Retail Properties Of America, Inc. Reports Second Quarter And Year To Date Results
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Company Release - 7/31/2018 4:15 PM ET
OAK BROOK, Ill., July 31, 2018 /PRNewswire/ -- Retail Properties of America, Inc. (NYSE: RPAI) (the "Company") today reported financial and operating results for the quarter and six months ended June 30, 2018.
FINANCIAL RESULTS
For the quarter ended June 30, 2018, the Company reported:
Net income attributable to common shareholders of $10.9 million, or $0.05 per diluted share, compared to $112.4 million, or $0.48 per diluted share, for the same period in 2017;
Funds from operations (FFO) attributable to common shareholders of $55.0 million, or $0.25 per diluted share, compared to $60.7 million, or $0.26 per diluted share, for the same period in 2017; and
Operating funds from operations (Operating FFO) attributable to common shareholders of $55.1 million, or $0.25 per diluted share, compared to $62.9 million, or $0.27 per diluted share, for the same period in 2017.
For the six months ended June 30, 2018, the Company reported:
Net income attributable to common shareholders of $52.7 million, or $0.24 per diluted share, compared to $100.9 million, or $0.43 per diluted share, for the same period in 2017;
FFO attributable to common shareholders of $110.0 million, or $0.50 per diluted share, compared to $61.2 million, or $0.26 per diluted share, for the same period in 2017; and
Operating FFO attributable to common shareholders of $110.8 million, or $0.51 per diluted share, compared to $129.8 million, or $0.55 per diluted share, for the same period in 2017.
The Company completed its portfolio transformation during the six months ended June 30, 2018. The Company owned 132 retail operating properties and one office property as of June 30, 2017, which decreased to 105 retail operating properties as of June 30, 2018. Gain on sales of investment properties was a significant driver of net income attributable to common shareholders for the three and six months ended June 30, 2017, contributing approximately $116.6 million, or $0.50 per diluted share, and $157.8 million, or $0.67 per diluted share, respectively, compared to no gain on sales of investment properties and $34.5 million, or $0.16 per diluted share, for the three and six months ended June 30, 2018, respectively.
OPERATING RESULTS
For the quarter ended June 30, 2018, the Companys portfolio results were as follows:
1.1% increase in same store net operating income (NOI) over the comparable period in 2017;
Total same store portfolio percent leased, including leases signed but not commenced: 93.6% at June 30, 2018, down 80 basis points from 94.4% at both March 31, 2018 and June 30, 2017. Toys "R" Us move-outs accounted for 105 basis points of deterioration;
Retail portfolio percent leased, including leases signed but not commenced: 93.5% at June 30, 2018, down 80 basis points from 94.3% at March 31, 2018 and down 20 basis points from 93.7% at June 30, 2017. Toys "R" Us move-outs accounted for 105 basis points of deterioration;
Retail portfolio annualized base rent (ABR) per occupied square foot of $19.29 at June 30, 2018, up 7.2% from $18.00 ABR per occupied square foot at June 30, 2017;
689,000 square feet of retail leasing transactions comprised of 128 new and renewal leases; and
Positive comparable cash leasing spreads of 4.4% on new leases and 5.1% on renewal leases for a blended re-leasing spread of 5.0%. Excluding the impact from one lease that backfilled a portion of a former Gander Mountain space, blended comparable cash re-leasing spreads were 5.5%, including 9.4% on new leases.
For the six months ended June 30, 2018, the Company's portfolio results were as follows:
1.3% increase in same store NOI over the comparable period in 2017;
1,326,000 square feet of retail leasing transactions comprised of 225 new and renewal leases; and
Positive comparable cash leasing spreads of 10.2% on new leases and 5.3% on renewal leases for a blended re-leasing spread of 5.7%.
"At the midpoint in our year of internal focus, we continue to execute on all cylinders across the business," stated Steve Grimes, chief executive officer. "Our leasing velocity continues and reflects the team's dedication to driving meaningful growth across the portfolio. With the signing of the development joint venture agreement at One Loudoun Downtown, we are on track with our plans to further enhance this trophy asset and create additional long-term shareholder value through its expansion."
INVESTMENT ACTIVITY
Dispositions
To date in 2018, the Company has completed property dispositions totaling $193.0 million and the sale of development air rights for $12.0 million. During the quarter, the Company completed the sales of one single-user retail asset for $1.6 million and its one remaining office complex, Schaumburg Towers, for a purchase price of $86.6 million.
In addition, the Company is under contract to sell land and the rights to develop 30 residential units at One Loudoun Downtown for $6.8 million. Subsequent to quarter end, the first phase of this transaction closed for a gross sales price of $1.8 million, which included the rights to develop eight residential units. The remaining two phases are expected to close by early 2019, subject to satisfaction of customary closing conditions.
One Loudoun Downtown Expansion – Joint Venture
Subsequent to quarter end, the Company entered into a development joint venture agreement for the expansion of pads G and H at One Loudoun Downtown. The project encompasses the construction of 378 residential units and up to 80,000 square feet of commercial space. The joint venture facilitates the construction and management of the residential units and construction of a portion of the commercial space, which will be delivered to the Company once complete.
BALANCE SHEET AND CAPITAL MARKETS ACTIVITY
As of June 30, 2018, the Company had approximately $1.6 billion of consolidated indebtedness with a weighted average contractual interest rate of 3.93%, a weighted average maturity of 5.3 years and a net debt to adjusted EBITDAre ratio of 5.3x.
During the quarter, as previously announced, the Company closed on a $1.1 billion amended and restated unsecured credit facility (2018 Unsecured Credit Facility). The 2018 Unsecured Credit Facility was amended and restated as follows:
$850 Million Unsecured Revolving Line of Credit
Increased the capacity on the existing unsecured revolver by $100 million to $850 million;
Set pricing, which is based on the Company's leverage, at LIBOR plus 105 basis points, a 30 basis point improvement from the previous rate;
Extended the maturity date to April 22, 2022 from January 5, 2020; and
Retained two six-month extension options.
$250 Million Unsecured Term Loan Due 2021
Set pricing, which is based on the Company's leverage, at LIBOR plus 120 basis points, a 10 basis point improvement from the previous rate; and
Retained the maturity date of January 5, 2021.
$100 Million Unsecured Term Loan Due 2018
Repaid the remaining $100 million unsecured term loan that was scheduled to mature on May 11, 2018.
In recognition of the completion of the Company's portfolio transformation and its improved portfolio quality, the capitalization rate used to calculate certain financial covenants under the 2018 Unsecured Credit Facility was set at 6.50%, a 25 basis point improvement from the previous rate.
GUIDANCE
The Company expects to generate net income attributable to common shareholders of $0.33 to $0.35 per diluted share in 2018. The Company is revising its 2018 Operating FFO attributable to common shareholders guidance range to $1.00 to $1.02 per diluted share from $0.98 to $1.02 per diluted share, an increase of $0.01 at the midpoint of the range, based, in part, on the following assumptions:
Same store NOI growth of 1.75% to 2.75%, a decrease of 25 basis points at the midpoint of the range;
Acquisitions of $25 to $75 million, including repurchases of common stock, a decrease of $50 million at the midpoint of the range;
Property dispositions of approximately $200 million; and
General and administrative expenses of $40 to $42 million, excluding the impact on earnings from executive separation, a reduction of $0.5 million at the midpoint of the range.
Press Release - RPAI
