Retail Opportunity Investments Corp. (NASDAQ:ROIC) announced today
financial and operating results for the three and nine months ended
September 30, 2018.
HIGHLIGHTS
- $14.2 million of net income attributable to common
stockholders ($0.12 per diluted share)
- $35.1 million of Funds From Operations(1) ($0.28 per
diluted share)
- 97.8% portfolio lease rate at September 30,
2018
- 17.1% increase in same-space comparative cash rents on
new leases (8.6% on renewals)
- 2.5% increase in same-center cash net operating income
(3Q’18 vs. 3Q’17)
- $5.0 million redevelopment site acquired
- $28.0 million shopping center disposition
- $24.2 million of common equity raised through ATM
program
- $64.0 million debt reduction (9/30/18 vs.
6/30/18)
- $0.1950 per share quarterly cash dividend
paid
__________________
(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, “Demand for
space across our portfolio remains robust and we continue to work
hard at making the most of it. During the third quarter we
increased our portfolio lease rate to a new record high for the
company, and again achieved growth in same-center NOI and
same-space releasing spreads.” Tanz added, “Along with advancing
portfolio operations, we also strengthened our financial position,
raising equity during the third quarter while retiring mortgage
debt and reducing our credit line balance. We look forward to a
solid finish to 2018.”
FINANCIAL SUMMARY
For the three months ended September 30, 2018,
GAAP net income attributable to common stockholders was $14.2
million, or $0.12 per diluted share, as compared to GAAP net income
attributable to common stockholders of $9.1 million, or $0.08 per
diluted share, for the three months ended September 30, 2017.
For the nine months ended September 30, 2018, GAAP net income
attributable to common stockholders was $32.2 million, or $0.28 per
diluted share, as compared to GAAP net income attributable to
common stockholders of $27.6 million, or $0.25 per diluted share,
for the nine months ended September 30, 2017.
FFO for the third quarter of 2018 was $35.1
million, or $0.28 per diluted share, as compared to $34.8 million
in FFO, or $0.29 per diluted share for the third quarter of
2017. FFO for the first nine months of 2018 was $105.6
million, or $0.85 per diluted share, as compared to $101.9 million
in FFO, or $0.84 per diluted share for the first nine months of
2017. 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.
At September 30, 2018, ROIC had a total market
capitalization of approximately $3.8 billion with approximately
$1.5 billion of principal debt outstanding, equating to a 38.8%
debt-to-total market capitalization ratio. ROIC’s debt
outstanding was comprised of $86.8 million of mortgage debt and
approximately $1.4 billion of unsecured debt, including $137.0
million outstanding on its unsecured credit facility at September
30, 2018. For the third quarter of 2018, ROIC’s interest
coverage was 3.3 times and 94.7% of its portfolio was unencumbered
(based on gross leasable area) at September 30, 2018.
ACQUISITION & DISPOSITION
SUMMARY
During the third quarter of 2018, ROIC acquired
for $5.0 million a redevelopment site adjacent to an existing ROIC
grocery-anchored shopping center located in Pinole, California,
within the San Francisco metropolitan area. In addition,
during the third quarter of 2018, ROIC sold Round Hill Square
Shopping Center for $28.0 million, recognizing a gain on sale of
$5.9 million.
PROPERTY OPERATIONS SUMMARY
At September 30, 2018, ROIC’s portfolio was
97.8% leased. For the third quarter of 2018, same-center net
operating income (NOI) was $45.2 million, as compared to $44.1
million in same-center NOI for the third quarter of 2017,
representing a 2.5% increase. The third quarter of 2018
same-center NOI included a $0.2 million one-time expense in
connection with an anchor space recapture initiative. For the
first nine months of 2018, same-center NOI was $128.1 million, as
compared to $124.8 million of same-center NOI for the first nine
months of 2017, representing a 2.6% increase. ROIC reports
same-center NOI on a cash basis. A reconciliation of GAAP
operating income to same-center NOI is provided at the end of this
press release.
During the third quarter of 2018, ROIC executed
106 leases, totaling 442,651 square feet, including 48 new leases,
totaling 138,733 square feet, achieving a 17.1% increase in
same-space comparative base rent, and 58 renewed leases, totaling
303,918 square feet, achieving an 8.6% increase in base
rent. ROIC reports same-space comparative base rent on
a cash basis.
CAPITAL MARKETS SUMMARY
During the third quarter of 2018, ROIC issued
approximately 1.25 million shares of common stock through its ATM
program, raising $24.2 million in gross proceeds.
CASH DIVIDEND
On September 27, 2018, ROIC distributed a
$0.1950 per share cash dividend. On October 23, 2018, ROIC’s
board of directors declared a cash dividend of $0.1950 per share,
payable on December 28, 2018 to stockholders of record on December
14, 2018.
2018 FFO GUIDANCE
ROIC currently estimates that FFO for the full
year 2018 will be within the range of $1.13 to $1.15 per diluted
share, and net income will be within the range of $0.36 to $0.37
per diluted share. The following table provides a
reconciliation of GAAP net income to FFO (in thousands, except per
share data).
|
|
|
Year Ended December 31,
2018 |
|
Low End |
|
High End |
GAAP net income applicable to stockholders |
$ |
40,722 |
|
|
$ |
41,600 |
|
Plus: Depreciation and amortization |
101,873 |
|
|
103,401 |
|
Less: Gain on sale of real estate |
(5,890 |
) |
|
(5,890 |
) |
Funds from operations (FFO) – basic |
136,705 |
|
|
139,111 |
|
Net income attributable to non-controlling interests |
4,178 |
|
|
4,265 |
|
Funds from operations (FFO) – diluted |
$ |
140,883 |
|
|
$ |
143,376 |
|
|
|
|
|
Diluted Shares |
124,675 |
|
|
124,675 |
|
|
|
|
|
Earnings per share (diluted) |
$ |
0.36 |
|
|
$ |
0.37 |
|
FFO per share (diluted) |
$ |
1.13 |
|
|
$ |
1.15 |
|
|
|
|
|
|
|
|
|
ROIC’s estimates are based on numerous
underlying assumptions. ROIC’s management will discuss the
company’s guidance and underlying assumption on its October 24,
2018 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 Wednesday, October 24, 2018 at
9:00 a.m. Eastern Time / 6:00 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: 7393596. 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 12:00 p.m. Eastern Time on
October 24, 2018 and will be available until 12:00a.m. Eastern Time
on October 31, 2018. To access the conference call recording, dial
(855) 859-2056 (domestic) or (404) 537-3406 (international) and use
the Conference ID: 7393596. 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 September 30, 2018, ROIC owned 91 shopping
centers encompassing approximately 10.5 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 and Standard & Poor's. 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) |
|
|
September 30, 2018
(unaudited) |
|
December 31,
2017 |
ASSETS |
|
|
|
Real Estate Investments: |
|
|
|
Land |
$ |
894,148 |
|
|
$ |
878,797 |
|
Building and improvements |
2,256,495 |
|
|
2,230,600 |
|
|
3,150,643 |
|
|
3,109,397 |
|
Less: accumulated depreciation |
309,066 |
|
|
260,115 |
|
Real Estate Investments, net |
2,841,577 |
|
|
2,849,282 |
|
Cash and cash equivalents |
3,046 |
|
|
11,553 |
|
Restricted cash |
1,611 |
|
|
5,412 |
|
Tenant and other receivables, net |
45,243 |
|
|
43,257 |
|
Deposits |
— |
|
|
500 |
|
Acquired lease intangible assets, net |
75,493 |
|
|
82,778 |
|
Prepaid expenses |
1,244 |
|
|
2,853 |
|
Deferred charges, net |
34,956 |
|
|
37,167 |
|
Other |
11,365 |
|
|
6,396 |
|
Total assets |
$ |
3,014,535 |
|
|
$ |
3,039,198 |
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
Liabilities: |
|
|
|
Term loan |
$ |
299,014 |
|
|
$ |
298,816 |
|
Credit facility |
134,474 |
|
|
140,329 |
|
Senior Notes |
941,104 |
|
|
940,086 |
|
Mortgage notes payable |
88,754 |
|
|
107,915 |
|
Acquired lease intangible liabilities, net |
170,079 |
|
|
178,984 |
|
Accounts payable and accrued expenses |
31,664 |
|
|
18,638 |
|
Tenants’ security deposits |
7,054 |
|
|
6,771 |
|
Other liabilities |
16,809 |
|
|
18,018 |
|
Total liabilities |
1,688,952 |
|
|
1,709,557 |
|
|
|
|
|
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;
113,984,835 and 112,347,451 shares issued and outstanding at
September 30, 2018 and December 31, 2017, respectively |
11 |
|
|
11 |
|
Additional paid-in capital |
1,439,548 |
|
|
1,412,590 |
|
Dividends in excess of earnings |
(244,690 |
) |
|
(210,490 |
) |
Accumulated other comprehensive income |
7,980 |
|
|
1,856 |
|
Total Retail Opportunity Investments Corp. stockholders’
equity |
1,202,849 |
|
|
1,203,967 |
|
Non-controlling interests |
122,734 |
|
|
125,674 |
|
Total equity |
1,325,583 |
|
|
1,329,641 |
|
Total liabilities and equity |
$ |
3,014,535 |
|
|
$ |
3,039,198 |
|
|
|
|
|
|
RETAIL OPPORTUNITY
INVESTMENTS CORP. |
Consolidated Statements
of Operations |
(Unaudited) |
(In thousands, except per share
data) |
|
|
Three Months Ended September
30, |
|
Nine Months Ended September
30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Revenues |
|
|
|
|
|
|
|
Base rents |
$ |
56,573 |
|
|
$ |
52,871 |
|
|
$ |
167,000 |
|
|
$ |
154,878 |
|
Recoveries from tenants |
16,455 |
|
|
14,210 |
|
|
49,087 |
|
|
43,100 |
|
Other income |
876 |
|
|
885 |
|
|
4,553 |
|
|
2,528 |
|
Total revenues |
73,904 |
|
|
67,966 |
|
|
220,640 |
|
|
200,506 |
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
Property operating |
11,150 |
|
|
9,702 |
|
|
32,645 |
|
|
28,630 |
|
Property taxes |
8,255 |
|
|
7,086 |
|
|
23,988 |
|
|
21,801 |
|
Depreciation and amortization |
25,335 |
|
|
24,627 |
|
|
75,883 |
|
|
71,330 |
|
General and administrative expenses |
3,770 |
|
|
3,475 |
|
|
11,291 |
|
|
10,790 |
|
Acquisition transaction costs |
— |
|
|
— |
|
|
— |
|
|
4 |
|
Other expense |
46 |
|
|
41 |
|
|
389 |
|
|
316 |
|
Total operating expenses |
48,556 |
|
|
44,931 |
|
|
144,196 |
|
|
132,871 |
|
|
|
|
|
|
|
|
|
Operating income |
25,348 |
|
|
23,035 |
|
|
76,444 |
|
|
67,635 |
|
Non-operating expenses |
|
|
|
|
|
|
|
Interest expense and other finance expenses |
(15,591 |
) |
|
(12,908 |
) |
|
(46,761 |
) |
|
(37,060 |
) |
Gain on sale of real estate |
5,890 |
|
|
— |
|
|
5,890 |
|
|
— |
|
Net income |
15,647 |
|
|
10,127 |
|
|
35,573 |
|
|
30,575 |
|
Net income attributable to non-controlling interests |
(1,453 |
) |
|
(978 |
) |
|
(3,338 |
) |
|
(2,947 |
) |
Net Income Attributable to Retail Opportunity Investments
Corp. |
$ |
14,194 |
|
|
$ |
9,149 |
|
|
$ |
32,235 |
|
|
$ |
27,628 |
|
|
|
|
|
|
|
|
|
Earnings per share – basic and diluted |
$ |
0.12 |
|
|
$ |
0.08 |
|
|
$ |
0.28 |
|
|
$ |
0.25 |
|
|
|
|
|
|
|
|
|
Dividends per common share |
$ |
0.1950 |
|
|
$ |
0.1875 |
|
|
$ |
0.5850 |
|
|
$ |
0.5625 |
|
|
|
|
|
|
|
|
|
|
CALCULATION OF FUNDS FROM
OPERATIONS |
(Unaudited) |
(In thousands) |
|
|
Three Months Ended September
30, |
|
Nine Months Ended September
30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net income attributable to ROIC |
$ |
14,194 |
|
|
$ |
9,149 |
|
|
$ |
32,235 |
|
|
$ |
27,628 |
|
Plus: Depreciation and amortization |
25,335 |
|
|
24,627 |
|
|
75,883 |
|
|
71,330 |
|
Less: Gain on sale of real estate |
(5,890 |
) |
|
— |
|
|
(5,890 |
) |
|
— |
|
Funds from operations – basic |
33,639 |
|
|
33,776 |
|
|
102,228 |
|
|
98,958 |
|
Net income attributable to non-controlling interests |
1,453 |
|
|
978 |
|
|
3,338 |
|
|
2,947 |
|
Funds from operations – diluted |
$ |
35,092 |
|
|
$ |
34,754 |
|
|
$ |
105,566 |
|
|
$ |
101,905 |
|
|
|
|
|
|
|
|
|
|
SAME-CENTER CASH NET
OPERATING INCOME ANALYSIS |
(Unaudited) |
(In thousands, except number of
shopping centers and percentages) |
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended September
30, |
|
|
2018 |
|
2017 |
|
$ Change |
|
% Change |
|
2018 |
|
2017 |
|
$ Change |
|
% Change |
Number of shopping centers included in same-center
analysis |
83 |
|
|
83 |
|
|
|
|
|
|
78 |
|
|
78 |
|
|
|
|
|
Same-center occupancy |
97.8 |
% |
|
97.3 |
% |
|
|
|
0.5 |
% |
|
97.8 |
% |
|
97.4 |
% |
|
|
|
0.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base rents |
$ |
47,283 |
|
|
$ |
45,988 |
|
|
$ |
1,295 |
|
|
2.8 |
% |
|
$ |
133,180 |
|
|
$ |
129,496 |
|
|
$ |
3,684 |
|
|
2.8 |
% |
|
Percentage rent |
89 |
|
|
101 |
|
|
(12 |
) |
|
(11.9 |
)% |
|
265 |
|
|
404 |
|
|
(139 |
) |
|
(34.4 |
)% |
|
Recoveries from tenants |
15,309 |
|
|
13,894 |
|
|
1,415 |
|
|
10.2 |
% |
|
42,952 |
|
|
40,993 |
|
|
1,959 |
|
|
4.8 |
% |
|
Other property income |
817 |
|
|
803 |
|
|
14 |
|
|
1.7 |
% |
|
1,886 |
|
|
2,437 |
|
|
(551 |
) |
|
(22.6 |
)% |
Total Revenues |
63,498 |
|
|
60,786 |
|
|
2,712 |
|
|
4.5 |
% |
|
178,283 |
|
|
173,330 |
|
|
4,953 |
|
|
2.9 |
% |
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating expenses |
10,280 |
|
|
9,249 |
|
|
1,031 |
|
|
11.1 |
% |
|
28,810 |
|
|
26,738 |
|
|
2,072 |
|
|
7.7 |
% |
|
Bad debt expense |
405 |
|
|
454 |
|
|
(49 |
) |
|
(10.8 |
)% |
|
711 |
|
|
1,186 |
|
|
(475 |
) |
|
(40.1 |
)% |
|
Property taxes |
7,597 |
|
|
6,953 |
|
|
644 |
|
|
9.3 |
% |
|
20,695 |
|
|
20,632 |
|
|
63 |
|
|
0.3 |
% |
Total Operating Expenses |
18,282 |
|
|
16,656 |
|
|
1,626 |
|
|
9.8 |
% |
|
50,216 |
|
|
48,556 |
|
|
1,660 |
|
|
3.4 |
% |
Same-Center Cash Net Operating Income |
$ |
45,216 |
|
|
$ |
44,130 |
|
|
$ |
1,086 |
|
|
2.5 |
% |
|
$ |
128,067 |
|
|
$ |
124,774 |
|
|
$ |
3,293 |
|
|
2.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SAME-CENTER CASH NET
OPERATING INCOME RECONCILIATION |
(Unaudited) |
(In thousands) |
|
|
Three Months Ended September
30, |
|
Nine Months Ended September
30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
GAAP operating income |
$ |
25,348 |
|
|
$ |
23,035 |
|
|
$ |
76,444 |
|
|
$ |
67,635 |
|
Depreciation and amortization |
25,335 |
|
|
24,627 |
|
|
75,883 |
|
|
71,330 |
|
General and administrative expenses |
3,770 |
|
|
3,475 |
|
|
11,291 |
|
|
10,790 |
|
Acquisition transaction costs |
— |
|
|
— |
|
|
— |
|
|
4 |
|
Other expense |
46 |
|
|
41 |
|
|
389 |
|
|
316 |
|
Property revenues and other expenses (1) |
(5,184 |
) |
|
(5,811 |
) |
|
(15,117 |
) |
|
(17,041 |
) |
Total Company cash NOI |
49,315 |
|
|
45,367 |
|
|
148,890 |
|
|
133,034 |
|
Non same-center cash NOI |
(4,099 |
) |
|
(1,237 |
) |
|
(20,823 |
) |
|
(8,260 |
) |
Same-center cash NOI |
$ |
45,216 |
|
|
$ |
44,130 |
|
|
$ |
128,067 |
|
|
$ |
124,774 |
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(1) Includes straight-line rents, amortization of above and
below-market lease intangibles, anchor lease termination fees, net
of contractual amounts, and expense and recovery adjustments
related to prior periods.
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
Relations858-255-4913arubino@roireit.net
Retail Oppurtunity Inves... (NASDAQ:ROIC)
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