InvenTrust Properties' Q3 2025 Earnings Call: Contradictions in Acquisition Timelines, Occupancy Projections, Leasing Spreads, and Market Expansion Strategies

Date of Call: October 29, 2025

Financials Results

• EPS: NAREIT FFO $0.49 per diluted share, up 8.9% YOY; Core FFO $0.47 per diluted share, up 6.8% YOY (Q3 2025)

Guidance:

• Raised full-year same-property NOI growth guidance to 4.75%–5.25%.
• Bad debt reserve guidance set to 55–75 basis points of total revenue.
• Increased midpoint of NAREIT FFO guidance to $1.87 per share; core FFO guidance raised to $1.80–$1.83 per share.
• Expect some Q4 deceleration due to backloaded property operating expenses and remaining bad debt reserve.
• Revised net investment guidance to a range of $49.6M to $158.6M (timing-dependent).

Business Commentary:

• Strong Financial Performance:
• InvenTrust reported same-property NOI growth of over 6% for Q3 2025 compared to the same period last year.
• The growth was driven by embedded rent escalations, occupancy gains, and positive rent spreads, as well as contributions from redevelopment activity and net expense reimbursements.

• The company’s NAREIT FFO increased by 8.9% to $0.49 per diluted share for the quarter, reflecting an 8.9% increase compared to the third quarter of last year.

• Capital Allocation Strategy:

• InvenTrust completed the full redeployment of proceeds from the sale of its California portfolio into higher-growth Sunbelt markets, acquiring high-quality assets in Asheville and Charlotte, North Carolina.

• These acquisitions align with the company's focused portfolio strategy, which emphasizes investing in markets with strong demographic profiles and essential anchors.

• Occupancy and Leasing Trends:

• Total lease occupancy reached 97.2%, with small shop lease occupancy at 93.8% and anchor space at 99.3%.

• The strength in occupancy was supported by high demand, particularly from quick-service restaurants and dining concepts, which accounted for a significant portion of new leasing activity.

• Financial Flexibility and Balance Sheet Strength:

• InvenTrust's weighted average interest rate is 3.98%, with a net leverage ratio of 24% and a sector-low net debt to adjusted EBITDA ratio of 4x.
• The company strengthened its financial position by extending and locking in fixed interest rates, providing it with ample capacity to execute its capital plan while maintaining financial strength.

Sentiment Analysis:

Overall Tone: Positive

• Management: "pleased to report another strong quarter"; same-property NOI up 6.4% YOY; NAREIT FFO $0.49, +8.9% YOY; raised full-year NOI and FFO guidance and expanded liquidity to $571M — all indicate confidence and constructive operating trends.

Q&A:

• Question from Andrew Reale (BofA Securities): Could you talk about tenants in discretionary categories including restaurants and how you're thinking about renewals if discretionary spend pulls back?
  Response: Demand for restaurants remains strong in the portfolio; most underperformers are operator-specific, not sector-wide, and turnover is limited with solid re-leasing demand.

• Question from Andrew Reale (BofA Securities): Within the acquisition pipeline, what percentage is core grocery versus power and lifestyle; size of pipeline and pricing color?
  Response: Pipeline exceeds $1B; majority (~70%+) are grocery/essential-anchored assets with a small mix of power and lifestyle; pricing/size align with current portfolio composition.

• Question from Linda Yu Tsai (Jefferies LLC): Occupancy over 97%, how are you thinking about the trajectory over the next couple of quarters?
  Response: Expect a slight small-shop occupancy dip into Q4/Q1, then reacceleration in 2026; several anchor vacancies are strategic for redevelopment and will be addressed.

• Question from Linda Yu Tsai (Jefferies LLC): How are you thinking about CapEx for leasing and tenant improvements in 2026 versus 2025?
  Response: 2025 CapEx similar to current run rate with some value-add redevelopments; anticipate CapEx burden to decline by mid-2026 as occupancy stabilizes, improving free cash flow.

• Question from Linda Yu Tsai (Jefferies LLC): Can you give context on back-end loaded expenses in Q4?
  Response: Q4 historically carries higher property operating expenses and typically higher corporate expenses, which is expected again this year.

• Question from Cooper Clark (Wells Fargo Securities): Walk through the puts and takes on the current net investment range with respect to the California disposition and acquisition pipeline timing?
  Response: Range widened due to timing of two awarded deals that may or may not close in 2025; low end reflects completed transactions; CA disposition likely shifts to 2026 due to administrative/environmental timing.

• Question from Cooper Clark (Wells Fargo Securities): Confidence level to grow accretively from here on acquisitions as you shift to funding with balance-sheet capacity?
  Response: Confident but selective: balance-sheet-funded deals have different cost-of-capital considerations; will pursue accretive transactions through disciplined investment committee review.

• Question from Michael Mueller (JPMorgan): For remaining budgeted bad debt expense, is most of Q4 visible or still assumption?
  Response: It's both: visibility to the bottom of the guidance at ~55 bps exists; the top of the 55–75 bps range is reserved for unforeseen fallout.

• Question from Michael Mueller (JPMorgan): Small shops ~92% occupied — what's the ceiling and can you get there over the next few years?
  Response: Demand supports higher occupancy, but mid-90s is a practical ceiling due to frictional/structural vacancies; targeted strategies (lower rents, percentage deals) can incrementally improve occupancy.

• Question from Michael Gorman (BTIG): Lease-to-economic occupancy spread compressed; where should it stabilize into 2026 and beyond?
  Response: Spread is timing-driven; a normal run rate is ~150–200 bps and will ebb and flow; signed-but-not-open pipeline (~$5M) should convert materially next year, narrowing timing gaps.

• Question from Michael Gorman (BTIG): How do you think grocers and eating-out/QSR can both remain strong — are they substitutes or complements?
  Response: In this portfolio they have been complements: grocers (Publix, HEB, Kroger) and restaurants are both performing well, supported by Sunbelt in-migration and strong local demographics.

• Question from Paulina Rojas Schmidt (Green Street): Are you comfortable if tertiary Sunbelt markets grew to represent a materially larger portion of the portfolio?
  Response: Yes, if entering secondary/tertiary markets, the focus is on owning top-quality assets with strong local demographics; hub-and-spoke strategy enables selective exposure to these markets.

• Question from Paulina Rojas Schmidt (Green Street): Do cap rates change in smaller markets where fewer institutional investors are active?
  Response: Yes — cap rates vary by market and property quality; in smaller markets they target initial yields in the high-5% to high-6% range to achieve risk-adjusted returns in the mid-to-high single digits.

• Question from Paulina Rojas Schmidt (Green Street): Is there an inefficiency opportunity in less-covered markets enabling outsized returns?
  Response: Potentially yes; exiting California was strategic to capture better risk-adjusted cash-flow growth elsewhere, allowing the company to exploit arbitrage opportunities outside CA.

• Question from Cooper Clark (Wells Fargo Securities): You mentioned operating leverage and margins up ~100 bps YoY — is further upside possible as occupancy comes online?
  Response: Yes — additional occupancy and portfolio growth should drive marginal operating and EBITDA margin upside; recovery rates are improving as they shift to more fixed CAM models.

• Question from Hong Zhang (JPMorgan): Given comments on occupancy, do you expect mid-single-digit same-store growth to be sustainable or will occupancy be a near-term headwind?
  Response: Not a headwind — occupancy gains bring CapEx costs that may moderate same-store NOI growth but higher retention and embedded escalators support durable free cash flow; growth may moderate but remains sustainable.

Contradiction Point 1

Acquisition Activity and Timing

It involves changes in the expected timing of acquisition activity, which can impact financial forecasts and investor expectations.

What are the trade-offs in the current net investment range related to California asset disposition and acquisition pipeline? - Cooper Clark (Wells Fargo)

2025Q3: The range is due to potential new acquisitions closing this year or early next. - Daniel Busch(CEO)

Given acquisition activity is more back-end loaded than expected, would you have raised guidance if it occurred as initially expected? - Linda Tsai (Jefferies)

2025Q2: The transaction market this year was slower than anticipated, but there's optimism as peers mentioned the speed picking up in the back half of this year. - Daniel Busch(CEO)

Contradiction Point 2

Occupancy Projections

It involves differing expectations for occupancy levels and trends, which can impact rental revenue and financial projections.

How do you see occupancy rates tracking over the next few quarters? - Linda Yu Tsai (Jefferies LLC)

2025Q3: Small shop occupancy is expected to decline slightly but reaccelerate in '26. - Daniel Busch(CEO)

What is the realistic ceiling for Small Shop occupancy given its current 94% leased status? - Andrew Reale (Bank of America)

2025Q2: We have direct visibility and potential for another 100 basis points of occupancy increase, which could extend further if Small Shop health remains strong. - Daniel Busch(CEO)

Contradiction Point 3

Leasing Spread Expectations

It involves changes in expectations regarding leasing spreads, which are crucial for understanding the company's financial performance and growth strategy.

Can the lease-to-economic-occupancy spread compress below the 2021 levels? - Michael Gorman (BTIG, LLC)

2025Q3: Spread will ebb and flow. We expect a range of 150 to 200 basis points. We have substantial signed deals that will occupy next year. - Daniel Busch(CEO)

Given nearly full anchor occupancy and six expiring leases this year, what are your expectations for aggregate leasing spreads? - Andrew Reale (Bank of America)

2025Q1: We will be flexible with spreads depending on the tenant and their value to the portfolio. Many opportunities we expected in the past 18-24 months haven't materialized. - DJ Busch(President & CEO)

Contradiction Point 4

Acquisition and Investment Strategy

It involves a shift in the company's approach towards acquisitions and investments, which may impact future growth and financial performance.

What percentage of the acquisition pipeline is core grocery versus power and lifestyle? What's the size of the pipeline and the latest pricing developments? - Andrew Reale (BofA Securities)

2025Q3: Pipeline remains robust at over $1 billion. We look at over 70% of assets with a core grocery component. Also, a small mix of power centers and lifestyle deals. We're looking at opportunities in markets we truly believe in. - Daniel Busch(CEO)

Is the $100M net investment figure conservative for 2025 acquisitions? Does it assume accelerated dispositions? - Dori Kesten (Wells Fargo)

2024Q4: We're expecting to recycle that into California next year. So we've got time, but our focus is on growing in markets where we see good demand dynamics, good population growth, good employment growth and good development opportunities. - DJ Busch(President & CEO)

Contradiction Point 5

Capital Recycling and Market Expansion

It involves the company's strategy for capital recycling and market expansion, which are critical for its growth and financial performance.

What are the trade-offs in the current net investment strategy regarding California's disposition and acquisition pipeline? - Cooper Clark (Wells Fargo)

2025Q3: The range is due to potential new acquisitions closing this year or early next. The last California asset sale is expected next year. - Daniel Busch(CEO)

Could capital recycling slip into later this year or next year due to market turbulence? - Michael Gorman (BTIG)

2025Q1: Our strategy is to upgrade the portfolio and increase core FFO this year. - DJ Busch(President & CEO)