EX-99.1 2 rvi-ex991_25.htm EX-99.1 rvi-ex991_25.htm

Exhibit 99.1

Retail Value Inc. Quarterly Financial Supplement For the period ended June 30, 2020 rvi

R

 

Retail Value Inc.

Table of Contents

 

Section

Page

 

 

Earnings Release & Financial Statements

 

Press Release

1-6

 

 

Company Summary

 

Portfolio Summary

7

Top 35 Tenants

8

Lease Expirations

9

 

 

Investments

 

Dispositions

10

 

 

Debt Summary

 

Capital Structure

11

 

 

Shopping Center Summary

 

Property List

12

 

 

Reporting Policies and Other

 

Notable Accounting and Supplemental Policies

13-14

Non-GAAP Measures

15-16

 

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 impact of the outbreak of COVID-19 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 rent; our ability to sell assets on commercially reasonable terms; our ability to complete dispositions of 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 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 reports on Form 10-K and Form 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.

For additional information:

3300 Enterprise Parkway

Christa Vesy, EVP and

Beachwood, OH 44122
216-755-5500

Chief Financial Officer

 

 

Retail Value Inc. Reports Second Quarter 2020 Operating Results

 

BEACHWOOD, OHIO, August 5, 2020 – Retail Value Inc. (NYSE: RVI) today announced operating results for the quarter ended June 30, 2020.  

 

Results for the Quarter

 

•

Second quarter net loss attributable to common shareholders was $1.9 million, or $0.10 per diluted share as compared to net income of $13.6 million, or $0.72 per share, in the year ago-period.  The year-over-year decrease in net income is primarily attributable to the impact of the COVID-19 pandemic and the dilutive effect of asset sales offset by reduced interest expense and debt extinguishment costs.  

 

•

Second quarter operating funds from operations attributable to common shareholders (“Operating FFO” or “OFFO”) was $12.2 million, or $0.61 per diluted share, compared to $24.4 million, or $1.28 per diluted share, in the year ago-period.  The year-over-year decrease in OFFO is primarily attributable to the same factors as above.

 

•

Sold one property, Big Oaks Crossing, on June 30, 2020 for $21 million; ninety percent (90%) of net proceeds were used to repay mortgage debt with the remaining proceeds retained as cash.

 

•

In July 2020, sold the Lowe’s parcel, Newnan Crossing for $15.6 million; ninety percent (90%) of net proceeds were used to repay mortgage debt with the remaining proceeds retained as cash.

 

•

The Continental U.S. leased rate was 89.3% at June 30, 2020 as compared to 89.6% at March 31, 2020, the decrease is primarily due to an asset sold in the second quarter.

 

•

The Puerto Rico leased rate was 85.9% at June 30, 2020 as compared to 85.8% at March 31, 2020.

 

Key Quarterly Operating Results

The following metrics are as of June 30, 2020:

 

 

 

Continental U.S.

 

Puerto Rico

Shopping Center Count

 

13

 

12

Gross Leasable Area (thousands)

 

5,457

 

4,432

Base Rent PSF

 

$13.60

 

$19.80

Leased Rate

 

89.3%

 

85.9%

Commenced Rate

 

88.8%

 

83.9%

NOI-Quarter (millions)

 

$10.9

 

$10.7

Impact of COVID-19

The impact to the portfolio as of July 31, 2020 is as follows:

 

 

 

Continental U.S.

 

Puerto Rico

% of Tenants open and operating (pro rata average rent)

 

92%

 

94%

% of second quarter rent paid

 

66%

 

60%

% of July rent paid

 

78%

 

72%

 

In Puerto Rico, malls and non-essential businesses at outdoor shopping centers remained fully closed until early June when they were permitted to reopen with significant occupancy and operating restrictions. As of July 31, 2020, approximately 93% of the Company’s tenants (based on average base rents) were open for business, up from a low of 34% in early April.

 

As of July 31, 2020, tenants for the entire company had paid approximately 63% of second quarter rents and 75% of July rents. As of July 31, 2020, the Company had reached deferral arrangements with tenants representing approximately 14% of second quarter rents and 8% of July rents. In addition, during the second quarter the Company’s rental revenue and NOI

1

 

 

were reduced by $6.8 million of uncollectible revenue primarily related to reserves associated with cash-basis tenants triggered by the impact of COVID-19.

 

The Company implemented a COVID-19 response plan that included enacting protocols in line with government guidelines at Company-owned shopping centers to keep its properties operational and working with tenants to access small business resources including those provided by the Payroll Protection Program (PPP).  The Company furthered its property level COVID-19 pandemic response to include: property level social media and email marketing campaigns to help communities identify operating tenants, facilitated gift card program to connect local businesses with members of the communities, instituted heightened cleaning and disinfection protocols, installed social distancing and hygiene signage around its properties to follow CDC guidelines, developed and implemented Vendor COVID Operating Protocol to promote safe and responsible operations by vendors, developed and implemented a COVID Operating Protocol for all property operations staff, deployed online purchase pick-up locations across the portfolio and completed a tenant survey to identify specific tenant needs around curbside and online purchase pick-up.

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 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.

 

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 impact of the outbreak of COVID-19 on the Company’s ability to manage its properties and finance its operations and on tenants’ ability to operate

2

 

 

their businesses, generate sales and meet their financial obligations, including the obligation to pay rent; our ability to sell assets on commercially reasonable terms; our ability to complete dispositions of 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 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 reports on Form 10-K and Form 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.

 

3

 

Retail Value Inc.

Income Statement

 

 

 

in thousands, except per share

 

 

 

 

 

 

 

 

 

2Q20

 

2Q20

 

Total

 

Total

 

 

Continental U.S.

 

Puerto Rico

 

2Q20

 

6M20

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

Rental income (1)

$19,077

 

$20,222

 

$39,299

 

$89,629

 

Other property revenues

(26)

 

19

 

(7)

 

32

 

 

19,051

 

20,241

 

39,292

 

89,661

 

Expenses:

 

 

 

 

 

 

 

 

Operating and maintenance (2)

3,854

 

8,339

 

12,193

 

25,807

 

Real estate taxes

4,299

 

1,184

 

5,483

 

11,202

 

 

8,153

 

9,523

 

17,676

 

37,009

 

 

 

 

 

 

 

 

 

 

Net operating income (3)

10,898

 

10,718

 

21,616

 

52,652

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Asset management fees

 

 

 

 

(2,324)

 

(4,648)

 

Interest expense, net

 

 

 

 

(5,660)

 

(12,952)

 

Depreciation and amortization

 

 

 

 

(14,211)

 

(30,681)

 

General and administrative

 

 

 

 

(924)

 

(2,001)

 

Impairment charges

 

 

 

 

(10,910)

 

(26,820)

 

Debt extinguishment costs, net

 

 

 

 

(12)

 

(3,977)

 

Other expense, net

 

 

 

 

0

 

334

 

Gain on disposition of real estate, net (4)

 

 

 

 

10,958

 

13,632

 

Loss before other items

 

 

 

 

(1,467)

 

(14,461)

 

 

 

 

 

 

 

 

 

 

Tax expense

 

 

 

 

(519)

 

(592)

 

Net loss

 

 

 

 

($1,986)

 

($15,053)

 

 

 

 

 

 

 

 

 

 

Weighted average shares – Basic & Diluted – EPS

 

 

 

 

19,816

 

19,782

 

 

 

 

 

 

 

 

 

 

Earnings per common share – Basic & Diluted

 

 

 

 

($0.10)

 

($0.76)

 

 

 

 

 

 

 

 

 

 

Revenue items:

 

 

 

 

 

 

 

(1)

Minimum rents

15,089

 

15,259

 

30,348

 

61,738

 

Ground lease minimum rents

1,099

 

2,013

 

3,112

 

6,318

 

Recoveries

5,932

 

5,887

 

11,819

 

24,716

 

Uncollectible revenue

(3,199)

 

(3,621)

 

(6,820)

 

(7,678)

 

Percentage and overage rent

6

 

32

 

38

 

1,055

 

Ancillary and other rental income

150

 

633

 

783

 

2,961

 

Lease termination fees

0

 

19

 

19

 

519

 

 

 

 

 

 

 

 

 

(2)

Operating expenses:

 

 

 

 

 

 

 

 

Property management fees

(1,099)

 

(1,467)

 

(2,566)

 

(5,118)

 

 

 

 

 

 

 

 

 

(3)

NOI from assets sold

 

 

 

 

224

 

2,487

 

 

 

 

 

 

 

 

 

(4)

SITE Centers disposition fees

 

 

 

 

(210)

 

(1,766)

 

4

 

Retail Value Inc.

Reconciliation: Net Income to FFO and Operating FFO

and Other Financial Information

 

 

in thousands, except per share

 

 

 

 

 

2Q20

 

6M20

 

 

 

 

 

 

Net loss attributable to Common Shareholders

($1,986)

 

($15,053)

 

Depreciation and amortization of real estate

14,193

 

30,646

 

Impairment of real estate

10,910

 

26,820

 

Gain on disposition of real estate, net

(10,958)

 

(13,632)

 

FFO attributable to Common Shareholders

$12,159

 

$28,781

 

 

 

 

 

 

Debt extinguishment, transaction, other, net

12

 

3,644

 

Total non-operating items, net

12

 

3,644

 

Operating FFO attributable to Common Shareholders

$12,171

 

$32,425

 

 

 

 

 

 

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

19,816

 

19,782

 

 

 

 

 

 

FFO per share – Basic & Diluted

$0.61

 

$1.45

 

Operating FFO per share – Basic & Diluted

$0.61

 

$1.64

 

Common stock dividends declared, per share

N/A

 

N/A

 

 

 

 

 

 

Certain non-cash items:

 

 

 

 

Straight-line rent

590

 

(517)

 

Straight-line fixed CAM

99

 

200

 

Loan cost amortization

(914)

 

(1,933)

 

Non-real estate depreciation expense

(17)

 

(34)

 

 

 

 

 

 

Capital expenditures:

 

 

 

 

Maintenance capital expenditures

645

 

663

 

Tenant allowances and landlord work

1,020

 

1,611

 

Leasing commissions - SITE Centers

473

 

1,704

 

Leasing commissions - external

68

 

155

 

Hurricane restorations

4,538

 

8,012

 

 

 

 

 

 

 

5

 

Retail Value Inc.

Balance Sheet

 

 

$ in thousands

 

 

 

 

 

At Period End

 

 

2Q20

 

4Q19

 

 

 

 

 

 

Assets:

 

 

 

 

Land

$464,876

 

$522,393

 

Buildings

1,205,401

 

1,380,984

 

Fixtures and tenant improvements

137,586

 

152,426

 

 

1,807,863

 

2,055,803

 

Depreciation

(622,100)

 

(670,509)

 

 

1,185,763

 

1,385,294

 

Construction in progress and land

6,962

 

2,017

 

Real estate, net

1,192,725

 

1,387,311

 

 

 

 

 

 

Cash

99,176

 

71,047

 

Restricted cash (1)

93,172

 

112,246

 

Receivables and straight-line (2)

31,884

 

25,195

 

Intangible assets, net (3)

14,106

 

19,573

 

Other assets, net

8,197

 

11,315

 

Total Assets

1,439,260

 

1,626,687

 

 

 

 

 

 

Liabilities and Equity:

 

 

 

 

Secured debt

506,688

 

655,833

 

 

 

 

 

 

Payable to SITE

280

 

105

 

Dividends payable

0

 

39,057

 

Other liabilities (4)

41,343

 

53,789

 

Total Liabilities

548,311

 

748,784

 

 

 

 

 

 

Redeemable preferred equity

190,000

 

190,000

 

 

 

 

 

 

Common shares

1,982

 

1,905

 

Paid-in capital

720,893

 

692,871

 

Distributions in excess of net income

(21,910)

 

(6,857)

 

Common shares in treasury at cost

(16)

 

(16)

 

Total Equity

700,949

 

687,903

 

 

 

 

 

 

Total Liabilities and Equity

$1,439,260

 

$1,626,687

 

 

 

 

 

(1)

Asset sale proceeds

17,275

 

17,388

 

Other escrows

75,897

 

94,858

 

 

 

 

 

(2)

SL rents (including fixed CAM), net

14,677

 

16,164

 

 

 

 

 

(3)

Operating lease right of use asset

1,613

 

1,714

 

 

 

 

 

(4)

Operating lease liabilities

2,721

 

2,835

 

Below-market leases, net

16,373

 

20,042

 

 

 

6

 

Retail Value Inc.

Portfolio Summary

 

 

GLA in thousands

 

 

 

 

 

 

 

 

 

 

 

 

 

6/30/2020

 

3/31/2020

 

12/31/2019

 

9/30/2019

 

6/30/2019

 

 

 

Shopping Center Count

 

 

 

 

 

 

 

 

 

 

 

 

Operating Centers

25

 

26

 

28

 

29

 

31

 

 

 

Continental U.S.

13

 

14

 

16

 

17

 

19

 

 

 

Puerto Rico

12

 

12

 

12

 

12

 

12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Leasable Area (GLA)

 

 

 

 

 

 

 

 

 

 

 

 

Owned and Ground Lease

9,889

 

10,240

 

11,448

 

11,633

 

12,135

 

 

 

Continental U.S.

5,457

 

5,805

 

7,017

 

7,202

 

7,704

 

 

 

Puerto Rico

4,432

 

4,435

 

4,431

 

4,431

 

4,431

 

 

 

Unowned

1,305

 

1,305

 

1,789

 

2,014

 

2,205

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarterly Operational Overview

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continental U.S.

 

 

 

 

 

 

 

 

 

 

 

 

Base Rent PSF

$13.60

 

$13.00

 

$13.54

 

$13.63

 

$13.52

 

 

 

Leased Rate

89.3%

 

89.6%

 

90.6%

 

91.4%

 

92.2%

 

 

 

Leased Rate < 10K SF

75.8%

 

77.1%

 

78.4%

 

80.0%

 

82.8%

 

 

 

Leased Rate > 10K SF

92.3%

 

92.3%

 

93.5%

 

94.2%

 

94.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Puerto Rico

 

 

 

 

 

 

 

 

 

 

 

 

Base Rent PSF

$19.80

 

$19.85

 

$19.93

 

$19.94

 

$20.62

 

 

 

Leased Rate

85.9%

 

85.8%

 

84.7%

 

83.8%

 

84.6%

 

 

 

Leased Rate < 10K SF

79.3%

 

79.0%

 

78.7%

 

77.1%

 

77.7%

 

 

 

Leased Rate > 10K SF

89.0%

 

89.0%

 

87.5%

 

87.0%

 

87.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operational Statistics

 

 

 

 

 

 

 

 

 

 

 

 

% of Aggregate Property NOI - Continental U.S.

50.4%

 

50.2%

 

54.8%

 

47.8%

 

58.4%

 

 

 

% of Aggregate Property NOI Puerto Rico

49.6%

 

49.8%

 

45.2%

 

52.2%

 

41.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Puerto Rico

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Minimum rents

17,272

 

16,380

 

16,392

 

15,666

 

16,115

 

 

 

Recoveries

5,887

 

6,250

 

5,804

 

5,715

 

5,622

 

 

 

Uncollectible revenue

(3,621)

 

(7)

 

(36)

 

144

 

(136)

 

 

 

Percentage rent

32

 

920

 

645

 

191

 

383

 

 

 

Ancillary income

633

 

1,856

 

2,822

 

1,928

 

1,823

 

 

 

Lease termination fees

19

 

0

 

0

 

830

 

12

 

 

 

Other property revenues

19

 

15

 

109

 

854

 

(5)

 

 

 

Business interruption income

0

 

0

 

0

 

5,675

 

2,000

 

 

 

 

20,241

 

25,414

 

25,736

 

31,003

 

25,814

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Operating and maintenance

8,339

 

8,725

 

8,237

 

8,038

 

7,844

 

 

 

Real estate taxes

1,184

 

1,231

 

1,205

 

1,329

 

1,198

 

 

 

 

9,523

 

9,956

 

9,442

 

9,367

 

9,042

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income

10,718

 

15,458

 

16,294

 

21,636

 

16,772

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

 

Retail Value Inc.

Top 35 Tenants

 

 

$ and GLA in thousands

 

 

 

 

 

 

 

 

 

 

 

Credit Ratings

 

 

Tenant

Number of Units

Base Rent

% of Total

Owned GLA

% of Total

(S&P/Moody's/Fitch)

1

 

Walmart (1)

8

$7,211

5.5%

1,098

11.1%

AA/Aa2/AA

2

 

Bed Bath & Beyond (2)

10

4,176

3.2%

412

4.2%

B+/Ba2/NR

3

 

PetSmart

12

4,121

3.2%

222

2.2%

B-/B3/NR

4

 

Kohl's

5

3,669

2.8%

458

4.6%

BBB-/Baa2/BBB-

5

 

TJX Companies (3)

10

3,377

2.6%

302

3.1%

A/A2/NR

6

 

Best Buy

5

3,094

2.4%

214

2.2%

BBB/Baa1/NR

7

 

T-Mobile

23

2,749

2.1%

48

0.5%

BB/NR/BB+

8

 

Gap (4)

9

2,744

2.1%

139

1.4%

BB-/Ba2/NR

9

 

Rainbow Apparel

23

2,652

2.0%

127

1.3%

NR

10

 

Foot Locker

13

2,364

1.8%

57

0.6%

BB+/Ba1/NR

11

 

Claro

18

2,239

1.7%

27

0.3%

BBB+/A3/A-

12

 

AMC Theatres

1

2,203

1.7%

92

0.9%

CC/Caa3/NR

13

 

Cinemark

2

2,143

1.6%

136

1.4%

BB-/NR/B+

14

 

Burlington

4

1,913

1.5%

235

2.4%

BB/NR/BB-

15

 

Dick's Sporting Goods

3

1,892

1.4%

139

1.4%

NR

16

 

Lowe's

2

1,836

1.4%

256

2.6%

BBB+/Baa1/NR

17

 

Michaels

6

1,829

1.4%

141

1.4%

B/NR/NR

18

 

Caribbean Cinemas

4

1,807

1.4%

201

2.0%

NR

19

 

Ulta

6

1,668

1.3%

67

0.7%

NR

20

 

Office Depot

4

1,631

1.2%

82

0.8%

NR

21

 

Yum! Brands

14

1,605

1.2%

31

0.3%

BB/Ba2/NR

22

 

Sears (5)

3

1,520

1.2%

281

2.8%

NR

23

 

Walgreens

3

1,405

1.1%

41

0.4%

BBB/Baa2/BBB-

24

 

BJ's Wholesale Club

1

1,362

1.0%

115

1.2%

BB-/NR/NR

25

 

JC Penney

2

1,326

1.0%

181

1.8%

NR

26

 

Jo-Ann

2

1,297

1.0%

91

0.9%

CCC/Caa1/NR

27

 

Home Depot

1

1,283

1.0%

114

1.2%

A/A2/A

28

 

Econo

3

1,259

1.0%

168

1.7%

NR

29

 

Ponderosa Steakhouse

7

1,236

0.9%

38

0.4%

NR

30

 

AT&T

12

1,183

0.9%

21

0.2%

BBB/Baa2/A-

31

 

Dave & Buster's

1

1,182

0.9%

40

0.4%

NR

32

 

Journeys

9

1,150

0.9%

19

0.2%

NR

33

 

Chili's

7

1,136

0.9%

40

0.4%

B+/B1/NR

34

 

DSW

3

1,106

0.8%

64

0.6%

NR

35

 

Burger King

9

1,090

0.8%

25

0.3%

BB/NR/NR

 

 

Top 35 Total

245

$74,458

57.1%

5,722

57.9%

 

 

 

Total Portfolio

 

$130,483

100.0%

9,889

100.0%

 

 

 

 

 

 

 

 

 

 

(1) Walmart (7) / Sam's Club (1)

(4) Gap (1) / Old Navy (8)

(2) Bed Bath (9) / CTS (1)

(5) Sears (1) / Kmart (2)

(3) T.J. Maxx (6) / Marshalls (3) / HomeGoods (1)

 

 

 

 

 

 

 

 

 

 

 

 

8

 

Retail Value Inc.

Lease Expirations

 

$ and GLA in thousands

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assumes no exercise of lease options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Greater than 10K SF

 

Less than 10K SF

 

Total

Year

# of

Leases

 

Expiring

SF

ABR

 

Rent

PSF

% of ABR

> 10K

 

# of

Leases

 

Expiring

SF

ABR

 

Rent

PSF

% of ABR

< 10K

 

# of

Leases

 

Expiring

SF

ABR

 

Rent

PSF

% of ABR

Total

MTM

0

 

0

$0

 

$0.00

0.0%

 

84

 

190

$7,244

 

$38.13

13.6%

 

84

 

190

$7,244

 

$38.13

6.1%

2020

3

 

96

918

 

$9.56

1.4%

 

63

 

128

4,323

 

$33.77

8.1%

 

66

 

224

5,241

 

$23.40

4.4%

2021

16

 

495

6,880

 

$13.90

10.6%

 

112

 

255

8,214

 

$32.21

15.4%

 

128

 

750

15,094

 

$20.13

12.8%

2022

31

 

966

11,100

 

$11.49

17.2%

 

100

 

226

8,334

 

$36.88

15.6%

 

131

 

1,192

19,434

 

$16.30

16.5%

2023

20

 

895

9,036

 

$10.10

14.0%

 

63

 

198

6,266

 

$31.65

11.7%

 

83

 

1,093

15,302

 

$14.00

13.0%

2024

25

 

1,061

10,947

 

$10.32

16.9%

 

80

 

273

7,809

 

$28.60

14.6%

 

105

 

1,334

18,756

 

$14.06

15.9%

2025

29

 

985

11,288

 

$11.46

17.5%

 

47

 

166

5,172

 

$31.16

9.7%

 

76

 

1,151

16,460

 

$14.30

14.0%

2026

9

 

363

3,322

 

$9.15

5.1%

 

26

 

77

2,896

 

$37.61

5.4%

 

35

 

440

6,218

 

$14.13

5.3%

2027

5

 

88

717

 

$8.15

1.1%

 

9

 

23

979

 

$42.57

1.8%

 

14

 

111

1,696

 

$15.28

1.4%

2028

4

 

175

1,989

 

$11.37

3.1%

 

3

 

5

140

 

$28.00

0.3%

 

7

 

180

2,129

 

$11.83

1.8%

2029

2

 

165

2,762

 

$16.74

4.3%

 

7

 

28

674

 

$24.07

1.3%

 

9

 

193

3,436

 

$17.80

2.9%

Thereafter

7

 

502

5,700

 

$11.35

8.8%

 

13

 

59

1,278

 

$21.66

2.4%

 

20

 

561

6,978

 

$12.44

5.9%

Total

151

 

5,791

$64,659

 

$11.17

100.0%

 

607

 

1,628

$53,329

 

$32.76

100.0%

 

758

 

7,419

$117,988

 

$15.90

100.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assumes all lease options are exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Greater than 10K SF

 

Less than 10K SF

 

Total

Year

# of

Leases

 

Expiring

SF

ABR

 

Rent

PSF

% of ABR

> 10K

 

# of

Leases

 

Expiring

SF

ABR

 

Rent

PSF

% of ABR

< 10K

 

# of

Leases

 

Expiring

SF

ABR

 

Rent

PSF

% of ABR

Total

MTM

0

 

0

$0

 

$0.00

0.0%

 

82

 

186

$7,005

 

$37.66

13.1%

 

82

 

186

$7,005

 

$37.66

5.9%

2020

1

 

13

203

 

$15.62

0.3%

 

59

 

117

3,983

 

$34.04

7.5%

 

60

 

130

4,186

 

$32.20

3.5%

2021

4

 

109

1,213

 

$11.13

1.9%

 

94

 

192

6,738

 

$35.09

12.6%

 

98

 

301

7,951

 

$26.42

6.7%

2022

10

 

174

2,041

 

$11.73

3.2%

 

87

 

187

7,000

 

$37.43

13.1%

 

97

 

361

9,041

 

$25.04

7.7%

2023

3

 

71

1,104

 

$15.55

1.7%

 

46

 

123

4,276

 

$34.76

8.0%

 

49

 

194

5,380

 

$27.73

4.6%

2024

3

 

101

1,358

 

$13.45

2.1%

 

56

 

177

5,210

 

$29.44

9.8%

 

59

 

278

6,568

 

$23.63

5.6%

2025

5

 

143

2,251

 

$15.74

3.5%

 

33

 

102

3,435

 

$33.68

6.4%

 

38

 

245

5,686

 

$23.21

4.8%

2026

1

 

30

165

 

$5.50

0.3%

 

26

 

68

2,592

 

$38.12

4.9%

 

27

 

98

2,757

 

$28.13

2.3%

2027

3

 

65

874

 

$13.45

1.4%

 

14

 

31

1,446

 

$46.65

2.7%

 

17

 

96

2,320

 

$24.17

2.0%

2028

1

 

27

457

 

$16.93

0.7%

 

13

 

54

1,498

 

$27.74

2.8%

 

14

 

81

1,955

 

$24.14

1.7%

2029

1

 

21

40

 

$1.90

0.1%

 

13

 

39

1,168

 

$29.95

2.2%

 

14

 

60

1,208

 

$20.13

1.0%

Thereafter

119

 

5,037

54,953

 

$10.91

85.0%

 

84

 

352

8,978

 

$25.51

16.8%

 

203

 

5,389

63,931

 

$11.86

54.2%

Total

151

 

5,791

$64,659

 

$11.17

100.0%

 

607

 

1,628

$53,329

 

$32.76

100.0%

 

758

 

7,419

$117,988

 

$15.90

100.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note: Excludes ground leases

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

 

Retail Value Inc.

Dispositions

 

$ and GLA in thousands

 

 

 

 

 

 

 

 

 

 

 

Owned

 

 

Allocated Loan

 

 

Property Name

City, State

 

GLA

 

Price

Amount (1)

 

 

 

 

 

 

 

 

 

04/17/18

 

Silver Spring Square (pre spin)

Mechanicsburg, PA

 

343

 

$80,810

$65,730

06/27/18

 

The Walk at Highwoods Preserve (pre spin)

Tampa, FL

 

138

 

25,025

18,250

07/06/18

 

Tequesta Shoppes

Tequesta, FL

 

110

 

14,333

11,400

07/10/18

 

Lake Walden Square

Plant City, FL

 

245

 

29,000

25,170

08/01/18

 

East Lloyd Commons

Evansville, IN

 

160

 

23,000

16,780

08/13/18

 

Grandville Marketplace

Grandville, MI

 

224

 

16,700

16,500

08/29/18

 

Brandon Boulevard Shoppes

Valrico, FL

 

86

 

14,650

11,120

09/14/18

 

Gresham Station

Gresham, OR

 

342

 

64,500

54,140

10/18/18

 

Palm Valley Pavilions

Goodyear, AZ

 

233

 

44,800

42,170

11/13/18

 

I-Drive Value Center

Orlando, FL

 

186

 

26,157

23,290

11/20/18

 

Douglasville Pavilion

Douglasville, GA

 

266

 

35,120

28,120

12/14/18

 

Kyle Crossing

Kyle, TX

 

121

 

27,600

22,690

 

 

 

Total 2018

 

2,454

 

$401,695

$335,360

 

 

 

 

 

 

 

 

 

02/08/19

 

Millenia Plaza

Orlando, FL

 

412

 

$56,400

$47,130

02/27/19

 

Homestead Pavilion (TD Bank)

Homestead, FL

 

4

 

4,091

2,490

03/01/19

 

West Allis Center (Chick-Fil-A)

Milwaukee, WI

 

5

 

2,211

1,680

03/04/19

 

Lowe's Home Improvement

Hendersonville, TN

 

129

 

16,058

10,700

03/26/19

 

Midway Marketplace

St. Paul, MN

 

324

 

31,210

20,400

04/05/19

 

Mariner Square

Spring Hill, FL

 

194

 

17,000

11,300

05/23/19

 

Shoppers World of Brookfield

Brookfield, WI

 

203

 

19,450

15,200

05/31/19

 

Homestead Pavilion

Homestead, FL

 

295

 

62,250

42,100

06/13/19

 

Beaver Creek Crossings

Apex, NC

 

321

 

52,750

34,300

08/07/19

 

Harbison Court

Columbia, SC

 

242

 

36,500

19,800

08/09/19

 

West Allis Center

West Allis, WI

 

259

 

18,100

11,000

12/19/19

 

Marketplace at Towne Centre

Mesquite, TX

 

180

 

19,150

16,500

 

 

 

Total 2019

 

2,568

 

$335,170

$232,600

 

 

 

 

 

 

 

 

 

01/15/20

 

Newnan Crossing S.C. Parcel (excluding Lowe's)

Newnan, GA

 

92

 

$11,600

$5,660

02/19/20

 

Hamilton Commons

Mays Landing, NJ

 

403

 

60,000

50,800

02/26/20

 

Tucson Spectrum

Tucson, AZ

 

717

 

84,000

69,300

06/30/20

 

Big Oaks Crossing

Tupelo, MS

 

348

 

21,000

14,500

07/27/20

 

Newnan Crossing -Lowe's Parcel

Newnan, GA

 

130

 

15,550

7,140

 

 

 

Total 2020 YTD

 

1,690

 

$192,150

$147,400

 

 

 

 

 

 

 

 

 

(1) Represents portion of CMBS loan balance allocated to specific asset.  Not equivalent to amount of debt repaid when specific asset was sold.

 

 

10

 

Retail Value Inc.

Capital Structure

 

$, shares and units in thousands, except per share

 

 

 

 

 

 

 

 

June 30, 2020

 

December 31, 2019

 

December 31, 2018

Capital Structure

 

 

 

 

 

 

Market Value Per Share

 

$12.36

 

$36.80

 

$25.59

 

 

 

 

 

 

 

Common Shares Outstanding

 

19,816

 

19,052

 

18,465

Common Shares Equity

 

$244,926

 

$701,119

 

$472,517

 

 

 

 

 

 

 

Redeemable Preferred Equity

 

$190,000

 

$190,000

 

190000

 

 

 

 

 

 

 

Bank Debt

 

$0

 

$0

 

$0

Mortgage Debt

 

$519,735

 

$674,331

 

$988,609

Less: Cash (including restricted cash)

 

$192,348

 

$183,294

 

$111,199

Net Debt

 

$327,387

 

$491,037

 

$877,410

 

 

 

 

 

 

 

Total Market Capitalization

 

$762,313

 

$1,382,155

 

$1,539,927

 

 

 

 

 

 

 

Debt Detail

 

 

 

 

 

 

 

 

June 30, 2020

 

Maturity

Date (1)

 

Contractual

Interest Rate (2)

Bank Debt (3)

 

 

 

 

 

 

Unsecured Revolver ($30m)

 

$0

 

09/22

 

L + 105

 

 

 

 

 

 

 

Mortgage Debt (3)

 

 

 

 

 

 

Mortgage Debt - Class A

 

$64,835

 

 

 

 

Mortgage Debt - Class B

 

$101,200

 

 

 

 

Mortgage Debt - Class C

 

$308,400

 

 

 

 

Mortgage Debt - Class HRR

 

$45,300

 

 

 

 

Total Mortgage Debt (4)

 

$519,735

 

03/24

 

L + 313

 

 

 

 

 

 

 

Debt Subtotal

 

$519,735

 

 

 

 

 

 

 

 

 

 

 

Unamortized Loan Costs, Net

 

($13,047)

 

 

 

 

Total Debt

 

$506,688

 

 

 

 

 

 

 

 

 

 

 

Rate Type

 

 

 

 

 

 

Fixed

 

$0

 

0.0 years

 

0.00%

Variable

 

$519,735

 

3.7 years

 

3.32%

 

 

$519,735

 

3.7 years

 

3.32%

 

 

 

 

 

 

 

Mortgage Debt Yield

 

 

 

 

 

 

 

 

June 30, 2020

 

December 31, 2019

 

December 31, 2018

Adjusted Net Cash Flow (5)

 

$52,162

 

$90,389

 

$99,639

Mortgage Loan Balance (6)

 

$502,460

 

$656,943

 

$961,640

Debt Yield

 

10.38%

 

13.76%

 

10.36%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Assumes borrower extension options are exercised.

 

 

 

 

 

 

(2) L = LIBOR; as of June 30, 2020 1M LIBOR .18%.

 

 

 

 

 

 

(3) Excludes loan fees and unamortized loan costs.

 

 

 

 

 

 

(4) LIBOR subject to a 3.0% cap.

 

 

 

 

 

 

(5) As defined in mortgage loan agreement. Reflects June

 

 

 

 

 

 

sale of Big Oaks Crossing

 

 

 

 

 

 

(6) Balance reflects July paydown of $17.3 million

 

 

 

 

 

 

related to the sale of Big Oaks Crossing

 

 

 

 

 

 

 

11

 

Retail Value Inc.

Property List

 

 

#

Center

MSA

Location

ST

Owned

GLA

Total

GLA

ABR

PSF

Anchor Tenants

1

Newnan Crossing

Atlanta-Sandy Springs-Roswell, GA

Newnan

GA

130

130

$7.42

Lowe's

2

Green Ridge Square

Grand Rapids-Wyoming, MI

Grand Rapids

MI

216

407

$12.57

Bed Bath & Beyond, Best Buy, Michaels, Target (U)

3

Riverdale Village

Minneapolis-St. Paul-Bloomington, MN-WI

Coon Rapids

MN

788

968

$15.68

Bed Bath & Beyond, Best Buy, Costco (U), Dick's Sporting Goods, DSW, JCPenney, Jo-Ann, Kohl's, Old Navy, T.J. Maxx

4

Maple Grove Crossing

Minneapolis-St. Paul-Bloomington, MN-WI

Maple Grove

MN

262

350

$13.42

Barnes & Noble, Bed Bath & Beyond, Cub Foods (U), Kohl's, Michaels

5

Crossroads Center

Gulfport-Biloxi-Pascagoula, MS

Gulfport

MS

555

591

$12.08

Academy Sports, Barnes & Noble, Belk, Burke's Outlet, Cinemark, Michaels, Ross Dress for Less, T.J. Maxx

6

Seabrook Commons

Boston-Cambridge-Newton, MA-NH

Seabrook

NH

175

393

$19.01

Dick's Sporting Goods, Walmart (U)

7

Wrangleboro Consumer Square

Atlantic City-Hammonton, NJ

Mays Landing

NJ

840

840

$13.62

Best Buy, BJ's Wholesale Club, Books-A-Million, Burlington, Christmas Tree Shops, Dick's Sporting Goods, Gabe's, Kohl's, Michaels, PetSmart, Staples, Target

8

Great Northern Plaza

Cleveland-Elyria, OH

North Olmsted

OH

630

669

$13.42

Bed Bath & Beyond, Best Buy, Big Lots, Burlington, DSW, Home Depot, Jo-Ann, K&G Fashion Superstore, Marc's, PetSmart

9

Uptown Solon

Cleveland-Elyria, OH

Solon

OH

182

182

$15.89

Bed Bath & Beyond

10

Peach Street Marketplace

Erie, PA

Erie

PA

721

1,001

$10.59

Bed Bath & Beyond, Best Buy (U), Burlington, Cinemark, Hobby Lobby, Home Depot (U), Kohl's, Lowe's, Marshalls, PetSmart,Target (U)

11

Noble Town Center

Philadelphia-Camden-Wilmington, PA-NJ-DE-MD

Jenkintown

PA

168

168

$14.22

Bed Bath & Beyond, PetSmart, Ross Dress for Less, Stein Mart

12

Willowbrook Plaza

Houston-The Woodlands-Sugar Land, TX

Houston

TX

385

393

$16.08

AMC Theatres, Bed Bath & Beyond, Bel Furniture, buybuy BABY, Cost Plus World Market

13

Marketplace of Brown Deer

Milwaukee-Waukesha-West Allis, WI

Brown Deer

WI

405

405

$9.49

Bob's Discount Furniture, Burlington, Michaels, OfficeMax, Pick 'n Save, Ross Dress for Less, T.J. Maxx

14

Plaza Isabela

Aguadilla-Isabela, PR

Isabela

PR

259

259

$14.58

Selectos Supermarket, Walmart

15

Plaza Fajardo

Fajardo, PR

Fajardo

PR

274

274

$15.93

Econo, Walmart

16

Plaza Walmart

Guayama, PR

Guayama

PR

164

164

$9.27

Walmart

17

Plaza del Atlántico

San Juan-Carolina-Caguas, PR

Arecibo

PR

223

223

$11.53

Capri

18

Plaza del Sol

San Juan-Carolina-Caguas, PR

Bayamon

PR

598

710

$31.33

Bed Bath & Beyond, Caribbean Cinemas, Dave & Buster's, H & M, Home Depot (U), Old Navy, Pep Boys, Walmart

19

Plaza Río Hondo

San Juan-Carolina-Caguas, PR

Bayamon

PR

555

555

$24.85

Best Buy, Caribbean Cinemas, Marshalls Mega Store, PetSmart, Pueblo, T.J. Maxx

20

Plaza Escorial

San Juan-Carolina-Caguas, PR

Carolina

PR

525

636

$15.58

Caribbean Cinemas, Home Depot (U), OfficeMax, Old Navy, PetSmart, Sam's Club, Walmart

21

Plaza Cayey

San Juan-Carolina-Caguas, PR

Cayey

PR

313

339

$9.04

Caribbean Cinemas (U), Pep Boys, Walmart

22

Plaza del Norte

San Juan-Carolina-Caguas, PR

Hatillo

PR

686

703

$19.18

Caribbean Cinemas, Econo Supermarket, JCPenney, OfficeMax, Rooms To Go, Sears, T.J. Maxx

23

Plaza Palma Real

San Juan-Carolina-Caguas, PR

Humacao

PR

448

448

$14.25

Marshalls, Pep Boys, Walmart

24

Señorial Plaza

San Juan-Carolina-Caguas, PR

Rio Piedras

PR

202

202

$17.33

Pueblo

25

Plaza Vega Baja

San Juan-Carolina-Caguas, PR

Vega Baja

PR

185

185

$11.32

Econo

 

 

 

Total

 

9,889

11,194

 

 

 

 

 

 

 

 

 

 

 

Note: (U) indicates unowned.  Anchors include tenants greater than 20K SF

 

 

 

 

 

 

 

12

 

Retail Value Inc.

Notable Accounting and Supplemental Policies

 

The information contained in the Quarterly Financial Supplement does not purport to disclose all items required by the accounting principles generally accepted in the United States of America (“GAAP”) and is unaudited information.  The Company’s Quarterly Financial Supplement should be read in conjunction with the Company’s Form 10-K and Form 10-Q.

 

Rental Income (Revenues)

 

•

Percentage and overage rents are recognized after the tenants’ reported sales have exceeded the applicable sales breakpoint.  

 

 

•

Tenant reimbursements are recognized in the period in which the expenses are incurred.  

 

 

•

Lease termination fees are recognized upon termination of a tenant’s lease when the Company has no further obligations under the lease.

 

 

Lease Modification Accounting

 

•

Elected not to apply lease modification accounting to lease amendments in which the total amount of rent due under the lease is substantially the same and there has been no increase in the lease term.  A majority of the Company’s concession amendments within this category provide for the deferral of rental payments to a later date within the remaining lease term.  

 

 

•

If abatements are granted as part of a lease amendment, the Company has elected to not treat the abatements as variable rent and instead will record the concession’s impact over the tenant’s remaining lease term on a straight-line basis. Modifications to leases that involve an increase in the lease term have been treated as a lease modification.  

 

 

•

For those tenants where the Company is unable to assert that collection of amounts due over the lease term is probable, regardless if the Company has entered into a deferral agreement to extend the payment terms, the Company has categorized these tenants on the cash basis of accounting.  As a result, no rental income is recognized from such tenants once they have been placed on the cash basis of accounting until payments are received and all existing accounts receivable relating to these tenants have been reserved in full, including straight-line rental income.  The Company will remove the cash basis designation and resume recording rental income from such tenants during the period earned at such time it believes collection from the tenants is probable based upon a demonstrated payment history or recapitalization event.

 

 

Deferred Financing Costs

 

•

Costs incurred in obtaining term financing are included as a reduction of the related debt liability and costs incurred related to the revolving credit facilities are included in other assets on the consolidated balance sheets.  All costs are amortized on a straight-line basis over the term of the related debt agreement; such amortization is reflected as interest expense in the consolidated income statements.

 

 

Real Estate

 

•

Real estate assets are stated at cost less accumulated depreciation, which, in the opinion of management, is not in excess of the individual property's estimated undiscounted future cash flows, including estimated proceeds from disposition.

 

 

•

Construction in progress includes expansions and re-tenanting.  

 

 

•

Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the assets as follows:

 

 

Buildings20 to 31.5 years

Building Improvements5 to 20 years

Furniture/Fixtures/ Shorter of economic life or lease terms

Tenant Improvements

 

13

 

Retail Value Inc.

Notable Accounting and Supplemental Policies

Capitalization

 

•

Expenditures for maintenance and repairs are charged to operations as incurred.  Renovations and expenditures that improve or extend the life of the asset are capitalized.

 

 

•

The Company capitalizes interest on funds used for the construction or expansion of shopping centers.  Capitalization of interest ceases when construction activities are completed and the property is available for occupancy by tenants.

 

 

•

Interest expense incurred during construction is capitalized and depreciated over the building life.

 

 

 

 

14

 

Retail Value Inc.

Non-GAAP Measures

 

FFO and Operating FFO

The Company believes that Funds from Operations (“FFO”) and Operating FFO, both non-GAAP financial measures, provide additional and useful means to assess the financial performance of REITs.  FFO and Operating FFO are frequently used by the real estate industry, as well as securities analysts, investors and other interested parties, to evaluate the performance of REITs.  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 excludes GAAP historical cost depreciation and amortization of real estate and real estate investments, which assume that the value of real estate assets diminishes ratably over time.  Historically, however, real estate values have risen or fallen with market conditions, and many companies use different depreciable lives and methods.  Because FFO excludes depreciation and amortization unique to real estate and gains and losses from depreciable property dispositions, it can provide a performance measure that, when compared year over year, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, interest costs and acquisition, disposition and development activities.  This provides a perspective of the Company’s financial performance not immediately apparent from net income determined in accordance with GAAP.

 

FFO is generally defined and calculated by the Company as net income (loss) (computed in accordance with 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 believes that certain charges and income recorded in its operating results are not comparable or reflective of its core operating performance.  Operating FFO is useful to investors as the Company removes non-comparable charges, income and gains to analyze the results of its operations and assess performance of the core operating real estate portfolio.  As a result, the Company also computes Operating FFO and discusses it with the users of its financial statements, in addition to other measures such as net income (loss) determined in accordance with GAAP and FFO.  Operating FFO is generally defined and calculated by the Company as FFO excluding certain charges and income that management believes are not comparable and indicative of the results of the Company’s operating real estate portfolio.  Such adjustments include gains/losses on the early extinguishment of debt, net hurricane-related activity and transaction costs.  The disclosure of these adjustments is regularly requested by users of the Company’s financial statements.

 

The adjustment for these charges and income may not be comparable to how other REITs or real estate companies calculate their results of operations, and the Company’s calculation of Operating FFO differs from NAREIT’s definition of FFO.  Additionally, the Company provides no assurances that these charges and income are non-recurring.  These charges and income could be reasonably expected to recur in future results of operations.

 

These measures of performance are used by the Company for several business purposes and by other REITs.  The Company uses FFO and/or Operating FFO in part (i) as a disclosure to improve the understanding of the Company’s operating results among the investing public, (ii) as a measure of a real estate asset’s performance and (iii) to compare the Company’s performance to that of other publicly traded shopping center REITs.  For the reasons described above, management believes that FFO and Operating FFO provide the Company and investors with an important indicator of the Company’s operating performance.  They provide recognized measures of performance other than GAAP net income, which may include non-cash items (often significant).  Other real estate companies may calculate FFO and Operating FFO in a different manner.

 

15

 

Retail Value Inc.

Non-GAAP Measures

Management recognizes the limitations of FFO and Operating FFO when compared to GAAP’s net income.  FFO and Operating FFO do not represent amounts available for dividends, capital replacement or expansion, debt service obligations or other commitments and uncertainties.  Management does not use FFO or Operating FFO as an indicator of the Company’s cash obligations and funding requirements for future commitments, acquisitions or development activities.  Neither FFO nor Operating FFO represents cash generated from operating activities in accordance with GAAP, and neither is necessarily indicative of cash available to fund cash needs.  Neither FFO nor Operating FFO should be considered an alternative to net income (computed in accordance with GAAP) or as an alternative to cash flow as a measure of liquidity.  FFO and Operating FFO are simply used as additional indicators of the Company’s operating performance.  The Company believes that to further understand its performance, FFO and Operating FFO should be compared with the Company’s reported net income (loss) and considered in addition to cash flows determined in accordance with GAAP, as presented in its condensed consolidated financial statements. Reconciliations of these measures to their most directly comparable GAAP measure of net income (loss) have been provided herein.

 

Net Operating Income (“NOI”)

The Company uses NOI, which is 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.

16

 

 

 

Retail Value Inc. 3300 Enterprise Pkwy. Beachwood, OH 44122 P.216.755.5500 F. 216.755.1500 www.retailvalueinc.com