IVT 10-Q
InvenTrust Properties Corp. (IVT)
10-Q
2022-05-03
For: 2022-03-31
View Original
Added on
April 10, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
For the quarterly period ended March 31, 2022
or
For the transition period from to
COMMISSION FILE NUMBER: 001-40896
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||||||||
| (Registrant’s telephone number, including area code) | |||||||||||||||||
Securities registered pursuant to Section 12(b) of the Exchange Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||||||||
| ☒ | Smaller reporting company | |||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of May 1, 2022, there were 67,388,703 shares of the registrant's common stock outstanding.
INVENTRUST PROPERTIES CORP.
Quarterly Report on Form 10-Q
For the quarterly period ended March 31, 2022
Table of Contents
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| Item 1. | ||||||||
| Item 1A. | ||||||||
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-i-
INVENTRUST PROPERTIES CORP.
Condensed Consolidated Balance Sheets
(in thousands, except share amounts)
| As of | |||||||||||
| March 31, 2022 | December 31, 2021 | ||||||||||
| (unaudited) | |||||||||||
| Assets | |||||||||||
| Investment properties | |||||||||||
| Land | $ | $ | |||||||||
| Building and other improvements | |||||||||||
| Construction in progress | |||||||||||
| Total | |||||||||||
| Less accumulated depreciation | ( | ( | |||||||||
| Net investment properties | |||||||||||
| Cash, cash equivalents and restricted cash | |||||||||||
| Investment in unconsolidated entities | |||||||||||
| Intangible assets, net | |||||||||||
| Accounts and rents receivable | |||||||||||
| Deferred costs and other assets, net | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities | |||||||||||
| Debt, net | $ | $ | |||||||||
| Accounts payable and accrued expenses | |||||||||||
| Distributions payable | |||||||||||
| Intangible liabilities, net | |||||||||||
| Other liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies | |||||||||||
| Stockholders' Equity | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Distributions in excess of accumulated net income | ( | ( | |||||||||
| Accumulated comprehensive income (loss) | ( | ||||||||||
| Total stockholders' equity | |||||||||||
| Total liabilities and stockholders' equity | $ | $ | |||||||||
See accompanying notes to the condensed consolidated financial statements.
1
INVENTRUST PROPERTIES CORP.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
(in thousands, except share and per share amounts)
| Three months ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Income | |||||||||||
| Lease income, net | $ | $ | |||||||||
| Other property income | |||||||||||
| Other fee income | |||||||||||
| Total income | |||||||||||
| Operating expenses | |||||||||||
| Depreciation and amortization | |||||||||||
| Property operating | |||||||||||
| Real estate taxes | |||||||||||
| General and administrative | |||||||||||
| Total operating expenses | |||||||||||
| Other (expense) income | |||||||||||
| Interest expense, net | ( | ( | |||||||||
| Loss on extinguishment of debt | ( | ||||||||||
| Gain on sale of investment properties, net | |||||||||||
| Equity in earnings of unconsolidated entities | |||||||||||
| Other income and expense, net | ( | ( | |||||||||
| Total other (expense) income, net | ( | ( | |||||||||
| Net income (loss) | $ | $ | ( | ||||||||
| Weighted-average common shares outstanding, basic | |||||||||||
| Weighted-average common shares outstanding, diluted | |||||||||||
| Net income (loss) per common share, basic and diluted | $ | $ | |||||||||
| Distributions declared per common share outstanding | $ | $ | |||||||||
| Distributions paid per common share outstanding | $ | $ | |||||||||
| Comprehensive income | |||||||||||
| Net income (loss) | $ | $ | ( | ||||||||
| Unrealized gain on derivatives | |||||||||||
| Reclassification to net income (loss) | |||||||||||
| Comprehensive income | $ | $ | |||||||||
See accompanying notes to the condensed consolidated financial statements.
2
INVENTRUST PROPERTIES CORP.
Condensed Consolidated Statements of Equity
(Unaudited)
(in thousands, except share amounts)
| Number of Shares | Common Stock | Additional Paid-in Capital | Distributions in Excess of Accumulated Net Income | Accumulated Comprehensive Income (Loss) | Total | ||||||||||||||||||||||||||||||
| Beginning balance, January 1, 2022 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||
| Unrealized gain on derivatives | — | — | — | — | |||||||||||||||||||||||||||||||
| Reclassification to interest expense, net | — | — | — | — | |||||||||||||||||||||||||||||||
| Reclassification to equity in earnings of unconsolidated entities | — | — | — | — | |||||||||||||||||||||||||||||||
| Distributions declared | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Stock-based compensation, net | — | — | — | ||||||||||||||||||||||||||||||||
| Ending balance, March 31, 2022 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
| Number of Shares | Common Stock | Additional Paid-in Capital | Distributions in Excess of Accumulated Net Income | Accumulated Comprehensive Income (Loss) | Total | ||||||||||||||||||||||||||||||
| Beginning balance, January 1, 2021 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Unrealized gain on derivatives | — | — | — | — | |||||||||||||||||||||||||||||||
| Reclassification to interest expense, net | — | — | — | — | |||||||||||||||||||||||||||||||
| Reclassification to equity in earnings of unconsolidated entities | — | — | — | — | |||||||||||||||||||||||||||||||
| Distributions declared | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Stock-based compensation, net | — | — | — | — | |||||||||||||||||||||||||||||||
| Ending balance, March 31, 2021 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
See accompanying notes to the condensed consolidated financial statements.
3
INVENTRUST PROPERTIES CORP.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
| Three months ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income (loss) | $ | $ | ( | ||||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Amortization of above and below-market leases and lease inducements, net | ( | ( | |||||||||
| Amortization of debt discounts and financing costs | |||||||||||
| Straight-line rent adjustment, net | ( | ( | |||||||||
| (Reversal of) provision for estimated credit losses | ( | ||||||||||
| Gain on sale of investment properties, net | ( | ||||||||||
| Loss on extinguishment of debt | |||||||||||
| Equity in earnings of unconsolidated entities | ( | ( | |||||||||
| Distributions from unconsolidated entities | |||||||||||
| Stock-based compensation, net | |||||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts and rents receivable | |||||||||||
| Deferred costs and other assets, net | ( | ( | |||||||||
| Accounts payable and accrued expenses | ( | ( | |||||||||
| Other liabilities | ( | ||||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Purchase of investment properties | ( | ||||||||||
| Capital expenditures and tenant improvements | ( | ( | |||||||||
| Investment in development and redevelopment projects | ( | ( | |||||||||
| Proceeds from sale of investment properties, net | |||||||||||
| Distributions from unconsolidated entities | |||||||||||
| Lease commissions and other leasing costs | ( | ( | |||||||||
| Other assets | ( | ( | |||||||||
| Other liabilities | ( | ( | |||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Distributions to shareholders | ( | ( | |||||||||
| Line of credit proceeds | |||||||||||
| Line of credit repayments | ( | ||||||||||
| Payoffs of debt | ( | ||||||||||
| Principal payments on mortgage debt | ( | ( | |||||||||
| Payment of finance lease liabilities | ( | ( | |||||||||
| Payment of loan fees and deposits | ( | ||||||||||
| Net cash provided by (used in) financing activities | ( | ||||||||||
| Net decrease in cash, cash equivalents and restricted cash | ( | ( | |||||||||
| Cash, cash equivalents and restricted cash at the beginning of the period | |||||||||||
| Cash, cash equivalents and restricted cash at the end of the period | $ | $ | |||||||||
4
INVENTRUST PROPERTIES CORP.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
| Three months ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Supplemental disclosure and schedules: | |||||||||||
| Cash flow disclosure, including non-cash activities: | |||||||||||
| Cash paid for interest, net of capitalized interest | $ | $ | |||||||||
| Cash paid for income taxes, net of refunds | $ | $ | |||||||||
| Distributions payable to shareholders | $ | $ | |||||||||
| Accrued capital expenditures and tenant improvements | $ | $ | |||||||||
| Capitalized costs placed in service | $ | $ | |||||||||
| Purchase of investment properties: | |||||||||||
| Net investment properties | $ | $ | |||||||||
| Accounts and rents receivable, lease intangibles, and deferred costs and other assets | |||||||||||
| Accounts payable and accrued expenses, lease intangibles, and other liabilities | ( | ||||||||||
| Assumption of mortgage debt | ( | ||||||||||
| Cash outflow for purchase of investment properties, net | |||||||||||
| Assumption of mortgage principal | |||||||||||
| Capitalized acquisition costs | ( | ||||||||||
| Credits and other changes in cash outflow, net | |||||||||||
| Gross acquisition price of investment properties | $ | $ | |||||||||
| Sale of investment properties: | |||||||||||
| Net investment properties | $ | $ | |||||||||
| Gain on sale of investment properties, net | |||||||||||
| Proceeds from sale of investment properties, net | |||||||||||
| Credits and other changes in cash inflow, net | |||||||||||
| Gross disposition price of investment properties | $ | $ | |||||||||
See accompanying notes to the condensed consolidated financial statements.
5
INVENTRUST PROPERTIES CORP.
Notes to Condensed Consolidated Financial Statements
March 31, 2022 and 2021
(Unaudited)
The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. Readers of these interim condensed consolidated financial statements (the "Quarterly Report") should refer to the audited consolidated financial statements of InvenTrust Properties Corp. (the "Company") as of and for the year ended December 31, 2021, which are included in the Company's Annual Report on Form 10-K (the "Annual Report") as certain note disclosures contained in such audited consolidated financial statements have been omitted from this Quarterly Report. In the opinion of management, all adjustments necessary (consisting of normal recurring accruals, except as otherwise noted) for a fair presentation have been included in these condensed consolidated financial statements. Unless otherwise noted, all square feet and dollar amounts are stated in thousands, except per share amounts.
1. Organization
On October 4, 2004, InvenTrust Properties Corp. (the "Company" or "InvenTrust") was incorporated as Inland American Real Estate Trust, Inc., a Maryland corporation, and has elected and operates in a manner to be taxed as a real estate investment trust ("REIT") for federal tax purposes. The Company changed its name to InvenTrust Properties Corp. in April of 2015 and is focused on owning, leasing, redeveloping, acquiring and managing a multi-tenant retail platform.
As a REIT, the Company is entitled to a tax deduction for some or all of the dividends paid to stockholders. Accordingly, the Company generally will not be subject to federal income taxes as long as it currently distributes to stockholders an amount equal to or in excess of the Company's taxable income. If the Company fails to qualify as a REIT in any taxable year, without the benefit of certain relief provisions, the Company will be subject to federal and state income tax on its taxable income at regular corporate tax rates.
The accompanying condensed consolidated financial statements include the accounts of the Company, as well as all wholly-owned subsidiaries. Subsidiaries generally consist of limited liability companies ("LLCs") and limited partnerships ("LPs"). All significant intercompany balances and transactions have been eliminated.
Each retail property is owned by a separate legal entity that maintains its own books and financial records. Each separate legal entity's assets are not available to satisfy the liabilities of other affiliated entities, except as otherwise disclosed in "Note 6. Investment in Unconsolidated Entities".
As of March 31, 2022 and 2021, the Company had an investment in one
Reduction of Authorized Shares
On April 28, 2022, the Company filed an amendment to its charter to decrease the number of authorized shares of common stock from 1,460,000,000 to 146,000,000 , in proportion with the one-for-ten reverse stock split effected by the Company on August 5, 2021. The authorized shares of preferred stock remain at 40,000,000 . The authorized shares of common stock have been retroactively adjusted within the accompanying condensed consolidated financial statements to give effect to the reduction as of March 31, 2022.
The Company determined it has a single reportable segment, multi-tenant retail, for disclosure purposes in accordance with GAAP. The following table summarizes the Company's retail portfolio as of March 31, 2022 and 2021:
| Wholly-Owned Retail Properties | Unconsolidated Retail Properties at 100% | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| No. of properties | |||||||||||||||||||||||
| Gross Leasable Area (square feet) | |||||||||||||||||||||||
6
2. Basis of Presentation and Recently Issued Accounting Pronouncements
Estimates, Risks, and Uncertainties
The accompanying condensed consolidated financial statements have been prepared in accordance with GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates, judgments and assumptions are required in a number of areas, including, but not limited to, evaluating the impairment of long-lived assets, allocating the purchase price of acquired retail properties, determining the fair value of debt and evaluating the collectibility of accounts receivable. The Company bases these estimates, judgments and assumptions on historical experience and various other factors that the Company believes to be reasonable under the circumstances. Actual results may differ from these estimates.
3. Revenue Recognition
Operating Leases
Minimum lease payments to be received under long-term operating leases and short-term specialty leases, excluding additional percentage rent based on tenants' sales volume and tenant reimbursements of certain operating expenses, and assuming no exercise of renewal options or early termination rights, are as follows:
| Minimum lease payments, by year | As of March 31, 2022 | ||||
| Remaining 2022 | $ | ||||
| 2023 | |||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| Thereafter | |||||
| Total | $ | ||||
The table above includes payments from tenants who have taken possession of their space, including tenants who have been moved to the cash basis of accounting for revenue recognition purposes. The remaining lease terms range from less than one year to seventy-seven years .
| Three months ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Minimum base rent | $ | $ | |||||||||
| Real estate tax recoveries | |||||||||||
| Common area maintenance, insurance, and other recoveries | |||||||||||
| Ground rent income | |||||||||||
| Above and below-market rent and lease inducement amortization, net | |||||||||||
| Short-term and other lease income | |||||||||||
| Termination fee income | |||||||||||
| Straight-line rent adjustment, net | |||||||||||
| Reversal of (provision for) uncollectible straight-line rent | ( | ||||||||||
| Provision for uncollectible billed rent and recoveries | ( | ( | |||||||||
| Reversal of uncollectible billed rent and recoveries | |||||||||||
| Lease income, net | $ | $ | |||||||||
Other Fee Income
| Timing of Satisfaction of Performance Obligations | Three months ended March 31, | ||||||||||||||||
| 2022 | 2021 | ||||||||||||||||
| Property management fees | Over time | $ | $ | ||||||||||||||
| Asset management fees | Over time | ||||||||||||||||
| Leasing commissions and other fees | Point in time | ||||||||||||||||
| Other fee income | $ | $ | |||||||||||||||
The Company had receivables of $228 and $215 as of March 31, 2022 and December 31, 2021, respectively, which are included in deferred costs and other assets, net on the condensed consolidated balance sheets.
7
4. Acquired Properties
The following table reflects the retail properties acquired, accounted for as asset acquisitions, during the three months ended March 31, 2022:
| Acquisition Date | Property | Metropolitan Area | Gross Acquisition Price | Square Feet | ||||||||||||||||||||||
| February 2, 2022 | Shops at Arbor Trails | Austin, TX | $ | |||||||||||||||||||||||
| February 2, 2022 | Escarpment Village | Austin, TX | ||||||||||||||||||||||||
| $ | ||||||||||||||||||||||||||
Transaction costs of $814 were capitalized during the three months ended March 31, 2022. There were no retail properties acquired during the three months ended March 31, 2021.
5. Disposed Properties
There was no real property disposed of during the three months ended March 31, 2022.
The following table reflects the real property disposed of during the three months ended March 31, 2021:
| Disposition Date | Property | Metropolitan Area | Square Feet | Gross Disposition Price | Gain (Loss) on Sale, net | |||||||||||||||||||||||||||
| February 28, 2021 | Sonterra Village (a) | San Antonio, TX | N/A | $ | $ | |||||||||||||||||||||||||||
| March 14, 2021 | Eldridge Town Center (a) | Houston, TX | N/A | |||||||||||||||||||||||||||||
| March 31, 2021 | Windward Commons (a) | Alpharetta, GA | N/A | ( | ||||||||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||||||||||
(a)These were partial condemnations at three retail properties.
6. Investment in Unconsolidated Entities
Joint Venture Interest in IAGM
As of March 31, 2022 and December 31, 2021, the Company owned a 55 one
During the three months ended March 31, 2022, IAGM disposed of Price Plaza, a 206 thousand square foot retail property, for a gross disposition price of $39,100 and recognized a gain on sale of $3,751 . The Company's share of IAGM's gain on sale was $2,063 . The buyer assumed a $17,800 mortgage payable secured by the property.
During the three months ended March 31, 2021, IAGM prepaid mortgages payable of $23,150 .
IAGM is party to two interest rate swap agreements to achieve fixed interest rates on its senior secured term loan facility previously subject to variability in the London Inter-bank Offered Rate ("LIBOR"). As of March 31, 2022, and December 31, 2021 the interest rate swaps were recorded as assets with fair values of $2,213 and $530 , respectively, on IAGM's condensed consolidated balance sheet, of which the Company's share was $1,217 and $291 , respectively. The Company recognizes its share of gains or losses resulting from IAGM's interest rate swaps as an adjustment to the Company's investment in IAGM and an increase or decrease in comprehensive income.
8
Condensed Financial Information
The following table presents condensed balance sheet information for IAGM:
| As of | |||||||||||
| March 31, 2022 | December 31, 2021 | ||||||||||
| Assets: | |||||||||||
| Net investment properties | $ | $ | |||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and equity: | |||||||||||
| Mortgages debt, net | $ | $ | |||||||||
| Other liabilities | |||||||||||
| Equity | |||||||||||
| Total liabilities and equity | |||||||||||
| Company's share of equity | |||||||||||
| Outside basis difference, net (a) | ( | ( | |||||||||
| Carrying value of investments in unconsolidated entities | $ | $ | |||||||||
(a)The outside basis difference reflects unamortized deferred gains on historical sales of Antoine Town Center and Prestonwood Town Center.
The following table presents condensed income statement information of IAGM:
| Three months ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Total income | $ | $ | |||||||||
| Depreciation and amortization | ( | ( | |||||||||
| Property operating | ( | ( | |||||||||
| Real estate taxes | ( | ( | |||||||||
| Asset management fees | ( | ( | |||||||||
| Interest expense, net | ( | ( | |||||||||
| Other (expense) and income, net | ( | ( | |||||||||
| Loss on debt extinguishment | ( | ( | |||||||||
| Gain on sale of real estate | |||||||||||
| Net income | $ | $ | |||||||||
| Company's share of net income | $ | $ | |||||||||
| Outside basis adjustment for investee's sale of real estate, net | |||||||||||
| Equity in earnings of unconsolidated entities | $ | $ | |||||||||
The following table summarizes the scheduled maturities of IAGM's mortgages payable as of March 31, 2022, for the remainder of 2022, each of the next four years and thereafter:
| Scheduled maturities by year: | As of March 31, 2022 | ||||
| 2022 | $ | ||||
| 2023 | |||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| Thereafter | |||||
| Total | $ | ||||
As of March 31, 2022 and December 31, 2021, none of IAGM's mortgages payable are recourse to the Company. It is anticipated that the joint venture will be able to repay, refinance or extend all of its debt on a timely basis.
9
7. Debt
The Company's debt consists of mortgages payable, unsecured term loans, and an unsecured revolving line of credit. The Company believes it has the ability to repay, refinance or extend any of its debt, and that it has adequate sources of funds to meet short-term cash needs. It is anticipated that the Company will use proceeds from property sales, cash on hand, and available capacity on credit agreements, if any, to repay, refinance or extend the mortgages payable maturing in the near term.
The Company's credit agreements and mortgage loans require compliance with certain covenants, such as debt service coverage ratios, investment restrictions and distribution limitations. As of March 31, 2022 and December 31, 2021, the Company was in compliance with all loan covenants.
Credit Agreements
On December 21, 2018, the Company entered into an unsecured revolving credit agreement, which amended and restated its prior unsecured revolving credit agreement in its entirety, and provided for a $350,000 unsecured revolving line of credit (the "Revolving Credit Agreement"). On September 22, 2021, the Company entered into an amendment to the Revolving Credit Agreement (the "Amended Revolving Credit Agreement"), which provides for, among other things, an extension of the maturity the $350,000 Revolving Credit Agreement to September 22, 2025, with two six-month extension options.
On December 21, 2018, the Company entered into an unsecured term loan credit agreement, which amended and restated its prior unsecured term loan credit agreement in its entirety (the “Term Loan Credit Agreement”). On September 22, 2021, the Company entered into an amendment to its $400,000 Term Loan Credit Agreement (the "Amended Term Loan Agreement"), which provides for, among other things, an extension of the maturity and a reallocation of indebtedness under the two outstanding tranches of term loans thereunder. The Amended Term Loan Agreement consists of a $200,000 5 -year tranche maturing on September 22, 2026, and a $200,000 5.5 -year tranche maturing on March 22, 2027.
Interest Rate Swaps
The Company is party to four interest rate forward swap agreements which address the periods between the maturity dates of the four effective swaps and the maturity dates of the Amended Term Loan Agreement. In tandem, the interest rate swaps achieve fixed interest rates for a constant notional amount through the maturity dates of the Amended Term Loan Agreement.
The following table summarizes the Company's debt as of March 31, 2022 and December 31, 2021:
| Interest Rate Type | As of March 31, 2022 | As of December 31, 2021 | |||||||||||||||||||||||||||||||||
| Maturity Date | Interest Rate | Amount | Interest Rate | Amount | |||||||||||||||||||||||||||||||
| Mortgages Payable | |||||||||||||||||||||||||||||||||||
| Total mortgages payable | Various | Fixed | $ | $ | |||||||||||||||||||||||||||||||
| Term loans | |||||||||||||||||||||||||||||||||||
$ | 9/22/2026 | Fixed | |||||||||||||||||||||||||||||||||
$ | 9/22/2026 | Fixed | |||||||||||||||||||||||||||||||||
$ | 3/22/2027 | Fixed | |||||||||||||||||||||||||||||||||
$ | 3/22/2027 | Fixed | |||||||||||||||||||||||||||||||||
$ | 3/22/2027 | Variable | 1M LIBOR + | 1M LIBOR + | |||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||
| Revolving Line of Credit | |||||||||||||||||||||||||||||||||||
$ | 9/22/2025 (d) | Variable | 1M LIBOR + | 1M LIBOR + | |||||||||||||||||||||||||||||||
| Total debt | |||||||||||||||||||||||||||||||||||
| Debt discounts and issuance costs, net of accumulated amortization | ( | ( | |||||||||||||||||||||||||||||||||
| Debt, net | $ | $ | |||||||||||||||||||||||||||||||||
(a)Interest rates reflect the fixed rates achieved through the Company's interest rate swaps.
(b)As of March 31, 2022 and December 31 2021, 1-Month LIBOR was 0.4520 % and 0.1013 %, respectively.
(c)For the year ending December 31, 2022, the Company qualified for a 0.01 % sustainability adjustment.
(d)Maturity date is not inclusive of two six-month extension options.
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The following table summarizes the scheduled maturities of the Company's mortgages payable as of March 31, 2022 for the remainder of 2022, each of the next four years and thereafter.
| Scheduled maturities by year: | As of March 31, 2022 | ||||
| 2022 | $ | ||||
| 2023 | |||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| Thereafter | |||||
| Total mortgage payable maturities | $ | ||||
8. Fair Value Measurements
Recurring Measurements
The following financial instruments are remeasured at fair value on a recurring basis:
| Fair Value Measurements as of | ||||||||||||||||||||||||||||||||||||||
| March 31, 2022 | December 31, 2021 | |||||||||||||||||||||||||||||||||||||
Cash Flow Hedges: (a) | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||||||
| Derivative interest rate swaps (b)(c) | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||
(a)During the twelve months subsequent to March 31, 2022, an estimated $1,503 of derivative interest rate assets recognized in accumulated comprehensive income (loss) will be reclassified into earnings.
(b)The Company's derivative assets or liabilities are recognized as a part of deferred costs and other assets, net or other liabilities, respectively. IAGM's derivative assets or liabilities are recognized as a part of investment in unconsolidated entities.
Nonrecurring Measurements
Investment Properties
During the three months ended March 31, 2022 and 2021, the Company had no
Financial Instruments Not Measured at Fair Value
The table below summarizes the estimated fair value of financial instruments presented at carrying values in the Company's condensed consolidated financial statements as of March 31, 2022 and December 31, 2021:
| March 31, 2022 | December 31, 2021 | ||||||||||||||||||||||
| Carrying Value | Estimated Fair Value | Carrying Value | Estimated Fair Value | ||||||||||||||||||||
| Mortgages payable | $ | $ | $ | $ | |||||||||||||||||||
| Term loans | $ | $ | $ | $ | |||||||||||||||||||
| Revolving line of credit | $ | $ | $ | $ | |||||||||||||||||||
The Company estimated the fair value of its mortgages payable using a weighted-average effective market interest rate of 5.21 % and 4.44 % as of March 31, 2022 and December 31, 2021, respectively. The Company estimated the fair value of its term loans using a weighted-average effective market interest rate of 3.53 % and 2.39 % as of March 31, 2022 and December 31, 2021, respectively. The Company classifies its debt instrument valuations within Level 2 of the fair value hierarchy.
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9. Earnings Per Share and Equity Transactions
Basic earnings per share ("EPS") is computed using the two-class method by dividing net income or loss by the weighted average number of common shares outstanding for the period (the "common shares") and participating securities. The time-based restricted share awards issued pursuant to the Incentive Award Plan are deemed to be participating securities. Diluted EPS is generally computed using the treasury-stock method by dividing net income or loss by the common shares plus potential common shares resulting from time-based restricted share awards.
The following table reconciles the amounts used in calculating basic and diluted earnings per share:
| Three months ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Numerator: | |||||||||||
| Net income (loss) attributed to common shareholders | $ | $ | ( | ||||||||
| Denominator: | |||||||||||
| Weighted average common shares outstanding - basic | |||||||||||
| Dilutive effect of unvested restricted shares (a) | |||||||||||
| Weighted average common shares outstanding - diluted | |||||||||||
| Basic and diluted earnings per common share: | |||||||||||
| Net income (loss) per common share, basic and diluted | $ | $ | |||||||||
(a)For the three months ended March 31, 2021, the Company has excluded the anti-dilutive effect of unvested restricted shares.
Share Repurchase Program
On February 23, 2022, the Company established a new share repurchase program (the "SRP") of up to $150.0 million of the Company's outstanding shares of common stock. The SRP may be suspended or discontinued at any time, and does not obligate the Company to repurchase any dollar amount or particular amount of shares. The SRP replaced the Company's prior share repurchase program (the "Prior SRP"), which the Board previously suspended effective September 5, 2021. As of March 31, 2022, the Company has not repurchased any common stock under the SRP.
ATM Program
On March 7, 2022, the Company established an at-the-market equity offering program (the "ATM Program") through which the Company may sell from time to time up to an aggregate of $250.0 million of its common stock. In connection with the ATM Program, the Company may sell shares of its common stock to or through sales agents, or may enter into separate forward sale agreements with one of the agents, or one of their respective affiliates, as a forward purchaser. When the Company enters into a forward sale agreement, it expects that the forward purchaser will attempt to borrow from third parties and sell, through a forward seller, shares of its common stock to hedge the forward purchaser's exposure under the forward sale agreement. As of March 31, 2022, the Company has not sold any common stock under the ATM Program.
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10. Stock-Based Compensation
Effective as of June 19, 2015, the Company's Board adopted the Incentive Award Plan, under which the Company may grant cash and equity incentive awards to eligible employees, directors, and consultants. The Company is authorized to grant up to 3,000,000 shares of the Company's common stock pursuant to awards under the Incentive Award Plan. As of March 31, 2022, 1,065,232 shares were available for future issuance under the Incentive Award Plan. Awards granted can be categorized as either time-based awards, performance-based awards, or market-based awards. All awards are valued at fair value, earn dividends throughout the vesting period, and have no voting rights.
Time-based restricted stock unit ("RSU") awards are generally measured at grant date fair value and not subsequently re-measured. Time-based awards granted to employees vest equally on each of the first anniversaries of the applicable vesting commencement date, subject to the employees' continued service to the Company. The time-based RSU awards granted to directors vest on the earlier of the one-year anniversary of the applicable grant date or the date of the Company's next annual meeting of its shareholders following the grant date, subject to the directors' continued service to the Company.
Performance-based awards are measured at grant date fair value and each grantee is eligible to vest in a number of RSUs ranging from 0 % to 100 % of the total number granted based on specified performance levels. Performance-based awards vest at the conclusion of the performance period, subject to the recipients' continued service to the Company and achievement of the specified performance levels.
Market-based awards are valued as of the grant date utilizing a Monte Carlo simulation model that assesses the probability of satisfying certain market performance thresholds over a three year performance period. The number of common shares ultimately issued is based on the Company's total shareholder return ("TSR") relative to that of the FTSE NAREIT Shopping Index peer group on a percentile basis. The resulting compensation expense is recorded over the service period regardless of whether the TSR performance measures are achieved.
The following table summarizes the Company's significant assumptions used in the Monte Carlo simulation models:
| Three months ended March 31, 2022 | ||||||||||||||
| Volatility | ||||||||||||||
| Risk free interest rate | % | - | ||||||||||||
| Dividend Yield | ||||||||||||||
The following table summarizes the Company's RSU activity during the three months ended March 31, 2022:
| Unvested Time- Based RSUs | Unvested Performance and Market-Based RSUs | Weighted-Average Grant Date Price Per Share | |||||||||||||||
| Outstanding as of January 1, 2022 | $ | ||||||||||||||||
| Shares granted | $ | ||||||||||||||||
| Shares vested | ( | $ | |||||||||||||||
| Shares forfeited | ( | $ | |||||||||||||||
| Outstanding as of March 31, 2022 | $ | ||||||||||||||||
As of March 31, 2022, there was $10,292 of total estimated unrecognized compensation expense related to unvested stock-based compensation arrangements that will vest through December 2024. The Company recognized stock-based compensation expense of $1,082 and $2,496 for the three months ended March 31, 2022 and 2021, respectively.
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11. Commitments and Contingencies
The Company is subject, from time to time, to various types of third-party legal claims or litigation that arise in the ordinary course of business, including, but not limited to, property loss claims, personal injury or other damages resulting from contact with the Company's properties. These claims and lawsuits and any resulting damages are generally covered by the Company's insurance policies. The Company accrues for legal costs associated with loss contingencies when these costs are probable and reasonably estimable. While the resolution of these matters cannot be predicted with certainty, based on currently available information, management does not expect that the final outcome of any pending claims or legal proceedings will have a material adverse effect on the financial condition, results of operations or cash flows of the Company.
Operating and Finance Lease Commitments
The Company has non-cancelable operating leases for office space used in its business. In addition, the Company has non-cancelable contracts of property improvements that have been deemed to contain finance leases.
Future minimum lease obligations as of March 31, 2022, were as follows:
| Minimum Lease Payments | |||||||||||
| Operating Leases | Finance Leases | ||||||||||
| Remaining 2022 | $ | $ | |||||||||
| 2023 | |||||||||||
| 2024 | |||||||||||
| 2025 | |||||||||||
| 2026 | |||||||||||
| Thereafter | |||||||||||
| Total expected minimum lease obligation | |||||||||||
| Less: Amount representing interest (a) | ( | ( | |||||||||
| Present value of net minimum lease payments | $ | $ | |||||||||
(a)Interest includes the amount necessary to reduce to present value the total expected minimum lease obligations calculated at the Company's incremental borrowing rate.
12. Subsequent Events
In preparing its condensed consolidated financial statements, the Company has evaluated events and transactions occurring after March 31, 2022, through the date the financial statements were issued for recognition and disclosure purposes.
On April 21, 2022, the Company acquired Highlands of Flower Mound, a 175,000 square foot power center shadow anchored by Target, located in Flower Mound, Texas, from IAGM for $38.0 million. The Company assumed $22.9 million of existing mortgage debt to partially finance the acquisition.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Certain statements in this "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in these interim condensed consolidated financial statements for the quarter ended March 31, 2022 (the "Quarterly Report"), other than purely historical information, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"). These statements include statements about InvenTrust Properties Corp.'s (the "Company") plans, objectives, strategies, financial performance and outlook, trends, the amount and timing of future cash distributions, prospects or future events; and they involve known and unknown risks that are difficult to predict.
As a result, our actual financial results, performance, achievements, or prospects may differ materially from those expressed or implied by these forward-looking statements. In some cases, forward-looking statements can be identified by the use of words such as "may," "could," "expect," "intend," "plan," "seek," "anticipate," "believe," "estimate," "guidance," "predict," "potential," "continue," "likely," "will," "would," "illustrative," and "should" and variations of these terms and similar expressions, or the negatives of these terms or similar expressions. Such forward-looking statements are necessarily based upon estimates and assumptions that, while we consider reasonable based on our knowledge and understanding of the business and industry, are inherently uncertain. These statements are expressed in good faith and are not guarantees of future performance or results. Our actual results could differ materially from those expressed in the forward-looking statements and stockholders should not rely on forward-looking statements in making investment decisions.
There are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking statements contained in this Quarterly Report. Such risks, uncertainties and other important factors, include, among others, the risks, uncertainties and factors set forth in our filings with the Securities and Exchange Commission ("SEC"), including our Annual Report on Form 10-K for the year ended December 31, 2021 (the "Annual Report"), and as updated in this Quarterly Report and other quarterly and current reports, which are on file with the SEC and are available at the SEC's website (www.sec.gov). Such risks and uncertainties are related to, among others, the following:
•our ability to collect rent from tenants or to rent space on favorable terms or at all;
•declaration of bankruptcy by our retail tenants;
•the economic success and viability of our anchor retail tenants;
•our ability to identify, execute and complete acquisition opportunities and to integrate and successfully operate any retail properties acquired in the future and manage the risks associated with such retail properties;
•our ability to manage the risks of expanding, developing or redeveloping our retail properties;
•loss of members of our senior management team or other key personnel;
•changes in the competitive environment in the leasing market and any other market in which we operate;
•shifts in consumer retail shopping from brick and mortar stores to e-commerce;
•the impact of leasing and capital expenditures to improve our retail properties to retain and attract tenants;
•our ability to refinance or repay maturing debt or to obtain new financing on attractive terms;
•future increases in interest rates;
•inflation;
•our status as a real estate investment trust ("REIT") for federal tax purposes; and
•changes in federal, state or local tax law, including legislative, administrative, regulatory or other actions affecting REITs.
These factors are not necessarily all of the important factors that could cause our actual results, performance or achievements to differ materially from those expressed in or implied by any of our forward-looking statements. Other unknown or unpredictable factors also could harm our business, financial condition, results of operations, cash flows and overall value. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above. Forward-looking statements are only as of the date they are made; we do not undertake or assume any obligation to update publicly any of these forward-looking statements to reflect actual results, new information, future events, changes in assumptions or changes in other factors affecting forward-looking statements, except to the extent required by applicable law. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.
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The following discussion and analysis relates to the three months ended March 31, 2022 and 2021 and as of March 31, 2022 and December 31, 2021. It should be read in conjunction with our condensed consolidated financial statements and the related notes included in this Quarterly Report. All square feet and dollar amounts are stated in thousands, except per share amounts and per square foot metrics, unless otherwise noted.
Overview
Strategy and Outlook
InvenTrust Properties Corp. is a premier Sun Belt, multi-tenant essential retail REIT that owns, leases, redevelops, acquires and manages grocery-anchored neighborhood and community centers, as well as high-quality power centers that often have a grocery component in markets with favorable demographics, including above average growth in population, employment, income and education levels. We believe these conditions create favorable demand characteristics for grocery-anchored and necessity-based essential retail centers which will position us to capitalize on potential future rent increases while benefiting from sustained occupancy at our centers.
Our strategically located regional field offices are within a two-hour drive of 90% of our properties which affords us the ability to respond to the needs of our tenants and provides us with in-depth local market knowledge. We believe that our Sun Belt portfolio of high quality grocery-anchored assets is a distinct differentiator for us in the marketplace. We pursue our business strategy by acquiring retail properties in Sun Belt markets, opportunistically disposing of retail properties, maintaining a flexible capital structure, and enhancing environmental, social and governance practices and standards.
Evaluation of Financial Condition
Historically, management has evaluated our financial condition and operating performance by focusing on the following financial and nonfinancial indicators, discussed in further detail herein:
•Net Operating Income ("NOI") and Same Property NOI, supplemental non-GAAP measures;
•NAREIT Funds From Operations ("NAREIT FFO") Applicable to Common Shares and Dilutive Securities, a supplemental non-GAAP measure;
•Core FFO Applicable to Common Shares and Dilutive Securities, a supplemental non-GAAP measure;
•Cash flow from operations as determined in accordance with GAAP;
•Economic and leased occupancy and rental rates;
•Leasing activity and lease rollover;
•Operating expense levels and trends;
•General and administrative expense levels and trends;
•Debt maturities and leverage ratios; and
•Liquidity levels.
Recent Developments
Acquisitions and Line of Credit Draw Down
On February 2, 2022, we acquired two properties in Austin, Texas for $189.3 million, Escarpment Village, approximately 170 thousand square feet and anchored by H.E.B., and Shops at Arbor Trails, approximately 357 thousand square feet and anchored by Costco and Whole Foods. We funded the acquisitions with cash on hand, drawing down $105.0 million on our line of credit, and by assuming mortgage debt on Shops at Arbor Trails and Escarpment Village of $31.5 million and $26.0 million, respectively.
Dispositions
On March 3, 2022, IAGM Retail Fund I, LLC ("IAGM"), our joint venture partnership with PGGM Private Real Estate Fund ("PGGM"), disposed of Price Plaza, a 206 thousand square foot retail property located in Katy, Texas, for a gross disposition price of $39.1 million and recognized a gain on sale of $3.8 million. Our share of IAGM's gain on sale was $2.1 million. The property's buyer assumed a $17.8 million mortgage payable at the property.
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Share Repurchase Program
On February 23, 2022, we established a new share repurchase program (the "SRP") of up to $150.0 million of our outstanding shares of common stock. The SRP may be suspended or discontinued at any time, and does not obligate us to repurchase any dollar amount or particular amount of shares. The SRP replaced our prior share repurchase program (the "Prior SRP"), which the Board previously suspended effective September 5, 2021. As of March 31, 2022, we have not repurchased any common stock under the SRP.
Debt
On March 4, 2022, we paid off a $22.3 million mortgage payable at Pavilion at La Quinta using cash on hand and recognized a loss on debt extinguishment of $0.1 million.
ATM Program
On March 7, 2022, we established an at-the-market equity offering program (the "ATM Program") through which we may sell from time to time up to an aggregate of $250.0 million of our common stock. In connection with the ATM Program, we may sell shares of our common stock to or through sales agents, or we may enter into separate forward sale agreements with one of the agents, or one of their respective affiliates, as a forward purchaser. When we enter into a forward sale agreement, we expect that the forward purchaser will attempt to borrow from third parties and sell, through a forward seller, shares of our common stock to hedge the forward purchaser's exposure under the forward sale agreement. As of March 31, 2022, we have not sold any common stock under the ATM Program.
Reduction of Authorized Shares
On April 28, 2022, we filed an amendment to our charter to decrease the number of authorized shares of common stock from 1,460,000,000 to 146,000,000, in proportion with the one-for-ten reverse stock split effected by the Company on August 5, 2021. The authorized shares of preferred stock remain at 40,000,000. The authorized shares of common stock have been retroactively adjusted within the accompanying condensed consolidated financial statements to give effect to the reduction as of March 31, 2022.
Our Retail Portfolio
Our wholly-owned and managed retail properties include grocery-anchored community and neighborhood centers and power centers, including those classified as necessity-based, as defined in our Annual Report. As of March 31, 2022, we owned or had an interest in 63 retail properties with a total gross leasable area ("GLA") of approximately 10.6 million square feet, which includes 6 retail properties with a GLA of approximately 1.6 million square feet owned through our 55% ownership interest in an unconsolidated joint venture, IAGM.
Where appropriate, we have included results from the IAGM properties at 55% ("at share") when combined with our wholly-owned properties, defined as "Pro Rata Combined Retail Portfolio". The following table summarizes our retail portfolio as of March 31, 2022 and 2021.
| Wholly-Owned Retail Properties | IAGM Retail Properties | Pro Rata Combined Retail Portfolio | |||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||
| No. of properties | 57 | 55 | 6 | 10 | 63 | 65 | |||||||||||||||||||||||||||||
| GLA (square feet) | 9,081 | 8,394 | 1,562 | 2,470 | 9,940 | 9,752 | |||||||||||||||||||||||||||||
| Economic occupancy (a) | 93.9% | 92.1% | 86.5% | 83.2% | 93.2% | 90.9% | |||||||||||||||||||||||||||||
| Leased occupancy (b) | 95.1% | 94.1% | 87.3% | 85.3% | 94.4% | 92.9% | |||||||||||||||||||||||||||||
| ABR PSF (c) | $18.76 | $18.40 | $17.23 | $17.13 | $18.64 | $18.24 | |||||||||||||||||||||||||||||
(a)Economic occupancy is defined as the percentage of occupied GLA divided by total GLA (excluding Specialty Leases) for which a tenant is obligated to pay rent under the terms of its lease agreement as of the rent commencement date, regardless of the actual use or occupancy by that tenant of the area being leased. Actual use may be less than economic occupancy. Specialty Leases represent leases of less than one year in duration for small shop space and include any term length for common area space.
(b)Leased occupancy is defined as economic occupancy plus the percentage of signed but not yet commenced GLA divided by total GLA.
(c)Annualized Base Rent ("ABR") is computed as base rent for the period multiplied by twelve months. Base rent is inclusive of ground rent and any abatement concessions, but excludes Specialty Lease rent. ABR per square foot ("PSF") is computed as ABR divided by the occupied square footage as of the end of the period.
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Retail Portfolio Summary by Center Type
The following tables summarize our retail portfolio, by center type, as defined in our Annual Report, as of March 31, 2022 and 2021.
| Community and neighborhood centers | |||||||||||||||||||||||||||||||||||
| Wholly-Owned Retail Properties | IAGM Retail Properties | Pro Rata Combined Retail Portfolio | |||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||
| No. of properties | 45 | 44 | 5 | 5 | 50 | 49 | |||||||||||||||||||||||||||||
| GLA (square feet) | 5,508 | 5,051 | 1,387 | 1,386 | 6,271 | 5,813 | |||||||||||||||||||||||||||||
| Economic occupancy | 94.4% | 93.1% | 85.9% | 87.2% | 93.4% | 92.3% | |||||||||||||||||||||||||||||
| Leased occupancy | 95.7% | 94.9% | 86.9% | 88.0% | 94.6% | 94.0% | |||||||||||||||||||||||||||||
| ABR PSF | $19.80 | $19.44 | $17.11 | $16.68 | $19.50 | $19.10 | |||||||||||||||||||||||||||||
| Power centers | |||||||||||||||||||||||||||||||||||
| Wholly-Owned Retail Properties | IAGM Retail Properties | Pro Rata Combined Retail Portfolio | |||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||
| No. of properties | 12 | 11 | 1 | 5 | 13 | 16 | |||||||||||||||||||||||||||||
| GLA (square feet) | 3,573 | 3,343 | 175 | 1,084 | 3,669 | 3,939 | |||||||||||||||||||||||||||||
| Economic occupancy | 93.1% | 90.7% | 90.8% | 78.0% | 93.0% | 88.8% | |||||||||||||||||||||||||||||
| Leased occupancy | 94.4% | 93.0% | 90.8% | 81.8% | 94.0% | 91.3% | |||||||||||||||||||||||||||||
| ABR PSF | $17.15 | $16.81 | $18.13 | $17.75 | $17.18 | $16.93 | |||||||||||||||||||||||||||||
Same Property Retail Portfolio Summary
The following tables summarize the GLA, economic occupancy and ABR PSF of the properties included in our retail portfolio classified as same property for the three months ended March 31, 2022 and 2021. Same Property Retail Portfolio summaries include results from properties owned for the entirety of both periods presented.
| Three months ended March 31 | |||||||||||||||||||||||||||||||||||
| Wholly-Owned Retail Properties | IAGM Retail Properties | Pro Rata Combined Retail Portfolio | |||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||
| No. of properties | 54 | 54 | 6 | 6 | 60 | 60 | |||||||||||||||||||||||||||||
| GLA (square feet) | 8,321 | 8,256 | 1,562 | 1,562 | 9,180 | 9,115 | |||||||||||||||||||||||||||||
| Economic occupancy | 93.9% | 92.0% | 86.5% | 85.5% | 93.2% | 91.4% | |||||||||||||||||||||||||||||
| Leased occupancy | 95.0% | 94.0% | 87.3% | 86.5% | 94.3% | 93.3% | |||||||||||||||||||||||||||||
| ABR PSF | $18.94 | $18.59 | $17.23 | $16.85 | $18.79 | $18.44 | |||||||||||||||||||||||||||||
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Lease Expirations
The following table presents the lease expirations of our economic occupied Pro Rata Combined Retail Portfolio as of March 31, 2022.
| Lease Expiration Year | No. of Expiring Leases (a) | GLA of Expiring Leases (square feet) | Percent of Total GLA of Expiring Leases | ABR of Expiring Leases | Percent of Total ABR | Expiring ABR PSF | ||||||||||||||||||||||||||||||||
| 2022 | 101 | 310 | 3.3% | $ | 6,418 | 3.5% | $ | 20.70 | ||||||||||||||||||||||||||||||
| 2023 | 204 | 1,041 | 11.2% | 19,253 | 10.5% | 18.49 | ||||||||||||||||||||||||||||||||
| 2024 | 201 | 1,032 | 11.1% | 21,177 | 11.6% | 20.52 | ||||||||||||||||||||||||||||||||
| 2025 | 185 | 1,166 | 12.6% | 21,085 | 11.5% | 18.08 | ||||||||||||||||||||||||||||||||
| 2026 | 204 | 877 | 9.5% | 20,372 | 11.1% | 23.23 | ||||||||||||||||||||||||||||||||
| 2027 | 188 | 1,723 | 18.6% | 33,465 | 18.3% | 19.42 | ||||||||||||||||||||||||||||||||
| 2028 | 87 | 461 | 5.0% | 10,590 | 5.8% | 22.97 | ||||||||||||||||||||||||||||||||
| 2029 | 91 | 530 | 5.7% | 11,473 | 6.3% | 21.65 | ||||||||||||||||||||||||||||||||
| 2030 | 68 | 339 | 3.7% | 8,632 | 4.7% | 25.46 | ||||||||||||||||||||||||||||||||
| 2031 | 76 | 491 | 5.3% | 10,442 | 5.7% | 21.27 | ||||||||||||||||||||||||||||||||
| Thereafter | 72 | 1,249 | 13.5% | 19,307 | 10.5% | 15.46 | ||||||||||||||||||||||||||||||||
| Other (b) | 13 | 42 | 0.5% | 965 | 0.5% | 22.98 | ||||||||||||||||||||||||||||||||
| 1,490 | 9,261 | 100% | $ | 183,179 | 100% | $ | 19.78 | |||||||||||||||||||||||||||||||
(a)No. of expiring leases includes IAGM at 100%.
(b)Other lease expirations include the GLA, ABR and ABR PSF of month-to-month leases.
In preparing the above table, we have not assumed that unexercised contractual lease renewal or extension options contained in our leases will, in fact, be exercised. Our retail business is neither highly dependent on specific retailers nor subject to lease roll-over concentration. We believe this minimizes risk to our retail portfolio from significant revenue variances over time.
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Leasing Activity, Pro Rata Combined Retail Portfolio
The following table summarizes the leasing activity for leases that were executed during the three months ended March 31, 2022, compared with expiring or expired leases for the same or previous tenant for renewals and the same unit for new leases at the 63 properties in our Pro Rata Combined Retail Portfolio. Except for number of leases, all figures reflect results from our wholly owned and IAGM properties at share. These tables do not include rent deferral lease amendments executed as a result of the impact of the COVID-19 pandemic.
In our Pro Rata Combined Retail Portfolio, we had GLA totaling 1.04 million square feet expiring during the three months ended March 31, 2022, of which 971 thousand square feet was re-leased. This achieved a retention rate of approximately 93.1%.
| No. of Leases Executed for the Three Months Ended March 31, 2022 | GLA SF (in thousands) | New Contractual Rent ($PSF) (b) | Prior Contractual Rent ($PSF) (b) | % Change over Prior Lease Rent (b) | Weighted Average Lease Term (Years) | Tenant Improvement Allowance ($PSF) | Lease Commissions ($PSF) | ||||||||||||||||||||||||||||||||||||||||
| All Tenants | |||||||||||||||||||||||||||||||||||||||||||||||
| Comparable Renewal Leases (a) | 46 | 114 | $27.72 | $26.56 | 4.4% | 4.1 | $0.98 | $— | |||||||||||||||||||||||||||||||||||||||
| Comparable New Leases (a) | 1 | 11 | $15.50 | $13.00 | 19.2% | 11.0 | $45.00 | $9.86 | |||||||||||||||||||||||||||||||||||||||
| Non-Comparable Renewal and New Leases | 21 | 58 | $30.80 | N/A | N/A | 10.0 | $42.07 | $11.80 | |||||||||||||||||||||||||||||||||||||||
| Total | 68 | 183 | $26.69 | $25.41 | 5.0% | 6.4 | $16.52 | $4.30 | |||||||||||||||||||||||||||||||||||||||
| Anchor Tenants (leases ten thousand square feet and over) | |||||||||||||||||||||||||||||||||||||||||||||||
| Comparable Renewal Leases (a) | 3 | 36 | $18.08 | $17.28 | 4.6% | 2.5 | $1.38 | $— | |||||||||||||||||||||||||||||||||||||||
| Comparable New Leases (a) | 1 | 11 | $15.50 | $13.00 | 19.2% | 11.0 | $45.00 | $9.86 | |||||||||||||||||||||||||||||||||||||||
| Non-Comparable Renewal and New Leases | — | — | $— | $— | N/A | — | $— | $— | |||||||||||||||||||||||||||||||||||||||
| Total | 4 | 47 | $17.50 | $16.31 | 7.3% | 4.4 | $11.22 | $2.22 | |||||||||||||||||||||||||||||||||||||||
| Small Shop Tenants (leases under ten thousand square feet) | |||||||||||||||||||||||||||||||||||||||||||||||
| Comparable Renewal Leases (a) | 43 | 78 | $32.19 | $30.85 | 4.3% | 4.9 | $0.79 | $— | |||||||||||||||||||||||||||||||||||||||
| Comparable New Leases (a) | — | — | $— | $— | —% | — | $— | $— | |||||||||||||||||||||||||||||||||||||||
| Non-Comparable Renewal and New Leases | 21 | 58 | $30.80 | N/A | N/A | 10.0 | $42.07 | $11.80 | |||||||||||||||||||||||||||||||||||||||
| Total | 64 | 136 | $32.19 | $30.85 | 4.3% | 7.1 | $18.34 | $5.02 | |||||||||||||||||||||||||||||||||||||||
(a)Comparable leases are leases that meet all of the following criteria: terms greater than or equal to one year, unit was vacant less than one year prior to executed lease, square footage of unit remains unchanged or within 10% of prior unit square footage, and has a rent structure consistent with the previous tenant.
(b)Non-comparable leases are not included in totals.
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Results of Operations
Comparison of results for the three months ended March 31, 2022 and 2021
We generate substantially all of our earnings from property operations. Since January 1, 2021, we have acquired three retail properties and disposed of one retail property.
The following table presents the changes in our income for the three months ended March 31, 2022 and 2021.
| Three months ended March 31, | |||||||||||||||||
| 2022 | 2021 | Increase (Decrease) | |||||||||||||||
| Income | |||||||||||||||||
| Lease income, net | $ | 57,768 | $ | 49,926 | $ | 7,842 | |||||||||||
| Other property income | 264 | 182 | 82 | ||||||||||||||
| Other fee income | 754 | 1,013 | (259) | ||||||||||||||
| Total income | $ | 58,786 | $ | 51,121 | $ | 7,665 | |||||||||||
Lease income, net, for the three months ended March 31, 2022, increased by $7.8 million when compared to the same period in 2021, primarily as a result of increased minimum rent of $4.4 million, net changes in credit losses and related reversals of $1.3 million, increased recovery income of $0.7 million, increased percentage rent of $0.1 million, and net increased GAAP rent adjustments of $1.3 million.
The following table presents the changes in our operating expenses for the three months ended March 31, 2022 and 2021.
| Three months ended March 31, | |||||||||||||||||
| 2022 | 2021 | Increase (Decrease) | |||||||||||||||
| Operating expenses | |||||||||||||||||
| Depreciation and amortization | $ | 22,829 | $ | 21,687 | $ | 1,142 | |||||||||||
| Property operating | 8,285 | 8,009 | 276 | ||||||||||||||
| Real estate taxes | 8,043 | 8,133 | (90) | ||||||||||||||
| General and administrative | 7,887 | 10,351 | (2,464) | ||||||||||||||
| Total operating expenses | $ | 47,044 | $ | 48,180 | $ | (1,136) | |||||||||||
Depreciation and amortization expenses for the three months ended March 31, 2022, increased $1.1 million when compared to the same period in 2021, primarily as a result of the acquisition of three retail properties since January 1, 2021 generating increased depreciation and amortization expense of $2.0 million, which was partially offset by $0.9 million of reduced depreciation and amortization expense pertaining to the demolition of a building at one retail property in 2021.
General and administrative expenses for the three months ended March 31, 2022, decreased $2.5 million when compared to the same period in 2021, primarily as a result of decreased long-term incentive plan costs of $1.4 million, decreased stock administration and investor relations costs of $0.7 million, and net decreases in all other costs of $0.4 million.
The following table presents the changes in our other income and expenses.
| Three months ended March 31, | |||||||||||||||||
| 2022 | 2021 | Change, net | |||||||||||||||
| Other (expense) income | |||||||||||||||||
| Interest expense, net | $ | (4,809) | $ | (3,985) | $ | (824) | |||||||||||
| Loss on extinguishment of debt | (96) | — | (96) | ||||||||||||||
| Gain on sale of investment properties, net | — | 519 | (519) | ||||||||||||||
| Equity in earnings of unconsolidated entities | 2,716 | 620 | 2,096 | ||||||||||||||
| Other income and expense, net | (52) | (195) | 143 | ||||||||||||||
| Total other (expense) income, net | $ | (2,241) | $ | (3,041) | $ | 800 | |||||||||||
Interest expense, net
Interest expense, net, for the three months ended March 31, 2022 increased $0.8 million when compared to the same period in 2021, primarily as a result of:
•fluctuations in our line of credit balances and 1-month LIBOR interest rates on our corporate credit facilities generating increased interest expense of $0.3 million,
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•assumption of mortgages on Shops at Arbor Trails and Escarpment Village of $31.5 million and $26.0 million, respectively, generating increased interest expense of $0.3 million,
•increased amortization of debt issuance costs of $0.3 million, and was offset by:
•paying off a $22.3 million mortgage payable on one retail property, decreasing interest expense by $0.1 million and generating a loss on debt extinguishment of $0.1 million.
Gain on sale of investment properties, net
During the three months ended March 31, 2021, we recognized a net gain of $0.5 million on the completion of partial condemnations at three retail properties.
Equity in earnings of unconsolidated entities
Equity in earnings of unconsolidated entities for the three months ended March 31, 2022, increased $2.1 million when compared to the same period in 2021, primarily as a result of a gain on sale of a property of $2.1 million and decreased interest expense of $0.3 million, which were partially offset by decreased earnings from property operations of $0.3 million. The aforementioned amounts represent our proportionate share of the activity.
Net Operating Income
We evaluate the performance of our retail properties based on NOI, which excludes general and administrative expenses, depreciation and amortization, provision for asset impairment, other income and expense, net, gains (losses) from sales of properties, gains (losses) on extinguishment of debt, interest expense, net, equity in earnings (losses) from unconsolidated entities, lease termination income and expense, and GAAP rent adjustments (such as straight-line rent, above/below market lease amortization and amortization of lease incentives). We bifurcate NOI into Same Property NOI and NOI from other investment properties based on whether the underlying retail properties meet our same property criteria.
We believe the supplemental non-GAAP financial measures of NOI, same property NOI, and NOI from other investment properties provide added comparability across periods when evaluating our financial condition and operating performance that is not readily apparent from "Operating income" or "Net income" in accordance with GAAP.
Comparison of Same Property results for the three months ended March 31, 2022 and 2021
A total of 54 wholly-owned retail properties and 60 Pro Rata retail properties met our Same Property criteria for the three months ended March 31, 2022 and 2021. The following table presents the reconciliation of net income (loss), the most directly comparable GAAP measure, to NOI, Same Property NOI, and Pro Rata Same Property NOI for the three months ended March 31, 2022 and 2021:
| Three months ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Net income (loss) | $ | 9,501 | $ | (100) | |||||||
| Adjustments to reconcile to non-GAAP metrics: | |||||||||||
| Other income and expense, net | 52 | 195 | |||||||||
| Equity in earnings of unconsolidated entities | (2,716) | (620) | |||||||||
| Interest expense, net | 4,809 | 3,985 | |||||||||
| Loss on extinguishment of debt | 96 | — | |||||||||
| Gain on sale of investment properties, net | — | (519) | |||||||||
| Depreciation and amortization | 22,829 | 21,687 | |||||||||
| General and administrative | 7,887 | 10,351 | |||||||||
| Other fee income | (754) | (1,013) | |||||||||
| Adjustments to NOI (a) | (3,872) | (1,881) | |||||||||
| NOI | 37,832 | 32,085 | |||||||||
| NOI from other investment properties | (2,096) | (150) | |||||||||
| Same Property NOI | 35,736 | 31,935 | |||||||||
| IAGM Same Property NOI at share | 3,001 | 2,596 | |||||||||
| Pro Rata Same Property NOI | $ | 38,737 | $ | 34,531 | |||||||
(a)Adjustments to NOI include termination fee income and expense and GAAP rent adjustments.
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Comparison of the components of Same Property NOI for the three months ended March 31, 2022 and 2021
| Three months ended March 31, | |||||||||||||||||||||||
| 2022 | 2021 | Change | Var. | ||||||||||||||||||||
| Lease income, net | $ | 50,666 | $ | 47,894 | $ | 2,772 | 5.8 | % | |||||||||||||||
| Other property income | 269 | 187 | 82 | 43.9 | % | ||||||||||||||||||
| 50,935 | 48,081 | 2,854 | 5.9 | % | |||||||||||||||||||
| Property operating | 7,847 | 8,012 | (165) | (2.1) | % | ||||||||||||||||||
| Real estate taxes | 7,352 | 8,134 | (782) | (9.6) | % | ||||||||||||||||||
| 15,199 | 16,146 | (947) | (5.9) | % | |||||||||||||||||||
| Same Property NOI | $ | 35,736 | $ | 31,935 | $ | 3,801 | 11.9 | % | |||||||||||||||
Same Property NOI increased by $3.8 million, or 11.9%, when comparing the three months ended March 31, 2022 to the same period in 2021, and was primarily a result of:
•increased minimum rent of $2.2 million,
•net changes in credit losses and related reversals of $0.7 million,
•decreased recoverable expenses of $0.7 million,
•decreased non-recoverable expenses of $0.3 million
•increased percentage rent of $0.1 million, and was offset by:
•decreased recovery income of $0.2 million.
The increase in minimum rent is primarily attributable increased economic and leased occupancy levels when comparing the three months ended March 31, 2022 to the same period in 2021.
During the three months ended March 31, 2022, we recognized credit losses relating to billed rent and recoveries of $0.2 million and reversals of credit losses of $0.8 million. During the three months ended March 31, 2021, we recognized credit losses relating to billed rent and recoveries of $0.9 million and reversals of credit losses of $0.8 million.
Real estate taxes and recoverable operating expenses, net of associated recoveries, decreased $0.5 million when comparing the three months ended March 31, 2022 to the same period in 2021, primarily reflecting increased real estate tax refunds.
Non-recoverable operating expenses relating to tenant lease negotiations decreased when comparing the three months ended March 31, 2022 to the same period in 2021.
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Funds From Operations
The National Association of Real Estate Investment Trusts ("NAREIT"), an industry trade group, has promulgated a widely accepted non-GAAP financial measure of operating performance known as Funds From Operations ("NAREIT FFO"). Our NAREIT FFO is net income (or loss) in accordance with GAAP, excluding gains (or losses) resulting from dispositions of properties, plus depreciation and amortization and impairment charges on depreciable real property. Adjustments for IAGM are calculated to reflect our proportionate share of the joint venture's funds from operations on the same basis.
Core Funds From Operations ("Core FFO") is an additional supplemental non-GAAP financial measure of our operating performance. In particular, Core FFO provides an additional measure to compare the operating performance of different REITs without having to account for certain remaining amortization assumptions within NAREIT FFO and other unique revenue and expense items which some may consider not pertinent to measuring a particular company's on-going operating performance. In that regard, we use Core FFO as an input to our compensation plan to determine cash bonuses and measure the achievement of certain performance-based equity awards.
See our Annual Report on Form 10-K for expanded descriptions of NAREIT FFO and Core FFO. FFO Applicable to Common Shares and Dilutive Securities and Core FFO Applicable to Common Shares and Dilutive Securities is calculated as follows:
| Three months ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Net income (loss) | $ | 9,501 | $ | (100) | |||||||
| Depreciation and amortization related to investment properties | 22,622 | 21,447 | |||||||||
| Gain on sale of investment properties, net | — | (519) | |||||||||
| Unconsolidated joint venture adjustments (a) | (465) | 2,070 | |||||||||
| NAREIT FFO Applicable to Common Shares and Dilutive Securities | 31,658 | 22,898 | |||||||||
| Amortization of above and below-market leases and lease inducements, net | (2,547) | (1,243) | |||||||||
| Straight-line rent adjustments, net | (1,157) | (517) | |||||||||
| Adjusting items, net (b) | 873 | 819 | |||||||||
| Unconsolidated joint venture adjusting items, net (c) | 194 | 168 | |||||||||
| Core FFO Applicable to Common Shares and Dilutive Securities | $ | 29,021 | $ | 22,125 | |||||||
| Weighted average common shares outstanding - basic | 67,354,717 | 71,998,654 | |||||||||
| Dilutive effect of unvested restricted shares (d) | 221,321 | — | |||||||||
| Weighted average common shares outstanding - diluted | 67,576,038 | 71,998,654 | |||||||||
| Net income (loss) per common share, basic and diluted | $ | 0.14 | $ | — | |||||||
| Per share adjustments - NAREIT FFO Applicable to Common Shares and Dilutive Securities | 0.33 | 0.32 | |||||||||
| NAREIT FFO Applicable to Common Shares and Dilutive Securities per share | $ | 0.47 | $ | 0.32 | |||||||
| Per share adjustments - Core FFO Applicable to Common Shares and Dilutive Securities | (0.04) | (0.01) | |||||||||
| Core FFO Applicable to Common Shares and Dilutive Securities per share | $ | 0.43 | $ | 0.31 | |||||||
(a)Represents our share of depreciation, amortization and gain on sale related to investment properties held in IAGM.
(b)Adjusting items, net, are primarily loss on extinguishment of debt, amortization of debt discounts and financing costs, depreciation and amortization of corporate assets, and non-operating income and expenses, net, which includes items which are not pertinent to measuring on-going operating performance, such as miscellaneous and settlement income.
(c)Represents our share of amortization of above and below-market leases and lease inducements, net, straight line rent adjustments, net and adjusting items, net related to IAGM.
(d)For purposes of calculating non-GAAP per share metrics, the same denominator is used as that which would be used in calculating diluted earnings per share in accordance with GAAP. For the three months ended March 31, 2021, unvested restricted shares were antidilutive and therefore excluded from the denominator in the diluted earnings per share calculation in accordance with GAAP.
24
Liquidity and Capital Resources
Development, Redevelopment, Capital Expenditures and Leasing Activities
The following table summarizes capital resources used through development and redevelopment, capital expenditures, and leasing activities at our retail properties owned during the three months ended March 31, 2022. These costs are classified as cash used in capital expenditures and tenant improvements and investment in development and redevelopment projects on the condensed consolidated statements of cash flows during the three months ended March 31, 2022.
| Development and Redevelopment | Capital Expenditures | Leasing | Total | ||||||||||||||||||||
| Direct costs | $ | 1,986 | (a) | $ | 1,145 | $ | 2,818 | (c) | $ | 5,949 | |||||||||||||
| Indirect costs | 377 | (b) | 340 | — | 717 | ||||||||||||||||||
| Total | $ | 2,363 | $ | 1,485 | $ | 2,818 | $ | 6,666 | |||||||||||||||
(a)Direct development and redevelopment costs relate to construction of buildings at our retail properties.
(b)Indirect development and redevelopment costs relate to capitalized interest, real estate taxes, insurance, and payroll attributed to improvements at our retail properties.
(c)Direct leasing costs relate to improvements to a tenant space that are either paid directly by or reimbursed to the tenants.
Short-Term Liquidity and Capital Resources
On a short-term basis, our principal uses for funds are to pay our operating and corporate expenses, interest and principal on our indebtedness, property capital expenditures, and to make distributions to our stockholders.
Our ability to maintain adequate liquidity for our operations in the future is dependent upon a number of factors, including our revenue, macroeconomic conditions, our ability to contain costs, including capital expenditures, and to collect rents and other receivables, and various other factors, many of which are beyond our control. We will continue to monitor our liquidity position and may seek to raise funds through debt or equity financing in the future to fund operations, significant investments or acquisitions that are consistent with our strategy. Our ability to raise these funds may also be diminished by other macroeconomic factors.
Long-Term Liquidity and Capital Resources
Our objectives are to maximize revenue generated by our retail platform, to further enhance the value of our retail properties to produce attractive current yield and long-term returns for our stockholders, and to generate sustainable and predictable cash flow from our operations to distribute to our stockholders.
Any future determination to pay distributions will be at the discretion of our board of directors (the "Board") and will depend on our financial condition, capital requirements, restrictions contained in current or future financing instruments, and such other factors as our Board deems relevant.
Our primary sources and uses of capital are as follows:
| Sources | Uses | |||||||
•Operating cash flows from our real estate investments; •Distributions from our joint venture investment; •Proceeds from sales of properties; •Proceeds from mortgage loan borrowings on properties; •Proceeds from corporate borrowings; and •Proceeds from any ATM Program activities. | •To invest in properties; •To fund development, redevelopment, maintenance and capital expenditures or leasing incentives; •To make distributions to our stockholders; •To service or pay down our debt; •To pay our operating expenses; and •To fund other general corporate uses. | |||||||
From time to time, we may seek to acquire additional amounts of our outstanding common stock through cash purchases or exchanges for other securities. Such purchases or exchanges, if any, will depend on our liquidity requirements, contractual restrictions, and other factors.
25
Distributions
During the three months ended March 31, 2022, we declared distributions to our stockholders totaling $13.8 million and paid cash distributions of $13.8 million. As we execute on our retail strategy and continue to evaluate our business, results of operations and cash flows, our Board will continue to evaluate our distribution on a periodic basis.
Summary of Cash Flows
| Three months ended March 31, | Change | ||||||||||||||||
| 2022 | 2021 | ||||||||||||||||
| Cash provided by operating activities | $ | 26,777 | $ | 20,846 | $ | 5,931 | |||||||||||
| Cash used in investing activities | (114,281) | (4,490) | (109,791) | ||||||||||||||
| Cash provided by (used in) financing activities | 68,373 | (64,087) | 132,460 | ||||||||||||||
| Decrease in cash, cash equivalents and restricted cash | (19,131) | (47,731) | 28,600 | ||||||||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 44,854 | 223,770 | (178,916) | ||||||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 25,723 | $ | 176,039 | $ | (150,316) | |||||||||||
Cash provided by operating activities of $26.8 million and $20.8 million for the three months ended March 31, 2022 and 2021, respectively, was generated primarily from income from property operations and operating distributions from IAGM. Cash provided by operating activities increased $5.9 million when comparing the three months ended March 31, 2022, to the same period in 2021, primarily from increased cash from property operations as a result of the resiliency of our tenants and markets in which we operate, increased distributions from IAGM, general fluctuations in working capital, and the acquisition of three retail properties, which was partially offset by the disposition of one retail property since January 1, 2021.
Cash used in investing activities of $114.3 million for the three months ended March 31, 2022, was primarily the result of:
•$130.9 million for acquisitions of investment properties,
•$4.3 million for capital expenditures and tenant improvements,
•$2.4 million for investment in development projects,
•$1.1 million for lease commissions and other leasing costs, and
•$0.9 million for cash outflows from other investing activities, which was partially offset by cash provided of
•$25.3 million from distributions from unconsolidated entities.
Cash used in investing activities of $4.5 million for the three months ended March 31, 2021, was primarily the result of:
•$3.0 million for capital expenditures and tenant improvements,
•$0.5 million for investment in development projects,
•$1.0 million for lease commissions and other leasing costs, and
•$0.9 million for cash inflows from other investing activities, which was partially offset by cash provided of
•$0.9 million from net proceeds received from the sale of investment properties.
Cash provided by financing activities of $68.4 million for the three months ended March 31, 2022, was primarily the result of:
•$105.0 million drawn from the line of credit to partially finance our Austin acquisitions, which was partially offset by cash used of
•$22.3 million for pay-offs of debt,
•$13.8 million to pay distributions, and
•$0.5 million for principal payments on mortgage debt, payment of finance lease liabilities, and payment of loan fees and other deposits.
Cash used in financing activities of $64.1 million for the three months ended March 31, 2021, was primarily the result of:
•$50.0 million for pay-down of line of credit,
•$13.6 million to pay distributions, and
•$0.5 million for principal payments on mortgage debt, payment of finance lease liabilities, and payment of loan fees and other deposits.
26
We consider all demand deposits, money market accounts and investments in certificates of deposit and repurchase agreements with a maturity of three months or less, at the date of purchase, to be cash equivalents. We maintain our cash and cash equivalents at major financial institutions. The combined account balances at one or more institutions generally exceed the Federal Depository Insurance Corporation ("FDIC") insurance coverage. We periodically assess the credit risk associated with these financial institutions. As a result, there is what we believe to be insignificant credit risk related to amounts on deposit in excess of FDIC insurance coverage.
Off Balance Sheet Arrangements
The Company does not have off balance sheet arrangements other than its joint venture, IAGM, as disclosed in "Part I. Item 1. Financial Statements - Note 6. Investment in Unconsolidated Entities."
Contractual Obligations
We have obligations related to our mortgage loans, term loan, and revolving credit facility as described in "Note 7. Debt" in the condensed consolidated financial statements. The unconsolidated joint venture in which we have an investment has third-party mortgage debt of $148.9 million as of March 31, 2022, as described in "Note 6. Investment in Unconsolidated Entities" in the condensed consolidated financial statements. It is anticipated that our unconsolidated joint venture will be able to repay or refinance all of its debt on a timely basis.
The following table presents, on a consolidated basis, obligations and commitments to make future payments under debt obligations and lease agreements. It excludes third-party debt associated with our unconsolidated joint venture and debt discounts that are not future cash obligations as of March 31, 2022.
| Payments due by year ending December 31, | |||||||||||||||||||||||||||||||||||||||||
| 2022 | 2023 | 2024 | 2025 | 2026 | Thereafter | Total | |||||||||||||||||||||||||||||||||||
| Long-term debt: | |||||||||||||||||||||||||||||||||||||||||
| Fixed rate debt, principal (a) | $ | — | $ | 38,999 | $ | 15,700 | $ | 28,630 | $ | 200,000 | $ | 157,500 | $ | 440,829 | |||||||||||||||||||||||||||
| Variable-rate debt, principal | — | — | — | 136,000 | — | 100,000 | 236,000 | ||||||||||||||||||||||||||||||||||
| Interest | 15,086 | 21,969 | 21,378 | 18,517 | 12,501 | 5,635 | 95,086 | ||||||||||||||||||||||||||||||||||
| Total long-term debt | 15,086 | 60,968 | 37,078 | 183,147 | 212,501 | 263,135 | 771,915 | ||||||||||||||||||||||||||||||||||
| Operating lease obligations (b) | 114 | 513 | 575 | 456 | 460 | 1,740 | 3,858 | ||||||||||||||||||||||||||||||||||
| Finance lease obligations (c) | 173 | 21 | — | — | — | — | 194 | ||||||||||||||||||||||||||||||||||
| Grand total | $ | 15,373 | $ | 61,502 | $ | 37,653 | $ | 183,603 | $ | 212,961 | $ | 264,875 | $ | 775,967 | |||||||||||||||||||||||||||
(a)Includes $300.0 million of variable-rate unsecured term loans that have been swapped to a fixed rate until September 22, 2026, and $100.0 million of variable-rate unsecured term loans that have been swapped to a fixed rate until March 22, 2027.
(b)Includes leases on corporate office spaces.
(c)Includes contracts for property improvements which have been deemed to contain finance leases.
27
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are subject to market risk associated with changes in interest rates both in terms of variable-rate debt and the price of new fixed-rate debt upon maturity of existing debt and for acquisitions.
Interest Rate Risk
Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows. As of March 31, 2022, our debt included outstanding variable-rate line of credit balances of $136.0 million and term loans of $400.0 million, of which $300.0 million has been swapped to a fixed rate. If market rates of interest on all variable-rate debt as of March 31, 2022 permanently increased and decreased by 1%, the annual increase and decrease in interest expense on the variable-rate debt and future earnings and cash flows would be approximately $2.4 million. See our Annual Report for expanded discussion regarding how we achieve our interest rate risk management objectives and how we often use financial instruments to hedge exposures to changes in interest rates on loans.
Our unsecured revolving line of credit, term loans, and interest rate swaps are indexed to USD-LIBOR. However, as our amended and restated line of credit and term loan agreements and interest rate swap agreements have provisions that allow for a transition to a new alternative rate, we believe that the transition from USD-LIBOR to the Secured Overnight Financing Rate ("SOFR") or other replacement rate will not have a material impact on our condensed consolidated financial statements. See our Annual Report on Form 10-K for expanded discussion regarding recent LIBOR transition related matters.
The following table summarizes our four effective interest rate swaps as of March 31, 2022:
| Fair Value as of | ||||||||||||||||||||||||||||||||||||||||||||
| Interest Rate Swap | Effective Date | Termination Date | InvenTrust Receives Variable Rate of | InvenTrust Pays Fixed Rate of | Notional Amount | March 31, 2022 | December 31, 2021 | |||||||||||||||||||||||||||||||||||||
| 5 year, fixed portion | Dec 2, 2019 | Dec 21, 2023 | 1-Month LIBOR | 1.4795% | $ | 100,000 | $ | 1,371 | $ | (1,304) | ||||||||||||||||||||||||||||||||||
| 5 year, fixed portion | Dec 2, 2019 | Dec 21, 2023 | 1-Month LIBOR | 1.4795% | 100,000 | 1,369 | (1,304) | |||||||||||||||||||||||||||||||||||||
| 5.5 year, fixed portion | Dec 2, 2019 | Jun 21, 2024 | 1-Month LIBOR | 1.4915% | 50,000 | 1,004 | (674) | |||||||||||||||||||||||||||||||||||||
| 5.5 year, fixed portion | Dec 2, 2019 | Jun 21, 2024 | 1-Month LIBOR | 1.4990% | 50,000 | 992 | (684) | |||||||||||||||||||||||||||||||||||||
| $ | 300,000 | $ | 4,736 | $ | (3,966) | |||||||||||||||||||||||||||||||||||||||
The following table summarizes our four forward interest rate swaps as of March 31, 2022:
| Fair Value as of | ||||||||||||||||||||||||||||||||||||||||||||
| Interest Rate Swap | Effective Date | Termination Date | InvenTrust Receives Variable Rate of | InvenTrust Pays Fixed Rate of | Notional Amount | March 31, 2022 | December 31, 2021 | |||||||||||||||||||||||||||||||||||||
| 5 year, fixed portion | Dec 21, 2023 | Sep 22, 2026 | 1-Month LIBOR | 1.5763% | $ | 100,000 | $ | 2,188 | $ | (230) | ||||||||||||||||||||||||||||||||||
| 5 year, fixed portion | Dec 21, 2023 | Sep 22, 2026 | 1-Month LIBOR | 1.5730% | 100,000 | 2,205 | (212) | |||||||||||||||||||||||||||||||||||||
| 5.5 year, fixed portion | Jun 21, 2024 | Mar 22, 2027 | 1-Month LIBOR | 1.5770% | 50,000 | 901 | (87) | |||||||||||||||||||||||||||||||||||||
| 5.5 year, fixed portion | Jun 21, 2024 | Mar 22, 2027 | 1-Month LIBOR | 1.5960% | 50,000 | 862 | (118) | |||||||||||||||||||||||||||||||||||||
| $ | 300,000 | $ | 6,156 | $ | (647) | |||||||||||||||||||||||||||||||||||||||
The following table summarizes IAGM's effective interest rate swaps as of March 31, 2022:
| Fair Value as of | ||||||||||||||||||||||||||||||||||||||||||||
| Interest Rate Swap | Effective Date | Termination Date | IAGM Receives Variable Rate of | IAGM Pays Fixed Rate of | Notional Amount | March 31, 2022 | December 31, 2021 | |||||||||||||||||||||||||||||||||||||
| Secured term loan | Apr 1, 2020 | Nov 2, 2023 | 1-Month LIBOR | 0.4290% | $ | 45,000 | $ | 1,321 | $ | 310 | ||||||||||||||||||||||||||||||||||
| Secured term loan | Apr 1, 2020 | Nov 2, 2023 | 1-Month LIBOR | 0.4060% | 30,000 | 892 | 220 | |||||||||||||||||||||||||||||||||||||
| $ | 75,000 | $ | 2,213 | $ | 530 | |||||||||||||||||||||||||||||||||||||||
The gains or losses resulting from marking-to-market our derivatives each reporting period are recognized as an increase or decrease in comprehensive income on our condensed consolidated statements of operations and comprehensive income.
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Item 4. Controls and Procedures
Disclosure Controls and Procedures
As required by Rule 13a-15(b) and Rule 15d-15(b) under the Securities Exchange Act, our management, including our Principal Executive Officer and our Principal Financial Officer, evaluated as of March 31, 2022, the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and Rule 15d-15(e). Based on that evaluation, our Principal Executive Officer and our Principal Financial Officer concluded that our disclosure controls and procedures, as of March 31, 2022, were effective for the purpose of ensuring that information required to be disclosed by us in this report is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Exchange Act and is accumulated and communicated to management, including the Principal Executive Officer and our Principal Financial Officer as appropriate to allow timely decisions regarding required disclosures.
Changes in Internal Control Over Financial Reporting
There were no changes to our internal control over financial reporting during the quarter ended March 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II - Other Information
Item 1. Legal Proceedings
We are subject, from time to time, to various legal proceedings and claims that arise in the ordinary course of business. While the resolution of these matters cannot be predicted with certainty, we believe, based on currently available information, that the final outcome of such matters will not have a material adverse effect on our financial condition, results of operations, or liquidity.
Item 1A. Risk Factors
There have been no material changes from the risk factors previously disclosed in response to Item 1A. to Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
| Exhibit No. | Description | |||||||
| Seventh Articles of Amendment and Restatement of InvenTrust Properties Corp., as amended (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 10-Q, as filed by the Registrant with the SEC on May 14, 2015) | ||||||||
Articles of Amendment of InvenTrust Properties Corp. (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K, as filed by the Registrant with the SEC on August 5, 2021) | ||||||||
Articles of Amendment of InvenTrust Properties Corp. (incorporated by reference to Exhibit 3.2 to the Registrant’s Form 8-K, as filed by the Registrant with the SEC on August 5, 2021) | ||||||||
Articles Supplementary of InvenTrust Properties Corp. (incorporated by reference to Exhibit 3.2 to the Registrant’s Form 8-K, as filed by the Registrant with the SEC on October 12, 2021) | ||||||||
Third Amended and Restated Bylaws of the Company, dated as of October 12, 2021 (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K, as filed by the Registrant with the SEC on October 12, 2021) | ||||||||
Form of Performance-Based Restricted Stock Unit Award Agreement (2022) | ||||||||
| Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||||||
| Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||||||
| Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||||||
| Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||||||
| 101 | The following financial information from our Quarterly Report on Form 10-Q for the period ended March 31, 2022, filed with the SEC on May 3, 2022, is formatted in Extensible Business Reporting Language ("XBRL"): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Comprehensive Income, (iii) Condensed Consolidated Statements of Equity, (iv) Condensed Consolidated Statements of Cash Flows (v) Notes to Condensed Consolidated Financial Statements (tagged as blocks of text). | |||||||
| 104 | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) | |||||||
| * Filed as part of this Quarterly Report on Form 10-Q | ||||||||
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
InvenTrust Properties Corp.
| Date: | May 3, 2022 | ||||
| By: | /s/ Daniel J. Busch | ||||
| Name: | Daniel J. Busch | ||||
| Title: | President, Chief Executive Officer (Principal Executive Officer) | ||||
| Date: | May 3, 2022 | ||||
| By: | /s/ Michael Phillips | ||||
| Name: | Michael Phillips | ||||
| Title: | Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) | ||||
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