InvenTrust Properties Corp. — Q2 2019 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2019. InvenTrust is a retail REIT focused on open-air, multi-tenant centers. Unless stated otherwise, financial amounts below are in millions of dollars.
Financial performance
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Total income | $57.2 | $61.5 | $113.6 | $125.3 |
| Net income from continuing operations | $6.3 | $23.2 | $10.3 | $57.4 |
| Net income (loss), including discontinued operations | $(5.7) | $23.2 | $(15.2) | $57.4 |
| Operating cash flow | Not separately presented | $53.0 | $65.3 | |
| Modified FFO applicable to common shares (non-GAAP) | $29.8 | $30.9 | $57.7 | $63.4 |
- Q2 lease income fell $4.5 million; first-half lease income fell $11.8 million. Management attributed the decline primarily to properties sold or transferred since January 2018, partly offset by acquisitions and same-property growth.
- Same-property modified NOI rose 5.1% in Q2 to $33.9 million and 4.2% for the half to $66.7 million. The company cited higher base rents, other property income, and recoveries.
- Net losses included $12.0 million in Q2 and $25.5 million for the first half from University House indemnity claims. Continuing-operations EPS was $0.01 in both periods; total EPS was $(0.01) for Q2 and $(0.02) for the half.
- Distributions declared and paid were $0.02 per share in Q2 and $0.04 per share for the first half. The board increased the annual distribution rate effective with the distribution paid in April; the filing does not state the new annual rate in the provided text.
Financial position, debt, and liquidity
- At June 30, 2019, total assets were $2.479 billion, total liabilities $668.4 million, and stockholders’ equity $1.811 billion.
- Cash and cash equivalents were $146.5 million, with restricted cash of $6.2 million. Cash, cash equivalents, and restricted cash declined by $112.1 million during the first half to $152.7 million.
- Debt, net, was $548.8 million: $199.6 million of mortgages and $349.2 million of unsecured term loans. Mortgage rates were fixed at 3.49%–5.49%, with a 4.27% weighted average. Term-loan principal was $352.0 million; $150.0 million was swapped to fixed rates.
- The company had no borrowings on its $350 million unsecured revolving credit facility and reported $48 million available under its term-loan commitments. Management said it expected to meet near-term needs using operating cash flow, joint-venture distributions, property-sale proceeds, cash, and borrowing capacity.
- First-half investing cash outflow was $124.0 million, reflecting acquisitions and investment spending, partly offset by property-sale proceeds and $30.0 million from liquidation of a joint-venture interest. Financing cash outflow was $41.1 million, including $26.4 million of distributions and $12.5 million of debt payoffs.
Portfolio changes and operating trends
- At quarter-end, the platform comprised 71 properties and approximately 12.1 million square feet, including 12 properties held through IAGM. Economic occupancy was 94.3%, versus 93.0% a year earlier; annualized base rent per square foot was $17.82, versus $16.95.
- During the first half, the company acquired properties for a gross $142.6 million and sold two retail properties for a gross $33.0 million. It also liquidated its Downtown Railyard Venture interest for $30.0 million, with no gain or loss recognized.
- Lease retention was approximately 77.5% for 939,909 square feet re-leased out of 1,211,689 square feet expiring. Comparable renewal rents were 5.3% above prior contractual rents; comparable new-lease rents were 7.8% higher.
- After quarter-end, on July 11, the company acquired Southern Palm, a 346,200-square-foot power center, for $96.75 million.
Outlook, risks, and unusual items
- No quantified earnings or operating guidance was provided. Management’s strategy is to focus on grocery-anchored and necessity-based centers in selected growth markets, pursue acquisitions and redevelopment, and sell assets outside core markets or whose values it believes are maximized. Management cautioned that competitive pricing may limit reinvestment opportunities and dispositions may dilute operating results during transition.
- On June 14, the company settled University House indemnity claims for $30.0 million and paid the settlement on June 24. It recorded $25.5 million of related first-half losses, including $12.0 million in Q2.
- Interest-rate risk includes $202.0 million of variable-rate term-loan principal. Management estimated that a permanent 1% rate increase or decrease would change annual interest expense by approximately $2.0 million. Two swaps covering $150.0 million were scheduled to terminate December 1, 2019.
- Management identified retail-market and economic conditions, e-commerce, tenant failures and lease rollover, property acquisition and disposition execution, refinancing and interest rates, and REIT qualification among key risks. It reported no material change in previously disclosed risk factors, no material off-balance-sheet arrangements, and effective disclosure controls.
Investor facts to verify
- Review the $30.0 million indemnity settlement, related accrual history, and whether any related exposure remains.
- Assess whether operating cash flow and available financing support distributions, acquisitions, and debt obligations, given the first-half cash decline.
- Check refinancing and interest-rate exposure, particularly the 2019 swap expiration and future mortgage maturities.
- Evaluate whether same-property NOI growth and occupancy improvements can offset portfolio dispositions and lower reported revenue.
- Confirm Southern Palm’s post-quarter acquisition funding and expected contribution to operating results.