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Section 1: 10-Q (10-Q)

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
þ    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
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 000-54691
 
399152238_pecohorizontallogoblue.jpg
PHILLIPS EDISON & COMPANY, INC.
(Exact Name of Registrant as Specified in Its Charter)
 
 
Maryland
27-1106076
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
11501 Northlake Drive
 Cincinnati, Ohio
45249
(Address of Principal Executive Offices)
(Zip Code)
(513) 554-1110
(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 such filing requirements for the past 90 days.    Yes  þ    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  þ    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
þ
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  þ
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol
 
Name of each exchange on which registered
None
 
None
 
None
As of August 1, 2019, there were 283.5 million outstanding shares of common stock of the Registrant.




PHILLIPS EDISON & COMPANY, INC.
FORM 10-Q
TABLE OF CONTENTS
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


1



w PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PHILLIPS EDISON & COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2019 AND DECEMBER 31, 2018
(Unaudited)
(In thousands, except per share amounts)
  
June 30, 2019
 
December 31, 2018
ASSETS
  
 
  
Investment in real estate:
  
 
  

Land and improvements
$
1,595,005

 
$
1,598,063

Building and improvements
3,241,923

 
3,250,420

In-place lease assets
460,994

 
464,721

Above-market lease assets
66,740

 
67,140

Total investment in real estate assets
5,364,662

 
5,380,344

Accumulated depreciation and amortization
(667,037
)
 
(565,507
)
Net investment in real estate assets
4,697,625

 
4,814,837

Investment in unconsolidated joint ventures
42,418

 
45,651

Total investment in real estate assets, net
4,740,043

 
4,860,488

Cash and cash equivalents
17,772

 
16,791

Restricted cash
34,784

 
67,513

Accounts receivable – affiliates
3,409

 
5,125

Corporate intangible asset, net
4,401

 
14,054

Goodwill
29,066

 
29,066

Other assets, net
131,101

 
153,076

Real estate investment and other assets held for sale
15,877

 
17,364

Total assets
$
4,976,453

 
$
5,163,477

 
 
 
 
LIABILITIES AND EQUITY
  

 
  

Liabilities:
  

 
  

Debt obligations, net
$
2,423,405

 
$
2,438,826

Below-market lease liabilities, net
125,041

 
131,559

Earn-out liability
32,000

 
39,500

Deferred income
14,899

 
14,025

Accounts payable and other liabilities
138,780

 
126,074

Liabilities of real estate investment held for sale
302

 
596

Total liabilities
2,734,427

 
2,750,580

Commitments and contingencies (Note 10)

 

Equity:
  

 
  

Preferred stock, $0.01 par value per share, 10,000 shares authorized, zero shares issued
  
 
  
and outstanding at June 30, 2019 and December 31, 2018, respectively

 

Common stock, $0.01 par value per share, 1,000,000 shares authorized, 283,770 and 279,803
  
 
  
shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively
2,838

 
2,798

Additional paid-in capital
2,718,871

 
2,674,871

Accumulated other comprehensive (loss) income (“AOCI”)
(20,538
)
 
12,362

Accumulated deficit
(830,358
)
 
(692,045
)
Total stockholders’ equity
1,870,813

 
1,997,986

Noncontrolling interests
371,213

 
414,911

Total equity
2,242,026

 
2,412,897

Total liabilities and equity
$
4,976,453

 
$
5,163,477


See notes to consolidated financial statements.

2



PHILLIPS EDISON & COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018
(Unaudited)
(In thousands, except per share amounts)
  
Three Months Ended June 30,
 
Six Months Ended June 30,
  
2019
 
2018
 
2019
 
2018
Revenues:
  
 
  
 
 
 
 
Rental income
$
129,030

 
$
94,410

 
$
257,890

 
$
188,296

Fees and management income
3,051

 
9,137

 
6,312

 
17,849

Other property income
500

 
626

 
1,148

 
1,227

Total revenues
132,581

 
104,173

 
265,350

 
207,372

Expenses:
  

 
  

 
 
 
 
Property operating
20,933

 
16,901

 
43,799

 
35,016

Real estate taxes
17,930

 
13,326

 
35,278

 
26,473

General and administrative
13,540

 
13,450

 
26,750

 
23,911

Depreciation and amortization
59,554

 
46,385

 
120,543

 
92,812

Impairment of real estate assets
25,199


10,939


38,916


10,939

Total expenses
137,156

 
101,001

 
265,286

 
189,151

Other:
  

 
  

 
 
 
 
Interest expense, net
(25,758
)
 
(17,051
)
 
(50,842
)
 
(33,830
)
(Loss) gain on disposal of property, net
(1,266
)
 
985

 
5,855

 
985

Other impairment charges
(9,661
)


 
(9,661
)
 

Other (expense) income, net
(912
)
 
(1,182
)
 
6,624

 
(1,289
)
Net loss
(42,172
)

(14,076
)

(47,960
)

(15,913
)
Net loss attributable to noncontrolling interests
5,602

 
2,725

 
6,195

 
2,962

Net loss attributable to stockholders
$
(36,570
)

$
(11,351
)

$
(41,765
)

$
(12,951
)
Earnings per common share:
  

 
  

 
 
 
 
Net loss per share attributable to stockholders - basic and diluted (See Note 13)
$
(0.13
)
 
$
(0.06
)
 
$
(0.15
)
 
$
(0.07
)
 
 
 
 
 
 
 
 
Comprehensive (loss) income:
  

 
  

 
 
 
 
Net loss
$
(42,172
)
 
$
(14,076
)
 
$
(47,960
)
 
$
(15,913
)
Other comprehensive (loss) income:
  

 
  

 
 
 
 
Change in unrealized value on interest rate swaps
(23,645
)
 
4,855

 
(38,006
)
 
18,343

Comprehensive (loss) income
(65,817
)
 
(9,221
)
 
(85,966
)
 
2,430

Net loss attributable to noncontrolling interests
5,602

 
2,725

 
6,195

 
2,962

Comprehensive loss (income) attributable to noncontrolling interests
3,168

 
1,782

 
5,106

 
(584
)
Comprehensive (loss) income attributable to stockholders
$
(57,047
)
 
$
(4,714
)
 
$
(74,665
)
 
$
4,808


See notes to consolidated financial statements.

3



PHILLIPS EDISON & COMPANY, INC.
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND 2018
(Unaudited)
(In thousands, except per share amounts)
 
Three Months Ended June 30, 2019 and 2018
  
Common Stock
 
Additional Paid-In Capital
 
AOCI
 
Accumulated Deficit
 
Total Stockholders’ Equity
 
Noncontrolling Interests
 
Total Equity
  
Shares
 
Amount
 
 
 
 
 
 
Balance at April 1, 2018
186,027

 
$
1,860

 
$
1,638,176

 
$
27,381

 
$
(634,164
)
 
$
1,033,253

 
$
428,019

 
$
1,461,272

Share repurchases
(3,830
)
 
(38
)
 
(42,099
)
 

 

 
(42,137
)
 

 
(42,137
)
Dividend reinvestment plan (“DRIP”)
1,102

 
11

 
12,124

 

 

 
12,135

 

 
12,135

Change in unrealized value on interest
   rate swaps

 

 

 
3,912

 

 
3,912

 
943

 
4,855

Common distributions declared, $0.17
   per share

 

 

 

 
(31,158
)
 
(31,158
)
 

 
(31,158
)
Distributions to noncontrolling interests

 

 

 

 

 

 
(7,308
)
 
(7,308
)
Share-based compensation expense
5

 

 
401

 

 

 
401

 
1,300

 
1,701

Other

 

 
(12
)
 

 

 
(12
)
 

 
(12
)
Net loss

 

 

 

 
(11,351
)
 
(11,351
)
 
(2,725
)
 
(14,076
)
Balance at June 30, 2018
183,304

 
$
1,833

 
$
1,608,590

 
$
31,293

 
$
(676,673
)
 
$
965,043

 
$
420,229

 
$
1,385,272

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at April 1, 2019
281,549

 
$
2,815

 
$
2,693,946

 
$
(61
)
 
$
(745,740
)
 
$
1,950,960

 
$
398,225

 
$
2,349,185

Share repurchases
(541
)
 
(5
)
 
(5,989
)
 

 

 
(5,994
)
 

 
(5,994
)
DRIP
1,558

 
15

 
17,225

 

 

 
17,240

 

 
17,240

Change in unrealized value on interest
rate swaps

 

 

 
(20,477
)
 

 
(20,477
)
 
(3,168
)
 
(23,645
)
Common distributions declared, $0.17
   per share

 

 

 

 
(48,048
)
 
(48,048
)
 

 
(48,048
)
Distributions to noncontrolling interests

 

 

 

 

 

 
(7,061
)
 
(7,061
)
Share-based compensation expense

 

 
630

 

 

 
630

 
1,891

 
2,521

Share-based awards vesting
24

 
1

 
(1
)
 

 

 

 

 

Conversion of noncontrolling interests
1,180

 
12

 
13,060

 

 

 
13,072

 
(13,072
)
 

Net loss

 

 

 

 
(36,570
)
 
(36,570
)
 
(5,602
)
 
(42,172
)
Balance at June 30, 2019
283,770

 
$
2,838

 
$
2,718,871

 
$
(20,538
)
 
$
(830,358
)
 
$
1,870,813

 
$
371,213

 
$
2,242,026



























4



PHILLIPS EDISON & COMPANY, INC.
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018
(Unaudited)
(In thousands, except per share amounts)
 
Six Months Ended June 30, 2019 and 2018
  
Common Stock
 
Additional Paid-In Capital
 
AOCI
 
Accumulated Deficit
 
Total Stockholders’ Equity
 
Noncontrolling Interests
 
Total Equity
  
Shares
 
Amount
 
 
 
 
 
 
Balance at January 1, 2018
185,233

 
$
1,852

 
$
1,629,130

 
$
16,496

 
$
(601,238
)
 
$
1,046,240

 
$
432,442

 
$
1,478,682

Share repurchases
(4,196
)
 
(42
)
 
(46,110
)
 

 

 
(46,152
)
 

 
(46,152
)
DRIP
2,262

 
23

 
24,876

 

 

 
24,899

 

 
24,899

Change in unrealized value on interest
   rate swaps

 

 

 
14,797

 

 
14,797

 
3,546

 
18,343

Common distributions declared, $0.34
   per share

 

 

 

 
(62,484
)
 
(62,484
)
 

 
(62,484
)
Distributions to noncontrolling interests

 

 

 

 

 

 
(14,097
)
 
(14,097
)
Share-based compensation expense
5

 

 
719

 

 

 
719

 
1,300

 
2,019

Other

 

 
(25
)
 

 

 
(25
)
 

 
(25
)
Net loss

 

 

 

 
(12,951
)
 
(12,951
)
 
(2,962
)
 
(15,913
)
Balance at June 30, 2018
183,304

 
$
1,833

 
$
1,608,590

 
$
31,293

 
$
(676,673
)
 
$
965,043

 
$
420,229

 
$
1,385,272

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2018
279,803

 
$
2,798

 
$
2,674,871

 
$
12,362

 
$
(692,045
)
 
$
1,997,986

 
$
414,911

 
$
2,412,897

Adoption of new accounting
   pronouncement (see Note 3)

 

 

 

 
(528
)
 
(528
)
 

 
(528
)
Balance at January 1, 2019
279,803

 
$
2,798

 
$
2,674,871

 
$
12,362

 
$
(692,573
)
 
$
1,997,458

 
$
414,911

 
$
2,412,369

Share repurchases
(1,146
)
 
(11
)
 
(12,663
)
 

 

 
(12,674
)
 

 
(12,674
)
DRIP
3,161

 
31

 
34,927

 

 

 
34,958

 

 
34,958

Change in unrealized value on interest
rate swaps

 

 

 
(32,900
)
 

 
(32,900
)
 
(5,106
)
 
(38,006
)
Common distributions declared, $0.34
   per share

 

 

 

 
(96,020
)
 
(96,020
)
 

 
(96,020
)
Distributions to noncontrolling interests

 

 

 

 

 

 
(14,228
)
 
(14,228
)
Share-based compensation expense

 

 
1,063

 

 

 
1,063

 
2,730

 
3,793

Share-based awards vesting
82

 
1

 
(1
)
 

 

 

 

 

Share-based awards retained for taxes
(18
)
 

 
(206
)
 

 

 
(206
)
 

 
(206
)
Conversion of noncontrolling interests
1,888

 
19

 
20,880

 

 

 
20,899

 
(20,899
)
 

Net loss

 

 

 

 
(41,765
)
 
(41,765
)
 
(6,195
)
 
(47,960
)
Balance at June 30, 2019
283,770

 
$
2,838

 
$
2,718,871

 
$
(20,538
)
 
$
(830,358
)
 
$
1,870,813

 
$
371,213

 
$
2,242,026


See notes to consolidated financial statements.

5



PHILLIPS EDISON & COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018
(Unaudited)
(In thousands)
 
Six Months Ended June 30,
  
2019
 
2018
CASH FLOWS FROM OPERATING ACTIVITIES:
  
 
  
Net loss
$
(47,960
)
 
$
(15,913
)
Adjustments to reconcile net loss to net cash provided by operating activities:
  

 
  

Depreciation and amortization of real estate assets
117,170

 
84,216

Impairment of real estate assets
38,916

 
10,939

Depreciation and amortization of corporate assets
3,373

 
7,672

Amortization of deferred financing expenses
2,522

 
2,401

Net amortization of above- and below-market leases
(2,224
)
 
(1,990
)
Gain on disposal of property, net
(5,855
)
 
(877
)
Change in fair value of earn-out liability
(7,500
)
 
1,500

Straight-line rent
(4,456
)
 
(2,471
)
Share-based compensation expense
3,793

 
1,994

Equity in net loss of unconsolidated joint ventures
976

 

Other impairment charges
9,661

 

Other
5,211

 
229

Changes in operating assets and liabilities:
  

 
  

Other assets, net
(1,553
)
 
(702
)
Accounts payable and other liabilities
(12,005
)
 
(9,186
)
Net cash provided by operating activities
100,069


77,812

CASH FLOWS FROM INVESTING ACTIVITIES:
  

 
  

Real estate acquisitions
(49,880
)
 
(9,222
)
Capital expenditures
(27,221
)
 
(17,346
)
Proceeds from sale of real estate
47,857

 
13,300

Return of investment in unconsolidated joint ventures
2,257

 

Net cash used in investing activities
(26,987
)
 
(13,268
)
CASH FLOWS FROM FINANCING ACTIVITIES:
  

 
  

Net change in credit facility
(73,359
)
 
(15,000
)
Proceeds from mortgages and loans payable
60,000

 
65,000

Payments on outstanding indebtedness
(4,835
)
 
(20,542
)
Distributions paid, net of DRIP
(60,787
)
 
(37,819
)
Distributions to noncontrolling interests
(13,841
)
 
(14,096
)
Repurchases of common stock
(11,802
)
 
(44,494
)
Other
(206
)
 

Net cash used in financing activities
(104,830
)
 
(66,951
)
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
(31,748
)
 
(2,407
)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH:
  

 
  

Beginning of period
84,304

 
27,445

End of period
$
52,556

 
$
25,038

 
 
 
 
RECONCILIATION TO CONSOLIDATED BALANCE SHEETS
 
 
 
Cash and cash equivalents
$
17,772

 
$
8,310

Restricted cash
34,784

 
16,728

Cash, cash equivalents, and restricted cash at end of period
$
52,556

 
$
25,038








6




PHILLIPS EDISON & COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018
(Unaudited)
(In thousands)
  
2019
 
2018
SUPPLEMENTAL CASH FLOW DISCLOSURE, INCLUDING NON-CASH INVESTING AND FINANCING ACTIVITIES:
 
 
Cash paid for interest
$
44,169

 
$
32,422

Accrued capital expenditures
2,960

 
2,428

Change in distributions payable
275

 
(235
)
Change in distributions payable - noncontrolling interests
387

 
2

Change in accrued share repurchase obligation
872

 
1,658

Distributions reinvested
34,958

 
24,899


See notes to consolidated financial statements.

7



Phillips Edison & Company, Inc.
Notes to Consolidated Financial Statements
(Unaudited)

1. ORGANIZATION
Phillips Edison & Company, Inc. (“we,” the “Company,” “our,” or “us”) was formed as a Maryland corporation in October 2009. Substantially all of our business is conducted through Phillips Edison Grocery Center Operating Partnership I, L.P., (the “Operating Partnership”), a Delaware limited partnership formed in December 2009. We are a limited partner of the Operating Partnership, and our wholly owned subsidiary, Phillips Edison Grocery Center OP GP I LLC, is the sole general partner of the Operating Partnership.
We invest primarily in well-occupied, grocery-anchored, neighborhood and community shopping centers that have a mix of creditworthy national, regional, and local retailers that sell necessity-based goods and services in strong demographic markets throughout the United States. In addition to managing our own properties, our third-party investment management business provides comprehensive real estate and asset management services to (i) Phillips Edison Grocery Center REIT III, Inc. (“PECO III”), a non-traded publicly registered REIT; (ii) three institutional joint ventures; and (iii) one private fund (collectively, the “Managed Funds”).
In November 2018, we completed a merger (the “Merger”) with Phillips Edison Grocery Center REIT II, Inc. (“REIT II”), a
public non-traded REIT that was advised and managed by us, in a 100% stock-for-stock transaction valued at approximately
$1.9 billion. As a result of the Merger, we acquired 86 properties and a 20% equity interest in Necessity Retail Partners (“NRP” or the “NRP joint venture”), a joint venture that owned 13 properties. For a more detailed discussion, see Note 4.
In November 2018, through our direct or indirect subsidiaries, we entered into a joint venture with The Northwestern
Mutual Life Insurance Company (“Northwestern Mutual”). At formation, we contributed or sold 17 grocery-anchored shopping centers with a fair value of approximately $359 million to the new joint venture, Grocery Retail Partners I LLC (“GRP I” or the “GRP I joint venture”). GRP I also assumed a portfolio loan from us as part of this transaction. In exchange, we received a 15% ownership interest in GRP I and cash of $161.8 million. For a more detailed discussion, see Note 6.
As of June 30, 2019, we wholly-owned fee simple interests in 298 real estate properties. In addition, we owned a 20% equity interest in NRP and a 15% interest in GRP I, as described previously.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Certain of our accounting estimates are particularly important for an understanding of our financial position and results of operations and require the application of significant judgment by management. For example, significant estimates and assumptions have been made with respect to the useful lives of assets, recoverable amounts of receivables, and other fair value measurement assessments required for the preparation of the consolidated financial statements. As a result, these estimates are subject to a degree of uncertainty.
Other than those noted below, there have been no changes to our significant accounting policies during the six months ended June 30, 2019. For a full summary of our accounting policies, refer to our 2018 Annual Report on Form 10-K filed with the SEC on March 13, 2019.
Basis of Presentation and Principles of Consolidation—The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Readers of this Quarterly Report on Form 10-Q should refer to our audited consolidated financial statements for the year ended December 31, 2018, which are included in our 2018 Annual Report on Form 10-K. In the opinion of management, all normal and recurring adjustments necessary for the fair presentation of the unaudited consolidated financial statements for the periods presented have been included in this Quarterly Report. Our results of operations for the three and six months ended June 30, 2019, are not necessarily indicative of the operating results expected for the full year.
The accompanying consolidated financial statements include our accounts and those of our majority-owned subsidiaries. All intercompany balances and transactions are eliminated upon consolidation.
Leases—We are party to a number of lease agreements, both as a lessor as well as a lessee of various types of assets.
Lessor—The majority of our revenue is lease revenue derived from our real estate assets, which is accounted for under Accounting Standards Codification (“ASC”) Topic 842, Leases (“ASC 842”). We adopted the accounting guidance contained within ASC 842 on January 1, 2019, the effective date of the standard for public companies. We record lease and lease-related revenue as Rental Income on the consolidated statements of operations and comprehensive (loss) income, also referred to herein as our “consolidated statements of operations”, in accordance with ASC 842.
We enter into leases primarily as a lessor as part of our real estate operations, and leases represent the majority of our revenue. We lease space in our properties generally in the form of operating leases. Our leases typically provide for reimbursements from tenants for common area maintenance, insurance, and real estate tax expenses. Common area maintenance reimbursements can be fixed, with revenue earned on a straight-line basis over the term of the lease, or variable, with revenue recognized as services are performed for which we will be reimbursed.

8



The terms and expirations of our operating leases with our tenants are generally similar. The majority of leases for inline (non-anchor) tenants have terms that range from 2 to 10 years, and the majority of leases for anchor tenants range from 3 to 13 years. In both cases, the full term of the lease prior to our acquisition or assumption of the lease will generally be longer, however, we are measuring the commencement date for these purposes as being the date that we acquired or assumed the lease, excluding option periods.
The lease agreements frequently contain fixed-price renewal options to extend the terms of leases and other terms and conditions as negotiated. In calculating the term of our leases, we consider whether these options are reasonably certain to be exercised. Our determination involves a combination of contract-, asset-, entity-, and market-based factors and involves considerable judgment. We retain substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Currently, our tenants have no options to purchase at the end of the lease term, although in a small number of leases, a tenant, usually the anchor tenant, may have the right of first refusal to purchase one of our properties if we elect to sell the center.
Beginning January 1, 2019, we evaluate whether a lease is an operating, sales-type, or direct financing lease using the criteria established in ASC 842. Leases will be considered either sales-type or direct financing leases if any of the following criteria are met:
if the lease transfers ownership of the underlying asset to the lessee by the end of the term;
if the lease grants the lessee an option to purchase the underlying asset that is reasonably certain to be exercised;
if the lease term is for the major part of the remaining economic life of the underlying asset; or
if the present value of the sum of the lease payments and any residual value guaranteed by the lessee equals or exceeds substantially all of the fair value of the underlying asset.
We utilize substantial judgment in determining the fair value of the leased asset, the economic life of the leased asset, and the relevant borrowing rate in performing our lease classification analysis. If none of the criteria listed above are met, the lease is classified as an operating lease. Currently all of our leases are classified as operating leases, and we expect that the majority, if not all, of our leases will continue to be classified as operating leases based upon our typical lease terms.
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. The determination of when revenue recognition under a lease begins, as well as the nature of the leased asset, is dependent upon our assessment of who is the owner, for accounting purposes, of any related tenant improvements. 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 we are not the owner, for accounting purposes, of the tenant improvements (i.e., the lessee is the owner), then the leased asset is the unimproved space and any tenant allowances funded under the lease are treated as lease incentives, which reduce revenue recognized over the term of the lease. In these circumstances, we begin revenue recognition when the lessee takes possession of the unimproved space to construct their own improvements. We consider a number of different factors in evaluating whether the lessee or we 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; and
who constructs or directs the construction of the improvements.
The majority of our leases provide for fixed rental escalations, and we recognize rental income on a straight-line basis over the term of each lease in such instances. The difference between rental income earned on a straight-line basis and the cash rent due under the provisions of the lease agreements is recorded as deferred rent receivable and is included as a component of Other Assets, Net. Due to the impact of the straight-line adjustments, rental income generally will be greater than the cash collected in the early years and will be less than the cash collected in the later years of a lease.
Reimbursements from tenants for recoverable real estate taxes and operating expenses that are fixed per the terms of the applicable lease agreements are recorded on a straight-line basis, as described above. The majority of our lease agreements with tenants, however, provide for tenant reimbursements that are variable depending upon the applicable expenses incurred. These reimbursements are accrued as revenue in the period in which the applicable expenses are incurred. We make certain assumptions and judgments in estimating the reimbursements at the end of each reporting period. We do not expect the actual results to materially differ from the estimated reimbursements. Both fixed and variable tenant reimbursements are recorded as Rental Income in the consolidated statements of operations. In certain cases, the lease agreement may stipulate that a tenant make a direct payment for real estate taxes to the relevant taxing authorities. In these cases, beginning on January 1, 2019, we no longer record any revenue or expense related to these tenant expenditures. Although we expect such cases to be rare, in the event that a direct-paying tenant failed to make their required payment to the taxing authorities, we would potentially be liable for such amounts, although they are not recorded as a liability in our consolidated balance sheets per the requirements of ASC 842. We have made a policy election to exclude amounts collected from customers for all sales tax and other similar taxes from the transaction price in our recognition of lease revenue.
Additionally, we record an immaterial amount of variable revenue in the form of percentage rental income. 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.

9



In some instances, as part of our negotiations, we may offer lease incentives to our tenants. These incentives usually take the form of payments made to or on behalf of the tenant, and such incentives will be deducted from the lease payment and recorded on a straight-line basis over the term of the new lease.
We record lease termination income if there is a signed termination agreement, all of the conditions of the agreement have been met, collectability is reasonably assured and the tenant is no longer occupying the property. Upon early lease termination, we provide for losses related to unrecovered tenant-specific intangibles and other assets. We record lease termination income as Rental Income in the consolidated statements of operations.
Historically, we periodically reviewed the collectability of outstanding receivables. Following the adoption of ASC 842, as of January 1, 2019, lease receivables are reviewed continually to determine whether or not it is likely that we will realize all amounts receivable for each of our tenants (i.e., whether a tenant is deemed to be a credit risk). If we determine that the tenant is not a credit risk, no reserve or reduction of revenue is recorded, except in the case of disputed charges. If we determine that the tenant is a credit risk, revenue for that tenant is recorded on a cash basis, including any amounts relating to straight-line rent receivables and/or receivables for recoverable expenses. Under ASC 842, the aforementioned adjustments as well as any reserve for disputed charges are recorded as a reduction of Rental Income rather than in Property Operating, where our reserves were previously recorded, on the consolidated statements of operations.
Lessee—We enter into leases as a lessee as part of our real estate operations in the form of ground leases of land for certain properties, and as part of our corporate operations in the form of office space and office equipment leases. Ground leases typically have initial terms of 15-40 years with one or more options to renew for additional terms of 3-5 years, and may include options that grant us, as the lessee, the right to terminate the lease, without penalty, in advance of the full lease term. Our office space leases generally have terms of less than ten years with no renewal options. Office equipment leases typically have terms ranging from 3-5 years with options to extend the term for a year or less, but contain minimal termination rights. In calculating the term of our leases, we consider whether we are reasonably certain to exercise renewal and/or termination options. Our determination involves a combination of contract-, asset-, entity-, and market-based factors and involves considerable judgment.
Currently, neither our operating leases nor our finance leases have residual value guarantees or other restrictions or covenants, but a small number may contain nonlease components which have been deemed not material. Beginning January 1, 2019, we evaluate whether a lease is a finance or operating lease using the criteria established in ASC 842. The criteria we use to determine whether a lease is a finance lease are the same as those we use to determine whether a lease is sales-type lease as a lessor. If none of the finance lease criteria is met, we classify the lease as an operating lease.
We record right-of-use (“ROU”) assets and liabilities in the consolidated balance sheets based upon the terms and conditions of the applicable lease agreement. We use discount rates to calculate the present value of lease payments when determining lease classification and measuring our lease liability. We use the rate implicit in the lease as our discount rate unless that rate cannot be readily determined, in which case we consider various factors to select an appropriate discount rate. This requires the application of judgment, and we consider the length of the lease as well as the length and securitization of our outstanding debt agreements in selecting an appropriate rate. Refer to Note 3 for further detail.
Revenue Recognition—In addition to our lease-related revenue, we also earn fee revenues by providing services to the Managed Funds. These fees are accounted for within the scope of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), and are recorded as Fees and Management Income on the consolidated statements of operations. We provide services to the Managed Funds, all of which are considered related parties. These services primarily include asset acquisition and disposition services, asset management, operating and leasing of properties, construction management, and other general and administrative responsibilities. These services are currently provided under various combinations of advisory agreements, property management agreements, and other service agreements (the “Management Agreements”). The wide variety of duties within the Management Agreements makes determining the performance obligations within the contracts a matter of judgment. We have concluded that each of the separately disclosed fee types in the below table represents a separate performance obligation within the Management Agreements.

10



The table below shows the most significant of these fee types in the Management Agreements:
Fee
 
Performance Obligation Satisfied
 
Form and Timing of Payment
 
Description
Asset Management
 
Over time
 
In cash and/or ownership units, monthly
 
Because each increment of service is distinct, although substantially the same, revenue is recognized at the end of each reporting period based upon asset base and the applicable rate.
Property Management
 
Over time
 
In cash, monthly
 
Because each increment of service is distinct, although substantially the same, revenue is recognized at the end of each month based on a percentage of the properties’ cash receipts.
Leasing Commissions
 
Point in time (upon close of a transaction)
 
In cash, upon completion
 
Revenue is recognized in an amount equal to the fees charged by unaffiliated persons rendering comparable services in the same geographic location.
Construction Management
 
Point in time (upon close of a project)
 
In cash, upon completion
 
Revenue is recognized in an amount equal to the fees charged by unaffiliated persons rendering comparable services in the same geographic location.
Acquisition/Disposition
 
Point in time (upon close of a transaction)
 
In cash, upon close of the transaction
 
Revenue is recognized based on a percentage of the purchase price or disposition price of the property acquired or sold.
Due to the nature of the services being provided under our Management Agreements, each performance obligation has a variable component. Therefore, when we determine the transaction price for the contracts, we are required to constrain our estimate to an amount that is not probable of significant revenue reversal. For most of these fee types, such as acquisition fees and leasing commissions, compensation only occurs if a transaction takes place and the amount of compensation is dependent upon the terms of the transaction. For our property and asset management fees, due to the large number and broad range of possible consideration amounts, we calculate the amount earned at the end of each month.
In addition to the fees listed above, certain of our Management Agreements include the potential for additional revenues if certain market conditions are in place or certain events take place. We have not recognized revenue related to these fees, nor will we until it is no longer highly probable that there would be a material reversal of revenue.
Additionally, effective January 1, 2018, sales or transfers to non-customers of non-financial assets or in substance non-financial assets that do not meet the definition of a business are accounted for within the scope of ASC Topic 610-20, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (“ASC 610-20”). Generally, our sales of real estate would be considered a sale of a non-financial asset as defined by ASC 610-20. Under ASC 610-20, if we determine we do not have a controlling financial interest in the entity that holds the asset and the arrangement meets the criteria to be accounted for as a contract, we would de-recognize the asset and recognize a gain or loss on the sale of the real estate when control of the underlying asset transfers to the buyer. Further, we may defer a tax gain through an Internal Revenue Code (the “Code”) Section 1031 like-kind exchange by purchasing another property within a specified time period. For additional information regarding gain on sale of assets, refer to Note 5.
Income Taxes—Our consolidated financial statements include the operations of wholly owned subsidiaries that have jointly elected to be treated as Taxable REIT Subsidiaries (“TRS”) and are subject to U.S. federal, state, and local income taxes at regular corporate tax rates. During the three and six months ended June 30, 2019 and 2018, no federal income tax expense or benefit was reported, and we recorded a full valuation allowance for our net deferred tax asset. We recognized an immaterial amount of state and local income tax expense, which is included in Other (Expense) Income, Net on the consolidated statements of operations.

11



Recently Issued and Newly Adopted Accounting Pronouncements—The following table provides a brief description of recent accounting pronouncements that could have a material effect on our consolidated financial statements:
Standard
 
Description
 
Date of Adoption
 
Effect on the Consolidated Financial Statements or Other Significant Matters
Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments

ASU 2018-19, Financial Instruments - Credit Losses (Topic 326): Codification Improvements

ASU 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief

 
The amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. It clarifies that receivables arising from operating leases are not within the scope of Topic 326. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with ASC 842. It also allows election of the fair value option on certain financial instruments. This update is effective for public entities in fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted after December 15, 2018.
 
January 1, 2020
 
We are currently evaluating the impact the adoption of this standard will have on our consolidated financial statements. The majority of our financial instruments result from operating leasing transactions, which are not within the scope of this standard.
ASU 2018-13, Fair Value Measurement (Topic 820)
 
This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of the Financial Accounting Standards Board’s disclosure framework project. It is effective for annual and interim reporting periods beginning after December 15, 2019, but early adoption is permitted.
 
January 1, 2020
 
We are currently evaluating the impact the adoption of this standard will have on our consolidated financial statements, which is expected to only impact fair value measurement disclosures.
ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities
 
This ASU amends two aspects of the related-party guidance in ASC 810: (1) adds an elective private-company scope exception to the variable interest entity guidance for entities under common control and (2) indirect interests held through related parties in common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. For entities other than private companies, the amendments in this update are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. All entities are required to apply the amendments in this update retrospectively with a cumulative effect adjustment to retained earnings at the beginning of the earliest period presented. Early adoption is permitted.
 
January 1, 2020
 
We are currently evaluating the impact the adoption of this standard will have on our consolidated financial statements.
ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments
 
This ASU amends a variety of topics, improving certain aspects of previously issued ASUs, including ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The amendment is effective for fiscal years beginning after December 15, 2019, but early adoption is permitted.
 
January 1, 2020
 
We are currently evaluating the impact the adoption of this standard will have on our consolidated financial statements.


12



The following table provides a brief description of newly adopted accounting pronouncements and their effect on our consolidated financial statements:
Standard
 
Description
 
Date of Adoption
 
Effect on the Financial Statements or Other Significant Matters
ASU 2016-02, Leases (Topic 842)

ASU 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842

ASU 2018-10, Codification Improvements to Topic 842, Leases

ASU 2018-11, Leases (Topic 842): Targeted Improvements

ASU 2018-20, Leases (Topic 842): Narrow-Scope Improvements for Lessors

ASU 2019-01, Leases (Topic 842): Codification Improvements
 
These updates amended existing guidance by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.

 
January 1, 2019
 
We adopted this standard on January 1, 2019 and a modified retrospective transition approach was required. We determined that the adoption had a material impact on our consolidated financial statements; please refer to Note 3 for additional details.

We elected to utilize the following optional practical expedients upon adoption:
- Package of practical expedients which permits us not to reassess our prior conclusions about lease identification, lease classification, and initial direct costs.
- Practical expedient permitting us not to assess whether existing, expired, or current land easements either are or contain a lease.
- Practical expedient which permits us as a lessor not to separate non-lease components, such as common area maintenance reimbursements, from the associated lease component, provided that the timing and pattern of transfer of the services are substantially the same. Because of our decision to elect this practical expedient, we will no longer present our Rental Income and Tenant Recovery Income amounts separately on our consolidated statements of operations, and have reclassified Tenant Recovery Income amounts to Rental Income for all periods presented on the consolidated statements of operations.
- Practical expedient which permits us not to record a right of use asset or lease liability related to leases of twelve months or fewer, but instead allows us to record expense related to any such leases as it is incurred.


ASU 2018-07, Compensation - Stock Compensation
(Topic 718):
Improvements to Non-employee Share-Based Payment Accounting
 
The amendments in this update expanded the scope of Topic 718: Compensation - Stock Compensation to include share-base payment transactions for acquiring goods and services from non-employees, except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period).
 
January 1, 2019
 
The adoption of this standard did not have a material impact on our consolidated financial statements.

ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes
 
This update permitted use of the OIS rate based on the SOFR as a US benchmark interest rate for hedge accounting purposes under Topic 815. The purpose of this was to facilitate the LIBOR to SOFR transition and provide sufficient lead time for entities to prepare for changes to interest rate risk hedging strategies for both risk management and hedge accounting purposes.
 
January 1, 2019
 
The adoption of this standard did not have a material impact on our consolidated financial statements.


13



Reclassifications—The following line items on our consolidated statements of operations for the three and six months ended June 30, 2018, were reclassified to conform to current year presentation:
Tenant Recovery was combined with Rental Income, and
Other Expense, Net previously included activity from property disposals, and this is now presented as (Loss) Gain on Disposal of Property, Net.
The following line items on our consolidated statements of cash flows for the six months ended June 30, 2018, were reclassified to conform to current year presentation:
Accounts Receivable - Affiliates was combined with Other Assets, Net;
Accounts Payable - Affiliates was combined with Accounts Payable and Other Liabilities; and
Net Loss on Write-off of Unamortized Capitalized Leasing Commissions, Market Debt Adjustments, and
Deferred Financing Expenses were reclassified to Other.

3. LEASES
Standard Adoption—Effective January 1, 2019, we adopted ASU 2016-02, Leases. This standard was adopted in conjunction with the related updates, ASU 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842; ASU 2018-10, Codification Improvements to Topic 842, Leases; ASU 2018-11, Leases (Topic 842): Targeted Improvements; and ASU 2018-20, Leases (Topic 842): Narrow-Scope Improvements for Lessors, collectively “ASC 842,” using a modified-retrospective approach, as required. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019.
The adoption of ASC 842 resulted in a $0.5 million adjustment to the current year’s opening balance in Accumulated Deficit on the consolidated balance sheets as a result of recognizing ROU assets and lease liabilities as well as adjustments to our collectability reserve. Beginning in January 1, 2019, due to the new standard’s narrowed definition of initial direct costs, we now expense significant lease origination costs as incurred, which were previously capitalized as initial direct costs and amortized to expense over the lease term. We capitalized $6.2 million of internal costs for the year ended December 31, 2018, some of which we will continue to capitalize in accordance with the standard. During the six months ended June 30, 2019, the amounts capitalized were $1.9 million, compared to $2.9 million during the six months ended June 30, 2018. Amounts that were capitalized prior to the adoption of ASC 842 will continue to be amortized over their remaining lives.
Additionally, ASC 842 requires that lessors exclude from variable payments all costs paid by a lessee directly to a third party. For the year ended December 31, 2018, $8.0 million in real estate tax payments made by tenants directly to third parties was recorded by us as both Tenant Recovery Income and Real Estate Taxes. This amount was approximately $1.3 million and $2.7 million for the three and six months ended June 30, 2018, respectively. Beginning January 1, 2019, such amounts are no longer recognized by us. As the recorded expense was completely offset by the tenant recovery income recorded, this has no net impact to earnings.
Beginning January 1, 2019, operating lease receivables are accounted for under ASC 842, which requires us to recognize changes in the collectability assessment for an operating lease as an adjustment to lease income. For the year ended December 31, 2018, $2.9 million of expense was recorded as Property Operating on our consolidated statements of operations, which would have been recorded as a reduction to Rental Income under the new standard. For the three and six months ended June 30, 2019, the total amount recorded as a reduction to Rental Income as a result of collectability reserves was $0.1 million and $0.7 million, respectively.
Lessor—The majority of our leases are largely similar in that the leased asset is retail space within our properties, and the lease agreements generally contain similar provisions and features, without substantial variations. All of our leases are currently classified as operating leases.
Approximate future fixed contractual lease payments to be received under non-cancelable operating leases in effect as of June 30, 2019, assuming no new or renegotiated leases or option extensions on lease agreements, are as follows (in thousands):
Year
Amount
Remaining 2019
$
191,571

2020
360,997

2021
316,521

2022
274,713

2023
223,940

2024 and thereafter
636,772

Total
$
2,004,514

No single tenant comprised 10% or more of our aggregate annualized base rent (“ABR”) as of June 30, 2019. As of June 30, 2019, our real estate investments in Florida and California represented 12.3% and 10.0% of our ABR, respectively. As a result, the geographic concentration of our portfolio makes it particularly susceptible to adverse economic or weather developments in the Florida and California real estate markets.

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Lessee—As a lessee, we recognized additional operating lease liabilities of $6.2 million with corresponding ROU assets of $6.0 million, and the difference between them was recorded as an adjustment to Accumulated Deficit on the consolidated balance sheets. On adoption of ASC 842, these asset and liability amounts represented the present value of the remaining fixed minimum rental payments under current leasing standards for existing leases, adjusted as appropriate for amounts written off in transition to the new guidance. The initial measurement of a ROU asset may differ from the initial measurement of the corresponding lease liability due to initial direct costs, prepaid lease payments, and lease incentives.
Lease assets, grouped by balance sheet line where they are recorded, consisted of the following as of June 30, 2019 (in thousands):
  
June 30, 2019
Assets
 
Investment in Real Estate:
 
ROU asset - operating leases
$
4,707

Less: accumulated amortization
(217
)
Total in Investment in Real Estate
4,490

Other Assets:
 
ROU asset - operating leases
2,540

ROU asset - finance leases
705

Less: accumulated amortization
(595
)
Total in Other Assets
2,650

Total ROU lease assets(1)
$
7,140

 
 
Liabilities
 
Accounts Payable and Other Liabilities:
 
Operating lease liability
$
6,790

Debt Obligations, Net:
 
Finance lease liability
581

Total lease liabilities(1)
$
7,371

(1) 
As of June 30, 2019, the weighted average remaining lease term was approximately 2.4 years for finance leases and 18.3 years for operating leases. The weighted average discount rate was 3.54% for finance leases and 4.07% for operating leases.
Below are the amounts recorded in our consolidated statements of operations related to our ROU assets and lease liabilities by lease type (in thousands):
 
Three Months Ended
 
Six Months Ended
 
June 30, 2019
 
June 30, 2019
Statements of operations information:
 
 
 
Finance lease cost:
 
 
 
Amortization of ROU assets
$
64

 
$
128

Interest on lease liabilities
4

 
9

Operating lease costs
449

 
797

Short term lease expense
376

 
767

Below are the amounts recorded in our consolidated statements of cash flows related to our leases by type (in thousands):
 
Six Months Ended
 
June 30, 2019
Statements of cash flows information:
 
Operating cash flows used for operating leases
$
(620
)
Financing cash flows used for finance leases
(122
)
ROU assets obtained in exchange for new lease liabilities
1,444


15



Future undiscounted payments for fixed lease charges by lease type as of June 30, 2019, are as follows (in thousands):
 
Undiscounted
 
Operating
 
Finance
Remaining 2019
$
745

 
$
148

2020
1,174

 
295

2021
723

 
98

2022
684

 
26

2023
529

 
20

Thereafter
6,419

 
15

Total undiscounted cash flows from leases
10,274

 
602

Total lease liabilities recorded at present value
6,790

 
581

Difference between undiscounted cash flows and present value of lease liabilities
$
3,484

 
$
21


4. MERGER WITH REIT II
In November 2018, we acquired 86 properties as part of the Merger with REIT II. Under the terms of the Merger, at the time of closing, the following consideration was given in exchange for REIT II common stock (in thousands):
 
Amount
Fair value of PECO common stock issued(1)
$
1,054,745

Fair value of REIT II debt:
 
Corporate debt
719,181

Mortgages and notes payable
102,727

Derecognition of REIT II management contracts, net(2)
30,428

Transaction costs
11,587

Total consideration and debt activity
1,918,668

Less: debt assumed
464,462

Total consideration
$
1,454,206

(1) 
The total number of shares of common stock issued was 95.5 million.
(2) 
Previously a component of Other Assets, Net.
To complete the Merger, we issued 2.04 shares of our common stock in exchange for each issued and outstanding share of REIT II common stock, which was equivalent to $22.54 based on our most recent estimated value per share (“EVPS”), as of the date of the transaction, of $11.05. The exchange ratio was based on a thorough review of the relative valuation of each entity, including factoring in our investment management business as well as each company’s transaction costs.
Upon completion of the Merger, our continuing stockholders owned approximately 71% of the issued and outstanding shares of the Company on a fully diluted basis (determined as if each Operating Partnership unit (“OP unit”) were exchanged for one share of our common stock) and former REIT II stockholders owned approximately 29% of the issued and outstanding shares of the Company on a fully diluted basis (determined as if each OP unit were exchanged for one share of our common stock).
Assets Acquired and Liabilities Assumed—After consideration of all applicable factors pursuant to the business combination accounting rules under ASC 805, Business Combinations (“ASC 805”), including the application of a screen test to evaluate if substantially all the fair value of the acquired properties is concentrated in a single asset or group of similar assets, we concluded that the Merger qualified as an asset acquisition.
Additionally, prior to the close of the Merger, all of REIT II’s real properties were managed and leased by us, under the terms of various management agreements. As we had contractual relationships with REIT II, we considered the provisions of ASC 805 regarding the settlement of pre-existing relationships. This guidance provides that a transaction that in effect settles pre-existing relationships between the acquirer and acquiree should be evaluated under the guidance set forth in ASC 805 for possible gain/loss recognition.
In applying the relevant guidance to the settlement of our contractual relationships with REIT II, we noted that the provisions of the various agreements provided both parties to each of the agreements with substantial termination rights. The agreements permitted either party to terminate without cause or penalty upon prior written notice within a specified number of days’ notice. Therefore, we determined that the termination of the agreements did not result in a settlement gain or loss under the relevant guidance, and thus no gain or loss was recorded in the consolidated financial statements.
Prior to the consummation of the Merger, we did, however, have an existing intangible asset related to our acquisition of certain REIT II management contracts. Because this relationship was internalized as part of the Merger, we derecognized the carrying value of these intangible assets upon completion of the Merger and have included the derecognized contract value of $30.4 million in our calculation of total consideration in the table above.

16



As of December 31, 2018, we capitalized approximately $11.6 million in costs related to the Merger. The following table summarizes the final purchase price allocation based on a valuation report prepared by a third-party valuation specialist that was subject to management’s review and approval (in thousands):
 
Amount
Assets:
 
Land and improvements
$
561,100

Building and improvements
1,198,884

Intangible lease assets
197,384

Fair value of unconsolidated joint venture
16,470

Cash and cash equivalents
354

Restricted cash
5,159

Accounts receivable and other assets
33,045

Total assets acquired
2,012,396

Liabilities:
 
Debt assumed
464,462

Intangible lease liabilities
60,421

Accounts payable and other liabilities
33,307

Total liabilities assumed
558,190

Net assets acquired
$
1,454,206

The allocation of the purchase price is based on management’s assessment, which requires a significant amount of judgment and represents management’s best estimate of the fair value as of the acquisition date.

5. REAL ESTATE ACTIVITY
Acquisitions—The following table summarizes our real estate acquisitions during the six months ended June 30, 2019 and 2018 (dollars in thousands):
Property Name
 
Location
 
Anchor Tenant
 
Acquisition Date
 
Purchase Price
 
Leased % of Rentable Square Feet at Acquisition
Murray Landing Outparcel
 
Columbia, SC
 
N/A
 
5/16/2019
 
$
295

 
N/A
Naperville Crossings
 
Naperville, IL
 
ALDI
 
4/26/2019
 
49,585

 
88.0%
Shoppes of Lake Village
 
Leesburg, FL
 
Publix
 
2/26/2018
 
8,423

 
71.3%
The fair value and weighted-average useful life at acquisition for lease intangibles acquired as part of the above acquisitions are as follows (dollars in thousands, weighted-average useful life in years):
 
Six Months Ended
 
June 30, 2019
 
June 30, 2018
 
Fair Value
 
Weighted-Average Useful Life
 
Fair Value
 
Weighted-Average Useful Life
In-place lease assets
$
4,736

 
11
 
$
946

 
6
Above-market lease assets
825

 
8
 
74

 
3
Below-market lease liabilities
(2,097
)
 
16
 
(457
)
 
16

17



Property Sales—The following table summarizes our property sales activity (dollars in thousands):
 
Six Months Ended
 
June 30,
 
2019
 
2018
Number of properties sold
6

 
2

Number of outparcels sold
1

 

Proceeds from sale of real estate
$
47,857

 
$
13,300

Gain on sale of properties, net(1)
6,627

 
985

(1) 
The gain on sale of properties, net does not include miscellaneous write-off activity, which is also recorded in Gain on Disposal of Property, Net on the consolidated statements of operations.
Property Held for Sale—As of June 30, 2019, two properties were classified as held for sale. For information regarding the disposition of held for sale property, refer to Note 16. As of December 31, 2018, we had two properties that were classified as held for sale, and both were sold in the first quarter of 2019. Properties classified as held for sale as of June 30, 2019 and December 31, 2018, were under contract to sell, with no substantive contingencies, and the prospective buyers had significant funds at risk as of the respective reporting date. A summary of assets and liabilities for the properties held for sale as of June 30, 2019 and December 31, 2018, is below (in thousands):
 
June 30, 2019
 
December 31, 2018
ASSETS
 
 
 
Total investment in real estate assets, net
$
15,555

 
$
16,889

Other assets, net
322

 
475

Total assets
$
15,877

 
$
17,364

LIABILITIES
 
 
 
Below-market lease liabilities, net
$
117

 
$
208

Accounts payable and other liabilities
185

 
388

Total liabilities
$
302

 
$
596

Impairment of Real Estate Assets—During the three and six months ended June 30, 2019, we recognized impairment charges totaling $25.2 million and $38.9 million, respectively. During the three and six months ended June 30, 2018, we recognized an impairment charge totaling $10.9 million. The impairments were associated with certain anticipated property dispositions where the net book value exceeded the estimated fair value. Our estimated fair value was based upon the contracted price to sell or the marketed price for disposition, less costs to sell. We have applied reasonable estimates and judgments in determining the amount of impairment recognized.


18



6. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
We co-invest with third parties in joint ventures that own multiple properties. As a result of the Merger in November 2018, we acquired a 20% interest in the NRP joint venture. In November 2018, we also entered into an agreement (the “Joint Venture Agreement”) with Northwestern Mutual to create the GRP I joint venture. Under the terms of the Joint Venture Agreement, we contributed or sold all of our ownership interests in 17 grocery-anchored shopping centers to the GRP I joint venture.
The following table details our investment balances in these unconsolidated joint ventures, which are accounted for using the equity method of accounting and are considered to be related parties to us as of June 30, 2019 and December 31, 2018 (dollars in thousands):
 
June 30, 2019
 
December 31, 2018
 
NRP
 
GRP I
 
NRP
 
GRP I
Ownership percentage
20
%
 
15
%
 
20
%

15
%
Number of properties
13

 
17

 
13


17

Investment balance
$
14,454

 
$
27,964

 
$
16,198

 
$
29,453

Unamortized basis adjustments(1)
5,317

 

 
6,026

 

(1) 
Our investment in NRP differs from our proportionate share of the entity’s underlying net assets due to basis differences initially recorded at $6.2 million arising from the Merger and recording the investment at fair value.
The following table summarizes the operating information of the unconsolidated joint ventures and their impact on our consolidated statements of operations and consolidated statements of equity. We did not have any investments in unconsolidated joint ventures during the three and six months ended June 30, 2018 (in thousands):
 
Three Months Ended
 
Six Months Ended
 
June 30, 2019
 
June 30, 2019
 
NRP
 
GRP I
 
NRP
 
GRP I
Loss from unconsolidated joint ventures, net
$
114

 
$
52

 
$
202

 
$
65

Amortization of basis adjustments(1)
354

 

 
709

 

Distributions
551

 
509

 
833

 
1,424

(1) 
These amounts are amortized starting at the date of the Merger and recorded as an offset to earnings from the NRP joint venture in Other Expense, Net on our consolidated statements of operations.

7. OTHER ASSETS, NET
The following is a summary of Other Assets, Net as of June 30, 2019 and December 31, 2018, excluding amounts related to assets classified as held for sale (in thousands):
 
June 30, 2019
 
December 31, 2018
Other assets, net:
 
 
 
Deferred leasing commissions and costs
$
35,518

 
$
32,957

Deferred financing expenses
13,971

 
13,971

Office equipment, ROU assets, and other
18,016

 
14,315

Total depreciable and amortizable assets
67,505

 
61,243

Accumulated depreciation and amortization
(28,603
)
 
(24,382
)
Net depreciable and amortizable assets
38,902

 
36,861

Accounts receivable, net
50,681

 
56,104

Deferred rent receivable, net
25,778

 
21,261

Derivative asset
5,324

 
29,708

Investment in affiliates
700

 
700

Prepaids and other
9,716

 
8,442

Total other assets, net
$
131,101

 
$
153,076



19



8. DEBT OBLIGATIONS
The following is a summary of the outstanding principal balances and interest rates, which include the effect of derivative financial instruments, on our debt obligations as of June 30, 2019 and December 31, 2018 (dollars in thousands):
   
Interest Rate(1)
 
June 30, 2019
 
December 31, 2018
Revolving credit facility(2)
LIBOR + 1.40%
 
$

 
$
73,359

Term loans
2.06%-4.59%
 
1,918,410

 
1,858,410

Secured portfolio loan facility
3.52%
 
195,000

 
195,000

Mortgages
3.45%-7.91%
 
329,404

 
334,117

Finance lease liability
 
 
581

 
552

Assumed market debt adjustments, net
 
 
(3,841
)
 
(4,571
)
Deferred financing expenses, net
 
 
(16,149
)
 
(18,041
)
Total  
 
 
$
2,423,405

 
$
2,438,826

(1) 
Interest rates are as of June 30, 2019.
(2) 
The gross borrowings and payments under our revolving credit facility were $105.6 million and $179.0 million, respectively, during the six months ended June 30, 2019. The gross borrowings and payments under our revolving credit facility were $151.0 million and $166.0 million, respectively, during the six months ended June 30, 2018.
In May 2019, we executed a $60 million delayed draw feature on one of our term loans. We used the proceeds from this draw to pay down our revolver balance.
As of June 30, 2019 and December 31, 2018, the weighted-average interest rate, including the effect of derivative financial instruments, for all of our debt obligations was 3.5%.
The allocation of total debt between fixed-rate and variable-rate as well as between secured and unsecured, excluding market debt adjustments and deferred financing expenses, net, as of June 30, 2019 and December 31, 2018, is summarized below (in thousands):
   
June 30, 2019
 
December 31, 2018
As to interest rate:(1)
 
 
 
Fixed-rate debt
$
2,111,985

 
$
2,216,669

Variable-rate debt
331,410

 
244,769

Total
$
2,443,395

 
$
2,461,438

As to collateralization:
 
 
 
Unsecured debt
$
1,918,410

 
$
1,931,769

Secured debt
524,985

 
529,669

Total  
$
2,443,395

 
$
2,461,438

(1) 
Includes the effects of derivative financial instruments (see Notes 9 and 15).

9. DERIVATIVES AND HEDGING ACTIVITIES
Risk Management Objective of Using Derivatives—We are exposed to certain risks arising from both our business operations and economic conditions. We principally manage our exposure to a wide variety of business and operational risks through management of our core business activities. We manage economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of our debt funding, and through the use of derivative financial instruments. Specifically, we enter into interest rate swaps to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Our derivative financial instruments are used to manage differences in the amount, timing, and duration of our known or expected cash receipts and our known or expected cash payments principally related to our investments and borrowings.
Cash Flow Hedges of Interest Rate Risk—Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for our making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.
The changes in the fair value of derivatives designated, and that qualify, as cash flow hedges are recorded in AOCI and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the six months ended June 30, 2019 and 2018, such derivatives were used to hedge the variable cash flows associated with certain variable-rate debt.
Amounts reported in AOCI related to these derivatives will be reclassified to Interest Expense, Net as interest payments are made on the variable-rate debt. During the next twelve months, we estimate that an additional $3.5 million will be reclassified from AOCI as an increase to Interest Expense, Net.

20



The following is a summary of our interest rate swaps that were designated as cash flow hedges of interest rate risk as of June 30, 2019 and December 31, 2018 (notional amounts in thousands):
 
June 30, 2019
 
December 31, 2018
Count
11

 
12

Notional amount
$
1,587,000

 
$
1,687,000

Fixed LIBOR
0.7% - 2.9%

 
0.7% - 2.9%

Maturity date
2019 - 2025

 
2019 - 2025

The table below details the nature of the gain or loss recognized on interest rate derivatives designated as cash flow hedges in the consolidated statements of operations (in thousands):
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
  
2019
 
2018
 
2019
 
2018
Amount of (loss) gain recognized in other comprehensive income on derivatives(1)
$
(22,348
)
 
$
5,608

 
$
(35,205
)
 
$
19,047

Amount of gain reclassified from AOCI into interest expense(1)
(1,297
)
 
(753
)
 
(2,801
)
 
(704
)
(1) 
Changes in value are solely driven from changes in LIBOR futures as a result of various economic factors.
Credit-risk-related Contingent Features—We have agreements with our derivative counterparties that contain provisions where, if we default, or are capable of being declared in default, on any of our indebtedness, we could also be declared to be in default on our derivative obligations. As of June 30, 2019, the fair value of our derivatives in a net liability position, which included accrued interest but excluded any adjustment for nonperformance risk related to these agreements, was approximately $21.0 million. As of June 30, 2019, we had not posted any collateral related to these agreements and were not in breach of any agreement provisions. If we had breached any of these provisions, we could have been required to settle our obligations under the agreements at their termination value of $21.0 million.

10. COMMITMENTS AND CONTINGENCIES
Litigation—We are involved in various claims and litigation matters arising in the ordinary course of business, some of which involve claims for damages. Many of these matters are covered by insurance, although they may nevertheless be subject to deductibles or retentions. Although the ultimate liability for these matters cannot be determined, based upon information currently available, we believe the resolution of such claims and litigation will not have a material adverse effect on our consolidated financial statements.
Environmental Matters—In connection with the ownership and operation of real estate, we may potentially be liable for costs and damages related to environmental matters. In addition, we may own or acquire certain properties that are subject to environmental remediation. Depending on the nature of the environmental matter, the seller of the property, a tenant of the property, and/or another third party may be responsible for environmental remediation costs related to a property. Additionally, in connection with the purchase of certain properties, the respective sellers and/or tenants may agree to indemnify us against future remediation costs. We also carry environmental liability insurance on our properties that provides limited coverage for any remediation liability and/or pollution liability for third-party bodily injury and/or property damage claims for which we may be liable. We are not aware of any environmental matters which we believe are reasonably likely to have a material effect on our consolidated financial statements.

11. EQUITY
General—The holders of common stock are entitled to one vote per share on all matters voted on by stockholders, including one vote per nominee in the election of our board of directors (“Board”). Our charter does not provide for cumulative voting in the election of directors.
On May 8, 2019, our Board increased the EVPS of our common stock to $11.10 based substantially on the estimated market value of our portfolio of real estate properties and our third-party investment management business as of March 31, 2019. We engaged a third-party valuation firm to provide a calculation of the range in EVPS of our common stock as of March 31, 2019, which reflected certain balance sheet assets and liabilities as of that date. Previously, on May 9, 2018, our Board increased the EVPS of our common stock to $11.05 from $11.00 based substantially on the estimated market value of our portfolio of real estate properties and our third-party investment management business as of March 31, 2018.
Shares of our common stock are issued under the DRIP, as discussed below, at the same price as the EVPS in effect at the time of issuance.
Dividend Reinvestment Plan—The DRIP allows stockholders to invest distributions in additional shares of our common stock, subject to certain limits. Stockholders who elect to participate in the DRIP may choose to invest all or a portion of their cash distributions in shares of our common stock at a price equal to our most recent estimated value per share.

21



Stockholders who elect to participate in the DRIP, and who are subject to U.S. federal income taxation laws, will incur a tax liability on an amount equal to the fair value on the relevant distribution date of the shares of our common stock purchased with reinvested distributions, even though such stockholders have elected not to receive the distributions in cash.
Share Repurchase Program (“SRP”)—Our SRP provides an opportunity for stockholders to have shares of common stock repurchased, subject to certain restrictions and limitations. The Board reserves the right, in its sole discretion, at any time and from time to time, to reject any request for repurchase.
Due to the funding limits, no proceeds were available for standard share repurchases during the six months ended June 30, 2019. Repurchase requests in connection with a stockholder’s death, “qualifying disability,” or “determination of incompetence” were completed in full. In July 2019, approximately 1.2 million shares of our common stock were repurchased under the SRP.
On August 7, 2019, the Board suspended the SRP with respect to standard repurchases. We will continue to fulfill repurchases sought upon a stockholder's death, “qualifying disability,” or “determination of incompetence” in accordance with the terms of the amended SRP, adopted on August 7, 2019 and described in Part II, Item 5 of this Quarterly Report on Form 10-Q.
Convertible Noncontrolling Interests—Under the terms of the Partnership Agreement, OP unit holders may elect to exchange OP units. The Operating Partnership controls the form of the redemption, and may elect to exchange OP units for shares of our common stock, provided that the OP units have been outstanding for at least one year. As the form of redemption for OP units is within our control, the OP units outstanding as of June 30, 2019 and December 31, 2018, are classified as Noncontrolling Interests within permanent equity on our consolidated balance sheets. The distributions that have been paid on OP units are included in Distributions to Noncontrolling Interests on the consolidated statements of equity. During the six months ended June 30, 2019, OP units were converted into shares of our common stock at a 1:1 ratio. There were approximately 42.7 million and 44.5 million OP units outstanding as of June 30, 2019 and December 31, 2018, respectively.
Nonconvertible Noncontrolling Interests—In addition to partnership units of the Operating Partnership, Noncontrolling Interests also includes a 25% ownership share of one of our subsidiaries who provides advisory services, which was not significant to our results.

12. COMPENSATION
Awards to employees under our Amended and Restated 2010 Long-Term Incentive Plan are typically granted and vest during the first quarter of each year. We also grant restricted stock to our independent directors under our Amended and Restated 2010 Independent Director Stock Plan, which vest based upon the completion of a service period. Certain of our executives have made the election to receive OP units in lieu of shares of common stock upon vesting of their award grants. All share-based compensation awards, regardless of the form of payout upon vesting, are presented in the following table, which summarizes our stock-based award activity (number of units in thousands):
 
Six Months Ended
 
June 30, 2019
 
Restricted
Stock Awards
 
Performance
Stock Awards(1)
 
Phantom
Stock Units
 
Weighted-Average Grant-Date Fair Value(2)
Nonvested at December 31, 2018
808

 
199

 
998

 
$
10.60

Granted
464

 
1,275

 

 
11.05

Vested
(196
)
 

 

 
10.99

Forfeited
(26
)
 

 
(12
)
 
10.76

Nonvested at June 30, 2019
1,050

 
1,474

 
986

 
$
10.80

(1) 
Certain performance-based awards granted during the period contain terms which dictate that the number of award units to be issued will vary based upon actual performance compared to target performance. The number of shares deemed to be issued per this table reflect our probability-weighted estimate of the number of shares that will vest based upon current and expected company performance. The maximum number of award units to be issued under all outstanding grants, excluding phantom stock units as they are settled in cash, was 4.0 million and 1.2 million as of June 30, 2019 and December 31, 2018, respectively.
(2) 
On an annual basis, we engage an independent third-party valuation advisory consulting firm to estimate the EVPS of our common stock.
On March 12, 2019, the Compensation Committee of the Company’s Board of Directors (the “Committee”) approved a new form of award agreement under the Company’s Amended and Restated 2010 Long-Term Incentive Plan for performance-based long term incentive units (“Performance LTIP Units”) and made one-time grants of Performance LTIP Units to certain of our executives. Any amounts earned under the Performance LTIP Unit award agreements will be issued in the form of LTIP Units, which represent OP units that are structured as a profits interest in the Operating Partnership. Dividends will accrue on the Performance LTIP Units until the measurement date, subject to a quarterly distribution of 10% of the regular quarterly distributions.
During the three months ended June 30, 2019 and 2018, the expense for all stock-based awards, including phantom stock units, was $3.3 million and $3.1 million, respectively. During the six months ended June 30, 2019 and 2018, the expense was $5.3 million and $4.7 million, respectively. We had $22.6 million of unrecognized compensation costs related to these awards that we expect to recognize over a weighted average period of approximately 4.3 years. The fair value at the vesting date for stock-based awards that vested during the six months ended June 30, 2019 was $2.2 million.


22



13. EARNINGS PER SHARE
We use the two-class method of computing earnings per share (“EPS”), which is an earnings allocation formula that determines EPS for common stock and any participating securities according to dividends declared (whether paid or unpaid). Under the two-class method, basic EPS is computed by dividing Net Loss Attributable to Stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted EPS reflects the potential dilution that could occur from share equivalent activity.
OP units held by limited partners other than us are considered to be participating securities because they contain non-forfeitable rights to dividends or dividend equivalents, and have the potential to be exchanged for an equal number of shares of our common stock in accordance with the terms of the Fourth Amended and Restated Agreement of Limited Partnership of the Operating Partnership. Phantom stock units are not considered to be participating securities, as they are not convertible into common stock.
The impact of OP units on basic and diluted EPS has been calculated using the two-class method whereby earnings are allocated to the OP units based on dividends declared and the OP units’ participation rights in undistributed earnings. The effects of the two-class method on basic and diluted EPS were immaterial to the consolidated financial statements as of June 30, 2019 and 2018.
The following table provides a reconciliation of the numerator and denominator of the earnings per share calculations (in thousands, except per share amounts):
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2019
 
2018
 
2019
 
2018
Numerator:
 
 
 
 
 
 
 
Net loss attributable to stockholders - basic
$
(36,570
)
 
$
(11,351
)
 
$
(41,765
)
 
$
(12,951
)
Net loss attributable to convertible OP units(1)
(5,643
)
 
(2,756
)
 
(6,426
)
 
(3,090
)
Net loss - diluted
$
(42,213
)
 
$
(14,107
)
 
$
(48,191
)
 
$
(16,041
)
Denominator:
 
 
 
 
 
 
 
Weighted-average shares - basic
283,010

 
184,450

 
282,148

 
185,171

OP units(1)
43,288


44,453

 
43,640

 
44,453

Adjusted weighted-average shares - diluted
326,298

 
228,903

 
325,788

 
229,624

Earnings per common share:
 
 
 
 
 
 
 
Basic and diluted
$
(0.13
)
 
$
(0.06
)
 
$
(0.15
)
 
$
(0.07
)
(1) OP units include units that are convertible into common stock or cash, at the Operating Partnership’s option. The Operating Partnership loss attributable to these OP units, which is included as a component of Net Loss Attributable to Noncontrolling Interests on the consolidated statements of operations, has been added back in the numerator as these OP units were included in the denominator for all years presented.
Approximately 2.5 million and 1.0 million unvested restricted stock awards were outstanding as of June 30, 2019 and 2018, respectively. These securities were anti-dilutive, and, as a result, their impact was excluded from the weighted-average common shares used to calculate diluted EPS.

14. REVENUE RECOGNITION AND RELATED PARTY TRANSACTIONS
Revenue—Summarized below are amounts included in Fee and Management Income. The revenue includes the fees and reimbursements earned by us from the Managed Funds, and other revenues that are not in the scope of ASC 606 but are included in this table for the purpose of disclosing all related party revenues (in thousands):
 
Three Months Ended
 
Six Months Ended
 
June 30, 2019
 
June 30, 2019
 
PECO III
 
Joint Ventures
 
Other Parties(1)
 
Total
 
PECO III
 
Joint Ventures
 
Other Parties(1)
 
Total
Recurring fees(2)
$
228

 
$
1,352

 
$
59

 
$
1,639

 
$
422

 
$
2,681

 
$
118

 
$
3,221

Transactional revenue and
   reimbursements(3)
204

 
621

 
2

 
827

 
1,016

 
1,026

 
7

 
2,049

Insurance premiums
21

 
72

 
492

 
585