− Recurring FFO per Share Increases 4.2%
−
Inland Real Estate Corporation (NYSE: IRC), a publicly traded
real estate investment trust that owns and operates high-quality,
necessity and value-based retail centers primarily in select
markets within the Central and Southeastern United States, today
announced financial and operational results for the three and nine
months ended September 30, 2015.
Highlights
- Funds from Operations (FFO) per
weighted average common share (basic and diluted) was $0.24 for the
three months ended September 30, 2015, equal to the third quarter
of 2014.
- Recurring FFO (defined as FFO adjusted
for the impact of lease termination income, certain gains and
non-cash impairment charges of non-depreciable real estate, net of
taxes) per weighted average common share (basic and diluted) was
$0.25 for the three months ended September 30, 2015, an increase of
4.2% over $0.24 for the third quarter of 2014.
- Same-store net operating income (NOI)
for the consolidated portfolio decreased 0.6% for the quarter and
increased 4.1% for the nine months ended September 30, 2015,
compared to the corresponding periods in 2014, in line with Company
expectations.
- Total portfolio leased occupancy was
95.3%, the eighth consecutive quarter with a rate of 95% or
above.
- Executed 84 leases within the total
portfolio for 579,348 square feet of leasable space, an increase in
square feet leased of 39.6% over the third quarter of 2014.
- Average base rent for new and renewal
leases signed in the total portfolio increased by 111.5% and 10.1%,
respectively, over expiring average rents.
- First anchor tenants opened for
business at joint venture developments Pulaski Promenade in Chicago
and Tanglewood Pavilions in Elizabeth City, North Carolina.
“For the quarter we reported an increase of 4.2% in Recurring
FFO per share, as well as another quarter of robust leasing
activity in the total portfolio with very strong rent spreads on
both new and renewal leases,” said Mark Zalatoris, president and
chief executive officer for Inland Real Estate Corporation. “As
expected, consolidated same store NOI for the quarter was impacted
by our asset improvement initiatives, specifically the timing of
new tenants coming on line in the third quarters of 2014 and 2015;
however, we remain on track to meet our full-year 2015 guidance for
consolidated same store growth. We continue to execute on our
strategic plan to enhance the quality and diversification of our
portfolio, in part by utilizing development joint ventures. During
the quarter the first anchor tenants opened at our
state-of-the-art, joint venture retail developments in Chicago and
North Carolina. Those developments are expected to provide very
attractive returns on investment, and reflect our balanced and
productive approach to capital allocation.”
Financial Results for the Quarter
FFO attributable to common stockholders was $24.1 million for
the quarter ended September 30, 2015, compared to $23.9
million for the third quarter of 2014. On a per share basis, FFO
was $0.24 (basic and diluted) for the third quarter of 2015, equal
to the third quarter of 2014.
Recurring FFO (defined as FFO adjusted for the impact of lease
termination income, certain gains and non-cash impairment charges
of non-depreciable real estate, net of taxes) was $24.7 million for
the third quarter of 2015, compared to $23.8 million for the prior
year quarter. On a per share basis, recurring FFO was $0.25 (basic
and diluted) for the three months ended September 30, 2015,
compared to 0.24 for the three months ended September 30, 2014. The
increases in Recurring FFO and Recurring FFO per share were
primarily due to receipt of a loan fee related to a mortgage
receivable outstanding at the end of the quarter and lower interest
expense. The increase was partially offset by lower property net
operating income from the consolidated same store portfolio,
primarily due to redevelopment initiatives.
Net income attributable to common stockholders for the three
months ended September 30, 2015 was $8.3 million, compared to $2.3
million for the third quarter of 2014. On a per share basis, net
income attributable to common stockholders (basic and diluted) was
$0.08 for the third quarter of 2015, compared to $0.02 for the
prior year quarter. The increases in net income and net income per
share for the quarter were primarily due to increased disposition
activity compared to the third quarter of 2014, which resulted in
higher gains on sale of investment properties; lower interest
expense; and higher interest income and loan fee income related to
repayment of a mortgage receivable by a joint venture partner.
Financial Results for the Nine Months Ended
September 30, 2015
For the nine months ended September 30, 2015, FFO attributable
to common stockholders was $76.5 million, compared to $70.0 million
for the same period in 2014. On a per share basis, FFO for the
first nine months of 2015 was $0.77 (basic) and $0.76 (diluted),
compared to $0.70 (basic and diluted) for the nine months ended
September 30, 2014. The increases in FFO and FFO per share were
primarily due to higher net operating income from the same store
portfolio, increased lease termination income, increased interest
income and fee income related to the mortgage receivable
outstanding at the end of the third quarter of 2015, lower interest
expense, and increased equity in earnings of unconsolidated joint
ventures, versus the comparable period of 2014.
Recurring FFO was $74.4 million for the nine months ended
September 30, 2015, compared to $69.7 million for the prior year
period. On a per share basis, Recurring FFO was $0.74 (basic and
diluted) for the first nine months of 2015, compared to $0.70
(basic and diluted) for the same period of 2014. The increases in
recurring FFO and recurring FFO per share were due to the same
items that impacted FFO for the nine-month period, excluding the
impact of lease termination income.
Net income attributable to common stockholders for the nine
months ended September 30, 2015, was $12.0 million, compared to
$25.9 million for the same period in 2014. On a per share basis,
net income attributable to common stockholders was $0.12 (basic and
diluted), compared to $0.26 for the same period of 2014. Net income
and net income per share decreased primarily due to decreased
disposition activity compared to the first nine months of 2014,
which resulted in lower gains on sales of investment properties, as
well as impairments recorded during the first nine months of 2015
on assets sold or marketed for sale at prices below carrying
values. The decrease in net income was partially offset by the same
items that impacted FFO, plus lower depreciation and amortization
expense.
Reconciliations of FFO and Recurring FFO to net income
attributable to common stockholders, calculated in accordance with
U.S. GAAP, as well as FFO and Recurring FFO per share to net income
attributable to common stockholders per share, are provided at the
end of this news release.
Portfolio Performance
Consolidated same-store NOI was $27.3 million for the quarter,
representing a slight decrease of 0.6% over the third quarter of
2014. The decrease in same-store NOI for the quarter was primarily
due to the impact of redevelopment and repositioning projects at
certain assets included in the consolidated same store pool. For
the nine months ended September 30, 2015, consolidated same-store
NOI was $83.5 million, representing an increase of 4.1% over the
comparable period of 2014. The increase in same-store NOI for the
first nine months of 2015 was primarily due to higher rental and
other property income related to increased rental rates on renewed
leases and new leases signed during the respective periods and on
repositioning and redevelopment projects, as well as lower property
operating expense, compared to the same period of 2014.
Same-store financial occupancy was 92.4% for the consolidated
portfolio, representing a decrease of 170 basis points over one
year ago.
The Company evaluates its overall portfolio by analyzing the
operating performance of properties that have been owned and
operated for the same three and nine-month periods during each
year. A total of 92 of the Company’s investment properties within
the consolidated portfolio satisfied this criterion during the
period and are referred to as “same-store” properties. Same-store
NOI is a supplemental non-GAAP measure used to monitor the
performance of the Company’s investment properties.
A reconciliation of consolidated same-store NOI to net income
attributable to common stockholders, calculated in accordance with
U.S. GAAP, is provided at the end of this news release.
Leasing
For the quarter, the Company executed 84 leases within the total
portfolio aggregating 579,348 square feet of gross leasable area
(GLA). Total leases executed included:
- Sixty-three renewal leases comprising
428,692 square feet, with an average rental rate of $14.34 per
square foot, representing an increase of 10.1% over the average
expiring rent.
- Ten new leases comprising 110,812
square feet, with an average rental rate of $12.60 per square foot,
representing an increase of 111.5% over the expiring rent.
Excluding one anchor lease executed with an average base rent that
was more than three times the expiring rent, the average base rent
on new leases increased approximately 11%.
- Eleven non-comparable leases comprising
39,844 square feet, with an average rental rate of $17.32 per
square foot. The Company defines non-comparable leases as leases
signed for expansion square footage or for space in which there was
no former tenant in place for a period of twelve months or
more.
On a blended basis, the 73 new and renewal leases executed
during the quarter had an average rental rate of $13.99 per square
foot, representing an increase of 20.8% over the average expiring
rent. The calculations of former and new average base rents are
adjusted for rent abatements on the included leases.
For the total portfolio as of September 30, 2015, leased
occupancy was 95.3% and financial occupancy was 93.1%, representing
decreases of 70 basis points and 120 basis points, respectively,
over one year ago. The decreases are due to an expected net change
in vacancy of approximately 108,000 square feet, primarily related
to the sale of a dark but 100% financially leased former Dominick’s
store at Park St. Claire in Schaumburg, Ill., and gross leasable
area taken out of service for repositioning and redevelopment.
Leased occupancy is defined as the percentage of total gross
leasable area for which there is a signed lease regardless of
whether the tenant is currently obligated to pay rent under the
lease agreement. Financial occupancy is defined as the percentage
of total gross leasable area for which a tenant is obligated to pay
rent under the terms of the lease agreement, regardless of the
actual use or occupation by that tenant of the area being leased,
and excludes tenants in abatement periods.
EBITDA, Balance Sheet, Liquidity and Market Value
The Company reported recurring EBITDA (earnings before interest,
taxes, depreciation and amortization), which is EBITDA adjusted for
the impact of lease termination income, certain gains and non-cash
impairment charges of non-depreciable real estate, of $38.9 million
for the third quarter of 2015, compared to $37.2 million for the
third quarter of 2014. Recurring EBITDA for the nine months ended
September 30, 2015, was $116.5 million, compared to $109.9 million
for the same period in 2014.
Definitions and reconciliations of EBITDA and recurring EBITDA
to net income attributable to Inland Real Estate Corporation are
provided at the end of this news release.
Recurring EBITDA coverage of interest expense was 4.0 times for
the quarter ended September 30, 2015 compared to 3.4 times for the
third quarter of 2014. Net debt-to-recurring EBITDA, pro-rata
consolidation, was 6.6 times for the quarter, compared to 6.9 times
for the comparable prior year quarter. The Company has provided
EBITDA and related non-GAAP coverage ratios because it believes
EBITDA and the related ratios provide useful supplemental measures
in evaluating the Company’s operating performance because expenses
that may not be indicative of operating performance are
excluded.
As of September 30, 2015, the Company had an equity market
capitalization (common shares) of $0.8 billion, outstanding
preferred stock of $210.0 million (at face value), and total debt
outstanding of $1.1 billion (including the pro-rata share of debt
in unconsolidated joint ventures), for a total market
capitalization of approximately $2.1 billion. The Company’s
debt-to-total market capitalization was 50.7% as of
September 30, 2015. Approximately 55.5% of total debt bears
interest at fixed rates. As of September 30, 2015, the
weighted average interest rate on the fixed rate debt was 5.08% and
the overall weighted average interest rate, including variable rate
debt, was 3.65%.
Dispositions
During the quarter, the Company sold portions of three retail
centers for a total price of $34.3 million, and recorded net gains
on sales of $3.9 million. The dispositions included the
73,000-square-foot building leased to Regal Cinema at Regal
Showplace in Crystal Lake, Ill., for $17.0 million; the
76,262-square-foot building leased to Dominick’s and H&R Block
at Wauconda Crossings in Wauconda, Ill., for $4.3 million; and the
71,400-square-foot building leased to Dominick’s at Park St. Clair
retail center in Schaumburg, Ill., for $13.0 million.
After the close of the quarter, the Company sold the University
Center in St. Paul, Minn., for $4.7 million. The Company also sold
the Wauconda Shopping Center and the building leased to Walgreens
at Wauconda Crossings, both located in Wauconda, Ill., for a
combined price of $8.0 million.
Joint Venture Activity
The Company has formed joint ventures with institutions and
established developers to advance its strategic goal to further
enhance the size, quality and diversification of its operating
platform.
At the Company’s Pulaski Promenade joint venture development in
Chicago, PetSmart celebrated its grand opening in September and
Marshalls and Shoe Carnival opened for business in October. In
addition, at the Company’s Tanglewood Pavilions development joint
venture in Elizabeth City, North Carolina, anchors Hobby Lobby and
TJ Maxx opened during the third quarter, and Ross Dress for Less
opened in October.
In September, the Company’s joint venture with PGGM closed a $50
million unsecured credit facility with a four-year term and
one-year extension option. The facility will be utilized by the
IRC-PGGM joint venture for general purposes, including funding the
acquisition of the completed Evergreen Promenade and Pulaski
Promenade shopping center developments and to pay off higher rate
secured debt maturities on properties owned by the venture.
In October, the Company’s joint venture with MAB American Retail
Partners, LLC, acquired for redevelopment the Weaverville Plaza
retail center located in Weaverville, North Carolina, in the
Asheville MSA. The IRC-MAB joint venture has signed a lease with
Publix for the ground-up development of a new 49,000-square-foot
grocery store at the center. The venture expects to invest a total
of $21.6 million in the redevelopment project, which will include
demolition of existing retail space for the new Publix store,
repositioning of in-line shop space, and construction of a new
outlot at the center. The completed redevelopment is expected to
total approximately 139,000 square feet of gross leasable area.
Distributions
In July, August, September and October of 2015, the Company paid
a monthly cash dividend of $0.169271 per share on the outstanding
shares of its 8.125% Series A Cumulative Redeemable Preferred Stock
(Series A Preferred Stock), and a monthly cash dividend of
$0.144791667 per share on the outstanding shares of its 6.95%
Series B Cumulative Redeemable Preferred Stock (Series B Preferred
Stock). In October, the Company declared a cash dividend of
$0.169271 per share on the outstanding shares of its Series A
Preferred Stock, and a cash dividend of $0.144791667 per share on
the outstanding shares of its Series B Preferred Stock, both
dividends payable on November 16, 2015, to Series A and Series B
Preferred Stockholders of record at the close of business on
November 2, 2015.
In July, August, September and October of 2015, the Company paid
monthly cash distributions to Common Stockholders of $0.0475 per
common share. In October, the Company declared a cash distribution
of $0.0475 per common share, payable on November 17, 2015, to
common stockholders of record at the close of business on November
2, 2015.
Guidance
For fiscal year 2015, the Company is revising its expectation
for recurring FFO per common share (basic and diluted) to a range
of $0.96 to $0.98, from the prior range of $0.96 to $1.00. The
revision is due to the Company’s decision to capitalize on
opportunities to complete a higher level of dispositions and to
certain sales being completed earlier than previously anticipated.
In addition, the Company is currently allocating a greater amount
of capital to redevelopment and development activities, versus new
acquisitions of stabilized assets. The Company’s guidance continues
to incorporate assumptions for an increase in consolidated
same-store NOI to range from 2% to 3%, and consolidated same-store
financial occupancy at year-end 2015 to range from 92.5% to
93.5%.
Conference Call/Webcast
Management will host a conference call to discuss the Company’s
financial and operational results for the quarter and nine months
ended September 30, 2015, on Thursday, November 5, 2015, at
1:00 p.m. CT (2:00 p.m. ET). Hosting the conference call will be
Mark Zalatoris, President and Chief Executive Officer; Brett Brown,
Chief Financial Officer; and Scott Carr, Chief Investment Officer.
The live conference call can be accessed by dialing 1-877-509-5836
for callers within the United States, 1-855-669-9657 for callers
dialing from Canada, or 1-412-902-4131 for other international
callers. A live webcast also will be available on the Company’s
website at www.inlandrealestate.com. The conference call will be
recorded and available for replay one hour after the end of the
live event until 12:01 a.m. ET on November 20, 2015. Interested
parties can access the replay of the conference call by dialing
1-877-344-7529 or 1-412-317-0088 for international callers, and
entering the conference number 10073677. An online playback of the
webcast will be archived for approximately one year within the
investor relations section of the Company’s website.
About Inland Real Estate Corporation
Inland Real Estate Corporation is a self-advised and
self-managed publicly traded real estate investment trust (REIT)
focused on owning and operating open-air neighborhood, community,
and power shopping centers located in well-established markets
primarily in the Central and Southeastern United States. As of
September 30, 2015, the Company owned interests in 135 fee
simple investment properties, including 36 owned through its
unconsolidated joint ventures, with aggregate leasable space of
approximately 15 million square feet. Additional information on
Inland Real Estate Corporation, including a copy of the Company’s
supplemental financial information for the three and nine months
ended September 30, 2015, is available at
www.inlandrealestate.com.
Certain information in this supplemental information may
constitute “forward-looking statements” within the meaning of the
Federal Private Securities Litigation Reform Act of 1995.
Forward-looking statements are statements that do not reflect
historical facts and instead reflect our management’s intentions,
beliefs, expectations, plans or predictions of the future.
Forward-looking statements can often be identified by words such as
“seek,” “believe,” “expect,” “anticipate,” “intend,” “estimate,”
“may,” “will,” “should” and “could.” Examples of forward-looking
statements include, but are not limited to, statements that
describe or contain information related to matters such as
management’s intent, belief or expectation with respect to our
financial performance, investment strategy or our portfolio, our
ability to address debt maturities, our cash flows, our growth
prospects, the value of our assets, our joint venture commitments
and the amount and timing of anticipated future cash distributions.
Forward-looking statements reflect the intent, belief or
expectations of our management based on their knowledge and
understanding of our business and industry and their assumptions,
beliefs and expectations with respect to the market for commercial
real estate, the U.S. economy and other future conditions.
Forward-looking statements are not guarantees of future
performance, and investors should not place undue reliance on them.
Actual results may differ materially from those expressed or
forecasted in forward-looking statements due to a variety of risks,
uncertainties and other factors, including but not limited to the
risks listed and described under Item 1A“Risk Factors” in our
Annual Report on Form 10-K for the year ended December 31, 2014, as
filed with the Securities and Exchange Commission (the “SEC”) on
February 27, 2015, as they may be revised or supplemented by us in
subsequent Reports on Form 10-Q and other filings with the SEC.
Except as otherwise required by applicable law, the Company
disclaims any obligation or undertaking to publicly release any
updates or revisions to any forward-looking statement in this
release to reflect any change in the Company’s expectations or any
change in events, conditions or circumstances on which any such
statement is based.
Consolidated Balance Sheets
(in thousands, except per share
data)
September 30, 2015 December 31, 2014 Assets:
(unaudited) Investment properties: Land $ 372,025 385,432
Construction in progress 33,543 23,812 Building and improvements
1,122,823 1,110,360 Total Investment Properties
1,528,391 1,519,604 Less accumulated depreciation 347,934
338,141 Net investment properties 1,180,457 1,181,463 Cash
and cash equivalents 12,335 18,385 Accounts receivable, net 35,348
38,211 Mortgages receivable 24,750 24,750 Investment in and
advances to unconsolidated joint ventures 170,879 170,720 Acquired
lease intangibles, net 71,792 85,858 Deferred costs, net 17,925
18,674 Other assets 36,615 34,890 Total assets $
1,550,101 1,572,951 Liabilities: Accounts
payable and accrued expenses $ 59,315 56,188 Acquired below market
lease intangibles, net 40,703 41,108 Distributions payable 5,439
5,420 Mortgages payable 387,688 384,769 Unsecured credit facilities
440,000 440,000 Other liabilities 20,375 22,290 Total
liabilities 953,520 949,775 Stockholders’
Equity: Preferred stock, $0.01 par value, 12,000 Shares authorized:
8.125% Series A Cumulative Redeemable shares, with a $25.00 per
share Liquidation Preference, 4,400 issued and outstanding at
September 30, 2015 and December 31, 2014, respectively 110,000
110,000 6.95% Series B Cumulative Redeemable shares, with a $25.00
per share Liquidation Preference, 4,000 issued and outstanding at
September 30, 2015 and December 31, 2014, respectively 100,000
100,000 Common stock, $0.01 par value, 500,000 shares authorized;
100,565 and 100,151 Shares issued and outstanding at September 30,
2015 and December 31, 2014, respectively 1,006 1,002 Additional
paid-in capital (net of offering costs of $78,590 and $78,372 at
September 30, 2015 and December 31, 2014, respectively) 878,770
874,154 Accumulated distributions in excess of net income (487,113
) (456,120 ) Accumulated other comprehensive loss (6,995 ) (6,338 )
Total stockholders’ equity 595,668 622,698 Noncontrolling
interest 913 478 Total equity 596,581 623,176
Total liabilities and equity $ 1,550,101
1,572,951
Consolidated Statements of Operations
and Comprehensive Income (unaudited)
(in thousands, except per share
data)
Three months ended September 30, Nine months ended
September 30, 2015 2014 2015
2014 Revenues: Rental income $ 33,310 33,768 101,541 103,981
Tenant recoveries 12,622 12,306 42,550 44,476 Other property income
881 612 4,950 1,577 Fee income from unconsolidated joint ventures
1,431 1,524 4,306 4,090 Total revenues
48,244 48,210 153,347 154,124
Expenses: Property operating expenses 6,514 6,127 21,886 25,082
Real estate tax expense 9,381 9,303 29,107 28,942 Depreciation and
amortization 16,616 17,185 48,860 54,116 Provision for asset
impairment 1,203 — 10,558 222 General and administrative expenses
5,587 5,553 17,604 17,638 Total
expenses 39,301 38,168 128,015 126,000
Operating income 8,943 10,042 25,332 28,124 Other income
2,837 390 3,622 1,158 Gain on sale of investment properties, net
6,450 — 9,383 22,828 Gain on sale of joint venture interest 39 313
228 427 Interest expense (7,337 ) (8,752 ) (21,869 ) (26,642 )
Income before income tax expense of taxable REIT subsidiaries,
equity in earnings of unconsolidated joint ventures and
discontinued operations 10,932 1,993 16,696 25,895 Income
tax expense of taxable REIT subsidiaries (693 ) (232 ) (1,706 )
(670 ) Equity in earnings of unconsolidated joint ventures 2,011
2,774 8,936 6,831 Income from
continuing operations 12,250 4,535 23,926 32,056 Income from
discontinued operations — 31 — 552 Net
income 12,250 4,566 23,926 32,608 Less: Net (income) loss
attributable to the noncontrolling interest 24 10 (51
) 39 Net income attributable to Inland Real Estate
Corporation 12,274 4,576 23,875 32,647 Dividends on
preferred shares (3,972 ) (2,234 ) (11,916 ) (6,703 ) Net income
attributable to common stockholders $ 8,302
2,342
11,959 25,944 Basic and diluted
earnings attributable to common shares per weighted average common
share: Income from continuing operations $ 0.08 0.02 0.12
0.25 Income from discontinued operations — — —
0.01 Net income attributable to common stockholders per
weighted average common share — basic and diluted $ 0.08
0.02 0.12 0.26 Weighted average number
of common shares outstanding — basic 100,188 99,617
100,041 99,495 Weighted average number of
common shares outstanding — diluted 100,540 100,060
100,454 99,874 Comprehensive income: Net
income attributable to common stockholders $ 8,302 2,342 11,959
25,944 Unrealized gain (loss) on derivative instruments (1,029 )
500 (657 ) (706 ) Comprehensive income attributable to
common stockholders $ 7,273 2,842 11,302
25,238
Funds From Operations
(unaudited)
(in thousands, except per share
data)
Non-GAAP Financial Measures
We consider FFO a widely accepted and appropriate measure of
performance for a REIT. FFO provides a supplemental measure to
compare our performance and operations to other REITs. Due to
certain unique operating characteristics of real estate companies,
NAREIT has promulgated a standard known as FFO, which it believes
more accurately reflects the operating performance of a REIT such
as ours. As defined by NAREIT, FFO means net income computed in
accordance with U.S. GAAP, excluding gains (or losses) from sales
of operating property, plus depreciation and amortization and after
adjustments for unconsolidated entities in which the REIT holds an
interest. In addition, NAREIT has further clarified the FFO
definition to add-back impairment write-downs of depreciable real
estate or of investments in unconsolidated entities that are driven
by measurable decreases in the fair value of depreciable real
estate. Under U.S. GAAP, impairment charges reduce net income.
While impairment charges are added back in the calculation of FFO,
we caution that because impairments to the value of any property
are typically based on reductions in estimated future undiscounted
cash flows compared to current carrying value, declines in the
undiscounted cash flows which led to the impairment charges reflect
declines in property operating performance that may be permanent.
We have adopted the NAREIT definition for computing FFO. Recurring
FFO includes adjustments to FFO for the impact of lease termination
income, certain gains and non-cash impairment charges of
non-depreciable real estate, net of taxes recorded in comparable
periods, in order to present the performance of our core portfolio
operations. Management uses the calculation of FFO and Recurring
FFO for several reasons. FFO and Recurring FFO are used to compare
our performance to that of other REITs in our peer group. The
calculation of FFO and Recurring FFO may vary from entity to entity
because capitalization and expense policies tend to vary from
entity to entity. Items that are capitalized do not impact FFO and
Recurring FFO whereas items that are expensed reduce FFO and
Recurring FFO. Consequently, our presentation of FFO and Recurring
FFO may not be comparable to other similarly titled measures
presented by other REITs. Additionally, Recurring FFO per weighted
average common share outstanding is used in the employment
agreements we have with our executives to determine a portion of
incentive compensation payable to them. FFO and Recurring FFO
do not represent cash flows from operations as defined by U.S.
GAAP, are not indicative of cash available to fund cash flow needs
and liquidity, including our ability to pay distributions, and
should not be considered as an alternative to net income, as
determined in accordance with U.S. GAAP, for purposes of evaluating
our operating performance. The following table reflects our FFO and
Recurring FFO for the periods presented, reconciled to net income
(loss) attributable to common stockholders for these periods:
Three months ended September 30, Nine
months ended September 30, 2015 2014
2015 2014 Net income attributable to common
stockholders $ 8,302 2,342 11,959 25,944 Gain on sale of investment
properties (6,450 ) — (9,203 ) (23,321 ) Impairment of depreciable
operating property 428 — 9,783 222 Equity in depreciation and
amortization of unconsolidated joint ventures 5,227 4,400 15,172
13,013 Amortization on in-place lease intangibles 3,800 4,575
11,320 15,839 Amortization on leasing commissions 581 530 1,553
1,495 Depreciation, net of noncontrolling interest 12,200
12,080 35,952 36,782 Funds From Operations
attributable to common stockholders $ 24,088 23,927 76,536 69,974
Lease termination income (397 ) (131 ) (3,070 ) (146 ) Lease
termination income included in equity in earnings of unconsolidated
joint ventures — (4 ) (106 ) (81 ) Impairment loss, net of taxes:
Impairment of non-depreciable property 775 — 775 Provision for
income taxes: Tax expense related to current impairment charges,
net of valuation allowance 215 215
Recurring Funds From Operations attributable to common stockholders
$ 24,681 23,792 74,350 69,747
Net income attributable to common stockholders per weighted average
common share — basic and diluted $ 0.08 0.02 0.12
0.26 Funds From Operations attributable to
common stockholders, per weighted average common share — basic $
0.24 0.24 0.77 0.70 Funds From
Operations attributable to common stockholders, per weighted
average common share — diluted $ 0.24 0.24 0.76
0.70 Recurring Funds From Operations
attributable to common stockholders, per weighted average common
share — basic and diluted $ 0.25 0.24 0.74
0.70 Weighted average number of common shares
outstanding — basic 100,188 99,617 100,041 99,495 Weighted average
number of common shares outstanding — diluted 100,540 100,060
100,454 99,874
Earnings Before Interest, Taxes,
Depreciation and Amortization (unaudited)
(in thousands, except per share
data)
EBITDA is defined as earnings (losses) from operations
excluding: (1) interest expense; (2) income tax benefit
or expenses; (3) depreciation and amortization expense; and
(4) gains (loss) on non-operating property. We believe EBITDA
is useful to us and to an investor as a supplemental measure in
evaluating our financial performance because it excludes expenses
that we believe may not be indicative of our operating performance.
By excluding interest expense, EBITDA measures our financial
performance regardless of how we finance our operations and capital
structure. By excluding depreciation and amortization expense, we
believe we can more accurately assess the performance of our
portfolio. Because EBITDA is calculated before recurring cash
charges such as interest expense and taxes and is not adjusted for
capital expenditures or other recurring cash requirements, it does
not reflect the amount of capital needed to maintain our properties
nor does it reflect trends in interest costs due to changes in
interest rates or increases in borrowing. EBITDA should be
considered only as a supplement to net earnings and may be
calculated differently by other REITs.
We believe EBITDA is an important supplemental non-GAAP measure.
We utilize EBITDA to calculate our interest expense coverage ratio,
which equals EBITDA divided by total interest expense. We believe
that using EBITDA, which excludes the effect of non-operating
expenses and non-cash charges, all of which are based on historical
cost and may be of limited significance in evaluating current
performance, facilitates comparison of core operating profitability
between periods and between REITs, particularly in light of the use
of EBITDA by a seemingly large number of REITs in their reports on
Forms 10-Q and 10-K. We believe that investors should consider
EBITDA in conjunction with net income and the other required U.S.
GAAP measures of our performance to improve their understanding of
our operating results. Recurring EBITDA includes adjustments to
EBITDA for the impact of lease termination income and non-cash
impairment charges in comparable periods in order to present the
performance of our core portfolio operations.
Three months ended September 30, Nine
months ended September 30, 2015 2014
2015 2014 Net income attributable to Inland
Real Estate Corporation $ 12,274 4,576 23,875 32,647 Gain on sale
of investment properties (6,450 ) — (9,203 ) (23,321 ) Gain on sale
of development properties — — (72 ) — Income tax expense of taxable
REIT subsidiaries 693 232 1,706 670 Interest expense 7,337 8,752
21,869 26,642 Interest expense associated with unconsolidated joint
ventures 2,468 2,180 6,897 6,147 Depreciation and amortization
16,581 17,185 48,825 54,116 Depreciation and amortization
associated with unconsolidated joint ventures 5,227 4,400
15,172 13,013 EBITDA 38,130 37,325 109,069
109,914 Lease termination income (397 ) (131 ) (3,070 ) (146
) Lease termination income included in equity in earnings of
unconsolidated joint ventures — (4 ) (106 ) (81 ) Impairment loss,
net of taxes: Provision for asset impairment 1,203 —
10,558 222 Recurring EBITDA $ 38,936 37,190
116,451 109,909 Total Interest Expense
$ 9,805 10,932 28,766 32,789
EBITDA: Interest Expense Coverage Ratio 3.9 x 3.4 x 3.8 x 3.4 x
Recurring EBITDA: Interest Expense Coverage Ratio 4.0 x 3.4
x 4.0 x 3.4 x
Same Store Net Operating Income
(unaudited)
(in thousands, except per share
data)
Same store net operating income, which is the net operating
income of properties owned during the same periods during each year
("same store" properties), is considered a non-GAAP financial
measure because it does not include straight-line rental income,
amortization of lease intangibles, lease termination income,
interest, depreciation, amortization and bad debt expense. We
provide same store net operating income as another metric to
compare the results of property operations for the three and nine
months ended September 30, 2015 and 2014. We also provide a
reconciliation of these amounts to the most comparable U.S. GAAP
measure, net income attributable to common stockholders.
Three months ended September 30,
Nine months ended September 30,
Consolidated 2015 2014 %
Change 2015 2014 % Change
Rental income and tenant recoveries: "Same store" investment
properties, 92 properties Rental income $ 29,245 29,087 0.5 %
87,531 86,584 1.1 % Tenant recovery income 11,080 11,037 0.4 %
37,098 37,533 -1.2 % Other property income 492 314 56.7 % 1,650 999
65.2 % "Other investment properties” Rental income 4,372 4,603
14,030 16,540 Tenant recovery income 1,542 1,269 5,452 6,943 Other
property income (8 ) 167 230 433
Total
property income $ 46,723 46,477
145,991 149,032 Property
operating expenses: "Same store" investment properties, 92
properties Property operating expenses $ 5,297 4,759 11.3 % 17,373
19,440 -10.6 % Real estate tax expense 8,251 8,246 0.1 % 25,389
25,439 -0.2 % "Other investment properties" Property operating
expenses 1,038 891 3,640 4,461 Real estate tax expense 1,130
1,057 3,718 3,503
Total property operating
expenses $ 15,716 14,953
50,120 52,843 Property net
operating income "Same store" investment properties 27,269 27,433
-0.6 % 83,517 80,237 4.1 % "Other investment properties" 3,738
4,091 12,354 15,952
Total property
net operating income $ 31,007
31,524 95,871 96,189
Other income: Straight-line rents $ 188 186 358 1,133
Amortization of lease intangibles (495 ) (108 ) (378 ) (276 ) Lease
termination income 397 131 3,070 145 Other income 2,837 390 3,622
1,158 Fee income from unconsolidated joint ventures 1,431 1,524
4,306 4,090 Gain on sale of investment properties, net 6,450 —
9,383 22,828 Gain on sale of joint venture interest 39 313 228 427
Equity in earnings of unconsolidated joint ventures 2,011
2,774 8,936 6,831 Other expenses: Income tax expense of
taxable REIT subsidiaries (693 ) (232 ) (1,706 ) (670 ) Bad debt
expense (179 ) (477 ) (873 ) (1,181 ) Depreciation and amortization
(16,616 ) (17,185 ) (48,860 ) (54,116 ) General and administrative
expenses (5,587 ) (5,553 ) (17,604 ) (17,638 ) Interest expense
(7,337 ) (8,752 ) (21,869 ) (26,642 ) Provision for asset
impairment (1,203 ) — (10,558 ) (222 ) Income from
continuing operations 12,250 4,535 23,926 32,056 Income from
discontinued operations — 31 — 552 Net
income 12,250 4,566 23,926 32,608 Less: Net (income) loss
attributable to the noncontrolling interest 24 10 (51
) 39 Net income attributable to Inland Real Estate
Corporation 12,274 4,576 23,875 32,647 Dividends on
preferred shares (3,972 ) (2,234 ) (11,916 ) (6,703 )
Net
income attributable to common stockholders $
8,302 2,342 11,959
25,944
Pro Rata Consolidated Information
(unaudited)
(in thousands, except per share
data)
These schedules present certain Non-GAAP pro-rata consolidated
information as of and for the three and nine months ended
September 30, 2015. These schedules are considered Non-GAAP
because they include financial information related to consolidated
joint ventures with an adjustment for the portion related to
noncontrolling interests and unconsolidated joint ventures
accounted for under the equity method of accounting. Because we
incur expenses to manage properties that are not on our balance
sheet, we believe providing this information allows investors to
better compare our overall performance, size and operating metrics
to those of other REITs in our peer group. The Company believes
this Non-GAAP information provides supplementary information that
is both useful to and has been requested by investors and analysts.
Investors should not consider Non-GAAP information as a substitute
for, or as superior to, U.S. GAAP information. Rather, Non-GAAP
information may provide useful information in addition to
information presented in accordance with U.S. GAAP.
Reconciliation of GAAP Reported to Selected Non-GAAP Pro Rata
Consolidated Information
At September 30, 2015 GAAP Reported
Noncontrolling Interest INP Retail LP (PGGM)
Development Properties IPCC Unconsolidated
properties Non-GAAP Pro-rata Consolidated
Information Total investment
properties $ 1,528,391 (2,018 ) 416,194 2,253 9,677 1,954,497 Total
assets 1,550,101 (3,704 ) 295,313 2,668 11,134 1,855,512 Mortgages
payable 387,688 (1,329 ) 222,255 — 8,820 617,434 Total liabilities
953,520 (1,393 ) 240,941 1,731 10,397 1,205,196
At December 31, 2014
GAAP Reported Noncontrolling Interest
INP Retail LP (PGGM) Development Properties
IPCC Unconsolidated properties Non-GAAP
Pro-rata Consolidated Information
Total investment properties $ 1,519,604 (325 ) 364,463 2,062
12,790 1,898,594 Total assets 1,572,951 (1,886 ) 251,697 2,455
7,640 1,832,857 Mortgages payable 384,769 — 168,689 — 6,267 559,725
Total liabilities 949,775 19 196,082 1,607 6,823 1,154,306
For the three months ended September 30, 2015 GAAP
Reported Noncontrolling Interest INP
Retail LP (PGGM) Development Properties
IPCC Unconsolidated properties Non-GAAP Pro-rata
Consolidated Information
Total revenues $ 48,244 (46 ) 13,616 — 2 61,816 Total expenses
39,301 (60 ) 9,376 4 1 48,622 Operating income (loss) 8,943 14
4,240 (4 ) 1 13,194
For the three months ended September
30, 2014 GAAP Reported Noncontrolling
Interest INP Retail LP (PGGM)
Development Properties IPCC Unconsolidated
properties Non-GAAP Pro-rata Consolidated
Information Total revenues $
48,210 — 12,225 — 702 61,137 Total expenses 38,168 (10 ) 8,273 3
408 46,842 Operating income (loss) 10,042 10 3,952 (3 ) 294 14,295
For the nine months ended September 30, 2015 GAAP
Reported Noncontrolling Interest INP
Retail LP (PGGM) Development Properties
IPCC Unconsolidated properties Non-GAAP Pro-rata
Consolidated Information
Total revenues $ 153,347 (46 ) 40,443 (1 ) 212 193,955 Total
expenses 128,015 (93 ) 27,932 11 116 155,981 Operating income
(loss) 25,332 47 12,511 (12 ) 96 37,974
For the nine
months ended September 30, 2014 GAAP Reported
Noncontrolling Interest INP Retail LP (PGGM)
Development Properties IPCC Unconsolidated
properties Non-GAAP Pro-rata Consolidated
Information Total revenues $
154,124 — 36,443 — 882 191,449 Total expenses 126,000 (39 ) 25,406
4 502 151,873 Operating income (loss) 28,124 39 11,037 (4 ) 380
39,576
View source
version on businesswire.com: http://www.businesswire.com/news/home/20151105005500/en/
Inland Real Estate Corporation Contact:Dawn Benchelt, Director
of Investor Relations(888) 331-4732ir@inlandrealestate.com
Inland Real Estate (NYSE:IRC)
Historical Stock Chart
From Jun 2024 to Jul 2024
Inland Real Estate (NYSE:IRC)
Historical Stock Chart
From Jul 2023 to Jul 2024