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Oct 26, 2020

Retail Opportunity Investments Corp. Reports 2020 Third Quarter Results

SAN DIEGO, Oct. 26, 2020 (GLOBE NEWSWIRE) -- Retail Opportunity Investments Corp. (NASDAQ:ROIC) announced today financial and operating results for the three and nine months ended September 30, 2020.

HIGHLIGHTS

  • $6.5 million of net income attributable to common stockholders for 3Q‘20 ($0.06 per diluted share)
  • $31.6 million of Funds From Operations (FFO)(1) for 3Q‘20 ($0.25 per diluted share)
  • 88.7% of total 3Q‘20 billed base rent has been paid to date
  • 96.8% portfolio lease rate at September 30, 2020 
  • 94.8% of total tenants are currently open, based on annualized base rent (ABR)
  • 441,148 square feet of leases executed in 3Q‘20 (comparable to pre-pandemic leasing volume)
  • 12.2% increase in same-space comparative cash rents on new leases in 3Q‘20 (11.6% on renewals)
  • 3.5% decrease in same-center cash net operating income (3Q‘20 vs. 3Q‘19)
  • $130.0 million liquidity borrowing repaid in full
  • $49.1 million of operational cash flow conserved since 1Q‘20
  • $62.2 million in cash & cash equivalents currently
  • Awarded investment grade rating from Fitch Ratings, Inc.
  • Quarterly cash dividend expected to be reinstated starting in 1Q‘21

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

Stuart A. Tanz, President and Chief Executive Officer of Retail Opportunity Investments Corp. stated, “Our business, portfolio and tenants continue to exhibit remarkable resiliency. Notwithstanding ongoing state safeguards on the West Coast, that continue to limit operational capacity for a number of businesses, consumer activity across our grocery-anchored shopping center portfolio is strong. Accordingly, demand for space from a broad range of retailers has ramped up considerably. Our leasing activity during the third quarter totaled over 441,000 square feet, which is close to a new record in terms of our historical third quarter leasing activity. Additionally, we achieved double-digit rent growth on both new leases signed during the quarter and renewals.” Tanz added, “We intend to continue making the most of the demand, along with working diligently and collaboratively with existing tenants toward returning to full operations, with the goal of achieving a solid finish to 2020.”

FINANCIAL RESULTS SUMMARY

For the three months ended September 30, 2020, GAAP net income attributable to common stockholders was $6.5 million, or $0.06 per diluted share, as compared to GAAP net income attributable to common stockholders of $17.9 million, or $0.16 per diluted share, for the three months ended September 30, 2019. For the nine months ended September 30, 2020, GAAP net income attributable to common stockholders was $23.1 million, or $0.20 per diluted share, as compared to GAAP net income attributable to common stockholders of $38.7 million, or $0.34 per diluted share, for the nine months ended September 30, 2019.

FFO for the third quarter of 2020 was $31.6 million, or $0.25 per diluted share, as compared to $33.4 million in FFO, or $0.27 per diluted share for the third quarter of 2019. FFO for the first nine months of 2020 was $98.2 million, or $0.77 per diluted share, as compared to $102.7 million in FFO, or $0.82 per diluted share for the first nine months 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 third quarter of 2020, same-center net operating income (NOI) was $47.0 million, as compared to $48.7 million in same-center NOI for the third quarter of 2019, representing a 3.5% decrease. For the first nine months of 2020, same-center NOI decreased 3.2% as compared to same-center NOI for the first nine months 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 three and nine months ended September 30, 2020, as compared to 2019, reflect $62.6 million in net property dispositions completed during 2019, and the impact to date in 2020 from the ongoing pandemic, including $2.2 million of bad debt in the third quarter of 2020, as compared $0.4 million of bad debt in the third quarter of 2019, and $8.8 million of bad debt in the first nine months of 2020, as compared to $1.7 million of bad debt in the first nine months of 2019.

BALANCE SHEET SUMMARY

During the third quarter 2020, ROIC repaid in full the liquidity borrowings that it had previously drawn on its unsecured credit facility at the outset of the pandemic, in March and April 2020, totaling $130.0 million. At September 30, 2020, ROIC had total real estate assets (before accumulated depreciation) of approximately $3.1 billion and approximately $1.4 billion of principal debt outstanding (net of cash and cash equivalents), including $103.5 million outstanding on its $600.0 million unsecured credit facility. As of September 30, 2020, 94.0% of ROIC’s principal debt outstanding was unsecured, and 92.8% was effectively fixed-rate. Additionally, ROIC’s interest coverage for the third quarter 2020 was 3.1 times and 94.5% of its portfolio was unencumbered at September 30, 2020, based on GLA.

Since the pandemic was declared in mid-March, ROIC has conserved approximately $49.1 million of operational cash flow to date.   ROIC currently has $62.2 million in cash and cash equivalents.   In terms of future debt maturities, ROIC has no unsecured debt maturing for the next three years, through late 2023. Additionally, ROIC has no secured debt maturing in 2020 and 2021, $23.1 million maturing in mid-2022, and no secured debt maturing in 2023.

Subsequent to third 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

During the third quarter of 2020, ROIC executed 77 leases, totaling 441,148 square feet, including 37 new leases, totaling 134,031 square feet, achieving a 12.2% increase in same-space comparative base rent, and 40 renewed leases, totaling 307,117 square feet, achieving an 11.6% increase in base rent.   ROIC reports same-space comparative base rent on a cash basis.

At September 30, 2020, ROIC’s portfolio was 96.8% leased.   In terms of ROIC’s tenant base, 94.8% (based on ABR) are currently open and operating. To date, ROIC has received 88.7% of total third quarter 2020 billed base rent.

DIVIDEND

ROIC’s board of directors currently expects to reinstate distributing quarterly cash dividends to stockholders in the first quarter of 2021.   ROIC intends to continue maintaining its compliance with REIT taxable income distribution requirements.

CONFERENCE CALL

ROIC will conduct a conference call and audio webcast to discuss its results on Tuesday, October 27, 2020 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: 3892546. 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 October 27, 2020 and will be available until 2:00 p.m. Eastern Time on November 3, 2020. To access the conference call recording, dial (855) 859-2056 (domestic) or (404) 537-3406 (international) and use the Conference ID: 3892546. 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 September 30, 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, S&P Global Ratings, 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)
       
  September 30, 2020    
  (unaudited)   December 31, 2019
ASSETS      
Real Estate Investments:      
Land $ 881,764     $ 879,540  
Building and improvements 2,262,430     2,252,301  
  3,144,194     3,131,841  
Less:  accumulated depreciation 440,541     390,916  
  2,703,653     2,740,925  
Mortgage note receivable 4,979     13,000  
Real Estate Investments, net 2,708,632     2,753,925  
Cash and cash equivalents 58,458     3,800  
Restricted cash 1,990     1,658  
Tenant and other receivables, net 56,122     45,821  
Acquired lease intangible assets, net 53,320     59,701  
Prepaid expenses 1,285     3,169  
Deferred charges, net 24,026     27,652  
Other assets 17,543     18,031  
Total assets $ 2,921,376     $ 2,913,757  
       
LIABILITIES AND EQUITY      
Liabilities:      
Term loan $ 298,433     $ 298,330  
Credit facility 100,544     80,743  
Senior Notes 943,267     942,850  
Mortgage notes payable 86,766     87,523  
Acquired lease intangible liabilities, net 133,590     144,757  
Accounts payable and accrued expenses 28,755     17,562  
Tenants’ security deposits 6,977     7,177  
Other liabilities 45,370     42,987  
Total liabilities 1,643,702     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; 117,940,155 and 116,496,016 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively 12     12  
Additional paid-in capital 1,493,989     1,481,466  
Dividends in excess of earnings (298,212 )   (297,998 )
Accumulated other comprehensive loss (10,230 )   (4,132 )
Total Retail Opportunity Investments Corp. stockholders’ equity 1,185,559     1,179,348  
Non-controlling interests 92,115     112,480  
Total equity 1,277,674     1,291,828  
Total liabilities and equity $ 2,921,376     $ 2,913,757  
               

 

RETAIL OPPORTUNITY INVESTMENTS CORP.
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)
 
  Three Months Ended September 30,   Nine Months Ended September 30,
  2020   2019   2020   2019
Revenues              
Rental revenue $ 69,066     $ 71,793     $ 208,997     $ 218,981  
Other income 706     645     2,199     2,440  
Total revenues 69,772     72,438     211,196     221,421  
               
Operating expenses              
Property operating 10,313     10,995     30,203     32,766  
Property taxes 8,510     8,113     25,265     24,183  
Depreciation and amortization 24,649     24,163     73,041     73,367  
General and administrative expenses 4,101     4,448     11,974     13,674  
Other expense 165     47     525     1,364  
Total operating expenses 47,738     47,766     141,008     145,354  
               
Gain on sale of real estate     10,357         13,175  
               
Operating income 22,034     35,029     70,188     89,242  
Non-operating expenses              
Interest expense and other finance expenses (15,065 )   (15,401 )   (45,047 )   (46,685 )
Net income 6,969     19,628     25,141     42,557  
Net income attributable to non-controlling interests (503 )   (1,770 )   (2,026 )   (3,864 )
Net Income Attributable to Retail Opportunity Investments Corp. $ 6,466     $ 17,858     $ 23,115     $ 38,693  
               
Earnings per share – basic and diluted $ 0.06     $ 0.16     $ 0.20     $ 0.34  
               
Dividends per common share $     $ 0.1970     $ 0.2000     $ 0.5910  
                               

 

CALCULATION OF FUNDS FROM OPERATIONS
(Unaudited)
(In thousands)
 
  Three Months Ended September 30,   Nine Months Ended September 30,
  2020   2019   2020   2019
Net income attributable to ROIC $ 6,466     $ 17,858     $ 23,115     $ 38,693  
Plus:  Depreciation and amortization 24,649     24,163     73,041     73,367  
Less: Gain on sale of real estate     (10,357 )       (13,175 )
Funds from operations – basic 31,115     31,664     96,156     98,885  
Net income attributable to non-controlling interests 503     1,770     2,026     3,864  
Funds from operations – diluted $ 31,618     $ 33,434     $ 98,182     $ 102,749  
                               

 

SAME-CENTER CASH NET OPERATING INCOME ANALYSIS
(Unaudited)
(In thousands, except number of shopping centers and percentages)
 
  Three Months Ended September 30,   Nine Months Ended September 30,
  2020   2019   $ Change   % Change   2020   2019   $ Change   % Change
Number of shopping centers included in same-center analysis 87     87             87     87          
Same-center occupancy 96.9 %   97.7 %       (0.8 )%   96.9 %   97.7 %       (0.8 )%
                               
Revenues:                              
Base rents $ 50,986     $ 50,994     $ (8 )   %   $ 154,261     $ 151,949     $ 2,312     1.5 %
Percentage rent 55     183     (128 )   (69.9 )%   268     316     (48 )   (15.2 )%
Recoveries from tenants 16,611     16,348     263     1.6 %   50,520     49,536     984     2.0 %
Other property income 481     455     26     5.7 %   1,163     1,895     (732 )   (38.6 )%
Bad debt (2,073 )   (209 )   (1,864 )   891.9 %   (8,251 )   (1,112 )   (7,139 )   642.0 %
Total Revenues 66,060     67,771     (1,711 )   (2.5 )%   197,961     202,584     (4,623 )   (2.3 )%
Operating Expenses                              
Property operating expenses 10,652     11,075     (423 )   (3.8 )%   31,615     32,958     (1,343 )   (4.1 )%
Property taxes 8,411     7,990     421     5.3 %   25,090     23,673     1,417     6.0 %
Total Operating Expenses 19,063     19,065     (2 )   %   56,705     56,631     74     0.1 %
Same-Center Cash Net Operating Income $ 46,997     $ 48,706     $ (1,709 )   (3.5 )%   $ 141,256     $ 145,953     $ (4,697 )   (3.2 )%
                                                           

 

SAME-CENTER CASH NET OPERATING INCOME RECONCILIATION
(Unaudited)
(In thousands)
 
  Three Months Ended September 30,   Nine Months Ended September 30,
  2020   2019   2020   2019
GAAP operating income $ 22,034     $ 35,029     $ 70,188     $ 89,242  
Depreciation and amortization 24,649     24,163     73,041     73,367  
General and administrative expenses 4,101     4,448     11,974     13,674  
Other expense 165     47     525     1,364  
Gain on sale of real estate     (10,357 )       (13,175 )
Straight-line rent (333 )   (924 )   (563 )   (2,650 )
Amortization of above- and below-market rent (2,756 )   (3,087 )   (10,756 )   (13,025 )
Property revenues and other expenses (1) (114 )   (161 )   (363 )   135  
Total Company cash NOI 47,746     49,158     144,046     148,932  
Non same-center cash NOI (749 )   (452 )   (2,790 )   (2,979 )
Same-center cash NOI $ 46,997     $ 48,706     $ 141,256     $ 145,953  

____________________

(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:
Carol Merriman, Investor Relations
858-255-7426
cmerriman@roireit.net

Source: Retail Opportunity Investments Corp.

 

Retail Opportunity Investments Corp. Logo

 

Source: Retail Opportunity Investments Corp.

Stock Information

  • Nov 19, 2020
  • 9:40 pm EST

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