RETAIL PROPERTIES OF AMERICA, INC. REPORTS
SECOND QUARTER AND YEAR TO DATE 2015 FINANCIAL RESULTS
Oak Brook, IL – August 4, 2015 – Retail Properties of America, Inc. (NYSE: RPAI) (the “Company”) today reported financial and operating results for the quarter and six months ended June 30, 2015.
FINANCIAL RESULTS
For the quarter ended June 30, 2015, the Company reported:
| |
▪ | Operating funds from operations (Operating FFO) attributable to common shareholders of $61.9 million, or $0.26 per share, compared to $65.7 million, or $0.28 per share, for the same period in 2014; |
| |
▪ | Funds from operations (FFO) attributable to common shareholders of $54.1 million, or $0.23 per share, compared to $63.8 million, or $0.27 per share, for the same period in 2014; and |
| |
▪ | Net income attributable to common shareholders of $28.3 million, or $0.12 per share, compared to $27.7 million, or $0.12 per share, for the same period in 2014. |
For the six months ended June 30, 2015, the Company reported:
| |
| ▪ | Operating FFO attributable to common shareholders of $124.2 million, or $0.53 per share, compared to $128.7 million, or $0.55 per share, for the same period in 2014; |
| |
| ▪ | FFO attributable to common shareholders of $114.7 million, or $0.49 per share, compared to $129.5 million, or $0.55 per share, for the same period in 2014; and |
| |
| ▪ | Net income attributable to common shareholders of $39.0 million, or $0.16 per share, compared to $39.4 million, or $0.17 per share, for the same period in 2014. |
OPERATING RESULTS
For the quarter ended June 30, 2015, the Company’s portfolio results were as follows:
| |
| ▪ | 3.3% increase in same store net operating income (NOI) over the comparable period in 2014; |
| |
| ▪ | 4.8% increase in same store NOI, excluding the impact of strategic remerchandising activities, over the comparable period in 2014; |
| |
▪ | Total portfolio percent leased, including leases signed but not commenced: 94.5% at June 30, 2015, down 30 basis points from 94.8% at June 30, 2014 and down 20 basis points from 94.7% at March 31, 2015; |
| |
▪ | Retail portfolio percent leased, including leases signed but not commenced: 94.4% at June 30, 2015, down 10 basis points from 94.5% at June 30, 2014 and down 10 basis points from 94.5% at March 31, 2015; |
| |
| ▪ | Retail portfolio annualized base rent (ABR) per occupied square foot of $16.03 at June 30, 2015, up 5.7% from $15.17 ABR per occupied square foot at June 30, 2014; |
| |
▪ | 782,000 square feet of retail leasing transactions comprised of 142 new and renewal leases; and |
| |
▪ | Positive comparable cash leasing spreads of 23.0% on new leases and 7.2% on renewal leases for a blended spread of 8.8%. |
n Retail Properties of America, Inc.
T: 800.541.7661
www.rpai.com 2021 Spring Road, Suite 200
Oak Brook, IL 60523
For the six months ended June 30, 2015, the Company’s portfolio results were as follows:
| |
| ▪ | 4.2% increase in same store NOI over the comparable period in 2014; |
| |
| ▪ | 5.3% increase in same store NOI, excluding the impact of strategic remerchandising activities, over the comparable period in 2014; |
| |
| ▪ | 1,547,000 square feet of retail leasing transactions comprised of 281 new and renewal leases; and |
| |
| ▪ | Positive comparable cash leasing spreads of 23.3% on new leases and 6.2% on renewal leases for a blended spread of 7.9%. |
“We are very pleased with our operational performance, driven by strong same store NOI growth,” stated Steve Grimes, president and chief executive officer. “In addition, at our current pace, we continue to exceed our expectations on all of the elements of our strategic plan, including disposing of non-strategic and non-core assets and redeploying proceeds into Class A assets within our target markets, as well as making significant enhancements to our leadership team and operating platform to position RPAI for long term, sustainable growth.”
REMERCHANDISING UPDATE
The Company continues its efforts to remerchandise 15 anchor locations within its 2015 same store portfolio, representing approximately 537,000 square feet of gross leasable area. Year to date, tenants in 10 of these locations vacated, representing approximately 399,000 square feet, of which one tenant vacated during the quarter, representing 155,000 square feet. Year to date, the Company has re-leased five of these locations with a weighted average downtime of approximately four months, representing approximately 146,000 square feet, of which 76,000 square feet was comparable with a weighted average re-leasing spread of 38.4%. The Company now expects that the weighted average comparable re-leasing spread for the 15 anchor locations will be in the low double digit range, with weighted average downtime of approximately 12 months.
INVESTMENT ACTIVITY
Acquisitions
During the quarter, the Company completed $66.8 million of previously announced acquisitions, including Tysons Corner, a community center located in the Washington, D.C. Metropolitan Statistical Area (MSA), and Woodinville Plaza, a grocery-anchored shopping center located in the Seattle MSA.
Subsequent to quarter end, the Company closed on the previously announced acquisition of an outparcel at one of its lifestyle centers, Southlake Town Square located in the Dallas MSA, for a gross purchase price of $8.4 million. The recently constructed building is occupied by Trader Joe’s.
Additionally, the Company remains under contract to acquire a grocery-anchored shopping center located in the Seattle MSA for a gross purchase price of $17.8 million. The Company also entered into a purchase agreement to acquire a mixed-use shopping center located in the Washington, D.C./Baltimore corridor for a gross purchase price of $40.5 million. These transactions are expected to close during the third and fourth quarters of 2015, respectively, subject to satisfaction of customary closing conditions.
Year to date, the Company has completed or announced $457.2 million of unencumbered acquisitions, with a weighted average ABR per occupied square foot of $21.47. These acquisitions are comprised of high quality, multi-tenant retail assets located in the Washington, D.C./Baltimore corridor, in addition to the Seattle, Austin and Dallas MSAs, resulting in an expansion of the Company’s multi-tenant retail footprint in these target markets by 1.2 million square feet. These properties possess strong demographic profiles, with weighted average household income of $129,000 and weighted average population of 101,000 within a three-mile radius.
Dispositions
During the quarter, the Company completed $118.8 million of dispositions, including the sales of five non-strategic multi-tenant retail assets for $104.3 million and three office assets for $14.5 million, one of which was classified as held for sale as of March 31, 2015. Subsequent to quarter end, the Company completed $78.1 million of dispositions, including the sales of two non-strategic multi-tenant retail assets for $73.3 million, one of which was classified as held for sale as of June 30, 2015, and one office asset for $4.8 million, which was classified as held for sale as of June 30, 2015. In addition, the Company entered into agreements to dispose of eight non-strategic retail assets for total consideration of $217.3 million. These transactions are expected to close during the third quarter of 2015, subject to satisfaction of customary closing conditions.
Year to date, the Company has completed or announced $450.5 million of dispositions, comprised of 16 non-strategic retail assets and five of its six remaining office assets.
OPERATING PLATFORM REALIGNMENT
Since the announcement of the Company’s strategic plan at its Investor Day in June 2013, the Company has continued to actively refine its portfolio, acquiring $1.1 billion of high quality, multi-tenant retail assets in its target markets, strengthening its multi-tenant retail footprint in these markets by 3.4 million square feet, and disposing of $1.1 billion of non-strategic and non-core assets. As a result of the substantial progress on its strategic plan, and in support of its focus on specific target markets, the Company has realigned its operating platform geographically between the eastern and western regions of the country.
As part of this realignment, Timothy Steffan has joined RPAI as president of the eastern division. Mr. Steffan most recently served as senior vice president, asset management and commercial leasing for The Macerich Company’s eastern region. Gerry Wright has been promoted to president of the western division. Mr. Wright most recently served as RPAI’s senior vice president of asset management. Messrs. Steffan and Wright will be responsible for executing the strategic plan for their respective divisions, which includes the oversight of asset management, leasing, property management and redevelopment.
APPOINTMENT OF CHIEF FINANCIAL OFFICER
On July 28, 2015, the board of directors (the Board) of the Company appointed Heath R. Fear to serve as its new Chief Financial Officer and Treasurer, effective August 17, 2015. Mr. Fear will play a key role in the continued execution of the Company’s portfolio and balance sheet strategy, in addition to oversight of all of the Company’s financial activities, including capital markets, accounting, investor relations, internal audit, internal reporting and treasury.
Mr. Fear has over 20 years of experience in the real estate industry and most recently served as senior vice president, head of capital markets of General Growth Properties, Inc. (GGP) and as a member of GGP’s capital and management committees. Mr. Fear was a key participant in establishing and executing on GGP’s capital raising and allocation strategies and has orchestrated over $32 billion of debt and equity transactions since assuming his capital markets responsibilities in 2010. Mr. Fear joined GGP in 2003 and prior to serving in his role as senior vice president, head of capital markets, held various senior roles within GGP’s legal team. Prior to joining GGP, Mr. Fear served as counsel for Prime Group Realty Trust and as an associate in the real estate practice groups of Kirkland & Ellis LLP and Pedersen & Houpt. Mr. Fear holds a Juris Doctor from the University of Illinois College of Law and a Bachelor of Arts degree in Political Science and English from John Carroll University.
APPOINTMENT OF CHIEF ACCOUNTING OFFICER
On July 28, 2015, the Board appointed Julie M. Swinehart as Senior Vice President and Chief Accounting Officer of the Company, effective immediately. Ms. Swinehart has held the position of Senior Vice President and Corporate Controller of the Company since April 2013 and has served as the Company’s principal accounting officer since May 2013. Since joining the Company in June 2008, Ms. Swinehart has held various accounting and financial reporting positions. Prior to joining the Company, Ms. Swinehart was a Manager of External Reporting at Equity Office Properties Trust for two years and she spent eight years in public accounting in the audit practices of Arthur Andersen LLP and Deloitte & Touche LLP. Ms. Swinehart received her Bachelor of Science in Accountancy from the University of Illinois at Urbana-Champaign and is a Certified Public Accountant.
APPOINTMENT OF NEW BOARD MEMBER
On July 28, 2015, the Board increased the number of directors comprising the Board from eight to nine and appointed Bonnie S. Biumi as a Director of the Company, effective immediately. The Board also appointed Ms. Biumi to its Audit Committee. Ms. Biumi has over 20 years of experience in public accounting and as a Chief Financial Officer or other senior level financial position at both public and private companies, including most recently as President and Chief Financial Officer of Kerzner International Resorts, Inc., a developer, owner and operator of destination resorts, casinos and luxury hotels, from 2007 through 2012. Ms. Biumi also serves on the board of two other public companies and received her Bachelor of Science in Accounting from the University of Florida.
BALANCE SHEET AND CAPITAL MARKETS ACTIVITY
During the quarter, the Company repaid $102.8 million of mortgage debt, excluding amortization, with a weighted average interest rate of 6.27%. In addition, the Company defeased $14.8 million of mortgage debt with an interest rate of 7.50%. Subsequent to quarter end, the Company repaid $54.2 million of mortgage debt, excluding amortization, with a weighted average interest rate of 5.92%.
Year to date, the Company repaid $224.3 million of mortgage debt, excluding amortization, with a weighted average interest rate of 6.22% and defeased $24.6 million of mortgage debt with an interest rate of 7.50%.
As of June 30, 2015, the Company had approximately $2.5 billion of consolidated indebtedness, which resulted in a net debt to adjusted EBITDA ratio of 6.3x, or a net debt and preferred stock to adjusted EBITDA ratio of 6.6x, as compared to 6.4x and 6.7x, respectively, as of March 31, 2015. Consolidated indebtedness had a weighted average contractual interest rate of 4.67% and a weighted average maturity of 4.5 years.
GUIDANCE
The Company is increasing its 2015 Operating FFO guidance to a range of $1.02 to $1.04 per share from $0.97 to $1.01 per share, as detailed below:
| |
| ▪ | Increasing its 2015 same store NOI growth guidance to a range of 1.75% to 2.75% from 0.5% to 2.0% as a result of outperformance during the first half of 2015; |
| |
| ▪ | Increasing its 2015 general and administrative expenses guidance to a range of $43 to $45 million, excluding executive and realignment separation charges of $4.7 million, from $40 to $42 million primarily attributable to changes in the Company’s executive compensation program; |
| |
| ▪ | Increasing its 2015 acquisition guidance to a range of $450 to $475 million from $400 to $450 million; and |
| |
| ▪ | Increasing its 2015 disposition guidance to a range of $500 to $550 million from $500 million. |
The following table reconciles the Company’s previous 2015 Operating FFO to the Company’s updated 2015 Operating FFO guidance range:
|
| | | | | | | |
| | Low | | High |
Previous 2015 Operating FFO attributable to common shareholders per common share outstanding | $ | 0.97 |
| | $ | 1.01 |
|
| | | | |
| Same store NOI, excluding the impact of strategic remerchandising activities | 0.02 |
| | 0.01 |
|
| Same store NOI related to strategic remerchandising activities | — |
| | — |
|
| Total same store NOI | 0.02 |
| | 0.01 |
|
| | | | |
| Non-cash items | 0.01 |
| | 0.01 |
|
| General and administrative expenses | (0.01 | ) | | (0.02 | ) |
| Lease termination fee income | 0.01 |
| | 0.01 |
|
| Interest expense | 0.01 |
| | 0.01 |
|
| Impact of 2015 investment activity | 0.01 |
| | 0.01 |
|
| | | | |
Updated 2015 Operating FFO attributable to common shareholders per common share outstanding | $ | 1.02 |
| | $ | 1.04 |
|
DIVIDEND
On July 28, 2015, the Company’s Board of Directors declared the third quarter 2015 Series A preferred stock distribution of $0.4375 per preferred share, for the period beginning July 1, 2015, which will be paid on September 30, 2015 to preferred shareholders of record on September 18, 2015.
On July 28, 2015, the Company’s Board of Directors also declared the third quarter 2015 quarterly cash dividend of $0.165625 per share on the Company’s outstanding Class A common stock, which will be paid on October 9, 2015 to Class A common shareholders of record on September 25, 2015.
WEBCAST AND SUPPLEMENTAL INFORMATION
The Company’s management team will hold a webcast on Wednesday, August 5, 2015 at 11:00 AM EDT, to discuss its quarterly financial results and operating performance, as well as business highlights and outlook. In addition, the Company may discuss business and financial developments and trends and other matters affecting the Company, some of which may not have been previously disclosed.
A live webcast will be available online on the Company’s website at www.rpai.com in the 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 2:00 PM (EDT) on August 5, 2015 until midnight (EDT) on August 19, 2015. The replay can be accessed by dialing (877) 870-5176 or (858) 384-5517 for international callers and entering pin number 13611504.
The Company has also posted supplemental financial and operating information and other data in the Investor Relations section of its website.
ABOUT RPAI
Retail Properties of America, Inc. is a REIT and is one of the largest owners and operators of high quality, strategically located shopping centers in the United States. As of June 30, 2015, the Company owned 208 retail operating properties representing 30.3 million square feet. The Company is publicly traded on the New York Stock Exchange under the ticker symbol RPAI. Additional information about the Company is available at www.rpai.com.
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 SEC titled “Risk Factors”. The Company assumes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
NON-GAAP FINANCIAL MEASURES
As defined by the National Association of Real Estate Investment Trusts (NAREIT), an industry trade group, Funds From Operations (FFO) means net income (loss) computed in accordance with generally accepted accounting principles (GAAP), excluding gains (or losses) from sales of depreciable real estate, plus depreciation and amortization and impairment charges on depreciable real estate, including amounts from continuing and discontinued operations as well as adjustments for unconsolidated joint ventures in which the reporting entity holds an interest. The Company has adopted the NAREIT definition in its computation of FFO attributable to common shareholders. The Company believes that, subject to the following limitations, FFO attributable to common shareholders provides a basis for comparing its performance and operations to those of other real estate investment trusts (REITs). The Company believes that FFO attributable to common shareholders, which is a non-GAAP performance measure, provides an additional and useful means to assess the operating performance of REITs. FFO attributable to common shareholders 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.
The Company also reports Operating FFO attributable to common shareholders, which is defined as FFO attributable to common shareholders 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, executive separation charges 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 attributable to common shareholders. The Company believes that Operating FFO attributable to common shareholders, which is a non-GAAP performance measure, provides an additional and useful means to assess the operating performance of REITs. Operating FFO attributable to common shareholders 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 attributable to common shareholders 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 for the six months ended June 30, 2015 represents NOI from the Company’s same store portfolio consisting of 192 operating properties acquired or placed in service and stabilized prior to January 1, 2014. NOI from Other Investment Properties for the six months ended June 30, 2015 represents NOI primarily from properties acquired during 2014 and 2015, the Company’s development properties, two properties where the Company has begun activities in anticipation of future redevelopment, one property that was impaired below its debt balance during 2014, the investment properties that were sold or held for sale in 2014 and 2015 that did not qualify for discontinued operations treatment and the historical ground rent expense related to an existing same store investment property that was subject to a ground lease with a third party prior to the Company’s acquisition of the fee interest during the first quarter of 2014. In addition, the financial results reported in Other Investment Properties for the six months ended June 30, 2015 include the net income from the Company's wholly-owned captive insurance company, which was formed on December 1, 2014, and the financial results reported in Other Investment Properties for the six months ended June 30, 2014 include the historical intercompany expense elimination related to the Company's former insurance captive unconsolidated joint venture investment, in which the Company terminated its participation effective December 1, 2014. For the six months ended June 30, 2014, the historical captive insurance expense related to the Company’s portfolio was recorded in equity in loss of unconsolidated joint ventures, net. For the three months ended June 30, 2015, the Company's same store portfolio consists of 193 operating properties inclusive of the same store portfolio for the six months ended June 30, 2015 and one additional operating property acquired during the first quarter of 2014. The financial results reported in Other Investment Properties for the three months ended June 30, 2015 are inclusive of the topics described above for the six months ended June 30, 2015 excluding the one investment property acquired during the first quarter of 2014. NOI consists of the sum of Same Store NOI and NOI from Other Investment Properties. Same Store NOI, excluding the impact of strategic remerchandising activities, represents Same Store NOI, less the operating revenues of the previously announced 15 anchor locations subject to strategic remerchandising that have vacated as of June 30, 2015, as well as the related revenue impact of such efforts due to co-tenancy provisions or otherwise. The Company believes that Same Store NOI, NOI from Other Investment Properties and Same Store NOI, excluding the impact of strategic remerchandising activities, are useful measures of the Company’s operating performance. Further, the Company believes Same Store NOI, excluding the impact of strategic remerchandising activities, is also useful as it provides a basis for evaluating the impact of the Company’s previously announced remerchandising activity on its operating results. Other REITs may use different methodologies for calculating these metrics, and accordingly, the Company’s NOI metrics may not be comparable to other REITs. The Company believes that these metrics provide an operating perspective not immediately apparent from operating income or net income attributable to common shareholders as defined within GAAP. The Company uses these metrics to evaluate its performance on a property-by-property basis because these measures allow management to evaluate the impact that factors such as lease structure, lease rates and tenant base, which vary by property, have on the Company’s operating results. However, these measures should only be used as alternative measures of the Company’s financial performance.
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
Michael Fitzmaurice, VP - Finance
Retail Properties of America, Inc.
(630) 634-4233
Retail Properties of America, Inc.
Condensed Consolidated Balance Sheets
(amounts in thousands, except par value amounts)
(unaudited)
|
| | | | | | | | |
| | | June 30,
2015 | | December 31,
2014 |
| Assets | | | | |
| Investment properties: | | | | |
| Land | | $ | 1,308,227 |
| | $ | 1,195,369 |
|
| Building and other improvements | | 4,584,542 |
| | 4,442,446 |
|
| Developments in progress | | 41,139 |
| | 42,561 |
|
| | | 5,933,908 |
| | 5,680,376 |
|
| Less accumulated depreciation | | (1,419,065 | ) | | (1,365,471 | ) |
| Net investment properties | | 4,514,843 |
| | 4,314,905 |
|
| | | | | |
| Cash and cash equivalents | | 84,701 |
| | 112,292 |
|
| Accounts and notes receivable (net of allowances of $8,215 and $7,497, respectively) | | 76,192 |
| | 86,013 |
|
| Acquired lease intangible assets, net | | 145,368 |
| | 125,490 |
|
| Assets associated with investment properties held for sale | | 20,262 |
| | 33,640 |
|
| Other assets, net | | 102,836 |
| | 131,520 |
|
| Total assets | | $ | 4,944,202 |
| | $ | 4,803,860 |
|
| | | | | |
| Liabilities and Equity | | | | |
| Liabilities: | | | | |
Mortgages payable, net (includes unamortized premium of $2,324 and $3,972, respectively, and unamortized discount of $(215) and $(470), respectively) | | $ | 1,438,806 |
| | $ | 1,634,465 |
|
Unsecured notes payable, net (includes unamortized discount of $(1,149) and $0, respectively) | | 498,851 |
| | 250,000 |
|
| Unsecured term loan | | 450,000 |
| | 450,000 |
|
| Unsecured revolving line of credit | | 110,000 |
| | — |
|
| Accounts payable and accrued expenses | | 61,340 |
| | 61,129 |
|
| Distributions payable | | 39,291 |
| | 39,187 |
|
| Acquired lease intangible liabilities, net | | 118,801 |
| | 100,641 |
|
| Liabilities associated with investment properties held for sale | | 409 |
| | 8,203 |
|
| Other liabilities | | 72,543 |
| | 70,860 |
|
| Total liabilities | | 2,790,041 |
| | 2,614,485 |
|
| | | | | |
| Commitments and contingencies | | | | |
| | | | | |
| Equity: | | | | |
Preferred stock, $0.001 par value, 10,000 shares authorized, 7.00% Series A cumulative redeemable preferred stock, 5,400 shares issued and outstanding as of June 30, 2015 and December 31, 2014; liquidation preference $135,000 | | 5 |
| | 5 |
|
Class A common stock, $0.001 par value, 475,000 shares authorized, 237,227 and 236,602 shares issued and outstanding as of June 30, 2015 and December 31, 2014, respectively | | 237 |
| | 237 |
|
| Additional paid-in capital | | 4,927,188 |
| | 4,922,864 |
|
| Accumulated distributions in excess of earnings | | (2,774,228 | ) | | (2,734,688 | ) |
| Accumulated other comprehensive loss | | (535 | ) | | (537 | ) |
| Total shareholders' equity | | 2,152,667 |
| | 2,187,881 |
|
| Noncontrolling interests | | 1,494 |
| | 1,494 |
|
| Total equity | | 2,154,161 |
| | 2,189,375 |
|
| Total liabilities and equity | | $ | 4,944,202 |
| | $ | 4,803,860 |
|
Retail Properties of America, Inc.
Condensed Consolidated Statements of Operations
(amounts in thousands, except per share amounts)
(unaudited)
|
| | | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | | 2015 | | 2014 | | 2015 | | 2014 |
| Revenues | | |
| | |
| | |
| | |
|
| Rental income | | $ | 119,022 |
| | $ | 117,419 |
| | $ | 238,810 |
| | $ | 234,950 |
|
| Tenant recovery income | | 29,416 |
| | 27,108 |
| | 60,716 |
| | 56,856 |
|
| Other property income | | 2,450 |
| | 1,919 |
| | 4,559 |
| | 3,831 |
|
| Total revenues | | 150,888 |
| | 146,446 |
| | 304,085 |
| | 295,637 |
|
| | | | | | | | | |
| Expenses | | |
| | |
| | |
| | |
|
| Property operating expenses | | 23,153 |
| | 22,142 |
| | 48,848 |
| | 48,668 |
|
| Real estate taxes | | 20,486 |
| | 19,067 |
| | 40,996 |
| | 37,481 |
|
| Depreciation and amortization | | 55,798 |
| | 55,061 |
| | 110,474 |
| | 108,891 |
|
| Provision for impairment of investment properties | | 3,944 |
| | 5,400 |
| | 3,944 |
| | 5,794 |
|
| General and administrative expenses | | 14,018 |
| | 7,362 |
| | 25,010 |
| | 15,812 |
|
| Total expenses | | 117,399 |
| | 109,032 |
| | 229,272 |
| | 216,646 |
|
| | | | | | | | | |
| Operating income | | 33,489 |
| | 37,414 |
| | 74,813 |
| | 78,991 |
|
| | | | | | | | | |
| Gain on extinguishment of other liabilities | | — |
| | — |
| | — |
| | 4,258 |
|
| Equity in loss of unconsolidated joint ventures, net | | — |
| | (433 | ) | | — |
| | (1,211 | ) |
| Gain on change in control of investment properties | | — |
| | 24,158 |
| | — |
| | 24,158 |
|
| Interest expense | | (36,140 | ) | | (31,873 | ) | | (70,185 | ) | | (63,736 | ) |
| Other (expense) income, net | | (306 | ) | | 250 |
| | 919 |
| | 677 |
|
| (Loss) income from continuing operations | | (2,957 | ) | | 29,516 |
| | 5,547 |
| | 43,137 |
|
| | | | | | | | | |
| Discontinued operations: | | |
| | |
| | |
| | |
|
| Loss, net | | — |
| | — |
| | — |
| | (148 | ) |
| Gain on sales of investment properties | | — |
| | — |
| | — |
| | 655 |
|
| Income from discontinued operations | | — |
| | — |
| | — |
| | 507 |
|
| Gain on sales of investment properties | | 33,641 |
| | 527 |
| | 38,213 |
| | 527 |
|
| Net income | | 30,684 |
| | 30,043 |
| | 43,760 |
| | 44,171 |
|
| Net income attributable to the Company | | 30,684 |
| | 30,043 |
| | 43,760 |
| | 44,171 |
|
| Preferred stock dividends | | (2,363 | ) | | (2,363 | ) | | (4,725 | ) | | (4,725 | ) |
| Net income attributable to common shareholders | | $ | 28,321 |
| | $ | 27,680 |
| | $ | 39,035 |
| | $ | 39,446 |
|
| | | | | | | | | |
| Earnings per common share - basic and diluted | | |
| | |
| | |
| | |
|
| Continuing operations | | $ | 0.12 |
| | $ | 0.12 |
| | $ | 0.16 |
| | $ | 0.17 |
|
| Discontinued operations | | — |
| | — |
| | — |
| | — |
|
| Net income per common share attributable to common shareholders | | $ | 0.12 |
| | $ | 0.12 |
| | $ | 0.16 |
| | $ | 0.17 |
|
| | | | | | | | | |
| Weighted average number of common shares outstanding - basic | | 236,354 |
| | 236,176 |
| | 236,302 |
| | 236,164 |
|
| | | | | | | | | |
| Weighted average number of common shares outstanding - diluted | | 236,356 |
| | 236,179 |
| | 236,305 |
| | 236,166 |
|
Retail Properties of America, Inc.
Reconciliation of Non-GAAP Financial Measures
(amounts in thousands, except per share amounts)
(unaudited)
Funds From Operations (FFO) Attributable to Common Shareholders and
Operating FFO Attributable to Common Shareholders (a)
|
| | | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | | 2015 | | 2014 | | 2015 | | 2014 |
| | | | | | | | | |
| Net income attributable to common shareholders | | $ | 28,321 |
| | $ | 27,680 |
| | $ | 39,035 |
| | $ | 39,446 |
|
| Depreciation and amortization | | 55,523 |
| | 55,357 |
| | 109,924 |
| | 109,600 |
|
| Provision for impairment of investment properties | | 3,944 |
| | 5,400 |
| | 3,944 |
| | 5,794 |
|
| Gain on sales of investment properties | | (33,641 | ) | | (24,685 | ) | | (38,213 | ) | | (25,340 | ) |
| FFO attributable to common shareholders | | $ | 54,147 |
| | $ | 63,752 |
| | $ | 114,690 |
| | $ | 129,500 |
|
| | | | | | | | | |
FFO attributable to common shareholders per common share outstanding | | $ | 0.23 |
| | $ | 0.27 |
| | $ | 0.49 |
| | $ | 0.55 |
|
| | | | | | | | | |
| | | | | | | | | |
| FFO attributable to common shareholders | | $ | 54,147 |
| | $ | 63,752 |
| | $ | 114,690 |
| | $ | 129,500 |
|
| Impact on earnings from the early extinguishment of debt, net | | 4,231 |
| | 1,951 |
| | 7,017 |
| | 3,631 |
|
| Provision for hedge ineffectiveness | | 4 |
| | — |
| | (21 | ) | | (13 | ) |
| Gain on extinguishment of other liabilities | | — |
| | — |
| | — |
| | (4,258 | ) |
| Executive separation charges (b) | | 3,537 |
| | — |
| | 3,537 |
| | — |
|
| Other (c) | | — |
| | (11 | ) | | (1,000 | ) | | (126 | ) |
| Operating FFO attributable to common shareholders | | $ | 61,919 |
| | $ | 65,692 |
| | $ | 124,223 |
| | $ | 128,734 |
|
| | | | | | | | | |
Operating FFO attributable to common shareholders per common share outstanding | | $ | 0.26 |
| | $ | 0.28 |
| | $ | 0.53 |
| | $ | 0.55 |
|
| |
| (a) | Results for the six months ended June 30, 2014 include amounts from discontinued operations and our pro rata share from our unconsolidated joint ventures. All of our unconsolidated joint venture arrangements were dissolved prior to December 31, 2014. |
| |
| (b) | Included in "General and administrative expenses" in the condensed consolidated statements of operations. |
| |
| (c) | Consists of settlement and easement proceeds, which are included in "Other (expense) income, net" in the condensed consolidated statements of operations. |
Retail Properties of America, Inc.
Reconciliation of Non-GAAP Financial Measures
(amounts in thousands)
(unaudited)
Reconciliation of Net Income Attributable to Common Shareholders to NOI
|
| | | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | | 2015 | | 2014 | | 2015 | | 2014 |
| Operating revenues | | |
| | |
| | |
| | |
|
| Same store investment properties (193 and 192 properties, respectively): | | |
| | |
| | |
| | |
|
| Rental income | | $ | 101,612 |
| | $ | 99,250 |
| | $ | 203,137 |
| | $ | 197,636 |
|
| Tenant recovery income | | 24,436 |
| | 23,503 |
| | 50,568 |
| | 48,978 |
|
| Other property income | | 1,009 |
| | 845 |
| | 2,050 |
| | 1,674 |
|
| Other investment properties: | | |
| | | | |
| | |
|
| Rental income | | 16,581 |
| | 16,837 |
| | 33,570 |
| | 33,685 |
|
| Tenant recovery income | | 4,980 |
| | 3,605 |
| | 10,148 |
| | 7,878 |
|
| Other property income | | 1,108 |
| | 1,071 |
| | 2,042 |
| | 2,024 |
|
| Operating expenses | | |
| | |
| | |
| | |
|
| Same store investment properties (193 and 192 properties, respectively): | | |
| | |
| | |
| | |
|
| Property operating expenses | | (18,050 | ) | | (18,156 | ) | | (37,906 | ) | | (39,503 | ) |
| Real estate taxes | | (17,217 | ) | | (16,554 | ) | | (34,485 | ) | | (32,735 | ) |
| Other investment properties: | | |
| | |
| | |
| | |
|
| Property operating expenses | | (4,311 | ) | | (3,195 | ) | | (9,356 | ) | | (7,467 | ) |
| Real estate taxes | | (3,269 | ) | | (2,513 | ) | | (6,511 | ) | | (4,746 | ) |
| | | | | | | | | |
| NOI from continuing operations | | |
| | |
| | |
| | |
|
| Same store investment properties | | 91,790 |
| | 88,888 |
| | 183,364 |
| | 176,050 |
|
| Other investment properties | | 15,089 |
| | 15,805 |
| | 29,893 |
| | 31,374 |
|
| Total NOI from continuing operations | | 106,879 |
| | 104,693 |
| | 213,257 |
| | 207,424 |
|
| | | | | | | | | |
| Other income (expense) | | |
| | |
| | |
| | |
|
| Straight-line rental income, net | | 630 |
| | 1,161 |
| | 1,642 |
| | 3,104 |
|
| Amortization of acquired above and below market lease intangibles, net | | 390 |
| | 370 |
| | 841 |
| | 882 |
|
| Amortization of lease inducements | | (191 | ) | | (199 | ) | | (380 | ) | | (357 | ) |
| Lease termination fees | | 333 |
| | 28 |
| | 467 |
| | 133 |
|
| Straight-line ground rent expense | | (932 | ) | | (956 | ) | | (1,866 | ) | | (1,978 | ) |
| Amortization of acquired ground lease intangibles | | 140 |
| | 140 |
| | 280 |
| | 280 |
|
| Depreciation and amortization | | (55,798 | ) | | (55,061 | ) | | (110,474 | ) | | (108,891 | ) |
| Provision for impairment of investment properties | | (3,944 | ) | | (5,400 | ) | | (3,944 | ) | | (5,794 | ) |
| General and administrative expenses | | (14,018 | ) | | (7,362 | ) | | (25,010 | ) | | (15,812 | ) |
| Gain on extinguishment of other liabilities | | — |
| | — |
| | — |
| | 4,258 |
|
| Equity in loss of unconsolidated joint ventures, net | | — |
| | (433 | ) | | — |
| | (1,211 | ) |
| Gain on change in control of investment properties | | — |
| | 24,158 |
| | — |
| | 24,158 |
|
| Interest expense | | (36,140 | ) | | (31,873 | ) | | (70,185 | ) | | (63,736 | ) |
| Other (expense) income, net | | (306 | ) | | 250 |
| | 919 |
| | 677 |
|
| Total other expense | | (109,836 | ) | | (75,177 | ) | | (207,710 | ) | | (164,287 | ) |
| | | | | | | | | |
| (Loss) income from continuing operations | | (2,957 | ) | | 29,516 |
| | 5,547 |
| | 43,137 |
|
| | | | | | | | | |
| Discontinued operations: | | |
| | |
| | |
| | |
|
| Loss, net | | — |
| | — |
| | — |
| | (148 | ) |
| Gain on sales of investment properties | | — |
| | — |
| | — |
| | 655 |
|
| Income from discontinued operations | | — |
| | — |
| | — |
| | 507 |
|
| Gain on sales of investment properties | | 33,641 |
| | 527 |
| | 38,213 |
| | 527 |
|
| Net income | | 30,684 |
| | 30,043 |
| | 43,760 |
| | 44,171 |
|
| Net income attributable to the Company | | 30,684 |
| | 30,043 |
| | 43,760 |
| | 44,171 |
|
| Preferred stock dividends | | (2,363 | ) | | (2,363 | ) | | (4,725 | ) | | (4,725 | ) |
| Net income attributable to common shareholders | | $ | 28,321 |
| | $ | 27,680 |
| | $ | 39,035 |
| | $ | 39,446 |
|
| | | | | | | | | |
| | | | | | | | | |
| Same Store NOI, Excluding the Impact of Strategic Remerchandising Activities | | | | | | | | |
| Same store NOI | | $ | 91,790 |
| | $ | 88,888 |
| | $ | 183,364 |
| | $ | 176,050 |
|
| Less: Impact of strategic remerchandising activities | | (1,162 | ) | | (2,374 | ) | | (3,043 | ) | | (4,736 | ) |
| Same store NOI, excluding the impact of strategic remerchandising activities | $ | 90,628 |
| | $ | 86,514 |
| | $ | 180,321 |
| | $ | 171,314 |
|
| | | | | | | | | |
Retail Properties of America, Inc.
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 |
| | | June 30, 2015 | | December 31, 2014 |
| | | | | |
| Net income attributable to common shareholders | | $ | 28,321 |
| | $ | 23,502 |
|
| Preferred stock dividends | | 2,363 |
| | 2,363 |
|
| Interest expense | | 36,140 |
| | 32,743 |
|
| Depreciation and amortization | | 55,798 |
| | 52,385 |
|
| Gain on sales of investment properties | | (33,641 | ) | | (26,501 | ) |
| Provision for impairment of investment properties | | 3,944 |
| | 11,825 |
|
| Executive separation charges (a) | | 3,537 |
| | — |
|
| Adjusted EBITDA | | $ | 96,462 |
| | $ | 96,317 |
|
| Annualized | | $ | 385,848 |
| | $ | 385,268 |
|
Reconciliation of Debt to Total Net Debt and Net Debt and Preferred Stock
|
| | | | | | | | |
| | | June 30,
2015 | | December 31,
2014 |
| | | | | |
| Total consolidated debt | | $ | 2,497,657 |
| | $ | 2,342,540 |
|
| Less: consolidated cash and cash equivalents | | (84,701 | ) | | (112,292 | ) |
| Total net debt | | $ | 2,412,956 |
| | $ | 2,230,248 |
|
| Preferred stock | | 135,000 |
| | 135,000 |
|
| Net debt and preferred stock | | $ | 2,547,956 |
| | $ | 2,365,248 |
|
| Net Debt to Adjusted EBITDA (b) | | 6.3x |
| | 5.8x |
|
| Net Debt and Preferred Stock to Adjusted EBITDA (b) | | 6.6x |
| | 6.1x |
|
FFO Attributable to Common Shareholders and Operating FFO Attributable to Common Shareholders Guidance
|
| | | | | | | | |
| | | Per Share Guidance Range Full Year 2015 |
| | | Low | | High |
| | | | | |
| Net income attributable to common shareholders | | $ | 0.62 |
| | $ | 0.64 |
|
| Depreciation and amortization | | 0.90 |
| | 0.90 |
|
| Provision for impairment of investment properties | | 0.02 |
| | 0.02 |
|
| Gain on sales of investment properties | | (0.61 | ) | | (0.61 | ) |
| FFO attributable to common shareholders | | $ | 0.93 |
| | $ | 0.95 |
|
| | | | | |
| Impact on earnings from the early extinguishment of debt, net | | 0.07 |
| | 0.07 |
|
| Provision for hedge ineffectiveness | | — |
| | — |
|
| Executive and realignment separation charges | | 0.02 |
| | 0.02 |
|
| Other | | — |
| | — |
|
| Operating FFO attributable to common shareholders | | $ | 1.02 |
| | $ | 1.04 |
|
| |
| (a) | Included in "General and administrative expenses" in the condensed consolidated statements of operations. |
| |
| (b) | For purposes of these ratio calculations, annualized three months ended figures were used. |
