Retail Opportunity Investments (US:ROIC)2024-02-15 18:56Portfolio and Property Details - The company's portfolio consists of 95 properties totaling approximately 10.7 million square feet of gross leasable area (GLA) as of December 31, 2023[35] - The company's retail portfolio as of December 31, 2023, consists of 95 properties (94 retail and one office) totaling approximately 10.7 million square feet of gross leasable area, with a 97.7% leased rate excluding one shopping center planned for redevelopment[170] - Paramount Plaza in the Los Angeles metro area has a 98.5% leased rate with 14 tenants and generates $1,983 in annual base rent[171] - Fallbrook Shopping Center, also in the Los Angeles metro area, has a 99.5% leased rate with 50 tenants and generates $14,325 in annual base rent[171] - The Market at Lake Stevens in the Seattle metro area has a 100% leased rate with 9 tenants and generates $1,706 in annual base rent[171] - Crossroads Shopping Center in the Seattle metro area has a 99.3% leased rate with 96 tenants and generates $12,868 in annual base rent[171] - Happy Valley Town Center in the Portland metro area has a 100% leased rate with 38 tenants and generates $4,181 in annual base rent[172] - South Point Plaza in the Seattle metro area has an 89.3% leased rate with 23 tenants and generates $2,276 in annual base rent[172] - Pleasant Hill Marketplace in the San Francisco metro area has a 100% leased rate with 3 tenants and generates $1,524 in annual base rent[172] - Pinole Vista Shopping Center in the San Francisco metro area has a 98.1% leased rate with 29 tenants and generates $3,237 in annual base rent[172] - Country Club Gate Center in the San Francisco metro area has a 98.7% leased rate with 34 tenants and generates $2,411 in annual base rent[172] - Total retail portfolio annual base rent (ABR) is $237.826 million with a 97.7% leased rate across 10,556,718 square feet[173] - Albertsons/Safeway Supermarkets are the largest tenant, contributing 5.6% of total ABR with 21 leases[175] - Kroger Supermarkets are the second-largest tenant, contributing 3.3% of total ABR with 11 leases[175] - 264 leases expiring in 2024, representing 8.1% of total ABR ($19.236 million)[176] - 310 leases expiring in 2025, representing 12.0% of total ABR ($28.699 million)[176] - 313 leases expiring in 2028, representing the highest percentage of total ABR at 17.5% ($41.616 million)[176] - Anchor tenants (occupying ≥15,000 sq. ft.) account for 37.2% of total ABR ($88.550 million)[179] - 7 anchor tenant leases expiring in 2024, representing 1.4% of total ABR ($3.293 million)[179] - 30 anchor tenant leases expiring in 2028, representing 7.9% of total ABR ($18.850 million)[179] Financial Performance and Metrics - Property operating income increased by $9.9 million to $237.1 million in 2023 compared to $227.2 million in 2022[202] - Depreciation and amortization expenses increased by $6.7 million to $104.2 million in 2023 compared to $97.5 million in 2022[203] - Interest expense and other finance expenses increased by $14.0 million to $73.2 million in 2023 compared to $59.2 million in 2022[207] - Funds from operations (FFO) decreased to $140.9 million in 2023 compared to $145.3 million in 2022[212] - Same-center cash NOI increased by 3.7% to $211.4 million in 2023 compared to $203.9 million in 2022, driven by higher base rents and lease termination fees[218] - Total Company cash NOI was $223.5 million in 2023, up from $212.1 million in 2022[217] - Same-center properties accounted for 87 out of 95 total properties as of December 31, 2023[217] - GAAP operating income decreased to $109.8 million in 2023 from $114.7 million in 2022[217] - Depreciation and amortization expenses increased to $104.2 million in 2023 from $97.5 million in 2022[217] - The company recorded a gain on sale of real estate of $7.7 million in 2022, with no such gain in 2023[217] - Straight-line rent adjustments were $1.9 million in 2023 compared to $2.7 million in 2022[217] - Amortization of above- and below-market rent decreased to $11.2 million in 2023 from $11.9 million in 2022[217] - Non same-center cash NOI was $12.2 million in 2023, up from $8.2 million in 2022[217] Debt and Financing - The Operating Partnership has a term loan of $300.0 million with a maturity date of January 20, 2025[46] - The Operating Partnership has a credit facility with borrowing capacity of up to $600.0 million, with a maturity date of March 2, 2027[49] - As of December 31, 2023, $200.0 million and $75.0 million were outstanding under the term loan and credit facility, respectively[53] - The weighted average interest rates on the term loan and the credit facility during 2023 were 6.1% and 5.9%, respectively[53] - The company completed a public offering of $350.0 million aggregate principal amount of 6.75% Senior Notes due 2028 on September 21, 2023[54] - The company's outstanding principal mortgage indebtedness as of December 31, 2023, was approximately $60.0 million[129] - The company had $75.0 million and $200.0 million outstanding under its $600.0 million unsecured revolving credit facility and $300.0 million term loan, respectively, as of December 31, 2023[129] - The Operating Partnership issued $350.0 million in unsecured senior notes in September 2023, $250.0 million in December 2017, $200.0 million in September 2016, and $250.0 million in December 2014[130] - The company's access to financing depends on factors such as general market conditions, asset quality, growth potential, and stock price[131] - Increases in interest rates could increase the company's debt payments and adversely affect its cash flow, operations, and ability to pay dividends[134] - The company may need to provide additional collateral or pay down debt if the market value of its secured assets declines[135] - A downgrade in the company's credit ratings could adversely affect its costs and availability of capital[137] - The company's cash flow depends on distributions from its subsidiaries, which must first satisfy their obligations to creditors[138] ESG and Sustainability Initiatives - The company achieved a 7% year-over-year reduction in energy usage from 2021 to 2022 at like-for-like properties[77] - The company has solar agreements at 12 properties, representing approximately 20% of its portfolio by gross leasable area[77] - The company has installed 70 EV charging stations at 9 properties and plans to add 137 more within the next 12 months[77] - Smart irrigation controllers and monitoring systems have been installed at 34 California shopping centers[77] - 37 shopping centers have converted common area lighting to LED[77] - The company’s ESG initiatives include annual diversity and inclusion training and participation in GRESB since 2021[71][77] Risks and Challenges - The company faces competition from larger entities with greater financial resources, which may impact its ability to acquire assets and retain tenants[67][68] - The company’s income and cash flow could be adversely affected by tenant defaults or inability to lease space on favorable terms[81] - The company’s properties are subject to environmental laws, and non-compliance could result in significant capital expenditures[63][65] - Inflation or deflation could negatively impact the company's property operating expenses, consumer spending, and tenant sales, potentially affecting rents and lease renewals[89] - Compliance with safety regulations may require significant unanticipated expenditures, potentially affecting the company's financial condition and ability to pay dividends[90] - The company expects to acquire additional properties, but faces risks such as increased acquisition costs, difficulties in leasing, and potential liabilities from new properties[91][92] - Redevelopment projects may face delays or fail to meet expectations, potentially resulting in investment losses or impairment charges[93][94] - Mixed-use development projects pose unique risks, including complex entitlement processes and potential dependency on third-party developers[95] - The company's retail-focused properties are vulnerable to changes in consumer spending habits, competition from online retailers, and tenant performance[96][97] - The company relies on external capital sources, including debt and equity financing, to fund growth, which may be limited by market conditions[98] - The company may face challenges in recovering Common Area Maintenance (CAM) costs from tenants, which could adversely affect cash flow[106] - Environmental compliance costs, including potential clean-up liabilities, could impact the company's financial condition[107] - Environmental compliance risks could result in significant costs, including fines and remedial actions for contamination at company properties[108] - Cybersecurity risks, including potential breaches and IT system disruptions, could materially impact the company's financial performance and operations[109][110] - The company relies on third-party service providers, but cannot guarantee the effectiveness of their data security measures[111] - System failures or disruptions could lead to material business interruptions and additional costs to remedy damages[112][113] - Declining real estate values during economic slowdowns could impair assets and negatively affect financial performance[114] - Loss of key personnel, including senior management, could harm operations and financial results[115] - Joint venture investments carry risks, including lack of sole decision-making authority and reliance on partners' financial stability[117] - Geographic concentration in California, Washington, and Oregon (65%, 22%, and 13% of operating income, respectively) exposes the company to localized market risks[120] - Expansion into new markets may face challenges due to unfamiliar market dynamics and operational risks[121] - Pandemics or public health crises could adversely impact tenant operations, rent collection, and overall financial performance[123][124] REIT and Tax Considerations - The company must distribute at least 90% of its REIT taxable income to stockholders annually to maintain REIT qualification, with a 4% non-deductible excise tax applied if distributions fall below a specified minimum[148] - Failure to qualify as a REIT would subject the company to U.S. federal income tax, potentially reducing cash available for distribution to stockholders[145][147] - The company may need to borrow funds or sell assets to meet REIT distribution requirements, even under unfavorable market conditions[151] - The company's taxable income may exceed GAAP net income due to non-cash taxable income, potentially requiring the use of cash reserves or debt to meet distribution requirements[149] - The company may be liable for tax obligations of certain limited partners until 2027, limiting its flexibility to dispose of related assets[155] - The company's ability to pay future distributions is subject to various risks, including earnings, financial condition, debt covenants, and REIT qualification[157] - The company maintains REIT qualification and believes it will continue to qualify for REIT taxation[229] Corporate Governance and Ownership - ROIC owns an approximate 94.4% partnership interest in the Operating Partnership, with other limited partners owning the remaining 5.6%[35] - ROIC's common stock trades on NASDAQ under the symbol "ROIC" with 67 registered holders as of February 8, 2024[183][184] - ROIC owns a 94.4% partnership interest in the Operating Partnership as of December 31, 2023[191] - Maryland law provisions may delay or prevent a change in control of the company, potentially affecting stockholder interests[140] - The company's charter limits ownership of its common stock to 9.8% by value or number of shares, whichever is more restrictive[144] Acquisitions and Leasing Activities - The company acquired Foothill Plaza for an adjusted purchase price of approximately $21.9 million on December 1, 2023[44] - The company plans to finance future acquisitions through operating cash flow, borrowings, equity and debt offerings, and potential asset sales[59] - The company leased and renewed approximately 382,000 and 1.3 million square feet, respectively, during the year ended December 31, 2023[192] - The company committed $15.3 million ($40.15 per square foot) in tenant improvements for new leases and $1.4 million ($3.57 per square foot) in leasing commissions for new leases during the year ended December 31, 2023[193] - The company actively explores acquisition opportunities consistent with its business strategy[194] Cybersecurity and Risk Management - The company has implemented cybersecurity measures, including annual employee training, vulnerability assessments, and third-party risk management, to protect against cyber threats[161][163][165] - The company's board of directors oversees cybersecurity risk management, with the audit committee providing specific oversight of cybersecurity and technology risks[167] Employee and Diversity Statistics - The company has 71 employees as of December 31, 2023, with 46% identifying as racial or ethnic minorities and 68% being female[69][71]