- Consolidated Portfolio Same Store NOI for
the Quarter Rises 3.8% Over Prior Year Period -
- Recurring FFO per Share for 2014 Increases
3.3% Year over Year -
Inland Real Estate Corporation (NYSE: IRC), a publicly traded
real estate investment trust that owns and operates high-quality,
necessity and value-based retail centers primarily in select
markets within the Central and Southeastern United States, today
announced financial and operational results for the three and
twelve months ended December 31, 2014.
Highlights
- Recurring FFO (defined as Funds From
Operations adjusted for the impact of lease termination income,
certain gains and non-cash impairment charges of non-depreciable
real estate, net of taxes) per weighted average common share (basic
and diluted) of $0.25 for the three months ended December 31, 2014,
equal to the fourth quarter of 2013.
- Recurring FFO per weighted average
common share (basic and diluted) of $0.95 for the twelve months
ended December 31, 2014, an increase of 3.3% over the full year
2013.
- Same-store net operating income (NOI)
for the consolidated portfolio increased 3.8% for the quarter and
2.3% for the year ended December 31, 2014, over the comparable
periods in 2013.
- Total portfolio leased occupancy was
95.4% and financial occupancy was 93.4% at December 31, 2014,
representing increases of 20 basis points and 30 basis points,
respectively, over one year ago.
- Average base rent for new and renewal
leases signed in the total portfolio during the quarter increased
by 10.0% and 14.5%, respectively, over expiring average rents. For
leases signed during the year, average base rent for new and
renewal leases rose by 17.0% and 9.8%, respectively, over expiring
rents.
- During the quarter, IRC acquired the
Prairie Crossings power center in the Chicago MSA for $24.7 million
and a 13.0-acre vacant land parcel in Northeastern Alabama for $3.0
million to be developed into a Publix-anchored shopping
center.
- Company’s joint venture with PGGM
acquired Newport Pavilion Phase II in the Cincinnati market for
$23.6 million during the quarter and Argonne Village in the
Minneapolis-St. Paul MSA for $26.3 million after the close of the
quarter.
- Evergreen Promenade, a
92,488-square-foot grocery-anchored development in the Chicago
suburb of Evergreen Park, Ill., was completed in December.
- Company sold 4 million shares of 6.95%
Series B Cumulative Redeemable Preferred Stock ("Series B Preferred
Stock") for net proceeds of $96.9 million and redeemed in full, the
$29.2 million of 5% Convertible Senior Notes during the
quarter.
“Recurring FFO per share of $0.95 for 2014 represents a
year-over-year increase of 3.3%, primarily driven by solid
portfolio performance including gains in occupancy, rent spreads
and same store net operating income,” said Mark Zalatoris,
president and chief executive officer of IRC. “In addition, in 2014
we continued to enhance the growth potential and diversification of
our platform through the acquisition of $134 million of high
quality stabilized assets for our wholly-owned and PGGM joint
venture portfolios, funded in part with recycled capital from
non-core asset dispositions. We complemented this activity with
retailer-driven development joint ventures, in both the Central and
Southeast regions of the United States, with the additional
objectives of achieving an attractive blended yield on total
investment, as well as further diversifying our cash flows. We also
strengthened our balance sheet and credit metrics primarily via the
retirement of debt, the successful offering of our Series B
Preferred Stock and the recast of our credit facilities earlier in
the year. We believe we begin 2015 in a strong position to drive
shareholder value through the continued execution of our strategic
plan.”
Financial Results for the Quarter
FFO attributable to common stockholders was $24.9 million for
the quarter ended December 31, 2014, compared to $18.8 million
for the fourth quarter of 2013. On a per share basis, FFO was $0.25
(basic and diluted) for the fourth quarter of 2014, compared to
$0.19 (basic and diluted) for the same period of 2013. The increase
in FFO and FFO per share was primarily due to higher property net
operating income from the consolidated portfolio and lower interest
expense, plus a provision for asset impairment on non-depreciable
real estate that was recorded in the fourth quarter of 2013. The
increase was partially offset by lower lease termination income
recorded in the fourth quarter of 2014.
Recurring FFO (defined as FFO adjusted for the impact of lease
termination income, certain gains and non-cash impairment charges
of non-depreciable real estate, net of taxes) was $24.9 million for
the fourth quarter of 2014, compared to $24.5 million for the prior
year quarter. On a per share basis, Recurring FFO was $0.25 (basic
and diluted) for the three months ended December 31, 2014, equal to
the three months ended December 31, 2013.
Net income attributable to common stockholders for the three
months ended December 31, 2014 was $2.9 million, compared to a loss
of $7.1 million for the fourth quarter of 2013. On a per common
share basis, net income attributable to common stockholders (basic
and diluted) was $0.03 for the fourth quarter of 2014, compared to
a loss of $0.07 for the prior year quarter. Net income for the
quarter increased primarily due to asset impairments recognized in
the prior year quarter and lower interest expense and depreciation
and amortization expense.
Financial Results for the Twelve Months Ended
December 31, 2014
For the twelve months ended December 31, 2014, FFO attributable
to common stockholders was $94.9 million, compared to $91.0 million
for the same period in 2013. On a per share basis, FFO for the full
year 2014 was $0.95 (basic and diluted), compared to $0.96 (basic)
and $0.95 (diluted) for the twelve months ended December 31, 2013.
FFO for 2014 increased primarily due to higher property net
operating income from the consolidated portfolio, increased lease
termination income and increased equity in earnings of
unconsolidated joint ventures, partially offset by higher general
and administrative expense, lower fee income from unconsolidated
joint ventures and asset impairments recorded in the fourth quarter
of 2013.
Recurring FFO was $94.7 million for the twelve months ended
December 31, 2014, compared to $87.7 million for the prior year
period. On a per share basis, Recurring FFO was $0.95 (basic and
diluted) for 2014, compared to $0.92 for 2013. Recurring FFO per
share for 2014 increased 3.3% year over year primarily due to the
aforementioned items, but excluding the impact of lease termination
income and asset impairments.
Net income attributable to common stockholders for the twelve
months ended December 31, 2014 was $28.8 million, compared to
$102.7 million for 2013. On a per share basis, net income
attributable to common stockholders was $0.29 (basic and diluted),
compared to $1.08 for the prior year. Net income decreased year
over year primarily due to a gain from the change in control of
investment properties in 2013 related to the consolidation of
NYSTRS joint venture assets and from the settlement of receivables
in 2013, as well as lower lease termination income in 2014. The
decrease in net income was partially offset by higher gains on sale
of investment properties recorded in 2014, as well as increases in
net operating income from our consolidated portfolio and equity in
earnings of unconsolidated joint ventures.
Reconciliations of FFO and Recurring FFO to net income
attributable to common stockholders, calculated in accordance with
U.S. GAAP, as well as FFO and Recurring FFO per share to net income
attributable to common stockholders per share, are provided at the
end of this news release.
Portfolio Performance
Same-store NOI for the consolidated portfolio was $21.4 million
for the quarter ended December 31, 2014, compared to $20.6
million for the fourth quarter of 2013, representing an increase of
3.8% quarter over quarter. Consolidated same store NOI for the full
year 2014 was $83.8 million, compared to $81.9 million for 2013,
representing an increase of 2.3% year over year.
Same-store financial occupancy was 92.5% for the consolidated
portfolio as of December 31, 2014, representing an increase of
150 basis points over one year ago.
The Company evaluates its overall portfolio by analyzing the
operating performance of properties that have been owned and
operated for the same three and twelve-month periods during each
year. A total of 81 of the Company's investment properties within
the consolidated portfolio satisfied this criterion during these
periods and are referred to as "same-store" properties. Same-store
NOI is a supplemental non-GAAP measure used to monitor the
performance of the Company's investment properties.
A reconciliation of consolidated same-store NOI to net income
attributable to common stockholders, calculated in accordance with
U.S. GAAP, is provided at the end of this news release.
Leasing
For the quarter, the Company signed 85 leases within the total
portfolio aggregating 323,276 square feet of gross leasable area
(GLA). Total leases executed included:
- Fifty-one renewal leases comprising
178,644 square feet, with an average rental rate of $21.83 per
square foot, representing an increase of 14.5% over the average
expiring rent;
- Eleven new leases comprising 57,751
square feet, with an average rental rate of $12.03 per square foot,
representing an increase of 10.0% over the expiring rent; and
- Twenty-three non-comparable leases
comprising 86,881 square feet, with an average rental rate of
$14.65 per square foot. The Company defines non-comparable leases
as leases signed for expansion square footage or for space in which
there was no former tenant in place for a period of twelve months
or more.
On a blended basis, the 62 new and renewal leases executed
during the quarter had an average rental rate of $19.43 per square
foot, representing an increase of 13.8% over the average expiring
rent. The calculations of former and new average base rents are
adjusted for rent abatements on the included leases.
For the total portfolio as of December 31, 2014, leased
occupancy was 95.4% and financial occupancy was 93.4%, representing
gains of 20 basis points and 30 basis points, respectively, over
one year ago. Leased occupancy is defined as the percentage of
total GLA for which there is a signed lease regardless of whether
the tenant is currently obligated to pay rent under their lease
agreement. Financial occupancy is defined as the percentage of
total GLA for which a tenant is obligated to pay rent under the
terms of the lease agreement, regardless of the actual use or
occupation by that tenant of the area being leased, and excludes
tenants in abatement periods.
EBITDA, Balance Sheet, Liquidity and Market Value
The Company reported Recurring EBITDA (earnings before interest,
taxes, depreciation and amortization), which is EBITDA adjusted for
the impact of lease termination income, certain gains and non-cash
impairment charges of non-depreciable real estate, of $38.6 million
for the three months ended December 31, 2014, compared to $37.6
million for the fourth quarter of 2013, representing an increase of
2.6% quarter over quarter. Recurring EBITDA for the full year 2014
was $148.5 million, compared to $142.8 million for 2013,
representing an increase of 4.0% year over year.
Definitions and reconciliations of EBITDA and Recurring EBITDA
to net income attributable to Inland Real Estate Corporation are
provided at the end of this news release.
Recurring EBITDA coverage of interest expense was 3.8 times for
the quarter ended December 31, 2014 compared to 3.3 times for
the fourth quarter of 2013. The Company has provided EBITDA and
related non-GAAP coverage ratios because it believes EBITDA and the
related ratios provide useful supplemental measures in evaluating
the Company's operating performance because expenses that may not
be indicative of operating performance are excluded.
On October 16, 2014, the Company issued 4,000,000 shares of its
Series B Preferred Stock at a public offering price of $25 per
share, for net proceeds of approximately $96.9 million, after the
underwriting discount but before expenses. The Company used the net
proceeds of the offering to purchase additional properties to be
owned by the Company or one or more of its joint ventures, and for
general corporate purposes, including the repayment of
indebtedness. The Series B Preferred Stock is traded on the New
York Stock Exchange under the symbol “IRCPrB.”
In addition, in December, the Company redeemed for cash all of
its outstanding 5.0% Convertible Senior Notes, due 2029, totaling
$29.2 million.
As of December 31, 2014, the Company had an equity market
capitalization (common shares) of $1.1 billion, outstanding
preferred stock of $210.0 million (at face value), and total debt
outstanding of $1.0 billion (including the pro-rata share of debt
in unconsolidated joint ventures) for a total market capitalization
of $2.3 billion. The Company's debt-to-total market capitalization
was 43.2% as of December 31, 2014, compared to 46.8% one year
ago. At year-end 2014, approximately 55.2% of total debt bore
interest at fixed rates, with a weighted average interest rate of
5.14%. The overall weighted average interest rate, including
variable rate debt, was 3.69% as of December 31, 2014.
Acquisitions
In October, the Company acquired for its wholly-owned portfolio
the 109,000-square-foot Prairie Crossings power center in the
Chicago suburb of Frankfort, Ill., for $24.7 million in cash,
excluding closing costs and prorations. The 99%-leased Prairie
Crossings is anchored by Bed Bath & Beyond, Sports Authority
and Office Depot, and shadow-anchored by a Kohl’s. The acquisitions
of Prairie Crossing during the quarter and the nearby Mokena
Marketplace earlier in the year are an example of the Company’s
strategy of clustering assets to facilitate leasing and operating
efficiencies.
During the quarter, the Company also purchased for $3.0 million
a fully-entitled 13.0-acre vacant land parcel in Rainbow City,
Ala., which is being developed in conjunction with MAB American
Retail Partners, LLC, into a 65,000-square-foot, Publix-anchored
shopping center which was approximately 74% pre-leased at
acquisition. Construction on the Shoppes at Rainbow Landing began
at the end of October, with the Publix store anticipated to open in
the fourth quarter of 2015.
Dispositions
During the quarter, the Company sold a 6,700-square-foot outlot
at its Park Square neighborhood center in Brooklyn Park, Minn., for
approximately $2.0 million and a 1.8 acre parcel at its North
Aurora Towne Center development in North Aurora, Ill., for $1.5
million, and recorded a combined gain on sale of approximately $2.1
million.
Joint Venture Activity
In October, the Company’s joint venture with PGGM purchased
Newport Pavilion Phase II in Newport, Ky., located near downtown
Cincinnati in a high-barrier-to-entry trade area, for $23.6 million
in cash, subject to future earnout payments. Newport Pavilion Phase
II aggregates 115,000 square feet including ground leases, which is
leased to Dick’s Sporting Goods, TJ Maxx, Buffalo Wild Wings,
Panera, Chipotle, and others. Including Phase I, which was acquired
by the IRC-PGGM venture last summer, the Kroger-anchored Newport
Pavilion shopping center encompasses 337,000 square feet including
ground leases and was 94% leased at year end. The total purchase
price for Newport Pavilion Phases I and II was $66.9 million,
subject to future earnout payments, which may aggregate a total of
approximately $13 million.
In October, the Company’s joint venture with PGGM, in
partnership with IBT Group LLC and Pine Tree Commercial Realty LLC,
began construction of the 133,000-square-foot Pulaski Promenade, a
power center located on the southwest side of Chicago, Ill. Pulaski
Promenade’s in-line space is over 80% pre-leased to Marshalls, Ross
Dress for Less, Michaels, PetSmart and Shoe Carnival, with store
openings expected to begin in the spring of 2016. Upon completion
of construction and stabilization, the IRC-PGGM joint venture has
the option to acquire 100% ownership in the property at a
pre-negotiated purchase price.
Also in October, the Company’s joint venture with Thompson
Thrift Development, Inc. commenced construction of Tanglewood
Pavilions, a 158,000-square-foot regional power center located in
Elizabeth City, North Carolina. Tanglewood Pavilions is
approximately 70% pre-leased to Hobby Lobby, TJMaxx, Ross Dress for
Less and Dollar Tree, and leases are in negotiation for another
24,000 square feet of space that would bring the center to 84%
pre-leased occupancy. Deliveries to tenants are scheduled to
commence prior to the fall of 2015. After completion of
construction and stabilization, IRC will acquire 100% ownership of
the center at a pre-negotiated purchase price.
In December, construction was completed on the Evergreen
Promenade grocery-anchored development in the Chicago suburb of
Evergreen Park, Ill. The 96-percent-leased, 92,488-square-foot
community center is anchored by PetSmart which opened in December
and Mariano’s which celebrated its grand opening in early
February.
After the close of the quarter, the Company’s joint venture with
PGGM acquired the 100-percent-leased, 113,000-square-foot Argonne
Village shopping center in Lakeville, Minn., for $26.3 million.
Argonne Village is a Class A neighborhood center anchored by a new
Cub Foods grocery store and Dollar Tree, which are complemented by
a strong line-up of tenants that includes national retailers such
as Starbucks, Taco Bell, Little Caesars, FedEx Office and Great
Clips. The property is located in a high traffic and strong
demographic trade area approximately 20 miles south of
Minneapolis.
Distributions
In November and December of 2014 and January and February of
2015, the Company paid a monthly cash dividend of $0.169271 per
share on the outstanding shares of its 8.125% Series A Cumulative
Redeemable Preferred Stock ("Series A Preferred Stock"). In
February of 2015, the Company also declared a cash dividend of
$0.169271 per share on the outstanding shares of its Series A
Preferred Stock, payable on March 16, 2015, to Series A Preferred
Stockholders of record at the close of business on March 2,
2015.
In November of 2014, the Company paid a monthly cash dividend of
$0.139965278 per share on the outstanding shares of its Series B
Preferred Stock. In December of 2014 and January and February of
2015, the Company paid a monthly cash dividend of $0.144791667 per
share on the outstanding shares of its Series B Preferred Stock. In
February of 2015, the Company also declared a cash dividend of
$0.144791667 per share on the outstanding shares of its Series B
Preferred Stock, payable on March 16, 2015, to Series B Preferred
Stockholders of record at the close of business on March 2,
2015.
In November and December of 2014 and January and February of
2015, the Company paid monthly cash distributions to Common
Stockholders of $0.0475 per common share. In February of 2015, the
Company also declared a cash distribution of $0.0475 per common
share, payable on March 17, 2015, to common stockholders of record
at the close of business on March 2, 2015.
Guidance
For fiscal year 2015, the Company expects Recurring FFO per
common share (basic and diluted) to range from $0.96 to $1.00. The
Company's guidance incorporates assumptions for an increase in
consolidated same-store NOI to range from 2% to 3%, and
consolidated same-store financial occupancy at year-end 2015 to
range from 92.5% to 93.5%.
Conference Call/Webcast
Management will host a conference call to discuss the Company's
financial and operational results for the quarter ended December
31, 2014 on Thursday, February 19, 2015, at 1:00 p.m. CT (2:00 p.m.
ET). Hosting the conference call will be Mark Zalatoris, President
and Chief Executive Officer; Brett Brown, Chief Financial Officer;
and Scott Carr, Chief Investment Officer. The live conference call
can be accessed by dialing 1-877-509-5836 for callers within the
United States, 1-855-669-9657 for callers dialing from Canada, or
1-412-902-4131 for other international callers. A live webcast also
will be available on the Company's website at
www.inlandrealestate.com. The conference call will be recorded and
available for replay one hour after the end of the live event
through 8:00 a.m. CT (9:00 a.m. ET) on March 6, 2015. Interested
parties can access the replay of the conference call by dialing
1-877-344-7529 or 1-412-317-0088 for international callers, and
entering the conference number 10058463. An online playback of the
webcast will be archived for approximately one year within the
investor relations section of the Company's website.
About Inland Real Estate Corporation
Inland Real Estate Corporation is a self-advised and
self-managed publicly traded real estate investment trust (REIT)
focused on owning and operating open-air neighborhood, community,
and power shopping centers located in well-established markets
primarily in the Central and Southeastern United States. As of
December 31, 2014, the Company owned interests in 159 investment
properties, including 59 owned through its unconsolidated joint
ventures, with aggregate leasable space of approximately 15 million
square feet. Additional information on Inland Real Estate
Corporation, including a copy of the Company's supplemental
financial information for the three and twelve months ended
December 31, 2014, is available at www.inlandrealestate.com.
Certain information in this supplemental information may
constitute "forward-looking statements" within the meaning of the
Federal Private Securities Litigation Reform Act of 1995.
Forward-looking statements are statements that do not reflect
historical facts and instead reflect our management's intentions,
beliefs, expectations, plans or predictions of the future.
Forward-looking statements can often be identified by words such as
"seek," “believe,” “expect,” “anticipate,” “intend,” “estimate,”
“may,” “will,” “should” and “could.” Examples of forward-looking
statements include, but are not limited to, statements that
describe or contain information related to matters such as
management's intent, belief or expectation with respect to our
financial performance, investment strategy or our portfolio, our
ability to address debt maturities, our cash flows, our growth
prospects, the value of our assets, our joint venture commitments
and the amount and timing of anticipated future cash distributions.
Forward-looking statements reflect the intent, belief or
expectations of our management based on their knowledge and
understanding of our business and industry and their assumptions,
beliefs and expectations with respect to the market for commercial
real estate, the U.S. economy and other future conditions.
Forward-looking statements are not guarantees of future
performance, and investors should not place undue reliance on them.
Actual results may differ materially from those expressed or
forecasted in forward-looking statements due to a variety of risks,
uncertainties and other factors, including but not limited to the
risks listed and described under Item 1A”Risk Factors” in our
Annual Report on Form 10-K for the year ended December 31, 2013, as
filed with the Securities and Exchange Commission (the “SEC”) on
February 28, 2014, as they may be revised or supplemented by us in
subsequent Reports on Form 10-Q and other filings with the SEC.
Except as otherwise required by applicable law, the Company
disclaims any obligation or undertaking to publicly release any
updates or revisions to any forward-looking statement in this
release to reflect any change in the Company's expectations or any
change in events, conditions or circumstances on which any such
statement is based.
Consolidated Balance Sheets
(in thousands, except per share
data)
December 31, 2014 December 31, 2013
Assets:
(unaudited) Investment properties: Land $ 385,432
387,010 Construction in progress 23,812 16,856 Building and
improvements 1,110,360 1,130,004 Total Investment
Properties 1,519,604 1,533,870 Less accumulated depreciation
338,141 327,684 Net investment properties 1,181,463
1,206,186 Cash and cash equivalents 18,385 11,258 Accounts
receivable, net 38,211 37,155 Mortgages receivable 24,750 —
Investment in and advances to unconsolidated joint ventures 170,720
119,476 Acquired lease intangibles, net 85,858 103,576 Deferred
costs, net 18,674 19,638 Other assets 34,890 32,648
Total assets $ 1,572,951 1,529,937
Liabilities: Accounts payable and accrued expenses $ 56,188 57,132
Acquired below market lease intangibles, net 41,108 43,191
Distributions payable 5,420 5,110 Mortgages payable 384,769 497,832
Unsecured credit facilities 440,000 325,000 Convertible notes —
28,790 Other liabilities 22,290 17,413 Total
liabilities 949,775 974,468 Stockholders’
Equity: Preferred stock, $0.01 par value, 12,000 Shares authorized:
8.125% Series A Cumulative Redeemable shares, with a $25.00 per
share Liquidation Preference, 4,400 issued and outstanding at
December 31, 2014 and 2013, respectively. 110,000 110,000 6.95%
Series B Cumulative Redeemable shares, with a $25.00 per share
Liquidation Preference, 4,000 issued and outstanding at December
31, 2014 and none issued and outstanding at December 31, 2013
100,000 — Common stock, $0.01 par value, 500,000 shares authorized;
100,151 and 99,721 Shares issued and outstanding at December 31,
2014 and 2013, respectively 1,002 997 Additional paid-in capital
(net of offering costs of $78,372 and $74,749 at December 31, 2014
and 2013, respectively) 874,154 877,328 Accumulated distributions
in excess of net income (456,120 ) (427,953 ) Accumulated other
comprehensive loss (6,338 ) (4,904 ) Total stockholders’ equity
622,698 555,468 Noncontrolling interest 478 1
Total equity 623,176 555,469 Total liabilities
and equity $ 1,572,951 1,529,937
Consolidated Statements of Operations
and Comprehensive Income (unaudited)
(in thousands, except per share
data)
Three months ended
Twelve months ended December 31, December 31,
2014 2013 2014 2013
Revenues Rental income $ 34,646 35,358 138,627 124,274 Tenant
recoveries 13,416 15,078 57,892 48,588 Other property income 540
421 2,117 3,631 Fee income from unconsolidated joint ventures 2,036
1,748 6,126 6,881 Total revenues 50,638
52,605 204,762 183,374 Expenses:
Property operating expenses 7,251 7,790 32,333 26,269 Real estate
tax expense 10,172 10,048 39,114 35,006 Depreciation and
amortization 17,438 22,102 71,554 67,770 Provision for asset
impairment — 13,235 222 13,235 General and administrative expenses
5,587 5,621 23,225 20,437 Total
expenses 40,448 58,796 166,448 162,717
Operating income (loss) 10,190 (6,191 ) 38,314 20,657 Other
income 131 40 1,289 1,773 Gain from settlement of receivables — — —
3,095 Gain on sale of investment properties 2,078 — 24,906 1,440
Gain from change in control of investment properties — — — 95,378
Gain on sale of joint venture interest 750 224 1,177 1,433 Interest
expense (7,949 ) (9,195 ) (34,591 ) (34,621 ) Income (loss) before
income tax benefit (expense) of taxable REIT subsidiaries, equity
in earnings of unconsolidated joint ventures and discontinued
operations 5,200 (15,122 ) 31,095 89,155 Income tax benefit
(expense) of taxable REIT subsidiaries (785 ) 4,220 (1,455 ) 2,721
Equity in earnings of unconsolidated joint ventures 1,931
2,253 8,762 7,893 Income (loss) from
continuing operations 6,346 (8,649 ) 38,402 99,769 Income
from discontinued operations 155 3,779 707
11,910 Net income (loss) 6,501 (4,870 ) 39,109 111,679
Less: Net (income) loss attributable to the noncontrolling
interest 27 (14 ) 66 5 Net income (loss)
attributable to Inland Real Estate Corporation 6,528 (4,884 )
39,175 111,684 Dividends on preferred shares (3,663 ) (2,234
) (10,366 ) (8,949 ) Net income (loss) attributable to common
stockholders $ 2,865 (7,118 ) 28,809 102,735
Basic and diluted earnings attributable to common shares per
weighted average common share: Income (loss) from continuing
operations $ 0.03 (0.11 ) 0.28 0.95 Income from discontinued
operations — 0.04 0.01 0.13 Net income
(loss) attributable to common stockholders per weighted average
common share — basic $ 0.03 (0.07 ) 0.29 1.08
Weighted average number of common shares outstanding — basic
99,685 99,366 99,543 95,279
Income (loss) from continuing operations $ 0.03 (0.11 ) 0.28 0.95
Income from discontinued operations — 0.04 0.01
0.12 Net income (loss) attributable to common
stockholders per weighted average common share — diluted $ 0.03
(0.07 ) 0.29 1.08 Weighted average
number of common shares outstanding — diluted 100,129 99,697
99,938 95,562 Comprehensive income: Net
income (loss) attributable to common stockholders $ 2,865 (7,118 )
28,809 102,735 Unrealized gain (loss) on investment securities — 37
— (762 ) Unrealized gain (loss) on derivative instruments (728 )
1,175 (1,434 ) 5,127 Comprehensive income (loss) $
2,137 (5,906 ) 27,375 107,100
Note: Basic and diluted Earnings Per Share may not foot due to
rounding.
Funds From Operations
(unaudited)
(in thousands, except per share
data)
Non-GAAP Financial Measures
We consider FFO a widely accepted and
appropriate measure of performance for a REIT. FFO provides a
supplemental measure to compare our performance and operations to
other REITs. Due to certain unique operating characteristics of
real estate companies, NAREIT has promulgated a standard known as
FFO, which it believes more accurately reflects the operating
performance of a REIT such as ours. As defined by NAREIT, FFO means
net income computed in accordance with U.S. GAAP, excluding gains
(or losses) from sales of operating property, plus depreciation and
amortization and after adjustments for unconsolidated entities in
which the REIT holds an interest. In addition, NAREIT has further
clarified the FFO definition to add-back impairment write-downs of
depreciable real estate or of investments in unconsolidated
entities that are driven by measurable decreases in the fair value
of depreciable real estate. Under U.S. GAAP, impairment charges
reduce net income. While impairment charges are added back in the
calculation of FFO, we caution that because impairments to the
value of any property are typically based on reductions in
estimated future undiscounted cash flows compared to current
carrying value, declines in the undiscounted cash flows which led
to the impairment charges reflect declines in property operating
performance that may be permanent. We have adopted the NAREIT
definition for computing FFO. Recurring FFO includes adjustments to
FFO for the impact of lease termination income, certain gains and
non-cash impairment charges of non-depreciable real estate, net of
taxes recorded in comparable periods, in order to present the
performance of our core portfolio operations. Management uses the
calculation of FFO and Recurring FFO for several reasons. FFO is
used in certain employment agreements we have with our executives
to determine a portion of incentive compensation payable to them.
Additionally, we use FFO and Recurring FFO to compare our
performance to that of other REITs in our peer group. The
calculation of FFO and Recurring FFO may vary from entity to entity
since capitalization and expense policies tend to vary from entity
to entity. Items that are capitalized do not impact FFO and
Recurring FFO whereas items that are expensed reduce FFO and
Recurring FFO. Consequently, our presentation of FFO and Recurring
FFO may not be comparable to other similarly titled measures
presented by other REITs. FFO and Recurring FFO do not represent
cash flows from operations as defined by U.S. GAAP, are not
indicative of cash available to fund cash flow needs and liquidity,
including our ability to pay distributions, and should not be
considered as an alternative to net income, as determined in
accordance with U.S. GAAP, for purposes of evaluating our operating
performance.
Three months ended December 31, Twelve months ended
December 31, 2014 2013 2014 2013 Net income (loss)
attributable to common stockholders $ 2,865 (7,118 ) 28,809 102,735
Gain on sale of investment properties (1,128 ) (5,436 ) (24,449 )
(10,702 ) Gain from change in control of investment properties — —
— (95,378 ) Impairment of depreciable operating property — 5,380
222 5,934 Equity in depreciation and amortization of unconsolidated
joint ventures 5,731 3,654 18,744 18,579 Amortization on in-place
lease intangibles 4,689 9,658 20,528 22,286 Amortization on leasing
commissions 537 445 2,032 1,847 Depreciation, net of noncontrolling
interest 12,212 12,242 48,994 45,738
Funds From Operations attributable to common stockholders $ 24,906
18,825 94,880 91,039 Gain from settlement of receivables — —
— (3,095 ) Lease termination income — (1,000 ) (146 ) (6,431 )
Lease termination income included in equity in earnings of
unconsolidated joint ventures 6 — (76 ) (22 ) Impairment loss, net
of taxes: Provision for asset impairment — 10,468 — 10,468
Impairment of investment securities — — — 98 Provision for asset
impairment included in equity in earnings of unconsolidated joint
ventures — — — 507 Provision for income taxes: Income tax
adjustments — (3,842 ) — (4,863 ) Recurring Funds
From Operations attributable to common stockholders $ 24,912
24,451 94,658 87,701 Net income (loss)
attributable to common stockholders per weighted average common
share — basic $ 0.03 (0.07 ) 0.29 1.08
Net income (loss) attributable to common stockholders per weighted
average common share — diluted $ 0.03 (0.07 ) 0.29
1.08 Funds From Operations attributable to common
stockholders, per weighted average commons share - basic $ 0.25
0.19 0.95 0.96 Funds From Operations
attributable to common stockholders, per weighted average commons
share - diluted $ 0.25 0.19 0.95 0.95
Recurring Funds From Operations attributable to common
stockholders, per weighted average commons share - basic $ 0.25
0.25 0.95 0.92 Recurring Funds From
Operations attributable to common stockholders, per weighted
average commons share - diluted $ 0.25 0.25 0.95
0.92 Weighted average number of common shares
outstanding, basic 99,685 99,366 99,543 95,279 Weighted average
number of common shares outstanding, diluted 100,129 99,697 99,938
95,562
Earnings Before Interest, Taxes,
Depreciation and Amortization (unaudited)
(in thousands, except per share
data)
EBITDA is defined as earnings (losses)
from operations excluding: (1) interest expense; (2) income tax
benefit or expenses; (3) depreciation and amortization expense; and
(4) gains (loss) on non-operating property. We believe EBITDA is
useful to us and to an investor as a supplemental measure in
evaluating our financial performance because it excludes expenses
that we believe may not be indicative of our operating performance.
By excluding interest expense, EBITDA measures our financial
performance regardless of how we finance our operations and capital
structure. By excluding depreciation and amortization expense, we
believe we can more accurately assess the performance of our
portfolio. Because EBITDA is calculated before recurring cash
charges such as interest expense and taxes and is not adjusted for
capital expenditures or other recurring cash requirements, it does
not reflect the amount of capital needed to maintain our properties
nor does it reflect trends in interest costs due to changes in
interest rates or increases in borrowing. EBITDA should be
considered only as a supplement to net earnings and may be
calculated differently by other equity REITs.
We believe EBITDA is an important non-GAAP
measure. We utilize EBITDA to calculate our interest expense
coverage ratio, which equals EBITDA divided by total interest
expense. We believe that using EBITDA, which excludes the effect of
non-operating expenses and non-cash charges, all of which are based
on historical cost and may be of limited significance in evaluating
current performance, facilitates comparison of core operating
profitability between periods and between REITs, particularly in
light of the use of EBITDA by a seemingly large number of REITs in
their reports on Forms 10-Q and 10-K. We believe that investors
should consider EBITDA in conjunction with net income and the other
required U.S. GAAP measures of our performance to improve their
understanding of our operating results. Recurring EBITDA includes
adjustments to EBITDA for the impact of least termination income
and non-cash impairment charges in comparable periods in order to
present the performance of our core portfolio operations.
Three months ended December 31, Twelve months ended
December 31, 2014 2013 2014 2013 Net income (loss)
attributable to Inland Real Estate Corporation $ 6,528 (4,884 )
39,175 111,684 Gain on sale of investment properties (1,128 )
(5,436 ) (24,449 ) (10,702 ) Gain on sale of development properties
(950 ) — (950 ) (863 ) Gain from change in control of investment
properties — — — (95,378 ) Income tax (benefit) expense of taxable
REIT subsidiaries 785 (4,220 ) 1,455 (2,721 ) Interest expense
7,949 9,195 34,591 34,621 Interest expense associated with
discontinued operations — 89 — 590 Interest expense associated with
unconsolidated joint ventures 2,192 1,970 8,340 9,580 Depreciation
and amortization 17,438 22,102 71,554 67,770 Depreciation and
amortization associated with discontinued operations — 243 — 2,147
Depreciation and amortization associated with unconsolidated joint
ventures 5,731 3,654 18,744 18,579
EBITDA 38,545 22,713 148,460 135,307 Gain from settlement of
receivables — — — (3,095 ) Lease termination income — (1,000 ) (146
) (6,431 ) Lease termination income included in equity in earnings
of unconsolidated joint ventures 6 — (76 ) (22 ) Impairment loss,
net of taxes: Provision for asset impairment — 15,848 222 16,402
Impairment of investment securities — — — 98 Provision for asset
impairment included in equity in earnings of unconsolidated joint
ventures — — — 507 Recurring EBITDA $
38,551 37,561 148,460 142,766
Total Interest Expense $ 10,141 11,254 42,931
44,791 EBITDA: Interest Expense Coverage Ratio 3.8 x
2.0 x 3.5 x 3.0 x Recurring EBITDA: Interest Expense
Coverage Ratio 3.8 x 3.3 x 3.5 x 3.2 x
Same Store Net Operating Income
(unaudited)
(in thousands, except per share
data)
Same store net operating income, which is
the net operating income of properties owned during the same
periods during each year, is considered a non-GAAP financial
measure because it does not include straight-line rental income,
amortization of lease intangibles, lease termination income,
interest, depreciation, amortization and bad debt expense. We
provide same store net operating income as another metric to
compare the results of property operations for the three and twelve
months ended December 31, 2014 and 2013. We also provide a
reconciliation of these amounts to the most comparable GAAP
measure, net income attributable to common stockholders.
Three months ended December 31, Twelve months
ended December 31, % %
Consolidated 2014 2013
Change 2014 2013 Change Rental income and tenant
recoveries: "Same-store" investment properties, 81 properties
Rental income $ 22,934 22,157 3.5 % 90,298 88,302 2.3 % Tenant
recovery income 8,350 8,800 -5.1 % 34,913 33,106 5.5 % Other
property income 373 323 15.5 % 1,327 1,269 4.6 % "Other investment
properties” Rental income 11,334 11,971 47,095 34,769 Tenant
recovery income 5,066 6,278 22,979 15,482 Other property income 166
98 645 405
Total property income
$ 48,223 49,627 197,257
173,333 Property operating expenses:
"Same-store" investment properties, 81 properties Property
operating expenses $ 4,266 4,696 -9.2 % 19,421 17,604 10.3 % Real
estate tax expense 5,971 5,955 0.3 % 23,348 23,204 0.6 % "Other
investment properties" Property operating expenses 2,297 2,566
11,043 6,508 Real estate tax expense 4,201 4,093
15,766 11,802
Total property operating
expenses $ 16,735 17,310
69,578 59,118 Property net
operating income "Same-store" investment properties 21,420 20,629
3.8 % 83,769 81,869 2.3 % "Other investment properties" 10,068
11,688 43,910 32,346
Total property
net operating income $ 31,488
32,317 127,679 114,215
Other income: Straight-line rents $ 310 850 1,442 1,368
Amortization of lease intangibles 68 380 (208 ) (165 ) Lease
termination income 1 — 145 1,957 Other income 131 40 1,289 1,773
Fee income from unconsolidated joint ventures 2,036 1,748 6,126
6,881 Gain from settlement of receivables — — — 3,095 Gain on sale
of investment properties 2,078 — 24,906 1,440 Gain from change in
control of investment properties — — — 95,378 Gain on sale of joint
venture interest 750 224 1,177 1,433 Equity in earnings of
unconsolidated joint ventures 1,931 2,253 8,762 7,893 Other
expenses: Income tax benefit (expense) of taxable REIT subsidiaries
(785 ) 4,220 (1,455 ) 2,721 Bad debt expense (688 ) (528 ) (1,869 )
(2,157 ) Depreciation and amortization (17,438 ) (22,102 ) (71,554
) (67,770 ) General and administrative expenses (5,587 ) (5,621 )
(23,225 ) (20,437 ) Interest expense (7,949 ) (9,195 ) (34,591 )
(34,621 ) Provision for asset impairment — (13,235 ) (222 )
(13,235 ) Income (loss) from continuing operations 6,346
(8,649 ) 38,402 99,769 Income from discontinued operations 155
3,779 707 11,910 Net income (loss)
6,501 (4,870 ) 39,109 111,679 Less: Net (income) loss
attributable to the noncontrolling interest 27 (14 ) 66
5 Net income (loss) attributable to Inland Real
Estate Corporation 6,528 (4,884 ) 39,175 111,684 Dividends
on preferred shares (3,663 ) (2,234 ) (10,366 ) (8,949 ) Net
income (loss) attributable to common stockholders $ 2,865
(7,118 ) 28,809 102,735
Pro Rata Consolidated Information
(unaudited)
(in thousands, except per share
data)
These schedules present certain Non-GAAP
pro-rata consolidated information as of and for the three and
twelve months ended December 31, 2014. These
schedules are considered Non-GAAP because they include financial
information related to consolidated joint ventures with an
adjustment for the portion related to noncontrolling interests and
unconsolidated joint ventures accounted for under the equity method
of accounting. The Company provides the pro rata amounts
of all properties owned through joint ventures to better compare
our overall performance and operating metrics to those of other
REITs in our peer group. The Company believes this
Non-GAAP information provides supplementary information that is
both useful to and has been requested by investors and
analysts. Investors should not consider Non-GAAP
information as a substitute for, or as superior to, U.S. GAAP
information. Rather, Non-GAAP information may provide
useful information in addition to information presented in
accordance with U.S. GAAP.
Reconciliation of GAAP Reported to
Selected Non-GAAP Pro Rata Consolidated Information
At December 31, 2014
IPCC Non-GAAP Pro-rata
Noncontrolling INP Retail LP Development
Unconsolidated Consolidated GAAP Reported
Interest (PGGM)
Properties properties
Information Total investment properties $ 1,519,604
(325 ) 364,463 2,062 12,790 1,898,594 Total assets 1,572,951 (1,886
) 251,697 2,455 7,640 1,832,857 Mortgages payable 384,769 — 168,689
— 6,267 559,725 Total liabilities 949,775 19 196,082 1,607 6,823
1,154,306
At December 31, 2013
IPCC Non-GAAP Pro-rata
Noncontrolling INP Retail LP Development
Unconsolidated Consolidated GAAP Reported
Interest (PGGM)
Properties properties
Information Total investment properties $ 1,533,870 —
306,434 2,062 13,261 1,855,627 Total assets 1,529,937 (2,249 )
250,224 2,460 9,928 1,790,300 Mortgages payable 497,832 — 163,630 —
9,295 670,757 Total liabilities 974,468 27 192,660 1,613 9,360
1,178,128
For the three months ended December 31,
2014 IPCC Non-GAAP
Pro-rata Noncontrolling INP Retail LP
Development Unconsolidated Consolidated
GAAP Reported Interest (PGGM)
Properties properties
Information Total revenues $ 50,638 — 13,083 — 616
64,337 Total expenses 40,448 (27 ) 9,914 1 403 50,739 Operating
income (loss) 10,190 27 3,169 (1 ) 213 13,598
For the
three months ended December 31, 2013
IPCC Non-GAAP Pro-rata
Noncontrolling INP Retail LP Development
Unconsolidated Consolidated GAAP Reported
Interest (PGGM)
Properties properties
Information Total revenues $ 52,605 — 11,405 — 211
64,221 Total expenses 58,796 (14 ) 7,768 73 131 66,754 Operating
income (loss) (6,191 ) 14 3,637 (73 ) 80 (2,533 )
For the
twelve months ended December 31, 2014
IPCC Non-GAAP Pro-rata
Noncontrolling INP Retail LP Development
Unconsolidated Consolidated GAAP Reported
Interest (PGGM)
Properties properties
Information Total revenues $ 204,762 — 49,526 — 1,498
255,786 Total expenses 166,448 (66 ) 35,320 5 904 202,611 Operating
income (loss) 38,314 66 14,206 (5 ) 594 53,175
For the
twelve months ended December 31, 2013
IN Retail Fund
IPCC Non-GAAP Pro-rata
Noncontrolling
LLC (NYSTRS)
INP Retail LP
Development Unconsolidated Consolidated
GAAP Reported Interest
(1)
(PGGM)
Properties properties
Information Total revenues $ 183,374 — 9,510 41,607
37 2,313 236,841 Total expenses 162,717 47 6,569 29,906 975 1,305
201,519 Operating income (loss) 20,657 (47 ) 2,941 11,701 (938 )
1,008 35,322
(1) Includes results through the June 3, 2013 acquisition
date.
Inland Real Estate Corporation Contact:Dawn Benchelt, Director
of Investor Relations(888) 331-4732ir@inlandrealestate.com
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