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Oct 25, 2022

Retail Opportunity Investments Corp. Reports 2022 Third Quarter Results

SAN DIEGO, Oct. 25, 2022 (GLOBE NEWSWIRE) -- Retail Opportunity Investments Corp. (NASDAQ:ROIC) announced today financial and operating results for the three and nine months ended September 30, 2022.

HIGHLIGHTS

  • $18.5 million of net income attributable to common stockholders ($0.15 per diluted share)
  • $36.5 million in Funds From Operations (FFO)(1) ($0.27 per diluted share)
  • FFO guidance range for 2022 narrowed ($1.09 - $1.11 per diluted share)
  • 1.2 million square feet of leases executed during first nine months of ‘22 (record activity)
  • 97.8% portfolio lease rate at 9/30/22 (vs. 97.6% at 6/30/22 and 97.4% at 9/30/21)
  • 47.7% increase in same-space cash base rents on new leases (6.8% renewal increase)
  • 2.1% increase in same-center cash net operating income (3Q‘22 vs. 3Q‘21)
  • 4.4% increase in same-center cash net operating income (first nine months ‘22 vs. ‘21)
  • $120.2 million of grocery-anchored shopping centers acquired
  • $36.2 million property sold
  • 3.5x interest coverage ratio for 3Q‘22
  • 6.6x net principal debt-to-annualized EBITDA ratio for 3Q‘22
  • $0.15 per share cash dividend declared

________________________
(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, “Demand for space continues to be strong across our portfolio and we continue to make the most of it, leasing space at a record pace with the third quarter being our most active and strongest year-to-date.   During the third quarter, we leased over 480,000 square feet, increased our portfolio lease rate to 97.8%, and achieved a 47.7% increase in same-space base rents on new leases signed during the quarter.”   Tanz added, “Overall, our West Coast grocery-anchored portfolio continues to perform well and we are poised to finish the year strong and with good momentum as we head towards 2023.”

FINANCIAL RESULTS SUMMARY

For the three months ended September 30, 2022, GAAP net income attributable to common stockholders was $18.5 million, or $0.15 per diluted share, as compared to GAAP net income attributable to common stockholders of $21.1 million, or $0.17 per diluted share, for the three months ended September 30, 2021. For the nine months ended September 30, 2022, GAAP net income attributable to common stockholders was $41.7 million, or $0.33 per diluted share, as compared to GAAP net income attributable to common stockholders of $45.0 million, or $0.38 per diluted share, for the nine months ended September 30, 2021. Included in 2021 GAAP net income was a $12.9 million and a $22.3 million gain on sale of real estate for the three and nine months ended September 30, 2021, respectively, as compared to a $7.7 million gain on sale of real estate for both the three and nine months ended September 30, 2022.

FFO for the third quarter of 2022 was $36.5 million, or $0.27 per diluted share, as compared to $32.6 million in FFO, or $0.25 per diluted share for the third quarter of 2021. FFO for the first nine months of 2022 was $109.4 million, or $0.83 per diluted share, as compared to $95.3 million in FFO, or $0.74 per diluted share for the first nine months of 2021. 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 2022, same-center net operating income (NOI) was $48.5 million, as compared to $47.5 million in same-center NOI for the third quarter of 2021, representing a 2.1% increase. For the first nine months of 2022, same-center NOI increased 4.4% as compared to same-center NOI for the first nine months of 2021. 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.

At September 30, 2022, ROIC had total real estate assets (before accumulated depreciation) of approximately $3.4 billion and approximately $1.4 billion of principal debt outstanding. As of September 30, 2022, 95.5% of ROIC’s principal debt outstanding was unsecured, including $52.0 million outstanding on its $600.0 million unsecured revolving credit facility. Additionally, ROIC’s interest coverage ratio and net principal debt-to-annualized EBITDA ratio for the third quarter of 2022 was 3.5 times and 6.6 times, respectively, and 96.6% of its portfolio was unencumbered at September 30, 2022, based on gross leasable area.

ACQUISITION & DISPOSITION SUMMARY

Year-to-date, ROIC has acquired $120.2 million of grocery-anchored shopping centers, including three grocery-anchored shopping centers acquired during the second quarter, totaling $60.0 million, and the following two grocery-anchored shopping centers acquired during the third quarter, totaling $60.2 million.

Ballinger Village

In August 2022, ROIC acquired Ballinger Village for $29.2 million. The shopping center is approximately 111,000 square feet and is anchored by Thriftway Supermarket and Rite Aid Pharmacy. The property is located in Shoreline, Washington, within the Seattle metropolitan area, and is currently 92.1% leased.

Thomas Lake Shopping Center

In August 2022, ROIC acquired Thomas Lake Shopping Center for $31.0 million. The shopping center is approximately 111,000 square feet and is anchored by Albertsons Supermarket and Rite Aid Pharmacy. The property is located in Mill Creek, Washington, within the Seattle metropolitan area, and is currently 100% leased.

In terms of property dispositions, during the third quarter ROIC sold one property for $36.2 million.

PROPERTY OPERATIONS SUMMARY

At September 30, 2022, ROIC’s portfolio was 97.8% leased. During the third quarter of 2022, ROIC executed 133 leases, totaling 480,458 square feet, including 48 new leases, totaling 131,422 square feet, achieving a 47.7% increase in same-space comparative base rent, and 85 renewed leases, totaling 349,036 square feet, achieving a 6.8% increase in base rent. ROIC reports same-space comparative new lease and renewal base rents on a cash basis.

ENVIRONMENTAL, SOCIAL & GOVERNANCE

During the third quarter, ROIC issued its annual Environmental, Social and Governance (ESG) report, detailing its ESG achievements during 2021, as well as its ongoing initiatives and long term strategic goals. The report was prepared in accordance with the Sustainability Accounting Standards Board (SASB) standards, the Task Force on Climate-related Financial Disclosures (TCFD) framework, and the United Nations Sustainable Development Goals (SDG). The report is available at: http://www.roireit.net/assets/001/5927.pdf.

CASH DIVIDEND

On October 7, 2022, ROIC distributed a $0.15 per share cash dividend. On October 25, 2022, ROIC’s board of directors declared a cash dividend of $0.15 per share, payable on December 29, 2022 to stockholders of record on December 15, 2022.

2022 GUIDANCE SUMMARY

ROIC currently estimates that GAAP net income for 2022 will be within the range of $0.37 to $0.39 per diluted share, and FFO will be within the range of $1.09 to $1.11 per diluted share.

  Year Ended December 31, 2022
  Previous   Current
  Low End   High End   Low End   High End
  (unaudited, amounts in thousands except per share and percentage data)
GAAP net income applicable to stockholders $ 37,546     $ 44,907     $ 45,128     $ 47,708  
Funds from operations (FFO) – diluted $ 142,560     $ 150,080     $ 144,425     $ 147,075  
               
GAAP net income per diluted share $ 0.31     $ 0.36     $ 0.37     $ 0.39  
FFO per diluted share $ 1.08     $ 1.12     $ 1.09     $ 1.11  
               
Key Drivers              
General and administrative expenses $ 22,500     $ 21,500     $ 22,000     $ 21,500  
Straight-line rent $ 2,400     $ 2,400     $ 3,000     $ 3,000  
Amortization of above- and below-market rent $ 11,300     $ 11,300     $ 11,900     $ 11,900  
Bad debt $ 3,000     $ 2,000     $ 2,500     $ 2,000  
Acquisitions $ 120,000     $ 200,000     $ 120,200     $ 120,200  
Dispositions $ 70,000     $ 100,000     $ 36,200     $ 36,200  
Same-center cash NOI growth (vs. 2021)   4.0 %     5.0 %     4.0 %     5.0 %
               

ROIC’s management will discuss guidance, and the underlying assumptions, on ROIC’s October 26, 2022 conference call.   ROIC’s guidance is a forward-looking statement and is subject to risks and other factors noted elsewhere in this press release.

CONFERENCE CALL

ROIC will conduct a conference call to discuss its results on Wednesday, October 26, 2022 at 9:00 a.m. Eastern Time / 6:00 a.m. Pacific Time. To participate in the conference call, click on the following link (ten minutes prior to the call) to register:

http://register.vevent.com/register/BI1623ee85efbe4f19a4a0cdf6f20f99fa

Once registered, participants will have the option of: 1) dialing in from their phone (using a PIN); or 2) clicking the “Call Me” option to receive an automated call directly to their phone.

The conference call will also be available live (in a listen-only mode) at: http://edge.media-server.com/mmc/p/bqnpah2h

The conference call will be recorded and available for replay following the conclusion of the live broadcast and will be accessible up to one year on ROIC’s website, specifically on its Investor Relations Events & Presentations page:
http://investor.roicreit.com/events-presentations

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, 2022, ROIC owned 93 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, 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, 2022
(unaudited)
  December 31, 2021
ASSETS      
Real Estate Investments:      
Land $ 942,276     $ 915,861  
Building and improvements   2,453,763       2,350,294  
    3,396,039       3,266,155  
Less:  accumulated depreciation   556,930       510,836  
    2,839,109       2,755,319  
Mortgage note receivable   4,808       4,875  
Real Estate Investments, net   2,843,917       2,760,194  
Cash and cash equivalents   7,439       13,218  
Restricted cash   1,997       2,145  
Tenant and other receivables, net   54,177       55,787  
Deposits   500        
Acquired lease intangible assets, net   50,496       50,139  
Prepaid expenses   1,504       5,337  
Deferred charges, net   25,221       25,017  
Other assets   16,437       17,007  
Total assets $ 3,001,688     $ 2,928,844  
       
LIABILITIES AND EQUITY      
Liabilities:      
Term loan $ 299,162     $ 298,889  
Credit facility   52,000        
Senior Notes   946,440       945,231  
Mortgage notes payable   61,130       85,354  
Acquired lease intangible liabilities, net   146,178       136,608  
Accounts payable and accrued expenses   56,585       48,598  
Tenants’ security deposits   7,525       7,231  
Other liabilities   41,591       40,580  
Total liabilities   1,610,611       1,562,491  
       
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; 124,541,618 and 122,685,266 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively   12       12  
Additional paid-in capital   1,609,588       1,577,837  
Accumulated dividends in excess of earnings   (307,394 )     (297,801 )
Accumulated other comprehensive income (loss)   27       (3,154 )
Total Retail Opportunity Investments Corp. stockholders’ equity   1,302,233       1,276,894  
Non-controlling interests   88,844       89,459  
Total equity   1,391,077       1,366,353  
Total liabilities and equity $ 3,001,688     $ 2,928,844  
       

 

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,
    2022       2021       2022       2021  
Revenues              
Rental revenue $ 77,420     $ 69,907     $ 229,675     $ 208,925  
Other income   618       1,478       3,061       2,377  
Total revenues   78,038       71,385       232,736       211,302  
               
Operating expenses              
Property operating   12,705       11,009       37,468       32,334  
Property taxes   8,876       8,564       25,812       25,502  
Depreciation and amortization   24,332       22,854       72,444       69,401  
General and administrative expenses   5,203       4,746       16,145       14,353  
Other expense   111       147       778       631  
Total operating expenses   51,227       47,320       152,647       142,221  
               
Gain on sale of real estate   7,653       12,880       7,653       22,340  
               
Operating income   34,464       36,945       87,742       91,421  
Non-operating expenses              
Interest expense and other finance expenses   (14,678 )     (14,356 )     (43,176 )     (43,173 )
Net income   19,786       22,589       44,566       48,248  
Net income attributable to non-controlling interests   (1,264 )     (1,494 )     (2,896 )     (3,254 )
Net Income Attributable to Retail Opportunity Investments Corp. $ 18,522     $ 21,095     $ 41,670     $ 44,994  
               
Earnings per share – basic $ 0.15     $ 0.17     $ 0.34     $ 0.38  
               
Earnings per share diluted $ 0.15     $ 0.17     $ 0.33     $ 0.38  
               
Dividends per common share $ 0.15     $ 0.11     $ 0.41     $ 0.33  
               

 

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

  Three Months Ended September 30,   Nine Months Ended September 30,
    2022       2021       2022       2021  
Net income attributable to ROIC $ 18,522     $ 21,095     $ 41,670     $ 44,994  
Plus:  Depreciation and amortization   24,332       22,854       72,444       69,401  
Less: Gain on sale of real estate   (7,653 )     (12,880 )     (7,653 )     (22,340 )
Funds from operations – basic   35,201       31,069       106,461       92,055  
Net income attributable to non-controlling interests   1,264       1,494       2,896       3,254  
Funds from operations – diluted $ 36,465     $ 32,563     $ 109,357     $ 95,309  
               

 

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,
      2022       2021     $ Change   % Change     2022       2021     $ Change   % Change
Number of shopping centers included in same-center analysis   84       84               84       84          
Same-center occupancy   97.8 %     97.3 %       0.5 %     97.8 %     97.3 %       0.5 %
                                 
Revenues:                              
  Base rents $ 51,309     $ 49,868     $ 1,441     2.9 %   $ 153,292     $ 148,192     $ 5,100     3.4 %
  Percentage rent   193       90       103     114.4 %     526       179       347     193.9 %
  Recoveries from tenants   17,441       16,352       1,089     6.7 %     52,157       49,258       2,899     5.9 %
  Other property income   414       939       (525 )   (55.9 )%     2,268       1,493       775     51.9 %
  Bad debt   (610 )     (513 )     (97 )   18.9 %     (1,310 )     (1,924 )     614     (31.9 )%
Total Revenues   68,747       66,736       2,011     3.0 %     206,933       197,198       9,735     4.9 %
Operating Expenses                                              
  Property operating expenses   11,959       10,850       1,109     10.2 %     35,826       31,727       4,099     12.9 %
  Property taxes   8,256       8,363       (107 )   (1.3 )%     24,245       24,855       (610 )   (2.5 )%
Total Operating Expenses   20,215       19,213       1,002     5.2 %     60,071       56,582       3,489     6.2 %
Same-Center Cash Net Operating Income $ 48,532     $ 47,523     $ 1,009     2.1 %   $ 146,862     $ 140,616     $ 6,246     4.4 %
                                 

 

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

  Three Months Ended September 30,   Nine Months Ended September 30,
    2022       2021       2022       2021  
GAAP operating income $ 34,464     $ 36,945     $ 87,742     $ 91,421  
Depreciation and amortization   24,332       22,854       72,444       69,401  
General and administrative expenses   5,203       4,746       16,145       14,353  
Other expense   111       147       778       631  
Gain on sale of real estate   (7,653 )     (12,880 )     (7,653 )     (22,340 )
Straight-line rent   (922 )     (126 )     (2,288 )     (438 )
Amortization of above- and below-market rent   (2,906 )     (2,125 )     (9,218 )     (6,571 )
Property revenues and other expenses (1)   (245 )     (183 )     (833 )     (364 )
Total Company cash NOI   52,384       49,378       157,117       146,093  
Non same-center cash NOI   (3,852 )     (1,855 )     (10,255 )     (5,477 )
Same-center cash NOI $ 48,532     $ 47,523     $ 146,862     $ 140,616  
               

________________________
(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:
Nicolette O’Leary
Director of Investor Relations
858-677-0900
noleary@roireit.net

 


Stock Information

  • Oct 16, 2022
  • 12:57 am EDT

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