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Inland Real Estate Corp. Reports Operating Results (10-K)

February 28, 2011 | About:
10qk

10qk

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Inland Real Estate Corp. (IRC) filed Annual Report for the period ended 2010-12-31.

Inland Real Estate Corp. has a market cap of $815.93 million; its shares were traded at around $9.37 with a P/E ratio of 13.58 and P/S ratio of 4.88. The dividend yield of Inland Real Estate Corp. stocks is 6.08%.Hedge Fund Gurus that owns IRC: Bruce Kovner of Caxton Associates, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Our asset-based ventures with NYSTRS and PGGM enable us to generate fee income via the acquisition, leasing, and property management services we provide to the ventures. The NYSTRS joint venture was formed in 2004 and acquired $312,000 of stabilized retail assets in Midwest markets. Subsequent to the change in control transaction involving Algonquin Commons during 2010, the joint venture owns $158,000 of retail assets. The joint venture does not intend to acquire additional assets at this time. The joint venture agreement expires on October 8, 2011 but we are currently in discussions with our partner to extend this joint venture relationship.

The PGGM joint venture was formed in June 2010 to acquire up to $270,000 of grocery-anchored and community retail centers in Midwestern U.S. markets. As of December 31, 2010, the PGGM joint venture has invested approximately $42,000 in retail assets.

The recent market disruptions may adversely affect the value of our investment properties. The recent market volatility will likely make the valuation of our investment properties and those of our unconsolidated joint ventures more difficult. There may be significant uncertainty in the valuation, or in the stability of the value of our investment properties and those of our unconsolidated joint ventures, that could result in a substantial decrease in the value of our properties and those of our unconsolidated joint ventures. As a result, we may not be able to recover the carrying amount of our properties and/or our investment in our unconsolidated joint ventures and we may be required to recognize an impairment charge, which would reduce our reported earnings. For example, although no impairment charges to consolidated properties were recorded or required during the year ended December 31, 2010, during the years ended December 31, 2009 and 2008, we recorded approximately $1,824 and $666, respectively, of such impairment charges related to certain consolidated properties that were subsequently sold at prices below their current carrying values and required adjustment. Similarly, during the year ended December 31, 2009, we recorded approximately $2,872 in impairment charges related to basis differences for interest costs incurred for certain development projects and during the years ended December 31, 2010 and 2009, we recorded approximately $2,498 and $14,753, respectively, amounts equal to our pro rata share of impairment charges on certain unconsolidated development joint venture projects to reflect the investments at fair value. No impairments of our unconsolidated joint ventures were required or recorded during the year ended December 31, 2008.

Our investment in preferred and common equity securities have, and may in the future, negatively impact our results. To enhance the yields available to us on our cash balances, we have invested in a portfolio of preferred and common equity securities issued by other REIT and non-REIT companies. As of December 31, 2010, the balance of our investment securities was $9,053, net of an unrealized gain of $3,240. Due to the well publicized severe dislocations and liquidity disruptions that recently took place in the U.S. and global credit and equity markets, the trading price of these securities declined significantly from our original purchase price. As a result, for the years ended December 31, 2009 and 2008, we recorded other than temporary impairment charges of approximately $2,660 and $12,043, respectively, related to our investment in these securities. The other than temporary impairment charge was determined primarily based upon the length of time over which these securities had experienced a decline in market value and their ability to recover in the near term, as well as the severity of the decline. No such impairment charges were recorded or required for the year ended December 31, 2010, but we may have to recognize impairment charges or losses related to these investments in future periods.

If we pay distributions that exceed our cash flow from operations, we will have less funds available for other purposes and the amount of distributions may not be sustainable. For the year ended December 31, 2010, we paid distributions totaling approximately $48,885. Our net cash provided by operating activities was approximately $59,523. For the year ended December 31, 2009, we paid distributions totaling approximately $55,288. Our net cash provided by operating activities was approximately $71,051. To the extent that net cash provided by operating activities declines further we may be forced to consider reducing our distributions or the amount that we pay in cash in order to preserve a cushion between the amount of cash distributions paid and net cash provided by operating activities. To the extent that we pay cash distributions exceeding net cash provided by operating activities, we will have less cash available for other purposes including acquiring new investment properties, funding capital expenditures on existing investment properties, funding cash requirements for our various joint ventures or repaying debt. If these other requirements cannot be reduced, we will likely be forced to reduce the amount of our cash distributions.

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