Retail Opportunity Investments (US:ROIC)2022-02-17 20:38Financial Data and Key Metrics Changes - GAAP net income attributable to common shareholders for 2021 totaled $53.5 million, equating to $0.44 per diluted share, while for Q4, net income was $8.5 million or $0.07 per diluted share [17] - Funds from operations (FFO) for 2021 totaled $127.9 million, equating to $1 per diluted share, and for Q4, FFO was $32.6 million or $0.25 per diluted share [17] - Same-center net operating income (NOI) increased by 3% in 2021 on a cash basis compared to 2020, with a 5.6% increase during Q4 [18] Business Line Data and Key Metrics Changes - The company leased over 1.4 million square feet in total during 2021, close to setting a new record for annual leasing activity [8] - For the ninth consecutive year, the company achieved double-digit rent growth on same-space new leases, with a 27% increase in Q4 [9] - The portfolio lease rate increased from 96.8% at the beginning of 2021 to 97.5% at year-end, nearing the record high of 97.9% achieved in 2019 [29] Market Data and Key Metrics Changes - Demand for space remained strong across the portfolio, driven by necessity, service, and destination businesses seeking to expand [27] - The company maintained 100% leased anchor space throughout 2021, executing 16 anchor leases totaling 469,000 square feet [31] - Non-anchor lease rate increased from 93% at the beginning of 2021 to 94.6% at year-end [33] Company Strategy and Development Direction - The company plans to focus on acquiring grocery-anchored shopping centers, with four acquisitions totaling $122 million made in 2021 [12] - The company aims to enhance its balance sheet while driving cash flow higher over time as certain anchor leases roll [16] - Densification projects are underway, with plans to add residential and retail space to existing centers [45] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the grocery-anchored portfolio's resilience amid ongoing market uncertainties [48] - The company anticipates a productive 2022, with strong leasing activity and a focus on off-market acquisitions [42] - Management remains cautious about the future due to potential impacts from COVID-19 and other market factors [47] Other Important Information - The Board raised the quarterly cash dividend to $0.13 per share, representing an 18% increase over the prior dividend [17] - The company raised $139 million of capital in 2021 through property dispositions and equity issuance [19] Q&A Session Summary Question: Expectations regarding leasing volumes - Management expects leasing activity to be consistent with past years, with opportunities arising that may lead to larger amounts of leased space than scheduled [50] Question: Anticipated cap rate for acquisitions in 2022 - Guidance assumes a 5.75% cap rate on average for acquisitions [52] Question: Tenant concerns regarding inflation and market conditions - Management has not heard concerns from tenants about inflation or other market conditions affecting leasing activity [54] Question: Total commenced occupancy upside this year - Management anticipates reaching occupancy levels close to pre-pandemic levels, aiming for approximately 98% [57] Question: Funding the external growth pipeline - The acquisition pipeline will be funded through a combination of disposition proceeds, equity issuance, and credit line borrowings [60] Question: Guidance on occupancy trends and re-leasing spread expectations - The portfolio lease rate is expected to hold steady in the 97% range, with re-leasing spreads estimated at 15% to 20% for new leases and 5% to 10% for renewals [62][64] Question: Capital outlays for densification projects - Minimal capital is anticipated for the Crossroads project, with entitlements already spent for other projects [66] Question: Market dynamics and competition from non-retail buyers - The buyer profile has changed, with increased interest from non-retail buyers seeking better yields in the retail sector [94]