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Feb 23, 2021

Retail Opportunity Investments Corp. Reports 2020 Results

SAN DIEGO, Feb. 23, 2021 (GLOBE NEWSWIRE) -- Retail Opportunity Investments Corp. (NASDAQ:ROIC) announced today financial and operating results for the year and three months ended December 31, 2020.

YEAR 2020 HIGHLIGHTS

  • $32.0mm of net income attributable to common stockholders ($0.27 per diluted share)
  • $132.5 million in Funds From Operations (FFO)(1) ($1.05 per diluted share)
  • 90.6% of total billed base rent during pandemic has been paid to date (2Q‘20 - 4Q‘20)
  • 96.8% portfolio lease rate at year-end (8th consecutive year above 96%)
  • 1.2mm sq. ft. of leases executed (10th consecutive year of leasing ~ 2x original expirations)
  • 12.5% increase in same-space cash rents on new leases (7.9% increase on renewals)
  • 4.6% decrease in same-center cash net operating income (2020 vs. 2019)
  • 96.5% of total debt effectively fixed-rate at year-end (no debt maturing in 2021)
  • Awarded investment grade rating and stable outlook from Fitch Ratings, Inc.

4TH QUARTER 2020 HIGHLIGHTS

  • $8.9mm of net income attributable to common stockholders ($0.08 per diluted share)
  • $34.3 million in FFO(1) ($0.27 per diluted share)
  • 91.8% of total 4Q‘20 billed base rent has been paid to date
  • 9.1% increase in same-space cash rents on new leases (3.3% increase on renewals)
  • 8.8% decrease in same-center cash net operating income (4Q‘20 vs. 4Q‘19)
  • $55.5 million reduction in credit line balance (4Q‘20 vs. 3Q‘20)
  • 3.4 times interest coverage (equal to 4Q‘19)

2021 YEAR-TO-DATE HIGHLIGHTS

  • 95.4% of total tenants are currently open, based on annualized base rent
  • 87.8% of January billed base rent has been paid to date
  • $25.8 million property disposition currently under contract
  • $0.11 per share cash dividend declared

________________________________________
(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 2020, in the face of extraordinary circumstances, our portfolio of grocery-anchored shopping centers proved to be resilient and we continued to post solid operating results. For the eighth consecutive year we maintained a year-end portfolio lease rate above 96%. Additionally, notwithstanding repeated government mandated shutdowns, demand for space across our portfolio remained remarkably strong and we continued to capitalize on it, leasing over 1.2 million square feet of space during 2020, which was the 10th consecutive year that we leased approximately double the amount of space originally scheduled to expire. We also achieved a 12.5% increase in same-space releasing spreads on new leases executed during 2020, representing the 8th consecutive year of achieving double-digit rent growth.” Tanz added, “As 2021 gets underway, and as mandated shutdowns on the West Coast are now being eased, we currently expect that our portfolio and tenant base will steadily move toward returning to full operations as the year progresses. Additionally, we intend to continue advancing our densification initiatives and, market conditions permitting, resume our capital recycling program.”

FINANCIAL RESULTS SUMMARY

For the year ended December 31, 2020, GAAP net income attributable to common stockholders was $32.0 million, or $0.27 per diluted share, as compared to GAAP net income attributable to common stockholders of $48.8 million, or $0.42 per diluted share, for the year ended December 31, 2019. For the three months ended December 31, 2020, GAAP net income attributable to common stockholders was $8.9 million, or $0.08 per diluted share, as compared to GAAP net income attributable to common stockholders of $10.2 million, or $0.09 per diluted share, for the three months ended December 31, 2019.

FFO for the full year 2020 was $132.5 million, or $1.05 per diluted share, as compared to $138.1 million in FFO, or $1.10 per diluted share for the year 2019. FFO for the fourth quarter of 2020 was $34.3 million, or $0.27 per diluted share, as compared to $35.3 million in FFO, or $0.28 per diluted share for the fourth quarter of 2019. 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.

For the full year 2020, same-center net operating income (NOI) was $187.4 million, as compared to $196.6 million in same-center NOI for the full year 2019, representing a 4.6% decrease. For the fourth quarter of 2020, same-center NOI decreased 8.8% as compared to same-center NOI for the fourth quarter of 2019. 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.

2020 financial results for the year and three months ended December 31, 2020 reflect: i) $62.6 million in net property dispositions completed during 2019; ii) $4.7 million non-cash, below market rental revenue recognized in the fourth quarter of 2020 in connection with recapturing/releasing activity; and iii) the impact in 2020 from the ongoing pandemic, including $11.0 million of bad debt in 2020.

BALANCE SHEET SUMMARY

During the fourth quarter, ROIC utilized $55.5 million of cash on its balance sheet to reduce borrowings outstanding on its unsecured credit facility. At December 31, 2020, ROIC had total real estate assets (before accumulated depreciation) of approximately $3.2 billion and approximately $1.4 billion of principal debt outstanding, including $48.0 million outstanding on its $600.0 million unsecured credit facility. At year-end 2020, 93.8% of ROIC’s principal debt outstanding was unsecured, and 96.5% was effectively fixed-rate.

In terms of future debt maturities, ROIC currently has no unsecured debt maturing for approximately the next three years, through late 2023. Additionally, ROIC currently has no secured debt maturing in 2021, $23.1 million maturing in mid-2022, and no secured debt maturing in 2023.

During the fourth quarter, Fitch Ratings, Inc. (Fitch) assigned a BBB- long-term issuer default rating to ROIC with a stable outlook. According to Fitch, the rating and outlook reflect ROIC’s high-quality, grocery-anchored shopping center portfolio located in densely populated, high barrier-to-entry west coast U.S. markets. Additionally, Fitch stated that ROIC’s best-in-class historical occupancy levels and investment-grade credit metrics are key factors supporting the rating.

PROPERTY OPERATIONS SUMMARY

At December 31, 2020, ROIC’s portfolio was 96.8% leased. For the full year 2020, ROIC executed 275 leases, totaling approximately 1.2 million square feet, including 109 new leases, totaling 377,906 square feet, achieving a 12.5% increase in same-space comparative base rent, and 166 renewed leases, totaling 831,225 square feet, achieving a 7.9% increase in base rent. During the fourth quarter of 2020, ROIC executed 74 leases, totaling 294,590 square feet, including 36 new leases, totaling 110,268 square feet, achieving a 9.1% increase in same-space comparative base rent, and 38 renewed leases, totaling 184,322 square feet, achieving a 3.3% increase in base rent.  ROIC reports same-space comparative base rent on a cash basis.

CASH DIVIDEND

During the first quarter of 2020, ROIC distributed a cash dividend of $0.20 per share. Given the uncertainty of the pandemic’s near and potential long term impact on ROIC’s business, and in order to preserve its liquidity position, ROIC’s board of directors temporarily suspended quarterly dividend distributions for the remainder of 2020.

On February 23, 2021, ROIC’s board of directors declared a cash dividend of $0.11 per share, payable on April 9, 2021 to stockholders of record on March 26, 2021.

2021 GUIDANCE

ROIC currently estimates that FFO for the full year 2021 will be within the range of $0.95 to $1.02 per diluted share, and net income to be within the range of $0.18 to $0.25 per diluted share. The following table provides a reconciliation of GAAP net income to FFO.

  2020 Actual
 
  Year Ended December 31, 2021
    Low End   High End
         
  (unaudited, amounts in thousands except per share and percentage data)
GAAP net income applicable to stockholders $ 32,014       $ 21,034       $ 29,805    
Funds from operations (FFO) – diluted $ 132,452       $ 120,555       $ 129,438    
           
GAAP net income per diluted share $ 0.27       $ 0.18       $ 0.25    
FFO per diluted share $ 1.05       $ 0.95       $ 1.02    
           
Key Drivers          
General and administrative expenses $ 16,755       $ 20,000       $ 19,000    
Straight-line rent $ 1,079       $ (500 )     $ (500 )  
Amortization of above- and below-market rent $ 17,654       $ 8,700       $ 8,700    
Bad debt $ 11,035       $ 7,000       $ 3,000    
Acquisitions $       $       $ 40,000    
Dispositions $       $ 25,800       $ 25,800    
Debt retired $ 36,000       $ 40,000       $    
Same-center cash NOI (4.6 )%   %   3.0  %

ROIC’s management will discuss the company’s guidance and underlying assumptions on its February 24, 2021 conference call. ROIC’s guidance is a forward-looking statement and is subject to risks and other factors described elsewhere in this press release.

CONFERENCE CALL

ROIC will conduct a conference call and audio webcast to discuss its results on Wednesday, February 24, 2021 at 12:00 p.m. Eastern Time / 9:00 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: 8069709. 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 3:00 p.m. Eastern Time on February 24, 2021 and will be available until 3:00 p.m. Eastern Time on March 3, 2021. To access the conference call recording, dial (855) 859-2056 (domestic) or (404) 537-3406 (international) and use the Conference ID: 8069709. 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 December 31, 2020, ROIC owned 88 shopping centers encompassing approximately 10.1 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, Standard & Poor’s, and Fitch Ratings, Inc. 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)

  December 31,
  2020   2019
ASSETS      
Real Estate Investments:      
Land $ 881,872     $ 879,540  
Building and improvements 2,274,680     2,252,301  
  3,156,552     3,131,841  
Less:  accumulated depreciation 460,165     390,916  
  2,696,387     2,740,925  
Mortgage note receivable 4,959     13,000  
Real Estate Investments, net 2,701,346     2,753,925  
Cash and cash equivalents 4,822     3,800  
Restricted cash 1,814     1,658  
Tenant and other receivables, net 58,756     45,821  
Acquired lease intangible assets, net 50,110     59,701  
Prepaid expenses 4,811     3,169  
Deferred charges, net 22,893     27,652  
Other assets 17,296     18,031  
Total assets $ 2,861,848     $ 2,913,757  
       
LIABILITIES AND EQUITY      
Liabilities:      
Term loan $ 298,524     $ 298,330  
Credit facility 45,238     80,743  
Senior Notes 943,655     942,850  
Mortgage notes payable 86,509     87,523  
Acquired lease intangible liabilities, net 125,796     144,757  
Accounts payable and accrued expenses 17,687     17,562  
Tenants’ security deposits 6,854     7,177  
Other liabilities 46,426     42,987  
Total liabilities 1,570,689     1,621,929  
       
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; 118,085,155 and 116,496,016 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively 12     12  
Additional paid-in capital 1,497,662     1,481,466  
Dividends in excess of earnings (289,309 )   (297,998 )
Accumulated other comprehensive loss (8,812 )   (4,132 )
Total Retail Opportunity Investments Corp. stockholders’ equity 1,199,553     1,179,348  
Non-controlling interests 91,606     112,480  
Total equity 1,291,159     1,291,828  
Total liabilities and equity $ 2,861,848     $ 2,913,757  
       

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

  Three Months Ended December 31,   Year Ended December 31,
  2020   2019   2020   2019
Revenues              
Rental revenue $ 71,391     $ 72,282     $ 280,388     $ 291,263  
Other income 1,527     1,337     3,726     3,777  
Total revenues 72,918     73,619     284,114     295,040  
               
Operating expenses              
Property operating 10,847     10,896     41,050     43,662  
Property taxes 8,023     8,205     33,288     32,388  
Depreciation and amortization 24,690     24,192     97,731     97,559  
General and administrative expenses 4,781     4,157     16,755     17,831  
Other expense 318     41     843     1,405  
Total operating expenses 48,659     47,491     189,667     192,845  
               
Gain on sale of real estate             13,175  
               
Operating income 24,259     26,128     94,447     115,370  
Non-operating expenses              
Interest expense and other finance expenses (14,679 )   (15,002 )   (59,726 )   (61,687 )
Net income 9,580     11,126     34,721     53,683  
Net income attributable to non-controlling interests (681 )   (975 )   (2,707 )   (4,839 )
Net Income Attributable to Retail Opportunity Investments Corp. $ 8,899     $ 10,151     $ 32,014     $ 48,844  
               
Earnings per share – basic and diluted $ 0.08     $ 0.09     $ 0.27     $ 0.42  
               
Dividends per common share $     $ 0.1970     $ 0.2000     $ 0.7880  
               

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

  Three Months Ended December 31,   Year Ended December 31,
  2020   2019   2020   2019
Net income attributable to ROIC $ 8,899     $ 10,151     $ 32,014     $ 48,844  
Plus:  Depreciation and amortization 24,690     24,192     97,731     97,559  
Less: Gain on sale of real estate             (13,175 )
Funds from operations – basic 33,589     34,343     129,745     133,228  
Net income attributable to non-controlling interests 681     975     2,707     4,839  
Funds from operations – diluted $ 34,270     $ 35,318     $ 132,452     $ 138,067  
               

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

    Three Months Ended December 31,   Year Ended December 31,
    2020   2019   $ Change   % Change   2020   2019   $ Change   % Change
Number of shopping centers included in same-center analysis 87       87               87       87            
Same-center occupancy 96.8   %   97.9   %       (1.1 ) %   96.8   %   97.9   %       (1.1 ) %
                                 
Revenues:                              
  Base rents $ 49,887       $ 51,385       $ (1,498 )     (2.9 ) %   $ 204,148       $ 203,334       $ 814       0.4   %
  Percentage rent 237       1,008       (771 )     (76.5 ) %   505       1,324       (819 )     (61.9 ) %
  Recoveries from tenants 15,816       16,719       (903 )     (5.4 ) %   66,336       66,255       81       0.1   %
  Other property income 1,227       1,051       176       16.7   %   2,390       2,945       (555 )     (18.8 ) %
  Bad debt (1,945 )     (306 )     (1,639 )     535.6   %   (10,196 )     (1,417 )     (8,779 )     619.5   %
Total Revenues 65,222       69,857       (4,635 )     (6.6 ) %   263,183       272,441       (9,258 )     (3.4 ) %
Operating Expenses                              
  Property operating expenses 11,055       11,142       (87 )     (0.8 ) %   42,671       44,100       (1,429 )     (3.2 ) %
  Property taxes 8,002       8,110       (108 )     (1.3 ) %   33,091       31,783       1,308       4.1   %
Total Operating Expenses 19,057       19,252       (195 )     (1.0 ) %   75,762       75,883       (121 )     (0.2 ) %
Same-Center Cash Net Operating Income $ 46,165       $ 50,605       $ (4,440 )     (8.8 ) %   $ 187,421       $ 196,558       $ (9,137 )     (4.6 ) %
                                 

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

  Three Months Ended December 31,   Year Ended December 31,
  2020   2019   2020   2019
GAAP operating income $ 24,259     $ 26,128     $ 94,447     $ 115,370  
Depreciation and amortization 24,690     24,192     97,731     97,559  
General and administrative expenses 4,781     4,157     16,755     17,831  
Other expense 318     41     843     1,405  
Gain on sale of real estate             (13,175 )
Straight-line rent (516 )   (433 )   (1,079 )   (3,083 )
Amortization of above- and below-market rent (6,898 )   (2,593 )   (17,654 )   (15,618 )
Property revenues and other expenses (1) (12 )   (278 )   (374 )   (142 )
Total Company cash NOI 46,622     51,214     190,669     200,147  
Non same-center cash NOI (457 )   (609 )   (3,248 )   (3,589 )
Same-center cash NOI $ 46,165     $ 50,605     $ 187,421     $ 196,558  
               

____________________

(1)   Includes anchor lease termination fees, net of contractual amounts, if any, expense and recovery adjustments related to prior periods and other miscellaneous adjustments.

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
858-677-0900
arubino@roireit.net

 

Stock Information

  • Oct 01, 2021
  • 11:06 pm EDT

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