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Retail Value Inc. Reports Second Quarter 2021 Operating Results

Retail Value Inc. (NYSE: RVI) today announced operating results for the quarter ended June 30, 2021.

Results for the Quarter and Recent Activity

  • Second quarter 2021 net loss attributable to common shareholders was $69.6 million, or $3.30 per diluted share, as compared to net loss of $1.9 million, or $0.10 per share, in the year-ago period. The period-over-period increase in net loss is primarily attributable to impairment charges and asset sales recorded in 2021 partially offset by lower interest expense and the impact of the COVID-19 pandemic.
  • Second quarter 2021 operating funds from operations attributable to common shareholders (“Operating FFO” or “OFFO”) was $20.2 million, or $0.96 per diluted share, compared to $12.2 million, or $0.61 per diluted share, in the year-ago period. The period-over-period increase in OFFO is primarily attributable to the COVID‑19 pandemic and lower interest expense offset by the impact of asset sales. Second quarter results included $2.3 million of net revenue related to prior year primarily from cash basis tenants.
  • The Continental U.S. leased rate was 89.6% at June 30, 2021 as compared to 86.7% at March 31, 2021. The increase in the leased rate primarily related to the sale of three shopping centers with lower leased rates and new leasing activity.
  • The Puerto Rico leased rate was 92.2% at June 30, 2021 as compared to 88.3% at March 31, 2021 primarily due to the sale of two shopping centers with lower leased rates.
  • Sold three Continental U.S. assets and two Puerto Rico assets for an aggregate sales price of $59.2 million. Net proceeds from the sales along with unrestricted cash on hand aggregating $68.5 million were used to repay a portion of the mortgage loan.
  • Funded additional voluntary prepayment of $20.0 million on the mortgage loan in June 2021. The balance of the mortgage loan was $214.5 million at June 30, 2021.
  • In June 2021, entered into an agreement to sell the remaining nine assets in Puerto Rico for an aggregate sales price of $550 million. In July 2021, the general due diligence period expired, and the purchaser posted a deposit of $15 million with the escrow agent. Closing of the transaction is expected to occur by the end of the third quarter of 2021 subject to satisfaction of various closing conditions.

Key Quarterly Operating Results

The following metrics are as of June 30, 2021:

 

 

Continental U.S.

 

Puerto Rico

Shopping Center Count

 

8

 

9

Gross Leasable Area (thousands)

 

3,779

 

3,537

Base Rent PSF

 

$13.41

 

$19.40

Leased Rate

 

89.6%

 

92.2%

Commenced Rate

 

87.7%

 

91.7%

NOI-Quarter (millions)

 

$11.8

 

$14.9

Impact of the COVID-19 Pandemic

The impact to the portfolio as of July 23, 2021 is as follows:

 

 

Continental U.S.

 

Puerto Rico

% of Tenants open and operating (average base rent)

 

100%

 

100%

% of Second quarter 2020 rent paid

 

94%

 

81%

% of Third quarter 2020 rent paid

 

98%

 

93%

% of Fourth quarter 2020 rent paid

 

97%

 

93%

% of First quarter 2021 rent paid

 

99%

 

97%

% of Second quarter 2021 rent paid

 

99%

 

97%

  • The Company calculates the aggregate percentage of rents paid for assets owned as of June 30, 2021, by comparing the amount of tenant payments received as of the date presented to the amount billed to tenants during the period, which billed amount includes abated rents, rents subject to deferral arrangements and rents owing from bankrupt tenants that were in possession of the space and billed. For the purposes of reporting the percentage of aggregate base rents collected for a given period, when rents subject to deferral arrangements are later paid, those payments are allocated to the period in which the rent was originally owed.
  • As of July 23, 2021, agreed upon rent deferral arrangements and abatements that remain unpaid represented approximately 8% of second quarter 2020 rents (primarily abatements), 2% of third quarter 2020 rents and 2% of fourth quarter 2020 rents. There are no outstanding rent deferral arrangements with respect to 2021 rents.
  • At June 30, 2021, the balance sheet reflects $1.0 million of deferred rents for tenants with payment plans that are not accounted for on the cash basis.
  • During the second quarter of 2021, the Company’s rental revenue and net operating income (“NOI”) benefited from $2.3 million of payments related to 2020 rental income received from cash-basis tenants.

Property Net Operating Income Projection

The Company has updated its projection of 2021 NOI. The Company projects, based on the assumptions below, 2021 property level NOI to be as follows:

Portfolio

 

NOI Projection

Continental U.S.

 

$38 – $41 million

Puerto Rico (9 assets under contract)

 

$50 – $53 million

These Projections:

  • Exclude all properties sold to date and assume all properties owned by the Company on August 3, 2021 are held through year end;
  • Reflect payment of property management fees;
  • Assume tenant collections at 100% for the second half of 2021 (as compared to the actual first and second quarter 2021 rent collection rates reflected above) and
  • Assume no reserve reversals related to 2020 rents for the second half of 2021.

Because these projections are based on assumptions that are subject to change, including, without limitation, the Company’s actual tenant collections and potential future sales of properties, they should not be viewed as guidance.

About RVI

RVI is an independent publicly traded company trading under the ticker symbol “RVI” on the New York Stock Exchange. RVI holds assets in the continental U.S. and Puerto Rico and is managed by one or more subsidiaries of SITE Centers Corp. RVI focuses on realizing value in its business through operations and sales of its assets. Additional information about RVI is available at www.retailvalueinc.com.

Non-GAAP Measures

Funds from Operations (“FFO”) is a supplemental non-GAAP financial measure used as a standard in the real estate industry and is a widely accepted measure of real estate investment trust (“REIT”) performance. Management believes that both FFO and Operating FFO provide additional indicators of the financial performance of a REIT. The Company also believes that FFO and Operating FFO more appropriately measure the core operations of the Company and provide benchmarks to its peer group.

FFO is generally defined and calculated by the Company as net income (loss) (computed in accordance with generally accepted accounting principles in the United States (“GAAP”)) adjusted to exclude (i) gains and losses from disposition of real estate property and related investments, which are presented net of taxes, if any, (ii) impairment charges on real estate property and related investments and (iii) certain non-cash items. These non-cash items principally include real property depreciation and amortization of intangibles. The Company’s calculation of FFO is consistent with the definition of FFO provided by NAREIT. The Company calculates Operating FFO by excluding certain non-operating charges and income. Operating FFO is useful to investors as the Company removes non-comparable charges and income to analyze the results of its operations and assess performance of the core operating real estate portfolio. Other real estate companies may calculate FFO and Operating FFO in a different manner.

The Company also uses net operating income (“NOI”), a non-GAAP financial measure, as a supplemental performance measure. NOI is calculated as property revenues less property-related expenses. The Company believes NOI provides useful information to investors regarding the Company’s financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level and, when compared across periods, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and disposition activity on an unleveraged basis.

FFO, Operating FFO and NOI do not represent cash generated from operating activities in accordance with GAAP, are not necessarily indicative of cash available to fund cash needs and should not be considered as alternatives to net income computed in accordance with GAAP as indicators of the Company’s operating performance or as alternatives to cash flow as a measure of liquidity. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in this release herein. Reconciliation of 2021 projected NOI to the most directly comparable GAAP financial measure is not provided because the Company is unable to provide such reconciliation without unreasonable effort.

Safe Harbor

RVI considers portions of the information in this press release to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended, with respect to the Company's expectation for future periods. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. For this purpose, any statements contained herein that are not historical fact may be deemed to be forward-looking statements. There are a number of important factors that could cause our results to differ materially from those indicated by such forward-looking statements, including, among other factors, the Company’s actual property NOI for 2021, which could differ materially from the NOI projections included in this press release; the impact of the COVID-19 pandemic on the Company’s ability to manage its properties and finance its operations and on tenants’ ability to operate their businesses, generate sales and meet their financial obligations, including the obligation to pay ongoing and deferred rents; our ability to sell assets on commercially reasonable terms; our ability to complete the sale of the remaining nine assets in Puerto Rico pursuant to the agreement entered into in June 2021 and dispositions of other assets under contract; property damage, expenses related thereto and other business and economic consequences (including the potential loss of rental revenues) resulting from extreme weather conditions and natural disasters in locations where we own properties, and the ability to estimate accurately the amounts thereof; sufficiency and timing of any insurance recovery payments related to damages from extreme weather conditions and natural disasters; local conditions such as an increase in the supply of, or a reduction in demand for, retail real estate in the area; the impact of e-commerce; dependence on rental income from real property; the loss of, significant downsizing of or bankruptcy of a major tenant and the impact of any such event on rental income from other tenants at our properties; our ability to secure equity or debt financing on commercially acceptable terms or at all; impairment charges; our ability to enter into definitive agreements with regard to our financing arrangements and our ability to satisfy conditions to the completion or extension of these arrangements; changes with respect to the Puerto Rican economy and government; the ability to secure and maintain management services provided to us, including pursuant to our external management agreement with one or more subsidiaries of SITE Centers; and our ability to maintain our REIT status. For additional factors that could cause the results of the Company to differ materially from those indicated in the forward-looking statements, please refer to the Company’s most recent report on Forms 10-K and 10-Q. The impacts of the COVID-19 pandemic may also exacerbate the risks described therein, any of which could have a material effect on the Company. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.

 

Retail Value Inc.

Income Statement

 

 

in thousands, except per share

 

 

 

 

 

 

 

 

 

2Q21

 

2Q20

 

6M21

 

6M20

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

Rental income (1)

$41,857

 

$39,299

 

$83,279

 

$89,629

 

Other property revenues

54

 

(7)

 

91

 

32

 

 

41,911

 

39,292

 

83,370

 

89,661

 

Expenses:

 

 

 

 

 

 

 

 

Operating and maintenance (2)

11,433

 

12,193

 

23,304

 

25,807

 

Real estate taxes

3,757

 

5,483

 

8,023

 

11,202

 

 

15,190

 

17,676

 

31,327

 

37,009

 

 

 

 

 

 

 

 

 

 

Net operating income (3)

26,721

 

21,616

 

52,043

 

52,652

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Asset management fees

(1,770)

 

(2,324)

 

(3,541)

 

(4,648)

 

Interest expense, net

(3,437)

 

(5,660)

 

(7,428)

 

(12,952)

 

Depreciation and amortization

(11,204)

 

(14,211)

 

(24,562)

 

(30,681)

 

General and administrative

(1,258)

 

(924)

 

(2,123)

 

(2,001)

 

Impairment charges

(79,050)

 

(10,910)

 

(81,060)

 

(26,820)

 

Debt extinguishment costs, net

(1,112)

 

(12)

 

(1,242)

 

(3,977)

 

Other income, net

197

 

0

 

197

 

334

 

Gain on disposition of real estate, net (4)

1,420

 

10,958

 

1,541

 

13,632

 

Loss before other items

(69,493)

 

(1,467)

 

(66,175)

 

(14,461)

 

 

 

 

 

 

 

 

 

 

Tax expense

(88)

 

(519)

 

(197)

 

(592)

 

Net loss

($69,581)

 

($1,986)

 

($66,372)

 

($15,053)

 

 

 

 

 

 

 

 

 

 

Weighted average shares – Basic & Diluted – EPS

21,094

 

19,816

 

21,006

 

19,782

 

 

 

 

 

 

 

 

 

 

Loss per common share – Basic & Diluted

($3.30)

 

$(0.10)

 

($3.16)

 

($0.76)

 

 

 

 

 

 

 

 

 

(1)

Revenue items:

 

 

 

 

 

 

 

 

Minimum rents

23,161

 

30,348

 

48,057

 

61,738

 

Ground lease minimum rents

2,400

 

3,112

 

5,043

 

6,318

 

Percentage and overage rent

639

 

38

 

2,095

 

1,055

 

Recoveries

9,574

 

11,819

 

19,869

 

24,716

 

Uncollectible revenue

2,840

 

(6,820)

 

3,078

 

(7,678)

 

Ancillary and other rental income

1,455

 

783

 

3,264

 

2,961

 

Lease termination fees

1,788

 

19

 

1,873

 

519

 

 

 

 

 

 

 

 

 

(2)

Operating expenses:

 

 

 

 

 

 

 

 

Property management fees

(2,264)

 

(2,566)

 

(4,528)

 

(5,118)

 

 

 

 

 

 

 

 

 

(3)

NOI from assets sold through June 30, 2021

172

 

3,705

 

2,044

 

10,445

 

 

 

 

 

 

 

 

 

(4)

SITE Centers disposition fees

(592)

 

(210)

 

(592)

 

(1,766)

 

Retail Value Inc.

Other Financial Information

 

 

in thousands, except per share

 

 

 

 

 

 

 

2Q21

 

2Q20

 

6M21

 

6M20

 

 

 

 

 

 

 

 

 

 

Net loss attributable to Common Shareholders

($69,581)

 

($1,986)

 

($66,372)

 

($15,053)

 

Depreciation and amortization of real estate

11,187

 

14,193

 

24,528

 

30,646

 

Impairment of real estate

79,050

 

10,910

 

81,060

 

26,820

 

Gain on disposition of real estate, net

(1,420)

 

(10,958)

 

(1,541)

 

(13,632)

 

FFO attributable to Common Shareholders

$19,236

 

$12,159

 

$37,675

 

$28,781

 

 

 

 

 

 

 

 

 

 

Debt extinguishment, transaction, other, net

915

 

12

 

1,045

 

3,644

 

Total non-operating items, net

915

 

12

 

1,045

 

3,644

 

Operating FFO attributable to Common Shareholders

$20,151

 

$12,171

 

$38,720

 

$32,425

 

 

 

 

 

 

 

 

 

 

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

21,094

 

19,816

 

21,006

 

19,782

 

 

 

 

 

 

 

 

 

 

FFO per share – Basic & Diluted

$0.91

 

$0.61

 

$1.79

 

$1.45

 

Operating FFO per share – Basic & Diluted

$0.96

 

$0.61

 

$1.84

 

$1.64

 

Common stock dividends declared, per share

N/A

 

N/A

 

N/A

 

N/A

 

 

 

 

 

 

 

 

 

 

Certain non-cash items:

 

 

 

 

 

 

 

 

Straight-line rent

(258)

 

590

 

(822)

 

(517)

 

Straight-line fixed CAM

75

 

99

 

146

 

200

 

Loan cost amortization

(712)

 

(914)

 

(1,494)

 

(1,933)

 

Non-real estate depreciation expense

(17)

 

(18)

 

(34)

 

(35)

 

 

 

 

 

 

 

 

 

 

Capital expenditures:

 

 

 

 

 

 

 

 

Maintenance capital expenditures

899

 

645

 

1,227

 

663

 

Tenant allowances and landlord work

665

 

1,020

 

1,273

 

1,611

 

Leasing commissions - SITE Centers

617

 

473

 

1,395

 

1,704

 

Leasing commissions - external

54

 

68

 

187

 

155

 

Hurricane restorations

486

 

4,538

 

2,334

 

8,012

 

Retail Value Inc.

Other Financial Information

 

 

in thousands, except per share

 

 

 

 

 

 

 

 

 

Continental U.S.

 

 

2Q21

 

2Q20

 

6M21

 

6M20

 

Revenues:

 

 

 

 

 

 

 

 

Minimum rents

10,215

 

15,089

 

21,782

 

32,100

 

Ground lease minimum rents

797

 

1,099

 

1,636

 

2,304

 

Percentage and overage rent

236

 

6

 

253

 

103

 

Recoveries

3,918

 

5,932

 

8,379

 

12,579

 

Uncollectible revenue

2,152

 

(3,199)

 

3,144

 

(4,050)

 

Ancillary and other rental income

91

 

150

 

282

 

472

 

Lease termination fees

1

 

0

 

86

 

500

 

Other property revenues

52

 

(26)

 

69

 

(2)

 

 

17,462

 

19,051

 

35,631

 

44,006

 

Expenses:

 

 

 

 

 

 

 

 

Operating and maintenance

2,179

 

2,755

 

4,563

 

6,544

 

Property management fees

701

 

1,099

 

1,401

 

2,198

 

Real estate taxes

2,767

 

4,299

 

5,901

 

8,787

 

 

5,647

 

8,153

 

11,865

 

17,529

 

 

 

 

 

 

 

 

 

 

Net operating income (1)

11,815

 

10,898

 

23,766

 

26,477

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Asset management fees

(846)

 

(1,318)

 

(1,694)

 

(2,637)

 

Interest expense, net

(2,707)

 

(4,513)

 

(5,858)

 

(10,689)

 

Depreciation and amortization

(4,700)

 

(6,961)

 

(11,688)

 

(16,191)

 

General and administrative (not allocated to segment)

N/A

 

N/A

 

N/A

 

N/A

 

Impairment charges

0

 

(10,910)

 

0

 

(26,820)

 

Debt extinguishment costs, net

(1,076)

 

(12)

 

(1,149)

 

(3,977)

 

Other expense, net

0

 

0

 

0

 

0

 

Gain on disposition of real estate, net

1,696

 

10,958

 

1,845

 

13,632

 

Tax expense

(77)

 

(52)

 

(143)

 

(125)

 

Net loss

4,105

 

(1,910)

 

5,079

 

(20,330)

 

 

 

 

 

 

 

 

 

(1)

NOI from assets sold through June 30, 2021

43

 

2,804

 

1,589

 

8,576

 

 

 

 

 

 

 

 

 

 

 

Puerto Rico

 

 

2Q21

 

2Q20

 

6M21

 

6M20

 

Revenues:

 

 

 

 

 

 

 

 

Minimum rents

12,946

 

15,259

 

26,275

 

29,638

 

Ground lease minimum rents

1,603

 

2,013

 

3,407

 

4,014

 

Percentage and overage rent

403

 

32

 

1,842

 

952

 

Recoveries

5,656

 

5,887

 

11,490

 

12,137

 

Uncollectible revenue

688

 

(3,621)

 

(66)

 

(3,628)

 

Ancillary and other rental income

1,364

 

633

 

2,982

 

2,489

 

Lease termination fees

1,787

 

19

 

1,787

 

19

 

Other property revenues

2

 

19

 

22

 

34

 

 

24,449

 

20,241

 

47,739

 

45,655

 

Expenses:

 

 

 

 

 

 

 

 

Operating and maintenance

6,990

 

6,872

 

14,213

 

14,145

 

Property management fees

1,563

 

1,467

 

3,127

 

2,920

 

Real estate taxes

990

 

1,184

 

2,122

 

2,415

 

 

9,543

 

9,523

 

19,462

 

19,480

 

 

 

 

 

 

 

 

 

 

Net operating income (1)

14,906

 

10,718

 

28,277

 

26,175

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Asset management fees

(924)

 

(1,006)

 

(1,847)

 

(2,011)

 

Interest expense, net

(730)

 

(1,147)

 

(1,570)

 

(2,263)

 

Depreciation and amortization

(6,504)

 

(7,250)

 

(12,874)

 

(14,490)

 

General and administrative (not allocated to segment)

N/A

 

N/A

 

N/A

 

N/A

 

Impairment charges

(79,050)

 

0

 

(81,060)

 

0

 

Debt extinguishment costs, net

(36)

 

0

 

(93)

 

0

 

Other expense, net

197

 

0

 

197

 

334

 

Gain on disposition of real estate, net

(276)

 

0

 

(304)

 

0

 

Tax expense

(11)

 

(467)

 

(54)

 

(467)

 

Net loss

(72,428)

 

848

 

(69,328)

 

7,278

 

 

 

 

 

 

 

 

 

(1)

NOI from assets sold through June 30, 2021

129

 

901

 

455

 

1,869

 

Retail Value Inc.

Balance Sheet

 

 

$ in thousands

 

 

 

 

 

At Period End

 

 

2Q21

 

4Q20

 

 

 

 

 

 

Assets:

 

 

 

 

Land

$337,869

 

$397,699

 

Buildings

918,294

 

1,031,886

 

Fixtures and tenant improvements

114,580

 

134,335

 

 

1,370,743

 

1,563,920

 

Depreciation

(554,434)

 

(593,691)

 

 

816,309

 

970,229

 

Construction in progress

2,489

 

1,515

 

Real estate, net

818,798

 

971,744

 

 

 

 

 

 

Cash

67,185

 

56,849

 

Restricted cash (1)

59,048

 

115,939

 

Receivables and straight-line (2)

17,501

 

25,302

 

Intangible assets, net (3)

7,078

 

9,452

 

Other assets, net (4)

10,882

 

16,590

 

Total Assets

980,492

 

1,195,876

 

 

 

 

 

 

Liabilities and Equity:

 

 

 

 

Secured debt (5)

207,243

 

344,485

 

 

 

 

 

 

Dividends payable

0

 

23,002

 

Other liabilities (6)

30,420

 

38,603

 

Total Liabilities

237,663

 

406,090

 

 

 

 

 

 

Redeemable preferred equity

190,000

 

190,000

 

 

 

 

 

 

Common shares

2,110

 

1,983

 

Paid-in capital

740,548

 

721,234

 

Distributions in excess of net income

(189,800)

 

(123,428)

 

Common shares in treasury at cost

(29)

 

(3)

 

Total Equity

552,829

 

599,786

 

 

 

 

 

 

Total Liabilities and Equity

$980,492

 

$1,195,876

 

 

 

 

 

(1)

Asset sale proceeds

0

 

51,168

 

Hurricane related escrows

37,169

 

38,469

 

Other lender required escrows

21,879

 

26,302

 

 

 

 

 

(2)

SL rents (including fixed CAM), net

11,337

 

13,683

 

 

 

 

 

(3)

Operating lease right of use asset

1,402

 

1,509

 

 

 

 

 

(4)

Note receivable

3,000

 

3,000

 

 

 

 

 

(5)

Unamortized loan costs

(7,302)

 

(9,718)

 

 

 

 

 

(6)

Operating lease liabilities

2,476

 

2,602

 

Below-market leases, net

11,828

 

13,829

 

Contacts

Retail Value Inc.

Christa Vesy, EVP and Chief Financial Officer

216-755-5500

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