InvenTrust Properties Corp. — Q2 2022 Form 10-Q
Business context and reporting period. This unaudited quarterly report covers the three and six months ended June 30, 2022. InvenTrust is a REIT focused on multi-tenant retail, particularly grocery-anchored neighborhood and community centers and power centers in Sun Belt markets. At quarter-end, it owned or held an interest in 62 retail properties totaling approximately 10.5 million square feet, including its 55% interest in the IAGM joint venture. Dollar amounts below are in millions unless otherwise noted.
Key financial results
| Metric | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 |
|---|---|---|---|---|
| Total income | $59.9 | $52.1 | $118.7 | $103.3 |
| Net income | $41.9 | $1.5 | $51.4 | $1.4 |
| Diluted EPS | $0.62 | $0.02 | $0.76 | $0.02 |
| Same Property NOI | $34.6 | $32.3 | $69.5 | $63.4 |
| Pro Rata Same Property NOI | $37.3 | $34.7 | $74.8 | $68.1 |
| NAREIT FFO | $30.4 | $25.0 | $62.1 | $47.9 |
| Core FFO | $28.6 | $23.9 | $57.7 | $46.0 |
| Core FFO per diluted share | $0.42 | $0.33 | $0.85 | $0.64 |
Q2 total income rose 14.9% year over year; H1 income rose 14.9%. Lease income increased 15.6% in Q2 and 15.7% in H1. Pro Rata Same Property NOI increased 7.7% in Q2 and 9.9% in H1. Management attributed growth mainly to higher occupancy and rents, with H1 also benefiting from credit-loss reversals, tax refunds, and grocery-related percentage rent. GAAP net income included a $36.9 million gain from property sales, so it is not a direct measure of recurring operating performance. Core FFO, a non-GAAP measure, increased 19.8% in Q2 and 25.3% in H1.
Cash, debt, and distributions
- Cash, cash equivalents, and restricted cash were $95.9 million at June 30, up from $44.9 million at year-end 2021. H1 operating cash flow was $63.5 million, versus $54.0 million a year earlier.
- H1 investing cash use was $73.8 million, primarily reflecting acquisitions and property investments, partly offset by sale proceeds and joint-venture distributions. Financing provided $61.3 million, including $112.0 million of revolver borrowings. Cash increased by $51.0 million during H1.
- Debt was $706.5 million before $3.7 million of unamortized discounts and issuance costs, or $702.8 million net, compared with $537.0 million gross at December 31, 2021. The increase primarily reflected revolver draws and assumed mortgage debt. The $350 million revolver had $143 million outstanding at quarter-end; approximately $207 million was undrawn, before any applicable conditions or other adjustments.
- Of $400 million in term loans, $300 million was effectively fixed through interest-rate swaps; the remaining $100 million was variable-rate. The company estimated that a sustained 1 percentage-point move in rates on its variable-rate debt would change annual interest expense by approximately $2.4 million.
- Mortgage principal maturities were $38.8 million in 2023, $15.7 million in 2024, and $51.5 million in 2025. The company reported compliance with loan covenants and said it believed it could repay, refinance, or extend debt as needed.
- H1 distributions declared were $0.41 per share and distributions paid were $0.41 per share. The quarterly declared distribution increased to $0.21 per share from $0.19 in Q2 2021.
Portfolio, transactions, and material changes
- During H1, the company acquired properties and land for a gross acquisition price of $238.5 million, including two Austin-area centers acquired in February. It assumed $80.4 million of mortgage principal as part of these acquisitions. It also acquired Bay Landing in Florida and a parcel at Kyle Marketplace in Texas.
- On June 30, the company sold Centerplace of Greeley and Cheyenne Meadows for a combined gross price of $55.5 million, recognizing $36.9 million in gains. In comparison, H1 2021 property dispositions were limited to partial condemnations generating $0.9 million of gains.
- At quarter-end, Pro Rata Combined economic occupancy was 93.2%, up from 91.6% a year earlier; leased occupancy was 95.4%, up from 92.9%. Annualized base rent per square foot was $18.80, compared with $18.33.
- For leases executed in H1, the reported retention rate was approximately 92.4% of expiring GLA. Comparable renewal rents increased 5.0%; comparable new-lease rents increased 38.6%, on the reported lease sample.
- General and administrative expense declined $1.8 million in Q2 and $4.3 million in H1, primarily due to lower incentive-plan and compensation costs. Net interest expense rose $1.7 million in Q2 and $2.5 million in H1, reflecting higher borrowings, rates, and assumed mortgages.
Outlook, risks, and contingencies
The company did not provide specific financial guidance in the supplied filing text. Management described its strategy as acquiring and managing Sun Belt essential-retail properties, selectively disposing of assets, and maintaining a flexible capital structure. It said it would continue to evaluate distributions periodically and noted that future distributions remain subject to Board discretion and financial, contractual, and other factors.
On June 3, the company agreed to a private placement of $250 million of senior notes: $150 million at 5.07% due 2029 and $100 million at 5.20% due 2032. The notes were expected to be issued August 11, 2022, subject to customary closing conditions; proceeds were intended for general corporate purposes, including debt repayment and acquisitions. Their issuance was not yet completed as of the filing date.
Key risks cited include tenant rent collection and bankruptcies, retail-market competition and e-commerce shifts, acquisition and redevelopment execution, leasing and capital costs, refinancing and interest-rate exposure, inflation, and maintaining REIT status. The company reported no material change in its previously disclosed risk factors. It stated that ordinary-course legal claims were not expected to have a material adverse effect, and that the joint venture’s $126.0 million of mortgage debt was expected to be repaid, refinanced, or extended timely; that debt is not recourse to InvenTrust. Management reported effective disclosure controls and no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether the $250 million senior-note placement closed as planned and how proceeds were applied.
- How much of the $143 million revolver balance remains outstanding, and the cost and maturity implications of variable-rate borrowing.
- Whether occupancy, leasing spreads, and same-property NOI growth continue, and how tenant credit quality and rent collections evolve.
- Recurring earnings and cash available for distributions excluding the $36.9 million property-sale gain; compare Core FFO with distributions and capital needs.
- Progress on the company and IAGM debt maturities, including the joint venture’s 2023 maturities, and the effects of refinancing terms.
- Future acquisition and disposition activity, capital spending, and any use of the $150 million share-repurchase authorization or $250 million at-the-market equity program; neither program had been used by June 30.