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Retail Opportunity Investments Holds the Course With Strategic Divestments

Steve Symington, The Motley Fool

Retail Opportunity Investments (NASDAQ: ROIC) announced second-quarter 2019 results on Wednesday after the markets closed, highlighting its continued planned strategic divestments of non-core properties and setting a fresh high mark for portfolio lease rates.

We can expect more color during Thursday morning's call regarding the shopping-center REIT's results and whether current market conditions support its eventual return to finding growth through acquisitions. But in the meantime, let's have a closer look at how Retail Opportunity Investments ended the first half, as well as what we should expect for the rest of the year.

A shopping center with palm trees owned by Retail Opportunity Investments.

Image source: Retail Opportunity Investments.

Retail Opportunity Investments results: The raw numbers

 
Metric

Q2 2019

Q2 2018

Year-Over-Year Growth (Decline)

Revenue

$72.93 million

$72.34 million

0.8%

GAAP net income attributable to retail opportunity investments

$7.59 million

$7.34 million

3.4%

GAAP net income per diluted share

$0.07

$0.06

16.7%

Diluted funds from operations (FFO)

$32.61 million

$33.43 million

(2.5%)

Diluted FFO per share

$0.26

$0.27 (3.7%)

Data source: Retail Opportunity Investments. 

What happened with Retail Opportunity Investments this quarter?

  • Base rents increased 4.3% year over year to $51 million, while recoveries from tenants climbed 2.9% to $16.5 million.
  • Same-space comparative base rent grew 27.3% on 27 new leases totaling 88,037 square feet, and increased 10.7% on 57 renewed leases totaling 231,444 square feet.
  • Ended the second quarter with a portfolio lease rate of 97.9% -- up 10 basis points from last quarter and good for a new company record -- marking the metric's 20th straight quarter at or above 97%.
  • Same-center net operating income rose 4.6% year over year to $49.3 million.
  • ROIC sold Norwood Shopping Center in Sacramento California for $13.5 million, and -- as previously announced -- has agreements to sell two more properties in separate transactions totaling $43 million.

What management had to say

CEO Stuart Tanz stated:

During the second quarter we continued to build on the solid momentum we established during the first quarter. We again posted strong releasing spreads and same-center NOI growth. Additionally, we achieved a new record high lease rate for the company, finishing the second quarter at a very strong 97.9%. We also continued to make steady progress in terms of disposing of non-core properties and with the entitlement process on our densification initiatives. Thus far we are squarely on track to achieve our stated objectives for the year and look forward to continuing to advance our business during the second half of 2019.

Looking forward

Looking to the full-year 2019, Retail Opportunity Investments once again reiterated its outlook for both GAAP net income per share of $0.40 to $0.44, and FFO per share of $1.11 to $1.15.

All told, there were no big surprises in this quarterly update -- though we'll be listening closely for management's elaboration on current market conditions when the company holds its conference call on Thursday. In the meantime, I think patient, long-term shareholders should be happy with where Retail Opportunity Investments stands today.

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Steve Symington owns shares of Retail Opportunity Investments. The Motley Fool owns shares of and recommends Retail Opportunity Investments. The Motley Fool has a disclosure policy.