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Generation IncomeProperties, Inc. (NASDAQ:GIPR) ("GIPR" or the"Company") today announced its financial and operating resultsfor the period ended September 30, 2022.
Highlights
(For the 3 months ended September 30, 2022)
- Generated net lossattributable to GIPR of $639 thousand, or ($0.28) per basic anddiluted share.
- Generated Core FFO of $326 thousand, or $0.14per basic and diluted share.
- Generated Core AFFO of $358thousand, or $0.16 per basic and diluted share.
Commenting on thequarter, CEO David Sobelman stated, “During the third quarter wefocused on maximizing internal growth and growing our pipeline inorder to better navigate the uncertainty that is prevalent throughouttoday’s markets. By positioning ourselves to take advantage of theimbalances within the market, we’ll look to opportunisticallyacquire assets when the time is right. We’re glad to be able to saythat we’re in a stable position as it relates to our 100% rentcollection, fixed debt rates that are well below today’s marketinterest rates, and the high credit worthiness of our tenants.”
FFO and relatedmeasures are supplemental non-GAAP financial measures used in the realestate industry to measure and compare the operating performance ofreal estate companies. A complete reconciliation containingadjustments from GAAP net income to Core FFO and Core AFFO is includedat the end of this release.
Portfolio (as of September 30, 2022, unless otherwisestated)
- Approximately 85% of our portfolio’s annualized base rent("ABR") as of September 30, 2022 was derived from tenants thathave (or whose parent company has) an investment grade credit ratingfrom a recognized credit rating agency of “BBB-” or better. Ourlargest tenants are the General Service Administration, PRA Holdings,Inc., Pratt and Whitney, and Kohl’s, all who have an ‘BB+’credit rating or better from S&P Global Ratings and contributedapproximately 66% of our portfolio’s annualized base rent.
- The Company’s tenants are 100% rent paying and have beensince our inception.
- Approximately 92% of our portfolio’sannualized base rent in our current portfolio provide for increases incontractual base rent during future years of the current term orduring the lease renewal periods.
- The average ABR per squarefoot is $15.70.
Liquidityand Capital Resources
- $2.6 million in total cash and cashequivalents as of September 30, 2022.
- Total mortgage loans,net was $35.4 million as of September 30, 2022.
Financial Results
- Total revenue fromoperations was $1.5 million during the three-month period endedSeptember 30, 2022, as compared to $1.0 million for the three-monthperiod ended September 30, 2021. This represents a year-over-yearincrease of 43% driven primarily by the acquisition of properties.
- Operating expenses, including G&A, for the same periodswere $2.0 million and $1.3 million, respectively, due to increases inG&A, recoverable expenses and depreciation/amortization fromrecent acquisitions, and compensation costs.
- Net operatingincome (“NOI”) for the same periods was $1.2 million and $838thousand, a 44% increase from the same period last year, which is adirect result of the acquisition of properties.
- Net lossattributable to GIPR for the three months ended September 30, 2022 was$639 thousand as compared to net income of $456 thousand for the sameperiod last year, with the change being attributable primarily to a$923 thousand gain on sale of a property during the three months endedSeptember 20, 2021 that did not occur in the same period of2022.
2022 Guidance
The Company is not providing guidance on futurefinancial results or acquisitions and dispositions at this time.However, the Company will provide timely updates on material events,which will be broadly disseminated in due course. The Company’sexecutives, along with its Board of Directors, continue to assess theadvisability and timing of providing such guidance to better alignGIPR with its industry peers.
Conference Call and Webcast
The Company will host its third quarterearnings conference call and audio webcast on Tuesday, November 15,2022, at 9:00 a.m. Eastern Time. To access the live webcast, whichwill be available in listen-only mode, please follow this link .If you prefer to listen via phone, U.S. participants may dial:877-407-3141 (toll free) or 201-689-7803 (local).
About GenerationIncome Properties
Generation Income Properties, Inc., located in Tampa, Florida,is an internally managed real estate investment trust formed toacquire and own, directly and jointly, real estate investments focusedon retail, office, and industrial net lease properties in denselypopulated submarkets. Additional information about Generation IncomeProperties, Inc. can be found at the Company's corporate website:www.gipreit.com.
Forward-Looking Statements
This press release, whether or not expresslystated, may contain "forward-looking" statements as defined inthe Private Securities Litigation Reform Act of 1995. The words"believe," "intend," "expect," "plan,""should," "will," "would," and similarexpressions and all statements, which are not historical facts, areintended to identify forward-looking statements. These statementsreflect the Company's expectations regarding future events andeconomic performance and are forward-looking in nature and,accordingly, are subject to risks and uncertainties. Suchforward-looking statements include risks and uncertainties that couldcause actual results to differ materially from those expressed orimplied by such forward-looking statements which are, in some cases,beyond the Company’s control which could have a material adverseeffect on the Company's business, financial condition, and resultsof operations. These risks and uncertainties include the risk that wemay not be able to timely identify and close on acquisitionopportunities, our limited operating history, potential changes in theeconomy in general and the real estate market in particular, theCOVID-19 pandemic, and other risks and uncertainties that areidentified from time to in our SEC filings, including those identifiedin our Annual Report on Form 10-K for the fiscal year ended December31, 2021 filed on March 18, 2022, which are available at www.sec.gov.The occurrence of any of these risks and uncertainties could have amaterial adverse effect on the Company's business, financialcondition, and results of operations. For these reasons, among others,investors are cautioned not to place undue reliance upon anyforward-looking statements in this press release. Any forward-lookingstatement made by us herein speaks only as of the date on which it ismade. The Company undertakes no obligation to publicly revise theseforward-looking statements to reflect events or circumstances thatarise after the date hereof, except as may be required by law.
Notice RegardingNon-GAAP Financial Measures
Inaddition to our reported results and net earnings per diluted share,which are financial measures presented in accordance with GAAP, thispress release contains and may refer to certain non-GAAP financialmeasures, including Funds from Operations ("FFO"), Core FundsFrom Operations ("Core FFO"), Adjusted Funds from Operations(“AFFO”), Core Adjusted Funds from Operations ("CoreAFFO"), and Net Operating Income (“NOI”). We believe the useof Core FFO, Core AFFO and NOI are useful to investors because theyare widely accepted industry measures used by analysts and investorsto compare the operating performance of REITs. FFO and relatedmeasures, including NOI, should not be considered alternatives to netincome as a performance measure or to cash flows from operations, asreported on our statement of cash flows, or as a liquidity measure,and should be considered in addition to, and not in lieu of, GAAPfinancial measures. You should not consider our Core FFO, Core AFFO,or NOI as an alternative to net income or cash flows from operatingactivities determined in accordance with GAAP. Our reconciliation ofnon-GAAP measures to the most directly comparable GAAP financialmeasure and statements of why management believes these measures areuseful to investors are included below.
Generation IncomeProperties, Inc.
Consolidated Balance Sheets
| As of September 30, 2022 (unaudited) | As of December 31, 2021 (Ascorrected, see Note 1) (audited) |
Assets |
|
|
Investment in real estate |
|
|
Land | $ 12,577,544 | $ 9,443,445 |
Building and siteimprovements | 39,762,696 | 31,581,864 |
Tenant improvements | 907,382 | 482,701 |
Acquired lease intangibleassets | 4,677,928 | 3,304,014 |
Less:accumulated depreciation and amortization | (5,063,422) | (3,512,343) |
Net real estateinvestments | 52,862,128 | 41,299,681 |
Investment in tenancy-in-common | 1,204,811 | 725,082 |
Cash and cashequivalents | 2,587,669 | 10,589,576 |
Restricted cash | 34,500 | 34,500 |
Deferred rent asset | 272,183 | 156,842 |
Deferred financing costs | 66,767 | - |
Prepaid expenses | 226,537 | 237,592 |
Accounts receivable | 61,950 | 88,661 |
Escrow deposit and otherassets | 238,389 | 288,782 |
Rightof use asset, net | 6,253,975 | - |
Total Assets | $ 63,808,909 | $ 53,420,716 |
Liabilities andEquity |
|
|
Liabilities |
|
|
Accounts payable | $ 104,772 | $ 201,727 |
Accrued expenses | 386,079 | 134,816 |
Acquiredlease intangible liabilities, net | 666,270 | 577,388 |
Insurance payable | 127,103 | 33,359 |
Deferred rent liability | 177,011 | 228,938 |
Lease liability, net | 6,303,232 | - |
Other payable - related party | 2,587,300 | - |
Mortgage loans, net of unamortized discount | 35,364,605 | 28,969,295 |
Total liabilities | 45,716,372 | 30,145,523 |
Redeemable Non-Controlling Interests | 5,773,636 | 9,134,979 |
Stockholders' Equity |
|
|
Common stock, $0.01 par value | 24,892 | 21,729 |
Additional paid-incapital | 19,506,770 | 19,051,929 |
Accumulated deficit | (7,664,430) | (5,403,156) |
Total stockholders' equity | 11,867,232 | 13,670,502 |
Non-Controlling Interests | 451,669 | 469,712 |
Total equity | 12,318,901 | 14,140,214 |
Total Liabilities and Equity | $ 63,808,909 | $ 53,420,716 |
Generation IncomeProperties, Inc.
Consolidated Statement ofOperations
(unaudited)
| Three Months EndedSeptember 30, | Nine Months Ended September30, | ||
| 2022 |
2021
| 2022 |
2021
|
|
|
(As corrected, see Note1) |
|
(As corrected, see Note1) |
Revenue |
|
|
|
|
Rentalincome | $ 1,473,789 | $ 988,244 | $ 4,034,286 | $ 2,913,322 |
Other income | 296 | 45,250 | 837 | 45,250 |
Total revenue | $ 1,474,085 | $ 1,033,494 | $ 4,035,123 | $ 2,958,572 |
|
|
|
|
|
Expenses |
|
|
|
|
General,administrative and organizational costs | 408,570 | 181,746 | 1,222,986 | 621,987 |
Building expenses | 269,781 | 195,464 | 848,373 | 539,739 |
Depreciation and amortization | 561,510 | 388,141 | 1,551,079 | 1,164,838 |
Interest expense, net | 382,440 | 336,025 | 1,088,361 | 1,028,446 |
Compensation costs | 334,992 | 204,218 | 925,432 | 515,030 |
Total expenses | 1,957,293 | 1,305,594 | 5,636,231 | 3,870,040 |
Operatingloss | (483,208) | (272,100) | (1,601,108) | (911,468) |
Income on investment intenancy-in-common | 16,751 | 4,750 | 23,841 | 4,750 |
Gainon sale of property | - | 923,178 | - | 923,178 |
Dead deal expense | (45,660) | - | (153,031) | - |
Loss ondebt extinguishment | - | - | (144,029) | - |
Net income (loss) | $ (512,117) | $ 655,828 | $ (1,874,327) | $ 16,460 |
Less: Net income attributable to non-controllinginterest | 126,803 | 200,277 | 386,947 | 398,781 |
Net income (loss) attributable to GenerationIncome Properties, Inc. | $ (638,920) | $ 455,551 | $ (2,261,274) | $ (382,321) |
Total Weighted Average Shares of Common Stock Outstanding– Basic & Diluted | 2,304,841 | 939,559 | 2,251,522 | 699,395 |
Basic & Diluted Income (Loss) Per Share Attributableto Common Stockholders | $ (0.28) | $ 0.48 | $ (1.00) | $ (0.55) |
Reconciliation ofNon-GAAP Measures
The following tables reconcilenet income (loss), which we believe is the most comparable GAAPmeasure, to Net Operating Income ("NOI"):
| Three Months EndedSeptember 30, | Nine Months Ended September30, | ||
| 2022 |
2021
| 2022 |
2021
|
|
|
(As corrected, see Note1) |
|
(As corrected, see Note1) |
Net income (loss) attributable to Generation IncomeProperties, Inc. | (638,920) | 455,551 | (2,261,274) | (382,321) |
Plus: Net income attributable tonon-controlling interest | 126,803 | 200,277 | 386,947 | 398,781 |
Net income(loss) | (512,117) | 655,828 | (1,874,327) | 16,460 |
|
|
|
|
|
Plus : |
|
|
|
|
General, administrative and organizationalcosts | 408,570 | 181,746 | 1,222,986 | 621,987 |
Depreciation and amortization | 561,510 | 388,141 | 1,551,079 | 1,164,838 |
Interest expense, net | 382,440 | 336,025 | 1,088,361 | 1,028,446 |
Compensation costs | 334,992 | 204,218 | 925,432 | 515,030 |
Income on investment intenancy-in-common | (16,751) | (4,750) | (23,841) | (4,750) |
Gain on sale of property | - | (923,178) | - | (923,178) |
Dead deal expense | 45,660 | - | 153,031 | - |
Loss on debt extinguishment | - | - | 144,029 | - |
Net Operating Income | $ 1,204,304 | $ 838,030 | $ 3,186,750 | $ 2,418,833 |
The following tables reconcile net income(loss), which we believe is the most comparable GAAP measure, to FFO,Core FFO, AFFO, and Core AFFO:
| Three months ended September,30 | Nine months ended September30, | ||
| 2022 |
2021
| 2022 |
2021
|
|
|
(As corrected, see Note1) |
|
(As corrected, see Note1) |
Net income(loss) | $ (512,117) | $ 655,828 | $ (1,874,327) | $ 16,460 |
Gain on disposal of property | - | (923,178) | - | (923,178) |
Depreciation and amortization | 561,510 | 388,141 | 1,551,079 | 1,164,838 |
FundsFrom Operations | $ 49,393 | $ 120,791 | $ (323,248) | $ 258,120 |
Amortization of debt issuance costs | 27,758 | 30,678 | 89,364 | 94,600 |
Non-cash stockcompensation | 110,869 | 53,887 | 328,913 | 186,636 |
Write off of deferred financing cost | 137,522 | - | 137,522 | - |
Adjustments toFunds From Operations | $ 276,149 | $ 84,565 | $ 555,799 | $ 281,236 |
Core Funds From Operations | $ 325,542 | $ 205,356 | $ 232,551 | $ 539,356 |
|
|
|
|
|
Netincome (loss) | $ (512,117) | $ 655,828 | $ (1,874,327) | $ 16,460 |
Gain on disposal of property | - | (923,178) | - | (923,178) |
Depreciation and amortization | 561,510 | 388,141 | 1,551,079 | 1,164,838 |
Amortization of debt issuance costs | 27,758 | 30,678 | 89,364 | 94,600 |
Above andbelow-market lease amortization, net | (26,297) | (40,329) | (76,478) | (115,921) |
Straight line rent, net | 13,203 | (14,796) | 29,263 | (42,785) |
Adjustments to net income (loss) | $ 576,174 | $ (559,484) | $ 1,593,228 | $ 177,554 |
AdjustedFunds From Operations | $ 64,057 | $ $96,344 | $ (281,099) | $ 194,014 |
Dead deal expense | 45,660 | - | 153,031 | - |
Loss on debtextinguishment | - | - | 144,029 | - |
Non-cash stock compensation | 110,869 | 53,887 | 328,913 | 186,636 |
Write off of deferred financingcost | 137,522 | - | 137,522 | - |
Adjustments toAdjusted Funds From Operations | $ 294,051 | $ 53,887 | $ 763,495 | $ 186,636 |
C ore Adjusted Funds FromOperations | $ 358,108 | $ 150,231 | $ 482,396 | $ 380,650 |
Net income (loss) | $ (512,117) | $ 655,828 | $ (1,874,327) | $ 16,460 |
Net incomeattributable to non-controlling interests | (126,803) | (200,277) | (386,947) | (398,781) |
Net income (loss) attributable toGeneration Income Properties, Inc. | $ (638,920) | $ 455,551 | $ (2,261,274) | $ (382,321) |
Note 1: Subsequent to the issuance of the Company’s 2021 Form 10-K and Q12022 Form 10-Q, management of the Company identified an immaterialerror in application of Accounting Standards Codification (ASC)480-10, Distinguishing Liabilities from Equity. Specifically, theCompany incorrectly classified the partnership interest of GIP Fund 1,LLC as Redeemable non-controlling interest rather than Non-controllinginterest within Equity. The Company has accordingly corrected certainnumbers in the prior year presentation above.
Our reported results arepresented in accordance with GAAP. We also disclose funds fromoperations ("FFO"), adjusted funds from operations("AFFO"), core funds from operations ("Core FFO") andcore adjusted funds of operations ("Core AFFO") all of whichare non-GAAP financial measures. We believe these non-GAAP financialmeasures are useful to investors because they are widely acceptedindustry measures used by analysts and investors to compare theoperating performance of REITs.
FFO and related measures do not represent cashgenerated from operating activities and are not necessarily indicativeof cash available to fund cash requirements; accordingly, they shouldnot be considered alternatives to net income or loss as a performancemeasure or cash flows from operations as reported on our statement ofcash flows as a liquidity measure and should be considered in additionto, and not in lieu of, GAAP financial measures.
We compute FFO inaccordance with the definition adopted by the Board of Governors ofthe National Association of Real Estate Investment Trusts("NAREIT"). NAREIT defines FFO as GAAP net income or lossadjusted to exclude extraordinary items (as defined by GAAP), netgains from sales of depreciable real estate assets, impairmentwrite-downs associated with depreciable real estate assets, and realestate related depreciation and amortization, including the pro ratashare of such adjustments of unconsolidated subsidiaries. We thenadjust FFO for non-cash revenues and expenses such as amortization ofdeferred financing costs, above and below market lease intangibleamortization, straight line rent adjustment where the Company is boththe lessor and lessee, and non-cash stock compensation to calculateCore AFFO.
FFO isused by management, investors, and analysts to facilitate meaningfulcomparisons of operating performance between periods and among ourpeers primarily because it excludes the effect of real estatedepreciation and amortization and net gains on sales, which are basedon historical costs and implicitly assume that the value of realestate diminishes predictably over time, rather than fluctuating basedon existing market conditions. We believe that AFFO is an additionaluseful supplemental measure for investors to consider because it willhelp them to better assess our operating performance without thedistortions created by other non-cash revenues or expenses. FFO andAFFO may not be comparable to similarly titled measures employed byother companies. We believe that Core FFO and Core AFFO are usefulmeasures for management and investors because they further remove theeffect of non-cash expenses and certain other expenses that are notdirectly related to real estate operations. We use each as measures ofour performance when we formulate corporate goals.
As FFO excludes depreciation andamortization, gains and losses from property dispositions that areavailable for distribution to stockholders and extraordinary items, itprovides a performance measure that, when compared year over year,reflects the impact to operations from trends in occupancy rates,rental rates, operating costs, general and administrative expenses andinterest costs, providing a perspective not immediately apparent fromnet income or loss. However, FFO should not be viewed as analternative measure of our operating performance since it does notreflect either depreciation and amortization costs or the level ofcapital expenditures and leasing costs necessary to maintain theoperating performance of our properties which could be significanteconomic costs and could materially impact our results fromoperations. Additionally, FFO does not reflect distributions paid toredeemable non-controlling interests.
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