InvenTrust Properties Corp. 2026 Q3 Earnings Call

Good morning, everyone, and thank you for joining us today. On the call from the InvenTrust team is DJ Busch, President and Chief Executive Officer, Mike Phillips, Chief Financial Officer, Christy David, Chief Operating Officer, and Dave Heimberger, Chief Investment Officer. Following the team's prepared remarks, the lines will be open for questions. As a reminder, some of today's comments may contain forward-looking statements about the company's views on the future of our business and financial performance, including forward-looking earnings guidance and future market conditions. These are based on management's current beliefs and expectations and are subject to various risks and uncertainties. Any forward-looking statements speak only as of today's date, and we assume no obligation to update any forward-looking statements made on today's call or that are in the quarterly financial, supplemental, or press release. In addition, we will also reference certain non-GAAP financial measures.

The comparable GAAP financial measures are included in this quarter's earnings materials, which are posted on our investor relations website. With that, I'll turn the call over to DJ.

Good morning, everyone, and thank you for joining us. The third quarter was another period of solid execution for InvenTrust, supported by healthy leasing demand, strong tenant retention, and our team's continued ability to convert that activity into occupancy and cash flow. This momentum generated year to date same property NOI and NAREIT FFO per share growth of 3.4% and 9.9%, respectively, underscoring the value of our well-located centers serving everyday needs of growing communities. Our recent acquisitions are contributing to growth as well. Earlier this year, market conditions created an attractive opportunity to expand the portfolio, and we acquired six Sunbelt properties, adding over 800,000 square feet of GLA for a total of nearly $290 million. The capital markets have shifted quickly since then. Rising Treasury yields have increased the cost of debt across the industry, while share prices have come under pressure.

At the same time, private capital remains active in the market for high-quality retail assets, and transaction pricing is yet to fully reflect today's financing costs and return requirements. We are responding with discipline. We have raised our return hurdles and are taking a measured approach until pricing better aligns with our cost of capital. Our team remains active, underwriting opportunities, tracking seller expectations, and evaluating the right sources of capital. Our goal remains to grow the portfolio and make a greater use of our operating platform with investments that can deliver durable cash flow growth. In the meantime, operating fundamentals in our Sun Belt portfolio remain strong. Contractual rent increases provide a dependable foundation, while renewals and new leases give us opportunities to capture mark-to-market rent growth. Our signed-not-open lease pipeline adds visibility as those leases commence and begin contributing rent.

Tenant retention is an important part of this approach. It supports rent growth and stronger lease terms while helping limit downtime and incremental capital needs. High occupancy also gives us the flexibility to recapture space selectively when we believe it can improve the center's long-term performance. Overall, we remain highly confident in our portfolio and the opportunities ahead. We will continue to operate our centers to meet the needs of our tenants and consumers, invest where we see best risk-adjusted returns, and maintain financial flexibility as the market conditions evolve. Mike will now review our financial results.

Thanks, DJ, and good morning, everyone. Same property NOI for the third quarter was $50.4 million, an increase of 3.1% from the third quarter of 2025. Growth was led by base rent increases of 280 basis points, including approximately 340 basis points from contractual rent bumps, leasing spreads, and redevelopment activity. Other contributors included 40 basis points from percentage rent and specialty income. These positive drivers were partially offset by an expected temporary occupancy impact of 60 basis points and 10 basis points of bad debt. Through the first nine months of the year, same property NOI totaled $144.8 million, representing 3.4% growth over the same period in 2025. As we noted previously, third quarter same property NOI growth was affected by the timing of certain operating expenses associated with scheduled projects.

We expect growth to re-accelerate in the fourth quarter as new leases commence and our signed-not-open pipeline converts to rent-paying occupancy. Third quarter NAREIT FFO was $41.5 million, or $0.53 per diluted share, up 8.2% from the third quarter of 2025. Core FFO increased 6.4% year-over-year to $0.50 per share. Same property NOI and net acquisition activity were the primary drivers of FFO growth, partially offset by interest expense. Through the first nine months of 2026, NAREIT FFO totaled $122.6 million, or $1.56 per diluted share, up 9.9% year-over-year. Core FFO was $1.47 per diluted share, up 7.3% from the comparable 2025 period. We closed the quarter with total liquidity of $510 million, including $29.5 million of cash and $480 million of availability under our revolving credit facility.

Net debt to adjusted EBITDA is 4.9 times on a current quarter annualized basis, while net leverage is 31.2%. Our weighted average interest rate is 4.7%, and our weighted average term to maturity is 4.1 years. With no debt maturities in 2026 and only $26 million due in 2027, we have good visibility into near-term interest expense and limited refinancing exposure. Finally, we declared a quarterly dividend of $0.25 per share. Turning to our outlook, we are updating our full year same property NOI guidance range to 3.75%-4.25%. We are also raising our FFO per share guidance to $2.05 to $2.07 for NAREIT FFO and $1.94 to $1.96 for core FFO. To reflect the timing of transactions, we are adjusting our net investment assumption to a range of $190 million to $255 million. Additional information on the assumptions underlying our guidance is included in our supplemental disclosure.

With that, I'll turn the call over to Christy for an update on our portfolio activity.

Thanks, Mike. Our portfolio continues to perform well, supported by broad tenant interest and strong execution by our teams. Retailers are advancing multi-year expansion plans, and industry announcements continue to point to more openings than closures, especially in Sun Belt markets. That is consistent with what we hear from our national and regional tenants who are focused on adding stores in the right locations. Favorable and growing demographics remain important, but site selection decisions increasingly reflect the role each store plays within a broader pickup, delivery, and omnichannel strategy. At the same time, elevated replacement costs continue to constrain new retail construction, making high-quality space in established trade areas more valuable. Where the limited development is occurring, it is generally tied to residential growth rather than new retail supply that competes directly with our centers. These dynamics support strong backfill interest and attractive lease economics when space becomes available.

Leasing demand remains robust across food, fitness, health, and other service-oriented uses. These tenants complement our grocery and essential retail anchors, giving customers more reasons to visit throughout the day and contributing to a more resilient tenant mix. Restaurants and beverage concepts are particularly active, ranging from growing brands such as 7 Brew and Dutch Bros to established operators like Wingstop and Chipotle. Traffic at our centers is up nearly 5% over the same period last year, with our grocery anchors remaining key drivers. Several grocery partners continue to reinvest in existing stores within our portfolio. These projects demonstrate their confidence in our centers and trade areas while helping attract additional visits to our properties. Turning to our portfolio results, we executed 86 leases during the quarter, covering approximately 549,000 square feet. Comparable blended lease spreads were 14%, with new lease spreads of 42% and renewal spreads of 11%.

Excluding contractual options, renewal spreads were 16%, with year-to-date tenant retention at 89%. Annual rent escalators on new and renewal small shop leases executed in 2026 average over 3.1%. One of the quarter's standout leasing wins was backfilling the former Painted Tree space. In less than three months, our team signed Nordstrom Rack at a 73% spread, which added a strong national retailer to the center and helped drive a 30 basis point sequential increase in anchor lease occupancy. It's a great example of the demand for quality space and the speed at which our team can act when the space becomes available. Annualized base rent per square foot increased 3.4% year-over-year to $20.97, reflecting continued strength in our leasing fundamentals. Leased occupancy ended the quarter at 96.4%, an increase of 20 basis points sequentially, while economic occupancy improved 70 basis points to 95.3%.

Small shop lease occupancy remained steady at 93.2%, and anchor lease occupancy increased 30 basis points to 98.4%. Looking ahead, our signed but not open lease pipeline represents approximately 110 basis points of occupancy and $4.3 million in annualized base rent, providing meaningful visibility into future cash flow growth. Beyond these executed leases, we have an additional 140 basis points of potential ABR in various stages of negotiation and documentation. In closing, our results reflect the quality of our portfolio and the strength of our leasing execution. We are retaining productive tenants, introducing concepts that support the community, and securing terms that drive long-term rent growth. As we work through the active pipeline, our focus on building the right tenant mix, making every new lease improve cash flow, and add value to each location. Operator, that concludes our prepared remarks, and we are ready to open the line for questions.