SITE Centers Corp. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. SITE Centers is a retail shopping-center REIT. At quarter-end, its portfolio comprised 137 centers, including 57 held through joint ventures, with 89.7% pro-rata occupancy and average annualized base rent of $18.39 per occupied square foot.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $135.5 million | $107.6 million | $263.6 million | $236.9 million |
| Net income (loss) attributable to SITE Centers | $21.9 million | $(4.6) million | $37.9 million | $29.7 million |
| Net income (loss) attributable to common shareholders | $13.8 million | $(9.7) million | $24.6 million | $19.5 million |
| Diluted earnings (loss) per share | $0.06 | $(0.05) | $0.12 | $0.10 |
| FFO attributable to common shareholders | $60.5 million | $39.2 million | $110.0 million | $86.6 million |
| Operating FFO attributable to common shareholders | $65.3 million | $39.9 million | $120.6 million | $101.0 million |
- For the six months, cash from operations was $144.8 million, compared with $71.9 million in 2020. Investing activities used $31.6 million, versus providing $111.9 million; financing activities used $126.5 million, versus $74.2 million. Cash, cash equivalents and restricted cash totaled $61.2 million at period-end.
- Total consolidated debt was $1.80 billion, down from $1.93 billion at December 31, 2020. Unrestricted cash was $57.9 million; revolving credit facilities were undrawn, with $970 million of stated availability, subject to borrowing conditions. The company reported covenant compliance.
- Six-month same-store NOI increased 12.8% including redevelopment and 11.8% excluding redevelopment. Management attributed much of the improvement to collection of deferred rents and other amounts from 2020, including from tenants previously accounted for on a cash basis.
- Common dividends declared were $0.23 per share for the first half: $0.11 in Q1 and $0.12 in Q2.
Material changes and notable items
- Q2 revenue increased approximately 26% year over year, while six-month revenue increased approximately 11%. Rental income rose, but six-month fee and other income fell to $17.5 million from $26.3 million, primarily reflecting changes in joint-venture interests and managed assets.
- Q2 2021 common-shareholder earnings turned positive from a year-earlier loss. The first-half comparison also reflects differing unusual items: 2021 included a $13.9 million gain on sale of a joint-venture interest and a $5.2 million preferred-share issuance-cost write-off; 2020 included a $22.9 million reserve for preferred equity interests and a $45.6 million gain on a joint-venture interest sale.
- First-half 2021 rental income included $7.2 million of net uncollectible-revenue adjustments, primarily reflecting 2021 cash received for amounts previously owed, including deferred 2020 rents. Q2 included $5.8 million. These items make reported year-over-year revenue and earnings comparisons less indicative of current-period rent trends.
- The company acquired two shopping centers for a combined $48.8 million, including $17.9 million of assumed mortgage debt. It issued 17.25 million common shares in March, raising net proceeds of $225.3 million, and redeemed all $150 million of its 6.25% Class K preferred shares in April.
- Six-month impairment charges were $7.3 million, related to a change in the expected hold period for an asset considered for sale and sold in Q1.
Outlook, commentary and risks
- No specific earnings or FFO guidance was provided in the supplied filing text. Management said it believed liquidity was sufficient for current operations and described a strategy of maintaining liquidity and low leverage.
- Management reported that all properties were open and 100% of tenants, measured by pro-rata average base rent, were open for business as of July 21, 2021. Rent collection rates, including later receipts applied to the original billing periods, were 98% for Q2 2021 and had improved from 89% for Q2 2020. Collections had not fully returned to pre-pandemic levels.
- Management anticipated approximately $28 million of funding for identified redevelopment projects. It reported positive leasing spreads for first-half new leases (9.7%) and renewals (0.7%); renewal spreads reflected a stated priority on occupancy, and management cautioned that maintaining occupancy could pressure future spreads.
- Key risks include renewed COVID-19 disruption, variants or reduced vaccine effectiveness, tenant nonpayment, closures and bankruptcies, and the concentration of credit exposure in retail. Movie theaters, fitness tenants and local restaurants were identified as particularly vulnerable. The company also highlighted refinancing and covenant risks, interest-rate exposure, redevelopment execution, and joint-venture debt and partner risks.
- Consolidated mortgage maturities included $5.9 million for the remainder of 2021 and $140.5 million in 2022, at the company’s share; no unsecured debt matured before 2023. Joint ventures had $34.2 million of mortgage maturities at the company’s share for the remainder of 2021 and $92.5 million in 2022. Management expected refinancing, extensions or repayment, but gave no assurance these would occur as anticipated.
- Legal proceedings were not expected by management to have a material adverse effect. The filing reported no material changes to internal controls and listed no new risk factors for this quarter.
Important facts for investors to verify
- How much of the earnings, FFO and same-store NOI improvement reflects recurring operations versus deferred-rent collections, asset-sale gains and other unusual items.
- Subsequent collection of deferred rents, cash-basis tenant receivables, and the $4.1 million of outstanding deferrals identified for tenants not on the cash basis.
- Leasing, occupancy and rental-rate trends, especially at joint-venture properties, where occupancy was 86.7% versus 90.2% for wholly owned centers.
- Liquidity, covenant headroom and refinancing plans for 2021–2022 consolidated and joint-venture mortgage maturities.
- Redevelopment spending and returns, the effect of the share issuance and preferred-share redemption on per-share results, and settlement of the forward equity sale agreement.