Business Wire | Aug 3, 2021 04:06PM EDT

Retail Value Inc. Reports Second Quarter 2021 Operating Results

Aug. 03, 2021

BEACHWOOD, Ohio--(BUSINESS WIRE)--Aug. 03, 2021--Retail Value Inc. (NYSE: RVI) today announced operating results for the quarter ended June 30, 2021.

Results for the Quarter and Recent Activity

* Second quarter 2021 net loss attributable to common shareholders was $69.6 million, or $3.30 per diluted share, as compared to net loss of $1.9 million, or $0.10 per share, in the year-ago period. The period-over-period increase in net loss is primarily attributable to impairment charges and asset sales recorded in 2021 partially offset by lower interest expense and the impact of the COVID-19 pandemic. * Second quarter 2021 operating funds from operations attributable to common shareholders ("Operating FFO" or "OFFO") was $20.2 million, or $0.96 per diluted share, compared to $12.2 million, or $0.61 per diluted share, in the year-ago period. The period-over-period increase in OFFO is primarily attributable to the COVID?19 pandemic and lower interest expense offset by the impact of asset sales. Second quarter results included $2.3 million of net revenue related to prior year primarily from cash basis tenants. * The Continental U.S. leased rate was 89.6% at June 30, 2021 as compared to 86.7% at March 31, 2021. The increase in the leased rate primarily related to the sale of three shopping centers with lower leased rates and new leasing activity. * The Puerto Rico leased rate was 92.2% at June 30, 2021 as compared to 88.3% at March 31, 2021 primarily due to the sale of two shopping centers with lower leased rates. * Sold three Continental U.S. assets and two Puerto Rico assets for an aggregate sales price of $59.2 million. Net proceeds from the sales along with unrestricted cash on hand aggregating $68.5 million were used to repay a portion of the mortgage loan. * Funded additional voluntary prepayment of $20.0 million on the mortgage loan in June 2021. The balance of the mortgage loan was $214.5 million at June 30, 2021. * In June 2021, entered into an agreement to sell the remaining nine assets in Puerto Rico for an aggregate sales price of $550 million. In July 2021, the general due diligence period expired, and the purchaser posted a deposit of $15 million with the escrow agent. Closing of the transaction is expected to occur by the end of the third quarter of 2021 subject to satisfaction of various closing conditions.

Key Quarterly Operating Results

The following metrics are as of June 30, 2021:

Continental U.S. Puerto Rico

Shopping Center Count 8 9

Gross Leasable Area (thousands) 3,779 3,537

Base Rent PSF $13.41 $19.40

Leased Rate 89.6% 92.2%

Commenced Rate 87.7% 91.7%

NOI-Quarter (millions) $11.8 $14.9

Impact of the COVID-19 Pandemic

The impact to the portfolio as of July 23, 2021 is as follows:

Continental Puerto U.S. Rico

% of Tenants open and operating (average base 100% 100%rent)

% of Second quarter 2020 rent paid 94% 81%

% of Third quarter 2020 rent paid 98% 93%

% of Fourth quarter 2020 rent paid 97% 93%

% of First quarter 2021 rent paid 99% 97%

% of Second quarter 2021 rent paid 99% 97%

* The Company calculates the aggregate percentage of rents paid for assets owned as of June 30, 2021, by comparing the amount of tenant payments received as of the date presented to the amount billed to tenants during the period, which billed amount includes abated rents, rents subject to deferral arrangements and rents owing from bankrupt tenants that were in possession of the space and billed. For the purposes of reporting the percentage of aggregate base rents collected for a given period, when rents subject to deferral arrangements are later paid, those payments are allocated to the period in which the rent was originally owed. * As of July 23, 2021, agreed upon rent deferral arrangements and abatements that remain unpaid represented approximately 8% of second quarter 2020 rents (primarily abatements), 2% of third quarter 2020 rents and 2% of fourth quarter 2020 rents. There are no outstanding rent deferral arrangements with respect to 2021 rents. * At June 30, 2021, the balance sheet reflects $1.0 million of deferred rents for tenants with payment plans that are not accounted for on the cash basis. * During the second quarter of 2021, the Company's rental revenue and net operating income ("NOI") benefited from $2.3 million of payments related to 2020 rental income received from cash-basis tenants.

Property Net Operating Income Projection

The Company has updated its projection of 2021 NOI. The Company projects, based on the assumptions below, 2021 property level NOI to be as follows:

Portfolio NOI Projection

Continental U.S. $38 - $41 million

Puerto Rico (9 assets under contract) $50 - $53 million

These Projections:

* Exclude all properties sold to date and assume all properties owned by the Company on August 3, 2021 are held through year end; * Reflect payment of property management fees; * Assume tenant collections at 100% for the second half of 2021 (as compared to the actual first and second quarter 2021 rent collection rates reflected above) and * Assume no reserve reversals related to 2020 rents for the second half of 2021.

Because these projections are based on assumptions that are subject to change, including, without limitation, the Company's actual tenant collections and potential future sales of properties, they should not be viewed as guidance.

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 generally accepted accounting principles in the United States ("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. Reconciliation of 2021 projected NOI to the most directly comparable GAAP financial measure is not provided because the Company is unable to provide such reconciliation without unreasonable effort.

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 Company's actual property NOI for 2021, which could differ materially from the NOI projections included in this press release; the impact of the COVID-19 pandemic 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 ongoing and deferred rents; our ability to sell assets on commercially reasonable terms; our ability to complete the sale of the remaining nine assets in Puerto Rico pursuant to the agreement entered into in June 2021 and dispositions of other 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 or extension 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 report on Forms 10-K and 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

2Q21 2Q20 6M21 6M20



Revenues:

Rental income (1) $41,857 $39,299 $83,279 $89,629

Other property revenues 54 (7) 91 32

41,911 39,292 83,370 89,661

Expenses:

Operating and maintenance (2) 11,433 12,193 23,304 25,807

Real estate taxes 3,757 5,483 8,023 11,202

15,190 17,676 31,327 37,009



Net operating income (3) 26,721 21,616 52,043 52,652



Other income (expense):

Asset management fees (1,770) (2,324) (3,541) (4,648)

Interest expense, net (3,437) (5,660) (7,428) (12,952)

Depreciation and amortization (11,204) (14,211) (24,562) (30,681)

General and administrative (1,258) (924) (2,123) (2,001)

Impairment charges (79,050) (10,910) (81,060) (26,820)

Debt extinguishment costs, net (1,112) (12) (1,242) (3,977)

Other income, net 197 0 197 334

Gain on disposition of real 1,420 10,958 1,541 13,632 estate, net (4)

Loss before other items (69,493) (1,467) (66,175) (14,461)



Tax expense (88) (519) (197) (592)

Net loss ($69,581) ($1,986) ($66,372) ($15,053)



Weighted average shares - 21,094 19,816 21,006 19,782 Basic & Diluted - EPS



Loss per common share - Basic ($3.30) $(0.10) ($3.16) ($0.76) & Diluted



(1) Revenue items:

Minimum rents 23,161 30,348 48,057 61,738

Ground lease minimum rents 2,400 3,112 5,043 6,318

Percentage and overage rent 639 38 2,095 1,055

Recoveries 9,574 11,819 19,869 24,716

Uncollectible revenue 2,840 (6,820) 3,078 (7,678)

Ancillary and other rental 1,455 783 3,264 2,961 income

Lease termination fees 1,788 19 1,873 519



(2) Operating expenses:

Property management fees (2,264) (2,566) (4,528) (5,118)



(3) NOI from assets sold through 172 3,705 2,044 10,445 June 30, 2021



(4) SITE Centers disposition fees (592) (210) (592) (1,766)

Retail Value Inc.

Other Financial Information

in thousands, except per share

2Q21

2Q20

6M21

6M20

Net loss attributable to Common Shareholders

($69,581)

($1,986)

($66,372)

($15,053)

Depreciation and amortization of real estate

11,187

14,193

24,528

30,646

Impairment of real estate

79,050

10,910

81,060

26,820

Gain on disposition of real estate, net

(1,420)

(10,958)

(1,541)

(13,632)

FFO attributable to Common Shareholders

$19,236

$12,159

$37,675

$28,781

Debt extinguishment, transaction, other, net

915

12

1,045

3,644

Total non-operating items, net

915

12

1,045

3,644

Operating FFO attributable to Common Shareholders

$20,151

$12,171

$38,720

$32,425

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

21,094

19,816

21,006

19,782

FFO per share - Basic & Diluted

$0.91

$0.61

$1.79

$1.45

Operating FFO per share - Basic & Diluted

$0.96

$0.61

$1.84

$1.64

Common stock dividends declared, per share

N/A

N/A

N/A

N/A

Certain non-cash items:

Straight-line rent

(258)

590

(822)

(517)

Straight-line fixed CAM

75

99

146

200

Loan cost amortization

(712)

(914)

(1,494)

(1,933)

Non-real estate depreciation expense

(17)

(18)

(34)

(35)

Capital expenditures:

Maintenance capital expenditures

899

645

1,227

663

Tenant allowances and landlord work

665

1,020

1,273

1,611

Leasing commissions - SITE Centers

617

473

1,395

1,704

Leasing commissions - external

54

68

187

155

Hurricane restorations

486

4,538

2,334

8,012

Retail Value Inc.

Other Financial Information

in thousands, except per share

2Q21 2Q20 6M21 6M20



Net loss attributable to Common ($69,581) ($1,986) ($66,372) ($15,053) Shareholders

Depreciation and amortization of 11,187 14,193 24,528 30,646 real estate

Impairment of real estate 79,050 10,910 81,060 26,820

Gain on disposition of real (1,420) (10,958) (1,541) (13,632) estate, net

FFO attributable to Common $19,236 $12,159 $37,675 $28,781 Shareholders



Debt extinguishment, 915 12 1,045 3,644 transaction, other, net

Total non-operating items, net 915 12 1,045 3,644

Operating FFO attributable to $20,151 $12,171 $38,720 $32,425 Common Shareholders



Weighted average shares and units - Basic & Diluted - FFO & 21,094 19,816 21,006 19,782 OFFO



FFO per share - Basic & Diluted $0.91 $0.61 $1.79 $1.45

Operating FFO per share - Basic $0.96 $0.61 $1.84 $1.64 & Diluted

Common stock dividends declared, N/A N/A N/A N/A per share



Certain non-cash items:

Straight-line rent (258) 590 (822) (517)

Straight-line fixed CAM 75 99 146 200

Loan cost amortization (712) (914) (1,494) (1,933)

Non-real estate depreciation (17) (18) (34) (35) expense



Capital expenditures:

Maintenance capital expenditures 899 645 1,227 663

Tenant allowances and landlord 665 1,020 1,273 1,611 work

Leasing commissions - SITE 617 473 1,395 1,704 Centers

Leasing commissions - external 54 68 187 155

Hurricane restorations 486 4,538 2,334 8,012

Retail Value Inc.

Other Financial Information

in thousands, except per share

Continental U.S.

2Q21

2Q20

6M21

6M20

Revenues:

Minimum rents

10,215

15,089

21,782

32,100

Ground lease minimum rents

797

1,099

1,636

2,304

Percentage and overage rent

236

6

253

103

Recoveries

3,918

5,932

8,379

12,579

Uncollectible revenue

2,152

(3,199)

3,144

(4,050)

Ancillary and other rental income

91

150

282

472

Lease termination fees

1

0

86

500

Other property revenues

52

(26)

69

(2)

17,462

19,051

35,631

44,006

Expenses:

Operating and maintenance

2,179

2,755

4,563

6,544

Property management fees

701

1,099

1,401

2,198

Real estate taxes

2,767

4,299

5,901

8,787

5,647

8,153

11,865

17,529

Net operating income (1)

11,815

10,898

23,766

26,477

Other income (expense):

Asset management fees

(846)

(1,318)

(1,694)

(2,637)

Interest expense, net

(2,707)

(4,513)

(5,858)

(10,689)

Depreciation and amortization

(4,700)

(6,961)

(11,688)

(16,191)

General and administrative (not allocated to segment)

N/A

N/A

N/A

N/A

Impairment charges

0

(10,910)

0

(26,820)

Debt extinguishment costs, net

(1,076)

(12)

(1,149)

(3,977)

Other expense, net

0

0

0

0

Gain on disposition of real estate, net

1,696

10,958

1,845

13,632

Tax expense

(77)

(52)

(143)

(125)

Net loss

4,105

(1,910)

5,079

(20,330)

(1)

NOI from assets sold through June 30, 2021

43

2,804

1,589

8,576

Puerto Rico

2Q21

2Q20

6M21

6M20

Revenues:

Minimum rents

12,946

15,259

26,275

29,638

Ground lease minimum rents

1,603

2,013

3,407

4,014

Percentage and overage rent

403

32

1,842

952

Recoveries

5,656

5,887

11,490

12,137

Uncollectible revenue

688

(3,621)

(66)

(3,628)

Ancillary and other rental income

1,364

633

2,982

2,489

Lease termination fees

1,787

19

1,787

19

Other property revenues

2

19

22

34

24,449

20,241

47,739

45,655

Expenses:

Operating and maintenance

6,990

6,872

14,213

14,145

Property management fees

1,563

1,467

3,127

2,920

Real estate taxes

990

1,184

2,122

2,415

9,543

9,523

19,462

19,480

Net operating income (1)

14,906

10,718

28,277

26,175

Other income (expense):

Asset management fees

(924)

(1,006)

(1,847)

(2,011)

Interest expense, net

(730)

(1,147)

(1,570)

(2,263)

Depreciation and amortization

(6,504)

(7,250)

(12,874)

(14,490)

General and administrative (not allocated to segment)

N/A

N/A

N/A

N/A

Impairment charges

(79,050)

0

(81,060)

0

Debt extinguishment costs, net

(36)

0

(93)

0

Other expense, net

197

0

197

334

Gain on disposition of real estate, net

(276)

0

(304)

0

Tax expense

(11)

(467)

(54)

(467)

Net loss

(72,428)

848

(69,328)

7,278

(1)

NOI from assets sold through June 30, 2021

129

901

455

1,869

Retail Value Inc.

Other Financial Information

in thousands, except per share

Continental U.S.

2Q21 2Q20 6M21 6M20

Revenues:

Minimum rents 10,215 15,089 21,782 32,100

Ground lease minimum rents 797 1,099 1,636 2,304

Percentage and overage rent 236 6 253 103

Recoveries 3,918 5,932 8,379 12,579

Uncollectible revenue 2,152 (3,199) 3,144 (4,050)

Ancillary and other rental income 91 150 282 472

Lease termination fees 1 0 86 500

Other property revenues 52 (26) 69 (2)

17,462 19,051 35,631 44,006

Expenses:

Operating and maintenance 2,179 2,755 4,563 6,544

Property management fees 701 1,099 1,401 2,198

Real estate taxes 2,767 4,299 5,901 8,787

5,647 8,153 11,865 17,529



Net operating income (1) 11,815 10,898 23,766 26,477



Other income (expense):

Asset management fees (846) (1,318) (1,694) (2,637)

Interest expense, net (2,707) (4,513) (5,858) (10,689)

Depreciation and amortization (4,700) (6,961) (11,688) (16,191)

General and administrative (not N/A N/A N/A N/A allocated to segment)

Impairment charges 0 (10,910) 0 (26,820)

Debt extinguishment costs, net (1,076) (12) (1,149) (3,977)

Other expense, net 0 0 0 0

Gain on disposition of real 1,696 10,958 1,845 13,632 estate, net

Tax expense (77) (52) (143) (125)

Net loss 4,105 (1,910) 5,079 (20,330)



(1) NOI from assets sold through June 43 2,804 1,589 8,576 30, 2021



Puerto Rico

2Q21 2Q20 6M21 6M20

Revenues:

Minimum rents 12,946 15,259 26,275 29,638

Ground lease minimum rents 1,603 2,013 3,407 4,014

Percentage and overage rent 403 32 1,842 952

Recoveries 5,656 5,887 11,490 12,137

Uncollectible revenue 688 (3,621) (66) (3,628)

Ancillary and other rental income 1,364 633 2,982 2,489

Lease termination fees 1,787 19 1,787 19

Other property revenues 2 19 22 34

24,449 20,241 47,739 45,655

Expenses:

Operating and maintenance 6,990 6,872 14,213 14,145

Property management fees 1,563 1,467 3,127 2,920

Real estate taxes 990 1,184 2,122 2,415

9,543 9,523 19,462 19,480



Net operating income (1) 14,906 10,718 28,277 26,175



Other income (expense):

Asset management fees (924) (1,006) (1,847) (2,011)

Interest expense, net (730) (1,147) (1,570) (2,263)

Depreciation and amortization (6,504) (7,250) (12,874) (14,490)

General and administrative (not N/A N/A N/A N/A allocated to segment)

Impairment charges (79,050) 0 (81,060) 0

Debt extinguishment costs, net (36) 0 (93) 0

Other expense, net 197 0 197 334

Gain on disposition of real (276) 0 (304) 0 estate, net

Tax expense (11) (467) (54) (467)

Net loss (72,428) 848 (69,328) 7,278



(1) NOI from assets sold through June 129 901 455 1,869 30, 2021

Retail Value Inc.

Balance Sheet

$ in thousands

At Period End

2Q21

4Q20

Assets:

Land

$337,869

$397,699

Buildings

918,294

1,031,886

Fixtures and tenant improvements

114,580

134,335

1,370,743

1,563,920

Depreciation

(554,434)

(593,691)

816,309

970,229

Construction in progress

2,489

1,515

Real estate, net

818,798

971,744

Cash

67,185

56,849

Restricted cash (1)

59,048

115,939

Receivables and straight-line (2)

17,501

25,302

Intangible assets, net (3)

7,078

9,452

Other assets, net (4)

10,882

16,590

Total Assets

980,492

1,195,876

Liabilities and Equity:

Secured debt (5)

207,243

344,485

Dividends payable

0

23,002

Other liabilities (6)

30,420

38,603

Total Liabilities

237,663

406,090

Redeemable preferred equity

190,000

190,000

Common shares

2,110

1,983

Paid-in capital

740,548

721,234

Distributions in excess of net income

(189,800)

(123,428)

Common shares in treasury at cost

(29)

(3)

Total Equity

552,829

599,786

Total Liabilities and Equity

$980,492

$1,195,876

(1)

Asset sale proceeds

0

51,168

Hurricane related escrows

37,169

38,469

Other lender required escrows

21,879

26,302

(2)

SL rents (including fixed CAM), net

11,337

13,683

(3)

Operating lease right of use asset

1,402

1,509

(4)

Note receivable

3,000

3,000

(5)

Unamortized loan costs

(7,302)

(9,718)

(6)

Operating lease liabilities

2,476

2,602

Below-market leases, net

11,828

13,829

View source version on businesswire.com: https://www.businesswire.com/news/home/20210803006017/en/

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