Executive Summary / Key Takeaways

• Focused Sun Belt Strategy: InvenTrust Properties Corp. (IVT) is a premier multi-tenant essential retail REIT, strategically concentrated in high-growth Sun Belt markets. This focus on grocery-anchored and necessity-based centers drives resilient performance and positions IVT for sustained rent growth and high occupancy.
• Robust Operational Performance: The company consistently delivers strong internal growth, with Q2 2025 Same Property NOI increasing by 4.8% and year-to-date growth at 5.6%, fueled by embedded rent escalations, occupancy gains, and positive leasing spreads. Total leased occupancy reached a near all-time record of 97.3%, with small shop occupancy hitting a new high of 93.8%.
• Disciplined Capital Recycling: IVT successfully executed the disposition of a five-property California portfolio for approximately $306 million in Q2 2025, a tactical reallocation of capital aimed at enhancing focus on core Sun Belt markets. Proceeds are being swiftly redeployed into higher-growth opportunities, with $230 million already closed and another $126 million secured or under contract.
• Strong Balance Sheet and Liquidity: With $787 million in total liquidity and a low net leverage ratio of 17% as of Q2 2025, IVT maintains a flexible capital structure. This financial strength enables opportunistic acquisitions and strategic initiatives without reliance on external capital markets.
• Positive Outlook with Clear Visibility: Management raised full-year 2025 Same Property NOI growth guidance to 4-5%, reflecting confidence in the portfolio's durability and strong leasing pipeline. The company has 100% of its 2025 leasing complete and approximately 85% of 2026 leasing secured, providing excellent near-term cash flow visibility.

The Resilient Core: InvenTrust's Sun Belt Imperative

InvenTrust Properties Corp. (IVT) operates as a premier multi-tenant essential retail REIT, strategically focused on owning, leasing, redeveloping, acquiring, and managing grocery-anchored neighborhood and community centers, alongside high-quality power centers that often feature a grocery component. Since its transformation in April 2015, when it sharpened its focus from its origins as Inland American Real Estate Trust, Inc., IVT has meticulously cultivated a portfolio designed for resilience and growth. This strategy is deeply rooted in the demographic shifts favoring the U.S. Sun Belt, where 97% of IVT's net operating income is generated, with a clear goal to reach 100%. These markets are characterized by robust population and employment growth, business-friendly policies, and a high quality of life, creating a fertile ground for necessity-based retail.

The company's approach is not merely about acquiring properties but about curating a complementary tenant mix that drives consistent foot traffic. This includes a strong emphasis on essential retail, such as quick-service restaurants, health and wellness providers, and other daily-needs services, which tend to exhibit resilience across economic cycles. IVT's strategically located field offices, within a two-hour drive of over 95% of its properties, provide in-depth local market knowledge and enable rapid responsiveness to tenant needs, a key operational differentiator in a competitive landscape.

Competitive Landscape and Strategic Positioning

The retail REIT sector is highly competitive, with IVT vying for tenants, capital, and market share against established players like Realty Income Corporation (O), Kimco Realty Corporation (KIM), Federal Realty Investment Trust (FRT), and Regency Centers Corporation (REG). While these peers also target open-air retail, IVT distinguishes itself through its concentrated Sun Belt focus and its emphasis on grocery-anchored and necessity-based centers. This specialized approach allows IVT to capitalize on demographic-driven growth and maintain high occupancy rates.

Compared to Realty Income, which primarily focuses on single-tenant net-leased assets, IVT's multi-tenant model offers greater flexibility for redevelopment and potential upside from tenant mix optimization. While Realty Income's scale and acquisition prowess often lead to higher revenue growth, IVT's targeted strategy in high-growth Sun Belt markets aims for superior risk-adjusted returns. IVT's gross profit margin of 70.82% and net profit margin of 39.20% demonstrate solid profitability, though some peers like Realty Income (gross margin ~95%, net margin ~40%) exhibit higher margins due to their net-lease structures.

Against Kimco and Federal Realty, both active in grocery-anchored centers, IVT's disciplined capital allocation in emerging Sun Belt markets provides a qualitative edge in demographic-driven growth. IVT's redevelopment expertise allows for efficient tenant turnover and rent growth, as evidenced by its ability to renegotiate leases at significantly higher spreads when tenants miss option notices. However, IVT acknowledges a competitive disadvantage in the adoption of advanced tech-driven property management and digital leasing tools, areas where some larger peers may have an edge. Despite this, IVT's operational efficiency, supported by its local market knowledge, contributes to its ability to achieve strong leasing spreads and maintain high retention rates.

The company's strategic decision to exit California, a market often considered core for many REITs, underscores its commitment to optimizing its portfolio for superior growth profiles in the Sun Belt. This capital reallocation allows IVT to be "appropriately competitive" on high-quality assets in its target markets, often at cap rates that might otherwise be unavailable. The high capital requirements to acquire and develop quality retail properties serve as a significant barrier to entry, favoring established players like IVT and defending its market share.

Financial Strength and Operational Excellence

InvenTrust's financial performance in the first half of 2025 reflects the success of its focused strategy. For the three months ended June 30, 2025, the company reported total income of $73.55 million, with net lease income contributing $73.13 million. Net income for the quarter stood at $95.94 million, or $1.23 per diluted share, a significant increase from $1.5 million in the prior year, largely driven by a substantial gain on the sale of investment properties.

Operational metrics continue to impress. Same Property Net Operating Income (NOI) grew by 4.8% in Q2 2025, reaching $42.63 million, and by 5.6% year-to-date, totaling $85.06 million. This growth was primarily driven by embedded rent escalations (150 basis points), occupancy gains (110 basis points), and positive rent spreads (80 basis points). The company's total leased occupancy reached a near-record 97.3%, with small shop occupancy hitting an all-time high of 93.8% and anchor space remaining at 99.5% capacity. Leasing activity was robust, with 73 leases executed for approximately 304,000 square feet in Q2 2025. New leases were signed at a remarkable 44.1% spread, while renewals achieved 9.2%, resulting in a blended leasing spread of 16.4% for the quarter. A high retention rate of 91% and the successful embedding of annual rent escalators of 3% or higher in over 90% of renewal leases further underpin predictable NOI growth.

The balance sheet remains a cornerstone of IVT's strategy. As of June 30, 2025, the company boasted $787 million in total liquidity, including a full $500 million available under its revolving line of credit. The net leverage ratio stood at a conservative 17%, and net debt to adjusted EBITDA was 2.8x on a trailing 12-month basis. The weighted average interest rate was 4%, with a weighted average maturity of 2.9 years, and all remaining debt is 100% fixed, largely due to the payoff of a $72.5 million variable rate mortgage in September 2024. This strong financial position allows IVT to be opportunistic in its capital allocation.

A key strategic initiative is the ongoing capital recycling program. In Q2 2025, IVT completed the sale of a five-property California portfolio for approximately $306 million. This was not merely a monetization event but a "tactical reallocation of capital" to enhance focus on core Sun Belt markets. Proceeds are being swiftly redeployed into high-growth Sun Belt opportunities. As of the Q2 2025 earnings call, IVT had already closed on six properties totaling approximately $230 million and had secured or was under contract for another two properties representing nearly $126 million. Recent acquisitions include Plaza Escondida (Tucson, AZ), Carmel Village (Charlotte, NC), West Ashley Station (Charleston, SC), and Twelve Oaks Shopping Center (Savannah, GA), with post-quarter additions like Marketplace at Encino Park (San Antonio, TX) and West Broad Marketplace (Richmond, VA).

Outlook and Risk Assessment

InvenTrust's outlook for 2025 remains positive, with management raising its full-year Same Property NOI growth guidance to 4% to 5%. This confidence is underpinned by the portfolio's strong operational momentum and high visibility into future cash flows, with 100% of 2025 leasing complete and approximately 85% of 2026 leasing already secured. The bad debt reserve for the full year 2025 has been adjusted to 65 to 85 basis points of total revenue, reflecting a cautious estimate for potential tenant fallout, though exposure to recent bankruptcies like Joann (JOAN) and Party City (PRTY) has been minimal.

The company maintains its Nareit FFO and Core FFO guidance, with net investment guidance remaining at $100 million. Management anticipates that net investment activity will be more back-end loaded for the year, given the swift transaction of the California portfolio, but remains "extremely confident" in its acquisition pipeline, which consistently holds about $1 billion in "real opportunities." The low-levered balance sheet provides ample capacity to execute these plans.

Despite the positive outlook, IVT acknowledges several macroeconomic risks. Slower economic growth, persistent inflationary pressures, and uncertain tariff activity could negatively impact tenant operations and consumer spending. While retailers in IVT's portfolio have shown resilience, the company continues to monitor these external factors. The competitive landscape for high-quality grocery-anchored assets remains intense, requiring IVT to be disciplined in its acquisition strategy. However, the company's ability to recycle capital from lower-growth markets into higher-growth Sun Belt opportunities mitigates some of these competitive pressures.

Conclusion

InvenTrust Properties Corp. presents a compelling investment thesis centered on its disciplined execution within the high-growth Sun Belt retail market. By strategically focusing on necessity-based, grocery-anchored centers, IVT has built a resilient portfolio capable of delivering consistent internal growth, as evidenced by its strong Same Property NOI and FFO per share performance. The company's proactive capital recycling, particularly the strategic exit from California, demonstrates a commitment to optimizing its asset base for superior long-term value creation.

IVT's robust balance sheet and ample liquidity provide a significant competitive advantage, enabling opportunistic acquisitions and insulating it from broader capital market volatility. While the company faces competition and macroeconomic uncertainties, its operational excellence, high occupancy rates, and embedded rent escalations provide a strong foundation. For investors seeking exposure to a well-managed retail REIT with a clear growth trajectory and a focus on sustainable cash flow, InvenTrust Properties Corp. offers a compelling proposition, poised to capitalize on favorable demographic trends and its strategic market positioning.