InvenTrust Properties (US:IVT)2023-11-03 21:21Financial Data and Key Metrics Changes - InvenTrust reported NAREIT FFO of $27.6 million or $0.41 per diluted share for Q3 2023, an increase of 5.1% compared to the same period in 2022 [14] - Year-to-date NAREIT FFO was $84.7 million or $1.25 per diluted share, a decrease of $0.06 per share driven by private placement debt funding and GAAP adjustments related to acquisitions [14] - Same-property NOI grew 5.3% over Q3 last year, with year-to-date same-property NOI at $106.3 million, growing 4.4% over the first nine months of 2022 [38] Business Line Data and Key Metrics Changes - The anchor space lease occupancy finished at 96.6%, a decline of 200 basis points from the last quarter, primarily due to new vacancies from recent bankruptcies [18] - Small shop leased occupancy increased to 92.4% [18] - Comparable leasing spreads were at 16% for new leases and 8% for renewal leases [43] Market Data and Key Metrics Changes - The total portfolio lease occupancy finished at 95.1% as of September 30 [43] - The total portfolio ABR was $19.36, an increase of 2.4% compared to 2022 [43] - New retail construction remains materially lower than historical averages, and shopping center vacancy is at its lowest level since the global financial crisis [12] Company Strategy and Development Direction - The company focuses on owning and operating essential open-air retail centers exclusively in the Sun Belt region, maintaining a low-leveraged capital structure [34] - Management acknowledges the strength of the current retail environment and the attractiveness of Sun Belt assets, indicating a positive outlook for continued momentum [21] - The company is selective in its external growth criteria due to uncertainty in capital markets, prioritizing sustainable cash flow growth [37] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in market rent growth outpacing the national average due to demographic trends in the Sun Belt [4] - The company anticipates challenges in 2024 due to tenant bankruptcies but believes it can overcome these headwinds through effective leasing strategies [24][60] - Management highlighted the resilience of small shop retailers and the overall strength of the retail environment despite recent bankruptcies [60][82] Other Important Information - The company declared a dividend payment of $0.215 per share, a 5% increase over last year [16] - Fitch Ratings affirmed the company's long-term issuer rating at BBB- with a stable outlook [16] - The company has $457 million of total liquidity, including $350 million of borrowing capacity available on its revolving line of credit [15] Q&A Session Summary Question: Inquiry about Bed Bath and Beyond bankruptcies and timelines for backfilling - Management confirmed they have five Bed Bath & Beyond spaces, with negotiations ongoing for four of them, expecting execution by the end of the year [48] - The expected timeline for backfilling these spaces is around 12 to 15 months, with payback periods under two years for most cases [24][25] Question: Comments on bid-ask spreads in core Sun Belt markets - Management noted that the bid-ask spread has narrowed for smaller assets, while larger assets remain more challenging due to financing costs [30][53] Question: Guidance for same-property NOI and tenant fallout - Management explained the wide range in fourth-quarter guidance is due to the size of the company and potential unforeseen fallout [58] - They acknowledged the resilience of shopping center REITs despite recent bankruptcies, indicating a strong overall performance [60] Question: Cost of retenanting and project development - Management indicated that costs for retenanting can be upwards of $150 to $175 per square foot, depending on the project specifics [64] - They emphasized the importance of ensuring that the economics and returns make sense for the company [64]