Business Overview and History: SITE Centers Corp. (SITC) is a self-administered and self-managed real estate investment trust (REIT) that owns and operates open-air shopping centers primarily in suburban, high household income communities. The company has navigated a transformative period, focusing on optimizing its portfolio and positioning itself for long-term growth.
SITE Centers was founded in 1984 and has since grown to become a leading owner and operator of shopping centers across the United States. The company's portfolio consists of 112 properties, including 11 owned through unconsolidated joint ventures, totaling approximately 11.5 million square feet of gross leasable area (GLA) as of September 30, 2024.
Over the years, SITE Centers has demonstrated its ability to adapt to changing market conditions. The company went public in 1993, which provided access to capital for further growth. Throughout the 1990s and 2000s, SITE Centers expanded its portfolio by taking advantage of opportunities arising from the growth of national retail chains and suburban communities. The company faced challenges during the Great Recession in the late 2000s but responded by focusing on strengthening its tenant base, improving property operations, and selectively disposing of underperforming assets.
In recent years, SITE Centers has shifted its strategy to emphasize the acquisition and management of open-air shopping centers in suburban, high household income markets. This focus on properties catering to the needs of local communities has been a key driver of the company's success. In 2023, SITE Centers announced plans to spin off its convenience retail assets into a separate publicly traded entity, Curbline Properties Corp. (CURB), to better align its portfolio and unlock value for shareholders. The spin-off, which was completed on October 1, 2024, has positioned SITE Centers as a focused owner and operator of open-air shopping centers.
Financial Performance and Liquidity: For the nine months ended September 30, 2024, SITE Centers reported net income attributable to common shareholders of $529.28 million, or $10.03 per diluted share, compared to $60.91 million, or $1.16 per diluted share, in the prior-year period. The significant increase in net income was primarily driven by gains from dispositions of real estate and higher interest income, partially offset by the impact of net property dispositions, debt extinguishment costs, and impairment charges.
SITE Centers' balance sheet remains strong, with a debt-to-EBITDA ratio of just over 3x and $1.06 billion in cash and cash equivalents as of September 30, 2024. The company has addressed all of its consolidated debt maturing in 2024 and has a flexible capital structure, allowing it to pursue strategic initiatives and manage its overall risk profile.
For the most recent fiscal year ended December 31, 2023, SITE Centers reported revenue of $546.27 million, net income of $265.70 million, and operating cash flow (OCF) and free cash flow (FCF) of $238.53 million. In the third quarter of 2024, the company reported revenue of $89.43 million, representing a 37.5% decrease compared to $143.09 million in Q3 2023, primarily due to the disposition of 25 properties during the quarter for an aggregate price of $1.4 billion. Net income for Q3 2024 was $48.64 million, with OCF and FCF of $84.63 million.
As of December 31, 2023, SITE Centers had a debt-to-equity ratio of 0.8923, cash of $551.97 million, and a current ratio and quick ratio of 2.57. The company terminated its $1.5 billion unsecured revolving credit facility in August 2024.
Portfolio Optimization and Leasing Activity: In the nine months ended September 30, 2024, SITE Centers executed new leases and renewals aggregating approximately 1.7 million square feet of space on a pro rata basis. The company's shopping center portfolio occupancy, on a pro rata basis, was 91.1% at September 30, 2024, compared to 92.0% at December 31, 2023.
The company has been actively engaged in asset sales, having closed $951 million in wholly-owned property sales year-to-date as of September 30, 2024. Additionally, SITE Centers has over $1 billion in additional real estate currently under contract, in contract negotiation, or with executed non-binding letters of intent at a blended cap rate in the mid-7% range.
During the nine months ended September 30, 2024, SITE Centers acquired 13 convenience centers and land parcels for a total purchase price of $193.6 million. The company also sold 40 wholly-owned shopping centers and two joint venture assets for an aggregate sales price of $2.33 billion during the same period.
Curbline Spin-Off and Strategic Focus: The spin-off of Curbline Properties has allowed SITE Centers to sharpen its strategic focus on its core open-air shopping center portfolio. Curbline, which owns 79 convenience retail assets with approximately 2.7 million square feet of GLA, is expected to have no debt and $600 million in cash at the time of the spin-off, positioning it for growth.
SITE Centers' post-spin portfolio will contain a diversified mix of assets in major markets with strong tenant sales. The company remains flexible and open to a variety of outcomes, including further asset sales, to maximize value for its stakeholders.
Outlook and Risks: SITE Centers has not provided formal 2024 FFO guidance due to the planned spin-off of Curbline and significant expected transaction activity. However, the company has projected total portfolio net operating income (NOI) for the SITE and Curbline portfolios. For the Curbline portfolio, total NOI is now expected to be approximately $84 million in 2024, up from $79 million at the midpoint of the previous projected range. Curbline's same-store NOI growth is expected to be between 3.5% and 5.5% for 2024.
For the SITE portfolio, total NOI is now expected to be $201 million at the midpoint of the projected range before any additional dispositions. This projection includes only properties owned as of June 30, 2024.
Risks facing SITE Centers include the potential for economic downturns, changes in consumer buying patterns, competition from other retail properties, and the financial health of its tenants. Additionally, the company's ability to refinance maturing obligations or satisfy applicable covenants, financial tests, or debt service requirements may be impacted by local or global market conditions.
Conclusion: SITE Centers has demonstrated its ability to navigate a challenging retail environment and position itself for long-term success. The spin-off of Curbline Properties has allowed the company to sharpen its strategic focus, optimize its portfolio, and maintain a strong balance sheet. As SITE Centers continues to execute on its value-maximizing initiatives, investors will closely watch the company's ability to capitalize on opportunities and manage the inherent risks in the retail real estate sector.