Retail Value Inc. (NYSE: RVI) today announced operating results
for the quarter ended March 31, 2019.
Results for the Quarter
- First quarter net loss attributable to
common shareholders was $10 thousand, or $0.00 per diluted share.
First quarter operating funds from operations attributable to
common shareholders (“Operating FFO” or “OFFO”) was
$24.3 million, or $1.29 per diluted share.
- Sold three shopping centers and two
outparcels for an aggregate sales price of $110.0 million.
- Refinanced previous $1.35 billion
mortgage loan with a new $900 million mortgage loan. The new loan
facility provides a lower interest rate, an extended maturity date,
a lower allocation of loan principal to the Company’s continental
U.S. assets as a result of the mortgage on one Puerto Rico property
and a lower debt yield requirement with respect to the Company’s
ability to maintain control of excess cash flow from its
properties. RVI paid $1.8 million refinancing fee to SITE Centers
in connection with new loan.
- The Continental U.S. leased rate was
92.2% as compared to 92.9% at December 31, 2018 with the decline
driven by the impact of asset sales.
- The Puerto Rico leased rate was 85.3%
as compared to 87.0% at December 31, 2018, the decline primarily
was due to the expiration of a JC Penney lease at Plaza Palma
Real.
Key Quarterly Operating Results
The following metrics are as of March 31, 2019:
Continental U.S. Puerto Rico Shopping
Center Count 23 12 Gross Leasable Area (thousands) 8,717 4,428 Base
Rent PSF $13.55 $20.59 Leased Rate 92.2% 85.3% Commenced Rate 91.1%
83.1% NOI (millions) $24.7 $15.9
Financial Statement Presentation Change
On January 1, 2019, the Company adopted the accounting framework
for leases, ASU No. 2016-02, Leases (“Topic 842”). The following is
a summary of the presentation changes within the 2019 Consolidated
Statement of Operations required by the adoption of the new
standard:
- All income related to tenant leases is
reflected in a single “Rental income” line item.
- The impact of bad debt is now a
component of the single Rental income line item and is no longer a
component of Operating and Maintenance expenses. This change is
reflected in 2019 reporting periods but was not made to 2018
historical results.
- Real estate taxes paid by certain major
tenants directly to the taxing authority are no longer reflected in
Rental Income and Real estate tax expense. This change is reflected
in 2019 reporting periods but was not made to 2018 historical
results.
The Company’s Net income, Net operating income and Operating FFO
were not impacted by these presentation changes.
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.
In December 2018, the National Association of Real Estate
Investment Trusts (“NAREIT”) issued NAREIT Funds From Operations
White Paper - 2018 Restatement (“the 2018 FFO White Paper”). The
purpose of the 2018 FFO White Paper was not to change the
fundamental definition of FFO but to clarify existing guidance and
to 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 was effective starting with first quarter
2019 reporting. The Company did not report any changes in the
calculation of FFO in 2019 related to the clarification in the 2018
FFO White Paper.
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 real estate
property and related investments, which are presented net of taxes,
if any, (ii) impairment charges on real estate property and related
investments 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 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.
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 and our ability 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
1Q19 1Q19
Total Continental U.S. Puerto Rico 1Q19
Revenues (1): Rental income (2) $36,970 $24,600
$61,570 Other property revenues 22 19 41 Business interruption
income 0 0 0 36,992 24,619 61,611
Expenses: Operating and
maintenance (3) 5,950 7,548 13,498 Real estate taxes 6,312 1,198
7,510 12,262 8,746 21,008
Net operating income (4)
24,730 15,873 40,603 Other income
(expense): Asset management fees (2,820) Interest expense
(13,974) Depreciation and amortization (19,355) General and
administrative (885) Impairment charges (6,090) Hurricane property
loss (183) Debt extinguishment costs, net (14,482) Transaction
costs (18) Other expense, net (850) Gain on disposition of real
estate, net (5) 18,219 Income before other items 165 Tax
expense (175)
Net loss ($10) Weighted
average shares – Basic & Diluted – EPS 18,882
Earnings per common share – Basic & Diluted $0.00
Revenue items: (1) Lost revenue related to hurricane
($1,625) (2) Minimum rents 25,301 14,070 39,371 Ground lease
minimum rents 1,940 1,872 3,812 Percentage rent 263 1,157 1,420
Recoveries 9,342 5,607 14,949 Lease termination fees 0 0 0
Ancillary rental income 261 1,906 2,167 Bad debt (137) (12) (149)
(3)
Operating expenses: Property management fees
(1,409) (1,587) (2,996) (4) NOI from assets sold 1,256 0
1,256 (5) SITE Centers disposition fees (1,100)
Retail Value Inc.
Reconciliation: Net Income to FFO
and Operating FFO
and Other Financial Information
$ in thousands, except per share
1Q19 Net income attributable to Common
Shareholders ($10) Depreciation and amortization of real
estate 19,329 Impairment of real estate 6,090 Gain on disposition
of real estate, net (18,219)
FFO attributable to Common
Shareholders $7,190 Hurricane property loss, net
(1) 1,808 Debt extinguishment, transaction, other, net 15,350 Total
non-operating items, net 17,158
Operating FFO attributable to
Common Shareholders $24,348 Weighted average
shares and units – Basic & Diluted – FFO & OFFO
18,882 FFO per share – Basic & Diluted
$0.38 Operating FFO per share – Basic & Diluted
$1.29 Common stock dividends declared, per share
N/A Certain non-cash items: Straight-line rent
(211) Straight-line fixed CAM 161 Loan cost amortization (1,302)
Non-real estate depreciation expense (26)
Capital
expenditures: Maintenance capital expenditures 24 Tenant
allowances and landlord work 2,401 Leasing commissions (2) 904
Hurricane restorations 21,687 (1)
Hurricane property
(income) loss: Lost tenant revenue 1,625 Business interruption
income 0 Clean up costs and other expenses 183 1,808 (2)
SITE Centers lease commissions 772
Retail Value Inc.
Balance Sheet
$ in thousands
At Period End 1Q19 4Q18
Assets: Land $588,801 $622,827 Buildings 1,554,766
1,629,862 Fixtures and tenant improvements 172,192 172,679
2,315,759 2,425,368 Depreciation (705,058) (704,401) 1,610,701
1,720,967 Construction in progress and land 45,411 26,070 Real
estate, net 1,656,112 1,747,037 Cash 37,560 44,565
Restricted cash (1) 71,556 66,634 Receivables and straight-line (2)
28,546 31,426 Property insurance receivable 15,953 29,422
Intangible assets, net (3) 24,339 31,882 Other assets, net 9,078
11,678
Total Assets 1,843,144 1,962,644
Liabilities and Equity: Secured debt 873,663 967,569
Payable to SITE 34,070 33,985 Dividends payable 0 24,005 Other
liabilities (4) 65,252 84,832
Total Liabilities
972,985 1,110,391 Redeemable preferred
equity 190,000 190,000 Common shares 1,904
1,846 Paid-in capital 692,771 675,566 Distributions in excess of
net income (14,507) (15,153) Common shares in treasury at cost (9)
(6)
Total Equity 680,159 662,253
Total Liabilities and Equity $1,843,144
$1,962,644 (1) Asset sale proceeds 30,452 26,969
Other escrows 41,104 39,665 (2) Straight-line rents
receivable 19,235 18,757 (3) Operating lease right of use
assets (related to adoption of Topic 842) 1,859 0 (4)
Operating lease liabilities (related to adoption of Topic 842)
2,995 0 Below-market leases, net 21,502 33,914
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190507006112/en/
Matthew Ostrower, 216-755-5500EVP and Chief Financial
Officer
Retail Value (NYSE:RVI)
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