Retail Opportunity Investments (US:ROIC)2022-10-26 20:02Financial Data and Key Metrics Changes - GAAP net income attributable to common shareholders for Q3 2022 was $18.5 million, or $0.15 per diluted share, compared to $41.7 million or $0.33 per diluted share for the first nine months of 2022 [8][10] - Funds from operations (FFO) for Q3 2022 totaled $36.5 million, or $0.27 per diluted share, up from $32.6 million or $0.25 per diluted share in Q3 2021 [8][10] - The company narrowed its FFO guidance for the full year 2022 to a range of $1.09 to $1.11 per share, with same-center NOI growth expected to be in the 4% to 5% range [10][11] Business Line Data and Key Metrics Changes - The portfolio lease rate increased to 97.8% as of September 30, 2022, up from 97.6% in Q2 2022 and 97.2% in Q1 2022 [5][13] - The company achieved a 48% increase in cash base rents on new leases signed during Q3 2022 [5] - Year-to-date, the company has renewed 884,000 square feet of space, including 349,000 square feet in Q3 alone [19] Market Data and Key Metrics Changes - The company acquired five grocery-anchored shopping centers for a total of $120 million, with a blended going-in yield in the low to mid-6% range [6][9] - Approximately 26% of total debt was floating rate, with 74% fixed rate, and no debt maturing until the end of 2023 [10] Company Strategy and Development Direction - The company plans to pause investment activity due to economic uncertainty and rising interest rates, focusing on monitoring the acquisition market [7] - The company aims to enhance tenant diversity and drive rental rates higher while maintaining a proactive approach to managing shopping centers [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand for space, anticipating continued opportunities to enhance value through proactive management [25] - The company noted that the current demand for space is expected to provide opportunities for growth, despite the challenges posed by rising interest rates [25][26] Other Important Information - The company is actively working to recapture space within its portfolio to accommodate existing tenants and attract new destination tenants [14][18] - Management highlighted that the fundamental drivers of the West Coast grocery-anchored portfolio remain sound, with strong demographic trends supporting long-term growth [25][26] Q&A Session Summary Question: Guidance clarification regarding occupancy and rental income - Management indicated that the majority of the $9.1 million in annual base rent expected to come online is anticipated to start in Q4 2022, offsetting increased interest expenses [29][30] Question: Plans for managing floating rate debt - Management stated that the term loan does not mature until 2025, allowing time to monitor market conditions for potential refinancing [32] Question: Investment appetite for 2023 - Management noted a cautious approach to investments, with a focus on monitoring market conditions and potential opportunities as they arise [36] Question: Leasing dynamics and tenant negotiations - Management confirmed that they are proactively negotiating with anchor tenants to secure longer lease terms and favorable conditions [46][52] Question: Impact of rising operating expenses - Management acknowledged that operating expenses have increased due to inflation but expect some stabilization in costs moving forward [60] Question: Tenant performance and potential risks - Management reported no significant weakness in the tenant base, with expectations for strong renewals among key tenants [91][92]