UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
None |
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None |
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None |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
As of August 9, 2021, there were
INLAND REAL ESTATE INCOME TRUST, INC.
TABLE OF CONTENTS
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Part I - Financial Information |
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Item 1. |
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Financial Statements |
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Consolidated Balance Sheets as of June 30, 2021 (unaudited) and December 31, 2020 |
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Consolidated Statements of Equity for the three months ended June 30, 2021 and 2020 (unaudited) |
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Consolidated Statements of Equity for the six months ended June 30, 2021 and 2020 (unaudited) |
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Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020 (unaudited) |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Part II - Other Information |
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3
INLAND REAL ESTATE INCOME TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except per share amounts)
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June 30, 2021 (unaudited) |
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December 31, 2020 |
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ASSETS |
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Assets: |
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Investment properties held and used: |
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Land |
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$ |
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$ |
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Building and other improvements |
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Total |
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Less accumulated depreciation |
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Net investment properties held and used |
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Cash and cash equivalents |
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Restricted cash |
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Accounts and rent receivable, net |
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Acquired lease intangible assets, net |
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Operating lease right-of-use asset, net |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND EQUITY |
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Liabilities: |
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Mortgages and credit facility payable, net |
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$ |
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Accounts payable and accrued expenses |
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Operating lease liability |
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Distributions payable |
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— |
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Acquired intangible liabilities, net |
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Due to related parties |
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Other liabilities |
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Total liabilities |
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Commitments and contingencies |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ 31, 2020, respectively |
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Additional paid in capital |
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Accumulated distributions and net loss |
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Accumulated other comprehensive loss |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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See accompanying notes to consolidated financial statements.
4
INLAND REAL ESTATE INCOME TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited, dollar amounts in thousands, except per share amounts)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2021 |
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2020 |
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2021 |
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2020 |
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Income: |
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Rental income |
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$ |
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$ |
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$ |
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$ |
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Other property income |
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Total income |
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Expenses: |
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Property operating expenses |
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Real estate tax expense |
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General and administrative expenses |
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Business management fee |
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Depreciation and amortization |
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Total expenses |
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Other Income (Expense): |
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Interest expense |
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Interest and other income |
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Net loss |
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$ |
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Net loss per common share, basic and diluted |
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$ |
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$ |
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Weighted average number of common shares outstanding, basic and diluted |
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Comprehensive income (loss): |
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Net loss |
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$ |
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$ |
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Unrealized (loss) gain on derivatives |
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Reclassification adjustment for amounts included in net loss |
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Comprehensive income (loss) |
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$ |
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$ |
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$ |
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$ |
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See accompanying notes to consolidated financial statements.
5
INLAND REAL ESTATE INCOME TRUST, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited, dollar amounts in thousands)
For the three months ended June 30, 2021 |
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Number of Shares |
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Common Stock |
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Additional Paid in Capital |
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Accumulated Distributions and Net Loss |
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Accumulated Other Comprehensive Loss |
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Total |
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Balance at March 31, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Distributions declared ($ |
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— |
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— |
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— |
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( |
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— |
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( |
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Unrealized loss on derivatives |
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— |
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— |
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— |
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— |
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( |
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Reclassification adjustment for amounts included in net loss |
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— |
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— |
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— |
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Equity-based compensation |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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— |
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Balance at June 30, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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For the three months ended June 30, 2020 |
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Number of Shares |
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Common Stock |
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Additional Paid in Capital |
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Accumulated Distributions and Net Loss |
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Accumulated Other Comprehensive Loss |
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Total |
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Balance at March 31, 2020 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Recission of Q1 2020 distribution (See Note 8) |
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— |
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— |
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— |
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— |
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Shares repurchased |
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( |
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— |
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( |
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— |
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— |
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( |
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Unrealized loss on derivatives |
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— |
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— |
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— |
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— |
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( |
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( |
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Reclassification adjustment for amounts included in net loss |
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— |
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— |
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— |
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— |
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Equity-based compensation |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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— |
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Balance at June 30, 2020 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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See accompanying notes to consolidated financial statements.
6
INLAND REAL ESTATE INCOME TRUST, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited, dollar amounts in thousands)
For the six months ended June 30, 2021 |
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Number of Shares |
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Common Stock |
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Additional Paid in Capital |
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Accumulated Distributions and Net Loss |
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Accumulated Other Comprehensive Loss |
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Total |
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Balance at December 31, 2020 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Distributions declared ($ |
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— |
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— |
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— |
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( |
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— |
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( |
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Unrealized gain on derivatives |
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— |
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— |
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— |
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— |
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Reclassification adjustment for amounts included in net loss |
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— |
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— |
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— |
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— |
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Equity-based compensation |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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— |
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( |
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Balance at June 30, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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For the six months ended June 30, 2020 |
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Number of Shares |
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Common Stock |
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Additional Paid in Capital |
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Accumulated Distributions and Net Loss |
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Accumulated Other Comprehensive Loss |
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Total |
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Balance at December 31, 2019 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Distributions declared ($ |
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— |
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— |
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— |
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( |
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— |
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( |
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Rescission of Q1 2020 distribution (See Note 8) |
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— |
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— |
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— |
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— |
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Proceeds from distribution reinvestment plan |
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— |
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— |
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— |
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Shares repurchased |
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( |
) |
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— |
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( |
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— |
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— |
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( |
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Unrealized loss on derivatives |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Reclassification adjustment for amounts included in net loss |
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— |
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— |
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— |
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— |
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Equity-based compensation |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Balance at June 30, 2020 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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|
See accompanying notes to consolidated financial statements.
7
INLAND REAL ESTATE INCOME TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, dollar amounts in thousands)
|
|
Six Months Ended June 30, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
Amortization of debt issuance costs and mortgage premiums, net |
|
|
|
|
|
|
|
|
Amortization of acquired market leases, net |
|
|
( |
) |
|
|
( |
) |
Amortization of equity-based compensation |
|
|
|
|
|
|
|
|
Reduction in the carrying amount of the right-of-use-asset |
|
|
|
|
|
|
|
|
Straight-line income, net |
|
|
( |
) |
|
|
( |
) |
Other non-cash adjustments |
|
|
|
|
|
|
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
|
( |
) |
|
|
|
|
Accounts and rent receivable |
|
|
|
|
|
|
( |
) |
Due to related parties |
|
|
( |
) |
|
|
( |
) |
Operating lease liability |
|
|
|
|
|
|
|
|
Other liabilities |
|
|
( |
) |
|
|
( |
) |
Other assets |
|
|
|
|
|
|
|
|
Net cash flows provided by operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
( |
) |
|
|
( |
) |
Proceeds from sale of investment properties |
|
|
— |
|
|
|
|
|
Net cash flows (used in) provided by investing activities |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Payment of credit facility |
|
|
( |
) |
|
|
( |
) |
Proceeds from credit facility |
|
|
|
|
|
|
|
|
Payment of mortgages payable |
|
|
( |
) |
|
|
( |
) |
Proceeds from the distribution reinvestment plan |
|
|
— |
|
|
|
|
|
Shares repurchased |
|
|
— |
|
|
|
( |
) |
Distributions paid |
|
|
— |
|
|
|
( |
) |
Net cash flows used in financing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Net increase in cash, cash equivalents and restricted cash |
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash, at beginning of the period |
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash, at end of period |
|
$ |
|
|
|
$ |
|
|
See accompanying notes to consolidated financial statements.
8
INLAND REAL ESTATE INCOME TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited, dollar amounts in thousands)
|
|
Six Months Ended June 30, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Supplemental schedule of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued capital expenditures |
|
$ |
|
|
|
$ |
|
|
See accompanying notes to consolidated financial statements.
9
INLAND REAL ESTATE INCOME TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
(Unaudited, dollar amounts in thousands, except per share amounts)
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Readers of this Quarterly Report should refer to the audited consolidated financial statements of Inland Real Estate Income Trust, Inc. (which may be referred to herein as the “Company,” “we,” “us,” or “our”) for the year ended December 31, 2020, which are included in the Company’s 2020 Annual Report on Form 10-K, as certain footnote disclosures contained in such audited consolidated financial statements have been omitted from this Quarterly Report.
NOTE 1 – ORGANIZATION
The Company was formed on August 24, 2011 to acquire and manage a portfolio of commercial real estate investments located in the United States. The Company is primarily focused on owning retail properties and targets a portfolio of
The Company has no employees. The Company is managed by IREIT Business Manager & Advisor, Inc. (the “Business Manager”), an indirect wholly owned subsidiary of Inland Real Estate Investment Corporation (the “Sponsor”), pursuant to a Business Management Agreement with the Business Manager.
On February 11, 2019, the Company’s board of directors approved a strategic plan (the “Strategic Plan”) with the goals of providing future liquidity to investors and creating long-term stockholder value. The Strategic Plan centers around owning a portfolio of
In connection with the Strategic Plan, the Company’s share repurchase program (as amended, the “SRP”) was amended and restated, effective March 21, 2019, and the Business Management Agreement with the Business Manager was amended and restated on February 11, 2019 to, among other things, eliminate all future acquisition and disposition fees. On March 3, 2020, the Company’s SRP was further amended and restated (the “Third A&R SRP”), which became effective on April 10, 2020, as further described below in Note 3 – “Equity”. The Strategic Plan may evolve or change over time. For example, the Company may decide to focus more on redeveloping existing properties relative to investing in new grocery-anchored centers, depending on such factors, including, but not limited to, market prices for its properties, availability of capital for redevelopment and construction costs. There is no assurance, particularly in light of the COVID-19 pandemic, that the Company will be able to successfully implement the Strategic Plan, including making strategic sales or purchases of properties or listing the Company’s common stock, within the timeframe we expected or would prefer or at all. We expect that no liquidity event will occur before the adverse effects of the COVID-19 pandemic on the economy and the retail commercial real estate market subside.
Due to the uncertainty surrounding the COVID-19 pandemic and the need to preserve cash for the payment of operating and other expenses, such as debt payments, the Company stopped paying distributions in the second quarter of 2020 and suspended its DRP and SRP. The suspension of the DRP was effective on
On March 5, 2021, as reported in the Company’s Form 8-K filed with the Securities and Exchange Commission on the same date, the Company announced that the Company’s board of directors unanimously approved: (i) an estimated per share net asset value (the “Estimated Per Share NAV”) as of December 31, 2020; (ii) the same per share purchase price for shares issued under the Company’s distribution reinvestment plan (as amended, the “DRP”) beginning with the first distribution payment to stockholders upon resumption of distributions and the DRP until the Company announces a new Estimated Per Share NAV, and (iii) that, in accordance with the SRP, beginning with repurchases when the Company resumes the SRP and until the Company announces a new Estimated Per Share NAV, any shares accepted for ordinary repurchases and “exceptional repurchases” will be repurchased at
10
On June 29, 2021, the Company announced the reinstatement, and lifting of the suspension, of its DRP. The effective date of the DRP reinstatement was July 22, 2021. The Company also announced the reinstatement and lifting of the suspension of its share repurchase program and its adoption of the fourth amendment and restatement of the program, with the first repurchase expected to occur on August 16, 2021. See Note 3 – “Equity” for additional details.
At June 30, 2021, the Company owned
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Disclosures discussing all significant accounting policies are set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission on March 18, 2021, under the heading Note 2 – “Summary of Significant Accounting Policies.” There have been no changes to the Company’s significant accounting policies during the six months ended June 30, 2021, except as noted below.
General
The consolidated financial statements have been prepared in accordance with U.S. GAAP and require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. In the opinion of management, all adjustments necessary for a fair statement, in all material respects, of the financial position and results of operations for the periods are presented. Actual results could differ from those estimates. The results of operations for the interim periods are not necessarily indicative of the results for the entire year.
Significant Risks and Uncertainties related to COVID-19 Pandemic
Currently, one of the most significant risks and uncertainties is the potential further adverse effect of the current pandemic of the novel coronavirus, or COVID-19. A number of our tenants had temporarily closed their stores and requested rent deferral or rent abatement during this pandemic. For amounts billed for the six months ended June 30, 2021, the Company collected over
However, the extent to which the COVID-19 pandemic further impacts the Company’s operations and those of our tenants will depend on future developments, including the impact of the emergence of the Delta variant of COVID-19 in the U.S. The impact cannot be predicted with confidence, including the scope, severity and duration of the pandemic’s variants, the actions taken to contain the pandemic’s variants or mitigate their impact, and the direct and indirect economic effects of the pandemic’s variants and containment measures, among others.
Recently Adopted Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of the effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.
In April 2020, the FASB issued a question-and-answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of COVID-19. Under existing lease guidance, the Company would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated with the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A grants relief to entities, allowing them an election to not evaluate whether lease-related relief that lessors provide to mitigate the economic effects of COVID-19 on lessees is a lease modification under Topic 842, Leases. An entity that makes this election can then
11
elect whether to apply the modification guidance (i.e. assume the relief was always contemplated by the contract or assume the relief was not contemplated by the contract). Both lessees and lessors may make this election. The Company has elected to apply such relief and avail itself of the election to avoid performing a lease by lease analysis.
Restricted Cash
Amounts included in restricted cash represent those required to be set aside by lenders for real estate taxes, insurance, capital expenditures and tenant improvements on our existing properties. These amounts also include post close escrows for tenant improvements, leasing commissions, master lease, general repairs and maintenance, and are classified as restricted cash on the Company’s consolidated balance sheets.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the Company’s consolidated balance sheets to such amounts shown in the Company’s consolidated statements of cash flows:
|
|
June 30, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
Restricted cash |
|
|
|
|
|
|
|
|
Total cash, cash equivalents, and restricted cash |
|
$ |
|
|
|
$ |
|
|
NOTE 3 – EQUITY
The Company commenced an initial public “best efforts” offering (the “Offering”) on October 18, 2012, which concluded on October 16, 2015. The Company sold
The Company provides the following programs to facilitate additional investment in the Company’s shares and to provide limited liquidity for stockholders.
Distribution Reinvestment Plan
Through the DRP, the Company provides stockholders with the option to purchase additional shares from the Company by automatically reinvesting cash distributions, subject to certain share ownership restrictions. The Company does not pay any selling commissions or a marketing contribution and due diligence expense allowance in connection with the DRP. Pursuant to the DRP, the price per share for shares of common stock purchased under the DRP is equal to the estimated value of a share, as determined by the Company’s board of directors and reported by the Company from time to time, until the shares become listed for trading, if a listing occurs, assuming that the DRP has not been terminated or suspended in connection with such listing.
On June 29, 2021, the Company announced the reinstatement and lifting of the suspension of its DRP. The effective date of the DRP reinstatement was July 22, 2021.
There were
Share Repurchase Program
The Company adopted the SRP effective October 18, 2012, under which the Company is authorized to purchase shares from stockholders who purchased their shares from the Company or received their shares through a non-cash transfer and who have held their shares for at least
12
Third A&R SRP the same way as described above for the second amended and restated SRP. Prior to the amendment, the Company was authorized to make Exceptional Repurchases at a price equal to
The Third A&R SRP provides the Company’s board of directors with the discretion to set the funding limit for share repurchases. The Third A&R SRP limits the dollar amount for any repurchases made by the Company each calendar quarter to an amount equal to a percentage determined in the sole discretion of the board on a quarterly basis that will not be less than
On June 29, 2021, the Company announced the reinstatement and lifting of the suspension of its share repurchase program and its adoption of the fourth amendment and restatement of the program. The effective date of the SRP reinstatement and the Fourth Amended and Restated Share Repurchase Program (the “Fourth SRP”) is August 12, 2021.
Pursuant to the Fourth SRP, any written request for treatment as an Exceptional Repurchase due to the death or qualifying disability of an owner that occurred between June 1, 2019 and May 31, 2020 (inclusive) will be timely received by the Company no later than January 31, 2022, and any written request for treatment as an Exceptional Repurchase due to the death or qualifying disability of an owner that occurred between June 1, 2020 and July 31, 2021, (inclusive) will be timely received if received by the Company no later than July 31, 2022.
The first repurchase under the SRP following its reinstatement, subject to the funding limit and the other terms and conditions of the SRP, will be on August 16, 2021.
If either or both of the aforementioned funding or repurchase limitations prevent the Company from repurchasing all of the shares offered for repurchase during a calendar quarter, the Company will repurchase shares on a pro rata basis within each of the following categories up to the repurchase limitations in the following order: (a) first, all Exceptional Repurchases and (b) second, all ordinary repurchases. The SRP will immediately terminate if the Company’s shares become listed for trading on a national securities exchange. In addition, the Company’s board of directors, in its sole discretion, may, at any time, amend, suspend or terminate the SRP.
Repurchases through the SRP were
NOTE 4 – DISPOSITIONS
In connection with the Strategic Plan, the Company sold
NOTE 5 – LEASES
The Company is lessor under approximately
Most of the revenue from the Company’s properties consists of rents received under long-term operating leases. Most leases require the tenant to pay fixed base rent paid monthly in advance, and to reimburse the Company for the tenant’s pro rata share of certain operating expenses including real estate taxes, special assessments, insurance, utilities, common area maintenance, management fees, and certain building repairs paid by the Company and recoverable under the terms of the lease. Under these leases, the Company pays all expenses and is reimbursed by the tenant for the tenant’s pro rata share of recoverable expenses paid.
13
Certain other tenants are subject to net leases which provide that the tenant is responsible for fixed base rent as well as all costs and expenses associated with occupancy. Under net leases where all expenses are paid directly by the tenant rather than the landlord, such expenses are not included in the consolidated statements of operations and comprehensive income (loss). Under leases where all expenses are paid by the Company, subject to reimbursement by the tenant, the expenses are included within property operating expenses. As of January 1, 2019, the date on which the Company adopted the new leasing standard, reimbursements for common area maintenance are considered non-lease components that are permitted to be combined with rental income. The combined lease component and reimbursements for insurance and taxes are reported as rental income on the consolidated statements of operations and comprehensive income (loss).
Rental income related to the Company's operating leases is comprised of the following:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Rental income - fixed payments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Rental income - variable payments (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquired market leases, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(a) |
|
The Company continues to monitor the impact of the COVID-19 pandemic on the collectability of lease obligations. As of June 30, 2021, the Company’s accounts and rent receivable, net balance was $
NOTE 6 – ACQUIRED INTANGIBLE ASSETS AND LIABILITIES
The following table summarizes the Company’s identified intangible assets and liabilities as of June 30, 2021 and December 31, 2020:
|
|
June 30, 2021 |
|
|
December 31, 2020 |
|
||
Intangible assets: |
|
|
|
|
|
|
|
|
Acquired in-place lease value |
|
$ |
|
|
|
$ |
|
|
Acquired above market lease value |
|
|
|
|
|
|
|
|
Accumulated amortization |
|
|
( |
) |
|
|
( |
) |
Acquired lease intangibles, net |
|
$ |
|
|
|
$ |
|
|
Intangible liabilities: |
|
|
|
|
|
|
|
|
Acquired below market lease value |
|
$ |
|
|
|
$ |
|
|
Accumulated amortization |
|
|
( |
) |
|
|
( |
) |
Acquired below market lease intangibles, net |
|
$ |
|
|
|
$ |
|
|
The portion of the purchase price allocated to acquired above market lease value and acquired below market lease value is amortized on a straight-line basis over the term of the related lease as an adjustment to rental income. For below market lease values, the amortization period includes any renewal periods with fixed rate renewals. The portion of the purchase price allocated to acquired in-place lease value is amortized on a straight-line basis over the acquired leases’ weighted average remaining term.
14
Amortization pertaining to acquired in-place lease value, above market lease value and below market lease value is summarized below:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Amortization recorded as amortization expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired in-place lease value |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Amortization recorded as a (reduction) increase to rental income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired above market leases |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Acquired below market leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net rental income increase |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Estimated amortization of the respective intangible lease assets and liabilities as of June 30, 2021 for each of the five succeeding years and thereafter is as follows:
|
|
Acquired In-Place Leases |
|
|
Above Market Leases |
|
|
Below Market Leases |
|
|||
2021 (remainder of year) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
2023 |
|
|
|
|
|
|
|
|
|
|
|
|
2024 |
|
|
|
|
|
|
|
|
|
|
|
|
2025 |
|
|
|
|
|
|
|
|
|
|
|
|
Thereafter |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
NOTE 7 – DEBT AND DERIVATIVE INSTRUMENTS
As of June 30, 2021 and December 31, 2020, the Company had the following mortgages and credit facility payable:
|
|
June 30, 2021 |
|
|
December 31, 2020 |
|
||||||||||
Type of Debt |
|
Principal Amount |
|
|
Weighted Average Interest Rate |
|
|
Principal Amount |
|
|
Weighted Average Interest Rate |
|
||||
Fixed rate mortgages payable |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
Variable rate mortgages payable with swap agreements |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
Variable rate mortgages payable without swap agreements |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
Mortgages payable |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
Credit facility payable |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
Total debt before unamortized mortgage premiums and debt issuance costs including impact of interest rate swaps |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
Add: Unamortized mortgage premiums |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Unamortized debt issuance costs |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
Total debt |
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
The Company estimates the fair value of its total debt by discounting the future cash flows of each instrument at rates currently offered for similar debt instruments of comparable maturities by the Company’s lenders using Level 3 inputs. The carrying value of the Company’s debt excluding mortgage premium and unamortized debt issuance costs was $
15
As of June 30, 2021, scheduled principal payments and maturities on the Company’s debt were as follows:
|
|
June 30, 2021 |
|
|||||||||||||
Scheduled Principal Payments and Maturities by Year: |
|
Scheduled Principal Payments |
|
|
Maturities of Mortgage Loans |
|
|
Maturity of Credit Facility |
|
|
Total |
|
||||
2021 (remainder of the year) |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2024 |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
2025 |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Thereafter |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Credit Facility Payable
The Company’s credit facility (the “Credit Facility”) consists of a $
At June 30, 2021, the Company had $
The Company’s performance of the obligations under the Credit Facility, including the payment of any outstanding indebtedness under the Credit Facility, is guaranteed by certain subsidiaries of the Company, including each of the subsidiaries of the Company which owns or leases any of the properties included in the pool of unencumbered properties comprising the borrowing base. Additional properties will be added to and removed from the pool from time to time to support amounts borrowed under the Credit Facility. At June 30, 2021, there were
The Credit Facility requires compliance with certain covenants, including a minimum tangible net worth requirement, a distribution limitation, restrictions on indebtedness and investment restrictions, as defined. It also contains customary default provisions including the failure to comply with the Company's covenants and the failure to pay when amounts outstanding under the Credit Facility become due. On September 29, 2020, the Company entered into a first amendment to the Company’s Amended and Restated Credit Agreement dated as of August 1, 2018 with KeyBank National Association individually and as administrative agent, KeyBanc Capital Markets Inc., PNC Capital Markets LLC and Merrill Lynch Pierce, Fenner & Smith Incorporated (now BofA Securities, Inc.) as joint lead arrangers, and other lenders from time to time parties to the agreement. This amendment provided a waiver of the minimum tangible net worth requirement for three consecutive quarters beginning with the quarter ended September 30, 2020. In exchange, our leverage ratio may be increased only to
Mortgages Payable
The mortgage loans require compliance with certain covenants, such as debt service ratios, investment restrictions and distribution limitations. As of June 30, 2021,
16
Interest Rate Swap Agreements
The Company entered into interest rate swaps to fix certain of its floating LIBOR based debt under variable rate loans to a fixed rate to manage its risk exposure to interest rate fluctuations. The Company will generally match the maturity of the underlying variable rate debt with the maturity date on the interest swap. See Note 14 – "Fair Value Measurements" for further information.
The following table summarizes the Company’s interest rate swap contracts outstanding as of June 30, 2021.
Date Entered |
|
Effective Date |
|
Maturity Date |
|
Pay Fixed Rate (a) |
|
|
Notional Amount |
|
|
Fair Value at June 30, 2021 |
|
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Liabilities |
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( |
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$ |
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$ |
( |
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(a)
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
Derivatives in Cash Flow Hedging Relationships |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Effective portion of derivatives |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
Reclassification adjustment for amounts included in net gain or loss (effective portion) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The total amount of interest expense presented on the consolidated statements of operations and comprehensive income (loss) was $
NOTE 8 – DISTRIBUTIONS
In 2020, due to the uncertainty surrounding the COVID-19 pandemic and the need to preserve cash for the payment of operating and other expenses, during the second quarter the Company’s board of directors rescinded the distribution that was declared in the first quarter of 2020, and the Company did
17
The table below presents the distributions paid, declared and rescinded during the three and six months ended June 30, 2021 and 2020.
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Distributions paid (1) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
Distributions declared (2) |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
Distributions rescinded (2) |
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
|
(1) |
The distribution paid in 2020 was authorized in the fourth quarter of 2019 and paid during the first quarter of 2020 to stockholders of record as of December 31, 2019. |
|
(2) |
|
NOTE 9 – EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share (“EPS”) is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period (the “common shares”). Diluted EPS is computed by dividing net income (loss) by the common shares plus common share equivalents. The Company excludes antidilutive restricted shares and units from the calculation of weighted-average shares for diluted EPS. As a result of a net loss in the three and six months ended June 30, 2021,
NOTE 10 – COMMITMENTS AND CONTINGENCIES
The Company may be subject, from time to time, to various legal proceedings and claims that arise in the ordinary course of business. While the resolution of these matters cannot be predicted with certainty, management believes, based on currently available information, that the final outcome of such matters will not have a material adverse effect on the consolidated financial statements of the Company.
NOTE 11 – EQUITY-BASED COMPENSATION
Under the Company’s Employee and Director Restricted Share Plan (“RSP”), restricted shares and restricted share units generally vest over a
A summary table of the status of the restricted shares and restricted share units is presented below:
|
|
Restricted Shares |
|
|
Restricted Share Units |
|
|||
Outstanding at December 31, 2020 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
— |
|
|
|
|
|
|
Vested |
|
|
( |
) |
|
|
( |
) |
|
Outstanding at June 30, 2021 |
|
|
|
|
|
|
|
|
18
NOTE 12 – SEGMENT REPORTING
The Company has
NOTE 13 – TRANSACTIONS WITH RELATED PARTIES
The following table summarizes the Company’s related party transactions for the three and six months ended June 30, 2020. Certain compensation and fees payable to the Business Manager for services provided to the Company are limited to maximum amounts.
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
Unpaid amounts as of |
|
|||||||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
June 30, 2021 |
|
|
December 31, 2020 |
|
||||||
General and administrative reimbursements |
(a) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
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|
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|
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|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
|
|
|
Real estate management fees |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Property operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
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|
Construction management fees |
|
|
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|
|
|
|
|
|
|
|
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Leasing fees |
|
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|
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|
Total real estate management related costs |
(b) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
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$ |
|
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|
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|
Business management fees |
(c) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(a) |
|
(b) |
|
(c) |
19
|
NOTE 14 – FAIR VALUE MEASUREMENTS
Fair Value Hierarchy
The Company defines fair value based on the price that it believes would be received upon sale of an asset or the exit price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value. The fair value hierarchy consists of three broad levels, which are described below:
Level 1 − |
|
Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access. |
|
|
|
Level 2 − |
|
Observable inputs, other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. |
|
|
|
Level 3 − |
|
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. |
The Company has estimated the fair value of its financial and non-financial instruments using available market information and valuation methodologies the Company believes to be appropriate for these purposes.
Recurring Fair Value Measurements
For assets and liabilities measured at fair value on a recurring basis, the table below presents the fair value of the Company’s cash flow hedges as well as their classification on the consolidated balance sheets as of June 30, 2021 and December 31, 2020, respectively.
|
|
Fair Value |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
June 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap agreements - Other assets |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Interest rate swap agreements - Other liabilities |
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap agreements - Other assets |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Interest rate swap agreements - Other liabilities |
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
The fair value of derivative instruments was estimated based on data observed in the forward yield curve which is widely observed in the marketplace. The Company also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the counterparty's nonperformance risk in the fair value measurements which utilize Level 3 inputs, such as estimates of current credit spreads. The Company has determined that the credit valuation adjustments are not significant to the overall valuation of its derivative interest rate swap agreements and therefore has classified these in Level 2 of the hierarchy.
NOTE 15 – SUBSEQUENT EVENTS
In connection with the preparation of its financial statements, the Company has evaluated events that occurred subsequent to June 30, 2021 through the date on which these financial statements were issued to determine whether any of these events required disclosure in the financial statements.
Repayment of Mortgage
On July 6, 2021, the Company drew $
Mortgage Paydown Requirements
20
by (2) the aggregate principal and interest projected to be due and payable over the twelve month period subsequent to the date of calculation based upon an imputed interest rate equal to ten percent (
21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Certain statements in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Words such as “may,” “could,” “should,” “expect,” “intend,” “plan,” “goal,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “variables,” “potential,” “continue,” “expand,” “maintain,” “create,” “strategies,” “likely,” “will,” “would” and variations of these terms and similar expressions, or the negative of these terms or similar expressions, are intended to identify forward-looking statements.
These forward-looking statements are not historical facts but reflect the intent, belief or current expectations of the management of Inland Real Estate Income Trust, Inc. (which we refer to herein as the “Company,” “we,” “our” or “us”) based on their knowledge and understanding of the business and industry, the economy and other future conditions. These statements are not guarantees of future performance, and we caution stockholders not to place undue reliance on forward-looking statements. Actual results may differ materially from those expressed or forecasted in the forward-looking statements due to a variety of risks, uncertainties and other factors, including but not limited to the factors listed and described under “Risk Factors” in this Quarterly Report on Form 10-Q, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, as filed with the Securities and Exchange Commission on May 11, 2021 and in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission on March 18, 2021, some of which are summarized below:
|
• |
We are subject to risks associated with a pandemic, epidemic or outbreak of a contagious disease, such as the ongoing global COVID-19 pandemic, including negative impacts on our tenants and their respective businesses, and we have agreed to defer a significant amount of rent owed to us, which tenants will be obligated to pay over time in addition to their regular rent but which they may not be able or willing to pay, particularly those whose results of operations or future prospects have been materially adversely affected by the COVID-19 pandemic or become so affected; |
|
• |
Market disruptions resulting from the economic effects of the COVID-19 pandemic have adversely impacted many aspects of our operating results and financial condition, and ongoing or future disruptions from the pandemic or otherwise may again adversely impact our results and financial condition, including our ability to service our debt obligations, borrow additional monies or pay distributions; |
|
• |
We have incurred net losses on a U.S. generally accepted accounting principles (“U.S. GAAP”) basis for the three and six months ended June 30, 2021 and 2020 and for the year ended December 31, 2020; |
|
• |
There is no established public trading market for our shares, our stockholders cannot currently sell their shares under our share repurchase program (as amended, “SRP”), which was suspended during the COVID-19 pandemic and may be suspended again, amended or terminated in our sole discretion, and even when repurchases are made pursuant to the SRP, the SRP is subject to limits, and stockholders may not be able to sell all of the shares they would like to sell; |
|
• |
Even if our stockholders are able to sell their shares under the SRP, or otherwise, they may not be able to recover the amount of their investment in our shares; |
|
• |
There is no assurance our board of directors will pursue a listing or other liquidity event at any time in the future, particularly in light of the COVID-19 pandemic; |
|
• |
Our charter generally limits the total amount we may borrow to 300% of our net assets, equivalent to 75% of the costs of our assets; |
|
• |
Inland Real Estate Investment Corporation (our “Sponsor”) may face a conflict of interest in allocating personnel and resources between its affiliates, our Business Manager (as defined below) and Inland Commercial Real Estate Services LLC, referred to herein as our “Real Estate Manager”; |
|
• |
We do not have arm’s-length agreements with our Business Manager, our Real Estate Manager or any other affiliates of our Sponsor; |
|
• |
We pay fees, which may be significant, to our Business Manager, Real Estate Manager and other affiliates of our Sponsor; |
|
• |
Our Business Manager and its affiliates face conflicts of interest caused by, among other things, their compensation arrangements with us, which could result in actions that are not in the long-term best interests of our stockholders; |
|
• |
Our properties may compete with the properties owned by other programs sponsored by our Sponsor or Inland Private Capital Corporation or other affiliates for, among other things, tenants; |
22
|
• |
Our Business Manager is under no obligation, and may not agree, to forgo or defer its business management fee; |
|
• |
If we fail to continue to qualify as a REIT, our operations and distributions to stockholders, if any, will be adversely affected; and |
|
• |
The strategic plan adopted by our board of directors on February 11, 2019, which is discussed further below, may evolve or change over time, and there is no assurance we will be able to successfully achieve our board’s objectives under the strategic plan, including making strategic sales or purchases of properties or listing our common stock, within the timeframe we expected or would prefer or at all; |
|
• |
The use of the internet by consumers to shop is expected to continue to expand, and this expansion has likely been accelerated by the effects of the COVID-19 pandemic, which would result in a further downturn in the business of our current tenants in their “brick and mortar” locations and could affect their ability to pay rent and their demand for space at our retail properties; and |
|
• |
We are subject to risks associated with any dislocations or liquidity disruptions that may exist or occur in credit markets of the United States from time to time, including disruptions and dislocations caused by the ongoing COVID-19 pandemic. |
Forward-looking statements in this Quarterly Report on Form 10-Q reflect our management’s view only as of the date of this Quarterly Report, and may ultimately prove to be incorrect or false. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results except as required by applicable law. We intend for these forward-looking statements to be covered by the applicable safe harbor provisions created by Section 27A of the Securities Act and Section 21E of the Exchange Act.
The following discussion and analysis relates to the three and six months ended June 30, 2021 and 2020 and as of June 30, 2021 and December 31, 2020. You should read the following discussion and analysis along with our consolidated financial statements and the related notes included in this report.
We routinely post important information about us and our business, including financial and other information for investors, on our website. We encourage investors to visit our website at inland-investments.com/inland-income-trust from time to time, as information is updated and new information is posted.
Overview
We were formed as a Maryland corporation on August 24, 2011 and elected to be taxed as a real estate investment trust for U.S. federal income tax purposes (“REIT”) under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, commencing with the year ended December 31, 2013. We have no employees. We are managed by our business manager, IREIT Business Manager & Advisor, Inc., referred to herein as our “Business Manager.”
We are primarily focused on owning retail properties and have targeted a portfolio of 100% grocery-anchored properties as described below. We have invested in joint ventures and may continue to invest in additional joint ventures or acquire other real estate assets if management believes the expected returns from those investments exceed that of retail properties. We also may invest in real estate-related equity securities of both publicly traded and private real estate companies, as well as commercial mortgage-backed securities.
On March 5, 2021, our board of directors determined an estimated per share net asset value of our common stock of $18.08 as of December 31, 2020. At June 30, 2021, we had total assets of $1.2 billion on our balance sheet and owned 44 properties located in 21 states containing 6.5 million square feet. A majority of our properties are multi-tenant, necessity-based retail shopping centers primarily located in major regional markets and growing secondary markets throughout the United States. As of June 30, 2021, 86% of our annualized base rental income was generated from grocery-anchored or grocery shadow-anchored shopping centers. A grocery shadow-anchored shopping center is a shopping center which we own that is located near a grocery store that we do not own but that generates traffic for our shopping center. The portfolio properties have staggered lease maturity dates. Grocery tenants accounted for 15% of our annualized base rent (“ABR”) as of June 30, 2021.
23
COVID-19 Pandemic
We continue to monitor the impact of the novel coronavirus (“COVID-19”) pandemic on all aspects of our business and locations, including how it is impacting our tenants and vendors. The Company’s deferrals, modifications and rent abatements have proven effective helping our tenants endure the economic impacts of the pandemic. As of June 30, 2021, our deferred rent balance was $1.6 million, down from $4.5 million at December 31, 2020 due primarily to collections during the six months ended June 30, 2021. We recognized bad debt recoveries of $1.1 million in the six months ended June 30, 2021, based on favorable trends in collections from our tenants impacted by the pandemic. As of June 30, 2021, we are not aware of any of our tenants being in bankruptcy. See Note 5 – “Leases” for additional information.
However, we are unable to predict with certainty the future impact that the COVID-19 pandemic will have on our financial condition, results of operations and cash flows due to numerous uncertainties, including the effects of the emergence and potential and actual spreading of the Delta variant of COVID-19 in the U.S.
We rely on the Business Manager to manage our day-to-day operations. Though many people have been able to work remotely effectively, the business and operations of our Business Manager and its affiliates may also be adversely impacted by further coronavirus outbreaks, including illness or quarantine of members of its workforce, which may negatively impact on its ability to provide us services to the same degree as it had prior to the outbreak.
For further information regarding the potential impact of COVID-19 on the Company, see Part II, Item 1A titled “Risk Factors.”
Company Update – Strategic Plan
On February 11, 2019, our board of directors approved a strategic plan with the goal of providing a future liquidity to investors and creating long-term stockholder value. The strategic plan has centered around owning a portfolio of 100% grocery-anchored properties with lower exposure to big box retailers. As part of this strategy, our management team continually evaluates possibilities for the opportunistic sale of certain assets with the goal of redeploying capital into the acquisition of strategically located grocery-anchored centers. Of the Company’s 841 leased spaces, there are 112 occupied non-grocery big box (anchor spaces of at least 10,000 square feet) and three vacant big box spaces in the portfolio as of July 31, 2021. We plan to move toward a liquidity event in the future, market conditions permitting, most likely through a listing on a public securities exchange. As part of the strategic plan, we preliminarily identified a select number of properties we would consider selling and marketed them. As further described in Note 4 – “Dispositions”, we completed the sale of three of the selected properties in the first quarter of 2020. We are not actively marketing any properties as of the date of this quarterly report on Form 10-Q. The strategic plan may evolve or change over time. For example, we may decide to focus more on redeveloping existing properties relative to investing in new grocery-anchored centers, depending on such factors, including, but not limited to, market prices for our properties, availability of capital for redevelopment and construction costs. There is no assurance we will be able to successfully implement the strategic plan, including making strategic sales or purchases of properties or listing our common stock, and we believe that no liquidity event or strategic sales will occur before the adverse effects of the COVID-19 pandemic on the economy and the retail commercial real estate market subside.
24
SELECT PROPERTY INFORMATION (All dollar amounts in thousands, except per square foot amounts)
Investment Properties
|
|
As of June 30, 2021 |
|
|
Number of properties |
|
44 |
|
|
Purchase price |
|
$ |
1,346,514 |
|
Total square footage |
|
|
6,470,962 |
|
Weighted average physical occupancy |
|
|
92.4 |
% |
Weighted average economic occupancy |
|
|
93.0 |
% |
Weighted average remaining lease term (years) |
|
|
4.7 |
|
25
The table below presents information for each of our investment properties as of June 30, 2021.
Property |
|
Location |
|
Square Footage |
|
|
Physical Occupancy |
|
|
Economic Occupancy |
|
|
Mortgage Balance |
|
|
Interest Rate (b) |
|
|||||
Newington Fair (a) |
|
Newington, CT |
|
|
186,205 |
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
— |
|
|
|
— |
|
Wedgewood Commons (a) |
|
Olive Branch, MS |
|
|
159,258 |
|
|
|
98.0 |
% |
|
|
98.0 |
% |
|
|
— |
|
|
|
— |
|
Park Avenue (a) |
|
Little Rock, AR |
|
|
79,131 |
|
|
|
66.7 |
% |
|
|
89.9 |
% |
|
|
— |
|
|
|
— |
|
North Hills Square (a) |
|
Coral Springs, FL |
|
|
63,829 |
|
|
|
97.5 |
% |
|
|
97.5 |
% |
|
|
— |
|
|
|
— |
|
Mansfield Shopping Center (a) |
|
Mansfield, TX |
|
|
148,529 |
|
|
|
95.0 |
% |
|
|
95.0 |
% |
|
|
— |
|
|
|
— |
|
Lakeside Crossing (a) |
|
Lynchburg, VA |
|
|
67,034 |
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
— |
|
|
|
— |
|
MidTowne Shopping Center (a) |
|
Little Rock, AR |
|
|
126,288 |
|
|
|
82.9 |
% |
|
|
82.9 |
% |
|
|
— |
|
|
|
— |
|
Dogwood Festival (a) |
|
Flowood, MS |
|
|
187,610 |
|
|
|
80.7 |
% |
|
|
80.7 |
% |
|
|
— |
|
|
|
— |
|
Pick N Save Center (a) |
|
West Bend, WI |
|
|
94,446 |
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
— |
|
|
|
— |
|
Harris Plaza (a) |
|
Layton, UT |
|
|
125,965 |
|
|
|
69.5 |
% |
|
|
69.5 |
% |
|
|
— |
|
|
|
— |
|
Dixie Valley |
|
Louisville, KY |
|
|
119,981 |
|
|
|
92.5 |
% |
|
|
92.5 |
% |
|
|
6,798 |
|
|
|
3.43 |
% |
The Landings at Ocean Isle (a) |
|
Ocean Isle, NC |
|
|
53,203 |
|
|
|
97.6 |
% |
|
|
97.6 |
% |
|
|
— |
|
|
|
— |
|
Shoppes at Prairie Ridge (a) |
|
Pleasant Prairie, WI |
|
|
232,606 |
|
|
|
97.9 |
% |
|
|
97.9 |
% |
|
|
— |
|
|
|
— |
|
Harvest Square |
|
Harvest, AL |
|
|
70,590 |
|
|
|
92.1 |
% |
|
|
92.1 |
% |
|
|
6,309 |
|
|
|
4.65 |
% |
Heritage Square |
|
Conyers, GA |
|
|
22,510 |
|
|
|
95.8 |
% |
|
|
95.8 |
% |
|
|
— |
|
|
|
— |
|
The Shoppes at Branson Hills (a) |
|
Branson, MO |
|
|
256,329 |
|
|
|
86.6 |
% |
|
|
86.6 |
% |
|
|
— |
|
|
|
— |
|
Branson Hills Plaza (a) |
|
Branson, MO |
|
|
210,201 |
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
— |
|
|
|
— |
|
Copps Grocery Store (a) |
|
Stevens Point, WI |
|
|
69,911 |
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
— |
|
|
|
— |
|
Fox Point Plaza (a) |
|
Neenah, WI |
|
|
171,121 |
|
|
|
87.6 |
% |
|
|
87.6 |
% |
|
|
— |
|
|
|
— |
|
Shoppes at Lake Park (a) |
|
W. Valley City, UT |
|
|
52,997 |
|
|
|
86.7 |
% |
|
|
86.7 |
% |
|
|
— |
|
|
|
— |
|
Plaza at Prairie Ridge (a) |
|
Pleasant Prairie,WI |
|
|
9,035 |
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
— |
|
|
|
— |
|
Green Tree Shopping Center |
|
Katy, TX |
|
|
147,621 |
|
|
|
98.3 |
% |
|
|
98.3 |
% |
|
|
13,100 |
|
|
|
3.24 |
% |
Eastside Junction |
|
Athens, AL |
|
|
79,675 |
|
|
|
85.7 |
% |
|
|
85.7 |
% |
|
|
5,862 |
|
|
|
4.60 |
% |
Fairgrounds Crossing |
|
Hot Springs, AR |
|
|
155,127 |
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
13,453 |
|
|
|
5.21 |
% |
Prattville Town Center (a) |
|
Prattville, AL |
|
|
168,842 |
|
|
|
10.0 |
% |
|
|
100.0 |
% |
|
|
— |
|
|
|
— |
|
Regal Court |
|
Shreveport, LA |
|
|
363,061 |
|
|
|
96.2 |
% |
|
|
96.2 |
% |
|
|
26,000 |
|
|
|
4.50 |
% |
Shops at Hawk Ridge (a) |
|
St. Louis, MO |
|
|
75,951 |
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
— |
|
|
|
— |
|
Walgreens Plaza |
|
Jacksonville, NC |
|
|
42,219 |
|
|
|
79.0 |
% |
|
|
79.0 |
% |
|
|
— |
|
|
|
— |
|
Frisco Marketplace (a) |
|
Frisco, TX |
|
|
112,024 |
|
|
|
89.7 |
% |
|
|
93.6 |
% |
|
|
— |
|
|
|
— |
|
White City |
|
Shrewsbury, MA |
|
|
256,974 |
|
|
|
93.9 |
% |
|
|
93.9 |
% |
|
|
48,250 |
|
|
|
3.24 |
% |
Yorkville Marketplace (a) |
|
Yorkville, IL |
|
|
111,591 |
|
|
|
93.6 |
% |
|
|
93.6 |
% |
|
|
— |
|
|
|
— |
|
Shoppes at Market Pointe |
|
Papillion, NE |
|
|
253,903 |
|
|
|
98.2 |
% |
|
|
98.2 |
% |
|
|
13,700 |
|
|
|
3.30 |
% |
Marketplace at El Paseo (a) |
|
Fresno, CA |
|
|
224,683 |
|
|
|
94.5 |
% |
|
|
95.3 |
% |
|
|
— |
|
|
|
— |
|
The Village at Burlington Creek |
|
Kansas City, MO |
|
|
157,937 |
|
|
|
78.9 |
% |
|
|
78.9 |
% |
|
|
17,550 |
|
|
|
4.25 |
% |
Milford Marketplace |
|
Milford, CT |
|
|
111,995 |
|
|
|
83.6 |
% |
|
|
83.6 |
% |
|
|
18,727 |
|
|
|
4.02 |
% |
Settlers Ridge |
|
Pittsburgh, PA |
|
|
473,763 |
|
|
|
91.2 |
% |
|
|
91.2 |
% |
|
|
76,532 |
|
|
|
3.70 |
% |
Blossom Valley Plaza (a) |
|
Turlock, CA |
|
|
111,435 |
|
|
|
97.8 |
% |
|
|
97.8 |
% |
|
|
— |
|
|
|
— |
|
Oquirrh Mountain Marketplace (a) |
|
South Jordan, UT |
|
|
75,950 |
|
|
|
91.6 |
% |
|
|
91.6 |
% |
|
|
— |
|
|
|
— |
|
Marketplace at Tech Center |
|
Newport News, VA |
|
|
210,505 |
|
|
|
73.5 |
% |
|
|
78.5 |
% |
|
|
47,550 |
|
|
|
3.15 |
% |
Coastal North Town Center |
|
Myrtle Beach, SC |
|
|
304,690 |
|
|
|
95.3 |
% |
|
|
95.3 |
% |
|
|
43,680 |
|
|
|
3.17 |
% |
Oquirrh Mountain Marketplace II (a) |
|
South Jordan, UT |
|
|
10,150 |
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
— |
|
|
|
— |
|
Wilson Marketplace (a) |
|
Wilson, NC |
|
|
311,030 |
|
|
|
98.1 |
% |
|
|
98.1 |
% |
|
|
— |
|
|
|
— |
|
Pentucket Shopping Center |
|
Plaistow, NH |
|
|
198,469 |
|
|
|
98.0 |
% |
|
|
98.0 |
% |
|
|
14,700 |
|
|
|
3.65 |
% |
Hickory Tavern |
|
Myrtle Beach, SC |
|
|
6,588 |
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
— |
|
|
|
— |
|
Portfolio total |
|
|
|
|
6,470,962 |
|
|
|
92.4 |
% |
|
|
93.0 |
% |
|
$ |
352,211 |
|
|
|
3.65 |
% |
|
(a) |
Property is included in the pool of unencumbered properties under our Credit Facility. |
|
(b) |
Portfolio total is equal to the weighted average interest rate. |
26
Tenancy Highlights
The following table presents information regarding the top ten tenants in our portfolio based on annualized base rent for leases in-place as of June 30, 2021.
Tenant Name |
|
Number of Leases |
|
|
Annualized Base Rent (a) |
|
|
Percent of Total Portfolio Annualized Base Rent |
|
|
Annualized Base Rent Per Square Foot |
|
|
Square Footage |
|
|
Percent of Total Portfolio Square Footage |
|
||||||
The Kroger Co |
|
|
4 |
|
|
$ |
3,374 |
|
|
|
3.7 |
% |
|
$ |
13.52 |
|
|
|
249,493 |
|
|
|
3.9 |
% |
The TJX Companies, Inc. |
|
|
12 |
|
|
|
3,073 |
|
|
|
3.4 |
% |
|
|
9.97 |
|
|
|
308,253 |
|
|
|
4.8 |
% |
Ross Dress for Less, Inc. |
|
|
10 |
|
|
|
2,673 |
|
|
|
2.9 |
% |
|
|
10.20 |
|
|
|
262,080 |
|
|
|
4.1 |
% |
Albertsons/Jewel/Shaw's |
|
|
2 |
|
|
|
2,304 |
|
|
|
2.5 |
% |
|
|
18.02 |
|
|
|
127,892 |
|
|
|
2.0 |
% |
Ulta Salon, Cosmetics & Fragrance Inc. |
|
|
9 |
|
|
|
2,177 |
|
|
|
2.4 |
% |
|
|
23.00 |
|
|
|
94,658 |
|
|
|
1.5 |
% |
PetSmart |
|
|
7 |
|
|
|
2,032 |
|
|
|
2.2 |
% |
|
|
14.67 |
|
|
|
138,578 |
|
|
|
2.1 |
% |
Dicks Sporting Goods, Inc. |
|
|
4 |
|
|
|
2,012 |
|
|
|
2.2 |
% |
|
|
11.13 |
|
|
|
180,766 |
|
|
|
2.8 |
% |
LA Fitness (Fitness International) |
|
|
2 |
|
|
|
1,966 |
|
|
|
2.1 |
% |
|
|
21.94 |
|
|
|
89,600 |
|
|
|
1.4 |
% |
Kohl's Department Stores |
|
|
4 |
|
|
|
1,888 |
|
|
|
2.1 |
% |
|
|
5.68 |
|
|
|
332,461 |
|
|
|
5.1 |
% |
Giant Eagle |
|
|
1 |
|
|
|
1,805 |
|
|
|
2.0 |
% |
|
|
13.96 |
|
|
|
129,340 |
|
|
|
2.0 |
% |
Top ten tenants |
|
|
55 |
|
|
$ |
23,304 |
|
|
|
25.5 |
% |
|
$ |
12.18 |
|
|
|
1,913,121 |
|
|
|
29.7 |
% |
|
(a) |
We have entered into rent deferral agreements with the tenants above that have generally been heavily impacted by the effects of the COVID-19 pandemic, which is a majority of the top ten tenants. To the extent we have agreed with a tenant to defer rent due in the base year to a later period, that deferred rent is still reflected in the annualized base rent amount above. |
The following table sets forth a summary of our tenant diversity for our entire portfolio and is based on leases in-place at June 30, 2021.
Tenant Type |
|
Gross Leasable Area – Square Footage |
|
|
Percent of Total Gross Leasable Area |
|
|
Percent of Total Annualized Base Rent |
|
|||
Discount and Department Stores |
|
|
1,307,696 |
|
|
|
21.7 |
% |
|
|
11.4 |
% |
Grocery |
|
|
1,084,647 |
|
|
|
18.0 |
% |
|
|
15.4 |
% |
Home Goods |
|
|
954,002 |
|
|
|
15.9 |
% |
|
|
9.1 |
% |
Lifestyle, Health Clubs, Books & Phones |
|
|
733,505 |
|
|
|
12.2 |
% |
|
|
16.2 |
% |
Restaurant |
|
|
527,900 |
|
|
|
8.8 |
% |
|
|
17.0 |
% |
Apparel & Accessories |
|
|
387,217 |
|
|
|
6.4 |
% |
|
|
8.7 |
% |
Pet Supplies |
|
|
247,039 |
|
|
|
4.1 |
% |
|
|
4.3 |
% |
Consumer Services, Salons, Cleaners, Banks |
|
|
245,245 |
|
|
|
4.1 |
% |
|
|
7.5 |
% |
Sporting Goods |
|
|
204,082 |
|
|
|
3.4 |
% |
|
|
2.8 |
% |
Health, Doctors & Health Foods |
|
|
163,937 |
|
|
|
2.7 |
% |
|
|
5.1 |
% |
Other |
|
|
161,993 |
|
|
|
2.7 |
% |
|
|
2.6 |
% |
Total |
|
|
6,017,263 |
|
|
|
100.0 |
% |
|
|
100.0 |
% |
The following table sets forth a summary, as of June 30, 2021, of the percent of total annualized base rent and the weighted average lease expiration by size of tenant.
Size of Tenant |
|
Description - Square Footage |
|
Percent of Total Annualized Base Rent |
|
|
Weighted Average Lease Expiration – Years |
|
||
Anchor |
|
10,000 and over |
|
|
52 |
% |
|
|
5.5 |
|
Junior Box |
|
5,000-9,999 |
|
|
14 |
% |
|
|
4.6 |
|
Small Shop |
|
Less than 5,000 |
|
|
35 |
% |
|
|
3.6 |
|
Total |
|
|
|
|
100 |
% |
|
|
4.7 |
|
27
Lease Expirations
The following table sets forth a summary, as of June 30, 2021, of lease expirations scheduled to occur during the remainder of 2021 and each of the calendar years from 2022 to 2030 and thereafter, assuming no exercise of renewal options or early termination rights for leases commenced on or prior to June 30, 2021. Annualized base rent represents the rent in-place of the applicable property at June 30, 2021. The table below includes ground leases. If ground leases are excluded, annualized base rent would equal $82,490 or $17.64 per square foot for total expiring leases.
Lease Expiration Year |
|
Number of Expiring Leases |
|
|
Gross Leasable Area of Expiring Leases - Square Footage |
|
|
Percent of Total Gross Leasable Area of Expiring Leases |
|
|
Total Annualized Base Rent of Expiring Leases |
|
|
Percent of Total Annualized Base Rent of Expiring Leases |
|
|
Annualized Base Rent per Leased Square Foot |
|
||||||
2021 (including month-to-month) |
|
|
52 |
|
|
|
171,300 |
|
|
|
2.9 |
% |
|
$ |
3,195 |
|
|
|
3.5 |
% |
|
$ |
18.65 |
|
2022 |
|
|
98 |
|
|
|
523,608 |
|
|
|
8.7 |
% |
|
|
9,128 |
|
|
|
10.0 |
% |
|
|
17.43 |
|
2023 |
|
|
113 |
|
|
|
960,466 |
|
|
|
16.0 |
% |
|
|
13,206 |
|
|
|
14.4 |
% |
|
|
13.75 |
|
2024 |
|
|
110 |
|
|
|
786,461 |
|
|
|
13.1 |
% |
|
|
14,760 |
|
|
|
16.1 |
% |
|
|
18.77 |
|
2025 |
|
|
117 |
|
|
|
819,853 |
|
|
|
13.6 |
% |
|
|
14,719 |
|
|
|
16.1 |
% |
|
|
17.95 |
|
2026 |
|
|
78 |
|
|
|
493,929 |
|
|
|
8.2 |
% |
|
|
8,126 |
|
|
|
8.9 |
% |
|
|
16.45 |
|
2027 |
|
|
35 |
|
|
|
471,595 |
|
|
|
7.8 |
% |
|
|
6,947 |
|
|
|
7.6 |
% |
|
|
14.73 |
|
2028 |
|
|
32 |
|
|
|
601,697 |
|
|
|
10.0 |
% |
|
|
6,270 |
|
|
|
6.9 |
% |
|
|
10.42 |
|
2029 |
|
|
13 |
|
|
|
171,691 |
|
|
|
2.9 |
% |
|
|
2,473 |
|
|
|
2.7 |
% |
|
|
14.41 |
|
2030 |
|
|
14 |
|
|
|
135,368 |
|
|
|
2.3 |
% |
|
|
2,183 |
|
|
|
2.4 |
% |
|
|
16.12 |
|
Thereafter |
|
|
33 |
|
|
|
881,295 |
|
|
|
14.7 |
% |
|
|
10,456 |
|
|
|
11.4 |
% |
|
|
11.86 |
|
Leased Total |
|
|
695 |
|
|
|
6,017,263 |
|
|
|
100.0 |
% |
|
$ |
91,463 |
|
|
|
100.0 |
% |
|
$ |
15.20 |
|
28
Liquidity and Capital Resources
General
Our primary uses and sources of cash are as follows:
Uses |
|
Sources |
||||||||
• |
Interest and principal payments on mortgage loans and Credit Facility |
|
• |
Cash receipts from our tenants |
||||||
• |
Property operating expenses |
|
• |
Sale of shares through the DRP (when distributions are paid and reinvested) |
||||||
• |
General and administrative expenses |
|
• |
Proceeds from new or refinanced mortgage loans |
||||||
• |
Distributions to stockholders |
|
• |
Borrowing on our Credit Facility |
||||||
• |
Fees payable to our Business Manager and Real Estate Manager |
|
• |
Proceeds from sales of real estate |
||||||
• |
Repurchases of shares under the SRP (only if there are DRP proceeds) |
|
• |
Proceeds from sales of securities (if any) other than through the DRP |
||||||
• |
Acquisitions of real estate directly or through joint ventures |
|
|
|
|
|
|
|||
• |
Capital expenditures, tenant improvements and leasing commissions |
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
During January 2020, we completed the sale of three properties generating net proceeds of $37.3 million. We are not currently actively marketing any properties and do not expect any strategic sales to occur until the effects of the COVID-19 pandemic on retail commercial real estate have subsided.
At June 30, 2021, we had $109 million outstanding under the Revolving Credit Facility and $150 million outstanding under the Term Loan. At June 30, 2021 the interest rate on the Revolving Credit Facility and the Term Loan was 1.90% and 4.29%, respectively. The Revolving Credit Facility matures on August 1, 2022, and we have the option to extend the maturity date for one additional year subject to the payment of an extension fee and certain other conditions under the Company’s control. We plan to refinance or extend the Revolving Credit Facility before August 1, 2022. The Term Loan matures on August 1, 2023. As of July 31, 2021, we had $83 million available for borrowing under the Revolving Credit Facility, subject to the terms and conditions, and assuming compliance with the covenants, of the Amended and Restated Credit Agreement that governs the Credit Facility. Our leverage ratio generally cannot exceed 60%, provided however that two times during the term of our Revolving Credit Facility our leverage ratio may be 62.5% for two consecutive quarters. Our leverage ratio was 51.6% as of June 30, 2021, as defined in the Revolving Credit Facility agreement.
As of June 30, 2021, we had total debt outstanding of $611.2 million, excluding mortgage premiums and unamortized debt issuance costs, which bore interest at a weighted average interest rate of 3.49% per annum. As of June 30, 2021, the weighted average years to maturity for our debt was 2.2 years. As of June 30, 2021 and December 31, 2020, our borrowings were 45% and 47%, respectively, of the purchase price of our investment properties. At June 30, 2021 our cash and cash equivalents balance was $11.3 million.
In the next twelve months, we have six mortgage loans maturing with an aggregate principal balance of $95.4 million, some of which we have the intent to refinance, and some of which we may repay by drawing on the line of credit. In addition, two of our mortgage loans, on Marketplace at Tech Center and Coastal North Town Center, respectively, each have covenants that require us to calculate an assumed debt service coverage ratio (the “Assumed DSCR”) within 30 days of August 1, 2021 and to promptly thereafter make principal paydowns or deposit additional collateral to achieve a minimum Assumed DSCR of at least 0.975 to 1.00. The minimum assumed debt service coverage ratio is calculated by dividing (1) adjusted net cash flow by (2) the aggregate principal and interest projected to be due and payable over the twelve month period subsequent to the date of calculation based upon an imputed interest rate equal to ten percent (10%). We expect to pay a combined total of approximately $15,000 to achieve the minimum Assumed DSCR at the two properties. We intend to finance these principal paydowns by drawing on the Credit Facility. For information related to our debt maturities reference is made to Note 7 – “Debt and Derivative Instruments” which is included in our June 30, 2021 Notes to Consolidated Financial Statements in Item 1.
To preserve cash for the payment of operating and other expenses, such as debt payments, during the second quarter of 2020 our board of directors rescinded the distribution that was declared in the first quarter of 2020, and we did not declare another distribution until June 29, 2021. We also suspended our DRP and SRP. The suspension of the DRP was effective on June 6, 2020 and the suspension of the SRP was effective on June 26, 2020. On June 29, 2021, we reinstated the DRP and the SRP and declared a distribution on our common stock in the amount of $0.135600 per share to stockholders of record as of June 30, 2021,
29
that was paid on or about July 26, 2021. The effective date of the DRP reinstatement was July 22, 2021 and was available for this distribution. The first share repurchases following the reinstatement of the SRP will be on August 16, 2021.
We have delayed making non-essential capital improvements and other non-essential capital expenditures at our properties since the onset of the pandemic, where possible, to reduce expenses and preserve cash and expect to continue to delay non-essential capital expenditures until they become essential or until the adverse effects of the COVID-19 pandemic on our tenants subside or there is better clarity on our tenants’ ability and willingness to pay rent and meet other lease obligations and, ultimately, the performance of our shopping centers. As we have seen rent collections increasing during 2021, we have been gradually returning to capital expenditures at our properties, and we do not expect the delay in making these capital expenditures to have any material effect on our tenants or our ability to lease space. In the second quarter of 2021, we spent $162 less (7% less) on capital expenditures than we did in the second quarter of 2020. Because we intend to gradually increase capital expenditures as rent collections increase, we do not anticipate a material effect on our liquidity from returning to pre-pandemic levels of capital expenditures, assuming the businesses of our tenants negatively affected by the COVID-19 pandemic continue to improve or they otherwise pay their rent.
As of June 30, 2021, we have paid all interest and principal amounts when due, and are in compliance with all financial covenants related to the Credit Facility as amended.
Cash Flow Analysis
|
|
Six Months Ended June 30, |
|
|
Change |
|
||||||
|
|
2021 |
|
|
2020 |
|
|
2021 vs. 2020 |
|
|||
|
|
(Dollar amounts in thousands) |
|
|||||||||
Net cash flows provided by operating activities |
|
$ |
23,698 |
|
|
$ |
13,376 |
|
|
$ |
10,322 |
|
Net cash flows (used in) provided by investing activities |
|
$ |
(2,317 |
) |
|
$ |
34,776 |
|
|
$ |
(37,093 |
) |
Net cash flows used in financing activities |
|
$ |
(19,806 |
) |
|
$ |
(20,988 |
) |
|
$ |
1,182 |
|
Operating activities
The increase in cash from operating activities during the six months ended June 30, 2021 compared to the six months ended June 30, 2020 was primarily due to an increase in tenant collections during 2021.
Investing activities
|
|
Six Months Ended June 30, |
|
|
Change |
|
||||||
|
|
2021 |
|
|
2020 |
|
|
2021 vs. 2020 |
|
|||
|
|
(Dollar amounts in thousands) |
|
|||||||||
Capital expenditures |
|
$ |
(2,317 |
) |
|
$ |
(2,479 |
) |
|
$ |
162 |
|
Proceeds from sale of investment properties |
|
|
— |
|
|
|
37,255 |
|
|
|
(37,255 |
) |
Net cash (used in) provided by investing activities |
|
$ |
(2,317 |
) |
|
$ |
34,776 |
|
|
$ |
(37,093 |
) |
Cash was used by our investing activities in the six months ended June 30, 2020 compared to the cash provided in the six months ended June 30, 2021. The primary reason for the change from the prior year was our receipt of $37.3 million of proceeds from the sale of three properties during January 2020.
Financing activities
|
|
Six Months Ended June 30, |
|
|
Change |
|
||||||
|
|
2021 |
|
|
2020 |
|
|
2021 vs. 2020 |
|
|||
|
|
(Dollar amounts in thousands) |
|
|||||||||
Total changes related to debt |
|
$ |
(19,806 |
) |
|
$ |
(12,289 |
) |
|
$ |
(7,517 |
) |
Proceeds from the distribution reinvestment plan, net of shares repurchased |
|
|
— |
|
|
|
2,142 |
|
|
|
(2,142 |
) |
Distributions paid |
|
|
— |
|
|
|
(10,841 |
) |
|
|
10,841 |
|
Net cash used in financing activities |
|
$ |
(19,806 |
) |
|
$ |
(20,988 |
) |
|
$ |
1,182 |
|
30
During the six months ended June 30, 2021, cash used to meet debt obligations increased $7.5 million from the six months ended June 30, 2020 primarily due to higher net paydowns of debt in the six months ended June 30, 2021. During the six months ended June 30, 2020, we generated proceeds from the sale of shares pursuant to the DRP of $4.5 million. For the six months ended June 30, 2020, share repurchases were $2.4 million. During the six months ended June 30, 2020, we paid $10.8 million in distributions. The decreases in distributions paid, proceeds from DRP and share repurchases in 2021 compared to 2020 are due to the suspensions of the authorization and payment of distributions, the DRP and the SRP, respectively.
Distributions
Distributions when declared have typically been paid quarterly in arrears. A summary of the distributions declared, distributions paid and cash flows provided by operations for the six months ended June 30, 2021 and 2020 follows (Dollar amounts in thousands except per share amounts):
|
|
|
|
|
|
|
|
|
|
Distributions Paid (1) |
|
|
|
|
|
|
|||||||||
Six Months Ended June 30, |
|
Distributions Declared |
|
|
Distributions Declared Per Share |
|
|
Cash |
|
|
Reinvested via DRP |
|
|
Total |
|
|
Cash Flows From Operations |
|
|
||||||
2021 |
|
$ |
4,886 |
|
|
$ |
0.135600 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
23,698 |
|
|
2020 |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
6,294 |
|
|
$ |
4,547 |
|
|
$ |
10,841 |
|
|
$ |
13,376 |
|
|
|
(1) |
Distributions were funded by cash flow from operations and cash on hand during the six months ended June 30, 2020. The distribution paid in 2020 was declared in the fourth quarter of 2019. |
Due to the uncertainty surrounding the COVID-19 pandemic and the need to preserve cash for the payment of operating and other expenses, such as debt payments, we have not paid any distributions since the first quarter of 2020. On June 29, 2021, the board declared a distribution of $0.135600 per share to common stockholders of record as of June 30, 2021 that was be paid on or about July 26, 2021.
Results of Operations
The following discussions are based on our consolidated financial statements for the three and six months ended June 30, 2021 and 2020. Dollar amounts are stated in thousands.
This section describes and compares our results of operations for the three and six months ended June 30, 2021 and 2020. We generate almost all of our net operating income from property operations. In order to evaluate our overall portfolio, management analyzes the net operating income of properties that we have owned and operated for both periods presented. A total of 44 investment properties (which are all of the properties we currently own) that were acquired on or before January 1, 2020 represent our “same store” properties during the three and six months ended June 30, 2021 and 2020. “Non-same store,” as reflected in the table below, consists of properties sold after January 1, 2020. For the three and six months ended June 30, 2021 and 2020, three properties that were sold constituted non-same store properties.
Net operating income is a supplemental non-GAAP performance measure that we believe is useful to investors in measuring the operating performance of our property portfolio because our primary business is the ownership of real estate, and net operating income excludes various items included in GAAP net income that do not relate to, or are not indicative of, our property operating performance, such as depreciation and amortization and parent-level corporate expenses (including general and administrative expenses). Same store net operating income is useful because it eliminates differences in net operating income resulting from the acquisition or disposition of properties during the periods presented and therefore provides a better comparison of the operating performance of our properties between periods.
The following tables present the property net operating income prior to straight-line income (expense), net, amortization of intangibles, interest, and depreciation and amortization for the three and six months ended June 30, 2021 and 2020, along with a reconciliation to net loss, calculated in accordance with U.S. GAAP.
31
Comparison of the three months ended June 30, 2021 and June 30, 2020
|
Total |
|
|
Same Store |
|
|
Non-Same Store |
|
|||||||||||||||||||||||||||
|
Three Months Ended June 30, |
|
|
Three Months Ended June 30, |
|
|
Three Months Ended June 30, |
|
|||||||||||||||||||||||||||
|
2021 |
|
|
2020 |
|
|
Change |
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|||||||||
Rental income |
$ |
29,147 |
|
|
$ |
25,449 |
|
|
$ |
3,698 |
|
|
$ |
29,147 |
|
|
$ |
25,449 |
|
|
$ |
3,698 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Other property income |
|
62 |
|
|
|
53 |
|
|
|
9 |
|
|
|
62 |
|
|
|
53 |
|
|
|
9 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total income |
$ |
29,209 |
|
|
$ |
25,502 |
|
|
$ |
3,707 |
|
|
$ |
29,209 |
|
|
$ |
25,502 |
|
|
$ |
3,707 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating expenses |
$ |
4,857 |
|
|
$ |
3,836 |
|
|
$ |
1,021 |
|
|
$ |
4,857 |
|
|
$ |
3,836 |
|
|
$ |
1,021 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Real estate tax expense |
|
3,678 |
|
|
|
3,784 |
|
|
|
(106 |
) |
|
|
3,678 |
|
|
|
3,784 |
|
|
|
(106 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total property operating expenses |
$ |
8,535 |
|
|
$ |
7,620 |
|
|
$ |
915 |
|
|
$ |
8,535 |
|
|
$ |
7,620 |
|
|
$ |
915 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property net operating income |
$ |
20,674 |
|
|
$ |
17,882 |
|
|
$ |
2,792 |
|
|
$ |
20,674 |
|
|
$ |
17,882 |
|
|
$ |
2,792 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Straight-line income (expense), net |
$ |
(115 |
) |
|
$ |
319 |
|
|
$ |
(434 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangibles and lease incentives |
$ |
139 |
|
|
|
207 |
|
|
|
(68 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses |
|
(918 |
) |
|
|
(1,447 |
) |
|
|
529 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business management fee |
|
(2,236 |
) |
|
|
(2,231 |
) |
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
(12,218 |
) |
|
|
(12,833 |
) |
|
|
615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
(5,801 |
) |
|
|
(6,279 |
) |
|
|
478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income |
|
29 |
|
|
|
69 |
|
|
|
(40 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
$ |
(446 |
) |
|
$ |
(4,313 |
) |
|
$ |
3,867 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss. Net loss was $446 and $4,313 for the three months ended June 30, 2021 and 2020, respectively.
Total property net operating income. On a “same store” basis, comparing the results of operations of investment properties owned during the three months ended June 30, 2021 with the results of the same investment properties owned during the three months ended June 30, 2020, property net operating income increased $2,792, total property income increased $3,707, and total property operating expenses including real estate tax expense increased $915.
The increase in “same store” total property income is primarily due to a decrease in bad debt expense and an increase in recovery income due to higher expenses during the three months ended June 30, 2021. See Note 5 – “Leases” for additional information regarding the effects of deferred rent and bad debt on rental income.
None of our properties were considered “non-same store” during the three months ended June 30, 2021 and 2020.
Straight-line income (expense), net. Straight-line income (expense), net decreased $434 in 2021 compared to 2020. This decrease is primarily due to lower rent abatements during the three months ended June 30, 2021.
Amortization of intangibles and lease incentives. Income from the amortization of intangibles and lease incentives decreased $68 in 2021 compared to 2020. The decrease is primarily attributable to below market intangibles being fully amortized during 2020.
General and administrative expenses. General and administrative expenses decreased $529 in 2021 compared to 2020. This decrease is primarily due to decreased legal and other professional costs for the three months ended June 30, 2021.
Business management fee. Business management fees increased $5 in 2021 compared to 2020.
Depreciation and amortization. Depreciation and amortization decreased $615 in 2021 compared to 2020. The decrease is primarily due to fully amortized assets in 2021 compared to 2020.
Interest expense. Interest expense decreased $478 in 2021 compared to 2020. The decrease is primarily due to lower average interest rates and a decrease in average debt outstanding in 2021 compared to 2020.
32
Interest and other income. Interest and other income decreased $40 in 2021 compared to 2020.
Comparison of the six months ended June 30, 2021 and June 30, 2020
|
Total |
|
|
Same Store |
|
|
Non-Same Store |
|
|||||||||||||||||||||||||||
|
Six Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|||||||||||||||||||||||||||
|
2021 |
|
|
2020 |
|
|
Change |
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|||||||||
Rental income |
$ |
58,821 |
|
|
$ |
55,438 |
|
|
$ |
3,383 |
|
|
$ |
58,822 |
|
|
$ |
55,254 |
|
|
$ |
3,568 |
|
|
$ |
— |
|
|
$ |
184 |
|
|
$ |
(184 |
) |
Other property income |
|
110 |
|
|
|
114 |
|
|
|
(4 |
) |
|
|
110 |
|
|
|
114 |
|
|
|
(4 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total income |
$ |
58,931 |
|
|
$ |
55,552 |
|
|
$ |
3,379 |
|
|
$ |
58,932 |
|
|
$ |
55,368 |
|
|
$ |
3,564 |
|
|
$ |
— |
|
|
$ |
184 |
|
|
$ |
(184 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating expenses |
$ |
10,375 |
|
|
$ |
9,132 |
|
|
$ |
1,243 |
|
|
$ |
10,375 |
|
|
$ |
9,095 |
|
|
$ |
1,280 |
|
|
$ |
— |
|
|
|
37 |
|
|
$ |
(37 |
) |
Real estate tax expense |
|
7,348 |
|
|
|
7,422 |
|
|
|
(74 |
) |
|
|
7,348 |
|
|
|
7,384 |
|
|
|
(36 |
) |
|
|
— |
|
|
|
38 |
|
|
|
(38 |
) |
Total property operating expenses |
$ |
17,723 |
|
|
$ |
16,554 |
|
|
$ |
1,169 |
|
|
$ |
17,723 |
|
|
$ |
16,479 |
|
|
$ |
1,244 |
|
|
$ |
— |
|
|
$ |
75 |
|
|
$ |
(75 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property net operating income |
$ |
41,208 |
|
|
$ |
38,998 |
|
|
$ |
2,210 |
|
|
$ |
41,209 |
|
|
$ |
38,889 |
|
|
$ |
2,320 |
|
|
$ |
— |
|
|
$ |
109 |
|
|
$ |
(109 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Straight-line income (expense), net |
$ |
(136 |
) |
|
$ |
257 |
|
|
$ |
(393 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible amortization and inducement |
|
285 |
|
|
|
779 |
|
|
|
(494 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses |
|
(2,231 |
) |
|
|
(2,687 |
) |
|
|
456 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business management fee |
|
(4,470 |
) |
|
|
(4,460 |
) |
|
|
(10 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
(24,673 |
) |
|
|
(26,137 |
) |
|
|
1,464 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
(11,843 |
) |
|
|
(12,777 |
) |
|
|
934 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income |
|
86 |
|
|
|
93 |
|
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
$ |
(1,774 |
) |
|
$ |
(5,934 |
) |
|
$ |
4,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss. Net loss was $1,774 and $5,934 for the six months ended June 30, 2021 and 2020, respectively.
Total property net operating income. On a “same store” basis, comparing the results of operations of investment properties owned during the six months ended June 30, 2021 with the results of the same investment properties owned during the six months ended June 30, 2020, property net operating income increased $2,210, total property income increased $3,379, and total property operating expenses including real estate tax expense increased $1,169.
The increase in “same store” total property income is primarily due to a decrease in bad debt partially offset by a decrease in base rent due to lower average occupancy and lower average rents due to the effects of the COVID-19 pandemic that led to rent abatements and amendments to leases mostly with tenants receiving protection from bankruptcy laws and a decrease in termination income during the six months ended June 30, 2021. See Note 5 – “Leases” for additional information regarding the effects of deferred rent and bad debt on rental income.
“Non-same store” total property net operating income decreased $109 during 2021 compared to 2020. The decrease was due to three properties sold in the first quarter of 2020. On a “non-same store” basis, total property income decreased $184 and total property operating expenses decreased $75 during the six months ended June 30, 2021.
Straight-line income (expense), net. Straight-line income (expense), net decreased $393 in 2021 compared to 2020. This decrease is primarily due to an increase in scheduled rental increases during the six months ended June 30, 2021.
Amortization of intangibles and lease incentives. Income from the amortization of intangibles and lease incentives decreased $494 in 2021 compared to 2020. The decrease is primarily attributable to lower below market intangible write-offs during the six months ended June 30, 2021.
General and administrative expenses. General and administrative expenses decreased $456 in 2021 compared to 2020. This decrease is primarily due to decreased legal and other professional costs for the six months ended June 30, 2021.
Business management fee. Business management fees increased $10 in 2021 compared to 2020.
33
Depreciation and amortization. Depreciation and amortization decreased $1,464 in 2021 compared to 2020. The decrease is primarily due to fully amortized assets in 2021 compared to 2020.
Interest expense. Interest expense decreased $934 in 2021 compared to 2020. The decrease is primarily due to lower average interest rates and a decrease in average debt outstanding in 2021 compared to 2020.
Interest and other income. Interest and other income decreased $7 in 2021 compared to 2020.
Off-Balance Sheet Arrangements
We currently have no off-balance sheet arrangements that are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Leasing Activity
The following table sets forth leasing activity during the six months ended June 30, 2021. Leases with terms of less than 12 months have been excluded from the table.
|
|
Number of Leases Signed |
|
|
Gross Leasable Area |
|
|
New Contractual Rent per Square Foot |
|
|
Prior Contractual Rent per Square Foot |
|
|
% Change over Prior Annualized Base Rent |
|
|
Weighted Average Lease Term |
|
|
Tenant Allowances per Square Foot |
|
|||||||
Comparable Renewal Leases |
|
|
41 |
|
|
|
201,211 |
|
|
$ |
22.51 |
|
|
$ |
21.93 |
|
|
|
2.6 |
% |
|
|
4.3 |
|
|
$ |
0.16 |
|
Comparable New Leases |
|
|
7 |
|
|
|
12,686 |
|
|
$ |
30.38 |
|
|
$ |
30.17 |
|
|
|
0.7 |
% |
|
|
7.3 |
|
|
$ |
25.93 |
|
Non-Comparable New and Renewal Leases (a) |
|
|
22 |
|
|
|
118,947 |
|
|
$ |
14.46 |
|
|
N/A |
|
|
N/A |
|
|
|
3.4 |
|
|
$ |
4.74 |
|
||
Total |
|
|
70 |
|
|
|
332,844 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Includes leases signed on units that were vacant for over 12 months, leases signed without fixed rent amounts and leases signed where the previous and current lease do not have similar lease structures. |
Lease extensions are treated as renewals and included in the above table only if the lease extension period exceeds any abatement period. Seven leases comprising 33,373 square feet (14.0% of total renewal square footage) renewed during the six months ended June 30, 2021 were extended early in connection with COVID-19 related abatement or deferral agreements.
Non-GAAP Financial Measures
Accounting for real estate assets in accordance with U.S. GAAP assumes the value of real estate assets is reduced over time due primarily to non-cash depreciation and amortization expense. Because real estate values may rise and fall with market conditions, operating results from real estate companies that use U.S. GAAP accounting may not present a complete view of their performance. We use Funds from Operations, or “FFO”, a widely accepted metric to evaluate our performance. FFO provides a supplemental measure to compare our performance and operations to other REITs. Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts, or “NAREIT”, has promulgated a standard known as FFO, which it believes more accurately reflects the operating performance of a REIT. On November 7, 2018, NAREIT’s Executive Board approved the White Paper restatement, effective December 15, 2018. The purpose of the restatement was not to change the fundamental definition of FFO but to clarify existing guidance. The restated definition of FFO by NAREIT is net income (loss) computed in accordance with U.S. GAAP, excluding depreciation and amortization related to real estate, excluding gains (or losses) from sales of certain real estate assets, excluding impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate and excluding gains and losses from change in control. We have adopted the restated NAREIT definition for computing FFO. Previously presented periods were not impacted.
Under U.S. GAAP, acquisition related costs are treated differently if the acquisition is a business combination or an asset acquisition. An acquisition of a single property will likely be treated as an asset acquisition as opposed to a business combination and acquisition related costs will be capitalized rather than expensed when incurred. Publicly registered, non-listed REITs typically engage in a significant amount of acquisition activity in the early years of their operations, and thus incur significant acquisition related costs, during these initial years. Although other start up entities may engage in significant acquisition activity during their initial years, publicly registered, non-listed REITs are unique in that they typically have a limited timeframe during which they acquire a significant number of properties and thus incur significant acquisition related costs. Due to the above factors and other unique features of publicly
34
registered, non-listed REITs, the Institute for Portfolio Alternatives, or “IPA”, an industry trade group, published a standardized measure known as Modified Funds from Operations, or “MFFO”, which the IPA has promulgated as a supplemental measure for publicly registered non-listed REITs and which may be another appropriate supplemental measure to reflect the operating performance of a non-listed REIT. We believe it is appropriate to use MFFO as a supplemental measure of operating performance because we believe that, when compared year-over-year, both before and after we have deployed all of our Offering proceeds and are no longer incurring a significant amount of acquisition fees or other related costs, it reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income.
MFFO excludes expensed costs associated with investing activities, some of which are acquisition related costs that affect our operations only in periods in which properties are acquired, and other non-operating items that are included in FFO, such as straight-lining of rents as required by U.S. GAAP. By excluding costs that we consider more reflective of acquisition activities and other non-operating items, the use of MFFO provides another measure of our operating performance once our portfolio is stabilized. Because MFFO may be a recognized measure of operating performance within the non-listed REIT industry, MFFO and the adjustments used to calculate it may be useful in order to evaluate our performance against other non-listed REITs. Like FFO, MFFO is not equivalent to our net income or loss as determined under U.S. GAAP, as detailed in the table below, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we continue to acquire a significant amount of properties. MFFO should only be used as a measurement of our operating performance while we are acquiring a significant amount of properties because it excludes, among other things, acquisition costs incurred during the periods in which properties were acquired.
We believe our definition of MFFO, a non-U.S. GAAP measure, is consistent with the IPA's Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations, or the “Practice Guideline,” issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of U.S. GAAP net income: acquisition fees and expenses; amounts relating to straight-line rents and amortization of above and below market lease assets and liabilities, accretion of discounts and amortization of premiums on debt investments; mark-to-market adjustments included in net income; nonrecurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis.
Our presentation of FFO and MFFO may not be comparable to other similarly titled measures presented by other REITs. We believe that the use of FFO and MFFO provides a more complete understanding of our operating performance to stockholders and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs. Neither FFO nor MFFO is intended to be an alternative to “net income” or to “cash flows from operating activities” as determined by U.S. GAAP as a measure of our capacity to pay distributions. Management uses FFO and MFFO to compare our operating performance to that of other REITs and to assess our operating performance.
Our FFO and MFFO for the six months ended June 30, 2021 and 2020 are calculated as follows:
|
|
|
|
Six Months Ended June 30, |
|
|||||
|
|
|
|
2021 |
|
|
2020 |
|
||
|
|
|
|
(Dollar amounts in thousands) |
|
|||||
|
|
Net loss |
|
$ |
(1,774 |
) |
|
$ |
(5,934 |
) |
Add: |
|
Depreciation and amortization related to investment properties |
|
|
24,673 |
|
|
|
26,137 |
|
|
|
Funds from operations (FFO) |
|
|
22,899 |
|
|
|
20,203 |
|
|
|
|
|
|
|
|
|
|
|
|
Less: |
|
Amortization of acquired market lease intangibles, net |
|
|
(334 |
) |
|
|
(828 |
) |
|
|
Straight-line income (expense), net |
|
|
136 |
|
|
|
(257 |
) |
|
|
Modified funds from operations (MFFO) |
|
$ |
22,701 |
|
|
$ |
19,118 |
|
Subsequent Events
For information related to subsequent events, reference is made to Note 15 – “Subsequent Events” which is included in our June 30, 2021 Notes to Consolidated Financial Statements in Item 1.
35
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market Risk
We are exposed to various market risks, including those caused by changes in interest rates and commodity prices. Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates and commodity prices. We do not enter into derivatives or other financial instruments for trading or speculative purposes. We have entered into, and may continue to enter into, financial instruments to manage and reduce the impact of changes in interest rates. The counterparties are, and are expected to continue to be, major financial institutions.
Interest Rate Risk
We are exposed to interest rate changes primarily as a result of long-term debt used to purchase properties or other real estate assets and to fund capital expenditures.
As of June 30, 2021, we had outstanding debt of $611.2 million, excluding mortgage premium and unamortized debt issuance costs, bearing interest rates ranging from 1.69% to 5.21% per annum. The weighted average interest rate was 3.49%, which includes the effect of interest rate swaps. As of June 30, 2021, the weighted average years to maturity for our mortgages and credit facility payable was 2.2 years.
As of June 30, 2021, our fixed-rate debt consisted of secured mortgage financings with a carrying value of $138.4 million and a fair value of $137.3 million. Changes in interest rates do not affect interest expense incurred on our fixed-rate debt until their maturity or earlier repayment, but interest rates do affect the fair value of our fixed rate debt obligations. If market interest rates were to increase by 1% (100 basis points), the fair market value of our fixed-rate debt would decrease by $4.5 million at June 30, 2021. If market interest rates were to decrease by 1% (100 basis points), the fair market value of our fixed-rate debt would increase by $4.7 million at June 30, 2021.
As of June 30, 2021, we had $109.7 million of debt or 17.9% of our total debt, excluding mortgage premium and unamortized debt issuance costs, bearing interest at variable rates with a weighted average interest rate equal to 3.27% per annum. We had variable rate debt subject to swap agreements of $363.1 million, or 59.4% of our total debt, excluding mortgage premium and unamortized debt issuance costs, at June 30, 2021.
If interest rates on all debt which bears interest at variable rates as of June 30, 2021 increased by 1% (100 basis points), the increase in interest expense on all debt would decrease earnings and cash flows by $0.9 million annually. If interest rates on all debt which bears interest at variable rates as of June 30, 2021 decreased by 1% (100 basis points), interest expense would not change earnings and cash flows primarily due to the impact of the LIBOR floor on the Revolving Credit Facility.
With regard to variable rate financing, our Business Manager assesses our interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities. Our Business Manager maintains risk management control systems to monitor interest rate cash flow risk attributable to both of our outstanding or forecasted debt obligations as well as our potential offsetting hedge positions.
We use derivative financial instruments to hedge exposures to changes in interest rates on loans secured by our assets. Derivative instruments may include interest rate swap contracts, interest rate cap or floor contracts, futures or forward contracts, options or repurchase agreements. Our actual hedging decisions are determined in light of the facts and circumstances existing at the time of the hedge. We have used derivative financial instruments, specifically interest rate swap contracts, to hedge against interest rate fluctuations on variable rate debt, which exposes us to both credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. If the fair value of a derivative contract is positive, the counterparty will owe us, which creates credit risk for us because the counterparty may not perform. Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates. We seek to manage the market risk associated with interest-rate contracts by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken. There is no assurance we will be successful.
In July 2017, the Financial Conduct Authority, the authority which regulates LIBOR, announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee, which identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative to LIBOR in derivatives and other financial contracts. Subsequently, in November 2020, the Intercontinental Exchange (“ICE”) Benchmark Administration Limited (“IBA”), the administrator of LIBOR, announced that it would consult on its intention to cease the publication of the one-week and two-month USD LIBOR settings immediately following December 31, 2021 and the remaining USD LIBOR settings immediately following the LIBOR publication on June 30, 2023. We are not able to predict when LIBOR may be limited or discontinued or when there will be sufficient liquidity in the SOFR market. We are monitoring and evaluating the risks related to potential changes in LIBOR availability, which include potential changes in interest paid on debt and amounts received and paid on
36
interest rate swaps. In addition, the value of debt or derivative instruments tied to LIBOR could also be impacted when LIBOR is limited or discontinued, and contracts must be transitioned to a new alternative rate. In some instances, transitioning to an alternative rate may require negotiation with lenders and other counterparties and could present challenges. The consequences of these developments cannot be entirely predicted and could include an increase in the cost of our variable rate debt.
While we expect LIBOR to be available in substantially its current form until the end of 2021, it is possible that LIBOR will become unavailable prior to that time. This could occur, for example, if a sufficient number of banks decline to make submissions to the LIBOR administrator. In that case, the risks associated with the transition to an alternative reference rate would be accelerated or magnified. Any of these events, as well as the other uncertainty surrounding the transition to LIBOR, could adversely affect us.
Derivatives
For information related to our derivatives, reference is made to Note 7 – “Debt and Derivative Instruments” which is included in our June 30, 2021 Notes to Consolidated Financial Statements in Item 1.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Our management has evaluated, with the participation of our principal executive and principal financial officers, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the principal executive and principal financial officers have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
Changes in Internal Control over Financial Reporting
There were no changes to our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) or Rule 15d-15(f)) during the three months ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II - Other Information
Item 1. Legal Proceedings
We are not a party to, and none of our properties are subject to, any material pending legal proceedings.
Item 1A. Risk Factors
The following risk factors supplement the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2020.
The spread of the novel coronavirus (COVID-19) at various times and in various locations throughout the U.S., and its future impacts are uncertain and hard to measure, but it has already had material adverse effects on our business, and these effects may recur and could be more severe, depending in part on the effectiveness of vaccinations and treatments and the willingness and ability of people to be vaccinated, the severity and duration of the pandemic in the U.S. and its immediate and lingering economic effects.
The continued spread of the COVID-19 pandemic globally has had, and could have a further, material adverse effect on the global and U.S. economies as a whole, as well as the states and cities where we own properties in particular, leading to significant adverse impacts on economic activity as well as significant volatility and lack of liquidity in financial markets, including commercial lending markets.
A sustained downturn in the U.S. economy and reduced consumer spending, including reduced consumer activity at brick-and-mortar commercial establishments, due to the prolonged existence and threat of the COVID-19 pandemic caused an economic recession in the U.S. that has negatively impacted, and could further impact, the ability and willingness of many of our tenants to pay their rent when due. Our ability to lease space and negotiate and maintain favorable rents is also likely to be negatively impacted by a prolonged recession in the U.S. economy, which would result in a decline in our occupancy percentage and reduction in rental revenues as tenants default and leases expire over time. An increase in the number of co-tenancy claims at Harris Plaza or other properties could result if the occupancy at those properties falls below required thresholds or large spaces, such as the Bed Bath & Beyond at Harris Plaza vacated at the end of January 2021, otherwise go dark, which may provide remaining tenants at such a property with certain rights that may include the right to cease operations or stop paying or abate (reduce) rent owed.
37
Because substantially all of our income is derived from rentals of commercial real property, our business, income, cash flow, results of operations, financial condition, liquidity and ability to comply with the terms of, draw upon or increase the size of our Credit Facility, prospects and ability to service our debt obligations, our ability to consummate future property acquisitions and our ability to pay future distributions to our stockholders would be materially adversely affected if a significant number of tenants become unable to meet their obligations to us. Also, there is no assurance that we will be able to refinance maturing debt on terms and conditions acceptable to us.
The impact of the COVID-19 pandemic and the threats posed by new variants such as the Delta variant have been rapidly evolving and are ever-changing. The coronavirus outbreak has negatively impacted almost every industry directly or indirectly at various times since its onset, particularly the travel, hotel and retail industries, and businesses that rely on or require close personal contact, such as theaters, live entertainment venues, gyms and exercise facilities, health and wellness service providers and beauty salons, restaurants and bars. Many of our tenants have been required for certain periods by the local, state or federal authorities to cease or limit operations thereby preventing them from generating revenue. Our tenants rely on retail customers and many of their businesses require close personal contact. Even if not prevented by the local, state or federal authorities, concern regarding the transmission of COVID-19 has impacted, and may continue to impact, the willingness of persons to engage in in-person commerce which will likely further result in reductions in customer foot traffic and reduced demand for our tenants’ products and services and may diminish the demand for space and the corresponding amounts of rent we can obtain for our properties and harm our tenants’ ability or willingness to pay us rent.
As disclosed in our reports filed with the Securities and Exchange Commission since the onset of the pandemic, there were periods during which we collected less than all rent billed, and rent billed did not include amounts that we agreed to defer. In addition, in 2020 following the onset of the pandemic we finalized payment plans with tenants totaling $8.1 million in total rent, and future deferrals may be needed if, for example, the Delta variant or a new variant of COVID-19 and measures taken to combat it again adversely affect our tenants. Rent deferrals reduce our cash available to pay operating expenses and service our debt obligations, even if we are able to reflect the deferred amounts as income in our financial statements. When the deferred rent becomes due, our tenants will be required to pay these deferred rent amounts in addition to the regular rent due, which may be difficult or impossible for tenants whose businesses have not recovered to pre-pandemic levels or are otherwise not performing well. Any rent forgiveness or additional deferrals would further reduce our available cash.
Enforcing our rights as landlord against tenants who fail to pay rent or otherwise do not comply with the terms of their leases may be costly and may consume valuable time and resources, and even if we obtain a judgment, tenants that have been severely impacted may not be able to pay us what we are owed. Our ability to recover amounts under the terms of our leases may further be restricted or delayed if moratoriums are imposed by governments in light of the COVID-19 pandemic on landlord-initiated commercial eviction and collection actions. When any of our tenants, or any guarantor of a tenant’s lease obligations, files for bankruptcy, we could be further adversely affected due not only to loss of revenue but also because the bankruptcy may make it more difficult for us to lease the remainder of the property or properties in which the bankrupt tenant operates. Even if co-tenancy rights do not exist at centers affected by anchor store closings, we may nevertheless be negatively affected because other tenants may experience downturns in their businesses that could further threaten their ongoing ability to continue paying rent and remain solvent. Further, certain of our tenants may not be eligible for or may not be successful in securing stimulus funds under government aid programs, if any, and there is no assurance they will pay rent even if they qualify.
As referenced above, a decrease in demand for in-person retail businesses has made and could continue to make it difficult for us to renew or re-lease our properties at lease rates equal to or above historical rates, and we could incur significant re-leasing costs and the re-leasing process with respect to both anticipated and unanticipated vacancies could take longer. Leasing spreads for 2020 were only 2.0% for new leases and -1.8% for renewals. Leasing spreads for the first quarter of 2021 were -1.8% for renewals. Leasing spreads for the first six months of 2021 were 0.7% for new leases and 2.6% for renewals. Some tenants that have been or are forced to close or have had their operations severely limited by government order or some other government action or whose customers and potential customers change their habits in light of the coronavirus, e.g., by shopping more online, may go out of business, which could have a material impact on occupancy at our properties and may continue to materially impact our results. To the extent that unemployment is high and government assistance decreases significantly from recent levels, for example, if unemployment assistance provided by the U.S. government is decreased or discontinued, retail consumer spending may correspondingly decrease, and our tenants may be materially adversely affected and forced to close. Additionally, many manufacturers of goods and suppliers and processors of food in many countries experienced complete or partial shut downs and may not be able to function at full capacity in an attempt to curb the spread of the illness. If the spread of new variants of COVID-19 were to continue despite vaccines and other measures taken to contain it, this could lead to additional temporary or long-term disruptions in supply chains and may also impact the operations of our tenants, further impacting their revenues and ability to pay rent when due.
The business and operating results of our tenants may also be negatively impacted if the outbreak of the coronavirus occurs within their respective workforces or otherwise disrupts their management and other personnel, their supply chains or their ability to operate
38
their businesses. Many companies have implemented policies and procedures designed to protect against the introduction of the coronavirus to the workforce, including permitting or requiring personnel to work offsite, among others. New changes in the work processes of our tenants could lead to disruptions, such as a reduced ability to effectively transact with customers and colleagues and a loss of IT system functionality due to unusual or excess burdens on IT infrastructures.
We rely on the Business Manager to manage our day-to-day operations. Non-essential businesses were previously closed and have been and may in the future be subject to limited operations in Illinois per the order of the Governor of Illinois, including our corporate headquarters in Oak Brook. Though many people are able to work remotely, the business and operations of our Business Manager and its affiliates may also be adversely impacted by the coronavirus outbreak, including illness or quarantine of members of its workforce, which may negatively impact its ability to provide us services to the same degree as it had prior to the outbreak and may adversely affect our financial reporting systems and internal controls and procedures and increase vulnerability to security breaches, information technology disruptions and other similar events.
The full extent to which the COVID-19 pandemic, or a future pandemic, impacts our operations and those of our tenants will depend on future developments, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others, which remain uncertain and cannot be predicted with confidence but could be material. The situation is ever-changing, and additional impacts to the business may arise that we are not aware of currently. The rapid development and fluidity of this situation precludes any reliable prediction as to the full adverse impact of the COVID-19 pandemic, but a prolonged outbreak (e.g., of new strains or variants of the virus) despite the discovery and availability of vaccines as well as continued efforts to mitigate the spread of the virus could again have a material impact on the cash rents that we are able to collect and would materially and adversely affect our business, results of operations and financial condition.
Many risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2020 should be interpreted as heightened risks as a result of the impact of the COVID-19 pandemic, including but not limited to risk factors related to the economy, competition (including e-commerce and online sales), leasing, debt financing, tenant bankruptcies, distributions, share repurchases, and anchor tenants. We suspended distributions, distribution reinvestments under our DRP, and share repurchases under our share repurchase program in response to the effects of and uncertainties surrounding the pandemic, and we may do so again in the future.
The Strategic Plan may evolve or change over time, particularly in light of the COVID-19 pandemic, and there is no assurance we will be able to successfully achieve our board’s objectives under the Strategic Plan, including making strategic sales or purchases of properties or listing our common stock, within the timeframe we expected or would prefer or at all.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Recent Sales of Unregistered Equity Securities
During the period covered by this quarterly report, we did not sell any equity securities that were not registered under the Securities Act.
Share Repurchase Program
Our board of directors, in its sole discretion, may amend, suspend (in whole or in part), or terminate our SRP. In the event that we amend, suspend or terminate the SRP, however, we will send stockholders notice of the change at least thirty days prior to the change, and we will disclose the change in a report filed with the Securities and Exchange Commission on either Form 8-K, Form 10-Q or Form 10-K, as appropriate. Further, our board reserves the right in its sole discretion, at any time, and from time to time to reject any requests for repurchases.
Due to the uncertainty surrounding the COVID-19 pandemic and the need to preserve cash for the payment of operating and other expenses, such as debt payments, our board of directors suspended our SRP effective on June 26, 2020. No shares were repurchased during the period covered by this quarterly report. Any unfulfilled repurchase requests will automatically roll over for processing under the terms and conditions of the SRP when we restart the plan, unless a stockholder withdraws the request for repurchase.
On June 29, 2021, we announced the reinstatement and lifting of the suspension of our share repurchase program and adoption of the fourth amendment and restatement of the program. The effective date of the SRP reinstatement and the Fourth Amended and Restated Share Repurchase Program (the “Fourth SRP”) is August 12, 2021.
Our board of directors has amended and restated the SRP primarily to accommodate requests for Exceptional Repurchases the deadline for which overlapped with the aforementioned suspension of the SRP. Pursuant to the Fourth SRP, any written request for
39
treatment as an Exceptional Repurchase due to the death or qualifying disability of an owner that occurred between June 1, 2019 and May 31, 2020 (inclusive) will be timely received by us no later than January 31, 2022, and any written request for treatment as an Exceptional Repurchase due to the death or qualifying disability of an owner that occurred between June 1, 2020 and July 31, 2021, (inclusive) will be timely received if received by us no later than July 31, 2022.
The first repurchase under the SRP following its reinstatement, subject to the funding limit and the other terms and conditions of the SRP, will be on August 16, 2021. Requests for repurchase received on or before July 30, 2021, that are in good order and submitted in accordance with the terms and conditions of the SRP will be eligible to be considered for repurchase in the aforementioned August 16, 2021, repurchase. Per our letter to stockholders dated May 27, 2020, any unfulfilled repurchase requests that were in good order and accepted for processing have automatically rolled over and remain as repurchase requests under the terms and conditions of the SRP following the reinstatement, unless the stockholder has withdrawn the request for repurchase. Repurchases of shares requested for Exceptional Repurchases have priority under the SRP over other repurchases and we expect that Exceptional Repurchases will consume all of the funds available for the August 16, 2021 repurchase.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
Not Applicable.
40
Item 6. Exhibits
The exhibits filed in response to Item 601 of Regulation S-K are listed on the Exhibit Index attached hereto and are incorporated herein by reference.
Exhibit Index
Exhibit No. |
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Description |
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3.1 |
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3.2 |
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3.3 |
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3.4 |
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4.1 |
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31.1 |
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31.2 |
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32.1 |
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32.2 |
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101.INS |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* |
Filed herewith. |
41
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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INLAND REAL ESTATE INCOME TRUST, INC. |
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/s/ Mitchell A. Sabshon |
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By: |
Mitchell A. Sabshon |
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President and Chief Executive Officer (principal executive officer) |
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Date: |
August 10, 2021 |
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/s/ Catherine L. Lynch |
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By: |
Catherine L. Lynch |
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Chief Financial Officer and Treasurer (principal financial officer) |
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Date: |
August 10, 2021 |
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42
Exhibit 31.1
CERTIFICATION
I, Mitchell A. Sabshon, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Inland Real Estate Income Trust, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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c. |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d. |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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/s/ Mitchell A. Sabshon |
Name: |
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Mitchell A. Sabshon |
Title: |
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President and Chief Executive Officer (Principal Executive Officer) |
Date: |
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August 10, 2021 |
Exhibit 31.2
CERTIFICATION
I, Catherine L. Lynch, certify that:
1. |
I have reviewed this Quarterly Report on Form 10-Q of Inland Real Estate Income Trust, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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c. |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d. |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
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a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
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b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
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/s/ Catherine L. Lynch |
Name: |
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Catherine L. Lynch |
Title: |
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Chief Financial Officer and Treasurer |
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(Principal Financial Officer) |
Date: |
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August 10, 2021 |
Exhibit 32.1
Certification Pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of Inland Real Estate Income Trust, Inc. (the “Company”) for the fiscal quarter ended June 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Mitchell A. Sabshon, President and Chief Executive Officer of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:
|
1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
|
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: August 10, 2021 |
By: |
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/s/ Mitchell A. Sabshon |
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Name: |
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Mitchell A. Sabshon |
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Title: |
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President and Chief Executive Officer |
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|
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(Principal Executive Officer) |
This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
Certification Pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of Inland Real Estate Income Trust, Inc. (the “Company”) for the fiscal quarter ended June 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Catherine L. Lynch, Chief Financial Officer and Treasurer of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of her knowledge:
|
1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
|
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: August 10, 2021 |
By: |
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/s/ Catherine L. Lynch |
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Name: |
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Catherine L. Lynch |
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Title: |
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Chief Financial Officer and Treasurer |
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|
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(Principal Financial Officer) |
This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares |
Jun. 30, 2021 |
Dec. 31, 2020 |
---|---|---|
Statement Of Financial Position [Abstract] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 40,000,000 | 40,000,000 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 1,460,000,000 | 1,460,000,000 |
Common stock, shares issued | 36,025,578 | 36,022,368 |
Common stock, shares outstanding | 36,025,578 | 36,022,368 |
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME ( LOSS ) (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
Income: | ||||
Rental income | $ 29,372 | $ 26,176 | $ 59,372 | $ 56,876 |
Other property income | 62 | 53 | 110 | 114 |
Total income | 29,434 | 26,229 | 59,482 | 56,990 |
Cost and Expenses: | ||||
Property operating expenses | 5,058 | 4,037 | 10,777 | 9,534 |
Real estate tax expense | 3,678 | 3,784 | 7,348 | 7,422 |
General and administrative expenses | 918 | 1,447 | 2,231 | 2,687 |
Business management fee | 2,236 | 2,231 | 4,470 | 4,460 |
Depreciation and amortization | 12,218 | 12,833 | 24,673 | 26,137 |
Total expenses | 24,108 | 24,332 | 49,499 | 50,240 |
Other Income (Expense): | ||||
Interest expense | (5,801) | (6,279) | (11,843) | (12,777) |
Interest and other income | 29 | 69 | 86 | 93 |
Net loss | $ (446) | $ (4,313) | $ (1,774) | $ (5,934) |
Net loss per common share, basic and diluted | $ (0.01) | $ (0.12) | $ (0.05) | $ (0.16) |
Weighted average number of common shares outstanding, basic and diluted | 36,022,933 | 36,020,150 | 36,022,652 | 36,019,771 |
Comprehensive income (loss): | ||||
Net loss | $ (446) | $ (4,313) | $ (1,774) | $ (5,934) |
Unrealized (loss) gain on derivatives | (258) | (1,930) | 903 | (16,482) |
Reclassification adjustment for amounts included in net loss | 1,843 | 1,570 | 3,707 | 1,973 |
Comprehensive income (loss) | $ 1,139 | $ (4,673) | $ 2,836 | $ (20,443) |
CONSOLIDATED STATEMENTS OF EQUITY (Unaudited) (Parenthetical) - $ / shares |
3 Months Ended | 6 Months Ended | |
---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
Statement Of Stockholders Equity [Abstract] | |||
Distributions declared per share | $ 0.135600 | $ 0.135600 | $ 0.226875 |
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands |
6 Months Ended | |||
---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|||
Cash flows from operating activities: | ||||
Net loss | $ (1,774) | $ (5,934) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||
Depreciation and amortization | 24,673 | 26,137 | ||
Amortization of debt issuance costs and mortgage premiums, net | 342 | 290 | ||
Amortization of acquired market leases, net | (334) | (828) | ||
Amortization of equity-based compensation | 32 | 31 | ||
Reduction in the carrying amount of the right-of-use-asset | 224 | 235 | ||
Straight-line income, net | (266) | (659) | ||
Other non-cash adjustments | 49 | 7 | ||
Changes in assets and liabilities: | ||||
Accounts payable and accrued expenses | (317) | 1,383 | ||
Accounts and rent receivable | 3,006 | (4,391) | ||
Due to related parties | (2,373) | (2,260) | ||
Operating lease liability | 178 | 167 | ||
Other liabilities | (59) | (1,105) | ||
Other assets | 317 | 303 | ||
Net cash flows provided by operating activities | 23,698 | 13,376 | ||
Cash flows from investing activities: | ||||
Capital expenditures | (2,317) | (2,479) | ||
Proceeds from sale of investment properties | 37,255 | |||
Net cash flows (used in) provided by investing activities | (2,317) | 34,776 | ||
Cash flows from financing activities: | ||||
Payment of credit facility | (8,097) | (43,022) | ||
Proceeds from credit facility | 52,097 | 31,000 | ||
Payment of mortgages payable | (63,806) | (267) | ||
Proceeds from the distribution reinvestment plan | 4,547 | |||
Shares repurchased | (2,405) | |||
Distributions paid | [1] | (10,841) | ||
Net cash flows used in financing activities | (19,806) | (20,988) | ||
Net increase in cash, cash equivalents and restricted cash | 1,575 | 27,164 | ||
Cash, cash equivalents and restricted cash, at beginning of the period | 13,985 | 5,533 | ||
Cash, cash equivalents and restricted cash, at end of period | 15,560 | 32,697 | ||
Supplemental disclosure of cash flow information: | ||||
Cash paid for interest | 11,523 | 12,515 | ||
Supplemental schedule of non-cash investing and financing activities: | ||||
Accrued capital expenditures | $ 132 | $ 72 | ||
|
Organization |
6 Months Ended |
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Jun. 30, 2021 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Organization |
NOTE 1 – ORGANIZATION The Company was formed on August 24, 2011 to acquire and manage a portfolio of commercial real estate investments located in the United States. The Company is primarily focused on owning retail properties and targets a portfolio of 100% grocery-anchored properties. The Company has invested in joint ventures and may continue to invest in additional joint ventures or acquire other real estate assets if its management believes the expected returns from those investments exceed that of retail properties. The Company also may invest in real estate-related equity securities of both publicly traded and private real estate companies, as well as commercial mortgage-backed securities.
On February 11, 2019, the Company’s board of directors approved a strategic plan (the “Strategic Plan”) with the goals of providing future liquidity to investors and creating long-term stockholder value. The Strategic Plan centers around owning a portfolio of 100% grocery-anchored properties with lower exposure to big box retailers. As part of this strategy, the Company’s management team and board have completed the sale of 15 properties, including the sale of three properties during January 2020, as further described in Note 4 – “Dispositions,” with the goal of redeploying capital into the acquisition of strategically located grocery-anchored centers. The Company plans to move toward a liquidity event in the future, market conditions permitting, most likely through a listing on a public securities exchange. In connection with the Strategic Plan, the Company’s share repurchase program (as amended, the “SRP”) was amended and restated, effective March 21, 2019, and the Business Management Agreement with the Business Manager was amended and restated on February 11, 2019 to, among other things, eliminate all future acquisition and disposition fees. On March 3, 2020, the Company’s SRP was further amended and restated (the “Third A&R SRP”), which became effective on April 10, 2020, as further described below in Note 3 – “Equity”. The Strategic Plan may evolve or change over time. For example, the Company may decide to focus more on redeveloping existing properties relative to investing in new grocery-anchored centers, depending on such factors, including, but not limited to, market prices for its properties, availability of capital for redevelopment and construction costs. There is no assurance, particularly in light of the COVID-19 pandemic, that the Company will be able to successfully implement the Strategic Plan, including making strategic sales or purchases of properties or listing the Company’s common stock, within the timeframe we expected or would prefer or at all. We expect that no liquidity event will occur before the adverse effects of the COVID-19 pandemic on the economy and the retail commercial real estate market subside. Due to the uncertainty surrounding the COVID-19 pandemic and the need to preserve cash for the payment of operating and other expenses, such as debt payments, the Company stopped paying distributions in the second quarter of 2020 and suspended its DRP and SRP. The suspension of the DRP was effective on June 6, 2020 and the suspension of the SRP was effective on June 26, 2020. On March 5, 2021, as reported in the Company’s Form 8-K filed with the Securities and Exchange Commission on the same date, the Company announced that the Company’s board of directors unanimously approved: (i) an estimated per share net asset value (the “Estimated Per Share NAV”) as of December 31, 2020; (ii) the same per share purchase price for shares issued under the Company’s distribution reinvestment plan (as amended, the “DRP”) beginning with the first distribution payment to stockholders upon resumption of distributions and the DRP until the Company announces a new Estimated Per Share NAV, and (iii) that, in accordance with the SRP, beginning with repurchases when the Company resumes the SRP and until the Company announces a new Estimated Per Share NAV, any shares accepted for ordinary repurchases and “exceptional repurchases” will be repurchased at 80% of the Estimated Per Share NAV. On June 29, 2021, the Company announced the reinstatement, and lifting of the suspension, of its DRP. The effective date of the DRP reinstatement was July 22, 2021. The Company also announced the reinstatement and lifting of the suspension of its share repurchase program and its adoption of the fourth amendment and restatement of the program, with the first repurchase expected to occur on August 16, 2021. See Note 3 – “Equity” for additional details. At June 30, 2021, the Company owned 44 retail properties, totaling 6,470,962 square feet. The properties are located in 21 states. At June 30, 2021, the portfolio had a weighted average physical occupancy of 92.4% and economic occupancy of 93.0%. |
Summary of Significant Accounting Policies |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies |
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Disclosures discussing all significant accounting policies are set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission on March 18, 2021, under the heading Note 2 – “Summary of Significant Accounting Policies.” There have been no changes to the Company’s significant accounting policies during the six months ended June 30, 2021, except as noted below. General The consolidated financial statements have been prepared in accordance with U.S. GAAP and require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. In the opinion of management, all adjustments necessary for a fair statement, in all material respects, of the financial position and results of operations for the periods are presented. Actual results could differ from those estimates. The results of operations for the interim periods are not necessarily indicative of the results for the entire year. Significant Risks and Uncertainties related to COVID-19 Pandemic Currently, one of the most significant risks and uncertainties is the potential further adverse effect of the current pandemic of the novel coronavirus, or COVID-19. A number of our tenants had temporarily closed their stores and requested rent deferral or rent abatement during this pandemic. For amounts billed for the six months ended June 30, 2021, the Company collected over 98% of rent payments originally contracted for in the period as of August 1, 2021. Also, the Company’s deferred rent balance is $1,650 at June 30, 2021, which is significantly lower than the deferred rent balance of $4,457 at December 31, 2020 due primarily to collections during the six months ended June 30, 2021. However, the extent to which the COVID-19 pandemic further impacts the Company’s operations and those of our tenants will depend on future developments, including the impact of the emergence of the Delta variant of COVID-19 in the U.S. The impact cannot be predicted with confidence, including the scope, severity and duration of the pandemic’s variants, the actions taken to contain the pandemic’s variants or mitigate their impact, and the direct and indirect economic effects of the pandemic’s variants and containment measures, among others. Recently Adopted Accounting Pronouncements In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of the effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.
In April 2020, the FASB issued a question-and-answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of COVID-19. Under existing lease guidance, the Company would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated with the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A grants relief to entities, allowing them an election to not evaluate whether lease-related relief that lessors provide to mitigate the economic effects of COVID-19 on lessees is a lease modification under Topic 842, Leases. An entity that makes this election can then elect whether to apply the modification guidance (i.e. assume the relief was always contemplated by the contract or assume the relief was not contemplated by the contract). Both lessees and lessors may make this election. The Company has elected to apply such relief and avail itself of the election to avoid performing a lease by lease analysis. Restricted Cash Amounts included in restricted cash represent those required to be set aside by lenders for real estate taxes, insurance, capital expenditures and tenant improvements on our existing properties. These amounts also include post close escrows for tenant improvements, leasing commissions, master lease, general repairs and maintenance, and are classified as restricted cash on the Company’s consolidated balance sheets.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the Company’s consolidated balance sheets to such amounts shown in the Company’s consolidated statements of cash flows:
|
Equity |
6 Months Ended |
---|---|
Jun. 30, 2021 | |
Equity [Abstract] | |
Equity |
NOTE 3 – EQUITY The Company commenced an initial public “best efforts” offering (the “Offering”) on October 18, 2012, which concluded on October 16, 2015. The Company sold 33,534,022 shares of common stock generating gross proceeds of $834,399 from the Offering. As of June 30, 2021, there were 36,025,578 shares of common stock outstanding including 5,574,215 shares issued through the DRP, net of 3,092,634 shares repurchased through the SRP. The Company provides the following programs to facilitate additional investment in the Company’s shares and to provide limited liquidity for stockholders. Distribution Reinvestment Plan
Through the DRP, the Company provides stockholders with the option to purchase additional shares from the Company by automatically reinvesting cash distributions, subject to certain share ownership restrictions. The Company does not pay any selling commissions or a marketing contribution and due diligence expense allowance in connection with the DRP. Pursuant to the DRP, the price per share for shares of common stock purchased under the DRP is equal to the estimated value of a share, as determined by the Company’s board of directors and reported by the Company from time to time, until the shares become listed for trading, if a listing occurs, assuming that the DRP has not been terminated or suspended in connection with such listing. On June 29, 2021, the Company announced the reinstatement and lifting of the suspension of its DRP. The effective date of the DRP reinstatement was July 22, 2021. There were no distributions reinvested through the DRP during the three months ended June 30, 2021 and 2020 due to the suspension of the DRP discussed in Note 1 – “Organization.” Distributions reinvested through the DRP were $4,547 for the six months ended June 30, 2020. There were no distributions reinvested through the DRP during the six months ended June 30, 2021. Share Repurchase Program
The Company adopted the SRP effective October 18, 2012, under which the Company is authorized to purchase shares from stockholders who purchased their shares from the Company or received their shares through a non-cash transfer and who have held their shares for at least one year. The SRP may be amended or terminated at the Company’s sole discretion. In the case of repurchases made upon the death of a stockholder or qualifying disability (“Exceptional Repurchases”), as defined in the SRP, the one year holding period does not apply. On February 11, 2019, the Company’s board of directors adopted a second amended and restated SRP, effective March 21, 2019, which reduced the price the Company was authorized to make ordinary repurchases from a range of 92.5% to 100% of the “share price” down to 80% of the “share price.” The “share price” is defined in the second amended and restated SRP as an amount equal to the lesser of: (A) $25, as adjusted under certain circumstances, including, among other things, if the applicable shares were purchased from the Company at a discounted price; or (B) the most recently disclosed estimated value per share. On March 3, 2020 the Company’s board of directors adopted the Third A&R SRP. Under the Third A&R SRP, the Company is authorized to make ordinary repurchases and Exceptional Repurchases at a price equal to 80.0% of the “share price,” which is defined in the Third A&R SRP the same way as described above for the second amended and restated SRP. Prior to the amendment, the Company was authorized to make Exceptional Repurchases at a price equal to 100% of the “share price.” The Third A&R SRP provides the Company’s board of directors with the discretion to set the funding limit for share repurchases. The Third A&R SRP limits the dollar amount for any repurchases made by the Company each calendar quarter to an amount equal to a percentage determined in the sole discretion of the board on a quarterly basis that will not be less than 50% of the net proceeds from the DRP during the applicable quarter. As the Company’s board of directors has not authorized distributions since December 2019, and there have been no distributions to reinvest through the DRP, there has been no net proceeds from the DRP available to fund the repurchase of shares by the Company through the SRP. See Note 1 – “Organization” for further discussion on the suspension of the SRP. The Company continues to limit the number of shares repurchased during any calendar year to 5% of the number of shares outstanding on December 31st of the previous calendar year, as adjusted for any stock splits or other combinations. On June 29, 2021, the Company announced the reinstatement and lifting of the suspension of its share repurchase program and its adoption of the fourth amendment and restatement of the program. The effective date of the SRP reinstatement and the Fourth Amended and Restated Share Repurchase Program (the “Fourth SRP”) is August 12, 2021. Pursuant to the Fourth SRP, any written request for treatment as an Exceptional Repurchase due to the death or qualifying disability of an owner that occurred between June 1, 2019 and May 31, 2020 (inclusive) will be timely received by the Company no later than January 31, 2022, and any written request for treatment as an Exceptional Repurchase due to the death or qualifying disability of an owner that occurred between June 1, 2020 and July 31, 2021, (inclusive) will be timely received if received by the Company no later than July 31, 2022. The first repurchase under the SRP following its reinstatement, subject to the funding limit and the other terms and conditions of the SRP, will be on August 16, 2021. If either or both of the aforementioned funding or repurchase limitations prevent the Company from repurchasing all of the shares offered for repurchase during a calendar quarter, the Company will repurchase shares on a pro rata basis within each of the following categories up to the repurchase limitations in the following order: (a) first, all Exceptional Repurchases and (b) second, all ordinary repurchases. The SRP will immediately terminate if the Company’s shares become listed for trading on a national securities exchange. In addition, the Company’s board of directors, in its sole discretion, may, at any time, amend, suspend or terminate the SRP.
Repurchases through the SRP were zero and $25 for the three months ended June 30, 2021 and 2020, respectively. Repurchases through the SRP were zero and $127 for the six months ended June 30, 2021 and 2020, respectively. There was no liability related to the SRP at June 30, 2021 or December 31, 2020 due to the suspension of the SRP. See Note 1 – “Organization” for further discussion on the suspension of the SRP. |
Dispositions |
6 Months Ended |
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Jun. 30, 2021 | |
Assets Of Disposal Group Including Discontinued Operation [Abstract] | |
Dispositions |
NOTE 4 – DISPOSITIONS In connection with the Strategic Plan, the Company sold three properties in January 2020. The Company collected proceeds of $37,255 net of selling costs upon completion of the three sales. |
Leases |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases |
NOTE 5 – LEASES The Company is lessor under approximately 700 retail operating leases. The remaining lease terms for the Company’s leases range from less than one year to 16 years. The Company considers the date on which it makes a leased space available to a lessee as the commencement date of the lease. At commencement, the Company determines the lease classification utilizing the classification tests under ASC 842. Options to extend a lease are included in the lease term when it is reasonably certain that the tenant will exercise its option to extend. Termination penalties are included in income when there is a termination agreement, all the conditions of the agreement have been met and amounts due are considered collectible. Such termination fees are recognized on a straight-line basis over the remaining lease term in rental income. If an operating lease is modified and the modification is not accounted for as a separate contract, the Company accounts for the modification as if it were a termination of the existing lease and the creation of a new lease. The Company considers any prepaid or accrued rentals relating to the original lease as part of the lease payments for the modified lease. Most of the revenue from the Company’s properties consists of rents received under long-term operating leases. Most leases require the tenant to pay fixed base rent paid monthly in advance, and to reimburse the Company for the tenant’s pro rata share of certain operating expenses including real estate taxes, special assessments, insurance, utilities, common area maintenance, management fees, and certain building repairs paid by the Company and recoverable under the terms of the lease. Under these leases, the Company pays all expenses and is reimbursed by the tenant for the tenant’s pro rata share of recoverable expenses paid.
Certain other tenants are subject to net leases which provide that the tenant is responsible for fixed base rent as well as all costs and expenses associated with occupancy. Under net leases where all expenses are paid directly by the tenant rather than the landlord, such expenses are not included in the consolidated statements of operations and comprehensive income (loss). Under leases where all expenses are paid by the Company, subject to reimbursement by the tenant, the expenses are included within property operating expenses. As of January 1, 2019, the date on which the Company adopted the new leasing standard, reimbursements for common area maintenance are considered non-lease components that are permitted to be combined with rental income. The combined lease component and reimbursements for insurance and taxes are reported as rental income on the consolidated statements of operations and comprehensive income (loss). Rental income related to the Company's operating leases is comprised of the following:
The Company continues to monitor the impact of the COVID-19 pandemic on the collectability of lease obligations. As of June 30, 2021, the Company’s accounts and rent receivable, net balance was $19,110, which is net of an allowance for bad debts of $2,723 and includes $1,650 of deferred rent receivable related to COVID-19 agreements negotiated with tenants. Such agreements generally allow tenants to defer the payment of a portion of rent with no substantive changes to the consideration in the original lease. Consistent with the guidance in the Lease Modification Q&A issued by the FASB, such deferrals affect the timing, but not the amount, of the lease obligations. The Company is accounting for these deferrals as if no changes to the lease were made. Under this accounting, the Company increases its rent receivable as tenant obligations accrue and continues to recognize rental income. |
Acquired Intangible Assets and Liabilities |
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Goodwill And Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquired Intangible Assets and Liabilities |
NOTE 6 – ACQUIRED INTANGIBLE ASSETS AND LIABILITIES The following table summarizes the Company’s identified intangible assets and liabilities as of June 30, 2021 and December 31, 2020:
The portion of the purchase price allocated to acquired above market lease value and acquired below market lease value is amortized on a straight-line basis over the term of the related lease as an adjustment to rental income. For below market lease values, the amortization period includes any renewal periods with fixed rate renewals. The portion of the purchase price allocated to acquired in-place lease value is amortized on a straight-line basis over the acquired leases’ weighted average remaining term. Amortization pertaining to acquired in-place lease value, above market lease value and below market lease value is summarized below:
Estimated amortization of the respective intangible lease assets and liabilities as of June 30, 2021 for each of the five succeeding years and thereafter is as follows:
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Debt and Derivative Instruments |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt and Derivative Instruments |
NOTE 7 – DEBT AND DERIVATIVE INSTRUMENTS
As of June 30, 2021 and December 31, 2020, the Company had the following mortgages and credit facility payable:
The Company estimates the fair value of its total debt by discounting the future cash flows of each instrument at rates currently offered for similar debt instruments of comparable maturities by the Company’s lenders using Level 3 inputs. The carrying value of the Company’s debt excluding mortgage premium and unamortized debt issuance costs was $611,211 and $631,017 as of June 30, 2021 and December 31, 2020, respectively, and its estimated fair value was $605,041 and $625,751 as of June 30, 2021 and December 31, 2020, respectively. As of June 30, 2021, scheduled principal payments and maturities on the Company’s debt were as follows:
Credit Facility Payable The Company’s credit facility (the “Credit Facility”) consists of a $200,000 revolving credit facility (the “Revolving Credit Facility”) and a $150,000 term loan (the “Term Loan”) and has an accordion feature that allows for an increase in available borrowings up to $700,000, subject to certain conditions. At June 30, 2021, the Company had $109,000 outstanding under the Revolving Credit Facility and $150,000 outstanding under the Term Loan. At June 30, 2021 the interest rate on the Revolving Credit Facility and the Term Loan was 1.90% and 4.29%, respectively. The Revolving Credit Facility matures on August 1, 2022, and the Company has the option to extend the maturity date for one additional year subject to the payment of an extension fee and certain other conditions under the Company’s control. The Term Loan matures on August 1, 2023. As of June 30, 2021, the Company had a maximum amount of $91,000 available for borrowing under the Revolving Credit Facility, subject to the terms and conditions, including compliance with the covenants which could further limit the amount available, of the Amended and Restated Credit Agreement that governs the Credit Facility. The Company’s performance of the obligations under the Credit Facility, including the payment of any outstanding indebtedness under the Credit Facility, is guaranteed by certain subsidiaries of the Company, including each of the subsidiaries of the Company which owns or leases any of the properties included in the pool of unencumbered properties comprising the borrowing base. Additional properties will be added to and removed from the pool from time to time to support amounts borrowed under the Credit Facility. At June 30, 2021, there were 27 properties included in the pool of unencumbered properties.
The Credit Facility requires compliance with certain covenants, including a minimum tangible net worth requirement, a distribution limitation, restrictions on indebtedness and investment restrictions, as defined. It also contains customary default provisions including the failure to comply with the Company's covenants and the failure to pay when amounts outstanding under the Credit Facility become due. On September 29, 2020, the Company entered into a first amendment to the Company’s Amended and Restated Credit Agreement dated as of August 1, 2018 with KeyBank National Association individually and as administrative agent, KeyBanc Capital Markets Inc., PNC Capital Markets LLC and Merrill Lynch Pierce, Fenner & Smith Incorporated (now BofA Securities, Inc.) as joint lead arrangers, and other lenders from time to time parties to the agreement. This amendment provided a waiver of the minimum tangible net worth requirement for three consecutive quarters beginning with the quarter ended September 30, 2020. In exchange, our leverage ratio may be increased only to 62.5% (formerly 65%) for two consecutive fiscal quarters two times prior to the facility termination date, the Company was restricted, during this waiver period, from making any share repurchases or distributions without lender approval, a LIBOR floor of 25 basis points will remain in effect for the remainder of the term, and the Company paid a set fee to the arranging bank and all the participating lenders. As of June 30, 2021, the Company is in compliance with all financial covenants related to the Credit Facility as amended. Mortgages Payable The mortgage loans require compliance with certain covenants, such as debt service ratios, investment restrictions and distribution limitations. As of June 30, 2021, the Company was current on all of its debt service payments and except for two mortgage loans with aggregate unpaid principal balances of $73,550 that have covenant violations which only required cash maintenance accounts be established for their two mortgaged properties, all other mortgage loans were in compliance with their financial covenants. All of the Company’s mortgage loans are secured by first mortgages on the respective real estate assets. As of June 30, 2021, the weighted average years to maturity for the Company’s mortgages payable was 2.6 years. For mortgage loans maturing in the next twelve months, the Company intends to either refinance such mortgage loans or repay such mortgage loans with cash on hand or use proceeds available under the Revolving Credit Facility. Interest Rate Swap Agreements The Company entered into interest rate swaps to fix certain of its floating LIBOR based debt under variable rate loans to a fixed rate to manage its risk exposure to interest rate fluctuations. The Company will generally match the maturity of the underlying variable rate debt with the maturity date on the interest swap. See Note 14 – "Fair Value Measurements" for further information.
The following table summarizes the Company’s interest rate swap contracts outstanding as of June 30, 2021.
(a) Receive floating rate index based upon one-month LIBOR. At June 30, 2021, the one-month LIBOR was 0.10%.
The table below presents the effect of the Company’s derivative financial instruments on the consolidated statements of operations and comprehensive income (loss) for the three and six months ended June 30, 2021 and 2020.
The total amount of interest expense presented on the consolidated statements of operations and comprehensive income (loss) was $5,801 and $6,279, for the three months ended June 30, 2021 and 2020, respectively. The total amount of interest expense presented on the consolidated statements of operations and comprehensive income (loss) was $11,843 and $12,777 for the six months ended June 30, 2021 and 2020, respectively. The location of the net gain or loss reclassified into income from accumulated other comprehensive income (loss) is reported in interest expense on the consolidated statements of operations and comprehensive income (loss). The amount that is expected to be reclassified from accumulated other comprehensive income (loss) into income in the next twelve months is $7,007. |
Distributions |
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Distributions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions |
NOTE 8 – DISTRIBUTIONS In 2020, due to the uncertainty surrounding the COVID-19 pandemic and the need to preserve cash for the payment of operating and other expenses, during the second quarter the Company’s board of directors rescinded the distribution that was declared in the first quarter of 2020, and the Company did not declare any additional distributions until June 29, 2021, when the Company declared a distribution to stockholders of record as of June 30, 2021 in the amount of $0.135600 per share, that will be paid on or about July 26, 2021.
The table below presents the distributions paid, declared and rescinded during the three and six months ended June 30, 2021 and 2020.
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Earnings (Loss) per Share |
6 Months Ended |
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Jun. 30, 2021 | |
Earnings Per Share [Abstract] | |
Earnings (Loss) per Share |
NOTE 9 – EARNINGS (LOSS) PER SHARE Basic earnings (loss) per share (“EPS”) is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period (the “common shares”). Diluted EPS is computed by dividing net income (loss) by the common shares plus common share equivalents. The Company excludes antidilutive restricted shares and units from the calculation of weighted-average shares for diluted EPS. As a result of a net loss in the three and six months ended June 30, 2021, 4,791 shares and 4,303 shares, respectively, were excluded from the computation of diluted EPS, because they would have been antidilutive. As a result of the net loss in the three and six months ended June 30, 2020, 6,892 shares and 6,667 shares, respectively, were excluded from the computation of diluted EPS, because they would have been antidilutive. |
Commitments and Contingencies |
6 Months Ended |
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Jun. 30, 2021 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies |
NOTE 10 – COMMITMENTS AND CONTINGENCIES The Company may be subject, from time to time, to various legal proceedings and claims that arise in the ordinary course of business. While the resolution of these matters cannot be predicted with certainty, management believes, based on currently available information, that the final outcome of such matters will not have a material adverse effect on the consolidated financial statements of the Company. |
Equity-Based Compensation |
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||
Equity-Based Compensation |
NOTE 11 – EQUITY-BASED COMPENSATION Under the Company’s Employee and Director Restricted Share Plan (“RSP”), restricted shares and restricted share units generally vest over a one to three year vesting period from the date of the grant, subject to the specific terms of the grant. In accordance with the RSP, restricted shares and restricted share units are issued to non-employee directors as compensation. Each restricted share and restricted share unit entitles the holder to receive one common share when it vests. Restricted shares are included in common stock outstanding on the date of vesting. Restricted share units are included in common stock outstanding on the date they are transferred to the non-employee director or their beneficiary. The grant-date value of the restricted shares and restricted share units is amortized over the vesting period representing the requisite service period. Compensation expense associated with the restricted shares and restricted share units issued to the non-employee directors was $14 and $32, in the aggregate, for the three and six months ended June 30, 2021, respectively. As of June 30, 2021, the Company had $35 of unrecognized compensation expense related to the unvested restricted shares and restricted share units, in the aggregate. The weighted average remaining period that compensation expense related to unvested restricted shares and restricted share units will be recognized is 1.4 years. The total fair value at the vesting date for restricted shares and restricted share units that vested during both the three and six months ended June 30, 2021 was $54. The total fair value at the vesting date for restricted shares and restricted share units that vested during both the three and six months ended June 30, 2020 was $46. A summary table of the status of the restricted shares and restricted share units is presented below:
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Segment Reporting |
6 Months Ended |
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Jun. 30, 2021 | |
Segment Reporting [Abstract] | |
Segment Reporting |
NOTE 12 – SEGMENT REPORTING The Company has one reportable segment as defined by U.S. GAAP, retail real estate, for the six months ended June 30, 2021 and 2020.
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Transactions with Related Parties |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Transactions With Related Parties |
NOTE 13 – TRANSACTIONS WITH RELATED PARTIES
The following table summarizes the Company’s related party transactions for the three and six months ended June 30, 2020. Certain compensation and fees payable to the Business Manager for services provided to the Company are limited to maximum amounts.
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Fair Value Measurements |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements |
NOTE 14 – FAIR VALUE MEASUREMENTS Fair Value Hierarchy The Company defines fair value based on the price that it believes would be received upon sale of an asset or the exit price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value. The fair value hierarchy consists of three broad levels, which are described below:
The Company has estimated the fair value of its financial and non-financial instruments using available market information and valuation methodologies the Company believes to be appropriate for these purposes. Recurring Fair Value Measurements
For assets and liabilities measured at fair value on a recurring basis, the table below presents the fair value of the Company’s cash flow hedges as well as their classification on the consolidated balance sheets as of June 30, 2021 and December 31, 2020, respectively.
The fair value of derivative instruments was estimated based on data observed in the forward yield curve which is widely observed in the marketplace. The Company also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the counterparty's nonperformance risk in the fair value measurements which utilize Level 3 inputs, such as estimates of current credit spreads. The Company has determined that the credit valuation adjustments are not significant to the overall valuation of its derivative interest rate swap agreements and therefore has classified these in Level 2 of the hierarchy. |
Subsequent Events |
6 Months Ended |
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Jun. 30, 2021 | |
Subsequent Events [Abstract] | |
Subsequent Events |
NOTE 15 – SUBSEQUENT EVENTS In connection with the preparation of its financial statements, the Company has evaluated events that occurred subsequent to June 30, 2021 through the date on which these financial statements were issued to determine whether any of these events required disclosure in the financial statements. Repayment of Mortgage On July 6, 2021, the Company drew $8,000 on the Revolving Credit Facility and used cash on hand to repay indebtedness secured by a mortgage on the Fairgrounds Crossing property with an outstanding principal balance of $13,453. Mortgage Paydown Requirements Two of the Company’s mortgage loans, on Marketplace at Tech Center and Coastal North Town Center, respectively, each have covenants that require the Company to calculate an assumed debt service coverage ratio (the “Assumed DSCR”) within 30 days of August 1, 2021 and to promptly thereafter make principal paydowns or deposit additional collateral to achieve a minimum Assumed DSCR of at least 0.975 to 1.00. The minimum assumed debt service coverage ratio is calculated by dividing (1) adjusted net cash flow by (2) the aggregate principal and interest projected to be due and payable over the twelve month period subsequent to the date of calculation based upon an imputed interest rate equal to ten percent (10%). The Company expects to pay a combined total of approximately $15,000 to achieve the minimum Assumed DSCR at the two properties. The Company intends to finance these principal paydowns by drawing on the Credit Facility. |
Summary of Significant Accounting Policies (Policies) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
General |
General The consolidated financial statements have been prepared in accordance with U.S. GAAP and require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. In the opinion of management, all adjustments necessary for a fair statement, in all material respects, of the financial position and results of operations for the periods are presented. Actual results could differ from those estimates. The results of operations for the interim periods are not necessarily indicative of the results for the entire year. |
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Significant Risks and Uncertainties related to COVID-19 Pandemic |
Significant Risks and Uncertainties related to COVID-19 Pandemic Currently, one of the most significant risks and uncertainties is the potential further adverse effect of the current pandemic of the novel coronavirus, or COVID-19. A number of our tenants had temporarily closed their stores and requested rent deferral or rent abatement during this pandemic. For amounts billed for the six months ended June 30, 2021, the Company collected over 98% of rent payments originally contracted for in the period as of August 1, 2021. Also, the Company’s deferred rent balance is $1,650 at June 30, 2021, which is significantly lower than the deferred rent balance of $4,457 at December 31, 2020 due primarily to collections during the six months ended June 30, 2021. However, the extent to which the COVID-19 pandemic further impacts the Company’s operations and those of our tenants will depend on future developments, including the impact of the emergence of the Delta variant of COVID-19 in the U.S. The impact cannot be predicted with confidence, including the scope, severity and duration of the pandemic’s variants, the actions taken to contain the pandemic’s variants or mitigate their impact, and the direct and indirect economic effects of the pandemic’s variants and containment measures, among others. |
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Recently Adopted Accounting Pronouncements |
Recently Adopted Accounting Pronouncements In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of the effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.
In April 2020, the FASB issued a question-and-answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of COVID-19. Under existing lease guidance, the Company would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated with the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A grants relief to entities, allowing them an election to not evaluate whether lease-related relief that lessors provide to mitigate the economic effects of COVID-19 on lessees is a lease modification under Topic 842, Leases. An entity that makes this election can then elect whether to apply the modification guidance (i.e. assume the relief was always contemplated by the contract or assume the relief was not contemplated by the contract). Both lessees and lessors may make this election. The Company has elected to apply such relief and avail itself of the election to avoid performing a lease by lease analysis. |
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Restricted Cash |
Restricted Cash Amounts included in restricted cash represent those required to be set aside by lenders for real estate taxes, insurance, capital expenditures and tenant improvements on our existing properties. These amounts also include post close escrows for tenant improvements, leasing commissions, master lease, general repairs and maintenance, and are classified as restricted cash on the Company’s consolidated balance sheets.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the Company’s consolidated balance sheets to such amounts shown in the Company’s consolidated statements of cash flows:
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Summary of Significant Accounting Policies (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Cash, Cash Equivalents and Restricted Cash |
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the Company’s consolidated balance sheets to such amounts shown in the Company’s consolidated statements of cash flows:
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Leases (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Rental Income Related to Operating Leases |
Rental income related to the Company's operating leases is comprised of the following:
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Acquired Intangible Assets and Liabilities (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill And Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Intangible Assets and Liabilities |
The following table summarizes the Company’s identified intangible assets and liabilities as of June 30, 2021 and December 31, 2020:
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Schedule of Amortization of Acquired In Place Lease Value, Above Market and Below Market Lease Values |
Amortization pertaining to acquired in-place lease value, above market lease value and below market lease value is summarized below:
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Schedule of Estimated Amortization of Intangible Lease Assets and Liabilities |
Estimated amortization of the respective intangible lease assets and liabilities as of June 30, 2021 for each of the five succeeding years and thereafter is as follows:
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Debt and Derivative Instruments (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Mortgages and Credit Facilities Payable |
As of June 30, 2021 and December 31, 2020, the Company had the following mortgages and credit facility payable:
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Schedule of Principal Payments and Maturities of Company's Debt |
As of June 30, 2021, scheduled principal payments and maturities on the Company’s debt were as follows:
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Summary of Interest Rate Swap Contracts Outstanding |
The following table summarizes the Company’s interest rate swap contracts outstanding as of June 30, 2021.
(a) Receive floating rate index based upon one-month LIBOR. At June 30, 2021, the one-month LIBOR was 0.10%. |
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Schedule of Effect of Derivatives on Consolidated Statements of Operations and Other Comprehensive Loss | The table below presents the effect of the Company’s derivative financial instruments on the consolidated statements of operations and comprehensive income (loss) for the three and six months ended June 30, 2021 and 2020.
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Distributions (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Distributions Paid, Declared and Rescinded |
The table below presents the distributions paid, declared and rescinded during the three and six months ended June 30, 2021 and 2020.
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Equity-Based Compensation (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||
Summary of Restricted Shares and Restricted Share Units |
A summary table of the status of the restricted shares and restricted share units is presented below:
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Transactions with Related Parties (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Related Party Transactions |
The following table summarizes the Company’s related party transactions for the three and six months ended June 30, 2020. Certain compensation and fees payable to the Business Manager for services provided to the Company are limited to maximum amounts.
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Fair Value Measurements (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value Assets and Liabilities Measured on a Recurring Basis |
For assets and liabilities measured at fair value on a recurring basis, the table below presents the fair value of the Company’s cash flow hedges as well as their classification on the consolidated balance sheets as of June 30, 2021 and December 31, 2020, respectively.
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Organization (Narrative) (Details) |
1 Months Ended | 6 Months Ended | 12 Months Ended |
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Jan. 31, 2020
Property
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Jun. 30, 2021
ft²
Property
State
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Sep. 30, 2020
Property
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Organization [Line Items] | |||
Target percentage of grocery-anchored property | 100.00% | ||
Number of properties sold | 3 | 15 | |
Number of retail properties owned | 44 | ||
Square footage of real estate properties owned | ft² | 6,470,962 | ||
Number of states in which company owns real estate properties | State | 21 | ||
Weighted average physical occupancy rate of property portfolio | 92.40% | ||
Weighted average economic occupancy rate of property portfolio | 93.00% | ||
Share Repurchase Program [Member] | |||
Organization [Line Items] | |||
Suspension effective date | Jun. 26, 2020 | ||
Percentage of share price on repurchase of shares | 80.00% | ||
DRP [Member] | |||
Organization [Line Items] | |||
Suspension effective date | Jun. 06, 2020 |
Summary of Significant Accounting Policies (Narrative) (Details) - COVID-19 [Member] - USD ($) $ in Thousands |
Aug. 01, 2021 |
Jun. 30, 2021 |
Dec. 31, 2020 |
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Acquired Finite Lived Intangible Assets [Line Items] | |||
Deferred rent receivable | $ 1,650 | $ 4,457 | |
Subsequent Event [Member] | |||
Acquired Finite Lived Intangible Assets [Line Items] | |||
Percentage of rent payments collected | 98.00% |
Summary of Significant Accounting Policies (Reconciliation of Cash, Cash Equivalents and Restricted Cash) (Details) - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
Jun. 30, 2020 |
Dec. 31, 2019 |
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Accounting Policies [Abstract] | ||||
Cash and cash equivalents | $ 11,290 | $ 12,906 | $ 31,624 | |
Restricted cash | 4,270 | 1,079 | 1,073 | |
Total cash, cash equivalents, and restricted cash | $ 15,560 | $ 13,985 | $ 32,697 | $ 5,533 |
Equity (Narrative) (Details) - USD ($) |
3 Months Ended | 6 Months Ended | 36 Months Ended | 104 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Oct. 16, 2015 |
Jun. 30, 2021 |
Dec. 31, 2020 |
Mar. 03, 2020 |
Mar. 21, 2019 |
Mar. 20, 2019 |
|
Equity [Line Items] | ||||||||||
Common stock, shares sold | 36,025,578 | 36,025,578 | 33,534,022 | 36,025,578 | 36,022,368 | |||||
Proceeds from offering | $ 834,399,000 | |||||||||
Common stock, shares outstanding | 36,025,578 | 36,025,578 | 36,025,578 | 36,022,368 | ||||||
Distribution reinvestment plan, shares | 5,574,215 | |||||||||
Shares repurchased through the share repurchase program | 3,092,634 | |||||||||
Distribution reinvested | $ 4,547,000 | |||||||||
Stock repurchase program, amount | $ 0 | $ 25,000 | $ 0 | 127,000 | ||||||
Liabilities | 708,345,000 | $ 708,345,000 | $ 708,345,000 | $ 732,091,000 | ||||||
Third Amended and Restated Share Repurchase Program [Member] | ||||||||||
Equity [Line Items] | ||||||||||
Limit on share repurchases as a percentage of proceeds of the distribution reinvestment program | 50.00% | |||||||||
Description of share repurchase program | Under the Third A&R SRP, the Company is authorized to make ordinary repurchases and Exceptional Repurchases at a price equal to 80.0% of the “share price,” which is defined in the Third A&R SRP the same way as described above for the second amended and restated SRP. Prior to the amendment, the Company was authorized to make Exceptional Repurchases at a price equal to 100% of the “share price.” The Third A&R SRP provides the Company’s board of directors with the discretion to set the funding limit for share repurchases. The Third A&R SRP limits the dollar amount for any repurchases made by the Company each calendar quarter to an amount equal to a percentage determined in the sole discretion of the board on a quarterly basis that will not be less than 50% of the net proceeds from the DRP during the applicable quarter. As the Company’s board of directors has not authorized distributions since December 2019, and there have been no distributions to reinvest through the DRP, there has been no net proceeds from the DRP available to fund the repurchase of shares by the Company through the SRP. See Note 1 – “Organization” for further discussion on the suspension of the SRP. The Company continues to limit the number of shares repurchased during any calendar year to 5% of the number of shares outstanding on December 31st of the previous calendar year, as adjusted for any stock splits or other combinations. If either or both of the repurchase limitations prevent the Company from repurchasing all of the shares offered for repurchase during a calendar quarter, the Company will repurchase shares, on a pro rata basis within each category below, in accordance with the repurchase limitations in the following order: (a) first, all Exceptional Repurchases and (b) second, all ordinary repurchases. | |||||||||
Third Amended and Restated Share Repurchase Program [Member] | Exceptional Repurchases [Member] | ||||||||||
Equity [Line Items] | ||||||||||
Percentage of share price on repurchase of shares | 80.00% | |||||||||
Repurchase of Shares Owned for One Year [Member] | ||||||||||
Equity [Line Items] | ||||||||||
Percentage of share price on repurchase of shares | 92.50% | |||||||||
Repurchase of Shares Owned for Four Years [Member] | ||||||||||
Equity [Line Items] | ||||||||||
Percentage of share price on repurchase of shares | 100.00% | |||||||||
Prior Share Repurchase Agreement [Member] | Exceptional Repurchases [Member] | ||||||||||
Equity [Line Items] | ||||||||||
Percentage of share price on repurchase of shares | 100.00% | |||||||||
Stock Repurchase Program [Member] | ||||||||||
Equity [Line Items] | ||||||||||
Liabilities | 0 | $ 0 | $ 0 | $ 0 | ||||||
Minimum [Member] | ||||||||||
Equity [Line Items] | ||||||||||
Stock repurchase program, to be held | 1 year | |||||||||
Maximum [Member] | Second Amended and Restated Share Repurchase Program [Member] | ||||||||||
Equity [Line Items] | ||||||||||
Stock repurchase program per share amount | $ 25 | |||||||||
Percentage of share price on repurchase of shares | 80.00% | |||||||||
Maximum [Member] | Third Amended and Restated Share Repurchase Program [Member] | ||||||||||
Equity [Line Items] | ||||||||||
Percentage of prior fiscal year end outstanding shares that may be repurchased | 5.00% | |||||||||
DRP [Member] | ||||||||||
Equity [Line Items] | ||||||||||
Distribution reinvested | $ 0 | $ 0 | $ 0 | $ 4,547,000 | ||||||
Net proceeds from distribution reinvestment | $ 0 |
Dispositions - Additional Information (Details) $ in Thousands |
1 Months Ended | 6 Months Ended | 12 Months Ended |
---|---|---|---|
Jan. 31, 2020
USD ($)
Property
|
Jun. 30, 2020
USD ($)
|
Sep. 30, 2020
Property
|
|
Assets Of Disposal Group Including Discontinued Operation [Abstract] | |||
Number of properties sold | Property | 3 | 15 | |
Cash proceeds from sale of property | $ | $ 37,255 | $ 37,255 |
Leases - Additional Information (Detail) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2021
USD ($)
OperatingLease
|
Dec. 31, 2020
USD ($)
|
|
Operating Leased Assets [Line Items] | ||
Number of retail operating leases | OperatingLease | 700 | |
Accounts and rent receivable, net | $ 19,110 | $ 21,851 |
COVID-19 [Member] | ||
Operating Leased Assets [Line Items] | ||
Accounts and rent receivable, net | 19,110 | |
Allowance for bad debts | 2,723 | |
Deferred rent receivable | $ 1,650 | $ 4,457 |
Minimum [Member] | ||
Operating Leased Assets [Line Items] | ||
Lessor, operating leases, remaining lease term | 1 year | |
Maximum [Member] | ||
Operating Leased Assets [Line Items] | ||
Lessor, operating leases, remaining lease term | 16 years |
Leases - Summary of Rental Income Related to Operating Leases (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|||
Operating Leases Lease Income [Abstract] | ||||||
Rental income - fixed payments | $ 23,432 | $ 20,938 | $ 47,321 | $ 44,968 | ||
Rental income - variable payments | [1] | 5,776 | 5,005 | 11,717 | 11,080 | |
Amortization of acquired market leases, net | 164 | 233 | 334 | 828 | ||
Rental income | $ 29,372 | $ 26,176 | $ 59,372 | $ 56,876 | ||
|
Acquired Intangible Assets and Liabilities (Schedule of Intangible Assets and Liabilities) (Details) - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
---|---|---|
Intangible assets: | ||
Accumulated amortization | $ (137,997) | $ (131,121) |
Acquired lease intangibles, net | 64,663 | 71,539 |
Intangible liabilities: | ||
Acquired below market lease value | 70,260 | 70,260 |
Accumulated amortization | (30,410) | (28,602) |
Acquired below market lease intangibles, net | 39,850 | 41,658 |
Acquired in-place lease value [Member] | ||
Intangible assets: | ||
Acquired intangible assets | 156,918 | 156,918 |
Acquired lease intangibles, net | 42,309 | |
Acquired above market lease value [Member] | ||
Intangible assets: | ||
Acquired intangible assets | 45,742 | $ 45,742 |
Acquired lease intangibles, net | $ 22,354 |
Acquired Intangible Assets and Liabilities (Schedule of Amortization of Acquired In Place Lease Value, Above Market and Below Market Lease Values) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
Acquired Finite Lived Intangible Assets [Line Items] | ||||
Amortization recorded as a (reduction) increase to rental income | $ 164 | $ 233 | $ 334 | $ 828 |
Acquired in-place lease value [Member] | ||||
Acquired Finite Lived Intangible Assets [Line Items] | ||||
Amortization recorded as amortization expense | 2,650 | 3,305 | 5,402 | 7,033 |
Acquired above market lease value [Member] | ||||
Acquired Finite Lived Intangible Assets [Line Items] | ||||
Amortization recorded as a (reduction) increase to rental income | (736) | (746) | (1,474) | (1,529) |
Acquired below market lease value [Member] | ||||
Acquired Finite Lived Intangible Assets [Line Items] | ||||
Amortization recorded as a (reduction) increase to rental income | $ 900 | $ 979 | $ 1,808 | $ 2,357 |
Acquired Intangible Assets and Liabilities (Schedule of Estimated Amortization of Intangible Assets and Liabilities) (Details) - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
---|---|---|
Future amortization for acquired in-place and above market lease assets: | ||
Acquired lease intangibles, net | $ 64,663 | $ 71,539 |
Future amortization for below market lease liabilities: | ||
2021 (remainder of year) | 1,779 | |
2022 | 3,366 | |
2023 | 3,108 | |
2024 | 2,933 | |
2025 | 2,741 | |
Thereafter | 25,923 | |
Total | 39,850 | |
Acquired in-place lease value [Member] | ||
Future amortization for acquired in-place and above market lease assets: | ||
2021 (remainder of year) | 4,826 | |
2022 | 7,599 | |
2023 | 6,397 | |
2024 | 5,412 | |
2025 | 3,620 | |
Thereafter | 14,455 | |
Acquired lease intangibles, net | 42,309 | |
Above Market Leases [Member] | ||
Future amortization for acquired in-place and above market lease assets: | ||
2021 (remainder of year) | 1,465 | |
2022 | 2,649 | |
2023 | 2,463 | |
2024 | 2,296 | |
2025 | 2,030 | |
Thereafter | 11,451 | |
Acquired lease intangibles, net | $ 22,354 |
Debt and Derivative Instruments (Schedule of Mortgages and Credit Facility Payable) (Details) - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
---|---|---|
Mortgage Loans On Real Estate [Line Items] | ||
Mortgages payable | $ 352,211 | $ 416,017 |
Credit facility payable | 259,000 | 215,000 |
Total debt before unamortized mortgage premiums and debt issuance costs including impact of interest rate swaps | 611,211 | 631,017 |
Add: Unamortized mortgage premiums | 115 | 419 |
Less: Unamortized debt issuance costs | (2,072) | (2,718) |
Total debt | $ 609,254 | $ 628,718 |
Mortgages Payable, Weighted Average Interest Rate | 3.65% | 3.69% |
Credit Facilities Payable, Weighted Average Interest Rate | 3.28% | 3.89% |
Total debt before unamortized mortgage premiums and debt issuance costs including impact of interest rate swaps, Weighted Average Interest Rate | 3.49% | 3.76% |
Fixed rate mortgages payable [Member] | ||
Mortgage Loans On Real Estate [Line Items] | ||
Mortgages payable | $ 138,433 | $ 163,738 |
Mortgages Payable, Weighted Average Interest Rate | 4.04% | 4.25% |
Variable rate mortgages payable with swap agreements [Member] | ||
Mortgage Loans On Real Estate [Line Items] | ||
Mortgages payable | $ 213,094 | $ 251,595 |
Mortgages Payable, Weighted Average Interest Rate | 3.40% | 3.33% |
Variable rate mortgages payable without swap agreements [Member] | ||
Mortgage Loans On Real Estate [Line Items] | ||
Mortgages payable | $ 684 | $ 684 |
Mortgages Payable, Weighted Average Interest Rate | 1.69% | 1.75% |
Debt and Derivative Instruments (Narrative) (Details) |
3 Months Ended | 6 Months Ended | |||||
---|---|---|---|---|---|---|---|
Sep. 29, 2020 |
Jun. 30, 2021
USD ($)
|
Jun. 30, 2020
USD ($)
|
Jun. 30, 2021
USD ($)
Property
|
Jun. 30, 2020
USD ($)
|
Dec. 31, 2020
USD ($)
|
Sep. 30, 2020 |
|
Debt Instrument [Line Items] | |||||||
Debt principal balance | $ 611,211,000 | $ 611,211,000 | $ 631,017,000 | ||||
Estimated fair value of debt | 605,041,000 | 605,041,000 | 625,751,000 | ||||
Outstanding line of credit | 259,000,000 | 259,000,000 | $ 215,000,000 | ||||
Outstanding balance repaid | 8,097,000 | $ 43,022,000 | |||||
Interest expense | 5,801,000 | $ 6,279,000 | 11,843,000 | $ 12,777,000 | |||
Amount expected to be reclassified from accumulated other comprehensive income (loss) into income in the next twelve months | $ 7,007,000 | ||||||
Mortgages Payable [Member] | |||||||
Debt Instrument [Line Items] | |||||||
Debt, covenant compliance | the Company was current on all of its debt service payments and except for two mortgage loans with aggregate unpaid principal balances of $73,550 that have covenant violations which only required cash maintenance accounts be established for their two mortgaged properties, all other mortgage loans were in compliance with their financial covenants. | ||||||
Weighted Average Years to Maturity | 2 years 7 months 6 days | ||||||
Aggregate unpaid principal balances for mortgage loans with cash maintenance accounts for financial covenant violations | 73,550,000 | $ 73,550,000 | |||||
Revolving Credit Facility [Member] | |||||||
Debt Instrument [Line Items] | |||||||
Credit facility, maximum borrowing capacity | 200,000,000 | 200,000,000 | |||||
Line of credit accordion feature to increase available borrowings | 700,000,000 | 700,000,000 | |||||
Outstanding line of credit | 109,000,000 | $ 109,000,000 | |||||
Credit facility, interest rate | 1.90% | ||||||
Credit facility, maturity date | Aug. 01, 2022 | ||||||
Line of credit facility, expiration date, extension period | 1 year | ||||||
Revolving Credit Facility [Member] | Maximum [Member] | |||||||
Debt Instrument [Line Items] | |||||||
Credit facility available for borrowing | 91,000,000 | $ 91,000,000 | |||||
Term Loan [Member] | |||||||
Debt Instrument [Line Items] | |||||||
Credit facility, maximum borrowing capacity | 150,000,000 | 150,000,000 | |||||
Outstanding line of credit | $ 150,000,000 | $ 150,000,000 | |||||
Credit facility, interest rate | 4.29% | ||||||
Credit facility, maturity date | Aug. 01, 2023 | ||||||
Credit Facility [Member] | |||||||
Debt Instrument [Line Items] | |||||||
Number of properties pledged as collateral | Property | 27 | ||||||
Debt, covenant compliance | the Company is in compliance with all financial covenants related to the Credit Facility as amended. | ||||||
Maximum leverage ratio | 65.00% | 62.50% | |||||
Credit Facility [Member] | LIBOR [Member] | |||||||
Debt Instrument [Line Items] | |||||||
LIBOR floor rate | 0.25% |
Debt and Derivative Instruments (Schedule of Principal Payments and Maturities of Company's Debt) (Details) - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
---|---|---|
Debt Instrument [Line Items] | ||
2021 (remainder of the year) | $ 20,484 | |
2022 | 211,152 | |
2023 | 241,556 | |
2024 | 341 | |
2025 | 92,951 | |
Thereafter | 44,727 | |
Total debt before unamortized mortgage premiums and debt issuance costs including impact of interest rate swaps | 611,211 | $ 631,017 |
Maturity of Credit Facility [Member] | ||
Debt Instrument [Line Items] | ||
2022 | 109,000 | |
2023 | 150,000 | |
Total debt before unamortized mortgage premiums and debt issuance costs including impact of interest rate swaps | 259,000 | |
Scheduled Principal Payments [Member] | ||
Debt Instrument [Line Items] | ||
2021 (remainder of the year) | 784 | |
2022 | 615 | |
2023 | 326 | |
2024 | 341 | |
2025 | 295 | |
Total debt before unamortized mortgage premiums and debt issuance costs including impact of interest rate swaps | 2,361 | |
Maturities of Mortgage Loans [Member] | ||
Debt Instrument [Line Items] | ||
2021 (remainder of the year) | 19,700 | |
2022 | 101,537 | |
2023 | 91,230 | |
2025 | 92,656 | |
Thereafter | 44,727 | |
Total debt before unamortized mortgage premiums and debt issuance costs including impact of interest rate swaps | $ 349,850 |
Debt and Derivative Instruments (Summary of Interest Rate Swap Contracts Outstanding) (Details) $ in Thousands |
6 Months Ended | |||
---|---|---|---|---|
Jun. 30, 2021
USD ($)
| ||||
Interest Rate Swap One [Member] | ||||
Derivative [Line Items] | ||||
Derivative instrument, date entered | Feb. 11, 2015 | |||
Derivative instrument, effective date | Mar. 02, 2015 | |||
Derivative instrument, maturity date | Mar. 01, 2022 | |||
Derivative instrument, pay fixed interest rate | 2.02% | [1] | ||
Derivative liability, notional amount | $ 6,114 | |||
Interest Rate Swap One [Member] | Recurring [Member] | ||||
Derivative [Line Items] | ||||
Fair value of derivative liabilities measured on recurring basis | $ (78) | |||
Interest Rate Swap Two [Member] | ||||
Derivative [Line Items] | ||||
Derivative instrument, date entered | Apr. 07, 2015 | |||
Derivative instrument, effective date | Apr. 07, 2015 | |||
Derivative instrument, maturity date | Apr. 07, 2022 | |||
Derivative instrument, pay fixed interest rate | 1.74% | [1] | ||
Derivative liability, notional amount | $ 48,250 | |||
Interest Rate Swap Two [Member] | Recurring [Member] | ||||
Derivative [Line Items] | ||||
Fair value of derivative liabilities measured on recurring basis | $ (600) | |||
Interest Rate Swap Three [Member] | ||||
Derivative [Line Items] | ||||
Derivative instrument, date entered | Sep. 17, 2015 | |||
Derivative instrument, effective date | Sep. 17, 2015 | |||
Derivative instrument, maturity date | Sep. 17, 2022 | |||
Derivative instrument, pay fixed interest rate | 1.90% | [1] | ||
Derivative liability, notional amount | $ 13,700 | |||
Interest Rate Swap Three [Member] | Recurring [Member] | ||||
Derivative [Line Items] | ||||
Fair value of derivative liabilities measured on recurring basis | $ (294) | |||
Interest Rate Swap Four [Member] | ||||
Derivative [Line Items] | ||||
Derivative instrument, date entered | Oct. 02, 2015 | |||
Derivative instrument, effective date | Nov. 01, 2015 | |||
Derivative instrument, maturity date | Nov. 01, 2022 | |||
Derivative instrument, pay fixed interest rate | 1.79% | [1] | ||
Derivative liability, notional amount | $ 13,100 | |||
Interest Rate Swap Four [Member] | Recurring [Member] | ||||
Derivative [Line Items] | ||||
Fair value of derivative liabilities measured on recurring basis | $ (288) | |||
Interest Rate Swap Five [Member] | ||||
Derivative [Line Items] | ||||
Derivative instrument, date entered | Dec. 23, 2015 | |||
Derivative instrument, effective date | Dec. 23, 2015 | |||
Derivative instrument, maturity date | Jan. 02, 2026 | |||
Derivative instrument, pay fixed interest rate | 2.30% | [1] | ||
Derivative liability, notional amount | $ 26,000 | |||
Interest Rate Swap Five [Member] | Recurring [Member] | ||||
Derivative [Line Items] | ||||
Fair value of derivative liabilities measured on recurring basis | $ (1,762) | |||
Interest Rate Swap Six [Member] | ||||
Derivative [Line Items] | ||||
Derivative instrument, date entered | Jun. 07, 2016 | |||
Derivative instrument, effective date | Jul. 01, 2016 | |||
Derivative instrument, maturity date | Jul. 01, 2023 | |||
Derivative instrument, pay fixed interest rate | 1.42% | [1] | ||
Derivative liability, notional amount | $ 43,680 | |||
Interest Rate Swap Six [Member] | Recurring [Member] | ||||
Derivative [Line Items] | ||||
Fair value of derivative liabilities measured on recurring basis | $ (1,016) | |||
Interest Rate Swap Seven [Member] | ||||
Derivative [Line Items] | ||||
Derivative instrument, date entered | Jul. 21, 2016 | |||
Derivative instrument, effective date | Aug. 01, 2016 | |||
Derivative instrument, maturity date | Aug. 01, 2023 | |||
Derivative instrument, pay fixed interest rate | 1.30% | [1] | ||
Derivative liability, notional amount | $ 47,550 | |||
Interest Rate Swap Seven [Member] | Recurring [Member] | ||||
Derivative [Line Items] | ||||
Fair value of derivative liabilities measured on recurring basis | $ (1,009) | |||
Interest Rate Swap Eight [Member] | ||||
Derivative [Line Items] | ||||
Derivative instrument, date entered | Jun. 05, 2017 | |||
Derivative instrument, effective date | May 31, 2017 | |||
Derivative instrument, maturity date | May 15, 2022 | |||
Derivative instrument, pay fixed interest rate | 1.90% | [1] | ||
Derivative liability, notional amount | $ 14,700 | |||
Interest Rate Swap Eight [Member] | Recurring [Member] | ||||
Derivative [Line Items] | ||||
Fair value of derivative liabilities measured on recurring basis | $ (230) | |||
Interest Rate Swap Nine [Member] | ||||
Derivative [Line Items] | ||||
Derivative instrument, date entered | Aug. 23, 2018 | |||
Derivative instrument, effective date | Sep. 04, 2018 | |||
Derivative instrument, maturity date | Aug. 01, 2023 | |||
Derivative instrument, pay fixed interest rate | 2.73% | [1] | ||
Derivative liability, notional amount | $ 60,000 | |||
Interest Rate Swap Nine [Member] | Recurring [Member] | ||||
Derivative [Line Items] | ||||
Fair value of derivative liabilities measured on recurring basis | $ (3,071) | |||
Interest Rate Swap Ten [Member] | ||||
Derivative [Line Items] | ||||
Derivative instrument, date entered | Aug. 23, 2018 | |||
Derivative instrument, effective date | Sep. 04, 2018 | |||
Derivative instrument, maturity date | Aug. 01, 2023 | |||
Derivative instrument, pay fixed interest rate | 2.74% | [1] | ||
Derivative liability, notional amount | $ 25,000 | |||
Interest Rate Swap Ten [Member] | Recurring [Member] | ||||
Derivative [Line Items] | ||||
Fair value of derivative liabilities measured on recurring basis | $ (1,280) | |||
Interest Rate Swap Eleven [Member] | ||||
Derivative [Line Items] | ||||
Derivative instrument, date entered | Aug. 23, 2018 | |||
Derivative instrument, effective date | Sep. 04, 2018 | |||
Derivative instrument, maturity date | Aug. 01, 2023 | |||
Derivative instrument, pay fixed interest rate | 2.74% | [1] | ||
Derivative liability, notional amount | $ 25,000 | |||
Interest Rate Swap Eleven [Member] | Recurring [Member] | ||||
Derivative [Line Items] | ||||
Fair value of derivative liabilities measured on recurring basis | $ (1,282) | |||
Interest Rate Swap Twelve [Member] | ||||
Derivative [Line Items] | ||||
Derivative instrument, date entered | Aug. 23, 2018 | |||
Derivative instrument, effective date | Sep. 04, 2018 | |||
Derivative instrument, maturity date | Aug. 01, 2023 | |||
Derivative instrument, pay fixed interest rate | 2.73% | [1] | ||
Derivative liability, notional amount | $ 40,000 | |||
Interest Rate Swap Twelve [Member] | Recurring [Member] | ||||
Derivative [Line Items] | ||||
Fair value of derivative liabilities measured on recurring basis | (2,048) | |||
Interest Rate Swap Thirteen [Member] | ||||
Derivative [Line Items] | ||||
Derivative liability, notional amount | 363,094 | |||
Interest Rate Swap Thirteen [Member] | Recurring [Member] | ||||
Derivative [Line Items] | ||||
Fair value of derivative liabilities measured on recurring basis | $ (12,958) | |||
|
Debt and Derivative Instruments (Summary of Interest Rate Swap Contracts Outstanding) (Parenthetical) (Details) |
6 Months Ended |
---|---|
Jun. 30, 2021 | |
Derivative [Line Items] | |
Derivative instrument, receive floating rate index | one-month LIBOR |
LIBOR [Member] | |
Derivative [Line Items] | |
One month floating rate | 0.10% |
Debt and Derivative Instruments (Schedule of Effect of Derivatives on Consolidated Statements of Operations and Other Comprehensive Income (Loss) (Details) - Designated as Hedging Instrument [Member] - Cash Flow Hedging [Member] - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Effective portion of derivatives | $ (258) | $ (1,930) | $ 903 | $ (16,482) |
Reclassification adjustment for amounts included in net gain or loss (effective portion) | $ 1,843 | $ 1,570 | $ 3,707 | $ 1,973 |
Distributions (Narrative) (Details) - USD ($) |
3 Months Ended | 6 Months Ended | 15 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Jun. 29, 2021 |
Jun. 30, 2021 |
Jun. 30, 2021 |
Jun. 30, 2020 |
[1] | Jun. 29, 2021 |
|||||
Distributions [Abstract] | ||||||||||
Amount per share of distributions | $ 0.135600 | $ 0.135600 | ||||||||
Dividends payable, date declared | Jun. 29, 2021 | |||||||||
Dividends payable, date of record | Jun. 30, 2021 | |||||||||
Dividends payable, date to be paid | Jul. 26, 2021 | |||||||||
Distributions declared | $ 4,886,000 | [1] | $ 4,886,000 | [1] | $ 8,173,000 | $ 0 | ||||
|
Distributions (Schedule of Distributions Paid, Declared and Rescinded) (Details) - USD ($) |
3 Months Ended | 6 Months Ended | 15 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 |
[2] | Jun. 30, 2020 |
Jun. 30, 2021 |
[2] | Jun. 30, 2020 |
Jun. 29, 2021 |
||||||
Distributions [Abstract] | ||||||||||||
Distributions paid | [1] | $ 10,841,000 | ||||||||||
Distributions declared | $ 4,886,000 | $ 4,886,000 | 8,173,000 | [2] | $ 0 | |||||||
Distributions rescinded | [2] | $ (8,173,000) | $ (8,173,000) | |||||||||
|
Earnings (Loss) per Share (Details) - shares |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
Earnings Per Share [Abstract] | ||||
Additional shares excluded from the computation of diluted earnings per share | 4,791 | 6,892 | 4,303 | 6,667 |
Equity-Based Compensation - Narrative (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
Minimum [Member] | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Share-based compensation vesting period | 3 years | |||
Restricted Stock [Member] | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Weighted average remaining period unrecognized compensation expense related to non-vested | 1 year 4 months 24 days | |||
Common stock shares issued upon vesting | 1 | |||
Restricted Stock [Member] | Minimum [Member] | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Share-based compensation vesting period | 1 year | |||
Restricted Stock [Member] | Maximum [Member] | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Share-based compensation vesting period | 3 years | |||
Restricted Stock Units (RSUs) [Member] | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Weighted average remaining period unrecognized compensation expense related to non-vested | 1 year 4 months 24 days | |||
Common stock shares issued upon vesting | 1 | |||
Restricted Stock Units (RSUs) [Member] | Maximum [Member] | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Share-based compensation vesting period | 1 year | |||
Restricted Shares and Restricted Share Units [Member] | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Unrecognized compensation expense of unvested share-based awards | $ 35,000 | $ 35,000 | ||
Total fair value at vesting date | 54,000 | $ 46,000 | 54,000 | $ 46,000 |
Non-Employee Directors [Member] | Restricted Shares and Restricted Share Units [Member] | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Share-based compensation expense | $ 14,000 | $ 32,000 |
Equity-Based Compensation (Summary of the Restricted Shares and Restricted Share Units) (Details) |
6 Months Ended |
---|---|
Jun. 30, 2021
shares
| |
Restricted Stock [Member] | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Outstanding, Shares | 6,457 |
Vested, Shares | (2,774) |
Outstanding, Shares | 3,683 |
Restricted Stock Units (RSUs) [Member] | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Outstanding, Shares | 683 |
Granted, Shares | 3 |
Vested, Shares | (436) |
Outstanding, Shares | 250 |
Segment Reporting (Details) - Segment |
6 Months Ended | |
---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
Segment Reporting [Abstract] | ||
Number of reportable segments | 1 | 1 |
Transactions with Related Parties (Schedule of Related Party Transactions) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Dec. 31, 2020 |
|||||||
Related Party Transaction [Line Items] | |||||||||||
Due to related parties | $ 2,975 | $ 2,975 | $ 5,348 | ||||||||
General and Administrative Reimbursements [Member] | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
General and administrative expenses incurred with related party | [1] | 403 | $ 461 | 712 | $ 790 | ||||||
Due to related parties | [1] | 232 | 232 | 237 | |||||||
Real Estate Management Fees [Member] | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Real estate management related costs with related party | 1,153 | 784 | 2,389 | 1,869 | |||||||
Due to related parties | 431 | 431 | 387 | ||||||||
Property Operating Expenses [Member] | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Real estate management related costs with related party | 322 | 423 | 672 | 766 | |||||||
Due to related parties | 178 | ||||||||||
Construction Management Fees [Member] | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Real estate management related costs with related party | 5 | 5 | 5 | 9 | |||||||
Due to related parties | 5 | 5 | 4 | ||||||||
Leasing fees [Member] | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Real estate management related costs with related party | 68 | 23 | 129 | 106 | |||||||
Due to related parties | 71 | 71 | 77 | ||||||||
Real Estate Management Costs [Member] | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Real estate management related costs with related party | [2] | 1,548 | 1,235 | 3,195 | 2,750 | ||||||
Due to related parties | [2] | 507 | 507 | 646 | |||||||
Business Management Fee [Member] | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Expenses incurred with related party | [3] | 2,236 | $ 2,231 | 4,470 | $ 4,460 | ||||||
Due to related parties | [3] | $ 2,236 | $ 2,236 | $ 4,465 | |||||||
|
Transactions with Related Parties (Narrative) (Details) |
6 Months Ended |
---|---|
Jun. 30, 2021 | |
Related Party Transaction [Line Items] | |
Annual business management fee to its average invested assets, percentage | 0.65% |
Quarterly payable business management fee to its average invested assets, percentage | 0.1625% |
Monthly Real Estate Management Fee Of Single Tenant Property [Member] | Maximum [Member] | |
Related Party Transaction [Line Items] | |
Property management fee, percentage of gross income | 1.90% |
Monthly Real Estate Management Fee Of Any Other Property [Member] | Maximum [Member] | |
Related Party Transaction [Line Items] | |
Property management fee, percentage of gross income | 3.90% |
Fair Value Measurements (Schedule of Fair Value Assets and Liabilities Measured on a Recurring Basis) (Details) - Recurring [Member] - Interest Rate Swap Agreements [Member] - Other Liabilities [Member] - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
---|---|---|
Derivatives Fair Value [Line Items] | ||
Interest rate swap agreements - Other liabilities | $ 12,958 | $ 17,568 |
Level 2 [Member] | ||
Derivatives Fair Value [Line Items] | ||
Interest rate swap agreements - Other liabilities | $ 12,958 | $ 17,568 |
Subsequent Events (Narrative) (Details) $ in Thousands |
6 Months Ended | |||
---|---|---|---|---|
Aug. 01, 2021
USD ($)
Property
|
Jul. 06, 2021
USD ($)
|
Jun. 30, 2021
USD ($)
|
Jun. 30, 2020
USD ($)
|
|
Subsequent Event [Line Items] | ||||
Repayment of mortgages | $ 63,806 | $ 267 | ||
Proceeds from credit facility | $ 52,097 | $ 31,000 | ||
Subsequent Event [Member] | ||||
Subsequent Event [Line Items] | ||||
Properties with covenant violations | Property | 2 | |||
Principal payments | $ 15,000 | |||
Imputed interest rate | 10.00% | |||
Subsequent Event [Member] | Minimum [Member] | ||||
Subsequent Event [Line Items] | ||||
Debt service coverage ratio | 0.975 | |||
Fairgrounds Crossing Property [Member] | Subsequent Event [Member] | ||||
Subsequent Event [Line Items] | ||||
Repayment of mortgages | $ 13,453 | |||
Fairgrounds Crossing Property [Member] | Subsequent Event [Member] | Revolving Credit Facility [Member] | ||||
Subsequent Event [Line Items] | ||||
Proceeds from credit facility | $ 8,000 |
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