OAK BROOK, Ill., Oct. 30, 2018 /PRNewswire/ -- Retail Properties of America, Inc. (NYSE: RPAI) (the "Company") today reported financial and operating results for the quarter and nine months ended September 30, 2018.

FINANCIAL RESULTS
For the quarter ended September 30, 2018, the Company reported:

• Net income attributable to common shareholders of $12.8 million, or $0.06 per diluted share, compared to $33.5 million, or $0.15 per diluted share, for the same period in 2017;
• Funds from operations (FFO) attributable to common shareholders of $54.3 million, or $0.25 per diluted share, compared to $57.1 million, or $0.25 per diluted share, for the same period in 2017; and
• Operating funds from operations (Operating FFO) attributable to common shareholders of $58.0 million, or $0.26 per diluted share, compared to $59.3 million, or $0.26 per diluted share, for the same period in 2017.

For the nine months ended September 30, 2018, the Company reported:

• Net income attributable to common shareholders of $65.5 million, or $0.30 per diluted share, compared to $134.5 million, or $0.57 per diluted share, for the same period in 2017;
• FFO attributable to common shareholders of $164.3 million, or $0.75 per diluted share, compared to $118.3 million, or $0.51 per diluted share, for the same period in 2017; and
• Operating FFO attributable to common shareholders of $168.8 million, or $0.77 per diluted share, compared to $189.1 million, or $0.81 per diluted share, for the same period in 2017.

OPERATING RESULTS
For the quarter ended September 30, 2018, the Company's portfolio results were as follows:

• 3.8% increase in same store net operating income (NOI) over the comparable period in 2017;
• Total same store portfolio percent leased, including leases signed but not commenced: 94.1% at September 30, 2018, up 50 basis points from 93.6% at June 30, 2018 and up 20 basis points from 93.9% at September 30, 2017;
• Retail portfolio percent leased, including leases signed but not commenced: 94.0% at September 30, 2018, up 50 basis points from 93.5% at June 30, 2018 and up 130 basis points from 92.7% at September 30, 2017;
• Retail portfolio annualized base rent (ABR) per occupied square foot of $19.36 at September 30, 2018, up 4.6% from $18.50 ABR per occupied square foot at September 30, 2017;
• 999,000 square feet of retail leasing transactions comprised of 140 new and renewal leases; and
• Positive comparable cash leasing spreads of 8.0% on new leases, containing 220 basis points of annual contractual rent increases, and 5.8% on renewal leases for a blended re-leasing spread of 6.3%.

For the nine months ended September 30, 2018, the Company's portfolio results were as follows:

• 2.1% increase in same store NOI over the comparable period in 2017;
• 2,325,000 square feet of retail leasing transactions comprised of 365 new and renewal leases; and
• Positive comparable cash leasing spreads of 8.7% on new leases, containing 220 basis points of annual contractual rent increases, and 5.5% on renewal leases for a blended re-leasing spread of 5.9%.

"The RPAI team delivered yet another strong quarter led by our same store NOI growth of 3.8%," stated Steve Grimes, chief executive officer. "Our operating portfolio continues to demonstrate its strength and resiliency, solidifying our conviction around our $400 million in expansion and redevelopment starts in 2019. Our balance sheet and liquidity are in check, our team is eager to grow, and we are operating on all fronts to capitalize on our value creation initiatives."

INVESTMENT ACTIVITY
Acquisitions
The Company is under contract to acquire One Loudoun Uptown, a 58 acre land parcel, of which 32 acres are developable, located adjacent to One Loudoun Downtown, an existing multi-tenant retail asset located in the Washington, D.C. metropolitan statistical area, for a gross purchase price of $25.0 million. This transaction is expected to close during the fourth quarter of 2018, subject to satisfaction of customary closing conditions.

Dispositions
Year to date, the Company has completed property dispositions totaling $193.0 million, the sale of development air rights for $12.0 million and the sale of a land parcel and the rights to develop eight residential units at One Loudoun Downtown for $1.8 million.

The Company is under contract to sell one non-target multi-tenant retail asset for $8.5 million and one single-user retail asset for $25.9 million, both of which are expected to close during the fourth quarter of 2018, subject to satisfaction of customary closing conditions. The Company is also under contract to sell land and the rights to develop 22 residential units at One Loudoun Downtown for $5.0 million. The sale of land and development rights is expected to close in two phases by early 2019, subject to satisfaction of customary closing conditions.

One Loudoun Downtown Expansion – Joint Venture
During the quarter, the Company entered into a development joint venture agreement for the expansion of pads G and H at One Loudoun Downtown. The project encompasses the construction of 378 residential rental units and up to approximately 66,600 square feet of commercial space. The joint venture facilitates the construction and management of the residential units and construction of a portion of the commercial space, which will be delivered to the Company once complete.

BALANCE SHEET AND CAPITAL MARKETS ACTIVITY
As of September 30, 2018, the Company had approximately $1.6 billion of consolidated indebtedness with a weighted average contractual interest rate of 3.82%, a weighted average maturity of 5.1 years and a net debt to adjusted EBITDAre ratio of 5.1x.

During the quarter, the Company repaid $67.2 million of mortgage debt, excluding amortization, with a weighted average interest rate of 6.06% and incurred prepayment penalties of $4.8 million. In addition, the Company entered into two forward-starting interest rate swap agreements to effectively fix the interest rate on the Term Loan Due 2023 at 2.85%, plus the applicable credit spread, effective November 23, 2018, upon maturity of the existing swaps, through November 22, 2023.

Year to date, the Company has repaid $178.0 million of total debt, excluding amortization, with a weighted average interest rate of 4.46% and incurred prepayment penalties of $5.8 million.

Common Stock Repurchases
To date in 2018, the Company has repurchased 4.1 million shares of common stock under its stock repurchase program at an average price per share of $12.12 for $49.7 million. These repurchases consist of (i) 2.6 million shares repurchased during the third quarter at an average price per share of $12.13 for $31.2 million, including 0.9 million shares repurchased in September 2018 for $10.5 million, which settled in October 2018 and (ii) 1.5 million shares repurchased in early October 2018 at an average price per share of $12.11 for $18.5 million.

2018 GUIDANCE
The Company expects to generate net income attributable to common shareholders of $0.36 to $0.38 per diluted share in 2018. The Company is maintaining its 2018 Operating FFO attributable to common shareholders guidance range of $1.00 to $1.02 per diluted share based, in part, on the following assumptions:

• Same store NOI growth of 2.0% to 2.5%, no change from the midpoint of the previous range of 1.75% to 2.75%;
• Acquisitions of approximately $75 million including repurchases of common stock, an increase of $25 million from the midpoint of the previous range of $25 to $75 million;
• Property dispositions of approximately $200 million; and
• General and administrative expenses of $40 to $42 million, excluding the impact on earnings from executive separation.

DIVIDEND
On October 24, 2018, the Company declared the fourth quarter 2018 quarterly cash dividend of $0.165625 per share on its outstanding Class A common stock, which will be paid on January 10, 2019 to Class A common shareholders of record on December 27, 2018.

WEBCAST AND CONFERENCE CALL INFORMATION
The Company's management team will hold a webcast on Wednesday, October 31, 2018 at 11:00 AM (ET), to discuss its quarterly financial results and operating performance, as well as business highlights and outlook. In addition, the Company may discuss business and financial developments and trends and other matters affecting the Company, some of which may not have been previously disclosed.

A live webcast will be available online on the Company's website at www.rpai.com in the INVEST section. A replay of the webcast will be available. To listen to the replay, please go to www.rpai.com in the INVEST section of the website and follow the instructions.

The conference call can be accessed by dialing (877) 705-6003 or (201) 493-6725 for international participants. Please dial in at least ten minutes prior to the start of the call to register. A replay of the call will be available from 2:00 PM (ET) on October 31, 2018 until midnight (ET) on November 14, 2018. The replay can be accessed by dialing (844) 512-2921 or (412) 317-6671 for international callers and entering pin number 13682719.

SUPPLEMENTAL INFORMATION
The Company has posted supplemental financial and operating information and other data in the INVEST section of its website.

ABOUT RPAI
Retail Properties of America, Inc. is a REIT that owns and operates high quality, strategically located open-air shopping centers, including properties with a mixed-use component. As of September 30, 2018, the Company owned 105 retail operating properties in the United States representing 19.5 million square feet. The Company is publicly traded on the New York Stock Exchange under the ticker symbol RPAI. Additional information about the Company is available at www.rpai.com.

SAFE HARBOR LANGUAGE
The statements and certain other information contained in this press release, which can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "should," "intends," "plans," "estimates" or "anticipates" and variations of such words or similar expressions or the negative of such words, constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbors created thereby. These forward-looking statements reflect the Company's current views about its plans, intentions, expectations, strategies and prospects, which are based on the information currently available to the Company and on assumptions it has made. Although the Company believes that its plans, intentions, expectations, strategies and prospects as reflected in or suggested by those forward-looking statements are reasonable, the Company can give no assurance that such plans, intentions, expectations or strategies will be attained or achieved. Furthermore, these forward-looking statements should be considered as subject to the many risks and uncertainties that exist in the Company's operations and business environment. Such risks and uncertainties could cause actual results to differ materially from those projected. These uncertainties include, but are not limited to, economic, business and financial conditions, and changes in the Company's industry and changes in the real estate markets in particular, rental rates and/or vacancy rates, frequency and magnitude of defaults on, early terminations of or non-renewal of leases by tenants, bankruptcy or insolvency of a major tenant or a significant number of smaller tenants, adverse impact of e-commerce developments and shifting consumer retail behavior on tenants, interest rates or operating costs, real estate valuations, the availability, terms and deployment of capital, general volatility of the capital and credit markets and the market price of the Company's Class A common stock, risks generally associated with real estate acquisitions and dispositions, including the Company's ability to identify and pursue acquisition and disposition opportunities, risks generally associated with redevelopment, including the impact of construction delays and cost overruns, the Company's ability to lease redeveloped space and identify and pursue redevelopment opportunities, competitive and cost factors, the Company's ability to enter into new leases or renew leases on favorable terms, the Company's ability to create long-term shareholder value, satisfaction of closing conditions to the pending transactions described herein, regulatory changes and other risk factors, including those detailed in the sections of the Company's most recent Forms 10-K and 10-Q filed with the SEC titled "Risk Factors." The Company assumes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

NON-GAAP FINANCIAL MEASURES
As defined by the National Association of Real Estate Investment Trusts (NAREIT), an industry trade group, Funds From Operations (FFO) means net income (loss) computed in accordance with generally accepted accounting principles (GAAP), excluding gains (or losses) from sales of depreciable real estate, plus depreciation and amortization and impairment charges on depreciable real estate. The Company has adopted the NAREIT definition in its computation of FFO attributable to common shareholders. The Company believes that, subject to the following limitations, FFO attributable to common shareholders provides a basis for comparing its performance and operations to those of other real estate investment trusts (REITs). The Company believes that FFO attributable to common shareholders, which is a supplemental non-GAAP financial measure, provides an additional and useful means to assess the operating performance of REITs. FFO attributable to common shareholders does not represent an alternative to (i) "Net income" or "Net income attributable to common shareholders" as an indicator of the Company's financial performance, or (ii) "Cash flows from operating activities" in accordance with GAAP as a measure of the Company's capacity to fund cash needs, including the payment of dividends.

The Company also reports Operating FFO attributable to common shareholders, which is defined as FFO attributable to common shareholders excluding the impact of discrete non-operating transactions and other events which the Company does not consider representative of the comparable operating results of its real estate operating portfolio, which is its core business platform. Specific examples of discrete non-operating transactions and other events include, but are not limited to, the impact on earnings from gains or losses associated with the early extinguishment of debt or other liabilities, gain on sale and impairment charges on assets other than depreciable real estate, litigation involving the Company, including actual or anticipated settlement and associated legal costs, the impact on earnings from executive separation and the excess of redemption value over carrying value of preferred stock redemption, which are not otherwise adjusted in the Company's calculation of FFO attributable to common shareholders. The Company believes that Operating FFO attributable to common shareholders, which is a supplemental non-GAAP financial measure, provides an additional and useful means to assess the operating performance of REITs. Operating FFO attributable to common shareholders does not represent an alternative to (i) "Net income" or "Net income attributable to common shareholders" as an indicator of the Company's financial performance, or (ii) "Cash flows from operating activities" in accordance with GAAP as a measure of the Company's capacity to fund cash needs, including the payment of dividends. Comparison of the Company's presentation of Operating FFO attributable to common shareholders to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in definition and application by such REITs.

The Company also reports Net Operating Income (NOI), which it defines as all revenues other than straight-line rental income (non-cash), amortization of lease inducements, amortization of acquired above and below market lease intangibles and lease termination fee income, less real estate taxes and all operating expenses other than lease termination fee expense, straight-line ground rent expense (non-cash) and amortization of acquired ground lease intangibles (non-cash). NOI consists of Same Store NOI and NOI from Other Investment Properties. Same Store NOI for the three and nine months ended September 30, 2018 represents NOI from the Company's same store portfolio consisting of 102 retail operating properties acquired or placed in service and stabilized prior to January 1, 2017. NOI from Other Investment Properties for the three and nine months ended September 30, 2018 represents NOI primarily from (i) properties acquired during 2017, (ii) Reisterstown Road Plaza, which is in active redevelopment, (iii) the redevelopment portion of Circle East, formerly known as Towson Circle, which is in active redevelopment, (iv) Carillon, formerly known as Boulevard at the Capital Centre, where the Company has begun activities in anticipation of future redevelopment,  (v) the properties that were sold or held for sale in 2017 and 2018, including Schaumburg Towers, and (vi) the net income from the Company's wholly-owned captive insurance company. The Company believes that NOI, Same Store NOI and NOI from Other Investment Properties, which are supplemental non-GAAP financial measures, provide an additional and useful operating perspective not immediately apparent from "Operating income" or "Net income attributable to common shareholders" in accordance with GAAP. The Company uses these measures to evaluate its performance on a property-by-property basis because they allow management to evaluate the impact that factors such as lease structure, lease rates and tenant base have on the Company's operating results. NOI, Same Store NOI and NOI from Other Investment Properties do not represent alternatives to "Net income" or "Net income attributable to common shareholders" in accordance with GAAP as indicators of the Company's financial performance. Comparison of the Company's presentation of NOI, Same Store NOI and NOI from Other Investment Properties to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in definition and application by such REITs.

As defined by NAREIT, EBITDA for real estate (EBITDAre) means net income (loss) computed in accordance with GAAP, plus (i) interest expense, (ii) income tax expense, (iii) depreciation and amortization, (iv) impairment charges on depreciable property and (v) impairment charges on investments in unconsolidated affiliates if caused by a decrease in the value of depreciable property in the affiliate, plus or minus (i) gains (or losses) from sales of depreciable property, including gains (or losses) on change in control, and (ii) adjustments to reflect the entity's share of EBITDAre of unconsolidated affiliates. The Company reports Adjusted EBITDAre, which excludes the impact of certain discrete non-operating transactions and other events such as (i) the impact on earnings from executive separation, (ii) impairment charges on non-depreciable real estate and (iii) gains on the sale of non-depreciable real estate, if any. The Company believes that Adjusted EBITDAre is useful because it allows investors and management to evaluate and compare the Company's performance from period to period in a meaningful and consistent manner in addition to standard financial measurements under GAAP. Adjusted EBITDAre is a supplemental non-GAAP financial measure and should not be considered an alternative to "Net income" or "Net income attributable to common shareholders" as an indicator of the Company's financial performance. Comparison of the Company's presentation of Adjusted EBITDAre to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in definition and application by such REITs.

Net Debt to Adjusted EBITDAre is a supplemental non-GAAP financial measure and represents (i) the Company's total notional debt, excluding unamortized premium, discount and capitalized loan fees, less cash and cash equivalents and disposition proceeds temporarily restricted related to potential Internal Revenue Code Section 1031 tax-deferred exchanges (1031 Exchanges) divided by (ii) Adjusted EBITDAre for the prior three months, annualized (Annualized Adjusted EBITDAre). The Company believes that this ratio is useful because it provides investors with information regarding its total notional debt net of cash and cash equivalents and disposition proceeds temporarily restricted related to potential 1031 Exchanges, which could be used to repay debt, compared to its performance as measured using Annualized Adjusted EBITDAre. Comparison of the Company's presentation of Net Debt to Adjusted EBITDAre to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in definition and application by such REITs.

CONTACT INFORMATION
Julie Swinehart
Executive Vice President, Chief Financial Officer and Treasurer
Retail Properties of America, Inc.
(630) 634-4225

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