OAK BROOK, Ill., Feb. 13, 2018 /PRNewswire/ — Retail Properties of America, Inc. (NYSE: RPAI) (the “Company”) today reported financial and operating results for the quarter and year ended December 31, 2017.

FINANCIAL RESULTS
For the quarter ended December 31, 2017, the Company reported:

  • Net income attributable to common shareholders of $103.1 million, or $0.46 per diluted share, compared to $15.9 million, or $0.07 per diluted share, for the same period in 2016;
  • Funds from operations (FFO) attributable to common shareholders of $50.4 million, or $0.23 per diluted share, compared to $52.9 million, or $0.22 per diluted share, for the same period in 2016; and
  • Operating funds from operations (Operating FFO) attributable to common shareholders of $56.4 million, or $0.25 per diluted share, compared to $59.9 million, or $0.25 per diluted share, for the same period in 2016.

For the year ended December 31, 2017, the Company reported:

  • Net income attributable to common shareholders of $237.6 million, or $1.03 per diluted share, compared to $157.4 million, or $0.66 per diluted share, for 2016;
  • FFO attributable to common shareholders of $168.8 million, or $0.73 per diluted share, compared to $268.0 million, or $1.13 per diluted share, for 2016; and
  • Operating FFO attributable to common shareholders of $245.5 million, or $1.06 per diluted share, compared to $257.2 million, or $1.09 per diluted share, for 2016.

OPERATING RESULTS
For the quarter ended December 31, 2017, the Company’s portfolio results were as follows:

  • 2.7% increase in same store net operating income (NOI) over the comparable period in 2016;
  • Total same store portfolio percent leased, including leases signed but not commenced: 95.2% at December 31, 2017, up 120 basis points from 94.0% at September 30, 2017 and down 30 basis points from 95.5% at December 31, 2016;
  • Retail portfolio percent leased, including leases signed but not commenced: 94.9% at December 31, 2017, up 220 basis points from 92.7% at September 30, 2017 and down 10 basis points from 95.0% at December 31, 2016;
  • Retail portfolio annualized base rent (ABR) per occupied square foot of $18.72 at December 31, 2017, up 9.4% from $17.11 ABR per occupied square foot at December 31, 2016;
  • 665,000 square feet of retail leasing transactions comprised of 126 new and renewal leases; and
  • Positive comparable cash leasing spreads of 37.4% on new leases and 5.1% on renewal leases for a blended re-leasing spread of 16.3%.

For the year ended December 31, 2017, the Company’s portfolio results were as follows:

  • 2.0% increase in same store NOI over the comparable period in 2016;
  • 2,715,000 square feet of retail leasing transactions comprised of 510 new and renewal leases; and
  • Positive comparable cash leasing spreads of 28.6% on new leases and 6.4% on renewal leases for a blended re-leasing spread of 10.1%.

2017 marks the year we virtually completed our portfolio transformation plan with over $1.1 billion in total transactions,” stated Steve Grimes, president and chief executive officer. “We achieved an all-time high for blended re-leasing spreads of 10% and further strengthened our best-in-class balance sheet with the redemption of our preferred equity, ending the year with net debt to adjusted EBITDA of 5.5x.  Our very well-positioned portfolio, platform and balance sheet will allow us to make the turn and focus inward as we begin to capitalize on our organic growth opportunities.”

INVESTMENT ACTIVITY
Dispositions
In 2017, the Company completed $917.8 million of dispositions, which included the sales of 41 multi-tenant retail assets for $870.2 million, six single-user retail assets for $30.1 million and one single-user parcel for $17.5 million. The Company completed its multi-tenant retail exit from six states and 25 markets in 2017.

During the quarter ended December 31, 2017, the Company completed $275.1 million of dispositions, which included the sales of 13 multi-tenant retail assets.

Subsequent to year end, the Company completed the sale of one single-user retail asset, which was classified as held for sale as of December 31, 2017, for $6.9 million. The Company is under contract for dispositions totaling $173.1 million, comprised of its one remaining office building, Schaumburg Towers, which is located in the northwest suburbs of Chicago, for a purchase price of $86.6 million, five multi-tenant retail assets for $83.1 million and two single-user retail assets for $3.4 million. These transactions are expected to close during the first quarter of 2018, subject to satisfaction of customary closing conditions.

Acquisitions
In 2017, the Company completed $202.9 million of acquisitions, which included three multi-tenant retail shopping centers, five additional phases at One Loudoun Downtown, the fee interest in an existing multi-tenant retail shopping center and an outparcel at an existing multi-tenant retail shopping center. These acquisitions are located in the Chicago, Dallas, New York and Washington, D.C. metropolitan statistical areas (MSAs) and possess strong demographic profiles, with weighted average household income of $142,000 and weighted average population of 98,000 within a three-mile radius.

During the quarter, the Company completed the acquisition of the Z Gallerie Building at Southlake Town Square in the Dallas MSA for $7.0 million. In addition, the Company completed the acquisition of Plaza del Lago, a grocery-anchored center located in the affluent community of Wilmette, Illinois in the Chicago MSA, for a gross purchase price of $48.3 million. Plaza del Lago sits in a high barrier-to-entry sub-market and features 100,213 square feet of retail and office space as well as 15 second-story residential apartments. Plaza del Lago is 91.2% leased and anchored by a diverse line-up of retailers including Jewel-Osco, Starbucks, CVS Pharmacy and NorthShore University HealthSystem, as well as a variety of boutique local restaurants and soft-goods retailers. The property is located within a “super-zip,” one of the most affluent and well-educated zip codes in the country, and boasts average household income of $163,000 and population of 83,000 within a three-mile radius.

APPOINTMENT OF CHIEF FINANCIAL OFFICER
On February 6, 2018, the board of directors of the Company appointed Julie M. Swinehart to serve as the Company’s executive vice president, chief financial officer and treasurer. Ms. Swinehart’s role will include the oversight and execution of all the Company’s financial activities, including internal and external reporting, capital markets, investor relations, internal audit and treasury.

Ms. Swinehart joined RPAI in June 2008 and held the position of senior vice president and chief accounting officer from July 2015 through February 2018. Before assuming her role as chief accounting officer in 2015, Ms. Swinehart served as the Company’s senior vice president and corporate controller since April 2013 and held various accounting and financial reporting positions since joining the team in 2008. Before joining RPAI, Ms. Swinehart was a manager of external reporting at Equity Office Properties Trust for two years and she spent eight years in public accounting in the audit practices of Arthur Andersen LLP and Deloitte & Touche LLP. Ms. Swinehart received her B.S. in accountancy from the University of Illinois at Urbana-Champaign and is a certified public accountant.

BALANCE SHEET AND CAPITAL MARKETS ACTIVITY
As of December 31, 2017, the Company had approximately $1.8 billion of consolidated indebtedness with a weighted average contractual interest rate of 3.83%, a weighted average maturity of 5.1 years and a net debt to adjusted EBITDA ratio of 5.5x.

During 2017, the Company executed on numerous significant capital markets initiatives, including the following:

  • In January, defeased the $379.4 million IW JV cross-collateralized portfolio of mortgages payable that was scheduled to mature in 2019 and had an interest rate of 7.50%. In connection with this transaction, the Company incurred approximately $60.2 million in defeasance costs;
  • During 2017, repaid $102.1 million of mortgage debt, excluding amortization, with a weighted average interest rate of 5.63%, of which $7.7 million was repaid during the fourth quarter with an interest rate of 7.70%. In connection with these transactions, the Company incurred approximately $8.3 million in prepayment penalties;
  • In January, drew the full balance of a seven-year $200.0 million senior unsecured term loan (Term Loan Due 2023) with an interest rate of London Interbank Offered Rate (LIBOR) plus a credit spread between 1.70% and 2.55% based on the Company’s leverage ratio. The applicable credit spread was 1.70% as of December 31, 2017;
  • In January, entered into two interest rate swap agreements to effectively fix the interest rate on the Term Loan Due 2023 at 1.26% plus the applicable credit spread through November 2018;
  • In September, repaid $100.0 million of its unsecured term loan due 2018, which had an interest rate of 2.93% and a remaining outstanding balance of $100.0 million as of December 31, 2017;
  • In December, redeemed all 5.4 million outstanding shares of its 7.00% Series A cumulative redeemable preferred stock for cash at a redemption price of $25.00 per preferred share, plus $0.3840 per preferred share representing all accrued and unpaid dividends;
  • In December, entered into three interest rate swap agreements to effectively fix the interest rate on its unsecured term loan due 2021 at 2.00% plus a credit spread based on the Company’s leverage ratio through January 2021. The applicable credit spread was 1.30% as of December 31, 2017;
  • During 2017, repurchased 17.7 million shares of common stock under its stock repurchase program at an average price per share of $12.82 for a total of approximately $227.1 million, of which 7.9 million shares of common stock were repurchased during the fourth quarter at an average price per share of $12.90 for a total of approximately $101.5 million; and
  • In December, the Company’s Board of Directors authorized a $250.0 million increase to the size of its existing stock repurchase program. Together with amounts previously authorized that have not been used for repurchases, the Company has approximately $264.1 million available for repurchases under its stock repurchase program as of December 31, 2017.

2018 GUIDANCE
The Company expects to generate net income attributable to common shareholders of $0.36 to $0.40 per diluted share in 2018. The Company expects to generate Operating FFO of $0.98 to $1.02 per diluted share in 2018, based, in part, on the following assumptions:

  • Same store NOI growth of 2.0% to 3.0%;
  • Asset acquisitions of $50 to $150 million;
  • Asset dispositions of approximately $200 million; and
  • General and administrative expenses of $40 to $43 million.

The following table reconciles the Company’s reported 2017 Operating FFO to the Company’s 2018 Operating FFO guidance range.

Low

High

2017 Operating FFO per common share outstanding – diluted

$1.06

$1.06

2017 net retail investment activity

(0.12)

(0.12)

2018 net retail investment activity(1)

(0.04)

(0.025)

Schaumburg Towers

0.015

0.015

Subtotal

$0.915

$0.93

Same store NOI growth

0.025

0.04

Redevelopment assets(2)

(0.005)

(0.005)

Interest expense(1)

0.02

0.015

General and administrative expenses

(0.005)

0.01

Lease termination fee income(3)

(0.005)

(0.005)

Non-cash items(4)

(0.005)

(0.005)

Preferred stock dividends

0.04

0.04

2018 estimated Operating FFO per common share outstanding – diluted

$0.98

$1.02

(1) Reflects the expected relative timing of acquisitions and dispositions during the year

(2) Primarily represents three properties where the Company has begun redevelopment and/or activities in anticipation of future redevelopment: Reisterstown Road Plaza, Towson Circle and Boulevard at the Capital Centre

(3) The Company has not forecasted speculative lease termination fee income for 2018

(4) Non-cash items include straight-line rental income, amortization of above and below market lease intangibles and lease inducements, and non-cash ground rent expense

DIVIDEND
On February 8, 2018, the Company declared the first quarter 2018 quarterly cash dividend of $0.165625 per share on its outstanding Class A common stock, which will be paid on April 10, 2018 to Class A common shareholders of record on March 27, 2018.

WEBCAST AND CONFERENCE CALL INFORMATION
The Company’s management team will hold a webcast on Wednesday, February 14, 2018 at 11:00 AM (ET), to discuss its quarterly and full year financial results and operating performance, as well as business highlights and outlook. In addition, the Company may discuss business and financial developments and trends and other matters affecting the Company, some of which may not have been previously disclosed.

A live webcast will be available online on the Company’s website at www.rpai.com in the INVEST section. A replay of the webcast will be available. To listen to the replay, please go to www.rpai.com in the INVEST section of the website and follow the instructions.

The conference call can be accessed by dialing (877) 705-6003 or (201) 493-6725 for international participants. Please dial in at least ten minutes prior to the start of the call to register. A replay of the call will be available from 2:00 PM (ET) on February 14, 2018 until midnight (ET) on February 28, 2018. The replay can be accessed by dialing (844) 512-2921 or (412) 317-6671 for international callers and entering pin number 13674071.

SUPPLEMENTAL INFORMATION
The Company has posted supplemental financial and operating information and other data in the INVEST section of its website.

ABOUT RPAI
Retail Properties of America, Inc. is a REIT that owns and operates high quality, strategically located shopping centers in the United States. As of December 31, 2017, the Company owned 112 retail operating properties representing 20.3 million square feet. The Company is publicly traded on the New York Stock Exchange under the ticker symbol RPAI. Additional information about the Company is available at www.rpai.com.

SAFE HARBOR LANGUAGE
The statements and certain other information contained in this press release, which can be identified by the use of forward-looking terminology such as “believes,” “expects,” “may,” “should,” “intends,” “plans,” “estimates,” “continue” or “anticipates” and variations of such words or similar expressions or the negative of such words, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbors created thereby. These forward-looking statements reflect the Company’s current views about its plans, intentions, expectations, strategies and prospects, which are based on the information currently available to the Company and on assumptions it has made. Although the Company believes that its plans, intentions, expectations, strategies and prospects as reflected in or suggested by those forward-looking statements are reasonable, the Company can give no assurance that such plans, intentions, expectations or strategies will be attained or achieved. Furthermore, these forward-looking statements should be considered as subject to the many risks and uncertainties that exist in the Company’s operations and business environment. Such risks and uncertainties could cause actual results to differ materially from those projected. These uncertainties include, but are not limited to, economic, business and financial conditions, and changes in the Company’s industry and changes in the real estate markets in particular, rental rates and/or vacancy rates, frequency and magnitude of defaults on, early terminations of or non-renewal of leases by tenants, bankruptcy or insolvency of a major tenant or a significant number of smaller tenants, interest rates or operating costs, real estate valuations, the availability, terms and deployment of capital, general volatility of the capital and credit markets and the market price of the Company’s Class A common stock, risks generally associated with real estate acquisitions and dispositions, including the Company’s ability to identify and pursue acquisition and disposition opportunities, risks generally associated with redevelopment, including the impact of construction delays and cost overruns, the Company’s ability to lease redeveloped space and identify and pursue redevelopment opportunities, competitive and cost factors, the Company’s ability to enter into new leases or renew leases on favorable terms, the Company’s ability to create long-term shareholder value, satisfaction of closing conditions to the pending transactions described herein, regulatory changes and other risk factors, including those detailed in the sections of the Company’s most recent Forms 10-K and 10-Q filed with the SEC titled “Risk Factors.” The Company assumes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

NON-GAAP FINANCIAL MEASURES
As defined by the National Association of Real Estate Investment Trusts (NAREIT), an industry trade group, Funds From Operations (FFO) means net income (loss) computed in accordance with generally accepted accounting principles (GAAP), excluding gains (or losses) from sales of depreciable real estate, plus depreciation and amortization and impairment charges on depreciable real estate. The Company has adopted the NAREIT definition in its computation of FFO attributable to common shareholders. The Company believes that, subject to the following limitations, FFO attributable to common shareholders provides a basis for comparing its performance and operations to those of other real estate investment trusts (REITs). The Company believes that FFO attributable to common shareholders, which is a supplemental non-GAAP financial measure, provides an additional and useful means to assess the operating performance of REITs. FFO attributable to common shareholders does not represent an alternative to (i) “Net income” or “Net income attributable to common shareholders” as an indicator of the Company’s financial performance, or (ii) “Cash flows from operating activities” in accordance with GAAP as a measure of the Company’s capacity to fund cash needs, including the payment of dividends.

The Company also reports Operating FFO attributable to common shareholders, which is defined as FFO attributable to common shareholders excluding the impact of discrete non-operating transactions and other events which the Company does not consider representative of the comparable operating results of its real estate operating portfolio, which is its core business platform. Specific examples of discrete non-operating transactions and other events include, but are not limited to, the impact on earnings from gains or losses associated with the early extinguishment of debt or other liabilities, impairment charges to write down the carrying value of assets other than depreciable real estate, litigation involving the Company, including actual or anticipated settlement and associated legal costs, the impact on earnings from executive separation and the excess of redemption value over carrying value of preferred stock redemption, which are not otherwise adjusted in the Company’s calculation of FFO attributable to common shareholders. The Company believes that Operating FFO attributable to common shareholders, which is a supplemental non-GAAP financial measure, provides an additional and useful means to assess the operating performance of REITs. Operating FFO attributable to common shareholders does not represent an alternative to (i) “Net income” or “Net income attributable to common shareholders” as an indicator of the Company’s financial performance, or (ii) “Cash flows from operating activities” in accordance with GAAP as a measure of the Company’s capacity to fund cash needs, including the payment of dividends. Comparison of the Company’s presentation of Operating FFO attributable to common shareholders to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in definition and application by such REITs.

The Company also reports Net Operating Income (NOI), which it defines as all revenues other than straight-line rental income, amortization of lease inducements, amortization of acquired above and below market lease intangibles and lease termination fee income, less real estate taxes and all operating expenses other than straight-line ground rent expense (non-cash) and amortization of acquired ground lease intangibles (non-cash). NOI consists of Same Store NOI and NOI from Other Investment Properties. Same Store NOI for the three months and year ended December 31, 2017 represents NOI from the Company’s same store portfolio consisting of 102 retail operating properties acquired or placed in service and stabilized prior to January 1, 2016. NOI from Other Investment Properties for the three months and year ended December 31, 2017 represents NOI primarily from properties acquired during 2016 and 2017, the Company’s one remaining office property, three properties where the Company has begun redevelopment and/or activities in anticipation of future redevelopment, the properties that were sold or held for sale in 2016 and 2017, the net income from the Company’s wholly-owned captive insurance company and the historical ground rent expense related to an existing same store investment property that was subject to a ground lease with a third party prior to the Company’s acquisition of the fee interest on April 29, 2016. The Company believes that NOI, Same Store NOI and NOI from Other Investment Properties, which are supplemental non-GAAP financial measures, provide an additional and useful operating perspective not immediately apparent from “Operating income” or “Net income attributable to common shareholders” in accordance with GAAP. The Company uses these measures to evaluate its performance on a property-by-property basis because they allow management to evaluate the impact that factors such as lease structure, lease rates and tenant base have on the Company’s operating results. NOI, Same Store NOI and NOI from Other Investment Properties do not represent alternatives to “Net income” or “Net income attributable to common shareholders” in accordance with GAAP as indicators of the Company’s financial performance. Comparison of the Company’s presentation of NOI, Same Store NOI and NOI from Other Investment Properties to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in definition and application by such REITs.

Adjusted EBITDA is a supplemental non-GAAP financial measure and represents net income attributable to common shareholders before interest, income taxes, depreciation and amortization, as further adjusted to eliminate the impact of certain items that the Company does not consider indicative of its ongoing performance. The Company believes that Adjusted EBITDA is useful because it allows investors and management to evaluate and compare the Company’s performance from period to period in a meaningful and consistent manner in addition to standard financial measurements under GAAP. Adjusted EBITDA should not be considered an alternative to “Net income attributable to common shareholders” as an indicator of the Company’s financial performance. Comparison of the Company’s presentation of Adjusted EBITDA to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in definition and application by such REITs.

Net Debt to Adjusted EBITDA is a supplemental non-GAAP financial measure and represents (i) the Company’s total notional debt, excluding unamortized premium, discount and capitalized loan fees, less cash and cash equivalents and disposition proceeds temporarily restricted related to potential Internal Revenue Code Section 1031 tax-deferred exchanges (1031 Exchanges) divided by (ii) Adjusted EBITDA for the prior three months, annualized. The Company believes that this ratio is useful because it provides investors with information regarding its total notional debt net of cash and cash equivalents and disposition proceeds temporarily restricted related to potential 1031 Exchanges, which could be used to repay debt, compared to its performance as measured using Adjusted EBITDA. Comparison of the Company’s presentation of Net Debt to Adjusted EBITDA to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in definition and application by such REITs.

CONTACT INFORMATION
Michael Fitzmaurice
Senior Vice President – Finance
Retail Properties of America, Inc.         
(630) 634-4233

 

Retail Properties of America, Inc.

Consolidated Balance Sheets

(amounts in thousands, except par value amounts)

(unaudited)

December 31,
 2017

December 31,
 2016

Assets

Investment properties:

Land

$

1,066,705

$

1,191,403

Building and other improvements

3,686,200

4,284,664

Developments in progress

33,022

23,439

4,785,927

5,499,506

Less accumulated depreciation

(1,215,990)

(1,443,333)

Net investment properties

3,569,937

4,056,173

Cash and cash equivalents

25,185

53,119

Accounts and notes receivable (net of allowances of $6,567 and $6,886, respectively)

71,678

78,941

Acquired lease intangible assets, net

122,646

142,015

Assets associated with investment properties held for sale

3,647

30,827

Other assets, net

125,171

91,898

Total assets

$

3,918,264

$

4,452,973

Liabilities and Equity

Liabilities:

Mortgages payable, net (includes unamortized premium of $1,024 and $1,437, respectively, unamortized discount of $(579) and $(622), respectively, and unamortized capitalized loan fees of $(615) and $(5,026), respectively)

$

287,068

$

769,184

Unsecured notes payable, net (includes unamortized discount of $(853) and $(971), respectively, and unamortized capitalized loan fees of $(3,399) and $(3,886), respectively)

695,748

695,143

Unsecured term loans, net (includes unamortized capitalized loan fees of $(2,730) and $(2,402), respectively)

547,270

447,598

Unsecured revolving line of credit

216,000

86,000

Accounts payable and accrued expenses

82,698

83,085

Distributions payable

36,311

39,222

Acquired lease intangible liabilities, net

97,971

105,290

Liabilities associated with investment properties held for sale

864

Other liabilities

69,498

74,501

Total liabilities

2,032,564

2,300,887

Commitments and contingencies

Equity:

Preferred stock, $0.001 par value, 10,000 shares authorized, 7.00% Series A cumulative redeemable preferred stock, liquidation preference $135,000, 0 and 5,400 shares issued and outstanding as of December 31, 2017 and 2016, respectively

5

Class A common stock, $0.001 par value, 475,000 shares authorized, 219,237 and 236,770 shares issued and outstanding as of December 31, 2017 and 2016, respectively

219

237

Additional paid-in capital

4,574,428

4,927,155

Accumulated distributions in excess of earnings

(2,690,021)

(2,776,033)

Accumulated other comprehensive income

1,074

722

Total equity

1,885,700

2,152,086

Total liabilities and equity

$

3,918,264

$

4,452,973

 

Retail Properties of America, Inc.

Consolidated Statements of Operations

(amounts in thousands, except per share amounts)

(unaudited)

Three Months Ended

December 31,

Year Ended

December 31,

2017

2016

2017

2016

Revenues

Rental income

$

97,836

$

111,577

$

414,804

$

455,658

Tenant recovery income

27,610

29,429

115,944

118,569

Other property income

1,142

1,746

7,391

8,916

Total revenues

126,588

142,752

538,139

583,143

Expenses

Operating expenses

22,116

22,457

84,556

85,895

Real estate taxes

17,526

20,808

82,755

81,774

Depreciation and amortization

46,598

60,828

203,866

224,430

Provision for impairment of investment properties

8,147

9,328

67,003

20,376

General and administrative expenses

11,356

11,233

40,724

44,522

Total expenses

105,743

124,654

478,904

456,997

Operating income

20,845

18,098

59,235

126,146

Gain on extinguishment of debt

13,653

Gain on extinguishment of other liabilities

6,978

Interest expense

(18,015)

(31,387)

(146,092)

(109,730)

Other (expense) income, net

(7)

(386)

373

63

Income (loss) from continuing operations

2,823

(13,675)

(86,484)

37,110

Gain on sales of investment properties

107,101

31,970

337,975

129,707

Net income

109,924

18,295

251,491

166,817

Preferred stock dividends

(6,780)

(2,363)

(13,867)

(9,450)

Net income attributable to common shareholders

$

103,144

$

15,932

$

237,624

$

157,367

Earnings per common share – basic and diluted

Net income per common share attributable to common shareholders

$

0.46

$

0.07

$

1.03

$

0.66

Weighted average number of common shares outstanding – basic

222,942

236,528

230,747

236,651

Weighted average number of common shares outstanding – diluted

223,095

236,852

230,927

236,951

 

Retail Properties of America, Inc.

Reconciliation of Non-GAAP Financial Measures

(amounts in thousands, except per share amounts)

(unaudited)

Funds From Operations (FFO) Attributable to Common Shareholders and

Operating FFO Attributable to Common Shareholders

Three Months Ended

December 31,

Year Ended

December 31,

2017

2016

2017

2016

Net income attributable to common shareholders

$

103,144

$

15,932

$

237,624

$

157,367

Depreciation and amortization of depreciable real estate

46,253

60,441

202,110

223,018

Provision for impairment of investment properties

8,147

8,485

67,003

17,369

Gain on sales of depreciable investment properties

(107,101)

(31,970)

(337,975)

(129,707)

FFO attributable to common shareholders

$

50,443

$

52,888

$

168,762

$

268,047

FFO attributable to common shareholders per common share outstanding – diluted

$

0.23

$

0.22

$

0.73

$

1.13

FFO attributable to common shareholders

$

50,443

$

52,888

$

168,762

$

268,047

Impact on earnings from the early extinguishment of debt, net

979

5,814

72,654

(7,028)

Provision for hedge ineffectiveness

(7)

14

9

(21)

Provision for impairment of non-depreciable investment property

843

3,007

Gain on extinguishment of other liabilities

(6,978)

Impact on earnings from executive separation, net (a)

(1,086)

Excess of redemption value over carrying value of preferred stock redemption (b)

4,706

4,706

Other (c)

253

321

441

132

Operating FFO attributable to common shareholders

$

56,374

$

59,880

$

245,486

$

257,159

Operating FFO attributable to common shareholders per common share outstanding – diluted

$

0.25

$

0.25

$

1.06

$

1.09

Weighted average number of common shares outstanding – diluted

223,095

236,852

230,927

236,951

(a)

Reflected as a reduction to “General and administrative expenses” in the consolidated statements of operations.

(b)

Included in “Preferred stock dividends” in the consolidated statements of operations.

(c)

Primarily consists of the impact on earnings from litigation involving the Company, including actual or anticipated settlement and associated legal costs, which are included in “Other (expense) income, net” in the consolidated statements of operations.

 

FFO Attributable to Common Shareholders and Operating FFO Attributable to Common Shareholders Guidance

Per Share Guidance Range

Full Year 2018

Low

High

Net income attributable to common shareholders

$

0.36

$

0.40

Depreciation and amortization of depreciable real estate

0.785

0.785

Provision for impairment of investment properties

Gain on sales of depreciable investment properties

(0.15)

(0.15)

FFO attributable to common shareholders

$

0.995

$

1.035

Impact on earnings from the early extinguishment of debt, net

0.01

0.01

Provision for hedge ineffectiveness

Gain on sale of non-depreciable investment property

(0.025)

(0.025)

Other

Operating FFO attributable to common shareholders

$

0.98

$

1.02

 

Retail Properties of America, Inc.

Reconciliation of Non-GAAP Financial Measures (continued)

(amounts in thousands)

(unaudited)

Reconciliation of Net Income Attributable to Common Shareholders to Same Store NOI

Three Months Ended
December 31,

Year Ended
December 31,

2017

2016

2017

2016

Net income attributable to common shareholders

$

103,144

$

15,932

$

237,624

$

157,367

Adjustments to reconcile to Same Store NOI:

Preferred stock dividends

6,780

2,363

13,867

9,450

Gain on sales of investment properties

(107,101)

(31,970)

(337,975)

(129,707)

Depreciation and amortization

46,598

60,828

203,866

224,430

Provision for impairment of investment properties

8,147

9,328

67,003

20,376

General and administrative expenses

11,356

11,233

40,724

44,522

Gain on extinguishment of debt

(13,653)

Gain on extinguishment of other liabilities

(6,978)

Interest expense

18,015

31,387

146,092

109,730

Straight-line rental income, net

(1,537)

(1,547)

(4,646)

(4,601)

Amortization of acquired above and below market lease intangibles, net

(1,551)

(579)

(3,313)

(2,991)

Amortization of lease inducements

241

216

1,065

1,033

Lease termination fees, net

289

(269)

(2,021)

(3,339)

Straight-line ground rent expense

673

881

2,710

3,253

Amortization of acquired ground lease intangibles

(140)

(140)

(560)

(560)

Other expense (income), net

7

386

(373)

(63)

NOI

84,921

98,049

364,063

408,269

NOI from Other Investment Properties

(13,412)

(28,431)

(77,145)

(127,002)

Same Store NOI

$

71,509

$

69,618

$

286,918

$

281,267

 

Retail Properties of America, Inc.

Reconciliation of Non-GAAP Financial Measures (continued)

(amounts in thousands, except ratios)

(unaudited)

Reconciliation of Mortgages Payable, Net, Unsecured Notes Payable, Net, Unsecured Term Loans, Net and

Unsecured Revolving Line of Credit to Total Net Debt and Total Net Debt and Preferred Stock

December 31,
 2017

December 31,
 2016

Mortgages payable, net

$

287,068

$

769,184

Unsecured notes payable, net

695,748

695,143

Unsecured term loans, net

547,270

447,598

Unsecured revolving line of credit

216,000

86,000

Total

1,746,086

1,997,925

Mortgage premium, net of accumulated amortization

(1,024)

(1,437)

Mortgage discount, net of accumulated amortization

579

622

Unsecured notes payable discount, net of accumulated amortization

853

971

Capitalized loan fees, net of accumulated amortization

6,744

11,314

Total notional debt

1,753,238

2,009,395

Less: consolidated cash and cash equivalents

(25,185)

(53,119)

Less: disposition proceeds temporarily restricted related to potential Internal Revenue Code Section 1031 tax-deferred exchanges

(54,087)

Total net debt

1,673,966

1,956,276

Series A preferred stock (a)

135,000

Total net debt and preferred stock

$

1,673,966

$

2,091,276

Net Debt to Adjusted EBITDA (b)

5.5x

5.6x

Net Debt and Preferred Stock to Adjusted EBITDA (a) (b)

5.5x

6.0x

 

Reconciliation of Net Income Attributable to Common Shareholders to Adjusted EBITDA

Three Months Ended December 31,

2017

2016

Net income attributable to common shareholders

$

103,144

$

15,932

Preferred stock dividends

6,780

2,363

Interest expense

18,015

31,387

Depreciation and amortization

46,598

60,828

Gain on sales of investment properties

(107,101)

(31,970)

Provision for impairment of investment properties

8,147

9,328

Adjusted EBITDA

$

75,583

$

87,868

Annualized

$

302,332

$

351,472

(a)

On December 20, 2017, the Company redeemed all 5,400 outstanding shares of its 7.00% Series A cumulative redeemable preferred stock for cash at a redemption price of $25.00 per preferred share.

(b)

For purposes of these ratio calculations, annualized three months ended figures were used.

 

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SOURCE Retail Properties of America, Inc.