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Commitments and Contingencies | 12 Months Ended
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Dec. 31, 2017
Commitments And Contingencies Disclosure [Abstract] |
Commitments and Contingencies |
9. | Commitments and Contingencies
Hurricane Casualty and Impairment Loss In 2017, Hurricane Irma made landfall in both Puerto Rico and Florida, and Hurricane Maria made landfall in Puerto Rico. The Company’s Florida assets were minimally impacted by Hurricane Irma, with the majority of repair costs related to debris removal. At December 31, 2017, the Company owned 12 assets in Puerto Rico, aggregating 4.4 million square feet of Company-owned GLA. One of the 12 assets (Plaza Palma Real, consisting of approximately 0.4 million of Company-owned GLA) was severely damaged and is currently not operational, except for a few tenants representing a minimal amount of Company-owned GLA. The other 11 assets sustained varying degrees of damage, consisting primarily of roof and HVAC system damage and water intrusion. Following the storm, the properties operated primarily on generator power. Grid power was restored to the Company’s properties throughout the fourth quarter. By the end of January 2018, all 12 of these assets had full utility power. With respect to the Company’s anchor spaces comprising greater than 25,000 square feet of GLA in Puerto Rico, 26 or 79% of such tenants, were open as of December 31, 2017, including six of seven Walmart stores, a Sam's Club, both Home Depot stores, all three Sears/Kmart stores and all five grocery stores (including Pueblo, Econo and Selectos Supermarket). Although some tenant spaces are currently untenantable, as of February 15, 2018, 85% of leased GLA was open for business, excluding Plaza Palma Real (76% including Plaza Palma Real). The Company has engaged various consultants to assist with the damage scoping assessment. The Company is working with its consultants to finalize the scope and schedule of work to be performed. Restoration work has already started at certain shopping centers, including Plaza Palma Real. The Company has completed debris removal and temporary repairs to mechanical systems and building interiors, as well as roof and exterior building repairs to prevent further water intrusion and related damages. The Company anticipates that repairs will be substantially complete at eight of the 12 properties by the end of 2018. For the three largest properties as well as Plaza Palma Real, the Company anticipates that repair work will be substantially complete by the end of the third quarter 2019. The timing and schedule of additional repair work to be completed are highly dependent upon any changes in the scope of work as well as the availability of building materials, supplies and skilled labor. The Company maintains insurance on its assets in Puerto Rico with policy limits of approximately $330 million for both property damage and business interruption. The Company's insurance policies are subject to various terms and conditions, including a combined property damage and business interruption deductible of approximately $6.0 million. The Company expects that its casualty insurance for property damage and business interruption claims will include the costs to clean up, repair and rebuild the properties, as well as lost revenue. Certain continental-U.S.-based anchor tenants maintain property insurance on their Company-owned premises and are expected to make the required repairs to their stores. The Company is unable to estimate the impact of potential increased costs associated with resource constraints in Puerto Rico relating to building materials, supplies and labor. The Company believes it maintains adequate insurance coverage on each of its properties and is working closely with the insurance carriers to obtain the maximum amount of insurance recovery provided under the policies. However, the Company can give no assurances as to the amounts of such claims, timing of payments and resolution of the claims. As of December 31, 2017, the estimated net book value of the property damage written off for damage to the Company’s Puerto Rico assets was $71.0 million. However, the Company is still assessing the impact of the hurricane on its properties, and the final net book value write-offs could vary significantly from this estimate. Any changes to this estimate will be recorded in the periods in which they are determined. The Company recorded a corresponding receivable of $58.6 million for estimated insurance recoveries related to the net book value of the property damage written off as well as other expenses, as the Company believes it is probable that the insurance recovery, net of the deductible, will exceed the net book value of the damaged property. The outstanding receivable is recorded as Casualty Insurance Receivable on the Company’s consolidated balance sheet as of December 31, 2017. The net impact of $5.1 million representing the property damage insurance deductible is reflected as a Hurricane Casualty and Impairment Loss in the Company’s consolidated statement of operations for the year ended December 31, 2017. The Company received $10.0 million toward its casualty insurance claim in December 2017. The Company’s business interruption insurance covers lost revenue through the period of property restoration and for up to 365 days following completion of restoration. For the year ended December 31, 2017, rental revenues of $11.8 million were not recorded because of lost tenant revenue attributable to Hurricanes Irma and Maria that has been partially defrayed by insurance proceeds. The Company estimates the waiting period deductible for the business interruption claim to be $0.9 million for the year ended December 31, 2017, which is included in the above $11.8 million. The Company will record revenue for covered business interruption in the period it determines that it is probable it will be compensated. This income recognition criteria will likely result in business interruption insurance recoveries being recorded in a period subsequent to the period that the Company experiences lost revenue from the damaged properties. In the fourth quarter of 2017, the Company received insurance proceeds of approximately $8.5 million related to business interruption claims, which is recorded on the Company’s consolidated statement of operations as Business Interruption Income. At December 31, 2017, six of the Puerto Rico assets were encumbered by mortgage notes aggregating $263.4 million at a weighted-average interest rate of 4.9%. The Company was in compliance with these financial covenants at December 31, 2017. In February 2018, such mortgage notes were fully repaid (Note 17). Legal Matters The Company and its subsidiaries are subject to various legal proceedings, which, taken together, are not expected to have a material adverse effect on the Company. The Company is also subject to a variety of legal actions for personal injury or property damage arising in the ordinary course of its business, most of which are covered by insurance. While the resolution of all matters cannot be predicted with certainty, management believes that the final outcome of such legal proceedings and claims will not have a material adverse effect on the Company’s liquidity, financial position or results of operations. Separation Charges The Company recorded separation charges aggregating $17.9 million in 2017, which are included in General and Administrative expenses. The aggregate charge included primarily $9.4 million related to the March 2, 2017, executive management transition, which was the result of the termination without cause of several of the Company’s executives under the terms of their respective employment agreements. In addition, $7.2 million related to the elimination of 65 positions, including nine officer level roles, in April 2017 as part of organization changes to further centralize key operational decision-making. The total charge included stock-based compensation expense of approximately $4.5 million related to the acceleration of expense associated with the grant date fair value of the unvested stock-based awards. Commitments and Guaranties In conjunction with the development and expansion of various shopping centers, the Company has entered into agreements with general contractors for the construction or redevelopment of shopping centers aggregating approximately $19.3 million as of December 31, 2017. At December 31, 2017, the Company had letters of credit outstanding of $17.3 million. The Company has not recorded any obligation associated with these letters of credit. The majority of the letters of credit are collateral for existing indebtedness and other obligations of the Company. In connection with the sale of the Company’s interest in a former unconsolidated joint venture (Note 2), the Company retained its pro rata guaranty obligation to fund amounts due to the joint venture’s lender, aggregating $4.0 million at December 31, 2017, under certain circumstances, until the loan matures in October 2020 if such amounts are not paid by the joint venture. The principal of the former joint venture partner is obligated to indemnify the Company in the event that the Company is required to make any payment in connection with this pro rata guaranty obligation and, accordingly, the Company did not record any liability related to this guaranty. Leases The Company is engaged in the operation of shopping centers that are either owned or, with respect to certain shopping centers, operated under long-term ground leases that expire at various dates through 2070, with renewal options. Space in the shopping centers is leased to tenants pursuant to agreements that provide for terms generally ranging from one month to 30 years and, in some cases, for annual rentals subject to upward adjustments based on operating expense levels, sales volume or contractual increases as defined in the lease agreements. The scheduled future minimum rental revenues from rental properties under the terms of all non-cancelable tenant leases, assuming no new or renegotiated leases or option extensions for such premises and the scheduled minimum rental payments under the terms of all non-cancelable operating leases, principally ground leases, in which the Company is the lessee as of December 31, 2017, are as follows (in thousands):
Year |  | Minimum Rental Revenues |  |  | Minimum Rental Payments |
2018 |  | $ | 569,936 |  |  | $ | 3,887 |
2019 |  |  | 503,242 |  |  |  | 3,478 |
2020 |  |  | 434,410 |  |  |  | 3,112 |
2021 |  |  | 360,858 |  |  |  | 3,121 |
2022 |  |  | 279,232 |  |  |  | 2,978 |
Thereafter |  |  | 792,050 |  |  |  | 117,703 |
|  | $ | 2,939,728 |  |  | $ | 134,279 |

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