10-K 1 rpai-2016x1231x10k.htm 10-K Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
or
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to
Commission File Number: 001-35481
RETAIL PROPERTIES OF AMERICA, INC.
(Exact name of registrant as specified in its charter)
 
Maryland
 
42-1579325
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
2021 Spring Road, Suite 200, Oak Brook, Illinois
 
60523
(Address of principal executive offices)
 
(Zip Code)
(630) 634-4200
(Registrant’s telephone number, including area code)
 Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Name of each exchange on which registered
Class A Common Stock, $.001 par value
 
New York Stock Exchange
7.00% Series A Cumulative Redeemable Preferred Stock, $.001 par value
 
New York Stock Exchange
 Securities registered pursuant to Section 12(g) of the Act:
 
Title of class
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer x
 
Accelerated filer o
 
 
 
Non-accelerated filer o
 
Smaller reporting company o
(Do not check if a smaller reporting company)
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of June 30, 2016, the aggregate market value of the Class A common stock held by non-affiliates was approximately $4.0 billion based upon the closing price as reported on the New York Stock Exchange on June 30, 2016 of $16.90 per share. (For this computation, the Registrant has excluded the market value of all shares of Class A common stock reported as beneficially owned by executive officers and directors of the Registrant. Such exclusion shall not be deemed to constitute an admission that any such person is an affiliate of the Registrant.)
Number of shares outstanding of the registrant’s classes of common stock as of February 10, 2017:
Class A common stock:    236,847,007 shares
DOCUMENTS INCORPORATED BY REFERENCE
Certain information contained in the Registrant’s Proxy Statement relating to its Annual Meeting of Stockholders to be held on May 25, 2017 is incorporated by reference in Items 10, 11, 12, 13 and 14 of Part III. The Registrant intends to file such Proxy Statement with the Securities and Exchange Commission no later than 120 days after the end of its fiscal year ended December 31, 2016.


RETAIL PROPERTIES OF AMERICA, INC.
TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



PART I
All dollar amounts and share amounts in this Form 10-K in Items 1. through 7A. are stated in thousands with the exception of per share amounts. In this report, all references to “we”, “our” and “us” refer collectively to Retail Properties of America, Inc. and its subsidiaries.
ITEM 1. BUSINESS
General
Retail Properties of America, Inc. is a real estate investment trust (REIT) that owns and operates high quality, strategically located shopping centers in the United States. As of December 31, 2016, we owned 156 retail operating properties representing 25,832,000 square feet of gross leasable area (GLA). Our retail operating portfolio includes (i) neighborhood and community centers, (ii) power centers, and (iii) lifestyle centers and multi-tenant retail-focused mixed-use properties, as well as single-user retail properties.
The following table summarizes our operating portfolio as of December 31, 2016:
Property Type
 
Number of
Properties
 
GLA
(in thousands)
 
Occupancy
 
Percent Leased
Including Leases
Signed (a)
Operating portfolio:
 
 
 
 
 
 
 
 
Multi-tenant retail
 


 
 
 
 
 
 
Neighborhood and community centers
 
81

 
9,958

 
94.2
%
 
94.4
%
Power centers
 
50

 
11,430

 
95.8
%
 
96.9
%
Lifestyle centers and mixed-use properties
 
14

 
3,868

 
89.7
%
 
90.3
%
Total multi-tenant retail
 
145

 
25,256

 
94.2
%
 
94.9
%
Single-user retail
 
11

 
576

 
100.0
%
 
100.0
%
Total retail operating portfolio
 
156

 
25,832

 
94.3
%
 
95.0
%
Office
 
1

 
895

 
1.1
%
 
44.3
%
Total operating portfolio (b)
 
157

 
26,727

 
91.2
%
 
93.3
%
(a)
Includes leases signed but not commenced.
(b)
Excludes one multi-tenant retail operating property and one single-user retail operating property classified as held for sale as of December 31, 2016.
In addition to our operating portfolio, as of December 31, 2016, we owned two properties where we have begun redevelopment activities.
Operating History
We are a Maryland corporation formed in March 2003 and have been publicly held and subject to U.S. Securities and Exchange Commission (SEC) reporting requirements since 2003. We were initially formed as Inland Western Retail Real Estate Trust, Inc. and on March 8, 2012, we changed our name to Retail Properties of America, Inc.
Business Objectives and Strategies
In 2012, management began a portfolio repositioning effort to focus the portfolio on high quality, multi-tenant retail properties. The core objective of this effort is to become a dominant owner of multi-tenant retail properties in 10 to 15 target markets, owning 3,000,000 to 5,000,000 square feet in each market. We believe that concentrating our portfolio in multi-tenant retail properties in these target markets will allow us to optimize our local and regional operating platforms and enhance our operating performance. To date, we have identified 10 target markets: Dallas, Washington, D.C./Baltimore, New York, Atlanta, Seattle, Chicago, Houston, San Antonio, Phoenix and Austin, which generally feature one or more of the following characteristics:
•
well-diversified local economy;
•
strong demographic profile with significant long-term population growth or above-average existing density, high disposable income and/or a highly educated employment base;
•
fiscal and regulatory environment conducive to business activity and growth;

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•
strong barriers to entry, whether topographical, regulatory or density driven; and
•
ability to create critical mass and realize operational efficiencies.
Since the beginning of 2012, we have sold 159 properties, primarily in our non-target markets, for aggregate consideration of $2,296,955, including our pro rata share of unconsolidated joint ventures and three development properties, with a majority of the proceeds used for debt reduction and the acquisition of high quality, multi-tenant retail assets within our target markets. Since we began executing on our external growth initiatives in the fourth quarter of 2013, we have purchased 30 properties for aggregate consideration of $1,396,761, including our pro rata share of unconsolidated joint ventures, resulting in an increase in consolidated GLA in our target markets by 4.5 million square feet and an increase in concentration to over 66% of multi-tenant retail annualized base rent (ABR) from our target markets as of December 31, 2016. Depending on whether favorable market conditions exist, among other factors, we expect to substantially complete our portfolio repositioning efforts by the end of 2018.
Competition
In seeking new investment opportunities, we compete with other real estate investors, including other REITs, pension funds, insurance companies, foreign investors, real estate partnerships, private equity funds, private individuals and other real estate companies, some of which may have a lower cost of capital than ours.
From an operational perspective, we compete with other property owners on a variety of factors, including, but not limited to, location, visibility, quality and aesthetic value of construction, and strength and name recognition of tenants. These factors combine to determine the level of occupancy and rental rates that we are able to achieve at our properties. Because our revenue potential may be linked to the success of retailers, we indirectly share exposure to the same competitive factors that our retail tenants experience when trying to attract customers. These factors include other forms of retailing, including e-commerce and direct consumer sales, and general competition from other regional shopping centers. To remain competitive, we evaluate all of the factors affecting our centers and work to position them accordingly. We believe the principal factors that retailers consider in making their leasing decisions include:
•
consumer demographics;
•
quality, design and location of properties;
•
diversity of retailers within individual shopping centers;
•
management and operational expertise of the landlord; and
•
rental rates.
Based on these factors, we believe that the size and scope of our property portfolio and operating platform, as well as the overall quality and attractiveness of our individual properties, enable us to compete effectively for retail tenants. We believe that our strategy of focusing on 10 to 15 target markets enhances our ability to drive revenue growth by more thoroughly understanding the local market dynamics and by increasing our market relevancy.
Tax Status
We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, or the Code. To maintain our qualification as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we annually distribute to our shareholders at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding net capital gains. As a REIT, we generally are not subject to U.S. federal income tax on the taxable income we distribute to our shareholders. If we fail to qualify as a REIT in any taxable year, we will be subject to U.S. federal income tax at regular corporate tax rates. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income, property or net worth and U.S. federal income and excise taxes on our undistributed income. We have one wholly-owned consolidated subsidiary that has jointly elected to be treated as a taxable REIT subsidiary, or TRS, for U.S. federal income tax purposes. A TRS is taxed on its net income at regular corporate tax rates. The income tax expense incurred through the TRS has not had a material impact on our consolidated financial statements.

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Regulation
General
The properties in our portfolio, including common areas, are subject to various laws, ordinances and regulations.
Americans with Disabilities Act (ADA)
Our properties must comply with Title III of the ADA to the extent that such properties are “public accommodations” as defined by the ADA. The ADA may require removal of structural barriers to allow access by persons with disabilities in certain public areas of our properties where such removal is readily achievable. We believe our existing properties are substantially in compliance with the ADA and that we will not be required to incur significant capital expenditures to address the requirements of the ADA. Refer to Item 1A. “Risk Factors” for more information regarding compliance with the ADA.
Environmental Matters
Under various federal, state and local laws, ordinances and regulations, as a current or former owner or operator of real property, we may be liable for costs and damages resulting from the presence or release of hazardous substances, waste, or petroleum products at, on, in, under or from such property, including costs for investigation, remediation, natural resource damages or third party liability for personal injury or property damage. These laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence or release of such materials, and the liability may be joint and several.
Independent environmental consultants conducted Phase I Environmental Site Assessments or similar environmental audits for all of our investment properties. A Phase I Environmental Site Assessment is a written report that identifies existing or potential environmental conditions associated with a particular property. These environmental site assessments generally involve a review of records and visual inspection of the property, but do not include soil sampling or ground water analysis. These environmental site assessments have not revealed, nor are we aware of, any environmental liability that we believe will have a material adverse effect on our operations. Refer to Item 1A. “Risk Factors” for more information regarding environmental matters.
Insurance
We carry comprehensive liability and property insurance coverage inclusive of fire, extended coverage, seismic activity, terrorism and loss of income insurance covering all of the properties in our portfolio under a blanket policy. We believe the policy specifications and insured limits are appropriate given the relative risk of loss, the cost of the coverage and industry practice. We believe that the properties in our portfolio are adequately insured. Terrorism insurance is carried on all properties in an amount and with deductibles that we believe are commercially reasonable. Refer to Item 1A. “Risk Factors” for more information. The terrorism insurance is subject to exclusions for loss or damage caused by nuclear substances, pollutants, contaminants and biological and chemical weapons. Insurance coverage is not provided for losses attributable to riots or certain acts of God.
Employees
As of December 31, 2016, we had 237 employees.
Access to Company Information
We make available, free of charge, through our website and by responding to requests addressed to our investor relations group, our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K including exhibits and all amendments to those reports and proxy statements filed or furnished pursuant to 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended. These reports are available as soon as reasonably practical after such material is electronically filed or furnished to the SEC. Our website address is www.rpai.com. The information contained on our website, or other websites linked to our website, is not part of this document. Our reports may also be obtained by accessing the EDGAR database at the SEC’s website at www.sec.gov.
Shareholders wishing to communicate directly with our board of directors or any committee can do so by writing to the attention of the Board of Directors or applicable committee in care of Retail Properties of America, Inc. at 2021 Spring Road, Suite 200, Oak Brook, Illinois 60523.

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ITEM 1A. RISK FACTORS
In evaluating our company, careful consideration should be given to the following risk factors, in addition to the other information included in this annual report. Each of these risk factors could adversely affect our business operating results and/or financial condition, as well as adversely affect the value of our common stock, preferred stock or unsecured debt. In addition to the following disclosures, please refer to the other information contained in this report including the accompanying consolidated financial statements and the related notes.
RISKS RELATED TO OUR BUSINESS AND OUR PROPERTIES
There are inherent risks associated with real estate investments and the real estate industry, each of which could have an adverse impact on our financial performance and the value of our properties.
Real estate investments are subject to various risks, many of which are beyond our control. Our operating and financial performance and the value of our properties can be affected by many of these risks, including, but not limited to, the following:
•
national, regional and local economies, which may be negatively impacted by inflation, deflation, government deficits, high unemployment rates, severe weather or other natural disasters, decreased consumer confidence, industry slowdowns, reduced corporate profits, lack of liquidity and other adverse business conditions;
•
local real estate conditions, such as an oversupply of retail space or a reduction in demand for retail space, resulting in vacancies or compromising our ability to rent space on favorable terms;
•
the convenience and quality of competing retail properties and other retailing platforms such as the internet;
•
adverse changes in the financial condition of tenants at our properties, including financial difficulties, lease defaults or bankruptcies;
•
competition for investment opportunities from other real estate investors with significant capital, including other REITs, real estate operating companies and institutional investment funds;
•
the illiquid nature of real estate investments, which may limit our ability to sell properties at the terms desired or at terms favorable to us;
•
fluctuations in interest rates and the availability of financing, which could adversely affect our ability and the ability of potential buyers and tenants of our properties, to obtain financing on favorable terms or at all;
•
changes in, and changes in the enforcement of, laws, regulations and governmental policies, including, without limitation, health, safety, environmental, zoning and tax laws, government fiscal policies and the ADA; and
•
civil unrest, acts of war, terrorist attacks and natural disasters, including seismic activity and floods, which may result in uninsured and underinsured losses.
During a period of economic slowdown or recession, or the public perception that such a period may occur, declining demand for real estate could result in a general decline in rents or an increased incidence of defaults among our existing leases, and, consequently, our properties may fail to generate revenues sufficient to meet operating, debt service and other expenses. As a result, we may have to borrow funds to cover fixed costs, and our cash flow, financial condition and results of operations could be adversely affected. As such, the per share trading prices of our Class A common stock and Series A preferred stock, as well as the market price of our debt securities, and our ability to satisfy our principal and interest obligations and to make distributions to our shareholders may be adversely affected.
Our financial condition and results of operations could be adversely affected by poor economic or market conditions where our properties are located, especially in our target markets where we have a high concentration of properties.
We are in the process of repositioning our portfolio into 10 to 15 target markets. To date, we have announced 10 of these markets. The economic conditions in markets where our properties are concentrated greatly influence our financial condition and results of operations. We are particularly susceptible to adverse economic and other developments in such areas, including increased unemployment, industry slowdowns, corporate layoffs or downsizing, relocations of businesses, decreased consumer confidence, adverse changes in demographics, increases in real estate and other taxes, increased regulation and natural disasters. As of

4

December 31, 2016, approximately 59.2% of our GLA and approximately 65.1% of our ABR in our retail operating portfolio was in our target markets, including amounts attributable to our redevelopments. Depending on whether favorable market conditions exist, among other factors, we expect to increase our concentration in our target markets over the next two years, with a goal of having 90% of our multi-tenant retail ABR in our target markets by the end of 2018. Notably, approximately 27.0% of our GLA and approximately 29.5% of our ABR in our retail operating portfolio is located in the state of Texas, where four of our target markets are located. Poor economic or market conditions in our target markets, including those that are in Texas, may adversely affect our cash flow, financial condition and results of operations.
A shift in retail shopping from brick and mortar stores to online shopping may have an adverse impact on our cash flow, financial condition and results of operations.
Many retailers operating brick and mortar stores have made online sales a vital piece of their business. Although many of the retailers operating in our properties sell groceries and other necessity-based soft goods or provide services, including entertainment and dining options, the shift to online shopping may cause declines in brick and mortar sales generated by certain of our tenants and/or may cause certain of our tenants to reduce the size or number of their retail locations in the future. As a result, our cash flow, financial condition and results of operations could be adversely affected.
We may choose to not renew leases or be unable to renew leases, lease vacant space or re-lease space as leases expire. In addition, rents associated with new or renewed leases may be less than expiring rents (lease roll-down) or, to facilitate leasing, we may choose to incur significant capital expenditures to improve our properties, which could adversely affect our cash flow, financial condition and results of operations.
Approximately 5.0% of the total GLA in our retail operating portfolio was vacant as of December 31, 2016, excluding leases signed but not commenced. In addition, leases accounting for approximately 35.6% of the ABR in our retail operating portfolio as of December 31, 2016 are scheduled to expire within the next three years. We may choose to not renew leases based on various strategic factors such as operating strength of the occupying tenant, the tenant’s retail category, merchandising composition of the property, other leasing opportunities available to us or redevelopment plans for the property. In our efforts to lease space, we compete with numerous developers, owners and operators of retail properties, many of whom own properties similar to, and in the same sub-markets as, our properties. As a result, we cannot assure you that leases will be renewed or that current or future vacancies will be re-leased at rental rates equal to or above the current average rental rates without significant down time, or that substantial rent abatements, tenant improvements, lease inducements, early termination and co-tenancy rights or below-market renewal options will not be offered to attract new tenants or retain existing tenants. Additionally, we may incur significant capital expenditures or accommodate requests for renovations and other improvements to make our properties more attractive to tenants. If we choose not to or are unable to renew existing leases, lease vacant space or re-lease space as leases expire, or if rents associated with new or renewed leases are less than expiring rents or we incur significant capital expenditures to improve our properties, our cash flow, financial condition and results of operations could be adversely affected.
Our inability to collect rents from tenants or collect balances due on our leases from any tenants in bankruptcy or experiencing other significant financial hardship may negatively impact our cash flow, financial condition and results of operations.
Substantially all of our income is derived from rentals of real property. If sales generated by stores operating in our properties decline sufficiently or if tenants encounter other significant financial hardships, tenants may be unable to pay their existing minimum rents or other charges, or tenants may decline to extend or renew a lease upon its expiration on terms favorable to us, or at all, or may even exercise early termination rights (to the extent available). If a significant number of our tenants are unable to make their rental payments to us or otherwise meet their lease obligations, our cash flow, financial condition and results of operations may be materially adversely affected. In addition, although minimum rent is generally supported by long-term lease contracts, tenants who file bankruptcy have the legal right to reject any or all of their leases and close related stores. In the event that a tenant with a significant number of leases in our properties files bankruptcy and rejects its leases, we could experience a significant reduction in our revenues and we may not be able to collect all pre-petition amounts owed by that party, which may adversely affect our cash flow, financial condition and results of operations.
If any of our anchor tenants experience a downturn in their business or terminate their leases, our cash flow, financial condition and results of operations could be adversely affected.
Anchor tenants occupy a significant amount of the square footage and pay a significant portion of the total rent in our retail operating portfolio. Specifically, our 20 largest tenants based on ABR represent 39.2% of occupied GLA and 31.7% of ABR as of December 31, 2016. In addition, anchor tenants and “shadow” anchors, retailers in or adjacent to our properties that occupy space we do not own, contribute to the success of other tenants by drawing customers to a property. The bankruptcy, insolvency or downturn in

5

business of any of our anchor tenants could result in another tenant vacating its space, defaulting on its lease obligations, terminating its lease, exercising co-tenancy rights or renewing its lease at lower rental rates. As a result, our cash flow, financial condition and results of operations could be adversely affected.
If small shop tenants are not successful and, consequently, terminate their leases, our cash flow, financial condition and results of operations could be adversely affected.
Small shop tenants, those that occupy less than 10,000 square feet, in our retail operating portfolio represent 29.1% of occupied GLA, but 44.8% of ABR as of December 31, 2016. Such tenants may have more limited resources than larger tenants and, as a result, may be more vulnerable to negative economic conditions. If a significant number of our small shop tenants experience financial difficulties or are unable to remain open, our cash flow, financial condition and results of operations could be adversely affected.
Many of the leases at our retail properties contain provisions, which, if triggered, may allow tenants to pay reduced rent, cease operations or terminate their leases, any of which could adversely affect our cash flow, financial condition and results of operations.
Some anchor tenants have the right to vacate their space and continue to pay rent through the end of their lease term, which inhibits our ability to re-lease the space during that period. Additionally, many of the leases at our retail properties contain provisions that condition a tenant’s obligation to remain open, the amount of rent payable by the tenant or potentially the tenant’s obligation to remain in the lease, on certain factors, including: (i) the presence and continued operation of a certain anchor tenant or tenants, (ii) minimum occupancy levels at the applicable property or (iii) tenant sales amounts. If such a provision is triggered by a failure of any of these or other applicable conditions, a tenant could have the right to cease operations at the applicable property, have its rent reduced or terminate its lease early. A tenant ceasing operations as a result of these provisions could cause a decrease in customer traffic and related decreased sales for other tenants at that property. To the extent these provisions result in lower revenue, our cash flow, financial condition and results of operations could be adversely affected.
Our expenses may remain constant or increase, even if income from our properties decreases, causing our cash flow, financial condition and results of operations to be adversely affected.
Certain costs associated with our business, such as real estate taxes, state and local taxes, insurance, utilities, mortgage payments and corporate expenses, are relatively inflexible and generally do not decrease when a property’s occupancy decreases, rental rates decrease, a tenant fails to pay rent or other circumstances cause our revenues to decrease. If we are unable to reduce our operating costs in response to revenue declines, our cash flow, financial condition and results of operations may be adversely affected. In addition, inflationary or other price increases could result in increased operating costs, and increases in assessed valuations or changes in tax rates could result in increased real estate taxes for us and our tenants, and to the extent to which we are unable to fully recover such increases in operating expenses and real estate taxes from tenants, our cash flow, financial condition and results of operations could be adversely affected.
We depend on external sources of capital that are outside of our control, which may affect our ability to execute on strategic opportunities, satisfy our debt obligations and make distributions to our shareholders.
In order to maintain our qualification as a REIT, we are generally required under the Code to annually distribute to our shareholders at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains. In addition, as a REIT, we will be subject to income tax at regular corporate rates to the extent that we distribute less than 100% of our REIT taxable income, including any net capital gains. Because of these distribution requirements, we may not be able to fund future capital needs (including redevelopment and acquisition activities, payments of principal and interest on our existing debt, tenant improvements and leasing costs) from operating cash flow. Consequently, we may rely on third party sources to fund our capital needs. We may not be able to obtain the necessary capital on favorable terms, in the time period we desire, or at all. Additional debt we incur may increase our leverage, expose us to the risk of default and may impose operating restrictions on us, and any additional equity we raise could be dilutive to existing shareholders. Our access to third party sources of capital depends, in part, on general market conditions, the market’s view of the quality of our assets, operating platform and growth potential, our current debt levels, and our current and expected future earnings, cash flow and distributions to our shareholders. If we cannot obtain capital from third party sources, we may be unable to acquire or redevelop properties when strategic opportunities exist, satisfy our principal and interest obligations or make cash distributions to our shareholders necessary to maintain our qualification as a REIT.

6

We may be unable to sell a property at the time we desire and on favorable terms or at all, which could limit our ability to access capital through dispositions and could adversely affect our cash flow, financial condition and results of operations.
A key component of our strategic plan is to pursue targeted dispositions. However, real estate investments generally cannot be sold quickly. Our ability to dispose of properties on advantageous terms depends on factors beyond our control, including competition from other sellers, increases in market capitalization rates and the availability of attractive financing for potential buyers of our properties, and we cannot predict the various market conditions affecting real estate investments that will exist at any particular time in the future. As a result of the uncertainty of market conditions, we cannot provide any assurance that we will be able to sell properties at a profit, or at all. In addition, and subject to certain safe harbor provisions, the Code generally imposes a 100% tax on gain recognized by REITs upon the disposition of assets if the assets are held primarily for sale in the ordinary course of business, rather than for investment, which may cause us to forego or defer sales of properties that otherwise would be attractive from a pre-tax perspective. Accordingly, our ability to access capital through dispositions may be limited, which could limit our ability to fund future capital needs.
We may be unable to complete acquisitions and even if acquisitions are completed, our operating results at acquired properties may not meet our financial expectations.
A key component of our strategic plan is to execute our investment strategy of acquiring high quality, multi-tenant retail assets within our target markets. We continue to evaluate the market of available properties and expect to continue to acquire properties when we believe strategic opportunities exist. Our ability to acquire properties on favorable terms and successfully operate or develop them is subject to the following risks:
•
we may be unable to acquire a desired property because of competition from other real estate investors with substantial capital, including other REITs, real estate operating companies and institutional investment funds;
•
even if we are able to acquire a desired property, competition from other potential acquirers may significantly increase the purchase price;
•
we may incur significant costs and divert management attention in connection with the evaluation and negotiation of potential acquisitions, including ones that are subsequently not completed;
•
we may be unable to finance acquisitions on favorable terms and in the time period we desire, or at all;
•
we may be unable to quickly and efficiently integrate new acquisitions, particularly the acquisition of portfolios of properties, into our existing operations;
•
we may acquire properties that are not initially accretive to our results upon acquisition, and we may not successfully manage and lease those properties to meet our expectations; and
•
we may acquire properties subject to liabilities and without any recourse, or with only limited recourse to former owners, with respect to unknown liabilities for clean-up of undisclosed environmental contamination, claims by tenants or other persons to former owners of the properties and claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the properties.
If we are unable to acquire properties on favorable terms, obtain financing in a timely manner and on favorable terms, or operate acquired properties to meet our financial expectations, our cash flow, financial condition and results of operations could be adversely affected.
Future joint venture investments could be adversely affected by our lack of sole decision-making authority.
As of December 31, 2016, we had no properties held in joint ventures. Any joint venture arrangements in which we may engage in the future could be subject to various risks including, among others: (i) lack of exclusive control over the joint venture, which may prevent us from taking actions that are in our best interest, (ii) future capital constraints of our partners, which may force us to contribute more capital than we anticipated to cover the joint venture’s liabilities, (iii) actions by our partners that could jeopardize our REIT status or the tax status of the joint venture, requiring us to pay taxes or subject properties owned by the joint venture to liabilities greater than those contemplated by the terms of the joint venture agreements, and (iv) disputes between us and our partners, which may result in litigation or arbitration that would increase our expenses and require our officers and/or directors to focus a disproportionate amount of their time and effort on the joint venture. If any of the foregoing were to occur, our cash flow, financial condition and results of operations could be adversely affected.

7

Development, redevelopment, expansions and pad development activities have inherent risks, which could adversely impact our cash flow, financial condition and results of operations.
As of December 31, 2016, we had two properties in redevelopment and three active expansions and pad developments. We have invested a total of approximately $12,357 in these projects, which are at various stages of completion, and based on our current plans and estimates, we anticipate that to complete these projects, it will require an additional $40,700 to $43,700, net of proceeds from land sales, reimbursement from third parties and contributions from project partners, as applicable. We anticipate engaging in additional redevelopment, expansions and pad development activities in the future. In addition to the risks associated with real estate investments in general as described elsewhere, the risks associated with future development, redevelopment, expansions and pad development activities include:
•
expenditure of capital and time on projects that may never be completed;
•
failure or inability to obtain financing on favorable terms or at all;
•
inability to secure necessary zoning or regulatory approvals;
•
higher than estimated construction or operating costs, including labor and material costs;
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inability to complete construction on schedule due to a number of factors, including inclement weather, labor disruptions, construction delays, delays or failure to receive zoning or other regulatory approvals, acts of terror or other acts of violence, or acts of God (such as fires, seismic activity or floods);
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significant time lag between commencement and stabilization resulting in delayed returns and greater risks due to fluctuations in the general economy, shifts in demographics and competition;
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decrease in customer traffic during the redevelopment period causing a decrease in tenant sales;
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inability to secure key anchor or other tenants at anticipated pace of lease-up or at all; and
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occupancy and rental rates at a newly completed project that may not meet expectations.
If any of the above events were to occur, the development, redevelopment, expansion or pad development of the properties may hinder our growth and may have an adverse effect on our cash flow, financial condition and results of operations. In addition, new development and significant redevelopment activities, regardless of whether they are ultimately successful, typically require substantial time and attention from management.
We are subject to litigation that may negatively impact our cash flow, financial condition and results of operations.
We are a defendant from time to time in lawsuits and regulatory proceedings relating to our business. Due to the inherent uncertainties of litigation and regulatory proceedings, we may not be able to accurately predict the ultimate outcome of any such litigation or proceedings. A significant unfavorable outcome could negatively impact our cash flow, financial condition and results of operations.
A number of properties in our portfolio are subject to ground leases; if we are found to be in breach of a ground lease or are unable to renew a ground lease, we could be materially and adversely affected.
We have 12 properties in our portfolio that are either completely or partially on land that is owned by third parties and leased to us pursuant to ground leases. Accordingly, we only own a long-term leasehold or similar interest in those properties. If we are found to be in breach of a ground lease and that breach cannot be cured, we could lose our interest in the improvements and the right to operate the property. In addition, unless we can purchase a fee interest in the underlying land or extend the terms of these leases before or at their expiration, as to which no assurance can be given, we will lose our interest in the improvements and the right to operate these properties. Assuming that we exercise all available options to extend the terms of our ground leases, all of our ground leases will expire between 2049 and 2115. However, in certain cases, our ability to exercise such options is subject to the condition that we are not in default under the terms of the ground lease at the time that we exercise such options, and we can provide no assurances that we will be able to exercise our options at such time. If we were to lose the right to operate a property due to a breach or non-renewal of the ground lease, we would be unable to derive income from such property, which could materially and adversely affect us.

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Uninsured losses or losses in excess of insurance coverage could materially and adversely affect our cash flow, financial condition and results of operations.
Each tenant is responsible for insuring its goods and demised premises and, in most circumstances, is required to reimburse us for its share of the cost of acquiring comprehensive insurance for the property, including casualty, liability, fire and extended coverage customarily obtained for similar properties in amounts which have been determined as sufficient to cover reasonably foreseeable losses. Tenants with net leases typically are required to pay all insurance costs associated with their space. However, material losses may occur in excess of insurance proceeds with respect to any property and, specific to net leases, tenants may fail to obtain adequate insurance. Additionally, losses of a catastrophic nature including loss due to wars, acts of terrorism, seismic activity, floods, hurricanes, wind, other natural disasters, pollution or environmental matters may be considered uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments. In the instance of a loss that is uninsured or that exceeds policy limits, a significant portion of the capital invested in the damaged property could be lost, as well as the anticipated future revenue of the property, which could materially and adversely affect our financial condition and results of operations. A variety of factors, including, among others, changes in building codes and ordinances and environmental considerations, might also make it impractical or undesirable to use insurance proceeds to replace a property after it has been damaged or destroyed. Furthermore, we may be unable to obtain adequate insurance coverage at reasonable costs in the future, as the costs associated with property and casualty renewals may be higher than anticipated.
A number of our properties are located in areas which are susceptible to, and could be significantly affected by, natural disasters that could cause significant damage. For example, many of our properties are located in coastal regions and would, therefore, be affected by any future increases in sea levels or in the frequency or severity of hurricanes and tropical storms to the extent they are located in impacted areas. In addition, some of our properties are located in California and other regions that are especially susceptible to seismic activity.
The occurrence of terrorist acts could sharply increase the premium paid for terrorism insurance coverage. Further, mortgage lenders, in some cases, insist that specific coverage against terrorism be purchased by commercial property owners as a condition for providing mortgage loans. It is uncertain whether such insurance policies will be available, or available at reasonable costs, which could inhibit our ability to finance or refinance our properties. In such instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. We cannot provide assurance that we will have adequate coverage for such losses and, to the extent we must pay unexpectedly large amounts for insurance, our cash flow, financial condition and results of operations could be materially and adversely affected.
We may incur significant costs complying with the ADA and similar laws, which could adversely affect our cash flow, financial condition and results of operations.
Under the ADA, all public accommodations must meet federal requirements related to access and use by disabled persons. Although we believe the properties in our portfolio substantially comply with the present requirements of the ADA, we have not conducted an audit or investigation of all of our properties to determine our compliance, nor can we be assured that requirements will not change. The obligation to make readily achievable accommodations is an ongoing one, and we will continue to assess our properties and make alterations as appropriate in this respect. If one or more of the properties in our portfolio is not in compliance with the ADA, we would be required to incur additional costs to bring the property into compliance, and it could result in the imposition of fines or an award of damages to private litigants. Additional federal, state and local laws may also require modifications to our properties, or restrict our ability to renovate our properties. We cannot predict the ultimate cost of compliance with the ADA or other legislation. If we incur substantial costs to comply with the ADA and any other legislation, our cash flow, financial condition and results of operations could be adversely affected.
We may become liable with respect to contaminated property or incur costs to comply with environmental laws, which may negatively impact our cash flow, financial condition and results of operations.
Under various federal, state and local laws, ordinances and regulations, as a current or former owner or operator of real property, we may be liable for costs and damages resulting from the presence or release of hazardous substances, waste, or petroleum products at, on, in, under or from such property, including costs for investigation, remediation, natural resource damages or third party liability for personal injury or property damage. These laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence or release of such materials, and the liability may be joint and several. In addition, the presence of contamination or the failure to remediate contamination at our properties may adversely affect our ability to sell, redevelop, or lease such property or to borrow funds using the property as collateral. Environmental laws may also create liens on contaminated sites in favor of the government for damages and costs it incurs to address such contamination. Moreover, if contamination is discovered on our properties, environmental laws may impose restrictions on the manner in which that property

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may be used or how businesses may be operated on that property. Some of our properties have been or may be impacted by contamination arising from current or prior uses of the property or adjacent properties for commercial or industrial purposes. Such contamination may arise from spills of petroleum or hazardous substances or releases from tanks used to store such materials. We may also be liable for the costs of remediating contamination at off-site disposal or treatment facilities when we arrange for disposal or treatment of hazardous substances at such facilities. The environmental site assessments described in Item 1. “Business — Environmental Matters” have a limited scope and may not reveal all potential environmental liabilities. Further, material environmental conditions may have arisen after the review was completed or may arise in the future, and future laws, ordinances or regulations may impose additional material environmental liability beyond what was known at the time the site assessment was conducted.
In addition, our properties are subject to various federal, state and local environmental, health and safety laws, including laws governing the management of waste and underground and aboveground storage tanks. Noncompliance with these environmental, health and safety laws could subject us or our tenants to liability, which could affect a tenant’s ability to make rental payments to us. Moreover, changes in laws could increase the potential costs of compliance with environmental, health and safety laws or increase liability for noncompliance. This may result in significant unanticipated expenditures or may otherwise materially and adversely affect our operations, or those of our tenants, which could in turn have a material adverse effect on us.
As the owner or operator of real property, we may also incur liability based on various building conditions. For example, buildings and other structures on properties that we currently own or operate or those we acquire or operate in the future contain, may contain, or may have contained, asbestos-containing material, or ACM. Environmental, health and safety laws require that ACM be properly managed and maintained and may impose fines or penalties on owners, operators or employers for non-compliance with these requirements. These requirements include special precautions, such as removal, abatement or air monitoring, if ACM would be disturbed during maintenance, renovation or demolition of a building, potentially resulting in substantial costs. In addition, we may be subject to liability for personal injury or property damage sustained as a result of exposure to ACM or releases of ACM into the environment.
When excessive moisture accumulates in buildings or on building materials, mold growth may occur if not addressed over a period of time. Some molds may produce airborne toxins or irritants. Indoor air quality issues can also stem from inadequate ventilation, chemical contamination from indoor or outdoor sources, and other biological contaminants such as pollen, viruses and bacteria. Indoor exposure to airborne toxins or irritants can be alleged to cause a variety of adverse health effects and symptoms, including allergic or other reactions. As a result, the presence of significant mold or other airborne contaminants at any of our properties could require us to undertake a costly remediation program to contain or remove the mold or other airborne contaminants or to increase ventilation. In addition, the presence of significant mold or other airborne contaminants could expose us to liability from our tenants, employees of our tenants, or others if property damage or personal injury occurs.
To the extent we incur costs or liabilities as a result of environmental issues, our cash flow, financial condition and results of operations could be materially and adversely affected.
We may experience a decline in the fair value of our assets, which could materially and adversely impact our results of operations.
A decline in the fair value of our assets may require us to recognize an impairment charge on such assets under accounting principles generally accepted in the United States (GAAP) if we were to determine that we do not have the ability and intent to hold such assets for a period of time sufficient to allow for recovery to the asset’s carrying value. If such a determination were to be made, we would recognize an impairment charge through earnings and write down the carrying value of such assets to a new cost basis based on the fair value of such assets on the date they are considered to not be recoverable. For the years ended December 31, 2016, 2015 and 2014, we recognized aggregate impairment charges related to investment properties of $20,376, $19,937 and $72,203, respectively. We may be required to recognize additional asset impairment charges in the future.
We face risks associated with security breaches through cyber attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (IT) networks and related systems.
We face risks associated with security breaches, whether through (i) cyber attacks or cyber intrusions, (ii) malware or ransomware, (iii) computer viruses, (iv) people with access or who gain access to our systems, and (v) other significant disruptions of our IT networks and related systems. The risk of a security breach or disruption, particularly through cyber attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations. Although we make efforts to maintain the security and integrity of our IT networks and related systems, and we have implemented various measures to manage the risk

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of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. A security breach or other significant disruption involving our IT networks and related systems could significantly disrupt the proper functioning of our networks and systems and, as a result, disrupt our operations, which could have a material adverse effect on our cash flow, financial condition and results of operations.
Our success depends on key personnel whose continued service is not guaranteed.
We depend on the efforts and expertise of our senior management team to manage our day-to-day operations and strategic business direction. While we have retention agreements with the members of our executive management team that provide for certain payments in the event of a change of control or termination without cause, we do not have employment agreements with the members of our executive management team. Therefore, we cannot guarantee their continued service. The loss of their services, and our inability to find suitable replacements, could have an adverse effect on our operations.
RISKS RELATED TO OUR DEBT FINANCING
We are generally subject to the risks associated with debt financing and our debt service obligations could adversely affect our financial health and operating flexibility.
Required principal and interest payments on our indebtedness reduce funds available for general business purposes and distributions to our shareholders. Our existing debt financing and debt service obligations also increase our vulnerability to general adverse economic and industry conditions, including increases in interest rates. In addition, as our existing debt comes due, we may be unable to refinance it on favorable terms, or at all, which could adversely affect our cash flow, financial condition and results of operations.
Credit ratings may not reflect all the risks of an investment in our debt or preferred shares.
Our credit ratings are an assessment by rating agencies of our ability to pay our debts and preferred dividends when due. Consequently, real or anticipated changes in our credit ratings will generally affect the market value of our publicly-traded debt or preferred shares. Credit ratings may be revised or withdrawn at any time by the rating agency at its sole discretion. We do not undertake any obligation to maintain the ratings or advise holders of our debt or preferred shares of any change in our ratings. There can be no assurance that we will be able to maintain our current credit ratings. Adverse changes in our credit ratings could impact our ability to obtain additional debt and equity financing on favorable terms, if at all, and could significantly reduce the market prices of our publicly-traded debt or preferred shares.
Our cash flow, financial condition and results of operations could be adversely affected by financial and other covenants and provisions under the unsecured credit agreement governing our Unsecured Credit Facility or our other debt agreements.
Our Unsecured Credit Facility, which is comprised of our unsecured revolving line of credit and two unsecured term loans, is governed by our unsecured credit agreement (the Unsecured Credit Agreement). Our other debt agreements include, but are not limited to, the Indenture, as supplemented, governing our Notes Due 2025 (the Indenture), the note purchase agreements governing our Notes Due 2021, 2024, 2026 and 2028 (the Note Purchase Agreements) and the credit agreement governing our Term Loan Due 2023, which closed during the year ended December 31, 2016 and funded on January 3, 2017 (the Term Loan Agreement). The Unsecured Credit Agreement, the Indenture, the Note Purchase Agreements, the Term Loan Agreement and any future debt agreements require, or may require, compliance with certain financial and operating covenants, including, among others, the requirement to maintain maximum unencumbered, secured and consolidated leverage ratios, minimum interest, fixed charge, debt service and unencumbered interest coverage ratios, a minimum ratio of assets to unsecured debt and a minimum consolidated net worth. They also contain or may contain customary events of default, including defaults on any of our recourse indebtedness in excess of $50,000. The provisions of these agreements could limit our ability to obtain additional funds needed to address cash shortfalls or pursue growth opportunities or other accretive transactions.
In addition, our senior unsecured debt obligations, including our Unsecured Credit Facility, Notes Due 2021, 2024, 2025, 2026 and 2028 and Term Loan Due 2023, are pari passu in priority of payment. Therefore, a breach of these covenants or other events of default would allow the lenders to require us to accelerate payment of amounts outstanding under one or all of these agreements. If payment is accelerated, our liquid assets may not be sufficient to repay such debt in full and, as a result, such an event may have a material adverse effect on our cash flow, financial condition and results of operations.
Given the restrictions in our debt covenants, we may be limited in our operating and financial flexibility and in our ability to respond to changes in our business or to pursue strategic opportunities in the future.

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Increases in interest rates would cause our borrowing costs to rise and may limit our ability to refinance debt.
Although a significant amount of our outstanding debt has fixed interest rates, we also borrow funds at variable interest rates. Increases in interest rates would increase our interest expense on any outstanding unhedged variable rate debt and would affect the terms under which we refinance our existing debt as it matures, which would adversely affect our cash flow, financial condition and results of operations.
We may choose to retire debt prior to its stated maturity date and may incur debt prepayment costs as a result, some of which may be significant.
At times, management has decided to retire debt prior to its stated maturity date, and in doing so, we have incurred prepayment or defeasance premiums in accordance with the relevant loan agreements. If we choose to retire debt prior to its stated maturity date in the future, we may incur significant debt prepayment costs or defeasance premiums, which could have an adverse effect on our cash flow and results of operations.
Defaults on secured indebtedness may result in foreclosure.
In the event that we default on mortgages in the future, either as a result of ceasing to make debt service payments or failing to meet applicable covenants, the lenders may accelerate the related debt obligations and foreclose and/or take control of the properties that secure their loans. In the event of a default under any of our recourse indebtedness, we may also remain liable for any deficiency between the value of the property securing such loan and the principal and accrued interest on the loan.
Further, for tax purposes, the foreclosure of a mortgage may result in the recognition of taxable income related to the extinguished debt without us having received any accompanying cash proceeds. As a result, since we are structured as a REIT, we may be required to identify and utilize sources for distributions to our shareholders related to such taxable income in order to avoid incurring corporate tax or to meet the REIT distribution requirements imposed by the Code.
RISKS RELATED TO OUR ORGANIZATIONAL STRUCTURE
Our board of directors may change significant corporate policies without shareholder approval.
Our investment, financing and distribution policies are determined by our board of directors. These policies may be amended or revised at any time at the discretion of the board of directors without a vote of our shareholders. As a result, the ability of our shareholders to control our policies and practices is extremely limited. We could make investments and engage in business activities that are different from, and possibly riskier than, the investments and businesses described in this report. In addition, our board of directors may change our policies with respect to conflicts of interest provided that such changes are consistent with applicable legal and regulatory requirements, including the listing standards of the New York Stock Exchange (NYSE). A change in these policies could have an adverse effect on our cash flow, financial condition and results of operations.
We could increase the number of authorized shares of stock and issue stock without shareholder approval.
Subject to applicable legal and regulatory requirements, our charter authorizes our board of directors, without shareholder approval, to increase the aggregate number of authorized shares of stock or the number of authorized shares of stock of any class or series, to issue authorized but unissued shares of our common stock or preferred stock, classify or reclassify any unissued shares of our common stock or preferred stock and to set the preferences, rights and other terms of such classified or unclassified shares. As a result, we may issue series or classes of common stock or preferred stock with preferences, dividends, powers and rights, voting or otherwise, that are senior to, or otherwise conflict with, the rights of holders of our common stock. The Company has also established an at-the-market equity program under which it may sell shares of its Class A common stock having an aggregate offering price of up to $250,000 from time to time. In addition, our board of directors could establish a series of preferred stock that could, depending on the terms of such series, delay, defer or prevent a transaction or a change of control that might involve a premium price for our common stock or that our shareholders may believe is in their best interests.
Certain provisions of our charter may limit the ability of a third party to acquire control of our company.
Our charter provides that no person may beneficially own more than 9.8% in value or number of shares, whichever is more restrictive, of our outstanding common stock or 9.8% in value of the aggregate outstanding shares of our capital stock. While these charter provisions help us to ensure we maintain our REIT status, these ownership limitations may prevent an acquisition of control of our company by a third party without our board of directors’ approval, even if our shareholders believe the change of control is in their best interests.

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Certain provisions of Maryland law could inhibit changes of control, which could lower the values of our Class A common stock and Series A preferred stock.
Certain provisions of the Maryland General Corporation Law, or MGCL, may have the effect of inhibiting or deterring a third party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide our common stockholders with the opportunity to realize a premium over the then prevailing market price of such shares, including:
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“business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested shareholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our shares or an affiliate or associate of ours who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of our then outstanding voting shares) or an affiliate of an interested shareholder for five years after the most recent date on which the shareholder becomes an interested shareholder, and thereafter, may impose special shareholder voting requirements unless certain minimum price conditions are satisfied; and
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“control share” provisions that provide that “control shares” of our company (defined as shares which, when aggregated with other shares controlled by the shareholder, entitle the shareholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of outstanding “control shares”) have no voting rights except to the extent approved by our shareholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.
As permitted by the MGCL, our board of directors has adopted a resolution exempting any business combinations between us and any other person or entity from the business combination provisions of the MGCL. Our bylaws provide that such resolution or any other resolution of our board of directors exempting any business combination from the business combination provisions of the MGCL may only be revoked, altered or amended, and our board of directors may only adopt a resolution that is inconsistent with any such prior resolution (including any amendment to that bylaw provision), which we refer to as an opt in to the business combination provisions, with the approval of stockholders entitled to cast a majority of all votes cast by the holders of the issued and outstanding shares of our common stock. In addition, as permitted by the MGCL, our bylaws contain a provision exempting from the control share acquisition provisions of the MGCL any acquisition by any person of shares of our stock. This bylaw provision may be amended, which we refer to as an opt in to the control share acquisition provisions, only with the affirmative vote of a majority of the votes cast on such matter by holders of the issued and outstanding shares of our common stock.
Title 3, Subtitle 8 of the MGCL permits our board of directors, without shareholder approval and regardless of what is currently provided in our charter or bylaws, to implement certain takeover defenses, including adopting a classified board. Such takeover defenses may have the effect of inhibiting a third party from making an acquisition proposal for us or of delaying, deferring or preventing a change of control of us under the circumstances that otherwise could provide our common shareholders with the opportunity to realize a premium over the then prevailing market price.
In addition, the provisions of our charter on removal of directors and the advance notice provisions of our bylaws, among others, could delay, defer or prevent a transaction or a change of control of our company that might involve a premium price for holders of our common stock or that our shareholders may believe to be in their best interests. Likewise, if our company’s board of directors were to opt in to the provisions of Title 3, Subtitle 8 of the MGCL, or if our board of directors were to opt in to the business combination provisions or the control share acquisition provisions of the MGCL, with shareholder approval, these provisions could have similar anti-takeover effects.
Our rights and the rights of our shareholders to take action against our directors and officers are limited, which could limit shareholder recourse in the event of actions that our shareholders do not believe are in their best interests.
Maryland law provides that a director or officer has no liability in that capacity if he or she satisfies his or her duties to us and our shareholders. As permitted by the MGCL, our charter limits the liability of our directors and officers to us and our shareholders for monetary damages, except for liability resulting from:
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actual receipt of an improper benefit or profit in money, property or services; or
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a final judgment based upon a finding of active and deliberate dishonesty by the director or officer that was material to the cause of action adjudicated.
In addition, our charter and bylaws and indemnification agreements that we have entered into with our directors and certain of our officers require us to indemnify our directors and officers, among others, for actions taken by them in those capacities to the

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maximum extent permitted by Maryland law. As a result, we and our shareholders may have more limited rights against our directors and officers than might otherwise exist. Accordingly, in the event that actions taken in good faith by any of our directors or officers impede the performance of our company, your ability to recover damages from such director or officer will be limited. In addition, we will be obligated to advance the defense costs incurred by our directors and officers with indemnification agreements, and may, at the discretion of our board of directors, advance the defense costs incurred by our employees and other agents, in connection with legal proceedings.
Our charter contains provisions that make removal of our directors difficult, which could make it difficult for our shareholders to effect changes to our management.
Our charter provides that a director may only be removed for cause upon the affirmative vote of holders of a majority of the votes entitled to be cast in the election of directors. Vacancies may be filled only by a majority vote of the remaining directors in office, even if less than a quorum. These requirements make it more difficult to change our management by removing and replacing directors and may prevent a change of control that is in the best interests of our shareholders.
RISKS RELATED TO OUR REIT STATUS
Failure to qualify as a REIT would cause us to be taxed as a regular corporation and, even if we qualify as a REIT, we may face other tax liabilities which could substantially reduce funds available for distribution to our shareholders and materially and adversely affect our cash flow, financial condition and results of operations.
We believe that we have been organized, owned and operated in conformity with the requirements for qualification and taxation as a REIT under the Code beginning with our taxable year ended December 31, 2003, and that our intended manner of ownership and operation will enable us to continue to meet the requirements for qualification and taxation as a REIT for U.S. federal income tax purposes. However, we cannot assure you that we have qualified or will qualify as such.
Qualification as a REIT involves the application of highly technical and complex provisions of the Code as to which there are only limited judicial and administrative interpretations and involves the determination of facts and circumstances not entirely within our control. For example, to qualify as a REIT, we generally are required to annually distribute to our shareholders at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding net capital gains. To the extent that we satisfy this distribution requirement, but distribute less than 100% of our taxable income, we will be subject to U.S. federal corporate income tax on our undistributed taxable income.
If we fail to qualify as a REIT in any taxable year, we will face serious tax consequences that will substantially reduce the funds available for distributions to our shareholders because:
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we would not be allowed a deduction for dividends paid to shareholders in computing our taxable income and would be subject to U.S. federal income tax at regular corporate rates;
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we could be subject to the U.S. federal alternative minimum tax;
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we could be subject to increased state and local taxes; and
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unless we are entitled to relief under certain U.S. federal income tax laws, we could not re-elect REIT status until the fifth calendar year after the year in which we failed to qualify as a REIT.
In addition, if we fail to qualify as a REIT, it could result in default under certain of our indebtedness agreements. As a result of all these factors, our failure to qualify as a REIT could adversely affect our cash flow, financial condition and results of operations.
We may be subject to adverse legislative or regulatory tax changes that could negatively impact our cash flow, financial condition and results of operations.
At any time, the U.S. federal income tax laws governing REITs or the administrative interpretation of those laws (or other laws affecting our business) may be amended. We cannot predict if or when any new or amended U.S. federal income tax law, regulation or administrative interpretation (or any repeal thereof) will become effective, and any such law, regulation, interpretation or repeal may take effect retroactively. Any such changes could adversely affect our cash flow, financial condition and results of operations.

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We may be required to borrow funds or sell assets to satisfy our REIT distribution requirements.
Our cash flows may be insufficient to fund distributions required to maintain our qualification as a REIT as a result of differences in timing between the actual receipt of income and the recognition of income for U.S. federal income tax purposes, or the effect of non-deductible expenditures, such as capital expenditures, payments of compensation for which Section 162(m) of the Code denies a deduction, the creation of reserves or required amortization payments. If we do not have other funds available in these situations, we may need to borrow funds on a short-term basis or sell assets, even if the then-prevailing market conditions are not favorable for these borrowings or sales, in order to satisfy our REIT distribution requirements. Such actions could adversely affect our cash flow and results of operations.
Dividends payable by REITs generally do not qualify for reduced tax rates.
Certain qualified dividends paid by corporations to individuals, trusts and estates that are U.S. shareholders are taxed at capital gain rates, which are lower than ordinary income rates. Dividends of current and accumulated earnings and profits payable by REITs, however, are taxed at ordinary income rates as opposed to the capital gain rates. Dividends payable by REITs in excess of these earnings and profits generally are treated as a non-taxable reduction of the shareholders’ basis in the shares to the extent thereof and thereafter as taxable gain. The more favorable rates applicable to regular corporate dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs, including us, to be relatively less attractive than investments in the stock of non-REIT corporations that pay dividends, which may negatively impact the trading prices of our Class A common stock and Series A preferred stock.
Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments.
To qualify as a REIT, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our shareholders and the ownership of our capital stock. In order to meet these tests, we may be required to forego investments we might otherwise make and refrain from engaging in certain activities. Thus, compliance with the REIT requirements may hinder our performance.
In addition, if we fail to comply with certain asset ownership tests at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification. As a result, we may be required to liquidate otherwise attractive investments.
If a transaction intended to qualify as an Internal Revenue Code Section 1031 tax-deferred exchange (1031 Exchange) is later determined to be taxable, we may face adverse consequences, and if the laws applicable to such transactions are amended or repealed, we may be unable to dispose of properties on a tax-deferred basis.
From time to time we may dispose of properties in transactions that are intended to qualify as 1031 Exchanges. It is possible that the qualification of a transaction as a 1031 Exchange could be successfully challenged and determined to be currently taxable. In such case, our taxable income and earnings and profits would increase, which could increase the ordinary dividend income to our stockholders. In some circumstances, we may be required to pay additional dividends or, in lieu of that, corporate income tax, possibly including interest and penalties. As a result, we may be required to borrow funds in order to pay additional dividends or taxes, and the payment of such taxes could cause us to have less cash available to distribute to our stockholders. In addition, if a 1031 Exchange were later determined to be taxable, we may be required to amend our tax returns for the applicable year in question, including any information reports we sent our stockholders. Moreover, it is possible that legislation could be enacted that could modify or repeal the laws with respect to 1031 Exchanges, which could make it more difficult or impossible for us to dispose of properties on a tax-deferred basis.
Shareholders may be restricted from acquiring or transferring certain amounts of our stock.
In order to maintain our REIT qualification, among other requirements, no more than 50% in value of our outstanding stock may be owned, directly or indirectly, by five or fewer individuals, as defined in the Code to include certain kinds of entities, during the last half of any taxable year, other than the first year for which we made a REIT election. To assist us in qualifying as a REIT, our charter contains an aggregate stock ownership limit of 9.8%, a common stock ownership limit of 9.8% and a preferred stock ownership limit of 9.8%. Generally, shareholders must include stock of affiliates for purposes of determining whether they own stock in excess of any of these ownership limits.
If anyone attempts to transfer or own shares of our stock in a way that would violate the aggregate stock ownership limit, the common stock ownership limit or the preferred stock ownership limit, unless such ownership limits have been waived by our

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board of directors, or in a way that would prevent us from continuing to qualify as a REIT, those shares instead will be transferred to a trust for the benefit of a charitable beneficiary and will be either redeemed by us or sold to a person whose ownership of the shares will not violate the aggregate stock ownership limit, the common stock ownership limit or the preferred stock ownership limit. Purported transferees generally bear any decline in the market price of such stock held in such trust, but do not benefit from any increase. If this transfer to a trust fails to prevent such a violation or our disqualification as a REIT, then the initial intended transfer or ownership will be null and void from the outset.
The ability of our board of directors to revoke our REIT qualification without shareholder approval may cause adverse consequences to our shareholders.
Our charter provides that our board of directors may revoke or otherwise terminate our REIT election, without the approval of our shareholders, if it determines that it is no longer in our best interest to continue to qualify as a REIT. If we cease to be a REIT, we will not be allowed a deduction for dividends paid to shareholders in computing our taxable income and will be subject to U.S. federal income tax at regular corporate rates and state and local taxes, which may have adverse consequences on our total return to our shareholders.
GENERAL INVESTMENT RISKS
The market prices and trading volume of our debt and equity securities may be volatile.
The market prices of our debt and equity securities depend on various factors which may be unrelated to our operating performance or prospects. We cannot assure you that the market prices of our debt and equity securities, including our Class A common stock, will not fluctuate or decline significantly in the future.
A number of factors could negatively affect, or result in fluctuations in, the prices or trading volume of our debt and equity securities, including:
•
actual or anticipated changes in our operating results and changes in expectations of future financial performance;
•
our operating performance and the performance of other similar companies;
•
our strategic decisions, such as acquisitions, dispositions, spin-offs, joint ventures, strategic investments or changes in business strategy;
•
adverse market reaction to any indebtedness we incur in the future;
•
equity issuances or buybacks by us or the perception that such issuances or buybacks may occur;
•
increases in market interest rates or decreases in our distributions to shareholders that lead purchasers of our shares to demand a higher yield;
•
changes in market valuations of similar companies;
•
changes in real estate valuations;
•
additions or departures of key management personnel;
•
changes in the real estate industry, including increased competition due to shopping center supply growth, and in the retail industry, including growth in e-commerce, catalog companies and direct consumer sales;
•
publication of research reports about us or our industry by securities analysts;
•
speculation in the press or investment community;
•
the passage of legislation or other regulatory developments that adversely affect us, our tax status, or our industry;
•
changes in accounting principles;
•
our failure to satisfy the listing requirements of the NYSE;

16

•
our failure to comply with the requirements of the Sarbanes‑Oxley Act;
•
our failure to qualify as a REIT; and
•
general market conditions, including factors unrelated to our performance.
In the past, securities class action litigation has often been instituted against companies following periods of volatility in the price of their common stock. This type of litigation could result in substantial costs and divert our management’s attention and resources, which could have a material adverse effect on our cash flow, financial condition and results of operations.
Increases in market interest rates may result in a decrease in the value of our publicly-traded debt and equity securities.
One of the factors that may influence the prices of our publicly-traded debt and equity securities is the interest rate on our publicly-traded debt and the dividend yield on our common and preferred stock relative to market interest rates. If market interest rates, which are currently at low levels relative to historical rates, rise, our borrowing costs could rise and result in less funds being available for distribution. Therefore, we may not be able to, or we may choose not to, provide a higher distribution rate on our common stock. In addition, fluctuations in interest rates could adversely affect the market value of our properties. These factors could result in a decline in the market prices of our publicly-traded debt and equity securities.
Future offerings of debt securities, which would be senior to our common and preferred stock, or equity securities, which would dilute the interests of our existing shareholders and may be senior to our existing common stock, may adversely affect the market prices of our common and preferred stock.
We have issued one series of preferred stock, $700,000 of unsecured notes and have established an at-the-market (ATM) equity program under which we may sell shares of our Class A common stock. In the future, we may attempt to increase our capital resources by making additional offerings of debt or equity securities, including senior or subordinated notes and classes of preferred or common stock. Holders of debt securities or shares of preferred stock will generally be entitled to receive interest payments or distributions, both current and in connection with any liquidation or sale, prior to the holders of our common stock. Furthermore, offerings of common stock or other equity securities may dilute the holdings of our existing shareholders. We are not required to offer any such equity securities to existing shareholders on a preemptive basis, and future offerings of debt or equity securities, or perceptions that such offerings may occur, may reduce the market prices of our common and preferred stock or the distributions that we pay with respect to our common stock. Because we may generally issue any such debt or equity securities in the future without obtaining the consent of our shareholders, our shareholders bear the risk of our future offerings reducing the market prices of our common and preferred stock and diluting their proportionate ownership.
The change of control conversion feature of our Series A preferred stock may make it more difficult for a party to take over our company or discourage a party from taking over our company.
Upon the occurrence of a change of control (as defined in our Articles Supplementary for our Series A preferred stock), holders of our Series A preferred stock will have the right to convert some or all of their Series A preferred stock into shares of our common stock, or equivalent value of alternative consideration, unless we have provided notice of our election to redeem our Series A preferred stock. Upon such a conversion, the preferred holders will be limited to a maximum number of shares of our common stock equal to 4.1736, subject to certain adjustments, multiplied by the number of shares of Series A preferred stock converted. The change of control conversion feature of our Series A preferred stock may have the effect of discouraging a third party from making an acquisition proposal for our company or of delaying, deferring or preventing certain change of control transactions of our company under circumstances that our shareholders may otherwise believe are in their best interests.
Our ability to pay dividends is limited by the requirements of Maryland law.
Our ability to pay dividends on our common stock and Series A preferred stock is limited by the laws of the State of Maryland. Under applicable Maryland law, a Maryland corporation generally may not make a distribution if, after giving effect to the distribution, the corporation would not be able to pay its debts as they become due in the usual course of business, or the corporation’s total assets would be less than the sum of its total liabilities plus, unless the corporation’s charter provides otherwise, the amount that would be needed, if the corporation were dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution. Accordingly, we generally may not make a distribution on our common stock or Series A preferred stock if, after giving effect to the distribution, we would not be able to pay our debts as they become due in the usual course of business or our total assets would be less than the sum of our total liabilities plus, unless the terms of such class or series provide otherwise, the amount that would be needed to satisfy the

17

preferential rights upon dissolution of the holders of shares of any class or series of preferred stock then outstanding, if any, with preferences senior to those of our common stock or Series A preferred stock, respectively.
Changes in accounting standards may adversely impact our financial results.
The Financial Accounting Standards Board (FASB) recently issued new guidance on a variety of topics, including, among others, lease accounting and revenue recognition, that may impact how we account for certain transactions. Specifically, the new lease accounting guidance will require the recognition of a lease liability and a right-of-use asset for operating leases where we are the lessee, such as ground leases and office and equipment leases. We are continuing to assess the impact of adoption of the new standards at this time and, as such, are unable to predict the full impact these new standards, or other new accounting standards that we have not yet adopted, could have on the presentation of our consolidated financial statements, results of operations and financial ratios required by our debt covenants.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
The following table sets forth summary information regarding our operating portfolio as of December 31, 2016. Dollars (other than per square foot information) and square feet of GLA are presented in thousands. This information is grouped into divisions based on the manner in which we have structured our asset management, property management and leasing operations. For additional property details on our operating portfolio, see “Real Estate and Accumulated Depreciation (Schedule III)” herein.
Division
 
Number of
Properties
 
ABR
 
% of Total
Retail
ABR (a)
 
ABR per
Occupied
Sq. Ft.
 
GLA
 
% of Total
Retail
GLA (a)
 
Occupancy (b)
Eastern Division
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alabama, Connecticut, Florida, Georgia, Indiana, Maryland, Massachusetts, Michigan, Missouri, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Virginia
 
89

 
$
213,990

 
51.3
%
 
$
16.22

 
13,903

 
53.8
%
 
94.9
%
Western Division
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Arizona, California, Colorado, Illinois, Louisiana, New Mexico, Oklahoma, Texas, Washington
 
67

 
202,917

 
48.7
%
 
18.15

 
11,929

 
46.2
%
 
93.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total retail operating portfolio
 
156

 
416,907

 
100.0
%
 
17.11

 
25,832

 
100.0
%
 
94.3
%
Office
 
1

 
69

 
 
 
7.01

 
895

 
 
 
1.1
%
Total operating portfolio (c)
 
157

 
$
416,976

 
 
 
$
17.11

 
26,727

 
 
 
91.2
%
(a)
Percentages are only provided for our retail operating portfolio.
(b)
Calculated as the percentage of economically occupied GLA as of December 31, 2016. Including leases signed but not commenced, our retail operating portfolio and our consolidated operating portfolio were 95.0% and 93.3% leased, respectively, as of December 31, 2016.
(c)
Excludes one multi-tenant retail operating property and one single-user retail operating property classified as held for sale as of December 31, 2016, as well as two properties where we have begun redevelopment activities.

18

The following table sets forth information regarding the 20 largest tenants in our retail operating portfolio based on ABR as of December 31, 2016. Dollars (other than per square foot information) and square feet of GLA are presented in thousands.
Tenant
 
Primary DBA
 
Number
of Stores
 
ABR
 
% of
Total ABR
 
ABR per
Occupied
Sq. Ft.
 
Occupied
GLA
 
% of
Occupied
GLA
Best Buy Co., Inc.
 
Best Buy, Pacific Sales
 
20

 
$
12,219

 
2.9
%
 
$
15.53

 
787

 
3.2
%
Ahold U.S.A. Inc.
 
Giant Foods, Stop & Shop, Martin's
 
9

 
11,006

 
2.6
%
 
19.87

 
554

 
2.3
%
Ross Stores, Inc.
 
Ross Dress for Less
 
30

 
9,752

 
2.3
%
 
11.04

 
883

 
3.6
%
The TJX Companies, Inc.
 
HomeGoods, Marshalls, T.J. Maxx
 
33

 
9,406

 
2.3
%
 
9.95

 
945

 
3.9
%
Bed Bath & Beyond Inc.
 
Bed Bath & Beyond, Buy Buy Baby, The Christmas Tree Shops, Cost Plus World Market
 
24

 
8,434

 
2.0
%
 
13.43

 
628

 
2.6
%
PetSmart, Inc.
 
 
 
26

 
7,993

 
1.9
%
 
14.91

 
536

 
2.2
%
Regal Entertainment Group
 
Edwards Cinema
 
2

 
6,911

 
1.7
%
 
31.56

 
219

 
0.9
%
AB Acquisition LLC
 
Safeway, Jewel-Osco, Shaw’s Supermarket, Tom Thumb
 
8

 
6,134

 
1.5
%
 
13.19

 
465

 
1.9
%
Michaels Stores, Inc.
 
Michaels, Aaron Brothers Art & Frame
 
23

 
6,108

 
1.5
%
 
11.86

 
515

 
2.1
%
The Gap, Inc.
 
Old Navy, Banana Republic, The Gap, Gap Factory Store, Athleta
 
26

 
5,396

 
1.3
%
 
16.35

 
330

 
1.4
%
Dick's Sporting Goods, Inc.
 
Dick's Sporting Goods, Golf Galaxy, Field & Stream
 
9

 
5,325

 
1.3
%
 
13.55

 
393

 
1.6
%
The Kroger Co.
 
Kroger, Harris Teeter, King Soopers, QFC
 
10

 
5,289

 
1.3
%
 
10.02

 
528

 
2.2
%
Ascena Retail Group Inc.
 
Dress Barn, Lane Bryant, Justice, Catherine’s, Ann Taylor, Maurices, LOFT
 
47

 
5,182

 
1.2
%
 
20.32

 
255

 
1.0
%
Pier 1 Imports, Inc.
 
 
 
24

 
4,970

 
1.2
%
 
20.45

 
243

 
1.0
%
Publix Super Markets Inc.
 
 
 
11

 
4,964

 
1.2
%
 
10.65

 
466

 
1.9
%
Office Depot, Inc.
 
Office Depot, OfficeMax
 
17

 
4,953

 
1.2
%
 
14.19

 
349

 
1.4
%
Lowe’s Companies, Inc.
 
 
 
6

 
4,790

 
1.1
%
 
6.44

 
744

 
3.1
%
BJ’s Wholesale Club, Inc.
 
 
 
2

 
4,609

 
1.1
%
 
18.81

 
245

 
1.0
%
Party City Holdings Inc.
 
 
 
23

 
4,496

 
1.1
%
 
14.50

 
310

 
1.3
%
Mattress Firm Holding Corp.
 
Mattress Firm, Sleepy’s
 
30

 
4,257

 
1.0
%
 
28.57

 
149

 
0.6
%
Total Top Retail Tenants
 
 
 
380

 
$
132,194

 
31.7
%
 
$
13.85

 
9,544

 
39.2
%

19

The following table sets forth a summary, as of December 31, 2016, of lease expirations scheduled to occur during 2017 and each of the nine calendar years from 2018 to 2026 and thereafter, assuming no exercise of renewal options or early termination rights for all leases in our retail operating portfolio. The following table is based on leases commenced as of December 31, 2016. Dollars (other than per square foot information) and square feet of GLA are presented in thousands.
Lease Expiration Year
 
Lease
Count
 
ABR
 
% of Total
ABR
 
ABR per
Occupied
Sq. Ft.
 
GLA
 
% of
Occupied
GLA
2017 (a)
 
356

 
$
25,470

 
6.2
%
 
$
18.51

 
1,376

 
5.6
%
2018
 
472

 
52,328

 
12.5
%
 
19.17

 
2,729

 
11.2
%
2019
 
533

 
69,138

 
16.6
%
 
18.76

 
3,685

 
15.1
%
2020
 
379

 
47,443

 
11.4
%
 
15.97

 
2,971

 
12.2
%
2021
 
339

 
50,077

 
12.0
%
 
18.05

 
2,775

 
11.4
%
2022
 
199

 
40,206

 
9.6
%
 
14.34

 
2,804

 
11.6
%
2023
 
117

 
25,364

 
6.0
%
 
15.36

 
1,651

 
6.7
%
2024
 
161

 
30,299

 
7.3
%
 
16.14

 
1,877

 
7.7
%
2025
 
105

 
23,282

 
5.6
%
 
16.51

 
1,410

 
5.8
%
2026
 
89

 
16,640

 
4.0
%
 
18.74

 
888

 
3.7
%
Thereafter
 
80

 
35,265

 
8.5
%
 
16.51

 
2,136

 
8.7
%
Month-to-month
 
22

 
1,395

 
0.3
%
 
20.82

 
67

 
0.3
%
Total
 
2,852

 
$
416,907

 
100.0
%
 
$
17.11

 
24,369

 
100.0
%
(a)
Excludes month-to-month leases.
The single-user lease at our one remaining office property expired on November 30, 2016. We continue to focus on leasing the vacant space at this property and have leased 397,000 square feet of the available 895,000 square feet as of December 31, 2016.
ITEM 3. LEGAL PROCEEDINGS
We are subject, from time to time, to various legal proceedings and claims that arise in the ordinary course of business. While the resolution of such matters may not be predicted with certainty, we believe, based on currently available information, that the final outcome of such matters will not have a material effect on our consolidated financial statements.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.

20

PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
The following table sets forth, for the quarterly periods indicated, the high and low sales prices of our Class A common stock, which trades on the NYSE under the trading symbol “RPAI”, and the quarterly dividend distributions per share of common stock for the years ended December 31, 2016 and 2015:
 
 
Sales Price
 
Dividends
per Share
 
 
High
 
Low
 
2016
 
 
 
 
 
 
Fourth Quarter
 
$
16.97

 
$
14.42

 
$
0.165625

Third Quarter
 
$
17.78

 
$
16.29

 
$
0.165625

Second Quarter
 
$
17.00

 
$
15.55

 
$
0.165625

First Quarter
 
$
16.09

 
$
14.02

 
$
0.165625

2015
 
 
 
 
 
 
Fourth Quarter
 
$
15.60

 
$
13.79

 
$
0.165625

Third Quarter
 
$
15.39

 
$
13.10

 
$
0.165625

Second Quarter
 
$
16.18

 
$
13.83

 
$
0.165625

First Quarter
 
$
18.24

 
$
15.42

 
$
0.165625

The closing share price for our Class A common stock on February 10, 2017, as reported on the NYSE, was $15.23.
We have determined that the dividends paid during 2016 and 2015 on our Class A common stock qualify for the following tax treatment:
 
 
2016
 
2015
Ordinary dividends
 
$
0.449528

 
$
0.499116

Non-dividend distributions
 
0.212972

 
0.163384

Total distribution per common share
 
$
0.662500

 
$
0.662500

As of February 10, 2017, there were approximately 14,900 record holders of our Class A common stock. The number of holders does not include individuals or entities who beneficially own shares but whose shares are held of record by a broker or clearing agency.
We intend to continue to qualify as a REIT for U.S. federal income tax purposes. The Code generally requires that a REIT annually distributes to its shareholders at least 90% of its REIT taxable income, determined without regard to the dividends paid deduction and excluding net capital gains. The Code imposes tax on any undistributed REIT taxable income.
To satisfy the requirements for qualification as a REIT and generally not be subject to U.S. federal income and excise tax, we intend to make regular quarterly distributions of all, or substantially all, of our REIT taxable income to shareholders. Our future distributions will be at the sole discretion of our board of directors. When determining the amount of future distributions, we expect to consider, among other factors, (i) the amount of cash generated from our operating activities, (ii) our expectations of future cash flow, (iii) our determination of near-term cash needs for debt repayments and potential future share repurchases, (iv) the market of available acquisitions of new properties and redevelopment, expansions and pad development opportunities, (v) the timing of significant re-leasing activities and the establishment of additional cash reserves for anticipated tenant allowances and general property capital improvements, (vi) our ability to continue to access additional sources of capital, (vii) the amount required to be distributed to maintain our status as a REIT, which is a requirement of our unsecured credit agreement, and to reduce any income and excise taxes that we otherwise would be required to pay and (viii) the amount required to declare and pay in cash, or set aside for the payment of, the dividends on our Series A preferred stock for all past dividend periods. Under certain circumstances, we may be required to make distributions in excess of cash available for distribution in order to meet the REIT distribution requirements.
If our operations do not generate sufficient cash flow to allow us to satisfy the REIT distribution requirements, we may be required to fund distributions from working capital or by borrowing funds, issuing equity or selling assets. Our actual results of operations will be affected by a number of factors, including the revenues we receive from tenants at our properties, our operating and corporate

21

expenses, interest expense, the ability of our tenants to meet their obligations and unanticipated expenditures. For more information regarding risk factors that could materially adversely affect our actual results of operations, please see Item 1A. “Risk Factors”.
Sales of Unregistered Equity Securities
There were no unregistered sales of equity securities during the quarter ended December 31, 2016.
Issuer Purchases of Equity Securities
The following table summarizes our common stock repurchases, including shares of common stock surrendered to the Company by employees to satisfy their tax withholding obligations in connection with the vesting of restricted shares, during the quarter ended December 31, 2016:
Period
 
Total number
of shares of
Class A common
stock purchased
 
Average price
paid per share
of Class A
common stock
 
Total number of
shares purchased
as part of publicly
announced plans
or programs
 
Maximum number
(or approximate dollar
value) of shares that
may yet be purchased
under the plans
or programs (a)
October 1, 2016 to October 31, 2016
 
1

 
$
15.99

 
—

 
$
250,000

November 1, 2016 to November 30, 2016
 
505

 
$
14.92

 
505

 
$
242,454

December 1, 2016 to December 31, 2016
 
105

 
$
15.06

(b)
86

 
$
241,159

Total
 
611

 
$
14.94

 
591

 
$
241,159

(a)
As disclosed on the Form 8-K dated December 15, 2015, represents the amount outstanding under our $250,000 common stock repurchase program, which has no scheduled expiration date.
(b)
Under the repurchase program, the average repurchase price per share was $14.99 for the period from December 1, 2016 to December 31, 2016.

22

ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with the accompanying consolidated financial statements and related notes appearing elsewhere in this annual report.
RETAIL PROPERTIES OF AMERICA, INC.
As of and for the years ended December 31, 2016, 2015, 2014, 2013 and 2012
(Amounts in thousands, except per share amounts)
 
 
2016
 
2015
 
2014
 
2013
 
2012
Net investment properties
 
$
4,056,173

 
$
4,254,647

 
$
4,314,905

 
$
4,474,044

 
$
4,687,091

Total assets
 
$
4,452,973

 
$
4,621,251

 
$
4,787,989

 
$
4,858,518

 
$
5,212,544

Total debt
 
$
1,997,925

 
$
2,166,238

 
$
2,318,735

 
$
2,280,587

 
$
2,567,206

Total shareholders’ equity
 
$
2,152,086

 
$
2,155,337

 
$
2,187,881

 
$
2,307,340

 
$
2,374,259

 
 
 
 
 
 
 
 
 
 
 
Total revenues
 
$
583,143

 
$
603,960

 
$
600,614

 
$
551,508

 
$
531,171

Expenses:
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
224,430

 
214,706

 
215,966

 
222,710

 
208,658

Other
 
232,567

 
248,184

 
282,003

 
251,277

 
187,949

Total expenses
 
456,997

 
462,890

 
497,969

 
473,987

 
396,607

Operating income
 
126,146

 
141,070

 
102,645

 
77,521

 
134,564

Gain on extinguishment of debt
 
13,653

 
—

 
—

 
—

 
3,879

Gain on extinguishment of other liabilities
 
6,978

 
—

 
4,258

 
—

 
—

Equity in loss of unconsolidated joint ventures, net
 
—

 
—

 
(2,088
)
 
(1,246
)
 
(6,307
)
Gain on sale of joint venture interest
 
—

 
—

 
—

 
17,499

 
—

Gain on change in control of investment properties
 
—

 
—

 
24,158

 
5,435

 
—

Interest expense
 
(109,730
)
 
(138,938
)
 
(133,835
)
 
(146,805
)
 
(171,295
)
Other non-operating income, net
 
63

 
1,700

 
5,459

 
4,741

 
24,791

Income (loss) from continuing operations
 
37,110

 
3,832

 
597

 
(42,855
)
 
(14,368
)
Income from discontinued operations, net
 
—

 
—

 
507

 
50,675

 
6,078

Gain on sales of investment properties, net
 
129,707

 
121,792

 
42,196

 
5,806

 
7,843

Net income (loss)
 
166,817

 
125,624

 
43,300

 
13,626

 
(447
)
Net income attributable to noncontrolling interest
 
—

 
(528
)
 
—

 
—

 
—

Net income (loss) attributable to the Company
 
166,817

 
125,096

 
43,300

 
13,626

 
(447
)
Preferred stock dividends
 
(9,450
)
 
(9,450
)
 
(9,450
)
 
(9,450
)
 
(263
)
Net income (loss) attributable to common shareholders
 
$
157,367

 
$
115,646

 
$
33,850

 
$
4,176

 
$
(710
)
Earnings (loss) per common share – basic and diluted:
 
 
 
 
 
 
 
 
 
 
Continuing operations
 
$
0.66

 
$
0.49

 
$
0.14

 
$
(0.20
)
 
$
(0.03
)
Discontinued operations
 
—

 
—

 
—

 
0.22

 
0.03

Net income per common share attributable to
common shareholders
 
$
0.66

 
$
0.49

 
$
0.14

 
$
0.02

 
$
—

 
 
 
 
 
 
 
 
 
 
 
Distributions declared – preferred
 
$
9,450

 
$
9,450

 
$
9,450

 
$
9,713

 
$
—

Distributions declared per preferred share
 
$
1.75

 
$
1.75

 
$
1.75

 
$
1.80

 
$
—

Distributions declared – common
 
$
157,168

 
$
157,173

 
$
156,742

 
$
155,616

 
$
146,769

Distributions declared per common share
 
$
0.66

 
$
0.66

 
$
0.66

 
$
0.66

 
$
0.66

Cash flows provided by operating activities
 
$
263,748

 
$
265,813

 
$
254,014

 
$
239,632

 
$
167,085

Cash flows provided by investing activities
 
$
17,537

 
$
25,288

 
$
77,900

 
$
103,212

 
$
471,829

Cash flows used in financing activities
 
$
(279,590
)
 
$
(351,969
)
 
$
(277,812
)
 
$
(422,723
)
 
$
(636,854
)
Weighted average number of common shares outstanding – basic
 
236,651

 
236,380

 
236,184

 
234,134

 
220,464

Weighted average number of common shares outstanding – diluted
 
236,951

 
236,382

 
236,187

 
234,134

 
220,464


23

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Risk Factors”, “Business” and elsewhere in this Annual Report on Form 10-K may constitute “forward-looking statements” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act). Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods which may be incorrect or imprecise and we may not be able to realize them. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). You can identify forward-looking statements by the use of forward-looking terminology such as “believes”, “expects”, “may”, “should”, “intends”, “plans”, “estimates”, “continue” or “anticipates” and variations of such words or similar expressions or the negative of such words. You can also identify forward-looking statements by discussions of strategies, plans or intentions. Risks, uncertainties and changes in the following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:
•
economic, business and financial conditions, and changes in our industry and changes in the real estate markets in particular;
•
economic and other developments in our target markets where we have a high concentration of properties;
•
our business strategy;
•
our projected operating results;
•
rental rates and/or vacancy rates;
•
frequency and magnitude of defaults on, early terminations of or non-renewal of leases by tenants;
•
bankruptcy or insolvency of a major tenant or a significant number of smaller tenants;
•
interest rates or operating costs;
•
real estate and zoning laws and changes in real property tax rates;
▪
real estate valuations;
•
our leverage;
•
our ability to generate sufficient cash flows to service our outstanding indebtedness and make distributions to our shareholders;
•
our ability to obtain necessary outside financing;
•
the availability, terms and deployment of capital;
•
general volatility of the capital and credit markets and the market price of our Class A common stock;
•
risks generally associated with real estate acquisitions and dispositions, including our ability to identify and pursue acquisition and disposition opportunities;
•
risks generally associated with redevelopment, including the impact of construction delays and cost overruns, our ability to lease redeveloped space and our ability to identify and pursue redevelopment opportunities;
•
composition of members of our senior management team;
•
our ability to attract and retain qualified personnel;
•
our ability to continue to qualify as a REIT;

24

•
governmental regulations, tax laws and rates and similar matters;
•
our compliance with laws, rules and regulations;
•
environmental uncertainties and exposure to natural disasters;
•
insurance coverage; and
•
the likelihood or actual occurrence of terrorist attacks in the U.S.
For a further discussion of these and other factors that could impact our future results, performance or transactions, see Item 1A. “Risk Factors”. Readers should not place undue reliance on any forward-looking statements, which are based only on information currently available to us (or to third parties making the forward-looking statements). We undertake no obligation to publicly release any revisions to such forward-looking statements to reflect events or circumstances after the date of this Annual Report on Form  10-K, except as required by applicable law.
The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes included in this report.
Executive Summary
Retail Properties of America, Inc. is a REIT that owns and operates high quality, strategically located shopping centers in the United States. As of December 31, 2016, we owned 156 retail operating properties representing 25,832,000 square feet of GLA. Our retail operating portfolio includes (i) neighborhood and community centers, (ii) power centers, and (iii) lifestyle centers and multi-tenant retail-focused mixed-use properties, as well as single-user retail properties.
The following table summarizes our operating portfolio as of December 31, 2016:
Property Type
 
Number of
Properties
 
GLA
(in thousands)
 
Occupancy
 
Percent Leased
Including Leases
Signed (a)
Operating portfolio:
 
 
 
 
 
 
 
 
Multi-tenant retail
 


 
 
 
 
 
 
Neighborhood and community centers
 
81

 
9,958

 
94.2
%
 
94.4
%
Power centers
 
50

 
11,430

 
95.8
%
 
96.9
%
Lifestyle centers and mixed-use properties
 
14

 
3,868

 
89.7
%
 
90.3
%
Total multi-tenant retail
 
145

 
25,256

 
94.2
%
 
94.9
%
Single-user retail
 
11

 
576

 
100.0
%
 
100.0
%
Total retail operating portfolio
 
156

 
25,832

 
94.3
%
 
95.0
%
Office
 
1

 
895

 
1.1
%
 
44.3
%
Total operating portfolio (b)
 
157

 
26,727

 
91.2
%
 
93.3
%
(a)
Includes leases signed but not commenced.
(b)
Excludes one multi-tenant retail operating property and one single-user retail operating property classified as held for sale as of December 31, 2016.
In addition to our operating portfolio, as of December 31, 2016, we owned two properties where we have begun redevelopment activities.
We are in the midst of a portfolio repositioning effort, the core objective of which is to become a dominant owner of multi-tenant retail properties in 10 to 15 target markets, owning 3,000,000 to 5,000,000 square feet in each market. To date, we have identified 10 target markets: Dallas, Washington, D.C./Baltimore, New York, Atlanta, Seattle, Chicago, Houston, San Antonio, Phoenix and Austin. Depending on whether favorable market conditions exist, among other factors, we expect to substantially complete our portfolio repositioning efforts by the end of 2018.

25

2016 Company Highlights
Acquisitions
During the year ended December 31, 2016, we continued to execute our investment strategy by acquiring seven multi-tenant retail operating properties, the fee interest in an existing wholly-owned multi-tenant retail operating property and the anchor space improvements at an existing wholly-owned multi-tenant retail operating property for a total purchase price of $408,308.
The following table summarizes our 2016 acquisitions:
Date
 
Property Name
 
Metropolitan
Statistical Area (MSA)
 
Property Type
 
Square
Footage
 
Acquisition
Price
January 15, 2016
 
Shoppes at Hagerstown (a)
 
Hagerstown
 
Multi-tenant retail
 
113,000

 
$
27,055

January 15, 2016
 
Merrifield Town Center II (a)
 
Washington, D.C.
 
Multi-tenant retail
 
76,000

 
45,676

March 29, 2016
 
Oak Brook Promenade
 
Chicago
 
Multi-tenant retail
 
183,200

 
65,954

April 1, 2016
 
The Shoppes at Union Hill (b)
 
New York
 
Multi-tenant retail
 
91,700

 
63,060

April 29, 2016
 
Ashland & Roosevelt – Fee Interest (c)
 
Chicago
 
Ground lease interest (c)
 
—

 
13,850

May 5, 2016
 
Tacoma South
 
Seattle
 
Multi-tenant retail
 
230,700

 
39,400

June 15, 2016
 
Eastside
 
Dallas
 
Multi-tenant retail
 
67,100

 
23,842

August 30, 2016
 
Woodinville Plaza – Anchor Space
Improvements (d)
 
Seattle
 
Anchor space improvements (d)
 
—

 
4,500

November 22, 2016
 
One Loudoun Downtown – Phase I (e)
 
Washington, D.C.
 
Multi-tenant retail
 
340,600

 
124,971

 
 
 
 
 
 
 
 
1,102,300

 
$
408,308

(a)
These properties were acquired as a two-property portfolio. Merrifield Town Center II also contains 62,000 square feet of storage space for a total of 138,000 square feet.
(b)
In conjunction with this acquisition, we assumed mortgage debt with a principal balance of $15,971 and an interest rate of 3.75% that matures in 2031.
(c)
We acquired the fee interest in an existing wholly-owned multi-tenant retail operating property located in Chicago, Illinois, which was previously subject to a ground lease with a third party. In conjunction with this transaction, we reversed the straight-line ground rent liability of $6,978, which is reflected as “Gain on extinguishment of other liabilities” in the accompanying consolidated statements of operations and other comprehensive income.
(d)
We acquired the anchor space improvements, which were previously subject to a ground lease with us, at an existing wholly-owned multi-tenant retail operating property located in Woodinville, Washington.
(e)
The remaining phases at One Loudoun Downtown, representing an aggregate gross purchase price of up to $35,500, are expected to close throughout the first three quarters of 2017 as the seller completes construction on stand-alone buildings at the property.
During the year ended December 31, 2016, we also completed a non-monetary transaction in which we received the fee interest in less than an acre of adjacent land and terminated the ground lease on certain undeveloped parcels at an existing wholly-owned multi-tenant retail operating property located in Southlake, Texas in exchange for the fee interest in approximately 2.5 acres of undeveloped parcels. As a result of this transaction, our fee interest in certain undeveloped parcels at the property are no longer encumbered by the ground lease. We capitalized $113 of costs related to this transaction.
Subsequent to December 31, 2016, we acquired Main Street Promenade, a 181,600 square foot multi-tenant retail property located in the Chicago MSA, for a gross purchase price of $88,000 through a consolidated variable interest entity (VIE) to facilitate a potential 1031 Exchange. In total for 2017, we expect to acquire approximately $375,000 to $475,000 of strategic acquisitions in our target markets, some of which may be structured as 1031 Exchanges.
Dispositions
During the year ended December 31, 2016, we continued to pursue targeted dispositions of select non-target and single-user properties. Consideration from dispositions totaled $540,362 and included the sales of 10 multi-tenant retail operating properties aggregating 2,388,000 square feet for total consideration of $386,625, 35 single-user retail properties aggregating 625,900 square feet for total consideration of $151,487 and one development property, which was not under active development, for consideration of $2,250.

26

The following table summarizes our 2016 dispositions:
Date
 
Property Name
 
Property Type
 
Square
Footage
 
Consideration
February 1, 2016
 
The Gateway (a)
 
Multi-tenant retail
 
623,200

 
$
75,000

February 10, 2016
 
Stateline Station
 
Multi-tenant retail
 
142,600

 
17,500

March 30, 2016
 
Six Property Portfolio (b)
 
Single-user retail
 
230,400

 
35,413

April 20, 2016
 
CVS Pharmacy – Oklahoma City
 
Single-user retail
 
10,900

 
4,676

June 2, 2016
 
Rite Aid Store (Eckerd) – Canandaigua
& Tim Horton Donut Shop (c)
 
Single-user retail
 
16,600

 
5,400

June 15, 2016
 
Academy Sports – Midland
 
Single-user retail
 
61,200

 
5,541

June 23, 2016
 
Four Rite Aid Portfolio (d)
 
Single-user retail
 
45,400

 
15,934

July 8, 2016
 
Broadway Shopping Center
 
Multi-tenant retail
 
190,300

 
20,500

July 21, 2016
 
Mid-Hudson Center
 
Multi-tenant retail
 
235,600

 
27,500

July 27, 2016
 
Rite Aid Store (Eckerd), Main St. – Buffalo
 
Single-user retail
 
10,900

 
3,388

July 29, 2016
 
Rite Aid Store (Eckerd) – Lancaster
 
Single-user retail
 
10,900

 
3,425

August 4, 2016
 
Alison’s Corner
 
Multi-tenant retail
 
55,100

 
7,850

August 5, 2016
 
Rite Aid Store (Eckerd) – Lake Ave.
 
Single-user retail
 
13,200

 
5,400

August 12, 2016
 
Maple Tree Place
 
Multi-tenant retail
 
489,000

 
90,000

August 12, 2016
 
CVS Pharmacy – Burleson
 
Single-user retail
 
10,900

 
4,190

August 18, 2016
 
Mitchell Ranch Plaza
 
Multi-tenant retail
 
199,600

 
55,625

August 22, 2016
 
Rite Aid Store (Eckerd), E. Main St. – Batavia
 
Single-user retail
 
13,800

 
5,050

September 9, 2016
 
Rite Aid Store (Eckerd) – Lockport
 
Single-user retail
 
13,800

 
4,690

September 9, 2016
 
Rite Aid Store (Eckerd), Ferry St. – Buffalo
 
Single-user retail
 
10,900

 
3,600

November 9, 2016
 
Walgreens – Northwoods
 
Single-user retail
 
16,300

 
6,450

November 23, 2016
 
Ten Rite Aid Portfolio (e)
 
Single-user retail
 
119,700

 
30,000

December 8, 2016
 
Vail Ranch Plaza
 
Multi-tenant retail
 
101,800

 
27,450

December 15, 2016
 
Pacheco Pass Phase I & II
 
Multi-tenant retail
 
194,300

 
41,500

December 16, 2016
 
South Billings Center (f)
 
Development (f)
 
—

 
2,250

December 22, 2016
 
Rite Aid Store (Eckerd) – Colesville
 
Single-user retail
 
13,400

 
7,700

December 29, 2016
 
Commons at Royal Palm
 
Multi-tenant retail
 
156,500

 
23,700

December 30, 2016
 
CVS Pharmacy (Eckerd) – Edmond &
CVS Pharmacy (Eckerd) – Norman (g)
 
Single-user retail
 
27,600

 
10,630

 
 
 
 
 
 
3,013,900

 
$
540,362

(a)
The property was disposed of through a lender-directed sale in full satisfaction of our $94,353 mortgage obligation. Immediately prior to the disposition, the lender reduced our loan obligation to $75,000 which was assumed by the buyer in connection with the disposition. Along with the loan reduction, the lender received the balance of the restricted escrows that they held and the rights to unpaid accounts receivable and forgave accrued interest, resulting in a net gain on extinguishment of debt of $13,653.
(b)
Portfolio consists of the following properties: (i) Academy Sports – Houma, (ii) Academy Sports – Port Arthur, (iii) Academy Sports – San Antonio, (iv) CVS Pharmacy – Moore, (v) CVS Pharmacy – Saginaw and (vi) Rite Aid Store (Eckerd) – Olean.
(c)
The terms of the disposition of Rite Aid Store (Eckerd) – Canandaigua and Tim Horton Donut Shop were negotiated as a single transaction.
(d)
Portfolio consists of the following properties: (i) Rite Aid Store (Eckerd) – Cheektowaga, (ii) Rite Aid Store (Eckerd), W. Main St. – Batavia, (iii) Rite Aid Store (Eckerd), Union Rd. – West Seneca and (iv) Rite Aid Store (Eckerd) – Greece.
(e)
Portfolio consists of the following properties: (i) Rite Aid Store (Eckerd) – Chattanooga, (ii) Rite Aid Store (Eckerd) – Yorkshire, (iii) Rite Aid Store (Eckerd), Sheridan Dr. – Amherst, (iv) Rite Aid Store (Eckerd) – Grand Island, (v) Rite Aid Store (Eckerd) – North Chili, (vi) Rite Aid Store (Eckerd) – Tonawanda, (vii) Rite Aid Store (Eckerd) – Irondequoit, (viii) Rite Aid Store (Eckerd) – Hudson, (ix) Rite Aid Store (Eckerd), Transit Rd. – Amherst and (x) Rite Aid Store (Eckerd), Harlem Rd. – West Seneca.
(f)
South Billings Center was classified as a development property but was not under active development.
(g)
The terms of the disposition of CVS Pharmacy (Eckerd) – Edmond and CVS Pharmacy (Eckerd) – Norman were negotiated as a single transaction.
During the year ended December 31, 2016, we also disposed of a single-user outparcel for consideration of $2,639.
Subsequent to December 31, 2016, we sold Rite Aid Store (Eckerd), Culver Rd., a 10,900 square foot single-user retail operating property, for consideration of $500. During 2017, we expect targeted dispositions to be approximately $800,000 to $900,000, some of which may be structured as 1031 Exchanges.

27

Market Summary
As a result of our capital recycling efforts over the past several years, we increased the amount of ABR in our target markets to 66.9% of our total multi-tenant retail ABR, including amounts attributable to our redevelopments. The following table summarizes our operating portfolio by market as of December 31, 2016:
Property Type/Market
 
Number of
Properties
 
ABR (a)
 
% of Total
Multi-Tenant
Retail ABR (a)
 
ABR per
Occupied
Sq. Ft.
 
GLA (a)
 
% of Total
Multi-Tenant
Retail GLA (a)
 
Occupancy
 
% Leased
Including
Signed
Multi-Tenant Retail:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Target Markets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dallas, Texas
 
20

 
$
82,265

 
20.4
%
 
$
21.56

 
4,098

 
16.2
%
 
93.1
%
 
93.4
%
Washington, D.C. /
Baltimore, Maryland
 
13

 
49,935

 
12.4
%
 
21.83

 
2,611

 
10.3
%
 
87.6
%
 
88.5
%
New York, New York
 
8

 
34,091

 
8.4
%
 
27.69

 
1,260

 
5.0
%
 
97.7
%
 
98.0
%
Chicago, Illinois
 
6

 
20,117

 
5.0
%
 
19.72

 
1,076

 
4.3
%
 
94.8
%
 
95.0
%
Seattle, Washington
 
8

 
19,514

 
4.8
%
 
14.32

 
1,473

 
5.8
%
 
92.5
%
 
94.6
%
Atlanta, Georgia
 
9

 
19,385

 
4.8
%
 
12.97

 
1,513

 
6.0
%
 
98.8
%
 
98.8
%
Houston, Texas
 
9

 
15,423

 
3.8
%
 
14.08

 
1,141

 
4.5
%
 
96.0
%
 
96.2
%
San Antonio, Texas
 
3

 
11,630

 
2.8
%
 
16.29

 
724

 
2.9
%
 
98.6
%
 
98.6
%
Phoenix, Arizona
 
3

 
10,015

 
2.5
%
 
17.17

 
632

 
2.5
%
 
92.3
%
 
92.3
%
Austin, Texas
 
4

 
5,199

 
1.3
%
 
15.99

 
350

 
1.4
%
 
92.9
%
 
92.9
%
Subtotal
 
83

 
267,574

 
66.2
%
 
19.21

 
14,878

 
58.9
%
 
93.6
%
 
94.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-Target – Top 50 MSAs
 
25

 
51,626

 
12.8
%
 
15.36

 
3,587

 
14.2
%
 
93.7
%
 
96.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Subtotal Target Markets
and Top 50 MSAs
 
108

 
319,200

 
79.0
%
 
18.47

 
18,465

 
73.1
%
 
93.6
%
 
94.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-Target – Other
 
37

 
84,884

 
21.0
%
 
13.06

 
6,791

 
26.9
%
 
95.7
%
 
95.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Multi-Tenant Retail
 
145

 
404,084

 
100.0
%
 
16.98

 
25,256

 
100.0
%
 
94.2
%
 
94.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Single-User Retail
 
11

 
12,823

 
 
 
22.26

 
576

 
 
 
100.0
%
 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Retail
 
156

 
416,907

 
 
 
17.11

 
25,832

 
 
 
94.3
%
 
95.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Office
 
1

 
69

 
 
 
7.01

 
895

 
 
 
1.1
%
 
44.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Operating Portfolio (b)
 
157

 
$
416,976

 
 
 
$
17.11

 
26,727

 
 
 
91.2
%
 
93.3
%
(a)
Excludes $7,857 of multi-tenant retail ABR and 816 square feet of multi-tenant retail GLA attributable to our two active redevelopments, which are located in the Washington, D.C./Baltimore MSA. Including these amounts, 66.9% of our multi-tenant retail ABR and 60.2% of our multi-tenant retail GLA is located in our target markets.
(b)
Excludes one multi-tenant retail operating property and one single-user retail operating property classified as held for sale as of December 31, 2016.
Leasing Activity
The following table summarizes the leasing activity in our retail operating portfolio during the year ended December 31, 2016. Leases with terms of less than 12 months have been excluded from the table.
 
 
Number of
Leases
Signed
 
GLA Signed
(in thousands)
 
New
Contractual
Rent per Square
Foot (PSF) (a)
 
Prior
Contractual
Rent PSF (a)
 
% Change
over Prior
ABR (a) (b)
 
Weighted
Average
Lease Term
 
Tenant
Allowances
PSF
Comparable Renewal Leases
 
372

 
2,321

 
$
19.65

 
$
18.43

 
6.62
%
 
4.75

 
$
1.29

Comparable New Leases
 
54

 
335

 
18.20

 
16.00

 
13.75
%
 
9.53

 
31.50

Non-Comparable New and Renewal Leases (c)
 
114

 
676

 
14.04

 
N/A

 
N/A

 
7.67

 
18.07

Total
 
540

 
3,332

 
$
19.47

 
$
18.12

 
7.45
%
 
5.68

 
$
7.73

(a)
Total excludes the impact of Non-Comparable New and Renewal Leases.

28

(b)
Excluding the impact from eight Rite Aid leases executed in the first quarter that were extended to effectuate the planned 2016 disposition of these single-user assets, all of which were sold during the second and third quarters, combined comparable re-leasing spreads were approximately 7.8% and comparable renewal re-leasing spreads were approximately 7.0% over previous rental rates for the year ended December 31, 2016.
(c)
Includes (i) leases signed on units that were vacant for over 12 months, (ii) leases signed without fixed rental payments and (iii) leases signed where the previous and the current lease do not have a consistent lease structure.
We anticipate our leasing efforts in 2017 will focus on (i) natural lease expirations, (ii) anchor spaces previously occupied by bankrupt tenants and (iii) vacant small shop space. In each case, we look to capitalize on the opportunity to mark rents to market, upgrade our tenancy and ensure the right mix of operators and unique retailers at our properties. Additionally, we continue to expect new small shop leases to generally be non-comparable in nature as the leased space is likely to have been vacant for longer than 12 months.
The single-user lease at our one remaining office property expired on November 30, 2016. We continue to focus on leasing the vacant space at this property and have leased 397,000 square feet of the available 895,000 square feet as of December 31, 2016.
Capital Markets
During the year ended December 31, 2016, we:
•
issued $100,000 of 10-year 4.08% senior unsecured notes and $100,000 of 12-year 4.24% senior unsecured notes in private placement transactions pursuant to a note purchase agreement we entered into with certain institutional investors;
•
closed on a seven-year $200,000 unsecured term loan, which funded on January 3, 2017;
•
entered into our fourth amended and restated unsecured credit agreement with a syndicate of financial institutions to provide for an unsecured credit facility aggregating $1,200,000, consisting of a $750,000 unsecured revolving line of credit and two unsecured term loans totaling $450,000 (Unsecured Credit Facility);
•
repaid $14,000, net of borrowings, on our unsecured revolving line of credit;
•
repurchased 591 shares of our common stock at an average price per share of $14.93 for a total of $8,841, resulting in $241,159 remaining available under our $250,000 common stock repurchase program;
•
entered into the following interest rate swaps that terminate on December 31, 2017: (i) $100,000 interest rate swap that effectively converts one-month floating rate London Interbank Offered Rate (LIBOR) to a fixed rate of 0.6591% and (ii) $150,000 interest rate swap that effectively converts one-month floating rate LIBOR to a fixed rate of 0.6735%. We previously had a $300,000 interest rate swap that matured on February 24, 2016;
•
repaid or defeased mortgages payable totaling $263,548 and made scheduled principal payments of $13,180 related to amortizing loans. One of the mortgages repaid, with a principal balance of $7,750 at maturity, had been swapped to a fixed rate and we had guaranteed a portion of the outstanding balance. Upon repayment of the mortgage on its scheduled maturity date, the interest rate swap expired and our guarantee was extinguished;
•
disposed of The Gateway through a lender-directed sale in full satisfaction of our $94,353 mortgage obligation; and
•
assumed a mortgage payable with a principal balance of $15,971 and an interest rate of 3.75% that matures in 2031 in conjunction with the acquisition of The Shoppes at Union Hill.
Distributions
We declared quarterly distributions totaling $1.75 per share of preferred stock and quarterly distributions totaling $0.6625 per share of common stock during 2016.

29

Results of Operations
Comparison of Results for the Years Ended December 31, 2016 and 2015
 
Year Ended December 31,
 
 
 
2016
 
2015
 
Change
Revenues
 
 
 
 
 
Rental income
$
455,658

 
$
472,344

 
$
(16,686
)
Tenant recovery income
118,569

 
119,536

 
(967
)
Other property income
8,916

 
12,080

 
(3,164
)
Total revenues
583,143

 
603,960

 
(20,817
)
 
 
 
 
 
 
Expenses
 
 
 
 
 
Operating expenses
85,895

 
94,780

 
(8,885
)
Real estate taxes
81,774

 
82,810

 
(1,036
)
Depreciation and amortization
224,430

 
214,706

 
9,724

Provision for impairment of investment properties
20,376

 
19,937

 
439

General and administrative expenses
44,522

 
50,657

 
(6,135
)
Total expenses
456,997

 
462,890

 
(5,893
)
 
 
 
 
 
 
Operating income
126,146

 
141,070

 
(14,924
)
 
 
 
 
 
 
Gain on extinguishment of debt
13,653

 
—

 
13,653

Gain on extinguishment of other liabilities
6,978

 
—

 
6,978

Interest expense
(109,730
)
 
(138,938
)
 
29,208

Other income, net
63

 
1,700

 
(1,637
)
Income from continuing operations
37,110

 
3,832

 
33,278

Gain on sales of investment properties
129,707

 
121,792

 
7,915

Net income
166,817

 
125,624

 
41,193

Net income attributable to noncontrolling interest
—

 
(528
)
 
528

Net income attributable to the Company
166,817

 
125,096

 
41,721

Preferred stock dividends
(9,450
)
 
(9,450
)
 
—

Net income attributable to common shareholders
$
157,367

 
$
115,646

 
$
41,721

Net income attributable to common shareholders increased $41,721 from $115,646 for the year ended December 31, 2015 to $157,367 for the year ended December 31, 2016 primarily as a result of the following:
•
a $29,208 decrease in interest expense primarily consisting of:
•
a $21,387 decrease in interest on mortgages payable due to a reduction in mortgage debt; and
•
a $12,582 decrease in prepayment penalties and defeasance premiums;
partially offset by
•
a $2,184 increase in interest on our Unsecured Credit Facility primarily due to higher average balances on our unsecured revolving line of credit and higher LIBOR interest rates;
•
a $1,944 increase in interest due to a full year of interest expense from our 4.00% senior unsecured notes due 2025 (Notes Due 2025), which were issued in March 2015; and
•
a $1,020 increase in interest from our 4.08% senior unsecured notes due 2026 (Notes Due 2026), which were issued in September 2016;
•
a $13,653 gain on extinguishment of debt recognized during the year ended December 31, 2016 associated with the disposition of The Gateway through a lender-directed sale in full satisfaction of our mortgage obligation. No such gain was recorded during the year ended December 31, 2015;

30

•
an $8,954 decrease in operating expenses and real estate taxes, net of tenant recovery income, primarily as a result of the operating properties sold during 2015 and 2016 or classified as held for sale as of December 31, 2016 and the impact from our same store portfolio, partially offset by an increase from our one remaining office property;
•
a $7,915 increase in gain on sales of investment properties related to the sales of 46 investment properties and one single-user outparcel, representing approximately 3,013,900 square feet of GLA, during the year ended December 31, 2016 compared to the sales of 26 investment properties, representing approximately 3,917,200 square feet of GLA, during the year ended December 31, 2015;
•
a $6,978 gain on extinguishment of other liabilities recognized during the year ended December 31, 2016 related to the acquisition of the fee interest in one of our existing investment properties that was previously subject to a ground lease with a third party. The amount recognized represents the reversal of the straight-line ground rent liability associated with the ground lease; and
•
a $6,135 decrease in general and administrative expenses primarily consisting of executive and realignment separation charges of $4,730 incurred during the year ended December 31, 2015, which were not present in 2016, and a $1,521 decrease in executive and employee bonus expense. During 2017, we expect to incur approximately $42,000 to $44,000 of general and administrative expenses;
partially offset by
•
a $16,686 decrease in rental income primarily consisting of a $16,324 decrease in base rent resulting from the operating properties sold during 2015 and 2016 or classified as held for sale as of December 31, 2016, along with our redevelopment properties and our one remaining office property, partially offset by an increase from the operating properties acquired during 2015 and 2016 and growth from our same store portfolio;
•
a $9,724 increase in depreciation and amortization primarily attributable to the write-off of assets taken out of service at two redevelopment properties during the year ended December 31, 2016; and
•
a $3,164 decrease in other property income primarily as a result of the operating properties sold during 2015 and 2016 or classified as held for sale as of December 31, 2016, along with our same store portfolio and our redevelopment properties, partially offset by an increase from the operating properties acquired during 2015 and 2016.
Net operating income (NOI)
We define NOI as all revenues other than (i) straight-line rental income, (ii) amortization of lease inducements, (iii) amortization of acquired above and below market lease intangibles and (iv) lease termination fee income, less real estate taxes and all operating expenses other than straight-line ground rent expense and amortization of acquired ground lease intangibles, which are non-cash items. NOI consists of same store NOI (Same Store NOI) and NOI from other investment properties (NOI from Other Investment Properties). We believe that NOI, Same Store NOI and NOI from Other Investment Properties, which are supplemental non-GAAP financial measures, provide an additional and useful operating perspective not immediately apparent from “Operating income” or “Net income attributable to common shareholders” in accordance with accounting principles generally accepted in the United States (GAAP). We use these measures to evaluate our performance on a property-by-property basis because they allow management to evaluate the impact that factors such as lease structure, lease rates and tenant base have on our operating results. NOI, Same Store NOI and NOI from Other Investment Properties do not represent alternatives to “Net income” or “Net income attributable to common shareholders” in accordance with GAAP as indicators of our financial performance. Comparison of our presentation of NOI, Same Store NOI and NOI from Other Investment Properties to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in definition and application by such REITs. For reference and as an aid in understanding our computation of NOI, a reconciliation of net income attributable to common shareholders as computed in accordance with GAAP to Same Store NOI has been presented for each comparable period presented.

31

Same store portfolio – 2016 and 2015
For the year ended December 31, 2016, our same store portfolio consisted of 140 retail operating properties acquired or placed in service and stabilized prior to January 1, 2015. The number of properties in our same store portfolio decreased to 140 as of December 31, 2016 from 180 as of December 31, 2015 as a result of the following:
•
the removal of 44 same store investment properties sold during the year ended December 31, 2016;
•
the removal of two same store investment properties classified as held for sale as of December 31, 2016;
•
the removal of one investment property where we have begun activities in anticipation of a redevelopment, which we expected to have a significant impact to property NOI during 2016; and
•
the removal of our one remaining office property;
partially offset by
•
the addition of eight investment properties acquired during the year ended December 31, 2014.
The sale of South Billings Center on December 16, 2016 did not impact the number of same store properties as it was a development property and consequently did not meet the criteria to be included in our same store portfolio.
The properties and financial results reported in “Other investment properties” primarily include the following:
•
properties acquired during 2015 and 2016;
•
our one remaining office property;
•
three properties where we have begun redevelopment and/or activities in anticipation of future redevelopment;
•
properties that were sold or held for sale in 2015 and 2016;
•
the net income from our wholly-owned captive insurance company; and
•
the historical ground rent expense related to an existing same store investment property that was subject to a ground lease with a third party prior to our acquisition of the fee interest on April 29, 2016.

32

The following tables present a reconciliation of net income attributable to common shareholders to Same Store NOI and details of the components of Same Store NOI for the years ended December 31, 2016 and 2015:
 
Year Ended December 31,
 
 
 
2016
 
2015
 
Change
Net income attributable to common shareholders
$
157,367

 
$
115,646

 
$
41,721

Adjustments to reconcile to Same Store NOI:
 
 
 
 
 
Preferred stock dividends
9,450

 
9,450

 
—

Net income attributable to noncontrolling interest
—

 
528

 
(528
)
Gain on sales of investment properties
(129,707
)
 
(121,792
)
 
(7,915
)
Depreciation and amortization
224,430

 
214,706

 
9,724

Provision for impairment of investment properties
20,376

 
19,937

 
439

General and administrative expenses
44,522

 
50,657

 
(6,135
)
Gain on extinguishment of debt
(13,653
)
 
—

 
(13,653
)
Gain on extinguishment of other liabilities
(6,978
)
 
—

 
(6,978
)
Interest expense
109,730

 
138,938

 
(29,208
)
Straight-line rental income, net
(4,601
)
 
(3,498
)
 
(1,103
)
Amortization of acquired above and below market lease intangibles, net
(2,991
)
 
(3,621
)
 
630

Amortization of lease inducements
1,033

 
847

 
186

Lease termination fees
(3,339
)
 
(3,757
)
 
418

Straight-line ground rent expense
3,253

 
3,722

 
(469
)
Amortization of acquired ground lease intangibles
(560
)
 
(560
)
 
—

Other income, net
(63
)
 
(1,700
)
 
1,637

NOI
408,269

 
419,503

 
(11,234
)
NOI from Other Investment Properties
(81,483
)
 
(103,832
)
 
22,349

Same Store NOI
$
326,786

 
$
315,671

 
$
11,115

 
Year Ended December 31,
 
 
 
2016
 
2015
 
Change
Same Store NOI:
 
 
 
 
 
Base rent
$
355,077

 
$
347,806

 
$
7,271

Percentage and specialty rent
3,626

 
3,095

 
531

Tenant recovery income
96,208

 
94,354

 
1,854

Other property operating income
3,405

 
3,527

 
(122
)
 
458,316

 
448,782

 
9,534

 
 
 
 
 
 
Property operating expenses
64,355

 
65,722

 
(1,367
)
Bad debt expense
31

 
1,179

 
(1,148
)
Real estate taxes
67,144

 
66,210

 
934

 
131,530

 
133,111

 
(1,581
)
 
 
 
 
 
 
Same Store NOI
$
326,786

 
$
315,671

 
$
11,115

Same Store NOI increased $11,115, or 3.5%, primarily due to the following:
•
base rent and percentage and specialty rent increased $7,802 primarily due to an increase of $2,983 from contractual rent changes, $2,574 from occupancy growth, $2,353 from re-leasing spreads and $531 from percentage and specialty rent, partially offset by a decrease of $718 from rent abatements; and
•
property operating expenses, bad debt expense and real estate taxes, net of tenant recovery income, decreased $3,435 primarily as a result of decreases in certain non-recoverable property operating expenses and bad debt expense combined with lower net recoverable property operating expenses and net real estate taxes resulting from lower than anticipated expenses and the receipt of real estate tax refunds.

33

Comparison of Results for the Years Ended December 31, 2015 to 2014
 
Year Ended December 31,
 
 
 
2015
 
2014
 
Change
Revenues
 
 
 
 
 
Rental income
$
472,344

 
$
474,684

 
$
(2,340
)
Tenant recovery income
119,536

 
115,719

 
3,817

Other property income
12,080

 
10,211

 
1,869

Total revenues
603,960

 
600,614

 
3,346

 
 
 
 
 
 
Expenses
 
 
 
 
 
Operating expenses
94,780

 
96,798

 
(2,018
)
Real estate taxes
82,810

 
78,773

 
4,037

Depreciation and amortization
214,706

 
215,966

 
(1,260
)
Provision for impairment of investment properties
19,937

 
72,203

 
(52,266
)
General and administrative expenses
50,657

 
34,229

 
16,428

Total expenses
462,890

 
497,969

 
(35,079
)
 
 
 
 
 
 
Operating income
141,070

 
102,645

 
38,425

 
 
 
 
 
 
Gain on extinguishment of other liabilities
—

 
4,258

 
(4,258
)
Equity in loss of unconsolidated joint ventures, net
—

 
(2,088
)
 
2,088

Gain on change in control of investment properties
—

 
24,158

 
(24,158
)
Interest expense
(138,938
)
 
(133,835
)
 
(5,103
)
Other income, net
1,700

 
5,459

 
(3,759
)
Income from continuing operations
3,832

 
597

 
3,235

 
 
 
 
 
 
Discontinued operations:
 
 
 
 
 
Loss, net
—

 
(148
)
 
148

Gain on sales of investment properties
—

 
655

 
(655
)
Income from discontinued operations
—

 
507

 
(507
)
Gain on sales of investment properties
121,792

 
42,196

 
79,596

Net income
125,624

 
43,300

 
82,324

Net income attributable to noncontrolling interest
(528
)
 
—

 
(528
)
Net income attributable to the Company
125,096

 
43,300

 
81,796

Preferred stock dividends
(9,450
)
 
(9,450
)
 
—

Net income attributable to common shareholders
$
115,646

 
$
33,850

 
$
81,796

Net income attributable to common shareholders increased $81,796 from $33,850 for the year ended December 31, 2014 to $115,646 for the year ended December 31, 2015 primarily as a result of the following:
•
a $79,596 increase in gain on sales of investment properties related to the sales of 26 investment properties, representing approximately 3,917,200 square feet of GLA, during the year ended December 31, 2015 compared to the sales of 23 investment properties and one single-user outparcel, representing approximately 2,459,700 square feet of GLA, during the year ended December 31, 2014; and
•
a $52,266 decrease in provision for impairment of investment properties. Based on the results of our evaluations for impairment (see Notes 15 and 16 to the accompanying consolidated financial statements), we recognized impairment charges of $19,937 and $72,203 for the years ended December 31, 2015 and 2014, respectively;
partially offset by
•
a $24,158 gain on change in control of investment properties recognized during the year ended December 31, 2014 associated with the dissolution of our MS Inland Fund, LLC (MS Inland) unconsolidated joint venture (see Note 11 to the accompanying consolidated financial statements). No such gain was recorded during the year ended December 31, 2015;

34

•
a $16,428 increase in general and administrative expenses primarily consisting of an increase in compensation expense, including bonuses and amortization of unvested restricted shares and performance restricted stock units, of $13,140 and executive and realignment separation charges of $4,730;
•
a $5,103 increase in interest expense primarily consisting of:
•
a $13,551 increase in interest on our unsecured notes payable, which were issued in June 2014 and March 2015; and
•
an $8,162 increase in prepayment penalties and defeasance premiums;
partially offset by
•
a $16,619 decrease in interest on mortgages payable due to the repayment of mortgage debt.
•
a $4,258 gain on extinguishment of other liabilities recognized during the year ended December 31, 2014 related to the acquisition of the fee interest in one of our existing investment properties that was previously subject to a ground lease with a third party. The amount recognized represents the reversal of a straight-line ground rent liability associated with the ground lease.
Same store portfolio – 2015 and 2014
For the year ended December 31, 2015, our same store portfolio consisted of 180 retail operating properties acquired or placed in service and stabilized prior to January 1, 2014.
The following tables present a reconciliation of net income attributable to common shareholders to Same Store NOI and details of the components of Same Store NOI for the years ended December 31, 2015 and 2014:
 
Year Ended December 31,
 
 
 
2015
 
2014
 
Change
Net income attributable to common shareholders
$
115,646

 
$
33,850

 
$
81,796

Adjustments to reconcile to Same Store NOI:
 
 
 
 
 
Preferred stock dividends
9,450

 
9,450

 
—

Net income attributable to noncontrolling interest
528

 
—

 
528

Income from discontinued operations
—

 
(507
)
 
507

Gain on sales of investment properties
(121,792
)
 
(42,196
)
 
(79,596
)
Depreciation and amortization
214,706

 
215,966

 
(1,260
)
Provision for impairment of investment properties
19,937

 
72,203

 
(52,266
)
General and administrative expenses
50,657

 
34,229

 
16,428

Gain on extinguishment of other liabilities
—

 
(4,258
)
 
4,258

Equity in loss of unconsolidated joint ventures, net
—

 
2,088

 
(2,088
)
Gain on change in control of investment properties
—

 
(24,158
)
 
24,158

Interest expense
138,938

 
133,835

 
5,103

Straight-line rental income, net
(3,498
)
 
(4,781
)
 
1,283

Amortization of acquired above and below market lease intangibles, net
(3,621
)
 
(2,076
)
 
(1,545
)
Amortization of lease inducements
847

 
707

 
140

Lease termination fees
(3,757
)
 
(2,667
)
 
(1,090
)
Straight-line ground rent expense
3,722

 
3,889

 
(167
)
Amortization of acquired ground lease intangibles
(560
)
 
(560
)
 
—

Other income, net
(1,700
)
 
(5,459
)
 
3,759

NOI
419,503

 
419,555

 
(52
)
NOI from Other Investment Properties
(73,003
)
 
(82,921
)
 
9,918

Same Store NOI
$
346,500

 
$
336,634

 
$
9,866


35

 
Year Ended December 31,
 
 
 
2015
 
2014
 
Change
Same Store NOI:
 
 
 
 
 
Base rent
$
382,171

 
$
374,758

 
$
7,413

Percentage and specialty rent
3,331

 
3,443

 
(112
)
Tenant recovery income
95,574

 
94,054

 
1,520

Other property operating income
4,051

 
3,475

 
576

 
485,127

 
475,730

 
9,397

 
 
 
 
 
 
Property operating expenses
70,646

 
74,229

 
(3,583
)
Bad debt expense
1,158

 
534

 
624

Real estate taxes
66,823

 
64,333

 
2,490

 
138,627

 
139,096

 
(469
)
 
 
 
 
 
 
Same Store NOI
$
346,500

 
$
336,634

 
$
9,866

Same store NOI increased $9,866, or 2.9%, primarily due to the following:
•
base rent and percentage and specialty rent increased $7,301 primarily due to an increase of $3,385 from contractual rent changes, $2,280 from re-leasing spreads and a net increase of $2,168 as a result of an increase in our small shop occupancy and a decrease in our anchor occupancy, partially offset by a decrease of $373 from rent abatements; and
•
total operating expenses, net of tenant recovery income, decreased $1,989 primarily as a result of a decrease in certain non-recoverable property operating expenses, partially offset by an increase in real estate taxes, bad debt expense and certain recoverable property operating expenses.
Funds From Operations Attributable to Common Shareholders
The National Association of Real Estate Investment Trusts, or NAREIT, an industry trade group, has promulgated a financial measure known as FFO. As defined by NAREIT, FFO means net income (loss) computed in accordance with GAAP, excluding gains (or losses) from sales of depreciable real estate, plus depreciation and amortization and impairment charges on depreciable real estate. We have adopted the NAREIT definition in our computation of FFO attributable to common shareholders. Management believes that, subject to the following limitations, FFO attributable to common shareholders provides a basis for comparing our performance and operations to those of other REITs.
We define Operating FFO attributable to common shareholders as FFO attributable to common shareholders excluding the impact of discrete non-operating transactions and other events which we do not consider representative of the comparable operating results of our real estate operating portfolio, which is our core business platform. Specific examples of discrete non-operating transactions and other events include, but are not limited to, the financial statement impact of gains or losses associated with the early extinguishment of debt or other liabilities, impairment charges to write down the carrying value of assets other than depreciable real estate, actual or anticipated settlement of litigation involving the Company and executive and realignment separation charges, which are otherwise excluded from our calculation of FFO attributable to common shareholders.
We believe that FFO attributable to common shareholders and Operating FFO attributable to common shareholders, which are supplemental non-GAAP financial measures, provide additional and useful means to assess the operating performance of REITs. FFO attributable to common shareholders and Operating FFO attributable to common shareholders do not represent alternatives to (i) “Net income” or “Net income attributable to common shareholders” as indicators of our financial performance, or (ii) “Cash flows from operating activities” in accordance with GAAP as measures of our capacity to fund cash needs, including the payment of dividends. Comparison of our presentation of Operating FFO attributable to common shareholders to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in definition and application by such REITs.

36

The following table presents a reconciliation of net income attributable to common shareholders to FFO attributable to common shareholders and Operating FFO attributable to common shareholders:
 
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
Net income attributable to common shareholders
 
$
157,367

 
$
115,646

 
$
33,850

Depreciation and amortization of depreciable real estate
 
223,018

 
213,602

 
216,676

Provision for impairment of investment properties
 
17,369

 
19,937

 
72,203

Gain on sales of depreciable investment properties, net of noncontrolling interest (a)
 
(129,707
)
 
(121,264
)
 
(67,009
)
FFO attributable to common shareholders
 
$
268,047

 
$
227,921

 
$
255,720

 
 
 
 
 
 
 
FFO attributable to common shareholders per common share outstanding
 
$
1.13

 
$
0.96

 
$
1.08

 
 
 
 
 
 
 
FFO attributable to common shareholders
 
$
268,047

 
$
227,921

 
$
255,720

Impact on earnings from the early extinguishment of debt, net
 
(7,028
)
 
18,864

 
10,479

Provision for hedge ineffectiveness
 
(21
)
 
(25
)
 
12

Provision for impairment of non-depreciable investment property
 
3,007

 
—

 
—

Reversal of excise tax accrual
 
—

 
—

 
(4,594
)
Gain on extinguishment of other liabilities
 
(6,978
)
 
—

 
(4,258
)
Executive and realignment separation charges (b)
 
—

 
4,730

 
—

Other (c)
 
132

 
(224
)
 
(199
)
Operating FFO attributable to common shareholders
 
$
257,159

 
$
251,266

 
$
257,160

 
 
 
 
 
 
 
Operating FFO attributable to common shareholders per common share outstanding
 
$
1.09

 
$
1.06

 
$
1.09

(a)
Results for the year ended December 31, 2014 include the gain on change in control of investment properties of $24,158 recognized pursuant to the dissolution of our joint venture arrangement with our partner in our MS Inland unconsolidated joint venture on June 5, 2014.
(b)
Included in “General and administrative expenses” in the accompanying consolidated statements of operations and other comprehensive income.
(c)
Consists of the impact on earnings from net settlements and easement proceeds, which are included in “Other income, net” in the accompanying consolidated statements of operations and other comprehensive income.
Liquidity and Capital Resources
We anticipate that cash flows from the below-listed sources will provide adequate capital for the next 12 months and beyond for all scheduled principal and interest payments on our outstanding indebtedness, including maturing debt, current and anticipated tenant allowances or other capital obligations, the shareholder distributions required to maintain our REIT status and compliance with the financial covenants of our unsecured debt agreements.
Our primary expected sources and uses of liquidity are as follows:
 
SOURCES
 
 
USES
▪
Operating cash flow
 
▪
Tenant allowances and leasing costs
▪
Cash and cash equivalents
 
▪
Improvements made to individual properties, certain of which are not
▪
Available borrowings under our unsecured revolving
 
 
recoverable through common area maintenance charges to tenants
 
line of credit
 
▪
Acquisitions
▪
Proceeds from capital markets transactions
 
▪
Debt repayments and defeasances
▪
Proceeds from asset dispositions
 
▪
Distribution payments
 
 
 
▪
Redevelopment, renovation or expansion activities
 
 
 
▪
New development
 
 
 
▪
Repurchases of our common stock
 
 
 
▪
Redemption of our preferred stock
We have made substantial progress over the last several years in strengthening our balance sheet, as demonstrated by our reduced leverage, increased liquidity and higher unencumbered asset ratio. Debt maturities have been funded primarily through asset dispositions and capital markets transactions, including public offerings of our common stock and preferred stock and private and public offerings of senior unsecured notes. As of December 31, 2016, we had $35,023 of debt scheduled to mature through the

37

end of 2017, comprised of $25,054 related to mortgages payable maturing in 2017 and $9,969 of principal amortization related to longer-dated maturities, which we plan on satisfying through a combination of proceeds from asset dispositions, capital markets transactions and our unsecured revolving line of credit.
The table below summarizes our consolidated indebtedness as of December 31, 2016:
Debt
 
Aggregate
Principal
Amount
 
Weighted
Average
Interest Rate
 
Maturity Date
 
Weighted
Average Years
to Maturity
Fixed rate mortgages payable (a)
 
$
773,395

 
6.31
%
 
Various
 
4.2 years
 
 
 
 
 
 
 
 
 
Unsecured notes payable:
 
 
 
 
 
 
 
 
Senior notes – 4.12% due 2021
 
100,000

 
4.12
%
 
June 30, 2021
 
4.5 years
Senior notes – 4.58% due 2024
 
150,000

 
4.58
%
 
June 30, 2024
 
7.5 years
Senior notes – 4.00% due 2025
 
250,000

 
4.00
%
 
March 15, 2025
 
8.2 years
Senior notes – 4.08% due 2026
 
100,000

 
4.08
%
 
September 30, 2026
 
9.8 years
Senior notes – 4.24% due 2028
 
100,000

 
4.24
%
 
December 28, 2028
 
12.0 years
Total unsecured notes payable (a)
 
700,000

 
4.19
%
 
 
 
8.3 years
 
 
 
 
 
 
 
 
 
Unsecured credit facility:
 
 
 
 
 
 
 
 
Term loan – fixed rate (b)
 
250,000

 
1.97
%
 
January 5, 2021
 
4.0 years
Term loan – variable rate (c)
 
200,000

 
2.22
%
 
May 11, 2018 (c)
 
1.4 years
Revolving line of credit – variable rate (c)
 
86,000

 
2.12
%
 
January 5, 2020 (c)
 
3.0 years
Total unsecured credit facility (a)
 
536,000

 
2.09
%
 
 
 
2.9 years
 
 
 
 
 
 
 
 
 
Total consolidated indebtedness (d)
 
$
2,009,395

 
4.44
%
 
 
 
5.3 years
(a)
Fixed rate mortgages payable excludes mortgage premium of $1,437, discount of $(622) and capitalized loan fees of $(5,026), net of accumulated amortization, as of December 31, 2016. Unsecured notes payable excludes discount of $(971) and capitalized loan fees of $(3,886), net of accumulated amortization, as of December 31, 2016. Term loans exclude capitalized loan fees of $(2,402), net of accumulated amortization, as of December 31, 2016. Capitalized loan fees related to the revolving line of credit are included in “Other assets, net” in the accompanying consolidated balance sheets.
(b)
Reflects $250,000 of LIBOR-based variable rate debt that has been swapped to a weighted average fixed rate of 0.6677% plus a credit spread based on a leverage grid ranging from 1.30% to 2.20% through December 31, 2017. The applicable credit spread was 1.30% as of December 31, 2016.
(c)
We have two one year extension options on the term loan due 2018 and two six-month extension options on the revolving line of credit, which we may exercise as long as we are in compliance with the terms of the unsecured credit agreement and we pay an extension fee equal to 0.15% for the term loan and 0.075% of the commitment amount being extended for the revolving line of credit.
(d)
Excludes the $200,000 unsecured term loan due 2023 (Term Loan Due 2023), which closed during the year ended December 31, 2016 and funded on January 3, 2017. Refer below for further discussion of the terms of the Term Loan Due 2023.
Mortgages Payable
During the year ended December 31, 2016, we repaid or defeased mortgages payable in the total amount of $263,548 which had a weighted average fixed interest rate of 5.09% and made scheduled principal payments of $13,180 related to amortizing loans. One of the mortgages repaid, with a principal balance of $7,750 at maturity, had been swapped to a fixed rate and we had guaranteed a portion of the outstanding balance. Upon repayment of the mortgage on its scheduled maturity date, the interest rate swap expired and our guarantee was extinguished. In addition, during the year ended December 31, 2016, we disposed of The Gateway through a lender-directed sale in full satisfaction of our $94,353 mortgage obligation, which had a fixed interest rate of 6.57%. Immediately prior to the disposition, the lender reduced our loan obligation to $75,000 which was assumed by the buyer in connection with the disposition. Along with the loan reduction, the lender received the balance of the restricted escrows that they held and the rights to unpaid accounts receivable and forgave accrued interest, resulting in a net gain on extinguishment of debt of $13,653. We also assumed a mortgage payable with a principal balance of $15,971 and an interest rate of 3.75% that matures in 2031 in conjunction with the acquisition of The Shoppes at Union Hill.
Subsequent to December 31, 2016, we defeased a portfolio of 45 cross-collateralized mortgages payable (known as the IW JV portfolio of mortgages payable), which had an outstanding principal balance of $379,435, an interest rate of 7.50% and were scheduled to mature in 2019, and incurred a defeasance premium of $60,198. As a result, the 45 properties that secured the mortgages payable as of December 31, 2016 are no longer encumbered by mortgages.

38

Unsecured Notes Payable
Notes Due 2026 and 2028
On September 30, 2016, we issued $100,000 of 10-year 4.08% senior unsecured notes due 2026 in a private placement transaction pursuant to a note purchase agreement we entered into with certain institutional investors on September 30, 2016. Pursuant to the same note purchase agreement, on December 28, 2016, we also issued $100,000 of 12-year 4.24% senior unsecured notes (Notes Due 2026 and 2028). The proceeds were used to pay down our unsecured revolving line of credit, early repay certain longer-dated mortgages payable and for general corporate purposes.
The note purchase agreement governing the Notes Due 2026 and 2028 contains customary representations, warranties and covenants, and events of default. Pursuant to the terms of the note purchase agreement, we are subject to various financial covenants, including the requirement to maintain the following: (i) maximum unencumbered, secured and consolidated leverage ratios; (ii) a minimum interest coverage ratio; (iii) a fixed charge coverage ratio (as set forth in our unsecured credit facility); and (iv) an unencumbered interest coverage ratio (as set forth in our unsecured credit facility and the note purchase agreement governing the Notes Due 2021 and 2024).
Notes Due 2025
On March 12, 2015, we completed a public offering of $250,000 in aggregate principal amount of the Notes Due 2025. The Notes Due 2025 were priced at 99.526% of the principal amount to yield 4.058% to maturity. The proceeds were used to repay a portion of our unsecured revolving line of credit.
The indenture, as supplemented, governing the Notes Due 2025 (the Indenture) contains customary covenants and events of default. Pursuant to the terms of the Indenture, we are subject to various financial covenants, including the requirement to maintain the following: (i) maximum secured and total leverage ratios; (ii) a debt service coverage ratio; and (iii) maintenance of an unencumbered assets to unsecured debt ratio.
Notes Due 2021 and 2024
On June 30, 2014, we completed a private placement of $250,000 of unsecured notes, consisting of $100,000 of 4.12% senior unsecured notes due 2021 and $150,000 of 4.58% senior unsecured notes due 2024 (Notes Due 2021 and 2024). The proceeds were used to repay a portion of our unsecured revolving line of credit.
The note purchase agreement governing the Notes Due 2021 and 2024 contains customary representations, warranties and covenants, and events of default. Pursuant to the terms of the note purchase agreement, we are subject to various financial covenants, some of which are based upon the financial covenants in effect in our primary credit facility, including the requirement to maintain the following: (i) maximum unencumbered, secured and consolidated leverage ratios; (ii) minimum interest coverage and unencumbered interest coverage ratios; and (iii) a minimum consolidated net worth.
As of December 31, 2016, management believes we were in compliance with the financial covenants under the Indenture and the note purchase agreements.
Unsecured Term Loans and Revolving Line of Credit
Unsecured Credit Facility
On January 6, 2016, we entered into our fourth amended and restated unsecured credit agreement with a syndicate of financial institutions led by KeyBank National Association serving as administrative agent and Wells Fargo Bank, National Association serving as syndication agent to provide for an unsecured credit facility aggregating $1,200,000 (Unsecured Credit Facility). Our Unsecured Credit Facility consists of a $750,000 unsecured revolving line of credit, a $250,000 unsecured term loan and a $200,000 unsecured term loan and is priced on a leverage grid at a rate of LIBOR plus a credit spread. We received investment grade credit ratings from two rating agencies in 2014. In accordance with the unsecured credit agreement, we may elect to convert to an investment grade pricing grid. As of December 31, 2016, making such an election would have resulted in a higher interest rate and, as such, we have not made the election to convert to an investment grade pricing grid.

39

The following table summarizes the key terms of our Unsecured Credit Facility:
 
 
 
 
 
 
 
 
Leverage-Based Pricing
 
Ratings-Based Pricing
Unsecured Credit Facility
 
Maturity Date
 
Extension Option
 
Extension Fee
 
Credit Spread
Unused Fee
 
Credit Spread
Facility Fee
$250,000 unsecured term loan
 
1/5/2021
 
N/A
 
N/A
 
1.30% - 2.20%
N/A
 
0.90% - 1.75%
N/A
$200,000 unsecured term loan
 
5/11/2018
 
2 one year
 
0.15%
 
1.45% - 2.20%
N/A
 
1.05% - 2.05%
N/A
$750,000 unsecured revolving line of credit
 
1/5/2020
 
2 six month
 
0.075%
 
1.35% - 2.25%
0.15% - 0.25%
 
0.85% - 1.55%
0.125% - 0.30%
Our Unsecured Credit Facility has a $400,000 accordion option that allows us, at our election, to increase the total credit facility up to $1,600,000, subject to (i) customary fees and conditions including, but not limited to, the absence of an event of default as defined in the agreement and (ii) our ability to obtain additional lender commitments.
The fourth amended and restated unsecured credit agreement (Unsecured Credit Agreement) contains customary representations, warranties and covenants, and events of default. Pursuant to the terms of the Unsecured Credit Agreement, we are subject to various financial covenants, including the requirement to maintain the following: (i) maximum unencumbered, secured and consolidated leverage ratios; and (ii) minimum fixed charge and unencumbered interest coverage ratios. As of December 31, 2016, management believes we were in compliance with the financial covenants and default provisions under the Unsecured Credit Agreement.
As of December 31, 2016, we had letter(s) of credit outstanding totaling $12,296 which serve as collateral for certain capital improvements and performance obligations on certain redevelopment projects, which will be satisfied upon completion of the projects, and reduced the available borrowings on our unsecured revolving line of credit.
Term Loan Due 2023
On November 22, 2016, we closed on a seven-year $200,000 unsecured term loan with a group of financial institutions, which funded on January 3, 2017. The Term Loan Due 2023 is priced on a leverage grid at a rate of LIBOR plus a credit spread ranging from 1.70% to 2.55%. In accordance with the term loan agreement (Term Loan Agreement), we may elect to convert to an investment grade pricing grid. As of December 31, 2016, making such an election would have resulted in a higher interest rate and, as such, we have not made the election to convert to an investment grade pricing grid. The Term Loan Due 2023 matures on November 22, 2023 and has a $100,000 accordion option that allows us, at our election, to increase the total unsecured term loan up to $300,000, subject to customary fees and conditions, including the absence of an event of default as defined in the Term Loan Agreement.
The Term Loan Agreement contains customary representations, warranties and covenants, and events of default, including financial covenants that require us to maintain the following: (i) maximum unencumbered, secured and consolidated leverage ratios; and (ii) minimum fixed charge and unencumbered interest coverage ratios. As of December 31, 2016, management believes we were in compliance with the financial covenants and default provisions under the Term Loan Agreement.
In addition, subsequent to December 31, 2016, we entered into two agreements to swap a total of $200,000 of LIBOR-based variable rate debt to a fixed rate of 1.2628% plus the relevant credit spread through November 22, 2018.

40

Debt Maturities
The following table shows the scheduled maturities and principal amortization of our indebtedness as of December 31, 2016 for each of the next five years and thereafter and the weighted average interest rates by year, as well as the fair value of our indebtedness as of December 31, 2016. The table does not reflect the impact of any 2017 debt activity, such as the defeasance of the IW JV portfolio of mortgages payable or the funding of the Term Loan Due 2023 on January 3, 2017.
 
2017
 
2018
 
2019
 
2020
 
2021
 
Thereafter
 
Total
 
Fair Value
Debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed rate debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgages payable (a)
$
35,023

 
$
11,463

 
$
433,982

 
$
4,334

 
$
23,249

 
$
265,344

 
$
773,395

 
$
833,210

Fixed rate term loan (b)
—

 
—

 
—

 
—

 
250,000

 
—

 
250,000

 
250,000

Unsecured notes payable (c)
—

 
—

 
—

 
—

 
100,000

 
600,000

 
700,000

 
679,212

Total fixed rate debt
35,023

 
11,463

 
433,982

 
4,334

 
373,249

 
865,344

 
1,723,395

 
1,762,422

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable rate debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable rate term loan and
revolving line of credit
—

 
200,000

 
—

 
86,000

 
—

 
—

 
286,000

 
286,551

Total debt (d)
$
35,023

 
$
211,463

 
$
433,982

 
$
90,334

 
$
373,249

 
$
865,344

 
$
2,009,395

 
$
2,048,973

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average interest rate on debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed rate debt
4.83
%
 
6.51
%
 
7.49
%
 
4.58
%
 
2.73
%
 
4.36
%
 
4.82
%
 
 
Variable rate debt (e)
—

 
2.22
%
 
—

 
2.12
%
 
—

 
—

 
2.19
%
 
 
Total
4.83
%
 
2.45
%
 
7.49
%
 
2.24
%
 
2.73
%
 
4.36
%
 
4.44
%
 
 
(a)
Excludes mortgage premium of $1,437 and discount of $(622), net of accumulated amortization, as of December 31, 2016.
(b)
$250,000 of LIBOR-based variable rate debt has been swapped to a fixed rate through two interest rate swaps. The swaps effectively convert one-month floating rate LIBOR to a weighted average fixed rate of 0.6677% through December 31, 2017.
(c)
Excludes discount of $(971), net of accumulated amortization, as of December 31, 2016.
(d)
The weighted average years to maturity of consolidated indebtedness was 5.3 years as of December 31, 2016. Total debt excludes capitalized loan fees of $(11,314), net of accumulated amortization, as of December 31, 2016, which are included as a reduction to the respective debt balances, and the Term Loan Due 2023, which funded on January 3, 2017. The $39,578 difference between total debt outstanding and its fair value is primarily attributable to a $45,120 difference related to the IW JV portfolio of mortgages payable. These mortgages were scheduled to mature in 2019 and had an interest rate of 7.50% and an outstanding principal balance of $379,435 as of December 31, 2016. Subsequent to December 31, 2016, we defeased the IW JV portfolio of mortgages payable. As a result, the 45 properties that secured the mortgages payable as of December 31, 2016 are no longer encumbered by mortgages.
(e)
Represents interest rates as of December 31, 2016.
We plan on addressing our debt maturities through a combination of proceeds from asset dispositions, capital markets transactions and our unsecured revolving line of credit.
Distributions and Equity Transactions
Our distributions of current and accumulated earnings and profits for U.S. federal income tax purposes are taxable to shareholders, generally, as ordinary income. Distributions in excess of these earnings and profits generally are treated as a non-taxable reduction of the shareholders’ basis in the shares to the extent thereof (non-dividend distributions) and thereafter as taxable gain. We intend to continue to qualify as a REIT for U.S. federal income tax purposes. The Code generally requires that a REIT annually distributes to its shareholders at least 90% of its REIT taxable income, determined without regard to the dividends paid deduction and excluding net capital gains. The Code imposes tax on any undistributed REIT taxable income.
To satisfy the requirements for qualification as a REIT and generally not be subject to U.S. federal income and excise tax, we intend to make regular quarterly distributions of all, or substantially all, of our taxable income to shareholders. Our future distributions will be at the sole discretion of our board of directors. When determining the amount of future distributions, we expect to consider, among other factors, (i) the amount of cash generated from our operating activities, (ii) our expectations of future cash flow, (iii) our determination of near-term cash needs for debt repayments and potential future share repurchases, (iv) the market of available acquisitions of new properties and redevelopment, expansions and pad development opportunities, (v) the timing of significant re-leasing activities and the establishment of additional cash reserves for anticipated tenant allowances and general property capital improvements, (vi) our ability to continue to access additional sources of capital, (vii) the amount required to be

41

distributed to maintain our status as a REIT, which is a requirement of our unsecured credit agreement, and to avoid or minimize any income and excise taxes that we otherwise would be required to pay and (viii) the amount required to declare and pay in cash, or set aside for the payment of, the dividends on our Series A preferred stock for all past dividend periods. Under certain circumstances, we may be required to make distributions in excess of cash available for distribution in order to meet the REIT distribution requirements.
In March 2013, we established an at-the-market (ATM) equity program under which we sold 5,547 shares of our Class A common stock during the year ended December 31, 2013. No shares were issued during the years ended December 31, 2014 and 2015 and the 2013 ATM equity program expired in November 2015.
In December 2015, we entered into a new ATM equity program under which we may issue and sell shares of our Class A common stock, having an aggregate offering price of up to $250,000, from time to time. Actual sales may depend on a variety of factors, including, among others, market conditions and the trading price of our Class A common stock. Any net proceeds are expected to be used for general corporate purposes, which may include the funding of acquisitions and redevelopment activities and the repayment of debt, including our Unsecured Credit Facility. We did not sell any shares under our ATM equity program during the years ended December 31, 2016 and 2015. As of December 31, 2016, we had Class A common shares having an aggregate offering price of up to $250,000 remaining available for sale under our ATM equity program.
In December 2015, our board of directors authorized a common stock repurchase program under which we may repurchase, from time to time, up to a maximum of $250,000 of shares of our Class A common stock. The shares may be repurchased in the open market or in privately negotiated transactions and are canceled upon repurchase. The timing and actual number of shares repurchased will depend on a variety of factors, including price in absolute terms and in relation to the value of our assets, corporate and regulatory requirements, market conditions and other corporate liquidity requirements and priorities. The common stock repurchase program may be suspended or terminated at any time without prior notice. We did not repurchase any shares during the year ended December 31, 2015. During the year ended December 31, 2016, we repurchased 591 shares at an average price per share of $14.93 for a total of $8,841. As of December 31, 2016, $241,159 remained available under the repurchase program.
Capital Expenditures and Redevelopment Activity
We anticipate that obligations related to capital improvements, including expansions and pad developments, at our operating properties in 2017 can be met with cash flows from operations, asset dispositions and working capital.
We began redevelopment at Reisterstown Road Plaza and Towson Circle in 2016 and have three active expansions and pad developments. We have invested a total of approximately $12,357 in these projects, which are at various stages of completion, and based on our current plans and estimates, we anticipate that to complete these projects, it will require an additional $40,700 to $43,700, net of proceeds from land sales, reimbursement from third parties and contributions from project partners, as applicable. We anticipate funding the redevelopments, expansions and pad developments with cash flows from operations, asset dispositions, working capital and proceeds from our unsecured revolving line of credit.
Dispositions
We continue to execute our portfolio repositioning strategy of disposing of select non-target and single-user properties. The following table highlights our property dispositions during 2016, 2015 and 2014:
 
 
Number of
Properties Sold
 
Square
Footage
 
Consideration
 
Aggregate
Proceeds, Net (a)
 
Debt
Extinguished
 
2016 Dispositions
 
46

 
3,013,900

 
$
540,362

 
$
448,216

 
$
94,353

(b) (c)
2015 Dispositions
 
26

 
3,917,200

 
$
516,444

 
$
505,524

 
$
25,724

(c)
2014 Dispositions
 
24

 
2,490,100

 
$
322,989

 
$
314,377

 
$
9,713

(c)
(a)
Represents total consideration net of transaction costs. 2016 dispositions include the disposition of one development property, which was not under active development. 2015 dispositions include the disposition of two development properties, one of which had been held in a consolidated joint venture.
(b)
Represents The Gateway’s outstanding mortgage payable prior to the lender-directed sale of the property. Immediately prior to the disposition, the lender reduced our loan obligation to $75,000 which was assumed by the buyer in connection with the disposition. Along with the loan reduction, the lender received the balance of the restricted escrows that they held and the rights to unpaid accounts receivable and forgave accrued interest, resulting in a net gain on extinguishment of debt of $13,653.
(c)
Excludes $10,695, $95,881 and $114,404 of mortgages payable repayments or defeasances completed prior to disposition of the respective property for the years ended December 31, 2016, 2015 and 2014, respectively.

42

In addition to the transactions presented in the preceding table, we received net proceeds of $2,549, $300 and $1,023 from other transactions, including condemnation awards and the sale of parcels at certain of our properties during the years ended December 31, 2016, 2015 and 2014, respectively.
Acquisitions
We continue to execute our investment strategy of acquiring high quality, multi-tenant retail assets within our target markets. The following table highlights our asset acquisitions during 2016, 2015 and 2014:
 
 
Number of
Assets Acquired
 
Square
Footage
 
Acquisition
Price
 
Pro Rata
Acquisition
Price (a)
 
Mortgage
Debt
 
Pro Rata
Mortgage
Debt (a)
2016 Acquisitions (b)
 
9

 
1,102,300

 
$
408,308

 
$
408,308

 
$
15,971

 
$
15,971

2015 Acquisitions (c)
 
11

 
1,179,800

 
$
463,136

 
$
463,136

 
$
—

 
$
—

2014 Acquisitions (d)
 
11

 
1,339,400

 
$
348,061

 
$
289,561

 
$
141,698

 
$
113,358

(a)
Includes amounts associated with the 2014 acquisition of our partner’s 80% ownership interest in our MS Inland unconsolidated joint venture, as well as acquisitions from unaffiliated third parties.
(b)
2016 acquisitions include the purchase of the following: 1) the fee interest in our Ashland & Roosevelt multi-tenant retail operating property that was previously subject to a ground lease with a third party, and 2) the anchor space improvements at our Woodinville Plaza multi-tenant retail operating property that was previously subject to a ground lease with us. The total number of properties in our portfolio was not affected by these transactions.
(c)
2015 acquisitions include the purchase of the following: 1) a land parcel at our Lake Worth Towne Crossing multi-tenant retail operating property, 2) a single-user outparcel located at our Southlake Town Square multi-tenant retail operating property that was subject to a ground lease with us prior to the transaction, and 3) a single-user outparcel located at our Royal Oaks Village II multi-tenant retail operating property. The total number of properties in our portfolio was not affected by these transactions.
(d)
2014 acquisitions include the purchase of the following: 1) the fee interest in our Bed Bath & Beyond Plaza multi-tenant retail operating property that was previously subject to a ground lease with a third party, 2) a single-user outparcel located at our Southlake Town Square multi-tenant retail operating property that was subject to a ground lease with us prior to the transaction, and 3) a parcel located at our Lakewood Towne Center multi-tenant retail operating property. The total number of properties in our portfolio was not affected by these transactions.
Summary of Cash Flows
 
 
Year Ended December 31,
 
 
2016
 
2015
 
Change
Cash provided by operating activities
 
$
263,748

 
$
265,813

 
$
(2,065
)
Cash provided by investing activities
 
17,537

 
25,288

 
(7,751
)
Cash used in financing activities
 
(279,590
)
 
(351,969
)
 
72,379

Increase (decrease) in cash and cash equivalents
 
1,695

 
(60,868
)
 
62,563

Cash and cash equivalents, at beginning of year
 
51,424

 
112,292

 
 
Cash and cash equivalents, at end of year
 
$
53,119

 
$
51,424

 
 
Cash Flows from Operating Activities
Cash flows from operating activities consist primarily of net income from property operations, adjusted for the following, among others: (i) depreciation and amortization, (ii) provision for impairment of investment properties, (iii) gains on sales of investment properties and change in control of investment properties, and (iv) gains on extinguishment of debt and other liabilities. Net cash provided by operating activities in 2016 decreased $2,065 primarily due to the following:
•
an $11,234 decrease in NOI, consisting of a decrease in NOI from properties that were sold or held for sale in 2015 and 2016 and other properties not included in our same store portfolio of $22,349, partially offset by an increase in Same Store NOI of $11,115;
•
a $5,427 increase in cash bonuses paid; and
•
a $1,456 increase in cash paid for leasing fees and inducements;
partially offset by

43

•
a $13,460 reduction in cash paid for interest; and
•
ordinary course fluctuations in working capital accounts;
Cash Flows from Investing Activities
Cash flows from investing activities consist primarily of proceeds from the sales of investment properties, net of cash paid to purchase investment properties and fund capital expenditures, tenant improvements and developments in progress, in addition to changes in restricted escrows. Net cash provided by investing activities in 2016 decreased $7,751 primarily due to the following:
•
a $55,059 decrease in proceeds from the sales of investment properties; and
•
a $21,950 net change in restricted escrow activity, of which $16,950 relates to acquisition deposits;
partially offset by
•
a $72,649 decrease in cash paid to purchase investment properties.
We will continue to execute our investment strategy by pursuing targeted dispositions. The majority of the proceeds from disposition activity in 2017 is expected to be used to acquire high quality, multi-tenant retail assets within our target markets, fund redevelopment, expansion and pad development activities, repay debt, potentially repurchase our common stock or redeem our preferred stock. In addition, tenant improvement costs associated with re-leasing vacant space may continue to be significant.
Cash Flows from Financing Activities
Cash flows from financing activities primarily consist of proceeds from our Unsecured Credit Facility and the issuance of debt instruments, partially offset by distribution payments, repayments of our Unsecured Credit Facility, principal payments on mortgages payable and the purchase of U.S. Treasury Securities in connection with defeasance of mortgages payable. Net cash used in financing activities in 2016 decreased $72,379 primarily due to the following:
•
a $175,457 decrease in principal payments on mortgages payable; and
•
a $75,005 decrease in the purchase of U.S. Treasury securities in connection with defeasance of mortgages payable;
partially offset by
•
a $114,000 decrease in net proceeds from our Unsecured Credit Facility;
•
a $48,815 decrease in proceeds from the issuance of unsecured notes related to a $200,000 private placement transaction in 2016 and a $248,815 underwritten public offering in 2015;
•
$8,841 paid in 2016 to repurchase common shares through our share repurchase program; and
•
a $6,513 increase in the payment of loan fees and deposits.
We plan to continue to address our debt maturities through a combination of proceeds from asset dispositions, capital markets transactions and our unsecured revolving line of credit.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Contractual Obligations
The following table presents our obligations and commitments to make future payments under our debt obligations and lease agreements as of December 31, 2016 and excludes the following:
•
the impact of any 2017 debt activity, such as the defeasance of the IW JV portfolio of mortgages payable and the Term Loan Due 2023, which closed during the year ended December 31, 2016 and funded on January 3, 2017;
•
recorded debt premiums, discounts and capitalized loan fees, which are not obligations;

44

•
obligations related to development, redevelopment, expansions and pad site developments, as payments are only due upon satisfactory performance under the contracts; and
•
letters of credit totaling $12,296 which serve as collateral for certain capital improvements and performance obligations on certain redevelopment projects, which will be satisfied upon completion of the projects.
 
 
Payment due by period
 
 
Less than
1 year (b)
 
1-3
years
 
3-5
years (c)
 
More than
5 years
 
Total
Long-term debt (a):
 
 
 
 
 
 
 
 
 
 
Fixed rate
 
$
35,023

 
$
445,445

 
$
377,583

 
$
865,344

 
$
1,723,395

Variable rate
 
—

 
200,000

 
86,000

 
—

 
286,000

Interest (d)
 
89,595

 
165,684

 
88,913

 
112,753

 
456,945

Operating lease obligations (e)
 
7,853

 
15,999

 
16,843

 
376,939

 
417,634

 
 
$
132,471

 
$
827,128

 
$
569,339

 
$
1,355,036

 
$
2,883,974

(a)
Fixed and variable rate amounts for each year include scheduled principal amortization payments. Interest payments related to variable rate debt were calculated using interest rates as of December 31, 2016.
(b)
We plan on addressing our 2017 mortgages payable maturities through a combination of proceeds from asset dispositions, capital markets transactions and our unsecured revolving line of credit.
(c)
Included in fixed rate debt is $250,000 of LIBOR-based variable rate debt that has been swapped to a fixed rate through two interest rate swaps through December 2017.
(d)
Represents expected interest payments on our consolidated debt obligations as of December 31, 2016, including any capitalized interest.
(e)
We lease land under non-cancellable leases at certain of our properties expiring in various years from 2028 to 2087, not inclusive of any available option period. In addition, unless we can purchase a fee interest in the underlying land or extend the terms of these leases before or at their expiration, we will lose our interest in the improvements and the right to operate these properties. We lease office space under non-cancellable leases expiring in various years from 2017 to 2023.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. For example, significant estimates and assumptions have been made with respect to useful lives of assets; capitalization of development costs; fair value measurements; provision for impairment, including estimates of holding periods, capitalization rates and discount rates (where applicable); provision for income taxes; recoverable amounts of receivables; deferred taxes and initial valuations and related amortization periods of deferred costs and intangibles, particularly with respect to property acquisitions. Actual results could differ from these estimates.
Summary of Significant Accounting Policies
Critical Accounting Policies and Estimates
The following disclosure pertains to accounting policies and estimates we believe are most “critical” to the portrayal of our financial condition and results of operations and require our most difficult, subjective or complex judgments. These judgments often result from the need to make estimates about the effect of matters that are inherently uncertain. GAAP requires information in financial statements about accounting principles, methods used and disclosures pertaining to significant estimates. This discussion addresses our judgment pertaining to known trends, events or uncertainties which were taken into consideration upon the application of those policies and the likelihood that materially different amounts would be reported upon taking into consideration different conditions and assumptions.
Acquisition of Investment Property
We allocate the purchase price of each acquired investment property accounted for as a business combination based upon the estimated acquisition date fair value of the individual assets acquired and liabilities assumed, which generally include (i) land, (ii) building and other improvements, (iii) in-place lease value intangibles, (iv) acquired above and below market lease intangibles, (v) any assumed financing that is determined to be above or below market, (vi) the value of customer relationships and (vii) goodwill, if any. Transaction costs related to acquisitions accounted for as business combinations are expensed as incurred and

45

included within “General and administrative expenses” in the accompanying consolidated statements of operations and other comprehensive income.
We elected to early adopt ASU 2017-01, Business Combinations, on a prospective basis as of October 1, 2016. This new guidance clarifies the definition of a business and provides a screen to determine when an integrated set of assets and activities is not considered a business and, thus, accounted for as an asset acquisition as opposed to a business combination. Refer to the “Recently Adopted Accounting Pronouncements” section within Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. Under this new guidance, we expect most acquisitions of investment property will meet this screen and, thus, be accounted for as asset acquisitions. We allocate the purchase price of each acquired investment property that is accounted for as an asset acquisition based upon the relative fair value of the individual assets acquired and liabilities assumed, which generally include (i) land, (ii) building and other improvements, (iii) in-place lease value intangibles, (iv) acquired above and below market lease intangibles, (v) any assumed financing that is determined to be above or below market and (vi) the value of customer relationships. Asset acquisitions do not give rise to goodwill and the related transaction costs are capitalized and included with the allocated purchase price.
For tangible assets acquired, including land, building and other improvements, we consider available comparable market and industry information in estimating the acquisition date fair value. We allocate a portion of the purchase price to the estimated acquired in-place lease value intangibles based on estimated lease execution costs for similar leases as well as lost rental payments during an assumed lease-up period. We also evaluate each acquired lease as compared to current market rates. If an acquired lease is determined to be above or below market, we allocate a portion of the purchase price to such above or below market leases based upon the present value of the difference between the contractual lease payments and estimated market rent payments over the remaining lease term. Renewal periods are included within the lease term in the calculation of above and below market lease intangibles if, based upon factors known at the acquisition date, market participants would consider it reasonably assured that the lessee would exercise such options. Fair value estimates used in acquisition accounting, including the discount rate used, require us to consider various factors, including, but not limited to, market knowledge, demographics, age and physical condition of the property, geographic location, size and location of tenant spaces within the acquired investment property and tenant profile. For acquisitions accounted for as business combinations, if, up to one year from the acquisition date, information regarding fair value of the assets acquired and liabilities assumed is received and estimates are refined, appropriate adjustments are made to the purchase price allocation on a prospective basis.
Impairment of Long-Lived Assets and Unconsolidated Joint Ventures
Our investment properties, including developments in progress, are reviewed for potential impairment at the end of each reporting period or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. At the end of each reporting period, we separately determine whether impairment indicators exist for each property. Examples of situations considered to be impairment indicators for both operating properties and developments in progress include, but are not limited to:
•
a substantial decline in or continued low occupancy rate or cash flow;
•
expected significant declines in occupancy in the near future;
•
continued difficulty in leasing space;
•
a significant concentration of financially troubled tenants;
•
a change in anticipated holding period;
•
a cost accumulation or delay in project completion date significantly above and beyond the original development or redevelopment estimate;
•
a significant decrease in market price not in line with general market trends; and
•
any other quantitative or qualitative events or factors deemed significant by our management or board of directors.
If the presence of one or more impairment indicators as described above is identified at the end of a reporting period or at any point throughout the year with respect to a property, the asset is tested for recoverability by comparing its carrying value to the estimated future undiscounted cash flows. An investment property is considered to be impaired when the estimated future undiscounted cash flows are less than its current carrying value. When performing a test for recoverability or estimating the fair

46

value of an impaired investment property, we make certain complex or subjective assumptions which include, but are not limited to:
•
projected operating cash flows considering factors such as vacancy rates, rental rates, lease terms, tenant financial strength, competitive positioning and property location;
•
estimated holding period or various potential holding periods when considering probability-weighted scenarios;
•
projected capital expenditures and lease origination costs;
•
estimated interest and internal costs expected to be capitalized, dates of construction completion and grand opening dates for developments in progress;
•
projected cash flows from the eventual disposition of an operating property or development in progress using a property-specific capitalization rate;
•
comparable selling prices; and
•
a property-specific discount rate.
We did not have any unconsolidated joint ventures as of December 31, 2016 and 2015. When we do hold investments in unconsolidated joint ventures, they are reviewed for potential impairment, in addition to impairment evaluations of the individual assets underlying these investments, each reporting period or whenever events or changes in circumstances warrant such an evaluation.
To determine whether any identified impairment is other-than-temporary, we consider whether we have the ability and intent to hold the investment until the carrying value is fully recovered. To the extent impairment has occurred, we will record an impairment charge calculated as the excess of the carrying value of the asset over its estimated fair value.
Cost Capitalization, Depreciation and Amortization Policies
Our policy is to review all expenses paid and capitalize any items which are deemed to be an upgrade or a tenant improvement, including internal salaries and related benefits of personnel directly involved in the upgrade or improvement. These costs are included in the investment properties financial statement caption as an addition to building and other improvements. We capitalized $1,152, $0 and $0 of internal salaries and related benefits of personnel directly involved in capital upgrades and tenant improvements during the years ended December 31, 2016, 2015 and 2014, respectively. In addition, we capitalized $423, $474 and $0 of internal leasing incentives, all of which were incremental to signed leases, during the years ended December 31, 2016, 2015 and 2014, respectively.
Depreciation expense is computed using the straight-line method. Building and other improvements are depreciated based upon estimated useful lives of 30 years for building and associated improvements and 15 years for site improvements and most other capital improvements. Tenant improvements, leasing fees and acquired in-place lease value intangibles are amortized on a straight-line basis over the life of the related lease as a component of depreciation and amortization expense. Acquired above and below market lease intangibles are amortized on a straight-line basis over the life of the related lease, inclusive of renewal periods if market participants would consider it reasonably assured that the lessee would exercise such options, as an adjustment to rental income when we are the lessor. For acquired leases in which we are the lessee, any value attributable to above and below market lease intangibles is amortized on a straight-line basis over the life of the related lease as an adjustment to property operating expenses.
Development and Redevelopment Projects
Development and redevelopment projects are classified as developments in progress on the accompanying consolidated balance sheets and include (i) land held for future development, (ii) ground-up developments and (iii) redevelopment properties undergoing significant renovations and improvements. During the development or redevelopment period, we capitalize direct project costs such as construction, insurance, architectural and legal, as well as certain indirect project costs such as interest, other financing costs, real estate taxes and internal salaries and related benefits of personnel directly involved in the project. Capitalization of the indirect project costs ceases and all project-related costs included in developments in progress are reclassified to land and building and other improvements at the time when development or redevelopment is considered substantially complete. Additionally, we

47

make estimates as to the probability of completion of development and redevelopment projects. If we determine that completion of the development or redevelopment project is no longer probable, we expense any capitalized costs that are not recoverable.
We capitalized $302 of indirect project costs, which includes $44 of internal salaries and related benefits of personnel directly involved in the redevelopment projects and $69 of interest, related to redevelopment projects during the year ended December 31, 2016. No costs were capitalized during the years ended December 31, 2015 and 2014.
A project’s classification changes from development to operating when it is substantially completed and held available for occupancy, but no later than one year from the completion of major construction activity. A property is considered stabilized upon reaching 90% occupancy, but no later than one year from the date it was classified as operating, and is included in our same store portfolio when it is stabilized for the periods presented.
Investment Properties Held for Sale
In determining whether to classify an investment property as held for sale, we consider whether: (i) management has committed to a plan to sell the investment property; (ii) the investment property is available for immediate sale in its present condition, subject only to terms that are usual and customary; (iii) we have initiated a program to locate a buyer; (iv) we believe that the sale of the investment property is probable; (v) we are actively marketing the investment property for sale at a price that is reasonable in relation to its current value, and (vi) actions required for us to complete the plan indicate that it is unlikely that any significant changes will be made.
If all of the above criteria are met, we classify the investment property as held for sale. When these criteria are met, we suspend depreciation (including depreciation for building improvements and tenant improvements) and amortization of acquired in-place lease value intangibles and any above or below market lease intangibles and we record the investment property held for sale at the lower of cost or net realizable value. The assets and liabilities associated with those investment properties that are classified as held for sale are presented separately on the consolidated balance sheets for the most recent reporting period. Prior to our adoption of the revised discontinued operations pronouncement in 2014, if the operations and cash flow of the property had been, or were upon consummation of such sale, eliminated from ongoing operations and we did not have significant continuing involvement in the operations of the property, then the operations for the periods presented were classified in the consolidated statements of operations and other comprehensive income as discontinued operations for all periods presented. However, the revised discontinued operations pronouncement, which we early adopted effective January 1, 2014, limits what qualifies for discontinued operations presentation. As a result, the investment properties that were sold or classified as held for sale during 2015 and 2014, except for Riverpark Phase IIA, which was classified as held for sale as of December 31, 2013 and, therefore, qualified for discontinued operations treatment under the previous standard, did not qualify for discontinued operations presentation and, as such, are reflected in continuing operations on the accompanying consolidated statements of operations and other comprehensive income.
Partially-Owned Entities
We consolidate partially-owned entities if they are VIEs in accordance with the Consolidation Topic of the FASB Accounting Standards Codification (ASC) and we are considered the primary beneficiary, we have voting control, the limited partners (or non-managing members) do not have substantive participatory rights, or other conditions exist that indicate that we have control. Management uses its judgment when determining if we are the primary beneficiary of, or have a controlling financial interest in, an entity in which we have a variable interest, to determine whether we have the power to direct the activities that most significantly impact the entity’s economic performance and if we have significant economic exposure to the risk and rewards of ownership. We assess our interests in VIEs on an ongoing basis to determine if the entity should be consolidated.
We did not have any VIEs as of December 31, 2016 and 2015. During the year ended December 31, 2016, we acquired three properties through consolidated VIEs in connection with 1031 Exchanges. We loaned $65,419, $39,215 and $23,522 to the VIEs to acquire Oak Brook Promenade, Tacoma South and Eastside, respectively. Each 1031 Exchange was completed during the year ended December 31, 2016 and, accordingly, no agreements remained outstanding related to 1031 Exchanges as of December 31, 2016. At the completion of the 1031 Exchanges, the sole membership interests of the VIEs were assigned to us and the respective outstanding loans were extinguished, resulting in the entities being wholly owned by us and no longer considered VIEs.
Revenue Recognition
We commence revenue recognition on our leases based on a number of factors. In most cases, revenue recognition under a lease begins when the lessee takes possession of or controls the physical use of the leased asset. Generally, this occurs on the lease

48

commencement date. The determination of who is the owner, for accounting purposes, of the tenant improvements determines the nature of the leased asset and when revenue recognition under a lease begins. If we are the owner, for accounting purposes, of the tenant improvements, then the leased asset is the finished space and revenue recognition begins when the lessee takes possession of the finished space, typically when the improvements are substantially complete. If we conclude that the lessee is the owner, for accounting purposes, of the tenant improvements, then the leased asset is the unimproved space and any tenant improvement allowances funded under the lease are accounted for as lease inducements which are amortized as a reduction to the revenue recognized over the term of the lease. In these circumstances, we commence revenue recognition when the lessee takes possession of the unimproved space for the lessee to construct their own improvements. We consider a number of factors to evaluate whether we or the lessee are the owner of the tenant improvements for accounting purposes. These factors include:
•
whether the lease stipulates how and on what a tenant improvement allowance may be spent;
•
whether the tenant or landlord retains legal title to the improvements;
•
the uniqueness of the improvements;
•
the expected economic life of the tenant improvements relative to the length of the lease;
•
who constructs or directs the construction of the improvements, and
•
whether the tenant or landlord is obligated to fund cost overruns.
The determination of who owns the tenant improvements, for accounting purposes, is subject to significant judgment. In making that determination, we consider all of the above factors. No one factor, however, necessarily establishes its determination.
Rental income, for only those leases that have fixed and measurable rent escalations, is recognized on a straight-line basis over the term of each lease. The difference between such rental income earned and the cash rent due under the provisions of a lease is recorded as deferred rent receivable and is included as a component of “Accounts and notes receivable” in the accompanying consolidated balance sheets.
Reimbursements from tenants for recoverable real estate taxes and operating expenses are accrued as revenue in the period the applicable expenditures are incurred. We make certain assumptions and judgments in estimating the reimbursements at the end of each reporting period.
We record lease termination income in “Other property income” upon: (i) execution of a termination letter agreement; (ii) when all of the conditions of such agreement have been fulfilled; (iii) the tenant is no longer occupying the property and (iv) collectibility is reasonably assured. Upon early lease termination, we may record losses related to recognized tenant specific intangibles and other assets or adjust the remaining useful life of the assets if determined to be appropriate.
Our policy for percentage rental income is to defer recognition of contingent rental income until the specified target (i.e. breakpoint) that triggers the contingent rental income is achieved.
Profits from sales of real estate are not recognized under the full accrual method unless: (i) a sale is consummated; (ii) the buyer’s initial and continuing investments are adequate to demonstrate a commitment to pay for the property; (iii) our receivable, if applicable, is not subject to future subordination; (iv) we have transferred to the buyer the usual risks and rewards of ownership, and (v) we do not have substantial continuing involvement with the property.
Accounts and Notes Receivable and Allowance for Doubtful Accounts
Accounts and notes receivable balances outstanding include base rents, tenant reimbursements and deferred rent receivables. An allowance for the uncollectible portion of accounts receivable is determined on a tenant-specific basis through an analysis of balances outstanding, historical bad debt levels, tenant creditworthiness and current economic trends. Additionally, estimates of the expected recovery of pre-petition and post-petition claims with respect to tenants in bankruptcy are considered in assessing the collectibility of the related receivables. As these factors change, the allowance is subject to revision and may impact our results of operations. Management’s estimate of the collectibility of accounts and notes receivable is based on the best information available to management at the time of evaluation.

49

Income Taxes
We have elected to be taxed as a REIT under Sections 856 through 860 of the Code. As a REIT, we generally will not be subject to U.S. federal income tax on the taxable income we currently distribute to our shareholders.
We record a benefit, based on the GAAP measurement criteria, for uncertain income tax positions if the result of a tax position meets a “more likely than not” recognition threshold.
Impact of Recently Issued Accounting Pronouncements
Recently Adopted Accounting Pronouncements
Effective January 1, 2016, we adopted Accounting Standards Update (ASU) 2015-02, Consolidation, which revised the consolidation guidance for all entities. This new guidance modifies the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities, eliminates the presumption that a general partner should consolidate a limited partnership and affects the consolidation analysis of reporting entities that are involved with VIEs. The adoption of this pronouncement under the modified retrospective method did not have any effect on our consolidated financial statements as we did not have any VIEs at adoption on January 1, 2016; however, during the year ended December 31, 2016, we acquired three properties through consolidated VIEs in connection with 1031 Exchanges and, accordingly, applied the revised consolidation guidance. See Note 3 to the consolidated financial statements for further details.
Effective January 1, 2016, we adopted ASU 2015-16, Business Combinations, which requires the acquirer in a business combination to recognize in the period any adjustments to provisional amounts that are identified during the measurement period rather than retrospectively accounting for those adjustments. The adoption of this pronouncement did not have any effect on our consolidated financial statements.
We elected to early adopt ASU 2014-15, Presentation of Financial Statements – Going Concern, on January 1, 2016. This new guidance requires a company’s management to assess the entity’s ability to continue as a going concern for a period of one year after the date the financial statements are issued (or available to be issued) and provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The adoption of this pronouncement did not have any effect on our consolidated financial statements.
We elected to early adopt ASU 2016-09, Compensation – Stock Compensation, on January 1, 2016. This new guidance allowed us to make an accounting policy election to account for share-based payment award forfeitures when they occur, which required a modified retrospective transition by means of a cumulative-effect adjustment to equity as of the beginning of the period of adoption and resulted in an adjustment of $17 to additional paid-in capital and accumulated distributions in excess of earnings as of January 1, 2016.
We elected to early adopt ASU 2017-01, Business Combinations, on a prospective basis as of October 1, 2016. This new guidance clarifies the definition of a business and provides a screen to determine when an integrated set of assets and activities is not considered a business and, thus, accounted for as an asset acquisition as opposed to a business combination. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not considered a business. Under this new guidance, we expect most acquisitions of investment property will meet the screen and, thus, be accounted for as asset acquisitions. Consistent with existing guidance, transaction costs associated with asset acquisitions are capitalized while transaction costs associated with business combinations are expensed as incurred. The adoption of this pronouncement resulted in our acquisition of investment properties subsequent to October 1, 2016 to qualify as asset acquisitions and as such, the related transactions costs of $725 were capitalized.
Other Recently Issued Accounting Pronouncements
In May 2014 with subsequent updates issued in August 2015 and March, April, May and December 2016, the Financial Accounting Standards Board (FASB) issued ASU 2014-09, Revenue from Contracts with Customers. This new guidance is effective January 1, 2018, with early adoption permitted beginning January 1, 2017, and will replace existing revenue recognition standards. The sale of investment property and any non-lease components contained within lease agreements will be required to follow the new guidance; however, lease components of lease contracts will be excluded from this guidance. This pronouncement allows either a full or a modified retrospective method of adoption. Expanded quantitative and qualitative disclosures regarding revenue recognition will be required for contracts that are subject to this guidance. While we anticipate additional disclosure, we do not expect the adoption of this pronouncement will have a material effect on our consolidated financial statements; however, we will continue to evaluate this assessment until the guidance becomes effective.

50

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall. This new guidance is effective January 1, 2018 and will require companies to disclose the fair value of financial assets and financial liabilities measured at amortized cost in accordance with the exit price notion and will no longer require disclosure of the methods and significant assumptions used, including any changes, to estimate fair value. In addition, companies will be required to disclose all financial assets and financial liabilities grouped by 1) measurement category and 2) form of financial instrument. We do not expect the adoption of this pronouncement will have a material effect on our consolidated financial statements; however, we will continue to evaluate this assessment until the guidance becomes effective.
In February 2016, the FASB issued ASU 2016-02, Leases. This new guidance is effective January 1, 2019, with early adoption permitted, and will require lessees to recognize a liability to make lease payments and a right-of-use asset, initially measured at the present value of lease payments, for both operating and financing leases. For leases with a term of 12 months or less, lessees will be permitted to make an accounting policy election by class of underlying asset to not recognize lease liabilities and lease assets. Under this new pronouncement, lessor accounting will be largely unchanged from existing GAAP. The pronouncement requires a modified retrospective method of adoption, with some optional practical expedients. Upon adoption, we will recognize a lease liability and a right-of-use asset for operating leases where we are the lessee, such as ground leases and office and equipment leases. We will continue to evaluate the impact of this guidance until it becomes effective.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses. This new guidance is effective January 1, 2020, with early adoption permitted beginning January 1, 2019, and replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses. Financial assets that are measured at amortized cost will be required to be presented at the net amount expected to be collected with an allowance for credit losses deducted from the amortized cost basis. In addition, an entity must consider broader information in developing its expected credit loss estimate, including the use of forecasted information. Generally, the pronouncement requires a modified retrospective method of adoption. We will continue to evaluate the impact of this guidance until it becomes effective.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows. This new guidance is effective January 1, 2018, with early adoption permitted, and adds or clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows. Of the eight types of cash flows discussed in the new guidance, the classification of debt prepayment costs as a financing outflow will impact our consolidated statements of cash flows as this item is currently reflected as an operating outflow. The pronouncement requires a retrospective transition method of adoption. We will continue to evaluate the impact of this guidance until it becomes effective.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows. This new guidance is effective January 1, 2018, with early adoption permitted, and requires amounts that are generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The pronouncement requires a retrospective transition method of adoption. Upon adoption, we will include amounts generally described as restricted cash within the beginning-of-period, change and end-of-period total amounts on the statement of cash flows rather than within an activity on the statement of cash flows.
Inflation
Certain of our leases contain provisions designed to mitigate the adverse impact of inflation. Such provisions include clauses enabling us to receive payment of additional rent calculated as a percentage of tenants’ gross sales above predetermined thresholds, which generally increase as prices rise, and/or escalation clauses, which generally increase rental rates during the terms of the leases. While most escalation clauses are fixed in nature, some may include increases based upon changes in the consumer price index or similar inflation indices. In addition, many of our leases are for terms of less than 10 years, which permits us to seek to increase rents to market rates upon renewal. Most of our leases require the tenant to pay an allocable share of operating expenses, including common area maintenance costs, real estate taxes and insurance, thereby reducing our exposure to increases in costs and operating expenses resulting from inflation.
Subsequent Events
Subsequent to December 31, 2016, we:
•
defeased the IW JV portfolio of mortgages payable, which had an outstanding principal balance of $379,435 and an interest rate of 7.50%, and incurred a defeasance premium of $60,198. See Note 7 to the accompanying consolidated financial statements for further details;

51

•
received funding in the amount of $200,000 on the Term Loan Due 2023. See Note 9 to the accompanying consolidated financial statements for further details;
•
entered into two agreements to swap a total of $200,000 of LIBOR-based variable rate debt to a fixed interest rate of 1.2628% through November 22, 2018;
•
closed on the acquisition of Main Street Promenade, a 181,600 square foot multi-tenant retail property located in Naperville, Illinois, for a gross purchase price of $88,000 through a consolidated VIE to facilitate a potential 1031 Exchange;
•
closed on the disposition of Rite Aid Store (Eckerd), Culver Rd., a 10,900 square foot single-user retail operating property located in Rochester, New York, for a sales price of $500 with no anticipated gain on sale or additional impairment due to previously recognized impairment charges;
•
granted 88 restricted shares at a grant date fair value of $15.34 per share and 253 RSUs at a grant date fair value of $15.52 per RSU to our executives in conjunction with our long-term equity compensation plan. The restricted shares will vest over three years and the RSUs granted are subject to a three-year performance period. Refer to Note 5 to the accompanying consolidated financial statements for additional details regarding the terms of the RSUs;
•
closed on a transaction whereby we received the fee interest in approximately 50 acres of land at Boulevard at the Capital Centre, an existing wholly-owned multi-tenant retail operating property located in Largo, Maryland. The property was previously subject to a ground lease with a third party for approximately 70 acres. In conjunction with this transaction, we paid consideration of $1,939 and agreed to shorten the term of the ground lease related to the remaining land;
•
declared the cash dividend for the first quarter of 2017 for our 7.00% Series A cumulative redeemable preferred stock. The dividend of $0.4375 per preferred share will be paid on March 31, 2017 to preferred shareholders of record at the close of business on March 20, 2017; and
•
declared the cash dividend for the first quarter of 2017 of $0.165625 per share on our outstanding Class A common stock, which will be paid on April 10, 2017 to Class A common shareholders of record at the close of business on March 27, 2017.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We may be exposed to interest rate changes primarily as a result of our long-term debt that is used to maintain liquidity and fund our operations. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve our objectives, we borrow primarily at fixed rates, and in some cases variable rates with the ability to convert to fixed rates.
With regard to variable rate financing, we assess interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities. We maintain risk management control systems to monitor interest rate cash flow risk attributable to both our outstanding or forecasted debt obligations as well as our potential offsetting hedge positions. The risk management control systems involve the use of analytical techniques, including cash flow sensitivity analysis, to estimate the expected impact of changes in interest rates on our future cash flows.
As of December 31, 2016, we had $250,000 of variable rate debt based on LIBOR that has been swapped to fixed rate debt through interest rate swaps. Our interest rate swaps as of December 31, 2016 are summarized in the following table:
 
 
Notional
Amount
 
Termination Date
 
Fair Value of
Derivative Asset
Fixed rate portion of unsecured credit facility
 
$
250,000

 
December 31, 2017
 
$
743

A decrease of 1% in market interest rates would result in a hypothetical decrease in our derivative asset of approximately $2,205.
The combined carrying amount of our mortgages payable, unsecured notes payable and Unsecured Credit Facility is approximately $51,048 lower than the fair value as of December 31, 2016.
We may use additional derivative financial instruments to hedge exposures to changes in interest rates. To the extent we do, we are exposed to market and credit risk. Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates. The market risk associated with interest rate contracts is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. When the fair value of a derivative contract is negative, we owe the counterparty and, therefore, we generally are not exposed to the credit risk of the counterparty. We minimize credit risk in derivative instruments by entering into transactions with highly rated counterparties or with the same party providing the financing, with the right of offset.

53

Debt Maturities
Our interest rate risk is monitored using a variety of techniques. The following table shows the scheduled maturities and principal amortization of our indebtedness as of December 31, 2016, for each of the next five years and thereafter and the weighted average interest rates by year, as well as the fair value of our indebtedness as of December 31, 2016. The table does not reflect the impact of any 2017 debt activity, such as the defeasance of the IW JV portfolio of mortgages payable or the funding of the Term Loan Due 2023 on January 3, 2017.
 
2017
 
2018
 
2019
 
2020
 
2021
 
Thereafter
 
Total
 
Fair Value
Debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed rate debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgages payable (a)
$
35,023

 
$
11,463

 
$
433,982

 
$
4,334

 
$
23,249

 
$
265,344

 
$
773,395

 
$
833,210

Fixed rate term loan (b)
—

 
—

 
—

 
—

 
250,000

 
—

 
250,000

 
250,000

Unsecured notes payable (c)
—

 
—

 
—

 
—

 
100,000

 
600,000

 
700,000

 
679,212

Total fixed rate debt
35,023

 
11,463

 
433,982

 
4,334

 
373,249

 
865,344

 
1,723,395

 
1,762,422

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable rate debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable rate term loan and
revolving line of credit
—

 
200,000

 
—

 
86,000

 
—

 
—

 
286,000

 
286,551

Total debt (d)
$
35,023

 
$
211,463

 
$
433,982

 
$
90,334

 
$
373,249

 
$
865,344

 
$
2,009,395

 
$
2,048,973

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average interest rate on debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed rate debt
4.83
%
 
6.51
%
 
7.49
%
 
4.58
%
 
2.73
%
 
4.36
%
 
4.82
%
 
 
Variable rate debt (e)
—

 
2.22
%
 
—

 
2.12
%
 
—

 
—

 
2.19
%
 
 
Total
4.83
%
 
2.45
%
 
7.49
%
 
2.24
%
 
2.73
%
 
4.36
%
 
4.44
%
 
 
(a)
Excludes mortgage premium of $1,437 and discount of $(622), net of accumulated amortization, as of December 31, 2016.
(b)
$250,000 of LIBOR-based variable rate debt has been swapped to a fixed rate through two interest rate swaps. The swaps effectively convert one-month floating rate LIBOR to a weighted average fixed rate of 0.6677% through December 31, 2017.
(c)
Excludes discount of $(971), net of accumulated amortization, as of December 31, 2016.
(d)
The weighted average years to maturity of consolidated indebtedness was 5.3 years as of December 31, 2016. Total debt excludes capitalized loan fees of $(11,314), net of accumulated amortization, as of December 31, 2016, which are included as a reduction to the respective debt balances, and the Term Loan Due 2023, which funded on January 3, 2017. The $39,578 difference between total debt outstanding and its fair value is primarily attributable to a $45,120 difference related to the IW JV portfolio of mortgages payable. These mortgages were scheduled to mature in 2019 and had an interest rate of 7.50% and an outstanding principal balance of $379,435 as of December 31, 2016. Subsequent to December 31, 2016, we defeased the IW JV portfolio of mortgages payable. As a result, the 45 properties that secured the mortgages payable as of December 31, 2016 are no longer encumbered by mortgages.
(e)
Represents interest rates as of December 31, 2016.
We had $286,000 of variable rate debt, excluding $250,000 of variable rate debt that has been swapped to fixed rate debt and debt issuance costs, with interest rates varying based upon LIBOR, with a weighted average interest rate of 2.19% as of December 31, 2016. An increase in the variable interest rate on this debt constitutes a market risk. If interest rates increase by 1% based on debt outstanding as of December 31, 2016, interest expense would increase by approximately $2,860 on an annualized basis.
The table incorporates only those interest rate exposures that existed as of December 31, 2016 and does not consider those interest rate exposures or positions that could arise after that date. The information presented herein is merely an estimate and has limited predictive value. As a result, the ultimate realized gain or loss with respect to interest rate fluctuations will depend on the interest rate exposures that arise during future periods, our hedging strategies at that time and future changes in interest rates.

54

On November 22, 2016, we closed on a seven-year $200,000 unsecured term loan with a group of financial institutions, which funded on January 3, 2017. The Term Loan Due 2023 is priced on a leverage grid at a rate of LIBOR plus a credit spread ranging from 1.70% to 2.55%. In accordance with the Term Loan Agreement, we may elect to convert to an investment grade pricing grid. As of December 31, 2016, making such an election would have resulted in a higher interest rate and, as such, we have not made the election to convert to an investment grade pricing grid. The Term Loan Due 2023 matures on November 22, 2023 and has a $100,000 accordion option that allows us, at our election, to increase the total unsecured term loan up to $300,000, subject to customary fees and conditions, including the absence of an event of default as defined in the Term Loan Agreement.
In addition, subsequent to December 31, 2016, we entered into two agreements to swap a total of $200,000 of LIBOR-based variable rate debt to a fixed interest rate of 1.2628% plus the relevant credit spread through November 22, 2018.

55

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index

RETAIL PROPERTIES OF AMERICA, INC.

Schedules not filed:
All schedules other than the two listed in the Index have been omitted as the required information is either not applicable or the information is already presented in the accompanying consolidated financial statements or related notes thereto.

56



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Retail Properties of America, Inc.
Oak Brook, Illinois
We have audited the accompanying consolidated balance sheets of Retail Properties of America, Inc. and subsidiaries (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of operations and other comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2016. Our audits also included the financial statement schedules listed in the Index at Item 15. These financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Retail Properties of America, Inc. and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for and disclosure of discontinued operations for the year ended December 31, 2014 due to the adoption of Accounting Standards Update 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for acquisitions as of October 1, 2016 due to the adoption of Accounting Standards Update 2017-01, Business Combinations.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 15, 2017 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 15, 2017

57

RETAIL PROPERTIES OF AMERICA, INC.
Consolidated Balance Sheets
(in thousands, except par value amounts)

 
 
December 31,
2016
 
December 31,
2015
Assets
 
 
 
 
Investment properties:
 
 
 
 
Land
 
$
1,191,403

 
$
1,254,131

Building and other improvements
 
4,284,664

 
4,428,554

Developments in progress
 
23,439

 
5,157

 
 
5,499,506

 
5,687,842

Less accumulated depreciation
 
(1,443,333
)
 
(1,433,195
)
Net investment properties
 
4,056,173

 
4,254,647

Cash and cash equivalents
 
53,119

 
51,424

Accounts and notes receivable (net of allowances of $6,886 and $7,910, respectively)
 
78,941

 
82,804

Acquired lease intangible assets, net
 
142,015

 
138,766

Assets associated with investment properties held for sale
 
30,827

 
—

Other assets, net
 
91,898

 
93,610

Total assets
 
$
4,452,973

 
$
4,621,251

 
 
 
 
 
Liabilities and Equity
 
 
 
 
Liabilities:
 
 
 
 
Mortgages payable, net
 
$
769,184

 
$
1,123,136

Unsecured notes payable, net
 
695,143

 
495,576

Unsecured term loans, net
 
447,598

 
447,526

Unsecured revolving line of credit
 
86,000

 
100,000

Accounts payable and accrued expenses
 
83,085

 
69,800

Distributions payable
 
39,222

 
39,297

Acquired lease intangible liabilities, net
 
105,290

 
114,834

Liabilities associated with investment properties held for sale
 
864

 
—

Other liabilities
 
74,501

 
75,745

Total liabilities
 
2,300,887

 
2,465,914

 
 
 
 
 
Commitments and contingencies (Note 17)
 

 

 
 
 
 
 
Equity:
 
 
 
 
Preferred stock, $0.001 par value, 10,000 shares authorized, 7.00% Series A cumulative
redeemable preferred stock, 5,400 shares issued and outstanding as of December 31, 2016
and 2015; liquidation preference $135,000
 
5

 
5

Class A common stock, $0.001 par value, 475,000 shares authorized, 236,770 and 237,267
shares issued and outstanding as of December 31, 2016 and 2015, respectively
 
237

 
237

Additional paid-in capital
 
4,927,155

 
4,931,395

Accumulated distributions in excess of earnings
 
(2,776,033
)
 
(2,776,215
)
Accumulated other comprehensive income (loss)
 
722

 
(85
)
Total equity
 
2,152,086

 
2,155,337

Total liabilities and equity
 
$
4,452,973

 
$
4,621,251


See accompanying notes to consolidated financial statements

58

RETAIL PROPERTIES OF AMERICA, INC.
Consolidated Statements of Operations and Other Comprehensive Income
(in thousands, except per share amounts)

 
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
Revenues
 
 
 
 
 
 
Rental income
 
$
455,658

 
$
472,344

 
$
474,684

Tenant recovery income
 
118,569

 
119,536

 
115,719

Other property income
 
8,916

 
12,080

 
10,211

Total revenues
 
583,143

 
603,960

 
600,614

 
 
 
 
 
 
 
Expenses
 
 
 
 
 
 
Operating expenses
 
85,895

 
94,780

 
96,798

Real estate taxes
 
81,774

 
82,810

 
78,773

Depreciation and amortization
 
224,430

 
214,706

 
215,966

Provision for impairment of investment properties
 
20,376

 
19,937

 
72,203

General and administrative expenses
 
44,522

 
50,657

 
34,229

Total expenses
 
456,997

 
462,890

 
497,969

 
 
 
 
 
 
 
Operating income
 
126,146

 
141,070

 
102,645

 
 
 
 
 
 
 
Gain on extinguishment of debt
 
13,653

 
—

 
—

Gain on extinguishment of other liabilities
 
6,978

 
—

 
4,258

Equity in loss of unconsolidated joint ventures, net
 
—

 
—

 
(2,088
)
Gain on change in control of investment properties
 
—

 
—

 
24,158

Interest expense
 
(109,730
)
 
(138,938
)
 
(133,835
)
Other income, net
 
63

 
1,700

 
5,459

Income from continuing operations
 
37,110

 
3,832

 
597

 
 
 
 
 
 
 
Discontinued operations:
 
 
 
 
 
 
Loss, net
 
—

 
—

 
(148
)
Gain on sales of investment properties
 
—

 
—

 
655

Income from discontinued operations
 
—

 
—

 
507

Gain on sales of investment properties
 
129,707

 
121,792

 
42,196

Net income
 
166,817

 
125,624

 
43,300

Net income attributable to noncontrolling interest
 
—

 
(528
)
 
—

Net income attributable to the Company
 
166,817

 
125,096

 
43,300

Preferred stock dividends
 
(9,450
)
 
(9,450
)
 
(9,450
)
Net income attributable to common shareholders
 
$
157,367

 
$
115,646

 
$
33,850

 
 
 
 
 
 
 
Earnings per common share – basic and diluted
 
 
 
 
 
 
Continuing operations
 
$
0.66

 
$
0.49

 
$
0.14

Discontinued operations
 
—

 
—

 
—

Net income per common share attributable to common shareholders
 
$
0.66

 
$
0.49

 
$
0.14

 
 
 
 
 
 
 
Net income
 
$
166,817

 
$
125,624

 
$
43,300

Other comprehensive income:
 
 
 
 
 
 
Net unrealized gain on derivative instruments (Note 10)
 
807

 
452

 
201

Comprehensive income
 
167,624

 
126,076

 
43,501

Comprehensive income attributable to noncontrolling interest
 
—

 
(528
)
 
—

Comprehensive income attributable to the Company
 
$
167,624

 
$
125,548

 
$
43,501

 
 
 
 
 
 
 
Weighted average number of common shares outstanding – basic
 
236,651

 
236,380

 
236,184

 
 
 
 
 
 
 
Weighted average number of common shares outstanding – diluted
 
236,951

 
236,382

 
236,187


See accompanying notes to consolidated financial statements

59

RETAIL PROPERTIES OF AMERICA, INC.
Consolidated Statements of Equity
(in thousands, except per share amounts)
 
Preferred Stock
 
Class A
Common Stock
 
Additional
Paid-in
Capital
 
Accumulated
Distributions
in Excess of
Earnings
 
Accumulated
Other
Comprehensive
(Loss) Income
 
Total
Shareholders’
Equity
 
Noncontrolling
Interest
 
Total
Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
Balance as of January 1, 2014
5,400

 
$
5

 
236,302

 
$
236

 
$
4,919,633

 
$
(2,611,796
)
 
$
(738
)
 
$
2,307,340

 
$
1,494

 
$
2,308,834

Net income
—

 
—

 
—

 
—

 
—

 
43,300

 
—

 
43,300

 
—

 
43,300

Other comprehensive income
—

 
—

 
—

 
—

 
—

 
—

 
201

 
201

 
—

 
201

Distributions declared to preferred shareholders
($1.75 per share)
—

 
—

 
—

 
—

 
—

 
(9,450
)
 
—

 
(9,450
)
 
—

 
(9,450
)
Distributions declared to common shareholders
($0.6625 per share)
—

 
—

 
—

 
—

 
—

 
(156,742
)
 
—

 
(156,742
)
 
—

 
(156,742
)
Issuance of common stock, net of offering costs
—

 
—

 
—

 
—

 
(145
)
 
—

 
—

 
(145
)
 
—

 
(145
)
Issuance of restricted shares
—

 
—

 
303

 
1

 
—

 
—

 
—

 
1

 
—

 
1

Exercise of stock options
—

 
—

 
2

 
—

 
23

 
—

 
—

 
23

 
—

 
23

Stock-based compensation expense, net of forfeitures
—

 
—

 
—

 
—

 
3,420

 
—

 
—

 
3,420

 
—

 
3,420

Shares withheld for employee taxes
—

 
—

 
(5
)
 
—

 
(67
)
 
—

 
—

 
(67
)
 
—

 
(67
)
Balance as of December 31, 2014
5,400

 
$
5

 
236,602

 
$
237

 
$
4,922,864

 
$
(2,734,688
)
 
$
(537
)
 
$
2,187,881

 
$
1,494

 
$
2,189,375

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
—

 
$
—

 
—

 
$
—

 
$
—

 
$
125,096

 
$
—

 
$
125,096

 
$
528

 
$
125,624

Other comprehensive income
—

 
—

 
—

 
—

 
—

 
—

 
452

 
452

 
—

 
452

Distribution upon dissolution of consolidated
joint venture
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(2,022
)
 
(2,022
)
Distributions declared to preferred shareholders
($1.75 per share)
—

 
—

 
—

 
—

 
—

 
(9,450
)
 
—

 
(9,450
)
 
—

 
(9,450
)
Distributions declared to common shareholders
($0.6625 per share)
—

 
—

 
—

 
—

 
—

 
(157,173
)
 
—

 
(157,173
)
 
—

 
(157,173
)
Issuance of common stock, net of offering costs
—

 
—

 
—

 
—

 
(216
)
 
—

 
—

 
(216
)
 
—

 
(216
)
Issuance of restricted shares
—

 
—

 
801

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Stock-based compensation expense, net of forfeitures
—

 
—

 
(4
)
 
—

 
10,755

 
—

 
—

 
10,755

 
—

 
10,755

Shares withheld for employee taxes
—

 
—

 
(132
)
 
—

 
(2,008
)
 
—

 
—

 
(2,008
)
 
—

 
(2,008
)
Balance as of December 31, 2015
5,400

 
$
5

 
237,267

 
$
237

 
$
4,931,395

 
$
(2,776,215
)
 
$
(85
)
 
$
2,155,337

 
$
—

 
$
2,155,337

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cumulative effect of accounting change
—

 
$
—

 
—

 
$
—

 
$
17

 
$
(17
)
 
$
—

 
$
—

 
$
—

 
$
—

Net income
—

 
—

 
—

 
—

 
—

 
166,817

 
—

 
166,817

 
—

 
166,817

Other comprehensive income
—

 
—

 
—

 
—

 
—

 
—

 
807

 
807

 
—

 
807

Distributions declared to preferred shareholders
($1.75 per share)
—

 
—

 
—

 
—

 
—

 
(9,450
)
 
—

 
(9,450
)
 
—

 
(9,450
)
Distributions declared to common shareholders
($0.6625 per share)
—

 
—

 
—

 
—

 
—

 
(157,168
)
 
—

 
(157,168
)
 
—

 
(157,168
)
Issuance of common stock, net of offering costs
—

 
—

 
—

 
—

 
(100
)
 
—

 
—

 
(100
)
 
—

 
(100
)
Shares repurchased through share repurchase program
—

 
—

 
(591
)
 
—

 
(8,841
)
 
—

 
—

 
(8,841
)
 
—

 
(8,841
)
Issuance of restricted shares
—

 
—

 
274

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Exercise of stock options
—

 
—

 
2

 
—

 
23

 
—

 
—

 
23

 
—

 
23

Stock-based compensation expense, net of forfeitures
—

 
—

 
(10
)
 
—

 
7,209

 
—

 
—

 
7,209

 
—

 
7,209

Shares withheld for employee taxes
—

 
—

 
(172
)
 
—

 
(2,548
)
 
—

 
—

 
(2,548
)
 
—

 
(2,548
)
Balance as of December 31, 2016
$
5,400

 
$
5

 
$
236,770

 
$
237

 
$
4,927,155

 
$
(2,776,033
)
 
$
722

 
$
2,152,086

 
$
—

 
$
2,152,086

See accompanying notes to consolidated financial statements

60

RETAIL PROPERTIES OF AMERICA, INC.
Consolidated Statements of Cash Flows
(in thousands)

 
Year Ended December 31,
 
2016
 
2015
 
2014
Cash flows from operating activities:
 
 
 
 
 
Net income
$
166,817

 
$
125,624

 
$
43,300

Adjustments to reconcile net income to net cash provided by operating activities (including discontinued operations):
 
 
 
 
 
Depreciation and amortization
224,430

 
214,706

 
215,966

Provision for impairment of investment properties
20,376

 
19,937

 
72,203

Gain on sales of investment properties
(129,707
)
 
(121,792
)
 
(42,851
)
Gain on extinguishment of debt
(13,653
)
 
—

 
—

Gain on extinguishment of other liabilities
(6,978
)
 
—

 
(4,258
)
Gain on change in control of investment properties
—

 
—

 
(24,158
)
Amortization of loan fees and debt premium and discount, net
5,781

 
5,129

 
4,926

Amortization of stock-based compensation
7,209

 
10,755

 
3,420

Premium paid in connection with defeasance of mortgages payable
1,735

 
17,343

 
1,322

Equity in loss of unconsolidated joint ventures, net
—

 
—

 
2,088

Distributions on investments in unconsolidated joint ventures
—

 
—

 
1,360

Payment of leasing fees and inducements
(9,640
)
 
(8,184
)
 
(8,523
)
Changes in accounts receivable, net
(1,918
)
 
4,420

 
(5,762
)
Changes in accounts payable and accrued expenses, net
2,007

 
1,976

 
3,220

Changes in other operating assets and liabilities, net
(1,776
)
 
(469
)
 
(7,499
)
Other, net
(935
)
 
(3,632
)
 
(740
)
Net cash provided by operating activities
263,748

 
265,813

 
254,014

 
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
 
Changes in restricted escrows, net
394

 
22,344

 
(16,757
)
Purchase of investment properties
(381,436
)
 
(454,085
)
 
(172,989
)
Capital expenditures and tenant improvements
(51,768
)
 
(45,649
)
 
(44,442
)
Proceeds from sales of investment properties
450,765

 
505,824

 
315,400

Investment in developments in progress
(1,362
)
 
(2,371
)
 
(2,992
)
Investment in unconsolidated joint ventures
—

 
—

 
(25
)
Other, net
944

 
(775
)
 
(295
)
Net cash provided by investing activities
17,537

 
25,288

 
77,900

 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
 
Proceeds from mortgages payable
—

 
1,049

 
3,541

Principal payments on mortgages payable
(266,033
)
 
(441,490
)
 
(192,244
)
Proceeds from unsecured notes payable
200,000

 
248,815

 
250,000

Proceeds from unsecured credit facility
622,500

 
610,000

 
375,500

Repayments of unsecured credit facility
(636,500
)
 
(510,000
)
 
(540,500
)
Payment of loan fees and deposits, net
(8,756
)
 
(2,243
)
 
(1,615
)
Purchase of U.S. Treasury securities in connection with defeasance of mortgages payable
(12,430
)
 
(87,435
)
 
(6,152
)
Distributions paid
(166,693
)
 
(166,513
)
 
(166,143
)
Shares repurchased through share repurchase program
(8,841
)
 
—

 
—

Other, net
(2,837
)
 
(4,152
)
 
(199
)
Net cash used in financing activities
(279,590
)
 
(351,969
)
 
(277,812
)
 
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
1,695

 
(60,868
)
 
54,102

Cash and cash equivalents, at beginning of year
51,424

 
112,292

 
58,190

Cash and cash equivalents, at end of year
$
53,119

 
$
51,424

 
$
112,292

(continued)
 

61

RETAIL PROPERTIES OF AMERICA, INC.
Consolidated Statements of Cash Flows
(in thousands)

 
Year Ended December 31,
 
2016
 
2015
 
2014
Supplemental cash flow disclosure, including non-cash activities:
 
 
 
 
 
Cash paid for interest, net of interest capitalized
$
101,789

 
$
115,249

 
$
127,645

Distributions payable
$
39,222

 
$
39,297

 
$
39,187

Accrued capital expenditures and tenant improvements
$
9,286

 
$
6,079

 
$
6,731

Accrued leasing fees and inducements
$
952

 
$
—

 
$
—

Accrued redevelopment costs
$
4,816

 
$
—

 
$
—

Amounts reclassified to developments in progress
$
17,261

 
$
—

 
$
—

Developments in progress placed in service
$
—

 
$
2,288

 
$
4,047

U.S. Treasury securities transferred in connection with defeasance of mortgages payable
$
12,430

 
$
87,435

 
$
6,152

Defeasance of mortgages payable
$
10,695

 
$
70,092

 
$
4,830

 
 
 
 
 
 
Purchase of investment properties (after credits at closing and including acquisition
of our partners’ joint venture interests):
 
 
 
 
 
Land, building and other improvements, net
$
(375,022
)
 
$
(442,763
)
 
$
(337,906
)
Accounts receivable, acquired lease intangibles and other assets
(40,989
)
 
(47,498
)
 
(31,116
)
Accounts payable, acquired lease intangibles and other liabilities
19,259

 
36,176

 
25,390

Mortgages payable assumed, net
15,316

 
—

 
146,485

Gain on change in control of investment properties
—

 
—

 
24,158

 
$
(381,436
)
 
$
(454,085
)
 
$
(172,989
)
 
 
 
 
 
 
Proceeds from sales of investment properties:
 
 
 
 
 
Net investment properties
$
393,680

 
$
379,419

 
$
265,127

Accounts receivable, acquired lease intangibles and other assets
18,183

 
8,959

 
12,053

Accounts payable, acquired lease intangibles and other liabilities
(11,605
)
 
(4,378
)
 
(4,631
)
Deferred gains
1,500

 
32

 
—

Mortgage debt forgiven or assumed
(94,353
)
 
—

 
—

Gain on extinguishment of debt
13,653

 
—

 
—

Gain on sales of investment properties
129,707

 
121,792

 
42,851

 
$
450,765

 
$
505,824

 
$
315,400


See accompanying notes to consolidated financial statements

62

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements


(1) ORGANIZATION AND BASIS OF PRESENTATION
Retail Properties of America, Inc. (the Company) was formed on March 5, 2003 and its primary purpose is to own and operate high quality, strategically located shopping centers in the United States.
The Company has elected to be taxed as a real estate investment trust (REIT) under the Internal Revenue Code of 1986, as amended (the Code). The Company believes it qualifies for taxation as a REIT and, as such, the Company generally will not be subject to U.S. federal income tax on taxable income that is distributed to its shareholders. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to U.S. federal income tax on its taxable income. Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes on its income, property or net worth and U.S. federal income and excise taxes on its undistributed income. The Company has one wholly-owned subsidiary that has jointly elected to be treated as a taxable REIT subsidiary (TRS) and is subject to U.S. federal, state and local income taxes at regular corporate tax rates. The income tax expense incurred by the TRS did not have a material impact on the Company’s accompanying consolidated financial statements.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States (GAAP) requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. For example, significant estimates and assumptions have been made with respect to useful lives of assets, capitalization of development costs, fair value measurements, provision for impairment, including estimates of holding periods, capitalization rates and discount rates (where applicable), provision for income taxes, recoverable amounts of receivables, deferred taxes and initial valuations and related amortization periods of deferred costs and intangibles, particularly with respect to property acquisitions. Actual results could differ from these estimates.
All share amounts and dollar amounts in the consolidated financial statements and notes thereto are stated in thousands with the exception of per share amounts and per square foot amounts. Square foot and per square foot amounts are unaudited.
The accompanying consolidated financial statements include the accounts of the Company, as well as all wholly-owned subsidiaries and any consolidated variable interest entities (VIEs). Wholly-owned subsidiaries generally consist of limited liability companies (LLCs), limited partnerships (LPs) and statutory trusts.
The Company’s property ownership as of December 31, 2016 is summarized below:
 
Wholly-owned
Retail operating properties (a)
156

Office properties
1

Total operating properties
157

 
 
Redevelopment properties
2

(a)
Excludes two wholly-owned operating properties classified as held for sale as of December 31, 2016.
Intercompany balances and transactions have been eliminated in consolidation. Investments in real estate joint ventures in which the Company has the ability to exercise significant influence, but does not have a controlling financial interest, are accounted for pursuant to the equity method of accounting. Accordingly, the Company’s share of the loss of these unconsolidated joint ventures is included in “Equity in loss of unconsolidated joint ventures, net” in the accompanying consolidated statements of operations and other comprehensive income. Refer to Note 11 to the consolidated financial statements for further discussion.
Noncontrolling interest is the portion of equity in a consolidated subsidiary not attributable, directly or indirectly, to the Company. In the consolidated statements of operations and other comprehensive income, revenues, expenses and net income or loss from less-than-wholly-owned consolidated subsidiaries are reported at the consolidated amounts, including both the amounts attributable to common shareholders and noncontrolling interests. Consolidated statements of equity are included in the annual financial statements, including beginning balances, activity for the period and ending balances for total shareholders’ equity, noncontrolling interests and total equity. Noncontrolling interests are adjusted for additional contributions from and distributions to noncontrolling interest holders, as well as the noncontrolling interest holders’ share of the net income or loss of each respective entity, as applicable.

63

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

The Company evaluates the classification and presentation of noncontrolling interests associated with consolidated joint venture investments, if any, on an ongoing basis as facts and circumstances necessitate.
On October 29, 2015, the Company dissolved its remaining less-than-wholly owned consolidated joint venture concurrent with the sale of Green Valley Crossing to an affiliate of the joint venture partner. The Company was entitled to a preferred return on its capital contributions to the entity. The noncontrolling interest holder was allocated $528 as its share of the gain on sale of the development property and received a distribution of $2,022 upon dissolution of the joint venture. No adjustments to the carrying value of the noncontrolling interest for contributions, distributions or allocation of net income or loss were made during the year ended December 31, 2014. As of December 31, 2016, the Company did not have any less-than-wholly-owned consolidated entities.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment Properties: Investment properties are recorded at cost less accumulated depreciation. Ordinary repairs and maintenance are expensed as incurred. Expenditures for significant improvements, including internal salaries and related benefits of personnel directly involved in the improvements, are capitalized.
The Company allocates the purchase price of each acquired investment property accounted for as a business combination based upon the estimated acquisition date fair value of the individual assets acquired and liabilities assumed, which generally include (i) land, (ii) building and other improvements, (iii) in-place lease value intangibles, (iv) acquired above and below market lease intangibles, (v) any assumed financing that is determined to be above or below market, (vi) the value of customer relationships and (vii) goodwill, if any. Transaction costs related to acquisitions accounted for as business combinations are expensed as incurred and included within “General and administrative expenses” in the accompanying consolidated statements of operations and other comprehensive income.
The Company elected to early adopt ASU 2017-01, Business Combinations, on a prospective basis as of October 1, 2016. This new guidance clarifies the definition of a business and provides a screen to determine when an integrated set of assets and activities is not considered a business and, thus, accounted for as an asset acquisition as opposed to a business combination. Refer to the “Recently Adopted Accounting Pronouncements” section within Note 2 to the consolidated financial statements. Under this new guidance, the Company expects most acquisitions of investment property will meet this screen and, thus, be accounted for as asset acquisitions. The Company allocates the purchase price of each acquired investment property that is accounted for as an asset acquisition based upon the relative fair value of the individual assets acquired and liabilities assumed, which generally include (i) land, (ii) building and other improvements, (iii) in-place lease value intangibles, (iv) acquired above and below market lease intangibles, (v) any assumed financing that is determined to be above or below market and (vi) the value of customer relationships. Asset acquisitions do not give rise to goodwill and the related transaction costs are capitalized and included with the allocated purchase price.
For tangible assets acquired, including land, building and other improvements, the Company considers available comparable market and industry information in estimating acquisition date fair value. The Company allocates a portion of the purchase price to the estimated acquired in-place lease value intangibles based on estimated lease execution costs for similar leases as well as lost rental payments during an assumed lease-up period. The Company also evaluates each acquired lease as compared to current market rates. If an acquired lease is determined to be above or below market, the Company allocates a portion of the purchase price to such above or below market leases based upon the present value of the difference between the contractual lease payments and estimated market rent payments over the remaining lease term. Renewal periods are included within the lease term in the calculation of above and below market lease values if, based upon factors known at the acquisition date, market participants would consider it reasonably assured that the lessee would exercise such options. Fair value estimates used in acquisition accounting, including the discount rate used, require the Company to consider various factors, including, but not limited to, market knowledge, demographics, age and physical condition of the property, geographic location, size and location of tenant spaces within the acquired investment property and tenant profile. For acquisitions accounted for as business combinations, if, up to one year from the acquisition date, information regarding fair value of the assets acquired and liabilities assumed is received and estimates are refined, appropriate adjustments are made to the purchase price allocation on a prospective basis.
The portion of the purchase price allocated to acquired in-place lease value intangibles is amortized on a straight-line basis over the life of the related lease as a component of depreciation and amortization expense. The Company incurred amortization expense pertaining to acquired in-place lease value intangibles of $27,443, $25,913 and $28,977 for the years ended December 31, 2016, 2015 and 2014, respectively.

64

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

With respect to acquired leases in which the Company is the lessor, the portion of the purchase price allocated to acquired above and below market lease intangibles is amortized on a straight-line basis over the life of the related lease as an adjustment to rental income. Amortization pertaining to above market lease intangibles of $4,406, $4,807 and $4,170 for the years ended December 31, 2016, 2015 and 2014, respectively, was recorded as a reduction to rental income. Amortization pertaining to below market lease intangibles of $7,396, $8,428 and $6,246 for the years ended December 31, 2016, 2015 and 2014, respectively, was recorded as an increase to rental income.
With respect to acquired leases in which the Company is the lessee, the portion of the purchase price allocated to acquired above and below market ground lease intangibles is amortized on a straight-line basis over the life of the related lease as an adjustment to property operating expenses. Amortization pertaining to above market ground lease intangibles of $560, $560 and $560 for the years ended December 31, 2016, 2015 and 2014, respectively, was recorded as a reduction to property operating expenses.
The following table presents the amortization during the next five years and thereafter related to the acquired lease intangible assets and liabilities for properties owned as of December 31, 2016:
 
 
2017
 
2018
 
2019
 
2020
 
2021
 
Thereafter
 
Total
Amortization of:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquired above market lease intangibles (a)
 
$
4,474

 
$
3,850

 
$
2,527

 
$
1,890

 
$
1,373

 
$
5,368

 
$
19,482

Acquired in-place lease value intangibles (a)
 
22,627

 
17,509

 
12,473

 
10,324

 
9,022

 
50,578

 
122,533

Acquired lease intangible assets, net (b)
 
$
27,101

 
$
21,359

 
$
15,000

 
$
12,214

 
$
10,395

 
$
55,946

 
$
142,015

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquired below market lease intangibles (a)
 
$
(6,124
)
 
$
(5,849
)
 
$
(5,545
)
 
$
(5,369
)
 
$
(5,177
)
 
$
(64,208
)
 
$
(92,272
)
Acquired ground lease intangibles (c)
 
(560
)
 
(560
)
 
(560
)
 
(560
)
 
(560
)
 
(10,218
)
 
(13,018
)
Acquired lease intangible liabilities, net (b)
 
$
(6,684
)
 
$
(6,409
)
 
$
(6,105
)
 
$
(5,929
)
 
$
(5,737
)
 
$
(74,426
)
 
$
(105,290
)
(a)
Represents the portion of the purchase price with respect to acquired leases in which the Company is the lessor. The amortization of acquired above and below market lease intangibles is recorded as an adjustment to rental income and the amortization of acquired in-place lease value intangibles is recorded to depreciation and amortization expense.
(b)
Acquired lease intangible assets, net and acquired lease intangible liabilities, net are presented net of $296,309 and $50,672 of accumulated amortization, respectively, as of December 31, 2016.
(c)
Represents the portion of the purchase price with respect to acquired leases in which the Company is the lessee. The amortization is recorded as an adjustment to property operating expenses.
Depreciation expense is computed using the straight-line method. Building and other improvements are depreciated based upon estimated useful lives of 30 years for building and associated improvements and 15 years for site improvements and most other capital improvements. Tenant improvements and leasing fees, including capitalized internal leasing incentives, are amortized on a straight-line basis over the life of the related lease as a component of depreciation and amortization expense. The Company capitalized $423, $474 and $0 of internal leasing incentives, all of which were incremental to signed leases, during the years ended December 31, 2016, 2015 and 2014, respectively.
Impairment of Long-Lived Assets and Unconsolidated Joint Ventures: The Company’s investment properties, including developments in progress, are reviewed for potential impairment at the end of each reporting period or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. At the end of each reporting period, the Company separately determines whether impairment indicators exist for each property. Examples of situations considered to be impairment indicators for both operating properties and developments in progress include, but are not limited to:
•
a substantial decline in or continued low occupancy rate or cash flow;
•
expected significant declines in occupancy in the near future;
•
continued difficulty in leasing space;
•
a significant concentration of financially troubled tenants;
•
a change in anticipated holding period;

65

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

•
a cost accumulation or delay in project completion date significantly above and beyond the original development or redevelopment estimate;
•
a significant decrease in market price not in line with general market trends; and
•
any other quantitative or qualitative events or factors deemed significant by the Company’s management or board of directors.
If the presence of one or more impairment indicators as described above is identified at the end of a reporting period or at any point throughout the year with respect to a property, the asset is tested for recoverability by comparing its carrying value to the estimated future undiscounted cash flows. An investment property is considered to be impaired when the estimated future undiscounted cash flows are less than its current carrying value. When performing a test for recoverability or estimating the fair value of an impaired investment property, the Company makes certain complex or subjective assumptions which include, but are not limited to:
•
projected operating cash flows considering factors such as vacancy rates, rental rates, lease terms, tenant financial strength, competitive positioning and property location;
•
estimated holding period or various potential holding periods when considering probability-weighted scenarios;
•
projected capital expenditures and lease origination costs;
•
estimated interest and internal costs expected to be capitalized, dates of construction completion and grand opening dates for developments in progress;
•
projected cash flows from the eventual disposition of an operating property or development in progress using a property-specific capitalization rate;
•
comparable selling prices; and
•
a property-specific discount rate.
The Company did not have any unconsolidated joint ventures as of December 31, 2016 and 2015. When the Company does hold investments in unconsolidated joint ventures, they are reviewed for potential impairment, in addition to impairment evaluations of the individual assets underlying these investments, each reporting period or whenever events or changes in circumstances warrant such an evaluation.
To determine whether any identified impairment is other-than-temporary, the Company considers whether it has the ability and intent to hold the investment until the carrying value is fully recovered. To the extent impairment has occurred, the Company will record an impairment charge calculated as the excess of the carrying value of the asset over its estimated fair value.
Below is a summary of impairment charges recorded during the years ended December 31, 2016, 2015 and 2014:
 
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
Impairment of consolidated properties (a)
 
$
20,376

 
$
19,937

 
$
72,203

(a)
Included in “Provision for impairment of investment properties” in the accompanying consolidated statements of operations and other comprehensive income.
The Company’s assessment of impairment as of December 31, 2016 was based on the most current information available to the Company. If the operating conditions mentioned above deteriorate or if the Company’s expected holding period for assets change, subsequent tests for impairment could result in additional impairment charges in the future. The Company can provide no assurance that material impairment charges with respect to the Company’s investment properties will not occur in 2017 or future periods. Based upon current market conditions, certain of the Company’s properties may have fair values less than their carrying amounts. However, based on the Company’s plans with respect to those properties, the Company believes that their carrying amounts are

66

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

recoverable and therefore, under applicable GAAP guidance, no additional impairment charges were recorded. Accordingly, the Company will continue to monitor circumstances and events in future periods to determine whether additional impairment charges are warranted. Refer to Note 15 to the consolidated financial statements for further discussion.
Development and Redevelopment Projects: Development and redevelopment projects are classified as developments in progress on the accompanying consolidated balance sheets and include (i) land held for future development, (ii) ground-up developments and (iii) redevelopment properties undergoing significant renovations and improvements. During the development or redevelopment period, the Company capitalizes direct project costs such as construction, insurance, architectural and legal, as well as certain indirect project costs such as interest, other financing costs, real estate taxes and internal salaries and related benefits of personnel directly involved in the project. Capitalization of the indirect project costs ceases and all project-related costs included in developments in progress are reclassified to land and building and other improvements at the time when development or redevelopment is considered substantially complete. Additionally, the Company makes estimates as to the probability of completion of development and redevelopment projects. If the Company determines that completion of the development or redevelopment project is no longer probable, the Company expenses any capitalized costs that are not recoverable. The Company capitalized $302 of indirect project costs related to development and redevelopment projects and $1,152 related to expansions, pad developments and other significant improvements during the year ended December 31, 2016. The Company did not capitalize any indirect project costs during the years ended December 31, 2015 and 2014.
Investment Properties Held for Sale: In determining whether to classify an investment property as held for sale, the Company considers whether: (i) management has committed to a plan to sell the investment property; (ii) the investment property is available for immediate sale in its present condition, subject only to terms that are usual and customary; (iii) the Company has initiated a program to locate a buyer; (iv) the Company believes that the sale of the investment property is probable; (v) the Company is actively marketing the investment property for sale at a price that is reasonable in relation to its current value, and (vi) actions required for the Company to complete the plan indicate that it is unlikely that any significant changes will be made.
If all of the above criteria are met, the Company classifies the investment property as held for sale. When these criteria are met, the Company suspends depreciation (including depreciation for tenant improvements and building improvements) and amortization of acquired in-place lease value intangibles and any above or below market lease intangibles and the Company records the investment property held for sale at the lower of cost or net realizable value. The assets and liabilities associated with those investment properties that are classified as held for sale are presented separately on the consolidated balance sheets for the most recent reporting period. Two properties were classified as held for sale as of December 31, 2016 and no properties qualified for held for sale accounting treatment as of December 31, 2015.
Prior to the Company’s early adoption of the revised discontinued operations pronouncement in 2014, if the operations and cash flow of the property had been, or were upon consummation of such sale, eliminated from ongoing operations and the Company did not have significant continuing involvement in the operations of the property, then the operations for the periods presented were classified in the consolidated statements of operations and other comprehensive income as discontinued operations for all periods presented. However, the Company elected to early adopt the revised discontinued operations pronouncement effective January 1, 2014, which limits what qualifies for discontinued operations presentation. As a result, the investment properties that were sold or classified as held for sale during 2016, 2015 and 2014, except for Riverpark Phase IIA, which was classified as held for sale as of December 31, 2013 and, therefore, qualified for discontinued operations treatment under the previous standard, did not qualify for discontinued operations presentation and, as such, are reflected in continuing operations on the consolidated statements of operations and other comprehensive income.
Partially-Owned Entities: The Company consolidates partially-owned entities if they are VIEs in accordance with the Consolidation Topic of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) and the Company is considered the primary beneficiary, the Company has voting control, the limited partners (or non-managing members) do not have substantive participatory rights, or other conditions exist that indicate that the Company has control. Management uses its judgment when determining if the Company is the primary beneficiary of, or has a controlling financial interest in, an entity in which it has a variable interest, to determine whether the Company has the power to direct the activities that most significantly impact the entity’s economic performance and if it has significant economic exposure to the risk and rewards of ownership. The Company assesses its interests in VIEs on an ongoing basis to determine if the entity should be consolidated.
Cash and Cash Equivalents: The Company considers all demand deposits, money market accounts and investments in certificates of deposit and repurchase agreements purchased with a maturity of three months or less at the date of purchase to be cash equivalents.

67

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

The Company maintains its cash and cash equivalents at major financial institutions. The cash and cash equivalents balance at one or more of these financial institutions exceeds the Federal Depository Insurance Corporation (FDIC) insurance coverage. The Company periodically assesses the credit risk associated with these financial institutions and believes that the risk of loss is minimal.
Restricted Cash and Escrows: Restricted cash and escrows consist of lenders’ escrows and funds restricted through lender or other agreements, including funds held in escrow for future acquisitions, and are included as a component of “Other assets, net” in the accompanying consolidated balance sheets. As of December 31, 2016 and 2015, the Company had $29,230 and $35,804, respectively, in restricted cash and escrows.
Derivative and Hedging Activities: Derivatives are recorded in the accompanying consolidated balance sheets at fair value within “Other assets, net” and “Other liabilities”. The Company uses interest rate derivatives to manage differences in the amount, timing and duration of the Company’s known or expected cash payments principally related to certain of its borrowings. The Company does not use derivatives for trading or speculative purposes. On the date the Company enters into a derivative, it may designate the derivative as a hedge against the variability of cash flows that are to be paid in connection with a recognized liability. Subsequent changes in the fair value of a derivative that is designated and qualifies as a cash flow hedge that is determined to be highly effective are recorded in “Accumulated other comprehensive income (loss)” and are reclassified to interest expense as interest payments are made on the Company’s variable rate debt. As of December 31, 2016, the balance in accumulated other comprehensive income (loss) relating to derivatives was $722. Any hedge ineffectiveness or changes in the fair value for any derivative not designated as a hedge is reported in “Other income, net” in the accompanying consolidated statements of operations and other comprehensive income.
Conditional Asset Retirement Obligations: The Company evaluates the potential impact of conditional asset retirement obligations on its consolidated financial statements. The term conditional asset retirement obligation refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. Thus, the timing and/or method of settlement may be conditional on a future event. Based upon the Company’s evaluation, no accrual of a liability for asset retirement obligations was warranted as of December 31, 2016 and 2015.
Revenue Recognition: The Company commences revenue recognition on its leases based on a number of factors. In most cases, revenue recognition under a lease begins when the lessee takes possession of or controls the physical use of the leased asset. Generally, this occurs on the lease commencement date. The determination of who is the owner, for accounting purposes, of the tenant improvements determines the nature of the leased asset and when revenue recognition under a lease begins. If the Company is the owner, for accounting purposes, of the tenant improvements, then the leased asset is the finished space and revenue recognition begins when the lessee takes possession of the finished space, typically when the improvements are substantially complete. If the Company concludes that the lessee is the owner, for accounting purposes, of the tenant improvements, then the leased asset is the unimproved space and any tenant improvement allowances funded under the lease are accounted for as lease inducements which are amortized as a reduction to the revenue recognized over the term of the lease. In these circumstances, the Company commences revenue recognition when the lessee takes possession of the unimproved space for the lessee to construct their own improvements.
The Company considers a number of factors to evaluate whether it or the lessee is the owner of the tenant improvements for accounting purposes. These factors include:
•
whether the lease stipulates how and on what a tenant improvement allowance may be spent;
•
whether the tenant or the Company retains legal title to the improvements;
•
the uniqueness of the improvements;
•
the expected economic life of the tenant improvements relative to the length of the lease;
•
who constructs or directs the construction of the improvements, and
•
whether the tenant or the Company is obligated to fund cost overruns.
The determination of who owns the tenant improvements, for accounting purposes, is subject to significant judgment. In making that determination, the Company considers all of the above factors. No one factor, however, necessarily establishes its determination.

68

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

Rental income, for only those leases that have fixed and measurable rent escalations, is recognized on a straight-line basis over the term of each lease. The difference between such rental income earned and the cash rent due under the provisions of a lease is recorded as deferred rent receivable and is included as a component of “Accounts and notes receivable” in the accompanying consolidated balance sheets.
Reimbursements from tenants for recoverable real estate taxes and operating expenses are accrued as revenue in the period the applicable expenditures are incurred. The Company makes certain assumptions and judgments in estimating the reimbursements at the end of each reporting period.
The Company records lease termination income as “Other property income” when (i) a termination letter agreement is signed, (ii) all of the conditions of such agreement have been fulfilled, (iii) the tenant is no longer occupying the property and (iv) collectibility is reasonably assured. Upon early lease termination, the Company provides for losses related to recognized tenant specific intangibles and other assets or adjusts the remaining useful life of the assets if determined to be appropriate. The Company recorded lease termination income of $3,339, $3,757 and $2,667 for the years ended December 31, 2016, 2015 and 2014, respectively.
The Company recorded contingent percentage rental income and percentage rental income in lieu of base rent of $4,082, $4,693 and $5,229 for the years ended December 31, 2016, 2015 and 2014, respectively. The Company’s policy is to defer recognition of contingent rental income until the specified target (i.e. breakpoint) that triggers the contingent rental income is achieved.
Profits from sales of real estate are not recognized under the full accrual method until the following criteria are met: a sale is consummated; the buyer’s initial and continuing investments are adequate to demonstrate a commitment to pay for the property; the Company’s receivable, if applicable, is not subject to future subordination; the Company has transferred to the buyer the usual risks and rewards of ownership; and the Company does not have substantial continuing involvement with the property. The Company sold 46, 26 and 24 consolidated investment properties during the years ended December 31, 2016, 2015 and 2014, respectively. Refer to Note 4 to the consolidated financial statements for further discussion.
Accounts and Notes Receivable and Allowance for Doubtful Accounts: Accounts and notes receivable balances outstanding include base rents, tenant reimbursements and deferred rent receivables. An allowance for the uncollectible portion of accounts and notes receivable is determined on a tenant-specific basis through an analysis of balances outstanding, historical bad debt levels, tenant creditworthiness and current economic trends. Additionally, estimates of the expected recovery of pre-petition and post-petition claims with respect to tenants in bankruptcy are considered in assessing the collectibility of the related receivables. Management’s estimate of the collectibility of accounts and notes receivable is based on the best information available to management at the time of evaluation.
Rental Expense: Rental expense associated with land and office space that the Company leases under non-cancellable operating leases, for only those leases that have fixed and measurable rent escalations, is recorded on a straight-line basis over the term of each lease. The difference between rental expense incurred on a straight-line basis and rental payments due under the provisions of a lease agreement is recorded as a deferred liability and is included as a component of “Other liabilities” in the accompanying consolidated balance sheets. See Note 6 to the consolidated financial statements for additional information pertaining to these leases.
Loan Fees: Loan fees are generally amortized using the effective interest method (or other methods which approximate the effective interest method) over the life of the related loan as a component of interest expense. Debt prepayment penalties and certain fees associated with exchanges or modifications of debt are expensed as incurred as a component of interest expense.
The Company presents unamortized capitalized loan fees, excluding those related to its unsecured revolving line of credit, as direct reductions of the carrying amounts of the related debt liabilities in the accompanying consolidated balance sheets. Unamortized capitalized loan fees attributable to the Company’s unsecured revolving line of credit are recorded in “Other assets, net” in the accompanying consolidated balance sheets.
Income Taxes: The Company has elected to be taxed as a REIT under Sections 856 through 860 of the Code. As a REIT, the Company generally will not be subject to U.S. federal income tax on the taxable income the Company currently distributes to its shareholders.

69

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

The Company records a benefit, based on the GAAP measurement criteria, for uncertain income tax positions if the result of a tax position meets a “more likely than not” recognition threshold. Tax returns for the calendar years 2013 through 2016 remain subject to examination by federal and various state tax jurisdictions.
Segment Reporting: The Company’s chief operating decision maker, which is comprised of its Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, assesses and measures the operating results of the Company’s portfolio of properties based on net operating income and does not differentiate properties by geography, market, size or type. Each of the Company’s investment properties is considered a separate operating segment, as each property earns revenue and incurs expenses, individual operating results are reviewed and discrete financial information is available. However, the Company’s properties are aggregated into one reportable segment as they have similar economic characteristics, the Company provides similar services to its tenants and the Company’s chief operating decision maker evaluates the collective performance of its properties.
Recently Adopted Accounting Pronouncements
Effective January 1, 2016, the Company adopted Accounting Standards Update (ASU) 2015-02, Consolidation, which revised the consolidation guidance for all entities. This new guidance modifies the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities, eliminates the presumption that a general partner should consolidate a limited partnership and affects the consolidation analysis of reporting entities that are involved with VIEs. The adoption of this pronouncement under the modified retrospective method did not have any effect on the Company’s consolidated financial statements as the Company did not have any VIEs at adoption on January 1, 2016; however, during the year ended December 31, 2016, the Company acquired three properties through consolidated VIEs in connection with Internal Revenue Code Section 1031 tax-deferred exchanges (1031 Exchanges) and, accordingly, applied the revised consolidation guidance. See Note 3 to the consolidated financial statements for further details.
Effective January 1, 2016, the Company adopted ASU 2015-16, Business Combinations, which requires the acquirer in a business combination to recognize in the period any adjustments to provisional amounts that are identified during the measurement period rather than retrospectively accounting for those adjustments. The adoption of this pronouncement did not have any effect on the Company’s consolidated financial statements.
The Company elected to early adopt ASU 2014-15, Presentation of Financial Statements – Going Concern, on January 1, 2016. This new guidance requires a company’s management to assess the entity’s ability to continue as a going concern for a period of one year after the date the financial statements are issued (or available to be issued) and provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The adoption of this pronouncement did not have any effect on the Company’s consolidated financial statements.
The Company elected to early adopt ASU 2016-09, Compensation – Stock Compensation, on January 1, 2016. This new guidance allowed the Company to make an accounting policy election to account for share-based payment award forfeitures when they occur, which required a modified retrospective transition by means of a cumulative-effect adjustment to equity as of the beginning of the period of adoption and resulted in an adjustment of $17 to additional paid-in capital and accumulated distributions in excess of earnings as of January 1, 2016.
The Company elected to early adopt ASU 2017-01, Business Combinations, on a prospective basis as of October 1, 2016. This new guidance clarifies the definition of a business and provides a screen to determine when an integrated set of assets and activities is not considered a business and, thus, accounted for as an asset acquisition as opposed to a business combination. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not considered a business. Under this new guidance, the Company expects most acquisitions of investment property will meet the screen and, thus, be accounted for as asset acquisitions. Consistent with existing guidance, transaction costs associated with asset acquisitions are capitalized while transaction costs associated with business combinations are expensed as incurred. The adoption of this pronouncement resulted in the Company’s acquisition of investment properties subsequent to October 1, 2016 to qualify as asset acquisitions and as such, the related transactions costs of $725 were capitalized.

70

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

Other Recently Issued Accounting Pronouncements
In May 2014 with subsequent updates issued in August 2015 and March, April, May and December 2016, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. This new guidance is effective January 1, 2018, with early adoption permitted beginning January 1, 2017, and will replace existing revenue recognition standards. The sale of investment property and any non-lease components contained within lease agreements will be required to follow the new guidance; however, lease components of lease contracts will be excluded from this guidance. This pronouncement allows either a full or a modified retrospective method of adoption. Expanded quantitative and qualitative disclosures regarding revenue recognition will be required for contracts that are subject to this guidance. While the Company anticipates additional disclosure, it does not expect the adoption of this pronouncement will have a material effect on its consolidated financial statements; however, it will continue to evaluate this assessment until the guidance becomes effective.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall. This new guidance is effective January 1, 2018 and will require companies to disclose the fair value of financial assets and financial liabilities measured at amortized cost in accordance with the exit price notion and will no longer require disclosure of the methods and significant assumptions used, including any changes, to estimate fair value. In addition, companies will be required to disclose all financial assets and financial liabilities grouped by 1) measurement category and 2) form of financial instrument. The Company does not expect the adoption of this pronouncement will have a material effect on its consolidated financial statements; however, it will continue to evaluate this assessment until the guidance becomes effective.
In February 2016, the FASB issued ASU 2016-02, Leases. This new guidance is effective January 1, 2019, with early adoption permitted, and will require lessees to recognize a liability to make lease payments and a right-of-use asset, initially measured at the present value of lease payments, for both operating and financing leases. For leases with a term of 12 months or less, lessees will be permitted to make an accounting policy election by class of underlying asset to not recognize lease liabilities and lease assets. Under this new pronouncement, lessor accounting will be largely unchanged from existing GAAP. The pronouncement requires a modified retrospective method of adoption, with some optional practical expedients. Upon adoption, the Company will recognize a lease liability and a right-of-use asset for operating leases where it is the lessee, such as ground leases and office and equipment leases. The Company will continue to evaluate the impact of this guidance until it becomes effective.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses. This new guidance is effective January 1, 2020, with early adoption permitted beginning January 1, 2019, and replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses. Financial assets that are measured at amortized cost will be required to be presented at the net amount expected to be collected with an allowance for credit losses deducted from the amortized cost basis. In addition, an entity must consider broader information in developing its expected credit loss estimate, including the use of forecasted information. Generally, the pronouncement requires a modified retrospective method of adoption. The Company will continue to evaluate the impact of this guidance until it becomes effective.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows. This new guidance is effective January 1, 2018, with early adoption permitted, and adds or clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows. Of the eight types of cash flows discussed in the new standard, the classification of debt prepayment costs as a financing outflow will impact the Company’s consolidated statements of cash flows as this item is currently reflected as an operating outflow. The pronouncement requires a retrospective transition method of adoption. The Company will continue to evaluate the impact of this guidance until it becomes effective.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows. This new guidance is effective January 1, 2018, with early adoption permitted, and requires amounts that are generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The pronouncement requires a retrospective transition method of adoption. Upon adoption, the Company will include amounts generally described as restricted cash within the beginning-of-period, change and end-of-period total amounts on the statement of cash flows rather than within an activity on the statement of cash flows.

71

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

(3) ACQUISITIONS
The Company closed on the following acquisitions during the year ended December 31, 2016:
Date
 
Property Name
 
Metropolitan
Statistical Area (MSA)
 
Property Type
 
Square
Footage
 
Acquisition
Price
January 15, 2016
 
Shoppes at Hagerstown (a)
 
Hagerstown
 
Multi-tenant retail
 
113,000

 
$
27,055

January 15, 2016
 
Merrifield Town Center II (a)
 
Washington, D.C.
 
Multi-tenant retail
 
76,000

 
45,676

March 29, 2016
 
Oak Brook Promenade
 
Chicago
 
Multi-tenant retail
 
183,200

 
65,954

April 1, 2016
 
The Shoppes at Union Hill (b)
 
New York
 
Multi-tenant retail
 
91,700

 
63,060

April 29, 2016
 
Ashland & Roosevelt – Fee Interest (c)
 
Chicago
 
Ground lease interest (c)
 
—

 
13,850

May 5, 2016
 
Tacoma South
 
Seattle
 
Multi-tenant retail
 
230,700

 
39,400

June 15, 2016
 
Eastside
 
Dallas
 
Multi-tenant retail
 
67,100

 
23,842

August 30, 2016
 
Woodinville Plaza – Anchor Space
Improvements (d)
 
Seattle
 
Anchor space improvements (d)
 
—

 
4,500

November 22, 2016
 
One Loudoun Downtown – Phase I (e)
 
Washington, D.C.
 
Multi-tenant retail
 
340,600

 
124,971

 
 
 
 
 
 
 
 
1,102,300

 
$
408,308

(a)
These properties were acquired as a two-property portfolio. Merrifield Town Center II also contains 62,000 square feet of storage space for a total of 138,000 square feet.
(b)
In conjunction with this acquisition, the Company assumed mortgage debt with a principal balance of $15,971 and an interest rate of 3.75% that matures in 2031.
(c)
The Company acquired the fee interest in an existing wholly-owned multi-tenant retail operating property located in Chicago, Illinois, which was previously subject to a ground lease with a third party. In conjunction with this transaction, the Company reversed the straight-line ground rent liability of $6,978, which is reflected as “Gain on extinguishment of other liabilities” in the accompanying condensed consolidated statements of operations and other comprehensive income.
(d)
The Company acquired the anchor space improvements, which were previously subject to a ground lease with the Company, at an existing wholly-owned multi-tenant retail operating property located in Woodinville, Washington.
(e)
The remaining phases at One Loudoun Downtown, representing an aggregate gross purchase price of up to $35,500, are expected to close throughout the first three quarters of 2017 as the seller completes construction on stand-alone buildings at the property.
During the year ended December 31, 2016, the Company also completed a non-monetary transaction in which it received the fee interest in less than an acre of adjacent land and terminated the ground lease on certain undeveloped parcels at an existing wholly-owned multi-tenant retail operating property located in Southlake, Texas in exchange for the fee interest in approximately 2.5 acres of undeveloped parcels. As a result of this transaction, the Company’s fee interest in certain undeveloped parcels at the property are no longer encumbered by the ground lease. The Company capitalized $113 of costs related to this transaction.
The Company closed on the following acquisitions during the year ended December 31, 2015:
Date
 
Property Name
 
Metropolitan
Statistical Area
(MSA)
 
Property Type
 
Square
Footage
 
Acquisition
Price
January 8, 2015
 
Downtown Crown
 
Washington, D.C.
 
Multi-tenant retail
 
258,000

 
$
162,785

January 23, 2015
 
Merrifield Town Center
 
Washington, D.C.
 
Multi-tenant retail
 
84,900

 
56,500

January 23, 2015
 
Fort Evans Plaza II
 
Washington, D.C.
 
Multi-tenant retail
 
228,900

 
65,000

February 19, 2015
 
Cedar Park Town Center
 
Austin
 
Multi-tenant retail
 
179,300

 
39,057

March 24, 2015
 
Lake Worth Towne Crossing – Parcel (a)
 
Dallas
 
Land (a)
 
—

 
400

May 4, 2015
 
Tysons Corner
 
Washington, D.C.
 
Multi-tenant retail
 
37,700

 
31,556

June 10, 2015
 
Woodinville Plaza
 
Seattle
 
Multi-tenant retail
 
170,800

 
35,250

July 31, 2015
 
Southlake Town Square – Outparcel (b)
 
Dallas
 
Single-user outparcel
 
13,800

 
8,440

August 27, 2015
 
Coal Creek Marketplace
 
Seattle
 
Multi-tenant retail
 
55,900

 
17,600

October 27, 2015
 
Royal Oaks Village II – Outparcel (a)
 
Houston
 
Single-user outparcel
 
12,300

 
6,841

November 13, 2015
 
Towson Square
 
Baltimore
 
Multi-tenant retail
 
138,200

 
39,707

 
 
 
 
 
 
 
 
1,179,800

 
$
463,136


72

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

(a)
The Company acquired a parcel located at its Lake Worth Towne Crossing multi-tenant retail operating property and a single-user outparcel located at its Royal Oaks Village II multi-tenant retail operating property.
(b)
The Company acquired a single-user outparcel located at its Southlake Town Square multi-tenant retail operating property that was subject to a ground lease with the Company (as lessor) prior to the transaction.
The Company closed on the following acquisitions during the year ended December 31, 2014:
Date
 
Property Name
 
MSA
 
Property Type
 
Square
Footage
 
Acquisition
Price
 
Pro Rata
Acquisition
Price
February 27, 2014
 
Heritage Square
 
Seattle
 
Multi-tenant retail
 
53,100

 
$
18,022

 
$
18,022

February 27, 2014
 
Bed Bath & Beyond Plaza – Fee Interest (a)
 
Miami
 
Ground lease
interest (a)
 
—

 
10,350

 
10,350

June 5, 2014
 
MS Inland Portfolio (b)
 
Various
 
Multi-tenant retail
 
1,194,800

 
292,500

 
234,000

June 23, 2014
 
Southlake Town Square – Outparcel (c)
 
Dallas
 
Single-user outparcel
 
8,500

 
6,369

 
6,369

November 20, 2014
 
Avondale Plaza
 
Seattle
 
Multi-tenant retail
 
39,000

 
15,070

 
15,070

December 30, 2014
 
Lakewood Towne Center – Parcel
 
Seattle
 
Multi-tenant parcel
 
44,000

 
5,750

 
5,750

 
 
 
 
 
 
 
 
1,339,400

 
$
348,061

 
$
289,561

(a)
The Company acquired the fee interest in an existing wholly-owned multi-tenant retail operating property located in Miami, Florida, which was previously subject to a ground lease with a third party. In conjunction with this transaction, the Company reversed a straight-line ground rent liability of $4,258, which is presented in “Gain on extinguishment of other liabilities” in the accompanying consolidated statements of operations and other comprehensive income.
(b)
As discussed in Note 11 to the consolidated financial statements, the Company dissolved its joint venture arrangement with its partner in MS Inland Fund, LLC (MS Inland) by acquiring its partner’s 80% ownership interest in the six multi-tenant retail properties owned by the joint venture (collectively, the MS Inland acquisitions). The Company paid total cash consideration of approximately $120,600 before transaction costs and prorations and after assumption of the joint venture’s in-place mortgage financing on those properties of $141,698. The Company accounted for this transaction as a business combination achieved in stages and recognized a gain on change in control of investment properties of $24,158 as a result of remeasuring the carrying value of its 20% interest in the six acquired properties to fair value. Such gain is presented as “Gain on change in control of investment properties” in the accompanying consolidated statements of operations and other comprehensive income.
(c)
The Company acquired a single-user outparcel located at its Southlake Town Square multi-tenant retail operating property that was subject to a ground lease with the Company (as lessor) prior to the transaction.
The following table summarizes the acquisition date fair values, before prorations, the Company recorded in conjunction with the acquisitions completed during the years ended December 31, 2016, 2015 and 2014 discussed above:
 
 
2016
 
2015
 
2014
Land
 
$
106,947

 
$
161,114

 
$
118,732

Building and other improvements
 
268,075

 
281,649

 
219,174

Acquired lease intangible assets (a)
 
41,002

 
45,474

 
35,520

Acquired lease intangible liabilities (b)
 
(8,258
)
 
(25,101
)
 
(20,578
)
Mortgages payable, net (c)
 
(15,316
)
 
—

 
(146,485
)
Net assets acquired (d)
 
$
392,450

 
$
463,136

 
$
206,363

(a)
The weighted average amortization period for acquired lease intangible assets is nine years, 15 years and eight years for acquisitions completed during the years ended December 31, 2016, 2015 and 2014, respectively.
(b)
The weighted average amortization period for acquired lease intangible liabilities is 18 years, 21 years and 16 years for acquisitions completed during the years ended December 31, 2016, 2015 and 2014, respectively.
(c)
Includes mortgage discount of $(655) for acquisitions completed during the year ended December 31, 2016 and mortgage premium of $4,787 for acquisitions completed during the year ended December 31, 2014.
(d)
Net assets attributable to the MS Inland acquisition are presented at 100%.
The above acquisitions were funded using a combination of available cash on hand, proceeds from dispositions and proceeds from the Company’s unsecured revolving line of credit. Transaction costs related to acquisitions accounted for as business combinations totaling $913, $1,591 and $2,271 for the years ended December 31, 2016, 2015 and 2014, respectively, were expensed as incurred

73

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

and included within “General and administrative expenses” in the accompanying consolidated statements of operations and other comprehensive income.
Included in the Company’s consolidated statements of operations and other comprehensive income from the properties acquired that were accounted for as business combinations are $87,161, $97,893 and $55,303 in total revenues and $22,283, $18,334 and $6,733 in net income attributable to common shareholders from the date of acquisition through December 31, 2016, 2015, and 2014, respectively. These amounts do not include the total revenue and net income attributable to common shareholders from the 2016 acquisitions of One Loudoun Downtown – Phase I, the anchor space improvements at Woodinville Plaza and the fee interest in Ashland & Roosevelt, the 2015 acquisition of a parcel at Lake Worth Towne Crossing and the 2014 acquisition of the fee interest in Bed Bath & Beyond Plaza as they have been accounted for as asset acquisitions.
Subsequent to December 31, 2016, the Company acquired Main Street Promenade, a 181,600 square foot multi-tenant retail property located in the Chicago MSA, for a gross purchase price of $88,000. The property was acquired on January 13, 2017 through a consolidated VIE to facilitate a potential 1031 Exchange. The Company has not completed the allocation of the acquisition date fair value for Main Street Promenade; however, it expects that this acquisition will be accounted for as an asset acquisition and that the purchase price of this property will primarily be allocated to land, building and acquired lease intangibles.
Condensed Pro Forma Financial Information
The results of operations of the acquisitions accounted for as business combinations that were completed during the period, or after such period through the financial statement issuance date, for which financial information was available, are included in the following unaudited condensed pro forma financial information as if these acquisitions had been completed as of the beginning of the year prior to the acquisition date. The following unaudited condensed pro forma financial information is presented as if the 2016 acquisitions were completed as of January 1, 2015, the 2015 acquisitions were completed as of January 1, 2014, and the 2014 acquisitions were completed as of January 1, 2013. The results of operations associated with the 2017 acquisition of Main Street Promenade, the 2016 acquisitions of One Loudoun Downtown – Phase I, the anchor space improvements at Woodinville Plaza and the fee interest in Ashland & Roosevelt, the 2015 acquisition of a parcel at Lake Worth Towne Crossing and the 2014 acquisition of the fee interest in Bed Bath & Beyond Plaza have not been adjusted in the pro forma presentation as they have been accounted for as asset acquisitions. The results of operations associated with the 2015 acquisitions of Towson Square on November 13, 2015, single-user outparcels at Southlake Town Square on July 31, 2015 and Royal Oaks Village II on October 27, 2015 and the 2014 acquisition of a single-user outparcel at Southlake Town Square on June 23, 2014 have not been adjusted in the pro forma presentation due to a lack of historical financial information. These pro forma results are for comparative purposes only and are not necessarily indicative of what the Company’s actual results of operations would have been had the acquisitions occurred at the beginning of the periods presented, nor are they necessarily indicative of future operating results.
The unaudited condensed pro forma financial information is as follows:
 
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
Total revenues
 
$
587,374

 
$
627,300

 
$
635,240

Net income
 
$
165,696

 
$
121,406

 
$
18,313

Net income attributable to common shareholders
 
$
156,246

 
$
111,428

 
$
8,863

Earnings per common share – basic and diluted:
 
 
 
 
 
 
Net income per common share attributable to common shareholders
 
$
0.66

 
$
0.47

 
$
0.04

Weighted average number of common shares outstanding – basic
 
236,651

 
236,380

 
236,184

Variable Interest Entities
During the year ended December 31, 2016, the Company entered into agreements with a qualified intermediary related to three 1031 Exchanges. The Company loaned $65,419, $39,215 and $23,522 to the VIEs to acquire Oak Brook Promenade, Tacoma South and Eastside, respectively. Each 1031 Exchange was completed during the year ended December 31, 2016 and, accordingly, no agreements remained outstanding related to 1031 Exchanges as of December 31, 2016. At the completion of the 1031 Exchanges, the sole membership interests of the VIEs were assigned to the Company and the respective outstanding loans were extinguished, resulting in the entities being wholly owned by the Company and no longer considered VIEs.

74

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

Prior to the completion of the 1031 Exchanges, the Company was deemed to be the primary beneficiary of the VIEs as it had the ability to direct the activities of the VIEs that most significantly impacted their economic performance and had all of the risks and rewards of ownership. Accordingly, the Company consolidated the VIEs. No value or income was attributed to the noncontrolling interests. The assets of the VIEs consisted of the investment properties which were operated by the Company.
(4) DISPOSITIONS
The Company closed on the following dispositions during the year ended December 31, 2016:
Date
 
Property Name
 
Property Type
 
Square
Footage
 
Consideration
 
Aggregate
Proceeds, Net (a)
 
Gain
February 1, 2016
 
The Gateway (b)
 
Multi-tenant retail
 
623,200

 
$
75,000

 
$
(795
)
 
$
3,868

February 10, 2016
 
Stateline Station
 
Multi-tenant retail
 
142,600

 
17,500

 
17,210

 
4,253

March 30, 2016
 
Six Property Portfolio (c)
 
Single-user retail
 
230,400

 
35,413

 
34,986

 
13,618

April 20, 2016
 
CVS Pharmacy – Oklahoma City
 
Single-user retail
 
10,900

 
4,676

 
4,608

 
1,764

June 2, 2016
 
Rite Aid Store (Eckerd) – Canandaigua
& Tim Horton Donut Shop (d)
 
Single-user retail
 
16,600

 
5,400

 
5,333

 
1,444

June 15, 2016
 
Academy Sports – Midland
 
Single-user retail
 
61,200

 
5,541

 
5,399

 
2,220

June 23, 2016
 
Four Rite Aid Portfolio (e)
 
Single-user retail
 
45,400

 
15,934

 
14,646

 
2,287

July 8, 2016
 
Broadway Shopping Center
 
Multi-tenant retail
 
190,300

 
20,500

 
20,103

 
7,958

July 21, 2016
 
Mid-Hudson Center
 
Multi-tenant retail
 
235,600

 
27,500

 
25,615

 
—

July 27, 2016
 
Rite Aid Store (Eckerd), Main St. –
Buffalo
 
Single-user retail
 
10,900

 
3,388

 
3,296

 
344

July 29, 2016
 
Rite Aid Store (Eckerd) – Lancaster
 
Single-user retail
 
10,900

 
3,425

 
3,349

 
625

August 4, 2016
 
Alison’s Corner
 
Multi-tenant retail
 
55,100

 
7,850

 
7,559

 
3,334

August 5, 2016
 
Rite Aid Store (Eckerd) – Lake Ave.
 
Single-user retail
 
13,200

 
5,400

 
5,334

 
907

August 12, 2016
 
Maple Tree Place
 
Multi-tenant retail
 
489,000

 
90,000

 
87,047

 
15,566

August 12, 2016
 
CVS Pharmacy – Burleson
 
Single-user retail
 
10,900

 
4,190

 
4,102

 
1,425

August 18, 2016
 
Mitchell Ranch Plaza
 
Multi-tenant retail
 
199,600

 
55,625

 
54,305

 
33,612

August 22, 2016
 
Rite Aid Store (Eckerd), E. Main St. –
Batavia
 
Single-user retail
 
13,800

 
5,050

 
4,924

 
1,249

September 9, 2016
 
Rite Aid Store (Eckerd) – Lockport
 
Single-user retail
 
13,800

 
4,690

 
4,415

 
753

September 9, 2016
 
Rite Aid Store (Eckerd), Ferry St. –
Buffalo
 
Single-user retail
 
10,900

 
3,600

 
3,370

 
612

November 9, 2016
 
Walgreens – Northwoods
 
Single-user retail
 
16,300

 
6,450

 
5,793

 
2,199

November 23, 2016
 
Ten Rite Aid Portfolio (f)
 
Single-user retail
 
119,700

 
30,000

 
29,380

 
251

December 8, 2016
 
Vail Ranch Plaza
 
Multi-tenant retail
 
101,800

 
27,450

 
27,160

 
11,247

December 15, 2016
 
Pacheco Pass Phase I & II
 
Multi-tenant retail
 
194,300

 
41,500

 
39,549

 
4,758

December 16, 2016
 
South Billings Center (g)
 
Development (g)
 
—

 
2,250

 
2,157

 
—

December 22, 2016
 
Rite Aid Store (Eckerd) – Colesville
 
Single-user retail
 
13,400

 
7,700

 
7,444

 
1,893

December 29, 2016
 
Commons at Royal Palm
 
Multi-tenant retail
 
156,500

 
23,700

 
21,460

 
6,553

December 30, 2016
 
CVS Pharmacy (Eckerd) – Edmond &
CVS Pharmacy (Eckerd) – Norman (h)
Single-user retail
 
27,600

 
10,630

 
10,467

 
5,069

 
 
 
 
 
 
3,013,900

 
$
540,362

 
$
448,216

 
$
127,809

(a)
Aggregate proceeds are net of transaction costs.
(b)
The property was disposed of through a lender-directed sale in full satisfaction of the Company’s $94,353 mortgage obligation. Immediately prior to the disposition, the lender reduced the Company’s loan obligation to $75,000 which was assumed by the buyer in connection with the disposition. Along with the loan reduction, the lender received the balance of the restricted escrows that they held and the rights to unpaid accounts receivable and forgave accrued interest, resulting in a net gain on extinguishment of debt of $13,653.
(c)
Portfolio consists of the following properties: (i) Academy Sports – Houma, (ii) Academy Sports – Port Arthur, (iii) Academy Sports – San Antonio, (iv) CVS Pharmacy – Moore, (v) CVS Pharmacy – Saginaw and (vi) Rite Aid Store (Eckerd) – Olean.
(d)
The terms of the disposition of Rite Aid Store (Eckerd) – Canandaigua and Tim Horton Donut Shop were negotiated as a single transaction.
(e)
Portfolio consists of the following properties: (i) Rite Aid Store (Eckerd) – Cheektowaga, (ii) Rite Aid Store (Eckerd), W. Main St. – Batavia, (iii) Rite Aid Store (Eckerd), Union Rd. – West Seneca and (iv) Rite Aid Store (Eckerd) – Greece.

75

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

(f)
Portfolio consists of the following properties: (i) Rite Aid Store (Eckerd) – Chattanooga, (ii) Rite Aid Store (Eckerd) – Yorkshire, (iii) Rite Aid Store (Eckerd), Sheridan Dr. – Amherst, (iv) Rite Aid Store (Eckerd) – Grand Island, (v) Rite Aid Store (Eckerd) – North Chili, (vi) Rite Aid Store (Eckerd) – Tonawanda, (vii) Rite Aid Store (Eckerd) – Irondequoit, (viii) Rite Aid Store (Eckerd) – Hudson, (ix) Rite Aid Store (Eckerd), Transit Rd. – Amherst and (x) Rite Aid Store (Eckerd), Harlem Rd. – West Seneca.
(g)
South Billings Center was classified as a development property but was not under active development.
(h)
The terms of the disposition of CVS Pharmacy (Eckerd) – Edmond and CVS Pharmacy (Eckerd) – Norman were negotiated as a single transaction.
During the year ended December 31, 2016, the Company also disposed of a single-user outparcel for consideration of $2,639, received net proceeds of $2,549 and recorded a gain of $1,898 from the transaction. The aggregate proceeds, net of closing costs, from the property dispositions and this additional transaction totaled $450,765 with aggregate gains of $129,707.
During the year ended December 31, 2016, the Company defeased $10,695 in mortgages payable prior to the 2016 dispositions.
As of December 31, 2016, the Company had entered into contracts to sell Century III Plaza, a 284,100 square foot multi-tenant retail operating property located in West Mifflin, Pennsylvania, and CVS Pharmacy – Sylacauga, a 10,100 square foot single-user retail operating property located in Sylacauga, Alabama. These properties qualified for held for sale accounting treatment upon meeting all applicable GAAP criteria during the quarter ended December 31, 2016, at which time depreciation and amortization were ceased. As such, the assets and liabilities associated with these properties are separately classified as held for sale in the accompanying consolidated balance sheet as of December 31, 2016. No properties qualified for held for sale accounting treatment as of December 31, 2015.
The following table presents the assets and liabilities associated with the investment properties classified as held for sale:
 
December 31, 2016
Assets
 
Land, building and other improvements
$
45,395

Accumulated depreciation
(15,769
)
Net investment properties
29,626

Other assets
1,201

Assets associated with investment properties held for sale
$
30,827

 
 
Liabilities
 
Other liabilities
$
864

Liabilities associated with investment properties held for sale
$
864

There was no activity during the years ended December 31, 2016 and 2015 related to discontinued operations. The results of operations for the year ended December 31, 2014 for the investment property accounted for as discontinued operations, Riverpark Phase IIA which was sold on March 11, 2014 but was classified as held for sale as of December 31, 2013, were immaterial.
Subsequent to December 31, 2016, the Company closed on the sale of Rite Aid Store (Eckerd), Culver Rd., a 10,900 square foot single-user retail operating property, for consideration of $500.

76

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

The Company closed on the following dispositions during the year ended December 31, 2015:
Date
 
Property Name
 
Property Type
 
Square
Footage
 
Consideration
 
Aggregate
Proceeds, Net (a)
 
Gain
January 20, 2015
 
Aon Hewitt East Campus
 
Single-user office
 
343,000

 
$
17,233

 
$
16,495

 
$
—

February 27, 2015
 
Promenade at Red Cliff
 
Multi-tenant retail
 
94,500

 
19,050

 
18,848

 
4,572

April 7, 2015
 
Hartford Insurance Building
 
Single-user office
 
97,400

 
6,015

 
5,663

 
860

April 30, 2015
 
Rasmussen College
 
Single-user office
 
26,700

 
4,800

 
4,449

 
1,334

May 15, 2015
 
Mountain View Plaza
 
Multi-tenant retail
 
162,000

 
28,500

 
27,949

 
10,184

June 4, 2015
 
Massillon Commons
 
Multi-tenant retail
 
245,900

 
12,520

 
12,145

 
—

June 5, 2015
 
Citizen's Property Insurance Building
 
Single-user office
 
59,800

 
3,650

 
3,368

 
440

June 17, 2015
 
Pine Ridge Plaza
 
Multi-tenant retail
 
236,500

 
33,200

 
31,858

 
12,938

June 17, 2015
 
Bison Hollow
 
Multi-tenant retail
 
134,800

 
18,800

 
18,657

 
4,061

June 17, 2015
 
The Village at Quail Springs
 
Multi-tenant retail
 
100,400

 
11,350

 
11,267

 
3,824

July 17, 2015
 
Greensburg Commons
 
Multi-tenant retail
 
272,500

 
18,400

 
18,283

 
2,810

July 28, 2015
 
Arvada Connection and
Arvada Marketplace
 
Multi-tenant retail
 
367,500

 
54,900

 
53,159

 
20,208

July 30, 2015
 
Traveler's Office Building
 
Single-user office
 
50,800

 
4,841

 
4,643

 
—

August 6, 2015
 
Shaw's Supermarket
 
Single-user retail
 
65,700

 
3,000

 
2,769

 
—

August 24, 2015
 
Harvest Towne Center
 
Multi-tenant retail
 
39,700

 
7,800

 
7,381

 
1,217

August 31, 2015
 
Trenton Crossing &
McAllen Shopping Center (b)
 
Multi-tenant retail
 
265,900

 
39,295

 
38,410

 
13,760

September 15, 2015
 
The Shops at Boardwalk
 
Multi-tenant retail
 
122,400

 
27,400

 
26,634

 
3,146

September 29, 2015
 
Best on the Boulevard
 
Multi-tenant retail
 
204,400

 
42,500

 
41,542

 
15,932

September 29, 2015
 
Montecito Crossing
 
Multi-tenant retail
 
179,700

 
52,200

 
51,415

 
17,928

October 29, 2015
 
Green Valley Crossing (c)
 
Development (c)
 
96,400

 
35,000

 
34,200

 
3,904

November 12, 2015
 
Lake Mead Crossing
 
Multi-tenant retail
 
219,900

 
42,565

 
41,930

 
507

December 2, 2015
 
Golfsmith
 
Single-user retail
 
14,900

 
4,475

 
4,298

 
1,010

December 9, 2015
 
Wal-Mart – Turlock
 
Single-user retail
 
61,000

 
6,200

 
5,996

 
3,157

December 18, 2015
 
Southgate Plaza
 
Multi-tenant retail
 
86,100

 
7,000

 
6,665

 
—

December 31, 2015
 
Bellevue Mall
 
Development
 
369,300

 
15,750

 
17,500

 
—

 
 
 
 
 
 
3,917,200

 
$
516,444

 
$
505,524

 
$
121,792

(a)
Aggregate proceeds are net of transaction costs and exclude $300 of condemnation proceeds, which did not result in any additional gain recognition.
(b)
The terms of the disposition of Trenton Crossing and McAllen Shopping Center were negotiated as a single transaction.
(c)
The development property had been held in a consolidated joint venture and was sold to an affiliate of the joint venture partner. Concurrent with the sale, the joint venture was dissolved. Approximately $528 of the gain on sale was allocated to the noncontrolling interest holder as its share of the gain.
During the year ended December 31, 2015, the Company repaid or defeased $121,605 in mortgages payable prior to or in connection with the 2015 dispositions.
During the year ended December 31, 2014, the Company sold 24 properties. The dispositions and certain additional transactions, including a pad sale and condemnations, resulted in aggregate proceeds, net of transaction costs, of $315,400 with aggregate gains of $42,851. During the year ended December 31, 2014, the Company repaid or defeased $128,947 in mortgages payable prior to or in connection with the 2014 dispositions.
(5) EQUITY COMPENSATION PLANS
The Company’s 2014 Long-Term Equity Compensation Plan, subject to certain conditions, authorizes the issuance of incentive and non-qualified stock options, restricted stock and restricted stock units, stock appreciation rights and other similar awards as well as cash-based awards to the Company’s employees, non-employee directors, consultants and advisors in connection with compensation and incentive arrangements that may be established by the Company’s board of directors or executive management.

77

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

The following table summarizes the Company’s unvested restricted shares as of and for the years ended December 31, 2016, 2015 and 2014:

Unvested
Restricted
Shares

Weighted Average
Grant Date Fair
Value per
Restricted Share
Balance as of January 1, 2014
152

 
$
15.11

Shares granted (a)
303

 
$
13.89

Shares vested
(58
)
 
$
14.50

Shares forfeited
(1
)
 
$
15.61

Balance as of December 31, 2014
396

 
$
14.26

Shares granted (a)
801

 
$
15.82

Shares vested
(405
)
 
$
14.89

Shares forfeited
(4
)
 
$
16.01

Balance as of December 31, 2015
788


$
15.52

Shares granted (a)
274


$
14.76

Shares vested
(510
)

$
15.38

Shares forfeited (b)
(10
)

$
14.70

Balance as of December 31, 2016 (c)
542


$
15.28

(a)
Shares granted in 2014, 2015 and 2016 vest over periods ranging from one year to three years, 0.4 years to 3.4 years and 0.4 years to 3.9 years, respectively, in accordance with the terms of applicable award agreements.
(b)
Effective January 1, 2016, the Company made an accounting policy election to account for forfeitures when they occur.
(c)
As of December 31, 2016, total unrecognized compensation expense related to unvested restricted shares was $2,674, which is expected to be amortized over a weighted average term of 1.3 years.
In addition, during the years ended December 31, 2016 and 2015, performance restricted stock units (RSUs) were granted to the Company’s executives. Following the three-year performance period, one-third of the RSUs will convert into shares of common stock and two-thirds will convert into restricted shares with a one year vesting term. As long as the minimum hurdle is achieved and the executive remains employed during the performance period, the RSUs will convert into shares of common stock and restricted shares at a conversion rate of between 50% and 200% based upon the Company’s Total Shareholder Return as compared to that of the peer companies within the National Association of Real Estate Investment Trusts (NAREIT) Shopping Center Index for the respective performance period. If an executive terminates employment during the performance period by reason of a qualified termination, as defined in the agreement, only a prorated portion of his or her outstanding RSUs will be eligible for conversion based upon the period in which the executive was employed during the performance period. If an executive terminates for any reason other than a qualified termination during the performance period, he or she would forfeit his or her outstanding RSUs. Following the performance period, additional shares of common stock will also be issued in an amount equal to the accumulated value of the dividends that would have been paid during the performance period on the shares of common stock and restricted shares issued at the end of the performance period divided by the then-current market price of the Company’s common stock. The Company calculated the grant date fair values per unit using Monte Carlo simulations based on the probabilities of satisfying the market performance hurdles over the remainder of the performance period.

78

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

The following table summarizes the Company’s unvested RSUs as of and for the years ended December 31, 2016 and 2015:
 
Unvested
RSUs
 
Weighted Average
Grant Date
Fair Value
per RSU
RSUs eligible for future conversion as of January 1, 2015
—

 
$
—

RSUs granted (a)
180

 
$
14.19

RSUs ineligible for conversion
(6
)
 
$
14.10

RSUs eligible for future conversion as of December 31, 2015
174

 
$
14.20

RSUs granted (b)
246

 
$
13.85

RSUs ineligible for conversion
(29
)
 
$
13.56

RSUs eligible for future conversion as of December 31, 2016 (c)
391

 
$
14.02

(a)
Assumptions as of the grant dates included a weighted average risk-free interest rate of 0.80%, the Company’s historical common stock performance relative to the peer companies within the NAREIT Shopping Center Index and the Company’s weighted average common stock dividend yield of 4.26%.
(b)
Assumptions as of the grant dates included a weighted average risk-free interest rate of 0.89%, the Company’s historical common stock performance relative to the peer companies within the NAREIT Shopping Center Index and the Company’s weighted average common stock dividend yield of 4.59%.
(c)
As of December 31, 2016, total unrecognized compensation expense related to unvested RSUs was $3,471, which is expected to be amortized over a weighted average term of 2.4 years.
During the years ended December 31, 2016, 2015 and 2014, the Company recorded compensation expense of $7,209, $10,755 and $3,417, respectively, related to unvested restricted shares and RSUs. Included within compensation expense recorded during the year ended December 31, 2015 is compensation expense of $2,159 related to the accelerated vesting of 194 restricted shares in conjunction with the departure of the Company’s former Chief Financial Officer and Treasurer and former Executive Vice President and President of Property Management. The total fair value of restricted shares vested during the years ended December 31, 2016, 2015 and 2014 was $7,596, $6,188 and $840, respectively.
Prior to 2013, non-employee directors had been granted options to acquire shares under the Company’s Third Amended and Restated Independent Director Stock Option and Incentive Plan. Options to purchase a total of 84 shares of common stock had been granted under the plan. During the year ended December 31, 2015, options to purchase one share expired and options to purchase 10 shares were forfeited. During the year ended December 31, 2016, options to purchase two shares were exercised, options to purchase one share expired and options to purchase 10 shares were forfeited. As of December 31, 2016, options to purchase 41 shares of common stock remained outstanding and exercisable. The Company did not grant any options in 2014, 2015 or 2016. Compensation expense of $0, $0 and $3 related to stock options was recorded during the years ended December 31, 2016, 2015 and 2014, respectively.
(6) LEASES
The majority of revenues from the Company’s properties consist of rents received under long-term operating leases. In addition to base rent paid monthly in advance, some leases provide for the reimbursement of the tenant’s pro rata share of certain operating expenses incurred by the landlord including real estate taxes, special assessments, insurance, utilities, common area maintenance, management fees and certain capital repairs, subject to the terms of the respective lease. Certain other tenants are subject to net leases which provide that the tenant is responsible for fixed base rent, as well as all costs and expenses associated with occupancy. Under net leases, where all expenses are paid directly by the tenant rather than the landlord, such expenses are not included in the accompanying consolidated statements of operations and other comprehensive income. Under leases where all expenses are paid by the landlord, subject to reimbursement by the tenant, the expenses are included in “Operating expenses” or “Real estate taxes” and reimbursements are included in “Tenant recovery income” in the accompanying consolidated statements of operations and other comprehensive income.
In certain municipalities, the Company is required to remit sales taxes to governmental authorities based upon the rental income received from properties in those regions. These taxes are reimbursed by the tenant to the Company depending upon the terms of the applicable tenant lease. The presentation of the remittance and reimbursement of these taxes is on a gross basis with sales tax expenses included in “Operating expenses” and sales tax reimbursements included in “Other property income” in the accompanying

79

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

consolidated statements of operations and other comprehensive income. Such taxes remitted to governmental authorities, which are reimbursed by tenants, exclusive of amounts attributable to discontinued operations, were $1,986, $2,071 and $1,985 for the years ended December 31, 2016, 2015 and 2014, respectively.
Minimum lease payments to be received under operating leases, excluding payments under master lease agreements, additional percentage rent based on tenants’ sales volume and tenant reimbursements of certain operating expenses and assuming no exercise of renewal options or early termination rights, are as follows:
 
 
Minimum Lease Payments
2017
 
$
423,207

2018
 
382,938

2019
 
321,179

2020
 
262,571

2021
 
213,514

Thereafter
 
720,075

Total
 
$
2,323,484

The remaining lease terms range from less than one year to more than 66 years.
Many of the leases at the Company’s retail properties contain provisions that condition a tenant’s obligation to remain open, the amount of rent payable by the tenant or potentially the tenant’s obligation to remain in the lease, upon certain factors, including: (i) the presence and continued operation of a certain anchor tenant or tenants, (ii) minimum occupancy levels at the applicable property or (iii) tenant sales amounts. If such a provision is triggered by a failure of any of these or other applicable conditions, a tenant could have the right to cease operations at the applicable property, have its rent reduced or terminate its lease early. The Company does not expect that such provisions will have a material impact on its future operating results.
The Company leases land under non-cancellable operating leases at certain of its properties expiring in various years from 2028 to 2087, exclusive of any available option periods. In addition, the Company leases office space for certain management offices and its corporate offices, which were expanded during the year ended December 31, 2016 to include a regional office in Tysons Corner, Virginia. The following table summarizes rent expense included in the accompanying consolidated statements of operations and other comprehensive income, including straight-line rent expense.
 
Year Ended December 31,
 
2016
 
2015
 
2014
Ground lease rent expense (a)
$
10,464

 
$
11,461

 
$
11,676

Office rent expense (b)
$
1,317

 
$
1,246

 
$
1,210

(a)
Included in “Operating expenses” in the accompanying consolidated statements of operations and other comprehensive income. Includes straight-line ground rent expense of $3,253, $3,722 and $3,889 for the years ended December 31, 2016, 2015 and 2014, respectively.
(b)
Office rent expense related to property management operations is included in “Operating expenses” and office rent expense related to corporate office operations is included in “General and administrative expenses” in the accompanying consolidated statements of operations and other comprehensive income.

80

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

Minimum future rental obligations to be paid under the ground and office leases, including fixed rental increases, are as follows:
 
 
Minimum Lease Obligations
2017
 
$
7,853

2018
 
7,842

2019
 
8,157

2020
 
8,318

2021
 
8,525

Thereafter
 
376,939

Total
 
$
417,634

(7) MORTGAGES PAYABLE
The following table summarizes the Company’s mortgages payable:

December 31, 2016

December 31, 2015
 
Aggregate
Principal
Balance
 
Weighted
Average
Interest Rate
 
Weighted
Average Years
to Maturity
 
Aggregate
Principal
Balance
 
Weighted
Average
Interest Rate
 
Weighted
Average Years
to Maturity
Fixed rate mortgages payable (a)
$
773,395

 
6.31
%
 
4.2

$
1,128,505

(b)
6.08
%
 
3.9
Premium, net of accumulated amortization
1,437

 
 
 
 
 
1,865

 
 
 
 
Discount, net of accumulated amortization
(622
)
 
 
 
 

(1
)
 
 
 
 
Capitalized loan fees, net of accumulated
amortization
(5,026
)
 
 
 
 
 
(7,233
)
 
 
 
 
Mortgages payable, net
$
769,184

 
 
 
 

$
1,123,136

 
 
 
 
(a)
The fixed rate mortgages had interest rates ranging from 3.75% to 8.00% and 3.35% to 8.00% as of December 31, 2016 and 2015, respectively.
(b)
Includes $7,910 of variable rate mortgage debt that was swapped to a fixed rate as of December 31, 2015.
During the year ended December 31, 2016, the Company repaid or defeased mortgages payable in the total amount of $263,548 which had a weighted average fixed interest rate of 5.09% and made scheduled principal payments of $13,180 related to amortizing loans. One of the mortgages repaid, with a principal balance of $7,750 at maturity, had been swapped to a fixed rate and the Company had guaranteed a portion of the outstanding balance. Upon repayment of the mortgage on its scheduled maturity date, the interest rate swap expired and the Company’s guarantee was extinguished. In addition, during the year ended December 31, 2016, the Company disposed of The Gateway through a lender-directed sale in full satisfaction of its $94,353 mortgage obligation, which had a fixed interest rate of 6.57%. Immediately prior to the disposition, the lender reduced the Company’s loan obligation to $75,000 which was assumed by the buyer in connection with the disposition. Along with the loan reduction, the lender received the balance of the restricted escrows that they held and the rights to unpaid accounts receivable and forgave accrued interest, resulting in a net gain on extinguishment of debt of $13,653. The Company also assumed a mortgage payable with a principal balance of $15,971 and an interest rate of 3.75% that matures in 2031 in conjunction with the acquisition of The Shoppes at Union Hill.
The majority of the Company’s mortgages payable require monthly payments of principal and interest, and some of the mortgages require reserves for real estate taxes and certain other costs. The Company’s properties and the related tenant leases are pledged as collateral for its mortgages payable. At times, the Company has borrowed funds financed as part of a cross-collateralized package, with cross-default provisions. In those circumstances, one or more of the Company’s properties may secure the debt of another of the Company’s properties. As of December 31, 2016, the Company had a portfolio of mortgages payable with a principal balance of $379,435 that was cross-collateralized by 45 properties and scheduled to mature in 2019 (known as the IW JV portfolio of mortgages payable). Subsequent to December 31, 2016, the Company defeased the IW JV portfolio of mortgages payable. As a result, the 45 properties that secured the mortgages payable as of December 31, 2016 are no longer encumbered by mortgages.

81

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

Debt Maturities
The following table shows the scheduled maturities and principal amortization of the Company’s indebtedness as of December 31, 2016, for each of the next five years and thereafter and the weighted average interest rates by year. The table does not reflect the impact of any 2017 debt activity, such as the defeasance of the IW JV portfolio of mortgages payable or the funding of the $200,000 unsecured term loan due 2023 (Term Loan Due 2023), which closed during the year ended December 31, 2016 and funded on January 3, 2017.
 
2017
 
2018
 
2019
 
2020
 
2021
 
Thereafter
 
Total
Debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed rate debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgages payable (a)
$
35,023

 
$
11,463

 
$
433,982

 
$
4,334

 
$
23,249

 
$
265,344

 
$
773,395

Fixed rate term loan (b)
—

 
—

 
—

 
—

 
250,000

 
—

 
250,000

Unsecured notes payable (c)
—

 
—

 
—

 
—

 
100,000

 
600,000

 
700,000

Total fixed rate debt
35,023

 
11,463

 
433,982

 
4,334

 
373,249

 
865,344

 
1,723,395

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable rate debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable rate term loan and
revolving line of credit
—

 
200,000

 
—

 
86,000

 
—

 
—

 
286,000

Total debt (d)
$
35,023

 
$
211,463

 
$
433,982

 
$
90,334

 
$
373,249

 
$
865,344

 
$
2,009,395

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average interest rate on debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed rate debt
4.83
%
 
6.51
%
 
7.49
%
 
4.58
%
 
2.73
%
 
4.36
%
 
4.82
%
Variable rate debt (e)
—

 
2.22
%
 
—

 
2.12
%
 
—

 
—

 
2.19
%
Total
4.83
%
 
2.45
%
 
7.49
%
 
2.24
%
 
2.73
%
 
4.36
%
 
4.44
%
(a)
Excludes mortgage premium of $1,437 and discount of $(622), net of accumulated amortization, as of December 31, 2016.
(b)
$250,000 of London Interbank Offered Rate (LIBOR)-based variable rate debt has been swapped to a fixed rate through two interest rate swaps. The swaps effectively convert one-month floating rate LIBOR to a weighted average fixed rate of 0.6677% through December 31, 2017.
(c)
Excludes discount of $(971), net of accumulated amortization, as of December 31, 2016.
(d)
The weighted average years to maturity of consolidated indebtedness was 5.3 years as of December 31, 2016. Total debt excludes capitalized loan fees of $(11,314), net of accumulated amortization, as of December 31, 2016, which are included as a reduction to the respective debt balances, and the Term Loan Due 2023, which funded on January 3, 2017. Refer to Note 9 to the consolidated financial statements for further details on the Term Loan Due 2023.
(e)
Represents interest rates as of December 31, 2016.
The Company plans on addressing its debt maturities through a combination of proceeds from asset dispositions, capital markets transactions and its unsecured revolving line of credit.

82

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

(8) UNSECURED NOTES PAYABLE
The following table summarizes the Company’s unsecured notes payable:
 
 
 
 
December 31, 2016
 
December 31, 2015
Unsecured Notes Payable
 
Maturity Date
 
Principal
Balance
 
Interest Rate/
Weighted Average
Interest Rate
 
Principal
Balance
 
Interest Rate/
Weighted Average
Interest Rate
Senior notes – 4.12% due 2021
 
June 30, 2021
 
$
100,000

 
4.12
%
 
$
100,000

 
4.12
%
Senior notes – 4.58% due 2024
 
June 30, 2024
 
150,000

 
4.58
%
 
150,000

 
4.58
%
Senior notes – 4.00% due 2025
 
March 15, 2025
 
250,000

 
4.00
%
 
250,000

 
4.00
%
Senior notes – 4.08% due 2026
 
September 30, 2026
 
100,000

 
4.08
%
 
—

 
—
%
Senior notes – 4.24% due 2028
 
December 28, 2028
 
100,000

 
4.24
%
 
—

 
—
%
 
 
 
 
700,000

 
4.19
%
 
500,000

 
4.20
%
Discount, net of accumulated amortization
 
 
 
(971
)
 
 
 
(1,090
)
 
 
Capitalized loan fees, net of accumulated amortization
 
 
(3,886
)
 
 
 
(3,334
)
 
 
 
 
Total
 
$
695,143

 
 
 
$
495,576

 
 
Notes Due 2026 and 2028
On September 30, 2016, the Company issued $100,000 of 10-year 4.08% senior unsecured notes due 2026 in a private placement transaction pursuant to a note purchase agreement it entered into with certain institutional investors on September 30, 2016. Pursuant to the same note purchase agreement, on December 28, 2016, the Company also issued $100,000 of 12-year 4.24% senior unsecured notes due 2028 (Notes Due 2026 and 2028). The proceeds were used to pay down the Company’s unsecured revolving line of credit, early repay certain longer-dated mortgages payable and for general corporate purposes.
The note purchase agreement governing the Notes Due 2026 and 2028 contains customary representations, warranties and covenants, and events of default. Pursuant to the terms of the note purchase agreement, the Company is subject to various financial covenants, including the requirement to maintain the following: (i) maximum unencumbered, secured and consolidated leverage ratios; (ii) a minimum interest coverage ratio; (iii) a fixed charge coverage ratio (as set forth in the Company’s unsecured credit facility); and (iv) an unencumbered interest coverage ratio (as set forth in the Company’s unsecured credit facility and the note purchase agreement governing the Notes Due 2021 and 2024).
Notes Due 2025
On March 12, 2015, the Company completed a public offering of $250,000 in aggregate principal amount of 4.00% senior unsecured notes due 2025 (Notes Due 2025). The Notes Due 2025 were priced at 99.526% of the principal amount to yield 4.058% to maturity. The proceeds were used to repay a portion of the Company’s unsecured revolving line of credit.
The indenture, as supplemented, governing the Notes Due 2025 (the Indenture) contains customary covenants and events of default. Pursuant to the terms of the Indenture, the Company is subject to various financial covenants, including the requirement to maintain the following: (i) maximum secured and total leverage ratios; (ii) a debt service coverage ratio; and (iii) maintenance of an unencumbered assets to unsecured debt ratio.
Notes Due 2021 and 2024
On June 30, 2014, the Company completed a private placement of $250,000 of unsecured notes, consisting of $100,000 of 4.12% senior unsecured notes due 2021 and $150,000 of 4.58% senior unsecured notes due 2024 (Notes Due 2021 and 2024). The proceeds were used to repay a portion of the Company’s unsecured revolving line of credit.
The note purchase agreement governing the Notes Due 2021 and 2024 contains customary representations, warranties and covenants, and events of default. Pursuant to the terms of the note purchase agreement, the Company is subject to various financial covenants, some of which are based upon the financial covenants in effect in the Company’s primary credit facility, including the requirement to maintain the following: (i) maximum unencumbered, secured and consolidated leverage ratios; (ii) minimum interest coverage and unencumbered interest coverage ratios; and (iii) a minimum consolidated net worth.

83

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

As of December 31, 2016, management believes the Company was in compliance with the financial covenants under the Indenture and the note purchase agreements.
(9) UNSECURED TERM LOANS AND REVOLVING LINE OF CREDIT
Unsecured Credit Facility
On January 6, 2016, the Company entered into its fourth amended and restated unsecured credit agreement with a syndicate of financial institutions led by KeyBank National Association serving as administrative agent and Wells Fargo Bank, National Association serving as syndication agent to provide for an unsecured credit facility aggregating $1,200,000 (Unsecured Credit Facility). The Company’s Unsecured Credit Facility consists of a $750,000 unsecured revolving line of credit, a $250,000 unsecured term loan and a $200,000 unsecured term loan and is priced on a leverage grid at a rate of LIBOR plus a credit spread. The Company received investment grade credit ratings from two rating agencies in 2014. In accordance with the unsecured credit agreement, the Company may elect to convert to an investment grade pricing grid. As of December 31, 2016, making such an election would have resulted in a higher interest rate and, as such, the Company has not made the election to convert to an investment grade pricing grid.
The following table summarizes the key terms of the Company’s Unsecured Credit Facility:
 
 
 
 
 
 
 
 
Leverage-Based Pricing
 
Ratings-Based Pricing
Unsecured Credit Facility
 
Maturity Date
 
Extension Option
 
Extension Fee
 
Credit Spread
Unused Fee
 
Credit Spread
Facility Fee
$250,000 unsecured term loan
 
1/5/2021
 
N/A
 
N/A
 
1.30% - 2.20%
N/A
 
0.90% - 1.75%
N/A
$200,000 unsecured term loan
 
5/11/2018
 
2 one year
 
0.15%
 
1.45% - 2.20%
N/A
 
1.05% - 2.05%
N/A
$750,000 unsecured revolving line of credit
 
1/5/2020
 
2 six month
 
0.075%
 
1.35% - 2.25%
0.15% - 0.25%
 
0.85% - 1.55%
0.125% - 0.30%
The Company’s Unsecured Credit Facility has a $400,000 accordion option that allows the Company, at its election, to increase the total credit facility up to $1,600,000, subject to (i) customary fees and conditions including, but not limited to, the absence of an event of default as defined in the agreement and (ii) the Company’s ability to obtain additional lender commitments.
The following table summarizes the Company’s Unsecured Credit Facility:
 
 
December 31, 2016
 
December 31, 2015
Unsecured Credit Facility
 
Balance
 
Interest Rate/
Weighted Average
Interest Rate
 
Balance
 
Interest Rate/
Weighted Average
Interest Rate
$250,000 unsecured term loan – fixed rate (a)
 
$
250,000

 
1.97
%
 
$
—

 
—
%
$200,000 unsecured term loan – variable rate
 
200,000

 
2.22
%
 
—

 
—
%
$450,000 unsecured term loan – fixed rate portion (b)
 
—

 
—
%
 
300,000

 
1.99
%
$450,000 unsecured term loan – variable rate portion
 
—

 
—
%
 
150,000

 
1.88
%
Subtotal
 
450,000

 
 
 
450,000

 
 
Capitalized loan fees, net of accumulated amortization
 
(2,402
)
 
 
 
(2,474
)
 
 
Term loans, net
 
447,598

 
 
 
447,526

 
 
Revolving line of credit – variable rate (c)
 
86,000

 
2.12
%
 
100,000

 
1.93
%
Total unsecured credit facility, net
 
$
533,598

 
2.09
%
 
$
547,526

 
1.95
%
(a)
As of December 31, 2016, $250,000 of LIBOR-based variable rate debt has been swapped to a weighted average fixed rate of 0.6677% plus a credit spread based on a leverage grid ranging from 1.30% to 2.20% through December 31, 2017. The applicable credit spread was 1.30% as of December 31, 2016.
(b)
As of December 31, 2015, $300,000 of LIBOR-based variable rate debt had been swapped to a fixed rate of 0.53875% plus a credit spread based on a leverage grid ranging from 1.45% to 2.00% through February 2016. The applicable credit spread was 1.45% as of December 31, 2015.
(c)
Excludes capitalized loan fees, which are included in “Other assets, net” in the accompanying consolidated balance sheets.

84

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

The fourth amended and restated unsecured credit agreement (Unsecured Credit Agreement) contains customary representations, warranties and covenants, and events of default. Pursuant to the terms of the Unsecured Credit Agreement, the Company is subject to various financial covenants, including the requirement to maintain the following: (i) maximum unencumbered, secured and consolidated leverage ratios; and (ii) minimum fixed charge and unencumbered interest coverage ratios. As of December 31, 2016, management believes the Company was in compliance with the financial covenants and default provisions under the Unsecured Credit Agreement.
The Company previously had a $1,000,000 unsecured credit facility that consisted of a $550,000 unsecured revolving line of credit and a $450,000 unsecured term loan that bore interest at a rate of LIBOR plus a credit spread ranging from 1.45% to 2.05% and was scheduled to mature on May 12, 2017 for the unsecured revolving line of credit and May 11, 2018 for the unsecured term loan.
Term Loan Due 2023
On November 22, 2016, the Company closed on a seven-year $200,000 unsecured term loan with a group of financial institutions, which funded on January 3, 2017. The Term Loan Due 2023 is priced on a leverage grid at a rate of LIBOR plus a credit spread ranging from 1.70% to 2.55%. In accordance with the term loan agreement (Term Loan Agreement), the Company may elect to convert to an investment grade pricing grid. As of December 31, 2016, making such an election would have resulted in a higher interest rate and, as such, the Company has not made the election to convert to an investment grade pricing grid. The Term Loan Due 2023 matures on November 22, 2023 and has a $100,000 accordion option that allows the Company, at its election, to increase the total unsecured term loan up to $300,000, subject to customary fees and conditions, including the absence of an event of default as defined in the Term Loan Agreement.
The Term Loan Agreement contains customary representations, warranties and covenants, and events of default, including financial covenants that require the Company to maintain the following: (i) maximum unencumbered, secured and consolidated leverage ratios; and (ii) minimum fixed charge and unencumbered interest coverage ratios. As of December 31, 2016, management believes the Company was in compliance with the financial covenants and default provisions under the Term Loan Agreement.
(10) DERIVATIVES
The Company’s objective in using interest rate derivatives is to manage its exposure to interest rate movements and add stability to interest expense. To accomplish this objective, the Company uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable rate amounts from a counterparty in exchange for the Company making fixed rate payments over the life of the agreement without exchange of the underlying notional amount.
The Company utilizes two interest rate swaps to hedge the variable cash flows associated with variable rate debt. The effective portion of changes in the fair value of derivatives that are designated and that qualify as cash flow hedges is recorded in “Accumulated other comprehensive income (loss)” and is reclassified to interest expense as interest payments are made on the Company’s variable rate debt. Over the next 12 months, the Company estimates that an additional $722 will be reclassified as a decrease to interest expense. The ineffective portion of the change in fair value of derivatives is recognized directly in earnings.
During the year ended December 31, 2016, the Company entered into the following two interest rate swaps which effectively convert one-month floating rate LIBOR to a fixed rate:
Effective Date
 
Notional
 
Fixed
Interest Rate
 
Termination Date
March 1, 2016
 
$
100,000

 
0.6591
%
 
December 31, 2017
May 16, 2016
 
$
150,000

 
0.6735
%
 
December 31, 2017
The Company previously had a $300,000 interest rate swap that matured on February 24, 2016. In addition, during the year ended December 31, 2016, the Company repaid a $7,750 variable rate mortgage payable that had been swapped to a fixed rate. Upon repayment of the mortgage on its scheduled maturity date, the interest rate swap expired. As of December 31, 2015, the outstanding principal balance of this variable rate mortgage was $7,910.

85

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

The following table summarizes the Company’s interest rate swaps that were designated as cash flow hedges of interest rate risk:
 
 
Number of Instruments
 
Notional
Interest Rate Derivatives
 
December 31,
2016
 
December 31,
2015
 
December 31,
2016
 
December 31,
2015
Interest rate swaps
 
2

 
2

 
$
250,000

 
$
307,910

The table below presents the estimated fair value of the Company’s derivative financial instruments as well as their classification in the consolidated balance sheets. The valuation techniques utilized are described in Note 16 to the consolidated financial statements.
 
 
December 31, 2016
 
December 31, 2015
 
 
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
Derivatives designated as cash flow hedges:
 
 
 
 
 
 
 
 
Interest rate swaps
 
Other assets, net
 
$
743

 
N/A
 
$
—

Interest rate swaps
 
N/A
 
$
—

 
Other liabilities
 
$
85

The following table presents the effect of the Company’s derivative financial instruments on the accompanying consolidated statements of operations and other comprehensive income:
Derivatives in
Cash Flow
Hedging
Relationships
 
Amount of (Gain) Loss
Recognized in Other
Comprehensive Income
on Derivative
(Effective Portion)
 
Location of Loss
Reclassified from
Accumulated Other
Comprehensive
Income (AOCI)
into Income
(Effective Portion)
 
Amount of Loss
Reclassified from
AOCI into Income
(Effective Portion)
 
Location of Gain
Recognized In
Income on Derivative
(Ineffective Portion
and Amount
Excluded from
Effectiveness Testing)
 
Amount of Gain
Recognized in Income
on Derivative
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)
 
 
2016
 
2015
 
 
 
2016
 
2015
 
 
 
2016
 
2015
Interest rate swaps
 
$
(399
)
 
$
643

 
Interest expense
 
$
408

 
$
1,095

 
Other income, net
 
$
(21
)
 
$
(25
)
Subsequent to December 31, 2016, the Company entered into two agreements to swap a total of $200,000 of LIBOR-based variable rate debt to a fixed interest rate of 1.2628% through November 22, 2018.
Credit-risk-related Contingent Features
The Company has agreements with each of its derivative counterparties that contain a provision whereby if the Company defaults on the related indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its corresponding derivative obligation.
The Company’s agreements with each of its derivative counterparties also contain a provision whereby if the Company consolidates with, merges with or into, or transfers all or substantially all of its assets to another entity and the creditworthiness of the resulting, surviving or transferee entity is materially weaker than the Company’s, the counterparty has the right to terminate the derivative obligations. As of December 31, 2016, the Company did not have any derivatives in a net liability position and has not posted any collateral related to these agreements.
(11) INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
The Company did not have any investments in unconsolidated joint ventures as of December 31, 2016 and 2015.
On June 5, 2014, the Company dissolved its joint venture arrangement with its partner in MS Inland, an unconsolidated joint venture formed with a large state pension fund, through the acquisition of the six properties owned by the joint venture. The Company was the managing member of the venture and earned fees for providing property management and leasing services. The Company had the ability to exercise significant influence, but did not have financial or operating control over the joint venture, and as a result, the Company accounted for its investment pursuant to the equity method of accounting.

86

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

Through December 1, 2014, Oak Property & Casualty LLC (the Captive) was an insurance association owned by the Company and three other unaffiliated parties that was formed to insure/reimburse the members’ deductible obligations for property and general liability insurance claims subject to certain limitations. The Captive was determined to be a VIE, but because the Company did not hold the power to most significantly impact the Captive’s performance, the Company was not considered the primary beneficiary. Accordingly, the Company’s investment in the Captive was accounted for pursuant to the equity method of accounting. The Company’s risk of loss was limited to its investment and it was not required to fund additional capital to the Captive. Effective December 1, 2014, the Company terminated its participation in the Captive and established a new wholly-owned captive insurance company. See Note 17 to the consolidated financial statements for further details.
Under the equity method of accounting, the Company’s net equity investment in each unconsolidated joint venture was reflected in the accompanying consolidated balance sheets and its share of net income or loss from each unconsolidated joint venture was reflected in the accompanying consolidated statements of operations and other comprehensive income. Distributions that were related to income from operations were included as operating activities and distributions that were related to capital transactions were included as investing activities in the accompanying consolidated statements of cash flows.
Combined condensed financial information of the Company’s unconsolidated joint ventures (at 100%) for the year ended December 31, 2014, the period attributable to the Company’s ownership, is summarized as follows:
 
Other Joint Ventures (a)
 
2014
Revenues
 
Property related income
$
11,853

Other income
6,679

Total revenues
18,532

 
 
Expenses
 
Operating expenses
1,660

Real estate taxes
2,339

Depreciation and amortization
3,948

General and administrative expenses
268

Interest expense
3,028

Other expense, net
11,921

Total expenses
23,164

 
 
Loss from continuing operations
(4,632
)
Net loss
$
(4,632
)
(a)
On June 5, 2014, the Company dissolved its joint venture arrangement with its partner in MS Inland. In addition, effective December 1, 2014, the Company terminated its investment in the Captive.
Profits, Losses and Capital Activity
The following table summarizes the Company’s share of net income (loss) as well as net cash distributions from (contributions to) each unconsolidated joint venture for the year ended December 31, 2014:
 
 
The Company’s Share of
Net Income (Loss)
 
Net Cash Distributions from/(Contributions to) Joint Ventures
 
Fees Earned by
the Company
Joint Venture
 
2014
 
2014
 
2014
MS Inland (a)
 
$
241

 
$
1,360

 
$
338

Captive (b)
 
(2,444
)
 
(25
)
 
—

 
 
$
(2,203
)
 
$
1,335

 
$
338

(a)
On June 5, 2014, the Company dissolved its joint venture arrangement with its partner in MS Inland.
(b)
Effective December 1, 2014, the Company terminated its participation in the Captive.

87

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

In addition to the Company’s share of net income (loss) for each unconsolidated joint venture, amortization of basis differences is recorded within “Equity in loss of unconsolidated joint ventures, net” in the accompanying consolidated statements of operations and other comprehensive income. Such basis differences resulted from the differences between the Company’s net book values based on historical cost and the fair values of investment properties contributed to its unconsolidated joint ventures and are amortized over the depreciable lives of the joint ventures’ real estate assets and liabilities. The Company recorded amortization of $115, which was accretive to net income, related to these differences during the year ended December 31, 2014.
The Company did not have any unconsolidated joint ventures as of December 31, 2016 and 2015. When the Company holds investments in unconsolidated joint ventures, they are reviewed for potential impairment, in addition to impairment evaluations of the individual assets underlying the investments, each reporting period or whenever events or changes in circumstances warrant such an evaluation. To determine whether impairment, if any, is other-than-temporary, the Company considers whether it has the ability and intent to hold the investment until its carrying value is fully recovered. The Company did not record any impairment charges to its investments in unconsolidated joint ventures during the year ended December 31, 2014.
Acquisitions
On June 5, 2014, the Company dissolved its joint venture arrangement with its partner in MS Inland by acquiring its partner’s 80% ownership interest in the six properties owned by the joint venture (see Note 3 to the consolidated financial statements). The six properties had, at acquisition, a combined fair value of $292,500, with the Company’s partner’s interest valued at $234,000. The Company paid total cash consideration of approximately $120,600 before transaction costs and prorations and after assumption of the joint venture’s in-place mortgage financing on those properties of $141,698 at a weighted average interest rate of 4.79%. The Company accounted for this transaction as a business combination achieved in stages and recognized a gain on change in control of investment properties of $24,158 as a result of remeasuring the carrying value of its 20% interest in the six acquired properties to fair value. The following table summarizes the calculation of the gain on change in control of investment properties recognized in conjunction with the transaction discussed above:
Fair value of the net assets acquired at 100%
 
$
150,802

 
 
 
Fair value of the net assets acquired at 20%
 
$
30,160

Less: Carrying value of the Company’s previous investment in the six properties acquired on June 5, 2014
 
6,002

Gain on change in control of investment properties
 
$
24,158

(12) EQUITY
On March 7, 2013, the Company established an at-the-market (ATM) equity program under which it sold 5,547 shares of its Class A common stock during the year ended December 31, 2013. The shares were issued at a weighted average price per share of $15.29 for proceeds of $83,527, net of commissions and offering costs. No shares were issued during the years ended December 31, 2014 and 2015 and the 2013 ATM equity program expired in November 2015.
On December 21, 2015, the Company entered into a new ATM equity program under which it may issue and sell shares of its Class A common stock, having an aggregate offering price of up to $250,000, from time to time. Actual sales may depend on a variety of factors, including, among others, market conditions and the trading price of the Company’s Class A common stock. Any net proceeds are expected to be used for general corporate purposes, which may include the funding of acquisitions and redevelopment activities and the repayment of debt, including the Company’s Unsecured Credit Facility. The Company did not sell any shares under its ATM equity program during the years ended December 31, 2016 and 2015. As of December 31, 2016, the Company had Class A common shares having an aggregate offering price of up to $250,000 remaining available for sale under its ATM equity program.
On December 15, 2015, the Company’s board of directors authorized a common stock repurchase program under which the Company may repurchase, from time to time, up to a maximum of $250,000 of shares of its Class A common stock. The shares may be repurchased in the open market or in privately negotiated transactions and are canceled upon repurchase. The timing and actual number of shares repurchased will depend on a variety of factors, including price in absolute terms and in relation to the value of the Company’s assets, corporate and regulatory requirements, market conditions and other corporate liquidity requirements and priorities. The common stock repurchase program may be suspended or terminated at any time without prior notice. The

88

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

Company did not repurchase any shares during the year ended December 31, 2015. During the year ended December 31, 2016, the Company repurchased 591 shares at an average price per share of $14.93 for a total of $8,841. As of December 31, 2016, $241,159 remained available under the repurchase program.
(13) EARNINGS PER SHARE
The following table summarizes the components used in the calculation of basic and diluted earnings per share (EPS):
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
 
Numerator:
 

 

 
 
Income from continuing operations
$
37,110


$
3,832


$
597

 
Gain on sales of investment properties
129,707


121,792


42,196

 
Net income from continuing operations attributable to noncontrolling interest
—

 
(528
)
 
—

 
Preferred stock dividends
(9,450
)
 
(9,450
)
 
(9,450
)
 
Income from continuing operations attributable to common shareholders
157,367


115,646


33,343

 
Income from discontinued operations
—

 
—


507

 
Net income attributable to common shareholders
157,367


115,646


33,850

 
Distributions paid on unvested restricted shares
(445
)
 
(481
)

(225
)
 
Net income attributable to common shareholders excluding amounts
attributable to unvested restricted shares
$
156,922


$
115,165


$
33,625

 





 
 
Denominator:
 

 
 
 
 
Denominator for earnings per common share – basic:
 
 
 
 
 
 
Weighted average number of common shares outstanding
236,651

(a)
236,380

(b)
236,184

(c)
Effect of dilutive securities:
 
 
 
 
 
 
Stock options
2

(d)
2

(d)
3

(d)
RSUs
298

(e)
—

(f)
—

 
Denominator for earnings per common share – diluted:






 
 
Weighted average number of common and common equivalent
shares outstanding
236,951

 
236,382

 
236,187

 
(a)
Excludes 542 shares of unvested restricted common stock, which equate to 637 shares on a weighted average basis for the year ended December 31, 2016. These shares will continue to be excluded from the computation of basic EPS until contingencies are resolved and the shares are released.
(b)
Excludes 788 shares of unvested restricted common stock, which equate to 768 shares on a weighted average basis for the year ended December 31, 2015. These shares were excluded from the computation of basic EPS as the contingencies remained and the shares had not been released as of the end of the reporting period.
(c)
Excludes 396 shares of unvested restricted common stock, which equate to 364 shares on a weighted average basis for the year ended December 31, 2014. These shares were excluded from the computation of basic EPS as the contingencies remained and the shares had not been released as of the end of the reporting period.
(d)
There were outstanding options to purchase 41, 53 and 64 shares of common stock as of December 31, 2016, 2015 and 2014, respectively, at a weighted average exercise price of $19.25, $19.39 and $19.32, respectively. Of these totals, outstanding options to purchase 35, 45 and 54 shares of common stock as of December 31, 2016, 2015 and 2014, respectively, at a weighted average exercise price of $20.55, $20.74 and $20.72, respectively, have been excluded from the common shares used in calculating diluted earnings per share as including them would be anti-dilutive.
(e)
There were 391 RSUs eligible for future conversion following the performance period as of December 31, 2016 (see Note 5 to the consolidated financial statements), which equate to 367 RSUs on a weighted average basis for the year ended December 31, 2016. These contingently issuable shares are included in diluted EPS based on the weighted average number of shares that would be outstanding during the period, if any, assuming the end of the reporting period was the end of the contingency periods.
(f)
There were 174 RSUs eligible for future conversion following the performance period as of December 31, 2015, which equate to 101 RSUs on a weighted average basis for the year ended December 31, 2015. These contingently issuable shares are included in diluted EPS based on the weighted average number of shares that would be outstanding during the period, if any, assuming the end of the reporting period was the end of the contingency period. Assuming December 31, 2015 was the end of the contingency period, none of these contingently issuable shares would have been outstanding.

89

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

(14) INCOME TAXES
The Company has elected to be taxed as a REIT under the Code. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement to annually distribute to its shareholders at least 90% of its REIT taxable income, determined without regard to the dividends paid deduction and excluding net capital gains. The Company intends to continue to adhere to these requirements and to maintain its REIT status. As a REIT, the Company is entitled to a deduction for some or all of the distributions it pays to shareholders. Accordingly, the Company is generally subject to U.S. federal income taxes on any taxable income that is not currently distributed to its shareholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to U.S. federal income taxes and may not be able to qualify as a REIT until the fifth subsequent taxable year.
Notwithstanding the Company’s qualification as a REIT, the Company may be subject to certain state and local taxes on its income or properties. In addition, the Company’s consolidated financial statements include the operations of one wholly-owned subsidiary that has jointly elected to be treated as a TRS and is subject to U.S. federal, state and local income taxes at regular corporate tax rates. The Company did not record any income tax expense related to the TRS for the years ended December 31, 2016, 2015 and 2014. As a REIT, the Company may also be subject to certain U.S. federal excise taxes if it engages in certain types of transactions.
Deferred income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted rates in effect for the year in which these temporary differences are expected to reverse. Deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on consideration of available evidence, including future reversal of existing taxable temporary differences, the magnitude and timing of future projected taxable income and tax planning strategies. The Company believes that it is not more likely than not that a portion of its net deferred tax asset will be realized in future periods and therefore, has recorded a valuation allowance for a portion of the balance, resulting in no effect on the consolidated financial statements.
The Company’s deferred tax assets and liabilities as of December 31, 2016 and 2015 were as follows:
 
 
2016
 
2015
Deferred tax assets:
 
 
 
 
Basis difference in properties
 
$
—

 
$
1,109

Capital loss carryforward
 
9,628

 
9,885

Net operating loss carryforward
 
10,677

 
12,543

Other
 
870

 
81

Gross deferred tax assets
 
21,175

 
23,618

Less: valuation allowance
 
(21,175
)
 
(23,618
)
Total deferred tax assets
 
—

 
—

Deferred tax liabilities:
 
 
 
 
Other
 
—

 
—

Net deferred tax assets
 
$
—

 
$
—

The Company’s deferred tax assets and liabilities result from the activities of the TRS. As of December 31, 2016, the TRS had a capital loss carryforward and a federal net operating loss carryforward of $27,510 and $30,507, respectively, which if not utilized, will begin to expire in 2019 and 2031, respectively.
Differences between net income from the consolidated statements of operations and other comprehensive income and the Company’s taxable income primarily relate to the recognition of sales of investment properties, impairment charges recorded on investment properties and the timing of both revenue recognition and investment property depreciation and amortization.

90

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

The following table reconciles the Company’s net income to REIT taxable income before the dividends paid deduction for the years ended December 31, 2016, 2015 and 2014:
 
 
2016
 
2015
 
2014
Net income attributable to the Company
 
$
166,817

 
$
125,096

 
$
43,300

Book/tax differences
 
(50,950
)
 
2,344

 
71,910

REIT taxable income subject to 90% dividend requirement
 
$
115,867

 
$
127,440

 
$
115,210

The Company’s dividends paid deduction for the years ended December 31, 2016, 2015 and 2014 is summarized below:
 
 
2016
 
2015
 
2014
Cash distributions paid
 
$
166,285

 
$
166,064

 
$
166,025

Less: non-dividend distributions
 
(50,418
)
 
(38,624
)
 
(50,815
)
Total dividends paid deduction attributable to earnings and profits
 
$
115,867

 
$
127,440

 
$
115,210

A summary of the tax characterization of the distributions paid per share to shareholders of the Company’s preferred stock and common stock for the years ended December 31, 2016, 2015 and 2014 follows:
 
 
2016
 
2015
 
2014
Preferred stock
 
 
 
 
 
 
Ordinary dividends
 
$
1.75

 
$
1.75

 
$
1.75

Non-dividend distributions
 
—

 
—

 
—

Total distributions per share
 
$
1.75

 
$
1.75

 
$
1.75

 
 
 
 
 
 
 
Common stock
 
 
 
 
 
 
Ordinary dividends
 
$
0.45

 
$
0.50

 
$
0.45

Non-dividend distributions
 
0.21

 
0.16

 
0.21

Total distributions per share
 
$
0.66

 
$
0.66

 
$
0.66

The Company records a benefit for uncertain income tax positions if the result of a tax position meets a “more likely than not” recognition threshold. No liabilities have been recorded as of December 31, 2016 or 2015 as a result of this provision. The Company expects no significant increases or decreases in unrecognized tax benefits due to changes in tax positions within one year of December 31, 2016. Returns for the calendar years 2013 through 2016 remain subject to examination by federal and various state tax jurisdictions.
(15) PROVISION FOR IMPAIRMENT OF INVESTMENT PROPERTIES
As of December 31, 2016, 2015 and 2014, the Company identified indicators of impairment at certain of its properties. Such indicators included a low occupancy rate, difficulty in leasing space and related cost of re-leasing, financially troubled tenants or reduced anticipated holding periods. The following table summarizes the results of these analyses as of December 31, 2016, 2015 and 2014:
 
December 31,
 
 
2016
 
2015
 
2014
 
Number of properties for which indicators of impairment were identified
7

 
3

(a)
8

(b)
Less: number of properties for which an impairment charge was recorded
2

 
—

 
3

 
Less: number of properties that were held for sale as of the date the analysis was performed
for which indicators of impairment were identified but no impairment charge was recorded
2

 
—

 
1

 
Remaining properties for which indicators of impairment were identified but
no impairment charge was considered necessary
3

 
3

 
4

 
 
 
 
 
 
 
 
Weighted average percentage by which the projected undiscounted cash flows exceeded
its respective carrying value for each of the remaining properties (c)
21
%
 
42
%
 
48
%
 
(a)
Includes one property which has subsequently been sold as of December 31, 2016.

91

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

(b)
Includes seven properties which have subsequently been sold as of December 31, 2016.
(c)
Based upon the estimated holding period for each asset where an undiscounted cash flow analysis was performed.
The Company recorded the following investment property impairment charges during the year ended December 31, 2016:
Property Name
 
Property Type
 
Impairment Date
 
Square
Footage
 
Provision for
Impairment of
Investment
Properties
South Billings Center (a)
 
Development
 
Various (a)
 
—

 
$
3,007

Mid-Hudson Center (b)
 
Multi-tenant retail
 
June 30, 2016
 
235,600

 
4,142

Saucon Valley Square (c)
 
Multi-tenant retail
 
September 30, 2016
 
80,700

 
4,742

Crown Theater (d)
 
Single-user retail
 
December 31, 2016
 
74,200

 
5,985

Rite Aid Store (Eckerd), Culver Rd. (e)
 
Single-user retail
 
December 31, 2016
 
10,900

 
2,500

 
 
 
 
 
 
 
 
$
20,376

 
 
Estimated fair value of impaired properties as of impairment date
$
40,850

(a)
An impairment charge was recorded on March 31, 2016 based upon the terms and conditions of an executed sales contract, which was subsequently terminated. The property, which was not under active development, was sold on December 16, 2016 and additional impairment was recognized pursuant to the terms and conditions of an executed sales contract.
(b)
The Company recorded an impairment charge based upon the terms and conditions of an executed sales contract. This property was classified as held for sale as of June 30, 2016 and was sold on July 21, 2016.
(c)
The Company recorded an impairment charge driven by a change in the estimated holding period for the property.
(d)
The Company recorded an impairment charge upon re-evaluating the strategic alternatives for the property.
(e)
The Company recorded an impairment charge based upon the terms and conditions of a bona fide purchase offer. This property was sold on January 27, 2017.
The Company recorded the following investment property impairment charges during the year ended December 31, 2015:
Property Name
 
Property Type
 
Impairment Date
 
Square
Footage
 
Provision for
Impairment of
Investment
Properties
Massillon Commons (a)
 
Multi-tenant retail
 
June 4, 2015
 
245,900

 
$
2,289

Traveler’s Office Building (a)
 
Single-user office
 
June 30, 2015
 
50,800

 
1,655

Shaw’s Supermarket (a)
 
Single-user retail
 
August 6, 2015
 
65,700

 
169

Southgate Plaza (a)
 
Multi-tenant retail
 
December 18, 2015
 
86,100

 
2,484

Bellevue Mall (a)
 
Development
 
December 31, 2015
 
369,300

 
13,340

 
 
 
 
 
 
 
 
$
19,937

 
 
Estimated fair value of impaired properties as of impairment date
$
43,720

(a)
The Company recorded impairment charges based upon the terms and conditions of an executed sales contract for the respective properties, which were sold during 2015.

92

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

The Company recorded the following investment property impairment charges during the year ended December 31, 2014:
Property Name
 
Property Type
 
Impairment Date
 
Square
Footage
 
Provision for
Impairment of
Investment
Properties
Midtown Center (a)
 
Multi-tenant retail
 
March 31, 2014
 
408,500

 
$
394

Gloucester Town Center (b)
 
Multi-tenant retail
 
Various (b)
 
107,200

 
6,148

Boston Commons (a)
 
Multi-tenant retail
 
August 19, 2014
 
103,400

 
453

Four Peaks Plaza (a)
 
Multi-tenant retail
 
August 27, 2014
 
140,400

 
4,154

Shaw’s Supermarket (c)
 
Single-user retail
 
September 30, 2014
 
65,700

 
6,230

The Gateway (d)
 
Multi-tenant retail
 
September 30, 2014
 
623,200

 
42,999

Newburgh Crossing (a)
 
Multi-tenant retail
 
December 22, 2014
 
62,900

 
1,139

Hartford Insurance Building (e)
 
Single-user office
 
December 31, 2014
 
97,400

 
5,782

Citizen’s Property Insurance Building (e)
 
Single-user office
 
December 31, 2014
 
59,800

 
4,341

Aon Hewitt East Campus (f)
 
Single-user office
 
December 31, 2014
 
343,000

 
563

 
 
 
 
 
 
Total

 
$
72,203

 
 
Estimated fair value of impaired properties as of impairment date
$
190,953

(a)
The Company recorded impairment charges based upon the terms and conditions of an executed sales contract for each of the respective properties, which were sold during 2014.
(b)
An impairment charge was recorded on June 30, 2014 based upon the terms of a bona fide purchase offer and additional impairment was recognized on September 30, 2014 pursuant to the terms and conditions of an executed sales contract.
(c)
The Company recorded an impairment charge upon re-evaluating the strategic alternatives for the property.
(d)
The Company recorded an impairment charge as a result of a combination of factors including the expected impact on future operating results stemming from a re-evaluation of the anticipated positioning of, and tenant population at, the property and a re-evaluation of other potential strategic alternatives for the property. This property was sold on February 1, 2016.
(e)
The Company recorded impairment charges driven by changes in the estimated holding periods for the properties.
(f)
The Company recorded an impairment charge based upon the terms and conditions of an executed sales contract. This property was classified as held for sale as of December 31, 2014 and was sold on January 20, 2015.
The Company can provide no assurance that material impairment charges with respect to its investment properties will not occur in future periods.
(16) FAIR VALUE MEASUREMENTS
Fair Value of Financial Instruments
The following table presents the carrying value and estimated fair value of the Company’s financial instruments:
 
December 31, 2016
 
December 31, 2015
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
Financial assets:
 
 
 
 
 
 
 
Derivative asset
$
743

 
$
743

 
$
—

 
$
—

Financial liabilities:
 
 
 
 
 
 
 
Mortgages payable, net
$
769,184

 
$
833,210

 
$
1,123,136

 
$
1,213,620

Unsecured notes payable, net
$
695,143

 
$
679,212

 
$
495,576

 
$
486,701

Unsecured term loans, net
$
447,598

 
$
450,421

 
$
447,526

 
$
450,000

Unsecured revolving line of credit
$
86,000

 
$
86,130

 
$
100,000

 
$
100,000

Derivative liability
$
—

 
$
—

 
$
85

 
$
85

The carrying value of the derivative asset is included in “Other assets, net” and the carrying value of the derivative liability is included in “Other liabilities” in the accompanying consolidated balance sheets.

93

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

Fair Value Hierarchy
A fair value measurement is based on the assumptions that market participants would use in pricing an asset or liability in an orderly transaction. The hierarchy for inputs used in measuring fair value are as follows:
•
Level 1 Inputs — Unadjusted quoted prices in active markets for identical assets or liabilities.
•
Level 2 Inputs — Observable inputs other than quoted prices in active markets for identical assets and liabilities.
•
Level 3 Inputs — Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable.
When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.
Recurring Fair Value Measurements
The following table presents the Company’s financial instruments, which are measured at fair value on a recurring basis, by the level in the fair value hierarchy within which those measurements fall. Methods and assumptions used to estimate the fair value of these instruments are described after the table.
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
 
Total
December 31, 2016
 
 
 
 
 
 
 
Derivative asset
$
—

 
$
743

 
$
—

 
$
743

 
 
 
 
 
 
 
 
December 31, 2015
 
 
 
 
 
 
 
Derivative liability
$
—

 
$
85

 
$
—

 
$
85

Derivatives:  The fair value of the derivative asset and derivative liability are determined using a discounted cash flow analysis on the expected future cash flows of each derivative. This analysis utilizes observable market data including forward yield curves and implied volatilities to determine the market’s expectation of the future cash flows of the variable component. The fixed and variable components of the derivative are then discounted using calculated discount factors developed based on the LIBOR swap rate and are aggregated to arrive at a single valuation for the period. The Company also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of December 31, 2016 and 2015, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation. As a result, the Company has determined that its derivative valuations in their entirety are classified within Level 2 of the fair value hierarchy. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered any applicable credit enhancements. The Company’s derivative instruments are further described in Note 10 to the consolidated financial statements.

94

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

Nonrecurring Fair Value Measurements
The following table presents the Company’s assets measured at fair value on a nonrecurring basis as of December 31, 2016 aggregated by the level within the fair value hierarchy in which those measurements fall. The table includes information related to properties remeasured to fair value during the year ended December 31, 2016, except for those properties sold prior to December 31, 2016. Methods and assumptions used to estimate the fair value of these assets are described after the table.
 
Fair Value
 
 
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Provision for
Impairment (a)
December 31, 2016
 
 
 
 
 
 
 
 
 
Investment properties
$
—

 
$
500

(b)
$
10,600

(c)
$
11,100

 
$
13,227

(a)
Excludes impairment charges recorded on investment properties sold prior to December 31, 2016.
(b)
Represents the fair value of the Company’s Rite Aid Store (Eckerd), Culver Rd. investment property. The estimated fair value of Rite Aid Store (Eckerd), Culver Rd. was based upon the expected sales price from a bona fide purchase offer and determined to be a Level 2 input.
(c)
Represents the fair values of the Company’s Crown Theater and Saucon Valley Square investment properties. The estimated fair values of Crown Theater and Saucon Valley Square of $4,000 and $6,600, respectively, were determined using the income approach. The income approach involves discounting the estimated income stream and reversion (presumed sale) value of a property over an estimated holding period to a present value at a risk-adjusted rate. Discount rates, growth assumptions and terminal capitalization rates utilized in this approach are derived from property-specific information, market transactions and other financial and industry data. The terminal capitalization rate and discount rate are significant inputs to this valuation. The following were the key Level 3 inputs used in estimating the fair values of Crown Theater as of December 31, 2016 and Saucon Valley Square as of September 30, 2016, the date the assets were measured at fair value:
 
 
2016
 
 
Low
 
High
Rental growth rates
 
Varies (i)
 
Varies (i)
Operating expense growth rates
 
3.10%
 
18.02%
Discount rates
 
9.35%
 
10.00%
Terminal capitalization rates
 
8.35%
 
9.50%
(i)
Since cash flow models are established at the tenant level, projected rental revenue growth rates fluctuate over the course of the estimated holding period based upon the timing of lease rollover, amount of available space and other property and space-specific factors.
The Company did not have any assets measured at fair value on a nonrecurring basis as of December 31, 2015.

95

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

Fair Value Disclosures
The following table presents the Company’s financial liabilities, which are measured at fair value for disclosure purposes, by the level in the fair value hierarchy within which those measurements fall. Methods and assumptions used to estimate the fair value of these instruments are described after the table.
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
 
Total
December 31, 2016
 
 
 
 
 
 
 
Mortgages payable, net
$
—

 
$
—

 
$
833,210

 
$
833,210

Unsecured notes payable, net
$
234,700

 
$
—

 
$
444,512

 
$
679,212

Unsecured term loans, net
$
—

 
$
—

 
$
450,421

 
$
450,421

Unsecured revolving line of credit
$
—

 
$
—

 
$
86,130

 
$
86,130

 
 
 
 
 
 
 
 
December 31, 2015
 
 
 
 
 
 
 
Mortgages payable, net
$
—

 
$
—

 
$
1,213,620

 
$
1,213,620

Unsecured notes payable, net
$
239,482

 
$
—

 
$
247,219

 
$
486,701

Unsecured term loan, net
$
—

 
$
—

 
$
450,000

 
$
450,000

Unsecured revolving line of credit
$
—

 
$
—

 
$
100,000

 
$
100,000

Mortgages payable, net:  The Company estimates the fair value of its mortgages payable by discounting the anticipated future cash flows of each instrument at rates currently offered to the Company by its lenders for similar debt instruments of comparable maturities. The rates used are not directly observable in the marketplace and judgment is used in determining the appropriate rate for each of the Company’s individual mortgages payable based upon the specific terms of the agreement, including the term to maturity, the quality and nature of the underlying property and its leverage ratio. The rates used range from 2.9% to 4.6% and 2.2% to 6.0% as of December 31, 2016 and 2015, respectively.
Unsecured notes payable, net: The quoted market price as of December 31, 2016 was used to value the Notes Due 2025. The Company estimates the fair value of its Notes Due 2021, 2024, 2026 and 2028 by discounting the future cash flows at rates currently offered to the Company by its lenders for similar debt instruments of comparable maturities. The rates used are not directly observable in the marketplace and judgment is used in determining the appropriate rates. The weighted average rates used were 4.48% and 4.64% as of December 31, 2016 and 2015, respectively.
Unsecured term loans, net:  The Company estimates the fair value of its unsecured term loans, net by discounting the anticipated future cash flows related to the credit spreads at rates currently offered to the Company by its lenders for similar instruments of comparable maturities. The rates used are not directly observable in the marketplace and judgment is used in determining the appropriate rates. The weighted average rate used to discount the credit spreads was 1.30% as of December 31, 2016 and 2015.
Unsecured revolving line of credit: The Company estimates the fair value of its unsecured revolving line of credit by discounting the anticipated future cash flows related to the credit spreads at rates currently offered to the Company by its lenders for similar facilities of comparable maturity. The rates used are not directly observable in the marketplace and judgment is used in determining the appropriate rates. The rates used to discount the credit spreads were 1.30% and 1.35% as of December 31, 2016 and 2015, respectively.
There were no transfers between the levels of the fair value hierarchy during the years ended December 31, 2016 and 2015.
(17) COMMITMENTS AND CONTINGENCIES
On December 1, 2014, the Company formed a wholly-owned captive insurance company, Birch Property and Casualty LLC (Birch), which insures the Company’s first layer of property and general liability insurance claims subject to certain limitations. The Company capitalized Birch in accordance with the applicable regulatory requirements and Birch established annual premiums based on projections derived from the past loss experience of the Company’s properties.
As of December 31, 2016, the Company had letter(s) of credit outstanding totaling $12,296 which serve as collateral for certain capital improvements and performance obligations on certain redevelopment projects, which will be satisfied upon completion of the projects, and reduced the available borrowings on its unsecured revolving line of credit.

96

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

As of December 31, 2016, the Company had active redevelopments at Reisterstown Road Plaza located in Baltimore, Maryland and Towson Circle located in Towson, Maryland. The Company estimates that it will incur net costs of approximately $12,000 to $13,000 related to the Reisterstown Road Plaza redevelopment and approximately $33,000 to $35,000 related to the Towson Circle redevelopment, of which $1,417 and $10,053, respectively, has been incurred as of December 31, 2016.
(18) LITIGATION
The Company is subject, from time to time, to various legal proceedings and claims that arise in the ordinary course of business. While the resolution of such matters cannot be predicted with certainty, management believes, based on currently available information, that the final outcome of such matters will not have a material effect on the consolidated financial statements of the Company.
(19) SUBSEQUENT EVENTS
Subsequent to December 31, 2016, the Company:
•
defeased the IW JV portfolio of mortgages payable, which had an outstanding principal balance of $379,435 and an interest rate of 7.50%, and incurred a defeasance premium of $60,198. See Note 7 to the consolidated financial statements for further details;
•
received funding in the amount of $200,000 on the Term Loan Due 2023. See Note 9 to the consolidated financial statements for further details;
•
entered into two agreements to swap a total of $200,000 of LIBOR-based variable rate debt to a fixed interest rate of 1.2628% through November 22, 2018;
•
closed on the acquisition of Main Street Promenade, a 181,600 square foot multi-tenant retail property located in Naperville, Illinois, for a gross purchase price of $88,000 through a consolidated VIE to facilitate a potential 1031 Exchange;
•
closed on the disposition of Rite Aid Store (Eckerd), Culver Rd., a 10,900 square foot single-user retail operating property located in Rochester, New York, for a sales price of $500 with no anticipated gain on sale or additional impairment due to previously recognized impairment charges;
•
granted 88 restricted shares at a grant date fair value of $15.34 per share and 253 RSUs at a grant date fair value of $15.52 per RSU to the Company’s executives in conjunction with its long-term equity compensation plan. The restricted shares will vest over three years and the RSUs granted are subject to a three-year performance period. Refer to Note 5 to the consolidated financial statements for additional details regarding the terms of the RSUs;
•
closed on a transaction whereby the Company received the fee interest in approximately 50 acres of land at Boulevard at the Capital Centre, an existing wholly-owned multi-tenant retail operating property located in Largo, Maryland. The property was previously subject to a ground lease with a third party for approximately 70 acres. In conjunction with this transaction, the Company paid consideration of $1,939 and agreed to shorten the term of the ground lease related to the remaining land;
•
declared the cash dividend for the first quarter of 2017 for its 7.00% Series A cumulative redeemable preferred stock. The dividend of $0.4375 per preferred share will be paid on March 31, 2017 to preferred shareholders of record at the close of business on March 20, 2017; and
•
declared the cash dividend for the first quarter of 2017 of $0.165625 per share on its outstanding Class A common stock, which will be paid on April 10, 2017 to Class A common shareholders of record at the close of business on March 27, 2017.

97

RETAIL PROPERTIES OF AMERICA, INC.
Notes to Consolidated Financial Statements

(20) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table sets forth selected quarterly financial data for the Company:
 
 
2016
 
 
Dec 31
 
Sep 30
 
Jun 30
 
Mar 31
Total revenues
 
$
142,752

 
$
144,526

 
$
147,226

 
$
148,639

 
 
 
 
 
 
 
 
 
Net income
 
$
18,295

 
$
72,494

 
$
28,602

 
$
47,426

 
 
 
 
 
 
 
 
 
Net income attributable to common shareholders
 
$
15,932

 
$
70,132

 
$
26,239

 
$
45,064

 
 
 
 
 
 
 
 
 
Net income per common share attributable to common
shareholders – basic and diluted
 
$
0.07

 
$
0.30

 
$
0.11

 
$
0.19

 
 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding – basic
 
236,528

 
236,783

 
236,716

 
236,578

 
 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding – diluted
 
236,852

 
237,108

 
236,902

 
236,680

 
 
 
 
 
 
 
 
 
 
 
2015
 
 
Dec 31
 
Sep 30
 
Jun 30
 
Mar 31
Total revenues
 
$
148,920

 
$
150,955

 
$
150,888

 
$
153,197

 
 
 
 
 
 
 
 
 
Net income
 
$
3,535

 
$
78,329

 
$
30,684

 
$
13,076

 
 
 
 
 
 
 
 
 
Net income attributable to common shareholders
 
$
644

 
$
75,967

 
$
28,321

 
$
10,714

 
 
 
 
 
 
 
 
 
Net income per common share attributable to common
shareholders – basic and diluted
 
$
—

 
$
0.32

 
$
0.12

 
$
0.05

 
 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding – basic
 
236,477

 
236,439

 
236,354

 
236,250

 
 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding – diluted
 
236,479

 
236,553

 
236,356

 
236,253



98

RETAIL PROPERTIES OF AMERICA, INC.

Schedule II
Valuation and Qualifying Accounts
For the Years Ended December 31, 2016, 2015 and 2014
(in thousands)

 
 
Balance at
beginning
of year
 
Charged to
costs and
expenses
 
Write-offs
 
Balance at
end of year
Year ended December 31, 2016
 
 
 
 
 
 
 
 
Allowance for doubtful accounts
 
$
7,910

 
2,466

 
(3,490
)
 
$
6,886

Tax valuation allowance
 
$
23,618

 
(2,443
)
 
—

 
$
21,175

 
 
 
 
 
 
 
 
 
Year ended December 31, 2015
 
 
 
 
 
 
 
 
Allowance for doubtful accounts
 
$
7,497

 
3,069

 
(2,656
)
 
$
7,910

Tax valuation allowance
 
$
20,355

 
3,263

 
—

 
$
23,618

 
 
 
 
 
 
 
 
 
Year ended December 31, 2014
 
 
 
 
 
 
 
 
Allowance for doubtful accounts
 
$
8,197

 
2,689

 
(3,389
)
 
$
7,497

Tax valuation allowance
 
$
18,631

 
1,724

 
—

 
$
20,355



99

RETAIL PROPERTIES OF AMERICA, INC.

Schedule III
Real Estate and Accumulated Depreciation
December 31, 2016
(in thousands)

 
 
 
 
Initial Cost (A)
 
 
 
Gross amount carried at end of period
 
 
 
 
 
 
Property Name
 
Encumbrance
 
Land
 
Buildings and Improvements
 
Adjustments to Basis (C)
 
Land and Improvements
 
Buildings and Improvements (D)
 
Total (B), (D)
 
Accumulated Depreciation (E)
 
Date Constructed
 
Date Acquired
23rd Street Plaza
 
$
2,823

 
$
1,300

 
$
5,319

 
$
900

 
$
1,300

 
$
6,219

 
$
7,519

 
$
2,578

 
2003
 
12/04
Panama City, FL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ashland & Roosevelt
 
973

 
13,850

 
21,052

 
642

 
13,850

 
21,694

 
35,544

 
9,110

 
2002
 
05/05
Chicago, IL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Avondale Plaza
 
—

 
4,573

 
9,497

 
36

 
4,573

 
9,533

 
14,106

 
779

 
2005
 
11/14
Redmond, WA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Azalea Square I
 
11,127

 
6,375

 
21,304

 
1,793

 
6,375

 
23,097

 
29,472

 
10,703

 
2004
 
10/04
Summerville, SC
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Azalea Square III
 
—

 
3,280

 
10,348

 
90

 
3,280

 
10,438

 
13,718

 
3,529

 
2007
 
10/07
Summerville, SC
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bed Bath & Beyond Plaza
 
8,355

 
10,350

 
18,367

 
692

 
10,350

 
19,059

 
29,409

 
8,561

 
2004
 
10/04
Miami, FL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bed Bath & Beyond Plaza
 
—

 
4,530

 
11,901

 
313

 
4,530

 
12,214

 
16,744

 
4,979

 
2000-2002
 
07/05
Westbury, NY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Boulevard at the Capital Centre
 
—

 
—

 
114,703

 
(28,975
)
 
—

 
85,728

 
85,728

 
28,916

 
2004
 
09/04
Largo, MD
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Boulevard Plaza
 
2,197

 
4,170

 
12,038

 
3,564

 
4,170

 
15,602

 
19,772

 
6,729

 
1994
 
04/05
Pawtucket, RI
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Brickyard
 
—

 
45,300

 
26,657

 
7,546

 
45,300

 
34,203

 
79,503

 
13,589

 
1977/2004
 
04/05
Chicago, IL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Brown's Lane
 
4,585

 
2,600

 
12,005

 
1,254

 
2,600

 
13,259

 
15,859

 
5,632

 
1985
 
04/05
Middletown, RI
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cedar Park Town Center
 
—

 
23,923

 
13,829

 
368

 
23,923

 
14,197

 
38,120

 
1,254

 
2013
 
02/15
Cedar Park, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Central Texas Marketplace
 
—

 
13,000

 
47,559

 
8,757

 
13,000

 
56,316

 
69,316

 
19,721

 
2004
 
12/06
Waco, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Centre at Laurel
 
—

 
19,000

 
8,406

 
16,714

 
18,700

 
25,420

 
44,120

 
9,805

 
2005
 
02/06
Laurel, MD
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Chantilly Crossing
 
—

 
8,500

 
16,060

 
2,347

 
8,500

 
18,407

 
26,907

 
7,633

 
2004
 
05/05
Chantilly, VA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cinemark Seven Bridges
 
4,585

 
3,450

 
11,728

 
15

 
3,450

 
11,743

 
15,193

 
4,824

 
2000
 
03/05
Woodridge, IL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Clearlake Shores
 
—

 
1,775

 
7,026

 
1,182

 
1,775

 
8,208

 
9,983

 
3,467

 
2003-2004
 
04/05
Clear Lake, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


100

RETAIL PROPERTIES OF AMERICA, INC.

Schedule III
Real Estate and Accumulated Depreciation
December 31, 2016
(in thousands)

 
 
 
 
Initial Cost (A)
 
 
 
Gross amount carried at end of period
 
 
 
 
 
 
Property Name
 
Encumbrance
 
Land
 
Buildings and Improvements
 
Adjustments to Basis (C)
 
Land and Improvements
 
Buildings and Improvements (D)
 
Total (B), (D)
 
Accumulated Depreciation (E)
 
Date Constructed
 
Date Acquired
Coal Creek Marketplace
 
—

 
5,023

 
12,382

 
76

 
5,023

 
12,458

 
17,481

 
672

 
1991
 
08/15
Newcastle, WA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Colony Square
 
—

 
16,700

 
22,775

 
3,564

 
16,700

 
26,339

 
43,039

 
9,481

 
1997
 
05/06
Sugar Land, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Columns
 
11,479

 
5,830

 
19,439

 
415

 
5,830

 
19,854

 
25,684

 
8,858

 
2004
 
8/04 &
Jackson, TN
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10/04
The Commons at Temecula
 
—

 
12,000

 
35,887

 
3,344

 
12,000

 
39,231

 
51,231

 
16,211

 
1999
 
04/05
Temecula, CA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Coppell Town Center
 
—

 
2,919

 
13,281

 
59

 
2,919

 
13,340

 
16,259

 
1,744

 
1999
 
10/13
Coppell, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Coram Plaza
 
12,992

 
10,200

 
26,178

 
3,091

 
10,200

 
29,269

 
39,469

 
12,854

 
2004
 
12/04
Coram, NY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corwest Plaza
 
13,985

 
6,900

 
23,851

 
2

 
6,900

 
23,853

 
30,753

 
11,409

 
1999-2003
 
01/04
New Britain, CT
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cottage Plaza
 
9,980

 
3,000

 
19,158

 
474

 
3,000

 
19,632

 
22,632

 
8,469

 
2004-2005
 
02/05
Pawtucket, RI
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cranberry Square
 
10,239

 
3,000

 
18,736

 
1,398

 
3,000

 
20,134

 
23,134

 
9,061

 
1996-1997
 
07/04
Cranberry Township, PA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Crown Theater
 
—

 
7,318

 
954

 
(5,481
)
 
2,707

 
84

 
2,791

 
—

 
2000
 
07/05
Hartford, CT
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cuyahoga Falls Market Center
 
3,387

 
3,350

 
11,083

 
581

 
3,350

 
11,664

 
15,014

 
5,006

 
1998
 
04/05
Cuyahoga Falls, OH
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CVS Pharmacy
 
—

 
750

 
1,958

 
—

 
750

 
1,958

 
2,708

 
831

 
1999
 
05/05
Lawton, OK
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cypress Mill Plaza
 
—

 
4,962

 
9,976

 
77

 
4,962

 
10,053

 
15,015

 
1,452

 
2004
 
10/13
Cypress, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Davis Towne Crossing
 
—

 
1,850

 
5,681

 
1,181

 
1,671

 
7,041

 
8,712

 
3,072

 
2003-2004
 
06/04
North Richland Hills, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Denton Crossing
 
25,322

 
6,000

 
43,434

 
12,889

 
6,000

 
56,323

 
62,323

 
24,358

 
2003-2004
 
10/04
Denton, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dorman Center I & II
 
19,906

 
17,025

 
29,478

 
1,057

 
17,025

 
30,535

 
47,560

 
14,747

 
2003-2004
 
3/04 & 7/04
Spartanburg, SC
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Downtown Crown
 
—

 
43,367

 
110,785

 
1,940

 
43,367

 
112,725

 
156,092

 
8,432

 
2014
 
01/15
Gaithersburg, MD
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


101

RETAIL PROPERTIES OF AMERICA, INC.

Schedule III
Real Estate and Accumulated Depreciation
December 31, 2016
(in thousands)

 
 
 
 
Initial Cost (A)
 
 
 
Gross amount carried at end of period
 
 
 
 
 
 
Property Name
 
Encumbrance
 
Land
 
Buildings and Improvements
 
Adjustments to Basis (C)
 
Land and Improvements
 
Buildings and Improvements (D)
 
Total (B), (D)
 
Accumulated Depreciation (E)
 
Date Constructed
 
Date Acquired
East Stone Commons
 
—

 
2,900

 
28,714

 
(727
)
 
2,826

 
28,061

 
30,887

 
10,813

 
2005
 
06/06
Kingsport, TN
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Eastside
 
—

 
4,055

 
17,620

 
27

 
4,055

 
17,647

 
21,702

 
455

 
2008
 
06/16
Richardson, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Eastwood Towne Center
 
—

 
12,000

 
65,067

 
4,574

 
12,000

 
69,641

 
81,641

 
31,168

 
2002
 
05/04
Lansing, MI
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Edgemont Town Center
 
6,040

 
3,500

 
10,956

 
449

 
3,500

 
11,405

 
14,905

 
5,067

 
2003
 
11/04
Homewood, AL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Edwards Multiplex
 
8,830

 
—

 
35,421

 
—

 
—

 
35,421

 
35,421

 
15,151

 
1988
 
05/05
Fresno, CA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Edwards Multiplex
 
12,765

 
11,800

 
33,098

 
—

 
11,800

 
33,098

 
44,898

 
14,157

 
1997
 
05/05
Ontario, CA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Evans Towne Centre
 
3,965

 
1,700

 
6,425

 
1,030

 
1,700

 
7,455

 
9,155

 
3,081

 
1995
 
12/04
Evans, GA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fairgrounds Plaza
 
—

 
4,800

 
13,490

 
4,626

 
5,431

 
17,485

 
22,916

 
7,329

 
2002-2004
 
01/05
Middletown, NY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Five Forks
 
—

 
2,540

 
6,393

 
493

 
2,540

 
6,886

 
9,426

 
3,008

 
1999/2004-
 
12/04 &
Simpsonville, SC
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2005
 
3/05
Fordham Place
 
—

 
17,209

 
96,547

 
(6
)
 
17,209

 
96,541

 
113,750

 
11,057

 
Redev: 2009
 
11/13
Bronx, NY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Forks Town Center
 
7,805

 
2,430

 
14,836

 
818

 
2,430

 
15,654

 
18,084

 
7,077

 
2002
 
07/04
Easton, PA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Evans Plaza II
 
—

 
16,118

 
44,880

 
174

 
16,118

 
45,054

 
61,172

 
3,701

 
2008
 
01/15
Leesburg, VA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fox Creek Village
 
8,386

 
3,755

 
15,563

 
(913
)
 
3,755

 
14,650

 
18,405

 
6,641

 
2003-2004
 
11/04
Longmont, CO
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fullerton Metrocenter
 
26,078

 
—

 
47,403

 
3,087

 
—

 
50,490

 
50,490

 
22,646

 
1988
 
06/04
Fullerton, CA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Galvez Shopping Center
 
—

 
1,250

 
4,947

 
382

 
1,250

 
5,329

 
6,579

 
2,247

 
2004
 
06/05
Galveston, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gardiner Manor Mall
 
35,741

 
12,348

 
56,199

 
673

 
12,348

 
56,872

 
69,220

 
5,454

 
2000
 
06/14
Bay Shore, NY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gateway Pavilions
 
22,538

 
9,880

 
55,195

 
1,165

 
9,880

 
56,360

 
66,240

 
24,741

 
2003-2004
 
12/04
Avondale, AZ
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


102

RETAIL PROPERTIES OF AMERICA, INC.

Schedule III
Real Estate and Accumulated Depreciation
December 31, 2016
(in thousands)

 
 
 
 
Initial Cost (A)
 
 
 
Gross amount carried at end of period
 
 
 
 
 
 
Property Name
 
Encumbrance
 
Land
 
Buildings and Improvements
 
Adjustments to Basis (C)
 
Land and Improvements
 
Buildings and Improvements (D)
 
Total (B), (D)
 
Accumulated Depreciation (E)
 
Date Constructed
 
Date Acquired
Gateway Plaza
 
—

 
—

 
26,371

 
5,803

 
—

 
32,174

 
32,174

 
13,593

 
2000
 
07/04
Southlake, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gateway Station
 
—

 
1,050

 
3,911

 
1,043

 
1,050

 
4,954

 
6,004

 
2,169

 
2003-2004
 
12/04
College Station, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gateway Station II & III
 
—

 
3,280

 
11,557

 
(7
)
 
3,280

 
11,550

 
14,830

 
3,791

 
2006-2007
 
05/07
College Station, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gateway Village
 
34,766

 
8,550

 
39,298

 
5,397

 
8,550

 
44,695

 
53,245

 
19,745

 
1996
 
07/04
Annapolis, MD
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gerry Centennial Plaza
 
—

 
5,370

 
12,968

 
9,282

 
5,370

 
22,250

 
27,620

 
7,491

 
2006
 
06/07
Oswego, IL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Governor's Marketplace
 
—

 
—

 
30,377

 
3,309

 
—

 
33,686

 
33,686

 
15,267

 
2001
 
08/04
Tallahassee, FL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Grapevine Crossing
 
—

 
4,100

 
16,938

 
241

 
3,894

 
17,385

 
21,279

 
7,382

 
2001
 
04/05
Grapevine, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Green's Corner
 
4,937

 
3,200

 
8,663

 
741

 
3,200

 
9,404

 
12,604

 
3,952

 
1997
 
12/04
Cumming, GA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gurnee Town Center
 
14,050

 
7,000

 
35,147

 
4,646

 
7,000

 
39,793

 
46,793

 
17,484

 
2000
 
10/04
Gurnee, IL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Henry Town Center
 
—

 
10,650

 
46,814

 
6,971

 
10,650

 
53,785

 
64,435

 
22,097

 
2002
 
12/04
McDonough, GA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Heritage Square
 
—

 
6,377

 
11,385

 
1,441

 
6,377

 
12,826

 
19,203

 
1,266

 
1985
 
02/14
Issaquah, WA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Heritage Towne Crossing
 
—

 
3,065

 
10,729

 
1,533

 
3,065

 
12,262

 
15,327

 
5,720

 
2002
 
03/04
Euless, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Hickory Ridge
 
17,939

 
6,860

 
33,323

 
613

 
6,860

 
33,936

 
40,796

 
15,155

 
1999
 
01/04
Hickory, NC
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
High Ridge Crossing
 
4,585

 
3,075

 
9,148

 
(159
)
 
3,075

 
8,989

 
12,064

 
3,897

 
2004
 
03/05
High Ridge, MO
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Holliday Towne Center
 
7,233

 
2,200

 
11,609

 
(333
)
 
2,200

 
11,276

 
13,476

 
5,007

 
2003
 
02/05
Duncansville, PA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home Depot Center
 
—

 
—

 
16,758

 
—

 
—

 
16,758

 
16,758

 
7,065

 
1996
 
06/05
Pittsburgh, PA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home Depot Plaza
 
10,689

 
9,700

 
17,137

 
1,738

 
9,700

 
18,875

 
28,575

 
7,805

 
1992
 
06/05
Orange, CT
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


103

RETAIL PROPERTIES OF AMERICA, INC.

Schedule III
Real Estate and Accumulated Depreciation
December 31, 2016
(in thousands)

 
 
 
 
Initial Cost (A)
 
 
 
Gross amount carried at end of period
 
 
 
 
 
 
Property Name
 
Encumbrance
 
Land
 
Buildings and Improvements
 
Adjustments to Basis (C)
 
Land and Improvements
 
Buildings and Improvements (D)
 
Total (B), (D)
 
Accumulated Depreciation (E)
 
Date Constructed
 
Date Acquired
HQ Building
 
—

 
5,200

 
10,010

 
4,211

 
5,200

 
14,221

 
19,421

 
5,858

 
Redev: 2004
 
12/05
San Antonio, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Huebner Oaks Center
 
—

 
18,087

 
64,731

 
217

 
18,087

 
64,948

 
83,035

 
6,139

 
1996
 
06/14
San Antonio, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Humblewood Shopping Center
 
—

 
2,200

 
12,823

 
1,392

 
2,200

 
14,215

 
16,415

 
5,406

 
Renov: 2005
 
11/05
Humble, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Irmo Station
 
4,674

 
2,600

 
9,247

 
1,231

 
2,579

 
10,499

 
13,078

 
4,529

 
1980 & 1985
 
12/04
Irmo, SC
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Jefferson Commons
 
—

 
23,097

 
52,762

 
2,001

 
23,097

 
54,763

 
77,860

 
17,720

 
2005
 
02/08
Newport News, VA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
John's Creek Village
 
—

 
14,446

 
23,932

 
568

 
14,446

 
24,500

 
38,946

 
2,531

 
2004
 
06/14
John's Creek, GA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
King Philip's Crossing
 
—

 
3,710

 
19,144

 
(150
)
 
3,710

 
18,994

 
22,704

 
7,779

 
2005
 
11/05
Seekonk, MA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
La Plaza Del Norte
 
—

 
16,005

 
37,744

 
4,007

 
16,005

 
41,751

 
57,756

 
19,057

 
1996/1999
 
01/04
San Antonio, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lake Mary Pointe
 
1,516

 
2,075

 
4,009

 
186

 
2,065

 
4,205

 
6,270

 
1,842

 
1999
 
10/04
Lake Mary, FL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lake Worth Towne Crossing
 
—

 
6,600

 
30,910

 
9,124

 
6,600

 
40,034

 
46,634

 
13,839

 
2005
 
06/06
Lake Worth, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lakepointe Towne Center
 
—

 
4,750

 
23,904

 
3,027

 
4,750

 
26,931

 
31,681

 
11,092

 
2004
 
05/05
Lewisville, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lakewood Towne Center
 
—

 
12,555

 
74,612

 
(13,958
)
 
12,555

 
60,654

 
73,209

 
27,077

 
1998/2002-
 
06/04
Lakewood, WA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2003
 
 
Lincoln Park
 
25,217

 
38,329

 
17,772

 
357

 
38,329

 
18,129

 
56,458

 
1,821

 
1997
 
06/14
Dallas, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lincoln Plaza
 
—

 
13,000

 
46,482

 
22,906

 
13,110

 
69,278

 
82,388

 
27,534

 
2001-2004
 
09/05
Worcester, MA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Low Country Village I & II
 
—

 
2,910

 
16,614

 
(277
)
 
2,486

 
16,761

 
19,247

 
7,536

 
2004 & 2005
 
06/04 &
Bluffton, SC
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
09/05
Lowe's/Bed, Bath & Beyond
 
—

 
7,423

 
799

 
(8
)
 
7,415

 
799

 
8,214

 
604

 
2005
 
08/05
Butler, NJ
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
MacArthur Crossing
 
—

 
4,710

 
16,265

 
2,242

 
4,710

 
18,507

 
23,217

 
8,609

 
1995-1996
 
02/04
Los Colinas, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


104

RETAIL PROPERTIES OF AMERICA, INC.

Schedule III
Real Estate and Accumulated Depreciation
December 31, 2016
(in thousands)

 
 
 
 
Initial Cost (A)
 
 
 
Gross amount carried at end of period
 
 
 
 
 
 
Property Name
 
Encumbrance
 
Land
 
Buildings and Improvements
 
Adjustments to Basis (C)
 
Land and Improvements
 
Buildings and Improvements (D)
 
Total (B), (D)
 
Accumulated Depreciation (E)
 
Date Constructed
 
Date Acquired
Magnolia Square
 
5,905

 
2,635

 
15,040

 
(654
)
 
2,635

 
14,386

 
17,021

 
6,245

 
2004
 
02/05
Houma, LA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Manchester Meadows
 
—

 
14,700

 
39,738

 
6,048

 
14,700

 
45,786

 
60,486

 
18,780

 
1994-1995
 
08/04
Town and Country, MO
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mansfield Towne Crossing
 
—

 
3,300

 
12,195

 
3,625

 
3,300

 
15,820

 
19,120

 
7,013

 
2003-2004
 
11/04
Mansfield, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Merrifield Town Center
 
—

 
18,678

 
36,496

 
497

 
18,678

 
36,993

 
55,671

 
2,716

 
2008
 
01/15
Falls Church, VA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Merrifield Town Center II
 
—

 
28,797

 
14,698

 
22

 
28,797

 
14,720

 
43,517

 
533

 
1972 Renov:
 
01/16
Falls Church, VA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2006-2007
 
 
New Forest Crossing
 
—

 
4,390

 
11,313

 
66

 
4,390

 
11,379

 
15,769

 
1,550

 
2003
 
10/13
Houston, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Newnan Crossing I & II
 
—

 
15,100

 
33,987

 
6,579

 
15,100

 
40,566

 
55,666

 
18,063

 
1999 &
 
12/03 &
Newnan, GA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2004
 
02/04
Newton Crossroads
 
3,478

 
3,350

 
6,927

 
541

 
3,350

 
7,468

 
10,818

 
3,110

 
1997
 
12/04
Covington, GA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
North Rivers Towne Center
 
9,360

 
3,350

 
15,720

 
570

 
3,350

 
16,290

 
19,640

 
7,444

 
2003-2004
 
04/04
Charleston, SC
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Northgate North
 
26,186

 
7,540

 
49,078

 
(14,262
)
 
7,540

 
34,816

 
42,356

 
16,401

 
1999-2003
 
06/04
Seattle, WA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Northpointe Plaza
 
21,651

 
13,800

 
37,707

 
4,463

 
13,800

 
42,170

 
55,970

 
19,119

 
1991-1993
 
05/04
Spokane, WA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Northwood Crossing
 
—

 
3,770

 
13,658

 
1,210

 
3,770

 
14,868

 
18,638

 
5,966

 
1979/2004
 
01/06
Northport, AL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Northwoods Center
 
7,914

 
3,415

 
9,475

 
6,668

 
3,415

 
16,143

 
19,558

 
7,007

 
2002-2004
 
12/04
Wesley Chapel, FL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Oak Brook Promenade
 
—

 
10,343

 
50,057

 
1,245

 
10,343

 
51,302

 
61,645

 
1,611

 
2006
 
03/16
Oak Brook, IL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
One Loudoun Downtown
 
—

 
22,113

 
91,138

 
1

 
22,113

 
91,139

 
113,252

 
322

 
2013-2016
 
11/16
Ashburn, VA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Orange Plaza (Golfland Plaza)
 
—

 
4,350

 
4,834

 
2,366

 
4,350

 
7,200

 
11,550

 
2,879

 
1995
 
05/05
Orange, CT
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Orchard
 
—

 
3,200

 
17,151

 
250

 
3,200

 
17,401

 
20,601

 
7,170

 
2004-2005
 
07/05 &
New Hartford, NY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9/05


105

RETAIL PROPERTIES OF AMERICA, INC.

Schedule III
Real Estate and Accumulated Depreciation
December 31, 2016
(in thousands)

 
 
 
 
Initial Cost (A)
 
 
 
Gross amount carried at end of period
 
 
 
 
 
 
Property Name
 
Encumbrance
 
Land
 
Buildings and Improvements
 
Adjustments to Basis (C)
 
Land and Improvements
 
Buildings and Improvements (D)
 
Total (B), (D)
 
Accumulated Depreciation (E)
 
Date Constructed
 
Date Acquired
Oswego Commons
 
—

 
6,454

 
16,004

 
465

 
6,454

 
16,469

 
22,923

 
1,931

 
2002-2004
 
06/14
Oswego, IL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Page Field Commons
 
—

 
—

 
43,355

 
1,156

 
—

 
44,511

 
44,511

 
18,522

 
1999
 
05/05
Fort Myers, FL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Paradise Valley Marketplace
 
8,565

 
6,590

 
20,425

 
756

 
6,590

 
21,181

 
27,771

 
9,931

 
2002
 
04/04
Phoenix, AZ
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Parkway Towne Crossing
 
—

 
6,142

 
20,423

 
8,740

 
6,142

 
29,163

 
35,305

 
11,011

 
2010
 
08/06
Frisco, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pavilion at Kings Grant I & II
 
—

 
10,274

 
12,392

 
12,243

 
10,274

 
24,635

 
34,909

 
9,357

 
2002-2003
 
12/03 &
Concord, NC
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
& 2005
 
06/06
Pelham Manor Shopping Plaza
 
—

 
—

 
67,870

 
62

 
—

 
67,932

 
67,932

 
8,615

 
2008
 
11/13
Pelham Manor, NY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Peoria Crossings I & II
 
24,082

 
6,995

 
32,816

 
3,909

 
8,495

 
35,225

 
43,720

 
16,227

 
2002-2003
 
03/04 &
Peoria, AZ
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
& 2005
 
05/05
Phenix Crossing
 
3,875

 
2,600

 
6,776

 
343

 
2,600

 
7,119

 
9,719

 
3,165

 
2004
 
12/04
Phenix City, AL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Placentia Town Center
 
10,334

 
11,200

 
11,751

 
2,413

 
11,200

 
14,164

 
25,364

 
5,921

 
1973/2000
 
12/04
Placentia, CA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Plaza at Marysville
 
8,565

 
6,600

 
13,728

 
866

 
6,600

 
14,594

 
21,194

 
6,520

 
1995
 
07/04
Marysville, WA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Plaza Santa Fe II
 
—

 
—

 
28,588

 
3,389

 
—

 
31,977

 
31,977

 
14,870

 
2000-2002
 
06/04
Santa Fe, NM
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pleasant Run
 
12,773

 
4,200

 
29,085

 
7,091

 
4,200

 
36,176

 
40,376

 
14,212

 
2004
 
12/04
Cedar Hill, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quakertown
 
—

 
2,400

 
9,246

 
43

 
2,400

 
9,289

 
11,689

 
3,853

 
2004-2005
 
09/05
Quakertown, PA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Red Bug Village
 
—

 
1,790

 
6,178

 
336

 
1,790

 
6,514

 
8,304

 
2,722

 
2004
 
12/05
Winter Springs, FL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reisterstown Road Plaza (a)
 
46,182

 
15,800

 
70,372

 
6,420

 
15,791

 
76,801

 
92,592

 
33,874

 
1986/2004
 
08/04
Baltimore, MD
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rite Aid Store (Eckerd)
 
1,535

 
900

 
2,377

 
—

 
900

 
2,377

 
3,277

 
1,126

 
2003-2004
 
06/04
Columbia, SC
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rite Aid Store (Eckerd)
 
1,224

 
600

 
2,033

 
1

 
600

 
2,034

 
2,634

 
938

 
2003-2004
 
06/04
Crossville, TN
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


106

RETAIL PROPERTIES OF AMERICA, INC.

Schedule III
Real Estate and Accumulated Depreciation
December 31, 2016
(in thousands)

 
 
 
 
Initial Cost (A)
 
 
 
Gross amount carried at end of period
 
 
 
 
 
 
Property Name
 
Encumbrance
 
Land
 
Buildings and Improvements
 
Adjustments to Basis (C)
 
Land and Improvements
 
Buildings and Improvements (D)
 
Total (B), (D)
 
Accumulated Depreciation (E)
 
Date Constructed
 
Date Acquired
Rite Aid Store (Eckerd)
 
1,473

 
1,050

 
2,047

 
1

 
1,050

 
2,048

 
3,098

 
944

 
2003-2004
 
06/04
Greer, SC
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rite Aid Store (Eckerd)
 
1,753

 
700

 
2,960

 
1

 
700

 
2,961

 
3,661

 
1,366

 
2003-2004
 
06/04
Kill Devil Hills, NC
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rite Aid Store (Eckerd), Culver Rd.
 
—

 
1,590

 
2,279

 
(3,380
)
 
265

 
224

 
489

 
—

 
2001
 
11/05
Rochester, NY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rivery Town Crossing
 
—

 
2,900

 
6,814

 
384

 
2,900

 
7,198

 
10,098

 
2,762

 
2005
 
10/06
Georgetown, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Royal Oaks Village II
 
—

 
3,450

 
17,000

 
272

 
3,450

 
17,272

 
20,722

 
5,039

 
2004-2005
 
11/05
Houston, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Saucon Valley Square
 
7,941

 
3,200

 
12,642

 
(9,645
)
 
1,818

 
4,379

 
6,197

 
87

 
1999
 
09/04
Bethlehem, PA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sawyer Heights Village
 
18,824

 
24,214

 
15,797

 
705

 
24,214

 
16,502

 
40,716

 
2,165

 
2007
 
10/13
Houston, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Schaumburg Towers
 
—

 
7,900

 
137,096

 
405

 
7,900

 
137,501

 
145,401

 
58,553

 
1986 & 1990
 
11/04
Schaumburg, IL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shoppes at Hagerstown
 
—

 
4,034

 
21,937

 
131

 
4,034

 
22,068

 
26,102

 
987

 
2008
 
01/16
Hagerstown, MD
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shoppes at Park West
 
4,940

 
2,240

 
9,357

 
78

 
2,240

 
9,435

 
11,675

 
4,201

 
2004
 
11/04
Mt. Pleasant, SC
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Shoppes at Quarterfield
 
—

 
2,190

 
8,840

 
193

 
2,190

 
9,033

 
11,223

 
4,232

 
1999
 
01/04
Severn, MD
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Shoppes at Union Hill
 
14,757

 
12,666

 
45,227

 
38

 
12,666

 
45,265

 
57,931

 
1,482

 
2003
 
04/16
Denville, NJ
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shoppes of New Hope
 
3,362

 
1,350

 
11,045

 
20

 
1,350

 
11,065

 
12,415

 
5,060

 
2004
 
07/04
Dallas, GA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shoppes of Prominence Point I & II
 
—

 
3,650

 
12,652

 
203

 
3,650

 
12,855

 
16,505

 
5,901

 
2004 & 2005
 
06/04 &
Canton, GA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
09/05
Shops at Forest Commons
 
—

 
1,050

 
6,133

 
294

 
1,050

 
6,427

 
7,477

 
2,807

 
2002
 
12/04
Round Rock, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Shops at Legacy
 
—

 
8,800

 
108,940

 
15,243

 
8,800

 
124,183

 
132,983

 
43,545

 
2002
 
06/07
Plano, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shops at Park Place
 
7,503

 
9,096

 
13,175

 
1,082

 
9,096

 
14,257

 
23,353

 
6,969

 
2001
 
10/03
Plano, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


107

RETAIL PROPERTIES OF AMERICA, INC.

Schedule III
Real Estate and Accumulated Depreciation
December 31, 2016
(in thousands)

 
 
 
 
Initial Cost (A)
 
 
 
Gross amount carried at end of period
 
 
 
 
 
 
Property Name
 
Encumbrance
 
Land
 
Buildings and Improvements
 
Adjustments to Basis (C)
 
Land and Improvements
 
Buildings and Improvements (D)
 
Total (B), (D)
 
Accumulated Depreciation (E)
 
Date Constructed
 
Date Acquired
Southlake Corners
 
21,090

 
6,612

 
23,605

 
82

 
6,612

 
23,687

 
30,299

 
3,009

 
2004
 
10/13
Southlake, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Southlake Town Square I - VII
 
—

 
43,790

 
201,028

 
23,258

 
41,603

 
226,473

 
268,076

 
84,812

 
1998-2007
 
12/04, 5/07,
Southlake, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9/08 & 3/09
Stilesboro Oaks
 
4,725

 
2,200

 
9,426

 
473

 
2,200

 
9,899

 
12,099

 
4,216

 
1997
 
12/04
Acworth, GA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stonebridge Plaza
 
—

 
1,000

 
5,783

 
427

 
1,000

 
6,210

 
7,210

 
2,593

 
1997
 
08/05
McKinney, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stony Creek I
 
7,947

 
6,735

 
17,564

 
1,739

 
6,735

 
19,303

 
26,038

 
9,234

 
2003
 
12/03
Noblesville, IN
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stony Creek II
 
—

 
1,900

 
5,106

 
79

 
1,900

 
5,185

 
7,085

 
2,112

 
2005
 
11/05
Noblesville, IN
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Streets of Yorktown
 
—

 
3,440

 
22,111

 
2,893

 
3,440

 
25,004

 
28,444

 
10,017

 
2005
 
12/05
Houston, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tacoma South
 
—

 
10,976

 
22,898

 
5

 
10,976

 
22,903

 
33,879

 
617

 
1984-2015
 
05/16
Tacoma, WA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Target South Center
 
—

 
2,300

 
8,760

 
727

 
2,300

 
9,487

 
11,787

 
3,951

 
1999
 
11/05
Austin, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tollgate Marketplace
 
34,933

 
8,700

 
61,247

 
7,081

 
8,700

 
68,328

 
77,028

 
29,407

 
1979/1994
 
07/04
Bel Air, MD
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Town Square Plaza
 
16,760

 
9,700

 
18,264

 
1,668

 
9,700

 
19,932

 
29,632

 
8,009

 
2004
 
12/05
Pottstown, PA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Towson Circle (a)
 
—

 
9,050

 
17,840

 
(26,835
)
 
—

 
55

 
55

 
—

 
1998
 
07/04
Towson, MD
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Towson Square
 
—

 
13,757

 
21,958

 
(174
)
 
13,757

 
21,784

 
35,541

 
959

 
2014
 
11/15
Towson, MD
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tysons Corner
 
—

 
22,525

 
7,184

 
15

 
22,525

 
7,199

 
29,724

 
426

 
1980
 
05/15
Vienna, VA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Renov:2004,
2012/2013
 
 
University Town Center
 
4,140

 
—

 
9,557

 
337

 
—

 
9,894

 
9,894

 
4,337

 
2002
 
11/04
Tuscaloosa, AL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Village Shoppes at Gainesville
 
19,325

 
4,450

 
36,592

 
1,975

 
4,450

 
38,567

 
43,017

 
15,727

 
2004
 
09/05
Gainesville, GA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Village Shoppes at Simonton
 
3,102

 
2,200

 
10,874

 
24

 
2,200

 
10,898

 
13,098

 
4,953

 
2004
 
08/04
Lawrenceville, GA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

108

RETAIL PROPERTIES OF AMERICA, INC.

Schedule III
Real Estate and Accumulated Depreciation
December 31, 2016
(in thousands)

 
 
 
 
Initial Cost (A)
 
 
 
Gross amount carried at end of period
 
 
 
 
 
 
Property Name
 
Encumbrance
 
Land
 
Buildings and Improvements
 
Adjustments to Basis (C)
 
Land and Improvements
 
Buildings and Improvements (D)
 
Total (B), (D)
 
Accumulated Depreciation (E)
 
Date Constructed
 
Date Acquired
Walter's Crossing
 
—

 
14,500

 
16,914

 
544

 
14,500

 
17,458

 
31,958

 
6,837

 
2005
 
07/06
Tampa, FL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Watauga Pavilion
 
—

 
5,185

 
27,504

 
986

 
5,185

 
28,490

 
33,675

 
12,913

 
2003-2004
 
05/04
Watauga, TX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
West Town Market
 
—

 
1,170

 
10,488

 
193

 
1,170

 
10,681

 
11,851

 
4,517

 
2004
 
06/05
Fort Mill, SC
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Wilton Square
 
—

 
8,200

 
35,538

 
371

 
8,200

 
35,909

 
44,109

 
14,949

 
2000
 
07/05
Saratoga Springs, NY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Winchester Commons
 
5,291

 
4,400

 
7,471

 
571

 
4,400

 
8,042

 
12,442

 
3,418

 
1999
 
11/04
Memphis, TN
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Woodinville Plaza
 
—

 
16,073

 
25,433

 
896

 
16,073

 
26,329

 
42,402

 
1,378

 
1981
 
06/15 &
Woodinville, WA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8/16
Total Operating Properties
 
769,184

 
1,208,948

 
4,039,199

 
227,920

 
1,191,403

 
4,284,664

 
5,476,067

 
1,443,333

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Developments in Progress
 
—

 
15,541

 
7,898

 
—

 
15,541

 
7,898

 
23,439

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Investment Properties
 
$
769,184

 
$
1,224,489

 
$
4,047,097

 
$
227,920

 
$
1,206,944

 
$
4,292,562

 
$
5,499,506

 
$
1,443,333

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(a)
The cost basis associated with this property or a portion of this property was reclassified to Developments in Progress.

109

RETAIL PROPERTIES OF AMERICA, INC.

Notes:
(A)
The initial cost to the Company represents the original purchase price of the property, including amounts incurred subsequent to acquisition which were contemplated at the time the property was acquired.
(B)
The aggregate cost of real estate owned as of December 31, 2016 for U.S. federal income tax purposes was approximately $5,524,479.
(C)
Adjustments to basis include payments received under master lease agreements as well as additional tangible costs associated with the investment properties, including any earnout of tenant space.
(D)
Reconciliation of real estate owned:
 
 
2016
 
2015
 
2014
Balance as of January 1,
 
$
5,687,842

 
$
5,680,376

 
$
5,804,518

Purchase of investment property
 
435,989

 
508,924

 
397,993

Sale of investment property
 
(526,970
)
 
(498,833
)
 
(338,938
)
Property held for sale
 
(47,151
)
 
—

 
(36,914
)
Provision for asset impairment
 
(47,159
)
 
(4,786
)
 
(159,447
)
Acquired lease intangible assets
 
4,586

 
(15,311
)
 
5,579

Acquired lease intangible liabilities
 
(7,631
)
 
17,472

 
7,585

Balance as of December 31,
 
$
5,499,506

 
$
5,687,842

 
$
5,680,376

(E)
Reconciliation of accumulated depreciation:
 
 
2016
 
2015
 
2014
Balance as of January 1,
 
$
1,433,195

 
$
1,365,471

 
$
1,330,474

Depreciation expense
 
191,493

 
183,639

 
183,142

Sale of investment property
 
(118,925
)
 
(111,346
)
 
(63,460
)
Property held for sale
 
(15,769
)
 
—

 
(5,358
)
Provision for asset impairment
 
(18,500
)
 
(2,497
)
 
(77,390
)
Write-offs due to early lease termination
 
(3,947
)
 
(2,072
)
 
(1,937
)
Other disposals
 
(24,214
)
 
—

 
—

Balance as of December 31,
 
$
1,443,333

 
$
1,433,195

 
$
1,365,471

Depreciation is computed based upon the following estimated useful lives in the accompanying consolidated statements of operations and other comprehensive income:
 
 
Years
Building and improvements
 
30
Site improvements
 
15
Tenant improvements
 
Life of related lease


110

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures to ensure that material information relating to us, including our consolidated subsidiaries, is made known to the officers who certify our financial reports and to the members of senior management and the board of directors.
Based on management’s evaluation as of December 31, 2016, our president and chief executive officer and our executive vice president, chief financial officer and treasurer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are effective to ensure that the information required to be disclosed by us in our reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our president and chief executive officer and our executive vice president, chief financial officer and treasurer to allow timely decisions regarding required disclosure.
Changes in Internal Controls
There were no changes to our internal controls over financial reporting during the fiscal quarter ended December 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control — Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2016. The effectiveness of our internal control over financial reporting as of December 31, 2016 has been audited by Deloitte & Touche LLP, an Independent Registered Public Accounting Firm, as stated in their report which is included herein.

111

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Retail Properties of America, Inc.
Oak Brook, Illinois
We have audited the internal control over financial reporting of Retail Properties of America, Inc. and its subsidiaries (the “Company”) as of December 31, 2016, based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedules as of and for the year ended December 31, 2016 of the Company and our report dated February 15, 2017 expressed an unqualified opinion on those consolidated financial statements and financial statement schedules and included an explanatory paragraph regarding the Company’s adoption of Accounting Standards Update 2017-01, Business Combinations.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 15, 2017

112

ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information required by this Item 10 will be included in our definitive proxy statement for our 2017 Annual Meeting of Stockholders and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this Item 11 will be included in our definitive proxy statement for our 2017 Annual Meeting of Stockholders and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information required by this Item 12 will be included in our definitive proxy statement for our 2017 Annual Meeting of Stockholders and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Information required by this Item 13 will be included in our definitive proxy statement for our 2017 Annual Meeting of Stockholders and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Information required by this Item 14 will be included in our definitive proxy statement for our 2017 Annual Meeting of Stockholders and is incorporated herein by reference.

113

PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
List of documents filed:
(1)
The consolidated financial statements of the Company are set forth in this report in Item 8.
(2)
Financial Statement Schedules:
The following financial statement schedules for the year ended December 31, 2016 are submitted herewith:
 
 
Page
Valuation and Qualifying Accounts (Schedule II)
 
99

Real Estate and Accumulated Depreciation (Schedule III)
 
100

Schedules not filed:
All schedules other than those indicated in the index have been omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes.
Exhibit No.
 
Description
 
 
 
3.1
 
Sixth Articles of Amendment and Restatement of the Registrant, dated March 20, 2012 (Incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on March 22, 2012).
3.2
 
Articles of Amendment to the Sixth Articles of Amendment and Restatement of the Registrant, dated March 20, 2012 (Incorporated herein by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed on March 22, 2012).
3.3
 
Articles of Amendment to the Sixth Articles of Amendment and Restatement of the Registrant, dated March 20, 2012 (Incorporated herein by reference to Exhibit 3.3 to the Registrant’s Current Report on Form 8-K filed on March 22, 2012).
3.4
 
Articles Supplementary to the Sixth Articles of Amendment and Restatement of the Registrant, as amended, dated March 20, 2012 (Incorporated herein by reference to Exhibit 3.4 to the Registrant’s Current Report on Form 8-K filed on March 22, 2012).
3.5
 
Articles Supplementary for the Series A Preferred Stock (Incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on December 17, 2012).
3.6
 
Certificate of Correction (Incorporated herein by reference to Exhibit 3.2 to the Registrant’s Current Report/Amended on Form 8-K/A filed on December 20, 2012).
3.7
 
Sixth Amended and Restated Bylaws of the Registrant (Incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on July 20, 2012).
3.8
 
Amendment No. 1 to the Sixth Amended and Restated Bylaws of the Registrant, dated February 11, 2014 (Incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on February 12, 2014).
4.1
 
Indenture, dated March 12, 2015, by and between the Registrant as Issuer and U.S. Bank National Association as Trustee (Incorporated herein by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on March 12, 2015).
4.2
 
First Supplemental Indenture, dated March 12, 2015, by and between the Registrant as Issuer and U.S. Bank National Association as Trustee (Incorporated herein by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on March 12, 2015).
4.3
 
Form of 4.00% Senior Notes due 2025 (attached as Exhibit A to the First Supplemental Indenture filed as Exhibit 4.2) (Incorporated herein by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed on March 12, 2015).
10.1
 
2014 Long-Term Equity Compensation Plan of the Registrant (Incorporated herein by reference to Appendix A to the Registrant’s Definitive Proxy Statement on Schedule 14A filed on March 31, 2014).
10.2
 
Third Amended and Restated Independent Director Stock Option and Incentive Plan of the Registrant (Incorporated herein by reference to Appendix A to the Registrant’s Definitive Proxy Statement on Schedule 14A filed on August 2, 2013).
10.3
 
Indemnification Agreements by and between the Registrant and its directors and officers (Incorporated herein by reference to Exhibits 10.6 A-E and H to the Registrant’s Annual Report/Amended on Form 10-K/A for the year ended December 31, 2006 and filed on April 27, 2007, Exhibits 10.560 - 10.561 and 10.568 - 10.570 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007 and filed on March 31, 2008, Exhibit 10.4 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011 and filed on February 22, 2012, Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 and filed on August 6, 2013, Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 and filed on August 5, 2014, Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 and filed on August 5, 2015, Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 and filed on November 4, 2015, and Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 and filed on November 2, 2016).

114

Exhibit No.
 
Description
 
 
 
10.4
 
Third Amended and Restated Credit Agreement dated as of May 13, 2013 among the Registrant as Borrower and KeyBank National Association as Administrative Agent, Wells Fargo Securities LLC as Co-Lead Arranger and Joint Book Manager, and Wells Fargo Bank, National Association as Syndication Agent and KeyBanc Capital Markets Inc. as Co-Lead Arranger and Joint Book Manager, and Citibank, N.A. as Co-Documentation Agent, Deutsche Bank Securities Inc. as Co-Documentation Agent and Certain Lenders from time to time parties hereto, as Lenders (Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 16, 2013).
10.5
 
First Amendment to Third Amended and Restated Credit Agreement dated as of February 21, 2014 among the Registrant as Borrower and KeyBank National Association as Administrative Agent and Certain Lenders from time to time parties hereto, as Lenders (Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 and filed on May 6, 2014).
10.6
 
Note Purchase Agreement dated as of May 16, 2014 among the Registrant as Issuer and Certain Institutions as Purchasers (Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 22, 2014).
10.7
 
Loan Agreement dated as of December 1, 2009 by and among Colesville One, LLC, JPMorgan Chase Bank, N.A. and certain subsidiaries of the Registrant (Incorporated herein by reference to Exhibit 10.587 to the Registrant’s Annual Report on Form 10-K/A for the year ended December 31, 2009 and filed on March 5, 2010).
10.8
 
Fourth Amended and Restated Credit Agreement dated as of January 6, 2016 among the Registrant as Borrower and KeyBank National Association as Administrative Agent, Wells Fargo Securities LLC as Co-Lead Arranger and Joint Book Manager, and Wells Fargo Bank, National Association as Syndication Agent, KeyBanc Capital Markets Inc., U.S. Bank National Association, PNC Capital Markets LLC, and Regions Capital Markets as Co-Lead Arrangers and Joint Book Managers, each of U.S. Bank National Association, PNC Capital Markets LLC, Regions Capital Markets, Bank of America, N.A., Citibank, N.A., The Bank of Nova Scotia, Capital One, N.A., Deutsche Bank Securities Inc., and Morgan Stanley Senior Funding, Inc. as Documentation Agents, and Certain Lenders from time to time parties hereto, as Lenders (Incorporated herein by reference to Exhibit 10.8 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015 and filed on February 17, 2016).
10.9
 
Note Purchase Agreement dated as of September 30, 2016, among the Registrant as Issuer and Certain Institutions as Purchasers (Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on October 5, 2016).
10.10
 
Term Loan Agreement, dated as of November 22, 2016, by and among the Registrant as Borrower and Capital One, National Association as Administrative Agent, Capital One, National Association, PNC Capital Markets LLC, TD Bank, N.A., and Regions Bank as Joint Lead Arrangers and Joint Book Managers, TD Bank, N.A. as Syndication Agent, PNC Capital Markets LLC and Regions Bank as Co-Documentation Agent, and Certain Lenders from time to time parties hereto, as Lenders (Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on November 29, 2016).
10.11
 
Retention Agreement dated February 19, 2013 by and between the Registrant and Steven P. Grimes (Incorporated herein by reference to Exhibit 10.9 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012 and filed on February 20, 2013).
10.12
 
Amendment to Retention Agreement dated February 19, 2015 by and between Registrant and Steven P. Grimes (Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 and filed on May 5, 2015).
10.13
 
Amended and Restated Retention Agreement dated October 31, 2016 by and between the Registrant and Steven P. Grimes (Incorporated herein by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 and filed on November 2, 2016).
10.14
 
Retention Agreement dated February 19, 2013 by and between the Registrant and Angela M. Aman (Incorporated herein by reference to Exhibit 10.10 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012 and filed on February 20, 2013).
10.15
 
Amendment to Retention Agreement dated February 19, 2015 by and between Registrant and Angela M. Aman (Incorporated herein by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 and filed on May 5, 2015).
10.16
 
Separation Agreement and General Release, dated May 7, 2015, by and between the Registrant and Angela M. Aman (Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 and filed on August 5, 2015).
10.17
 
Retention Agreement dated February 19, 2013 by and between the Registrant and Niall J. Byrne (Incorporated herein by reference to Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012 and filed on February 20, 2013).
10.18
 
Amendment to Retention Agreement dated February 19, 2015 by and between Registrant and Niall J. Byrne (Incorporated herein by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 and filed on May 5, 2015).
10.19
 
Separation Agreement and General Release, dated October 2, 2015, by and between the Registrant and Niall J. Byrne (Incorporated herein by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 and filed on November 4, 2015).
10.20
 
Retention Agreement dated February 19, 2013 by and between the Registrant and Shane C. Garrison (Incorporated herein by reference to Exhibit 10.12 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012 and filed on February 20, 2013).

115

Exhibit No.
 
Description
 
 
 
10.21
 
Amendment to Retention Agreement dated February 19, 2015 by and between Registrant and Shane C. Garrison (Incorporated herein by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 and filed on May 5, 2015).
10.22
 
Amended and Restated Retention Agreement dated October 31, 2016 by and between the Registrant and Shane C. Garrison (Incorporated herein by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 and filed on November 2, 2016).
10.23
 
Retention Agreement dated February 19, 2013 by and between the Registrant and Dennis K. Holland (Incorporated herein by reference to Exhibit 10.13 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012 and filed on February 20, 2013).
10.24
 
Amendment to Retention Agreement dated February 19, 2015 by and between Registrant and Dennis K. Holland (Incorporated herein by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 and filed on May 5, 2015).
10.25
 
Offer Letter, dated July 13, 2015, by and between the Registrant and Heath R. Fear (Incorporated herein by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 and filed on August 5, 2015).
10.26
 
Retention Agreement dated October 31, 2016 by and between the Registrant and Heath R. Fear (Incorporated herein by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 and filed on November 2, 2016).
10.27
 
Offer Letter, dated March 24, 2016, by and between the Registrant and Paula C. Maggio (filed herewith).
10.28
 
Indemnification Agreement, dated May 2, 2016, by and between the Registrant and Paula C. Maggio (filed herewith).
10.29
 
Retention Agreement dated October 31, 2016 by and between the Registrant and Paula C. Maggio (Incorporated herein by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 and filed on November 2, 2016).
12.1
 
Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends (filed herewith).
21.1
 
List of Subsidiaries of Registrant (filed herewith).
23.1
 
Consent of Deloitte & Touche LLP (filed herewith).
31.1
 
Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 (filed herewith).
31.2
 
Certification of Executive Vice President, Chief Financial Officer and Treasurer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 (filed herewith).
32.1
 
Certification of President and Chief Executive Officer and Executive Vice President, Chief Financial Officer and Treasurer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C Section 1350 (furnished herewith).
101
 
Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2016 and 2015, (ii) Consolidated Statements of Operations and Other Comprehensive Income for the Years Ended December 31, 2016, 2015 and 2014, (iii) Consolidated Statements of Equity for the Years Ended December 31, 2016, 2015 and 2014, (iv) Consolidated Statements of Cash Flows for the Years Ended December 31, 2016, 2015 and 2014, (v) Notes to Consolidated Financial Statements and (vi) Financial Statement Schedules.


116

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
RETAIL PROPERTIES OF AMERICA, INC.
 
/s/ STEVEN P. GRIMES
 
 
By:
Steven P. Grimes
 
President and Chief Executive Officer
Date:
February 15, 2017
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
 
/s/ STEVEN P. GRIMES
 
 
/s/ BONNIE S. BIUMI
 
 
/s/ RICHARD P. IMPERIALE
 
 
 
 
 
 
 
By:
Steven P. Grimes
By:
Bonnie S. Biumi
By:
Richard P. Imperiale
 
Director, President and
Chief Executive Officer
 
Director
 
Director
Date:
February 15, 2017
Date:
February 15, 2017
Date:
February 15, 2017
 
 
 
 
 
 
 
/s/ HEATH R. FEAR
 
 
/s/ FRANK A. CATALANO, JR.
 
 
/s/ PETER L. LYNCH
 
 
 
 
 
 
 
By:
Heath R. Fear
By:
Frank A. Catalano, Jr.
By:
Peter L. Lynch
 
Executive Vice President,
Chief Financial Officer and Treasurer
(Principal Financial Officer)
 
Director
 
Director
Date:
February 15, 2017
Date:
February 15, 2017
Date:
February 15, 2017
 
 
 
 
 
 
 
/s/ JULIE M. SWINEHART
 
 
/s/ PAUL R. GAUVREAU
 
 
/s/ THOMAS J. SARGEANT
 
 
 
 
 
 
 
By:
Julie M. Swinehart
By:
Paul R. Gauvreau
By:
Thomas J. Sargeant
 
Senior Vice President and
Chief Accounting Officer
(Principal Accounting Officer)
 
Director
 
Director
 
Date:
February 15, 2017
Date:
February 15, 2017
Date:
February 15, 2017
 
 
 
 
 
 
 
 
 
/s/ GERALD M. GORSKI
 
 
/s/ ROBERT G. GIFFORD
 
 
 
 
 
 
 
 
 
 
 
By:
Gerald M. Gorski
By:
Robert G. Gifford
 
 
 
Chairman of the Board and Director
 
Director
 
 
 
Date:
February 15, 2017
Date:
February 15, 2017
 
 


117