Business Context and Reporting Period
Company: Inland American Real Estate Trust, Inc. (Note: The filing text identifies the registrant as Inland American Real Estate Trust, Inc., despite the user prompt referencing Inventrust Properties Corp.)
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 2009
Business Overview: A Maryland corporation and Real Estate Investment Trust (REIT) focused on acquiring and managing a diversified portfolio of commercial real estate, including retail, office, industrial, lodging, multi-family, and healthcare (LIP-H) properties. The company is managed by affiliates of The Inland Group, Inc.
Key Financial Metrics
| Metric | 2009 | 2008 |
|---|---|---|
| Total Assets | $11.33 billion | $11.14 billion |
| Total Income | $1.13 billion | $1.05 billion |
| Net Loss Applicable to Company | $(397.96) million | $(365.18) million |
| Funds from Operations (FFO) | $35.82 million | $6.35 million |
| Cash Flow from Operating Activities | $369.03 million | $384.37 million |
| Total Debt (Mortgages, Notes, Margins) | $5.09 billion | $4.44 billion |
| Cash and Cash Equivalents | $500.49 million | $945.23 million |
| Distributions Declared | $405.34 million ($0.50/share) | $418.69 million ($0.62/share) |
Material Changes vs. Prior Period
- Net Loss Increase: Net loss increased to $398 million in 2009 from $365 million in 2008. This was primarily driven by a $149 million loss on the consolidation of LIP-Holdings, LLC, a $74 million impairment of notes receivable, and a $78 million equity loss in unconsolidated entities (specifically Concord Debt Holdings). These were partially offset by a significant reduction in impairment charges on investment securities compared to 2008 ($4 million in 2009 vs. $246 million in 2008).
- Revenue Growth: Total property revenues increased by $79 million to $1.13 billion, driven by the full-year impact of 2008 acquisitions and 48 new properties acquired in 2009. This growth was partially offset by a $52 million decline in lodging operating income due to economic downturns.
- Portfolio Occupancy: Economic occupancy rates declined slightly across most segments: Retail (93% vs. 95%), Office (96% vs. 97%), Industrial (96% vs. 99%), and Multi-family (84% vs. 92%). Lodging occupancy dropped to 65% from 69%.
- Debt Levels: Total debt increased by approximately $648 million to $5.09 billion, reflecting new mortgage financings and debt assumed in acquisitions.
Guidance, Outlook, and Risks
- Outlook: Management expects 2010 acquisitions to be fewer than in prior years as the primary capital raise was completed in April 2009. The company anticipates that the lodging industry recovery will lag general economic improvements.
- Distributions: The company intends to continue paying monthly cash distributions. However, there is no assurance that distributions will increase or not decrease further. In 2009, 72% of distributions were classified as a return of capital for tax purposes.
- Refinancing Risk: Significant debt maturities are scheduled for 2010 ($552 million) and 2011 ($656 million). Management is negotiating refinancing but notes that continued market volatility could result in higher credit spreads or lower loan-to-value ratios.
- Legal Contingencies: The company is involved in litigation regarding development hotels (Crockett Capital Corporation) with potential damages up to $16.8 million, and disputes with joint venture partners (Lex-Win Concord LLC and The Lauth Group). A settlement regarding Concord was reached in December 2009 but is contingent on bond cancellations by August 2010.
- Impairments: The company recorded significant impairments in 2009 related to the consolidation of LIP-H ($149 million loss), notes receivable ($74 million), and goodwill ($27 million).
Key Facts for Investor Verification
- Share Liquidity: There is no established public market for the company's common stock. The share repurchase program was suspended in March 2009, limiting liquidity for stockholders.
- Concentration Risk: Approximately 18% of rental revenue is derived from two tenants: SunTrust Bank (10%) and AT&T, Inc. (8%).
- Related Party Transactions: The company pays significant fees to its business manager and property managers, which are affiliates of the sponsor. In 2009, the business manager waived a portion of its fees to ensure sufficient cash for distributions.
- REIT Status: The company must distribute at least 90% of its REIT taxable income to maintain tax-advantaged status. Failure to qualify as a REIT would subject the company to regular corporate income taxes.
- Unconsolidated Joint Ventures: The company has significant investments in unconsolidated entities ($454 million), including Concord Debt Holdings, which recorded substantial losses and impairments in 2009.