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SITE Centers (SITC) - 2021 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The third quarter OFFO exceeded budget expectations, driven by higher-than-expected NOI and lower G&A expenses [9][22] - The company collected 99% of billed rent for the quarter and has collected 96% of 2020 base rent, including $21 million in deferral repayments [10][9] - The lease rate for the portfolio increased by 50 basis points sequentially, building on a 40 basis point increase from the previous quarter [24] Business Line Data and Key Metrics Changes - Over 1 million square feet were leased in the third quarter, including 237,000 square feet of new leasing, marking the highest new leasing volume in two years [11] - The company signed six anchor leases in the quarter, bringing the year-to-date total to 19, with 15 of these signed with publicly traded companies [12] - The company executed over 50 new shop leases in the quarter, indicating strong demand for retail space [13] Market Data and Key Metrics Changes - The acquisition of Hammond Springs in Atlanta for $31 million pushed year-to-date acquisitions to $80 million, exceeding the $75 million goal for 2021 [14] - The average household income in the Atlanta area is over $130,000, indicating a strong market for retail growth [14] Company Strategy and Development Direction - The company aims to grow its portfolio in wealthy suburban communities, focusing on both anchored and unanchored assets [15] - The investment thesis is based on increased wealth in suburbs, more frequent customer visits due to flexible work-from-home culture, and rising demand for convenience [16] - The company is focused on finding properties in submarkets where rent growth is occurring and re-tenanting existing spaces with stronger credit tenants [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving a portfolio occupancy rate of 95% to 96%, citing improved asset quality post-RVI spinoff [39] - The company anticipates continued leasing demand and expects renewals to increase as occupancy rises [48] - Management noted that while construction costs have risen by 10% to 15% for materials, the overall impact on total deal costs remains manageable [47] Other Important Information - The company received a $190 million distribution from RVI, which will be reinvested into acquisitions [18][63] - The company has approximately $150 million in cash on hand and $25 million in common equity available for future investments [33] Q&A Session Summary Question: How much of the $12.7 million benefit was realized in 3Q? - $1.6 million was realized in the third quarter, with no future revisions included in the budget [37] Question: What is the path to getting back to 95% occupancy? - Management believes the cadence looks good, with the potential for higher occupancy than pre-COVID levels due to strong demand [39][40] Question: What drove the increase in leasing CapEx per square foot this quarter? - The increase was primarily due to a higher percentage of anchor deals, which typically have lower net effective rents [45] Question: What are the expectations for recapturing space and mark-to-market upside next year? - Strong leasing demand is expected to lead to increased renewals and less available inventory, which should support upward pressure on rents [48] Question: What are the new concepts being pursued? - New concepts include Public Lands by Dick's Sporting Goods and Popshelf by Dollar General, indicating a trend towards innovative retail offerings [94][95]