Retail Value Inc. (NYSE: RVI) today announced operating results
for the quarter ended September 30, 2020.
Results for the Quarter
- Third quarter net loss attributable to common shareholders was
$69.0 million, or $3.48 per diluted share as compared to net income
of $72.3 million, or $3.79 per share, in the year-ago period. The
period-over-period decrease in net income is primarily attributable
to reduced rental income and increased impairment charges stemming
from the impact of the COVID-19 pandemic and the dilutive effect of
asset sales offset by reduced interest expense and debt
extinguishment costs.
- Third quarter operating funds from operations attributable to
common shareholders (“Operating FFO” or “OFFO”) was $14.6 million,
or $0.74 per diluted share, compared to $23.1 million, or $1.21 per
diluted share, in the year-ago period. The period-over-period
decrease in OFFO is primarily attributable to the same factors as
above.
- Sold two properties, Riverdale Village and Newnan Crossing
(Lowe’s), aggregating $85.6 million; $69.7 million of mortgage debt
was repaid in October 2020.
- The Continental U.S. leased rate was 90.7% at September 30,
2020 as compared to 89.3% at June 30, 2020. The increase is
primarily due to the impact of the asset sold in the third
quarter.
- The Puerto Rico leased rate was 86.3% at September 30, 2020 as
compared to 85.9% at June 30, 2020. The increase is primarily due
to new leasing activity which included 12 new leases for
approximately 53,000 square feet partly offset by the impact of
tenant lease expirations.
Key Quarterly Operating Results
The following metrics are as of September 30, 2020:
Continental U.S.
Puerto Rico
Shopping Center Count
11
12
Gross Leasable Area (thousands)
4,539
4,432
Base Rent PSF
$13.31
$19.72
Leased Rate
90.7%
86.3%
Commenced Rate
89.8%
83.7%
NOI-Quarter (millions)
$12.0
$10.7
Impact of the COVID-19 Pandemic
The impact to the portfolio as of October 31, 2020 is as
follows:
Continental U.S.
Puerto Rico
% of Tenants open and operating (pro rata
average rent)
97%
96%
% of Second quarter rent paid
76%
69%
% of Third quarter rent paid
88%
84%
% of October rent paid
88%
80%
As of October 31, 2020, approximately 97% of the Company’s
tenants (based on average base rents) were open for business, up
from a low of 34% in early April. In Puerto Rico, while 96% of the
Company’s tenants are open, most remain open subject to significant
capacity and operating restrictions.
Further, as of October 31, 2020, the additional impact of the
COVID-19 pandemic for the entire Company is as follows:
- Tenants paid approximately 72% of second quarter 2020 rents,
86% of third quarter 2020 rents and 84% of October 2020 rents.
- The Company had reached deferral arrangements with tenants
representing approximately 9% of second quarter 2020 rents and 4%
of third quarter 2020 rents.
- The Company granted abatements to tenants representing
approximately 5% of second quarter 2020 rents and 0.5% of third
quarter 2020 rents.
In addition, during the third quarter of 2020 the Company’s
rental revenue and NOI were reduced by $6.1 million of
uncollectible revenue primarily related to reserves associated with
cash-basis tenants as well as the impact of lease modification
accounting, both triggered by the impact of the COVID-19
pandemic.
The Company’s COVID-19 pandemic response remains at the
forefront of our property operations objectives. As tenants ramped
up their in-store operations, the Company worked to facilitate
curbside and online purchase pick-up, continued with the Company’s
social media and property level promotional programs, and worked to
promote social distancing and CDC protocols among shopping center
patrons through signage and other measures. Our property operations
teams continued to maintain heightened cleaning and disinfection
procedures in accordance with CDC guidelines and worked diligently
to monitor the compliance of vendors’ operations with our Vendor
COVID Operating Protocol.
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 generally accepted
accounting principles in the United States (“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 herein.
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 impact of the COVID-19 pandemic on the
Company’s ability to manage its properties and finance its
operations and on tenants’ ability to operate their businesses,
generate sales and meet their financial obligations, including the
obligation to pay ongoing and deferred rents; our ability to sell
assets on commercially reasonable terms; our ability to complete
dispositions of assets under contract; property damage, expenses
related thereto and other business and economic consequences
(including the potential loss of rental revenues) resulting from
extreme weather conditions and natural disasters 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 and
natural disasters; local conditions such as an increase in the
supply of, or a reduction in demand for, retail real estate in the
area; the impact of e-commerce; 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;
impairment charges; 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; changes
with respect 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 the Company’s most
recent reports on Form 10-K and Form 10-Q. The impacts of the
COVID-19 pandemic may also exacerbate the risks described therein,
any of which could have a material effect on the Company. 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
3Q20
3Q20
Total
Total
Continental U.S.
Puerto Rico
3Q20
9M20
Revenues:
Rental income (1)
$19,366
$20,598
$39,964
$129,593
Other property revenues
33
19
52
84
19,399
20,617
40,016
129,677
Expenses:
Operating and maintenance (2)
3,253
8,726
11,979
37,786
Real estate taxes
4,091
1,227
5,318
16,520
7,344
9,953
17,297
54,306
Net operating income (3)
12,055
10,664
22,719
75,371
Other income (expense):
Asset management fees
(2,002)
(6,650)
Interest expense, net
(5,175)
(18,127)
Depreciation and amortization
(13,797)
(44,478)
General and administrative
(860)
(2,861)
Impairment charges
(77,795)
(104,615)
Debt extinguishment costs, net
(440)
(4,417)
Other expense, net
107
441
Gain on disposition of real estate, net
(4)
8,324
21,956
Loss before other items
(68,919)
(83,380)
Tax expense
(86)
(678)
Net loss
($69,005)
($84,058)
Weighted average shares – Basic &
Diluted – EPS
19,829
19,798
Earnings per common share – Basic &
Diluted
($3.48)
($4.25)
Revenue items:
(1)
Minimum rents
14,795
14,565
29,360
91,097
Ground lease minimum rents
1,082
2,048
3,130
9,448
Recoveries
5,402
5,993
11,395
36,111
Uncollectible revenue
(2,229)
(3,912)
(6,141)
(13,819)
Percentage and overage rent
147
277
424
1,480
Ancillary and other rental income
169
1,627
1,796
4,757
Lease termination fees
0
0
0
519
(2)
Operating expenses:
Property management fees
(850)
(1,558)
(2,408)
(7,526)
(3)
NOI from assets sold
1,914
7,813
(4)
SITE Centers disposition fees
856
2,622
Retail Value Inc.
Reconciliation: Net Income
to FFO and Operating FFO
and Other Financial
Information
in thousands, except per share
3Q20
9M20
Net loss attributable to Common
Shareholders
($69,005)
($84,058)
Depreciation and amortization of real
estate
13,780
44,427
Impairment of real estate
77,795
104,615
Gain on disposition of real estate,
net
(8,324)
(21,956)
FFO attributable to Common
Shareholders
$14,246
$43,028
Debt extinguishment, transaction, other,
net
333
3,976
Total non-operating items, net
333
3,976
Operating FFO attributable to Common
Shareholders
$14,579
$47,004
Weighted average shares and units –
Basic & Diluted – FFO & OFFO
19,829
19,798
FFO per share – Basic &
Diluted
$0.72
$2.17
Operating FFO per share – Basic &
Diluted
$0.74
$2.37
Common stock dividends declared, per
share
N/A
N/A
Certain non-cash items:
Straight-line rent
41
(476)
Straight-line fixed CAM
108
308
Loan cost amortization
(883)
(2,817)
Non-real estate depreciation expense
(17)
(51)
Capital expenditures:
Maintenance capital expenditures
471
1,134
Tenant allowances and landlord work
1,618
3,229
Leasing commissions - SITE Centers
288
1,992
Leasing commissions - external
71
226
Hurricane restorations
1,875
9,887
Retail Value Inc.
Balance Sheet
$ in thousands
At Period End
3Q20
4Q19
Assets:
Land
$414,653
$522,393
Buildings
1,085,202
1,380,984
Fixtures and tenant improvements
133,852
152,426
1,633,707
2,055,803
Depreciation
(604,085)
(670,509)
1,029,622
1,385,294
Construction in progress and land
4,811
2,017
Real estate, net
1,034,433
1,387,311
Cash
115,254
71,047
Restricted cash (1)
140,548
112,246
Receivables and straight-line (2)
27,527
25,195
Intangible assets, net (3)
10,041
19,573
Other assets, net
11,090
11,315
Total Assets
1,338,893
1,626,687
Liabilities and Equity:
Secured debt
477,087
655,833
Payable to SITE
770
105
Dividends payable
0
39,057
Other liabilities (4)
38,653
53,789
Total Liabilities
516,510
748,784
Redeemable preferred equity
190,000
190,000
Common shares
1,983
1,905
Paid-in capital
721,318
692,871
Distributions in excess of net income
(90,915)
(6,857)
Common shares in treasury at cost
(3)
(16)
Total Equity
632,383
687,903
Total Liabilities and Equity
$1,338,893
$1,626,687
(1)
Asset sale proceeds
69,720
17,388
Hurricane related escrows
41,469
57,224
Other escrows
29,359
37,634
(2)
SL rents (including fixed CAM), net
14,313
16,164
(3)
Operating lease right of use asset
1,562
1,714
(4)
Operating lease liabilities
2,663
2,835
Below-market leases, net
14,129
20,042
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201105006072/en/
Christa Vesy, EVP and Chief Financial Officer 216-755-5500
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