InvenTrust Properties Corp. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; comparisons are with Q1 2021 unless noted. InvenTrust is a REIT focused on multi-tenant retail properties, principally grocery-anchored and other essential retail centers in Sun Belt markets. Dollar amounts below are in millions unless stated otherwise.
Financial results and operating metrics
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Total income | $58.8 | $51.1; up $7.7 (15.0%) |
| Net income (loss) | $9.5 | $(0.1) |
| Net income per share, diluted | $0.14 | Approximately $0.00 |
| Same Property NOI | $35.7 | $31.9; up 11.9% |
| Pro Rata Same Property NOI | $38.7 | $34.5 |
| NAREIT FFO per diluted share | $0.47 | $0.32 |
| Core FFO per diluted share | $0.43 | $0.31 |
| Cash provided by operating activities | $26.8 | $20.8 |
| Cash, cash equivalents and restricted cash at quarter-end | $25.7 | $44.9 at Dec. 31, 2021 |
Income growth primarily reflected higher minimum rent, occupancy and rent adjustments, along with acquisitions. Same Property NOI rose mainly on higher minimum rent and improved occupancy, credit-loss changes and lower property expenses. General and administrative expense fell $2.5 million to $7.9 million; net interest expense increased $0.8 million to $4.8 million. The company reported a $2.7 million contribution from equity in unconsolidated entities, including its share of a joint-venture property sale gain.
At March 31, total assets were $2.35 billion, net investment properties were $2.09 billion, and stockholders’ equity was $1.58 billion. Total debt was $676.8 million before $3.5 million of discounts and issuance costs ($673.3 million net), versus $537.0 million gross at year-end. Debt comprised $140.8 million of mortgages, $400.0 million of term loans and $136.0 million drawn on a $350 million revolving facility. The facility matures in September 2025, with two six-month extension options; term-loan tranches mature in 2026 and 2027. The company reported compliance with all debt covenants.
Investing cash outflow was $114.3 million, principally for acquisitions; financing provided $68.4 million, including a $105.0 million credit-line draw. Distributions declared were $0.21 per share and distributions paid were $0.20 per share. Operating cash flow was below distributions paid for the quarter; these figures alone do not establish full distribution coverage.
Portfolio, transactions and material changes
- At quarter-end, the pro rata combined portfolio comprised 63 properties and approximately 9.94 million square feet. Economic occupancy was 93.2%, up from 90.9% a year earlier; leased occupancy was 94.4%, up from 92.9%. Annualized base rent per square foot was $18.64, versus $18.24.
- In February, the company acquired two Austin, Texas centers for a gross price of $189.3 million, assuming $57.5 million of mortgage debt and drawing $105.0 million on its credit line to help fund the acquisitions.
- The IAGM joint venture sold Price Plaza for $39.1 million and recognized a $3.8 million gain; InvenTrust’s share of the gain was $2.1 million. The joint venture distributed $25.3 million to the company during the quarter.
- In March, the company paid off a $22.3 million property mortgage and recorded a $0.1 million extinguishment loss.
- After quarter-end, on April 21, the company acquired Highlands of Flower Mound, Texas, for $38.0 million and assumed $22.9 million of mortgage debt.
- Management reported a 93.1% retention rate on 1.04 million square feet of leases expiring during the quarter. Comparable renewal and new leases showed a 5.0% increase in contractual rent over prior leases.
Outlook, risks and other notable items
The filing provides no quantified earnings, FFO or occupancy guidance. Management describes a strategy centered on acquiring and managing Sun Belt essential retail properties, maintaining a flexible capital structure and generating sustainable cash flows; distributions remain subject to Board review and discretion. Management said it believes available funding sources are adequate for short-term needs and expects to address near-term mortgage maturities using property-sale proceeds, cash and available credit capacity.
Key disclosed risks include tenant rent collection, tenant bankruptcies and anchor-retailer health; acquisition, redevelopment and leasing execution; competition and e-commerce shifts; capital spending needs; refinancing and interest-rate risk; inflation; and maintaining REIT tax status. A permanent 1% change in rates on variable-rate debt outstanding at quarter-end would change annual interest expense by approximately $2.4 million, according to the filing. The company uses swaps to fix rates on portions of its term loans. Management said the LIBOR transition to SOFR or another replacement rate was not expected to materially affect the financial statements.
Management did not expect pending ordinary-course legal claims to have a material adverse effect, based on information then available. The filing reported no material change in previously disclosed risk factors, effective disclosure controls, and no material internal-control changes during the quarter. Derivative fair-value changes contributed to comprehensive income: unrealized derivative gains were $15.4 million, and accumulated comprehensive income was $12.1 million at quarter-end.
Capital-raising capacity was established but unused at quarter-end: a new share repurchase program of up to $150 million and an at-the-market offering program of up to $250 million. No shares had been repurchased under the new program and no shares sold under the ATM program as of March 31.
Important facts for investors to verify
- Whether the Austin and subsequent Flower Mound acquisitions deliver expected leasing, occupancy and returns, and how much incremental debt they require.
- Debt maturities, borrowing availability and covenant headroom, particularly with $136 million drawn on the revolving facility and exposure to variable rates.
- Whether operating cash generation can sustainably fund distributions, capital expenditures and debt service; the quarterly distribution declared exceeded quarterly operating cash flow.
- Occupancy and lease-renewal trends, tenant credit quality, and the sustainability of the quarter’s credit-loss reversals and joint-venture sale-related earnings.
- Execution and potential dilution implications of the unused ATM offering and share repurchase authorization, and the Board’s future distribution decisions.
- Quarter-end liquidity was $25.7 million of cash and restricted cash; the filing does not present a standalone cash runway or a quantified forward earnings outlook.