Retail Opportunity Investments Corp. (NASDAQ:ROIC) reports first quarter earnings this Wednesday after the market close, and it's time for investors in the strip mall REIT to start thinking about what to expect. In no particular order, here are four things I'll be watching when the company's release hits the wires:
First, crucial to Retail Opportunity Investments' ability to monetize its real estate portfolio is actually having tenants occupy its shopping centers. By the end of 2014, Retail Opportunity Investments had increased its leased rate for five consecutive years to a new company-record 97.6%, good for a 130 basis point jump over 2013. With the exception of acquiring new shopping centers with lower starting occupancy rates, investors would like to see Retail Opportunity Investments at least maintain its impressive overall leased rates.
Relatedly, I hope to see continued progress with increasing same-space cash rents, which last quarter rose 17.9% year over year. This metric is typically included in the earnings report under a section titled "Leasing Summary." A positive number indicates strength in Retail Opportunity Investments' pricing power, as well as its ability to charge higher rents for both new tenants and renewed leases.
Next, Retail Opportunity Investments should provide details not only on new shopping center acquisitions from the first quarter, but also complete and pending purchases so far in Q2. After all, last quarter the company raised capital by issuing shares that increased its net share count by 24%, so you can bet the company and investors alike are just chomping at the bit to put those funds to use for their intended purpose.
Updates here usually include the total cost of those purchases, as well as the shopping centers' respective square footage, occupancy rates, and demographic and other relevant information. Remember, Retail Opportunity Investments focuses primarily on finding shopping and community centers in densely populated, mid- to high-income areas anchored by a dominant supermarket and drug store. As of Dec. 31, 2015, it owned 61 shopping centers encompassing roughly 7.3 million square feet.
Funds from operations
Last but not least, keep an eye on Retail Opportunity Investments' funds from operations (FFO). FFO is arguably a better way than net income to gauge the success of a REIT, as it measures the company's cash flow from its operations. Last quarter, ROIC's funds from operations rose 22.1% year over year to $20.2 million, but remained roughly flat on a per-share basis at $0.21 thanks to the aforementioned share issuance.
For reference, however, ROIC offered full-year 2015 guidance for net income per share in the range of $0.24 to $0.25, and FFO per diluted share in the range of $0.88 to $0.93.
In the end, while I'd love to see some movement on ROIC's FFO per share, as a long-term investor I'll be encouraged if it simply maintains this guidance, indicating its own long-term plans are continuing to progress. Assuming that happens, I still think ROIC is a lucrative bet for patient investors willing to collect a continuously rising dividend and let compounding do its work.