CORRECTION -- Retail Opportunity Investments Corp. Reports Second Quarter 2021 Results

Retail Opportunity Investments Corp.
15 min read
0
In this article:

SAN DIEGO, July 28, 2021 (GLOBE NEWSWIRE) -- In a release issued under the same headline earlier today, please note that the time of the conference call on Thursday, July 29 has been corrected to 12:00 p.m. Eastern Time / 9:00 a.m. Pacific Time. The corrected release follows:

Retail Opportunity Investments Corp. (NASDAQ:ROIC) announced today financial and operating results for the three and six months ended June 30, 2021.

HIGHLIGHTS

  • $16.5 million of net income attributable to common stockholders ($0.14 per diluted share)

  • $31.7 million in Funds From Operations(1) ($0.25 per diluted share)

  • 9.6% increase in same-center cash net operating income (2Q‘21 vs. 2Q‘20)

  • 96.9% portfolio lease rate at June 30, 2021

  • 338,230 square feet of leases executed (record second quarter activity)

  • 15.8% increase in same-space cash rents on new leases (3.3% increase on renewals)

  • $61 million grocery-anchored shopping center acquisitions currently lined up

  • $25.8 million property disposition completed

  • $45 million property dispositions currently lined up (exiting Sacramento)

  • $34.8 million of common equity raised through ATM program ($46.1 million YTD)

  • $117 million of capital lined up year-to-date (equity issuance and sale proceeds combined)

  • $48.3 million debt reduction year-to-date (6/30/21 vs. 12/31/20)

  • No borrowings outstanding on unsecured credit facility at June 30, 2021

  • Investment-grade rating reaffirmed by Moody’s and S&P

  • Awarded 2021 Green Lease Leader Gold recognition for ESG initiatives

  • 2021 FFO guidance range updated ($0.98 to $1.02 per diluted share)

  • $0.11 per share cash dividend declared

________________________________________
(1) A reconciliation of GAAP net income to Funds From Operations (FFO) is provided at the end of this press release.

Stuart A. Tanz, President and Chief Executive Officer of Retail Opportunity Investments Corp. stated, “Capitalizing on the strength and appeal of our grocery-anchored portfolio, we had a highly productive and active second quarter. We achieved a new second quarter record in terms of leasing activity, as well as double-digit rent growth on new leases. Additionally, we are moving forward with our investment recycling program. We currently have approximately $132 million of transactions completed or lined up, including approximately $61 million of grocery-anchored shopping center acquisitions and approximately $71 million of property dispositions.” Tanz further commented, “We are heading into the second half of 2021 with excellent momentum and look forward to continuing to advance our business and enhance long-term value.”

FINANCIAL RESULTS SUMMARY

For the three months ended June 30, 2021, GAAP net income attributable to common stockholders was $16.5 million, or $0.14 per diluted share, as compared to GAAP net income attributable to common stockholders of $4.6 million, or $0.04 per diluted share, for the three months ended June 30, 2020. For the six months ended June 30, 2021, GAAP net income attributable to common stockholders was $23.9 million, or $0.20 per diluted share, as compared to GAAP net income attributable to common stockholders of $16.6 million, or $0.14 per diluted share, for the six months ended June 30, 2020.

FFO for the second quarter of 2021 was $31.7 million, or $0.25 per diluted share, as compared to $29.2 million in FFO, or $0.23 per diluted share for the second quarter of 2020. FFO for the first six months of 2021 was $62.7 million, or $0.49 per diluted share, as compared to $66.6 million in FFO, or $0.52 per diluted share for the first six months of 2020. ROIC reports FFO as a supplemental performance measure in accordance with the definition set forth by the National Association of Real Estate Investment Trusts. A reconciliation of GAAP net income to FFO is provided at the end of this press release.

For the second quarter of 2021, same-center net operating income (NOI) was $48.6 million, as compared to $44.4 million in same-center NOI for the second quarter of 2020, representing a 9.6% increase. For the first six months of 2021, same-center NOI increased 1.5% as compared to same-center NOI for the first six months of 2020. ROIC reports same-center comparative NOI on a cash basis. A reconciliation of GAAP operating income to same-center comparative NOI is provided at the end of this press release.

At June 30, 2021, ROIC had total real estate assets (before accumulated depreciation) of approximately $3.2 billion and approximately $1.3 billion of principal debt outstanding. As of June 30, 2021, 93.6% of ROIC’s principal debt outstanding was unsecured, and no borrowings were outstanding on its $600 million unsecured revolving credit facility. Additionally, ROIC’s interest coverage for the second quarter 2021 was 3.2 times and 94.5% of its portfolio was unencumbered at June 30, 2021, based on GLA.

Year to date, ROIC has issued approximately 2.5 million shares of common stock through its ATM program, raising $46.1 million in gross proceeds, including issuing approximately 1.9 million shares of common stock during the second quarter, and approximately 0.6 million shares to date in the third quarter.

ACQUISITION SUMMARY

ROIC currently has lined up to acquire, in separate transactions, two grocery-anchored shopping centers totaling approximately $61 million, subject to completion of customary due diligence and other closing conditions. One property is located in Northern California and one property is located in Southern California.

DISPOSITION SUMMARY

During the second quarter, ROIC sold one property, located in San Diego, California, for $25.8 million. Additionally, ROIC currently has lined up to sell, in separate transactions, its final two properties in the Sacramento metropolitan area, for approximately $45 million, subject to completion of customary due diligence and other closing conditions.

PROPERTY OPERATIONS SUMMARY

At June 30, 2021, ROIC’s portfolio was 96.9% leased. During the second quarter, ROIC executed 118 leases, totaling 338,230 square feet, including 59 new leases, totaling 116,462 square feet, achieving a 15.8% increase in same-space comparative base rent, and 59 renewed leases, totaling 221,768 square feet, achieving a 3.3% increase in base rent. ROIC reports same-space comparative base rent on a cash basis.

CASH DIVIDEND

On July 9, 2021, ROIC distributed a cash dividend of $0.11 per share. On July 28, 2021, ROIC’s board of directors declared a cash dividend of $0.11 per share, payable on October 8, 2021 to stockholders of record on September 17, 2021.

2021 FFO GUIDANCE

ROIC currently estimates that FFO for the full year 2021 will be within the range of $0.98 to $1.02 per diluted share, and net income to be within the range of $0.29 to $0.33 per diluted share.

Year Ended December 31, 2021 (2)

Initial Guidance (2/23/21)

Updated Guidance (7/28/21)

Low End

High End

Low End

High End

GAAP net income applicable to stockholders

$

21,034

$

29,805

$

33,695

$

38,684

Funds from operations (FFO) – diluted

$

120,555

$

129,438

$

124,950

$

130,050

GAAP net income per diluted share

$

0.18

$

0.25

$

0.29

$

0.33

FFO per diluted share

$

0.95

$

1.02

$

0.98

$

1.02

Key Drivers

General and administrative expenses

$

20,000

$

19,000

$

20,000

$

19,000

Straight-line rent

$

(500

)

$

(500

)

$

500

$

500

Amortization of above- and below-market rent

$

8,700

$

8,700

$

8,700

$

8,700

Bad debt

$

7,000

$

3,000

$

5,000

$

3,000

Acquisitions

$

—

$

40,000

$

61,000

$

100,000

Dispositions

$

25,800

$

25,800

$

71,000

$

71,000

Common equity raised (gross proceeds)

$

—

$

—

$

46,000

$

46,000

Debt reduction (vs. 12/31/20)

$

40,000

$

—

$

49,000

$

49,000

Equity proceeds (cash) at year-end

$

—

$

—

$

56,000

$

17,000

Same-center cash NOI growth (vs. 2020)

—

%

3

%

2

%

4

%

________________________________________
(2) Data is unaudited, amounts in thousands except per share data.

ROIC’s management will discuss the company’s guidance and underlying assumptions on its July 29, 2021 conference call. ROIC’s guidance is a forward-looking statement and is subject to risks and other factors described elsewhere in this press release.

CONFERENCE CALL

ROIC will conduct a conference call and audio webcast to discuss its results on Thursday, July 29, 2021 at 12:00 p.m. Eastern Time / 9:00 a.m. Pacific Time. Those interested in participating in the conference call should dial (877) 312-8783 (domestic), or (408) 940-3874 (international) at least ten minutes prior to the scheduled start of the call. When prompted, provide the Conference ID: 3092989. A live webcast will also be available in listen-only mode at http://www.roireit.net/. The conference call will be recorded and available for replay beginning at 3:00 p.m. Eastern Time on July 29, 2021 and will be available until 3:00 p.m. Eastern Time on August 5, 2021. To access the conference call recording, dial (855) 859-2056 (domestic) or (404) 537-3406 (international) and use the Conference ID: 3092989. The conference call will also be archived on http://www.roireit.net/ for approximately 90 days.

ABOUT RETAIL OPPORTUNITY INVESTMENTS CORP.

Retail Opportunity Investments Corp. (NASDAQ: ROIC), is a fully-integrated, self-managed real estate investment trust (REIT) that specializes in the acquisition, ownership and management of grocery-anchored shopping centers located in densely-populated, metropolitan markets across the West Coast. As of June 30, 2021, ROIC owned 87 shopping centers encompassing approximately 10.0 million square feet. ROIC is the largest publicly-traded, grocery-anchored shopping center REIT focused exclusively on the West Coast. ROIC is a member of the S&P SmallCap 600 Index and has investment-grade corporate debt ratings from Moody's Investor Services, Standard & Poor’s, and Fitch Ratings, Inc. Additional information is available at: www.roireit.net.

When used herein, the words "believes," "anticipates," "projects," "should," "estimates," "expects," “guidance” and similar expressions are intended to identify forward-looking statements with the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and in Section 21F of the Securities and Exchange Act of 1934, as amended. Certain statements contained herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results of ROIC to differ materially from future results expressed or implied by such forward-looking statements. Information regarding such risks and factors is described in ROIC's filings with the SEC, including its most recent Annual Report on Form 10-K, which is available at: www.roireit.net.


RETAIL OPPORTUNITY INVESTMENTS CORP.
Consolidated Balance Sheets
(In thousands, except share data)

June 30, 2021
(unaudited)

December 31, 2020

ASSETS

Real Estate Investments:

Land

$

874,514

$

881,872

Building and improvements

2,279,520

2,274,680

3,154,034

3,156,552

Less: accumulated depreciation

491,063

460,165

2,662,971

2,696,387

Mortgage note receivable

4,917

4,959

Real Estate Investments, net

2,667,888

2,701,346

Cash and cash equivalents

45,033

4,822

Restricted cash

1,978

1,814

Tenant and other receivables, net

55,733

58,756

Deposits

500

—

Acquired lease intangible assets, net

45,992

50,110

Prepaid expenses

1,668

4,811

Deferred charges, net

23,597

25,655

Other assets

17,170

17,296

Total assets

$

2,859,559

$

2,864,610

LIABILITIES AND EQUITY

Liabilities:

Term loan

$

298,706

$

298,524

Credit facility

—

48,000

Senior Notes

944,438

943,655

Mortgage notes payable

85,988

86,509

Acquired lease intangible liabilities, net

119,796

125,796

Accounts payable and accrued expenses

31,343

17,687

Tenants’ security deposits

6,679

6,854

Other liabilities

42,975

46,426

Total liabilities

1,529,925

1,573,451

Commitments and contingencies

Equity:

Preferred stock, $0.0001 par value 50,000,000 shares authorized; none issued and outstanding

—

—

Common stock, $0.0001 par value, 500,000,000 shares authorized; 120,806,366 and 118,085,155 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

12

12

Additional paid-in capital

1,539,263

1,497,662

Dividends in excess of earnings

(291,839

)

(289,309

)

Accumulated other comprehensive loss

(6,133

)

(8,812

)

Total Retail Opportunity Investments Corp. stockholders’ equity

1,241,303

1,199,553

Non-controlling interests

88,331

91,606

Total equity

1,329,634

1,291,159

Total liabilities and equity

$

2,859,559

$

2,864,610


RETAIL OPPORTUNITY INVESTMENTS CORP.
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

Revenues

Rental revenue

$

70,114

$

65,734

$

139,018

$

139,931

Other income

616

818

899

1,493

Total revenues

70,730

66,552

139,917

141,424

Operating expenses

Property operating

10,766

9,286

21,325

19,890

Property taxes

8,332

8,766

16,938

16,755

Depreciation and amortization

23,507

24,114

46,547

48,392

General and administrative expenses

5,232

3,929

9,607

7,873

Other expense

331

296

484

360

Total operating expenses

48,168

46,391

94,901

93,270

Gain on sale of real estate

9,460

—

9,460

—

Operating income

32,022

20,161

54,476

48,154

Non-operating expenses

Interest expense and other finance expenses

(14,337

)

(15,125

)

(28,817

)

(29,982

)

Net income

17,685

5,036

25,659

18,172

Net income attributable to non-controlling interests

(1,201

)

(389

)

(1,760

)

(1,523

)

Net Income Attributable to Retail Opportunity Investments Corp.

$

16,484

$

4,647

$

23,899

$

16,649

Earnings per share – basic and diluted

$

0.14

$

0.04

$

0.20

$

0.14

Dividends per common share

$

0.11

$

—

$

0.22

$

0.20


CALCULATION OF FUNDS FROM OPERATIONS
(Unaudited)
(In thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

Net income attributable to ROIC

$

16,484

$

4,647

$

23,899

$

16,649

Plus: Depreciation and amortization

23,507

24,114

46,547

48,392

Less: Gain on sale of real estate

(9,460

)

—

(9,460

)

—

Funds from operations – basic

30,531

28,761

60,986

65,041

Net income attributable to non-controlling interests

1,201

389

1,760

1,523

Funds from operations – diluted

$

31,732

$

29,150

$

62,746

$

66,564


SAME-CENTER CASH NET OPERATING INCOME ANALYSIS
(Unaudited)
(In thousands, except number of shopping centers and percentages)

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

$ Change

% Change

2021

2020

$ Change

% Change

Number of shopping centers included in same-center analysis

87

87

87

87

Same-center occupancy

96.9

%

97.0

%

(0.1

)

%

96.9

%

97.0

%

(0.1

)

%

Revenues:

Base rents

$

50,534

$

51,313

$

(779

)

(1.5

)

%

$

100,860

$

102,909

$

(2,049

)

(2.0

)

%

Percentage rent

(9

)

120

(129

)

(107.5

)

%

173

213

(40

)

(18.8

)

%

Recoveries from tenants

16,699

16,608

91

0.5

%

33,663

33,762

(99

)

(0.3

)

%

Other property income

444

413

31

7.5

%

554

801

(247

)

(30.8

)

%

Bad debt

152

(5,680

)

5,832

(102.7

)

%

(1,352

)

(6,156

)

4,804

(78.0

)

%

Total Revenues

67,820

62,774

5,046

8.0

%

133,898

131,529

2,369

1.8

%

Operating Expenses

Property operating expenses

10,916

9,806

1,110

11.3

%

21,668

20,900

768

3.7

%

Property taxes

8,272

8,601

(329

)

(3.8

)

%

16,762

16,573

189

1.1

%

Total Operating Expenses

19,188

18,407

781

4.2

%

38,430

37,473

957

2.6

%

Same-Center Cash Net Operating Income

$

48,632

$

44,367

$

4,265

9.6

%

$

95,468

$

94,056

$

1,412

1.5

%


SAME-CENTER CASH NET OPERATING INCOME RECONCILIATION
(Unaudited)
(In thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

GAAP operating income

$

32,022

$

20,161

$

54,476

$

48,154

Depreciation and amortization

23,507

24,114

46,547

48,392

General and administrative expenses

5,232

3,929

9,607

7,873

Other expense

331

296

484

360

Gain on sale of real estate

(9,460

)

—

(9,460

)

—

Straight-line rent

(294

)

(319

)

(312

)

(230

)

Amortization of above- and below-market rent

(2,214

)

(2,522

)

(4,446

)

(8,000

)

Property revenues and other expenses (1)

(61

)

(99

)

(190

)

(249

)

Total Company cash NOI

49,063

45,560

96,706

96,300

Non same-center cash NOI

(431

)

(1,193

)

(1,238

)

(2,244

)

Same-center cash NOI

$

48,632

$

44,367

$

95,468

$

94,056

________________________________________
(1) Includes anchor lease termination fees, net of contractual amounts, if any, expense and recovery adjustments related to prior periods and other miscellaneous adjustments.

NON-GAAP DISCLOSURES

Funds from operations (“FFO”), is a widely recognized non-GAAP financial measure for REITs that the Company believes when considered with financial statements presented in accordance with GAAP, provides additional and useful means to assess its financial performance. FFO is frequently used by securities analysts, investors and other interested parties to evaluate the performance of REITs, most of which present FFO along with net income as calculated in accordance with GAAP. The Company computes FFO in accordance with the “White Paper” on FFO published by the National Association of Real Estate Investment Trusts (“NAREIT”), which defines FFO as net income attributable to common stockholders (determined in accordance with GAAP) excluding gains or losses from debt restructuring, sales of depreciable property and impairments, plus real estate related depreciation and amortization, and after adjustments for partnerships and unconsolidated joint ventures.

The Company uses cash net operating income (“NOI”) internally to evaluate and compare the operating performance of the Company’s properties. The Company believes cash NOI provides useful information to investors regarding the Company’s financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level, and when compared across periods, can be used to determine trends in earnings of the Company’s properties as this measure is not affected by the non-cash revenue and expense recognition items, the cost of the Company’s funding, the impact of depreciation and amortization expenses, gains or losses from the acquisition and sale of operating real estate assets, general and administrative expenses or other gains and losses that relate to the Company’s ownership of properties. The Company believes the exclusion of these items from operating income is useful because the resulting measure captures the actual revenue generated and actual expenses incurred in operating the Company’s properties as well as trends in occupancy rates, rental rates and operating costs. Cash NOI is a measure of the operating performance of the Company’s properties but does not measure the Company’s performance as a whole and is therefore not a substitute for net income or operating income as computed in accordance with GAAP. The Company defines cash NOI as operating revenues (base rent and recoveries from tenants), less property and related expenses (property operating expenses and property taxes), adjusted for non-cash revenue and operating expense items such as straight-line rent and amortization of lease intangibles, debt-related expenses and other adjustments. Cash NOI also excludes general and administrative expenses, depreciation and amortization, acquisition transaction costs, other expense, interest expense, gains and losses from property acquisitions and dispositions, extraordinary items, tenant improvements and leasing commissions. Other REITs may use different methodologies for calculating cash NOI, and accordingly, the Company’s cash NOI may not be comparable to other REITs.

Contact:
Ashley Rubino, Investor Relations
858-677-0900
arubino@roireit.net


Advertisement

Recommended Stories