UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

or

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

COMMISSION FILE NUMBER: 000-51609

INVENTRUST PROPERTIES CORP.

(Exact name of registrant as specified in its charter)

Maryland					34-2019608
(State or other jurisdiction of incorporation or organization)					(I.R.S. Employer Identification No.)
3025 Highland Parkway,	Suite 350	Downers Grove,	Illinois		60515
(Address of principal executive offices)					(Zip Code)
(855)			377-0510
(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 the filing requirements for the past 90 days. Yes ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒   No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐		Accelerated filer	☐
Non-accelerated filer	☒		Smaller reporting company	☐
			Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock		N/A		N/A

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐   No ☒

As of August 1, 2019, there were 728,722,763 shares of the registrant’s common stock outstanding.

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InvenTrust Properties Corp.

 

Quarterly Report on Form 10-Q

For the quarterly period ended June 30, 2019

Table of Contents

	Part I - Financial Information	Page
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018	1
	Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the three and six months ended June 30, 2019 and 2018	2
	Condensed Consolidated Statements of Equity for the three and six months ended June 30, 2019 and 2018	3
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018	5
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	39
	Part II - Other Information
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	40
	Signatures	41

- i-

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INVENTRUST PROPERTIES CORP.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

 

	As of
	June 30, 2019				December 31, 2018
	(unaudited)
Assets
Investment properties
Land	$	575,032			$	558,817
Building and other improvements	1,766,310				1,670,678
Construction in progress	7,571				12,788
Total	2,348,913				2,242,283
Less accumulated depreciation	(307,893		)		(286,330		)
Net investment properties	2,041,020				1,955,953
Cash and cash equivalents	146,525				260,131
Restricted cash	6,184				4,722
Investment in unconsolidated entities	122,365				156,132
Intangible assets, net	110,472				108,005
Accounts and rents receivable, net	26,578				27,087
Deferred costs and other assets, net	25,938				23,976
Total assets	$	2,479,082			$	2,536,006
Liabilities
Debt, net	$	548,752			$	561,782
Accounts payable and accrued expenses	34,318				32,784
Distributions payable	13,408				13,029
Intangible liabilities, net	44,544				46,985
Other liabilities	27,363				29,112
Total liabilities	668,385				683,692
Commitments and contingencies
Stockholders' Equity
Preferred stock, $.001 par value, 40,000,000 shares authorized, none outstanding	—				—
Common stock, $.001 par value, 1,460,000,000 shares authorized, 728,722,763 shares issued and outstanding as of June 30, 2019 and 728,558,989 shares issued and outstanding as of December 31, 2018.	729				729
Additional paid-in capital	5,587,350				5,585,758
Distributions in excess of accumulated net income	(3,777,844		)		(3,735,810		)
Accumulated comprehensive income	462				1,637
Total stockholders' equity	1,810,697				1,852,314
Total liabilities and stockholders' equity	$	2,479,082			$	2,536,006

See accompanying notes to the condensed consolidated financial statements.

1

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INVENTRUST PROPERTIES CORP.

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income

(Unaudited)

(in thousands, except share and per share amounts)

	Three months ended June 30,								Six months ended June 30,
	2019				2018				2019				2018
Income
Lease income, net	$	55,509			$	60,034			$	110,544			$	122,373
Other property income	821				532				1,272				951
Other fee income	860				924				1,765				2,000
Total income	57,190				61,490				113,581				125,324
Operating expenses
Depreciation and amortization	24,692				23,254				47,554				48,084
Property operating expenses	7,035				8,463				14,509				17,648
Real estate taxes	8,958				9,671				18,009				19,030
General and administrative expenses	8,886				8,720				17,409				16,989
Total operating expenses	49,571				50,108				97,481				101,751
Other (expense) income
Interest, dividend and other income	656				953				1,310				1,643
Interest expense, net	(5,627		)		(6,451		)		(11,105		)		(13,093		)
(Loss) gain on extinguishment of debt, net	(809		)		(55		)		(809		)		10,697
Provision for asset impairment	—				—				—				(797		)
Gain on sale and transfer of investment properties, net	5,662				17,960				5,662				38,265
Equity in losses of unconsolidated entities	(1,079		)		(711		)		(620		)		(2,752		)
Realized and unrealized investment gains	—				236				—				223
Total other (expense) income	(1,197		)		11,932				(5,562		)		34,186
Income before income taxes	6,422				23,314				10,538				57,759
Income tax expense	(144		)		(151		)		(259		)		(364		)
Net income from continuing operations	6,278				23,163				10,279				57,395
Net loss from discontinued operations	(12,000		)		—				(25,500		)		—
Net (loss) income	$	(5,722	)		$	23,163			$	(15,221	)		$	57,395
Weighted-average number of common shares outstanding, basic	728,654,374				774,391,881				728,606,945				774,351,790
Weighted-average number of common shares outstanding, diluted	729,287,663				774,930,240				728,623,337				774,351,790
Net income per common share, from continuing operations, basic and diluted	$	0.01			$	0.03			$	0.01			$	0.07
Net loss per common share, from discontinued operations, basic and diluted	$	(0.02	)		$	—			$	(0.03	)		$	—
Net (loss) income per common share, basic and diluted	$	(0.01	)		$	0.03			$	(0.02	)		$	0.07
Distributions declared per common share outstanding	$	0.02			$	0.02			$	0.04			$	0.04
Distributions paid per common share outstanding	$	0.02			$	0.02			$	0.04			$	0.04
Comprehensive (loss) income
Net (loss) income	$	(5,722	)		$	23,163			$	(15,221	)		$	57,395
Unrealized (loss) gain on derivatives	(204		)		316				(316		)		1,076
Reclassification to interest expense, net	(427		)		(216		)		(859		)		(309		)
Comprehensive (loss) income	$	(6,353	)		$	23,263			$	(16,396	)		$	58,162

See accompanying notes to the condensed consolidated financial statements.

2

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INVENTRUST PROPERTIES CORP.

Condensed Consolidated Statements of Equity

(Unaudited)

(in thousands, except share amounts)

	Number of Shares			Common Stock				Additional Paid-in Capital				Distributions in Excess of Accumulated Net Income				Accumulated Comprehensive Income				Total
Beginning balance, January 1, 2018	774,293,197			$	773			$	5,681,912			$	(3,778,908	)		$	1,945			$	1,905,722
Impact of Accounting Standards Update ("ASU") No. 2016-01 (a)	—			—				—				275				(275		)		—
Impact of ASU No. 2017-05 (a)	—			—				—				12,756				—				12,756
Adjusted balance, January 1, 2018	774,293,197			773				5,681,912				(3,765,877		)		1,670				1,918,478
Net income	—			—				—				34,232				—				34,232
Unrealized gain on derivatives	—			—				—				—				760				760
Reclassification to interest expense, net	—			—				—				—				(93		)		(93		)
Distributions declared	—			—				—				(13,860		)		—				(13,860		)
Stock-based compensation, net	18,057			—				545				—				—				545
Ending balance, March 31, 2018	774,311,254			773				5,682,457				(3,745,505		)		2,337				1,940,062
Net income	—			—				—				23,163				—				23,163
Unrealized gain on derivatives	—			—				—				—				316				316
Reclassification to interest expense, net	—			—				—				—				(216		)		(216		)
Distributions declared	—			—				—				(13,863		)		—				(13,863		)
Stock-based compensation, net	137,893			—				751				—				—				751
Ending balance, June 30, 2018	774,449,147			$	773			$	5,683,208			$	(3,736,205	)		$	2,437			$	1,950,213

(a)	See Note 2. Recently Issued Accounting Pronouncements Adopted.

See accompanying notes to the condensed consolidated financial statements.

3

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INVENTRUST PROPERTIES CORP.

Condensed Consolidated Statements of Equity

(Unaudited)

(in thousands, except share amounts)

	Number of Shares			Common Stock				Additional Paid-in Capital				Distributions in Excess of Accumulated Net Income				Accumulated Comprehensive Income				Total
Beginning balance, January 1, 2019	728,558,989			$	729			$	5,585,758			$	(3,735,810	)		$	1,637			$	1,852,314
Net loss	—			—				—				(9,499		)		—				(9,499		)
Unrealized loss on derivatives	—			—				—				—				(112		)		(112		)
Reclassification to interest expense, net	—			—				—				—				(432		)		(432		)
Distributions declared	—			—				—				(13,405		)		—				(13,405		)
Stock-based compensation, net	—			—				397				—				—				397
Ending balance, March 31, 2019	728,558,989			729				5,586,155				(3,758,714		)		1,093				1,829,263
Net loss	—			—				—				(5,722		)		—				(5,722		)
Unrealized loss on derivatives	—			—				—				—				(204		)		(204		)
Reclassification to interest expense, net	—			—				—				—				(427		)		(427		)
Distributions declared	—			—				—				(13,408		)		—				(13,408		)
Stock-based compensation, net	163,774			—				1,195				—				—				1,195
Ending balance, June 30, 2019	728,722,763			$	729			$	5,587,350			$	(3,777,844	)		$	462			$	1,810,697

See accompanying notes to the condensed consolidated financial statements.

4

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INVENTRUST PROPERTIES CORP.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

	Six months ended June 30,
	2019				2018
Cash flows from operating activities:
Net (loss) income	$	(15,221	)		$	57,395
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	47,554				48,084
Amortization of above and below-market leases and lease inducements, net	(2,917		)		(2,748		)
Amortization of debt premiums, discounts and financing costs, net	844				544
Straight-line rent adjustment, net	(1,787		)		(2,243		)
Provision for asset impairment	—				797
Gain on sale and transfer of investment properties, net	(5,662		)		(38,265		)
Loss (gain) on extinguishment of debt, net	809				(10,697		)
Equity in losses of unconsolidated entities	620				2,752
Distributions from unconsolidated entities	3,147				3,880
Stock-based compensation, net	2,165				2,084
Realized and unrealized investment losses	—				(223		)
Provision for indemnification claims	25,500				—
Changes in assets and liabilities:
Accounts and rents receivable, net	1,783				2,310
Deferred costs and other assets	(2,894		)		3,070
Accounts payable and accrued expenses	(1,156		)		(2,431		)
Other liabilities	172				963
Net cash provided by operating activities	52,957				65,272
Cash flows from investing activities:
Purchase of investment properties	(126,769		)		(143,216		)
Acquired in-place and market lease intangibles, net	(13,699		)		(8,544		)
Capital expenditures and tenant improvements	(9,953		)		(9,433		)
Investment in development projects	(3,696		)		(1,650		)
Proceeds from sale and transfer of investment properties, net	31,842				186,778
Payment due to indemnification claims related to the sale of investment properties	(30,000		)		—
Proceeds from the sale of marketable securities	—				3,610
Proceeds from the sale of unconsolidated entity	30,000				—
Contributions to unconsolidated entities	—				(1,841		)
Distributions from unconsolidated entities	—				282
Lease commissions and other leasing costs	(1,584		)		(3,526		)
Other assets	119				(167		)
Other liabilities	(290		)		486
Net cash (used in) provided by investing activities	(124,030		)		22,779
Cash flows from financing activities:
Distributions	(26,434		)		(27,301		)
Pay-off of debt	(12,491		)		(16,100		)
Debt prepayment penalties	(779		)		(1,617		)
Principal payments of debt	(945		)		(939		)
Payment of finance lease liabilities	(232		)		—
Payment of loan fees and deposits	(190		)		(429		)
Net cash used in financing activities	(41,071		)		(46,386		)
Net (decrease) increase in cash, cash equivalents, and restricted cash	(112,144		)		41,665
Cash, cash equivalents, and restricted cash at the beginning of the period	264,853				171,878
Cash, cash equivalents, and restricted cash at the end of the period	$	152,709			$	213,543

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INVENTRUST PROPERTIES CORP.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

	Six months ended June 30,
	2019				2018
Reconciliation of cash, cash equivalents, and restricted cash to condensed consolidated balance sheets:
Cash and cash equivalents	$	146,525			$	185,703
Restricted cash	6,184				27,840
Cash, cash equivalents, and restricted cash at the end of the period	$	152,709			$	213,543
Supplemental disclosure and schedules:
Cash flow disclosure, including non-cash activities:
Cash paid for interest, net of capitalized interest of $42 and $0	$	10,545			$	12,650
Cash paid for income taxes, net of refunds of $438 and $140	$	359			$	979
Cash paid for operating lease liabilities	$	393			$	—
Right-of-use assets obtained in exchange for operating lease liabilities	$	2,890			$	—
Lease liabilities arising from obtaining right-of-use assets	$	3,114			$	—
Distributions payable	$	13,408			$	13,863
Recognition of partially deferred gains on property sales	$	—			$	12,756
Accrued capital expenditures and tenant improvements	$	3,151			$	2,224
Accrued investment in re-development projects	$	431			$	21
Accrued lease commissions and other leasing costs	$	414			$	397
Tenant building construction placed into service	$	7,950			$	—
Purchase of investment properties:
Net investment properties	$	127,499			$	143,644
Accounts and rents receivable, lease intangibles, and deferred costs and other assets	15,855				13,567
Accounts payable and accrued expenses, lease intangibles, and other liabilities	(2,886		)		(5,451		)
Cash outflow for purchase of investment properties, net	140,468				151,760
Capitalized acquisition costs	(918		)		(200		)
Construction escrow accounts	—				278
Credits and other changes in cash outflow, net	3,092				462
Gross acquisition price of investment properties	$	142,642			$	152,300
Sale and transfer of investment properties:
Net investment properties	$	25,977			$	198,586
Accounts and rents receivable, lease intangibles, and deferred costs and other assets	1,096				7,517
Accounts payable and accrued expenses, lease intangibles, and other liabilities	(893		)		(9,102		)
Debt extinguished through the transfer of properties	—				(44,331		)
Debt assumed by the buyer through the disposition of properties	—				(14,854		)
Gain on sale and transfer of investment properties, net	5,662				38,265
Gain on extinguishment of debt	—				10,697
Proceeds from sale and transfer of investment properties, net	31,842				186,778
Transfer of mortgage principal to buyer	—				16,600
Surrender of mortgage escrows for transferred properties	—				2,160
Credits and other changes in cash inflow, net	1,108				7,412
Gross disposition price of investment properties	$	32,950			$	212,950

See accompanying notes to the condensed consolidated financial statements.

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INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. Readers of these interim condensed consolidated financial statements (the "Quarterly Report") should refer to the audited consolidated financial statements of InvenTrust Properties Corp. (the "Company") as of and for the year ended December 31, 2018, which are included in the Company's Annual Report on Form 10-K (the "Annual Report") as certain note disclosures contained in such audited consolidated financial statements have been omitted from this Quarterly Report. In the opinion of management, all adjustments necessary (consisting of normal recurring accruals, except as otherwise noted) for a fair presentation have been included in these condensed consolidated financial statements.

As used throughout this Quarterly Report, the terms "Company," "InvenTrust," "we," "us," and "our" mean InvenTrust Properties Corp. and its wholly-owned and unconsolidated joint venture investments. Unless otherwise noted, all dollar amounts are stated in thousands, except share, per share and per square foot data. Any reference to the number of properties, square feet, and tenant and occupancy data are unaudited.

1. Organization

On October 4, 2004, the Company was incorporated as Inland American Real Estate Trust, Inc. as a Maryland corporation and has elected to be taxed, and currently qualifies, as a real estate investment trust ("REIT") for federal tax purposes. The Company changed its name to InvenTrust Properties Corp. in April of 2015 and is focused on owning, managing, acquiring, and developing a multi-tenant retail platform.

The Company is taxed and operates in a manner that will allow the Company to continue to qualify as a REIT for U.S. federal income tax purposes. So long as it maintains its qualification as a REIT, the Company generally will not be subject to U.S. federal income tax on taxable income that is distributed to stockholders. If the Company fails to continue to qualify as a REIT in any taxable year, without the benefit of certain relief provisions, the Company will be subject to U.S. federal and state income tax on its taxable income at regular corporate tax rates and will not be able to re-elect REIT status during the four years following the year of the failure.

The accompanying condensed consolidated financial statements include the accounts of the Company and all wholly-owned subsidiaries and any consolidated variable interest entities ("VIEs"). Subsidiaries generally consist of limited liability companies ("LLCs") and limited partnerships ("LPs"). All significant intercompany balances and transactions have been eliminated.

Each retail property is owned by a separate legal entity that maintains its own books and financial records, and each separate legal entity's assets are not available to satisfy the liabilities of other affiliated entities, except as otherwise disclosed in "Note 7. Debt."

As of June 30, 2019, the Company's wholly-owned investment properties consisted of 59 retail properties, with a gross leasable area ("GLA") of approximately 9.5 million square feet. As of June 30, 2018, the Company's wholly-owned or consolidated investment properties consisted of 64 retail properties, with a GLA of approximately 11.0 million square feet. In addition, as of June 30, 2019 and 2018, the Company had an investment in one unconsolidated real estate joint venture which owns an interest in 12 and 14 retail properties, respectively, with GLA of approximately 2.6 million and 3.0 million square feet, respectively, managed by the Company. As of June 30, 2018, the Company had an investment in a separate unconsolidated real estate joint venture which owned land being developed in Sacramento, California. The Company has since liquidated its interest in that venture as disclosed in "Note 6. Investment in Consolidated and Unconsolidated Entities."

2. Basis of Presentation and Recently Issued Accounting Pronouncements

The accompanying condensed consolidated financial statements have been prepared in accordance with GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates, judgments and assumptions are required in a number of areas, including, but not limited to, evaluating the impairment of long-lived assets, allocating the purchase price of acquired assets, determining the fair value of debt and evaluating the collectability of accounts and rents receivable. The Company bases these estimates, judgments and assumptions on historical experience and various other factors that the Company believes to be reasonable under the circumstances. Actual results may differ from these estimates.

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INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Recently Issued Accounting Pronouncements Adopted

Standard		Description		Date of adoption		Effect on the financial statements or other significant matters
ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities		Under ASU No. 2016-01, investments in equity securities are generally required to be measured at fair value with changes in fair value recognized in net income. Historically, changes in fair value were reported as a separate component of comprehensive income until realized.		January 2018		The Company adopted ASU No. 2016-01 on a modified retrospective basis, which resulted in a net unrealized gain of $275 on available-for-sale equity securities as an adjustment to accumulated comprehensive income with a corresponding adjustment to the opening balance of distributions in excess of accumulated net income.
ASU No. 2017-05, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20)		ASU No. 2017-05, which adds guidance for partial sales of nonfinancial assets and clarifies the scope of Subtopic 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets, applies to the derecognition of all nonfinancial assets (including real estate) for which the counterparty is not a customer. The new guidance requires an entity to derecognize a nonfinancial asset in a partial sale transaction when it ceases to have a controlling financial interest in the asset and has transferred control of the asset and generally requires the full gain be recognized.		January 2018		For property sales in which the Company has no continuing involvement, there should be no change to the Company's timing of gain or loss recognition. The Company adopted ASU No. 2017-05 in conjunction with the new revenue standard on January 1, 2018, resulting in deferred gains from sales of investment properties of $12,756 recognized through beginning distributions in excess of accumulated net income, as discussed in "Note 6. Investment in Consolidated and Unconsolidated Entities".
ASU No. 2016-02, Leases, (Topic 842) and related updates		ASU No. 2016-02 amends the existing guidance for lease accounting for both parties to a lease contract (i.e., lessees and lessors). The new standard requires a modified retrospective transition method for all leases existing at the date of initial application, with an option to use certain practical expedients available.		January 2019		The Company adopted ASU No. 2016-02 and the related updates on a modified retrospective basis and applied the effective date method in which the elected practical expedients were applied consistently to all leases commenced before the ASU effective date of January 1, 2019. The incremental disclosures pertaining to the Company as a lessor and lessee have been included in "Note 3. Revenue Recognition" and "Note 11. Commitments and Contingencies," respectively.

Recently Issued Accounting Pronouncements Not Yet Adopted
Standard		Description		Date of adoption		Effect on the financial statements or other significant matters
ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement		ASU No. 2018-13 is intended to improve the effectiveness of the disclosures required by Topic 820, Fair Value Measurement by eliminating, amending, or adding certain disclosures. Certain amendments require a prospective transition method, while others require a retrospective transition method. The guidance is effective for all entities for fiscal years beginning after December 15, 2019, and early adoption is permitted.		January 2020		The Company is continuing to evaluate this guidance, but expects the standard to only impact fair value measurement disclosures, and therefore should have no impact on the Company's condensed consolidated financial position, results of operations, or cash flows.

Other recently issued accounting standards or pronouncements not disclosed in the foregoing tables have been excluded because they are either not relevant to the Company, or are not expected to have, or did not have, a material effect on the condensed consolidated financial statements of the Company.

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INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

3. Revenue Recognition

Operating Leases

The majority of revenue recognized from the Company’s retail properties consists of minimum lease payments received from tenants under long-term operating leases with varying terms. In addition to minimum lease payments, some leases provide for the reimbursement of the tenant’s pro rata share of certain operating expenses incurred by the landlord as recoveries, including real estate taxes, special assessments, insurance, utilities, common area maintenance, management fees and certain capital repairs. Certain other tenants are subject to net leases whereby the tenant is responsible for fixed minimum lease payments to the Company, as well as directly paying all costs and expenses associated with occupancy to third party service providers. Such direct payments to third parties are not recorded as revenue and expense by the Company.

In conjunction with the adoption of Topic 842, Leases ("Topic 842") on January 1, 2019, the Company elected the package of practical expedients that permits the Company to not reassess: (1) whether any expired or existing contracts are or contain leases; (2) the lease classification for any expired or existing leases; and (3) any initial direct costs for existing leases as of the effective date. Except as described below, the Company's accounting policies and resulting recognition of lease income remained substantially consistent with previous guidance.

Because of the narrowed definition of initial direct costs under Topic 842, the Company expenses as incurred certain lease origination costs previously capitalized and amortized to expense over the lease term. The Company has elected the practical expedient of not separating lease and non-lease components for all qualifying leases. In effect, this will generally relieve the Company from the requirement to account for certain consideration under the new revenue standard. As a result of the accounting policy election, all income arising from leases is presented on a combined basis as lease income, net on the condensed consolidated statements of operations and comprehensive (loss) income.

Beginning on January 1, 2019, the provision for estimated credit losses resulting from changes in the collectability of lease payments will be recognized as a direct reduction to lease income on the condensed consolidated statements of operations and comprehensive (loss) income and a direct write-off of the operating lease receivable on the condensed consolidated balance sheets. Changes in collectability occur when the Company no longer believes it is probable that substantially all of the lease payments will be collected. If collection is not probable, the lease payments will be accounted for on a cash basis, and revenue will be recorded as received. When reassessed and the collection of substantially all of the lease payments from the tenant becomes probable, the accrual basis of revenue recognition will be reestablished.

Consistent with previous guidance, unless there is a change in the minimum lease payment credit risk, changes in the collectability of billed and unbilled recoveries will continue to be recognized as bad debt expense in property operating expenses on the condensed consolidated statements of operations and comprehensive (loss) income and an allowance for doubtful accounts established on the condensed consolidated balance sheets.

As of June 30, 2019, minimum lease payments to be received under long-term operating leases and short-term specialty leases, excluding additional percentage rent based on tenants' sales volume and tenant reimbursements of certain operating expenses, and assuming no exercise of renewal options or early termination rights, are as follows:

	Minimum Lease Payments
Remaining 2019	$	80,410
2020	152,400
2021	138,621
2022	117,565
2023	99,353
Thereafter	338,479
Total	$	926,828

9

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INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

As of December 31, 2018, minimum lease payments to be received under long-term operating leases and short-term specialty leases, excluding additional percentage rent based on tenants' sales volume and tenant reimbursements of certain operating expenses, and assuming no exercise of renewal options or early termination rights, are as follows:

	Minimum Lease Payments
2019	$	151,874
2020	139,290
2021	124,366
2022	103,204
2023	83,744
Thereafter	282,629
Total	$	885,107

Topic 842 Reclassifications

The Company has chosen to apply the combined presentation of lease income, net required by Topic 842 retrospectively to the three and six months ended June 30, 2018, by combining amounts previously reported as rental income and tenant recovery income and making certain other reclassifications to the condensed consolidated statements of operations and comprehensive (loss) income. The following table reflects the disaggregation of lease income, net:

	Three months ended June 30,								Six months ended June 30,
	2019				2018				2019				2018
Minimum lease payments	$	39,059			$	43,590			$	78,466			$	88,183
Billed and unbilled tax and insurance recoveries	8,717				9,286				16,975				18,175
Billed and unbilled common area maintenance and other recoveries	5,348				5,783				11,125				12,602
Amortization of above and below-market leases and lease inducements, net	1,327				1,246				2,918				2,748
Short-term, termination fee, and other lease income	1,478				413				2,149				1,031
Estimated credit losses	(420		)		(284		)		(1,089		)		(366		)
Lease income, net	$	55,509			$	60,034			$	110,544			$	122,373

Contracts with Customers

The Company earned other fee income of $860 and $1,765 for the three and six months ended June 30, 2019, respectively, and $924 and $2,000 for the three and six months ended June 30, 2018, respectively, which is comprised of fees derived from services provided to IAGM Retail Fund I, LLC ("IAGM"), an unconsolidated retail joint venture partnership between the Company as 55% owner and PGGM Private Real Estate Fund ("PGGM"), as disclosed in "Note 6. Investment in Consolidated and Unconsolidated Entities", and therefore deemed to be related party transactions. The property management, asset management, leasing and other services are provided over the term of the contract, which has a remaining original duration through 2023. The Company has receivables of $434 and $778 as of June 30, 2019 and December 31, 2018, respectively, which are included in deferred costs and other assets, net, on the condensed consolidated balance sheets. The following table reflects the disaggregation of other fee income:

	Three months ended June 30,								Six months ended June 30,
	2019				2018				2019				2018
Property management fees	$	588			$	637			$	1,226			$	1,365
Asset management fees	272				259				517				562
Leasing commissions and other fees	—				28				22				73
Other fee income	$	860			$	924			$	1,765			$	2,000

10

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INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

4. Acquired Properties

The following table reflects the retail properties acquired, accounted for as asset acquisitions, during the six months ended June 30, 2019:

Acquisition Date		Property		Metropolitan Statistical Area ("MSA")(a)		Gross Acquisition Price				Square Feet
January 31, 2019		Commons at University Place		Raleigh-Cary, NC		$	23,250			92,000
March 20, 2019		Lakeside Winter Park and Lakeside Crossings		Orlando-Kissimmee-Sanford, FL		63,500				76,000
April 30, 2019		Scofield Crossing (b)		Austin-Round Rock, TX		3,000				64,000
May 7, 2019		Tomball Town Center Kroger		Houston-The Woodlands-Sugar Land, TX		13,992				74,000
June 14, 2019		Sandy Plains Outparcel (c)		Atlanta-Sandy Springs-Roswell, GA		2,900				6,000
June 28, 2019		Shoppes at Fairview		Dallas-Fort Worth-Arlington, TX		36,000				67,500
						$	142,642			379,500

(a)	As defined by the United States Office of Management and Budget.

(b)	The building and tenant improvements were acquired subject to an existing ground lease at the property.

(c)	An adjacent outparcel to an existing property was acquired.

The following table reflects the retail properties acquired, accounted for as asset acquisitions, during the six months ended June 30, 2018:

Acquisition Date		Property		MSA		Gross Acquisition Price				Square Feet
May 16, 2018		PGA Plaza (a)		Miami-Fort Lauderdale-West Palm Beach, FL		$	88,000			120,000
May 30, 2018		Kennesaw Marketplace (a)		Atlanta-Sandy Springs-Roswell, GA		64,300				117,000
						$	152,300			237,000

(a)

These acquisitions were made through two consolidated VIEs and were used to facilitate reverse like-kind exchanges under Section 1031 of the Internal Revenue Code of 1986, as amended ("Reverse 1031 Exchanges"). During the last quarter of 2018, the title of PGA Plaza and Kennesaw Marketplace transferred to the Company through the completions of an exchange and expiration of the 180-day waiting period, respectively.

The Company incurred transaction costs of $310 and $918 during the three and six months ended June 30, 2019, respectively, and $200 during the three and six months ended June 30, 2018, which were capitalized and included in building and other improvements on the Company's condensed consolidated balance sheets.

The following table summarizes the estimated fair value of the retail properties' assets acquired and liabilities assumed for the six months ended June 30, 2019 and June 30, 2018:

	2019 Acquisitions				2018 Acquisitions
Land	$	28,846			$	21,629
Building and other improvements	98,653				121,815
Total investment properties	127,499				143,444
Intangible assets (a)	15,830				13,500
Intangible liabilities (b)	(2,131		)		(4,956		)
Net other assets and liabilities	151				312
Total fair value of assets acquired and liabilities assumed	$	141,349			$	152,300

(a)	Intangible assets include in-place leases and above-market leases.

(b)	Intangible liabilities include below-market leases.

11

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INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

5. Disposed Properties

The following table reflects the retail properties disposed of during the six months ended June 30, 2019:

Date		Property		Square Feet			Gross Disposition Price				Gain on Sale of Investment Properties				Loss on Extinguishment of Debt
April 3, 2019		Brooks Corner		173,000			$	26,300			$	5,531			$	(809	)
May 31, 2019		Silverlake		101,000			6,650				131				—
				274,000			$	32,950			$	5,662			$	(809	)

In aggregate, the Company recognized net proceeds of $31,842 from the sales of these properties on the condensed consolidated statement of cash flows during the six months ended June 30, 2019.

The following table reflects the retail properties disposed of during the six months ended June 30, 2018:

Date		Property		Square Feet			Gross Disposition Price				Gain (Loss) on Sale and Transfer of Investment Properties, net				Gain (Loss) on Extinguishment of Debt, net
January 9, 2018		Sherman Town Center I & II		485,000			$	63,000			$	12,382			$	—
January 25, 2018		Grafton Commons		239,000			33,500				6,564				—
March 8, 2018		Lakeport Commons		283,000			31,000				(666		)		—
March 21, 2018		Stonecrest Marketplace (a)		265,000			—				1,777				10,752
March 31, 2018		Northwest Marketplace (b)		—			—				248				—
April 17, 2018		Market at Morse/Hamilton		45,000			10,000				1,592				—
May 24, 2018		Siegen Plaza		156,000			29,000				3,849				(54		)
June 20, 2018		Tomball Town Center		67,000			22,750				7,184				—
June 26, 2018		Bellerive Plaza (c)		76,000			—				(22		)		1,694
June 28, 2018		Parkway Centre North		143,000			23,700				5,357				(1,695		)
				1,759,000			$	212,950			$	38,265			$	10,697

(a)	On March 21, 2018, the Company surrendered Stonecrest Marketplace, with a carrying value of $23,932, to the lender in satisfaction of non-recourse debt with an initial maturity date of March 1, 2017, and recognized a gain on transfer of assets, net, of $1,777. The Company is not aware of any material outstanding commitments and contingencies related to Stonecrest Marketplace.

(b)	The Company recognized a gain on sale of $248 related to the completion of a partial condemnation at this retail property.

(c)	On June 26, 2018, the Company surrendered Bellerive Plaza, with a carrying value of $4,771, to the lender in satisfaction of non-recourse debt with an initial maturity date of June 1, 2017. The Company recognized a loss on transfer of assets, net, of $22. The Company is not aware of any material outstanding commitments and contingencies related to Bellerive Plaza.

In aggregate, the Company recognized net proceeds of $186,778 from the sales and condemnation of these properties on the condensed consolidated statement of cash flows during the six months ended June 30, 2018.

12

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INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

6. Investment in Consolidated and Unconsolidated Entities

Consolidated Entities

As of June 30, 2019, the Company has no VIEs. During the fourth quarter of 2018, the Company entered into purchase agreements structured as Reverse 1031 Exchanges to acquire Sandy Plains Centre, which was the Company's only consolidated VIE as of December 31, 2018. Due to the expiration of the 180-day waiting period subsequent to December 31, 2018, the Reverse 1031 Exchange was terminated and the title of Sandy Plains Centre transferred to the Company. The liabilities of the VIE are non-recourse to the Company, and the assets must first be used to settle obligations of the VIE. The following table presents the net assets of the VIE:

	December 31, 2018
Net investment properties	$	39,634
Other assets	4,457
Total assets	44,091
Liabilities	(385		)
Net assets	$	43,706

Unconsolidated Entities

The entities listed below are owned by the Company and other unaffiliated parties in joint ventures. Net income, distributions and capital transactions for these entities are allocated to the Company and its joint venture partners in accordance with the respective partnership agreements.

				Current Ownership %		Carrying Value of Investment as of
Entity		Description				June 30, 2019				December 31, 2018
IAGM Retail Fund I, LLC		Multi-tenant retail shopping centers		55%		$	122,365			$	126,195
Downtown Railyard Venture, LLC		Land development		—%		—				30,049
Other unconsolidated entities		Various real estate investments		Various		—				(112		)
						$	122,365			$	156,132

IAGM

On April 17, 2013, the Company entered into a joint venture, IAGM, with PGGM for the purpose of acquiring, owning, managing, supervising, and disposing of retail properties and sharing in the profits and losses from those retail properties and their activities. The Company contributed 14 properties to IAGM during the year ended December 31, 2013, and treated the contribution as a partial sale under Topic 360-20, "Property, Plant and Equipment - Real Estate Sales," and deferred an aggregate gain of $15,625 as a result of the property sales into the joint venture. Through December 31, 2017, the Company was amortizing the basis adjustment over 30 years, consistent with the depreciation period of the investee's underlying assets. In accordance with the provisions of ASU No. 2017-05, full gain recognition may be required for property sales in which the Company has continuing involvement, when those gains may have been deferred under prior GAAP. As of January 1, 2018, with the adoption of ASU No. 2017-05, the Company's remaining $12,756 of the aforementioned deferred gain had been recognized through beginning distributions in excess of accumulated net income.

During the three months ended June 30, 2019, IAGM disposed of Rockwell Plaza, a 255,000 square foot retail property, for a gross disposition price of $20,500 and recognized a provision for asset impairment of $1,443 and a loss on sale of $559. The Company's share of IAGM's provision for asset impairment was $794 and its share of the loss on sale was $307. Proceeds from the sale were used to extinguish the related $16,250 non-recourse mortgage loan.

During the three months ended June 30, 2018, IAGM recognized a provision for asset impairment of $1,596 on one retail property. During the six months ended June 30, 2018, IAGM also disposed of Bryant Square, a 268,000 square foot retail property, for a gross disposition price of $38,000 and recognized a provision for asset impairment of $672 and a loss on sale of $3,905 related to this retail property. During the three and six months ended June 30, 2019 and 2018, the Company's share of IAGM's provision for asset impairment was $878 and $1,248, respectively, and its share of the loss on sale for the six months ended June 30, 2018 was $2,148.

13

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INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Downtown Railyard Ventures, LLC

On September 30, 2015, the Company was admitted as a member of Downtown Railyard Venture, LLC ("DRV"), which was a joint venture established for the purpose of developing and selling a land development in Sacramento, California. On June 24, 2019, the Company liquidated all interests in DRV in exchange for $30,000 of cash consideration. During the year ended December 31, 2018, the Company recorded an other-than-temporary impairment of $29,933 on DRV due to a reduction in the expected hold period, thereby reducing the investment to an estimated fair value that the Company believed would be most probable of realization if the investment was liquidated. As a result of the other-than-temporary impairment, the liquidation of interests resulted in no gain or loss being recognized on the transaction. Upon liquidation, the Company has no continuing involvement with DRV.

Combined Financial Information

The following tables present the combined condensed financial information for the Company's unconsolidated entities.

	As of
	June 30, 2019				December 31, 2018
Assets:
Real estate assets, net of accumulated depreciation	$	438,281			$	494,583
Other assets	54,487				103,565
Total assets	$	492,768			$	598,148
Liabilities and equity:
Mortgages payable, net	256,453				272,629
Other liabilities	15,410				42,569
Equity	220,905				282,950
Total liabilities and equity	$	492,768			$	598,148
Company's share of equity	$	122,365			$	185,814
Outside basis difference (a)	—				(29,682		)
Carrying value of investments in unconsolidated entities	$	122,365			$	156,132

(a)	The outside basis difference is principally related to other-than-temporary impairment recorded in 2018 on DRV.

	Three months ended June 30,								Six months ended June 30,
	2019				2018				2019				2018
Revenues	$	13,106			$	14,175			$	26,747			$	29,864
Expenses:
Interest expense and loan cost amortization	2,894				3,420				5,788				6,806
Depreciation and amortization	5,663				5,622				10,939				11,277
Operating and general and administrative expenses	4,521				4,652				9,111				11,008
Provision for asset impairment	1,443				1,596				1,443				2,268
Total expenses	14,521				15,290				27,281				31,359
Net loss before loss on sale of real estate	(1,415		)		(1,115		)		(534		)		(1,495		)
Loss on sale of real estate	(559		)		—				(5,540		)		(3,905		)
Net loss	$	(1,974	)		$	(1,115	)		$	(6,074	)		$	(5,400	)
Company's share of net income (loss)	$	(1,079	)		$	(661	)		$	(5,023	)		$	(2,976	)
Distributions from unconsolidated entities in excess of the investments' carrying value	—				(50		)		—				224
Outside basis adjustment for investee's sale of real estate	—				—				4,403				—
Equity in losses of unconsolidated entities	$	(1,079	)		$	(711	)		$	(620	)		$	(2,752	)

14

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INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following table shows the scheduled maturities of IAGM's mortgages payable as of June 30, 2019, for the remainder of 2019, each of the next four years, and thereafter.

	Maturities during the year ending December 31,
	2019				2020			2021			2022			2023			Thereafter			Total
Mortgages payable	$	—			14,872			23,150			—			180,125			40,680			$	258,827

On June 30, 2019, IAGM entered into a one year extension on a $15,103 non-recourse mortgage loan related to one retail property. The original maturity date of June 30, 2019 was extended to June 30, 2020 and a partial paydown resulted in a new balance of $14,872. As of June 30, 2019 and December 31, 2018, none of IAGM's mortgages payable are recourse to the Company. It is anticipated that the joint venture will be able to repay, refinance or extend all of its debt on a timely basis.

7. Debt

As of June 30, 2019, the Company's total debt, net, was $548,752, which consists of mortgages payable, net, of $199,556 and credit agreements, net, of $349,196. The Company believes it has the ability to repay, refinance or extend any of its debt, and that it has adequate sources of funds to meet short-term cash needs related to mortgages payable. It is anticipated that the Company will use proceeds from property sales, cash on hand, and available capacity on credit agreements, if any, to repay, refinance or extend the mortgages payable maturing in the near term.

Mortgages Payable

As of June 30, 2019 and December 31, 2018, the Company had the following mortgages payable outstanding:

	June 30, 2019				December 31, 2018
Mortgages payable (a)	$	200,489			$	213,925
Premium, net of accumulated amortization	120				239
Discount, net of accumulated amortization	(139		)		(158		)
Debt issuance costs, net of accumulated amortization	(914		)		(1,079		)
Total mortgages payable, net	$	199,556			$	212,927

(a)	Mortgages payable had fixed interest rates ranging from 3.49% to 5.49% as of June 30, 2019 and December 31, 2018, with a weighted-average interest rate of 4.27% and 4.33% as of June 30, 2019 and December 31, 2018.

Some of the mortgage loans require compliance with certain covenants, such as debt service coverage ratios, investment restrictions and distribution limitations. As of June 30, 2019 and December 31, 2018, the Company was in compliance with all mortgage loan requirements.

The following table shows the scheduled maturities of the Company's mortgages payable as of June 30, 2019 for the remainder of 2019, each of the next four years, and thereafter.

	Maturities during the year ending December 31,
	2019				2020				2021				2022				2023				Thereafter				Total
Mortgages payable	$	—			$	41,000			$	—			$	50,270			$	41,339			$	67,880			$	200,489

Credit Agreements

Unsecured revolving line of credit

On December 21, 2018, the Company entered into an unsecured revolving credit agreement, which amends and restates the Company’s prior revolving credit agreement in its entirety, and provides for a $350,000 unsecured revolving line of credit (the "Revolving Credit Agreement"). The Revolving Credit Agreement has a 4-year term maturing on December 21, 2022, with two six months extension options. Interest rates are based on the Company's total leverage ratio or, at the Company's one-time irrevocable option, upon achievement of an investment-grade credit rating. A facility fee accrues on the aggregate commitments at a rate ranging from 0.15% to 0.30% depending on the Company’s total leverage ratio, and as of June 30, 2019 and December 31, 2018, the facility fee was 0.15%. As of June 30, 2019 and December 31, 2018, the Company had no outstanding borrowings under the Revolving Credit Agreement.

15

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INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Unsecured term loans

On December 21, 2018, the Company entered into an unsecured term loan credit agreement, which amends and restates the Company’s prior term loan agreement in its entirety, and provides for $400,000 in unsecured term loans (the "Term Loan Agreement"). The Term Loan Agreement consists of two tranches: a $250,000 5-year tranche maturing on December 21, 2023, and a $150,000 5.5-year tranche maturing on June 21, 2024. Interest rates are based on the Company's total leverage ratio or, at the Company's one-time irrevocable option, upon achievement of an investment-grade credit rating. A fee is charged on the unused portion of the term loans at a rate ranging from 0.15% to 0.25% depending on the Company’s total leverage ratio, and as of June 30, 2019 and December 31, 2018, the unused fee was 0.15%. As of June 30, 2019 and December 31, 2018, the Company had a total of $48,000 available for borrowing under both the 5-year tranche and the 5.5-year tranche.

As of June 30, 2019 and December 31, 2018, the Company had the following borrowings outstanding under its unsecured term loans:

	June 30, 2019						December 31, 2018
	Principal Balance				Interest Rate		Principal Balance				Interest Rate		Maturity Date
$250.0 million 5 year - swapped to fixed rate	$	90,000			2.5510% (a)		$	90,000			2.5510% (a)		December 21, 2023
$250.0 million 5 year - swapped to fixed rate	60,000				2.5525% (a)		60,000				2.5525% (a)		December 21, 2023
$250.0 million 5 year - variable-rate	50,000				3.6400% (b)		50,000				3.5493% (c)		December 21, 2023
$250.0 million 5 year - variable-rate	26,000				3.6400% (b)		26,000				3.6794% (d)		December 21, 2023
$150.0 million 5.5 year - variable-rate	100,000				3.6400% (b)		100,000				3.5493% (c)		June 21, 2024
$150.0 million 5.5 year - variable-rate	26,000				3.6400% (b)		26,000				3.6794% (d)		June 21, 2024
Total unsecured term loans	352,000						352,000
Issuance costs, net of accumulated amortization	(2,804		)				(3,145		)
Total unsecured term loans, net	$	349,196					$	348,855

(a)

The Company swapped $90,000 (notional amount of $90,000) and $60,000 (notional amount of $60,000) of variable-rate debt at an interest rate of 1-Month LIBOR plus 1.20% to a fixed rate of 2.5510% and 2.5525%, respectively. The swaps have an effective date of December 10, 2015 and a termination date of December 1, 2019. As a result, all net deferred amounts in accumulated comprehensive income related to swaps will be reclassified into earnings during 2019.

(b)	Interest rate reflects 1-Month LIBOR plus 1.2% effective June 3, 2019.

(c)	Interest rate reflects 1-Month LIBOR plus 1.2% effective December 3, 2018.

(d)	Interest rate reflects 1-Month LIBOR plus 1.2% effective December 21, 2018.

8. Fair Value Measurements

Recurring Measurements

The following financial instruments are remeasured at fair value on a recurring basis:

		Fair Value Measurements as of
		June 30, 2019												December 31, 2018
Assets		Level 1				Level 2				Level 3				Level 1				Level 2				Level 3
Derivative interest rate swaps		—				$	462			—				—				$	1,637			—
Total assets		$	—			$	462			$	—			$	—			$	1,637			$	—

Level 1

At June 30, 2019 and December 31, 2018, the Company had no Level 1 recurring fair value measurements.

16

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INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Level 2

To calculate the fair value of the derivative interest rate instruments, the Company primarily uses quoted prices for similar contracts. For the derivative interest rate instruments, the Company uses inputs based on data that are observed in the forward yield curve that is widely observable in the marketplace. The Company also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements that utilize Level 3 inputs, such as estimates of current credit spreads.

As of June 30, 2019 and December 31, 2018, the Company determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company's derivative valuations in their entirety are classified as Level 2 of the fair value hierarchy.

Level 3

At June 30, 2019 and December 31, 2018, the Company had no Level 3 recurring fair value measurements.

Nonrecurring Measurements

During the six months ended June 30, 2019, the Company had no Level 3 nonrecurring fair value measurements.

During the six months ended June 30, 2018, the Company identified one retail property that had a reduction in its expected holding period and recorded a provision for asset impairment of $797 on the condensed consolidated statement of operations and comprehensive (loss) income as a result of the fair value being lower than the property's carrying value. The Company's fair value was based on an executed sales contract.

The following table summarizes activity for the Company’s assets measured at fair value on a nonrecurring basis and the related impairment charges for the three and six months ended June 30, 2019 and 2018:

		For the three months ended June 30,												For the six months ended June 30,
		2019						2018						2019						2018
		Level 3			Impairment Losses			Level 3			Impairment Losses			Level 3			Impairment Losses			Level 3				Impairment Losses
Investment properties		—			—			—			—			—			—			$	31,000			$	797

Financial Instruments Not Measured at Fair Value

The table below represents the estimated fair value of financial instruments presented at carrying values in the Company's condensed consolidated financial statements as of June 30, 2019 and December 31, 2018:

	June 30, 2019							December 31, 2018
	Carrying Value			Estimated Fair Value				Carrying Value			Estimated Fair Value
Mortgages payable	$	200,489		$	203,312			$	213,925		$	212,572
Term loans	$	352,000		$	351,993			$	352,000		$	352,006

The Company estimated the fair value of its mortgages payable using a weighted-average effective market interest rate of 3.71% and 4.38% as of June 30, 2019 and December 31, 2018, respectively. The fair value estimate of the term loans approximate the carrying value due to limited market volatility in pricing. The assumptions reflect the terms currently available on similar borrowing terms to borrowers with credit profiles similar to that of the Company's. As a result, the Company used a weighted-average interest rate of 2.83% and 3.63% as of June 30, 2019 and December 31, 2018, respectively, to estimate the fair value of its term loans. The Company has determined that its debt instrument valuations are classified in Level 2 of the fair value hierarchy.

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INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

9. Earnings (loss) per Share

The following table summarizes the calculation of the basic and diluted earnings (loss) per share:

	Three months ended June 30,								Six months ended June 30,
	2019				2018				2019				2018
Numerator:
Net income from continuing operations	$	6,278			$	23,163			$	10,279			$	57,395
Earnings allocated to unvested restricted shares	—				(29		)		—				(75		)
Net income from continuing operations attributable to common shareholders - basic and diluted	$	6,278			$	23,134			$	10,279			$	57,320
Net loss from discontinued operations attributable to common shareholders - basic and diluted	$	(12,000	)		$	—			$	(25,500	)		$	—
Denominator:
Weighted-average number of common shares outstanding - basic	728,654,374				774,391,881				728,606,945				774,351,790
Effect of unvested restricted shares	633,289				538,359				16,392				—
Weighted-average number of common shares outstanding - diluted	729,287,663				774,930,240				728,623,337				774,351,790
Income per common share:
Net income from continuing operations per share - basic and diluted	$	0.01			$	0.03			$	0.01			$	0.07
Net loss from discontinued operations per share - basic and diluted	(0.02		)		—				(0.03		)		—
Net (loss) income per share - basic and diluted	$	(0.01	)		$	0.03			$	(0.02	)		$	0.07

10. Stock-Based Compensation

The following table summarizes the Company's restricted stock unit ("RSU") activity for the six months ended June 30, 2019:

	Unvested Time-Based RSUs			Unvested Performance-Based RSUs			Weighted-Average Grant Date Price Per Share (a)
Outstanding as of January 1, 2019	1,548,150			—			$3.18
Shares granted	1,109,078			863,847			$3.14
Shares vested	(227,707	)		—			$3.14
Shares forfeited	(82,898	)		—			$3.19
Outstanding at June 30, 2019	2,346,623			863,847			$3.16

(a)	On an annual basis, the Company engages an independent third-party valuation advisory firm to estimate the per share value of the Company's common stock.

On May 8, 2019, the board of directors approved the grant of time-based and performance-based RSUs under the Company's 2015 Incentive Award Plan. Stock-based compensation expense is recognized on a straight-line basis over the vesting period for time-based RSUs and recognized, when achievement of the performance condition is deemed probable, on a straight-line basis over the vesting period for performance-based RSUs. Forfeitures of all stock-based awards are recognized as they occur.

As of June 30, 2019, there was $8,269 of total unrecognized compensation expense related to unvested stock-based compensation arrangements that will vest through December 2019, 2020 and 2021, as applicable. The Company recognized stock-based compensation expense of $1,320 and $2,165 for the three and six months ended June 30, 2019, respectively, and $1,216 and $2,084 for the three and six months ended June 30, 2018, respectively, as a part of general and administrative expenses on the condensed consolidated statements of operations and comprehensive (loss) income.

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INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

11. Commitments and Contingencies

The Company is subject, from time to time, to various types of third-party legal claims or litigation that arises in the ordinary course of business, including, but not limited to, property loss claims, personal injury or other damages resulting from contact with the Company’s properties. These claims and lawsuits and any resulting damages are generally covered by the Company's insurance policies. The Company accrues for legal costs associated with loss contingencies when these costs are probable and reasonably estimable. While the resolution of these matters cannot be predicted with certainty, management does not expect, based on currently available information, that the final outcome of any pending claims or legal proceedings will have a material adverse effect on the financial condition, results of operations or cash flows of the Company.

University House Communities Group, Inc., Indemnity Claims

The Company received an indemnity notice from UHC Acquisition Sub LLC ("UHC") regarding certain matters under the Stock Purchase Agreement, dated January 3, 2016, for University House Communities Group, Inc., which was sold in June 2016. The notice sets forth various items for which UHC believes they are entitled to indemnification from the Company. In the normal course of property dispositions, pursuant to the purchase and sale agreements, certain indemnification claims can be made against the Company by the purchaser, and the Company will continue to adjust the financial statements, as necessary, based on those claims. Based on the facts and circumstances of the indemnification claims made, guidance provided by third-party specialists and external counsel, and management’s ongoing assessment of the UHC claims, in 2017 the Company accrued a potential loss contingency representing their best estimate of the potential loss related to these claims. Since 2017, the Company has increased the accrual, when appropriate, based on changes to those facts and circumstances of the indemnification claims made, guidance provided by third-party specialists and external counsel, and management’s ongoing assessment of the UHC claims. On June 14, 2019, UHC and the Company, through various negotiations, reached a final settlement for the claims in the amount of $30,000, which was paid by the Company on June 24, 2019. During the three and six months ended June 30, 2019, the Company recognized losses from discontinued operations of $12,000 and $25,500, respectively, related to these claims.

Operating and Finance Lease Commitments

The Company has non-cancelable operating leases for office space used in its business and non-cancelable contracts of property improvements that have been deemed to contain finance leases that, prior to the adoption of Topic 842, were previously classified as capital leases. In addition, upon the adoption of Topic 842, the Company recognized operating lease right-of-use ("ROU") assets of $2,890 and lease liabilities of $3,114.

In conjunction with the adoption of Topic 842, the Company elected the following practical expedients and accounting policies:

•	to combine the lease and non-lease components related to the leases described above and apply Topic 842 to the combined component;

•	to utilize a portfolio approach for determining a discount rate for groups of leases which are similar in nature and have similar contract provisions;

•	to not recognize assets and liabilities related to leases with terms of 12 months or less and which otherwise qualify as short-term leases; and

•	to exclude variable lease payments from initial recognition of the lease liabilities and all lease options from the determination of minimum lease terms.

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INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following table reflects the Company's operating, finance, and capital lease arrangements:

	As of
	June 30, 2019				December 31, 2018
Operating lease ROU assets (a)	$	2,493			$	—
Operating lease ROU accumulated amortization (a)	$	(271	)		$	—
Operating lease liabilities (b)	$	2,435			$	—
Finance lease ROU assets (c)	$	2,097			$	—
Finance lease ROU accumulated amortization (d)	$	(174	)		$	—
Finance lease liabilities (b)	$	1,557			$	—
Capital lease assets (c)	$	—			$	2,097
Capital lease accumulated amortization (d)	$	—			$	(104	)
Capital lease liabilities (b)	$	—			$	1,789

(a)	Recognized as a part of deferred costs and other assets, net on the condensed consolidated balance sheets.

(b)	Recognized as a part of other liabilities on the condensed consolidated balance sheets.

(c)	Recognized as a part of building and other improvements on the condensed consolidated balance sheets.

(d)	Recognized as a part of accumulated depreciation on the condensed consolidated balance sheets.

The following table reflects the Company's total lease cost, weighted-average lease terms, and weighted-average discount rates for the three and six months ended June 30, 2019:

	Three months ended June 30, 2019				Six months ended June 30, 2019
Minimum operating lease payments (a)	$	168			$	340
Variable operating lease payments (a)	29				62
Short-term operating lease payments (a)	74				144
ROU amortization of finance leases (b)	35				70
Interest expense of finance leases (c)	15				31
Total lease cost	$	321			$	647
Weighted-average remaining lease term of operating leases					5.6 years
Weighted-average remaining lease term of finance leases					3.2 years
Weighted-average discount rate of operating leases					4.44		%
Weighted-average discount rate of finance leases					3.50		%

(a)	Recognized as a part of general and administrative expenses on the condensed consolidated statements of operations and comprehensive (loss) income.

(b)	Recognized as a part of depreciation and amortization on the condensed consolidated statements of operations and comprehensive (loss) income.

(c)	Recognized as a part of interest expense, net on the condensed consolidated statements of operations and comprehensive (loss) income.

Future minimum lease obligations as of June 30, 2019, were as follows:

	Future Minimum Lease Payments
	Operating Leases				Finance Leases
Remaining 2019	$	301			$	300
2020	587				532
2021	471				518
2022	443				317
2023	455				40
Thereafter	470				—
Total expected minimum lease obligation	2,727				1,707
Less: Amount representing interest (a)	(292		)		(150		)
Present value of net minimum lease payments	$	2,435			$	1,557

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INVENTRUST PROPERTIES CORP.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(a)	Interest includes the amount necessary to reduce the total expected minimum lease obligations to present value calculated at the Company's incremental borrowing rate.

Future minimum lease obligations as of December 31, 2018, were as follows:

	Future Minimum Lease Payments
	Operating Leases				Capital Leases
2019	$	717			$	532
2020	611				532
2021	494				519
2022	466				317
2023	479				40
Thereafter	1,041				—
Total expected minimum lease obligation	$	3,808			1,940
Less: Amount representing interest (a)					(151		)
Present value of net minimum lease payments					$	1,789

(a)	Interest includes the amount necessary to reduce the total expected minimum lease obligations to present value calculated at the Company's incremental borrowing rate.

12. Subsequent Events

In preparing its condensed consolidated financial statements, the Company has evaluated events and transactions occurring after June 30, 2019, through the date the financial statements were issued for recognition and disclosure purposes.

On July 11, 2019, the Company acquired Southern Palm, a 346,200 square foot power center, located in the Miami-Fort Lauderdale-West Palm Beach, FL MSA, for a gross acquisition price of $96,750.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements in this "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in these interim condensed consolidated financial statements for the quarter ended June 30, 2019 (the "Quarterly Report"), other than purely historical information, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include statements about the Company's plans, objectives, strategies, financial performance and outlook, trends, the amount and timing of future cash distributions, prospects or future events; and they involve known and unknown risks that are difficult to predict. As a result, our actual financial results, performance, achievements, or prospects may differ materially from those expressed or implied by these forward-looking statements. In some cases, forward-looking statements can be identified by the use of words such as "may," "could," "expect," "intend," "plan," "seek," "anticipate," "believe," "estimate," "guidance," "predict," "potential," "continue," "likely," "will," "would," "illustrative," and "should," and variations of these terms and similar expressions, or the negatives of these terms or similar expressions. Such forward-looking statements are necessarily based upon estimates and assumptions that we consider reasonable based on our knowledge and understanding of the business and industry, but that are inherently uncertain. These statements are not guarantees of future performance, and stockholders should not place undue reliance on forward-looking statements.

A number of risks, uncertainties and other important factors, many of which are beyond our control, could cause our actual results to differ materially from the forward-looking statements contained in this Quarterly Report. Such risks, uncertainties and other important factors, include, among others, the risks, uncertainties and factors set forth in our filings with the Securities and Exchange Commission ("SEC"), including our Annual Report on Form 10-K for the year ended December 31, 2018 (the "Annual Report"). This may be updated in this Quarterly Report and other quarterly and current reports, which are on file with the SEC and are available at the SEC's website (www.sec.gov). Such risks and uncertainties, among others, include the following:

•	market, political and economic volatility experienced by the U.S. economy or real estate industry as a whole, and the regional and local political and economic conditions in the markets in which our retail properties are located;

•	our ability to execute on potential strategic transactions aimed to enhance stockholder value and provide investment liquidity to stockholders;

•	our ability to identify, execute and complete disposition opportunities and at expected valuations;

•	our ability to identify, execute and complete acquisition opportunities and to integrate and successfully operate any retail properties acquired in the future and manage the risks associated with such retail properties;

•	our ability to manage the risks of expanding, developing or re-developing some of our current and prospective retail properties;

•	loss of members of our senior management team or other key personnel;

•	changes in governmental regulations and U.S. accounting standards or interpretations thereof;

•	our ability to access capital for development, re-development and acquisitions on terms and at times that are acceptable to us;

•	changes in the competitive environment in the leasing market and any other market in which we operate;

•	shifts in consumer retail shopping from brick and mortar stores to e-commerce;

•	declaration of bankruptcy by our retail tenants;

•	forthcoming expirations of certain of our leases and our ability to re-lease such retail properties;

•	our ability to collect rent from tenants or to rent space on favorable terms or at all;

•	the impact of leasing and capital expenditures to improve our retail properties to retain and attract tenants;

•	events beyond our control, such as war, terrorist attacks (including acts of domestic terrorism), natural disasters and severe weather incidents, and any uninsured or under-insured loss resulting therefrom;

•	actions or failures by our joint venture partners, including development partners;

•	the cost of compliance with and liabilities under environmental, health and safety laws;

•	changes in real estate and zoning laws and increases in real property tax rates;

•	the economic success and viability of our anchor retail tenants;

•	our debt financing, including risk of default, loss and other restrictions placed on us;

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•	our ability to refinance maturing debt or to obtain new financing on attractive terms;

•	future increases in interest rates;

•	the availability of cash flow from operating activities to fund distributions;

•	our investment in equity and debt securities in companies we do not control;

•	our status as a real estate investment trust ("REIT") for federal tax purposes; and

•	changes in federal, state or local tax law, including legislative, administrative, regulatory or other actions affecting REITs.

These factors are not necessarily all of the important factors that could cause our actual results, performance or achievements to differ materially from those expressed in or implied by any of our forward-looking statements. Other unknown or unpredictable factors also could harm our business, financial condition, results of operations or cash flows. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above. Forward-looking statements are only as of the date they are made; we do not undertake or assume any obligation to update publicly any of these forward-looking statements to reflect actual results, new information, future events, changes in assumptions or changes in other factors affecting forward-looking statements, except to the extent required by applicable law. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

The following discussion and analysis relates to the three and six months ended June 30, 2019 and 2018 and as of June 30, 2019 and December 31, 2018. It should be read in conjunction with our condensed consolidated financial statements and the related notes included in this Quarterly Report. All dollar amounts in tables are stated in thousands, except per square foot metrics.

Executive Summary

InvenTrust Properties Corp. is a premier retail REIT that owns, leases, redevelops, acquires and manages open-air centers in key growth markets with favorable demographics. We seek to continue to execute our strategy to enhance our multi-tenant retail platform by acquiring the right centers in the right markets, driven by focused and disciplined capital allocation.

During the six months ended June 30, 2019, we continued to execute on our strategy by exploring opportunities to dispose of retail properties not located in our core markets or where we believe the properties' values have been maximized. Our strategy is to redeploy the proceeds from these sales with a disciplined approach into strategic retail properties in our target markets. However, we face significant competition for attractive investment opportunities. As a result of this competition, the purchase prices for properties that we find attractive and suitable may be significantly elevated and may adversely impact our ability to redeploy the proceeds from property sales for reinvestment. In addition, our disposition activity could continue to cause us to experience dilution in financial operating performance during the period in which we dispose of properties.

In evaluating our financial condition and operating performance, management focuses on the following, which are discussed in further detail herein:

•

Property net operating income ("NOI"), which excludes general and administrative expenses, depreciation and amortization, provision for asset impairment, interest, dividend and other income, gains (losses) from sales of properties, gains (losses) on extinguishment of debt, interest expense, net, equity in earnings (losses) from unconsolidated entities, and realized and unrealized investment losses;

•	Modified NOI, a supplemental measure not determined in accordance with generally accepted accounting principles in the United States ("GAAP"), which reflects property NOI exclusive of lease termination income and GAAP rent adjustments (such as straight-line rent and above/below-market lease amortization);

•	Funds From Operations ("FFO") Applicable to Common Shares, a supplemental non-GAAP measure;

•	Modified Funds From Operations ("MFFO") Applicable to Common Shares, a supplemental non-GAAP measure;

•	Cash flow from operations as determined in accordance with GAAP;

•	Economic and physical occupancy and rental rates;

•	Leasing activity and lease rollover;

•	Management of operating expenses;

•	Management of general and administrative expenses;

•	Debt maturities and leverage ratios; and

•	Liquidity levels.

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Multi-tenant retail platform

Our wholly-owned, consolidated, and managed retail properties include grocery-anchored community and neighborhood centers and power centers, including those classified as necessity-based. As of June 30, 2019, we owned 71 retail properties with a gross leasable area ("GLA") of approximately 12.1 million square feet, which includes 12 retail properties with a GLA of approximately 2.6 million square feet owned through the Company's ownership interest in one of its unconsolidated joint ventures, IAGM Retail Fund I, LLC ("IAGM"). The following table summarizes our multi-tenant retail platform as of June 30, 2019 and 2018.

	Total Multi-tenant Retail Platform				Wholly-Owned and Consolidated Retail Properties				IAGM Retail Properties
	2019		2018		2019		2018		2019		2018
No. of properties	71		78		59		64		12		14
GLA (square feet)	12,112,475		13,927,159		9,535,631		10,951,058		2,576,844		2,976,101
Economic occupancy (a)	94.3%		93.0%		94.5%		94.0%		93.4%		90.0%
ABR per square foot (b)	$17.82		$16.95		$17.92		$16.96		$17.43		$16.90

(a)	Economic occupancy is defined as the percentage of total GLA for which a tenant is obligated to pay rent under the terms of its lease agreement, regardless of the actual use or occupancy by that tenant of the area being leased. Actual use may be less than economic occupancy.

(b)

Annualized Base Rent ("ABR") is computed as revenue for the last month of the period multiplied by 12 months. ABR includes the effect of rent abatements, lease inducements, straight-line rent GAAP adjustments and ground rent income. ABR per square foot is computed as ABR divided by the total leased square footage at the end of the period. Specialty leasing represents leases of less than one year in duration for inline space and includes any term length for a common area space, and is excluded from the ABR and leased square footage figures when computing the ABR per square foot.

Multi-tenant retail platform summary by center type

Our retail properties consist of community and neighborhood centers and power centers.

•

Community and neighborhood centers are generally open-air and designed for tenants that offer a wide array of merchandise including groceries, apparel, other soft goods and convenience-oriented offerings. Our community centers contain large anchor stores and a significant presence of national retail tenants. Our neighborhood centers are generally smaller open-air centers with a grocery store anchor and/or drugstore, and other small service-type retailers.

•	Power centers are generally larger and consist of several anchors, such as discount department stores, off-price stores, specialty grocers, and warehouse clubs or stores that offer a large selection of merchandise. Typically, the number of specialty tenants is limited and most are national or regional in scope.

The following tables summarize our multi-tenant retail platform, by center type, as of June 30, 2019 and 2018.

Community and neighborhood centers
	Total Multi-tenant Retail Platform				Wholly-Owned and Consolidated Retail Properties				IAGM Retail Properties
	2019		2018		2019		2018		2019		2018
No. of properties	48		46		41		39		7		7
GLA (square feet)	6,108,028		5,423,196		4,615,010		4,156,500		1,493,018		1,266,696
Economic occupancy	95.3%		93.0%		95.1%		94.0%		95.9%		91.0%
ABR per square foot	$18.94		$19.04		$19.51		$19.16		$17.20		$18.61

Power centers
	Total Multi-tenant Retail Platform				Wholly-Owned and Consolidated Retail Properties				IAGM Retail Properties
	2019		2018		2019		2018		2019		2018
No. of properties	23		32		18		25		5		7
GLA (square feet)	6,004,447		8,503,963		4,920,621		6,794,558		1,083,826		1,709,405
Economic occupancy	93.3%		93.0%		94.0%		94.0%		89.8%		90.0%
ABR per square foot	$16.63		$15.59		$16.39		$15.60		$17.80		$15.53

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Multi-tenant retail platform by same-property

The following table summarizes the GLA, economic occupancy and ABR per square foot of the properties included in our multi-tenant retail platform classified as same-property for the three and six months ended June 30, 2019 and 2018. Properties classified as same-property have been owned for the entirety of both periods presented and exclude properties sold and/or acquired in 2019 and 2018.

	Same-property results for the three and six months ended June 30, 2019 and 2018
	Multi-tenant Retail Platform				Wholly-owned Retail Assets (a)				IAGM Retail Assets (b)
	2019		2018		2019		2018		2019		2018
No. of properties	64		64		52		52		12		12
GLA (square feet)	11,422,555		11,069,379		8,845,711		8,718,860		2,576,844		2,350,519
Economic occupancy	94.4%		93.5%		94.7%		94.3%		93.4%		90.4%
ABR per square foot	$17.33		$17.24		$17.30		$17.06		$17.43		$17.98

Market summary

The following table represents the geographical diversity of our multi-tenant retail platform as of June 30, 2019.

Region			No. of Properties		GLA (square feet)		% of Total GLA
East
	Maryland		1		125,018		1.0%
South Atlantic
	Florida		10		1,845,879		15.3%
	North Carolina		8		1,580,764		13.1%
	Georgia		9		995,538		8.2%
	Virginia		2		375,652		3.1%
	Alabama		1		207,568		1.7%
	Total South Atlantic		30		5,005,401		41.4%
Southwest
	Texas		29		5,261,985		43.4%
West
	California		7		1,046,633		8.6%
	Colorado		4		673,438		5.6%
	Total West		11		1,720,071		14.2%
	Grand total		71		12,112,475		100.0%

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Leasing activity

The following table represents the lease expirations of our economic occupied multi-tenant retail platform as of June 30, 2019.

Lease Expiration Year		No. of Expiring Leases		GLA of Expiring Leases		ABR of Expiring Leases				Percent of Total GLA		Percent of Total ABR		Expiring ABR per sq. ft.
2019		65		142,689		$	3,910			1.2%		1.9%		$	27.40
2020		216		840,366		17,037				7.3%		8.4%		20.27
2021		242		1,245,402		22,975				10.8%		11.4%		18.45
2022		250		1,537,514		28,785				13.3%		14.3%		18.72
2023		225		1,337,558		24,246				11.6%		12.0%		18.13
2024		185		1,789,864		28,563				15.6%		14.2%		15.96
2025		71		856,544		12,190				7.4%		6.0%		14.23
2026		78		350,812		8,454				3.0%		4.2%		24.10
2027		105		859,352		18,141				7.5%		9.0%		21.11
2028		87		607,033		11,106				5.3%		5.5%		18.30
Thereafter		115		1,634,744		25,051				14.2%		12.4%		15.32
Other (a)		241		327,738		1,330				2.8%		0.7%		4.06
		1,880		11,529,616		$	201,788			100.0%		100.0%		$	17.50

(a)

Other lease expirations include month-to-month and specialty leases. Specialty leasing represents leases of less than one year in duration for inline space and includes any term length for a common area space. Examples include retail holiday stores, storage, and short-term clothing and furniture consignment stores. Specialty leasing includes, but is not limited to, any term length for a common area space, such as tent sales, automated teller machines, cell towers, billboards, and vending.

We believe the percentage of leases expiring annually over the next five years may allow us to capture an appropriate portion of potential market rent increases while allowing us to manage any potential re-leasing risk. For purposes of preparing the table, we have not assumed that unexercised contractual lease renewal or extension options contained in our leases will, in fact, be exercised.

For the three and six months ended June 30, 2019, we have not experienced any tenant bankruptcies or receivable write-offs that materially impacted our results of operations. Our retail business is neither highly dependent on specific retailers nor subject to lease roll-over concentration. We believe this minimizes risk to our multi-tenant retail platform from significant revenue variances over time.

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The following table summarizes the leasing activity for leases that were executed during the six months ended June 30, 2019, compared with expiring or expired leases for the same or previous tenant for renewals and the same unit for new leases at the 71 retail properties in our multi-tenant retail platform. We had GLA totaling 1,211,689 square feet expiring during the six months ended June 30, 2019, of which 939,909 square feet was re-leased. This achieved a retention rate of approximately 77.5%.

	No. of Leases Executed as of June 30, 2019		GLA SF		New Contractual Rent ($PSF) (b)		Prior Contractual Rent ($PSF) (b)		% Change over Prior Contract Rent (b)		Weighted- Average Lease Term (Years)		Tenant Improve-ment Allowance ($PSF)		Lease Commissions ($PSF)
All Tenants
Comparable Renewal Leases (a)	69		511,472		$15.82		$15.02		5.3%		5.3		$0.88		$0.03
Comparable New Leases (a)	16		28,595		$35.24		$32.68		7.8%		7.8		$16.79		$13.86
Non-Comparable Renewal and New Leases	44		141,855		$21.38		N/A		N/A		7.1		$14.43		$6.50
Total	129		681,922		$16.85		$15.96		5.6%		5.8		$4.36		$1.95
Anchor Tenants (leases over 10,000 square feet)
Comparable Renewal Leases (a)	13		389,713		$11.95		$11.40		4.8%		5.3		$0.77		$—
Non-Comparable Renewal and New Leases	2		36,532		$4.72		N/A		N/A		6.7		$—		1.77
Total	15		426,245		$11.95		$11.40		4.8%		5.4		$0.70		$0.15
Non-anchor Tenants (leases under 10,000 square feet)
Comparable Renewal Leases (a)	56		121,759		$28.20		$26.62		5.9%		5.2		$1.22		$0.11
Comparable New Leases (a)	16		28,595		$35.24		$32.68		7.8%		7.8		$16.79		$13.86
Non-Comparable Renewal and New Leases	42		105,323		$27.16		N/A		N/A		7.2		$19.43		$8.15
Total	114		255,677		$29.54		$27.77		6.4%		6.3		$10.46		$4.96

(a)	Comparable leases are leases that meet all of the following criteria: terms greater than one year, unit was vacant one year or less prior to occupancy, square footage of unit remains unchanged or within 10% of prior unit square footage, and has a rent structure consistent with the previous tenant.

(b)	Non-comparable leases are not included in totals.

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Highlights for the Three Months Ended June 30, 2019

During the three months ended June 30, 2019, we continued to execute our strategy to enhance our multi-tenant retail platform with the acquisition of retail properties in our core markets and by exploring opportunities to dispose of retail properties not located in our core markets or where we believe the properties' values have been maximized.

Retail property acquisitions

Acquisition Date

Property

Metropolitan Statistical Area ("MSA")(a)

Center Type

Gross Acquisition Price

Square Feet

April 30, 2019

Scofield Crossing (b)

Austin-Round Rock, TX

Neighborhood Center

$

3,000

64,000

May 7, 2019

Tomball Town Center Kroger

Houston-The Woodlands-Sugar Land, TX

Community Center

13,992

74,000

June 14, 2019

Sandy Plains Outparcel (c)

Atlanta-Sandy Springs-Roswell, GA

Community Center

2,900

6,000

June 28, 2019

Shoppes at Fairview

Dallas-Fort Worth-Arlington, TX

Neighborhood Center

36,000

67,500

$

55,892

211,500

(a)	As defined by the United States Office of Management and Budget.

(b)	The building and tenant improvements were acquired subject to an existing ground lease at the property.

(c)	An adjacent outparcel to an existing property was acquired.

Retail property dispositions

Disposition Date

Property

MSA

Center Type

Gross Disposition Price

Square Feet

April 3, 2019

Brooks Corner

San Antonio - New Braunfels, TX

Power Center

$

26,300

173,000

May 31, 2019

Silverlake

Cincinnati-Middletown, OH-KY-IN

Neighborhood Center

6,650

101,000

$

32,950

274,000

Liquidation of Joint Venture Interest

On June 24, 2019, the Company liquidated all interests in Downtown Railyard Venture, LLC ("DRV"), a joint venture established for the purpose of developing and selling a land development in Sacramento, California in exchange for $30.0 million of cash consideration. During the year ended December 31, 2018, the Company recorded an other-than-temporary impairment of $29.9 million on DRV due to a reduction in the expected hold period, thereby reducing the investment to an estimated fair value that the Company believed would be most probable of realization if the investment was liquidated. As a result of the other-than-temporary impairment, the liquidation of interests resulted in no gain or loss being recognized on the transaction during the three months ended June 30, 2019. See "Note 6. Investment in Consolidated and Unconsolidated Entities" to the condensed consolidated financial statements.

University House Communities Group, Inc., Indemnity Claims

On June 14, 2019, UHC Acquisition Sub LLC ("UHC") and the Company, through various negotiations, reached a final settlement in the amount of $30.0 million for the indemnity claims made to the Company by UHC, which was paid by the Company during the three months ended June 30, 2019. During the three and six months ended June 30, 2019, the Company recognized additional losses, within discontinued operations, of $12.0 million and $25.5 million, respectively, related to these claims. See "Note 11. Commitments and Contingencies" to the condensed consolidated financial statements.

Current strategy and outlook

For InvenTrust, the right properties mean open-air grocery-anchored and certain necessity-based power centers, and the right markets mean those with above average growth in population, employment and wages. We believe these conditions create markets that are poised to experience increasing tenant demand for grocery-anchored and necessity-based retail centers, which will then position us to capitalize on potential future rent increases while enjoying sustained occupancy at our centers. Using

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these criteria, we have identified a number of core markets that meet this criteria, including: Atlanta, Austin, Charlotte, Dallas-Fort Worth-Arlington, Denver, Houston, the greater Los Angeles and San Diego areas, suburban Washington, D.C., Miami, Orlando, Raleigh-Durham, San Antonio and Tampa.

We have a coordinated program designed to increase rental income by maximizing re-development opportunities (which may have a mixed-use component) and identifying locations in our current multi-tenant retail platform where we can develop pad sites. We are continuing to work with our tenants to expand rentable square footage at select retail properties where demand warrants. In addition, because our properties are both retail centers and community focal points, we are able to identify short-term and specialty leasing opportunities that generate revenue from areas of the properties that are typically vacant.

Our grocery-anchored community and neighborhood centers bring consumers to our well-located properties, while our larger-format necessity-based power center retailers continue to adapt their business models to embrace omni-channel retail and appeal to consumers' continuing focus on value. Our property management team is focused on enhancing the consumers' shopping experiences at our centers by maintaining strong tenant relationships, controlling expenses, and investing in sustainability programs at a number of our retail properties with initiatives such as LED lighting, trash recycling, water conservation and other programs to reduce energy consumption and related costs.

In addition, our leasing staff continues to focus on leasing space at our retail properties at favorable rental rates while establishing a more favorable tenant mix and identifying complementary uses to maximize tenant performance. We believe our strong locations have allowed and will continue to allow us to backfill the vacancies created by such tenants.

We believe that the continuing refinement of our multi-tenant retail platform will position us for future success and put us in a position to evaluate and ultimately execute potential strategic transactions aimed at achieving liquidity for our stockholders in the long term. While we believe in our ability to execute our plan, the speed of its completion is uncertain and may be shortened or extended by external and macroeconomic factors including, among others, interest rate movements, local, regional, national and global economic performance, competitive factors, the impact of e-commerce on the retail industry, future retailer store closings, retailer bankruptcies, and government policy changes.

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Results of Operations

Comparison of results for the three and six months ended June 30, 2019 and 2018

The following section describes and compares our consolidated results of operations for the three and six months ended June 30, 2019 and 2018. We generate substantially all of our net income from property operations. All dollar amounts shown in the following tables are stated in thousands unless otherwise noted.

	Three months ended June 30												Six months ended June 30
	2019				2018				Increase (Decrease)				2019				2018				Increase (Decrease)
Income
Lease income, net	$	55,509			$	60,034			$	(4,525	)		$	110,544			$	122,373			$	(11,829	)
Other property income	821				532				289				1,272				951				321
Other fee income	860				924				(64		)		1,765				2,000				(235		)
Total income	57,190				61,490				(4,300		)		113,581				125,324				(11,743		)
Operating expenses
Depreciation and amortization	24,692				23,254				1,438				47,554				48,084				(530		)
Property operating expenses	7,035				8,463				(1,428		)		14,509				17,648				(3,139		)
Real estate taxes	8,958				9,671				(713		)		18,009				19,030				(1,021		)
General and administrative expenses	8,886				8,720				166				17,409				16,989				420
Total operating expenses	49,571				50,108				(537		)		97,481				101,751				(4,270		)
Other (expense) income
Interest, dividend and other income	656				953				(297		)		1,310				1,643				(333		)
Interest expense, net	(5,627		)		(6,451		)		(824		)		(11,105		)		(13,093		)		(1,988		)
(Loss) gain on extinguishment of debt, net	(809		)		(55		)		(754		)		(809		)		10,697				(11,506		)
Provision for asset impairment	—				—				—				—				(797		)		797
Gain on sale and transfer of investment properties, net	5,662				17,960				(12,298		)		5,662				38,265				(32,603		)
Equity in losses of unconsolidated entities	(1,079		)		(711		)		(368		)		(620		)		(2,752		)		2,132
Realized and unrealized investment gains	—				236				(236		)		—				223				(223		)
Total other (expense) income	(1,197		)		11,932				(14,777		)		(5,562		)		34,186				(43,724		)
Income before income taxes	6,422				23,314				(16,892		)		10,538				57,759				(47,221		)
Income tax expense	(144		)		(151		)		7				(259		)		(364		)		105
Net income from continuing operations	6,278				23,163				(16,885		)		10,279				57,395				(47,116		)
Net loss from discontinued operations	(12,000		)		—				(12,000		)		(25,500		)		—				(25,500		)
Net (loss) income	$	(5,722	)		$	23,163			$	(28,885	)		$	(15,221	)		$	57,395			$	(72,616	)

Lease income, net

Lease income, net, consists of basic monthly rent, amortization of acquired above and below-market leases, amortization of lease inducements, straight-line rent adjustments, percentage of sales rental income recorded pursuant to tenant leases, contractual reimbursements for real estate taxes, common area maintenance costs, tax and insurance costs, late charges, termination fee income, and estimated credit losses resulting from changes in the collectability of operating lease receivables.

Lease income, net, for the three and six months ended June 30, 2019, decreased by $4.5 million and $11.8 million, respectively, when compared to the same periods in 2018, primarily as a result of $10.1 million and $22.0 million, respectively, of reductions relating to the disposition of 16 retail properties and transfer of two retail properties since January 1, 2018. These reductions were partially offset by increases of $4.4 million and $8.4 million, respectively, relating to the acquisition of seven retail properties, and $1.2 million and $1.8 million, respectively, from 52 retail properties classified as same-property since January 1, 2018. These same property increases were primarily attributable to increases in base rent of $0.6 million and $1.4 million, respectively.

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Depreciation and amortization

Depreciation and amortization for the three months ended June 30, 2019 increased by $1.4 million when compared to the same period in 2018 primarily as a result of accelerated depreciation on certain tenant specific improvements at retail properties classified as same-property. These tenants vacated prior to lease expiration.

Depreciation and amortization for the six months ended June 30, 2019 decreased by $0.5 million when compared to the same period in 2018 which reflects $6.6 million of reductions relating to the disposition of 16 retail properties and transfer of two retail properties since January 1, 2018. These reductions were substantially offset by increases of $5.1 million relating to the acquisition of seven retail properties and $1.0 million relating to 52 retail properties classified as same-property since January 1, 2018, which was primarily related to the accelerated depreciation on certain tenant specific improvements at retail properties classified as same-property. These tenants vacated prior to lease expiration.

Property operating expenses

Property operating expenses consist of recurring repair and maintenance, utilities, and insurance (most of which are recoverable from the tenants).

Property operating expenses for the three and six months ended June 30, 2019 decreased by $1.4 million and $3.1 million, respectively, when compared to the same periods in 2018 primarily as a result of $1.9 million and $3.9 million, respectively, of reductions relating to the disposition of 16 retail properties and transfer of two retail properties since January 1, 2018. These reductions were partially offset by increases of $0.5 million and $0.8 million, respectively, relating to the acquisition of seven retail properties since January 1, 2018.

Real estate taxes

Real estate taxes for the three and six months ended June 30, 2019 decreased by $0.7 million and $1.0 million, respectively, when compared to the same periods in 2018 primarily as a result of $1.4 million and $2.5 million, respectively, of reductions relating to the disposition of 16 retail properties and transfer of two retail properties since January 1, 2018. These reductions were partially offset by increases of $0.7 million and $1.5 million, respectively, relating to the acquisition of seven retail properties since January 1, 2018.

Interest expense, net

Interest expense, net, for the three and six months ended June 30, 2019 decreased by $0.8 million and $2.0 million, respectively, when compared to the same periods in 2018 primarily as a result of $0.9 million and $2.1 million, respectively, of reductions relating to the disposition of three retail properties since January 1, 2018, and the surrender of Stonecrest Marketplace and Bellerive Plaza to the lenders in satisfaction of non-recourse debt in 2018. Additionally, interest expense, net, for the three and six months ended June 30, 2019 was further reduced $0.6 million and $1.3 million, respectively, as a result of the pay-off of mortgages at two retail properties in 2018 and increased by $0.7 million and $1.4 million, respectively, due to higher outstanding balances on the corporate term loans subsequent to June 30, 2018.

Loss (gain) on extinguishment of debt, net

During the three and six months ended June 30, 2019, the Company recognized a loss on extinguishment of debt of $0.8 million related to the loan payoff on one retail property, comprising a $0.7 million prepayment penalty and $0.1 million of loan fee write-offs.

During the six months ended June 30, 2018, the Company recognized a gain on extinguishment of debt of $10.8 million related to the surrender of Stonecrest Marketplace.

Gain on sale and transfer of investment properties, net

During the three and six months ended June 30, 2019, the Company recognized a gain of $5.6 million related to the sale of two retail properties.

During the three months ended June 30, 2018, the Company recognized a gain of $18.0 million related to the sale of four retail properties and a loss on transfer of assets of $0.02 million related to the surrender of Bellerive Plaza in satisfaction of non-recourse debt. During the six months ended June 30, 2018, the Company recognized a gain of $36.3 million related to the sale of seven retail properties and a gain on transfer of assets, net, of $1.8 million, related to the surrender of Stonecrest Marketplace and Bellerive Plaza to the lender in satisfaction of non-recourse debt, and a gain on sale of $0.2 million related to the completion of a partial condemnation at one retail property.

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Equity in losses of unconsolidated entities

Equity in losses of unconsolidated entities for the three months ended June 30, 2019 increased by $0.4 million when compared to the same period in 2018, primarily attributable to lower net income recognized from IAGM. IAGM's decrease in net income was a result of the recognition of asset impairment of $1.4 million on one retail property during the three months ended June 30, 2019.

Equity in losses of unconsolidated entities for the six months ended June 30, 2019 decreased by $2.1 million when compared to the same period in 2018, primarily attributable to the recognition of asset impairment of $0.7 million and a loss on sale of $3.9 million related to the disposition of Bryant Square on February 28, 2018.

Net loss from discontinued operations

During the three and six months ended June 30, 2019, the Company incurred increased costs of $12.0 million and $25.5 million, respectively, from loss contingencies relating to indemnity claims from the sale of our discontinued operation, University House Communities Group, Inc., which was sold in June 2016.

Net Operating Income

We evaluate the performance of our wholly-owned and consolidated retail properties based on modified NOI. Modified NOI reflects the income from operations excluding lease termination income and GAAP rent adjustments (such as straight-line rent and above/below market lease amortization). We believe modified NOI, same-property modified NOI, and modified NOI from other investment properties, each of which are supplemental non-GAAP financial measures, provide added comparability across periods when evaluating the financial condition and operating performance that is not readily apparent from "Operating income" or "Net income" in accordance with GAAP.

Comparison of same-property results for the three and six months ended June 30, 2019 and 2018

A total of 52 wholly-owned retail properties met our same-property criteria for the three months ended June 30, 2019 and 2018. Modified NOI from other investment properties in the table below for the three and six months ended June 30, 2019 and 2018 includes retail properties that did not meet our same-property criteria, including retail properties sold and/or acquired in 2019 and 2018. The following table represents the reconciliation of net income, the most directly comparable GAAP measure, to modified NOI and same-property modified NOI for the three and six months ended June 30, 2019 and 2018:

	Three months ended June 30								Six months ended June 30
	2019				2018				2019				2018
Net (loss) income	$	(5,722	)		$	23,163			$	(15,221	)		$	57,395
Adjustments to reconcile to non-GAAP metrics:
Net loss from discontinued operations	12,000				—				25,500				—
Income tax expense	144				151				259				364
Realized and unrealized investment losses	—				(236		)		—				(223		)
Equity in losses of unconsolidated entities	1,079				711				620				2,752
Interest expense, net	5,627				6,451				11,105				13,093
Loss (gain) on extinguishment of debt	809				55				809				(10,697		)
Gain on sale and transfer of investment properties, net	(5,662		)		(17,960		)		(5,662		)		(38,265		)
Interest, dividend and other income	(656		)		(953		)		(1,310		)		(1,643		)
Provision for asset impairment	—				—				—				797
Depreciation and amortization	24,692				23,254				47,554				48,084
General and administrative expenses	8,886				8,720				17,409				16,989
Other fee income	(860		)		(924		)		(1,765		)		(2,000		)
Adjustments to modified NOI (a)	(2,721		)		(2,375		)		(5,532		)		(5,051		)
Modified NOI	37,616				40,057				73,766				81,595
Modified NOI from other investment properties	(3,677		)		(7,774		)		(7,029		)		(17,570		)
Same-property modified NOI	$	33,939			$	32,283			$	66,737			$	64,025

(a)	Adjustments to modified NOI include termination fee income and GAAP rent adjustments (such as straight-line rent and above/below-market lease amortization).

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Comparison of the components of same-property modified NOI for the three and six months ended June 30, 2019 and 2018

	Three months ended June 30															Six months ended June 30
	2019				2018				Change				Var.			2019				2018				Change				Var.
Lease income, net	$	47,968			$	46,735			$	1,233			2.6	%		$	95,371			$	93,520			$	1,851			2.0	%
Other property income	816				490				326				66.5	%		1,271				873				398				45.6	%
	48,784				47,225				1,559				3.3	%		96,642				94,393				2,249				2.4	%
Property operating expenses	6,642				6,759				(117		)		(1.7	)%		13,474				14,199				(725		)		(5.1	)%
Real estate taxes	8,203				8,183				20				0.2	%		16,431				16,169				262				1.6	%
	14,845				14,942				(97		)		(0.6	)%		29,905				30,368				(463		)		(1.5	)%
Same-property modified NOI	$	33,939			$	32,283			$	1,656			5.1	%		$	66,737			$	64,025			$	2,712			4.2	%

Same-property modified NOI increased by $1.7 million, or 5.1%, when comparing the three months ended June 30, 2019 to the same period in 2018. Approximately $1.0 million is attributable to base rent increases resulting from the Company leasing previously unoccupied space and achieving more favorable rental terms with tenants. The remaining increase of $0.7 million is the result of a $0.4 million increase in other property income and a $0.3 million increase in net recoveries. Included in the $1.7 million increase in same-property modified NOI is $0.3 million of modified NOI related to expansions at our retail properties, which reflects a base rent increase of $0.3 million and a net recoveries decrease of $0.02 million.

Same-property modified NOI increased by $2.7 million, or 4.2%, when comparing the six months ended June 30, 2019, to the same period in 2018. Approximately $1.9 million is attributable to base rent increases resulting from the Company leasing previously unoccupied space and achieving more favorable rental terms with tenants. The remaining increase of $0.8 million is the result of a $0.5 million increase in other property income and a $0.3 million increase in net recoveries. Included in the $2.7 million increase in same-property modified NOI is $0.62 million of modified NOI related to expansions at our retail properties, which reflects a base rent increase of $0.70 million and a net recoveries decrease of $0.08 million.

Funds From Operations Attributable to Common Shareholders

The National Association of Real Estate Investment Trusts ("NAREIT"), an industry trade group, has promulgated a standard known as Funds From Operations (FFO). Our FFO, based on the NAREIT definition, is net income (loss) in accordance with GAAP excluding gains (or losses) resulting from dispositions of properties, plus depreciation and amortization and impairment charges on depreciable real property, after adjustments for unconsolidated partnerships and joint ventures in which we hold an interest. We have adopted the NAREIT definition in our calculation of FFO Applicable to Common Shares because management considers FFO a widely accepted and appropriate non-GAAP measure of performance for REITs.

In calculating FFO, impairment charges of depreciable real estate assets are added back even though the impairment charge may represent a permanent decline in value due to the decreased operating performance of the applicable property. Furthermore, because gains and losses from sales of property are excluded from FFO, it is consistent and appropriate that impairments, which are often early recognition of losses on prospective sales of property, also be excluded. If evidence exists that a loss reflected in the investment of an unconsolidated entity is due to the impairment of depreciable real estate assets, our share of these impairments is added back to net income in the determination of FFO.

Modified Funds From Operations ("Modified FFO") is an additional financial measure used by the Company because FFO includes certain non-comparable items that affect our performance over time. We define Modified FFO as FFO Applicable to Common Shares excluding the impact of discrete non-operating transactions and other events, which we do not deem representative of the comparable operating results of our multi-tenant retail platform.

We believe FFO Applicable to Common Shares provides a performance measure that, when compared year over year, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, acquisition and development activities, and financing costs. This provides a perspective of our financial performance that is not immediately apparent from net income determined in accordance with GAAP. We believe that Modified FFO extends that perspective and is helpful in assisting management and investors in assessing of the sustainability of operating performance in future periods by excluding items that may cause short-term fluctuations in net income but have no impact on cash flows.

FFO and Modified FFO are neither intended to be a substitute to "net income" nor a substitute for "cash flows from operating activities" as determined by GAAP. Other REITs may use alternative methodologies for calculating similarly titled measures, which may not be comparable to the Company's calculation of FFO Applicable to Common Shares or Modified FFO Applicable to Common Shares.

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NAREIT FFO Applicable to Common Shares and Modified FFO Applicable to Common Shares is calculated as follows:

	Three months ended June 30								Six months ended June 30
	2019				2018				2019				2018
Net (loss) income	$	(5,722	)		$	23,163			$	(15,221	)		$	57,395
Depreciation and amortization related to investment properties	23,834				22,466				45,888				45,808
Our share of depreciation and amortization of unconsolidated entities	3,119				3,092				6,021				6,202
Provision for asset impairment	—				—				—				797
Our share of provision for asset impairment recognized in equity in losses of unconsolidated entities	793				878				793				1,248
Gain on sale and transfer of investment properties, net	(5,662		)		(17,960		)		(5,662		)		(38,265		)
Our share of losses from property dispositions recognized in equity in losses of unconsolidated entities	307				—				307				2,148
FFO Applicable to Common Shares	$	16,669			$	31,639			$	32,126			$	75,333
Realized and unrealized investment losses	—				(236		)		—				(223		)
Loss (gain) on extinguishment of debt, net	809				55				809				(10,697		)
Amortization of mark to market debt, (premium) and discount, net	(50		)		(51		)		(101		)		(101		)
Amortization of above and (below)-market leases and inducements, net	(1,326		)		(1,246		)		(2,917		)		(2,748		)
Amortization of operating lease ROU assets	134				—				271				—
Depreciation and amortization of corporate assets	858				788				1,666				2,276
Straight-line rent adjustment, net	(661		)		(1,130		)		(1,787		)		(2,243		)
Our share of straight-line rent adjustment, net, recognized in equity in losses of unconsolidated entities	33				(139		)		(4		)		(299		)
Stock-based compensation expense, net	1,320				1,216				2,165				2,084
Provision for indemnification claims in discontinued operations	12,000				—				25,500				—
Modified FFO Applicable to Common Shares	$	29,786			$	30,896			$	57,728			$	63,382

Liquidity and Capital Resources

Capital Expenditures and Re-development Activity

The following table summarizes capital resources used through development, re-development and leasing activities at the Company’s retail properties owned during the three and six months ended June 30, 2019. These costs are classified as cash used in capital expenditures and tenant improvements on the condensed consolidated statements of cash flows for the six months ended June 30, 2019.

	Development				Re-development				Leasing				Total
Direct costs	$	2,230		(a)	$	7,242		(a)	$	2,912		(c)	$	12,384
Indirect costs	488			(b)	777			(b)	—				1,265
Total	$	2,718			$	8,019			$	2,912			$	13,649

(a)	Direct development and re-development costs relate to construction of buildings at our retail properties.

(b)	Indirect development and re-development costs relate to the capitalized interest, real estate taxes, insurance, and payroll attributed to improvements at our retail properties.

(c)	Direct leasing costs relate to improvements to a tenant space that are either paid directly or reimbursed to the tenants.

Short-term Liquidity and Capital Resources

On a short-term basis, our principal demands for funds are to pay our operating, corporate, and transaction readiness expenses, as well as to pay property capital expenditures, to make distributions to our stockholders, and to pay interest and principal on our indebtedness. We expect to meet our short-term liquidity requirements from cash flows from operations, distributions from our joint venture investments, sales of our retail properties and available capacity on our unsecured term loans and revolving credit agreements.

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Long-term Liquidity and Capital Resources

Our objectives are to maximize revenue generated by our multi-tenant retail platform, to further enhance the value of our retail properties to produce attractive current yield and long-term returns for our stockholders, and to generate sustainable and predictable cash flow from our operations to distribute to our stockholders. We are seeking to increase our operating cash flows over time through the execution of our strategy.

Our board of directors (the "Board") approved an increase to our annual distribution rate effective for the quarterly distribution paid in April 2019. As we execute our retail strategy, the Board has evaluated and will continue to evaluate our distribution rate and, if the Board deems appropriate, adjust the rate to take into account our progress in refining and balancing our multi-tenant retail platform.

Our primary sources and uses of capital are as follows:

Sources

•	Operating cash flows from our real estate investments, which consists of our retail properties;

•	Distributions from our joint venture investments;

•	Proceeds from sales of properties;

•	Proceeds from mortgage loan borrowings on properties;

•	Proceeds from corporate borrowings; and

•	Cash and cash equivalents.

Uses

•	To pay our operating expenses;

•	To make distributions to our stockholders;

•	To service or pay down our debt;

•	To fund capital expenditures and leasing related costs;

•	To invest in properties and portfolios of properties;

•	To fund development, re-development, or leasing investments; and

•	To repurchase our common stock.

We may, from time to time, seek to retire or purchase additional amounts of our outstanding equity through cash purchases or exchanges for other securities. Such purchases or exchanges, if any, will depend on our liquidity requirements, contractual restrictions, and other factors. The amounts involved may be material.

Distributions

During the six months ended June 30, 2019, we declared cash distributions to our stockholders totaling $26.8 million and paid cash distributions of $26.4 million. As we execute on our retail strategy, the Board has and expects to continue to evaluate our distribution rate on a periodic basis. See "Current Strategy and Outlook" for more information regarding our retail strategy.

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Borrowings

Mortgages Payable, Maturities

The following table shows the scheduled maturities for the Company's mortgages payable as of June 30, 2019, for the remainder of 2019, each of the next four years, and thereafter.

	Maturities during the year ending December 31,
	2019				2020				2021				2022				2023				Thereafter				Total
Mortgages payable	$	—			$	41,000			$	—			$	50,270			$	41,339			$	67,880			$	200,489

Credit Agreements, Maturities

The following table shows the Company's outstanding borrowings under its unsecured term loans as of June 30, 2019:

	Principal Balance				Interest Rate		Maturity Date
$250.0 million 5 year - swapped to fixed rate	$	90,000			2.5510% (a)		December 21, 2023
$250.0 million 5 year - swapped to fixed rate	60,000				2.5525% (a)		December 21, 2023
$250.0 million 5 year - variable-rate	50,000				3.6400% (b)		December 21, 2023
$250.0 million 5 year - variable-rate	26,000				3.6400% (b)		December 21, 2023
$150.0 million 5.5 year - variable-rate	100,000				3.6400% (b)		June 21, 2024
$150.0 million 5.5 year - variable-rate	26,000				3.6400% (b)		June 21, 2024
Total unsecured term loans	$	352,000

(a)

The Company swapped $90,000 (notional amount of $90,000) and $60,000 (notional amount of $60,000) of variable-rate debt at an interest rate of 1-Month LIBOR plus 1.20% to a fixed rate of 2.5510% and 2.5525%, respectively. The swaps have an effective date of December 10, 2015, and a termination date of December 1, 2019. As a result, all net deferred amounts in accumulated comprehensive income will be reclassified into earnings during 2019.

(b)	Interest rate reflects 1-Month LIBOR plus 1.20% effective March 1, 2019.

Summary of Cash Flows

	Six months ended June 30								Change
	2019				2018
Cash provided by operating activities	$	52,957			$	65,272			$	(12,315	)
Cash (used in) provided by investing activities	(124,030		)		22,779				(146,809		)
Cash used in financing activities	(41,071		)		(46,386		)		5,315
(Decrease) increase in cash, cash equivalents, and restricted cash	(112,144		)		41,665				(153,809		)
Cash, cash equivalents, and restricted cash at beginning of period	264,853				171,878				92,975
Cash, cash equivalents, and restricted cash at end of period	$	152,709			$	213,543			$	(60,834	)

Operating Activities

Cash provided by operating activities of $53.0 million and $65.3 million for the six months ended June 30, 2019 and 2018, respectively, was generated primarily from operating income from property operations and operating distributions from unconsolidated entities. Cash provided by operating activities decreased $12.3 million when comparing the six months ended June 30, 2019 with the same period in 2018 primarily as a result of general fluctuations in working capital and the disposal of 18 properties since January 1, 2018, which was partially offset by the acquisition of seven properties since January 1, 2018.

Investing Activities

Cash used in investing activities of $124.0 million for the six months ended June 30, 2019, was primarily attributed to cash used in the acquisition of three investment properties, one building, and two single tenant properties of $140.5 million, cash used for capital expenditures and tenant improvements of $10.0 million, investment in development projects of $3.7 million, lease commissions and other leasing costs of $1.6 million, and cash used to settle the UHC claims for $30.0 million as described in "Note 11. Commitments and Contingencies" of the condensed consolidated financial statements. These were partially offset by the proceeds from sale and transfer of two retail properties of $31.8 million, and proceeds from sale of an unconsolidated entity of $30.0 million.

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Cash provided by investing activities of $22.8 million for the six months ended June 30, 2018, was primarily a result of proceeds from the sale of investment properties of $186.8 million related to the disposal of three retail properties. These proceeds were partially offset by cash used for acquisitions of $151.8 million, capital expenditures and tenant improvements of $9.4 million and lease commissions and other leasing costs of $3.5 million.

Financing Activities

Cash used in financing activities of $41.1 million for the six months ended June 30, 2019, was primarily attributed to cash used to pay distributions of $26.4 million, pay-offs of debt of $12.5 million, debt prepayment penalties of $0.8 million, principal payments of mortgage debt of $0.9 million, payment of finance lease liabilities of $0.2 million, and $0.3 million net cash outflow from other financing activities.

Cash used in financing activities of $46.4 million for the six months ended June 30, 2018, was primarily attributed to cash used to pay distributions of $27.3 million, pay-offs of debt of $16.1 million, debt prepayment penalties of $1.6 million, principal payments of mortgage debt of $0.9 million, and $0.4 million net cash outflow from other financing activities.

We consider all demand deposits, money market accounts and investments in certificates of deposit and repurchase agreements with a maturity of three months or less, at the date of purchase, to be cash equivalents. We maintain our cash and cash equivalents at major financial institutions. The combined account balances at one or more institutions generally exceed the Federal Depository Insurance Corporation ("FDIC") insurance coverage. The Company periodically assesses the credit risk associated with these financial institutions. As a result, there is what we believe to be insignificant credit risk related to amounts on deposit in excess of FDIC insurance coverage.

Off-Balance Sheet Arrangements

We do not have material off-balance sheet arrangements.

Contractual Obligations

We have obligations related to our mortgage loans, unsecured term loans, and revolving credit facility as described in "Note 7. Debt" in the condensed consolidated financial statements. The unconsolidated entities in which we have an investment have third-party mortgage debt of $258.8 million as of June 30, 2019, as described in "Note 6. Investment in Consolidated and Unconsolidated Entities" in the condensed consolidated financial statements. It is anticipated that our unconsolidated entities will be able to repay or refinance all of their debt on a timely basis.

The following table presents, on a consolidated basis, obligations and commitments to make future payments under debt obligations and lease agreements. It excludes third-party debt associated with our unconsolidated entities and debt premiums and discounts that are not future cash obligations as of June 30, 2019.

	Payments due by year ending December 31,
	2019				2020				2021				2022				2023				Thereafter				Total
Long-term debt:
Fixed rate debt, principal (a)	$	—			$	41,000			$	—			$	50,270			$	191,339			$	67,880			$	350,489
Variable-rate debt, principal	—				—				—				—				76,000				126,000				202,000
Interest	10,260				16,954				16,168				14,855				13,532				5,515				77,284
Total long-term debt	10,260				57,954				16,168				65,125				280,871				199,395				629,773
Operating lease obligations (b)	301				587				471				443				455				470				2,727
Finance lease obligations (c)	300				532				518				317				40				—				1,707
Grand total	$	10,861			$	59,073			$	17,157			$	65,885			$	281,366			$	199,865			$	634,207

(a)	Includes $150.0 million of variable-rate unsecured term loans that have been swapped to a fixed rate as of June 30, 2019.

(b)	Includes leases on corporate office spaces used in our business.

(c)	Includes contracts for property improvements that have been deemed to contain finance leases.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are subject to market risk associated with changes in interest rates both in terms of variable-rate debt and the price of new fixed-rate debt upon maturity of existing debt and for acquisitions.

Interest Rate Risk

Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. As of June 30, 2019, our debt included outstanding variable-rate term loans of $352.0 million, of which $150.0 million have been swapped to a fixed rate. If market rates of interest on all variable-rate debt as of June 30, 2019 permanently increased and decreased by 1%, the annual increase and decrease in interest expense on the variable-rate debt and future earnings and cash flows would be approximately $2.0 million.

With regard to our variable-rate financing, we assess interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities. We maintain risk management control systems to monitor interest rate cash flow risk attributable to both outstanding or forecasted debt obligations as well as our potential offsetting hedge positions. The risk management control systems involve the use of analytical techniques, including cash flow sensitivity analysis, to estimate the expected impact of changes in interest rates on our future cash flows. We continue to assess retaining cash flows that may assist us in maintaining a flexible low debt balance sheet and managing the impact of upcoming debt maturities.

We monitor interest rate risk using a variety of techniques, including periodically evaluating fixed interest rate quotes on all variable-rate debt and the costs associated with converting the debt to fixed-rate debt. In addition, existing fixed and variable-rate loans that are scheduled to mature within the next two years are evaluated for possible early refinancing and/or extension due to consideration given to current interest rates. Refer to our Borrowings table in Item 2 of this Quarterly Report for debt principal amounts and expected maturities by year to evaluate the expected cash flows and sensitivity to interest rate changes.

We may use financial instruments to hedge exposures to changes in interest rates on loans. To the extent we do, we are exposed to credit risk and market risk. Credit risk is the risk of failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes us, which creates a credit risk for us. When the fair value of a derivative contract is negative, we owe the counterparty and, therefore, it does not pose credit risk. We seek to minimize the credit risk in derivative instruments by entering into transactions with what we believe are high-quality counterparties. Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates.

In July 2017, the Financial Conduct Authority (the authority that regulates LIBOR) announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. The Alternative Reference Rates Committee ("AARC") has proposed that the Secured Overnight Financing Rate ("SOFR") is the rate that best represents the alternative to USD-LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR. The ARRC has proposed a paced market transition plan to SOFR from USD-LIBOR and organizations are currently working on industry wide and company specific transition plans as it relates to derivatives and cash markets exposed to USD-LIBOR. Our unsecured line of credit and term loans are indexed to USD-LIBOR. However, as our amended and restated line of credit and term loan agreements have provisions that allow for a transition to a new alternative rate, we believe that the transition from USD-LIBOR to SOFR will not have a material impact on our condensed consolidated financial statements.

As of June 30, 2019, we had two interest rate swaps. The following table summarizes those interest rate swap contracts:

Variable-Rate Debt Swapped to Fixed Rate		Effective Date		Termination Date		Bank Pays Variable Rate of		InvenTrust Pays Fixed Rate of		Notional Amount as of March 31, 2019				Fair Value as of
														June 30, 2019				December 31, 2018
5 year - fixed portion		12/10/2015		12/1/2019		1-Month LIBOR		1.3510%		$	90,000			$	279			$	983
5 year - fixed portion		12/10/2015		12/1/2019		1-Month LIBOR		1.3525%		60,000				183				654
Total 5 year, fixed portion										$	150,000			$	462			$	1,637

The gains or losses resulting from marking-to-market our derivatives each reporting period are recognized as an increase or decrease in other comprehensive income on our condensed consolidated statements of operations and comprehensive (loss) income.

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Item 4. Controls and Procedures

Disclosure Controls and Procedures

As required by Rule 13a-15(b) and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), our management, including our principal executive officer and our principal financial officer, evaluated, as of June 30, 2019, the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and Rule 15d-15(e) of the Exchange Act. Based on that evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures, as of June 30, 2019, were effective at a reasonable assurance level for the purpose of ensuring that the information we are required to disclose in this Quarterly Report is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Exchange Act; and is accumulated and communicated to management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

There were no changes to our internal control over financial reporting during the quarter ended June 30, 2019, that materially affected our internal control over financial reporting or are reasonably likely to materially affect it.

Part II - Other Information

Item 1. Legal Proceedings

We are subject, from time to time, to various legal proceedings and claims that arise in the ordinary course of business. While the resolution of these matters cannot be predicted with certainty, we believe, based on currently available information, that the final outcome of such matters will not have a material adverse effect on our financial condition, results of operations, or liquidity.

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in response to Item 1A. to Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

EXHIBIT NO.	DESCRIPTION
2.1	Master Modification Agreement, dated as of March 12, 2014, by and among Inland American Real Estate Trust, Inc., Inland American Business Manager & Advisor, Inc., Inland American Lodging Corporation, Inland American Holdco Management LLC, Inland American Retail Management LLC, Inland American Office Management LLC, Inland American Industrial Management LLC and Eagle I Financial Corp. (incorporated by reference to Exhibit 2.1 to the Registrant’s Form 8-K, as filed by the Registrant with the SEC on March 13, 2014)
2.2	Asset Acquisition Agreement, dated as of March 12, 2014, by and among Inland American Real Estate Trust, Inc., Inland American Holdco Management LLC, Inland American Retail Management LLC, Inland American Office Management LLC, Inland American Industrial Management LLC and Eagle I Financial Corp. (incorporated by reference to Exhibit 2.2 to the Registrant’s Form 8-K, as filed by the Registrant with the SEC on March 13, 2014)
2.3	Separation and Distribution Agreement by and between Inland American Real Estate Trust, Inc. and Xenia Hotels & Resorts, Inc., dated as of January 20, 2015 (incorporated by reference to Exhibit 2.1 to the Registrant’s Form 8-K, as filed by the Registrant with the SEC on January 23, 2015)
2.4	Separation and Distribution Agreement by and between InvenTrust Properties Corp. and Highlands REIT, Inc., dated as of April 14, 2016 (incorporated by reference to Exhibit 2.1 to the Registrant’s Form 8-K, as filed by the Registrant with the SEC on April 14, 2016)
2.5	Stock Purchase Agreement by and among InvenTrust Properties Corp., University House Communities Group, Inc. and UHC Acquisition Sub LLC, dated as of January 3, 2016 (incorporated by reference to Exhibit 2.1 to the Registrant's Form 10-Q, as filed by the Registrant on May 10, 2016)
2.6	Amendment No. 1 to Stock Purchase Agreement, dated as of May 30, 2016, by and among InvenTrust Properties Corp., University House Communities Group, Inc. and UHC Acquisition Sub LLC (incorporated by reference to Exhibit 2.2 to the Registrant's Form 8-K, as filed by the Registrant on June 27, 2016)
2.7	Amendment No. 2 to Stock Purchase Agreement, dated as of June 20, 2016, by and among InvenTrust Properties Corp., University House Communities Group, Inc. and UHC Acquisition Sub LLC (incorporated by reference to Exhibit 2.3 to the Registrant's Form 8-K, as filed by the Registrant on June 27, 2016)
3.1	Seventh Articles of Amendment and Restatement of InvenTrust Properties Corp., as amended (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 10-Q, as filed by the Registrant with the SEC on May 14, 2015)
3.2	Second Amended and Restated Bylaws of the Company, dated as of November 9, 2017
10.1	Form of Performance Based Restricted Stock Unit Agreement , as filed by the Registrant with the SEC on May 14, 2019
10.2*	Employment Offer Letter, dated as of June 20, 2019, by and between InvenTrust Properties Corp. and Daniel J. Busch
31.1*	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following financial information from our Quarterly Report on Form 10-Q for the period ended June 30, 2019, filed with the SEC on August 8, 2019, is formatted in Extensible Business Reporting Language ("XBRL"): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income, (iii) Condensed Consolidated Statements of Equity, (iv) Condensed Consolidated Statements of Cash Flows (v) Notes to Condensed Consolidated Financial Statements (tagged as blocks of text).
	* Filed as part of this Quarterly Report on Form 10-Q

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

InvenTrust Properties Corp.

Date:	August 8, 2019
By:	/s/ Thomas P. McGuinness
Name:	Thomas P. McGuinness
Title:	President and Chief Executive Officer (Principal Executive Officer)
Date:	August 8, 2019
By:	/s/ Adam M. Jaworski
Name:	Adam M. Jaworski
Title:	Senior Vice President, Chief Accounting Officer and Interim Treasurer (Principal Accounting Officer and Interim Principal Financial Officer)

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