Retail Value Inc. (NYSE: RVI) today announced operating results
for the quarter ended December 31, 2018.
“We made significant progress realizing equity value for
shareholders in the Company’s first year. Puerto Rico repair and
restoration work remains on track to be substantially complete by
the end of 2019 and operations are slowly improving,” commented
David R. Lukes, president and chief executive officer.
Results for the Quarter
- Fourth quarter net income attributable
to common shareholders was $2.9 million, or $0.15 per diluted
share. Fourth quarter operating funds from operations attributable
to common shareholders (“Operating FFO” or “OFFO”) was
$25.0 million, or $1.36 per diluted share.
- Sold four shopping centers for an
aggregate sales price of $133.7 million.
- The Continental U.S. leased rate was
92.9% as compared to 93.1% at September 30, 2018 with the decline
driven by the impact of asset sales.
Key Quarterly Operating Results
The following metrics are as of December 31, 2018:
Continental U.S. Puerto Rico Shopping
Center Count 26 12 Gross Leasable Area (thousands) 9,592 4,431 Base
Rent PSF $13.42 $20.66 Leased Rate 92.9% 87.0% Commenced Rate 91.5%
84.4% NOI (millions) $26.9 $17.7
About RVI
RVI is an independent publicly traded company trading under the
ticker symbol “RVI” on the New York Stock Exchange. RVI holds
assets in the continental U.S. and Puerto Rico and is managed by
one or more subsidiaries of SITE Centers Corp. RVI focuses on
realizing value in its business through operations and sales of its
assets. Additional information about RVI is available at
www.retailvalueinc.com.
Non-GAAP Measures
Funds from Operations (“FFO”) is a supplemental non-GAAP
financial measure used as a standard in the real estate industry
and is a widely accepted measure of real estate investment trust
(“REIT”) performance. Management believes that both FFO and
Operating FFO provide additional indicators of the financial
performance of a REIT. The Company also believes that FFO and
Operating FFO more appropriately measure the core operations of the
Company and provide benchmarks to its peer group.
FFO is generally defined and calculated by the Company as net
income (loss) (computed in accordance with GAAP) adjusted to
exclude (i) gains and losses from disposition of depreciable real
estate property, which are presented net of taxes, if any, (ii)
impairment charges on depreciable real estate property and (iii)
certain non-cash items. These non-cash items principally include
real property depreciation and amortization of intangibles. The
Company’s calculation of FFO is consistent with the definition of
FFO provided by the National Association of Real Estate Investment
Trusts (“NAREIT”). The Company calculates Operating FFO by
excluding certain non-operating charges and income. Operating FFO
is useful to investors as the Company removes non-comparable
charges and income to analyze the results of its operations and
assess performance of the core operating real estate portfolio.
Other real estate companies may calculate FFO and Operating FFO in
a different manner.
In December 2018, NAREIT issued NAREIT Funds From Operations
White Paper - 2018 Restatement (“2018 FFO White Paper”). The
purpose of the 2018 FFO White Paper was not to change the
fundamental definition of FFO but clarify existing guidance and
consolidate into a single document, alerts and policy bulletins
issued by NAREIT since the last FFO white paper was issued in 2002.
The 2018 FFO White Paper is effective starting with first quarter
2019 reporting. Although early adoption for the year ended 2018 is
permitted, the Company plans to adopt any changes in its
calculation in 2019 on a retrospective basis. The Company does not
expect to report any changes in the calculation of FFO related to
the clarification in the 2018 FFO White Paper.
The Company also uses net operating income (“NOI”), a non-GAAP
financial measure, as a supplemental performance measure. NOI is
calculated as property revenues less property-related expenses. The
Company believes 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, reflects the impact on operations from trends in occupancy
rates, rental rates, operating costs and acquisition and
disposition activity on an unleveraged basis.
FFO, Operating FFO and NOI do not represent cash generated from
operating activities in accordance with GAAP, are not necessarily
indicative of cash available to fund cash needs and should not be
considered as alternatives to net income computed in accordance
with GAAP as indicators of the Company’s operating performance or
as alternatives to cash flow as a measure of liquidity.
Reconciliations of these non-GAAP measures to their most directly
comparable GAAP measures are included in this release and the
accompanying financial supplement.
Safe Harbor
RVI considers portions of the information in this press release
to be forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, both as amended, with respect to the
Company's expectation for future periods. Although the Company
believes that the expectations reflected in such forward-looking
statements are based upon reasonable assumptions, it can give no
assurance that its expectations will be achieved. For this purpose,
any statements contained herein that are not historical fact may be
deemed to be forward-looking statements. There are a number of
important factors that could cause our results to differ materially
from those indicated by such forward-looking statements, including,
among other factors, the ability to execute our strategy as an
independent, publicly traded company. Other risks and uncertainties
that could cause our results to differ materially from those
indicated by such forward-looking statements include our ability to
sell assets on commercially reasonable terms; our ability to
complete dispositions of assets under contract; the success of our
asset sale strategy; property damage, expenses related thereto and
other business and economic consequences (including the potential
loss of rental revenues) resulting from extreme weather conditions
in locations where we own properties, and the ability to estimate
accurately the amounts thereof; sufficiency and timing of any
insurance recovery payments related to damages from extreme weather
conditions; local conditions such as supply of space or a reduction
in demand for real estate in the area; competition from other
available space; dependence on rental income from real property;
the loss of, significant downsizing of or bankruptcy of a major
tenant and the impact of any such event on rental income from other
tenants at our properties; our ability to secure equity or debt
financing on commercially acceptable terms or at all; our ability
to enter into definitive agreements with regard to our financing
arrangements or our failure to satisfy conditions to the completion
of these arrangements; unforeseen changes to the Puerto Rican
economy and government; the ability to secure and maintain
management services provided to us, including pursuant to our
external management agreement with one or more subsidiaries of SITE
Centers; and our ability to maintain our REIT status. For
additional factors that could cause the results of the Company to
differ materially from those indicated in the forward-looking
statements, please refer to “Risk Factors” included in the
Company’s report on Form 10-K for the year ended December 31, 2018.
The Company undertakes no obligation to publicly revise these
forward-looking statements to reflect events or circumstances that
arise after the date hereof.
Retail Value Inc.
Income Statement
$ in thousands, except per share
4Q18 4Q18
Total Total Continental U.S. Puerto
Rico 4Q18 6M18 Revenues (1):
Minimum rents (2) $ 29,607 $ 16,126 $ 45,733 $ 94,319 Percentage
rent 295 959 1,254 1,612 Recoveries 10,321 5,741 16,062 32,119
Other property revenues (3) 435 2,208 2,643 4,893 Business
interruption income 0 2,000
2,000 4,404 40,658 27,034 67,692 137,347
Expenses: Operating and maintenance (4) 6,487 8,047 14,534
28,193 Real estate taxes 7,267 1,268
8,535 17,597 13,754 9,315 23,069 45,790
Net operating income (5) 26,904 17,719
44,623 91,557 Other income (expense):
Asset management fees (3,268 ) (6,537 ) Interest expense (15,199 )
(32,249 ) Depreciation and amortization (20,333 ) (42,471 ) General
and administrative (1,138 ) (2,147 ) Impairment charges (1,970 )
(6,390 ) Hurricane property loss (211 ) (366 ) Debt extinguishment
costs, net (3,718 ) (6,431 ) Transaction costs (7 ) (186 ) Other
income (expense), net (3,035 ) (2,590 )
Gain on disposition of real estate, net
(6)
6,978 16,813 Income before other items
2,722 9,003 Tax benefit (expense) 177
(151 )
Net income $ 2,899 $
8,852 Weighted average shares – Basic &
Diluted – EPS 18,464 18,464 Earnings
per common share – Basic & Diluted $ 0.15
$ 0.48 Revenue items: (1 ) Lost revenue
related to hurricane ($1,849 ) ($4,250 ) (2 ) Ground lease revenue
4,070 8,178 (3 ) Lease termination fees 70 81 (4 )
Operating expenses: Property management fees (1,666 ) (1,589
) (3,255 ) (6,538 ) Bad debt expense (218 ) (222 ) (5 ) NOI
from assets sold 1,142 0 1,142 5,531 (6 ) SITE Centers
disposition fees (1,337 ) (2,959 )
Retail Value Inc.
Reconciliation: Net Income to FFO
and Operating FFO
and Other Financial Information
$ in thousands, except per share
4Q18 6M18
Net income attributable to Common Shareholders
$ 2,899 $ 8,852 Depreciation and
amortization of real estate 20,319 42,419 Impairment of depreciable
real estate 1,970 6,390 Gain on disposition of depreciable real
estate, net (6,978 ) (16,813 )
FFO attributable to
Common Shareholders $ 18,210 $
40,848 Hurricane property loss, net (1) 60 212 Debt
extinguishment, transaction, other, net 6,760
9,207 Total non-operating items, net 6,820
9,419
Operating FFO attributable to Common
Shareholders $ 25,030 $ 50,267
Weighted average shares and units – Basic & Diluted –
FFO & OFFO 18,465 18,465 FFO per
share – Basic & Diluted $ 0.99 $
2.21 Operating FFO per share – Basic & Diluted
$ 1.36 $ 2.72 Common stock dividends
declared, per share $ 1.30 $ 1.30
Certain non-cash items: Straight-line rent, net ($114
) ($13 ) Loan cost amortization (1,368 ) (2,866 ) Non-real estate
depreciation expense (14 ) (52 )
Capital
expenditures: Maintenance capital expenditures 300 983 Tenant
allowances and landlord work 4,160 5,786 Leasing commissions (2)
573 1,491 Hurricane restorations 18,487 31,380 (1 )
Hurricane property (income) loss: Lost tenant revenue 1,849
4,250 Business interruption income (2,000 ) (4,404 ) Clean up costs
and other expenses 211 366 60 212
(2 ) SITE Centers lease commissions 420 1,085
Retail Value Inc.
Balance Sheet
$ in thousands
At Period End 4Q18
Assets: Land $ 622,827 Buildings 1,629,862 Fixtures and
tenant improvements 172,679 2,425,368 Depreciation
(704,401 ) 1,720,967 Construction in progress and land
26,070 Real estate, net 1,747,037 Cash 44,565
Restricted cash(1) 66,634 Receivables, net (2) 31,426 Property
insurance receivable 29,422 Intangible assets, net 31,882 Other
assets, net 11,678
Total Assets
1,962,644 Liabilities and Equity: Secured debt
967,569 Payable to SITE 33,985 Dividends payable 24,005
Other liabilities (3) 84,832
Total Liabilities
1,110,391 Redeemable preferred equity
190,000 Common shares 1,846 Paid-in capital 675,566
Distributions in excess of net income (15,153 ) Common shares in
treasury at cost (6 )
Total Equity 662,253
Total Liabilities and Equity $
1,962,644 (1 ) Asset sale proceeds 26,969 Other
escrows 39,665 (2 ) Straight-line rents receivable, net
18,757 (3 ) Below-market leases, net 33,914
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version on businesswire.com: https://www.businesswire.com/news/home/20190305005913/en/
Matthew Ostrower,EVP and Chief Financial Officer216-755-5500
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