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 ACT OF 1934
 
For the quarterly period ended September 30, 2017
 
Commission file number 1-10093
 
RAMCO-GERSHENSON PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
 
MARYLAND
 
13-6908486
(State of other jurisdiction of incorporation or organization)
 
(I.R.S Employer Identification Numbers)
 
 
 
31500 Northwestern Highway, Suite 300
Farmington Hills, Michigan
 
48334
(Address of principal executive offices)
 
(Zip Code)
 
 
248-350-9900
 
(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   x                       No  o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
Yes   x                       No  o
 
Indicate by check mark 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 definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer  x
Accelerated filer  o
Non-accelerated filer  o
(Do not check if a smaller
reporting company)
Smaller reporting company  o
 
 
 
Emerging growth company o
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes   o                       No  x
 
Number of common shares of beneficial interest ($0.01 par value) of the registrant outstanding as of October 26, 2017: 79,366,003


INDEX
Page No.
 
 
 
 
 
Condensed Consolidated Balance Sheets – September 30, 2017 (unaudited) and December 31, 2016
 
 
 
 
 
 
Three and Nine Months Ended September 30, 2017 and 2016 (unaudited)
 
 
 
 
Condensed Consolidated Statement of Shareholders’ Equity - Nine Months Ended September 30, 2017 (unaudited)
 
 
 
 
Condensed Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2017 and 2016 (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Page 2 of 39






PART 1 – FINANCIAL INFORMATION
Item 1.  Unaudited Condensed Consolidated Financial Statements
RAMCO-GERSHENSON PROPERTIES TRUST
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
 
 
 
 
 
September 30,
2017
 
December 31,
2016
 
(unaudited)
 
(as revised)
ASSETS
 
 
 
Income producing properties, at cost:
 
 
 
Land
$
409,863

 
$
374,889

Buildings and improvements
1,790,464

 
1,757,781

Less accumulated depreciation and amortization
(345,432
)
 
(345,204
)
Income producing properties, net
1,854,895

 
1,787,466

Construction in progress and land available for development or sale
56,099

 
61,224

Real estate held for sale
—

 
8,776

Net real estate
1,910,994

 
1,857,466

Equity investments in unconsolidated joint ventures
2,734

 
3,150

Cash and cash equivalents
4,781

 
3,582

Restricted cash and escrows
5,256

 
11,144

Accounts receivable (net of allowance for doubtful accounts of $1,882 and $1,861 as of September 30, 2017 and December 31, 2016, respectively)
25,459

 
24,016

Acquired lease intangibles, net
71,785

 
72,424

Other assets, net
92,042

 
89,716

TOTAL ASSETS
$
2,113,051

 
$
2,061,498

 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 

 
 

Notes payable, net
$
1,081,510

 
$
1,021,223

Capital lease obligation
1,066

 
1,066

Accounts payable and accrued expenses
55,090

 
57,357

Acquired lease intangibles, net
65,633

 
63,734

Other liabilities
9,273

 
9,893

Distributions payable
19,666

 
19,627

TOTAL LIABILITIES
1,232,238

 
1,172,900

 
 
 
 
Commitments and Contingencies


 


 
 
 
 
Ramco-Gershenson Properties Trust ("RPT") Shareholders' Equity:
 
 

Preferred shares, $0.01 par, 2,000 shares authorized: 7.25% Series D Cumulative Convertible Perpetual Preferred Shares, (stated at liquidation preference $50 per share), 1,849 shares issued and outstanding as of September 30, 2017 and December 31, 2016
92,427

 
92,427

Common shares of beneficial interest, $0.01 par, 120,000 shares authorized, 79,366 and 79,272 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively
794

 
793

Additional paid-in capital
1,160,054

 
1,158,430

Accumulated distributions in excess of net income
(394,516
)
 
(384,934
)
Accumulated other comprehensive income
1,265

 
985

TOTAL SHAREHOLDERS' EQUITY ATTRIBUTABLE TO RPT
860,024

 
867,701

Noncontrolling interest
20,789

 
20,897

TOTAL SHAREHOLDERS' EQUITY
880,813

 
888,598

 
 
 
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
2,113,051

 
$
2,061,498

 

The accompanying notes are an integral part of these condensed consolidated financial statements.


Page 3 of 39




RAMCO-GERSHENSON PROPERTIES TRUST
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands, except per share amounts)
(Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2017
 
2016
 
2017
 
2016
 
REVENUE
 
 
 
 
 
 
 
 
Minimum rent
$
49,736

 
$
47,591

 
$
149,970

 
$
144,540

 
Percentage rent
106

 
71

 
570

 
511

 
Recovery income from tenants
14,923

 
15,289

 
46,655

 
48,067

 
Other property income
1,078

 
1,055

 
3,310

 
2,927

 
Management and other fee income
88

 
73

 
314

 
429

 
TOTAL REVENUE
65,931

 
64,079

 
200,819

 
196,474

 
 
 
 
 
 
 
 
 
 
EXPENSES
 
 
 
 
 

 
 

 
Real estate taxes
10,948

 
10,269

 
32,670

 
31,710

 
Recoverable operating expense
6,660

 
6,475

 
20,699

 
21,227

 
Non-recoverable operating expense
825

 
603

 
3,216

 
2,560

 
Depreciation and amortization
23,130

 
23,245

 
69,282

 
69,806

 
Acquisition costs
—

 
55

 
—

 
118

 
General and administrative expense
5,952

 
5,787

 
18,775

 
17,075

 
Provision for impairment
1,885

 
977

 
8,423

 
977

 
TOTAL EXPENSES
49,400

 
47,411

 
153,065

 
143,473

 
 
 
 
 
 
 
 
 
 
OPERATING INCOME
16,531

 
16,668

 
47,754

 
53,001

 
 
 
 
 
 
 
 
 
 
OTHER INCOME AND EXPENSES
 
 
 
 
 

 
 

 
Other (expense) income, net
123

 
(158
)
 
(612
)
 
(307
)
 
Gain on sale of real estate
24,545

 
9,359

 
35,920

 
35,684

 
Earnings from unconsolidated joint ventures
81

 
119

 
223

 
337

 
Interest expense
(11,586
)
 
(11,140
)
 
(33,871
)
 
(33,818
)
 
Other gain on unconsolidated joint ventures
—

 
—

 
—

 
215

 
Loss on extinguishment of debt
—

 
(847
)
 
—

 
(847
)
 
INCOME BEFORE TAX
29,694

 
14,001

 
49,414

 
54,265

 
Income tax provision
(65
)
 
(133
)
 
(119
)
 
(234
)
 
NET INCOME
29,629

 
13,868

 
49,295

 
54,031

 
Net income attributable to noncontrolling partner interest
(696
)
 
(326
)
 
(1,158
)
 
(1,282
)
 
NET INCOME ATTRIBUTABLE TO RPT
28,933

 
13,542

 
48,137

 
52,749

 
Preferred share dividends
(1,675
)
 
(1,675
)
 
(5,026
)
 
(5,026
)
 
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS
$
27,258

 
$
11,867

 
$
43,111

 
$
47,723

 
 
 
 
 
 
 
 
 
 
EARNINGS PER COMMON SHARE
 
 
 
 
 

 
 

 
Basic
$
0.34

 
$
0.15

 
$
0.54

 
$
0.60

 
Diluted
$
0.33

 
$
0.15

 
$
0.54

 
$
0.60

 
 
 
 
 
 


 


 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
 
 
 
 
 

 
 

 
Basic
79,381

 
79,249

 
79,337

 
79,226

 
Diluted
86,259

 
79,437

 
79,514


79,404

 
 
 
 
 
 
 
 
 
 
Cash Dividend Declared per Common Share
$
0.22

 
$
0.21

 
$
0.66

 
$
0.64

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
OTHER COMPREHENSIVE INCOME
 
 
 
 
 

 
 

 
Net income
$
29,629

 
$
13,868

 
$
49,295

 
$
54,031

 
Other comprehensive gain (loss):
 
 
 
 
 

 
 

 
Gain (loss) on interest rate swaps
196

 
1,745

 
287

 
(5,252
)
 
Comprehensive income
29,825

 
15,613

 
49,582

 
48,779

 
Comprehensive income attributable to noncontrolling interest
(701
)
 
(367
)
 
(1,164
)
 
(1,154
)
 
COMPREHENSIVE INCOME ATTRIBUTABLE TO RPT
$
29,124

 
$
15,246

 
$
48,418

 
$
47,625

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

Page 4 of 39




RAMCO-GERSHENSON PROPERTIES TRUST
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the Nine Months Ended September 30, 2017
(In thousands)
(Unaudited)
 
 
 
 
 
 
 
Shareholders' Equity of Ramco-Gershenson Properties Trust
 
 
 
 
 
Preferred
Shares
 
Common
Shares
 
Additional
Paid-in Capital
 
Accumulated Distributions in Excess of Net Income
 
Accumulated Other Comprehensive Income
 
Noncontrolling Interest
 
Total Shareholders’ Equity
Balance, December 31, 2016 (as revised)
$
92,427

 
$
793

 
$
1,158,430

 
$
(384,934
)
 
$
985

 
$
20,897

 
$
888,598

Issuance of common shares, net of issuance costs
—

 
—

 
(24
)
 
—

 
—

 
—

 
(24
)
Redemption of OP unit holders
—

 
—

 
—

 
(1
)
 
—

 
(7
)
 
(8
)
Share-based compensation and other expense, net of shares withheld for employee taxes
—

 
1

 
1,648

 
—

 
—

 
—

 
1,649

Dividends declared to common shareholders
—

 
—

 
—

 
(52,381
)
 
—

 
—

 
(52,381
)
Dividends declared to preferred shareholders
—

 
—

 
—

 
(5,026
)
 
—

 
—

 
(5,026
)
Distributions declared to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
(1,266
)
 
(1,266
)
Dividends declared to deferred shares
—

 
—

 
—

 
(311
)
 
—

 
—

 
(311
)
Other comprehensive income adjustment
—

 
—

 
—

 
—

 
280

 
7

 
287

Net income
—

 
—

 
—

 
48,137

 
—

 
1,158

 
49,295

Balance,
September 30, 2017
$
92,427

 
$
794

 
$
1,160,054

 
$
(394,516
)
 
$
1,265

 
$
20,789

 
$
880,813

 
The accompanying notes are an integral part of these condensed consolidated financial statements.


Page 5 of 39




RAMCO GERSHENSON PROPERTIES TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
 
 
Nine Months Ended September 30,
 
2017
 
2016
OPERATING ACTIVITIES
 
 
 
Net income
$
49,295

 
$
54,031

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 

Depreciation and amortization
69,282

 
69,806

Amortization of deferred financing fees
1,040

 
1,099

Income tax provision
119

 
234

Earnings from unconsolidated joint ventures
(223
)
 
(337
)
Distributions received from operations of unconsolidated joint ventures
613

 
382

Provision for impairment
8,423

 
977

Loss on extinguishment of debt
—

 
847

Other gain on unconsolidated joint ventures
—

 
(215
)
Gain on sale of real estate
(35,920
)
 
(35,684
)
Amortization of premium on mortgages, net
(870
)
 
(1,346
)
Service-based restricted share expense
1,970

 
2,150

Long-term incentive cash and equity compensation expense
251

 
827

Changes in assets and liabilities:
 

 
 

Accounts receivable, net
(1,441
)
 
2,580

Acquired lease intangibles and other assets, net
(480
)
 
522

Accounts payable, acquired lease intangibles and other liabilities
(3,201
)
 
(6,110
)
Net cash provided by operating activities
88,858

 
89,763

 
 
 
 
INVESTING ACTIVITIES
 

 
 

Acquisition of real estate
(165,882
)
 
—

Development and capital improvements
(43,966
)
 
(51,146
)
Net proceeds from sales of real estate
121,419

 
88,212

Distributions from sale of joint venture property
—

 
1,303

Change in restricted cash
1,888

 
682

Net cash (used in) provided by investing activities
(86,541
)
 
39,051

 
 
 
 
FINANCING ACTIVITIES
 

 
 

Repayments of mortgages and notes payable
(2,381
)
 
(23,221
)
Proceeds on revolving credit facility
224,000

 
181,000

Repayments on revolving credit facility
(161,000
)
 
(231,000
)
Payment of deferred financing costs
(2,263
)
 
(457
)
Proceeds, net of costs, from issuance of common stock
(24
)
 
(185
)
Redemption of operating partnership units for cash
(8
)
 
(1,518
)
Shares used for employee taxes upon vesting of awards
(497
)
 
—

Dividends paid to preferred shareholders
(5,026
)
 
(5,026
)
Dividends paid to common shareholders and deferred shares
(52,653
)
 
(50,176
)
Distributions paid to operating partnership unit holders
(1,266
)
 
(1,245
)
Net cash used in financing activities
(1,118
)
 
(131,828
)
 
 
 
 
Net change in cash and cash equivalents
1,199

 
(3,014
)
Cash and cash equivalents at beginning of period
3,582

 
6,644

Cash and cash equivalents at end of period
$
4,781

 
$
3,630

 
 
 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
 

 
 

Cash paid for interest (net of capitalized interest of $193 and $640 in 2017 and 2016, respectively)
$
29,698

 
$
32,557

Proceeds from dispositions held in escrow
$
—

 
$
18,990

Decrease in restricted cash attributable to acquired real estate
$
4,000

 
$
—


The accompanying notes are an integral part of these condensed consolidated financial statements.

Page 6 of 39




RAMCO-GERSHENSON PROPERTIES TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.  Organization and Basis of Presentations

Organization

Ramco-Gershenson Properties Trust, together with its subsidiaries (the “Company” or "RPT"), is a real estate investment trust (“REIT”) engaged in the business of owning, developing, redeveloping, acquiring, managing and leasing large multi-anchored shopping centers primarily in a number of the largest metropolitan markets in the central United States.  As of September 30, 2017, our property portfolio consisted of 60 wholly owned shopping centers comprising approximately 14.2 million square feet. We also have ownership interests of 7%, 20% and 30%, respectively, in three joint ventures. Our joint ventures are reported using equity method accounting. We earn fees from the joint ventures for managing, leasing and redeveloping the shopping centers they own. In addition, we own interests in several land parcels that are available for development or sale. Most of our properties are anchored by supermarkets and/or national chain stores.  Our credit risk, therefore, is concentrated in the retail industry.

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of the Company and our majority owned subsidiary, the Operating Partnership, Ramco-Gershenson Properties, L.P. (the "OP") (97.6% owned by the Company at September 30, 2017 and December 31, 2016), and all wholly-owned subsidiaries, including entities in which we have a controlling financial interest.

We have elected to be a REIT for federal income tax purposes.  All intercompany balances and transactions have been eliminated in consolidation.  The information furnished is unaudited and reflects all adjustments which are, in the opinion of management, necessary to reflect a fair statement of the results for the interim periods presented, and all such adjustments are of a normal recurring nature.  These condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2016.

The preparation of our unaudited financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management of the Company 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 unaudited financial statements and the reported amounts of revenues and expenses during the reporting period.  We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and reported amounts that are not readily apparent from other sources.  Actual results could differ from those estimates.

Correction of Immaterial Error

In the third quarter of 2017, management identified certain special assessment obligations on undeveloped land that required revision. The adjustment to revise the obligations approximated $3.1 million. The revision had no impact on earnings or cash flows for 2016, 2015 and 2014.

Pursuant to the guidance of Staff Accounting Bulletin ("SAB") No. 99, Materiality, the Company concluded that the adjustments were not material to any of its prior period financial statements. Although the adjustments were immaterial to prior periods, the prior period financial statements were revised, in accordance with SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, due to the significance of the out-of-period correction in the third quarter of 2017.












Page 7 of 39







A reconciliation of the effects of the revision to the previously reported balance sheet at December 31, 2016 follows:

 
December 31, 2016
 
As reported
 
Adjustment
 
As Revised
 
(In thousands)
Other liabilities
$
6,800

 
$
3,093

 
$
9,893

Total liabilities
$
1,169,807

 
$
3,093

 
$
1,172,900

Accumulated distributions in excess of net income
$
(381,912
)
 
$
(3,022
)
 
$
(384,934
)
Noncontrolling interest
$
20,968

 
$
(71
)
 
$
20,897

Total shareholder's equity
$
891,691

 
$
(3,093
)
 
$
888,598

 
 
 
 
 
 

A reconciliation of the effects of the revision to the previously reported statement of stockholders' equity for the years ending December 31, 2016, 2015, and 2014 follows:
 
Year Ended December 31,
 
2016
 
2015
 
2014
 
(In thousands)
Accumulated distributions in excess of net income, as reported
$
(381,912
)
 
$
(365,747
)
 
$
(358,525
)
Adjustment
(3,022
)
 
(3,022
)
 
(3,022
)
Accumulated distributions in excess of net income, as revised
$
(384,934
)
 
$
(368,769
)
 
$
(361,547
)
 
 
 
 
 
 
Noncontrolling interest, as reported
$
20,968

 
$
22,053

 
$
25,861

Adjustment
(71
)
 
(71
)
 
(71
)
Noncontrolling interest, as revised
$
20,897

 
$
21,982

 
$
25,790

 
 
 
 
 
 

Recently Adopted Accounting Pronouncements

In January 2017, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2017-01, "Clarifying the Definition of a Business" ("ASU 2017-01"). ASU 2017-01 changes the definition of a business to exclude acquisitions where substantially all of the fair value of the assets acquired are concentrated in a single identifiable asset or a group of similar identifiable assets. While there are various differences between the accounting for an asset acquisition and a business combination, the largest impact is that certain transaction costs are capitalized for asset acquisitions rather than expensed when they are considered business combinations. ASU 2017-01 is effective January 1, 2019; however the Company early adopted this standard during the first quarter of 2017. Transaction costs of $0.6 million have been capitalized in connection with our acquisitions.

In March 2016, the FASB updated ASC Topic 718 "Compensation - Stock Compensation" with ASU 2016-09 "Improvements to Employee Share-Based Payment Accounting" ("ASU 2016-09"). ASU 2016-09 simplifies several aspects of share-based payment award transactions, including tax consequences, classification of awards and the classification on the statement of cash flows. ASU 2016-09 is effective for annual periods (including interim periods within those periods) beginning after December 15, 2016. The adoption of this standard resulted in classifying cash paid by the Company to taxing authorities when directly withholding shares upon vesting as financing activities in the consolidated statements of cash flows.

Page 8 of 39







Recent Accounting Pronouncements

In September 2017, the FASB issued ASU 2017-13 "'Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments" ("ASU 2017-13"). The amendments in ASU 2017-13 amend the early adoption date option for certain companies related to the adoption of ASU 2014-09 related to revenue and ASU 2016-02 related to leases and is effective consistent with each of these updates. The adoption of this update is not anticipated to have a material impact on our consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12 "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities" ("ASU 2017-12"). These amendments refine and expand hedge accounting for both financial (e.g., interest rate) and commodity risks. Its provisions create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes. It also makes certain targeted improvements to simplify the application of hedge accounting guidance. It is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The adoption of this update is not anticipated to have a material impact on our consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09 "Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting" ("ASU 2017-09"). ASU 2017-09 clarifies guidance about what changes to the terms and conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. It is effective for annual periods, and interim periods within those annual periods, beginning after December 31, 2017. The adoption of this standard is not anticipated to have a material impact on our consolidated financial statements.

In February 2017, the FASB issued ASU 2017-05 "Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets" ("ASU 2017-05"). ASU 2017-05 clarifies that a financial asset is within the scope of Subtopic 610-20 if it meets the definition of an in substance nonfinancial asset. ASU 2017-05 also defines the term in substance nonfinancial asset. It is effective for annual periods beginning after December 15, 2017. The adoption of this standard is not anticipated to have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04 "Simplifying the Test for Goodwill Impairment" ("ASU 2017-04"). ASU 2017-04 simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. ASU 2017-04 is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, and should be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not anticipate the adoption of ASU 2017-04 will have a material impact on our consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15 "Classification of Certain Cash Receipts and Cash Payments" ("ASU 2016-15"), which clarifies the treatment of several cash flow categories. In addition, ASU 2016-15 clarifies that when cash receipts and cash payments have aspects of more than one class of cash flows and cannot be separated, classification will depend on the predominant source or use. This update is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted, including adoption in an interim period. We are currently evaluating the guidance and have not determined the impact this standard may have on our consolidated financial statements.

In June 2016, the FASB updated Accounting Standards Codification ("ASC") Topic 326 "Financial Instruments - Credit Losses" with ASU 2016-13 “Measurement of Credit Losses on Financial Instruments” ("ASU 2016-13"). ASU 2016-13 enhances the methodology of measuring expected credit losses to include the use of forward-looking information to better inform credit loss estimates. ASU 2016-13 is effective for annual periods (including interim periods within those periods) beginning after December 15, 2019. We are currently evaluating the guidance and have not determined the impact this standard may have on our consolidated financial statements.

In February 2016, the FASB updated ASC Topic 842 "Leases" ("ASU 2016-02"). ASU 2016-02 requires lessees to record operating and financing leases as assets and liabilities on the balance sheet and lessors to expense costs that are not direct leasing costs. ASU 2016-02 is effective for periods beginning after December 15, 2018, with early adoption permitted upon issuance using a modified retrospective approach. The Company continues to evaluate the effect the adoption of ASU 2016-02 will have on our consolidated financial statements and related disclosures. However, we currently believe the adoption of ASU 2016-02 will not have a material impact for operating leases where we are a lessor and will continue to record revenues from rental properties for its operating leases on a straight-line basis. In addition, for leases where the Company is a lessee, primarily for the Company’s ground lease and administrative office lease, the Company believes it will record a lease liability and a right of use asset at fair value upon adoption related to these items. In addition, we are reviewing internal costs associated with our leasing staff and what changes will be required under the new guidance related to leasing costs.

Page 9 of 39








In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers" ("ASU 2014-09"). ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing GAAP revenue recognition guidance as well as impact the existing GAAP guidance governing the sale of non-financial assets. The standard’s core principle is that a company will recognize revenue when it satisfies performance obligations, by transferring promised goods or services to customers, in an amount that reflects the consideration to which the company expects to be entitled in exchange for fulfilling those performance obligations. In doing so, companies will need to exercise more judgment and make more estimates than under existing GAAP guidance. ASU 2014-09 will be effective for public entities for annual and interim reporting periods beginning after December 15, 2017 and early adoption is permitted in periods ending after December 15, 2016. We anticipate adopting ASU 2014-09 and the related updates subsequently issued by the FASB using the modified retrospective method.  In addition, we are evaluating our revenue streams and the appropriate accounting literature each is governed under.  Our current evaluation of the revenue streams indicates less than 20% of our consolidated revenues require evaluation under ASU 2014-09, however that process is on-going as we review and document selected arrangements.  We are also reviewing the impact of additional disclosures required under ASU 2014-09. At this time we do not expect material changes to our accounting policies for these revenue streams, but as indicated our review of contractual arrangements and disclosures under ASU 2014-09 will continue through the remainder of 2017. 

2.  Real Estate

Included in our net real estate assets are income producing properties that are recorded at cost less accumulated depreciation and amortization, construction in process and land available for development or sale.

We review our investment in real estate, including any related intangible assets, for impairment on a property-by-property basis whenever events or changes in circumstances indicate that the carrying value of the property may not be recoverable.  These changes in circumstances include, but are not limited to, changes in occupancy, rental rates, tenant sales, net operating income, geographic location, real estate values and expected holding period.

For the three months ended September 30, 2017 and nine months ended September 30, 2017, we recorded impairment provisions totaling $1.9 million and $8.4 million, respectively on shopping centers classified as income producing. The impairment provision for the three months ended September 30, 2017 related to a certain center disposed of during the quarter. The impairment was primarily the result of events occurring during the due diligence period including a long-term renewal commitment from a tenant at a rental rate lower than anticipated and the loss of certain tenants. In the first half of 2017 the adjustments were triggered by changes in the associated market price and expected hold period assumptions related to certain shopping centers. To estimate fair value, we use discounted cash flow models that include assumptions of the discount rates that market participants would use in pricing an asset or market pricing from potential or comparable transactions.

Land available for development or sale includes real estate projects where vertical construction has yet to commence, but which have been identified by us and are available for future development when market conditions dictate the demand for a new shopping center. The viability of all projects under construction or development, including those owned by unconsolidated joint ventures, is regularly evaluated under applicable accounting requirements, including requirements relating to abandonment of assets or changes in use.  Land available for development or sale was $36.4 million and $37.8 million at September 30, 2017 and December 31, 2016, respectively.

Construction in progress represents existing development, redevelopment and tenant build-out projects.  When projects are substantially complete and ready for their intended use, balances are transferred to land or building and improvements as appropriate.  Construction in progress was $19.7 million and $23.4 million at September 30, 2017 and December 31, 2016, respectively. The decrease in construction in progress from December 31, 2016 to September 30, 2017 was due primarily to the completion of ongoing redevelopment and expansion projects across the portfolio.

Pursuant to the criteria established under ASC Topic 360 we classify properties as held for sale when executed purchase and sales agreement contingencies have been satisfied thereby signifying that the sale is legally binding. As of September 30, 2017, we had no properties and no parcels classified as held for sale. As of December 31, 2016, the Company had one property classified as held for sale with a net book value of $8.8 million which closed in February 2017.


Page 10 of 39







3.  Property Acquisitions and Dispositions

Acquisitions

The following table provides a summary of our acquisitions for the nine months ended September 30, 2017:

 
 
 
 
 
 
 
 
 
 
Gross
Property Name
 
Location
 
GLA (in thousands)

 
Acreage

 
Date
Acquired
 
Purchase
Price
 
Assumed
Debt
 
 
 
 
 
 
 
 
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Providence Marketplace
 
Mt. Juliet, TN
 
632

 
N/A

 
02/17/17
 
$
115,126

 
$
—

Webster Place
 
Chicago, IL
 
135

 
N/A

 
02/17/17
 
53,162

 
—

  Total consolidated income producing acquisitions
 
767

 
—

 
 
 
$
168,288

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
Troy Marketplace - Outparcel
 
Troy, MI
 
N/A

 
0.4

 
08/24/17
 
$
901

 
$
—

Troy Marketplace - Outparcel
 
Troy, MI
 
N/A

 
0.4

 
06/30/17
 
175

 
$
—

Troy Marketplace - Outparcel
 
Troy, MI
 
N/A

 
0.5

 
01/17/17
 
475

 
—

  Total consolidated land / outparcel acquisitions
 
—

 
1.3

 
 
 
$
1,551

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
Total Acquisitions
 
 
 
767

 
1.3

 
 
 
$
169,839

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 

The aggregate fair value of our 2017 acquisitions through September 30, 2017, was allocated and is reflected in the following table.

 
 
Allocated
Fair Value
 
 
(In thousands)
Land
 
$
52,132

Buildings and improvements
 
107,156

Above market leases
 
409

Lease origination costs
 
12,885

Other assets
 
3,899

Below market leases
 
(6,642
)
Net assets acquired
 
$
169,839

 
 
 

Total revenue and net income for the 2017 acquisitions included in our condensed consolidated statement of operations for the three and nine months ended September 30, 2017 were as follows:
 
 
Three Months Ended September 30, 2017
 
Nine Months Ended September 30, 2017
 
 
(In thousands)
 
 
Total revenue from 2017 acquisitions
 
$
3,862

 
$
9,477

Net income from 2017 acquisitions
 
$
687

 
$
1,674




Page 11 of 39







Unaudited Proforma Information

If the 2017 acquisitions had occurred on January 1, 2016, our consolidated revenues and net income for the three and nine months ended September 30, 2017 and 2016 would have been as follows:

 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30, 2017
 
 
2017
 
2016
 
2017
 
2016
 
 
(In thousands)
 
 
Consolidated revenue
 
$
65,931

 
$
68,445

 
$
202,714

 
$
207,846

Consolidated net income available to common shareholders
 
$
27,258

 
$
12,366

 
$
43,346

 
$
49,235


Dispositions

The following table provides a summary of our disposition activity for the nine months ended September 30, 2017:

 
 
 
 
 
 
 
 
 
 
Gross
Property Name
 
Location
 
GLA
 
Acreage

 
Date
Sold
 
Sales
Price
 
Gain
on Sale
 
 
 
 
(In thousands)
 
 
 
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Hoover Eleven
 
Warren, MI
 
281

 
N/A

 
09/29/17
 
$
20,350

 
$
—

Auburn Mile - Aqua Tots
 
Auburn Hills, MI
 
5

 
N/A

 
08/25/17
 
1,000

 
123

New Towne Plaza
 
Canton Township, MI
 
193

 
N/A

 
08/04/17
 
26,000

 
15,899

Clinton Valley
 
Sterling Heights, MI
 
205

 
N/A

 
08/01/17
 
23,500

 
7,168

Roseville Towne Center
 
Roseville, MI
 
77

 
N/A

 
07/24/17
 
10,250

 
(291
)
Gaines Marketplace
 
Caledonia, MI
 
60

 
N/A

 
07/07/17
 
9,500

 
690

Walgreen's Data Center
 
Mount Prospect, IL
 
73

 
N/A

 
07/07/17
 
6,200

 
252

Auburn Mile
 
Auburn Hills, MI
 
91

 
N/A

 
03/17/17
 
13,311

 
7,005

Oak Brook Square
 
Flint, MI
 
152

 
N/A

 
02/10/17
 
14,200

 
4,185

   Total income producing dispositions
 
1,137

 
—

 
 
 
$
124,311

 
$
35,031

 
 
 
 
 
 
 
 
 
 
 
 
 
River City Marketplace - Outparcel
 
Jacksonville, FL
 
N/A

 
0.9

 
09/29/17
 
$
360

 
$
63

Hartland - Outparcel
 
Hartland, MI
 
N/A

 
1.6

 
08/04/17
 
550

 
148

River City Marketplace
 
Jacksonville, FL
 
N/A

 
1.4

 
07/27/17
 
675

 
493

Lakeland Park Center - Outparcel
 
Lakeland, FL
 
N/A

 
1.8

 
03/31/17
 
1,305

 
185

  Total outparcel dispositions
 
—

 
5.7

 
 
 
$
2,890

 
$
889

 
 
 
 
 
 
 
 
 
 
 
   Total consolidated dispositions
 
1,137

 
5.7

 
 
 
$
127,201

 
$
35,920

 
 
 
 
 
 
 
 
 
 
 
 
 




Page 12 of 39







4.  Equity Investments in Unconsolidated Joint Ventures

We have three joint venture agreements whereby we own 7%, 20% and 30%, respectively, of the equity in each joint venture. We and the joint venture partners have joint approval rights for major decisions, including those regarding property operations.  We cannot make significant decisions without our partner’s approval.  Accordingly, we account for our interest in the joint ventures using the equity method of accounting.

The combined condensed financial information for our unconsolidated joint ventures is summarized as follows:
Balance Sheets
 
September 30, 2017
 
December 31, 2016
 
 
(In thousands)
ASSETS
 
 
 
 
Investment in real estate, net
 
$
43,001

 
$
43,995

Other assets
 
3,234

 
3,712

Total Assets
 
$
46,235

 
$
47,707

LIABILITIES AND OWNERS' EQUITY
 
 

 
 

Other liabilities
 
$
488

 
$
219

Owners' equity
 
45,747

 
47,488

Total Liabilities and Owners' Equity
 
$
46,235

 
$
47,707

 
 
 
 
 
RPT's equity investments in unconsolidated joint ventures
 
$
2,734

 
$
3,150

 
 
 
 
 

 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Statements of Operations
 
2017
 
2016
 
2017
 
2016
 
 
(In thousands)
Total revenue
 
$
1,192

 
$
1,279

 
$
3,485

 
$
4,588

Total expenses 
 
745

 
915

 
2,250

 
3,017

Income before other income and expense
 
447

 
364

 
1,235

 
1,571

Gain on sale of real estate
 
—

 
—

 
—

 
371

Net income
 
$
447

 
$
364

 
$
1,235

 
$
1,942

 
 
 
 
 
 
 
 
 
RPT's share of earnings from unconsolidated joint ventures
 
$
81

 
$
119

 
$
223

 
$
337

 
 
 
 
 
 
 
 
 

Acquisitions

There was no acquisition activity in the nine months ended September 30, 2017 by any of our unconsolidated joint ventures.

Dispositions

There was no disposition activity in the nine months ended September 30, 2017 by any of our unconsolidated joint ventures.

Page 13 of 39








Joint Venture Management and Other Fee Income

We are engaged by our joint ventures to provide asset management, property management, leasing and investing services for such ventures' respective properties.  We receive fees for our services, including a property management fee calculated as a percentage of gross revenues received, and recognize these fees as the services are rendered.  

The following table provides information for our fees earned which are reported in our condensed consolidated statements of operations:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
 
(In thousands)
Management fees
$
69

 
$
65

 
$
206

 
$
251

Leasing fees
19

 
6

 
108

 
89

Construction fees
—

 
2

 
—

 
42

Disposition fees
—

 
—

 
—

 
47

Total
$
88

 
$
73

 
$
314

 
$
429

 
 
 
 
 
 
 
 

5.  Debt

The following table summarizes our mortgages and notes payable and capital lease obligation as of September 30, 2017 and December 31, 2016:
Notes Payable and Capital Lease Obligation
 
September 30,
2017
 
December 31,
2016
 
 
(In thousands)
Senior unsecured notes
 
$
535,000

 
$
535,000

Unsecured term loan facilities
 
210,000

 
210,000

Fixed rate mortgages
 
158,337

 
160,718

Unsecured revolving credit facility
 
149,000

 
86,000

Junior subordinated notes
 
28,125

 
28,125

 
 
1,080,462

 
1,019,843

Unamortized premium
 
4,251

 
5,120

Unamortized deferred financing costs
 
(3,203
)
 
(3,740
)
Total notes payable
 
$
1,081,510

 
$
1,021,223

 
 
 
 
 
Capital lease obligation
 
$
1,066

 
$
1,066

 
 
 
 
 
 

Senior unsecured notes and unsecured term loans

Our $745.0 million of senior unsecured notes and unsecured term loans have interest rates ranging from 3.14% to 4.74% and are due at various maturity dates from May 2020 through November 2028.

Mortgages

Our $158.3 million of fixed rate mortgages have interest rates ranging from 2.86% to 7.38% and are due at various maturity dates from January 2018 through June 2026. The fixed rate mortgages are secured by properties that have an approximate net book value of $251.6 million as of September 30, 2017. It is our intent to repay the mortgages maturing in 2018 and beyond using cash, borrowings under our unsecured line of credit, or other sources of financing which may include long-term unsecured notes.


Page 14 of 39







The mortgage loans encumbering our properties are generally nonrecourse, subject to certain exceptions for which we would be liable for any resulting losses incurred by the lender.  These exceptions vary from loan to loan but generally include fraud or a material misrepresentation, misstatement or omission by the borrower, intentional or grossly negligent conduct by the borrower that harms the property or results in a loss to the lender, filing of a bankruptcy petition by the borrower, either directly or indirectly and certain environmental liabilities.  In addition, upon the occurrence of certain events, such as fraud or filing of a bankruptcy petition by the borrower, we or our joint ventures would be liable for the entire outstanding balance of the loan, all interest accrued thereon and certain other costs, including penalties and expenses.

We have entered into mortgage loans which are secured by multiple properties and contain cross-collateralization and cross-default provisions.  Cross-collateralization provisions allow a lender to foreclose on multiple properties in the event that we default under the loan.  Cross-default provisions allow a lender to foreclose on the related property in the event a default is declared under another loan.

Revolving Credit Facility

On September 14, 2017, the Company entered into a Fourth Amended and Restated Credit Agreement (the “Fourth Amendment”). The Fourth Amendment amends and restates the Company's existing credit agreement with a number of financial institutions to provide an unsecured credit facility in the aggregate amount of $350.0 million with the ability to increase borrowing capacity up to $650.0 million through an accordion feature. The credit facility matures on September 14, 2021, and may be extended by the Company for two periods of six months each subject to continued compliance with the terms of the credit facility and the payment of an extension fee of 0.075%. Borrowings on the facility will be priced at London Interbank Offered Rate (LIBOR) plus a margin of between 1.30% and 1.95%, based on the Company’s leverage ratio as calculated under the credit facility. Deferred financing fees associated with the Fourth Amendment were approximately $2.3 million.

As of September 30, 2017, we had $149.0 million outstanding under our revolving credit facility, an increase of $63.0 million from December 31, 2016, as a result of borrowings to partially fund acquisitions of properties. After adjusting for outstanding letters of credit issued under our revolving credit facility, not reflected in the accompanying condensed consolidated balance sheets, totaling $1.3 million, we had $199.7 million of availability under our revolving credit facility. The interest rate as of September 30, 2017 was 2.59%.

Junior Subordinated Notes

Our junior subordinated notes have a variable rate of LIBOR plus 3.30%. The maturity date is January 2038.

The following table presents scheduled principal payments on mortgages and notes payable as of September 30, 2017:
Year Ending December 31,
 
(In thousands)
2017
$
822

2018
39,132

2019
5,859

2020
102,269

2021 (1)
263,508

Thereafter
668,872

Subtotal debt
1,080,462

Unamortized premium
4,251

Unamortized deferred financing costs
(3,203
)
Total debt
$
1,081,510

 
 

(1) Scheduled maturities in 2021 include the $149.0 million balance on the unsecured revolving credit facility drawn as of September 30, 2017. The unsecured revolving credit facility has two six-month extensions available at the Company's option provided compliance with financial covenants is maintained.

Our unsecured revolving credit facility, senior unsecured notes, and unsecured term loan facilities contain financial covenants relating to total leverage, fixed charge coverage ratio, unencumbered assets, tangible net worth and various other calculations. As of September 30, 2017, we were in compliance with these covenants.

Page 15 of 39








6.  Fair Value

We utilize fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.  Derivative instruments (interest rate swaps) are recorded at fair value on a recurring basis.  Additionally, we, from time to time, may be required to record other assets at fair value on a nonrecurring basis.  As a basis for considering market participant assumptions in fair value measurements, GAAP establishes three fair value levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.  The assessed inputs used in determining any fair value measurement could result in incorrect valuations that could be material to our condensed consolidated financial statements.  These levels are:

Level 1
Valuation is based upon quoted prices for identical instruments traded in active markets.

Level 2
Valuation is based upon prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3
Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market.  These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the assets or liabilities.

The following is a description of valuation methodologies used for our assets and liabilities recorded at fair value.

Derivative Assets and Liabilities

All of our derivative instruments are interest rate swaps for which quoted market prices are not readily available.  For those derivatives, we measure fair value on a recurring basis using valuation models that use primarily market observable inputs, such as yield curves.  We classify these instruments as Level 2.  Refer to Note 7 Derivative Financial Instruments of the notes to the condensed consolidated financial statements for additional information on our derivative financial instruments.

The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016.
 
 
 
 
Total
 
 
 
 
 
 
Balance Sheet Location
 
Fair Value
 
 
Level 2
 
September 30, 2017
 
 
 
(In thousands)
Derivative assets - interest rate swaps
 
Other assets
 
$
1,725

 
 
$
1,725

 
Derivative liabilities - interest rate swaps
 
Other liabilities
 
$
(595
)
 
 
$
(595
)
 
December 31, 2016
 
 
 
 
 
 
 
 
Derivative assets - interest rate swaps
 
Other assets
 
$
2,143

 
 
$
2,143

 
Derivative liabilities - interest rate swaps
 
Other liabilities
 
$
(1,300
)
 
 
$
(1,300
)
 
 
 
 
 
 
 
 
 
 
 
The carrying values of cash and cash equivalents, restricted cash, receivables and accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short maturity of these financial instruments.

We estimated the fair value of our debt based on our incremental borrowing rates for similar types of borrowing arrangements with the same remaining maturity and on the discounted estimated future cash payments to be made for other debt.  The discount rates used approximate current lending rates for loans or groups of loans with similar maturities and credit quality, assume the debt is outstanding through maturity and consider the debt’s collateral (if applicable).  Since such amounts are estimates that are based on limited available market information for similar transactions (Level 3), there can be no assurance that the disclosed value of any financial instrument could be realized by immediate settlement of the instrument. 

Fixed rate debt (including variable rate debt swapped to fixed through derivatives) with carrying values of $903.3 million and $905.7 million as of September 30, 2017 and December 31, 2016, respectively, had fair values of approximately $880.8 million and $900.3 million, respectively.  Variable rate debt’s fair value is estimated to be the carrying values of $177.1 million and $114.1 million as of September 30, 2017 and December 31, 2016, respectively.


Page 16 of 39







The following is a description of valuation methodologies used for our assets and liabilities recorded at fair value on a nonrecurring basis:
Net Real Estate
Our net investment in real estate, including any identifiable intangible assets, is subject to impairment testing on a nonrecurring basis. To estimate fair value, we use discounted cash flow models that include assumptions of the discount rates that market participants would use in pricing the asset or pricing from potential or comparable market transactions. To the extent impairment has occurred, we charge to expense the excess of the carrying value of the property over its estimated fair value. We classify impaired real estate assets as nonrecurring Level 3. During the nine months ended September 30, 2017, certain income producing shopping centers with a fair value of approximately $68.1 million incurred an impairment charge of $8.4 million. We did not have any material liabilities that were required to be measured at fair value on a nonrecurring basis during the period.
7.  Derivative Financial Instruments

We utilize interest rate swap agreements for risk management purposes to reduce the impact of changes in interest rates on our variable rate debt.  We may also enter into forward starting swaps to set the effective interest rate on planned variable rate financing. On the date we enter into an interest rate swap, the derivative is designated as a hedge against the variability of cash flows that are to be paid in connection with a recognized liability.  Subsequent changes in the fair value of a derivative designated as a cash flow hedge that is determined to be effective are recorded in other comprehensive income (“OCI”) until earnings are affected by the variability of cash flows of the hedged transaction.  The differential between fixed and variable rates to be paid or received is accrued, as interest rates change, and recognized currently as interest expense in the condensed consolidated statements of operations.  We assess effectiveness of our cash flow hedges both at inception and on an ongoing basis.   Our cash flow hedges become ineffective, for example, if critical terms of the hedging instrument and the debt do not perfectly match such as notional amounts, settlement dates, reset dates and calculation period and LIBOR rate. Changes in the fair values are immediately included in other income and expenses. At September 30, 2017, all of our hedges were effective.

The following table summarizes the notional values and fair values of our derivative financial instruments as of September 30, 2017:
 
 
Hedge
 
Notional
 
Fixed
 
Fair
 
Expiration
Underlying Debt
 
Type
 
Value
 
Rate
 
Value
 
Date
 
 
 
 
(In thousands)
 
 
 
(In thousands)
 
 
Derivative Assets
 
 
 
 
 
 
 
 
 
 
Unsecured term loan
 
Cash Flow
 
$
50,000

 
1.460
%
 
$
297

 
05/2020
Unsecured term loan
 
Cash Flow
 
20,000

 
1.498
%
 
205

 
05/2021
Unsecured term loan
 
Cash Flow
 
15,000

 
1.490
%
 
159

 
05/2021
Unsecured term loan
 
Cash Flow
 
40,000

 
1.480
%
 
436

 
05/2021
 
 
 
 
$
125,000

 
 
 
$
1,097

 
 
Derivative Assets - Forward Swaps
 
 
 
 
 
 
 
 
 
 
Unsecured term loan
 
Cash Flow
 
60,000

 
1.770
%
 
628

 
03/2023
Total Derivative Assets
 
 
 
$
185,000

 
 
 
$
1,725

 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative Liabilities
 
 
 
 
 
 
 
 
 
 
Unsecured term loan
 
Cash Flow
 
$
30,000

 
2.048
%
 
$
(178
)
 
10/2018
Unsecured term loan
 
Cash Flow
 
25,000

 
1.850
%
 
(98
)
 
10/2018
Unsecured term loan
 
Cash Flow
 
5,000

 
1.840
%
 
(19
)
 
10/2018
Unsecured term loan
 
Cash Flow
 
15,000

 
2.150
%
 
(180
)
 
05/2020
Unsecured term loan
 
Cash Flow
 
10,000

 
2.150
%
 
(120
)
 
05/2020
Total Derivative Liabilities
 
 
 
$
85,000

 
 
 
$
(595
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Page 17 of 39







The effect of derivative financial instruments on our condensed consolidated statements of operations for the three months ended September 30, 2017 and 2016 is summarized as follows:

 
 
Amount of Gain (Loss)
Recognized in OCI on Derivative
(Effective Portion)
 
Location of Gain
(Loss)
Reclassified from
Accumulated OCI
into Income
(Effective Portion)
 
Amount of Loss
Reclassified from
Accumulated OCI into
Income (Effective Portion)
Derivatives in Cash Flow Hedging Relationship
 
Three Months Ended September 30,
 
 
Three Months Ended September 30,
 
2017
 
2016
 
 
2017
 
2016
 
 
(In thousands)
 
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts - assets
 
$
(44
)
 
$
—

 
Interest Expense
 
$
62

 
$
—

Interest rate contracts - liabilities
 
360

 
1,093

 
Interest Expense
 
(182
)
 
652

Total
 
$
316

 
$
1,093

 
Total
 
$
(120
)
 
$
652

 
 
 
 
 
 
 
 
 
 
 


The effect of derivative financial instruments on our condensed consolidated statements of operations for the nine months ended September 30, 2017 and 2016 is summarized as follows:
 
 
Amount of Gain (Loss)
Recognized in OCI on Derivative
(Effective Portion)
 
Location of Gain
(Loss)
Reclassified from
Accumulated OCI
into Income
(Effective Portion)
 
Amount of Loss
Reclassified from
Accumulated OCI into
Income (Effective Portion)
Derivatives in Cash Flow Hedging Relationship
 
Nine Months Ended September 30,
 
 
Nine Months Ended September 30,
 
2017
 
2016
 
 
2017
 
2016
 
 
(In thousands)
 
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts - assets
 
$
(98
)
 
$
(716
)
 
Interest Expense
 
$
(319
)
 
$
74

Interest rate contracts - liabilities
 
1,437

 
(6,436
)
 
Interest Expense
 
(733
)
 
1,826

Total
 
$
1,339

 
$
(7,152
)
 
Total
 
$
(1,052
)
 
$
1,900

 
 
 
 
 
 
 
 
 
 
 
 


Page 18 of 39







8.   Earnings Per Common Share

The following table sets forth the computation of basic and diluted earnings per share (“EPS”):
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2017
 
2016
 
2017
 
2016
 
 
(In thousands, except per share data)
Net income
$
29,629

 
$
13,868

 
$
49,295

 
$
54,031

 
Net income attributable to noncontrolling interest
(696
)
 
(326
)
 
(1,158
)
 
(1,282
)
 
Allocation of income to restricted share awards
(135
)
 
(90
)
 
(310
)
 
(287
)
 
Income attributable to RPT
28,798

 
13,452

 
47,827

 
52,462

 
Preferred share dividends
(1,675
)
 
(1,675
)
 
(5,026
)
 
(5,026
)
 
Net income available to common shareholders
27,123

 
11,777

 
42,801

 
47,436

 
Add back preferred shares for dilution (1)
1,675

 
—

 
—

 
—

 
Net income available to common shareholders - Diluted
$
28,798

 
$
11,777

 
$
42,801

 
$
47,436

 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding, Basic
79,381

 
79,249

 
79,337

 
79,226

 
Restricted stock awards using the treasury method
165

 
188

 
177

 
178

 
Dilutive effect of securities (1)
6,713

 
—

 
—

 
—

 
Weighted average shares outstanding, Diluted
86,259

 
79,437

 
79,514

 
79,404

 

 
 
 
 
 

 
 

 
Income per common share, Basic
$
0.34

 
$
0.15

 
$
0.54

 
$
0.60

 
Income per common share, Diluted
$
0.33

 
$
0.15

 
$
0.54

 
$
0.60

 
 
 
 
 
 
 
 
 
 

(1) The assumed conversion of preferred shares is dilutive for the three months ended September 30, 2017 and anti-dilutive for all other periods presented.
We exclude certain securities from the computation of diluted earnings per share because the inclusion of these securities would have been anti-dilutive. The following table presents the outstanding securities that were excluded from the computation of diluted earnings per share and the number of common shares each was convertible into (amounts in thousands):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2017
 
2016
 
2017
 
2016
 
 
Issued
Converted
 
Issued
Converted
 
Issued
Converted
 
Issued
Converted
Operating Partnership Units
 
1,917

1,917

 
1,917

1,917

 
1,917

1,917

 
1,917

1,917

Series D Preferred Shares
 
—

—

 
1,849

6,592

 
1,849

6,713

 
1,849

6,592

Performance Share Units
 
98

—

 
—

—

 
98

—

 
—

—

 
 
2,015

1,917

 
3,766

8,509

 
3,864

8,630

 
3,766

8,509

 
 
 
 
 
 
 
 
 
 
 
 
 



Page 19 of 39







9.  Share-based Compensation Plans

As of September 30, 2017, we have one share-based compensation plan in effect, the 2012 Omnibus Long-Term Incentive Plan (“2012 LTIP”) under which our compensation committee may grant, subject to any Company performance conditions as specified by the compensation committee, restricted shares, restricted share units, options and other awards to trustees, officers and other key employees.  The 2012 LTIP allows us to issue up to 2.0 million shares of our common stock, units or stock options, of which 1.2 million remained available for issuance as of September 30, 2017.

As of September 30, 2017, we had 412,623 unvested share awards granted under the 2012 LTIP and other plans which terminated when the 2012 LTIP became effective.  These awards have various expiration dates through July 2022.

During the nine months ended September 30, 2017