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

May 07, 2010 | About:

10qk

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Inland Real Estate Corp. (IRC) filed Quarterly Report for the period ended 2010-03-31.

Inland Real Estate Corp. has a market cap of $738.1 million; its shares were traded at around $8.64 with a P/E ratio of 8.1 and P/S ratio of 4.4. The dividend yield of Inland Real Estate Corp. stocks is 6.6%.IRC is in the portfolios of Steven Cohen of SAC Capital Advisors.

Highlight of Business Operations:

In order to mitigate the decline in our revenues we will attempt to re-lease those spaces that are vacant, or may become vacant, at existing properties, at more favorable rental rates and generally will acquire additional investment properties, if circumstances allow. During the three months ended March 31, 2010, we executed 15 new, 47 renewal and 10 non-comparable leases (expansion square footage or spaces for which no former tenant was in place for one year or more), aggregating approximately 496,000 square feet on our consolidated portfolio. The 15 new leases comprise approximately 105,000 square feet with an average rental rate of $10.74 per square foot, a 1.0% decrease over the average expiring rate. The 47 renewal leases comprise approximately 230,000 square feet with an average rental rate of $12.90 per square foot, a 0.7% decrease over the average expiring rate. The 10 non-comparable leases comprise approximately 161,000 square feet with an average base rent of $7.09. During the remainder of 2010, 118 leases will be expiring in our consolidated portfolio, which comprise approximately 388,000 square feet and account for approximately 4.6% of our annualized base rent. We will attempt to renew or re-lease these spaces at more favorable rental rates to increase revenues and cash flow. Occupancy at March 31, 2010 and 2009 for our consolidated and unconsolidated portfolio is summarized below:

During 2010, our focus is on strengthening our balance sheet, within an improving credit market environment. As of March 31, 2010, approximately $146,000 of indebtedness secured by our investment properties matures prior to year end. Subsequent to the end of the quarter, we repaid approximately $50,100 of this debt using approximately $20,000 in proceeds on previously unencumbered properties, $20,000 in draws on our line of credit facility, and $10,100 of cash on hand. We have been in discussions with our lenders and based on these discussions and non-binding term sheets reflecting these discussions, we believe we will be able to refinance the remaining secured debt maturing in 2010. We expect the average rates on the new borrowings will be approximately 100 to 200 basis points above average expiring rates. Finalizing these new borrowings is subject to, among other things, the lenders completing their respective due diligence and negotiating and executing definitive agreements. There is no assurance we will be able to complete these borrowings. Additionally, our $140,000 term loan matures during 2010 and our $155,000 line of credit facility matures in April 2011. We have received non-binding commitments from a syndicate of banks led by KeyBank N.A. aggregating approximately $300,000 which will be used to refinance the term loan and line of credit facility. These loans are also subject to, among other things, the lending syndicate completing its due diligence and other closing requirements, including executing definitive agreements. We expect the rates on these new loans will be greater than the rates on the expiring debt. The result of higher interest rates would have a negative impact on our results of operations and may impact our ability to pay distributions at the current rate. Further, as part of any refinancing, we may be required to pledge additional assets as collateral and may not be able to achieve the same loan to value ratios on our secured indebtedness.

This section describes our balance sheet and discusses our liquidity and capital commitments. Our most liquid asset is cash and cash equivalents which consists of cash and short-term investments. Cash and cash equivalents at March 31, 2010 and December 31, 2009 were $11,149 and $6,719, respectively. See our discussion of the statements of cash flows for a description of our cash activity during the three months ended March 31, 2010 and 2009. We consider all demand deposits, money market accounts and investments in certificates of deposit and repurchase agreements purchased with a maturity of three months or less, at the date of purchase, to be cash equivalents. We maintain our cash and cash equivalents at financial institutions. The combined account balances at one or more institutions could periodically exceed the Federal Depository Insurance Corporation ("FDIC") insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposits in excess of FDIC insurance coverage. However, we do not believe the risk is significant based on our review of the rating of the institutions where our cash is deposited. In 2008, FDIC insurance coverage was increased to $250,000 per depositor at each insured bank. This increase will be in place until December 13, 2013, at which time it will return to $100,000 per depositor.

Income generated from our investment properties is the primary source from which we generate cash. Other sources of cash include amounts raised from the sale of securities, including shares of our common stock sold under our DRP, our draws on our line of credit facility, which may be limited due to covenant compliance requirements, proceeds from financings secured by our investment properties and earnings we retain that are not distributed to our stockholders. As of March 31, 2010, we were in compliance with the covenants on our line. We had up to $105,000 available under our $155,000 line of credit facility and an additional $145,000 available under an accordion feature. The access to the accordion feature is at the discretion of the current lending group. If approved, the terms for the funds borrowed under the accordion feature would be current market terms and not the terms of the existing line of credit facility. The lending group is not obligated to approve access to the additional funds. If necessary, such as for new acquisitions, we believe we can generate capital by entering into financing arrangements or joint venture agreements with institutional investors. We use our cash primarily to pay distributions to our stockholders, for operating expenses at our investment properties, for purchasing additional investment properties, joint venture commitments, to repay draws on the line of credit facility and for retiring mortgages payable.

Certain joint venture commitments require us to invest cash in properties under development and in properties that do not necessarily meet our investment criteria but which are offered for syndication through our joint venture with IREX. In certain cases, this cash is invested for periods longer than expected. The syndication of the four buildings leased by Bank of America that are being marketed through our joint venture with IREX in two separate offerings has taken longer than we anticipated. We have approximately $16,655 invested in the current IREX joint venture properties available for syndication. As of March 31, 2010, we had received approximately $41,100 of our original $62,300 investment back in the Bank of America buildings. The joint venture anticipates that sales of the Bank of America buildings will continue to close throughout 2010. Additionally, we have delayed completion of our development projects from our original 2010 and 2011 completion dates to one to two years beyond that point due to challenging conditions. Therefore, our investment of $48,854 in our development projects will be committed longer than originally anticipated. During the year ended December 31, 2009, we invested approximately $19,000 of preferred equity in these ventures which was used to pay down the principal on the loans and negotiated dollar for dollar reductions of loan guarantees on certain projects. As of March 31, 2010, we have guaranteed approximately $25,600 of current unconsolidated joint venture debt. These guarantees are in effect for the entire term of each respective loan as set forth in the loan documents. There is no assurance that we will be able to recover the funds invested in these ventures or that we will earn a return on these invested funds.

We invest in marketable securities of other entities, including REITs. These investments in securities totaled $10,911 at March 31, 2010, consisting of preferred and common stock investments. At March 31, 2010, we had recorded a net unrealized gain of $3,919 on these investment securities. Realized gains and losses from the sale of available-for-sale securities are specifically identified and determined. During the three months ended March 31, 2010, we realized gains on sale of $1,042. No such gains were recorded during the three months ended March 31, 2009. Additionally, during the three months ended March 31, 2009, we realized a non-cash impairment loss of $1,681, related to a decline in value of certain investment securities which were determined to be other than temporary. No such losses were required or recorded in the accompanying consolidated financial statements for the three months ended March 31, 2010.

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10qk
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