RPT Realty Reports Third Quarter 2020 Results; Provides COVID-19 Update

  • Net (loss) income attributable to common shareholders for the third quarter 2020 of $(3.6) million, or $(0.05) per diluted share, compared to $3.8 million, or $0.05 per diluted share for the same period in 2019.

  • 94% of total tenants were open and operating, as of October 30, 2020, based on annualized base rent ("ABR").
     
  • 90% of October and 87% of third quarter 2020 rent and recovery income have been paid as of October 30, 2020.
     
  • Generated a 42.9% comparable new re-leasing spread in the third quarter 2020, the highest quarterly level since the second quarter 2018.
     
  • Ended the third quarter 2020 with a signed but not opened ABR backlog of $3.0 million, up from $1.6 million in the second quarter 2020.
     
  • Filed inaugural GRESB assessment during the third quarter 2020. Additional details regarding our sustainability program can be found on the Company's website at http://rptrealty.com/corporate-responsibility.
     
  • Continued temporary suspension of payment of the common dividend. Decisions regarding future dividend payments will be made quarterly based on liquidity needs and REIT distribution requirements.

NEW YORK, Nov. 04, 2020 (GLOBE NEWSWIRE) -- RPT Realty (NYSE:RPT) (the "Company") today announced its financial and operating results for the quarter ended September 30, 2020.

“I am pleased with the resiliency of the organization amidst the pandemic and the speed with which we are seeing demand return," said Brian Harper, President and CEO. "During the quarter, we experienced positive momentum in our rent collection, consumer traffic trends and our signed not open backlog. We also posted our strongest new re-leasing spread in over two years, which reflects our embedded mark-to-market opportunity, the quality of our real estate and our transformed platform that should benefit us in our future lease negotiations. I am also thrilled with the quality of the leases signed this quarter including Nike, Sephora, Burlington and Bank Of America. In light of our liquidity and limited near-term obligations, we are in a position to play offense at a time of great disruption that has historically led to unique value creation opportunities such as the current wave of grocer demand."

FINANCIAL RESULTS

Net (loss) income attributable to common shareholders for the third quarter 2020 of $(3.6) million, or $(0.05) per diluted share, compared to $3.8 million, or $0.05 per diluted share for the same period in 2019.

Funds from operations ("FFO") for the third quarter 2020 of $16.6 million, or $0.20 per diluted share, compared to $24.7 million, or $0.28 per diluted share for the same period in 2019.

Operating FFO for the third quarter 2020 of $15.2 million, or $0.19 per diluted share, compared to $23.7 million or $0.27 per diluted share for the same period in 2019. Operating FFO for the third quarter 2020 excludes certain net income that totaled $1.4 million, primarily attributable to insurance proceeds related to storm damage at Front Range Village in Fort Collins, CO and the write-off of below market lease intangibles within our unconsolidated joint venture. The change in Operating FFO was primarily driven by higher rental income not probable of collection, higher straight-line rent reserves and lower NOI resulting from the contribution of a 48.5% interest in five assets into a joint venture formed in fourth quarter 2019. Third quarter 2020 rental income not probable of collection and straight-line rent reserves, were $4.0 million or $0.05 per diluted share and $1.2 million or $0.01 per diluted share, respectively, including the Company's share of unconsolidated joint ventures.

OPERATING RESULTS

The Company's operating results include its consolidated properties and its pro-rata share of unconsolidated joint ventures.

Same property NOI during the third quarter 2020 decreased 8.3% compared to the same period in 2019. The decrease was driven by the impact of the COVID-19 pandemic, resulting in higher income not probable of collection, which detracted 8.9% from same property NOI growth.

During the third quarter 2020, the Company signed 44 leases totaling 278,838 square feet. Blended re-leasing spreads on comparable leases were 10.7% with ABR of $13.72 per square foot. Re-leasing spreads on nine comparable new and 25 renewal leases were 42.9% and 2.6%, respectively.

As of September 30, 2020, the Company had $3.0 million of signed not commenced ABR that is scheduled to commence through the end of 2021.

The table below summarizes the Company's leased rate and occupancy results at September 30, 2020, June 30, 2020 and September 30, 2019.

 September 30, 2020June 30, 2020September 30, 2019
Consolidated & Joint Venture Portfolio   
Leased rate93.3% 93.6% 94.7% 
Occupancy92.1% 92.9% 93.1% 
Anchor (GLA of 10,000 square feet or more)   
Leased rate96.8% 96.7% 97.5% 
Occupancy95.6% 96.3% 96.3% 
Small Shop (GLA of less than 10,000 square feet)   
Leased rate84.9% 86.3% 88.2% 
Occupancy83.6% 84.9% 85.7% 

BALANCE SHEET

The Company ended the third quarter 2020 with $220.1 million in cash, cash equivalents and restricted cash. At September 30, 2020, the Company had approximately $1.1 billion of consolidated debt and finance lease obligations, which resulted in a trailing twelve month net debt to proforma adjusted EBITDA ratio of 7.2x. Consolidated debt had a weighted average interest rate of 3.53% and a weighted average maturity, excluding scheduled amortization, of 4.8 years.

FINANCING ACTIVITY

During the third quarter 2020, the Company repaid $50.0 million on its unsecured revolving line of credit. At September 30, 2020, the Company had $125.0 million drawn on its $350.0 million unsecured revolving line of credit.

DIVIDEND

In light of the disruption caused by the COVID-19 pandemic, the Board of Trustees has temporarily suspended the quarterly common dividend to retain cash. The Board of Trustees will continue to evaluate the Company’s dividend policy based upon the Company’s financial performance and economic outlook and, at a later date, intends to reinstate the quarterly common dividend in at least the amount required to continue qualifying as a REIT for U.S. federal income tax purposes. Based on the Company's current taxable income forecast, no additional common dividend payments would be required to satisfy REIT requirements for the 2020 tax year.

On October 28, 2020, the Company’s Board of Trustees declared a fourth quarter 2020 Series D convertible preferred share dividend of $0.90625 per share. The current conversion ratio of the Series D convertible preferred shares can be found on the Company's website at investors.rptrealty.com/shareholder-information/dividends. The preferred dividend, for the period October 1, 2020 through December 31, 2020 is payable on January 4, 2021 to shareholders of record on December 18, 2020.

COVID-19 UPDATE

The Company is closely monitoring the COVID-19 pandemic, including the impact on our business, employees, tenants, shopping centers and communities. The following summary is intended to provide information pertaining to the impacts of the COVID-19 pandemic on the Company’s business. Unless otherwise specified, the statistical and other information regarding the Company’s portfolio are as of October 30, 2020. These estimates are based on information available to the Company and includes its consolidated properties and its pro-rata share of unconsolidated joint ventures.

  • 100% of the Company's 49 shopping centers remain open and operating.
  • 94% of total tenants by ABR were open and operating, up from the low of 41% on April 22, 2020.
  • 67% of the Company’s properties by ABR had a grocery or grocer component and 87% of ABR stemmed from national or regional tenants, as of September 30, 2020.
  • 90% of October and 87% of third quarter 2020 rent and recovery income have been paid.
  • 6% of October and 9% of third quarter 2020 rent and recovery income are subject to signed or approved deferral agreements.
  • Ended the third quarter 2020 with $220.1 million in cash, cash equivalents and restricted cash with no debt maturities until June 27, 2021.

The table below summarizes the Company's rent and recovery income collection results at various points in time and for the selected reporting periods.

As of2Q20 3Q20 October 
July 31, 202065% N/A N/A 
October 30, 202076% 87% 90% 

CONFERENCE CALL/WEBCAST:

The Company will host a live broadcast of its third quarter 2020 conference call to discuss its financial and operating results.

Date:Thursday, November 5, 2020
Time:10:00 a.m. ET
Dial in #:(877) 705-6003
International Dial in #(201) 493-6725
Webcast:investors.rptrealty.com

A telephonic replay of the call will be available through November 12, 2020.  The replay can be accessed by dialing (844) 512-2921 or (412) 317-6671 for international callers and entering passcode 13709053.  A webcast replay will also be archived on the Company’s website for twelve months.

SUPPLEMENTAL MATERIALS

The Company’s quarterly financial and operating supplement is available on its corporate web site at rptrealty.com. If you wish to receive a copy via email, please send requests to invest@rptrealty.com.

RPT Realty owns and operates a national portfolio of open-air shopping destinations principally located in top U.S. markets. The Company's shopping centers offer diverse, locally-curated consumer experiences that reflect the lifestyles of their surrounding communities and meet the modern expectations of the Company's retail partners. The Company is a fully integrated and self-administered REIT publicly traded on the New York Stock Exchange (the “NYSE”). The common shares of the Company, par value $0.01 per share (the “common shares”) are listed and traded on the NYSE under the ticker symbol “RPT”. As of September 30, 2020, our property portfolio consisted of 49 shopping centers (including five shopping centers owned through a joint venture) representing 11.9 million square feet of gross leasable area. As of September 30, 2020, the Company’s pro-rata share of the aggregate portfolio was 93.3% leased. For additional information about the Company please visit rptrealty.com.

Company Contact:

Vin Chao, Senior Vice President - Finance
19 W 44th St. 10th Floor, Ste 1002
New York, New York 10036
vchao@rptrealty.com
(212) 221-1752

FORWARD-LOOKING STATEMENTS

This press release contains 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. These forward-looking statements represent our expectations, plans or beliefs concerning future events and may be identified by terminology such as “may,” “will,” “should,” “believe,” “expect,” “estimate,” “anticipate,” “continue,” “predict” or similar terms. Although the forward-looking statements made in this document are based on our good faith beliefs, reasonable assumptions and our best judgment based upon current information, certain factors could cause actual results to differ materially from those in the forward-looking statements.  Many of the factors that will determine the outcome of forward-looking statements are beyond our ability to predict or control. Currently, one of the most significant factors is the potential adverse effect of the current COVID-19 pandemic on the financial condition, results of operations, cash flows and performance of the Company and our tenants (including their ability to timely make rent payments), the real estate market (including the local markets where our properties are located), the financial markets and general global economy as well as the potential adverse impact on our ability to enter into new leases or renew leases with existing tenants on favorable terms or at all. The impact COVID-19 has, and will continue to have, on the Company and its tenants is highly uncertain, cannot be predicted and will vary based upon the duration, magnitude and scope of the COVID-19 pandemic as well as the actions taken by federal, state and local governments to mitigate the impact of COVID-19, including social distancing protocols, restrictions on business activities and “shelter-in- place” and “stay at home” mandates. Additional factors which may cause actual results to differ materially from current expectations include, but are not limited to: our success or failure in implementing our business strategy; economic conditions generally and in the commercial real estate and finance markets specifically; the cost and availability of capital, which depends in part on our asset quality and our relationships with lenders and other capital providers; risks associated with bankruptcies or insolvencies or general downturn in the businesses of tenants; the potential adverse impact from tenant defaults generally or from the unpredictability of the business plans and financial condition of the Company's tenants, which are heightened as a result of the COVID-19 pandemic; the execution of rent deferral or concession agreements on the agreed-upon terms; our business prospects and outlook; changes in governmental regulations, tax rates and similar matters; our continuing to qualify as a REIT; and other factors detailed from time to time in our filings with the Securities and Exchange Commission ("SEC"), including in particular those set forth under “Risk Factors” in our latest annual report on Form 10-K and our latest quarterly report on Form 10-Q, which you should interpret as being heightened as a result of the numerous and ongoing adverse impacts of COVID-19. Given these uncertainties, you should not place undue reliance on any forward-looking statements. Except as required by law, we assume no obligation to update these forward-looking statements, even if new information becomes available in the future


RPT REALTY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
(unaudited)
 September 30,
2020
 December 31, 2019
  
ASSETS   
Income producing properties, at cost:   
Land$331,265   $331,265  
Buildings and improvements1,492,689   1,486,838  
Less accumulated depreciation and amortization(384,368)  (352,006) 
Income producing properties, net1,439,586   1,466,097  
Construction in progress and land available for development36,870   42,279  
Net real estate1,476,456   1,508,376  
Equity investments in unconsolidated joint ventures127,964   130,321  
Cash and cash equivalents217,818   110,259  
Restricted cash and escrows2,304   4,293  
Accounts receivable, net32,833   24,974  
Acquired lease intangibles, net27,934   34,278  
Operating lease right-of-use assets18,745   19,222  
Other assets, net79,580   86,836  
TOTAL ASSETS$1,983,634   $1,918,559  
    
LIABILITIES AND SHAREHOLDERS' EQUITY   
Notes payable, net$1,053,378   $930,808  
Finance lease obligation926   926  
Accounts payable and accrued expenses45,969   55,360  
Distributions payable1,730   19,792  
Acquired lease intangibles, net36,069   38,898  
Operating lease liabilities17,911   18,181  
Other liabilities22,234   6,339  
TOTAL LIABILITIES1,178,217   1,070,304  
    
Commitments and Contingencies   
    
RPT Realty ("RPT") Shareholders' Equity:   
Preferred shares of beneficial interest, $0.01 par, 2,000 shares authorized: 7.25% Series D Cumulative Convertible Perpetual Preferred Shares, (stated at liquidation preference $50 per share), 1,849 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively92,427   92,427  
Common shares of beneficial interest, $0.01 par, 240,000 and 120,000 shares authorized as of September 30, 2020 and December 31, 2019, respectively, and 80,055 and 79,850 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively801   798  
Additional paid-in capital1,172,998   1,169,557  
Accumulated distributions in excess of net income(463,617)  (436,361) 
Accumulated other comprehensive income(16,252)  1,819  
TOTAL SHAREHOLDERS' EQUITY ATTRIBUTABLE TO RPT786,357   828,240  
Noncontrolling interest19,060   20,015  
TOTAL SHAREHOLDERS' EQUITY805,417   848,255  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$1,983,634   $1,918,559  


RPT REALTY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2020 2019 2020 2019
REVENUE       
Rental income$45,375   $57,809   $140,783   $172,808  
Other property income774   1,024   2,290   3,004  
Management and other fee income338   88   917   178  
TOTAL REVENUE46,487   58,921   143,990   175,990  
        
EXPENSES       
Real estate tax expense8,509   9,123   25,113   27,667  
Recoverable operating expense5,118   6,180   15,894   18,204  
Non-recoverable operating expense2,126   2,463   6,549   7,662  
Depreciation and amortization18,295   20,018   57,003   59,865  
Transaction costs      186     
General and administrative expense6,062   6,249   18,979   18,845  
Insured expenses, net(1,092)     (2,745)    
TOTAL EXPENSES39,018   44,033   120,979   132,243  
        
OPERATING INCOME7,469   14,888   23,011   43,747  
        
OTHER INCOME AND EXPENSES       
Other (expense) income, net(92)  4   322   (227) 
Gain on sale of real estate         6,073  
Earnings from unconsolidated joint ventures456   373   1,514   453  
Interest expense(9,913)  (9,917)  (29,491)  (30,350) 
Other gain on unconsolidated joint ventures   237      237  
Loss on extinguishment of debt         (622) 
(LOSS) INCOME BEFORE TAX(2,080)  5,585   (4,644)  19,311  
Income tax benefit (provision)87   (11)  37   (82) 
NET (LOSS) INCOME(1,993)  5,574   (4,607)  19,229  
Net loss (income) attributable to noncontrolling partner interest46   (129)  106   (448) 
NET (LOSS) INCOME ATTRIBUTABLE TO RPT(1,947)  5,445   (4,501)  18,781  
Preferred share dividends(1,676)  (1,676)  (5,026)  (5,026) 
NET (LOSS) INCOME AVAILABLE TO COMMON SHAREHOLDERS$(3,623)  $3,769   $(9,527)  $13,755  
        
(LOSS) EARNINGS PER COMMON SHARE       
Basic$(0.05)  $0.05   $(0.12)  $0.17  
Diluted$(0.05)  $0.05   $(0.12)  $0.17  
        
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING       
Basic80,051   79,848    79,978   79,786  
Diluted80,051   80,540    79,978   80,479  



 

RPT REALTY
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FUNDS FROM OPERATIONS
(In thousands, except per share data)
(unaudited)
 Three Months Ended September 30, Nine Months Ended September 30,
 2020 2019 2020 2019
Net (loss) income$(1,993)  $5,574   $(4,607)  $19,229  
Net loss (income) attributable to noncontrolling partner interest46   (129)  106   (448) 
Preferred share dividends(1,676)  (1,676)  (5,026)  (5,026) 
Net (loss) income available to common shareholders(3,623)  3,769   (9,527)  13,755  
Adjustments:       
Rental property depreciation and amortization expense18,149   19,787   56,588   59,436  
Pro-rata share of real estate depreciation from unconsolidated joint ventures (1)2,116   7   4,898   35  
Gain on sale of depreciable real estate         (5,702) 
Gain on sale of joint venture depreciable real estate   (385)     (385) 
Other gain on unconsolidated joint ventures   (237)     (237) 
FFO available to common shareholders16,642   22,941   51,959   66,902  
Noncontrolling interest in Operating Partnership (2)(46)  129   (106)  448  
Preferred share dividends (assuming conversion) (3)   1,676      5,026  
FFO available to common shareholders and dilutive securities$16,596   $24,746   $51,853   $72,376  
Gain on sale of land         (371) 
Transaction costs (4)      186     
Insured expenses, net(1,092)     (2,745)    
Severance expense (5)88   32   216   130  
Executive management reorganization, net (5)(6)   329      775  
Above and below market lease intangible write-offs135   (1,381)  (256)  (3,055) 
Pro-rata share of acquisition costs from unconsolidated joint ventures (1)6      407     
Pro-rata share of above and below market lease intangible write-offs from unconsolidated joint ventures (1)(506)     (506)    
Loss on extinguishment of debt         622  
Payment of loan amendment fees (5)      184     
Bond interest proceeds (7)      (213)    
Operating FFO available to common shareholders and dilutive securities$15,227   $23,726   $49,126   $70,477  
        
Weighted average common shares80,051   79,848   79,978   79,786  
Shares issuable upon conversion of Operating Partnership Units (“OP Units”) (2)1,909   1,909   1,909   1,909  
Dilutive effect of restricted stock167   692   297   693  
Shares issuable upon conversion of preferred shares (3)   6,954      6,954  
Weighted average equivalent shares outstanding, diluted82,127   89,403   82,184   89,342  
        
FFO available to common shareholders and dilutive securities per share, diluted$0.20   $0.28   $0.63   $0.81  
        
Operating FFO available to common shareholders and dilutive securities per share, diluted$0.19   $0.27   $0.60   $0.79  
        
Dividend per common share$   $0.22   $0.22   $0.66  
Payout ratio - Operating FFO%  81.5%  36.7%  83.5% 
        

(1)  Amounts noted are included in Earnings from unconsolidated joint ventures.
(2)  The total noncontrolling interest reflects OP units convertible on a one-of-one basis into common shares.
(3)  7.25% Series D Cumulative Convertible Perpetual Preferred Shares of Beneficial Interest, $0.01 par (“Series D Preferred Shares”) are paid annual dividends of $6.7 million and are currently convertible into approximately 7.0 million shares of common stock. They are dilutive only when earnings or FFO exceed approximately $0.24 per diluted share per quarter and $0.96 per diluted share per year.  The conversion ratio is subject to adjustment based upon a number of factors, and such adjustment could affect the dilutive impact of the Series D convertible preferred shares on FFO and earning per share in future periods.
(4)  Costs associated with a terminated acquisition and a terminated disposition.
(5)  Amounts noted are included in General and administrative expense.
(6)  For 2019, largely comprised of severance to a former executive officer and performance award expense related to the former Chief Executive Officer.
(7)  Amounts noted are included in Other (expense) income, net.

RPT REALTY
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(amounts in thousands)
(unaudited)
 
Reconciliation of net (loss) income available to common shareholders to Same Property Net Operating Income (NOI) at Pro-Rata
        
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 2020 2019 2020 2019
Net (loss) income available to common shareholders$(3,623)  $3,769   $(9,527)  $13,755  
Preferred share dividends1,676   1,676   5,026   5,026  
Net (loss) income attributable to noncontrolling partner interest(46)  129   (106)  448  
Income tax (benefit) provision(87)  11   (37)  82  
Interest expense9,913   9,917   29,491   30,350  
Loss on extinguishment of debt         622  
Earnings from unconsolidated joint ventures(456)  (373)  (1,514)  (453) 
Gain on sale of real estate         (6,073) 
Other gain on unconsolidated joint ventures   (237)     (237) 
Insured expenses, net(1,092)     (2,745)    
Other expense (income), net92   (4)  (322)  227  
Management and other fee income(338)  (88)  (917)  (178) 
Depreciation and amortization18,295   20,018   57,003   59,865  
Transaction costs      186     
General and administrative expenses6,062   6,249   18,979   18,845  
Pro-rata share of NOI from unconsolidated joint venture (1)2,006      6,156     
Lease termination fees(43)  (102)  (185)  (334) 
Amortization of lease inducements225   135   554   359  
Amortization of acquired above and below market lease intangibles, net(515)  (2,172)  (2,248)  (5,544) 
Straight-line ground rent expense77   77   230   230  
Straight-line rental income1,100   (567)  2,018   (1,951) 
NOI at Pro-Rata (2)33,246   38,438   102,042   115,039  
NOI from Other Investments811   (1,293)  1,602   (4,232) 
Same Property NOI at Pro-Rata (3)$34,057   $37,145   $103,644   $110,807  
        

(1)  Represents 51.5% of the NOI from the five properties contributed to R2G Venture LLC after December 9, 2019.
(2)  Includes 100.0% of the NOI from the five properties contributed to R2G Venture LLC prior to December 10, 2019 and 51.5% of the NOI from the same five properties after December 9, 2019.
(3)  Includes 51.5% of the NOI from the five properties contributed to R2G Venture LLC for all periods presented.

RPT REALTY
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(amounts in thousands)
(unaudited)
   
Reconciliation of net (loss) income  
Net loss - Nine months ended September 30, 2020 $(4,607) 
Plus: Net income - Twelve months ended December 31, 2019 93,686  
Less: Net income - Nine months ended September 30, 2019 19,229  
Net income - Twelve months ended September 30, 2020 $69,850  
   
  Twelve Months Ended
September 30, 2020
  
Reconciliation of net income to proforma adjusted EBITDA  
Net income $69,850  
Interest expense 39,198  
Income tax provision 60  
Depreciation and amortization 75,785  
Gain on sale of depreciable real estate (75,783) 
Pro-rata adjustments from unconsolidated entities 5,321  
EBITDAre $114,431  
   
Severance expense 216  
Executive management reorganization, net 627  
Above and below market lease intangible write-offs (726) 
Transaction costs 186  
Pro-rata share of above and below market lease intangible write-offs from unconsolidated entities (506) 
Pro-rata share of acquisition costs from unconsolidated entities 406  
R2G Venture LLC related costs 499  
Insured expenses, net (469) 
Loss on extinguishment of debt 1,949  
Payment of loan amendment fees 184  
Bond interest proceeds (213) 
Adjusted EBITDA 116,584  
Proforma adjustments (1) (51) 
Proforma adjusted EBITDA $116,533  
   
Reconciliation of Notes Payable, net to Net Debt  
Notes payable, net $1,053,378  
Unamortized premium (1,319) 
Deferred financing costs, net 3,804  
Consolidated notional debt 1,055,863  
Finance lease obligation 926  
Cash, cash equivalents and restricted cash (220,122) 
Pro-rata share of unconsolidated entities cash, cash equivalents and restricted cash (2,877) 
Net debt $833,790  
   
Reconciliation of interest expense to total fixed charges  
Interest expense $39,198  
Preferred share dividends 6,701  
Scheduled mortgage principal payments 2,389  
Total fixed charges $48,288  
   
Net debt to proforma adjusted EBITDA 7.2x 
Interest coverage ratio (proforma adjusted EBITDA / interest expense) 3.0x 
Fixed charge coverage ratio (proforma adjusted EBITDA / fixed charges) 2.4x 
   

(1) The twelve months ended September 30, 2020 excludes $1.5 million representing 48.5% of the five properties contributed to R2G Venture LLC  partially offset by $1.1 million from an annual expense that was fully recognized in the fourth quarter of 2019 and $0.3 million from the acquisition of Lakehills Plaza.

RPT REALTY
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(amounts in thousands)
(unaudited)
    
 Three Months Ended September 30,
 2020 2019
Reconciliation of net income to annualized proforma adjusted EBITDA   
Net (loss) income$(1,993)  $5,574  
Interest expense9,913   9,917  
Income tax (benefit) provision(87)  11  
Depreciation and amortization18,295   20,018  
Pro-rata adjustments from unconsolidated entities2,116   7  
Gain on sale of joint venture depreciable real estate   (385) 
Other gain on unconsolidated joint ventures   (237) 
EBITDAre28,244   34,905  
    
Severance expense88   32  
Executive management reorganization, net   329  
Above and below market lease intangible write-offs135   (1,381) 
Pro-rata share of acquisition costs from unconsolidated entities6     
Pro-rata share of above and below market lease intangible write-offs from unconsolidated entities(506)    
Insured expenses, net(1,092)    
Adjusted EBITDA26,875   33,885  
Proforma adjustments (1)   (182) 
Proforma adjusted EBITDA$26,875   $33,703  
Annualized proforma adjusted EBITDA$107,500   $134,812  
    
Reconciliation of Notes Payable, net to Net Debt   
Notes payable, net$1,053,378   $933,509  
Unamortized premium(1,319)  (2,226) 
Deferred financing costs, net3,804   1,911  
Consolidated notional debt1,055,863   933,194  
Finance lease obligation926   975  
Cash, cash equivalents and restricted cash(220,122)  (48,236) 
Pro-rata share of unconsolidated entities cash, cash equivalents and restricted cash(2,877)    
Net debt$833,790   $885,933  
    
Reconciliation of interest expense to total fixed charges   
Interest expense$9,913   $9,917  
Preferred share dividends1,676   1,676  
Scheduled mortgage principal payments592   648  
Total fixed charges$12,181   $12,241  
    
Net debt to annualized proforma adjusted EBITDA7.8x  6.6x 
Interest coverage ratio (proforma adjusted EBITDA / interest expense)2.7x  3.4x 
Fixed charge coverage ratio (proforma adjusted EBITDA / fixed charges)2.2x  2.8x 
    

(1)  3Q19 excludes $0.2 million of income from dispositions.  The proforma adjustments treat the activity as if they occurred at the start of each quarter.

RPT Realty
Non-GAAP Financial Definitions

Certain of our key performance indicators are considered non-GAAP financial measures. Management uses these measures along with our GAAP financial statements in order to evaluate our operations results. We believe these measures provide additional and useful means to assess our performance. These measures do not represent alternatives to GAAP measures as indicators of performance and a comparison of the Company's presentations to similarly titled measures of other REITs may not necessarily be meaningful due to possible differences in definition and application by such REITs.

Funds From Operations (FFO)
As defined by the National Association of Real Estate Investment Trusts (NAREIT), Funds From Operations (FFO) represents net income computed in accordance with generally accepted accounting principles, excluding gains (or losses) from sales of depreciable property and impairment provisions on depreciable real estate or on investments in non-consolidated investees that are driven by measurable decreases in the fair value of depreciable real estate held by the investee, plus depreciation and amortization of depreciable real estate, (excluding amortization of financing costs). Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect funds from operations on the same basis. We have adopted the NAREIT definition in our computation of FFO.

Operating FFO
In addition to FFO, we include Operating FFO as an additional measure of our financial and operating performance. Operating FFO excludes transactions costs and periodic items such as gains (or losses) from sales of land and impairment provisions on land, bargain purchase gains, severance expense, executive management reorganization costs, net, accelerated amortization of debt premiums, gains or losses on extinguishment of debt, insured expenses, net, accelerated write-offs of above and below market lease intangibles and R2G Venture LLC related costs that are not adjusted under the current NAREIT definition of FFO. We provide a reconciliation of FFO to Operating FFO. In future periods, Operating FFO may also include other adjustments, which will be detailed in the reconciliation for such measure, that we believe will enhance comparability of Operating FFO from period to period. FFO and Operating FFO should not be considered alternatives to GAAP net income available to common shareholders or as alternatives to cash flow as measures of liquidity.

While we consider FFO available to common shareholders and Operating FFO available to common shareholders useful measures for reviewing our comparative operating and financial performance between periods or to compare our performance to different REITs, our computations of FFO and Operating FFO may differ from the computations utilized by other real estate companies, and therefore, may not be comparable. We recognize the limitations of FFO and Operating FFO when compared to GAAP net income available to common shareholders. FFO and Operating FFO available to common shareholders do not represent amounts available for needed capital replacement or expansion, debt service obligations, or other commitments and uncertainties. In addition, FFO and Operating FFO do not represent cash generated from operating activities in accordance with GAAP and are not necessarily indicative of cash available to fund cash needs, including the payment of dividends.

Net Operating Income (NOI) / Same Property NOI / NOI from Other Investments
NOI consists of (i) rental income and other property income, before straight-line rental income, amortization of lease inducements, amortization of acquired above and below market lease intangibles and lease termination fees less (ii) real estate taxes and all recoverable and non-recoverable operating expenses other than straight-line ground rent expense, in each case, including our share of these items from our R2G Venture LLC unconsolidated joint venture.

NOI, Same Property NOI and NOI from Other Investments are supplemental non-GAAP financial measures of real estate companies' operating performance. Same Property NOI is considered by management to be a relevant performance measure of our operations because it includes only the NOI of comparable operating properties for the reporting period. Same Property NOI for the three and nine months ended September 30, 2020 and 2019 represents NOI from the Company's same property portfolio consisting of 41 consolidated operating properties acquired or placed in service and stabilized prior to January 1, 2019 and five previously consolidated properties contributed to the newly formed joint venture, R2G Venture LLC, in December 2019. Same property NOI from these five properties includes 51.5% of their NOI as a consolidated property for the period January 1, 2019 through September 30, 2019 and 51.5% of their NOI as an unconsolidated property accounted for under the equity method for the period January 1, 2020 through September 30, 2020. Same Property NOI excludes properties under redevelopment or where activities have started in preparation for redevelopment. A property is designated as a redevelopment when planned improvements significantly impact the property. NOI from Other Investments for the three and nine months ended September 30, 2020 and 2019 represents NOI primarily from (i) properties disposed of and acquired during 2019, (ii) 48.5% of the NOI prior to December 10, 2019 from the five previously consolidated properties contributed to the R2G Venture LLC unconsolidated joint venture, (iii) Webster Place and Rivertowne Square where the Company has begun activities in anticipation of future redevelopment, (iv) certain property related employee compensation, benefits, and travel expense and (v) noncomparable operating income and expense adjustments.

NOI, Same Property NOI and NOI from Other Investments should not be considered as alternatives to net income in accordance with GAAP or as measures of liquidity. Our method of calculating these measures may differ from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

RPT Realty
Non-GAAP Financial Definitions (continued)

Net Debt
Net Debt represents (i) our total debt principal, which excludes unamortized premium and deferred financing costs, net, plus (ii) our finance lease obligation, less (iii) our cash, cash equivalents and restricted cash, less (iv) our pro-rata share of cash, cash equivalents and restricted cash of each of our unconsolidated entities. We present net debt to show the ratio of our net debt to our proforma Adjusted EBITDA.

EBITDAre/Adjusted EBITDA/Proforma Adjusted EBITDA
NAREIT defines EBITDAre as net income computed in accordance with GAAP, plus interest expense, income tax expense (benefit), depreciation and amortization and impairment of depreciable real estate and in substance real estate equity investments; plus or minus gains or losses from sales of operating real estate assets and interests in real estate equity investments; and adjustments to reflect our share of unconsolidated real estate joint ventures and partnerships for these items. The Company calculates EBITDAre in a manner consistent with the NAREIT definition. The Company also presents Adjusted EBITDA which is EBITDAre net of other items that we believe enhance comparability of Adjusted EBITDA across periods and are listed as adjustments in the applicable reconciliation. EBITDAre and Adjusted EBITDA should not be considered an alternative measure of operating results or cash flow from operations as determined in accordance with GAAP.

Pro-Rata
We present certain financial information on a “pro-rata” basis or including “pro-rata” adjustments. Unless otherwise specified, pro-rata financial information includes our proportionate economic ownership of each of our unconsolidated joint ventures derived on an entity-by-entity basis by applying the ownership percentage interest used to arrive at our share of the net operations for the period consistent with the
application of the equity method of accounting to each of our unconsolidated joint ventures. See page 30 of our quarterly financial and operating supplement for a discussion of important considerations and limitations that you should be aware of when review financial information that we present on a pro-rata basis or including pro-rata adjustment.

Occupancy
Occupancy is defined, for a property or group of properties, as the ratio, expressed as a percentage, of (a) the number of square feet of such property economically occupied by tenants under leases with an initial term of greater than one year, to (b) the aggregate number of square feet for such property.

Leased Rate

Lease Rate is defined, for a property or group of properties, as the ratio, expressed as a percentage, of (a) the number of square feet of such property under leases with an initial term of greater than one year, including signed leases not yet commenced, to (b) the aggregate number of square feet for such property.

Metropolitan Statistical Area (MSA)
Metropolitan Statistical Area (MSA) information is sourced from the United States Census Bureau and rank is determined based on the most recently available population estimates.

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