SITE Centers Corp. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. SITE Centers is a retail REIT focused on owning, leasing, acquiring, redeveloping and managing shopping centers. Its portfolio included 114 centers, including 13 held through joint ventures, with approximately 21.9 million square feet of gross leasable area.
Financial and operating results
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Total revenue | $122.1 million | $138.7 million; down $16.6 million |
| Net income (loss) attributable to common shareholders | $(26.3) million; $(0.13) per diluted share | $12.5 million; $0.06 per diluted share |
| FFO attributable to common shareholders | $51.9 million | $61.9 million; down $10.0 million |
| Operating FFO attributable to common shareholders | $59.8 million | $62.7 million; down $2.9 million |
| Cash from operating activities | $40.0 million | $42.2 million |
| Same-store NOI growth | 1.5% at SITE’s share | Consolidated growth was 1.6% |
| Portfolio occupancy | 91.6% at pro rata share | 92.0% at December 31, 2023; 92.8% at March 31, 2023 |
| Average annualized base rent per square foot | $20.69 at pro rata share | $20.35 at December 31, 2023; $19.65 at March 31, 2023 |
Rental income declined $16.3 million year over year, primarily because dispositions reduced base rent by $17.1 million, partly offset by comparable-property growth and acquisitions. The GAAP loss included $66.6 million of impairment charges and a $31.7 million gain on real estate dispositions. Impairments followed revised hold-period assumptions. Operating FFO, a non-GAAP measure, declined modestly; it should not be treated as cash available for dividends or debt service.
The company leased approximately 0.8 million square feet through 99 new and renewal leases. Cash leasing spreads were 11.5% on new leases and 8.0% on renewals. Tenant demand and rent growth supported same-store NOI, while occupancy eased from the prior-year level.
Cash, debt and liquidity
- At March 31, unrestricted cash was $551.3 million; restricted cash was $5.4 million. The $950 million revolving credit facility had no borrowings, subject to its borrowing conditions.
- Total consolidated debt was $1.565 billion, down from $1.626 billion at year-end. All consolidated debt was fixed-rate after accounting for the swap on the $200 million term loan; weighted-average rate was 4.3% and maturity was 2.3 years.
- Q1 investing cash flow was $78.1 million, including $115.3 million of real estate sale proceeds. Financing cash flow was a $130.4 million outflow, including $60.8 million to repurchase senior notes and $63.7 million of dividends paid. Cash, cash equivalents and restricted cash fell $12.3 million during the quarter.
- The company repurchased $61.6 million principal amount of 2025 and 2026 senior notes for $60.8 million including expenses, recording a $0.8 million gain. It had $400.4 million of senior notes and $25.5 million of mortgage debt due in 2025; it reported no consolidated debt maturing in 2024.
- The $200 million term loan’s SOFR component is fixed at 2.75% through a swap expiring in June 2027. The company reported compliance with debt covenants.
Strategy, outlook and risks
SITE expects to spin off its convenience properties into Curbline Properties Corp. on or around October 1, 2024. The company expects Curbline to have no debt at separation and to hold cash, a preferred investment in SITE, and an undrawn credit line. SITE plans to close a mortgage facility before the spin-off and combine its proceeds with asset-sale proceeds to repay outstanding unsecured debt. The committed facility was reduced from $1.1 billion to $1.0 billion after two collateral properties were released; closing is subject to conditions, and the company is not obligated to draw it.
Through April 26, 2024, SITE reported five wholly owned shopping-center sales for $169.6 million in aggregate and acquisitions of two convenience centers plus a land parcel for $20.1 million. It expected asset-sale closings to increase in Q2 and Q3, but noted that closings depend on market conditions and buyer due diligence. After the spin-off, it may sell additional assets to repay debt, redeem preferred stock and make shareholder distributions. No specific earnings or FFO guidance was provided.
Management cited steady retailer demand, suburban tenant demand and rent increases, while noting tenant bankruptcies, elevated leasing capital needs, inflation, interest rates, consumer-spending uncertainty and retail competition. Other key risks include failure to complete the spin-off or mortgage financing, difficulty refinancing or selling assets on favorable terms, covenant breaches, and potential impairment from further changes in property hold assumptions. The company reported no material expected adverse effect from legal proceedings and no new risk factors in this filing.
Key facts investors should verify
- Whether Curbline’s targeted separation date and the $1.0 billion mortgage facility close on the expected terms and timetable.
- Progress and realized proceeds from planned asset sales, and how proceeds are applied to unsecured debt, preferred shares and distributions.
- Debt maturities and refinancing plans, particularly the 2025 obligations, and continued covenant compliance.
- Whether occupancy, tenant demand and leasing spreads can offset dispositions, bankruptcies and leasing-related capital costs.
- Valuation assumptions behind the $66.6 million impairment and the potential for additional impairments or changes in sale timing.