Retail Opportunity Investments Corp. Reports 2020 Third Quarter Results

Retail Opportunity Investments Corp.
·16-min read

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.