InvenTrust Properties Q4 2024 Earnings Report

InvenTrust Properties EPS Results

• Actual EPS: $0.43
• Consensus EPS: $0.04
• Beat/Miss: Beat by +$0.39
• One Year Ago EPS: N/A

InvenTrust Properties Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $69.69 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

InvenTrust Properties Announcement Details

• Quarter: Q4 2024
• Date: 2/11/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, February 12, 2025
• Conference Call Time: 10:00AM ET

InvenTrust Properties (NYSE:IVT) (NYSE: IVT) is a real estate investment trust focused on owning, leasing, developing and managing open-air retail properties. Its portfolio primarily consists of grocery-anchored neighborhood and community shopping centers designed to serve daily consumer needs.

The company concentrates on high-growth markets across the Sun Belt, including the Southeast, Southwest and other expanding regions of the United States. Its properties typically feature grocery stores, pharmacies, restaurants, service businesses and other necessity-oriented retailers, with tenant mixes intended to support recurring customer traffic.

InvenTrust traces its history to Inland American Real Estate Trust and became a publicly traded company on the New York Stock Exchange in 2021. In addition to acquiring and owning retail real estate, the company provides property management, leasing, redevelopment and development services to maintain and enhance its shopping-center portfolio.

InvenTrust Properties Q4 2024 Earnings Call Transcript

Key Takeaways

• The company delivered 5% growth in core FFO per share for both Q4 and full year 2024, marking the third consecutive year of cash flow growth above 4%, driven by higher occupancy, strong leasing spreads, disciplined expense management and strategic capital allocation.
• Robust demand for necessity-based retail in the Sunbelt—supported by a projected 7% population growth over the next decade and expanding tech, healthcare and logistics sectors—combined with the lowest retail development starts since 2015, underpins leasing momentum and supply constraints.
• Portfolio occupancy reached an all-time high of 97.4% lease occupancy (95.3% economic), with a 210-bp spread yielding approximately $6.3 million in incremental annualized base rent and a 94% tenant retention rate, setting the stage for accelerated AFFO growth.
• In H2 2024, the company raised about $250 million of equity to fund accretive acquisitions and retire variable-rate debt, closing on eight properties for $282 million (including four in Q4) and disposing of two for $68 million.
• The balance sheet remains strong with 100% fixed-rate debt at a 4.0% weighted average rate and 3.3-year maturity, net leverage at 23%, while the board approved a 5% dividend increase to $0.95; 2025 guidance calls for 3.5%–4.5% same-store NOI growth, FFO of $1.83–$1.89 and core FFO of $1.79–$1.83 per share.

Presentation

[Operator]

Thank you for standing by, and welcome to InvenTrust's Fourth Quarter and Full Year 2024 earnings conference call. My name is Elliott, and I'll be your conference call operator today. Before we begin, I would like to remind our listeners that today's presentation is being recorded, and the replay will be available on the Investors section of the company's website at inventrustproperties.com. If you'd like to register a question during today's event, please press star one on your telephone keypad. I'd now like to hand over to Mr. Dan Lombardo, Vice President, Investor Relations. Please go ahead, sir.

[Dan Lombardo, VP of Investor Relations at InvenTrust Properties]

Thank you, Operator, and good morning, everyone. Thank you for attending our call today. Joining me from the InvenTrust team is D.J. Busch, President and Chief Executive Officer, Mike Phillips, Chief Financial Officer, Christy David, Chief Operating Officer, and Dave Heimberger, Chief Investment Officer. Following the team's prepared remarks, the lines will be open for questions. As a reminder, some of today's comments may contain forward-looking statements about the company's views on the future of our business and financial performance, including forward-looking earnings guidance and future market conditions. These are based on management's current beliefs and expectations and are subject to various risks and uncertainties. Any forward-looking statements speak only as of today's date, and we assume no obligation to update any forward-looking statements made on today's call or that are in the quarterly financial supplemental or press release. In addition, we will also reference certain non-GAAP financial measures.

[Dan Lombardo, VP of Investor Relations at InvenTrust Properties]

The comparable GAAP financial measures are included in this quarter's earnings materials, which are posted on our Investor Relations website. With that, I will turn the call over to D.J.

[DJ Busch, President and CEO at InvenTrust Properties]

Thank you, Dan. Good morning, everyone, and welcome. I appreciate everyone joining us this morning. I'm going to start the call with some high-level commentary regarding the fourth quarter and full year 2024 accomplishments, as well as key strategic objectives for 2025. After that, Mike will provide more detail on our financial results and expectations for the year ahead. Finally, Christy will share highlights of our operational successes and offer additional color on market performance and leasing activity. We're pleased to report strong results for the fourth quarter and full year 2024, driven by robust demand for our properties and InvenTrust's highly effective capital deployment. Core FFO per share grew by 5% both in the fourth quarter and for the full year, which marks the third consecutive year of cash flow per share growth above 4%.

[DJ Busch, President and CEO at InvenTrust Properties]

Increased occupancy, solid leasing spreads, expense management, and strategic capital allocation continue to be the underpinning factors of our consistent above-sector average cash flow growth. Healthy economic growth, perpetual migration tailwinds, and favorable business conditions continue to drive demand across our markets. As we've consistently emphasized, Sun Belt cities are experiencing significant population inflows, particularly from higher-cost coastal areas, which is driving demand for our retail real estate. Recent forecasts project that the Sun Belt's population will grow by approximately 7% over the next decade, outpacing the national growth rate of less than 1%. Beyond these demographic trends, the region's expanding tech, healthcare, and logistics sectors create a solid foundation for sustained long-term job growth. We are especially optimistic about opportunities in these markets, where we believe demand will outpace supply, further enhancing the strength and resilience of our portfolio. Supporting this dynamic, retail development starts across the U.S.

[DJ Busch, President and CEO at InvenTrust Properties]

Fell to the lowest level since the first quarter of 2015, underscoring the constrained pipeline for retail strip centers. Leasing activity and portfolio operations remain impressive despite some well-documented retailer disruptions in late 2024 and early 2025. InvenTrust has minimal exposure to headline bankruptcies and store closures, and we fully expect to maintain significant leasing leverage across our properties in upcoming negotiations. We ended the year with lease occupancy at 97.4% and economic occupancy at 95.3%, a 210 basis points spread representing approximately $6.3 million in incremental annualized base rent expected to come online over the next several quarters. If you take into consideration an all-time high occupancy, the built-in leasing pipeline, and the high retention rate of our existing tenants, the recipe for accelerated AFFO and free cash flow growth is quite promising.

[DJ Busch, President and CEO at InvenTrust Properties]

Due to a relatively favorable capital markets backdrop in the late summer and early fall of 2024, coupled with a compelling mix of high-quality and accretive acquisition opportunities, we issued approximately $250 million of equity to accelerate growth. This meaningfully expanded our acquisition activity while also taking the opportunity to pay off expensive variable-rate debt. In the fourth quarter, we acquired four high-quality assets. In Charleston, a new market for InvenTrust, we added Market at Mill Creek, an 80,000 sq ft center anchored by a high-performing Lowes Foods. We also acquired Nexton Square, a 134,000 sq ft open-air lifestyle center featuring a strong mix of high-performing restaurants and local retailers. In Fort Myers, one of the fastest-growing cities in the U.S., according to the U.S. Census, we secured The Forum, a 186,000 sq ft center with 96% occupancy, shadow-anchored by a Target.

[DJ Busch, President and CEO at InvenTrust Properties]

As mentioned on our last call in October, we grew our presence in the Richmond market with Stonehenge Village. In total for 2024, we acquired eight properties for $282 million and opportunistically disposed of two properties for $68 million. As we move into 2025, we are highly confident in our ability to continue executing on our strategy and believe the future holds even greater promise for InvenTrust. We will remain focused on creating value through property acquisitions, portfolio optimization, operational excellence, and leveraging our in-place established platform. I'll now turn the call over to Mike for a detailed review of our financial results and to discuss our expectations for 2025. Mike.

[Mike Phillips, EVP, CFO, and Treasurer at InvenTrust Properties]

Thanks, D.J. InvenTrust closed out 2024 on a strong note, as our team and portfolio continued to perform at a high level, as reflected in our results. The company's full year Same-Property NOI reached $162.6 million, growing 5% over 2023. This represents our fourth consecutive year of Same-Property NOI growth exceeding 4%. The year-over-year increase was primarily driven by 270 basis points in base rent, with 150 basis points attributed to embedded rent bumps. Additionally, net expense reimbursement contributed approximately 170 basis points, with better collections from revenues deemed uncollectible adding 50 basis points. In the fourth quarter, Same-Property NOI grew 7.1% compared to Q4 of 2023. For the full year, Nareit FFO totaled $126.7 million, or $1.78 per diluted share, reflecting an increase of 4.7% over 2023. Core FFO rose 4.8% to $1.73 per share year-over-year.

[Mike Phillips, EVP, CFO, and Treasurer at InvenTrust Properties]

Growth was primarily driven by same-property NOI, debt acquisitions, and slightly offset by G&A and interest expense. The balance sheet remains in excellent shape, providing InvenTrust with the liquidity and flexibility needed to execute our long-term growth strategy. At year-end, InvenTrust's net leverage ratio stood at 23%, with our net debt to Adjusted EBITDA at 4.1 times on a trailing 12-month basis. Our entire debt structure is now 100% fixed. Our weighted average interest rate was 4%, with a weighted average maturity of 3.3 years. Finally, the Board of Directors approved an increase of 5% in the company's cash dividend for 2025. The new annualized rate of $0.95 will be reflected in the April dividend payment. Moving to guidance, we expect our performance and momentum to carry forward into the new year.

[Mike Phillips, EVP, CFO, and Treasurer at InvenTrust Properties]

Our full year Same-Property NOI growth guidance is in the range of 3.5%-4.5%, incorporating a bad debt reserve of 75-100 basis points of total revenue. This reserve accounts for the recent tenant bankruptcy assumptions as well as ordinary bad debt levels we expect in any given year. For Nareit FFO, we are providing guidance in the range of $1.83-$1.89 per share, representing a 4.5% increase at the midpoint over 2024. Our Core FFO guidance is $1.79-$1.83 per share, reflecting a 4.6% increase at the midpoint over last year. With expectations for acquisitions and dispositions, our net acquisition assumption is $100 million for 2025. Further details on our guidance assumptions are available in our supplemental disclosure filed yesterday. With that, I'll turn the call over to Christy to discuss our portfolio activity. Christy.

[Christy David, EVP, COO, and General Counsel & Secretary at InvenTrust Properties]

Thanks, Mike. We remain confident that InvenTrust is well-positioned to achieve near and long-term growth targets. Our Sun Belt portfolio of necessity-based retail assets, supported by our experienced leasing and property management teams, continues to deliver strong, above-average results. We remain focused on maximizing cash flow by optimizing rents, enhancing occupancy, and refining the merchandising mix across our centers. With 87% of our NOI coming from grocery-anchored assets, we recognize the vital role these tenants play in driving foot traffic to a thriving retail center. This dynamic strengthens our leasing leverage and brings additional value to our portfolio. At the time of our listing in 2021, our total portfolio lease occupancy stood at 93.5%. By the end of 2024, we achieved 97.4%, a 390 basis points increase, highlighting the exceptional quality of our centers and the appeal of our Sun Belt markets.

[Christy David, EVP, COO, and General Counsel & Secretary at InvenTrust Properties]

Anchor space lease occupancy ended the year at 99.8%, matching our all-time high achieved last quarter. Small shop lease occupancy finished the quarter at 93.3%, also an all-time high for our portfolio. Even at these unprecedented levels, our leasing team remains committed to further increasing occupancy, especially in the small shop category. In 2024, we signed 210 leases, totaling 1.3 million sq ft. Notable tenants signed in the fourth quarter include Skechers, Snooze, an A.M. Eatery, and Mendocino Farms. Beyond simply increasing occupancy, we believe that curating the right mix of national, regional, and local retailers is essential to creating a dynamic environment that drives tenant sales growth and maximizes leasing spreads for both new and renewal leases. By strategically assembling the best combination of necessity-based retailers for each market, we cultivate an atmosphere where tenants can prosper, fueling their success while enhancing our ability to grow rents.

[Christy David, EVP, COO, and General Counsel & Secretary at InvenTrust Properties]

InvenTrust's total portfolio ABR ended 2024 at $20.07 per sq ft, reflecting an increase of 3% compared to 2023. For the year, we delivered blended comparable leasing spreads of 11.3%, with new lease spreads at 16.6% and renewals at 10.6%. Our retention rate stood at 94% in 2024. High tenant retention remains a key element of our portfolio. This dynamic translates to better economics, reducing downtime and significantly lowering tenant improvement costs. Additionally, we have successfully embedded rent escalators of 3% or higher in 90% of our renewals, supporting long-term NOI growth. Moving to retail news, I want to briefly address the recent store closing and bankruptcies. At InvenTrust, we view this as part of the natural life cycle of retail. Disruption and store closures following the new year are predictable and expected.

[Christy David, EVP, COO, and General Counsel & Secretary at InvenTrust Properties]

While store closures remain below historical averages, they may be returning to more normalized levels compared to the last few years. As a reminder, our portfolio has one JOANN location in Austin, Texas, and three Party City locations that contribute collectively approximately 60 basis points of ABR. We have no exposure to Big Lots or The Container Store. As Mike mentioned earlier, any expected disruptions or assumed vacancies within our portfolio from distressed retailers are fully accounted for in our guidance. Despite these headlines, demand for high-quality retail space remains strong. Supply is still constrained, and many retailers are increasing their long-term store opening targets in our markets, recognizing the traffic and sales growth these locations can generate. We remain confident that any space we recapture presents an opportunity to drive rent growth and further enhance our tenant mix.

[Christy David, EVP, COO, and General Counsel & Secretary at InvenTrust Properties]

Before concluding, I want to take a moment to acknowledge the devastating wildfires in Southern California. The widespread destruction and loss are truly heartbreaking. Thankfully, all InvenTrust employees are safe, and at this time, our properties remain unaffected. We continue to closely monitor the situation, and InvenTrust is ready to provide support to our communities and tenants wherever it is needed. Operator, that concludes our prepared remarks, and you can open the line for questions.

[Operator]

Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from Dori Kesten with Wells Fargo. Your line is open. Please go ahead.

[Dori Kesten, Managing Director and Senior Analyst at Wells Fargo]

Thanks. Good morning. Based on what you've said previously about the likely trajectory of acquisitions this year, the $100 million net investment figure seemed a bit conservative. Is this meant to be what you're close to closing? I guess does it assume an acceleration in dispositions?

[DJ Busch, President and CEO at InvenTrust Properties]

Hey, Dori. Good morning. No, it's a great question. So when we think about 2025, I think we've said this in the past. When we're thinking about our initial acquisition guidance, what we really are trying to message is that we're going to continue being a net acquirer over the course of the year. The pace and acceleration of that really is dependent on our cost of capital. You did mention dispositions. We are going through a kind of capital recycling endeavor in 2025 with some of our properties in California, depending on what those pricing comes in. We think our California portfolio is probably our most attractive kind of use or cost of capital to redeploy those proceeds into some of the other markets that we've been a little bit more excited about and we've been recently more active in.

[DJ Busch, President and CEO at InvenTrust Properties]

So within that $100 million, you can expect the gross number to be materially higher than that, depending on the success of our disposition activity in our California markets.

[Dori Kesten, Managing Director and Senior Analyst at Wells Fargo]

Okay. And then your retention rate, I think, was about 94%, 95% this year, up from 90% last year. Can you talk through your expectations for this measure in 2025? And then kind of somewhat related, would you expect leasing spreads this year to be comparable to the low teens that you were able to achieve in 2024?

[DJ Busch, President and CEO at InvenTrust Properties]

Yeah. Maybe I'll just touch quickly on the retention rate, and then I'll have Christy give a little more color on what we're expecting from a spread standpoint. The 94% is probably a little bit higher than what we're expecting in 2025, only because of the known exits that we may have this year as it relates to Party City and to a lower probability than JOANN Fabrics. Other than that, when we think about 2025 and beyond, 90% retention rate is kind of the bogey for us, and that allows us to push spreads while also keeping capital costs low.

[Christy David, EVP, COO, and General Counsel & Secretary at InvenTrust Properties]

I mean, Dori, I just follow up on that and say that with respect to the leasing spreads, I think that our current run rate that you've seen over the past year should run similar into 2025, and we should be able to. The leasing team is focused on continuing to deliver at that rate.

[Dori Kesten, Managing Director and Senior Analyst at Wells Fargo]

Okay. Thank you.

[Operator]

We now turn to Jeff Spector with Bank of America. Your line is open. Please go ahead.

[Jeffrey Spector, Managing Director and Senior Wall Street Analyst at Bank of America]

Great. Thank you. And congratulations on a great 2024. Just thinking about some of the comments and your discussion around your best use of capital, the dispositions, California, what about the balance sheet? I mean, you are under-leveraged. I guess, how are you thinking about the balance sheet and using that to grow even faster?

[DJ Busch, President and CEO at InvenTrust Properties]

No, Jeff, it's a great comment. Obviously, coming off the equity raise last year, which we found to be pretty opportunistic, both just as it relates to what our cost of equity capital was at the time, but most importantly, our ability to go and acquire quickly and accretively to use those proceeds and show transparency and quick visibility to the market. But we're going to. That's the same recipe that we're planning on using this year. Now, as you can appreciate, California, as it relates to our property, we have a phenomenal California portfolio. It's a strategic decision for InvenTrust. I mean, California retail is core for most shopping center REITs, both public and private. We just have found that we have an opportunity set in some of our other core markets that are going to look more attractive to us over time.

[DJ Busch, President and CEO at InvenTrust Properties]

And because of that, we can make a nice little spread on that capital recycling or get very, very high-quality trophy properties in those markets that we otherwise probably wouldn't be able to go after, given where our cost of debt and cost of equity capital is if we were to just use the balance sheet. But we are in a position with the capacity on the balance sheet to lever up if the opportunity set presents itself, and we'll do that as you saw what we did in the back half of last year.

[Jeffrey Spector, Managing Director and Senior Wall Street Analyst at Bank of America]

Okay. Fair. Thank you. And then as the company has gotten more aggressive, let's say, on acquisitions, is that changing the conversation, let's say, with owners or sellers? I assume that there's a lot of competition to buy Sun Belt grocery-anchored centers. How do you think this has changed, let's say, IVT's profile or the ability to do deals versus others?

[DJ Busch, President and CEO at InvenTrust Properties]

No, it's a great question. I think what I would say is, look, it is an extremely competitive environment, and we've been successful both on marketed deals, off-marketed deals, and everything in between, and I think that's been kind of our recipe for success, and that's the reason why I think we feel more comfortable and confident continuing to invest all of our energy in some of the markets where you've seen us been active. I would say because of our cost of capital, both with our capital recycling program and then obviously where our multiple is, I think we have an ability to be appropriately aggressive and opportunistic, but it is a competitive environment, and we try to fully contemplate that as we think about our ability to be successful over the course of the year.

[Jeffrey Spector, Managing Director and Senior Wall Street Analyst at Bank of America]

Okay. Thank you. And then just to confirm on the same-store range at 3.5%-4.5%, I guess, is it just safe to assume that at the high end, you're assuming, let's say, you continue to move occupancy higher or leasing spreads are even stronger versus the bottom end? Let's say that the bad debt reserve, let's say the 75 basis points is more towards the 100 basis points. Is that fair to say? Or is there anything else to point out on the range of the same-store or why? Thank you.

[Mike Phillips, EVP, CFO, and Treasurer at InvenTrust Properties]

Yeah. Yeah. This is Mike. I think you've got it. Kind of the range from the top to bottom, really what can move it is the uncollectible lease income, the bad debt throughout the year, and then just getting tenants kind of in and operating on time. But the big driver would be the uncollectible lease income.

[Jeffrey Spector, Managing Director and Senior Wall Street Analyst at Bank of America]

Okay. Great. Thank you.

[Operator]

As a reminder, if you'd like to ask a question, please press star one on your telephone keypad now. We now turn to Linda Tsai with Jefferies. Your line is open. Please go ahead.

[Dori Kesten, Managing Director and Senior Analyst at Wells Fargo]

Hi. Thanks for taking my question. What is the appetite like for your California assets? Who are the potential buyers, and what kind of cap rate do you apply to those centers?

[DJ Busch, President and CEO at InvenTrust Properties]

Yeah. It's a good question, Linda. I would say California has always had a wide canvas of buyers, public, private, smaller, and then certainly some of the larger international and sovereign funds. I mean, that's the good and bad thing about California. It is extremely competitive because of the dynamics of that market. So we sold one California asset last year. We're in market with several assets currently. The demand has been very, very strong thus far, but nothing signed or executed yet. And we'll watch those. The important thing to note is we don't have to sell anything in California if we don't feel like we can redeploy those proceeds accretively.

[DJ Busch, President and CEO at InvenTrust Properties]

So if we're not satisfied with the price or the opportunity set on the buy side isn't as robust as we would hope, we have the ability to kind of slow or accelerate that pace accordingly because the most important thing is that we're moving cash flow forward for InvenTrust. As it relates to pricing, it would be too early to kind of comment on what that pricing looks like, but I would say that the goal is to, we're expecting pricing to come in. It would allow us to be, like I said earlier, appropriately aggressive on trophy properties in markets where we've been more active and at a positive spread.

[Dori Kesten, Managing Director and Senior Analyst at Wells Fargo]

Thanks for that. And then my second question is, for your recent acquisitions, how do you think about the mark-to-market opportunities in those assets?

[DJ Busch, President and CEO at InvenTrust Properties]

No, I mean, look, I think the one thing that we love about our portfolio in the Sun Belt is that market rents are outpacing our current growth profile. And maybe to give you a little context of that, for instance, in any given quarter, we'll have tenants miss an option notice date, in which case we get to renegotiate the lease, right? And I think the most recent quarter we're in 2024, we had about 23 tenants that missed their option period, in which case they would have probably had an increase in rent between, call it, in the high single digits. We were able to renegotiate those rents at closer to 30% spread. It gives us confidence that we're perpetually below market in many of our, in most of the portfolio.

[DJ Busch, President and CEO at InvenTrust Properties]

And that allows us to build a sustainable cash flow model, even if there is a slowdown in the economy, we still feel like we're in a good spot. And that's what we look for in our new acquisitions as well. The acquisitions that we tend to buy, it's market-rate driven as opposed to any type of significant occupancy or value-add upside, I would say.

[Dori Kesten, Managing Director and Senior Analyst at Wells Fargo]

Really helpful. Thank you.

[Operator]

We now turn to Floris van Dijkum with Compass Point. Your line is open. Please go ahead.

[Floris van Dijkum, Managing Director and Senior Research Analyst at Compass Point]

Hey. Thanks. Interesting. 20 tenants last quarter missed their option periods. Presumably, that was not in your budget. And it's not in your guidance either. Does that seem normal?

[DJ Busch, President and CEO at InvenTrust Properties]

Yeah. Floris, let me clarify. It was 23 tenants for the year. So when you think about all the activity throughout the year, it's not that much, but it is a nice surprise when it happens. But it would be very hard for us to forecast a subset of tenants missing their option date. If you were to do the percentage, it's certainly on the lower end, but it does give you an indication of where market rents are relative to where people are resigning due to option.

[Floris van Dijkum, Managing Director and Senior Research Analyst at Compass Point]

My question that I had before you mentioned the missing option thing, which prompted another, the cap rates on new acquisitions. One of the things that I find interesting is that I think you're really the only REIT right now that's playing in the town of South Charleston. You've got two assets there. Presumably, that means the returns that you're getting on those assets should be a little bit higher than more heavily trafficked markets like Houston, like Tampa, where a lot of the other REITs are active and a lot of the, obviously, the pool of private buyers is bigger as well. Maybe you can talk a little bit about the cap rates and if you see more opportunities in markets like Charleston and Richmond, which are not as heavily trafficked.

[DJ Busch, President and CEO at InvenTrust Properties]

No, that's actually a, it's a good observation, Floris. I would say yes. On a risk-adjusted basis, we think markets like a Charleston, like a Richmond, are equally as attractive. And it's a great complement to the InvenTrust portfolio, which tends to be anchored around those larger cities, right? So we have spent more time in canvassing the Charleston markets or markets, excuse me, or even markets like Asheville. Certainly, Nashville would be on the larger end, but Knoxville, some of these cities that are very complementary to the markets in which we already operate. And we can be very efficient in those markets. Now, I will tell you, the criteria in those markets is much more stringent, right? In Houston, we can own 10 assets. In Austin, we can own 10 assets. We're not there yet.

[DJ Busch, President and CEO at InvenTrust Properties]

But the point being, in these smaller markets, we may only get to two, three, or four, but we want to make sure that they are in the top quartile of assets or retail centers in those markets. So I think the bar is a little bit higher, but the risk-adjusted returns in the ones that we've identified are equally, or if not more compelling, than what we've seen in some of those larger markets where, to your point, can be a little bit more competitive.

[Floris van Dijkum, Managing Director and Senior Research Analyst at Compass Point]

The cap rates would be, or the risk-adjusted returns, are they 50-100 basis points higher?

[DJ Busch, President and CEO at InvenTrust Properties]

I would say the former. I mean, look, there are some of the highest quality assets in those markets with great growth profiles. So the initial yields are still going to be in the sixes, but we're still buying everything that we look at has to make sense. And that tends to be anywhere in the low to mid-sevens from a levered return perspective.

[Floris van Dijkum, Managing Director and Senior Research Analyst at Compass Point]

My last question maybe, and I apologize if I'm using up my question here, but wanted to, your cost of equity. I mean, you did raise a little bit of equity last quarter. Your stock continues to trade at sort of where consensus has your NAV. I know you have a pretty good balance sheet as it is, but how do you, if you see deals that you like and presumably you're scouring the markets, why not raise more equity to fund some of those transactions? Or maybe talk about your thinking on that.

[DJ Busch, President and CEO at InvenTrust Properties]

No, I think it's a good point, and obviously, we're very, very, our equity is precious. We want to make sure we're doing it at the right time, and anything we're doing is value-accretive for both current and prospective shareholders, but the opportunities that have to match it as well, and that's what was so fortuitous in the back half of last year, is that the pipeline, we had deals that were very close to under contract or under contract and had an immediate use of proceeds.

[DJ Busch, President and CEO at InvenTrust Properties]

Now, I'm not saying it has to be matched perfectly like that, but if our cost of equity capital continues to be attractive or get more attractive, and we can put those proceeds to use in an accretive manner and leverage our platform faster because the whole goal is to use this platform to grow cash flow faster than other options within the sector, we're going to absolutely do that. But we got to make sure that we can find opportunities and uses for that capital.

[Floris van Dijkum, Managing Director and Senior Research Analyst at Compass Point]

Thank you, DJ.

[DJ Busch, President and CEO at InvenTrust Properties]

Thank you.

[Operator]

We now turn to Paulina Rojas with Green Street. Your line is open. Please go ahead.

[Paulina Rojas, Senior Analyst at Green Street]

Good morning. I find Nexton Square-

[Mike Phillips, EVP, CFO, and Treasurer at InvenTrust Properties]

Morning.

[Paulina Rojas, Senior Analyst at Green Street]

Hi. I find Nexton Square an interesting property anchored closer to a lifestyle center. How does pricing for a property like this compare to a traditional grocery anchored center in terms of cap rate, and how do you think about the growth profile on a relative basis and the risk as well?

[DJ Busch, President and CEO at InvenTrust Properties]

Good morning, Paulina. Great questions. You're absolutely right. This is more of a lifestyle type of center. And the reason I say that it's unanchored, it doesn't have any traditional grocer or large box spaces. So you can imagine when we look at that, that certainly we own things like this, but they tend to have some sort of shadow grocer or some box components. What made this particular asset attractive to us was the market in which it's in, Nexton, which is up near Summerville. The market is growing very, very quickly, and this asset is serving that market and will continue to serve that market as it relates to a lot of the dining options and local retail options that it has. And we found the market, the in-place rents, very attractive to us.

[DJ Busch, President and CEO at InvenTrust Properties]

Obviously, there is a different risk profile when you remove some sort of grocer, but it's a really great complement for our portfolio because I think we've discussed with you and many in the past. InvenTrust anchors towards grocery and food centers, mostly necessity-based. But we are format agnostic, but we find the risk-adjusted returns attractive. This is a market-driven strategy, not an asset-specific strategy or retail asset-specific strategy, I should say. So you can see us do things like a Nexton Square, and you can see us do some things like The Forum, which tends to have a little bit more box, but it's in a market that we really, really like, and we got very comfortable with those rents as well.

[DJ Busch, President and CEO at InvenTrust Properties]

We're always going to anchor to those necessity-based centers, but these are nice complements with different growth profiles and risk profiles that I think complement and fill out the portfolio nicely.

[Paulina Rojas, Senior Analyst at Green Street]

In terms of pricing, how does the cap rate for something like this compare to a traditional high-quality grocery-anchored?

[DJ Busch, President and CEO at InvenTrust Properties]

I would say, let's put a cap rate aside, but when you think about the risk-adjusted returns, you can think of it kind of falling in between what you would consider core grocery anchored and on the low end and then power center. It would be somewhere in between. And obviously, the underwritten rents are going to move that, but that's kind of where some of these types of centers fall. And I will mention, it is on the smaller side of a lifestyle center, which obviously was attractive to us as well. So 130,000 or so sq ft, we got comfortable with the tenant mix and the current in-place rents.

Participants

Executives

• Mike Phillips, EVP, CFO, and Treasurer
• DJ Busch, President and CEO
• Dan Lombardo, VP of Investor Relations
• Christy David, EVP, COO, and General Counsel & Secretary

Analysts

• Jeffrey Spector, Managing Director and Senior Wall Street Analyst at Bank of America
• Dori Kesten, Managing Director and Senior Analyst at Wells Fargo
• Paulina Rojas, Senior Analyst at Green Street
• Floris van Dijkum, Managing Director and Senior Research Analyst at Compass Point