Market Overview

Urban Edge Properties Reports Fourth Quarter and Full Year 2017 Results

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Urban Edge Properties (NYSE:UE) (the "Company") today announced its
results for the quarter and year ended December 31, 2017.

Financial Results(1)(2)

  • Reported a net loss of $15.9 million, or $0.13 per diluted share, for
    the quarter and net income of $72.9 million, or $0.61 per diluted
    share, for the year.
  • Generated Funds from Operations applicable to diluted common
    shareholders ("FFO") of $5.6 million, or $0.04 per share, for the
    quarter and $157.8 million, or $1.33 per share, for the year.
  • Generated FFO as Adjusted of $0.34 per share for the quarter and $1.34
    per share for the year, an increase of 3.0% per share over the fourth
    quarter of 2016 and an increase of 5.5% per share over the year ended
    December 31, 2016.

Operating Results(1)

  • Increased same-property cash Net Operating Income ("NOI") by 4.9% over
    the fourth quarter of 2016 and by 4.7% over the year ended December
    31, 2016 primarily due to rent commencements and higher recovery
    revenue.
  • Increased same-property cash NOI including properties in redevelopment
    by 5.4% over both the fourth quarter and year ended December 31, 2016.
  • Increased same-property retail portfolio occupancy by 10 basis points
    to 98.3% compared to December 31, 2016 and unchanged compared to
    September 30, 2017.
  • Reported a decline in consolidated retail portfolio occupancy of 120
    basis points to 96.0% compared to December 31, 2016 as a result of the
    acquisition of centers with lower occupancy than our existing
    portfolio in the second quarter of 2017. This metric increased by 10
    basis points compared to September 30, 2017.
  • Executed 24 new leases, renewals and options totaling 505,000 square
    feet (sf) during the quarter. Same-space leases totaled 408,000 sf and
    generated average rent spreads of 12.4% on a GAAP basis and 9.0% on a
    cash basis.

Financing Activity(1)(3)(4)

  • During the fourth quarter, completed $710 million in individual,
    non-recourse mortgages with an average interest rate of 4.0% and a
    weighted average term to maturity of 10 years. Proceeds were used to
    defease and prepay a $544 million, 4.2% cross-collateralized mortgage
    scheduled to mature in 2020. The Company generated $120 million of
    additional cash proceeds net of costs and recognized a $34.1 million
    loss on debt extinguishment.
  • During the year, completed approximately $1.5 billion of financing
    transactions including $1 billion in individual, non-recourse
    mortgages and $500 million in equity at a weighted average net price
    of $25.62 per share. These transactions resulted in the following
    benefits:
    • Reduced net debt to total market capitalization to 22% and net
      debt to adjusted earnings before interest, tax, depreciation and
      amortization ("EBITDA") to 4.6x;
    • Increased cash balance by $361 million to $501 million at year end;
    • Increased line of credit to $600 million and extended maturity
      date to March 2021, with no borrowings outstanding;
    • Grew unencumbered asset base by $500 million to $1.4 billion and
      eliminated all cross-collateralized mortgages; and
    • Increased weighted average term to maturity on outstanding debt
      from 5 years to 8 years with no debt maturing until 2021.

Development, Redevelopment and Anchor Repositioning Activity

During the fourth quarter, the Company completed three redevelopment
projects totaling $22 million at a blended yield of 11%.

  • Expanded Garfield Commons by 85,000 square feet to accommodate new
    stores for Burlington, PetSmart and Ulta.
  • Renovated and remerchandised Hanover Commons to include Saks Off
    Fifth, Forever 21 Red and The Paper Store.
  • Added fast food outparcel at Rockaway River Commons.

In addition, the Company commenced a $4.5 million anchor repositioning
project at Goucher Commons with a national organic grocer replacing
hhgregg.

The Company has 15 active projects with total estimated costs of $195.5
million expected to generate an 8% return.

Hurricane Casualty Loss(5)

During the fourth quarter and for the year, the Company incurred $3.9
million and $6.1 million, respectively, of casualty-related losses from
Hurricane Maria on its two properties in Puerto Rico. The Company
expects its property and business interruption insurance will cover a
significant portion of these losses subject to deductibles of
approximately $2.3 million. Casualty-related losses are excluded from
FFO as Adjusted and same-property cash NOI for the quarter and the year.
Currently, 86% of all stores previously occupied prior to the hurricane
(measured by gross leasable area) are open and another 10% are expected
to open later this year.

Disposition Activity

During the fourth quarter, the Company executed a contract to sell its
property in Allentown, PA for $55.3 million. The sale is expected to
close in the second quarter of 2018.

(1) Refer to "Non-GAAP Financial Measures" and "Operating
Metrics" for definitions and additional detail.

(2) Refer to page 8 for a reconciliation of FFO to FFO as
Adjusted for the quarter and year ended December 31, 2017.

(3) The tables accompanying this press release provide the
calculation of fully diluted common shares and a reconciliation of net
income (loss) to EBITDA and annualized Adjusted EBITDA.

(4) Net debt as of December 31, 2017 is calculated as total
consolidated debt of $1.6 billion less total cash and cash equivalents,
including restricted cash, of $500.8 million.

(5) For additional information on the Hurricane Casualty Loss
refer to footnote 3 on page 8 of this Press Release and Note 11 to our
consolidated financial statements in Part II, Item 8 of our Annual
Report on Form 10-K for the year ended December 31, 2017.

Non-GAAP Financial Measures

The Company uses certain non-GAAP performance measures, in addition to
the primary GAAP presentations, as we believe these measures improve the
understanding of the Company's operational results. We continually
evaluate the usefulness, relevance, limitations, and calculation of our
reported non-GAAP performance measures to determine how best to provide
relevant information to the investing public, and thus such reported
measures are subject to change. The Company's non-GAAP performance
measures have limitations as they do not include all items of income and
expense that affect operations, and accordingly, should always be
considered as supplemental financial results. The following non-GAAP
measures are commonly used by the Company and investing public to
understand and evaluate our operating results and performance:

  • FFO: The Company believes FFO is a useful, supplemental measure of its
    operating performance that is a recognized metric used extensively by
    the real estate industry and, in particular REITs. FFO, as defined by
    the National Association of Real Estate Investment Trusts ("NAREIT")
    and the Company, is net income (computed in accordance with GAAP),
    excluding gains (or losses) from sales of depreciated real estate
    assets, real estate impairment losses, rental property depreciation
    and amortization expense. The Company believes that financial
    analysts, investors and shareholders are better served by the
    presentation of comparable period operating results generated from FFO
    primarily because it excludes the assumption that the value of real
    estate assets diminish predictably. FFO does not represent cash flows
    from operating activities in accordance with GAAP, should not be
    considered an alternative to net income as an indication of our
    performance, and is not indicative of cash flow as a measure of
    liquidity or our ability to make cash distributions.
  • FFO as Adjusted: The Company provides disclosure of FFO as Adjusted
    because it believes it is a useful supplemental measure of its core
    operating performance that facilitates comparability of historical
    financial periods. FFO as Adjusted is calculated by making certain
    adjustments to FFO to account for items the Company does not believe
    are representative of ongoing core operating results including
    non-comparable revenues and expenses. The Company's method of
    calculating FFO as Adjusted may be different from methods used by
    other REITs and, accordingly, may not be comparable to such other
    REITs.
  • Cash NOI: The Company uses cash NOI internally to make investment and
    capital allocation decisions and to compare the unlevered performance
    of our properties to our peers. The Company believes cash NOI is
    useful to investors as a performance measure because, when compared
    across periods, cash NOI reflects the impact on operations from trends
    in occupancy rates, rental rates, operating costs and acquisition and
    disposition activity on an unleveraged basis, providing perspective
    not immediately apparent from operating income or net income. The
    Company calculates cash NOI using net income as defined by GAAP
    reflecting only those income and expense items that are incurred at
    the property level, adjusted for the following items: lease
    termination fees, bankruptcy settlement income, non-cash rental income
    and ground rent expense and income or expenses that we do not believe
    are representative of ongoing operating results, if any.
  • Same-property Cash NOI: The Company provides disclosure of cash NOI on
    a same-property basis, which includes the results of properties that
    were owned and operated for the entirety of the reporting periods
    being compared totaling 75 properties for the three months ended
    December 31, 2017 and 2016 and 74 properties for the twelve months
    ended December 31, 2017 and 2016. Information provided on a
    same-property basis excludes properties under development,
    redevelopment or that involve anchor repositioning where a substantial
    portion of the gross leasable area ("GLA") is taken out of service and
    also excludes properties acquired, sold, under contract to be sold, or
    that are in the foreclosure process during the periods being compared.
    As such, same-property cash NOI assists in eliminating disparities in
    net income due to the development, redevelopment, acquisition or
    disposition of properties during the periods presented, and thus
    provides a more consistent performance measure for the comparison of
    the operating performance of the Company's properties. While there is
    judgment surrounding changes in designations, a property is removed
    from the same-property pool when it is designated as a redevelopment
    property because it is undergoing significant renovation or
    retenanting pursuant to a formal plan that is expected to have a
    significant impact on its operating income. A development or
    redevelopment property is moved back to the same-property pool once a
    substantial portion of the NOI growth expected from the development or
    redevelopment is reflected in both the current and comparable prior
    year period, generally one year after at least 80% of the expected NOI
    from the project is realized on a cash basis. Acquisitions are moved
    into the same-property pool once we have owned the property for the
    entirety of the comparable periods and the property is not under
    significant development or redevelopment. The Company has also
    provided disclosure of cash NOI on a same-property basis adjusted to
    include redevelopment properties. Same-property cash NOI may include
    other adjustments as detailed in the Reconciliation of Net Income
    (Loss) to cash NOI and same-property cash NOI included in the tables
    accompanying this press release.
  • EBITDA and Adjusted EBITDA: EBITDA and Adjusted EBITDA are
    supplemental, non-GAAP measures utilized by us in various financial
    ratios. EBITDA and Adjusted EBITDA are presented to assist investors
    in the evaluation of REITs, as a measure of the Company's operational
    performance as they exclude various items that do not relate to or are
    not indicative of our operating performance and because they
    approximate key performance measures in our debt covenants.
    Accordingly, the Company believes that the use of EBITDA and Adjusted
    EBITDA, as opposed to income before income taxes in various ratios,
    provides meaningful performance measures related to the Company's
    ability to meet various coverage tests for the stated periods. The
    Company also presents the ratio of net debt (net of cash) to
    annualized Adjusted EBITDA for the fourth quarter of 2017, and net
    debt (net of cash) to total market capitalization, which it believes
    is useful to investors as a supplemental measure in evaluating the
    Company's balance sheet leverage.

The Company believes net income is the most directly comparable GAAP
financial measure to the non-GAAP performance measures outlined above.
Reconciliations of these measures to net income have been provided in
the tables accompanying this press release.

Operating Metrics

The Company presents certain operating metrics related to our properties
including occupancy, leasing activity and rental rates. Operating
metrics are used by the Company and are useful to investors in
facilitating an understanding of the operational performance for our
properties.

Occupancy metrics represent the percentage of occupied gross leasable
area based on executed leases (including properties in development and
redevelopment) and includes leases signed, but for which rent has not
yet commenced. Same-property retail portfolio occupancy includes
shopping centers and malls that have been owned and operated for the
entirety of the reporting periods being compared totaling 75 properties
for the three months ended December 31, 2017 and 2016 and 74 properties
for the twelve months ended December 31, 2017 and 2016. Occupancy
metrics presented for the Company's same-property retail portfolio
excludes properties under development, redevelopment or that involve
anchor repositioning where a substantial portion of the gross leasable
area is taken out of service and also excludes properties acquired
within the past 12 months, properties sold, under contract to be sold,
or that are in the foreclosure process during the periods being compared.

Executed new leases, renewals and exercised options are presented on a
same-space basis. Same-space leases represent those leases signed on
spaces for which there was a previous lease with comparable gross
leasable area.

ADDITIONAL INFORMATION

For a copy of the Company's supplemental disclosure package, please
access the "Investors" section of UE's website at www.uedge.com.
Our website also includes other financial information, including our
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K, and amendments to those reports.

ABOUT URBAN EDGE

Urban Edge Properties is a NYSE listed real estate investment trust
focused on managing, acquiring, developing, and redeveloping retail real
estate in urban communities, primarily in the New York metropolitan
region. Urban Edge owns 90 properties totaling 16.7 million square feet
of gross leasable area.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this Press Release constitute
forward-looking statements as such term is defined in Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements are not
guarantees of future performance. They represent our intentions, plans,
expectations and beliefs and are subject to numerous assumptions, risks
and uncertainties. Our future results, financial condition and business
may differ materially from those expressed in these forward-looking
statements. You can find many of these statements by looking for words
such as "approximates," "believes," "expects," "anticipates,"
"estimates," "intends," "plans," "would," "may" or other similar
expressions in this Press Release. Many of the factors that will
determine the outcome of these and our other forward-looking statements
are beyond our ability to control or predict; these factors include,
among others, the Company's ability to complete its active development,
redevelopment and anchor repositioning projects, the Company's ability
to pursue, finance and complete acquisition opportunities, the Company's
ability to engage in the projects in its planned expansion and
redevelopment pipeline, the Company's ability to achieve the estimated
unleveraged returns for such projects and acquisitions, the estimated
remediation and repair costs related to Hurricane Maria and the timing
of re-opening and resumption of full operations at the affected
properties. For further discussion of factors that could materially
affect the outcome of our forward-looking statements, see "Risk Factors"
in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended
December 31, 2017 and the other documents filed by the Company with the
Securities and Exchange Commission.

For these statements, we claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. You are cautioned not to place undue
reliance on our forward-looking statements, which speak only as of the
date of this Press Release. All subsequent written and oral
forward-looking statements attributable to us or any person acting on
our behalf are expressly qualified in their entirety by the cautionary
statements contained or referred to in this section. We do not undertake
any obligation to release publicly any revisions to our forward-looking
statements to reflect events or circumstances occurring after the date
of this Press Release.

 

URBAN EDGE PROPERTIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

       
December 31, December 31,
2017 2016
ASSETS
Real estate, at cost:
Land $ 521,669 $ 384,217
Buildings and improvements 2,010,527 1,650,054
Construction in progress 133,761 99,236
Furniture, fixtures and equipment 5,897   4,993  
Total 2,671,854 2,138,500
Accumulated depreciation and amortization (587,127 ) (541,077 )
Real estate, net 2,084,727 1,597,423
Cash and cash equivalents 490,279 131,654
Restricted cash 10,562 8,532
Tenant and other receivables, net of allowance for doubtful accounts
of $4,937 and $2,332, respectively
20,078 9,340
Receivable arising from the straight-lining of rents, net of
allowance for doubtful accounts of $494 and $261, respectively
85,843 87,695
Identified intangible assets, net of accumulated amortization of
$33,827 and $22,361, respectively
87,249 30,875
Deferred leasing costs, net of accumulated amortization of $14,796
and $13,909, respectively
20,268 19,241
Deferred financing costs, net of accumulated amortization of $1,740
and $726, respectively
3,243 1,936
Prepaid expenses and other assets 18,559   17,442  
Total assets $ 2,820,808   $ 1,904,138  
 
LIABILITIES AND EQUITY
Liabilities:
Mortgages payable, net $ 1,564,542 $ 1,197,513
Identified intangible liabilities, net of accumulated amortization
of $65,832 and $72,528, respectively
180,959 146,991
Accounts payable and accrued expenses 69,595 48,842
Other liabilities 15,171   14,675  
Total liabilities 1,830,267   1,408,021  
Commitments and contingencies
Shareholders' equity:
Common shares: $0.01 par value; 500,000,000 shares authorized and
113,827,529 and 99,754,900 shares issued and outstanding,
respectively
1,138 997
Additional paid-in capital 946,402 488,375
Accumulated deficit (57,621 ) (29,066 )
Noncontrolling interests:
Operating partnership 100,218 35,451
Consolidated subsidiaries 404   360  
Total equity 990,541   496,117  
Total liabilities and equity $ 2,820,808   $ 1,904,138  
 
 

URBAN EDGE PROPERTIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share and per share amounts)

       
Quarter Ended
December 31,
Year Ended
December 31,
2017   2016 2017   2016
REVENUE
Property rentals $ 69,153 $ 60,048 $ 265,984 $ 236,798
Tenant expense reimbursements 27,508 22,647 99,098 84,921
Management and development fees 336 403 1,535 1,759
Income from acquired leasehold interest 39,215
Other income 379   380   1,210   2,498  
Total revenue 97,376   83,478   407,042   325,976  
EXPENSES
Depreciation and amortization 21,776 14,237 82,281 56,145
Real estate taxes 15,762 12,728 59,737 51,429
Property operating 15,036 12,684 50,894 45,280
General and administrative 7,693 6,565 30,413 27,438
Casualty and impairment loss 1,745 7,382
Ground rent 2,851 2,518 10,848 10,047
Transaction costs 1,098 278 1,405
Provision for doubtful accounts 1,771   220   3,445   1,214  
Total expenses 66,634   50,050   245,278   192,958  
Operating income 30,742 33,428 161,764 133,018
Gain on sale of real estate 202 15,618
Interest income 1,066 159 2,248 679
Interest and debt expense (14,839 ) (12,866 ) (56,218 ) (51,881 )
Loss on extinguishment of debt (34,062 )   (35,336 )  
Income (loss) before income taxes (17,093 ) 20,721 72,660 97,434
Income tax benefit (expense) 1,220   (455 ) 278   (804 )
Net income (loss) (15,873 ) 20,266 72,938 96,630
Less net (income) loss attributable to noncontrolling interests in:
Operating partnership 1,607 (1,218 ) (5,824 ) (5,812 )
Consolidated subsidiaries (11 ) (4 ) (44 ) (3 )
Net income (loss) attributable to common shareholders $ (14,277 ) $ 19,044   $ 67,070   $ 90,815  
 
Earnings (loss) per common share - Basic: $ (0.13 ) $ 0.19   $ 0.62   $ 0.91  
Earnings (loss) earnings per common share - Diluted: $ (0.13 ) $ 0.19   $ 0.61   $ 0.91  
Weighted average shares outstanding - Basic 113,642   99,609   107,132   99,364  
Weighted average shares outstanding - Diluted 113,642   99,988   118,390   99,794  
 

Reconciliation of Net (Loss) Income to FFO and FFO as Adjusted

The following table reflects the reconciliation of net (loss) income to
FFO and FFO as Adjusted for the quarter and year ended December 31,
2017. Net (loss) income is considered the most directly comparable GAAP
measure. Refer to "Non-GAAP Financial Measures" on page 3 for a
description of FFO and FFO as Adjusted.

       
Quarter Ended
December 31, 2017
Year Ended
December 31, 2017
(in thousands)   (per share) (in thousands)   (per share)
Net (loss) income $ (15,873 ) $ (0.13 ) $ 72,938 $ 0.62
Less net loss (income) attributable to noncontrolling interests in:
Operating partnership 1,607 0.01 (5,824 ) (0.05 )
Consolidated subsidiaries (11 )   (44 )  
Net (loss) income attributable to common shareholders (14,277 ) (0.12 ) 67,070 0.57
Adjustments:
Rental property depreciation and amortization 21,515 0.17 81,401 0.68
Real estate impairment loss(3) 3,467 0.03
Limited partnership interests in operating partnership (1,607 ) (0.01 ) 5,824   0.05  
FFO applicable to diluted common shareholders 5,631 0.04 157,762 1.33
 
Loss on extinguishment of debt 34,062 0.27 35,336 0.30
Casualty loss(3) 3,922 0.03 6,092 0.05
Construction settlement due to tenant 902 0.01 902 0.01
Transaction costs 278
Gain on sale of land (202 )
Tenant bankruptcy settlement income (27 ) (655 ) (0.01 )
Income tax benefit from hurricane losses (1,767 ) (0.01 ) (1,767 ) (0.01 )
Income from acquired leasehold interest(2)     (39,215 ) (0.33 )
FFO as Adjusted applicable to diluted common shareholders $ 42,723   $ 0.34   $ 158,531   $ 1.34  
 
Weighted average diluted shares used to calculate EPS 113,642 118,390
Assumed conversion of OP and LTIP Units to common shares(1) 13,023   2  
Weighted average diluted common shares - FFO 126,665   118,392  
 

(1) Operating Partnership ("OP") and Long-Term Incentive Plan
("LTIP") Units are excluded from the calculation of earnings per diluted
share for the quarter because their inclusion is anti-dilutive and are
included for the year because their inclusion is dilutive. FFO per share
includes units as these units are dilutive.

(2) Income from the acquired leasehold interest at the Shops
at Bruckner includes the write-off of unamortized intangible liability
related to the below-market ground lease acquired and to the existing
straight-line receivable balance.

(3) Casualty and impairment loss per the consolidated
statements of income of $7.4 million for the year includes $1.7 million
of hurricane-related expenses, a $2.2 million write-off of net book
value of assets damaged and $3.5 million of real estate impairment
losses from the sale of our property in Eatontown, NJ. Casualty loss,
subject to insurance reimbursement, for the quarter and year ended
December 31, 2017 includes:

       
(in thousands) Quarter Ended
December 31, 2017
Year Ended
December 31, 2017
Write-off of net book value of assets damaged $ $ 2,170
Hurricane related expenses 1,745 1,745
Provision for doubtful accounts 1,249 1,249
Property rental and tenant reimbursement losses 928   928
Total Casualty loss $ 3,922   $ 6,092
 

Reconciliation of Net Income (Loss) to Cash NOI and Same-Property
Cash NOI

The following table reflects the reconciliation of net income (loss) to
cash NOI, same-property cash NOI and same-property cash NOI including
properties in redevelopment for the quarter and year ended December 31,
2017 and 2016. Net income (loss) is considered the most directly
comparable GAAP measure. Refer to "Non-GAAP Financial Measures" on page
3 for a description of cash NOI and same-property cash NOI.

       
Quarter Ended
December 31,
Year Ended
December 31,
(Amounts in thousands) 2017   2016 2017   2016
Net (loss) income $ (15,873 ) $ 20,266 $ 72,938 $ 96,630
Add: income tax (benefit) expense (1,220 ) 455 (278 ) 804
Interest income (1,066 ) (159 ) (2,248 ) (679 )
Gain on sale of real estate (202 ) (15,618 )
Interest and debt expense 14,839 12,866 56,218 51,881
Loss on extinguishment of debt 34,062 35,336
Management and development fee income from non-owned properties (336 ) (403 ) (1,535 ) (1,759 )
Other income (32 ) (37 ) (235 ) (121 )
Depreciation and amortization 21,776 14,237 82,281 56,145
Casualty and impairment loss(6) 1,745 7,382
General and administrative expense 7,693 6,565 30,413 27,438
Transaction costs 1,098 278 1,405
Less: non-cash revenue and expenses (2,354 ) (1,377 ) (47,161 ) (6,465 )
Cash NOI(1) 59,234   53,511   233,187   209,661  
Adjustments:
Non-same property cash NOI(1)(2) (12,473 ) (6,873 ) (46,766 ) (28,164 )
Hurricane related operating loss(4) 1,267 1,267
Construction settlement due to tenant 902 902
Tenant bankruptcy settlement income(3) (347 ) (343 ) (975 ) (2,378 )
Same-property cash NOI $ 48,583   $ 46,295   $ 187,615   $ 179,119  
Adjustments:
Cash NOI related to properties being redeveloped(5) 6,199   5,690   25,304   22,846  
Same-property cash NOI including properties in redevelopment $ 54,782   $ 51,985   $ 212,919   $ 201,965  
 

(1) Cash NOI is calculated as total property revenues less
property operating expenses excluding the net effects of non-cash rental
income and non-cash ground rent expense.

(2) Non-same property cash NOI for the quarter and the year
includes cash NOI related to properties being redeveloped and properties
acquired, disposed, or in foreclosure.

(3) Tenant bankruptcy settlement income includes lease
termination fees.

(4) Amount reflects rental and tenant reimbursement losses as
well as provisions for outstanding amounts due from tenants at Las
Catalinas that are subject to reimbursement from the insurance company.

(5) Excludes $0.9 million of rental and tenant reimbursement
losses as well as provisions for outstanding amounts due from tenants at
Montehiedra that are subject to reimbursement from the insurance company.

(6) Casualty and impairment loss for the quarter and the year
includes $1.7 million of hurricane-related expenses incurred subject to
insurance reimbursement. Casualty and impairment loss for the year also
includes a $2.2 million write-off of net book value of assets damaged by
the hurricane at Montehiedra and $3.5 million of real estate impairment
losses incurred in connection with the sale of the Company's property in
Eatontown, NJ.

Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA

The following table reflects the reconciliation of net income (loss) to
EBITDA and Adjusted EBITDA for the quarter and year ended December 31,
2017. Net income (loss) is considered the most directly comparable GAAP
measure. Refer to "Non-GAAP Financial Measures" on page 3 for a
description of EBITDA and Adjusted EBITDA.

       
Quarter Ended
December 31,
Year Ended
December 31,
(Amounts in thousands) 2017   2016 2017   2016
Net income (loss) $ (15,873 ) $ 20,266 $ 72,938 $ 96,630
Depreciation and amortization 21,776 14,237 82,281 56,145
Interest and debt expense 14,839 12,866 56,218 51,881
Income tax (benefit) expense (1,220 ) 455   (278 ) 804  
EBITDA 19,522   47,824   211,159   205,460  
Adjustments for Adjusted EBITDA:
Casualty loss(1) 3,922 6,092
Construction settlement due to tenant 902 902
Real estate impairment loss 3,467
Transaction costs 1,098 278 1,405
Loss on extinguishment of debt 34,062 35,336
Tenant bankruptcy settlement income (27 ) (343 ) (655 ) (2,378 )
Gain on sale of real estate (202 ) (15,618 )
Income from acquired leasehold interest     (39,215 )  
Adjusted EBITDA $ 58,381   $ 48,579   $ 217,162   $ 188,869  
 

(1) Refer to footnote 3 on page 8, Reconciliation of Net
Income (Loss) to FFO and FFO as Adjusted, for the adjustments included
in Casualty loss for the quarter and year ended December 31, 2017.

The following table reflects the Company's fully diluted common shares
outstanding which is the total number of shares that would be
outstanding assuming all possible conversions. Fully diluted common
shares outstanding are utilized to calculate our equity market
capitalization to allow investors the ability to assess our market
value. The sum of the total equity market capitalization and total debt,
as calculated in accordance with GAAP, represents the Company's total
market capitalization.

     
December 31, 2017
Common shares outstanding 113,827,529
OP and LTIP units (dilutive) 12,812,954
Fully diluted common shares 126,640,483
 

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