Retail Properties Of America, Inc. Reports First Quarter 2015 Financial Results
FINANCIAL RESULTS
For the quarter ended
- Operating Funds From Operations (Operating FFO) of
$62.3 million , or$0.26 per share, compared to$63.0 million , or$0.27 per share, for the same period in 2014; - Funds From Operations (FFO) of
$60.5 million , or$0.26 per share, compared to$65.7 million , or$0.28 per share, for the same period in 2014; and - Net income attributable to common shareholders of
$10.7 million , or$0.05 per share, compared to$11.8 million , or$0.05 per share, for the same period in 2014.
OPERATING RESULTS
For the quarter ended
- 4.9% increase in same store net operating income (NOI) over the comparable period in 2014, based on same store occupancy of 94.2% at
March 31, 2015 , up 50 basis points from 93.7% atMarch 31, 2014 and down 100 basis points from 95.2% atDecember 31, 2014 ; - Total portfolio percent leased, including leases signed but not commenced: 94.7% at
March 31, 2015 , up 10 basis points from 94.6% atMarch 31, 2014 and down 90 basis points from 95.6% atDecember 31, 2014 ; - Retail portfolio percent leased, including leases signed but not commenced: 94.5% at
March 31, 2015 , up 20 basis points from 94.3% atMarch 31, 2014 and down 90 basis points from 95.4% atDecember 31, 2014 ; - 765,000 square feet of retail leasing transactions comprised of 139 new and renewal leases; and
- Positive comparable cash leasing spreads of 7.1%.
"We are pleased to report another solid quarter of operational and transactional results while also executing on remerchandising opportunities in order to drive long term value. We believe our strong start to the year, combined with today's favorable leasing environment, further strengthens our ability to successfully execute on our 2015 strategic initiatives," stated
REMERCHANDISING UPDATE
The Company now expects to remerchandise 15 anchor locations within the 2015 same store portfolio, representing approximately 537,000 square feet of gross leasable area. During the quarter, tenants in nine of these locations vacated, representing approximately 245,000 square feet. Year to date, the Company has re-leased three of these locations, representing approximately 83,000 square feet. The Company continues to expect that the weighted average re-leasing spread for the 15 anchor locations will be in the mid-single digit range, with weighted average downtime of approximately 12 months.
INVESTMENT ACTIVITY
Acquisitions
During the quarter, the Company completed
Subsequent to quarter end, the Company closed on the previously announced acquisition of Tysons Corner ("Tysons") in the
As previously announced, the Company entered into a purchase agreement to acquire a grocery-anchored shopping center located in the Seattle MSA for a gross purchase price of
Year-to-date, the Company has completed or announced
Dispositions
During the quarter, the Company completed
BALANCE SHEET AND CAPITAL MARKETS ACTIVITY
Senior Unsecured Notes
During the quarter, the Company completed a public offering of
During the quarter, the Company repaid
As of
GUIDANCE
The Company is maintaining its 2015 Operating FFO guidance of
DIVIDEND
On
On
WEBCAST AND SUPPLEMENTAL INFORMATION
The Company's management team will hold a webcast on
A live webcast will be available online on the Company's website at www.rpai.com in the Investor Relations section. The conference call can be accessed by dialing (877) 705-6003 or (201) 493-6725 for international participants. Please dial in at least ten minutes prior to the start of the call to register.
A replay of the webcast will be available. To listen to the replay, please go to www.rpai.com in the Investor Relations section of the website and follow the instructions. A replay of the call will be available from
The Company has also posted supplemental financial and operating information and other data in the Investor Relations section of its website.
ABOUT RPAI
SAFE HARBOR LANGUAGE
The statements and certain other information contained in this press release, which can be identified by the use of forward-looking terminology such as "may," "expect," "continue," "remains," "intend," "aim," "should," "prospects," "could," "future," "potential," "believes," "plans," "likely," "anticipate" and "probable," or the negative thereof or other variations thereon or comparable terminology, constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbors created thereby. These forward-looking statements reflect the Company's current views about its plans, intentions, expectations, strategies and prospects, which are based on the information currently available to the Company and on assumptions it has made. Although the Company believes that its plans, intentions, expectations, strategies and prospects as reflected in or suggested by those forward-looking statements are reasonable, the Company can give no assurance that such plans, intentions, expectations or strategies will be attained or achieved. Furthermore, these forward-looking statements should be considered as subject to the many risks and uncertainties that exist in the Company's operations and business environment. Such risks and uncertainties could cause actual results to differ materially from those projected. These uncertainties include, but are not limited to, economic, business and financial conditions, and changes in the Company's industry and changes in the real estate markets in particular, market price of the Company's common stock, general volatility of the capital and credit markets, competitive and cost factors, the ability of the Company to enter into new leases or renew leases on favorable terms, frequency and magnitude of defaults on, early terminations of or non-renewal of leases by tenants, bankruptcy or insolvency of a major tenant or a significant number of smaller tenants, the effects of declining real estate valuations and impairment charges on the Company's operating results, interest rates and operating costs, rental rates and/or vacancy rates, risks generally associated with real estate acquisitions, dispositions and redevelopment activity, satisfaction of closing conditions to the pending transactions described herein, the Company's failure to successfully execute its non-core disposition program and capital recycling efforts, the Company's ability to create long-term shareholder value, the Company's ability to effectively manage growth, the availability, terms and deployment of capital, regulatory changes and other risk factors, including those detailed in the sections of the Company's most recent Forms 10-K and 10-Q filed with the
NON-GAAP FINANCIAL MEASURES
As defined by the
The Company also reports Operating FFO, which is defined as FFO excluding the impact of discrete non-operating transactions and other events which the Company does not consider representative of the comparable operating results of the Company's core business platform, its real estate operating portfolio. Specific examples of discrete non-operating transactions and other events include, but are not limited to, the financial statement impact of gains or losses associated with the early extinguishment of debt or other liabilities, actual or anticipated settlement of litigation involving the Company, and impairment charges to write down the carrying value of assets other than depreciable real estate, which are otherwise excluded from the Company's calculation of FFO. The Company believes that Operating FFO, which is a non-GAAP performance measure, provides an additional and useful means to assess the operating performance of REITs. Operating FFO does not represent an alternative to "Net Income" as an indicator of the Company's performance or "Cash Flows from Operating Activities" as determined by GAAP as a measure of the Company's capacity to fund cash needs, including the payment of dividends. Further, comparison of the Company's presentation of Operating FFO to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in definition and application by such REITs.
The Company also reports same store NOI. The Company defines NOI as operating revenues (rental income, tenant recovery income and other property income, excluding straight-line rental income, amortization of lease inducements, amortization of acquired above and below market lease intangibles and lease termination fee income) less property operating expenses (real estate tax expense and property operating expense, excluding straight-line ground rent expense, amortization of acquired ground lease intangibles and straight-line bad debt expense). Same Store NOI represents NOI from the Company's same store portfolio consisting of 201 operating properties acquired or placed in service and stabilized prior to
Adjusted EBITDA represents net income attributable to common shareholders before interest, income taxes, depreciation and amortization, as further adjusted to eliminate the impact of certain items that the Company does not consider indicative of its ongoing performance. The Company believes that Adjusted EBITDA is useful because it allows investors and management to evaluate and compare its performance from period to period in a meaningful and consistent manner in addition to standard financial measurements under GAAP. Adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative to net income attributable to common shareholders, as an indicator of operating performance or any measure of performance derived in accordance with GAAP. The Company's calculation of Adjusted EBITDA may be different from the calculation used by other companies and, accordingly, comparability may be limited.
Net Debt to Adjusted EBITDA represents (i) the Company's total debt less cash and cash equivalents divided by (ii) Adjusted EBITDA for the prior three months, annualized. The Company believes that this ratio is useful because it provides investors with information regarding total debt net of cash and cash equivalents, which could be used to repay debt, compared to the Company's performance as measured using Adjusted EBITDA.
Net Debt and Preferred Stock to Adjusted EBITDA represents (i) the Company's total debt, plus preferred stock, less cash and cash equivalents divided by (ii) Adjusted EBITDA for the prior three months, annualized. The Company believes that this ratio is useful because it provides investors with information regarding total debt and preferred stock, net of cash and cash equivalents, which could be used to repay debt, compared to the Company's performance as measured using Adjusted EBITDA.
CONTACT INFORMATION
(630) 634-4233
|
||||||||
Condensed Consolidated Balance Sheets |
||||||||
(amounts in thousands, except par value amounts) |
||||||||
(unaudited) |
||||||||
2015 |
2014 |
|||||||
Assets |
||||||||
Investment properties: |
||||||||
Land |
$ |
1,297,067 |
$ |
1,195,369 |
||||
Building and other improvements |
4,652,456 |
4,442,446 |
||||||
Developments in progress |
42,983 |
42,561 |
||||||
5,992,506 |
5,680,376 |
|||||||
Less accumulated depreciation |
(1,411,423) |
(1,365,471) |
||||||
Net investment properties |
4,581,083 |
4,314,905 |
||||||
Cash and cash equivalents |
64,895 |
112,292 |
||||||
Accounts and notes receivable (net of allowances of |
77,937 |
86,013 |
||||||
Acquired lease intangible assets, net |
151,437 |
125,490 |
||||||
Assets associated with investment properties held for sale |
5,041 |
33,640 |
||||||
Other assets, net |
112,817 |
131,520 |
||||||
Total assets |
$ |
4,993,210 |
$ |
4,803,860 |
||||
Liabilities and Equity |
||||||||
Liabilities: |
||||||||
Mortgages payable, net (includes unamortized premium of |
$ |
1,560,956 |
$ |
1,634,465 |
||||
Unsecured notes payable, net (includes unamortized discount of |
498,822 |
250,000 |
||||||
Unsecured term loan |
450,000 |
450,000 |
||||||
Unsecured revolving line of credit |
35,000 |
— |
||||||
Accounts payable and accrued expenses |
54,563 |
61,129 |
||||||
Distributions payable |
39,284 |
39,187 |
||||||
Acquired lease intangible liabilities, net |
117,502 |
100,641 |
||||||
Liabilities associated with investment properties held for sale |
320 |
8,203 |
||||||
Other liabilities |
75,575 |
70,860 |
||||||
Total liabilities |
2,832,022 |
2,614,485 |
||||||
Commitments and contingencies |
||||||||
Equity: |
||||||||
Preferred stock, |
5 |
5 |
||||||
Class A common stock, |
237 |
237 |
||||||
Additional paid-in capital |
4,923,342 |
4,922,864 |
||||||
Accumulated distributions in excess of earnings |
(2,763,258) |
(2,734,688) |
||||||
Accumulated other comprehensive loss |
(632) |
(537) |
||||||
Total shareholders' equity |
2,159,694 |
2,187,881 |
||||||
Noncontrolling interests |
1,494 |
1,494 |
||||||
Total equity |
2,161,188 |
2,189,375 |
||||||
Total liabilities and equity |
$ |
4,993,210 |
$ |
4,803,860 |
|
||||||||
Condensed Consolidated Statements of Operations |
||||||||
(amounts in thousands, except per share amounts) |
||||||||
(unaudited) |
||||||||
Three Months Ended |
||||||||
2015 |
2014 |
|||||||
Revenues: |
||||||||
Rental income |
$ |
119,788 |
$ |
117,531 |
||||
Tenant recovery income |
31,300 |
29,748 |
||||||
Other property income |
2,109 |
1,912 |
||||||
Total revenues |
153,197 |
149,191 |
||||||
Expenses: |
||||||||
Property operating expenses |
25,695 |
26,526 |
||||||
Real estate taxes |
20,510 |
18,414 |
||||||
Depreciation and amortization |
54,676 |
53,830 |
||||||
Provision for impairment of investment properties |
— |
394 |
||||||
General and administrative expenses |
10,992 |
8,450 |
||||||
Total expenses |
111,873 |
107,614 |
||||||
Operating income |
41,324 |
41,577 |
||||||
Gain on extinguishment of other liabilities |
— |
4,258 |
||||||
Equity in loss of unconsolidated joint ventures, net |
— |
(778) |
||||||
Interest expense |
(34,045) |
(31,863) |
||||||
Other income, net |
1,225 |
427 |
||||||
Income from continuing operations |
8,504 |
13,621 |
||||||
Discontinued operations: |
||||||||
Loss, net |
— |
(148) |
||||||
Gain on sales of investment properties |
— |
655 |
||||||
Income from discontinued operations |
— |
507 |
||||||
Gain on sales of investment properties |
4,572 |
— |
||||||
Net income |
13,076 |
14,128 |
||||||
Net income attributable to the Company |
13,076 |
14,128 |
||||||
Preferred stock dividends |
(2,362) |
(2,362) |
||||||
Net income attributable to common shareholders |
$ |
10,714 |
$ |
11,766 |
||||
Earnings per common share - basic and diluted |
||||||||
Continuing operations |
$ |
0.05 |
$ |
0.05 |
||||
Discontinued operations |
— |
— |
||||||
Net income per common share attributable to common shareholders |
$ |
0.05 |
$ |
0.05 |
||||
Weighted average number of common shares outstanding - basic |
236,250 |
236,151 |
||||||
Weighted average number of common shares outstanding - diluted |
236,253 |
236,153 |
|
||||||||
Reconciliation of Non-GAAP Financial Measures |
||||||||
(amounts in thousands, except per share amounts) |
||||||||
(unaudited) |
||||||||
Funds From Operations (FFO) and Operating FFO (a) |
||||||||
Three Months Ended |
||||||||
2015 |
2014 |
|||||||
Net income attributable to common shareholders |
$ |
10,714 |
$ |
11,766 |
||||
Depreciation and amortization |
54,401 |
54,243 |
||||||
Provision for impairment of investment properties |
— |
394 |
||||||
Gain on sales of investment properties |
(4,572) |
(655) |
||||||
FFO |
$ |
60,543 |
$ |
65,748 |
||||
FFO per common share outstanding |
$ |
0.26 |
$ |
0.28 |
||||
FFO |
$ |
60,543 |
$ |
65,748 |
||||
Impact on earnings from the early extinguishment of debt, net |
2,786 |
1,680 |
||||||
Provision for hedge ineffectiveness |
(25) |
(13) |
||||||
Gain on extinguishment of other liabilities |
— |
(4,258) |
||||||
Other (b) |
(1,000) |
(115) |
||||||
Operating FFO |
$ |
62,304 |
$ |
63,042 |
||||
Operating FFO per common share outstanding |
$ |
0.26 |
$ |
0.27 |
(a) |
Results for the three months ended |
(b) |
Consists of settlement and easement proceeds, which are included in "Other income, net" in the condensed consolidated statements of operations. |
|
||||||||
Reconciliation of Non-GAAP Financial Measures |
||||||||
(amounts in thousands) |
||||||||
(unaudited) |
||||||||
Reconciliation of Net Income Attributable to Common Shareholders to NOI |
||||||||
Three Months Ended |
||||||||
2015 |
2014 |
|||||||
Operating revenues: |
||||||||
Same store investment properties (201 properties): |
||||||||
Rental income |
$ |
104,691 |
$ |
101,634 |
||||
Tenant recovery income |
26,891 |
26,268 |
||||||
Other property income |
1,041 |
839 |
||||||
Other investment properties: |
||||||||
Rental income |
13,823 |
13,600 |
||||||
Tenant recovery income |
4,409 |
3,480 |
||||||
Other property income |
934 |
943 |
||||||
Operating expenses: |
||||||||
Same store investment properties (201 properties): |
||||||||
Property operating expenses |
(20,318) |
(21,983) |
||||||
Real estate taxes |
(17,726) |
(16,564) |
||||||
Other investment properties: |
||||||||
Property operating expenses |
(4,583) |
(3,636) |
||||||
Real estate taxes |
(2,784) |
(1,850) |
||||||
NOI from continuing operations: |
||||||||
Same store investment properties |
94,579 |
90,194 |
||||||
Other investment properties |
11,799 |
12,537 |
||||||
Total NOI from continuing operations |
106,378 |
102,731 |
||||||
Other income (expense): |
||||||||
Straight-line rental income, net |
1,012 |
1,943 |
||||||
Amortization of acquired above and below market lease intangibles, net |
451 |
512 |
||||||
Amortization of lease inducements |
(189) |
(158) |
||||||
Lease termination fees |
134 |
105 |
||||||
Straight-line ground rent expense |
(934) |
(1,022) |
||||||
Amortization of acquired ground lease intangibles |
140 |
140 |
||||||
Depreciation and amortization |
(54,676) |
(53,830) |
||||||
Provision for impairment of investment properties |
— |
(394) |
||||||
General and administrative expenses |
(10,992) |
(8,450) |
||||||
Gain on extinguishment of other liabilities |
— |
4,258 |
||||||
Equity in loss of unconsolidated joint ventures, net |
— |
(778) |
||||||
Interest expense |
(34,045) |
(31,863) |
||||||
Other income, net |
1,225 |
427 |
||||||
Total other expense |
(97,874) |
(89,110) |
||||||
Income from continuing operations |
8,504 |
13,621 |
||||||
Discontinued operations: |
||||||||
Loss, net |
— |
(148) |
||||||
Gain on sales of investment properties |
— |
655 |
||||||
Income from discontinued operations |
— |
507 |
||||||
Gain on sales of investment properties |
4,572 |
— |
||||||
Net income |
13,076 |
14,128 |
||||||
Net income attributable to the Company |
13,076 |
14,128 |
||||||
Preferred stock dividends |
(2,362) |
(2,362) |
||||||
Net income attributable to common shareholders |
$ |
10,714 |
$ |
11,766 |
|
||||||||
Reconciliation of Non-GAAP Financial Measures |
||||||||
(amounts in thousands, except ratios and per share amounts) |
||||||||
(unaudited) |
||||||||
Reconciliation of Net Income Attributable to Common Shareholders to Adjusted EBITDA |
||||||||
Three Months Ended |
||||||||
|
|
|||||||
Net income attributable to common shareholders |
$ |
10,714 |
$ |
23,502 |
||||
Preferred stock dividends |
2,362 |
2,363 |
||||||
Interest expense |
34,045 |
32,743 |
||||||
Depreciation and amortization |
54,676 |
52,385 |
||||||
Gain on sales of investment properties |
(4,572) |
(26,501) |
||||||
Provision for impairment of investment properties |
— |
11,825 |
||||||
Adjusted EBITDA |
$ |
97,225 |
$ |
96,317 |
||||
Annualized |
$ |
388,900 |
$ |
385,268 |
Reconciliation of Debt to Total Net Debt and Net Debt and Preferred Stock |
||||||||
|
|
|||||||
Total consolidated debt |
$ |
2,544,778 |
$ |
2,342,540 |
||||
Less: consolidated cash and cash equivalents |
(64,895) |
(112,292) |
||||||
Total net debt |
$ |
2,479,883 |
$ |
2,230,248 |
||||
Preferred stock |
135,000 |
135,000 |
||||||
Net debt and preferred stock |
$ |
2,614,883 |
$ |
2,365,248 |
||||
Net Debt to Adjusted EBITDA (a) |
6.4x |
5.8x |
||||||
Net Debt and Preferred Stock to Adjusted EBITDA (a) |
6.7x |
6.1x |
FFO and Operating FFO Guidance |
||||||||
Per Full Year 2015 |
||||||||
Low |
High |
|||||||
Net income attributable to common shareholders |
$ |
0.54 |
$ |
0.58 |
||||
Depreciation and amortization |
0.90 |
0.90 |
||||||
Provision for impairment of investment properties |
— |
— |
||||||
Gain on sales of investment properties |
(0.55) |
(0.55) |
||||||
FFO |
$ |
0.89 |
$ |
0.93 |
||||
Impact on earnings from the early extinguishment of debt, net |
0.08 |
0.08 |
||||||
Provision for hedge ineffectiveness |
— |
— |
||||||
Other |
— |
— |
||||||
Operating FFO |
$ |
0.97 |
$ |
1.01 |
(a) |
For purposes of these ratio calculations, annualized three months ended figures were used. |
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