IVT 10-Q
InvenTrust Properties Corp. (IVT)
10-Q
2023-05-02
For: 2023-03-31
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, 2023
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 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.
| ☒ | Accelerated filer | ☐ | ||||||||||||
| Non-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, 2023, there were 67,508,641 shares of the registrant's common stock outstanding.
INVENTRUST PROPERTIES CORP.
Quarterly Report on Form 10-Q
For the quarterly period ended March 31, 2023
Table of Contents
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| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Item 1. | ||||||||
| Item 1A. | ||||||||
| Item 2. | ||||||||
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| Item 5. | ||||||||
| Item 6. | ||||||||
-i-
INVENTRUST PROPERTIES CORP.
Condensed Consolidated Balance Sheets
(in thousands, except share amounts)
| As of | |||||||||||
| March 31, 2023 | December 31, 2022 | ||||||||||
| (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, $ issued and outstanding as of March 31, 2023 and outstanding as of December 31, 2022 | |||||||||||
| Additional paid-in capital | |||||||||||
| Distributions in excess of accumulated net income | ( | ( | |||||||||
| Accumulated comprehensive income | |||||||||||
| 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 (Loss) Income
(Unaudited)
(in thousands, except share and per share amounts)
| Three months ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| 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 | ( | ||||||||||
| Equity in (losses) earnings of unconsolidated entities | ( | ||||||||||
| Other income and expense, net | ( | ||||||||||
| Total other (expense) income, net | ( | ( | |||||||||
| Net income | $ | $ | |||||||||
| Weighted-average common shares outstanding - basic | |||||||||||
| Weighted-average common shares outstanding - diluted | |||||||||||
| Net income per common share - basic | $ | $ | |||||||||
| Net income per common share - diluted | $ | $ | |||||||||
| Distributions declared per common share outstanding | $ | $ | |||||||||
| Distributions paid per common share outstanding | $ | $ | |||||||||
| Comprehensive (loss) income | |||||||||||
| Net income | $ | $ | |||||||||
| Unrealized (loss) gain on derivatives | ( | ||||||||||
| Reclassification (to) from net income | ( | ||||||||||
| Comprehensive (loss) 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 | Total | ||||||||||||||||||||||||||||||
| Beginning balance, January 1, 2023 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||
| Unrealized loss on derivatives | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Reclassification from interest expense, net | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Distributions declared | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Stock-based compensation, net | — | — | |||||||||||||||||||||||||||||||||
| Ending balance, March 31, 2023 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
| 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 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
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, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Amortization of market-lease intangibles and inducements, net | ( | ( | |||||||||
| Amortization of debt discounts and financing costs | |||||||||||
| Straight-line rent adjustment, net | ( | ( | |||||||||
| Reversal of estimated credit losses | ( | ( | |||||||||
| Loss on extinguishment of debt | |||||||||||
| Equity in losses (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 | ( | ( | |||||||||
| Distributions from unconsolidated entities | |||||||||||
| Lease commissions and other leasing costs | ( | ( | |||||||||
| Other investing activities | ( | ||||||||||
| 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 loan fees and deposits | ( | ||||||||||
| Other financing activities | ( | ( | |||||||||
| Net cash (used in) provided by 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, | |||||||||||
| 2023 | 2022 | ||||||||||
| 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 | $ | $ | |||||||||
| Previously held equity investments in real estate assets acquired | $ | $ | |||||||||
| 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, at fair value | ( | ( | |||||||||
| 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 | $ | $ | |||||||||
See accompanying notes to the condensed consolidated financial statements.
5
INVENTRUST PROPERTIES CORP.
Notes to Condensed Consolidated Financial Statements
March 31, 2023 and 2022
(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 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 in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 (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, 2022, 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, 2023 and 2022, the Company had an investment in one four remaining retail properties from IAGM by acquiring 100 % of the membership interests in each of IAGM's wholly owned subsidiaries, as disclosed in "Note 6. Investment in Unconsolidated Entities".
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, 2023 and 2022:
| Wholly-Owned Retail Properties | Unconsolidated Retail Properties at 100% | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| 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, 2023 | ||||
| Remaining 2023 | $ | ||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| Thereafter | |||||
| Total | $ | ||||
The foregoing table includes payments from tenants who have taken possession of their space and 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-six years .
The following table reflects the disaggregation of lease income, net:
| Three months ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Minimum base rent | $ | $ | |||||||||
| Real estate tax recoveries | |||||||||||
| Common area maintenance, insurance, and other recoveries | |||||||||||
| Ground rent income | |||||||||||
| Amortization of market-lease intangibles and inducements, net | |||||||||||
| Short-term and other lease income | |||||||||||
| Termination fee income | |||||||||||
| Straight-line rent adjustment, net | |||||||||||
| Reversal of uncollectible straight-line rent | |||||||||||
| Provision for uncollectible billed rent and recoveries | ( | ( | |||||||||
| Reversal of uncollectible billed rent and recoveries | |||||||||||
| Lease income, net | $ | $ | |||||||||
7
4. Acquired Properties
The following table reflects the retail properties acquired, accounted for as asset acquisitions, during the three months ended March 31, 2023:
| Acquisition Date | Property (a) | Metropolitan Area | Square Feet | Gross Acquisition Price | Assumption of Mortgage Debt | |||||||||||||||||||||||||||
| January 18, 2023 | Bay Colony | Houston, TX | $ | $ | ||||||||||||||||||||||||||||
| January 18, 2023 | Blackhawk Town Center | Houston, TX | ||||||||||||||||||||||||||||||
| January 18, 2023 | Cyfair Town Center | Houston, TX | ||||||||||||||||||||||||||||||
| January 18, 2023 | Stables Town Center | Houston, TX | ||||||||||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||||||||||
(a)These retail properties were acquired from the Company's unconsolidated joint venture, IAGM, as disclosed in "Note 6. Investment in Unconsolidated Entities". The Company recognized a fair value adjustment of $692 related to the pooled mortgage debt on these 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 | Square Feet | Gross Acquisition Price | Assumption of Mortgage Debt | |||||||||||||||||||||||||||
| February 2, 2022 | Shops at Arbor Trails | Austin, TX | $ | $ | ||||||||||||||||||||||||||||
| February 2, 2022 | Escarpment Village | Austin, TX | ||||||||||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||||||||||
5. Disposed Properties
8
6. Investment in Unconsolidated Entities
Joint Venture Interest in IAGM
As of March 31, 2023 and December 31, 2022, the Company owned a 55 one
On January 18, 2023, the Company acquired the four remaining retail properties from IAGM for an aggregate purchase price of $222.3 million by acquiring 100 % of the membership interests in each of IAGM's wholly owned subsidiaries. The Company assumed aggregate mortgage debt of $92.5 million and funded the remaining balance with its available liquidity. IAGM recognized a gain on sale of $45.2 million, of which the Company's share was approximately $24.9 million. Subsequent to the transaction, IAGM proportionately distributed substantially all net proceeds from the sale, of which the Company's share was approximately $71.4 million. In connection with the foregoing, IAGM adopted a liquidation plan on January 11, 2023. As of March 31, 2023, net assets of IAGM were $28.6 million, inclusive of cash and cash equivalents of $30.7 million.
As of March 31, 2023, the Company's aggregate deferred gains related to its previously owned equity interest in real estate acquisitions from IAGM of $39.9 million are reflected in the basis of the respective acquired assets. Previously, deferred gains were reflected as a reduction of the Company's investment in IAGM and amortized to equity in earnings of unconsolidated entities.
On January 18, 2023, the Company also acquired IAGM's two interest rate swap agreements which achieve fixed interest rates on an aggregate notional amount of $75.0 million of the assumed pooled mortgage priced in a Secured Overnight Financing Rate ("SOFR"), each of which reprice monthly ("1-Month Term SOFR"). IAGM recognized a gain on sale of $2.6 million representing the fair value of the derivatives, of which the Company's share was approximately $1.4 million. The Company deferred its share of IAGM's gain on sale of derivatives, initially reflecting it within accumulated comprehensive income and amortizing it to interest expense, net, through the instruments' maturity date.
The following table reflects the real property disposed by IAGM since January 1, 2022.
| Date | Property | Square Feet | Gross Disposition Price | IAGM's Gain (Loss) on Sale | The Company's Gain Deferral | |||||||||||||||||||||||||||
| March 3, 2022 | Price Plaza (a) | $ | $ | $ | ||||||||||||||||||||||||||||
| April 21, 2022 | The Highlands of Flower Mound (b) | |||||||||||||||||||||||||||||||
| December 16, 2022 | Stone Ridge Market (b) | |||||||||||||||||||||||||||||||
| December 22, 2022 | Stables Town Center (c) | ( | ||||||||||||||||||||||||||||||
| January 18, 2023 | Bay Colony (b) | |||||||||||||||||||||||||||||||
| January 18, 2023 | Blackhawk Town Center (b) | |||||||||||||||||||||||||||||||
| January 18, 2023 | Cyfair Town Center (b) | |||||||||||||||||||||||||||||||
| January 18, 2023 | Stables Town Center (b) | |||||||||||||||||||||||||||||||
(a)The buyer assumed a $17,800 mortgage payable secured by the property.
(b)The Company purchased these properties at a purchase price determined by a third party real estate valuation specialist.
9
Condensed Financial Information
The following table presents condensed balance sheet information for IAGM:
| As of | |||||||||||
| March 31, 2023 | December 31, 2022 | ||||||||||
| 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 differences, net (a) | ( | ||||||||||
| Carrying value of investments in unconsolidated entities | $ | $ | |||||||||
(a)The outside basis differences reflect unamortized deferred gains on historical property sales from IAGM to the Company.
The following table presents condensed income statement information of IAGM:
| Three months ended March 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| Total income | $ | $ | ||||||||||||
| Depreciation and amortization | ( | ( | ||||||||||||
| Property operating | ( | ( | ||||||||||||
| Real estate taxes | ( | ( | ||||||||||||
| Asset management fees | ( | ( | ||||||||||||
| Interest expense, net | ( | ( | ||||||||||||
| Other income and expense, net | ( | |||||||||||||
| Gain (loss) on debt extinguishment | ( | |||||||||||||
| Gain on sale of real estate | ||||||||||||||
| Gain on sale of derivatives | ||||||||||||||
| Net income | $ | $ | ||||||||||||
| Company's share of net income | $ | $ | ||||||||||||
| Outside basis adjustments for IAGM's sales to the Company | ( | |||||||||||||
| Equity in (losses) earnings of unconsolidated entities | $ | ( | $ | |||||||||||
10
7. Debt
The Company's debt consists of mortgages payable, unsecured term loans, senior notes, 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, 2023 and December 31, 2022, the Company was in compliance with all loan covenants.
On February 6, 2023, the Company extinguished the $13.7 million mortgage payable secured by Renaissance Center with its available liquidity.
Credit Agreements
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 of the $350.0 million Revolving Credit Agreement to September 22, 2025, with two six-month extension options.
On September 22, 2021, the Company entered into an amendment to its $400.0 million Term Loan Credit Agreement (the "Amended Term Loan Agreement"), which provides for, among other things, an extension of the maturity dates and a reallocation of indebtedness under the two outstanding tranches of term loans thereunder. The Amended Term Loan Agreement consists of a $200.0 million 5-year tranche maturing on September 22, 2026, and a $200.0 million 5.5 -year tranche maturing on March 22, 2027.
On June 3, 2022, in connection with and upon effectiveness of the Note Purchase Agreement (as defined below) and in accordance with the terms of the Amended Term Loan Credit Agreement and Amended Revolving Credit Agreement, each of the administrative agents under such agreements released all of the subsidiary guarantors from their guaranty obligations that were previously made for the benefit of the lenders under such agreements.
Interest Rate Swaps
The Company is party to four effective interest rate swap agreements and four interest rate forward swap agreements, which address the periods between the maturity dates of the 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.
On January 18, 2023, the Company acquired IAGM's two interest rate swap agreements, which achieve fixed interest rates on an aggregate notional amount of $75.0 million of the assumed pooled mortgage, each priced in 1-Month Term SOFR.
On March 16, 2023, the Company entered into one interest rate swap agreement with a notional amount of $100.0 million at 3.69 %, achieving a fixed interest rate of 4.99 %. As of the effective date of April 3, 2023, the entirety of the Company's variable rate term loans were swapped to fixed rates through the maturity dates of the Amended Term Loan Agreement.
Senior Notes
On August 11, 2022, the Company issued $250.0 million aggregate principal amount of senior notes in a private placement, of which (i) $150.0 million are designated as 5.07 % Senior Notes, Series A, due August 11, 2029 (the "Series A Notes") and (ii) $100.0 million are designated as 5.20 % Senior Notes, Series B, due August 11, 2032 (the "Series B Notes" and, together with the Series A Notes, the "Notes") pursuant to a note purchase agreement (the "Note Purchase Agreement"), dated June 3, 2022, between the Company and the various purchasers named therein. The Notes were issued at par in accordance with the Note Purchase Agreement and pay interest semiannually on February 11th and August 11th until their respective maturities.
The Company may prepay at any time all or any part of the Notes, in an amount not less than 5 % of the aggregate principal amount of any series of the Notes then outstanding in the case of a partial prepayment, at 100 % of the principal amount so prepaid plus accrued interest and a Make-Whole Amount (as defined in the Note Purchase Agreement). The Notes will be required to be absolutely and unconditionally guaranteed by certain subsidiaries of the Company that guarantee certain material credit facilities of the Company. Currently, there are no subsidiary guarantees of the Notes.
11
The following table summarizes the Company's debt as of March 31, 2023 and December 31, 2022:
| Interest Rate Type | As of March 31, 2023 | As of December 31, 2022 | |||||||||||||||||||||||||||||||||
| Maturity Date | Interest Rate | Amount | Interest Rate | Amount | |||||||||||||||||||||||||||||||
| Mortgages Payable | |||||||||||||||||||||||||||||||||||
| Fixed rate mortgages payable | Various | Fixed | $ | $ | |||||||||||||||||||||||||||||||
| Variable rate mortgages payable | 11/2/2023 | Variable | 1M SOFR + | ||||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||
| Term Loans | |||||||||||||||||||||||||||||||||||
$ | 9/22/2026 | Fixed | |||||||||||||||||||||||||||||||||
$ | 9/22/2026 | Fixed | |||||||||||||||||||||||||||||||||
$ | 3/22/2027 | Fixed | |||||||||||||||||||||||||||||||||
$ | 3/22/2027 | Fixed | |||||||||||||||||||||||||||||||||
$ | 3/22/2027 | Variable | 1M SOFR + | 1M LIBOR + | |||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||
| Senior Notes | |||||||||||||||||||||||||||||||||||
$ | 8/11/2029 | Fixed | |||||||||||||||||||||||||||||||||
$ | 8/11/2032 | Fixed | |||||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||
| Revolving Line of Credit | |||||||||||||||||||||||||||||||||||
$ | 9/22/2025 | Variable | 1M SOFR + | 1M SOFR + | |||||||||||||||||||||||||||||||
| Total debt | |||||||||||||||||||||||||||||||||||
| Debt discounts and issuance costs, net | ( | ( | |||||||||||||||||||||||||||||||||
| Debt, net | $ | $ | |||||||||||||||||||||||||||||||||
(a)Interest rates reflect the weighted average of the Company's mortgages payable.
(b)Interest rates reflect the fixed rates achieved through the Company's interest rate swaps.
(c)As of March 31, 2023 and December 31, 2022, 1-Month Term SOFR was 4.80 % and 4.36 %, respectively.
(d)As of April 3, 2023, the variable portion was swapped to 3.69 %, achieving a fixed rate of 4.99 % through the maturity date.
The following table summarizes the scheduled maturities of the Company's mortgages payable as of March 31, 2023 for the remainder of 2023, each of the next four years, and thereafter.
| Scheduled maturities by year: | As of March 31, 2023 | ||||
| 2023 (a) | $ | ||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| Thereafter | |||||
| Total mortgage payable maturities | $ | ||||
(a)Scheduled maturities during the year ended December 31, 2023 do not include two 12-month extension options available.
12
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, 2023 | December 31, 2022 | |||||||||||||||||||||||||||||||||||||
Cash Flow Hedges: (a) (b) | Level 1 | Level 2 (c) | Level 3 | Level 1 | Level 2 (d) | Level 3 | ||||||||||||||||||||||||||||||||
| Derivative interest rate swap assets | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Derivative interest rate swap liabilities | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
(a)During the twelve months subsequent to March 31, 2023, an estimated $11,281 of derivative interest rate balances recognized in accumulated comprehensive income will be reclassified into earnings.
(b)As of March 31, 2023 and December 31, 2022, the Company determined that the credit valuation adjustments associated with nonperformance risk are not significant to the overall valuation of its derivatives. As a result, the Company's derivative valuations in their entirety are classified as Level 2 of the fair value hierarchy.
(c)The Company's derivative assets or liabilities are recognized as a part of deferred costs and other assets, net or other liabilities, respectively.
Nonrecurring Measurements
Investment Properties
During the three months ended March 31, 2023 and 2022, 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, 2023 and December 31, 2022:
| March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||
| Carrying Value | Estimated Fair Value | Market Interest Rate | Carrying Value | Estimated Fair Value | Market Interest Rate | ||||||||||||||||||||||||||||||
| Mortgages payable | $ | $ | % | $ | $ | % | |||||||||||||||||||||||||||||
| Senior notes | % | % | |||||||||||||||||||||||||||||||||
| Term loans | % | % | |||||||||||||||||||||||||||||||||
| Revolving line of credit | N/A | N/A | |||||||||||||||||||||||||||||||||
The market interest rates used to estimate the fair value of the Company's mortgages payable, senior notes, term loans, and revolving line of credit reflect the terms currently available on similar borrowing terms to borrowers with credit profiles similar to that of the Company's. The Company classifies its debt instrument valuations within Level 2 of the fair value hierarchy.
13
9. Earnings Per Share and Equity Transactions
Basic earnings per share ("EPS") is computed by dividing net income or loss attributed to common shares by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that may occur from awards issued pursuant to the InvenTrust Properties Corp. 2015 Incentive Award Plan (the "Incentive Award Plan").
The following table reconciles the amounts used in calculating basic and diluted earnings per share:
| Three months ended March 31 | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| Numerator: | ||||||||||||||
| Net income attributed to common shares | $ | $ | ||||||||||||
| Earnings allocated to unvested restricted shares | ||||||||||||||
| Net income attributed to common shares - basic and diluted | ||||||||||||||
| 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 per common share - basic | $ | $ | ||||||||||||
| Net income per common share - diluted | $ | $ | ||||||||||||
(a)For the three months ended March 31, 2023, the Company has excluded the anti-dilutive effect of market-based awards granted in 2023.
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. As of March 31, 2023, the Company has not sold any common stock under the ATM Program.
Share Repurchase Program
14
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 issue or transfer up to 3,000,000 shares (the “Share Limit”) of the Company's common stock pursuant to awards granted under the Incentive Award Plan.
As of March 31, 2023, 574,423 shares were available for future issuance under the Incentive Award Plan. Outstanding restricted stock unit ("RSU") awards are categorized as either time-based awards, performance-based awards, or market-based awards. All awards are granted at fair value, earn dividends throughout the vesting period, and have no voting rights.
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 following table summarizes the Company's significant assumptions used in the Monte Carlo simulation models:
| Three months ended March 31, 2023 | 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, 2023:
| Unvested Time- Based RSUs | Unvested Performance and Market-Based RSUs | Weighted-Average Grant Date Value Per Share | |||||||||||||||
| Outstanding as of January 1, 2023 | $ | ||||||||||||||||
| Shares granted | $ | ||||||||||||||||
| Shares vested | ( | $ | |||||||||||||||
| Unearned performance shares added back to Share Limit | ( | $ | |||||||||||||||
| Outstanding as of March 31, 2023 | $ | ||||||||||||||||
15
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 Lease Commitments
The Company has non-cancelable operating leases for office space used in its business. Future minimum operating lease obligations as of March 31, 2023, were as follows:
| Minimum Lease Payments | |||||
| Remaining 2023 | $ | ||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 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
16
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 this Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 (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 ("Securities Act"), 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" or "InvenTrust") 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, 2022 (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.
The following discussion and analysis 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.
17
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. 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 our environment, social and governance practices and standards.
InvenTrust focuses on Sun Belt 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 over 95% 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.
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
On January 18, 2023, the Company acquired the four remaining retail properties held by its joint venture entity, IAGM Retail Fund I, LLC ("IAGM"), for an aggregate purchase price of $222.3 million by acquiring 100% of the membership interests in each of IAGM's wholly owned subsidiaries. The Company assumed aggregate mortgage debt of $92.5 million and funded the remaining balance with its available liquidity. IAGM recognized a gain on sale of $45.2 million, of which the Company's share was approximately $24.9 million. Subsequent to the transaction, IAGM proportionately distributed substantially all net proceeds from the sale, of which the Company's share was approximately $71.4 million. In connection with the foregoing, IAGM adopted a liquidation plan on January 11, 2023. As of March 31, 2023, net assets of IAGM was $28.6 million, inclusive of cash and cash equivalents of $30.7 million.
18
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, 2023, we owned 62 retail properties with a total gross leasable area ("GLA") of approximately 10.3 million square feet.
For the three months ended March 31, 2022, 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, 2023 and 2022.
| Retail Portfolio | IAGM Retail Properties | Pro Rata Combined Retail Portfolio | |||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||||||||
| No. of properties | 62 | 57 | — | 6 | 62 | 63 | |||||||||||||||||||||||||||||
| GLA (square feet) | 10,295 | 9,081 | — | 1,562 | 10,295 | 9,940 | |||||||||||||||||||||||||||||
| Economic occupancy (a) | 94.0% | 93.9% | —% | 86.5% | 94.0% | 93.2% | |||||||||||||||||||||||||||||
| Leased occupancy (b) | 96.1% | 95.1% | —% | 87.3% | 96.1% | 94.4% | |||||||||||||||||||||||||||||
| ABR PSF (c) | $19.12 | $18.76 | $— | $17.23 | $19.12 | $18.64 | |||||||||||||||||||||||||||||
(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.
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, 2023 and 2022.
| Community and neighborhood centers | |||||||||||||||||||||||||||||||||||
| Retail Portfolio | IAGM Retail Properties | Pro Rata Combined Retail Portfolio | |||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||||||||
| No. of properties | 50 | 45 | — | 5 | 50 | 50 | |||||||||||||||||||||||||||||
| GLA (square feet) | 6,772 | 5,508 | — | 1,387 | 6,772 | 6,271 | |||||||||||||||||||||||||||||
| Economic occupancy | 94.0% | 94.4% | —% | 85.9% | 94.0% | 93.4% | |||||||||||||||||||||||||||||
| Leased occupancy | 96.5% | 95.7% | —% | 86.9% | 96.5% | 94.6% | |||||||||||||||||||||||||||||
| ABR PSF | $19.92 | $19.80 | $— | $17.11 | $19.92 | $19.50 | |||||||||||||||||||||||||||||
| Power centers | |||||||||||||||||||||||||||||||||||
| Retail Portfolio | IAGM Retail Properties | Pro Rata Combined Retail Portfolio | |||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||||||||
| No. of properties | 12 | 12 | — | 1 | 12 | 13 | |||||||||||||||||||||||||||||
| GLA (square feet) | 3,523 | 3,573 | — | 175 | 3,523 | 3,669 | |||||||||||||||||||||||||||||
| Economic occupancy | 93.9% | 93.1% | —% | 90.8% | 93.9% | 93.0% | |||||||||||||||||||||||||||||
| Leased occupancy | 95.5% | 94.4% | —% | 90.8% | 95.5% | 94.0% | |||||||||||||||||||||||||||||
| ABR PSF | $17.57 | $17.15 | $— | $18.13 | $17.57 | $17.18 | |||||||||||||||||||||||||||||
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Same Property Retail Portfolio Summary
Properties classified as same property were owned for the entirety of both periods presented ("Same Properties"). The following table summarizes the GLA, economic occupancy, leased occupancy, and ABR PSF of Same Properties included in our retail portfolio for the three months ended March 31, 2023 and 2022.
| Three Months Ended March 31 | |||||||||||
| 2023 | 2022 | ||||||||||
| No. of properties | 52 | 52 | |||||||||
| GLA (square feet) | 8,092 | 8,087 | |||||||||
| Economic occupancy | 94.4% | 93.5% | |||||||||
| Leased occupancy | 96.5% | 94.8% | |||||||||
| ABR PSF | $19.72 | $19.09 | |||||||||
Lease Expirations
The following table presents the lease expirations of our economic occupied Retail Portfolio as of March 31, 2023.
| Lease Expiration Year | No. of Expiring Leases | GLA of Expiring Leases (square feet) | Percent of Total GLA of Expiring Leases | ABR of Expiring Leases | Percent of Total ABR | Expiring ABR PSF | ||||||||||||||||||||||||||||||||
| 2023 | 92 | 340 | 3.5% | $ | 7,233 | 3.7% | $ | 21.27 | ||||||||||||||||||||||||||||||
| 2024 | 175 | 953 | 9.8% | 19,775 | 10.1% | 20.75 | ||||||||||||||||||||||||||||||||
| 2025 | 173 | 1,142 | 11.8% | 20,179 | 10.3% | 17.67 | ||||||||||||||||||||||||||||||||
| 2026 | 209 | 973 | 10.1% | 22,466 | 11.4% | 23.09 | ||||||||||||||||||||||||||||||||
| 2027 | 269 | 1,952 | 20.3% | 39,756 | 20.2% | 20.37 | ||||||||||||||||||||||||||||||||
| 2028 | 165 | 922 | 9.5% | 20,873 | 10.5% | 22.64 | ||||||||||||||||||||||||||||||||
| 2029 | 103 | 653 | 6.7% | 13,752 | 7.0% | 21.06 | ||||||||||||||||||||||||||||||||
| 2030 | 72 | 366 | 3.8% | 9,263 | 4.7% | 25.31 | ||||||||||||||||||||||||||||||||
| 2031 | 73 | 506 | 5.2% | 10,590 | 5.4% | 20.93 | ||||||||||||||||||||||||||||||||
| 2032 | 92 | 575 | 5.9% | 13,091 | 6.7% | 22.77 | ||||||||||||||||||||||||||||||||
| Thereafter | 57 | 1,262 | 13.0% | 18,736 | 9.5% | 14.85 | ||||||||||||||||||||||||||||||||
| Other (a) | 14 | 36 | 0.4% | 908 | 0.5% | 25.22 | ||||||||||||||||||||||||||||||||
| 1,494 | 9,680 | 100% | $ | 196,622 | 100% | $ | 20.31 | |||||||||||||||||||||||||||||||
(a)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.
20
Leasing Activity, Retail Portfolio
The following table summarizes the leasing activity for leases that were executed during the three months ended March 31, 2023, compared with expiring or expired leases for the same or previous tenant for renewals and the same unit for new leases at the 62 properties in our Retail Portfolio. In our Retail Portfolio, we had GLA totaling 320 thousand square feet expiring during the three months ended March 31, 2023, of which 304 thousand square feet was re-leased to the in-place tenant. This achieved a retention rate of approximately 95.0%.
| No. of Leases Executed | 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 | 132 | $29.61 | $27.52 | 7.6% | 5.4 | $0.63 | $— | |||||||||||||||||||||||||||||||||||||||
| Comparable New Leases (a) | 4 | 10 | $34.85 | $34.75 | 0.3% | 9.7 | $27.91 | $17.11 | |||||||||||||||||||||||||||||||||||||||
| Non-Comparable Renewal and New Leases | 14 | 112 | $21.10 | N/A | N/A | 4.7 | $6.38 | $2.64 | |||||||||||||||||||||||||||||||||||||||
| Total | 64 | 254 | $29.97 | $28.02 | 7.0% | 5.2 | $4.22 | $1.83 | |||||||||||||||||||||||||||||||||||||||
| Anchor Tenants (leases ten thousand square feet and over) | |||||||||||||||||||||||||||||||||||||||||||||||
| Comparable Renewal Leases (a) | 2 | 35 | $19.43 | $17.68 | 9.9% | 5.0 | $— | $— | |||||||||||||||||||||||||||||||||||||||
| Comparable New Leases (a) | — | — | $— | $— | —% | — | $— | $— | |||||||||||||||||||||||||||||||||||||||
| Non-Comparable Renewal and New Leases | 2 | 82 | $17.17 | N/A | N/A | 3.6 | $— | $— | |||||||||||||||||||||||||||||||||||||||
| Total | 4 | 117 | $19.43 | $17.68 | 9.9% | 4.0 | $— | $— | |||||||||||||||||||||||||||||||||||||||
| Small Shop Tenants (leases under ten thousand square feet) | |||||||||||||||||||||||||||||||||||||||||||||||
| Comparable Renewal Leases (a) | 44 | 97 | $33.35 | $31.14 | 7.1% | 5.5 | $0.86 | $— | |||||||||||||||||||||||||||||||||||||||
| Comparable New Leases (a) | 4 | 10 | $34.85 | $34.75 | 0.3% | 9.7 | $27.91 | $17.11 | |||||||||||||||||||||||||||||||||||||||
| Non-Comparable Renewal and New Leases | 12 | 30 | $31.71 | N/A | N/A | 7.7 | $23.62 | $9.77 | |||||||||||||||||||||||||||||||||||||||
| Total | 60 | 137 | $33.49 | $31.47 | 6.4% | 6.3 | $7.85 | $3.40 | |||||||||||||||||||||||||||||||||||||||
(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.
21
Results of Operations
Comparison of results for the three months ended March 31, 2023 and 2022
We generate substantially all of our earnings from property operations. Since January 1, 2022, we have acquired ten retail properties and disposed of three.
The following table presents the changes in our income for the three months ended March 31, 2023 and 2022.
| Three months ended March 31 | |||||||||||||||||
| 2023 | 2022 | Increase (Decrease) | |||||||||||||||
| Income | |||||||||||||||||
| Lease income, net | $ | 64,830 | $ | 57,768 | $ | 7,062 | |||||||||||
| Other property income | 295 | 264 | 31 | ||||||||||||||
| Other fee income | 80 | 754 | (674) | ||||||||||||||
| Total income | $ | 65,205 | $ | 58,786 | $ | 6,419 | |||||||||||
Lease income, net increased $7.1 million as a result of increases from properties acquired of $9.3 million, decreases from properties disposed of $3.0 million, and the following activity related to our Same Properties:
•$1.9 million of increased minimum rent attributable to increased occupancy levels and rental rates,
•$0.6 million of increased recoveries associated with common area maintenance, insurance, and real estate taxes,
•$0.2 million of increased percentage rent attributable to grocers' heightened sales volumes, partially offset by:
•$1.5 million of increased amortization of market lease intangibles and straight-line rent adjustments, and
•$0.4 million of net changes in credit losses and related reversals primarily attributable to lump sum rent collections from our cash basis tenants in 2022 pertaining to prior period rent charges.
Other fee income decreased $0.7 million as a result of the Company acquiring the four remaining retail properties from IAGM.
The following table presents the changes in our operating expenses for the three months ended March 31, 2023 and 2022.
| Three months ended March 31 | |||||||||||||||||
| 2023 | 2022 | Increase (Decrease) | |||||||||||||||
| Operating expenses | |||||||||||||||||
| Depreciation and amortization | $ | 26,758 | $ | 22,829 | $ | 3,929 | |||||||||||
| Property operating | 10,230 | 8,285 | 1,945 | ||||||||||||||
| Real estate taxes | 9,628 | 8,043 | 1,585 | ||||||||||||||
| General and administrative | 7,731 | 7,887 | (156) | ||||||||||||||
| Total operating expenses | $ | 54,347 | $ | 47,044 | $ | 7,303 | |||||||||||
Depreciation and amortization increased $3.9 million as a result of:
•$5.7 million of increases from properties acquired, partially offset by:
•$0.8 million of decreases from properties disposed, and
•$1.0 million of decreased in-place lease intangible amortization from our Same Properties.
Property operating expenses increased $1.9 million as a result of:
•$1.6 million of increases from properties acquired, and
•$0.8 million of increased insurance premiums and other costs from our Same Properties, partially offset by:
•$0.5 million of decreases from properties disposed.
22
Real estate taxes increased $1.6 million as a result of:
•$1.7 million of increased real estate taxes from properties acquired, and
•$0.4 million of increased real estate taxes from our Same Properties, partially offset by:
•$0.5 million of decreased real estate taxes from properties disposed.
The following table presents the changes in our other income and expenses for the three months ended March 31, 2023 and 2022.
| Three months ended March 31 | |||||||||||||||||
| 2023 | 2022 | Change | |||||||||||||||
| Other (expense) income | |||||||||||||||||
| Interest expense, net | $ | (9,509) | $ | (4,809) | $ | (4,700) | |||||||||||
| Loss on extinguishment of debt | — | (96) | 96 | ||||||||||||||
| Equity in (losses) earnings of unconsolidated entities | (663) | 2,716 | (3,379) | ||||||||||||||
| Other income and expense, net | 447 | (52) | 499 | ||||||||||||||
| Total other (expense) income, net | $ | (9,725) | $ | (2,241) | $ | (7,484) | |||||||||||
Interest expense, net
Interest expense, net, for the three months ended March 31, 2023 increased $4.7 million when compared to the same period in 2022, primarily as a result of:
•the private placement of our senior notes, generating increased interest expense of $3.1 million,
•increased interest rates on our corporate credit facilities generating increased interest expense of $0.6 million,
•aggregate assumption of mortgages of $172.8 million since January 1, 2022, generating increased interest expense of $1.6 million, and
•increased amortization of debt issuance costs of $0.2 million, partially offset by:
•aggregate reduction of mortgage payable of $90.3 million since January 1, 2022, generating decreased interest expense of $0.8 million.
Loss on extinguishment of debt
During the three months ended March 31, 2022, we recognized a loss of $0.1 million on the extinguishment of the $22.3 million mortgage payable on Pavilion at LaQuinta.
Equity in (losses) earnings of unconsolidated entities
Equity in (losses) earnings of unconsolidated entities decreased $3.4 million primarily as a result of the Company acquiring the four remaining retail properties from IAGM on January 18, 2023.
Other income and expense, net
Other income and expense, net, increased $0.5 million primarily as a result of increased interest income earned on cash and cash equivalents.
23
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 adjustments, amortization of market lease intangibles, and amortization of lease incentives ("GAAP Rent Adjustments"). 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, 2023 and 2022
A total of 52 wholly-owned retail properties met our Same Property criteria for the three months ended March 31, 2023 and 2022. The following table presents the reconciliation of net income, the most directly comparable GAAP measure, to NOI and Same Property NOI for the three months ended March 31, 2023 and 2022:
| Three months ended March 31 | |||||||||||
| 2023 | 2022 | ||||||||||
| Net income | $ | 1,133 | $ | 9,501 | |||||||
| Adjustments to reconcile to non-GAAP metrics: | |||||||||||
| Other income and expense, net | (447) | 52 | |||||||||
| Equity in losses (earnings) of unconsolidated entities | 663 | (2,716) | |||||||||
| Interest expense, net | 9,509 | 4,809 | |||||||||
| Loss on extinguishment of debt | — | 96 | |||||||||
| Depreciation and amortization | 26,758 | 22,829 | |||||||||
| General and administrative | 7,731 | 7,887 | |||||||||
| Other fee income | (80) | (754) | |||||||||
| Adjustments to NOI (a) | (2,559) | (3,872) | |||||||||
| NOI | 42,708 | 37,832 | |||||||||
| NOI from other investment properties | (6,869) | (3,107) | |||||||||
| Same Property NOI | $ | 35,839 | $ | 34,725 | |||||||
(a)Adjustments to NOI include termination fee income and expense and GAAP Rent Adjustments.
24
Comparison of the components of Same Property NOI for the three months ended March 31, 2023 and 2022
| Three months ended March 31 | |||||||||||||||||||||||
| 2023 | 2022 | Change | Variance | ||||||||||||||||||||
| Lease income, net | $ | 51,501 | $ | 49,162 | $ | 2,339 | 4.8 | % | |||||||||||||||
| Other property income | 255 | 267 | (12) | (4.5) | % | ||||||||||||||||||
| 51,756 | 49,429 | 2,327 | 4.7 | % | |||||||||||||||||||
| Property operating | 8,337 | 7,563 | 774 | 10.2 | % | ||||||||||||||||||
| Real estate taxes | 7,580 | 7,141 | 439 | 6.1 | % | ||||||||||||||||||
| 15,917 | 14,704 | 1,213 | 8.2 | % | |||||||||||||||||||
| Same Property NOI | $ | 35,839 | $ | 34,725 | $ | 1,114 | 3.2 | % | |||||||||||||||
Same Property NOI increased by $1.1 million, or 3.2%, when comparing the three months ended March 31, 2023 to the same period in 2022, and was primarily a result of:
•$1.9 million of increased minimum rent attributable to increased occupancy levels and rental rates,
•$0.2 million of increased percentage rent attributable to grocers' heightened sales volumes, partially offset by:
•$0.4 million of net changes in credit losses and related reversals primarily attributable to lump sum rent collections from our cash basis tenants in 2022 pertaining to prior period rent charges,
•$0.2 million of increased operating expense, net of associated recoveries, primarily attributable to increased insurance premiums and other operating costs, and
•$0.4 million of increased non-recoverable operating expenses relating to compensation costs tied to performance.
25
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 for expanded descriptions of NAREIT FFO and Core FFO. NAREIT 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, | |||||||||||
| 2023 | 2022 | ||||||||||
| Net income | $ | 1,133 | $ | 9,501 | |||||||
| Depreciation and amortization related to investment properties | 26,543 | 22,622 | |||||||||
| Unconsolidated joint venture adjustments (a) | 342 | (465) | |||||||||
| NAREIT FFO Applicable to Common Shares and Dilutive Securities | 28,018 | 31,658 | |||||||||
| Amortization of above and below-market leases and lease inducements, net | (1,516) | (2,547) | |||||||||
| Straight-line rent adjustments, net | (909) | (1,157) | |||||||||
| Adjusting items, net (b) | 1,934 | 873 | |||||||||
| Unconsolidated joint venture adjusting items, net (c) | (156) | 194 | |||||||||
| Core FFO Applicable to Common Shares and Dilutive Securities | $ | 27,371 | $ | 29,021 | |||||||
| Weighted average common shares outstanding - basic | 67,508,641 | 67,354,717 | |||||||||
| Dilutive effect of unvested restricted shares (d) | 145,883 | 221,321 | |||||||||
| Weighted average common shares outstanding - diluted | 67,654,524 | 67,576,038 | |||||||||
| Net income per common share - diluted | $ | 0.02 | $ | 0.14 | |||||||
| Per share adjustments - NAREIT FFO Applicable to Common Shares and Dilutive Securities | 0.39 | 0.33 | |||||||||
| NAREIT FFO Applicable to Common Shares and Dilutive Securities per share | $ | 0.41 | $ | 0.47 | |||||||
| Per share adjustments - Core FFO Applicable to Common Shares and Dilutive Securities | (0.01) | (0.04) | |||||||||
| Core FFO Applicable to Common Shares and Dilutive Securities per share | $ | 0.40 | $ | 0.43 | |||||||
(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 basis difference recognition arising from acquiring the four remaining properties of our joint venture, and miscellaneous and settlement income.
(c)Represents our share of amortization of market lease intangibles and 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.
26
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, 2023. 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, 2023.
| Development and Redevelopment | Capital Expenditures | Leasing | Total | ||||||||||||||||||||
| Direct costs | $ | 589 | (a) | $ | 3,095 | $ | 1,208 | (c) | $ | 4,892 | |||||||||||||
| Indirect costs | 220 | (b) | 431 | — | 651 | ||||||||||||||||||
| Total | $ | 809 | $ | 3,526 | $ | 1,208 | $ | 5,543 | |||||||||||||||
(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.
Capital Sources and Uses
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 debt financings; •Proceeds from any ATM Program activities; and •Proceeds from our Series A Notes and Series B Notes. | •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; •To repurchase shares of our common stock; 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. At this time, we believe our current sources of liquidity are sufficient to meet our short- and long-term cash demands.
27
Distributions
During the three months ended March 31, 2023, we declared distributions to our stockholders totaling $14.5 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 | ||||||||||||||||
| 2023 | 2022 | ||||||||||||||||
| Cash provided by operating activities | $ | 16,025 | $ | 26,777 | $ | (10,752) | |||||||||||
| Cash used in investing activities | (56,360) | (114,281) | 57,921 | ||||||||||||||
| Cash provided by (used in) financing activities | (28,136) | 68,373 | (96,509) | ||||||||||||||
| Increase (decrease) in cash, cash equivalents and restricted cash | (68,471) | (19,131) | (49,340) | ||||||||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 137,762 | 44,854 | 92,908 | ||||||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 69,291 | $ | 25,723 | $ | 43,568 | |||||||||||
Cash provided by operating activities of $16.0 million and $26.8 million for the three months ended March 31, 2023 and 2022, respectively, was generated primarily from income from property operations. Cash provided by operating activities decreased $10.8 million when comparing the three months ended March 31, 2023, to the same period in 2022, primarily as a result of the semi-annual interest payment on our senior notes, and annual payments for real estate taxes on ten acquired retail properties in excess of real estate taxes of three disposed retail properties since January 1, 2022.
Cash used in investing activities of $56.4 million for the three months ended March 31, 2023 was the result of:
•$129.6 million for acquisitions of investment properties, and
•$6.1 million for capital investments and leasing costs, which were partially offset by cash provided by:
•$79.3 million from distributions from unconsolidated entities.
Cash used in investing activities of $114.3 million for the three months ended March 31, 2022 was the result of:
•$130.9 million for acquisitions of investment properties, and
•$8.7 million for capital investments and leasing costs, which were partially offset by cash provided by:
•$25.3 million from distributions from unconsolidated entities.
Cash used in financing activities of $28.1 million for the three months ended March 31, 2023 was the result of:
•$14.3 million for pay-offs of debt, and other financing activities, and
•$13.8 million to pay distributions.
Cash provided by financing activities of $68.4 million for the three months ended March 31, 2022 was 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 for:
•$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 loan fees, and other financing activities.
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 substantially all our cash and cash equivalents at systemically important 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.
28
Off Balance Sheet Arrangements
The Company does not have off balance sheet arrangements other than its joint venture, IAGM, as disclosed in "Note 6. Investment in Unconsolidated Entities" in the condensed consolidated financial statements.
Contractual Obligations
We have obligations related to our mortgage loans, senior notes, term loans, and revolving credit facility as described in "Note 7. Debt" in the condensed consolidated financial statements.
The following table presents our obligations to make future payments under debt and lease agreements as of March 31, 2023, exclusive of debt discounts and issuance costs that are not future cash obligations.
| Payments due by year ending December 31 | |||||||||||||||||||||||||||||||||||||||||
| 2023 | 2024 | 2025 | 2026 | 2027 | Thereafter | Total | |||||||||||||||||||||||||||||||||||
| Long-term debt: | |||||||||||||||||||||||||||||||||||||||||
| Fixed rate, principal (a) | $ | 75,000 | $ | 15,700 | $ | 22,880 | $ | 200,000 | $ | 126,000 | $ | 281,500 | $ | 721,080 | |||||||||||||||||||||||||||
| Variable-rate, principal (b) | 17,468 | — | — | — | 100,000 | — | 117,468 | ||||||||||||||||||||||||||||||||||
| Interest | 24,143 | 29,905 | 29,532 | 27,141 | 16,339 | 38,732 | 165,792 | ||||||||||||||||||||||||||||||||||
| Total long-term debt | 116,611 | 45,605 | 52,412 | 227,141 | 242,339 | 320,232 | 1,004,340 | ||||||||||||||||||||||||||||||||||
| Operating leases (c) | 513 | 628 | 511 | 517 | 529 | 1,308 | 4,006 | ||||||||||||||||||||||||||||||||||
| Grand total | $ | 117,124 | $ | 46,233 | $ | 52,923 | $ | 227,658 | $ | 242,868 | $ | 321,540 | $ | 1,008,346 | |||||||||||||||||||||||||||
(a)Includes variable rate debt swapped to fixed rates through the Company's interest rate swaps.
(b)Includes $100.0 million of variable rate term loan debt which became fixed through an interest rate swap effective April 3, 2023.
(c)Includes leases on corporate office spaces.
Critical Accounting Estimates
Our financial statements are prepared in accordance with GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, 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. 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.
There have been no material changes to our critical accounting estimates as compared to the critical accounting estimates described in our "Management’s Discussion and Analysis of Financial Condition and Results of Operations" set forth in our Annual Report.
29
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate 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. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows. As of March 31, 2023, our debt included outstanding variable-rate debt of $417.5 million, of which $300.0 million has been swapped to a fixed rate.
On March 16, 2023, we entered into one interest rate swap agreement with a notional amount of $100.0 million at 3.69%, achieving a fixed interest rate of 4.99%. As of the effective date of April 3, 2023, the entirety of our variable rate term loans were swapped to fixed rates through the maturity dates of the Amended Term Loan Agreement.
As of April 3, 2023, our interest rate risk was limited to $17.5 million of variable rate pooled mortgage debt. If market rates of interest on all variable-rate debt as of March 31, 2023 permanently increased or decreased by 1%, the annual increase or decrease in interest expense on the variable-rate debt and future earnings and cash flows would be approximately $0.2 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.
We are party to interest rate forward swap agreements which address the periods between the maturity dates of the effective swaps and the maturity dates of the Amended Term Loan Agreement. In tandem, the interest rate swaps effectively fix the interest rates for a constant notional amount through the maturity dates on borrowings under the Amended Term Loan Agreement.
The following table summarizes our effective interest rate swaps as of March 31, 2023:
| Fair Value as of | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Effective Interest Rate Swaps | Effective Date | Termination Date | InvenTrust Receives | InvenTrust Pays Fixed Rate of | Fixed Rate Achieved | Notional Amount | March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||
| 5 year term loan | Dec 2, 2019 | Dec 21, 2023 | 1-Month SOFR | 1.41% | 2.71 | % | $ | 100,000 | $ | 2,390 | $ | 3,222 | ||||||||||||||||||||||||||||||||||||||
| 5 year term loan | Dec 2, 2019 | Dec 21, 2023 | 1-Month SOFR | 1.42% | 2.72 | % | 100,000 | 2,378 | 3,238 | |||||||||||||||||||||||||||||||||||||||||
| 5.5 year term loan | Dec 2, 2019 | Jun 21, 2024 | 1-Month SOFR | 1.46% | 2.76 | % | 50,000 | 1,801 | 2,281 | |||||||||||||||||||||||||||||||||||||||||
| 5.5 year term loan | Dec 2, 2019 | Jun 21, 2024 | 1-Month SOFR | 1.47% | 2.77 | % | 50,000 | 1,795 | 2,275 | |||||||||||||||||||||||||||||||||||||||||
| Pooled mortgage | Jan 18, 2023 | Nov 2, 2023 | 1-Month SOFR | 0.35% | 2.00 | % | 45,000 | 1,170 | — | |||||||||||||||||||||||||||||||||||||||||
| Pooled mortgage | Jan 18, 2023 | Nov 2, 2023 | 1-Month SOFR | 0.32% | 1.97 | % | 30,000 | 784 | — | |||||||||||||||||||||||||||||||||||||||||
| $ | 375,000 | $ | 10,318 | $ | 11,016 | |||||||||||||||||||||||||||||||||||||||||||||
The following table summarizes our forward interest rate swaps as of March 31, 2023:
| Fair Value as of | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Forward Interest Rate Swaps | Effective Date | Termination Date | InvenTrust Receives | InvenTrust Pays Fixed Rate of | Fixed Rate Achieved | Notional Amount | March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||
| 5.5 year term loan | Apr 3, 2023 | Mar 22, 2027 | 1-Month SOFR | 3.69% | 4.99% | $ | 100,000 | $ | (960) | $ | — | |||||||||||||||||||||||||||||||||||||||
| 5 year term loan | Dec 21, 2023 | Sep 22, 2026 | 1-Month SOFR | 1.51% | 2.81% | 100,000 | 4,249 | 4,949 | ||||||||||||||||||||||||||||||||||||||||||
| 5 year term loan | Dec 21, 2023 | Sep 22, 2026 | 1-Month SOFR | 1.51% | 2.81% | 100,000 | 4,227 | 4,924 | ||||||||||||||||||||||||||||||||||||||||||
| 5.5 year term loan | Jun 21, 2024 | Mar 22, 2027 | 1-Month SOFR | 1.54% | 2.84% | 50,000 | 1,747 | 2,116 | ||||||||||||||||||||||||||||||||||||||||||
| 5.5 year term loan | Jun 21, 2024 | Mar 22, 2027 | 1-Month SOFR | 1.48% | 2.78% | 50,000 | 1,827 | 2,196 | ||||||||||||||||||||||||||||||||||||||||||
| $ | 400,000 | $ | 11,090 | $ | 14,185 | |||||||||||||||||||||||||||||||||||||||||||||
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 (loss) income.
The information presented above does not consider all exposures or positions that could arise in the future. Therefore, the information represented herein has limited predictive value. As a result, the ultimate realized gain or loss with respect to interest rate fluctuations will depend on the exposures that arise during the period, the hedging strategies at the time, and the related interest rates.
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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 Exchange Act, our management, including our Principal Executive Officer and our Principal Financial Officer, evaluated as of March 31, 2023, 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, 2023, 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 our 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, 2023, 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
As of March 31, 2023, 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, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On February 23, 2022, we established a 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. As of March 31, 2023, no common stock has been repurchased under the SRP.
The following is a summary of all share repurchases during the first quarter of 2023:
| Period | Total No. of Shares Purchased (a) | Average Price Paid per Share | Total No. of Shares Purchased as Part of Publicly Announced Plans or Programs | Approx. Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) | ||||||||||||||||||||||
| January 1 - January 31, 2023 | — | $ | — | — | $ | 150,000 | ||||||||||||||||||||
| February 1 - February 28, 2023 | — | $ | — | — | $ | 150,000 | ||||||||||||||||||||
| March 1 - March 31, 2023 | 23,954 | $ | 23.23 | — | $ | 150,000 | ||||||||||||||||||||
(a)Consists of shares of common stock surrendered to the Company to satisfy tax withholding obligations associated with the vesting of restricted stock awards under our equity-based compensation plan.
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) | ||||||||
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 April 28, 2022) | ||||||||
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) | ||||||||
| 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, 2023, filed with the SEC on May 2, 2023, is formatted in Extensible Business Reporting Language ("XBRL"): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Comprehensive (Loss) 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 2, 2023 | ||||
| By: | /s/ Daniel J. Busch | ||||
| Name: | Daniel J. Busch | ||||
| Title: | President, Chief Executive Officer (Principal Executive Officer) | ||||
| Date: | May 2, 2023 | ||||
| By: | /s/ Michael Phillips | ||||
| Name: | Michael Phillips | ||||
| Title: | Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) | ||||
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