InvenTrust Properties Corp. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparisons are with Q1 2020 unless noted. InvenTrust is a REIT focused on grocery-anchored neighborhood and select power centers, principally in Sun Belt markets. It owned or held an interest in 65 properties totaling approximately 10.9 million square feet, including its 55% interest in a 10-property joint venture. Dollar amounts below are in millions unless stated otherwise.
Financial performance and position
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Total income | $51.1 | $52.4; down 2.5% |
| Net loss | $(0.1) | $(3.5) |
| Operating expenses | $48.2 | $44.9 |
| Net interest expense | $4.0 | $4.8 |
| Same-property NOI | $31.4 | $33.6; down 6.3% |
| FFO / AFFO per share | $0.03 / $0.03 | $0.04 / $0.04 |
| Operating cash flow | $20.8 | $16.9 |
| Cash, cash equivalents and restricted cash | $176.0 | $334.4 at March 31, 2020 |
GAAP diluted loss per share was reported as “—” for both periods. Distributions declared and paid were $0.02 per share in Q1 2021, unchanged from Q1 2020. Total assets were $2.34 billion and stockholders’ equity was $1.73 billion at March 31, 2021.
Debt, net of discounts and issuance costs, was $505.0 million at quarter-end, versus $555.1 million at December 31, 2020. It comprised $106.4 million of mortgage debt and $398.5 million of unsecured term loans. The $350 million revolving facility had no borrowings outstanding, leaving $350 million undrawn. Cash decreased $47.7 million during the quarter, primarily reflecting $50.0 million of debt repayment and $13.6 million of cash distributions. The company reported compliance with all loan covenants.
Material changes and operating trends
- Lease income declined $1.4 million. Management attributed the $1.7 million same-property decline principally to lower minimum rent, increased abatements, reduced recoveries and higher non-recoverable costs, partly offset by lower estimated credit losses; it linked these changes to COVID-19.
- Same-property economic occupancy for the pro rata combined portfolio fell to 93.7% from 95.7% a year earlier. Portfolio ABR per square foot was $18.44, compared with $18.56.
- General and administrative expense rose $3.2 million, primarily from higher long-term incentive and other compensation costs related to the CEO’s expected August 2021 retirement and executive succession appointments.
- Interest expense decreased $0.8 million, attributed to mortgage repayments and lower LIBOR rates. Q1 2021 included no asset impairment, compared with a $9.0 million impairment in Q1 2020.
- Operating cash flow increased $3.9 million. Investing cash use was $4.5 million versus $38.5 million, as Q1 2020 included property acquisitions. Financing cash flow shifted to $64.1 million used, versus $95.2 million provided in Q1 2020, when the company drew $150 million on its revolver.
Outlook, risks and unusual items
Management provided no numerical earnings or operating guidance. It said the pandemic continued to disrupt tenants and collections, and noted uncertainty over future restrictions, tenant solvency, rent collections, vacancies and property values. During Q1, $3.4 million of deferred rent came due across the company and its proportionate joint-venture interest; $3.1 million had been collected by quarter-end. Cumulative rent deferrals were approximately $6.6 million, with contractual payments extending through 2023.
The company stated that it did not expect COVID-19 to impair its short-term liquidity needs, while emphasizing that future liquidity depends on rent collections, operating conditions, costs and capital access. Management is exploring a potential strategic transaction intended to enhance stockholder value and provide liquidity, but said the pandemic had delayed the process and there is no assurance it can be completed on acceptable terms. The board increased the annual distribution rate in December 2020, effective with the distribution paid in April 2021; future distributions remain at the board’s discretion.
Subsequent to quarter-end, the company announced that its share repurchase program would resume May 14, 2021 for qualifying shareholders, at $2.17 per share, a 25% discount to the stated $2.89 NAV per share. The distribution reinvestment plan remained suspended. Interest-rate sensitivity disclosure estimated that a permanent 1% move in rates on variable-rate debt would change annual interest expense by approximately $1.0 million; $300 million of the company’s $400 million term loans was swapped to fixed rates. Management reported no material change in risk factors from its 2020 Form 10-K and no expected material adverse effect from ordinary-course legal proceedings.
Key facts for investors to verify
- Whether rent collections, tenant credit quality and occupancy recover as pandemic-related disruption eases, and how deferred rent is ultimately collected.
- Drivers of the 6.3% decline in same-property NOI and whether higher non-recoverable expenses and rent abatements persist.
- Debt maturities, refinancing plans and covenant headroom, particularly the scheduled 2023 and 2024 term-loan maturities.
- Progress, terms and feasibility of the potential strategic transaction, and the funding and limits applicable to the reinstated share repurchase program.
- Sustainability of distributions relative to operating cash flow, capital needs and debt obligations.