InvenTrust Properties (IVT) - 2023 Q4 - Annual Report

Part I Business InvenTrust Properties Corp. is a REIT specializing in owning and managing 62 grocery-anchored retail properties totaling 10.3 million square feet in the U.S. Sun Belt, focusing on strategic growth and ESG Retail Portfolio Summary (as of December 31, 2023) | Metric | Value | | :--- | :--- | | Number of properties | 62 | | Gross Leasable Area (GLA) | 10.3 million sq. ft. | | Economic Occupancy | 93.3% | | Leased Occupancy | 96.2% | | Annualized Base Rent (ABR) PSF | $19.48 | - The company's business strategy is centered on four key pillars: acquiring retail properties in high-growth Sun Belt markets, opportunistically disposing of non-core assets, maintaining a flexible capital structure, and enhancing environmental, social, and governance (ESG) practices[21][30] - As of December 31, 2023, the company had 104 full-time employees, with approximately 67% diversity (gender and racial/ethnic groups), including 61% women and 19% racial minorities[29][30] - In 2023, the company increased its GRESB (Global Real Estate Sustainability Benchmark) score by five points year-over-year, reflecting progress on its ESG goals[34] - On January 18, 2023, the Company acquired the four remaining retail properties from its unconsolidated joint venture, IAGM, and subsequently liquidated the venture[20] Risk Factors The company faces diverse risks including economic downturns, e-commerce shifts, geographic concentration, real estate investment challenges, financial risks, and cybersecurity threats - The company has significant geographic concentration, with approximately 41.7% of its total annualized base rental income generated by properties in Texas as of December 31, 2023[45] - The business is dependent on the success of both anchor tenants (occupying 10,000+ sq. ft.) and small shop tenants (less than 10,000 sq. ft.), which generate approximately 58.0% of total annualized base rental income[46][47] - Lease expirations pose a risk, with leases representing 5.0% of the retail portfolio's GLA scheduled to expire in 2024, and 12.1% in 2025 as of December 31, 2023[48] - Failure to qualify as a REIT would subject the company to federal income tax at corporate rates and disqualify it from REIT status for four years, significantly impacting cash available for distributions[96][97] - Cybersecurity threats are a growing risk, as threat actors become more sophisticated, potentially leading to operational interruption, data exposure, and reputational damage[90][93] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[99] Cybersecurity The company implements a cybersecurity risk management program guided by the NIST Cybersecurity Framework, overseen by the Audit Committee, with no material past incidents reported - The company's cybersecurity program is designed and assessed based on the National Institute of Standards and Technology Cybersecurity Framework (NIST CSF)[101] - The Audit Committee of the Board of Directors has been delegated oversight of cybersecurity and other information technology risks[103] - Management, led by the Vice President of Information Technology, is responsible for the day-to-day assessment and management of cybersecurity threats and supervises external consultants[106] - The company has not identified any risks from known cybersecurity threats or prior incidents that have materially affected its operations, business strategy, or financial condition[102] Properties InvenTrust's portfolio comprises 62 wholly-owned retail properties totaling 10.3 million square feet, primarily grocery-anchored, with high occupancy and geographic concentration in the Sun Belt Portfolio Overview (as of Dec 31, 2023) | Metric | Wholly-Owned 2023 | | :--- | :--- | | No. of properties | 62 | | GLA (square feet, in thousands) | 10,324 | | Economic occupancy | 93.3% | | Leased occupancy | 96.2% | | ABR PSF | $19.48 | Top 5 Markets by ABR (as of Dec 31, 2023) | Market | % of Total ABR | | :--- | :--- | | Austin-Round Rock, TX | 17.5% | | Houston-Sugar Land-Baytown, TX | 11.2% | | Miami-Fort Lauderdale-Miami Beach, FL | 10.1% | | Dallas-Fort Worth-Arlington, TX | 9.8% | | Atlanta Metro Area, GA | 9.7% | Top 5 Tenants by ABR (as of Dec 31, 2023) | Tenant | % of Total ABR | | :--- | :--- | | Kroger | 5.2% | | Publix Super Markets, Inc. | 3.3% | | TJX Companies | 2.6% | | Albertson's | 2.3% | | H.E.B. | 2.3% | Lease Expiration Schedule (% of Total ABR) | Expiration Year | % of Total ABR | | :--- | :--- | | 2024 | 5.4% | | 2025 | 10.1% | | 2026 | 11.2% | | 2027 | 19.5% | | 2028 | 12.8% | Legal Proceedings The company is involved in ordinary course legal proceedings, which management does not expect to materially affect its financial condition or operations - The company is subject to ordinary course legal proceedings but does not expect them to have a material adverse effect on its financial condition or operations[115] Mine Safety Disclosures This item is not applicable to the company - Not applicable[116] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities InvenTrust's common stock trades on the NYSE under 'IVT', with a $150 million share repurchase program and 2023 cash distributions totaling $57.5 million - The company's common stock is traded on the New York Stock Exchange (NYSE) under the ticker symbol "IVT"[117] - A share repurchase program for up to $150.0 million was established in February 2022, with no common stock repurchased under this program as of December 31, 2023[119] 2023 vs. 2022 Distribution Tax Characterization | Common Stock Tax Characterization | 2023 | 2022 | | :--- | :--- | :--- | | Ordinary distribution | 78.50% | 93.20% | | Capital gain distributions | 21.50% | —% | | Total | 100.00% | 100.00% | Cumulative Total Stockholder Return (10/12/2021 - 12/31/2023) | Ticker / Index | 10/12/2021 | 12/31/2023 | | :--- | :--- | :--- | | IVT | $100.00 | $115.87 | | FTSE NAREIT Equity Index | $100.00 | $96.99 | | FTSE NAREIT Shopping Centers Index | $100.00 | $105.70 | | S&P 500 Index | $100.00 | $113.63 | Management's Discussion and Analysis of Financial Condition and Results of Operations The company's 2023 financial performance shows increased total income to $258.7 million, a net income of $5.3 million, 4.9% Same Property NOI growth, and Core FFO per diluted share of $1.65, supported by strong liquidity and a 'BBB-' credit rating - In 2023, the company acquired five retail properties for a gross price of $244.0 million and disposed of one property and a partial interest for $13.1 million[136][137] - During Q4 2023, the company raised $5.4 million in net proceeds under its at-the-market (ATM) equity program by issuing 208,040 shares[140] Leasing Activity Spreads (Year Ended Dec 31, 2023) | Lease Type | Number of Leases | % Change over Prior Rent | | :--- | :--- | :--- | | Comparable Renewal Leases | 190 | 7.2% | | Comparable New Leases | 32 | 25.3% | | Total Comparable | 222 | 9.8% | Results of Operations Comparison (in thousands) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Total Income | $258,676 | $236,707 | | Total Operating Expenses | $222,868 | $201,458 | | Gain on sale of investment properties | $2,691 | $38,249 | | Net Income | $5,269 | $52,233 | - Same Property Net Operating Income (NOI) increased by 4.9% to $142.1 million for the year ended December 31, 2023, compared to $135.5 million in 2022, driven by higher minimum rent and increased expense recoveries[167][168] FFO & Core FFO per Diluted Share | Metric | 2023 | 2022 | | :--- | :--- | :--- | | NAREIT FFO per diluted share | $1.70 | $1.66 | | Core FFO per diluted share | $1.65 | $1.57 | - The company's liquidity is supported by operating cash flows, proceeds from property sales, and debt financing, including an ATM program with $244.6 million remaining capacity as of year-end, and Fitch Ratings affirmed the company's 'BBB-' investment-grade rating with a Stable outlook[193][195][196] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate volatility on variable-rate debt, mitigated by interest rate swaps, with a 1% rate change impacting annual interest expense by approximately $0.7 million - The company's primary market risk is from changes in interest rates affecting its variable-rate debt and future refinancing[217] - As of December 31, 2023, the company had $472.5 million in variable-rate debt, of which $400.0 million has been swapped to a fixed rate, mitigating a large portion of the interest rate risk[217] - A permanent 1% change in interest rates on the unhedged variable-rate debt ($72.5 million) would result in an approximate annual change in interest expense of $0.7 million[222] Effective Interest Rate Swaps (as of Dec 31, 2023) | Notional Amount (in thousands) | InvenTrust Pays (Fixed Rate) | InvenTrust Receives (Variable Rate) | Maturity Date | | :--- | :--- | :--- | :--- | | $100,000 | 1.46% - 1.47% | 1-Month SOFR | Jun 21, 2024 | | $100,000 | 3.69% | 1-Month SOFR | Mar 22, 2027 | | $200,000 | 1.51% | 1-Month SOFR | Sep 22, 2026 | Consolidated Financial Statements and Supplementary Data This section refers to the company's audited consolidated financial statements and supplementary data, commencing on page F-1 - This section refers to the Index to Consolidated Financial Statements and Financial Statement Schedule, which begins on page F-1 of the report[226] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - Not applicable[227] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with no material changes reported - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2023[228] - Management concluded that the company maintained effective internal control over financial reporting as of December 31, 2023, based on the COSO framework (2013)[229] - There were no changes in internal control over financial reporting during the fourth quarter of 2023 that materially affected, or are reasonably likely to materially affect, these controls[231] Other Information The company reports no other information for this item - None[232] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable[233] Part III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the company's 2024 Proxy Statement - Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's upcoming Proxy Statement[234] Executive Compensation Information regarding executive compensation is incorporated by reference from the company's 2024 Proxy Statement - Information regarding executive compensation is incorporated by reference from the company's upcoming Proxy Statement[235] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This section incorporates security ownership information by reference and details equity compensation plans as of December 31, 2023 Equity Compensation Plan Information (as of Dec 31, 2023) | Plan Category | Number of Shares Issuable Upon Vesting | Number of Securities Remaining Available for Future Issuance | | :--- | :--- | :--- | | Equity compensation plans not approved by stockholders (Incentive Award Plan) | 1,172,363 | 536,429 | | Equity compensation plans approved by stockholders (ESPP) | N/A | 3,288,272 | | Total | 1,172,363 | 3,824,701 | Certain Relationships and Related Transactions, and Director Independence Information on certain relationships, related transactions, and director independence is incorporated by reference from the company's 2024 Proxy Statement - Information regarding related transactions and director independence is incorporated by reference from the company's upcoming Proxy Statement[240] Principal Accounting Fees and Services Information on principal accounting fees and services is incorporated by reference from the company's 2024 Proxy Statement - Information regarding principal accounting fees and services is incorporated by reference from the company's upcoming Proxy Statement[241] Part IV Exhibits and Financial Statement Schedules This section lists all financial statements, schedules, and exhibits filed as part of the Annual Report, including governance documents and material contracts - This section provides an index of all financial statements, schedules, and exhibits filed with the Form 10-K[242] Form 10-K Summary The company reports no information for this item - None[247]