Business context and reporting period
InvenTrust Properties Corp. is a non-traded Maryland REIT focused on grocery-anchored neighborhood and community shopping centers and select power centers, primarily in Sun Belt markets. This summary covers the fiscal year ended December 31, 2020; the filing was dated February 19, 2021. Unless noted, dollar amounts are in millions.
At year-end, the company owned or held an interest in 65 retail properties totaling approximately 10.8 million square feet, including a 55% interest in the unconsolidated IAGM joint venture. Pro rata economic occupancy was 93.8%, down from 95.3% a year earlier.
Financial and operating performance
| Metric | 2020 | 2019 |
|---|---|---|
| Total income | $197.8 | $226.5 |
| Net income (loss) | $(10.2) | $38.4 |
| Net income (loss) per diluted share | $(0.01) | $0.05 |
| Cash from operating activities | $94.2 | $106.0 |
| FFO per share | $0.14 | $0.15 |
| AFFO per share | $0.13 | $0.15 |
| Cash distributions paid | $54.2 | $53.3 |
Net investment properties were $1,929.4; total assets were $2,407.3 and total liabilities were $668.5. Debt, net of discounts and issuance costs, was $555.1. Cash and cash equivalents were $222.6, with an additional $1.2 of restricted cash. The $350 million revolving facility had $50 million drawn and $300 million undrawn at year-end; the company reported compliance with its debt covenants.
Same-property Modified NOI, a non-GAAP measure, declined 5.4% to $110.5. The filing reports that 2020 distributions were funded from operating cash flow, distributions from unconsolidated entities, and property-sale proceeds. Approximately 49% of 2020 distributions were characterized as ordinary dividends for federal tax purposes and 51% as return of capital.
For the fourth quarter, total income was $51.2 and net income was $1.2, compared with $54.7 and $28.7, respectively, in fourth-quarter 2019.
Material changes versus the prior comparable period
- Total income declined 12.7% year over year. Same-property lease income fell $9.0, primarily reflecting higher estimated credit losses, rent abatements, and lower recovery revenue attributed to COVID-19.
- Estimated credit losses on billed rent and straight-line rent increased; the cash-flow statement reports $11.1 of estimated credit-loss provision, versus $1.6 in 2019. Same-property Modified NOI decreased $6.3.
- Net results shifted from $38.4 income to a $10.2 loss. A key comparison factor was the reduction in net gains on property sales, from $62.0 in 2019 to $1.8 in 2020; 2020 also included $9.0 of property impairment and $6.1 as the company’s share of an IAGM impairment.
- Operating cash flow decreased $11.9 to $94.2. Year-end cash, cash equivalents, and restricted cash fell to $223.8 from $260.7.
- Pro rata occupancy fell 1.5 percentage points. Same-property occupancy was 93.6%, compared with 96.1% in 2019.
- The company acquired properties for a gross price of $42.2 and reported gross dispositions of $8.5 in 2020, compared with $365.8 of acquisitions and $357.8 of dispositions in 2019.
Outlook, commentary, risks, and unusual items
Management said the pandemic’s duration and financial effects remained uncertain. Through February 9, 2021, tenants representing approximately 52% of portfolio GLA had requested assistance. The company granted approximately $6.5 of rent deferrals, including its pro rata joint-venture share, with contractual payment terms extending through 2023. It reported collection of 95.6% of January 2021 tenant billings by February 9, 2021.
The company drew $150.0 on its revolver in March 2020 for flexibility and repaid $100.0 in October. Management stated it did not expect COVID-19 to impair short-term liquidity needs, while noting that future liquidity depends on rent collection, operating conditions, capital markets, and cost management. The filing provides no numeric earnings or operating guidance.
The board approved an increase in the annualized distribution rate to $0.0782 per share, effective for the quarterly distribution payable in April 2021. The 2020 distribution rate was $0.075 per share for the calendar year. The share repurchase and distribution reinvestment programs were suspended effective July 11, 2020. The company’s shares were not listed on a national exchange; its estimated $2.89 per-share value as of December 1, 2020 is not a trading price or assurance of realizable value.
Management said COVID-19-related uncertainty delayed exploration of a potential strategic transaction intended to provide stockholder liquidity. E-commerce competition, tenant distress and bankruptcies, leasing costs, Texas revenue concentration, refinancing and interest-rate exposure, and the illiquidity of the shares remain significant risks. The independent auditor highlighted the assessment of property expected holding periods as a critical audit matter; KPMG issued an unqualified opinion on the financial statements.
Important facts for investors to verify
- Whether deferred rents and receivables are collected on schedule and whether tenant credit losses or bankruptcies increase.
- Debt maturities, covenant headroom, and the company’s capacity to refinance; $150.0 of variable-rate debt remained unhedged at year-end, and the revolver matures in December 2022, subject to extension options.
- Whether operating cash flow can sustainably support distributions, given 2020 distributions also relied on joint-venture distributions and property-sale proceeds.
- Property occupancy, leasing spreads, tenant improvement costs, and the performance of the IAGM portfolio, whose year-end economic occupancy was 87.4%.
- The assumptions underlying impairments and the estimated $2.89 share value, and the prospects and terms of any strategic transaction or future stockholder liquidity.