Retail Value Inc. Reports First Quarter 2020 Operating Results

BEACHWOOD, Ohio--()--Retail Value Inc. (NYSE: RVI) today announced operating results for the quarter ended March 31, 2020.

Results for the Quarter

  • First quarter net loss attributable to common shareholders was $13.1 million, or $0.66 per diluted share as compared to net loss of $10 thousand, or $0.00 per share, in the year ago-period. The year-over-year increase in net loss is primarily attributable to an increase in impairment charges and lower gain on sale of assets and the dilutive effect of asset sales offset by reduced interest expense and debt extinguishment costs.
  • First quarter operating funds from operations attributable to common shareholders (“Operating FFO” or “OFFO”) was $20.3 million, or $1.03 per diluted share, compared to $24.3 million, or $1.29 per diluted share, in the year ago-period. The year-over-year decrease in OFFO is primarily attributable to the impact of asset sales.
  • Sold three shopping centers for an aggregate sales price of $155.6 million.
  • The Continental U.S. leased rate was 89.6% as compared to 90.6% at December 31, 2019 due to lease expirations and assets sold in first quarter.
  • The Puerto Rico leased rate was 85.8% as compared to 84.7% at December 31, 2019 primarily due to the reopening of an anchor lease tenant that had closed in 2017 due to the hurricane.

Key Quarterly Operating Results

The following metrics are as of March 31, 2020:

 

 

Continental U.S.

 

Puerto Rico

Shopping Center Count

 

14

 

12

Gross Leasable Area (thousands)

 

5,805

 

4,435

Base Rent PSF

 

$13.00

 

$19.85

Leased Rate

 

89.6%

 

85.8%

Commenced Rate

 

89.3%

 

83.4%

NOI-Quarter (millions)

 

$15.5

 

$15.5

Impact of COVID-19

The Company implemented a COVID-19 response plan that included enacting protocols in line with government guidelines at Company-owned shopping centers to keep its properties operational and working with tenants to access small business resources including those provided by the Payroll Protection Program (PPP).

The impact to the portfolio as of April 29, 2020 is as follows:

 

 

Continental U.S.

 

Puerto Rico

% of Tenants open and operating (pro rata rent)

 

49%

 

37%

% of April rent paid

 

44%

 

36%

In addition, during the first quarter the Company’s NOI was reduced by $1.2 million of straight-line rent reserves and bad debt triggered by the impact of COVID-19.

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 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 impact of the outbreak of COVID-19 on the Company’s ability to manage its properties, finance its operations and perform necessary administrative and reporting functions and on tenants’ ability to operate their businesses, generate sales and meet their financial obligations, including the obligation to pay rent; 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 COVID-19 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

 

 

 

 

 

 

 

1Q20

 

1Q20

 

Total

 

 

Continental U.S.

 

Puerto Rico

 

1Q20

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

Rental income (1)

$24,931

 

$25,399

 

$50,330

 

Other property revenues

24

 

15

 

39

 

 

24,955

 

25,414

 

50,369

 

Expenses:

 

 

 

 

 

 

Operating and maintenance (2)

4,889

 

8,725

 

13,614

 

Real estate taxes

4,488

 

1,231

 

5,719

 

 

9,377

 

9,956

 

19,333

 

 

 

 

 

 

 

 

Net operating income (3)

15,578

 

15,458

 

31,036

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

Asset management fees

 

 

 

 

(2,324)

 

Interest expense, net

 

 

 

 

(7,292)

 

Depreciation and amortization

 

 

 

 

(16,470)

 

General and administrative

 

 

 

 

(1,077)

 

Impairment charges

 

 

 

 

(15,910)

 

Debt extinguishment costs, net

 

 

 

 

(3,965)

 

Other expense, net

 

 

 

 

334

 

Gain on disposition of real estate, net (4)

 

 

 

 

2,674

 

Loss before other items

 

 

 

 

(12,994)

 

 

 

 

 

 

 

 

Tax expense

 

 

 

 

(73)

 

Net loss

 

 

 

 

($13,067)

 

 

 

 

 

 

 

 

Weighted average shares – Basic & Diluted – EPS

 

 

 

 

19,749

 

 

 

 

 

 

 

 

Earnings per common share – Basic & Diluted

 

 

 

 

($0.66)

 

 

 

 

 

 

 

 

Revenue items:

 

 

 

 

 

(1)

Minimum rents

17,012

 

14,379

 

31,391

 

Ground lease minimum rents

1,205

 

2,001

 

3,206

 

Percentage and overage rent

97

 

920

 

1,017

 

Recoveries

6,646

 

6,250

 

12,896

 

Lease termination fees

500

 

0

 

500

 

Ancillary and other rental income

322

 

1,856

 

2,178

 

Bad debt

(851)

 

(7)

 

(858)

 

 

 

 

 

 

 

(2)

Operating expenses:

 

 

 

 

 

 

Property management fees

(1,099)

 

(1,453)

 

(2,552)

 

 

 

 

 

 

 

(3)

NOI from assets sold

 

 

 

 

1,680

 

 

 

 

 

 

 

(4)

SITE Centers disposition fees

 

 

 

 

(1,556)

Retail Value Inc.

Reconciliation: Net Income to FFO and Operating FFO

and Other Financial Information

 

in thousands, except per share

 

 

 

1Q20

 

 

 

 

Net loss attributable to Common Shareholders

($13,067)

 

Depreciation and amortization of real estate

16,453

 

Impairment of real estate

15,910

 

Gain on disposition of real estate, net

(2,674)

 

FFO attributable to Common Shareholders

$16,622

 

 

 

 

Debt extinguishment, transaction, other, net

3,631

 

Total non-operating items, net

3,631

 

Operating FFO attributable to Common Shareholders

$20,253

 

 

 

 

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

19,749

 

 

 

 

FFO per share – Basic & Diluted

$0.84

 

Operating FFO per share – Basic & Diluted

$1.03

 

Common stock dividends declared, per share

N/A

 

 

 

 

Certain non-cash items:

 

 

Straight-line rent

(1,108)

 

Straight-line fixed CAM

101

 

Loan cost amortization

(1,020)

 

Non-real estate depreciation expense

(17)

 

 

 

 

Capital expenditures:

 

 

Maintenance capital expenditures

18

 

Tenant allowances and landlord work

591

 

Leasing commissions - SITE Centers

1,231

 

Leasing commissions - external

87

 

Hurricane restorations

3,474

 

 

 

Retail Value Inc.

Balance Sheet

 

 

$ in thousands

 

 

 

 

 

At Period End

 

 

1Q20

 

4Q19

 

 

 

 

 

 

Assets:

 

 

 

 

Land

$469,890

 

$522,393

 

Buildings

1,230,987

 

1,380,984

 

Fixtures and tenant improvements

140,181

 

152,426

 

 

1,841,058

 

2,055,803

 

Depreciation

(624,546)

 

(670,509)

 

 

1,216,512

 

1,385,294

 

Construction in progress and land

2,242

 

2,017

 

Real estate, net

1,218,754

 

1,387,311

 

 

 

 

 

 

Cash

92,366

 

71,047

 

Restricted cash (1)

81,268

 

112,246

 

Receivables and straight-line (2)

21,407

 

25,195

 

Intangible assets, net (3)

15,036

 

19,573

 

Other assets, net

11,837

 

11,315

 

Total Assets

1,440,668

 

1,626,687

 

 

 

 

 

 

Liabilities and Equity:

 

 

 

 

Secured debt

505,790

 

655,833

 

 

 

 

 

 

Payable to SITE

105

 

105

 

Dividends payable

0

 

39,057

 

Other liabilities (4)

41,838

 

53,789

 

Total Liabilities

547,733

 

748,784

 

 

 

 

 

 

Redeemable preferred equity

190,000

 

190,000

 

 

 

 

 

 

Common shares

1,982

 

1,905

 

Paid-in capital

720,893

 

692,871

 

Distributions in excess of net income

(19,924)

 

(6,857)

 

Common shares in treasury at cost

(16)

 

(16)

 

Total Equity

702,935

 

687,903

 

 

 

 

 

 

Total Liabilities and Equity

$1,440,668

 

$1,626,687

 

 

 

 

 

(1)

Asset sale proceeds

0

 

17,388

 

Other escrows

81,268

 

94,858

 

 

 

 

 

(2)

SL rents (including fixed CAM), net

14,011

 

16,164

 

 

 

 

 

(3)

Operating lease right of use asset

1,664

 

1,714

 

 

 

 

 

(4)

Operating lease liabilities

2,779

 

2,835

 

Below-market leases, net

16,733

 

20,042

 

Contacts

Retail Value Inc.
Christa Vesy, EVP and
Chief Financial Officer
216-755-5500

Release Summary

Retail Value Inc. Reports First Quarter 2020 Operating Results

Contacts

Retail Value Inc.
Christa Vesy, EVP and
Chief Financial Officer
216-755-5500