HIGHLIGHTS
- $16.5 million of net income attributable to common stockholders ($0.14 per diluted share)
- $31.7 million in Funds From Operations(1) ($0.25 per diluted share)
- 9.6% increase in same-center cash net operating income (2Q‘21 vs. 2Q‘20)
- 96.9% portfolio lease rate at June 30, 2021
- 338,230 square feet of leases executed (record second quarter activity)
- 15.8% increase in same-space cash rents on new leases (3.3% increase on renewals)
- $61 million grocery-anchored shopping center acquisitions currently lined up
- $25.8 million property disposition completed
- $45 million property dispositions currently lined up (exiting Sacramento)
- $34.8 million of common equity raised through ATM program ($46.1 million YTD)
- $117 million of capital lined up year-to-date (equity issuance and sale proceeds combined)
- $48.3 million debt reduction year-to-date (6/30/21 vs. 12/31/20)
- No borrowings outstanding on unsecured credit facility at June 30, 2021
- Investment-grade rating reaffirmed by Moody’s and S&P
- Awarded 2021 Green Lease Leader Gold recognition for ESG initiatives
- 2021 FFO guidance range updated ($0.98 to $1.02 per diluted share)
- $0.11 per share cash dividend declared
________________________________________
(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, “Capitalizing on the strength and appeal of our grocery-anchored portfolio, we had a highly productive and active second quarter. We achieved a new second quarter record in terms of leasing activity, as well as double-digit rent growth on new leases. Additionally, we are moving forward with our investment recycling program. We currently have approximately $132 million of transactions completed or lined up, including approximately $61 million of grocery-anchored shopping center acquisitions and approximately $71 million of property dispositions.” Tanz further commented, “We are heading into the second half of 2021 with excellent momentum and look forward to continuing to advance our business and enhance long-term value.”
FINANCIAL RESULTS SUMMARY
For the three months ended June 30, 2021, GAAP net income attributable to common stockholders was $16.5 million, or $0.14 per diluted share, as compared to GAAP net income attributable to common stockholders of $4.6 million, or $0.04 per diluted share, for the three months ended June 30, 2020. For the six months ended June 30, 2021, GAAP net income attributable to common stockholders was $23.9 million, or $0.20 per diluted share, as compared to GAAP net income attributable to common stockholders of $16.6 million, or $0.14 per diluted share, for the six months ended June 30, 2020.
FFO for the second quarter of 2021 was $31.7 million, or $0.25 per diluted share, as compared to $29.2 million in FFO, or $0.23 per diluted share for the second quarter of 2020. FFO for the first six months of 2021 was $62.7 million, or $0.49 per diluted share, as compared to $66.6 million in FFO, or $0.52 per diluted share for the first six months of 2020. 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.
For the second quarter of 2021, same-center net operating income (NOI) was $48.6 million, as compared to $44.4 million in same-center NOI for the second quarter of 2020, representing a 9.6% increase. For the first six months of 2021, same-center NOI increased 1.5% as compared to same-center NOI for the first six months of 2020. ROIC reports same-center comparative NOI on a cash basis. A reconciliation of GAAP operating income to same-center comparative NOI is provided at the end of this press release.
At June 30, 2021, ROIC had total real estate assets (before accumulated depreciation) of approximately $3.2 billion and approximately $1.3 billion of principal debt outstanding. As of June 30, 2021, 93.6% of ROIC’s principal debt outstanding was unsecured, and no borrowings were outstanding on its $600 million unsecured revolving credit facility. Additionally, ROIC’s interest coverage for the second quarter 2021 was 3.2 times and 94.5% of its portfolio was unencumbered at June 30, 2021, based on GLA.
Year to date, ROIC has issued approximately 2.5 million shares of common stock through its ATM program, raising $46.1 million in gross proceeds, including issuing approximately 1.9 million shares of common stock during the second quarter, and approximately 0.6 million shares to date in the third quarter.
ACQUISITION SUMMARY
ROIC currently has lined up to acquire, in separate transactions, two grocery-anchored shopping centers totaling approximately $61 million, subject to completion of customary due diligence and other closing conditions. One property is located in Northern California and one property is located in Southern California.
DISPOSITION SUMMARY
During the second quarter, ROIC sold one property, located in San Diego, California, for $25.8 million. Additionally, ROIC currently has lined up to sell, in separate transactions, its final two properties in the Sacramento metropolitan area, for approximately $45 million, subject to completion of customary due diligence and other closing conditions.
PROPERTY OPERATIONS SUMMARY
At June 30, 2021, ROIC’s portfolio was 96.9% leased. During the second quarter, ROIC executed 118 leases, totaling 338,230 square feet, including 59 new leases, totaling 116,462 square feet, achieving a 15.8% increase in same-space comparative base rent, and 59 renewed leases, totaling 221,768 square feet, achieving a 3.3% increase in base rent. ROIC reports same-space comparative base rent on a cash basis.
CASH DIVIDEND
On July 9, 2021, ROIC distributed a cash dividend of $0.11 per share. On July28, 2021, ROIC’s board of directors declared a cash dividend of $0.11 per share, payable on October8, 2021 to stockholders of record on September17, 2021.
2021 FFO GUIDANCE
ROIC currently estimates that FFO for the full year 2021 will be within the range of $0.98 to $1.02 per diluted share, and net income to be within the range of $0.29 to $0.33 per diluted share.
| Year Ended December 31, 2021 (2) | ||||||||||||||||||
| Initial Guidance (2/23/21) | Updated Guidance (7/28/21) | |||||||||||||||||
| Low End | High End | Low End | High End | |||||||||||||||
| GAAP net income applicable to stockholders | $ | 21,034 | $ | 29,805 | $ | 33,695 | $ | 38,684 | ||||||||||
| Funds from operations (FFO) – diluted | $ | 120,555 | $ | 129,438 | $ | 124,950 | $ | 130,050 | ||||||||||
| GAAP net income per diluted share | $ | 0.18 | $ | 0.25 | $ | 0.29 | $ | 0.33 | ||||||||||
| FFO per diluted share | $ | 0.95 | $ | 1.02 | $ | 0.98 | $ | 1.02 | ||||||||||
| Key Drivers | ||||||||||||||||||
| General and administrative expenses | $ | 20,000 | $ | 19,000 | $ | 20,000 | $ | 19,000 | ||||||||||
| Straight-line rent | $ | (500 | ) | $ | (500 | ) | $ | 500 | $ | 500 | ||||||||
| Amortization of above- and below-market rent | $ | 8,700 | $ | 8,700 | $ | 8,700 | $ | 8,700 | ||||||||||
| Bad debt | $ | 7,000 | $ | 3,000 | $ | 5,000 | $ | 3,000 | ||||||||||
| Acquisitions | $ | — | $ | 40,000 | $ | 61,000 | $ | 100,000 | ||||||||||
| Dispositions | $ | 25,800 | $ | 25,800 | $ | 71,000 | $ | 71,000 | ||||||||||
| Common equity raised (gross proceeds) | $ | — | $ | — | $ | 46,000 | $ | 46,000 | ||||||||||
| Debt reduction (vs. 12/31/20) | $ | 40,000 | $ | — | $ | 49,000 | $ | 49,000 | ||||||||||
| Equity proceeds (cash) at year-end | $ | — | $ | — | $ | 56,000 | $ | 17,000 | ||||||||||
| Same-center cash NOI growth (vs. 2020) | — | % | 3 | % | 2 | % | 4 | % | ||||||||||
________________________________________
(2) Data is unaudited, amounts in thousands except per share data.
ROIC’s management will discuss the company’s guidance and underlying assumptions on its July 29, 2021 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 Thursday, July 29, 2021 at 9:30 a.m. Eastern Time / 6:30 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: 3092989. 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 3:00 p.m. Eastern Time on July 29, 2021 and will be available until 3:00 p.m. Eastern Time on August 5, 2021. To access the conference call recording, dial (855) 859-2056 (domestic) or (404) 537-3406 (international) and use the Conference ID: 3092989. 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 June 30, 2021, ROIC owned 87 shopping centers encompassing approximately 10.0 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, Standard & Poor’s, and Fitch Ratings, Inc. 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)
| June 30, 2021 (unaudited) | December 31, 2020 | ||||||||
| ASSETS | |||||||||
| Real Estate Investments: | |||||||||
| Land | $ | 874,514 | $ | 881,872 | |||||
| Building and improvements | 2,279,520 | 2,274,680 | |||||||
| 3,154,034 | 3,156,552 | ||||||||
| Less:accumulated depreciation | 491,063 | 460,165 | |||||||
| 2,662,971 | 2,696,387 | ||||||||
| Mortgage note receivable | 4,917 | 4,959 | |||||||
| Real Estate Investments, net | 2,667,888 | 2,701,346 | |||||||
| Cash and cash equivalents | 45,033 | 4,822 | |||||||
| Restricted cash | 1,978 | 1,814 | |||||||
| Tenant and other receivables, net | 55,733 | 58,756 | |||||||
| Deposits | 500 | — | |||||||
| Acquired lease intangible assets, net | 45,992 | 50,110 | |||||||
| Prepaid expenses | 1,668 | 4,811 | |||||||
| Deferred charges, net | 23,597 | 25,655 | |||||||
| Other assets | 17,170 | 17,296 | |||||||
| Total assets | $ | 2,859,559 | $ | 2,864,610 | |||||
| LIABILITIES AND EQUITY | |||||||||
| Liabilities: | |||||||||
| Term loan | $ | 298,706 | $ | 298,524 | |||||
| Credit facility | — | 48,000 | |||||||
| Senior Notes | 944,438 | 943,655 | |||||||
| Mortgage notes payable | 85,988 | 86,509 | |||||||
| Acquired lease intangible liabilities, net | 119,796 | 125,796 | |||||||
| Accounts payable and accrued expenses | 31,343 | 17,687 | |||||||
| Tenants’ security deposits | 6,679 | 6,854 | |||||||
| Other liabilities | 42,975 | 46,426 | |||||||
| Total liabilities | 1,529,925 | 1,573,451 | |||||||
| 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; 120,806,366 and 118,085,155 shares issued and outstanding at June30, 2021 and December31, 2020, respectively | 12 | 12 | |||||||
| Additional paid-in capital | 1,539,263 | 1,497,662 | |||||||
| Dividends in excess of earnings | (291,839 | ) | (289,309 | ) | |||||
| Accumulated other comprehensive loss | (6,133 | ) | (8,812 | ) | |||||
| Total Retail Opportunity Investments Corp. stockholders’ equity | 1,241,303 | 1,199,553 | |||||||
| Non-controlling interests | 88,331 | 91,606 | |||||||
| Total equity | 1,329,634 | 1,291,159 | |||||||
| Total liabilities and equity | $ | 2,859,559 | $ | 2,864,610 | |||||
RETAIL OPPORTUNITY INVESTMENTS CORP.
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
| Revenues | |||||||||||||||||||
| Rental revenue | $ | 70,114 | $ | 65,734 | $ | 139,018 | $ | 139,931 | |||||||||||
| Other income | 616 | 818 | 899 | 1,493 | |||||||||||||||
| Total revenues | 70,730 | 66,552 | 139,917 | 141,424 | |||||||||||||||
| Operating expenses | |||||||||||||||||||
| Property operating | 10,766 | 9,286 | 21,325 | 19,890 | |||||||||||||||
| Property taxes | 8,332 | 8,766 | 16,938 | 16,755 | |||||||||||||||
| Depreciation and amortization | 23,507 | 24,114 | 46,547 | 48,392 | |||||||||||||||
| General and administrative expenses | 5,232 | 3,929 | 9,607 | 7,873 | |||||||||||||||
| Other expense | 331 | 296 | 484 | 360 | |||||||||||||||
| Total operating expenses | 48,168 | 46,391 | 94,901 | 93,270 | |||||||||||||||
| Gain on sale of real estate | 9,460 | — | 9,460 | — | |||||||||||||||
| Operating income | 32,022 | 20,161 | 54,476 | 48,154 | |||||||||||||||
| Non-operating expenses | |||||||||||||||||||
| Interest expense and other finance expenses | (14,337 | ) | (15,125 | ) | (28,817 | ) | (29,982 | ) | |||||||||||
| Net income | 17,685 | 5,036 | 25,659 | 18,172 | |||||||||||||||
| Net income attributable to non-controlling interests | (1,201 | ) | (389 | ) | (1,760 | ) | (1,523 | ) | |||||||||||
| Net Income Attributable to Retail Opportunity Investments Corp. | $ | 16,484 | $ | 4,647 | $ | 23,899 | $ | 16,649 | |||||||||||
| Earnings per share – basic and diluted | $ | 0.14 | $ | 0.04 | $ | 0.20 | $ | 0.14 | |||||||||||
| Dividends per common share | $ | 0.11 | $ | — | $ | 0.22 | $ | 0.20 | |||||||||||
CALCULATION OF FUNDS FROM OPERATIONS
(Unaudited)
(In thousands)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||
| Net income attributable to ROIC | $ | 16,484 | $ | 4,647 | $ | 23,899 | $ | 16,649 | |||||||||
| Plus:Depreciation and amortization | 23,507 | 24,114 | 46,547 | 48,392 | |||||||||||||
| Less: Gain on sale of real estate | (9,460 | ) | — | (9,460 | ) | — | |||||||||||
| Funds from operations – basic | 30,531 | 28,761 | 60,986 | 65,041 | |||||||||||||
| Net income attributable to non-controlling interests | 1,201 | 389 | 1,760 | 1,523 | |||||||||||||
| Funds from operations – diluted | $ | 31,732 | $ | 29,150 | $ | 62,746 | $ | 66,564 | |||||||||
SAME-CENTER CASH NET OPERATING INCOME ANALYSIS
(Unaudited)
(In thousands, except number of shopping centers and percentages)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||
| 2021 | 2020 | $ Change | % Change | 2021 | 2020 | $ Change | % Change | |||||||||||||||||||||||||||||||
| Number of shopping centers included in same-center analysis | 87 | 87 | 87 | 87 | ||||||||||||||||||||||||||||||||||
| Same-center occupancy | 96.9 | % | 97.0 | % | (0.1 | ) | % | 96.9 | % | 97.0 | % | (0.1 | ) | % | ||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||||||||||||
| Base rents | $ | 50,534 | $ | 51,313 | $ | (779 | ) | (1.5 | ) | % | $ | 100,860 | $ | 102,909 | $ | (2,049 | ) | (2.0 | ) | % | ||||||||||||||||||
| Percentage rent | (9 | ) | 120 | (129 | ) | (107.5 | ) | % | 173 | 213 | (40 | ) | (18.8 | ) | % | |||||||||||||||||||||||
| Recoveries from tenants | 16,699 | 16,608 | 91 | 0.5 | % | 33,663 | 33,762 | (99 | ) | (0.3 | ) | % | ||||||||||||||||||||||||||
| Other property income | 444 | 413 | 31 | 7.5 | % | 554 | 801 | (247 | ) | (30.8 | ) | % | ||||||||||||||||||||||||||
| Bad debt | 152 | (5,680 | ) | 5,832 | (102.7 | ) | % | (1,352 | ) | (6,156 | ) | 4,804 | (78.0 | ) | % | |||||||||||||||||||||||
| Total Revenues | 67,820 | 62,774 | 5,046 | 8.0 | % | 133,898 | 131,529 | 2,369 | 1.8 | % | ||||||||||||||||||||||||||||
| Operating Expenses | ||||||||||||||||||||||||||||||||||||||
| Property operating expenses | 10,916 | 9,806 | 1,110 | 11.3 | % | 21,668 | 20,900 | 768 | 3.7 | % | ||||||||||||||||||||||||||||
| Property taxes | 8,272 | 8,601 | (329 | ) | (3.8 | ) | % | 16,762 | 16,573 | 189 | 1.1 | % | ||||||||||||||||||||||||||
| Total Operating Expenses | 19,188 | 18,407 | 781 | 4.2 | % | 38,430 | 37,473 | 957 | 2.6 | % | ||||||||||||||||||||||||||||
| Same-Center Cash Net Operating Income | $ | 48,632 | $ | 44,367 | $ | 4,265 | 9.6 | % | $ | 95,468 | $ | 94,056 | $ | 1,412 | 1.5 | % | ||||||||||||||||||||||
SAME-CENTER CASH NET OPERATING INCOME RECONCILIATION
(Unaudited)
(In thousands)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
| GAAP operating income | $ | 32,022 | $ | 20,161 | $ | 54,476 | $ | 48,154 | |||||||||||
| Depreciation and amortization | 23,507 | 24,114 | 46,547 | 48,392 | |||||||||||||||
| General and administrative expenses | 5,232 | 3,929 | 9,607 | 7,873 | |||||||||||||||
| Other expense | 331 | 296 | 484 | 360 | |||||||||||||||
| Gain on sale of real estate | (9,460 | ) | — | (9,460 | ) | — | |||||||||||||
| Straight-line rent | (294 | ) | (319 | ) | (312 | ) | (230 | ) | |||||||||||
| Amortization of above- and below-market rent | (2,214 | ) | (2,522 | ) | (4,446 | ) | (8,000 | ) | |||||||||||
| Property revenues and other expenses (1) | (61 | ) | (99 | ) | (190 | ) | (249 | ) | |||||||||||
| Total Company cash NOI | 49,063 | 45,560 | 96,706 | 96,300 | |||||||||||||||
| Non same-center cash NOI | (431 | ) | (1,193 | ) | (1,238 | ) | (2,244 | ) | |||||||||||
| Same-center cash NOI | $ | 48,632 | $ | 44,367 | $ | 95,468 | $ | 94,056 | |||||||||||
________________________________________
(1)Includes anchor lease termination fees, net of contractual amounts, if any, expense and recovery adjustments related to prior periods and other miscellaneous adjustments.
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 Relations
858-677-0900
arubino@roireit.net
