InvenTrust Properties Corp. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023; comparisons are with the corresponding 2022 periods. Dollar amounts below are in millions unless noted. InvenTrust is a Sun Belt, multi-tenant retail REIT focused on grocery-anchored and other essential retail centers. At quarter-end it owned 63 properties totaling approximately 10.4 million square feet.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Total income | $64.7 | $59.9 | $129.9 | $118.7 |
| Net income | $2.1 | $41.9 | $3.2 | $51.4 |
| Diluted EPS | $0.03 | $0.62 | $0.05 | $0.76 |
| Same-property NOI | $38.0 | $36.7 | $71.8 | $69.3 |
| Core FFO | $29.1 | $28.6 | $56.4 | $57.7 |
| Core FFO per diluted share | $0.43 | $0.42 | $0.83 | $0.85 |
Lease income rose 9.1% in Q2 and 10.6% for the first half. Same-property NOI increased 3.7% and 3.5%, respectively. The company attributed growth mainly to higher minimum rents from improved occupancy and rental rates. Economic occupancy was 93.9% and leased occupancy 96.2% at June 30, versus 93.8% and 95.9% a year earlier. Six-month comparable lease renewals achieved a 6.3% increase in contractual rent; tenant retention was approximately 92% of expiring space.
Net income fell sharply year over year primarily because 2022 included a $36.9 million gain on sales of two properties; Q2 2023 included only a $1.0 million gain from a partial condemnation. Net income also faced higher interest costs and depreciation. Q2 net margin was approximately 3.2%, compared with 70.0% in Q2 2022, largely reflecting the prior-year sale gain; these are calculated from reported income and net income.
Cash flow, liquidity and debt
- Six-month operating cash flow was $63.5 million, essentially unchanged from 2022. Investing activities used $77.8 million; financing activities used $42.7 million. Cash, cash equivalents and restricted cash ended at $80.7 million, down from $137.8 million at year-end 2022.
- Cash distributions paid were $28.4 million in the first half; distributions declared were $29.1 million, or $0.43 per share. The company states current liquidity is sufficient for short- and long-term cash demands, but future distributions remain at the Board’s discretion.
- Gross debt was $838.5 million ($833.7 million net of discounts and issuance costs), up from $759.8 million at year-end. Debt included $188.5 million of mortgages, $400.0 million of term loans and $250.0 million of senior notes. The $350 million revolving facility had no balance outstanding.
- Reported weighted-average debt rate was 3.88%, versus 4.08% at year-end. The company fixed the rates on its $400 million term loans through their maturities using swaps; $17.5 million of pooled mortgage debt remained variable-rate. A permanent 1% rate change on variable-rate debt was estimated to change annual interest expense by about $0.2 million.
- Six-month net interest expense increased to $18.9 million from $10.4 million, driven principally by the 2022 senior-note issuance, higher term-loan rates, assumed mortgages and debt-cost amortization. Management reported compliance with debt covenants.
Material changes, outlook and risks
- On January 18, 2023, the company acquired the four remaining properties in its IAGM joint venture for an aggregate purchase price of $222.3 million, assuming approximately $92.5 million of mortgage debt. It received approximately $71.4 million as its share of IAGM distributions following the transaction. In June, it acquired The Shoppes at Davis Lake in Charlotte for $22.4 million.
- Management cited rent collection and leasing, tenant financial health, acquisition and redevelopment execution, inflation, interest rates, debt refinancing, competition from e-commerce and continued REIT qualification among principal risks. It expects to use cash, property-sale proceeds and available credit capacity as needed for near-term debt repayment, refinancing or extensions.
- No specific earnings, FFO or occupancy guidance is provided in the supplied filing text. Management said it believes available liquidity is adequate; it may pursue debt or equity financing for operations, investments or acquisitions. Near-term mortgage maturities include $92.5 million scheduled for 2023, with extension options noted.
- Ordinary-course legal claims are not expected by management to have a material adverse effect. The filing reports no material change to previously disclosed risk factors, no defaults on senior securities, and effective disclosure controls.
Important facts for investors to verify
- How much of income and NOI growth reflects acquired assets versus same-property rent, occupancy and recoveries.
- Debt maturities, extension availability and refinancing terms, especially the 2023 mortgage balance and variable-rate exposure.
- Whether operating cash flow can sustain distributions, capital spending and planned acquisitions as cash balances decline.
- Tenant rent collection, leasing spreads, occupancy and the impact of lease expirations, particularly the 2027 expiration concentration.
- How the completed IAGM acquisition and its deferred gains affect future reported earnings, FFO and property-level performance.