SITC - SITE Centers Reports Third Quarter 2023 Results

SITE Centers Corp. (NYSE: SITC), an owner of open-air shopping centers in suburban, high household income communities, announced today operating results for the quarter ended September 30, 2023.

“Third quarter results reflect a continuation of year-to-date trends including steady demand for vacant space in the Company’s supply constrained markets and recycling of capital from highly leased properties into Convenience assets,” commented David R. Lukes, President and Chief Executive Officer. “Rent commencements, the backfill of vacant space from bankruptcies and tactical redevelopment deliveries remain significant tailwinds for SITE Centers going forward.”

Results for the Quarter

• Third quarter net income attributable to common shareholders was $45.9 million, or $0.22 per diluted share, as compared to net income of $63.4 million, or $0.30 per diluted share, in the year-ago period. The decrease year-over-year primarily was the result of lower income from joint ventures as a result of asset sales in the third quarter of 2022, partially offset by higher gain on sale from asset sales, property net operating income ("NOI") growth and the net impact of property acquisitions.
• Third quarter operating funds from operations attributable to common shareholders (“Operating FFO” or “OFFO”) was $69.9 million, or $0.33 per diluted share, compared to $62.8 million, or $0.29 per diluted share, in the year-ago period primarily due to property NOI growth and the net impact of property acquisitions. Third quarter OFFO included $8.1 million, or $0.04 per diluted share, of income related to below-market lease adjustments primarily for terminated Bed, Bath & Beyond leases.

Significant Third Quarter and Recent Activity

• SITE Centers sold 11 wholly owned shopping centers in the third quarter and fourth quarter to date for an aggregate price of $645.6 million including five wholly-owned shopping centers during the third quarter for an aggregate price of $118.3 million.
• Acquired three convenience shopping centers during the quarter for an aggregate price of $28.1 million, including Towne Crossing Shops (Richmond, VA) for $4.2 million, Oaks at Slaughter (Austin, TX) for $14.1 million and Marketplace at 249 (Houston, TX) for $9.8 million.
• In the third quarter, recorded a $1.3 million charge related to the previously announced restructuring plan, which included a Voluntary Retirement Offer. The balance of the total charges is expected to be incurred in the fourth quarter of 2023. Restructuring charges have been excluded from OFFO.
• In October, closed on a five-year, $100 million mortgage secured by Nassau Park Pavilion (Princeton, NJ).
• In October, acquired two convenience shopping centers for an aggregate price of $26.0 million, including Estero Crossing (Fort Myers, FL) for $17.1 million and Point at University (Charlotte, NC) for $8.9 million.

Key Quarterly Operating Results

• Reported an increase of 2.9% in same-store net operating income (“SSNOI”) on a pro rata basis for the third quarter of 2023, including redevelopment, as compared to the year-ago period. The impact of prior period rental income receipts related to cash basis tenants was immaterial to third quarter 2023 SSNOI growth.
• Generated cash new leasing spreads of 37.7% and cash renewal leasing spreads of 7.3%, both on a pro rata basis, for the trailing twelve-month period ended September 30, 2023 and cash new leasing spreads of 58.2% and cash renewal leasing spreads of 6.6%, both on a pro rata basis, for the third quarter of 2023.
• Generated straight-lined new leasing spreads of 50.9% and straight-lined renewal leasing spreads of 11.5%, both on a pro rata basis, for the trailing twelve-month period ended September 30, 2023 and straight-lined new leasing spreads of 73.0% and straight-lined renewal leasing spreads of 10.2%, both on a pro rata basis, for the third quarter of 2023.

• Reported a leased rate of 94.6% at September 30, 2023, compared to 95.5% at June 30, 2023 and 95.0% at September 30, 2022, all on a pro rata basis. The sequential decline was primarily related to the recapture of the remaining units leased by Bed, Bath & Beyond and the sale of properties in the third quarter with an average leased rate of 98.5%, partially offset by new leasing activity.
• As of September 30, 2023, the Signed Not Opened (“SNO”) spread was 260 basis points, representing $17.9 million of annualized base rent on a pro rata basis.

Guidance

The Company has updated its 2023 full-year guidance for net income attributable to common shareholders and Operating FFO per share to reflect third quarter results and announced transaction activity. Impairment charges, gains on sale of interests and assets, transaction and debt extinguishment costs are excluded from guidance. The guidance update is as follows:

Reconciliation of Net Income Attributable to Common Shareholders to FFO and Operating FFO estimates:

In reliance on the exception provided by Item 10(e)(1)(i)(B) of Regulation S-K, reconciliation of the assumed range of 2023 SSNOI growth to the most directly comparable GAAP financial measure is not provided because the Company is unable to provide such reconciliation without unreasonable effort due to the multiple components of the calculation which only includes properties owned for comparable periods and excludes all corporate level activity as described below under Non-GAAP Measures and Other Operational Metrics. Key assumptions for 2023 guidance include the following:

About SITE Centers Corp.

SITE Centers is an owner and manager of open-air shopping centers located in suburban, high household income communities. The Company is a self-administered and self-managed REIT operating as a fully integrated real estate company, and is publicly traded on the New York Stock Exchange under the ticker symbol SITC. Additional information about the Company is available at www.sitecenters.com . To be included in the Company’s e-mail distributions for press releases and other investor news, please click here .

Conference Call and Supplemental Information

The Company will hold a conference call to discuss quarterly results and other business updates today at 5:30 p.m. Eastern Time. All interested parties can access the call by dialing 888-317-6003 (U.S.), 866-284-3684 (Canada), or 412-317-6061 (international) using passcode 5228692. The call will also be webcast and available in a listen-only mode on SITE Centers’ website at ir.sitecenters.com. SITE Centers no longer intends to host its previously announced earnings conference call on November 2, 2023. Copies of the Company’s supplemental package are available on the Company’s website.

Non-GAAP Measures and Other Operational Metrics

Funds from Operations (“FFO”) is a supplemental non-GAAP financial measure used as a standard in the real estate industry and is a widely accepted measure of real estate investment trust (“REIT”) performance. Management believes that both FFO and Operating FFO provide additional indicators of the financial performance of a REIT. The Company also believes that FFO and Operating FFO more appropriately measure the core operations of the Company and provide benchmarks to its peer group.

FFO is generally defined and calculated by the Company as net income (loss) (computed in accordance with generally accepted accounting principles in the United States (“GAAP”)), adjusted to exclude (i) preferred share dividends, (ii) gains and losses from disposition of real estate property and related investments, which are presented net of taxes, (iii) impairment charges on real estate property and related investments, (iv) gains and losses from changes in control and (v) certain non-cash items. These non-cash items principally include real property depreciation and amortization of intangibles, equity income (loss) from joint ventures and equity income (loss) from non-controlling interests and adding the Company’s proportionate share of FFO from its unconsolidated joint ventures and non-controlling interests, determined on a consistent basis. The Company’s calculation of FFO is consistent with the definition of FFO provided by NAREIT. The Company calculates Operating FFO as FFO excluding certain non-operating charges, income and gains. Operating FFO is useful to investors as the Company removes non-comparable charges, income and gains to analyze the results of its operations and assess performance of the core operating real estate portfolio. Other real estate companies may calculate FFO and Operating FFO in a different manner.

In calculating the expected range for or amount of net (loss) income attributable to common shareholders to estimate projected FFO and Operating FFO for future periods, the Company does not include a projection of gain and losses from the disposition of real estate property, potential impairments and reserves of real estate property and related investments, debt extinguishment costs and certain transaction costs. Other real estate companies may calculate expected FFO and Operating FFO in a different manner.

The Company also uses net operating income (“NOI”), a non-GAAP financial measure, as a supplemental performance measure. NOI is calculated as property revenues less property-related expenses. The Company believes NOI provides useful information to investors regarding the Company’s financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level and, when compared across periods, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and disposition activity on an unleveraged basis.

The Company presents NOI information herein on a same store basis or “SSNOI.” The Company defines SSNOI as property revenues less property-related expenses, which exclude straight-line rental income and reimbursements and expenses, lease termination income, management fee expense, fair market value of leases and expense recovery adjustments. SSNOI includes assets owned in comparable periods (15 months for prior period comparisons). In addition, SSNOI is presented including activity associated with redevelopment. SSNOI excludes all non-property and corporate level revenue and expenses. Other real estate companies may calculate NOI and SSNOI in a different manner. The Company believes SSNOI at its effective ownership interest provides investors with additional information regarding the operating performances of comparable assets because it excludes certain non-cash and non-comparable items as noted above.

FFO, Operating FFO, NOI and SSNOI do not represent cash generated from operating activities in accordance with GAAP, are not necessarily indicative of cash available to fund cash needs and should not be considered as alternatives to net income computed in accordance with GAAP, as indicators of the Company’s operating performance or as alternatives to cash flow as a measure of liquidity. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures have been provided herein. In reliance on the exception provided by Item 10(e)(1)(i)(B) of Regulation S-K, reconciliation of the assumed rate of 2023 SSNOI growth to the most directly comparable GAAP financial measure is not provided because the Company is unable to provide such reconciliation without unreasonable effort due to the multiple components of the calculation which only includes properties owned for comparable periods and excludes all corporate level activity as noted above.

The Company calculates Cash Leasing Spreads by comparing the prior tenant's annual base rent in the final year of the prior lease to the executed tenant's annual base rent in the first year of the executed lease. Straight-Lined Leasing Spreads are calculated by comparing the prior tenant's average base rent over the prior lease term to the executed tenant's average base rent over the term of the executed lease. For both Cash and Straight-Lined Leasing Spreads, the reported calculation includes only comparable leases which are deals executed within one year of the date that the prior tenant vacated. Deals executed after one year of the date the prior tenant vacated, deals which are a combination of existing units, new leases at redevelopment properties, and deals for units vacant at the time of acquisition are considered non-comparable and excluded from the calculation.

Safe Harbor

SITE Centers Corp. considers portions of the information in this press release to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended, with respect to the Company's expectation for future periods. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. For this purpose, any statements contained herein that are not historical fact may be deemed to be forward-looking statements. There are a number of important factors that could cause our results to differ materially from those indicated by such forward-looking statements, including, among other factors, general economic conditions, including inflation and interest rate volatility; local conditions such as the supply of, and demand for, retail real estate space in our geographic markets; the impact of e-commerce; dependence on rental income from real property; the loss of, significant downsizing of or bankruptcy of a major tenant and the impact of any such event on rental income from other tenants and our properties; redevelopment and construction activities may not achieve a desired return on investment; our ability to buy or sell assets on commercially reasonable terms; our ability to secure equity or debt financing on commercially acceptable terms or at all; impairment charges; valuation and risks relating to our joint venture investments; the termination of any joint venture arrangements or arrangements to manage real property; property damage, expenses related thereto and other business and economic consequences (including the potential loss of rental revenues) resulting from extreme weather conditions or natural disasters in locations where we own properties, and the ability to estimate accurately the amounts thereof; sufficiency and timing of any insurance recovery payments related to damages from extreme weather conditions or natural disasters; any change in strategy; the impact of pandemics and other public health crises; unauthorized access, use, theft or destruction of financial, operations or third party data maintained in our information systems or by third parties on our behalf; our ability to maintain REIT status; and the finalization of the financial statements for the period ended September 30, 2023. For additional factors that could cause the results of the Company to differ materially from those indicated in the forward-looking statements, please refer to the Company's most recent reports on Forms 10-K and 10-Q. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.

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Conor Fennerty, EVP and
Chief Financial Officer
216-755-5500