Retail Opportunity Investments Corp. Reports Third Quarter 2021 Results

Rhea-AI Summary

Retail Opportunity Investments Corp. (NASDAQ:ROIC) reported a net income of $21.1 million ($0.17 per diluted share) for the three months ending September 30, 2021, up from $6.5 million the previous year. Funds From Operations (FFO) reached $32.6 million ($0.25 per diluted share). The company maintains a strong 97.4% lease rate, with a 4.0% increase in same-center cash net operating income year-over-year. ROIC has acquired $122.7 million in grocery-anchored shopping centers year-to-date, including two properties in California. A cash dividend of $0.11 per share was declared.

Positive

• $21.1 million net income for Q3 2021, up from $6.5 million in Q3 2020.
• Funds From Operations of $32.6 million ($0.25 per diluted share) for Q3 2021, stable from $31.6 million in Q3 2020.
• 97.4% lease rate as of September 30, 2021, indicating strong demand.
• 4.0% increase in same-center cash net operating income for Q3 2021 vs. Q3 2020.
• Acquired $122.7 million in grocery-anchored shopping centers YTD.
• Cash dividend of $0.11 per share declared.

Negative

• FFO for the first nine months of 2021 decreased to $95.3 million from $98.2 million the previous year.
• Property dispositions totaling $69.7 million YTD, indicating a market exit strategy.

SAN DIEGO, Oct. 26, 2021 (GLOBE NEWSWIRE) -- Retail Opportunity Investments Corp. (NASDAQ:ROIC) announced today financial and operating results for the three and nine months ended September 30, 2021.

HIGHLIGHTS

• $21.1 million of net income attributable to common stockholders ($0.17 per diluted share)
• $32.6 million in Funds From Operations⁽¹⁾ ($0.25 per diluted share)
• 97.4% portfolio lease rate at September 30, 2021
• 4.0% increase in same-center cash net operating income (3Q‘21 vs. 3Q‘20)
• 10.9% increase in same-space cash rents on new leases (5.2% increase on renewals)
• $122.7 million of grocery-anchored shopping center acquisitions lined up year to date
• $60.4 million of grocery-anchored shopping centers acquired YTD ($27.9 million in 3Q‘21)
• $62.3 million of grocery-anchored shopping center acquisitions currently under contract
• $69.7 million of property dispositions YTD ($43.9 million in 3Q‘21, exited Sacramento)
• $46.1 million of common equity raised YTD ($11.2 million in 3Q‘21)
• No borrowings outstanding on unsecured credit facility at September 30, 2021
• 2021 FFO guidance range reaffirmed ($0.98 to $1.02 per diluted share)
• $0.11 per share cash dividend declared
  
  

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⁽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, “During the third quarter we again posted solid leasing results capitalizing on the strong demand for space.  We increased our portfolio lease rate to over 97% again and achieved releasing rent growth on both new leases signed as well as renewals.  Additionally, we are enhancing our portfolio through our disciplined investment program.  To date, we have lined up $122.7 million of grocery-anchored shopping center acquisitions.  We also completed our exit of the Sacramento market, selling our last two properties during the third quarter.”  Tanz further commented, “Looking ahead, we are poised to have a solid finish to 2021 and are diligently working to position the company for a strong 2022.”

FINANCIAL RESULTS SUMMARY

For the three months ended September 30, 2021, GAAP net income attributable to common stockholders was $21.1 million, or $0.17 per diluted share, as compared to GAAP net income attributable to common stockholders of $6.5 million, or $0.06 per diluted share, for the three months ended September 30, 2020. For the nine months ended September 30, 2021, GAAP net income attributable to common stockholders was $45.0 million, or $0.38 per diluted share, as compared to GAAP net income attributable to common stockholders of $23.1 million, or $0.20 per diluted share, for the nine months ended September 30, 2020. Included in net income for the three and nine months ended September 30, 2021 were $12.9 million and $22.3 million, respectively, of gain on sale of real estate.

FFO for the third quarter of 2021 was $32.6 million, or $0.25 per diluted share, as compared to $31.6 million in FFO, or $0.25 per diluted share for the third quarter of 2020. FFO for the first nine months of 2021 was $95.3 million, or $0.74 per diluted share, as compared to $98.2 million in FFO, or $0.77 per diluted share for the first nine 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 third quarter of 2021, same-center net operating income (NOI) was $47.9 million, as compared to $46.0 million in same-center NOI for the third quarter of 2020, representing a 4.0% increase. For the first nine months of 2021, same-center NOI increased 2.2% as compared to same-center NOI for the first nine 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 September 30, 2021, ROIC had a total market capitalization of approximately $3.6 billion including approximately $1.3 billion of principal debt outstanding. As of September 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 ratio and net principal debt-to-annualized EBITDA ratio for the third quarter was 3.3 times and 6.6 times, respectively.

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 in the third quarter.

ACQUISITION SUMMARY

Year to date, ROIC has lined up a total of $122.7 million in grocery-anchored shopping center acquisitions, including acquiring one grocery-anchored shopping center in the third quarter.

Canyon Creek Plaza

In September 2021, ROIC acquired Canyon Creek Plaza for $27.9 million. The shopping center is approximately 65,000 square feet and is anchored by New Seasons Supermarket. The property is located in San Jose, California, and is currently 98.5% leased.

Subsequent to the third quarter, ROIC acquired the following grocery-anchored shopping center.

Palomar Village

In October 2021, ROIC acquired Palomar Village for $32.5 million. The shopping center is approximately 125,000 square feet and is anchored by Albertsons Supermarket and CVS Pharmacy. The property is located in Temecula, California and is currently 95.6% leased.

ROIC currently has contracts to acquire two grocery-anchored shopping centers in separate transactions for a total of $62.3 million. Both properties are located within the Seattle metropolitan area.

DISPOSITION SUMMARY

Year to date, ROIC has sold three properties, in separate transactions, for a total of $69.7 million. During the second quarter, ROIC sold one property, located in San Diego, California, for $25.8 million. During the third quarter, ROIC completed its planned exit of the Sacramento market, selling its remaining two Sacramento properties, in separate transactions, for a total of $43.9 million.

PROPERTY OPERATIONS SUMMARY

At September 30, 2021, ROIC’s portfolio was 97.4% leased.  During the third quarter, ROIC executed 121 leases, totaling 374,572 square feet, including 49 new leases, totaling 91,280 square feet, achieving a 10.9% increase in same-space comparative base rent, and 72 renewed leases, totaling 283,292 square feet, achieving a 5.2% increase in base rent.   ROIC reports same-space comparative base rent on a cash basis.

CASH DIVIDEND

On October 8, 2021, ROIC distributed a cash dividend of $0.11 per share. On October 25, 2021, ROIC’s board of directors declared a cash dividend of $0.11 per share, payable on January 7, 2022 to stockholders of record on December 17, 2021.

CONFERENCE CALL

ROIC will conduct a conference call and audio webcast to discuss its results on Wednesday, October 27, 2021 at 12:00 p.m. Eastern Time / 9:00 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: 3366916. 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 October 27, 2021 and will be available until 3:00 p.m. Eastern Time on November 3, 2021. To access the conference call recording, dial (855) 859-2056 (domestic) or (404) 537-3406 (international) and use the Conference ID: 3366916. 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, 2021, ROIC owned 86 shopping centers encompassing approximately 9.8 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)
	September 30, 2021 (unaudited)				December 31, 2020
ASSETS
Real Estate Investments:
Land	$	875,818			$	881,872
Building and improvements	2,272,296				2,274,680
	3,148,114				3,156,552
Less:  accumulated depreciation	490,638				460,165
	2,657,476				2,696,387
Mortgage note receivable	4,896				4,959
Real Estate Investments, net	2,662,372				2,701,346
Cash and cash equivalents	91,150				4,822
Restricted cash	2,319				1,814
Tenant and other receivables, net	56,545				58,756
Deposits	1,000				—
Acquired lease intangible assets, net	44,342				50,110
Prepaid expenses	1,328				4,811
Deferred charges, net	22,198				25,655
Other assets	16,982				17,296
Total assets	$	2,898,236			$	2,864,610
LIABILITIES AND EQUITY
Liabilities:
Term loan	$	298,797			$	298,524
Credit facility	—				48,000
Senior Notes	944,833				943,655
Mortgage notes payable	85,727				86,509
Acquired lease intangible liabilities, net	117,166				125,796
Accounts payable and accrued expenses	51,215				17,687
Tenants’ security deposits	6,918				6,854
Other liabilities	40,700				46,426
Total liabilities	1,545,356				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; 121,423,616 and 118,085,155 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively	12				12
Additional paid-in capital	1,552,447				1,497,662
Dividends in excess of earnings	(284,144		)		(289,309		)
Accumulated other comprehensive loss	(4,877		)		(8,812		)
Total Retail Opportunity Investments Corp. stockholders’ equity	1,263,438				1,199,553
Non-controlling interests	89,442				91,606
Total equity	1,352,880				1,291,159
Total liabilities and equity	$	2,898,236			$	2,864,610

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,
	2021				2020				2021				2020
Revenues
Rental revenue	$	69,907			$	69,066			$	208,925			$	208,997
Other income	1,478				706				2,377				2,199
Total revenues	71,385				69,772				211,302				211,196
Operating expenses
Property operating	11,009				10,313				32,334				30,203
Property taxes	8,564				8,510				25,502				25,265
Depreciation and amortization	22,854				24,649				69,401				73,041
General and administrative expenses	4,746				4,101				14,353				11,974
Other expense	147				165				631				525
Total operating expenses	47,320				47,738				142,221				141,008
Gain on sale of real estate	12,880				—				22,340				—
Operating income	36,945				22,034				91,421				70,188
Non-operating expenses
Interest expense and other finance expenses	(14,356		)		(15,065		)		(43,173		)		(45,047		)
Net income	22,589				6,969				48,248				25,141
Net income attributable to non-controlling interests	(1,494		)		(503		)		(3,254		)		(2,026		)
Net Income Attributable to Retail Opportunity Investments Corp.	$	21,095			$	6,466			$	44,994			$	23,115
Earnings per share – basic and diluted	$	0.17			$	0.06			$	0.38			$	0.20
Dividends per common share	$	0.11			$	—			$	0.33			$	0.20

CALCULATION OF FUNDS FROM OPERATIONS
(Unaudited)
(In thousands)
	Three Months Ended September 30,								Nine Months Ended September 30,
	2021				2020				2021				2020
Net income attributable to ROIC	$	21,095			$	6,466			$	44,994			$	23,115
Plus:  Depreciation and amortization	22,854				24,649				69,401				73,041
Less: Gain on sale of real estate	(12,880		)		—				(22,340		)		—
Funds from operations – basic	31,069				31,115				92,055				96,156
Net income attributable to non-controlling interests	1,494				503				3,254				2,026
Funds from operations – diluted	$	32,563			$	31,618			$	95,309			$	98,182

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,
		2021				2020				$ Change				% Change			2021				2020				$ Change				% Change
Number of shopping centers included in same-center analysis		85				85											85				85
Same-center occupancy		97.4		%		97.0		%						0.4	%		97.4		%		97.0		%						0.4	%
Revenues:
	Base rents	$	50,276			$	49,854			$	422			0.8	%		$	149,257			$	150,964			$	(1,707	)		(1.1	)%
	Percentage rent	90				55				35				63.6	%		264				268				(4		)		(1.5	%
	Recoveries from tenants	16,492				16,248				244				1.5	%		49,634				49,440				194				0.4	%
	Other property income	939				539				400				74.2	%		1,493				1,335				158				11.8	%
	Bad debt	(513		)		(2,065		)		1,552				(75.2	)%		(1,938		)		(8,131		)		6,193				(76.2	)%
Total Revenues		67,284				64,631				2,653				4.1	%		198,710				193,876				4,834				2.5	%
Operating Expenses
	Property operating expenses	10,969				10,311				658				6.4	%		32,069				30,607				1,462				4.8	%
	Property taxes	8,418				8,278				140				1.7	%		25,022				24,695				327				1.3	%
Total Operating Expenses		19,387				18,589				798				4.3	%		57,091				55,302				1,789				3.2	%
Same-Center Cash Net Operating Income		$	47,897			$	46,042			$	1,855			4.0	%		$	141,619			$	138,574			$	3,045			2.2	%

SAME-CENTER CASH NET OPERATING INCOME RECONCILIATION
(Unaudited)
(In thousands)
	Three Months Ended September 30,								Nine Months Ended September 30,
	2021				2020				2021				2020
GAAP operating income	$	36,945			$	22,034			$	91,421			$	70,188
Depreciation and amortization	22,854				24,649				69,401				73,041
General and administrative expenses	4,746				4,101				14,353				11,974
Other expense	147				165				631				525
Gain on sale of real estate	(12,880		)		—				(22,340		)		—
Straight-line rent	(126		)		(333		)		(438		)		(563		)
Amortization of above- and below-market rent	(2,125		)		(2,756		)		(6,571		)		(10,756		)
Property revenues and other expenses (1)	(183		)		(156		)		(466		)		(420		)
Total Company cash NOI	49,378				47,704				145,991				143,989
Non same-center cash NOI	(1,481		)		(1,662		)		(4,372		)		(5,415		)
Same-center cash NOI	$	47,897			$	46,042			$	141,619			$	138,574

____________________

(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 

FAQ

What were the financial results for Retail Opportunity Investments Corp. for Q3 2021?

Retail Opportunity Investments Corp. reported a net income of $21.1 million and Funds From Operations of $32.6 million for Q3 2021.

What is the current portfolio lease rate for ROIC?

As of September 30, 2021, ROIC's portfolio lease rate is 97.4%.

How much has ROIC invested in grocery-anchored shopping centers this year?

ROIC has lined up $122.7 million in grocery-anchored shopping center acquisitions year-to-date.

When is the next cash dividend payment for ROIC?

ROIC's next cash dividend payment of $0.11 per share is scheduled for January 7, 2022.

What is the FFO guidance for Retail Opportunity Investments Corp. for 2021?

ROIC has reaffirmed its FFO guidance range for 2021 to be between $0.98 and $1.02 per diluted share.