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Jul 25, 2018

Retail Opportunity Investments Corp. Reports 2018 Second Quarter Results

SAN DIEGO, July 25, 2018 (GLOBE NEWSWIRE) -- Retail Opportunity Investments Corp. (NASDAQ:ROIC) announced today financial and operating results for the three and six months ended June 30, 2018.

HIGHLIGHTS

  • $7.3 million of net income attributable to common stockholders ($0.06 per diluted share)
  • $33.4 million of Funds From Operations(1) ($0.27 per diluted share)
  • 97.5% portfolio lease rate at June 30, 2018
  • 20.4% increase in same-space comparative cash rents on new leases (7.6% on renewals)
  • 2.8% increase in same-center cash net operating income (2Q’18 vs. 2Q’17)
  • $15.7 million grocery-anchored shopping center acquired
  • $0.1950 per share quarterly cash dividend paid

__________________________

(1) A reconciliation of GAAP net income to Funds From Operations (FFO) is provided at the end of this press release.

Stuart A. Tanz, President and Chief Executive Officer of Retail Opportunity Investments Corp. stated, “During the second quarter, demand for space across our portfolio continued to be strong, coming from a broad range of necessity-based retailers.  We continued to maintain our portfolio at over 97% leased, ending the second quarter specifically at a strong, 97.5%.  Additionally, for the 26th consecutive quarter, we achieved growth in our key same-center and same-space comparative operating metrics.  During the second quarter, we grew same-center cash NOI by 2.8% and achieved a 20.4% increase in same-space cash rents on new leases.”  Tanz added, “Looking ahead, with the current leasing activity and momentum across our portfolio, we are on track to continue achieving solid portfolio operational results as we progress through the second half of 2018.”

FINANCIAL SUMMARY

For the three months ended June 30, 2018, GAAP net income attributable to common stockholders was $7.3 million, or $0.06 per diluted share, as compared to GAAP net income attributable to common stockholders of $8.3 million, or $0.08 per diluted share, for the three months ended June 30, 2017.  For the six months ended June 30, 2018, GAAP net income attributable to common stockholders was $18.0 million, or $0.16 per diluted share, as compared to GAAP net income attributable to common stockholders of $18.5 million, or $0.17 per diluted share, for the six months ended June 30, 2017.

FFO for the second quarter of 2018 was $33.4 million, or $0.27 per diluted share, as compared to $32.8 million in FFO, or $0.27 per diluted share for the second quarter of 2017.  FFO for the first six months of 2018 was $70.5 million, or $0.57 per diluted share, as compared to $67.2 million in FFO, or $0.55 per diluted share for the first six months of 2017.  ROIC reports FFO as a supplemental performance measure in accordance with the definition set forth by the National Association of Real Estate Investment Trusts.  A reconciliation of GAAP net income to FFO is provided at the end of this press release.

At June 30, 2018, ROIC had a total market capitalization of approximately $3.9 billion with approximately $1.5 billion of principal debt outstanding, equating to a 39.3% debt-to-total market capitalization ratio.  ROIC’s principal debt outstanding was comprised of $95.8 million of mortgage debt and approximately $1.4 billion of unsecured debt, including $192.0 million outstanding on its unsecured revolving credit facility at June 30, 2018.  ROIC’s interest coverage for the second quarter was 3.1 times and 93.6% of its portfolio was unencumbered at June 30, 2018 (based on gross leasable area).

ACQUISITION SUMMARY

Year-to-date in 2018, ROIC has acquired a total of $38.7 million of shopping center assets.  During the first quarter of 2018, ROIC acquired a grocery-anchored shopping center for $19.0 million.  During the second quarter of 2018, ROIC acquired a grocery-anchored shopping center for $15.7 million.  Additionally, during the second quarter, ROIC acquired a multi-tenant, freestanding pad for $4.0 million located at one of its existing grocery-anchored shopping centers.

King City Plaza

In May 2018, ROIC acquired King City Plaza for $15.7 million.  The shopping center is approximately 63,000 square feet and is anchored by Grocery Outlet Supermarket and McCann’s Pharmacy.  The property is located in King City, Oregon, within the Portland metropolitan area, and is currently 100% leased.

PROPERTY OPERATIONS SUMMARY

At June 30, 2018, ROIC’s portfolio was 97.5% leased.  For the second quarter of 2018, same-center net operating income (NOI) was $44.5 million, as compared to $43.2 million in same-center NOI for the second quarter of 2017, representing a 2.8% increase.  ROIC reports same-center comparative NOI on a cash basis.  A reconciliation of GAAP operating income to same-center comparative NOI is provided at the end of this press release.

During the second quarter of 2018, ROIC executed 97 leases, totaling 265,743 square feet, including 42 new leases, totaling 98,669 square feet, achieving a 20.4% increase in same-space comparative base rent, and 55 renewed leases, totaling 167,074 square feet, achieving a 7.6% increase in base rent.   ROIC reports same-space comparative base rent on a cash basis.

CASH DIVIDEND

On June 28, 2018, ROIC distributed a $0.1950 per share cash dividend.  On July 25, 2018, ROIC’s board of directors declared a cash dividend of $0.1950 per share, payable on September 27, 2018 to stockholders of record on September 13, 2018.

CONFERENCE CALL

ROIC will conduct a conference call and audio webcast to discuss its results on Thursday, July 26, 2018 at 9:00 a.m. Eastern Time / 6:00 a.m. Pacific Time.  Those interested in participating in the conference call should dial (877) 312-8783 (domestic), or (408) 940-3874 (international) at least ten minutes prior to the scheduled start of the call. When prompted, provide the Conference ID: 1890648. A live webcast will also be available in listen-only mode at http://www.roireit.net/.  The conference call will be recorded and available for replay beginning at 12:00 p.m. Eastern Time on July 26, 2018 and will be available until 12:00 a.m. Eastern Time on August 2, 2018. To access the conference call recording, dial (855) 859-2056 (domestic) or (404) 537-3406 (international) and use the Conference ID: 1890648. The conference call will also be archived on http://www.roireit.net/ for approximately 90 days.

ABOUT RETAIL OPPORTUNITY INVESTMENTS CORP.

Retail Opportunity Investments Corp. (NASDAQ:ROIC), is a fully-integrated, self-managed real estate investment trust (REIT) that specializes in the acquisition, ownership and management of grocery-anchored shopping centers located in densely-populated, metropolitan markets across the West Coast.  As of June 30, 2018, ROIC owned 92 shopping centers encompassing approximately 10.6 million square feet.  ROIC is the largest publicly-traded, grocery-anchored shopping center REIT focused exclusively on the West Coast.  ROIC is a member of the S&P SmallCap 600 Index and has investment-grade corporate debt ratings from Moody's Investor Services and Standard & Poor's.  Additional information is available at: www.roireit.net.

When used herein, the words "believes," "anticipates," "projects," "should," "estimates," "expects," “guidance” and similar expressions are intended to identify forward-looking statements with the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and in Section 21F of the Securities and Exchange Act of 1934, as amended. Certain statements contained herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results of ROIC to differ materially from future results expressed or implied by such forward-looking statements.   Information regarding such risks and factors is described in ROIC's filings with the SEC, including its most recent Annual Report on Form 10-K, which is available at: www.roireit.net

RETAIL OPPORTUNITY INVESTMENTS CORP.
Consolidated Balance Sheets
(In thousands, except share data)

  June 30, 2018
(unaudited)
  December 31,
2017
ASSETS      
Real Estate Investments:      
Land $ 898,436     $ 878,797  
Building and improvements 2,265,760     2,230,600  
  3,164,196     3,109,397  
Less: accumulated depreciation 295,602     260,115  
Real Estate Investments, net 2,868,594     2,849,282  
Cash and cash equivalents 10,958     11,553  
Restricted cash 1,420     5,412  
Tenant and other receivables, net 42,095     43,257  
Deposits     500  
Acquired lease intangible assets, net 78,246     82,778  
Prepaid expenses 1,600     2,853  
Deferred charges, net 36,150     37,167  
Other 10,606     6,396  
Total assets $ 3,049,669     $ 3,039,198  
       
LIABILITIES AND EQUITY      
Liabilities:      
Term loan $ 298,942     $ 298,816  
Credit facility 189,259     140,329  
Senior Notes 940,762     940,086  
Mortgage notes payable 97,884     107,915  
Acquired lease intangible liabilities, net 173,911     178,984  
Accounts payable and accrued expenses 14,580     18,638  
Tenants’ security deposits 6,997     6,771  
Other liabilities 18,213     18,018  
Total liabilities 1,740,548     1,709,557  
       
Commitments and contingencies      
       
Equity:      
Preferred stock, $0.0001 par value 50,000,000 shares authorized; none issued and outstanding      
Common stock, $0.0001 par value, 500,000,000 shares authorized; 112,719,459 and 112,347,451 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively 11     11  
Additional paid-in capital 1,415,286     1,412,590  
Dividends in excess of earnings (236,570 )   (210,490 )
Accumulated other comprehensive income 7,235     1,856  
Total Retail Opportunity Investments Corp. stockholders’ equity 1,185,962     1,203,967  
Non-controlling interests 123,159     125,674  
Total equity 1,309,121     1,329,641  
Total liabilities and equity $ 3,049,669     $ 3,039,198  
       

RETAIL OPPORTUNITY INVESTMENTS CORP.
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)

       
  Three Months Ended June 30,   Six Months Ended June 30,
  2018   2017   2018   2017
Revenues              
Base rents $ 55,050     $ 50,528     $ 110,427     $ 102,007  
Recoveries from tenants 16,471     15,222     32,632     28,890  
Other income 820     890     3,677     1,643  
Total revenues 72,341     66,640     146,736     132,540  
               
Operating expenses              
Property operating 11,017     9,628     21,495     18,928  
Property taxes 7,914     7,647     15,733     14,715  
Depreciation and amortization 25,331     23,645     50,548     46,703  
General and administrative expenses 3,990     3,817     7,521     7,316  
Acquisition transaction costs     4         4  
Other expense 274     225     343     274  
Total operating expenses 48,526     44,966     95,640     87,940  
               
Operating income 23,815     21,674     51,096     44,600  
Non-operating expenses              
Interest expense and other finance expenses (15,713 )   (12,477 )   (31,170 )   (24,152 )
Net income 8,102     9,197     19,926     20,448  
Net income attributable to non-controlling interests (763 )   (888 )   (1,885 )   (1,969 )
Net Income Attributable to Retail Opportunity Investments Corp. $ 7,339     $ 8,309     $ 18,041     $ 18,479  
               
Earnings per share – basic and diluted $ 0.06     $ 0.08     $ 0.16     $ 0.17  
               
Dividends per common share $ 0.1950     $ 0.1875     $ 0.3900     $ 0.3750  
               

CALCULATION OF FUNDS FROM OPERATIONS
(Unaudited)
(In thousands)

       
  Three Months Ended June 30,   Six Months Ended June 30,
  2018   2017   2018   2017
Net income attributable to ROIC $ 7,339     $ 8,309     $ 18,041     $ 18,479  
Plus: Depreciation and amortization 25,331     23,645     50,548     46,703  
Funds from operations – basic 32,670     31,954     68,589     65,182  
Net income attributable to non-controlling interests 763     888     1,885     1,969  
Funds from operations – diluted $ 33,433     $ 32,842     $ 70,474     $ 67,151  
               

SAME-CENTER CASH NET OPERATING INCOME ANALYSIS
(Unaudited)
(In thousands, except number of shopping centers and percentages)

         
    Three Months Ended June 30,   Six Months Ended June 30,
    2018   2017   $
Change
  %
Change
  2018   2017   $
Change
  %
Change
Number of shopping centers included in same-center analysis 82     82             79     79          
Same-center occupancy 97.3 %   97.4 %       (0.1 )%   97.4 %   97.5 %       (0.1 )%
                                 
Revenues:                              
  Base rents $ 46,229     $ 44,666     $ 1,563     3.5 %   $ 89,342     $ 86,911     $ 2,431     2.8 %
  Percentage rent 91     187     (96 )   (51.3 )%   176     302     (126 )   (41.7 )%
  Recoveries from tenants 15,181     14,985     196     1.3 %   28,861     28,183     678     2.4 %
  Other property income 789     897     (108 )   (12.0 )%   1,089     1,655     (566 )   (34.2 )%
Total Revenues 62,290     60,735     1,555     2.6 %   119,468     117,051     2,417     2.1 %
Operating Expenses                              
  Property operating expenses 10,312     9,805     507     5.2 %   19,418     18,322     1,096     6.0 %
  Bad debt expense 276     255     21     8.2 %   364     743     (379 )   (51.0 )%
  Property taxes 7,252     7,449     (197 )   (2.6 )%   13,769     14,134     (365 )   (2.6 )%
Total Operating Expenses 17,840     17,509     331     1.9 %   33,551     33,199     352     1.1 %
Same-Center Cash Net Operating Income $ 44,450     $ 43,226     $ 1,224     2.8 %   $ 85,917     $ 83,852     $ 2,065     2.5 %
                                 

SAME-CENTER CASH NET OPERATING INCOME RECONCILIATION
(Unaudited)
(In thousands)

       
  Three Months Ended June 30,   Six Months Ended June 30,
  2018   2017   2018   2017
GAAP operating income $ 23,815     $ 21,674     $ 51,096     $ 44,600  
Depreciation and amortization 25,331     23,645     50,548     46,703  
General and administrative expenses 3,990     3,817     7,521     7,316  
Acquisition transaction costs     4         4  
Other expense 274     225     343     274  
Property revenues and other expenses (1) (4,441 )   (4,311 )   (9,924 )   (11,201 )
Total Company cash NOI 48,969     45,054     99,584     87,696  
Non same-center cash NOI (4,519 )   (1,828 )   (13,667 )   (3,844 )
Same-center cash NOI $ 44,450     $ 43,226     $ 85,917     $ 83,852  
               

__________________________

(1) Includes straight-line rents, amortization of above and below-market lease intangibles, anchor lease termination fees, net of contractual amounts, and expense and recovery adjustments related to prior periods.

NON-GAAP DISCLOSURES

Funds from operations (“FFO”), is a widely recognized non-GAAP financial measure for REITs that the Company believes when considered with financial statements presented in accordance with GAAP, provides additional and useful means to assess its financial performance.  FFO is frequently used by securities analysts, investors and other interested parties to evaluate the performance of REITs, most of which present FFO along with net income as calculated in accordance with GAAP.  The Company computes FFO in accordance with the “White Paper” on FFO published by the National Association of Real Estate Investment Trusts (“NAREIT”), which defines FFO as net income attributable to common stockholders (determined in accordance with GAAP) excluding gains or losses from debt restructuring, sales of depreciable property and impairments, plus real estate related depreciation and amortization, and after adjustments for partnerships and unconsolidated joint ventures.

The Company uses cash net operating income (“NOI”) internally to evaluate and compare the operating performance of the Company’s properties.  The Company believes cash NOI provides useful information to investors regarding the Company’s financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level, and when compared across periods, can be used to determine trends in earnings of the Company’s properties as this measure is not affected by the non-cash revenue and expense recognition items, the cost of the Company’s funding, the impact of depreciation and amortization expenses, gains or losses from the acquisition and sale of operating real estate assets, general and administrative expenses or other gains and losses that relate to the Company’s ownership of properties.  The Company believes the exclusion of these items from operating income is useful because the resulting measure captures the actual revenue generated and actual expenses incurred in operating the Company’s properties as well as trends in occupancy rates, rental rates and operating costs.  Cash NOI is a measure of the operating performance of the Company’s properties but does not measure the Company’s performance as a whole and is therefore not a substitute for net income or operating income as computed in accordance with GAAP.  The Company defines cash NOI as operating revenues (base rent and recoveries from tenants), less property and related expenses (property operating expenses and property taxes), adjusted for non-cash revenue and operating expense items such as straight-line rent and amortization of lease intangibles, debt-related expenses and other adjustments.  Cash NOI also excludes general and administrative expenses, depreciation and amortization, acquisition transaction costs, other expense, interest expense, gains and losses from property acquisitions and dispositions, extraordinary items, tenant improvements and leasing commissions.  Other REITs may use different methodologies for calculating cash NOI, and accordingly, the Company’s cash NOI may not be comparable to other REITs.

Contact:
Ashley Rubino, Investor Relations
858-255-4913
arubino@roireit.net 

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Source: Retail Opportunity Investments Corp.

Stock Information

  • Aug 14, 2018
  • 3:32 pm EDT

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