Business Wire | Aug 5, 2020 04:06PM EDT

Retail Value Inc. Reports Second Quarter 2020 Operating Results

Aug. 05, 2020

BEACHWOOD, Ohio--(BUSINESS WIRE)--Aug. 05, 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 ResultsThe 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-19The impact to the portfolio as of July 31, 2020 is as follows:

Continental Puerto U.S. Rico

% of Tenants open and operating (pro rata average 92% 94%rent)

% 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 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 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.

Income Statement

in thousands, except per share

2Q20 2Q20 Total Total

Continental Puerto 2Q20 6M20 U.S. Rico



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 10,958 13,632 estate, net (4)

Loss before other items (1,467) (14,461)



Tax expense (519) (592)

Net loss ($1,986) ($15,053)



Weighted average shares - 19,816 19,782 Basic & Diluted - EPS



Earnings per common share - ($0.10) ($0.76) Basic & Diluted



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 150 633 783 2,961 income

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)

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 - 19,816 19,782 FFO & OFFO



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

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20200805005701/en/

CONTACT: Retail Value Inc. For additional information: Christa Vesy, EVP and Chief Financial Officer 216-755-5500