SITE Centers Corp. annual report, FY2022

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SITE Centers Corp. — 2022 Form 10-K

Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter filing. SITE Centers is a REIT that owns, leases, redevelops and manages open-air shopping centers.

Business context and portfolio

  • At year-end, the portfolio comprised 119 centers, including 18 held through unconsolidated joint ventures, with 27.0 million square feet of GLA across 20 states.
  • Pro rata occupancy was 92.4%, up from 90.0% in 2021. Average annualized base rent per occupied square foot rose to $19.52 from $18.33.
  • The company focuses on suburban communities with higher household incomes and on value- and convenience-oriented retail. TJX was the largest tenant at 5.9% of annualized base rent; no other tenant exceeded 3%.

Financial and operating performance

  • Revenue: $552.4 million, up 3.7% from $532.9 million. Rental income increased to $537.1 million from $490.8 million, while fee and other income fell to $15.2 million from $42.1 million, mainly reflecting asset sales and lower RVI and joint-venture management fees.
  • Profit: Net income attributable to common shareholders was $157.6 million ($0.73 diluted EPS), versus $106.1 million ($0.51) in 2021. The increase primarily reflected larger property-sale and joint-venture-interest gains, alongside rent growth and acquisition activity.
  • REIT operating measures: FFO attributable to common shareholders was $251.0 million, up from $242.8 million; Operating FFO was $253.3 million, up from $245.7 million. Same-store NOI at the company’s effective interest increased 0.8% to $359.1 million. FFO, Operating FFO and NOI are non-GAAP measures and are not substitutes for GAAP earnings or cash flow.
  • Cash flow: Operating cash flow was $257.3 million, down from $282.5 million. Investing activities used $167.6 million, versus providing $74.5 million in 2021; financing activities used $111.7 million, versus $388.1 million used in 2021.
  • Expenses and interest: Operating and maintenance expense rose to $89.3 million from $76.7 million; real estate taxes rose to $80.7 million from $76.1 million. Interest expense was $77.7 million versus $76.4 million. The filing reports no single overall profit-margin measure.
  • Debt and liquidity: Consolidated debt was $1.707 billion at year-end, versus $1.677 billion a year earlier; the filing also reports $110.6 million of the joint ventures’ mortgage debt as the company’s proportionate share. Unrestricted cash was $20.3 million and the undrawn revolving facility was $950 million, subject to borrowing conditions. Consolidated debt was fixed-rate after the term-loan swap; its weighted-average rate was 4.1% and weighted-average maturity 3.1 years.
  • Capital returns: Common dividends declared were $0.52 per share for 2022; the first-quarter 2023 dividend was declared at $0.13 per share. The company repurchased 3.2 million shares for $42.3 million under its prior program and authorized a new $100 million repurchase program.

Material changes versus 2021

  • Portfolio occupancy and average rent per occupied square foot improved, and 2022 leasing volume was the highest in five years: 4.3 million square feet at the company’s share. Cash lease spreads were 26.0% for new leases and 6.4% for renewals.
  • The company acquired 16 centers for an aggregate $342.4 million and sold centers, land and joint-venture interests. Sale activity contributed materially to reported earnings: gain on disposition of real estate was $46.6 million versus $6.1 million; gain on sale and change in control of interests was $45.6 million versus $19.2 million.
  • Operating cash flow declined despite higher earnings. Fee income fell substantially, and joint-venture equity income decreased to $27.9 million from $47.3 million.
  • The joint-venture portfolio contracted from 47 centers in 2021 to 18 in 2022, primarily reflecting transactions and asset sales.

Outlook, risks and unusual items

  • No formal earnings or FFO guidance is provided in the supplied filing text. Management identifies rent increases, continued lease-up, redevelopment and selective acquisitions as growth opportunities, while emphasizing prudent leverage and liquidity.
  • Management anticipated approximately $23 million of remaining spend on identified redevelopment projects. It reported about $56 million in construction in progress across active consolidated redevelopment and other projects at year-end.
  • Management said rent collections had generally returned to pre-pandemic levels and COVID-related deferrals for tenants not on cash-basis accounting had been repaid. Prior-period rental revenue included in 2022 results was $3.6 million, compared with $13.8 million in 2021.
  • Key risks include inflation and rising interest rates, reduced consumer spending, e-commerce and tenant distress, higher property and re-leasing costs, refinancing and covenant exposure, and weather, cybersecurity and joint-venture risks. Theater vacancies may be harder to re-lease and may require significant capital.
  • Approximately 5.0% of leased GLA was scheduled to expire in 2023 on a pro rata basis. Management noted that replacement leasing may require additional capital and that renewal rents are not assured.
  • Debt maturities include $87.2 million of senior notes in 2023 and $65.6 million of senior notes plus $27.1 million of consolidated mortgage debt in 2024. Joint ventures had $22.1 million of debt maturing through 2023 at the company’s share; repayment or extension was expected, but not assured.
  • Unusual items include $2.5 million of 2022 impairment charges, triggered by a tenant exercising a fixed-price purchase option on a building, and substantial gains from property and joint-venture transactions. RVI sold its last asset in April 2022; SITE Centers’ related wind-up management fees are expected to diminish.

Important facts for investors to verify

  • Whether occupancy, leasing spreads and rent growth persist, and the capital required to execute new leases and re-tenant vacancies.
  • The sustainability of cash flow and dividends, considering lower operating cash flow, REIT distribution requirements and ongoing capital needs.
  • Funding and repayment plans for 2023–2024 maturities, joint-venture debt and committed redevelopment spending.
  • How much 2022 earnings growth came from recurring property operations versus asset-sale and change-in-control gains.
  • Tenant credit exposure, especially the largest tenants and vulnerable categories such as theaters, fitness and restaurants.
  • Management’s non-GAAP reconciliations and the filing’s full financial statements for detailed debt covenants, cash-flow drivers and property-level performance.