 31, 2021 , we made an investment in a third party business that resulted in a net cash outflow of$3.0 million . Financing Activities-Our net cash used in financing activities was primarily impacted by the following: •Debt borrowings and payments-During the three months endedMarch 31, 2021 , we had$16.5 million in net repayment of debt primarily as a result of early repayments of mortgage loans. During the three months endedMarch 31, 2020 we had net borrowings of$1.5 million , largely as a result of drawing$34.0 million on our revolving credit facility, offset by a pay down inJanuary 2020 of$30.0 million on term loan debt maturing in 2021. •Distributions to stockholders and OP unit holders-Cash used for distributions to common stockholders and OP unit holders decreased$11.1 million for the three months endedMarch 31, 2021 as compared to the same period in 2020, primarily due a reduction of the distribution rate beginning with theDecember 2020 distribution, which was paid inJanuary 2021 , and due to a lower share count as a result of a tender offer. •Share repurchases-Cash outflows for share repurchases increased by$72.6 million for the three months endedMarch 31, 2021 as compared to the same period in 2020, primarily as a result of a tender offer, which was settled inJanuary 2021 . In connection with the liquidity alternative review process, the Fourth Amended SRP, which is currently limited to repurchases resulting from DDI of stockholders, has been suspended, and theMarch 31, 2021 repurchases related to stockholder DDI were not executed. The SRP for both standard and DDI requests will remain suspended until further notice. Critical Accounting Policies and Estimates Our 2020 Annual Report on Form 10-K, filed with theSEC onMarch 12, 2021 , contains a description of our critical accounting policies and estimates, including those relating to real estate acquisitions, rental income, and the valuation of real estate assets. There have been no significant changes to our critical accounting policies during 2021.
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