10. Shareholders’ Equity, Noncontrolling Interests and Other Comprehensive Income

Common Shares and Units

The Company completed the following transactions in its common shares during the nine months ended September 30, 2018:

•

The Company withheld 3,288 Restricted Shares to pay the employees’ statutory minimum income taxes due on the value of the portion of their Restricted Shares that vested.

•

The Company recognized Common Share and Common OP Unit-based compensation totaling $6.3 million in connection with Restricted Shares and Units (Note 13) compared to $6.5 million for the nine months ended September 30, 2017.

The Company completed the following transactions in its common shares during the year ended December 31, 2017:

•

The Company withheld 4,314 Restricted Shares to pay the employees’ statutory minimum income taxes due on the value of the portion of their Restricted Shares that vested.

•

The Company recognized Common Share and Common OP Unit-based compensation totaling $8.4 million in connection with Restricted Shares and Units (Note 13).

•

At the May 10 Shareholder Meeting, Shareholders approved an amendment to the Company’s Declaration of Trust to increase the authorized share capital of the Company from 100 million shares of beneficial interest to 200 million shares which became effective on July 24, 2017.

Share Repurchases

During 2018, the Company revised its share repurchase program. The new share repurchase program authorizes management, at its discretion, to repurchase up to $200.0 million of its outstanding Common Shares. The program may be discontinued or extended at any time. The Company repurchased 2,294,235 shares for $55.1 million, inclusive of $0.1 million of fees, during the nine months ended September 30, 2018. The Company did not repurchase any shares during the year ended December 31, 2017. As of September 30, 2018, management may repurchase up to approximately $144.9 million of the Company’s outstanding Common Shares under this program.

Dividends and Distributions

On August 7, 2018, the Board of Trustees declared a regular quarterly cash dividend of $0.27 per Common Share, which was paid on October 15, 2018 to the holders of record as of September 28, 2018.

On May 11, 2018, the Board of Trustees declared a regular quarterly cash dividend of $0.27 per Common Share, which was paid on July 13, 2018 to holders of record as of June 29, 2018.

On February 27, 2018, the Board of Trustees declared a regular quarterly cash dividend of $0.27 per Common Share, which was paid on April 13, 2018 to holders of record as of March 30, 2018.

On November 8, 2017, the Board of Trustees declared an increase of $0.01 to the $0.27 per Common Share regular quarterly cash dividend, which was paid on January 13, 2018 to holders of record as of December 29, 2017.

Accumulated Other Comprehensive Income

The following table sets forth the activity in accumulated other comprehensive income for the nine months ended September 30, 2018 and 2017 (in thousands):

	Gains or Losses on Derivative Instruments
Balance at January 1, 2018	$	2,614

Other comprehensive income before reclassifications		12,576
Reclassification of realized interest on swap agreements		417
Net current period other comprehensive income		12,993
Net current period other comprehensive income attributable to noncontrolling interests		(2,340	)
Balance at September 30, 2018	$	13,267

Balance at January 1, 2017	$	(798	)

Other comprehensive income before reclassifications		(2,652	)
Reclassification of realized interest on swap agreements		2,637
Net current period other comprehensive income		(15	)
Net current period other comprehensive loss attributable to noncontrolling interests		260
Balance at September 30, 2017	$	(553	)

Noncontrolling Interests

The following table summarizes the change in the noncontrolling interests for the nine months ended September 30, 2018 and 2017 (dollars in thousands):

	Noncontrolling Interests in Operating Partnership ^(a)			Noncontrolling Interests in Partially-Owned Affiliates ^(b)			Total
Balance at January 1, 2018	$	102,921		$	545,519		$	648,440
Distributions declared of $0.81 per Common OP Unit		(5,126	)		—			(5,126	)
Net income (loss) for the nine months ended September 30, 2018		1,977			(35,313	)		(33,336	)
Conversion of 111,588 Common OP Units to Common Shares by limited partners of the Operating Partnership		(1,957	)		—			(1,957	)
Other comprehensive income - unrealized gain on valuation of swap agreements		625			1,435			2,060
Reclassification of realized interest expense on swap agreements		10			270			280
Noncontrolling interest contributions		—			46,990			46,990
Noncontrolling interest distributions		—			(24,654	)		(24,654	)
Employee Long-term Incentive Plan Unit Awards		7,924			—			7,924
Rebalancing adjustment ^(c)		(2,581	)		—			(2,581	)
Balance at September 30, 2018	$	103,793		$	534,247		$	638,040

Balance at January 1, 2017	$	95,422		$	494,126		$	589,548
Distributions declared of $0.78 per Common OP Unit		(4,805	)		—			(4,805	)
Net income (loss) for the nine months ended September 30, 2017		2,816			(4,010	)		(1,194	)
Conversion of 61,150 Common OP Units to Common Shares by limited partners of the Operating Partnership		(1,086	)		—			(1,086	)
Other comprehensive income - unrealized loss on valuation of swap agreements		(68	)		(726	)		(794	)
Reclassification of realized interest expense on swap agreements		116			418			534
Noncontrolling interest contributions		—			20,522			20,522
Noncontrolling interest distributions		—			(7,278	)		(7,278	)
Employee Long-term Incentive Plan Unit Awards		8,704			—			8,704
Rebalancing adjustment ^(c)		2,105			—			2,105
Balance at September 30, 2017	$	103,204		$	503,052		$	606,256

(a)

Noncontrolling interests in the Operating Partnership are comprised of (i) the limited partners’ 3,331,440 and 3,328,873 Common OP Units at September 30, 2018 and December 31, 2017; (ii) 188 Series A Preferred OP Units at September 30, 2018 and December 31, 2017; (iii) 136,593 Series C Preferred OP Units at September 30, 2018 and December 31, 2017; and (iv) 2,547,002 and 2,274,147 LTIP units at September 30, 2018 and December 31, 2017, respectively, as discussed in Share Incentive Plan (Note 13). Distributions declared for Preferred OP Units are reflected in net income (loss) in the table above.

(b)	Noncontrolling interests in partially-owned affiliates comprise third-party interests in Funds II, III, IV and V, and Mervyns I and II, and six other subsidiaries.

(c)	Adjustment reflects the difference between the fair value of the consideration received or paid and the book value of the Common Shares, Common OP Units, Preferred OP Units, and LTIP Units involving changes in ownership (the “Rebalancing”).

Preferred OP Units

There were no issuances of Preferred OP Units during the nine months ended September 30, 2018.

In 1999 the Operating Partnership issued 1,580 Series A Preferred OP Units in connection with the acquisition of a property, which have a stated value of $1,000 per unit, and are entitled to a preferred quarterly distribution of the greater of (i) $22.50 ( 9% annually) per Series A Preferred OP Unit or (ii) the quarterly distribution attributable to a Series A Preferred OP Unit if such unit was converted into a Common OP Unit. Through September 30, 2018, 1,392 Series A Preferred OP Units were converted into 185,600 Common OP Units and then into Common Shares. The 188 remaining Series A Preferred OP Units are currently convertible into Common OP Units based on the stated value divided by $7.50. Either the Company or the holders can currently call for the conversion of the Series A Preferred OP Units at the lesser of $7.50 or the market price of the Common Shares as of the conversion date.

During 2016, the Operating Partnership issued 442,478 Common OP Units and 141,593 Series C Preferred OP Units to a third party to acquire Gotham Plaza (Note 4). The Series C Preferred OP Units have a value of $100.00 per unit and are entitled to a preferred quarterly distribution of $0.9375 per unit and are convertible into Common OP Units at a rate based on the share price at the time of conversion. If the share price is below $28.80 on the conversion date, each Series C Preferred OP Unit will be convertible into 3.4722 Common OP Units. If the share price is between $28.80 and $35.20 on the conversion date, each Series C Preferred OP Unit will be convertible into a number of Common OP Units equal to $100.00 divided by the closing share price. If the share price is above $35.20 on the conversion date, each Series C Preferred OP Unit will be convertible into 2.8409 Common OP Units. The Series C Preferred OP Units have a mandatory conversion date of December 31, 2025, at which time all units that have not been converted will automatically be converted into Common OP Units based on the same calculations. Through September 30, 2018, 5,000 Series C Preferred OP Units were converted into 17,165 Common OP Units and then into Common Shares.