InvenTrust Properties Corp. — Q3 2021 Form 10-Q
Business context and period: InvenTrust is a Sun Belt-focused, multi-tenant retail REIT specializing in grocery-anchored neighborhood and community centers and select power centers. This unaudited report covers the three and nine months ended September 30, 2021; financial amounts below are in millions unless noted. At quarter-end, the company owned or held an interest in 63 retail properties totaling approximately 9.7 million square feet on a pro rata basis.
Financial and operating performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Total income | $55.1 | $52.5 | $158.4 | $146.6 |
| Net income (loss) | $4.0 | $1.7 | $5.4 | $(11.4) |
| Net income (loss) per share | $0.06 | $0.02 | $0.08 | $(0.16) |
| Operating cash flow | — | — | $85.7 | $69.9 |
| Cash used in investing | — | — | $(55.6) | $(36.5) |
| Cash used in financing | — | — | $(115.6) | Cash provided: $33.1 |
| Same-property NOI growth | 8.3% | — | 6.0% | — |
| Core FFO per diluted share | $0.38 | $0.31 | $1.02 | $0.97 |
Lease income, net, increased 4.8% in Q3 and 7.9% for the nine-month period year over year. Management attributed much of the increase to improved credit-loss experience and reversals of prior reserves, alongside leasing and recovery income. Same-property NOI rose to $34.9 million in Q3 from $32.2 million, and to $98.2 million for nine months from $92.6 million. These NOI figures are company-defined non-GAAP measures.
Operating expenses were $48.4 million in Q3 and $144.5 million for nine months. Nine-month interest expense, net, declined to $12.0 million from $14.3 million. No asset impairment was recorded in 2021; the comparable 2020 nine-month period included a $9.0 million impairment charge. Direct-listing costs of $1.7 million were recognized in Q3.
Balance sheet, debt and liquidity
- At September 30, 2021, total assets were $2.314 billion, total liabilities $619.5 million, and stockholders’ equity $1.695 billion.
- Debt, net, was $502.2 million, comprising $105.9 million of mortgages and $396.3 million of unsecured term loans. The company had no borrowings on its $350 million revolving facility, leaving the full amount undrawn.
- Cash, cash equivalents and restricted cash were $138.3 million, down from $223.8 million at year-end 2020. The nine-month cash decrease was $85.4 million, reflecting debt repayments, shareholder distributions, share repurchases and investment spending.
- The company repaid $450 million of debt and received $400 million of debt proceeds during the nine months. It reported compliance with all debt covenants. Of $400 million in term-loan principal, $300 million was swapped to fixed rates; $100 million remained variable rate.
- Cash distributions paid were $41.6 million for the nine months; distributions declared were $0.20 per share for Q3 and $0.58 per share year to date.
Material changes and developments
- Compared with 2020, net income improved in both reported periods; nine-month operating cash flow increased by $15.8 million. Prior-year results included the $9.0 million impairment charge and a $2.5 million debt-extinguishment loss.
- Same-property NOI growth was supported substantially by lower credit-loss provisions and reversals. In Q3 2021, the company recorded $2.2 million of net reversals of estimated losses on billed rent and recoveries.
- The company acquired Prestonwood Town Center for $52.8 million and a retail outparcel for $1.9 million, and sold Kroger Tomball for $13.7 million. It also completed partial property condemnations. It purchased Prestonwood from its 55%-owned joint venture.
- The 1-for-10 reverse stock split took effect August 5, 2021. The share and per-share data in the filing reflect the split retrospectively.
- On September 22, the company extended its $350 million revolving credit facility to September 2025, with two six-month extension options, and amended its $400 million term loans, extending maturities to 2026 and 2027.
- On October 12, 2021, after quarter-end, common stock began trading on the NYSE as IVT. The company also commenced a modified Dutch auction tender offer for up to $100 million of shares at $25–$28 per share, scheduled to expire November 8, 2021. Approximately $16.6 million of listing-related advisory fees incurred after quarter-end are expected to be expensed in Q4.
Outlook, risks and contingencies
The filing provides no specific earnings or FFO guidance. Management described its strategy as investing selectively in Sun Belt grocery-anchored and essential retail assets and characterized the long-term business outlook as strong, while noting continued uncertainty from COVID-19. The Board approved a 5% increase in the annual distribution rate, effective with the quarterly distribution paid in January 2022; future distributions remain subject to Board discretion.
COVID-19-related tenant rent collection remains a principal risk. The company reported cumulative rental deferrals of approximately $5.9 million, including its proportionate share of the joint venture, with payment terms extending through 2023. Management cautioned that tenant amendments and collections are not assured. Other disclosed risks include occupancy and leasing, tenant bankruptcies, retail competition and e-commerce, interest rates and refinancing, access to capital, property investment execution, joint-venture risks, and maintaining REIT and NYSE status. Management stated that ordinary-course legal matters are not expected to have a material adverse effect. The company said it was in compliance with loan covenants and expected to have resources to address near-term debt maturities.
Important facts for investors to verify
- How much of improved rent income and NOI reflects sustainable property-level improvement versus one-time or timing-related credit-loss reversals.
- Actual tender-offer participation, purchase price and liquidity impact, including the planned use of up to $100 million of cash.
- Whether occupancy, rent collections and deferred-rent repayments continue to improve, and how the portfolio performs as leases expire.
- Debt refinancing plans and sensitivity to interest rates; the filing estimates a roughly $1.0 million annual interest-expense impact from a permanent 1% rate change on variable-rate debt.
- The impact of the $16.6 million in post-quarter direct-listing advisory fees on Q4 results, and the future level and coverage of distributions.