SITE Centers Corp. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2021. SITE Centers is a retail shopping-center REIT. At quarter-end, its portfolio comprised 137 centers, including 56 held through joint ventures; pro rata occupancy was 90.2% and annualized base rent averaged $18.44 per occupied square foot.
Financial performance and position
Amounts are in millions except per-share data. GAAP results compare with the same 2020 periods.
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Total revenue | $134.4 | $105.6 | $398.0 | $342.4 |
| Net income attributable to SITE Centers | $28.1 | $7.3 | $65.9 | $37.0 |
| Net income attributable to common shareholders | $25.3 | $2.2 | $49.9 | $21.6 |
| Diluted EPS | $0.12 | $0.01 | $0.24 | $0.11 |
| FFO attributable to common shareholders | $66.5 | $42.3 | $176.5 | $128.9 |
| Operating FFO attributable to common shareholders | $61.4 | $43.5 | $181.9 | $144.6 |
Cash flow: Nine-month operating cash flow was $217.4 million, versus $125.9 million. Investing activities used $64.7 million, compared with $102.4 million provided in 2020; financing activities used $161.7 million, versus $189.9 million. Cash, cash equivalents and restricted cash totaled $65.3 million at September 30.
Debt and liquidity: Total consolidated indebtedness was $1.79 billion, down from $1.93 billion at December 31, 2020. The company had $61.9 million of unrestricted cash, no revolver borrowings and $970 million of stated revolving-facility availability, subject to borrowing conditions. Debt was 34% of total market capitalization, versus 51% at September 30, 2020. The company reported compliance with debt covenants. It had $140.5 million of consolidated mortgage debt maturing before year-end 2022; $87.6 million was repaid in October 2021. No unsecured debt matures before 2023.
Margins and property operations: The filing does not provide a single company-wide operating margin. Nine-month same-store NOI increased 14.4% excluding redevelopment and 15.5% including redevelopment, on the company’s effective ownership basis. Occupancy rose from 89.0% at December 31, 2020 to 90.2%; average rent per occupied square foot declined from $18.50 to $18.44. New-lease and renewal leasing spreads were 12.4% and 1.5%, respectively.
Material changes and notable items
- Revenue and earnings improved substantially year over year. Management attributed the improvement primarily to collections of prior-period rent, asset-sale gains, higher disposition fees, and comparison with 2020 debt-extinguishment costs and a preferred-investment valuation allowance.
- Collections included $12.4 million of 2020 net revenue at the company’s share during the first nine months of 2021. Management said most 2020 deferrals had been repaid by quarter-end and expected this benefit to decline in future periods.
- The company acquired three shopping centers for an aggregate purchase price of $79.8 million, including $17.9 million of assumed mortgage debt. It also sold assets, including a joint venture’s undeveloped land parcel; that transaction contributed to reported gains.
- In March, the company issued 17.25 million common shares for net proceeds of $225.2 million. In April it redeemed all $150 million of its 6.25% Class K preferred shares, recording a $5.1 million charge attributable to common shareholders. It also sold approximately 1.7 million shares forward under its continuous equity program; none had been settled by September 30.
- On October 6, after quarter-end, the company received a $190 million distribution on its RVI preferred investment, which it described as the full amount expected. It also repaid $87.6 million of mortgage debt in October.
Outlook, risks and contingencies
- Management said all properties were open and 100% of tenants, measured by the company’s share of average base rent, were open for business as of October 15, 2021. Rent-payment rates for the third quarter were 99% as of that date, using the filing’s methodology, which allocates later receipts to the period originally owed.
- The company anticipated approximately $26 million of funding for identified redevelopment projects and reported $19.7 million of construction commitments. It provided no specific earnings or revenue guidance.
- COVID-19 remains a risk to collections, tenant operations and leasing; management identified movie theaters, fitness tenants and local restaurants as particularly vulnerable. Future outbreaks, variants, or restrictions could cause rent relief requests, closures, bankruptcies or weaker collections.
- Joint ventures had $126.5 million of mortgage maturities through October 2022 at the company’s share. Refinancing, extension and repayment expectations are subject to uncertainty; joint-venture debt is generally non-recourse, with exceptions for specified circumstances.
- Other key risks include retail-sector and tenant credit exposure, leasing and re-leasing costs, interest-rate and refinancing risk, redevelopment execution and cost risks, REIT qualification and distribution requirements, and potential asset impairments. The company recorded $7.3 million of impairment charges in the first nine months of 2021.
- Management stated that legal proceedings, individually and collectively, were not expected to have a material adverse effect. The filing reported no risk-factor changes for this quarter and effective disclosure controls.
Important facts for investors to verify
- How much of earnings and NOI growth reflects recurring property operations versus deferred-rent collections, dispositions, fees and other non-recurring or timing-related items.
- Whether rent collection and occupancy remain durable as prior-period deferrals roll off; note that the company’s collection-rate calculation includes abated and deferred billed rent.
- Actual proceeds and dilution from forward equity sales, and how the $190 million RVI distribution and October mortgage repayment affect liquidity and leverage.
- Refinancing or repayment progress for company and joint-venture mortgage maturities, alongside covenant compliance and revolver availability.
- Leasing capital needs, redevelopment spending and returns, and the potential for additional impairments or tenant credit deterioration.
- FFO, Operating FFO and NOI are non-GAAP measures and are not substitutes for GAAP income or operating cash flow; review their definitions and reconciliations in the filing.