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Inland Real Estate Income Trust, Inc. (INRE)·Q4 2020 Earnings Summary

Executive Summary

  • Q4 2020 total income was $31.03M and net loss was $1.26M (-4.1% margin), improving sequentially from Q3 (-11.5% margin) on better collections and lower operating costs; YoY net loss narrowed vs Q4 2019 (-$2.96M) despite pandemic headwinds .
  • The Board set estimated NAV at $18.08 per share (range $17.58–$19.57) as of Dec 31, 2020; DRP/SRP remain suspended, with SRP repurchases priced at $14.46 (80% of NAV) upon reinstatement .
  • Portfolio economic occupancy was 93.3% at year-end with 691 tenants and >85% of properties grocer-anchored; tenant retention was 78% in 2020, underscoring necessity retail resilience .
  • No formal EPS/revenue guidance and no Wall Street consensus estimates available via S&P Global for Q4 2020 given the non-listed status; investors should anchor on NAV and operating metrics (occupancy, collections) rather than quarterly “beats/misses” .
  • Catalyst: potential future reinstatement of distributions and SRP/DRP as collections/visibility improve; long-term plan remains to pursue a liquidity event subject to market conditions and pandemic normalization .

What Went Well and What Went Wrong

What Went Well

  • Stable occupancy and tenant retention: “As of December 31, 2020…economic occupancy of 93.3%, and 691 primarily necessity-based tenants…More than 78% of tenants renewed their leases in 2020” .
  • Leasing activity resilience: “Thirty-six new leases were executed throughout 2020, an increase of 16% over 2019” .
  • Strategic focus on grocery: “More than 85% of properties anchored or shadow-anchored by a grocer,” reinforcing performance during COVID-19 .

What Went Wrong

  • Same-store income pressure: “Top line same-store rental income was lower by approximately $8.5 million due to higher bad debt…lower reimbursements…lower rent because of pandemic-related abatements” .
  • Pandemic-driven uncertainty: Board selected NAV below midpoint due to risks around non-grocery big box exposure (~37% of ABR) and macro interest rate uncertainty impacting retail values .
  • Distributions and SRP/DRP suspended to preserve cash; 2020 distributions paid were treated as nondividend (return of capital) for tax purposes .

Financial Results

MetricQ4 2019Q2 2020Q3 2020Q4 2020
Total Income ($USD Thousands)$32,813 $26,229 $27,672 $31,027
Net Loss ($USD Thousands)$(2,959) $(4,313) $(3,191) $(1,263)
Net Loss per Share ($)$(0.08) $(0.12) $(0.09) $(0.04)
Net Loss Margin (%)-9.0% -16.4% -11.5% -4.1%

Segment breakdown: Not applicable (single real estate portfolio) .

KPIs

KPIQ4 2019 / FY 2019Q4 2020
Economic Occupancy (%)94.4% (YoY prior) 93.3%
Tenants (#)—691
Properties (#)—44
Tenant Retention (%)—78%
Grocer-anchored (% of properties)—>85%
Estimated NAV per Share ($)$18.15 (Dec 31, 2019) $18.08 (Dec 31, 2020)
NAV Range ($)—$17.58–$19.57

Notes: Total income and net loss are quarterly; occupancy/tenant metrics are as of Dec 31, 2020; NAV values are Board-determined estimates.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
DistributionsAs of Mar 11, 2021Suspended since onset of pandemic Remain suspended; Board to revisit as visibility improves Maintained
DRP PriceIf DRP resumes before next NAVN/A$18.08 per share (based on 12/31/2020 NAV) Set
SRP Repurchase PriceIf SRP resumesN/A$14.46 per share (80% of $18.08 NAV) Set
Liquidity PlanOngoingPursue liquidity event, market conditions permitting No liquidity event expected until COVID-19 effects subside Clarified timing

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2020)Trend
COVID-19 impact on collections/tenantsOct 2020 letter: Nov rent collections 91%; defensive actions to preserve cash, suspended distributions/SRP/DRP Continued prudence; Board preserving cash pending clarity; occupancy and collections “recently been stable” Stabilizing but cautious
Grocery-anchored resilienceEmphasis on necessity retail; tenants performing relatively well >85% grocer/shadow-anchored; grocery preference and retail sales outlook highlighted in presentation Positive narrative reinforced
Leasing/retentionDefensive stance; pandemic challenges noted 36 new leases (+16% YoY), 78% retention Improving activity
Capital structure/liquidityCredit agreement amended (Oct 2020); payout restrictions tied to covenants NAV reset; SRP/DRP terms defined; mortgages repaid using revolver in early 2021 Liquidity prudence, debt management
Strategic planReduce big-box exposure; focus on necessity retail No asset sales/new acquisitions until post-pandemic clarity; long-term plan toward listing remains Maintain course, timing deferred

Management Commentary

  • “It is our goal to resume the payment of distributions and to reopen the SRP as soon as appropriate…prudent to continue preserving cash…until there is further clarity around the longer-term impacts of the pandemic” (FAQ Q5) .
  • “The Inland Income Trust portfolio generally performed well in 2020…Thirty-six new leases…More than 78% of tenants renewed…economic occupancy of 93.3%” (FAQ Q6) .
  • “Estimated per share NAV $18.08; range $17.58–$19.57…Board selected an estimated per-share NAV lower than the mid-point due to COVID-19 uncertainty and retail volatility” .
  • “Distributions, DRP and SRP remain suspended…If resumed prior to striking a new NAV in 2022, DRP $18.08 and SRP $14.46” .

Q&A Highlights

  • DRP/SRP reinstatement: Board aims to resume when appropriate; cash preservation prioritized until better visibility .
  • Portfolio status: 93.3% occupancy; 691 tenants; 36 new leases; 78% renewals; grocery strength .
  • Same-store revenue drivers: ~$8.5M decline from higher bad debt, lower reimbursements, abatements; offset by ~$3.4M lower operating expenses .
  • Strategic plan: Avoid asset sales/new acquisitions until market clarity; continued pivot away from big-box; three properties sold in Q1 2020 .

Estimates Context

  • Wall Street consensus estimates for Q4 2020 EPS/revenue/EBITDA were unavailable via S&P Global for INRE due to non-listed status and lack of coverage. Values retrieved from S&P Global.
  • Implication: Focus on operating KPIs (occupancy, leasing, collections), NAV trajectory, and program status (DRP/SRP/distributions) rather than quarterly estimate beats/misses .

Key Takeaways for Investors

  • Sequential improvement in net loss margin (-4.1% in Q4 vs -11.5% in Q3) suggests collections and cost controls are gaining traction into year-end .
  • Necessity/grocery-anchored exposure (>85% of properties) supports defensive cash flows amid ongoing consumer shifts; monitor tenant mix (~37% ABR from non-grocery big box exposure highlighted as risk in NAV methodology) .
  • NAV reset to $18.08 provides an anchor for valuation and program pricing; watch for future NAV updates and any movement toward reinstating distributions/SRP/DRP as visibility improves .
  • Leasing momentum (36 new leases, +16% YoY) and 78% tenant retention signal post-pandemic stabilization potential; track same-store NOI, bad debt, and reimbursements recovery .
  • Capital prudence remains: distributions suspended; targeted debt repayment via revolver in early 2021; liquidity event timing explicitly deferred until pandemic effects subside .
  • Near-term: catalysts would be explicit reinstatement of distributions/SRP/DRP and improved collections/occupancy; medium-term: execution on strategic plan and eventual listing/liquidity pathway .

Additional references

  • 2019 vs 2020 drivers (same-store NOI -$5.16M; property income -$8.52M; operating expenses -$3.36M) provide context for recovery path in 2021 .
  • Tax treatment: 2020 distributions paid treated as nondividend (return of capital) for income tax purposes .