10-Q 1 ivtpseptember30201810-q.htm 10-Q Document

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED September 30, 2018
or
¨
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: 000-51609
INVENTRUST PROPERTIES CORP.
(Exact name of registrant as specified in its charter)

Maryland
 
34-2019608
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
3025 Highland Parkway, Suite 350, Downers Grove, Illinois
 
60515
(Address of principal executive offices)
 
(Zip Code)
855-377-0510
(Registrant’s telephone number, including area code)
_______________________________________________________________
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 the filing requirements for the past 90 days.
Yes x   No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Yes x   No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨
 
Accelerated filer ¨
 
 
 
Non-accelerated filer   x
 
Smaller reporting company ¨
 
 
 
 
 
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ¨   No x
As of November 1, 2018, there were 727,895,082 shares of the registrant’s common stock outstanding.
 




InvenTrust Properties Corp.
 
Quarterly Report on Form 10-Q
For the quarterly period ended September 30, 2018
Table of Contents

 
Page
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 
 
 
 



- i-

INVENTRUST PROPERTIES CORP.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)



 
    
 
As of
 
September 30, 2018
 
December 31, 2017
 
(unaudited)
 
 
Assets
 
 
 
Investment properties
 
 
 
Land
$
586,710

 
$
628,487

Building and other improvements
1,744,864

 
1,887,598

Construction in progress
7,543

 
4,975

Total
2,339,117

 
2,521,060

Less accumulated depreciation
(306,123
)
 
(348,337
)
Net investment properties
2,032,994

 
2,172,723

Cash and cash equivalents
157,351

 
162,747

Restricted cash
28,035

 
9,131

Investment in marketable securities
1,385

 
4,758

Investment in unconsolidated entities
188,135

 
180,764

Intangible assets, net
106,862

 
115,411

Accounts and rents receivable (net of allowance of $1,743 and $1,266)
28,064

 
30,522

Deferred costs and other assets, net
21,010

 
22,548

Total assets
$
2,563,836

 
$
2,698,604

 
 
 
 
Liabilities
 
 
 
Debt, net
$
589,994

 
$
667,861

Accounts payable and accrued expenses
45,809

 
37,798

Distributions payable
13,030

 
13,441

Intangible liabilities, net
48,952

 
53,532

Other liabilities
18,778

 
20,250

Total liabilities
716,563

 
792,882

Commitments and contingencies


 


 
 
 
 
Stockholders' Equity
 
 
 
Preferred stock, $.001 par value, 40,000,000 shares authorized, none outstanding

 

Common stock, $.001 par value, 1,460,000,000 shares authorized,
727,949,198 shares issued and outstanding as of September 30, 2018 and
774,293,197 shares issued and outstanding as of December 31, 2017, respectively
728

 
773

Additional paid-in capital
5,584,538

 
5,681,912

Distributions in excess of accumulated net income
(3,740,288
)
 
(3,778,908
)
Accumulated comprehensive income
2,295

 
1,945

Total stockholders' equity
1,847,273

 
1,905,722

Total liabilities and stockholders' equity
$
2,563,836

 
$
2,698,604

See accompanying notes to condensed consolidated financial statements.

1

INVENTRUST PROPERTIES CORP.

Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)

(in thousands, except share and per share amounts)

 
Three months ended September 30,
 
Nine months ended September 30,
 
2018
 
2017
 
2018
 
2017
Income
 
 
 
 
 
 
 
Rental income
$
44,297

 
$
46,808

 
$
135,893

 
$
140,146

Tenant recovery income
13,614

 
14,704

 
44,390

 
42,523

Other property income
1,617

 
321

 
2,935

 
1,409

Other fee income
965

 
1,018

 
2,965

 
3,212

Total income
60,493

 
62,851

 
186,183

 
187,290

 
 
 
 
 
 
 
 
Expenses
 
 
 
 
 
 
 
General and administrative expenses
9,628

 
11,051

 
26,617

 
33,484

Property operating expenses
8,615

 
9,200

 
26,629

 
25,654

Real estate taxes
8,712

 
9,874

 
27,742

 
27,041

Depreciation and amortization
29,684

 
23,941

 
77,768

 
69,815

Provision for asset impairment
2,713

 

 
3,510

 
16,440

Total expenses
59,352

 
54,066

 
162,266

 
172,434

Operating income
1,141

 
8,785

 
23,917

 
14,856

Interest and dividend income
340

 
938

 
1,489

 
3,853

Gain on sale of investment properties, net
13,476

 
7,253

 
51,741

 
21,634

(Loss) gain on extinguishment of debt, net
(4
)
 
(42
)
 
10,693

 
840

Other income (expense)
21

 
2,611

 
515

 
(671
)
Interest expense
(5,954
)
 
(7,588
)
 
(19,047
)
 
(22,795
)
Equity in (losses) earnings of unconsolidated entities
(43
)
 
648

 
(2,795
)
 
1,895

Realized and unrealized investment gains, net
13

 
71

 
236

 
30,940

Income from continuing operations before income taxes
8,990

 
12,676

 
66,749

 
50,552

Income tax expense
(43
)
 
(432
)
 
(407
)
 
(943
)
Net income from continuing operations
8,947

 
12,244

 
66,342

 
49,609

Net income from discontinued operations

 
9,721

 

 
8,372

Net income
$
8,947

 
$
21,965

 
$
66,342

 
$
57,981

 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding,
basic and diluted
768,385,770

 
773,517,492

 
772,341,263

 
773,405,710

Net income per common share, from continuing operations, basic and diluted
$
0.01

 
$
0.02

 
$
0.09

 
$
0.06

Net income per common share, from discontinued operations, basic and diluted
$

 
$
0.01

 
$

 
$
0.01

Net income per common share, basic and diluted
$
0.01

 
$
0.03

 
$
0.09

 
$
0.07

 
 
 
 
 
 
 
 
Distributions declared per common share outstanding
$
0.01

 
$
0.02

 
$
0.05

 
$
0.05

Distributions paid per common share outstanding
$
0.01

 
$
0.02

 
$
0.05

 
$
0.05

Comprehensive income
 
 
 
 
 
 
 
Net income
$
8,947

 
$
21,965

 
$
66,342

 
$
57,981

Unrealized gain (loss) on investment securities

 
4,257

 

 
(13,407
)
Unrealized gain on derivatives
142

 
111

 
1,218

 
426

Reclassification for amounts recognized in net income
(284
)
 
(71
)
 
(593
)
 
(30,940
)
Comprehensive income
$
8,805

 
$
26,262

 
$
66,967

 
$
14,060

See accompanying notes to condensed consolidated financial statements.

2

INVENTRUST PROPERTIES CORP.

Condensed Consolidated Statements of Equity
(Unaudited)

(in thousands, except share amounts)

 
Number of Shares
 
Common
Stock
 
Additional
Paid-in
Capital
 
Distributions
in excess of accumulated
net income
 
Accumulated Comprehensive Income
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance, January 1, 2017
773,304,997

 
$
773

 
$
5,676,639

 
$
(3,786,943
)
 
$
59,059

 
$
1,949,528

Net income

 

 

 
57,981

 

 
57,981

Unrealized gain on investment securities

 

 

 

 
(13,407
)
 
(13,407
)
Unrealized loss on derivatives

 

 

 

 
426

 
426

Reclassification for amounts recognized in net income

 

 

 

 
(30,940
)
 
(30,940
)
Distributions declared

 

 

 
(40,316
)
 

 
(40,316
)
Stock-based compensation, net
215,544

 

 
2,686

 

 

 
2,686

Refund of excess funds associated with 2016 tender offer

 

 
1,929

 

 

 
1,929

Ending balance, September 30, 2017
773,520,541

 
$
773

 
$
5,681,254

 
$
(3,769,278
)
 
$
15,138

 
$
1,927,887


 
Number of Shares
 
Common
Stock
 
Additional
Paid-in
Capital
 
Distributions
in excess of accumulated
net income
 
Accumulated Comprehensive Income
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance, January 1, 2018
774,293,197

 
$
773

 
$
5,681,912

 
$
(3,778,908
)
 
$
1,945

 
$
1,905,722

Impact of Accounting Standards Update ("ASU")
No. 2016-01 (a)

 

 

 
275

 
(275
)
 

Impact of ASU No. 2017-05 (a)

 

 

 
12,756

 

 
12,756

Adjusted balance at January 1, 2018
774,293,197

 
773

 
5,681,912

 
(3,765,877
)
 
1,670

 
1,918,478

Net income

 

 

 
66,342

 

 
66,342

Unrealized gain on derivatives

 

 

 

 
1,218

 
1,218

Reclassification for amounts recognized in net income

 

 

 

 
(593
)
 
(593
)
Distributions declared

 

 

 
(40,753
)
 

 
(40,753
)
Stock-based compensation, net
159,540

 

 
1,812

 

 

 
1,812

Repurchase of common stock
(46,503,539
)
 
(45
)
 
(99,186
)
 

 

 
(99,231
)
Ending balance, September 30, 2018
727,949,198

 
$
728

 
$
5,584,538

 
$
(3,740,288
)
 
$
2,295

 
$
1,847,273

(a)
See Note 2. Recently Issued Accounting Pronouncements Adopted.
See accompanying notes to condensed consolidated financial statements.

3

INVENTRUST PROPERTIES CORP.

Condensed Consolidated Statements of Cash Flows
(Unaudited)

(in thousands)

 
Nine months ended September 30,
 
2018
 
2017
Cash flows from operating activities:
 
 
 
Net income
$
66,342

 
$
57,981

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
77,906

 
71,096

Amortization of above and below-market leases, net
(3,990
)
 
(4,638
)
Amortization of debt premiums, discounts and financing costs
797

 
947

Straight-line rental income
(3,237
)
 
(1,418
)
Provision for asset impairment
3,510

 
16,440

Gain on sale of investment properties, net
(51,741
)
 
(31,749
)
Gain on extinguishment of debt, net
(10,693
)
 
(838
)
Equity in losses (earnings) of unconsolidated entities
2,795

 
(1,895
)
Distributions from unconsolidated entities
5,069

 
351

Realized and unrealized investment gains, net
(236
)
 
(30,940
)
Non-cash stock-based compensation, net
3,187

 
4,007

Changes in assets and liabilities:
 
 
 
Accounts and rents receivable, net
400

 
1,682

Deferred costs and other assets
3,742

 
6,326

Accounts payable and accrued expenses
7,862

 
3,988

Other liabilities
(22
)
 
3,546

Net cash provided by operating activities
101,691

 
94,886

Cash flows from investing activities:
 
 
 
Purchase of investment properties
(149,781
)
 
(517,061
)
Acquired in-place and market lease intangibles, net
(8,935
)
 
(50,207
)
Capital expenditures and tenant improvements
(17,636
)
 
(20,278
)
Investment in development projects
(2,028
)
 

Proceeds from sale and transfer of investment properties, net
254,424

 
197,843

Proceeds from sale of marketable securities, net
3,609

 
140,171

Contributions to unconsolidated entities
(2,761
)
 
(6,109
)
Distributions from unconsolidated entities
282

 
1,285

Lease commissions and other leasing costs
(5,353
)
 
(2,201
)
Other assets
(89
)
 
998

Other liabilities
(330
)
 
(1,124
)
Net cash provided by (used in) investing activities
71,402

 
(256,683
)
Cash flows from financing activities:
 
 
 
Shares repurchased
(98,666
)
 

Distributions
(41,164
)
 
(39,917
)
Refund received of excess funds associated with 2016 tender offer

 
1,929

Proceeds from debt
52,000

 

Pay-offs of debt
(68,096
)
 
(104,032
)
Debt prepayment penalties
(1,617
)
 

Principal payments of mortgage debt
(1,423
)
 
(1,022
)
Payment of loan fees and deposits
(619
)
 
(343
)
Net cash used in financing activities
(159,585
)
 
(143,385
)
Net increase (decrease) in cash, cash equivalents, and restricted cash
13,508

 
(305,182
)
Cash, cash equivalents, and restricted cash at beginning of period
171,878

 
417,325

Cash, cash equivalents, and restricted cash at end of period
$
185,386

 
$
112,143

 
 
 
 

4

INVENTRUST PROPERTIES CORP.

Condensed Consolidated Statements of Cash Flows
(Unaudited)

(in thousands)

 
Nine months ended September 30,
 
2018
 
2017
Reconciliation of cash, cash equivalents, and restricted cash to
condensed consolidated balance sheets:
 
 
 
Cash and cash equivalents
$
157,351

 
$
102,810

Restricted cash
28,035

 
9,333

Cash, cash equivalents, and restricted cash at end of period
$
185,386

 
$
112,143

 
 
 
 
Supplemental disclosure and schedules:
 
 
 
Cash flow disclosure, including non-cash activities:
 
 
 
Cash paid for interest
$
18,504

 
$
23,973

Cash paid for income taxes, net of refunds of $138 and $509
$
1,040

 
$
684

Distributions payable
$
13,030

 
$
13,440

Recognition of partially deferred gains on property sales
$
12,756

 
$

Accrued capital expenditures and tenant improvements
$
5,207

 
$
1,706

Accrued investment in re-development projects
$
362

 
$

Accrued lease commissions and other leasing costs
$
410

 
$
218

Accrued common stock repurchase costs
$
565

 
$

 
 
 
 
Purchase of investment properties:
 
 
 
Net investment properties
$
150,477

 
$
570,403

Accounts receivable, lease intangibles, and deferred costs and other assets
14,121

 
69,214

Accounts payable, accrued expenses, lease intangibles, and other liabilities
(5,882
)
 
(30,632
)
Assumption of mortgage debt

 
(41,717
)
Cash outflow for purchase of investment properties
158,716

 
567,268

Assumption of mortgage principal

 
41,000

Capitalized acquisition costs
(260
)
 
(1,692
)
Construction escrow accounts
467

 
14,568

Credits and other changes in cash outflow, net
877

 
2,567

Accrued contingent consideration

 
9,714

Gross acquisition price of investment properties
$
159,800

 
$
633,425

 
 
 
 
Sale and transfer of investment properties:
 
 
 
Net investment properties
$
251,383

 
$
166,724

Accounts receivable, lease intangibles, and deferred costs and other assets
10,077

 
5,597

Accounts payable, accrued expenses, lease intangibles, and other liabilities
(10,289
)
 
(3,682
)
Debt extinguished through transfer of properties
(44,331
)
 
(3,383
)
Debt extinguished through disposition of properties
(14,854
)
 

Gain on sale and transfer of investment properties, net
51,741

 
31,749

Gain on extinguishment of debt, net
10,697

 
838

Cash inflow from sale and transfer of investment properties, net
254,424

 
197,843

Transfer of mortgage principal to buyer
16,600

 

Surrender of mortgage escrows for transferred properties
2,160

 
8,071

Credits and other changes in cash inflow, net
9,766

 
216

Gross disposition price of investment properties
$
282,950

 
$
206,130


See accompanying notes to condensed consolidated financial statements.


5

INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. Readers of these interim condensed consolidated financial statements (the "Quarterly Report") should refer to the audited consolidated financial statements of InvenTrust Properties Corp. (the "Company") as of and for the year ended December 31, 2017, which are included in the Company's Annual Report on Form 10-K (the "Annual Report"), as certain note disclosures contained in such audited consolidated financial statements have been omitted from this Quarterly Report. In the opinion of management, all adjustments necessary (consisting of normal recurring accruals, except as otherwise noted) for a fair presentation have been included in these condensed consolidated financial statements.
1. Organization
The Company was incorporated as Inland American Real Estate Trust, Inc. in October of 2004 as a Maryland corporation and has elected to be taxed, and currently qualifies, as a real estate investment trust ("REIT") for federal tax purposes. The Company is taxed and operates in a manner that will allow the Company to continue to qualify as a REIT for U.S. federal income tax purposes. So long as it maintains its qualification as a REIT, the Company generally will not be subject to U.S. federal income tax on taxable income that is distributed to stockholders. If the Company fails to continue to qualify as a REIT in any taxable year, without the benefit of certain relief provisions, the Company will be subject to U.S. federal and state income tax on its taxable income at regular corporate tax rates and would not be able to re-elect REIT status during the four years following the year of the failure.
The Company changed its name to InvenTrust Properties Corp. in April of 2015. The Company was formed to own, manage, acquire, and develop a diversified portfolio of commercial real estate located throughout the United States and to own properties in development, to partially own properties through joint ventures, and to own investments in marketable securities and other assets. The Company is now solely focused on owning, managing, acquiring, and developing a multi-tenant retail platform. As used throughout this Quarterly Report, the terms "Company," "InvenTrust," "we," "us," or "our" mean InvenTrust Properties Corp. and its wholly owned and unconsolidated joint venture investments.
Unless otherwise noted, all amounts are stated in thousands, except share, per share, and per square foot data. Any reference to number of properties, square feet, tenant and occupancy data are unaudited.
The accompanying condensed consolidated financial statements include the accounts of the Company, and all wholly owned subsidiaries and any consolidated variable interest entities (VIEs). Subsidiaries generally consist of limited liability companies (LLCs) and limited partnerships (LPs). All significant intercompany balances and transactions have been eliminated.
Each retail property is owned by a separate legal entity that maintains its own books and financial records, and each separate legal entity's assets are not available to satisfy the liabilities of other affiliated entities, except as otherwise disclosed in "Note 7. Debt."
As of September 30, 2018, the Company's assets consisted of 63 retail properties, including two retail properties classified as consolidated VIEs. As of September 30, 2017, the Company's assets consisted of 70 retail properties. In addition, as of September 30, 2018 and 2017, the Company had significant investments in two operating real estate joint ventures, one of which owns an interest in 14 and 15 retail properties, respectively, managed by the Company. The other joint venture owns land to be developed in Sacramento, California.
2. Basis of Presentation and Recently Issued Accounting Pronouncements
The accompanying condensed consolidated financial statements have been prepared in accordance with GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates, judgments and assumptions are required in a number of areas, including, but not limited to, evaluating the impairment of long-lived assets, allocating the purchase price of acquired assets, determining the fair value of debt and evaluating the collectability of accounts receivable. The Company bases these estimates, judgments and assumptions on historical experience and various other factors that the Company believes to be reasonable under the circumstances. Actual results may differ from these estimates.

6

INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

Reclassifications
The Company has made certain reclassifications to the condensed consolidated statement of operations and comprehensive income for the three and nine months ended September 30, 2017 to conform to the 2018 presentation, including a $1,019 and $2,846 reclassification, respectively, of certain payroll costs from general and administrative expenses to property operating expenses based on the determination by the Company that certain functions' activities were more directly associated with the operations of the retail properties than corporate-level activities.
In addition, upon the adoption of ASU No. 2016-18, Statement of Cash Flows, the Company has made certain reclassifications to the condensed consolidated statement of cash flows for the nine months ended September 30, 2017 to conform to the 2018 presentation. For the nine months ended September 30, 2017, the adoption resulted in a net $4,092 increase in cash used in investing activities. The Company determined that the presentation of funds held in escrow for potential future property acquisitions as restricted cash most appropriately reflects the nature of the restrictions on the balances and underlying transactions; historically, the funds were recorded as deferred costs and other assets, net. This reclassification increased restricted cash on the condensed consolidated balance sheets by $6,650 as of December 31, 2016. As a result, the Company made additional reclassifications to the condensed consolidated statement of cash flows for the nine months ended September 30, 2017 to conform to the 2018 presentation, including a $6,650 increase in net cash used in investing activities resulting from the reclassification of funds held in escrow for potential future property acquisitions.
Recently Issued Accounting Pronouncements Adopted
Standard
 
Description
 
Date of adoption
 
Effect on the financial statements or other significant matters
ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) and related updates
 
Under ASU No. 2014-09, an entity is required to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those promised goods or services. The standard allows either a full or modified retrospective method of adoption.
 
January 2018
 
The Company adopted ASU No. 2014-09 and the related subsequent updates on a modified retrospective basis. The Company has included "Note 3. Revenue Recognition" to address the incremental disclosures pertaining to the new standard which enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
 
 
 
 
 
 
 
ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities
 
Under ASU No. 2016-01, equity investments are generally required to be measured at fair value with changes in fair value recognized in net income. Historically, changes in fair value were reported as a separate component of comprehensive income (loss) until realized.
 
January 2018
 
The Company adopted ASU No. 2016-01 on a modified retrospective basis. The Company determined that this standard did not have a significant impact on the condensed consolidated financial statements.
 
 
 
 
 
 
 
ASU No. 2016-15, Statement of Cash Flows
 
ASU No. 2016-15 reduces existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows, including payment of debt extinguishment costs, settlement of zero-coupon bonds, insurance claim proceeds, and distributions from equity method investees.
 
January 2018
 
The Company adopted ASU No. 2016-15 on a retrospective basis. The Company determined that this standard did not have a significant impact on the condensed consolidated financial statements.
 
 
 
 
 
 
 
ASU No. 2016-18, Statement of Cash Flows
 
ASU No. 2016-18 requires an entity to explain the changes in the combined total of restricted and unrestricted cash in the statement of cash flows.
 
January 2018
 
Upon the Company’s retrospective method adoption, the Company includes amounts generally described as restricted cash with cash and cash equivalents. For the nine months ended September 30, 2017, the adoption resulted in a net $4,092 increase in net cash used in investing activities.

7

INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

Recently Issued Accounting Pronouncements Adopted, continued
 
 
 
 
 
 
 
Standard
 
Description
 
Date of adoption
 
Effect on the financial statements or other significant matters
ASU No. 2017-05, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20)
 
ASU No. 2017-05, which adds guidance for partial sales of nonfinancial assets and clarifies the scope of Subtopic 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets, applies to the derecognition of all nonfinancial assets (including real estate) for which the counterparty is not a customer. The new guidance requires an entity to derecognize a nonfinancial asset in a partial sale transaction when it ceases to have a controlling financial interest in the asset and has transferred control of the asset and generally requires the full gain be recognized.
 
January 2018
 
For property sales where the Company has no continuing involvement, there should be no change to the Company's timing of gain or loss recognition. The Company adopted ASU No. 2017-05 in conjunction with the new revenue standard on January 1, 2018, resulting in deferred gains of $12,756 recognized through beginning distributions in excess of accumulated net income, as discussed in "Note 6. Investment in Consolidated and Unconsolidated Entities".
Recently Issued Accounting Pronouncements Not Yet Adopted
 
 
 
 
 
 
 
Standard
 
Description
 
Date of adoption
 
Effect on the financial statements or other significant matters
ASU No. 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities

 
ASU No. 2017-12 is intended to better align the results of cash flow and fair value hedge accounting with risk-management activities through changes to both the designation and measurement guidance for qualifying hedging relationships in the financial statements. The transition guidance provides the option of early adoption of the new standard using a modified retrospective transition method in any interim period, or alternatively requires adoption for fiscal years beginning after December 15, 2018.
 
January 2019
 
The Company is continuing to evaluate this guidance but does not expect its adoption will have a significant impact on the condensed consolidated financial statements.

 
 
 
 
 
 
 
ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement

 
ASU No. 2018-13 is intended to improve the effectiveness of the disclosures required by Topic 820, Fair Value Measurement by eliminating, amending, or adding certain disclosures. The amendments in this ASU are the result of a broader disclosure project called FASB Concepts Statement, Conceptual Framework for Financial Reporting — Chapter 8: Notes to Financial Statements, which was finalized on August 28, 2018. Certain amendments require a prospective transition method, while others require a retrospective transition method. The guidance is effective for all entities for fiscal years beginning after December 15, 2019, and early adoption is permitted.
 
January 2020
 
The Company is continuing to evaluate this guidance but does not expect its adoption will have a significant impact on the condensed consolidated financial statements.


8

INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

Recently Issued Accounting Pronouncements Not Yet Adopted, continued
Standard
 
Description
 
Date of adoption
 
Effect on the financial statements or other significant matters
ASU No. 2016-02, Leases, (Topic 842) and related updates
 
ASU No. 2016-02 amends the existing guidance for lease accounting for both parties to a lease contract (i.e. lessees and lessors). ASU No. 2016-02 will be effective for annual reporting periods beginning after December 15, 2018, and early adoption is permitted. The new standard requires a modified retrospective transition method for all leases existing at the date of initial application, with an option to use certain practical expedients available.
 
January 2019
 
The Company will adopt the new standard and related updates on a modified retrospective basis on January 1, 2019 and will apply the effective date method in which the elected practical expedients will be applied consistently to all leases commenced before the effective date of January 1, 2019. The Company's comparative periods will not be restated.

The Company will elect the accounting policy, among others, to not separate lease and non-lease components for all qualifying leases. In effect, this will generally relieve the Company from the requirement to account for certain consideration under the new revenue standard.

Due to the new standard’s narrowed definition of initial direct costs, the Company expects to expense as incurred certain lease origination costs currently capitalized and amortized to expense over the lease term. Any costs no longer qualifying as initial direct costs will result in an increase to general and administrative expense in the condensed consolidated statements of operations and comprehensive income in the period of adoption and prospectively. However, the Company does not believe this change will have a material impact on its condensed consolidated financial statements.

As a lessee, the most significant impact to the Company will be the recognition of a new right-of-use asset and lease liability on the condensed consolidated balance sheet of approximately $3,000, which was estimated by utilizing an average discount rate of approximately 4.4%, reflecting the Company's incremental borrowing rate. These initial estimates are based on the Company’s corporate office and ground lease arrangements as of September 30, 2018 and may change prior to the adoption date.

As a lessor, the Company believes that substantially all of the Company's leases will continue to be classified as operating leases under the new standard and will continue to record revenues from rental properties on a straight-line basis. However, certain ground, anchor, and other long-term leases entered into or acquired subsequent to the adoption date have an increased likelihood of being classified as either sales-type or finance-type leases.
Any other recently issued accounting standards or pronouncements not disclosed above have been excluded as they are either not relevant to the Company, or are not expected to have a material effect on the condensed consolidated financial statements of the Company.

9

INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

3. Revenue Recognition
As a result of the adoption of Topic 606, Revenue from Contracts with Customers ("Topic 606"), the Company has changed its accounting policy from Topic 605, Revenue Recognition ("Topic 605"), for revenue recognized through other fee income on the condensed consolidated statement of operations and comprehensive income. The comparative period information has not been adjusted and continues to be reported under Topic 605. For the comparative period information reported under Topic 605, the Company recognized the fees as revenue when the related services were performed. The implementation of Topic 606 generally did not change the timing or pattern of revenue recognition for other fee income. As a result, there was no cumulative effect recognized. The Company has elected to apply Topic 606 to new and existing contracts that are not completed contracts as of January 1, 2018.
The Company has changed its accounting policy regarding the sales of investment property in accordance with Subtopic 610-20. When a sale contract exists and the Company has transferred control of the investment property, the Company derecognizes the investment property and recognizes a gain or loss equal to the difference between the amount of consideration transferred and the carrying amount of the investment property. Historically, the Company recognized gains and losses from the sale of investment property at the time of sale using the full accrual method based on the criteria in Topic 360-20, Property, Plant and Equipment - Real Estate Sales.
The following table reflects the disaggregation of other fee income:
 
Three months ended September 30,
 
Nine months ended September 30,
 
2018
 
2017
 
2018
 
2017
Property management fees
$
631

 
$
671

 
$
1,996

 
$
2,126

Asset management fees
269

 
303

 
831

 
910

Leasing commissions and other fees
65

 
44

 
138

 
176

Other fee income
$
965

 
$
1,018

 
$
2,965

 
$
3,212

Contract Balances
The Company recognizes revenue when it satisfies a performance obligation. These rights to consideration most often result in receivables that are settled through recurring monthly customer payments for services provided over the term of the contract, which has a remaining original duration through 2023. The Company generally does not receive prepayments for services or recognize revenue prior to being legally entitled to payment from the customer. As a result, the Company generally does not record material contract assets or contract liabilities. The Company has receivables of $683 and $515 as of September 30, 2018 and December 31, 2017, respectively, which are included in deferred costs and other assets, net, on the condensed consolidated balance sheets.
Property Management and Asset Management Fees
The Company earns property management and asset management fees from services provided to our joint venture partnerships. Property management and asset management fees are recognized over time as services are rendered. The bundled services of the property management performance obligation and asset management performance obligation each qualify as a series of distinct services satisfied over time. The variable consideration related to each of the performance obligations is recognized in each of the periods that directly relate to the Company's efforts to provide those services. Accordingly, the Company has elected the optional exemption provided by Topic 606 and does not disclose information about remaining wholly unsatisfied performance obligations. The uncertainty of the property management and asset management fees, which generally relate to the fluctuation in cash receipts from tenants and potential changes in equity capitalization, are resolved on a monthly basis. For certain services, the Company acts as an agent on behalf of the customer to arrange for performance by a third-party. Based on the Company's judgment, both the underlying asset management service activities and the underlying property management service activities are not distinct but are inputs (or fulfillment activities) to provide the combined output (either the overall asset management service or the overall property management service).

10

INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

Leasing Commissions and Other Fees
The Company earns leasing commissions and other fees from services provided to our joint venture partnerships. Leasing commissions and other fees are recognized at a point in time consistent with the underlying service. The leasing performance obligation and other performance obligations are satisfied at the point in time which the customer is transferred control over and consumes the benefit of the service. The variable consideration related to each of the performance obligations is recognized in each of the periods that directly relate to the Company's efforts to provide those services. The uncertainty of the leasing commissions and other fees are resolved upon delivery of the underlying service.
4. Acquired Properties
The following table reflects the retail properties acquired, accounted for as asset acquisitions, during the nine months ended September 30, 2018:
Property
 
Metropolitan Statistical Area (MSA)(a)
 
Acquisition Date
 
Gross
Acquisition Price
 
Square Feet
PGA Plaza (b)
 
Miami-Fort Lauderdale-West Palm Beach, FL
 
May 16, 2018
 
$
88,000

 
120,000

Kennesaw Marketplace (b)
 
Atlanta-Sandy Springs-Roswell, GA
 
May 30, 2018
 
64,300

 
117,000

Kennesaw Marketplace, Phase 3 (c)
 
Atlanta-Sandy Springs-Roswell, GA
 
September 13, 2018
 
7,500

 
13,000

 
 
 
 
 
 
$
159,800

 
250,000

(a)
As defined by the United States Office of Management and Budget.
(b)
These acquisitions were made through two consolidated VIEs and used to facilitate an Internal Revenue Code Section 1031 tax-deferred exchange ("Reverse 1031 Exchange").
(c)
The assets, liabilities, and operations of Kennesaw Marketplace, Phase 3, are accounted for as part of the larger Kennesaw Marketplace retail property.
The following table summarizes the retail properties acquired, accounted for as asset acquisitions, during the nine months ended September 30, 2017:
Property
 
MSA
 
Acquisition Date
 
Gross
Acquisition Price
 
Square Feet
Campus Marketplace (a)
 
San Diego-Carlsbad, CA
 
January 6, 2017
 
$
73,350

 
144,000

Paraiso Parc and
Westfork Plaza
 
Miami-Fort Lauderdale-West Palm Beach, FL
 
February 1, 2017
 
163,000

 
393,000

The Shops at Town Center
 
Washington-Arlington-Alexandria,
DC-VA-MD-WV
 
February 21, 2017
 
53,550

 
125,000

Cary Park Town Center
 
Raleigh-Cary, NC
 
August 14, 2017
 
25,000

 
93,000

The Parke
 
Austin-Round Rock, TX
 
August 18, 2017
 
112,250

 
364,000

The Plaza Midtown
 
Atlanta-Sandy Springs-Roswell, GA
 
August 18, 2017
 
31,800

 
70,000

River Oaks (b)
 
San Jose-Sunnyvale-Santa Clara, CA
 
September 14, 2017
 
115,000

 
275,000

Kyle Marketplace (b)
 
Austin-Round Rock, TX
 
September 21, 2017
 
59,475

 
226,000

 
 
 
 
 
 
$
633,425

 
1,690,000

(a)
As part of this acquisition, the Company assumed mortgage debt of $41,717, as reported within non-cash financing activities on the condensed consolidated statement of cash flows for the nine months ended September 30, 2017.
(b)
These asset acquisitions were structured as Reverse 1031 Exchanges. During the first quarter of 2018, the title of Kyle Marketplace and River Oaks transferred to the Company through the completions of an exchange and expiration of the 180-day waiting period, respectively.
The Company incurred transaction costs of $60 and $260 during the three and nine months ended September 30, 2018, respectively, and $524 and $1,692 during the three and nine months ended September 30, 2017, respectively, which were capitalized and included in building and other improvements on the Company's condensed consolidated balance sheets.

11

INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

The following table summarizes the estimated fair value of the retail properties' assets acquired and liabilities assumed for the nine months ended September 30, 2018 and September 30, 2017:
 
2018 Acquisitions
 
2017 Acquisitions
Land
$
23,001

 
$
125,990

Building and other improvements
127,216

 
440,204

Total investment properties
150,217

 
566,194

Intangible assets (a)
14,054

 
69,306

Intangible liabilities (b)
(5,119
)
 
(19,099
)
Net other assets and liabilities
648

 
17,024

Total fair value of assets acquired and liabilities assumed
$
159,800

 
$
633,425

(a)
Intangible assets include in-place leases and above-market leases.
(b)
Intangible liabilities include below-market leases.
5. Disposed Properties
Continuing operations
The following retail properties were disposed of during the nine months ended September 30, 2018:
Date
 
Property
 
Square
Feet
 
Gross
Disposition
Price
 
Gain (Loss) on Sale of Investment Properties, net
 
Gain (Loss) on Extinguishment
of Debt (d)
January 9, 2018
 
Sherman Town Center I & II
 
485,000

 
$
63,000

 
$
12,382

 
$

January 25, 2018
 
Grafton Commons
 
239,000

 
33,500

 
6,564

 

March 8, 2018
 
Lakeport Commons
 
283,000

 
31,000

 
(666
)
 

March 21, 2018
 
Stonecrest Marketplace (a)
 
265,000

 

 
1,777

 
10,752

March 31, 2018
 
Northwest Marketplace (b)
 

 

 
248

 

April 17, 2018
 
Market at Morse/Hamilton
 
45,000

 
10,000

 
1,592

 

May 24, 2018
 
Siegen Plaza
 
156,000

 
29,000

 
3,849

 
(54
)
June 20, 2018
 
Tomball Town Center
 
67,000

 
22,750

 
7,184

 

June 26, 2018
 
Bellerive Plaza (c)
 
76,000

 

 
(22
)
 
1,694

June 28, 2018
 
Parkway Centre North
 
143,000

 
23,700

 
5,357

 
(1,695
)
September 14, 2018
 
Tulsa Hills
 
473,000

 
70,000

 
13,476

 

 
 
 
 
2,232,000

 
$
282,950

 
$
51,741

 
$
10,697

(a)
On March 21, 2018, the Company surrendered Stonecrest Marketplace, with a carrying value of $23,932, to the lender in satisfaction of non-recourse debt with an initial maturity date of March 1, 2017 and recognized a gain on transfer of assets, net, of $1,777. The Company is not aware of any material outstanding commitments and contingencies related to Stonecrest Marketplace.
(b)
The Company recognized a gain on sale of $248 related to the completion of a partial condemnation at this retail property.
(c)
On June 26, 2018, the Company surrendered Bellerive Plaza, with a carrying value of $4,771, to the lender in satisfaction of non-recourse debt with an initial maturity date of June 1, 2017. The Company recognized a loss on transfer of assets, net, of $22. The Company is not aware of any material outstanding commitments and contingencies related to Bellerive Plaza.
(d)
In addition to the gain or loss recognized as a result of the disposition of retail properties, the Company extinguished an additional loan on a retail property resulting in a loss on debt extinguishment of $4.
In aggregate, the Company recognized net proceeds of $254,424 from the sales, surrender, and condemnation of these properties on the condensed consolidated statement of cash flows during the nine months ended September 30, 2018.

12

INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

The following retail properties were disposed of during the nine months ended September 30, 2017:
Date
 
Property
 
Square
Feet
 
Gross
Disposition
Price
 
Gain (Loss) on Sale of Investment Properties, net
 
Gain (Loss) on Extinguishment
of Debt
January 10, 2017
 
Penn Park
 
242,000

 
$
29,050

 
$
1,021

 
$

May 17, 2017
 
Intech Retail (a)
 
19,000

 

 
(53
)
 
882

May 19, 2017
 
Sparks Crossing
 
336,000

 
40,280

 
10,584

 

June 23, 2017
 
Lincoln Village
 
164,000

 
30,000

 
2,355

 

June 30, 2017
 
Market at Westlake (b)
 

 

 
474

 

July 31, 2017
 
Pavilions at Hartman Heritage
 
223,000

 
21,700

 
(1,708
)
 

July 31, 2017
 
Legacy Crossing
 
134,000

 
10,250

 
(211
)
 
(1
)
September 28, 2017
 
Heritage Plaza
 
132,000

 
21,350

 
9,172

 
(41
)
 
 
 
 
1,250,000

 
$
152,630

 
$
21,634

 
$
840

(a)
On May 17, 2017, the Company surrendered Intech Retail, with a carrying value of $2,338, to the lender in satisfaction of non-recourse debt with an initial maturity date of November 1, 2016 and recognized a loss on transfer of assets, net, of $53. The Company is not aware of any material outstanding commitments and contingencies related to Intech Retail.
(b)
The Company recognized a gain on sale of $474 related to the completion of a partial condemnation at this retail property.
In aggregate, the Company recognized net proceeds of $197,843 from the sales, surrender, and condemnation of these properties on the condensed consolidated statement of cash flows during the nine months ended September 30, 2017.
Discontinued operations
On August 30, 2017, the Company sold its remaining non-core office property, Worldgate Plaza, for a gross disposition price of $53,500. This disposition represented the conclusion of the Company's strategic shift away from a diversified portfolio of commercial real estate assets not classified as multi-tenant retail. Certain reclassifications were made to discontinued operations on the condensed consolidated statement of operations and comprehensive income for the three and nine months ended September 30, 2017 to reflect the operations of Worldgate Plaza.
 
Three months ended
September 30, 2017
 
Nine months ended
September 30, 2017
Total income
$
844

 
$
3,855

Less:
 
 
 
Depreciation and amortization expense
301

 
1,205

General and administrative, property operating, and real estate tax expenses
492

 
2,398

Operating income from discontinued operations
51

 
252

Interest expense, income taxes, and other miscellaneous expenses
(443
)
 
(1,993
)
Gain on sale of properties, net
10,115

 
10,115

Loss on extinguishment of debt
(2
)
 
(2
)
Net income from discontinued operations
$
9,721

 
$
8,372

 
 
 
 
Net income per common share, from discontinued operations, basic and diluted
$
0.01

 
$
0.01

Weighted average number of common shares outstanding, basic and diluted
773,517,492

 
773,405,710


13

INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

6. Investment in Consolidated and Unconsolidated Entities
Consolidated Entities
During the second quarter of 2018, the Company entered into purchase agreements structured as Reverse 1031 Exchanges and loaned $152,300 to the VIEs to acquire PGA Plaza and Kennesaw Marketplace, which were the Company's only active Reverse 1031 Exchanges. As of September 30, 2018, the Company was deemed to be the primary beneficiary as it has the ability to direct the activities of the entities that most significantly impact economic performance and has all of the risks and rewards of ownership. Accordingly, the Company consolidated each active Reverse 1031 Exchange at September 30, 2018. The liabilities of the VIEs are non-recourse to the Company, and the assets must first be used to settle obligations of the VIEs. The following table presents the net assets of the VIEs as of September 30, 2018.
 
September 30, 2018
Net investment properties
$
142,329

Other assets
14,225

Total assets
156,554

Other liabilities
(6,614
)
Net assets
$
149,940

Unconsolidated Entities
The entities listed below are owned by the Company and other unaffiliated parties in joint ventures. Net income, distributions and capital transactions for these entities are allocated to the Company and its joint venture partners in accordance with the respective partnership agreements.
 
 
 
 
 
 
Carrying Value of Investment as of
Entity
 
Description
 
Ownership %
 
September 30, 2018
 
December 31, 2017
IAGM Retail Fund I, LLC
 
Multi-tenant retail shopping centers
 
55%
 
$
128,286


$
123,693

Downtown Railyard Venture, LLC
 
Land development
 
90%
 
59,961

 
57,183

Other unconsolidated entities
 
Various real estate investments
 
Various
 
(112
)

(112
)

 

 

 
$
188,135

 
$
180,764

On April 17, 2013, the Company entered into a joint venture, IAGM Retail Fund I, LLC ("IAGM"), with PGGM Private Real Estate Fund, for the purpose of acquiring, owning, managing, supervising, and disposing of retail properties and sharing in the profits and losses from those retail properties and their activities. The Company contributed 14 properties to IAGM during the year ended December 31, 2013, and treated the contribution as a partial sale under Topic 360-20, "Property, Plant and Equipment - Real Estate Sales," and deferred an aggregate gain of $15,625 as a result of the property sales into the joint venture. Through December 31, 2017, the Company was amortizing the basis adjustment over 30 years, consistent with the depreciation period of the investee's underlying assets.
In accordance with the provisions of ASU No. 2017-05, full gain recognition may be required for property sales in which the Company has continuing involvement, where those gains may have been deferred under prior GAAP. As of January 1, 2018, with the adoption of ASU No. 2017-05, the Company's remaining $12,756 of the aforementioned deferred gain has been recognized through beginning distributions in excess of accumulated net income.
During the three months ended September 30, 2018, IAGM recognized a provision for asset impairment of $1,405 on one retail property. During the nine months ended September 30, 2018, IAGM recognized a provision for asset impairment of $3,673 on three retail properties. During the nine months ended September 30, 2018, IAGM disposed of one retail property and recognized a loss on sale of $3,905. For the three and nine months ended September 30, 2018, the Company's share of IAGM's provision for asset impairment was $773 and $2,020, respectively, and its share of the loss on sale for the nine months ended September 30, 2018, was $2,148.

14

INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

Combined Financial Information
The following tables present the combined condensed financial information for the Company's unconsolidated entities.
 
As of
 
September 30, 2018
 
December 31, 2017
Assets:
 
 
 
Real estate assets, net of accumulated depreciation
$
545,014

 
$
586,671

Other assets
99,630

 
73,423

Total assets
$
644,644

 
$
660,094

Liabilities and equity:
 
 
 
Debt, net
311,699

 
311,574

Other liabilities
45,858

 
49,032

Equity
287,087

 
299,488

Total liabilities and equity
$
644,644

 
$
660,094

 
 
 
 
Company's share of equity
$
187,905

 
$
193,572

Cost of investments in excess of the Company's share of underlying net book value, net of accumulated amortization of $0 and $2,647, respectively.
230

 
(12,808
)
Carrying value of investments in unconsolidated entities
$
188,135

 
$
180,764

 
Three months ended September 30,
 
Nine months ended September 30,
 
2018
 
2017
 
2018
 
2017
Revenues
$
15,087

 
$
15,543

 
$
44,951

 
$
49,307

Expenses:
 
 
 
 
 
 
 
Interest expense and loan cost amortization
3,434

 
3,505

 
10,240

 
10,032

Depreciation and amortization
5,124

 
6,234

 
16,401

 
18,848

Operating expenses, ground rent and general and administrative expenses
4,766

 
5,193

 
15,774

 
17,463

Provision for asset impairment
1,405

 

 
3,673

 

Total expenses
14,729

 
14,932

 
46,088

 
46,343

Net income (loss) before gain (loss) on sale of real estate
358

 
611

 
(1,137
)
 
2,964

Gain (loss) on sale of real estate
13

 

 
(3,892
)
 

Net income (loss)
$
371

 
$
611

 
$
(5,029
)
 
$
2,964

 
 
 
 
 
 
 
 
Company's share of net income (loss), net of excess basis depreciation of $0, $130, $0 and $390, respectively
$
(93
)
 
$
648

 
$
(3,069
)
 
$
1,895

Distributions from unconsolidated entities in excess of the investments' carrying value
50

 

 
274

 

Equity in (losses) earnings of unconsolidated entities
$
(43
)
 
$
648

 
$
(2,795
)
 
$
1,895

The following table shows the scheduled maturities of IAGM's mortgages payable as of September 30, 2018 for the remainder of 2018, each of the next four years, and thereafter.
 
Maturities during the year ending December 31,
 
 
 
 
 
2018
 
2019
 
2020
 
2021
 
2022
 
Thereafter
 
Total
Mortgages payable
$
188,925

 
31,353

 

 
23,150

 

 
68,805

 
$
312,233

On June 30, 2018, IAGM entered into a one-year extension on a non-recourse mortgage loan with a balance of $15,103 related to one retail property. The original maturity date of June 30, 2018 has been extended to June 30, 2019.
On October 5, 2018, IAGM used proceeds from the sale of Victory Lakes to extinguish $38,300 of mortgages payable at two retail properties maturing in 2018 and on November 2, 2018, IAGM entered into a non-revolving, senior secured term loan

15

INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

facility of $152,000 to refinance its remaining mortgages payable maturing in 2018, as disclosed in "Note 12. Subsequent Events."
As of September 30, 2018, $23,000 of mortgages payable by the joint venture are recourse to the Company. Subsequent to the execution of the November 2, 2018 non-revolving, senior secured term loan facility, these mortgages payable are no longer recourse of the Company.
7. Debt
As of September 30, 2018, the Company's total debt, net, was $589,994, which consists of mortgages payable, net, of $239,264 and credit agreements, net, of $350,730. The Company believes that it has the ability to repay, refinance or extend any of its debt, and that it has adequate sources of funds to meet short-term cash needs related to mortgages payable. It is anticipated that the Company will use proceeds from property sales, cash on hand, available capacity on term loan and line of credit, if any, to repay, refinance or extend the mortgages payable maturing in the near term.
Mortgages payable
As of September 30, 2018 and December 31, 2017, the Company had the following mortgages payable outstanding:
 
September 30, 2018
 
December 31, 2017
Mortgages payable (a)
$
240,351

 
$
370,804

Premium, net of accumulated amortization
299

 
478

Discount, net of accumulated amortization
(167
)
 
(195
)
Debt issuance costs, net of accumulated amortization
(1,219
)
 
(1,611
)
Total mortgages payable, net
$
239,264

 
$
369,476

(a)
Mortgages payable had fixed interest rates (for both conforming loans and loans in default) ranging from 3.49% to 5.49%, with a weighted average interest rate of 4.37% as of September 30, 2018, and 3.49% to 10.45% with a weighted average interest rate of 5.13%, as of December 31, 2017.
Some of the mortgage loans require compliance with certain covenants, such as debt service coverage ratios, investment restrictions and distribution limitations. As of September 30, 2018, the Company was in compliance with all mortgage loan requirements. Of the total outstanding mortgages payable, $3,000 is recourse to the Company as of September 30, 2018.
The following table shows the scheduled maturities of the Company's mortgages payable as of September 30, 2018 for the remainder of 2018, each of the next four years, and thereafter.
 
Maturities during the year ending December 31,
 
 
 
 
 
2018
 
2019
 
2020
 
2021
 
2022
 
Thereafter
 
Total
Mortgages payable
$
7,575

 
$

 
$
41,000

 
$
12,627

 
$
50,982

 
$
128,167

 
$
240,351

On November 5, 2018, the Company used cash on hand to extinguish a mortgage payable maturing in 2018 of $7,575. Subsequent to this extinguishment, there were no outstanding mortgages payable recourse to the Company.
Credit agreements
On November 5, 2015, the Company entered into a term loan credit agreement for a $300,000 unsecured credit facility with an accordion feature that allows the Company to increase the size of the unsecured term loan credit facility to $600,000, subject to certain conditions. The term loan credit facility is subject to the maintenance of certain financial covenants. As of September 30, 2018 and December 31, 2017, the Company was in compliance with all of the covenants and default provisions under the term loan credit agreement.
On February 3, 2015, the Company entered into an amended and restated credit agreement for a $300,000 unsecured revolving line of credit with an accordion feature that allows the Company to increase the size of its unsecured line of credit up to $600,000, subject to certain conditions. The unsecured revolving line of credit matures on February 2, 2019 and contains one twelve-month extension option that the Company may exercise upon payment of an extension fee equal to 0.15% of the commitment amount on the maturity date and subject to certain other conditions. The unsecured revolving line of credit bears

16

INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

interest at a rate equal to 1-Month LIBOR plus 1.40% and requires the maintenance of certain financial covenants. On July 12, 2018, the Company drew $52,000 on the unsecured revolving line of credit to repay some of the Company's mortgages payable that are maturing in 2018. The Company had $248,000 available under the unsecured revolving line of credit as of September 30, 2018.
As of September 30, 2018 and December 31, 2017, the Company had the following borrowings outstanding under its term loan credit facility and line of credit:
 
September 30, 2018
 
December 31, 2017
 
 
 
Aggregate
Principal Balance
 
Interest
Rate
 
Aggregate
Principal Balance
 
Interest
Rate
 
Maturity Date
5 year - swapped to fixed rate (a)
$
90,000

 
2.6510%
 
$
90,000

 
2.6510%
 
January 15, 2021
5 year - swapped to fixed rate (b)
60,000

 
2.6525%
 
60,000

 
2.6525%
 
January 15, 2021
5 year - variable rate (c)
50,000

 
3.4038%
 
50,000

 
2.6607%
 
January 15, 2021
7 year - variable rate (d)
100,000

 
3.7038%
 
100,000

 
2.9607%
 
November 5, 2022
Total unsecured term loans
300,000

 

 
300,000

 
 
 
 
Issuance costs, net of accumulated amortization
(1,270
)
 
 
 
(1,615
)
 
 
 
 
Total unsecured term loans, net of amortized issuance costs
$
298,730

 
 
 
$
298,385

 
 
 
 
Unsecured revolving line of credit - variable rate (e)
52,000

 
3.5211%
 

 
n/a
 
February 2, 2019
Total outstanding credit agreements, net
$
350,730

 
 
 
 
 
 
 
 
(a)
The Company swapped $90,000 of variable rate debt at an interest rate of 1-Month LIBOR plus 1.3% to a fixed rate of 2.6510%. The swap has an effective date of December 10, 2015, a termination date of December 1, 2019, and a notional amount of $90,000.
(b)
The Company swapped $60,000 of variable rate debt at an interest rate of 1-Month LIBOR plus 1.3% to a fixed rate of 2.6525%. The swap has an effective date of December 10, 2015, a termination date of December 1, 2019, and a notional amount of $60,000.
(c)
Interest rate reflects 1-Month LIBOR plus 1.3% as of September 30, 2018 and December 31, 2017.
(d)
Interest rate reflects 1-Month LIBOR plus 1.6% as of September 30, 2018 and December 31, 2017.
(e)
Interest rate reflects 1-Month LIBOR plus 1.4% as of September 30, 2018.
8. Fair Value Measurements
Recurring Measurements
For assets and liabilities measured at fair value on a recurring basis, quantitative disclosure of the fair value for each major category of assets and liabilities is presented below:
 
 
Fair Value Measurements at September 30, 2018
Assets
 
Level 1
 
Level 2
 
Level 3
Marketable equity securities
 
$
1,078

 
$

 
$

Real estate related bonds
 

 
307

 

Derivative interest rate swaps
 

 
2,295

 

Total assets
 
$
1,078

 
$
2,602

 
$

 
 
Fair Value Measurements at December 31, 2017
Assets
 
Level 1
 
Level 2
 
Level 3
Available-for-sale marketable securities
 
$
4,431


$


$

Real estate related bonds
 


327



Derivative interest rate swaps
 


1,670



Total assets
 
$
4,431

 
$
1,997

 
$


17

INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

Level 1
At September 30, 2018 and December 31, 2017, the fair value of the marketable equity securities has been determined based upon quoted market prices.
Level 2
To calculate the fair value of the real estate related bonds and the derivative interest rate instruments, the Company primarily uses quoted prices for similar securities and contracts. For the real estate related bonds, the Company reviews price histories for similar market transactions. For the derivative interest rate instruments, the Company uses inputs based on data that is observed in the forward yield curve that is widely observable in the marketplace.  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 which utilizes Level 3 inputs, such as estimates of current credit spreads.
As of September 30, 2018 and December 31, 2017, the Company determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company's derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. As of September 30, 2018 and December 31, 2017, the Company had outstanding interest rate swap agreements with an aggregate notional value of $150,000.
Level 3
At September 30, 2018 and December 31, 2017, the Company had no Level 3 recurring fair value measurements.
Nonrecurring Measurements
During the nine months ended September 30, 2018, the Company identified three retail properties that had reductions in the expected holding periods. The Company's estimated fair value was based on executed purchase contracts. The Company recorded a provision for asset impairment of $3,510 on these three retail properties. During the three months ended September 30, 2018, the Company identified two retail properties that had reductions in the expected holding periods. The Company's estimated fair value was based on executed purchase contracts. The Company recorded a provision for asset impairment of $2,713 on these two retail properties.
During the nine months ended September 30, 2017, the Company identified three retail properties that had reductions in the expected holding periods and reviewed the probability of these retail properties' dispositions. The Company's estimated fair values were based on broker opinions of value and letters of intent. The Company recorded a provision for asset impairment of $16,440 on these three retail properties. There was no provision for asset impairment recorded for the three months ended September 30, 2017.
The following table summarizes activity for the Company’s assets measured at fair value on a nonrecurring basis and the related impairment charges for the three and nine months ended September 30, 2018 and 2017:
 
For the three months ended September 30,
 
For the nine months ended September 30,
 
2018
 
2017
 
2018
 
2017
 
Level 3
 
Impairment Losses
 
Level 3
 
Impairment Losses
 
Level 3
 
Impairment Losses
 
Level 3
 
Impairment Losses
Investment properties
$
33,075

 
$
2,713

 
$

 
$

 
$
64,075

 
$
3,510

 
$
36,676

 
$
16,440

Financial Instruments Not Measured at Fair Value
The table below represents the fair value of financial instruments presented at carrying values in the Company's condensed consolidated financial statements as of September 30, 2018 and December 31, 2017.

18

INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

 
September 30, 2018

December 31, 2017
 
Carrying Value
Estimated Fair Value

Carrying Value
Estimated Fair Value
Mortgages payable
$
240,351

$
236,433


$
370,804

$
372,962

Unsecured term loans and revolving line of credit
$
352,000

$
352,276

 
$
300,000

$
299,770

The Company estimated the fair value of its mortgages payable using a weighted average effective market interest rate of 4.71% and 4.20% as of September 30, 2018 and December 31, 2017, respectively. The fair value estimate of the line of credit and term loan approximates the carrying value due to limited market volatility in pricing. The assumptions reflect the terms currently available on similar borrowing terms to borrowers with credit profiles similar to the Company's. As a result, the Company used a weighted average interest rate of 4.08% and 3.48% as of September 30, 2018 and December 31, 2017, respectively, to estimate the fair value of its line of credit and term loan. The Company has determined that its debt instrument valuations are classified in Level 2 of the fair value hierarchy.
9. Earnings per Share and Equity Transactions
The following summarizes the calculation of basic and diluted earnings per share:
 
Three months ended September 30,
 
Nine months ended September 30,
 
2018
 
2017
 
2018
 
2017
Numerator:
 
 
 
 
 
 
 
Net income from continuing operations
$
8,947

 
$
12,244

 
$
66,342

 
$
49,609

Net income from discontinued operations

 
9,721

 

 
8,372

Net income
$
8,947

 
$
21,965

 
$
66,342

 
$
57,981

 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
Weighted average shares outstanding, basic and diluted
768,385,770

 
773,517,492

 
772,341,263

 
773,405,710

 
 
 
 
 
 
 
 
Net income from continuing operations allocated to common stockholders per share
$
0.01

 
$
0.02

 
$
0.09

 
$
0.06

Net income from discontinued operations allocated to common stockholders per share
$

 
$
0.01

 
$

 
$
0.01

Net income per common share, basic and diluted
$
0.01

 
$
0.03

 
$
0.09

 
$
0.07

On August 15, 2018, the Company announced and commenced a modified "Dutch Auction" tender offer (the "Offer") to purchase for cash up to $75.0 million in value of shares of the Company's common stock, par value $0.001 per share (the "Shares"), subject to the Company's ability to increase the number of Shares accepted for payment in the Offer by up to 2% of the Company's outstanding Shares, without amending or extending the Offer in accordance with the rules promulgated by the SEC. The Company exercised that option and increased the Offer by 10,706,774 shares, or $22.5 million, to avoid any proration for the stockholders tendering shares. The Offer expired on September 13, 2018.
As a result of the Offer, the Company has accepted for purchase 46,503,539 shares of its common stock at a purchase price of $2.10 per share, for an aggregate cost of approximately $99.2 million, including fees and expenses, relating to the Offer as of September 30, 2018. Aggregate costs of $99.2 million have been classified as reductions to common stock and additional paid-in capital on the condensed consolidated statement of equity for the nine months ended September 30, 2018. The 46,503,539 shares accepted for purchase in the Offer represented approximately 6.0% of the shares of common stock outstanding at the time of the Offer.

19

INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

10. Stock-Based Compensation
Incentive Award Plan
Effective as of June 19, 2015, the Company's board of directors adopted and approved the InvenTrust Properties Corp. 2015 Incentive Award Plan (as amended, the "Incentive Award Plan"), under which the Company may grant cash and equity incentive awards to eligible employees, directors, and consultants. The restricted share units granted under the Incentive Award Plan to employees vest equally on each of three anniversaries subsequent to the grant date, and annually for those shares granted to directors, subject to the recipients' continued service to the Company. Under the Incentive Award Plan, the Company is authorized to grant up to 30,000,000 shares of the Company's common stock pursuant to awards under the plan. At September 30, 2018, 23,523,614 shares were available for future issuance under the Incentive Award Plan.
A summary of the Company's restricted stock unit activity for the nine months ended September 30, 2018 is as follows:
 
Unvested Restricted
Stock Units
 
Weighted Average Grant Date Price Per Share (a)
Outstanding as of January 1, 2018
1,535,505

 
$3.19
Shares granted
1,892,903

 
$3.14
Shares vested
(190,117
)
 
$3.28
Shares forfeited
(427,970
)
 
$3.20
Outstanding at September 30, 2018
2,810,321

 
$3.16
(a)
On an annual basis, the Company engages an independent third-party valuation advisory consulting firm to estimate the per share value of the Company's common stock on a fully diluted basis.
On September 30, 2018, there was $5,753 of total unrecognized compensation expense related to unvested stock-based compensation arrangements which vest through December 2018, 2019 and 2020, as applicable. The Company recognized stock-based compensation expense of $1,103 and $3,187 for the three and nine months ended September 30, 2018, respectively, and $1,616 and $4,325 for the three and nine months ended September 30, 2017, respectively. Stock-based compensation expense is recognized on a straight-line basis over the vesting period and forfeitures of stock-based awards are recognized as they occur.
11. Commitments and Contingencies
The Company is subject, from time to time, to various types of third-party legal claims or litigation that arise in the ordinary course of business, including, but not limited to, property loss claims, personal injury or other damages resulting from contact with the Company’s properties. These claims and lawsuits and any resulting damages are generally covered by the Company's insurance policies. The Company accrues for legal costs associated with loss contingencies when these costs are probable and reasonably estimable. While the resolution of these matters cannot be predicted with certainty, management does not expect, based on currently available information, that the final outcome of any pending claims or legal proceedings will have a material adverse effect on the financial condition, results of operations or cash flows of the Company.
University House Communities Group, Inc., Indemnity Claims
The Company received an indemnity notice from UHC Acquisition Sub LLC ("UHC") regarding certain matters under the Stock Purchase Agreement, dated January 3, 2016, for University House Communities Group, Inc., which was sold in June 2016. The notice sets forth various items for which UHC believes they are entitled to indemnification from the Company. In the normal course of property dispositions, pursuant to the purchase and sale agreements, certain indemnification claims can be made against the Company by the purchaser, in which the Company will continue to adjust the financial statements, as necessary, based on these claims. Based on the facts and circumstances of the indemnification claims made, guidance provided by third-party specialists and counsel, and management’s initial and ongoing assessment of the UHC claims, the Company accrued a potential loss contingency on the condensed consolidated financial statements as of and for the year ended December 31, 2017; the impact of the accrual was not material to the overall condensed consolidated financial statements. Management has accrued their best estimate of the potential loss related to these claims, but, due to the preliminary nature of this matter, the ultimate resolution could result in a loss of up to $5,000 in excess of the amount accrued. As of September 30, 2018, no material additional information has come to the attention of management that would change their estimate of the potential loss related to these claims.

20

INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

12. Subsequent Events
In preparing its condensed consolidated financial statements, the Company has evaluated events and transactions occurring after September 30, 2018 through the date the financial statements were issued for recognition and disclosure purposes.
The Company has disposed of the following power center retail properties subsequent to September 30, 2018:
Date
 
Property
 
MSA
 
Square Feet
 
Gross Disposition
Price
October 5, 2018
 
McKinney Town Center
 
Dallas-Fort Worth-Arlington, TX
 
243,000

 
$
51,000

October 5, 2018
 
Riverstone
 
Houston-The Woodlands-Sugar Land, TX
 
273,000

 
27,750

October 23, 2018
 
Hiram Pavilion
 
Atlanta–Sandy Springs–Roswell, GA
 
363,000

 
44,350

 
 
 
 
 
 
879,000

 
$
123,100

On October 5, 2018, IAGM disposed of Victory Lakes Shopping Center, a 370,000 square foot power center located in the Houston-The Woodlands-Sugar Land, TX MSA for a gross disposition price of $53,000. IAGM used proceeds from the sale of Victory Lakes to extinguish $38,300 of mortgages payable at two retail properties maturing in 2018.
On November 2, 2018, IAGM entered into a non-revolving, senior secured term loan facility of $152,000 to refinance its mortgages payable maturing in 2018. The senior secured term loan facility matures in November 2023 and contains two twelve-month extension options that IAGM may exercise upon payment of an extension fee equal to 0.10% of the commitment amount on the first day of the extension term and subject to certain other conditions. The senior secured term loan facility bears interest at a rate equal to LIBOR daily floating rate plus 1.55% and requires the maintenance of certain financial covenants. Subsequent to this refinance, there were no outstanding IAGM mortgages payable recourse to the Company.
On November 5, 2018, the Company used cash on hand to extinguish a mortgage payable at Woodlake Crossing of $7,575. Subsequent to this refinance, there were no outstanding mortgages payable recourse to the Company.

21


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Certain statements in this "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Quarterly Report, other than purely historical information, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include statements about the Company's plans, objectives, strategies, financial performance and outlook, trends, the amount and timing of future cash distributions, prospects or future events and involve known and unknown risks that are difficult to predict. As a result, our actual financial results, performance, achievements or prospects may differ materially from those expressed or implied by these forward-looking statements. In some cases, forward-looking statements can be identified by the use of words such as "may," "could," "expect," "intend," "plan," "seek," "anticipate," "believe," "estimate," "guidance," "predict," "potential," "continue," "likely," "will," "would," "illustrative," "should" and variations of these terms and similar expressions, or the negative of these terms or similar expressions. Such forward-looking statements are necessarily based upon estimates and assumptions that, while considered reasonable by us based on our knowledge and understanding of the business and industry, are inherently uncertain. These statements are not guarantees of future performance, and stockholders should not place undue reliance on forward-looking statements.
There are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking statements contained in this Quarterly Report. Such risks, uncertainties and other important factors, include, among others, the risks, uncertainties and factors set forth in our filings with the U.S. SEC, including our Annual Report for the year ended December 31, 2017, as may be updated in this Quarterly Report and other quarterly and current reports, which are on file with the SEC and available at the SEC’s website (www.sec.gov). Such risks and uncertainties, among others, include:
market, political and economic volatility experienced by the U.S. economy or real estate industry as a whole, and the regional and local political and economic conditions in the markets in which our retail properties are located;
our ability to execute on potential strategic transactions aimed to enhance stockholder value and provide investment liquidity to stockholders;
our ability to identify, execute and complete disposition opportunities and at expected valuations;
our ability to identify, execute and complete acquisition opportunities and to integrate and successfully operate any retail properties acquired in the future and manage the risks associated with such retail properties;
our ability to manage the risks of expanding, developing or re-developing some of our current and prospective retail properties;
our transition to an integrated operating platform may not prove successful over the long-term;
loss of members of our senior management team or other key personnel;
changes in governmental regulations and U.S. GAAP or interpretations thereof;
our ability to access capital for renovations and acquisitions on terms and at times that are acceptable to us;
changes in the competitive environment in the leasing market and any other market in which we operate;
shifts in consumer retail shopping from brick and mortar stores to e-commerce;
declaration of bankruptcy by our retail tenants;
forthcoming expirations of certain of our leases and our ability to re-lease such retail properties;
our ability to collect rent from tenants or to rent space on favorable terms or at all;
the impact of leasing and capital expenditures to improve our retail properties to retain and attract tenants;
events beyond our control, such as war, terrorist attacks, including acts of domestic terrorism, natural disasters and severe weather incidents, and any uninsured or under-insured loss resulting therefrom;
actions or failures by our joint venture partners, including development partners;
the cost of compliance with and liabilities under environmental, health and safety laws;
changes in real estate and zoning laws and increases in real property tax rates;
the economic success and viability of our anchor retail tenants;
our debt financing, including risk of default, loss and other restrictions placed on us;
our ability to refinance maturing debt or to obtain new financing on attractive terms;

22


future increases in interest rates;
the availability of cash flow from operating activities to fund distributions;
our investment in equity and debt securities in companies we do not control;
our status as a REIT for federal tax purposes;
changes in federal, state or local tax law, including legislative, administrative, regulatory or other actions affecting REITs; and
the impact of changes in the tax code as a result of recent U.S. federal income tax reform and uncertainty as to how some of those changes may be applied.
These factors are not necessarily all of the important factors that could cause our actual results, performance or achievements to differ materially from those expressed in or implied by any of our forward-looking statements. Other unknown or unpredictable factors also could harm our business, financial condition, results of operations or cash flows. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above. Forward-looking statements speak only as of the date they are made; we do not undertake or assume any obligation to update publicly any of these forward-looking statements to reflect actual results, new information or future events, changes in assumptions or changes in other factors affecting forward-looking statements, except to the extent required by applicable law. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.
The following discussion and analysis relates to the three and nine months ended September 30, 2018 and 2017 and as of September 30, 2018 and December 31, 2017. The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the related notes included in this Quarterly Report.
Executive Summary
InvenTrust Properties Corp. is a premier, pure-play retail REIT that owns, leases, redevelops, acquires and manages open-air centers in key growth markets with favorable demographics. We continue to execute our strategy to enhance our multi-tenant retail platform by acquiring the right centers in the right markets, driven by focused and disciplined capital allocation.
During the nine months ended September 30, 2018, we continued to execute on our strategy by opportunistically disposing of properties not located in our core markets or where we believe the properties' values have been maximized. Our strategy is to redeploy the proceeds from these sales with a disciplined approach into strategic retail properties in our target markets. However, we face significant competition for attractive investment opportunities. As a result of this competition, the purchase prices for attractive and suitable assets may be significantly elevated and may adversely impact our ability to acquire assets at all. Dispositions of real estate assets can be particularly difficult in a challenging economic environment when uncertainties exist about the impact of e-commerce on retailers and when financing alternatives are limited for potential buyers. Our inability to sell assets, or to sell assets at attractive prices, could have an adverse impact on our ability to realize proceeds for reinvestment. In addition, our disposition activity could continue to cause us to experience dilution in financial operating performance during the period in which we dispose of properties.
In evaluating our financial condition and operating performance, management focuses on the following financial and non-financial indicators, discussed in further detail herein:
Property net operating income ("NOI"), which excludes general and administrative expenses, depreciation and amortization, provision for asset impairment, interest and dividends from corporate investments, gains (losses) from sales of properties, gains (losses) on extinguishment of debt, other income (expenses), interest expense, equity in earnings (losses) from unconsolidated entities, and realized and unrealized investment gains, net;
Modified NOI, which reflects property NOI exclusive of lease termination income and GAAP rent adjustments (such as straight-line rent and above/below market lease amortization);
Funds From Operations ("FFO") Applicable to Common Shares, a supplemental non-GAAP measure;
Cash flow from operations as determined in accordance with GAAP;
Economic and physical occupancy and rental rates;