SITE Centers (SITC) - 2024 Q2 - Quarterly Results

Company & Portfolio Overview SITE Centers Corp. is a REIT focused on owning and managing open-air shopping centers in high-income suburban communities Company Overview SITE Centers Corp. is a self-managed REIT specializing in open-air shopping centers in high-income suburban communities - The Company is a publicly traded, self-administered, and self-managed REIT on the NYSE under the ticker SITC[9] - SITE Centers focuses on owning and managing open-air shopping centers located in suburban areas with high household incomes[39][49] Portfolio Overview As of June 30, 2024, SITE Centers' portfolio comprises 112 open-air shopping centers with 15.1 million square feet GLA, 93.2% leased, primarily in the Southeast and leased to national retailers Portfolio Statistics (as of June 30, 2024) | Metric | Value | | :--- | :--- | | Wholly-Owned Properties | 101 | | Leased Rate (Pro Rata) | 93.2% | | Average Household Income | $113K | | Shopping Center Count | 112 | | Gross Leasable Area (Pro Rata Share) | 15,051 (in thousands sq ft) | - The portfolio has a high concentration of national retailers, which make up 86% of the tenant mix, with the remaining 14% being local tenants[40] - Geographically, the portfolio is heavily weighted towards the Southeast region, accounting for 50% of the properties, with Miami, Atlanta, and Chicago MSAs being the top three by Annualized Base Rent (ABR), each contributing approximately 9%[40][60] Quarterly Operational Overview (Pro Rata Share) | Metric | 6/30/2024 | 6/30/2023 | | :--- | :--- | :--- | | Base Rent PSF | $21.98/sq ft | $19.89/sq ft | | Commenced Rate | 90.9% | 92.4% | | Leased Rate | 93.2% | 95.5% | Earnings Release & Financial Performance This section details SITE Centers' Q2 2024 financial results, including net income, FFO, balance sheet, and future NOI projections, reflecting portfolio transformation efforts Second Quarter 2024 Highlights SITE Centers reported a significant increase in Q2 2024 net income driven by property sales, while Operating FFO per share decreased amid active portfolio transformation and spin-off progress - The planned spin-off of Curbline Properties Corp. is on track, with significant progress made in Q2, including nearly $1 billion in transactions[19][43][46] - Sold 15 shopping centers for an aggregate price of $868.2 million and acquired six convenience shopping centers for $56.0 million during the second quarter and third quarter to date[18] - Repurchased $26.7 million of senior unsecured notes, resulting in a gain on debt retirement of approximately $0.3 million[18] - Announced a one-for-four reverse stock split of common shares, expected to be effective August 19, 2024[18] Q2 2024 Key Financial Results (per diluted share) | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net Income per Share | $1.11 | $0.01 | +$1.10 | | Operating FFO per Share | $0.27 | $0.29 | -$0.02 | Financial Statements (Consolidated) Consolidated revenues decreased in Q2 2024 due to dispositions, while net income surged to $238.2 million driven by real estate gains, increasing cash to $1.18 billion Consolidated Income Statement Highlights (in thousands) | Account | 2Q24 | 2Q23 | | :--- | :--- | :--- | | Total Revenues | $114,129 | $136,383 | | Net Operating Income | $78,730 | $93,628 | | Gain on disposition of real estate, net | $233,316 | $(22) | | Net Income | $238,245 | $5,353 | | Earnings per common share – Diluted | $1.11 | $0.01 | Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Real estate, net | $2,649,113 | $3,260,782 | | Cash | $1,181,292 | $551,968 | | Total Assets | $4,045,565 | $4,061,351 | | Total Debt (Unsecured + Secured) | $1,513,631 | $1,626,275 | | Total Liabilities | $1,711,466 | $1,885,808 | | Total Equity | $2,334,099 | $2,175,543 | FFO & OFFO Reconciliation Q2 2024 FFO decreased to $40.2 million and Operating FFO to $55.9 million, primarily due to lower property NOI from net dispositions FFO & Operating FFO Reconciliation (in thousands, except per share) | Metric | 2Q24 | 2Q23 | | :--- | :--- | :--- | | Net income Common Shareholders | $235,456 | $2,564 | | Adjustments (Depreciation, Gains, etc.) | ($195,279) | $54,955 | | FFO attributable to Common Shareholders | $40,177 | $57,519 | | Non-operating items, net | $15,706 | $3,776 | | Operating FFO attributable to Common Shareholders | $55,883 | $61,295 | | FFO per share – Diluted | $0.19 | $0.27 | | Operating FFO per share – Diluted | $0.27 | $0.29 | Property NOI Projection SITE Centers projects full-year 2024 property NOI between $198.3 million and $204.4 million, with Curbline Properties projected at $82.6 million to $84.9 million 2024 Property NOI Projection ($M) | Portfolio | NOI Projection ($M) | | :--- | :--- | | SITE Centers | $198.3 – $204.4 | | Curbline Properties | $82.6 – $84.9 | - The projections assume a 2024 Same-Store NOI (SSNOI) growth of 3.5% to 5.5% for Curbline Properties[198] Portfolio Metrics This section provides key operational metrics including same-store performance, leasing activity, lease expiration schedules, and tenant diversification Same Store Metrics Q2 2024 Same-Store Net Operating Income (SSNOI) at SITE's share increased by 0.8%, with the consolidated same-store leased rate at 93.2% - Same-store net operating income (SSNOI) on a pro rata basis increased by 0.8% for Q2 2024 compared to the same period last year[47] Same Store NOI Performance (at SITE share) | Period | Total SSNOI at SITE share ($ thousands) | % Change YoY | | :--- | :--- | :--- | | Q2 2024 | $66,549 | 0.8% | | 6M 2024 | $132,700 | 0.9% | Consolidated Same Store Operating Metrics | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Leased Rate | 93.2% | 94.7% | | Commenced Rate | 90.8% | 90.9% | | Operating Margin | 70.0% | 70.2% | Leasing Summary SITE Centers reported strong Q2 2024 leasing performance with 44.2% cash new leasing spreads, and a 230 basis point Signed Not Opened (SNO) spread representing $10.2 million in future ABR - The Signed Not Opened (SNO) spread was 230 basis points as of June 30, 2024, which represents $10.2 million of future annualized base rent on a pro rata basis[47] Q2 2024 Leasing Spreads (Pro Rata Share) | Lease Type | Cash Spread | Straight-Lined Spread | | :--- | :--- | :--- | | SITE New Leases | 44.2% | 50.6% | | SITE Renewals | 9.1% | 14.8% | | Curbline New Leases | 64.5% | 97.3% | | Curbline Renewals | 14.7% | 28.7% | Trailing Twelve-Month Leasing Spreads (Pro Rata Share) | Lease Type | Cash Spread | Straight-Lined Spread | | :--- | :--- | :--- | | SITE New Leases | 38.8% | 50.1% | | SITE Renewals | 6.9% | 11.6% | | Curbline New Leases | 24.4% | 49.2% | | Curbline Renewals | 11.3% | 22.4% | Lease Expirations Approximately 10.2% of ABR is set to expire in 2025, with the largest concentration of 17.3% in 2028, indicating future re-leasing opportunities Lease Expiration Schedule by ABR (Pro Rata, No Options Exercised) | Year | % of ABR Expiring | | :--- | :--- | | 2024 (Remaining) | 1.6% | | 2025 | 10.2% | | 2026 | 8.8% | | 2027 | 15.3% | | 2028 | 17.3% | | Thereafter | 46.8% | - The schedule shows a significant portion of leases expiring between 2027 and 2029, representing a key period for re-leasing and rent negotiations[68] Top Tenants The tenant base is diversified, with the top 10 tenants accounting for 20.3% of pro rata base rent, led by TJX Companies at 3.8% Top 5 Tenants by Pro Rata Base Rent | Rank | Tenant | % of Total Pro Rata Base Rent | | :--- | :--- | :--- | | 1 | TJX Companies | 3.8% | | 2 | PetSmart | 2.2% | | 3 | Dick's Sporting Goods | 2.1% | | 4 | Ross Stores | 2.1% | | 5 | Burlington | 1.9% | - The top 50 tenants in the portfolio represent 45.0% of the total pro rata base rent[95] Investments & Transactions This section details SITE Centers' redevelopment pipeline and recent transaction activity, reflecting ongoing portfolio refinement efforts Redevelopment Pipeline SITE Centers has a redevelopment pipeline with estimated net costs of $7.4 million and an 11% estimated yield, with projects stabilizing between Q2 2026 and Q1 2027 Redevelopment Pipeline Summary (in thousands) | Metric | Value | | :--- | :--- | | Estimated Net Costs | $7,418 | | Estimated Yield | 11% | | Costs to Date | $2,479 | | Estimated Remaining Costs | $4,939 | - The pipeline includes two main projects: Shops at Tanasbourne (Portland, OR) and Shops at Boca Center (Boca Raton, FL)[97] Transactions Year-to-date 2024, SITE Centers has been a net seller, disposing of $987.6 million in properties and acquiring $127.4 million in assets as part of its portfolio refinement strategy 2024 YTD Transactions Summary (in thousands) | Transaction Type | Price (At 100%) | Price (At Share) | | :--- | :--- | :--- | | Acquisitions | $127,410 | $112,080 | | Dispositions | $987,580 | $958,380 | - Significant Q2 dispositions included a six-property portfolio sold for $495.0 million and Johns Creek Town Center for $58.9 million[99] - Key Q2 acquisitions included Meadowmont Village for $44.3 million (acquiring the remaining 80% interest) and Roswell Market Center for $17.8 million[18][99] Capital & Debt Structure This section details SITE Centers' capital and debt structure, including market capitalization, debt composition, maturity schedule, and leverage ratios Capital Structure As of June 30, 2024, SITE Centers' total market capitalization was $3.64 billion, with a net debt position significantly reduced to $427.8 million due to asset sales Capital Structure (as of June 30, 2024, in thousands) | Component | Value | | :--- | :--- | | Common Shares Equity | $3,038,649 | | Total Debt (includes JVs at SITE share) | $1,624,693 | | Less: Cash | ($1,196,881) | | Net Debt | $427,812 | | Total Market Capitalization | $3,641,461 | Debt Profile SITE Centers' total debt at share was $1.62 billion with a 4.61% weighted average interest rate and 2.2-year maturity, predominantly fixed-rate and unsecured Debt Composition (at SITE Share, in thousands) | Debt Type | Balance ($) | Interest Rate | | :--- | :--- | :--- | | Unsecured Public Debt | $1,217,893 | 4.36% | | Unsecured Term Loan | $200,000 | 3.99% | | Mortgage Loans | $206,800 | 6.43% (Blended) | | Total | $1,624,693 | 4.61% | Debt Maturity Schedule (Total at SITE Share, in thousands) | Year | Amount Maturing ($) | | :--- | :--- | | 2024 | $386 | | 2025 | $402,523 | | 2026 | $401,794 | | 2027 | $650,162 | | 2028 | $94,633 | - The company's debt is predominantly fixed-rate, accounting for 98.1% of the total debt at SITE's share, which mitigates interest rate risk[77][101] Leverage & Covenants SITE Centers' leverage significantly improved, with pro-rata Net Debt to Adjusted EBITDA decreasing to 3.4x, and the company remains in compliance with all debt covenants Leverage Ratios (TTM) | Metric | June 30, 2024 | June 30, 2023 | | :--- | :--- | :--- | | Average Consolidated Net Debt / Adjusted EBITDA | 3.1x | 5.2x | | Average Pro-Rata Net Debt / Adjusted EBITDA | 3.4x | 5.5x | Debt Covenant Compliance | Covenant | Ratio | Limit | | :--- | :--- | :--- | | Total Debt to Real Estate Assets | 38% | < 65% | | Secured Debt to Assets | 2% | < 40% | | Unencumbered Assets to Unsecured Debt | 267% | > 135% | | Fixed Charge Coverage | 3.9x | > 1.5x | Unconsolidated Joint Ventures This section provides an overview of SITE Centers' unconsolidated joint ventures, including portfolio details and financial contributions JV Overview & Financials SITE Centers holds interests in 11 properties through unconsolidated joint ventures, generating $15.6 million in Q2 2024 NOI at 100% and $1.6 million in SITE's share of FFO Unconsolidated Joint Venture Portfolio (as of June 30, 2024) | Joint Venture | SITE Own % | Number of Properties | Leased Rate | Debt Balance (100%) | | :--- | :--- | :--- | :--- | :--- | | Chinese Institutional Investors DTP | 20% | 10 | 95.5% | $380.6M | | Prudential RVIP IIIB | 50% | 1 | 81.6% | $61.7M | JV Financial Highlights (at 100%) | Metric | 2Q24 | 6M24 | | :--- | :--- | :--- | | Net Operating Income | $15,643K | $31,829K | | Net Income | $7,334K | $6,179K | | FFO | $5,693K | $11,712K | - SITE's share of FFO from its unconsolidated joint ventures was $1.6 million for Q2 2024[141] Shopping Center Summary This section provides a detailed list of all shopping centers within the portfolio, including key operational and ownership data Property List The comprehensive property list details 112 shopping centers, providing key information such as MSA, GLA, ABR per square foot, and major anchor tenants - The property list details 112 centers, including 101 wholly-owned and 11 in joint ventures[113][114] - Information provided for each property includes MSA, location, ownership structure, GLA, ABR per square foot, and major anchor tenants (those greater than 20K SF)[113][143] Reporting Policies & Definitions This section outlines SITE Centers' key accounting policies and provides definitions for non-GAAP financial measures used in performance evaluation Notable Accounting Policies Key accounting policies cover revenue recognition, capitalization of expenditures, and distinct methodologies for calculating leasing spreads for SITE Centers and Curbline Properties - Revenue from lease termination fees is recognized upon lease termination, and tenant reimbursements are recognized as expenses are incurred[118] - The company capitalizes expenditures that improve or extend asset life, as well as interest and certain administrative costs during construction, while maintenance and repairs are expensed[151] - The calculation for leasing spreads differs for SITE Centers and Curbline Properties, with SITE excluding certain non-comparable deals and long-vacant leases, while Curbline includes them[28][125] Non-GAAP Measures Definitions The report defines key non-GAAP measures such as FFO, Operating FFO (OFFO), Net Operating Income (NOI), and Same Store NOI (SSNOI) used for performance evaluation - FFO (Funds from Operations): Calculated per NAREIT definition as net income adjusted for real estate depreciation, gains/losses on property sales, and impairment charges, serving as a standard REIT performance measure[25][50][128] - Operating FFO (OFFO): A company-specific metric that further adjusts FFO by removing items management deems non-comparable or not indicative of core portfolio performance, such as transaction costs and gains on debt retirement[50][178] - NOI and SSNOI (Net Operating Income): NOI represents property revenues less property-related expenses, while SSNOI compares NOI for a consistent pool of properties to measure organic operational performance[26][51][180]