InvenTrust Properties Corp. — 2021 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2021; it is not a quarterly report. InvenTrust is a REIT focused on grocery-anchored neighborhood and community centers and select power centers, primarily in Sun Belt markets. At year-end, it owned or held an interest in 62 properties totaling approximately 9.5 million square feet on a pro rata basis, including a 55% interest in the unconsolidated IAGM joint venture. Its common stock began trading on the NYSE as IVT on October 12, 2021.
Financial and operating performance
Dollar amounts below are in millions unless otherwise noted. Financial results are consolidated; portfolio statistics identified as pro rata include InvenTrust’s share of IAGM.
| Metric | 2021 | 2020 | Change / context |
|---|---|---|---|
| Total income | $212.0 | $197.8 | Up $14.1, or about 7%; net lease income increased $14.4. |
| Operating expenses | $209.2 | $179.7 | Up $29.6, including $19.8 of direct listing costs. |
| Net loss | $(5.4) | $(10.2) | Loss narrowed by $4.8; 2021 diluted loss per share was $0.08 versus $0.14. |
| NAREIT FFO | $84.1 | $98.6 | Down $14.5; $1.18 per share versus $1.37. |
| Core FFO | $99.6 | $97.2 | Up $2.4; $1.40 per share versus $1.35. This non-GAAP measure excludes specified items, including direct listing costs. |
| Pro rata Same Property NOI | $144.8 | $138.7 | Up $6.1, or 4.4%. |
| Cash from operating activities | $90.0 | $94.2 | Down $4.2. |
| Cash, cash equivalents and restricted cash | $44.9 | $223.8 | Down $178.9. |
| Total debt, net | $533.1 | $555.1 | Balance-sheet carrying value; cash and restricted cash at year-end was $44.9. |
Year-end pro rata economic occupancy was 92.8%, compared with 91.1% in 2020; leased occupancy was 93.9%, compared with 92.8%. Pro rata annualized base rent per square foot was $18.59, up from $18.21. The company reported 93.5% economic occupancy for its same-property wholly owned portfolio.
Debt included $106.0 million of mortgages, $400.0 million of unsecured term loans and $31.0 million drawn on a $350.0 million revolving facility, with $319.0 million undrawn at year-end. The company extended its revolving facility maturity to September 2025, with two six-month extension options, and amended term loans to mature in September 2026 and March 2027. $300.0 million of term loans was swapped to fixed rates; $100.0 million remained variable-rate. The company said it was in compliance with debt covenants.
Capital uses included $53.1 million for property acquisitions, $15.4 million for capital expenditures and tenant improvements, and $5.5 million for development and redevelopment. The company declared $55.7 million and paid $55.6 million in distributions during 2021. It stated that it intended to continue quarterly distributions subject to Board approval and increased its annual distribution rate effective for the payment in January 2022; the filing does not provide a clear new annualized rate in this discussion.
Material changes versus 2020
- Lease income growth included a $13.4 million net favorable change in credit losses and reversals, as well as higher minimum rent and recoveries. Same-property NOI rose 5.4% on a wholly owned basis, principally due to lower net credit losses; higher property operating expenses partly offset the improvement.
- Net loss improved, but NAREIT FFO declined, reflecting differences in the FFO adjustments and the year’s operating results. Core FFO increased after excluding specified items, including direct listing costs.
- The company recorded $19.8 million of direct listing expense and $3.3 million of tender-offer fees and expenses recorded as reductions to equity. It repurchased 4.0 million shares in the tender offer for $100.0 million and 755,643 shares under its repurchase program for $16.7 million. The program was suspended effective September 5, 2021.
- The company acquired Prestonwood Town Center from IAGM for $52.8 million and an outparcel for $1.9 million. It sold Kroger Tomball for $13.7 million and completed partial condemnations; IAGM also sold two properties. Consolidated gain on sale was $1.5 million, while equity in earnings from unconsolidated entities improved substantially, partly because of joint-venture property sale gains and lower impairment charges.
- Year-end property count in the pro rata portfolio fell from 65 to 62 and GLA from 9.75 million to 9.53 million square feet, reflecting portfolio transactions. Occupancy and ABR per square foot improved.
Outlook, risks and unusual items
- Management’s strategy is to acquire grocery-anchored and necessity-based retail properties in Sun Belt markets, selectively dispose of assets, and maintain capital flexibility. It described long-term business prospects as strong but provided no numerical earnings or FFO guidance.
- COVID-19 remained a risk to tenant rent collection, leasing and occupancy. Cumulative rent deferrals granted were approximately $5.8 million, including InvenTrust’s share of IAGM; $5.3 million of amounts due during 2021 had been collected by year-end. Management noted uncertainty from future variants and possible restrictions.
- Other principal risks include tenant and anchor-retailer distress, the shift to e-commerce, lease rollover and re-leasing costs, geographic concentration, inflation and rising property expenses, interest rates and refinancing, natural disasters and climate-related costs, and the ability to maintain REIT qualification. Texas generated 34.4% of portfolio annualized base rent.
- In 2021, the company reported no consolidated asset impairment provision, versus $9.0 million in 2020. KPMG identified the assessment of expected property holding periods in impairment analyses as a critical audit matter. The auditor gave an unmodified opinion on the financial statements; management reported effective disclosure controls and internal control over financial reporting.
- Subsequent to year-end, on February 2, 2022, the company acquired two Austin properties for $189.3 million, assumed $57.5 million of mortgage debt and drew approximately $105.0 million on its credit line.
- Legal claims arise in the ordinary course; management did not expect pending matters to have a material adverse effect. The filing also identifies environmental, cyber-security, insurance and joint-venture risks.
Key facts for investors to verify
- Reconcile the sharp decline in year-end cash with the 2021 share repurchases, tender offer, debt repayments, acquisitions and ongoing distribution needs; confirm current undrawn borrowing capacity.
- Review the quality and repeatability of 2021 rent and NOI improvement, particularly the credit-loss reversals, deferred-rent collections and tenant rent relief.
- Assess debt maturities, variable-rate exposure, interest-rate hedges and refinancing needs, including IAGM’s $166.7 million of third-party mortgage debt, which is not recourse to InvenTrust.
- Monitor occupancy, lease expirations and tenant concentration, including the company’s exposure to small-shop tenants and Texas markets.
- Confirm the post-listing distribution rate and its coverage by recurring operating cash flow, rather than relying on FFO alone, which the company cautions is not a measure of liquidity or cash available for distributions.
- Evaluate the financing and expected returns of the February 2022 Austin acquisitions and their effect on leverage and liquidity.