InvenTrust Properties Corp. — Q3 2023 Form 10-Q
Reporting period: Quarter ended September 30, 2023; financial statements are unaudited. InvenTrust is a REIT focused on multi-tenant retail, primarily grocery-anchored and necessity-based centers in Sun Belt markets. Unless noted, dollar amounts below are in millions.
Financial results and operating metrics
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Total income | $64.1 | $58.8 | $194.0 | $177.4 |
| Net income (loss) | ($0.8) | $0.9 | $2.4 | $52.4 |
| Diluted EPS | ($0.01) | $0.01 | $0.04 | $0.77 |
| Same Property NOI | $37.5 | $35.6 | $106.3 | $101.8 |
| Core FFO per diluted share | $0.41 | $0.37 | $1.24 | $1.23 |
| Operating cash flow | Not reported separately for the quarter | $99.8 | $100.9 |
At September 30, 2023, total assets were $2,530.0 million, net investment properties were $2,208.4 million, cash and restricted cash were $104.1 million, and debt, net, was $834.2 million ($838.5 million before discounts and issuance costs). The weighted-average stated debt rate was 3.88%. The $350 million revolving credit facility had no balance drawn.
Quarterly distributions declared and paid were $0.22 per share, versus $0.21 a year earlier. For the first nine months, $43.7 million was declared and $42.9 million paid.
Material changes versus comparable periods
- Q3 total income rose $5.3 million year over year, including a $5.9 million increase in net lease income. Acquisitions contributed $7.8 million of lease-income growth, partly offset by dispositions and same-property movements.
- Same Property NOI increased 5.3% in Q3 and 4.4% for the first nine months. However, portfolio economic occupancy was 92.6%, down from 94.0% a year earlier; leased occupancy was 95.1%, versus 96.1%.
- Net income declined to a Q3 loss and fell sharply for the nine-month period. Higher depreciation and amortization and interest expense weighed on results; the prior-year nine-month comparison also included $36.9 million of property-sale gains, versus $2.7 million in 2023.
- Net interest expense increased $1.9 million in Q3 and $10.3 million for the first nine months, reflecting senior notes issued in 2022, higher rates on term loans, and assumed mortgages.
- Core FFO per share increased to $0.41 in Q3 from $0.37, and to $1.24 for the first nine months from $1.23.
Cash, debt, transactions and outlook
- For the first nine months, operating cash flow was $99.8 million. Investing used $76.2 million and financing used $57.3 million; cash and restricted cash declined $33.7 million to $104.1 million.
- Investing cash flows included $152.0 million of property acquisitions, $28.2 million of capital and leasing costs, $12.6 million of net sale proceeds, and $91.4 million of distributions from unconsolidated entities.
- In January 2023, the Company acquired IAGM’s four remaining properties for $222.3 million, assuming $92.5 million of mortgage debt. The transaction substantially wound down the joint venture; InvenTrust received approximately $71.4 million of its share of distributed proceeds.
- In August, the Company sold Trowbridge Crossing for $11.5 million, recognizing a $1.7 million gain. Nine-month property purchases totaled $244.0 million gross; dispositions totaled $13.1 million gross.
- After quarter-end, on October 17, 2023, the Company extended the maturity of $92.5 million of mortgage debt from November 2, 2023 to November 2, 2024. The rate is one-month Term SOFR plus 1.65%.
- The Company reported compliance with all debt covenants and stated that current liquidity sources were sufficient for short- and long-term cash demands. It expects to address near-term maturities using property-sale proceeds, cash, and available credit capacity. No specific earnings or FFO guidance was provided.
- Management cites risks including rent collection and tenant bankruptcy, retail competition and e-commerce, leasing and capital costs, acquisition and redevelopment execution, refinancing, interest rates, inflation, and maintaining REIT status. Management did not expect pending ordinary-course legal matters to materially affect financial condition, results, or cash flows.
- Interest-rate swaps fixed the $400 million term-loan balance; reported remaining variable-rate exposure was approximately $17.5 million. A permanent 1% rate move on variable-rate debt was estimated to affect annual interest expense by about $0.2 million.
Important facts for investors to verify
- Whether occupancy and same-property rent growth improve, and whether leasing spreads translate into sustained NOI and cash flow.
- Debt maturities, refinancing terms, floating-rate exposure, hedge coverage, and covenant headroom, including the extended $92.5 million mortgage.
- Whether operating cash flow can support acquisitions, capital and leasing requirements, debt service, and distributions; distributions remain subject to Board discretion.
- The ongoing impact of the IAGM property acquisition and liquidation on reported earnings, FFO, and cash distributions.
- Tenant credit and rent collection trends, particularly given provisions for uncollectible rent and lower occupancy than the prior year.