Retail real estate investment trust (REIT) InvenTrust Properties (NYSE: IVT) recently listed its stock on the NYSE, a big step up from its previous presence on the over-the-counter, or OTC, markets. With a focus on grocery-anchored retail properties in the Sun Belt region, is InvenTrust worth a closer look now that it has joined the big leagues of the public market?
InvenTrust Properties: What investors need to know
As mentioned, InvenTrust Properties specializes in retail properties in the Sun Belt region, with a focus on those anchored by grocery stores. The company's portfolio as of October 2021 consists of 65 properties with 10.8 million square feet of leasable space, 85% of which is anchored by grocery stores. Just under 93% of the company's square footage is occupied, which is on par with similarly focused retail REITs.
Sun Belt markets generally have above-average population and job growth, and that's especially true in InvenTrust's top markets. The top five markets in the portfolio include Austin, Texas; Southern California; Atlanta; Miami; and Dallas, which combine to account for 57% of the company's net operating income (NOI). In InvenTrust's markets, population is growing at twice the rate of its non-Sun Belt peers, and household income is outpacing the peer group as well.
Not surprisingly, InvenTrust's top tenants include some of the largest grocery chains in the U.S. Kroger (NYSE: KR), Publix, and Albertsons (NYSE: ACI) are the three largest tenants by rental income. Nongrocery tenants in the top 10 include TJX Companies (NYSE: TJX), PetSmart (NASDAQ: PETM), Best Buy (NYSE: BBY), and Bed Bath & Beyond (NASDAQ: BBBY).
InvenTrust has one of the stronger balance sheets in the retail REIT space, with a net leverage ratio of just 18% and a debt-to-EBITDA ratio of 3.9 (both of these figures are well below its peer group average). It also has over $500 million in total liquidity between borrowing capacity and cash on hand, which is quite a bit of financial flexibility for a REIT with a $1.8 billion market cap. The company is willing to take on considerably more debt, so it's fair to say that InvenTrust could grow quite a bit in the next few years.
Speaking of growth, InvenTrust growth through acquisitions as opposed to development. Since 2015, the company has acquired 47 properties out of more than 600 evaluated opportunities. The company also actively recycles capital, strategically disposing of properties to raise capital for high-potential opportunities.
It's also important to point out that like most other REITs, InvenTrust pays an above-average dividend yield. As of late October, InvenTrust yields about 3.2% annualized, which is on par with other retail REITs with a similar focus. Although it's new to the NYSE, InvenTrust has a nice track record of increasing its dividend, with five consecutive years of raising the payout (including in 2020).
The Millionacres bottom line
With a market capitalization of less than $1.8 billion, InvenTrust Properties is a relatively small REIT. However, with a focus on the fastest-growing areas of the United States, a strong balance sheet, and a focus on grocery-anchored (read: recession-resistant) retail properties, it could have quite a bit of growth potential in the years ahead.