Retail Value Inc. Reports Second Quarter 2019 Operating Results

BEACHWOOD, Ohio--()--Retail Value Inc. (NYSE: RVI) today announced operating results for the quarter ended June 30, 2019.

Results for the Quarter

  • Second quarter net income attributable to common shareholders was $13.6 million, or $0.72 per diluted share. Second quarter operating funds from operations attributable to common shareholders (“Operating FFO” or “OFFO”) was $24.4 million, or $1.28 per diluted share.
  • Sold four shopping centers for an aggregate sales price of $151.5 million.
  • The Continental U.S. leased rate remained at 92.2%.
  • The Puerto Rico leased rate was 84.6% as compared to 85.3% at March 31, 2019 due to the Payless bankruptcy and natural lease expirations.

Key Quarterly Operating Results

The following metrics are as of June 30, 2019:

 

 

Continental U.S.

 

Puerto Rico

Shopping Center Count

 

19

 

12

Gross Leasable Area (thousands)

 

7,704

 

4,431

Base Rent PSF

 

$13.52

 

$20.62

Leased Rate

 

92.2%

 

84.6%

Commenced Rate

 

91.3%

 

81.3%

NOI (millions)

 

$23.5

 

$16.8

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 the Company’s most recent reports on Form 10-K and Form 10-Q. 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

 

 

 

 

 

 

2Q19

 

2Q19

 

Total

 

Total

 

 

Continental U.S.

 

Puerto Rico

 

2Q19

 

6M19

 

 

 

 

 

 

 

Revenues (1):

 

 

 

 

 

Rental income (2)

35,056

$23,819

$58,875

$120,445

 

Other property revenues

15

(5)

10

51

 

Business interruption income

0

2,000

2,000

2,000

 

 

35,071

25,814

60,885

122,496

 

Expenses:

 

 

 

 

 

Operating and maintenance (3)

5,556

7,844

13,400

26,898

 

Real estate taxes

5,971

1,198

7,169

14,679

 

 

11,527

9,042

20,569

41,577

 

 

 

 

 

 

 

Net operating income (4)

23,544

16,772

40,316

80,919

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

Asset management fees

 

 

(2,820)

(5,640)

 

Interest expense

 

 

(10,846)

(24,820)

 

Depreciation and amortization

 

 

(18,378)

(37,733)

 

General and administrative

 

 

(1,058)

(1,943)

 

Impairment charges

 

 

(7,110)

(13,200)

 

Hurricane property insurance income, net

 

 

3,814

3,631

 

Debt extinguishment costs, net

 

 

(2,927)

(17,409)

 

Transaction costs

 

 

0

(18)

 

Other expense, net

 

 

0

(850)

 

Gain on disposition of real estate, net (5)

 

 

12,946

31,165

 

Income before other items

 

 

13,937

14,102

 

 

 

 

 

 

 

Tax expense

 

 

(320)

(495)

 

Net income

 

 

$13,617

$13,607

 

 

 

 

 

 

 

Weighted average shares – Basic & Diluted – EPS

 

 

19,043

18,963

 

 

 

 

 

 

 

Earnings per common share – Basic & Diluted

 

 

$0.72

$0.72

 

 

 

 

 

 

 

Revenue items:

 

 

 

 

(1)

Lost revenue related to hurricane

0

(1,152)

($1,152)

($2,777)

 

 

 

 

 

 

(2)

Minimum rents

22,973

14,335

37,308

76,680

 

Ground lease minimum rents

1,551

1,780

3,331

7,143

 

Percentage and overage rent

714

383

1,097

2,517

 

Recoveries

8,511

5,622

14,133

29,081

 

Lease termination fees

65

12

77

77

 

Ancillary and other rental income

685

1,823

2,508

4,675

 

Bad debt

557

(136)

421

272

 

 

 

 

 

 

(3)

Operating expenses:

 

 

 

 

 

Property management fees

(1,413)

(1,586)

(2,999)

(5,995)

 

 

 

 

 

 

(4)

NOI from assets sold

 

 

2,475

6,622

 

 

 

 

 

 

(5)

SITE Centers disposition fees

1,515

2,614 

Retail Value Inc.

Reconciliation: Net Income to FFO and Operating FFO and Other Financial Information

 

in thousands, except per share

 

 

 

 

2Q19

6M19

 

 

 

 

 

Net income attributable to Common Shareholders

$13,617

$13,607

 

Depreciation and amortization of real estate

18,352

37,681

 

Impairment of real estate

7,110

13,200

 

Gain on disposition of real estate, net

(12,946)

(31,165)

 

FFO attributable to Common Shareholders

$26,133

$33,323

 

 

 

 

 

Hurricane activity, net (1)

(4,662)

(2,854)

 

Debt extinguishment, transaction, other, net

2,927

18,277

 

Total non-operating items, net

(1,735)

15,423

 

Operating FFO attributable to Common Shareholders

$24,398

$48,746

 

 

 

 

 

Weighted average shares and units – Basic & Diluted – FFO & OFFO

19,043

18,963

 

 

 

 

 

FFO per share – Basic & Diluted

$1.37

$1.76

 

Operating FFO per share – Basic & Diluted

$1.28

$2.57

 

Common stock dividends declared, per share

N/A

N/A

 

 

 

 

 

Certain non-cash items:

 

 

 

Straight-line rent

(238)

(450)

 

Straight-line fixed CAM

141

301

 

Loan cost amortization

(1,295)

(2,597)

 

Non-real estate depreciation expense

(26)

(52)

 

 

 

 

 

Capital expenditures:

 

 

 

Maintenance capital expenditures

283

307

 

Tenant allowances and landlord work

2,718

5,119

 

Leasing commissions - SITE Centers

731

1,474

 

Leasing commissions - external

191

352

 

Hurricane restorations

18,756

40,443

 

 

 

 

(1)

Hurricane activity, net:

 

 

 

Lost tenant revenue

1,152

2,777

 

Property insurance proceeds in excess of receivable

(3,972)

(3,972)

 

Business interruption income

(2,000)

(2,000)

 

Clean up costs and other expenses

158

341

 

 

(4,662)

(2,854)

Retail Value Inc.

Balance Sheet

 

$ in thousands

 

 

 

 

 

At Period End

 

 

2Q19

 

4Q18

 

 

 

 

 

 

Assets:

 

 

 

 

Land

$549,622

 

$622,827

 

Buildings

1,463,674

 

1,629,862

 

Fixtures and tenant improvements

159,702

 

172,679

 

 

2,172,998

 

2,425,368

 

Depreciation

(663,677)

 

(704,401)

 

 

1,509,321

 

1,720,967

 

Construction in progress and land

15,566

 

26,070

 

Real estate, net

1,524,887

 

1,747,037

 

 

 

 

 

 

Cash

58,522

 

44,565

 

Restricted cash (1)

93,315

 

66,634

 

Receivables and straight-line (2)

25,355

 

31,426

 

Property insurance receivable

0

 

29,422

 

Intangible assets, net (3)

22,181

 

31,882

 

Other assets, net

5,672

 

11,678

 

Total Assets

1,729,932

 

1,962,644

 

 

 

 

 

 

Liabilities and Equity:

 

 

 

 

Secured debt

752,404

 

967,569

 

 

 

 

 

 

Payable to SITE

33,759

 

33,985

 

Dividends payable

0

 

24,005

 

Other liabilities (4)

60,100

 

84,832

 

Total Liabilities

846,263

 

1,110,391

 

 

 

 

 

 

Redeemable preferred equity

190,000

 

190,000

 

 

 

 

 

 

Common shares

1,904

 

1,846

 

Paid-in capital

692,665

 

675,566

 

Distributions in excess of net income

(890)

 

(15,153)

 

Common shares in treasury at cost

(10)

 

(6)

 

Total Equity

693,669

 

662,253

 

 

 

 

 

 

Total Liabilities and Equity

$1,729,932

 

$1,962,644

 

 

 

 

 

(1)

Asset sale proceeds

48,538

 

26,969

 

Other escrows

44,777

 

39,665

 

 

 

 

 

(2)

Straight-line rents receivable

17,556

 

18,757

 

 

 

 

 

(3)

Operating lease right of use assets (related to adoption of Topic 842)

1,811

 

0

 

 

 

 

 

(4)

Operating lease liabilities (related to adoption of Topic 842)

2,943

 

0

 

Below-market leases, net

20,893

 

33,914

 

Contacts

Matthew Ostrower, EVP and Chief Financial Officer
216-755-5500

Release Summary

Retail Value Inc. Reports Second Quarter 2019 Operating Results

Contacts

Matthew Ostrower, EVP and Chief Financial Officer
216-755-5500