SITE Centers Corp. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; balance-sheet comparisons are with December 31, 2022. SITE Centers is a REIT that owns, leases, acquires, redevelops, develops and manages shopping centers. Its portfolio comprised 120 centers, including 15 held through unconsolidated joint ventures, with approximately 26.6 million square feet of gross leasable area.
Key financial metrics
| Metric | Q1 2023 | Q1 2022 or prior date |
|---|---|---|
| Revenue | $138.7 million | $134.3 million; up 3.3% |
| Net income attributable to SITE Centers | $15.3 million | $13.9 million |
| Net income attributable to common shareholders | $12.5 million; diluted EPS $0.06 | $11.1 million; diluted EPS $0.05 |
| FFO attributable to common shareholders | $61.9 million | $61.2 million |
| Operating FFO attributable to common shareholders | $62.7 million | $61.6 million |
| Same-store NOI growth | 4.2% | Year-over-year, including redevelopment |
| Operating cash flow | $42.2 million | $50.0 million |
| Capital spending and acquisitions | $54.5 million | Cash used in investing activities was $50.8 million |
| Consolidated debt | $1.782 billion | $1.707 billion at December 31, 2022 |
| Cash and cash equivalents | $25.0 million | $20.3 million at December 31, 2022 |
Revenue growth reflected higher base rents and recoveries, partly offset by lower joint-venture fee income. Net income improved despite higher depreciation and interest expense. Results included a $3.7 million gain from resolution of contingent proceeds on a prior joint-venture land sale. The company declared a $0.13 per-share common dividend.
Operations and material changes
- Comparable base and percentage rental income increased $3.3 million; acquisitions added $4.9 million and dispositions reduced it by $3.7 million.
- Portfolio occupancy was 92.8% at March 31, versus 92.4% at year-end 2022 and 90.2% a year earlier. Average annualized base rent was $19.65 per square foot, versus $19.52 at year-end and $18.55 a year earlier.
- The company executed 94 new and renewal leases covering approximately 0.5 million square feet. Cash lease spreads were 20.3% on comparable new leases and 8.7% on renewals.
- Q1 acquisitions were Parker Keystone and Foxtail Center for a combined $26.1 million. In April, the company acquired Barrett Corners for $15.6 million. A joint venture sold three centers for $40.2 million.
- Q1 share repurchases totaled 1.5 million shares for $20.0 million, at an average $13.43 per share. The company reported $26.6 million repurchased cumulatively under its $100 million authorization through March 31.
Liquidity, debt and capital commitments
At March 31, the company had $25.0 million of unrestricted cash and $875.0 million of available capacity on its $950 million revolving facility, subject to borrowing conditions; $75.0 million was drawn at a weighted-average rate of 5.7%. Total debt had a weighted-average interest rate of 4.2% and weighted-average maturity of 2.9 years. The company reported compliance with debt covenants. A $200 million term loan’s SOFR component was swapped to a fixed 2.75%; a 5.0% rate cap on up to $100 million of revolver borrowings took effect in April 2023.
Senior notes of $87.2 million mature in May 2023. 2024 consolidated maturities include $65.6 million of senior notes and $27.8 million of mortgage debt. Joint-venture mortgage maturities through April 2024 total $89.7 million at SITE Centers’ share; refinancing or extension is expected, but not assured. Redevelopment projects had $26.3 million incurred against estimated costs of $44.5 million; approximately $20 million of identified pipeline costs remained to be incurred. Construction commitments were approximately $23.5 million.
Outlook, risks and unusual items
- No specific full-year earnings or operating guidance is provided. Management said it believes liquidity is sufficient and expects to fund maturities and investment from revolver capacity, operating cash flow, asset sales and/or additional financing.
- Management cited retailer demand and leasing strength, while noting economic uncertainty, inflation, higher rates, reduced consumer spending, labor and supply-chain pressures, and capital-market volatility.
- Risks include tenant bankruptcies or non-renewals, higher re-leasing costs and potential difficulty backfilling theater space; rising refinancing costs or limited financing access; joint-venture debt refinancing and partner risks; and redevelopment cost, timing and leasing risks.
- Operating cash flow declined year over year, partly due to cash use for prepaid items and changes in operating liabilities. Interest expense rose to $19.9 million from $18.3 million.
- Management reported no material expected adverse effect from legal proceedings, no new risk factors in this quarter, and effective disclosure controls. The filing identifies no defaults on senior securities.
Important facts for investors to verify
- How the May 2023 note maturity was repaid or refinanced, and the company’s subsequent liquidity and borrowing costs.
- Whether joint-venture debt due through April 2024 was extended or refinanced, particularly the $89.7 million share attributed to SITE Centers.
- Whether occupancy and rent growth persist, and the capital required to execute leasing and redevelopment plans.
- How much reported earnings growth depended on gains and other non-recurring or non-core items; compare GAAP results with FFO, Operating FFO and cash flows.
- How share repurchases and dividends affect liquidity while the company funds maturities, acquisitions and redevelopment.