SITE Centers (SITC) - 2024 Q4 - Annual Report

Part I Business SITE Centers, a REIT, spun off 79 convenience retail properties into Curbline Properties Corp. on October 1, 2024, now owning 33 shopping centers and focusing on value realization through operations and asset sales - On October 1, 2024, the Company completed the spin-off of 79 convenience retail properties into Curbline Properties Corp, now treated as discontinued operations[12][13] - The Company generated approximately $3.1 billion from property sales from July 2023 to December 2024 to repay debt and fund distributions[17] - Under a Shared Services Agreement, SITE Centers provides operational staff to Curbline and earns a fee of 2.0% of Curbline's Gross Revenue, while Curbline provides SITE Centers with a CEO and CIO[22][23] - The company's full-time workforce decreased from 220 employees at year-end 2023 to 172 at year-end 2024, partly due to employee transition to Curbline Properties post-spin-off[32] Portfolio Overview as of December 31, 2024 (Pro Rata Basis) | Metric | Value | | :--- | :--- | | Shopping Centers Owned | 33 (including 11 in JVs) | | Total Gross Leasable Area (GLA) | 8.8 million sq ft | | Aggregate Occupancy | 90.6% | | Average Annualized Base Rent | $19.64 per sq ft | Top 5 Tenants by Annualized Base Rental Revenue (as of Dec 31, 2024) | Tenant | % of Aggregate Annualized Base Rental Revenue | | :--- | :--- | | TJX Companies, Inc. | 4.6% | | Dick's Sporting Goods, Inc. | 4.4% | | Burlington Stores, Inc. | 4.3% | | The Kroger Co. | 3.6% | | PetSmart, Inc. | 3.3% | Risk Factors The Company faces business, property, financial, and cybersecurity risks, including economic downturns, e-commerce impact, significant indebtedness, and potential conflicts of interest with Curbline Properties - Business risks include economic dependency, e-commerce impact on tenants, and reliance on large national tenants, with 6.8% of leased GLA expiring in 2025[43][54] - Financial risks include the absence of a revolving credit facility since August 2024, $306.8 million in consolidated debt, $106.6 million in JV debt, and restrictive covenants on its Mortgage Facility[78][79][82] - The relationship with Curbline Properties presents potential conflicts of interest due to shared executive leadership and non-arm's length Shared Services Agreements[102][105] - Failure to adhere to complex REIT qualification rules could result in corporate taxation and reduced distributions, with the post-spin-off size decreasing the margin for non-qualifying assets[86] - Cybersecurity risks are significant due to reliance on computer systems for business operations and services to Curbline and JVs, with potential for disruption and liability from failures or breaches[75] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[112] Cybersecurity The company maintains a comprehensive cybersecurity program managed by the CTO and overseen by the Audit Committee, incorporating risk assessments, third-party providers, and employee training, with no material impact from threats to date - Cybersecurity risk management is integrated into the enterprise risk management system, overseen by the internal audit team, CTO, Security and Privacy Governance Committee, and the Audit Committee of the Board[114][119][120] - Mitigation strategies include physical and software safeguards, contracts with independent cybersecurity providers, timely system updates, and annual employee cybersecurity awareness training[115][118] - To date, cybersecurity threats have not materially affected the company's operations or information systems availability[121] Properties As of December 31, 2024, SITE Centers' portfolio comprises 33 shopping centers totaling 8.8 million square feet of GLA across 15 states, with an average annualized base rent of $19.64 per square foot - The portfolio includes 33 shopping centers (8.8 million sq ft GLA), with 90.6% occupancy on a pro rata basis as of December 31, 2024[122][126] - In addition to its retail portfolio, the company owns two office buildings in Beachwood, Ohio, totaling 339,000 sq ft, one serving as its corporate headquarters[127] Lease Expirations for Wholly-Owned Properties (2025-2029) | Expiration Year | % of Total GLA | % of Total Base Rental Revenues | | :--- | :--- | :--- | | 2025 | 6.4% | 9.0% | | 2026 | 8.1% | 7.5% | | 2027 | 14.9% | 17.5% | | 2028 | 13.2% | 14.1% | | 2029 | 13.2% | 15.9% | Lease Expirations for Joint Venture Properties (2025-2029) | Expiration Year | % of Total GLA | % of Total Base Rental Revenues | | :--- | :--- | :--- | | 2025 | 5.1% | 5.6% | | 2026 | 13.0% | 12.7% | | 2027 | 16.6% | 17.3% | | 2028 | 14.1% | 15.3% | | 2029 | 13.8% | 13.4% | Legal Proceedings The company is involved in various legal proceedings, but management does not expect a material adverse effect on its financial position or operations - The Company is subject to various legal proceedings, but management believes the final outcome will not have a material adverse effect on its financial condition or results of operations[132] Mine Safety Disclosures This item is not applicable to the company - Not Applicable[133] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common shares trade on the NYSE under 'SITC', with future dividend policy influenced by operations and asset sales, and $73.4 million remaining authorized for share repurchases - The Company's common shares are listed on the NYSE under 'SITC', with 3,145 record holders as of February 21, 2025[136] - The Company does not expect regular quarterly dividend payments, with future policy influenced by operations, asset sales, debt repayment, and REIT payout rules[137] - A common share repurchase program authorizes up to $100 million in repurchases, with $73.4 million remaining available as of December 31, 2024[139] Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes the company's 2024 financial performance, highlighting the Curbline spin-off, significant deleveraging via asset sales, increased net income from dispositions, decreased FFO due to a smaller portfolio, and a shift to secured debt with a new $530 million mortgage facility - The spin-off of Curbline Properties on October 1, 2024, was a major strategic event, with its historical results now presented as discontinued operations[142][143] - In 2024, the company sold 40 wholly-owned shopping centers for $2.3 billion, using proceeds to repay all outstanding unsecured debt and preferred shares[154] - The increase in net income was driven by a $633.2 million gain on real estate disposition, while FFO decreased due to net property dispositions and $42.8 million in debt extinguishment costs[164][186][184] - The company's capital structure was significantly altered in 2024, terminating its revolving credit facility and term loan, repaying all senior notes, and entering a new $530 million secured mortgage facility, with $206.9 million outstanding at year-end[212][221][223] Key Financial Results (Year Ended Dec 31) | Metric (in thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Net income attributable to common shareholders | $516,031 | $254,547 | | FFO attributable to common shareholders | $79,443 | $240,199 | | Operating FFO attributable to common shareholders | $166,724 | $247,872 | Critical Accounting Estimates Management identifies critical accounting estimates in purchase price allocation for property acquisitions and impairment assessment of real estate assets, both requiring significant judgment and subjective assumptions - Purchase price allocations for acquired properties require significant management estimates for the fair value of tangible and intangible assets[168] - The company assesses real estate assets for impairment by estimating undiscounted future cash flows, a subjective process considering expected income, hold periods, and competition[169] - For assets considered for sale, impairment analysis is probability-weighted based on the most likely course of action, using fair value estimates from broker opinions or negotiated agreements[170] Results of Operations Total revenues decreased to $277.5 million in 2024 due to property dispositions, while net income attributable to SITE Centers increased to $531.8 million driven by a $633.2 million gain on real estate dispositions, despite a $66.6 million impairment charge and $42.8 million in debt extinguishment costs - The company recorded a $633.2 million gain on real estate disposition in 2024, a significant increase from $218.7 million in 2023[186] - Debt extinguishment costs totaled $42.8 million in 2024, primarily from Mortgage Commitment termination ($21.2 million), property releases from the new Mortgage Facility ($10.1 million), and Senior Notes redemption ($6.7 million)[187] - Income from discontinued operations (Curbline properties) was $6.1 million in 2024, a decrease from $36.4 million in 2023, reflecting the shorter period and $30.7 million in transaction costs[186][189] Revenues from Operations (in thousands) | Revenue Type | 2024 | 2023 | $ Change | | :--- | :--- | :--- | :--- | | Rental income | $269,286 | $444,062 | $(174,776) | | Fee and other income | $8,181 | $8,553 | $(372) | | Total revenues | $277,467 | $452,615 | $(175,148) | Expenses from Operations (in thousands) | Expense Type | 2024 | 2023 | $ Change | | :--- | :--- | :--- | :--- | | Operating and maintenance | $55,372 | $78,306 | $(22,934) | | Real estate taxes | $40,292 | $65,501 | $(25,209) | | Impairment charges | $66,600 | $— | $66,600 | | General and administrative | $47,080 | $50,867 | $(3,787) | | Depreciation and amortization | $101,344 | $180,611 | $(79,267) | Non-GAAP Financial Measures FFO for 2024 significantly decreased to $79.4 million from $240.2 million in 2023, primarily due to net property dispositions and debt extinguishment costs, while Operating FFO also decreased to $166.7 million from $247.9 million due to a smaller portfolio - The decrease in FFO in 2024 was primarily due to net property dispositions, debt extinguishment costs, and transaction costs related to the Curbline spin-off[201] Reconciliation of Net Income to FFO and Operating FFO (in thousands) | Line Item | 2024 | 2023 | | :--- | :--- | :--- | | Net income attributable to common shareholders | $516,031 | $254,547 | | Depreciation and amortization | $97,186 | $175,156 | | Impairment of real estate | $66,600 | $— | | Gain on disposition of real estate, net | $(633,219) | $(218,655) | | Other FFO adjustments | $32,845 | $29,151 | | FFO attributable to common shareholders | $79,443 | $240,199 | | Separation, transaction, and debt extinguishment costs | $76,714 | $9,776 | | Other Operating FFO adjustments | $10,567 | $(2,103) | | Operating FFO attributable to common shareholders | $166,724 | $247,872 | Liquidity, Capital Resources and Financing Activities The company's liquidity strategy shifted in 2024, relying on operating cash flow, debt financings, and asset sales after terminating its revolving credit facility, resulting in $1.8 billion from investing activities and $2.5 billion used for financing, ending with $54.6 million cash and a restructured, secured debt profile - As of December 31, 2024, the company had $306.8 million in consolidated debt, a sharp reduction from $1.6 billion at year-end 2023, and no longer has a revolving credit facility[208][207] - Major 2024 financing activities included closing a new $530.0 million Mortgage Facility, repaying $1.3 billion in Senior Notes, $200.0 million Term Loan, redeeming $175.0 million in Class A Preferred Shares, and contributing $800.0 million cash to Curbline[212][222][223][224] - The company declared cash dividends of $1.04 per common share in 2024 prior to the spin-off, with no dividends declared for Q3 and Q4 to maximize Curbline capitalization and preserve operating funds[229][230] Summary of Cash Flow Activities (in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Cash flow provided by operating activities | $112,044 | $238,533 | | Cash flow provided by investing activities | $1,843,903 | $559,899 | | Cash flow used for financing activities | $(2,457,312) | $(250,615) | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rates, with 67.3% of consolidated debt now variable-rate, and a 100 basis-point increase would raise annual interest expense by approximately $2.0 million - A 100 basis-point increase in short-term market interest rates on variable-rate debt would result in an approximate $2.0 million increase in annual interest expense[281] Consolidated Debt Composition (as of Dec 31, 2024) | Debt Type | Amount (Millions) | Percentage of Total | | :--- | :--- | :--- | | Fixed-Rate Debt | $98.5 | 32.7% | | Variable-Rate Debt | $202.9 | 67.3% | Fair Value of Debt (in millions) | Debt Type | Carrying Amount (Dec 31, 2024) | Fair Value (Dec 31, 2024) | | :--- | :--- | :--- | | Mortgage Indebtedness | $301.4 | $309.2 | Financial Statements and Supplementary Data This item incorporates by reference the company's audited consolidated financial statements and supplementary data, located in a separate section of the Annual Report on Form 10-K beginning on page F-1 - The response to this item is included in a separate section at the end of this Annual Report on Form 10-K beginning on page F-1[286] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[287] Controls and Procedures The company's disclosure controls and procedures and internal control over financial reporting were deemed effective as of December 31, 2024, with no material changes during Q4 2024 - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of December 31, 2024[288] - Management concluded that the Company's internal control over financial reporting was effective as of December 31, 2024, based on the COSO 2013 framework, audited by PricewaterhouseCoopers LLP[289][290] - No changes in internal control over financial reporting occurred during the fourth quarter of 2024 that materially affected, or are reasonably likely to materially affect, these controls[291] Other Information The company reports no other information for this item - None[292] Disclosure Regarding Foreign Jurisdictions That Prevent Inspections This item is not applicable to the company - Not applicable[293] Part III Directors, Executive Officers and Corporate Governance This section incorporates by reference information from the 2025 Proxy Statement regarding directors and corporate governance, with executive officer details in Part I of this Form 10-K - Information regarding directors and corporate governance is incorporated by reference from the Company's 2025 Proxy Statement[296] - Information about the Company's Executive Officers is located in Part I of this Annual Report on Form 10-K[296] Executive Compensation This section incorporates by reference detailed executive and director compensation information from the company's 2025 Proxy Statement, including the Compensation Discussion and Analysis and related tables - Information required by this item is incorporated by reference from the Company's 2025 Proxy Statement, including the 'Compensation Discussion and Analysis' and 'Executive Compensation Tables' sections[297] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership by beneficial owners and management is incorporated by reference from the 2025 Proxy Statement, detailing 310,113 securities to be issued and 2,667,768 available for future issuance under equity compensation plans as of December 31, 2024 - Information regarding security ownership is incorporated by reference from the Company's 2025 Proxy Statement[299] Equity Compensation Plan Information (as of Dec 31, 2024) | Plan Category | Number of Securities to Be Issued Upon Exercise | Weighted-Average Exercise Price | Number of Securities Remaining Available for Future Issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 310,113 | $30.96 | 2,667,768 | Certain Relationships and Related Transactions, and Director Independence This section incorporates by reference information from the company's 2025 Proxy Statement concerning related-party transactions and director independence - Information required by this item is incorporated by reference from the Company's 2025 Proxy Statement[303] Principal Accountant Fees and Services This section incorporates by reference information from the company's 2025 Proxy Statement regarding fees paid to and services provided by PricewaterhouseCoopers LLP - Information regarding fees paid to PricewaterhouseCoopers LLP is incorporated by reference from the Company's 2025 Proxy Statement[304] Part IV Exhibits and Financial Statement Schedules This item lists the financial statements, schedules, and exhibits filed with the Form 10-K, including the independent auditor's report, consolidated financial statements, and key agreements like the Separation and Distribution Agreement with Curbline - This section lists all financial statements, schedules, and exhibits filed with the report, including the Separation and Distribution Agreement with Curbline Properties (Exhibit 2.1), the new Loan Agreement for the Mortgage Facility (Exhibit 10.21), and various employment and compensation plan documents[307][310] Form 10-K Summary The company reports that no Form 10-K summary is provided - None[313] Financial Statements and Schedules Report of Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP issued an unqualified opinion on the consolidated financial statements and internal control over financial reporting, identifying real estate impairment assessments as a critical audit matter due to significant management judgment - The auditor, PricewaterhouseCoopers LLP, issued unqualified opinions on both the consolidated financial statements and the effectiveness of internal control over financial reporting[322] - A critical audit matter was identified concerning real estate impairment assessments due to significant management judgment required for identifying indicators and estimating undiscounted future cash flows, particularly regarding hold periods, market rents, and capitalization rates[329][330] Consolidated Financial Statements The consolidated financial statements show a significant reduction in total assets to $933.6 million and liabilities to $416.9 million in 2024 due to the Curbline spin-off and asset sales, with net income increasing to $531.8 million driven by large gains on property sales Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total real estate assets, net | $772,012 | $2,386,143 | | Cash and cash equivalents | $54,595 | $551,402 | | Assets related to discontinued operations | $— | $921,632 | | Total Assets | $933,602 | $4,061,350 | | Indebtedness | $301,373 | $1,600,517 | | Total Liabilities | $416,858 | $1,885,807 | | Total Equity | $516,744 | $2,175,543 | Consolidated Statement of Operations Highlights (in thousands) | Account | 2024 | 2023 | | :--- | :--- | :--- | | Total Revenues | $277,467 | $452,615 | | Gain on disposition of real estate, net | $633,219 | $218,655 | | Debt extinguishment costs | $(42,822) | $(50) | | Impairment charges | $66,600 | $— | | Income from discontinued operations | $6,060 | $36,372 | | Net Income | $531,824 | $265,721 | Notes to Consolidated Financial Statements The notes detail accounting policies and financial results, covering the Curbline spin-off as discontinued operations, significant changes in indebtedness including senior note repayment and a new mortgage facility, $66.6 million in impairment charges, and ongoing agreements with Curbline - Note 12 details operating results for spun-off Curbline properties, which generated $86.0 million in revenue and incurred $30.9 million in transaction costs, resulting in $6.1 million of income from discontinued operations for Jan 1 - Sep 30, 2024[469] - Note 6 details the complete overhaul of the company's debt, with all $1.3 billion senior unsecured notes and $200 million Term Loan repaid in August 2024, and the new primary debt being a variable-rate Mortgage Facility with a $206.9 million balance at year-end[426][428][430] - Note 11 discloses $66.6 million in impairment charges in 2024 related to three properties, triggered by a change in hold period assumptions, which were subsequently sold[465] - Note 13 details the ongoing financial relationship with Curbline, including a $33.8 million liability payable to Curbline as of December 31, 2024, primarily for redevelopment projects on spun-off properties[473][481] - Note 9 states all $175 million Class A Preferred Shares were redeemed in 2024, a 1-for-4 reverse stock split was effected in August 2024, and the spin-off was treated as a stock dividend valued at $44.58 per common share[458][373][460]