Business context and reporting period
InvenTrust Properties Corp. is a REIT focused on multi-tenant, grocery-anchored neighborhood and select power centers in Sunbelt markets. This Form 10-Q covers the quarter and six months ended June 30, 2021; financial amounts are in thousands except per-share data. At quarter-end, the company owned 55 wholly owned retail properties and held a 55% interest in a joint venture owning 10 properties. Its pro rata combined portfolio comprised 65 properties and approximately 9.8 million square feet.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Total income | $52,140 | $41,639 | $103,261 | $94,077 |
| Net income (loss) | $1,499 | $(9,611) | $1,399 | $(13,097) |
| Diluted EPS | $0.02 | $(0.13) | $0.02 | $(0.18) |
| Same-property NOI (non-GAAP) | $33,231 | $28,102 | $64,147 | $61,161 |
| FFO per diluted share (non-GAAP) | $0.35 | $0.21 | $0.66 | $0.61 |
| AFFO per diluted share (non-GAAP) | $0.33 | $0.26 | $0.64 | $0.66 |
| Operating cash flow | — | — | $53,999 | $40,333 |
Q2 lease income was $50,978 (2020: $40,718); six-month lease income was $100,904 (2020: $92,002). The filing does not provide a single headline operating-margin measure.
- Balance sheet, June 30: total assets were $2,313,845; debt, net, $504,829; total liabilities, $611,121; and stockholders’ equity, $1,702,724. Cash, cash equivalents and restricted cash were $172,111, down from $223,770 at year-end 2020.
- Debt and liquidity: debt comprised $106,154 of mortgages, net, and $398,675 of unsecured term loans, net. The $350,000 revolving credit facility was undrawn at quarter-end. The company reported compliance with loan covenants. Of $400,000 in term-loan principal, $300,000 was swapped to fixed rates; mortgages carried fixed rates of 3.49%–4.58%.
- Cash uses: six-month investing cash outflow was $10,358, including $6,696 of capital expenditures and tenant improvements and $1,546 for development and redevelopment. Financing cash outflow was $95,300, including $50,000 of debt repayment, $27,707 of distributions and $16,679 of share repurchases.
- Distributions: $0.39 per share was declared and $0.38 paid during the first half. Distributions declared totaled $28.0 million; cash distributions paid totaled $27.7 million.
Material changes versus the prior comparable period
- Total income rose 25.2% in Q2 and 9.8% for the first half. Management attributed the increase chiefly to lower estimated credit losses, higher expense recoveries and GAAP rent adjustments; minimum rent declined.
- Same-property NOI increased 18.3% in Q2 and 4.9% for the first half. Q2 improvement was primarily due to a $6.4 million decrease in estimated credit losses. Economic occupancy in the pro rata combined portfolio fell to 91.6% from 93.6% year over year; ABR per square foot rose to $18.33 from $17.90.
- Net income improved from losses in both 2020 periods. The comparison also reflects the absence of 2020 charges, including a $9,002 impairment for the first half and a $2,543 debt-extinguishment loss. Six-month interest expense declined $1,776.
- Operating expenses increased $6,909 for the first half, including higher property operating costs and $4,679 higher general and administrative expense. Management linked much of the G&A increase to executive succession and long-term incentive costs.
- First-half operating cash flow increased $13,666. Cash declined by $51,659 overall, compared with a $50,033 increase in the prior-year period, primarily reflecting debt repayment, distributions and share repurchases.
Outlook, risks and unusual items
- Management said it had reinitiated consideration of strategic liquidity alternatives, including a possible national exchange listing, but gave no assurance a transaction would occur or on what terms. No numerical earnings or operating guidance was provided.
- The company cited continuing uncertainty from COVID-19, including tenant rent collection, possible restrictions or resurgences, and effects on cash flow and debt covenants. It reported collecting $4.1 million of $4.3 million in deferred rent that came due during the first half, including its proportionate joint-venture share; cumulative deferrals were approximately $6.7 million.
- Other stated risks include occupancy and lease rollover, tenant bankruptcies and retail changes including e-commerce, property costs, capital access, refinancing and interest rates, and execution of property sales or a strategic transaction.
- After quarter-end, the company completed a 1-for-10 reverse stock split on August 5, 2021; figures in the report are retroactively adjusted unless otherwise noted. The board also approved a 5% increase in the annual distribution rate effective with the January 2022 quarterly payment and suspended the share repurchase program effective September 5, 2021.
- On July 12, 2021, the company purchased Prestonwood Town Center from its joint venture for $52.8 million. Management said ordinary-course legal matters were not expected to have a material adverse effect; no material changes to previously disclosed risk factors were reported.
Important facts for investors to verify
- Whether tenant collections, occupancy and credit-loss trends continue to improve, and the amount and timing of remaining deferred-rent collections.
- Progress, terms and potential outcome of the strategic liquidity review, including any proposed exchange listing.
- Debt maturities, refinancing plans, covenant headroom and exposure to variable rates; the filing estimates a 1% rate change would affect annual interest expense by approximately $1.0 million.
- Sustainability of distributions in relation to recurring operating cash flow, capital needs and debt service, and the effect of the announced distribution increase.
- Portfolio and joint-venture performance, leasing spreads, upcoming lease expirations, and the impact of the Prestonwood acquisition and share repurchase suspension.