SITE Centers Corp. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. SITE Centers is a shopping-center REIT; its portfolio included 148 centers, including 79 held through joint ventures. Figures below are in U.S. dollars; financial statement amounts are generally in millions.
Financial and operating results
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Total revenue | $129.3 | $131.0; down 1.3% |
| Net income attributable to SITE Centers | $34.3 | $35.8 |
| Net income attributable to common shareholders | $29.2 | $27.4 |
| Diluted EPS | $0.15 | $0.15 |
| FFO attributable to common shareholders | $47.4 | $60.7 |
| Operating FFO attributable to common shareholders | $61.2 | $58.7 |
| Operating cash flow | $35.9 | $42.3 |
| Consolidated NOI | $77.9 | $77.1 |
- Same-store NOI rose 3.1% including redevelopment and 3.7% excluding redevelopment, at the Company’s effective ownership interest.
- Portfolio occupancy was 90.1%, versus 90.8% at December 31, 2019 and 89.2% a year earlier. Average annualized base rent per occupied square foot was $18.49, up from $17.92 a year earlier.
- Q1 revenue included a $45.7 gain on sale of a joint-venture interest; results also included an $18.1 reserve increase on preferred interests in Blackstone joint ventures and $16.6 of make-whole costs to redeem senior notes. These items materially affect comparisons. Common-shareholder net income increased partly because preferred dividends fell to $5.1 from $8.4.
Balance sheet, cash flow and capital
- Cash and cash equivalents were $514.3 at March 31, compared with $16.1 at year-end. Operating, investing and financing cash flows were $35.9, $129.1 and $330.2, respectively. Investing cash included $140.5 of proceeds from the joint-venture interest sale; financing cash reflected $640.0 of net revolver borrowings and debt repayments.
- Total consolidated debt was $2.247 billion, up from $1.847 billion at December 31, 2019. Debt included $645 million drawn on revolving facilities and $744.5 million of total variable-rate debt, including the term loan. Remaining revolver availability was reported as $325 million, subject to borrowing conditions.
- The Company redeemed $200 million of 4.625% notes due 2022 in March. It reported no unsecured debt maturities before 2023 and no consolidated mortgage debt due in 2020; $16.2 million of consolidated mortgage debt matures in 2021. Joint ventures had $59.0 million of mortgage debt at SITE Centers’ share maturing in 2020.
- The Company reported compliance with its debt covenants. Debt-to-total-market-capitalization was 0.63 at March 31, versus 0.38 at March 31, 2019. A 100-basis-point increase in short-term rates was estimated to increase quarterly interest expense by about $1.9 million for the Company and $0.2 million for its proportionate share of joint ventures.
Material changes, outlook and risks
- COVID-19 significantly disrupted tenant operations beginning in March. The Company reported a substantial number of requests for rent relief and a significant impact on April rent collections; Q1 March collections were described as relatively minimally affected. The scale and duration of effects on collections, occupancy, leasing, liquidity and asset values could not be reasonably forecast.
- The Board elected not to declare a common-share dividend for Q2 2020 to preserve liquidity. The $0.20-per-share Q1 common dividend was paid April 2. The Board had made no decision on later quarters and planned to reassess quarterly; the Company stated it intended to meet REIT distribution requirements.
- Management drew $645 million on revolving facilities, substantially reduced planned capital spending, and said approximately $30 million remained to fund on its redevelopment pipeline. It believed these actions would provide sufficient liquidity, but cautioned that this depended on uncertain pandemic effects and access to financing.
- The Company sold its 15% interest in the DDRTC joint venture for $140.5 million of net proceeds and recorded a $45.7 million gain. It also increased the valuation allowance on Blackstone joint-venture preferred interests by $18.1 million; the cumulative allowance was $106.0 million against the interests.
- Management cited potential rent deferrals or abatements, tenant closures and bankruptcies, delayed leasing and rent commencements, reduced joint-venture distributions, refinancing risk and possible covenant or debt-service pressure. Insurance recovery for business interruption was uncertain. Joint-venture debt is generally non-recourse, subject to limited exceptions.
- No numerical full-year earnings or revenue guidance was provided. Management’s outlook was expressly uncertain; it expected pandemic effects to adversely affect results.
Most important facts for investors to verify
- Subsequent-period rent collection rates, rent relief granted, deferred-rent collectability and tenant defaults or bankruptcies.
- Liquidity, revolver availability, variable-rate exposure, covenant headroom and refinancing outcomes, particularly for joint-venture debt maturities.
- Future common-dividend decisions and the cash required to satisfy REIT distribution obligations.
- Updated valuation assumptions and any further reserves or impairment charges on preferred interests, properties or joint ventures.
- Underlying operating performance apart from the joint-venture sale gain, preferred-interest reserve and debt-redemption costs; review GAAP results alongside the Company’s non-GAAP FFO and Operating FFO measures.