SITC SITE Centers Corp

SITE Centers Corp. (NYSE: SITC), an owner of open-air shopping centers in suburban, high household income communities, announced today operating results for the quarter ended March 31, 2024.

“SITE Centers made additional progress on the announced planned spin-off of the Company’s Convenience assets in the first quarter highlighted by $189 million of year-to-date transaction activity and remains on track to form and scale what is expected to be the first public real estate company focused exclusively on Convenience properties,” commented David R. Lukes, President and Chief Executive Officer. “We remain excited by the prospects and opportunity set for both SITE Centers and Curbline Properties and believe both companies remain positioned to achieve their business plans and create stakeholder value.”

Results for the First Quarter

• First quarter net loss attributable to common shareholders was $26.3 million, or $0.13 per diluted share, as compared to net income of $12.5 million, or $0.06 per diluted share, in the year-ago period. The decrease year-over-year primarily was the result of the impact of net property dispositions and impairment charges, partially offset by higher gain on sale from dispositions.
• First quarter operating funds from operations attributable to common shareholders (“Operating FFO” or “OFFO”) was $59.8 million, or $0.28 per diluted share, compared to $62.7 million, or $0.30 per diluted share, in the year-ago period. The decrease year-over-year primarily was due to the impact of net property dispositions, partially offset by property net operating income ("NOI") growth and increased interest income.

Significant First Quarter and Recent Activity

• SITE Centers sold five wholly-owned shopping centers in the first quarter and second quarter to date for an aggregate price of $169.6 million including three wholly-owned shopping centers sold during the first quarter for an aggregate price of $119.4 million.
• Acquired two convenience shopping centers during the first quarter for an aggregate price of $19.1 million, including Grove at Harper's Preserve (Houston, TX) for $10.6 million and Shops at Gilbert Crossroads (Phoenix, AZ) for $8.5 million.
• During the quarter, repurchased $61.6 million aggregate principal amount of outstanding senior unsecured notes due in 2025 and 2026 for a total consideration, including expenses, of $60.8 million and recorded a gain on retirement of debt of approximately $0.8 million.
• During the quarter, recorded impairments of $66.6 million due to changes in hold period assumptions for three wholly-owned assets. Two of the properties, representing $55.7 million of the first quarter impairment, were development projects commenced in 2007 and 2010. These properties were 96.6% leased as of March 31, 2024.
• In October 2023, announced the expected spin-off of the Company’s Convenience assets into a separate publicly-traded REIT to be named Curbline Properties Corp. (“Curbline Properties” or “CURB”). The spin-off is expected to be completed on or around October 1, 2024. As of March 31, 2024, the Company has amassed a portfolio of 67 wholly-owned properties to be included in the CURB portfolio, including assets separated or in the process of being separated from SITE Centers properties. The transaction is subject to certain conditions, including the effectiveness of CURB’s Form 10 registration statement and final approval and declaration of the distribution by SITE Centers' Board of Directors.
• In October 2023, obtained a commitment from affiliates of Apollo, including ATLAS SP Partners, to provide a $1.1 billion mortgage facility to be secured by 40 properties with flexibility to reduce the commitment or loan balance with proceeds from asset sales or other sources of capital. The mortgage is expected to be funded prior to the spin-off date with loan and additional asset sale proceeds expected to be used to retire all unsecured debt, including all outstanding public notes, prior to the spin-off of CURB. In the first quarter of 2024, the Company released two properties that had previously been identified to serve as collateral for the facility, thereby reducing the committed amount to $1.0 billion as of March 31, 2024. The Company expensed $0.7 million of fees related to the facility in the first quarter as a result of the property releases.

Key Quarterly Operating Results

• Reported an increase of 1.5% in same-store net operating income (“SSNOI”) on a pro rata basis for the first quarter of 2024 as compared to the year-ago period which included a 310 basis-point headwind due to lost revenue related to the bankruptcy of Bed Bath & Beyond.
• Generated cash new leasing spreads of 29.0% and cash renewal leasing spreads of 6.5%, both on a pro rata basis, for the trailing twelve-month period ended March 31, 2024 and cash new leasing spreads of 11.5% and cash renewal leasing spreads of 8.0%, both on a pro rata basis, for the first quarter of 2024.
• Generated straight-lined new leasing spreads of 40.3% and straight-lined renewal leasing spreads of 11.0%, both on a pro rata basis, for the trailing twelve-month period ended March 31, 2024 and straight-lined new leasing spreads of 26.9% and straight-lined renewal leasing spreads of 12.4%, both on a pro rata basis, for the first quarter of 2024.
• Reported a leased rate of 94.2% at March 31, 2024 compared to 94.5% at December 31, 2023 and 95.9% at March 31, 2023, all on a pro rata basis.
• As of March 31, 2024, the Signed Not Opened (“SNO”) spread was 260 basis points, representing $13.1 million of annualized base rent on a pro rata basis.

Property NOI Projection

The Company projects, based on the assumptions below, 2024 property level NOI to be as follows:

Portfolio

 

NOI Projection ($M)

SITE Centers

 

$252.8 – $260.6

Curbline Properties

 

$76.9 – $80.2

These projections:

• Calculate NOI pursuant to the definition of NOI used in the SSNOI calculation as described below, except that it includes lease termination fees, assumes all SITE Centers properties owned as of March 31, 2024 are held for the full year 2024 and includes NOI for Curbline Properties assets acquired in 2024 from the date of acquisition,
• Assume 2024 SSNOI growth of 3.5% – 5.5% for Curbline Properties,
• Exclude from NOI G&A allocated to operating expenses which totaled $2.6 million in 1Q2024, or $10.2 million annualized and
• Adjust NOI for the estimated impact of remaining expected parcel separations and includes NOI for SITE Centers from its Beachwood, OH office headquarters.

In reliance on the exception provided by Item 10(e)(1)(i)(B) of Regulation S-K, reconciliation of the projected NOI and assumed range of 2024 SSNOI growth to the most directly comparable GAAP financial measure is not provided because the Company is unable to provide such reconciliations without unreasonable effort due to the multiple components of the calculations which for the same-store calculation only includes properties owned for comparable periods and excludes all corporate level activity as described below under Non-GAAP Measures and Other Operational Metrics.

About SITE Centers Corp.

SITE Centers is an owner and manager of open-air shopping centers located in suburban, high household income communities. The Company is a self-administered and self-managed REIT operating as a fully integrated real estate company, and is publicly traded on the New York Stock Exchange under the ticker symbol SITC. Additional information about the Company is available at www.sitecenters.com. To be included in the Company’s e-mail distributions for press releases and other investor news, please click here.

Conference Call and Supplemental Information

The Company will hold its quarterly conference call today at 8:00 a.m. Eastern Time. To participate with access to the slide presentation, please visit the Investor Relations portion of SITE's website, ir.sitecenters.com, or for audio only, dial 888‑317‑6003 (U.S.), 866-284-3684 (Canada) or 412-317-6061 (international) using pass code 7262807 at least ten minutes prior to the scheduled start of the call. The call will also be webcast and available in a listen-only mode on SITE Centers’ website at ir.sitecenters.com. If you are unable to participate during the live call, a replay of the conference call will also be available at ir.sitecenters.com for further review. You may also access the telephone replay by dialing 877-344-7529 (U.S.), 855-669-9658 (Canada) or 412-317-0088 (international) using passcode 4967980 through May 30, 2024. Copies of the Company’s supplemental package and earnings slide presentation are available on the Company’s website.

Non-GAAP Measures and Other Operational Metrics

Funds from Operations (“FFO”) is a supplemental non-GAAP financial measure used as a standard in the real estate industry and is a widely accepted measure of real estate investment trust (“REIT”) performance. Management believes that both FFO and Operating FFO provide additional indicators of the financial performance of a REIT. The Company also believes that FFO and Operating FFO more appropriately measure the core operations of the Company and provide benchmarks to its peer group.

FFO is generally defined and calculated by the Company as net income (loss) (computed in accordance with generally accepted accounting principles in the United States (“GAAP”)), adjusted to exclude (i) preferred share dividends, (ii) gains and losses from disposition of real estate property and related investments, which are presented net of taxes, (iii) impairment charges on real estate property and related investments, (iv) gains and losses from changes in control and (v) certain non-cash items. These non-cash items principally include real property depreciation and amortization of intangibles, equity income (loss) from joint ventures and equity income (loss) from non-controlling interests and adding the Company’s proportionate share of FFO from its unconsolidated joint ventures and non-controlling interests, determined on a consistent basis. The Company’s calculation of FFO is consistent with the definition of FFO provided by NAREIT. The Company calculates Operating FFO as FFO excluding certain non-operating charges, income and gains/losses. Operating FFO is useful to investors as the Company removes non-comparable charges, income and gains/losses to analyze the results of its operations and assess performance of the core operating real estate portfolio. Other real estate companies may calculate FFO and Operating FFO in a different manner.

The Company also uses NOI, a non-GAAP financial measure, as a supplemental performance measure. NOI is calculated as property revenues less property-related expenses. The Company believes NOI provides useful information to investors regarding the Company’s financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level and, when compared across periods, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and disposition activity on an unleveraged basis.

The Company presents NOI information herein on a same store basis or “SSNOI.” The Company defines SSNOI as property revenues less property-related expenses, which exclude straight-line rental income and reimbursements and expenses, lease termination income, management fee expense, fair market value of leases and expense recovery adjustments. SSNOI includes assets owned in comparable periods (15 months for prior period comparisons). In addition, SSNOI is presented including activity associated with redevelopment. SSNOI excludes all non-property and corporate level revenue and expenses. Other real estate companies may calculate NOI and SSNOI in a different manner. The Company believes SSNOI at its effective ownership interest provides investors with additional information regarding the operating performances of comparable assets because it excludes certain non-cash and non-comparable items as noted above.

FFO, Operating FFO, NOI and SSNOI do not represent cash generated from operating activities in accordance with GAAP, are not necessarily indicative of cash available to fund cash needs and should not be considered as alternatives to net income (loss) computed in accordance with GAAP, as indicators of the Company’s operating performance or as alternatives to cash flow as a measure of liquidity. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures have been provided herein. In reliance on the exception provided by Item 10(e)(1)(i)(B) of Regulation S-K, reconciliation of the projected NOI and assumed rate of 2024 SSNOI growth to the most directly comparable GAAP financial measure is not provided because the Company is unable to provide such reconciliations without unreasonable effort due to the multiple components of the calculations which for the same-store calculation only includes properties owned for comparable periods and excludes all corporate level activity as noted above.

The Company calculates Cash Leasing Spreads by comparing the prior tenant's annual base rent in the final year of the prior lease to the executed tenant's annual base rent in the first year of the executed lease. Straight-Lined Leasing Spreads are calculated by comparing the prior tenant's average base rent over the prior lease term to the executed tenant's average base rent over the term of the executed lease. For both Cash and Straight-Lined Leasing Spreads, the reported calculation includes only comparable leases which are deals executed within one year of the date that the prior tenant vacated. Deals executed after one year of the date the prior tenant vacated, deals which are a combination of existing units, new leases at redevelopment properties, and deals for units vacant at the time of acquisition are considered non-comparable and excluded from the calculation.

Safe Harbor

SITE Centers Corp. considers portions of the information in this press release to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended, with respect to the Company's expectation for future periods. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. For this purpose, any statements contained herein that are not historical fact, including statements regarding the Company's projected operational and financial performance, strategy, prospects and plans, may be deemed to be forward-looking statements. There are a number of important factors that could cause our results to differ materially from those indicated by such forward-looking statements, including, among other factors, general economic conditions, including inflation and interest rate volatility; local conditions such as the supply of, and demand for, retail real estate space in our geographic markets; the consistency with future results of assumptions based on past performance; the impact of e-commerce; dependence on rental income from real property; the loss of, significant downsizing of or bankruptcy of a major tenant and the impact of any such event on rental income from other tenants and our properties; our ability to enter into agreements to buy and sell properties on commercially reasonable terms and to satisfy closing conditions applicable to such sales; our ability to complete the spin-off of Curbline Properties in a timely manner or at all; our ability to secure equity or debt financing on commercially acceptable terms or at all; redevelopment and construction activities may not achieve a desired return on investment; impairment charges; valuation and risks relating to our joint venture investments; the termination of any joint venture arrangements or arrangements to manage real property; property damage, expenses related thereto and other business and economic consequences (including the potential loss of rental revenues) resulting from extreme weather conditions or natural disasters in locations where we own properties, and the ability to estimate accurately the amounts thereof; sufficiency and timing of any insurance recovery payments related to damages from extreme weather conditions or natural disasters; any change in strategy; the impact of pandemics and other public health crises; unauthorized access, use, theft or destruction of financial, operations or third party data maintained in our information systems or by third parties on our behalf; our ability to maintain REIT status; and the finalization of the financial statements for the period ended March 31, 2024. For additional factors that could cause the results of the Company to differ materially from those indicated in the forward-looking statements, please refer to the Company's most recent reports on Forms 10-K and 10-Q. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.

SITE Centers Corp.

Income Statement: Consolidated Interests

in thousands, except per share

 

 

 

 

1Q24

 

1Q23

Revenues:

 

 

 

 

Rental income (1)

 

$119,592

 

$135,872

Other property revenues

 

1,029

 

961

 

 

120,621

 

136,833

Expenses:

 

 

 

 

Operating and maintenance

 

20,544

 

23,166

Real estate taxes

 

16,738

 

20,053

 

 

37,282

 

43,219

 

 

 

 

 

Net operating income (2)

 

83,339

 

93,614

 

 

 

 

 

Other income (expense):

 

 

 

 

JV and other fee income

 

1,470

 

1,859

Interest expense

 

(18,913)

 

(19,923)

Depreciation and amortization

 

(43,150)

 

(54,016)

General and administrative

 

(11,072)

 

(10,645)

Other income (expense), net (3)

 

(105)

 

(687)

Impairment charges

 

(66,600)

 

0

(Loss) income before earnings from JVs and other

 

(55,031)

 

10,202

 

 

 

 

 

Equity in net income of JVs

 

17

 

1,359

Gain on sale and change in control of interests

 

0

 

3,749

Gain on disposition of real estate, net

 

31,714

 

205

Tax expense

 

(252)

 

(213)

Net (loss) income

 

(23,552)

 

15,302

Non-controlling interests

 

0

 

(18)

Net (loss) income SITE Centers

 

(23,552)

 

15,284

Preferred dividends

 

(2,789)

 

(2,789)

Net (loss) income Common Shareholders

 

($26,341)

 

$12,495

 

 

 

 

 

Weighted average shares – Basic – EPS

 

209,419

 

209,971

Assumed conversion of diluted securities

 

0

 

436

Weighted average shares – Diluted – EPS

 

209,419

 

210,407

 

 

 

 

 

(Loss) earnings per common share – Basic

 

$(0.13)

 

$0.06

(Loss) earnings per common share – Diluted

 

$(0.13)

 

$0.06

 

 

 

 

 

(1)

Rental income:

 

 

 

 

Minimum rents

 

$76,062

 

$88,973

Ground lease minimum rents

 

5,444

 

6,469

Straight-line rent, net

 

680

 

676

Amortization of (above)/below-market rent, net

 

1,152

 

1,185

Percentage and overage rent

 

1,927

 

1,151

Recoveries

 

29,682

 

35,316

Uncollectible revenue

 

355

 

233

Ancillary and other rental income

 

1,236

 

1,757

Lease termination fees

 

3,054

 

112

 

 

 

 

 

(2)

Includes NOI from wholly-owned assets sold in 1Q24

 

937

 

N/A

 

 

 

 

 

(3)

Interest income (fees), net

 

7,294

 

(23)

Transaction costs

 

(3,398)

 

(664)

Debt extinguishment costs

 

(665)

 

0

Gain on debt retirement

 

760

 

0

Loss on equity derivative instruments

 

(4,096)

 

0

 

SITE Centers Corp. Reconciliation: Net Income to FFO and Operating FFO and Other Financial Information

in thousands, except per share

 

 

1Q24

 

1Q23

Net (loss) income attributable to Common Shareholders

($26,341)

 

$12,495

Depreciation and amortization of real estate

41,819

 

52,717

Equity in net income of JVs

(17)

 

(1,359)

JVs' FFO

1,584

 

1,982

Non-controlling interests

0

 

18

Impairment of real estate

66,600

 

0

Gain on sale and change in control of interests

0

 

(3,749)

Gain on disposition of real estate, net

(31,714)

 

(205)

FFO attributable to Common Shareholders

$51,931

 

$61,899

Gain on debt retirement

(760)

 

0

Loss on equity derivative instruments

4,096

 

0

Transaction, debt extinguishment and other (at SITE's share)

4,139

 

829

Other charges

395

 

0

Total non-operating items, net

7,870

 

829

Operating FFO attributable to Common Shareholders

$59,801

 

$62,728

 

 

 

 

Weighted average shares & units – Basic: FFO & OFFO

209,419

 

210,112

Assumed conversion of dilutive securities

802

 

436

Weighted average shares & units – Diluted: FFO & OFFO

210,221

 

210,548

 

 

 

 

FFO per share – Basic

$0.25

 

$0.29

FFO per share – Diluted

$0.25

 

$0.29

Operating FFO per share – Basic

$0.29

 

$0.30

Operating FFO per share – Diluted

$0.28

 

$0.30

Common stock dividends declared, per share

$0.13

 

$0.13

 

 

 

 

Capital expenditures (SITE Centers share):

 

 

 

Redevelopment costs

3,053

 

4,410

Maintenance capital expenditures

1,286

 

2,146

Tenant allowances and landlord work

12,035

 

14,721

Leasing commissions

1,959

 

2,328

Construction administrative costs (capitalized)

961

 

796

 

 

 

 

Certain non-cash items (SITE Centers share):

 

 

 

Straight-line rent

714

 

696

Straight-line fixed CAM

63

 

75

Amortization of below-market rent/(above), net

1,269

 

1,269

Straight-line ground rent expense

(5)

 

(64)

Debt fair value and loan cost amortization

(1,411)

 

(1,228)

Capitalized interest expense

293

 

286

Stock compensation expense

(1,888)

 

(1,620)

Non-real estate depreciation expense

(1,333)

 

(1,303)

 

SITE Centers Corp.

Balance Sheet: Consolidated Interests

 

 

$ in thousands

 

 

 

 

 

At Period End

 

 

1Q24

 

4Q23

 

Assets:

 

 

 

 

Land

$906,727

 

$930,540

 

Buildings

3,185,457

 

3,311,368

 

Fixtures and tenant improvements

542,875

 

537,872

 

 

4,635,059

 

4,779,780

 

Depreciation

(1,575,920)

 

(1,570,377)

 

 

3,059,139

 

3,209,403

 

Construction in progress and land

54,148

 

51,379

 

Real estate, net

3,113,287

 

3,260,782

 

 

 

 

 

 

Investments in and advances to JVs

38,607

 

39,372

 

Cash

551,285

 

551,968

 

Restricted cash

5,433

 

17,063

 

Receivables and straight-line (1)

57,159

 

65,623

 

Intangible assets, net (2)

79,015

 

86,363

 

Other assets, net

47,792

 

40,180

 

Total Assets

3,892,578

 

4,061,351

 

 

 

 

 

 

Liabilities and Equity:

 

 

 

 

Revolving credit facilities

0

 

0

 

Unsecured debt

1,242,191

 

1,303,243

 

Unsecured term loan

198,940

 

198,856

 

Secured debt

124,100

 

124,176

 

 

1,565,231

 

1,626,275

 

Dividends payable

30,161

 

63,806

 

Other liabilities (3)

173,242

 

195,727

 

Total Liabilities

1,768,634

 

1,885,808

 

 

 

 

 

 

Preferred shares

175,000

 

175,000

 

Common shares

21,437

 

21,437

 

Paid-in capital

5,971,666

 

5,974,904

 

Distributions in excess of net income

(3,988,449)

 

(3,934,736)

 

Deferred compensation

5,052

 

5,167

 

Accumulated comprehensive income

8,723

 

6,121

 

Common shares in treasury at cost

(69,485)

 

(72,350)

 

Total Equity

2,123,944

 

2,175,543

 

 

 

 

 

 

Total Liabilities and Equity

$3,892,578

 

$4,061,351

 

 

 

 

 

(1)

SL rents (including fixed CAM), net

$31,395

 

$31,206

 

 

 

 

 

(2)

Operating lease right of use assets

17,107

 

17,373

 

 

 

 

 

(3)

Operating lease liabilities

36,847

 

37,108

 

Below-market leases, net

43,241

 

46,096

 

 

 

 

 

SITE Centers Corp.

Reconciliation of Net Income Attributable to SITE to Same Store NOI

$ in thousands

 

 

 

 

 

 

 

 

1Q24

 

1Q23

 

1Q24

 

1Q23

 

SITE Centers at 100%

 

At SITE Centers Share (Non-GAAP)

GAAP Reconciliation:

 

 

 

 

 

 

 

Net (loss) income attributable to SITE Centers

($23,552)

 

$15,284

 

($23,552)

 

$15,284

Fee income

(1,470)

 

(1,859)

 

(1,470)

 

(1,859)

Interest expense

18,913

 

19,923

 

18,913

 

19,923

Depreciation and amortization

43,150

 

54,016

 

43,150

 

54,016

General and administrative

11,072

 

10,645

 

11,072

 

10,645

Other expense (income), net

105

 

687

 

105

 

687

Impairment charges

66,600

 

0

 

66,600

 

0

Equity in net income of joint ventures

(17)

 

(1,359)

 

(17)

 

(1,359)

Tax expense

252

 

213

 

252

 

213

Gain on sale and change in control of interests

0

 

(3,749)

 

0

 

(3,749)

Gain on disposition of real estate, net

(31,714)

 

(205)

 

(31,714)

 

(205)

Income from non-controlling interests

0

 

18

 

0

 

18

Consolidated NOI

83,339

 

93,614

 

83,339

 

93,614

Less: Non-Same Store NOI adjustments

 

 

 

 

(6,684)

 

(18,137)

Total Consolidated SSNOI

 

 

 

 

$76,655

 

$75,477

 

 

 

 

 

 

 

 

Consolidated SSNOI % Change

 

 

 

 

1.6%

 

 

 

 

 

 

 

 

 

 

Net (loss) income from unconsolidated joint ventures

(1,155)

 

4,767

 

(176)

 

1,004

Interest expense

8,271

 

7,041

 

1,832

 

1,587

Depreciation and amortization

7,145

 

9,062

 

1,727

 

2,091

Other expense (income), net

1,896

 

2,560

 

441

 

574

Loss (gain) on disposition of real estate, net

29

 

(5,304)

 

6

 

(1,062)

Unconsolidated NOI

$16,186

 

$18,126

 

3,830

 

4,194

Less: Non-Same Store NOI adjustments

 

 

 

 

(164)

 

(547)

Total Unconsolidated SSNOI at SITE share

 

 

 

 

$3,666

 

$3,647

 

 

 

 

 

 

 

 

Unconsolidated SSNOI % Change

 

 

 

 

0.5%

 

 

 

 

 

 

 

 

 

 

SSNOI % Change at SITE Share

 

 

 

 

1.5%

 

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240430566713/en/

Conor Fennerty, EVP and Chief Financial Officer 216-755-5500