InvenTrust Properties Corp. (IVT) Earnings Call Transcript & Summary

Hello, and welcome to InvenTrust Properties Shareholder and Financial Adviser webcast discussing the company's listing on the New York Stock Exchange next Tuesday as well as the launch of a Dutch tender. I'm Dan Lombardo, Vice President of Investor Relations for InvenTrust. With me today is DJ Busch, President and CEO of InvenTrust. Thank you for joining us today. To start, DJ is going to walk through some of the mechanics of the Dutch tender as well as provide information listing on the New York Stock Exchange. We will also discuss why we believe now is the right time to pursue this listing and finally provide an update of our performance and portfolio strategy moving forward. After our prepared remarks, we will open up the webcast to your questions. Feel free to submit your questions at any time during this webcast. Before we begin, I would like to remind everyone that during the course of this webcast we will be making forward-looking statements, which involve a number of risks and uncertainties that may cause actual results to differ significantly from those indicated. These risks are outlined in our 10-K and 10-Qs for the periods ending December 31, 2020, March 31, 2021, 30, 2021. We undertake no obligation to update any forward-looking statements as a result of future events or developments. With that, it's my pleasure to turn the webcast over to DJ.

Thanks, Dan. Good afternoon, and thank you to all who are joining us. We are very pleased to be addressing you today. When I joined InvenTrust in 2019, the primary objective was to execute on our liquidity event. By the most efficient and effective means possible and provide optionality for shareholders as it relates to their investment in InvenTrust. Obviously, the pandemic delayed our initial plans to embark and execute on such an event. But the pandemic, while terrible, was, in some cases, a blessing in disguise for our business. The resiliency of our portfolio was better than our most optimistic expectations. Our grocery-anchored thesis and our concentrated and clustered Sun Belt market strategy was validated. Our portfolio is better positioned today and the future is even brighter. Because of this, we were able to reengage and evaluate liquidity options much sooner than expected. And you, all of our shareholders have been patient with our company as we continue to execute on our strategy to ensure that a liquidity alternative was tenable. We thank you for this patience. . And we are very pleased to announce that we will be listing our shares on the New York Stock Exchange next Tuesday, October 12. This means that your shares in InvenTrust stock will be freely tradable at market pricing with no lockup period. In conjunction with the listing next Tuesday, the company will be conducting a Dutch tender of up to $100 million that will run from October 12 to November 8. The intention of the Dutch tender is to support the share price in its initial trading sessions to enhance liquidity and instill confidence in the public market and -- which is customary for companies that choose to execute on a direct listing. The range at which InvenTrust plans to participate in the Dutch tender will be announced prior to the market open on October 12. So to reiterate what this means for you, our shareholders. There are effectively 3 options available to you. One, you can sell your shares at the open market at prevailing market pricing on or after October 12. Two, you can participate in the Dutch tender at a chosen price within the range provided to be settled in the days following the tender close on November 8. Or three, you can continue to invest in InvenTrust and participate in the future of the company knowing that the option of liquidity is available to you at any point in the future given that the shares will be freely traded. These key dates are highlighted on Page 7 of our recently filed investor presentation that is also available on our website. Now I want to spend a little bit more time on the third option. And much of what I'm going to discuss is on Page 8 of the investor presentation. As I mentioned earlier, I believe the future is bright for our company. First, the markets in which we operate, almost exclusively in the Sun Belt continue to benefit from in migration and demographic trends that are expected to continue in the years to come. 90% of our income comes from these markets. And we are hopeful that the 90% investment will increase even higher. Second, the essential nature of our portfolio, that is the merchandise mix that is anchored in necessity-based retailers that meet the daily needs of the communities in which they serve has proven resilient in the midst of a significant transformation in the retail industry, some of which was accelerated by the pandemic. 85% of our portfolio has a grocer or a grocery component at the center. Necessity-based retail in our markets is a proven strategy and 1 that we think will continue to bear fruit as we look forward. Third, we are expert operators in our markets. During the early onset of the pandemic, we had eyes on 62 of our 65 properties, working tirelessly with our tenants to make sure they could be open and operating, if safe and mandated to do so and to partner with them if concessions and relief was necessary. This partnership has left us with a more healthy tenant base and stronger relationships than going into the pandemic. And finally, our balance sheet and low leverage served us exceedingly well and will continue to be a cornerstone for us moving forward. Our balance sheet position and cash flow allowed us not only to sustain our dividend but raise it twice during the pandemic. To reiterate, InvenTrust was 1 of the only -- 1 of the few retail real estate companies that did not suspend or cut its dividend. We raised it twice. And as previously announced, we are increasing the dividend by 5% at the end of the year. We know this income is important to many of you, and the dividend policy will continue to be a key component to our investment strategy as we look to grow in the future. I'm very excited for the future of InvenTrust and while I'm extremely pleased to be able to provide the option of liquidity for those who wish to divest their investment, I am hopeful that some of you share in our excitement and the opportunities to create shareholder value in the future. Thank you once again. And with that, I'm going to -- me and Dan will be happy to answer any of your questions.

DJ, great. It is truly exciting time for InvenTrust. So what I'm going to do is there's a lot of questions coming in, so I'm going to try to group them all into kind of the same category. But I think DJ, it might help if you give a little color for what kind of the company has been going through the last couple of weeks as far as kind of the non-deal roadshow that we've been going through in the meetings?

Sure. Happy to, Dan. Thank you. And I'll go back a little bit further than just the last couple of weeks. Obviously, there's been a lot of preparation to prepare for this event. A lot of it has come down to disclosure, making sure InvenTrust message is reaching the market, the investor presentation that's been recently filed, a supplemental quarterly package, additional disclosure on that front has been an important endeavor for the company. But as you mentioned, in the last couple of weeks, we've been doing a significant amount of outreach with the help of our investment advisers to key potential new investors to participate in InvenTrust as a public -- as a newly listed company.

Great. So a whole host of questions on what do shareholders need to do in regards to this listing? So I'll take that one, DJ. So basically, the shareholder, let's take into account that you have with a brokerage firm or a custodian. Right now behind the scenes, Computershare, our transfer agent, is working with all the custodians to make sure those shares and those accounts are fully tradable come October 12. To sell those shares, if you are a client with shares in those accounts, you need to contact your financial adviser or the custodian directly, they'll have their own systems in place to get those shares to the market. . If you're a shareholder that owns shares in your account directly through Computershare, all you have to do is contact Computershare or go to the investor online services, and you'll be able to sell your shares that way. Computershare will take shares to the market and liquidate them. There's nothing that you need to do as far as signing up or making your shares eligible to trade, everything should be eligible come October 12. The next question here is, why do a listing now, why not raise money with the traditional IPO? So I guess that's kind of 2 questions in 1 there.

No, it's a good question. And the answer really is we looked at all avenues and options as it relates to a liquidity event. The most important thing to our management team was to provide liquidity as quickly and as efficiently as possible. The public -- the retail market right now is quite healthy, both in the public market and what we're observing in the private market, in private sales. With that constructive, I guess, tension, as I like to call it, is a unique opportunity and doing a direct listing is the quickest and most efficient option. . The second piece to that is we really don't need the money. I spoke a little bit about the balance sheet in my prepared remarks, but we have an ability to execute on our capital plan for the next couple of years without raising any initial equity. And the good news for our current shareholders is a lot of times when you do an IPO, it does come at the dilution in some cases, at -- or at the expense of current shareholders, and we weren't prepared to do that.

Great. Thank you. So there's another talk here, another question on an option of selling the platform. It sounds like you kind of already addressed that a little bit. What about -- why is the company doing a tender at this time?

Well, yes, it kind of dovetails on what I just mentioned. I think doing something now and not waiting. The good news about what we're doing with the direct listing is it doesn't change our capital structure. And it alludes to the question that you just talked about on selling the platform. It doesn't take anything off the table. Our capital structure remains intact. We are not issuing any new equity. We're simply taking something that has been illiquid for a long period of time for our investors and making it liquid on October 12. All those strategic options are certainly available to us if we believe that it's going to create the most value for our shareholders. So I think we, myself and the management team have a tremendous sense of urgency to make sure that we take advantage of our retail market that it's very constructive and allow our shareholders liquidity if they choose to do so.

I'm going to talk a little bit about the mechanics of the Dutch tender, DJ. There are some questions on that. So there's a couple of different options again on how to sign up for the Dutch tender, if that's the way you choose to do that. One is, again, if you have a custodian or broker-controlled account, you're going to need to contact your financial advisers. There's going to be certain methods that each custodian has to kind of sign up for the tender as well as taking the price that you're wishing to tender at. And then again, if your Computershare held a direct account, you're going to have 2 different options. First of all, we're going to mail out the tender docs and the letter of transmittal all to you directly. You can then send it back via the mail or there's going to be an online portal for you to sign up similar to what we did with our SRP earlier this year. So you're going to have a couple of different options as a registered shareholder to sign up for the tender. And again, I'll just reiterate, signing up for the tender means you're going to select the price. And then at the end, when the tender closes 20 business days, the company will come out with what the results were and then what the price of that tender will be. Now I see here that there's a lot of questions on what's the pricing of the first trade going to be? What's the pricing of the Dutch tender? That we're going to announce on October 12 pre-market. So the tender range will come out at that time with a press release and a filing. And then we'll hopefully, soon after that, our first trade will take place at the New York Stock Exchange. Let's see the next one. Is the company going to increase its dividend or change its dividend policy after going public?

No, it's a good question. And obviously, I alluded to the dividend in my prepared remarks, but the short answer is no. I think our dividend policy and our coverage ratio, which is basically our ability to cover and pay our dividend related to the funds from operation that we bring into the business is healthy, and it puts us in a position not only to where we can continue to reinvest in our core business, but also to have sustainable dividend growth, if that's what the Board decides to do so. So it proved itself exceedingly well during the pandemic, and it's a strategy, I think that we continue -- we'll continue to implement going forward.

There's a question here on when is the Dutch tender document is going to be sent out. DJ, I'll take that one. So the 12 is -- we'll file the documents, they'll start printing and they'll be mailed out the week of the 12. So hopefully, you'll see those relatively quickly if that's something you want to participate in. Next question is on Highlands. I'll take that. Does this -- does any of this listing or Dutch tender or what is Highlands going to do? Again, Highlands is a separate company. They have their own Board of Directors, their own management. They're not related to InvenTrust any longer. So you'd have to go to their website and their filings to understand what they're doing as far as liquidity. Here's 1 on the portfolio, and you touched on it in your opening remarks, but maybe give a little bit more color as how has the portfolio performed coming out of the pandemic? And what is the company's occupancy rate currently?

Yes, sure. I can give a couple more specifics. I did allude to it, but obviously, we're very happy. And we were -- can continue, quite frankly, to be very pleasantly surprised about the resiliency and the trajectory of the recovery within our own portfolio. And it's obviously a testament to the product that we own and then obviously, the markets in which we operate. Currently, our lease occupancy rate is right around 92% -- between 92% and 93%. The high watermark we actually hit in the fourth quarter of 2019, which was right around 95%. So we do have an ability to continue to grow occupancy over the next several quarters, to grow back into kind of where that high watermark was. As I mentioned in my prepared remarks, we're very excited about the quality of the tenancy that we're bringing in and the demand that we're seeing on the leasing front. So -- and we feel like we can get back to those pre-pandemic occupancy levels in pretty short order.

Great. The -- I guess the last question here that the last seen question is really, will InvenTrust be looking to purchase more properties in 2021 and what kind of properties?

Yes, it's a great question, and it's a key part of our growth plan -- is our external growth plan. I mentioned our balance sheet, but it really is what is our competitive advantage and stands us apart from some of the other publicly traded peers in the shopping center space, which is an ability to substantially grow our business, using and leveraging our current balance sheet without going to the market for additional equity capital right out of the gate. It's an important differentiator because not only can we support the $100 million tender offering that we are doing, but we can also grow our business to the tune of $400 million or so over the next couple of years, and still be in a very conservative leverage grid as it relates to what's the appropriate type of balance sheet leverage we should have as a public company. . The types of properties that we're buying on this are similar to the ones that we bought prepandemic. We continue to look to grow further investment in our current markets. So call it the 15 or 16 markets that were already concentrated and clustered in the Sun Belt, that's where our focus is. We want to continue to move that 90%, as I mentioned, that 90% of net operating income that is generated from our Sun Belt market assets, we want to drive that even higher.

Okay. Great. There is 1 more question that I'll take is what's the ticker symbol going to be. It's going to be IVT. So that's something you can look for on October 12 on Tuesday. So again, very exciting times. I'm going to close the webcast by thanking everybody for attending. If you do have any future questions or different questions that have been submitted, please feel free to reach out to me, [email protected]. And I wish everybody a great day, and again, exciting times, and we'll keep communicating after we're a listed company. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.