Retail Properties of America, Inc. Reports Fourth Quarter and Full Year 2020 Results - WIRE.RealEstate

Retail Properties of America, Inc. Reports Fourth Quarter and Full Year 2020 Results

Feb 24, 2021 12:07 PM ET


Retail Properties of

iCrowdNewswire   Feb 24, 2021  12:07 PM ET

Retail Properties of America, Inc. reported financial and operating results for the quarter and year ended December 31, 2020.

FINANCIAL RESULTS
For the quarter ended December 31, 2020, the Company reported:

  • Net income attributable to common shareholders of $1.8 million, or $0.01 per diluted share, compared to $16.2 million, or $0.08 per diluted share, for the same period in 2019;
  • Funds from operations (FFO) attributable to common shareholders of $40.5 million, or $0.19 per diluted share, compared to $57.9 million, or $0.27 per diluted share, for the same period in 2019;
  • Operating funds from operations (Operating FFO) attributable to common shareholders of $41.7 million, or $0.20 per diluted share, compared to $58.5 million, or $0.27 per diluted share, for the same period in 2019;
  • Cash collections as of February 8, 2021 of 94.1% of billed fourth quarter base rent, up from an updated 87.6% of billed third quarter base rent; and
  • $13.6 million decrease in lease income, equating to $0.06 per diluted share, compared to the same period in 2019, primarily driven by the impact on the Company’s business from the novel coronavirus (COVID-19) pandemic during the fourth quarter of 2020. A $2.8 million decrease in straight-line rental income, equating to $0.01 per diluted share, largely driven by the movement of certain additional tenants to the cash basis of accounting, contributed to this decline in lease income.

For the year ended December 31, 2020, the Company reported:

  • Net income attributable to common shareholders of $14.6 million, or $0.07 per diluted share, compared to $32.4 million, or $0.15 per diluted share, for the same period in 2019;
  • FFO attributable to common shareholders of $180.5 million, or $0.85 per diluted share, compared to $219.0 million, or $1.03 per diluted share, for the same period in 2019;
  • Operating FFO attributable to common shareholders of $180.0 million, or $0.84 per diluted share, compared to $229.7 million, or $1.08 per diluted share, for the same period in 2019;
  • Cash collections as of February 8, 2021 of 94.1% of billed fourth quarter base rent, 87.6% of billed third quarter base rent, up from 84.2% previously reported, and 78.0% of billed second quarter base rent, up from 73.6% most recently reported; and
  • $51.6 million decrease in lease income, equating to $0.24 per diluted share, compared to the same period in 2019, primarily driven by the impact on the Company’s business from the COVID-19 pandemic during the second, third and fourth quarters of 2020. A $6.7 million decrease in straight-line rental income, equating to $0.03 per diluted share, largely driven by the movement of certain additional tenants to the cash basis of accounting, contributed to this decline in lease income.

OPERATING RESULTS
For the quarter ended December 31, 2020, the Company’s portfolio results were as follows:

  • 11.4% decrease in same store net operating income (NOI) over the comparable period in 2019, primarily driven by the impact on the Company’s business from the COVID-19 pandemic;
  • Retail portfolio occupancy: 91.7% at December 31, 2020, down 50 basis points from 92.2% at September 30, 2020 and down 350 basis points from 95.2% at December 31, 2019. Bankruptcy-related move-outs account for 210 basis points of the 350-basis point occupancy decline since December 31, 2019;
  • Retail portfolio percent leased, including leases signed but not commenced: 93.1% at December 31, 2020, down 70 basis points from 93.8% at September 30, 2020 and down 310 basis points from 96.2% at December 31, 2019. Bankruptcy-related move-outs account for 210 basis points of the 310-basis point decline in retail portfolio percent leased since December 31, 2019;
  • Total retail portfolio annualized base rent (ABR) per occupied square foot of $19.36 at December 31, 2020, down 0.4% from $19.44 ABR per occupied square foot at September 30, 2020 and down 0.8% from $19.52 ABR per occupied square foot at December 31, 2019;
  • 748,000 square feet of retail leasing transactions comprised of 118 new and renewal leases;
  • A blended re-leasing spread of positive 3.8%, comprised of comparable cash leasing spreads of positive 3.8% on renewal leases and positive 3.3% on new leases; and
  • Portfolio square footage open: 98% based on gross leasable area (GLA) and 97% based on ABR as of February 12, 2021.

For the year ended December 31, 2020, the Company’s portfolio results were as follows:

  • 11.2% decrease in same store NOI over the comparable period in 2019, primarily driven by the impact on the Company’s business from the COVID-19 pandemic during the second, third and fourth quarters of 2020;
  • 2,166,000 square feet of retail leasing transactions comprised of 371 new and renewal leases; and
  • A blended re-leasing spread of positive 3.0%, comprised of comparable cash leasing spreads of positive 4.0% on renewal leases and negative (2.8)% on new leases.

“Our team continued to drive incremental operational gains in the fourth quarter as exemplified by our strong leasing results and sequentially higher cash collections,” stated Steve Grimes, chief executive officer. “We enter 2021 holding optimism about our intermediate- and long-term business prospects as well as pragmatism toward the near-term challenges posed by the current backdrop.”

BALANCE SHEET AND CAPITAL MARKETS ACTIVITY
During 2020, as previously announced, the Company engaged in multiple transactions to enhance balance sheet strength and financial flexibility, including:

  • In July, in a reopening, issued an additional $100.0 million aggregate principal amount of its 4.00% senior unsecured notes due 2025;
  • In August, in a new issuance, issued $400.0 million aggregate principal amount of its 4.75% senior unsecured notes due 2030;
  • In July and August, repaid the $135.0 million balance outstanding as of June 30, 2020 under the Company’s $850.0 million unsecured revolving line of credit;
  • In August, prepaid the Company’s $250.0 million term loan due January 2021 and terminated the related interest rate swaps that had effectively fixed this variable rate loan; and
  • In September, prepaid the Company’s $100.0 million private placement notes due June 2021.

Following this activity, as of December 31, 2020, the Company holds no debt maturities until 2022, a fully undrawn $850.0 million unsecured revolving line of credit and approximately $891.5 million in total available liquidity, up from $877.1 million as of September 30, 2020, and $841.7 million as of December 31, 2019.

As of December 31, 2020, the Company had $1.8 billion of gross consolidated indebtedness with a weighted average contractual interest rate of 4.19% and a weighted average maturity of 5.9 years, up from 4.7 years as of December 31, 2019. The Company continues to benefit from substantial headroom relative to its debt covenants, including a debt service coverage ratio of 3.4x, well in excess of the 1.5x requirement under its debt agreements.

DIVIDEND
As previously announced on December 8, 2020, the Company’s board of directors declared a fourth quarter dividend for its outstanding Class A common stock of $0.06 per common share, up from the $0.05 per common share declared for the third quarter. The quarterly dividend of $0.06 per common share, which totaled $12.9 million, was paid on January 8, 2021, to Class A common stockholders of record on December 23, 2020.

The Company’s board of directors will continue to monitor financial performance and declare additional dividend payments to at least cover the Company’s minimum taxable distribution requirements, aiming to grow this quarterly dividend amount over time. During the calendar year 2020, the Company paid aggregate dividends of $81.6 million.

INVESTMENT ACTIVITY
Expansions and Redevelopments
The Company continues to make progress on the execution of its active expansion and redevelopment projects and invested $81.4 million during 2020 at Circle East, One Loudoun Downtown, Carillon, The Shoppes at Quarterfield and Southlake Town Square, with the vast majority of this investment related to the One Loudoun Downtown Pads G & H expansion project.

Active Projects
One Loudoun Downtown
During the quarter, the Company and KETTLER, its joint venture partner for the multi-family component of the mixed-use expansion of Pads G & H at One Loudoun Downtown located in the Washington, D.C. metropolitan statistical area (MSA), advanced work toward the planned spring opening of Pad G’s 99 multi-family rental units. Additionally, the Company has executed a contract with Vivint Smart Home for the installation and servicing of smart home technology for the multi-family rental units at Pads G & H, branded Vyne.

The Company also is working to complete interior finishes for Pad G’s 33,000 square feet of office space, branded One Endicott. As previously announced, this project received a Wired Certified Platinum rating, the highest rating possible, from WiredScore, confirming One Endicott as best-in-class across connectivity features. At Pad H’s 279 multi-family rental units, the Company and KETTLER continue drywall installation and other finishes.

The aggregate One Loudoun Downtown Pads G & H expansion project, which includes 378 multi-family rental units as well as 67,000 to 70,000 square feet of commercial GLA, remains on track to stabilize in Q2 – Q3 2022.

Circle East
During the quarter, the Company signed two leases for in-line space at its 80,000 square foot Circle East mixed-use project located in Towson, MD within the Baltimore MSA, bringing the project to 17% leased. Ethan Allen, one of the two anchor tenants for the project, opened on January 21, 2021, and Shake Shack, the other anchor tenant, plans to open in the near term.

Other Projects
During the quarter, as previously announced, the Company delivered space to ALDI at The Shoppes at Quarterfield, representing 37% of the project’s GLA. The Company has extended the aggregate targeted stabilization date for this redevelopment project to Q1 – Q2 2022 due to delays related to concession negotiation and construction with the other anchor tenant for this space. The project remains 100% leased.

Construction continues at the single-tenant pad development at Southlake Town Square with targeted stabilization in Q1 – Q2 2021.

Dispositions
During the first quarter of 2020, as previously reported, the Company completed the sale of one non-target, multi-tenant power center asset for $13.9 million.

Acquisitions
During the first quarter of 2020, as previously reported, the Company acquired the fee interest in an existing multi-tenant, community center retail property for a gross purchase price of $55.0 million. In connection with this acquisition, the Company also assumed the lessor position in a ground lease with a shadow anchor.

2021 GUIDANCE
Taking into account the current macroeconomic and public health outlook, among other factors and variables, the Company currently expects to generate net income attributable to common shareholders of $0.02 to $0.10 per diluted share in 2021. The Company also expects to generate Operating FFO attributable to common shareholders of $0.76 to $0.84 per diluted share in 2021 based, in part, on the following assumptions:

  • General and administrative expenses of $41 to $43 million; and
  • Acquisitions, property dispositions and capital markets transactions evaluated and executed opportunistically.

Additional factors influencing the 2021 guidance ranges include, among others:

  • Occupancy expectations;
  • Collectibility of lease income amounts deferred from 2020 that are due in 2021;
  • Collection of 2021 lease income amounts due from tenants accounted for on the cash basis of accounting, which aggregated 12% of ABR as of December 31, 2020, the population of which is subject to evaluation and adjustment each reporting period, and the impact of any such adjustment could be significant; and
  • Variability in non-cash items, including straight-line rent, which is largely dependent on changes to the aforementioned population of cash-basis tenants.

WEBCAST AND CONFERENCE CALL INFORMATION
The Company’s management team will hold a webcast on Wednesday, February 17, 2021 at 11:00 AM (ET), to discuss its quarterly and full year financial results and operating performance, as well as business highlights and outlook. In addition, the Company may discuss business and financial developments and trends and other matters affecting the Company, some of which may not have been previously disclosed.

A live webcast will be available online on the Company’s website at www.rpai.com in the INVEST section. A replay of the webcast will be available. To listen to the replay, please go to www.rpai.com in the INVEST section of the website and follow the instructions.

The conference call can be accessed by dialing (877) 705-6003 or (201) 493-6725 for international callers. Please dial in at least ten minutes prior to the start of the call to register. A replay of the call will be available from 2:00 PM (ET) on February 17, 2021, until midnight (ET) on March 3, 2021. The replay can be accessed by dialing (844) 512-2921 or (412) 317-6671 for international callers and entering pin number 13713677.

SUPPLEMENTAL INFORMATION
The Company has posted supplemental financial and operating information and other data in the INVEST section of its website.

ABOUT RPAI
Retail Properties of America, Inc. is a REIT that owns and operates high quality, strategically located open-air shopping centers, including properties with a mixed-use component. As of December 31, 2020, the Company owned 102 retail operating properties in the United States representing 20.0 million square feet. The Company is publicly traded on the New York Stock Exchange under the ticker symbol RPAI. Additional information about the Company is available at www.rpai.com.

Contact Information:

www.rpai.com


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